EduLab,Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥6.23B
• Operating Income: ¥391M
• Net Income: ¥-1.29B
• 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

EduLab (4427) reported FY2025 Q4 consolidated results under JGAAP showing a sharp deterioration in profitability amid a double‑digit revenue decline. Revenue fell 12.8% YoY to ¥6,229m, while operating income dropped 79.6% to ¥391m, indicating pronounced negative operating leverage. Despite a reported gross profit of ¥1,718.98m (27.6% margin), the compression at the operating level points to higher operating expenses or reduced scale benefits. Ordinary income of ¥450m exceeded operating income, implying positive non-operating items (e.g., financial income or FX gains), but bottom-line net income was only ¥16m, suggesting material taxes and/or extraordinary losses and minority interest effects. The reported net margin of 0.26% highlights weak earnings conversion despite adequate EBITDA of ¥420m and strong interest coverage of 28.5x. DuPont analysis shows ROE of 0.87%, driven by thin net margin (0.26%), reasonable asset turnover (1.727x), and moderate leverage (1.97x). Liquidity appears comfortable with a current ratio of 179% and working capital of ¥1,319.7m, supported by sizeable current assets of ¥2,981.8m. The balance sheet carries moderate leverage (D/E 1.03x), which remains manageable given strong interest coverage. Cash generation was modest: operating cash flow was ¥98m and free cash flow was negative ¥223m, reflecting investment outflows of ¥321m. Earnings quality appears mixed: OCF exceeded net income (OCF/NI 6.12x), but this was not sufficient to fund investments, resulting in negative FCF. Dividend policy remains conservative with zero DPS and a 0% payout, aligning with the need to preserve liquidity during a weak profit phase. Reported zeros for Cash & Equivalents, Equity Ratio, and share counts indicate unreported items rather than actual zeros; conclusions are based on available non-zero disclosures. The sharp swing from a previously high operating margin (implied near 27% in the prior year) to 6.3% underscores sensitivity to volume and mix. Overall, EduLab’s short-term profile is characterized by pressured profitability, adequate liquidity, and manageable leverage, with near-term focus likely on stabilizing revenues, recalibrating costs, and normalizing cash generation. Key uncertainties remain around the drivers of the large tax burden relative to net income and the sustainability of non-operating gains. Monitoring revenue trajectory, cost actions, and working capital discipline will be critical into the next fiscal period.

Profitability Analysis

ROE decomposition: Net margin 0.26% × asset turnover 1.727 × financial leverage 1.97 = ~0.87% ROE (consistent with reported 0.87%). The dominant drag is the compressed net margin, not asset utilization or leverage. Gross margin is reported at 27.6%, which appears reasonable for the business mix, but significant SG&A intensity and/or lost operating scale reduced operating margin to ~6.3% (¥391m / ¥6,229m). The 79.6% YoY decline in operating income against a 12.8% revenue drop indicates high operating leverage and/or unfavorable product mix and pricing. EBITDA of ¥420m implies limited D&A (¥29m), consistent with an asset-light model, but the low EBITDA margin (~6.7%) signals diminished pricing power or higher delivery costs. Ordinary income (¥450m) exceeding operating income suggests supportive non-operating income; however, the translation to net income was poor (¥16m), likely due to taxes and/or one-offs. Interest coverage remains strong at 28.5x on EBIT, indicating that financing costs are not the profitability constraint. Overall margin quality is weak at the bottom line; restoring operating margin will be pivotal to recovering ROE.

Growth Assessment

Revenue declined 12.8% YoY to ¥6,229m, implying prior-year revenue around ¥7,142m. The scale of the operating income decline relative to revenue indicates that a portion of revenue may be higher-fixed-cost or that pricing/mix shifted unfavorably. With gross margin still at 27.6%, the primary issue seems to be at the operating expense level and operating scale, not direct cost inflation alone. Profit quality is mixed: ordinary income benefits from non-operating factors, while the net result is constrained, implying elevated tax/extraordinary items or minority interests. Sustainability of revenue will depend on order intake visibility in core segments and the ability to defend price while optimizing delivery costs. Near-term outlook is cautious: to improve earnings, the company must either re-accelerate top-line growth or execute cost realignment to lift operating margin from ~6%. Absent clear growth catalysts, management’s focus likely remains on stabilizing core revenue streams, enhancing utilization, and prioritizing higher-margin offerings. Any normalization in one-offs and taxes could provide a mechanical uplift to net income if operating margin stabilizes.

Financial Health

Liquidity is solid: current ratio 179.4% and quick ratio 179.4% (inventories undisclosed), with working capital of ¥1,319.7m. Current assets of ¥2,981.8m comfortably cover current liabilities of ¥1,662.0m, providing a buffer amid earnings volatility. Solvency is manageable: total liabilities of ¥1,877.1m vs. equity of ¥1,830.0m yields a D/E of 1.03x, while assets/equity (leverage) of 1.97x aligns with DuPont inputs. Interest expense is modest at ¥13.7m; interest coverage of 28.5x on EBIT indicates low refinancing risk under current conditions. The reported equity ratio of 0.0% is an undisclosed item rather than an actual ratio; based on provided totals, equity/asset ratio approximates 50.7%. The balance sheet indicates moderate leverage with adequate liquidity to absorb near-term shocks, though prolonged negative FCF would incrementally pressure this position.

Cash Flow Quality

Operating cash flow was ¥98m against net income of ¥16m, yielding an OCF/NI ratio of 6.12x, which suggests earnings are backed by cash, likely due to non-cash charges and/or working capital inflows. However, absolute OCF is modest relative to revenue and EBITDA, pointing to underlying working capital needs or timing effects. Investing cash outflows of ¥321m drove free cash flow to −¥223m (per the provided FCF metric), implying that growth or maintenance investments exceeded internally generated cash this period. If we proxy capex by total investing outflow, implied capex intensity is roughly 5% of revenue; the true mix of capex vs. financial investments is undisclosed. Working capital remains a key swing factor: with significant current assets and liabilities, small changes in collections or payables can materially affect OCF. Overall, cash earnings quality is acceptable in ratio terms but insufficient in magnitude to self-fund investment at current profitability.

Dividend Sustainability

The company did not pay a dividend (DPS ¥0.00; payout ratio 0%). Given negative free cash flow (−¥223m) and a very low net margin (0.26%), maintaining a non-distributive stance appears consistent with capital preservation. With manageable leverage but pressured earnings, reinstating dividends would likely require a sustained recovery in operating margin and positive, repeatable FCF. Absent clear disclosure of a formal dividend policy, the near-term outlook suggests continued prudence until profitability and cash flows normalize.

Risk Assessment

Business Risks:

• Revenue volatility and high operating leverage amplify earnings swings on small volume changes
• Pricing and mix pressure potentially compressing margins in core offerings
• Execution risk in cost control and delivery efficiency to restore operating margin
• Dependence on non-operating income to support ordinary income
• Customer concentration or contract timing risk (implied by scale sensitivity)

Financial Risks:

• Negative free cash flow driven by investment outlays amid modest OCF
• Potential for working capital outflows to pressure liquidity in weaker quarters
• Tax and extraordinary item volatility impacting bottom-line predictability
• Moderate leverage (D/E ~1.03x) could become more constraining if profitability weakens further

Key Concerns:

• Sharp decline in operating margin from an implied ~27% to ~6%
• Net income of only ¥16m despite ¥450m in ordinary income, indicating material non-recurring or tax drags
• Sustainability of non-operating gains not guaranteed
• Negative FCF limiting optionality for shareholder returns and growth investments

Investment Implications

Key Takeaways:

• Profitability under significant pressure with ROE at 0.87% driven by a 0.26% net margin
• Liquidity cushion is adequate (current ratio ~179%) and interest coverage is strong (28.5x)
• Negative FCF (−¥223m) signals the need for either margin recovery or moderated investment
• Non-operating income props up ordinary profits, but bottom line remains weak due to taxes/one-offs
• Operating leverage is high; revenue stabilization or cost realignment is critical to earnings recovery

Metrics to Watch:

• Top-line trajectory and order backlog/visibility
• Operating margin progression versus prior-year levels
• Working capital turns (DSO/DPO) and OCF conversion from EBITDA
• Capex/Investment outlays relative to revenue and OCF
• Composition of non-operating items and effective tax rate normalization
• Leverage (D/E) and interest coverage resilience

Relative Positioning: Relative to peers, EduLab currently exhibits below-average profitability and ROE, offset by adequate liquidity and manageable leverage; recovery hinges on restoring operating margin and achieving consistently positive free cash flow.

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