Advantage Risk Management Co.,Ltd. Q4 FY2025 earnings call

Company Milestone & Overall Performance

• The company celebrated its 30th anniversary since founding in 1995, and achieved record-high full-year profit in FY2025. Around 30% of companies listed on the White 500 Health Management Stock Index use the company's solutions.
• Full-year consolidated revenue hit 8.554 billion yen, 22.2% YoY growth, driven by the half-year revenue contribution of the two recently acquired companies (Mediplat and Fits Plus). Operating profit hit 1.022 billion yen, 40.9% YoY growth, with operating margin improving to 12.0%. Net profit hit 744 million yen, 47.2% YoY growth, with a Resily impairment offset by tax benefits from the merger.
• Total service users exceed 6 million people. Cross-sell rate to existing customers increased 1 percentage point YoY, with steady growth in revenue per customer. Cost as a percentage of revenue has declined for multiple consecutive years, despite higher absolute costs from the new acquisitions.

Operational & Strategic Highlights

• Mentality Management Business: The company saw growing corporate demand for post-stress-check improvement solutions following a Ministry of Health, Labour and Welfare amendment to the Industrial Safety and Health Act. It fully launched monthly pulse surveys paired with solution packages to track improvement effectiveness, expanded upfront solution sales (rather than only post-stress-check add-ons), and secured new major clients including Olympus. It also entered a mutual sales agency partnership with Kaonavi, a human resources service provider.
• Health Management Business: All clients that received the company's health management consulting obtained the 2025 Excellent Health Management Corporation certification. The company added NAC Care as a new health check system partner to expand client options, and will pursue cross-sell synergies, cost reductions from scale economies, and integrated new product development with the two acquired firms.
• Work-Life Balance Support Business: The company added a lower-cost, lower-customization Lite plan for its ADVANTAGE HARMONY leave/return-to-work management system to target small and medium enterprises. System investment has been completed, and the company expects significant profit improvement starting from the next fiscal year.
• Risk Financing Business: The company is building out a full-suite Employee Benefits business to expand beyond its core LTD offering, investing in this new line while gradually winding down the legacy acquired cancer insurance book.

1. Mentality Management Business: Revenue of 4.36 billion yen, 7.2% YoY growth, accounting for 50.9% of total company revenue. Segment profit of 903 million yen, 36% YoY growth, with segment profit margin improving from ~16% to ~20%. Stock revenue reached 3.107 billion yen, 5.4% YoY growth including price increase benefits; solution sales grew 15.8% YoY. 2. Health Management Business: Revenue of 2.14 billion yen, 111.4% YoY growth, accounting for 25% of total company revenue. Segment profit reached 172 million yen, with profit margin improving to 8.1%. This growth is driven by the acquisition of Mediplat and Fits Plus; among sub-segments, occupational physician/public health nurse services hit 1.242 billion yen (77% YoY growth), health check management services hit 349 million yen (17.5% YoY growth), and specific health guidance reached 566 million yen after the acquisition. 3. LTD Business: Revenue of 1.377 billion yen, 5.6% YoY growth, accounting for 16.1% of total company revenue. Segment profit of 516 million yen, 4.5% YoY growth, with solid performance driven by strong existing contracts and wage increase effects. 4. Work-Life Balance Support Business: Revenue of 349 million yen, 26.2% YoY growth, accounting for 4.1% of total company revenue. Segment loss narrowed to -13 million yen, with significant improvement in profitability. 5. Risk Financing Business: Revenue was in gradual decline as the wind-down of the legacy American Family Cancer Insurance business continues, and the company is investing in the new Employee Benefits business expansion, leading to a slight decrease in segment profit compared to previous years.

• FY2026 (March 2026) Full-Year Performance Guidance: Management forecasts total revenue of 9.925 billion yen, 16% YoY growth. It expects operating profit of 1.14 billion yen, 11.5% YoY growth, factoring in planned investment for new business lines and one expected large contract loss in the LTD business segment.
• Shareholder Return Guidance: The company maintains a base policy of stable, continuous dividends targeting a consolidated payout ratio of 35% or higher. It raised the FY2025 full-year dividend to 16 yen per share (up 1 yen from the earlier guidance), and has guided a FY2026 dividend of 17 yen per share.

• Work-Life Balance Support Business saw stronger-than-expected customer demand, but multiple contract start dates were pushed back from original plans, leading the segment to slightly miss its initial full-year performance target.
• The Health Management Business had not reached critical mass before the recent acquisitions, and had not been able to benefit from economies of scale prior to the combination with Mediplat and Fits Plus.
• The company took on new debt to fund the recent acquisitions, leading to a moderate increase in total liabilities, though management judges the overall balance sheet remains healthy with no impact on financial stability.

Q: With the addition of new subsidiaries last year, should we expect person-related expenses to grow in line with future revenue growth? What is the outlook for system investment and amortization expenses after the 700 million+ yen of investment in the past two years? / A: Management has shifted from a pure growth-focused strategy to a greater emphasis on efficiency, launching company-wide business improvement initiatives around two years ago that are already delivering results. While wage increases will drive some person-related expense growth, management targets that person-related expense growth will remain below revenue growth going forward to expand profit margins. / A: System investment peaked during 2021-2022, when the company developed the Advantage Wellbeing DXP platform and pulse survey tools. Investment has since stabilized, and will not exceed previous peak levels going forward, though the company will maintain steady investment for new product development and existing platform updates. Amortization expenses, which rose from prior large investment rounds, will peak in the next few years and begin to decline as annual investment slows down.

Q: What is the company's approach to future M&A strategy? / A: The company's core focus is on the employee wellbeing and productivity space, and all future M&A will target complementary businesses that align with this core strategy. The company prioritizes deals that can deliver synergy via cross-selling to the company's existing client base, and that help the company reach critical mass to unlock economies of scale in new service lines.

Q: How does the company plan to deliver corporate productivity improvement for Japanese clients? / A: The company's core value proposition is helping clients improve employee wellbeing, which in turn reduces turnover, increases engagement, and drives sustained productivity improvement. The company is building data to demonstrate the measurable impact of its solutions on client productivity, and will continue to expand its end-to-end offerings that go beyond measurement to deliver targeted improvement and verified results.