9158.T

Consolidated Cumulative Results

• Cumulative consolidated revenue for the 3Q of FY2026 is 40.17 billion yen, up 16.2% year-over-year
• EBITDA is 6.129 billion yen, down 7.2% year-over-year, primarily due to early-stage losses from new hospice openings
• Profit attributable to owners of the parent is 1.433 billion yen, down 48.3% year-over-year
• Through 3Q, operating income came in at 3.181 billion yen, 0.8 billion yen below the planned 4.0 billion yen, driven by underperformance in the Hospice and Medical Care Residence segments

Domestic Business Updates

• Monthly fees for domestic medical institution clients have recovered to year-ago levels after gradual normalization of discount levels starting in 3Q
• The company is evaluating a non-original planned business real estate liquidation, with multiple favorable inbound inquiries received, and is progressing with proactive evaluation for balance sheet optimization
• The upcoming June 2026 revision of medical fees is moving toward more detailed and refined evaluation systems, which is expected to appropriately reward high-quality operators that operate seriously, with many provisions expected to be positive for CUC, though quantitative impacts cannot yet be calculated

U.S. Business Updates

• Past work to refresh governance, rebuild the management base, optimize fixed cost structure, close unprofitable locations, and adjust physician compensation structures has put revenue quality improvements on track
• Starting next fiscal year, U.S. business will enter Phase 2, focused on standardizing and scaling a high-profit business model, with PDCA testing across location types alongside continued M&A and new location openings, prioritizing dominant market positioning in multiple cities for the OBL (Outpatient Surgery Center Lower Extremity) segment
• Full-scale investment recovery is targeted for FY2028 and beyond
• The company's strategy is to build an integrated lower extremity medical platform starting from podiatry, integrating complementary vascular, musculoskeletal, and wound care markets to maximize business value, targeting high-margin, complex-risk patients rather than mild cases
• Internal data shows 29% theoretical prevalence of patients requiring vascular treatment and related lower extremity care, but only 1.6% of these patients are currently captured for ongoing treatment within the CUC group; the company will close this gap with AI-optimized patient detection and expanded treatment menus including OBL

• Full-year FY2026 guidance is maintained, though management acknowledges achievement is challenging given current progress below plan. The company will target plan achievement through core business recovery in Q4 combined with the potential non-original planned real estate liquidation.
• Q4 FY2026 expectations by segment:
  • Medical Institution segment: Domestic business will see the delayed M&A support revenue originally planned for 3Q recognized in 4Q, driving significant segment improvement despite an expected slight decline in U.S. revenue and profit from seasonal patient count decreases
  • Hospice segment: Stable occupancy and recovering pricing are expected to deliver improvement compared to 3Q
  • Home-Visit Nursing segment: Seasonal fewer working days plus planned human capital investment will drive revenue and profit decline compared to 3Q
  • Medical Care Residence segment: Renovations for hospice floor conversion are complete at 4 facilities, normal admissions have resumed, and strengthened patient acquisition efforts are expected to drive performance improvement alongside rising occupancy
• Next fiscal year (FY2027) segment profit outlook:
  • Domestic Medical Institution: Higher M&A activity and new location support than this fiscal year is expected to drive increased M&A support fees and monthly fees, leading to year-over-year profit growth
  • U.S. Medical Institution: The segment remains in the base-building phase through next fiscal year, with expected growth in patient count at existing locations and expanded M&A in podiatry and OBL. However, upfront investment for new OBL openings will drive a temporary profit decline. New OBL locations require ~5 months to launch, with monetization targeted starting in FY2027
  • Hospice: Rising occupancy at new facilities launched through this fiscal year, the end of pricing declines, and reduced upfront costs from slower new opening growth are expected to deliver profit growth
  • Home-Visit Nursing: Expanding scale at existing locations will drive revenue growth, but higher planned new location openings than this fiscal year is expected to keep profit contribution at similar levels to this fiscal year
  • Medical Care Residence: Upfront investments are completed this fiscal year, and expanded admissions of high-priced residents plus expanded sales of Fuyakun are expected to deliver profit growth
• Overall, the company remains in an investment phase, but expects accelerating profitability at domestic existing locations starting from next fiscal year.

1. Medical Institution Segment: Cumulative revenue decreased 5.8% year-over-year. Domestic revenue fell due to upper-half monthly fee reductions, while U.S. revenue saw a 0.5 billion yen reversal decline from prior-year one-time past accounts receivable collections. U.S. roll-up M&A in the podiatry space remained solid. Cumulative patient count in the U.S. increased 3.7% year-over-year, and excluding the prior-year one-time revenue, revenue per patient is rising, showing a gradual shift to higher-margin services. For the quarter, both domestic revenue and EBITDA increased quarter-over-quarter, driven by normalized monthly fee discount levels, and U.S. performance stayed stable. This segment contributes approximately X% of total consolidated revenue (no explicit contribution percentage provided in the transcript).

2. Hospice Segment: Cumulative revenue increased 20.2% year-over-year, driven by rising occupancy at existing facilities and contributions from new openings. EBITDA decreased 13.2% year-over-year due to early-stage losses from new facilities, bringing the EBITDA margin to 12.4%, down 4.8 percentage points year-over-year. On a quarterly trend, revenue, EBITDA, and EBITDA margin all improved quarter-over-quarter as new facility occupancy rose. Pricing declines at some existing facilities are starting to show improvement from corrective actions, with further gradual improvement expected from Q4 onward. 13 facilities are planned to open in FY2026, 8 in FY2027, with only 2 planned openings pushed back one month to April 2026 from March 2026. This segment is the fastest growing revenue segment for CUC.

3. Home-Visit Nursing Segment: Cumulative revenue increased 5.6% year-over-year, and EBITDA increased 4.0% year-over-year. Early-stage losses at new stations were offset by improved occupancy for nurses and therapists, keeping the EBITDA margin stable. Cumulative user count increased 3.9% year-over-year, and total cumulative care hours increased 4.4% year-over-year driven by more medium-to-severely ill patients. Care hours per nurse/therapist stayed at a strong 89 hours for the cumulative period, with new sites launching smoothly. In the third quarter, revenue decreased quarter-over-quarter due to fewer working days, but EBITDA increased quarter-over-quarter driven by lower recruiting costs. This segment contributes a mid-single-digit percentage of total consolidated revenue growth.

4. Medical Care Residence Segment: Revenue grew steadily driven by higher medical fee revenue for home-visit nursing and increased sales of the medication support system "Fuyakun." Compared to the second quarter, EBITDA and EBITDA margin declined due to higher SG&A from personnel expansion. All upfront investments for personnel expansion are expected to be completed this fiscal year, with future growth driven by expanded admissions of high-priced residents. Occupancy has been low due to admission controls during renovations to convert 4 facilities to hospice floors, but renovations are now complete, and occupancy is expected to improve gradually. Revenue per resident increased by 100 thousand yen quarter-over-quarter.

• Full-year FY2026 profit achievement is challenging, as first-half underperformance cannot be fully offset by second-half recovery even with the second-quarter recovery trend.
• U.S. healthcare market has structural issues including highly variable accounts receivable collection rates due to complex insurance pricing and coverage frameworks, which creates revenue recognition volatility; while a new IT system has improved estimation accuracy, opportunity loss from inefficient collection processes remains a key area for improvement.
• U.S. labor costs are already elevated, and there is ongoing risk of further increases in medical supply prices.
• The 2026 medical fee revision has not yet published final point values, so full quantitative impact cannot yet be assessed, and there is risk of increased operating costs from stricter and more detailed reporting/operating requirements.
• Increased regulatory stringency for outpatient/internal medicine clinics may create operating headwinds for smaller operators, though it also creates new support opportunities for CUC.

Q: Full-year guidance is maintained but current progress is below plan, is the company planning to cover the gap with one-time gains from asset liquidation? What is the medium-long term strategic impact of this liquidation, and what other one-time gains are recognized in 3Q?

A: The core path to plan achievement is recovery of the core business, with asset liquidation used as a complementary measure if appropriate. Asset liquidation is part of ongoing long-term capital efficiency strategy, and it is being pursued now because favorable conditions and timing have aligned. In 3Q, the company recognized 0.22 billion yen of gain on debt extinguishment from the cancellation of a real estate purchase agreement for a Vietnamese subsidiary, which is a one-time item.

Q: Next fiscal year, the U.S. OBL business will generate losses; earlier commentary suggested faster monetization for this segment, has anything changed? Will overall Medical Institution segment profit still grow, with domestic gains offsetting U.S. losses?

A: The overall direction is solid profit growth in domestic, strategic red ink in the U.S., and the company will manage overall group profit growth to avoid sacrificing group-wide profit growth. For the U.S., Podiatry and Vein businesses are still expected to grow revenue and profit next fiscal year; the net loss for the segment comes from upfront investment in the new OBL business, which the company is pursuing proactively to capture long-term growth.

Q: How strong is demand for medical institution management support services post the 2026 medical fee revision? Will demand come more from struggling clinics, or higher-margin areas like acute care that got favorable revisions? How will the target market change, and how do hands-on support vs data solution services compete or coexist?

A: The medical fee revision is increasing complexity, which is a key demand driver for support services, especially for hospitals. Failing to meet new requirements leads to lower reimbursement or lower profitability unless operators restructure their personnel and operations, so demand for support is expected to increase even though the headline revision rate is the highest in company history. There is new pressure on outpatient/internal medicine, which was not historically a core target, so new demand may emerge in this segment. For service types, it is segmentation based on problem complexity, not competition. Large hospitals need integrated, hands-on support to implement organizational changes, which cannot be solved with data solutions alone; smaller clinics with less complex needs can use seminars and simpler tools, so there is segmentation matching need depth.

Q: What is the expected impact of the medical fee revision on the Hospice segment, especially stricter documentation requirements for home-visit nursing? Will increased costs delay profit recovery?

A: Point values are still unknown, but the overall shift to inclusive payments and tighter requirements will increase operating load somewhat, but more intensive nursing and better patient care based on medical management should be appropriately rewarded, so the impact is not expected to be large. Final point values will be published within two weeks, and the company will adjust its response after that.

Q: Compared to earlier policy discussions, has the direction of hospice policy become more favorable, and how does the new evaluation framework work?

A: The discussion has become more aligned with actual operating realities rather than softer. Regulators agree on the necessity of hospice, but there is still pressure for appropriate standardization. The shift is to more detailed evaluation that rewards high-quality operators, but may be more challenging for smaller mid-sized operators. New/additional add-on fees require adaptation to new requirements, and the company will analyze the balance of added costs and added revenue before making decisions on which add-ons to pursue.

Q: Will hospital bed surrenders after the revision create opportunities to repurpose empty beds as hospice, creating a new business model that pairs consulting and hospice operation without new construction?

A: This is possible. The company already has experience converting an unprofitable nursing home owned by a client into a multi-function facility combining hospice and regular visiting nursing, which has become a high-profit business that is performing well. That said, most bed surrenders are partial conversions when hospitals rebalance their service mix, not full closures, so it is too early to say this will become a major new growth driver for FY2027 or FY2028.

Q: Will the revision create new demand for solutions for clinics, for example for IT adoption or new service lines?

A: There is growing demand for support to help clinics transition to home-visit care, which is expected to increase significantly. The company already provides internal tools to visualize clinic coordination for home-visit care for supported clients, and is considering offering these tools as a standalone service in the future. In the U.S., the company is trialing an AI platform that automates the entire revenue cycle from appointment booking to collections for outpatient clinics, which will launch full-scale in May, and the company is targeting a 2028 launch of similar solutions in Japan.

Q: How do changes to the U.S. healthcare environment (higher uninsured rates after the ACA changes) impact the OBL investment strategy? Are there new risks or opportunities?

A: Healthcare economic disparity is a serious issue, but CUC primarily serves middle and upper-income patients, so it does not accept many Medicaid patients currently. The main risk is ongoing high labor costs and potential further medical price inflation. However, OBL surgery is much lower cost than hospital-based surgery, so there is strong demand from Medicare and private insurers that want to shift procedures to lower-cost settings, which remains a strong tailwind for the OBL business.

Q: The current capture rate of potential lower extremity patients is very low; can this gap be closed by CUC alone, or does it require stakeholder collaboration, and what additional initiatives are planned? Do large device company acquisitions in the space help CUC?

A: CUC is creating a new "care navigator" role (expected to be a nurse) to coordinate patient referrals between OBL, podiatry, and vein care, to break down the barrier of physician behavior change, which the company sees as the core challenge. This is a solvable problem internal to CUC, and the company will test this model experimentally in the Chicago area. Entry by large device companies is a tailwind, because their larger capital base funds education about new lower extremity treatments, which grows overall market awareness, and CUC is positioned to benefit directly from this market expansion. Greater industry attention to lower extremity care is driven by the large macroeconomic benefits of preventing falls and unnecessary amputations, which aligns perfectly with CUC's strategy.

Q: Is the plan to continue expanding podiatry while launching OBL, and will this spread management resources too thin, or are there synergies?

A: Podiatry operations are already highly systematized, with clear KPIs and clear operating processes, so day-to-day execution does not require significant senior management time. OBL is a much more profitable business model, with a very low break-even point of only 10 patients per month, and patient referrals from existing podiatry practices make it easy to hit this volume, so getting OBL scaled quickly is very high priority and does not create problematic resource dilution, with strong synergies from existing patient flow.

Q: What is the nature of the accounts receivable issue in the U.S. podiatry business, can improving collection drive material profit growth, or is it a structural industry issue?

A: High variability in collection rates is a core feature of U.S. healthcare, because coverage is unclear when care is provided, and pricing varies widely across payers. After acquiring Beyond Podiatry, CUC found that receivables had been overstated, so the company switched to a very conservative revenue recognition approach, which led to actual collected amounts being higher than recognized revenue consistently. There was no system to track revenue by clinic, month, and payer, so the company has now implemented a new IT system that allows more precise revenue estimation, which will lead to more accurate revenue recognition starting next fiscal year. This is a company-specific historical issue, not just a general industry issue. Going forward, one-time gains from past collection will end, and revenue will be smoothed across quarters. While the improvement just brings recognition in line with actual collection (no material permanent increase in collection rate), there is clear opportunity cost from past poor estimation that will be eliminated going forward, which is a material improvement.