FinTech Global Incorporated FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥14.43B
• Operating Income: ¥3.41B
• Net Income: ¥1.84B
• EPS: ¥10.91

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

Verdict: Solid profitability with strong margin expansion, but cash flow quality deteriorated and FCF was negative, tempering the headline earnings growth. Revenue grew 4.5% YoY to 144.32, while operating income rose 32.5% YoY to 34.06, lifting ordinary income to 32.42 (+31.7%) and net income to 21.21 (+26.6%). Gross profit reached 88.69, implying a 61.5% gross margin, and operating margin improved to roughly 23.6%. Based on the growth rates, prior-year operating income was about 25.71, suggesting prior OPM near 18.6%, implying ~+500 bps YoY operating margin expansion. Net margin printed 14.7%, supported by a modest effective tax rate of 16.4% and limited non-operating drag (non-op income 1.26 vs non-op expenses 2.90). EBITDA was 38.87, with a healthy 26.9% EBITDA margin, and interest coverage was strong at 20.13x despite interest expense of 1.69. However, operating cash flow was -6.64 versus net income of 21.21, producing an OCF/NI ratio of -0.31x, a clear earnings quality red flag. Free cash flow was -22.54, and financing inflows of 31.30 (despite 5.29 of buybacks) largely bridged the funding gap, indicating reliance on external funding. The balance sheet is moderately conservative with total equity of 120.42, total assets of 269.94, and an approximate equity ratio around the mid-40% range using total equity, while D/E is 1.24x and current ratio is 127.4%. Short-term loans are 34.15 against cash and deposits of 66.33, which mitigates near-term liquidity risk but exposes the company to refinancing and rate risks. Equity method income is small at 0.23 (0.8% of profit base), so results are driven mainly by core operations rather than affiliates. ROE is robust at 17.6%, driven primarily by higher net margins and moderate leverage (2.24x). Looking ahead, sustaining the improved margin profile will be key, but normalization of working capital and a return to positive OCF are necessary to underpin dividends, capex, and buybacks without increasing leverage. The quarter’s strong profitability is encouraging, yet the negative OCF and FCF constrain the quality of earnings and raise questions about durability.

Profitability Analysis

ROE of 17.6% decomposes into Net Profit Margin (14.7%) × Asset Turnover (0.535) × Financial Leverage (2.24x). The largest driver is the expansion in profitability (operating margin ~23.6% and net margin 14.7%), while asset turnover remains modest and leverage moderate. Operating income growth of 32.5% far outpaced revenue growth of 4.5%, indicating positive operating leverage and better cost discipline (SG&A ratio ~37.9% vs sales). Non-operating contributions were limited (non-op income 1.26; expenses 2.90), so the improvement is mostly operational rather than financial or one-off. The underlying business reason appears to be mix/pricing and operating efficiency gains, as gross margin is high (61.5%) and SG&A growth appears contained relative to revenue (exact YoY SG&A not disclosed). Sustainability is plausible if the business mix and pricing hold, but the cash conversion gap (negative OCF) suggests some improvement was accompanied by working capital outflows, which may not be repeatable. Watch for any future periods where SG&A growth exceeds revenue growth, which would erode operating leverage.

Growth Assessment

Top-line growth was modest at +4.5% YoY to 144.32, while operating profit surged +32.5% to 34.06, indicating mix and efficiency gains. Ordinary income (+31.7%) and net income (+26.6%) confirm broad-based P&L improvement. Gross margin at 61.5% and EBITDA margin at 26.9% point to healthy unit economics. Equity method income (0.23) is not a material driver, reinforcing that the performance is core-operating in nature. However, negative OCF (-6.64) and FCF (-22.54) raise concerns about the sustainability of reported earnings growth without cash generation. Financing inflows (31.30) covered cash burn and buybacks (-5.29), implying growth is currently not self-funded. Outlook depends on normalizing working capital and maintaining the improved OPM; if OCF turns positive, current profit levels look more sustainable.

Financial Health

Liquidity is adequate with a current ratio of 127.4% and quick ratio of 127.4%, above the warning threshold but below the >150% comfort benchmark. Working capital stands at 33.58, supported by cash and deposits of 66.33. Solvency is moderate: D/E is 1.24x and debt/EBITDA is about 1.41x (comfortable). Total liabilities are 149.52 vs total equity 120.42; using total equity, the equity ratio is roughly 44.6% (owners' equity basis ~40.3%). Short-term loans of 34.15 present some maturity concentration, but liquidity is bolstered by cash holdings. Long-term loans are 20.68, limiting near-term refinancing pressure. No off-balance sheet obligations were disclosed in the provided data. No explicit warnings triggered for Current Ratio < 1.0 or D/E > 2.0.

Cash Flow Quality

OCF/Net Income is -0.31x, well below the 0.8 threshold, signaling weak cash conversion and an earnings quality concern. Free cash flow was -22.54, indicating internal cash generation was insufficient to fund operations and investments. Financing inflow of 31.30 (despite 5.29 of share repurchases) implies reliance on external capital to support spending and shareholder returns. The negative OCF may be linked to working capital outflows (e.g., receivables or other current asset changes), but the breakdown is not disclosed; careful monitoring is warranted. No clear signs of deliberate working capital manipulation can be confirmed from the limited data, but the scale of the OCF shortfall versus NI is a caution flag for near-term sustainability.

Dividend Sustainability

The payout ratio (calculated) is low at 14.2%, suggesting room for distributions from an earnings perspective, though reported DOE is 0.0% and DPS is undisclosed. FCF coverage is -7.46x, indicating dividends (if any) and buybacks are not covered by free cash flow and instead rely on financing. With OCF negative and capex detail undisclosed, near-term sustainability of shareholder returns hinges on restoring positive OCF and maintaining balance sheet capacity. Policy outlook is unclear due to unreported DPS; prudence suggests aligning payouts with cash generation until OCF normalizes.

Risk Assessment

Business Risks:

• Margin sustainability risk if mix/pricing tailwinds fade (current OPM ~23.6%).
• Execution risk in controlling SG&A to maintain operating leverage.
• Dependence on maintaining high gross margins (61.5%) amid potential cost inflation.
• Low but present affiliate income variability (equity method income 0.23).

Financial Risks:

• Earnings quality risk: OCF/NI -0.31x and FCF -22.54 indicate weak cash conversion.
• Refinancing and interest rate risk due to short-term loans of 34.15.
• Reliance on financing inflows (31.30) to fund operations and buybacks (-5.29).
• Potential working capital volatility impacting liquidity.

Key Concerns:

• Sustained negative or weak OCF could pressure liquidity and constrain growth investments.
• If profitability normalizes while financing costs rise, interest coverage could compress from 20.13x.
• Limited disclosure on dividends and capex complicates assessment of long-term cash commitments.

Investment Implications

Key Takeaways:

• Strong profit growth with significant operating margin expansion (~+500 bps YoY).
• High ROE at 17.6% driven mainly by improved margins and moderate leverage.
• Cash flow quality is weak with OCF negative and FCF deeply negative.
• Balance sheet is moderately solid (equity ratio ~45%, D/E 1.24x) but short-term debt exposure exists.
• Equity method income is minor; results reflect core operations.

Metrics to Watch:

• OCF/Net Income ratio and working capital movements (receivables, other current assets).
• Operating margin sustainability and SG&A-to-sales ratio.
• Short-term debt levels and effective interest rate trend.
• FCF coverage of dividends and buybacks once DPS is disclosed.
• Cash balance relative to near-term obligations.

Relative Positioning: Within non-sogo-shosha peers focused on services/investments, the company stands out for margin improvement and strong ROE but lags on cash conversion; balance sheet leverage is moderate, offering some buffer if OCF recovers.

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