Mental Health Technologies Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥4.68B
• Operating Income: ¥435M
• Net Income: ¥-164M
• EPS: ¥24.08

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

Mental Health Technologies (TSE: 9218) reported strong topline and operating momentum for FY2025 Q3 (JGAAP, consolidated). Revenue grew 27.3% YoY to ¥4,677m, indicating robust demand across its core services. Operating income surged to ¥435m (+432% YoY), pointing to material operating leverage and better cost discipline. Net income was ¥249m, essentially flat YoY, implying headwinds below the operating line (non-operating items and/or extraordinary items and tax effects). The company’s reported net margin is 5.32% and operating margin is approximately 9.3%, a healthy spread that evidences better SG&A control. DuPont analysis shows ROE of 16.04%, driven by 5.32% net margin, 0.908x asset turnover, and 3.32x financial leverage, suggesting balanced profitability and asset efficiency augmented by moderate leverage. The gross margin is shown as 29.0%, and with operating margin at 9.3%, implied SG&A intensity is about 19.7% of sales. Liquidity is sound with a current ratio of 185% and working capital of ¥833m, supported by a service-heavy model (no inventories reported). Capital structure shows liabilities of ¥3,331m and equity of ¥1,552m, implying a liabilities-to-equity ratio of 2.15x and an inferred equity ratio near 30% (despite a reported 0.0% placeholder). Interest coverage is comfortable at 19.7x, indicating low immediate refinancing stress. Cash flow data are unreported in XBRL (zeros are placeholders), limiting assessment of earnings-to-cash conversion and free cash flow coverage. The company paid no dividend (DPS ¥0) with a payout ratio of 0%, consistent with reinvestment amid growth. Notably, there is an internal inconsistency between the provided cost of sales, gross profit, and the gross margin; this analysis relies on the stated gross margin and gross profit for margin commentary. Overall, fundamentals exhibit improving profitability and stable liquidity, but the flat bottom line and data gaps on cash flows warrant monitoring. Near-term outlook depends on sustaining revenue growth, retaining margin gains, and managing non-operating items and taxes. We refrain from recommendations and focus on analytical implications based on disclosed non-zero metrics.

Profitability Analysis

ROE_decomposition: DuPont indicates ROE 16.04% = Net margin 5.32% × Asset turnover 0.908 × Financial leverage 3.32. The ROE is chiefly supported by improved operating profitability and moderate leverage rather than asset churn alone. margin_quality: Reported gross margin 29.0% and operating margin ~9.3% (¥435m/¥4,677m). Implied SG&A ~¥922m, or ~19.7% of sales, suggesting disciplined overhead. Ordinary income below operating income (¥403m vs. ¥435m) reflects net non-operating expense (notably interest expense of ¥22.1m and other items). Effective tax rate shown as 0.0% in the calculated metrics is not consistent with reported income tax of ¥92m; using ordinary income as a proxy suggests a tax burden in the ~20–25% range, though extraordinary items are not disclosed. operating_leverage: Operating income growth (+432% YoY) far outpaced revenue growth (+27.3% YoY), evidencing strong operating leverage from scaling and cost control. The spread between gross and operating margins (~19.7pp) indicates room for further operating leverage if SG&A grows below sales.

Growth Assessment

revenue_sustainability: Revenue growth of +27.3% YoY to ¥4,677m underscores robust underlying demand in corporate mental health/occupational health services; the absence of segment detail limits visibility into concentration and durability. profit_quality: Operating margin expansion indicates improving unit economics; however, flat net income suggests pressure from non-operating items and/or tax/extraordinary effects. Interest expense (¥22.1m) mildly weighs on bottom line but coverage is strong. outlook: Continuation of mid-20s% revenue growth with stable gross margin and SG&A discipline could sustain a high-single-digit to low-double-digit operating margin. Near-term EPS trajectory depends on containing non-operating drags and tax rate normalization. Limited disclosure on cash flows tempers confidence in the durability of margin gains.

Financial Health

liquidity: Current assets ¥1,809m vs. current liabilities ¥976m; current ratio 185.4% and quick ratio 185.4% (no inventories reported). Working capital stands at ¥833m, indicating adequate short-term coverage. solvency: Total liabilities ¥3,331m and total equity ¥1,552m imply liabilities-to-equity of 2.15x. Inferred equity ratio is ~30.1% (¥1,552m/¥5,151m), despite a reported 0.0% placeholder, indicating a moderate leverage profile. capital_structure: Financial leverage at 3.32x (assets/equity) supports ROE but warrants monitoring if debt grows faster than earnings. Interest coverage at 19.7x (operating income/interest expense) suggests manageable debt service capacity.

Cash Flow Quality

earnings_quality: Operating CF and investing/financing CF are unreported (zeros are placeholders), preventing direct assessment of earnings-to-cash conversion. The OCF/Net Income ratio shown as 0.00 is not meaningful given missing OCF data. FCF_analysis: Free cash flow is undisclosed; thus FCF coverage of dividends or debt service cannot be evaluated from the provided dataset. working_capital: Working capital is positive at ¥833m; without cash flow detail, the magnitude and direction of working capital movements (e.g., receivable days, payable terms) cannot be assessed.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 and payout ratio is 0%. With improving operating earnings and ongoing growth, current policy appears to favor reinvestment or balance sheet strengthening. FCF_coverage: Not assessable due to unreported OCF/FCF; coverage metrics shown as 0.00x are placeholders and should not be interpreted as lack of cash generation. policy_outlook: Future distributions likely contingent on sustained profitability, visibility on cash conversion, and leverage management; current stance suggests a growth-first allocation framework.

Risk Assessment

Business Risks:

• Revenue concentration in key corporate clients or channels (not disclosed).
• Dependence on medical professionals and compliance with occupational health regulations.
• Pricing pressure in B2B wellness/health-tech services amid competition.
• Execution risk in scaling platforms and integrating services while maintaining margins.
• Regulatory/data privacy and information security risks for health-related data.

Financial Risks:

• Moderate leverage (liabilities/equity 2.15x) increases sensitivity to earnings volatility.
• Potential volatility in non-operating items and taxes that compress net margin.
• Cash flow visibility is limited due to unreported OCF/FCF; working capital swings could affect liquidity.
• Interest rate risk on floating-rate debt (interest expense ¥22.1m) if rates rise.

Key Concerns:

• Internal inconsistency between reported cost of sales, gross profit, and gross margin; reliance on stated gross margin for analysis.
• Unreported cash flow statements and share count/BVPS hinder EPS quality and valuation metrics.
• Flat net income despite strong operating growth suggests below-the-line pressures that need clarification.

Investment Implications

Key Takeaways:

• Strong topline growth (+27.3% YoY) with significant operating leverage (+432% YoY OI).
• Healthy margins: ~29% gross and ~9.3% operating, implying improved SG&A efficiency (~19.7% of sales).
• ROE at 16.04% supported by profitability and moderate leverage (3.32x).
• Sound liquidity (current ratio 185%) and comfortable interest coverage (19.7x).
• Bottom-line flat due to non-operating and/or tax effects; cash flow disclosure absent.

Metrics to Watch:

• Revenue growth trajectory and client renewal/expansion rates.
• Gross margin stability and SG&A-to-sales ratio to gauge operating leverage persistence.
• Ordinary vs. operating income gap (non-operating gains/losses, interest burden).
• Cash conversion (OCF/NI) and FCF once disclosed; receivables/payables days.
• Leverage and equity ratio trends; interest coverage under different rate scenarios.
• Effective tax rate normalization and any extraordinary items.

Relative Positioning: Within Japan’s health-tech/occupational health services space, the company exhibits above-peer growth and improving operating margins with a moderate leverage profile; however, cash flow transparency and below-the-line volatility temper comparability until fuller disclosures are available.

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