Pole To Win Holdings,Inc. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥37.00B
• Operating Income: ¥178M
• Net Income: ¥-227M
• EPS: ¥-6.71

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 FY2026 Q3, Pole To Win Holdings (3657) posted revenue of 369.98 (100M JPY), down 0.7% YoY, indicating a broadly flat top line amid a softer demand environment. Gross profit was 84.34, translating to a 22.8% gross margin, which is adequate for a service-heavy QA/CS/BPO model but leaves limited buffer when utilization softens. SG&A of 78.03 consumed 92.5% of gross profit, yielding operating income of just 1.78 and an operating margin of 0.5%, down sharply as operating income fell 71.7% YoY. Non-operating items were a slight net expense (income 1.13, expenses 1.33), and ordinary income compressed to 0.67 (-89.0% YoY), reflecting weaker core profitability after non-operating impacts. Profit before tax was 5.31, implying positive extraordinary items under JGAAP, but a very high effective tax rate of 142.7% (tax expense 7.58) swung bottom-line to a net loss of -2.37 and total comprehensive loss of -6.86. DuPont shows ROE at -2.1% driven by a thin net margin of -0.6%, asset turnover of 1.469, and financial leverage of 2.25x; leverage amplified the negative margin into a modestly negative ROE. Liquidity is adequate with a current ratio of 1.28x and quick ratio of 1.28x, supported by 70.13 of cash; however, short-term loans of 70.00 introduce near-term refinancing attention. Net cash is roughly neutral to slightly negative when comparing cash to interest-bearing debt (cash 70.13 vs short- and long-term loans 70.62). Total liabilities to equity stand at 1.43x, a moderate balance-sheet load for a service company. Intangible intensity is notable: goodwill 21.83 and intangibles 41.85 together represent meaningful portions of assets and equity, implying future impairment risk if earnings remain weak. Interest coverage remains around 5x on current run-rate, but the cushion is thin given low absolute operating profit. Revenue resilience is mixed—slight YoY decline—but margin compression and cost stickiness created significant negative operating leverage. Cash flow data are not disclosed this quarter, limiting assessment of earnings-to-cash conversion; working capital specifics are also limited with receivables unreported. Dividend indicators are unreported; the calculated payout ratio of -257.6% is a function of negative earnings and suggests policy risk if dividends were maintained, but actual cash dividend data are unavailable. Overall, the quarter signals pressure on profitability and earnings quality, mitigated by still-adequate liquidity and manageable leverage, but with elevated tax volatility and a heavier short-term debt profile.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: -0.6% (Net Income -2.37 / Revenue 369.98)
• asset_turnover: 1.469 (Revenue 369.98 / Assets base; as provided)
• financial_leverage: 2.25x (Total Assets 251.90 / Total Equity 111.92)
• calculated_ROE: -2.1% (matches provided DuPont result) margin_quality:
• gross_margin: 22.8% (84.34 / 369.98)
• SGA_ratio: 21.1% (78.03 / 369.98)
• operating_margin: 0.5% (1.78 / 369.98)
• ordinary_income_margin: 0.2% (0.67 / 369.98)
• net_margin: -0.6% (-2.37 / 369.98)
• comments: Margins compressed sharply due to cost stickiness and likely lower utilization. Non-operating net expense (approx. -0.20) modestly hurt ordinary income. Elevated tax expense (142.7% effective rate) drove net loss despite positive PBT from extraordinary items. operating_leverage: Revenue declined slightly (-0.7% YoY) but operating income fell 71.7% YoY, evidencing strong negative operating leverage. Fixed/semi-fixed SG&A and delivery costs appear insufficiently flexible to volume changes, magnifying small top-line shifts into large EBIT swings.

Growth Assessment

revenue_sustainability: Top line was essentially flat to slightly lower at -0.7% YoY, suggesting subdued client demand and/or slower project starts. Inventory is negligible (0.20), consistent with service delivery; growth depends on headcount utilization and pricing rather than inventory build. profit_quality: Profit before tax exceeded ordinary income, implying reliance on extraordinary items to offset weak core profit. Non-operating items were mildly negative, while the tax burden was unusually high, indicating one-offs in tax adjustments or valuation changes (e.g., deferred tax). The quality of earnings is therefore weak this quarter. outlook: Near-term earnings hinge on utilization recovery, pricing discipline, and SG&A containment. With leverage modest and liquidity adequate, the company has runway to adjust cost structure. However, if end-markets (e.g., game/tech client activity) remain soft, margins may stay compressed.

Financial Health

liquidity:

• current_ratio: 1.28x (197.08 / 153.91)
• quick_ratio: 1.28x ((197.08 - 0.20) / 153.91)
• cash: 70.13
• working_capital: 43.17
• assessment: Near-term liquidity is adequate, anchored by cash roughly equal to short-term borrowings. Receivables are unreported, limiting visibility into collection risk. solvency_capital_structure:
• total_liabilities_to_equity: 1.43x (159.96 / 111.92)
• interest_bearing_debt_to_equity: 0.63x ((70.00 + 0.62) / 111.92)
• net_cash_debt: -0.49 (cash 70.13 - interest-bearing debt 70.62), effectively neutral
• interest_coverage: 5.19x (provided; vs. 1.78 / 0.34 ≈ 5.24x)
• intangibles: Goodwill 21.83 (≈19.5% of equity); Intangible assets 41.85 (≈16.6% of assets).
• assessment: Balance sheet is moderate in leverage with a tilt to short-term debt, implying some refinancing/rollover risk. Intangible intensity elevates impairment sensitivity if weak earnings persist.

Cash Flow Quality

earnings_quality: Limited by lack of OCF disclosure. Earnings include significant tax expense and extraordinary impacts, reducing repeatability. Non-operating net expense is modest but ordinary income is thin. free_cash_flow: FCF unreported. With limited capex data and no OCF, FCF coverage cannot be assessed. working_capital: Receivables and payables not disclosed. Given service model and negligible inventories, cash conversion is primarily driven by DSO and billing cycles; visibility is limited this quarter.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio of -257.6% reflects negative earnings and suggests dividends, if paid, are not covered by current period profits. Actual DPS and total dividends are unreported, so this indicator should be treated cautiously. FCF_coverage: Not assessable due to lack of OCF/FCF disclosure. policy_outlook: With a quarterly net loss and thin operating margin, sustaining prior dividends would likely depend on balance sheet capacity and management’s capital allocation stance. Short-term debt reliance argues for prudence until earnings normalize.

Risk Assessment

Business Risks:

• Demand cyclicality from gaming and tech clients affecting utilization rates.
• Pricing pressure and wage inflation impacting gross margin in labor-intensive delivery.
• Project timing and ramp risk leading to quarter-to-quarter volatility.
• High intangible asset base raises impairment risk if performance weakens.
• Overseas operations exposure to FX and geopolitical disruptions (if applicable to service footprint).

Financial Risks:

• Short-term borrowing concentration (70.00) introduces refinancing/rollover risk.
• Thin interest coverage (~5x) could compress further if operating profit weakens.
• High effective tax burden volatility (142.7% this quarter) undermines net income predictability.
• Limited disclosure on receivables/payables constrains visibility into cash conversion and credit risk.

Key Concerns:

• Negative operating leverage with small revenue changes causing outsized profit swings.
• Extraordinary/tax effects driving divergence between PBT and net income.
• Potential dividend-policy strain amid negative net income and limited cash flow disclosure.

Investment Implications

Key Takeaways:

• Top line is broadly stable but margins compressed severely; operating margin at 0.5%.
• ROE turned negative (-2.1%) due to a thin/negative net margin.
• Liquidity adequate (current ratio 1.28x) but short-term debt is high versus cash.
• Intangible and goodwill levels are material, adding impairment sensitivity.
• Earnings quality is weak this quarter, with large tax expense and extraordinary effects.

Metrics to Watch:

• Utilization rate and billable headcount productivity.
• SG&A efficiency and subcontractor/people cost ratios versus revenue.
• Order backlog/book-to-bill and pipeline in gaming/tech verticals.
• DSO/collections once receivables are disclosed; OCF conversion from EBIT.
• Interest coverage and the refinancing profile of short-term loans.
• Any guidance on extraordinary items and normalization of effective tax rate.

Relative Positioning: Within the Japanese QA/testing and customer support outsourcing space, the company shows stable revenue but weaker profitability versus peers emphasizing higher-value consulting/automation. Balance sheet leverage is moderate, but the reliance on short-term debt and elevated intangibles increase sensitivity to cyclical downturns compared to more asset-light, cash-rich peers.

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