Kanamic Network Co.,LTD FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥5.50B
• Operating Income: ¥1.61B
• Net Income: ¥1.06B
• EPS: ¥23.42

Income Statement

Balance Sheet

Cash Flow Statement

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: A strong FY2025 Q4 with double-digit profit growth, margin expansion, and solid cash conversion, underpinned by a cash-rich balance sheet. Revenue rose 9.9% YoY to 55.0, while operating income increased 11.6% YoY to 16.06, outpacing top-line growth. Net income climbed 20.8% YoY to 11.11, reflecting both operating leverage and a benign non-operating environment. Gross margin stood at a robust 64.3%, consistent with a high-value software/services mix. Operating margin reached 29.2% (16.06/55.0), expanding by approximately 45 bps YoY based on reconstructed prior-period figures. Net margin improved to 20.2%, an expansion of roughly 181 bps YoY, aided by better operating efficiency and limited non-operating drag. Ordinary income of 16.12 and minimal non-operating items (income 0.20; expenses 0.14) indicate largely clean earnings. Earnings quality is solid: OCF was 12.92 versus net income of 11.11 (OCF/NI 1.16x), and FCF of 5.49 after 1.43 of capex signals prudent investment. The balance sheet is exceptionally liquid with cash and deposits of 33.27, current ratio of 276%, and modest long-term loans of 3.06. Leverage is conservative (D/E 0.41x) and interest coverage is extremely high at 257.7x, implying negligible financial risk. ROE is a best-in-class 23.9%, driven predominantly by a strong 20.2% net profit margin, moderate asset turnover of 0.841, and low financial leverage of 1.41x. Intangibles (14.57) and goodwill (7.94) are material, reflecting M&A and product development, which introduces impairment risk but also supports high margins. The effective tax rate of 31.1% is within a normal range, with no evident tax one-offs. Dividend affordability appears healthy with an estimated payout ratio of 28.2% and FCF coverage of 1.75x, leaving room for reinvestment. Forward-looking, the company’s high gross margin, scalable cost base, and ample cash position support continued profit growth and optionality for M&A or shareholder returns. Key watchpoints are sustainability of demand in healthcare/eldercare IT, retention and upsell rates, and any changes in public-sector budgets or reimbursement frameworks that could affect client spending.

Profitability Analysis

DuPont decomposition: ROE 23.9% = Net Profit Margin (20.2%) × Asset Turnover (0.841) × Financial Leverage (1.41x). The primary driver of high ROE is the elevated net profit margin, with asset turnover below 1.0 (cash-heavy balance sheet) and modest leverage contributing less. Versus last year, operating income grew faster than revenue (11.6% vs 9.9%), indicating slight operating margin expansion; our reconstruction suggests operating margin expanded ~45 bps and net margin ~181 bps. The business reason appears to be operating leverage in SG&A (absolute SG&A 19.30 grew slower than gross profit) and stable gross margin at 64.3%. Non-operating items were minimal and roughly net neutral, so core operations explain the improvement. The change looks sustainable near term given recurring-revenue characteristics typical of healthcare IT/SaaS and continued cost discipline, though mix shifts, pricing, and wage inflation could temper further expansion. No red flags in expense growth relative to revenue are visible; however, the limited SG&A breakdown reduces visibility into wage and marketing trends, so we will monitor if SG&A growth accelerates above revenue.

Growth Assessment

Top-line growth of 9.9% YoY to 55.0 is healthy and appears organic, consistent with solution adoption in healthcare/eldercare IT. Operating profit grew 11.6% YoY, implying modest operating leverage. Net profit rose 20.8% YoY, aided by improved margins and low non-operating drag. The gross margin of 64.3% supports a value-added software/services model; scalability suggests mid-term operating margin stability or slight expansion. Revenue sustainability hinges on customer retention, upsell, and public/municipal budget cycles—key in this vertical. Near-term outlook is positive given strong cash position enabling product investment and sales capacity, but we flag sensitivity to policy changes and competitive pricing. Absent reported R&D details, we assume ongoing product investment is embedded in SG&A; visibility on innovation cadence would strengthen the growth case.

Financial Health

Liquidity is very strong: current ratio 276.2% and quick ratio 276.2%, with cash and deposits of 33.27 far exceeding current liabilities of 13.60. No warning triggers (Current Ratio well above 1.0; D/E at 0.41x well below 2.0). Solvency is conservative: long-term loans 3.06 and high equity of 46.49. Interest coverage is 257.7x, indicating minimal refinancing or rate-risk pressure. Maturity mismatch risk is low given cash of 33.27 and receivables of 2.12 versus current liabilities of 13.60. Off-balance sheet obligations were not reported; we note potential for software-related lease commitments or vendor contracts typical for the sector but cannot quantify from the data.

Cash Flow Quality

OCF/Net Income at 1.16x indicates good earnings quality with cash conversion above 1.0. Operating CF of 12.92 comfortably funds capex of 1.43, resulting in positive FCF of 5.49 even after investing CF of -7.43 (likely including intangibles or acquisitions beyond capex). Financing CF of -6.51 suggests shareholder returns and/or debt service; specific dividends and buybacks are unreported. Working capital appears well managed given small receivables and negligible payables relative to cash; no signs of aggressive working capital pulls. No red flags on cash realization vs. earnings.

Dividend Sustainability

Based on a calculated payout ratio of 28.2% and FCF coverage of 1.75x, the dividend appears comfortably sustainable under current profitability and cash flow. The cash balance (33.27) further supports capacity to maintain or cautiously increase dividends while funding organic capex and potential M&A. Reported DPS and total dividends are unreported; our assessment relies on the calculated payout ratio and FCF. Policy outlook: given high ROE (23.9%) and growth opportunities, management may balance returns with reinvestment; a stable-to-modestly rising payout would be consistent with the profile.

Risk Assessment

Business Risks:

• Customer concentration and budget risk in healthcare/eldercare and public-sector clients
• Pricing pressure and competitive intensity in healthcare IT/SaaS
• Product execution risk without disclosed R&D detail (innovation cadence, feature roadmap)
• Cybersecurity and data privacy risks inherent to healthcare data handling

Financial Risks:

• Goodwill (7.94) and intangible assets (14.57) elevate impairment risk if growth slows
• Potential dependence on a limited number of large contracts could introduce revenue volatility
• Interest rate normalization has limited impact given low debt, but could affect discount rates and valuations

Key Concerns:

• Sustainability of margin expansion as scale increases (wage inflation in tech roles)
• Visibility into SG&A composition is limited (unreported breakdown), obscuring underlying cost trends
• Policy/regulatory changes impacting care coordination and reimbursement may affect customer spend

Investment Implications

Key Takeaways:

• Healthy 9.9% revenue growth with 11.6% operating profit growth and 20.8% net profit growth
• Margin expansion: operating margin ~29.2% (+~45 bps YoY) and net margin 20.2% (+~181 bps YoY)
• Strong ROE at 23.9% primarily driven by high net margins rather than leverage
• Robust liquidity (cash 33.27; current ratio 276%) and minimal debt (long-term loans 3.06)
• High earnings quality (OCF/NI 1.16x) and positive FCF (5.49) support both investment and dividends

Metrics to Watch:

• Net retention rate and churn in core healthcare/eldercare SaaS
• SG&A growth vs revenue; personnel cost trend within SG&A
• Pipeline and backlog indicators for municipal/healthcare clients
• Goodwill and intangible asset impairment tests and amortization trends
• OCF/NI ratio sustainability and working capital movements

Relative Positioning: Within Japan small/mid-cap healthcare IT, the company stands out for superior margins, cash-rich balance sheet, and high ROE with low leverage; key differentiators will be sustained retention/upsell and continued product innovation.

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