Medical Ikkou Group Co.,Ltd. Q4 FY2027 earnings call

• Overall Financial Performance: • Consolidated revenue for the Feb 2026 full fiscal year hit 54.982 billion yen, with operating profit of 1.788 billion yen, ordinary profit of 1.859 billion yen, and net profit attributable to parent company shareholders of 1.275 billion yen • All top-line and bottom-line metrics increased YoY and exceeded the company's revised performance guidance published in October 2025 • The company met the Tokyo Exchange Standard Market listing maintenance requirements as of the end of Feb 2026, after submitting a compliance plan in December 2021
• M&A and Geographic Expansion: • The company completed 3 M&A deals in the Feb 2026 fiscal year: 2 regional generic drug distributor acquisitions in Kochi and Aichi Prefectures for the pharmaceutical wholesale business, and 1 nursing care facility acquisition in Ibaraki Prefecture for the healthcare business • All acquired targets have already been merged into the group's core subsidiary, Medical Ichikatsu • Geographic coverage expanded to 1 prefecture, 1 territory, 2 urban prefectures, and 24 other prefectures, adding new presence in Kochi Prefecture (wholesale) and Ibaraki Prefecture (healthcare) • Goodwill has barely increased despite multiple M&A deals, as amortization offsets new goodwill additions, leaving ample financial capacity for future M&A activity
• Balance Sheet Health: • Net interest-bearing debt stood at 0.951 billion yen at period end, which is largely unchanged from the prior year, even with M&A-driven asset growth • The equity ratio improved 0.5 percentage points YoY to 41.7%, maintaining a safe level above 40%, while ROE improved 0.3 percentage points YoY to 8.6%, holding above the 8% target • Cash and cash equivalents plus marketable securities totaled 9.438 billion yen at period end, with sufficient funding capacity to support future M&A
• Dividend Policy: • The full-year dividend for FY2026 is maintained at 120 yen per share (60 yen interim, 60 yen year-end), consistent with prior guidance

1. Dispensing Pharmacy Business: Revenue of 26.291 billion yen (47.8% of total consolidated revenue), up from 24.709 billion yen year-over-year (YoY). Operating profit of 1.373 billion yen, up from 1.234 billion yen YoY, with a slight improvement in operating margin. 2. Healthcare Business: Revenue of 8.99 billion yen (16.4% of total consolidated revenue), up from 8.121 billion yen YoY. Reported operating profit of 0.111 billion yen, down from 0.163 billion yen YoY; excluding one-time M&A and upfront costs, adjusted operating profit is 0.201 billion yen, which is in line with revenue growth and has a roughly stable adjusted operating margin of 2.24%. 3. Pharmaceutical Wholesale Business: Revenue of 19.447 billion yen (35.4% of total consolidated revenue), up from 15.357 billion yen YoY, driven primarily by M&A contributions from prior and current period acquisitions. Operating profit of 0.287 billion yen, down from 0.344 billion yen YoY, due to large ongoing negative impacts from drug price cuts that offset revenue growth.

• For the full fiscal year ending Feb 2027 (FY2027), management projects revenue of 56.5 billion yen, operating profit of 1.8 billion yen, ordinary profit of 1.85 billion yen, and net profit attributable to parent company shareholders of 1.3 billion yen, representing modest YoY growth from FY2026 results
• The full-year dividend for FY2027 is maintained at 120 yen per share, unchanged from FY2026
• Management expects continued cost headwinds from rising prices and increasing labor costs, and a tough operating environment for the industry overall including the 2026 dispensing fee revision
• The company's priority is to grow the top line and improve its cost structure through M&A, and to realize integration synergies as early as possible to drive revenue expansion

• Ongoing drug price cuts continue to put significant downward pressure on profitability in the pharmaceutical wholesale segment, leading to a decline in operating profit even as revenue grows from M&A
• Rising labor costs are creating margin pressure for the healthcare business, contributing to a decline in reported operating profit even after accounting for government wage improvement subsidies
• The 2026 dispensing fee revision is expected to create additional headwinds for the dispensing pharmacy business, contributing to a challenging broader industry operating environment
• General macroeconomic headwinds including sustained price and labor cost inflation are expected to continue pressuring the group's cost structure in FY2027

Q: What is management's view of the 2026 dispensing fee revision and its impact on the dispensing pharmacy business, especially for front-of-clinic locations? / A: The full transcript of this exchange is not available in the provided document. The company identifies the 2026 revision as a key industry headwind for the coming fiscal year, but does not share specific quantified impact estimates in the available text.

Q: Why has average revenue per store increased in the dispensing pharmacy business? / A: The full transcript of this exchange is not included in the provided material. The company noted in prepared remarks that YoY revenue growth came from full-year contributions from 6 pharmacies acquired via M&A in the prior fiscal year, offsetting a slight decline in total prescription volume.

Q: What steps is management taking to address the pharmaceutical wholesale segment's profit decline linked to drug price cuts? / A: The full transcript is not available in the provided document. Prepared remarks note that the company will focus on delivering M&A integration synergies to improve cost structures across all segments, including wholesale, to offset margin pressure.

Q: What is the company's geographic expansion strategy for new store and facility openings via M&A? / A: The full exchange is not available. The company's prepared remarks confirm that M&A is the core driver of growth and geographic expansion, with recent deals expanding the group's footprint into the Kanto region for healthcare and new regional markets for wholesale, maintaining solid financial capacity to continue this strategy.

Q: What efforts is management making to improve the company's PBR? / A: The full transcript of this exchange is not included in the provided summary of the earning call.