IDEA Consultants,Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥17.88B
• Operating Income: ¥2.25B
• Net Income: ¥1.95B
• EPS: ¥223.33

Income Statement

Balance Sheet

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

Idea Consultants (いであ株式会社) reported FY2025 Q3 consolidated results under JGAAP showing modest topline growth but notable margin compression. Revenue rose 0.6% year over year to ¥17,877 million, while operating income fell 15.8% to ¥2,253 million, indicating negative operating leverage in the period. Gross profit was ¥6,215.7 million, implying a gross margin of 34.8%, but the operating margin declined to 12.6%, likely due to higher SG&A, cost inflation, and/or project mix effects. Ordinary income of ¥2,388 million exceeded operating income by ¥135 million, reflecting positive net non-operating income despite ¥6.8 million of interest expense. Net income declined 18.4% to ¥1,594 million, yielding a net margin of 8.92%. DuPont analysis points to an ROE of 5.36%, driven primarily by profitability (8.92% net margin), with low asset turnover (0.484x) and modest financial leverage (1.24x). The balance sheet is conservative: total assets are ¥36,961 million, total equity is ¥29,763 million, implying an equity-to-asset ratio around 80.5% (despite the reported equity ratio being 0.0% due to disclosure limitations). Liquidity appears strong with a current ratio of 310% and working capital of ¥11,689 million. Interest coverage is very high at 333.7x, indicating negligible financial risk from debt service. Cash flow data (OCF/Investing/Financing/Cash) were not disclosed in this dataset, so free cash flow and earnings quality cannot be verified from cash metrics. Depreciation and EBITDA are also not disclosed; EBITDA-based metrics are therefore not meaningful here. The effective tax rate shown as 0.0% is a data artifact; using ordinary income as a proxy for pretax income, the implied tax rate is roughly 38% (¥908 million/¥2,388 million). Dividend data (DPS, payout ratio, FCF coverage) and share count were not reported in this extract, limiting per-share and payout analysis beyond EPS of ¥223.33. Overall, the company remains solidly profitable with a strong balance sheet, but experienced margin pressure in Q3 leading to lower earnings. Given the project-based nature of the business, timing and mix likely influenced quarterly profitability. The low leverage and high equity base dampen ROE, which at 5.36% is moderate relative to profitability levels. Outlook hinges on order intake, execution efficiency, and containment of labor/subcontracting costs. Data gaps (cash flows, D&A, dividends, shares) constrain the depth of cash and capital allocation assessment.

Profitability Analysis

ROE is 5.36%, decomposed into net profit margin 8.92% × asset turnover 0.484 × financial leverage 1.24. Operating margin is 12.6% (¥2,253m/¥17,877m), down YoY given the 15.8% decline in operating income versus 0.6% revenue growth, indicating negative operating leverage (fixed costs and/or SG&A grew faster than revenue). Gross margin is 34.8% (¥6,215.7m/¥17,877m), suggesting solid value-add but compression likely occurred below gross profit (SG&A and other operating costs) as operating income contracted. Ordinary income margin is 13.4% (¥2,388m/¥17,877m), lifted by net non-operating gains of about ¥135m, partly offset by ¥6.8m interest expense. Net margin is 8.92%, reflecting a roughly 38% implied tax rate (using ordinary income as pretax proxy), though the reported 0% tax rate is a disclosure limitation. Asset turnover at 0.484x is low, typical of consulting/engineering businesses with large working capital and cash balances, which combined with low leverage (assets/equity 1.24x) yields moderate ROE despite healthy margins. Interest coverage is extremely strong at ~334x, confirming minimal drag from financing costs. Without D&A disclosure, EBITDA and EBITDA margin cannot be assessed; operating income should be used as the primary earnings metric. Overall, profitability remains sound but under near-term pressure from cost dynamics and mix.

Growth Assessment

Revenue grew 0.6% YoY to ¥17,877m, suggesting stable demand but limited expansion in the period. The 15.8% YoY decline in operating income implies margin compression and adverse operating leverage, likely due to higher labor/subcontractor costs, project timing, and/or a lower-margin mix. Net income declined 18.4% to ¥1,594m, steeper than operating income, consistent with a normalized tax burden and limited non-operating tailwinds. Sustainability of revenue will depend on order intake/book-to-bill in public and private sectors; this dataset lacks order/backlog information, so forward visibility is limited. Profit quality remains reasonable at the operating level, but the absence of cash flow data prevents verification of earnings conversion. With low leverage and a high equity base, earnings growth will rely primarily on margin recovery, utilization, and cost control rather than financial engineering. Near-term outlook hinges on execution discipline in fixed-price projects, subcontractor rate management, and seasonality around fiscal year-end deliveries typical in Japan. A return to mid-teens operating margins would support ROE improvement, while continued cost pressure would cap earnings growth.

Financial Health

Liquidity is strong: current assets ¥17,261m vs current liabilities ¥5,572m yields a current ratio of ~3.10x and working capital of ¥11,689m. The quick ratio equals the current ratio in this dataset because inventories are undisclosed (shown as zero); actual quick liquidity may be slightly lower if inventories exist. Solvency is robust with total liabilities ¥8,727m and total equity ¥29,763m; debt-to-equity (using total liabilities as a proxy) is ~0.29x. Equity-to-asset ratio is approximately 80.5% (¥29,763m/¥36,961m), despite the reported 0.0% equity ratio entry, indicating a very conservative capital structure. Interest expense is minimal at ¥6.8m, and interest coverage is ~334x based on operating income, underscoring very low refinancing or covenant risk. The company has ample capacity to absorb working capital swings and invest modestly without stressing the balance sheet.

Cash Flow Quality

Operating, investing, financing cash flows, and cash/equivalents were not disclosed in this dataset (zeros indicate unreported, not actual zero). As a result, OCF/Net Income (shown as 0.00) and FCF cannot be interpreted and should not be used to judge earnings quality here. In project-based businesses, OCF can be lumpy due to receivables and unbilled work; absent data, we cannot assess conversion, DSO, or working capital intensity. Depreciation and amortization are undisclosed, so we cannot bridge from operating income to CFO via non-cash charges. Working capital appears ample (¥11,689m), which provides a buffer but could mask potential receivables concentration risk if collections slow. Until OCF and capex are available, treat earnings quality as unverified from a cash standpoint.

Dividend Sustainability

Dividend per share, payout ratio, and FCF coverage are not disclosed in this dataset (zeros indicate unreported). EPS is ¥223.33; without DPS or actual FCF, we cannot compute payout or FCF coverage. The balance sheet’s strength (equity ratio ~80.5%, low leverage) suggests capacity to sustain a reasonable dividend if one exists, but policy, historical payout, and cash balances are not available here. Assess sustainability once actual DPS and cash flow statements are provided; cross-check against OCF stability and working capital swings.

Risk Assessment

Business Risks:

• Project timing and seasonality affecting quarterly revenue recognition and margins
• Cost inflation in labor and subcontracting leading to margin compression on fixed-price contracts
• Execution risk on complex engineering/environmental projects (scope changes, delays)
• Dependence on public-sector budgets and tender cycles
• Revenue mix shifts toward lower-margin work
• Client concentration and receivables collection timing
• Regulatory changes in environmental standards impacting demand and compliance costs

Financial Risks:

• Cash flow volatility from working capital swings (unbilled receivables, milestone billing)
• Limited cash flow disclosure impeding assessment of earnings conversion and FCF
• Potential overstatement of quick liquidity due to undisclosed inventories/cash detail
• ROE dilution from a large equity base and low leverage
• Tax rate variability versus assumptions (implied ~38% this period)

Key Concerns:

• Operating income down 15.8% despite marginal revenue growth, indicating negative operating leverage
• Lack of cash flow and D&A disclosure prevents verification of earnings quality and FCF
• Equity ratio reported as 0.0% in the dataset conflicts with calculated ~80.5%, highlighting data limitations

Investment Implications

Key Takeaways:

• Stable topline (+0.6% YoY) but material margin pressure with operating income down 15.8%
• Healthy gross margin (34.8%) but higher costs/SG&A compressed operating margin to 12.6%
• ROE at 5.36% reflects strong balance sheet (low leverage) and modest asset turnover
• Liquidity and solvency are strong (current ratio ~3.1x, D/E ~0.29x, interest coverage ~334x)
• Earnings quality unverified due to absent cash flow data; monitor OCF and capex when available

Metrics to Watch:

• Order intake, backlog, and book-to-bill
• Operating margin and SG&A-to-sales ratio
• Subcontracting ratio and labor cost per hour/utilization
• DSO and unbilled receivables; OCF/Net income conversion
• Capex and D&A once disclosed; FCF generation
• Effective tax rate versus normalized level
• Equity ratio and leverage trends

Relative Positioning: Within domestic engineering/environmental consulting peers, the company exhibits a very conservative balance sheet and strong interest coverage, with mid-teens operating margin potential but currently pressured. ROE is moderate due to low leverage and modest asset turnover; improvement depends more on margin recovery and efficiency than balance-sheet optimization.

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