Pharmarise Holdings Corporation Q1 FY2026 earnings call

Overall Financial Results

• Total consolidated revenue increased 10% YoY to 16.753 billion yen (1.521 billion yen increase), driven by the December 2024 acquisition of Kan'ichi Shogyo Group (now next PH) which added the new subsidiary to the group.
• Gross profit increased 4.4% YoY to 2.232 billion yen (94 million yen increase). Gross margin increased due to higher procurement costs and labor costs (including wage increases and an accounting reclassification of some selling, general and administrative labor costs to cost of goods sold).
• Operating profit increased 188.5% YoY to 152 million yen (99 million yen increase). Recurring profit increased 399.1% YoY to 115 million yen (92 million yen increase). Parent company attributable net loss was 18 million yen, representing a 112 million yen reduction in loss YoY.

Reimbursement Reform Progress

• After the April 2024 cut in pharmacy base fees for chains over 300 stores, company-wide efforts to increase qualifying technical add-on fees (such as regional support system add-ons) have restored technical fee per prescription to pre-cut levels, with the 1st quarter coming in above plan. Lower than planned prescription volumes were caused by patient avoidance of clinic visits during record August heat, which increased the share of long-term 29+ day prescriptions.
• Generic drug volume share maintained a high 91.7% in August, driven by the 2024 introduction of co-payment for original brand long-listed drugs. 97.7% of stores qualify for generic drug dispensing add-ons, already exceeding the full-year plan, with 85.2% qualifying for the highest tier 3 add-on.
• 96.4% of stores qualify for the medical DX promotion system add-on, meeting the rising My Number Insurance Card utilization requirements. My Number Insurance Card utilization grew from 43% at end-May 2025 to 56% at end-August 2025. Regional support add-on qualifying stores increased 18 locations, with tier 4 add-on stores growing from 60 to 92, on track to hit the full-year target of 50% of all stores qualifying.

Medium-Term Management Plan "Make a Leap 2027"

• The plan's long-term vision is to become a pharmacy group trusted and chosen by local communities, focused on meeting the health, medical and long-term care needs of elderly patients. Dedicated task forces with clear owners, KPIs and progress tracking have been established for all key strategic initiatives.
  • Patient-centric pharmacy operations: The company was the first pharmacy group selected for Japan's Ministry of Economy, Trade and Industry's Orange Innovation Project Phase 4, focused on dementia support. It has expanded its hybrid in-person/online dementia café program "Cafe Nya-marize", hitting its initial target of 50 participating stores 4 months early, and now targets 100+ stores with 100+ total events by end-May 2026. 25 of 32 September events were co-hosted with local governments.
  • Increasing prescription volume: In-home and facility prescription sales grew 8.1% YoY to 1.151 billion yen in the quarter, on track to hit the full-year target of 4.521 billion yen, with expansion supported by expanded geographic coverage from M&A.
• Sustainability and Growth Initiatives:
  • Human capital investment: The company is running its second next-generation leader training program, focused on developing cross-departmental leadership to support group growth.
  • Stakeholder engagement: The company participated in the 2025 Nikkei/TSE IR Fair for the first time since the COVID-19 pandemic, engaging directly with individual investors and increasing awareness of the group.

1. Pharmacy Business: Segment revenue was 14% year-over-year growth, increasing by 1.732 billion yen to 14.132 billion yen, beating plan by 114 million yen. Total prescription volumes increased 15.6% YoY (192,000 additional prescriptions) driven by M&A store additions, but missed plan by 50,000 prescriptions, which was offset by a 432 yen higher-than-planned average prescription price. Operating profit increased 150 million yen YoY, but missed plan by 17 million yen due to the lower prescription volume. This segment contributes approximately 84% of total company revenue. 2. Retail Sales Business: Segment revenue decreased 8.5% YoY, dropping 193 million yen, driven by prior-period unprofitable store closures, but still met the original revenue plan and beat plan overall. Drugstore sub-segment missed plan by 14 million yen due to lower foot traffic from extreme heat and rising labor costs, while convenience sub-segment beat plan by 7 million yen on higher average customer spending. Overall segment operating profit missed plan by 11 million yen. This segment contributes approximately 10% of total company revenue. 3. Medical Document Storage and Management: Revenue was steady, and the segment beat operating profit plan by 16 million yen due to corporate headquarter operation consolidation that reduced administrative and payment fees. 4. Medical Mall Business and Other Segments: Results were broadly in line with plan.

• The full-year technical fee growth target is 509 million yen, which includes 266 million yen in incremental revenue from 8 months of operations from the acquired next PH business. As of the 1st quarter, full-year cumulative technical fees are running 33 million yen above the original plan, despite the 50,000 lower-than-planned prescription volume, so overall progress is rated as on track.
• The company reaffirms its original expectation that business recovery is proceeding as planned after the completion of one-time M&A-related expenses, and full-year targets remain achievable. The expected timing of return to net profit attributable to parent shareholders is between the 2nd and 3rd quarters of the current fiscal year.
• The company expects existing store activity to improve as the temporary impact of heat-driven patient visit reduction fades, and will continue to integrate acquired stores and improve their profitability to hit full-year targets.

• Rising procurement costs for pharmaceuticals and increasing labor costs (including mandatory wage increases) continue to put margin pressure on the core pharmacy business.
• Extreme weather (record August heat) led to lower patient clinic visits and lower-than-planned prescription volumes in the quarter.
• Drugstore retail segment foot traffic and profitability was negatively impacted by extreme heat, creating performance headwinds.
• Additional unplanned valuation adjustments for deferred corporate taxes created a larger-than-expected net loss in the 1st quarter, though this impact is expected to be one-time and will resolve after the completion of subsidiary mergers.

Q: Management noted early signs of business recovery, but net income is still negative. Is a return to net profitability expected in the 2nd quarter, and when can we expect full return to black ink? / A: The 1st quarter operating profit missed plan by 12 million yen, but recurring profit and pre-tax profit beat plan by around 10 million yen. The larger-than-expected net loss was driven by 40 million yen higher-than-planned corporate taxes, 10 million yen of which is expected to be returned to the company over the full year. The 2nd quarter operating profit plan is slightly higher than the 1st quarter actual result, and management expects it to proceed as planned. While the original plan called for a 10 million yen net loss in the 2nd quarter, management believes the improving operating trend will cover this deficit. A full return to net profitability (black ink) is expected between the 2nd and 3rd quarters of the current fiscal year.