RECOMM CO.,LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥13.09B
• Operating Income: ¥407M
• Net Income: ¥295M
• EPS: ¥2.43

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

Recomm is reporting FY2025 Q4 consolidated results under IFRS with solid top-line growth and improved profitability. Revenue reached 130.88, up 12.0% YoY, supported by a gross profit of 28.75 and a gross margin of 22.0%. Operating income rose to 4.07 (+51.4% YoY), implying notable operating leverage as profit growth outpaced sales growth. The operating margin is approximately 3.1% (4.07/130.88), and EBITDA was 5.83 with an EBITDA margin of 4.5%. Despite these improvements, net income remains modest at 2.32 (+176.6% YoY), implying a net margin of 1.8% and an effective tax rate of 36.7%. Ordinary income was reported at 1.42 (+127.4% YoY), which is below operating income despite profit before tax being higher than operating income; this likely reflects differences in Japanese “ordinary income” presentation and unreported non-operating items under IFRS. Profit before tax of 4.47 exceeding operating income signals positive non-operating contributions (e.g., equity-method gains of 0.71), but full reconciliation is not possible due to missing non-operating line items. On the balance sheet, total assets stand at 127.39 with total equity of 54.44 (equity ratio 40.0%), implying financial leverage (assets/equity) of 2.34x. Interest-bearing debt detail is partially available (short-term 27.88 and long-term 16.37), totaling at least 44.25, indicating moderate leverage against equity (≈0.81x) and cash and equivalents of 26.80. Working capital appears ample with current assets of 83.65; however, current liabilities are unreported, limiting liquidity ratio analysis. Cash generation improved, with operating cash flow of 4.72 exceeding net income (OCF/NI = 2.03x), and free cash flow positive at 1.40 after investing cash outflows of -3.32. Financing cash outflow of -4.43 suggests debt service and shareholder returns (dividends -1.27 and buybacks -0.36), leaving net cash down modestly but still adequate. DuPont analysis shows calculated ROE of 4.3% (margin 1.8% x asset turnover 1.027 x leverage 2.34x), while reported ROE of 0.1% appears inconsistent with the supplied figures, likely due to XBRL definitional or timing issues. Retained earnings remain negative (-5.14), indicating historical accumulated losses despite recent profitability. Overall, the quarter demonstrates better earnings quality (cash conversion > income), margin progress, and manageable leverage, though data gaps (non-operating detail, current liabilities, DPS) constrain precision. Monitoring the sustainability of the margin gains and working capital discipline will be key to sustaining ROE improvement.

Profitability Analysis

ROE_decomposition: Calculated ROE ≈ 4.3% = Net margin 1.8% x Asset turnover 1.027 x Financial leverage 2.34x. Reported ROE 0.1% in XBRL contradicts this and is likely a disclosure/definition issue. ROA proxy (NI/Assets) ≈ 1.8% x 1/2.34 ≈ 0.77%. margin_quality: Gross margin 22.0% reflects a reasonable spread over cost of sales. Operating margin ≈ 3.1% (4.07/130.88) and EBITDA margin 4.5% indicate thin but improving profitability. Net margin at 1.8% is compressed by tax (36.7%) and unobserved non-operating items. Equity-method income of 0.71 supports PBT above operating income. operating_leverage: Revenue grew 12.0% YoY while operating income grew 51.4% YoY, implying strong operating leverage from SG&A discipline and/or mix improvement. Implied prior operating income ≈ 2.69, suggesting prior operating margin ≈ 2.3% vs current ≈ 3.1%, a ~80 bps expansion.

Growth Assessment

revenue_sustainability: Top-line increased 12.0% YoY to 130.88. Without segment detail, sustainability depends on maintaining order intake and conversion amid a roughly 113-day cash conversion cycle. Inventory and receivables levels (23.52 and 27.03) imply reliance on working capital to support growth. profit_quality: NI growth (+176.6% YoY) outpaced sales due to margin expansion and positive non-operating contributions (e.g., equity-method income 0.71). OCF/NI of 2.03x corroborates earnings quality. However, ordinary income at 1.42 (below operating income) highlights classification effects and possible volatility in non-operating items. outlook: With improving operating margin and positive FCF, the trajectory is constructive if cost discipline persists. Key sensitivities include maintaining gross margin, managing inventory turns, and preserving equity-method gains. Elevated effective tax rate (36.7%) and negative retained earnings could temper net margin expansion if one-off benefits fade.

Financial Health

liquidity: Cash and equivalents are 26.80. Current assets are 83.65, but current liabilities are unreported, so current and quick ratios cannot be calculated. Working capital appears positive given accounts receivable (27.03) and inventories (23.52) vs accounts payable (14.50). solvency: Total liabilities 73.51 vs equity 54.44 imply a debt-to-equity (total liabilities/equity) of 1.35x and equity ratio of 40.0%. Interest-bearing debt identified totals at least 44.25 (ST 27.88 + LT 16.37), ≈0.81x equity and ≈0.35x assets. capital_structure: Moderate leverage with a tilt to short-term borrowings (27.88), increasing refinancing/rollover sensitivity. Equity-method investments contribute to earnings (0.71), but underlying asset details (investment securities, goodwill) are unreported.

Cash Flow Quality

earnings_quality: OCF 4.72 vs NI 2.32 yields OCF/NI of 2.03x, indicating cash-backed earnings. EBITDA 5.83 and D&A 1.76 support cash generation from operations. FCF_analysis: FCF positive at 1.40 (4.72 OCF - 3.32 investing CF). Financing outflows (-4.43) exceeded FCF due to dividends (-1.27), share repurchases (-0.36), and likely debt service, resulting in a net cash decrease but leaving a cash balance of 26.80. working_capital: Estimated AR days ≈ 75 (27.03/130.88365), inventory days ≈ 97 (23.52/88.13365), and AP days ≈ 60 (14.50/88.13*365), implying a cash conversion cycle around 113 days. This underscores the importance of inventory and receivables management to sustain OCF.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 57.0% based on available figures, while reported XBRL payout is 1.5%, which appears inconsistent with EPS/aggregate dividends indications. DPS is unreported, limiting precision. FCF_coverage: FCF coverage of dividends is 1.06x, indicating dividends were just covered by free cash flow in the period. policy_outlook: Given modest profitability (NI margin 1.8%), negative retained earnings (-5.14), and reliance on operating cash flow, a conservative approach to shareholder returns is implied. Continuity depends on sustaining OCF and managing leverage; explicit dividend policy details are not disclosed.

Risk Assessment

Business Risks:

• Thin operating margin (≈3.1%) susceptible to input cost inflation and pricing pressure
• Working capital intensity with a ~113-day cash conversion cycle
• Dependence on equity-method income (0.71) and other non-operating items to lift PBT
• Potential demand cyclicality in core markets and customer concentration risk (not disclosed)
• Execution risk in inventory and receivables management

Financial Risks:

• Short-term debt concentration (27.88) increases refinancing/interest rate exposure
• Negative retained earnings (-5.14) constrain balance sheet flexibility
• Limited visibility on interest expense and current liabilities impedes coverage analysis
• Tax rate volatility (effective 36.7%) impacting net earnings
• Liquidity assessment hampered by unreported current liabilities and cash detail granularity

Key Concerns:

• Discrepancies between operating income, ordinary income, and profit before tax due to classification and unreported items
• Sustainability of margin expansion given low EBITDA margin (4.5%)
• Dividend coverage only marginally above FCF (1.06x) amid moderate leverage

Investment Implications

Key Takeaways:

• Revenue grew 12.0% YoY to 130.88 with operating income up 51.4% YoY, indicating operating leverage
• Operating margin improved to ~3.1% and EBITDA margin is 4.5%, but profitability remains thin
• OCF/NI at 2.03x and positive FCF (1.40) signal improved cash conversion
• Balance sheet leverage moderate (liabilities/equity 1.35x; interest-bearing debt ≥44.25) with equity ratio 40.0%
• Calculated ROE ~4.3% contrasts with reported 0.1%, likely due to XBRL definitional issues
• Retained earnings remain negative (-5.14), highlighting historical deficits
• Dividend outlays appear just covered by FCF (1.06x) amid incomplete DPS disclosure

Metrics to Watch:

• Operating margin and gross margin trajectory
• OCF/NI ratio and free cash flow consistency
• Inventory and receivables days to manage the ~113-day CCC
• Short-term debt rollover and interest rate sensitivity
• Equity-method income contribution and volatility
• Effective tax rate normalization
• Equity ratio and net debt to EBITDA once interest and cash details are fully disclosed

Relative Positioning: Within small-to-mid cap Japanese peers in electronics/IT services and distribution clusters, Recomm exhibits average top-line growth with below-average but improving margins, moderate leverage, and better-than-earnings cash conversion; visibility is constrained by missing non-operating and liquidity disclosures.

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