Orchestra Holdings Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥11.75B
• Operating Income: ¥1.07B
• Net Income: ¥646M
• EPS: ¥63.87

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

Orchestra Holdings reported FY2025 Q3 consolidated IFRS results with solid top-line growth but only modest operating profit expansion, indicating some operating cost pressure. Revenue was 117.48, up 15.8% year over year, demonstrating healthy demand across the portfolio. Gross profit was 47.62, implying a gross margin of 40.5%, which is respectable for a services-oriented model and suggests pricing and mix remained supportive. Operating income was 10.74, up 6.7% year over year, resulting in an operating margin of approximately 9.1%; the slower growth in operating profit versus revenue points to negative operating leverage in the period. SG&A expenses were 37.63, rising faster than gross profit and compressing incremental margins; this likely reflects investments in talent, sales, and corporate functions, or higher variable costs tied to growth. Profit before tax was 10.34, slightly below operating income, implying minor net non-operating expenses during the period. Net income reached 6.17, up 7.1% year over year, with an effective tax rate of 34.4%, broadly in line with domestic benchmarks. DuPont decomposition indicates ROE of 8.8%, driven by a 5.2% net margin, asset turnover of 0.742, and financial leverage of 2.27x; this ROE is adequate but leaves scope for improvement via margin expansion and/or higher asset efficiency. The balance sheet shows total assets of 158.42 and total liabilities of 75.49, with total equity of 69.79; reported equity ratio is 40.9%, and book value per share is 729.77 JPY. Loans outstanding total 28.66 (short-term 8.94; long-term 19.72), while cash and equivalents are 32.77, indicating a modest net cash position that supports financial flexibility. Accounts receivable are 32.98 against accounts payable of 24.37, highlighting a working capital structure typical of project and service businesses; current liabilities are unreported, limiting a precise liquidity assessment. EPS (basic) was 63.87 JPY and diluted 58.54 JPY, suggesting some dilution from potential equity instruments but still within a manageable gap. Dividend payout ratio is indicated at 17.9%, signaling headroom for future distributions, although dividend per share details are unreported and free cash flow is not available. Several items (non-operating income/expenses breakdown, operating cash flow, capex, and dividends paid) are unreported, which constrains a full-quality-of-earnings and cash coverage analysis. There are small internal inconsistencies between some line items (e.g., cost of sales versus gross profit arithmetic), so we anchor our analysis on the internally consistent gross margin metric provided. Overall, the company exhibits healthy growth, stable core profitability, and a conservative balance sheet, but near-term operating leverage is muted and cash flow disclosure is limited.

Profitability Analysis

ROE_decomposition: ROE 8.8% = Net profit margin 5.2% × Asset turnover 0.742 × Financial leverage 2.27x. Net margin reflects a 9.1% operating margin, modest non-operating drag (~0.40 between operating income and PBT), and a 34.4% tax rate. margin_quality: Gross margin at 40.5% suggests resilient pricing and mix. Operating margin at ~9.1% indicates a meaningful SG&A load (SG&A/revenue ~32.0%). The gap between gross and operating margins (c. 31.4ppt) implies room for scale benefits, but Q3 saw negative operating leverage (OP +6.7% vs revenue +15.8%). Net margin at ~5.2% is aligned with the cost structure and tax rate. operating_leverage: Revenue +15.8% YoY vs operating income +6.7% YoY indicates cost growth ahead of gross profit. SG&A of 37.63 rose faster than gross profit, diluting incremental margins. Sustained revenue growth with tighter SG&A control could re-accelerate operating leverage.

Growth Assessment

revenue_sustainability: Top-line growth of 15.8% YoY is strong for a services-led model and likely supported by demand in digital/IT-related solutions and marketing services. The 40.5% gross margin suggests growth is not being driven solely by discounting. profit_quality: Operating income growth lagged revenue, indicating investment or cost inflation in the near term. PBT is slightly below operating income due to small non-operating expenses, and the tax rate is within a normalized range, supporting the quality of net income. outlook: If growth investments normalize and utilization improves, there is potential for margin catch-up and better operating leverage. Focus areas include SG&A intensity, project mix, and pricing discipline. Absent cash flow data, we assume earnings are broadly supported by operations given the net cash balance and receivables scale, but confirmation via OCF would improve confidence.

Financial Health

liquidity: Cash and equivalents of 32.77 provide a liquidity buffer. Current assets are 75.51, but current liabilities are unreported, so current and quick ratios cannot be calculated. Accounts receivable of 32.98 are material; collection discipline is important for cash conversion. solvency: Total liabilities/equity is 1.08x. Reported equity ratio is 40.9% (equity/asset), indicative of a conservative capital structure. Loans total 28.66 versus cash of 32.77, implying net cash of ~4.11 and low refinancing risk. capital_structure: Debt mix skews to long-term (19.72) over short-term (8.94), which supports stability. Absence of interest expense data precludes interest coverage analysis, but the net cash position and modest leverage cushion solvency.

Cash Flow Quality

earnings_quality: With PBT closely tracking operating income and a normalized tax rate, earnings appear operationally driven with limited reliance on non-operating items. However, the lack of OCF and working capital detail prevents validation of accrual versus cash earnings. FCF_analysis: Free cash flow is unreported; capex and OCF are also unreported. Given cash (32.77) exceeds loans (28.66), internal funding capacity seems adequate, but FCF coverage of dividends cannot be assessed. working_capital: Receivables (32.98) and payables (24.37) are significant relative to revenue, typical of project/service models. Current liabilities are unreported, so true working capital and cash conversion cycle metrics cannot be computed.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio of 17.9% implies conservative distributions relative to earnings, allowing reinvestment headroom. DPS and total dividends paid are unreported, so we cannot reconcile payout in cash terms. FCF_coverage: Not assessable due to unreported OCF and capex. The net cash balance provides near-term flexibility, but sustainable coverage requires visibility into recurring OCF. policy_outlook: With ROE at 8.8% and a conservative balance sheet, the company could maintain a modest payout while prioritizing growth investments. Clarity on dividend policy and cash flow generation would improve visibility.

Risk Assessment

Business Risks:

• Demand cyclicality in digital marketing/IT services tied to client budgets
• Utilization risk and wage inflation pressure on margins
• Project execution and pricing discipline affecting gross margins
• Client concentration risk typical of B2B services
• Competitive intensity and potential price-based competition
• Potential goodwill/intangible impairment risk if M&A-driven growth is material (intangible details unreported)

Financial Risks:

• Limited visibility on cash generation due to unreported OCF and capex
• Receivables collection and credit risk given sizable AR balance
• Interest rate risk on floating-rate borrowings (interest expense unreported)
• Potential dilution risk indicated by gap between basic and diluted EPS

Key Concerns:

• Negative operating leverage this period as SG&A outpaced gross profit growth
• Incomplete disclosures on cash flow, capex, and dividends limit assessment of cash coverage
• Minor inconsistencies between cost of sales and gross profit figures; reliance on reported margins is necessary

Investment Implications

Key Takeaways:

• Strong revenue growth (+15.8% YoY) with solid gross margin (40.5%)
• Operating margin ~9.1% and operating income growth (+6.7% YoY) indicate near-term cost pressure
• ROE at 8.8% is supported by moderate leverage (2.27x) and asset turnover of 0.742
• Net cash position (~4.11) underpins financial flexibility
• Tax rate normalized at 34.4%, supporting earnings quality
• Cash flow data gaps prevent full assessment of FCF and dividend coverage

Metrics to Watch:

• SG&A-to-revenue ratio and operating margin trajectory
• Order intake/backlog and headcount utilization
• Accounts receivable days and cash conversion
• Net cash/EBITDA (once EBITDA disclosed) and leverage trends
• Effective tax rate stability
• Dividend policy updates and any DPS guidance
• Non-operating gains/losses and interest expense disclosure

Relative Positioning: Within TSE services/IT peers, Orchestra exhibits above-average revenue growth, mid-tier operating margins, conservative leverage with a slight net cash position, and a mid-single to high-single digit ROE; improving operating leverage and clearer cash flow disclosure would enhance its standing.

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