PBsystems,Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥2.63B
• Operating Income: ¥124M
• Net Income: ¥85M
• EPS: ¥14.12

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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 weak quarter with sharp profit contraction, but cash conversion remained solid and liquidity is strong. Revenue fell 15.2% YoY to 26.34, while operating income declined 65.5% YoY to 1.24 and net income dropped 66.5% YoY to 0.85. Operating margin is approximately 4.7% (1.24/26.34), down materially from an estimated 11.6% in the prior year’s comparable period. Net margin is about 3.2%, down from an estimated 8.2% a year ago. Gross margin is indicated at 33.8%, but note that the reported cost of sales and gross profit figures are internally inconsistent (COGS 22.17 would imply a much lower gross profit), so we rely on the provided gross margin metric. The company generated operating cash flow of 1.90, exceeding net income (0.85), yielding an OCF/NI of 2.24x, which indicates high earnings quality this period. Free cash flow was negative at -1.36 due to elevated investing outflows (-3.26), despite modest capex (-0.26), suggesting strategic investments or other non-capex uses of cash. Liquidity remains robust with a current ratio of 204.2% and a quick ratio of 188.8%, supported by cash and deposits of 8.48 and sizable receivables of 15.16. Leverage appears moderate with a debt-to-equity ratio of 1.25x (based on total liabilities to equity), and interest coverage is very strong at 402.6x, aided by minimal interest expense. ROE stands at 7.4%, supported more by asset turnover (1.448x) and moderate leverage (1.58x) than by net margin (3.2%). The effective tax rate was 29.3%, broadly in line with statutory levels, suggesting limited tax-related distortion. Dividend metrics are largely unreported; the calculated payout ratio is 77.5% while reported DOE is 0.0%, and FCF coverage is negative (-2.07x) given FCF was negative, implying potential tension between shareholder returns and internal investment. Notably, total assets (18.19) are reported below current assets (27.78), an inconsistency that limits precision in certain ratio analyses; we prioritize the provided ratios (current ratio, quick ratio) over raw totals. Forward-looking, the profit shortfall appears primarily margin-driven amid lower sales, pointing to weaker operating leverage; recovering demand and tighter cost control are needed to re-expand margins. Near term, focus should be on backlog, order intake, and receivables collection to support revenue stabilization and cash discipline.

Profitability Analysis

ROE (7.4%) = Net Profit Margin (3.2%) × Asset Turnover (1.448) × Financial Leverage (1.58x). The largest drag is the sharp compression in net profit margin, with operating margin down from an estimated 11.6% to 4.7%, and net margin down from ~8.2% to ~3.2% YoY (roughly 690 bps and 500 bps compressions, respectively). The business driver is negative operating leverage: revenue fell 15.2% while fixed cost elements in SG&A (5.28) did not decline proportionately, squeezing operating profit. Gross margin is shown at 33.8%; however, internal inconsistencies between reported COGS and gross profit suggest caution—still, even assuming stable gross margin, lower volume and sticky SG&A likely drove the margin decline. Asset turnover at 1.448 remains a relative strength, indicating efficient use of the asset base to generate sales. Leverage (1.58x) contributed moderately to ROE but is not excessive, keeping financial risk contained. Sustainability: margin pressure may be cyclical if tied to project timing and customer capex deferrals; recovery depends on order intake mix and utilization. Concerning trends include profit contraction outpacing revenue decline (OI -65.5% vs sales -15.2%), implying deteriorating operating leverage and potential price/mix pressure. With depreciation low (0.14) and EBITDA of 1.38, the gap between EBITDA and OI is narrow, leaving limited cushion if demand weakens further.

Growth Assessment

Top-line contracted 15.2% YoY to 26.34, indicating weaker demand or project timing slippage. Operating income fell 65.5% to 1.24, signaling negative operating leverage as fixed costs could not flex with volume. The non-operating line netted near zero (0.01 income vs 0.01 expense), so earnings were primarily operational. ROE at 7.4% remains acceptable for a small-cap IT firm but below best-in-class peers. Near-term growth sustainability hinges on backlog conversion, new orders in core offerings, and any pricing power to protect margins. The strong OCF/NI ratio suggests earnings are cash-backed, providing some resilience for reinvestment. However, negative FCF (-1.36) implies growth investments are currently outpacing internal cash generation, which is acceptable if tied to high-IRR projects but bears monitoring. Outlook: If demand normalizes and SG&A discipline improves, operating margin could re-expand toward mid-to-high single digits; absent that, earnings may stay subdued.

Financial Health

Liquidity is strong: current ratio 204.2% and quick ratio 188.8% comfortably exceed benchmarks. No explicit warning triggers: Current Ratio is well above 1.0 and D/E (using total liabilities/equity) is 1.25x, below the 2.0 warning threshold. Working capital is healthy at 14.17, with cash and deposits 8.48 and receivables 15.16 against current liabilities of 13.60. Maturity mismatch risk appears limited given current assets significantly exceed current liabilities. Interest-bearing debt is unreported; however, minimal interest expense and very high interest coverage (402.6x) imply low debt service burden. Note a data inconsistency: total assets (18.19) are reported below current assets (27.78), which is not plausible; we therefore rely more on the provided liquidity ratios than the absolute totals. No off-balance sheet obligations are disclosed in the data provided.

Cash Flow Quality

Earnings quality is strong this period with OCF/NI at 2.24x (OCF 1.90 vs NI 0.85), well above the 0.8 threshold. Free cash flow is negative (-1.36), driven by investing CF of -3.26; capex is modest (-0.26), so the delta likely reflects other investments (e.g., software intangibles, deposits, or minority investments). Financing CF was -3.93, including share repurchases of -0.81; dividend cash outflow is unreported. Working capital looks manageable given robust liquidity; however, sizable receivables (15.16) relative to sales warrant monitoring of DSO and collection discipline, especially in a declining revenue environment. There are no overt signs of working capital manipulation; OCF exceeding NI argues against accrual-driven earnings.

Dividend Sustainability

Dividend data are largely unreported; the calculated payout ratio of 77.5% suggests a relatively high distribution versus earnings, while reported DOE is 0.0%. With FCF negative (-1.36), FCF coverage is -2.07x by the provided calculation, implying any cash dividends would not be covered by FCF this period. Given investing outflows drove negative FCF and OCF was positive, sustainability improves if investment intensity normalizes; nonetheless, absent visibility on DPS or total dividends paid, conservatism is warranted. Balance sheet liquidity is strong, which can temporarily support distributions, but sustained high payout amid weak profits could constrain reinvestment capacity.

Risk Assessment

Business Risks:

• Revenue volatility from project timing and customer capex cycles (sales -15.2% YoY).
• Negative operating leverage as fixed SG&A (5.28) pressures margins when volume declines.
• Pricing/mix pressure evidenced by steep operating margin compression.
• Execution risk on receivables collection with AR at 15.16.

Financial Risks:

• Negative free cash flow (-1.36) due to elevated investing outflows.
• Potential tension between shareholder returns (share repurchases -0.81) and funding for growth.
• Data inconsistencies (assets vs current assets) could mask leverage or liquidity nuances.

Key Concerns:

• Sustained margin compression (OI -65.5% vs sales -15.2%).
• Visibility on dividends is low; payout metrics are inconsistent (calculated vs reported).
• Limited disclosure on interest-bearing debt despite using total liabilities for D/E.

Investment Implications

Key Takeaways:

• Earnings downturn driven by margin compression; operating margin ~4.7% vs ~11.6% prior.
• Cash earnings quality is solid (OCF/NI 2.24x) despite weaker profits.
• Liquidity strong (current ratio 204%) with modest leverage (D/E ~1.25x).
• Negative FCF reflects investment; capex is low, implying non-capex investments are the swing factor.
• ROE 7.4% supported by asset turnover and moderate leverage, not by margin strength.
• Data inconsistencies limit precision; rely on provided ratios over raw totals.
• Near-term recovery depends on order intake and SG&A cost discipline.

Metrics to Watch:

• Order backlog and quarterly bookings growth.
• Operating margin trajectory and SG&A as a percentage of sales.
• DSO and receivables turnover to validate cash conversion.
• Free cash flow normalization as investing outflows stabilize.
• Return on invested capital for new initiatives (if disclosed).

Relative Positioning: Versus domestic small-cap IT integrators, the company currently exhibits below-peer profitability (compressed operating and net margins) but maintains comparatively strong liquidity and cash conversion; ROE is mid-single-digit to high-single-digit, trailing top-tier peers that sustain double-digit ROE through steadier margins.

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