Howtelevision,Inc. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥1.90B
• Operating Income: ¥234M
• Net Income: ¥217M
• EPS: ¥47.16

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 FY2026 Q3, Howtelevision (70640) delivered solid top-line growth but experienced significant margin compression at the operating and net income levels. Revenue increased 16.3% YoY to 18.99, signaling resilient demand across the company’s services. Gross profit is reported at 13.66, implying a gross margin of 71.9%, which remains a strong indicator of pricing power and a relatively light cost-of-sales model. However, operating income fell 35.4% YoY to 2.34, indicating a step-up in operating costs, most likely within SG&A. The SG&A expense base reached 10.03, resulting in an SG&A-to-sales ratio of 52.8%, which constrained operating leverage despite strong revenue growth. Ordinary income declined 35.7% YoY to 2.32, broadly in line with the operating trend, with non-operating items remaining small (net expense of roughly 0.02). Notably, profit before tax rose to 3.61, materially above ordinary income, suggesting the presence of non-recurring/extraordinary gains around 1.29 that partially offset weaker core profitability. The bottom line came in at 1.28 (-40.9% YoY), as a relatively high effective tax rate of 39.9% further weighed on net profitability. The calculated net margin is 6.7%, which together with asset turnover of 0.813 and financial leverage of 1.61x yields a DuPont ROE of 8.8%. Liquidity is strong, with cash and deposits of 16.00 and a current ratio of 290.6%, providing ample cushion against 6.34 of current liabilities. The balance sheet is conservative: total liabilities of 10.41 versus equity of 14.50 (debt-to-equity 0.72x), and long-term loans of 3.98 are more than covered by cash, implying a net cash position. Intangible assets stand at 3.00 (including goodwill of 1.55), which highlights potential future impairment risk if growth underperforms. Interest coverage remains very high at 85.53x, underscoring limited financing risk. EPS (basic) is 47.16 JPY, and BVPS (calculated) is 533.58 JPY, indicating that earnings are accretive over book value but trending down YoY in absolute terms. Cash flow data were not disclosed, limiting the ability to assess earnings quality and free cash flow conversion in detail. There is a data discrepancy between the reported cost of sales (2.68) and the combination of reported gross profit (13.66) and revenue (18.99); our analysis relies on the reported gross profit and gross margin as they are consistent with each other.

Profitability Analysis

ROE (DuPont): 8.8% = Net margin (6.7%) x Asset turnover (0.813) x Equity multiplier (1.61x). Net margin of 6.7% reflects the combination of a high gross margin (71.9%) offset by elevated SG&A intensity (52.8% of sales) and a 39.9% effective tax rate. Operating margin (calculated) is approximately 12.3% (2.34 / 18.99), down YoY given the -35.4% decline in operating income against +16.3% revenue growth, signaling negative operating leverage this period. Ordinary income margin sits close to operating margin due to minimal non-operating items (net expense ~0.02). Profit before tax exceeds ordinary income by roughly 1.29, indicating likely non-recurring gains; absent these, core profitability is weaker. Interest expense is de minimis (0.03), and interest coverage is very strong at 85.53x, reinforcing that finance costs are not a drag on margins. Overall margin quality is mixed: gross margin remains robust, but increased spending (likely in people, product, and/or marketing) compressed operating and net margins.

Growth Assessment

Revenue grew 16.3% YoY to 18.99, demonstrating healthy top-line momentum. However, operating income declined 35.4% YoY to 2.34, indicating that growth was not matched by cost discipline, resulting in negative operating leverage. Ordinary income contracted 35.7% YoY to 2.32, broadly mirroring operating trends with only minor non-operating impact. Net income fell 40.9% to 1.28, further pressured by a high effective tax rate. The implied extraordinary gains (difference between profit before tax of 3.61 and ordinary income of 2.32) suggest non-recurring tailwinds masked some weakness in core profitability. Sustainability of revenue growth appears reasonable given the company’s high gross margin model, but profit quality is currently challenged by higher SG&A intensity. Near-term outlook hinges on the company’s ability to moderate SG&A growth relative to sales while maintaining demand, and on normalization of the effective tax rate. Without cash flow disclosure, durability of growth cannot be fully validated through cash conversion metrics.

Financial Health

Liquidity is strong: current assets of 18.43 vs current liabilities of 6.34 yield a current ratio of 290.6% and a quick ratio of 290.6% (no inventories reported). Cash and deposits of 16.00 comfortably cover all current liabilities, providing a sizable liquidity buffer. Total assets are 23.36 and total equity is 14.50, implying an equity ratio of ~62% (23.36/14.50 inverse = 1.61x equity multiplier), consistent with a solid capital base. Total liabilities are 10.41 and long-term loans are 3.98; with cash of 16.00, the company is in a net cash position. Debt-to-equity is 0.72x (liabilities/equity), indicating conservative leverage. Interest coverage is 85.53x, reflecting minimal financial risk from borrowing costs. Intangible assets total 3.00 (goodwill 1.55), which is manageable but does introduce potential impairment risk if growth underperforms.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed, preventing direct assessment of OCF/NI and free cash flow. As such, OCF/Net Income and FCF metrics are not calculable, and earnings quality cannot be validated via cash conversion. The balance sheet suggests prudent liquidity with cash of 16.00 and positive working capital of 12.09, which supports operations even if cash conversion is temporarily weak. Accounts receivable are 1.94, modest versus revenue, but without collection data or DSO trends we cannot assess timing of cash inflows. Capex and depreciation were not disclosed, limiting visibility into maintenance vs growth investment needs. Given the net cash position, the company has flexibility; however, confirmation via OCF data would be needed to assert high earnings quality.

Dividend Sustainability

Dividend information (DPS, total dividends, payout ratio, FCF coverage) is unreported, so we cannot assess current distribution levels or policy execution. With EPS (basic) of 47.16 JPY and BVPS of 533.58 JPY, internal capital generation is positive but down YoY at the net level. Retained earnings stand at 7.54, indicating accumulated capacity to support future distributions if the policy allows, but sustainability must be judged against free cash flow, which is not disclosed. The net cash balance provides capacity, yet policy clarity and cash conversion are prerequisites. Absent disclosure, payout ratio and FCF coverage cannot be calculated.

Risk Assessment

Business Risks:

• Margin compression from elevated SG&A, reducing operating leverage despite revenue growth
• Dependence on continued demand in recruitment/media or platform services (sector cyclicality)
• Potential customer concentration and contract renewal risk (common in B2B/B2C platform models)
• Intangible asset and goodwill carrying value risk if growth underperforms
• Competitive intensity potentially requiring sustained marketing and product investment

Financial Risks:

• Profit reliance on non-recurring gains this period (PBT > ordinary income by ~1.29)
• High effective tax rate (39.9%) dampening net profitability
• Limited visibility on cash generation due to unreported cash flow statements
• Potential interest rate risk on refinancing of long-term loans (3.98), albeit mitigated by net cash

Key Concerns:

• Negative operating leverage: operating income -35.4% YoY vs revenue +16.3% YoY
• SG&A ratio elevated at 52.8%, pressuring operating margin to ~12.3%
• Net income -40.9% YoY despite implied extraordinary gains
• Data discrepancy between reported cost of sales and gross profit; reliance on reported gross profit and margin
• Lack of OCF/FCF disclosure limits earnings quality assessment

Investment Implications

Key Takeaways:

• Top-line growth is strong (+16.3% YoY) but profitability is under pressure
• Gross margin remains high (71.9%), evidencing pricing power and a scalable model
• Operating margin compressed to ~12.3% due to higher SG&A (52.8% of sales)
• Ordinary income declined in line with operating income; PBT buoyed by non-recurring gains (~1.29)
• Balance sheet strength: net cash position with cash (16.00) exceeding long-term loans (3.98)
• Interest coverage is robust (85.53x), implying low financing risk
• High effective tax rate (39.9%) further constrains net margin (6.7%) and ROE (8.8%)
• Intangibles (3.00) and goodwill (1.55) warrant monitoring for impairment risk

Metrics to Watch:

• SG&A-to-sales ratio and operating margin trajectory
• Evidence of extraordinary items normalizing (gap between ordinary income and PBT)
• Cash conversion: OCF/Net income and FCF once disclosed
• Customer metrics (retention/renewal, ARPU) to gauge growth durability
• Effective tax rate normalization and drivers
• Receivables quality and DSO
• Capex levels versus growth investment needs

Relative Positioning: Relative to small-cap peers in Japan’s information services/platform space, Howtelevision exhibits above-average gross margins and a strong net cash balance, but currently lags on operating leverage and profit growth, with limited transparency on cash flow 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