3-D Matrix,Ltd. Q2 FY2026 earnings call

Overall Financial Performance

• Achieved double-digit revenue growth and significant profit expansion, putting the full-year net profitability plan on solid track. First half revenue grew 47% year-over-year to 4.807 billion yen, with operating profit of 360 million yen, 350 million yen above the original plan.
• Currency depreciation (yen weakening) generated significant foreign exchange gains on intercompany loans to subsidiaries, which pushed below-operating profit lines to net profit, but these are non-cash accounting gains, and management emphasizes that operating profit is the core metric for evaluating business performance.
• On the balance sheet, fixed liabilities decreased 2.489 billion yen year-over-year to 1.166 billion yen due to continued conversion of convertible bonds, and net assets increased 2.146 billion yen year-over-year to approximately 4 billion yen, strengthening the company's capital position.

Sales and Commercial Progress

• United States: High growth continues, with new sales hires added at the start of the period contributing to strong new customer acquisition. The business has just entered the mass market segment, with multiple times remaining expansion room. Management is improving sales quality (expanding KOL-backed clinical evidence, upskilling the sales team) to offset rising sales difficulty from larger scale market entry. The new pediatric focus segment is seeing growing adoption and positive reception for PuraStat, and the ENT segment hit another all-time sales record, with growth from both new customers and higher usage among existing customers. Management will continue focusing on large markets and accounts to balance sales efficiency, contribution profit profitability and growth.
• Europe: Grew 28% year-over-year, outperforming budget. The GI (gastroenterology) segment accelerated growth after adding sales personnel in the UK to drive higher hospital usage. Growth remains strong in ENT (head and neck applications) and urology, where management is cross-selling to hospitals with robotic surgery systems for prostate procedures, expanding use to radioactive cystitis and partial kidney resection procedures. Italy saw temporary sales decline from a distributor change. Management does not plan to add additional sales resources as the region operates on an agency model, and maintains a conservative plan for slower growth regions like Germany.
• Japan: Grew 13% year-over-year, outperforming budget, with growth driven by higher usage among existing customers after high large hospital coverage limited new customer growth. A competitor's product launched in September 2025; management notes market segmentation is already established in the US, where the competitor's powder product is used for emergency undifferentiated bleeding, while PuraStat's clear, washable formulation is designed for repeated intra-surgical use, so the two products serve different use cases. Management will continue monitoring competitive dynamics in Japan.
• Quarterly results: Both Q1 and Q2 beat plan, with cumulative first half revenue 12% (520 million yen) above plan. Q1 hit near break-even against a planned deficit, and Q2 delivered far higher operating profit than planned, leading to a 350 million yen cumulative overperformance against plan.

Research and Development Pipeline

• Oropharyngeal hemostasis: Already launched in Europe and the US, with published clinical papers; a clinical study is ongoing to generate regulatory submission data for the US.
• Next-generation hemostatic agent for neurosurgery: CE mark approval is delayed as regulatory review has taken longer than expected, the company is still awaiting the final certificate.
• Purelift (endoscopic submucosal injection material): Sales are currently suspended in Japan, but manufacturing preparation is ongoing at a new production facility; US regulatory submission is in preparation.
• Mucosal wound healing: An initial 510(k) submission to the FDA was changed to a De Novo 510(k) submission after FDA determined there are no equivalent existing marketed products for this indication; the company is preparing the resubmission.
• Myocardial function recovery (myocardial regeneration): A study from Harvard University has been published, including in the journal Science.

Geographic product segments performance for the first half (first and second quarters combined) of the 2026 April fiscal year:

• United States: 81% year-over-year revenue growth, with results coming in well above budget. Drove the company's overall 47% total revenue growth.
• Europe: 28% year-over-year revenue growth, beating budget. The ENT (ear, nose, throat) and urology segments drove strong growth, while Germany hit all-time record sales after improvement initiatives took partial effect; Italy saw temporary revenue decline due to a secondary distributor change that interrupted new inventory purchases.
• Japan: 13% year-over-year revenue growth, exceeding budget, with growth coming from increased usage volume among existing customers (new customer growth is limited as large hospital coverage is already high).

Total company first half revenue was 4.807 billion yen, up 47% year-over-year, with total operating profit of 360 million yen, 892 million yen improvement year-over-year and 350 million yen above plan. Gross profit grew 60% year-over-year with an improved gross margin.

• Full year 2026 April fiscal year guidance is maintained with no changes from the initial plan. Full year revenue is planned at 9.283 billion yen, 34% year-over-year growth, with the company expected to reach the break-even point and deliver a small positive operating profit.
• The 3-year long-term plan is maintained: after the current fiscal year, revenue will grow 30% and 20% in the subsequent two fiscal years, reaching approximately 15 billion yen in total revenue, with operating profit expanding significantly alongside revenue growth.
• For the current fiscal year by region: the US is planned for continued high growth, with the target considered achievable as sales resources are already fully expanded; Europe targets 21% year-over-year growth, matching the prior year's growth rate; Japan targets 8% year-over-year growth, down from 37% last year due to limited remaining new customer growth from large hospitals.

• Approval for the next-generation neurosurgery hemostatic product is delayed, with CE mark review taking longer than expected and no final certificate received to date.
• Italy's sales are temporarily depressed due to a distributor change after a secondary distributor leadership transition left the distributor unable to continue operations, with no new inventory purchases while existing inventory is liquidated.
• A competitor's hemostatic product just launched in Japan, creating new competitive pressure, though management expects potential market segmentation similar to the US market and is continuing to monitor the impact.
• As the business scales up and enters the mass market segment in the US, overall sales difficulty is increasing, requiring ongoing investments to improve sales quality.
• Foreign exchange rate fluctuations create accounting volatility in below-operating profit lines due to large intercompany loan balances, though this does not impact operating cash flow or core business performance.

No question and answer section was included in the provided transcript.