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

For FY2026 Q2 (single-entity, JGAAP), 株式会社メディックス posted revenue of ¥1,937 million, down 0.4% YoY, indicating a broadly flat top line in a likely mature or mixed-demand environment. Gross profit was ¥1,739 million, translating to an exceptionally high gross margin of 89.8%, consistent with a service/agency-like model with low cost of sales. Operating income declined 4.7% YoY to ¥241 million, implying some negative operating leverage as modest revenue softness translated into a larger percentage decline in operating profit. Ordinary income was essentially in line with operating income at ¥240 million, suggesting limited non-operating impacts in the quarter. Net income fell sharply by 62.3% YoY to ¥163 million despite a reported negative tax expense (tax credit) of ¥35 million, pointing to the likely presence of non-recurring or extraordinary items affecting the bottom line this period or an unusually strong non-operating tailwind in the prior year. The company’s calculated ROE stands at 5.33%, derived from an 8.42% net margin, 0.284x asset turnover, and 2.23x financial leverage, indicating modest returns on equity in the context of high gross margins but relatively low asset velocity. Liquidity appears strong with a current ratio of 215% and quick ratio of 215%, supported by sizeable current assets of ¥6,102 million versus current liabilities of ¥2,833 million. On solvency, total liabilities of ¥3,401 million versus total equity of ¥3,056 million yields a liabilities-to-equity ratio of 1.11x; using reported totals, equity-to-asset capitalization is approximately 44.8% (our calculation), although the disclosed equity ratio field shows 0.0% (unreported in the source). Cash flow quality is solid: operating cash flow was ¥276 million, 1.69x net income, indicating strong earnings conversion to cash. EBITDA of ¥262 million (13.5% margin) and very high interest coverage of ~147x underline ample headroom against limited financial charges. Investing cash flow is listed as 0 and cash & equivalents are shown as 0, which we treat as undisclosed rather than zero balances; thus, true free cash flow and cash buffer cannot be precisely assessed. The company paid no dividend (DPS ¥0, payout 0%), so there is no current cash distribution drag on liquidity. Overall, the profile suggests a high-margin service business with stable operations, strong liquidity, and modest leverage, but with notable YoY volatility at the net level likely tied to below-the-line items. The slight revenue contraction and greater decline in operating income point to cost rigidity, making margin management a key focus. Given limited disclosure on investing and cash balances, capital allocation and capex intensity remain data gaps. Short-term outlook hinges on demand normalization, SG&A discipline, and the absence of further extraordinary losses.

Profitability Analysis

ROE of 5.33% is decomposed via DuPont into a net margin of 8.42%, asset turnover of 0.284x, and financial leverage of 2.23x, indicating that returns are driven more by margin and leverage than by asset velocity. Operating margin is approximately 12.4% (¥241m / ¥1,937m), below the elevated gross margin of 89.8%, highlighting a cost structure where SG&A intensity is the key determinant of earnings. EBITDA margin of 13.5% suggests modest operating efficiency after adding back depreciation and amortization (¥21m). The YoY revenue decline of 0.4% versus a 4.7% decline in operating income indicates negative operating leverage, implying fixed or semi-fixed costs did not flex down in tandem with revenue. Ordinary income is nearly identical to operating income, meaning non-operating items had minimal influence on pre-tax profits this period. The 62.3% YoY drop in net income, despite stable operating/ordinary trends, points to extraordinary items or timing effects below ordinary income, or unusually favorable non-recurring factors in the base period. Interest expense remains negligible at ¥1.6m, yielding interest coverage of ~147x, so financial costs are not constraining profitability. The effective tax rate metric is reported as 0.0%; actual tax line is a negative ¥35m (credit), which supports reported net margin but is unlikely to be structural. Overall margin quality is characterized by high gross margins but sensitivity at the operating line due to SG&A leverage. Sustained ROE expansion would require either improved asset turnover (faster sales growth), higher operating margin through cost control, or a recalibration of capital structure—though leverage already looks reasonable.

Growth Assessment

Top-line performance was essentially flat (-0.4% YoY), suggesting stable but subdued demand. The modest decline in revenue coupled with a larger decline in operating income (-4.7% YoY) indicates cost rigidity and negative operating leverage in the current period. Net income fell 62.3% YoY, which is disproportionate to operating trends and likely reflects extraordinary losses or a tougher non-operating/extraordinary comparison versus the prior year. Given the agency-like gross margin profile, revenue sustainability typically depends on client spend cycles, project timing, and retention; a flat top line may reflect cautious client budgets. Profit quality at the operating level remains acceptable, with ordinary income closely tracking operating income; the main quality concern is bottom-line volatility from below-the-line items. Outlook hinges on stabilization of extraordinary factors, restoration of modest revenue growth, and tighter SG&A control to mitigate operating leverage in a flat-demand scenario. Without disclosure on order backlog or pipeline, we assume near-term growth to be low-single-digit at best, contingent on macro and client activity. The high gross margin suggests pricing power or a value-added mix, but capturing operating margin improvement requires utilization and cost discipline. Any rebound in client spending could translate to improved operating leverage given the largely fixed cost base.

Financial Health

Liquidity is strong: current assets of ¥6,102m against current liabilities of ¥2,833m yield a current ratio of 215% and a quick ratio of 215% (inventories unreported). Working capital stands at ¥3,270m, providing ample short-term flexibility. Solvency appears sound with total liabilities of ¥3,401m and total equity of ¥3,056m, implying a liabilities-to-equity ratio of 1.11x. Based on total equity and total assets disclosed, a proxy equity ratio is approximately 44.8% (¥3,056m / ¥6,828m), despite the equity ratio field showing 0.0% (treated as undisclosed). Interest burden is minimal (¥1.6m expense), and coverage of ~147x indicates low refinancing risk from current profitability. The capital structure is balanced; leverage provides some ROE support without pressuring coverage. Absence of disclosed cash and investment flows limits deeper assessment of liquidity buffers and capex commitments.

Cash Flow Quality

Operating cash flow was ¥275.7m, equating to 1.69x net income, which signals strong cash conversion and low accrual reliance this period. EBITDA of ¥262.2m is broadly aligned with OCF magnitude, supportive of earnings quality. Investing cash flow is reported as 0, which we treat as undisclosed rather than no investment; therefore, true free cash flow cannot be reliably calculated. The provided FCF metric is 0 by convention due to missing investing data; analytically, FCF is indeterminate. Working capital details by component are not provided, but the strong OCF/NI ratio suggests either stable working capital or a modest release. With limited capex visibility, we cannot assess maintenance versus growth investment intensity; future OCF sustainability will depend on receivables collections and project billing cycles typical of service models.

Dividend Sustainability

The company paid no dividend (DPS ¥0; payout 0%) in the period. With OCF of ¥276m, cash generation would have covered a modest dividend if policy permitted, but management currently prioritizes retention. As investing cash flows are undisclosed and FCF cannot be determined, we cannot assess FCF-based dividend coverage. Absent a stated policy, sustainability considerations turn on earnings stability and capex needs; both appear manageable, but bottom-line volatility from extraordinary items warrants caution. If a dividend were reintroduced, coverage would likely be evaluated against normalized OCF and maintenance capex rather than reported NI volatility.

Risk Assessment

Business Risks:

• Client budget cyclicality and project timing affecting revenue visibility
• High operating leverage from fixed SG&A leading to margin sensitivity on small revenue changes
• Potential client concentration typical of service/agency models
• Regulatory and compliance risks if engaged in healthcare-related advertising or data handling
• Talent retention and wage inflation impacting SG&A
• Competitive pricing pressure in digital/marketing services

Financial Risks:

• Bottom-line volatility from extraordinary items or one-off adjustments
• Limited disclosure on cash balances and investing cash flows, obscuring FCF and liquidity buffers
• Receivables collection risk inherent to service billing (turnover not disclosed)
• Potential refinancing or covenant risks not visible due to limited debt detail (though interest burden is currently minimal)

Key Concerns:

• Sharp YoY decline in net income (-62.3%) not explained by operating trends, implying non-recurring pressures
• Negative operating leverage as operating income fell faster than revenue
• Insufficient visibility on capex and cash holdings due to undisclosed cash and investing flows

Investment Implications

Key Takeaways:

• Flat revenue (-0.4% YoY) with a larger drop in operating income (-4.7%) indicates cost rigidity and negative operating leverage
• Very high gross margin (89.8%) consistent with a service model; operating margin depends on SG&A control
• ROE at 5.33% is modest, driven by healthy margins and moderate leverage but constrained by low asset turnover
• OCF/NI of 1.69x signals solid cash conversion and good earnings quality this period
• Balance sheet is liquid (current ratio 215%) with moderate leverage (liabilities/equity ~1.11x); proxy equity ratio ~44.8%
• Net income volatility suggests extraordinary or below-the-line effects; ordinary income tracks operating income
• Dividend currently suspended (DPS 0); FCF indeterminate due to undisclosed investing cash flows

Metrics to Watch:

• Revenue growth and client pipeline/retention indicators
• Operating margin and SG&A ratio to track operating leverage
• Extraordinary gains/losses and reconciliation from ordinary income to net income
• OCF/NI ratio and working capital movements (DSO/collections)
• Capex and investing cash flows to clarify FCF and capital intensity
• Leverage metrics and equity ratio (computed) for capital structure stability
• Interest coverage and any changes in borrowing costs

Relative Positioning: Within service-oriented peers, the company exhibits superior gross margins and strong liquidity, with modest ROE and high interest coverage; however, it appears more exposed to operating leverage and bottom-line volatility from non-recurring items than peers with more diversified revenue or clearer capital allocation 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