KLab Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥4.93B
• Operating Income: ¥-860M
• Net Income: ¥-1.76B
• EPS: ¥-72.55

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

Verdict: FY2025 Q3 was weak with a sharp operating loss and a much deeper bottom-line loss, driven by revenue contraction and heavy fixed-cost drag. Revenue fell to 49.33 (−18.6% YoY), while operating income deteriorated to −8.60, implying an operating margin of −17.4%. Gross profit was 7.10, translating to a gross margin of 14.4%, which is low for the mobile gaming sector and signals limited monetization against server, royalty, and platform fees. Ordinary income came in at −10.45 as non-operating income of 0.96 (notably dividend income 0.59 and interest income 0.08) was offset by non-operating expenses of 1.65, including interest expense of 0.26. Profit before tax was −11.84, yet income tax expense was +5.73, producing an effective tax rate of −48.4%, which is unfavorable in a loss year and likely reflects valuation allowance movements or non-deductible items under JGAAP. Net income plunged to −39.74 (EPS −72.55 yen), markedly worse than the pre-tax loss, implying additional below-the-line factors not detailed in the dataset. Liquidity remains adequate with current assets of 49.08 versus current liabilities of 29.33 (current ratio 167%), and cash and deposits of 24.80 comfortably above short-term loans of 8.00. Capital structure appears conservative on paper (D/E 0.45x; equity ratio approximately 68.8%), but retained earnings are negative (−57.57), indicating accumulated deficits and limited internal buffer for future shocks. DuPont shows a calculated ROE of −55.2% (net margin −80.6%, asset turnover 0.472x, leverage 1.45x), with profitability being the dominant drag. ROIC is estimated at −15.6%, well below the 7–8% target range, underscoring value destruction in the quarter. Interest coverage is deeply negative (−32.7x), pointing to a lack of earnings capacity to service debt from operations, although absolute interest burden is small. Margin comparisons in basis points cannot be quantified YoY due to missing prior-period detail, but the current −1,740 bps operating margin level indicates significant compression from typical breakeven thresholds. Earnings quality assessment is constrained as operating cash flow was not disclosed; hence OCF-to-NI cannot be evaluated. The heavy tax expense in a loss period and the large gap between pre-tax loss and net loss are red flags for recurring bottom-line volatility. Forward-looking, stabilization hinges on revitalizing the title portfolio, tighter SG&A control, and safeguarding cash, while sizable intangibles (36.59) raise future impairment risk if performance does not recover.

Profitability Analysis

ROE decomposition: ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (−80.6%) × 0.472 × 1.45 ≈ −55.2%. The component that changed most adversely is the net profit margin, as evidenced by the operating margin of −17.4% and the net margin of −80.6%; asset turnover at 0.472x and leverage at 1.45x are secondary contributors. Business reason: revenue contracted by 18.6% YoY amid a fixed and semi-fixed cost base (server, royalties, platform fees, and SG&A), driving operating losses; additional below-the-line charges (tax expense despite loss and other unclarified items) amplified the net loss. Sustainability: the depth of the net margin appears partly cyclical (title life-cycle and pipeline timing), but the tax and below-the-line burden may include valuation allowances or one-off items; without detail, we assume portions are non-recurring, yet operating-level weakness is likely to persist until new titles or live-ops stabilization materialize. Concerning trends: SG&A breakdown is unreported, but with revenue down 18.6% and operating loss widening to −8.60, implied operating cost growth relative to revenue indicates negative operating leverage. Also, interest coverage at −32.7x underscores insufficient core earnings capacity.

Growth Assessment

Top-line declined 18.6% YoY to 49.33, indicating weaker title performance and/or lower in-game monetization. Gross margin of 14.4% is thin, suggesting high platform fees/royalties and limited pricing power. Operating margin of −17.4% shows deteriorating operating leverage. Non-operating income (0.96) provided limited cushion vs non-operating expenses (1.65), so growth relies primarily on core operations. Net income of −39.74 versus PBT of −11.84 implies structurally volatile bottom-line factors, which may obscure true run-rate profitability. With intangibles at 36.59 and goodwill at 5.55, the outlook is sensitive to impairment triggers if revenue momentum does not recover. Near-term growth sustainability will depend on the cadence of new launches, live-ops events, and IP/license renewals; absent a pipeline uplift, revenue pressures could persist. Data gaps (no CF, DA, capex) limit visibility into investment pacing for future growth.

Financial Health

Liquidity: current ratio 167.3% and quick ratio 167.3% are healthy; cash and deposits of 24.80 cover short-term loans of 8.00, mitigating near-term refinancing risk. No warning for current ratio (<1.0) or D/E (>2.0); D/E is 0.45x, conservative. Working capital is positive at 19.75, with accounts receivable of 7.88 supporting near-term inflows. Solvency: total equity of 71.95 against total assets of 104.60 implies an equity ratio of ~68.8%, though retained earnings are negative (−57.57), highlighting accumulated losses and limited internal capital. Maturity mismatch: current assets (49.08) comfortably exceed current liabilities (29.33); near-term debt concentration (short-term loans 8.00) appears manageable given cash on hand. Off-balance sheet: none disclosed in the dataset.

Cash Flow Quality

Operating cash flow is unreported, so OCF/NI cannot be assessed; this is a key limitation for earnings quality. Given the operating loss (−8.60), cash burn risk exists unless working capital releases offset the deficit. Free cash flow and capex are unreported; sustainability of any investment program or dividends cannot be evaluated. Potential red flags to monitor include: aggressive working capital swings (receivables vs deferred revenues), capitalization of development costs into intangibles (36.59 suggests sizable capitalized assets), and any large tax payments despite losses.

Dividend Sustainability

Dividend disclosures are unreported. With net income at −39.74 and negative retained earnings (−57.57), internal capacity to fund dividends appears weak. Without OCF and FCF data, coverage cannot be assessed; however, losses and negative ROE/ROIC suggest limited room for distributions under a typical profit-linked policy.

Risk Assessment

Business Risks:

• Title concentration and life-cycle risk leading to volatile revenue and user monetization
• Dependence on third-party IP licensing terms and renewals affecting profitability
• Platform fee and royalty burden compressing gross margins (gross margin 14.4%)
• Execution risk in live-ops and new title launches needed to restore growth

Financial Risks:

• Earnings capacity insufficient to cover interest (interest coverage −32.7x), albeit low absolute interest
• Potential impairment risk on intangibles (36.59) and goodwill (5.55) if performance remains weak
• Tax expense in a loss period (effective tax rate −48.4%) indicating valuation allowance or non-deductible items increasing bottom-line volatility
• Liquidity strain if operating cash flow remains negative (OCF unreported)

Key Concerns:

• Deep net loss (−39.74) versus PBT (−11.84) suggests additional negative items not detailed
• Negative ROE (−55.2%) and ROIC (−15.6%) highlight value destruction
• Accumulated deficits (retained earnings −57.57) limit financial flexibility
• Data gaps (no CF, DA, capex, SG&A detail) reduce transparency

Investment Implications

Key Takeaways:

• Revenue down 18.6% YoY with thin gross margin (14.4%) drove a −17.4% operating margin
• Bottom line severely impacted (net margin −80.6%) with adverse tax effects (−48.4% effective rate)
• Liquidity adequate (current ratio 167%) and low leverage (D/E 0.45x), but earnings capacity is weak
• High intangibles elevate impairment risk if turnaround lags
• ROE −55.2% and ROIC −15.6% signal urgent need for operational recovery

Metrics to Watch:

• Operating cash flow and working capital movements (deferred revenue, receivables)
• Monthly/quarterly bookings, ARPPU, and MAU/DAU trends for key titles
• SG&A trajectory versus revenue to gauge operating leverage
• Intangible asset roll-forward (capitalized development, amortization, impairments)
• Tax expense normalization and deferred tax accounting impacts
• Debt mix and maturity profile relative to cash balance

Relative Positioning: Within domestic mobile gaming peers, the company exhibits weaker profitability and efficiency (GPM 14.4%, OM −17.4%, ROE −55.2%, ROIC −15.6%) but maintains comparatively solid balance sheet liquidity and moderate leverage; recovery depends on pipeline execution 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
• 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