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

Kayac Inc. (39040) reported FY2025 Q3 consolidated results under JGAAP with strong top-line momentum and sharp operating profit recovery, while bottom-line comparability is distorted by prior-year one-offs. Revenue rose 18.8% year over year to ¥14.22 billion, supported by broad-based growth across its service-driven model. Gross profit reached ¥6.42 billion, translating to a gross margin of 45.1%, indicating solid value-add and pricing, or a favorable mix shift. Operating income surged 249.0% YoY to ¥704 million, lifting the operating margin to approximately 4.95%, evidencing meaningful operating leverage. Ordinary income was ¥619 million, reflecting minor non-operating expense effects, with interest expense at a modest ¥9.24 million. Net income was ¥646 million, down 97.4% YoY, implying a very large prior-year non-recurring gain or a base effect that materially inflates the comparison; underlying profitability in the current period appears healthy. DuPont analysis shows ROE of 9.78%, decomposed into a 4.54% net margin, 1.010x asset turnover, and 2.13x financial leverage, which is consistent with the reported ROE. Liquidity appears sound with a current ratio of 187.5% and working capital of ¥4.18 billion, supporting operating flexibility. Based on balance sheet totals, the implied equity ratio is roughly 46.9% (¥6.61 billion equity / ¥14.08 billion assets), though the disclosed equity ratio field is unreported (0.0%). Interest coverage is robust at approximately 76x, highlighting low financing burden and headroom against rate or credit shocks. While the company’s EBITDA is shown as zero due to unreported depreciation and amortization, the strong operating profit trajectory points to improving core earnings quality. Cash flow statement items are unreported (zeros), limiting assessment of OCF conversion and free cash flow; therefore, FCF-related conclusions are tentative. The dividend is unreported (DPS 0.00), and payout ratio is shown as 0.0%, suggesting either a retention stance or pending decision; without OCF/FCF data, coverage cannot be validated. Capital structure is moderate with debt-to-equity of 1.04x, consistent with a balanced risk profile and return potential. Overall, the period evidences healthy growth and operating margin scaling, but the sharp YoY decline in net income likely reflects extraordinary prior-year effects rather than deterioration, and data gaps on cash flows and depreciation require cautious interpretation. Key watchpoints include sustainability of revenue growth, durability of margin expansion, and confirmation of operating cash conversion once cash flow data is available.

Profitability Analysis

ROE is 9.78%, driven by a 4.54% net profit margin, 1.010x asset turnover, and 2.13x equity multiplier. Operating margin is approximately 4.95% (¥704m / ¥14,222m), improving markedly alongside 18.8% revenue growth and 249% operating income growth, indicating strong operating leverage in the quarter-to-date period. Gross margin of 45.1% suggests healthy value capture, likely from a services-heavy mix and/or favorable project profitability. Ordinary income trails operating income modestly due to minor non-operating costs (interest expense ¥9.24m), leaving interest coverage at about 76x and signaling limited financial drag. The large decline in net income YoY (−97.4%) is inconsistent with operating performance and implies prior-year extraordinary items; thus, current-period net margin likely reflects normalized profitability better than the YoY net income trend. EBITDA and EBITDA margin are not available due to unreported depreciation and amortization; as such, margin quality assessments rely on operating metrics rather than EBITDA. Overall, advancing gross-to-operating margin conversion and low financing costs underpin improving profitability dynamics, with ROE primarily supported by margin recovery and reasonable asset efficiency rather than leverage.

Growth Assessment

Revenue increased 18.8% YoY to ¥14.22bn, reflecting solid demand and likely expansion across key digital/creative service lines. Operating income growth of +249% YoY demonstrates significant operating leverage as fixed costs were spread over a larger revenue base and/or cost discipline improved. Net income declined 97.4% YoY despite stronger operations, pointing to a high base in the prior period (likely non-recurring gains or unique tax effects), reducing the usefulness of bottom-line YoY comparisons for trend analysis. Asset turnover of 1.010x indicates efficient utilization of the asset base to generate sales, consistent with an asset-light business model. The improvement in operating margin to ~4.95% supports a positive outlook on near-term earnings scalability if volume growth persists. Given data limitations (unreported D&A and cash flows), the quality of growth cannot be validated via cash conversion metrics; however, the high interest coverage and working capital buffer reduce downside risks. Outlook hinges on maintaining project pipeline visibility, pricing, and utilization rates; near-term growth appears sustainable contingent on market demand and execution. Watch for potential seasonality in Q4 and client budget phasing, which can affect quarterly run-rates in creative/contract businesses.

Financial Health

Liquidity is strong: current assets ¥8.95bn versus current liabilities ¥4.77bn yields a current ratio of 187.5% and working capital of ¥4.18bn. The quick ratio is also shown as 187.5% due to unreported inventories; actual quick liquidity may be slightly lower if inventories exist, though the business model likely carries low inventory. Total liabilities are ¥6.85bn against equity of ¥6.61bn, implying a debt-to-equity ratio of 1.04x and a balanced capital structure. Implied equity ratio is approximately 46.9% (calculated from reported totals), which indicates moderate leverage and adequate solvency. Interest expense is low (¥9.24m) relative to operating income, supporting resilience against interest rate and credit spread movements. No detailed breakdown of interest-bearing debt or maturity profile is provided, so refinancing risk and duration cannot be assessed. Overall, the balance sheet appears sound with ample short-term liquidity and manageable leverage.

Cash Flow Quality

Cash flow data (operating, investing, financing) are unreported for the period, so OCF/NI and free cash flow metrics cannot be evaluated. The reported OCF/Net Income ratio of 0.00 and FCF of 0 reflect data gaps rather than actual cash outcomes. Given strong operating profit growth, cash generation could be favorable, but this cannot be confirmed without OCF and working capital movement details. The positive working capital position (¥4.18bn) supports liquidity, but changes in receivables and contract assets are key for cash conversion in project-based businesses. Absence of depreciation data obscures non-cash expense contribution to earnings quality; true EBITDA is likely higher than operating income if D&A exists. In summary, earnings quality appears to be improving operationally, but validation via cash conversion is pending disclosure of cash flow statements.

Dividend Sustainability

Annual DPS is unreported (0.00) and payout ratio is shown as 0.0%, indicating either no dividend or a decision not yet recorded for the period. Without OCF and FCF figures, we cannot assess dividend coverage from cash generation. From an earnings perspective, net income of ¥646m could support a dividend, but policy and capital allocation priorities (growth investments, working capital needs) are unknown from this dataset. Balance sheet strength (implied equity ratio ~46.9%, current ratio 187.5%) provides flexibility, yet sustained distributions require consistent OCF. Until cash flow data and explicit dividend policy guidance are available, the outlook for dividends remains indeterminate.

Risk Assessment

Business Risks:

• Project timing and utilization risk inherent to creative/contract-based revenue, leading to revenue and margin volatility.
• Client concentration risk if large accounts dominate bookings (not disclosed here).
• Pricing pressure from competition in digital/creative services and game/entertainment segments.
• Execution risk in scaling headcount and controlling fixed costs to maintain operating leverage.
• Macroeconomic sensitivity affecting client marketing/IT budgets and discretionary projects.
• Talent retention and wage inflation risk impacting gross margin.

Financial Risks:

• Cash flow conversion risk due to potential elongation of receivables or milestone billing structures.
• Refinancing and interest rate risk cannot be fully assessed due to lack of debt detail; however, current interest burden is low.
• Working capital swings affecting quarter-to-quarter liquidity.
• Limited visibility on capital expenditures and lease obligations due to unreported cash flow data.

Key Concerns:

• Unreported cash flow statements impede assessment of earnings quality and FCF sustainability.
• Large YoY decline in net income suggests prior-year extraordinary items; comparability of bottom-line trends is limited.
• Depreciation and amortization unreported, obscuring EBITDA and capex requirements.
• Equity ratio field unreported; solvency must be inferred from total equity and assets.

Investment Implications

Key Takeaways:

• Top-line growth of +18.8% YoY and operating income +249% YoY indicate strong operating leverage.
• Gross margin at 45.1% and operating margin ~4.95% show improved margin conversion.
• ROE at 9.78% reflects balanced profitability, efficiency, and moderate leverage.
• Interest coverage ~76x highlights minimal financing drag.
• Implied equity ratio ~46.9% suggests a healthy balance sheet, despite the unreported equity ratio field.
• Cash flow data unreported; validation of earnings quality via OCF/FCF is pending.
• Net income YoY comparison distorted by prior-year one-offs; current operating trends are more indicative.

Metrics to Watch:

• Order backlog/pipeline and utilization rates to gauge revenue visibility.
• Operating margin trajectory and SG&A efficiency to confirm sustained operating leverage.
• OCF, FCF, and working capital turns (DSO/DPO) once cash flow data is available.
• Capex and D&A to understand reinvestment needs and true EBITDA.
• Client concentration and churn metrics to assess revenue durability.
• Any guidance on dividend policy and capital allocation.

Relative Positioning: Within Japan’s digital/creative and content services peers, Kayac appears to combine solid revenue growth with improving operating margins and moderate leverage; however, the absence of cash flow disclosure in this period tempers comparability on earnings quality versus peers that report stronger OCF transparency.

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