Roland Corporation FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥69.57B
• Operating Income: ¥6.18B
• Net Income: ¥4.29B
• EPS: ¥204.46

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

Roland Co., Ltd. (7944) reported FY2025 Q3 (cumulative) consolidated results under JGAAP with essentially flat top-line performance and resilient profitability. Revenue was ¥69.57bn, down 0.1% YoY, indicating stable demand despite a challenging macro and FX backdrop. Gross profit was ¥30.245bn, implying a solid gross margin of 43.5%, supportive of pricing power and/or favorable product mix. Operating income declined 4.6% YoY to ¥6.183bn, taking the operating margin to 8.9%; this suggests some operating deleverage or higher SG&A amid flat sales. Ordinary income was ¥5.876bn, and net income rose 26.8% YoY to ¥5.438bn, aided by a normalized effective tax rate (~24% by our calculation) and potentially lower non-operating drag. EPS stood at ¥204.46. DuPont analysis indicates ROE of 13.47%, driven by a 7.82% net margin, 0.838x asset turnover, and 2.06x financial leverage—an attractive level for the sector. Liquidity is strong with a current ratio of 275% and quick ratio of 184.6%, supported by ¥36.9bn of working capital and inventories of ¥19.1bn. Leverage appears moderate (debt-to-equity 0.86x) and interest coverage is robust at 53.8x on an operating-income basis, indicating low refinancing risk. Operating cash flow was ¥3.106bn, implying OCF/net income of 0.57; cash conversion softness likely reflects working capital investment, consistent with the inventory position. Investing and cash balances were not disclosed in the dataset (values shown as zero are unreported), so free cash flow cannot be reliably assessed from this extract. Dividend data and share counts were also not disclosed here, limiting payout and per-share balance sheet analysis in this period. Overall, Roland is delivering steady revenue with healthy margins and double-digit ROE, offset by weaker cash conversion year-to-date and elevated inventories that bear monitoring. Given data limitations (notably certain balance sheet and cash flow details), conclusions are based on the disclosed non-zero items and provided calculated metrics. The near-term focus should be on inventory normalization, OCF catch-up in Q4, and sustaining gross margin resilience.

Profitability Analysis

ROE of 13.47% decomposes into a 7.82% net margin, 0.838x asset turnover, and 2.06x financial leverage. Operating margin is 8.9% (¥6.183bn on ¥69.57bn sales), down modestly YoY in the context of flat revenue, indicating some operating deleverage and/or higher SG&A. Gross margin of 43.5% (¥30.245bn/¥69.57bn) remains a key strength, suggesting sustained pricing, product mix, and cost management. EBITDA was ¥8.038bn, with an 11.6% margin; the EBITDA-to-operating income delta of ¥1.855bn reflects modest capital intensity. Interest expense of ¥115m is small relative to operating income, yielding a 53.8x coverage on an EBIT basis; profitability is therefore not constrained by financing costs. The spread between gross and operating margins implies SG&A intensity of roughly 34.6% of sales, which appears slightly elevated for flat revenue and may explain the YoY operating income decline. Overall profitability quality is solid at the gross level, with some pressure below gross profit from fixed-cost absorption and/or opex investments.

Growth Assessment

Revenue was essentially flat at -0.1% YoY, pointing to stable but not expanding end-market demand through Q3 YTD. Operating income declined 4.6% YoY, underperforming revenue and indicating negative operating leverage in the period. Net income rose 26.8% YoY, benefiting from below-the-line factors (including a normalized tax rate of ~24% based on tax expense/ordinary income). With gross margin at 43.5%, the company continues to demonstrate product strength; however, growth sustainability hinges on demand in key regions/channels and the pace of new product cycles. Inventory at ¥19.1bn suggests the company is positioned for sales in coming quarters, but it raises execution risk if demand softens. Absent disclosed order/backlog data, near-term outlook is cautiously stable; the key will be Q4 sell-through and channel inventory normalization. FX developments could materially influence reported growth given the export profile. Overall, revenue sustainability appears steady, but profit growth may depend on SG&A discipline and mix improvements.

Financial Health

Liquidity is strong: current ratio 275% (¥57.99bn CA / ¥21.09bn CL) and quick ratio 184.6% after excluding inventories, supported by ¥36.91bn working capital. Solvency metrics appear comfortable with debt-to-equity at 0.86x and financial leverage at 2.06x. Interest coverage is ample at 53.8x on EBIT, suggesting low near-term refinancing risk. Total assets are ¥83.03bn, equity ¥40.38bn, and liabilities ¥34.90bn; definitions under JGAAP and disclosure scope can lead to presentation differences, so we rely on the provided leverage and liquidity ratios. Overall capital structure looks balanced, with capacity to absorb cyclical volatility.

Cash Flow Quality

OCF was ¥3.106bn versus net income of ¥5.438bn, yielding an OCF/net income ratio of 0.57, indicating weaker cash conversion year-to-date. The most plausible driver is working capital build, consistent with inventories at ¥19.08bn (about 27% of YTD sales) and an indicative DIO of ~132 days using period COGS; this should be monitored for obsolescence and normalization risk. Depreciation and amortization totaled ¥1.855bn, aligning with modest capital intensity; however, investing cash flows were not disclosed in the dataset (displayed as zero), so free cash flow cannot be reliably computed. On a coverage basis, OCF/interest expense is a healthy ~27x, suggesting adequate internal funding of financing costs. Earnings quality remains acceptable but would be stronger with Q4 working capital release and improved OCF alignment with earnings.

Dividend Sustainability

Dividend per share, payout ratio, and FCF coverage are shown as zero in the dataset, indicating non-disclosure for this extract rather than true zeros. As such, we cannot assess payout sustainability quantitatively for this period. Qualitatively, double-digit ROE (13.5%), strong liquidity, and robust interest coverage support capacity for shareholder returns, subject to capital allocation priorities and actual cash generation after working capital and capex. Visibility will improve once full-year cash flow and dividend policy disclosures are available.

Risk Assessment

Business Risks:

• Demand cyclicality in global musical instruments and pro audio markets
• FX volatility impacting revenue and margins given export exposure
• Channel inventory and sell-through risk, especially into Q4
• Product cycle timing and competitive launches affecting mix and pricing
• Component cost and logistics normalization risks
• Geographic concentration risks in key markets (US, Europe, China)

Financial Risks:

• Working capital build reducing cash conversion (OCF/NI at 0.57)
• Inventory obsolescence risk if demand softens
• Moderate leverage (D/E 0.86x) amplifying downside in a downturn
• Potential volatility in non-operating items affecting net income
• Refinancing and interest rate risks, albeit mitigated by high coverage

Key Concerns:

• Sustaining gross margin at 43–44% amid cost and FX fluctuations
• Normalizing inventory levels and improving OCF in Q4
• Managing SG&A to restore operating leverage with flat sales
• Clarity on dividend policy and cash deployment given undisclosed FCF data

Investment Implications

Key Takeaways:

• Top line stable (-0.1% YoY) with resilient 43.5% gross margin
• Operating income down 4.6% YoY; operating margin at 8.9% shows some deleverage
• Net income up 26.8% YoY; effective tax rate ~24% supports bottom line
• ROE at 13.47% is attractive, driven by solid margin and moderate leverage
• OCF/NI at 0.57 indicates weaker cash conversion; inventory elevated
• Liquidity is strong (CR 275%, QR 185%); interest coverage very high (53.8x)

Metrics to Watch:

• Operating cash flow and OCF/NI ratio in Q4
• Inventory levels, turns, and DIO
• Gross and operating margin trajectory
• FX rates and hedging impacts
• SG&A efficiency and operating leverage
• Capex and investing cash flows once disclosed
• Dividend and capital allocation updates

Relative Positioning: Within Japanese electronics/musical instrument peers, Roland exhibits superior gross margins and a competitive double-digit ROE, coupled with strong liquidity and coverage. Near-term relative performance hinges on inventory normalization and maintaining operating margins in a flat growth environment.

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