TEAR Corporation FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥21.56B
• Operating Income: ¥1.64B
• Net Income: ¥882M
• EPS: ¥39.62

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

TEAR (24850) delivered solid top-line and bottom-line growth in FY2025 Q4 on a consolidated JGAAP basis, with revenue up 14.5% YoY to ¥21.563bn. Operating income increased 14.3% YoY to ¥1.643bn, implying an operating margin of 7.6%, supported by disciplined cost control and operating leverage on a growing revenue base. Net income rose 18.5% YoY to ¥891m, taking calculated ROE to 10.36% via a DuPont decomposition of 4.13% net margin, 0.774x asset turnover, and 3.24x financial leverage. Gross profit is reported at ¥7.437bn (34.5% margin), and EBITDA of ¥2.555bn implies an 11.8% margin, consistent with D&A of ¥912m. Cash generation was strong: operating cash flow of ¥2.377bn exceeded net income by 2.67x, and free cash flow was positive at ¥596m after ¥1.781bn of investing outflows, indicating good earnings quality. Liquidity is tight with a current ratio of 97.6% and slightly negative working capital (¥-0.14bn), which warrants monitoring given the company’s service-heavy cost structure and potential seasonality. The balance sheet shows total assets of ¥27.868bn, liabilities of ¥19.14bn, and equity of ¥8.603bn, resulting in a debt-to-equity of 2.22x and leverage (assets/equity) of 3.24x. Interest coverage is comfortable at 16.8x (EBIT/interest), suggesting manageable near-term debt service risk. The company reported no annual dividend (DPS ¥0) and a payout ratio of 0%, preserving cash for reinvestment or balance sheet flexibility. Ordinary income of ¥1.576bn and income tax expense of ¥567m suggest a normalized tax burden in the mid-30% range; therefore, the reported “effective tax rate 0.0%” metric is not reflective of the actual tax charge. There is an internal inconsistency between the reported cost of sales and gross profit; however, the gross margin metric (34.5%) appears internally consistent with the gross profit figure and revenue. Several key items show as zero (equity ratio, cash & equivalents, inventories, share counts), which indicates non-disclosure or different tagging rather than true zero balances; conclusions are drawn only from the available non-zero data. Overall profitability improved on both an operating and net basis, supported by strong cash conversion and adequate interest coverage. The near-term focus should be on sustaining revenue growth, maintaining gross margin discipline, and strengthening liquidity. Capital allocation appears prudent with positive free cash flow and no dividend outlay this period.

Profitability Analysis

ROE_decomposition: ROE 10.36% = Net Margin 4.13% × Asset Turnover 0.774 × Financial Leverage 3.24. This indicates moderate profitability, moderate asset efficiency, and relatively high leverage as the key driver of ROE. margin_quality: Gross profit of ¥7.437bn implies a 34.5% gross margin. Operating margin is 7.6% (¥1.643bn / ¥21.563bn). EBITDA margin is 11.8% on EBITDA of ¥2.555bn. The net margin of 4.13% reflects depreciation intensity and interest burden, yet remains healthy with YoY earnings growth. operating_leverage: Operating income grew 14.3% YoY alongside a 14.5% revenue increase, suggesting roughly neutral operating leverage this period. D&A at ¥912m (≈4.2% of revenue) indicates a capital-intensive element; sustained revenue growth is key to leveraging fixed costs further.

Growth Assessment

revenue_sustainability: Revenue increased 14.5% YoY to ¥21.563bn. The breadth of growth drivers is not disclosed; however, the scale suggests both volume and potentially price/mix contributions. Sustainability will hinge on continued customer acquisition and retention and capacity utilization. profit_quality: Operating income growth (+14.3% YoY) closely tracked revenue growth, while net income outpaced at +18.5% YoY, pointing to improved below-OP items (e.g., finance costs or non-operating items) and efficient tax planning. OCF/NI of 2.67x supports the quality of earnings. outlook: With solid margins, strong cash conversion, and adequate interest coverage, the company appears positioned to continue stable growth, assuming steady demand. Key dependencies include maintaining gross margin discipline and prudent capex to support expansion without overleveraging liquidity.

Financial Health

liquidity: Current ratio 97.6% and quick ratio 97.6% with working capital of ¥-0.14bn indicate tight short-term liquidity. Monitoring receivables turnover and payables terms will be important given the slight current liability overhang. solvency: Debt-to-equity is 2.22x (liabilities/equity). Interest coverage of 16.8x reflects comfortable debt servicing capacity. Leverage (assets/equity) of 3.24x supports ROE but elevates sensitivity to earnings volatility. capital_structure: Assets ¥27.868bn, liabilities ¥19.14bn, equity ¥8.603bn. The reported equity ratio of 0.0% is a non-disclosure artifact; the implied equity ratio (equity/assets) is approximately 30.9%.

Cash Flow Quality

earnings_quality: OCF of ¥2.377bn vs. net income of ¥891m (OCF/NI 2.67x) indicates high-quality earnings with strong cash realization. FCF_analysis: Free cash flow of ¥596m after investing outflows of ¥1.781bn suggests internally funded investment capacity. Financing CF was ¥-383m, consistent with modest deleveraging or shareholder-neutral flows. working_capital: Despite negative working capital of ¥-0.14bn, strong OCF implies effective working capital management. However, the absence of disclosed inventory and cash balances limits granular interpretation.

Dividend Sustainability

payout_ratio_assessment: Payout ratio is reported at 0% (DPS ¥0), implying full earnings retention. With EPS of ¥39.62 and positive FCF, the company could have optionality for future distributions, but current policy appears conservative. FCF_coverage: Given DPS of ¥0, coverage is effectively not applicable. Free cash flow of ¥596m provides capacity for debt reduction or reinvestment before considering dividends. policy_outlook: Absent explicit guidance, the zero dividend suggests a focus on reinvestment and balance sheet flexibility. Future distributions will likely depend on sustaining OCF strength and improving liquidity metrics.

Risk Assessment

Business Risks:

• Dependence on continued demand growth to leverage fixed costs and sustain margins
• Potential input cost inflation that could pressure gross margins
• Execution risk in capacity expansion and service delivery quality
• Customer mix and pricing power uncertainties

Financial Risks:

• Tight liquidity with current ratio below 1.0 and negative working capital
• Leverage sensitivity (2.22x D/E; 3.24x A/E) to earnings volatility
• Interest rate risk affecting financing costs despite current strong coverage
• Data gaps on cash balance and inventories limit visibility into short-term buffer

Key Concerns:

• Sustaining gross margin at 34–35% amid cost pressures
• Maintaining OCF/NI above 1.0x while managing working capital
• Ensuring capex discipline so that FCF remains positive
• Reconciling disclosed cost of sales with gross profit to validate margin trajectory

Investment Implications

Key Takeaways:

• Healthy growth with revenue +14.5% YoY and OP +14.3% YoY
• ROE of 10.36% driven by moderate margins, moderate asset efficiency, and elevated leverage
• Strong cash conversion (OCF/NI 2.67x) and positive FCF (¥596m)
• Tight liquidity (current ratio 97.6%) despite solid profitability
• Comfortable interest coverage (16.8x) mitigates near-term solvency risk
• No dividend; cash retained for reinvestment and balance sheet resilience

Metrics to Watch:

• Gross margin vs. cost inflation and pricing
• Operating margin and EBITDA margin stability
• OCF/Net income and free cash flow consistency
• Current ratio and working capital turns
• Asset turnover and capex intensity (D&A and new investments)
• Leverage (Debt-to-equity) and interest coverage

Relative Positioning: Within service-oriented peers, TEAR shows solid margin and ROE performance supported by strong cash conversion but operates with tighter liquidity and higher financial leverage than conservative peers; continued FCF generation will be key to improving balance-sheet resilience.

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