ReYuu Japan Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥6.26B
• Operating Income: ¥-163M
• Net Income: ¥-225M
• EPS: ¥-40.13

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 revenue-driven quarter (+32.3% YoY) but loss-making with weak earnings quality and reliance on external financing. Revenue reached 62.59, while gross profit was 4.81, implying a thin gross margin of 7.7%. SG&A of 5.46 exceeded gross profit, resulting in operating income of -1.63 and an operating margin of roughly -2.6%. Ordinary income was -1.89 and net income was -2.25, translating to EPS of -40.13 JPY. Asset turnover remained high at 2.76, but the net profit margin of -3.6% dragged ROE to -16.4% (DuPont). Liquidity is strong with a current ratio of 336.7% and quick ratio of 336.7%, underpinned by current assets of 18.02 versus current liabilities of 5.35. Leverage is moderate at a D/E of 0.75x, with short-term loans of 4.00 and long-term loans of 4.37. Cash and deposits totaled 4.11 at period-end. Cash flow quality is weak: OCF was -1.28 versus net loss of -2.25, yielding an OCF/NI ratio of 0.57x, below the 0.8 threshold. Free cash flow was -2.21, and the company relied on financing CF of +4.78 to fund the deficit and a share repurchase of -0.99. Interest coverage was deeply negative at -19.94x, indicating poor debt-service capacity from operations despite the small absolute interest expense (0.08). Retained earnings stand at -1.67, reflecting accumulated losses, though total equity remains solid at 13.34 thanks to capital surplus of 10.83. We cannot quantify YoY margin expansion or compression in basis points due to missing prior-period margin data. Earnings quality concerns center on negative OCF, thin gross margins, and operating deleverage. Forward-looking, sustaining rapid top-line growth must be paired with gross margin improvement and SG&A discipline to return to profitability and reduce dependence on external funding. In the near term, liquidity appears adequate, but interest coverage and FCF trends are key watchpoints for solvency risk if losses persist.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (-3.6%) × 2.760 × 1.66 ≈ -16.4%. The component exerting the largest negative impact is the Net Profit Margin, as evidenced by an operating margin around -2.6% and net loss of -2.25 despite high asset turnover. Business driver: gross margin at 7.7% is very thin relative to SG&A (5.46), implying inadequate pricing power and/or a high mix of low-margin resale/services; this led to operating deleverage. Sustainability: without structural gross margin uplift or SG&A right-sizing, profitability will remain pressured; the loss profile appears operational rather than one-time. Operating leverage is currently unfavorable; incremental revenue is not covering fixed costs. Expense discipline red flag: SG&A exceeded gross profit this quarter; we lack YoY SG&A data to test whether SG&A growth outpaced revenue, but current cost structure is misaligned with margin profile.

Growth Assessment

Revenue growth was robust at +32.3% YoY to 62.59, suggesting successful customer acquisition or expanded scope. However, growth quality is questionable given a 7.7% gross margin and a negative operating margin (~-2.6%). With depreciation only 0.01, losses are not driven by heavy non-cash charges, indicating true operating shortfall. The business appears volume-led with limited pricing power; sustaining growth without margin improvement risks compounding losses. Outlook hinges on: (1) mix shift to higher-margin offerings, (2) procurement/carrier cost pass-through, and (3) SG&A productivity. Absent these, profit inflection is unlikely despite top-line momentum.

Financial Health

Liquidity: strong. Current assets 18.02 vs current liabilities 5.35 yields a current ratio of 3.37x and quick ratio of 3.37x; no warning for Current Ratio (<1.0). Working capital is 12.67, and cash stands at 4.11. Solvency: D/E is 0.75x, below the 2.0 warning threshold; total liabilities 10.21 vs equity 13.69 suggest moderate leverage. Debt structure: short-term loans 4.00 and long-term loans 4.37; with current assets 18.02, near-term maturity risk appears limited. Interest coverage is -19.94x due to negative operating income, highlighting weak debt service from operations despite low absolute interest expense (0.08). No off-balance sheet obligations were reported in the provided data.

Cash Flow Quality

OCF/Net Income is 0.57x (<0.8), flagging weak earnings quality; cash generation did not keep pace with accrual losses. Free cash flow was -2.21, implying operations and maintenance capex (if any) are not self-funded. Financing CF of +4.78 (despite a -0.99 share buyback) funded the cash burn, pointing to reliance on external capital. Working capital specifics are not disclosed, but the OCF shortfall suggests limited working capital release; no signs of aggressive working capital inflows offsetting losses are evident. Given negative OCF and FCF, sustaining dividends (if any) or continued buybacks would require ongoing financing or cash drawdown.

Dividend Sustainability

Dividend data is unreported; payout ratios and DPS cannot be calculated. With net income at -2.25 and FCF at -2.21, internal coverage for any dividend would be inadequate this period. The -0.99 share repurchase despite negative FCF indicates capital returns funded by financing CF (+4.78). Policy outlook: unless profitability and OCF improve, sustained shareholder returns would likely hinge on external funding or balance-sheet cash, which is not prudent over multiple periods.

Risk Assessment

Business Risks:

• Structural low gross margin (7.7%) exposes business to small pricing/cost shocks.
• Operating deleverage: SG&A (5.46) exceeds gross profit (4.81), embedding losses.
• Execution risk in improving mix/pricing to lift margins.
• Revenue growth reliance without margin improvement may deepen losses.

Financial Risks:

• Weak earnings quality: OCF/NI at 0.57x and FCF of -2.21.
• Negative interest coverage (-19.94x) despite moderate leverage (D/E 0.75x).
• Dependence on financing CF (+4.78) to fund operations and buybacks.
• Retained earnings deficit (-1.67) reduces flexibility for future losses.

Key Concerns:

• Sustainability of cash burn if external financing tightens.
• Thin liquidity buffer relative to potential downturn in receipts (cash 4.11 vs short-term loans 4.00).
• Lack of disclosed detail on capex, dividends, and working capital components limits forward cash modeling.
• Potential vulnerability to supplier/carrier pricing and contract terms typical in IT/telecom resale or services.

Investment Implications

Key Takeaways:

• Top-line growth strong (+32.3% YoY) but profitability negative at all levels.
• DuPont: ROE -16.4% driven by negative margin; asset turnover remains high at 2.76.
• Gross margin 7.7% insufficient to cover SG&A, yielding operating margin ~-2.6%.
• OCF -1.28 and FCF -2.21 indicate weak cash conversion; financing CF plugged the gap.
• Liquidity solid (current ratio 3.37x), leverage moderate (D/E 0.75x), but interest coverage is deeply negative.

Metrics to Watch:

• Gross margin trajectory (bps improvement needed to exceed SG&A burden).
• Operating margin and SG&A-to-revenue ratio.
• OCF/Net income and FCF trend; reliance on financing CF.
• Debt mix and interest expense vs EBITDA to monitor serviceability.
• Working capital turns (AR 4.72 vs revenue) and collection cycles.

Relative Positioning: Versus TSE small-cap peers, the company shows superior liquidity and moderate leverage but materially weaker profitability and cash flow quality; earnings reliance on external funding is above peer norms while asset turnover is strong.

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