TriIs Incorporated FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥1.37B
• Operating Income: ¥2M
• Net Income: ¥121M
• EPS: ¥28.78

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

Verdict: FY2025 Q3 was mixed—headline net profit surged, but core operations remained near breakeven and earnings were heavily reliant on non-operating gains. Revenue rose to 13.68 (100M JPY), up 155.9% YoY, indicating a large top-line rebound. Gross profit registered 2.75, implying a gross margin of 20.1%. Despite this, SG&A of 3.13 exceeded gross profit, yielding operating income of just 0.02, an operating margin of roughly 15 bps. Ordinary income was 1.77, down 10.0% YoY, despite non-operating income of 2.42 (interest income 0.48), highlighting weaker recurring earnings power versus last year. Net income was 2.24, up 85.7% YoY, an outcome driven by below-the-line items rather than improved operating fundamentals. The non-operating income ratio was 108.2%, underscoring that most profit came from outside core operations. Interest coverage was only 0.39x (EBIT/interest), signaling weak debt-servicing capacity from operating earnings even though balance sheet liquidity is extremely strong. Current ratio stood at 2540.5% and quick ratio at 2490.8%, supported by cash and deposits of 32.36 against current liabilities of 2.19. Financial leverage remained conservative with D/E at 0.13x and equity of 52.34 representing 88.8% of assets. ROE was 4.3%, driven by a high net profit margin (16.4%) on a very low asset turnover (0.232) and minimal leverage (1.13x). ROIC was only 0.1%, well below a 5% warning threshold, implying value creation from core invested capital is weak. Margin context: current operating margin is ~+15 bps, ordinary margin ~12.9% (1.77/13.68), and net margin 16.4%—but YoY basis-point changes are not derivable due to missing prior-period margin data. Earnings quality is uncertain as operating cash flow was unreported; the divergence between NI and operating income raises quality concerns pending cash confirmation. Forward-looking, sustaining profits at current levels will likely require either a structural uplift in operating margin (via higher gross margin or lower SG&A) or continued non-operating gains, which are volatile by nature.

Profitability Analysis

ROE decomposition (DuPont): ROE 4.3% = Net Profit Margin 16.4% × Asset Turnover 0.232 × Financial Leverage 1.13x. The largest contributor is the elevated net margin, which is inflated by non-operating gains rather than operating efficiency. Asset turnover is very low (0.232), reflecting a cash-heavy, low-utilization balance sheet relative to sales. Financial leverage is modest at 1.13x, providing limited ROE amplification. The key change driver versus typical steady-state would be the non-operating income uplift (2.42) that masks weak operating profit (0.02). Business reason: income from interest and likely other investment-related items supported ordinary profit while SG&A exceeded gross profit. Sustainability: reliance on non-operating items is generally non-recurring or volatile; without an operating margin recovery, ROE is vulnerable. Concerning trends include SG&A (3.13) running ahead of gross profit (2.75), implying negative operating leverage at current scale.

Growth Assessment

Revenue growth of +155.9% YoY suggests strong volume or project wins, but conversion to operating profit was minimal, indicating mix, pricing, or cost absorption challenges. Ordinary income declined 10.0% YoY despite the revenue surge, implying lower quality growth and a heavier dependence on non-operating income. Net income rose 85.7% YoY, but this was driven below the operating line; absent similar non-operating tailwinds, earnings could normalize lower. Current gross margin is 20.1%; with SG&A at 3.13, scale or cost discipline is needed to lift operating margin above 1–2%. Outlook hinges on improving operating margin and stabilizing non-operating drivers (interest income, securities-related gains). Asset turnover at 0.232 is a drag on growth in returns; redeploying excess cash (32.36) into higher-return initiatives could help if disciplined. Overall, revenue momentum appears strong, but profit quality and sustainability are uncertain until operating earnings improve.

Financial Health

Liquidity is very strong: current ratio 2540.5% and quick ratio 2490.8%, with cash and deposits (32.36) vastly exceeding current liabilities (2.19). No warning on current ratio (<1.0) or D/E (>2.0); D/E is 0.13x, indicating conservative leverage. Maturity profile shows long-term loans of 4.30 against substantial cash, limiting refinancing pressure; short-term debt was unreported. Working capital is ample at 53.38, and accounts payable (0.05) and receivables (0.17) are de minimis relative to cash. Interest coverage is weak at 0.39x on an EBIT basis, so servicing interest from operations alone is challenging; however, cash balances mitigate near-term liquidity risk. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

Operating cash flow was not disclosed, so OCF/Net Income and FCF cannot be assessed. The large gap between net income (2.24) and operating income (0.02) suggests earnings quality risk unless cash flow confirms realizations (e.g., cash interest income or realized gains). With a cash-heavy balance sheet, near-term cash resilience is high, but the sustainability of non-operating contributions is uncertain. No clear signs of working capital manipulation can be inferred given minimal receivables and payables and the absence of OCF data.

Dividend Sustainability

Dividend data (DPS, payout, dividends paid) were unreported, so current policy and payout capacity cannot be quantified. On balance sheet strength alone (net cash position implied by cash 32.36 vs long-term loans 4.30), capacity exists to fund dividends, but without OCF and capex details, FCF coverage cannot be evaluated. Given earnings reliance on non-operating items, a conservative payout approach would be prudent until operating cash generation is evidenced. No DOE or payout ratios were available from XBRL.

Risk Assessment

Business Risks:

• Core operating margin near breakeven (operating income 0.02 vs SG&A 3.13), indicating weak underlying profitability.
• High dependence on non-operating income (2.42; non-operating income ratio 108.2%), which can be volatile.
• Low asset turnover (0.232) constrains return generation.
• ROIC at 0.1% is far below typical cost of capital, implying value dilution risk if sustained.

Financial Risks:

• Interest coverage at 0.39x points to inadequate operating earnings to cover interest expense.
• Potential earnings volatility related to investment/financial income sensitivity (e.g., interest rate changes, market valuation swings).
• Concentration of assets in cash may create reinvestment risk and drag on returns.

Key Concerns:

• Ordinary income down 10.0% YoY despite a 155.9% revenue increase, signaling poor operating leverage.
• Net income exceeding profit before tax suggests complex below-the-line/tax effects; sustainability uncertain given limited disclosures.
• Lack of OCF/FCF and dividend disclosure limits visibility on cash conversion and shareholder return policy.

Investment Implications

Key Takeaways:

• Earnings quality is mixed: net profit strong but predominantly driven by non-operating items.
• Core profitability remains weak with operating margin ~0.1%, requiring gross margin lift and/or SG&A control.
• Balance sheet is very liquid and lowly leveraged, providing time to execute improvements.
• ROE of 4.3% and ROIC of 0.1% indicate subpar capital efficiency absent structural changes.
• Debt service from operations is insufficient (interest coverage 0.39x), though cash balances mitigate near-term risk.

Metrics to Watch:

• Operating margin progression and SG&A-to-sales ratio.
• Composition and persistence of non-operating income (interest and investment-related gains).
• OCF and FCF once disclosed to validate earnings quality.
• ROIC and asset turnover improvement, particularly utilization of excess cash.
• Interest coverage trend and any refinancing of long-term loans (4.30).

Relative Positioning: Versus small-cap peers, the company exhibits superior liquidity and conservative leverage but materially weaker core operating profitability and capital efficiency; near-term performance is more exposed to financial/non-operating income volatility than to operating momentum.

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