Summary
In 1H FY12/2026, revenue fell 14.0% YoY on the deconsolidation of the toy sales business, while operating income rose sharply to JPY 81M (+217.8%) and recurring profit to JPY 91M (+201.5%). The benefits of the focus on core operations are showing through in earnings ahead of the top line. 3Q will be the first full quarter composed solely of the A-COMS business following the divestment of Pelican Co., Ltd., so investors need to separate reported revenue declines from underlying growth on a like-for-like basis. The key questions are whether the A-COMS business can sustain the 1H growth rates — revenue of JPY 1,245M (+8.5%) and segment profit of JPY 87M (+49.9%) — through 3Q cumulative results, and whether progress toward full-year guidance (revenue JPY 2,700M, recurring profit JPY 165M) remains consistent once 2H cost trends are factored in. The interim net loss of JPY 45M stemmed primarily from a JPY 130M loss on sale of shares in affiliates; bridging this to the full-year net income target of JPY 15M is a central 2H earnings issue. We also want clarity on which accounting periods will reflect growth and capital policy developments, including approval for listing on the Nagoya Stock Exchange Main Market and the establishment of a robotics joint venture.
Key Points for Next Quarter
| Key Points & Focus | Implications |
|---|---|
Core Business GrowthYoY change in 3Q cumulative revenue and segment profit for the A-COMS business | 1H revenue was JPY 1,245M (+8.5%) with segment profit of JPY 87M (+49.9%). Continued top- and bottom-line growth in 3Q cumulative results would confirm expansion of the subscription-based revenue base. |
Progress vs. Full-Year Guidance3Q cumulative recurring profit against full-year guidance of JPY 165M | 1H recurring profit of JPY 91M represents 55.3% progress (our estimate). The 3Q cumulative build will determine the likelihood of meeting full-year guidance. |
Business Portfolio RestructuringConsolidated revenue post-deconsolidation of the toy sales business and like-for-like comparison | 1H toy sales business revenue was JPY 373M (January–March only). As 3Q comprises the A-COMS business alone for the full period, reported revenue declines must be distinguished from underlying growth. |
ProfitabilityTrends in gross profit margin and SG&A | 1H gross profit margin was 35.7% with SG&A of JPY 496M (vs. JPY 618M a year earlier). We will assess the uplift from mix shift versus genuine margin improvement alongside absolute profit levels. |
Earnings QualityBreakdown of extraordinary items and income taxes | 1H included a JPY 130M loss on sale of shares in affiliates, producing an interim net loss of JPY 45M. Against full-year net income guidance of JPY 15M, whether further extraordinary items emerge in 2H is the key issue. |
Key Issues from Previous Results (2Q FY12/2026)
In 1H FY12/2026, the company divested the toy sales business under its strategy of concentrating on core operations, shrinking the top line while delivering sharp growth at the operating and recurring profit lines. At the same time, the JPY 130M loss on sale of shares in affiliates tied to the divestment pushed the company to an interim net loss, producing a mixed picture depending on the profit line examined. 3Q is the first quarter in which the post-restructuring earnings structure becomes fully visible, making standalone A-COMS growth and margins, plus progress against full-year guidance, the primary items to verify.
1. Sustainability of Growth in the A-COMS Business
- Previous Quarter: 1H A-COMS revenue of JPY 1,245.976M (+8.5% YoY) and segment profit of JPY 87.978M (+49.9% YoY). By service line, HONEY-STYLE grew to JPY 62.164M (+85.8%), the Honetsugi chain to JPY 289.405M (+12.1%), and the Atlas Billing Service to JPY 316.902M (+5.8%).
- To Watch This Quarter: Whether adoption by newly opened clinics and switching contracts from rival systems continued in 3Q, sustaining segment revenue and profit growth rates.
- Key Metrics: YoY change in 3Q cumulative A-COMS revenue and segment profit; growth rates by service line (particularly HONEY-STYLE and the Honetsugi chain).
2. Consolidated Revenue Post-Deconsolidation and Full-Year Guidance
- Previous Quarter: All shares in Pelican Co., Ltd. were transferred effective March 31, 2026, removing it from consolidation. 1H toy sales revenue was JPY 373.523M (▲49.1% YoY), reflecting January–March only, with a segment loss of JPY 7.254M (vs. a loss of JPY 33.240M a year earlier). Consolidated revenue was JPY 1,619M (▲14.0%).
- To Watch This Quarter: With zero contribution from the toy sales business in 3Q, the reported revenue decline will widen; the extent of like-for-like underlying growth must be assessed separately. Full-year guidance calls for revenue of JPY 2,700M (▲31.2% YoY), with 1H progress at 60.0% (our estimate).
- Key Metrics: 3Q cumulative consolidated revenue as a percentage of full-year guidance of JPY 2,700M; standalone A-COMS YoY growth.
3. Margin Improvement and Cost Structure
- Previous Quarter: 1H gross profit was JPY 578.053M, with a gross profit margin of 35.7% (34.2% a year earlier). SG&A declined to JPY 496.430M from JPY 618.877M, lifting the operating income margin to 5.0% (1.4% a year earlier).
- To Watch This Quarter: Margin improvement partly reflects mix shift from removing the low-margin toy sales business, so genuine profitability gains must be verified using absolute profit alongside like-for-like revenue. We will also look at the impact on SG&A from 3Q onward of costs associated with approval for listing on the Nagoya Stock Exchange Main Market.
- Key Metrics: 3Q cumulative gross profit margin, operating income margin, and SG&A; A-COMS segment profit margin.
4. Extraordinary Items and Consistency with Full-Year Net Income Guidance
- Previous Quarter: Extraordinary losses included a JPY 130.301M loss on sale of shares in affiliates, resulting in an interim loss before income taxes of JPY 37.944M and an interim net loss attributable to owners of the parent of JPY 45.957M (vs. +JPY 115.569M a year earlier, which included a JPY 92.486M gain on sale of investment securities).
- To Watch This Quarter: Full-year Net Income Attributable to Owners of Parent Company is guided at JPY 15M (▲94.2% YoY), with EPS of JPY 1.46. We will look for any additional extraordinary items in 2H and the trajectory of the tax burden.
- Key Metrics: Breakdown of 3Q cumulative extraordinary gains and losses, total income taxes, and quarterly net income/loss attributable to owners of the parent.
5. Balance Sheet Strength and Allocation of Growth Investment
- Previous Quarter: Equity ratio of 48.6% at the interim period end (41.1% at the prior year-end), with cash and cash equivalents of JPY 1,182.735M. Operating CF was an inflow of JPY 142.825M (vs. JPY 4.394M a year earlier), investing CF an inflow of JPY 17.414M, and financing CF an outflow of JPY 106.143M. Purchases of property, plant and equipment rose to JPY 139.513M (vs. JPY 10.152M a year earlier).
- To Watch This Quarter: The nature of the increased fixed asset investment and its payback timing, plus the pace of interest-bearing debt reduction via continued long-term borrowing repayments (JPY 105,417K in 1H). The joint venture announced on October 29, 2026 is expected by the company to contribute to revenue from FY12/2027 onward, so for 3Q the focus is on the investment and consolidation impact rather than any earnings contribution.
- Key Metrics: Equity ratio at 3Q-end, cash and cash equivalents, borrowings outstanding, and cash flow from investing activities.
Major Timely Disclosures During the Period
- 2026/10/29Notice Regarding Establishment of a Joint Venture (Change in Specified Subsidiary) and Commencement of a New Business at a Subsidiary - The company will establish a joint venture with RBB Co., Ltd. to sell and support the implementation of robotics systems, taking a 51% stake and consolidating it as a subsidiary. Total outlay is planned at roughly JPY 150M. As the company expects revenue contribution only from FY12/2027 onward, the focus is on investment scale and business ramp-up progress rather than any 3Q P&L impact.
- 2026/09/10Notice Regarding Approval for Listing on the Nagoya Stock Exchange Main Market - Broader listing should improve share liquidity and widen the investor base, though the timing of related cost recognition in SG&A from 3Q onward needs to be monitored.
- 2026/08/07Notice Regarding Revision to Guidance - Full-year guidance was revised alongside 2Q results. Revenue of JPY 2,700M (▲31.2% YoY), recurring profit of JPY 165M (+11.1% YoY), and net income of JPY 15M (▲94.2% YoY) form the benchmark for 3Q results.
Previous Quarter Results (2Q FY12/2026 Actuals)
The group is a service provider centered on A-COMS, a core operating system for acupuncture and judo therapy clinics, with additional offerings spanning the Honetsugi chain, equipment and consumables sales, the Atlas Billing Service, HONEY-STYLE, and nursing care support. Within a domestic market of roughly 50,000 acupuncture and judo therapy clinics, it has installed its systems at approximately 3,000 clinics, and is advancing medical collaboration, self-pay treatment support, enhanced e-commerce functionality, and cross-selling into the relaxation and beauty salon markets. Effective March 31, 2026, it divested Pelican Co., Ltd., the toy sales business, concentrating resources on core operations. 1H saw lower revenue but sharply higher operating and recurring profit, with an interim net loss due to extraordinary losses.
| Item | Amount | YoY | vs. Company Guidance | Notes |
|---|---|---|---|---|
| Revenue | JPY 1,619M | ▲14.0% | - | Driven mainly by deconsolidation of the toy sales business; A-COMS +8.5% |
| Operating Income | JPY 81M | +217.8% | - | Gross profit margin 35.7%; SG&A down to JPY 496M |
| Recurring Profit | JPY 91M | +201.5% | - | Non-operating income JPY 15M; interest expense JPY 5M |
| Interim Net Income Attributable to Owners of Parent Company | ▲JPY 45M | - | - | JPY 130M loss on sale of shares in affiliates booked as an extraordinary loss |
| EPS | ▲JPY 4.48 | - | - | JPY 11.26 a year earlier |
(Note) Company guidance for the interim period is not disclosed in this earnings release, so "vs. Company Guidance" is shown as "-". Full-year guidance comprises revenue of JPY 2,700M, operating income of JPY 160M, recurring profit of JPY 165M, Net Income Attributable to Owners of Parent Company of JPY 15M, and EPS of JPY 1.46.
Guidance Achievement Rate (Recurring Profit Basis): 55.3% (our estimate). As interim-period company guidance for the prior year is not available in this material, for reference, prior-year interim recurring profit of JPY 30M represented 20.5% of the prior full-year actual of JPY 148M (our estimate).
ENVALITH, INC. ("ENVALITH") provides exclusive research coverage services to domestic and international institutional investors, as well as domestic individual investors, with the objective of contributing to the development of global and Japanese capital markets by providing information necessary for considering investments in Japanese listed companies.
- Purpose and Disclaimer Regarding Investment Decisions
This report has been prepared solely for informational purposes and does not constitute a solicitation to acquire, sell, or hold securities or any other financial products. Furthermore, this report does not constitute specific investment, financial, or tax advice. Any opinions, judgments, or recommendations contained herein are not intended to induce investment activities. Please be advised that all investment decisions must be made based on the investor's own responsibility and judgment, and ENVALITH and subject company shall not be involved in any such investment decisions.
- Information Sources, Accuracy, and Disclaimer of Warranty
This report has been prepared based on a formal request from the subject company, utilizing information provided by and interviews conducted with said company. By using this report, you are deemed to have agreed to the following: 1. Information Sources: This report is prepared on the assumption that the publicly available information and information disclosed by the subject company and provided during interviews is true and reliable. ENVALITH has not independently verified or validated the veracity of such information. 2. Accuracy: The interpretations, analyses, and hypotheses or conclusions based thereon contained in this report are independently derived by ENVALITH using its own perspectives and analytical methods based on the information mentioned in the preceding paragraph. 3. Disclaimer of Warranty: In the event that there are errors or omissions in the information disclosed by the subject company, ENVALITH and subject company shall not be held liable for any inaccuracies in this report resulting therefrom. ENVALITH and subject company make no warranties, whether express or implied, regarding the accuracy, safety, validity, completeness, or any other aspect of this report, nor regarding the past or future performance of the subject company.
- Limitation of Liability
ENVALITH and subject company shall not be liable for any costs, damages, or losses (including direct, indirect, incidental, consequential, or punitive damages) arising from the use of this report or the information obtained therefrom. Users of this report acknowledge and agree that such use is at their own risk.
- Potential Conflicts of Interest
ENVALITH may have, or may have in the future, business relationships with the subject company. Accordingly, investors should be aware that conflicts of interest may exist that could affect the objectivity of this report.
- No Obligation to Change or Update Content
The contents and opinions in this report, as well as the information upon which it is based, are current as of the date of preparation and are subject to change without notice. Please be advised that ENVALITH is under no obligation to update the contents of this report, and investors must verify the timeliness of the information on their own.
- Governing Language
This report is prepared in Japanese, English, and Chinese. In the event of any discrepancy or difference in interpretation between the language versions, the Japanese version shall be treated as the original and shall prevail.
- Copyright
All rights (including copyrights) relating to this report belong to ENVALITH. Any reproduction, redistribution, or other use of all or part of this report without the prior written permission of ENVALITH is strictly prohibited.
- Use for Other Investment Products
Except where ENVALITH has provided prior written approval, the use of this report and the trademarks or trade names of ENVALITH or the subject company in connection with the information distribution, transaction, sales promotion, or advertising of any investment products (including derivatives, structured products, investment trusts, or investment assets whose price, return, or performance is based on or linked to this report) is strictly prohibited.