ZETA INC. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥1.25B
• Operating Income: ¥155M
• Net Income: ¥78M
• EPS: ¥3.77

Income Statement

Balance Sheet

Profitability Ratios

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

ZETA Co., Ltd. (60310) reported FY2025 Q3 consolidated results under JGAAP with largely flat topline and operating profit versus the prior year, indicating a pause in growth momentum. Revenue was ¥1,245 million (+0.0% YoY), while operating income was ¥155 million (+0.0% YoY), and net income was ¥77 million (+0.0% YoY). Profitability remains anchored by a very high gross margin of 79.1%, suggesting a software-like or service-heavy model with limited direct cost of sales. Operating margin stands at approximately 12.4%, implying a sizable SG&A cost base relative to revenue despite the strong gross profitability. Ordinary income of ¥139 million and interest expense of ¥12.6 million yield an interest coverage ratio of 12.3x, indicating manageable financing costs at current earnings levels. DuPont analysis shows net margin of 6.18%, asset turnover of 0.408x, and financial leverage of 3.69x, producing an ROE of 9.31% that is modest and supported in part by leverage. Based on the balance sheet figures, the implied equity ratio is about 27.1% (¥827 million equity / ¥3,054 million assets), indicating a moderately leveraged capital structure, though the disclosed “equity ratio” metric shows 0.0% due to non-disclosure conventions. Liquidity appears strong with a current ratio and quick ratio of 252% and working capital of ¥1,086 million, providing ample short-term coverage. Revenue and operating profit stasis point to limited operating leverage realization in the period, as cost structure seems to be scaling roughly in line with revenue. The company’s margin profile suggests pricing power and value-add, but the translation from gross profit to operating profit indicates room for SG&A efficiency improvements. Cash flow figures were not disclosed (zeros denote non-reported), so operating cash flow, free cash flow, and cash balances cannot be evaluated from this dataset. EPS is ¥3.77, but per-share balance sheet metrics and share count were not disclosed; thus, per-share capital metrics cannot be reconciled. The effective tax rate metric shows 0.0% (non-disclosed), while the income statement includes ¥50.6 million of income tax, implying a tax burden consistent with normal taxation. Dividend DPS is ¥0 with a payout ratio of 0%, consistent with reinvestment or capital preservation given flat growth. Overall, ZETA exhibits high gross profitability, stable but not expanding operating earnings, comfortable liquidity, and moderate leverage, with cash flow visibility limited by disclosure gaps. Key watchpoints include re-acceleration of revenue, SG&A discipline to unlock operating leverage, and confirmation that earnings quality is supported by cash generation once cash flow data are available.

Profitability Analysis

roe_decomposition:

• net_profit_margin: 6.18%
• asset_turnover: 0.408
• financial_leverage: 3.69
• calculated_roe: 9.31%
• comments: ROE of ~9.3% is driven by modest net margin and low asset turnover, amplified by leverage. Improving operating margin or asset utilization would be the most direct levers to enhance ROE. margin_quality:
• gross_margin: 79.1%
• operating_margin: 12.4% (¥155m / ¥1,245m)
• ordinary_margin: 11.2% (¥139m / ¥1,245m)
• net_margin: 6.18% (¥77m / ¥1,245m)
• comments: High gross margin suggests a scalable, low COGS model. The spread between gross and operating margins indicates substantial SG&A intensity; tightening overhead or improving sales efficiency could lift operating margins. operating_leverage:
• status: Muted in the period
• evidence: Revenue and operating income both flat YoY (+0.0%), implying limited incremental margin capture.
• implications: Without revenue growth, operating leverage cannot materialize; future margin expansion hinges on growth outpacing fixed-cost increases and SG&A productivity.

Growth Assessment

revenue_sustainability: Topline was flat at ¥1,245m, indicating stable demand but no visible acceleration. High gross margin suggests the offering retains pricing power or mix quality. profit_quality: Operating income flat YoY with strong gross margin implies profitability is being maintained by cost control rather than volume growth; the model remains sound but not expanding. outlook: Near-term outlook appears stable given resilient margins and liquidity. Re-acceleration will likely require new customer acquisition, upselling, or product expansion; absent that, growth may remain subdued.

Financial Health

liquidity:

• current_assets: ¥1,799m
• current_liabilities: ¥713m
• current_ratio: 252.4%
• quick_ratio: 252.4%
• working_capital: ¥1,086m
• comments: Ample short-term headroom; no inventory reliance disclosed, suggesting a service-oriented profile. solvency:
• total_assets: ¥3,054m
• total_liabilities: ¥1,922m
• total_equity: ¥827m
• debt_to_equity: 2.32x
• implied_equity_ratio: ≈27.1% (computed from assets/equity)
• interest_coverage: 12.3x (operating income / interest expense)
• comments: Moderate leverage is serviceable given current earnings and coverage; however, flat earnings reduce headroom for adverse shocks. capital_structure: Leverage supports ROE but increases sensitivity to earnings volatility and interest rate moves. Equity base of ¥827m implies limited buffer for large non-recurring losses without impacting ratios.

Cash Flow Quality

earnings_quality: Cannot be assessed from cash flow statements as OCF/FCF were not disclosed in this dataset. Accrual quality and cash conversion remain unknown. free_cash_flow_analysis: Free cash flow not disclosed. With high gross margins and no inventory intensity indicated, the model could be cash generative, but confirmation requires OCF and capex data. working_capital: High current ratio and working capital suggest a cushion; receivables and payables dynamics are not detailed, preventing assessment of collection risk or DSO trends.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 and payout ratio is 0%, aligning with reinvestment or balance sheet strengthening during flat growth. fcf_coverage: Not assessable due to non-disclosed OCF/FCF. Dividend affordability cannot be evaluated from cash flows. policy_outlook: With ROE ~9% and moderate leverage, future distributions likely depend on visibility into growth and sustained cash generation. Absent cash flow disclosure and growth acceleration, a conservative policy appears prudent.

Risk Assessment

Business Risks:

• Growth stagnation risk given flat revenue and operating income
• Pricing pressure or mix deterioration that could compress the high gross margin
• Dependence on SG&A productivity to unlock operating leverage
• Customer concentration or contract renewal risk (not disclosed, but common in service/software models)
• Human capital cost inflation impacting SG&A and operating margin

Financial Risks:

• Moderate leverage (D/E 2.32x) increases sensitivity to earnings declines
• Interest rate risk impacting interest expense and coverage (currently 12.3x)
• Cash flow visibility risk due to non-disclosure of OCF/FCF
• Potential working capital swings affecting liquidity despite current strong ratios

Key Concerns:

• Lack of growth despite strong gross margins
• Limited transparency on cash generation and capex needs
• Reliance on leverage to support ROE rather than operational efficiency gains

Investment Implications

Key Takeaways:

• Very high gross margin (79.1%) underscores a defensible, low-COGS model
• Operating margin (~12.4%) leaves room for SG&A efficiency improvements
• ROE of 9.31% is supported by leverage (A/E 3.69x) rather than asset productivity
• Liquidity is strong (current ratio ~252%), providing operating flexibility
• Earnings flat YoY suggests muted operating leverage and growth headwinds
• Cash flow metrics are not disclosed, limiting assessment of earnings quality
• Interest coverage of 12.3x indicates manageable financing costs at current earnings

Metrics to Watch:

• Revenue growth rate and net new bookings/pipeline (if disclosed)
• SG&A-to-sales ratio and operating margin progression
• OCF/Net income, FCF, and capex once disclosed
• Receivables days and cash conversion cycle
• Interest coverage and effective tax burden
• Leverage (D/E) and implied equity ratio

Relative Positioning: Relative to TSE peers in service/software-like sectors, ZETA exhibits high gross margins and acceptable ROE, but growth is flat and leverage is on the higher side; visibility on cash conversion lags due to disclosure gaps.

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