SOLIZE Holdings Corporation FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥18.75B
• Operating Income: ¥-571M
• Net Income: ¥114M
• EPS: ¥-67.06

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

Verdict: Revenue growth was solid but profitability deteriorated, resulting in a net loss and negative ROE for FY2025 Q3 on a consolidated JGAAP basis. Revenue grew 14.3% YoY to 187.51, demonstrating demand resilience. Gross profit was 45.36, translating to a 24.2% gross margin. SG&A totaled 43.16 (23.0% of revenue), but operating income was -5.71, implying other operating items of roughly -7.9 beyond SG&A. Ordinary income was -5.79 as net non-operating items were a modest -0.18 (non-op income 0.20 minus non-op expenses 0.38). Profit before tax is disclosed as +1.83, suggesting material extraordinary gains versus ordinary loss, yet reported net income is -3.54, indicating post-tax adjustments or items below PBT that turned earnings negative. The net profit margin is -1.9%, operating margin approximately -3.0%, and ordinary margin about -3.1%. With current margins, operating margin compressed into negative territory; precise YoY basis-point changes cannot be computed due to missing prior-period margin details. ROE calculated by DuPont is -3.2%, driven by negative net margin despite moderate asset turnover (1.259) and low financial leverage (1.37x). Liquidity is strong with a current ratio of 266.6% and cash and deposits of 43.11 versus current liabilities of 37.35, providing a cushion despite losses. Interest coverage is deeply negative (-190x), reflecting the operating loss, although absolute interest burden is very small (0.03). ROIC is -5.4%, below the 5% warning threshold, underscoring poor capital efficiency this period. Earnings quality cannot be assessed from cash flow due to unreported OCF; however, accounts receivable of 43.23 against annualized sales implies roughly 63 days of receivables, not unusual. Forward-looking, the company must restore operating profitability by addressing the gap between gross profit and total operating costs; with ample liquidity and low leverage, it has time to execute, but sustained negative ROIC would pressure valuation and capital allocation flexibility. Data limitations (unreported OCF, CAPEX, and SG&A details) constrain deeper diagnostics, and the unusual PBT-positive yet NI-negative pattern points to special items or XBRL mapping nuances to monitor in the next filing.

Profitability Analysis

ROE decomposition: ROE (-3.2%) = Net Profit Margin (-1.9%) × Asset Turnover (1.259) × Financial Leverage (1.37x). The component exerting the greatest drag is the net profit margin turning negative, while asset turnover is adequate and leverage is modest. Business drivers: despite a 24.2% gross margin, operating margin is around -3.0% because operating costs (SG&A plus other operating expenses) exceeded gross profit by roughly 7.9, indicating cost inflation, one-time operating items, or revenue mix shifts reducing operating contribution. Non-operating items were a small net loss (-0.18), so they did not drive the deterioration. Sustainability: margin pressure appears operational rather than financial; if the gap stems from temporary items or integration costs, recovery is possible, but if structural (wage inflation, pricing pressure, or lower-utilization in project businesses), negative ROIC could persist. Watch for SG&A and other operating costs growth versus revenue; with revenue up 14.3% YoY, if SG&A growth outpaces revenue consistently, operating leverage will remain negative. Operating leverage is currently unfavorable; incremental gross profit is not flowing through due to elevated operating costs.

Growth Assessment

Revenue grew 14.3% YoY to 187.51, indicating healthy top-line momentum. Gross profit of 45.36 implies revenue growth did not translate into sufficient incremental gross profit to cover higher operating costs. Operating income (-5.71) and ordinary income (-5.79) show core earnings pressure despite top-line expansion, suggesting mix or cost headwinds. Net income of -3.54 points to additional post-tax impacts, likely extraordinary or below-the-line items. With gross margin at 24.2% and SG&A at 23.0% of revenue, the business requires either pricing/mix improvement or cost control to restore positive operating margin. Absent disclosed backlog, order trends, or segment detail, sustainability of the 14% growth cannot be judged; however, the negative ROIC (-5.4%) indicates current growth is not value-accretive. Outlook hinges on normalizing the gap between gross profit and operating costs and clarifying the nature of extraordinary impacts that swung PBT vs NI.

Financial Health

Liquidity is strong: current ratio 266.6% and quick ratio 252.1%, with cash and deposits (43.11) nearly covering current liabilities (37.35). No warning flags for current ratio <1.0 or D/E >2.0; D/E is 0.37x (conservative). Maturity mismatch risk looks low given sizable cash, receivables (43.23), and limited disclosed debt service (interest expense 0.03). Total liabilities are 39.84 versus total equity of 109.08, implying low overall leverage (assets/equity 1.37x). Interest-bearing debt amounts are unreported, so the D/E figure may reflect total liabilities rather than true net debt; caution is warranted in interpreting solvency metrics. No off-balance sheet obligations are disclosed in the provided data. Goodwill (11.96) and intangible assets (17.13) total 29.09 (≈19.5% of assets), introducing impairment risk if profitability does not recover.

Cash Flow Quality

Operating cash flow is unreported; OCF/Net Income cannot be assessed and FCF is unavailable. Earnings quality thus remains uncertain, and the negative operating income drives an interest coverage flag even though interest expense is small. Working capital: accounts receivable of 43.23 against annualized revenue approximates ~63 AR days, broadly reasonable; inventories are modest at 5.41, suggesting limited inventory risk. With cash of 43.11 and positive working capital of 62.22, near-term liquidity is ample, but without OCF and capex data, sustainability of funding dividends or growth capex from internal cash cannot be verified. No clear signs of working-capital manipulation can be inferred from the limited data provided.

Dividend Sustainability

Dividend details are unreported; the calculated payout ratio of -79.7% is not meaningful with negative net income and absent DPS/FCF disclosure. With negative NI and ROIC at -5.4%, distributable capacity should be considered constrained from an earnings perspective. Liquidity is strong (cash 43.11), which could support distributions temporarily, but sustainability depends on restoring positive OCF and operating margin. Absence of OCF and capex data prevents FCF coverage analysis. Policy outlook cannot be inferred without management guidance; watch for full-year guidance updates on payout policy and cash flow.

Risk Assessment

Business Risks:

• Margin pressure: operating costs exceeding gross profit leading to negative operating margin (-3.0%).
• Execution risk in cost control and pricing needed to restore profitability.
• Intangible asset impairment risk (goodwill and other intangibles totaling 29.09) if earnings remain weak.
• Potential revenue mix or utilization risk if growth is skewed to lower-margin lines.

Financial Risks:

• Negative ROIC (-5.4%) indicating value-destructive deployment in the period.
• Interest coverage deeply negative (-190x) due to operating loss, albeit with low absolute interest costs.
• Data gap on interest-bearing debt and cash flows complicates leverage and coverage assessment.
• Possible extraordinary items driving PBT/NI divergence introduce earnings volatility.

Key Concerns:

• Unusual financial statement pattern: positive PBT (1.83) yet negative NI (-3.54), implying post-tax special items or data mapping differences.
• Reliance on cash reserves to bridge operating losses if OCF is also negative (not disclosed).
• ROE (-3.2%) and ROIC (-5.4%) below acceptable thresholds, pressuring valuation and capital allocation flexibility.

Investment Implications

Key Takeaways:

• Top-line growth +14.3% YoY did not translate to profits; operating margin around -3.0%.
• ROE -3.2% driven by negative net margin; leverage is low and not the issue.
• Liquidity is solid (current ratio 266.6%, cash 43.11) despite losses.
• Interest burden is minimal (0.03), but loss-driven coverage is flagged (-190x).
• ROIC at -5.4% signals capital efficiency challenges.
• Earnings structure suggests other operating expenses beyond SG&A weighed on profit.
• PBT vs NI discrepancy hints at extraordinary or below-PBT items; needs clarification.
• Data gaps (OCF, capex, DPS) limit quality and dividend sustainability analysis.

Metrics to Watch:

• Operating margin trajectory and SG&A + other operating costs as a % of revenue.
• OCF and FCF once disclosed; OCF/NI ratio (>1.0 desirable).
• ROIC recovery toward 7–8% management-type targets.
• AR days and working-capital intensity as growth continues.
• Any disclosures on extraordinary gains/losses or impairments explaining PBT/NI gap.
• Capex plans and cash burn rate relative to cash on hand.

Relative Positioning: Versus peers, SOLIZE shows healthy liquidity and conservative leverage but underperforms on profitability (negative operating margin, ROE, and ROIC). The balance sheet strength affords time, yet sustained negative ROIC places it behind peers that convert growth to profits.

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