eWeLL Co.,Ltd. Q4 FY2024 earnings call

Market Context and Business Position

• Japan's national policy is shifting to post-surgery at-home chronic/end-of-life care, driving rapid growth in home healthcare demand as the elderly population expands, which reduces overall national healthcare costs by 35%.
• Visiting nursing sits at the center of coordinating medical and long-term care, but faces structural nurse shortages and widespread analog operational inefficiencies that limit patient care capacity.
• eWeLL's core product iBow is a specialized visiting nursing electronic medical record (EMR) that digitizes and accumulates clinical data, currently used by 54,000 medical professionals supporting 740,000 patients, with 72 million cumulative chronic care data points collected since 2014.
• iBow uses a hybrid subscription pricing model: a 18,000 yen monthly base fee plus 100 yen per visit, which aligns with customers' revenue model (they earn ~8,500 yen per visit from public insurance) and aligns eWeLL's growth with customer growth.

2024 Fiscal Year Operational Results

• Q4 new contracted stations hit an all-time high of 178, driven by large multi-station contracts from major corporate clients, bringing total end-of-period contracted stations to 3,028, beating the target of 3,024. Most new contracts will start contributing to revenue in April 2025.
• 27% of existing iBow customers subscribed to the AI Visiting Nursing Plan & Report service ahead of its January 2025 paid launch, outperforming expectations. The product is differentiated from generic AI by its training on eWeLL's proprietary 7.2 million clinical records, which minimizes hallucinations and delivers high accuracy for medical documentation.
• The company achieved 6 consecutive years of revenue growth since 2018, and 4 consecutive years of profit growth since 2020 profitability. It has maintained over 40% operating margin since its 2022 IPO.
• End-market share reached 17.5%, up 1.1 percentage points year-over-year.
• Revenue churn rose 0.08 points to 0.19% year-over-year, with higher cancellations from small station closures and shifts to low-cost/free alternatives, driven by customer financial stress.
• Planned hiring was fully completed, with targeted expansion of development and BPaaS teams, and the company maintains a strong capital position to support future organic and inorganic growth.

Mid-Term Growth Strategy

• The company's vision is to become a platformer for home healthcare, pursuing a multi-product strategy leveraging data and technology, with faster new product launches and growing upsell/cross-sell revenue share.
• Upcoming product launches include: AI Visiting Nurse Schedule (spring 2025) to optimize routing and scheduling to increase visit capacity, and a free nurse recruitment matching service to fix structural problems in the current high-cost, conflicted recruitment market.
• The kea-log-tto regional care connectivity platform will resolve information asymmetry across hospitals, visiting nursing stations, and pharmacies to improve regional care coordination, with broader stakeholder expansion planned in 2025.
• Growth investment will prioritize development infrastructure expansion, sales organization upgrade for multi-product operations, advertising investment, and customer success reinforcement.
• The company maintains a policy of maintaining financial soundness while increasing dividends, with 12 yen per share dividend for FY2024 (1 yen increase over forecast) and a planned 15 yen per share dividend for FY2025 (3 yen increase).

1. Cloud Service: Revenue grew 22.4% year-over-year, beating budget. The segment includes core offerings iBow and iBow Recept, plus the mandatory training service, which saw increased applications from October to November due to subsidy utilization. Gross profit margin came in at exactly 80%, meeting initial expectations after planned development team expansion and server upgrades. This segment contributed the bulk of the company's total gross profit growth for the period.

2. BPaaS (formerly BPO): The segment was renamed to better reflect its high-margin integrated business process support model, which combines cloud SaaS, AI/automation, and expert human support for claims processing, regulatory inquiry, document preparation, and DX promotion assistance. Strong cross-selling to existing iBow customers and improved new customer onboarding drove increased contract volume and higher average customer spending. Contract retention reached a stable 77%. Gross profit margin recovered to the target 60% in Q4 after early-period headwinds from accelerated hiring, and the segment was the key driver of overall average customer unit price growth to 81,300 yen, just 0.1% below target due to the extended free trial for AI services.

• Three-year mid-term target to reach 5.0 billion yen in total revenue by 2027, while maintaining the company's high operating margin.
• FY2025 (2025 December period) targets 30% revenue growth driven by upsell and cross-sell expansion, supported by strong early adoption of AI services, BPaaS growth, and iBow contract growth.
• The mid-term plan forecasts continued steady growth in contracted station numbers, capturing demand from industry growth, competitor switching, and new station openings by existing customers.
• Average customer unit price is expected to grow, driven by paid adoption of AI Visiting Nursing Plan & Report (already subscribed by 27% of iBow customers, expected to add an average of 10,000 yen per station monthly, or ~15% unit price increase for adopting stations) and increased visit volume driven by efficiency gains.
• Churn is expected to remain at slightly elevated levels compared to historical averages due to ongoing small station closures and shifts to low-cost alternatives, with the company implementing ongoing improvements to churn reduction.
• FY2025 revenue target for AI Visiting Nursing Plan & Report is 80 million yen.

• Small visiting nursing stations face higher risk of closure and switching to low-cost/free alternatives due to economic and operational pressure, which has increased churn slightly compared to historical levels.
• The home healthcare industry faces frequent regulatory changes to medical and long-term care fees, requiring ongoing investment in system updates and customer education to ensure compliance.
• Structural nurse shortages across the visiting nursing industry may limit customer growth in visit volume, which translates to slower revenue growth for eWeLL's per-visit pricing model.

Q: What has driven eWeLL's strong performance in recent periods? / A: Management cites strong tailwinds from growing demand for visiting nursing services, and industry-wide pressure for DX and efficiency improvements, which have driven steady growth in contracted stations. The company avoids price competition and focuses on delivering high-value one-stop solutions tailored to the visiting nursing industry, leading to higher average customer prices and lower churn than competitors, supporting stable growth.

Q: Why is the operating profit margin only projected to grow slightly in the mid-term plan? / A: Management explains that the company operates in a fast-growing market, and chooses to reinvest most current profits into growth initiatives including hiring, new product development, and market expansion. Building a sustainable long-term growth base and maximizing enterprise value is prioritized over near-term margin expansion.

Q: What is the adoption status and roadmap for the kea-log-tto platform? / A: Currently, around 500 visiting nursing stations are registered on the platform. In spring 2025, the platform will be updated to open registration to hospitals and care managers. Currently, the platform is focused on helping stakeholders find available visiting nursing stations via real-time visibility of capacity, to solve key regional care coordination problems.

Q: What impact does the Sanwellz corporate incident have on eWeLL's performance? / A: eWeLL has an individual contract aligned with Sanwellz's PD house business model, that is structured so no material impact to eWeLL's revenue will occur if visit volumes decrease. No revenue decline is currently expected from this incident.

Q: What are the biggest current management challenges for the business? / A: The biggest challenge is supporting the industry to comply with constantly changing complex medical and care regulatory requirements. eWeLL is addressing this through its product portfolio including iBow, kea-log-tto, and BPaaS, to help customers operate appropriately and strengthen governance.