CareNet,Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥8.96B
• Operating Income: ¥2.19B
• Net Income: ¥871M
• EPS: ¥30.00

Income Statement

Balance Sheet

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

CareNet (2150) delivered strong FY2025 Q3 year-to-date performance under JGAAP on a consolidated basis, with revenue of ¥8.96bn (+15.1% YoY) and operating income of ¥2.195bn (+55.0% YoY), indicating material operating leverage. Gross profit of ¥4.632bn implies a gross margin of 51.7%, a healthy level for a digital healthcare marketing/medical education platform with low inventory intensity. Operating margin expanded to roughly 24.5% (¥2.195bn/¥8.96bn), reflecting disciplined SG&A and scale benefits. Ordinary income of ¥2.037bn was below operating income, suggesting net non-operating losses or adjustments despite minimal reported interest expense (¥0.671m), but the gap does not detract from the strong core profitability. Net income was ¥1.271bn (+51.5% YoY), translating into a net margin of 14.2% and a DuPont-calculated ROE of 11.78% (net margin 14.19% × asset turnover 0.672 × leverage 1.24). The balance sheet is conservative: total assets of ¥13.333bn against total liabilities of ¥2.783bn yield an implied equity ratio around 80.9%, despite a reported equity ratio of 0.0% (likely undisclosed/placeholder). Liquidity is robust with a current ratio of 415.6% and working capital of ¥7.947bn; inventories are negligible at ¥19m, consistent with an asset-light model. Interest coverage is effectively in the thousands of times, underscoring very low financial risk from debt. Tax expense of ¥511m implies an approximate effective tax rate in the high-20s based on net income, though ordinary/pre-tax definitions may vary under JGAAP. Cash flow statements are unreported (OCF/ICF/FCF shown as zero placeholders), limiting direct assessment of cash conversion and free cash flow. Dividend data are also undisclosed (DPS and payout shown as zero placeholders), so payout policy cannot be inferred from this dataset. Despite these disclosures gaps, the combination of double-digit revenue growth and outsized operating profit growth points to solid demand and effective cost control. Asset turnover of 0.672 and low leverage (assets/equity ≈1.24x) indicate returns are primarily driven by margins, not balance sheet risk. Overall, the company appears to be executing well, with high-quality margins, ample liquidity, and modest financial leverage. The key monitoring areas are cash conversion once cash flows are disclosed, sustainability of the elevated operating margin, and the ordinary-to-operating income gap drivers.

Profitability Analysis

ROE of 11.78% decomposes into net margin 14.19%, asset turnover 0.672x, and financial leverage 1.24x, indicating returns are margin-led rather than leverage-driven. Gross margin of 51.7% and operating margin of ~24.5% (¥2,195m/¥8,960m) reflect a scalable, asset-light model with tight cost discipline. Operating income grew +55% YoY versus +15.1% revenue, evidencing strong operating leverage from fixed-cost absorption and efficiency gains. The spread between operating income (¥2,195m) and ordinary income (¥2,037m) implies net non-operating losses of ~¥158m; given negligible interest expense (¥0.671m), this likely stems from other non-operating items (e.g., investments, FX, or one-off costs). Net margin at 14.2% supports healthy bottom-line conversion even after non-operating items and taxes. Implied SG&A is ~¥2.44bn (gross profit ¥4.632bn minus operating income ¥2.195bn), suggesting SG&A ratio near 27% of revenue; the YoY decline in this ratio is consistent with scale benefits. With leverage low, further ROE improvement will rely on sustaining elevated operating margins and enhancing asset turnover. The interest coverage ratio (~3,270x using operating income/interest) highlights negligible finance costs, keeping pre-tax margins robust.

Growth Assessment

Revenue growth of +15.1% YoY indicates solid demand for CareNet’s services; the service mix likely includes digital promotion to physicians and medical education solutions, consistent with low inventories. Operating income growth of +55.0% YoY far outpaced revenue, pointing to mix improvements and cost efficiencies; sustainability will depend on recurring revenue, client retention, and pricing power. The net income increase of +51.5% YoY corroborates broad-based profit momentum. Asset turnover at 0.672x is reasonable for a content/platform business; further improvement could come from higher monetization per asset base (e.g., expanding client wallet share). The ordinary-to-operating gap (-¥158m) warrants monitoring; if driven by recurring items, it could temper profit growth; if one-off, reported ordinary income may normalize upward. Without cash flow data, we cannot verify whether growth is cash-accretive; however, the strong working capital and low financial leverage suggest capacity to support growth internally. Outlook hinges on continued digital marketing spending by pharma and life science clients and on user engagement metrics in the physician network; macro/cycle sensitivity is moderate as promotional budgets can be discretionary.

Financial Health

Total assets ¥13.333bn against total liabilities ¥2.783bn imply an equity ratio of ~80.9% (equity/assets), despite the reported 0.0% placeholder. Current assets of ¥10.465bn and current liabilities of ¥2.518bn yield a current ratio of 415.6% and quick ratio of 414.8%, indicating very strong short-term liquidity. Working capital stands at ¥7.947bn, providing ample buffer for operations and investment. Debt-to-equity of 0.26x (liabilities/equity) reflects low leverage; interest expense is minimal (¥0.671m), limiting solvency risk. Interest coverage, using operating income, is ~3,270x, reinforcing a conservative capital structure. Inventories are only ¥19m, consistent with an asset-light, service-centric model and low obsolescence risk. Overall solvency and liquidity are robust, with capacity to absorb shocks and fund growth without immediate reliance on external debt.

Cash Flow Quality

Operating, investing, and financing cash flows are undisclosed (reported as zeros, i.e., unreported), so we cannot compute OCF, FCF, or OCF/NI. Consequently, earnings quality cannot be validated via cash conversion, and the shown OCF/NI ratio of 0.00 should not be interpreted as weak cash generation. Working capital appears ample (¥7.947bn), and inventories are negligible, which typically supports stable cash conversion; however, the key unknown is accounts receivable collection (DSO) and deferred revenue dynamics. Depreciation/amortization is unreported, preventing EBITDA analysis and non-cash charge assessment. Given the strong profitability and low leverage, baseline expectations for cash generation are favorable, but confirmation awaits actual cash flow disclosure.

Dividend Sustainability

Dividend information is not disclosed (DPS and payout shown as zero placeholders). With net income of ¥1.271bn, low leverage, and strong liquidity, there appears to be capacity for distributions in principle, but policy cannot be inferred from this dataset. Free cash flow is unreported, so FCF coverage of dividends cannot be assessed. Any payout ratio assessment would be speculative without cash flow and board policy guidance. Monitor subsequent filings for declared DPS, payout targets, and capital allocation priorities (organic investment vs. M&A vs. shareholder returns).

Risk Assessment

Business Risks:

• Demand cyclicality in pharmaceutical and life science promotional budgets affecting digital marketing spend
• Regulatory scrutiny on pharma promotion and medical advertising (MHLW/PMDA guidelines) potentially impacting product offerings
• Platform engagement risk (physician user activity, content relevance) influencing monetization
• Client concentration risk if top clients contribute a large share of revenue
• Competitive pressure from larger digital healthcare platforms and ad-tech players
• Technology and cybersecurity risks, including data privacy and service outages
• Talent retention and hiring in content, tech, and sales functions
• Execution risk in new service launches and potential M&A integration

Financial Risks:

• Uncertainty around cash flow conversion due to undisclosed OCF/FCF
• Potential non-operating losses recurring (ordinary income below operating income)
• Tax rate variability affecting net margins
• Limited visibility on lease obligations or off-balance commitments under JGAAP disclosures

Key Concerns:

• Lack of cash flow disclosure obscures earnings quality and dividend capacity assessment
• Drivers of the ordinary vs. operating income gap are not specified
• Sustainability of elevated operating margin as growth normalizes

Investment Implications

Key Takeaways:

• Double-digit top-line growth (+15.1% YoY) coupled with outsized operating income growth (+55.0% YoY) indicates strong operating leverage
• High margins (gross 51.7%, operating ~24.5%, net 14.2%) and low leverage drive ROE of 11.78% without balance-sheet risk
• Balance sheet is conservative with implied equity ratio ~80.9% and current ratio 415.6%
• Ordinary income trails operating income by ~¥158m; monitoring non-operating items is important
• Cash flow statements are undisclosed, leaving cash conversion and FCF unverified

Metrics to Watch:

• Operating margin trajectory and SG&A ratio to revenue
• Ordinary-to-operating income bridge (non-operating gains/losses)
• Disclosure of OCF and FCF; OCF/NI conversion ratio
• Client concentration and retention metrics; new booking trends
• Effective tax rate normalization and any one-off items
• Asset turnover and working capital efficiency (e.g., DSO) once disclosed

Relative Positioning: Within Japan’s digital healthcare and medical marketing ecosystem, CareNet appears smaller in scale than leading peers but exhibits high margins, low leverage, and strong liquidity, positioning it as a disciplined, asset-light operator with room to invest for growth.

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