Showcase Inc. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥2.58B
• Operating Income: ¥80M
• Net Income: ¥-719M
• Earnings per Unit (EPU): ¥94.20

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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: Mixed quarter with severe topline contraction but headline net profit boosted by likely one-off gains, masking weak underlying operations. Revenue was 25.82, down 45.7% YoY, indicating a sharp slowdown in core activity. Gross profit was 10.65, implying a 41.3% gross margin; operating income was 0.80, for an operating margin of about 3.1%. Ordinary income was 0.75, broadly consistent with operating income after minor non-operating items (income 0.03, expenses 0.22). Profit before tax was -7.03, yet net income printed 8.07 and comprehensive income 9.04, implying sizable extraordinary gains (on the order of roughly 15–16) not detailed in the dataset. Net profit margin was an elevated 31.2%, driven by these non-recurring items rather than operating performance. DuPont shows ROE at 45.3% (NPM 31.2% × asset turnover 1.024 × leverage 1.42x), again primarily inflated by non-operating, likely extraordinary, factors. Liquidity remains very strong with current ratio at 328.8% and quick ratio at 328.8%, and the company sits in a net cash position (cash 7.85 vs total loans 4.71). Interest coverage is acceptable at 5.78x based on the modest operating income and low interest burden (0.14). Working capital is ample at 14.13, reducing short-term funding risk. However, the 45.7% revenue drop points to weakened demand or mix shifts; SG&A (12.64) exceeds gross profit (10.65), limiting operating leverage. There is a data mismatch between reported cost of sales (36.93) and gross profit; margins were assessed using the internally consistent revenue and gross profit. Cash flow was not disclosed; earnings quality cannot be validated against operating cash flow, which is a key gap given the reliance on extraordinary profit. With retained earnings still slightly negative (-0.47), consistent profitability and cash generation will be necessary to rebuild equity quality and consider sustainable shareholder returns. Forward-looking, the focus should be on stabilizing revenue, improving cost structure to lift operating margin, and demonstrating cash-based earnings absent one-time gains.

Profitability Analysis

ROE decomposition: ROE 45.3% = Net Profit Margin 31.2% × Asset Turnover 1.024 × Financial Leverage 1.42x. The largest driver this period is the surge in net profit margin, which is inconsistent with operating trends and appears linked to extraordinary gains (profit before tax -7.03 reversing to net income 8.07). Asset turnover at ~1.02 is reasonable for a small IT/services company and appears stable, while leverage is modest at 1.42x, providing limited amplification. Business explanation: subdued operating margin (3.1%) amid a 45.7% revenue decline suggests weaker volume and under-absorption of fixed costs; the headline net margin was elevated by non-recurring gains rather than core earnings. Sustainability: the boost from extraordinary items is unlikely to recur; absent such gains, ROE would normalize materially lower. Cost structure watchouts: SG&A (12.64) exceeds gross profit (10.65), indicating negative operating leverage; absent revenue recovery or SG&A discipline, operating margin may remain thin.

Growth Assessment

Revenue contracted 45.7% YoY to 25.82, indicating a significant deceleration. Operating income of 0.80 (3.1% margin) suggests weak underlying profitability post-decline. Ordinary income at 0.75 is consistent with subdued core profit; non-operating items were minor. Net income of 8.07 is inconsistent with pre-tax loss (-7.03), implying one-off gains that are not a durable earnings base. With no segment or backlog disclosure, sustainability of revenue is unclear; core demand signals appear soft given the magnitude of the decline. Outlook hinges on reaccelerating topline and restoring operating leverage; near-term profit is likely to compress if extraordinary gains do not repeat. Key catalysts would include new product wins, subscription retention improvement, and cost rationalization to bring SG&A below gross profit.

Financial Health

Liquidity is strong: current ratio 328.8% and quick ratio 328.8% (no inventory reported), with working capital of 14.13. No warning triggers: Current Ratio is well above 1.0 and D/E is a conservative 0.42x. Balance sheet shows cash and deposits 7.85 against short-term loans 4.00 and long-term loans 0.71, implying net cash of approximately 3.14; short-term obligations are well covered by cash and current assets, keeping maturity mismatch risk low. Total assets are 25.21 and equity 17.81, supporting a healthy equity buffer. Retained earnings are still slightly negative (-0.47), reflecting accumulated past losses; ongoing profitability is needed to strengthen equity quality. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow are unreported, so OCF/Net Income and FCF coverage cannot be assessed. Given the reliance on extraordinary gains to achieve positive net income, cash conversion risk is elevated until OCF is disclosed. Working capital appears ample, and interest coverage of 5.78x suggests manageable cash interest; however, without OCF data we cannot validate earnings quality. No clear signs of working capital manipulation can be assessed due to missing AR/AP and inventory turnover details.

Dividend Sustainability

Dividend data are unreported, and payout ratios are not calculable. With net income driven by extraordinary gains and OCF unreported, we cannot confirm capacity for sustained distributions. The balance sheet is conservative with net cash, but the revenue decline and thin operating margin argue for cautious capital returns until recurring profitability and FCF are demonstrated. Policy outlook depends on restoring operating income and achieving positive, stable OCF.

Risk Assessment

Business Risks:

• Severe revenue contraction (-45.7% YoY) indicating demand weakness or churn.
• Operating margin pressure with SG&A (12.64) exceeding gross profit (10.65).
• High dependence on non-recurring gains to achieve positive net income this period.
• Execution risk in cost control and re-acceleration of sales pipeline.

Financial Risks:

• Earnings quality risk due to lack of OCF disclosure; OCF/NI cannot be assessed.
• Retained earnings negative (-0.47), limiting distributable reserves until consistently rebuilt.
• Potential sensitivity to refinancing if short-term loans (4.00) were to rise, though currently covered by cash.

Key Concerns:

• Data inconsistency between reported cost of sales (36.93) and gross profit (10.65), complicating margin analysis.
• Unspecified extraordinary income needed to reconcile pre-tax loss (-7.03) to net income (8.07).
• Visibility: absence of segment/AR/inventory data limits assessment of demand and working capital dynamics.

Investment Implications

Key Takeaways:

• Headline ROE (45.3%) and NPM (31.2%) are inflated by one-off gains; core profitability is modest.
• Core operations weakened materially as evidenced by a 45.7% revenue decline and ~3.1% operating margin.
• Balance sheet strength (net cash ~3.14, current ratio ~329%) provides runway to execute a turnaround.
• Earnings quality cannot be verified without OCF; cash conversion is a key unknown.
• Sustainable improvement requires revenue stabilization and SG&A discipline to restore operating leverage.

Metrics to Watch:

• Disclosure of extraordinary gains and their recurrence likelihood.
• Operating cash flow and OCF/NI ratio (target >1.0).
• Revenue trajectory and backlog/new bookings.
• Gross margin trend (and resolution of cost of sales disclosure inconsistency).
• SG&A run-rate vs revenue growth (ensure SG&A growth ≤ revenue growth).
• Net cash position and any changes to short-term borrowing.

Relative Positioning: Versus small-cap domestic IT/service peers, the company exhibits weaker current topline momentum and thinner operating margins, offset by a stronger liquidity profile and net cash; reported ROE outperforms on a one-off basis but is not indicative of recurring earnings power.

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