Kanamic Network (3939) FY2026 Q1 Earnings Report

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Executive Summary

In addition to double-digit revenue growth, Operating Income and Net Income increased at rates exceeding revenue growth, primarily due to an improved gross margin. Revenue was ¥1.48B (¥1.31B in the same period of the previous year, YoY +12.9%), Operating Income was ¥0.46B (+25.9%), Ordinary Income was ¥0.46B (+26.0%), and Net Income attributable to owners of the parent was ¥0.31B (+29.6%). With the increase in cost of sales limited to 2.0%, the gross margin improved from 62.8% to 66.4%, absorbing the increase in SG&A expenses (+14.2%) and achieving profit growth.

Factors Affecting Business Performance

【Revenue】Revenue was ¥1.48B, up +12.9% year on year. By segment, the core MedicalAndNursingCareCloudPlatform generated revenue of ¥0.96B (65.0% of total revenue) and an Operating Income margin of 44.2%, making it the earnings pillar. HealthyLifespanExtension generated revenue of ¥0.31B with a profit margin of 16.8%, while SolutionsDevelopment generated revenue of ¥0.24B with a profit margin of 6.1%, both relatively low-profitability businesses.

【Profit and Loss】Cost of sales was ¥0.50B, up only +2.0% year on year and significantly below revenue growth, resulting in a 360bp improvement in the gross margin from 62.8% to 66.4%. SG&A expenses were ¥0.52B, up +14.2% year on year and exceeding the revenue growth rate; however, the improvement in gross profit absorbed this increase, expanding the Operating Income margin from 27.9% to 31.1%. Non-operating gains and losses were immaterial, and Ordinary Income was approximately at the same level as Operating Income. Against Profit Before Tax of ¥0.46B, the Company incurred income taxes of ¥0.16B (effective tax rate: 33.9%), resulting in Net Income of ¥0.31B, up +29.6% YoY. This was a high-quality earnings performance, characterized by both revenue and profit growth, with the profit growth rate exceeding the revenue growth rate.

Segment Analysis

MedicalAndNursingCareCloudPlatform is the core business, generating revenue of ¥0.96B and Operating Income of ¥0.42B (profit margin: 44.2%), and accounting for the majority of segment profit. HealthyLifespanExtension generated revenue of ¥0.31B and Operating Income of ¥0.05B (profit margin: 16.8%), while SolutionsDevelopment generated revenue of ¥0.24B and Operating Income of ¥0.01B (profit margin: 6.1%), indicating significant differences in profitability among the businesses. The Company-wide Operating Income margin of 31.1% is supported by the high margins of the core cloud platform business.

Key Financial Indicators

【Profitability】The Operating Income margin of 31.1% (27.9% in the previous year), Net Income margin of 20.6% (18.0% in the previous year), and gross margin of 66.4% (62.8% in the previous year) all improved year on year.【Cash Quality】Cash and deposits were ¥3.04B, accounting for 48.6% of total assets, while accounts receivable of ¥0.21B and accounts payable of ¥0.04B indicate that operating receivables and payables remain limited in scale. Contract liabilities were ¥0.21B, down 28.0% from ¥0.29B in the previous year, indicating that support for cash flow from deferred revenue has weakened.【Investment Efficiency】Annualized ROE was high at 26.4%. This was primarily attributable to the Net Income margin being in the 20% range, while both total asset turnover and financial leverage remained low.【Financial Soundness】The Equity Ratio was 74.0%. Current assets of ¥3.47B versus current liabilities of ¥1.16B indicate ample liquidity. Long-term borrowings were ¥0.24B, down 22.0% from ¥0.31B in the previous year, and reliance on interest-bearing debt was low.

Cash Flow Analysis

Cash and deposits were ¥3.04B, a decrease of ¥0.29B (8.5%) from ¥3.33B in the same period of the previous year. The ratio to total assets remained high at 48.6%, and the Company maintained cash liquidity substantially exceeding current liabilities of ¥1.16B. Accounts receivable of ¥0.21B and accounts payable of ¥0.04B were small in scale, limiting their impact on cash efficiency. Meanwhile, contract liabilities (advances received) were ¥0.21B, down 28.0% from ¥0.29B in the previous year, indicating that support for working capital from deferred revenue has weakened. Work in progress also increased significantly to ¥0.04B from ¥0.01B in the previous year, apparently reflecting the progress of development on individual projects; however, depending on the progress of acceptance inspections and revenue recognition, this may affect the timing of future cash collections.

Earnings Quality

The increase in profit for the current period was primarily attributable to an improvement in the gross margin, as the increase in cost of sales was significantly below revenue growth. Both non-operating income and expenses were immaterial, and the impact of temporary factors was limited. The difference between Ordinary Income of ¥0.46B and Net Income of ¥0.31B was attributable to income taxes of ¥0.16B (effective tax rate: 33.9%), and no extraordinary gains or losses were identified. Comprehensive Income was ¥0.34B, with the difference from Net Income of ¥0.31B primarily attributable to a ¥0.04B increase in foreign currency translation adjustments. The significant year-on-year increase in work in progress represents an accrual-related factor concerning the timing of revenue recognition, and the progress of acceptance inspections should be monitored going forward. Overall, the profit increase resulted from improved recurring business earnings power, and earnings quality is considered sound.

Earnings Forecast and Guidance

The full-year Company forecast calls for Revenue of ¥6.35B (YoY +15.4%), Operating Income of ¥2.05B (+27.5%), Ordinary Income of ¥2.05B (+27.1%), and forecast EPS of ¥28.87. Q1 results (Revenue of ¥1.48B and Operating Income of ¥0.46B) represent progress rates of 23.3% for Revenue and 22.4% for Operating Income, slightly below the 25% benchmark for evenly distributed quarterly progress. However, the Q1 annualized Operating Income margin of 31.1% is close to the full-year plan’s Operating Income margin of 32.3%, and the slower progress does not indicate a significant downside.

Shareholder Returns

Retained earnings were ¥4.66B, while cash and deposits were ¥3.04B, indicating substantial capital accumulation and cash on hand. Quarterly Net Income attributable to owners of the parent was ¥0.31B, up +29.6% year on year, and the funds available for shareholder returns are trending upward. The dividend per share was recorded at ¥9 (¥0 in the same quarter of the previous year).

Risk Factors

1. Sharp Increase in Work in Progress: Work in progress was ¥0.04B, a significant year-on-year increase of +251.4%. Although this may reflect progress in the development of individual projects, delays in acceptance inspections or deterioration in project profitability could affect the timing of future revenue recognition and profit margins.

2. SG&A Expense Growth Exceeding Revenue Growth: SG&A expenses increased +14.2% year on year, exceeding the revenue growth rate of +12.9%. If upfront investments in personnel, sales, and development continue, they could pressure the Operating Income margin after the benefits of gross margin improvement have run their course.

3. Potential Impairment of Goodwill and Intangible Assets: The Company holds goodwill of ¥0.79B (17.1% of net assets) and intangible assets of ¥1.47B (23.5% of total assets). If the profitability of the related businesses falls below plan, accounting impairment losses could arise.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

The Company’s Operating Income margin and Net Income margin significantly exceed the industry median, placing it in the upper-tier group.

Growth and Capital Efficiency

The revenue growth rate was approximately in line with the industry median. Although it was not as high as the upper end of the IQR, the Company achieved average growth.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. During the quarter, Revenue increased +12.9%, while Operating Income increased +25.9% and Net Income increased +29.6%, confirming revenue and profit growth accompanied by an improved gross margin. The Operating Income margin of 31.1% and Net Income margin of 20.6% were significantly above the industry median.

2. With an Equity Ratio of 74.0% and a capital structure in which current assets substantially exceed current liabilities, the Company’s financial soundness is high. Long-term borrowings decreased 22.0% from the previous year, and reliance on interest-bearing debt also declined.

3. The substantial increase in work in progress (+251.4%) and the increase in SG&A expenses exceeding revenue growth (+14.2%) are points to monitor when assessing future profit margins and cash collection efficiency. Full-year progress rates (Revenue: 23.3%; Operating Income: 22.4%) were slightly below the standard 25%.

Theoretical Share Price (Reference Value)

Sensitivity: ¥163–¥173 at ±1% for the cost of equity, and ¥166–¥171 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing gap relative to the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(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 future share prices.)

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This report is an earnings analysis document automatically generated by AI through analysis of 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 professionals as necessary.

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