MEDLEY,INC. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥27.54B
• Operating Income: ¥1.61B
• Net Income: ¥2.35B
• EPS: ¥34.72

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

Medley (4480) reported FY2025 Q3 consolidated results under JGAAP showing robust top-line momentum but material profit compression. Revenue grew 27.2% YoY to ¥27.536bn, reflecting sustained demand across core platform businesses. Gross profit is reported at ¥13.993bn, implying a gross margin of 50.8%, which remains healthy for a digital platform model. Operating income declined 31.7% YoY to ¥1.611bn, indicating elevated operating investments or cost pressures that outpaced gross profit growth. Ordinary income of ¥1.681bn exceeded operating income, suggesting positive non-operating contributions that more than offset modest interest expense of ¥40m. Net income fell 52.0% YoY to ¥1.114bn, compressing net margin to 4.05%. The DuPont framework indicates ROE of 6.83% driven by a modest net margin (4.05%), solid asset turnover (0.639x), and moderate financial leverage (2.64x). Liquidity appears strong with a current ratio of 239.9% and quick ratio of 237.5%, supported by sizeable working capital of ¥14.775bn. The balance sheet shows total assets of ¥43.099bn and equity of ¥16.302bn; this implies an equity ratio of roughly 37.8% (versus the reported 0.0% figure which is likely an undisclosed placeholder), pointing to a conservative capital structure. Debt-to-equity of 1.53x (liabilities/equity) is consistent with moderate leverage and manageable financial risk. Interest coverage is robust at 40.3x, indicating ample capacity to service debt from operating earnings. Reported depreciation and amortization are 0, likely a disclosure gap rather than an economic zero; therefore EBITDA metrics are not meaningful this period. Cash flow statements are unreported (OCF/ICF/FCF all shown as 0), limiting direct assessment of earnings-to-cash conversion and investment intensity. Dividend remains nil (DPS ¥0) with a nominal payout ratio of 0%, consistent with a growth-focused reinvestment stance. Overall, Medley demonstrates strong top-line expansion and resilient gross profitability but faces near-term margin pressure at the operating and net levels; liquidity and solvency remain sound, and ROE is supported more by efficiency and leverage than by margin.

Profitability Analysis

ROE_decomposition: ROE 6.83% = Net Margin 4.05% × Asset Turnover 0.639 × Financial Leverage 2.64. Margin compression is the primary drag, while asset turnover and moderate leverage provide partial support. margin_quality: Gross margin is 50.8% (¥13.993bn gross profit on ¥27.536bn revenue), indicating strong unit economics. Operating margin is ~5.85% (¥1.611bn/¥27.536bn), down YoY given operating income fell 31.7% against 27.2% revenue growth. Net margin is 4.05%, impacted by higher below-OP items and/or taxes. Reported D&A is 0 (likely undisclosed), so EBITDA-based margin analysis is not reliable. operating_leverage: Negative operating leverage this period: revenue grew 27.2% YoY while operating income declined 31.7% YoY, implying SG&A growth outpaced gross profit expansion. Ordinary income exceeded operating income, indicating non-operating gains or financial income partially mitigated operating pressure.

Growth Assessment

revenue_sustainability: Revenue growth of 27.2% YoY suggests continued traction in core platforms and customer acquisition. The high gross margin implies recurring or scalable revenue components that can support ongoing growth. profit_quality: Net margin at 4.05% and the sharp YoY decline in operating and net income indicate elevated investment or cost inflation. Positive ordinary income vs. operating income points to supportive non-operating items; however, reliance on these is less durable than operating profit expansion. outlook: If SG&A growth normalizes relative to revenue, operating leverage can improve given the solid gross margin. Sustainability hinges on maintaining client adoption, stabilizing customer acquisition costs, and converting growth into operating profit. Absent cash flow disclosures, we assume reinvestment remains a priority and that near-term margins may remain constrained while scaling.

Financial Health

liquidity: Current ratio 239.9% and quick ratio 237.5% indicate strong short-term liquidity. Working capital of ¥14.775bn provides a cushion for growth investments. solvency: Total liabilities ¥24.981bn vs. equity ¥16.302bn implies debt-to-equity of 1.53x (liabilities/equity). Implied equity ratio is ~37.8% (equity/assets), indicating moderate leverage and balance sheet resilience. capital_structure: Financial leverage (assets/equity) at 2.64x supports ROE without excessive balance sheet risk. Interest expense is modest at ¥40m with coverage of 40.3x, suggesting ample headroom under current earnings.

Cash Flow Quality

earnings_quality: OCF is undisclosed (reported as 0), so OCF/NI ratio (0.00) is not informative. Without OCF, we cannot validate the conversion of earnings into cash or assess non-cash adjustments (D&A, working capital swings). FCF_analysis: Investing and financing cash flows are undisclosed (0 placeholders), preventing a view on capex intensity, M&A outlays, or true free cash flow. Given the asset-light profile implied by high gross margins, underlying FCF may be positive, but this is an assumption pending disclosure. working_capital: Current assets ¥25.337bn vs. current liabilities ¥10.562bn indicates a comfortable liquidity buffer. However, without line-item cash flow detail (AR, AP, deferred revenue movements), we cannot assess working capital drag or release.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is ¥0 with a nominal payout ratio of 0%, aligning with a growth-reinvestment policy amid margin compression. FCF_coverage: FCF is undisclosed; thus, dividend coverage cannot be assessed quantitatively. Liquidity levels suggest capacity, but policy remains reinvestment-led. policy_outlook: Given strong revenue growth and current focus on scaling, a continued zero or minimal payout is plausible until operating margins re-expand and cash flow visibility improves.

Risk Assessment

Business Risks:

• Execution risk in scaling platforms while controlling customer acquisition and operating costs
• Competitive intensity in healthcare/HR tech marketplaces affecting pricing and take rates
• Client demand cyclicality tied to hiring and healthcare spending trends
• Regulatory and reimbursement changes in Japan’s healthcare sector impacting platform economics
• Data privacy, security, and compliance risks given sensitive health-related information
• Dependence on digital marketing channels and algorithmic exposure for lead generation
• Potential integration challenges and impairment risk if M&A or capitalized development is utilized

Financial Risks:

• Margin compression from sustained SG&A investment outpacing revenue
• Limited visibility on cash generation due to undisclosed OCF/FCF
• Potential working capital volatility (receivables, deferred revenue) not observable in this period
• Exposure to rising interest rates is limited currently, but leverage could amplify if debt increases

Key Concerns:

• Operating profit down 31.7% YoY despite 27.2% revenue growth
• Net income down 52.0% YoY with net margin at 4.05%
• Cash flow statements undisclosed, constraining earnings quality assessment

Investment Implications

Key Takeaways:

• Strong top-line growth (+27.2% YoY) with healthy gross margin (50.8%) supports medium-term scalability
• Operating margin compression (~5.85% OPM) is the key near-term challenge
• ROE at 6.83% is mainly constrained by low net margin; efficiency and moderate leverage are supportive
• Liquidity and solvency are solid (current ratio ~240%, implied equity ratio ~38%)
• Non-operating items support ordinary income above operating income; quality of earnings rests on restoring operating leverage

Metrics to Watch:

• Operating margin and SG&A-to-sales trajectory
• Gross profit growth vs. headcount and marketing spend
• Customer acquisition cost (CAC), churn, and LTV/CAC by cohort
• AR days and deferred revenue balances to gauge cash conversion
• Share-based compensation and dilution (shares outstanding are undisclosed here)
• Any guidance updates on monetization, new services, or regulatory changes

Relative Positioning: Within Japan’s digital health and HR platform ecosystem, Medley combines strong growth with premium gross margins, but currently trails best-in-class peers on operating margin expansion; balance sheet strength provides flexibility to invest and narrow this gap.

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