Photosynth inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥2.44B
• Operating Income: ¥215M
• Net Income: ¥105M
• EPS: ¥16.28

Income Statement

Balance Sheet

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

Photosynth (43790) delivered solid topline and strong earnings momentum in FY2025 Q3 on a consolidated JGAAP basis. Revenue reached ¥2,445m, up 11.7% YoY, indicating healthy demand and stable execution. Operating income rose 97.4% YoY to ¥215m, demonstrating meaningful operating leverage as the cost base scaled more slowly than revenue. Net income increased 52.1% YoY to ¥252m, outpacing sales growth but lagging operating income growth, implying some non-operating and/or extraordinary items influenced the bottom line. Gross profit of ¥1,679m translates to a very high gross margin of 68.7%, consistent with a software/IoT-enabled subscription model that benefits from scale. Operating margin improved to 8.8% (¥215m/¥2,445m), reflecting better cost discipline and efficiency gains. Ordinary income was ¥217m, nearly aligned with operating income, signaling limited interest burden and modest non-operating items. Notably, net income (¥252m) exceeds ordinary income (¥217m), suggesting a positive extraordinary item and/or tax credits under JGAAP; the reported income tax of ¥4.9m appears low relative to pre-tax income. Liquidity appears sound with a current ratio of 154% and a quick ratio of 153%, supported by minimal inventories (¥15m), which mitigates working capital drag. Balance sheet strength is solid: total assets of ¥3,700m are funded primarily by equity of ¥2,450m, implying an equity ratio around 66% (computed), despite the reported 0.0% placeholder. Leverage remains conservative with liabilities-to-equity of 0.52x and interest expense of only ¥1.7m, resulting in robust interest coverage of 129x. The DuPont decomposition shows a net margin of 10.31%, asset turnover of 0.661x, and financial leverage of 1.51x, yielding an ROE of 10.29%, pointing to improving profitability with moderate capital intensity. Cash flow statement items (OCF/FCF/cash) were not disclosed in this dataset, so cash conversion cannot be assessed from the provided figures. Dividend distribution remains nil (DPS ¥0, payout 0%), consistent with reinvestment at this growth stage. Overall, Photosynth’s Q3 performance indicates strengthening fundamentals, but the absence of cash flow data and the presence of non-operating effects on net income warrant monitoring.

Profitability Analysis

ROE (10.29%) is supported by a 10.31% net margin, 0.661x asset turnover, and 1.51x financial leverage. The double-digit net margin reflects high gross profitability (68.7%) and growing operating efficiency. Operating margin of 8.8% (¥215m/¥2,445m) has expanded meaningfully YoY given the 97.4% increase in operating income versus 11.7% revenue growth, indicating strong operating leverage. Ordinary margin sits at roughly 8.9% (¥217m/¥2,445m), close to operating margin, implying limited non-operating drag. Interest expense is very low at ¥1.664m, and interest coverage is robust at 129x, underscoring that financing costs are not a headwind. The fact that net income (¥252m) exceeds ordinary income (¥217m) suggests non-recurring or below-the-line positives under JGAAP, which boosts the reported net margin; underlying recurring profitability should be evaluated excluding such items. With depreciation and EBITDA not disclosed, margin and cost structure assessments rely on operating profit; actual D&A likely exists and would modestly reduce true cash operating earnings. Overall, profitability quality is high at the gross level, and operating leverage is evident, but the durability of below-the-line boosts should be treated cautiously.

Growth Assessment

Revenue grew 11.7% YoY to ¥2,445m, indicating mid-teens momentum consistent with scaling subscription and device deployments. Operating income nearly doubled (+97.4% YoY) to ¥215m, signaling successful cost control and improved unit economics as the installed base expands. Net income rose 52.1% YoY to ¥252m; however, the divergence between operating and net growth suggests non-operating/extraordinary items and a low effective tax burden aided the bottom line. Gross margin at 68.7% remains strong, consistent with a recurring-revenue mix; maintaining this level supports sustainable incremental margins. Asset turnover of 0.661x is reasonable for a company blending software-like revenues with some hardware, and should improve with scale if subscription mix continues to rise. Given the limited disclosure on cash flows and no visibility into ARR, churn, and contract liabilities, the sustainability of growth should be validated against customer retention and pipeline indicators. Outlook-wise, continued expansion appears likely if Photosynth can preserve pricing power, control hardware subsidies, and maintain low churn. Key watchpoints include sales efficiency (CAC payback), cohort profitability, and any hardware cost inflation that could erode gross margin.

Financial Health

Liquidity is comfortable: current assets ¥1,869m vs current liabilities ¥1,213m yields a current ratio of 154% and a quick ratio of 153%, supported by low inventories (¥15m). Working capital stands at ¥657m, providing a buffer for growth investments and seasonality. Solvency is solid: total liabilities of ¥1,278m against equity of ¥2,450m implies liabilities-to-equity of 0.52x and computed equity ratio of ~66% (despite the reported placeholder of 0.0%). Interest expense is minimal (¥1.7m), and interest coverage is very strong at 129x, reducing refinancing and rate risk. Capital structure is conservative with modest leverage and ample equity backing, appropriate for a company still scaling recurring revenues. Without disclosed cash and cash equivalents, short-term funding headroom cannot be fully assessed from this dataset.

Cash Flow Quality

Cash flow data (operating, investing, and financing) are not disclosed in this extract; reported zeros are placeholders, not actual figures. Accordingly, OCF/Net Income and FCF cannot be meaningfully interpreted from the provided 0.00 metrics. Earnings quality appears supported by high gross margins and limited interest burden, but the fact that net income exceeds ordinary income suggests non-recurring items that may not translate into recurring cash flows. Working capital dynamics seem manageable given low inventory (¥15m), but receivables and payables details are not provided; changes therein could materially affect OCF. In absence of OCF and capex detail, we cannot confirm cash conversion, FCF sustainability, or the extent of growth investments.

Dividend Sustainability

The company pays no dividend (DPS ¥0; payout ratio 0%), consistent with a reinvestment-focused policy at this stage. With FCF unreported, coverage analysis is not possible from the provided data. Given improving profitability and conservative leverage, the balance sheet could support future shareholder returns once cash generation is demonstrated; however, priority likely remains on growth and scale. Any future dividend policy should be grounded in sustained positive OCF and predictable capex needs, as well as visibility on recurring revenue durability.

Risk Assessment

Business Risks:

• Customer concentration and contract renewal risk affecting ARR and churn.
• Competitive intensity in smart locks/IoT access control, pressuring pricing and margins.
• Hardware cost inflation and semiconductor supply constraints impacting unit economics.
• Product reliability and cybersecurity incidents that could impair brand and retention.
• Execution risk in scaling sales channels and installations while maintaining service quality.
• Dependence on third-party components and logistics partners.
• Potential regulatory changes in building security and data privacy.

Financial Risks:

• Limited visibility on cash generation due to undisclosed OCF/FCF.
• Potential volatility from extraordinary items under JGAAP affecting net income.
• Working capital swings from receivables and contract liabilities as the business scales.
• Interest rate or credit environment shifts, albeit mitigated by low debt.
• Currency exposure if procurement or sales are tied to foreign currencies.

Key Concerns:

• Net income exceeding ordinary income suggests non-recurring boosts; underlying run-rate needs validation.
• Absence of cash and cash flow disclosures limits assessment of cash conversion and runway.
• Sustainability of high gross margins if hardware mix rises or component costs increase.

Investment Implications

Key Takeaways:

• Revenue up 11.7% YoY to ¥2,445m with strong operating leverage (+97.4% YoY operating income).
• High gross margin of 68.7% supports scalable unit economics.
• ROE at 10.29% driven by 10.31% net margin, 0.661x asset turnover, and modest leverage (1.51x).
• Conservative balance sheet: computed equity ratio ~66% and liabilities-to-equity 0.52x.
• Interest burden negligible (¥1.7m), coverage robust at 129x.
• Cash flow data not disclosed; cannot assess FCF or cash runway from this dataset.
• No dividend (payout 0%), consistent with reinvestment phase.

Metrics to Watch:

• ARR growth, net/gross retention, and churn rates.
• Operating cash flow, free cash flow, and working capital movements (receivables, contract liabilities).
• Capex and capitalized development, to gauge maintenance vs growth investment.
• Hardware vs subscription revenue mix and gross margin trajectory.
• Sales efficiency (CAC payback, LTV/CAC) and cohort profitability.
• Extraordinary and non-operating items affecting net income quality.

Relative Positioning: Within Japan’s listed IoT/Access Control and subscription-led peers on the TSE Growth market, Photosynth exhibits above-average gross margins, improving operating profitability, and lower financial leverage; however, transparency on cash generation is weaker in this dataset, making it harder to benchmark cash conversion and FCF discipline.

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