rakumo Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥1.31B
• Operating Income: ¥318M
• Net Income: ¥166M
• Earnings per Unit (EPU): ¥33.48

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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: Solid top-line growth with resilient profitability, tempered by likely mild margin compression and data gaps on cash flows. Revenue rose 24.0% YoY to 13.09 (100M JPY), beating typical SaaS growth benchmarks for a small-cap name. Operating income increased 19.2% YoY to 3.18, and net income grew 17.5% YoY to 1.94, indicating positive, if slightly decelerating, operating leverage. Gross margin stands at 52.7%, consistent with a software/services mix and adequate pricing power. Operating margin is 24.3% (3.18/13.09), and net margin is 14.8%, both healthy for the company’s scale. Ordinary income increased 20.7% YoY to 3.14, with non-operating items remaining immaterial (non-op income ~0.00, non-op expenses 0.06). Because operating income (+19.2%) lagged revenue growth (+24.0%), operating margin likely compressed modestly YoY, but the exact basis point change is not disclosed. Similarly, net margin likely compressed slightly given net income growth (+17.5%) trailed revenue, but precise bps are not calculable with available data. ROE is 10.8%, supported by a strong net margin (14.8%) and moderate leverage (2.30x), partly offset by low asset turnover (0.317x). Liquidity is healthy with a current ratio of 173.8% and cash of 17.43 against current liabilities of 11.16. Balance sheet quality is mixed: cash is strong, but intangibles are high (intangibles 20.23 and goodwill 16.82, together nearly half of assets), raising medium-term impairment sensitivity. Effective tax rate is elevated at 36.5%, dampening bottom-line conversion. Interest coverage appears extremely high (3655x) but is less meaningful due to de minimis interest expense. Earnings quality cannot be assessed fully because operating cash flow is unreported; however, receivables of 1.74 imply a reasonable implied DSO near one month. Dividend payout looks conservative at a calculated 18.0%, but dividend disclosures are limited and OCF coverage is unknown. Forward-looking, sustaining >20% growth with a >20% operating margin is encouraging, but reliance on intangibles and potential deferred revenue dynamics (not disclosed) warrant monitoring.

Profitability Analysis

ROE decomposition (DuPont): ROE 10.8% = Net Profit Margin 14.8% × Asset Turnover 0.317 × Financial Leverage 2.30x. The strongest contributor is the high net margin, while the main drag is low asset turnover, which is typical for a cash-rich, intangible-heavy software model. Leverage at 2.30x provides a modest boost without appearing excessive relative to peers. YoY component changes are not disclosed, but the fact that operating and net income grew slower than revenue suggests modest pressure on margin rather than changes in turnover or leverage. Business drivers: stable gross margin (52.7%) and limited non-operating noise indicate core operations are the primary profit engine; the low turnover reflects high cash and goodwill/intangibles from past investments. Sustainability: net margins near 15% look sustainable if pricing discipline and churn remain controlled; asset turnover may improve only gradually as the company scales. Watch for signs of negative operating leverage: with revenue +24% vs operating income +19.2%, SG&A likely grew at or above revenue (details unreported), which could weigh on incremental margins if continued.

Growth Assessment

Top-line growth of 24.0% YoY is robust and indicative of healthy demand or expansion in subscriptions/projects. Operating income +19.2% and net income +17.5% confirm continued scalability, albeit with softer operating leverage this quarter. Revenue quality appears solid given minimal non-operating contributions and no reliance on investment income. However, the composition of growth (new bookings vs expansion vs price) and deferred revenue trends are not disclosed, limiting visibility on durability. Gross margin at 52.7% suggests a balanced mix of software and services; further productization could expand margins. The elevated tax rate (36.5%) is a headwind to net growth. Outlook hinges on maintaining new wins and retention; absent churn/LTV/CAC data, we assume steady conditions but note potential volatility if customer concentration is high (not disclosed).

Financial Health

Liquidity: Current ratio 173.8% and quick ratio 173.8% indicate ample near-term coverage; no warning (both comfortably >1.0). Solvency: Debt-to-equity 1.30x is within conservative benchmarks (<1.5x), and equity/asset ratio (calculated) is ~43.5% (17.96/41.31), a solid buffer. Maturity profile: Current liabilities 11.16 vs cash 17.43 and receivables 1.74 imply low near-term refinancing risk; short-term loans are unreported but long-term loans total 6.35. Interest coverage is effectively unconstrained given negligible interest expense, though the ratio is inflated by rounding. Asset quality: High intangibles (20.23) and goodwill (16.82) constitute roughly half of assets, increasing impairment risk if growth or profitability falters. Off-balance sheet items are not disclosed; none identified.

Cash Flow Quality

OCF data is unreported, so OCF/NI and FCF cannot be assessed; we cannot confirm earnings-to-cash conversion. Working capital appears conservative: receivables 1.74 vs revenue 13.09 imply an approximate DSO near one month, consistent with timely collections. Potential working capital signals (deferred revenue inflows typical for subscriptions) are not disclosed, limiting our ability to assess any revenue recognition timing effects. With cash at 17.43 and modest reported debt service needs, near-term cash flexibility seems adequate, but sustainability of FCF for dividends and capex cannot be verified without OCF and capex data.

Dividend Sustainability

The calculated payout ratio is 18.0%, suggesting capacity for distributions relative to reported earnings. However, DPS and total dividend paid are unreported, and OCF/FCF coverage is unknown, preventing a firm view on cash-based sustainability. If OCF is broadly aligned with NI (unconfirmed), current payout would be conservative. Policy visibility is limited given a lack of disclosed dividend framework; monitoring guidance and cash flow disclosures is necessary.

Risk Assessment

Business Risks:

• Customer concentration and churn risk typical for small-cap software businesses (not disclosed).
• Price competition and potential downward pressure on gross margin if mix shifts toward services.
• Execution risk in scaling sales/marketing: slower operating leverage this quarter hints at rising cost intensity.
• Goodwill/intangible impairment risk if performance underwhelms relative to past acquisition assumptions.

Financial Risks:

• High intangible asset base (goodwill 16.82; intangibles 20.23) elevates balance sheet sensitivity to impairment.
• Elevated effective tax rate (36.5%) depresses net income conversion.
• Data gaps on OCF and capex obscure FCF resilience and dividend coverage.
• Potential covenant or refinancing considerations around long-term loans (6.35), though near-term liquidity is strong.

Key Concerns:

• Possible mild margin compression as revenue growth outpaced operating and net income growth.
• Limited disclosure on SG&A composition and growth may hide cost pressures.
• Absence of deferred revenue disclosure reduces visibility on forward revenue and cash dynamics.
• Interest coverage metric is not very informative due to near-zero interest expense.

Investment Implications

Key Takeaways:

• Robust revenue growth (+24% YoY) with healthy operating (24.3%) and net (14.8%) margins.
• Operating leverage softened (OP +19.2% vs sales +24.0%), suggesting watchfulness on cost control.
• Strong liquidity (current ratio 173.8%) and cash of 17.43 underpin financial flexibility.
• ROE 10.8% supported by high margin and moderate leverage, constrained by low asset turnover (0.317x).
• Balance sheet quality mixed due to high intangibles/goodwill (~49% of assets), implying impairment sensitivity.
• Dividend payout appears conservative at 18%, but cash flow coverage is unverified.

Metrics to Watch:

• Operating cash flow and free cash flow, including OCF/NI ratio (target >1.0).
• Deferred revenue balances and billings growth as leading indicators.
• SG&A growth vs revenue and efficiency metrics (sales efficiency, CAC payback).
• Retention/churn (net and gross), ARPU/expansion, and pricing actions.
• Goodwill impairment testing signals and intangible amortization effects.
• DSO and working capital trends; tax rate normalization.

Relative Positioning: Within small-cap Japanese software/service peers, rakumo shows above-average revenue growth and competitive operating margins, with stronger liquidity than many but a higher-than-average intangible concentration; near-term performance is solid, but visibility on cash conversion and forward indicators (deferred revenue, churn) lags best-in-class disclosures.

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