Atrae,Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥7.63B
• Operating Income: ¥1.85B
• Net Income: ¥1.17B
• EPS: ¥49.34

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 quarter with margin-driven earnings growth despite flat topline, supported by strong cash generation and a robust balance sheet. Revenue was 76.34, essentially flat YoY (-0.1%), while operating income rose 11.7% to 18.53, indicating meaningful operating leverage. Net income surged 66.3% to 11.71, lifting calculated net margin to 15.3%. Operating margin improved to 24.3% (18.53/76.34), reflecting disciplined SG&A control against a high gross margin base (99.0%). We estimate operating margin expanded by roughly 260 bps YoY and net margin by about 610 bps, given revenue contraction and outsized profit growth. Ordinary income increased 10.1% to 18.12, with limited contribution from non-operating items (non-op income 0.10; non-op expenses 0.23). Cash flow quality was strong: operating cash flow of 18.68 exceeded net income (OCF/NI 1.60x), and free cash flow (OCF + investing CF) was 14.11. Liquidity remains excellent with a current ratio of 277.8% and cash of 43.62 versus short-term loans of 5.00. Leverage is conservative (D/E 0.37x) and interest coverage extremely high (969x), underscoring low financial risk. Equity method income was modest at 0.38 (3.3% of profit), indicating low dependency on affiliates for earnings. Capital allocation leaned toward buybacks (11.09 via financing CF), while dividends are not disclosed in the period but the calculated payout ratio is a moderate 40.9%. Reported ratios in XBRL (e.g., operating margin 0.2%) appear inconsistent with the core statements; our analysis relies on the provided financial line items. Effective tax rate is shown at 38.5%, though PBT and tax/net figures appear partially misaligned; we treat tax as reported and emphasize cash-based indicators. Forward-looking, sustaining elevated margins hinges on SG&A discipline and stability in client demand; with a cash-rich balance sheet, the company has flexibility for continued shareholder returns or selective investment.

Profitability Analysis

ROE decomposition (DuPont): ROE 22.5% = Net Profit Margin 15.3% × Asset Turnover 1.058 × Financial Leverage 1.39x. The biggest driver of the YoY improvement is net margin expansion, as operating income grew 11.7% on flat revenue and net income rose 66.3%. Operating margin reached 24.3%, up an estimated ~260 bps YoY, indicating improved operating leverage from SG&A efficiency relative to sales. Net margin expanded an estimated ~610 bps YoY, implying additional tailwinds beyond operating profit (e.g., smaller non-operating drag or favorable below-the-line items). Asset turnover at 1.058 is stable for an asset-light model, while leverage at 1.39x is low and not the main contributor to ROE. Business drivers: high gross margin (99.0%) combined with controlled SG&A (58.95, 77.2% of revenue) lifted operating profits; non-operating impacts were small (net -0.13). Sustainability: Margin gains appear structurally supported by cost discipline in a subscription/platform-like revenue mix, but sustaining 24%+ OPM on flat revenue requires continued expense control; further expansion may be harder without reacceleration in sales. Watch for any SG&A growth re-acceleration; at present, SG&A growth is implied below operating profit growth (a positive sign). Flag: Revenue stagnation (-0.1% YoY) against rising profits suggests cost-led earnings; if SG&A growth later outpaces revenue, margin gains could reverse.

Growth Assessment

Revenue was flat (-0.1% YoY) at 76.34, implying limited volume or ARPU growth and potential end-market softness. Operating income increased 11.7% to 18.53 on improved efficiency, not topline expansion. Ordinary income rose 10.1% to 18.12, and net income rose 66.3% to 11.71, driving net margin to 15.3%. Equity method income was small at 0.38 (3.3% of profit), confirming that growth is mainly organic/operating. The quality of profit growth is reasonable given strong OCF (18.68) exceeding NI, and FCF of 14.11 post investing CF. Outlook: With high gross margins, incremental sales should carry attractive flow-through, but near-term growth visibility is tempered by flat revenue this period. Continued buybacks (11.09) point to management confidence and capital return focus. Key swing factors for future growth include: demand trends in core services, client retention/churn, pricing/ARPU changes, and potential M&A or new product introductions enabled by a strong cash position.

Financial Health

Liquidity is strong: current ratio 277.8% and quick ratio 277.8%, with cash and deposits of 43.62 covering short-term loans of 5.00 multiple times. Solvency is conservative: D/E 0.37x and interest coverage 969x indicate low financial risk. Working capital is ample at 33.95, and current assets (53.04) comfortably exceed current liabilities (19.09), minimizing maturity mismatch risk. No noncurrent liabilities are reported; based on disclosed items, the balance sheet is light on leverage. Off-balance sheet obligations are not disclosed in the dataset. There are no explicit warning thresholds triggered (Current Ratio well >1.0; D/E well <2.0).

Cash Flow Quality

OCF/Net Income is 1.60x, indicating high earnings quality with cash conversion comfortably above 1.0. FCF (defined here as OCF + Investing CF) was 14.11, after investing CF of -4.57, suggesting room to fund both shareholder returns and organic investments. Capex was modest at -1.11, consistent with an asset-light model; even using a stricter FCF definition (OCF – Capex), cash generation remains strong. Financing CF of -16.13 was driven primarily by share repurchases (-11.09), with dividends not disclosed. No clear signs of working-capital manipulation are evident from the top-line data: cash accumulation is high, accounts receivable (7.83) appear manageable vs revenue scale, and payables are minimal. Overall, cash flows support the sustainability of current profitability.

Dividend Sustainability

Dividends per share are unreported for the period; however, the calculated payout ratio is 40.9%, within a prudent range (<60%). FCF coverage for shareholder returns is strong (FCF coverage 2.94x, methodology per provided metrics), even after considering significant buybacks (11.09). With net cash (cash 43.62 vs short-term loans 5.00) and robust OCF, the company appears well positioned to maintain or modestly increase capital returns, subject to actual dividend policy disclosure. Given earnings growth driven by margins and strong cash conversion, dividend sustainability looks favorable, though confirmation depends on the company’s explicit payout policy and any upcoming investment needs.

Risk Assessment

Business Risks:

• Topline stagnation (-0.1% YoY) raises risk that earnings growth is cost-driven and may not be repeatable without revenue reacceleration.
• Competitive intensity in core HR/Internet services (pricing pressure, churn risk, customer acquisition costs).
• Dependence on maintaining very high gross margins (99.0%); any mix shift or pricing concessions could compress margins.
• Potential cyclicality tied to hiring markets and macro conditions affecting client budgets.
• Execution risk in new product launches or M&A if pursued using cash reserves.

Financial Risks:

• Concentration of cash as the primary asset (43.62) exposes returns to low-yield environments; ROIC deployment risk.
• Limited but present refinancing/interest rate risk on short-term loans (5.00), albeit mitigated by cash surplus.
• Potential variability in below-the-line items (e.g., extraordinary gains/losses) that could cause earnings volatility.

Key Concerns:

• Reported P/L subtotals (PBT, tax, NI) show inconsistencies versus margins; while cash flow is strong, headline ratios in XBRL (e.g., operating margin 0.2%) appear misclassified.
• Revenue growth softness; sustained profit growth relies on ongoing SG&A discipline.
• Visibility on dividend policy is limited due to unreported DPS, complicating precise payout assessment.

Investment Implications

Key Takeaways:

• Earnings beat revenue trends: operating income +11.7% on -0.1% revenue highlights cost discipline.
• Material margin expansion: operating margin ~24.3% and net margin 15.3%.
• High cash quality: OCF/NI 1.60x and FCF 14.11 support capital returns and reinvestment.
• Balance sheet strength: current ratio 278% and D/E 0.37x, with cash far exceeding short-term debt.
• ROE of 22.5% driven mainly by margin expansion rather than leverage.
• Shareholder returns ongoing via buybacks (-11.09); dividend specifics undisclosed but payout ratio calculated at ~41%.

Metrics to Watch:

• Revenue growth reacceleration (QoQ/YoY) and client churn/retention rates.
• SG&A trajectory vs revenue (flag if SG&A growth outpaces sales).
• Operating margin sustainability around mid-20% level.
• OCF/NI ratio and working capital trends (AR days).
• Capital allocation mix: pace of buybacks vs potential M&A and capex.
• Equity method income (currently small at 0.38) for any volatility.

Relative Positioning: Among Japan internet/HR-platform peers, the company exhibits superior cash conversion and a net-cash balance sheet with above-peer operating margins and ROE driven by efficiency rather than leverage; however, revenue growth lag is a near-term relative weakness.

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