Aucfan Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥4.66B
• Operating Income: ¥-201M
• Net Income: ¥-95M
• EPS: ¥-31.51

Income Statement

Balance Sheet

Cash Flow Statement

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

Aucfan Co., Ltd. (TSE: 3674) reported FY2025 Q4 consolidated results under JGAAP showing a top-line contraction and a sharp deterioration in profitability. Revenue declined 3.8% YoY to ¥4,657 million, indicating softer demand or pricing pressure across the company’s commerce data and platform businesses. Gross profit was reported at ¥2,677 million, reflecting a high gross margin of 57.5%, which suggests the core service model remains structurally high-margin despite revenue headwinds. Operating income swung to a loss of ¥201 million (down 88.9% YoY), driven by operating cost pressure and limited operating leverage at the current revenue run-rate. Ordinary income was a loss of ¥168 million, and net income deteriorated to a loss of ¥329 million (+997.7% YoY in losses), highlighting additional below-operating line impacts and tax effects. EBITDA was modestly positive at ¥36.9 million, implying that non-cash charges (notably ¥237.9 million of depreciation and amortization) weighed heavily on operating income. Interest expense was limited at ¥8.1 million, but negative operating income translated to a negative interest coverage ratio (-25.0x). The company generated positive operating cash flow of ¥203 million despite the net loss, indicating working capital inflows and/or non-cash expense add-backs cushioned cash burn. Free cash flow was negative at ¥343 million due to ¥546 million of investing outflows, suggesting continued investment in development/intangibles or strategic assets. The balance sheet remains relatively sound: total assets were ¥7,084 million and total equity ¥4,092 million, implying an equity ratio of roughly 57.8% based on the balance sheet figures, although the reported equity ratio metric shows 0.0% (likely undisclosed in XBRL). Liquidity appears adequate with current assets of ¥6,806 million and current liabilities of ¥3,181 million, yielding a current ratio of 214%. Working capital stands at approximately ¥3,625 million, providing an operating buffer into FY2026. Debt-to-equity is shown as 0.80x (likely using total liabilities), but interest expense remains modest, suggesting limited reliance on interest-bearing debt. No dividend was declared (DPS ¥0.00), and the payout ratio is 0%, appropriate given negative earnings and negative FCF. DuPont decomposition indicates ROE of -8.04%, driven by a -7.06% net margin, 0.657x asset turnover, and 1.73x financial leverage, pinpointing margin pressure as the dominant drag. Data limitations exist (e.g., cash and equivalents, equity ratio, and share data are shown as zero/unreported), but the available figures indicate profitability headwinds, manageable leverage, solid liquidity, and continued investment spend.

Profitability Analysis

ROE of -8.04% is explained by a -7.06% net margin, 0.657x asset turnover, and 1.73x financial leverage, confirming that margin compression—not leverage or asset intensity—is the principal driver of negative equity returns. The 57.5% gross margin underscores a fundamentally high-value service mix; however, cost escalation in SG&A and D&A drove operating margin into the red. EBITDA margin was 0.8%, signaling minimal operating cushion and low near-term operating leverage at the current revenue level. The swing to operating loss despite a high gross margin suggests rising personnel, platform, or customer acquisition costs and higher amortization from prior investments. Ordinary loss was smaller than operating loss, indicating limited non-operating drag beyond modest interest expense. The negative interest coverage (-25.0x) is a function of operating losses rather than debt burden. Effective tax rate appears distorted (income tax charge alongside losses), likely reflecting non-deductible expenses or prior-period adjustments, further depressing net margin. Overall, profitability is constrained by insufficient scale against fixed costs, with a path to improvement dependent on revenue reacceleration and cost discipline.

Growth Assessment

Revenue fell 3.8% YoY to ¥4,657 million, indicating a slowdown in demand or competitive pressure. Given the high gross margin, the product/value proposition likely remains intact, but customer growth, retention, or pricing may have softened. The steep decline in operating profit into loss suggests operating deleverage: small revenue declines have an outsized impact on earnings due to fixed cost levels. EBITDA barely positive implies that current scale is near break-even on a cash operating basis before capex and investments. With investing cash outflows of ¥546 million, the company appears to be prioritizing product development, platform enhancements, or M&A, which may support future growth but weighs on near-term free cash flow. Profit quality is currently weak due to losses and tax distortions, but operating cash generation was positive in the period, partially mitigating the headline loss. Sustainability of revenue depends on stabilizing core subscriber/licensing or transaction volumes within the marketplace and analytics offerings; achieving even low single-digit growth could restore operating profitability given the high gross margin model. Near-term outlook is cautious: absent cost reduction or reacceleration in top line, earnings may remain under pressure. Medium term, successful monetization of ongoing investments could improve growth durability and margin recovery.

Financial Health

Liquidity is solid with current assets of ¥6,806 million versus current liabilities of ¥3,181 million, yielding a current ratio of 213.9% and working capital of ¥3,625 million. Quick ratio matches current ratio due to inventories shown as zero (unreported), but balance sheet composition suggests a cash and receivables-heavy profile typical of a platform/IT-services model. Total assets are ¥7,084 million and total equity ¥4,092 million; this implies an equity ratio near 57.8% based on available balance sheet figures, despite the reported equity ratio field being 0.0% (likely not disclosed). Total liabilities of ¥3,285 million translate to a debt-to-equity of approximately 0.80x on a broad definition; true interest-bearing debt levels are not disclosed but interest expense is modest at ¥8.1 million, implying limited financial leverage. Solvency appears adequate given the equity base and low interest burden, though recurring losses would gradually erode equity if not addressed. The company has capacity to absorb short-term volatility, but persistent negative FCF would incrementally pressure the balance sheet over time.

Cash Flow Quality

Operating cash flow was positive at ¥203 million, despite a net loss of ¥329 million, resulting in an OCF/Net Income ratio of -0.62 (a positive OCF against a negative NI). This suggests non-cash charges (notably ¥237.9 million D&A) and working capital inflows supported cash generation. While this is a favorable indicator for earnings quality relative to accounting losses, sustainability depends on stable receivables collections and payables cycles. Free cash flow was negative at ¥343 million due to ¥546 million of investing outflows, consistent with continued product and platform investment or capitalized development. The gap between EBITDA (¥36.9 million) and OCF (¥203 million) implies beneficial working capital timing in the period; reversal risk should be monitored. With cash and equivalents not disclosed (reported as zero), we infer adequate liquidity from the strong current ratio and sizeable current assets, but precise cash runway cannot be quantified. Overall, cash conversion is mixed: supportive near-term OCF but structurally negative FCF due to investment, necessitating either improved EBITDA or moderated capex to turn FCF positive.

Dividend Sustainability

No dividend was declared (DPS ¥0.00), and payout ratio is 0% given negative earnings. Free cash flow coverage is 0.00x, reflecting the absence of distributions and negative FCF. With net losses and negative FCF, resumption or initiation of dividends would be unlikely near term under a conservative policy. The balance sheet’s equity base and liquidity are supportive over the medium term, but capital allocation appears focused on reinvestment. Future dividend capacity will hinge on restoring operating profitability, achieving consistently positive OCF, and normalizing investment outlays to yield positive FCF.

Risk Assessment

Business Risks:

• Revenue contraction (-3.8% YoY) indicating demand softness or competitive pressure in core services
• High fixed-cost base leading to operating deleverage and sensitivity of earnings to small revenue changes
• Execution risk on ongoing investments (¥546 million investing outflows) requiring monetization to justify spend
• Potential customer churn or slower new customer acquisition impacting subscription/usage revenues
• Dependence on data/platform ecosystems and potential regulatory changes affecting data usage

Financial Risks:

• Sustained operating losses eroding equity and limiting financial flexibility over time
• Negative free cash flow driven by elevated investment requirements
• Tax expense despite losses, indicating potential cash tax or non-deductible items impacting cash generation
• Interest coverage negative due to operating loss, leaving limited room for incremental borrowing if needed
• Working capital timing reversal risk after period of favorable OCF

Key Concerns:

• Restoration of operating profitability from a -¥201 million loss
• Turning negative FCF (-¥343 million) to positive without impairing growth investments
• Stabilizing revenue trajectory to reestablish operating leverage given high gross margin
• Clarifying true cash position and interest-bearing debt levels (unreported in XBRL fields)
• Managing D&A and capitalized development to align investment pace with returns

Investment Implications

Key Takeaways:

• Top line declined 3.8% YoY to ¥4,657 million; growth stabilization is critical for margin recovery
• Gross margin remains robust at 57.5%, but operating cost base drove an operating loss of ¥201 million
• EBITDA positive but thin (¥36.9 million; 0.8% margin), indicating limited operating buffer
• OCF positive at ¥203 million despite net loss, but FCF negative at -¥343 million due to heavy investing outflows
• Balance sheet appears sound with an implied equity ratio around 58% and current ratio of 214%
• Interest burden is low (¥8.1 million), but coverage is negative given operating losses
• Dividend remains suspended (DPS ¥0), consistent with reinvestment and negative FCF

Metrics to Watch:

• Quarterly revenue growth and customer/subscriber metrics to gauge demand recovery
• Operating margin and EBITDA progression as indicators of operating leverage and cost control
• Capitalized development and investing cash flows to assess FCF trajectory
• Working capital movements (DSO/DPO) to validate sustainability of positive OCF
• Cash and equivalents disclosure and any changes in interest-bearing debt
• Tax payments/charges relative to profitability to monitor cash tax drag

Relative Positioning: Within Japan’s data/platform and e-commerce support peer set, Aucfan retains a structurally high gross margin profile but currently lags on operating profitability and free cash flow due to scale and investment headwinds; liquidity and capitalization are comparatively solid, offering runway to execute a turnaround.

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