Hybrid Technologies Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥3.02B
• Operating Income: ¥29M
• Net Income: ¥55M
• EPS: ¥1.64

Income Statement

Balance Sheet

Cash Flow Statement

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

Hybrid Technologies (TSE: 42600) reported FY2025 Q4 consolidated IFRS results with revenue of 30.25 (100M JPY), down 3.5% YoY, indicating a mild top-line contraction. Gross profit was 9.74, resulting in a gross margin of 32.2%, which supports a value-added delivery model but leaves limited room for absorption of fixed costs. SG&A of 8.47 consumed most of gross profit, leading to operating income of 0.29 and a thin operating margin of roughly 1.0%. Despite positive operating income, ordinary income was -0.30, implying net non-operating losses of approximately 0.59. Profit before tax was -0.15, yet net income was positive at 0.19, highlighting sizeable below-the-line effects and a distorted effective tax rate of -245.6% due to the small loss at the pre-tax level. Total comprehensive income was -1.08, signaling meaningful OCI losses that reduced equity despite a positive bottom line. EBITDA was 2.12 and the EBITDA margin was 7.0%, reflecting some cash earnings capacity but pressure from SG&A and non-operating items. Cash generation was weak: operating cash flow was 0.12 versus net income of 0.19 (OCF/NI = 0.63x), and free cash flow was negative at -5.28 driven primarily by investing outflows of -5.40. The balance sheet remains moderately strong with total assets of 38.92 and equity of 21.72, implying an equity ratio in the mid-50s and financial leverage of 1.79x. Total liabilities were 17.88, and the liabilities-to-equity ratio was 0.82x, indicating limited balance sheet risk at present. Accounts receivable stood at 3.02, suggesting receivable days of roughly 37, which is reasonable for a project-based service business. DuPont analysis shows a net margin of 0.6%, asset turnover of 0.777, and leverage of 1.79x, yielding an ROE near 0.9%, underscoring subpar profitability. The sharp 73.3% YoY decline in operating income points to negative operating leverage on a modest revenue dip. Cash and equivalents of 9.17 provide a cushion to absorb near-term investment and operating volatility, aided by financing inflows of 0.93 during the period. Dividend information is unreported; given negative FCF and weak earnings quality, internal retention appears prudent until cash conversion improves. Data gaps in current liabilities, interest expense, and dividend policy constrain precision in liquidity and coverage assessments; conclusions rely on the disclosed non-zero items.

Profitability Analysis

ROE_decomposition: Net margin 0.6% x Asset turnover 0.777 x Financial leverage 1.79x = ROE ~0.9%. The ROE is primarily constrained by very low net margin; leverage and turnover are not sufficient to offset the weak profitability. margin_quality: Gross margin at 32.2% is decent for services, but SG&A of 8.47 consumed 87% of gross profit, leaving operating margin at ~1.0% (0.29/30.25). The negative ordinary income (-0.30) suggests non-operating losses (approx. -0.59), further compressing comprehensive profitability. EBITDA margin of 7.0% shows some operating cash earnings, but falls short of covering investments and growth. operating_leverage: Operating income fell 73.3% YoY on a 3.5% revenue decline, indicating high negative operating leverage and limited cost flexibility. The cost structure appears relatively fixed in the short term, making earnings sensitive to volume shifts.

Growth Assessment

revenue_sustainability: Revenue decreased 3.5% YoY to 30.25, implying softer demand or project timing effects. Accounts receivable of 3.02 (about 37 days) suggests collections remain healthy, supporting continuity but not growth acceleration. profit_quality: Operating margin compressed to ~1.0%, and ordinary income was negative, indicating earnings reliance on below-the-line items to achieve positive net income. Total comprehensive income was -1.08, highlighting OCI volatility and weaker equity accretion than net income implies. outlook: Without disclosed backlog, pipeline, or segment mix, near-term growth visibility is limited. Restoring operating margin via cost discipline and stabilizing non-operating items will be necessary to re-establish profit growth. Investment outflows (-5.40) may support future capability and growth, but near-term earnings contribution is uncertain.

Financial Health

liquidity: Current assets are 17.31; current liabilities are unreported, so current and quick ratios cannot be calculated. Cash and equivalents of 9.17 provide liquidity, and receivable days near 37 indicate acceptable working capital turnover. Working capital was shown as 17.31 but likely equals current assets only due to missing current liabilities data. solvency: Equity is 21.72 and total liabilities are 17.88 (liabilities/equity = 0.82x). The equity ratio is disclosed at 54.8% (calculated equity/asset ratio approximates mid-50s), indicating a conservative capital structure. capital_structure: Short-term loans are 1.03 and long-term loans are 2.32, implying modest reliance on interest-bearing debt. Interest coverage cannot be assessed due to unreported interest expense, but low operating income suggests limited buffer if interest costs rise.

Cash Flow Quality

earnings_quality: OCF of 0.12 versus net income of 0.19 (OCF/NI = 0.63x) indicates weak cash conversion, potentially from working capital investments or non-cash profit elements. The negative total comprehensive income further questions underlying earnings durability. FCF_analysis: Free cash flow was -5.28 (0.12 OCF plus -0.05 capex), largely driven by other investing outflows (-5.40) rather than maintenance capex (small at -0.05). This suggests strategic or growth investments, though the payoff horizon is unclear. working_capital: Accounts receivable of 3.02 and reasonable implied DSO support collection efficiency. Inventories and other current liabilities are unreported, limiting assessment of the full working capital cycle.

Dividend Sustainability

payout_ratio_assessment: Dividend amounts and policy are unreported; payout ratios cannot be calculated. Given low net income (0.19), negative FCF (-5.28), and negative comprehensive income (-1.08), internal retention would be more sustainable than distributions at present. FCF_coverage: Not calculable due to unreported dividends. On a standalone basis, negative FCF implies insufficient coverage for any potential cash dividends without tapping cash or financing. policy_outlook: With equity ratio in the mid-50s but soft earnings and cash conversion, a conservative stance on dividends is likely until OCF improves and investing outlays normalize. Explicit guidance is needed to refine this view.

Risk Assessment

Business Risks:

• Revenue volatility from project timing and potential customer budget adjustments (YoY revenue decline of 3.5%).
• High operating leverage and limited cost flexibility evidenced by a 73.3% YoY drop in operating income.
• Profit sensitivity to non-operating items (ordinary income negative despite positive operating profit).
• OCI volatility driving total comprehensive loss (-1.08), which can erode equity and book value.

Financial Risks:

• Weak cash conversion (OCF/NI = 0.63x) and negative FCF (-5.28).
• Limited operating income buffer reduces capacity to absorb potential increases in financing costs (interest expense unreported).
• Visibility on liquidity ratios is constrained due to missing current liabilities; true short-term coverage cannot be verified.
• Dependence on financing inflows (0.93) to partially offset investing cash burn (-5.40).

Key Concerns:

• Sustained sub-1% operating margins and negative ordinary income.
• Earnings quality concerns given divergence between net income and comprehensive income.
• Magnitude and nature of investing outflows without clear payoff timeline.
• Data gaps (current liabilities, interest costs, dividend policy) limiting precise risk quantification.

Investment Implications

Key Takeaways:

• Top-line contracted modestly (-3.5% YoY) but triggered a disproportionate earnings decline due to negative operating leverage.
• Operating margin compressed to ~1.0%, and ordinary income turned negative, pressuring overall profitability.
• EBITDA margin at 7.0% provides some operating cash base but is insufficient to fund current investment pace.
• Free cash flow was deeply negative (-5.28) as investing outflows dominated, despite minimal capex.
• Balance sheet remains moderately strong with liabilities/equity of 0.82x and mid-50% equity ratio.
• Comprehensive loss (-1.08) offsets reported net profit (0.19), weakening equity accretion.
• Liquidity appears adequate given cash of 9.17, but true current ratio is unknown due to unreported current liabilities.

Metrics to Watch:

• Order intake/backlog and quarterly revenue trajectory to gauge recovery from the -3.5% YoY decline.
• Operating margin and SG&A efficiency to assess progress on cost containment.
• Ordinary income and non-operating items to reduce earnings volatility.
• OCF/NI and FCF to validate earnings quality and funding capacity.
• Nature and returns of investing cash outflows (e.g., acquisitions, intangibles).
• Equity ratio and any changes in debt levels, given limited interest coverage visibility.

Relative Positioning: Within Japanese small-cap IT/services peers, the company exhibits comparable gross margins but weaker operating margin resilience and cash conversion this quarter; capital structure is conservative, while profitability and FCF lag near-term.

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