Repriority Co., Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥2.63B
• Operating Income: ¥314M
• Net Income: ¥229M
• EPS: ¥205.93

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: Solid profitability resilience with margin expansion despite a small revenue decline, but cash conversion lagged earnings and warrants monitoring. Revenue decreased 2.7% YoY to 26.31, while operating income slipped a modest 0.7% to 3.14 and net income rose 7.1% to 2.29, indicating operating discipline and favorable below-OP items. Gross profit was 13.88, implying a robust gross margin of 52.7%. Operating margin improved to 11.9% despite lower sales, supported by controlled SG&A at 10.73. Ordinary income increased 3.0% to 3.28 with minimal non-operating expense (0.01) and modest non-operating income (0.14), including 0.03 of interest income. Net margin reached 8.7% (2.29/26.31), up from an estimated ~7.9% last year given the reported growth dynamics. Operating margin expanded by roughly +23 bps YoY (approximate) as operating income declined less than revenue. Ordinary margin expanded by about +68 bps YoY, helped by net financial income. Net margin expanded by approximately +79 bps YoY due to a stable effective tax rate (30.1%) and tight cost control. Earnings quality is a watch point: OCF was 1.43 vs net income of 2.29, yielding OCF/NI of 0.62x, below the 0.8 threshold. Liquidity and solvency are very strong, with a current ratio of 425%, net cash positioning (cash and deposits 13.32 vs long-term loans 0.65), and interest coverage of 254x. Balance sheet efficiency improved, with asset turnover at 1.53x and moderate financial leverage (1.36x), driving ROE of 18.1%. Free cash flow of 1.43 more than covered estimated dividends (payout ratio 23.5%; FCF coverage 2.66x), indicating near-term dividend sustainability. Capital intensity remains low (D&A 0.04; capex 0.01), supporting structurally high cash generation in steady-state. Reported ROIC of 14632% is not decision-useful and likely stems from a denominator definition issue; it should not be interpreted as economic ROIC. Forward-looking, cost discipline and a strong net cash position should cushion macro softness, but sustaining growth will require stabilizing top line and improving cash conversion. Key watch items include receivables evolution, project billing/milestone timing, and the durability of SG&A efficiency gains.

Profitability Analysis

DuPont decomposition: ROE 18.1% = Net Profit Margin 8.7% × Asset Turnover 1.527 × Financial Leverage 1.36x. The largest positive change component appears to be margin expansion, as net profit rose 7.1% despite a 2.7% revenue decline, implying better cost control and slightly favorable non-operating items. Asset turnover at 1.53x is healthy for a low-asset, service-centric model; change vs prior is not disclosed, but the decline in sales with stable assets suggests AT was likely flat to slightly lower. Financial leverage at 1.36x remains conservative; leverage did not drive ROE, implying quality of returns is predominantly operational. Business drivers: SG&A containment (10.73) limited deleveraging from lower sales, and minimal interest expense (0.01) plus small interest income (0.03) supported ordinary profit. The effective tax rate at 30.1% remained stable, aiding net margin expansion. Sustainability: Margin gains from cost discipline are reasonably sustainable near term, but may be tested if revenue pressure persists; any mix shift or pricing discipline will be key. One-time factors look limited; non-operating gains are small and recurring-like (interest). Concerning trend flag: Revenue contraction (-2.7%) alongside flat-ish SG&A (absolute level 10.73) implies SG&A intensity likely rose; if SG&A growth were to outpace revenue for multiple quarters, operating leverage could turn adverse. Operating margin was approximately 11.9% (+~23 bps YoY), ordinary margin ~12.5% (+~68 bps YoY), and net margin ~8.7% (+~79 bps YoY).

Growth Assessment

Revenue declined 2.7% YoY to 26.31, signaling some demand softness or timing effects in project recognition. Operating income was resilient (-0.7% YoY to 3.14), suggesting improved mix or cost management offsetting top-line pressure. Net income rose 7.1% to 2.29, aided by stable taxes and minor net financial income. With D&A at 0.04 and capex at 0.01, growth is not capex-led; expansion depends on headcount productivity, pricing, and project volume. Ordinary income outperformance vs sales suggests improved efficiency, but sustainability hinges on stabilizing revenue. Non-operating items were small (non-operating income 0.14), indicating profit quality is predominantly operating. Near-term outlook: maintaining double-digit margins looks feasible given cost discipline and low interest burden; a return to top-line growth would be the key catalyst for further profit expansion. Risks to growth include client budget tightening and project timing slippage; potential mitigants include sticky customer relationships and a high cash buffer to invest in business development.

Financial Health

Liquidity is very strong: current ratio 424.6% and quick ratio 424.6%, supported by cash and deposits of 13.32 against current liabilities of 3.90. No warning for current ratio (<1.0) or D/E (>2.0); D/E is 0.36x on a liabilities-to-equity basis, and interest-bearing debt is limited (long-term loans 0.65). Equity ratio (calculated) is approximately 73.6% (12.68/17.23), indicating a solid capital base. Maturity mismatch risk is low: current assets 16.56 comfortably exceed current liabilities 3.90. Interest coverage is exceptionally strong at 253.63x, reflecting minimal interest expense and healthy operating earnings. Off-balance sheet obligations are not reported; no guarantees or lease commitments were disclosed in the provided data. Overall solvency and funding flexibility are high, with ample cash to weather volatility or fund small-scale investments and dividends.

Cash Flow Quality

OCF of 1.43 vs net income of 2.29 yields OCF/NI of 0.62x, which is below the 0.8 benchmark and flagged as a potential quality issue. Free cash flow was 1.43 (capex negligible at 0.01), indicating structurally low capital intensity. The OCF shortfall relative to earnings likely stems from working capital movements (e.g., receivables build or timing of payables) rather than non-cash gains, as non-operating income is small and D&A is modest. Without detailed working capital breakdown YoY, we cannot pinpoint the driver, but the presence of high cash balances reduces immediate risk. There are no signs of aggressive one-off gains or large non-core items influencing cash, given ordinary income closely tracks operating income and non-operating items are minimal. Sustainability: While FCF covered estimated dividends comfortably, sustained OCF/NI below 0.8 over multiple periods would be a concern; monitoring receivables, billing milestones, and collection timing is essential.

Dividend Sustainability

The calculated payout ratio is 23.5%, implying total dividends of roughly 0.54 against net income of 2.29. Free cash flow of 1.43 covers the implied dividend about 2.66x, indicating comfortable coverage for the period. Financing cash flow was -0.80, potentially reflecting dividends and/or minor debt service; total dividend paid was unreported. With a strong net cash position and low capex needs, the company has headroom to sustain or modestly grow dividends if earnings remain stable. Policy visibility is limited as DPS and policy statements are unreported; thus, conclusions rely on calculated payout and FCF coverage. Key watch items for dividend durability include cash conversion (OCF/NI), revenue trajectory, and maintenance of double-digit operating margins.

Risk Assessment

Business Risks:

• Top-line softness (-2.7% YoY) could persist, pressuring operating leverage.
• Project timing and billing milestones may cause cash flow volatility (OCF/NI 0.62x).
• Potential customer concentration risk typical of project/service models (not disclosed).
• Wage inflation and hiring market tightness could compress margins given low D&A and high labor component.

Financial Risks:

• Earnings-to-cash conversion risk if working capital continues to absorb cash.
• Interest rate risk is limited but present on cash balances (asset yield) and any floating-rate debt.
• Refinancing risk is low given net cash, but long-term loans (0.65) exist.

Key Concerns:

• OCF/Net Income below benchmark (0.62x) indicates near-term earnings quality caution.
• Revenue decline alongside largely fixed SG&A may limit further margin gains if sales do not recover.
• Data gaps (dividends, detailed SG&A, investment securities) reduce transparency.
• Reported ROIC of 14632% is not meaningful; denominator definition likely caused an anomaly.

Investment Implications

Key Takeaways:

• Margin resilience: Operating margin ~11.9% with YoY expansion despite lower sales.
• Strong balance sheet: ~74% equity ratio and large net cash (cash 13.32 vs long-term loans 0.65).
• High ROE of 18.1% driven by healthy margins and asset turnover, not leverage.
• Earnings quality watch: OCF/NI 0.62x suggests working capital timing weighed on cash.
• Dividend appears sustainable at a ~23.5% payout with 2.66x FCF coverage, subject to cash conversion improving.

Metrics to Watch:

• OCF/Net Income ratio and receivables turnover (DSO).
• Revenue growth re-acceleration and backlog/order intake (if disclosed).
• SG&A growth vs revenue to gauge operating leverage.
• Gross margin stability (pricing/mix) and utilization.
• Effective tax rate stability around ~30%.

Relative Positioning: Relative to small-cap Japanese service peers, the company shows superior liquidity, conservative leverage, and solid margins but lags on cash conversion this quarter; sustaining ROE near 18% will hinge on restoring top-line growth and normalizing working capital.

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