CARTA HOLDINGS,INC. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥19.48B
• Operating Income: ¥2.42B
• Net Income: ¥958M
• EPS: ¥53.87

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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: Strong Q3 with clear margin expansion and sharp profit growth, tempered by a sizable extraordinary loss and limited cash flow disclosure. Revenue rose 11.8% YoY to 194.81, driven by robust topline momentum in the core advertising/marketing businesses. Operating income surged 79.4% YoY to 24.20, lifting the operating margin to about 12.4%. Ordinary income climbed 89.3% YoY to 24.96, indicating improved core earnings despite slightly negative net non-operating items. Profit before tax, however, dropped to 15.01 versus ordinary income, implying an extraordinary loss of roughly 9.95 in the period. Net income increased 48.6% YoY to 13.63, translating to a net margin of 7.0%. Operating margin expanded by approximately 468 bps YoY (from ~7.7% to ~12.4%), reflecting strong operating leverage as SG&A grew slower than gross profit. Net margin also improved by roughly 174 bps YoY (from ~5.3% to 7.0%). Gross profit margin stands high at 80.4%, supporting the view of a higher-value, fee-based revenue mix. Equity increased to 251.26 and cash and deposits remain sizeable at 161.90, underpinning liquidity. Current ratio is healthy at 163%, and the provided D/E ratio of 0.91x indicates a conservative capital structure. Earnings quality assessment is constrained because operating cash flow was not disclosed; OCF/NI and FCF coverage cannot be verified. The extraordinary loss (approx. 9.95) is a watch-point for earnings volatility and indicates potential one-off items such as impairment or valuation losses. Forward-looking, sustained margin discipline and revenue growth could keep ROE trending up from the calculated 5.4%, contingent on avoiding further extraordinary losses and maintaining working capital efficiency. Dividend sustainability looks tight on a period basis given the calculated payout ratio of 104%, but the cash position provides near-term flexibility. Overall, momentum is positive, but confirmation via cash flows and the nature of extraordinary items will be key to the durability of earnings.

Profitability Analysis

DuPont decomposition: ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 7.0% × 0.405 × 1.91 ≈ 5.4%. The biggest driver of ROE improvement in the period is net profit margin expansion, supported by strong operating margin gains (OI +79.4% vs revenue +11.8%). Asset turnover at 0.405 reflects a cash- and receivables-heavy model typical for digital advertising intermediation; this likely moved modestly YoY given revenue growth outpacing total asset growth only slightly. Financial leverage at ~1.91x is stable and conservative. Business drivers: higher-margin segments, tighter SG&A control, and improved pricing/mix likely lifted the operating margin. Non-operating items were a slight drag (non-op expense net ~0.30), and an extraordinary loss (~9.95) diluted the flow-through from ordinary income to PBT/NI. Sustainability: the operating margin expansion appears structurally supported if SG&A discipline and mix persist; however, extraordinary items are by nature non-recurring but can recur sporadically (impairments/fair value). Watch for SG&A growth relative to revenue; in this quarter, operating leverage was favorable (OI growth far exceeded revenue). No red flags like SG&A growth outpacing revenue are visible in the available data.

Growth Assessment

Topline growth of 11.8% YoY indicates solid demand recovery and/or share gains in higher-value ad/marketing services. Operating income growth of 79.4% demonstrates significant operating leverage, likely from mix shift and cost control. Ordinary income +89.3% YoY further confirms improved core profitability before extraordinary factors. The net income growth of 48.6% is strong despite the extraordinary loss; absent that, bottom-line growth would have been even higher. Revenue sustainability appears reasonable given the broad industry recovery and platform-driven ad demand, but it remains sensitive to macro cycles and advertiser budgets. Profit quality is mixed: core operating performance is robust, yet the presence of a large extraordinary loss introduces earnings volatility. Outlook: If revenue growth moderates but margins hold near current levels, full-year profit should still expand meaningfully; upside hinges on maintaining mix/price discipline and avoiding further one-off losses.

Financial Health

Liquidity is solid: current ratio 163.3% and quick ratio 163.3% (no inventory exposure reported), with cash and deposits of 161.90 and accounts receivable of 154.11 against current liabilities of 227.51. No warning triggers (Current Ratio < 1.0) or high leverage (D/E > 2.0) are present; D/E is provided at 0.91x. Maturity profile shows most liabilities are short-term (current liabilities 227.51 vs noncurrent 2.00), typical for the industry; however, the large cash and receivables base alleviates refinancing/maturity mismatch risk. Accounts payable of 149.79 largely offset receivables, consistent with an agency/settlement model. Interest-bearing debt specifics are unreported, limiting a detailed solvency assessment; nonetheless, overall leverage appears conservative given equity of 251.26 and ample liquidity. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

Operating CF is unreported, so OCF/Net Income cannot be assessed; we therefore cannot confirm cash conversion quality. Free cash flow is not available, preventing formal FCF coverage analysis for dividends or capex. Working capital looks balanced: receivables (154.11) and payables (149.79) are closely matched, and high cash (161.90) supports liquidity. No explicit signs of working capital-driven earnings management are visible from the limited data (e.g., no unusual spikes disclosed), but this cannot be fully ruled out without OCF and detailed WC schedules. The extraordinary loss (~9.95) suggests valuation or impairment effects that do not reflect cash operating performance; this lowers the comparability of NI to underlying cash earnings in the quarter.

Dividend Sustainability

The calculated payout ratio is 104.0%, indicating dividends slightly exceed period net income, which is a potential sustainability flag if repeated. However, given the strong cash position (161.90) and likely seasonality/one-off extraordinary loss in the quarter, near-term dividend capacity appears manageable. FCF coverage is not calculable due to missing OCF and capex data. Policy-wise, the company has historically emphasized shareholder returns, but visibility on FY payout depends on full-year earnings and cash conversion. Key watch-points: restoration of payout ratio below 60% on a full-year basis, confirmation of positive OCF > NI, and absence of new extraordinary losses impairing distributable income.

Risk Assessment

Business Risks:

• Cyclicality of digital advertising demand tied to macro conditions and advertiser budgets
• Platform dependency and policy changes by major ad ecosystems affecting inventory and pricing
• Execution risk in maintaining higher-margin mix and SG&A discipline
• Competitive intensity from domestic peers and global platforms compressing margins

Financial Risks:

• Earnings volatility from extraordinary items (estimated ~9.95 loss this period)
• Unreported operating cash flow creates uncertainty around cash conversion and FCF
• Short-term liability concentration (though matched by cash/receivables) could elevate liquidity management needs
• Potential impairment or valuation risks on investment securities (59.39) amid market volatility

Key Concerns:

• Large extraordinary loss reducing PBT vs ordinary income
• Payout ratio at 104% for the period absent FCF disclosure
• Limited transparency on SG&A composition and cash flow metrics
• Tax rate at 36.1% may remain elevated if one-offs distort taxable base

Investment Implications

Key Takeaways:

• Strong operating momentum: revenue +11.8% YoY; operating income +79.4% with ~468 bps operating margin expansion
• Core profitability improved (ordinary income +89.3%), but a sizable extraordinary loss (~9.95) curtailed PBT/NI
• Net margin rose to 7.0%; DuPont ROE at 5.4% is primarily driven by margin gains with stable leverage
• Balance sheet is liquid (current ratio 163%) and cash-rich (161.90), supporting resilience and shareholder returns
• Dividend sustainability looks tight on a period basis (payout ~104%), pending confirmation from OCF/FCF

Metrics to Watch:

• Operating cash flow and OCF/NI ratio (target >1.0)
• Extraordinary gains/losses and impairment/valuation drivers
• SG&A as a percentage of gross profit and revenue for signs of cost creep
• Working capital days (DSO/DPO) and net working capital swings
• Effective tax rate normalization and any changes in tax items
• Contribution and volatility of non-operating items vs core OI

Relative Positioning: Versus domestic digital advertising peers, CARTA exhibits stronger near-term operating leverage and healthy liquidity with a conservative leverage profile; the main differentiator to monitor is the recurrence of extraordinary losses and cash conversion consistency.

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