Emergency Assistance Japan Co., Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥2.71B
• Operating Income: ¥20M
• Net Income: ¥36M
• EPS: ¥20.20

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: Strong topline growth but margin compression and reliance on non-operating gains led to weak operating profitability in FY2025 Q3. Revenue surged 25.0% YoY to 27.12, while operating income fell 30.4% YoY to 0.20, indicating negative operating leverage. Gross profit was 5.97 with a gross margin of 22.0%, but SG&A of 5.67 absorbed nearly all gross profit, yielding a slim operating margin of 0.74%. Ordinary income declined 13.5% YoY to 0.44, supported by non-operating income of 0.26 (notably 0.03 of interest income) and limited non-operating expenses of 0.05. Net income rose 42.5% YoY to 0.50, implying favorable below-ordinary items and/or tax effects despite operating weakness. Operating margin compressed by approximately 58 bps YoY (from ~1.32% to 0.74%), and ordinary margin compressed by roughly 72 bps YoY (from ~2.34% to 1.62%). Conversely, net margin improved by about 22 bps to 1.84%, highlighting the non-operating boost. ROE stood at 2.8%, with DuPont showing a modest asset turnover (0.725x) and low net margin (1.8%) as the primary drag; financial leverage is moderate at 2.08x. ROIC is 3.0%, below the 5% warning threshold, flagging capital efficiency concerns. Liquidity is ample (current ratio 185.2%, cash 24.03 vs short-term loans 10.80), but interest coverage at 4.43x is below the 5x comfort threshold. Earnings quality cannot be assessed robustly as cash flow statements were unreported; OCF/NI and FCF are N/A. Dividend payout ratio is indicated at 40.3%, suggesting nominal earnings cover, but FCF coverage is unknown. Forward-looking, sustaining revenue growth will require cost discipline to restore operating margin, while reducing dependence on non-operating income. Balance sheet strength (high cash) mitigates near-term refinancing risk, but structurally low margins and ROIC must improve for value creation. Key watchpoints are SG&A efficiency, pricing power, and stabilization of non-operating contributions.

Profitability Analysis

ROE decomposition (DuPont): 2.8% ROE = 1.8% Net Profit Margin × 0.725x Asset Turnover × 2.08x Financial Leverage. The margin component is the dominant constraint on ROE, given a very low operating margin (0.74%) and heavy reliance on non-operating income (non-operating income ratio 52.6%). Business drivers: rapid revenue growth (+25.0% YoY) did not scale through SG&A (5.67 nearly matched gross profit of 5.97), suggesting either wage inflation, staffing expansion, or acquisition/onboarding costs that outpaced gross profit growth. Ordinary income benefitted from non-operating items (0.26) offsetting operating weakness, while interest expense (0.05) compressed the spread. Sustainability: the net margin uplift vs prior year appears driven by below-ordinary items and tax effects rather than core operations, thus less repeatable; operating margin recovery would require SG&A efficiency and/or better gross margin. Concerning trends: operating income down 30.4% YoY despite strong sales, indicating negative operating leverage; non-operating dependency elevated; ROIC at 3.0% is subpar relative to a typical 6–8% implied cost of capital.

Growth Assessment

Revenue growth was robust at +25.0% YoY to 27.12, indicating healthy demand recovery/expansion in assistance services. However, operating income declined 30.4% YoY to 0.20, highlighting cost pressure and weak operating leverage. Ordinary income fell 13.5% YoY to 0.44, partly cushioned by non-operating gains (0.26) relative to small non-operating expenses (0.05). Net income rose 42.5% YoY to 0.50, implying supportive non-operating/tax items; effective tax rate is shown at 28.8%, but reported PBT (0.50) vs NI (0.50) suggests potential below-tax adjustments—data limitations apply. Profit quality is mixed: core operations are soft, while net profit benefited from non-operating factors. Sustainability hinges on SG&A control and gross margin stabilization; without that, further revenue growth may not translate to earnings. Near-term outlook: focus on cost discipline, pricing/mix improvement, and reducing reliance on non-operating items to normalize ordinary and net margins.

Financial Health

Liquidity is strong: current ratio 185.2% and quick ratio 185.2%, with cash and deposits of 24.03 covering 1.26x current liabilities (19.13). Solvency is acceptable: D/E 1.08x and an estimated equity ratio around 48% (equity 17.95 / assets 37.39). Interest coverage of 4.43x is below the 5x comfort benchmark, flagging sensitivity to earnings volatility or rate increases. Maturity profile risk: short-term loans total 10.80 versus cash 24.03; refinancing risk is mitigated by cash on hand, but reliance on short-term funding remains a consideration. No off-balance sheet obligations were disclosed in the provided data. Current ratio is comfortably >1.0 and D/E <2.0; no explicit covenant stress indicated.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow were unreported, so OCF/Net Income and FCF coverage cannot be assessed. As such, earnings quality cannot be validated via cash conversion metrics (OCF/NI benchmark >1.0). Working capital indicators: accounts receivable are modest at 1.90 against revenue of 27.12, but without period averages or payables/inventory dynamics, we cannot infer deliberate working capital timing effects. With interest coverage at 4.43x and low operating margin, strong cash conversion is important; absence of OCF data is a key limitation.

Dividend Sustainability

The calculated payout ratio is 40.3%, which is within a generally sustainable range (<60%), but FCF coverage is unknown due to unreported cash flows. With cash and deposits of 24.03 and working capital of 16.30, near-term dividend capacity appears supported by balance sheet liquidity. However, structurally low ROIC (3.0%) and weak operating margins suggest that maintaining or growing dividends long term should be contingent on improving core cash generation and reducing non-operating reliance. No information on DPS progression or buybacks was disclosed.

Risk Assessment

Business Risks:

• Margin compression from SG&A growth outpacing gross profit amid rapid revenue expansion
• Dependence on non-operating income to sustain ordinary and net profit
• Potential wage inflation and staffing costs in assistance/call-center operations
• FX exposure related to overseas assistance and cross-border medical payments
• Customer/partner concentration risk with insurers/travel agencies (typical for the industry)

Financial Risks:

• Interest coverage at 4.43x below strong threshold, raising sensitivity to rate hikes or earnings shocks
• Short-term debt reliance (10.80) despite strong cash; rolling risk if cash is redeployed
• Low ROIC at 3.0% risks value dilution if growth requires incremental capital
• Cash flow opacity: OCF/FCF unreported, limiting assessment of dividend and capex coverage

Key Concerns:

• ROIC 3.0% (<5% warning) indicates poor capital efficiency
• Operating margin 0.74% with negative operating leverage despite +25% revenue growth
• Non-operating income ratio 52.6% underscores earnings quality risk
• Interest coverage below 5x
• Data limitations on cash flows and SG&A breakdown obscure underlying drivers

Investment Implications

Key Takeaways:

• Topline momentum is strong (+25% YoY), but core profitability weakened materially
• Net income growth (+42.5% YoY) is not fully reflective of operating strength due to non-operating support
• Liquidity is ample; refinancing risk is contained near term, though operating resilience must improve
• Capital efficiency (ROIC 3.0%) is below cost-of-capital norms—improvement is critical for value creation
• Monitoring cost discipline and the mix of operating vs non-operating earnings is essential

Metrics to Watch:

• Operating margin and ordinary margin progression (bps changes QoQ/YoY)
• SG&A-to-sales ratio and any disclosed cost initiatives
• Non-operating income share of ordinary profit
• ROIC vs management targets, and drivers (NOPAT, invested capital efficiency)
• OCF/Net Income and FCF once reported
• Interest coverage and short-term debt levels
• Effective tax rate stability and any extraordinary items

Relative Positioning: Within Japan-listed assistance/medical support peers, the company shows above-average liquidity but below-average operating margin and ROIC; earnings are more sensitive to non-operating items than peers with stronger core profitability.

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
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