Japan Business Systems,Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥172.58B
• Operating Income: ¥7.59B
• Net Income: ¥5.43B
• EPS: ¥123.47

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

Japan Business Systems Co., Ltd. (50360) delivered strong FY2025 Q4 results under JGAAP on a consolidated basis, with clear operating leverage and improved profitability. Revenue increased 22.5% year over year to ¥172.58 billion, demonstrating robust top-line momentum. Operating income rose 65.3% to ¥7.59 billion, outpacing revenue growth and signaling effective cost discipline and scale benefits. Gross profit was ¥14.57 billion, implying a gross margin of 8.4%, which is modest and consistent with integration-heavy or resale-related revenue mix. Operating margin improved to 4.4% (¥7.59b/¥172.58b), and ordinary income reached ¥7.37 billion. Net income surged 271.6% to ¥5.63 billion, lifting net margin to 3.26%. DuPont analysis shows ROE of 20.66%, driven by a 3.26% net margin, high asset turnover of 2.318x, and financial leverage of 2.73x. Liquidity remains adequate with a current ratio of 135.4% and quick ratio of 127.3%, supported by low inventories relative to current assets. Leverage is moderate (total liabilities/equity of 1.40x), while interest coverage is very strong at 90.4x, reflecting limited financing burden. Cash flow quality is a weak spot this period: operating cash flow was ¥1.14 billion (OCF/NI of 0.20), and free cash flow was negative ¥3.61 billion due to heavier investing cash outflows of ¥4.74 billion. Financing inflows of ¥3.13 billion partially offset investment needs, indicating reliance on external capital to fund growth in the period. The reported effective tax rate of 0.0% in the calculated metrics appears inconsistent with disclosed income tax expense of ¥1.34 billion; by simple approximation, the effective rate seems closer to the high-teens to ~20% range. The equity ratio, cash and equivalents, and share count were not disclosed (zeros indicate unreported), limiting certain per-share and capital structure diagnostics. Dividend data (DPS, payout) were also unreported in XBRL, so dividend policy and coverage cannot be confirmed from this dataset. Overall, fundamentals show strong growth and profitability improvement with solid ROE, tempered by weaker cash conversion and elevated investment outflows.

Profitability Analysis

ROE is 20.66%, decomposed as Net Profit Margin 3.26% × Asset Turnover 2.318 × Financial Leverage 2.73. The primary drivers are high asset turnover and moderate leverage, with margins improving but still modest for the business model. Gross margin is 8.4% (¥14.57b/¥172.58b), indicating a revenue mix likely weighted to lower-margin integration/resale activities; nonetheless, operating margin improved to 4.4% on stronger scale and cost control. EBITDA was ¥8.52 billion, with an EBITDA margin of 4.9%, and D&A of ¥0.92 billion suggests relatively light capital intensity. Operating leverage is evident: revenue grew 22.5% YoY while operating income rose 65.3% YoY, indicating fixed-cost dilution and efficiency gains. Ordinary income of ¥7.37 billion is close to operating income, with limited non-operating drags; interest expense is only ¥84 million, amplifying bottom-line conversion. Net income accelerated 271.6% YoY to ¥5.63 billion, helped by improved operations and a normalized tax/non-operating burden versus the prior year. Margin quality appears improved but remains constrained by the business mix; sustaining this operating margin expansion will depend on mix shift toward higher value-added services and continued cost discipline.

Growth Assessment

Top-line growth of 22.5% YoY to ¥172.58 billion signals robust demand and/or successful share gains. Profit growth far outpaced sales (operating income +65.3% YoY), indicative of operating leverage and possibly favorable pricing or mix. Net income growth of +271.6% suggests substantial year-on-year normalization or one-off factors in the base year; the current period appears more reflective of core earnings power. Asset turnover at 2.318x supports a scalable model with efficient asset use; this is a positive for sustainable ROE if margins hold. Revenue sustainability will hinge on repeatable service streams and backlog/contract visibility; however, such disclosures are not available in this dataset. Profit quality is mixed: accounting profit is strong, but cash conversion is weak this period (OCF/NI 0.20), likely reflecting working capital outflows associated with rapid growth. Near-term outlook is constructive given demonstrated operating leverage, yet the ability to convert growth to cash and reduce dependence on financing will be a key determinant of durability. Investment outflows (¥4.74b) suggest ongoing capacity/competitiveness investments, which can support medium-term growth if returns exceed cost of capital.

Financial Health

Liquidity is adequate with a current ratio of 135.4% (¥30.44b/¥22.49b) and a quick ratio of 127.3%, supported by low inventories of ¥1.81 billion relative to current assets. Working capital stands at ¥7.95 billion, providing an operating buffer. Solvency is comfortable: total liabilities of ¥38.21 billion versus equity of ¥27.24 billion imply liabilities/equity of 1.40x; financial leverage (assets/equity) is 2.73x. Interest expense is modest at ¥84 million and interest coverage is strong at 90.4x (EBIT/interest), indicating low refinancing risk under current conditions. Total assets are ¥74.47 billion, and asset turnover of 2.318x reflects efficient asset utilization. The equity ratio is not disclosed in XBRL (reported as 0.0%), limiting a direct assessment of the capital structure ratio; however, other leverage indicators suggest a balanced profile. Positive financing cash flow (¥3.13b) was used to support negative FCF in the period, pointing to some reliance on external funding for growth or capex.

Cash Flow Quality

Operating cash flow of ¥1.14 billion is low relative to net income of ¥5.63 billion (OCF/NI 0.20), indicating weak cash conversion this period. The gap likely reflects working capital needs tied to strong revenue growth (e.g., accounts receivable build), though detailed working capital components beyond inventories are not disclosed. Free cash flow was negative at ¥-3.61 billion, driven by investing cash outflows of ¥4.74 billion; this suggests significant growth or maintenance investments. EBITDA of ¥8.52 billion and D&A of ¥0.92 billion imply limited non-cash earnings inflation; the main issue is timing of cash receipts and investment spend. Financing inflows of ¥3.13 billion partially bridged the FCF shortfall, which is acceptable in a growth phase but should trend toward self-funding over time. Cash and equivalents were not disclosed (reported as 0), limiting assessment of immediate liquidity buffers. Overall earnings quality is acceptable from an accrual standpoint but currently weak on cash realization; monitoring OCF recovery relative to NI will be important.

Dividend Sustainability

Dividend-related figures (DPS, payout) are unreported in the dataset (zeros represent missing disclosure). EPS is ¥123.47, but without disclosed DPS or total dividends paid, we cannot compute an accurate payout ratio or assess policy adherence. Free cash flow is negative (¥-3.61b), implying that any hypothetical dividend would not be covered by FCF this period; however, absent confirmed DPS, this remains a theoretical observation. Financing inflows (¥3.13b) supported investment needs, which would make dividend funding from external sources undesirable if practiced. Given strong net income but weak OCF, sustainable dividends would require normalization of cash conversion. Policy outlook cannot be inferred from the provided data; future disclosure of DPS, total dividends, and guidance will be needed for a full assessment.

Risk Assessment

Business Risks:

• Margin pressure from a revenue mix with low gross margins (8.4%), particularly if hardware/resale components remain significant
• Execution risk in scaling higher value-added services to sustain operating margin expansion
• Dependence on large projects or key customers (not disclosed), which can introduce revenue volatility and collection risk
• Talent retention and wage inflation pressures in IT services potentially compressing margins
• Supply chain or vendor pricing dynamics affecting cost of sales and delivery schedules

Financial Risks:

• Weak cash conversion in the period (OCF/NI 0.20) heightens reliance on working capital and could pressure liquidity if prolonged
• Negative free cash flow (¥-3.61b) funded partly by financing inflows (¥3.13b), increasing sensitivity to capital market conditions
• Moderate leverage (liabilities/equity 1.40x) could rise if investments continue without OCF improvement
• Potential mismatch between accounting profitability and cash availability for obligations and investments
• Disclosure gaps (cash balance, equity ratio, dividends) complicate full risk evaluation

Key Concerns:

• Sustaining operating margin gains while improving gross margin mix
• Normalizing operating cash flow to align with earnings and reduce external funding needs
• Managing working capital efficiently amid rapid growth
• Visibility on capital allocation priorities given sizable investing outflows

Investment Implications

Key Takeaways:

• Strong topline growth (+22.5% YoY) with significant operating leverage (+65.3% YoY OI)
• ROE at 20.66% supported by high asset turnover (2.318x) and moderate leverage (2.73x)
• Margin profile improving but still modest (GM 8.4%, OP margin 4.4%)
• Cash conversion weak (OCF/NI 0.20) and FCF negative (¥-3.61b) due to investment and likely working capital outflows
• Liquidity adequate (current ratio 135.4%), interest coverage very strong (90.4x)
• Dividend data unreported; payout capacity dependent on OCF normalization

Metrics to Watch:

• Operating cash flow trajectory and OCF/NI ratio (targeting >0.8 over time)
• Free cash flow and capex/investment intensity
• Gross margin and operating margin progression (mix shift to higher-value services)
• Receivables days and working capital turns (not disclosed; infer via OCF trends)
• Leverage metrics (liabilities/equity, interest coverage) and reliance on financing CF
• Disclosure of DPS and total dividends for policy clarity

Relative Positioning: The company exhibits above-average growth and ROE versus typical domestic IT integrators, with efficient asset use and strong coverage metrics, but trails best-in-class peers on cash conversion and margin depth due to a likely integration-heavy revenue mix.

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