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

Adish Co., Ltd. (7093) reported FY2025 Q3 consolidated results under JGAAP showing modest topline growth but continued operating losses. Revenue was ¥2,724 million, up 1.5% YoY, indicating limited expansion amid what appears to be a services-heavy model with negligible inventories. Gross profit reached ¥733 million, translating to a gross margin of 26.9%, which provides a reasonable contribution but was insufficient to cover operating expenses. Operating income was a loss of ¥21 million (flat YoY), implying that incremental gross profit from revenue growth was largely absorbed by fixed and semi-fixed SG&A. Ordinary loss narrowed to ¥11 million, suggesting some non-operating gains partially offset interest expense of ¥2.6 million. Net loss was ¥24 million (flat YoY), with EPS at -¥13.14, indicating that profitability inflection has not yet materialized by Q3. The DuPont analysis shows a net margin of -0.88%, asset turnover of 2.172x, and financial leverage of 2.41x, resulting in a calculated ROE of -4.62%. This profile reflects high operating efficiency in asset use but margins that remain negative and leverage that amplifies the loss at the equity level. Liquidity appears adequate with a current ratio of 156.6% and quick ratio of 156.6%, consistent with a low-inventory service business and working capital of ¥414 million. Total liabilities are ¥988 million against total assets of ¥1,254 million, indicating meaningful leverage alongside a thin equity base implied by the reported debt-to-equity ratio of 1.90x. Interest coverage is -8.1x due to the operating loss, underscoring ongoing earnings pressure relative to fixed financing costs. Cash flow statement line items are not disclosed in the provided XBRL (reported as zeros), limiting assessment of operating cash generation and free cash flow. Dividend remains suspended (DPS ¥0, payout 0%), which is appropriate given the negative earnings profile and undisclosed cash flows. Overall, the quarter shows stable but low growth, a steady gross margin, and a stubborn operating loss, implying that cost control and operating leverage are the key levers for a turn to profitability. With positive working capital and manageable interest expense in absolute yen terms, near-term liquidity risk appears contained, but sustained losses could pressure the thin equity cushion over time. Data limitations (particularly cash flows, D&A, and share-related metrics) temper the depth of analysis, so conclusions rely primarily on the income statement and available ratio set.

Profitability Analysis

ROE decomposition: Net profit margin is -0.88%, asset turnover 2.172x, and financial leverage 2.41x, yielding a calculated ROE of -4.62%. The negative margin is the principal driver of the negative ROE; high asset turnover partly offsets weak margin but cannot overcome the loss. Gross margin at 26.9% indicates reasonable value-add for a service business, but SG&A intensity near or slightly above gross profit kept operating margin at roughly -0.8% (operating loss of ¥21 million on ¥2,724 million revenue). Implied SG&A is approximately ¥754 million (gross profit minus operating income), or about 27.7% of revenue, highlighting a cost structure that currently exceeds contribution. Operating leverage appears unfavorable in this period: 1.5% revenue growth did not translate into margin improvement, suggesting either wage inflation, higher delivery costs, or investment in growth capabilities offsetting scale benefits. Ordinary loss (-¥11 million) versus operating loss (-¥21 million) implies net non-operating income of roughly ¥10 million, partially cushioning operating weakness despite ¥2.6 million interest expense. Interest coverage is -8.1x (operating loss vs. interest), signaling insufficient recurring earnings to service financing costs from operations. Reported EBITDA is undisclosed (shows as 0), so we cannot parse the contribution of depreciation/amortization; however, with operating loss and no reported D&A, EBITDA directionally is weak. Overall profitability hinges on tightening SG&A and/or raising unit pricing/mix to lift the gross margin and convert high asset turnover into positive operating returns.

Growth Assessment

Revenue grew 1.5% YoY to ¥2,724 million, indicating modest growth momentum. The gross profit increase implied by the top line did not translate into operating profit improvement, pointing to reinvestment or cost pressures that offset scale benefits. With a steady gross margin of 26.9%, the revenue quality appears stable, but the inability to pass through costs or secure higher-margin work is constraining incremental profitability. Ordinary loss improvement vs operating loss suggests some support from non-operating items, but this is not a durable growth driver. Given the low growth rate, sustaining a turnaround likely requires either mix upgrades (higher-value services) or more aggressive SG&A discipline. Without disclosed contract backlog or net retention, we cannot assess sustainability beyond the single-period rate; however, the services model and quick ratio strength suggest continued operational activity. Near-term outlook hinges on converting pipeline into higher-margin workloads and managing labor utilization. Any acceleration in revenue without corresponding SG&A growth would materially improve operating leverage. Conversely, continued low-single-digit growth may keep the company near breakeven but loss-making.

Financial Health

Liquidity is sound with current assets of ¥1,145 million against current liabilities of ¥732 million, yielding a current ratio of 156.6% and quick ratio of 156.6%. Working capital stands at ¥413.8 million, providing a buffer for operations. Total liabilities are ¥988.3 million vs total assets of ¥1,254 million, reflecting meaningful leverage; the provided debt-to-equity ratio is 1.90x, indicating a thin equity base relative to obligations. Interest expense is modest at ¥2.6 million, but negative operating income results in negative interest coverage. The equity ratio is shown as 0.0% in the dataset, which should be treated as undisclosed rather than actual; thus, solvency assessment relies on liabilities-to-assets and D/E. Overall, short-term liquidity appears adequate, but persistent losses could erode the equity cushion and raise medium-term solvency risk if not offset by capital or improved profitability.

Cash Flow Quality

Operating, investing, and financing cash flows are not disclosed in the provided XBRL (shown as 0), limiting direct assessment of earnings-to-cash conversion. OCF/Net Income is reported as 0.00 due to unavailable OCF, and Free Cash Flow is not provided. With a small net loss (¥24 million) and reasonable working capital, cash burn could be limited if receivables and payables are stable, but this cannot be confirmed. Earnings quality from an accrual standpoint appears mixed: stable gross margin but operating loss suggests costs are not yet aligned to revenue scale. Key working capital levers to monitor include collection cycles (accounts receivable days), contract billings, and any project-based prepayments. In absence of cash data, we cannot evaluate the sustainability of operations from internal cash generation.

Dividend Sustainability

Dividend per share is ¥0 with a payout ratio of 0%, consistent with negative earnings and the priority to restore profitability. With FCF unreported, coverage cannot be assessed, but given operating losses, internal funding of dividends would be imprudent at this stage. The likely policy stance is to maintain suspension until the company achieves consistent positive operating income and demonstrable OCF. Any future initiation would depend on margin recovery, stable working capital, and visibility on growth capex needs.

Risk Assessment

Business Risks:

• Low revenue growth (1.5% YoY) may be insufficient to achieve operating leverage.
• SG&A intensity (~27.7% of revenue) keeps operating margin negative.
• Potential wage inflation and labor utilization risk in a service delivery model.
• Pricing pressure and mix risk if higher-value contracts are limited.
• Customer concentration and churn risk typical for BPO/monitoring services.
• Execution risk in scaling operations while preserving gross margin.

Financial Risks:

• Thin equity base implied by D/E of 1.90x increases sensitivity to losses.
• Negative interest coverage (-8.1x) despite modest absolute interest costs.
• Undisclosed cash flows constrain visibility on liquidity runway and FCF.
• Potential need for external financing if losses persist and working capital tightens.

Key Concerns:

• Continued operating losses despite positive gross margin.
• Limited topline growth not translating into margin improvement.
• Data limitations on cash flows and equity metrics reduce analytical certainty.

Investment Implications

Key Takeaways:

• Topline grew modestly (+1.5% YoY) to ¥2,724 million, but operating loss persisted at ¥21 million.
• Gross margin at 26.9% is stable; SG&A near 28% of sales prevents breakeven.
• Liquidity is adequate (current ratio 156.6%, working capital ¥414 million).
• Leverage meaningful with D/E 1.90x; interest coverage negative due to operating loss.
• ROE is -4.62% driven by negative net margin, despite strong asset turnover (2.172x).
• Cash flow data not disclosed; dividend remains at ¥0 given losses.

Metrics to Watch:

• Revenue growth rate and mix (higher-margin services uptake).
• Gross profit margin and SG&A-to-sales ratio trajectory.
• Operating margin/ordinary profit inflection toward positive territory.
• Operating cash flow, free cash flow, and accounts receivable days once disclosed.
• Interest coverage and liabilities-to-assets as proxies for solvency resilience.

Relative Positioning: Within Japan’s listed service/BPO and digital monitoring peers, Adish exhibits reasonable asset efficiency but below-peer profitability, with liquidity adequate yet equity thin; improvement hinges on cost discipline and margin-accretive growth rather than balance sheet capacity.

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