Synspective Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥1.67B
• Operating Income: ¥-3.16B
• Net Income: ¥-2.19B
• EPS: ¥-30.45

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: FY2025 Q3 shows continued heavy operating losses despite modest topline growth, with adequate liquidity but weak returns and debt service coverage. Revenue was 16.72 (100M JPY), up 4.0% YoY, while gross profit was 2.60 (100M JPY) at a 15.5% margin. Operating income deteriorated to -31.60 (100M JPY), implying an operating margin of approximately -189%. Ordinary income was -34.18 (100M JPY) and net income was -34.13 (100M JPY), equating to a net margin of -204.1%. Interest expense of 1.64 (100M JPY) against negative operating income yields an interest coverage ratio of -19.30x, flagging debt service risk despite low leverage. The balance sheet remains liquid: cash and deposits stand at 124.46 (100M JPY) versus current liabilities of 26.81 (100M JPY), driving a current ratio of 510.2%. Total assets are 327.08 (100M JPY) against equity of 239.29 (100M JPY), implying a high equity ratio of approximately 73.2% and a D/E of 0.37x. Asset turnover is low at 0.051, highlighting early-stage scaling with a small revenue base relative to assets. ROIC is deeply negative at -16.9%, and calculated ROE is -14.3% via DuPont, both indicating value destruction at current scale. Gross margin at 15.5% is insufficient to cover SG&A of 22.29 (100M JPY), resulting in sizeable operating deleverage. We cannot quantify margin expansion or compression in basis points due to lack of YoY margin disclosure. Earnings quality cannot be assessed fully as operating cash flow and capex are unreported; OCF vs NI divergence is therefore indeterminable. Liquidity runway appears reasonable given cash on hand, but losses will pressure funding needs if not offset by revenue scaling or cost control. Forward-looking, the company must improve gross margin and ramp revenue to dilute fixed costs, while managing interest burden and potential financing needs. Near-term priorities are improving unit economics, lengthening debt maturity where possible, and demonstrating order visibility to stabilize revenue.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (-204.1%) × (0.051) × (1.37) ≈ -14.3%. The dominant driver of negative ROE is the extraordinarily low net profit margin, driven by operating losses (operating margin ~ -189%). Asset turnover of 0.051 is also weak, reflecting an early-stage asset base ahead of revenue scale. Financial leverage at 1.37x (Assets/Equity) is conservative and does not materially amplify returns (positive or negative). Business reason: SG&A of 22.29 (100M JPY) is far above gross profit of 2.60 (100M JPY), indicating a scaling/R&D and commercialization phase with high fixed costs relative to current revenue. Sustainability: margin pressure is likely to persist near term until revenue scales, pricing improves, or cost base is optimized; leverage is unlikely to be the key lever for ROE improvement. Concerning trends: operating deleverage is evident (SG&A materially exceeding gross profit). With interest expense at 1.64 (100M JPY) and negative operating profit, financial expenses further deepen net losses. Absent YoY SG&A detail, we cannot confirm whether SG&A growth exceeded revenue growth, but the current cost structure is inconsistent with the current revenue run-rate.

Growth Assessment

Revenue grew 4.0% YoY to 16.72 (100M JPY), indicating modest growth momentum. Gross margin is 15.5%, which is low for sustainable profitability and suggests limited pricing power or a high cost-to-delivery at this stage. Operating income of -31.60 (100M JPY) shows that scale economies have not yet materialized. Profit quality is weak given the dependence on non-operating items is minimal and cannot offset operating losses; ordinary income (-34.18) broadly tracks operating income. Outlook hinges on pipeline conversion for satellite data/solutions and services and improving utilization of existing asset base to lift asset turnover. With ROIC at -16.9%, incremental investments must clear a high hurdle; management will likely emphasize commercialization milestones and cost discipline. Near-term growth catalysts would include larger multi-year contracts, international customer wins, and improved delivery efficiency; risks include project timing slippage and customer procurement cycles. Given limited disclosures on backlog, we cannot assess revenue visibility or stickiness.

Financial Health

Liquidity: Strong on paper with current assets of 136.76 (100M JPY) versus current liabilities of 26.81 (100M JPY); current ratio 510.2% and quick ratio 510.2%. Solvency: Equity of 239.29 (100M JPY) vs total assets of 327.08 (100M JPY) implies an equity ratio of ~73.2%, while D/E is 0.37x—conservative. Debt profile: short-term loans are 10.90 (100M JPY) and long-term loans 60.98 (100M JPY); cash and deposits of 124.46 (100M JPY) exceed total interest-bearing debt, limiting immediate refinancing pressure. Maturity mismatch: low risk, as cash comfortably covers current liabilities and short-term borrowings. Debt service: interest coverage is -19.30x, a clear warning that operating cash generation (if similar to operating income) is insufficient to meet interest without drawing on cash. No off-balance sheet obligations are disclosed in the provided data. Explicit warnings: Current Ratio is well above 1.0 (no warning); D/E is well below 2.0 (no warning).

Cash Flow Quality

OCF is unreported; OCF/Net Income cannot be calculated, so cash earnings quality versus accruals cannot be assessed. Free cash flow is unreported, and capex detail is unavailable, limiting our ability to judge sustainability of funding needs. Given net losses of -34.13 (100M JPY) and negative operating income, internal funding for growth and interest is likely insufficient without using cash on hand or external financing. Working capital: accounts receivable are 5.16 (100M JPY) against quarterly revenue of 16.72 (100M JPY), suggesting moderate collections exposure, but inventory and payables are unreported, preventing a full working capital assessment. No clear signs of working capital manipulation can be inferred from the limited data. Overall, cash on balance sheet provides a buffer, but persistent losses will consume liquidity unless operating metrics improve.

Dividend Sustainability

No dividends are reported for the period, and retained earnings are negative (-69.95 (100M JPY)), implying no capacity or policy support for payouts at this stage. Payout ratio and FCF coverage cannot be calculated due to unreported OCF/FCF. Given negative net income and ROIC, distributing cash would be imprudent; we assume a no-dividend stance continues until profitability and positive OCF are established.

Risk Assessment

Business Risks:

• Commercialization risk in scaling satellite data/solutions revenue with lumpy project timing.
• Low gross margin (15.5%) and negative operating margin (~-189%) indicate weak unit economics at current scale.
• Execution risk in deploying/operating satellite assets and timely service delivery.
• Customer concentration and contract timing risk typical of early-stage space/defense solutions.
• Regulatory and export control compliance risk across jurisdictions.

Financial Risks:

• Interest coverage of -19.30x indicates elevated debt service risk absent operating cash flow.
• ROIC at -16.9% and ROE at -14.3% signal value destruction and potential need for additional funding.
• Potential dilution risk if equity financing is required to fund losses/capex.
• Refinancing risk on short-term loans (10.90 (100M JPY)) if growth milestones slip.

Key Concerns:

• Persistent operating losses with SG&A (22.29 (100M JPY)) far exceeding gross profit (2.60 (100M JPY)).
• Low asset turnover (0.051) implies underutilized asset base.
• Limited disclosure on OCF/FCF, capex, and backlog impedes visibility on runway and investment efficiency.
• Negative effective tax rate reflects loss-making status; limited tax shield benefits going forward if losses continue.

Investment Implications

Key Takeaways:

• Topline grew modestly (+4.0% YoY) to 16.72 (100M JPY) but profitability remains deeply negative.
• Operating margin ~ -189% and net margin -204.1% are the primary drivers of negative ROE (-14.3%).
• Liquidity is strong (cash 124.46 (100M JPY); current ratio 510.2%), with conservative leverage (D/E 0.37x).
• Debt service capacity is weak (interest coverage -19.30x), requiring cash usage or external funding.
• ROIC -16.9% underscores the need for rapid revenue scaling and/or cost restructuring.
• Equity ratio ~73.2% provides solvency cushion despite losses.

Metrics to Watch:

• Order intake/backlog and revenue growth trajectory.
• Gross margin progression and unit economics for delivered projects.
• Operating expense trend relative to revenue (operating leverage inflection).
• Operating cash flow and free cash flow once disclosed.
• Debt maturity profile and interest expense trend; any refinancing or covenant updates.
• Capex and satellite deployment schedule versus commercialization milestones.

Relative Positioning: Compared to other early-stage space and advanced sensing peers, Synspective displays strong liquidity and low leverage but weaker profitability and ROIC, implying higher execution dependency to achieve scale-driven operating leverage.

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