CYBERLINKS CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥13.11B
• Operating Income: ¥1.33B
• Net Income: ¥445M
• EPS: ¥80.42

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

Verdict: A strong FY2025 Q3 with sharp profit acceleration and improved returns, albeit with some line-item inconsistencies and missing cash flow disclosures that temper confidence in earnings quality assessment. Revenue rose 14.4% YoY to 131.13, while operating income surged 81.6% YoY to 13.34, demonstrating strong operating leverage. Ordinary income increased 79.8% YoY to 13.34, and net income doubled (+101.0% YoY) to 8.95, lifting the calculated ROE to 10.2%. Operating margin is estimated at 10.2% (13.34/131.13), up meaningfully from roughly 6.4% in the prior-year period, implying an expansion of about 370–380 bps. Net profit margin stands at 6.8%, and asset turnover at 0.875 with financial leverage at 1.72x, indicating improved profitability as the primary ROE driver. Gross margin is reported at 26.3%, and SG&A ratio is approximately 20.7%, signaling a better cost structure year over year given the outsized operating income growth versus revenue. Interest coverage is very strong at 95.3x, reflecting modest financing costs and improved earnings power. Liquidity is healthy with a current ratio of 165%, and solvency appears conservative with a reported D/E of 0.72x and an analytically computed equity ratio near 58%. Cash and deposits of 25.43 comfortably exceed short-term loans of 17.00, reducing near-term refinancing risk. One caution: profit before tax (7.10) is below net income (8.95) despite a 37.2% effective tax rate, implying the presence of non-recurring items or minority interest effects not fully detailed in the disclosures. Operating cash flow, capex, and FCF are unreported, preventing validation of earnings-to-cash conversion and dividend coverage. With ROIC at 8.9%, returns are at or slightly above a typical software/services hurdle in Japan, suggesting value creation. Looking ahead, margin momentum and strong liquidity support continued earnings resilience, but the absence of cash flow details and the unusual PBT/NI relationship warrant caution. Key forward watchpoints include sustained operating margin above 10%, stability of the tax rate, and confirmation of OCF generation when disclosed.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 6.8% × 0.875 × 1.72 ≈ 10.2%. The largest change versus last year is most likely the Net Profit Margin, given revenue grew +14.4% while operating income expanded +81.6%, implying significant operating margin expansion. Business drivers likely include mix shift to higher-margin solutions, improved pricing/renewal economics in software/services, and fixed-cost leverage in SG&A. The sustainability of this margin uplift depends on the recurrence of higher-margin revenue, the endurance of cost discipline, and the absence of one-off items; given the PBT/NI anomaly, part of the bottom-line jump could include non-recurring gains or minority interest/tax effects. Asset turnover at 0.875 is consistent with a software/IT-services profile and appears stable; no evidence suggests a structural change here. Financial leverage at 1.72x is moderate and roughly steady, indicating ROE improvements are not debt-driven. Watch for SG&A growth outpacing revenue; current period signals positive operating leverage, but a re-acceleration of hiring or sales investments could compress margins. Given the reported gross margin (26.3%) and the step-up in operating margin (~10.2%), the operating spread has widened materially, but line-item inconsistencies between gross profit, cost of sales, and operating income suggest relying on headline OI and NI for trend analysis.

Growth Assessment

Top-line growth of 14.4% YoY to 131.13 indicates solid demand, likely from recurring software/services and project work. Operating income +81.6% YoY reflects strong operating leverage and improved mix. Ordinary income tracked operating income closely, supporting the narrative of core earnings improvement. Net income +101.0% YoY outpaced operating income growth, but the PBT < NI gap suggests one-off or non-controlling interest/tax items enhanced the bottom line this quarter. Revenue sustainability will depend on retention/expansion in enterprise clients and backlog/ARR dynamics (not disclosed). Profit quality appears improved at the operating level; confirmation requires OCF and capex data. Outlook: if operating margins can be maintained at ~10% with revenue growth in the low-to-mid teens, annualized ROE above 10% and ROIC near 9% look achievable. Risks to growth include project timing, client budget cycles, and competitive pricing. Near-term, liquidity and low interest burden provide flexibility to invest without impairing margins.

Financial Health

Liquidity: Current ratio 165.1% and quick ratio 165.1% indicate healthy short-term coverage. No explicit warning triggers (Current Ratio > 1.0). Working capital of 30.23 supports operations. Solvency: Reported D/E 0.72x is conservative, and interest coverage at 95.3x is very strong. Total equity/total assets ≈ 58.2% (87.29/149.88), implying a solid equity cushion. Debt profile: Short-term loans 17.00 are covered by cash 25.43 and receivables 34.35, mitigating maturity mismatch. Long-term loans 14.93 are moderate relative to equity. No off-balance sheet obligations disclosed. Overall, balance sheet appears robust with low refinancing risk under current conditions.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow are unreported, so OCF/Net Income and FCF coverage cannot be assessed. Consequently, we cannot validate earnings-to-cash conversion or working capital drag/benefit this quarter. Interest expense is low (0.14), aligning with strong interest coverage and suggesting limited cash leakage from financing. Without capex data, sustainability of growth investments and dividend coverage from FCF remain unverified. No signs of working capital manipulation can be inferred due to missing OCF and balance of inventories and payables details beyond AR/AP snapshots.

Dividend Sustainability

Annual DPS is unreported, but the calculated payout ratio is 21.7%, which is comfortably below the 60% benchmark and implies room for reinvestment and potential distribution stability. With liquidity strong and leverage moderate, the balance sheet could support dividends even absent FCF data, though confirmation awaits OCF and capex disclosure. Given ROE of 10.2% and ROIC of 8.9%, reinvestment returns appear adequate; thus, management has flexibility to balance growth and payouts. Near-term policy outlook appears stable, contingent on maintaining double-digit operating margins and confirming positive OCF when reported.

Risk Assessment

Business Risks:

• Execution risk on higher-margin software/services mix sustaining double-digit operating margins
• Client budget and project timing volatility impacting quarterly revenue recognition
• Competitive pressure in IT services/solutions potentially compressing pricing and margins
• Dependence on key enterprise clients (potential concentration not disclosed)

Financial Risks:

• Limited visibility on cash generation due to unreported OCF/FCF
• Potential exposure to interest rate increases on floating-rate debt (short-term loans 17.00)
• Tax rate volatility and minority interest effects given PBT < NI anomaly
• Working capital swings impacting cash if receivables collection lengthens

Key Concerns:

• Non-recurring items or structural tax/NCI effects implied by net income exceeding profit before tax
• Line-item inconsistencies between gross profit, cost of sales, SG&A, and operating income, making margin bridge analysis uncertain
• Absence of capex and dividends paid data prevents FCF-based dividend coverage assessment
• Lack of segment disclosure limits identification of growth/margin durability by business line

Investment Implications

Key Takeaways:

• Earnings inflection: operating income +81.6% on revenue +14.4% signals strong operating leverage
• Operating margin lifted to ~10.2%, up roughly 370–380 bps YoY
• ROE at 10.2% and ROIC at 8.9% indicate value creation above typical cost of capital
• Balance sheet strength with current ratio 165% and interest coverage 95x reduces downside risk
• Earnings quality cannot be validated without OCF/FCF; monitor for confirmation

Metrics to Watch:

• Operating margin sustainability at or above 10%
• OCF/Net income once disclosed (target ≥1.0)
• DSO and receivables trends vs revenue growth
• Tax rate normalization and reconciliation of PBT to NI
• Capex intensity and FCF coverage of dividends

Relative Positioning: Within Japan small/mid-cap IT services and software peers, Cyberlinks presently screens favorably on margin momentum, ROE/ROIC, and balance sheet strength, but lags best-in-class peers on disclosure depth (cash flows, segment detail) needed to validate earnings quality and durability.

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