SPACE CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥51.06B
• Operating Income: ¥3.51B
• Net Income: ¥1.84B
• EPS: ¥100.63

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

For FY2025 Q3 (consolidated, JGAAP), 株式会社スペース delivered solid growth and improved profitability, with revenue of ¥51.06bn (+9.4% YoY) and operating income of ¥3.51bn (+31.9% YoY). Net income reached ¥2.47bn (+34.7% YoY), and EPS was ¥100.63. Operating margin improved to approximately 6.9% (¥3.51bn/¥51.06bn), reflecting strong operating leverage as profit growth substantially outpaced sales. Gross profit was ¥5.33bn, implying a gross margin of 10.4%; the implied SG&A spend is about ¥1.82bn (gross profit minus operating income), or roughly 3.6% of revenue. Ordinary income of ¥3.54bn is close to operating income, indicating minimal non-operating distortions; interest expense was a negligible ¥3.56m, yielding an exceptionally high interest coverage of about 988x. Net margin was 4.83%, and DuPont decomposition indicates ROE of 7.36% driven by modest leverage (assets/equity ≈ 1.33) and healthy asset turnover (≈1.14). The balance sheet is strong: total assets ¥44.72bn, total equity ¥33.50bn, total liabilities ¥8.26bn; the implied equity ratio is approximately 74.9% (despite the reported field showing 0.0%, which we treat as undisclosed). Liquidity appears ample with a current ratio of 365% and working capital of ¥20.09bn, suggesting strong near-term funding capacity for projects. While cash flow statements are not disclosed for the period (items reported as 0), the earnings trajectory and low financial leverage mitigate immediate balance sheet concerns. The effective tax rate implied by income tax expense (¥851m) and pre-tax profit (net income + tax ≈ ¥3.32bn) is about 25–26%, consistent with domestic norms, despite the reported metric showing 0.0% (undisclosed). Dividend data are also undisclosed, but the earnings base and strong equity position suggest capacity to sustain ordinary shareholder returns, subject to cash flow timing and capital allocation priorities. Given the company’s project-based model, quarter-to-quarter cash flows can be volatile due to working capital swings and revenue recognition timing. Strategic context likely includes a supportive renovation and commercial facilities market backdrop, which, combined with cost discipline, underpins the observed margin expansion. Key data limitations include the absence of cash flow details, cash balance, inventory/WIP disclosure, and share count details; we infer approximately 24.5 million shares from EPS and net income. Overall, the company demonstrates improved profitability, conservative leverage, and strong liquidity, with the primary analytical gap being visibility on operating cash conversion and dividend policy specifics for the period.

Profitability Analysis

ROE is 7.36%, consistent with DuPont: net margin 4.83% × asset turnover 1.142 × financial leverage 1.33. Net margin of 4.83% reflects solid cost control and limited non-operating drag; ordinary margin of ~6.93% (¥3.537bn/¥51.062bn) is close to operating margin ~6.88%, confirming earnings quality at the operating level. Gross margin is 10.4%; implied SG&A is ~¥1.820bn, or ~3.6% of sales, highlighting tight overhead management. Operating income growth of +31.9% versus revenue growth of +9.4% indicates meaningful operating leverage (profit growth 3.4x sales growth), likely from mix, execution, and fixed-cost dilution. Interest expense is immaterial (¥3.56m), leaving operating results as the principal earnings driver. Tax expense of ¥851m implies an effective tax rate around 25–26% on pre-tax profit (¥3.32bn), in line with statutory levels and indicating no unusual tax effects. Overall, margin quality appears healthy with improving operating efficiency and low non-operating noise.

Growth Assessment

Revenue grew 9.4% YoY to ¥51.06bn, indicating sustained demand through Q3. Operating income expanded 31.9% YoY to ¥3.51bn, evidencing strong margin expansion and favorable operating leverage. Net income rose 34.7% YoY to ¥2.47bn, tracking operating profit growth with minor impact from below-the-line items. The ordinary income closely tracking operating income suggests growth is driven by core operations rather than one-offs. With asset turnover at ~1.14, the company is utilizing its asset base efficiently to support the top line. Revenue sustainability will depend on order intake, backlog, and customer investment cycles in retail/commercial spaces; while not disclosed here, the current trajectory suggests positive momentum into the fiscal year-end. Profit quality appears solid given the low interest burden and normalized tax rate; however, confirmation via operating cash flow would strengthen the assessment. Outlook hinges on continued project execution, cost control, and potential market catalysts (e.g., renovation cycles), with the caveat that quarterly variability can be high in project businesses.

Financial Health

Total assets ¥44.72bn, total equity ¥33.50bn, total liabilities ¥8.26bn. Implied equity ratio ≈ 74.9% (equity/assets), despite the reported equity ratio showing 0.0% as undisclosed. Debt-to-equity is 0.25x (liabilities/equity), reflecting a conservative capital structure. Current assets ¥27.68bn vs. current liabilities ¥7.59bn yields a current ratio of ~365% and working capital of ¥20.09bn, indicating robust short-term liquidity. Quick ratio matches current ratio due to inventory being undisclosed; nonetheless, the large working capital buffer is reassuring. Interest expense is only ¥3.56m, and interest coverage is ~988x, signifying negligible refinancing risk. Solvency is strong given low leverage and high equity base.

Cash Flow Quality

Operating, investing, and financing cash flows are undisclosed for this period (reported as 0 indicates not reported). As a result, OCF/Net Income of 0.00 and FCF of 0 should be treated as placeholders rather than actual outcomes. Earnings quality appears sound at the P&L level (operating income aligned with ordinary income; normalized tax rate), but confirmation via cash conversion is not available. Working capital is sizeable (¥20.09bn), and in a project-based business, timing of receivables, unbilled work-in-progress, and advances can drive significant intra-year OCF volatility. Without cash and equivalents disclosure, short-term cash positioning cannot be assessed directly, though the strong current ratio implies adequate liquidity supported by current assets. Key watch items for cash flow quality include the trajectory of trade receivables, contract assets/WIP, customer advances, and OCF relative to net income over the full fiscal year.

Dividend Sustainability

Dividend per share and payout ratio are undisclosed for the period (displayed as 0.00). Based on earnings capacity (EPS ¥100.63; net income ¥2.47bn) and low leverage, the company appears to have headroom to fund ordinary dividends, subject to cash flow timing and investment needs. FCF coverage cannot be evaluated due to the absence of OCF/Capex data. Historically, project-driven companies often target stable dividends, but without explicit guidance here, policy visibility is limited. Sustainability assessment therefore relies on earnings strength and balance sheet resilience rather than cash flow evidence this quarter.

Risk Assessment

Business Risks:

• Order intake and backlog volatility tied to client capex cycles in retail and commercial facilities
• Project execution risk affecting gross margins and delivery schedules
• Input cost inflation (materials, subcontracting) and labor availability pressures
• Revenue recognition and milestone timing leading to quarterly volatility
• Customer concentration risk on large projects
• Competitive pricing pressure in store design/fit-out markets

Financial Risks:

• Working capital swings impacting operating cash flow despite reported profits
• Potential increase in receivables or unbilled WIP, elevating credit and collection risk
• Limited transparency on cash balance and cash flows this quarter
• Exposure to macro slowdown reducing order pipeline and utilization

Key Concerns:

• Lack of disclosed cash flow statement and cash balance limits assessment of cash conversion
• Inventory/contract asset details not disclosed, obscuring working capital quality
• Dividend policy and payout not disclosed for the period, reducing visibility on shareholder returns

Investment Implications

Key Takeaways:

• Strong Q3 with revenue +9.4% YoY and operating income +31.9% YoY, indicating meaningful operating leverage
• Margins improved: operating margin ~6.9%, net margin 4.83%; ordinary income aligned with operating performance
• Robust balance sheet with implied equity ratio ~74.9% and current ratio ~365%
• Minimal financial risk: interest expense ¥3.56m and coverage ~988x
• Primary analytical gap is cash flow visibility; OCF and FCF not disclosed

Metrics to Watch:

• Order intake, backlog, and book-to-bill
• Gross margin and SG&A ratio trend
• Operating cash flow and free cash flow versus net income
• Receivables, contract assets/WIP, and advances received
• Year-end guidance updates and any dividend announcements
• Asset turnover and ROE progression

Relative Positioning: Within Japan’s store design/fit-out and commercial space contracting peers, the company exhibits above-average balance sheet strength (low leverage, high equity ratio) and solid asset efficiency (turnover ~1.14). Profitability is improving with disciplined overheads and limited non-operating noise, positioning it favorably on quality metrics; visibility on cash conversion remains the key differentiator to fully validate earnings quality.

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