NTT,Inc. FY2025 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥6.77T
• Operating Income: ¥945.03B
• Net Income: ¥589.56B
• EPS: ¥7.20

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

NTT (9432) reported FY2025 Q2 consolidated results under IFRS showing resilient profitability and strong cash conversion despite limited disclosure on cost structure. Revenue was 67,727.13 (100M JPY), with operating income of 9,450.29 (100M JPY), up 2.7% YoY, indicating modest operating growth. Net income reached 5,956.51 (100M JPY), up 7.4% YoY, benefiting from solid operations and a net margin of 8.8%. DuPont analysis indicates ROE of 6.2%, driven by moderate profitability, low asset turnover (0.202x), and material financial leverage (3.51x). The effective tax rate was 32.5% (income tax of 2,892.88 against PBT of 8,893.05), broadly consistent with domestic norms for large telecom groups. Cash flow quality was strong: operating cash flow (OCF) of 11,213.66 (100M JPY) equates to 1.88x net income, reflecting robust earnings cash conversion. Free cash flow (FCF) was 1,778.30 (100M JPY) after -9,435.36 (100M JPY) in investing cash flow, implying elevated investment outlays in the period. Financing cash flow was a net inflow of 636.28 (100M JPY) despite dividends of -2,186.73 and share repurchases of -361.23, suggesting incremental funding or other inflows offset shareholder returns. The balance sheet shows total assets of 334,527.90 (100M JPY), equity of 95,401.68, and an equity ratio of 27.5%, consistent with a capital-intensive incumbent carrier. Reported debt-to-equity is 1.96x; interest-bearing debt detail is unreported, limiting solvency granularity. Liquidity is supported by current assets of 83,703.59, including sizable accounts receivable (48,807.69) and inventories (5,565.76), while accounts payable stand at 28,495.34. Cash and equivalents are 10,009.94, offering additional liquidity, though current liabilities are unreported, so precise current and quick ratios cannot be derived. Dividend sustainability is mixed: the calculated payout ratio is 79.0%, while FCF coverage is 0.38x, indicating that dividends exceed internally generated free cash flow in this period. However, strong OCF provides a buffer, and investing cash flows may include non-recurring items beyond capex, which is unreported. Overall, NTT remains a scale player with diversified earnings and robust cash generation, but elevated leverage and FCF shortfall versus dividends in the period warrant monitoring. Data limitations are material (cost of sales, capex, interest, and current liabilities are unreported), so conclusions focus on available non-zero metrics.

Profitability Analysis

ROE of 6.2% is decomposed into a net profit margin of 8.8%, asset turnover of 0.202x, and financial leverage of 3.51x. The key ROE driver is leverage given the inherently low asset turnover of telecom infrastructure businesses. Operating income rose 2.7% YoY to 9,450.29, but with revenue YoY unreported, operating leverage cannot be precisely measured; the positive delta suggests some cost discipline and/or mix improvement. The effective tax rate stands at 32.5%, modestly dilutive to net margin but in line with domestic corporate tax levels. Gross margin, EBITDA, and interest coverage are unreported, limiting visibility into margin quality below operating income. Equity-method income contributed 176.38, supportive but not a primary earnings driver relative to group scale. Overall margin quality appears stable, with net margin at 8.8% supported by strong OCF/NI conversion of 1.88x. Given the capital intensity, the low asset turnover is expected; ROE enhancement would likely require further cost optimization, mix shift to higher-margin ICT/data center services, or capital efficiency improvements.

Growth Assessment

Operating income growth of +2.7% YoY indicates steady progress; net income growth of +7.4% YoY suggests improved below-OP line effects or better tax/associate contributions. Revenue growth YoY is unreported, constraining assessment of volume versus price drivers. The telecom core likely faced continued ARPU pressure offset by data usage, enterprise/solutions growth, and cost measures, consistent with the industry backdrop. Profit quality looks reasonable given the 1.88x OCF/NI ratio, indicating earnings are well backed by cash. Equity-method gains (176.38) provide incremental support but are not the main growth engine. Outlook-wise, investment intensity implied by -9,435.36 investing CF points to ongoing network/fiber/5G and platform investments, which can underpin medium-term service revenue and ICT growth. However, the FCF-light period and high payout ratio may limit near-term growth in shareholder returns absent external funding. With limited disclosure on segment trends, we assume growth remains mid-single-digit in operating profit, contingent on execution in enterprise/overseas services and continued cost rationalization.

Financial Health

Total assets are 334,527.90 and total equity is 95,401.68, yielding financial leverage of ~3.51x and an equity ratio of 27.5%. Reported debt-to-equity is 1.96x, but interest-bearing debt specifics and maturity ladder are unreported, constraining solvency analysis. Liquidity is supported by current assets of 83,703.59, cash and equivalents of 10,009.94, accounts receivable of 48,807.69, and inventories of 5,565.76. Accounts payable are 28,495.34; current liabilities are unreported, so the current ratio cannot be computed. Positive operating cash flow of 11,213.66 and net financing inflow of 636.28 suggest adequate access to liquidity. The balance sheet structure (large fixed assets and receivables) is typical for an incumbent telecom with infrastructure-heavy operations. While leverage is meaningful, the scale and cash generation help mitigate solvency risk; interest coverage cannot be assessed due to missing interest expense and EBITDA.

Cash Flow Quality

Earnings quality is strong: OCF/Net Income is 1.88x (11,213.66 / 5,956.51), indicating high cash realization. Free cash flow is 1,778.30 after -9,435.36 investing CF; capex itself is unreported, and investing CF may include M&A and other items, so FCF should be viewed as a blended proxy. Working capital dynamics cannot be fully dissected as current liabilities are unreported; however, sizable receivables (48,807.69) and payables (28,495.34) are consistent with the scale of telecom billing cycles. Financing CF was +636.28 despite dividends (-2,186.73) and buybacks (-361.23), implying net inflows from borrowing or other financing sources. Cash and equivalents of 10,009.94 bolster liquidity and provide a cushion for investment and distributions. Overall, cash conversion supports the quality of earnings, but the period’s FCF was insufficient to fully fund shareholder returns, indicating reliance on balance sheet or future cash flows.

Dividend Sustainability

The calculated payout ratio is 79.0%, indicating a high distribution level relative to earnings. Reported DPS is unreported, but cash dividends paid were -2,186.73 (100M JPY) in the period. FCF coverage is reported at 0.38x, signaling that dividends exceeded free cash generation in this period; absent capex detail, it is unclear how much is driven by strategic investments versus recurring capex. OCF of 11,213.66 provides underlying capacity to sustain distributions, but sustaining a high payout amid elevated investing needs could pressure leverage if FCF remains constrained. Share repurchases of -361.23 add to cash outflow demands. Policy-wise, NTT historically targets stable and progressive dividends; however, near-term flexibility may depend on investment cadence and cash generation in the second half. Without DPS guidance and capex disclosure, we view the payout as serviceable on an OCF basis but tight on an FCF basis.

Risk Assessment

Business Risks:

• Regulatory and policy changes impacting telecom pricing and wholesale access
• Domestic mobile ARPU pressure and competitive intensity from peers
• High capital intensity for fiber/5G/cloud platforms potentially compressing near-term FCF
• Technology shifts (cloud, edge, AI networking) requiring ongoing investment
• Integration and execution risks in global/enterprise services
• Cybersecurity, network outages, and data privacy incidents
• Natural disasters impacting network infrastructure and service continuity

Financial Risks:

• Elevated leverage (debt-to-equity 1.96x) with incomplete disclosure on interest-bearing debt
• Dividend and buyback outflows exceeding period FCF (FCF coverage 0.38x)
• Interest rate risk on sizable debt base (interest expense unreported)
• Working capital swings given large receivables and payables
• Potential pension/long-term obligations not detailed in the provided dataset
• FX exposure related to overseas operations and investments

Key Concerns:

• Sustainability of high payout ratio (79.0%) amid investment-heavy period
• Visibility on capex and interest coverage due to unreported items
• Dependence on financing inflows to bridge FCF shortfalls if investing remains elevated

Investment Implications

Key Takeaways:

• Operating income grew 2.7% YoY to 9,450.29 with net income up 7.4% to 5,956.51, indicating resilient earnings momentum
• ROE of 6.2% is leverage-supported, with low asset turnover (0.202x) typical of telecom
• Strong cash conversion (OCF/NI 1.88x) underpins earnings quality
• FCF of 1,778.30 was insufficient to fully fund dividends (FCF coverage 0.38x)
• Equity ratio of 27.5% and debt-to-equity of 1.96x reflect a leveraged but manageable capital structure
• Information gaps (cost structure, capex, interest, current liabilities) limit precision on margin and solvency metrics

Metrics to Watch:

• Capex and segment capex intensity (missing) to refine FCF outlook
• OCF/Net Income trend and working capital movements
• Net debt and interest expense to assess coverage and sensitivity to rates
• Dividend policy updates and DPS trajectory relative to FCF
• Revenue growth and ARPU/churn trends in domestic mobile and enterprise
• Equity-method income and overseas business profitability
• Regulatory developments affecting pricing and wholesale terms

Relative Positioning: Within Japanese telecom, NTT’s scale, diversified revenue mix (including enterprise and global services), and robust OCF provide defensive characteristics; however, its high investment needs and leverage, alongside a high payout ratio, make sustained FCF generation and disciplined capital allocation particularly important relative to peers.

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