GLOE Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥2.84B
• Operating Income: ¥18M
• Net Income: ¥-7M
• EPS: ¥1.38

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

GLOE Co., Ltd. (95650) reported FY2025 Q4 consolidated results under JGAAP showing solid top-line expansion but very thin profitability and elevated tax drag. Revenue grew 25.8% YoY to 28.43 (100M JPY), while operating income rose 11.6% to 0.18, implying margin compression as SG&A largely absorbed the gross profit increase. Gross profit margin was 21.3% and the operating margin was approximately 0.6%, highlighting limited operating leverage this period. Ordinary income increased to 0.24, above operating income, indicating a small positive net non-operating contribution, despite non-operating items being largely unreported in detail. Net income was 0.03, with total comprehensive income negative at -0.05, suggesting OCI losses weighed on equity this quarter. The effective tax rate printed at 153.3%, which is significantly above the statutory level and a key driver of the slim bottom line. On capital efficiency, DuPont shows a reported ROE of 0.6% = 0.1% net margin × 1.761x asset turnover × 3.19x leverage; leverage is moderately high because equity is small relative to assets. Liquidity is sound with a current and quick ratio of 182% and positive working capital of 3.37, supported by cash and deposits of 3.59. The company exhibits a likely net cash position when comparing cash to disclosed short- and long-term loans, which mitigates refinancing risk despite small scale. Operating cash flow was positive at 1.25, comfortably exceeding net income and indicating strong cash conversion for the period; however, free cash flow was negative (-0.61) due to investing outflows. Investing cash outflow (-1.86) far exceeded modest capital expenditures (-0.05), implying spending on intangibles and/or M&A (consistent with goodwill of 1.36 and intangible assets of 1.53 on the balance sheet). Financing inflows (+1.89) funded investment and cushioned cash needs, pointing to reliance on external capital during a growth and build-out phase. Balance sheet size remains modest (total assets 16.14), with accounts receivable at 3.26 and no inventory detail disclosed, which concentrates working capital management on collections. Equity totaled 5.06 (owners' equity 4.80), and the negative total comprehensive income indicates some OCI volatility that investors should monitor. Dividends are unreported; retained earnings increased to 1.73, but with weak net income and negative FCF, near-term dividend capacity is limited without policy clarity. Overall, the profile is of a small, growing business with improving but very slim operating profitability, strong liquidity, and negative FCF driven by growth investments; tax normalization and SG&A discipline are key to converting revenue growth into sustainable earnings.

Profitability Analysis

ROE (DuPont): 0.6% = net profit margin 0.1% × asset turnover 1.761 × financial leverage 3.19x. Gross margin was 21.3% (gross profit 6.05 on revenue 28.43). SG&A ratio was approximately 20.7%, leaving a thin operating margin of about 0.6% (operating income 0.18). EBITDA was 0.35 with an EBITDA margin of 1.2%, highlighting limited operating buffer. Ordinary income exceeded operating income (0.24 vs. 0.18), indicating a net positive non-operating contribution despite detailed items being largely unreported. Interest coverage was 8.16x, adequate given low absolute interest expense, though absolute earnings are small. The effective tax rate was 153.3%, which materially depressed net income and should not be extrapolated without understanding one-off or timing effects. Operating leverage: revenue grew 25.8% YoY while operating income grew 11.6% YoY, implying negative operating leverage in the quarter as SG&A growth offset gross profit gains. Margin quality appears constrained by a narrow gross-to-operating spread (~60 bps), leaving little room for error; improving scale efficiency or pricing power is necessary for margin expansion.

Growth Assessment

Top line grew 25.8% YoY to 28.43, indicating healthy demand momentum. However, profit growth lagged (operating income +11.6% YoY), with operating margin around 0.6%, reflecting cost pressure and/or investment in growth. The increase of ordinary income to 0.24 suggests small tailwinds outside core operations, but details are unreported. Net income was 0.03, heavily impacted by an unusually high tax rate. The quality of growth from a cash perspective is reasonable at the operating level (OCF 1.25 vs. NI 0.03), suggesting earnings are backed by cash collection and working capital management. Negative free cash flow (-0.61) stems from investment outflows (-1.86), consistent with expansion and intangible build (goodwill 1.36; intangibles 1.53). Sustainability: revenue growth appears robust but will need SG&A efficiency and tax normalization to translate into consistent profit growth. Outlook hinges on the company’s ability to scale gross profit faster than SG&A and to moderate the effective tax rate; given small base effects, incremental wins in pricing, mix, or utilization can materially impact margins. Without reported order backlog or segment detail, we assume growth is organic with potential contribution from acquired assets reflected in goodwill.

Financial Health

Liquidity is solid: current ratio 182% and quick ratio 182%, with working capital of 3.37 supported by cash and deposits of 3.59. Receivables stand at 3.26; inventories are unreported. Solvency: total liabilities were 5.26 vs. total equity 5.06, implying a liabilities-to-equity ratio of ~1.04x (reported as the debt-to-equity ratio). Interest-bearing debt is not reported as a single line, but disclosed loans total 2.15 (short-term 1.00; long-term 1.15). Against cash of 3.59, this suggests a likely net cash position, reducing refinancing risk. Financial leverage (assets/equity) was 3.19x, which inflates ROE but reflects small equity base relative to assets. OCI volatility reduced total comprehensive income to -0.05, signaling some market or FX sensitivity on equity. Overall balance sheet scale is modest (assets 16.14), limiting shock absorption capacity but offset by liquidity and likely net cash.

Cash Flow Quality

Earnings quality appears conservative with OCF of 1.25 far exceeding net income of 0.03 (OCF/NI ~41.7x), which is typical when net income is depressed by non-cash factors (e.g., tax timing) and working capital inflows. EBITDA of 0.35 and D&A of 0.17 are consistent with reported operating income. Free cash flow was negative at -0.61 due to investing CF of -1.86; capex was modest (-0.05), so most investment outflow likely relates to intangibles or acquisitions (supported by goodwill and intangible balances). Financing CF of +1.89 funded the investment gap, indicating reliance on external capital while scaling. Working capital: receivables of 3.26 vs. payables of 1.27 suggest a need for disciplined collection; inventory data is unreported, so we cannot assess full cash conversion cycle. Overall, cash generation from operations is healthy relative to accounting earnings, but FCF is negative due to growth investments.

Dividend Sustainability

Dividend data (DPS, total dividends, payout) are unreported, so no policy inference can be made from this filing. With net income of 0.03 and free cash flow of -0.61, internal capacity to fund dividends this period was limited absent draw on cash or financing. Retained earnings were 1.73, indicating some distributable reserves, but management appears to be prioritizing reinvestment (investing CF -1.86). If a dividend exists, its sustainability would hinge on normalization of the tax rate, operating margin expansion, and conversion of investments into cash-generating assets. FCF coverage and payout ratios are not calculable from disclosed data. Near-term policy outlook likely skewed to retention given growth investments, but explicit guidance is not available in the data.

Risk Assessment

Business Risks:

• Thin operating margin (~0.6%) leaves limited buffer against demand or cost shocks
• SG&A intensity (~20.7% of revenue) could impede operating leverage if growth slows
• Execution risk in scaling newly acquired or developed intangible assets (goodwill/intangibles on balance sheet)
• Potential customer concentration risk typical for small-scale companies (not disclosed, but scale suggests exposure)
• Pricing power and mix risk in maintaining 21.3% gross margin amid cost inflation
• Tax rate volatility affecting reported profitability

Financial Risks:

• Negative free cash flow (-0.61) driven by investment outflows requires ongoing funding
• Reliance on financing inflows (+1.89) to support investments
• Small equity base (equity 5.06; leverage 3.19x) heightens sensitivity to earnings volatility
• OCI volatility (total comprehensive income -0.05) may impact equity and covenants
• Receivables concentration and collection risk (AR 3.26) with inventories unreported

Key Concerns:

• Sustainability of revenue growth translating to profit expansion
• Normalization of the effective tax rate from 153.3%
• Margin expansion via SG&A discipline and scale efficiencies
• Conversion of growth investments into positive FCF
• Goodwill/intangible impairment risk if growth underperforms

Investment Implications

Key Takeaways:

• Strong revenue growth (+25.8% YoY) but limited operating leverage (operating margin ~0.6%)
• Cash generation from operations is healthy relative to earnings (OCF 1.25; OCF/NI ~41.7x)
• Negative FCF (-0.61) due to elevated investment outflows (-1.86) consistent with a build phase
• Solid liquidity (current ratio 182%) and likely net cash mitigates near-term solvency risk
• ROE is low at 0.6% despite leverage of 3.19x, constrained by ultra-thin net margin (0.1%) and high tax rate

Metrics to Watch:

• Gross margin and SG&A ratio trajectory (targeting operating margin >1–2%)
• Effective tax rate normalization and drivers of tax expense
• OCF vs. NI convergence and FCF inflection as investments mature
• Receivables days and cash conversion metrics (inventories when disclosed)
• Net cash/EBITDA and interest coverage to assess funding flexibility
• Composition and amortization of goodwill/intangibles and any impairment indicators

Relative Positioning: Relative to small-cap TSE peers, GLOE shows above-average revenue growth but below-average profitability, offset by stronger liquidity and likely net cash. The company appears earlier in its scale curve, with investment-led negative FCF and limited operating leverage; successful maturation of recent investments could improve margins and cash generation.

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