M&A Capital Partners Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥22.45B
• Operating Income: ¥7.13B
• Net Income: ¥5.07B
• EPS: ¥159.66

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

Verdict: Solid topline and profit growth with best-in-class margins, albeit with modest margin compression and heavy investing cash outflows tied to growth initiatives. Revenue rose 17.1% year over year to 224.5, with operating income up 9.7% to 71.3, demonstrating continued scale in core M&A advisory. Gross profit reached 141.5, implying a high gross margin of 63.1% consistent with an advisory-heavy model. Operating margin was 31.7% versus roughly 33.9% a year ago, a compression of about 220 bps, reflecting higher operating cost intensity (likely hiring and variable compensation). Net income increased 12.4% to 50.7, translating to a net margin of 22.6%, down about 90 bps from approximately 23.5% in the prior period. DuPont analysis yields an ROE of 11.7% (NPM 22.6% × asset turnover 0.402 × leverage 1.29x), squarely in the ‘good’ range by benchmark. The reported ROE of 0.1% and operating margin of 0.3% in XBRL appear inconsistent with IFRS income statement totals, suggesting mapping/classification anomalies rather than true underperformance. Earnings quality is strong: operating cash flow of 95.3 exceeds net income by 1.88x, indicating robust cash conversion. Free cash flow reported as -165.7 reflects the inclusion of substantial investing cash outflows (-261.0), which look discretionary (likely acquisitions/financial investments) given minimal capex (-0.5). The balance sheet remains conservative with an equity ratio of 77.6% and D/E of 0.29x, providing ample flexibility. Liquidity appears strong with current assets of 469.2 against modest total liabilities of 124.9, though current liabilities were not disclosed. Dividend policy remains disciplined: year-end DPS ¥40 implies a 25.1% payout, well-covered by operating cash flow. Forward-looking, sustainability hinges on deal volume, fee rates, and consultant productivity; recent investment outlays may be aimed at capacity expansion or strategic capabilities that can support medium-term growth. Near-term risks include macro-driven M&A cycle volatility and cost pressure from talent acquisition. Overall, the quarter supports a constructive fundamental trajectory with healthy profitability, conservative leverage, and high cash earnings quality. Key watchpoints are margin discipline amid hiring, the trajectory of investing cash uses, and maintenance of strong OCF relative to earnings.

Profitability Analysis

ROE decomposition (DuPont): ROE ≈ 11.7% = Net Profit Margin (22.6%) × Asset Turnover (0.402x) × Financial Leverage (1.29x). The largest change versus last year appears in margins: operating margin declined from 33.9% to 31.7% (-220 bps) and net margin from 23.5% to 22.6% (-90 bps), while leverage stayed conservative and asset turnover likely moved modestly with asset growth outpacing revenue. Business drivers: higher SG&A intensity (SG&A ratio ~27.6%) is consistent with ramping headcount/compensation to capture deal flow, and potentially higher marketing/IT spend to support pipeline. This mix shift typically reduces near-term operating margin but can add capacity for future growth. Sustainability: margin headwinds tied to hiring should moderate as cohorts ramp; variable comp should normalize with deal closures, suggesting medium-term operating leverage potential. Alert: revenue grew 17.1% while operating income grew 9.7%, signaling negative operating leverage in the period; without prior SG&A, we infer cost growth > revenue growth from the margin compression.

Growth Assessment

Revenue growth of 17.1% indicates solid demand for advisory services and/or higher average fees. Operating income growth of 9.7% lagged revenue due to cost investments, but absolute profitability remains strong at a 31.7% operating margin. Net income increased 12.4% with an effective tax rate of ~29.6%, in line with norms. Given the model’s success-fee nature, growth sustainability depends on macro M&A activity, client appetite, and consultant capacity; recent investing CF suggests capability/scale investments supportive of medium-term growth. Absence of R&D and detailed segment data limits visibility into new service lines or productivity initiatives. Near-term outlook: expect margins to stabilize if hiring slows and new consultants scale; growth should correlate with mid-market M&A volumes and succession-driven deals in Japan. Watch for conversion rates from mandate to closing, backlog/pipeline indicators, and headcount productivity.

Financial Health

Equity ratio of 77.6% and D/E of 0.29x indicate a conservative capital structure. Total liabilities of 124.9 are modest versus total assets of 557.7, and current assets of 469.2 imply strong liquidity, though current liabilities were not disclosed (current ratio not calculable). No explicit interest-bearing debt breakdown, but the low leverage and interest burden >0.90 imply limited financing costs. Maturity mismatch risk cannot be fully assessed without short-term debt data; however, large cash and current assets likely cover near-term obligations. No off-balance sheet obligations were reported in the provided data. Warning thresholds: Current Ratio <1.0 not assessable; D/E >2.0 not an issue here. The firm appears well-capitalized to absorb cyclical volatility and fund selective investments.

Cash Flow Quality

OCF/Net Income is 1.88x (>1.0), signaling high earnings quality and strong cash conversion. Accruals ratio at -8.0% supports the view that earnings are cash-backed. Reported FCF of -165.7 reflects OCF plus sizable investing outflows (-261.0), which are likely discretionary (acquisitions/financial investments) since maintenance capex is de minimis (-0.5). For dividend capacity analysis, operating FCF (OCF - CapEx) is ~94.8, comfortably covering dividends. No clear signs of working capital manipulation: accounts receivable are small (2.7) in the context of 224.5 revenue, consistent with success-fee timing in advisory. Cash and equivalents stood at 162.4, providing liquidity for operations despite investment spend.

Dividend Sustainability

Year-end DPS of ¥40 and an estimated payout ratio of ~25.1% are conservative and sustainable on an earnings basis. On a cash basis, dividends of ~12.7 are well-covered by operating FCF (~94.8), yielding strong coverage. The negative FCF coverage reported (-13.04x) stems from including growth investments in investing CF; these are discretionary and should be evaluated separately from recurring dividend capacity. With high margins, low capex needs, and ample equity cushion, the company has flexibility to sustain and potentially raise dividends, subject to M&A cycle conditions and ongoing investment priorities. DOE reported at 0.0% appears inconsistent with payouts and likely reflects XBRL categorization rather than a policy change.

Risk Assessment

Business Risks:

• Cyclicality of M&A activity tied to macro conditions and CEO confidence
• Revenue concentration in success fees leading to quarter-to-quarter volatility
• Talent acquisition and retention pressure increasing compensation costs
• Competitive intensity among domestic advisory firms and boutiques
• Client budgeting delays and longer decision cycles in downturns

Financial Risks:

• Large investing cash outflows (-261.0) increasing execution risk on acquired assets/investments
• Potential goodwill/intangible impairment risk if acquisitions underperform (intangible assets disclosed at 0.92; goodwill not disclosed)
• Limited visibility on debt maturity profile (short-term vs long-term debt unreported)
• FX exposure minimal by data provided, but possible if cross-border mandates increase

Key Concerns:

• Margin compression (~220 bps at operating level) indicating rising cost intensity
• Dependence on robust pipeline conversion; lack of disclosed backlog metrics
• Reported ratio inconsistencies (ROE 0.1%, operating margin 0.3%) suggest XBRL mapping noise that can obscure trend analysis

Investment Implications

Key Takeaways:

• Healthy growth with elite-level margins (31.7% operating, 22.6% net) and ROE ~11.7% in the ‘good’ range
• Earnings quality is strong: OCF/NI 1.88x and negative accruals ratio
• Margin headwinds reflect investment in capacity; potential to recover as cohorts ramp
• Balance sheet conservative (equity ratio 77.6%, D/E 0.29x) supporting resilience and optionality
• Dividend policy prudent with ~25% payout and strong OCF coverage despite heavy investing CF

Metrics to Watch:

• Operating margin trajectory and SG&A ratio as hiring moderates
• OCF/NI and working capital movements to validate earnings quality
• Breakdown of investing CF (deal-related investments vs financial assets) and any acquisition returns
• Consultant headcount, productivity per consultant, and mandate-to-close conversion
• Deal pipeline/backlog indicators and fee rate trends
• Tax rate stability and any changes in compensation mix affecting margins

Relative Positioning: Within Japanese advisory/IT-enabled professional services peers, the company exhibits superior margins and cash conversion with a conservative balance sheet; near-term margin compression is a manageable trade-off for growth capacity, positioning it competitively for the mid-market succession M&A wave.

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