Welby Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥380M
• Operating Income: ¥-421M
• Net Income: ¥-538M
• EPS: ¥-50.23

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

Welby (44380) reported FY2025 Q3 consolidated results under JGAAP showing solid top-line growth but persistent operating losses. Revenue was 380.0 million yen, up 28.0% year over year, indicating healthy demand or expanded deployments. Reported gross profit was 201.0 million yen, implying a gross margin of 52.9%, which is attractive for a software/services-centric model and suggests good unit economics at the gross level. Despite this, operating income was a loss of 421.0 million yen, essentially flat year over year, indicating that operating expenses continued to outpace gross profit gains. Ordinary income and net income were similar losses at 422.0 million yen and 415.0 million yen, respectively, with a negligible tax expense of 0.02 million yen. The DuPont breakdown shows a net profit margin of -109.21%, asset turnover of 0.487x, and financial leverage of 1.81x, resulting in a calculated ROE of -96.29%, underscoring the severity of losses relative to equity. The interest burden remains small (interest expense 1.10 million yen), but the negative operating base produces an interest coverage of -383.1x. Liquidity indicators appear strong with a current ratio of 295.9% and working capital of 644.4 million yen, suggesting headroom to fund operations in the near term. Balance sheet leverage is moderate with a debt-to-equity ratio of 0.76x, and liabilities total 328.9 million yen versus total assets of 781.0 million yen and total equity of 431.0 million yen. Dividend policy remains conservative (DPS 0, payout 0%), appropriate given the net loss and the need to reinvest or preserve cash. Cash flow figures (operating, investing, financing) and cash balances were not disclosed in the dataset; therefore, cash runway and free cash flow coverage cannot be assessed from this release. Some intermediate line items (e.g., cost of sales vs. gross profit) and ratios (e.g., equity ratio) show inconsistencies versus other provided figures; analysis prioritizes the internally consistent metrics (gross margin, DuPont, current ratio) and disclosed totals. Overall, Welby demonstrates improving revenue traction and decent gross margin but remains constrained by scale and operating efficiency, with continued focus required on cost controls and monetization. Sustained gross margin at or above 50% is a positive indicator, but the path to operating break-even remains the key catalyst. With limited interest burden and ample working capital, short-term solvency risk appears manageable, though persistent losses could pressure equity over time. Future quarters should focus on converting revenue growth into operating leverage while preserving liquidity. Given the incomplete cash flow disclosures, conclusions about earnings quality and dividend capacity are subject to higher uncertainty. Monitoring expense intensity relative to gross profit and customer acquisition efficiency will be critical for assessing progress toward profitability.

Profitability Analysis

DuPont ROE decomposition indicates profitability is the primary drag: Net profit margin (-109.21%) x Asset turnover (0.487x) x Financial leverage (1.81x) = ROE of -96.29%. The gross margin of 52.9% suggests a scalable model at the contribution level, but operating expenses more than offset gross profit, leading to an operating loss of 421.0 million yen. With revenue of 380.0 million yen and gross profit of 201.0 million yen, the implied operating expense run-rate is roughly 622.0 million yen (sum of SG&A and R&D), indicating high fixed and semi-fixed cost intensity. The flat YoY operating loss despite 28% revenue growth suggests negative operating leverage in the period, likely due to deliberate growth investments or cost inflation outpacing gross profit expansion. Ordinary and net losses are close to operating loss given minimal interest and tax effects, pointing to core operations as the primary issue. Interest expense is small (1.10 million yen), so financing costs are not the driver of losses. EBITDA is not disclosed (and D&A is undisclosed), but given the magnitude of operating loss and the zero D&A entry likely reflecting non-disclosure, underlying cash operating losses may be substantial. Effective tax rate is near zero due to losses, offering no buffer. Overall, profitability hinges on tightening opex, improving utilization of the installed base, and achieving scale benefits to translate gross margin into operating profits.

Growth Assessment

Revenue grew 28.0% YoY to 380.0 million yen, a robust pace implying successful commercialization or customer expansion. The sustainability of growth will depend on retention and upsell dynamics as well as new logo acquisition; the gross margin profile (52.9%) is consistent with a software-enabled service model that can scale if churn is contained. However, profit quality remains weak, with operating and net losses flat YoY despite higher sales, suggesting that current growth is not yet accretive to earnings. The lack of improvement in operating losses indicates either continued upfront investments (salesforce, product, partnerships) or cost pressures in delivery and support. Outlook hinges on converting revenue growth into operating leverage: reducing customer acquisition costs over time, increasing ARPU, and driving higher utilization of the platform. Given the small absolute revenue base, incremental wins can materially shift growth rates; conversely, any delay in contract timing could introduce quarterly volatility. Without disclosed backlog/ARR and cash flow data, confidence in the durability of growth is moderated. Near-term, expect management focus on balancing growth with cost discipline to narrow operating losses.

Financial Health

Liquidity is strong on the disclosed metrics: current assets of 973.3 million yen versus current liabilities of 328.9 million yen yield a current ratio of 295.9% and working capital of 644.4 million yen. Quick ratio equals current ratio due to undisclosed inventories, implying a liquid current asset base. Solvency appears reasonable: total liabilities are 328.9 million yen against total assets of 781.0 million yen and equity of 431.0 million yen; the implied leverage from DuPont (Assets/Equity ≈ 1.81x) aligns with the reported totals. Debt-to-equity is 0.76x, indicating moderate balance sheet leverage; the small interest expense (1.10 million yen) suggests low financial risk from debt servicing. Equity remains positive at 431.0 million yen, but persistent losses (net loss 415.0 million yen in the period) could erode equity if not reversed. The reported equity ratio of 0.0% is inconsistent with the disclosed totals and likely reflects non-disclosure; analysis relies on the explicit assets and equity figures. Overall, near-term liquidity risk is limited, while medium-term solvency hinges on curbing losses or accessing additional capital.

Cash Flow Quality

Cash flow data (operating, investing, financing, and cash/equivalents) were not disclosed in the provided dataset, so earnings quality cannot be triangulated via OCF/NI, FCF, or cash conversion. The OCF/NI ratio and FCF are shown as 0.00, which we treat as undisclosed rather than actual zeros. Depreciation and amortization is also undisclosed, limiting visibility into the gap between operating income and cash operating performance. Working capital appears ample (644.4 million yen), but without AR/AP/cash details, we cannot assess collection cycles, payables management, or cash burn. Given the sizable operating loss (421.0 million yen), underlying operating cash outflows are likely significant unless offset by non-cash items or working capital release; however, this cannot be confirmed with the current data. Future disclosures should include OCF, capex, and ending cash to evaluate cash runway and free cash flow trajectory.

Dividend Sustainability

DPS is 0 and payout ratio is 0%, which is appropriate given the net loss of 415.0 million yen and the priority to fund operations. With FCF undisclosed, FCF coverage of dividends cannot be assessed, but the company is not distributing cash. Near-term dividend initiation or increases appear unlikely until sustainable profitability and positive OCF are achieved. Policy-wise, the emphasis should remain on reinvestment, cash preservation, and reaching break-even; any future consideration of dividends would depend on achieving consistent net profit and FCF generation.

Risk Assessment

Business Risks:

• Execution risk in converting revenue growth into operating leverage
• Customer acquisition and retention risk given subscale revenue base
• Pricing pressure or contract timing risk affecting quarterly volatility
• Regulatory and reimbursement environment sensitivity in healthcare-related services
• Product development and integration risks that could elevate operating expenses

Financial Risks:

• Ongoing operating and net losses eroding equity
• Potential need for external financing if cash burn persists
• Limited visibility on cash balances and cash flows due to undisclosed figures
• Interest coverage negative, leaving little buffer if borrowing increases
• Working capital management risk without detailed AR/AP disclosures

Key Concerns:

• Persistent operating loss of 421.0 million yen despite 28% revenue growth
• Net margin of -109.21% and ROE of -96.29% indicating severe profitability pressure
• Inadequate disclosure of cash flow and cash balances, obscuring runway
• Cost base size relative to gross profit suggests insufficient scale
• Reliance on continued growth to offset fixed cost intensity

Investment Implications

Key Takeaways:

• Top-line up 28% YoY to 380.0 million yen with gross margin of 52.9%, indicating healthy unit economics at the gross level
• Operating loss remains large at 421.0 million yen and flat YoY, signaling limited operating leverage to date
• Liquidity is solid (current ratio 296%, working capital 644.4 million yen), mitigating near-term cash strain based on disclosed balances
• Leverage moderate (D/E 0.76x) and interest burden low (1.10 million yen), so financial costs are not the core problem
• Visibility on cash runway and FCF is limited due to undisclosed cash flow data; monitoring is essential

Metrics to Watch:

• Revenue growth rate and new contract wins/retention
• Gross margin stability at or above 50%
• Operating expense to revenue ratio and trajectory of operating losses
• OCF and FCF once disclosed; cash balance and burn rate
• AR and AP days (working capital efficiency) and any capital-raising activity

Relative Positioning: Versus Japan SaaS/health-IT peers, Welby shows competitive gross margins but remains subscale with pronounced operating losses. Liquidity is comparatively comfortable, leverage is moderate, and interest burden is low, but profitability lags peers that have achieved breakeven or positive 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