GMO Payment Gateway,Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥82.50B
• Operating Income: ¥31.34B
• Net Income: ¥22.54B
• EPS: ¥287.79

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

FY2025 Q4 was a strong finish for GMO Payment Gateway, with double-digit top-line growth and outsized operating profit expansion, indicating healthy operating leverage. Revenue rose 11.8% year over year to 824.99, while operating income grew 24.4% to 313.40 and net income increased 16.7% to 218.29. Gross profit reached 554.95, translating to a high gross margin of 67.3%, consistent with an asset-light, fee-based model. Operating margin is estimated at 38.0% (313.40/824.99), up roughly 390 bps from about 34.1% a year ago based on derived prior-period figures, signaling improved cost discipline and scale benefits. Net margin printed at 26.5%, underscoring strong profitability despite investment in growth. Ordinary income surged 47.8% to 294.05, suggesting limited drag from non-operating items and possibly improved equity-method and other contributions (equity method income was 4.00, about 1.3% of profit). Cash generation was excellent: operating cash flow of 537.59 was 2.46x net income, and free cash flow of 464.31 comfortably covered dividends (4.89x). The effective tax rate was 29.4%, broadly in line with a normalized level under IFRS. Balance sheet scale increased to total assets of 4,068.00 with equity of 1,161.77 and an equity ratio of 27.8%. While the reported D/E ratio of 2.50x screens high, interest-bearing debt is modest relative to EBITDA (Debt/EBITDA about 0.66x), and liquidity appears ample with cash and equivalents of 2,200.40. SG&A was 244.23 (about 29.6% of revenue), and with operating profit growing faster than revenue, operating leverage was positive in the period. Reported XBRL ratios such as ROE 0.2% and operating margin 0.4% appear inconsistent with the underlying financials; the DuPont-derived ROE is approximately 18.8%. ROIC is strong at 15.9%, well above the 7–8% benchmark, supporting value creation. Dividend sustainability looks sound with a calculated payout ratio of 43.5% and ample FCF coverage. Forward-looking, the company enters the new fiscal year with healthy momentum in margins, strong cash generation to fund growth and shareholder returns, and manageable financial risk, though leverage optics will remain elevated due to operating liabilities inherent to the payments model. Key watchpoints include sustaining operating leverage, monitoring working-capital-driven cash flow volatility tied to settlement cycles, and competitive/pricing dynamics in payment processing.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (26.5%) × Asset Turnover (0.203) × Financial Leverage (3.50x) ≈ 18.8% ROE. The largest change driver versus revenue growth was margin expansion: operating income grew 24.4% vs revenue 11.8%, implying operating margin rose from ~34.1% to ~38.0% (approximately +390 bps). The business reason appears to be operating leverage from scale in transaction volumes and disciplined SG&A growth relative to revenue, within a high gross margin model (67.3%). Asset turnover remains modest at 0.203, typical for payment intermediaries with sizable settlement-related assets/liabilities; there is no evidence of a structural change here. Financial leverage at 3.50x reflects large operating liabilities (settlement/payables) rather than heavy debt funding; the Debt/EBITDA of ~0.66x supports this view. Sustainability: Gross margin and positive operating leverage are likely sustainable if transaction volumes and value-added services continue to grow; however, competitive pricing and product mix shifts could cap further margin expansion. Flag: While SG&A as a percent of sales is about 29.6%, the lack of YoY SG&A granularity prevents confirming whether SG&A growth definitively trailed revenue; nonetheless, the faster growth in operating profit than revenue signals favorable operating leverage this period.

Growth Assessment

Revenue growth of 11.8% indicates healthy demand across payment processing and related services. Profit growth outpaced revenue, with operating income up 24.4% and net income up 16.7%, pointing to efficiency gains and a richer mix. Ordinary income rose 47.8%, signaling supportive non-operating contributions and limited drag from below-OP items. EBITDA of 352.61 (42.7% margin) underlines strong operating cash earnings. Equity-method income was small at 4.00 (about 1.3% of profit), suggesting performance is primarily driven by core operations. Outlook: sustaining double-digit revenue growth will rely on continued e-commerce penetration, merchant acquisition, and cross-sell of value-added services; margin durability depends on pricing discipline and scale. The company’s ROIC of 15.9% indicates ample headroom to reinvest at attractive returns. Near-term growth risks include competitive fee pressure, regulatory changes affecting interchange and settlement, and macro sensitivity of transaction volumes. Overall, growth quality appears solid given margin expansion and strong cash conversion, but quarterly cash flows may remain volatile due to settlement timing.

Financial Health

Liquidity: Current ratio is not calculable from disclosed items, but current assets are large (3,529.36) vs total liabilities (2,906.23), and cash & equivalents are substantial at 2,200.40, indicating strong liquidity. Solvency: Reported D/E is 2.50x (warning threshold >2.0), but interest-bearing debt is modest (short-term loans 134.10, long-term loans 99.03; total ~233.13) versus EBITDA 352.61 (Debt/EBITDA ~0.66x), implying manageable financial risk. No explicit current ratio <1.0 or D/E >2.0 breach-driven distress, though we flag the D/E as elevated largely due to operating liabilities inherent to payment settlement. Maturity mismatch: Without a breakdown of current liabilities, typical settlement-related short-term obligations could be large; however, cash on hand and current assets appear sufficient to cover near-term needs. Off-balance sheet: None disclosed in the provided data.

Cash Flow Quality

Earnings quality is high: OCF/Net Income is 2.46x, comfortably above the 0.8 threshold. Free cash flow of 464.31 after modest capex (-2.79) indicates strong cash generation from operations. FCF sustainability: With low capital intensity and robust OCF, FCF should be sufficient to fund dividends and selective growth investments; nevertheless, OCF may be influenced by working-capital swings tied to settlement cycles. Potential working capital signals: The magnitude of OCF suggests favorable working capital movements this period; absent a detailed breakdown, we cannot rule out timing effects from receivables/payables related to payment processing. No signs of aggressive cash management are evident from the limited disclosures.

Dividend Sustainability

The calculated payout ratio is 43.5%, within the <60% benchmark for sustainability. Dividends paid totaled 94.00, covered 4.89x by free cash flow, indicating ample headroom. With strong OCF and minimal capex needs, dividend capacity appears robust under current conditions. Policy outlook: While DPS details are unreported, the company has room to maintain or moderately raise dividends if earnings and cash flows remain resilient; capital allocation can balance shareholder returns with growth investments given ROIC of 15.9%. Key caveat: Quarterly cash flow volatility from settlement timing should be monitored, though liquidity is strong.

Risk Assessment

Business Risks:

• Competitive pricing pressure in payment processing potentially compressing take rates and margins
• Regulatory changes impacting fees, settlement rules, or fintech/payment intermediary oversight
• Operational risk: system outages, cybersecurity incidents, and fraud/chargeback exposure
• Merchant concentration or sector exposure affecting transaction volumes during macro slowdowns
• Product mix shifts (e.g., lower-margin payment types) that could dilute margins

Financial Risks:

• Elevated reported D/E (2.50x) driven by operating liabilities may mask liquidity stress if settlement flows tighten
• Working-capital-driven OCF volatility due to timing of receivables/payables in settlement cycles
• Interest rate risk affecting float income/expenses and the value of cash-like assets
• Data limitations on interest expense and current liabilities hinder precise coverage and liquidity analysis

Key Concerns:

• Sustaining operating leverage after a ~390 bps operating margin expansion
• Maintaining ROIC at 15.9% amid competition and potential regulatory headwinds
• Dependence on macro and e-commerce growth to support double-digit revenue increases

Investment Implications

Key Takeaways:

• Strong operating leverage: revenue +11.8% with operating income +24.4% and net income +16.7%
• High profitability: operating margin ~38.0%, net margin 26.5%, gross margin 67.3%
• Excellent cash conversion: OCF/NI 2.46x and FCF 464.31
• Solid returns: DuPont ROE ~18.8%, ROIC 15.9%
• Leverage optics elevated (D/E 2.50x) but economic leverage modest (Debt/EBITDA ~0.66x)

Metrics to Watch:

• Operating margin trajectory and SG&A as a percentage of revenue
• OCF volatility vs NI to detect settlement timing effects
• Take rate/pricing and mix of value-added services
• Liquidity buffers vs settlement obligations (cash, current assets vs current liabilities)
• Regulatory developments in payments and cybersecurity incident frequency

Relative Positioning: Within Japan’s payments ecosystem, GMO-PG exhibits superior margin profile and cash generation with moderate economic leverage, positioning it favorably versus peers reliant on higher capital intensity. Key differentiators are strong operating leverage and ROIC, while reported balance sheet leverage appears elevated due to the nature of settlement liabilities rather than debt reliance.

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