SEPTENI HOLDINGS CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥22.29B
• Operating Income: ¥2.81B
• Net Income: ¥2.49B
• EPS: ¥12.00

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

Septeni Holdings reported FY2025 Q3 consolidated IFRS results showing steady top-line expansion with amplified operating leverage, but bottom-line softness due to non-operating factors versus the prior year. Revenue rose 6.7% YoY to 222.89, demonstrating resilient demand in core businesses. Gross profit increased to 165.18 with a robust gross margin of 74.1%, implying a favorable mix and/or continued efficiencies in media buying and operations. SG&A was 143.36, equating to 64.3% of revenue and 86.8% of gross profit, leaving operating income at 28.10, up 28.2% YoY. The operating margin of roughly 12.6% indicates healthy operating leverage, as costs grew slower than revenue. Profit before tax reached 33.61, aided by 7.78 in equity-method gains, highlighting a meaningful non-operating contribution. Despite stronger operating profit, net income declined 41.7% YoY to 24.90, pointing to prior-year one-offs or differences in non-operating items and minority interest effects; the current period’s effective tax rate is 28.8%. DuPont shows net margin of 11.2%, asset turnover of 0.246, and financial leverage of 1.38x, producing a modest ROE of 3.8%. Asset efficiency remains a constraint on ROE, and leverage is conservative given a 72.4% equity ratio. Cash generation is adequate but not exceptional: operating cash flow of 19.15 equates to 0.77x net income, while reported free cash flow of 28.09 is supported by positive investing cash flow (likely asset disposals/redemptions) rather than recurring operating inflows alone. Capex was limited at 0.60, underscoring an asset-light profile typical of digital businesses. The balance sheet is solid with total assets of 905.48 and total equity of 656.26; reported debt-to-equity of 0.42x suggests manageable leverage, though interest-bearing debt details are unreported. Cash and equivalents were 237.30, underpinning liquidity, but the absence of current liability disclosure limits ratio analysis. Dividend data are incomplete; the reported payout ratio of 266.1% and FCF coverage of 0.42x appear inconsistent with other provided figures and may reflect definitional or timing differences. Overall, the quarter exhibits improving operating profitability, strong solvency, and reasonable liquidity, with headline ROE held back by low asset turnover and a conservative capital structure. Key watchpoints are the sustainability of equity-method income, cash conversion from profits, and clarity on dividend policy and coverage.

Profitability Analysis

ROE_decomposition: ROE 3.8% = Net margin 11.2% x Asset turnover 0.246 x Financial leverage 1.38x. Margin is solid, turnover is low, leverage is conservative, collectively yielding modest ROE. margin_quality: Gross margin 74.1% indicates strong unit economics and favorable mix. Operating margin ~12.6% (28.10 / 222.89) expanded with revenue growing faster than operating costs. EBITDA was 33.29, implying an EBITDA margin of 14.9% and D&A of 5.19, consistent with an asset-light model. operating_leverage: Revenue +6.7% YoY vs operating income +28.2% YoY evidences positive operating leverage from cost discipline and scale. SG&A at 64.3% of revenue leaves room for further leverage if growth sustains.

Growth Assessment

revenue_sustainability: Revenue of 222.89 (+6.7% YoY) suggests steady underlying demand; sustainability will hinge on client budgets, platform dynamics, and competitive intensity in digital marketing and related businesses. profit_quality: Operating income improved notably, reflecting mix and cost control. However, net income fell 41.7% YoY despite higher PBT, implying prior-year non-recurring gains/lower tax/minority impacts or current-year headwinds outside operations. outlook: With positive operating momentum and equity-method gains supporting PBT (7.78), the near-term outlook is constructive, but reliance on non-operating contributions and low asset turnover cap ROE expansion unless operating scale and cash conversion improve. Watch for stability of equity-method income and trajectory of SG&A ratio.

Financial Health

liquidity: Cash and equivalents of 237.30 provide a liquidity cushion. Current assets total 459.78, but current liabilities are unreported, preventing current/quick ratio calculation. Working capital equals reported current assets (459.78), but this likely overstates net working capital without current liabilities. solvency: Equity ratio is strong at 72.4% (equity 656.26 / assets 905.48). Reported debt-to-equity is 0.42x, indicating manageable leverage, though the breakdown of interest-bearing debt is unreported. capital_structure: Financial leverage is modest at 1.38x per DuPont. Capital surplus (254.24) and retained earnings (276.93) underpin equity quality. The balance sheet appears resilient against cyclical volatility.

Cash Flow Quality

earnings_quality: OCF/Net income is 0.77x (19.15 / 24.90), a moderate conversion that suggests working capital absorption or timing differences. Effective tax rate is 28.8%, close to statutory norms. FCF_analysis: Reported free cash flow is 28.09, largely due to positive investing CF of 8.94 alongside OCF of 19.15. Capex was only 0.60, consistent with an asset-light profile, but reliance on investing inflows (e.g., asset sales/redemptions) may not be recurring. working_capital: Detailed components are unreported, but the OCF shortfall versus net income implies either higher receivables, lower payables, or other timing effects. Monitoring DSO/DPO and accrued expenses is important as disclosures permit.

Dividend Sustainability

payout_ratio_assessment: The provided payout ratio is 266.1%, which appears elevated relative to net income; however, DPS is unreported and timing/definition may differ from consolidated net income, so interpret with caution. FCF_coverage: Reported FCF coverage is 0.42x, suggesting dividends exceed FCF, but this contrasts with the disclosed dividends paid of 10.77 and reported FCF of 28.09 (which would imply comfortable coverage). The discrepancy likely stems from definitional differences or period alignment. policy_outlook: Given strong equity ratio and cash reserves, the company has capacity to sustain ordinary dividends, but clarity on dividend policy, payout baseline versus special items, and alignment with cash generation is needed once full-year figures and DPS are disclosed.

Risk Assessment

Business Risks:

• Sensitivity of client advertising budgets to macro conditions
• Platform and algorithm changes at major digital media partners impacting campaign performance
• Competitive pressure compressing agency margins and fees
• Talent acquisition/retention in digital marketing and technology functions
• Dependence on specific verticals or clients (potential concentration risk)
• Regulatory shifts in data privacy and digital advertising compliance

Financial Risks:

• Moderate cash conversion (OCF/NI 0.77x) indicating working capital timing risk
• Reliance on non-operating income (equity-method gains of 7.78) to support PBT
• Potential volatility in equity-method contributions and investment security valuations
• Limited visibility on interest-bearing debt and current liabilities due to unreported items

Key Concerns:

• Net income down 41.7% YoY despite stronger operating profit, implying non-operating or non-recurring drags
• Low asset turnover (0.246) constrains ROE despite solid margins
• Dividend metrics are unclear/inconsistent given unreported DPS and differing coverage calculations

Investment Implications

Key Takeaways:

• Healthy operating momentum: revenue +6.7% and operating income +28.2% YoY with ~12.6% OPM
• ROE modest at 3.8% due to low asset turnover and conservative leverage
• Non-operating tailwind from equity-method income (7.78) boosted PBT
• Cash conversion is adequate but below earnings (OCF/NI 0.77x); watch working capital
• Balance sheet strength with 72.4% equity ratio and cash of 237.30 supports flexibility
• Dividend data incomplete; reported payout/coverage metrics appear inconsistent and need confirmation

Metrics to Watch:

• Operating margin trend and SG&A as a percentage of revenue
• OCF/Net income and changes in receivables/payables once disclosed
• Equity-method income sustainability and volatility
• Asset turnover progression and revenue per employee (if disclosed)
• Dividend announcements (DPS) and payout policy clarification
• Cash and equivalents relative to total liabilities

Relative Positioning: Within Japan-listed digital marketing/IT services peers, Septeni exhibits above-average gross margins and improving operating leverage, paired with a conservative balance sheet; however, ROE trails peers driven by low asset turnover and limited leverage, with added sensitivity to non-operating income contributions.

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
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