CL Holdings Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥25.81B
• Operating Income: ¥649M
• Net Income: ¥309M
• EPS: ¥30.06

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

CL Holdings (IFRS, consolidated) reported FY2025 Q3 results showing resilient profit recovery despite a modest revenue contraction. Revenue was 258.06 (100M JPY), down 2.7% YoY, but operating income rebounded sharply to 6.49 (100M JPY), up 465.1% YoY, evidencing significant cost discipline and/or increased other operating income under IFRS. Gross profit was 79.81 (100M JPY), implying a gross margin of 30.9%, while SG&A was 79.00 (100M JPY), or 30.6% of revenue. The gap between gross profit and SG&A (0.81) versus reported operating income (6.49) indicates material positive contribution from other operating items, which improved EBIT margin to 2.5%. Net income rose 97.6% YoY to 3.26 (100M JPY), with an effective tax rate of 30.6%, yielding a net margin of 1.3%. DuPont shows ROE at 4.3%, driven by a modest net margin (1.3%), solid asset turnover (1.148x), and financial leverage of 2.96x. Cash flow quality was weak in the period: operating cash flow (OCF) was -25.88 (100M JPY), equating to -7.94x net income and driving free cash flow (FCF) to -31.84 (100M JPY). The cash drain appears largely working-capital driven, consistent with high receivables (90.77) relative to 9M revenue and a sizeable accounts payable balance (41.03), pointing to lengthened collection cycles. Financing cash inflow of 54.55 (100M JPY) and higher short-term borrowings (61.06) funded working capital and cushioned liquidity; ending cash and equivalents stood at 47.57 (100M JPY). The balance sheet carries total assets of 224.80 and equity of 75.83 (equity ratio 33.3%), with total liabilities/equity at about 1.94x; interest-bearing debt is at least 65.68 (short-term 61.06, long-term 4.62). Net debt appears modest at approximately 18.11 (debt 65.68 less cash 47.57), or about 1.1x EBITDA, though cash on the balance sheet was not separately disclosed. Capital intensity remains low: capex was 2.59 (1.0% of revenue), below depreciation of 10.14, implying limited maintenance reinvestment needs or timing effects. The headline payout ratio is low at 17.7%, but cash dividends in the period (-1.66) exceeded this implied figure, highlighting timing differences and stressing the need to assess dividend sustainability against cash generation rather than earnings alone. Overall, profitability inflected positively, but quality of earnings is a concern given negative OCF and reliance on short-term financing, with working capital normalization the key swing factor into year-end. Data limitations include unreported non-operating items, current liabilities, detailed cash composition, and segment disclosures, which constrain precision in liquidity and margin attribution analysis.

Profitability Analysis

ROE_decomposition: - Net profit margin: 1.3% (3.26 / 258.06). Asset turnover: 1.148x. Financial leverage: 2.96x. Implied ROE: ~4.3%, matching the reported figure. ROA (approximate) is ~1.45% (NI/Assets = 3.26 / 224.80), consistent with ROE/leverage. margin_quality: - Gross margin: 30.9% is healthy for the business model and stable despite revenue -2.7% YoY. SG&A ratio: 30.6%, leaving only 0.3% margin headroom before other operating items. The step-up from gross profit minus SG&A (0.81) to operating income (6.49) suggests meaningful other operating income or improved expense mix within IFRS operating lines. EBITDA margin is 6.4%, indicating D&A drag of ~3.9% of revenue. Pre-tax margin is ~2.3% (5.87 / 258.06), and net margin is 1.3% after a 30.6% tax rate. operating_leverage: - Despite a 2.7% top-line decline, operating income surged +465% YoY, reflecting strong operating leverage from cost actions and/or non-core operating income. SG&A discipline is evident (flat vs revenue), but sustainability depends on recurring nature of other operating gains. Incremental margin in the period is high but may normalize if other operating income is non-recurring.

Growth Assessment

revenue_sustainability: - Revenue at 258.06 (100M JPY) fell 2.7% YoY. Receivables magnitude (90.77) and negative OCF suggest slower collections and/or back-end loading. Without segment detail, the sustainability of the revenue mix is unclear; gross margin resilience implies mix or pricing held up. profit_quality: - Net income +97.6% YoY and EBIT +465% YoY are quality-positive on headline, but earnings quality is pressured by OCF of -25.88 and OCF/NI at -7.94x. The divergence implies working capital build and possibly timing of revenue recognition versus cash conversion. outlook: - Near-term growth hinges on normalization of receivables and stabilization of short-term financing. If DSO improves and other operating income is repeatable, EBITDA margin (6.4%) can be defended. Absent explicit guidance, base case is modest revenue stabilization with margin support from cost control; key uncertainty is the recurrence of other operating income.

Financial Health

liquidity: - Cash & equivalents: 47.57 (100M JPY). Operating cash outflow of -25.88 funded by financing inflows of 54.55; near-term liquidity supported by short-term loans but reliant on external funding. Current ratio and quick ratio are not calculable due to undisclosed current liabilities; reported working capital figure appears to mirror current assets and should not be interpreted as CA−CL. solvency: - Total liabilities: 147.40; equity: 75.83; liabilities/equity ~1.94x. Interest-bearing debt disclosed: 65.68 (short-term 61.06, long-term 4.62). Equity ratio: 33.3% (close to 75.83/224.80=33.7%). capital_structure: - Net debt approximates 18.11 (debt 65.68 minus cash 47.57), yielding net debt/EBITDA ~1.09x, indicating moderate leverage if cash is freely available. Debt skewed to short-term (93% of IBD), increasing refinancing and rate-reset risk.

Cash Flow Quality

earnings_quality: - OCF/NI at -7.94x signals poor cash conversion for the period. OCF/EBITDA is -1.56x, pointing to sizable working capital drag and/or cash taxes/other items. FCF_analysis: - FCF of -31.84 (100M JPY) is substantially negative despite low capex of 2.59 (1.0% of revenue) and capex/depreciation of ~0.26x. This indicates that cash burn is not capex-driven but primarily working-capital related. working_capital: - Receivables at 90.77 vs 9M revenue imply a high DSO (indicatively ~95 days using a 270-day period). Inventory is modest at 15.96, or ~23 DIO versus 9M COGS. Payables at 41.03 imply ~60 DPO. Approximate cash conversion cycle around 58 days suggests structural working capital intensity; improvement here is the key lever to restore OCF.

Dividend Sustainability

payout_ratio_assessment: - Calculated payout ratio is 17.7%, implying dividends of ~0.58 (100M JPY) on NI of 3.26. However, cash flow statements show dividends paid of -1.66, likely reflecting timing and prior period appropriations, so the period’s cash payout exceeded the implied ratio. FCF_coverage: - FCF coverage is weak: FCF is -31.84, yielding a negative coverage (-55.12x), meaning dividends were not covered by free cash in the period and relied on financing cash inflows. policy_outlook: - With earnings improving but cash conversion weak, sustaining dividends depends on working capital normalization and access to short-term funding. A conservative payout trajectory is prudent until OCF turns positive; lack of DPS disclosure limits visibility on full-year policy.

Risk Assessment

Business Risks:

• Revenue softness (-2.7% YoY) indicating potential end-market demand weakness or client budget tightening
• Dependence on other operating income items to bridge EBIT, which may be non-recurring
• Elongated receivables and cash conversion cycle increasing exposure to client credit risk
• Margin pressure if mix and pricing deteriorate or if SG&A savings are not repeatable
• Potential platform, regulatory, or technology changes affecting marketing/IT-related services (industry-typical risk)

Financial Risks:

• Negative OCF and reliance on short-term loans (61.06) heighten refinancing and liquidity risk
• Rate risk due to short-tenor debt concentration
• Limited disclosure of current liabilities and cash composition complicates liquidity assessment
• FCF-negative profile in the period necessitating external funding to sustain operations, investments, and shareholder returns

Key Concerns:

• Sustainability of other operating income that underpinned EBIT expansion
• Receivables normalization and DSO reduction to restore OCF
• Short-term debt rollover risk and potential interest cost creep
• Alignment of dividend/capital return with cash generation

Investment Implications

Key Takeaways:

• Profit recovery: EBIT +465% YoY to 6.49 on flattish gross profit vs SG&A and likely other operating gains; EBIT margin 2.5%
• Cash conversion weak: OCF -25.88 and FCF -31.84 despite low capex; OCF/NI -7.94x
• Leverage manageable on a net basis (~1.1x EBITDA) but skewed to short-term borrowings
• Working capital intensity (indicative CCC ~58 days) is the principal drag and swing factor
• Equity ratio 33.3% provides some balance sheet resilience, but total liabilities/equity at ~1.94x warrants monitoring

Metrics to Watch:

• Operating cash flow trend and OCF/EBITDA conversion
• DSO/receivables levels and collections progress
• Net debt and the mix of short-term vs long-term borrowings
• EBITDA margin sustainability and the recurrence of other operating income
• Capex vs depreciation to gauge reinvestment needs
• Dividend cash outflow versus earnings-based payout ratio

Relative Positioning: Within Japanese mid-cap service/IT-adjacent peers, CL Holdings shows improving earnings momentum but lags on cash conversion and carries higher working capital reliance; balance sheet leverage is moderate on a net basis but structurally more short-term debt–dependent than peers with stronger OCF.

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
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