KYODO PUBLIC RELATIONS CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥6.01B
• Operating Income: ¥957M
• Net Income: ¥471M
• EPS: ¥61.80

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

Kyodo Public Relations Co., Ltd. (24360) delivered solid top-line and operating performance in FY2025 Q3 (consolidated, JGAAP), with revenue of ¥6.01bn, up 13.8% YoY, and operating income of ¥957m, up 15.9% YoY, indicating positive operating leverage. Gross profit of ¥2.42bn implies a gross margin of 40.3%, a healthy level for a PR/communications service model, suggesting effective pricing and mix. Operating margin stands at approximately 15.9%, reflecting good expense control relative to growth. Net income rose 39.8% YoY to ¥538m, outpacing operating income growth, likely aided by non-operating items and/or tax normalization. DuPont metrics indicate an 8.95% net margin, 1.023x asset turnover, and 1.36x financial leverage, yielding an ROE of 12.46%, consistent with the reported metric. The balance sheet is strong: total assets are ¥5.875bn and total equity is ¥4.317bn, implying an equity ratio of roughly 73.5% (despite the reported equity ratio field showing 0.0%, which should be treated as undisclosed). Liquidity appears robust with a current ratio of 303% and working capital of ¥3.18bn, providing ample buffer for project-based cash cycles. Leverage is modest with total liabilities-to-equity of about 0.44x and minimal interest expense of ¥4.45m, resulting in interest coverage of about 215x. The effective tax rate field shows 0.0%, but using disclosed figures (income taxes ¥306.7m and ordinary income ¥954m) suggests a tax rate near 32%, consistent with domestic statutory levels. Cash flow statements were not disclosed (zeros represent unreported), limiting our ability to assess cash conversion, free cash flow, and dividend coverage from cash. Dividend information (DPS, payout) was not disclosed; EPS is ¥61.80 but share count data were not provided, constraining per-share balance sheet analysis. Overall profitability quality appears strong, benefiting from an asset-light model and controlled SG&A, but the absence of cash flow disclosure is a key limitation. The company’s operating outperformance versus revenue growth signals positive operating leverage and likely disciplined project execution. With a strong equity base and low financial risk, the firm appears well positioned to fund growth organically. However, we remain cautious on cash conversion and working capital needs until operating cash flow trends are disclosed. Future updates should clarify cash generation, dividend policy, and any non-operating drivers of net income outperformance.

Profitability Analysis

ROE decomposes to 12.46% = 8.95% net margin × 1.023x asset turnover × 1.36x financial leverage. Operating margin is approximately 15.9% (¥957m/¥6,010m), expanding faster than revenue (+15.9% OI vs. +13.8% sales) and indicating positive operating leverage. Gross margin at 40.3% is healthy for PR services, implying stable pricing and utilization. Net income growth (+39.8% YoY) outpaced operating income growth, suggesting favorable non-operating factors and/or tax normalization; ordinary income (¥954m) is close to operating income, and interest expense is negligible (¥4.45m), so below-the-line items likely modest. Interest coverage is very strong at ~215x, consistent with low financing costs and high operating earnings. With asset turnover at 1.02x, the business is reasonably efficient for a services company with limited fixed assets. The estimated effective tax rate based on disclosed taxes and ordinary income is about 32%, despite the reported 0.0% placeholder. EBITDA is not computable due to undisclosed D&A (shown as zero), but given the model, D&A likely low and EBITDA directionally close to operating income. Overall margin quality appears solid, supported by scale benefits and controlled fixed costs.

Growth Assessment

Revenue growth of 13.8% YoY to ¥6.01bn points to healthy demand, likely driven by sustained PR/communications spending and potential client wins. Operating income growth of 15.9% suggests cost discipline and operating leverage as scale improves. Net income growth of 39.8% reflects additional tailwinds beyond operations (tax rate normalization or minor non-operating improvements). Given the asset-light model and minimal interest burden, growth appears predominantly organic. Sustainability will depend on client retention, new mandates, and event/project timing typical of the PR industry. Gross margin at 40.3% supports the view that growth is not solely price-driven discounts; mix and utilization likely favorable. With asset turnover at 1.02x, the company converts assets into sales efficiently, which can support scalable growth without heavy capex. Near-term outlook appears constructive provided macro marketing budgets remain stable and execution continues. However, the absence of cash flow data prevents validation of cash-backed growth. Monitoring backlog/booking trends, pipeline, and headcount utilization would refine the growth quality assessment.

Financial Health

Liquidity is strong with current assets of ¥4.75bn and current liabilities of ¥1.57bn, yielding a current ratio of ~303% and a quick ratio of ~303% (inventories undisclosed/zero). Working capital stands at ¥3.18bn, providing a cushion for receivables cycles and project pre-financing. Solvency is robust: total liabilities of ¥1.92bn vs. equity of ¥4.32bn imply a liabilities-to-equity ratio of ~0.44x. Based on assets of ¥5.88bn and equity of ¥4.32bn, the implied equity ratio is about 73.5% (the reported 0.0% value should be treated as undisclosed). Interest expense is minimal at ¥4.45m, and interest coverage at ~215x indicates negligible refinancing risk. Capital structure is conservative, supporting resilience against revenue volatility. No cash and equivalents were disclosed in the cash flow section (treated as undisclosed), so absolute liquidity buffers cannot be quantified; however, the balance sheet liquidity metrics are strong.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed (zeros indicate unreported), so OCF/Net Income and FCF metrics cannot be meaningfully assessed. The reported OCF/Net Income ratio of 0.00 and FCF of 0 should be treated as placeholders, not actual values. Earnings quality from an accrual perspective appears reasonable given strong margins and minimal interest expense, but verification requires OCF data. Working capital appears ample with ¥3.18bn of net current assets; for a services firm, accounts receivable management is the key driver of cash conversion. With no inventories reported and likely low capex, structural cash conversion should be favorable in steady-state, but seasonality and project timing can cause intra-year volatility. Pending disclosure of cash flow statements, we cannot confirm free cash flow coverage of earnings or dividends.

Dividend Sustainability

Dividend data (DPS, payout) were not disclosed; the reported DPS and payout of 0 should be treated as undisclosed. EPS is ¥61.80 for the period, and leverage is low, implying potential capacity to return cash subject to actual OCF and capex. Without operating and free cash flow disclosure, we cannot assess cash coverage or sustainability of any dividend policy. Historically for asset-light communications firms, dividends are supported when receivables are well-managed and capex remains modest; this likely applies here, but confirmation awaits CF data. Policy outlook is therefore indeterminate pending management guidance and cash flow visibility.

Risk Assessment

Business Risks:

• Cyclical exposure to marketing and PR budgets amid macro fluctuations
• Client concentration risk and renewal risk on key retainers/projects
• Project timing and seasonality affecting quarterly revenue recognition and cash collection
• Talent acquisition and retention in PR/communications impacting service quality and margins
• Reputation/brand risk inherent to PR mandates and crisis communications
• Competition from global agencies and digital-first boutiques pressuring pricing
• Potential shift in media mix to digital channels requiring continuous capability investment

Financial Risks:

• Cash conversion risk due to receivables concentration and payment terms
• Limited visibility on operating cash flow and free cash flow due to undisclosed CF statements
• Potential tax rate variability around ~30% depending on non-deductibles and incentives
• Exposure to interest rate changes is low but not zero given small interest expense

Key Concerns:

• Lack of disclosed cash flow statements prevents validation of earnings quality
• Dividend policy and cash return capacity unclear without FCF data
• Net income outpacing operating income warrants monitoring of non-operating/tax effects

Investment Implications

Key Takeaways:

• Strong topline growth (+13.8% YoY) with operating income growing faster (+15.9%), indicating positive operating leverage
• Healthy profitability with 40.3% gross margin and ~15.9% operating margin
• ROE of 12.46% driven by 8.95% net margin, 1.02x asset turnover, and modest leverage (1.36x)
• Robust balance sheet with implied equity ratio ~73.5% and current ratio ~303%
• Minimal interest burden (interest coverage ~215x) reduces financial risk
• Cash flow data not disclosed, limiting assessment of cash conversion and dividend capacity

Metrics to Watch:

• Operating cash flow and free cash flow once disclosed
• DSO/accounts receivable turnover and client concentration metrics
• SG&A ratio vs. revenue to gauge operating leverage durability
• Gross margin stability and project mix
• Order intake/backlog or retainer wins as a forward indicator
• Effective tax rate normalization vs. ~30–33% baseline
• Any changes in non-operating income/expenses

Relative Positioning: Asset-light PR/communications player with above-average margins, conservative leverage, and strong liquidity, likely well positioned versus domestic peers on profitability but with disclosure gaps on cash flows and dividends.

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