CellSeed Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥65M
• Operating Income: ¥-824M
• Net Income: ¥-849M
• EPS: ¥-24.51

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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 severe operating losses amid collapsing revenue, cushioned by an exceptionally strong cash position and low leverage. Revenue was 0.65 (down 52.8% YoY), while operating income was -8.24, driving ordinary income to -8.23 and net income to -8.49. Gross profit reported at 0.79 implies an unusually high gross margin of 121.4%, likely reflecting classification of other operating-related income or inventory adjustments rather than underlying product profitability. SG&A was 7.43, more than 11x revenue, and is the main driver of losses. Operating margin was approximately -1,268%, and net margin -1,306%, highlighting extreme negative operating leverage at the current scale. The DuPont result shows ROE at -64.8% driven by a deeply negative net margin, very low asset turnover (0.039), and modest leverage (1.27x). Interest coverage is -531.6x, not due to high interest burden but because EBIT is deeply negative against a tiny interest expense (0.02). Liquidity is very strong: cash and deposits are 21.34 versus current liabilities of 1.03, yielding a current ratio of 2,241.7% and quick ratio of 2,229.6%. The balance sheet is conservatively levered with D/E of 0.21x and long-term loans of 1.33, reducing near-term solvency risk. However, there are internal inconsistencies in the reported balance sheet (current assets exceed total assets; liabilities + equity do not reconcile to total assets), so point estimates should be used cautiously. Cash flow statements were not disclosed, limiting earnings quality assessment; OCF/NI cannot be calculated. With net losses of 8.49 for the period and cash of 21.34, the implied cash runway appears adequate for the near term, but sustainability depends on future fundraising or commercialization progress. Dividend capacity appears absent given negative retained earnings (-24.66) and ongoing losses. Forward-looking, the company must either materially scale revenue or reduce SG&A to narrow losses; otherwise, equity financing risk remains elevated despite today’s cash cushion. Key watch items are revenue traction, SG&A discipline, disclosure of OCF, and any capital market actions.

Profitability Analysis

ROE decomposition: ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (-1306.2%) × 0.039 × 1.27 ≈ -64.8%. The dominant driver is the collapse in net profit margin given operating losses (operating margin roughly -1,268%). Asset turnover at 0.039 indicates very low monetization of the asset base, typical of a development-stage or pre-commercial revenue mix. Financial leverage at 1.27x is modest, so leverage is not a material driver of ROE. The business reason for the margin compression is SG&A (7.43) materially exceeding gross profit (0.79) and revenue (0.65), indicating fixed cost absorption issues and limited scale. This margin profile is unlikely to be sustainable without either significant revenue inflection or structural cost reductions; absent that, losses will persist. Concerning trend: SG&A far exceeds revenue (SG&A/revenue ≈ 11.4x), implying negative operating leverage and a high breakeven threshold.

Growth Assessment

Revenue declined 52.8% YoY to 0.65, signaling weak demand or timing of contracts/licensing income. Gross profit exceeded revenue, suggesting classification effects; underlying unit economics from core sales cannot be reliably inferred from disclosed data. Operating and ordinary losses widened significantly (operating income -8.24; ordinary income -8.23), indicating no operating scale benefits this period. With no disclosure on R&D or segment detail, growth quality cannot be dissected between recurring vs one-time items. Outlook hinges on converting pipeline to commercial revenue and/or securing milestone or licensing income; current run-rate does not support fixed cost absorption. Near-term growth catalysts would need to materially raise revenue above SG&A to improve operating leverage. Absent that, growth remains constrained by funding cycles and risk of dilution. The decline in accounts receivable (0.37 level) and small inventory (0.12) align with low activity levels. Given limited visibility, revenue sustainability is uncertain and likely volatile.

Financial Health

Liquidity is very strong with a current ratio of 2241.7% and quick ratio of 2229.6%, driven by cash and deposits of 21.34 versus current liabilities of 1.03. No warning on current ratio (<1.0) or leverage (D/E > 2.0): D/E is 0.21x, indicating conservative capital structure. Interest-bearing debt disclosure is partial, but long-term loans are 1.33 and noncurrent liabilities total 1.67, minimizing near-term refinancing pressure. Maturity mismatch risk appears low given cash far exceeds current liabilities and short-term borrowings are not reported. However, interest coverage is extremely negative due to operating losses, not debt burden; sustained losses could eventually pressure capital resources. Notable data limitation: balance sheet does not reconcile (current assets 23.12 exceed total assets 16.65; liabilities + equity 15.81 is below total assets), indicating mapping inconsistencies—interpret liquidity and solvency using line items (cash, CL, LT loans) rather than the totals.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income and FCF cannot be calculated. Earnings quality therefore cannot be validated via cash conversion; risk remains that working capital or non-cash items affect the reported loss. With net income at -8.49 and significant cash (21.34), near-term funding needs are contained; however, without OCF disclosure, the cash burn rate must be approximated from earnings, which is imprecise. No evidence of working capital manipulation can be assessed given missing cash flow detail; working capital on the balance sheet is positive at 22.09. Sustainability of FCF to cover any dividends or capex cannot be judged; capex is unreported.

Dividend Sustainability

Dividend disclosures are unreported, and retained earnings are negative (-24.66), indicating an absence of distributable profits under JGAAP standards. With net losses in the period (-8.49) and FCF unreported, any dividend would be economically unsustainable. Cash on hand is ample, but given ongoing losses and likely need to fund operations, policy prudence suggests maintenance of non-dividend stance. Payout ratio and FCF coverage are not calculable; outlook: dividends appear unlikely until profitability and retained earnings recover.

Risk Assessment

Business Risks:

• Revenue contraction of 52.8% YoY indicating weak commercialization or timing volatility
• SG&A significantly exceeding revenue (≈11.4x), implying negative operating leverage
• Limited scale and potentially high fixed cost base
• Product/gross margin interpretability issues due to gross profit > revenue (classification effects)

Financial Risks:

• Persistent operating losses leading to cash burn and potential future equity financing/dilution
• Interest coverage deeply negative due to losses, constraining debt capacity
• Data inconsistencies in balance sheet totals may obscure true asset base and leverage
• Negative retained earnings limiting flexibility for distributions

Key Concerns:

• Absence of cash flow statement impedes assessment of cash conversion and burn rate
• Dependence on external funding if revenue does not scale rapidly
• Potential covenant or refinancing risk if additional borrowing is sought despite current low leverage
• Visibility on R&D intensity and commercialization timeline is limited by unreported SG&A/R&D breakdowns

Investment Implications

Key Takeaways:

• Severe operating loss (-8.24) on minimal revenue (0.65) signals need for scale or cost reset
• Cash position strong at 21.34 with minimal current liabilities (1.03), providing near-term runway
• Leverage is low (D/E 0.21x), but interest coverage is negative due to losses, not debt load
• ROE is sharply negative (-64.8%), driven by extreme negative margins and low asset turnover
• Balance sheet reporting inconsistencies require cautious interpretation of aggregate totals

Metrics to Watch:

• Quarterly revenue trajectory and order/bookings visibility
• SG&A trend and any cost containment actions
• Disclosure of operating cash flow and quarterly cash burn
• Cash balance versus financing activities (equity issuance or new debt)
• Operating margin and gross margin composition (classification of other operating income)

Relative Positioning: Within pre-commercial/early-commercial life science peers on TSE, the company has stronger-than-average liquidity and low leverage but weaker revenue traction and high operating losses; its runway is adequate short term, yet the path to breakeven is unclear without a material revenue inflection or cost restructuring.

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