Quick View
| Metric | Current Period | Same period last year | YoY |
|---|---|---|---|
| Revenue | ¥116.1B | ¥117.2B | −1.0% |
| Operating Income | ¥6.7B | ¥4.8B | +39.8% |
| Ordinary Income | ¥7.0B | ¥4.8B | +43.5% |
| Net Income | ¥5.4B | ¥1.4B | +381.7% |
| ROE | 9.6% | 2.4% | - |
Executive Summary
In FY2026 Q3 consolidated results, Revenue was ¥116.1B (YoY -¥1.2B, -1.0%), a slight decrease, while Operating Income was ¥6.7B (YoY +¥1.9B, +39.8%), Ordinary Income ¥7.0B (YoY +¥2.1B, +43.5%), and Net Income ¥5.4B (YoY +¥4.0B, +281.4%), achieving significant profit growth. The primary driver was improved operating leverage through SG&A control; while maintaining a Gross Margin of 38.2%, the Operating Margin expanded to 5.8%. The full-year outlook expects Revenue of ¥164.0B (YoY +5.6%), Operating Income of ¥11.0B (YoY +55.6%), and Net Income of ¥8.5B, projecting topline and bottom-line growth.
Key Financial Metrics
[Profitability] ROE 9.1% (above the average of the past five fiscal years), Operating Margin 5.8%, Net Margin 4.7%, ROA (Return on Assets) 4.2%. DuPont analysis shows ROE 9.1% formed by Net Margin 4.4% × Total Asset Turnover 1.122x × Financial Leverage 1.84x. Profitability improvement at the operating level was achieved through SG&A restraint. [Efficiency] Total Asset Turnover of 1.122x indicates solid asset efficiency. Accounts Receivable of ¥20.5B increased +35.3% YoY, and Days Sales Outstanding (DSO) of approximately 65 days is at a warning level for collection delays. Inventories are ¥0.2B, up +79.2% YoY, with Work in Process (WIP) accounting for the majority. [Financial Soundness] Equity Ratio 54.4% (Equity attributable to owners of parent 46.3%), Current Ratio 158.8%, and Quick Ratio 158.3% indicate healthy short-term payment capacity. Interest-bearing Debt is ¥8.6B with Debt/EBITDA of 1.09x and Interest Coverage of 48.45x, showing ample ability to service interest. However, the Short-term Liabilities Ratio is a relatively high 63.2%, and Cash and Deposits are ¥41.1B (YoY -26.9%), decreasing by ¥15.1B during the period. [Investment/Shareholder Returns] Dividend is ¥50 at year-end (implied Payout Ratio 73.1%). Goodwill of ¥15.6B and Intangible Assets of ¥16.4B total ¥32.1B in intangibles, accounting for 31.0% of total assets.
Cash Flow Analysis
Cash and Deposits decreased by ¥15.1B YoY to ¥41.1B. While there is no direct disclosure of Operating Cash Flow (OCF), analysis of funding movements from BS trends shows that despite recording Net Income of ¥5.4B, Accounts Receivable increased by +¥5.4B and Inventories, including WIP, increased by +¥0.1B, indicating an expansion of working capital. The main cause of cash decrease is inferred to be working capital pressure due to delayed collection of receivables, and an accruals ratio of 10.0% suggests a divergence between accrual-based profit and cash. On the financing side, Long-term Borrowings decreased by -¥1.1B (YoY -25.2%), with repayments progressing. Short-term Borrowings are ¥5.4B, almost flat YoY. Cash coverage of short-term liabilities is 7.58x, so liquidity is secured, but the pace of cash balance decline warrants monitoring.
Quality of Earnings
With Ordinary Income at ¥7.0B and Operating Income at ¥6.7B, net non-operating gain is about ¥0.3B and limited. The net increase from non-operating income of ¥0.4B minus non-operating expenses of ¥0.2B is small, and the majority of Ordinary Income is derived from core operations. Net Income of ¥5.4B is the result after deducting tax expenses, etc., from Ordinary Income of ¥7.0B, and the impact of extraordinary gains/losses is minor. EBITDA, adding depreciation of ¥1.2B, is ¥7.9B, with an EBITDA margin of 6.8%. However, due to the +35.3% YoY increase in Accounts Receivable and the rise in Inventories, the estimated OCF is presumed negative, and the cash backing for earnings is weak. The accruals ratio of 10.0% and Cash Conversion Ratio of -0.67x (estimate) indicate a level of concern regarding earnings quality. While Operating Income is improving, delays in cash realization are deteriorating the quality of earnings.
Risk Factors
Working capital pressure risk: Accounts Receivable increased +35.3% YoY, DSO is about 65 days at a warning level for collection delays, and Inventories centered on WIP increased +79.2%. The expansion of working capital is causing cash outflows and is the main reason for the estimated negative OCF. Probability is high, with medium to high impact on cash management and liquidity. Intangible asset impairment risk: Goodwill plus Intangible Assets total ¥32.1B, accounting for 31.0% of total assets, and there is a possibility of impairment recognition if the business environment deteriorates. Probability is low to medium, but impact is moderate, with potential impairment of several hundred million yen per occurrence. Dividend sustainability risk: With a Payout Ratio of 73.1% at a high level and estimated negative OCF implying negative FCF, the capacity to cover dividends with cash is insufficient; maintaining dividends requires improvement in OCF or financing. Probability is medium, impact is medium (possibility of changes to dividend policy).
Industry Benchmark (Reference; our research)
[Position within the industry] (Reference information; our research) Profitability: ROE 9.1% exceeds the industry median of 6.5%, placing the company in the mid-to-upper range within the industry. Operating Margin of 5.8% is below the industry median of 7.1%, but Net Margin of 4.7% is close to the median of 5.3%. Total Asset Turnover of 1.122x is significantly higher than the industry median of 0.81x, and high asset efficiency underpins profitability. Soundness: Equity Ratio of 54.4% is slightly below the industry median of 57.1% but remains healthy. Current Ratio of 158.8% is lower than the industry median of 230.0%, placing liquidity leeway at mid to slightly lower within the industry. Interest-bearing debt is light with Debt/EBITDA of 1.09x, and the estimated Net Debt/EBITDA is negative (cash exceeds debt), indicating a light financial burden. Efficiency: DSO of 65 days exceeds the industry median of 57.9 days, indicating a tendency toward collection delays. Inventory days, centered on WIP, are approximately 5.9 days on a calculated basis, close to the industry median of 5.94 days. Cash conversion cycle days for operating working capital are estimated to exceed the industry median of 43.0 days due to increased Accounts Receivable. Growth: Revenue growth rate of -1.0% significantly underperforms the industry median of +9.1%, but the full-year outlook projects +5.6% growth. Industry: Information & Communications (the healthcare classification is a limitation of reference information; headquarters relate to information media). Comparables: 56 companies in the industry aggregation for 2025 Q3. Source: our compilation.
Key Takeaways from Results
Gap between profit improvement and cash generation: Operating Income improved significantly by +39.8% YoY, but working capital expanded due to Accounts Receivable +35.3% and Inventories +79.2%, with estimated OCF turning negative. An accruals ratio of 10.0% suggests weak cash backing for earnings. While reported results show profit growth, cash-based realization of earnings is lagging; enhanced receivables collection management and improvements in the WIP completion and delivery cycle are focal points going forward. Balance between high dividend policy and funding capacity: The Payout Ratio of 73.1% is high, but Cash and Deposits declined -26.9% YoY to ¥41.1B, and with estimated negative FCF, concerns remain about the cash backing for dividends. However, against Short-term Borrowings of ¥5.4B, cash is 7.6x, securing near-term capacity for dividend payments. Achieving the full-year outlook will require improvement in OCF and working capital efficiency; alignment between quarterly cash flow trends and dividend policy is an important item to confirm in the results.
This report is an earnings analysis document automatically generated by AI based on XBRL financial summary data. It does not constitute a recommendation to invest in any specific security. The industry benchmark is reference information compiled by our firm based on publicly available financial statements. Investment decisions are your own responsibility; please consult a professional as necessary before investing.
AI Financial Analysis
Executive Summary
Broadmedia delivered a strong Q3 FY2026 earnings recovery despite a 1.0% year-on-year decline in cumulative revenue to ¥11.61bn. Operating income rose 39.8% year on year to ¥668m, lifting the operating margin to 5.8% from 4.1% in the prior-year period, an expansion of approximately 170bp. Ordinary income increased 43.5% to ¥695m, supported by the improvement in core profitability and a modest net non-operating income contribution. Profit attributable to owners of the parent rose sharply to ¥513m from ¥106m, taking the attributable net margin to 4.4% from 0.9% a year earlier. The magnitude of net-profit growth exceeded that of operating profit because the prior-year comparison included larger extraordinary losses and a higher tax burden. Gross profit declined 2.3% to ¥4.43bn, and the gross margin contracted by roughly 50bp to 38.2%. However, SG&A expenses fell 7.3% to ¥3.76bn, more than offsetting the gross-profit decline and demonstrating meaningful operating-cost discipline. EBITDA was ¥787m and the EBITDA margin was 6.8%, while EBITDA before JGAAP goodwill amortization was ¥866m. Goodwill amortization of ¥79m represented 10.0% of EBITDA, a moderate JGAAP accounting drag that should be considered when comparing profitability with IFRS-reporting peers. Annualized ROE was 12.1%, which is in the good 10-15% range and was driven by a 4.4% net margin, 1.496x asset turnover, and 1.84x financial leverage. Cash conversion was the principal weakness: operating cash flow was negative ¥526m against ¥513m of profit attributable to owners, yielding an OCF/net income ratio of negative 1.03x. The cash shortfall was associated principally with a ¥534m increase in trade receivables and a ¥1.35bn reduction in advances received, indicating working-capital absorption. Free cash flow was negative ¥678m after ¥152m of investing cash outflow, so internally generated cash did not cover investing requirements during the nine-month period. Liquidity nevertheless remains sound, with ¥4.11bn of cash, a 158.8% current ratio, and cash equal to 7.58x short-term debt. Management's full-year guidance implies a substantial Q4 contribution, as Q3 progress is 60.7% for operating income and 60.4% for attributable net income versus a standard 75% seasonal benchmark. The investment case is therefore increasingly dependent on a conversion of receivables and other working-capital items into cash, together with delivery of the forecasted fourth-quarter profit acceleration.
Profitability Analysis
The annualized 12.1% ROE decomposes into a 4.4% net profit margin, 1.496x asset turnover, and 1.84x financial leverage. The most material operating change was margin improvement rather than sales growth: revenue declined 1.0%, but operating income grew 39.8%. Gross margin decreased to 38.2% from approximately 38.7%, reflecting a roughly 50bp deterioration at the gross-profit level. The operating-margin increase of approximately 170bp was instead generated by SG&A discipline, with SG&A declining 7.3% while revenue was broadly stable. This indicates favorable operating leverage from cost reduction, although the sustainability of the improvement depends on preserving these lower overheads without impairing revenue generation. The 5.8% EBIT margin remains below the 8% threshold generally viewed as good, although it has moved above the sub-5% concern range. The annualized ROA implied by net margin and asset turnover is approximately 6.6%, a mid-range return level. Financial leverage of 1.84x contributes constructively to ROE without indicating excessive balance-sheet leverage. The extended DuPont tax burden was 0.744 and the interest burden was 1.033, indicating that taxes were within a normal range and that financing costs did not materially constrain earnings. Interest coverage was very strong at 48.45x on EBIT and 57.07x on EBITDA. The gap between ordinary income of ¥695m and profit before tax of ¥690m was limited, while net profit benefited from a lower effective tax rate of 21.6% relative to the prior-year period. Extraordinary income of ¥18m was more than offset by extraordinary losses of ¥24m, including ¥17m of fixed-asset disposal losses, so the earnings recovery was principally operational rather than driven by non-recurring gains.
Growth Assessment
Revenue of ¥11.61bn was 1.0% below the prior-year nine-month level, so the current earnings improvement is cost-led rather than top-line-led. Gross profit fell 2.3% to ¥4.43bn, consistent with modest pressure on gross profitability. The reduction in SG&A enabled operating income to rise by ¥191m year on year despite the lower gross profit. Full-year guidance calls for revenue of ¥16.40bn, operating income of ¥1.10bn, ordinary income of ¥1.10bn, and profit attributable to owners of ¥850m. Q3 revenue progress was 70.8% against the standard 75% nine-month benchmark, a 4.2 percentage-point shortfall that requires a seasonally stronger Q4 but is not an extreme deviation. Operating-income progress was 60.7%, 14.3 percentage points below the standard benchmark, and attributable net-income progress was 60.4%, 14.6 percentage points below benchmark. Accordingly, guidance requires Q4 operating income of approximately ¥432m and attributable net income of approximately ¥337m. The implied Q4 operating margin would need to be approximately 9.0%, materially above the nine-month 5.8% margin, making execution on cost control, sales mix, and timing of revenue recognition important. JGAAP goodwill amortization of ¥79m reduces reported operating earnings; EBITDA before goodwill amortization of ¥866m gives a clearer view of underlying pre-amortization operating capacity. Goodwill of ¥1.56bn equals 1.99x EBITDA and 27.7% of equity, which suggests prior acquisitions are not currently carrying an excessive valuation burden. The combination of softer revenue and higher receivables means that reported profit growth will be higher quality if it is followed by sales stabilization and cash collection.
Financial Health
Liquidity is sound, with current assets of ¥6.72bn exceeding current liabilities of ¥4.23bn and producing a current ratio of 158.8%. The quick ratio was similarly robust at 158.3%, reflecting the predominance of cash and receivables rather than inventory in current assets. Cash and deposits were ¥4.11bn, equivalent to 39.7% of total assets and 7.58x short-term interest-bearing debt. Interest-bearing debt totaled ¥857m, comprising ¥542m of short-term loans and ¥315m of long-term loans. Debt-to-equity was 0.84x, debt-to-capital was 13.2%, and debt/EBITDA was 1.09x, all consistent with manageable solvency. Interest coverage of 48.45x on EBIT provides a substantial cushion against the ¥14m of interest expense. The short-term debt ratio of 63.2% is a refinancing-risk alert because a majority of borrowings mature within one year. However, this maturity concentration is mitigated by the large cash balance, strong quick ratio, and cash-to-short-term-debt coverage of 7.58x. There is no current liquidity mismatch: working capital was positive ¥2.49bn, and current assets exceed both current liabilities and short-term debt by wide margins. Trade receivables increased 35.3% year on year to ¥2.05bn, a material use of capital that should be monitored against revenue trends. Cash declined 26.9% year on year to ¥4.11bn, principally alongside negative operating and financing cash flows. Long-term loans declined 25.2% to ¥315m, reducing structural debt obligations. Goodwill and intangible assets totaled ¥3.21bn, or 31.0% of total assets, creating some dependence on the continued value realization of acquired businesses and intellectual-property-related assets. Goodwill alone is 15.1% of assets and 27.7% of equity, below the 30% healthy benchmark but still sufficiently material to warrant monitoring for impairment indicators.
Notable B/S Changes
Accounts receivable: +¥0.54bn (+35.3%) to ¥2.05bn - material working-capital build despite lower revenue; collection timing and credit quality are key cash-flow considerations. Cash and deposits: -¥1.51bn (-26.9%) to ¥4.11bn - reflects cumulative negative operating, investing, and financing cash flows, although absolute liquidity remains strong. Inventories: +¥0.09bn (+79.2%) to ¥0.20bn - small in absolute terms, but the elevated work-in-process composition heightens project-conversion and obsolescence monitoring needs. Long-term loans: -¥0.11bn (-25.2%) to ¥0.32bn - reduces longer-dated leverage, while the remaining debt structure is concentrated in short-term borrowings. Advances received: -¥1.35bn (-57.5%) to ¥1.00bn - a significant release of customer prepayments or contract liabilities that contributed to operating cash outflow and reduced current liabilities. Goodwill: -¥0.08bn (-4.8%) to ¥1.56bn - decline is consistent with JGAAP amortization; goodwill remains 27.7% of equity and should be monitored for value-retention and impairment risk.
Cash Flow Quality
Cash-flow quality is the key financial concern in the quarter. Operating cash flow was negative ¥526m, compared with ¥513m of profit attributable to owners, producing an OCF/net income ratio of negative 1.03x and triggering the earnings-quality alert. This is materially below the 0.8x threshold generally used to identify potential accrual or working-capital risk. Cash conversion, measured as OCF/EBITDA, was negative 0.67x, also well below the 0.7x concern threshold. The reported accruals ratio was 10.0%, at the high-accrual warning level, indicating that a meaningful portion of earnings has not yet translated into operating cash. The principal identifiable working-capital drag was the ¥534m increase in trade receivables, which is notable given the 1.0% decline in revenue. Advances received decreased by ¥1.35bn, contributing further to operating cash outflow and suggesting reduced customer prepayments or the unwind of prior-period balances. Trade payables increased by ¥85m, providing only limited offset to the receivable and advance-received movements. Inventory increased 79.2% to ¥20m, although its absolute balance remains immaterial relative to revenue and assets. The high work-in-process ratio alert remains relevant: work in process was ¥121m and represented 82.7% of inventory under the reported manufacturing classification, above the 40% alert threshold. A high WIP share can raise execution, obsolescence, and project-completion risk if conversion into finished goods or revenue slows. Investing cash flow was negative ¥152m, including ¥132m of purchases of non-current assets, resulting in negative free cash flow of ¥678m. Financing cash flow was negative ¥846m, including ¥355m of cash dividends and ¥339m of distributions to non-controlling interests, accelerating the decline in cash. Although the cash balance remains ample, future earnings quality would improve materially if receivables are collected and operating cash flow turns positive.
Dividend Sustainability
The company reported no Q2 dividend, while full-year guidance indicates a ¥50.0 per-share dividend. Based on forecast EPS of ¥119.27, the implied dividend payout ratio is approximately 41.9%, below the 60% sustainability benchmark. This indicated ordinary dividend commitment is therefore moderate relative to forecasted accounting earnings. The reported share repurchase outflow was only ¥1m during the period and does not materially change the shareholder-return assessment. However, the cumulative nine-month free cash flow was negative ¥678m, so cash generation did not cover capital expenditure and shareholder distributions during the reported period. Financing cash flow included ¥355m of cash dividends, indicating that distributions were funded alongside a reduction in cash rather than through positive current-period free cash flow. Cash and deposits of ¥4.11bn provide near-term capacity to support the planned dividend. The durability of the ¥50 DPS policy will depend on delivery of full-year profit guidance and, more importantly, normalization of operating cash conversion. The forecast payout ratio is acceptable, but a sustained pattern of negative free cash flow would weaken the quality of dividend coverage.
Risk Assessment
Business risks include Revenue risk: nine-month revenue declined 1.0% year on year, and full-year guidance requires a stronger Q4 revenue outcome., Margin sustainability risk: operating-profit growth was driven primarily by a 7.3% reduction in SG&A rather than gross-profit expansion; recurring cost savings must be maintained without compromising sales capability., Working-capital and collection risk: trade receivables rose 35.3% to ¥2.05bn while revenue declined, which requires evidence of timely customer collection., Industry-specific digital-content and media-services risk: demand, customer project timing, content rights, and technology-platform investment can create volatility in revenue recognition and operating margins., Project execution risk: work in process of ¥121m, representing 82.7% of the reported inventory classification, raises the risk of delayed completion, cost overruns, or obsolescence..
Financial risks include Earnings-quality risk: negative ¥526m operating cash flow versus ¥513m attributable profit resulted in an OCF/net income ratio of negative 1.03x., High-accrual risk: the 10.0% accruals ratio is at the warning threshold and is consistent with weak cash conversion., Refinancing risk: 63.2% of interest-bearing debt is short term, although this is substantially mitigated by ¥4.11bn of cash and 7.58x cash coverage of short-term debt., M&A asset-value risk: goodwill of ¥1.56bn represents 27.7% of equity; future underperformance of acquired businesses could create impairment exposure under JGAAP., Cash-balance risk: cash declined 26.9% year on year and by ¥1.51bn during the nine-month period, reflecting negative operating, investing, and financing cash flows..
Key concerns include Highest priority is the divergence between sharply improved accounting earnings and negative operating cash flow., Second priority is the implied Q4 earnings concentration needed to reach full-year operating-income and net-income guidance., The receivables increase and reduction in advances received should be monitored as indicators of whether cash conversion normalizes., The company has strong liquidity and low debt burden, which reduces near-term financial-stress risk despite the short-term borrowing mix., Goodwill amortization is a moderate 10.0% of EBITDA under JGAAP; profitability should be assessed both on reported EBITDA and pre-goodwill-amortization EBITDA..
Investment Implications
Key takeaways include Operating profitability improved substantially, with operating margin rising approximately 170bp to 5.8% despite a 1.0% revenue decline., Annualized ROE of 12.1% is supported by adequate asset turnover and moderate leverage, but is below a 15% high-return threshold., Balance-sheet liquidity is strong: the current ratio is 158.8%, cash is ¥4.11bn, and debt/EBITDA is only 1.09x., Cash-flow conversion is currently weak, as negative ¥526m operating cash flow and negative ¥678m free cash flow contrast with ¥513m attributable profit., Full-year guidance requires a meaningful Q4 uplift, particularly in operating profit, making quarterly execution and cash conversion central analytical variables., The indicated ¥50 DPS equates to a forecast payout ratio of about 41.9%, which is moderate on earnings but should be assessed against future free-cash-flow recovery..
Metrics to watch include Trade receivables and operating cash flow, particularly whether the ¥2.05bn receivables balance converts into cash., Q4 operating margin relative to the approximately 9.0% margin implied by full-year guidance., Revenue trajectory after the 1.0% nine-month decline., SG&A expense discipline and whether lower spending remains sustainable., Short-term debt refinancing and cash-to-short-term-debt coverage., Goodwill, impairment indicators, and goodwill amortization relative to EBITDA., Work-in-process conversion, project execution, and inventory composition..
Regarding relative positioning, Broadmedia combines moderate reported profitability and an annualized ROE in the good range with a conservatively funded balance sheet. Its principal relative weakness is not leverage but earnings-to-cash conversion: negative operating cash flow, elevated accruals, and receivable growth contrast with the reported profit recovery. The JGAAP goodwill amortization charge moderately depresses reported operating profit relative to pre-amortization EBITDA, while goodwill leverage itself remains within a generally healthy range.