Silver Egg Technology CO.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥787M
• Operating Income: ¥-29M
• Net Income: ¥-22M
• EPS: ¥-7.60

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

Silver Egg Technology (3961) reported FY2025 Q3 single-entity results under JGAAP showing top-line contraction and a small operating loss, with improving loss magnitude year over year. Revenue was ¥787 million, down 15.2% YoY, indicating demand softness or churn/price pressure in its recommendation engine/AI personalization services. Operating income was a loss of ¥29 million (operating margin approximately -3.7%), an improvement versus the prior-year Q3 loss by 20.8%, implying cost discipline or mix optimization. Ordinary loss was ¥28 million and net loss was ¥22 million, with a reported income tax expense of ¥25.9 million despite a loss, suggesting tax-normalization items or non-deductible expenses under JGAAP. DuPont analysis indicates a net margin of -2.8%, asset turnover of 0.54x, and low financial leverage at 1.04x, yielding a calculated ROE of -1.57%. The balance sheet is strong: total assets ¥1,458 million, equity ¥1,404 million, liabilities ¥101 million, implying an equity ratio around the mid-90% range by calculation despite the disclosed “0.0%” equity ratio field being unreported. Liquidity appears ample with current assets of ¥1,402 million against current liabilities of ¥101 million, leading to a current ratio of 1,384% and working capital of ¥1,301 million. Debt is minimal (debt-to-equity 0.07x), and interest expense is unreported/immaterial, which supports low financial risk. Cash flow statement items are not disclosed (all zeros reflect unreported), so operating cash flow (OCF), free cash flow (FCF), and cash balance cannot be assessed directly; however, the high current asset base suggests a solid liquidity buffer. Profitability quality can’t be dissected at the gross profit/EBITDA level due to unreported items, but the narrow operating loss and improved YoY trajectory suggest operating leverage could turn positive with modest revenue stabilization. The revenue decline is the key concern for medium-term growth sustainability, pointing to client budget tightening, competitive pressures, or mix changes in subscription/usage-based fees. Dividend remains nil (DPS ¥0) with negative earnings; given the early-stage profitability profile, reinvestment and liquidity preservation are likely priorities. Overall, the company retains a conservative balance sheet and adequate liquidity to navigate near-term headwinds, but visibility on cash generation and margin trajectory is limited by missing disclosures. Near-term focus should be on revenue stabilization, expense discipline, and converting to positive OCF. Data limitations (notably gross profit, EBITDA, CF, and cash) constrain precision of profitability and cash quality assessments, so monitoring subsequent disclosures is critical.

Profitability Analysis

DuPont ROE decomposition: Net profit margin -2.80%, asset turnover 0.540x, financial leverage 1.04x, producing a calculated ROE of -1.57% (consistent with the reported figure). Operating margin is approximately -3.7% (operating loss ¥29 million on ¥787 million revenue), indicating that the loss is modest relative to sales and improved YoY by 20.8%. Ordinary loss (¥28 million) closely tracks operating loss, implying limited non-operating drag. The positive income tax expense (¥25.9 million) alongside a net loss suggests tax effects (e.g., valuation allowances, non-deductibles) rather than operational tax burden. Gross profit and EBITDA were not disclosed (zeros reflect unreported), limiting assessment of margin layering and the extent of non-cash expenses. Given the business model (software/AI services), underlying gross margins are typically high, implying operating losses stem from SG&A/R&D scale versus revenue. Operating leverage appears improving as smaller losses on lower revenue suggest cost containment; however, negative top-line growth offsets efficiency gains. Interest expense is unreported/immaterial, indicating that financing costs are not depressing profitability. Overall profitability remains negative but near breakeven on an operating basis, with scope for rapid margin recovery upon revenue stabilization or modest cost reductions.

Growth Assessment

Revenue was ¥787 million, down 15.2% YoY, pointing to contraction across the customer base or pricing/mix headwinds. The YoY improvement in operating loss (-20.8%) despite lower revenue indicates underlying cost actions that partially mitigate top-line pressure. Sustainability of revenue will hinge on client retention, upsell/cross-sell of personalization modules, and macro-sensitive e-commerce/retail IT spending. Absent disclosure on gross profit and bookings/ARR, profit quality cannot be triangulated via unit economics; however, software-like models typically recover margins quickly if churn moderates. Near-term outlook is cautious given the top-line decline; recovery drivers include new product adoption, improved win rates against competitors, and normalization of client IT budgets. Mix of subscription vs. usage-based fees will also affect volatility; higher recurring subscription mix would stabilize revenue. Given the small operating loss, breakeven is achievable with modest revenue uplift or further fixed-cost optimization. Monitoring subsequent quarters for stabilization in revenue trajectory is critical before inferring sustained growth.

Financial Health

Total assets ¥1,458 million, total equity ¥1,404 million, total liabilities ¥101 million. Calculated equity ratio is approximately 96% (despite the disclosed 0.0% being unreported), indicating a very conservative capital structure. Current assets ¥1,401.9 million versus current liabilities ¥101.3 million imply a current ratio of 1,384% and robust working capital of ¥1,300.6 million, suggesting ample short-term liquidity. Debt-to-equity ratio is 0.07x, and interest expense is unreported/immaterial, pointing to low solvency risk. The asset base is largely current, likely including cash and receivables; cash and equivalents were not disclosed directly. No long-term liabilities are indicated, simplifying the solvency profile. Overall, the company appears strongly capitalized with significant liquidity buffers to absorb operating volatility.

Cash Flow Quality

Operating, investing, and financing cash flows are not disclosed (all zeros reflect unreported), preventing direct assessment of earnings-to-cash conversion. OCF/Net income ratio (0.00) and FCF (0) should be treated as unavailable rather than indicative of poor cash generation. With a net loss of ¥22 million and near-breakeven operating results, cash burn may be modest, but this is an assumption absent CF data. Working capital dynamics cannot be quantified due to lack of line-item details (e.g., receivables, payables, unearned revenue). Given the large current asset base, liquidity is likely sufficient near term, but validation awaits cash disclosure. Key indicators to monitor include OCF margin, changes in deferred revenue (if subscription), and DSO/DPO trends once reported.

Dividend Sustainability

DPS is ¥0 with a payout ratio of 0.0%, consistent with negative earnings and a reinvestment stance. FCF coverage is unreported (0.00x is not meaningful due to missing CF data). With equity ratio calculated around 96% and significant working capital, the balance sheet can support operations, but initiating dividends would depend on sustainable profitability and positive OCF. Near-term policy is likely to prioritize growth investments and margin recovery over distributions. Any future dividend capacity will hinge on stabilizing revenue, achieving steady positive OCF, and maintaining cash buffers.

Risk Assessment

Business Risks:

• Revenue contraction of 15.2% YoY indicates demand softness, churn, or pricing pressure.
• Competitive intensity in AI recommendation/personalization tools from global and domestic SaaS players.
• Client budget cyclicality in e-commerce/retail IT spending, increasing volatility.
• Execution risk in upselling/cross-selling and product roadmap delivery.
• Potential customer concentration typical of small-cap SaaS vendors (not disclosed here).

Financial Risks:

• Limited visibility on cash generation due to unreported cash flow statements.
• Tax expense recorded despite a loss suggests potential volatility in effective tax rate under JGAAP.
• Small operating margin buffer leaves limited room for negative revenue surprises.
• Reliance on current assets for liquidity with no explicit cash balance disclosed.

Key Concerns:

• Top-line decline outpacing cost reductions could prolong losses.
• Absence of gross profit/EBITDA disclosure hampers margin quality assessment.
• Cash and OCF unreported, constraining analysis of runway and FCF sustainability.

Investment Implications

Key Takeaways:

• Revenue ¥787 million declined 15.2% YoY; growth headwinds are the primary issue.
• Operating loss narrowed to ¥29 million (margin ~ -3.7%), indicating improving cost control.
• Calculated ROE is -1.57% with very low leverage (1.04x), highlighting operational—not financial—drivers of returns.
• Balance sheet is strong: liabilities ¥101 million vs equity ¥1,404 million; working capital ¥1,301 million.
• Cash flow items are unreported; liquidity appears adequate but cash conversion remains unverified.

Metrics to Watch:

• Quarterly revenue growth rate and net retention/ARR (if disclosed).
• Operating margin trajectory and breakeven timing.
• Operating cash flow and free cash flow once reported.
• Deferred revenue and DSO for insight into subscription health and collections.
• Customer churn, new logo additions, and ARPU trends.
• R&D and SG&A efficiency (opex as % of revenue).

Relative Positioning: Compared with small-cap Japanese software/AI peers on the TSE Growth market, Silver Egg exhibits weaker near-term top-line momentum but stronger balance sheet conservatism (low leverage, high working capital). Profitability is slightly negative yet improving, implying potential for faster recovery if demand stabilizes.

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