enish,inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥1.68B
• Operating Income: ¥-652M
• Net Income: ¥-900M
• EPS: ¥-28.91

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

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 a weak quarter for enish, marked by severe losses and negative gross margins despite adequate near-term liquidity. Revenue was 16.80 (100M JPY), down 32.1% YoY, underscoring demand softness and/or title underperformance. Gross profit was -0.24, implying a gross margin of -1.4%, which indicates pricing pressure and/or high platform and variable costs outweighing revenue. Operating loss widened to -6.52, translating to an operating margin of -38.8%, signaling insufficient scale to cover fixed SG&A of 6.81. Ordinary loss was -6.43 after 0.08 in non-operating income and 0.46 in non-operating expenses, with interest expense of 0.34 weighing on results. Net loss was -9.00, equating to a net margin of -53.6%, reflecting additional below-the-line items and minimal taxes (0.03). Interest coverage was -19.16x (Operating Income/Interest Expense), a clear stress indicator from a profitability perspective. Balance sheet liquidity remains adequate with a current ratio of 171.5% supported by cash and deposits of 8.10 and accounts receivable of 4.35. However, equity is thin at 7.16 with retained earnings deeply negative at -78.91, and financial leverage at 2.09x has amplified the -125.7% ROE. Asset turnover of 1.12 suggests the asset base is being utilized, but value creation is hampered by the sharply negative margin. Margin comparison vs prior year is not quantifiable from disclosed data, but the current profile shows material compression to below zero at the gross and operating level. Cash flow quality cannot be assessed due to unreported cash flow statements; therefore, the divergence between operating cash flow and net income is unknown. Short-term loans of 3.00 appear manageable against cash of 8.10, but persistent losses will erode this buffer. The effective tax rate is distorted by losses (-0.4%), providing no cushion. Forward-looking, enish needs either a meaningful hit title launch, cost resets, or platform/marketing efficiency improvements to restore gross profitability and narrow operating losses. Near-term solvency risk is mitigated by cash, but the run-rate loss threatens future dilution or refinancing pressure if performance does not improve.

Profitability Analysis

ROE decomposition: ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (-53.6%) × 1.120 × 2.09 ≈ -125.7%. The dominant driver of negative ROE is the extremely weak net profit margin, as asset turnover is modestly healthy and leverage is moderate. The margin pressure is rooted in negative gross profitability (-1.4% GPM) and fixed SG&A (6.81) that overwhelms the revenue base, producing a -38.8% operating margin. Non-operating items (interest expense 0.34 net of small non-op income) further depress ordinary income, but the core issue is operational. This deterioration is likely tied to underperforming titles, possibly elevated platform fees and user acquisition costs without commensurate monetization (ARPPU/retention), and a lack of scale. Sustainability: current margin levels are not sustainable; management must either launch successful titles or structurally cut costs to return to positive gross margins and narrow SG&A. Concerning trends include SG&A absolute levels that are high relative to revenue (SG&A/Revenue ≈ 40.5%), implying negative operating leverage as revenue declines 32.1% YoY without proportional cost reduction.

Growth Assessment

Top-line contracted by 32.1% YoY to 16.80, indicating weaker bookings and lower engagement/monetization across titles. With gross margin at -1.4%, the revenue mix and pricing are not covering direct costs, suggesting unfavorable platform terms, IP royalties, or high server/ops and marketing costs relative to sales. Profit quality is poor as losses are driven by the core operating line, not one-time items. Revenue sustainability is uncertain absent a clear pipeline catalyst; a new hit title could quickly change trajectory in the games sector, but visibility is limited from disclosed data. Outlook: base case requires revenue stabilization and cost discipline; upside scenario hinges on successful title launches or live-ops improvements boosting LTV/CAC, while downside risk is further revenue erosion and cash burn that may necessitate external funding.

Financial Health

Liquidity: Current ratio 171.5% and quick ratio 171.5% indicate adequate near-term coverage; cash and deposits of 8.10 are sizable vs current liabilities 8.68. No warning on current ratio (<1.0) is triggered. Solvency: Debt-to-equity ratio 1.22x (Total Liabilities 8.71 / Equity 7.16) is moderate but risky given losses; effective equity ratio is approximately 47.7% (7.16/15.00), though reported as N/A in XBRL. Maturity mismatch: Short-term loans of 3.00 are covered by cash of 8.10 and current assets of 14.88; near-term refinancing risk is manageable barring rapid cash burn. Interest burden: interest coverage is deeply negative (-19.16x), highlighting profit stress and potential future refinancing at higher spreads. Off-balance sheet obligations: none reported; data limitations prevent assessment of lease liabilities or content/IP commitments.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income cannot be assessed and earnings quality cannot be validated against cash generation. Given the scale of operating losses, underlying OCF is likely negative unless working capital releases are significant. Free cash flow is unreported; therefore, coverage of maintenance capex and any dividends cannot be evaluated. Working capital: accounts receivable of 4.35 vs revenue of 16.80 is notable, but without period sales cadence and AR aging, collection risk cannot be quantified; no clear signs of working capital manipulation can be inferred from available data. Sustainability: current cash balance (8.10) provides a buffer against short-term obligations (notably 3.00 in short-term loans), but prolonged negative OCF would erode liquidity and force funding actions.

Dividend Sustainability

No dividend data is reported, and given the net loss of -9.00 and likely negative free cash flow, dividend payments would be unsustainable. Payout ratios and FCF coverage are not calculable. Policy outlook: with retained earnings at -78.91 and low book value per share (≈21–21.35 JPY), capital preservation and business turnaround should take precedence over distributions.

Risk Assessment

Business Risks:

• Hit-driven games business; title underperformance leads to rapid revenue declines
• Negative gross margin (-1.4%) indicating structural pricing/cost issues
• User acquisition and marketing efficiency risk (LTV/CAC imbalance)
• Platform fee and IP royalty pressure affecting unit economics
• Pipeline execution risk for new title launches and live-ops

Financial Risks:

• Sustained operating losses driving equity erosion (ROE -125.7%)
• Interest coverage deeply negative (-19.16x), raising future refinancing costs
• Potential need for dilutive equity financing if cash burn persists
• Concentration in short-term borrowing (3.00) requiring rollover amid weak earnings

Key Concerns:

• Cash runway vs loss run-rate; cash 8.10 against net loss -9.00
• High SG&A intensity (~40.5% of revenue) amid revenue contraction
• Limited visibility due to unreported cash flow statements and SG&A breakdown
• Asset-light model offers flexibility but magnifies dependence on hit titles

Investment Implications

Key Takeaways:

• Revenue down 32.1% YoY to 16.80 with negative gross margin, pointing to stressed unit economics
• Operating margin -38.8% and net margin -53.6% drive ROE to -125.7%
• Liquidity adequate near term (current ratio 171.5%, cash 8.10) but profitability is the core weakness
• Interest coverage -19.16x underscores financing sensitivity if losses persist
• Balance sheet equity thin (equity 7.16; retained earnings -78.91) heightening dilution risk if turnaround lags

Metrics to Watch:

• Monthly bookings and ARPPU/retention for key titles
• Operating cash flow and cash balance trajectory
• SG&A run-rate vs revenue; marketing efficiency (CAC and payback)
• Gross margin recovery toward positive territory
• Short-term loan rollover terms and interest costs
• Pipeline milestones and launch schedules for new titles

Relative Positioning: Compared to domestic mobile/game peers, enish currently sits in the lower tier on profitability and earnings visibility, with adequate short-term liquidity but elevated execution and financing risk pending evidence of title traction and cost normalization.

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