M3 (2413) FY2026 Q3 Earnings Report

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Executive Summary

Revenue and profit both continued to grow at double-digit rates year on year, resulting in higher revenue and earnings, while changes in the cost structure affected profit margins. Revenue was ¥264.39B (+28.6% year on year, +¥58.87B), Operating Income was ¥62.35B (+24.4%, +¥12.25B), and Net Income was ¥45.24B (+27.3%, +¥9.70B). As the impact of the decline in COVID-related revenue has subsided, the Company has entered a phase in which its underlying growth potential, centered on digital transformation in healthcare settings and overseas businesses, is being reflected in its performance. Meanwhile, the increase in cost of sales (+44.1% year on year) exceeded the revenue growth rate, and the Operating Income margin was 23.6%, indicating pressure at the gross profit level.

Factors Affecting Financial Performance

【Revenue】Revenue increased 28.6% year on year to ¥264.39B. While the Medical Platform (+20%) and Overseas Business (+8%) performed steadily, Patient Solutions surged +397%, driven by the contribution from the acquisition of EWEL, leading overall revenue growth.

【Profit and Loss】Operating Income was ¥62.35B (+24.4%), below the revenue growth rate, and the gross profit margin declined from 56.0% in the previous year to 50.7%. Meanwhile, the SG&A expense ratio improved to 29.8% from 32.6% in the previous year, with cost efficiencies partially offsetting the decline in the profit margin. Net Income was ¥45.24B (+27.3%), boosted by a one-time gain of approximately ¥4.0B on the sale of shares in an affiliated company. In conclusion, the Company achieved higher revenue and earnings.

Segment Analysis

Medical Platform generated revenue of ¥81.8B (+20%) and profit of ¥30.0B (+16%), representing the largest segment by composition and serving as the core business. Pharmaceutical marketing support and digital transformation in healthcare settings performed steadily, becoming one of the primary drivers of the upward revision to the Full-Year outlook.

Patient Solutions expanded sharply, generating revenue of ¥42.0B (+397%) due to the contribution from the EWEL acquisition and recording profit of ¥1.6B. Meanwhile, Site Solutions generated revenue of ¥40.2B (+16%), but profit declined to ¥3.2B (-31%) due to losses during the launch phase of new facilities, highlighting significant differences in profit margins among the segments. Emerging Businesses recorded a substantial increase in profit to ¥4.8B (+566%), backed by the approximately ¥4.0B gain on the sale of shares in an affiliated company; however, this increase is strongly characterized by one-time factors.

Key Financial Metrics

ROE was 13.3% on an annualized basis, while the Operating Income margin was 23.6% (24.4% in the previous year). The Equity Ratio was 64.7%, and the Current Ratio was approximately 289%, indicating a high level of financial soundness. Although capital expenditures cannot be directly calculated from the disclosed data, Property, Plant and Equipment increased to ¥53.62B from the previous fiscal year, suggesting that the Company is in a growth investment phase.

Cash Flow Analysis

Although disclosure of Operating Cash Flow (OCF) is limited, EBITDA-equivalent income was ¥75.17B, exceeding Net Income of ¥45.24B, indicating generally solid support for cash-generation capacity. Cash and cash equivalents were substantial at ¥144.31B, greatly exceeding short-term borrowings of ¥3.80B. Long-term borrowings increased 40.6% year on year to ¥29.999B; however, Debt/EBITDA was 0.45x, a conservative level. Cash-generation capacity is considered above average.

Quality of Earnings

Against Profit Before Tax of ¥64.33B, Net Income was ¥45.24B, with income taxes of ¥19.09B recorded, representing an effective tax rate of approximately 29.7%. Of Net Income of ¥45.24B, ¥41.65B was attributable to owners of the parent. Other income increased substantially to ¥5.70B from ¥0.64B in the previous year and includes the one-time gain of approximately ¥4.0B on the sale of shares in an affiliated company. It should be noted that, excluding this one-time factor, recurring earnings power has remained limited to more moderate growth on an Operating Income basis.

Earnings Outlook and Guidance

Progress toward the Full-Year forecasts—Revenue of ¥360.0B, Operating Income of ¥70.00B, and Net Income of ¥50.00B—was 73.4% for Revenue, 89.1% for Operating Income, and 90.5% for Net Income. Compared with the standard progress benchmark (approximately 75% by the end of Q3), Revenue was broadly in line with the standard trajectory, while profit progress was significantly ahead. This was because one-time gains on the sale of shares and an improved revenue mix contributed through Q3; based on the assumptions for Q4, the structure implies a decline in the profit margin.

Shareholder Returns

Total dividends were ¥17.09B, resulting in a Payout Ratio of approximately 41.0% relative to profit attributable to owners of the parent of ¥41.65B. In addition, the Company conducted share repurchases of ¥3.65B, bringing the Total Return Ratio, including dividends and share repurchases, to approximately 49.8%. With Cash and cash equivalents of ¥144.31B and an Equity Ratio of 64.7%, the Company’s financial foundation has sufficient capacity to support this level of shareholder returns.

Catalysts

【Short Term】The reversal in profit progress in Q4, including the structure in which the required Q4 Operating Income margin declines relatively, and the earnings trends associated with the launch of new facilities in Site Solutions.

【Long Term】Expansion of business domains through the programmatic M&A strategy (approximately 10 transactions annually), expansion of coverage for corporate health support services (White Jack Project), and progress in the penetration of digital transformation in healthcare settings (M3 Digital and Digisma Medical Care).

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

Both the Operating Income margin and Net Income margin are substantially above the industry median, placing the Company among the high-profitability group within the industry.

Growth and Capital Efficiency

The Revenue growth rate is approximately 2.75 times the industry median, placing the Company among the high-growth group within the industry.

※Source: Compiled by the Company

Risk Factors

1. Decline in gross profit margin: Cost of sales increased 44.1% year on year, exceeding the 28.6% growth rate in Revenue, and the gross profit margin declined by approximately 5.3pt year on year. If changes in the business mix and the costs of launching new businesses continue, they may become factors contributing to a secular decline in the profit margin.

2. Policy sensitivity of overseas businesses: Negative effects arising from policy developments emerged in Q3 in vaccine-related projects within the North American clinical trial business. As overseas Revenue accounts for a certain proportion of total Revenue, region-specific policy risks may affect financial performance.

3. Scale of goodwill and intangible assets: Goodwill of ¥125.84B and intangible fixed assets of ¥104.36B account for approximately 34.6% of total assets. Under a business model that continues programmatic M&A, the integration status of acquired businesses and any slowdown in growth could lead to future impairment risk.

Key Points from the Earnings Results

1. While the Operating Income margin declined slightly relative to the revenue growth rate, improvement in the SG&A expense ratio partially offset this decline. Whether the change in the gross profit margin is temporary or structural can be confirmed through future quarterly data.

2. The profit progress rate against the Full-Year plan (89.1%–90.5%) exceeded the Revenue progress rate (73.4%), with the contribution of one-time gains on the sale of shares through Q3 confirmed as a factor.

3. The Payout Ratio of 41.0% and Total Return Ratio of 49.8% represent demonstrated shareholder returns supported by substantial cash holdings and conservative interest-bearing debt levels (Debt/EBITDA of 0.45x).

Theoretical Share Price (Reference Value)

Sensitivity: ¥641–¥679 at ±1% for the Cost of Equity, and ¥659–¥662 at ±0.1 for ω.

Notes:

• Since Net Income progress against the Full-Year forecast (93%) exceeds the standard benchmark (75%), Forecast EPS has been adjusted upward within a maximum range of +10% (because companies whose progress is ahead of schedule tend to exceed forecasts; adjustments may be excessive for businesses with strong seasonality).
• Goodwill represents a high proportion of net assets, and the assumptions would change significantly if impairment were recognized.
• Net assets as of the end of the quarter are used (there is a timing difference from the Full-Year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI through integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.

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