CRI Middleware Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥3.45B
• Operating Income: ¥554M
• Net Income: ¥351M
• EPS: ¥80.51

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

CRI Middleware reported FY2025 Q4 full-year revenue of 3,448 million yen, up 8.9% year on year, with strong operating leverage driving operating income up 50.5% to 554 million yen. Gross profit of 1,717 million yen implies a gross margin of 49.8%, highlighting a resilient, asset-light middleware model. Operating margin expanded to approximately 16.1%, and ordinary income of 566 million yen outpaced operating income, suggesting modest non-operating gains. Net income rose 38.2% to 420 million yen, producing a net margin of 12.2% and ROE of 10.25% via a DuPont profile of 12.18% margin, 0.591x asset turnover, and 1.42x financial leverage. Cash generation was robust with operating cash flow of 849 million yen, equivalent to 2.0x net income, reflecting high earnings quality and favorable working capital dynamics. Free cash flow reached 714 million yen after 135 million yen of investing cash outflows, reinforcing ample financial flexibility. The balance sheet is conservative with total assets of 5,839 million yen, total liabilities of 1,592 million yen, and total equity of 4,098 million yen, translating to a low debt-to-equity of about 0.39x. Liquidity appears very strong with current assets of 4,484 million yen versus current liabilities of 391 million yen, yielding an 11.5x current ratio and substantial working capital of 4,093 million yen. Interest expense was not disclosed (reported as zero), consistent with a low-debt profile; hence interest coverage metrics are not meaningful but credit risk from leverage appears limited. The reported effective tax rate field is zero, but using income tax expense of 85 million yen and ordinary income of 566 million yen implies an approximate tax burden in the mid-teens. EBITDA of about 701 million yen implies an EBITDA margin near 20.3%, consistent with healthy operating efficiency for a software licensing and royalty model. Revenue growth combined with outsized profit growth points to margin expansion likely driven by mix (higher royalty and license contribution) and disciplined cost control. The firm’s asset-light structure underpins high returns on capital and strong cash conversion, while modest investment needs preserve free cash flow. Dividend data were not disclosed in this dataset (DPS and payout ratio appear as zeros); financing cash outflows of 104 million yen suggest some capital returns or lease/other repayments, but details are not provided. Overall, CRI Middleware enters the new fiscal year with strengthened profitability, solid cash generation, and a conservative balance sheet, though disclosure gaps (cash balance, DPS, share count) limit precision on per-share and capital return analysis.

Profitability Analysis

ROE of 10.25% decomposes into a 12.18% net margin, 0.591x asset turnover, and 1.42x financial leverage, indicating returns are driven primarily by margin strength rather than leverage. Gross margin of 49.8% reflects strong pricing power and an IP-driven model; the operating margin of roughly 16.1% improved markedly given operating income growth (+50.5% YoY) far exceeding revenue growth (+8.9% YoY). The spread between gross and operating margins suggests a meaningful fixed-cost base that allowed operating leverage to materialize as sales grew. Ordinary income of 566 million yen slightly above operating income indicates limited but positive non-operating contributions. EBITDA of 701 million yen (20.3% margin) underscores healthy core profitability after adding back 147 million yen of depreciation and amortization. The implied tax burden based on disclosed income tax (approximately 15% of ordinary income) supports net margin durability. Overall, margin quality appears high and improving, supported by mix and scalability inherent in middleware royalties and licenses.

Growth Assessment

Top-line increased 8.9% YoY to 3,448 million yen, a steady pace for a niche middleware provider. Profit growth substantially outpaced revenue, with operating income up 50.5% and net income up 38.2%, evidencing operating leverage and likely a favorable revenue mix (higher-margin royalties/licenses). Sustainability of growth will hinge on the pipeline of titles/products adopting CRI’s middleware, retention with existing gaming and non-gaming clients, and expansion into adjacencies (e.g., automotive/embedded). The asset turnover of 0.591x suggests moderate utilization; gains in turnover could be realized if revenue scales faster than asset base expansion. Cash flow-based growth quality is strong: OCF at 849 million yen exceeds net income by 2.0x, implying low accrual intensity and supportive working capital dynamics. Outlook is cautiously positive given margin momentum and cash generation, though the pace of revenue growth may remain tied to industry release cycles and customer concentration effects.

Financial Health

Liquidity is very strong, with current assets of 4,484 million yen versus current liabilities of 391 million yen, yielding a current and quick ratio of about 11.5x and working capital of 4,093 million yen. Solvency is conservative: total liabilities of 1,592 million yen against equity of 4,098 million yen implies a debt-to-equity of approximately 0.39x. Interest expense was undisclosed (reported as zero), consistent with minimal interest-bearing debt; interest coverage metrics are not informative but leverage risk appears low. Total assets stand at 5,839 million yen; with equity of 4,098 million yen, financial leverage is modest at 1.42x. Overall balance sheet resiliency is high, providing capacity to absorb industry volatility and invest in R&D without stressing liquidity.

Cash Flow Quality

Earnings quality is strong with OCF of 849 million yen at 2.02x net income, indicating favorable cash conversion and limited reliance on accruals. Free cash flow of 714 million yen after 135 million yen of investing outflows demonstrates ample internal funding capacity. Working capital appears well-managed given the scale of OCF relative to earnings; the absence of disclosed inventories is consistent with a software model. Investing cash flows are modest, suggesting low capital intensity; spending likely reflects software development assets and equipment rather than heavy capex. Financing cash flow of -104 million yen could include shareholder returns or lease/other repayments; details are not disclosed. Reported cash and equivalents are not available in this dataset, so period-end liquidity cannot be quantified from cash alone, but strong OCF and working capital indicate solid cash generation.

Dividend Sustainability

Dividend-related fields (DPS, payout ratio) are not disclosed in the provided data and appear as zeros, so no conclusion on actual distributions can be drawn from this dataset. From a capacity perspective, free cash flow of 714 million yen provides room for potential dividends or buybacks while funding R&D and growth initiatives. With a conservative balance sheet (debt-to-equity ~0.39x) and strong liquidity, prospective distributions would likely be sustainable at moderate payout levels if the earnings and cash flow trajectory is maintained. FCF coverage of dividends cannot be computed due to missing DPS and share data. Company dividend policy and historical payouts should be referenced from official disclosures to assess consistency and target payout ratios.

Risk Assessment

Business Risks:

• Exposure to gaming and digital content release cycles affecting license and royalty timing
• Customer concentration risk with large publishers or platform holders
• Technology obsolescence risk given rapid engine and audio/video middleware evolution
• Competition from integrated engines and open-source alternatives reducing pricing power
• Dependence on key engineers and R&D talent in a tight labor market
• International exposure through customers creating FX and legal/IP risks
• Potential slowdown in mobile/console title launches impacting near-term licensing

Financial Risks:

• Scale risk as a relatively small-cap company with concentrated revenue streams
• Receivables collection timing variability tied to royalty reporting cycles
• Intangible-heavy asset base with limited hard collateral
• Potential volatility in non-operating items and effective tax rates
• Limited disclosure granularity in this dataset (cash, share count, DPS) complicates payout and per-share analysis

Key Concerns:

• Sustainability of margin expansion if revenue mix normalizes
• Visibility on pipeline and backlog given project-based nature of licensing
• Data gaps around cash balance and capital return policy in the period

Investment Implications

Key Takeaways:

• Solid topline growth (+8.9% YoY) with outsized operating income growth (+50.5% YoY) indicates strong operating leverage
• High margins (gross 49.8%, operating ~16.1%, EBITDA 20.3%) reflect scalable, IP-driven model
• ROE of 10.25% primarily margin-driven with modest leverage (1.42x), suggesting quality returns without balance sheet stretch
• OCF at 2.0x net income and FCF of 714 million yen demonstrate strong cash conversion and funding capacity
• Balance sheet conservative with debt-to-equity ~0.39x and very high liquidity
• Dividend and share-related disclosures are absent; capital return assessment requires additional information

Metrics to Watch:

• License and royalty mix, including number of titles and ARR-like components
• Gross and operating margin trends as proxies for pricing and operating leverage
• OCF/Net income ratio and free cash flow to monitor earnings quality
• Accounts receivable days and deferred revenue for demand and cash conversion signals
• R&D intensity and hiring trends to sustain product competitiveness
• Exposure to new platforms/verticals (e.g., automotive/embedded) to diversify growth

Relative Positioning: Within Japan’s middleware niche, CRI Middleware exhibits a high-quality, asset-light profile with strong cash conversion and improving margins; leverage is low, providing resilience versus peers that rely on heavier investment or lower-margin services.

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