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

Kanamic Network reported solid FY2025 Q4 results with revenue of ¥5.5bn, up 9.9% YoY, indicating sustained top-line momentum. Profitability expanded faster than sales: operating income rose 11.6% YoY to ¥1.606bn and net income increased 20.8% to ¥1.111bn, evidencing positive operating leverage and improved below-the-line dynamics. Gross margin was robust at 55.9%, supporting an operating margin of 29.2% and an EBITDA margin of 34.7%, consistent with a scalable software-like model. Ordinary income (¥1.612bn) slightly exceeded operating income, suggesting neutral-to-modestly positive non-operating contributions. Net profit margin stood at 20.2%, healthy for a cloud/IT service provider focused on healthcare and elderly care networks. DuPont analysis shows ROE of 23.9%, driven by a strong net margin (20.2%), moderate asset turnover (0.841x), and conservative financial leverage (1.41x). The business generated operating cash flow of ¥1.292bn (OCF/NI of 1.16), indicating good earnings quality and cash conversion. Free cash flow was ¥549m after ¥743m of investing outflows, implying capacity to fund organic investments while remaining FCF positive. Liquidity is strong with current assets of ¥3.86bn and current liabilities of ¥1.58bn, yielding a current ratio of 244% and healthy working capital of ¥2.28bn. The balance sheet is conservative: total liabilities are ¥2.34bn versus equity of ¥4.65bn, implying a debt-to-equity ratio of 0.50x and an implied equity ratio around 71% based on totals (the reported 0% equity ratio appears undisclosed rather than actual). Interest coverage is very high at 250x, reflecting minimal financial risk. Tax expense of ¥432m against net income implies an effective tax rate near the high-20% range; the displayed 0.0% is likely an undisclosed metric rather than an actual rate. Financing cash outflows of ¥651m suggest shareholder returns or debt/lease repayments, though dividends are not disclosed in the dataset provided. Overall, the company exhibits high profitability, disciplined cost structure, and strong cash generation alongside prudent leverage. Strategic reinvestment (reflected in investing CF) appears manageable within internally generated cash. Data gaps remain (e.g., cash balance, equity ratio field, share data, DPS), but available figures point to a resilient, capital-light model with attractive returns. The outlook hinges on sustaining ARR growth in healthcare IT, controlling churn, and scaling efficiently without eroding margins.

Profitability Analysis

ROE of 23.9% is decomposed into: net profit margin 20.2% x asset turnover 0.841x x financial leverage 1.41x. The margin component is the dominant driver, reflecting a high-value software/service mix and operating efficiency. Gross margin of 55.9% supports an operating margin of 29.2%, indicating disciplined opex and favorable unit economics. EBITDA margin at 34.7% shows meaningful non-cash charges (D&A ¥301m) but still sizable cash earnings. Operating leverage is positive: revenue grew 9.9% YoY while operating income rose 11.6% and net income 20.8%, implying cost scaling below revenue growth and some below-the-line tailwinds. Interest burden is negligible (interest expense ¥6.4m; coverage 250x), preserving earnings quality. Ordinary income slightly exceeding operating income suggests modest non-operating gains or financial income that did not materially distort performance. Overall, profitability quality is high with a balanced contribution from gross margin strength and opex discipline.

Growth Assessment

Top-line growth of 9.9% YoY indicates steady demand, likely underpinned by recurring revenue dynamics in healthcare/elderly-care IT solutions. Operating income growth of 11.6% outpacing sales suggests improving operating efficiency and scale benefits. Net income growth of 20.8% further benefits from a stable financial structure and normalized tax, enhancing per-share earnings (EPS ¥23.42). The margin profile (OPM 29.2%) appears sustainable if customer retention remains high and pricing power endures. Investing CF of -¥743m indicates continued product/platform investment and/or selective M&A to support future growth. With OCF/NI at 1.16, profit quality appears sound, reducing the risk of accrual-driven growth. Sustainability hinges on retention/expansion within care providers, new customer wins, and potential upselling of modules; competitive intensity and policy changes are key external variables. Near-term outlook is cautiously positive given scale and cash generation, though visibility would improve with recurring revenue and backlog/disclosure details.

Financial Health

Liquidity is strong: current assets ¥3,859m vs. current liabilities ¥1,579m yield a current ratio of 244.5% and ample working capital of ¥2,281m. Quick ratio equals current ratio in the dataset, reflecting no reported inventories (likely not material for a software/services model). Solvency appears robust with total liabilities of ¥2,341m versus equity of ¥4,649m, implying debt-to-equity of 0.50x and an implied equity ratio of ~71% using reported totals. Interest coverage at 250x evidences minimal financial risk and limited dependence on debt. Cash and equivalents were not disclosed in the dataset; however, positive OCF and FCF suggest adequate liquidity buffers in practice. Capital structure is conservative, providing flexibility for investment or shareholder returns without straining the balance sheet.

Cash Flow Quality

Earnings quality is solid with OCF of ¥1,292m at 116% of net income (¥1,111m), implying positive working capital contribution and limited accrual build. EBITDA of ¥1,907m supports strong cash earnings, with D&A of ¥301m consistent with a software-driven asset base. Free cash flow of ¥549m after ¥743m of investing outflows demonstrates the ability to self-fund growth while remaining cash generative. Working capital management appears effective given the OCF/NI ratio; specific components (receivables, payables, deferred revenue) are not disclosed, limiting granularity. Investing outflows likely reflect product development capitalization, infrastructure, or bolt-on M&A; returns on these investments should be monitored via revenue growth and margin resilience. Financing CF of -¥651m indicates net cash outflow to capital providers, potentially dividends, share repurchases, or debt/lease repayments; exact composition is undisclosed. Overall, cash conversion and FCF profile are healthy.

Dividend Sustainability

Dividend information is not disclosed in the provided dataset (DPS reported as 0.00 likely indicates non-disclosure rather than an actual zero payout). The calculated payout ratio of 0.0% and FCF coverage of 0.00x should be treated as placeholders, not definitive metrics. From a capacity perspective, net income of ¥1,111m and FCF of ¥549m indicate room for shareholder returns while maintaining investment, assuming no significant competing cash needs. Balance sheet strength (low leverage, high coverage) further supports potential payout flexibility. Policy outlook cannot be inferred without management guidance or historical DPS trends; any future dividend policy would need to balance growth investments (as seen in -¥743m investing CF) with returns. Monitoring official disclosures is essential for an accurate assessment of dividend sustainability.

Risk Assessment

Business Risks:

• Dependence on healthcare/elderly-care IT markets subject to regulatory and reimbursement changes
• Customer concentration risk among care providers, municipalities, and healthcare institutions
• Competition from domestic SaaS/IT vendors and platform players leading to pricing pressure
• Churn and net retention volatility affecting recurring revenue scalability
• Cybersecurity, data privacy, and system reliability risks in cloud-based services
• Execution risk in product development and integration of any acquired businesses
• Sales cycle lengthening due to public-sector procurement processes

Financial Risks:

• Limited disclosure of cash balance and certain ratios complicates liquidity assessment
• Potential capitalization of development costs could inflate near-term margins if not matched by returns
• Accounts receivable concentration and collection timing could impact OCF
• Exposure to tax and accounting adjustments affecting net income volatility
• Small interest expense base could rise if borrowing increases for M&A or expansion

Key Concerns:

• Sustaining double-digit growth while preserving a ~30% operating margin
• Visibility into recurring revenue metrics (ARR, net retention, churn)
• Clarity on dividend/buyback policy given financing outflows and undisclosed DPS
• Pipeline conversion and sales efficiency amid potential macro or policy shifts

Investment Implications

Key Takeaways:

• Strong profitability with OPM 29.2%, EBITDA margin 34.7%, and ROE 23.9%
• Healthy cash conversion (OCF/NI 1.16) and positive FCF of ¥549m despite growth investments
• Conservative balance sheet (D/E 0.50x; implied equity ratio ~71%) and very high interest coverage (250x)
• Positive operating leverage: revenue +9.9% YoY vs. OP +11.6% and NI +20.8%
• Data gaps exist (cash balance, DPS, equity ratio field), but underlying metrics indicate resilience

Metrics to Watch:

• ARR growth, net retention, and churn in core healthcare/elderly-care platforms
• Deferred revenue and receivables days to gauge demand and cash conversion
• R&D capitalization versus expense and ROI of investing CF
• Operating margin trajectory and sales efficiency as the company scales
• Composition of financing CF (dividends, buybacks, debt service) and any policy statements

Relative Positioning: Within Japanese healthcare/enterprise SaaS peers, Kanamic Network exhibits above-average margins, strong ROE, and low leverage, positioning it as a high-quality, capital-light operator contingent on sustaining recurring revenue growth and regulatory navigation.

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