NEXYZ.Group Corporation FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥28.43B
• Operating Income: ¥1.82B
• Net Income: ¥105M
• EPS: ¥70.94

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

Verdict: A solid FY2025 Q4 finish with strong operating leverage and cash flow quality, tempered by elevated leverage. Revenue rose 16.1% YoY to 284.33, while operating income jumped 53.1% YoY to 18.20, driving a clear uptick in profitability. Using the disclosed growth rates, we estimate operating margin expanded by roughly 154 bps YoY to 6.4% (from ~4.9%), as operating income outpaced sales growth. Gross profit reached 138.19 with a gross margin of 48.6%, indicating strong unit economics despite high SG&A intensity. Ordinary income increased 50.7% YoY to 17.42, implying ordinary margin of 6.1% and limited drag from non-operating items. Net income climbed 50.8% YoY to 9.22, with a net margin of 3.2% and an effective tax rate of 39.1%, which remains a headwind versus peers. Cash flow quality was strong: operating cash flow of 17.40 exceeded net income (OCF/NI 1.89x), and free cash flow was a robust 20.22, aided by light capex (-0.69) and positive investing CF (2.82), likely from asset disposals. Liquidity is adequate with current ratio at 144.5% and cash of 84.47 comfortably covering short-term loans of 11.00, but the debt-to-equity ratio of 2.02x flags high leverage risk. Interest coverage is very strong at 30.85x, mitigating near-term solvency concerns despite the leverage. ROE is a healthy 11.4% per DuPont, driven more by leverage (3.02x) and asset turnover (1.162) than by a still-modest net margin. The discrepancy between calculated BVPS (622.45 JPY) and XBRL BVPS (338.16 JPY) suggests differing calculation bases or timing, not necessarily an error. Dividend affordability looks comfortable with a calculated payout ratio of 29.2% and FCF coverage at 7.5x, though DPS details were not disclosed. Total comprehensive income of 35.88 substantially exceeds net income, implying sizable OCI gains (e.g., on investment securities), which are non-cash and volatile. Forward-looking, sustaining the expanded operating margin and managing leverage will be key, while the high tax rate and any reliance on asset sales in investing CF warrant monitoring. Overall, momentum into FY2026 is positive if operating discipline continues and balance sheet risk is contained.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 3.2% × 1.162 × 3.02 ≈ 11.4%. The component changing most this quarter appears to be margin improvement, inferred from operating income growing 53.1% vs revenue 16.1%, which we estimate expanded operating margin by ~154 bps YoY to 6.4%. Business driver: better operating leverage as SG&A growth likely lagged gross profit growth, and mix/pricing supported a high 48.6% gross margin. Financial leverage (3.02x) is a significant contributor to ROE, but did not obviously change this quarter based on available data; asset turnover (1.162) looks efficient and stable. Sustainability: margin gains are more credible if tied to recurring cost control and mix rather than one-off items (non-operating income/expense was small), suggesting partial sustainability; however, the high tax rate (39.1%) caps NPM. Concerning trends: SG&A ratio to sales is elevated at 42.2% (119.98/284.33), leaving a thin operating spread versus gross margin; any uptick in SG&A could compress margins quickly. No evidence of equity-method or one-time gains driving profit, supporting quality of operating earnings.

Growth Assessment

Top-line growth was solid at +16.1% YoY to 284.33, indicating healthy demand or successful expansion initiatives. Profit growth was stronger: operating income +53.1% YoY to 18.20 and ordinary income +50.7% to 17.42, implying positive operating leverage. Net income rose 50.8% to 9.22 despite a high 39.1% effective tax rate, underscoring improved underlying profitability. Operating margin improved to ~6.4% from ~4.9% by our derivation, driven by high gross margin (48.6%) and controlled opex. The quality of growth appears robust as non-operating contributions were modest (non-op income 0.31; non-op expenses 1.09) and interest burden was low relative to EBIT (interest coverage 30.85x). Investing CF was positive (2.82), suggesting asset sales or investment securities-related cash inflows; this is not a repeatable growth driver and should be treated as non-core. Capex was light (-0.69), indicating low capital intensity; future growth may rely more on working capital and possibly M&A/financial investments (investment securities 58.32). Outlook: sustaining mid-teens revenue growth may be challenging without new growth vectors; maintaining the higher operating margin via SG&A discipline will be pivotal. Watch for normalization of tax rate and any volatility in comprehensive income tied to securities valuations.

Financial Health

Liquidity: Current ratio 144.5% and quick ratio 144.5% indicate adequate near-term liquidity, though slightly below the 1.5x benchmark. Working capital stands at 49.22, supported by cash and deposits of 84.47 versus current liabilities of 110.68; short-term loans are 11.00 and well-covered by cash. Solvency: Debt-to-equity ratio is elevated at 2.02x (warning threshold >2.0), warranting caution despite strong interest coverage (30.85x). Long-term loans of 39.07 are comfortably backed by noncurrent assets of 84.73, limiting asset-liability duration mismatch. Maturity mismatch risk appears manageable given current assets (159.90) exceed current liabilities (110.68). Off-balance sheet obligations: none disclosed in the provided data. Equity base totals 80.97 with owners' equity 43.98, implying significant non-controlling interests or accumulated OCI within total equity; monitor equity quality given large investment securities (58.32).

Cash Flow Quality

OCF/Net income is 1.89x, indicating high earnings quality and healthy cash conversion. Free cash flow is strong at 20.22, easily covering typical shareholder returns and modest capex (-0.69). Investing CF was positive (2.82), likely reflecting asset or securities disposals; this boosts FCF in the period but is non-recurring and should not be extrapolated. No signs of aggressive working capital manipulation are apparent from the top-line figures; accounts receivable (28.90) appear modest relative to revenue scale, and cash remains high. Given strong OCF and low capex needs, FCF sustainability looks good barring a reversal in working capital or loss of disposal gains. Interest payments (0.59) are well-covered by operating profits, consistent with the high interest coverage ratio.

Dividend Sustainability

The calculated payout ratio is 29.2%, comfortably below the 60% benchmark for sustainability; reported DOE is 0.1% but DPS details were not disclosed. FCF coverage is 7.50x, suggesting ample capacity to fund dividends from internally generated cash. With leverage elevated (D/E 2.02x), management could prioritize deleveraging alongside dividends; nonetheless, current cash generation supports ongoing distributions. Policy outlook: absent explicit guidance, a stable-to-modest growth dividend policy appears financeable given OCF strength and low capex, but is contingent on sustaining operating margins and avoiding reliance on asset sale gains.

Risk Assessment

Business Risks:

• Margin sensitivity to SG&A given high SG&A-to-sales ratio (42.2%).
• High effective tax rate (39.1%) constraining net margin and ROE.
• Potential reliance on non-recurring investing cash inflows (asset or securities sales).
• Valuation volatility in investment securities (58.32) affecting comprehensive income and equity.

Financial Risks:

• Elevated leverage (D/E 2.02x) despite strong interest coverage.
• Refinancing and interest rate risk on 50.07 total loans (short-term 11.00, long-term 39.07).
• Equity base sensitivity to OCI swings given sizeable financial assets.
• Liquidity buffer slightly below ideal benchmark (current ratio 1.45x vs >1.5x).

Key Concerns:

• Sustainability of the ~154 bps operating margin expansion without further scale benefits.
• Potential normalization downward of positive investing CF boosting FCF.
• Discrepancy between calculated and XBRL BVPS suggests definitional differences that could confuse valuation metrics.
• Limited disclosure granularity (e.g., depreciation, SG&A breakdown) obscures cost structure assessment.

Investment Implications

Key Takeaways:

• Strong operating leverage: revenue +16.1% YoY, operating income +53.1% YoY; operating margin ~6.4% (+~154 bps).
• High cash conversion: OCF/NI 1.89x and FCF 20.22 with light capex.
• Leverage is the primary balance sheet overhang (D/E 2.02x) despite robust interest coverage (30.85x).
• ROE at 11.4% is driven more by leverage and asset turnover than by net margin (3.2%).
• Comprehensive income (35.88) far exceeds net income, highlighting securities valuation impacts.

Metrics to Watch:

• Operating margin trajectory and SG&A-to-sales ratio.
• OCF/Net income and working capital movements (especially receivables).
• Debt-to-equity and net debt to OCF trends; refinancing profile.
• Effective tax rate normalization.
• Investment securities valuation and OCI volatility.
• Capex and any M&A or disposal activity affecting investing CF.

Relative Positioning: Within diversified services peers, the company demonstrates above-average cash conversion and improving operating margins, offset by higher-than-average leverage; sustainability of margin gains and management of balance sheet risk will determine relative performance.

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