Interspace Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥8.85B
• Operating Income: ¥371M
• Net Income: ¥-61M
• EPS: ¥32.82

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

Interspace reported FY2025 Q4 (consolidated, JGAAP) results with solid top-line momentum but notable margin compression. Revenue grew 11.8% YoY to ¥8,846m, while operating income declined 33.2% YoY to ¥371m, indicating negative operating leverage as costs outpaced growth. Gross profit rose to ¥6,359m, translating to a robust gross margin of 71.9%, but the operating margin compressed to 4.2%, pointing to higher SG&A, customer acquisition, or platform costs. Ordinary income was ¥399m and net income improved sharply to ¥206m (+246.1% YoY), suggesting favorable below-OP movements versus the weak prior-year base. DuPont decomposition yields a net margin of 2.33%, asset turnover of 0.791x, and financial leverage of 1.98x, culminating in an ROE of 3.66%, which is low for a digital marketing/advertising business profile. Cash generation was modest: operating cash flow was ¥169m (OCF/NI ~0.82), and free cash flow was negative at ¥-164m, reflecting higher investing outflows of ¥-333m. Liquidity appears sound with current assets of ¥9,628m vs. current liabilities of ¥5,524m (current ratio ~174%), supporting near-term obligations. The balance sheet is balanced with total liabilities of ¥5,591m and equity of ¥5,636m; recalculating from provided balances implies an equity ratio of roughly 50% (the reported 0.0% is an unreported placeholder). Debt-to-equity of ~0.99x (liabilities/equity) and zero reported interest expense suggest limited interest-bearing debt or minimal interest burden. EBITDA was ¥622m (7.0% margin), indicating low operating headroom after significant operating costs. The effective tax rate metric given as 0.0% is not reliable, as income tax expense of ¥279m is disclosed; we refrain from relying on the reported tax ratio. Dividend per share was ¥0.00, aligned with conservative capital returns amid weak FCF and compressed profitability. Overall, the results depict healthy revenue growth but strained profitability and cash conversion, with a stable liquidity position and moderate leverage. Key near-term priorities are restoring operating margin, improving OCF conversion, and calibrating investment intensity. Data limitations exist due to several unreported items (e.g., cash balance, share count, detailed debt), so conclusions focus on disclosed non-zero metrics.

Profitability Analysis

ROE_decomposition: ROE 3.66% = Net margin 2.33% × Asset turnover 0.791 × Financial leverage 1.98. Net margin is modest given strong gross margin, indicating elevated operating and/or non-operating costs. Asset turnover below 1.0x reflects a relatively asset-heavy balance sheet for the revenue base. Leverage is moderate and contributes to ROE but does not offset margin weakness. margin_quality: Gross margin 71.9% (¥6,359m/¥8,846m) is strong for a performance-driven digital model, but operating margin is only 4.2% (¥371m/¥8,846m). EBITDA margin of 7.0% suggests limited operating buffer after marketing and personnel costs. Net margin of 2.33% is thin and sensitive to any cost inflation or revenue mix shifts. operating_leverage: Revenue +11.8% YoY alongside operating income -33.2% YoY indicates negative operating leverage in FY2025, likely from higher variable acquisition costs, platform fees, or increased SG&A (e.g., sales/tech investments). Depreciation and amortization of ¥251m (2.8% of sales) implies that fixed cost absorption did not offset opex increases, compressing OP margin.

Growth Assessment

revenue_sustainability: Double-digit revenue growth (+11.8% YoY) is encouraging and suggests healthy demand and/or share gains. Sustaining this pace will depend on advertiser budgets, affiliate network health, and competitive pricing dynamics. profit_quality: Despite growth, profit quality weakened: OP margin fell to 4.2% and OCF/NI was 0.82, signaling softer cash conversion and potential working-capital drag. The jump in net income (+246% YoY) likely reflects a low prior-year base or non-operating/tax effects rather than underlying margin expansion. outlook: Near-term outlook hinges on cost normalization and discipline in customer acquisition spend. If the company can stabilize SG&A intensity and improve working capital turns, incremental revenue could translate more effectively to operating profit. Investment outflows (¥-333m) may support future growth, but execution must translate to improved EBITDA and OCF.

Financial Health

liquidity: Current assets ¥9,628m vs. current liabilities ¥5,524m yield a current ratio of ~174% and quick ratio of ~174% (inventories unreported). Working capital is ¥4,104m, indicating comfortable short-term liquidity. solvency: Total liabilities ¥5,591m vs. equity ¥5,636m imply an equity ratio of roughly 50% (recalculated; the disclosed 0.0% is an unreported placeholder). Debt-to-equity ~0.99x (liabilities/equity). Interest expense is unreported (0), suggesting a light interest burden and manageable solvency risk. capital_structure: Balance sheet is roughly half equity-financed. With low apparent interest costs and adequate liquidity, the capital structure is conservative to moderate. Absence of detailed interest-bearing debt disclosure limits precision on net leverage.

Cash Flow Quality

earnings_quality: OCF/Net income of 0.82 indicates below-par cash conversion, implying working-capital investments or non-cash gains. Depreciation and amortization of ¥251m provides some non-cash support to earnings, but not enough to lift OCF above net income. FCF_analysis: Free cash flow was negative at ¥-164m (OCF ¥169m minus investing ¥333m). Investing outflows likely relate to capex, software/intangible development, or strategic investments. Sustained negative FCF would constrain optionality unless offset by improved OCF or external funding. working_capital: Working capital is ample in absolute terms (¥4,104m), but the OCF shortfall suggests a YoY increase in receivables or other current asset items. Monitoring DSO/DPO/advance balances is key to restoring cash conversion.

Dividend Sustainability

payout_ratio_assessment: DPS was ¥0.00 with a payout ratio of 0.0%, appropriate given low ROE (3.66%), thin net margin (2.33%), and negative FCF. Retention supports reinvestment or balance sheet strength. FCF_coverage: With no cash dividends, FCF coverage is not a constraint this period. However, negative FCF would not support distributions without drawing on cash or increasing leverage. policy_outlook: Resumption or initiation of dividends likely requires improved operating margin, consistent positive FCF, and clearer visibility on investment paybacks. A conservative policy is plausible until cash conversion improves.

Risk Assessment

Business Risks:

• Margin pressure from higher customer acquisition costs and revenue-share payouts.
• Cyclicality of advertiser budgets and macro sensitivity in digital marketing.
• Competitive intensity in affiliate/performance advertising impacting pricing and take rates.
• Execution risk on investments (¥-333m) not translating to EBITDA/OCF gains.
• Regulatory or platform policy changes affecting traffic sources and conversion.

Financial Risks:

• Weak cash conversion (OCF/NI 0.82) and negative FCF (¥-164m).
• Potential working-capital volatility affecting liquidity despite a strong current ratio.
• Limited visibility on interest-bearing debt and cash balances due to unreported items.
• ROE at 3.66% below cost of equity, constraining internal capital generation.

Key Concerns:

• Sustained operating margin compression despite double-digit revenue growth.
• Persistence of negative FCF if investment intensity remains high.
• Data limitations on cash, debt composition, and share metrics complicate assessment.

Investment Implications

Key Takeaways:

• Top-line growth strong (+11.8% YoY), but operating income fell 33.2% YoY, indicating negative operating leverage.
• ROE is low at 3.66% due to thin net margin (2.33%) and sub-1x asset turnover.
• Liquidity is comfortable (current ratio ~174%) and leverage moderate (D/E ~0.99x).
• Cash conversion is soft (OCF/NI 0.82) and FCF negative (¥-164m) due to higher investing outflows.
• Dividend remains suspended (DPS ¥0.00), consistent with reinvestment and FCF profile.

Metrics to Watch:

• Operating margin and EBITDA margin trajectory.
• OCF/NI ratio and working-capital turns (DSO, DPO).
• Free cash flow and investing outflow normalization.
• Revenue growth versus customer acquisition/traffic costs (take rate).
• ROE improvement via margin expansion and asset turnover.

Relative Positioning: Relative to domestic digital marketing/affiliate peers, Interspace shows competitive gross margin but weaker operating margin and ROE, offset by solid liquidity and moderate leverage; improving cash conversion is key to closing the profitability gap.

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