Classico,Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥3.63B
• Operating Income: ¥164M
• Net Income: ¥169M
• EPS: ¥129.24

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

Verdict: a top-line beat with sharply improved profitability but weak cash conversion and a heavier near-term reliance on short-term borrowing. Revenue rose 17.7% YoY to 36.31, while operating income jumped 151.7% YoY to 1.64, indicating strong operating leverage. Ordinary income increased 154.0% YoY to 1.38, and net income surged 499.1% YoY to 1.69, aided by a negative tax charge. Gross margin printed at 44.6% (gross profit 16.18), demonstrating healthy unit economics for the quarter. Operating margin reached approximately 4.5% (1.64/36.31), versus an implied prior-year margin near ~2.1%, suggesting an expansion of about 240 basis points. Net margin was approximately 4.7% (1.69/36.31), versus an implied prior-year net margin near ~0.9%, suggesting an expansion of roughly 375 basis points. EBITDA was 1.94, translating to an EBITDA margin of about 5.4%, consistent with the operating improvement. DuPont-calculated ROE was 12.0%, driven by 4.7% net margin, 1.51x asset turnover, and 1.70x financial leverage. Earnings quality is a concern: operating cash flow was -1.37 versus net income of 1.69, yielding an OCF/NI ratio of -0.81x, well below the >1.0x quality threshold. Free cash flow was negative at -1.54, indicating the improvement in earnings has not yet converted to cash. Liquidity is adequate on headline ratios (current ratio 133%), but cash on hand (2.13) is small relative to short-term loans (5.70), increasing refinancing sensitivity. Leverage is moderate (D/E 0.95x), and interest coverage is strong at 18.1x, reflecting low interest burden relative to operating profit. The reported profit before tax (0.11) versus net income (1.69) and negative tax expense (-0.17) point to one-off or non-recurring tax effects under JGAAP that boosted bottom line. With many items unreported (e.g., dividends, inventory details), visibility into sustainability is limited. Forward-looking, if revenue momentum holds and SG&A discipline continues, margin gains can persist, but the company must normalize working capital and strengthen cash generation to support any future shareholder returns and reduce reliance on short-term debt.

Profitability Analysis

ROE of 12.0% (DuPont) decomposes into a 4.7% net profit margin × 1.51x asset turnover × 1.70x financial leverage. The largest driver of the YoY improvement appears to be net margin expansion, given operating income grew 151.7% on 17.7% revenue growth and the net margin rose to ~4.7% from an implied ~0.9% a year ago. The business explanation is improved operating leverage: SG&A intensity remains high (SG&A/revenue ~42.7%), but stronger gross profit throughput and cost control lifted operating margin to ~4.5%. The negative tax expense (-159% effective rate) further inflated net margin this quarter, likely a one-off factor under JGAAP (e.g., tax credits/benefits). Sustainability is mixed: operating efficiency gains could persist with scale, but the tax benefit is not structural and may reverse. Watch for any re-acceleration in SG&A outpacing revenue; current SG&A disclosure lacks YoY detail, but at 42.7% of sales it limits margin headroom unless revenue continues to scale.

Growth Assessment

Top-line growth of 17.7% is solid, suggesting healthy demand or improved pricing/mix. Profit growth significantly outpaced sales (OI +151.7%, NI +499.1%), implying meaningful operating leverage and one-time tax tailwinds. Gross margin at 44.6% and EBITDA margin at ~5.4% confirm improved unit economics, though the SG&A burden remains elevated. Sustainability of revenue growth is plausible if underlying drivers (volume, pricing, customer wins) persist, but evidence is limited due to data gaps (no segment/customer breakdown). Profit quality is less certain because cash generation lagged (OCF negative) and tax benefits boosted bottom line. Near-term outlook hinges on maintaining volume/pricing and converting earnings to cash via working capital normalization.

Financial Health

Liquidity: Current ratio is 1.33x and quick ratio is 1.33x, above the 1.0x minimum but below the 1.5x comfort benchmark; no explicit warning triggered (<1.0), but headroom is modest. Cash and deposits total 2.13 versus short-term loans of 5.70, indicating potential near-term refinancing needs absent stronger OCF. Working capital is positive at 4.39. Solvency: Debt-to-equity is 0.95x, within conservative thresholds (<1.5x) though not ultra-low; total liabilities are 13.48 against equity of 14.13. Interest coverage is strong at ~18.1x, supported by improved operating income and modest interest expense (0.09). Maturity mismatch risk: Current liabilities (13.18) largely comprise short-term loans (5.70) and payables (3.38); with cash at 2.13, the company relies on receivables and ongoing cash generation for coverage, elevating rollover risk if credit conditions tighten. No off-balance sheet obligations were disclosed in the data provided.

Cash Flow Quality

OCF was -1.37 against net income of 1.69, yielding an OCF/NI ratio of -0.81x, which flags weak earnings quality this quarter. Free cash flow was -1.54, indicating that internal funds did not cover operating needs and capex (-0.25). The negative OCF likely reflects working capital outflows (e.g., receivables timing and/or other current asset movements); inventories were unreported, limiting diagnostic clarity. There is no clear evidence of working capital manipulation, but the divergence between NI and OCF warrants caution and monitoring over subsequent quarters. Financing inflows of 3.40 bridged the cash gap, increasing dependence on external funding. Sustained dividend payments (if any) would not be covered by FCF at current run-rate.

Dividend Sustainability

Dividend information is unreported; DPS, payout ratio, and total dividends paid are N/A. Given negative FCF (-1.54) and reliance on financing CF (+3.40), internal coverage for potential dividends this quarter would be insufficient. With ROE at 12.0% but cash conversion weak, any dividend policy would need to be conservative until OCF normalizes and working capital stabilizes. In absence of disclosed policy or historical payout, sustainability cannot be assessed quantitatively; near-term priority should logically be liquidity and deleveraging over distributions.

Risk Assessment

Business Risks:

• Execution risk in maintaining revenue growth after a strong quarter (+17.7%).
• Margin risk from high SG&A intensity (~42.7% of revenue) if sales growth slows.
• Dependence on non-recurring tax benefits (negative effective tax rate) that boosted NI.
• Potential demand sensitivity to macro conditions given limited product/segment disclosure.

Financial Risks:

• Refinancing risk due to short-term loans (5.70) exceeding cash (2.13).
• Weak earnings quality (OCF/NI -0.81x) and negative FCF (-1.54).
• Moderate leverage (D/E 0.95x) leaving less room if profitability weakens.
• Working capital volatility impacting cash generation.

Key Concerns:

• Large divergence between accounting profits and cash flow.
• Tax-driven uplift to NI (effective tax rate -159%) unlikely to recur.
• Liquidity headroom adequate but not ample (current ratio 1.33x) amid short-term debt reliance.
• Data gaps (dividends, inventory, segment details) reduce visibility on sustainability.

Investment Implications

Key Takeaways:

• Strong top-line and operating profit growth with meaningful margin expansion.
• ROE at 12.0% supported primarily by margin gains, not leverage.
• Cash conversion is weak; OCF negative despite higher NI.
• Short-term borrowing dependence has increased; refinancing sensitivity elevated.
• Tax benefits inflated bottom line and may normalize.

Metrics to Watch:

• OCF/Net Income and working capital movements (especially receivables).
• Operating margin and SG&A ratio trajectory.
• Short-term debt levels versus cash and undrawn facilities (if disclosed).
• Effective tax rate normalization and any extraordinary items.
• Free cash flow and capex discipline.
• Disclosure on dividend policy and payout intentions.

Relative Positioning: Versus typical small/mid-cap JGAAP filers, profitability momentum and interest coverage are strong, but liquidity headroom and cash conversion are weaker; sustainability depends on translating operating gains into cash and reducing reliance on short-term funding.

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