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

Mercari (4385) reported FY2026 Q1 consolidated IFRS results showing solid top-line growth and sharp profit improvement, alongside weak cash conversion and a still-levered balance sheet structure typical of marketplace/payment businesses. Revenue rose 10.1% YoY to 494.4, with cost of sales at 136.0, lifting gross profit to 313.2 and implying a strong gross margin of 63.4%. Operating income more than doubled to 88.9 (+104.6% YoY), as SG&A at 272.2 (55.1% of revenue) grew well below gross profit, demonstrating operating leverage. Net income reached 49.9 (+70.0% YoY), with an effective tax rate of 28.6%, and profit before tax of 89.2 suggests limited non-operating swings in the quarter. DuPont analysis shows a 10.1% net margin, asset turnover of 0.089, and financial leverage of 5.29x, yielding a reported and calculated ROE of 4.7% for the quarter. EBITDA was 93.3 (margin 18.9%), indicating low depreciation and amortization (4.35) and an asset-light core. Despite accounting profitability, operating cash flow was negative at -87.2, driving free cash flow to -89.1, likely reflecting a sizable working capital outflow tied to settlement timing and receivables dynamics inherent to the marketplace/payments model. The balance sheet shows total assets of 5,567.9 and equity of 1,051.6 (equity ratio 18.8%), with total liabilities of 4,441.2, producing a high debt-to-equity ratio of 4.22x; the level is influenced by customer-related liabilities, though interest-bearing debt was not disclosed. Current assets are large at 4,202.4 (including accounts receivable of 2,547.3) and cash and equivalents stood at 1,470.3, offering liquidity buffers despite cash outflows this quarter. Retained earnings remain slightly negative (-30.1), but profitability is improving and should gradually rebuild equity if sustained. EPS (basic) was 30.30 yen on average shares of 164.6 million; book value per share is calculated at 638.47 yen. Reported ratios like ROA and operating margin were not provided via XBRL, but calculated operating margin is about 18.0%. No dividend information was reported, consistent with a reinvestment-led strategy at this stage. Overall, Mercari is demonstrating margin expansion and operating leverage, but cash flow volatility and high reported leverage persist. Data gaps (e.g., non-operating items, current liabilities, interest-bearing debt) limit precision on liquidity and coverage metrics, so conclusions focus on the disclosed non-zero items.

Profitability Analysis

ROE_decomposition: ROE 4.7% = Net margin 10.1% x Asset turnover 0.089 x Financial leverage 5.29x. The quarter’s ROE improvement comes primarily from higher margins and operating leverage, with asset turnover low on a quarterly snapshot and leverage magnifying equity returns. margin_quality: Gross margin of 63.4% reflects strong take-rate economics and cost discipline in cost of sales. SG&A of 55.1% of revenue still heavy but improved operationally given operating income growth of +104.6% YoY versus revenue +10.1%. Operating margin is approximately 18.0% (88.94/494.40), and EBITDA margin is 18.9%, indicating minimal D&A drag and an asset-light model. operating_leverage: Operating income more than doubled on 10.1% revenue growth, indicating significant operating leverage from fixed-cost absorption and efficiency in customer acquisition and marketing spend. The modest D&A (4.35) further supports flow-through from revenue to EBITDA.

Growth Assessment

revenue_sustainability: Revenue grew 10.1% YoY to 494.4, consistent with steady GMV expansion and monetization in the core marketplace and payments ecosystem. Sustainability hinges on user growth, transaction frequency, and take-rate stability; while not disclosed here, the gross margin suggests stable unit economics. profit_quality: Profit before tax (89.21) is close to operating income (88.94), implying limited reliance on non-operating gains. Effective tax rate is 28.6%, and total comprehensive income (51.08) slightly exceeds net income (49.87), indicating minor positive OCI effects. outlook: With EBITDA margin at 18.9% and SG&A scaling more slowly than gross profit, near-term profitability should benefit from continued operating leverage if revenue growth persists. However, cash flow volatility from working capital and leverage from customer-related liabilities could constrain the pace of equity accretion. Continued focus on cost discipline and monetization in new services (e.g., payments) is key to sustaining growth.

Financial Health

liquidity: Cash and equivalents are 1,470.3, and current assets total 4,202.4 (including accounts receivable of 2,547.3). Current liabilities were not disclosed, so current and quick ratios cannot be calculated. Working capital reported in the dataset equals current assets (4,202.4), but true net working capital cannot be evaluated without current liabilities. solvency: Total liabilities are 4,441.2 against equity of 1,051.6, resulting in a debt-to-equity ratio of 4.22x and an equity ratio of 18.8%. Interest-bearing debt is unreported; thus, interest coverage cannot be assessed. Leverage likely reflects settlement/customer-related liabilities common in marketplace/payment models rather than pure financial debt. capital_structure: Capital surplus is 510.0 with retained earnings of -30.1, indicating prior accumulated losses but improving trajectory with current profitability. The asset base is primarily current (4,202.4) versus noncurrent (1,235.2), consistent with an asset-light, transaction-driven model.

Cash Flow Quality

earnings_quality: OCF/Net income is -1.75x, signaling that accounting profits did not convert to operating cash this quarter. The divergence likely stems from working capital outflows (e.g., higher receivables/settlement timing) and possibly tax payments; specific drivers are not disclosed. FCF_analysis: Free cash flow was -89.08, with OCF of -87.18 and modest capex of -0.92, indicating limited investment needs but cash strain from operations this quarter. EBITDA of 93.29 contrasts with negative OCF, underscoring the impact of working capital rather than structural cash burn. working_capital: Accounts receivable are large at 2,547.3 relative to quarterly revenue (indicative of settlement balances). Without current liabilities detail, net working capital movement cannot be decomposed, but negative OCF implies a build in receivables or reduction in payables/other operating liabilities during the quarter.

Dividend Sustainability

payout_ratio_assessment: No dividend data were reported; payout ratios are not calculable. With retained earnings at -30.1 and a growth-focused model, the current stance appears to favor reinvestment over distributions. FCF_coverage: Given negative free cash flow (-89.08), any hypothetical dividend would not be covered by FCF this quarter. policy_outlook: Absent disclosures of a dividend policy change, and considering ongoing investments in growth and the need to rebuild retained earnings, a conservative reinvestment-first approach is likely to persist.

Risk Assessment

Business Risks:

• Competitive intensity in C2C marketplaces and adjacent e-commerce/payment services
• Take-rate pressure and promotional spend required to sustain GMV growth
• Fraud, chargebacks, and trust/safety costs affecting margin
• Regulatory changes affecting payments/fintech operations (e.g., Merpay) and consumer protection
• Execution risk in product expansion and international operations
• Platform dependency on user engagement and network effects

Financial Risks:

• High reported leverage (D/E 4.22x) driven by customer-related liabilities
• Weak cash conversion this quarter (OCF/NI -1.75x) and working capital volatility
• Limited visibility on interest-bearing debt and interest costs (unreported), constraining coverage analysis
• Equity base still modest (equity ratio 18.8%) with retained earnings negative (-30.1)
• Potential liquidity strain if working capital outflows persist despite cash balance of 1,470.3

Key Concerns:

• Sustained negative OCF despite strong EBITDA
• Reliance on high financial leverage to drive ROE under a low asset turnover profile
• Data gaps on current liabilities and debt hinder precise liquidity and solvency assessment

Investment Implications

Key Takeaways:

• Top-line growth of 10.1% YoY with significant operating leverage drove operating income +104.6% YoY
• Healthy gross margin (63.4%) and EBITDA margin (18.9%) underscore asset-light economics
• OCF was negative (-87.2), leading to negative FCF (-89.1), highlighting working capital volatility
• Balance sheet shows high leverage (D/E 4.22x) and low equity ratio (18.8%), though likely influenced by customer liabilities
• Retained earnings remain slightly negative, but improving profitability should support equity rebuilding if maintained

Metrics to Watch:

• GMV growth, take rate, and revenue growth trajectory
• SG&A ratio and marketing efficiency to sustain operating leverage
• OCF/NI conversion and movements in receivables/settlement balances
• Cash and equivalents versus changes in customer-related liabilities
• Equity ratio and retained earnings progression
• Profitability of new services and international segments (if disclosed)

Relative Positioning: Mercari remains a leading Japan C2C marketplace with an expanding fintech/payment ecosystem, exhibiting improving profitability and asset-light margins but with cash flow volatility and a leveraged liability structure that differentiates it from traditional retailers and may compress financial flexibility in periods of working capital outflow.

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