FINDEX Inc. FY2026 Q2 Earnings Report

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Executive Summary

The first half of FY2026 saw higher revenue but lower earnings, with the recognition of an extraordinary loss weighing down net income as the key development. Revenue remained essentially flat at ¥31.45B (+0.6% YoY). Operating income declined 7.0% to ¥8.88B, ordinary income declined 6.4% to ¥9.22B, and net income declined 18.4% to ¥5.65B, with the magnitude of the decline increasing progressively. The primary factors behind the decline were a deterioration in the segment mix—due to a sharp slowdown in Public and upfront investment in HealthTech—and the recognition of a ¥1.1B impairment loss on investment securities as an extraordinary loss.

Factors Affecting Financial Performance

【Revenue】Revenue was essentially flat at ¥31.45B (+0.6% YoY). Core Medical remained steady at ¥29.08B (92.5% of total revenue, +1.8% YoY), while Public declined sharply to ¥1.73B (-29.1% YoY). HealthTech expanded rapidly to ¥0.65B (+150.2% YoY), albeit from a small base. Overall, stable growth in the core business offset the slowdown in the public-sector business.

【Profit and Loss】Operating income declined 7.0% YoY to ¥8.88B, while ordinary income declined 6.4% YoY to ¥9.22B. Public operating income plunged 77.6% YoY to ¥0.28B, with its margin also declining to 16.2%, which had a significant impact. HealthTech also continued to incur an operating loss of ¥0.85B as upfront investment continued. In addition, the recognition of a ¥1.1B impairment loss on investment securities as an extraordinary loss caused net income to decline 18.4% YoY to ¥5.65B, a larger decline than that in ordinary income. Revenue increased while earnings declined.

Segment Analysis

Medical generated revenue of ¥29.08B (+1.8% YoY) and operating income of ¥9.46B (+1.0% YoY), maintaining a high margin of 32.5% and serving as the company’s effective earnings driver. Public decelerated sharply, with revenue of ¥1.73B (-29.1% YoY) and operating income of ¥0.28B (-77.6% YoY), while its margin declined substantially from the previous year. HealthTech expanded rapidly, with revenue of ¥0.65B (+150.2% YoY), but continued to post an operating loss of ¥0.85B and remains in the upfront investment phase. Of the company-wide operating income of ¥8.88B, Medical effectively generated all profits, while the decline in Public and the investment burden in HealthTech offset one another.

Key Financial Metrics

【Profitability】The operating margin declined to 28.2% from 30.6% in the previous year, although the gross margin improved to 65.8% from 65.2%, indicating effective cost management. The net margin declined to 17.8% from 21.9% in the previous year, as the extraordinary loss and tax burden pressured margins.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥13.04B, approximately 2.3 times net income, demonstrating strong cash-generation capacity and good earnings support.【Capital Efficiency】ROE was 9.9%. Although the decline was primarily attributable to the lower net margin, the earnings structure does not depend on financial leverage. Total asset turnover remains low, leaving room to reduce accounts receivable.【Financial Soundness】The Equity Ratio was 82.1%, while the current ratio exceeded 420%, indicating an extremely conservative capital structure and a high level of payment capacity.

Cash Flow Analysis

Operating Cash Flow was ¥13.04B, approximately 2.3 times net income of ¥5.65B, demonstrating solid cash-generation capacity. The primary factor was a ¥6.49B positive contribution from the accelerated collection of trade receivables, which significantly boosted first-half cash flow. Investing Cash Flow was -¥1.71B, primarily allocated to the acquisition of intangible assets and other items, resulting in Free Cash Flow of ¥11.36B. Financing Cash Flow was -¥3.43B, mainly due to dividend payments. Although Free Cash Flow more than sufficiently covered dividends, the collection of trade receivables that boosted OCF this period was partly temporary in nature, and caution is warranted regarding the sustainability of cash flow at the same level.

Quality of Earnings

Against ordinary income of ¥9.22B, an extraordinary loss of ¥1.1B from an impairment loss on investment securities was recognized, reducing profit before tax to ¥8.15B. This impairment loss is strongly one-off in nature and should be distinguished from recurring earnings power. Non-operating income was small at ¥0.34B, consisting primarily of ¥0.24B in interest income, indicating a low dependence on non-core income. OCF substantially exceeded net income, suggesting limited accruals—the divergence between accounting profit and cash—and overall good earnings quality. However, the fact that accelerated collection of trade receivables temporarily boosted OCF should be considered when evaluating recurring cash-generation capacity.

Earnings Forecast and Guidance

Against the full-year plan, revenue was ¥62.09B (+1.6% YoY), representing a progress rate of 50.7% and tracking in line with the plan. Operating income was ¥18.29B (+2.2% YoY), with a progress rate of 48.6%, while ordinary income was ¥18.89B (+2.6% YoY), with a progress rate of 48.8%; both represent generally standard progress. By contrast, net income was ¥5.65B for the first half against a full-year forecast of ¥13.02B, representing a progress rate of 43.4%, below the standard progress rate of 50%. This delay was primarily attributable to the one-off impact of the extraordinary loss, while progress at the operating level itself remained within an acceptable range. There were no revisions to either the earnings forecast or the dividend forecast.

Shareholder Returns

The interim dividend was ¥13 per share, and the full-year dividend forecast is ¥27. Based on total interim dividend payments of ¥3.43B against net income attributable to owners of the parent of ¥5.60B, the Payout Ratio is calculated at 61.3%, a somewhat high level. However, Free Cash Flow of ¥11.36B more than sufficiently covered dividends, and concerns regarding payment capacity are limited. No share repurchases were confirmed, indicating a shareholder-return policy centered on dividends.

Risk Factors

1. Segment concentration risk: Medical accounts for 92.5% of revenue and nearly all operating income, creating a structure in which demand trends and price competition in this business directly affect company-wide performance.

2. Sharp slowdown in the Public segment: Revenue declined 29.1% and operating income declined 77.6%, representing a significant deterioration. If this trend continues, it may weigh on company-wide growth and earnings.

3. Valuation fluctuations in investment securities: The company recognized a ¥1.1B impairment loss as an extraordinary loss this period, reducing net income more than ordinary income. Price fluctuations in its securities holdings may continue to cause volatility in future performance.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

The company has a highly profitable business profile, significantly exceeding the industry median.

Growth and Capital Efficiency

The revenue growth rate is significantly below the industry average, positioning the company as a high-profitability, low-growth business.

※Source: Compiled by the company

Key Points from the Earnings Report

1. The net income progress rate was 43.4%, below the standard progress rate of 50%. However, the primary cause was the one-off factor of the impairment loss on investment securities, while progress in operating income and ordinary income remained in line with the plan.

2. OCF was approximately 2.3 times net income, and Free Cash Flow more than sufficiently covered dividends. Together with an Equity Ratio of 82.1%, this confirms the soundness of the balance sheet.

3. The slowdown in the Public segment and losses from upfront investment in HealthTech are offsetting the high profitability of core Medical. The performance of these two segments will structurally influence the future trend in the company-wide operating margin.

Theoretical Share Price (Reference Value)

Sensitivity: ¥322–¥341 at Cost of Equity ±1%, and ¥329–¥335 at ω±0.1.

Note:

• Net assets as of the quarter-end were 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 values based solely on publicly disclosed data; these values do not constitute a forecast of the market share price or a recommendation of any specific investment action, and do not forecast or guarantee future share prices）

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. 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 discretion and responsibility, after consulting with professionals as necessary.

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