ProjectHoldings,Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥4.03B
• Operating Income: ¥66M
• Net Income: ¥-17M
• EPS: ¥9.62

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: A modestly profitable quarter with thin margins and adequate liquidity, but limited visibility due to multiple unreported items. Revenue reached 40.33 (100M JPY), up 2.8% YoY, indicating modest top-line growth. Gross profit was 12.87 with a gross margin of 31.9%, but SG&A of 14.88 exceeded gross profit, implying reliance on other operating income to achieve an operating profit. Operating income came in at 0.66, translating to an operating margin of roughly 1.6%. Ordinary income was 0.59, indicating a slight drag from non-operating items relative to operating income. Profit before tax was reported at -0.21, suggesting the presence of extraordinary losses or adjustments between ordinary profit and pre-tax profit. Despite the negative PBT, net income was positive at 0.51 (EPS 9.62 JPY), implying tax effects and/or non-controlling interest allocation benefited the bottom line. Asset efficiency remains modest with asset turnover at 0.84x, and leverage is moderate with financial leverage at 2.20x, yielding a calculated ROE of 2.3%. Liquidity is strong with a current ratio of 238% and a large cash balance of 22.55, comfortably exceeding current liabilities of 12.83. Solvency appears manageable with total liabilities of 26.21 versus equity of 21.83 (D/E 1.20x) and long-term loans of 11.80 anchored in noncurrent liabilities. Interest coverage is 3.95x, adequate but below the 5x comfort threshold. ROIC is indicated at 5.0%, sitting at the warning threshold and signaling capital efficiency needs improvement. Cash flow data are unreported, preventing assessment of earnings quality and the sustainability of investment or shareholder returns. YoY margin changes cannot be quantified due to missing prior-period margin data. Forward-looking, management likely needs to intensify cost control and improve operating leverage, while maintaining balance sheet discipline to fund growth without overstretching.

Profitability Analysis

ROE decomposition (DuPont): ROE 2.3% = Net Profit Margin 1.3% × Asset Turnover 0.84 × Financial Leverage 2.20x. The most constrained component is the net profit margin at 1.3%, given asset turnover is modest and leverage is not excessive. The margin pressure stems from SG&A (14.88) exceeding gross profit (12.87), implying low operating leverage and dependence on other operating income to stay profitable. This dynamic is likely structural near term given the current cost base; without a step-up in revenue scale or SG&A efficiencies, margin expansion may be limited. Asset turnover at 0.84x is reasonable for a services-driven model but not high enough to compensate for thin margins. Financial leverage at 2.20x provides some ROE lift, but added leverage is not a sustainable driver given interest coverage of 3.95x and already moderate D/E. Concerning trend flags: SG&A growth vs revenue growth cannot be assessed precisely due to lack of YoY SG&A disclosure, but the absolute relationship (SG&A > GP) is a headwind. The sustainability of operating profit depends on either higher gross profit conversion (pricing/mix) or cost rationalization; one-time items between ordinary profit and PBT (evidenced by negative PBT) make the quarter’s profit quality look mixed.

Growth Assessment

Revenue grew 2.8% YoY to 40.33, a modest pace that suggests stable but not accelerating demand. Gross margin printed at 31.9%; without YoY comparatives, we cannot confirm margin expansion/compression in basis points. Operating income of 0.66 implies an operating margin of ~1.6%, indicating limited operating leverage at current scale. Non-operating items were a small net drag relative to operating income (ordinary income 0.59 vs operating income 0.66), but the large swing to negative PBT indicates extraordinary or below-the-line losses. Net income of 0.51 demonstrates resilience at the bottom line, likely supported by tax effects and/or minority interest allocation, but this may not be repeatable. Overall profit quality cannot be verified due to missing cash flow data. Near-term outlook hinges on SG&A control and improving gross profit conversion; a 3–5% revenue growth trajectory without cost actions is unlikely to yield meaningful margin improvement. Monitoring any strategic initiatives to lift ROIC above 7–8% is key, as the current 5.0% sits only at the warning threshold.

Financial Health

Liquidity is strong: Current assets 30.55 vs current liabilities 12.83 yields a current ratio of 238.1% and a quick ratio effectively the same given high cash (22.55). No warning: Current Ratio is well above 1.0. Solvency is moderate: Total liabilities 26.21 vs equity 21.83 results in D/E of 1.20x (below the 2.0 warning threshold). Interest-bearing debt detail is limited, but long-term loans are 11.80, with noncurrent liabilities 13.38 suggesting a back-ended maturity profile; near-term refinancing pressure appears limited given the sizable cash buffer. Maturity mismatch risk looks low: cash and receivables (approximately 28.94 combined) comfortably cover current liabilities of 12.83. No off-balance sheet obligations are disclosed in the provided data. Equity base is solid at 21.83, with retained earnings of 14.01 indicating accumulated profitability.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow are unreported; thus, OCF/Net Income and FCF coverage cannot be assessed. As a result, earnings quality cannot be corroborated—flagging data limitation rather than a quality issue. The relationship of SG&A exceeding gross profit suggests reliance on other operating income to sustain operating profit, which could introduce volatility to cash conversion if those items are non-cash or timing-related. With 22.55 in cash and no disclosed capex or dividend outflows, near-term liquidity appears sufficient, but sustainability of FCF for dividends and growth capex cannot be evaluated. No clear signs of working capital manipulation can be identified due to missing inventory and cash flow detail.

Dividend Sustainability

Dividend data (DPS, payout ratio, total dividends, FCF coverage) are unreported, so we cannot assess current payout sustainability. Given net income of 0.51 and strong on-balance-sheet liquidity, the capacity for a modest dividend exists in principle, but without OCF/FCF and capex visibility, coverage cannot be confirmed. Policy outlook remains uncertain due to missing disclosures; monitoring future guidance and cash flow statements is essential.

Risk Assessment

Business Risks:

• Low operating margin (~1.6%) exposes earnings to small revenue or cost shocks.
• SG&A exceeding gross profit indicates limited operating leverage at current scale.
• Potential one-off/extraordinary losses implied by negative PBT could recur if underlying drivers persist.
• Execution risk in lifting ROIC from ~5% to management-relevant thresholds (>7–8%).

Financial Risks:

• Interest coverage at 3.95x is adequate but below strong benchmark (5x), limiting room for higher rates or leverage.
• Reliance on other operating/non-operating items introduces volatility to ordinary profit and below-the-line results.
• Limited disclosure of short-term borrowings and interest-bearing debt composition raises visibility risk on funding costs.

Key Concerns:

• Profit quality uncertainty due to unreported cash flows (OCF/FCF).
• Negative profit before tax despite positive ordinary income suggests extraordinary losses or adjustments.
• Thin net margin (1.3%) constrains ROE (2.3%), pressuring valuation metrics tied to returns.

Investment Implications

Key Takeaways:

• Modest revenue growth (+2.8% YoY) but thin operating margin (~1.6%).
• ROE 2.3% and ROIC ~5.0% indicate below-target capital efficiency.
• Strong liquidity (current ratio 238%) buffers near-term risk despite moderate leverage (D/E 1.20x).
• Earnings quality cannot be validated absent OCF; caution on sustainability.
• Extraordinary items likely impacted PBT, adding volatility to reported earnings.

Metrics to Watch:

• OCF/Net Income and FCF once disclosed.
• SG&A trend versus revenue growth (operating leverage).
• Gross margin trajectory and mix/pricing actions.
• Interest coverage and funding cost trends.
• ROIC improvement toward >7–8%.

Relative Positioning: Within small-cap service-oriented peers, the company shows stronger liquidity than average but lags on profitability and capital efficiency, with earnings more sensitive to cost structure and potential below-the-line items.

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