Fureasu Q1 FY2026 Earnings Analysis: Structural Reform via Hospice Business Divestiture, Return to Operating Profitability, and Shift Toward Profitability-Focused Growth

Overview: Returning to Profitability and Transforming the Earnings Structure through Portfolio Reorganization

In the Q1 FY2026 earnings results for Fureasu Co., Ltd. (Securities Code: 7062), consolidated net sales decreased by 32.8% year-on-year to 1,609 million yen , primarily due to the divestiture of medical-type nursing facilities (hospices, etc.) executed in the previous fiscal year. Conversely, by shedding businesses that were either unprofitable or required heavy upfront investment, and by curbing fixed costs at the headquarters and other operational expenses, the company achieved a significant improvement in operating profit to 53 million yen (compared to a 12 million yen loss in the same period last year) , marking a successful return to operating profitability .

This quarter's results represent more than just a superficial change in revenue or profit; they mark a milestone where the fruits of the company's "selection and concentration" strategy have begun to clearly manifest on the P/L statement. This report provides a multi-faceted analysis of key topics, ranging from Q1 performance and full-year forecasts to segment-specific trends and financial health.

---

1. Q1 FY2026 Performance Highlights and Changes in Profit Structure

The overall results for the first quarter are as follows:

• Net Sales : 1,609 million yen ( -32.8% YoY)
• Gross Profit : 823 million yen ( -17.8% YoY)
• Operating Profit : 53 million yen (Turnaround from a 12 million yen loss YoY)
• Net Income : 24 million yen (Turnaround from a 70 million yen loss YoY)
• Operating Profit Margin : +3.3% (Up 3.8 percentage points from -0.5% YoY)

[Significance of the Slide and Background of Numerical Data]

This slide is critical as it most clearly encapsulates the results of Fureasu's structural reform . It is important to note that despite a 32.8% decline in net sales , the company achieved a 65 million yen year-on-year turnaround in operating profit .

While the top line (net sales) contracted due to the divestiture of the hospice business—which had been a drag on consolidated performance until the previous fiscal year—the outflow of business losses has been halted . Furthermore, company-wide cost reductions and operational efficiencies have contributed to a sharp improvement in the operating profit margin to +3.3% , marking a strong start toward the full-year target of +7.8% .

---

2. Segment Performance Trends and Factor Analysis

Fureasu's business is primarily composed of three segments: "Directly Operated Massage Business," "Massage Franchise (FC) Business," and "Medical Care Business." The trends for each segment in the first quarter are as follows:

[Significance of the Slide and Background of Numerical Data]

This segment-specific slide is essential for understanding the profitability and reform progress of each business. It clearly outlines the distinct drivers and challenges for each segment.

1. Directly Operated Massage Business (Stable Foundation & Temporary Cost Increase)

   • Net Sales : 1,067 million yen ( +3.0% YoY)
   • Operating Profit : 236 million yen ( -22.5% YoY)
   • Analysis : Demand for home-visit massage services for patients receiving home care remains robust, with increases in both the number of users and service frequency . Despite achieving revenue growth, operating profit temporarily declined year-on-year due to factors such as wage increases (higher personnel costs) aimed at securing and retaining massage therapists.

2. Massage Franchise (FC) Business (Increased Royalties & Upfront Investment)

   • Net Sales : 297 million yen ( +2.6% YoY)
   • Operating Profit : 72 million yen ( -10.0% YoY)
   • Analysis : Net sales expanded as royalty income increased in line with the growth in the number of franchise outlets. However, profit saw a slight year-on-year decline due to increased expenses related to developing new franchise stores and strengthening support systems for existing franchisees.

3. Medical Care Business (Drastic Change via Divestiture & V-shaped Recovery)

   • Net Sales : 240 million yen ( -77.3% YoY)
   • Operating Profit : 28 million yen (Turnaround from a 74 million yen loss YoY)
   • Analysis : Net sales dropped by over 70% due to last year's divestiture of the hospice business. However, with the downsizing and reorganization of the business—the primary source of operating losses—now complete, segment profit has seen a V-shaped recovery to a 28 million yen surplus .

4. Headquarters & Other Expenses (Reduction of Fixed Costs)

   • Operating Expenses : -283 million yen ( 40 million yen reduction from -323 million yen YoY)
   • Analysis : This reflects the progress made in streamlining the organization to match the business scale and reviewing administrative costs.

---

3. Financial Position as Seen in the Balance Sheet

The status of assets, liabilities, and net assets at the end of Q1 FY2026 reflects a stable financial foundation following the business portfolio reorganization.

• Total Assets : 5,185 million yen
  • Current Assets : 4,048 million yen (including 1,362 million yen in cash and deposits , 1,279 million yen in accounts receivable, and 1,242 million yen in suspense payments)
  • Non-current Assets : 1,136 million yen (including 632 million yen in tangible fixed assets and 322 million yen in intangible fixed assets)
• Total Liabilities : 3,007 million yen (including 1,429 million yen in interest-bearing debt )
• Total Net Assets : 2,177 million yen

The high ratio of current assets, including a solid 1,362 million yen in cash and deposits , combined with interest-bearing debt controlled at a manageable level of 1,429 million yen, ensures the financial flexibility to continue investing in human resources and franchise development for the core home-visit massage business.

---

4. FY2026 Full-Year Earnings Forecast and Growth Story

Fureasu plans its consolidated earnings for the full fiscal year 2026 as follows:

• Net Sales : 6,586 million yen ( -13.8% YoY)
• Gross Profit : 3,342 million yen ( -4.2% YoY)
• Operating Profit : 520 million yen ( +77.5% YoY)
• Net Income : 330 million yen ( -35.1% YoY)
• Operating Profit Margin : 7.8% (Up 4.0 percentage points YoY)

[Significance of the Slide and Background of Numerical Data]

This full-year segment forecast slide serves as a roadmap showing the profit structure the company aims to build in FY2026.

Of particular note is the significant profit growth plan of 520 million yen in full-year operating profit (+77.5% YoY) . The breakdown reveals the following:

1. Steady Profit Growth from the Two Pillars: Direct and FC Massage Businesses

   • Directly Operated Massage : Planned net sales of 4,351 million yen (+4.9%) and operating profit of 1,171 million yen (+1.4%) . Positioned as the primary profit driver, it aims to generate stable earnings while absorbing the impact of therapist wage hikes.
   • Massage FC : Planned net sales of 1,257 million yen (+10.9%) and operating profit of 316 million yen (+10.4%) . High-margin royalty income, driven by the expansion of the nationwide network, will lead growth.

2. Full-Year Profitability in the Medical Care Business (+144 million yen)

   • The company expects a profit improvement of over 300 million yen , turning the previous year's 184 million yen operating loss into a 144 million yen operating profit . This will be driven by the monetization of remaining facilities, including nursing-based small-scale multi-functional home care (6 locations), home nursing (4 locations), and home care (1 location).

3. Dramatic Improvement in Company-Wide Profitability

   • By combining the reorganization of unprofitable businesses with growth in core segments, the company plans to nearly double its operating profit margin from 3.8% in the previous fiscal year to 7.8% , demonstrating a strategy to evolve into a high-profit enterprise.

---

5. Comprehensive Analysis and Future Evaluation Points

The strategic takeaways from Fureasu's Q1 FY2026 results are as follows:

1. Completion of "Selection and Concentration" : Although the divestiture of the hospice business caused a temporary contraction in sales scale, the company successfully eliminated loss-making factors and achieved an early return to operating profitability and improved profit margins .
2. Resilience of Core Businesses : Against the backdrop of increasing demand for home medical and nursing care, both directly operated and FC home-visit massage businesses have maintained stable revenue growth .
3. Balance of Human Capital Investment and Cost Control : The company has demonstrated a balanced approach by making upfront investments to strengthen long-term competitiveness (securing talent) through therapist wage hikes, while simultaneously ensuring profitability through company-wide cost reviews.
4. Growth Model Post-Structural Reform : With a target of 520 million yen in operating profit and a 7.8% operating profit margin for FY2026, the focus will now shift to how the company reinvests the cash flow generated from its expanded FC network and stable direct-operation bases.