Retty Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥1.63B
• Operating Income: ¥19M
• Net Income: ¥11M
• EPS: ¥0.79

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

Verdict: A modest top-line increase with sharp YoY profit recovery, but earnings quality is weak and leverage remains elevated. Revenue grew 4.4% YoY to 16.30, while operating income rose 141.5% YoY to 0.19 and ordinary income increased 158.2% YoY to 0.13. Net income improved 172.7% YoY to 0.11, translating to a 0.7% net margin. Gross profit was 10.96 on a 67.3% gross margin, indicating solid unit economics at the gross level. Operating margin was approximately 1.2% (vs. ~0.5% a year ago by back-calculation), reflecting about 66 bps of margin expansion. Net margin likely expanded about 41 bps YoY (from ~0.26% to 0.67%) given reported growth rates. Despite reported profit growth, operating cash flow was -0.41, producing an OCF/NI of -3.73x and signaling low earnings quality this quarter. Free cash flow was -1.50, pressured further by -1.09 in investing cash outflows (capex itself was minimal at -0.01). Liquidity looks ample on the surface with a current ratio of 300% and cash of 6.60, but solvency is stretched with D/E at 2.22x and Debt/EBITDA at a very high 24.6x. Interest coverage of 2.54x is only modestly above the caution threshold, leaving limited room for earnings volatility. Balance sheet line items show inconsistencies (current assets exceeding total assets), suggesting classification or reporting quirks; conclusions are drawn only from the stated figures. ROE calculated at 3.2% is driven more by financial leverage (equity multiplier 2.75x) and slightly better margins than by asset turnover (1.75x). Tax was a credit this quarter (-0.15), which aided bottom-line growth. With retained earnings still negative (-6.92), balance sheet resilience depends on sustained profit and cash generation. Forward-looking, stabilizing OCF, improving operating leverage, and deleveraging will be essential to sustain the profit recovery. Overall, the quarter shows financial progress at the P/L level but leaves questions on sustainability given negative FCF and high leverage.

Profitability Analysis

ROE decomposition: ROE (3.2%) ≈ Net Profit Margin (0.7%) × Asset Turnover (1.749) × Financial Leverage (2.75x). The most notable change YoY appears to be margin improvement (operating income +141.5% and net income +172.7% on +4.4% revenue), implying margin was the primary ROE driver rather than turnover or leverage. The business reason likely reflects better monetization and/or cost control from a high fixed-cost base, as GP of 10.96 versus SG&A of 11.87 still yields a thin but positive operating profit; small revenue gains can drive outsized operating profit changes due to operating leverage. This improvement is partly sustainable if revenue continues to grow and cost discipline holds, but it is vulnerable given the still-high SG&A burden and low operating margin starting point. Concerning trends: SG&A (11.87) exceeds gross profit (10.96), so absolute overhead remains heavy; with interest expense at 0.07 and interest coverage only 2.54x, further margin compression would quickly pressure ordinary income.

Growth Assessment

Revenue growth of 4.4% YoY to 16.30 is modest but positive. Profit growth was outsized (OP +141.5%, NI +172.7%) due to operating leverage from a low base, not broad-based margin strength. Gross margin at 67.3% remains healthy for a digital/service model, but operating margin of ~1.2% underscores limited scale efficiency to date. The sustainability of profit growth hinges on sustained top-line expansion and tighter SG&A control; otherwise, interest burden and low margin may cap ordinary profit. With OCF negative (-0.41) and FCF at -1.50, near-term self-funded growth is constrained. Outlook: gradual improvement is possible if revenue momentum continues and working capital normalizes; however, volatility risk is high given thin margins and leverage.

Financial Health

Liquidity is strong by ratios: current ratio 300.1% and quick ratio 300.1%, supported by cash and deposits of 6.60 versus current liabilities of 3.31. Solvency is a concern: D/E at 2.22x exceeds the 2.0x warning threshold; long-term loans of 4.23 represent the bulk of liabilities, and Debt/EBITDA is 24.55x. Interest coverage at 2.54x is only modestly comfortable; any earnings dip could stress coverage. Maturity mismatch risk appears moderate: short-term loans are 0.45 against ample cash; however, reliance on long-term debt remains high. Note a data inconsistency where current assets (9.92) exceed total assets (9.32); this may reflect classification/reporting issues, so interpretations weigh the stated totals but remain cautious. No off-balance sheet obligations were disclosed in the data provided.

Cash Flow Quality

OCF/Net Income is -3.73x (<0.8), flagging poor earnings quality this quarter. Free cash flow was -1.50, with minimal capex (-0.01) implying that FCF pressure was driven by OCF shortfall and other investing outflows (-1.09), likely intangible or investment-related. With NI positive (0.11) but OCF negative, working capital outflows and/or non-cash gains likely explain the divergence; detailed drivers are unreported. Given leverage and interest needs, sustained negative FCF is not compatible with deleveraging or shareholder returns. No apparent signs of deliberate working capital ‘window dressing’ are detectable from the limited data, but the magnitude of OCF shortfall warrants attention.

Dividend Sustainability

No dividends were reported for the period, and payout ratios are not calculable. With retained earnings at -6.92 and FCF negative (-1.50), internal capacity to fund dividends is absent. Given leverage (D/E 2.22x) and thin profitability, a conservative policy is likely to persist until sustained positive FCF and earnings accumulation restore balance sheet strength.

Risk Assessment

Business Risks:

• Subscale operating margin (~1.2%) leaves limited buffer against revenue volatility.
• Competitive pressure in restaurant discovery/marketing from larger platforms and ecosystem players.
• Macroeconomic sensitivity of restaurant marketing spend and SME budgets.
• Execution risk in monetization and cost control to align SG&A with gross profit.

Financial Risks:

• High leverage (D/E 2.22x) and very high Debt/EBITDA (24.6x).
• Interest coverage only 2.54x, exposing earnings to rate or profit shocks.
• Negative OCF (-0.41) and FCF (-1.50) reduce financial flexibility.
• Accumulated deficit (retained earnings -6.92) limits capital buffer.

Key Concerns:

• Earnings quality: OCF/NI at -3.73x signals weak cash conversion.
• Dependence on continued revenue growth to sustain thin profitability.
• Potential covenant or refinancing risk if profitability weakens.
• Data inconsistencies in the balance sheet (current assets > total assets) may obscure true liquidity.

Investment Implications

Key Takeaways:

• Top-line grew 4.4% with strong YoY profit optics from a low base.
• Operating and net margins expanded modestly (~66 bps and ~41 bps, respectively), but remain thin.
• OCF negative and FCF negative; cash conversion is the key weakness this quarter.
• Leverage is high (D/E 2.22x) with limited interest coverage (2.54x).
• Liquidity appears ample via cash, but quality of balance sheet data shows inconsistencies.

Metrics to Watch:

• Operating cash flow and working capital movements (AR and deferred revenue).
• Operating margin trajectory and SG&A growth versus revenue growth.
• Interest coverage and Debt/EBITDA as earnings evolve.
• Equity ratio (net assets/total assets) and trend in retained earnings.
• Revenue growth drivers (ARPA, churn, MAU/DAU) as leading indicators of scalability.

Relative Positioning: Versus domestic internet/service peers, Retty remains subscale with thin operating margins and higher leverage, making its recovery more sensitive to execution and cash flow normalization.

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