Kanamic Network Co.,LTD FY2026 Q3 Earnings Report

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Executive Summary

This was a results period of higher revenue and earnings, achieving profit growth that exceeded the rate of revenue growth, driven by the expansion of the Medical and Nursing Care Cloud Platform Business and the Healthy Life Expectancy Extension Business. Revenue was ¥4.63B (+15.2% YoY), Operating Income was ¥1.50B (+29.5%), Ordinary Income was ¥1.52B (+30.7%), and Net Income was ¥1.02B (+27.5%). Operating leverage took effect as the rate of increase in SG&A expenses remained below the revenue growth rate, improving the Operating Income margin to 32.5% from 28.9% in the same period of the previous year.

Factors Affecting Business Performance

【Revenue】Revenue of ¥4.63B (+15.2% YoY) was driven by the growth of the Medical and Nursing Care Cloud Platform Business (¥3.07B, +15.5% YoY, 66.4% of total revenue) and the Healthy Life Expectancy Extension Business (¥1.05B, +26.2% YoY, 22.7% of total revenue). Meanwhile, the Solutions Development Business remained sluggish at ¥0.62B (+10.2% YoY, including certain factors contributing to the increase, but -4.6% YoY in revenue from external customers). The combined increase in revenue from the two core businesses exceeded the consolidated increase in revenue, offsetting the decline in the Solutions Development Business.

【Profit and Loss】Operating Income of ¥1.50B (+29.5% YoY), Ordinary Income of ¥1.52B (+30.7%), and Net Income of ¥1.02B (+27.5%) all grew faster than revenue. The primary factors behind the higher earnings growth rate were a slight improvement in the gross margin to 64.7% from 64.3% in the same period of the previous year and the containment of the SG&A expense ratio at 32.2%. Non-operating income and expenses resulted in a small net gain, with the difference between Ordinary Income and Operating Income limited to ¥0.015B. By segment, the Solutions Development Business shifted to an operating loss (-¥0.002B), indicating divergent profitability structures within the business portfolio despite higher revenue and earnings. In conclusion, the Company achieved higher revenue and earnings.

Segment Analysis

The Medical and Nursing Care Cloud Platform Business forms the core of Company-wide profitability, with revenue of ¥3.07B (+15.5% YoY), Operating Income of ¥1.41B (+27.8%), and a profit margin of 46.0%, improved from 41.7% in the same period of the previous year. The Healthy Life Expectancy Extension Business recorded the highest growth rate, with revenue of ¥1.05B (+26.2% YoY), Operating Income of ¥0.17B (+85.6%), and a profit margin of 15.8%, improved from 10.8% in the same period of the previous year. Revenue from external customers in the Solutions Development Business declined year on year, and operating results shifted to a loss of ¥0.0B, compared with a profit in the same period of the previous year. Goodwill has increased in this business following the consolidation of THE WORLD MANAGEMENT PTE LTD as a subsidiary, and acquisition integration costs may be depressing short-term profitability.

Key Financial Metrics

【Profitability】The Operating Income margin of 32.5% and Net Income margin of 22.0% both improved from the same period of the previous year (28.9% and 19.8%, respectively), primarily due to a slight improvement in the gross margin to 64.7% and the containment of the increase in SG&A expenses (+5.6%, below the revenue growth rate of 15.2%). 【Cash Quality】Cash and deposits amounted to ¥4.10B, accounting for 55.1% of total assets, while contract liabilities increased significantly to ¥0.61B from ¥0.29B in the same period of the previous year, indicating an expansion of the prepaid contract base. 【Investment Efficiency】Annualized ROE remained high at 25.3%, while the net income structure—calculated by deducting corporate income taxes and other taxes of ¥0.50B from Profit Before Tax of ¥1.52B—reflects an effective tax rate of approximately 33%. 【Financial Soundness】With an Equity Ratio of 72.2%, current assets of ¥4.55B, and current liabilities of ¥1.72B, the Company has financial flexibility for short-term funding needs. Long-term borrowings have declined to ¥0.11B, indicating low financial leverage.

Cash Flow Analysis

Cash and deposits amounted to ¥4.10B, an increase of ¥0.77B from ¥3.33B in the same period of the previous year. Long-term borrowings declined significantly year on year, and the fact that cash levels increased while debt repayments progressed suggests that cash generation from the core business exceeded funding needs. Contract liabilities doubled to ¥0.61B from ¥0.29B in the same period of the previous year, with customer prepayments supporting the funding base. Accounts receivable amounted to ¥0.18B, down from ¥0.21B in the same period of the previous year, indicating no deterioration in the collection cycle despite revenue growth. Inventories are negligible, but work in process accounts for most of the balance, warranting monitoring alongside the progress of projects in the Solutions Development Business.

Quality of Earnings

The difference between Ordinary Income of ¥1.52B and Operating Income of ¥1.50B was small at ¥0.015B, indicating that most earnings were generated by the core business. Non-operating income, including interest income and miscellaneous income, was ¥0.02B, while non-operating expenses, including interest expenses and foreign exchange losses, were ¥0.01B. Both were negligible relative to revenue, and the Company’s results are not structured to be materially affected by financial income and expenses. A gain on the sale of fixed assets of ¥0.006B and a loss on disposal of fixed assets of ¥0.003B were included as extraordinary items, but their impact on Net Income was limited. Comprehensive Income was ¥1.07B, nearly equivalent to Net Income of ¥1.02B. Excluding foreign currency translation adjustments of ¥0.06B, the divergence between the two was small, supporting the assessment that earnings quality was high. The continued reduction in Operating Income caused by goodwill amortization should be noted as a difference between reported earnings and the underlying earnings power of the business.

Earnings Forecast and Guidance

The full-year plan calls for revenue of ¥6.35B (+15.4% from the previous fiscal year), Operating Income of ¥2.05B (+27.5%), and Ordinary Income of ¥2.05B (+27.1%). The Q3 cumulative progress rates were 72.9% for revenue, 73.4% for Operating Income, and 74.1% for Ordinary Income, broadly in line with the standard 75% progress level. The revenue and Operating Income required in Q4 are approximately ¥1.72B and ¥0.55B, respectively, corresponding to a required Q4 Operating Income margin of approximately 31.7%, only slightly below the actual Q3 cumulative Operating Income margin of 32.5%. No revisions have been made to the earnings forecast, and the current plan remains unchanged.

Shareholder Returns

The full-year dividend forecast is ¥9.00 per share. The Q2 dividend was ¥0, and the annual dividend structure concentrates distributions in the year-end dividend. Based on forecast EPS of ¥28.87, the Payout Ratio is approximately 31%, and the ratio of total dividends to forecast full-year Net Income is also approximately at the same level. Given the substantial cash and deposits of ¥4.10B and low debt levels, balance-sheet constraints on the payment of the year-end dividend are considered limited. The Company holds 675 thousand treasury shares, but whether additional purchases were made during the current period cannot be confirmed from the disclosed information.

Risk Factors

1. Dependence on the core business for earnings: The Medical and Nursing Care Cloud Platform Business accounts for 66.4% of external revenue and is the core of Company-wide earnings, with an Operating Income margin of 46.0%. Changes in regulations, customer IT investment trends, and the competitive environment directly affect consolidated results.

2. Deterioration in the profitability of the Solutions Development Business: Revenue from external customers in this business declined year on year, and operating results shifted to a loss of ¥0.0B. With goodwill also increasing following the consolidation of THE WORLD MANAGEMENT PTE LTD, the progress of acquisition integration and project profitability management are key challenges.

3. Goodwill and intangible fixed assets: Goodwill amounted to ¥0.75B, representing 14.0% of net assets, while intangible fixed assets amounted to ¥1.47B, representing 19.8% of total assets. If the monetization of the acquired business falls below plan, impairment risk could arise in addition to the amortization burden.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

The Company’s profitability metrics significantly exceed the industry median, positioning it among the high-profitability group within the IT and telecommunications industry.

Growth and Capital Efficiency

The revenue growth rate also exceeds the industry median, but does not reach the upper bound of the IQR (19.9%). The growth rate is therefore in the upper range of the industry, though not among the very highest.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Operating Income growth of +29.5% significantly exceeded revenue growth of +15.2%, clearly demonstrating operating leverage against the backdrop of the contained increase in SG&A expenses (+5.6%).

2. Q3 cumulative progress against the full-year plan was 72.9% for revenue and 73.4% for Operating Income, broadly in line with the standard 75% progress level. The required Q4 Operating Income margin of 31.7% is slightly below the Q3 cumulative actual result of 32.5%, meaning that achieving the plan does not require a significant improvement over the existing profitability level.

3. Contract liabilities expanded by +109.5% year on year (¥0.29B→¥0.61B), confirming the accumulation of the prepaid contract base. At the same time, the shift of the Solutions Development Business into the red and the increase in goodwill have emerged as issues requiring close monitoring of post-acquisition integration and monetization.

Theoretical Share Price (Reference Value)

Sensitivity: ¥171–¥181 at Cost of Equity ±1%, and ¥174–¥178 at ω±0.1.

Notes:

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

(Valuation 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 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 a professional as necessary.

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