| Indicator | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue | ¥115.7B | ¥100.1B | +15.6% |
| Operating Income | ¥4.0B | ¥20.3B | -80.2% |
| Ordinary Income | ¥4.3B | ¥20.2B | -78.6% |
| Net Income | ¥3.1B | ¥14.3B | -78.0% |
| ROE | 4.6% | 20.4% | - |
For the fiscal year ended March 2026, Revenue reached ¥115.7B (YoY +¥15.6B, +15.6%), achieving top-line growth, while Operating Income was ¥4.0B (YoY -¥16.3B, -80.2%), Ordinary Income ¥4.3B (YoY -¥15.9B, -78.6%), and Net Income attributable to owners of the parent was ¥2.8B (YoY -¥11.1B, -80.5%), reflecting a material decline in profitability. Revenue growth of +15.6% was driven by new consolidations: the Dental Distribution Business (¥23.9B) and the DX Business (¥3.1B). However, Operating Income plunged -80.2% due to a large increase in SG&A (¥60.7B, up ¥7.2B from prior ¥53.5B), start-up costs for new businesses, and recognition of goodwill amortization of ¥0.6B. Operating margin fell to 3.5% (down -16.7pt from 20.2% prior), highlighting structural deterioration in profitability.
[Revenue] Revenue was ¥115.7B (+15.6%), led by contributions from newly consolidated Dental Distribution Business ¥23.9B and DX Business ¥3.1B, while the incumbent Medical Platform Business declined to ¥50.3B (-19.7%). The Smart Clinic Business performed steadily at ¥33.5B (+5.7%). Revenue composition was 76.8% existing businesses and 23.2% new consolidations. Gross profit was ¥64.7B with a gross margin of 55.9% (prior 73.8%) remaining at a high level, but the ~18pt decline from last year reflects different commercial structures in the new businesses.
[Profitability] Operating Income was ¥4.0B (-80.2%). SG&A increased to ¥60.7B (prior ¥53.5B, +13.5%), and the SG&A-to-Revenue ratio rose to 52.5% (prior 53.5%, +0.4pt). In addition to new goodwill amortization of ¥0.6B, company-wide overhead increases reduced operating margin to 3.5% (prior 20.2%, -16.7pt). By segment, the Medical Platform Business saw Operating Income of ¥17.8B (-43.2%), indicating profit decline in the core business; Dental Distribution incurred an operating loss of ¥1.4B (margin -5.9%) as start-up costs led performance. Non-operating income/expense was a small positive ¥0.3B, with interest and dividend income ¥0.1B roughly offset by interest expense ¥0.1B. Extraordinary gains of ¥0.8B (e.g., gain on sale of fixed assets) lifted Profit Before Tax to ¥5.1B, but high tax expense of ¥2.3B (effective tax rate 45.8%) compressed Net Income attributable to owners of the parent to ¥2.8B (-80.5%). In summary, the company experienced revenue growth but profit decline: start-up and upfront costs for new businesses materially impaired profitability.
The Medical Platform Business reported Revenue ¥50.3B (-19.7%) and Operating Income ¥17.8B (-43.2%, margin 35.4%), showing declines in both revenue and profit. Although still high-margin, the margin contraction from 50.2% prior to 35.4% this period (-14.8pt) suggests weakening intrinsic profitability before company-wide overhead allocation. The Smart Clinic Business reported Revenue ¥33.5B (+5.7%) and Operating Income ¥5.5B (-4.4%, margin 16.5%), a slight profit decline but steady performance. The Dental Distribution Business posted Revenue ¥23.9B and an operating loss of ¥1.4B (margin -5.9%) as start-up costs dominated and pressured consolidated profit. The DX Business, though small, delivered Revenue ¥3.1B and Operating Income ¥0.9B (margin 27.3%). Other businesses recorded Revenue ¥4.8B (-14.9%) and Operating Income ¥1.0B (-12.6%, margin 20.6%). Allocation of company-wide overhead of ¥19.8B reduced consolidated Operating Income to ¥4.0B; losses in Dental Distribution and profit declines in the core business clearly depressed group margins.
[Profitability] Operating margin was 3.5% (down -16.7pt from 20.2% prior), and Net margin fell to 2.4% (down -11.9pt from prior 14.3%). Gross margin at 55.9% (prior 73.8%) remains high, but was reduced by new business impact, while elevated SG&A ratio of 52.5% worsened operating efficiency. ROE was 4.6% (prior 22.9%), ROA (based on Ordinary Income) was 4.2% (prior 23.6%), and return metrics declined across the board. EBITDA was ¥4.9B (Operating Income ¥4.0B + Depreciation & Amortization ¥0.9B); the operating margin is the bottleneck in DuPont decomposition and the compression of Net margin lowered ROE. [Cash Quality] Operating Cash Flow (OCF) was ¥0.5B, which is 0.16x of Net Income ¥3.1B, showing very weak cash conversion. OCF before working capital changes was ¥6.4B, but corporate tax payments of ¥6.7B were a drag, and increases in trade receivables ¥1.2B, accounts payable ¥3.3B, and contract liabilities ¥1.3B largely offset, leaving final OCF at a very limited level. [Investment Efficiency] Capex was ¥1.0B, roughly matching depreciation ¥0.9B; main investing cash outflows were business acquisition payments ¥5.5B and net security deposits, totaling -¥8.1B. Free Cash Flow was -¥7.6B, reflecting cash outflows for growth investments and M&A. Total asset turnover was 1.13x, and balance sheet asset efficiency slightly declined due to increases in goodwill ¥10.3B and intangible assets ¥10.5B. [Financial Soundness] Equity Ratio was 67.3% (prior 76.9%), current ratio 373%, and cash & deposits ¥53.2B indicating very ample liquidity. Interest-bearing debt was ¥7.4B (short-term ¥1.2B + long-term ¥6.2B), Debt/EBITDA was 1.5x, and interest coverage 76.2x, indicating conservative financial leverage. Contract liabilities of ¥3.6B indicate increased deferred revenue, reflecting some degree of forward revenue capture.
OCF was ¥0.5B, equal to 0.16x of Net Income ¥3.1B, highlighting a marked deterioration in cash conversion. OCF before working capital changes secured ¥6.4B, but corporate tax payments of ¥6.7B were the largest deduction (a reversal from the prior year's high profitability) and substantially compressed OCF. Working capital movements included an increase in trade receivables of ¥1.2B as a cash outflow, while increases in accounts payable ¥3.3B and contract liabilities ¥1.3B provided inflows, and inventory increase of ¥0.4B had a minor impact. Investing Cash Flow was -¥8.1B: besides capex ¥1.0B (roughly balanced with ¥0.9B depreciation), business acquisition-related disbursements ¥5.5B and net security deposit outflows were the main drivers, resulting in Free Cash Flow of -¥7.6B. Financing Cash Flow was +¥2.0B: long-term borrowings of ¥8.2B were obtained, while loan repayments ¥1.1B, share buybacks ¥6.4B, and dividend payments ¥5.2B were executed, leaving modest net inflow. Cash and cash equivalents declined ¥5.6B from ¥58.7B at the beginning of the period to ¥53.2B at the end, as high shareholder returns and growth investments drove cash outflows and slightly reduced liquidity.
The gap between Ordinary Income ¥4.3B and Operating Income ¥4.0B was ¥0.3B; net contribution from non-operating items was modest, with non-operating income ¥0.4B (interest & dividend income ¥0.1B etc.) less non-operating expense ¥0.1B (interest expense ¥0.1B etc.). Extraordinary gains of ¥0.8B (e.g., gain on sale of fixed assets) lifted Profit Before Tax to ¥5.1B, but this is a one-time factor and not considered part of the recurring earnings base. Comprehensive income was ¥2.8B, nearly matching Net Income attributable to owners of the parent ¥2.8B; foreign currency translation adjustments were ¥0.0B and valuation differences had minimal impact. OCF was ¥0.5B (0.16x of Net Income ¥3.1B), and OCF/EBITDA ratio was 0.10x, indicating very low cash realization of earnings. Goodwill amortization ¥0.6B (JGAAP) is a recurring non-cash expense going forward; goodwill/EBITDA ratio is 2.1x, within recoverable range, but monitoring for future impairment tests is necessary. Tax burden is high with an effective tax rate of 45.8%; although deferred tax assets of ¥6.3B are recognized, taxes compress after-tax earnings, and there is scope for improvement via tax planning.
Full year guidance assumes Revenue ¥216.0B (YoY +86.8%), Operating Income ¥15.7B (YoY +293.0%), and Ordinary Income ¥15.6B (YoY +260.1%), reflecting an optimistic recovery scenario. Operating margin is expected to improve to 7.3%. Progress rates are 53.5% for Revenue (first half actual / full year forecast) and 25.5% for Operating Income, indicating a back-end weighted plan. Achievement of forecasts assumes full-year contribution from newly consolidated entities (e.g., full ownership of Akasaka Co., Ltd.), profitability turnaround in the Dental Distribution Business, recovery in core businesses, and SG&A reduction. Given the low first half Operating Income progress, substantial improvement in the second half is required, making execution risk high. EPS forecast is ¥68.74, while dividend forecast is ¥0, implying a revision of dividend policy.
A year-end dividend of ¥30 was paid (interim dividend ¥0), with total dividend payments of ¥5.2B (same as prior ¥5.2B). Dividend payout ratio relative to Net Income attributable to owners of the parent ¥2.8B was 189%, an extremely high level, representing distributions far exceeding earnings. Prior year Net Income was ¥14.1B with payout ratio 37.6%, a reasonable level, but this year the sharp profit decline caused payout ratio to surge. Additionally, share buybacks of ¥6.4B were executed (Financing CF), making total shareholder returns (dividends + buybacks) ¥11.6B and Total Return Ratio 422%. With Free Cash Flow at -¥7.6B, total returns ¥11.6B substantially exceeded internal funds, funded by declines in cash and deposits. The dividend included a 20th anniversary commemorative dividend of ¥20 (ordinary dividend ¥10 + commemorative dividend ¥20), and the ¥0 dividend forecast for next fiscal year signals priority on profit recovery.
Rapid deterioration in operating efficiency: Operating margin fell sharply to 3.5% (down -16.7pt from 20.2%), creating a structure where SG&A ratio 52.5% nearly offsets gross margin 55.9%. The primary drivers are start-up costs for new businesses and increases in company-wide overhead. Unless SG&A-to-Revenue declines, recovery in profitability will be difficult. The full year forecast assumes operating margin of 7.3%, but this requires significant cost reductions and revenue expansion in H2, presenting high execution risk.
Delay in monetizing new segments: The Dental Distribution Business generated Revenue ¥23.9B but an operating loss of ¥1.4B (margin -5.9%), with losses persisting during the ramp-up and integration benefits taking time to materialize. With goodwill ¥10.3B (goodwill/Net Assets 15%) and intangible assets ¥10.5B recognized, persistent shortfalls in future cash flow plans could trigger impairment risk. EBITDA ¥4.9B and goodwill/EBITDA of 2.1x are not excessive, but monitoring progress against plans is critical.
Weakening cash generation risk: OCF ¥0.5B is 0.16x of Net Income and OCF/EBITDA ratio is 0.10x, indicating structural cash conversion issues. High corporate tax payments ¥6.7B and limited room for improving working capital management mean that if weak cash generation persists, maintaining both high shareholder returns and growth investments will be difficult. Cash & deposits ¥53.2B are ample, but continued Free Cash Flow of -¥7.6B could create medium-term liquidity constraints.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.5% | 8.1% (3.6%–16.0%) | -4.6pt |
| Net Margin | 2.7% | 5.8% (1.2%–11.6%) | -3.1pt |
Profitability is below the industry median and near the lower bound of the IQR. The decline in Operating Margin is pronounced, indicating weakened competitiveness within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 15.6% | 10.1% (1.7%–20.2%) | +5.5pt |
Revenue growth outperformed the industry median, sustained by M&A contributions. Top-line expansion ranks among the upper end within the industry.
※ Source: Company compilation
Inflection in revenue structure: Revenue increased +15.6% through new consolidations, but Operating Income plunged -80.2%, and Operating Margin fell to 3.5% (down -16.7pt from 20.2%). The Dental Distribution Business operating loss of ¥1.4B and profit decline in the core Medical Platform Business (Operating Income -43.2%) pressed down group margins. Achieving the full-year forecast (Operating Margin 7.3%) requires substantial profit recovery in H2. SG&A reduction and progress toward segment-level profitability are key to restoring earnings.
Discrepancy between financial soundness and cash generation: While Equity Ratio 67.3%, Cash & Deposits ¥53.2B, and Debt/EBITDA 1.5x indicate very strong balance-sheet health, OCF ¥0.5B (0.16x of Net Income) and Free Cash Flow -¥7.6B show sharply weakened cash generation. Total shareholder returns of Dividends ¥5.2B and Share Buybacks ¥6.4B (total ¥11.6B) pushed Total Return Ratio to 422%, with cash outflows far exceeding internal funds. Recovery in OCF and profit growth going forward will determine sustainability of shareholder returns.
Progress and risks of M&A integration: Recognition of goodwill ¥10.3B (goodwill/Net Assets 15%, goodwill/EBITDA 2.1x) and intangible assets ¥10.5B altered the balance sheet composition. The Dental Distribution Business is loss-making in the ramp-up phase, and integration benefits will take time. Goodwill amortization ¥0.6B (JGAAP) is a persistent earnings headwind; attainment of future cash flow plans is a prerequisite, so monitoring segment performance and impairment indicators is important.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company from public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.