FINDEX Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥4.37B
• Operating Income: ¥1.20B
• Net Income: ¥830M
• EPS: ¥33.72

Income Statement

Balance Sheet

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: Solid quarter with modest top-line growth, healthy margin expansion, and robust balance sheet strength, though cash flow disclosure is lacking and an inferred extraordinary loss muted profit before tax. Revenue rose 1.5% year over year to 43.72, indicating steady demand despite a high prior-year base. Gross profit was 26.02 with a gross margin of 59.5%, reflecting continued pricing power and favorable mix. Operating income increased 6.2% to 11.95, outpacing sales and lifting operating margin to 27.3%. Based on prior-period estimates (derived from growth rates), operating margin expanded by roughly 120 bps year over year. Ordinary income grew 9.5% to 12.40, implying a larger 210 bps expansion in ordinary margin to 28.4%, supported by minor net non-operating gains. Profit before tax was 11.33, below ordinary income, implying an approximate extraordinary loss of about 1.07 that was not detailed in the XBRL breakdown. Net income rose 2.6% to 8.53, with net margin improving modestly by roughly 20 bps to 19.5%. EPS was 33.72 JPY, consistent with net income growth and unchanged capital structure dynamics. DuPont shows ROE at 16.1% (Net margin 19.5% × Asset turnover 0.691 × Leverage 1.19x), an attractive level achieved with low financial leverage. The balance sheet is conservative: equity is 53.02 against total assets of 63.28, implying an equity ratio around 84%, and cash and deposits of 16.06 plus receivables of 13.40 exceed total current liabilities of 7.33 by a large margin. Liquidity is very strong (current ratio 444%, quick ratio 423%), and the reported debt-to-equity ratio of 0.19x indicates low solvency risk. ROIC is reported at 23.7%, well above typical cost of capital, signaling efficient deployment of capital. Earnings quality can’t be fully assessed due to unreported operating cash flow; however, working capital appears manageable with inventories low at 1.53 and receivables broadly in line with revenue scale. The payout ratio is calculated at 46.8%, which appears sustainable given profitability, though free cash flow coverage cannot be verified. Overall, the quarter demonstrates resilient core profitability, disciplined cost control, and balance sheet strength; key watchpoints are cash conversion once OCF is disclosed and clarification of the extraordinary loss that reduced profit before tax.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 19.5% × Asset Turnover 0.691 × Financial Leverage 1.19x = ROE 16.1%. The largest positive change driver this quarter is profitability (margins), as operating income grew 6.2% versus revenue at 1.5%, implying operating margin expansion of ~120 bps year over year to 27.3%. Asset turnover at 0.691 remains moderate and consistent with a software/solutions provider with sizable cash and intangibles; leverage is low at 1.19x, so ROE is mainly earnings-driven rather than leverage-driven. Business reasons for margin improvement likely include favorable product mix, disciplined SG&A, and stable cost of sales; non-operating items added only ~0.05 to ordinary income, so quality is predominantly operating. The presence of an inferred extraordinary loss (~1.07) indicates some one-time drag below ordinary income; excluding this, underlying profitability trends are slightly stronger than the reported net income growth suggests. Sustainability: Operating margin gains appear sustainable near term given revenue growth outpaced by profit growth, but confirmation requires SG&A trend data (not disclosed) and OCF. Concerning trends to watch: SG&A growth versus revenue cannot be assessed due to missing YoY SG&A, creating uncertainty around operating leverage durability.

Growth Assessment

Top-line growth of 1.5% YoY to 43.72 is modest but positive, suggesting steady demand in core businesses. Operating income growth of 6.2% and ordinary income growth of 9.5% indicate operating leverage and improved mix. Net income grew 2.6% to 8.53, dampened by an inferred extraordinary loss that lowered profit before tax versus ordinary income. Revenue quality appears recurring/solution-driven given the high gross margin (59.5%), consistent with software and healthcare IT profiles, but exact recurring vs. one-time split is not disclosed. Non-operating contributions are minimal (non-operating income 0.07; expenses 0.02), supporting the view that growth is primarily operational. Estimated DSO is roughly low-80s days (receivables 13.40 versus nine-month revenue base), which is reasonable for the sector, though full-year seasonality could change this. With ROIC at 23.7%, reinvestment continues to create value; however, capex and R&D are unreported, limiting visibility into growth investments. Outlook: With margins trending up and liquidity abundant, the company appears positioned to sustain mid- to high-teens ROE; near-term growth likely hinges on hospital/clinic IT spending cycles and successful delivery of backlog. Confirmation of momentum awaits disclosure of cash flow from operations and any update on extraordinary items.

Financial Health

Liquidity is very strong: current ratio 443.8% and quick ratio 422.8% far exceed healthy thresholds; no warning flags (both >> 1.0). Solvency is conservative: total liabilities 10.26 against equity 53.02; reported D/E 0.19x is low, and implied equity ratio is ~84%. Cash and deposits of 16.06 plus receivables of 13.40 comfortably exceed current liabilities of 7.33, indicating low maturity mismatch risk. Interest-bearing debt is unreported, but given low total liabilities and strong cash, net cash is likely positive. No off-balance sheet obligations are mentioned in the provided data. Working capital is ample at 25.18, supporting operational needs and potential investment without stressing liquidity.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income cannot be calculated; therefore, earnings quality cannot be fully validated. With net income at 8.53 and strong cash and receivables, cash conversion is likely reasonable, but this is an assumption pending disclosure. Free cash flow is unreported; hence FCF coverage of dividends and capex cannot be assessed quantitatively. Working capital appears stable: inventories are low (1.53), receivables are the principal working capital item, and accounts payable (0.31) is small, consistent with a software/solutions mix. No clear signs of working capital manipulation can be inferred from the limited snapshot. Key watchpoint: If future OCF/NI < 0.8, it would signal a potential quality issue; for now, lack of data is the main limitation.

Dividend Sustainability

The calculated payout ratio is 46.8%, within a generally sustainable range (<60%) given profitability and low leverage. However, DPS and total dividends paid are unreported, and FCF coverage cannot be computed due to missing OCF and capex data. With robust liquidity (cash 16.06 and minimal liabilities) and strong ROE/ROIC, the balance sheet can support the current payout policy in the near term. Sustainability would be confirmed by demonstrating consistent positive OCF and maintaining margin discipline; absent that, our assessment remains cautiously favorable but data-limited.

Risk Assessment

Business Risks:

• Healthcare IT spending cycles and budget timing at hospitals/clinics could delay orders and revenue recognition.
• Competitive pressure from larger medical IT vendors may compress pricing and margins.
• Potential project implementation delays affecting revenue timing and cost overruns.
• Product mix shifts (licenses vs. services) could impact gross margin volatility.
• Regulatory/reimbursement changes in Japan affecting hospital investment appetite.

Financial Risks:

• Cash flow visibility risk due to unreported OCF and capex metrics.
• Receivables concentration risk if large customers dominate sales (not disclosed).
• Extraordinary loss exposure (approx. 1.07 inferred) implying occasional one-time charges.
• Potential currency exposure on components or overseas sales (not disclosed).

Key Concerns:

• Absence of cash flow disclosure prevents validation of earnings quality.
• Inferred extraordinary loss reduced profit before tax vs ordinary income; details unknown.
• Limited SG&A breakdown restricts analysis of cost structure resilience.

Investment Implications

Key Takeaways:

• Core profitability improved with operating margin expansion of roughly 120 bps YoY to 27.3%.
• Net margin held robust at 19.5% despite an inferred extraordinary loss.
• ROE of 16.1% is achieved with low leverage (1.19x), underscoring quality of earnings.
• Balance sheet is very strong (equity ratio ~84%, current ratio ~4.4x).
• ROIC at 23.7% indicates value-accretive deployment of capital.

Metrics to Watch:

• Operating cash flow and OCF/Net Income ratio upon disclosure.
• Details and recurrence risk of extraordinary items impacting PBT.
• Order backlog and pipeline conversion to sustain revenue growth.
• SG&A trajectory versus revenue to gauge operating leverage durability.
• Receivables days and collections to validate cash conversion.

Relative Positioning: Within Japan healthcare/IT solutions peers, the company exhibits above-average margins, strong ROE/ROIC, and a conservative balance sheet, offset by limited cash flow disclosure this quarter; overall positioning appears solid with quality-driven returns rather than leverage.

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