internet infinity INC. Q2 FY2026 earnings call

Corporate Identity & Market Context

• Mission: Solve challenges of Japan's super-aging society under the "Healthy Future" philosophy, aiming to enable all generations to live actively and securely.
• As of September 30, 2025, consolidated full-time employees reached 407, following the addition of Cent Works as a consolidated subsidiary.
• Key industry challenges: The 2025 Problem (rapid growth in social security costs as baby boomers become late-stage elderly) and the 2040 Problem (peak elderly population, severe labor/healthcare worker shortages that threaten service sustainability).
• Business structure: B2C services for elderly users (Record Book for mildly impaired users, Active Life covering assistive device rental and home renovation for all impairment levels), intermediate work-care balance support for families of care recipients, and B2B DX solutions for corporate and care provider clients.

Strategic Acquisitions & Long-Term DX Strategy

• Cent Works was acquired in April 2025 to support the company's non-core back-office efficiency solution for mid-sized care providers.
• The core Cent Works product SuisuiRemon is a billing (receipt) software purpose-built for mid-sized care providers, with robust multi-site performance tracking and accounts receivable management functionality, developed in-house for St. Care Holding's own growth, making it an ideal fit for the company's target market.
• Strategic priority: Most industry workforce efficiency efforts focus on core care tasks, but non-core back-office tasks have become increasingly fragmented and inefficient as multiple tools/sensors are adopted. Management prioritizes non-core efficiency as the most impactful near-term solution to workforce shortages.
• The long-term DX business plan: Use SuisuiRemon as a hub to connect all disparate care management systems, integrate back-office functions (HR, accounting), provide consulting leveraging the company's own care operation experience, and eventually build a dedicated BPO center for non-core care operations (with plans for M&A and partnerships to build out BPaaS platform capabilities). Mid-sized care providers (5-10+ locations) are the primary target, as they have unmet integration needs that large providers can solve in-house and small providers do not require.
• Long-term (FY2029 March Term) targets: 8.04 billion yen revenue, 1.27 billion yen operating profit, 750 million yen net profit, 138 yen EPS, with a goal of reaching 10 billion yen market capitalization.

Operating Highlights

• Q2 operating profit was 1.8x Q1 levels, representing a significant improvement over Q1, consistent with the company's historic second-half weighted revenue and profit trend.
• Work-care balance support added 5 new Hitachi Group companies, Tokyo Gas Real Estate Group, and Itochu Group clients in H1, with accelerated group-wide expansion following the April 2025 legal change. Q1 revenue was temporarily elevated due to one-time training/handbook projects, so the slight Q2 decline does not reflect a downward trend.

1. Record Book (sub-segment of Healthcare Solutions): Both revenue and profit increased year-over-year, with larger growth in the franchise segment. New franchise openings slowed slightly, but existing store royalty revenue grew strongly. Average Q3 2025 (Jul-Sep) utilization reached 79% for directly operated stores (+3pp YoY) and 72.3% for franchise stores (+3.2pp YoY). Monthly active users exceeded 22,000 as of July 2025, with 239 total stores as of November 2025 after 5 new openings in H1.
2. Active Life: Core assistive device business was solid with revenue and profit growth, but subsidiary Shomitsu Giken's home renovation business saw year-over-year revenue and profit declines due to ongoing structural reform. Overall operating profit for the segment was -71 million yen for the half-year.
3. DX Solution: Both revenue and profit increased sharply year-over-year, driven primarily by the addition of Cent Works to the consolidated group. Organic growth came from strong performance in work-care balance support services, boosted by the revised Child Care and Nursing Care Leave Law enacted in April 2025. Cent Works contributed to operating profit but goodwill amortization made its net contribution minor in the half-year.
4. In-Home Service: Overall revenue saw a slight increase, while profit saw a slight decrease. Home-visit care and day care grew revenue and profit, but home care support (care managers) saw declines due to slower-than-planned care manager hiring. One of two facility care locations had sustained vacancies, leading to lower revenue and profit year-over-year.

Consolidated half-year results: Total revenue = 2.946 billion yen, operating profit = 203 million yen, ordinary profit = 231 million yen, net profit = 135 million yen. (YoY revenue growth +12.5%)

• Full-year FY2026 March Term consolidated guidance is maintained, with management expecting results to be broadly in line with original plans, and the full-year target remains achievable.
  • Record Book directly operated stores are on track to meet full-year revenue and profit plans, with utilization, user count, and service volume all in line with projections.
  • Record Book franchise revenue is broadly on track (driven by strong existing store royalty growth), but operating profit is expected to come in slightly below plan due to slower new store openings that will leave initial opening fees below the original 20-store target.
  • Active Life revenue is broadly on track, but operating profit is expected to come in below plan. Cost reduction benefits from Shomitsu Giken's structural reform are delayed, and the segment will not be able to fully recover H1 shortfalls in the second half.
  • DX Solution revenue and profit are both broadly on track to meet full-year plans, with the Cent Works integration proceeding as expected.
  • In-Home Service has resolved the vacancy issue at the affected facility (new move-ins secured in October-November 2025), so full-year revenue and profit are expected to be broadly in line with plan.
  • Corporate overhead costs are expected to come in below plan, providing an offset to segment shortfalls that supports full-year profit targets. One-time shareholder-related costs were only incurred in Q1, and the lower cost trend is expected to continue through H2.
• Dividend guidance is maintained: Full-year FY2026 dividend per share is projected at 15.0 yen, consistent with the company's target 25% payout ratio and ongoing steady dividend growth policy.

• New store opening for Record Book is facing prolonged site selection delays due to high competition for commercial real estate from other industries (including food service), leading to slower-than-planned new franchise growth.
• Structural reform at Shomitsu Giken (Active Life segment) has had slower-than-expected cost reduction benefits, leading to a projected full-year operating profit shortfall for the segment.
• One of the company's two facility care locations had sustained vacancies in H1, which reduced H1 revenue and profit, though the issue has been partially resolved entering Q3.
• Care manager hiring for the in-home care support segment has been slower than planned, leading to H1 revenue and profit declines.

Q: What explains the Q2 operating profit improvement, and how likely is full-year guidance to be met? / A: Q2 operating profit hit 1.8x Q1 levels after elevated Q1 costs from structural reform delays at Shomitsu Giken, temporary PMI costs from the Cent Works acquisition, and one-time shareholder-related expenses. H1 cumulative operating profit is slightly down YoY due to these temporary factors, but Q2 returned to planned profit levels. Record Book utilization continues to grow, and DX Solution has a typical second-half weighting. Management reaffirms that full-year guidance is achievable.

Q: Why is Record Book new store opening missing the original 20-location target, and what is the impact on full-year results? / A: Strong existing store profitability (current average franchise utilization exceeds the 70% break-even threshold) has increased demand for new openings, including from existing franchisees looking to add locations. However, competition for suitable commercial real estate with other industries is very high, leading to prolonged site selection that has slowed progress. The company has added staff and expanded sourcing channels to address the issue, but the full-year opening count will still miss the original target. The shortfall in opening fees will be offset by higher-than-expected revenue and profit from existing store utilization growth, so the full-year Record Book target remains on track.

Q: What is the progress of Shomitsu Giken's structural reform, and what is the full-year outlook for Active Life? / A: Shomitsu Giken was acquired to create synergy with Fukucare, the group's regional assistive device business, by providing home renovation services for Fukucare's elderly clients. The company is currently refocusing Shomitsu Giken away from unprofitable non-core projects (like commercial exterior/roof work) to focus on high-synergy elderly-focused home renovation and interior work for Fukucare clients. Fixed cost reductions have been implemented, and cost savings started to appear in late Q2. A second-half recovery is planned, but the segment will still miss its full-year profit target due to the H1 shortfall.

Q: What is the current outlook for the DX Solution segment's full-year performance? / A: All core DX Solution lines (work-care balance support, silver marketing, medical solutions) are performing solidly. The SaaS-based system solution business has low volatility and stable performance. The April 2025 revised nursing care leave law has been a strong tailwind for work-care balance support, and the business continues to add new clients. Silver marketing and medical projects are also weighted to the second half, so management expects the segment to meet its full-year profit and revenue target.