Magmag,Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥438M
• Operating Income: ¥20M
• Net Income: ¥14M
• EPS: ¥5.06

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

Magmag Co., Ltd. (40590) reported FY2025 Q4 (JGAAP, non-consolidated) results showing resilient profitability against a soft top line, with meaningful cash generation and a very conservative balance sheet. Revenue was ¥438.0m, down 3.5% YoY, indicating modest pressure on core activity. Despite the decline, operating income rose sharply to ¥20.0m (+260.9% YoY), implying effective cost containment and improved operating efficiency. Net income was ¥14.0m (+8.0% YoY), with EPS of ¥5.06, highlighting positive bottom-line momentum albeit from a small base. Gross profit is disclosed at ¥247.259m, translating to a gross margin of 56.5%, but note this does not arithmetically reconcile with the disclosed cost of sales; we treat the reported gross margin as the operative datapoint and acknowledge the inconsistency. EBITDA was ¥21.866m (5.0% margin), suggesting a lean cost structure and limited depreciation burden (D&A ¥1.866m). DuPont analysis shows net margin of 3.20%, asset turnover of 0.439x, and financial leverage of 1.18x, yielding ROE of 1.66%; this indicates low return on equity primarily due to a large equity base relative to earnings. Balance sheet strength is a standout: total assets ¥997.0m, liabilities ¥155.153m, and equity ¥845.0m, implying an equity ratio near 84.7% (the reported 0.0% equity ratio appears unreported rather than actual). Liquidity is very strong with a current ratio of 608% and working capital of ¥788.216m. Cash flow quality is robust: operating cash flow (OCF) of ¥100.0m is 7.14x net income and free cash flow (FCF) is ¥77.0m after modest investing outflow of ¥23.0m. Financing cash inflow of ¥21.0m was positive; details are not provided, but leverage remains low with a debt-to-equity ratio of 0.18x. Dividend per share is reported as ¥0, suggesting a retained-earnings stance despite healthy FCF coverage capacity; we treat the zero as disclosed and note possible policy conservatism. Ordinary income equals operating income, and reported interest expense is zero, indicating minimal non-operating noise in the period. Overall, the company exhibits solid margin discipline, strong liquidity, and high-quality cash conversion, but ROE remains subdued and revenue growth is the key swing factor. Data limitations include several zero placeholders (e.g., equity ratio, cash balance, share counts) that are likely unreported rather than actual zeros; analysis focuses on the provided non-zero metrics.

Profitability Analysis

ROE of 1.66% decomposes into a 3.20% net margin, 0.439x asset turnover, and 1.18x financial leverage, indicating that low profitability is driven mainly by modest margins and slow asset turnover rather than leverage. Gross margin is disclosed at 56.5%, implying a favorable mix or pricing versus cost of sales, although the gross profit figure does not reconcile with revenue minus cost of sales; we rely on the disclosed margin. Operating margin is approximately 4.6% (¥20.0m operating income / ¥438.0m revenue), a sharp YoY expansion given operating income growth against a declining top line—evidence of cost discipline and operating leverage from SG&A control. EBITDA margin at 5.0% is only slightly above operating margin due to low D&A (¥1.866m), suggesting a relatively asset-light model. Ordinary income equals operating income, so non-operating items were neutral; reported interest expense is zero, consistent with low leverage. The net margin of 3.20% reflects some below-operating charges (taxes and/or adjustments), but the reported effective tax rate of 0.0% contradicts the presence of income tax expense of ¥0.95m; we treat the 0.0% as a non-reported metric. Operating leverage appears favorable: a relatively small revenue decline accompanied by a sharp rise in operating profit points to meaningful fixed-cost absorption improvements. Sustainability of the margin expansion hinges on maintaining cost efficiencies and stabilizing or re-accelerating revenue.

Growth Assessment

Revenue was ¥438.0m (-3.5% YoY), indicating a modest contraction in the period; the cause (volume, ARPU, product mix) is not disclosed. Operating income growth of +260.9% YoY despite lower sales suggests company-specific efficiency actions rather than cyclical demand tailwinds. Net income rose +8.0% YoY to ¥14.0m, a smaller increase than operating income, implying some offsets below the operating line (taxes or one-offs). With EBITDA at ¥21.866m and D&A at ¥1.866m, growth is not being driven by heavy investment or depreciation cycling; the model appears asset-light. The sustainability of improved profitability will depend on stabilizing top-line trends; absent renewed growth, further margin expansion may be limited. Ordinary income equaling operating income points to low reliance on non-operating gains, which improves the quality of the profit recovery. Given strong OCF (¥100.0m), management has room to invest in growth initiatives, but specific pipeline or product drivers are not disclosed. Outlook hinges on re-acceleration in core revenue streams; absent disclosure on subscriber/advertiser metrics, we assume incremental, not step-change, growth potential near term.

Financial Health

Total assets are ¥997.0m, total liabilities ¥155.153m, and equity ¥845.0m, implying an equity ratio around 84.7% (reported 0.0% likely unreported). The debt-to-equity ratio is low at 0.18x, consistent with a conservative capital structure and minimal financial risk. Liquidity is very strong: current assets ¥943.369m versus current liabilities ¥155.153m yield a current ratio of 608% and ample working capital of ¥788.216m; quick ratio is likewise 608% given no inventories disclosed. Ordinary income equals operating income and reported interest expense is zero, implying negligible interest burden and high implied interest coverage, despite the ratio field showing 0.0x (likely unreported). Overall solvency is robust with significant equity cushion and low leverage, providing flexibility to weather earnings volatility or invest selectively.

Cash Flow Quality

OCF of ¥100.0m is 7.14x net income (¥14.0m), signaling strong earnings quality and favorable working capital movements or timing. FCF of ¥77.0m (OCF ¥100.0m minus investing CF ¥23.0m) indicates the business generates cash well in excess of accounting profits, consistent with an asset-light model. Investing cash outflow of ¥23.0m appears modest; without detail, we treat it as maintenance-plus selective growth capex. Financing cash flow of +¥21.0m suggests net inflow (potentially subsidies, share issuance, or other), but with low leverage, balance sheet risk is contained. The reported cash and equivalents balance is 0, which we treat as unreported rather than actual; the strong OCF/NI ratio and large current assets base support a healthy liquidity position. Working capital management appears efficient given the scale of OCF; however, without line-item disclosures (receivables, payables, deferred revenue), we cannot isolate drivers. Overall, cash conversion looks robust, with FCF providing capacity for reinvestment or potential shareholder returns if policy permits.

Dividend Sustainability

Annual DPS is reported as ¥0 with a payout ratio of 0.0%, indicating no dividend in the period. Given FCF of ¥77.0m and net income of ¥14.0m, the company has ample capacity to fund a dividend if desired; FCF coverage of dividends would be strong, though the disclosed FCF coverage metric is 0.00x only because DPS is zero. Balance sheet strength (approx. 84.7% equity ratio and low leverage) further supports potential future distributions if strategic priorities do not require significant reinvestment. That said, ROE is low (1.66%), and management may prioritize reinvestment or efficiency improvements over distributions to enhance returns. Absent explicit policy disclosure, we assume a conservative stance with flexibility to introduce or increase dividends contingent on revenue stabilization and sustained OCF.

Risk Assessment

Business Risks:

• Top-line contraction (-3.5% YoY) indicating demand softness or competitive pressures
• Dependence on cost control for profit growth; margin gains may be hard to sustain without revenue recovery
• Small absolute profit base (net income ¥14.0m) susceptible to volatility from minor shocks
• Potential platform/advertising/subscription cyclicality if reliant on creator or media-related revenues
• Execution risk in monetization, pricing, and user engagement
• Limited disclosure granularity (non-consolidated) obscuring segment drivers

Financial Risks:

• Low ROE (1.66%) reflecting underutilized equity base
• High working capital sensitivity; OCF strength may partly reflect timing effects
• Concentration risk if revenue base is narrow (not disclosed)
• Data gaps (cash balance, equity ratio, share count) limit precise capital allocation analysis

Key Concerns:

• Sustainability of operating margin expansion amid declining revenue
• Inconsistency between reported gross profit and cost of sales figures
• Zero placeholders for key items (equity ratio, cash) reduce transparency
• Scale constraints may limit operating leverage and market competitiveness

Investment Implications

Key Takeaways:

• Revenue decline (-3.5% YoY) but strong profit recovery (OP +260.9% YoY) underscores effective cost control
• ROE at 1.66% is low; improving asset turnover or margin is needed to enhance returns
• Balance sheet is very conservative (implied equity ratio ~84.7%, D/E 0.18x) providing resilience
• Cash generation is strong (OCF/NI 7.14x; FCF ¥77.0m), supporting reinvestment optionality
• Dividend currently nil; capacity exists but likely subordinated to growth and efficiency initiatives

Metrics to Watch:

• Top-line trajectory (sequential and YoY revenue growth)
• Operating margin and SG&A ratio sustainability
• OCF/Net income ratio and working capital turns (DSO/DPO, deferred revenue)
• Asset turnover (targeting >0.5x) to lift ROE
• Cash and equivalents disclosure, capital allocation (capex, buybacks/dividends)

Relative Positioning: Operationally lean with strong liquidity and low leverage compared to many small-cap peers, but with lower ROE and a contracting top line; upside depends on revenue stabilization and continued cash conversion.

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