Q1 revenue rose and losses narrowed, but further profit improvement from H1 is needed to achieve profitability for FY27

In FY2026, revenue increased by ¥1,640 million, or 6.2% year on year, from ¥26,496 million to ¥28,136 million, while operating profit turned from a profit of ¥1,114 million into a loss of ¥1,223 million. The operating margin also fell 8.5 percentage points, from 4.2% to negative 4.3%. Ordinary income turned from a profit of ¥388 million into a loss of ¥2,168 million, while net income deteriorated from a loss of ¥925 million to a loss of ¥1,656 million. Growth in revenue scale and profit recovery have clearly diverged, and the company’s profitability can no longer be explained by its traditional growth model of opening additional facilities.

In Q1 of FY2027, revenue was ¥7,298 million, the operating loss was ¥347 million, the ordinary loss was ¥519 million and the net loss for the quarter was ¥557 million. Revenue increased by ¥692 million, or 10.5%, from ¥6,605 million in the prior-year quarter, while the operating loss narrowed by ¥160 million, from ¥507 million to ¥347 million. However, operating, ordinary and net results were all in the red, so it is too early to equate year-on-year improvement with progress toward profitability. Q1 revenue represented 25.3% of the full-year forecast of ¥28,872 million, broadly in line with a quarterly allocation.

The company forecasts full-year revenue of ¥28,872 million, operating profit of ¥420 million, an ordinary loss of ¥854 million and a net loss of ¥1,060 million. Assuming the Q1 operating loss of ¥347 million, achieving full-year operating profit of ¥420 million will require cumulative operating profit of ¥767 million over the remaining 3 quarters. The operating profit plan for Q2 through Q4 presented in the earnings materials is negative ¥199 million, ¥307 million and ¥480 million, respectively, for a total of ¥588 million. Actual results therefore need to exceed the plan by at least ¥179 million. If Q2 remains loss-making, the pace of profit improvement required in H2 will become even steeper.

Q1 EBITDA was ¥115 million. The disclosed factors behind the change included a ¥47 million increase in revenue from facilities opened by March 2025, accompanied by a ¥272 million reduction in personnel expenses, and a ¥965 million increase in revenue from facilities opened in the fiscal year ending March 2026, accompanied by a ¥720 million increase in personnel expenses. New facilities are contributing to revenue, but the personnel burden is also substantial, and higher revenue is not translating directly into operating profit. It will be important to see how much the company’s initiatives to optimize staffing, bring operations in-house and reduce administrative expenses are reflected in expense ratios from Q2 onward.

The company operates in a single nursing-care segment and does not disclose quarterly trends in segment revenue and profit, gross margin or operating margin. At the next earnings release, it will be necessary to check not only whether operating profit has turned positive, but also whether the impact of changes to the medical reimbursement system, revenue and personnel expenses by facility opening year, and SG&A reductions can be presented separately. In particular, even if revenue reaches 50% of the full-year forecast, expanding operating losses could indicate that the premise for full-year profitability has broken down.