Executive Summary
Following Welby's business alliance with TISI and a third-party allotment of shares by its consolidated subsidiary WHS, Envalith interviewed Representative Director Takeshi Hiki. After building its B2B business with pharmaceutical and insurance companies, the company is now scaling its municipal business as a second pillar. The equity stake gives TISI a basis for co-managing the business. Welby is strong with medical institutions, while TISI is strong with municipalities. Building on this complementarity, the company plans a dominant strategy of winning municipal and medical institution contracts in the same regions at the same time. Preparations to win orders funded from municipal budgets starting April 2027 are on track. FY12/2027 is therefore a key year to watch, as the municipal business is expected to lift results.
Message from the Company
TISI has a large municipal customer base, while Welby has long provided disease-specific medical PHR services to patients and medical institutions across regions. By using each other's strengths to offset our weaknesses, we will further accelerate and expand our municipal business. Revenue is clearly recovering from the weak performance of the past two years, and this initiative is designed to accelerate that growth further. We hope investors will look forward to our growth.
Key Discussion Points
Building the Municipal Business into a Second Pillar
Alongside its existing B2B business with pharmaceutical and insurance companies, the company positions municipalities as its second revenue pillar. TISI brings a municipal sales network and customer base. Welby brings PHR products for municipalities and know-how in health guidance and prevention of disease progression. The capital alliance aims to deepen the collaboration that began with the business alliance in February 2026.
Dominant Strategy: Growing Municipal and Medical Institution Contracts in the Same Regions
The company expects synergies to come from municipal and medical institution orders rising in tandem within the same region. The approach is taking shape in Osaka, Shizuoka and other areas. Some regions have already delivered results during FY2026.
JV Structure by Business Domain, with Equity Stakes Reflecting Responsibilities
The company has organized separate entities by customer domain. The parent serves pharmaceutical and insurance companies, and WHS serves municipalities and some health insurance societies. Medical Data Card runs the fee-based business for medical institutions. Nippon Life already holds a stake in WHS, and TISI's entry creates a three-party structure. The 34% stake reflects the division of roles in jointly driving the business.
Envalith's Perspectives
The investment amount was not driven by funding needs. It followed from first setting a 34% stake, and management does not expect to spend most of it on R&D and sales. Management stressed that the boost to consolidated equity is merely a side benefit. We view near-integrated operations with TISI, including staff secondments, as the real substance of the alliance. We also welcome the easing of the financial concerns flagged in our previous report while growth investment continues.
Municipalities operate on fiscal-year budgets running April to March. Sales activities in 2026 therefore target budgets from April 2027 onward. Management expressed confidence that pipeline-building is progressing well. The 2027 business plan assigns municipalities a substantial share of company-wide revenue and assumes a certain level of revenue growth.
Municipal contracts are generally annual. However, medical services such as prevention of disease progression often continue for multiple years, and the company treats these as recurring revenue. The medical institution business is billed monthly, with a short lag from order to monetization, and is already contributing to current revenue. Municipal orders draw in medical institution contracts, and each year's sales activities add to the following year's revenue.
Management focuses on two internal KPIs: the number of contracted municipalities and the number of contracted medical institutions within those regions. The aim is to sign municipalities of all sizes within a prefecture and raise prefectural market share. For investors, the first checkpoints will be the number of target regions and the penetration in each, to be disclosed in February–March 2027.
Monetization lags owing to dependence on municipal budget cycles. Upfront investment in development and headcount may limit early profits. The collaboration depends on the depth of the relationship with TISI. Outside shareholders in the subsidiary mean part of its profit will be attributable to non-controlling interests. Progress of actual results against 2027 guidance.
Q&A Highlights
- Q
What is the key message for investors regarding this alliance?
AAccelerating the municipal business. TISI entered the municipal market earlier than Welby and has an established customer base. Welby, on the other hand, has an edge in medical services. We will complement each other to build municipalities into a second pillar. We have been preparing since the February 2026 alliance and have further strengthened our structure to achieve full-scale results in 2027. In our business plan from FY2027 onward, we intend to present a clear growth strategy for this domain.
- Q
Why is WHS, rather than the parent, the recipient of the investment, and what does the 34.01% stake signify?
AOur longstanding policy is to set up separate entities by customer domain and share profits with partners in each domain. An investment in the parent would extend to all consolidated businesses, so we use a JV structure through a purpose-specific subsidiary. The 34% reflects a capital policy premised on TISI co-managing the business with us. We have already moved ahead with integrated operations, including personnel exchanges.
- Q
How will the proceeds be used?
AThere are two main uses. The first is developing PHR products for municipalities. This includes technology development and hiring staff for health guidance and prevention of disease progression. The second is sales and promotion to increase the number of contracted municipalities. However, the investment amount was determined by the stake size, and these two uses will not absorb most of it. Please understand this as an alliance for business growth, not a liquidity measure.
- Q
When and how will the alliance's impact show up in the P&L?
AIn the municipal business, sales efforts in one fiscal year generate revenue the following year. Activities in 2026 will lead to revenue from April 2027 onward and continue to compound each year. The medical institution business is billed monthly and can be monetized immediately after an order. In some regions, such as Osaka and Shizuoka, it has already begun contributing to earnings during 2026. However, given upfront investment, initial profits will be limited and revenue growth is expected to lead.
- Q
What is your message to shareholders and prospective investors?
ARevenue is recovering from the declines of the past two years. Our published guidance calls for growth of around 200% in FY12/2026. A business plan for further growth in 2027 has already been approved. In the September third-party allotment, I personally subscribed so that my stake would not be diluted, demonstrating my commitment to growth as CEO. This alliance is intended to accelerate that growth, and we hope investors will look forward to the expansion of our business.
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