CAREER CO.,LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥14.94B
• Operating Income: ¥-9M
• Net Income: ¥-197M
• EPS: ¥-17.66

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

Career Co., Ltd. (TSE:6198) delivered FY2025 Q4 (full-year) results marked by top-line contraction and marginal operating loss, but with signs of cost discipline and resilient activity levels relative to its asset base. Revenue declined 10.6% YoY to ¥14.94bn, consistent with cyclical softness in staffing demand—particularly in eldercare and administrative placements—amid a mixed macro backdrop. Gross profit was reported at ¥3.66bn, implying a gross margin of 24.5%; this appears internally consistent with the disclosed margin, but differs from the stated cost of sales figure, suggesting presentation or classification differences under JGAAP. Operating income was a small loss of ¥9m, near breakeven, evidencing some operating leverage after revenue pressure. Ordinary income fell to a ¥22m loss, reflecting modest non-operating drag including ¥4.29m of interest expense. Net income was a ¥150m loss (EPS -¥17.66), constrained by tax expense treatment despite a pretax loss—likely reflecting permanent items or valuation allowance effects under JGAAP. DuPont analysis shows ROE at -8.18%, driven by a -1.0% net margin partially offset by high asset turnover of 3.49x and leverage of 2.34x. Liquidity remains adequate with a current ratio of 171%, supported by working capital of ¥1.60bn. However, operating cash flow at -¥15m lagged net income quality, and free cash flow was -¥349m due to heavier investing outflows. Solvency is acceptable with debt-to-equity of 1.31x, but negative EBIT renders interest coverage (-2.1x) a monitoring point. Dividend was suspended (DPS ¥0), consistent with negative earnings and FCF. Cash and equivalents, equity ratio, shares outstanding, and inventories are unreported in the XBRL; zeros in these lines should not be interpreted as actual values, which limits precision on per-share and capital structure analysis. Overall, the business absorbed a meaningful revenue decline yet preserved gross margin and maintained near-breakeven operating performance, indicating some flexibility on SG&A and pricing. The key questions for the outlook are revenue stabilization, conversion of earnings into positive operating cash flow, and capex moderation to restore FCF. Given the staffing business model, recovery in assignment volumes, bill rates, and utilization could quickly swing operating income and cash flow back to positive territory. Absent a stronger top line, sustaining even modest profitability will require continued SG&A control and working capital discipline.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: -0.01
• asset_turnover: 3.485
• financial_leverage: 2.34
• calculated_ROE: -0.0818
• comments: ROE of -8.18% is primarily margin-driven; high turnover (3.49x) reflects an asset-light staffing model and mitigates, but cannot offset, the negative net margin. margin_quality:
• gross_profit: 3657410000
• gross_margin: 0.245
• operating_income: -9000000
• operating_margin: -0.0006
• EBITDA: 42655000
• EBITDA_margin: 0.003
• notes: Gross margin resilience at 24.5% amid a 10.6% revenue decline suggests pricing and mix held up. Operating loss was minimal, indicating SG&A flexibility, but tax and non-operating items pulled down net income. operating_leverage:
• observation: Revenue fell 10.6% YoY while operating income was approximately breakeven; this implies cost actions absorbed most of the volume deleverage. The EBITDA margin (~0.3%) points to thin buffer; small revenue swings can flip EBIT positive/negative.

Growth Assessment

revenue_sustainability: Revenue of ¥14.94bn (-10.6% YoY) indicates cyclical softness or contract churn in core staffing verticals (likely eldercare and office support). High asset turnover implies underlying activity remained robust relative to assets; recovery depends on placement volumes and bill rates. profit_quality: Operating loss (-¥9m) is small versus revenue base, suggesting the earnings power is intact if volumes stabilize. However, net loss (-¥150m) and tax burden despite pretax loss reduce bottom-line quality. outlook: If demand normalizes, even low-single-digit revenue growth could restore positive operating income and improve OCF. Near-term, management focus likely remains on utilization, pricing discipline, and SG&A control. A key watchpoint is whether gross margin can be maintained as volumes recover.

Financial Health

liquidity:

• current_assets: 3855161000
• current_liabilities: 2252803000
• current_ratio: 1.711
• quick_ratio: 1.711
• working_capital: 1602358000
• comments: Liquidity appears adequate. Quick ratio equals current ratio due to unreported inventories; actual quick ratio may be slightly lower if inventories exist but are undisclosed. solvency_capital_structure:
• total_assets: 4285000000
• total_liabilities: 2402886000
• total_equity: 1833000000
• debt_to_equity: 1.31
• interest_coverage_EBIT_to_interest: -2.1
• equity_ratio_reported: 0.0
• notes: Debt-to-equity is manageable for a staffing model. Negative EBIT coverage needs attention, though the absolute interest burden (¥4.29m) is modest. The reported equity ratio of 0.0% is an unreported placeholder, not an actual value.

Cash Flow Quality

earnings_quality:

• net_income: -150000000
• operating_cash_flow: -15000000
• OCF_to_NI_ratio: 0.1
• comment: OCF did not cover the net loss, implying working capital outflows or accrual reversals. For a staffing firm, receivables timing (DSO) is typically the key driver. FCF_analysis:
• investing_Cash_Flow: -334000000
• free_cash_flow: -349000000
• comment: Negative FCF reflects both weak OCF and elevated investing outflows. Without detail on capex vs. deposits/intangibles, sustainability cannot be precisely assessed; moderation of investing would materially improve FCF. working_capital_dynamics: Working capital is sizeable (¥1.60bn). Given the model, receivables management and billing cycles are likely the primary OCF swing factors; improving DSO would be the most direct lever to lift cash conversion.

Dividend Sustainability

payout_ratio_assessment:

• DPS: 0.0
• payout_ratio: 0.0
• comment: Dividend suspension aligns with negative earnings and negative FCF; resumption would require restored profitability and positive OCF. FCF_coverage:
• FCF: -349000000
• FCF_coverage_of_dividends: 0.0
• comment: No dividends paid; current FCF would not support distributions. policy_outlook: With thin margins and negative OCF, preserving cash takes precedence. A prudent policy would be to prioritize balance-sheet stability and revisit shareholder returns once OCF turns sustainably positive.

Risk Assessment

Business Risks:

• Demand cyclicality in staffing and placement volumes, especially in eldercare and administrative roles
• Pricing pressure from clients and competition, affecting gross margin
• Talent supply constraints and wage inflation compressing spreads
• Client concentration and contract renewal risk
• Regulatory changes in labor dispatch laws and social insurance affecting costs

Financial Risks:

• Negative EBIT leading to weak interest coverage (-2.1x)
• Negative operating cash flow and FCF requiring careful liquidity management
• Working capital intensity and potential receivables collection risk
• Leverage at 1.31x D/E limits headroom if profitability weakens
• Tax expense volatility under JGAAP despite pretax losses

Key Concerns:

• Sustained revenue decline (-10.6% YoY) without clear stabilization
• Low EBITDA margin (0.3%) leaves limited cushion against shocks
• OCF/NI of 0.10 indicates weak cash conversion
• Investing outflows (-¥334m) pressuring FCF
• Data gaps (cash balance, shares outstanding, inventories) constrain precision in per-share and liquidity analysis

Investment Implications

Key Takeaways:

• Top-line contracted 10.6% but gross margin held at 24.5%, highlighting pricing/mix resilience
• Operating loss was minimal (-¥9m), suggesting near-term path back to profitability if volumes stabilize
• ROE (-8.18%) is margin-driven; high asset turnover (3.49x) remains a structural strength
• Liquidity is adequate (current ratio 171%), but negative EBIT yields weak coverage
• Cash conversion is the principal issue; OCF (-¥15m) and FCF (-¥349m) must improve
• Dividend remains suspended appropriately given earnings and FCF profile

Metrics to Watch:

• Quarterly revenue growth and order intake by segment
• Gross margin and spread per hour/day (pricing vs. wage inflation)
• Operating margin and SG&A ratio trajectory
• DSO/receivables turnover and OCF margin
• Capex/investing outflows and FCF
• Leverage and interest coverage
• Tax expense normalization vs. pretax profits

Relative Positioning: Within Japan’s staffing peers, Career exhibits typical asset-light efficiency (high asset turnover) but currently lags on profitability and cash conversion due to revenue softness and negative EBIT. Recovery in volumes and tighter working capital could quickly narrow the gap.

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
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