Global Kids Company Corp. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥27.00B
• Operating Income: ¥858M
• Net Income: ¥256M
• EPS: ¥7.65

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

Global Kids Company reported FY2025 Q4 (full-year) consolidated results under JGAAP with modest top-line growth but a sharp compression in bottom-line profitability due to below-the-line items. Revenue rose 2.1% YoY to ¥26.997bn, indicating steady demand in its childcare and related services despite a mature market backdrop. Gross profit was ¥2.665bn, implying a gross margin of 9.9%, which remains structurally thin for the sector and leaves earnings sensitive to cost inflation. Operating income increased 8.7% YoY to ¥0.858bn, expanding operating margin to about 3.2% and evidencing some operating leverage and cost control. Ordinary income was ¥0.808bn, slightly below operating income due to modest net non-operating expenses (including ¥25m interest). Net income fell 71.7% YoY to ¥72m, a sharp divergence from ordinary profit that strongly suggests significant extraordinary losses and/or non-controlling interest impacts. EPS printed at ¥7.65, consistent with low net profit despite solid operating cash generation. DuPont metrics highlight a very low net margin of 0.27% and asset turnover of 1.345x; with financial leverage of 2.60x, calculated ROE is only 0.93%, matching the reported figure. Cash flow generation was robust at the operating level, with OCF of ¥1.637bn (OCF/NI of 22.7x), but free cash flow was negative at -¥468m due to ¥2.105bn of investing outflows, likely for new center openings and fit-outs. Financing cash inflow of ¥1.868bn indicates reliance on external funding to support growth capex. Liquidity appears adequate with a current ratio of 133.7% and working capital of ¥1.151bn, though disclosed cash balances were not provided in XBRL. The balance sheet shows total assets of ¥20.066bn and total equity of ¥7.714bn, implying an equity ratio around 38% by calculation, though the reported equity ratio field was unpopulated. Interest coverage is strong at 34.3x, reflecting low financing burden relative to EBITDA. Dividend remains suspended (DPS ¥0, payout 0%), consistent with prioritizing reinvestment and balance sheet resilience amid heavy capex. Overall, operating trends improved modestly, but headline net income was depressed by one-offs; cash generation is healthy, yet investment needs keep FCF negative, underscoring the importance of disciplined growth and careful funding.

Profitability Analysis

ROE_decomposition: ROE 0.93% = Net profit margin 0.27% × Asset turnover 1.345 × Financial leverage 2.60. The weak ROE is driven almost entirely by a compressed net margin, as asset efficiency is reasonable for the asset-heavy childcare model and leverage is moderate. margin_quality: Gross margin 9.9% and EBITDA margin 6.2% indicate thin but stable unit economics. Operating margin ~3.2% (¥858m/¥26,997m) improved YoY in line with the 8.7% rise in operating income vs 2.1% sales growth, suggesting cost control. Ordinary profit trails operating profit by ~¥50m, mostly interest and other non-operating costs. The collapse in net margin to 0.27% reflects sizable extraordinary charges and/or minority interest effects below ordinary income. operating_leverage: Revenue grew 2.1% while operating income grew 8.7%, indicating positive operating leverage as fixed costs were better absorbed. However, given the low gross margin base, incremental cost inflation (labor, rents, utilities) can quickly erode gains; maintaining occupancy and staffing efficiency remains critical.

Growth Assessment

revenue_sustainability: Top-line growth of 2.1% suggests steady capacity utilization and incremental facility additions/fee revisions. Growth is moderate, consistent with a mature, regulated market and capacity constraints. profit_quality: Operating profit growth outpaced sales, pointing to improved cost discipline. However, the divergence between ordinary profit (¥808m) and net income (¥72m) implies one-off items that depress statutory earnings quality. Normalized profit (ex-one-offs) appears stronger than reported net income. outlook: With ongoing capex (¥2.105bn investing CF) and external funding support, management is likely pursuing selective expansion or refurbishments. Near-term net income may remain sensitive to one-off charges and depreciation ramp from new openings, but underlying OPM should be defensible if occupancy and staffing ratios hold.

Financial Health

liquidity: Current assets ¥4.569bn vs current liabilities ¥3.418bn yields a current ratio of 133.7% and quick ratio identical due to unreported inventories. Working capital stands at ¥1.151bn. Disclosed cash was not provided; hence absolute liquidity buffers cannot be verified from the dataset. solvency: Total assets ¥20.066bn and total equity ¥7.714bn imply an equity ratio of roughly 38.4% by calculation (reported field unpopulated). Debt-to-equity is indicated at 0.95x, and interest coverage is strong at 34.3x, suggesting manageable leverage and low interest burden. capital_structure: Liabilities total ¥7.346bn; with D/E at 0.95x, interest-bearing debt likely comprises a significant portion of liabilities, used to fund capex. The mix appears appropriate for long-lived assets with stable cash flows, but additional leverage should be calibrated against FCF trajectory.

Cash Flow Quality

earnings_quality: OCF ¥1.637bn vs net income ¥72m yields OCF/NI of 22.7x, reflecting strong cash conversion driven by add-backs (¥828m depreciation) and likely favorable working capital dynamics. Given the large gap to net income, underlying operating performance is better than headline profit suggests. FCF_analysis: Free cash flow is -¥468m (OCF ¥1.637bn minus capex/other investing outflows ¥2.105bn). Negative FCF is aligned with an expansionary investment phase. Financing inflow of ¥1.868bn bridges the funding gap. working_capital: Working capital improved to ¥1.151bn; the ability to sustain OCF through disciplined receivables/payables management is a key buffer amid thin margins.

Dividend Sustainability

payout_ratio_assessment: With DPS at ¥0 and payout 0%, distributions are suspended. Given net income of ¥72m and negative FCF, a low or zero payout remains prudent. FCF_coverage: FCF coverage of dividends is 0.00x (no dividend paid). Even if small dividends were considered, current FCF is negative, implying reliance on balance sheet or financing—unlikely to be a policy priority during active investment. policy_outlook: Management likely prioritizes reinvestment and balance sheet strength over near-term payouts. Resumption would depend on stabilization of one-offs, sustained OCF, and FCF turning positive as capex normalizes.

Risk Assessment

Business Risks:

• Labor cost inflation and staffing shortages impacting margins in a labor-intensive model
• Occupancy/utilization risk at childcare centers affecting revenue and operating leverage
• Regulatory changes in subsidies, accreditation standards, and fee structures
• Ramp-up risk and initial losses from new center openings driving near-term profit volatility
• Reputational and safety compliance risks inherent to childcare operations

Financial Risks:

• Negative free cash flow requiring ongoing external financing to fund capex
• Potential for further extraordinary losses (impairments, closures, restructuring) depressing net income
• Interest rate risk on floating-rate borrowings affecting financing costs
• Limited disclosure of cash and certain balance sheet items complicating liquidity assessment

Key Concerns:

• Sharp divergence between ordinary profit (¥808m) and net income (¥72m) indicating significant one-offs
• Sustained negative FCF during investment phase despite strong OCF
• Thin gross margin (9.9%) leaves little cushion against cost shocks

Investment Implications

Key Takeaways:

• Top line grew 2.1% YoY to ¥26.997bn; operating income rose 8.7% to ¥858m, evidencing cost discipline
• Net income fell 71.7% to ¥72m due to below-the-line impacts; normalized earnings likely higher than reported
• OCF was strong at ¥1.637bn, but FCF was negative (-¥468m) amid ¥2.105bn investing outflows
• Leverage appears moderate (D/E 0.95x) with strong interest coverage (34.3x)
• Equity ratio is approximately 38% by calculation, though the reported field was unpopulated
• Dividend remains suspended (DPS ¥0), consistent with reinvestment priorities

Metrics to Watch:

• Like-for-like occupancy/utilization and fee rate changes
• Staffing costs as a percentage of sales and overtime/agency usage
• Capex commitments and new center pipeline vs OCF to gauge FCF inflection
• Extraordinary items (impairments/closures) and their trajectory
• Net debt and interest coverage under different rate scenarios
• Working capital turns and cash conversion cycle

Relative Positioning: Within Japanese childcare operators, the company exhibits typical thin margins but relatively solid operating cash generation and measured leverage; short-term reported earnings are weaker due to one-offs, while underlying operations appear stable.

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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