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

Retty (単体, JGAAP) delivered modest top-line growth in FY2025 Q4, with revenue up 4.4% year over year to ¥1,630 million, while translating that growth into a sharp improvement in profitability at the operating and net levels. Gross profit was ¥1,096.3 million, implying a high gross margin of 67.3%, consistent with an asset-light, platform-oriented model. Operating income increased to ¥19 million (+141.5% YoY), lifting the operating margin to roughly 1.2%, highlighting operating leverage as costs scaled slower than revenue. Ordinary income was ¥13 million and net income ¥11 million (+172.7% YoY), resulting in a net margin of 0.67%. DuPont decomposition indicates ROE of 3.24%, driven by a low net margin (0.67%), high asset turnover (1.749x), and moderate leverage (2.75x). Interest expense of ¥7.49 million kept the interest coverage ratio at 2.5x (EBIT/interest), adequate but not robust and sensitive to earnings volatility. Cash conversion was weak: operating cash flow was negative at -¥41 million versus positive net income, yielding an OCF/Net Income ratio of -3.73x. Free cash flow was -¥150 million (OCF -¥41 million plus investing CF -¥109 million), signaling investment and/or working capital absorption beyond internally generated cash. On the balance sheet, liabilities of ¥753.0 million against equity of ¥339.0 million imply a debt-to-equity of 2.22x, indicating non-trivial leverage while equity remains modest in absolute terms. Liquidity metrics suggest a high current ratio of 300% and ample working capital (¥661.3 million), although reported current assets (¥991.8 million) exceed total assets (¥932.0 million), indicating classification or reporting timing issues to interpret cautiously. Tax expense was negative (¥-14.9 million), effectively producing a near-zero effective tax rate, likely reflecting tax credits/loss carryforwards under JGAAP. EPS was ¥0.79, but shares outstanding were not disclosed in the provided snapshot, limiting per-share cross-checks. No dividend was declared (DPS ¥0), consistent with negative free cash flow and a focus on reinvestment or balance sheet stabilization. Financing cash outflows of -¥141 million further reduced cash buffers, elevating the importance of near-term cash generation and capital access. Overall, the quarter shows improving earnings leverage on modest growth, but with weak cash flow quality, moderate leverage, and some reporting gaps that constrain certainty. Key watchpoints are OCF improvement, stabilization of working capital, and maintaining interest coverage as rates and financing conditions evolve.

Profitability Analysis

roe_decomposition: DuPont ROE = 0.67% net margin × 1.749x asset turnover × 2.75x financial leverage ≈ 3.24%. The ROE is largely constrained by thin net margin, while efficient asset use (high turnover) and moderate leverage provide uplift. margin_quality: Gross margin of 67.3% indicates a high-value, low-COGS model consistent with a digital platform or service. Operating margin is 1.2%, reflecting heavy operating expenses relative to revenue; incremental margin improvement YoY suggests improving cost discipline. Ordinary margin (~0.8%) and net margin (0.67%) remain thin, with interest expense and other non-operating items consuming a meaningful share of EBIT. The negative tax charge supports net margin but is non-core and may not recur. operating_leverage: Revenue grew 4.4% YoY while operating income rose 141.5% YoY, demonstrating positive operating leverage from expense control and scale effects. EBITDA was ¥19.024 million (1.2% margin), indicating early-stage margin expansion; further leverage depends on controlling fixed costs and enhancing monetization.

Growth Assessment

revenue_sustainability: Revenue of ¥1,630 million (+4.4% YoY) indicates steady but modest growth, consistent with a mature or carefully expanding customer/merchant base and ad/solution monetization. Sustainability will depend on user engagement, advertiser/merchant retention, and upsell. profit_quality: Net income of ¥11 million benefited from negative tax expense (¥-14.9 million). Core profit quality is modest given low operating margin and reliance on interest coverage that is only 2.5x. EBITDA is positive but small relative to revenue, suggesting limited buffer against shocks. outlook: If top-line expands mid-single digits and operating costs remain contained, incremental margins could lift EBIT. However, negative OCF and FCF imply growth is not yet self-funded; improving cash conversion and reducing working capital drag are prerequisites for durable profit growth.

Financial Health

liquidity: Current assets ¥991.8 million vs current liabilities ¥330.5 million imply a current ratio of 300.1% and working capital of ¥661.3 million. Quick ratio is identical given no inventories reported. Note: reported current assets exceed total assets (¥932.0 million), suggesting classification or timing differences; interpret liquidity strength with caution. solvency: Total liabilities ¥753.0 million and equity ¥339.0 million imply a debt-to-equity ratio of 2.22x and financial leverage (assets/equity) of 2.75x. Interest coverage is 2.5x, adequate but vulnerable if EBIT slips. Equity base is small in absolute terms, limiting shock absorption. capital_structure: Leverage relies more on liabilities than equity; with financing CF of -¥141 million, the company appears to be repaying or reducing financing sources. Maintaining access to credit lines and managing cost of debt are important, given thin margins.

Cash Flow Quality

earnings_quality: OCF of -¥41 million versus net income of ¥11 million yields an OCF/NI ratio of -3.73x, indicating weak cash conversion and earnings not fully backed by cash. Negative tax expense further clouds recurring earnings power. fcf_analysis: Free cash flow was -¥150 million (OCF -¥41 million + investing -¥109 million), indicating that growth capex or product investment plus working capital needs exceeded internally generated funds. working_capital: The negative OCF likely reflects working capital outflow (e.g., receivables growth or reduced payables). With current liabilities at ¥330.5 million and strong reported working capital, discipline in collections and contract terms will be key to improving cash generation.

Dividend Sustainability

payout_ratio_assessment: No dividend (DPS ¥0; payout ratio 0%) is aligned with the company’s low profitability (net margin 0.67%) and negative FCF. fcf_coverage: With FCF at -¥150 million, dividends are not currently covered by internal cash generation. policy_outlook: Absent sustained positive OCF and higher operating margins, initiation of dividends appears unlikely in the near term; priority should remain on reinvestment and balance sheet resilience.

Risk Assessment

Business Risks:

• Dependence on advertising/merchant monetization with potential cyclicality in advertiser budgets
• User and merchant retention risk impacting recurring revenue and pricing power
• Competitive intensity among restaurant/digital platforms affecting traffic and monetization
• Execution risk in new product features or sales productivity needed to drive ARPU
• Regulatory and data/privacy compliance for digital platforms

Financial Risks:

• Weak cash conversion (OCF/NI -3.73x) and negative FCF (-¥150 million)
• Moderate leverage (D/E 2.22x) with thin interest coverage (2.5x)
• Potential reliance on external financing amid financing CF outflows (-¥141 million)
• Sensitivity of earnings to non-operating items, including negative tax effects that may not repeat
• Small equity base (¥339 million) limiting loss-absorption capacity

Key Concerns:

• Sustaining margin improvement while maintaining revenue growth beyond +4.4% YoY
• Turning OCF positive and reducing working capital drag
• Maintaining at least 2.5x interest coverage amid potential rate and cost pressures
• Data inconsistencies in reported balance sheet subtotals (e.g., current assets exceeding total assets), which constrain precise ratio interpretation

Investment Implications

Key Takeaways:

• High gross margin (67.3%) confirms attractive unit economics, but operating margin is still thin (1.2%).
• ROE of 3.24% is leverage- and turnover-supported; sustainable improvement requires higher net margin.
• Cash flow profile is weak (OCF -¥41m; FCF -¥150m), indicating growth is not self-financed.
• Leverage is meaningful (D/E 2.22x) with only moderate interest coverage (2.5x).
• Liquidity metrics look strong on paper, but classification/timing issues warrant caution.

Metrics to Watch:

• Operating cash flow and OCF/NI conversion ratio
• EBIT margin and EBITDA margin progression
• Interest coverage and effective borrowing costs
• Working capital turns (DSO/DPO) and deferred revenue trends
• Revenue growth reacceleration and ARPU/retention metrics

Relative Positioning: Economics are consistent with an asset-light digital platform exhibiting high gross margins but modest scale efficiency to date; compared with peers, profitability inflection is nascent and cash conversion lags, making operational execution and cash discipline more critical than capital intensity.

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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