adish Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥2.72B
• Operating Income: ¥-21M
• Net Income: ¥-100M
• EPS: ¥-13.14

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: FY2025 Q3 shows a marginal top-line increase but a return to operating loss, indicating a soft quarter with profitability pressure despite adequate liquidity. Revenue was 27.24 (100M JPY), up 1.5% YoY, while gross profit was 7.33 for a gross margin of 26.9%. Operating income was -0.21, translating to an operating margin of about -0.8%. Non-operating income of 0.18 only partially offset the operating loss, with ordinary income at -0.11. Profit before tax was reported at -0.83 and net income at -0.24, implying a net margin of -0.9%. The effective tax rate prints at -20.3%, which is atypical for a loss-making quarter and likely reflects tax adjustments rather than recurring tax expense behavior. SG&A of 8.32 exceeded gross profit of 7.33, the primary driver of the operating loss. Interest expense was modest at 0.03, but with negative EBIT the interest coverage ratio is -8.12x, flagging weak debt service coverage from current earnings. Liquidity remains sound: current assets of 10.71 comfortably cover current liabilities of 6.41, producing a current ratio of 167.1%. The balance sheet is moderate in leverage with total liabilities of 7.34 versus equity of 5.20, implying D/E of 1.41x (total liabilities basis) and an equity ratio around 41.5%. Asset turnover is relatively high at 2.172, consistent with an asset-light service model. DuPont shows ROE at -4.6%, driven mainly by the negative net margin rather than asset efficiency or leverage. Cash flow data are not disclosed; therefore, earnings quality cannot be corroborated via OCF, which is a key limitation this quarter. With net loss and no disclosed dividends, capital return visibility is low near term. Forward-looking, a path to profitability requires either gross margin improvement or SG&A right-sizing; given stable revenue, operating leverage is currently unfavorable. Absent cash flow disclosure, the investment case hinges on near-term margin repair and maintaining liquidity while servicing debt.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin (-0.9%) × Asset turnover (2.172) × Financial leverage (2.41x) = ROE (-4.6%). The dominant drag is the net profit margin turning negative, despite efficient asset utilization. Business driver: SG&A (8.32) exceeded gross profit (7.33), resulting in an operating margin of about -0.8%; this implies cost base rigidity against modest revenue growth (+1.5% YoY). Non-operating income (0.18) helped but was insufficient to offset the operating shortfall. Sustainability: The negative margin appears more cyclical/operational than structural if management can align SG&A with revenue and lift gross margin; however, without SG&A breakdowns, the timing and levers are unclear. Operating leverage is unfavorable at present: small revenue growth did not translate to profit given the fixed/semifixed cost burden. Warning flags: SG&A outpaces gross profit in absolute terms this quarter; while YoY SG&A growth is undisclosed, the current cost structure is not supported by revenue, pressuring profitability until adjusted.

Growth Assessment

Revenue grew 1.5% YoY to 27.24, a modest pace that did not translate into earnings due to cost pressure. Gross margin stood at 26.9%; without YoY margin data, we cannot quantify basis-point expansion/compression. Operating income slipped to -0.21, and net loss was -0.24, indicating negative operating leverage. Non-operating items (0.18 income, 0.03 expense) provided limited cushion, suggesting core business profitability is the key swing factor. With asset turnover at 2.172, the company maintains efficient asset use typical of an asset-light service model. Outlook hinges on cost discipline and potentially pricing/mix improvements to lift gross margin. Absent cash flow data, the durability of growth (i.e., whether supported by cash collections) cannot be validated. Near-term, achieving breakeven requires closing the gap between gross profit (7.33) and SG&A (8.32) through either revenue acceleration or expense optimization.

Financial Health

Liquidity: Current assets 10.71 vs current liabilities 6.41 yields a current ratio of 167.1% (healthy; no warning as CR > 1.0). Quick ratio is also 167.1% given negligible inventories reported. Solvency: Total liabilities 7.34 vs equity 5.20 implies D/E of 1.41x (below the 2.0 warning threshold). Equity ratio is approximately 41.5% (5.20 / 12.54), indicating a moderately capitalized balance sheet. Debt profile: Short-term loans 1.12 and long-term loans 0.93 total 2.05 in interest-bearing debt; cash and deposits of 5.30 exceed total debt, implying net cash on a simple basis. Maturity mismatch: Current assets (10.71) substantially exceed current liabilities (6.41), and cash alone (5.30) covers 83% of current liabilities, reducing refinancing pressure. Debt service: Interest coverage is -8.12x due to negative operating earnings; while cash levels are supportive, prolonged losses could erode cushions. Off-balance sheet: No disclosures provided; cannot assess lease liabilities or contingent obligations.

Cash Flow Quality

Operating cash flow is undisclosed; thus, OCF/Net Income and free cash flow cannot be calculated. Without OCF, we cannot validate earnings quality or working capital dynamics. Accounts receivable (4.74) is sizable versus revenue but within typical service-business ranges; however, AR days cannot be robustly estimated without period flow data. Working capital stands at 4.30, and cash of 5.30 provides flexibility, but sustainability of cash balances depends on future OCF given operating losses. No signs of working capital manipulation can be assessed due to absent CF details. Overall, earnings quality is indeterminable this quarter due to missing cash flow data; this is a key monitoring gap.

Dividend Sustainability

Dividend data are unreported. With net income at -0.24 and absent OCF/FCF disclosure, payout capacity cannot be assessed. Cash of 5.30 and net cash position provide theoretical room for shareholder returns, but negative earnings and weak interest coverage argue for balance-sheet preservation. Policy outlook is unclear from available data; unless profitability and OCF improve, maintaining or initiating dividends could be constrained. FCF coverage cannot be measured due to missing capex and OCF.

Risk Assessment

Business Risks:

• Margin pressure from SG&A exceeding gross profit, leading to operating losses.
• Potential pricing and wage inflation risk in a labor-intensive service model.
• Client budget tightening or churn impacting modest revenue growth (+1.5% YoY).
• Execution risk in achieving cost reductions without harming service delivery.

Financial Risks:

• Negative interest coverage (-8.12x) indicating weak debt service capacity from earnings.
• Dependence on cash reserves to bridge operating losses; prolonged deficits could deplete liquidity.
• Refinancing risk if short-term loans (1.12) cannot be rolled in a weaker earnings environment.
• Tax line volatility (effective tax rate -20.3%) complicates earnings predictability.

Key Concerns:

• Sustained operating losses if SG&A is not right-sized or revenue does not accelerate.
• Lack of cash flow disclosure obscures earnings quality and working capital trends.
• Potential covenant constraints unknown due to lack of debt agreement disclosure.
• Sensitivity to demand cycles for outsourced/managed services typical in the sector.

Investment Implications

Key Takeaways:

• Top-line grew 1.5% YoY to 27.24, but profitability deteriorated to an operating loss of -0.21.
• Gross margin at 26.9% is insufficient to cover SG&A (8.32) under current scale.
• ROE at -4.6% is driven by negative net margin despite solid asset turnover (2.172).
• Liquidity is adequate (current ratio 167.1%) and cash (5.30) exceeds total debt (2.05), mitigating near-term stress.
• Interest coverage is negative (-8.12x), making earnings repair urgent for debt service from operations.
• Cash flow data are missing; assessment of earnings quality and dividend capacity is constrained.

Metrics to Watch:

• Operating margin and the gap between gross profit and SG&A each quarter.
• Gross margin trajectory (pricing, mix, utilization).
• OCF/Net Income once disclosed, and free cash flow after capex.
• Cash balance versus short-term loans and any changes in borrowing.
• Accounts receivable levels and collection trends.
• Any updates on cost structure optimization initiatives.

Relative Positioning: Within asset-light service peers, the company maintains healthy liquidity and efficient asset use but is currently disadvantaged by negative operating leverage and weak debt service capacity from earnings. Visibility is further limited by absent cash flow disclosure.

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