Starts Publishing Corporation FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥5.67B
• Operating Income: ¥1.12B
• Net Income: ¥919M
• EPS: ¥239.40

Income Statement

Balance Sheet

Cash Flow Statement

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

Starts Publishing Co., Ltd. (Stand-alone, JGAAP) reported FY2025 Q3 year-to-date revenue of ¥5,673 million, declining 10.0% YoY, indicating a challenging demand environment and/or reduced monetization per user/advertiser. Despite the topline decline, gross profit of ¥3,424 million implies a robust gross margin of 60.4%, suggesting healthy unit economics or improved content/product mix. Operating income was ¥1,122 million, down 32.4% YoY, signaling material operating deleverage as fixed costs weighed on profitability amid lower sales. Ordinary income reached ¥1,216 million, and net income was ¥919 million, down 29.1% YoY, with a net margin of 16.2% that remains solid but compressed versus the prior year. The EBITDA margin of 20.7% reflects reasonable operating efficiency but confirms margin pressure relative to last year given the sharper decline in operating income than revenue. DuPont analysis shows ROE of 8.86% (Net margin 16.2%, Asset turnover 0.466x, Leverage 1.17x), which is respectable and underpinned more by margin than by asset intensity. Asset turnover is modest, typical for content/media-type businesses with sizable cash and receivables, while leverage is conservative. Liquidity is very strong, with current assets of ¥10,616 million vs. current liabilities of ¥2,022 million (current ratio ~525%), underpinning operational resilience. Total liabilities are only ¥2,214 million against equity of ¥10,373 million, implying low balance sheet risk; based on totals, the equity ratio approximates 85.3%, although the reported equity ratio field shows as unreported. Operating cash flow of ¥1,283 million exceeds net income (OCF/NI 1.40x), indicating good cash conversion and earnings quality. Financing cash flow was an outflow of ¥343 million, likely reflecting shareholder returns and/or debt repayment, while investing cash flows were not disclosed in this dataset. Dividend information is unreported (DPS and payout ratio shown as zero indicate non-disclosure in this feed), so dividend sustainability must be assessed from earnings and cash flow capacity rather than stated policy. The widened gap between revenue and operating income suggests higher fixed-cost absorption and/or increased spending on content, marketing, or platform investments. Tax expense is disclosed (¥538 million), but an effective tax rate cannot be reliably determined from the reported fields; a simple proxy using ordinary income implies a higher tax burden, potentially due to non-recurring items or tax adjustments. Overall, the company demonstrates strong balance sheet health and solid cash generation, but momentum in profitability has weakened due to operating leverage under a softer topline. Key focuses going forward include revenue stabilization, operating margin recovery, and maintaining cash flow strength to support reinvestment and potential shareholder returns. Data limitations (unreported items such as equity ratio detail, interest expense, investing cash flows, cash balance, and DPS) temper the precision of our conclusions, but the available non-zero data still suggest resilient fundamentals alongside near-term profit pressure.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 16.20%
• asset_turnover: 0.466
• financial_leverage: 1.17
• calculated_ROE: 8.86%
• commentary: ROE is driven primarily by healthy net margins and low leverage; asset turnover is modest. The decline in operating income vs. revenue indicates margin compression that likely pulled ROE down YoY. margin_quality: Gross margin of 60.4% is strong and implies solid value-add or favorable product mix. Operating margin of ~19.8% (¥1,122m / ¥5,673m) remains healthy but contracted meaningfully YoY, reflecting fixed-cost deleverage and/or higher opex (content, marketing, or platform costs). Net margin at 16.2% is robust but also down YoY alongside operating income. operating_leverage: Revenue fell 10.0% YoY while operating income fell 32.4% YoY, evidencing elevated operating leverage. This suggests a sizable fixed-cost base; modest top-line pressure can translate into outsized profit volatility. Continued cost discipline and mix optimization will be key to stabilizing margins.

Growth Assessment

revenue_sustainability: Revenue decreased 10.0% YoY to ¥5,673m, indicating weaker demand or monetization in the period. Sustainability will depend on regaining advertising demand, user engagement, and/or paid content traction. profit_quality: EBITDA margin of 20.7% and net margin of 16.2% remain solid, but the larger drop in operating income vs. revenue highlights profit sensitivity to volumes and mix. OCF/NI of 1.40x supports earnings quality despite margin compression. outlook: Near-term outlook hinges on stabilizing sales and mitigating fixed-cost deleverage. With a strong balance sheet, the company can invest to support growth initiatives; however, absent reacceleration in revenue, profitability may remain under pressure.

Financial Health

liquidity: Current assets ¥10,615.8m vs. current liabilities ¥2,021.7m imply a current ratio of ~525% and ample working capital of ¥8,594.1m. Quick ratio appears equivalent due to inventories being unreported in this dataset. solvency: Total liabilities ¥2,214.4m vs. equity ¥10,373.0m indicate low leverage (debt-to-equity ~0.21x on a broad liabilities basis). Interest expense is unreported; nevertheless, the liability structure looks conservative. capital_structure: Financial leverage of ~1.17x (assets/equity) is low. Based on disclosed totals, the equity ratio approximates 85.3% (equity/assets), although the reported equity ratio field is unreported in this feed.

Cash Flow Quality

earnings_quality: OCF of ¥1,282.5m exceeds net income of ¥919.0m (OCF/NI 1.40x), indicating good cash conversion and limited accrual build in the period. FCF_analysis: Free cash flow cannot be precisely determined as investing cash flows and capex are not disclosed in this dataset (values shown as zero are unreported). However, positive OCF suggests capacity to fund ordinary investment needs under typical capex levels. working_capital: Strong liquidity and high working capital suggest flexibility. The positive OCF despite lower profits implies working capital did not deteriorate materially; detailed drivers (receivables, payables) are not disclosed here.

Dividend Sustainability

payout_ratio_assessment: EPS is ¥239.40; payout ratio is shown as 0% in the dataset but should be treated as unreported. Based on earnings capacity, there appears to be room for distributions, subject to policy and reinvestment needs. FCF_coverage: FCF is shown as zero due to unreported investing cash flows; thus, true FCF coverage of dividends cannot be assessed. OCF strength provides an indicative cushion if capex remains modest. policy_outlook: With a strong balance sheet and solid cash generation, the company retains optionality on shareholder returns. Actual dividend policy cannot be inferred from the provided data and should be confirmed from company disclosures.

Risk Assessment

Business Risks:

• Revenue decline (-10% YoY) indicating demand softness or monetization pressure
• High operating leverage leading to outsized profit sensitivity to sales fluctuations
• Potential shifts in advertising markets and client budgets affecting media revenues
• Execution risk in digital product development and content investment
• Competition for audience attention and advertiser spend
• Potential seasonality around major campaigns or publication cycles

Financial Risks:

• Profitability compression from fixed-cost base if revenue softness persists
• Limited visibility on capex/investing needs due to unreported cash flow details
• Tax expense variability; effective tax rate not clearly derivable from provided fields
• Concentration risk if revenue streams are not well diversified (not disclosed here)

Key Concerns:

• Operating income down 32.4% YoY vs. revenue down 10.0% YoY, signaling deleverage
• Need for revenue stabilization to prevent further margin erosion
• Data gaps (investing CF, cash balance, DPS) constrain assessment of capital allocation

Investment Implications

Key Takeaways:

• Solid gross margin (60.4%) and net margin (16.2%) but clear YoY margin compression
• ROE at 8.86% with low leverage; room to enhance via margin recovery and asset turnover
• Strong liquidity and low liabilities provide resilience and strategic flexibility
• OCF/NI of 1.40x supports earnings quality despite profit headwinds
• Revenue reacceleration is pivotal to restoring operating leverage and profitability

Metrics to Watch:

• Revenue trajectory and ARPU/advertising yield trends
• Operating margin and EBITDA margin progression
• OCF/NI and working capital movements
• Capex/investing cash flows to gauge FCF and reinvestment pace
• Asset turnover and utilization
• Tax rate normalization and below-the-line items

Relative Positioning: Compared to typical domestic media/content peers, the company exhibits stronger balance sheet conservatism and healthy cash conversion, but current-period profitability is under greater pressure due to operating deleverage from a 10% revenue decline.

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