SIOS Corporation FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥13.61B
• Operating Income: ¥296M
• Net Income: ¥-13M
• EPS: ¥27.19

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

Saios Co., Ltd. (3744) reported FY2025 Q3 consolidated results under JGAAP showing a mixed but improving earnings profile marked by significant cost discipline and recovering profitability despite top-line contraction. Revenue was ¥13.605bn, down 13.4% YoY, indicating softer demand or deliberate portfolio pruning, yet operating income rose sharply to ¥296m (+811.8% YoY) from a low base, highlighting effective expense control and/or improved gross margin mix. Gross profit was disclosed at ¥3.946bn, implying a 29.0% gross margin, which aligns with the provided margin metric; however, the reported cost of sales (¥11.772bn) does not reconcile with gross profit and revenue, suggesting the cost figure may include items classified differently or contains a disclosure mismatch. Ordinary income reached ¥363m and net income was ¥235m (-23.2% YoY), producing a net margin of 1.73%, indicating that below-operating-line items and/or non-operating factors weighed on bottom-line YoY. The DuPont decomposition yields an ROE of 13.41% (net margin 1.73% × asset turnover 1.856 × leverage 4.18), reflecting modest profitability supported by efficient asset turnover and relatively high financial leverage. The balance sheet shows total assets of ¥7.329bn, equity of ¥1.752bn, and liabilities of ¥6.548bn, implying a leverage ratio (assets/equity) of 4.18x and a debt-to-equity of 3.74x; the disclosed equity ratio metric of 0.0% is clearly a placeholder, with the implied equity ratio actually around 23.9%. Liquidity appears adequate with current assets of ¥7.176bn versus current liabilities of ¥6.183bn (current ratio ~116%), though the quick ratio equivalence is not reliable due to inventories being unreported rather than zero. Interest burden is minimal (interest expense ~¥0.713m) and coverage is very strong (≈415x on operating income), reducing near-term refinancing risk. EPS printed at ¥27.19, but per-share balance sheet metrics are not assessable as shares outstanding were unreported. Operating, investing, and financing cash flows are undisclosed (reported as zeros), preventing direct assessment of cash conversion or free cash flow; consequently, the reported OCF/NI ratio of 0.00 and FCF metrics should not be interpreted as economic zeros. Dividend per share is disclosed as ¥0 with a payout ratio of 0%, consistent with a cautious capital allocation stance or the absence of a declared interim distribution; sustainability assessment requires cash flow visibility. Overall, despite revenue pressure, the company exhibits improved operating profitability, solid interest coverage, and manageable liquidity, but the absence of cash flow disclosures and certain inconsistencies in cost/margin metrics are key analytical limitations. The outlook hinges on sustaining a higher gross margin mix and maintaining cost discipline while stabilizing demand in core segments. Monitoring backlog, order intake, and recurring revenue components will be critical to assess the durability of the margin-led recovery. Given the leverage level and modest equity base, maintaining profitability is important to preserve balance sheet resilience.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 1.73% (NI ¥235m / Revenue ¥13,605m)
• asset_turnover: 1.856x (Revenue ¥13,605m / Assets ¥7,329m)
• financial_leverage: 4.18x (Assets ¥7,329m / Equity ¥1,752m)
• calculated_ROE: 13.41% (matches reported) margin_quality: Gross margin is disclosed at 29.0% (implied gross profit ≈¥3,945.8m), which aligns with the gross profit figure but does not reconcile with the reported cost of sales. Operating margin stands at ~2.18% (¥296m/¥13,605m), indicating improved expense efficiency versus the prior-year low base. Net margin is 1.73%, showing drag from non-operating items and taxes. operating_leverage: Revenue declined 13.4% YoY while operating income surged +811.8% YoY, suggesting positive operating leverage from cost rationalization and/or higher-margin mix. The rebound from a depressed prior-year operating base amplifies the growth rate; sustainability will depend on maintaining gross margin and SG&A discipline.

Growth Assessment

revenue_sustainability: Top-line contracted to ¥13.605bn (-13.4% YoY), indicating demand softness, project timing, or portfolio reshaping. Without segment disclosure, sustainability is unclear; visibility would improve with order backlog and recurring revenue mix data. profit_quality: Operating income of ¥296m and ordinary income of ¥363m point to improved core profitability despite lower revenue. Net income fell 23.2% YoY, implying non-operating factors, prior-year one-offs, or tax effects impacted the bottom line. outlook: Near-term trajectory depends on defending the 29% gross margin, controlling SG&A, and stabilizing sales. If revenue stabilizes and margin gains hold, operating profit growth could persist; however, absent OCF data, conversion of earnings to cash remains unverified.

Financial Health

liquidity: Current assets ¥7,175.7m vs current liabilities ¥6,183.0m yield a current ratio of ~116%. Quick ratio is reported equal to current ratio because inventories are unreported; true quick liquidity may be lower if inventories exist. solvency: Total liabilities ¥6,547.9m vs equity ¥1,752.0m imply debt-to-equity of ~3.74x and an equity ratio of ~23.9% (despite the placeholder 0.0%). Interest expense is minimal (¥0.713m) with coverage ≈415x on operating income, indicating low interest burden. capital_structure: Leverage (assets/equity) at 4.18x supports ROE but heightens sensitivity to earnings volatility. Maintaining profitability is essential to preserve equity cushion.

Cash Flow Quality

earnings_quality: Cash flow statements are undisclosed (zeros indicate not reported), so OCF/NI and FCF cannot be assessed; the presented OCF/NI ratio of 0.00 should not be interpreted as economic zero. FCF_analysis: Free cash flow is not disclosed. Capex and depreciation are also unreported, preventing insight into reinvestment needs and cash conversion. working_capital: Working capital is ¥992.7m (current assets minus current liabilities). Receivables, payables, and inventory dynamics are not provided, limiting analysis of cash conversion cycle.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0.00 with a payout ratio of 0%. Given positive EPS (¥27.19), this indicates retention of earnings, potentially for balance sheet reinforcement or reinvestment. FCF_coverage: Not assessable due to undisclosed OCF and capex; reported FCF coverage of 0.00x is a placeholder. policy_outlook: Without cash flow visibility and given leverage of 3.74x liabilities/equity, a conservative payout stance appears consistent with preserving financial flexibility. Future distributions will likely depend on sustained operating profit and verified cash generation.

Risk Assessment

Business Risks:

• Revenue contraction (-13.4% YoY) suggesting demand softness or project delays
• Dependence on maintaining a higher gross margin mix to support profitability
• Potential customer concentration or cyclical IT spending exposure (typical for software/services)
• Execution risk in cost control after sharp operating rebound from a low base
• Limited disclosure on segment performance and backlog, hindering visibility

Financial Risks:

• Elevated leverage (assets/equity 4.18x; liabilities/equity 3.74x) increases sensitivity to earnings shocks
• Cash flow opacity (OCF/FCF undisclosed) prevents assessment of liquidity generation
• Quick liquidity uncertain as inventories are unreported rather than zero
• Equity base is modest (¥1.752bn), making capital structure reliant on sustained profitability

Key Concerns:

• Inconsistency between reported cost of sales and gross profit/revenue figures
• Absence of cash flow statements, depreciation and capex data
• Net income decline (-23.2% YoY) despite operating improvement, indicating below-OP line pressures

Investment Implications

Key Takeaways:

• Margin-led earnings recovery at the operating level despite double-digit revenue decline
• ROE of 13.41% supported by solid asset turnover and leverage
• Strong interest coverage (~415x) and adequate current ratio (~116%) mitigate near-term funding risk
• Data limitations on cash flow constrain confidence in earnings quality and dividend capacity
• Cost/margin disclosure mismatch warrants cautious interpretation of gross profit drivers

Metrics to Watch:

• Order backlog and book-to-bill to gauge revenue stabilization
• Gross margin trajectory and mix (recurring vs project-based)
• SG&A ratio and operating margin sustainability
• OCF, FCF, and capex once disclosed to validate cash conversion
• Leverage and equity ratio progression
• Non-operating gains/losses and effective tax rate normalization

Relative Positioning: Within Japan small-cap IT/software peers, the company shows improving operating profitability and strong interest coverage but weaker revenue momentum and higher leverage; disclosure gaps on cash flow and some cost/margin inconsistencies place it at a transparency disadvantage relative to best-in-class 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
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