freee K.K. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥9.74B
• Operating Income: ¥271M
• Net Income: ¥170M
• EPS: ¥2.61

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

Freee Co., Ltd. (44780) reported FY2026 Q1 consolidated results under JGAAP with strong top-line momentum and modest profitability. Revenue rose 32.1% year over year to ¥9.743bn, reflecting sustained demand for its cloud accounting and back-office SaaS solutions. Reported gross profit was ¥6.097bn, implying a 62.6% gross margin, consistent with a software model but below best-in-class levels for mature SaaS. Operating income increased 27.2% YoY to ¥271m, yielding an operating margin of 2.8%, slightly lower than the prior-year margin, suggesting limited operating leverage this quarter despite robust growth. Ordinary income was ¥149m, below operating income, indicating net non-operating losses of roughly ¥122m; interest expense was modest at ¥10.8m, implying other non-operating items weighed on ordinary profit. Net income was ¥154m, down 9.1% YoY, aided by minimal taxes (reported effective tax rate rounded to 0%), and likely by non-recurring factors given net exceeds ordinary income. DuPont decomposition shows a net margin of 1.58%, asset turnover of 0.192 (quarterly basis), and financial leverage of 2.55, resulting in a reported ROE of about 0.77% for the quarter. On balance sheet strength, total assets were ¥50.77bn and equity ¥19.94bn, implying a computed equity ratio of ~39.3% despite the disclosure field showing 0% (treated as undisclosed). Liquidity appears sound with a current ratio of 146.5% and no inventory, consistent with a subscription model. Leverage is moderate with liabilities-to-equity at 1.65x, and interest coverage is healthy at ~25x based on operating income. Cash flow statements were not disclosed (zeros indicate not reported), limiting assessment of cash generation and free cash flow for the quarter. Dividend remains nil, appropriate for a growth-focused issuer reinvesting for scale. Overall, the quarter demonstrates durable revenue growth, stable-to-slightly softer margins, and adequate solvency, albeit with limited visibility on cash conversion. Key watchpoints are the sustainability of 30%+ growth, trajectory of S&M efficiency, and containment of non-operating losses. Given data limitations (notably OCF/FCF and share count not disclosed), conclusions are drawn from available non-zero items and computed ratios, and should be revisited when full quarterly cash flow and segment metrics are available.

Profitability Analysis

ROE_decomposition: ROE ≈ 0.77% (quarter) = Net margin 1.58% × Asset turnover 0.192 × Financial leverage 2.55. On an annualized view, asset turnover would be higher (revenue seasonality and quarterly base), suggesting potential full-year ROE uplift if margins hold. margin_quality: - Revenue: ¥9,743m; Gross profit: ¥6,097m; Gross margin: 62.6% (implied). Note: the disclosed cost of sales (¥1,280m) does not align with gross profit; we rely on the reported gross profit and margin for analysis due to possible XBRL mapping differences. - Operating income: ¥271m; Operating margin: 2.8%. - Ordinary margin: 1.5% (¥149m). - Net margin: 1.58% (¥154m). The delta between operating and ordinary profit points to non-operating losses beyond interest expense (¥10.8m). Minimal tax burden supports bottom line. operating_leverage: Operating income grew 27.2% YoY vs. revenue +32.1% YoY, implying slightly negative operating leverage this quarter. Prior-year operating margin was 2.9% (¥213m/¥7,379m) vs. 2.8% this quarter (-11bps). Continued scale benefits in R&D/S&M and G&A will be key to re-accelerate operating leverage.

Growth Assessment

revenue_sustainability: Revenue growth of +32.1% YoY is robust for a domestic SaaS leader and likely driven by subscriber additions and ARPU uplift from higher-tier plans and add-ons. Seasonality is typical in this model; annualization should be approached with caution. profit_quality: Gross margin at 62.6% supports a scalable model but suggests room for improvement via infrastructure efficiency, partner fees, and customer support productivity. Net margin remains low due to growth investments and non-operating items; ordinary profit below operating profit indicates some volatility in below-the-line items. outlook: Assuming continued subscription momentum and disciplined opex growth, modest margin expansion is plausible in subsequent quarters. Key swing factors include marketing efficiency, churn and net retention, and any normalization in non-operating expenses.

Financial Health

liquidity: Current assets ¥45.875bn vs. current liabilities ¥31.311bn; current ratio 146.5% and quick ratio 146.5% (no inventory reported). Working capital stands at ¥14.564bn, indicating adequate short-term coverage. solvency: Total liabilities ¥32.932bn and equity ¥19.937bn imply liabilities/equity of 1.65x and a computed equity ratio of ~39.3% (equity/assets). Interest coverage ~25.0x (operating income / interest expense) indicates low near-term refinancing risk. capital_structure: Financial leverage at 2.55x (assets/equity) is moderate for a growth company. The mix likely includes deferred revenue and lease obligations typical for SaaS; exact breakdown is not disclosed in the provided data.

Cash Flow Quality

earnings_quality: Net income of ¥154m is supported by positive operating income, but ordinary income lag and minimal taxes suggest some non-recurring or non-operating effects. Without OCF disclosure, cash conversion cannot be verified. FCF_analysis: Operating CF and investing CF were not reported (zeros treated as undisclosed), so Free Cash Flow cannot be determined for the quarter. working_capital: Working capital is positive at ¥14.564bn. However, quarter-on-quarter movements in receivables, payables, and deferred revenue are not available, limiting assessment of cash generation from working capital.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is ¥0 and payout ratio 0.0%, consistent with a reinvestment-led strategy at this growth stage. Given low net margins and ongoing scale investments, a cash return policy shift appears unlikely near term. FCF_coverage: FCF coverage cannot be assessed due to undisclosed OCF/FCF. From a prudence standpoint, maintaining a no-dividend policy preserves flexibility. policy_outlook: Management is likely to prioritize ARR growth and margin expansion before considering dividends; any future policy would depend on sustained positive OCF and visibility on durable profitability.

Risk Assessment

Business Risks:

• Competition in SME cloud accounting and back-office software (pricing pressure and feature parity).
• Churn and net retention volatility amid SME macro sensitivity.
• Execution risk in upselling higher-tier plans and ecosystem monetization.
• Dependence on cloud infrastructure providers and potential cost inflation.
• Regulatory and tax policy changes affecting SMEs and accounting workflows.
• Talent retention in product and engineering amid competitive labor markets.

Financial Risks:

• Limited visibility on operating and free cash flow due to undisclosed cash flow statements this quarter.
• Non-operating losses impacting ordinary income despite low interest expense.
• Potential dilution from equity-based compensation (not disclosed here).
• Moderate leverage (liabilities/equity 1.65x) could weigh on flexibility if growth slows.
• Revenue seasonality and deferred revenue dynamics affecting intra-year liquidity.

Key Concerns:

• Slight negative operating leverage despite 32% revenue growth.
• Inconsistency between cost of sales and gross profit lines suggests XBRL mapping differences; relying on gross profit for margin analysis.
• Cash generation and FCF trajectory not assessable this quarter.

Investment Implications

Key Takeaways:

• Top-line growth remains strong at +32.1% YoY, underscoring product-market fit.
• Gross margin at 62.6% is healthy but leaves room for optimization.
• Operating margin at 2.8% and ordinary profit below operating profit indicate limited leverage and some below-the-line headwinds.
• Liquidity is solid (current ratio 146.5%) and solvency moderate (equity ratio ~39%, liabilities/equity 1.65x).
• Cash flow not disclosed; assessment of earnings-to-cash conversion deferred.
• No dividend aligns with reinvestment focus.

Metrics to Watch:

• ARR growth and net revenue retention.
• Sales and marketing efficiency (S&M as % of revenue) and CAC payback.
• Gross margin trajectory (infrastructure and support cost efficiency).
• Operating margin and ordinary income vs. operating income gap.
• Deferred revenue and operating cash flow.
• Churn rates and cohort ARPU expansion.

Relative Positioning: Within the domestic SaaS peer set (e.g., Japanese SME-focused platforms), Freee exhibits above-peer revenue growth with modest profitability and healthy liquidity, but currently trails best-in-class margins; sustained operating leverage and clearer cash flow disclosure would strengthen its relative standing.

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