3-D Matrix,Ltd. Q1 FY2026 earnings call

Financial Milestone

• Achieved first operating profit from core product sales in Q1, a rare milestone for product-focused biotech companies, with operating profit turning black after more than 300 million yen of year-over-year improvement
• Increased conversion of convertible bonds led to a large reduction in fixed liabilities, and net assets increased by approximately 0.9 billion yen
• Foreign exchange gains from yen depreciation on foreign currency-denominated loans to subsidiaries boosted net and ordinary profit, but management notes that operating profit better reflects core business performance

Sales & Growth Strategy

• The company is transitioning from targeting early adopters to attacking the larger mass market segment, with a dual "offense and defense" sales strategy:
  • Offense: Target harder-to-acquire new customers with data-driven sales and improved procedure-specific proposal capabilities
  • Defense: Prioritize retention of existing acquired customers and improve overall sales quality
• US: Sales resources have already been expanded 1.5x, with continued multiple-fold growth headroom remaining in the market
• Europe: Agency-based sales model means no major additional sales resource is planned; improvement strategies for previously stagnant German growth are currently being developed for H2 upside; otorhinolaryngology and urology are being cultivated as the next core growth pillars
• Japan: Focus on increasing usage volume from existing customers; evaluating sales team expansion to more efficiently penetrate the still-large untapped mid-sized customer segment

Product Development Pipeline

• Commercialized indications: Neck/oropharyngeal hemostasis (Europe), HHT hemostasis (US), BPH surgery hemostasis (Europe), radiation proctitis healing (US), oral mucositis (US)
• In-progress key milestones:
  • Next-generation hemostat for neurosurgery: Approval expected in Fall 2025 after delayed regulatory review (no additional company data submission required, just regulatory processing)
  • Mucosal wound healing: Completed US FDA approval application for expanded indication to the entire gastrointestinal tract (already approved for rectum and oral cavity); currently in discussions with FDA on review eligibility for the expansion pathway
  • Inflammatory bowel disease mucosal healing: Multiple US research projects ongoing, Japanese specific clinical trial has enrolled 5 patients at Gunma University
  • New DDS (sustained release) platform: Ongoing non-clinical trials combining the company's material with antibiotics/steroids for sustained drug release, with potential broad application across multiple therapeutic areas

Geographic segment performance for Q1 2025 (FY2026 April term):

• United States: 87% year-over-year revenue growth, 10% above planned target, driving overall company growth. Gastroenterology endoscopy segment revenue grows in line with sales team expansion, with increasing contribution profit; otorhinolaryngology segment maintains positive contribution profit and achieves steady growth.
• Europe: 26% year-over-year revenue growth, beating budget. Gastroenterology endoscopy segment posts strong growth in the UK, Italy, and Austria; otorhinolaryngology (head and neck surgery) achieves 70% year-over-year growth; urology (radiation cystitis and benign prostatic hyperplasia) doubles year-over-year revenue; cardiovascular surgery segment remains flat.
• Japan: 17% year-over-year revenue growth, 10% above budget. Growth is driven by increased usage volume from existing customers, with slowed growth from new customers due to high market penetration of large hospitals.

Overall consolidated Q1 revenue is 2.194 billion yen, 47.7% year-over-year, 7.5% above plan. Overall operating profit is 9.51 million yen, the first positive operating profit from product sales in company history, 77 million yen above plan. Gross profit increased 56% year-over-year, operating profit improved by more than 300 million yen year-over-year.

• No changes to the full-year 2025 (FY2026 April term) guidance; maintains target of 9.283 billion yen total revenue (34% year-over-year growth) and 0.4 billion yen full-year operating profit
• Full-year geographic growth targets are maintained: 55% year-over-year growth for the US, 21% for Europe, 8% for Japan
• Management plans to continue achieving quarterly operating profit through the remainder of the fiscal year to solidify the black ink status and build market confidence
• Three-year plan targets continued steady revenue expansion and significant operating profit growth after achieving full-year profitability this fiscal year

• Yen depreciation/foreign exchange volatility causes large non-operating fluctuations in ordinary and net profit that do not reflect core business operating performance or actual cash flow changes
• In the US, acquiring new customers in the mass market segment is expected to be more difficult than in the early adopter phase
• Germany (Europe) saw stagnant growth in the prior year, and the upside from planned improvement initiatives is not yet guaranteed
• Japan's domestic growth is expected to slow due to high penetration of large hospital customers and declining new customer growth
• Next-generation neurosurgery hemostat approval is delayed from the original April 2025 target, with approval now expected in Fall 2025

The provided transcript does not include a question and answer section, so there are no exchanges to summarize.