Showcase Inc. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥2.58B
• Operating Income: ¥80M
• Net Income: ¥-719M
• EPS: ¥94.20

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

Showcase Co., Ltd. (TSE:3909) reported FY2026 Q3 consolidated results under JGAAP with a sharp top-line contraction but resilient operating profit and an unusually large bottom-line gain. Revenue was ¥2,582m, down 45.7% YoY, indicating a significant reset in volumes or project delivery timing. Despite the contraction, the company posted operating income of ¥80m (+0.0% YoY), suggesting swift cost actions and/or a favorable mix that preserved operating profit. Gross profit of ¥1,065m implies a gross margin of 41.3%, a solid level given the revenue decline and indicative of value-added services or effective pricing. Ordinary income was ¥75m, reflecting interest expense of ¥13.8m and limited non-operating income. Net income was ¥807m, far exceeding operating and ordinary profit, indicating substantial below-the-line gains (likely extraordinary income) and/or tax effects; the provided effective tax rate is 0.0%. DuPont metrics point to a high reported ROE of 45.31%, driven primarily by an elevated net margin (31.25%) and reasonable asset turnover (1.024), with moderate financial leverage (1.42x). Liquidity ratios are strong on the reported figures, with a current ratio and quick ratio both at 213.1% and working capital of about ¥1,589m. Leverage appears moderate with a debt-to-equity ratio of 1.23x and interest coverage of 5.8x, consistent with manageable financial risk in the near term. Cash flow statement items are unreported (all zeros), so cash generation and free cash flow coverage cannot be assessed from the provided data. Dividend per share is undisclosed (DPS 0.00), implying no dividend currently, and payout and FCF coverage metrics are not meaningful in the absence of cash flow data. There are internal inconsistencies in the balance sheet (e.g., current assets exceed total assets; the accounting equation does not reconcile), and some headline ratios (equity ratio 0.0%) appear unreported rather than truly zero. Given these limitations, the analysis relies on the provided calculated metrics (DuPont, margins, interest coverage, liquidity) and income statement line items. Overall, operational profitability remains modest but stable, while the net income surge is likely non-recurring and should not be extrapolated. The key questions for sustainability are revenue stabilization, recurrence of high gross margins, and the extent to which extraordinary gains contributed to net profit. Monitoring order intake, churn, and pipeline conversion will be critical to gauge revenue normalization into FY2027. Financial flexibility appears adequate based on the reported liquidity and coverage ratios, but cash and cash flow clarity are needed to fully assess resilience.

Profitability Analysis

ROE_decomposition: Reported ROE 45.31% = Net margin 31.25% × Asset turnover 1.024 × Financial leverage 1.42. The outsized net margin vs operating margin implies a large extraordinary gain driving ROE rather than core operations. margin_quality: Gross margin is 41.3%, indicating decent pricing power and cost control. Operating income of ¥80m on ¥2,582m revenue suggests an operating margin of roughly 3.1%, far below the 31.25% net margin, confirming non-operating/extraordinary items as the main driver of bottom-line profitability this quarter. operating_leverage: Revenue fell 45.7% YoY, yet operating income was flat YoY at ¥80m. This points to aggressive fixed cost reduction and/or a more profitable mix that offset volume decline. However, sustaining this with lower scale may be challenging without revenue recovery.

Growth Assessment

revenue_sustainability: The 45.7% YoY revenue drop indicates a reset in demand or scope (e.g., lost clients, delayed implementations, or product rationalization). Without disclosure on orders/backlog, sustainability of the current run-rate is uncertain. profit_quality: Net income (¥807m) is not indicative of recurring earnings given the divergence from operating profit (¥80m) and ordinary income (¥75m). The implied extraordinary gains and 0.0% effective tax rate are unlikely to be repeatable. outlook: Short-term stabilization hinges on arresting the revenue decline and maintaining gross margin discipline. If the business can restore even modest growth while holding operating costs at current levels, operating leverage could improve earnings. Conversely, if revenue pressure persists, operating margin may compress.

Financial Health

liquidity: Current ratio 213.1% and quick ratio 213.1% indicate ample short-term liquidity on the reported figures; working capital is approximately ¥1,588.99m. Cash and equivalents are unreported, so the cash buffer itself cannot be confirmed. solvency: Interest coverage of 5.8x (EBIT/interest ≈ ¥80m/¥13.83m) suggests manageable debt service. Debt-to-equity of 1.23x points to moderate leverage. The reported equity ratio is 0.0% (unreported), and balance sheet totals are internally inconsistent, so conclusions rely on the provided leverage metrics. capital_structure: Financial leverage in DuPont (Assets/Equity) is 1.42x, consistent with moderate leverage. Ordinary income is slightly below operating income, reflecting interest burden but not excessive financial strain.

Cash Flow Quality

earnings_quality: With operating CF unreported, we cannot reconcile earnings to cash. The disparity between operating profit (¥80m) and net profit (¥807m) indicates reliance on non-operating/extraordinary items; thus, current period earnings quality is low from a cash sustainability perspective. FCF_analysis: Free cash flow is unreported (0). Capex and working capital movements are unknown, preventing assessment of true FCF generation or reinvestment needs. working_capital: Working capital is positive and sizable on the reported numbers (≈¥1,589m), but without cash flow details we cannot judge whether this position improved through operations or one-off events.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is 0.00 and payout ratio is 0.0%, implying no distributions. Given net income is likely inflated by non-recurring items, a low payout is consistent with prudence. FCF_coverage: FCF coverage is not meaningful as FCF is unreported. Without OCF and capex data, coverage of any prospective dividend cannot be assessed. policy_outlook: With revenue under pressure and earnings boosted by non-recurring items, management is likely to prioritize balance sheet flexibility and reinvestment until core profitability normalizes. Any future dividend initiation would depend on visible, recurring OCF.

Risk Assessment

Business Risks:

• Sustained revenue decline (-45.7% YoY) indicating potential market share loss or demand contraction
• Dependence on non-recurring gains to support net income, masking underlying operating trends
• Potential client concentration or project timing risk leading to volatile quarterly revenue
• Pricing pressure or increased competition that could erode the 41.3% gross margin
• Execution risk in cost restructuring to maintain operating profit at reduced scale

Financial Risks:

• Limited visibility on cash and cash flows due to unreported CF statements
• Moderate leverage (D/E 1.23x) and interest burden, with coverage at 5.8x potentially weakening if EBIT declines
• Balance sheet inconsistencies (e.g., current assets > total assets) reduce reliability of solvency analysis
• Potential reversal risk of extraordinary gains impacting future net income

Key Concerns:

• Quality and sustainability of earnings given the large gap between operating and net income
• Visibility into cash generation and liquidity absent OCF and cash disclosures
• Path to revenue stabilization and recovery after a steep YoY decline

Investment Implications

Key Takeaways:

• Top line down 45.7% YoY to ¥2,582m, but operating income held at ¥80m
• Gross margin solid at 41.3%, indicating some pricing/mix strength
• Net income of ¥807m driven by non-operating/extraordinary items; not indicative of run-rate earnings
• ROE reported at 45.31% chiefly due to elevated net margin effects, not core operations
• Liquidity appears strong (current ratio 213.1%), leverage moderate (D/E 1.23x), but cash flow data absent

Metrics to Watch:

• Order intake/backlog and net revenue retention to assess revenue trajectory
• Operating margin ex-nonrecurring items and SG&A run-rate versus revenue
• Cash and operating cash flow, including working capital movements
• Recurrence or absence of extraordinary gains below operating line
• Interest coverage trend amid potential EBIT volatility

Relative Positioning: Based on provided metrics, Showcase demonstrates resilient operating profit and solid gross margins despite a substantial revenue drop, but its reported profitability and ROE are heavily influenced by non-recurring items. Liquidity and leverage appear acceptable on reported ratios, yet lack of cash flow disclosure and balance sheet inconsistencies limit comparability and increase uncertainty versus peers with clearer reporting and steadier core earnings.

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