MEDINET Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥810M
• Operating Income: ¥-1.45B
• Net Income: ¥-1.36B
• EPS: ¥-5.15

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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: Weak quarter with heavy operating losses despite modest top-line growth, cushioned by a very strong cash position and low leverage. Revenue grew 5.4% YoY to 8.10, but gross profit was only 1.13, yielding a thin gross margin of 13.9%. SG&A of 14.97 dwarfed gross profit, driving operating loss to -14.45 and ordinary loss to -13.39. Net loss was -13.62 (EPS -5.15 JPY), reflecting a structurally unprofitable cost base at current scale. Operating margin based on disclosed figures is approximately -178.4% (vs. reported -1.8% in XBRL, which appears inconsistent with the income statement). Non-operating income contributed 1.30 (interest income 0.07), but was immaterial relative to the operating loss. Cash and deposits are substantial at 46.51 against current liabilities of 2.69, yielding a current ratio of 1864%, providing liquidity buffer. Operating cash flow was -14.13, broadly in line with net loss (OCF/NI 1.04x), indicating losses are not masked by working capital movements but reflect true operating burn. Free cash flow was deeply negative at -19.78, driven by OCF deficits and -0.54 of capex plus additional investing outflows. ROE calculated at -36.1% mirrors extremely negative margins, with asset turnover of 0.19 and modest leverage of 1.13x. We cannot quantify margin expansion/compression in bps due to lack of prior-period margin disclosures; however, the current gross margin of 13.9% is too low to cover SG&A at the present cost base. Balance sheet presentation shows current assets (50.13) exceeding total assets (42.54), signaling a likely classification/reporting anomaly; conclusions rely on the line items rather than the subtotals. The effective tax rate of -0.3% reflects losses and minimal tax expense (0.04). With cash of 46.51 and total burn (OCF+capex+other investing) near ~19.8 during the period, runway looks adequate in the near term, but sustained losses will erode equity (retained earnings already at -27.15). Forward-looking, profitability requires either substantial revenue scaling or aggressive SG&A rightsizing; otherwise, ongoing losses will pressure capital and may necessitate financing measures.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (-168.2%) × Asset Turnover (0.190) × Financial Leverage (1.13x) = ROE (-36.1%). The largest negative driver is the Net Profit Margin, reflecting operating loss of -14.45 on revenue of 8.10 and thin gross margins. Business reason: revenue scale is insufficient relative to SG&A (14.97), while gross margin at 13.9% leaves negligible contribution to fixed costs; non-operating income (1.30) cannot offset operating deficits. Asset turnover of 0.19 is low, indicating underutilized assets or a small revenue base relative to asset size, which is typical for early-stage or R&D/service-heavy models with high cash balances. Financial leverage is modest at 1.13x (equity-heavy, minimal debt), so leverage neither boosts ROE nor amplifies risk materially. Sustainability: The negative margin is not sustainable; absent a material uplift in revenue or reduction in SG&A, losses will persist. Warning signs: SG&A (14.97) vastly exceeds revenue (8.10); this implies SG&A growth likely outpacing revenue growth (revenue +5.4% YoY vs. no SG&A YoY available), a concerning trend if continued. Operating leverage is unfavorable given the slim gross margin; any growth must either come with margin expansion or significant cost restructuring to approach break-even.

Growth Assessment

Revenue grew 5.4% YoY to 8.10, indicating modest top-line momentum but from a small base. The gross margin at 13.9% suggests limited pricing power or a cost-intensive service mix; without evidence of mix shift, sustained profitability from growth alone is unlikely in the near term. Non-operating income (1.30) provided some support but is not a recurring operating growth engine. Profit quality is weak: operating loss -14.45 and EBITDA -13.30 indicate core operations are deeply negative. Outlook hinges on either step-change revenue wins (e.g., contracts, new services) or SG&A rationalization; with current scale, even double-digit revenue growth would likely be insufficient without gross margin improvement. No segment data were disclosed, limiting assessment of growth drivers or concentration risk. In sum, revenue growth is not yet translating to operating leverage.

Financial Health

Liquidity is very strong: cash and deposits 46.51 vs. current liabilities 2.69 yields a current ratio of 1864.1% and quick ratio of 1864.1%. Solvency looks conservative: total liabilities 5.09 vs. equity 37.77 yields a D/E of 0.13x; there is no reported interest-bearing debt and interest expense rounds to 0.00. No explicit current ratio <1.0 or D/E >2.0 warnings. Maturity mismatch risk is low given the large cash buffer relative to short-term obligations. Off-balance sheet obligations were not disclosed (N/A), so no assessment possible. Data limitation: the balance sheet subtotals show current assets (50.13) > total assets (42.54), likely a classification/reporting anomaly; however, the line items (particularly cash) support the strong liquidity conclusion.

Cash Flow Quality

OCF/Net Income is 1.04x, which is above the 0.8 threshold; however, both OCF (-14.13) and NI (-13.62) are significantly negative, indicating losses are cash-real rather than accrual-driven. Free cash flow is -19.78, reflecting sustained cash burn after modest capex (-0.54) and additional investing outflows (-5.65). There are no clear signs of working capital manipulation from disclosed items; accounts receivable (2.28) appear reasonable relative to annual revenue (8.10), though detailed WC movements were not provided. Dividend and buyback cash outflows were unreported (likely none). At the current burn rate (FCF ~ -19.8), the cash balance of 46.51 implies a runway of roughly 2–2.5 periods of similar magnitude, absent funding or a turnaround.

Dividend Sustainability

Dividends are unreported; with net loss (-13.62) and negative FCF (-19.78), distributions would be economically unsustainable. Payout ratios are not calculable, but current financials suggest a de facto retention stance is appropriate. Given retained earnings of -27.15 and the need to fund ongoing losses, dividend initiation or resumption appears unlikely without a decisive profitability improvement or external capital.

Risk Assessment

Business Risks:

• Structural unprofitability: SG&A (14.97) far exceeds gross profit (1.13), creating persistent operating losses.
• Low gross margin (13.9%) limits operating leverage and resilience.
• Small revenue base (8.10) increases concentration/volatility risk.
• Execution risk in scaling revenue or reducing fixed costs without impairing operations.

Financial Risks:

• Cash burn risk: OCF (-14.13) and FCF (-19.78) could shorten runway if not improved.
• Equity erosion: retained earnings already -27.15; continued losses will reduce book value per share (14.27 JPY).
• Potential future financing need if losses persist, with dilution risk given equity-heavy capital structure.
• Data anomalies (current assets > total assets) may obscure true liquidity metrics, though large cash balance mitigates.

Key Concerns:

• Operating margin approximately -178.4% implies business model stress at current scale.
• Reliance on non-operating income (1.30) is insufficient to offset operating deficits.
• Interest coverage metric is not meaningful due to near-zero interest expense; core issue is operating loss, not debt service.
• Lack of disclosure detail (SG&A breakdown, R&D, dividends) limits diagnostic precision.

Investment Implications

Key Takeaways:

• Modest top-line growth (+5.4% YoY) but unsustainably negative operating profitability (OP -14.45 on 8.10 revenue).
• Liquidity is ample (cash 46.51, current ratio 1864%) and leverage is low (D/E 0.13x), reducing near-term default risk.
• Cash burn is material (FCF -19.78), implying roughly 2–2.5 periods of runway at current pace.
• ROE -36.1% driven by extremely negative net margin; asset turnover low at 0.19.
• Turnaround requires both revenue scaling and cost rationalization and/or gross margin improvement.

Metrics to Watch:

• Quarterly revenue growth and order backlog (if disclosed) for scale trajectory.
• Gross margin trend vs. 13.9% baseline to assess pricing/mix improvements.
• SG&A trajectory and any restructuring savings vs. 14.97 baseline.
• OCF and FCF run-rate vs. cash balance (46.51) to refine runway.
• Any financing actions (equity issuance, partnerships, grants) and their dilutive impact.

Relative Positioning: Compared to profitable healthcare service peers, the company operates at substantially lower margins and scale but with a stronger liquidity buffer and minimal leverage; near-term survival risk is low, but profitability gap is wide and requires significant operational improvement.

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