MarketEnterprise Co.,Ltd FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥6.33B
• Operating Income: ¥-80M
• Net Income: ¥-19M
• EPS: ¥-20.06

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

MarketEnterprise (TSE:3135) reported FY2026 Q1 consolidated results under JGAAP with solid top-line growth but a continued operating loss. Revenue rose 15.3% year over year to ¥6,334 million, reflecting sustained expansion in its core businesses. Gross profit reached ¥1,980.7 million, implying a gross margin of 31.3%, which is healthy for a recommerce/platform-driven model. Despite the higher revenue and decent gross margin, operating income was a loss of ¥80 million, indicating that selling, general and administrative expenses (SG&A) outweighed gross profit gains. Ordinary income was a loss of ¥85 million, and net income was a loss of ¥107 million, translating to a net margin of -1.69% and EPS of -¥20.06 for the quarter. The DuPont-based ROE printed at -5.97%, driven by the negative net margin, partially offset by relatively efficient asset turnover of 1.097 and financial leverage of 3.22x. Liquidity appears adequate with a current ratio of 117.7% and working capital of ¥755.7 million, suggesting near-term obligations are covered. Leverage is elevated but manageable with a debt-to-equity ratio of 2.41x and interest expense of ¥7.1 million; interest coverage was negative at -11.3x due to the operating loss. The lack of disclosed depreciation and cash flow statements limits assessment of cash conversion and investment intensity; zeros should be interpreted as not disclosed, not actual zero values. Inventory was also not disclosed, making quick ratio equal to the current ratio by construction and limiting working capital quality insights. Equity ratio was shown as 0.0% in the dataset but should be inferred as approximately 31% (equity of ¥1,793 million over total assets of ¥5,772 million), indicating a reasonable capital buffer. The quarterly loss despite strong revenue growth suggests operating leverage remains unfavorable at current scale, or there are upfront growth investments and/or marketing costs depressing near-term profitability. Tax expense of ¥43.5 million despite a pre-tax loss likely reflects non-cash tax items or timing differences under JGAAP. With no dividend (DPS ¥0) and negative earnings, capital allocation appears focused on reinvestment and balance-sheet preservation. Overall, the quarter underscores the need for tighter cost control or monetization improvements to translate growth into sustainable profitability, while liquidity is acceptable and solvency is stable. Data limitations, particularly absent cash flow disclosures, constrain definitive conclusions on cash generation and the durability of growth investments.

Profitability Analysis

ROE_decomposition: ROE -5.97% = Net Margin (-1.69%) × Asset Turnover (1.097x) × Financial Leverage (3.22x). The negative net margin is the primary drag; asset utilization and leverage are within typical ranges for an asset-light platform-enabled model. margin_quality: Gross margin at 31.3% (¥1,980.7m gross profit on ¥6,334m revenue) is healthy, implying reasonable unit economics. Operating margin is -1.26% (¥-80m/¥6,334m), indicating SG&A intensity remains high. Implied SG&A is ~¥2,060.7m (gross profit minus operating income), suggesting growth investments, marketing spend, or logistics/fulfillment costs are pressuring margins. Net margin at -1.69% reflects additional non-operating costs and tax items. operating_leverage: Revenue grew 15.3% YoY but operating income remained negative, implying fixed/semi-fixed costs are not yet leveraged. If gross margin holds near 31%+, incremental SG&A discipline is needed to achieve breakeven; small improvements in SG&A ratio could swing to positive operating profit given the current revenue base.

Growth Assessment

revenue_sustainability: Top-line growth of 15.3% YoY to ¥6.33bn suggests demand resilience across recommerce and platform services. Sustained growth will depend on inventory sourcing, partner ecosystem expansion, and customer acquisition efficiency. profit_quality: Losses at operating and net levels indicate current growth is not yet translating into earnings. Gross margin is adequate, but SG&A intensity dilutes profitability; improving marketing ROI, logistics efficiency, and automation will be key to提升 profit quality. outlook: Near-term profitability hinges on SG&A normalization and scale benefits. If revenue growth persists in mid-teens and gross margin remains stable, breakeven could be achievable within the fiscal year; however, absent visibility on cash flows and depreciation, the timing is uncertain.

Financial Health

liquidity: Current assets ¥5,031.9m vs. current liabilities ¥4,276.1m yield a current ratio of 117.7% and working capital of ¥755.7m. Quick ratio is reported equal to the current ratio due to undisclosed inventories; true quick ratio may be lower if inventories exist. solvency: Total liabilities ¥4,324.8m and equity ¥1,793.0m imply a debt-to-equity of 2.41x and inferred equity ratio near 31% (not 0.0%). Interest expense ¥7.1m with negative EBIT produces interest coverage of -11.3x, indicating short-term pressure if losses persist. capital_structure: Financial leverage at 3.22x (assets/equity) supports ROE when profitable but amplifies downside during losses. Balance sheet appears moderately leveraged for a platform/commerce model, warranting careful management of working capital and financing costs.

Cash Flow Quality

earnings_quality: Cash flow data were not disclosed (OCF/ICF/FCF shown as zero placeholders). Consequently, accrual intensity and cash conversion cannot be assessed this quarter. The presence of a tax expense with a net loss suggests non-cash/timing effects under JGAAP. FCF_analysis: Free cash flow is undisclosed. Given the operating loss and positive working capital position, near-term FCF risk skews negative unless SG&A efficiency improves or working capital releases occur. working_capital: Working capital is ¥755.7m; inventory and receivable details are not available. Payables, prepayments, and other current liability dynamics cannot be evaluated without the cash flow statement and detailed current asset breakdown.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 and payout ratio is effectively 0% given negative earnings. With net income at -¥107m in Q1, distributions are understandably paused. FCF_coverage: FCF coverage is not assessable due to undisclosed OCF/CapEx. Given operating losses and interest burden, internal coverage of dividends would likely be insufficient near term. policy_outlook: Capital appears directed toward growth and stabilization of profitability. A resumed dividend would likely require sustained positive operating income and demonstrated cash generation; no change in policy is inferred for now.

Risk Assessment

Business Risks:

• Execution risk in scaling recommerce/platform operations while controlling SG&A.
• Dependence on customer acquisition and inventory/product sourcing quality.
• Competitive intensity in online marketplaces and reuse ecosystems compressing margins.
• Logistics and fulfillment cost volatility affecting unit economics.
• Potential seasonality between quarters leading to earnings volatility.

Financial Risks:

• Negative operating income leading to weak interest coverage (-11.3x) if prolonged.
• Moderate leverage (D/E 2.41x) increasing sensitivity to earnings shortfalls.
• Limited cash flow visibility due to non-disclosure of OCF/FCF this quarter.
• Tax cash outflows despite accounting losses due to timing/valuation allowances.
• Refinancing and rate risk if debt includes short-term borrowings.

Key Concerns:

• Sustained SG&A intensity preventing operating breakeven despite 15.3% YoY revenue growth.
• Lack of disclosed cash flow data obstructs assessment of cash runway and investment needs.
• Interest burden and leverage could constrain strategic flexibility if losses persist.

Investment Implications

Key Takeaways:

• Top-line momentum is solid (¥6.33bn, +15.3% YoY) with a healthy 31.3% gross margin.
• Operating and net losses (-¥80m and -¥107m) highlight cost discipline as the key lever.
• Liquidity is adequate (current ratio 1.18x; WC ¥756m), but interest coverage is negative.
• Leverage is moderate-to-elevated (D/E 2.41x; leverage 3.22x), amplifying profit sensitivity.
• Data gaps (cash flows, inventories, depreciation) limit visibility on cash generation and asset intensity.

Metrics to Watch:

• Operating margin progression toward breakeven and positive territory.
• SG&A-to-sales ratio and marketing ROI.
• Gross margin stability around 30%+.
• Interest coverage and net debt/EBITDA (when EBITDA is disclosed).
• Operating cash flow and working capital turns (AR/AP/inventory days) once disclosed.

Relative Positioning: Within Japanese recommerce/platform peers, the company exhibits above-average revenue growth but lags on profitability conversion in the quarter; balance sheet leverage is manageable but requires improvement in operating earnings to enhance coverage and 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
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