ZOOM CORPORATION FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥12.09B
• Operating Income: ¥-281M
• Net Income: ¥-390M
• EPS: ¥-158.43

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

For FY2025 Q3, Zoom Corporation (6694) reported revenue of ¥12.09bn, essentially flat year over year (-0.2%), but remained in the red with operating income of -¥281m and net income of -¥686m. Gross profit was ¥4.68bn, implying a solid gross margin of 38.7%, yet SG&A of roughly ¥4.96bn (about 41.0% of revenue) outweighed gross profit, resulting in a small operating loss margin of -2.3%. Ordinary income of -¥386m reflects additional non-operating net costs of approximately ¥105m, including reported interest expense of ¥75.6m. Despite a consolidated net loss, income tax expense of ¥248m suggests tax effects (e.g., valuation allowance movements or jurisdictional profit/loss mix) rather than a conventional effective tax rate. The DuPont bridge indicates net margin of -5.67%, asset turnover of 0.63x, and financial leverage of 2.42x, yielding a calculated ROE of -8.63%. Balance sheet strength is mixed: the computed equity ratio is about 41.4% (¥7.95bn equity on ¥19.20bn assets), but inventory is elevated at ¥7.35bn (49% of current assets) and nearly equals the reported 9M cost of sales, which constrains cash conversion. Liquidity looks adequate on a current ratio basis (193%), while the quick ratio is borderline at ~98%, highlighting reliance on inventory. Debt-to-equity is 1.44x, and interest coverage is negative (-3.7x) due to operating losses. Cash flow statements were not disclosed in this dataset (zeros denote unreported), limiting direct assessment of operating cash generation and free cash flow. Dividend distributions are suspended (DPS ¥0), consistent with loss-making conditions and a prudent capital preservation stance. Operationally, the company’s cost base remains high relative to current revenue run-rate, indicating meaningful operating leverage if topline or gross margin improves. Inventory normalization and working capital efficiency will be central to restoring positive ordinary income and cash flow. Given the high product mix exposure to audio gear, demand visibility, channel inventory health, and new product cadence will likely drive near-term recovery prospects. Overall, the company retains a reasonable capital buffer but needs to reduce opex intensity and right-size inventory to convert its healthy gross margin into sustainable net profitability and cash flow.

Profitability Analysis

ROE_decomposition: ROE -8.63% = Net margin (-5.67%) x Asset turnover (0.63x) x Financial leverage (2.42x). The negative margin is the principal drag; asset turnover is moderate, and leverage is not excessive. margin_quality: Gross margin of 38.7% is healthy for audio equipment, indicating pricing and product mix support. However, SG&A of ~¥4.96bn equates to ~41.0% of revenue, pushing operating margin to -2.3% and signaling an elevated fixed/semi-fixed cost base. Ordinary margin deteriorates further due to non-operating costs (notably interest of ¥75.6m) and other items leading to -3.2% ordinary margin. operating_leverage: Cost structure shows high operating leverage: modest revenue or gross margin improvements could swing operating income to breakeven or better, but equally, any demand softness amplifies losses. Tight opex discipline and better absorption via volume are key to restoring positive operating income.

Growth Assessment

revenue_sustainability: Revenue was ¥12.09bn (-0.2% YoY), implying flat demand. Given the industry’s product cycle sensitivity and channel dynamics, sustaining revenue likely depends on new product introductions, channel sell-through, and FX effects on international sales. profit_quality: With gross margin at 38.7% but operating loss at -¥281m, profit quality is constrained by opex intensity and non-operating expenses. The tax expense despite a loss suggests non-cash or jurisdictional effects, making bottom-line trends less reflective of cash earnings. outlook: If demand stabilizes and inventory is normalized, the combination of robust gross margins and operating leverage could support a return to operating profitability. However, absent visible opex reductions or stronger sell-through, ordinary income may remain pressured in the near term.

Financial Health

liquidity: Current ratio 192.8% (¥14.97bn CA / ¥7.76bn CL) indicates ample near-term coverage, but the quick ratio of 98.1% shows reliance on inventory conversion. Working capital stands at ¥7.20bn, which is sizable but tied up heavily in inventories. solvency: Debt-to-equity is 1.44x (total liabilities ¥11.47bn / equity ¥7.95bn). Interest coverage is -3.7x due to operating losses, highlighting sensitivity to financing costs until EBITDA/EBIT turns positive. capital_structure: Computed equity ratio is ~41.4% (equity ¥7.95bn / assets ¥19.20bn). Leverage (assets/equity) at 2.42x is moderate; balance sheet can likely absorb near-term volatility but prolonged losses would erode equity.

Cash Flow Quality

earnings_quality: Cash flow statements are not disclosed in the provided data; thus, OCF/NI (reported as 0.00) is not meaningful. The presence of tax expense in a loss-making period and negative interest coverage indicate potential gaps between accounting earnings and cash flow. FCF_analysis: Free cash flow cannot be assessed from the dataset (FCF reported as 0 due to non-disclosure). Given high inventories (~¥7.35bn ≈ 99% of 9M COGS), working capital likely weighed on OCF during the period. working_capital: Inventories represent 49% of current assets and are nearly equivalent to 9M COGS, implying elongated inventory days and potential obsolescence risk. Normalization of inventory and tighter receivables/payables management will be crucial to unlock cash.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is ¥0 and payout ratio 0% in the dataset. Given the net loss (EPS -¥158.43), resuming dividends would require a return to sustainable profitability or excess balance sheet capacity, which is not evident currently. FCF_coverage: FCF coverage cannot be computed from undisclosed cash flows. With operating losses and likely working capital drag, internal funding for dividends appears limited at this stage. policy_outlook: A conservative stance (suspension of dividends) seems aligned with balance sheet preservation and reinvestment needs until visibility on profitable growth and positive OCF improves.

Risk Assessment

Business Risks:

• Demand volatility in audio equipment and prosumer markets
• Channel inventory buildup and sell-through uncertainty
• Product cycle execution risk and timing of new launches
• Price competition and promotional intensity
• FX exposure on sales and sourcing (USD/CNY/others vs JPY)
• Supply chain and component lead-time risks
• Inventory obsolescence and markdown risk

Financial Risks:

• Negative interest coverage (-3.7x) and sensitivity to borrowing costs
• High inventory levels tying up working capital
• Potential inventory valuation/write-down risk impacting gross margin
• Tax expense despite losses, implying earnings volatility from tax items
• Equity erosion risk if losses persist

Key Concerns:

• Sustained operating losses despite healthy gross margin
• Borderline quick ratio (~98%) highlighting dependence on inventory conversion
• Ordinary loss driven by both operating and non-operating costs
• Lack of disclosed cash flow data obscures OCF/FCF visibility

Investment Implications

Key Takeaways:

• Revenue flat YoY at ¥12.09bn, but cost structure yields operating loss of -¥281m
• Gross margin robust at 38.7%, indicating pricing/mix strength
• SG&A at ~41% of revenue is the main profitability headwind
• Inventory elevated at ¥7.35bn (~99% of 9M COGS), constraining cash conversion
• Liquidity adequate on current ratio (193%), but quick ratio ~98% is tight
• Leverage moderate (equity ratio ~41%, D/E 1.44x), yet interest coverage is negative
• Dividend suspended; capital preservation until profitability/OCF recover

Metrics to Watch:

• Inventory turnover and inventory-to-COGS ratio
• Operating expense ratio (SG&A/revenue) and progress on cost controls
• Gross margin trajectory and product mix
• Ordinary income and interest coverage
• Operating cash flow and working capital delta
• FX rates and their impact on margins and demand
• Sell-through data and channel inventory health
• New product launch cadence and ASP trends

Relative Positioning: Compared with domestic electronics/AV peers, Zoom’s gross margin is competitive but operating margins trail due to higher opex intensity; leverage is moderate, but weaker interest coverage and elevated inventories place it in a more cash-constrained cohort until operational improvements materialize.

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