TEMONA.inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥1.83B
• Operating Income: ¥155M
• Net Income: ¥74M
• EPS: ¥6.88

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

Verdict: Solid quarter with resilient profitability and strong cash generation despite muted top-line growth. Revenue was 18.32 (100M JPY), up a modest 0.4% YoY, indicating near-flat demand but stable retention in the core business. Gross profit reached 9.76 with a gross margin of 53.3%, supporting an operating income of 1.55 and an operating margin of approximately 8.5%. Ordinary income came in at 1.53, and net income was 0.73, implying a net margin of 4.0%. EBITDA was 1.77, equating to a 9.7% EBITDA margin and an interest coverage ratio of 19.9x, reflecting ample capacity to service debt. Operating cash flow of 2.23 significantly exceeded net income (OCF/NI = 3.05x), a strong signal of earnings quality under JGAAP. Free cash flow was robust at 2.29, as investing cash inflows offset modest capex of 0.45. Liquidity remains strong with a current ratio of 248% and cash and deposits of 12.32 against short-term loans of 2.00, mitigating near-term refinancing risk. Total assets were 17.66 and total equity was 7.67, implying financial leverage (A/E) of 2.30x and supporting a DuPont-calculated ROE of 9.5%. The effective tax rate was elevated at 52.9%, which depressed net income relative to pre-tax profit; normalization here would lift bottom-line margin. SG&A intensity is high at 8.21 (about 84% of gross profit), capping operating margin but offering potential operating leverage if revenue growth accelerates. Balance sheet quality appears clean with limited investment securities and moderate goodwill (1.62), reducing impairment risk but still requiring monitoring. No dividend information was disclosed; however, current FCF would comfortably cover a modest payout if initiated. Margin trend comparisons in basis points versus prior periods are not available due to missing YoY margin data (profits YoY unreported). Overall, the quarter demonstrates durable unit economics, strong cash conversion, and a healthy liquidity cushion, albeit with a need for renewed growth momentum and attention to the high tax rate.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (4.0%) × Asset Turnover (1.037x) × Financial Leverage (2.30x) = ROE 9.5%. The largest sensitivity driver for ROE is the net margin, given modest asset turnover typical of a software/service model and moderate leverage. Net margin was constrained by an elevated effective tax rate (52.9%) and high SG&A intensity (SG&A of 8.21 equals ~84% of gross profit), which limited flow-through from a healthy 53.3% gross margin to an 8.5% operating margin and 4.0% net margin. Asset turnover of 1.037x is consistent with a light-asset SaaS/solution model with high cash balances diluting turnover. Leverage at 2.30x is moderate and primarily reflects non-debt liabilities; large cash holdings temper true balance sheet risk. Sustainability: gross margin quality appears stable; operating leverage could improve margins if revenue growth resumes and SG&A grows slower than sales. One-time factors: the unusually high tax rate appears non-structural and, if normalizing, would lift net margin and ROE. Concerning trend watchpoints: with revenue up just 0.4% YoY and no SG&A YoY disclosed, there is risk that SG&A growth may be outpacing revenue; future disclosures should confirm SG&A discipline.

Growth Assessment

Top-line growth was +0.4% YoY to 18.32, suggesting stabilization but limited expansion. Gross margin at 53.3% supports scalability, but high SG&A absorption restricted operating margin to ~8.5%. Profit growth YoY is unreported; however, EBITDA margin of 9.7% and strong OCF point to underlying profitability resilience. The business likely relies on recurring subscription/solution revenues; retention appears stable given the flat revenue trajectory. Operating leverage potential exists: each incremental revenue point could drop through at attractive rates if SG&A is contained. Mix effects were minimal at the non-operating line (non-op income 0.06 vs non-op expenses 0.08), so core operations drove the outcome. Outlook hinges on reacceleration of bookings/new logo wins, churn control, and upsell within the installed base; absent stronger demand, margins may plateau. Tax normalization would be an easy lever for net profit growth without top-line acceleration. Cash generation capacity (OCF 2.23) supports continued product investment to drive growth. Data limitations prevent precise YoY margin change analysis, but current margins indicate a solid base for improvement if growth initiatives land.

Financial Health

Liquidity is strong: Current ratio 248%, Quick ratio 248%, and working capital of 8.97. Cash and deposits of 12.32 comfortably cover current liabilities of 6.06 and short-term loans of 2.00, indicating low near-term liquidity risk. Solvency: Total liabilities/equity (D/E as provided) is 1.30x, below the 2.0x warning threshold; interest-bearing debt totals ~5.85 (ST 2.00 + LT 3.85). Net cash position is positive when comparing cash (12.32) to interest-bearing debt (5.85), implying balance sheet flexibility. Interest coverage is strong at 19.9x on operating income, suggesting ample headroom against rate or earnings volatility. Maturity mismatch risk appears low: current assets of 15.02 exceed current liabilities of 6.06 by a wide margin, and cash alone covers all short-term obligations. No off-balance sheet obligations were disclosed. Goodwill/intangibles total ~1.64–1.62, moderate relative to assets (about 9–10%), with manageable impairment risk given profitability.

Cash Flow Quality

Earnings quality is high with OCF/Net Income at 3.05x, indicating strong cash conversion and limited accrual risk. Free cash flow was 2.29, as operating cash inflow (2.23) plus net investing inflow (0.06) more than covered capex of 0.45; FCF margin is roughly 12.5%. The positive investing CF despite capex implies disposal proceeds or investment redemptions; absent detail, this may not recur every quarter. Working capital appears well-managed: low receivables relative to revenue and strong cash suggest favorable billing/collection or prepayment structures; no signs of end-period working capital pulls are evident from the aggregate data. With EBITDA of 1.77 and interest expense of 0.08, cash interest is well covered. Overall, cash generation comfortably supports maintenance capex and leaves capacity for selective growth investments.

Dividend Sustainability

Dividend data is unreported; thus payout ratios and FCF coverage cannot be directly assessed. Capacity perspective: FCF of 2.29 (≈229 million JPY) translates to roughly 21.4 JPY per average share (FCF per share using 10.685 million average shares), suggesting room for a modest dividend if the company chooses to initiate or increase distributions. Given strong liquidity and positive net cash, there is financial flexibility; however, management’s capital allocation stance is unknown from the disclosure. Absent a stated policy, we assume priority remains on organic growth and product investment, with potential for shareholder returns if growth visibility improves.

Risk Assessment

Business Risks:

• Muted revenue growth (+0.4% YoY) indicating potential demand softness or competitive pressure.
• High SG&A intensity (~84% of gross profit) limiting operating leverage if growth does not reaccelerate.
• Potential customer concentration and churn risk typical of subscription/solution businesses (not disclosed but common for the model).
• Product and cybersecurity/data privacy risk inherent in software/services.

Financial Risks:

• Elevated effective tax rate (52.9%) suppressing net margins; persistence would weigh on ROE.
• Debt/EBITDA around ~3.3x, though mitigated by large cash; rising rates could increase interest burden.
• Goodwill/intangible asset impairment risk (intangible-heavy balance sheet) if growth weakens.
• Dependence on investing cash inflows this period; not guaranteed to recur.

Key Concerns:

• Sustained low top-line growth may cap margin expansion.
• Visibility on SG&A trajectory is limited (YoY breakdown unreported), raising cost discipline questions.
• Tax normalization timing uncertain; if delayed, net income leverage remains constrained.
• Data gaps (dividends, detailed SG&A, YoY profit metrics) reduce clarity on trends and capital allocation.

Investment Implications

Key Takeaways:

• Resilient profitability with gross margin at 53.3% and operating margin ~8.5%.
• Strong cash conversion: OCF/NI 3.05x and FCF 2.29.
• Healthy liquidity: current ratio 248% and net cash after debt.
• ROE of 9.5% primarily constrained by high tax rate and SG&A intensity.
• Operating leverage potential if revenue growth improves and SG&A is contained.

Metrics to Watch:

• Revenue growth reacceleration (bookings, churn, ARPU/upsell).
• SG&A growth vs revenue growth (operating leverage).
• Effective tax rate normalization trajectory.
• Cash balance vs debt and Debt/EBITDA trend.
• OCF stability and capex needs (to gauge sustainable FCF).

Relative Positioning: Compared with small-cap Japanese software/service peers, Temona exhibits above-average cash conversion and liquidity with moderate leverage and mid-single-digit net margins; the key differentiator for upside would be reigniting top-line growth to unlock operating leverage while normalizing the tax rate.

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