Integral Corporation FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥8.94B
• Operating Income: ¥5.76B
• Net Income: ¥3.65B
• EPS: ¥107.96

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

Integral Co., Ltd. (consolidated, IFRS) posted FY2025 Q3 results showing sharp top- and bottom-line declines but retained very high margins and a solid balance sheet. Revenue was 89.39 (100M JPY), down 48.6% YoY, indicating pronounced revenue volatility. Operating income was 57.60, down 57.3% YoY, but the operating margin remained exceptionally high at about 64.4%, consistent with an asset-management/investment-driven model that can record sizable gains under operating income. Net income came in at 36.52, down 60.9% YoY, implying a net margin of 40.9%. DuPont analysis yields ROE of 6.1%, decomposed as 40.9% net margin × 0.113 asset turnover × 1.32x leverage, confirming returns driven primarily by margin rather than balance sheet leverage or turnover. EBITDA was 58.98, with a 66.0% EBITDA margin, corroborating strong economics when realizations accrue. OCF was 25.19, giving OCF/Net income of 0.69x, pointing to weaker cash conversion this period and likely reflecting working capital movements and/or non-cash gains typical for investment activities. Free cash flow was 24.28, supported by modest investing cash outflows (-0.91). The balance sheet is conservative: equity of 599.96 and an equity ratio of 75.6% provide a sizable buffer; total liabilities of 214.15 and loans of 31.48 indicate low financial risk. Ending cash and equivalents were 221.37, implying ample liquidity relative to short-term loans of 7.59 and accounts payable of 8.97. The reported effective tax rate was elevated at about 71.1% (41.05 tax on 57.74 PBT), which weighed on net income. The dividend payout ratio (calculated) is 32.6%, and FCF coverage of 2.04x suggests room to sustain shareholder returns, though actual cash dividends paid this period were 3.71, well covered by OCF. Operating leverage appears unfavorable in the downturn, with operating profit falling faster than revenue, underscoring result timing and dependence on realizations. Overall profitability remains structurally strong but cyclical/episodic, cash conversion is mixed, and the balance sheet is robust. Data constraints exist in several line items (cost of sales, gross profit, current liabilities, interest expense, capital expenditures), which limits certain ratio calculations and more granular diagnostics.

Profitability Analysis

ROE is 6.1%, driven primarily by an unusually high net margin of 40.9%, offset by low asset turnover (0.113) and modest leverage (assets/equity 1.32x). Operating margin is approximately 64.4% (57.60 / 89.39), consistent with investment/fee-related economics and potential fair value or realization gains recorded in operating income under IFRS. EBITDA margin is 66.0%, close to the operating margin given low D&A (1.38), indicating limited capital intensity. The YoY contraction in operating income (-57.3%) outpaced the top-line decline (-48.6%), suggesting negative operating leverage in this downswing, likely due to a relatively fixed cost base and/or revenue mix effects. Net margin compression was amplified by a high effective tax rate of 71.1%, depressing after-tax returns. With limited leverage, profitability is margin-led, and returns will hinge on realization cycles and fee-related stability. Absence of cost of sales and SG&A detail limits deeper margin quality diagnostics, but the narrow gap between EBITDA and operating income indicates limited non-cash expense drag. Interest expense is unreported, so interest coverage cannot be assessed, but low loan balances imply minimal pressure.

Growth Assessment

Revenue fell 48.6% YoY to 89.39, evidencing material volatility consistent with the timing of exits and investment gains. Operating income declined 57.3% and net income 60.9%, indicating that profit growth is more volatile than revenue and sensitive to mix and taxes. Despite the decline, very high operating and EBITDA margins imply that when realizations materialize, earnings can scale efficiently. Sustainability of revenue will depend on fee-related earnings versus performance/realization-driven components; current data do not separate these streams. The high effective tax rate (71.1%) is a headwind to net growth and may normalize depending on loss utilization, jurisdictional mix, and the nature of gains; directionality remains uncertain. Working capital dynamics (accounts receivable 107.79) may affect near-term cash recognition and growth conversion. With strong equity and cash, the company has balance-sheet flexibility to pursue new investments, which is supportive for medium-term opportunity capture. However, absent disclosure on AUM, pipeline, or commitments, forward growth visibility remains limited. In sum, growth appears cyclical and event-driven with substantial quarter-to-quarter variability, though the structural profitability when active is strong.

Financial Health

Total assets are 794.06 and equity is 599.96, yielding an equity ratio of 75.6%, which is conservative and supports resilience. Total liabilities are 214.15, with reported loans of 31.48 (short-term 7.59, long-term 23.89), indicating low reliance on debt. The reported D/E ratio of 0.36x aligns with total liabilities to equity; leverage measured as assets/equity is 1.32x. Cash and equivalents of 221.37 are sizable versus identified near-term obligations (accounts payable 8.97, short-term loans 7.59), implying strong liquidity. Current assets are 330.70, but current liabilities are unreported, so current and quick ratios cannot be computed. Working capital is listed as 330.70 (driven by current assets), but absent current liabilities, aggregate liquidity metrics remain incomplete. No interest expense is disclosed, limiting solvency coverage analysis; nonetheless, small loan balances suggest low financing burden. Capital surplus is 64.21 and retained earnings 435.74, indicating accumulated profitability and capacity to absorb shocks.

Cash Flow Quality

OCF was 25.19 versus net income of 36.52, yielding OCF/NI of 0.69x, which is below 1.0 and indicates weaker cash conversion in the period. Free cash flow was 24.28, essentially OCF plus modest net investing outflow (-0.91), suggesting limited capex intensity and cash discipline. The gap between net income and OCF likely reflects working capital movements (notably accounts receivable of 107.79) and non-cash elements within operating income typical for investment entities. EBITDA of 58.98 versus OCF of 25.19 implies significant non-cash or timing effects between accrual earnings and cash. Cash and equivalents at period end were 221.37, providing ample liquidity and flexibility. Capex is unreported; however, the small investing cash outflow indicates limited capital spending or net proceeds from investment activities. Without a cash flow breakdown, it is not possible to isolate underlying fee-related cash earnings from realization-related accruals, which tempers confidence in recurring cash flow assessment.

Dividend Sustainability

The calculated payout ratio is 32.6%, which appears manageable relative to earnings volatility, though actual cash dividends paid this period were 3.71, equating to roughly 10% of reported net income, indicating prudent cash distribution. FCF coverage is reported at 2.04x, implying that free cash flow more than covers dividends, with room for reinvestment or balance-sheet reinforcement. With a strong equity base (equity ratio 75.6%) and significant cash (221.37), near-term dividend capacity looks well supported. However, given earnings cyclicality and the high effective tax rate this period, a flexible dividend approach may be warranted to maintain balance-sheet strength through cycles. DPS and detailed policy disclosure are unreported, so assessment relies on payout and cash coverage indicators rather than explicit guidance. Sustained dividend affordability will depend on normalization of cash conversion (OCF/NI), stability of fee-related income, and the cadence of realizations.

Risk Assessment

Business Risks:

• Earnings volatility driven by timing of realizations and fair value changes
• Revenue concentration in investment-related income with limited recurring visibility
• High effective tax rate this period, creating uncertainty around after-tax profitability
• Potential key-person and deal-sourcing risk typical of private equity/alternative asset managers
• Regulatory and compliance risk across jurisdictions if investing internationally
• Valuation risk on portfolio companies and potential impairments in downturns
• Fundraising cycle risk affecting AUM and fee base

Financial Risks:

• Weaker cash conversion (OCF/NI 0.69x) in the period
• Working capital risk tied to accounts receivable collection and timing
• Limited disclosure on interest expense and current liabilities constrains coverage/liquidity analysis
• Tax rate volatility impacting net income and cash taxes
• Market risk affecting exit multiples and investment marks

Key Concerns:

• Sharp YoY declines in revenue (-48.6%) and net income (-60.9%)
• Negative operating leverage in the downturn (OP down -57.3% vs sales -48.6%)
• Elevated effective tax rate at 71.1% suppressing net returns
• OCF trailing net income (0.69x), indicating reliance on non-cash earnings/timing
• Data gaps (COGS, SG&A, current liabilities, interest expense, capex) limit precision of diagnostics

Investment Implications

Key Takeaways:

• Profitability remains structurally high (OP margin ~64%, EBITDA margin 66%) despite cyclical softness
• ROE of 6.1% is margin-led with low leverage and low asset turnover
• Cash conversion is weaker this period; monitoring OCF relative to earnings is critical
• Balance sheet is strong (equity ratio 75.6%, cash 221.37) with modest loans (31.48)
• Earnings are event-driven; realization cadence and mix will dictate near-term outcomes
• Elevated tax burden materially depresses net income; potential normalization would be a tailwind

Metrics to Watch:

• Fee-related earnings versus realization/performance-driven income mix
• OCF/Net income and working capital movements (especially receivables)
• Effective tax rate trajectory and cash tax payments
• Realization pipeline and exit activity impacting operating income
• Equity ratio and any changes in leverage or borrowing
• Dividend policy disclosure and payout relative to FCF

Relative Positioning: Versus domestic alternative asset managers, Integral exhibits a conservative balance sheet with high equity and low loans, very high operating margins when realizations occur, but higher earnings volatility and cash conversion variability; return profile is driven by margin rather than leverage.

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