EUCALIA Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥16.76B
• Operating Income: ¥1.34B
• Net Income: ¥1.70B
• EPS: ¥46.97

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: Mixed quarter—top-line grew solidly, but core profitability weakened; bottom-line resilience was supported by one-off gains and non-operating items. Revenue rose 14.3% YoY to 167.58, while operating income fell 31.0% YoY to 13.39, indicating cost pressure and/or unfavorable mix. Gross profit reached 66.45, implying a robust gross margin of 39.7% on the quarter-to-date basis. Operating margin stands at roughly 8.0% (13.39/167.58), signaling compression versus last year given the revenue/OP divergence. Ordinary income contracted 52.6% YoY to 11.71, underscoring weakness in recurring earnings after financing and other non-operating costs. Despite that, profit before tax printed 25.67—well above ordinary income—implying material extraordinary gains under JGAAP classification that lifted pre-tax results. Net income increased 3.4% YoY to 16.68, with an effective tax rate of 34.0%, highlighting the role of one-time gains in cushioning the bottom line. Interest coverage is healthy at 6.57x, supported by 13.39 of operating income and 2.04 of interest expense. Leverage is elevated with D/E at 2.04x, triggering a high-leverage alert even as liquidity is comfortable (current ratio 208.5%). ROE calculated at 8.1% is decent, but is achieved with low asset turnover (0.267) and relatively high financial leverage (3.04x). ROIC is weak at 2.7%, below the 5% warning threshold, suggesting economic returns trail the likely cost of capital. Non-operating factors and extraordinary items appear to be outsized contributors this period, with a high non-operating income ratio of 45.9%, which dilutes the quality of earnings. Cash flow data are not disclosed; hence, we cannot corroborate earnings quality via OCF, which is a key limitation. Balance sheet shows 24.16 in goodwill and 29.60 in intangibles, implying M&A execution and impairment risks if performance stalls. Forward-looking, margin repair and cash generation proof-points are needed to sustain dividends and delever; continued reliance on non-operating/one-time gains is not a durable earnings strategy. Overall, management must demonstrate operating leverage restoration and capital discipline to improve ROIC and reduce balance-sheet risk.

Profitability Analysis

DuPont decomposition: ROE ≈ Net Profit Margin (9.9%) × Asset Turnover (0.267) × Financial Leverage (3.04x) = 8.1%. The weakest structural component is asset turnover at 0.267, reflecting a capital-heavy balance sheet relative to revenue scale. Net margin at 9.9% is supported this period by extraordinary gains (PBT 25.67 > ordinary income 11.71), while core margins (operating ~8.0%) look pressured. The component most likely to have changed YoY is net margin composition: operating margin contracted (OP -31% YoY vs revenue +14.3%), while non-operating/extraordinary gains propped up after-tax profitability. Business drivers likely include SG&A inflation, mix shifts, or project timing that suppressed operating income, offset by one-off gains below ordinary line. Sustainability: operating margin pressure is a concern if driven by recurring cost growth; extraordinary gains are by nature non-recurring and should not be extrapolated. Watch for SG&A growth outpacing revenue—full SG&A breakdown is undisclosed, but the OP decline versus revenue growth implies deleveraging in the cost base.

Growth Assessment

Revenue growth of +14.3% YoY to 167.58 indicates solid demand or consolidation effects, but profit quality is mixed. Operating income fell 31.0% YoY, signaling adverse operating leverage; operating margin likely compressed meaningfully (exact bps not quantifiable due to missing prior-period margins). Ordinary income dropped 52.6% YoY, suggesting weaker recurring earnings after non-operating items. Net income rose 3.4% YoY, but benefited from extraordinary gains (gap between PBT and ordinary income), which are not repeatable. Gross margin at 39.7% remains healthy, indicating pricing and/or mix at the gross level are supportive; the squeeze appears in SG&A and other operating costs. Outlook hinges on the company’s ability to control SG&A, improve efficiency, and normalize non-operating contributions. Without OCF visibility, we cannot confirm whether growth is cash-backed; this is a key data gap. Near term, expect earnings volatility if extraordinary gains normalize and if cost pressure persists; medium term focus should be on ROIC uplift from 2.7% toward cost of capital.

Financial Health

Liquidity is strong: current ratio 208.5% and quick ratio 208.5% (no inventory disclosed), with working capital of 123.72. Cash and deposits (72.85) plus accounts receivable (40.97) broadly match current liabilities (113.99), reducing near-term refinancing risk. Leverage is high: D/E at 2.04x exceeds the 2.0 warning threshold; total liabilities are 421.32 vs equity 206.82. Interest-bearing debt is at least 199.15 (short-term 35.55 + long-term 163.60), implying reliance on debt funding. Interest coverage at 6.57x is adequate, but could compress if operating income weakens further. Maturity profile shows 35.55 in short-term loans versus ample liquidity, mitigating immediate maturity mismatch; the larger long-term debt requires sustained cash generation. Intangibles and goodwill total 53.76, raising potential impairment risk if performance underwhelms. No off-balance sheet obligations are disclosed in the data provided.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow are not disclosed; thus OCF/Net Income and FCF coverage cannot be assessed. Given net income benefited from extraordinary gains, earnings quality risk is elevated until OCF confirms cash realization. With capex and dividends undisclosed, FCF sustainability for shareholder returns and deleveraging cannot be validated. Working capital indicators: receivables at 40.97 against revenue scale are reasonable, but without period cash conversion details, potential working capital swings cannot be ruled out. No clear signs of working capital manipulation can be assessed due to data gaps.

Dividend Sustainability

Dividend per share, total dividends, and payout ratios are unreported; hence we cannot compute dividend coverage. With ROIC at 2.7% and leverage at 2.04x, sustaining or increasing dividends will likely depend on restoring operating margins and generating positive, consistent FCF. Absent cash flow data, we treat dividend sustainability as uncertain and contingent on improved core profitability and deleveraging progress. Policy outlook cannot be inferred from the provided data.

Risk Assessment

Business Risks:

• Operating margin pressure as SG&A and other operating costs appear to outpace revenue growth (OP -31% YoY vs revenue +14.3%).
• Earnings volatility due to reliance on non-operating and extraordinary gains to support net income.
• Execution and impairment risk tied to goodwill (24.16) and intangibles (29.60).
• Potential regulatory/reimbursement changes if the company operates in healthcare-related services (industry context for Yukaria).

Financial Risks:

• High leverage: D/E 2.04x and sizable interest-bearing debt (≥199.15).
• Sensitivity of interest coverage (6.57x) to further declines in operating income.
• Refinancing risk over the medium term due to significant long-term borrowings.
• Limited visibility on OCF and FCF, impairing assessment of debt service capacity.

Key Concerns:

• ROIC at 2.7% is below the 5% warning threshold, implying value dilution risk if not improved.
• Non-operating income ratio is elevated (45.9%), suggesting profit composition risk.
• Data limitations (no cash flow, no detailed SG&A or segment data) hinder full risk quantification.

Investment Implications

Key Takeaways:

• Top-line growth is solid, but core earnings weakened materially with operating margin around 8.0%.
• Bottom-line resilience (+3.4% NI YoY) was assisted by extraordinary gains (PBT well above ordinary income).
• Leverage is high (D/E 2.04x); liquidity is comfortable (current ratio 208.5%).
• Interest coverage is acceptable at 6.57x but exposed to further OP softness.
• ROE of 8.1% is driven by leverage amid low asset turnover (0.267); ROIC of 2.7% remains below cost of capital.

Metrics to Watch:

• Operating margin trajectory and SG&A growth versus revenue.
• Ordinary income and the mix of operating vs non-operating/extraordinary items.
• OCF and FCF (when disclosed) to validate earnings quality and dividend capacity.
• Net debt and D/E trend; refinancing and interest cost development.
• Impairment indicators for goodwill/intangibles and ROIC improvement.

Relative Positioning: Within domestically focused service/solutions peers, the company shows stronger liquidity but higher financial leverage and lower ROIC; earnings mix is less favorable due to heavier reliance on non-operating/extraordinary items, making the quality of earnings comparatively weaker until operating margins recover.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis