Aplix Corporation FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥2.20B
• Operating Income: ¥155M
• Net Income: ¥103M
• Earnings per Unit (EPU): ¥4.78

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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: Aplix FY2025 Q3 delivered resilient profitability amid a sharp top-line contraction, with positive operating profit and solid operating cash generation but weak capital efficiency and negative free cash flow due to heavy investing outflows. Revenue was 22.01 (−22.0% YoY), while gross profit was 7.61, yielding a gross margin of 34.6%. Operating income reached 1.55, translating to a 7.0% operating margin, and net income was 1.03 (−16.8% YoY) for a 4.7% net margin. Operating cash flow came in at 1.35, exceeding net income (OCF/NI = 1.31x), which indicates acceptable earnings quality this quarter. However, investing cash outflows were large at −9.51, driving free cash flow to −8.16. Financing cash flow was +2.67, helped by incremental borrowing (short-term loans 1.98 and long-term loans 2.48 outstanding), partially offset by dividends (−0.75) and share repurchases (−0.92). The balance sheet remains conservative with equity of 26.22 and D/E of 0.43x, and an equity ratio of 70.0%. Intangibles and goodwill are sizable (goodwill 8.93; intangible assets 8.75), implying integration and impairment risk if performance lags. Calculated ROE is 3.9% and ROIC is 4.0%, below common value-creation thresholds, signaling capital efficiency headwinds. Margins this quarter are: gross 34.6%, operating 704 bps, and net 468 bps; lack of prior-period margin disclosures prevents bps change evaluation. The effective tax rate was 20.8%, broadly normal. Dividend quality looks stretched: a 74.4% payout ratio and negative FCF (FCF coverage −10.65x) suggest dependence on balance sheet or financing to fund returns. Liquidity ratios (current/quick) are not calculable due to unreported current liabilities; thus, short-term liquidity cannot be fully assessed despite current assets of 17.96. Overall, the company stabilized profitability and cash conversion from operations, but capital deployment (likely acquisitions or intangible investments) depressed FCF and weighs on near-term financial flexibility. Forward-looking, sustaining margins and converting recent investments into cash-generating growth are key to improving ROIC, restoring FCF, and supporting dividends without additional leverage.

Profitability Analysis

DuPont ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 4.7% × 0.588 × 1.43x ≈ 3.9%. The most binding constraint on ROE is the low asset turnover (0.588), followed by moderate net margin (4.7%), while leverage remains conservative at 1.43x. The −22% YoY revenue decline depresses asset turnover, and the high balance of intangibles/goodwill increases the asset base, further lowering turnover. Operating margin of ~7.0% shows cost control (SG&A 6.07 vs gross profit 7.61), but the topline weakness likely pressured fixed-cost absorption. Given limited disclosure, we cannot quantify YoY bps changes; however, current margins suggest a business that is profitable but not high-return. Sustainability: margin profile could be maintained near-term if mix and pricing hold, but asset turnover improvement hinges on reacceleration of sales or pruning/optimizing the asset base post-investment. Watch for SG&A growth versus revenue; with revenue down 22% YoY and SG&A absolute level at 6.07, any further negative operating leverage would pressure margins.

Growth Assessment

Revenue contracted 22.0% YoY to 22.01, indicating demand softness or timing effects in key businesses. Operating income of 1.55 and net income of 1.03 (−16.8% YoY) show better resilience at the bottom line than at the top line, implying some cost containment or mix shift. EBITDA was 2.42 (11.0% margin), supporting the view of a still profitable core. Heavy investing CF (−9.51) alongside minimal reported capex (−0.01) suggests investment in financial assets, acquisitions, or internally developed intangibles; balance sheet growth in goodwill (8.93) and intangibles (8.75) is consistent with this. Near-term growth sustainability depends on monetizing these investments into revenue and cash; otherwise, ROIC (4.0%) may stay subscale. Outlook: focus on order inflows, backlog (if applicable), and customer retention to re-accelerate revenue; absent growth, cost actions and asset efficiency will be critical to defend returns.

Financial Health

Leverage is conservative with D/E at 0.43x and an equity ratio of 70.0%. Total assets are 37.44 against total equity of 26.22 (financial leverage 1.43x). Short-term loans are 1.98 and long-term loans are 2.48; interest-bearing debt total is not reported, but these figures indicate modest gross debt. Liquidity assessment is constrained: current ratio and quick ratio are not calculable due to unreported current liabilities; we cannot conclusively assess near-term coverage despite current assets of 17.96 and cash & deposits unreported. There is some maturity mismatch risk as short-term loans exist (1.98) and we cannot verify current liabilities coverage; monitoring debt maturities and available liquidity is important. Off-balance commitments are not disclosed in the dataset; no explicit off-balance sheet obligations can be assessed here.

Cash Flow Quality

OCF/Net Income is 1.31x (>1.0), indicating acceptable earnings quality and conversion this quarter. Free cash flow is −8.16, as positive OCF (1.35) was offset by heavy investing outflows (−9.51). With capex minimal (−0.01), the investing cash likely reflects acquisitions, investments, or intangible development; this is a key swing factor for future FCF normalization. Financing CF of +2.67, despite dividends (−0.75) and buybacks (−0.92), implies net borrowing or other financing inflows to support cash needs. No clear signs of working capital manipulation are apparent from limited disclosures; accounts receivable are 3.65 and inventories 1.12, but we lack period-to-period movements to validate trends.

Dividend Sustainability

The payout ratio is 74.4%, above the <60% benchmark for comfort. FCF coverage is −10.65x, indicating dividends were not covered by free cash flow this period and were effectively financed by cash on hand or incremental financing. Given negative FCF driven by large investing CF, dividend sustainability hinges on either a reduction in investment outflows, an improvement in OCF, or willingness to use the balance sheet. With D/E at 0.43x and a 70% equity ratio, there is capacity, but persistent negative FCF would erode flexibility. Policy outlook: if management prioritizes growth investments, dividend growth may be constrained until FCF improves.

Risk Assessment

Business Risks:

• Revenue decline of 22.0% YoY indicating demand softness or competitive pressure.
• High proportion of goodwill (8.93) and intangible assets (8.75) raises impairment and amortization risk if performance underwhelms.
• Execution risk in monetizing recent investments to lift ROIC above the 5–8% threshold.
• Potential pricing and mix pressure impacting margins if volume recovery is slow.

Financial Risks:

• Negative free cash flow (−8.16) reliant on financing inflows (+2.67) to bridge cash needs.
• Dividend and buyback outflows (−1.67 combined) despite negative FCF increase funding pressure.
• Liquidity opacity: current liabilities unreported, limiting visibility on short-term coverage; presence of short-term loans (1.98) adds refinancing/maturity risk.
• Capital efficiency risk: ROIC at 4.0% below cost-of-capital benchmarks could persist if growth lags.

Key Concerns:

• Sustained top-line weakness could further depress asset turnover and ROE.
• Potential impairment of acquired intangibles/goodwill if expected synergies do not materialize.
• Interest rate exposure on variable-rate debt (if applicable), with interest expense unreported and interest coverage not calculable.
• Dependence on financing to support shareholder returns while FCF is negative.

Investment Implications

Key Takeaways:

• Profitability held (OP margin ~7.0%; NPM 4.7%) despite a 22% revenue decline.
• Earnings quality is acceptable (OCF/NI 1.31x), but FCF is negative due to large investing outflows.
• Balance sheet leverage is modest (D/E 0.43x; equity ratio 70%), offering some buffer.
• Capital efficiency is weak (ROIC 4.0%; ROE 3.9%), requiring either revenue recovery or asset base optimization.
• Dividend coverage is tight (74.4% payout; negative FCF), implying limited scope for increases absent FCF improvement.

Metrics to Watch:

• Top-line trajectory and order intake to gauge recovery from −22% YoY decline.
• Operating margin sustainability versus SG&A discipline.
• OCF trend and working capital movements to validate earnings quality.
• Investing cash outflows breakdown (M&A, intangibles) and subsequent returns (ROIC uplift).
• Liquidity indicators (cash balance, current liabilities) and debt maturity profile.
• Dividend policy updates relative to FCF and leverage.

Relative Positioning: Within small/mid-cap tech/IoT software-adjacent peers, Aplix shows decent operating margins and cash conversion but lags on capital efficiency and FCF due to recent investment outflows; balance sheet strength partially offsets near-term funding strain, leaving execution on growth and ROIC improvement as the key differentiator.

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