KAYAC Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥14.22B
• Operating Income: ¥704M
• Net Income: ¥22M
• EPS: ¥40.16

Income Statement

Balance Sheet

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: Strong topline and operating rebound with margin expansion, but bottom-line presentation shows unusual below-the-line movements that cloud earnings quality. Revenue grew 18.8% YoY to 142.22, while operating income surged 249% YoY to 7.04, indicating improved operating leverage. Gross profit reached 64.19 with a gross margin of 45.1%, and SG&A was 62.17, implying substantial cost absorption and likely other operating income supporting the operating result. Operating margin improved to roughly 4.9% (7.04/142.22), up from about 1.7% a year ago, a c. 320–330 bps expansion. Ordinary income was 6.19, reflecting modest net non-operating expenses (non-op income 0.65 vs non-op expenses 0.80). Profit before tax was reported at 1.62, suggesting significant extraordinary/lower-of-the-line items between ordinary income and PBT under JGAAP. Net income was 6.46 (−97.4% YoY per the filing) despite the low PBT and tax expense of 1.39 (effective tax rate 86.1% on the reported PBT), indicating classification/timing effects or one-off items not fully broken out in the XBRL. The divergence between PBT (1.62) and net income (6.46) is atypical and points to material non-recurring factors; this warrants caution when interpreting bottom-line strength. DuPont-calculated ROE is 9.8% (Net margin 4.5% × Asset turnover 1.01 × Leverage 2.13x), in line with the reported ROE of 9.8%. Liquidity remains solid with a current ratio of 187.2% and cash of 58 against total debt of 24.2, implying a net cash position. Interest coverage is strong at 76.2x, pointing to low immediate financial stress. ROIC printed at 10.9%, above an 8% excellence threshold, indicating improving capital efficiency. With cash flow statements unreported, operating-to-cash conversion cannot be validated this quarter. The payout ratio is low at 9.7%, suggesting room for distribution flexibility, subject to cash flow confirmation. Forward-looking, sustaining the higher operating margin while normalizing extraordinary/tax effects will be key to consistent ROE delivery. Monitoring the composition of operating income (including any other operating gains) and the recurrence of below-the-line items will determine the durability of earnings momentum into FY-end.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 4.5% × Asset Turnover 1.010 × Financial Leverage 2.13x = ROE 9.8%. The most notable change appears to be in margin, given operating income rose 249% on 18.8% revenue growth; we estimate operating margin expanded from ~1.7% in the prior-year period to ~4.9% (+~326 bps). Business drivers likely include improved project mix/pricing, better utilization, and/or the presence of other operating income items boosting operating profitability (GP 64.19 less SG&A 62.17 would imply only 2.02 of EBIT absent other operating items versus the reported 7.04). Non-operating activities were a small drag (net −0.15), while a large movement between ordinary income (6.19) and PBT (1.62) implies extraordinary impacts. Sustainability: the core margin uplift tied to operating execution can be partly sustainable if mix and utilization persist; however, any boost from other operating income or extraordinary gains should be treated as one-time unless guidance confirms recurrence. Watch for SG&A discipline: the SG&A ratio is ~43.7% of revenue; if SG&A growth runs ahead of revenue growth, operating leverage could reverse. Overall, near-term ROE improvements are primarily margin-driven rather than asset turnover or leverage changes.

Growth Assessment

Revenue growth of 18.8% YoY to 142.22 demonstrates solid demand momentum. Operating income growth of 249% indicates strong operating leverage, likely from mix/pricing and scale. Gross margin held at 45.1%, consistent with a value-added mix; the key swing factor was below SG&A, with indications of other operating income supporting EBIT. Ordinary income at 6.19 and the significant drop to PBT at 1.62 point to extraordinary/lower-of-the-line items affecting reported growth at the pre-tax level. Net income of 6.46 conflicts with the low PBT, suggesting classification/timing effects not fully disclosed in detail in the XBRL. Without cash flow data, sustainability of growth in cash terms remains unverified. Near-term outlook hinges on maintaining the improved operating margin and avoiding negative extraordinary items into Q4. Given ROIC at 10.9%, the current growth appears value-accretive. Key catalysts will be pipeline visibility, cost control, and clarity on one-offs versus recurring operating gains.

Financial Health

Liquidity is healthy: current ratio 187.2% (current assets 101.71 vs current liabilities 54.34) with ample working capital of 47.37. Quick ratio equals the current ratio at 187.2% given material cash holdings. Leverage is moderate: D/E 1.13x; however, gross interest-bearing debt of 24.2 is comfortably covered by cash of 58, implying net cash. Interest coverage is very strong at 76.2x, indicating low servicing risk. No explicit warning triggers: Current Ratio > 1.0 and D/E < 2.0. Maturity mismatch risk appears low with short-term loans of 4.62 covered many times by cash; current assets exceed current liabilities by 47.37. Balance sheet includes goodwill (4.87) and intangibles (8.69), raising some impairment sensitivity if project/game performance turns. No off-balance sheet obligations were reported in the provided data.

Cash Flow Quality

Operating cash flow, free cash flow, and capex were unreported, so OCF/Net Income and FCF coverage cannot be assessed. Consequently, we cannot validate earnings-to-cash conversion or working capital dynamics this quarter. Given the discrepancy between ordinary income, PBT, and net income, cash flow disclosure at FY-end will be important to confirm the quality of earnings. No signs of working capital manipulation can be identified from the limited data, but we note the reliance on other operating income implied by EBIT versus GP-SG&A, which may not be cash-heavy or recurring.

Dividend Sustainability

Payout ratio is low at 9.7%, suggesting conservative distributions. With net cash (cash 58 > total debt 24.2) and strong interest coverage, balance-sheet capacity for dividends appears adequate. However, FCF coverage is not calculable due to unreported cash flows, so ultimate sustainability should be reassessed when OCF/FCF are disclosed. Policy outlook cannot be inferred from the data provided; if the company targets stable dividends, current earnings and balance sheet suggest room to maintain, but confirmation requires cash flow visibility.

Risk Assessment

Business Risks:

• Execution risk on project-based revenues and utilization, which drive operating leverage.
• Content/title hit risk and volatility in creative/game-related income streams.
• Cost inflation in personnel and outsourcing that could compress margins given SG&A at ~43.7% of revenue.
• Goodwill and intangible asset impairment risk if performance of acquired or internally developed assets underperforms.

Financial Risks:

• Potential volatility from extraordinary items impacting PBT and bottom line under JGAAP.
• Interest rate risk on 24.2 of interest-bearing loans, albeit mitigated by large cash holdings.
• Tax rate volatility (reported 86.1% effective rate on PBT) that can swing net income.

Key Concerns:

• Unusual divergence between ordinary income (6.19), PBT (1.62), and net income (6.46) indicating material below-the-line items not fully detailed.
• Apparent reliance on other operating income to bridge GP-SG&A to reported operating income.
• Lack of operating cash flow disclosure prevents validation of earnings quality.
• High SG&A base limits downside protection if revenue growth slows.

Investment Implications

Key Takeaways:

• Core operations improved materially with ~330 bps operating margin expansion and 249% YoY EBIT growth.
• Balance sheet is robust with net cash and strong liquidity; financial stress is low.
• ROE at 9.8% and ROIC at 10.9% indicate value-accretive growth this period.
• Earnings quality is opaque due to extraordinary/tax effects; clarity on one-offs is essential.
• Sustainability hinges on maintaining margin gains without reliance on non-recurring items.

Metrics to Watch:

• Operating cash flow and free cash flow at FY-end (OCF/NI target >1.0).
• Operating margin trajectory and SG&A growth vs revenue growth.
• Breakdown of other operating income and any extraordinary items.
• Effective tax rate normalization and its drivers.
• Net cash position and debt maturity profile.
• ROIC sustainability at or above ~8%.

Relative Positioning: Within Japanese small/mid-cap digital/creative peers, the company currently exhibits stronger liquidity, solid ROE/ROIC, and improving operating leverage, but with higher-than-average earnings composition risk due to below-the-line items and possible reliance on other operating income.

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