M3,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥170.88B
• Operating Income: ¥35.99B
• Net Income: ¥25.32B
• EPS: ¥33.47

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

M3, Inc. (TSE:2413) delivered strong top-line growth in FY2026 Q2 with revenue of 1,708.85 (100M JPY), up 36.9% YoY, underscoring robust demand across its healthcare platform businesses. Operating income rose 24.2% YoY to 359.92, indicating scaling benefits but also suggesting some margin investment relative to revenue growth. Net income increased 31.3% YoY to 227.11, with an effective tax rate of 25.9% derived from income tax of 94.85 on pre-tax profit of 366.81. The reported net profit margin was 13.3%, while the implied operating margin was approximately 21.1% (operating income over revenue), reflecting solid profitability for a platform-driven model. Gross profit reported at 709.01 translates to a gross margin of 41.5%, consistent with an asset-light, service-oriented mix. Total comprehensive income of 279.99 exceeded net income, implying positive other comprehensive income contributions during the period. Balance sheet strength remains a hallmark: total assets were 6,123.93 with total equity of 4,237.35, implying an equity ratio of 63.2% and financial leverage of 1.45x. Asset turnover was 0.279x, consistent with the model’s moderate capital intensity and recurring revenue nature. DuPont decomposition yields an ROE of 5.4% (= 13.3% net margin × 0.279 asset turnover × 1.45 leverage), which is respectable for a semiannual period but leaves room for improvement via higher turnover or margin expansion. Cash and equivalents stood at 1,349.33, comfortably exceeding interest-bearing debt of approximately 244.20 (short-term 30.78 + long-term 213.42), placing the company in a net cash position. Accounts receivable were 650.47, implying an approximate DSO of about 69–70 days on a half-year revenue base, which is reasonable for enterprise/healthcare clients but should be monitored given rapid growth. The reported liabilities-to-equity ratio of 0.40x indicates conservative leverage, while operating cash flow details were not disclosed this quarter, limiting cash conversion analysis. Equity-method income contributed 13.08, a modest tailwind to bottom line quality. The reported payout ratio was 62.8%, though DPS and total dividends were not disclosed; policy interpretation therefore remains tentative absent full cash flow data. Overall, M3’s quarter showcases healthy growth, solid operating profitability, and a robust balance sheet; however, the lack of detailed cash flow and segment disclosures in this snapshot constrains assessment of cash conversion, investment intensity, and segment mix. Continued monitoring of working capital discipline, operating margin trajectory, and the balance between growth investments and shareholder returns will be important in subsequent quarters.

Profitability Analysis

ROE decomposition: Reported ROE is 5.4%, driven by a 13.3% net margin, 0.279x asset turnover, and 1.45x financial leverage. Operating margin (implied) is about 21.1% (359.92 / 1,708.85), indicating strong operating efficiency for a platform business, though below the net-new revenue growth rate, suggesting incremental reinvestment or mix effects. Gross margin is 41.5%, supportive of a high-value digital services mix; maintaining this level while scaling indicates pricing power and/or favorable product mix. The effective tax rate is 25.9%, consistent with a global footprint under IFRS. Net margin at 13.3% is healthy and in line with digital healthcare peers, benefitting from operating scale and limited depreciation drag (D&A not disclosed). Operating leverage: revenue grew 36.9% YoY vs. operating income up 24.2% YoY, implying some margin compression from growth investments (e.g., SG&A of 429.08) or mix (e.g., greater contribution from earlier-stage or lower-margin businesses). Equity-method gains of 13.08 provided incremental support but are not the core driver of profitability. DuPont suggests the principal opportunity to lift ROE lies in margin expansion and/or improving asset turnover as the platform scales.

Growth Assessment

Revenue grew 36.9% YoY to 1,708.85, a strong acceleration indicative of robust client demand in healthcare marketing solutions, platform subscriptions, and adjacent services. Operating income increased 24.2% YoY to 359.92, trailing revenue growth and hinting at reinvestment, cost inflation, or growth in lower-margin lines. Net income rose 31.3% YoY to 227.11, with positive comprehensive income (279.99) adding to total return. Given accounts receivable at 650.47, growth appears supported by extended enterprise billing cycles typical in pharma and hospital clients; DSO around 69–70 days on a half-year base appears manageable. Profit quality is supported by a 13.3% net margin and a 21.1% implied operating margin; sustainability hinges on maintaining gross margin at 41.5% while scaling services and international operations. Outlook: with a strong balance sheet (net cash) and demonstrated ability to grow at scale, M3 is positioned to continue investing in product and M&A; however, absent segment disclosures and OCF detail, visibility on the sustainability of 30%+ growth is limited. Monitor whether YoY operating margin stabilizes as growth normalizes and new cohorts mature.

Financial Health

Liquidity: Current assets were 2,434.25; current liabilities were not disclosed, so current and quick ratios are not calculable. Cash and equivalents of 1,349.33 versus interest-bearing debt of 244.20 indicate a solid net cash position of roughly 1,105. Net working capital is only partially observable; reported working capital equals current assets due to lack of current liabilities disclosure. Solvency: Total liabilities were 1,689.42 against equity of 4,237.35, implying liabilities-to-equity of 0.40x and an equity ratio of 63.2%, both conservative. Capital structure: Short-term loans 30.78 and long-term loans 213.42 are modest relative to cash; interest coverage cannot be computed due to missing interest expense, but leverage is low. The asset base (6,123.93) is financed predominantly by equity, supporting resilience to macro shocks and investment flexibility.

Cash Flow Quality

Earnings quality cannot be fully assessed due to undisclosed operating, investing, and financing cash flows. Positive indicators include strong net cash (cash 1,349.33 vs. debt 244.20) and net income of 227.11 backed by a 13.3% net margin. However, without OCF we cannot compute OCF/NI or assess working capital cash usage in the growth phase. Free cash flow is not reported; capex is also not disclosed, limiting assessment of reinvestment intensity. Accounts receivable of 650.47 relative to half-year sales suggests DSO around 69–70 days; this is reasonable for enterprise clients but should be watched for elongation as overseas business scales. Total comprehensive income exceeding net income implies positive OCI (e.g., securities valuation or FX), which does not translate directly to operating cash. Overall, earnings quality appears sound but requires confirmation when OCF is disclosed.

Dividend Sustainability

Dividend details (DPS, total dividends paid, FCF coverage) are unreported, but a calculated payout ratio of 62.8% is provided. With net income at 227.11 and a net cash position of roughly 1,105, balance sheet capacity to support dividends is ample. That said, without OCF and FCF data, coverage by internally generated cash cannot be verified. Given the company’s growth profile and historical focus on reinvestment, policy likely balances shareholder returns with M&A and organic investments; the 62.8% payout ratio should be interpreted cautiously due to missing DPS/FCF disclosure and the period being semiannual. Monitor future guidance on full-year dividends, FCF trajectory, and any share repurchase plans.

Risk Assessment

Business Risks:

• Dependence on pharmaceutical and healthcare marketing budgets, which can be cyclical and policy-sensitive
• Execution risk in overseas expansion and integration of acquired businesses
• Regulatory changes in healthcare promotion, data privacy, and digital advertising standards
• Client concentration risk within large pharma or hospital networks
• Competitive intensity from global digital health platforms and domestic IT service providers
• Talent acquisition and retention in technology and medical content domains

Financial Risks:

• Working capital expansion as business scales, potentially increasing DSO and cash conversion risk
• FX volatility affecting overseas earnings and OCI
• Potential goodwill/intangible impairment risk from M&A (intangible detail not disclosed in this snapshot)
• Limited visibility on capex and FCF due to unreported cash flow data

Key Concerns:

• Operating income growth lagging revenue growth, implying some margin pressure from investments or mix
• Lack of disclosed operating cash flow and capex constrains assessment of cash generation and FCF sustainability
• Heavy reliance on continued high growth to lift ROE from 5.4%

Investment Implications

Key Takeaways:

• Robust revenue growth of 36.9% YoY with solid profitability (implied operating margin ~21.1%, net margin 13.3%)
• Conservative balance sheet with net cash of ~1,105 and equity ratio of 63.2%
• ROE at 5.4% driven mainly by margin; scope to improve via operating leverage and turnover
• Comprehensive income exceeds net income, indicating positive OCI tailwinds
• Cash flow details are missing; confirm OCF and FCF to validate earnings quality

Metrics to Watch:

• Operating margin trajectory versus revenue growth
• OCF/Net income and free cash flow when disclosed
• DSO and receivables growth relative to revenue
• Segment/geographic mix and gross margin sustainability
• Payout policy updates (DPS, buybacks) versus reinvestment needs

Relative Positioning: Within the Japanese digital healthcare and IT services peer set, M3 exhibits above-peer revenue growth with superior balance sheet strength and healthy margins, though near-term ROE is moderate and cash conversion visibility is limited pending disclosure.

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