PIXELA CORPORATION FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥1.00B
• Operating Income: ¥-796M
• Net Income: ¥-604M
• EPS: ¥-13.53

Income Statement

Balance Sheet

Cash Flow Statement

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

Pixela Co., Ltd. (TSE: 6731) reported FY2025 Q4 consolidated results under JGAAP with revenue of ¥1,001 million, down 13.9% YoY, indicating sustained top-line pressure. Despite a reported gross profit of ¥230 million and an implied gross margin of 23.0%, operating performance was deeply negative with operating income of -¥796 million, suggesting heavy operating expense burden and/or restructuring costs overwhelming gross profit. Ordinary loss was -¥817 million and net loss -¥853 million, resulting in a calculated ROE of -100.95%, driven by severely negative margins and modest financial leverage (assets/equity ~1.33x). EBITDA was -¥784 million (margin -78.3%), highlighting that the core earnings power before depreciation and interest is significantly in deficit. Asset turnover of 0.889x implies moderate utilization of the asset base, but not enough to offset negative margins. Liquidity metrics appear reasonably strong on paper (current ratio 167.6%, quick ratio 124.8%, working capital ¥234 million), suggesting near-term solvency from a balance sheet perspective. However, the company relied on substantial financing inflows of ¥1,474 million to fund an operating cash outflow of -¥997 million, indicating dependence on external capital to sustain operations. Free cash flow was -¥995 million, underscoring a large cash burn relative to scale. Interest expense is low at ¥0.9 million, and interest coverage is deeply negative due to negative EBITDA, though absolute interest burden is not currently the main pressure point. The OCF/NI ratio of 1.17 suggests that reported losses are somewhat corroborated by cash outflows, implying poor but not overstated earnings quality. Inventories of ¥148 million relative to revenue suggest a manageable stock position, but working capital dynamics remain a likely swing factor for cash. Equity is reported at ¥845 million and debt-to-equity at 0.50x, indicating moderate balance sheet leverage, though the sustainability of equity given continuous losses is a concern. Dividends remain suspended (DPS ¥0; payout 0%), which is appropriate given losses and negative FCF. Certain disclosures (e.g., equity ratio, cash and equivalents, share data) show as zero and should be interpreted as unreported rather than actual zeros; there are also apparent internal inconsistencies in some line items, which may stem from taxonomy mapping. Overall, the profile is one of shrinking revenue, severely loss-making operations, negative free cash flow, and reliance on financing, with short-term liquidity adequate but medium-term sustainability contingent on turnaround execution and access to capital.

Profitability Analysis

ROE decomposition (DuPont) indicates: Net profit margin -85.21%, asset turnover 0.889x, and financial leverage 1.33x, yielding a calculated ROE of approximately -101%, indicating that negative margins are the primary driver of value erosion rather than excessive leverage. Gross margin stands at 23.0%, which is modest for electronics/consumer device businesses, but is overwhelmed by operating expenses and other charges, resulting in an operating loss of ¥796 million. EBITDA of -¥783.8 million and EBITDA margin of -78.3% highlight severely negative operating leverage; small changes in revenue likely translate into outsized changes in profit due to a high fixed-cost base. Depreciation and amortization are low at ¥12.2 million, implying the gap between EBITDA and operating income is minimal; thus, the core issue is insufficient gross profit to cover SG&A and R&D rather than heavy non-cash charges. Ordinary loss of -¥817 million suggests limited non-operating relief; interest burden is small but there may be other non-operating items contributing to losses. Effective tax rate appears near 0% given the loss position. Overall, profitability is constrained by weak top-line scale, modest gross margin, and a cost structure that does not flex down sufficiently, indicating poor operating leverage and the need for structural cost reduction or a significant revenue mix/volume improvement.

Growth Assessment

Revenue declined 13.9% YoY to ¥1,001 million, pointing to ongoing demand challenges or product cycle headwinds. The current gross margin of 23.0% suggests limited pricing power and/or an unfavorable product mix relative to historical profitability needs. With operating income at -¥796 million, growth quality is weak as incremental scale today is not translating into profitability. The negative EBITDA margin (-78.3%) signals that near-term growth would need to be both material and margin-accretive to shift the earnings trajectory. Asset turnover of 0.889x is reasonable but cannot compensate for the margin deficit; productivity improvements alone are unlikely to close the loss gap. The OCF/NI ratio of 1.17 indicates cash losses broadly in line with accounting losses, suggesting limited hidden earnings power in working capital at this stage. Outlook hinges on cost restructuring, product portfolio optimization, and possible shift toward software/services or higher-margin hardware niches if applicable to the business model. Given the magnitude of losses, management will likely prioritize cash preservation over growth investments until financing visibility improves. Absent evidence of a demand inflection, near-term revenue sustainability appears fragile, and profitability restoration will require both cost resets and a higher-margin sales mix.

Financial Health

Total assets are ¥1,126 million, liabilities ¥418.9 million, and equity ¥845.0 million (noting possible classification discrepancies as A ≠ L+E based on the provided figures). The implied leverage (assets/equity ~1.33x) and reported debt-to-equity ratio of 0.50x indicate moderate financial leverage. Liquidity appears adequate with a current ratio of 167.6% and quick ratio of 124.8%, supported by current assets of ¥579.0 million versus current liabilities of ¥345.4 million. Working capital is positive at ¥233.5 million, offering some short-term buffer. Interest expense is low at ¥0.9 million, and while interest coverage is negative due to operating losses, the absolute interest burden is not currently a key constraint. However, the company is relying on external financing (financing CF +¥1,474 million) to offset negative operating cash flow, highlighting refinancing and capital access risk. Equity remains positive, but persistent losses at the current run-rate would erode capital; solvency over the medium term depends on the pace of loss reduction and continued funding. The reported equity ratio at 0.0% should be treated as undisclosed, not as a true zero.

Cash Flow Quality

Operating cash flow was -¥997 million versus net income of -¥853 million, yielding OCF/NI of 1.17, which implies that losses are reflected in cash and not primarily driven by non-cash charges; earnings quality is therefore not overstated but rather constrained by the underlying economics. Depreciation is only ¥12.2 million, so non-cash adjustments are minimal; working capital likely contributed to the OCF shortfall relative to NI. Free cash flow was -¥995 million (OCF plus investing CF of +¥2 million), indicating substantial cash burn. Financing inflows of ¥1,474 million more than covered FCF burn in the period, signaling reliance on new debt/equity or other financing instruments. With inventories at ¥148.0 million, inventory management and turns will be important for cash generation; any demand softness could tie up cash further. Overall, cash conversion is weak, and improvement requires both operating margin recovery and tighter working capital discipline.

Dividend Sustainability

No dividends were paid (DPS ¥0; payout ratio 0%), which is consistent with the loss position and negative free cash flow (-¥995 million). FCF coverage of dividends is 0.00x, reflecting the absence of distributions and insufficient cash generation. Given the scale of operating losses and dependence on external financing, resumption of dividends appears unlikely until a sustained return to positive OCF and profitability is demonstrated. Policy-wise, preservation of liquidity and balance sheet stability will likely take precedence over shareholder distributions in the foreseeable future.

Risk Assessment

Business Risks:

• Revenue decline of 13.9% YoY indicating potential demand weakness or product obsolescence
• Low gross margin (23.0%) limiting pricing power and profit generation
• High fixed cost base leading to negative operating leverage and large operating losses
• Execution risk in restructuring and cost reduction initiatives required to restore profitability
• Product cycle and competitive intensity in electronics/consumer devices
• Supply chain and procurement risks that could pressure margins further

Financial Risks:

• Sustained negative FCF (-¥995 million) requiring continued external financing
• Refinancing and capital access risk despite currently moderate leverage
• Erosion of equity capital if losses persist, pressuring solvency over time
• Working capital volatility impacting operating cash flow
• Potential covenant or funding terms tightening if performance does not improve

Key Concerns:

• Severe operating losses (operating income -¥796 million; EBITDA margin -78.3%)
• Dependence on financing inflows of ¥1,474 million to fund cash burn
• Negative ROE (-100.95%) driven by deeply negative margins
• Data inconsistencies across some reported line items, complicating precise analysis

Investment Implications

Key Takeaways:

• Top line contracted 13.9% YoY to ¥1,001 million with modest gross margin of 23.0%
• Core profitability is deeply negative (EBITDA -¥784 million; margin -78.3%)
• ROE of -100.95% driven primarily by negative net margin rather than leverage
• OCF -¥997 million and FCF -¥995 million indicate substantial cash burn
• Liquidity buffers appear adequate (current ratio 168%; quick ratio 125%) but funded by external capital (+¥1,474 million financing CF)
• Moderate leverage (D/E 0.50x) but solvency depends on curbing losses
• Dividend remains suspended appropriately given losses and negative FCF

Metrics to Watch:

• Quarterly revenue trend and order visibility
• Gross margin trajectory and product mix improvements
• Operating expense run-rate and progress on fixed-cost reduction
• OCF and FCF progression, including working capital turns (inventory, receivables)
• Financing activities, cash runway, and covenant/funding terms
• Asset turnover and utilization relative to revenue scale

Relative Positioning: Relative to peers in electronics and consumer device markets, Pixela exhibits weaker profitability and cash flow resilience, with moderate leverage but significantly higher dependence on external financing to sustain operations; near-term competitiveness hinges on rapid cost restructuring and margin recovery.

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
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