Fixstars Corporation FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥9.62B
• Operating Income: ¥2.58B
• Net Income: ¥1.69B
• EPS: ¥60.34

Income Statement

Balance Sheet

Cash Flow Statement

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 Q4 result with robust top-line growth and solid cash generation, albeit with modest operating margin compression. Revenue rose 20.3% YoY to 96.17, driving operating income up 11.9% YoY to 25.78 and net income up 30.2% YoY to 19.45. Gross profit reached 50.06, implying a gross margin of 52.1%. Operating margin stands at 26.8% (25.78/96.17), while net margin is 20.2%. Using the YoY growth rates, prior-year revenue is estimated at 79.93 and prior-year operating income at 23.05, indicating operating margin compression of roughly 202 bps (from ~28.8% to ~26.8%). Conversely, net margin expanded about 150 bps (from ~18.7% to 20.2%) as non-operating and tax effects were favorable. Cash generation was healthy: operating cash flow was 19.78, essentially matching net income (OCF/NI 1.02x), and free cash flow was 13.47 after capex of 1.10. Liquidity is exceptional with a current ratio of 651.9% and cash/deposits of 51.78 against current liabilities of 13.27. Leverage is conservative with total liabilities of 13.49 versus equity of 85.22 (D/E 0.16x). Earnings quality looks clean with strong cash conversion, limited non-operating items (non-operating income 0.08), and de minimis interest expense (0.01). The reported ROE is a high 22.8%, driven primarily by strong net margins and low leverage (financial leverage 1.16x) with asset turnover near 1.0x. Working capital remains sizable (AR 28.15), but operating cash flow suggests receivable collection is adequate. Financing cash outflow of -10.43 likely reflects shareholder returns (dividends), though itemized dividends were unreported in XBRL. With a calculated payout ratio of 32.9% and FCF coverage of 2.11x, dividend capacity looks well supported. Looking ahead, the company exits the year with ample cash, high profitability, and room to invest, while monitoring is warranted on operating margin pressure and receivables.

Profitability Analysis

ROE decomposition (DuPont): ROE 22.8% = Net Profit Margin (20.2%) × Asset Turnover (0.974x) × Financial Leverage (1.16x). The dominant driver is profitability (net margin), with asset turnover near 1x and leverage conservative. Change drivers: Using YoY-derived estimates, operating margin compressed by ~202 bps (from ~28.8% to 26.8%), while net margin expanded by ~150 bps (from ~18.7% to 20.2%), suggesting tax/non-operating tailwinds more than offset the operating compression at the bottom line. Business reasons: Rapid revenue growth likely required continued investment in delivery capacity (headcount and SG&A), and the cost base stepped up faster than gross margin expansion, squeezing operating margin. Sustainability: The operating margin compression may be transitory if utilization and pricing improve; the net margin uplift from a favorable effective tax rate (22.2%) and minimal non-operating drag may be sustainable but offers less room for further upside. Flags: SG&A rose to 24.28 (breakdown unreported), and given revenue growth of 20.3% vs operating income growth of 11.9%, operating leverage was negative this period; SG&A outpaced operating profit growth, which warrants monitoring.

Growth Assessment

Top-line growth was strong at +20.3% YoY to 96.17, indicating robust demand in core offerings. Operating income growth of +11.9% lagged revenue, reflecting some cost pressure or investment for growth. Net income grew faster at +30.2% on a favorable tax/non-operating profile. Revenue sustainability looks supported by sizable accounts receivable (28.15) consistent with project delivery, though implied DSO (~107 days using full-year revenue) is on the higher side for software services and should be watched. Margin outlook: gross margin is strong at 52.1%; near-term operating margin may depend on hiring/productivity, pricing power, and mix. With cash of 51.78 and low leverage, the company can continue investing in talent and offerings without balance sheet strain. Overall outlook: positive growth trajectory with an eye on restoring operating leverage as scale benefits catch up with cost additions.

Financial Health

Liquidity is exceptionally strong: current ratio 651.9% and quick ratio 651.6%; no warning thresholds breached. Solvency is conservative: total liabilities 13.49 vs equity 85.22 (D/E 0.16x), and interest expense is negligible (0.01) with interest coverage at 3720x. Maturity mismatch risk appears low: current assets 86.53 vs current liabilities 13.27 provide ample coverage; cash alone (51.78) nearly 4x current liabilities. Interest-bearing debt details were unreported, but overall liabilities are small relative to assets. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF/Net Income is 1.02x (19.78/19.45), indicating high-quality earnings with cash conversion in line with reported profit. Free cash flow was 13.47 after capex of 1.10, comfortably covering a calculated payout ratio of 32.9% (FCF coverage 2.11x). Working capital: accounts receivable of 28.15 is sizable; however, positive OCF suggests collections are keeping pace with growth. No signs of working capital manipulation are evident (no unusual non-operating boosts; small interest income 0.05, minimal interest expense). Investing CF of -6.31 reflects moderate reinvestment, largely manageable given cash reserves.

Dividend Sustainability

While DPS and total dividends were unreported, the calculated payout ratio is 32.9%, which is conservative. With FCF of 13.47 and FCF coverage of 2.11x, current shareholder returns appear well supported by internally generated cash. The balance sheet’s net cash position and low leverage further underpin dividend capacity. Policy outlook: absent explicit guidance, maintaining a payout in the ~30% range seems operationally sustainable given profitability and cash flows.

Risk Assessment

Business Risks:

• Operating margin compression (~202 bps YoY) amid growth investments and potential wage inflation.
• High implied DSO (~107 days) indicating slower cash conversion if client collections lengthen.
• Customer concentration risk typical for project-driven software providers (not disclosed but industry-standard).
• Talent acquisition and retention risk impacting delivery capacity and utilization.
• Technology and demand cyclicality in end-markets (e.g., semiconductors/AI-related projects).

Financial Risks:

• Receivables concentration and timing risk given AR 28.15 vs AP 1.42.
• Potential FX exposure if contracts or costs are in foreign currencies (not disclosed).
• Dividend outflows (financing CF -10.43) reducing cash if profitability were to soften, though current buffer is ample.

Key Concerns:

• Negative operating leverage this period (operating income growth < revenue growth).
• Limited disclosure in SG&A breakdown and dividend details (DPS unreported).
• Sustainability of favorable effective tax rate (22.2%) supporting net margin.

Investment Implications

Key Takeaways:

• Strong growth (+20.3% YoY revenue) with high gross margin (52.1%).
• Operating margin compressed ~200 bps YoY; net margin expanded ~150 bps on tax/other effects.
• Cash generation solid (OCF/NI 1.02x; FCF 13.47) and balance sheet conservative (D/E 0.16x).
• ROE high at 22.8%, driven by profitability and low leverage.
• Liquidity ample with cash 51.78 and current ratio ~6.5x.

Metrics to Watch:

• Operating margin trajectory and SG&A growth vs revenue.
• DSO/receivables trends and OCF sustainability.
• Headcount productivity/utilization and pricing.
• Effective tax rate and non-operating items stability.
• Capex and hiring plans vs revenue growth.

Relative Positioning: Versus domestic software/service peers, the company exhibits above-average margins, exemplary balance sheet strength, and strong ROE primarily driven by operating profitability rather than leverage; near-term watchpoint is restoring operating leverage as growth investments normalize.

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