Karadanote FY2026 Earnings Deep Dive: Structural Reform Complete, Return to Profitability Across All Levels, and Entering a Rapid Growth Phase via Sumitomo Life Partnership and Acquisitions

The fiscal year ended July 2026 marked a major turning point for Karadanote Inc. (4014), as its business structural reforms and 'selection and concentration' strategy bore fruit, resulting in the company's first operating profit in two years and record-high net income . Having established a leaner business structure through the divestiture of low-margin operations, the company is now planning a return to a rapid growth trajectory with a 41.6% year-on-year increase in revenue for the fiscal year ending July 2027, leveraged by the qualitative and quantitative deepening of its business alliance with Sumitomo Life Insurance Company and the full acquisition of the insurance agency Karadanote Life Partners (KNLP).

This report provides a detailed, neutral analysis of key topics based on the recently disclosed financial results, including performance trends, the evolution of the business model, growth strategies, and shareholder return policies.

---

1. FY2026 Full-Year Highlights: Profitability Across All Levels and Record Net Income

For the fiscal year ended July 2026, consolidated revenue was 1,059 million yen, a 16.6% decrease year-on-year, yet it met the initial forecast (+0.4% vs. plan). The decline in revenue was primarily due to structural reforms, including the divestiture and downsizing of low-margin businesses aimed at improving profitability. Conversely, the shift toward a profit-oriented strategy proved successful, leading to dramatic improvements at every profit level.

As shown in the slide above, operating profit turned from a loss of 34 million yen in the previous fiscal year to a profit of 218 million yen . Ordinary profit reached 196 million yen , and net income saw a significant recovery from a loss of 69 million yen in the previous year to a record high of 256 million yen , aided by tax expense reductions related to the recognition of deferred tax assets. Furthermore, operating cash flow, the company's core cash-generating ability, turned positive for the first time in five years , effectively resolving concerns regarding the 'going concern' assumption and clearly demonstrating the stabilization of the company's financial foundation.

2. Quarterly Trends: Strong Growth Rebound and Improved Profitability in 4Q

Quarterly revenue and operating profit trends clearly illustrate the bottoming out of structural reforms and the shift toward growth. Notably, consolidated revenue in the fourth quarter (4Q) expanded rapidly to 328 million yen (+65 million yen QoQ, +68% YoY) . On a non-consolidated basis, the company also recorded a significant 35% year-on-year increase in revenue.

4Q operating profit grew to 73 million yen (+14 million yen QoQ) . The company maintained a high pace of profit growth while absorbing increased advertising, personnel, and commission expenses (totaling 255 million yen, +51 million yen QoQ) associated with the consolidation of KNLP (three months included in 4Q) and strengthened collaboration with Sumitomo Life.

3. FY2027 Earnings Forecast: Rapid Expansion to 1.5 Billion Yen in Revenue and 350 Million Yen in Operating Profit

The consolidated earnings forecast for the fiscal year ending July 2027 represents a powerful plan symbolizing the counter-offensive following the completion of structural reforms.

This slide discloses critical premises for future investment decisions. Excluding new M&A, and assuming organic growth of the existing group and the full-year contribution (12 months) of the acquired KNLP, the company projects revenue of 1,500 million yen (+41.6% YoY) and operating profit of 350 million yen (+59.9% YoY) .

Furthermore, the company has newly disclosed Adjusted EBITDA of 400 million yen (EBITDA margin of 26.7%) as an indicator of actual earning power, accounting for non-cash expenses such as goodwill amortization (approx. 50 million yen) resulting from M&A. While net income will face a reactionary decline due to the previous year's tax effects, the company plans for 277 million yen (+8.1% YoY) , with pre-tax income projected at 307 million yen (+57.0% YoY).

4. Progress with Sumitomo Life: Stepping Up from Quantitative to Qualitative Deepening

The deepening of the partnership with Sumitomo Life Insurance Company is positioned as the company's primary growth driver.

• Quantitative Evolution : Digital acquisition of 'Vitality' has grown significantly, contributing to the achievement of Sumitomo Life's medium-term management plan. The launch of non-insurance joint services combined with 'Vitality' is planned within the year.
• Qualitative Deepening : Key performance indicators (KPIs) for the well-being value provision flow, such as appointments and meetings, have exceeded targets. The company is promoting a plan to deploy a nationwide system where its inside sales team handles everything from lead generation to meeting scheduling.

Beyond simple lead referrals, both companies are establishing a 'digital winning formula' that commits to final outcomes, such as contract closures.

5. Grouping of Karadanote Life Partners: Full-Scale Development of Insurance Agency Business

Effective June 1, 2026 (deemed acquisition date for accounting purposes: May 1, 2026), the company made Karadanote Life Partners (KNLP), which operates free insurance consultation services (Hoken no Madoguchi franchise), a wholly-owned subsidiary .

The significance of this slide lies in the evolution of the company's business model from a 'media/referral model' to a 'hybrid model that handles in-house solicitation and closing.' By acquiring an in-house solicitation network through its own physical stores and online meetings, in addition to the existing referral and joint solicitation with external agencies, the company enables a dramatic improvement in LTV (Lifetime Value) per customer . Multi-faceted synergies are also expected, such as strengthening cross-selling for housing and savings needs, and establishing a recruitment base in the Chubu region.

6. Growth of Core Asset 'Family Data': Surpassing 3.53 Million Members

The number of members in the family database, which serves as the business foundation, reached 3.53 million, a 13.6% increase year-on-year . The company holds an overwhelming share in the pregnancy and childcare app market (93.5% share of births for the labor record app alone, 1.58 million DLs annually), and this robust population is the source of a competitive advantage that others cannot easily replicate.

Currently, the company is strengthening long-term monetization of the database by implementing additional action functions within the app based on the child's birthday, as well as stages of growth such as lessons and housing, rather than focusing solely on the infancy period.

7. Business Positioning: 'Pre-empting Potential Customers' via Life Event Marketing

The company has redefined its strength as 'pre-empting long-term potential customers' rather than 'competing for active customers.' General digital advertising targeting active customers with high purchase intent is seeing soaring CPAs (Cost Per Acquisition) due to intensified competition.

In contrast, the company connects with customers at the moment of life events—pregnancy, childbirth, and childcare—and uses AI and first-party data to capture needs for high-unit-price products (insurance, mortgages, etc.) significantly earlier than competitors. This combination of high-unit-price products (lead unit price approx. 20,000 to 100,000 yen) and potential customers forms the structure that supports high profit margins.

8. M&A Strategy Based on Strict Investment Discipline

While indicating a policy of prioritizing M&A as a means for non-linear growth, the company has established three strict judgment criteria based on lessons learned from past businesses like home-delivered water.

1. Potential for Utilization with Family DB : Must allow for cross-selling to the database of over 3.5 million people.
2. Affinity with Life Event Marketing : Must be an asset-light business model with high Free Cash Flow (FCF) generation capability.
3. Discipline in Investment Recovery : Using bank loans and cash on hand, the company will make agile decisions with an 'investment recovery period of 3-5 years' as an absolute standard .

Through this, the company aims to expand its scale with high capital efficiency while controlling financial risks.

9. Unique Shareholder Return Policy: Implementation of a 'Share-Type' Shareholder Benefit System

Regarding shareholder returns, the company has redesigned and introduced a unique 'share-type' shareholder benefit system . It sets an annual budget of 30 million yen (15 million yen per half-year), which is distributed equally among shareholders holding 10 units (1,000 shares) or more.

• 1st Benefit Results (as of end of July 2026) : The number of eligible shareholders expanded by 52% from 416 before the announcement to 633 . Each shareholder received 23,697 yen per half-year ( 47,394 yen on an annual basis ), representing an annual benefit yield of 9.4% based on the record date.

From the fiscal year ending July 2027 onwards, the company will continue to operate based on the budget while considering the expansion of returns in line with profit growth, such as setting a target for total return ratio and considering future dividend payments.

10. Summary and Future Outlook

Karadanote's FY2026 financial results clearly demonstrate the achievement of profitability through the selection and concentration of businesses and the completion of the restructuring of its future growth foundation.

Key points to watch moving forward include:

• Progress on the FY2027 plan (1.5 billion yen in revenue, 350 million yen in operating profit)
• Speed of joint product releases with Sumitomo Life and nationwide deployment
• Cross-selling performance and productivity improvements through KNLP's hybrid solicitation system
• Further medium-to-long-term vision in the 'Growth Potential Materials' (Medium-Term Management Plan) scheduled for disclosure in October

Following the improvement of its revenue base and the establishment of a growth engine, the company's steady progress toward its evolution into a life-event marketing company will be the primary metric for future evaluation.