GMO internet,Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥58.34B
• Operating Income: ¥5.63B
• Net Income: ¥-41M
• EPS: ¥14.63

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

GMO Internet Co., Ltd. (47840) reported FY2025 Q3 consolidated results under JGAAP with strong top-line expansion but flat bottom-line growth. Revenue reached ¥58.345 billion, surging +506.4% YoY, indicating a step-change in scale or consolidation/segment recognition effects. Despite the outsized revenue growth, operating income was ¥5.633 billion and net income ¥4.013 billion, both indicated as +0.0% YoY, implying significant margin compression or non-recurring items in the base period. The DuPont framework shows ROE at a robust 28.86%, driven by a 6.88% net margin, 1.166x asset turnover, and 3.60x financial leverage. Operating margin is approximately 9.6% (OI/Revenue), but reported gross margin is only 7.5%, which is atypical as operating margin normally trails gross margin; this suggests classification differences (e.g., other operating income or cost allocations) or line-item presentation nuances under JGAAP. Interest expense of ¥132 million is small relative to earnings, yielding a strong interest coverage ratio of 42.7x. Liquidity appears sound with a current ratio of 181.6% and working capital of ¥3.892 billion. Total assets were ¥50.054 billion and total equity ¥13.903 billion, implying an equity ratio of roughly 27.8% despite a reported “equity ratio: 0.0%” placeholder, which likely reflects non-disclosure rather than zero. The effective tax burden appears unusually low (income tax ¥24 million on ¥4.013 billion net income), implying temporary tax shields, loss carryforwards, or timing effects. Cash flow statements are unreported (all zeros in OCF/ICF/FCF), so cash conversion and FCF quality cannot be evaluated from the provided data. Dividend per share is reported as zero with a payout ratio of 0%, suggesting either a retained-earnings priority or undisclosed interim distributions. The balance sheet indicates moderate leverage (total liabilities/equity of ~0.37x) and efficient asset use (asset turnover 1.166x) underpinning strong ROE. The juxtaposition of explosive revenue growth with flat profit growth raises questions around revenue quality, cost absorption, and the sustainability of the current earnings run-rate. Given missing cash flow disclosures and some internal line-item inconsistencies, conclusions must be tempered; analysis below focuses on disclosed non-zero data per instruction. Overall, profitability at the equity level is strong, liquidity is adequate, and solvency risk appears limited, but margin quality and cash generation remain key unknowns. Near-term focus should be on clarifying revenue mix, gross-to-operating margin bridge, and tax normalization.

Profitability Analysis

roe_decomposition: ROE 28.86% = Net Profit Margin 6.88% × Asset Turnover 1.166 × Financial Leverage 3.60. Drivers: solid efficiency (asset turnover) and moderate leverage amplify a mid-single digit net margin to a high ROE. margin_quality: Reported gross margin is 7.5% (gross profit ¥4.375b on revenue ¥58.345b), while operating margin is ~9.6% (OI ¥5.633b). This inversion suggests material other operating income or classification differences, making gross margin less reliable as a cost indicator. Net margin is 6.88%, supported by low interest burden and an unusually low tax charge (¥24m). operating_leverage: Revenue grew +506% YoY while operating income was flat YoY, implying significant negative operating leverage in the period—costs and/or mix effects scaled faster than incremental gross profit. This could reflect low-margin revenue additions, aggressive customer acquisition costs, or consolidation effects diluting margins.

Growth Assessment

revenue_sustainability: The +506.4% YoY revenue surge to ¥58.345b is likely driven by one-off factors (e.g., consolidation, large contracts, or revenue recognition changes) rather than purely organic growth, given profit stagnation. profit_quality: Operating income (¥5.633b) and net income (¥4.013b) reported as flat YoY despite the revenue step-up indicate pressure on unit economics and/or higher operating costs. The very low tax expense also contributes to bottom-line resilience and may not be sustainable. outlook: Absent disclosure of segment mix and cost drivers, sustaining revenue at current scale with improving margins is uncertain. Attention should focus on gross-to-operating profit bridge, customer concentration, and normalization of the tax rate.

Financial Health

liquidity: Current assets ¥8.660b vs. current liabilities ¥4.768b yield a current ratio of 181.6% and quick ratio of 181.6% (no inventories reported). Working capital stands at ¥3.892b, indicating adequate near-term liquidity. solvency: Total liabilities ¥5.109b vs. equity ¥13.903b imply leverage of ~0.37x (liabilities/equity). Interest coverage is strong at 42.7x, suggesting low refinancing risk under current earnings. capital_structure: Assets ¥50.054b and equity ¥13.903b imply financial leverage of 3.60x (assets/equity). The reported equity ratio of 0.0% is likely a placeholder; computed equity ratio is approximately 27.8%.

Cash Flow Quality

earnings_quality: Operating cash flow is unreported (0 placeholder), so OCF/Net Income ratio of 0.00 cannot be interpreted as weak conversion; it reflects missing disclosure. Earnings quality therefore cannot be validated by cash conversion. fcf_analysis: Free cash flow is unreported (0). Without OCF and capex details, we cannot assess FCF coverage of operations or the durability of cash generation. working_capital: Positive working capital of ¥3.892b supports liquidity, but the impact of the revenue spike on receivables/payables and collection cycles is unknown due to missing cash flow and balance sheet granularity.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is reported as ¥0.00 with a payout ratio of 0.0%, despite net income of ¥4.013b and EPS of ¥14.63. This suggests retained earnings prioritization or timing of dividend declarations not captured here. fcf_coverage: FCF is unreported; therefore, coverage analysis is not possible. Absent cash flow data, we cannot ascertain whether dividends (if any) would be sustainably covered by FCF. policy_outlook: Given strong ROE but missing cash flow disclosure and margin ambiguity, prudent capital allocation would emphasize balance sheet resilience; the current reported stance implies no distribution, though official policy cannot be inferred from the presented data.

Risk Assessment

Business Risks:

• Margin compression risk from low-margin revenue mix and customer acquisition costs
• Revenue sustainability risk following a one-off surge (+506% YoY)
• Potential customer or product concentration given step-change in revenue
• Operational complexity and cost absorption tied to scale-up or consolidation
• Regulatory and competitive pressures in internet and related services

Financial Risks:

• Tax normalization risk given unusually low tax expense (¥24m)
• Data gaps on cash flows limit visibility into cash conversion and FCF
• Potential working capital strain not observable due to missing OCF details
• Leverage sensitivity via financial leverage of 3.60x assets/equity if earnings weaken
• Interest rate risk albeit mitigated by high interest coverage (42.7x)

Key Concerns:

• Inversion of gross vs. operating margin suggests classification issues affecting margin interpretation
• Profit stagnation despite a >5x increase in revenue raises concerns on unit economics
• Lack of cash flow disclosure prevents validation of earnings quality and dividend capacity

Investment Implications

Key Takeaways:

• ROE is strong at 28.86% supported by efficient asset use (1.166x turnover) and moderate leverage (3.60x).
• Top-line growth (+506% YoY) did not translate to profit growth, indicating margin/mix headwinds.
• Liquidity is adequate (current ratio 181.6%); solvency appears comfortable (liabilities/equity ~0.37x).
• Interest burden is low with coverage at 42.7x, limiting near-term financial risk.
• Tax expense is unusually low and likely non-recurring, a potential headwind upon normalization.
• Cash flow data are unavailable; earnings quality and FCF remain unverified.
• Gross-to-operating margin inversion indicates reliance on other operating income or presentation effects.

Metrics to Watch:

• Segment mix and gross-to-operating profit bridge
• Normalized operating margin and net margin trajectory
• OCF/Net income conversion and FCF once disclosed
• Effective tax rate normalization path
• Leverage (liabilities/equity) and interest coverage sustainability
• Customer concentration and contract durability

Relative Positioning: Within Japan-listed internet/services peers, the company exhibits strong ROE and balance sheet resilience but weaker visibility on margin quality and cash conversion due to disclosure gaps; revenue growth appears outsized versus peers but with inferior profit translation in this period.

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