Visual Processing Japan Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥934M
• Operating Income: ¥151M
• Net Income: ¥90M
• EPS: ¥56.96

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 (JGAAP, non-consolidated), Visual Processing Japan delivered steady top-line growth and strong margin expansion. Revenue rose 4.2% year over year to ¥934.0 million, while operating income increased 28.1% to ¥151.0 million, evidencing meaningful operating leverage. Gross profit of ¥509.36 million implies a robust gross margin of roughly 54.6%, supportive of a software/services-heavy mix with limited cost of goods sold. Operating margin expanded to about 16.2% (¥151.0 million on ¥934.0 million sales), and ordinary income reached ¥138.0 million, a 14.8% ordinary margin. Net income was ¥90.0 million (up 13.4% YoY), translating to a net margin of 9.6% and EPS of ¥56.96. DuPont analysis indicates ROE of 7.51%, driven by a 9.64% net margin, asset turnover of 0.612x, and modest leverage of 1.27x. The balance sheet is conservative with total assets of ¥1,525.0 million and total equity of ¥1,198.0 million; this implies an equity ratio of about 78.6% (versus the reported 0.0%, which appears to reflect undisclosed/placeholder data). Liquidity is solid with current assets of ¥879.835 million and current liabilities of ¥325.029 million, resulting in a current ratio of 270.7% and working capital of ¥554.806 million. Debt is minimal, inferred from a tiny interest expense of only ¥28 thousand and an implied interest coverage ratio above 5,000x. The effective tax rate appears to be around 31% when comparing income tax to pre-tax income, despite a reported 0.0% effective tax metric; this discrepancy stems from undisclosed items in standardized fields. Cash flow statements show zeros, which under the stated data policy indicates non-disclosure rather than actual zero cash flows; thus, operating and free cash flow quality cannot be directly assessed. No dividend data is disclosed (DPS and payout ratios show as zero due to non-reporting), so capital return policy remains unclear. Overall, the company exhibits attractive profitability, improving operating leverage, and a strong balance sheet, but the lack of cash flow disclosure and certain metric placeholders require careful interpretation. Near-term outlook hinges on sustaining revenue momentum while maintaining cost discipline. Key watchpoints include order intake, accounts receivable dynamics, and confirmation of cash generation.

Profitability Analysis

ROE of 7.51% decomposes into a 9.64% net margin, 0.612x asset turnover, and 1.27x financial leverage. Gross margin stands at approximately 54.6% (¥509.36m/¥934.0m), indicating a value-added service/software model with low direct costs. Operating margin of roughly 16.2% (¥151.0m/¥934.0m) reflects improved cost control or favorable mix; ordinary margin is about 14.8%, and net margin is 9.6%. With revenue up 4.2% YoY and operating income up 28.1% YoY, operating leverage is clearly positive; indicative incremental margin is high when comparing estimated changes from prior-year levels (approx. +¥33m OI on +¥38m revenue). Interest expense is de minimis (¥28k), boosting pre-tax profitability and interest coverage. The implied effective tax rate is around 31% (¥40.77m tax on ~¥130.77m pre-tax income), consistent with domestic statutory levels. EBITDA and D&A are undisclosed (zeros indicate non-reporting), but the high gross and operating margins suggest limited depreciation burden relative to revenue. Overall, margin quality appears strong, supported by pricing power and cost discipline.

Growth Assessment

Top-line growth of 4.2% YoY to ¥934.0m is moderate but appears sustainable if driven by recurring or repeat business in core solutions. Profit growth significantly outpaced revenue, with operating income up 28.1% YoY and net income up 13.4% YoY, indicating mix improvement and operating efficiency gains. The high gross margin suggests value-added services or software licensing/maintenance, which can support recurring revenue streams; however, the disclosure does not specify revenue composition. The widening operating margin underscores ongoing scalability; sustaining this will depend on utilization, project execution, and SG&A efficiency. Ordinary income of ¥138.0m and negligible interest costs highlight a clean earnings profile with limited financial distortion. Net margin at 9.6% is healthy for a small-cap tech/services firm in Japan and leaves room for reinvestment. Without cash flow details, we cannot confirm whether profit growth is backed by cash conversion; monitoring accounts receivable and contract liabilities will be important. Near-term outlook is constructive if demand remains steady and the company maintains pricing discipline. External risks include timing of enterprise IT budgets and potential delays in project acceptance, which can affect quarterly growth cadence.

Financial Health

The balance sheet is strong: total assets ¥1,525.0m, total equity ¥1,198.0m, and total liabilities ¥325.029m. This implies an equity ratio near 78.6% (equity/assets), despite the disclosed 0.0% placeholder, and a low debt-to-equity ratio of about 0.27x when viewing total liabilities relative to equity. Liquidity is ample, with current assets ¥879.835m and current liabilities ¥325.029m, yielding a current ratio of 270.7% and quick ratio of 270.7% (inventories undisclosed). Working capital is ¥554.806m, providing a buffer for operations and growth investments. Interest expense of ¥28k and interest coverage above 5,000x indicate negligible financial risk from borrowing. The conservative capital structure affords resilience against earnings volatility. The absence of cash and cash flow disclosures limits our ability to evaluate immediate cash liquidity, but the magnitude of current assets suggests adequate cash or equivalents and receivables.

Cash Flow Quality

Operating, investing, and financing cash flows are undisclosed (reported as zeros by policy), so we cannot directly assess earnings-to-cash conversion. With net income of ¥90.0m and no OCF reported, the OCF/NI ratio shown as 0.00 is not decision-useful. Free cash flow likewise cannot be determined, as capex and working capital movements are unspecified. The high working capital position (¥554.806m) and strong current ratio suggest headroom, but without AR/AP detail we cannot judge collection efficiency. Given high gross and operating margins and minimal interest burden, underlying cash generation is likely positive if receivables are well-managed; confirmation via future OCF disclosure is necessary. Key items to monitor include trade receivables days, unbilled receivables, deferred revenue/contract liabilities, and capex intensity.

Dividend Sustainability

Dividend data are not disclosed for the period (DPS and payout ratio appear as zeros due to non-reporting). With EPS at ¥56.96 and strong balance sheet metrics, the capacity to pay a dividend likely exists, but policy and payout intent are unknown. Free cash flow coverage cannot be assessed because OCF and capex are undisclosed. In the absence of cash flow data, we cannot evaluate sustainability; any future payout assessment should reference normalized OCF, maintenance capex needs, and potential growth investments. Current capital structure and earnings trajectory would typically support at least a modest payout once cash generation is confirmed.

Risk Assessment

Business Risks:

• Project timing and acceptance risk affecting quarterly revenue recognition and margins
• Customer concentration risk typical of specialized IT/services providers
• Pricing pressure from larger integrators or platform vendors
• Human capital constraints and wage inflation impacting delivery capacity and margins
• Technology obsolescence and the need for ongoing R&D or partner alignment
• Dependence on enterprise and public-sector IT budgets and macro conditions

Financial Risks:

• Cash flow visibility risk due to lack of disclosed OCF/FCF data
• Working capital swings from receivables collection or billing milestones
• Small-cap equity market liquidity, potentially elevating cost of capital
• Potential currency exposure on imported tools/services (if applicable) despite non-disclosure

Key Concerns:

• Non-disclosure of cash flow statements limits assessment of earnings quality
• Equity ratio reported as 0.0% despite strong implied equity base, highlighting data field limitations
• Inventory and share count fields reported as zero, complicating per-share and liquidity analyses

Investment Implications

Key Takeaways:

• Moderate revenue growth (+4.2% YoY) with strong operating leverage (+28.1% YoY OI)
• High gross margin (~54.6%) supports durable profitability profile
• ROE of 7.51% underpinned by healthy margins and low leverage
• Very strong balance sheet with implied equity ratio ~78.6% and minimal interest burden
• Cash flow data not disclosed; verification of cash conversion is the main analytical gap

Metrics to Watch:

• Operating cash flow and free cash flow disclosure in subsequent quarters
• Accounts receivable days and collection trends
• Order intake/book-to-bill or backlog (if disclosed)
• SG&A as a percentage of sales and headcount productivity
• Deferred revenue/contract liabilities as a proxy for recurring revenue
• Capex-to-sales ratio to gauge investment intensity
• Gross margin stability and project mix

Relative Positioning: Within Japan small-cap IT/services peers, the company appears to have above-average gross margins and a stronger-than-average balance sheet with low financial risk, though transparency on cash flows lags best-in-class disclosures.

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