Recovery International Co.,Ltd. Q1 FY2025 earnings call

Mission and Market Position

• Mission is to act as a warm, trusted care provider to enable patients to age and receive end-of-life care in their own homes, aligning with 93.1% of adults over 60 who prefer to stay in their communities, and 51% who prefer to receive end-of-life care at home (only 16.6% currently achieve this).
• The Japanese home-visit nursing market was 857 billion yen in 2022, and is projected to grow to 36.2 trillion yen for the combined home healthcare and nursing market by 2040 as the population ages; Recovery International held less than 1% market share as of 2024, leaving large room for growth.
• Home-visit nursing has a more favorable profit structure than home care or facility-based nursing: it has higher gross profit per visit than home care (¥8,000 per visit vs ¥3,900 for home care) and far lower fixed costs than facility-based care, resulting in a ~9% operating profit margin vs ~3% for facility-based nursing, with lower initial investment requirements and more stable profit amid utilization volatility.

Core Operational Strengths

• Addresses industry-wide nurse shortages by actively hiring nurses with no prior home-visit nursing experience, and runs a structured 3-month early training program to get new hires fully independent, combined with ongoing mental health support and on-the-job training.
• Drives operational efficiency via DX initiatives: centralizes back-office management for all locations at headquarters (rather than per-site management) to cut operational costs, uses data analysis to select new locations and pursues clustered (dominant) entry to expand existing service areas for higher efficiency.
• Builds organizational capacity via structured management training: an 8-month program for new managers plus mandatory 30 hours of annual ongoing training to develop enough skilled leaders to support scalable expansion.

1Q Operational Progress

• Completed planned site selection for new store openings as scheduled, opened a new location in Ota Ward, Tokyo in April 2025 to strengthen clustered coverage in the area.
• Completed acquisition of a nursing specialist human resources firm via subsidiary RePath in March 2025 to strengthen in-house recruitment capacity.
• Preparation for new consulting and SaaS business lines is progressing on schedule.
• Continued recruiting for new business and headquarters management roles, with on-track hiring for frontline nursing staff in the core business; total headcount reached 280 employees as of March 2025, on track to reach 300 employees imminently.
• KPIs all improved year-over-year: total active nursing staff increased by 50, average visits per nurse increased by 3 visits, average visit price increased by ~¥60, and total users and total visits grew steadily.
• Implemented a 110,000 share buyback program running from April 17 to October 31 2025 to improve capital efficiency and strengthen shareholder returns.

Recovery International operates as a single-reporting core segment focused on home-visit nursing, with an additional newly acquired nursing-focused recruitment business. For the 1st quarter of the 2025 December fiscal year:

• Core home-visit nursing: 572 million yen in revenue, accounting for 100% of reported individual revenue, with 66 million yen in operating profit and an 11.6% operating profit margin. Revenue grew 29.5% year-over-year, operating profit grew 65.4% year-over-year, and operating margin improved 2.5 percentage points year-over-year.
• The newly acquired nursing specialist recruitment firm, held via subsidiary RePath, is expected to add a small incremental increase to consolidated full-year revenue and profit with no separate 1Q revenue breakdown provided.

• Full-year 2025 December fiscal individual earnings guidance is maintained from the prior announcement: revenue of 2.532 billion yen (24% year-over-year growth) and operating profit of 201 million yen (11.4% year-over-year growth).
• The planned net income figure is lower year-over-year due to conservative accounting for uncertain wage increase tax credit timing, which is not confirmed until the end of the fiscal period.
• As of the 1st quarter, revenue progress is nearly on plan at +1 percentage point versus prior year progress rate, while operating profit progress is well ahead of plan at 32.8% of full-year guidance achieved (vs 22.1% in the prior year 1Q), driven by higher productivity from prior year site openings and hiring.
• Consolidated full-year guidance, including the newly acquired recruitment business, projects a small incremental increase in both revenue and profit compared to the original individual guidance.
• Q2 is expected to see a temporary decline in profit due to planned large-scale new hiring, and a temporary drop in visits per nurse during the 3-month new hire training period, though productivity is expected to recover faster than in prior years due to improved training systems.

• The home-visit nursing industry faces persistent systemic nurse shortages that could limit growth if the company cannot hire and train enough staff fast enough to meet demand.
• Utilization is inherently volatile because the majority of patients are elderly, with sudden hospitalizations or deaths creating regular churn that requires steady new client acquisition to maintain growth.
• Intense competition for nurse hiring increases recruitment costs and creates risk of unfilled positions, though the acquired recruitment firm is intended to mitigate this risk.
• Billing compliance risk for insurance-based reimbursement exists, though no specific operational failures related to billing were reported in the quarter. No other material operational failures or unaddressed risks were disclosed.

Q: Why does Recovery International focus exclusively on home-visit nursing instead of combining it with home care services, which is a more common industry model?

A: Management highlights that home-visit nursing has a far more attractive profit structure than home care, with higher per-visit revenue and gross profit for the same basic travel and operational work. The company chooses to focus exclusively on this higher-margin segment to maximize returns rather than diversifying into lower-margin adjacent services.

Q: What specific initiatives does the company have for its digital transformation (DX) strategy, and how do they improve operations?

A: The company’s DX work covers two core areas: first, data-driven site selection that supports the clustered dominant expansion strategy to ensure efficient service coverage. Second, centralization of all back-office administrative work at the headquarters level, rather than per-site administration, which reduces redundant work, cuts operational costs, and enables consistent process improvement across all locations.

Q: What synergies does management expect from the recent acquisition of the nursing-focused recruitment firm via subsidiary RePath?

A: The primary synergies are threefold: first, eliminating the ~1 million yen per-hire external recruitment fee the company previously paid to outside agencies, cutting direct hiring costs. Second, speeding up the recruitment process to improve offer acceptance rates in a competitive hiring market. Third, improving matching quality between candidates and the company to reduce early turnover by combining the acquirer’s deep data on in-house nursing roles with the recruitment firm’s candidate data.

Q: What is the company’s broader M&A strategy going forward, and what types of targets will it pursue?

A: Management confirms M&A will focus on targets that align with the company’s core mission of expanding home-visit nursing capacity. The highest priority targets are businesses that can help solve the core industry challenge of nurse shortages, with recruitment-focused assets like the recent acquisition being the most desirable near-term targets to support accelerated growth.