Safie Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥13.46B
• Operating Income: ¥-95M
• Net Income: ¥-1.27B
• EPS: ¥0.70

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: Strong top-line growth with near break-even operations, but accounting inconsistencies and missing cash flow data obscure earnings quality and sustainability. Revenue grew 27.9% YoY to 134.64, demonstrating robust demand scaling. Gross profit is reported at 52.56, implying a gross margin of 39.0%; however, this conflicts with the disclosed cost of sales of 52.70, which would mathematically yield a higher gross profit, suggesting a classification or reporting discrepancy. SG&A was 56.22, exceeding gross profit and indicating that scale efficiencies are not yet fully realized. Operating income was -0.95 (operating margin -0.7%), pointing to near break-even at the operating level. Ordinary income came in at -1.17 after non-operating income of 0.11 and non-operating expenses of 0.34. Profit before tax is shown as -12.67, yet net income is positive at 0.39 and total comprehensive income is 0.51, suggesting the presence of unreported extraordinary items, minority interest effects, or other below-ordinary items that offset pre-tax losses; the mismatch requires clarification. EPS (basic and diluted) is 0.70 JPY, consistent with the small net profit. ROE is modest at 0.5%, driven primarily by thin net margins given low leverage. Asset turnover is healthy at 1.21x, indicating effective asset utilization for a software/platform-oriented business with significant cash. Financial position is solid: cash and deposits of 58.66 and a current ratio of 438% indicate ample liquidity and low refinancing risk. Retained earnings remain negative at -51.55, highlighting cumulative losses and limiting near-term capacity for shareholder returns absent sustained profitability. ROIC is reported at -3.3%, underscoring that economic returns remain below the cost of capital. Margin change analysis versus prior year is not possible due to insufficient disclosed comparatives for margins; only revenue YoY is provided. Earnings quality cannot be assessed due to unreported operating cash flow; thus, the durability of the positive net income is uncertain. Forward-looking, the path to sustainable profitability hinges on raising gross margin, improving operating efficiency (SG&A leverage), and achieving positive operating cash flow while maintaining growth.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (NPM) 0.3% × Asset Turnover (AT) 1.212 × Financial Leverage (FL) 1.27x = ROE ~0.5% (matches reported 0.5%). The primary constraint on ROE is the very thin NPM, as leverage is low by design and AT is reasonably strong. Business drivers: Near break-even operating income (-0.95) amid SG&A (56.22) exceeding gross profit (52.56) is compressing margins; the business is still absorbing fixed costs to support growth (sales capacity, R&D, platform costs). Non-operating items were not material enough to offset operating losses (ordinary income -1.17), although unreported extraordinary items appear to have supported bottom-line net profit. Sustainability: Asset turnover at 1.21x is likely sustainable given the cash-heavy balance sheet and recurring revenue model, but NPM improvement requires either higher gross margin (mix shift to higher-margin software/recurring components, lower pass-through hardware) or tighter SG&A growth versus revenue. Warning flags: SG&A/revenue at ~41.8% is high relative to the reported gross margin of 39%, implying limited operating leverage at current scale; SG&A growth vs revenue growth cannot be assessed due to missing YoY SG&A data.

Growth Assessment

Revenue growth of +27.9% YoY to 134.64 indicates solid demand for the platform and/or expansion in customer adoption. Profit growth is unclear due to lack of prior-period operating/profit comparatives; current operating loss of -0.95 implies that profitable scale has not yet been secured. The profit composition suggests core profitability depends primarily on operating income, with non-operating contributions small (net -0.23), while the swing to positive net income likely includes extraordinary or below-ordinary effects not disclosed. Sustainability: To sustain growth while improving profitability, the company needs to lift gross margins (e.g., reduce hardware pass-through mix or improve pricing) and gain SG&A leverage. Outlook: With cash of 58.66 and low debt, the company has runway to invest in growth; however, ROIC at -3.3% indicates current investments are not yet earning above the cost of capital. Key constraints to growth quality: missing cash flow data, conflicting gross profit vs cost of sales metrics, and the unexplained gap between profit before tax (-12.67) and net income (0.39).

Financial Health

Liquidity is strong: current assets 102.95 vs current liabilities 23.49 yield a current ratio of 438.2% and a quick ratio of 438.2%. No warnings on current ratio (<1.0) or D/E (>2.0); D/E is a conservative 0.27x, with long-term loans only 0.01 and ample cash of 58.66. Working capital is 79.46, providing a sizable buffer for operations and growth. Maturity mismatch risk appears low as current assets substantially exceed current liabilities. Solvency: Total equity of 87.19 supports total assets of 111.13 (equity ratio ~78% by calculation), indicating a strong capital base despite negative retained earnings (-51.55). Off-balance sheet obligations are not disclosed; no information on leases or purchase commitments is provided, which may understate liabilities.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income and free cash flow cannot be evaluated; thus, earnings quality is indeterminate. Given operating income is slightly negative and net income positive, cash conversion could diverge materially depending on working capital movements (e.g., receivables at 24.67) and non-cash or extraordinary items. Withhold judgment on OCF/NI quality thresholds; OCF/NI ratio cannot be calculated. FCF sustainability for dividends or large capex is unknown; that said, cash on hand (58.66) provides cushion. Watch for potential working capital effects: rapid revenue growth can temporarily depress OCF via higher receivables; no inventory data was disclosed.

Dividend Sustainability

No dividend is reported (DPS N/A) and retained earnings are negative (-51.55), implying a low likelihood of near-term distributions under a conservative capital policy. Payout ratios and FCF coverage are not calculable due to missing cash flow data and unreported DPS. Even with ample cash, the combination of small net profit, negative retained earnings, and ROIC (-3.3%) suggests the priority will remain reinvestment and reaching sustainable profitability. Policy outlook: continuation of a no-dividend stance until the company achieves stable positive earnings and cash flows.

Risk Assessment

Business Risks:

• Margin pressure from hardware pass-through or low-margin components limiting gross margin (reported 39%)
• Execution risk in achieving SG&A leverage as SG&A/revenue is ~41.8% while operating margin is -0.7%
• Dependence on continued high growth (+27.9% YoY) to attain break-even and scale efficiencies
• Platform and cybersecurity risk inherent to a cloud video service (service reliability, data protection)
• Customer churn and cohort profitability risk (limited visibility without ARR/churn disclosures)

Financial Risks:

• Earnings quality uncertainty due to unreported operating cash flow and unexplained PBT-to-NI reconciliation
• Negative retained earnings (-51.55) constrain financial flexibility for shareholder returns
• ROIC at -3.3% indicates investments are not yet covering the cost of capital
• Potential working capital strain from growth (receivables 24.67; collections cadence unknown)

Key Concerns:

• Inconsistency between cost of sales (52.70) and reported gross profit (52.56) vs revenue (134.64), which implies different margins
• Profit before tax (-12.67) inconsistent with positive net income (0.39), suggesting missing extraordinary items or classification differences
• Interest coverage alert (-411x) is likely not meaningful given unreported/near-zero interest expense and minimal debt

Investment Implications

Key Takeaways:

• Top-line growth is strong at +27.9% YoY, but profitability remains fragile (operating margin -0.7%)
• Gross margin reported at 39% and SG&A at 41.8% of revenue indicate insufficient operating leverage at current scale
• Balance sheet strength (cash 58.66; current ratio 4.38x; low debt) provides runway to continue investing
• ROE is modest at 0.5% due to thin margins and low leverage; ROIC is negative (-3.3%)
• Data gaps and internal inconsistencies limit confidence in assessing earnings quality and the durability of the reported net profit

Metrics to Watch:

• OCF and FCF trends (cash conversion vs net income)
• Gross margin trajectory and hardware/recurring mix
• SG&A growth vs revenue growth (evidence of operating leverage)
• ARR growth, churn, and net revenue retention (for a clearer view of recurring revenue health)
• Deferred revenue and billings as leading indicators of revenue sustainability
• Clarification of extraordinary items and reconciliation between PBT and NI

Relative Positioning: Versus Japan SaaS/platform peers, the company shows healthy growth and a very strong liquidity profile but remains sub-scale on profitability with negative ROIC; achieving higher gross margins and SG&A discipline will be key to converging toward peer-level operating margins.

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