Peers Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥6.10B
• Operating Income: ¥559M
• Net Income: ¥585M
• EPS: ¥47.08

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

Peers Inc. (70660) reported FY2025 Q4 consolidated results under JGAAP showing resilient profitability despite a modest top-line contraction. Revenue declined 1.7% YoY to 6,103 million yen, but operating income rose 16.4% YoY to 559 million yen, indicating meaningful margin improvement and disciplined cost execution. Gross profit was 1,641.993 million yen, translating to a gross margin of 26.9%, which supports the operating margin expansion. EBITDA was 628.385 million yen with a 10.3% EBITDA margin, reflecting an asset-light model and contained non-cash charges (D&A of 69.385 million yen). Ordinary income of 497 million yen suggests slight non-operating headwinds versus operating profit, driven in part by interest expense of 18.548 million yen and other non-operating items. Net income decreased 26.1% YoY to 432 million yen, implying below-the-line pressures and/or special items despite stronger operating profit; the very low recorded income tax expense (7.817 million yen) indicates unusual tax effects or offsets. The company generated robust operating cash flow of 703 million yen, which is 1.63x net income, signaling high earnings quality and strong cash conversion. Free cash flow was solid at 652 million yen after 51 million yen of investing outflows, underscoring ample self-funding capacity. The balance sheet appears conservative: total assets were 4,456 million yen and total equity was 2,759 million yen, implying an equity ratio around the low-60% range and financial leverage of 1.62x (assets/equity). Liquidity is strong with a current ratio of 335.8% and working capital of 2,024.346 million yen, pointing to a comfortable short-term funding position. Debt-to-equity stood at 0.59x, and interest coverage was a healthy 30.1x, highlighting low financial risk. Financing cash outflows of 847 million yen suggest deleveraging and/or other shareholder-related uses of cash; DPS was reported as 0.00 and payout ratio as 0.0%, indicating retained earnings to support growth or balance sheet priorities. DuPont analysis yields a net margin of 7.08%, asset turnover of 1.370x, and financial leverage of 1.62x, producing an ROE of 15.66%, which is competitive for a services/outsourcing-oriented business model. While top-line softness raises questions about demand momentum, mix and cost measures delivered meaningful operating leverage. Data limitations exist where items were reported as zero (e.g., cash and equivalents, equity ratio, inventories, share counts) and should be treated as undisclosed rather than true zeros; analysis focuses on available non-zero data points.

Profitability Analysis

ROE decomposition indicates solid underlying returns: net profit margin 7.08% × asset turnover 1.370 × financial leverage 1.62 = ROE 15.66%. The margin profile strengthened at the operating level, with operating income up 16.4% YoY despite a 1.7% YoY revenue decline, evidencing cost discipline and favorable mix. Gross margin of 26.9% supports the notion of improved project economics and pricing power in core service lines. EBITDA margin of 10.3% and modest D&A (69.385 million yen) are consistent with an asset-light service model, which typically scales well when utilization and mix improve. Interest expense was 18.548 million yen and interest coverage was 30.1x (EBIT/interest), indicating negligible drag from financing costs. The divergence between operating income growth (+16.4% YoY) and net income decline (-26.1% YoY) suggests non-operating/extraordinary items or minority interests affected the bottom line; ordinary income (497 million yen) sits below operating income (559 million yen), and taxes recorded were unusually low (7.817 million yen). Operating leverage appears positive: fixed cost absorption improved as margins expanded against slightly lower revenue. Overall, profitability quality is strong at the operating and cash levels, though bottom-line volatility from below-the-line items warrants monitoring.

Growth Assessment

Revenue decreased 1.7% YoY to 6,103 million yen, indicating modest top-line softness. Despite the decline, operating income rose 16.4% YoY to 559 million yen, implying improved mix (higher-margin services) and/or effective SG&A control. Gross profit of 1,641.993 million yen and a 26.9% gross margin corroborate the margin expansion story. Ordinary income of 497 million yen and net income of 432 million yen reflect pressure below the operating line, which masked the healthy operating trend. The gap between operating and net income points to non-operating items outweighing tax effects (tax expense was only 7.817 million yen), suggesting potential one-offs. From a cash perspective, the 703 million yen OCF versus 432 million yen net income indicates solid profit quality and sustainability, as cash tracked ahead of accounting earnings. With 51 million yen investing outflow and 652 million yen FCF, internal funding capacity for organic initiatives remains robust. Looking ahead, sustaining operating margin gains will be key if revenue growth remains subdued; mix shift towards higher-value consulting/support and disciplined project selection should underpin margins. However, revenue recovery is important to drive further ROE gains beyond cost actions. The near-term outlook hinges on client activity levels and the cadence of new wins in core verticals; while not disclosed here, maintaining the 26–27% gross margin region would support mid- to high-single-digit operating margins.

Financial Health

Total assets were 4,456 million yen and total equity was 2,759 million yen, implying an equity ratio in the low-60% range and financial leverage of 1.62x. Total liabilities were 1,640.773 million yen (debt-to-equity of 0.59x), indicating a conservative capital structure. Liquidity is strong: current assets were 2,882.976 million yen and current liabilities 858.630 million yen, producing a current ratio of 335.8% and working capital of 2,024.346 million yen. Quick ratio equals the current ratio due to undisclosed inventories, suggesting a largely liquid current asset base. Interest expense was modest at 18.548 million yen with interest coverage of 30.1x, indicating low refinancing risk under current earnings power. Financing cash flows were a net outflow of 847 million yen, consistent with deleveraging or other financing uses; the balance sheet appears resilient even after these outflows. Overall solvency and liquidity metrics indicate ample buffer against macro or idiosyncratic shocks.

Cash Flow Quality

Operating cash flow of 703 million yen exceeded net income of 432 million yen (OCF/NI = 1.63), supporting strong earnings quality and limited accrual risk. Free cash flow was 652 million yen (703 OCF minus 51 investing outflows), demonstrating capacity to fund growth and reduce leverage without external funding. D&A was 69.385 million yen, consistent with a low capital intensity profile. Working capital dynamics are not fully disclosed, but strong liquidity ratios and positive OCF suggest effective receivables collection and disciplined project billing. The sizable financing outflow of 847 million yen alongside positive FCF implies internal cash generation funded debt repayment and/or other financing needs during the year. Cash and equivalents were undisclosed; conclusions are based on flow statements and non-zero items only.

Dividend Sustainability

DPS is reported as 0.00 and payout ratio as 0.0%, indicating no common dividend distribution for the period based on disclosed items. With net income of 432 million yen and FCF of 652 million yen, coverage capacity for dividends would be strong if a distribution policy were adopted, but current disclosure implies retention to prioritize reinvestment or balance sheet management. Given financing outflows of 847 million yen and low leverage, capital allocation appears focused on strengthening the financial position or other financing uses rather than cash returns. In the absence of a stated policy here, dividend outlook should be viewed as conservative and contingent on maintaining positive FCF and visibility on growth investments.

Risk Assessment

Business Risks:

• Client demand cyclicality and budget tightening in core outsourcing/consulting verticals impacting revenue (FY revenue declined 1.7% YoY).
• Project mix and utilization risk affecting gross margin sustainability (26.9% this period).
• Execution risk on scaling higher-margin services needed to sustain operating margin gains.
• Potential customer concentration typical for specialized B2B service firms (not disclosed here).
• Pricing pressure and competitive intensity in domestic business support/outsourcing markets.
• Talent acquisition and retention risk for skilled consultants/operatives in a tight labor market.

Financial Risks:

• Below-the-line volatility: net income fell 26.1% YoY despite stronger operating profit, implying exposure to non-operating or extraordinary items.
• Interest rate and refinancing risk are currently low (30.1x coverage) but could rise if earnings soften.
• Working capital timing risk inherent in project-based businesses (specific components not disclosed).
• Policy risk around tax effects given unusually low tax expense recorded (7.817 million yen).

Key Concerns:

• Sustainability of operating margin expansion if revenue softness persists.
• Drivers of the net income decline relative to operating income growth (clarity on non-operating items needed).
• Visibility on capital allocation priorities given significant financing outflows alongside zero DPS.

Investment Implications

Key Takeaways:

• Operating momentum improved: operating income +16.4% YoY on revenue -1.7% YoY.
• Healthy profitability: gross margin 26.9%, EBITDA margin 10.3%, ROE 15.66%.
• Strong cash generation: OCF 703 million yen (1.63x NI) and FCF 652 million yen.
• Conservative balance sheet: implied equity ratio ~62% and D/E 0.59x, interest coverage 30.1x.
• Bottom-line volatility: net income -26.1% YoY due to non-operating/extraordinary effects.
• High liquidity: current ratio 335.8% and working capital 2,024 million yen.

Metrics to Watch:

• Revenue trajectory and backlog/pipeline conversion to re-accelerate top-line growth.
• Gross margin and SG&A ratio to assess durability of margin gains.
• Operating margin and ordinary income bridge to net income (nature of non-operating items).
• OCF/NI ratio and FCF consistency to validate earnings quality.
• Debt levels and financing cash flows to monitor capital structure strategy.
• Client concentration and new business mix (not disclosed here).

Relative Positioning: Within Japan’s business support/outsourcing peer set, the company exhibits above-average balance sheet strength, solid ROE for an asset-light model, and strong cash conversion, offset by modest top-line momentum and elevated variability below the operating line.

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