AsiaQuest Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥3.67B
• Operating Income: ¥321M
• Net Income: ¥231M
• EPS: ¥139.41

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

AsiaQuest Co., Ltd. (42610) delivered strong top-line momentum in FY2025 Q3 YTD with revenue of ¥3,669 million, up 27.5% YoY, indicating robust demand and/or successful scaling of its service delivery. Despite the solid sales growth, operating income decreased 8.2% YoY to ¥321 million, pointing to margin compression from higher operating costs, likely driven by talent additions, wage inflation, and business development investments typical in scaling digital/IT services. Gross profit reached ¥1,389 million with a gross margin of 37.9%, which is healthy for a services-oriented model and suggests continued value capture at the delivery level. Operating margin compressed to 8.8% (operating income/revenue), reflecting negative operating leverage in the period. Ordinary income of ¥319 million was close to operating income, indicating minimal non-operating drag, consistent with low interest expense of ¥2.0 million and a clean financial structure. Net income was ¥205 million (−11.0% YoY), translating to a net margin of 5.59%, as a standard Japanese tax burden flowed through (calculated effective tax rate around 38.4%). DuPont analysis yields ROE of 10.86%, driven by a 5.59% net margin, asset turnover of 1.296x, and modest financial leverage of 1.50x, showing profitability is primarily earnings- and efficiency-led rather than leverage-driven. The balance sheet appears conservative: total assets ¥2,832 million and equity ¥1,888 million imply an equity ratio near 66.6% (despite the reported equity ratio field showing 0.0%, which likely reflects non-disclosure). Liquidity is strong with a current ratio of 238% and ample working capital of ¥1,288 million, aligning with a services model that carries minimal inventories. Interest coverage is very high at ~161.5x, underscoring limited financial risk from borrowing costs. Cash flow statement items (operating, investing, financing) were not disclosed in this dataset, so cash conversion and free cash flow cannot be assessed from the provided figures. Depreciation and EBITDA were also not disclosed; hence, non-cash earnings components and EBITDA-based leverage cannot be evaluated here. Dividend data are not provided (DPS and payout appear as zero placeholders), and outstanding share data are undisclosed, limiting per-share and distribution analysis. Overall, the company is exhibiting strong growth with conservative leverage, but near-term profitability has softened due to higher operating costs, making execution on utilization, pricing, and cost control key to re-expanding margins. Given the data gaps (notably cash flows and share/distribution details), conclusions center on the available income statement and balance sheet, which suggest a fundamentally healthy but investment-intensive growth phase.

Profitability Analysis

ROE_decomposition: ROE 10.86% = Net Margin 5.59% × Asset Turnover 1.296 × Financial Leverage 1.50. Profitability is largely driven by efficient asset use and positive, though pressured, margins rather than balance sheet leverage. margin_quality: Gross margin of 37.9% indicates healthy delivery economics for a services-led model. Operating margin of ~8.8% has compressed YoY as operating income fell despite strong revenue, implying elevated SG&A (calculated SG&A ≈ ¥1,068 million, about 29.1% of revenue). Net margin of 5.59% reflects a typical tax load (calculated effective tax rate ≈ 38.4%). operating_leverage: Revenue +27.5% YoY vs operating income −8.2% YoY indicates negative operating leverage in the period, likely from upfront hiring, wage inflation, training, recruitment costs, and/or higher go-to-market spend. Re-acceleration of operating profit will require utilization/pricing improvements and stabilization of SG&A growth relative to revenue.

Growth Assessment

revenue_sustainability: The 27.5% YoY revenue growth suggests strong demand and/or capacity expansion. Given the services nature (no inventories reported), growth appears driven by headcount and utilization rather than product stocking, which can be sustainable if hiring and delivery quality keep pace with bookings. profit_quality: Gross margin is solid, but operating profit declined, indicating revenue growth is currently being ‘bought’ with higher operating cost intensity. Low non-operating items and minimal interest expense mean core operations largely explain profit trends. outlook: Key to sustaining growth with improving profitability will be utilization management, pricing discipline, and moderating SG&A intensity. If hiring investments normalize and project mix improves, operating margins can recover; conversely, continued wage pressure or fixed-price project overruns could keep margins subdued.

Financial Health

liquidity: Current assets ¥2,219 million vs current liabilities ¥931 million produce a current ratio of 238% and working capital of ¥1,288 million, indicating strong short-term solvency. Quick ratio equals current ratio given no inventories reported. solvency: Total liabilities ¥1,076 million vs equity ¥1,888 million imply a debt-to-equity (using total liabilities as a proxy) of ~0.57x and an equity ratio near 66.6%. Interest coverage ~161.5x indicates very low debt service risk. capital_structure: Leverage is modest (financial leverage 1.50x), consistent with a services firm relying more on human capital than fixed assets. The structure provides flexibility to invest without stressing the balance sheet.

Cash Flow Quality

earnings_quality: Cash flow data (OCF/NI, FCF) are not disclosed in this dataset; therefore, we cannot quantify cash conversion. Earnings quality appears driven by core operations given minimal non-operating impacts, but without OCF we cannot validate accrual intensity. FCF_analysis: Free cash flow not disclosed. With limited capex intensity typical for services firms, FCF can be healthy when utilization is stable; however, working capital swings (receivables, unbilled revenue) can materially affect near-term FCF. working_capital: Working capital is ample, but receivables and unbilled balances (not disclosed here) are key to monitoring cash conversion. Days sales outstanding (DSO) and collection cycles should be watched closely as growth accelerates.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout appear as zero placeholders; no conclusion can be drawn from the provided data. EPS is ¥139.41, but without an announced DPS we cannot compute a true payout ratio. FCF_coverage: FCF not disclosed, so coverage of any dividend policy cannot be assessed from these figures. policy_outlook: Given the growth phase and modest leverage, reinvestment in talent and delivery capability likely remains a priority. Any future dividend policy should be aligned with sustainable OCF generation and visibility on backlog and utilization.

Risk Assessment

Business Risks:

• Utilization and pricing risk as headcount expands
• Wage inflation and talent retention in a tight IT labor market
• Fixed-price project execution risk and potential margin slippage
• Client concentration and backlog visibility (not disclosed)
• Cyclical IT spending and DX budget sensitivity to macro conditions
• Competitive pressure from larger SIers and consulting firms

Financial Risks:

• Working capital expansion and receivables collection risk during high growth
• Potential increase in personnel-related liabilities and bonuses in peak seasons
• Limited visibility on cash flows (OCF/FCF not disclosed) impeding assessment of cash conversion
• Exposure to tax rate volatility (calculated effective rate ~38%)

Key Concerns:

• Negative operating leverage despite 27.5% revenue growth
• SG&A intensity at ~29% of revenue pressuring operating margin
• Lack of disclosed cash flow data to validate earnings quality and FCF
• Dependence on continued hiring and utilization to sustain growth

Investment Implications

Key Takeaways:

• Top-line growth strong at +27.5% YoY to ¥3,669 million
• Operating income declined 8.2% YoY; operating margin ~8.8% indicates cost pressure
• ROE 10.86% driven by margin and asset turnover with modest leverage (1.50x)
• Balance sheet conservative: equity ratio ~66.6%, interest coverage ~161.5x
• Liquidity robust: current ratio 238%, working capital ¥1,288 million
• Cash flow and dividend data not disclosed; monitoring cash conversion is critical

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio
• Gross margin trend and project mix
• OCF/Net income conversion and FCF (when disclosed)
• DSO and unbilled receivables levels
• Headcount growth, utilization rate, and pricing
• Order backlog and client concentration
• Effective tax rate and non-operating items

Relative Positioning: Versus domestic DX/system integration peers, revenue growth appears above sector averages with conservative leverage and strong liquidity; however, margin compression and negative operating leverage in the period place near-term profitability below best-in-class operators until cost discipline and utilization improve.

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