YRGLM Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥4.93B
• Operating Income: ¥278M
• Net Income: ¥72M
• 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

Irugluum Co., Ltd. (3690) delivered FY2025 Q4 consolidated results under JGAAP showing strong top-line growth and improved operating profitability, but a bottom-line net loss due to significant non-operating/extraordinary factors. Revenue rose 35.7% YoY to ¥4,934m, with operating income up 69.6% YoY to ¥278m, indicating effective operating leverage. Ordinary income was ¥279m, but net income was a loss of ¥142m (EPS -¥22.98), implying sizeable extraordinary losses and/or non-recurring charges. Based on the bridge from ordinary income to net income and reported taxes, implied extraordinary loss is approximately ¥334m. Cash generation was solid: operating cash flow reached ¥590m and free cash flow was ¥402m after ¥188m of investing outflows. Liquidity is comfortable with a current ratio of 199.5% and working capital of ¥1,117m, while leverage appears moderate with a debt-to-equity ratio of 0.94x and interest coverage at 82.9x. DuPont decomposition points to negative ROE of -8.43%, driven by a -2.88% net margin despite healthy asset turnover of 1.54x and leverage of 1.90x. EBITDA was ¥453m, for a 9.2% margin, signaling underlying earnings capacity above the net result. There is an internal inconsistency between the reported gross profit (¥2,119m) and cost of sales (¥1,517m) versus revenue (¥4,934m); we rely on the provided gross margin metric but note the discrepancy. Dividend was suspended (DPS ¥0), and payout ratio was 0%, consistent with preserving capital amid a reported net loss. The balance sheet shows total assets of ¥3,205m and equity of ¥1,684m; the reported equity ratio field shows 0.0% but should be interpreted as undisclosed, not an actual zero. Cash and equivalents were not disclosed (shown as 0), but positive OCF and FCF indicate adequate internal funding capacity. Financing cash outflow of ¥264m suggests debt reduction and/or lease/other financing outflows in the absence of dividends. Overall, the business exhibited strong revenue momentum and improved operating earnings, offset by one-off charges dragging net income negative. Visibility into the nature and recurrence of extraordinary losses will be key to assessing normalized profitability. The company’s liquidity and cash generation provide a buffer while it addresses non-recurring items and invests for growth.

Profitability Analysis

ROE at -8.43% reflects a negative net margin (-2.88%) despite decent asset turnover (1.539x) and moderate leverage (assets/equity 1.90x). Operating income grew 69.6% YoY to ¥278m, outpacing revenue growth, highlighting operating leverage benefits. EBITDA of ¥453m (9.2% margin) versus operating income implies D&A of ~¥175m and indicates reasonable underlying profitability pre-D&A. Gross margin is cited at 42.9%; however, the provided gross profit (¥2,119m) is not arithmetically aligned with revenue and cost of sales—analysis proceeds using the stated margin while noting data inconsistency. Interest coverage is strong at 82.9x (operating income/interest expense), suggesting low financial drag on operations. The delta from ordinary income (¥279m) to net income (-¥142m) implies ~¥334m in net extraordinary or non-operating losses and taxes, which overwhelmed operating gains. Effective tax rate is not meaningful given negative pre-tax income (calculated metric shows 0.0%); reported income tax expense was ¥87m. Overall margin quality at the operating level looks improved YoY, but bottom-line quality is currently impaired by non-recurring items; normalization could restore positive ROE if extraordinary losses abate. Expense discipline and scale benefits are evident given the acceleration in operating profit versus revenue. Sustainability of EBITDA margin expansion will depend on maintaining revenue mix and cost control.

Growth Assessment

Revenue expanded 35.7% YoY to ¥4,934m, indicating strong demand and/or successful commercial execution. Operating income grew 69.6% YoY to ¥278m, showing positive operating leverage and potential scale efficiencies. Ordinary income was positive at ¥279m, but net income turned to a loss of ¥142m, driven by extraordinary items (~¥334m implied) and tax expense of ¥87m despite negative pre-tax income. The quality of growth appears solid at the operating level—EBITDA margin at 9.2% and interest coverage at 82.9x both improved capital efficiency and resilience. Cash flow growth is supportive: OCF of ¥590m and FCF of ¥402m suggest growth is not overly reliant on external funding. The sustainability of revenue growth will hinge on demand continuity in core products/services; details on segment mix are not provided, which limits granularity. The key question for outlook is whether extraordinary losses are one-off (e.g., impairments, litigation, restructuring) or recurring; normalization would likely translate operating gains into net profitability. Near-term growth investments are visible via ¥188m investing cash outflows, which could support continued top-line expansion. Overall, the outlook is constructive at the operating level, contingent on resolving non-recurring headwinds at the net income line.

Financial Health

Total assets were ¥3,205m and total equity ¥1,684m, implying leverage of 1.90x and a debt-to-equity ratio of 0.94x (using total liabilities as a proxy for debt under data constraints). Liquidity is sound with current assets of ¥2,240m and current liabilities of ¥1,123m, yielding a current ratio of 199.5% and working capital of ¥1,117m. Quick ratio equals the current ratio given reported inventories of 0 (treated as undisclosed rather than actual zero, but we can only use the provided numbers). Interest expense was modest at ¥3.4m, and coverage by operating income (¥278m) was 82.9x, indicating low refinancing risk near term. Financing cash outflow of ¥264m suggests debt repayments and/or other financing uses; dividend was 0, so outflows were not from distributions. While the equity ratio field shows 0.0%, this represents an unreported item; based on totals, an indicative equity ratio would be approximately 52.5% (¥1,684m/¥3,205m) if calculated, implying a balanced capital structure. No cash and equivalents figure was disclosed, but robust OCF and positive FCF mitigate immediate liquidity concerns. Overall solvency and liquidity appear adequate to support operations and investment plans.

Cash Flow Quality

OCF was ¥590m versus net income of -¥142m, yielding an OCF/Net Income ratio of -4.15; this indicates strong cash generation relative to accounting loss, consistent with non-cash extraordinary charges and D&A of ¥175m. Free cash flow was positive at ¥402m after ¥188m of investing outflows, suggesting internally funded growth. Working capital dynamics are not fully disclosed; however, the size of OCF relative to operating income (¥278m) implies favorable working capital movements and/or non-cash add-backs. EBITDA of ¥453m supports the conversion of earnings into cash; cash interest burden is low at ~¥3.4m. The negative net income alongside positive OCF points to earnings quality impacted by exceptional items rather than core cash generation. Financing outflows of ¥264m, absent dividends, likely reflect debt reduction and/or lease liability servicing, which is cash prudent. Cash balance was not disclosed (shown as 0), so period-end liquidity buffer cannot be quantified, but internally generated cash appears sufficient.

Dividend Sustainability

DPS was ¥0.00 with a payout ratio of 0.0% for the period, appropriate given the net loss of ¥142m. Free cash flow of ¥402m would have provided capacity for distributions, but prioritizing balance sheet strength and reinvestment is prudent amid extraordinary losses. FCF coverage of dividends is reported as 0.00x given zero dividends (not meaningful for capacity assessment). With interest coverage at 82.9x and comfortable liquidity, the company has room to reinstate dividends when net profitability normalizes, subject to policy and capital allocation priorities. Under JGAAP, extraordinary losses may be non-recurring; confirmation of their nature will drive dividend policy outlook. For now, dividend sustainability is not in question due to non-payment; future resumption would depend on maintaining positive OCF/FCF and returning to positive net income.

Risk Assessment

Business Risks:

• Revenue concentration or dependence on specific products/channels not disclosed; potential sensitivity to client budgets and digital advertising cycles (industry assumption).
• Execution risk in scaling operations while maintaining margin improvements.
• Competitive pressure potentially affecting pricing and gross margin sustainability.
• Potential need for ongoing investment (¥188m investing CF) to support growth, with uncertain payback periods.

Financial Risks:

• Extraordinary/non-recurring losses of approximately ¥334m driving a net loss despite positive ordinary income.
• Data limitations on cash and equivalents and inventory could obscure short-term liquidity buffers.
• Potential refinancing or covenant risk cannot be fully assessed without detailed debt maturity data, though interest coverage is strong.
• Equity ratio not reported; while implied solvency is acceptable, formal disclosure is incomplete.

Key Concerns:

• Understanding the nature, magnitude, and recurrence of the ~¥334m extraordinary losses.
• Resolving the inconsistency between reported gross profit and cost of sales to accurately assess margin structure.
• Sustaining revenue growth of 35.7% YoY without diluting margins.
• Visibility on cash balances and debt maturities to corroborate liquidity strength.

Investment Implications

Key Takeaways:

• Strong top-line growth (+35.7% YoY) with operating income up 69.6%, showcasing operating leverage.
• Net loss (-¥142m) driven by ~¥334m extraordinary impacts despite positive ordinary income (¥279m).
• Healthy cash generation: OCF ¥590m and FCF ¥402m; financing outflow of ¥264m likely debt-related.
• Liquidity and solvency appear solid (current ratio 199.5%, D/E 0.94x, interest coverage 82.9x).
• EBITDA margin 9.2% indicates improving underlying earnings capacity.
• Data gaps (cash, equity ratio, shares) and an internal gross profit inconsistency warrant cautious interpretation.

Metrics to Watch:

• Nature and recurrence of extraordinary losses (target: absence or material reduction in coming periods).
• Operating margin and EBITDA margin trends to confirm structural improvement.
• OCF conversion versus operating income (cash conversion), and FCF sustainability.
• Working capital movements (receivables and payables days) once disclosed.
• Leverage metrics (net debt/EBITDA) when cash balances are available.
• Revenue growth durability and churn/retention metrics, if disclosed.

Relative Positioning: Within TSE-listed digital/IT service peers, the company shows superior revenue growth momentum and strong interest coverage, but trails on reported net profitability due to extraordinary items; on a cash basis, it appears competitive with positive FCF and moderate leverage.

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