Aeria Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥11.80B
• Operating Income: ¥542M
• Net Income: ¥-352M
• EPS: ¥15.64

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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 was a mixed but overall resilient quarter, with profitability maintained despite a sharp revenue decline and unusual below-the-line swings. Revenue fell 20.7% YoY to 118.1, yet the company posted operating income of 5.4 (OPM ~4.6%), indicating cost control and operating discipline. Gross profit was 44.0 with a gross margin of 37.2%, suggesting the core margin profile remains healthy even as volumes softened. Ordinary income printed at 3.9, but profit before tax was -2.8, implying sizable extraordinary losses between ordinary and pre-tax lines. Despite the pre-tax loss, net income was positive at 3.3 and EPS was 15.64 JPY, aided by a negative effective tax rate (-24%), likely from tax effects such as loss carryforwards or valuation changes. DuPont-calculated ROE was 3.7%, with components: net margin 2.8%, asset turnover 0.563x, and financial leverage 2.39x. Liquidity is strong: current ratio 220% and quick ratio 220%, underpinned by cash and deposits of 85.0. Leverage is moderate to elevated with D/E at 1.39x and interest-bearing loans totaling about 50.4 (short-term 11.1, long-term 39.3). Interest coverage is solid at 5.5x, indicating operating earnings cover interest costs adequately. Non-operating income was 1.5 (dividends 0.15, interest 0.01), but non-operating expenses nearly offset at 1.48; the non-operating income ratio of 46.6% signals meaningful reliance on items outside core operations this quarter. ROIC is estimated at 10.2%, above typical cost-of-capital benchmarks, pointing to decent efficiency on invested capital in aggregate. Earnings quality cannot be fully assessed because operating and free cash flow were unreported; thus, the OCF/NI ratio and FCF coverage of dividends are not calculable. Dividend sustainability looks reasonable at a calculated payout ratio of 32.6%, but cash flow confirmation is pending. Margin dynamics versus last year are unclear due to missing YoY for operating profit; however, the maintained OPM in the face of a double-digit revenue decline implies at least neutral-to-slightly positive operating leverage execution. Forward-looking, the key watchpoints are stabilization of revenue, normalization of extraordinary items driving the gap between ordinary income and pre-tax, and confirmation of cash conversion to support ongoing dividends and debt service.

Profitability Analysis

ROE decomposition: ROE 3.7% = Net Profit Margin (2.8%) × Asset Turnover (0.563x) × Financial Leverage (2.39x). The largest swing factor in the quarter appears to be the net profit margin, given the 20.7% revenue decline and the presence of sizable extraordinary items that pushed PBT negative but net income positive via tax effects. Business drivers: core operations produced a ~4.6% operating margin (5.42/118.05), demonstrating some cost containment (SG&A 46.95 vs gross profit 43.95), but below-the-line items (non-operating and extraordinary) introduced volatility that diluted ordinary-to-net translation. Sustainability: the operating margin looks more sustainable than the net margin given the latter’s dependence on non-recurring tax/extraordinary impacts; absent these, net margin would likely track closer to ordinary income dynamics. Asset turnover at 0.563x indicates moderate capital intensity with scope to improve utilization as revenue stabilizes. Leverage at 2.39x modestly supports ROE but raises sensitivity to earnings volatility. Concerning trend: SG&A (46.95) slightly exceeds gross profit (43.95), implying limited overhead absorption; while operating profit remained positive this quarter, management will need either revenue recovery or SG&A recalibration to avoid margin compression.

Growth Assessment

Top-line contracted 20.7% YoY to 118.1, signaling demand softness or portfolio headwinds. Despite the decline, operating income remained positive at 5.4, implying some flexibility in cost structure and pricing. Non-operating items netted close to zero this quarter (1.52 income vs 1.48 expenses), but the shift from positive ordinary income (3.9) to negative PBT (-2.8) indicates material extraordinary losses; this clouds underlying growth quality. With EPS at 15.64 JPY, earnings growth quality cannot be ascertained absent cash flow data, and the negative effective tax rate suggests one-time tax effects. Revenue sustainability hinges on core business recovery and new pipeline momentum; without segment disclosures, we assume stabilization is needed to prevent further deleveraging of fixed costs. Outlook: if revenue stabilizes and extraordinary losses normalize, ordinary income should better translate to net income; conversely, further top-line weakness could pressure operating margins given SG&A scale.

Financial Health

Liquidity is robust: current ratio 220.1% and quick ratio 220.1%, supported by cash and deposits of 85.0 against current liabilities of 76.5. No warning: current ratio is comfortably >1.0. Solvency: D/E is 1.39x (below the 2.0x warning threshold but elevated vs conservative peers), with short-term loans 11.1 and long-term loans 39.3; total liabilities are 122.0 vs total equity 87.8. Interest coverage of 5.53x indicates manageable debt service capacity from operations. Maturity mismatch risk appears moderate: cash (85.0) plus current assets (168.4) exceed current liabilities (76.5), mitigating near-term refinancing risk; however, the presence of both short-term and sizable long-term loans warrants monitoring in a higher-rate environment. Off-balance sheet obligations: none reported in the provided data.

Cash Flow Quality

Operating cash flow, free cash flow, and capex were unreported, so we cannot compute OCF/Net Income or FCF. This limits our ability to validate earnings quality and dividend coverage. Given ordinary income was positive but PBT turned negative due to extraordinary items, earnings quality is sensitive to below-the-line volatility; cash confirmation will be key. Working capital details (AR, inventory) are unreported; thus, we cannot assess changes in receivables or inventory that might have supported or drained OCF. No explicit signs of working capital manipulation can be inferred from the available data.

Dividend Sustainability

Calculated payout ratio is 32.6%, which is comfortably below the 60% benchmark and suggests room to maintain distributions if earnings persist. However, with FCF unreported, we cannot confirm cash coverage of dividends. Balance sheet liquidity (cash 85.0, strong current ratio) provides a buffer, but reliance on one-off tax/extraordinary effects this quarter introduces uncertainty in recurring distributable income. Policy outlook cannot be assessed without management guidance; stability likely hinges on normalization of below-the-line items and revenue recovery.

Risk Assessment

Business Risks:

• Revenue decline of 20.7% YoY indicates demand or portfolio headwinds that could continue.
• Operating leverage risk: SG&A (46.95) exceeds gross profit (43.95), leaving limited margin for error.
• Dependence on non-operating and extraordinary items driving divergence between ordinary income and PBT.
• Potential industry cyclicality/hit-driven dynamics for digital content or services (exact segment mix not disclosed).

Financial Risks:

• Moderate leverage with D/E at 1.39x increases sensitivity to earnings swings.
• Interest rate risk on 50.4 of interest-bearing loans (short-term 11.1, long-term 39.3).
• Earnings quality uncertainty due to negative effective tax rate (-24%) and lack of OCF data.
• Liquidity reliance on cash balances absent reported operating cash generation.

Key Concerns:

• Gap from ordinary income (3.9) to PBT (-2.8) suggests material extraordinary losses this quarter.
• Net income positive despite negative PBT implies non-recurring tax or consolidation effects; sustainability uncertain.
• Top-line contraction may pressure fixed-cost absorption if not reversed.
• Limited disclosure on segment performance, OCF, and capex constrains forward visibility.

Investment Implications

Key Takeaways:

• Core operations remained profitable (OPM ~4.6%) despite a 20.7% revenue decline.
• ROE at 3.7% is modest; leverage (2.39x) supports returns but increases volatility.
• Strong liquidity (current ratio 220%) offsets refinancing risk; interest coverage is adequate at 5.5x.
• Below-the-line volatility (extraordinary items, tax effects) is currently the biggest driver of NI variability.
• ROIC at 10.2% is healthy in aggregate, but confirmation via segment and cash flow data is needed.

Metrics to Watch:

• Revenue trajectory and order/backlog indicators for signs of stabilization.
• Operating margin vs SG&A run-rate to assess operating leverage.
• Extraordinary gains/losses and reconciliation from ordinary income to PBT.
• OCF, FCF, and capex once disclosed to validate earnings quality and dividend coverage.
• Net debt, interest costs, and refinancing schedule amid rate conditions.
• Effective tax rate normalization and use of tax attributes.

Relative Positioning: Compared to small-cap peers with similar leverage, the company’s liquidity position is strong and ROIC appears solid, but revenue contraction and elevated below-the-line volatility place it in a cautious middle tier on earnings quality until cash flow data and extraordinary item normalization are evidenced.

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