FB CARE SERVICE CO.,LTD. Q4 FY2025 earnings call

• Overall Financial Performance

  • Consolidated revenue hit a record high of 10.967 billion yen, up 5.9% year-over-year, with gross profit of 1.696 billion yen (up 14.0% YoY) and operating profit of 659 million yen (up 25.1% YoY, also a record high).
  • Recurring profit fell 15.4% YoY to 678 million yen and net profit attributable to parent shareholders fell 22.4% YoY to 406 million yen, due to the expiration of large 2024 fiscal year subsidy income and impairment losses on existing nursing care facilities.
  • The company proactively reduced debt in anticipation of future interest rate hikes, cutting total assets by 641 million yen to 8.858 billion yen and total liabilities by 804 million yen to 5.217 billion yen. The equity ratio rose 4.5 percentage points to 41.1%, strengthening the financial base.

• Operational Developments

  • Opened 2 new nursing care facilities in April 2024, 1 new group home in Utsunomiya, Tochigi in June 2025, and completed acquisition of welfare equipment business from Maruya Furniture Co., Ltd. in Shiojiri, Nagano in June 2025. Launched the company's first dedicated severe care visiting nursing office in Ueda, Nagano in April 2025 to serve both elderly and severely disabled clients.
  • Implemented human resources reforms: shifted most nursing care division employees to a flexible working time system in April 2024, enabling 3-day weekends for staff who request it to improve work-life balance, retain talent, and boost productivity.
  • Leverages core competitive advantages: high profitability of the welfare equipment business from an in-house rental model with in-house maintenance that enables reuse and fast delivery, and strong collaborative synergy between the two business segments that allows early client engagement and one-stop service provision across all stages of care need, which is rare among industry peers.

1. Welfare Equipment Business: Revenue reached 4.586 billion yen, a 4.9% increase year-over-year, contributing 41.8% of total consolidated revenue. Segment profit was 313 million yen, a 6.0% decrease year-over-year. The decrease in profit stemmed from increased purchases of in-house rental products (full cost is recognized at purchase under accounting rules) and rising supplier prices. 2. Nursing Care Business: Revenue reached 6.381 billion yen, a 6.5% increase year-over-year, contributing 58.2% of total consolidated revenue. Segment profit was 346 million yen, a 78.5% increase year-over-year. Growth was driven by full-year operation of 3 newly opened group homes, existing facility sales growth from operational improvements, and passing through some cost increases to users via price hikes, which offset rising commodity and labor costs.

• 2026 March Fiscal Year (full year) guidance expects another record high for revenue and operating profit:

  • Consolidated revenue is projected at 11.735 billion yen, up 7.0% year-over-year. Operating profit is projected at 684 million yen, up 3.7% year-over-year. Recurring profit is projected at 742 million yen (up 9.5% YoY) and net profit attributable to parent shareholders is projected at 460 million yen (up 13.2% YoY).
  • Welfare Equipment Business: Projected revenue of 4.849 billion yen (up 5.7% YoY) and segment profit of 320 million yen (up 2.2% YoY), with growth from the completed Maruya Furniture business acquisition and existing sales expansion offsetting continued higher rental product purchasing costs.
  • Nursing Care Business: Projected revenue of 6.885 billion yen (up 7.9% YoY) and segment profit of 363 million yen (up 5.1% YoY), with ongoing operational improvements offsetting initial costs for newly opened facilities and sustained high commodity and labor costs.
  • Dividend guidance: Annual dividend is raised by 5 yen to 38 yen per share (13 yen interim + 25 yen year-end), representing a 20.8% consolidated payout ratio. The company intends to continue pursuing dividend increases going forward.

• Medium-term (2025-2029 March Fiscal Years) strategic and financial guidance maintained:

  • Targets 150 billion yen total consolidated revenue and 10 billion yen adjusted operating profit by the 2029 final fiscal year, with 10 billion yen of revenue growth coming from M&A.
  • Welfare Equipment Business targets 6 billion yen in revenue and 460 million yen in segment profit by 2029, focusing on existing location sales expansion rather than new office openings, but will actively evaluate suitable industry M&A opportunities.
  • Nursing Care Business targets 8 billion yen in revenue and 540 million yen in segment profit by 2029, with a 1 billion yen M&A budget allocated for targeted acquisitions to meet growth goals.

• Industry-wide headwinds: Sustained price inflation pushes up raw material, supply, and labor costs, while industry competition is intensifying, putting pressure on gross margins. Chronic industry-wide labor shortages and aging workforce limit new client intake capacity for visiting care services, and overall industry bankruptcies have hit record highs.
• M&A risks: While there are many inbound M&A inquiries from struggling industry players, potential targets rarely meet the company's criteria (aligned corporate philosophy, geographic fit with dominant regional strategy, reasonable valuation) and the industry's low underlying profitability means large M&A investments risk dragging down group performance if turnaround takes significant time.
• Stock market valuation risk: The company acknowledges its current stock price does not reflect its performance, primarily due to low investor awareness from its relatively recent 2022 listing.

Q: Why did operating profit hit a new high in FY2025, but recurring profit and net profit did not? / A: In FY2024, the company received 156 million yen in construction subsidies for 3 new group homes plus additional COVID-19 relief subsidies, which boosted non-operating income that year. No equivalent large subsidies were received in FY2025, leading to lower non-operating income. Additionally, the company recorded impairment losses on existing nursing care facilities as a special loss in FY2025, which reduced net profit. The prior record net profit in FY2022 also included a one-off gain from a subsidiary share sale that does not recur.

Q: What is the progress on the M&A target of 10 billion yen in revenue by the final year of the mid-term plan? / A: Many aging industry players face succession issues and operating stress from cost pressures, so there is no shortage of M&A inquiries. However, the company must be selective to ensure alignment with its philosophy, geographic fit with its clustered dominant region strategy, reasonable valuation, and sustainable profitability. The company will not pursue risky M&A that would drag on group performance to hit targets. To date, the only completed M&A in the plan period is the 2025 acquisition of Maruya Furniture's welfare equipment business, and the company will continue to pursue opportunities cautiously.

Q: What will the company do to lift its stock price, which has not risen despite strong performance and a dividend increase? / A: The company agrees it has not received fair market valuation, primarily due to low investor awareness after its 2022 listing on the Tokyo Standard Market. Going forward, it will increase IR activity: it has already published earnings call materials publicly and held its first investor briefing for individual investors, and will continue to participate in broker-hosted investor events to increase broad market awareness of the company.