YRGLM Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥4.93B
• Operating Income: ¥278M
• Net Income: ¥-169M
• EPS: ¥-22.98

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

Verdict: Strong topline and operating execution, but bottom-line swung to a net loss due to below-the-line and tax effects, while cash generation remained solid. Revenue rose 35.7% YoY to 49.34, with gross profit of 25.66 and a gross margin of 52.0%, highlighting robust unit economics. Operating income increased 69.6% YoY to 2.78, translating to an operating margin of roughly 5.6%. Ordinary income was also positive at 2.79, indicating stable non-operating balance (0.33 in income vs 0.32 in expense). Despite that, profit before tax was -0.61 and net income was -1.42, implying sizable special/extraordinary losses and an adverse tax impact (effective tax rate -178.6%). Operating cash flow was strong at 5.90, yielding free cash flow of 4.02 after -1.88 investing CF, comfortably funding -2.64 financing CF including -1.00 in share repurchases. Liquidity is ample with cash and deposits of 15.58 and a current ratio of 217.6%, and leverage remains manageable (D/E 0.90x, interest coverage 37.26x). DuPont shows ROE of -8.4% driven by a negative net margin (-2.9%) despite solid asset turnover (1.539x) and moderate leverage (1.90x). SG&A of 22.87 absorbed 89% of gross profit, but operating leverage was evident as operating income grew faster than revenue. The divergence between OCF and net income (OCF/NI -4.15x) points to non-cash charges and/or favorable working capital as the main drivers of cash strength. Tax expense of 1.08 despite a pre-tax loss suggests valuation allowance changes, non-deductible items, or taxes at profitable subsidiaries. Balance sheet resilience and positive FCF provide headroom to continue selective shareholder returns, though dividend data are unreported and payout metrics are noisy with negative earnings. Forward-looking, the key watchpoints are normalization of below-the-line losses, tax rate stabilization, and sustaining double-digit revenue growth without SG&A re-acceleration. If one-off losses abate, current operating momentum could translate into positive net profit given the 5.6% operating margin baseline. Near term, management discipline on capex (0.21) and working capital should preserve FCF while investing CF remains contained.

Profitability Analysis

ROE decomposition: ROE (-8.4%) = Net Profit Margin (-2.9%) × Asset Turnover (1.539x) × Financial Leverage (1.90x). The component with the largest negative impact is Net Profit Margin, which turned negative despite healthy operating margin and ordinary income. Business driver: likely extraordinary/special losses and an unusually adverse tax charge (effective tax rate -178.6%), overwhelming improved operating performance. Sustainability: the operating margin (~5.6%) looks more sustainable given revenue growth (+35.7% YoY) and SG&A discipline; the below-the-line and tax items appear episodic rather than structural based on the positive ordinary income. Operating leverage: Revenue growth outpaced SG&A growth (OI +69.6% vs revenue +35.7%), implying SG&A ratio improvement; SG&A consumed ~46.4% of revenue and ~89.1% of gross profit, leaving room for further margin expansion if growth persists. Gross margin at 52.0% supports healthy unit economics and potential for incremental margin with scale. Flag: watch for any reacceleration in SG&A that outpaces revenue, which would pressure OPM and offset the leverage benefits.

Growth Assessment

Revenue growth of +35.7% YoY to 49.34 indicates strong demand momentum in the core businesses. Operating income grew +69.6% to 2.78, evidencing operating leverage from higher gross profit on relatively contained SG&A. Ordinary income of 2.79 corroborates that non-operating items were net neutral. The net loss (-1.42) is inconsistent with operating trends and likely reflects non-recurring losses and/or tax effects rather than deteriorating core economics. EBITDA of 4.76 (9.7% margin) provides additional buffer for reinvestment. With capex at only 0.21 and investing CF -1.88, reinvestment remains disciplined. Outlook hinges on sustaining double-digit revenue growth while keeping the SG&A ratio trending down; if achieved, net profitability should normalize as one-off losses roll off. Equity method income is immaterial (0.03), so growth is primarily organic/operational. Key forward drivers: customer acquisition, retention and ARPU expansion, product roadmap execution, and any pricing initiatives. Risks to growth: macro advertising spend fluctuations and potential regulatory/platform changes affecting measurement/attribution products.

Financial Health

Liquidity is strong: current assets 24.02 vs current liabilities 11.04 yields a current ratio of 217.6% and quick ratio of 217.6%. Cash and deposits of 15.58 comfortably cover short-term loans of 2.50 and accounts payable of 1.38, minimizing refinancing risk. Solvency: total liabilities 15.20 vs equity 16.84; D/E at 0.90x remains below the 2.0x warning threshold, and interest coverage is robust at 37.26x. Maturity profile: short-term borrowings (2.50) are well covered by liquidity; long-term loans 3.54 are moderate relative to EBITDA (Debt/EBITDA 1.27x per provided metric). No explicit off-balance sheet obligations are reported; absence of disclosures means contingent liabilities cannot be ruled out. No warnings triggered for Current Ratio (<1.0) or D/E (>2.0).

Cash Flow Quality

OCF was 5.90 versus net income of -1.42 (OCF/NI = -4.15x), indicating strong cash earnings despite an accounting loss; this divergence likely reflects non-cash charges (depreciation 1.98, potential impairments) and/or favorable working capital movements. Free cash flow was 4.02 (OCF 5.90 + Investing CF -1.88), comfortably funding -2.64 in financing outflows including -1.00 share repurchases. Capex was modest at 0.21, consistent with an asset-light model. No overt signs of aggressive working capital manipulation are evident from the limited data; receivables (6.05) and payables (1.38) appear manageable relative to revenue scale, and cash rose despite buybacks. Earnings quality: while the metric flags (<0.8), the nature of the shortfall is accounting-driven (one-offs and tax) rather than cash weakness. Sustainability: maintaining positive OCF seems feasible if operating margins hold and working capital remains disciplined.

Dividend Sustainability

Dividend data (DPS and total dividends) are unreported; the reported payout ratio is 0.7% and the calculated payout ratio is -35.0% due to negative net income, which makes payout ratios noisy this period. Free cash flow coverage is ample (FCF coverage 8.09x per provided metric), indicating capacity for shareholder returns even with a net loss. Financing CF includes -1.00 in share repurchases, demonstrating flexibility to return cash while maintaining liquidity. Given stable cash generation, modest capex needs, and healthy cash reserves, ordinary dividends (if any) would be readily covered by FCF; however, visibility is limited by lack of DPS disclosure. Policy outlook: with net income negative, management may emphasize buybacks or maintain a conservative dividend to preserve flexibility until bottom-line normalizes.

Risk Assessment

Business Risks:

• Demand cyclicality tied to digital advertising and marketing budgets
• Product and platform dependency risk (e.g., cookie deprecation, API/policy changes by major platforms)
• Competitive pressure in marketing technology and analytics tools impacting pricing and churn
• Execution risk in scaling while containing SG&A to sustain operating leverage

Financial Risks:

• Earnings volatility from below-the-line items and tax effects (effective tax rate -178.6%)
• Potential impairment or special loss risk affecting net profit despite solid operations
• Refinancing risk limited but present due to 2.50 short-term loans and 3.54 long-term loans
• Sensitivity to working capital swings affecting OCF despite low capex

Key Concerns:

• Negative net income (-1.42) despite positive ordinary income (2.79) suggests one-off losses that need clarification
• Large divergence between OCF and NI (OCF/NI -4.15x) warrants reconciliation to non-cash items and WC movements
• Tax charge (1.08) in a pre-tax loss period raises uncertainty around future effective tax rate and deferred tax assets
• Reliance on continued SG&A discipline to maintain operating margin gains

Investment Implications

Key Takeaways:

• Core operations improved: revenue +35.7% YoY and operating income +69.6% with a 52.0% gross margin and ~5.6% OPM
• Bottom-line loss driven by non-operating/extraordinary and tax effects rather than operating weakness
• Cash generation strong: OCF 5.90, FCF 4.02, supporting -2.64 financing outflows and -1.00 buybacks
• Balance sheet resilient with 15.58 cash, current ratio 217.6%, and interest coverage 37.26x
• ROE negative (-8.4%) due to net margin; improvement hinges on normalization of below-the-line items and tax

Metrics to Watch:

• Operating margin trajectory vs SG&A ratio (SG&A as % of revenue currently ~46.4%)
• Reconciliation of special/extraordinary losses and outlook for their recurrence
• Effective tax rate normalization and deferred tax asset movements
• OCF conversion and working capital turns (receivables and payables vs sales)
• Cash balance and net debt relative to EBITDA (Debt/EBITDA 1.27x provided)

Relative Positioning: Within Japan small/mid-cap marketing technology peers, the company shows stronger-than-average cash generation and liquidity with improving operating leverage, but exhibits higher bottom-line volatility due to special losses and tax noise; near-term positioning depends on demonstrating repeatable profitability at the net level while sustaining double-digit top-line growth.

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