SPRIX Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥35.13B
• Operating Income: ¥2.17B
• Net Income: ¥1.09B
• EPS: ¥61.73

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

Sprix (7030) delivered a solid FY2025 Q4 (full-year) performance with revenue of ¥35.1bn, up 10.3% YoY, signaling healthy demand across its education-related franchises and services. Operating income nearly doubled to ¥2.17bn (+98.5% YoY), evidencing strong operating leverage as fixed costs were absorbed on higher volumes and cost discipline improved. Ordinary income of ¥2.22bn and net income of ¥1.09bn (+117.4% YoY) confirm that gains at the operating level translated through to the bottom line. Gross margin of 28.3% and operating margin of 6.2% indicate a meaningful margin recovery versus the prior year’s depressed base. The DuPont framework shows ROE at 10.89%, driven by a 3.09% net margin, high asset turnover of 1.56x, and moderate financial leverage of 2.25x. Cash generation was a bright spot: operating cash flow reached ¥3.58bn, 3.3x net income, reflecting robust earnings quality and likely favorable working capital dynamics. Free cash flow of ¥1.97bn after ¥1.61bn investing cash outflow supports balance sheet flexibility. Liquidity is adequate but tight, with a current ratio of 106% and quick ratio of 103%, underscoring the importance of continued positive operating cash flow. Leverage remains moderate with a debt-to-equity ratio of 1.09x and immaterial interest expense (¥8m), yielding a very high interest coverage of 271x. On dividends, Sprix paid no dividend (DPS ¥0), keeping payout at 0%, which aligns with a reinvestment stance following a year of margin recovery. The reported equity ratio and cash balance show as zero due to disclosure conventions (unreported items), so solvency and liquidity should be interpreted from other provided line items (liabilities, equity, ratios). The effective tax rate metric provided (0.0%) appears inconsistent with the income tax expense of ¥513m; we rely on the given net income figure for profitability analysis. Overall, FY2025 demonstrates a return to growth with materially improved profitability and cash conversion. While the top-line expansion appears broad-based, sustaining momentum will likely depend on enrollment trends, unit economics at centers, and cost control amid wage inflation. Near-term priorities include managing working capital prudently, maintaining capex discipline, and balancing growth investments with liquidity. Given data limitations on certain disclosures (equity ratio, cash, shares), conclusions focus on the reliable, non-zero metrics provided.

Profitability Analysis

ROE of 10.89% decomposes into a net profit margin of 3.09%, asset turnover of 1.56x, and financial leverage of 2.25x. The step-up in operating income (+98.5% YoY) versus revenue (+10.3% YoY) indicates strong operating leverage and improved fixed-cost absorption. Gross margin at 28.3% suggests a healthier mix or pricing and cost control versus the prior year. Operating margin at 6.2% and ordinary margin at 6.3% imply limited non-operating drag; interest expense (¥8m) is negligible. EBITDA was ¥2.92bn (EBITDA margin 8.3%), providing an additional buffer over operating income for maintenance capex. Margin quality looks improved, supported by high OCF/NI (3.29x), which indicates earnings were not driven by accruals. The main profitability swing factor ahead is likely staff-related costs and utilization at learning centers; small changes in classroom occupancy and hourly wage rates can materially affect OPM given the labor-intensive model.

Growth Assessment

Revenue growth of 10.3% YoY to ¥35.1bn appears sustainable near term if enrollment, same-school sales, and new program rollouts continue. The outsized growth in operating income versus sales points to structural efficiency gains and/or favorable mix, not just volume growth. Net income growth (+117.4% YoY) reflects both operating improvement and disciplined non-operating expenses. Profit quality is reinforced by strong cash conversion (OCF/NI 3.29x), suggesting working capital tailwinds or tight receivables management. Looking forward, incremental growth will depend on center openings, capacity utilization, student retention, and expansion in ancillary education services or digital offerings. Wage and rent inflation remain key headwinds, partly offset by pricing power and productivity measures. Absent disclosed guidance, a continued mid-to-high single-digit revenue trajectory with measured margin expansion appears achievable if cost discipline persists.

Financial Health

Liquidity is adequate but tight: current ratio 106.3% and quick ratio 102.8% indicate limited cushion, making sustained OCF important. Working capital stands at ¥585m, consistent with a low-inventory, service-centric model (inventories ¥326m). Solvency looks sound with total liabilities of ¥10.89bn versus equity of ¥9.98bn, yielding a debt-to-equity ratio of 1.09x. Interest burden is minimal (¥8m), and interest coverage is extremely strong at 271x, mitigating near-term refinancing risk. While the equity ratio is shown as 0.0% due to non-disclosure in this dataset, the liabilities-to-assets profile (¥10.89bn/¥22.49bn) indicates moderate leverage. Positive FCF provides optionality to bolster liquidity or fund selective investment without stressing the balance sheet.

Cash Flow Quality

Earnings quality is strong: OCF of ¥3.58bn versus net income of ¥1.09bn yields an OCF/NI ratio of 3.29x, indicating robust cash conversion and likely favorable working capital movements. Free cash flow of ¥1.97bn (OCF ¥3.58bn less investing CF ¥1.61bn) demonstrates capacity to self-fund growth while increasing liquidity. Depreciation and amortization of ¥753m represent a moderate non-cash component of earnings; EBITDA comfortably exceeds maintenance capex implied in investing CF, though the latter may include growth investments. Working capital appears well-managed given the quick ratio above 100% and strong OCF; continued attention to receivables collection and payables terms will be important given the tight current ratio. Overall, cash flow quality supports the sustainability of the current earnings level.

Dividend Sustainability

Sprix declared no dividend (DPS ¥0), with a payout ratio of 0% and FCF coverage not applicable given no distributions. From a capacity standpoint, FCF of ¥1.97bn and minimal interest burden could support dividends; however, management appears to prioritize reinvestment and balance sheet resilience following a year of profit recovery. Sustainability of any future dividend would depend on maintaining OCF coverage comfortably above 1.0x of dividends plus capex, keeping liquidity ratios above 1.0x, and preserving interest coverage at very high levels. Policy outlook likely leans toward retaining earnings to fund growth and maintain flexibility, with potential for distributions as visibility on stable cash generation improves.

Risk Assessment

Business Risks:

• Enrollment volatility and student retention affecting same-school sales
• Teacher recruitment, wage inflation, and utilization impacting margins
• Competitive intensity in cram schools/after-school education and digital learning
• Regulatory and curriculum changes influencing demand and pricing
• Execution risks in new center openings and program rollouts
• Technology/content development and potential cannibalization between formats
• Seasonality around academic calendars affecting quarterly cash flows

Financial Risks:

• Tight liquidity buffer (current ratio ~1.06x) in the event of working capital swings
• Moderate leverage (D/E ~1.09x) increasing sensitivity to earnings downturns
• Potential capex needs for expansion could pressure FCF in weaker years
• Dependence on sustained OCF given limited reported cash balance (cash not disclosed)
• Possible tax rate normalization affecting net margin

Key Concerns:

• Sustaining margin gains amid labor cost pressures
• Maintaining strong cash conversion to support liquidity
• Visibility on capital allocation given zero dividends and growth ambitions

Investment Implications

Key Takeaways:

• Top-line growth of 10.3% YoY with disproportionately higher operating profit growth indicates healthy operating leverage.
• ROE at 10.89% is underpinned by high asset turnover (1.56x) and moderate leverage (2.25x).
• Cash generation is robust (OCF/NI 3.29x; FCF ¥1.97bn), supporting balance sheet flexibility.
• Liquidity is adequate but tight (current ratio 1.06x), making continued OCF strength critical.
• Interest burden is negligible (coverage 271x), reducing financial risk.
• Dividend held at zero; capital remains directed to reinvestment and resilience.

Metrics to Watch:

• Same-school sales, enrollment mix, and retention rates
• Labor cost ratio and teacher recruitment/turnover metrics
• Center utilization and new opening performance
• Working capital days (DSO/DPO) and OCF/NI ratio
• Capex intensity and FCF sustainability
• Any guidance on dividend or share repurchase policy
• Ordinary vs operating income spread (non-operating items)

Relative Positioning: Within Japan’s after-school education/cram school and education services space, Sprix demonstrates above-average asset turnover and improving margins, with moderate leverage and strong cash conversion this year; however, liquidity is thinner than some peers, and sustained execution on cost control and enrollment will be key to maintaining its improving profitability profile.

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