AlphaPurchase Corporation FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥42.82B
• Operating Income: ¥1.03B
• Net Income: ¥594M
• EPS: ¥73.97

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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 top-line growth and notable operating leverage drove double-digit profit increases in FY2025 Q3, but cash conversion was weak, warranting caution on earnings quality. Revenue rose 6.1% YoY to 428.22, while operating income increased 22.6% to 10.33, and net income grew 20.7% to 7.17. Gross profit reached 39.88, translating to a gross margin of 9.3%, and operating margin improved to 2.4%. Ordinary income was 10.37 (up 25.3% YoY), supported by minimal non-operating items (non-operating income 0.06 and expenses 0.21), indicating largely operating-driven performance. Using the reported growth rates, we estimate operating margin expanded by roughly 32 bps YoY (from ~2.09% to 2.41%). Net margin likely expanded by about 20 bps YoY (from ~1.47% to 1.67%), consistent with operating leverage and controlled below-the-line items. DuPont metrics show ROE at 11.2% (Net margin 1.7% × Asset turnover 2.713 × Leverage 2.47x), with asset efficiency remaining a key strength. EBITDA was 14.94, implying an EBITDA margin of 3.5%, signaling some fixed-cost absorption. Liquidity remains adequate with a current ratio of 141%, and cash and deposits are a solid 39.78 against current liabilities of 93.36. However, operating cash flow was only 0.78 versus net income of 7.17 (OCF/NI 0.11x), highlighting a meaningful divergence and a quality flag. Financing cash outflows of -2.32 were driven by share repurchases of -2.26, exceeding internally generated FCF, implying reliance on cash on hand. The balance sheet is lightly levered in terms of interest-bearing debt (long-term loans 0.03) and enjoys extremely high interest coverage, but total liabilities are sizable relative to equity given the trading-payables model. With an estimated payout ratio of 37%, the dividend policy appears conservative, yet sustained cash conversion will be necessary to support both shareholder returns and growth investments. Forward-looking, maintaining SG&A discipline and improving working-capital efficiency (receivables and payables cycle) will be pivotal to sustain margin gains. Key watchpoints include OCF normalization in Q4, receivables collection trends, and any changes in customer mix or procurement spread that could affect gross margin.

Profitability Analysis

ROE decomposition (DuPont): ROE 11.2% = Net Profit Margin 1.7% × Asset Turnover 2.713 × Financial Leverage 2.47x. The most notable change appears in net profit margin, which we estimate expanded ~20 bps YoY (from ~1.47% to ~1.67%), while operating margin expanded ~32 bps (from ~2.09% to ~2.41%), implying underlying operating leverage. Asset turnover remains very strong at 2.71x; without prior-period asset data, we assume it was broadly stable, but the revenue growth outpacing balance sheet expansion suggests efficiency remained intact. Business drivers: revenue growth (+6.1%) combined with restrained SG&A led to outsized operating income growth (+22.6%); SG&A-to-sales is 7.35% this period, indicating cost control and scale benefits. The improvement looks recurrent if volume growth and procurement spreads hold, but the weak cash conversion (OCF/NI 0.11x) tempers confidence in pure quality of earnings this quarter. Non-operating items were small (net -0.15), so ordinary income growth was fundamentally operating-led. Risks to sustainability include potential normalization of payables/receivables that could pressure reported margins if rebates or timing benefits reverse, and wage or IT investment inflation that could lift SG&A. No red flags on interest burden (interest expense effectively negligible), so margin sensitivity is mainly at the gross and SG&A levels. We do not see SG&A growth outpacing revenue this quarter; instead, operating leverage was favorable, but confirmation requires YoY SG&A detail which was not disclosed.

Growth Assessment

Revenue growth of 6.1% YoY appears organic and accompanied by margin expansion, indicating healthy operating leverage. Operating income growth (+22.6%) outstripped sales, driven by a better sales mix and/or procurement efficiency and SG&A discipline. Net income growth (+20.7%) tracked operating profit, with non-operating items minimally dilutive. EBITDA growth versus sales implies improved fixed-cost absorption. Sustainability hinges on continued demand from key enterprise customers and maintaining procurement spreads in a competitive B2B purchasing environment. With intangible assets of 22.67, digital capabilities/platform value likely support scalability, but may require ongoing investment. Given the OCF shortfall in Q3, normalization of working capital is necessary to convert accounting gains to cash; otherwise, growth may require cash reserves to fund operations. Near-term outlook is cautiously positive on profitability if volumes hold into Q4, with upside from further SG&A efficiency and downside from any gross margin compression due to price competition or supplier dynamics.

Financial Health

Liquidity is adequate with a current ratio of 141% (above 1.0 but slightly below the 150% best-practice benchmark). Quick ratio is also 141% given no reported inventories, supported by cash of 39.78 and receivables of 79.14. Working capital stands at 38.40, providing cushion against short-term obligations of 93.36. Solvency: total liabilities are 93.93 vs equity 63.91 (D/E by total liabilities-to-equity ~1.47x), which is acceptable for a trading-like working-capital model, especially with negligible interest-bearing debt (long-term loans 0.03). Interest coverage is extremely strong at 9745x, reflecting de minimis interest burden. Maturity mismatch risk is moderate: current assets comfortably exceed current liabilities, but reliance on trade payables (85.78) underscores the need for consistent collections. No off-balance-sheet obligations were disclosed in the data provided.

Cash Flow Quality

OCF/Net Income is 0.11x, below the 0.8 threshold, signaling weak earnings-to-cash conversion this quarter. Operating CF was 0.78 against NI of 7.17, suggesting a working-capital drag (likely receivables build or timing of payables/other accruals), though detailed drivers were not disclosed. Capex was minimal at 0.04, implying maintenance investment needs are light; thus, proxied FCF (OCF - Capex) is about 0.74, which is below net income and insufficient to fund buybacks. Financing CF of -2.32 reflects share repurchases (-2.26), funded by cash on hand (cash and deposits 39.78). Sustainability: dividends (payout ratio ~37%) plus any continued buybacks would require improved OCF in coming quarters, absent balance-sheet drawdown. No clear signs of aggressive working-capital management can be confirmed without period-on-period AR/AP days; however, the magnitude of OCF shortfall warrants close monitoring.

Dividend Sustainability

The calculated payout ratio is 37.0%, comfortably below the 60% benchmark and consistent with a conservative policy. Given minimal capex needs, dividends should be covered by normalized OCF, but the current quarter's OCF shortfall (0.78) is a caution flag. FCF coverage cannot be fully assessed due to unreported investing CF and dividend cash amounts, but share repurchases of 2.26 exceeded proxied FCF, implying reliance on cash reserves. With cash of 39.78 and strong profitability, the base dividend appears maintainable if working capital normalizes; any increase or continued buybacks would require demonstrable improvement in cash conversion.

Risk Assessment

Business Risks:

• Gross margin pressure from competitive pricing in B2B procurement and e-commerce channels
• Customer concentration risk common in enterprise procurement models (data not disclosed)
• Supplier rebate/timing risk affecting recognized gross profit and OCF
• Execution risk in scaling digital/intangible asset-driven services (intangible assets 22.67)
• Wage and IT inflation potentially lifting SG&A run-rate

Financial Risks:

• Weak cash conversion this quarter (OCF/NI 0.11x) increasing reliance on cash balances
• Working-capital exposure with high receivables (79.14) and payables (85.78)
• Potential liquidity tightening if receivables collection slows despite current ratio 141%
• Shareholder returns (buybacks) outpacing FCF in the quarter

Key Concerns:

• Earnings quality flagged due to OCF shortfall vs net income
• Sustainability of margin gains without detailed SG&A and gross margin drivers
• Lack of disclosure on dividends paid and investing cash flows limits assessment of capital allocation durability

Investment Implications

Key Takeaways:

• Top-line grew 6.1% YoY with strong operating leverage; operating income +22.6% and net income +20.7%
• Operating margin estimated to have expanded ~32 bps YoY to 2.41%; net margin up ~20 bps to 1.67%
• ROE healthy at 11.2%, driven by high asset turnover (2.71x) and moderate leverage (2.47x)
• Cash conversion is weak (OCF/NI 0.11x), creating a key watchpoint for Q4
• Balance sheet liquidity adequate (current ratio 141%) and very low interest burden
• Share repurchases (2.26) exceeded proxied FCF, funded by existing cash
• Capex minimal (0.04), suggesting low maintenance investment needs but ongoing digital spend may appear in OPEX

Metrics to Watch:

• OCF/Net Income and trend into Q4
• Accounts receivable days and collection patterns
• Operating and gross margin trajectory by segment (if disclosed)
• SG&A-to-sales ratio and hiring/IT expense run-rate
• ROIC versus internal targets and spread over WACC
• Buyback/dividend outflows versus FCF

Relative Positioning: Within Japanese small-cap B2B procurement/services peers, AlphaPurchase exhibits above-average asset efficiency and solid ROE, but trails best-in-class on cash-flow conversion this quarter; liquidity is adequate and leverage low on an interest-bearing basis, positioning it defensively if working-capital normalizes.

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