GMO Pepabo,Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥8.26B
• Operating Income: ¥790M
• Net Income: ¥551M
• EPS: ¥145.32

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

GMO Pepabo (36330) reported FY2025 Q3 consolidated results under JGAAP showing steady top-line growth and resilient profitability despite modest margin compression at the operating level. Revenue increased 1.9% year over year to ¥8,263 million, while operating income rose 1.1% to ¥790 million, implying a slightly lower operating margin versus the prior year. Gross profit of ¥4,262 million implies a strong gross margin of 51.6%, underscoring pricing power and scale efficiencies in its service mix. Ordinary income outpaced operating income at ¥1,046 million, indicating meaningful non-operating contributions (net financial and other income) that boosted earnings above core operations. Net income rose 37.7% to ¥759 million, with a net margin of 9.19%, suggesting improved below-the-line items (e.g., lower non-operating expenses or better tax effects) versus the prior year. DuPont analysis indicates ROE of 28.08%, driven by a combination of moderate asset turnover (0.755x), healthy net margins (9.19%), and elevated financial leverage (4.05x). Liquidity is adequate but not abundant, with a current ratio of 1.13x and positive working capital of approximately ¥1,083 million. Total liabilities of ¥9,030 million against equity of ¥2,703 million imply a liabilities-to-equity ratio of 3.34x, consistent with reported financial leverage and a computed equity ratio near 24.7% (equity/total assets), although the reported equity ratio field shows 0.0% due to non-disclosure formatting. Interest expense is minimal at ¥7.9 million, yielding very strong interest coverage of 100.5x off operating income. The ordinary-to-operating income gap suggests recurring non-operating gains or financial income as a tailwind in the period. Cash flow disclosure is not available in this extract (OCF/FCF shown as zero indicates unreported), limiting assessment of earnings-to-cash conversion. No dividends are disclosed in this dataset; payout ratios and FCF coverage metrics listed as zero are placeholders rather than actuals. Overall, the company demonstrates solid margin structure, disciplined operating expense control, and strong ROE, with leverage amplifying equity returns. The key watchpoint is reliance on non-operating items to bridge operating to ordinary profits amid modest revenue growth, along with the relatively tight current ratio. Data gaps (cash flow, D&A, share data) constrain deeper quality-of-earnings and capital allocation analysis, so conclusions focus on the available non-zero items.

Profitability Analysis

ROE_decomposition: ROE 28.08% = Net margin 9.19% × Asset turnover 0.755 × Financial leverage 4.05. ROA approximates 6.9% (NI/Assets = 759 / 10,938), indicating leverage is a significant driver of equity returns. margin_quality: Gross margin is robust at 51.6% (¥4,262m GP on ¥8,263m revenue), evidencing scalable, higher-value services. Operating margin is 9.6% (¥790m OI), slightly compressed versus revenue growth (+1.9% YoY vs. OI +1.1% YoY), suggesting incremental cost pressure or higher strategic spend. Ordinary margin is 12.7% (¥1,046m), supported by non-operating income net of small interest costs. Net margin is 9.19%, up YoY given net profit growth outpacing revenue. operating_leverage: With revenue up 1.9% and operating income up 1.1%, incremental operating leverage was modestly negative in the quarter, implying either mix effects or increased fixed cost absorption. Nonetheless, the high gross margin provides headroom for future operating leverage if top-line growth re-accelerates.

Growth Assessment

revenue_sustainability: Top-line growth of 1.9% YoY is positive but subdued, pointing to a mature growth phase or mixed demand across services. The high gross margin suggests the core franchise remains resilient. profit_quality: Ordinary income exceeding operating income by ~¥256m indicates recurring non-operating support (e.g., financial income or other gains). Interest expense is minimal, so the delta is likely from non-operating income; sustainability depends on the nature of those items. The net profit increase of 37.7% YoY suggests below-the-line improvements; based on income tax of ¥283m versus ordinary income of ¥1,046m, the implied effective tax rate is roughly 27%, even though the metric field shows 0.0% due to data limitations. outlook: If revenue growth remains low single digits, OI growth will hinge on cost discipline and mix optimization. A re-acceleration in subscription/service demand would translate well given the 52% gross margin, but dependence on non-operating contributions to reach ordinary income levels is a watchpoint.

Financial Health

liquidity: Current assets ¥9,253m vs. current liabilities ¥8,170m gives a current ratio of 1.13x and positive working capital of ¥1,083m; this is adequate but not conservative. Quick ratio mirrors current ratio given no inventories disclosed. solvency: Total liabilities ¥9,030m and equity ¥2,703m imply liabilities-to-equity of 3.34x and an equity ratio near 24.7% (computed). Interest burden is light (¥7.9m), and interest coverage is very strong at ~100x. capital_structure: Financial leverage of 4.05x (Assets/Equity) is elevated, magnifying ROE. The low interest expense suggests limited interest-bearing debt or favorable rates, with liabilities likely including non-debt items (e.g., contract liabilities), but this cannot be confirmed from the extract.

Cash Flow Quality

earnings_quality: Operating, investing, and financing cash flows are not disclosed here (zeros denote unreported), preventing reconciliation of earnings to cash. As such, accrual intensity and cash conversion cannot be assessed. FCF_analysis: Free cash flow is undisclosed. With strong interest coverage and positive working capital, liquidity appears manageable, but FCF coverage of any obligations cannot be evaluated without OCF and capex data. working_capital: Working capital of ~¥1,083m supports near-term obligations. Without detailed AR/AP/contract liability movements, we cannot assess whether working capital was a source or use of cash in the period.

Dividend Sustainability

payout_ratio_assessment: No dividend data is disclosed in this extract (DPS and payout ratio showing 0.00 are placeholders). Therefore, payout sustainability relative to earnings cannot be assessed. FCF_coverage: FCF coverage cannot be computed due to missing OCF and capex data. policy_outlook: Given ROE of 28% and modest revenue growth, capital allocation could prioritize selective reinvestment and balance sheet resilience; however, without management guidance or historical policy detail, dividend outlook remains undetermined.

Risk Assessment

Business Risks:

• Slower top-line growth (+1.9% YoY) may limit operating leverage and profit expansion.
• Dependence on non-operating income to lift ordinary income above operating income may not be consistently repeatable.
• Potential competitive pressure in internet services could compress pricing and utilization, impacting gross margin.
• Execution risk in product mix optimization required to sustain margins.

Financial Risks:

• Elevated financial leverage (Assets/Equity 4.05x; Liabilities/Equity 3.34x) increases sensitivity to earnings volatility.
• Tight liquidity buffer (current ratio 1.13x) leaves less room for working capital shocks.
• Data gaps on cash flows and debt composition limit visibility into refinancing or covenant risks.

Key Concerns:

• Sustainability of non-operating income contributions to ordinary income.
• Maintaining operating margin amid low-single-digit revenue growth.
• Limited disclosed cash flow data impeding assessment of earnings-to-cash conversion.

Investment Implications

Key Takeaways:

• Resilient profitability: gross margin 51.6% and operating margin 9.6% on modest growth.
• ROE is strong at 28.1%, aided by leverage (4.05x) and decent asset turnover (0.755x).
• Ordinary income exceeds operating income by ~¥256m, highlighting non-operating tailwinds.
• Liquidity is adequate but not ample (current ratio 1.13x; working capital ~¥1.08bn).
• Interest burden is minimal (coverage ~100x), mitigating near-term solvency risk.
• Data limitations on cash flows, D&A, and dividends constrain deeper analysis.

Metrics to Watch:

• Top-line growth re-acceleration and customer/ARPU trends.
• Operating margin trajectory and cost discipline versus mix shifts.
• Composition and recurrence of non-operating income.
• Working capital movements and any disclosure of OCF/FCF.
• Leverage metrics (equity ratio, interest-bearing debt details) and interest coverage sustainability.

Relative Positioning: Within Japanese internet/service peers, GMO Pepabo exhibits above-average gross margins and strong ROE, but with higher financial leverage and a tighter liquidity cushion; sustained performance will depend on stabilizing operating margins and reducing reliance on non-operating boosts.

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
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