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

Revenue reached 2,712 million yen, up a robust 25.0% YoY, indicating strong demand recovery and/or successful expansion of service volumes and pricing in the assistance business. Despite this top-line momentum, operating income declined 30.4% YoY to 20 million yen, implying negative operating leverage in the period. The reported gross profit margin is 22.0%, which suggests material cost pressure and/or a change in cost classification; however, we note an internal arithmetic inconsistency between reported revenue, cost of sales, and gross profit that may reflect presentation differences under JGAAP (e.g., certain operating costs booked in cost of sales or changes in account naming). Ordinary income was 44 million yen, outpacing operating income, suggesting contribution from non-operating gains and modest interest expense (4.5 million yen). Net income rose 42.5% YoY to 50 million yen, driving a net margin of 1.84% and highlighting a favorable below-the-line impact despite weak operating profitability. DuPont analysis yields ROE of 2.79% = 1.84% net margin × 0.725x asset turnover × 2.08x financial leverage; this is low versus typical service-sector benchmarks in Japan (often mid-to-high single digits). Liquidity is solid with a current ratio of 181.1% and working capital of approximately 1,600.7 million yen, underpinned by high current assets (3,574.3 million yen). The balance sheet shows moderate leverage (liabilities/equity of 1.12x) and total assets of 3,739 million yen, implying an equity ratio near 48% despite the reported equity ratio field showing 0.0% (likely unreported). Interest coverage is 4.4x (operating income/interest expense), adequate but leaving limited cushion should operating income remain depressed. Cash flow statement items are unreported (zeros), preventing an assessment of operating cash conversion, free cash flow, or reinvestment. EBITDA is unreported, so margin and leverage metrics using EBITDA cannot be validated. The company did not disclose dividends (DPS 0.00), which is consistent with preserving cash while profitability is thin and cash flow data are unavailable. Overall, the quarter highlights a tension between strong revenue growth and pressured margins, with earnings sustained by non-operating items and a benign tax burden, while the financial position remains liquid. The outlook hinges on restoring operating margin via cost discipline and mix optimization, converting growth into cash, and stabilizing below-the-line contributions. Data limitations, particularly missing cash flow details, constrain the depth of earnings quality analysis; conclusions are therefore based on the disclosed line items and computed ratios.

Profitability Analysis

ROE is 2.79%, decomposed as net margin 1.84% × asset turnover 0.725 × financial leverage 2.08. The low ROE is primarily a function of a very thin net margin, rather than asset efficiency or leverage. Operating margin is 0.7% (20 million yen / 2,712 million yen), indicating significant SG&A inflation and/or cost-of-services pressure despite the 25% revenue growth. Ordinary margin of 1.6% (44 million yen / 2,712 million yen) shows reliance on non-operating income to offset weak core profits. Reported gross margin is 22.0%, which suggests cost pressure or accounting presentation differences; the gap between revenue, cost of sales, and gross profit implies possible reclassification or timing effects under JGAAP. Interest expense is modest (4.5 million yen), with coverage at 4.4x based on operating income—adequate but not comfortable if operating income remains subdued. The YoY pattern (revenue up, operating income down) indicates negative operating leverage this quarter, potentially due to higher personnel costs, network/medical partner fees, or ramp-up expenses tied to growth. Tax effects appear favorable at the bottom line (net income > ordinary income after tax expense recognition), helping the net margin, though the reported effective tax rate metric is not reliable given data inconsistencies. Overall, profitability quality is mixed: healthy top-line throughput and asset turnover, but weak cost control and reliance on non-operating gains.

Growth Assessment

Revenue growth of +25.0% YoY to 2,712 million yen signals strong demand, likely from travel and medical assistance normalization and contract wins/expansion with insurers and corporates. However, operating income fell 30.4% YoY to 20 million yen, indicating that incremental revenue did not translate into operating profit—suggesting cost inflation (labor, partner fees, case handling costs) or investments ahead of demand. Net income rose 42.5% YoY to 50 million yen, implying supportive non-operating items and/or favorable tax effects offsetting weak operations. Sustainability of revenue growth appears reasonable given sector tailwinds (travel normalization), but profit quality is a concern until gross and operating margins recover. Asset turnover of 0.725x looks efficient for a service model, consistent with higher current assets supporting receivables and cash for operations. Near-term outlook hinges on: 1) stabilizing unit economics per case, 2) pricing power with insurers/corporate clients, and 3) controlling SG&A as growth scales. Without cash flow data, we cannot confirm whether growth is cash-generative; monitoring DSO and OCF is essential to validate sustainability. Mix improvements (higher-margin services, value-added assistance, BPO) could lift margins if executed.

Financial Health

Liquidity is strong: current assets 3,574.3 million yen vs current liabilities 1,973.6 million yen yields a current ratio of 181.1% and ample working capital of roughly 1,600.7 million yen. Quick ratio is reported equal to current ratio due to unreported inventories; operationally, assistance businesses typically hold minimal inventory, so the quick ratio likely approximates reality. Solvency is adequate with total liabilities of 2,004.4 million yen and equity of 1,795.0 million yen (liabilities/equity 1.12x; assets/equity 2.08x). The reported equity ratio field shows 0.0% but appears unreported; based on totals, the implied equity ratio is about 48%, a comfortable buffer. Interest expense is low (4.5 million yen), and interest coverage at 4.4x is acceptable but could compress if operating income remains weak. No detail is available on the composition of liabilities (short- vs long-term debt, payables, provisions), limiting deeper solvency analysis. Overall, the balance sheet supports ongoing operations and selective investment while management addresses margin recovery.

Cash Flow Quality

Cash flow statement items (operating, investing, financing CF) are unreported, so earnings-to-cash conversion cannot be assessed. The OCF/Net Income ratio and FCF reported as zero should be treated as not disclosed, not actual zeros. Earnings quality thus relies on accrual-based line items: working capital is sizable, which can absorb cash if receivables grow with revenue. Depreciation and EBITDA are unreported, preventing reconciliation from operating income to OCF and making it difficult to gauge the level of non-cash charges. Given the thin operating margin, positive cash conversion will depend on tight receivables collection and disciplined payment terms with partners. Until OCF and FCF are disclosed, we cannot validate dividend capacity or reinvestment funding from internal cash generation.

Dividend Sustainability

No dividend is disclosed (DPS 0.00; payout ratio 0.0%), which is prudent in light of weak operating profitability and unavailable cash flow data. With net income of 50 million yen and thin operating margin, any payout would risk crowding out reinvestment or balance sheet flexibility unless cash conversion is strong. FCF coverage is shown as 0.00x due to unreported cash flows; therefore, we cannot compute true dividend coverage. Policy-wise, the company may prioritize strengthening profitability and cash generation before resuming or initiating distributions. Future payout capacity will hinge on restoring operating margins, stabilizing non-operating contributions, and demonstrating consistent positive OCF.

Risk Assessment

Business Risks:

• Cost inflation in medical partner networks and personnel eroding margins
• Contract renewal and pricing risk with insurers and corporate clients
• Case volume volatility tied to travel activity and macro conditions
• Geopolitical and public health events impacting international assistance demand
• FX exposure if overseas medical costs are incurred in foreign currencies
• Service mix shift toward lower-margin offerings
• Execution risk in scaling operations without proportional SG&A growth

Financial Risks:

• Thin operating margin (0.7%) leaves limited cushion against shocks
• Reliance on non-operating income to sustain earnings
• Working capital expansion risk as revenue grows (receivables collection)
• Potential interest coverage compression if earnings weaken
• Data limitations on cash flows hinder visibility into liquidity dynamics

Key Concerns:

• Negative operating leverage despite 25% revenue growth
• Low ROE of 2.79% versus typical sector norms
• Inconsistencies in gross profit presentation under JGAAP complicate margin tracking
• Unreported cash flow data prevents assessment of earnings quality and FCF

Investment Implications

Key Takeaways:

• Top-line growth is strong (+25% YoY), but operating income contracted, highlighting margin pressure.
• ROE is low at 2.79%, driven by a very thin net margin rather than asset efficiency or leverage.
• Balance sheet liquidity is healthy (current ratio 181%), providing flexibility during margin recovery.
• Earnings rely on non-operating items; operating margin repair is the main lever for value creation.
• Lack of disclosed cash flows is a key limitation for assessing sustainability of earnings and dividends.

Metrics to Watch:

• Gross margin trend and cost-of-services per case
• SG&A ratio and operating margin progression
• Operating cash flow, free cash flow, and days sales outstanding
• Ordinary income composition (recurring vs one-off non-operating gains)
• Interest coverage and liability mix
• Contract renewals/pricing with insurers and corporate clients

Relative Positioning: Within TSE-listed service providers, the company exhibits healthy revenue momentum and solid liquidity but subpar profitability and ROE relative to domestic peers; near-term performance hinges on restoring operating margin and demonstrating cash conversion.

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