Nyle Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥4.90B
• Operating Income: ¥-165M
• Net Income: ¥-606M
• EPS: ¥-22.56

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

NILE Co., Ltd. (56180) delivered solid top-line growth in FY2025 Q3 with revenue of ¥4.899bn, up 24.8% YoY, but remained loss-making at the operating and net levels. The period shows an operating loss of ¥165m and a net loss of ¥192m, with ordinary loss of ¥191m, indicating modest non-operating net expenses on top of interest costs. Gross profit is disclosed at ¥1.607bn, implying a gross margin of 32.8%; however, this does not reconcile with the disclosed cost of sales of ¥2.318bn, which would imply a much higher margin, so we rely on the disclosed gross margin as the better indicator. Operating margin stands at approximately -3.4%, evidencing that opex growth has offset the healthy revenue expansion. The DuPont framework indicates ROE of -47.8%, driven by a -3.9% net margin, strong asset turnover of 1.523x, and high financial leverage of 8.0x. The company’s asset turnover suggests efficient revenue generation on its asset base, but negative profitability overwhelms this benefit. Capital structure is aggressive: total equity of ¥402m against total assets of ¥3.217bn implies an equity ratio around 12–13% (versus the disclosed 0.0%), and liabilities/equity of about 5.8x. Liquidity appears adequate with a current ratio near 190% and working capital of approximately ¥1.108bn. Interest expense of ¥13.4m yields an interest coverage of around -12x (on operating income), highlighting low headroom while the company remains loss-making. Cash flow statement items are unreported (0), limiting visibility into operating cash conversion and capex intensity this quarter. EPS is -¥22.56 and no dividend is paid, which is appropriate given losses and the likely prioritization of reinvestment or balance sheet stability. The improvement in revenue alongside flat YoY operating loss (0.0% change) suggests operating leverage is not yet translating into profit improvement, possibly due to growth investments or higher variable costs. The mix between gross margin and operating expense control will be pivotal to restoring profitability. With high leverage and negative earnings, sustaining liquidity and access to funding are important near-term considerations. Key watchpoints include trajectory of gross margin (using the disclosed 32.8% as the anchor), operating expense discipline, and any progress toward operating breakeven.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin -3.92% × Asset turnover 1.523 × Financial leverage 8.00 = ROE -47.76% (matches reported). The negative margin is the primary driver of weak ROE, while high leverage amplifies the loss impact. Operating margin is approximately -3.37% (¥-165m / ¥4,899m). Ordinary margin is about -3.90%, and net margin -3.92%, showing limited non-operating noise beyond interest and minor other items. Gross margin is disclosed at 32.8%; however, cost of sales and gross profit lines do not reconcile, so we anchor on the disclosed gross margin and treat the cost of sales figure cautiously. Margin quality: The spread between gross margin (32.8%) and operating margin (-3.4%) indicates heavy operating cost burden; scaling revenue without proportional opex growth is necessary to achieve breakeven. Operating leverage: Despite +24.8% revenue growth, operating loss remained flat YoY, implying that either gross margin compressed or opex expanded roughly in line with revenue; fixed-cost leverage has not yet materialized. Interest burden: Interest expense of ¥13.4m against negative EBIT yields an interest coverage of about -12.3x, underscoring limited capacity to absorb financing costs while loss-making.

Growth Assessment

Revenue growth of +24.8% YoY demonstrates strong demand momentum or effective expansion of the business lines. Sustainability will hinge on customer retention, unit economics, and pricing power; the current gross margin disclosure (32.8%) suggests room to improve contribution if scale efficiencies or mix improve. Profit quality remains weak given operating and net losses; ordinary loss close to operating loss suggests limited reliance on one-off non-operating gains. With EBITDA unreported, we cannot assess add-backs, but the negative operating income signals limited near-term profit conversion. Given the flat YoY operating loss, incremental growth is currently not dropping to the bottom line; management focus likely remains on scaling and cost productivity. Near-term outlook depends on stabilization or improvement in gross margin and tighter control of SG&A to capture operating leverage. If revenue growth persists near 20%+ and opex growth moderates, breakeven could be achievable; conversely, if margins compress, losses could persist.

Financial Health

Liquidity: Current assets of ¥2.341bn vs current liabilities of ¥1.233bn yield a current ratio of ~190% and working capital of ~¥1.108bn, indicating adequate short-term liquidity. Quick ratio equals current ratio due to unreported inventories; true quick liquidity may be slightly lower if inventories exist but are unreported. Solvency: Total liabilities of ¥2.322bn vs equity of ¥402m imply a debt-to-equity of ~5.78x and an implied equity ratio around 12.5% (equity/assets), reflecting a thin capital buffer. Interest expense of ¥13.4m with negative EBIT shows limited interest service capacity until profitability improves. Capital structure: High leverage combined with losses heightens sensitivity to earnings volatility; maintaining lender confidence and proactive refinancing/working capital management will be important. Despite adequate current assets, the low equity base constrains resilience.

Cash Flow Quality

Cash flow data are unreported for OCF, investing, and financing, so we cannot directly assess cash conversion or free cash flow for the quarter. The OCF/Net Income ratio is shown as 0.00 due to unreported OCF and should not be interpreted as true zero cash generation. Earnings quality: With negative operating income and unreported depreciation/amortization, the extent of non-cash charges is unclear; accordingly, EBITDA and FCF metrics cannot be reliably derived. Working capital: Current assets and liabilities indicate positive working capital, but without cash flow detail we cannot assess the direction or magnitude of working capital swings. FCF: Not assessable this quarter; investment intensity (capex or software development costs) is unknown.

Dividend Sustainability

Annual DPS is ¥0.00 with a reported payout ratio of 0.0%, consistent with ongoing losses (EPS -¥22.56) and a focus on reinvestment or balance sheet stability. With unreported OCF and FCF, cash coverage cannot be assessed, but paying dividends while loss-making and with elevated leverage would be imprudent. Policy outlook: Dividend resumption likely hinges on achieving stable operating profitability and improving the equity buffer; near-term emphasis should remain on funding growth and strengthening solvency.

Risk Assessment

Business Risks:

• Execution risk in scaling revenue while improving operating leverage
• Gross margin pressure from pricing, mix, or input cost inflation
• Customer acquisition cost and retention dynamics impacting unit economics
• Dependence on continued high growth to approach breakeven

Financial Risks:

• High leverage (liabilities/equity ~5.8x) with thin equity buffer (implied ~12–13% equity ratio)
• Negative operating income leading to weak interest coverage (-12.3x)
• Limited visibility on cash flow due to unreported OCF/FCF
• Potential refinancing/liquidity risk if losses persist

Key Concerns:

• Discrepancy between disclosed gross profit and cost of sales; reliance on gross margin disclosure
• Operating leverage not yet evident despite +24.8% revenue growth
• Sustained losses heighten sensitivity to funding costs and market conditions

Investment Implications

Key Takeaways:

• Top-line momentum is strong (+24.8% YoY), but profitability remains negative at all levels.
• ROE is deeply negative (-47.8%), driven by margin weakness and high leverage.
• Liquidity is adequate (current ratio ~190%), but solvency is tight given the small equity base.
• Operating leverage has not materialized; cost discipline and margin execution are critical.
• Cash flow visibility is limited this quarter due to unreported OCF/FCF and D&A.

Metrics to Watch:

• Gross margin (anchor on disclosed 32.8%) and its trajectory
• Operating expense growth vs revenue growth (path to operating breakeven)
• Ordinary income vs operating income (non-operating gains/losses, interest burden)
• Equity ratio and net debt metrics (capital buffer and solvency)
• Operating cash flow and free cash flow once disclosed
• Interest coverage improvement as earnings scale

Relative Positioning: Versus typical TSE growth companies, NILE exhibits above-average revenue growth but below-average profitability and a thinner equity cushion; the path to breakeven and strengthening of the capital base will determine convergence toward peers.

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