CAC Holdings Corporation FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥37.63B
• Operating Income: ¥2.39B
• Net Income: ¥1.56B
• EPS: ¥109.39

Income Statement

Balance Sheet

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

CAC Holdings (4725) reported FY2025 Q3 (cumulative) results showing modest top-line contraction and slight operating margin compression, offset by a sharp improvement in bottom-line growth. Revenue declined 3.9% YoY to ¥37.63bn, with gross profit of ¥10.06bn, implying a gross margin of 26.7%. Operating income fell 6.8% YoY to ¥2.39bn, translating to an operating margin of 6.3%, indicating mild negative operating leverage amid the revenue decline. Ordinary income was ¥2.02bn, below operating income, suggesting net non-operating costs (notably beyond the ¥30m interest expense), potentially FX or investment-related items. Net income rose 27.1% YoY to ¥1.87bn, a divergence from the weaker operating trend that likely reflects favorable below-the-line items versus the prior year or the absence of one-off losses. The reported net margin is 4.97%, and DuPont metrics indicate an ROE of 5.39% driven by a 4.97% net margin, 0.771x asset turnover, and 1.41x financial leverage. Liquidity appears strong with a current ratio of 241% and working capital of ¥14.69bn. The balance sheet is conservatively structured with total liabilities of ¥17.02bn against equity of ¥34.70bn (assets/equity ≈ 1.41x). Effective tax rate (reconstructed from disclosures) is approximately 31.5% (¥860m tax on ~¥2.73bn pre-tax profit), despite a tabular “0.0%” indicator that reflects non-disclosure rather than reality. Cash flow statements show zeros and should be treated as unreported; therefore, OCF/Net Income and FCF cannot be assessed from the provided data. Dividend data are also unreported (DPS and payout shown as zero are placeholders), so dividend capacity must be inferred from earnings power and balance sheet strength rather than cash flow coverage. EBITDA is not disclosed due to D&A not being reported; at minimum, EBITDA is at least in line with operating income, subject to actual D&A. Overall, the company is demonstrating resilient profitability despite softer sales, disciplined cost control at the gross level, and ample liquidity to navigate near-term uncertainties. The key watchpoints include revenue trajectory into Q4, margin preservation in the face of wage inflation and project mix, and clarity on non-operating items that weighed on ordinary profit. Given data limitations (notably cash flows, D&A, and dividend details), conclusions on cash generation and capital returns remain provisional. The reported ROE of 5.39% is modest relative to typical Japanese IT services peers but supported by conservative leverage. The company appears to have capacity to sustain investments and potential returns to shareholders subject to underlying cash generation, which is not disclosed here. Additional disclosures at full year (cash flows, D&A, DPS) will be essential to refine views on earnings quality and capital allocation.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 4.97% (NI ¥1,870m / Revenue ¥37,632m)
• asset_turnover: 0.771x (as provided)
• financial_leverage: 1.41x (Assets ¥48,797m / Equity ¥34,695m)
• calculated_ROE: 5.39% (matches reported) margin_quality:
• gross_margin: 26.7% (¥10,059m / ¥37,632m)
• operating_margin: 6.3% (¥2,386m / ¥37,632m)
• ordinary_margin: 5.4% (¥2,023m / ¥37,632m)
• net_margin: 4.97%
• commentary: Gross margin is solid and indicates decent pricing/mix and delivery efficiency. Operating margin compression versus revenue decline (-6.8% OI vs -3.9% sales) suggests negative operating leverage and possibly wage inflation or project mix pressure. Ordinary profit is below operating profit by ¥363m, implying net non-operating losses beyond the ¥30m interest expense (likely FX/valuation). Net income outperformed (+27.1% YoY), implying favorable below-the-line effects versus the prior year. operating_leverage: With revenue down 3.9% and operating income down 6.8%, incremental margins were negative in Q3 YTD, indicating moderate negative operating leverage. Maintaining a 6.3% operating margin amid topline softness suggests some cost flexibility but not full absorption of fixed costs.

Growth Assessment

revenue_sustainability: Revenue of ¥37.63bn (-3.9% YoY) indicates modest demand softness or phasing of projects. The gross margin resilience suggests underlying contract quality remains intact, but visibility into Q4 run-rate is limited without backlog or order data. profit_quality: Net income growth (+27.1% YoY) contrasts with weaker operating income, pointing to non-operating and/or tax effects as key drivers. Reconstructed effective tax rate is ~31.5%, consistent with a normalized level, so YoY net growth likely reflects prior-year one-offs more than structural improvement. outlook: Near-term growth will hinge on project timing, client IT budgets (especially in financial services and pharma where CAC is active), and wage cost management. Watch ordinary income trends and any FX sensitivity from overseas operations. Absent cash flow data, conversion of earnings to cash remains a key unknown.

Financial Health

liquidity:

• current_ratio: 241.1% (CA ¥25,095m / CL ¥10,407m)
• quick_ratio: 241.1% (inventories unreported; ratio likely overstated vs true quick ratio if inventories exist)
• working_capital: ¥14,688m
• commentary: Liquidity is ample on reported figures, implying strong short-term resilience. Cash balance is unreported, so immediate funding headroom via cash-on-hand cannot be assessed. solvency:
• total_liabilities: ¥17,019m
• equity: ¥34,695m
• leverage: Assets/Equity 1.41x; proxy Debt-to-Equity ~0.49x using total liabilities as a proxy for debt (true interest-bearing debt not disclosed).
• interest_coverage: 79.5x (Operating income ¥2,386m / Interest expense ¥30m), indicating very low financial risk from interest costs. capital_structure: Balance sheet is conservative with sizeable equity buffer. Without detail on interest-bearing debt and cash, net debt cannot be determined, but coverage and liability levels suggest low solvency risk.

Cash Flow Quality

earnings_quality: Unable to assess OCF/NI due to OCF unreported (shown as zero placeholder). That said, stable gross margin and moderate operating margin are consistent with typical IT services cash conversion, but confirmation is needed. FCF_analysis: FCF is unreported (displayed as zero placeholder). Capex and D&A are also undisclosed, preventing assessment of maintenance vs growth investment needs. Minimum EBITDA approximates operating income in the absence of disclosed D&A, but true EBITDA is likely higher. working_capital: With strong current assets vs current liabilities, working capital is positive; however, composition (receivables, unbilled work, payables) is not disclosed, limiting insight into cash conversion cycle and potential project-related cash swings.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are unreported (zeros are placeholders). EPS is ¥109.39 with NI of ¥1.87bn, implying capacity for dividends in principle, but actual policy and historical payout are not provided here. FCF_coverage: Cannot evaluate due to unreported OCF and capex. Earnings-based coverage appears adequate given low leverage, but cash flow confirmation is required. policy_outlook: Given conservative balance sheet and modest ROE (5.39%), there may be scope for stable or progressively aligned dividends contingent on cash generation and investment needs. Formal guidance or historical policy is needed for a firm view.

Risk Assessment

Business Risks:

• Project execution risk in fixed-price system integration and development
• Client concentration risk in key verticals (e.g., financial services, life sciences/pharma)
• Wage inflation and talent retention pressure impacting margins
• Timing risk of large projects causing revenue and working capital volatility
• Overseas exposure including FX movements (ordinary profit sensitivity) and geopolitical factors
• Competition from larger SIers and global IT service providers affecting pricing

Financial Risks:

• Cash flow conversion risk (OCF/NI not disclosed for the period)
• Potential increase in non-operating losses (FX/valuation) that depress ordinary income
• Uncertainty around true debt and cash balances due to unreported cash flow and cash data
• Possible goodwill/asset impairment risk if M&A-related assets exist (not disclosed here)

Key Concerns:

• Negative operating leverage with sales decline (-3.9% YoY) and steeper operating income decline (-6.8% YoY)
• Ordinary income below operating income by ¥363m, indicating non-operating drags
• Lack of cash flow disclosure limits assessment of earnings quality and dividend capacity

Investment Implications

Key Takeaways:

• Top-line down 3.9% YoY with resilient gross margin at 26.7%
• Operating margin at 6.3% shows mild negative operating leverage
• Ordinary profit impacted by non-operating losses despite low interest expense
• Net income rose 27.1% YoY, likely aided by below-the-line factors vs prior year
• ROE at 5.39% with conservative leverage (Assets/Equity 1.41x)
• Very strong liquidity (current ratio 241%) and ample working capital
• Cash flow and DPS unreported; dividend capacity cannot be verified from FCF

Metrics to Watch:

• Order backlog and Q4 revenue run-rate
• Operating margin trajectory versus wage inflation and utilization
• Ordinary income components (FX, investment gains/losses, equity-method results)
• Cash conversion (OCF/NI) and capex when disclosed
• Tax rate normalization and any one-offs affecting net income
• Client concentration and renewal rates in core verticals

Relative Positioning: Within Japan IT services/SI peers, CAC appears conservatively financed with mid-20s gross margin and mid-single-digit operating margin; ROE is modest and below higher-return peers, but balance sheet strength offers resilience pending confirmation of cash generation.

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