Bridge Consulting Group Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥2.24B
• Operating Income: ¥202M
• Net Income: ¥134M
• EPS: ¥72.55

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: Solid top-line growth but margin compression and weak cash conversion characterize FY2025 Q4, resulting in lower operating and net profit despite healthy balance sheet strength. Revenue rose 11.0% year over year to 22.39, while operating income declined 12.4% to 2.02 and net income fell 13.1% to 1.47. Gross profit was 12.00, implying a 53.6% gross margin, and SG&A totaled 9.97, or 44.6% of sales. Calculated operating margin was 9.0% (2.02/22.39), down from an estimated 11.4% in the prior year, indicating compression of roughly 240 basis points. Net margin was 6.6%, consistent with the provided DuPont component. Ordinary income was 2.04 (down 11.6% YoY), with modest non-operating items (income 0.04, expenses 0.02) that did not materially change the narrative. The effective tax rate was 28.7% (0.59/2.05 PBT), broadly in a normal range. Cash generation lagged earnings: operating cash flow was 0.31 versus net income of 1.47, resulting in an OCF/NI ratio of 0.21x and free cash flow of -0.16 (OCF + investing CF). The balance sheet remains robust with cash and deposits of 10.61, total assets of 15.33, and total liabilities of 3.86, yielding a current ratio of 406% and D/E of 0.34x. Interest coverage is very strong at 245.7x, and short-term borrowings are minimal (0.09) relative to cash. Financing cash outflows (-1.26) were driven in part by share repurchases of -0.60, signaling continued shareholder returns despite weak OCF. EPS (basic) was 72.55 JPY with average shares of 2,033,870; BVPS was 574.13 JPY, and calculated ROE was a solid 12.8% supported by moderate leverage (1.34x). Reported operating margin in XBRL (0.1%) is inconsistent with the calculated 9.0%, likely due to tagging or definition differences; the analysis herein relies on the calculated ratio. Looking ahead, sustaining double-digit revenue growth while normalizing SG&A intensity is key to restoring operating margin. The immediate focus must be on improving cash conversion (working capital discipline) to align OCF with earnings and support ongoing shareholder distributions. Overall, the quarter shows resilient demand but highlights cost discipline and cash flow execution as priorities for the coming year.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 6.6% × Asset Turnover 1.461 × Financial Leverage 1.34x = ROE 12.8% (matches reported). The most notable change versus last year is likely the decline in net profit margin, given revenue grew 11.0% while operating income fell 12.4%, implying operating margin compression (~240 bps from ~11.4% to ~9.0% by our estimate). The underlying driver appears to be elevated operating costs (SG&A at 44.6% of sales), likely reflecting headcount additions, wage inflation, or growth investments outpacing revenue productivity. Asset turnover at 1.461 is healthy for an asset-light consulting/services model and likely stable to slightly improved on higher revenue against a modest asset base; leverage is modest at 1.34x and not a major ROE driver. Sustainability: the NPM compression looks partially cyclical/controllable—if hiring pace moderates and utilization improves, margins could recover; conversely, if growth investments persist ahead of revenue, NPM may remain pressured. Watch for SG&A growth outpacing revenue growth—this period's profile suggests negative operating leverage despite higher sales. Gross margin at 53.6% remains strong, but operating leverage was negative due to SG&A intensity.

Growth Assessment

Revenue growth of +11.0% YoY to 22.39 indicates solid demand. However, profit growth was negative: operating income -12.4% and net income -13.1%, reflecting cost pressure and/or pricing/mix headwinds. EBITDA was 2.04 (9.1% margin), close to operating income due to low D&A (0.02), highlighting the labor-centric nature of the business. Non-operating items were small (net +0.02), so core operations drove the decline. The growth outlook hinges on converting bookings into higher utilization and tighter SG&A control; with a strong cash position, the company can support growth initiatives, but investors will look for improving operating leverage. Near-term, we expect management to prioritize cost efficiency and working capital optimization to lift cash conversion and support potential shareholder returns.

Financial Health

Liquidity is very strong: current ratio 406% and quick ratio 406%, with cash and deposits of 10.61 exceeding total liabilities of 3.86. No warnings for Current Ratio (<1.0) or D/E (>2.0); D/E stands at a conservative 0.34x. Maturity profile is benign: short-term loans 0.09 and current liabilities 3.48 are well covered by current assets 14.13; minimal maturity mismatch risk. Long-term loans are modest at 0.38, and interest coverage is 245.7x, indicating ample debt-servicing capacity. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF/Net Income is 0.21x, below the 0.8 threshold, flagging weak earnings-to-cash conversion this period. Free cash flow, defined here as OCF plus investing CF, was -0.16, as investing outflows (-0.47) exceeded OCF (0.31); capex itself was minimal (-0.01), implying investments were likely financial or acquisition-related rather than PP&E heavy. The divergence between NI (1.47) and OCF (0.31) likely reflects working capital outflows (e.g., higher receivables or lower payables), consistent with growth and possible billing/collection timing; continued monitoring is warranted to rule out structural cash conversion issues. With cash of 10.61 and low debt, near-term liquidity is not at risk, but sustaining shareholder returns and growth investments will require better OCF alignment over time. No clear signs of deliberate working capital manipulation are evident from the limited disclosure, but the magnitude of the gap merits scrutiny next quarter.

Dividend Sustainability

Dividend information (DPS, total dividends) is unreported, so payout ratios are not calculable. Financing cash outflow includes share repurchases of -0.60, indicating shareholder returns are occurring despite negative FCF this period. Given strong cash reserves and low leverage, near-term capacity to fund dividends/buybacks is adequate; however, sustained distributions should be supported by positive, consistent FCF rather than balance-sheet drawdown. Policy outlook cannot be inferred without management guidance; watch for commentary on capital allocation and any target payout/DOE metrics in upcoming disclosures.

Risk Assessment

Business Risks:

• Margin pressure from SG&A growth outpacing revenue, compressing operating margin by an estimated ~240 bps YoY
• Utilization and pricing risk typical of consulting/professional services models
• Wage inflation and competitive hiring potentially elevating personnel costs
• Client demand cyclicality in governance/compliance/IT advisory spending

Financial Risks:

• Weak cash conversion (OCF/NI 0.21x) and negative FCF this period
• Potential working capital volatility as receivables scale with growth
• Reliance on cash reserves to fund buybacks/returns if OCF does not improve

Key Concerns:

• Operating margin compressed to ~9.0% from ~11.4% (estimate)
• OCF significantly below net income and FCF negative
• Limited disclosure on SG&A breakdown and dividends limits visibility on cost drivers and capital return policy
• Ordinary income decline (-11.6% YoY) in line with operating profit decline indicates core profitability pressure

Investment Implications

Key Takeaways:

• Strong top-line (+11%) but negative operating leverage drove profit declines
• ROE is solid at 12.8% on healthy asset turnover and moderate leverage
• Balance sheet strength (cash 10.61; current ratio 406%; D/E 0.34x) provides resilience
• Cash conversion is the weak link (OCF/NI 0.21x; FCF -0.16) and a priority to fix
• Buybacks (-0.60) continued despite negative FCF, enabled by cash reserves

Metrics to Watch:

• Operating margin trajectory and SG&A as a percentage of revenue
• OCF/NI ratio and working capital movements (DSO, payables days)
• Revenue growth sustainability and utilization rates
• Any disclosed dividend policy or DOE target
• Client mix and pricing to assess resilience in a softer demand scenario

Relative Positioning: Within Japan small-cap consulting/services peers, the company shows above-average balance sheet strength and decent ROE, but lags on cash conversion and near-term operating margin momentum.

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