Prored Partners CO.,LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥12.30B
• Operating Income: ¥4.95B
• Net Income: ¥-244M
• EPS: ¥18.85

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: Strong top-line and operating performance with exceptional cash generation, but headline net income is depressed by below-the-line items, creating a mixed optical result for FY2025 Q4. Revenue rose to 123.02 (億円), up 158.7% YoY, while operating income surged to 49.45 (億円), up 395.1% YoY, evidencing powerful operating leverage. Gross profit reached 75.32 (億円), yielding a gross margin of 61.2%, and EBITDA was 50.48 (億円) for an EBITDA margin of 41.0%. Ordinary income printed at 49.47 (億円) (+287.8% YoY), roughly in line with operating income, indicating minimal non-operating drag. However, reported net income was only 2.05 (億円) (+35.6% YoY), far below profit before tax of 49.55 (億円) and tax expense of 2.69 (億円), implying significant below-the-line impacts not detailed in the provided tags (e.g., extraordinary losses, non-controlling interests, or other adjustments). The operating margin expanded materially on a YoY basis given OI growth far outpacing revenue growth; exact basis-point expansion cannot be determined due to missing prior-period margin data. Cash flow quality was excellent: operating cash flow of 54.10 (億円) equates to an OCF/Net Income ratio of 26.39x, signaling net income conservatism and significant non-cash or non-recurring charges depressing the bottom line. Free cash flow was 49.48 (億円) using the provided definition (OCF + Investing CF), comfortably positive after capex of 2.61 (億円). The balance sheet is very strong with a current ratio of 7.68x, quick ratio of 7.68x, and low leverage (D/E 0.21x). Liquidity is ample with cash and deposits of 58.44 (億円) versus current liabilities of 16.65 (億円), minimizing near-term refinancing risk. Interest coverage is extremely robust at 577.21x, reflecting low interest burden and high operating earnings. Effective tax rate appears low at 5.4%, but given the net income anomaly, headline tax metrics may not reflect a steady-state rate. The mismatch between strong operating profit and weak net profit suggests one-time items; notably, total comprehensive income of 49.56 (億円) aligns with pre-tax earnings, reinforcing the view that net income was impacted by below-the-line items not captured in comprehensive income. Forward-looking, if the operating strength persists and one-off charges subside, reported net margins should normalize materially higher. Near-term focus should be on disclosures explaining the net income gap, sustainability of elevated gross and operating margins, and visibility into pipeline conversion and fee realization.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 1.7% × 0.853 × 1.21 ≈ 1.7%. The weakest component is Net Profit Margin at 1.7% (Net Income 2.05 ÷ Revenue 123.02), despite very strong operating margin implied by Operating Income 49.45. Asset turnover is healthy at 0.853 (Revenue 123.02 ÷ Total Assets 144.25), reflecting good asset utilization for a consulting/services model. Financial leverage is modest at 1.21x (Assets 144.25 ÷ Equity 118.92), implying limited balance-sheet-driven ROE. The component that changed the most versus revenue growth appears to be operating profitability (OI +395.1% vs Revenue +158.7%), while net margin lagged due to likely one-off charges below operating income; exact prior-period DuPont components are not disclosed, so directional assessment is used. Business driver: revenue scale and mix likely enhanced gross margin (61.2%) and drove operating leverage (SG&A 25.87 vs Gross Profit 75.32), but net margin was suppressed by extraordinary items, minority interests, or similar below-the-line effects. Sustainability: operating margin gains can be partly sustainable if driven by scale and utilization, but the extremely low net margin is not likely representative of underlying earnings power; normalization is plausible if one-offs fade. Watch for SG&A growth relative to revenue in future periods; current period indicates favorable operating leverage, but we lack YoY SG&A detail to confirm persistent discipline.

Growth Assessment

Top-line growth of +158.7% YoY to 123.02 (億円) indicates exceptional commercial momentum, likely driven by project wins and/or higher success-fee recognition. Operating income growth of +395.1% far outpaced revenue, signaling strong operating leverage and improved pricing or mix. Ordinary income (+287.8%) corroborates operational strength with minimal recurring non-operating drag. Net income growth of +35.6% to 2.05 (億円) is an outlier versus operating performance, likely reflecting non-recurring or non-cash adjustments; total comprehensive income of 49.56 (億円) supports the view that underlying performance is stronger than headline NI. Gross margin (61.2%) and EBITDA margin (41.0%) point to high value-add services and favorable delivery efficiency. Revenue sustainability will hinge on pipeline, client concentration, and success-fee realization; absent backlog disclosure, near-term visibility is limited. The effective tax rate (5.4%) and NI anomaly suggest that normalized profit conversion could be much higher when one-off items subside. Near-term outlook is constructive on operations but depends on clarity around below-the-line items and repeatability of large engagements.

Financial Health

Liquidity is very strong: Current Ratio 7.68x and Quick Ratio 7.68x, with Current Assets 127.83 (億円) vs Current Liabilities 16.65 (億円). No warning on Current Ratio (<1.0) or D/E (>2.0); D/E is conservative at 0.21x. Maturity profile is favorable: cash and deposits 58.44 (億円) and accounts receivable 6.22 (億円) comfortably cover current liabilities, limiting maturity mismatch risk. Noncurrent liabilities are modest at 8.68 (億円), including long-term loans of 5.58 (億円), which are well covered by cash. Interest burden is low (interest expense 0.09 (億円)) with interest coverage at 577.21x. No off-balance sheet obligations were disclosed in the provided data; absence of disclosure does not rule out items such as operating leases or performance guarantees typical for services firms.

Cash Flow Quality

Earnings quality is high on a cash basis: OCF 54.10 (億円) vs Net Income 2.05 (億円) yields OCF/NI of 26.39x, indicating that reported NI is likely depressed by non-cash or one-time charges. Free cash flow (as provided: OCF + Investing CF) was 49.48 (億円), ample after capex of 2.61 (億円); on an OCF − Capex basis, FCF would be approximately 51.49 (億円), also very strong. Working capital appears a net source of cash given the large OCF relative to NI, but detailed components (e.g., contract assets, accrued revenue) are not disclosed, limiting detection of timing effects. There are no clear signs of working capital manipulation in the provided summary, but revenue-recognition timing and success-fee collection should be monitored in subsequent quarters. Cash generation comfortably supports internal investment and potential shareholder returns, absent large undisclosed obligations.

Dividend Sustainability

Dividend data are unreported (DPS, payout ratio, and total dividends not disclosed), so we cannot quantify current distribution levels. From a capacity perspective, FCF of 49.48 (億円) and low leverage indicate ample room to fund dividends if the company elects to pay. Given the discrepancy between NI and cash generation, a payout policy tied strictly to accounting earnings could understate capacity; a cash-flow-based lens is more indicative. Without a stated policy, expected dividend trajectory and DOE cannot be assessed. Coverage of capex is robust, and even a moderate dividend would likely be sustainable on current FCF, subject to maintaining operating momentum and absent large acquisitions.

Risk Assessment

Business Risks:

• Revenue lumpiness and timing risk inherent in success-fee or project-based consulting engagements
• Client concentration risk if growth is driven by a small number of large mandates
• Human capital dependency: recruitment, retention, and utilization of consultants
• Pricing and mix risk affecting high gross margins (61.2%)
• Execution risk on large-scale cost-reduction or transformation projects

Financial Risks:

• Net income significantly below operating profit suggests exposure to one-off losses or adjustments below the operating line
• Potential volatility in effective tax rate and below-the-line items affecting reported profitability
• Limited disclosure on interest-bearing debt composition and off-balance commitments
• Dependence on working capital timing given services nature, though liquidity is currently strong

Key Concerns:

• Large gap between profit before tax (49.55 (億円)) and net income (2.05 (億円)) without detail on the drivers
• Reliance on extraordinary or non-recurring items to explain earnings optics; clarity needed from management
• Data limitations in XBRL (e.g., margins and ROA tagged at atypical levels) could obscure trend analysis

Investment Implications

Key Takeaways:

• Core operations appear very strong with material operating margin expansion and high gross margin
• Reported net income understates underlying performance; total comprehensive income aligns with operational strength
• Cash generation is exceptional, supporting balance sheet resilience and optionality for capital allocation
• Leverage is low and liquidity is ample, minimizing solvency risk
• Visibility into sustainability hinges on disclosures around the NI compression and revenue pipeline

Metrics to Watch:

• Reconciliation of net income to comprehensive income, including extraordinary items and NCI impacts
• Normalized tax rate and below-the-line adjustments
• Backlog/pipeline metrics, client concentration, and repeat business indicators
• Working capital movements (AR, contract assets/liabilities) and cash conversion cycle
• Headcount, utilization rates, and average fee realization
• SG&A growth versus revenue to confirm ongoing operating leverage

Relative Positioning: Within Japan-listed professional services/consulting peers, the company exhibits superior operating margins and cash conversion this quarter, paired with a stronger-than-average balance sheet; however, headline net profitability trails due to atypical below-the-line impacts, making reported ROE appear subdued versus underlying earnings power.

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