BCC Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥1.47B
• Operating Income: ¥-98M
• Net Income: ¥-73M
• EPS: ¥-66.23

Income Statement

Balance Sheet

Cash Flow Statement

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 Q4 shows revenue growth but a clear earnings deterioration, with operating and ordinary losses despite ample liquidity. Revenue rose to 14.67 (100M JPY), up 5.9% YoY, showing some topline momentum. Gross profit reached 5.33, implying a 36.3% gross margin. However, SG&A of 5.51 exceeded gross profit, driving operating income to -0.98 and an operating margin of roughly -6.7%. Ordinary income fell sharply to -0.92 (down 91.3% YoY), and net income was -0.73, translating to basic EPS of -66.23 yen. On margins, operating margin sits approximately 670 bps below break-even and ordinary margin about 630 bps below break-even; precise YoY bps changes cannot be calculated due to missing historical margin data. Earnings quality mixed: OCF/NI is 1.29x, suggesting losses are not purely accrual-driven, but both OCF (-0.94) and FCF (-1.49) were negative. Working capital and cash are solid, with cash and deposits of 5.77 and a current ratio of 319%, limiting near-term liquidity risk. Leverage is conservative with D/E at 0.47x and modest interest-bearing loans (0.30 total), although interest coverage is negative given EBITDA losses. Asset efficiency is reasonable (asset turnover 1.441), but profitability is the primary drag on ROE (-12.8%). ROIC is deeply negative on current-year losses, highlighting capital inefficiency in the period. The cost structure (SG&A > gross profit) suggests limited operating leverage at current scale and/or temporary cost overhang. Forward-looking, stabilizing SG&A intensity and rebuilding operating margin back to at least break-even will be key to restoring ROE and ROIC. Cash runway appears adequate near term, but sustained negative FCF would eventually pressure financing needs. With dividends unreported, shareholder returns appear deprioritized pending earnings normalization. Overall, execution on cost control and margin recovery is the primary focus into the next fiscal period.

Profitability Analysis

ROE decomposition: ROE (-12.8%) = Net Profit Margin (-5.0%) × Asset Turnover (1.441) × Financial Leverage (1.79x). The dominant negative driver is Net Profit Margin, given operating losses despite positive gross profit. Asset turnover is comparatively healthy for a services-like profile, and leverage is moderate; neither appears to be the source of deterioration. Business explanation: SG&A (5.51) exceeded gross profit (5.33), likely from elevated personnel, sales promotion, or other overheads that did not scale with revenue, pushing operating margin to roughly -6.7%. Sustainability: The negative margin may be partially reversible if SG&A normalization and pricing/mix improvements occur; however, without evidence of cost downs or mix shift, recovery should be treated as uncertain. Concerning trends: ordinary income declined 91.3% YoY, indicating deterioration beyond operating level, and SG&A growth appears to have outpaced revenue growth (5.9% topline vs. rising cost burden), signaling unfavorable operating leverage.

Growth Assessment

Revenue grew 5.9% YoY to 14.67, indicating some demand resilience. Gross margin at 36.3% suggests pricing and direct cost management are not the core issue; the problem lies in overhead absorption. Operating income turned to -0.98, implying growth was insufficient to cover fixed costs. Ordinary income at -0.92 (down 91.3% YoY) underscores broad-based profit pressure beyond core operations. Non-operating income of 0.25 provided limited cushion and was insufficient to offset the operating deficit. With depreciation at only 0.06, this is not an asset-intensity issue but a scale and cost alignment issue. Outlook hinges on SG&A intensity reduction and improving utilization; absent that, incremental growth may not translate into profit. Near-term growth quality is low given negative EBITDA (-0.92) and negative OCF (-0.94). Watch for sequential improvement in operating margin and SG&A/revenue ratio as leading indicators of a return to profitability.

Financial Health

Liquidity is strong: current ratio 319% and quick ratio 318%, supported by cash and deposits of 5.77 versus current liabilities of 2.48. No warning thresholds breached (Current Ratio well above 1.0; D/E 0.47x below 1.5). Maturity mismatch risk is low: short-term loans are 0.10 and accounts payable 0.22, comfortably covered by cash and receivables (1.51). Total liabilities are modest at 2.68 against equity of 5.68, yielding a conservative capital structure. Interest-bearing debt totals about 0.30 (short + long term), indicating limited refinancing pressure. No off-balance sheet obligations are reported in the provided data. Despite negative interest coverage due to losses, absolute interest burden is de minimis (interest expense 0.00 rounded), so solvency risk is low near term.

Cash Flow Quality

OCF was -0.94 versus NI -0.73, resulting in OCF/NI of 1.29x; while the ratio exceeds the 0.8 threshold, both figures are negative, indicating weak cash earnings. FCF was -1.49 after relatively light capex (-0.08), pointing to a cash burn primarily from operations rather than investment. Financing inflow of 1.71 bridged the FCF gap, preserving liquidity. Working capital dynamics are not disclosed in detail, but negative OCF alongside rising revenue may reflect elevated operating expenses or receivable build; no obvious signs of deliberate working capital manipulation are evident from the limited data. Sustainability: Without a return to positive OCF, reliance on financing will persist, which is not durable long-term despite current balance sheet strength.

Dividend Sustainability

Dividends are unreported for the period, and with negative NI and negative FCF, capacity to pay cash dividends appears constrained. Payout ratios are not calculable due to losses. Given the cash position and low leverage, a nominal dividend could be funded, but it would not be covered by earnings or FCF. Unless profitability and OCF normalize, a conservative shareholder return stance is likely to persist.

Risk Assessment

Business Risks:

• Operating leverage risk: SG&A exceeding gross profit, creating sustained operating losses if revenue growth stalls.
• Execution risk in cost control and scaling capabilities to match demand.
• Revenue growth durability risk given modest 5.9% YoY growth against worsening profits.
• Potential client concentration or project timing risk (typical for small-cap service companies; not disclosed).
• Pricing/mix risk impacting gross margin resilience if competition intensifies.

Financial Risks:

• Cash burn risk: negative OCF and FCF necessitating continued financing inflows.
• Interest coverage is negative due to EBITDA losses, limiting debt capacity if losses persist.
• Potential equity dilution risk if prolonged losses require capital raising (not indicated in period, but a medium-term risk).
• ROIC deeply negative, indicating poor capital efficiency this period.

Key Concerns:

• Ordinary income declined 91.3% YoY, signaling broad profitability pressure.
• Operating margin around -6.7% despite a 36.3% gross margin, implying overhead misalignment.
• OCF negative despite non-large capex, suggesting core cash earnings weakness.
• Dependence on financing inflow (1.71) to offset FCF deficit (-1.49).
• Earnings per share negative (-66.23 yen), with book value per share at ~511 yen limiting immediate equity cushion for losses if they persist.

Investment Implications

Key Takeaways:

• Topline grew 5.9% YoY to 14.67, but profits turned negative at all levels.
• SG&A exceeded gross profit, driving operating margin to roughly -6.7%.
• ROE -12.8% chiefly due to negative net margin; asset turnover and leverage are not primary issues.
• Liquidity is ample (current ratio 319%, net cash position), tempering near-term solvency concerns.
• Cash generation is weak: OCF -0.94 and FCF -1.49, covered by financing inflow of 1.71.
• ROIC is deeply negative, highlighting urgent need for margin recovery and better capital efficiency.

Metrics to Watch:

• SG&A-to-revenue ratio and absolute SG&A trend
• Operating and ordinary margins (sequential bps improvement)
• OCF and FCF trajectory; cash conversion of earnings
• Gross margin stability (pricing/mix and cost of sales)
• Accounts receivable and DSO trends (collection efficiency)
• Cash balance versus cumulative cash burn rate over the next 2-4 quarters

Relative Positioning: Versus Japan small-cap services peers, BCC shows adequate liquidity and conservative leverage but weaker profitability and cash generation; revenue growth is modest, and the cost structure needs recalibration to restore competitiveness.

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