eWeLL Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥2.47B
• Operating Income: ¥1.20B
• Net Income: ¥832M
• EPS: ¥54.99

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

eWeLL (50380) reported strong FY2025 Q3 single-entity results under JGAAP, highlighted by 33.0% YoY revenue growth to ¥2,473 million and 45.2% YoY growth in operating income to ¥1,195 million. Profitability was exceptional, with an operating margin of approximately 48.3% and a reported net profit margin of 33.64%. The DuPont framework indicates ROE of 26.78%, driven primarily by a high net margin and reasonable asset turnover of 0.668, with only modest financial leverage (assets/equity 1.19x). Ordinary income was ¥1,202 million, slightly above operating income, indicating small positive non-operating balance despite a minor interest expense of ¥2.248 million. Net income reached ¥832 million (+43.7% YoY), signaling strong operating leverage and cost discipline. Liquidity appears very robust, with a current ratio of 451.9% and working capital of ¥1,967 million; solvency is also strong with total liabilities of ¥661 million versus equity of ¥3,107 million (implied equity ratio approximately 83.9%). The interest coverage of about 532x underscores negligible financial risk from borrowings. There is an internal inconsistency between reported cost of sales (¥426 million) and gross profit (¥1,434 million); the gross margin of 58.0% aligns with revenue, so we rely on the provided margin and gross profit for analysis. Cash flow data (OCF/ICF/FCF) and cash balances were not disclosed in this dataset; as instructed, zeros indicate non-disclosure rather than actual zero values, which limits direct assessment of cash conversion and FCF coverage. Despite this limitation, the balance sheet composition suggests an asset-light model with low leverage and ample current assets. The effective tax rate computed from available figures is roughly 20–21%, although the gap between pre-tax income and net income implies other below-the-line items; exact drivers are not fully discernible from the provided data. On growth quality, operating profit outpaced revenue growth, implying positive operating leverage, likely from scale benefits and SG&A efficiency. With DPS at ¥0 and payout ratio at 0.0%, capital appears to be retained for growth, which is consistent with the company’s high-return, low-leverage profile. Overall, fundamentals point to a high-margin, capital-light business with strong ROE, robust liquidity, and limited financial risk, though the absence of cash flow disclosure and the cost-of-sales/gross-profit inconsistency require caution in interpreting margin quality and cash conversion.

Profitability Analysis

ROE_decomposition: Reported ROE is 26.78%, decomposed as Net margin 33.64% × Asset turnover 0.668 × Financial leverage 1.19. This indicates value creation is primarily margin-driven, with modest leverage. margin_quality: Operating margin ≈ 48.3% (¥1,195m / ¥2,473m). Gross margin is reported at 58.0% (¥1,434m gross profit on ¥2,473m revenue). Note: reported cost of sales (¥425.9m) is inconsistent with gross profit; margin-based gross profit appears internally consistent, so we rely on the 58.0% GPM for analysis. operating_leverage: Operating income grew +45.2% YoY versus revenue +33.0% YoY, indicating positive operating leverage and SG&A efficiency. The small gap between gross profit (¥1,434m) and operating income (¥1,195m) implies tight cost control. other_profitability_metrics: Ordinary income margin ≈ 48.6% (¥1,202m/¥2,473m). ROA (approx.) ≈ 22.5% (net margin 33.64% × turnover 0.668), underscoring strong asset productivity.

Growth Assessment

revenue_sustainability: Revenue +33.0% YoY to ¥2,473m suggests strong demand momentum. Asset turnover at 0.668 indicates growth with controlled asset base, consistent with a scalable, asset-light model. profit_quality: Operating income +45.2% YoY and net income +43.7% YoY imply margin expansion and operating leverage. Ordinary income exceeded operating income slightly, with minimal interest burden; recurring earnings quality appears solid, though the cost-of-sales discrepancy warrants monitoring. outlook: With high gross and operating margins, modest leverage, and strong liquidity, the company appears positioned to sustain growth near term, contingent on continued demand and retention of operating efficiency. Greater clarity on cost of sales classification and cash flow conversion would enhance visibility on sustainability.

Financial Health

liquidity: Current assets ¥2,526.7m vs current liabilities ¥559.1m → current ratio 451.9% and quick ratio 451.9% (inventories unreported). Working capital is ¥1,967.6m, indicating ample short-term flexibility. solvency: Total liabilities ¥661.5m vs equity ¥3,107.0m → debt-to-equity 0.21x. Implied equity ratio ≈ 83.9% (equity/total assets), despite a reported 0.0% figure which appears undisclosed in XBRL. capital_structure: Financial leverage is low (assets/equity 1.19x). Interest expense is minimal at ¥2.248m, and interest coverage is ~532x, indicating negligible financial risk from debt.

Cash Flow Quality

earnings_quality: Cash flow statements are undisclosed in this dataset (zeros indicate non-disclosure). Consequently, OCF/Net income and FCF cannot be evaluated from the provided figures. Earnings quality must be inferred from margins and balance sheet strength rather than cash conversion. FCF_analysis: Free cash flow is not available (undisclosed). With large working capital surplus and low leverage, the company likely has financial flexibility, but FCF sustainability cannot be confirmed without OCF/Capex data. working_capital: Working capital of ¥1,967.6m supports operations and growth. Without AR/AP breakdown or cash detail, we cannot assess collection cycles or structural changes in payables/receivables.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 and payout ratio 0.0%, indicating no dividend distributions in the period. Given high ROE (26.78%) and growth, earnings are likely being retained to fund expansion. FCF_coverage: FCF coverage cannot be assessed due to undisclosed cash flows. From a balance sheet perspective, low leverage and substantial working capital are supportive if a dividend were contemplated, but visibility is limited. policy_outlook: The current stance appears growth-oriented capital retention. Any shift to dividends would depend on disclosure of consistent OCF generation and capex needs; near-term, reinvestment seems aligned with the company’s high-return profile.

Risk Assessment

Business Risks:

• Revenue growth normalization or demand volatility after rapid expansion (+33% YoY).
• Potential margin pressure if cost structure scales (e.g., higher personnel or customer acquisition costs) reducing the current 48% operating margin.
• Customer concentration or churn risk typical for platform/service models (not disclosed).
• Competitive intensity in digital/IT services potentially impacting pricing and retention.
• Regulatory or reimbursement changes if exposure to healthcare-related workflows (industry assumption; specifics not disclosed).

Financial Risks:

• Limited transparency on cash flows (OCF/FCF undisclosed), constraining assessment of earnings-to-cash conversion.
• Accounting presentation inconsistency between cost of sales and gross profit figures could mask true margin dynamics.
• Potential extraordinary or below-the-line impacts (gap between pre-tax and net income beyond tax expense).
• Small absolute interest cost today could rise if rates or borrowings increase, though current leverage is low.

Key Concerns:

• Undisclosed cash flow statements impede FCF and cash conversion analysis.
• Inconsistency between cost of sales (¥425.9m) and gross profit (¥1,434.3m) versus revenue suggests classification or reporting differences.
• Sustainability of very high operating margins as the company scales.

Investment Implications

Key Takeaways:

• High-margin, asset-light model delivering strong ROE of 26.78% driven by a 33.64% net margin and moderate asset turnover.
• Robust growth with operating leverage: revenue +33.0% YoY, operating income +45.2% YoY, net income +43.7% YoY.
• Very strong liquidity (current ratio 451.9%) and low leverage (D/E 0.21x) limit financial risk.
• Cash flow non-disclosure and COGS/gross profit inconsistency reduce visibility into margin quality and cash conversion.
• Dividend policy remains conservative (DPS ¥0) with earnings retained for growth.

Metrics to Watch:

• Disclosure of operating cash flow and free cash flow; OCF/NI and FCF margins.
• Reconciliation of cost of sales and gross profit; stability of gross margin around 58%.
• SG&A intensity and operating margin sustainability (target range vs. 48% current).
• Revenue growth trajectory and customer metrics (retention/churn, ARPU) if disclosed.
• Tax rate normalization and any extraordinary items affecting net income.

Relative Positioning: Among domestic software/service peers on the TSE, eWeLL appears to be a high-margin, capital-light operator with superior liquidity and low leverage, positioning it favorably on profitability and balance sheet strength, albeit with below-average disclosure on cash flows in this dataset.

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