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

For FY2025 Q3 (consolidated, JGAAP), Yukaria reported revenue of ¥16,758 million, up 14.3% YoY, indicating healthy top-line momentum. Gross profit reached ¥6,645 million, implying a gross margin of 39.7%, which suggests a relatively value-added service/product mix and decent pricing power at the gross level. Despite the strong revenue growth, operating income declined 31.0% YoY to ¥1,339 million, compressing operating margin to about 8.0%; this points to notable pressure from SG&A, mix shifts, or cost inflation outweighing gross profit growth. Ordinary income of ¥1,171 million sits below operating income, consistent with interest expense of ¥204 million and limited non-operating gains in the period. Net income rose 3.4% YoY to ¥1,668 million, a divergence from operating trends that implies material below-operating-line gains (likely extraordinary income under JGAAP) offsetting weaker core profitability and recorded taxes. The net profit margin printed at 9.95%, significantly above the operating margin, reinforcing the role of non-recurring or non-operating factors in supporting bottom-line results. ROE is calculated at 8.06% via DuPont (net margin 9.95%, asset turnover 0.267x, financial leverage 3.04x), a moderate level given the current mix of profitability and leverage. Liquidity appears solid with a current ratio of 204% and working capital of approximately ¥12.3 billion, indicating ample short-term coverage. The capital structure shows total liabilities of ¥41.2 billion versus equity of ¥20.7 billion (D/E ≈ 1.99x), implying moderate leverage; the implied equity ratio from the balance sheet is roughly 32.9% (equity/total assets), even though the separately reported equity ratio field is not populated. Interest coverage is 6.6x (operating income/interest), providing a reasonable buffer against rate or earnings volatility. Cash flow statements and several per-share and depreciation data points were not disclosed in the provided extract, limiting assessment of cash conversion and capital intensity. Dividend data show DPS at zero for the period, with payout and FCF coverage metrics not assessable due to unreported cash flows. Overall, the period reflects strong sales growth but weaker operating leverage, with net income aided by non-operating or extraordinary items; balance sheet and liquidity are adequate, and solvency metrics are acceptable. The key analytical focus going forward is whether operating margin can recover as growth continues, and whether the bottom line can be supported by recurring operating drivers rather than one-off items. Given data limitations (notably cash flows and depreciation), conclusions on earnings quality and capital allocation efficiency are preliminary. Monitoring cost control, pricing discipline, and the nature and recurrence of below-the-line gains will be critical to assessing sustainability.

Profitability Analysis

ROE decomposition (DuPont): Net margin 9.95% × asset turnover 0.267 × financial leverage 3.04 = ~8.06% ROE. Gross margin is 39.7% (¥6,645m / ¥16,758m), indicating decent value-add at the gross level. Operating margin is about 8.0% (¥1,339m / ¥16,758m), down YoY given operating income -31.0% against revenue +14.3%, evidencing negative operating leverage in the period (higher SG&A, cost inflation, or mix). Ordinary margin is ~7.0% (¥1,171m / ¥16,758m) as interest expense (¥204m) weighs on pre-tax earnings. Net margin at 9.95% is elevated relative to operating margin, suggesting meaningful below-operating-line gains (likely extraordinary income under JGAAP) that offset taxes and interest. Interest coverage is 6.6x (¥1,339m / ¥204m), adequate but sensitive to further operating income compression. The gap between gross and operating margins highlights SG&A intensity; improving scale efficiency or cost discipline would be needed to restore operating leverage. Overall profitability is supported at the bottom line by non-operating/extraordinary items, while core operations show margin pressure.

Growth Assessment

Revenue growth of +14.3% YoY to ¥16,758m indicates solid demand and/or share gains. However, operating income declined 31.0% YoY to ¥1,339m, implying that growth was not accretive to operating profit this period due to higher operating costs or adverse mix. Net income increased 3.4% YoY to ¥1,668m, a divergence from operating trends, likely driven by one-off gains at the extraordinary level under JGAAP. Sustainability of net profit growth therefore depends on restoring operating margin or repeating non-recurring gains, the latter being inherently uncertain. Asset turnover of 0.267x suggests a comparatively asset-intensive or lower-turn model; sustaining growth may require continued working capital discipline. Outlook hinges on cost normalization, pricing actions, and retention of the gross margin while managing SG&A. With data limited on segment mix and backlog, revenue sustainability cannot be fully assessed, but the strong top-line print provides a positive base if operating efficiencies improve. Monitoring quarterly trend in operating margin and any disclosed extraordinary income will be key to evaluating the quality of growth.

Financial Health

Liquidity is strong: current ratio 204.1% (current assets ¥24.14bn vs. current liabilities ¥11.83bn) and working capital ~¥12.31bn suggest a comfortable near-term funding position. Quick ratio equals current ratio given no inventories reported in this extract. Total assets are ¥62.81bn versus total equity of ¥20.68bn, implying an equity ratio of ~32.9% (based on the balance sheet totals) and a debt-to-equity of 1.99x (total liabilities ¥41.20bn / equity ¥20.68bn), indicating moderate leverage. Interest expense of ¥203.7m is covered 6.6x by operating income, providing reasonable solvency headroom. Ordinary income below operating income reflects financial costs; higher rates or lower EBIT would pressure coverage. No maturity profile or cash balance was reported here, so near-term refinancing or cash cushion cannot be assessed from this dataset. Overall solvency appears acceptable with moderate leverage and adequate interest coverage, while liquidity metrics are strong.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed in this extract (values shown as zero indicate unreported items). As a result, OCF/Net Income and FCF cannot be evaluated from the provided data, and the OCF/NI ratio of 0.00 should not be interpreted as actual zero cash conversion. Earnings quality assessment must therefore rely on accrual metrics: the divergence between operating income and net income suggests reliance on non-operating or extraordinary items in the period, which can reduce recurring cash generation visibility. Depreciation and amortization were not disclosed; capital intensity and maintenance capex needs are thus unclear. Working capital appears positive with current assets exceeding current liabilities by ~¥12.31bn, but the period’s change in working capital is not available. Until cash flows are disclosed, conclusions on cash conversion, FCF sustainability, and reinvestment requirements remain tentative.

Dividend Sustainability

The disclosed DPS is ¥0.00 for the period, with a payout ratio of 0.0%. Given unreported operating and free cash flows, FCF coverage cannot be assessed from this extract, and the stated 0.00x should not be treated as actual coverage. Balance sheet liquidity is solid and leverage is moderate, which would typically support distribution capacity if the company elected to pay dividends. However, net income appears supported by non-operating/extraordinary items, while operating income declined YoY, which argues for caution in assuming distributable capacity without visibility on cash generation. Policy outlook is unclear based on the provided data; future dividend capacity will depend on operating cash flow recovery, capex needs, and management’s capital allocation policy once disclosed.

Risk Assessment

Business Risks:

• Operating margin pressure from SG&A inflation, wage costs, or adverse sales mix
• Potential price competition eroding gross-to-operating margin conversion
• Execution risk in scaling operations to restore operating leverage
• Dependence on non-operating/extraordinary gains to support net income
• Customer concentration or contract renewal risk (not disclosed, but typical for service-oriented models)
• Regulatory and reimbursement changes if exposed to public-sector or quasi-public demand

Financial Risks:

• Moderate leverage (D/E ~1.99x) amplifies earnings volatility
• Interest rate and refinancing risk given interest expense of ~¥204m and 6.6x coverage
• Earnings quality risk if extraordinary gains are non-recurring and cash-light
• Limited visibility on cash balances and cash flow generation due to unreported CF statements
• Potential impairment risk if intangible/long-lived assets are material (not disclosed here)

Key Concerns:

• Operating income down 31% YoY despite 14.3% revenue growth, indicating negative operating leverage
• Net income growth (+3.4% YoY) appears supported by below-the-line items, not core operations
• Absence of cash flow disclosure prevents assessment of cash conversion and FCF

Investment Implications

Key Takeaways:

• Top-line growth is strong (+14.3% YoY) but core profitability contracted (operating income -31% YoY).
• Net margin (9.95%) exceeds operating margin (~8.0%), implying reliance on non-operating/extraordinary items.
• ROE is moderate at 8.06%, driven by healthy net margin and leverage of 3.04x but tempered by low asset turnover (0.267x).
• Liquidity is robust (current ratio ~204%; working capital ~¥12.31bn) and leverage is moderate (D/E ~1.99x).
• Cash flow data are not disclosed; conclusions on earnings quality and dividend capacity are provisional.

Metrics to Watch:

• Operating margin trend and SG&A as a percentage of sales
• Nature, size, and recurrence of extraordinary and non-operating items
• Interest coverage and sensitivity to rate changes
• Disclosure of OCF, capex, and FCF; OCF/Net Income conversion ratio
• Working capital efficiency (DSO/DPO/turnover) when available

Relative Positioning: Based on the provided metrics, the company exhibits strong revenue growth but weaker operating leverage versus peers with steadier margin expansion; liquidity stands out as a strength, while earnings quality is less robust due to reliance on below-the-line contributions.

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
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