Beaglee Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥12.69B
• Operating Income: ¥1.00B
• Net Income: ¥724M
• EPS: ¥87.16

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

Verdict: FY2025 Q3 was a weaker quarter with double‑digit revenue decline and notable margin compression, resulting in a ~33% drop in net income and a mid‑single digit ROE. Revenue came in at 126.88 (−11.0% YoY), with operating income of 10.03 (−28.9% YoY) and net income of 4.86 (−32.8% YoY). Gross profit was 49.81, implying a gross margin of 39.3%, while operating margin was approximately 7.9% (10.03/126.88). Based on YoY deltas, operating margin likely compressed by ~200 bps (from ~9.9% to ~7.9%), reflecting operating deleverage and cost pressure. Net margin fell to 3.8% from an estimated ~5.1% a year ago, a contraction of ~130 bps. Ordinary income declined 29.3% to 9.68, with non‑operating income low (0.03) and non‑operating expenses (0.44) including interest expense (0.37), leaving limited cushion below the operating line. The effective tax rate was elevated at 47.1%, magnifying the net profit decline despite profit before tax of 13.70. ROE (DuPont) landed at 6.2% (Net Margin 3.8% × Asset Turnover 0.789 × Financial Leverage 2.04x), below an 8% cost‑of‑equity proxy, pressured primarily by margin compression. Liquidity is adequate but tight, with a current ratio of 109.2% and quick ratio of 108.3%, and debt to equity at 1.04x; interest coverage remains strong at 27.15x. Balance sheet quality warrants caution: goodwill/intangibles are very large (goodwill 72.95; intangibles 77.64) relative to equity (78.64), implying minimal tangible equity and sensitivity to impairment. Operating cash flow was unreported, limiting earnings quality verification and FCF assessment for dividends and capex. Dividend payout is calculated at 29.8%, which appears conservative, but FCF coverage is unassessable given missing CF data. Forward‑looking, stabilizing revenue, restoring operating margin (through content procurement discipline and SG&A efficiency), normalizing the tax rate, and sustaining strong interest coverage while managing short‑term debt will be key. The high share of intangibles suggests future impairment risk if growth underperforms, and the elevated effective tax rate is a headwind to EPS conversion. Overall, execution on cost control and monetization, plus cash generation visibility, will determine whether ROE can improve above the 8% threshold.

Profitability Analysis

ROE decomposition (DuPont): ROE 6.2% = Net Profit Margin 3.8% × Asset Turnover 0.789 × Financial Leverage 2.04x. The dominant negative change driver this quarter is Net Profit Margin, given revenue fell 11% while operating profit fell 29%, implying operating margin compression of ~200 bps YoY and net margin down ~130 bps. Business reasons likely include weaker top line in digital content, higher content procurement/royalty costs, and/or less efficient SG&A (marketing and platform fees) leading to operating deleverage. The 47.1% effective tax rate further depressed net margin, suggesting either non‑deductible items or geography/credits mix. Asset turnover at 0.789 is moderate; with revenue down, AT likely slipped marginally YoY, but the larger swing is at the margin level. Financial leverage at 2.04x is stable and not the key driver. Sustainability: margin pressure could be partially cyclical if tied to campaign intensity or mix; however, the structurally high intangible base and competitive spend suggest only a gradual recovery unless revenue growth reaccelerates. Watch for SG&A growth vs revenue: operating income fell faster than revenue, indicating SG&A and/or COGS grew as a percentage of sales; if SG&A growth is exceeding revenue, that is a concerning trend that must be reversed to restore operating leverage.

Growth Assessment

Revenue declined 11.0% YoY to 126.88, indicating demand softness or tougher comps in digital comics/distribution. Operating income dropped 28.9% to 10.03, and ordinary income fell 29.3% to 9.68, underscoring negative operating leverage. Net income decreased 32.8% to 4.86, highlighting tax headwinds and lower non‑operating support. Gross margin stands at 39.3%; the compression at operating and net levels implies either higher content costs, promotional activity, or increased platform fees relative to sales. With limited non‑operating income (0.03) and higher effective tax, profit quality hinges on restoring core operating efficiency. Outlook: stabilization requires reacceleration of revenue (catalog depth, IP, pricing/promo optimization) and SG&A discipline. Any normalization of the effective tax rate would be an EPS tailwind. Near‑term growth visibility is modest until evidence emerges of traffic/user growth or improved monetization.

Financial Health

Liquidity: Current ratio 109.2% and quick ratio 108.3% are only slightly above 1.0, so short‑term liquidity is adequate but tight; explicit warning threshold (<1.0) not breached. Maturity structure: current liabilities 71.93 include short‑term loans of 20.00 versus cash 44.52 and receivables 31.83; near‑term obligations appear covered, though working capital headroom is limited (working capital 6.59). Solvency: Debt-to-equity 1.04x is moderate and within conservative bounds (<1.5x), and interest coverage is strong at 27.15x, indicating manageable debt service. Balance sheet quality: intangibles (77.64) and goodwill (72.95) are very high relative to total equity (78.64), implying minimal tangible equity and heightened impairment risk. No off‑balance sheet obligations are disclosed in the data provided. Overall, leverage is acceptable, but the combination of thin liquidity buffer and a large intangible base elevates financial risk if earnings weaken.

Cash Flow Quality

OCF was unreported, so OCF/Net Income and FCF cannot be assessed; this limits validation of earnings quality. With net income at 4.86 and interest expense modest (0.37), cash conversion could be reasonable if working capital is stable; however, the revenue decline raises the risk of promotional expense timing or receivables drag. Signs of potential working capital pressure include tight current ratio and reliance on short‑term loans (20.00). FCF sustainability for dividends and any capex is unassessable without OCF and capex data; therefore, dividend coverage by FCF remains uncertain. No explicit signs of working capital manipulation can be inferred from the limited data.

Dividend Sustainability

The calculated payout ratio is 29.8%, which appears conservative relative to earnings capacity. However, OCF and FCF are unreported, so coverage by free cash flow is unknown. Leverage is moderate (D/E 1.04x) and interest coverage strong, which supports serviceability, but the tight liquidity buffer and large intangible base increase caution. Dividend sustainability will depend on restoring operating margin and maintaining positive OCF; any earnings volatility or impairment could pressure distributions. Corporate policy details (target payout, DOE) are not disclosed in the data.

Risk Assessment

Business Risks:

• Revenue decline of 11% YoY indicates demand softness/competitive pressure in digital content.
• Operating and net margin compression (~200 bps and ~130 bps respectively) reflecting operating deleverage.
• High effective tax rate (47.1%) depresses net income and ROE.
• Execution risk in content procurement/IP monetization and marketing efficiency.
• Platform dependency risk (app store policies/fees, distribution partners) typical for digital comics.

Financial Risks:

• Thin liquidity buffer: current ratio 1.09x, quick ratio 1.08x.
• Intangible asset and goodwill concentration (intangibles 77.64; goodwill 72.95 vs equity 78.64) leading to minimal tangible equity and impairment sensitivity.
• Short‑term debt reliance (20.00) introduces refinancing/maturity risk if markets tighten.
• Earnings sensitivity to tax rate; sustained elevated ETR would constrain cash generation.

Key Concerns:

• Sustained decline in operating income (−28.9% YoY) and net income (−32.8% YoY).
• Potential impairment risk given performance softness and large goodwill/intangibles.
• Limited visibility on cash flow (OCF/FCF unreported) hampers assessment of dividend and investment capacity.
• Margin restoration depends on SG&A discipline amid competition.

Investment Implications

Key Takeaways:

• Top line contracted 11% YoY to 126.88, with operating income down 28.9% to 10.03 and net income down 32.8% to 4.86.
• Margins compressed: operating margin ~7.9% (−~200 bps YoY), net margin 3.8% (−~130 bps YoY).
• ROE at 6.2% driven by low net margin despite moderate asset turnover (0.789) and leverage (2.04x).
• Liquidity adequate but tight (current ratio 1.09x); interest coverage robust at 27.15x.
• Balance sheet heavily intangible; impairment risk is a key overhang.
• Dividend payout ratio ~30% appears conservative, but FCF coverage is unverified.

Metrics to Watch:

• Quarterly revenue trajectory and user/ARPU trends.
• Operating margin and SG&A as a percentage of sales.
• Effective tax rate normalization.
• Operating cash flow and working capital movements (receivables, payables).
• Goodwill/intangible impairment tests and ROIC vs WACC.
• Short‑term debt rollover and cash balance continuity.

Relative Positioning: Within Japan’s digital content/distribution peers, the company shows weaker near‑term growth and margin compression but maintains strong interest coverage and moderate leverage; however, its exceptionally high intangible/goodwill intensity versus equity places it at higher balance sheet quality risk compared to peers with stronger tangible capital bases.

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