Accrete Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥5.58B
• Operating Income: ¥346M
• Net Income: ¥122M
• EPS: ¥25.47

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Acrylate Inc. (4395) reported robust topline and margin expansion for FY2025 Q3 (cumulative), with revenue of ¥5,583m (+19.0% YoY) and operating income of ¥346m (+74.6% YoY), indicating clear operating leverage. Gross profit was ¥1,107m, implying a gross margin of 19.8%, consistent with a telecom/SMS delivery cost structure where carrier fees dominate cost of sales. Operating margin rose to 6.2% (¥346m/¥5,583m), up significantly YoY given the 74.6% OI growth versus 19% revenue growth. Ordinary income of ¥341m was slightly below operating income due to minor non-operating costs (interest expense of ¥4.9m), yielding an ordinary margin of 6.1%. Net income was ¥163m (+22.7% YoY), a net margin of 2.92%, reflecting tax and any below-the-line items. DuPont analysis shows ROE of 4.46%, driven by thin net margin (2.92%), moderate asset turnover (0.933x), and modest financial leverage (1.64x assets/equity). The balance sheet remains conservative: total assets ¥5,985m, equity ¥3,653m, liabilities ¥1,497m; debt-to-equity is 0.41x and interest coverage is strong at ~70x. Liquidity is ample with a current ratio of 222.7% and working capital of ¥1,470.9m, supporting ongoing growth without immediate external funding. Cash flow statement items were not disclosed (reported as zeros), limiting assessment of cash conversion and free cash flow. Dividend per share is undisclosed/zero and the payout ratio shows as 0%, consistent with reinvestment during a growth phase. The reported equity ratio of 0.0% is an unreported metric; based on balance sheet figures, the equity ratio is healthy (equity/total assets ≈ 61%). Revenue growth appears supported by strong authentication/SMS volumes and possibly customer acquisition, while the sizable OI uplift suggests opex discipline and/or scale benefits. Profitability remains modest at the bottom line due to the inherently low gross margin model and tax burden, but trajectory is improving. The company’s low leverage and high liquidity mitigate financial risk, while business risks center on telecom pricing, competitive pressure, and technological substitution (e.g., in-app or passkey authentication). Overall, fundamentals point to solid execution with better operating efficiency, though confirmation via cash flow disclosure and sustainability of volume growth will be key for the outlook.

Profitability Analysis

ROE of 4.46% decomposes into net profit margin 2.92% × asset turnover 0.933 × financial leverage 1.64, indicating ROE is primarily constrained by a thin net margin typical of aggregator/telecom cost structures. Gross margin at 19.8% reflects carrier fee pass-throughs; improvement in operating income (+74.6% YoY) against revenue growth (+19.0%) implies solid operating leverage via fixed-cost dilution and/or pricing/mix gains. Operating margin of 6.2% and ordinary margin of 6.1% show limited non-operating drag (interest expense ¥4.9m). Net margin at 2.92% remains modest; using income tax expense (¥72.3m) and net income (¥163m) implies an effective tax rate around low-30% (estimated PBT ≈ ¥235m), suggesting taxes are a meaningful headwind to bottom-line scalability. Interest coverage near 70x underscores minimal financing burden, allowing incremental profits to flow from operations. The margin structure suggests the company benefits from scale but remains sensitive to carrier pricing and throughput volumes. With depreciation reported as unlisted (0), EBITDA-based analysis is not available; however, the step-up in operating profit signals improved cost efficiency and likely SG&A discipline. Overall profitability quality has improved, but sustaining net margin expansion will depend on managing telecom costs, product mix (e.g., higher-value messaging/authentication services), and continued scale effects.

Growth Assessment

Topline growth of 19.0% YoY to ¥5,583m indicates solid demand, likely tied to increased two-factor authentication and transactional messaging volumes among enterprise clients. Operating income outpaced revenue (+74.6% YoY), highlighting strong operating leverage and potentially improved pricing or customer mix. Gross profit reached ¥1,107m; while we lack YoY gross profit for precise comparison, the scale of OI growth indicates better incremental margins. Net income grew 22.7% YoY to ¥163m, lagging operating income growth due to taxes and small non-operating costs. The sustainability of revenue growth hinges on enterprise adoption trends, churn, and any migration from SMS to alternative authentication methods (e.g., app-based, passkeys). If growth is primarily volume-driven, carrier pricing changes could compress gross margin; if mix/pricing led, sustainability depends on competitive responses. Given the strong liquidity and low leverage, the company is positioned to invest in platform reliability and product enhancements to support future growth. Near-term outlook appears constructive assuming steady authentication traffic and stable carrier economics, though confirmation through subsequent quarters and any disclosed pipeline wins will be important.

Financial Health

Liquidity is strong: current assets ¥2,669.6m vs current liabilities ¥1,198.6m imply a current ratio of 222.7% and quick ratio equivalent (inventories unreported). Working capital stands at ¥1,470.9m, supporting operational needs and buffer against receivables cycles with carriers and large clients. Solvency is solid: total liabilities ¥1,497.3m vs equity ¥3,653.0m implies debt-to-equity of ~0.41x and an implied equity ratio near 61% (despite the reported 0.0% being an unreported metric). Interest expense is small at ¥4.9m and interest coverage is ~70x, indicating low financial risk. Capital structure is conservative with modest leverage and ample equity supporting growth investments. No cash balance is disclosed (reported as zero), limiting visibility into immediate liquidity headroom beyond current assets. Overall, the balance sheet appears resilient.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed (reported as zeros), so we cannot directly assess cash conversion or free cash flow. Consequently, the OCF/Net Income ratio and FCF figure shown as zero should be treated as unavailable rather than actual values. Earnings quality inference must rely on accrual metrics: rising operating income and strong working capital position suggest the business is generating cash from operations under normal conditions, but timing effects from receivables/payables with carriers and enterprise clients can materially swing period cash flows. The business model typically features low capital intensity, implying that, when disclosed, maintenance capex should be modest and free cash flow should broadly track operating income over time—subject to working capital movements. Key watch items include accounts receivable days and payable cycles to carriers, which drive cash conversion volatility.

Dividend Sustainability

Dividend per share is undisclosed/zero and the payout ratio is shown as 0%. With EPS of ¥25.47 for the period and improving profitability, internal reinvestment appears to be the current stance. Without cash flow disclosure, we cannot evaluate dividend coverage by FCF; however, strong liquidity and conservative leverage would support flexibility if management were to initiate or increase dividends in the future. Given the low net margin and growth investments, a cautious payout policy is reasonable. Monitor management guidance on capital allocation, any stated payout ratio targets, and the relationship between earnings growth and prospective cash generation once cash flows are disclosed.

Risk Assessment

Business Risks:

• Carrier pricing changes and termination fee adjustments that can compress gross margins
• Technological substitution risk from in-app authentication, push notifications, or passkeys reducing SMS volumes
• Intense competition among messaging aggregators leading to pricing pressure
• Customer concentration with large platform clients, raising volume and pricing sensitivity
• Regulatory or compliance changes affecting messaging (anti-spam, data privacy, telecom regulations)
• Quality of service and security risks (deliverability, latency, data breaches) that could impact reputation
• Macroeconomic slowdowns reducing transactional messaging volumes

Financial Risks:

• Limited cash flow disclosure obscures cash conversion and FCF visibility
• Working capital timing swings due to receivable/payable cycles with carriers and enterprises
• Thin net margins heighten sensitivity to cost inflation or adverse pricing changes
• Potential FX exposure if any international traffic is settled in foreign currencies (if applicable)

Key Concerns:

• Sustainability of operating margin expansion amid possible carrier cost volatility
• Dependence on two-factor authentication trends as alternative technologies scale
• Lack of disclosed cash flow data to validate earnings quality and dividend capacity

Investment Implications

Key Takeaways:

• Revenue growth of +19.0% YoY with operating income up +74.6% indicates strong operating leverage
• Operating margin improved to 6.2% and interest coverage ~70x, reflecting healthy core profitability and low financing risk
• ROE 4.46% is constrained by thin net margin (2.92%); further net margin gains are needed to lift returns
• Balance sheet is conservative (debt-to-equity ~0.41x; implied equity ratio ~61%) with ample liquidity (current ratio 222.7%)
• Cash flow data not disclosed; validation of cash conversion and FCF trajectory remains a key information gap
• No dividend currently (payout 0%); capital allocation remains skewed to reinvestment

Metrics to Watch:

• Gross margin trend versus carrier pricing and product mix
• Operating margin and SG&A ratio to assess sustainability of operating leverage
• Accounts receivable days and payables days to evaluate cash conversion
• Revenue growth by customer segment/use case (authentication vs. other messaging)
• Ordinary income and net margin progression given tax and non-operating items
• Any disclosure on capex and maintenance needs impacting FCF

Relative Positioning: Versus TSE-listed information services and communications platforms, Acrylate exhibits above-average revenue growth with below-SaaS operating margins but improving efficiency; financial leverage is lower than many peers, supporting resilience while leaving upside if margins expand further.

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