Living Technologies Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥3.59B
• Operating Income: ¥503M
• Net Income: ¥315M
• Earnings per Unit (EPU): ¥235.94

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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

FY2025 Q4 was a strong profitability inflection for Livin Technologies (4445), with sharp earnings upside despite largely flat top-line growth. Revenue rose modestly to 35.92 (+0.6% YoY), but operating income surged to 5.03 (+143.2% YoY), driving a calculated operating margin of roughly 14.0%. Ordinary income increased to 4.73 (+126.5% YoY), and net income climbed to 3.14 (+175.9% YoY), translating to a net margin of 8.7%. Using the YoY growth to infer prior margins, operating margin expanded approximately 820 bps YoY (from ~5.8% to ~14.0%). Ordinary margin expanded roughly 730 bps YoY (from ~5.9% to ~13.2%). Net margin expanded about 550 bps YoY (from ~3.2% to ~8.7%). The quality of earnings was solid: operating cash flow of 4.52 exceeded net income (OCF/NI 1.44x), indicating good cash conversion. Free cash flow of 5.32 was buoyed by positive investing cash flows (0.80), suggesting some support from asset sales or redemptions alongside light capex (-0.09). Liquidity is robust with a current ratio of 317.9% and cash of 19.47 against current liabilities of 8.91, limiting near-term refinancing risk. Leverage appears manageable with a reported D/E of 0.94x and interest coverage at a strong 52.7x. ROE is high at 18.3%, primarily driven by improved margins and decent asset turnover (1.079), with moderate financial leverage (1.94x). Non-operating items were small (non-operating income ratio 4.4%) and interest expense of 0.10 was easily covered, keeping core earnings the main story. The effective tax rate was 33.4%, consistent with domestic norms under JGAAP. The absence of disclosed COGS, gross profit, SG&A, and dividend details limits a deeper margin bridge and payout assessment, but the available data point to cost discipline and possibly improved revenue mix. Shareholder returns included buybacks (-1.48) funded comfortably by FCF. Looking ahead, sustaining double-digit operating margins will hinge on maintaining operating efficiency while reigniting top-line growth beyond the current +0.6% YoY. Overall, the quarter signals a step-change in profitability with supportive cash generation and a solid balance sheet, though confirmation of recurring drivers is needed.

Profitability Analysis

ROE decomposition (DuPont): ROE 18.3% = Net Profit Margin (8.7%) × Asset Turnover (1.079) × Financial Leverage (1.94x). The largest change driver appears to be net profit margin expansion, given revenue was up only +0.6% while operating income and net income more than doubled. Business reasons likely include tighter cost control (lower fixed cost intensity), operating leverage from past investments, and/or a richer mix in higher-margin services; non-operating items were small, so the improvement seems operational. Based on inferred margins, operating margin expanded roughly 820 bps YoY, which explains most of the ROE uplift versus relatively stable asset turnover and leverage. Sustainability: margins at ~14% are achievable if cost discipline and mix persist, but with flat revenue growth, sustaining such profitability may require continued efficiency gains or renewed growth; one-time investing cash inflows suggest some non-recurring support to FCF, though not to operating profit. Watch for any reversal in SG&A efficiency once growth investments resume; SG&A was not disclosed, limiting a granular check on operating leverage quality.

Growth Assessment

Top-line growth was muted at +0.6% YoY (35.92), suggesting the profit surge was cost/mix-driven rather than volume-led. Operating income grew +143.2% and net income +175.9%, indicating significant operating leverage and/or favorable pricing/mix. With ordinary income up +126.5% and non-operating income small (0.14), the growth quality appears predominantly operational. Sustainability will depend on whether the company can accelerate revenue while retaining efficiency; otherwise margins could normalize. The effective tax rate (33.4%) is in line, implying no unusual tax distortions to net profit growth. Forward-looking, key catalysts would be product enhancements, monetization improvements, or expansion into higher-margin offerings; conversely, renewed marketing or hiring could compress margins near term. Given limited disclosure (no COGS/SG&A breakdown), we treat the margin step-up as cautiously positive but await evidence across subsequent quarters.

Financial Health

Liquidity is strong: current assets 28.34 (cash 19.47, AR 5.74) vs current liabilities 8.91; current ratio 317.9% and quick ratio 317.9%. No warning triggers (Current Ratio >> 1.0). Solvency is comfortable: total liabilities 16.13 vs equity 17.16 (reported D/E 0.94x), and interest coverage 52.69x is robust. Debt profile shows noncurrent liabilities 7.21 (long-term loans), reducing near-term rollover pressure; maturity mismatch risk is low given ample cash. Balance sheet shows investment securities 2.81 which can provide additional liquidity if needed. No off-balance sheet obligations are disclosed in the provided data. Overall capital structure and liquidity are prudent for growth and shareholder returns.

Cash Flow Quality

OCF/Net Income is 1.44x (>1.0), signaling healthy cash conversion. Free cash flow of 5.32 exceeded OCF due to positive investing cash flow (0.80), indicating proceeds from asset sales/redemptions or low capex (-0.09); this is supportive but partially non-recurring. Working capital appears well managed given strong cash and modest AR relative to revenue; no clear signs of channel stuffing or receivable build from the disclosed figures. FCF comfortably covers capex and supported buybacks (-1.48) in the period; even after financing outflows (-4.92), cash resources remain ample. Monitor whether OCF continues to track NI at >1.0x once investing inflows normalize.

Dividend Sustainability

Dividend data were not disclosed (DPS and payout ratio unreported), so we cannot assess payout directly. From a capacity standpoint, FCF of 5.32 comfortably covers capex and share repurchases (-1.48), implying room for dividends if desired. Cash on hand (19.47) and low capex needs suggest a strong ability to fund ordinary shareholder returns. However, absent an explicit policy or DPS, we cannot comment on trajectory or policy adherence. Key watch items: any announced payout policy (target payout or DOE), OCF stability, and potential increases in growth investment that could pre-empt cash returns.

Risk Assessment

Business Risks:

• Margin sustainability risk after a step-change in profitability with only +0.6% revenue growth
• Execution risk in scaling higher-margin services without inflating SG&A
• Competitive intensity in digital/platform businesses that may pressure pricing and customer acquisition costs
• Customer concentration or vertical exposure risk (details not disclosed) that could amplify earnings volatility
• Product mix shift risk if one-time or cyclical projects supported margins this quarter

Financial Risks:

• Potential normalization of investing cash inflows that lifted FCF above OCF
• Leverage is manageable but increases sensitivity to earnings if margins revert (reported D/E 0.94x)
• Tax rate variability around ~33% could impact net income leverage
• Small-cap liquidity and market access risk if external funding needed for larger initiatives

Key Concerns:

• Limited disclosure on COGS/SG&A prevents validating the durability of operating leverage
• Top-line growth softness suggests reliance on efficiency gains rather than demand growth
• Any uptick in marketing or headcount could compress the ~14% operating margin achieved
• Absence of dividend disclosure prevents assessment of long-term payout commitments

Investment Implications

Key Takeaways:

• Earnings inflection: operating margin ~14% and net margin 8.7% on flat revenue
• ROE 18.3% supported mainly by margin expansion; asset turnover and leverage steady
• OCF quality strong (1.44x NI); FCF elevated by investing inflows
• Balance sheet conservative: current ratio ~318%, strong interest coverage
• Buybacks executed (-1.48) and comfortably covered by FCF

Metrics to Watch:

• Revenue growth re-acceleration beyond +0.6% YoY
• Operating margin progression and SG&A intensity (once disclosed)
• OCF/NI ratio stability as investing inflows normalize
• AR trends and DSO given platform/advertising exposure
• Effective tax rate stability and any policy changes
• Capital allocation mix: buybacks vs dividends vs growth capex

Relative Positioning: Within Japan small/mid-cap digital/platform peers, Livin Technologies shows superior recent margin execution and cash conversion, backed by a liquid balance sheet and moderate leverage; however, revenue growth trails high-growth peers, making the sustainability of elevated margins the key differentiator to watch.

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