8769.T

Company Overview & Mission

• Mission: Create "safe working environments" and "vital individuals/organizations" to deliver employee well-being, which improves corporate productivity, attracts and retains top talent, and increases firm value.
• 13 consecutive years of revenue growth since FY2012 March, with over 3,200 client companies and 6.07 million total service users. Approximately 30% of Japan's "Healthy Company" designated firms use the company's services.

Overall Company Performance

• H1 total consolidated revenue: 4.559 billion yen, +35.7% YoY (organic growth +7.7% YoY, remainder from M&A).
• H1 operating profit: 280 million yen, +76.9% YoY (organic growth +36% YoY), operating margin improved from 4.7% to 6.1% YoY.
• EBITDA: 798 million yen, +49.4% YoY, 17.5% EBITDA margin.
• Net income attributable to parent: turned positive to 186 million yen from a prior year loss.
• Free cash flow turned positive to 755 million yen on strong operating cash flow performance.
• System investment intensity has peaked after multi-year investment, with overall cost as a percentage of revenue declining steadily despite M&A-related cost increases.

Operational Updates & New Initiatives

• Mentality Management: Consolidating two legacy stress check systems into アドバンテッジ タフネス to improve operational efficiency. Expanded cross-selling: now selling solutions to non-stress-check clients first, with plans to convert those clients to the company's stress check service over time. Launched a new generative AI-powered automatic summary feature for stress check result reports on the アドバンテッジ ウェルビーイング DXP platform, which aggregates employee stress check, health check, and attendance data.
• New Rework Facility Entry: Entered in-person rework facility operations to meet growing market demand for in-person return-to-work support, complementing the existing online eRework service to create a hybrid online-offline support model for employees on mental health leave.
• EB Platform Development: Built the first cross-insurer, cross-life/casualty online employee benefits (EB) platform to replace inefficient paper-based annual employee enrollment common in Japanese workplace insurance. The platform reduces corporate administrative burden, improves employee enrollment rates (especially among younger workers), and allows the company to add new insurance products to existing LTD clients, as well as win full-service workplace insurance contracts from large new clients. The platform is already live, with new orders growing and results expected to hit in the second half of the fiscal year.
• Small Sum Short Term Insurance Acquisition: Acquired KNS (健康年齢少額短期保険) in Q1, which offers health age-linked medical insurance and low-cost end-of-life insurance for seniors. Acquisition aligns with the company's mission of holistic employee health and risk management, and will leverage the company's existing client base and EB platform for growth and cost efficiency.

• H1 2Q performance is in line with internal company targets, with no deviations from plan.
• Mentality management solution sales are seasonally weighted to the second half, consistent with historical trends, so full details of second half performance are not yet finalized, but everything outside of this seasonal factor is currently within expected ranges.
• Existing core businesses are expected to maintain their current growth pace next fiscal year, with the EB platform, small sum short term insurance business, and rework facilities adding incremental growth. The large expiring LTD contract this fiscal year is already fully priced into guidance, and after this one-time impact, LTD will return to growth next fiscal year.
• System investment has already peaked, so capital expenditure and depreciation expense are not expected to increase sharply in future periods. Large legacy system investments from 3-4 years ago will complete depreciation in the next few years, so cost pressure will ease over time. No large sharp increase in overall costs is expected for the second half or next fiscal year, with ongoing efficiency improvements continuing to improve margins.

1. メンタリティマネジメント事業: YoY 1.5% revenue growth, segment margin improved from 15% to 16%. Core アドバンテッジ タフネス grew 1.5% YoY (2.6% QoQ), while solution sales grew 9.1% YoY in 2Q. Revenue contribution: ~undisclosed absolute revenue, 1.5% overall YoY increase. 2. 健康経営事業: YoY 190.6% revenue growth (M&A contribution is large; organic growth 25.9% YoY). Segment profit was 125 million yen, with segment margin 8.2%. 3. LTD事業: YoY 10.3% revenue growth, in line with plan. Segment margin improved from 23.6% to 28.3% due to process efficiency. Existing contracts grew steadily driven by wage increase pass-through to commissions. 4. 両立支援事業: YoY 23.7% revenue growth, in line with plan. Overall segment loss due to upfront investment in new in-person rework facilities; excluding investment costs, the segment achieved 3.3% segment margin and turned profitable. Contract count grew to 136 companies, service revenue grew 18.1% YoY. 5. リスクファイナンシング事業: YoY 1.9% revenue decrease to 138 million yen, in line with long-term gradual decline trend. Segment profit was 81 million yen, slight YoY decrease due to EB Platform investment; excluding investment, profit margin stayed at prior year level. 6. 少額短期保険事業 (new segment added after Q1 acquisition): H1 revenue 71 million yen, segment loss 8 million yen.

• A large LTD contract is scheduled to expire in Q4 of this fiscal year, which will cause a one-time revenue decline in Q4, though this impact is already fully incorporated into current planning and does not change full-year guidance.
• Specific保健指導 services from the acquired FitzPlus subsidiary in the Health Management segment have seasonal revenue fluctuations, with H1 revenue naturally lower than H2, which is a known seasonal pattern already accounted for.
• New initiatives including the rework facility entry and EB platform require upfront investment that creates near-term margin pressure for their respective segments, though these investments are expected to drive long-term growth.

Q: The firm did not publish an official H1 guidance at the start of the fiscal year. How does H1 performance compare to internal plans, and will the current growth momentum continue into the second half (Q3/Q4)? / A: H1 and Q2 performance is in line with internal targets and expectations. Mentality management solution revenue is seasonally concentrated in the second half, as client decisions are often made near year-end, so specific performance for the second half cannot be finalized at this point. Outside of this seasonal factor, all business lines are tracking within expected ranges.

Q: Is the correct outlook that existing core businesses will maintain their current growth rate next fiscal year, with M&A and new businesses (including the new small sum short term insurance business) adding incremental growth on top? / A: That understanding is correct. Existing businesses are expected to maintain their current growth pace, and new initiatives including the small sum short term insurance acquisition, the rework facility (opened November this year, will contribute to revenue and profit starting next fiscal year with possible expansion if performance goes well), and the EB platform (already gaining new large client orders and system business from other agencies) will all add incremental growth next year. After the one-time impact of the expiring large LTD contract this fiscal year, LTD will return to growth next fiscal year, so overall next fiscal year performance is expected to be solid.

Q: Which cost items are likely to increase from H2 into next fiscal year, and where can efficiency improvements be expected? For example, what is the outlook for personnel expenses and system development costs? / A: The efficiency improvement trend seen in H1 is expected to continue into the second half, with ongoing sales efficiency improvements in the mentality management and LTD segments continuing to improve profitability. System investment has already passed its peak, so investment amounts are declining, and no sharp increase in depreciation expense is expected going forward. Large legacy system investments for the タフネス platform made 3-4 years ago will complete depreciation in the next few years, so no sharp increase in overall costs is expected for the second half or next fiscal year.