Q3 FY2026 results: Revenue ¥401.70B (YoY +¥56.10B, +16.2%), Operating Income ¥31.81B (YoY -¥13.95B, -30.5%), Profit Before Tax ¥26.99B (YoY -¥20.06B, -42.6%), Net income attributable to owners of the parent ¥13.71B (YoY -¥13.49B, -49.6%). While Revenue expanded steadily, Operating Income declined significantly due to initial losses at newly opened hospice facilities, upfront investments, and higher SG&A. A high effective tax rate of 49.2% also weighed on profitability, pushing the net margin down to 3.6%. On an EBITDA basis including Depreciation of ¥35.77B, the company has an earnings capacity equivalent to ¥67.58B, but capital efficiency remains low at ROE 4.5% and ROIC 2.5%. The company maintains its Full Year outlook of Revenue ¥582.50B and Operating Income ¥55.00B, aiming to achieve the plan in Q4 through various measures including asset monetization (off-balance-sheet).
[Revenue] Revenue was ¥401.70B (YoY +16.2%), expanding steadily. The main drivers were expansion of the Hospice Business (59 facilities in operation; Revenue ¥122.82B, YoY +20.2%) and the newly consolidated Medical Care Residence Business (consolidated as a subsidiary in October 2024; Revenue ¥57.32B; 27 facilities; capacity 2,010 residents). The Home-visit Nursing business also contributed to growth with 91 locations and Revenue of ¥97.75B (+5.6%). Meanwhile, the Healthcare Institutions Segment (Japan) recorded Revenue of ¥72.77B (-8.9%) due to the impact of monthly fee reductions in the first half, and the U.S. posted Revenue of ¥51.49B (-0.9%) reflecting seasonality and refined estimates for receivables collection, showing a slight slowdown.
[Profit and Loss] Operating Income decreased significantly to ¥31.81B (YoY -30.5%). Gross profit was ¥186.12B, maintaining a high gross margin of 46.3%, but SG&A reached ¥160.61B and, together with cost of sales, offset the positive impact of higher Revenue. Key factors included initial losses at newly opened hospice facilities (six facilities opened in Q3; occupancy at existing facilities is 85.4%, while new facilities are in ramp-up), upfront investments to strengthen staffing at Medical Care Residences, and increased support costs in the domestic Healthcare Institutions business. The Operating margin fell to 7.9%.
Below Operating Income, the company recorded Finance costs of ¥5.26B (long-term borrowings increased by +¥89.12B YoY; interest-bearing debt ¥329.62B), Finance income of ¥0.43B, and Other income of ¥6.78B, resulting in Profit Before Tax of ¥26.99B (YoY -42.6%). As a one-off factor, Revenue was reduced by refined estimates for past receivables collection at U.S. healthcare institutions, an adjustment not included in the recurring earnings structure. The effective tax rate was elevated at 49.2%, with tax expense reaching ¥12.66B. This heavy tax burden likely reflects a temporary rise in the statutory effective tax rate and/or the impact of deferred tax asset valuation. Consequently, Net income attributable to owners of the parent decreased significantly to ¥13.71B (YoY -49.6%), and the net margin declined to 3.6%.
The divergence between Profit Before Tax of ¥26.99B and Net income of ¥13.71B (-49.2%) is mainly attributable to the high effective tax rate (49.2%), indicating a temporary tax burden structure that compressed profitability.
Conclusion: higher Revenue but lower profit. The topline expanded steadily, but initial losses at new facilities and upfront investment-driven cost increases, together with a high tax burden, substantially depressed margins.
Healthcare Institutions Segment (Japan): Revenue ¥72.77B (YoY -8.9%), EBITDA ¥27.00B (-21.5%), resulting in lower Revenue and profit. Although affected by monthly fee reductions in the first half, trends have improved since Q3. The number of key supported locations increased to 158 (YoY +22.0%), and monthly fee optimization measures are expected to contribute to earnings improvement from Q4 onward.
Healthcare Institutions Segment (U.S.): Revenue ¥51.49B (YoY -0.9%), roughly flat. Seasonality in patient volumes and reduced Revenue due to refined estimates for past receivables collection had an impact. Roll-up M&A continues, and with the acquisition of DM Foot & Ankle, the network expanded to 36 locations. With the launch of OBL (office-based labs for catheter treatments), the company is building a foundation for medium- to long-term earnings growth.
Hospice Segment: Revenue ¥122.82B (YoY +20.2%), higher Revenue but lower earnings with EBITDA of ¥15.26B (-13.2%). As the core business, it accounts for approximately 30.6% of total Revenue, the largest share. Operations are solid with 59 facilities and occupancy of 85.4% at existing facilities, but initial losses at six new facilities opened in Q3 and declining unit prices weighed on margins. Contribution to Operating Income was limited, making this the main segment driving higher Revenue but lower profit. For the Full Year, the company expects profit improvement through higher utilization at new facilities and unit price recovery.
Home-visit Nursing Segment: Revenue ¥97.75B (YoY +5.6%), EBITDA ¥13.99B (+4.0%), delivering higher Revenue and profit. With 91 locations, the segment continues stable growth. Although initial losses arose at new stations, improved utilization of nurses and therapists preserved profitability.
Medical Care Residence Segment: Newly consolidated with Revenue of ¥57.32B. Added as a new segment through the consolidation of Noah Konzern as a subsidiary. The segment has 27 facilities with a capacity of 2,010 residents and an occupancy rate of 78.7%, but profitability remains low due to upfront investments to strengthen staffing. In Q4, the company aims to improve profitability through higher utilization and expansion of higher-acuity, higher-paying resident intake.
Summary: The largest-contribution Hospice Business compressed Operating Income due to initial losses at new facilities, becoming the primary driver of the company-wide profit decline. Meanwhile, Home-visit Nursing provided stable profit growth, Healthcare Institutions (Japan) is on an improving trend, and Medical Care Residences are in an upfront investment phase.
Profitability: ROE 4.5% (prior year 9.0%), Operating margin 7.9% (prior year 13.2%), net margin 3.6% (prior year 7.9%). DuPont decomposition consists of a net margin of 3.6%, total asset turnover of 0.419, and financial leverage of 2.98x. ROIC 2.5% (well below the industry median of 9.0%). The effective tax rate of 49.2% is high even within the industry, and tax burden is a drag on profitability improvement.
Cash quality: Including Depreciation of ¥35.77B, EBITDA-equivalent is approximately ¥67.58B. Operating Cash Flow data are undisclosed, but Accounts receivable of ¥134.57B (14.0% of total assets) and DSO of 122 days indicate lengthening, highlighting challenges in working capital collection. Free Cash Flow is also undisclosed, but CapEx is concentrated in new hospice facility openings (six facilities in Q3) and U.S. M&A, implying significant cash outflows.
Investment efficiency: Although invested capital expanded due to increases in Property, plant and equipment of ¥22.65B and Goodwill of ¥13.62B, ROIC remains low at 2.5%, indicating underperformance in capital efficiency. While the CapEx/Depreciation multiple is not disclosed, given the pace of new facility openings (15 facilities planned in FY26/3), the company appears to be in a growth investment phase with a ratio above 1.0x.
Financial soundness: Equity Ratio 32.9% (prior year 35.6%), total assets ¥959.84B, net assets ¥321.94B, total liabilities ¥637.90B. Long-term borrowings of ¥295.65B increased by +¥89.12B (+43.2%) YoY, with total interest-bearing debt of ¥329.62B, and a debt-to-equity ratio of 1.98x. The current ratio is undisclosed, but with short-term borrowings of ¥33.97B, short-term liquidity warrants attention. Debt/Capital ratio is 50.6%, indicating relatively high leverage within the industry.
Progress versus Full Year guidance: Revenue of ¥401.70B is 69.0% of the Full Year outlook of ¥582.50B (6.0pt below the standard 75% by Q3). Operating Income of ¥31.81B is 57.8% of the Full Year outlook of ¥55.00B (17.2pt below the standard 75%). Net Income of ¥13.71B is 47.6% of the Full Year outlook of ¥28.80B (a substantial 27.4pt below the standard 75%).
Background to the shortfall: Initial losses and unit price declines at new hospice facilities, prolonged impact from monthly fee reductions in the domestic Healthcare Institutions business, reduced Revenue due to refined estimates for receivables collection in the U.S., and higher tax burden from a high effective tax rate overlapped. The Hospice Business notably has a back-half-weighted earnings structure, with expectations for improved utilization and unit price recovery in Q4.
Outlook revision: The company maintains its Full Year outlook and plans to execute various measures in Q4, including asset monetization. Given the low progress, significant profit improvement in Q4 or one-off profit recognition will be necessary; potential actions include recognizing gains on sales via asset monetization (off-balance-sheet) and SG&A reductions. The outlook assumes continued improvement in monthly fees in the domestic Healthcare Institutions business, unit price recovery and higher utilization at new hospice facilities, and utilization improvements in Home-visit Nursing and Medical Care Residences.
Dividend policy: Interim dividend (Q2) ¥0, year-end dividend outlook ¥0, Full Year dividend outlook ¥0. The payout ratio is 0%, and the company continues a no-dividend policy. While the company has not provided explicit commentary on dividend policy, given current performance (Net Income ¥13.71B, Full Year outlook ¥28.80B) and increased borrowings (long-term borrowings +¥89.12B), it is inferred that the company prioritizes strengthening its financial base via retained earnings and growth investments.
Share repurchases: No share repurchase program has been disclosed.
Total Return Ratio: With dividends at ¥0 and share repurchases at ¥0, total shareholder returns are ¥0 and the Total Return Ratio is 0%. No shareholder returns are being implemented at present, and profits are fully retained.
Sustainability assessment: Conditions for resuming dividends include stable Net Income growth, a positive turn in Free Cash Flow, and normalization of borrowing levels. Currently, limited Operating Cash Flow (Accounts receivable DSO 122 days), continued large-scale investments (new hospice facilities; U.S. M&A), and rising borrowings make a near- to mid-term dividend resumption difficult. Cash flow improvement via asset monetization in Q4 and a recovery in profitability in subsequent periods are prerequisites for dividend resumption.
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[Long term]
[Industry positioning] (Reference information; our research)
Profitability: ROE 4.5% (2.0pt below the industry median of 6.5%), Operating margin 7.9% (0.8pt above the industry median of 7.1%), net margin 3.6% (1.7pt below the industry median of 5.3%). While the Operating margin is around the industry median, the high effective tax rate compresses the net margin, placing ROE in the lower tier within the industry.
Soundness: Equity Ratio 32.9% (significantly below the industry median of 57.1% by -24.2pt), financial leverage 2.98x (1.26x above the industry median of 1.72x). Dependence on debt is high within the industry, and financial soundness lags.
Efficiency: Total asset turnover 0.419 (well below the industry median of 0.81), ROIC 2.5% (well below the industry median of 9.0%), and Accounts receivable turnover (DSO) 122 days (64 days above the industry median of 57.87 days). Both capital efficiency and working capital efficiency rank in the lower tier within the industry, leaving substantial room for improvement.
Growth: Revenue growth rate +16.2% (+7.1pt above the industry median of 9.1%). Topline growth ranks high within the industry, indicating a strong pace of business expansion.
Net debt/EBITDA multiple: Undisclosed, but given long-term borrowings of ¥295.65B and interest-bearing debt of ¥329.62B versus EBITDA of approximately ¥67.58B, it is estimated at about 4.9x (industry median -1.54x, i.e., the industry median is a net cash position). Debt levels are high within the industry, warranting attention to financial risk.
(Industry: Healthcare services (healthcare), comparables: 2025 Q3, n=56 companies; source: our aggregation)
Risk of the next medical fee schedule revision (June 2026): Although the base revision rate is +3.09%, the hospice industry has suffered reputational damage since 2024 due to reports of misconduct by competitors, raising the possibility of increased operating burden via bundled payments, etc. Profitability improvement for healthcare institutions is also expected to be limited as revisions focus on wage increases and inflation responses, potentially exerting medium-term downward pressure on profitability in the core Hospice and Healthcare Institutions (Japan) businesses. While quantification is difficult, there is a risk that the Operating margin could decline further from the current 7.9%.
Financial risk (rising borrowings and liquidity): Long-term borrowings increased by +¥89.12B (+43.2%) YoY, bringing interest-bearing debt to ¥329.62B. Short-term borrowings of ¥33.97B also exist, and in a rising rate environment, Finance costs could increase. A quality alert points to liquidity stress (Cash/short-term liabilities 0.00x), requiring attention to short-term liquidity. If Q4 asset monetization measures do not progress as planned, there is concern over refinancing risk and deterioration in funding conditions.
Working capital risk (delayed receivables collection): DSO at 122 days (64 days above the industry median of 57.87 days) is lengthening, and in particular, the U.S. Healthcare Institutions Segment saw reduced Revenue due to refined estimates for receivables collection. If collection delays persist, Operating Cash Flow will be squeezed, potentially making it difficult to balance growth investments and debt repayment. Accounts receivable of ¥134.57B account for 14.0% of total assets; a 1% deterioration in collection rate would equate to an impact of approximately 4.2% of Operating Income.
Q4 asset monetization measures are key to achieving the Full Year plan: As of Q3, progress stands at 69.0% for Revenue, 57.8% for Operating Income, and 47.6% for Net Income, all well below standard progress. If one-off profit recognition via asset monetization (off-balance-sheet) or SG&A reductions do not materialize, the risk of missing Full Year guidance is high. It is necessary to monitor the specific measures and their impact in the Q4 results.
SG&A control and tax burden reduction are essential for profitability improvement: While the Operating margin of 7.9% is around the industry median, the high effective tax rate of 49.2% depresses the net margin to 3.6%, below the industry median of 5.3%. SG&A of ¥160.61B is 40.0% of Revenue; eliminating initial losses at new facilities and reducing fixed costs are prerequisites for margin improvement. Reducing tax burden (utilizing deferred tax assets and tax optimization) is also a medium-term challenge.
Working capital efficiency is the top priority for improving returns on capital: DSO is lengthening at 122 days, roughly 64 days longer than the industry median of 57.87 days. This equates to approximately ¥9.0B worth of capital tied up in receivables, and improving collection could materially enhance Operating Cash Flow and ROIC. Specific measures include strengthening receivables collection systems in Japan and the U.S. healthcare businesses and streamlining claims processes for medical fees in the Hospice Business.
This report is an automatically generated earnings analysis produced by AI that integrates XBRL financial statement data and PDF results briefing materials. It does not constitute a recommendation to invest in any specific security. The industry benchmarks are reference information aggregated by our firm based on publicly available financial data. Investment decisions are your own responsibility; consult a professional as needed.
Operating Cash Flow (OCF): While detailed OCF information is not available in the dataset, non-cash expenses are sizable relative to Net Income of ¥13.71B, with Depreciation of ¥35.77B, indicating a gap between accounting profit and cash generation. With DSO lengthening to 122 days, the OCF/Net Income multiple may be below 1.0x, suggesting limited cash backing for earnings.
Investing Cash Flow: CapEx continues at a large scale due to new hospice facility openings (six facilities in Q3; 15 facilities planned for FY26/3 Full Year) and U.S. M&A (Goodwill increased by ¥13.62B from the DM Foot & Ankle acquisition). Property, plant and equipment increased by +¥22.65B YoY, and Right-of-use assets increased by +¥19.44B. Asset monetization (including off-balance-sheet) is under consideration for Q4, which could shift part of Investing CF to Financing CF.
Financing Cash Flow: Long-term borrowings increased by +¥89.12B (+43.2%) YoY, with a ¥20B borrowing for overseas business funding executed in September 2025. Short-term borrowings of ¥33.97B are also outstanding, and Financing CF is primarily funding via borrowings. With no dividends (no payout), there is no cash outflow for dividends, and no share repurchases have been executed.
Free Cash Flow (FCF): As detailed OCF and CapEx are undisclosed, precise FCF cannot be calculated, but considering continued large-scale growth investments and lengthening DSO, FCF is inferred to be negative or limited.
Cash generation assessment: Requires monitoring. Cash generation is limited due to delayed receivables collection and large-scale investments, resulting in a financing structure dependent on increased borrowings. Q4 asset monetization measures will be key to improving cash flows.
AI analysis of the PDF results briefing materials
Consolidated results for Q3 YTD FY2026 (26/3 Q3 YTD): Revenue ¥401.70B (+16.2%) expanded steadily, while Operating Income ¥31.81B (-30.5%) and Net Income ¥14.33B (-48.3%) declined significantly. Revenue grew on the back of expansion in Hospice and Medical Care Residences, while initial losses at newly opened hospice facilities and upfront investment costs led to back-half-weighted progress. Healthcare Institutions (Japan) saw monthly fees improve in Q3, and the U.S. maintained steady roll-up M&A in the podiatry field. Meanwhile, Hospice profitability was pressured by initial losses at new facilities and lower unit prices at some existing facilities. Although the Full Year plan (Revenue ¥582.5B, Operating Income ¥55.0B) is maintained, progress is currently below plan, with the company aiming to achieve targets through various measures in Q4, including asset monetization. The impact of the medical fee schedule revision (June 2026, base +3.09%) will be an important variable for future performance.
Monthly fees in Healthcare Institutions (Japan) improved in Q3, and the number of supported locations is on an increasing trend (25/3 Q3 YTD average 158 locations), including eight new openings. Hospice occupancy at existing facilities improved to 85.4% (+1.8pt), but initial losses at new facilities remained heavy and unit prices declined at some facilities. U.S. podiatry recorded patient volumes +3.7% and Revenue of ¥51.49B (-0.9%), remaining steady, though Q3 saw fluctuations due to seasonality and refined estimates of past receivables collection rates. Home-visit Nursing expanded with users +3.9% and care hours +4.4%, maintaining profitability through improved utilization. Medical Care Residences converted portions of four Noah Konzern facilities into hospice floors, aiming to transition to a composite model.
The company maintains its Full Year plan and is considering asset monetization in Q4 (including off-balance-sheet). Healthcare Institutions (Japan) will promote new M&A and support for new site openings, expecting monthly fee accumulation. In the U.S., the company targets diversification of earnings through expanded M&A in podiatry/lower extremity venous disease and OBL openings (5–11 sites). Hospice will shift to a ‘multi-function co-located model’ in large-scale facilities (120 beds) and temporarily halt new openings, focusing on renovation projects to prioritize investment efficiency, unit price recovery, and higher utilization. Home-visit Nursing will accelerate hiring at existing sites and drive early profitability at new sites.
The base medical fee schedule revision for June 2026 at +3.09% (wage increases +1.70%, inflation +0.76%, etc.) is seen as having a limited impact on profitability improvement for healthcare institutions, while potential deductions from revised facility standards in convalescent rehabilitation warrant attention. In Hospice, structural changes such as bundled payments are expected to provide appropriate evaluation for higher-acuity services. The company views the impact of the temporary long-term care fee revision on Home-visit Nursing and Medical Care Residences as limited. The company aims to achieve the Full Year plan through the execution of various measures in Q4.
Healthcare Institutions (Japan): Support scale expansion at client institutions (M&A, bed conversions, clinic openings) and enhance productivity through standardization of operating know-how. Healthcare Institutions (U.S.): Expand Revenue at existing clinics (increase Revenue per physician) and continue roll-up M&A in Michigan, Ohio, and Illinois, while strengthening capabilities for related conditions such as lower extremity varicose veins. Hospice: Transition to a ‘multi-function co-located model’ providing multiple functions by floor in large-scale facilities (approx. 120 beds); temporarily halt new openings and focus on renovation-led investments to prioritize efficiency, unit price recovery, and utilization improvement. Home-visit Nursing: Strengthen capabilities for higher-acuity patients (better assessments, stronger collaboration with medical institutions), improve utilization and visit efficiency at existing sites, and accelerate early profitability of new sites. Medical Care Residences: Add four new hospice floors to existing Noah Konzern care facilities, strengthen intake of higher medical/care-dependency residents, improve efficiency through DX (robots, mechanical baths, etc.), and expand sales of the medication support system “Fukuyakkun.”
Uncertainty over deduction impacts from the medical fee schedule revision (June 2026), particularly due to changes in facility standards/requirements for convalescent rehabilitation. Risk of tighter regulations due to reputational damage in the hospice industry (reports of excessive home-visit nursing/unlawful claims by competitors). Ongoing inflation and elevated construction costs, rising personnel expenses for medical/care workers pressuring profitability. Risks of misconduct/excessive claims in home-visit nursing services and need for preventive measures (rigorous controls, surveillance camera installation, internal audit inspections). Risk that initial losses at new hospice facilities persist and unit prices remain depressed (driven by regional supply-demand, competitive environment, and fee schedule revisions).
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