DIGITAL PLUS,Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥933M
• Operating Income: ¥-3M
• Net Income: ¥-81M
• EPS: ¥-16.73

Income Statement

Balance Sheet

Cash Flow Statement

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

DigitalPlus Co., Ltd. (36910) reported FY2025 Q4 consolidated IFRS results with revenue of 9.33 (hundred million JPY), up 11.3% YoY, indicating continued top-line momentum. Gross profit was 7.14, implying a robust gross margin of 76.5%, consistent with a high value-add software/services model. However, SG&A of 7.16 slightly exceeded gross profit, resulting in an operating loss of 0.03 and an operating margin of approximately -0.3%. Ordinary income of -1.96 suggests sizable non-operating losses, though the lack of non-operating line-item disclosure limits attribution. Profit before tax improved materially versus ordinary income to -0.36, implying positive non-recurring or below-ordinary items, with reported net loss of -0.71 (net margin -7.6%). EBITDA was modestly positive at 0.37 (margin 4.0%), indicating that core cash earnings before non-cash charges remain narrow but not negative. Cash flow from operations was -4.45, much weaker than net income, pointing to significant working capital outflows or cash costs not captured in operating profit. Free cash flow, defined here as OCF plus investing CF, was -3.99, despite a positive investing CF of 0.46, suggesting divestments or low capex intensity in the period. The balance sheet is relatively light, with total assets of 33.31 and equity of 9.21 (equity ratio 25.3%), implying financial leverage of 3.62x and a debt-to-equity ratio of 1.65x. Owners’ equity is 5.68 versus total equity of 9.21, suggesting substantial non-controlling interests; retained earnings are negative at -10.63, evidencing accumulated losses. Liquidity assessment is constrained by unreported current liabilities, but current assets of 15.97 and cash & equivalents of 11.12 provide some buffer. Accounts receivable of 7.07 equate to roughly 68 days of sales on a quarterly run-rate, an acceptable profile for a service-led business but a focus area given cash burn. DuPont-calculated ROE is -7.7% (net margin -7.6%, asset turnover 0.280, leverage 3.62x), weaker than a reported ROE of -0.1%, likely reflecting methodology and scope differences. With dividends unreported and retained earnings negative, distributable capacity appears constrained until sustained profitability and positive free cash flow are restored. Overall, the quarter shows healthy revenue growth and gross margin strength offset by opex pressure, negative operating cash flow, and capital structure leverage that warrants monitoring.

Profitability Analysis

ROE_decomposition: DuPont ROE = -7.7% = (-7.6% net margin) × (0.280 asset turnover) × (3.62x equity multiplier). Net losses are the primary drag; low asset turnover typical for a small-cap services/software model modestly compounds the impact, while leverage amplifies downside. margin_quality: Gross margin 76.5% demonstrates strong unit economics. SG&A at 7.16 slightly exceeds gross profit, driving operating margin to -0.3%. The large gap between operating income (-0.03) and ordinary income (-1.96) implies sizable non-operating losses; without line-item disclosure, the quality of earnings is opaque. Net margin is -7.6%. Effective tax rate of -2.0% reflects loss-making status and minor tax effects. operating_leverage: Revenue grew 11.3% YoY, but operating income remained negative due to SG&A pressure, indicating limited operating leverage realization in the quarter. EBITDA margin at 4.0% shows some underlying contribution before D&A, but cost discipline is needed for scalability.

Growth Assessment

revenue_sustainability: Top-line growth of 11.3% YoY suggests demand resilience. The high gross margin indicates that growth is likely driven by higher-value offerings rather than low-price volume. Sustainability will hinge on customer retention and new bookings; receivables growth vs. sales should be tracked to ensure revenue quality. profit_quality: EBITDA positive but slim (0.37) and operating loss indicate that opex growth is outpacing gross profit expansion. The discrepancy between operating and ordinary income suggests volatility or non-operating headwinds that can mask core trends. outlook: If SG&A can be contained and scaled against revenue, the business can pivot to positive operating leverage given the strong gross margin. However, persistent OCF deficits and negative retained earnings suggest a near-term focus on cash discipline and monetization rather than aggressive expansion.

Financial Health

liquidity: Current assets are 15.97, with cash & equivalents at 11.12, but current liabilities are unreported, preventing calculation of current/quick ratios. Working capital is shown as 15.97 (equal to current assets due to missing current liabilities), suggesting data limitations. AR of 7.07 (~68 days of quarterly sales) is material and should be monitored for collections risk. solvency: Total liabilities 15.19 vs. equity 9.21 implies D/E of 1.65x and equity ratio of 25.3%. Long-term loans are modest at 0.90; interest-bearing debt detail is unreported. Leverage is meaningful for a loss-making entity, elevating solvency risk if cash burn persists. capital_structure: Owners’ equity of 5.68 vs total equity 9.21 implies notable non-controlling interests (~3.53). Capital surplus of 18.41 and retained earnings of -10.63 indicate past equity infusions offset accumulated losses. Book value per share discrepancy (calculated 211.40 JPY vs XBRL 193.54 JPY) likely reflects differences in equity base used (total vs owners’ equity) and share count basis.

Cash Flow Quality

earnings_quality: OCF of -4.45 vs net income of -0.71 (OCF/NI = 6.27x in absolute terms) indicates cash outflows far exceed accounting losses, pointing to working capital build or cash costs not reflected in operating profit. EBITDA is positive, yet cash conversion is weak. FCF_analysis: Free cash flow defined as OCF + investing CF is -3.99, with investing CF positive at 0.46 (suggesting disposals or low capex intensity). Reported capex is essentially unreported (shown as -0.00), limiting traditional FCF (OCF - capex) analysis. working_capital: Receivables at 7.07 are high relative to quarterly sales; inventory is minimal at 0.35, consistent with an asset-light model. The large negative OCF implies either receivables expansion, prepayments, or other WC uses; without current liabilities details, precise attribution is not possible.

Dividend Sustainability

payout_ratio_assessment: Dividends are unreported; with net losses (EPS -16.73 JPY) and negative retained earnings (-10.63), a sustainable payout ratio is not currently supportable from earnings. FCF_coverage: FCF is negative (-3.99), indicating insufficient cash generation to fund dividends without external financing. policy_outlook: Given negative earnings, negative OCF, and accumulated deficits, near-term policy likely prioritizes reinvestment and balance sheet stability over distributions. Future dividends would require sustained profitability and positive FCF.

Risk Assessment

Business Risks:

• Execution risk in scaling revenue while controlling SG&A to reach durable operating profitability
• Customer concentration or churn risk typical for small-cap software/services firms (not disclosed, but a potential factor)
• Revenue recognition and collection risk evidenced by sizable receivables relative to quarterly sales
• Dependence on non-recurring items affecting the gap between operating and ordinary income

Financial Risks:

• Negative operating cash flow despite positive EBITDA, heightening liquidity pressure
• Leverage (D/E 1.65x; equity ratio 25.3%) amid losses, increasing solvency risk if cash burn continues
• Limited retained earnings (-10.63) constraining financial flexibility and dividend capacity
• Reliance on financing cash inflows (financing CF +7.09) to bridge operating deficits

Key Concerns:

• Sustained opex discipline needed to translate high gross margin into positive operating income
• Visibility on non-operating items causing ordinary income volatility is limited
• Working capital management and AR collections critical to restoring positive OCF
• Equity base quality and NCI impact on shareholders’ residual value

Investment Implications

Key Takeaways:

• Double-digit revenue growth (+11.3% YoY) with strong gross margin (76.5%) confirms attractive unit economics.
• Operating loss is narrow (-0.3% margin) but reflects SG&A pressure; EBITDA remains slightly positive (4.0% margin).
• OCF is materially negative (-4.45), indicating cash conversion challenges likely from working capital.
• Leverage is meaningful (D/E 1.65x; equity ratio 25.3%), increasing sensitivity to continued losses.
• Retained earnings are negative (-10.63), limiting distributable capacity.
• Financing inflow (+7.09) supported liquidity; sustainability of external funding should be monitored.

Metrics to Watch:

• Operating margin and SG&A-to-revenue ratio trend
• OCF and changes in working capital (especially receivables turnover and DSO)
• EBITDA margin progression and retention vs. expansion hiring
• Leverage ratios (D/E, net debt/EBITDA if interest-bearing debt becomes reportable)
• Repeatable revenue indicators (churn, net retention, backlog/bookings, if disclosed)
• Gap between operating income and ordinary income to assess non-operating volatility

Relative Positioning: Within Japan’s small-cap digital/services cohort, the company exhibits above-average gross margins but lags peers on operating leverage and cash conversion. Balance sheet leverage and negative retained earnings place it in the more cautious end of the spectrum until consistent positive OCF is demonstrated.

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
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