CARE TWENTYONE CORPORATION FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥48.16B
• Operating Income: ¥784M
• Net Income: ¥314M
• EPS: ¥28.45

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

Care21 reported FY2025 Q4 consolidated results under JGAAP with steady top-line growth but pressured margins. Revenue increased 6.1% YoY to 481.58, demonstrating resilient demand across care services. Gross profit rose to 111.21 with a gross margin of 23.1%, but SG&A of 103.36 absorbed most of the gross profit, leaving operating income at 7.84. Operating income declined sharply (-103.2% YoY), indicating significant margin compression despite revenue growth. Ordinary income fell to 5.43 (-35.6% YoY) as non-operating expenses (5.53) exceeded non-operating income (3.12), with interest expense of 4.88 being the main drag. Profit before tax was 6.68 and net income improved 38.0% YoY to 3.84, implying support from below-the-line items or a more normal tax burden despite weaker operating and ordinary results. Total comprehensive income was only 0.04, suggesting material negative other comprehensive income, likely from valuation changes in securities or other OCI items. EBITDA was 21.61, implying a modest 4.5% EBITDA margin and limited operating leverage at current scale. Liquidity is tight but positive with a current ratio of 105.3% and working capital of 6.74, supported by cash of 41.65 and accounts receivable of 64.38. Leverage is high: total equity is 44.91 against total assets of 310.30 (equity ratio calculated at ~14.5%), and debt-to-equity is 5.91x, with at least 70.22 of loans outstanding. Interest coverage is thin at 1.61x, leaving limited cushion against rate increases or earnings volatility. Cash flow quality is strong this period: operating cash flow of 21.71 is 5.65x net income, aided by non-cash charges (D&A 13.77) and likely working-capital inflows. Free cash flow was robust at 23.10, helped by low net investing outflows and modest capex of 1.47. Dividend data are largely unreported, but a calculated payout ratio of 65.7% and FCF coverage of 9.15x suggest dividends, if declared, were covered by cash generation this year; however, high leverage and narrow margins temper visibility. Overall, the company shows solid revenue momentum and good cash conversion, offset by very thin profitability, high financial leverage, and elevated interest burden. Data limitations (multiple unreported XBRL line items) constrain granularity, but available metrics point to a need for margin recovery and deleveraging to improve resilience.

Profitability Analysis

ROE decomposition: DuPont indicates ROE of 8.6% = Net margin 0.8% x Asset turnover 1.552 x Leverage 6.91x. The ROE is driven primarily by high financial leverage and efficient asset use, while very low net margin is the key bottleneck. margin_quality: Gross margin at 23.1% is reasonable for care services, but operating margin is thin at ~1.6% (7.84/481.58). Non-operating costs, notably interest (4.88), further compress ordinary income to 5.43. EBITDA margin of 4.5% indicates limited pricing power and a cost structure heavily influenced by labor and facility expenses. operating_leverage: Revenue grew 6.1% YoY but operating income fell sharply, implying negative operating leverage in the period. SG&A at 103.36 nearly matches gross profit, suggesting overhead absorption issues or wage/benefit inflation outpacing revenue growth. D&A (13.77) helps bridge to EBITDA, but the underlying EBIT sensitivity to small revenue/cost shifts is high.

Growth Assessment

revenue_sustainability: Top-line growth of 6.1% appears broadly sustainable given demographic tailwinds in eldercare and relatively stable demand. Accounts receivable at 64.38 (vs revenue scale) suggests normal collection dynamics in a reimbursement-heavy model. profit_quality: Net income rose 38.0% YoY despite weaker operating/ordinary profit, implying reliance on below-the-line factors and tax normalization rather than core margin expansion. Ordinary income decline (-35.6% YoY) and thin operating margin point to fragile core earnings quality. outlook: Key to near-term growth quality will be utilization/occupancy, staffing stability, and reimbursement rate developments. With leverage and interest burden elevated, converting revenue growth into EBIT and ordinary income growth is the critical hurdle.

Financial Health

liquidity: Current assets 132.86 vs current liabilities 126.12 yields a current ratio of 105.3% and quick ratio of 105.3%, indicating tight but positive short-term liquidity. Cash and deposits of 41.65 provide a modest cushion. Working capital stands at 6.74. solvency: Total assets 310.30 and equity 44.91 imply an equity ratio of ~14.5% (calculated). Debt-to-equity is 5.91x, with identified loans of 70.22 (23.50 short-term, 46.72 long-term). Interest coverage is 1.61x, indicating vulnerability to earnings volatility or rate increases. capital_structure: High leverage underpins ROE but raises refinancing and covenant risks. Investment securities are small at 7.18; goodwill is minimal (0.33), reducing impairment risk but also indicating limited M&A premium on the balance sheet.

Cash Flow Quality

earnings_quality: OCF/Net income of 5.65x reflects strong cash conversion, supported by D&A of 13.77 and likely favorable working-capital movements. This offsets weak accounting margins in the period. FCF_analysis: OCF of 21.71 and capex of 1.47 produce solid organic FCF. Reported FCF of 23.10 suggests additional inflows from asset sales or low net investing needs (Investing CF positive at 1.39). working_capital: Receivables of 64.38 relative to revenue appear manageable; payables are small (2.48), consistent with a labor-heavy service model. The OCF strength indicates no evident deterioration in collections this period.

Dividend Sustainability

payout_ratio_assessment: DPS is unreported, but the calculated payout ratio of 65.7% against EPS of 28.45 JPY implies a moderate-to-high payout relative to earnings. Reported payout metrics showing near zero likely reflect disclosure gaps, not actual values. FCF_coverage: FCF coverage is reported at 9.15x, indicating ample cash coverage of dividends for this fiscal year’s payments, if any. However, this may include benefits from low capex and positive investing CF that are not guaranteed to recur. policy_outlook: Given high leverage and thin interest coverage, a conservative dividend stance would be prudent to preserve balance sheet flexibility. Without explicit guidance or historical DPS, visibility on policy consistency is limited.

Risk Assessment

Business Risks:

• Reimbursement policy and fee schedule changes in long-term care impacting pricing and margins
• Labor shortages and wage inflation for caregivers pressuring SG&A and COGS
• Utilization/occupancy volatility across facilities and home-care hours
• Regulatory compliance costs and quality-of-care standards
• Competition in regional care markets and potential price discounting

Financial Risks:

• High leverage (D/E 5.91x) and low equity ratio (~14.5%)
• Thin interest coverage (1.61x) amid potential rate increases
• Refinancing risk tied to 23.50 in short-term loans
• Sensitivity of ROE to small changes in net margin
• Potential OCI volatility (comprehensive income 0.04) affecting equity

Key Concerns:

• Sustained margin compression despite revenue growth
• Dependence on non-operating items to support bottom line
• Balance sheet resilience under stress given leverage and tight liquidity

Investment Implications

Key Takeaways:

• Revenue growth is healthy (+6.1% YoY), supported by secular demand.
• Operating profitability is very thin (EBIT margin ~1.6%) with negative operating leverage.
• Ordinary income pressured by interest costs; interest expense of 4.88 is material.
• ROE of 8.6% is leverage-driven; net margin of 0.8% is the main constraint.
• Cash generation is solid this year (OCF 21.71; FCF 23.10), providing near-term flexibility.
• Leverage and interest coverage are the primary financial constraints.
• Dividend visibility is limited, but calculated payout appears covered by FCF this year.

Metrics to Watch:

• Operating margin and EBITDA margin trajectory
• Staff cost ratio and turnover rates (Salaries and allowances 21.13 within SG&A 103.36)
• Interest coverage and refinancing schedule for 23.50 short-term loans
• Working capital trends (receivables days) and OCF consistency
• Equity ratio and net debt movement (deleveraging progress)
• Any changes in reimbursement rates or regulatory fees

Relative Positioning: Within Japan’s care services peers, Care21 exhibits comparable revenue growth but weaker operating margins and higher leverage, making cash flow execution and balance sheet strengthening more critical for narrowing the gap.

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