Fujisan Magazine Service Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥4.27B
• Operating Income: ¥60M
• Net Income: ¥131M
• EPS: ¥2.32

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: A weak quarter on profitability despite modest top-line growth, with margins compressing sharply and net profit collapsing. Revenue rose 3.2% year over year to 42.66, while gross profit reached 12.42 (gross margin 29.1%). Operating income fell 71.5% YoY to 0.60, ordinary income declined 68.6% to 0.65, and net income plunged 93.5% to 0.07. Operating margin deteriorated to roughly 1.4% (0.60/42.66) from an estimated ~5.1% a year ago, implying about 370 bps of compression. Net margin fell to 0.16% from an estimated 2.6% last year (−244 bps). SG&A was 10.28 (24.1% of sales), and given gross profit of 12.42, the gap to reported operating income suggests additional operating-level costs or one-time items within operating expenses. Profit before tax printed at 2.09 versus ordinary income of 0.65, indicating sizable extraordinary gains that are not itemized in the provided data. Despite that extraordinary lift, high taxes (0.78; ~37% effective rate) and other below-the-line factors drove net profit to just 0.07. Liquidity remains adequate with a current ratio of 153% and cash and deposits of 28.57 against current liabilities of 30.09. Leverage is moderate with D/E at 1.22x and short-term loans of 5.50 comfortably covered by cash. Interest coverage is strong at 23.06x, mitigating near-term financing risk. Cash flow data are not disclosed this quarter, so earnings quality cannot be validated via OCF; this is a key limitation. A calculated payout ratio of 757.9% implies potential dividend strain if accurate, but dividend cash figures are unreported and should be treated cautiously. Forward-looking, the combination of cost pressure and very thin net margin elevates execution risk into Q4, even as the balance sheet provides a buffer. Management likely needs to tighten cost control and protect gross margins to restore a sustainable earnings run-rate.

Profitability Analysis

ROE decomposition (DuPont): ROE ≈ Net Profit Margin × Asset Turnover × Financial Leverage = 0.2% × 0.774 × 2.22 ≈ 0.3%. The sharp deterioration in net margin is the dominant driver of the low ROE, with asset turnover and leverage relatively stable. Business drivers: despite a 3.2% revenue increase, operating income fell 71.5% YoY, pointing to cost inflation (e.g., fulfillment/postage, content/IT amortization) or unfavorable mix, plus likely additional operating expenses or one-offs within operating costs. Sustainability: cost-driven margin pressure can be reversible with pricing and cost discipline, but if structural (e.g., persistent postage/shipping hikes or digital platform cost creep), recovery may be slow. Warning signs: SG&A grew to 24.1% of sales, and operating margin compressed to ~1.4% from ~5.1% (≈−370 bps). Net margin fell to 0.16% from ~2.6% (≈−244 bps), indicating weak operating leverage and higher below-the-line drag.

Growth Assessment

Top-line growth of 3.2% appears modest and likely driven by recurring subscription/e-commerce volumes rather than price-led growth. However, the significant deterioration in operating profit indicates growth was not accretive to margin this quarter. Ordinary income also dropped 68.6% YoY, implying limited support from non-operating items. The large gap between ordinary income (0.65) and PBT (2.09) suggests extraordinary gains; excluding those, underlying earnings momentum is weak. Without OCF data, we cannot confirm whether revenue growth translated into cash. Near-term outlook hinges on restoring gross margin and containing SG&A/other operating costs; stabilization of distribution and IT-related costs would be key to improving operating leverage.

Financial Health

Liquidity: Current ratio 153.1% and quick ratio 153.1% indicate adequate coverage of short-term obligations; no warning on current ratio (≥1.0). Cash and deposits of 28.57 exceed short-term loans of 5.50, limiting near-term refinancing risk. Solvency: D/E at 1.22x is moderate and below the 1.5x caution threshold; no D/E > 2.0 warning. Maturity profile: Current liabilities (30.09) are largely covered by current assets (46.07), suggesting low maturity mismatch risk. Off-balance sheet: Not disclosed; none identified in the provided data.

Cash Flow Quality

OCF and FCF are unreported, so OCF/Net Income and FCF coverage cannot be calculated. As such, we cannot validate earnings quality via cash conversion; this is a key data limitation. Given very low net income and the presence of extraordinary gains implied in PBT, underlying cash earnings may be weaker than PBT suggests. Working capital movements cannot be assessed due to missing CF details; no specific signs of manipulation can be identified from the available data.

Dividend Sustainability

Dividend data (DPS, total dividends paid, FCF) are unreported. The calculated payout ratio of 757.9% implies dividends materially exceed earnings if accurate, which would be unsustainable over time absent excess cash or one-off gains. However, in the absence of dividend cash outflow and OCF/FCF data, we cannot confirm coverage. With cash and deposits of 28.57 and modest debt, near-term capacity exists to fund dividends, but continuation at a payout implied by current earnings would rely on either earnings recovery or balance-sheet drawdown.

Risk Assessment

Business Risks:

• Margin compression from higher postage/shipping and fulfillment costs impacting gross margin.
• Shift from print to digital reducing high-margin legacy revenue streams and increasing platform costs.
• Customer churn or weaker subscription renewal rates pressuring top-line growth.
• Content acquisition and IT amortization costs rising relative to revenue.

Financial Risks:

• Earnings dependence on non-recurring items (implied extraordinary gains) to support PBT.
• Thin net margin (0.16%) leaves little cushion for shocks.
• Reliance on short-term loans (5.50) introduces rollover risk if credit conditions tighten, albeit mitigated by large cash balance.
• Potential tax and below-the-line volatility affecting net income.

Key Concerns:

• Operating margin compressed by ~370 bps YoY to ~1.4%, indicating weak operating leverage.
• Net income declined 93.5% YoY to 0.07 despite positive PBT, implying significant below-the-line drag.
• Lack of OCF/FCF disclosure prevents assessment of cash conversion and dividend coverage.
• Possible one-off operating charges or reclassification within operating expenses given the gap between gross profit minus SG&A and reported operating income.

Investment Implications

Key Takeaways:

• Revenue grew modestly (+3.2%), but profitability deteriorated sharply across operating, ordinary, and net levels.
• Operating margin fell to ~1.4%; restoring gross margin and controlling operating costs are immediate priorities.
• Extraordinary gains likely inflated PBT; underlying earnings appear weaker than headline PBT.
• Balance sheet liquidity is sound (cash 28.57 vs ST loans 5.50; current ratio 153%).
• Dividend sustainability is uncertain given very low net income and unreported cash flows.

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio
• Gross margin progression (pricing, postage/shipping cost trends)
• Extraordinary gains/losses and their recurrence
• OCF/Net income once disclosed; FCF after capex
• Effective tax rate stability
• Cash balance versus short-term debt

Relative Positioning: Within Japanese small-cap media/subscription peers, the company shows adequate liquidity and moderate leverage but underperforms on profitability this quarter due to significant margin compression and below-the-line drag; visibility is further hampered by absent cash flow disclosure.

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