HENNGE K.K. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥10.92B
• Operating Income: ¥1.79B
• Net Income: ¥1.42B
• EPS: ¥42.40

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

HENNGE (4475) delivered a strong FY2025 Q4 (full-year) under JGAAP, with revenue of ¥10.924bn (+30.6% YoY) and operating income of ¥1.793bn (+76.7% YoY), signaling clear operating leverage as the business scales. Gross profit reached ¥7.035bn, translating to a robust gross margin of 64.4%, consistent with a scalable, subscription-heavy software model. Profitability improved across the P&L: ordinary income was ¥1.854bn and net income ¥1.358bn (+64.2% YoY), lifting the net margin to 12.43%. DuPont analysis indicates calculated ROE of 35.33%, driven by a healthy net margin, modestly improving asset turnover (1.017x), and moderate financial leverage (2.79x). EBITDA rose to ¥1.833bn, with a 16.8% margin, highlighting improving cost efficiency while still investing for growth. The current ratio of 136% and quick ratio of 136% suggest adequate short-term liquidity, supported by working capital of ¥1.827bn. Operating cash flow of ¥2.726bn was 2.01x net income, pointing to strong earnings quality and good collections/billing dynamics. Free cash flow was ¥1.392bn after ¥1.334bn of investing cash outflows, indicating the company can fund growth internally. Interest expense was minimal at ¥2.9m, and interest coverage was exceptionally high at 616x, reflecting minimal financial risk from debt service. Although the reported equity ratio is shown as 0.0% (undisclosed in XBRL), the balance sheet totals imply an equity ratio of about 35.8% (¥3.844bn/¥10.742bn), suggesting a solid capital base. Cash and equivalents and share counts were not disclosed in the provided data (shown as 0), which limits per-share and cash runway analyses; however, EPS was disclosed at ¥42.40, enabling profitability per-share insight. The tax expense of ¥353.7m implies an effective tax rate around the high teens, despite the displayed “0.0%” metric; actual tax burden is clearly present. The company paid no dividends (DPS ¥0; payout 0%), consistent with a growth-first capital allocation stance typical of Japanese SaaS firms. Strategic focus appears to be on scaling the core subscription platform with disciplined cost control, as evidenced by the widening operating margin. Key caveats include unidentified components within investing CF and the absence of detailed cash and share data, which constrains deeper capital allocation and per-share diagnostics. Overall, the year reflects healthy growth, margin expansion, strong cash conversion, and manageable leverage, positioning HENNGE favorably versus many domestic SaaS peers while leaving room for further improvement in disclosure depth.

Profitability Analysis

ROE_decomposition: Calculated ROE is 35.33%, decomposed as Net Margin 12.43% × Asset Turnover 1.017 × Financial Leverage 2.79. This reflects balanced contributions from profitability and moderate leverage, with efficiency stable at ~1.0x turnover. margin_quality: Gross margin of 64.4% indicates strong unit economics for a subscription software model. Operating margin improved materially (operating income +76.7% vs revenue +30.6%), suggesting disciplined opex scaling. Net margin at 12.43% benefits from low interest costs and positive non-operating income (ordinary income > operating income). operating_leverage: Revenue +30.6% YoY vs operating income +76.7% YoY confirms operating leverage. EBITDA margin at 16.8% shows expanding profitability while still investing in growth; further scale could lift margins toward best-in-class SaaS levels over time.

Growth Assessment

revenue_sustainability: Top-line growth of +30.6% YoY is strong for a Japan-listed SaaS vendor and likely supported by expanding subscriber base and upsells. Asset turnover at 1.017x is consistent with a recurring revenue base and efficient asset use. profit_quality: Net margin 12.43% with OCF/NI of 2.01x indicates high-quality earnings and strong cash conversion, likely aided by upfront billings/deferred revenue dynamics typical in SaaS. outlook: Given margin expansion and strong cash generation, the company appears well-positioned to reinvest in growth. Key sustainability factors will be net revenue retention, churn, ARPU growth, and cost discipline in S&M and R&D. Non-operating gains that lifted ordinary income may not be recurring; core trajectory should be judged on operating income and OCF.

Financial Health

liquidity: Current ratio 135.9% and quick ratio 135.9% indicate adequate short-term coverage. Working capital is ¥1.827bn, providing flexibility for operations. solvency: Debt-to-equity is 1.38x (liabilities/equity), with implied equity ratio ~35.8% despite the reported 0.0% (undisclosed). Interest coverage is 616x, indicating very low near-term solvency risk from interest-bearing debt. capital_structure: Total assets ¥10.742bn, liabilities ¥5.299bn, equity ¥3.844bn. Leverage (assets/equity) at 2.79x is moderate for a profitable SaaS company and appears manageable given cash generation.

Cash Flow Quality

earnings_quality: OCF/Net Income of 2.01x demonstrates strong cash realization of earnings, supportive of low accrual risk. FCF_analysis: Free cash flow is ¥1.392bn (OCF ¥2.726bn less investing CF ¥1.334bn). This comfortably covers typical growth investments and provides optionality for further R&D, sales capacity, or selective M&A. working_capital: Positive working capital of ¥1.827bn and strong OCF suggest effective receivables collection and/or upfront billing. Detailed components (deferred revenue, AR/AP) were not provided but likely supportive given cash conversion.

Dividend Sustainability

payout_ratio_assessment: No dividend declared (DPS ¥0; payout 0%). With EPS at ¥42.40 and strong FCF, the company has capacity but appears to prioritize reinvestment. FCF_coverage: FCF coverage of dividends is not applicable due to zero payout; FCF of ¥1.392bn indicates ample capacity if policy shifts in the future. policy_outlook: Given growth profile and operating leverage, a continued zero- or low-dividend policy is plausible as management focuses on scaling. Any future distribution would likely follow sustained FCF stability and cash balance accumulation.

Risk Assessment

Business Risks:

• Subscription growth dependency on net retention and new logo adds; elevated churn or weaker upsell would pressure growth.
• Competitive intensity in identity/access management and email/security solutions from global and domestic SaaS providers.
• Pricing power risk if customers trade down or if competitors discount amid macro softness.
• Product execution risk, including feature delivery cadence and security/compliance reliability.
• Customer concentration risk if large enterprise/public-sector clients represent outsized ARR.
• Sales efficiency risk as expansion into new segments may require higher S&M spend.

Financial Risks:

• Disclosure gaps (cash, equity ratio, share counts) limit visibility into liquidity runway and per-share dynamics.
• Investing CF (-¥1.334bn) lacks detail; if driven by capitalized development, M&A, or deposits, cash durability could vary.
• Potential FX and interest rate exposure via deposits/securities if applicable (not disclosed).
• Tax rate volatility; displayed metric shows 0.0% but tax expense suggests a materially positive effective rate.

Key Concerns:

• Sustainability of 30%+ revenue growth given competitive landscape.
• Reliance on operating leverage to expand margins while continuing to invest in growth.
• Limited granularity on cash position and investing CF components impedes full assessment of liquidity and capital allocation.

Investment Implications

Key Takeaways:

• Robust growth with clear operating leverage: revenue +30.6% YoY; operating income +76.7% YoY.
• Healthy unit economics: 64.4% gross margin; EBITDA margin 16.8% with room for expansion.
• Strong cash generation: OCF ¥2.726bn (2.01x net income); FCF ¥1.392bn.
• Sound balance sheet: implied equity ratio ~35.8%; interest coverage 616x; manageable leverage.
• High ROE at 35.33% supported by profit expansion and moderate leverage.
• Dividend abstention consistent with growth strategy; ample capacity if policy changes.

Metrics to Watch:

• ARR growth, net revenue retention, churn, and ARPU trends for core SaaS offerings.
• Operating margin and EBITDA margin progression as scale increases.
• OCF/NI ratio, deferred revenue/billings, and working capital dynamics.
• Breakdown of investing CF (capex vs. intangibles vs. deposits vs. M&A).
• Implied equity ratio and leverage; any changes in interest-bearing debt.
• S&M and R&D as a percentage of revenue to assess sales efficiency and product investment.

Relative Positioning: Versus Japan SaaS peers, HENNGE’s 30%+ growth, double-digit operating and EBITDA margins, strong OCF conversion, and high ROE position it favorably; while absolute margins trail best-in-class global SaaS, improvement trajectory and cash conversion are competitive within the domestic cohort.

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