CELSYS,Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥6.99B
• Operating Income: ¥2.24B
• Net Income: ¥1.36B
• Earnings per Unit (EPU): ¥44.50

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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 strong topline and operating profit beat with clear operating margin expansion, offset by below-the-line headwinds that left net profit flat year over year. Revenue rose 12.9% YoY to 69.87, driven by robust demand and better monetization, while operating income climbed 35.1% YoY to 22.36, evidencing solid operating leverage. Operating margin improved to 32.0% (22.36/69.87), up roughly 534 bps from an implied ~26.7% a year ago, reflecting disciplined SG&A against strong gross profit. Gross margin stood at a healthy 60.1%, underlining a high-value software model with limited cost of sales drag. Despite the operating outperformance, net income was flat YoY at 13.60, implying compression in net margin to 19.5% from an implied ~22.0% last year, mainly due to below-the-line items. Ordinary income grew 25.4% YoY to 22.26, but profit before tax was 19.38, suggesting approximately 2.9 of special/extraordinary losses weighed on the bottom line. Non-operating items were a small net expense (0.30 income vs 0.39 expense), so the net decline in net margin was primarily from special losses and normal taxation. The implied tax burden (PBT 19.38 to NI 13.60) suggests an effective tax rate near 30%, consistent with Japan’s statutory range. Liquidity remains excellent with a current ratio of 254% and cash of 51.89 far exceeding current liabilities of 23.80, reducing near-term financial risk. Balance sheet strength is underpinned by total equity of 52.21 (implied equity ratio ~65.6%), and leverage remains conservative (D/E 0.55x as provided). DuPont shows ROE at a robust 26.1%, driven by high net margin (19.5%), decent asset turnover (0.878x), and moderate leverage (1.52x). Earnings quality can’t be fully assessed due to unreported cash flow data; however, the strong cash position provides a cushion while we await OCF clarity. The calculated payout ratio is 64%, slightly above our 60% benchmark, making cash flow visibility important for dividend sustainability. Forward-looking, operating momentum appears solid given margin gains and operating leverage, but sustaining net profit growth will require fewer special losses and stable tax effects. Key watch items include cash conversion (OCF/NI), any recurrence of special losses, and continued control of SG&A as growth scales. Overall, the quarter demonstrates strong core operations with transitory below-the-line drags masking underlying improvement.

Profitability Analysis

ROE decomposition (DuPont): ROE 26.1% = Net Profit Margin 19.5% × Asset Turnover 0.878 × Financial Leverage 1.52x. The largest change driver versus last year is net profit margin, which compressed at the bottom line (flat NI on higher sales) despite significant expansion in operating margin. Business reason: strong operating leverage (SG&A ratio at 28.1% of sales; Op. margin 32.0%) was offset by special/extraordinary losses (~2.9) and a typical tax burden, pulling net margins down. Asset turnover (0.878x) is stable and healthy for a software model with meaningful cash and intangibles; leverage (1.52x) remains moderate and not the ROE driver. Sustainability: operating margin gains look more durable, reflecting scale and cost discipline; the net margin drag appears one-time in nature (special losses). Concerning trends: none on operating cost growth—SG&A growth data is unreported, but the marked operating margin expansion implies SG&A did not outpace revenue. Monitor whether special losses recur and whether non-operating items remain minor relative to operations.

Growth Assessment

Revenue grew 12.9% YoY to 69.87, indicating healthy demand and likely successful monetization/expansion efforts. Operating income rose 35.1% YoY to 22.36, outpacing revenue growth and delivering roughly 534 bps of operating margin expansion to 32.0%. Gross margin at 60.1% supports scalability; the spread between gross and operating margin (about 28 pts) reflects controlled SG&A at 28.1% of sales. Net income was flat at 13.60 despite strong operating results due to ~2.9 in special losses and normal tax expense. Non-operating items were minimal on a net basis (-0.09), so the ordinary-to-PBT step-down drove the NI stagnation. Outlook: if special/extraordinary losses normalize, net profit growth should realign with operating profit growth. Key sustainability indicators will be continued topline momentum, retention/ARPU resilience, and maintenance of SG&A discipline.

Financial Health

Liquidity is strong: current ratio 254.2% and quick ratio 254.2%, with cash of 51.89 exceeding current liabilities of 23.80 (cash ratio ~2.18x). No warning on current ratio (<1.0) or high leverage (D/E 0.55x) thresholds; both are comfortable. Maturity mismatch risk appears low given cash and current assets (60.52) comfortably covering current liabilities. Balance sheet quality looks solid with total equity 52.21 and an implied equity ratio of ~65.6% (equity/asset), supporting resilience. Interest-bearing debt details are unreported, but overall liabilities are modest relative to equity. No off-balance sheet obligations are indicated in the data provided.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income and FCF cannot be calculated—this is a key limitation. Given the cash balance (51.89) and modest liabilities, near-term liquidity is ample even without cash flow disclosure. Without OCF and capex detail, we cannot assess working capital dynamics or potential timing effects (e.g., receivable build) that might distort earnings quality. No signs of working capital manipulation are inferable from the limited data: accounts receivable are small (2.21) relative to sales, but full working capital components are not disclosed. We will reassess earnings quality once OCF and capex are available.

Dividend Sustainability

Calculated payout ratio is 64.0%, slightly above our <60% benchmark for comfort. With OCF and FCF unreported, coverage cannot be verified; however, the cash balance offers a buffer for near-term distributions. Sustainability will depend on the conversion of higher operating profits into cash and the absence of recurring special losses. Policy outlook: if management targets stable or progressive dividends, maintaining payout near current levels should be feasible provided cash generation remains robust and one-time losses abate.

Risk Assessment

Business Risks:

• Dependence on flagship software revenues; user churn or weaker ARPU could slow growth.
• Platform policy and fee changes (app stores/payment processors) could pressure take rates.
• International exposure implies FX translation risk on overseas sales and costs.
• Product roadmap execution risk in subscription/feature development affecting retention.
• Competition in digital art/creative software leading to price discounting or higher marketing spend.

Financial Risks:

• Earnings sensitivity to special/extraordinary losses that can compress net margins.
• Cash flow visibility risk due to unreported OCF/FCF; dividend coverage cannot be validated.
• Potential intangible asset concentration increasing impairment risk if growth slows.

Key Concerns:

• Net income flat YoY despite strong operating results due to below-the-line losses.
• Payout ratio at 64% sits above our comfort threshold, raising the bar for cash generation.
• Data limitations (cash flow and expense breakdowns) obscure earnings quality assessment.

Investment Implications

Key Takeaways:

• Core operations are strengthening: revenue +12.9% YoY, operating income +35.1% YoY, operating margin ~32.0%.
• Net profit flat YoY driven by ~2.9 in special losses and standard taxes, not by core weakness.
• Balance sheet conservative with cash 51.89 and current ratio 254%; low near-term refinancing risk.
• ROE robust at 26.1% despite moderate leverage (1.52x), underpinned by high margins.
• Dividend capacity looks adequate near term, but OCF/FCF disclosure is needed to confirm sustainability at a 64% payout.

Metrics to Watch:

• Operating cash flow and OCF/NI ratio (target ≥1.0).
• Recurrence or normalization of special/extraordinary losses.
• SG&A trend versus revenue growth to preserve operating leverage.
• Net retention/ARPU and churn (if disclosed) to gauge revenue durability.
• FX exposure and pricing power in overseas markets.

Relative Positioning: Within Japan software peers, the company exhibits above-average operating margins and ROE with a stronger-than-average liquidity profile; the main near-term differentiator is clean operating execution versus peers, while the principal watchpoint is bottom-line volatility from special items and the lack of cash flow disclosure.

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