BASE,Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥14.05B
• Operating Income: ¥1.15B
• Net Income: ¥687M
• EPS: ¥7.87

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

Verdict: Solid topline acceleration with stronger operating leverage delivered a healthy profit beat in FY2025 Q3, though leverage and limited cash flow disclosure temper confidence. Revenue rose 24.4% YoY to 140.52, with operating income up 43.2% to 11.45 and net income up 31.8% to 9.06, indicating positive operating leverage. Gross profit reached 50.24, implying a gross margin of 35.8%. Operating margin stands at 8.1% and ordinary income margin at 8.4%, with net margin at 6.5%. Given operating income growth outpaced revenue, operating margin likely expanded YoY, but basis-point quantification is not possible due to absent prior-period margin data. Non-operating items were small (income 0.17 vs expenses 0.03), and interest expense was modest at 0.10, supporting an interest coverage of 114.5x. Effective tax rate was 15.5%, likely aided by NOLs or tax incentives, helping net profit growth. Balance sheet shows total assets of 469.12 and equity of 141.03, implying an equity ratio of about 30.1% (calculated), with current assets of 423.23 vs current liabilities of 317.59 yielding a current ratio of 133.3%. Cash and deposits are sizable at 220.07, providing liquidity against predominantly current liabilities. Debt-to-equity is elevated at 2.33x (warning threshold >2.0), but interest burden is low, suggesting liabilities may be dominated by non-interest-bearing items (e.g., settlement-related payables). DuPont ROE is 6.4% (Net margin 6.5% × Asset turnover 0.30 × Leverage 3.33x), showing ROE is supported more by leverage than asset efficiency. Reported ROIC of -13.3% conflicts with positive operating income, so treat it cautiously given possible definitional differences or data gaps. Cash flow data (OCF/FCF) were not disclosed, limiting assessment of earnings quality and dividend capacity. Forward-looking, sustaining revenue growth with disciplined SG&A and improving asset turnover will be key to lifting ROE without relying on leverage.

Profitability Analysis

ROE decomposition: 6.4% = 6.5% net margin × 0.300 asset turnover × 3.33x financial leverage. ROE is most influenced by financial leverage (3.33x), while asset turnover is low at 0.300 and net margin is mid-single-digit. The main moving piece in the quarter appears to be operating margin improvement (operating income +43.2% vs revenue +24.4%), implying positive operating leverage from SG&A discipline and/or better gross spread. This looks partially sustainable if mix and operating efficiency gains continue, though some tailwinds (e.g., a low effective tax rate at 15.5%) may normalize. Watch for SG&A growth relative to revenue in coming quarters; current data show operating growth outpacing revenue, a positive sign, but detailed SG&A line items were unreported. Gross margin at 35.8% suggests a balanced take-rate/mix environment; maintaining this while scaling will be important to offset low asset turnover. Overall margin quality is improving, but ROE remains capped by low turnover and dependence on leverage.

Growth Assessment

Revenue grew 24.4% YoY to 140.52, indicating robust demand/GMV expansion or improved monetization (take-rate) on the platform. Operating income growth of 43.2% outpaced revenue, evidencing operating leverage from cost control or scale benefits. Ordinary income rose 44.3% with minimal contribution from non-operating items (net +0.14), suggesting core operations are the driver. Net income rose 31.8% to 9.06, supported by a low 15.5% effective tax rate. Current margins: gross 35.8%, operating 8.1%, net 6.5%. While directionally margins improved, exact basis-point changes YoY are not quantifiable due to missing prior-period margin data. Given the platform nature of the business, sustainability hinges on GMV growth, merchant retention, and payment economics; absent segment data, we assume momentum continues near term. Risks to growth include competitive pricing pressure, changes in payment fee caps, and SME macro sensitivity. Near-term outlook: cautiously positive with continued operating leverage possible if revenue momentum persists and SG&A scales prudently.

Financial Health

Liquidity: Current ratio 133.3% and quick ratio 133.3% (no inventory reported) indicate adequate but not robust liquidity relative to our >150% benchmark. No explicit warning for current ratio (<1.0), but it is below the preferred comfort level. Cash and deposits of 220.07 cover about 69% of current liabilities (317.59), reducing near-term liquidity risk. Solvency: Debt-to-equity 2.33x triggers a high leverage warning (>2.0). However, interest expense is only 0.10 with interest coverage at 114.5x, implying most liabilities are low-cost and possibly operational (e.g., settlement payables). Long-term loans are 6.33; noncurrent liabilities total 10.48, so refinancing risk appears modest. Maturity mismatch: Current assets 423.23 vs current liabilities 317.59 yields positive working capital of 105.64, suggesting manageable short-term obligations. Equity ratio (calculated) ≈ 30.1%, acceptable for a platform/payments model but leaves limited buffer against shocks. No off-balance sheet obligations were reported in the provided data.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow were not disclosed, so OCF/Net Income and FCF coverage cannot be assessed. Given net income of 9.06 and low interest burden, earnings quality appears supported by operating results rather than non-operating gains. However, without working capital detail (receivables/payables components) and OCF data, we cannot rule out timing effects from settlement payables or merchant float. No evidence of working capital manipulation is observable due to data gaps; monitor changes in current liabilities relative to revenue and cash to assess sustainability. Capex and capitalized development spend were unreported, constraining FCF visibility.

Dividend Sustainability

Dividend data were unreported; BASE historically prioritizes reinvestment over cash dividends. With no disclosed DPS or payout ratio, we cannot evaluate coverage. Given current profitability and unknown OCF/FCF, initiating or increasing dividends would depend on sustained positive OCF and stable working capital dynamics. Balance sheet liquidity (cash 220.07) is strong, but high reported leverage and the growth phase argue for conservatism. Policy outlook likely remains growth investment focused absent guidance changes.

Risk Assessment

Business Risks:

• Competitive pressure in e-commerce platforms and payment processing could compress take rates and marketing ROI.
• SME customer concentration and churn risk; macro downturns can reduce GMV and onboarding.
• Regulatory and fee-structure changes in payments could affect margins.
• Technology/platform reliability and cybersecurity risks impacting merchant trust.
• Potential goodwill (22.05) and intangible (22.21) impairment risk if growth slows.

Financial Risks:

• High leverage reported by D/E of 2.33x despite low interest burden; sensitivity to shifts in working capital liabilities.
• Liquidity cushion moderate: current ratio 1.33x; reliance on cash of 220.07 to meet 317.59 of current liabilities.
• Effective tax rate at 15.5% may normalize upward, pressuring net income.
• Limited cash flow disclosure (OCF/FCF) obscures earnings quality assessment.

Key Concerns:

• Dependence on operating leverage to drive profit; margin gains could reverse if growth slows or CAC rises.
• Low asset turnover (0.300) constrains ROE absent further margin improvements.
• Reported ROIC of -13.3% conflicts with positive operating income; metric likely noisy but flags capital efficiency scrutiny.
• Data gaps (cash flow, SG&A breakdown, segment/GMV metrics) limit validation of sustainability.

Investment Implications

Key Takeaways:

• Strong quarter with revenue +24.4% YoY and operating income +43.2% indicates healthy operating leverage.
• Margins solid: gross 35.8%, operating 8.1%, net 6.5%; directionally improved YoY.
• ROE 6.4% is primarily leverage-driven (3.33x) with low asset turnover (0.300); improving efficiency is key.
• Balance sheet shows adequate liquidity (cash 220.07; current ratio 1.33x) but elevated D/E at 2.33x.
• Interest coverage is very strong at 114.5x, implying low cash interest risk.
• Cash flow data absent; earnings quality and FCF sustainability cannot be verified.
• Equity ratio around 30% provides a reasonable but not ample capital buffer.

Metrics to Watch:

• GMV growth and take rate (implied in revenue growth) and merchant cohort retention.
• Operating margin progression and SG&A growth vs revenue.
• Operating cash flow, free cash flow, and changes in settlement payables/working capital.
• Effective tax rate normalization and its impact on net profit.
• Asset turnover improvement and ROE trajectory independent of leverage.
• Cash balance relative to current liabilities and any changes in interest-bearing debt.

Relative Positioning: Within Japanese internet/platform peers, BASE demonstrates above-market revenue growth with improving operating leverage, but maintains lower asset turnover and a higher reported leverage profile; lack of cash flow transparency keeps it at a cautious stance versus peers with consistent positive OCF and clearer capital efficiency.

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