AXIS CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥5.94B
• Operating Income: ¥612M
• Net Income: ¥407M
• EPS: ¥95.86

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

Axis Co., Ltd. (40120) reported FY2025 Q3 standalone JGAAP results showing steady top-line growth with somewhat muted profit expansion. Revenue was ¥5,944 million, up 8.0% YoY, underscoring resilient demand for the company’s services. Gross profit of ¥1,391 million translates to a gross margin of 23.4%, consistent with a labor-intensive, project-based model typical of Japanese IT services/SI businesses. Operating income rose 3.3% YoY to ¥612 million, implying an operating margin of 10.3%, and indicating limited operating leverage this quarter as costs rose roughly in line with sales. Ordinary income (¥631 million) exceeded operating income by about ¥19 million, suggesting modest net non-operating gains. Net income was ¥407 million, down 0.5% YoY, reflecting either cost inflation, mix, or discrete items despite healthy revenue growth. EPS was ¥95.86 on a standalone basis; share count was not disclosed in the data provided, constraining per-share trend analysis. DuPont analysis indicates a net margin of 6.85%, asset turnover of 1.169x, and financial leverage of 1.33x, producing an ROE of 10.62% that matches the reported figure. The computed effective tax rate is approximately 34.6% (¥218 million tax on ~¥631 million pretax), in line with Japan’s statutory range. The balance sheet is conservative with total assets of ¥5,085 million and total equity of ¥3,834 million, implying an equity ratio of roughly 75.4% (reported 0% is an undisclosed placeholder). Liquidity is strong: current assets of ¥4,226 million against current liabilities of ¥912 million yield a current ratio of 463% and sizeable working capital of ¥3,314 million. Leverage is modest with total liabilities/equity around 0.32x, affording financial flexibility. Cash flow statements are undisclosed (zeros represent non-reporting), which limits earnings quality and free cash flow assessment. Dividend information is likewise undisclosed (DPS and payout shown as zero), so capital return policy cannot be inferred from this dataset. Overall, Axis exhibits healthy profitability and a robust balance sheet, with soft operating leverage in Q3 and incomplete visibility into cash generation due to missing cash flow disclosures.

Profitability Analysis

ROE_decomposition: ROE 10.62% = Net profit margin 6.85% × Asset turnover 1.169× × Financial leverage 1.33×. The ROE level is solid for an asset-light IT services company, driven primarily by respectable asset efficiency and moderate leverage rather than exceptionally high margins. margin_quality: Gross margin is 23.4% (¥1,391m/¥5,944m), indicative of typical SI/project delivery economics with limited pricing power but manageable cost pass-through. Operating margin is 10.3% (¥612m/¥5,944m). Net margin of 6.85% reflects a normal tax burden (34.6%) and minor non-operating gains (¥19m). The small gap between ordinary and operating income suggests limited dependence on non-core items. operating_leverage: Revenue grew 8.0% YoY while operating income rose 3.3% YoY, implying modest negative operating leverage this quarter (cost growth outpaced revenue growth). This could reflect higher personnel/subcontractor costs, wage inflation, or a shift toward lower-margin project mix. Without segment detail, the persistence of this pressure is unclear.

Growth Assessment

revenue_sustainability: Top-line growth of 8.0% suggests stable demand, likely supported by ongoing digital transformation and IT outsourcing trends in Japan. The absence of segment/customer concentration data limits assessment of durability. profit_quality: Ordinary income slightly above operating income indicates core operations are the main profit engine. The tax rate is consistent with statutory levels, and there is no sign of heavy reliance on non-recurring gains. However, margin expansion stalled, pointing to cost pressures that could weigh on incremental profitability. outlook: Assuming stable demand, growth should persist, but near-term margin expansion looks constrained unless pricing or utilization improves. Watch for hiring/subcontracting costs, wage revisions, and mix shift (fixed-price versus T&M) as key determinants of operating leverage in upcoming quarters.

Financial Health

liquidity: Current assets ¥4,225,955k vs. current liabilities ¥912,443k yield a current ratio of 463% and quick ratio of 463% (inventories undisclosed). Working capital is ¥3,313,512k, providing a substantial liquidity cushion for project execution and seasonality. solvency: Total liabilities ¥1,208,994k vs. equity ¥3,834,000k implies liabilities/equity of ~0.32x and an equity ratio near 75.4% (computed), indicating low leverage and strong solvency. capital_structure: Leverage is modest (financial leverage factor 1.33x in DuPont), consistent with an asset-light model. Interest expense is undisclosed, but given low leverage, interest burden is likely minimal.

Cash Flow Quality

earnings_quality: OCF is undisclosed, preventing direct validation of earnings-to-cash conversion. Given the project-based nature of the business, working capital timing (receivables billing/collections) can drive quarter-to-quarter cash volatility. FCF_analysis: Free cash flow is not available due to missing OCF and capex data. With low capital intensity typical for IT services, structural FCF conversion should be reasonable over the cycle, but this cannot be confirmed for FY2025 Q3. working_capital: Receivables and unbilled revenues (likely embedded in current assets) are key. The large working capital position supports operations, but without cash flow detail, it is unclear whether Q3 saw collection strength or build-ups.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are undisclosed in this dataset (zeros are placeholders). With net income of ¥407m and low leverage, the capacity for dividends exists in principle, but policy and track record are not evidenced here. FCF_coverage: Not assessable due to missing OCF/FCF data. As an asset-light business, sustainable dividends typically align with stable OCF; confirmation awaits disclosure. policy_outlook: Without stated policy, assume a conservative stance consistent with a strong equity ratio. Future distributions may balance growth investment (hiring, training, potential M&A) with returns, contingent on cash generation visibility.

Risk Assessment

Business Risks:

• Project execution and utilization risk impacting margins in fixed-price or complex engagements
• Wage inflation and subcontractor cost increases compressing gross margin
• Client concentration or delays in large projects (undisclosed) affecting revenue visibility
• Talent acquisition/retention in a tight IT labor market
• Competitive pricing pressure in domestic SI and custom development

Financial Risks:

• Working capital swings from receivables/unbilled positions can strain cash if collections lag
• Limited disclosure of cash flows reduces visibility into earnings-to-cash conversion
• Potential tax or social insurance cost increases affecting net margin
• Exposure to macro slowdown in Japan that could defer IT spending

Key Concerns:

• Operating leverage turned soft: revenue +8.0% vs. operating income +3.3%
• Cash flow statement not disclosed, limiting FCF and dividend capacity assessment
• Margin sensitivity to labor and subcontract costs amidst wage inflation

Investment Implications

Key Takeaways:

• Solid top-line growth (+8.0% YoY) with stable core profitability
• ROE at 10.62% driven by decent asset turnover and conservative leverage
• Operating margin at 10.3% shows resilience but limited expansion
• Strong balance sheet with equity ratio ~75% and current ratio ~463%
• Cash generation and dividend capacity cannot be evaluated due to undisclosed cash flows

Metrics to Watch:

• Operating margin trend and gross margin (cost pass-through and mix)
• Receivables and unbilled balances within current assets to gauge cash conversion
• Headcount, subcontract ratio, and wage trends for cost control insight
• Order backlog/book-to-bill if disclosed for revenue visibility
• Any disclosure on dividend policy or share repurchases

Relative Positioning: Within Japanese small/mid-cap IT services/SI peers, Axis exhibits a healthy operating margin (~10%) and strong balance sheet with low leverage; growth is respectable, but near-term operating leverage appears weaker than ideal, placing it as a quality, financially conservative operator with room to improve margin execution.

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