Kushim,Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥26M
• Operating Income: ¥-488M
• Net Income: ¥-1.41B
• EPS: ¥-77.07

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: FY2025 Q4 was very weak, marked by a collapse in revenue and deep operating losses, with cash burn outpacing earnings and relying on financing inflows. Revenue was 0.26 (100M JPY), down 98.4% YoY, indicating a near halt in core operations. Gross profit was 0.25 against cost of sales of just 0.02, yielding an unusually high gross margin of 94.9% due to tiny sales and cost base, but this is not economically meaningful given the scale. SG&A was 5.14, dwarfing revenue by roughly 20x and driving operating income to -4.88. Non-operating income of 0.44 (including interest income of 0.34) partially offset operating losses at the ordinary income line (-4.53), but not nearly enough to support net profitability. Profit before tax deteriorated to -13.64, with reported net income of -13.65 and total comprehensive income of -11.77, signaling additional OCI losses. Basic EPS was -77.07 JPY on average shares of 17.72 million, and book value per share sits low at roughly 23 JPY. Operating cash flow was -6.39, financing cash flow +1.99, and investing cash flow -2.58, resulting in free cash flow of -8.97; cash and deposits ended at 2.23. The OCF/Net Income ratio was 0.47x, indicating weak earnings quality as cash generation lagged reported losses. Liquidity appears adequate on headline metrics (current ratio 232.7%, quick ratio 232.7%), but cash burn versus cash on hand is a pressing concern. Leverage looks modest by totals (D/E 0.25x), though interest coverage is negative (-166.7x) due to operating losses. A data inconsistency exists: reported long-term loans (13.03) exceed total liabilities (1.05); ratio analysis here relies on the disclosed totals and may understate true leverage if the loans figure is correct. Margin comparison in basis points versus prior periods cannot be quantified due to unavailable YoY margin baselines; within the quarter, the gap between gross margin (9,490 bps) and operating margin (approximately -187,600 bps) underscores extreme operating deleverage. Forward-looking, the company must restore revenue and reduce SG&A intensity quickly or raise additional capital; reliance on non-operating income is not a durable earnings driver. Cash runway appears tight if current OCF trends persist, elevating going concern risk. The balance sheet shows negative retained earnings (-53.51), implying accumulated deficits that may constrain future financing flexibility. Overall, the quarter signals urgent need for business stabilization, cost actions, and clarity on liabilities.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (-5,250.0%) × 0.049 × 1.25 ≈ -318.9% (matches reported). The dominant driver of the collapse is the net profit margin, which is extraordinarily negative due to revenue imploding while SG&A remained high. Asset turnover of 0.049 indicates the asset base is largely unproductive this quarter, compounding weak profitability. Financial leverage at 1.25x is modest versus typical small-cap peers, so leverage is not the main culprit. Business reason: topline fell 98.4% YoY, but opex (SG&A 5.14) did not flex down, creating significant negative operating leverage; non-operating income (0.44, mainly interest income 0.34) provided only limited relief. Sustainability: the margin deterioration appears tied to revenue collapse and is not sustainably low if revenue normalizes; however, absent evidence of near-term recovery, the current loss profile could persist. Concerning trends include SG&A vastly outpacing revenue (5.14 vs 0.26), indicating the cost base is misaligned with scale and requires restructuring.

Growth Assessment

Revenue declined 98.4% YoY to 0.26, suggesting severe disruption or loss of key revenue streams. The quality of revenue is questionable because gross margin at 94.9% is more reflective of a distorted quarter with minimal cost of sales than durable pricing power. Ordinary income (-4.53) benefited from non-operating interest income (0.34), indicating reliance on financial income rather than core operations. With EBITDA at -4.88 and EBITDA margin around -1,876%, the business lacks operating scale. No R&D or breakdown of segment drivers was reported, limiting visibility into underlying growth engines. Near-term outlook is contingent on restoring sales and resizing SG&A; without these, further dilution or debt reliance is likely. Monitoring any pipeline recovery, recurring revenue components, and contract wins will be key to assessing sustainability.

Financial Health

Liquidity: Current assets 2.37 vs current liabilities 1.02 yield a current ratio of 232.7% and quick ratio of 232.7%, above healthy thresholds. Cash and deposits of 2.23 cover short-term loans of 0.30 and most current liabilities when combined with other current assets, reducing immediate liquidity stress. Solvency: Reported D/E is 0.25x (1.05 liabilities / 4.28 equity), indicating modest leverage at the totals level; interest expense is 0.03, but negative EBITDA yields a negative coverage ratio (-166.7x). Important data inconsistency: reported long-term loans of 13.03 exceed total liabilities of 1.05; if the 13.03 figure is accurate, true leverage and refinancing risk are substantially higher than ratios suggest. Maturity mismatch: short-term obligations appear manageable given cash on hand; the ambiguity around long-term loans impairs a clear view of long-term solvency. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

OCF/Net Income is 0.47x (<0.8), flagging lower-quality earnings as cash outflow is less severe than accrual losses but still materially negative. Free cash flow is -8.97, implying the business is consuming cash even with minimal capex (-0.01). Investing CF of -2.58 suggests additional uses of cash beyond capex (details not disclosed), possibly securities or intangible investments. Financing CF of +1.99 indicates reliance on external funding to partially offset operating and investing outflows. Working capital details are limited (AR, inventories unreported), constraining assessment of potential timing effects; however, the magnitude of OCF suggests losses rather than pure working capital swings are driving cash burn. Sustainability: At the current pace, cash (2.23) provides limited runway unless OCF improves or additional financing is secured.

Dividend Sustainability

No dividend data is reported, and retained earnings are deeply negative (-53.51), indicating accumulated losses. With net income at -13.65 and FCF at -8.97, there is no capacity to fund distributions from internal cash generation. Even if a dividend policy exists, sustainable payout is not feasible until profitability and positive FCF are restored. Policy outlook: preservation of liquidity and potential recapitalization are higher priorities than shareholder returns in the near term.

Risk Assessment

Business Risks:

• Revenue collapse (-98.4% YoY) indicating loss of customers, contracts, or business line disruption
• Extreme operating deleverage with SG&A far exceeding sales
• Dependence on non-operating income (interest income) to partially offset losses
• Potential concentration risk if revenue is reliant on a few projects or clients
• Industry-specific volatility (e.g., technology/blockchain/digital services exposure) affecting demand and pricing

Financial Risks:

• Negative EBITDA and interest coverage (-166.7x) raise going concern and refinancing risk
• Free cash flow deeply negative (-8.97), requiring ongoing external funding
• Data inconsistency on long-term loans (13.03 vs total liabilities 1.05) obscures true leverage
• Low book value per share (~23 JPY) and accumulated deficits (-53.51) may constrain financing flexibility
• Cash balance (2.23) is small relative to recent OCF burn (-6.39)

Key Concerns:

• Sustainability of operations at current cost structure
• Visibility into receivables, inventories, and segment trends due to unreported line items
• Potential need for equity issuance or debt refinancing to fund operations
• Valuation risk of investment securities (1.33) amid market volatility

Investment Implications

Key Takeaways:

• Operational performance deteriorated materially with revenue nearly disappearing
• Cost base is misaligned with scale; SG&A reduction is critical
• Cash burn is significant and not covered by current cash or operating inflows
• Headline liquidity looks fine, but cash runway is short if OCF remains negative
• Leverage appears low on totals, but loan disclosure inconsistency could mean higher true leverage
• Earnings quality is weak (OCF/NI 0.47x) with reliance on non-operating income

Metrics to Watch:

• Quarterly revenue recovery trajectory and backlog/bookings
• SG&A run-rate and concrete cost-reduction actions
• Cash and deposits vs quarterly OCF burn (runway)
• Any new financing (equity/debt) and terms
• Details on long-term loans and reconciliation with total liabilities
• Ordinary income composition (share of non-operating items)
• Working capital movements (AR, AP) once disclosed

Relative Positioning: Relative to TSE small-cap tech peers, the company is currently weaker on core profitability and cash generation, carries higher execution risk due to revenue disruption, and has less visibility, while balance-sheet headline leverage appears modest but is clouded by inconsistent loan disclosures.

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