EduLab,Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥6.23B
• Operating Income: ¥391M
• Net Income: ¥65M
• EPS: ¥1.61

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: Weak quarter with sharp profit compression despite acceptable liquidity, cushioned somewhat by non-operating gains and positive operating cash flow. Revenue fell 12.8% YoY to 62.29, while operating income collapsed 79.6% YoY to 3.91, indicating severe operating deleverage. Gross profit was 20.55, yielding a 33.0% gross margin, and SG&A was 16.64, or 26.7% of sales. Operating margin calculated at 6.3% contrasts with a reported 0.1% operating margin in XBRL; based on provided line items, 6.3% is the economically consistent figure for this quarter. Ordinary income came in at 4.50 (-95.6% YoY), implying that last year’s ordinary profit was inflated by sizable one-time items; this year’s ordinary-to-operating profit gap reflects non-operating income (2.11) offset by non-operating expenses (1.53). Profit before tax was 1.61, with a high effective tax rate of 59.4% (tax expense 0.96), leading to net income of just 0.16 and a net margin of roughly 0.26%. On margins, operating margin compressed by an estimated ~2,060 bps YoY (from ~26.9% to ~6.3%), assuming last year’s revenue of ~71.38 and operating profit of ~19.2 implied by the YoY rate. Cash flow quality was better than earnings: operating cash flow was 0.98, exceeding net income (0.16), with OCF/NI at 6.12x. Free cash flow was negative at -2.23 due to -3.21 investing CF, suggesting continued investment needs or portfolio changes. The balance sheet shows total assets of 36.07 and equity of 18.30 (financial leverage ~1.97x), with cash and deposits of 13.87 supporting a current ratio of 171.3%. Debt appears manageable on headline metrics, though reported D/E of 0.97x is higher than what simple interest-bearing debt suggests, indicating definitional differences; interest coverage is strong at 37.74x. Retained earnings remained negative (-1.00), highlighting limited internal capital accumulation despite positive OCF this period. Non-operating items (investment securities gains, interest income) contributed, but extraordinary losses are implied by the decline from ordinary income (4.50) to PBT (1.61). Forward-looking, the sharp operating margin compression and elevated effective tax rate depress earnings power, while liquidity provides runway to execute operational improvements; focus should be on stabilizing core revenue, improving SG&A efficiency, and curtailing extraordinary losses to restore sustainable profitability.

Profitability Analysis

ROE decomposition (DuPont): ROE 0.9% = Net profit margin (~0.26%) × Asset turnover (1.73x) × Financial leverage (1.97x). Component changes: The dominant drag is the net profit margin, given the steep drop in operating income (-79.6% YoY) against a 12.8% revenue decline, alongside a high tax rate and extraordinary losses. Business drivers: Lower revenue throughput combined with relatively fixed SG&A (26.7% of sales) compressed operating margin to ~6.3%; non-operating balance was slightly positive, but extraordinary items and tax burden eroded bottom line. Sustainability: The current net margin appears cyclically and event-driven depressed (extraordinary items, high tax rate), suggesting scope for partial recovery if extraordinary charges fade and tax normalizes; however, revenue softness and SG&A rigidity could keep margins subdued near term. Asset turnover at 1.73x is decent for an asset-light education/testing services model and could be maintained if sales stabilize; leverage at ~1.97x is moderate and unlikely to be a key driver of ROE. Concerning trends: Revenue (-12.8%) fell faster than SG&A reductions (absolute SG&A 16.64 still high), indicating negative operating leverage; monitor if SG&A growth outpaces or fails to flex with revenue in subsequent periods.

Growth Assessment

Top line contracted 12.8% YoY to 62.29, signaling demand weakness or fewer project/exam cycles; no segment detail is disclosed to pinpoint drivers. Operating income fell disproportionately (-79.6%) to 3.91, reflecting operating deleverage as gross profit compression combined with a largely fixed cost base. Non-operating income (2.11) partially offset operating weakness, but non-operating expenses (1.53) and implied extraordinary losses pushed PBT down to 1.61. The unusually high effective tax rate (59.4%) further constrained net income, producing NI of 0.16 (-39.8% YoY). With OCF positive (0.98) but FCF negative (-2.23) due to investing outflows, near-term growth likely remains investment-dependent. Outlook hinges on stabilizing core revenues and restoring operating margin via SG&A efficiency and mix; absent segment disclosures, we assume conservative growth until execution evidence improves. Management’s ability to avoid extraordinary losses and normalize tax could mechanically lift earnings even at flat revenues. Near-term catalysts would include order backlogs, exam administration schedules, and contract renewals across education clients; absent these, growth visibility is low.

Financial Health

Liquidity: Current ratio 171.3% and quick ratio 171.3% indicate healthy short-term coverage; cash and deposits of 13.87 vs current liabilities of 16.45 reduce near-term refinancing pressure. Solvency: Financial leverage (Assets/Equity) ~1.97x is moderate; reported D/E 0.97x suggests meaningful leverage on a broad definition, though explicit interest-bearing debt totals 4.29 (short 3.00, long 1.29). Interest coverage is strong at 37.74x, mitigating near-term solvency risk. Maturity mismatch: Current assets (28.18) exceed current liabilities (16.45) comfortably; short-term loans (3.00) are covered by cash and receivables (13.87 + 7.03). Off-balance sheet: None disclosed. Warnings: None of the thresholds (Current ratio <1.0 or D/E >2.0) are breached. Note: Retained earnings are negative (-1.00), underscoring limited accumulated profits and a thinner buffer for shocks despite adequate liquidity.

Cash Flow Quality

Earnings quality is acceptable this period: OCF/NI at 6.12x indicates cash earnings exceeded accounting profits, likely due to non-cash charges and/or working capital effects. However, FCF was negative (-2.23) as investing CF (-3.21) outpaced operating inflows, implying continued investment or portfolio activity. With EBITDA of 4.20 and capex modest at 0.23, maintenance capex appears manageable; the FCF shortfall is more from broader investing flows than core capex. No clear signs of working-capital manipulation are visible from limited disclosures; receivables (7.03) and cash (13.87) support liquidity. Sustainability: If OCF remains near ~1.0 while investing outflows persist, self-funding growth may be tight without incremental financing; improved profitability is needed to restore FCF.

Dividend Sustainability

Dividend data are unreported; payout ratios and FCF coverage cannot be calculated. Given negative retained earnings (-1.00) and modest OCF (0.98) versus negative FCF (-2.23), room for dividends appears limited absent a clear profitability and FCF recovery. Policy outlook: Without explicit guidance, we assume a conservative stance on shareholder returns until retained earnings turn positive and FCF becomes sustainably positive.

Risk Assessment

Business Risks:

• Revenue volatility from exam/project cycles and client budget timing (implied by -12.8% YoY revenue).
• Operating deleverage from a relatively fixed SG&A base (26.7% of sales).
• Dependence on non-operating items and exposure to extraordinary losses (ordinary income 4.50 vs PBT 1.61).
• High effective tax rate (59.4%) reducing net profitability.
• Limited visibility due to lack of segment and SG&A breakdown disclosure.

Financial Risks:

• Negative retained earnings (-1.00) constrain internal capital formation.
• Negative FCF (-2.23) driven by investing outflows may require funding if persistent.
• Potential definitional or classification differences in leverage (reported D/E 0.97x vs simple debt figures), adding uncertainty to true leverage profile.
• Earnings sensitivity to non-operating/valuation gains (investment securities gains 0.21) and interest income (0.12).

Key Concerns:

• Structural margin compression from revenue decline and SG&A rigidity.
• Extraordinary losses implied between ordinary income and PBT.
• Sustainability of OCF if revenue softness persists.
• Data limitations (no segment, SG&A detail, or dividend policy) hinder precise risk sizing.

Investment Implications

Key Takeaways:

• Severe operating margin compression with operating income down 79.6% YoY on a 12.8% revenue decline.
• OCF outpaced NI (6.12x), but FCF was negative due to investing outflows.
• Liquidity is adequate (current ratio 171.3%) and interest coverage strong (37.74x).
• High tax rate and implied extraordinary charges depressed net income to 0.16.
• Retained earnings remain negative; capacity for distributions appears constrained.

Metrics to Watch:

• Order backlog and exam administration schedule (revenue visibility).
• SG&A trajectory vs revenue (operating leverage recovery).
• Extraordinary gains/losses and reconciliation from ordinary income to PBT.
• Effective tax rate normalization path.
• Working capital movements (receivables days, cash balance) and capex vs total investing CF.

Relative Positioning: Within Japan small-cap edtech/testing peers, EduLab shows weaker recent profitability and visibility but maintains acceptable liquidity and low absolute interest burden; recovery hinges on stabilizing top line and normalizing non-operating/extraordinary items.

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