FINDEX (3649) FY2026 Q1 Earnings Report

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Executive Summary

FY2026 Q1 (Jan–Mar) results were Revenue ¥19.9B (YoY +¥0.4B +2.0%), Operating Income ¥8.0B (YoY -¥0.2B -2.4%), Ordinary Income ¥8.2B (YoY -¥0.2B -1.9%), and quarterly Net Income attributable to owners of the parent ¥5.6B (YoY -¥0.1B -2.6%), resulting in a revenue increase but profit decrease. Revenue was driven by the Medical Business (+4.6%), lifting overall sales, while the Public Business posted a large decline of -45.7% YoY, constraining company growth. Operating income: Gross profit improved to ¥14.1B (+4.6%) and gross margin improved to 70.8% (prior 69.1%) (+1.7pt), but SG&A rose significantly to ¥6.1B (+15.6%), compressing margins and reducing operating margin to 40.4% (prior 42.2%) (-1.8pt). Net profit margin also contracted to 28.3% (prior 29.6%) (-1.3pt).

Drivers of Performance

Revenue: Revenue was ¥19.9B, a slight increase of +2.0% YoY. By segment, the core Medical Business was ¥18.2B (share 91.6%) and grew +4.6%, supporting company sales. Conversely, the Public Business fell sharply to ¥1.0B (YoY -45.7%), affected by timing of policy budgets and tender project recognition. The HealthTech Business expanded to ¥0.6B (YoY +224.5%) but remains small and its contribution to company revenue is limited. Revenue composition remains heavily dependent on the Medical Business; timing of project recognition and acceptance inspections introduces volatility to company results.

Profitability: Cost of sales decreased to ¥5.8B (YoY -4.0%), improving gross margin to 70.8% (+1.7pt), likely due to improved product mix and maintained pricing. Meanwhile, SG&A increased materially to ¥6.1B (YoY +15.6%), driven by upfront investments in hiring, marketing, and development. As a result, Operating Income was ¥8.0B (-2.4%) and operating margin fell to 40.4% (-1.8pt), with SG&A growth offsetting gross margin gains. Non-operating income/expense was minor: non-operating income ¥0.2B (interest income ¥0.1B, forex gains ¥0.1B) and non-operating expense ¥0.0B, resulting in Ordinary Income of ¥8.2B (-1.9%). After corporate taxes of ¥2.5B (effective tax rate 30.9%) and non-controlling interests ¥0.1B, Net Income attributable to owners of the parent was ¥5.6B (-2.6%). In conclusion, the period showed revenue growth but profit decline, with deteriorated operating leverage from higher SG&A compressing profitability.

Segment Analysis

The Medical Business posted Revenue ¥18.2B (YoY +4.6%) and Operating Income ¥7.8B (YoY +5.2%), maintaining a high operating margin of 42.7%. As the main profit contributor, improved gross margin and revenue expansion contributed to profit growth. The Public Business recorded Revenue ¥1.0B (YoY -45.7%) and Operating Income ¥0.3B (YoY -75.9%), with an operating margin of 31.1%; concentration of projects and timing of recognition caused significant YoY declines. The HealthTech Business grew rapidly to Revenue ¥0.6B (YoY +224.5%) but reported an operating loss of -¥0.1B (loss narrowed YoY -86.8%), with a margin of -10.2%, indicating continued investment/recovery phase. While Medical’s stable earnings support the company, Public volatility and delayed monetization in HealthTech are key drivers of company profit variability.

Key Financial Metrics

Profitability: Operating margin 40.4% (prior 42.2%), Net margin 28.3% (prior 29.6%); both lower YoY but remain at high levels. Gross margin improved to 70.8% (prior 69.1%) (+1.7pt), but SG&A ratio rose to 30.4% (prior 26.8%) (+3.6pt), pressuring operating margin. ROE is 10.0%, reflecting a healthy return level, and Equity Ratio is 81.6%, indicating strong capital structure.

Cash Quality: Operating Cash Flow / Net Income actual figure not disclosed, but Accounts Receivable increased materially to ¥22.4B (prior ¥17.9B, +24.8%), suggesting extended collection. DSO (days sales outstanding) is 411 days and CCC (cash conversion cycle) is 465 days, indicating prolonged cycles. Inventories decreased to ¥1.0B (prior ¥1.6B, -36.4%), with inventory turnover days at 66 days—still somewhat long but improving. Rising receivables are the principal concern for working capital, potentially impairing cash quality.

Investment Efficiency: Total asset turnover is 0.286x (annualized 1.14x); with Revenue growth +2.0% and total assets up +2.2% YoY, asset growth slightly outpaced sales, slightly reducing turnover efficiency. Assets comprise Current Assets ¥38.5B (Cash and deposits ¥14.1B, Accounts receivable ¥22.4B) and Fixed Assets ¥31.0B. Capital expenditures are light (Tangible fixed assets ¥0.8B, Intangible fixed assets ¥3.1B), and capital efficiency is generally sound, though receivables growth pressures asset efficiency.

Financial Soundness: Equity Ratio 81.6%, Current Ratio 399.9% (Current Assets ¥38.5B / Current Liabilities ¥9.6B), Quick Ratio 389.1%—indicating very high liquidity and safety. Interest-bearing debt is effectively zero, with Cash and deposits ¥14.1B, so short-term payment ability is not a concern. Retained earnings ¥69.7B and treasury stock ¥21.8B reflect a very conservative capital structure.

Cash Flow Analysis

Cash flow statement disclosure is absent, so balance sheet items are used to infer cash movements. Cash and deposits were ¥14.1B (prior ¥16.8B, -¥2.7B). Accounts receivable rose to ¥22.4B (prior ¥17.9B, +¥4.5B), suggesting delayed collections or timing mismatches in post-sales acceptance. Inventories compressed to ¥1.0B (prior ¥1.6B, -¥0.6B), indicating improved inventory management. Current liabilities were ¥9.6B (prior ¥10.3B, -¥0.7B), primarily Accounts Payable ¥0.4B and other current liabilities ¥4.8B. Non-current liabilities were ¥3.1B (prior ¥3.1B, roughly flat), mainly stock-based compensation reserve ¥3.1B. Retained earnings were ¥69.7B (prior ¥67.6B, +¥2.1B), reflecting the addition of quarterly net income ¥5.6B and dividend payments. The rise in receivables is the main driver of cash decline. Long cycles (DSO 411 days, CCC 465 days) indicate deteriorated working capital efficiency and risk that Operating Cash Flow may trail Net Income. The medical IT sector’s seasonality biases recognition and collection toward year-end, implying high Q-to-Q cash flow volatility. Dividends are planned at full-year DPS ¥13 (payout ratio approx. 24%), and given cash levels and low debt, sustainability appears high. Collecting receivables earlier and shortening CCC will be key to improving working capital efficiency.

Quality of Earnings

Recurring operating income constitutes most profits; non-operating income ¥0.2B (1.1% of Revenue) is mainly interest income ¥0.1B and forex gains ¥0.1B and is limited in one-off character. Non-operating expenses are ¥0.0B and immaterial, so core operations are the source of Ordinary Income. The effective tax rate is 30.9%, within normal range, with no notable tax adjustments or deferred tax asset write-downs. For Ordinary Income ¥8.2B, pre-tax income ¥8.3B, and Net Income ¥5.6B (after deducting non-controlling interests ¥0.1B), the gap between Ordinary Income and Net Income is mainly due to corporate taxes ¥2.5B and non-controlling interests, as expected. Total comprehensive income was ¥5.5B (¥5.5B attributable to owners of the parent, ¥0.1B non-controlling interests), with Other Comprehensive Income at -¥0.2B (securities valuation difference -¥0.2B), which is minor. From an accrual quality perspective, persistently high Accounts Receivable (¥22.4B, DSO 411 days) and prolonged CCC (465 days) are strong warning signals that Operating Cash Flow may lag Net Income. While gross margin improvement is positive, timing differences between revenue recognition and cash collection (acceptance conditions and billing terms) are large, reducing cash conversion efficiency and impacting earnings quality. Recurring revenue sustainability is high, but deteriorating working capital efficiency is a concern for earnings quality.

Forecasts & Guidance

Full Year guidance is unchanged: Revenue ¥62.1B (YoY +1.6%), Operating Income ¥18.3B (YoY +2.2%), Ordinary Income ¥18.9B (YoY +2.6%), Net Income attributable to owners of the parent ¥13.0B (YoY not disclosed), EPS ¥53.34, DPS ¥13. Q1 progress toward full year is: Revenue 3.2% (¥19.9B/¥62.1B), Operating Income 4.4% (¥8.0B/¥18.3B), Ordinary Income 4.3% (¥8.2B/¥18.9B), Net Income 4.3% (¥5.6B/¥13.0B), which is well below standard progress (Q1 = 25%). Medical IT is strongly back-end loaded seasonally, with large project acceptance and recognition concentrated in Q4; therefore, a single-quarter lag does not necessarily indicate full-year shortfall. However, given the large Public segment decline (-45.7%) and rising receivables, delays in acceptance timing or project progress cannot be ruled out, making monitoring of orders and recognition from Q2 onward important. SG&A growth (+15.6%) far outpaced Revenue growth (+2.0%); if second-half revenue ramp-up does not proceed as planned, operating margin compression may continue. No forecast revisions have been made; the company appears confident in achieving full-year targets, but order/acceptance trends in Q2–Q3 and SG&A control will be critical to full-year attainment.

Shareholder Returns

Quarterly dividend was maintained at DPS ¥8 (prior period DPS ¥8). Full-year dividend forecast is DPS ¥13, implying a payout ratio of about 24.4% against forecast EPS ¥53.34, a conservative level. With Equity Ratio 81.6%, Cash and deposits ¥14.1B, and retained earnings ¥69.7B, the financial base is strong and dividend sustainability is high. No share buybacks have been implemented or announced; dividends are currently the sole shareholder return mechanism. Total Return Ratio is not disclosed, but with no buybacks, the dividend payout ratio of ~24% effectively represents the total return. Given financial strength and cash levels, downside risk to dividends is low, and shareholder return policy is expected to remain stable. Depending on stabilization of Operating Cash Flow and the quality of investment opportunities, there is scope to raise the payout ratio or introduce buybacks in the future.

Risk Factors

1. Segment concentration risk: The Medical Business accounts for 91.6% of Revenue and the majority of Operating Income, creating a high concentration structure where healthcare providers’ investment cycles, acceptance delays, and tender trends directly affect company results. The Public Business showed YoY -45.7% and high volatility, with policy budgets and project timing swings destabilizing earnings. The HealthTech Business, despite high growth, is small and loss-making, and delayed monetization increases investment burden.

2. Deterioration of working capital efficiency risk: Accounts Receivable ¥22.4B (YoY +24.8%) with DSO 411 days and CCC 465 days indicate prolonged collection. Receivables growth outpacing revenue suggests acceptance timing mismatches or lengthened billing terms, increasing the risk that Operating Cash Flow will fall below Net Income. Given strong seasonality, quarterly cash flow volatility is large and temporary liquidity pressure may arise.

3. Margin pressure from SG&A increase risk: SG&A grew +15.6% YoY, far outpacing Revenue growth +2.0%, reducing operating margin by -1.8pt. These increases likely include upfront investments in hiring, development, and marketing. If second-half revenue ramp does not progress as planned, cost burden may continue to impair profitability. Cost control and recovery of operating leverage are focal points for the second half.

Industry Benchmark (Reference, Company Survey)

Profitability & Returns

Profitability metrics substantially exceed industry medians, confirming very high margin levels.

Growth & Capital Efficiency

Revenue growth rate is well below the industry median, indicating relative underperformance on growth.

※Source: Company aggregation

Points of Focus in the Results

1. Trade-off between gross margin improvement and SG&A increase: Gross margin improved to 70.8% (+1.7pt) due to maintained pricing and product mix improvement, but SG&A +15.6% led to a -1.8pt decline in operating margin. Cost control and second-half revenue ramp-up are key to restoring profitability. Considering seasonality, monitoring Q2–Q3 order trends and SG&A efficiency is essential.

2. Deterioration of working capital efficiency and lengthened collection cycle: Accounts Receivable increased by ¥4.5B YoY (+24.8%), with DSO 411 days and CCC 465 days, indicating significantly extended collection. While inventories have been compressed, delayed receivable collection is impairing cash quality; reassessment of acceptance conditions and billing terms and progress on advancing collections are critical to verify effectiveness. Although year-end biased recognition practices are entrenched in the industry, structural improvements are required.

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This report is an AI-generated earnings analysis document automatically produced from XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information aggregated by the Company based on public financial statements. Investment decisions are your responsibility; consult professionals as appropriate.

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AI Financial Analysis

Executive Summary

FY2026 Q1 was a mixed quarter for Findex, with modest revenue growth but lower operating and net profit as SG&A growth outweighed a substantial gross-margin improvement. Revenue rose 2.0% YoY to ¥1.989bn. Operating income declined 2.4% YoY to ¥0.804bn, while ordinary income fell 1.9% to ¥0.825bn. Profit attributable to owners declined 2.6% YoY to ¥0.563bn, equivalent to basic EPS of ¥23.07. The operating margin compressed by approximately 180bp YoY to 40.4%, remaining exceptionally high for a software-led business model. Gross margin expanded by approximately 180bp YoY to 70.8%, reflecting a 3.7% decline in cost of sales despite revenue growth. However, SG&A expense increased 15.6% YoY to ¥0.605bn, lifting the SG&A-to-sales ratio by approximately 360bp to 30.4%. Consequently, the net profit margin declined by approximately 130bp YoY to 28.3%. Medical Business remained the core business, generating ¥1.822bn of revenue, or 91.6% of consolidated sales, and ¥0.778bn of segment profit. Medical Business revenue increased 4.6% YoY and segment profit increased 5.2%, indicating continued resilience in the company’s principal earnings base. Public Business revenue fell 45.7% YoY to ¥0.103bn and segment profit declined 76.0% to ¥0.032bn, creating a material drag on consolidated profit growth. Healthtech Business revenue more than tripled to ¥0.065bn, while its segment loss narrowed sharply from ¥0.050bn to ¥0.007bn. The balance sheet remains highly liquid, with a 399.9% current ratio, 389.1% quick ratio and conservative 0.23x debt-to-equity ratio. Receivables increased 24.8% YoY to ¥2.238bn and the 103-day DSO requires close monitoring relative to the pace of revenue growth. Q1 progress against the full-year operating-income forecast was strong at 43.9%, substantially above the normal 25% first-quarter benchmark, although earnings seasonality and project delivery timing should be considered. The unchanged full-year outlook implies management continues to expect full-year revenue of ¥6.209bn and operating income of ¥1.829bn. The central forward implication is that sustained Medical Business growth and Healthtech loss reduction need to offset weaker Public Business performance and elevated SG&A intensity for the company to deliver its forecast profit expansion.

Profitability Analysis

Annualized DuPont ROE was 39.7%, comprising a 28.3% net profit margin, 1.144x asset turnover and 1.23x financial leverage. The primary source of this high annualized ROE is the company’s unusually strong earnings margin rather than balance-sheet leverage, as financial leverage remains low. The 28.3% net margin declined from approximately 29.6% in the prior-year quarter, while the operating margin declined to 40.4% from approximately 42.2%. Gross margin strengthened to 70.8% from approximately 69.0%, demonstrating favorable gross-profit conversion and lower cost of sales. The principal negative swing was operating leverage below the gross-profit line: SG&A expenses increased 15.6% YoY, materially exceeding the 2.0% revenue increase. As a result, the gross-margin gain did not translate into higher operating profit. Medical Business supported profitability, with segment margin improving slightly to 42.7% from 42.5%. Public Business segment margin declined sharply to 31.1% from 70.1%, reflecting the substantial revenue contraction and likely lower fixed-cost absorption. Healthtech Business improved its segment margin from negative 249.5% to negative 10.2%, but it remains loss-making. The tax burden was 0.682, equivalent to a 30.9% effective tax rate, while the interest burden of 1.028 reflects net non-operating income, including ¥0.013bn of interest income and ¥0.008bn of foreign-exchange gains. The modest difference between operating income of ¥0.803bn and ordinary income of ¥0.825bn means Q1 profit was predominantly generated by operating activity rather than non-operating items.

Growth Assessment

Consolidated revenue growth of 2.0% YoY was modest and was driven entirely by Medical Business and Healthtech Business, offsetting the sharp Public Business decline. Medical Business added ¥0.080bn of revenue YoY and remains the key determinant of consolidated growth sustainability. Its 4.6% revenue growth and 5.2% segment-profit growth indicate that the core business retained positive operating momentum. Healthtech Business expanded revenue by ¥0.045bn YoY to ¥0.065bn, and its loss narrowed by ¥0.043bn, making it a potentially improving incremental contributor. Public Business revenue decreased by ¥0.087bn YoY, or 45.7%, and its segment-profit decline of ¥0.101bn was the largest adverse movement in the segment portfolio. Full-year guidance calls for revenue growth of 1.6% YoY and operating-income growth of 2.2% YoY. Q1 revenue progress was 32.0% of the full-year forecast, 7.0 percentage points above the standard 25% first-quarter pace. Operating-income progress was 43.9%, 18.9 percentage points above the standard pace, while ordinary-income progress was 43.7% and profit-attributable-to-owners progress was 43.2%. This front-loaded progress provides a favorable starting point for the unchanged forecast, but the full-year plan still requires the company to sustain Medical Business execution, improve Public Business activity, and contain SG&A growth relative to sales.

Financial Health

Financial health is strong. Current assets of ¥3.853bn exceeded current liabilities of ¥0.964bn by ¥2.890bn, producing a 399.9% current ratio and ¥2.890bn of working capital. The 389.1% quick ratio indicates that liquidity is supported predominantly by cash and receivables rather than inventory. Cash and deposits were ¥1.409bn, representing 20.3% of total assets. Total liabilities were ¥1.278bn against total equity of ¥5.678bn, and the debt-to-equity ratio was a conservative 0.23x. The equity ratio was 81.1%, up from 79.9% a year earlier, supporting substantial financial flexibility. There is no apparent short-term liquidity mismatch given the large excess of current assets over current liabilities. Accounts receivable increased 24.8% YoY to ¥2.238bn, compared with only 2.0% sales growth. The 103-day DSO quality alert is important: the root cause is that receivables represent 32.2% of total assets and have grown materially faster than revenue. In an enterprise software and public-sector project business, billing and customer acceptance cycles can lengthen collection periods, but the present receivable intensity increases dependence on timely customer payment. The impact is greater working-capital absorption and potentially weaker conversion of reported earnings into cash if collections do not normalize. Inventories declined 36.4% YoY to ¥0.104bn, reducing inventory-related capital commitment and limiting inventory obsolescence exposure. Intangible assets were only 4.4% of total assets, consisting almost entirely of software, indicating limited balance-sheet concentration in capitalized intangible assets. Treasury stock was ¥1.752bn, equivalent to 25.2% of total assets, while its YoY balance was broadly unchanged.

Notable B/S Changes

Accounts receivable: +¥0.445bn (+24.8%) YoY to ¥2.238bn, materially outpacing 2.0% revenue growth and contributing to a 103-day DSO; collection timing is the key working-capital risk. Inventories: -¥0.060bn (-36.4%) YoY to ¥0.104bn, reducing capital tied up in finished goods and lowering inventory-obsolescence exposure.

Cash Flow Quality

The operating-profit profile remains strong, with operating income of ¥0.803bn converting into a 40.4% operating margin and profit attributable to owners of ¥0.563bn. Receivable growth materially exceeded revenue growth, and the 103-day DSO indicates that working-capital collection discipline is the principal earnings-quality metric to monitor. The reduction in inventories to ¥0.104bn partially mitigates working-capital intensity. Non-operating income was limited at ¥0.021bn, or approximately 1.1% of revenue, so reported profitability is chiefly operating in nature. The difference between ordinary income of ¥0.825bn and profit attributable to owners of ¥0.563bn primarily reflects the ¥0.255bn income-tax expense, with the effective tax rate at 30.9%.

Dividend Sustainability

The full-year dividend forecast is ¥27.00 per share, unchanged from the company’s stated plan. Against forecast EPS of ¥53.34, the implied dividend payout ratio is approximately 50.6%. This is within the 60% sustainability benchmark and leaves a meaningful portion of forecast earnings for retained capital. The company’s strong liquidity position, 81.1% equity ratio and 0.23x debt-to-equity ratio provide balance-sheet support for the planned dividend. Retained earnings were ¥6.975bn, substantially exceeding the planned annual dividend commitment implied by the current share base. The large treasury-share balance also means per-share capital allocation and any future cancellation or repurchase decisions remain relevant to shareholder-return analysis.

Risk Assessment

Business risks include Medical Business concentration: Medical Business accounted for 91.6% of Q1 revenue and 96.8% of consolidated segment profit, making consolidated performance highly dependent on healthcare IT demand, hospital investment budgets, project implementation schedules and customer acceptance timing., Public Business volatility: Public Business revenue declined 45.7% YoY and segment profit declined 76.0% YoY, showing that order timing or project mix can materially affect quarterly consolidated earnings., Healthtech execution risk: Healthtech revenue grew strongly, but the segment remained loss-making at ¥0.007bn; achieving durable profitability depends on converting growth into scalable gross profit and controlled operating costs., Technology and cybersecurity risk: As a provider of medical, public-sector and health-related digital solutions, the company faces risks from technology obsolescence, system failures, cybersecurity incidents and data-protection requirements..

Financial risks include Receivable collection risk: DSO of 103 days exceeds the 60-day quality-alert threshold, while receivables grew 24.8% YoY versus 2.0% revenue growth. Delayed customer acceptance or collection could pressure liquidity conversion., Cost-discipline risk: SG&A increased 15.6% YoY, far faster than sales, causing operating-margin compression despite gross-margin expansion., Market-value risk in securities: Valuation differences on securities were negative ¥0.058bn, and other comprehensive income was negative ¥0.016bn in Q1..

Key concerns include The highest-priority issue is whether elevated receivables and the 103-day DSO normalize through collections, because this directly affects earnings conversion and working-capital efficiency., The second priority is whether Public Business recovers sufficiently to prevent continued dilution of the high-margin Medical Business contribution., The third priority is SG&A discipline: operating-income growth under the full-year plan requires expenses to grow more slowly than revenue over the remaining quarters., Healthtech’s sharply reduced loss is constructive, but recurring profitability rather than revenue growth alone is necessary for the segment to become a meaningful earnings contributor..

Investment Implications

Key takeaways include The company combines exceptional profitability, with a 40.4% operating margin and 39.7% annualized ROE, with low financial leverage of 1.23x., Medical Business remains a high-margin and growing core earnings engine, with Q1 segment profit of ¥0.778bn., Gross-margin improvement was offset by SG&A growth, making expense control the key determinant of near-term profit progression., Q1 operating-income progress of 43.9% versus the full-year forecast provides a favorable cushion, while the guidance remains unchanged., The balance sheet is highly liquid and conservatively capitalized, but elevated receivable days are the principal financial-quality issue..

Metrics to watch include Medical Business revenue growth and segment margin, Public Business order timing, revenue recovery and segment-profit trajectory, Healthtech Business path from a ¥0.007bn Q1 segment loss to sustained profitability, SG&A growth relative to revenue growth and operating-margin recovery, Accounts receivable balance, DSO and collection timing, Progress against full-year revenue guidance of ¥6.209bn and operating-income guidance of ¥1.829bn, Delivery of the ¥27.00 per-share full-year dividend plan.

Regarding relative positioning, Findex is positioned as a highly profitable, net-cash-oriented healthcare IT and digital-solutions company, with returns driven primarily by strong margins rather than leverage. Its operating-margin profile is notably strong, but quarterly growth visibility is moderated by exposure to project timing in Public Business and elevated receivable days.