Amvis Holdings (7071) FY2026 Q2 Earnings Report

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Executive Summary

For Q2 (interim period) of FY2026, revenue increased while earnings declined, as cost increases exceeding revenue growth pressured profitability. Revenue expanded to ¥256.0B (+7.5% YoY), while Operating Income declined to ¥28.0B (△25.1%), Ordinary Income to ¥27.9B (△26.8%), and Net Income to ¥19.0B (△29.5%). The primary factor was an increase in the cost ratio in the core Ishinkan Business, with the gross margin declining from 32.5% to 27.6%.

Factors Affecting Performance

【Revenue】Revenue was ¥256.0B, representing a 7.5% increase YoY. The core Ishinkan segment contributed ¥250.3B (97.8% of the total, YoY +6.1%), while the Comprehensive Medical Support segment contributed ¥5.7B (2.2% of the total, YoY +149.6%); both contributed to revenue growth. Although still small in scale, Comprehensive Medical Support continues to achieve high growth.

【Profit and Loss】Operating Income was ¥28.0B (YoY △25.1%), resulting in a decline in earnings despite higher revenue. Cost of sales increased to ¥185.4B (YoY +15.6%), substantially outpacing revenue growth, and the gross margin declined by 491bp from 32.5% in the same period of the previous year to 27.6%. Meanwhile, the SG&A ratio improved from 16.8% to 16.6%, indicating that the increase in the cost ratio was the primary cause of the deterioration in profitability. By segment, the Ishinkan segment’s margin declined by 570bp from 15.6% to 9.9%, driving the decline in consolidated earnings, while Comprehensive Medical Support showed contrasting performance, with a margin of 57.1% and segment profit growth of 376.5% YoY. Ordinary Income was ¥27.9B (YoY △26.8%), and Net Income was ¥19.0B (YoY △29.5%); the increase in interest expense (¥3.37B versus ¥2.53B in the previous year) further reduced profit at the ordinary income level. Overall, the Company reported higher revenue but lower earnings, making improvement in the profitability of the core business a key focus going forward.

Segment Analysis

Ishinkan recorded revenue of ¥250.3B (97.8% of the total, YoY +6.1%), segment profit of ¥24.8B (YoY △32.5%), and a margin of 9.9% (15.6% in the previous year), with the margin declining substantially despite higher revenue. Comprehensive Medical Support generated revenue of ¥5.7B (2.2% of the total, YoY +149.6%), segment profit of ¥3.2B (YoY +376.5%), and a high margin of 56.9%, but its scale remains small and its impact on consolidated performance is limited. Most of the decline in consolidated Operating Income resulted from deteriorating profitability in Ishinkan.

Key Financial Metrics

【Profitability】The Operating Income margin was 11.0%, down from 15.7% in the same period of the previous year, while the Net Income margin was 7.4%, down 387bp from 11.3% in the same period of the previous year. The primary factor was the decline in the gross margin to 27.6% from 32.5%; the SG&A ratio improved slightly to 16.6% from 16.8%. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥37.7B, approximately 2.0 times Net Income of ¥19.0B, indicating strong cash backing for earnings. 【Investment Efficiency】ROE (annualized) was 10.0%, while capital expenditures of ¥32.3B were approximately 2.0 times depreciation and amortization of ¥15.9B, demonstrating continued investment in facilities. 【Financial Soundness】The Equity Ratio improved to 45.2% from 43.0% in the previous year, and current assets of ¥200.0B exceeded current liabilities of ¥171.3B. However, interest-bearing debt was substantial at ¥248.5B, including long-term borrowings of ¥198.5B; the level of financial leverage requires monitoring.

Cash Flow Analysis

Operating Cash Flow was ¥37.7B, up 14.8% YoY and exceeding Net Income of ¥19.0B. Investing Cash Flow was an outflow of ¥32.3B, most of which comprised capital expenditures of ¥32.3B, reflecting continued investment in facility expansion. Financing Cash Flow was an outflow of ¥21.6B, mainly due to a reduction in short-term borrowings (a decrease of ¥26.99B YoY). As a result, free cash flow, calculated as OCF less capital expenditures, remained positive at ¥5.4B, while cash and cash equivalents decreased by ¥16.2B to ¥92.1B. Dividend payments of ¥3.9B were also covered by OCF, indicating sound funding conditions during the first half.

Quality of Earnings

Non-operating income of ¥3.4B and non-operating expenses of ¥3.6B (including interest expense of ¥3.4B) both increased from the same period of the previous year, and recurring interest costs are pressuring Ordinary Income. Extraordinary items were small, comprising extraordinary income of ¥0.3B and extraordinary losses of ¥0.1B (loss on disposal of fixed assets), and their impact on current-period earnings was limited. Accordingly, the earnings decline can be judged to have resulted not from temporary factors but from an increase in the cost ratio of the core business. Comprehensive income was ¥19.0B, approximately equal to Net Income of ¥19.0B, while other comprehensive income items (remeasurements of retirement benefit plans of ¥0.0B) were immaterial, indicating little divergence between accounting profit and comprehensive income. The fact that OCF exceeded Net Income also demonstrates that earnings are supported by cash generation.

Earnings Forecast and Guidance

Progress against the full-year forecast was 49.5% for Revenue (forecast: ¥517.0B), 73.8% for Operating Income (forecast: ¥38.0B), 84.5% for Ordinary Income (forecast: ¥33.0B), and 90.3% for Net Income (forecast: ¥21.0B), with progress on earnings substantially exceeding the standard 50% level. This suggests that the full-year forecast was set conservatively without assuming a recovery in the profit margin during the second half, implying an expected second-half Operating Income level of approximately ¥9.96B. Neither the earnings forecast nor the dividend forecast was revised during the current quarter.

Shareholder Returns

The Q2 dividend was ¥0 per share, and the full-year dividend forecast is ¥4.0 per share. Based on the average number of shares outstanding during the period of 97,713,903 shares, the estimated annual total dividend is ¥3.9B, resulting in a Payout Ratio of approximately 18.6% against the full-year Net Income forecast of ¥21.0B and indicating a restrained shareholder return policy relative to the earnings level. First-half free cash flow of ¥5.4B exceeded the projected full-year total dividend, indicating that the current dividend level is supported by cash flow.

Risk Factors

1. Deterioration in the profitability of the core business: Ishinkan is the core business, accounting for 97.8% of consolidated revenue, but its segment profit margin declined by 570bp from 15.6% in the same period of the previous year to 9.9%. Improvement in cost factors such as personnel expenses and utilization rates is a prerequisite for a recovery in consolidated profitability.

2. High financial leverage: The Debt/EBITDA multiple is at a high level relative to interest-bearing debt of ¥248.5B, and interest expense increased from ¥2.53B in the same period of the previous year to ¥3.37B. Although EBITDA interest coverage remains sufficient, monitoring is required if the decline in profitability continues.

3. Longer collection period for trade receivables: Accounts receivable increased by ¥0.7B YoY to ¥92.6B, and annualized receivable days reached approximately 66 days. If collection terms continue to change, working capital and OCF could be affected.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

The Company’s profitability is below the industry median.

Growth and Capital Efficiency

The Company’s revenue growth rate is substantially below the industry median and is also relatively weak in terms of growth.

※Source: Compiled by the Company

Key Points from the Financial Results

1. Although Revenue increased by 7.5%, Operating Income declined by 25.1% as the gross margin fell by 491bp, clearly establishing a pattern of higher revenue but lower earnings. The increase in the cost ratio in the core Ishinkan Business is the key factor determining consolidated profitability.

2. OCF was approximately 2.0 times Net Income, and free cash flow remained positive at ¥5.4B, indicating strong cash backing for earnings. Meanwhile, the level of interest-bearing debt and the lengthening of receivable days are key areas to monitor from a future cash-efficiency perspective.

3. Progress toward the full-year earnings forecasts was high at 73.8%–90.3%; however, this reflects conservative plan setting rather than a recovery in profit margins during the second half. The profitability trend at Ishinkan during the second half will determine the full-year outcome.

Theoretical Share Price (Reference Value)

Sensitivity: ¥338–¥358 at Cost of Equity ±1%; ¥347–¥349 at ω ±0.1.

Notes:

• Goodwill amortization of ¥0.2 per share is added back to earnings (due to its non-cash nature and to enhance comparability with IFRS companies).
• Because Net Income progress against the full-year forecast (90%) exceeds the standard level (50%), forecast EPS is adjusted upward within a maximum range of +10% (because companies with progress ahead of plan tend to exceed forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Because forecast ROE is below the Cost of Equity, the theoretical value is below Book Value per Share.
• 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.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data; it 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 based on XBRL financial summary data. It does not recommend investment in any specific security. 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 professionals as necessary.

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