GAKKEN HOLDINGS CO.,LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥199.12B
• Operating Income: ¥8.24B
• Net Income: ¥2.52B
• EPS: ¥86.02

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

Gakken Holdings (9470) delivered solid top-line and margin expansion in FY2025, with consolidated revenue up 7.3% YoY to ¥199.1bn and operating income up 19.7% YoY to ¥8.24bn, indicating positive operating leverage. Gross profit of ¥49.9bn implies a 25.1% gross margin, supporting the step-up in operating margin to approximately 4.1%. Ordinary income of ¥7.81bn sits slightly below operating income, reflecting non-operating costs, including ¥0.33bn in interest expense, though interest coverage remains strong at 25.3x. Net income rose 58.3% YoY to ¥3.58bn, with net margin at 1.80%, showing material bottom-line improvement versus sales growth. DuPont analysis yields an ROE of 6.02%, driven by modest net margin, sound asset turnover of 1.431x, and financial leverage of 2.34x, consistent with the balance sheet. Cash generation was robust: operating cash flow reached ¥7.82bn, and reported free cash flow (approximated as OCF plus investing CF) was ¥8.21bn, indicating healthy earnings-to-cash conversion (OCF/NI of 2.18x). Liquidity is comfortable with a current ratio of 146% and a quick ratio of 125%, backed by positive working capital of ¥19.9bn. The company’s capital structure is moderate: total equity of ¥59.5bn against total assets of ¥139.2bn implies an equity ratio around the low-40% range, despite the reported equity ratio field being unreported. Debt-to-equity of 1.30x suggests meaningful, but manageable, leverage supported by ample interest coverage. Inventory of ¥9.25bn equates to roughly 25 days on cost of sales, which appears efficient for the business model. Investing cash flow was a net inflow (+¥0.39bn), likely reflecting asset sales or divestments offsetting capex, which temporarily boosted free cash flow. Dividend fields show zeros (DPS and payout), which we treat as unreported rather than actual zeros; thus, we cannot infer current distribution policy from the provided data. Despite a low headline net margin, cash flow quality is strong, and the beat in operating profit growth over sales suggests improving cost discipline or mix. The earnings profile is consistent with a steady, cash-generative education and publishing platform with moderate leverage and improving profitability. Key watchpoints include sustainability of operating leverage, the mix of non-operating items affecting ordinary income, and the durability of positive investing cash flows. Overall, the fiscal year reflects improving fundamentals and healthy cash conversion, within the constraints of incomplete disclosures in certain fields.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 1.80%
• asset_turnover: 1.431
• financial_leverage: 2.34
• calculated_ROE: 6.02%
• interpretation: ROE is primarily driven by solid asset turnover and moderate leverage; margin remains the main constraint on equity returns. margin_quality:
• gross_margin: 25.1% (¥49.9bn / ¥199.1bn)
• operating_margin: 4.1% (¥8.24bn / ¥199.1bn)
• net_margin: 1.80%
• commentary: Operating margin expanded faster than revenue (+19.7% OI vs +7.3% sales), pointing to operating leverage and cost control. Net margin remains thin but improved YoY alongside cash conversion. operating_leverage:
• evidence: Operating income growth (+19.7% YoY) outpaced revenue growth (+7.3% YoY).
• drivers: Likely SG&A efficiency and/or favorable mix within core segments; limited impact from non-operating factors as ordinary income remains close to OI.
• sustainability_considerations: Sustaining leverage will depend on pricing, mix, and cost containment; monitoring SG&A as % of sales and gross margin trajectory is key.

Growth Assessment

revenue_sustainability: Revenue growth of 7.3% YoY appears balanced with efficient inventory levels (~25 days on COGS), suggesting demand-health without overstocking. profit_quality: High OCF/NI (2.18x) indicates earnings are well backed by cash generation. Interest coverage at 25.3x supports operational resilience. outlook: If gross margin and SG&A efficiencies persist, mid-single-digit top-line growth could translate into further operating margin gains. Non-operating items (including interest and other gains/losses) will influence the bridge from OI to ordinary income.

Financial Health

liquidity:

• current_ratio: 146.1%
• quick_ratio: 124.7%
• working_capital: ¥19.93bn
• assessment: Comfortable near-term liquidity with positive working capital and strong cash generation. solvency:
• debt_to_equity: 1.30x
• interest_coverage: 25.3x
• equity_ratio_inferred: Approximately 42.7% (¥59.5bn / ¥139.2bn), noting the reported equity ratio field is unreported.
• assessment: Moderate leverage profile with ample coverage; balance sheet can support ongoing operations and selective investment. capital_structure: Assets ¥139.2bn, equity ¥59.5bn, liabilities ¥77.1bn imply asset-to-equity leverage of 2.34x as per DuPont, consistent with reported metrics.

Cash Flow Quality

earnings_quality: OCF of ¥7.82bn vs NI of ¥3.58bn (OCF/NI 2.18x) demonstrates strong cash realization and limited accrual stress. FCF_analysis: Free cash flow reported at ¥8.21bn equals OCF plus investing CF, implying net inflows from asset sales or low capex in the period. This may not be recurring; underlying maintenance/growth capex levels were not disclosed. working_capital: Inventory of ¥9.25bn (~25 days on COGS) looks lean. Receivables and payables details are not disclosed, but overall working capital was positive, supporting OCF.

Dividend Sustainability

payout_ratio_assessment: Dividend fields (DPS, payout, FCF coverage) are unreported and should not be interpreted as actual zeros. Based on NI and FCF, capacity exists for distributions, but policy cannot be inferred here. FCF_coverage: With FCF of ¥8.21bn and NI of ¥3.58bn, cash coverage of potential payouts appears strong in this period; sustainability depends on normalized capex rather than one-off asset sale proceeds. policy_outlook: Without disclosed DPS/policy, assess alongside capital allocation priorities (growth investments in education services, digital/content initiatives, and balance sheet management).

Risk Assessment

Business Risks:

• Margin pressure from content development costs and education service delivery expenses.
• Demand cyclicality tied to demographics and education spending trends in Japan.
• Execution risk in digital transformation and product mix shifts.
• Competition in educational materials and services impacting pricing power.
• Dependence on seasonal demand patterns affecting working capital.

Financial Risks:

• Moderate leverage (D/E 1.30x) exposes earnings to interest rate changes, though current coverage is strong.
• Potential volatility in non-operating gains/losses affecting ordinary income.
• Investing CF positive due to asset disposals may not recur, potentially lowering future FCF.
• Limited visibility on cash balance and interest-bearing debt structure due to unreported line items.

Key Concerns:

• Sustainability of operating margin improvement amid cost inflation.
• Visibility on recurring capex needs vs. one-off asset sales.
• Data gaps (DPS, cash, share count) limit precision in capital returns analysis.

Investment Implications

Key Takeaways:

• Solid revenue growth (+7.3% YoY) with stronger operating profit growth (+19.7% YoY) indicates healthy operating leverage.
• ROE at 6.02% is anchored by asset turnover and moderate leverage; margin enhancement is the main lever for higher returns.
• Cash conversion is strong (OCF/NI 2.18x) and FCF was robust, aided by positive investing CF.
• Liquidity is sound (current ratio 146%, quick ratio 125%) and interest coverage is high (25.3x).
• Dividend details are unreported; cash capacity exists, but sustainability depends on normalized capex and policy.

Metrics to Watch:

• Operating margin trajectory and SG&A as a percentage of sales.
• Gross margin mix effects across publishing and education services.
• Capex vs. asset disposal proceeds to assess normalized FCF.
• Working capital turns (inventory days, receivable/payable cycles).
• Ordinary income bridge: non-operating items and interest costs.
• Leverage trend (net debt/EBITDA if available) and interest coverage.

Relative Positioning: Within Japan’s education and publishing ecosystem, the company exhibits steady top-line growth, improving operating leverage, and above-average cash conversion with moderate leverage, albeit with thinner net margins than asset-light peers and some reliance on non-recurring investing inflows in this period.

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