JIG-SAW INC. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥2.67B
• Operating Income: ¥397M
• Net Income: ¥361M
• EPS: ¥45.58

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

JIG-SAW (3914) reported FY2025 Q3 consolidated results under JGAAP with modest top-line growth but softer profitability. Revenue was ¥2,672m, up 3.2% YoY, while operating income declined 10.6% YoY to ¥397m, indicating margin compression despite strong gross profitability. Gross profit reached ¥1,815.7m, implying a robust gross margin of 68.0%, which is a key strength for a software/services-heavy model. Operating margin was approximately 14.9% (¥397m/¥2,672m), down YoY given the negative operating income growth versus positive revenue growth. Ordinary income of ¥444m and net income of ¥300m translate into an 11.23% net margin, confirming solid underlying profitability levels. The DuPont framework yields a calculated ROE of 9.33%, derived from an 11.23% net margin, 0.571x asset turnover, and 1.45x financial leverage, in line with the reported ROE of 9.33%. Asset efficiency (turnover 0.571x) is typical for an asset-light model, while leverage is moderate with total liabilities of ¥1,701.9m against equity of ¥3,216m (debt-to-equity 0.53x). Liquidity appears strong: current assets of ¥3,392.6m versus current liabilities of ¥1,332.7m yield a current ratio of 254.6% and working capital of about ¥2,060m. Interest expense is minimal at ¥0.8m, producing an interest coverage ratio of approximately 485x, underscoring low financial risk. While the calculated section shows an effective tax rate of 0.0%, the disclosed income tax of ¥136.0m against net income of ¥300.0m suggests a normalized tax burden; using ordinary income as a proxy for pre-tax implies a tax rate in the low-30% range, subject to JGAAP definition differences. Cash flow data (OCF/FCF) are not disclosed in the provided XBRL extract, as are D&A and cash & equivalents, limiting earnings quality and FCF analysis; zeros should be interpreted as unreported rather than true zeros. Dividend remains nil (DPS ¥0), implying retained earnings support for growth and/or balance sheet reinforcement. The equity ratio is shown as 0.0% in the dataset, but the balance sheet implies equity/asset ratio of roughly 68.8%, indicating a conservative capital structure; we treat the 0.0% as an undisclosed tag. Overall, the quarter exhibits resilient gross economics but indicates operating cost pressure and a pause in operating leverage. Near-term focus should be on SG&A intensity, revenue mix (recurring vs. project), and visibility into cash generation once cash flow statements are available. Data limitations on cash flows and D&A necessitate cautious interpretation of EBITDA and free cash flow metrics.

Profitability Analysis

roe_decomposition: ROE 9.33% = Net margin 11.23% × Asset turnover 0.571 × Financial leverage 1.45. The net margin reflects solid profitability for an asset-light services business; asset turnover is moderate; leverage is conservative, modestly amplifying returns. margin_quality: Gross margin is high at 68.0%, indicating strong pricing and a favorable mix (likely recurring services/IoT and software-enabled operations). Operating margin of ~14.9% is healthy but down YoY given operating income decline (-10.6%) against revenue growth (+3.2%), pointing to higher operating expenses (e.g., personnel, R&D, cloud/infrastructure, or sales investments). Net margin of 11.23% remains robust after minimal interest burden (¥0.8m) and a normalized tax outflow implied by ¥136.0m income tax. operating_leverage: Negative in the period: revenue increased while operating profit fell, implying cost growth outpaced sales. With high gross margin, incremental margins should be attractive when growth reaccelerates and cost growth normalizes; near-term, SG&A efficiency is the swing factor.

Growth Assessment

revenue_sustainability: Top-line growth of +3.2% YoY (¥2,672m) suggests steady but subdued momentum; sustainability depends on recurring contract renewals, upsell to installed base, and new logo wins in IoT/managed services. profit_quality: Despite strong gross margin, declining operating profit indicates investment or cost inflation. Minimal interest expense supports earnings quality, and an implied non-zero tax burden signals normalized profitability. Lack of D&A disclosure limits assessment of non-cash components. outlook: If sales mix skews toward higher-margin recurring services, operating leverage can recover. Conversely, persistent SG&A growth or elevated delivery costs could cap margin expansion. Visibility will improve with disclosures on backlog/ARR, churn, and pipeline conversion.

Financial Health

liquidity: Current assets ¥3,392.6m vs. current liabilities ¥1,332.7m; current ratio 254.6%, quick ratio 254.6% (no inventories reported). Working capital is approximately ¥2,060m, indicating ample short-term coverage. solvency: Total liabilities ¥1,701.9m against equity ¥3,216.0m yields debt-to-equity of 0.53x and an implied equity ratio near 68.8% (despite a 0.0% tag in the data), reflecting a solid cushion. capital_structure: Low interest burden (¥0.8m) and very high interest coverage (~485x) indicate conservative leverage; balance sheet capacity exists for investment if needed.

Cash Flow Quality

earnings_quality: Tax expense (¥136.0m) and low interest costs support the view of recurring, cash-generative operations; however, absent OCF/FCF and D&A data, we cannot triangulate accrual intensity or non-cash contributions. fcf_analysis: Free cash flow not disclosed (0 indicates unreported). With high gross margin and positive working capital, the business likely generates cash, but confirmation requires OCF and capex figures. working_capital: Positive working capital of ~¥2,060m suggests operational flexibility; further detail on receivables turnover and contract liabilities would clarify cash conversion.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 and payout ratio is 0.0%, indicating full earnings retention. Given current ROE (9.33%) and growth investments implied by higher operating costs, retention aligns with reinvestment. fcf_coverage: Not assessable due to undisclosed OCF/FCF; no dividend outflow reduces near-term cash demands. policy_outlook: With a conservative balance sheet and no dividend, future policy likely hinges on achieving stable operating leverage and visible cash generation; management may prioritize growth and balance sheet strength.

Risk Assessment

Business Risks:

• Slower-than-expected revenue growth in core IoT/managed services segments
• Margin compression from rising personnel, infrastructure, or customer acquisition costs
• Customer concentration risk typical of B2B tech service models
• Project timing/recognition volatility impacting quarterly results
• Competition from domestic and global cloud/service providers

Financial Risks:

• Limited visibility on cash flows due to undisclosed OCF/FCF and D&A
• Potential working capital swings from receivables collection or contract liabilities
• Exposure to tax rate variability (inferred effective tax not explicitly disclosed)

Key Concerns:

• Operating income decline despite revenue growth (negative operating leverage)
• Insufficient cash flow disclosure to validate earnings-to-cash conversion
• High dependence on maintaining premium gross margins to support ROE

Investment Implications

Key Takeaways:

• Revenue grew 3.2% YoY to ¥2,672m; growth is positive but modest
• Operating income fell 10.6% YoY to ¥397m; operating margin ~14.9%
• Gross margin is strong at 68.0%, underpinning profitability
• ROE 9.33% driven by 11.23% net margin, 0.571x asset turnover, and 1.45x leverage
• Balance sheet is conservative: D/E 0.53x, implied equity ratio ~68.8%, interest coverage ~485x
• Liquidity robust: current ratio 254.6%, working capital ~¥2,060m
• Cash flow and D&A not disclosed; FCF and EBITDA cannot be validated
• Dividend is nil (DPS ¥0), earnings retained for growth or balance sheet strength

Metrics to Watch:

• OCF and FCF once disclosed; OCF/Net income conversion ratio
• SG&A-to-sales and personnel cost trajectory for operating leverage recovery
• ARR/recurring revenue mix, churn, and net retention
• Backlog/pipeline indicators for near-term growth visibility
• Contract liabilities and receivables turnover for cash conversion
• Tax rate normalization and any one-off items

Relative Positioning: Compared to domestic asset-light tech/service peers, JIG-SAW exhibits superior gross margins and conservative leverage, but near-term operating leverage underperforms given cost growth outpacing sales; cash flow transparency is currently below peers where OCF/FCF data are regularly disclosed.

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