kubell Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥6.95B
• Operating Income: ¥274M
• Net Income: ¥135M
• EPS: ¥1.08

Income Statement

Balance Sheet

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

Kubell (44480) reported FY2025 Q3 consolidated results under JGAAP showing solid top-line expansion but weak bottom-line translation. Revenue reached ¥6,948 million, up 12.4% YoY, supported by a high gross profit margin of 61.4%, indicating strong unit economics and pricing power or a software/service-heavy mix. Operating income rose 48.6% YoY to ¥274 million, lifting the operating margin to roughly 3.9%, evidencing positive operating leverage as costs grew slower than revenue. Ordinary income was ¥251 million, and interest expense remained modest at ¥13 million, yielding an interest coverage of about 21x and indicating manageable financing costs. Despite the improvement at the operating and ordinary levels, net income fell sharply by 66.6% YoY to ¥45 million, compressing the net margin to 0.65%. The divergence implies sizable non-operating or extraordinary charges and/or minority interests in the period; based on the bridge from ordinary income to net income and reported income tax, we infer roughly ¥170 million-class downward items below ordinary income. DuPont analysis points to a calculated ROE of 2.54%, driven by a thin net margin (0.65%), moderate asset turnover (1.126x), and relatively high financial leverage (3.49x). The balance sheet shows total assets of ¥6,169 million and total equity of ¥1,769 million, implying an estimated equity ratio of about 28.7% (the reported 0% appears to reflect disclosure limitations), and a debt-to-equity ratio of 2.55x. Liquidity is tight but positive with a current ratio of 105.2% and working capital of ~¥200 million; the quick ratio equals the current ratio given no inventories reported. Cash flow figures are unreported (all zeros), limiting assessment of earnings-to-cash conversion and free cash flow durability. Dividend distribution is currently nil (DPS ¥0), consistent with a focus on reinvestment and balance sheet strengthening amid low net profitability. Overall, the company exhibits robust gross margins and improving operating profits but faces headwinds from below-the-line items that depress net income and ROE. The outlook hinges on sustaining revenue growth, improving operating margin efficiency, and normalizing non-operating/extraordinary losses. Data gaps (notably cash flows and depreciation) constrain full-quality assessments; conclusions are therefore based on available, non-zero line items and ratio triangulation.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 0.65% (¥45m net income / ¥6,948m revenue)
• asset_turnover: 1.126x (¥6,948m / ¥6,169m)
• financial_leverage: 3.49x (¥6,169m / ¥1,769m equity)
• calculated_ROE: 2.54% (matches reported DuPont ROE) margin_quality: Gross margin is high at 61.4%, suggesting strong value-add and a software/service-centric cost structure. Operating margin is modest at ~3.9% (¥274m / ¥6,948m), reflecting elevated SG&A or growth investments. Ordinary margin stands at ~3.6% (¥251m / ¥6,948m). Net margin compressed to 0.65% due to significant below-the-line charges or extraordinary losses, overshadowing the operating improvement. operating_leverage: Revenue grew 12.4% YoY while operating income increased 48.6% YoY, indicating positive operating leverage and improving cost absorption. The spread between gross and operating margins (~57.5ppt) indicates ample room for operating leverage if SG&A scales more slowly than revenue.

Growth Assessment

revenue_sustainability: Top-line grew 12.4% YoY to ¥6,948m, a healthy pace consistent with a scaling digital/services model. High gross margin supports pricing power and potential retention, but visibility on contract mix/ARR is not disclosed. profit_quality: Operating profit growth outpaced revenue, signaling improving efficiency. However, net profit declined 66.6% YoY due to non-operating/extraordinary factors, reducing the quality of earnings at the bottom line. outlook: If extraordinary items normalize and operating efficiency continues to improve, margin expansion at the ordinary and net levels is plausible. Near-term growth will depend on sustaining double-digit revenue expansion and controlling SG&A, while mitigating below-the-line drags.

Financial Health

liquidity: Current ratio 105.2% and quick ratio 105.2% indicate marginal but positive short-term coverage; working capital ~¥200m provides a limited buffer. Absence of reported inventories suggests a light-asset model; however, cash and detailed components are unreported, limiting precision. solvency: Debt-to-equity at 2.55x denotes meaningful leverage. Interest expense is modest (¥13m) with strong coverage (~21x), implying manageable debt service under current earnings. capital_structure: Total assets ¥6,169m and equity ¥1,769m imply an estimated equity ratio of ~28.7% (reported 0% appears to be a disclosure artifact). Leverage (assets/equity 3.49x) supports DuPont results but constrains ROE uplift given low net margins.

Cash Flow Quality

earnings_quality: Operating-to-net income conversion cannot be assessed as OCF is unreported (shown as zero). The sharp gap between ordinary and net income suggests transient items; recurring cash earnings quality remains unclear. FCF_analysis: Free cash flow is unreported. Without OCF and capex/depreciation, we cannot validate cash yield, reinvestment needs, or capital intensity. working_capital: Working capital is positive at ~¥200m, but lack of receivables/payables detail prevents analysis of DSO/DPO trends. The no-inventory profile aligns with a software/services model.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 and payout ratio 0%, consistent with conserving cash given low net income and balance sheet leverage. FCF_coverage: Not assessable; cash flows are unreported. On available data, dividends would require internal cash or balance sheet capacity, but current practice is to retain earnings. policy_outlook: With ROE at ~2.5% and net margin compressed by below-the-line items, maintaining a no-dividend stance appears aligned with reinvestment and stabilization priorities until profitability and cash generation improve.

Risk Assessment

Business Risks:

• Execution risk in scaling sales while managing SG&A to lift operating margin
• Dependence on maintaining high gross margins amid competitive pressures
• Potential customer concentration or churn risk typical of digital/service models (not disclosed)
• Sensitivity to macro demand for IT/digital transformation budgets

Financial Risks:

• Elevated leverage (D/E 2.55x) with limited working capital buffer
• Material below-the-line/extraordinary items depressing net income
• Liquidity tightness with current ratio near 1.0x and unreported cash balances
• Potential volatility in effective tax and minority interests impacting bottom line

Key Concerns:

• Sustained gap between operating and net income due to recurring extraordinary losses
• Absence of cash flow disclosure impeding assessment of earnings-to-cash conversion
• Tight short-term liquidity and reliance on continued revenue momentum to support obligations

Investment Implications

Key Takeaways:

• Strong gross margin (61.4%) and positive operating leverage as OI grew 48.6% on 12.4% revenue growth
• Net income down 66.6% YoY due to significant below-the-line charges, compressing net margin to 0.65%
• ROE modest at 2.54%; leverage (3.49x assets/equity) magnifies low net margin rather than boosting shareholder returns
• Liquidity is only slightly above breakeven (current ratio 105.2%); interest coverage is comfortable at ~21x
• Cash flow data unreported, limiting evaluation of FCF and dividend capacity

Metrics to Watch:

• Extraordinary and non-operating items bridging ordinary income to net income
• Operating margin trajectory and SG&A intensity
• Cash and OCF disclosure; FCF generation versus growth investment needs
• Leverage and equity ratio (target capital structure, refinancing plans)
• Revenue growth durability and gross margin stability

Relative Positioning: Versus TSE software/IT services peers, Kubell’s gross margin is competitive, but operating margin (~3.9%) is below sector norms and leverage is higher than many asset-light peers; liquidity is near the low end, and bottom-line volatility from non-operating items is elevated.

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
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