3-D Matrix,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.81B
• Operating Income: ¥360M
• Net Income: ¥-806M
• EPS: ¥14.88

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

Three-D Matrix (7777) reported FY2026 Q2 (cumulative) consolidated results under JGAAP with strong topline momentum but notable quality and classification issues within the earnings mix. Revenue was 48.07, up 46.8% YoY, indicating substantial traction, likely from product rollouts or market expansion. Using disclosed revenue and cost of sales, derived gross profit is approximately 38.47, implying an unusually high gross margin of about 80.0%, which merits verification against product mix and one-time inventory effects. SG&A was 25.57, yielding operating income of 3.60 and an operating margin of roughly 7.5%, showing improved scale efficiency but still indicating limited operating leverage relative to the very high gross margin. Non-operating income was minimal at 0.07, while non-operating expenses were 2.73; interest expense was 0.42, and the interest coverage ratio was reported at 8.64x, broadly consistent with operating income. Ordinary income was reported at 20.12, which appears inconsistent with the arithmetic of operating income plus net non-operating items (3.60 + 0.07 − 2.73 ≈ 0.94); this suggests classification peculiarities or unreported items affecting the “ordinary” line. Profit before tax was −7.95 despite positive operating income, implying significant below-ordinary items (extraordinary losses) not detailed here. Net income was positive at 17.01, indicating large extraordinary gains or tax effects below the PBT line; the small income tax of 0.11 combined with negative PBT yields a negative effective tax rate (−1.4%). Total comprehensive income was 1.94, far below net income, pointing to sizable other comprehensive losses (likely FX valuation or securities valuation effects), which limit equity accretion. Cash flow quality was weak: operating cash flow (OCF) was −10.04, yielding an OCF/net income ratio of −0.59x, signaling earnings that did not convert to cash in the half. Financing cash flow was +17.25, indicating reliance on external funding to support operations and working capital. Balance sheet liquidity looks ample on headline ratios (current ratio 406.5%, quick ratio 248.8%), but is inventory-heavy (inventories 24.91; c. 52% of half-year revenue), which can inflate liquidity optics and underscores execution risk in sell-through. Leverage by liabilities-to-equity is 1.09x; financial leverage (assets/equity) is 1.72x. DuPont shows net margin 35.4%, asset turnover 0.707, and leverage 1.72x, implying a calculated ROE of 43.0%; however, this high ROE appears flattered by below-the-line items and is inconsistent with negative OCF, so it may not be durable. Equity structure shows large accumulated deficits (retained earnings −262.65) offset by substantial paid-in capital (capital stock 154.90; capital surplus 154.80), consistent with a capital-dependent, still-scaling medtech business. Overall, reported profitability is strong at face value, but quality of earnings is low due to negative OCF, classification discrepancies around ordinary income and PBT, and heavy reliance on financing inflows. Data limitations (numerous unreported items) constrain full reconciliation; conclusions focus on disclosed figures and derived metrics only.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 35.4% (Net income 17.01 / revenue 48.07; likely inflated by below-the-line items and not reflective of operating run-rate)
• asset_turnover: 0.707 (half-year basis; interpret cautiously due to seasonality and mid-year denominator)
• financial_leverage: 1.72x (assets 67.99 / equity 39.54)
• calculated_ROE: 43.0% (matches provided DuPont; quality is questionable given negative OCF and PBT) margin_quality_and_mix: Derived gross margin ~80.0% (gross profit ≈ 38.47 = 48.07 − 9.60), unusually high for a medtech/biomaterial profile; may reflect product mix, pricing, or inventory accounting effects., Operating margin ~7.5% (3.60 / 48.07), indicating significant SG&A intensity relative to high gross margin., Ordinary income (20.12) is not reconcilable with operating and non-operating components (implied ~0.94); classification differences or unreported items likely., Net margin 35.4% is elevated despite negative PBT, implying sizable extraordinary gains or adjustments. operating_leverage: Revenue +46.8% YoY with operating income of 3.60 suggests some operating leverage, but the conversion from gross to operating profit (approx. 72.5% of gross profit consumed by SG&A) remains heavy., Further scale could improve operating margin if SG&A grows slower than revenue; however, inventory build and OCF trends suggest near-term efficiency challenges.

Growth Assessment

revenue_sustainability: Revenue 48.07, up 46.8% YoY, indicates strong momentum; need to confirm whether growth is broad-based versus driven by specific tenders/geographies., AR 19.70 implies DSO ~74 days (indicative; assumes 180-day period), acceptable for medtech but requires monitoring for extended terms as growth accelerates. profit_quality_and_outlook: Operating income positive at 3.60 with 7.5% margin, but negative OCF (−10.04) questions earnings quality and sustainability., Reported net income 17.01 and ROE 43.0% likely include non-recurring or below-the-line items; outlook should be anchored on operating trends and cash conversion., Inventory 24.91 vs COGS 9.60 implies low turns (~0.39x in H1), suggesting pipeline fill or demand uncertainty; normalization could pressure reported gross margin. forward_drivers_and_flags: Key growth drivers: commercialization ramp of hemostatic/biomaterial products, geographic expansion, and reimbursement wins., Key flags: working capital intensity (inventories), reliance on financing CF (+17.25), and potential volatility from extraordinary items affecting reported earnings.

Financial Health

liquidity: Current ratio 406.5% (CA 64.19 / CL 15.79) and quick ratio 248.8% indicate strong headline liquidity., Cash and deposits 15.80 approximately cover current liabilities (15.79) 1.0x; liquidity is adequate but inventory-heavy., Working capital 48.40 provides buffer but ties up cash in inventories and receivables. solvency_and_capital_structure: Total liabilities 42.97 versus equity 39.54 yields debt-to-equity of 1.09x; financial leverage (A/E) 1.72x., Noncurrent liabilities 27.18 are significant relative to total assets (40%), warranting visibility on long-term debt terms., Interest expense 0.42 with operating income 3.60 gives interest coverage ~8.6x, but sensitivity rises if operating profit normalizes lower or rates increase., Retained earnings are deeply negative (−262.65), highlighting historical losses funded by paid-in capital (capital stock + surplus totaling 309.7).

Cash Flow Quality

earnings_vs_cash: OCF −10.04 vs net income 17.01 yields OCF/NI −0.59x, signaling weak cash conversion and reliance on non-cash gains or working capital build., Total comprehensive income 1.94 vs net income 17.01 indicates significant OCI losses, limiting tangible equity accretion. free_cash_flow_and_investing: CapEx reported at −0.01 (minimal). Investing CF was unreported; thus, official FCF is not calculable., A proxy FCF using OCF − CapEx suggests around −10.0, excluding other investing flows; treat as indicative only. working_capital_dynamics: Inventories 24.91 vs H1 COGS 9.60 imply inventory turns ~0.39x for H1 (annualized ~0.78x), indicating a substantial build., Receivables 19.70 imply DSO ~74 days (indicative), manageable but should not drift higher., The negative OCF likely reflects working capital absorption (inventory and AR growth); tighter WC management is pivotal for cash improvement.

Dividend Sustainability

payout_ratio_assessment: Dividend data are unreported; payout ratio not calculable. Given negative OCF and accumulated deficits (retained earnings −262.65), internal capacity to fund dividends appears limited absent sustained positive FCF. fcf_coverage: Not calculable from reported FCF. Proxy FCF is negative based on OCF and minimal CapEx, implying poor coverage for any potential distributions. policy_outlook: With reliance on financing CF (+17.25) and a growth investment profile, the company likely prioritizes reinvestment and balance sheet support over cash returns until OCF stabilizes.

Risk Assessment

Business Risks:

• Commercial execution risk in scaling hemostatic/biomaterial products and achieving sustainable demand.
• Pricing and reimbursement uncertainties across geographies.
• Inventory obsolescence or write-down risk given low turns and sizable balances.
• Regulatory and clinical adoption hurdles inherent to medtech/biomaterials.
• FX volatility impacting comprehensive income and cost structure (implied by OCI swing).

Financial Risks:

• Weak cash conversion (OCF −10.04) despite reported profitability.
• Dependence on external financing (+17.25 financing CF) to fund operations and WC.
• Potential covenant or refinancing risk tied to noncurrent liabilities (27.18) with limited disclosure of terms.
• Earnings volatility from extraordinary items leading to large gaps between PBT and net income.
• High accumulated deficits (−262.65) limiting financial flexibility.

Key Concerns:

• Inconsistency between reported ordinary income (20.12) and the sum of operating and non-operating items (~0.94).
• Negative PBT (−7.95) concurrent with positive net income (17.01), suggesting material below-the-line items not detailed.
• Negative OCF and inventory build undermining earnings quality.

Investment Implications

Key Takeaways:

• Topline growth strong (+46.8% YoY) with positive operating profit, but operating margin remains modest at ~7.5%.
• Reported net income and ROE are likely boosted by non-recurring/below-the-line factors and do not align with cash generation.
• Liquidity is ample on paper but concentrated in inventories and receivables; cash roughly equals current liabilities.
• Balance sheet relies on paid-in capital with sizeable accumulated deficits; continued access to financing remains important.
• Improving working capital turns is critical to convert growth into cash and reduce financing dependence.

Metrics to Watch:

• Operating cash flow and OCF/NI convergence toward >0.8x.
• Inventory turns (targeting sustained improvement from ~0.8x annualized) and DSO trend.
• Operating margin trajectory vs revenue growth (evidence of operating leverage).
• Breakdown and reconciliation of ordinary income, PBT, and extraordinary items.
• Noncurrent liability composition, maturity schedule, and interest burden.
• Total comprehensive income vs net income gap (OCI volatility).

Relative Positioning: Within Japan small/mid-cap medtech/biomaterials peers, the company shows above-peer revenue growth and high reported gross margin, but lags on cash conversion and exhibits higher earnings volatility, with heavier reliance on external financing and accumulated deficits compared to more mature peers.

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
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