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

PB Systems (4447) reported FY2025 Q4 (non-consolidated, JGAAP) results with revenue of ¥2,634m, down 15.2% year-on-year, signaling a meaningful top-line slowdown. Profitability contracted more sharply: operating income fell 65.5% to ¥124m and net income declined 66.5% to ¥85m, indicating significant operating leverage and pressure on cost absorption. Gross profit of ¥890.5m yields a gross margin of 33.8%, but the operating margin compressed to 4.7%, suggesting SG&A rigidity amid lower volumes. Net margin settled at 3.23%, with DuPont-based ROE of 7.38% driven by modest asset turnover (1.448x) and moderate leverage (financial leverage 1.58x). Cash conversion was solid, with operating cash flow of ¥190m equating to 2.24x net income, pointing to decent earnings quality. However, free cash flow was negative at ¥-136m due to ¥326m investing outflows, implying elevated capex or growth investments outweighing internal cash generation this period. Liquidity appears strong with a current ratio of 204% and quick ratio of 189%, and working capital of ¥1,417m, providing a meaningful buffer against near-term shocks. Solvency is adequate but not conservative: the reported debt-to-equity ratio of 1.25x indicates a leveraged balance sheet versus equity size, though interest burden is negligible (interest expense ¥0.3m; interest coverage >400x). The reported equity ratio of 0.0% should be treated as undisclosed rather than actual, per provided guidance, and DuPont implies an equity ratio around the mid-60% range. There are internal data limitations: current assets exceed total assets and tax line items appear inconsistent with net profit; analysis therefore prioritizes the provided calculated metrics (e.g., ROE, asset turnover) and non-zero line items. Dividend remained suspended (DPS ¥0; payout 0%), consistent with preserving capital during an earnings downshift and negative FCF. The decline in operating profit far outpaced revenue contraction, highlighting sensitivity to volume and mix, and underscoring the need for gross margin recovery and SG&A control. Cash flow quality is better than earnings imply, but sustaining investments will require either a rebound in operating cash or external funding if the negative FCF persists. Overall, the profile is of a company with solid liquidity and acceptable ROE but pressured profitability in the period, with investment intensity weighing on free cash flow. Near-term outlook hinges on recovering order intake, stabilizing margins, and calibrating capex to cash generation.

Profitability Analysis

ROE decomposition (DuPont): Net margin 3.23% × Asset turnover 1.448 × Financial leverage 1.58 = ROE 7.38%. The net margin of 3.23% reflects significant compression from the steep decline in operating income (down 65.5% YoY) versus revenue (-15.2% YoY), indicating negative operating leverage and likely unfavorable mix or pricing. Gross margin at 33.8% is respectable for a solutions/IT-services-like profile, but the operating margin of 4.7% suggests elevated SG&A as a percentage of sales in this period. EBITDA of ¥138.2m implies a thin EBITDA margin of 5.2%, only modestly above the operating margin given low D&A (¥14.2m), indicating that the margin pressure stems from operating costs rather than depreciation. Interest burden is de minimis (interest expense ¥0.3m; coverage ~403x), so financial costs did not drive the earnings decline. The sharp drop in operating profit relative to sales suggests high fixed-cost content and project delivery timing effects; to restore ROE, the company needs either a revenue rebound or structural SG&A efficiencies. With leverage at 1.58x (assets/equity), the capital structure adds some ROE uplift without creating material interest risk at present.

Growth Assessment

Top line contracted by 15.2% YoY to ¥2,634m, indicating demand softness or project timing deferrals. The disproportionate fall in operating income (-65.5% YoY) points to deteriorated operating leverage, consistent with lower utilization or a less favorable revenue mix. Ordinary income of ¥127m and net income of ¥85m reflect the compressed margin environment; the reported effective tax rate metric of 0% should be treated as unreliable given the presence of non-zero tax expense. Sustainability of revenue will depend on order backlog normalization and execution cadence; absent backlog data, the visibility is limited. Profit quality is mixed: despite lower earnings, OCF outperformed net income (OCF/NI 2.24x), suggesting good cash conversion from working capital, which is a positive for near-term resilience. Outlook near term is cautious: to re-expand margins, the company needs volume recovery and/or cost actions; otherwise, profitability may remain subdued notwithstanding strong liquidity.

Financial Health

Liquidity is strong with a current ratio of 204.2% and quick ratio of 188.8%, supported by ¥1,417m of working capital. Solvency is acceptable but indicates reliance on liabilities: the stated debt-to-equity ratio of 1.25x suggests total liabilities exceed equity by 25%, though interest costs are minimal. Total assets are reported at ¥1,819m and total liabilities at ¥1,436m, implying equity around ¥383m by derivation, but a separate equity figure of ¥1,152m is provided; given this inconsistency, we rely on the DuPont financial leverage (1.58x), which implies an equity ratio near the low-to-mid 60% range and adequate capitalization. The reported equity ratio of 0.0% should be treated as undisclosed rather than actual. No stress is evident from interest coverage (>400x). Overall, the company appears liquid with manageable solvency risk, though data inconsistencies limit precision on capital structure.

Cash Flow Quality

Earnings quality is solid this period: operating cash flow of ¥190m exceeds net income of ¥85m (OCF/NI 2.24x), indicating positive working capital unwinds or prudent revenue recognition. However, free cash flow is negative at ¥-136m due to ¥326m of investing outflows, suggesting elevated capex or growth investments exceeding internally generated cash. With interest expense of only ¥0.3m, financing costs do not distort cash flows. Sustained negative FCF would necessitate either cash reserves (cash balance not disclosed) or additional financing; note that cash and equivalents are shown as 0, which should be treated as undisclosed rather than actual. Working capital management appears supportive of cash generation in the period, but durability will depend on revenue trajectory and project billing/collection cycles.

Dividend Sustainability

Dividend per share is reported at ¥0 with a payout ratio of 0%; given negative free cash flow and pressured earnings, a conservative stance on distributions is consistent with capital preservation. FCF coverage of the dividend is 0.00x by definition, but the absence of a dividend avoids cash leakage amid investment needs. With ROE at 7.38% and liquidity strong, the company could reassess distributions once free cash flow turns sustainably positive; near-term, the priority likely remains funding operations and investments. Policy outlook is therefore cautious, contingent on margin recovery and FCF improvement.

Risk Assessment

Business Risks:

• Revenue volatility and project timing risk, evidenced by a 15.2% YoY sales decline
• High operating leverage causing outsized profit swings relative to revenue
• Margin pressure from unfavorable mix or pricing, reflected in 4.7% operating margin
• Execution risk on projects that can impact billing and cash conversion
• Competitive pressure in solutions/IT-like markets potentially compressing margins

Financial Risks:

• Negative free cash flow due to elevated investing cash outflows (¥326m)
• Reliance on liabilities (reported D/E 1.25x) despite low interest burden
• Data inconsistencies (assets, equity, tax metrics) reduce transparency for stakeholders
• Potential need for external funding if investment pace continues and OCF weakens

Key Concerns:

• Operating income down 65.5% YoY, substantially outpacing revenue decline
• Sustained investment outlays driving FCF negative (¥-136m)
• Visibility limited by undisclosed or inconsistent balance sheet and equity ratio figures

Investment Implications

Key Takeaways:

• Top-line decline of 15.2% and disproportionate operating profit contraction highlight sensitivity to volume and mix
• ROE at 7.38% is supported by moderate leverage and asset turnover but constrained by thin margins
• OCF strength (2.24x NI) is a bright spot; however, negative FCF reflects investment intensity
• Liquidity is robust (current ratio 204%, quick 189%), mitigating near-term stress
• Interest burden is negligible, so earnings recovery hinges on operations rather than financing

Metrics to Watch:

• Order backlog and book-to-bill to gauge revenue recovery
• Gross margin trajectory and SG&A ratio to assess operating leverage normalization
• Free cash flow and capex cadence to ensure self-funded growth
• Working capital turns (DSO/DPO/DIO) given reliance on OCF
• ROE and operating margin progression versus peers

Relative Positioning: Versus domestic small-cap IT/solutions peers, PB Systems currently exhibits weaker operating margin and mid-single-digit ROE, but maintains stronger-than-average liquidity and minimal interest burden; near-term performance is levered to demand recovery and cost discipline.

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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