YAMADA SERVICER SYNTHETIC OFFICE FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥1.41B
• Operating Income: ¥-161M
• Net Income: ¥22M
• EPS: ¥-36.63

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

FY2025 Q3 results point to a weak quarter with continued losses, pressured margins, and strained interest coverage despite ample liquidity. Revenue declined 19.1% year over year to 14.13, reflecting softer business activity in the period. Gross profit was 4.74, implying a gross margin of 33.5% that is reasonable for a service-heavy model but insufficient to offset fixed SG&A. SG&A expenses of 4.78 exceeded gross profit, driving operating income to a loss of -1.61 and an operating margin of -11.4%. Non-operating income of 1.16 and non-operating expenses of 0.42 netted +0.74, partially offsetting operating losses. Reported ordinary income was -1.49 and net income was -1.56, marking a 76.1% YoY deterioration in the bottom line. The basis-point view suggests operating margin compressed to negative territory (exact YoY bps change not calculable with disclosed data), while gross margin appears stable to slightly pressured. Interest expense of 0.28 pushed interest coverage to -5.73x, underscoring inability to cover debt costs from operations. The balance sheet remains liquid with current assets of 51.33 vs current liabilities of 15.80 (current ratio 324.8%). Short-term loans of 13.00 are the dominant liability, but cash and deposits of 9.51 plus working capital of 35.53 provide a buffer. Total equity stands at 31.86 (book value per share about 748 JPY), yielding a leverage of 1.84x and a calculated ROE of -4.9%. ROIC of -2.3% is below the 5% warning threshold, indicating value dilution at current returns. Cash flow statements were not disclosed, preventing an assessment of earnings quality via OCF/NI or free cash flow coverage. The PBT figure (0.70) does not reconcile with the negative ordinary income and net income, suggesting unreported extraordinary items or classification differences; we rely on the reported net result for performance interpretation. Forward-looking, the company must restore operating leverage by aligning SG&A with a lower revenue run-rate and stabilizing non-operating items to return to breakeven. Near-term priorities include protecting liquidity, refinancing short-term borrowings prudently, and improving collection efficiency to lift asset turnover and margins.

Profitability Analysis

ROE breakdown (DuPont) for FY2025 Q3: Net Profit Margin -11.0% × Asset Turnover 0.241 × Financial Leverage 1.84x = ROE -4.9%. The primary drag is the negative net profit margin, which overwhelms modest asset turnover and moderate leverage. Operating loss (-1.61) driven by SG&A exceeding gross profit is the core reason for margin weakness; non-operating gains only partially offset the operational shortfall. Asset turnover of 0.241 indicates low revenue generation relative to the asset base, likely reflecting subdued collection volumes/fee income or timing effects in the receivables recovery business. Financial leverage at 1.84x is not excessive but magnifies losses into negative ROE given the margin deficit. The most material change vs. typical profitability is the margin component (NPM), given revenue fell 19.1% YoY and fixed costs appear sticky. Business reason: demand softness or lower recoveries in the restructuring/servicing pipeline, coupled with fixed personnel and administrative costs, compressed operating leverage. Sustainability: margin weakness is partially cyclical, but unless SG&A is flexed or revenue stabilizes, negative NPM could persist. Concerning trends: SG&A (4.78) exceeds gross profit (4.74), implying that fixed cost absorption is poor; with revenue down 19.1% YoY, this suggests cost growth or insufficient cost takeout relative to the revenue decline.

Growth Assessment

Top-line contracted 19.1% YoY to 14.13, indicating a weaker operating environment for collections/restructuring services. Gross profit of 4.74 suggests stable unit economics at the gross level, but fixed SG&A has outpaced gross profit, leading to operating losses. Non-operating items (net +0.74) are supportive but insufficient to change the earnings trajectory. Ordinary income (-1.49) and net income (-1.56) both remain negative, pointing to pressure across the P&L. With no cash flow disclosures, we cannot validate whether working capital dynamics masked underlying momentum. Outlook hinges on cost discipline and recovery in fee-generating activity; absent revenue stabilization or SG&A reductions, profit recovery is unlikely. Near-term growth catalysts could include improved collection rates, new mandates, or portfolio acquisitions, but these are not evidenced in the data provided.

Financial Health

Liquidity is strong: current assets 51.33 vs current liabilities 15.80 yield a current ratio of 324.8% and quick ratio of 324.8%. No warning on current ratio (<1.0) is triggered. Solvency is moderate: debt-to-equity is 0.84x, below the 1.5x conservative threshold, but interest coverage is weak (-5.73x) due to operating losses. Short-term loans of 13.00 represent the bulk of liabilities; while covered by current assets and largely by cash plus working capital, reliance on short tenor debt introduces refinancing risk if losses persist. Long-term loans are minimal at 0.25, indicating low maturity tail risk. Equity base is 31.86, supporting a leverage factor of 1.84x; however, continued losses could erode equity. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

Operating, investing, and financing cash flows are unreported, so OCF/Net Income and free cash flow cannot be assessed. Consequently, earnings quality cannot be validated; we cannot confirm whether the net loss is amplified or mitigated by working capital changes or non-cash items. With interest coverage negative at -5.73x, internal cash generation is likely insufficient to service interest without drawing on cash or incremental financing. Dividend and capex cash needs are unknown, constraining FCF sustainability analysis. No explicit signs of working capital manipulation can be inferred from the limited disclosures.

Dividend Sustainability

Dividend disclosures are absent; total dividends paid and DPS are unreported. The calculated payout ratio of -27.4% is not meaningful given negative earnings. Without OCF and capex data, FCF coverage cannot be determined. Under a prudent policy framework, sustaining or increasing dividends would typically require a return to positive operating income and adequate interest coverage; current metrics argue for caution until profitability normalizes.

Risk Assessment

Business Risks:

• Revenue contraction of 19.1% YoY indicates weaker demand or lower recovery volumes in core services.
• Negative operating margin (-11.4%) due to SG&A exceeding gross profit, implying fixed cost rigidity.
• Execution risk in cost reduction; inability to flex SG&A could prolong losses.
• Potential project/mandate timing risk impacting quarterly revenue recognition.

Financial Risks:

• Interest coverage at -5.73x signals inability to cover debt costs from operations.
• Reliance on short-term loans (13.00) introduces refinancing and interest rate risk.
• ROIC at -2.3% indicates returns below cost of capital, risking value erosion.
• Equity erosion risk if losses persist, potentially tightening covenant headroom (if any).

Key Concerns:

• Data inconsistency: reported profit before tax (0.70) vs negative ordinary income and net income suggests unreported extraordinary items or classification differences.
• Absence of cash flow disclosures masks earnings quality and liquidity burn rate.
• High effective tax rate optics (68.3%) are distorted by losses and non-standard items, complicating normalized earnings assessment.
• Sensitivity to macro and legal environment affecting collections/restructuring activity (industry-specific).

Investment Implications

Key Takeaways:

• Quarter marked by operating losses and negative ROE (-4.9%) amid a 19.1% revenue decline.
• Liquidity is ample (current ratio 324.8%), but interest coverage is poor and short-term debt reliance is high.
• Non-operating gains provided only partial relief; core operating profitability must improve.
• ROIC (-2.3%) below 5% warning threshold points to value dilution unless returns rebound.
• Earnings quality and FCF cannot be validated due to missing cash flow data.

Metrics to Watch:

• Operating margin recovery and SG&A as a percentage of revenue.
• Interest coverage improvement (target >2x near term, >5x medium term).
• Revenue trajectory and asset turnover (currently 0.241).
• Cash and deposits trend vs short-term loans (13.00) and refinancing activity.
• Any disclosed extraordinary items to reconcile PBT and net income.
• ROIC progression toward >5% first, then 7–8%.

Relative Positioning: Within small-cap Japanese service firms, the company exhibits strong liquidity but weaker profitability and coverage metrics; priority must be on restoring operating leverage and reducing dependence on short-term borrowings to align with peers showing positive operating margins and adequate interest coverage.

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