Medix Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.94B
• Operating Income: ¥241M
• Net Income: ¥163M
• EPS: ¥20.52

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: Soft quarter operationally with heavy reliance on non-operating/extraordinary gains, yet cash generation and liquidity remained strong. Revenue was 19.37 (−0.4% YoY), essentially flat, while operating income declined to 2.41 (−4.7% YoY). Operating margin was approximately 12.4%, down about 60 bps from an estimated ~13.0% a year ago. Net income fell sharply to 1.63 (−62.3% YoY), compressing net margin to 8.4% from an estimated ~22.3% (−1,389 bps), driven by a large gap between ordinary income and profit before tax and a negative effective tax rate. Ordinary income was reported at 2.40 (−40.0% YoY), while profit before tax was 4.01, implying sizable extraordinary gains in the period. Non-operating income was 1.50 with minimal interest/dividend contribution disclosed, indicating other non-operating items drove the increase. Gross margin remained very high at 89.8%, underscoring a high value-added service model, but SG&A intensity remained elevated with SG&A of 14.86 against revenue of 19.37. Cash flow quality was strong: operating cash flow of 2.76 exceeded net income (OCF/NI 1.69x). Liquidity is ample with a current ratio of 215% and cash of 37.71; leverage by liabilities-to-equity stands at roughly 1.11x, and interest burden is negligible (interest coverage ~147x). ROE calculated at 5.3% is modest given leverage of 2.23x, implying margin/turnover constraints; ROIC shows a flagged negative figure (−34.5%) from XBRL-derived metrics, suggesting capital efficiency concerns or denominator effects, and warrants caution in interpretation. Capital allocation included sizable share repurchases of 2.57, partly offset by financing outflows (−1.81), with capex minimal at 0.05. The quarter’s earnings quality appears mixed: cash conversion is good, but reported profit depends heavily on non-operating/extraordinary items and a negative effective tax rate. Forward-looking, normalization of non-operating/extraordinary items and taxes could pressure net margins unless operating leverage improves. Key watch items include the breakdown of other non-operating items, the nature and recurrence of extraordinary gains, AR trends given high receivables, and sustainability of buybacks/payouts against core OCF.

Profitability Analysis

ROE (DuPont) = Net Profit Margin × Asset Turnover × Financial Leverage = 8.4% × 0.284 × 2.23 = ~5.3%. The weakest link is asset turnover at 0.284, which is low for a service business and constrains ROE despite high gross margins. The component that appears to have changed the most YoY is net margin, given net income declined 62.3% on essentially flat revenue (implying substantial margin compression). Business drivers include a large contribution from non-operating/extraordinary items and a negative effective tax rate this period, versus likely different one-offs in the base period; operating profit also declined modestly on SG&A intensity. Sustainability: the current net margin level is unlikely to be stable given dependence on one-off items and tax effects; operating margin compression of ~60 bps could stabilize with cost control, but requires SG&A discipline. Watch for SG&A growth relative to revenue; with revenue −0.4% and operating income −4.7%, implied SG&A deleveraged YoY. Overall margin quality is mixed: structurally high gross margin is positive, but operating leverage is limited and non-operating/extraordinary items drive bottom-line volatility.

Growth Assessment

Top-line was essentially flat (−0.4% YoY) at 19.37, indicating stable demand but limited growth momentum. Operating income fell 4.7% YoY to 2.41, signaling mild negative operating leverage as costs did not flex down with revenue. Ordinary income declined sharply (−40.0% YoY to 2.40), highlighting the volatility of non-operating items. Net income dropped 62.3% to 1.63, reflecting extraordinary and tax effects. Given the high gross margin (89.8%), modest revenue growth could translate to improved operating profit if SG&A is contained. However, current results suggest reliance on non-operating/extraordinary items to bridge earnings, not a sustainable growth driver. Near term outlook hinges on cost discipline, stabilization/recurrence of non-operating contributions, and normalization of the effective tax rate. The minimal capex (0.05) suggests asset-light operations; growth likely depends on human capital and client acquisition rather than heavy investment. Without disclosed order backlog or segment detail, revenue sustainability beyond near-term is uncertain.

Financial Health

Liquidity is strong: current assets 61.02 vs current liabilities 28.33 yields a current ratio of 215.4% (well above 1.5x benchmark). Quick ratio equals current ratio (no inventories disclosed), also strong at 215.4%. No warning on current ratio (<1.0) or D/E (>2.0); liabilities-to-equity is about 1.11x, while disclosed interest-bearing debt is minimal (long-term loans 0.16). Cash and deposits are high at 37.71, providing ample coverage for short-term obligations. Maturity mismatch risk appears low given cash and receivables (22.27) comfortably exceed current liabilities. Equity/asset ratio (calculated) is approximately 44.8% (30.56/68.28), a healthy buffer. No off-balance sheet obligations were reported in the provided data. Interest coverage is very strong at ~147x, indicating negligible solvency stress.

Cash Flow Quality

OCF of 2.76 exceeds net income of 1.63 (OCF/NI 1.69x), indicating good earnings quality for the period. Free cash flow cannot be fully calculated due to unreported investing CF, but capex is de minimis at 0.05, implying that OCF likely covers maintenance capex with room to spare. Financing CF outflow of −1.81 and share repurchases of −2.57 were supported by the strong cash position; there is no evidence of debt-funded dividends or buybacks from the disclosed figures. Working capital quality: receivables are sizeable at 22.27, but period-over-period movements are not provided, limiting assessment of collection risk; absence of inventories aligns with an asset-light model. No explicit signs of working capital manipulation are detectable from the available snapshot.

Dividend Sustainability

The calculated payout ratio is 69.4%, slightly above the <60% benchmark for conservative sustainability. Absolute dividend amounts are unreported; based on NI of 1.63, implied dividends would be roughly 1.13 if the payout ratio reflects this period. With OCF of 2.76 and minimal capex (0.05), dividend coverage from cash generation appears adequate, though the lack of full investing CF disclosure limits full FCF analysis. Share repurchases of 2.57 represent a material cash use and, combined with dividends (if paid at the implied level), rely on the substantial cash balance. Policy outlook: without explicit guidance, continued dividends/buybacks seem feasible near term given liquidity, but sustainability depends on stabilizing core operating profit and reducing reliance on non-operating/extraordinary items.

Risk Assessment

Business Risks:

• Operating leverage risk from elevated SG&A; small revenue declines magnify profit pressure.
• Dependence on non-operating and extraordinary items to support bottom line, introducing volatility.
• Potential client concentration or project timing risk typical of high-margin service models (not disclosed but plausible).
• Execution risk in cost control to protect operating margins.

Financial Risks:

• Capital efficiency flagged (reported ROIC −34.5%), suggesting potential misallocation or denominator effects; requires verification.
• Payout/buyback commitments versus core OCF if non-operating support fades.
• Tax normalization risk: negative effective tax (−8.7%) may reverse, lowering net income.

Key Concerns:

• Large discrepancy between ordinary income (2.40) and profit before tax (4.01) implies significant extraordinary gains; recurrence uncertain.
• High receivables (22.27) warrant monitoring for collection and DSOs.
• ROE is modest at 5.3% despite leverage of 2.23x, constrained by low asset turnover (0.284).

Investment Implications

Key Takeaways:

• Core operations softened: operating income −4.7% on flat revenue, with ~60 bps operating margin compression.
• Bottom line highly dependent on non-operating/extraordinary items and a negative tax rate, driving net margin volatility.
• Cash generation and balance sheet strength are clear positives (OCF/NI 1.69x; current ratio 215%).
• Capital allocation active via buybacks (2.57) with minimal capex needs, but payout ratio appears elevated at ~69%.
• Capital efficiency flagged (reported ROIC negative); ROE restrained by low asset turnover.

Metrics to Watch:

• Operating margin and SG&A growth vs revenue growth.
• Breakdown and recurrence of non-operating income and extraordinary gains.
• Effective tax rate normalization path.
• Accounts receivable days and cash conversion cycle.
• OCF/NI and ability to fund dividends/buybacks from organic cash.
• Equity ratio and any changes in interest-bearing debt.

Relative Positioning: Within domestic small-cap, asset-light service peers, the company exhibits superior gross margins and liquidity but modest ROE and elevated earnings volatility due to non-operating/extraordinary effects; improving operating leverage and clarifying the quality/recurrence of below-OP items would be key to narrowing any quality gap with higher-ROE peers.

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