Mercari,Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥49.44B
• Operating Income: ¥8.89B
• Net Income: ¥4.96B
• EPS: ¥30.30

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

FY2026 Q1 was a strong profitability quarter for Mercari, marked by sharp operating margin expansion and YoY profit growth, albeit with weak operating cash flow. Revenue rose 10.1% YoY to 494.4, while operating income more than doubled (+104.6% YoY) to 88.94. Net income increased 70.0% YoY to 49.87, with basic EPS of 30.30 yen and an effective tax rate of 28.6%. Gross profit reached 313.22, producing a solid gross margin of 63.4%. Operating margin improved to approximately 18.0% this quarter, up from about 9.7% in the prior-year quarter (calculated), an expansion of roughly 830 bps. Net profit margin improved to 10.1% from about 6.5% a year ago, an expansion of roughly 360 bps. EBITDA was 93.29 (18.9% margin), highlighting operating leverage despite limited D&A (4.35). ROE registered 4.7% (DuPont: NPM 10.1% × asset turnover 0.089 × leverage 5.29x), with high financial leverage amplifying returns. However, cash generation lagged earnings: operating cash flow was -87.18 (OCF/NI -1.75x), and free cash flow was -89.08, pointing to timing/working-capital headwinds. The balance sheet shows an equity ratio of 18.8% and a D/E ratio of 4.29x, indicating a leveraged capital structure. Total assets stood at 5,567.94 with current assets of 4,612.26, including sizable receivables of 2,742.91. Liquidity ratios are not disclosed, limiting a full short-term solvency assessment. The expansion in profitability likely reflects revenue growth and tight cost control in SG&A, but the OCF shortfall tempers quality-of-earnings confidence in the near term. Forward-looking, sustaining the improved operating margin while normalizing cash conversion will be key to enhancing ROE above mid-single digits. With ROIC indicated at 6.0%, improvement toward an 8%+ range would strengthen the investment case. Data gaps (non-operating items, debt composition, and dividends) constrain deeper attribution and payout analysis.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin ~10.1% × Asset Turnover ~0.089 × Financial Leverage ~5.29x = ROE ~4.7% (matches reported). The most impactful driver of YoY improvement appears to be margin expansion: net margin rose to ~10.1% from ~6.5% last year, while operating margin expanded ~830 bps to ~18.0%. Business context suggests improved operating leverage on 10.1% revenue growth, disciplined SG&A intensity (SG&A 272.24, ~55.1% of sales), and solid gross margin (63.4%). Asset turnover remains low (0.089), consistent with a marketplace/payment platform carrying large receivables and cash balances relative to sales, which dampens ROA and structurally limits ROE absent margin gains. Financial leverage is high at 5.29x, materially boosting ROE but increasing risk. The margin gains could be partly sustainable if tied to take-rate improvements, marketing efficiency, or scale benefits; however, without SG&A YoY detail and segment disclosure, we cannot confirm durability. Watch for any re-acceleration in SG&A growth outpacing revenue in coming quarters, which would compress operating margin and ROE.

Growth Assessment

Revenue grew 10.1% YoY to 494.4, indicating healthy top-line momentum. Operating income growth (+104.6% YoY) far outpaced revenue, evidencing strong operating leverage. Net income rose 70.0% YoY, with net margin up ~360 bps to 10.1%, confirming improved profit quality at the P&L level. Gross margin is robust at 63.4%, supporting the thesis of scaling fixed costs and/or better unit economics. However, the negative OCF (-87.18) and negative FCF (-89.08) point to weak cash conversion, likely driven by working capital outflows (e.g., receivable build; receivables at 2,742.91). Absent segment detail, we cannot separate marketplace vs. fintech contributions, but the P&L suggests broad-based cost discipline. Outlook hinges on sustaining margin discipline while normalizing cash conversion; if cash collects as expected, OCF should improve in subsequent quarters. Any macro softness or GMV deceleration could narrow the margin gains achieved this quarter. Without guidance and non-operating detail, growth quality assessment is positive on earnings leverage but cautious on cash realization.

Financial Health

Equity ratio is 18.8%, and D/E is 4.29x (warning threshold >2.0), indicating a leveraged profile. Total assets are 5,567.94 and total liabilities are 4,516.37; total equity is 1,051.57. Current ratio and quick ratio are not calculable from disclosed items, limiting short-term liquidity assessment. Current assets are large at 4,612.26, notably accounts receivable of 2,742.91; accounts payable is 139.41, suggesting limited supplier financing and potential settlement-timing exposures. Maturity mismatch risk cannot be fully assessed due to missing breakdown of current vs. noncurrent liabilities and debt maturities. Interest-bearing debt and interest expense are not disclosed; interest coverage cannot be calculated. Off-balance sheet obligations are not reported in the provided data. Warning: leverage is elevated (D/E 4.29x), which amplifies both returns and downside risk.

Cash Flow Quality

OCF/Net Income is -1.75x, which flags earnings quality concerns for the quarter (benchmark >1.0). Free cash flow is -89.08 after modest capex (-0.92), indicating cash burn despite profitability. The divergence likely stems from working capital dynamics, particularly receivable growth and settlement timing typical for marketplace/fintech flows; payables are relatively low (139.41), offering little offset. There is no evidence of working capital manipulation in the data provided, but the magnitude of negative OCF warrants monitoring for seasonality vs. structural issues. Financing CF is -184.13 (details not disclosed), which, alongside negative OCF, reduced cash resources; cash & equivalents remain sizable at 1,485.55. Sustainability: current FCF does not cover potential dividends or incremental growth investments; improvement in cash conversion is required to support distributions or deleveraging.

Dividend Sustainability

Dividend data are unreported; no DPS or payout ratio is available. With FCF at -89.08 and leverage elevated (D/E 4.29x), initiating or increasing dividends would not be supported by current cash generation. Absent a stated policy, we assume a reinvestment/debt-management stance is more likely near term. For future sustainability, watch for OCF normalization to >NI and consistent positive FCF; only then would a payout ratio below 60% be considered prudent. Until OCF turns durably positive, dividend visibility remains low.

Risk Assessment

Business Risks:

• Execution risk in sustaining operating margin improvements amid competitive pressures in marketplace and fintech services
• Potential GMV growth slowdown impacting take rates and fee revenue
• Regulatory and compliance risk related to payments, KYC/AML, and consumer protection
• Technology/platform reliability and cybersecurity risks affecting user trust and transaction volume

Financial Risks:

• High leverage (D/E 4.29x) magnifies earnings volatility and limits financial flexibility
• Negative operating cash flow and FCF this quarter increase liquidity management risk
• Working capital timing risk due to large receivables (2,742.91) vs. limited payables (139.41)
• Interest rate risk if floating-rate debt exists (interest expense not disclosed)

Key Concerns:

• OCF/NI of -1.75x signals low earnings quality this quarter
• Equity ratio of 18.8% denotes a thin capital buffer
• Lack of disclosure on debt composition, maturities, and interest coverage
• Non-operating items not disclosed, limiting full PBT/NI attribution

Investment Implications

Key Takeaways:

• Strong YoY profit growth with operating margin expansion of ~830 bps to ~18.0%
• Net margin improved to 10.1%, lifting ROE to 4.7% despite low asset turnover
• Cash conversion lagged materially: OCF -87.18 and FCF -89.08
• Leverage is high (D/E 4.29x), increasing both return potential and risk
• ROIC at 6.0% leaves room for improvement toward 8%+ to solidify value creation

Metrics to Watch:

• OCF/NI and working capital movements (especially receivables turnover)
• Sustained operating margin at or above mid-teens
• Leverage trajectory (D/E) and any disclosure on interest-bearing debt/coverage
• Revenue growth vs. SG&A growth to confirm operating leverage
• ROIC progression toward 8%+

Relative Positioning: Within Japanese internet/platform peers, Mercari demonstrates superior near-term operating leverage and margin expansion but ranks weaker on cash conversion and balance sheet conservatism due to elevated leverage and a low equity ratio.

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