E-Guardian Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥11.32B
• Operating Income: ¥1.50B
• Net Income: ¥1.09B
• EPS: ¥81.52

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

E-Guardian Inc. (6050) reported FY2025 Q4 full-year consolidated results under JGAAP with revenue of ¥11,321mn (-0.6% YoY), demonstrating a largely flat topline amid softer demand and/or pricing pressure. Operating income fell 11.8% to ¥1,504mn, indicating notable negative operating leverage as small revenue softness translated into a disproportionate profit decline. Net income declined 10.8% to ¥943mn, with EPS of ¥81.52, reflecting margin compression through the P/L. Gross profit was ¥3,367mn, yielding a gross margin of 29.7%, and the operating margin settled at 13.3%, implying increased SG&A intensity year over year. Ordinary income of ¥1,530mn broadly reconciles with pre-tax profit, and the implied effective tax rate is approximately 38% (¥582mn tax on ~¥1,525mn pre-tax), despite the tabulated effective tax rate showing 0.0% (unreported). DuPont analysis shows a ROE of 7.82%, driven by an 8.33% net margin, asset turnover of 0.825x, and very low financial leverage of 1.14x. The balance sheet is conservative: total assets ¥13,728mn, total liabilities ¥1,956mn, and total equity ¥12,053mn; the implied equity ratio is about 87.8% (the disclosed 0.0% is unreported). Liquidity is exceptionally strong, with current assets of ¥11,870mn and current liabilities of ¥1,725mn, bringing the current ratio to roughly 6.9x and working capital to ¥10,145mn. Operating cash flow was solid at ¥1,045mn (OCF/NI = 1.11), indicating good earnings quality; free cash flow of ¥923mn suggests modest capex requirements (approx. ¥122mn). Financing cash outflow of ¥339mn likely reflects buybacks, lease or other financing payments; annual DPS and payout are shown as zero but may be unreported, so we do not infer an explicit distribution policy shift from this alone. EBITDA was ¥1,601mn with a 14.1% margin, consistent with relatively asset-light operations and low D&A (¥97mn). The company remains effectively unlevered with negligible interest expense, supporting financial resilience. Overall, FY2025 shows resilient cash generation and a robust balance sheet, offset by revenue stagnation and margin pressure that lowered profit levels and ROE. Data limitations exist (several items reported as zero are unreported), but the available figures support a view of high liquidity, low leverage, decent cash conversion, and near-term profitability headwinds. Key questions are centered on the durability of demand in core services, pricing/mix dynamics, and cost discipline to protect margins.

Profitability Analysis

ROE_decomposition: ROE 7.82% = Net margin 8.33% × Asset turnover 0.825 × Financial leverage 1.14. The primary driver is profitability (net margin), with modest asset efficiency and very low leverage restraining ROE expansion. margin_quality: - Gross margin: 29.7% (¥3,367mn/¥11,321mn) indicates decent value-add but some pressure YoY given OP declined faster than revenue. - Operating margin: ~13.3% (¥1,504mn/¥11,321mn) suggests increased SG&A intensity or wage inflation. - Net margin: 8.33% reflects normalized tax rate (~38%) and minimal non-operating drag. operating_leverage: Revenue declined 0.6% while operating income fell 11.8%, evidencing negative operating leverage and a relatively high fixed-cost base (labor/overheads) within the period. EBITDA margin of 14.1% vs operating margin of 13.3% and low D&A imply cost pressure predominantly in personnel and selling expenses rather than depreciation.

Growth Assessment

revenue_sustainability: Topline was broadly flat (-0.6% YoY), indicating stable but not expanding demand. Given the company’s service profile (moderation/cybersecurity-type operations), growth depends on volume, price/mix, and new service penetration; current figures suggest limited pricing power or slower volume growth. profit_quality: Ordinary income aligns closely with operating income, with minimal non-operating noise and negligible interest expense, supporting quality of earnings. The implied tax rate (~38%) appears normal. Cash conversion (OCF/NI 1.11) is healthy, reinforcing earnings quality. outlook: For growth to re-accelerate, the company likely needs improved order intake, better capacity utilization, and/or higher-value service mix. Stabilization is visible in resilient revenue, but margin recovery requires tighter cost control or pricing improvements. Without leverage, ROE expansion will hinge on margin recovery and asset turnover.

Financial Health

liquidity: Current assets ¥11,870mn vs current liabilities ¥1,725mn yield a current ratio ~6.9x and ample working capital (¥10,145mn). Quick ratio matches due to no inventory reported. Cash and equivalents are unreported, but the large current asset base implies substantial liquidity. solvency: Total liabilities ¥1,956mn vs equity ¥12,053mn correspond to a very conservative capital structure (debt-to-equity ~0.16x). Equity ratio implied ~87.8%, highlighting strong solvency despite the equity ratio field being unreported. capital_structure: Leverage is minimal (financial leverage 1.14x). Interest expense is reported as zero (likely negligible), indicating capacity to fund growth or shareholder returns without balance sheet strain.

Cash Flow Quality

earnings_quality: OCF/Net income of 1.11 suggests profits are backed by cash generation. Minimal D&A (¥97mn) vs EBITDA indicates limited non-cash inflation of earnings. FCF_analysis: Free cash flow of ¥923mn (OCF ¥1,045mn less investing CF ~¥122mn) is solid and consistent with an asset-light model. Sustained positive FCF provides flexibility for investment, M&A, or distributions. working_capital: Large working capital base (¥10,145mn) supports operations; details like DSO/DPO are not disclosed, but OCF performance implies no acute working capital stress.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are shown as 0.00% but may be unreported; based on EPS of ¥81.52 and strong FCF, capacity to pay exists. Any payout would likely be well-covered by earnings given modest capex and healthy margins. FCF_coverage: With FCF at ¥923mn vs NI ¥943mn, FCF coverage of prospective dividends appears strong in principle. Actual coverage cannot be computed precisely due to DPS being unreported/zero in the dataset. policy_outlook: Given the conservative balance sheet and consistent FCF, the company has room to maintain or consider distributions while funding growth. Policy direction will depend on growth investments and management’s capital allocation stance.

Risk Assessment

Business Risks:

• Revenue concentration by key platform or enterprise clients impacting pricing and volumes
• Labor cost inflation and staffing constraints affecting service delivery margins
• Demand variability for monitoring/cybersecurity services due to macro or platform policy changes
• Technological disruption (automation/AI altering the service model and pricing)
• Regulatory and compliance shifts in content, data privacy, and security
• Execution risk in scaling higher-value services and cross-selling

Financial Risks:

• Margin compression from wage and SG&A pressure
• Potential receivables concentration and collection timing affecting OCF
• Exposure to JPY cost base vs any non-JPY revenues (if applicable)
• Limited leverage reduces financial risk but constrains ROE without margin/turnover improvements

Key Concerns:

• Negative operating leverage as small revenue decline led to double-digit OP contraction
• ROE at 7.82% below typical market benchmarks despite low leverage
• Data gaps (e.g., cash, equity ratio, shares) limit precision on per-share and liquidity metrics

Investment Implications

Key Takeaways:

• Topline essentially flat with notable margin compression; focus on cost discipline is key
• Strong balance sheet and liquidity provide resilience and optionality
• Cash generation is robust with OCF/NI >1.0 and positive FCF
• ROE constrained by both margin pressure and intentionally low leverage
• Capex needs remain modest, enabling flexibility for M&A or returns

Metrics to Watch:

• Operating margin trajectory and SG&A ratio
• Order intake/Backlog and utilization in core services
• Pricing/mix shifts toward higher-value cybersecurity or adjacent services
• OCF/NI ratio and working capital efficiency (e.g., DSO trends)
• Headcount productivity and wage inflation
• Share repurchases or dividend announcements impacting capital returns

Relative Positioning: Versus TSE Growth/tech-enabled service peers, E-Guardian exhibits superior liquidity and a very conservative balance sheet, mid-teens EBITDA and low-teens operating margins, but a modest ROE profile due to low leverage and recent margin pressure.

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