PIXTA Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥1.91B
• Operating Income: ¥101M
• Net Income: ¥317M
• EPS: ¥38.45

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

Pixta Co., Ltd. (TSE: 34160) reported FY2025 Q3 consolidated results under JGAAP with clear top-line pressure and sharp profit contraction, highlighting meaningful operating deleverage. Revenue was ¥1,910m, down 13.2% YoY, while operating income declined 78.0% YoY to ¥101m and net income fell 79.0% YoY to ¥66m. Despite the downturn, reported gross profit margin is high at 75.9%, indicating a predominantly platform- and service-driven mix with low direct costs. Ordinary income of ¥99m was close to operating income, implying minimal non-operating impacts; interest expense was only ¥0.178m and not a material driver. DuPont analysis points to a calculated ROE of 5.71%, derived from a 3.46% net margin, 0.799x asset turnover, and 2.07x financial leverage. The current ratio of 173.2% and reported working capital of ¥1,060.964m suggest ample liquidity headroom in the near term. Interest coverage is robust at 567x, reflecting low financial burden. Revenue decline outpaced any cost adjustment, evidencing high operating leverage and sensitivity of earnings to volume. Given EPS of ¥38.45 against net income of ¥66m, implied shares outstanding are roughly 1.72m (indicative, as shares were not disclosed). The equity base is ¥1,155m, supporting a moderate ROE but below typical cost-of-equity ranges for small-cap internet/platform businesses. Some line-item inconsistencies exist between provided subtotals (e.g., cost of sales vs. gross profit, current assets vs. total assets), so we anchor on the furnished ratios and DuPont outputs for interpretation. Cash flow statements were not disclosed (values shown as zero denote unreported), limiting assessment of earnings-to-cash conversion and free cash flow. No dividend was declared (DPS ¥0), keeping cash within the business amid profit compression. Near-term outlook hinges on stabilizing revenue trends, improving conversion on the platform, and further cost discipline to rebuild operating margins. Key watchpoints include trajectory of revenue decline into Q4, marketing efficiency, and any strategic response to competitive and AI-related industry shifts.

Profitability Analysis

ROE of 5.71% is driven by net margin 3.46%, asset turnover 0.799x, and financial leverage 2.07x. The margin component fell meaningfully YoY as operating income dropped 78% on a 13.2% revenue decline, indicating pronounced operating leverage. Gross margin at 75.9% is strong for a digital marketplace model, but the compression occurred below gross profit (SG&A intensity). Operating margin approximates 5.3% (¥101m/¥1,910m), well below what the gross margin would imply, pointing to high fixed costs in content, marketing, and platform operations. Ordinary income (¥99m) is close to operating income, and negligible interest expense (¥0.178m) confirms limited financial drag; thus, the margin pressure is chiefly operational. Interest coverage at 567x indicates no near-term constraint from financing costs. Asset turnover at 0.799x is moderate for an asset-light platform; the decline in revenue likely weighed on turnover versus equity and assets. The high reported gross margin suggests content sourcing and distribution costs remain well-controlled, but SG&A absorption is the key variable. Overall, profitability deterioration is primarily a function of revenue contraction interacting with fixed cost structure, rather than cost-of-goods or financing.

Growth Assessment

Revenue was ¥1,910m, down 13.2% YoY, indicating a significant contraction in core demand or take-rate/monetization. Profitability fell far more than revenue (operating income -78% YoY), highlighting a lack of flexibility in the cost base. With net margin at 3.46% and ROE 5.71%, the company’s profit quality is currently modest and reliant on stabilizing sales. Ordinary income roughly tracking operating income suggests no one-off non-operating drag or support of note this quarter. The high gross margin implies the core business model remains intact, but the deleverage at the operating level underscores the need for cost recalibration or revenue reacceleration. Sustainability of revenue will likely hinge on user acquisition/retention, content supply breadth/quality, pricing, and competitive dynamics, including impacts from generative AI on demand for traditional stock assets. Near-term growth outlook is constrained until evidence of top-line stabilization emerges; a flat-to-slightly improving revenue trend would have outsized positive impact on earnings due to operating leverage. Absent disclosed quarterly cash flows, assessing the durability of investment in growth (e.g., marketing and platform development) is constrained.

Financial Health

Liquidity appears sound with a current ratio of 173.2% and working capital of ¥1,060.964m, suggesting comfortable short-term coverage. Debt-to-equity of 1.26x indicates moderate leverage; however, interest expense is minimal, implying the structure may include low-cost liabilities (e.g., trade payables or contract liabilities) rather than sizable interest-bearing debt. Financial leverage in DuPont at 2.07x (assets/equity) is consistent with a balanced capital structure for a platform company. Some reported balances show inconsistencies (e.g., current assets exceed total assets; liabilities plus equity not aligning to total assets), so we rely on the DuPont leverage figure and stated equity to frame solvency. Equity of ¥1,155m supports a buffer against earnings volatility. With ordinary to operating income closely aligned, there is no indication of hidden financial strain from non-operating items this quarter.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed (zeros indicate unreported), limiting an assessment of earnings-to-cash conversion. As a result, OCF/Net Income and free cash flow metrics cannot be interpreted, and the reported OCF/NI of 0.00 should not be read as a true cash shortfall. Given the strong gross margin but weak operating margin, working capital discipline and SG&A cash components are likely key drivers of future cash conversion. In the absence of CF data, we infer that liquidity (current ratio 173.2%) provides some cushion even if cash conversion is temporarily weak. Monitoring changes in receivables, payables, and deferred revenue (when disclosed) will be crucial to validate earnings quality.

Dividend Sustainability

No dividend was declared (DPS ¥0; payout ratio 0.0%). With operating income down 78% YoY and net margin at 3.46%, preserving cash appears consistent with near-term priorities. Free cash flow was not disclosed, so FCF coverage cannot be assessed; the reported 0.00x coverage reflects non-disclosure rather than an actual zero. Policy-wise, maintaining a non-dividend stance or a conservative payout until margins recover is reasonable given earnings volatility. Future capacity to resume dividends will depend on revenue stabilization and recovery in operating margin, alongside demonstrated cash generation.

Risk Assessment

Business Risks:

• Continued revenue contraction (-13.2% YoY) indicating demand softness or competitive pressure in stock content marketplaces
• High operating leverage leading to outsized earnings volatility when revenue declines
• Competitive intensity from global and domestic platforms, including pricing pressure and take-rate competition
• Disruption from generative AI altering customer demand for traditional stock photos/illustrations and affecting contributor economics
• Customer acquisition cost inflation and dependence on SEO/traffic algorithms
• Potential currency exposure if a portion of transactions or contributors are non-JPY
• Execution risk in cost control and product roadmap needed to restore operating margins

Financial Risks:

• Earnings compression reducing internal funding capacity for growth initiatives
• Working capital swings potentially impacting cash conversion (CF data not disclosed)
• Moderate leverage (D/E 1.26x) that could magnify downside if profitability weakens further
• Data limitations in reported items impede precise solvency/cash assessments

Key Concerns:

• Sustained top-line pressure without clear signs of stabilization
• Operating margin resilience given fixed cost base
• Visibility on cash flow generation and capital allocation absent disclosed CF statements

Investment Implications

Key Takeaways:

• Revenue down 13.2% YoY to ¥1,910m with significant operating deleverage (OP -78% YoY to ¥101m)
• Net margin 3.46% and ROE 5.71% reflect subdued profitability relative to historical potential
• Gross margin remains strong (75.9%), but SG&A intensity is compressing operating margins
• Liquidity is adequate (current ratio 173.2%, working capital ¥1,060.964m); interest burden negligible
• Cash flow statements unreported; earnings-to-cash conversion cannot be verified
• No dividend (DPS ¥0) preserves cash amid profit pressure
• Strategic response to competition and generative AI will be pivotal for revenue and margin recovery

Metrics to Watch:

• Quarterly revenue trend and ARPU/active buyer metrics (if disclosed)
• Operating margin progression and SG&A ratio
• Contributor payouts/take-rate and content supply breadth
• Traffic acquisition efficiency (CAC, paid vs. organic mix)
• Working capital movements and OCF/NI once disclosed
• Updates to guidance and any restructuring or cost optimization initiatives

Relative Positioning: Platform-like economics with high gross margin but currently weaker operating margin versus best-in-class digital marketplaces; leverage and interest burden are manageable, leaving recovery dependent on stabilizing demand and cost discipline.

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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