Kidswell Bio Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.28B
• Operating Income: ¥215M
• Net Income: ¥-242M
• EPS: ¥1.26

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

Kidswell Bio (4584) reported FY2026 Q2 consolidated results under JGAAP showing sharp top-line expansion but muted bottom-line progress and weak operating cash generation. Revenue surged 87.2% YoY to ¥3,276m, yet operating income was flat YoY at ¥215m, indicating material margin compression and/or higher operating cost intensity. Gross profit was ¥492m, implying a gross margin of 15.0%, which is modest for the sector and suggests either pricing pressure, product mix headwinds, or elevated cost of goods. EBITDA was ¥215.5m (6.6% margin), nearly equal to operating income due to very low reported depreciation and amortization (¥0.45m), highlighting limited non-cash cost buffers. Ordinary income declined to ¥76m, reflecting non-operating burdens (including interest expense of ¥21.1m and other non-operating items), and net income was ¥60m with a negligible tax charge. DuPont analysis indicates a low net margin of 1.83%, moderate asset turnover of 0.563x, and financial leverage of 2.66x, yielding ROE of 2.74%, which is modest for the risk profile. Operating cash flow was negative at ¥-288m despite positive earnings, signaling weak earnings-to-cash conversion (OCF/NI = -4.81x) driven likely by working capital build or cash costs not captured in non-cash add-backs. Financing cash flow was also negative at ¥-245m, suggesting net repayments or servicing outflows, thus cash resources were being used, although period-end cash was not disclosed. Liquidity appears adequate on reported ratios, with current and quick ratios of 155%, supported by working capital of ¥2,382m; however, cash details are not disclosed and inventories are unreported. Leverage is elevated, with total liabilities/equity of 2.56x, increasing sensitivity to earnings volatility and refinancing conditions despite an EBITDA interest coverage of 10.2x. Balance sheet disclosures show inconsistencies (total assets ¥5,815m vs liabilities plus equity summing higher), so point-in-time solvency conclusions should be treated with caution. No dividend was paid (DPS ¥0) and payout was 0%, which is consistent with the company’s cash needs and investment cycle. The combination of strong revenue growth and flat operating profit suggests near-term operating leverage is not yet materializing, possibly due to pricing/mix, scale inefficiencies, or R&D/SG&A investment. Sustainability of the revenue ramp will be key, as current profitability and cash conversion are insufficient to de-lever without improvement. Overall, the quarter demonstrates commercial momentum but highlights execution needs on margin discipline, working capital management, and capital structure resilience.

Profitability Analysis

ROE_decomposition: ROE 2.74% = Net margin 1.83% × Asset turnover 0.563× × Financial leverage 2.66×. The low ROE is predominantly constrained by thin net margins rather than asset intensity or leverage. margin_quality: Gross margin is 15.0% (¥492m/¥3,276m), indicating limited pricing power and/or high cost of sales. Operating margin is approximately 6.6% (¥215m/¥3,276m), with EBITDA margin also 6.6% due to minimal D&A. The spread between gross and operating margin (~8.4pp) reflects sizeable SG&A/R&D intensity (estimated operating costs beyond COGS of ~¥277m). Ordinary margin drops further given non-operating losses, including interest. operating_leverage: Despite +87.2% YoY revenue growth, operating income was flat YoY at ¥215m, implying negative operating leverage in the period (cost base rose roughly in line with or faster than revenue). To restore leverage, the company needs either higher gross margin (price/mix) or tighter SG&A/R&D control.

Growth Assessment

revenue_sustainability: Top-line growth of +87.2% YoY indicates strong commercial traction, likely from product launches, expanded indications, or distribution scale-up. Sustainability depends on repeatability (recurring orders vs one-time shipments), pricing durability, and pipeline or portfolio breadth. profit_quality: Flat operating income against strong sales growth, combined with low gross margin, suggests current profit is volume-driven with limited margin cushion. Ordinary income (¥76m) is sensitive to non-operating items, and net income (¥60m) benefits from a very low effective tax rate in this period. outlook: Near-term outlook hinges on mix improvements, cost discipline, and realization of scale efficiencies. If gross margin can be lifted a few points and SG&A growth moderates, incremental revenue could translate to stronger operating leverage; otherwise, growth may not translate into cash or ROE improvements.

Financial Health

liquidity: Current ratio 155.1% and quick ratio 155.1% suggest adequate short-term coverage; working capital stands at ¥2,381.7m. However, cash and inventories are unreported, so the composition of liquid assets is unknown. solvency: Debt-to-equity is 2.56x (liabilities ¥5,597.5m / equity ¥2,186.0m), indicating elevated leverage. EBITDA interest coverage is 10.2x, providing a reasonable buffer for interest servicing but reliant on maintaining EBITDA at current levels. capital_structure: Total equity is ¥2,186.0m. Using disclosed totals, an indicative equity ratio would be around 37.6% (equity/total assets), but reported equity ratio is undisclosed and the balance sheet shows inconsistencies (assets vs liabilities + equity), so derived ratios should be treated cautiously.

Cash Flow Quality

earnings_quality: OCF of ¥-288.4m versus net income of ¥60.0m yields an OCF/NI ratio of -4.81x, indicating poor conversion. Minimal D&A (¥0.45m) provides limited non-cash offsets; negative OCF likely stems from working capital consumption and/or cash operating costs not reflected in accrual earnings. FCF_analysis: Investing cash flows are undisclosed; therefore, reported free cash flow is not available. Given negative OCF, underlying FCF is likely negative in the period, but the magnitude cannot be confirmed without capex/R&D capitalization details. working_capital: Working capital is ¥2,381.7m, implying growth investments tied up in receivables or other current assets. Inventories are unreported, so we cannot assess inventory turns or the contribution of stock build to OCF.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0.00 and payout ratio is 0%. Given modest profitability and negative OCF, the absence of dividends aligns with preserving liquidity. FCF_coverage: Free cash flow is not disclosed; with OCF negative, dividend coverage by FCF would not be sufficient if dividends were paid. policy_outlook: With elevated leverage and a need to improve cash generation, continued retention of earnings is likely until operating cash flow becomes consistently positive and leverage moderates.

Risk Assessment

Business Risks:

• Margin pressure from product mix, pricing, and manufacturing cost structure evidenced by 15% gross margin.
• Execution risk in scaling operations where costs have offset revenue growth, limiting operating leverage.
• Dependence on key products or partners typical for biotech/biosimilar models; concentration could amplify volatility.
• Regulatory and quality compliance risks inherent to pharmaceutical and biotech production.
• Supply chain and COGS inflation risks affecting already thin gross margins.

Financial Risks:

• Elevated leverage (D/E 2.56x) increases sensitivity to earnings shortfalls or higher interest rates.
• Weak cash conversion (OCF/NI -4.81x) and negative OCF create funding pressure if sustained.
• Non-operating expense drag from interest and other items reduces ordinary income resilience.
• Disclosure gaps on cash and investing flows complicate assessment of liquidity runway.

Key Concerns:

• Sustainability of revenue growth without corresponding margin and cash flow improvement.
• Working capital absorption and its impact on near-term liquidity.
• Balance sheet data inconsistencies (assets vs liabilities + equity) warrant caution in solvency inference.

Investment Implications

Key Takeaways:

• Strong revenue growth (+87.2% YoY) did not translate into higher operating profit (flat YoY).
• Gross margin is thin at 15%, constraining operating leverage.
• ROE is modest at 2.74%, constrained by low net margin despite moderate asset turnover and leverage.
• Operating cash flow is negative (¥-288m), indicating weak earnings quality and working capital drag.
• Leverage is high (D/E 2.56x) but interest coverage is currently adequate (10.2x).
• Liquidity ratios are acceptable (current/quick 155%), though cash composition is undisclosed.

Metrics to Watch:

• Gross margin trajectory and pricing/mix changes.
• Operating margin versus SG&A/R&D intensity to gauge operating leverage.
• OCF/NI and working capital days (receivables, payables, inventories) to validate cash conversion.
• Net debt and interest coverage trends amid financing outflows.
• Ordinary income versus operating income to monitor non-operating drag.
• Equity ratio and reconciliation of balance sheet totals as disclosures improve.

Relative Positioning: Within Japan’s biotech/biopharma small-cap cohort, Kidswell Bio shows comparatively higher revenue scale but lower margins and weaker cash conversion, coupled with higher leverage than many R&D-focused peers that hold net cash; execution on margin and cash flow will determine its competitive standing.

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