ORO Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥5.99B
• Operating Income: ¥1.86B
• Net Income: ¥1.23B
• EPS: ¥77.96

Income Statement

Balance Sheet

Cash Flow Statement

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 (IFRS, consolidated), Oro delivered modest top-line growth with revenue of 59.94 (億円), up 3.4% YoY, but experienced profit compression as operating income declined 6.7% YoY to 18.56 (億円). Gross profit was 38.74 (億円), implying a robust gross margin of 64.6%, while SG&A of 18.11 (億円) resulted in an operating margin of roughly 30.9%. Net income was 12.34 (億円), down 10.6% YoY, yielding a net margin of 20.6%; the effective tax rate was elevated at 34.8%, weighing on bottom-line growth. Cash generation remained strong with operating cash flow (OCF) of 15.08 (億円), 1.22x net income, and free cash flow (FCF) of 13.99 (億円) after modest capex of 0.57 (億円). The balance sheet is highly conservative, with total assets of 126.17 (億円), equity of 96.80 (億円), and an equity ratio of 76.7%, indicating low financial risk. Cash and equivalents stood at 99.03 (億円), comfortably exceeding total liabilities of 33.09 (億円) by roughly 3.0x. DuPont analysis shows ROE of 12.8%, driven mainly by strong margins, low asset turnover (0.475x), and modest leverage (1.30x). EBITDA was 21.24 (億円), an EBITDA margin of 35.4%, reflecting solid operating efficiency. Despite resilient gross margins, the YoY decline in operating income suggests pressure from SG&A growth and a higher tax burden. Dividend affordability appears sound: the payout ratio was 45.2% and FCF coverage was 2.51x, supported by ample net cash. Liquidity looks strong, though certain sub-line items (e.g., current liabilities, interest-bearing debt) were unreported, limiting precision on ratios like current and quick ratios. Revenue growth was modest, indicating a need to monitor demand momentum and operating leverage into Q4. Asset composition data shows some classification inconsistencies (current plus noncurrent assets exceed total), so ratio analysis prioritizes total assets and equity figures provided. Overall, Oro remains a high-margin, cash-generative operator with a fortress balance sheet, but near-term profit growth is constrained by higher costs and taxes. Outlook hinges on sustaining revenue growth, controlling SG&A, and maintaining high cash conversion.

Profitability Analysis

ROE_decomposition: ROE 12.8% = Net margin 20.6% x Asset turnover 0.475x x Financial leverage 1.30x (DuPont). Margin strength is the dominant driver; asset intensity and leverage are modest. margin_quality: - Gross margin: 64.6% (38.74/59.94), indicating strong value add and pricing power.

• Operating margin: ~30.9% (18.56/59.94). Despite strength, operating income fell 6.7% YoY versus +3.4% revenue, implying SG&A growth outpaced gross profit expansion.
• EBITDA margin: 35.4% (21.24/59.94). D&A of 2.68 (億円) suggests a relatively light capex model.
• Net margin: 20.6% with an elevated effective tax rate of 34.8%, a headwind to bottom line. operating_leverage: Negative operating leverage this period: revenue +3.4% YoY but operating income -6.7% YoY, pointing to higher fixed cost absorption or incremental growth requiring increased SG&A (e.g., headcount, sales & marketing). Maintaining or expanding margins will require tighter SG&A control or mix/pricing improvements.

Growth Assessment

revenue_sustainability: Top-line growth of 3.4% YoY is modest. The high gross margin suggests a favorable mix, but sustaining growth likely depends on project pipeline conversion and recurring revenue components. profit_quality: OCF/Net income at 1.22x supports earnings quality; EBITDA margin of 35.4% indicates healthy underlying operations. However, net income was pressured by a higher tax burden and SG&A growth, implying sensitivity of profits to cost dynamics. outlook: Near-term earnings trajectory will hinge on SG&A efficiency and tax normalization. If cost growth moderates and revenue momentum improves into Q4, operating leverage could recover. Conversely, continued cost inflation or slower bookings would keep operating margins under pressure.

Financial Health

liquidity: Cash & equivalents of 99.03 (億円) versus total liabilities of 33.09 (億円) implies strong liquidity (cash covers liabilities ~3.0x). Current ratio and quick ratio are not calculable due to unreported current liabilities, but the cash position suggests ample short-term coverage. solvency: Equity ratio is 76.7%; financial leverage in DuPont is low at 1.30x. Interest-bearing debt is unreported; however, the large net cash indicates low solvency risk. capital_structure: Total equity 96.80 (億円) vs. total liabilities 33.09 (億円). Reported Debt-to-Equity of 0.34x likely reflects total liabilities to equity rather than interest-bearing debt given missing disclosures.

Cash Flow Quality

earnings_quality: OCF of 15.08 (億円) is 1.22x net income, consistent with solid cash conversion. Elevated tax payments may explain part of the NI-OCF dynamics, but overall conversion is healthy. FCF_analysis: FCF of 13.99 (億円) with capex at 0.57 (億円) implies low capital intensity (~0.95% of revenue) and a strong FCF margin of ~23.3%. Investing CF of -1.09 (億円) suggests limited inorganic activity in this period. working_capital: Accounts receivable of 9.75 (億円) against accounts payable of 4.73 (億円) appears balanced. Working capital is reported at 124.55 (億円), but current liabilities are unreported; thus, interpret with caution. No inventory figure was disclosed.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 45.2%, consistent with a balanced approach between shareholder returns and reinvestment. FCF_coverage: FCF coverage of dividends is 2.51x, supported by strong cash generation and low capex requirements. policy_outlook: Given the net cash position and stable FCF, the company has capacity to sustain dividends. Future payouts will be influenced by profit growth, tax rate normalization, and potential uses of cash (organic investment, M&A). DPS specifics were unreported, limiting precision.

Risk Assessment

Business Risks:

• Slower client IT spending leading to softer bookings and revenue growth
• Cost inflation in personnel and subcontracting impacting SG&A and margins
• Execution risk on project delivery affecting revenue recognition and profitability
• Competitive pricing pressure in software/IT services reducing gross and operating margins
• Potential variability in tax rate impacting net income

Financial Risks:

• Limited visibility on interest-bearing debt and current liabilities due to unreported items
• Concentration risks (customers or segments) not disclosed in this dataset
• Potential FX or overseas exposure not assessable from the provided data

Key Concerns:

• Operating income declining despite revenue growth (negative operating leverage)
• Elevated effective tax rate (34.8%) compressing net income
• Data gaps in liability detail and non-operating items constrain full ratio analysis

Investment Implications

Key Takeaways:

• High-margin model with gross margin 64.6% and EBITDA margin 35.4%
• ROE 12.8% primarily margin-driven; asset turnover remains low at 0.475x
• Operating income -6.7% YoY despite revenue +3.4% indicates cost pressure
• Strong cash generation: OCF 15.08 (億円), FCF 13.99 (億円), OCF/NI 1.22x
• Fortress balance sheet: equity ratio 76.7%, cash 99.03 (億円) > total liabilities 33.09 (億円)
• Dividend appears sustainable with 45.2% payout and 2.51x FCF coverage
• Capex-light profile (capex/revenue ~0.95%) supports consistent FCF

Metrics to Watch:

• Operating margin trajectory and SG&A as a percentage of revenue
• Effective tax rate normalization and its impact on net margin
• Bookings/backlog or recurring revenue indicators (if disclosed)
• Headcount and personnel cost trends
• OCF/Net income ratio and FCF margin
• Accounts receivable days and working capital intensity
• Capital allocation plans for excess cash (dividends, M&A, internal investment)

Relative Positioning: Within domestic mid-cap IT/software service peers, Oro stands out for high margins, strong cash conversion, and a conservative balance sheet, supporting mid-teens ROE potential; current period softness reflects cost/tax headwinds rather than structural weakness.

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