internet infinity (6545) FY2026 Q3 Earnings Report

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Executive Summary

Revenue and profit increased, driven by growth in the core Healthcare Solutions Business. Ordinary income and net income expanded at a faster pace than operating income, supported by an improvement in non-operating income and expenses. Revenue was ¥44.4B (+13.2% YoY), operating income was ¥3.9B (+13.9%), ordinary income was ¥4.3B (+24.2%), and net income attributable to owners of the parent was ¥2.6B (+26.3%). The gross profit margin improved to 41.1% (40.0% in the previous year), but the SG&A expense ratio also rose to 32.5% (31.4% in the previous year), limiting the improvement in the operating margin to 8.7% (8.6% in the previous year). Meanwhile, the improvement in non-operating income and expenses, including subsidy income, boosted the growth of ordinary income and net income.

Factors Affecting Earnings

【Revenue】Revenue increased 13.2% YoY to ¥44.4B. By segment, the Healthcare Solutions Business led growth with revenue of ¥31.8B (71.8% of total revenue, +18.4% YoY), while the Home Care Services Business remained at ¥12.5B (28.2% of total revenue, +1.8%). The Healthcare Solutions Business accounted for the majority of the ¥5.2B consolidated revenue increase, indicating that the breadth of growth remains limited.

【Profit and Loss】Operating income was ¥3.9B (+13.9% YoY), with the operating margin at 8.7%, broadly unchanged from 8.6% in the previous year. The improvement in the gross profit margin (+approximately 1.1pt) was largely offset by the increase in the SG&A expense ratio (+approximately 1.1pt). Ordinary income was ¥4.3B (+24.2% YoY), as the ¥0.7B increase in non-operating income, including ¥0.4B in subsidy income, resulted in growth exceeding that of operating income. Net income was ¥2.6B (+26.3%). As the same period of the previous year included extraordinary losses, including a ¥42.77M goodwill impairment loss, the reduction in extraordinary income and losses this period contributed to the increase in profit. Revenue and profit increased.

Segment Analysis

The Healthcare Solutions Business is the core business, with revenue of ¥31.8B (+18.4% YoY), segment profit of ¥5.0B (+22.5%), and a profit margin of 15.8% (15.3% in the previous year), showing improvement in scale, growth, and profitability. The Home Care Services Business generated revenue of ¥12.5B (+1.8%), segment profit of ¥3.0B (+5.6%), and a profit margin of 23.9% (23.1% in the previous year). Although its profit margin is high, growth has slowed. The Healthcare Solutions Business contributed 62.7% and the Home Care Services Business 37.3% of total segment profit of ¥8.0B. Corporate expenses (adjustments) increased to ¥4.2B (+17.2% YoY), at a faster pace than total segment profit, which is restraining the improvement in the consolidated operating margin.

Key Financial Indicators

【Profitability】The operating margin was 8.7% (8.6% in the previous year), the net profit margin was 5.8% (5.3% in the previous year), and the ordinary income margin was 9.7% (8.9% in the previous year), with all three improving modestly from the previous year. 【Cash Flow Quality】Accounts receivable were ¥10.2B, up approximately 15% from ¥8.9B in the previous year, increasing at a faster pace than the 13.2% revenue growth rate. Trends in the collection period will therefore require monitoring. Cash and deposits were ¥17.9B, down from ¥23.0B in the previous year. 【Investment Efficiency】Annualized ROE was 20.2% and remained high due to the combination of the net profit margin, total asset turnover, and financial leverage. However, the substantial contribution from financial leverage should be taken into account in the assessment. 【Financial Soundness】The equity ratio was 38.1% (38.0% in the previous year), broadly unchanged. Goodwill was ¥5.0B, representing 29.1% of net assets, while intangible assets increased to ¥8.8B. The recovery of investments in acquired assets will determine the quality of financial soundness.

Cash Flow Analysis

As the cash flow statement is not disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥17.9B, down approximately ¥5.1B from ¥23.0B in the same period of the previous year. During the same period, goodwill of ¥3.0B and intangible assets increased significantly following the acquisition of all shares of Centworks Co., Ltd. Accordingly, M&A-related cash outflows appear to have contributed to the decline in cash. Accounts receivable were ¥10.2B, up approximately 15% from ¥8.9B in the previous year and increasing faster than revenue (+13.2%), potentially placing some pressure on cash generation from operating activities. Current assets were ¥29.4B against current liabilities of ¥20.9B. Although short-term liquidity remains intact, the company’s ability to address short-term liabilities, including ¥7.5B in short-term borrowings and ¥1.1B in current maturities of long-term debt, requires ongoing monitoring.

Earnings Quality

The increase in profit this period reflected not only operating income growth (+13.9%) but also an improvement in non-operating income and expenses, which boosted ordinary income (+24.2%) and net income (+26.3%). These two factors should be distinguished when evaluating earnings quality. Non-operating income of ¥0.7B included ¥0.4B in subsidy income, equivalent to 1.6% of revenue. This includes temporary and policy-dependent elements that differ in nature from recurring business income. The same period of the previous year included a ¥42.77M goodwill impairment loss recorded as an extraordinary loss, whereas no similar extraordinary loss was identified this period. Accordingly, part of the year-on-year improvement in net income represents an apparent increase resulting from the elimination of a temporary factor in the previous year. Comprehensive income was ¥2.6B, broadly in line with net income attributable to owners of the parent of ¥2.6B. As other comprehensive income items, such as valuation differences on available-for-sale securities, were immaterial, the divergence between net income and comprehensive income was small, with no significant factors materially impairing earnings quality. The fact that the increase in accounts receivable (approximately 15%) exceeded the revenue growth rate (13.2%) provides a basis for monitoring the speed at which profit is converted into cash from an accrual perspective.

Earnings Forecast and Guidance

The full-year earnings forecast remains unchanged at revenue of ¥60.1B (+16.4% YoY), operating income of ¥5.3B (+32.4%), and ordinary income of ¥5.3B (+30.0%). The Q3 cumulative progress rates were 73.8% for revenue, 72.7% for operating income, 80.9% for ordinary income, and 83.8% for net income. Ordinary income and net income exceeded the standard progress benchmark of approximately 75%, while operating income was slightly below it. To achieve the full-year plan, Q4 revenue of ¥15.7B, operating income of approximately ¥1.5B, and an operating margin in the approximately 9% range will be required, implying an improvement from the cumulative actual operating margin of 8.7%. The full-year plan assumes a significant year-on-year improvement in profit margins, and the modest improvement achieved in the cumulative results to date is a point requiring attention when assessing progress.

Shareholder Returns

The dividend forecast was revised during the quarter, and the full-year forecast dividend per share is ¥18. The Q2-end dividend was ¥0, suggesting a policy centered on the year-end dividend. Based on an average number of shares outstanding during the period of 5.295M shares, the total annual dividend is approximately ¥0.95B, and the forecast payout ratio against forecast full-year net income of ¥3.10B is approximately 30.7%, within the generally accepted sustainability guideline of less than 60%. Treasury shares increased from effectively zero in the same period of the previous year to ¥0.9B, indicating that share repurchases were conducted. Cash and deposits decreased year on year, and the company is in a phase of pursuing M&A investment and shareholder returns simultaneously. Accordingly, the allocation of funds to dividends and share repurchases, as well as the relationship with cash and deposits, should be monitored continuously.

Risk Factors

1. Concentration of growth by segment: Revenue in the Healthcare Solutions Business increased 18.4% YoY and drove consolidated growth, while the Home Care Services Business remained at +1.8%, widening the difference in growth rates between the businesses.

2. Goodwill and acquired-asset impairment risk: Goodwill was ¥5.0B, representing 29.1% of net assets, and a ¥42.77M impairment loss related to goodwill associated with Seiko Giken was recorded in the same period of the previous year. Goodwill of approximately ¥3.0B was newly recognized this period following the acquisition of Centworks Co., Ltd. The acquired company’s progress in achieving its business plan will be directly linked to future impairment risk.

3. Trends in short-term liabilities and collection periods: The company is dependent on short-term liabilities, including ¥7.5B in short-term borrowings and ¥1.1B in current maturities of long-term debt. In addition, the increase in accounts receivable (approximately 15%) exceeded the revenue growth rate (13.2%). Funding and collection management will require ongoing monitoring.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The operating margin was slightly above the industry median, while the net profit margin was slightly below the median, placing profitability broadly at the middle of the industry range.

Growth and Capital Efficiency

The revenue growth rate exceeded the industry median but did not reach the upper bound of the IQR (19.9%).

※Source: Compiled by the Company

Key Earnings Highlights

1. The primary driver of the increase in revenue and profit was the expansion of the Healthcare Solutions Business, whose segment profit margin improved to 15.8% (15.3% in the previous year). Meanwhile, the Home Care Services Business maintained a high profit margin of 23.9%, but its growth rate slowed to +1.8%. The difference in growth between the businesses is therefore a notable feature of the earnings structure.

2. Growth in ordinary income and net income (+24.2% and +26.3%, respectively) exceeded operating income growth (+13.9%). This difference resulted from the improvement in non-operating income and expenses, including subsidy income. The improvement in operating-level profit margins was modest (+approximately 0.1pt), and the sustainability of growth in ordinary income and net income depends on the recurrence of non-operating factors.

3. Following the acquisition of Centworks Co., Ltd., goodwill and intangible assets increased significantly, raising their ratio to total assets. The recovery of investments following the recognition of acquisition-related assets is an item that can be continuously monitored in the earnings data as a potential medium-term inflection point in the earnings structure.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥393–¥416 at ±1% for the cost of equity, and ¥402–¥407 at ±0.1 for ω.

Notes:

• Net assets as of the quarter-end were 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 price or a recommendation of any specific investment action, and does not predict or guarantee future stock prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary 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 responsibility, after consulting with a professional as necessary.

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