Services and key customers: Kanamic mainly provides cloud services in the healthcare and long-term care domains. Subscription fees are its main source of revenue. In FY09/21, the company had revenue of JPY2.1bn (+10.6% YoY) and operating profit of JPY842mn (+28.6% YoY); operating profit margin was 40.5% (+5.7pp YoY). The company operates in a single reportable segment that comprises three businesses: Kanamic cloud services (89.3% of FY09/21 revenue), platform services (6.9%), and other services (3.8%). The mainstay Kanamic cloud services business offers an information-sharing platform (allows the sharing of patient information among municipalities, medical associations*, and other parties involved in long-term care) and a long-term care (LTC) management system (helps improve the work efficiency of care managers and LTC service providers). The company’s services stand out for their information-sharing feature, which facilitates the exchange of information among various parties involved in healthcare/long-term care, resulting in more efficient and effective patient care. The database structure, programming structure, and concept behind the company’s service platform is protected by a patent (No. 4658225) up to 2031, making it difficult for a competitor to replicate them in the short term.* Local suborganizations of the Japan Medical Association

Marketing strategy: Kanamic first pitches its information-sharing platform to municipalities and medical associations. The strategy is to have the platform installed across the entire community to initially expand the number of free users. The company then works to increase uptake of its LTC management system among these free users, converting them to paying users. User counts are a key performance indicator (KPI) for the company.

Earnings structure: The LTC management system uses a recurring-revenue model, charging a fixed monthly subscription fee per contract. Total revenue is the product of the number of paid contracts (per facility), monthly service charge (subscription fee) per contract, and number of months. Fixed costs such as personnel expenses make up the bulk of Kanamic’s costs, and marginal profitability is high. The company says cancellation rates (figures undisclosed) are low, because the information-sharing platform carries patient data. A single subscription to the system costs JPY20,000–30,000/month (list price basis; options extra). The number of paid contracts for the LTC management system is not disclosed.

Breakeven point: At end-September 2021, 32,000 facilities* disclosed by the company were utilizing the company’s cloud services. In FY09/20, revenue per facility (average service charge based on revenue reflecting all discounts and options) was roughly JPY5,100 per month (JPY61,000/year). Assuming the average service charge was JPY61,000 per year, costs of revenue and SG&A expenses were all fixed costs, and all revenue came from the Kanamic cloud services, we estimate that the breakeven point for FY09/21 was revenue of roughly JPY1.2bn, or about 20,000 contracts.* Number of facilities includes those with only free users (facilities that only use the information-sharing platform).

Competition: Other software catering to the long-term care industry include Honobono NEXT (used by more than 50,000 facilities) and Paruna by ND Software (delisted in 2019 due to a management buyout); Wiseman (used by more than 44,000 facilities) and MeLL+ (used by more than 2,800 facilities) by WISEMAN (delisted in 2014 due to a management buyout); and Kaipoke (used by about 34,000 facilities) by SMS (TSE1: 2175; data regarding user facilities taken from each company's website and is current as of February 2022). Many of the competitors specialize in fee statements and insurance claims software. Meanwhile, Kanamic’s service platform offers functions spanning sales management, payroll, timesheet, accounts receivable, and business analysis, and has information-sharing features that enable more efficient and effective patient care. Service providers in the long-term care industry are looking to improve productivity in the face of margin pressure due to changes in the law. Software dedicated to fee statements and insurance claims cannot handle the demands of such businesses and often gets replaced as a result.

Market share: As of November 2021, Kanamic operated only in Japan. Japanese laws require fee statements and insurance claims to be handled electronically, so all domestic long-term care operators have systems for these functions, but computerization lags for other processes. As of September 2021, 32,000 LTC facilities used Kanamic’s service platform, and the company estimates that these facilities accounted for about 10–11% of all LTC facilities in Japan.

Financing and M&A strategy: In July 2021, the company announced the issuance of convertible bonds with stock acquisition rights and separate stock acquisition rights. The estimated proceeds thereby generated were JPY4.9bn (of which JPY2.0bn was raised immediately). The company aims to use these funds to facilitate collaboration with companies that are likely to generate synergy through cooperative activities focused on achieving the company's vision, thereby accelerating the establishment of its planned Kanamic PHR platform. Specific areas of interest when it comes to future acquisitions include: (1) companies with technology and development and application expertise in the various type of data record tools used in personal health record (PHR) management in all stages of life, (2) companies providing in-person services in the area of longevity healthcare, physician, nursing, and pharmacy services that will put the company in a position to acquire various healthcare-related data so as to speed the addition of new features to its platform for Kanamic Cloud Services that are designed to facilitate PHR management, and (3) companies with various health-related technology and systems, including AI-based health diagnostic systems, electronic medical records systems, and systems related to nursing, pharmacy, and childcare.

Trends and outlook

In full-year FY09/21, the company reported revenue of JPY2.1bn (+10.6% YoY), gross profit of JPY1.8bn (+10.8% YoY), operating profit of JPY842mn (+28.6% YoY), recurring profit of JPY830mn (+22.6% YoY), and net income attributable to owners of the parent of JPY580mn (+22.6% YoY). Versus the revised full-year FY09/21 forecast, revenue reached 99.1%, operating profit 105.2%, recurring profit 103.7%, and net income attributable to owners of the parent 105.4%. Revenue in the mainstay Kanamic cloud services grew 13.1% (+8.9% in FY09/20). Meanwhile, revenue from the platform services fell 4.3% YoY, hurt by intensified competition with other COVID-19 countermeasure products.

FY09/22 forecast (initial): For FY09/22, Kanamic forecasts revenue of JPY2.4bn (+12.9% YoY), operating profit of JPY930mn (+10.5% YoY), recurring profit of JPY930mn (+12.1% YoY), net income attributable to owners of the parent of JPY640mn (+10.4% YoY), and EPS of JPY13.50. The company plans to pay a year-end dividend per share of JPY3.0. It has received an order from a major long-term care provider for its cloud services (to be introduced in FY09/23), and expects to incur upfront expenditures in FY09/22 for the introduction of the services. In terms of KPIs, the company targets paying user (ID) count of 105,000 (+17.6% YoY), free user (ID) count of 70,000 (+11.3% YoY), member facility count of 36,000 (+11.2% YoY), and member community count of 1,350 (+8.8% YoY).

Medium-term management plan (released November 2, 2021): For FY09/24, taking into account contributions from possible M&A deals, the company targets revenue of JPY5.3bn (CAGR of 36.6% from FY09/21 results), operating profit of JPY1.7bn (26.4%), and EBITDA of JPY2.1bn (29.1%). Excluding potential impact from M&A deals, the company targets revenue of JPY3.3bn (CAGR of 16.6% from FY09/21 results), operating profit of JPY1.5bn (21.2%), and EBITDA of JPY1.8bn (22.6%). Its KPI goals for FY09/24 are paying user (ID) count of 154,000 (CAGR of 19.9% from FY09/21 results), free user (ID) count of 84,000 (10.1%), member facility count of 50,000 (16.3%), and member community count of 1,550 (7.7%).

Strengths and weaknesses

Strengths
・Patent protecting the information-sharing platform until 2031, which makes it difficult for a competitor to replicate the platform
・Sales strategy that monetizes the information-sharing platform by increasing the number of free users in urban areas
・High marginal profitability with OPM rising in line with revenue growth

Weaknesses
・Business growth constrained by the industry’s paper-centric culture
・Operations (as of August 2021) centered in Japan where certified care recipients are expected to peak out in 2040
・Information-sharing platform geared to urban areas is less effective in rural settings with low population density

Key financial data

Income statement		FY09/15	FY09/16	FY09/17	FY09/18	FY09/19	FY09/20	FY09/21	FY09/22
(JPYmn)		Parent	Parent	Parent	Parent	Parent	Cons.	Cons.	Cons. Est.
Revenue		1,042	1,129	1,292	1,504	1,686	1,881	2,081	2,350
	YoY	-	8.4%	14.4%	16.5%	12.1%	11.6%	10.6%	12.9%
Gross profit		914	1,009	1,166	1,294	1,478	1,614	1,788
	YoY	-	10.4%	15.6%	11.0%	14.2%	9.2%	10.8%
	Gross profit margin	87.7%	89.3%	90.3%	86.0%	87.6%	85.8%	85.9%
Operating profit		244	264	330	399	545	654	842	930
	YoY	-	8.2%	25.1%	20.8%	36.5%	20.2%	28.6%	10.5%
	Operating profit margin	23.4%	23.4%	25.6%	26.5%	32.3%	34.8%	40.5%	39.6%
Recurring profit		244	252	331	381	543	677	830	930
	YoY	-	3.3%	31.1%	15.2%	42.7%	24.6%	22.6%	12.1%
	Recurring profit margin	23.4%	22.3%	25.6%	25.3%	32.2%	36.0%	39.9%	39.6%
Net income		161	165	223	257	358	473	580	640
	YoY	-	2.3%	35.3%	15.0%	39.4%	32.1%	22.6%	10.4%
	Net margin	15.5%	14.6%	17.3%	17.1%	21.2%	25.1%	27.9%	27.2%
Per-share data (split-adjusted; JPY)
期末発行済株式数('000 shares )		39,600	42,732	48,132	48,132	48,132	48,132	48,132
EPS (JPY)		4.1	4.2	4.7	5.3	7.4	9.8	12.1	13.5
EPS(fully diluted) (円)		-	3.7	4.6	-	-	-	12.0
Dividend per share (JPY)		-	0.8	0.8	0.8	1.0	2.0	2.5	3.0
Book value per share (JPY)		8.6	17.4	19.9	24.4	31.0	39.6	41.2
Balance sheet(JPYmn)
	Cash and cash equivalents	315	619	788	890	1,220	1,707	3,711
Total current assets		382	703	928	1,017	1,358	1,851	3,859
	Tangible fixed assets	56	47	52	49	63	51	79
	Intangible assets	176	205	260	340	324	306	364
	投資その他の資産	57	59	58	82	98	94	93
Total fixed assets		289	310	371	448	485	452	536
Total assets		672	1,014	1,298	1,488	1,843	2,303	4,395
	Short-term debt	26	19	16	16	-	-	-
Total current liabilities		258	221	311	299	341	385	420
	Long-term debt	55	36	20	4	-	-	2,004
Total fixed liabilities		74	48	32	16	12	12	2,016
Total liabilities		332	269	342	315	352	397	2,436
	Shareholders' equity	340	745	956	1,173	1,490	1,906	1,955
Total net assets		340	745	956	1,173	1,490	1,906	1,959
Total interest-bearing debt		81	55	36	20	-	-	2,004
Cash flow statement(JPYmn)
Cash flows from operating activities		267	205	346	369	527	635	757
Cash flows from investing activities		-116	-105	-137	-194	-136	-104	-216
Cash flows from financing activities		-42	204	-40	-74	-60	-48	1,459
Financial indicators
ROA (RP-based)		41.1%	29.9%	28.6%	27.3%	32.6%	32.7%	24.8%
ROE		62.3%	30.4%	26.2%	24.1%	26.9%	27.8%	30.0%
	Financial leverage (equity multiplier)	2.3	1.6	1.4	1.3	1.3	1.2	1.7
	Total asset turnover	1.8	1.3	1.1	1.1	1.0	0.9	0.6
	Net margin	15.5%	14.6%	17.3%	17.1%	21.2%	25.1%	27.9%

Source: Shared Research based on company data.
Note: Per-share data is adjusted for stock splits. Transitioned to consolidated results in FY09/20.

Kanamic cloud services: KPI

		Sep 2015	Sep 2016	Sep 2017	Sep 2018	Sep 2019	Sep 2020	Sep 2021	Mar 2017	Mar 2018	Mar 2019	Mar 2020	Mar 2021
Kanamic Cloud Services	Annual revenue (JPYmn)	849	937	1,111	1,299	1,508	1,643	1,858	538	628	735	807	893
Kanamic Cloud Services	YoY growth rate		10.3%	18.5%	17.0%	16.1%	8.9%	13.1%		16.7%	17.0%	9.8%	10.6%
No. of communities using Kanamic	No. at period-end	202	370	616	761	817	1,159	1,241	477	701	807	854	1,191
	YoY change		168	246	145	56	342	82		224	106	47	337
	YoY growth rate		83.2%	66.5%	23.5%	7.4%	41.9%	7.1%		47.0%	15.1%	5.8%	39.5%
No. of facilities using Kanamic	No. at period-end			18,218	21,719	25,075	28,953	32,155	17,066	20,059	23,637	26,565	30,536
	YoY change				3,501	3,356	3,878	3,202		2,993	3,578	2,928	3,971
	YoY growth rate				19.2%	15.5%	15.5%	11.1%		17.5%	17.8%	12.4%	14.9%
No. of IDs for free users	No. at period-end	12,487	15,949	24,865	31,324	36,814	43,554	62,874	19,729	28,695	34,565	38,188	52,416
	YoY change	1,894	3,462	8,916	6,459	5,490	6,740	19,320		8,966	5,870	3,623	14,228
	YoY growth rate	17.9%	27.7%	55.9%	26.0%	17.5%	18.3%	44.4%		45.4%	20.5%	10.5%	37.3%
No. of IDs for paying users	No. at period-end	31,389	35,472	46,002	57,487	70,210	78,964	89,267	41,217	51,877	65,163	76,137	82,834
	YoY change	6,615	4,083	10,530	11,485	12,723	8,754	10,303		10,660	13,286	10,974	6,697
	YoY growth rate	26.7%	13.0%	29.7%	25.0%	22.1%	12.5%	13.0%		25.9%	25.6%	16.8%	8.8%

Avg. service price per community (JPY'000/year)			3,276	2,253	1,887	1,911	1,663	1,548	2,543	1,909	1,876	1,933	1,520
Avg. service price per facility (JPY'000/year)					65	64	61	61		66	65	63	60
Avg. service price per paying ID (JPY'000/year)		30	28	27	25	24	22	22	28	26	24	22	22
Ratio of paying users		71.5%	69.0%	64.9%	64.7%	65.6%	64.5%	58.7%	67.6%	64.4%	65.3%	66.6%	61.2%
No. of facilities per community using Kanamic				30	29	31	25	26	36	29	29	31	26
No. of user IDs per facility				3.9	4.1	4.3	4.2	4.7	3.6	4.0	4.2	4.3	4.4

Source: Shared Research based on company materials. “Number of facilities” includes facilities that only have free users (only use the information-sharing platform).

Average service prices in the table above are calculated using the average between the beginning and yearend for the number of areas, facilities, and paid IDs.

In FY09/16, ID counts of paying users grew only 13.0% YoY, falling behind usual year levels. The main cause of this drop was the acquisition of a major service user by another company and the subsequent cancellation of contract with Kanamic. FY09/16 revenue from the Kanamic cloud services business grew just 10.3% YoY as a result. The pace of the increase in paying user IDs in FY09/20 slowed from the 22.1% YoY growth shown in FY09/19.In April and May 2020, when the government’s state of emergency was in effect, potential customers were slow to make decisions (lengthening the sales cycle) and potential as well as existing customers put off location development efforts.

Growth in the number of communities using the services trended downward in FY09/18 and FY09/19. However, FY09/16 and FY09/17 were a growth phase when the service uptake expanded as a result of the 2015 revisions to the Long-Term Care Insurance Act. The release of the Tokyo multi-occupational collaboration portal site allowed the company to receive orders from throughout the greater Tokyo Metropolitan area, leading to the number of communities using the company’s services rising by 41.9% YoY in FY09/20.

In FY09/17, the ID counts of free users grew 55.9% YoY, exceeding usual year levels. In 2015, the Long-Term Care Insurance Act was overhauled to improve the coordination between home healthcare and long-term care. The sharp increase in free users in FY09/17 is attributable to the initiatives taken by municipalities to integrate community healthcare and long-term care by the target date of April 2018.
In FY09/2021, free user IDs increased significantly, rising 44.4% YoY due in part to the release of the Tokyo multi-occupational collaboration portal site in FY09/20. Due to this increase, the company's paying user ratio reached 58.7% as of September 30, 2021.

Average service price per paid ID continued to fall, reflecting an increase in service utilization (growth in ID counts of paying users per facility [per contract]). Higher utilization rates lead to declining contract cancellation rates and more ad revenue, testament to the fact that the company’s strategy is unfolding as expected.

Trends and outlook

Quarterly trends and results

Cumulative		FY09/20				FY09/21				FY09/22		FY09/22
(JPYmn)		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	% of Est.	FY Est.
Revenue		420	909	1,366	1,881	533	1,043	1,555	2,081	519	1,068	45.5%	2,350
	YoY	11.0%	9.2%	9.6%	11.6%	27.1%	14.8%	13.9%	10.6%	-2.7%	2.4%		12.9%
Gross profit		372	792	1,194	1,614	436	876	1,326	1,788	455	938
	YoY	10.1%	9.3%	9.6%	9.2%	17.1%	10.7%	11.0%	10.8%	4.5%	7.0%
	Gross profit margin	88.7%	87.1%	87.5%	85.8%	81.7%	84.0%	85.3%	85.9%	87.7%	87.8%
SG&A expenses		272	494	729	960	232	457	688	946	252	503
	YoY	10.9%	7.6%	6.1%	2.8%	-14.8%	-7.5%	-5.5%	-1.4%	8.8%	9.9%
	SG&A ratio	64.8%	54.4%	53.4%	51.0%	43.4%	43.8%	44.3%	45.5%	48.5%	47.1%
Operating profit		100	297	466	654	204	419	638	842	203	435	46.8%	930
	YoY	8.2%	12.2%	15.5%	20.2%	103.5%	40.8%	36.9%	28.6%	-0.3%	3.9%		10.5%
	Operating profit margin	23.9%	32.7%	34.1%	34.8%	38.2%	40.1%	41.0%	40.5%	39.1%	40.7%		39.6%
Recurring profit		102	317	485	677	207	423	642	830	203	435	46.8%	930
	YoY	9.7%	19.7%	20.4%	24.6%	103.7%	33.5%	32.3%	22.6%	-1.7%	2.9%		12.1%
	Recurring profit margin	24.2%	34.9%	35.5%	36.0%	38.8%	40.6%	41.3%	39.9%	39.1%	40.7%		39.6%
Net income		69	213	325	473	144	295	446	580	140	299	46.8%	640
	YoY	11.8%	23.1%	23.2%	32.1%	106.9%	38.6%	37.3%	22.6%	-2.7%	1.4%		10.4%
	Net margin	16.5%	23.4%	23.8%	25.1%	26.9%	28.3%	28.7%	27.9%	26.9%	28.0%		27.2%
Quarterly		FY09/20				FY09/21				FY09/22
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2
Revenue		420	489	457	516	533	510	512	525	519	549
	YoY	11.0%	7.6%	10.6%	17.1%	27.1%	4.2%	12.1%	1.9%	-2.7%	7.7%
Gross profit		372	420	403	420	436	441	450	462	455	483
	YoY	10.1%	8.6%	10.1%	8.3%	17.1%	5.0%	11.8%	10.1%	4.5%	9.5%
	Gross profit margin	88.7%	85.8%	88.1%	81.4%	81.7%	86.4%	87.9%	87.9%	87.7%	87.9%
SG&A expenses		272	223	234	231	232	226	231	258	252	251
	YoY	10.9%	3.9%	3.0%	-6.2%	-14.8%	1.4%	-1.3%	11.6%	8.8%	11.0%
	SG&A ratio	64.8%	45.5%	51.3%	44.8%	43.4%	44.3%	45.1%	49.1%	48.5%	45.7%
Operating profit		100	197	168	189	204	215	219	204	203	232
	YoY	8.2%	14.4%	21.8%	33.5%	103.5%	9.0%	30.0%	8.2%	-0.3%	7.9%
	Operating profit margin	23.9%	40.3%	36.9%	36.6%	38.2%	42.1%	42.8%	38.9%	39.1%	42.2%
Recurring profit		102	216	168	192	207	216	219	188	203	232
	YoY	9.7%	25.1%	21.7%	36.9%	103.7%	0.4%	30.1%	-2.0%	-1.7%	7.2%
	Recurring profit margin	24.2%	44.1%	36.8%	37.2%	38.8%	42.4%	42.8%	35.7%	39.1%	42.2%
Net income		69	144	112	148	144	152	151	134	140	160
	YoY	11.8%	29.4%	23.4%	56.8%	106.9%	5.6%	34.8%	-9.6%	-2.7%	5.3%
	Net margin	16.5%	29.3%	24.5%	28.7%	26.9%	29.7%	29.5%	25.4%	26.9%	29.1%

Source: Shared Research based on company data. Transitioned to consolidated results from FY09/20.
Note: Figures may differ from company materials due to differences in rounding methods.

Revenue by service category

Cumulative			FY09/20				FY09/21				FY09/22
(JPYmn)			Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2
Revenue			420	909	1,366	1,881	533	1,043	1,555	2,081	519	1,068
	YoY		11.0%	9.2%	9.6%	11.6%	27.1%	14.8%	13.9%	10.6%	-2.7%	2.4%
	Kanamic Cloud Services		396	807	1,227	1,643	435	893	1,367	1,858	487	991
		YoY	12.1%	9.8%	9.6%	8.9%	10.0%	10.6%	11.4%	13.1%	11.8%	11.0%
		% of total	94.4%	88.9%	89.9%	87.3%	81.6%	85.6%	87.9%	89.3%	93.8%	92.8%
	Platform Services		15	33	59	150	67	95	122	144	24	48
		YoY	-10.7%	-30.1%	-7.6%	72.8%	346.5%	191.4%	106.2%	-4.3%	-64.4%	-49.7%
		% of total	3.6%	3.6%	4.3%	8.0%	12.6%	9.1%	7.8%	6.9%	4.6%	4.5%
	Other		9	69	79	89	31	55	67	79	8	29
		YoY	7.1%	36.0%	27.2%	-2.6%	259.7%	-19.8%	-15.7%	-10.5%	-72.9%	-46.8%
		% of total	2.0%	7.6%	5.8%	4.7%	5.7%	5.3%	4.3%	3.8%	1.6%	2.7%
Quarterly			FY09/20				FY09/21				FY09/22
(JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2
Revenue			420	489	457	516	533	510	512	525	519	549
	YoY		11.0%	7.6%	10.6%	17.1%	27.1%	4.2%	12.1%	1.9%	-2.7%	7.7%
	Kanamic Cloud Services		396	411	420	416	435	458	474	491	487	504
		YoY	12.1%	7.7%	9.3%	6.9%	10.0%	11.2%	12.8%	18.2%	11.8%	10.2%
		% of total	94.4%	84.1%	91.9%	80.6%	81.6%	89.8%	92.5%	93.5%	93.8%	91.8%
	Platform Services		15	18	26	91	67	28	27	22	24	24
		YoY	-10.7%	-41.1%	53.1%	297.4%	346.5%	57.8%	1.0%	-76.0%	-64.4%	-13.8%
		% of total	3.6%	3.6%	5.8%	17.6%	12.6%	5.4%	5.2%	4.2%	4.6%	4.3%
	Other		9	60	11	9	31	24	12	12	8	21
		YoY	7.1%	41.4%	-10.5%	-67.6%	259.7%	-59.3%	10.3%	34.5%	-72.9%	-14.2%
		% of total	2.0%	12.3%	2.3%	1.8%	5.7%	4.8%	2.3%	2.4%	1.6%	3.8%

Source: Shared Research based on company data. In FY09/20, Content Services was renamed Platform Services.

Progress versus initial company forecasts

Progress versus Init. Est.				FY09/20				FY09/21				FY09/22
				Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2
Total revenue				22.6%	48.9%	73.4%	101.2%	25.4%	49.7%	74.1%	99.1%	22.1%	45.5%

Source: Shared Research based on company data

1H FY09/22 results

Summary

In 1H FY09/22, the company reported revenue of JPY1.1bn (+2.4% YoY), gross profit of JPY938mn (+7.0% YoY), operating profit of JPY435mn (+3.9% YoY), recurring profit of JPY435mn (+2.9% YoY), and net income attributable to owners of the parent of JPY299mn (+1.4% YoY). Revenue was broadly in line with the original forecast. Operating profit, recurring profit, and net income attributable to owners of the parent were 108.8%, 108.8%, and 108.9% of the original forecast, respectively.

Revenue in the mainstay Kanamic cloud services business increased 11.0% YoY (+10.6% in 1H FY09/21). Meanwhile, revenue from the platform services fell 49.7% YoY due to increased competition with other COVID-19 countermeasure products.

The company's GPM was 87.8%, up 3.8pp YoY due primarily to changes in its sales mix. On the other hand, the company's SG&A-to-sales ratio rose 3.3pp YoY to 47.1%. Although experimentation and research expenses decreased thanks to the conclusion of joint research conducted with universities, personnel expenses rose due to an increase in the company's workforce. As a result, the company's OPM grew 0.6pp YoY to 40.7%.

The company maintained its existing projections full-year FY09/22. The progress rate against the existing full-year FY09/22 forecast was 45.5% for revenue, 46.8% for operating profit, 46.8% for recurring profit, and 46.8% of net income attributable to owners of the parent. For details regarding assumptions and preconditions associated with the company's initial forecasts, please refer to the section below, entitled "Full-year company forecast for FY09/22."

Revenue by service category

Kanamic cloud services

In 1H FY09/22, revenue amounted to JPY991mn (+11.0% YoY). In addition to its ongoing recurring revenue business with existing customers, the company continued to add new customers.

While the spread of COVID-19 resulted in some long-term care providers, the company’s leading customers limiting activity in their respective long-term care businesses (for example, cancellation of Kanamic cloud services), the company indicated at its results announcement for 1H that this factor had only a marginal impact on earnings.

Platform services

In 1H FY09/22, revenue was JPY48mn (-49.7% YoY).

The business has a stable revenue base of website development work outsourced from major long-term care (LTC) service providers and contract production, operation, and management of websites for LTC service providers introduced through the Care Work Foundation. In FY09/21, the company provided online advertising services related to long-term care, as well as various services including the sale of COVID-19-related products through information sharing platforms. However, sales of these products declined significantly due to the emergence of many competing products.

Other services

Revenue in 1H FY09/22 was JPY29mn (-46.8% YoY). The company was commissioned to perform customized development for a large client, but no associated revenue was recorded in 1H due to the lengthy period of this development.

Other

Urban Fit Co., Ltd. becomes a consolidated subsidiary

On May 10, 2022, the company announced that it had made Urban Fit a wholly-owned subsidiary. Urban Fit is a healthcare business primarily engaged in the operation and franchising of 24-hour fitness gyms in the Osaka area. It operates eight directly managed outlets and six franchise outlets. The acquisition is not expected to have a material impact on the company's consolidated FY09/2022 results.

The acquisition price is JPY257mn. The consideration for the acquisition is cash, entirely funded by cash on hand. The scheduled date for completion of the acquisition is May 20, 2022.

Urban Fit's business falls under the category of companies providing brick and mortar facilities with healthcare and wellness businesses (healthy longevity) and companies with IT services with healthcare and wellness businesses (Healthcare technology) that the company has highlighted as potential M&A targets.

For FY09/21, Urban Fit reported revenue of JPY504mn, an operating loss of JPY27mn, a recurring loss of JPY27mn, EBITDA of JPY24mn, a net loss of JPY28mn and net assets of JPY73mn.

Full-year company forecast for FY09/22

		FY09/20			FY09/21			FY09/22
(JPYmn)		1H Act.	2H Act.	FY Act.	1H Act.	2H Act.	FY Act.	1H Act.	2H Est.	FY Est.
Revenue		909	973	1,881	1,043	1,038	2,081	1,068	1,282	2,350
	YoY	9.2%	14.0%	11.6%	14.8%	6.7%	10.6%	2.4%	23.5%	12.9%
Cost of revenue		117	150	267	167	126	293	131
Gross profit		792	822	1,614	876	912	1,788	938
	Gross profit margin	87.1%	84.5%	85.8%	84.0%	87.9%	85.9%	87.8%
SG&A expenses		494	465	960	457	489	946	503
	SG&A ratio	54.4%	47.8%	51.0%	43.8%	47.1%	45.5%	47.1%
Operating profit		297	357	654	419	423	842	435	495	930
	YoY	12.2%	27.7%	20.2%	40.8%	18.5%	28.6%	3.9%	17.0%	10.5%
	Operating profit margin	32.7%	36.7%	34.8%	40.1%	40.8%	40.5%	40.7%	38.6%	39.6%
Recurring profit		317	360	677	423	407	830	435	495	930
	YoY	19.7%	29.3%	24.6%	33.5%	13.0%	22.6%	2.9%	21.6%	12.1%
	Recurring profit margin	34.9%	37.0%	36.0%	40.6%	39.2%	39.9%	40.7%	38.6%	39.6%
Net income		213	260	473	295	284	580	299	341	640
	YoY	23.1%	40.5%	32.1%	38.6%	9.5%	22.6%	1.4%	19.8%	10.4%
	Net margin	23.4%	26.7%	25.1%	28.3%	27.4%	27.9%	28.0%	26.6%	27.2%

Source: Shared Research based on company data

Initial full-year company forecast (November 2, 2021)

For full-year FY09/22, Kanamic forecasts revenue of JPY2.4bn (+12.9% YoY), operating profit of JPY930mn (+10.5%), recurring profit of JPY930mn (+12.1%), net income attributable to owners of the parent of JPY640mn (+10.4%), and EPS of JPY13.50. The company plans to pay a year-end dividend per share of JPY3.0.

The company says that it has confirmed an order for its cloud services (to be introduced in FY09/23) from a major long-term care provider and that it expects to incur upfront expenditures (investment in software development and server upgrades and other aspects of hardware) in FY09/22 for the introduction of the services. The company's software development activities will cover both the addition of standard features and customization for major long-term care providers.

In terms of KPIs, for FY09/22 the company targets paying user (ID) count of 105,000 (+17.6% YoY), free user (ID) count of 70,000 (+11.3% YoY), member facility count of 36,000 (+11.2% YoY), and member community count of 1,350 (+8.8% YoY). Based on the current rise in business negotiations, the company expects its number of paying users to grow by 17.6% YoY.

For 1H YF09/22, Kanamic projects revenue of JPY1.1bn (+1.6% YoY), operating profit of JPY400mn (-4.5% YoY), recurring profit of JPY400mn (-5.5% YoY), net income attributable to owners of the parent of JPY275mn (-6.8% YoY), and EPS of JPY5.80. In 1H, the company expects a slight increase in revenue and a decrease in profit compared to 1H FY09/21 because during the latter period, revenue associated with COVID-19 infection prevention products was strong and increases in depreciation stemming from infrastructure investment began in 2H.

Starting with FY09/22, the company will change its method of recording depreciation for tools, furniture, and fixtures, adopting the straight-line method rather than the declining-balance method. The company explains that it made this change because it expects its facilities to operate stably over the long term and anticipates that impact from its investments will be distributed relatively evenly over this period of time. This change will have a slight impact on profits, and the associated impact has already been reflected through the company's initial forecast.

Initial forecasts versus results

A comparison of historical initial forecasts and results shows that revenue forecasts are highly accurate. This is because the company mainly operates a recurring-revenue business. In FY09/2021, revenue fell slightly short of the company's projections due to an increase in competition surrounding COVID-19 countermeasure products. On the profit front, we can see from past results that forecasts were somewhat conservative.

Initial forecasts and results

Results vs. Initial Estimates			FY09/16	FY09/17	FY09/18	FY09/19	FY09/20	FY09/21
(JPYmn)			Parent	Parent	Parent	Parent	Cons.	Cons.
Revenue	Initial Est.		1,104	1,270	1,500	1,670	1,860	2,100
	Result		1,129	1,292	1,504	1,686	1,881	2,081
		Vs. Initial Est.	2.3%	1.7%	0.3%	1.0%	1.2%	-0.9%
Operating profit	Initial Est.		259	280	360	450	610	730
	Result		264	330	399	545	654	842
		Vs. Initial Est.	1.9%	17.9%	10.8%	21.0%	7.3%	15.3%
Recurring profit	Initial Est.		249	280	332	440	630	730
	Result		252	331	381	543	677	830
		Vs. Initial Est.	1.3%	18.0%	14.7%	23.5%	7.5%	13.7%
Net income	Initial Est.		162	170	230	290	410	510
	Result		165	223	257	358	473	580
		Vs. Initial Est.	1.9%	31.3%	11.6%	23.4%	15.3%	13.6%

Source: Shared Research based on company data

Medium-term management plan (released November 2, 2021)

On November 2, 2021, Kanamic announced a medium-term management plan ending FY09/24.

Performance targets

		FY09/21	FY09/22	FY09/23	FY09/24	FY09/24
(JPYmn)		FY Act.	FY Est.	Target	Target (incl. M&A)	Target (excl. M&A)
Revenue		2,081	2,350	2,800	5,300	3,300
	YoY	10.6%	12.9%	19.1%	89.3%	17.9%
	CAGR		12.9%	16.0%	36.6%	16.6%
Operating profit		842	930	1,150	1,700	1,500
	YoY	28.6%	10.5%	23.7%	47.8%	30.4%
	Operating profit margin	40.5%	39.6%	41.1%	32.1%	45.5%
	CAGR		10.5%	16.9%	26.4%	21.2%
EBITDA		977	1,130	1,400	2,100	1,800
	YoY	23.8%	15.7%	23.9%	50.0%	28.6%
	EBITDA margin	47.0%	48.1%	50.0%	39.6%	54.5%
	CAGR		15.7%	19.7%	29.1%	22.6%

Source: Shared Research based on company data
Note: FY09/21 serves as the base year for all average annual growth rates

Including projected impact from potential M&A activities, for FY09/24, the company is targeting revenue of JPY5.3bn (average annual growth of 36.6% using FY09/21 as a base year), operating profit of JPY1.7bn (26.4%), and EBITDA of JPY2.1bn (29.1%). Excluding potential M&A impact, the company is targeting revenue of JPY3.3bn (16.6%), operating profit of JPY1.5bn (21.2%), and EBITDA of JPY1.8bn (22.6%). As KPIs for FY09/24, the company is aiming for 154,000 paying users (19.9%), 84,000 free users (10.1%), 50,000 member facilities (16.3%), and 1,550 member communities (7.7%).

In its medium-term management plan, the company has only disclosed estimates (rather than projections) regarding the impact of M&A through FY09/24 because predicting the timing at which M&A activities will contribute to performance is prohibitively difficult. As of November 2021, formulating accurate estimates regarding acquisition prices was not feasible, and the company accordingly excluded impact from amortization of goodwill when calculating its forecast for operating profit.

For FY09/23, Kanamic targets revenue of JPY2.8bn, operating profit of JPY1.2bn, and EBITDA of JPY1.4bn. In terms of KPIs for FY09/23, it aims to have paying user (ID) count of 138,000, free user (ID) count of 77,000, member facility count of 43,000, and member community count of 1,450. The company said that it confirmed an order for its cloud services (to be introduced in FY09/23) from a major long-term care provider. The order concerns the replacement and customization of packages provided by another company, and the company believes that implementation associated with this order will require more than one year due to the large scale of the client.

Supplementary information regarding KPIs, etc.

KPIs

		End of Sep 2021	End of Sep 2022	End of Sep 2023	End of Sep 2024
		Result	Targets	Targets	Targets
No. of communities using Kanamic	No. at period-end	1,241	1,350	1,450	1,550
	YoY change	82	109	100	100
	YoY growth rate	7.1%	8.8%	7.4%	6.9%
	CAGR		8.8%	8.1%	7.7%
No. of facilities using Kanamic	No. at period-end	32,155	36,000	43,000	50,000
	YoY change	3,202	3,845	7,000	7,000
	YoY growth rate	11.1%	12.0%	19.4%	16.3%
	CAGR		12.0%	15.6%	15.9%
No. of IDs for free users	No. at period-end	62,874	70,000	77,000	84,000
	YoY change	19,320	7,126	7,000	7,000
	YoY growth rate	44.4%	11.3%	10.0%	9.1%
	CAGR		11.3%	10.7%	10.1%
No. of IDs for paying users	No. at period-end	89,267	105,000	138,000	154,000
	YoY change	10,303	15,733	33,000	16,000
	YoY growth rate	13.0%	17.6%	31.4%	11.6%
	CAGR		17.6%	24.3%	19.9%

Ratio of paying users		58.7%	60.0%	64.2%	64.7%
No. of facilities per community using Kanamic		26	27	30	32
No. of user IDs per facility		4.7	4.9	5.0	4.8

Source: Shared Research based on company data
Note: FY09/21 serves as the base year for all average annual growth rates

Member communities

During the period covered by its medium-term management plan, the company is focusing on increasing utilization rates, particularly in metropolitan areas. The company aims to expand its pool of member communities at a rate of about 100 communities per year.

Member facilities

In FY09/22, the company projects that member facilities will rise by a count of 3.8 thousand. Additionally, the company expects to add about 7.0 thousand member facilities annually in both FY09/23 and FY09/24, reflecting a major long-term care provider's decision to become a member in FY09/23 and the favorable order booking environment that persisted at the time the company announced its medium-term management plan.

Free user IDs

The company expects free user IDs to increase at a pace of about 7.0 thousand per year.

Paying user IDs

The company expects paying user IDs to increase at a pace of about 16.0 thousand per year. In addition, the company anticipates a further increase of about 17.0 thousand paying user IDs in FY09/23, thanks to a major long-term care provider's implementation of its services in FY09/23. At the end of FY09/23, the company projects a total of 138.0 thousand paying user IDs and expects that paying user IDs associated with major long-term care providers will account for more than 10% of this total. Kanamic believes that M&A activities will intensify in the long-term care industry, and has emphasized the importance of maintaining business relationships with major long-term care providers.

Unit price

Excluding projected growth stemming from M&A, the company expects revenue to grow at an average annual rate of 17% through FY09/24 (calculated using FY09/21 as a base year). Meanwhile, the company anticipates that its paying user count will grow by an annual rate of 20%, outpacing the rate of revenue growth. The company is basing these projections on two factors: the current tendency among customers to increase their per-facility user numbers to further improve productivity and impact from volume-based discounts for large contracts that are scheduled to take effect in FY09/23. As of November 2021, the company was not planning to make any changes to its pricing structure during its medium-term management plan.

Long-term vision (Kanamic Vision 2030)

The company has publicly shared its long-term vision, "Kanamic Vision 2030." In this vision, the company has identified four growth phases. During Phase 1, the company focused on acquisition of users for the Kanamic Cloud service and in Phase 2, it concentrated on expanding platform services based on a foundation of cloud services. As of November 2021, the company was in Phase 3, during which it will focus on branding activities aimed at increasing awareness regarding itself and its services, including the expansion of BtoC services. It expects this phase to last until around the end of 2025. Sometime around 2025, the company will enter Phase 4, and it plans to launch a full-scale overseas rollout of the model it has built in Japan by roughly the same time.

Total addressable market (TAM) and serviceable available market (SAM) statistics for domestic healthcare and nursing care systems, etc.

As indicators of its anticipations regarding the scale of the domestic market, the company has provided the following TAM and SAM projections. If the company's business domain expands in the future, or if it launches full-scale overseas expansion, these numbers may increase further.

TAM and SAM statistics as presented by Kanamic Network

(JPYmn)			2020	2025	2030
TAM			739,200	780,800	832,500
	CAGR			1.1%	1.2%
	Medical systems		485,500	500,000	518,700
		CAGR		0.6%	0.7%
	Data health		210,000	224,000	240,000
		CAGR		1.3%	1.3%
	Nursing care software		43,700	56,800	73,800
		CAGR		5.4%	5.4%
SAM			76,100	99,200	128,100
	CAGR			5.4%	5.3%
	Medical systems		11,400	20,000	30,300
		CAGR		11.9%	10.3%
	Data health		21,000	22,400	24,000
		CAGR		1.3%	1.3%
	Nursing care software		43,700	56,800	73,800
		CAGR		5.4%	5.4%

Sources for TAM:
Medical systems: "Research concerning the Domestic Medical Information Systems Market" published by Fuji Keizai Group Co., Ltd.
Data health: "Data Health Market Trends" published by Seed Planning, Inc.
Long-term care-related software: "Current Status and Future Prospects of the Nursing Care Systems Market" published by Seed Planning, Inc.

Bases for the calculation of SAM statistics
Medical systems: Extracted the estimated size of the market for comprehensive regional care-related systems from the total scale of the medical systems market.
Data health: Extracted estimated sizes of the markets for health check systems (90%) and PHR and other data health areas (10%) from the total scale of the data health market
Long-term care-related software: Calculated SAM statistics for the entire long-term care-related software market because the company is capable of providing all services associated with this field.

Note: 2020 serves as the base year for all average annual growth rates

Total addressable market (TAM): The overall size of the market available for acquisition
Serviceable available market (SAM): The maximum size of the portion of the market within which services can be provided (smaller than TAM)

M&A strategy (announced July 2021)

The company set out its M&A strategy along with its July 2021 announcement regarding the issuance of warrants and convertible bonds. During its results briefing for FY09/21, the company indicated that it had already considered adopting an area-based targeting system for its M&A activities and expected these activities to generate revenue of JPY2.0bn in FY09/24, as well as operating profit of JPY200mn (OPM of 10%), and EBITDA of JPY300mn. The estimated acquisition price is based on the following assumptions. As of November 2021, formulating accurate estimates regarding acquisition prices was not feasible, and the company accordingly excluded impact from amortization of goodwill when calculating its forecast for operating profit.

Basic approach

The company is looking into acquisitions to reinforce and expand three elements of its medium-term vision, namely, business contents, business reach, and business tools. Its aim is to find businesses that have synergies with its existing Kanamic cloud services business and for its existing business and target to each accelerate growth subsequently.

Business contents: Develop Personal Health Record (PHR) schemes to manage health from cradle to grave.

Business reach: Provide services for people the world over, not just those in Japan.

Business tools: Build healthcare platform to provide value to all individual and corporate users.

* Personal Health Record (PHR)
This refers to a scheme which collects health-related information that is scattered among medical institutions and pharmacies in one location for centralized management over the course of a lifetime. This may include basic data such as height, weight, blood type, allergies, history of side effects, as well as records of treatment from medical institutions, prescription records from pharmacies, results from sports gyms, and weight and blood pressure data measured at home.

Potential candidates for M&A (including alliances) in the business contents space

The company aims to build a Kanamic PHR platform at an early stage in collaboration with businesses that align with its vision and have synergies. It is also considering in-person facilities to acquire data. Specific areas of interest include: (1) companies with technology and expertise in development and application in data record tools used in personal health record (PHR) management in all stages of life, (2) companies providing in-person services in longevity healthcare, physician, nursing, and pharmacy services that will position the company to acquire a range of healthcare data and hasten the addition of new features to its platform for Kanamic cloud services to facilitate PHR management, and (3) companies with health-related technology and systems, including AI-based health check systems, electronic medical records systems, and systems related to nursing, pharmacy, and childcare. Candidates are classified according to the four quadrants shown following. The company intends to increase points of contact with potential targets with this calssification.

IT services with healthcare, nursing care, and childcare businesses

The company has stated that his area is its highest priority. Systems for electronic health records, nursing care, pharmacy, and childcare. Would also include services for governments.

IT services with healthcare and wellness businesses

Healthcare technology, AI technology, health check systems, and custom development projects.

Brick and mortar facilities with healthcare, nursing care, and childcare businesses

Healthcare, nursing care, and pharmacy services. The company is only considering the acquisition of entities providing "related services" and is not considering the acquisition of nursing care facilities or the prospect of competing with customers of the Kanamic Cloud service.

Brick and mortar facilities with healthcare and wellness businesses

Services targeting healthy longevity (food, nutrition, exercise, and communities).

Amendments to the company's Articles of Incorporation
The company will include the following domains under business objectives in its Articles of Incorporation during the Ordinary General Meeting of Shareholders planned for December 2021. In accordance with the M&A policy indicated above, the company has stated that it may acquire businesses in these domains through business transfers or other means.
26. Operation of Pharmacies
27. Sale of the following: pharmaceuticals, quasi-pharmaceutical products, medical equipment,
hygiene products, nursing care supplies/equipment, daily necessities, and other products
28. Manufacturing and sale of the following: dietary supplements, “healthy food products”, various foodstuffs, and skin care products
29. Provision of contractually-based clinical trial services (for pharmaceutical products, quasi-pharmaceutical products, skin care products, medical devices, and Foods for Specified Health Uses [FOSHU])
30. “Clinical-trial operations support” services for medical institutions
31. Operation of fitness clubs
32. Operation of massage clinics, sports facilities, esthetic salons, osteopathic clinics, chiropractic services, acupuncture clinics, and “relaxation rooms”
33. Dietary/wellness management services
34. Online sales / wholesale business
35. Operation of restaurants
36. Franchise agreements and management guidance services related to the preceding items

Anticipated size of M&A deals

Net proceeds from the issuance of convertible bonds and warrants announced in July 2021 amount to JPY4.9bn (JPY2.0bn has already been raised). The company plans to allocate the entire amount by May 2026 on acquisitions to grow its existing business, expand service areas with the aim of strengthening its platform capabilities, launch in-person services including healthcare, expand overseas, and strengthen its brand portfolio. If the entire amount has not been allocated to M&A by the end of May 2026, the company plans to use it for subsequent M&A activities.

The company may also raise debt to execute a future M&A deal, an acquisition could be bigger than the net proceeds outlined above. The company has not set minimum or maximum sizes for any potential deal, and said while a number of smaller deals might be possible, as would a large deal.

ESG

The most important contribution that the company can make to the environment is the value generated through the spread of its Kanamic Cloud service. In short, the spread of this service will facilitate progress in user digitalization efforts, which will in turn lead to conservation of paper resources and reduction of CO2 emissions across society. However, the company does not include these contributions in its quantitative disclosures, as they fall outside the scope of disclosure recommended by the Task Force on Climate-related Financial Disclosures (TCFD). On the social front, the company aims to establish a sustainable society by conducting digital transformation efforts aimed at addressing the social issues of a super-aging society, where the number of working-age people and caregivers is decreasing while the numbers of elderly individuals and people who need care are increasing.

Business

Business model

Kanamic mainly provides cloud services in the healthcare and long-term care domains.

In FY09/21, the company had revenue of JPY2.1bn (+10.6% YoY) and operating profit of JPY842mn (+28.6% YoY); operating profit margin was 40.5% (+5.7pp YoY).

The company operates in a single reportable segment that comprises three businesses: Kanamic cloud services (89.3% of FY09/21 revenue), platform services (6.9%), and other services (3.8%).

In Kanamic cloud services, the company offers an information-sharing platform and a long-term care (LTC) management system. The information-sharing platform allows the exchange of patient information among municipalities, medical associations*, and other parties involved in community healthcare/long-term care, while the management system helps improve the work efficiency of care managers and LTC service providers. The Kanamic cloud services stand out for their information-sharing feature aimed at providing more efficient and effective care to patients. Kanamic has a patent (No. 4658225) that protects the database structure, programming structure, and concept behind its service platform up to 2031, so it would be difficult for another company to replicate them in the short term.

The company provides platform services, including online ad distribution for the medical and long-term care practitioners who use the Kanamic cloud services, a web development service, and various other services utilizing information sharing platforms.

Business structure

Source: Shared Research based on company data

Free and paying users

Kanamic cloud services has both free and paying users.

The paying users of Kanamic’s information-sharing platform (referred to as “administrators”) are those at the heart of community long-term care such as municipalities, community-based integrated care centers, medical associations, core hospitals, and home doctors. Kanamic charges a subscription fee per administrator, but users assigned by an administrator can use the platform for free.

For the long-term care (LTC) management system, the company charges a subscription fee per member facility, which can in turn use the service for an unlimited number of users. The system is mainly utilized by community-based integrated care centers, care managers, and LTC service providers involved in everyday onsite care.

Kanamic cloud services

In this business, the company operates cloud services comprising an information-sharing platform and a long-term care (LTC) management system. It also offers a system for child-rearing support businesses.

The cloud service is based on community collaboration, and enables multidisciplinary collaboration across organizational boundaries in a community.

It is compatible with multiple devices including personal computers, smartphones, and tablets, and is suitable for use in home healthcare and long-term care.

Healthcare and long-term care cloud services

Kanamic’s information-sharing platform and LTC management system are essentially two components of a single system.

Information-sharing platform: Designed to share patient information. Its main customers are local government organizations and medical associations at the heart of community long-term care, which the company refers to as administrators. The company offers the platform for a relatively low subscription fee charged per administrator (paying user). Users invited by the administrator can use the platform for free.

LTC management system: Designed to boost efficiency of LTC service providers, its main customers. The system with Enterprise Resource Planning (ERP) functionality is provided on a per-facility basis, where the company charges each facility a fixed subscription fee of JPY20,000–30,000 per month plus additional fees for options. There is no limit to the number of system users per facility.

Enterprise Resource Planning (ERP)
Refers to a management methodology for efficient operations that entails building core operating systems to handle important data and business resources related to general affairs, accounting, human resources, production, inventory, purchasing, logistics, and sales comprehensively and in real time. A key benefit of ERP is centralized information management. Collecting all the information scattered around a company in one location enables accurate and timely monitoring of the company’s status and swift strategic and tactical decisions.

Differences between the information platform and the long-term care management system

	Information-sharing platform	Long-term care management system
Purpose	Share information on patients	Optimize efficiency of operation for long-term care operators
Main customers	Municipalities and medical associations	Long-term care operators
Coverage unit	By community	By facility (by service type)
Function	Sharing information on individual patients	Enterprise resources planning (ERP)
Price	Monthly fee: JPY5,000 per administrator	Monthly fee: JPY20–30,000 per office (list price) plus charge for optional services
Free users	Yes	None

Source: Shared Research based on company data

Service adoption logic

LTC service providers without a common information-sharing platform use different IT systems and generally share information through traditional mail or fax.

The adoption of Kanamic’s information-sharing platform enables smooth sharing of information across an entire community. However, this alone is not sufficient to resolve the inefficiencies of paper-based workflow management.

Going a step further and subscribing to the company’s LTC management system enables more efficient, paperless workflows for the service providers.

Information-sharing platform

The company’s information-sharing platform promotes the development of community-based integrated care systems by sharing patient information in real time across multidisciplinary organizational boundaries related to health, nursing, long-term care, and municipalities. The platform acts as a closed social network that enables communication exclusively among relevant healthcare and long-term care practitioners. It also has features designed to stimulate multidisciplinary collaboration such as assessment and evaluation indicators, electronic drug notebooks, and data analysis and evaluation functions.

Kanamic developed the information-sharing platform through a joint research project with the University of Tokyo’s Institute of Gerontology that aimed to build a model community-based integrated care system in the city of Kashiwa (Chiba prefecture).

The platform was also used in pilot projects run by the Ministry of Health Labour and Welfare (MHLW) and Ministry of Internal Affairs during fiscal 2013–2015, and is equipped with data linkage functionality that allows information sharing with electronic medical record (EMR) systems, dispensing systems, and long-term care systems operated by other companies.

The platform is particularly effective in long-term care provided at home. While care based in facilities only involves a few parties, there can be many more involved in home care since care teams differ for each patient. The difficulty of sharing information depends on the frequency with which information needs to be shared, which is a function of the number of patients and parties involved (n_p x n_i). The company’s platform simplifies information sharing by eliminating the number of parties involved as a factor in the equation.

Community-based integrated care systems
In Japan, people aged over 75 as a percentage of the total population is set to rise through 2025 when the postwar baby boomers become 75 or older. The MHLW is working to build community-based integrated care systems that provide comprehensive support and services so that the elderly can continue to live in areas they are used to as much as possible. The aim is to maintain the dignity of the elderly and support independent living. The ministry wants to have such systems up and running by 2025.

How the information-sharing platform works

Administrators of the information-sharing platform (municipalities, medical associations, core hospitals, and home doctors) have authority over the online “rooms” (screens) set up for each patient. Only healthcare and long-term care practitioners invited by an administrator can have access to these rooms, which carry information on patients’ residential circumstances, family, healthcare and long-term care status (Activities of Daily Living [ADL]), vital signs, food and water intake, toileting, and medicine, which. The platform serves as a closed social network where information is shared effectively and efficiently across disciplines and organizations, and healthcare and long-term care practitioners can report, communicate, and consult smoothly in real time.

Overview of the information-sharing platform

Source: Shared Research based on company data

Long-term care (LTC) management system

Kanamic’s LTC management system can be linked to its information-sharing platform, allowing on-site practitioners to create a care plan or file paperwork online and automatically share the information with doctors and other service providers in the community. Since the cloud-based system can be easily accessed from the field using a smartphone or tablet, it helps reduce on-site paper communication and boosts workflow efficiency. The system also offers options such as centralized management functions for head offices and data analysis.

The management system stands out in that it offers a wide range of functions covering Sales Force Automation (SFA), creation of various forms and billing statements, timesheet/payroll calculation, receivables management, and business analysis.

It enhances user efficiency since data entered into the system can be shared with the information-sharing platform, eliminating the need for users to reenter the same data into a different system.

Kanamic opted not to include a proprietary electronic medical record (EMR) reporting function, assuming the number of medical institutions will not grow substantially in the future; instead, it added the functionality to link up with the EMR systems run by other companies.

Care plan management system

Kanamic provides a system for community-based integrated care centers and long-term care support specialists (care managers) responsible for drafting care plans for those covered by the public long-term care insurance. The system is aligned with care management flows starting with assessment by the care manager, and covers necessary tasks associated with the preparation of an assessment checklist, a care plan, and service use and supply slips, as well as insurance benefit management, and monitoring.

Home care service management system

This is a system for providers of home care services covering home-visit care, home-visit nursing, and home-visit bathing, day care, assistive equipment rental and sales, and small-scale multiple function home care. It is equipped with functions that support business operation including the preparation of home long-term care plans, record-keeping, monitoring, insurance billing, customer billing, receivables management, and payroll calculation, and also offers data linkage with other companies’ accounting, payroll, and sales management systems. In addition, the system has specialist menu options such as the Kanaeru Touch functionality for filing long-term care logs on-site via a tablet.

Facility service management system

This system is for operators of long-term care facilities (special nursing homes for the elderly, designated facilities covered by public aid providing long-term care to the elderly, private nursing homes, and serviced housing for seniors). The system covers various tasks involved in facility operation such as the preparation of a service plan, room management, insurance billing, customer billing, and receivables management. It also has specialist options including a tablet-based care log system, Care Watcher.

Child-rearing support system

The company does not disclose the top-line figure for its child-rearing support system, but Shared Research understands that revenue from this business is small compared to the healthcare and long-term care support systems.

The company leverages the information platform developed in its healthcare and long-term care initiatives to operate a cloud system utilized by specialists partaking in municipalities’ child-rearing support activities (such as hospitals, obstetricians and gynecologists, health check centers, and childcare workers) as well as parents. The system’s features include a closed social network that allows exclusive communication among the parties involved, electronic maternal and child health handbook, distribution of government notices (e.g. information on immunization and upcoming events), and child-rearing diaries. The system is used in regional revitalization projects headed by the municipalities.

The child-rearing support system corresponds to the top layer, the information-sharing platform, of Kanamic’s two-tiered healthcare and long-term care cloud services. Since it was adapted from the same software, there were no development costs for the overlapping elements.

The child-rearing support system does not offer an equivalent of the long-term care (LTC) management system, which is the bottom layer of the healthcare and long-term care cloud service. This is because the company thinks the childcare market is likely to shrink in the future, and it is difficult to systemically solve the work style issues of childcare workers and improve efficiency.

Charges for the child-rearing support system are about the same as the information platform in the healthcare and long-term care cloud service. The company said it was considering monetization by providing platform services (advertising) targeting the users.

Earnings structure

The company’s mainstay Kanamic cloud services is a recurring revenue business with a fixed monthly subscription fee per contract; total revenue is a product of the number of paid contracts, monthly service charge (subscription fee) per contract, and number of months. Cost of revenue mostly comprises fixed expenses such as personnel expenses. This means that fixed costs are a heavy impost until the breakeven point is reached, but beyond the breakeven point, an increase in revenue tends to result in profit growth. The company explains its revenue is growing at a faster rate than expenses.

At the time of installation, the company performs the initial setup and explains how to operate the system, for which it charges a separate fee of about JPY50,000–150,000 per facility. Charges are mainly from the briefing sessions on how to operate the system, so the total amount may vary depending on the number of sessions conducted (ultimately a function of the difficulty of operation contingent on the type of service). In the case of a large installation contract involving multiple facilities, the company may hold joint briefing sessions, which could result in lower charges per facility.

Monthly service charge

Monthly service charges (subscription fees) differ between the information-sharing platform and the LTC management system. The service charge for the information-sharing platform is JPY5,000/month per administrator. Contracts for the LTC management system are per facility, with base rates of JPY20,000–30,000/month (list price basis) and additional charges for optional functions (billed per added function). The information-sharing platform has a low service charge, since the company uses it as a marketing tool to promote adoption of the LTC management system.

A member facility is counted as one facility for each type of service it provides, so if one operates multiple varying services, it would be counted as multiple facilities.

The long-term care management system is charged per facility, so the charge is the same no matter how many user IDs are registered at one facility. The company wants to increase the number of user IDs, since higher usage at the facilities results in lower cancellation rates and a boost in advertising revenue. From the service subscriber’s perspective, having the entire facility use the service has the benefit of reducing charges per person.

In some cases, the company offers volume-based discounts to organizations with which it has concluded large-scale contracts. As a result, in fiscal years during which large-scale contracts are formed, rates of revenue growth may be lower than the rates of growth associated with member facility and paying user ID numbers disclosed by the company.

Cancellation rates

Cancellation rates are an important indicator in the cloud service industry. The company does not disclose actual figures, but explains that cancellation rates are low, since once in use, Kanamic’s information-sharing platform becomes a common source of patient data not only for the service subscriber but also for outside parties involved in long-term care.

Breakeven point

The company does not disclose the number of paid contracts.

Including facilities that only had free users, revenue per facility (average service charge; based on revenue reflecting all discounts and options) in FY09/21 was roughly JPY5,100/month (JPY61,000/year).

Based on an assumption that the average service charge was JPY61,000/year, cost of revenue and SG&A expenses were all fixed costs, and all revenue came from the Kanamic cloud services, Shared Research estimates that the breakeven point for FY09/21 was revenue of roughly JPY1.2bn, or about 20,000 member facilities.

Company’s conceptual image of breakeven point

Source: Shared Research based on company data

Key performance indicators

KPIs

		End Sep. 2015	End Sep. 2016	End Sep. 2017	End Sep. 2018	End Sep. 2019	End Sep. 2020	End of Sep 2021	End Mar. 2017	End Mar. 2018	End Mar. 2019	End Mar. 2020	End Mar. 2021
Kanamic Cloud Services	Annual revenue (JPYmn)	849	937	1,111	1,299	1,508	1,643	1,858	538	628	735	807	893
Kanamic Cloud Services	YoY growth rate		10.3%	18.5%	17.0%	16.1%	8.9%	13.1%		16.7%	17.0%	9.8%	10.6%
No. of communities using Kanamic	No. at period-end	202	370	616	761	817	1,159	1,241	477	701	807	854	1,191
	YoY change		168	246	145	56	342	82		224	106	47	337
	YoY growth rate		83.2%	66.5%	23.5%	7.4%	41.9%	7.1%		47.0%	15.1%	5.8%	39.5%
No. of facilities using Kanamic	No. at period-end			18,218	21,719	25,075	28,953	32,155	17,066	20,059	23,637	26,565	30,536
	YoY change				3,501	3,356	3,878	3,202		2,993	3,578	2,928	3,971
	YoY growth rate				19.2%	15.5%	15.5%	11.1%		17.5%	17.8%	12.4%	14.9%
No. of IDs for free users	No. at period-end	12,487	15,949	24,865	31,324	36,814	43,554	62,874	19,729	28,695	34,565	38,188	52,416
	YoY change	1,894	3,462	8,916	6,459	5,490	6,740	19,320		8,966	5,870	3,623	14,228
	YoY growth rate	17.9%	27.7%	55.9%	26.0%	17.5%	18.3%	44.4%		45.4%	20.5%	10.5%	37.3%
No. of IDs for paying users	No. at period-end	31,389	35,472	46,002	57,487	70,210	78,964	89,267	41,217	51,877	65,163	76,137	82,834
	YoY change	6,615	4,083	10,530	11,485	12,723	8,754	10,303		10,660	13,286	10,974	6,697
	YoY growth rate	26.7%	13.0%	29.7%	25.0%	22.1%	12.5%	13.0%		25.9%	25.6%	16.8%	8.8%

Avg. service price per community (JPY'000/year)			3,276	2,253	1,887	1,911	1,663	1,548	2,543	1,909	1,876	1,933	1,520
Avg. service price per facility (JPY'000/year)					65	64	61	61		66	65	63	60
Avg. service price per paying ID (JPY'000/year)		30	28	27	25	24	22	22	28	26	24	22	22
Ratio of paying users		71.5%	69.0%	64.9%	64.7%	65.6%	64.5%	58.7%	67.6%	64.4%	65.3%	66.6%	61.2%
No. of facilities per community using Kanamic				30	29	31	25	26	36	29	29	31	26
No. of user IDs per facility				3.9	4.1	4.3	4.2	4.7	3.6	4.0	4.2	4.3	4.4

Source: Shared Research based on company materials. “Number of facilities” includes facilities with only free users (only use the information-sharing platform).

Average service charges in the table above are calculated using the average of respective community, facility, and ID counts (paid ID) at the beginning and end of the fiscal year.

Number of member communities

In 2015, the Long-Term Care Insurance Act was overhauled to enhance coordination between home healthcare and long-term care. Municipalities spearheaded moves to coordinate community healthcare and long-term care by an April 2018 target. In FY09/16 and FY09/17 the number of communities using Kanamic’s services increased in the wake of these changes. In FY09/20, the increase in communities using the service was driven by the release of the Tokyo multi-occupational collaboration portal site, which allowed the company to receive orders from throughout the greater Tokyo Metropolitan area.

Growth in the number of member communities eventually leads to growth in free user ID counts, which in turn drives future growth in the ID counts of paying users. As such, an increase in member communities serves as a leading indicator.

Community units
A single unit of community for community-based integrated care, per estimate by the Ministry of Health, Labour and Welfare (MHLW), covers an area with population of roughly 30,000, equivalent to a junior high school catchment area. There are over 4,000 communitiesnationwide.

Number of member facilities

Facilities with only free users (those that only use the information-sharing platform) are included in the number of member facilities.

ID count—free users

The number of free users (ID counts) is the number of individuals that use the information platform, excluding the paying users of the platform.

ID count—paying users

The number of paying users (ID counts) is the sum of the paying users of the information-sharing platform (administrators) and the users of the long-term care management system.

Paying user ratio (ID count—paying users/total ID count—paying users and free users)

Facilities with free users are candidates for marketing activities by the company. The paying user ratio has historically trended at around 60–70%, so anything around this level should be viewed as normal. On the other hand, if the share varies markedly from this level, it may point to some change in the environment.

ID count per facility

The company aims at boosting usage rates at the member facilities. Higher usage means lower cancellation rates, and more users means higher advertising revenue. The ID count per facility has been rising since September 2017, indicating that numbers are unfolding in line with the company strategy.

Sales

Kanamic first markets its information-sharing platform to municipalities and medical associations (local suborganizations of the Japan Medical Association) at the heart of community-based long-term care. The strategy is to get the platform installed across the entire community to initially expand the number of free users. The company then works to increase uptake of its LTC management system among these free users, converting them to paying users. Subscription revenue from the LTC management system is the main source of revenue for the company.

In principle, a subscription to the long-term care management system involves adoption of the system at all of the facilities operated by the subscribing LTC service provider. Accordingly, if a large care provider takes up the system, some of its facilities could be operating in communities where Kanamic’s information-sharing platform has not been rolled out. Because the information-sharing platform and LTC management system are both components of one system, in some cases member facilities help spread the information-sharing platform in these communities.

Target communities

As of May 2021, the company prioritized communities in urban areas. In the medium-term management plan it announced in November 2021, the company will also focus on increasing utilization rates, especially in metropolitan areas. This is because aging population in urban areas is a pressing issue and potential users of Kanamic’s services are concentrated there. In rural areas, there are communities that have already seen aging reach its peak and the concentration of potential users is thinner, so strategically, these communities are less important.

In rural areas, it is difficult to introduce the Kashiwa model without modification, because the model is premised on urban infrastructure. The company is working on a Hokkaido model as a template for rollout in rural areas (for details of these models, refer to the “Evolution of the company’s services” section).

Customers

As of FY09/20, the company's clients were diversified, with no major client accounting for more than 10% of sales. However, when it announced results for FY09/21, the company stated that a major long-term care provider had decided to implement its services during FY09/23. According to its medium-term management plan, the company projects that it will have 138.0 thousand paying user IDs as the end of FY09/23, and payings user IDs associated with major long-term care providers are expected to exceed 10% of this total. The company believes that M&A activities will become more prevalent in the long-term care industry, and emphasizes the importance of maintaining business relationships with major long-term care providers. As of November 2021, the company had generated no revenue through customers outside Japan.

According to the company, the timing of when free users convert to paying users depends on their individual circumstances and varies accordingly. Switching to the company’s long-term care management system can depend on the timing of lease expiry on fee statements and insurance billing systems being used, but the timing of lease expiry depends on when the leases began.

Long-term care insurance has been subject to major revisions every three years. Customer inquiries for Kanamic cloud services typically increase ahead of a revision. Legal amendments usually come into effect in April, so if a major revision is planned, this usually boosts customer inquiries six months before and six months after the planned amendment.

Sales methodology

As a general rule, Kanamic sells directly to customers.

Once municipalities and medical associations have adopted the company’s service, Kanamic uses this fact in its branding and launches a regional dominance strategy of pitching its long-term care management system to the LTC providers in that community through presentations and other efforts. This boosts usage rates across the whole community, improving the benefits of using the information platform and thereby reducing withdrawal rates. In contrast, others in the industry tend to bundle equipment and software as sets which they lease via distributors, or advertise online to target the widest audience possible.

Telephone sales and cold calling are inefficient and cause customers to feel ill at ease, so the company does not employ these methods. It uses a small team of highly efficient salespeople.

Kanamic primarily operates in densely populated urban areas. As of November 2021, it had six sales offices in Tokyo, Nagoya, Osaka, Fukuoka, Hiroshima, and Okinawa.

Fee collection

Kanamic receives upfront payment for the next month’s system usage. As a result, most of its transactions are free of collection risks.

System development

The company carries out system design in-house, and outsources development when necessary depending on circumstances such as amount of work to be done and the need to address changes in the law.

The company’s salespeople and customer support staff regularly collect information on user needs, and a system improvement committee is in place for discussions on the direction of systems development.

The company analyzes how its systems are used and prioritizes upgrades of functions used more frequently.

By reflecting requests from major long-term care operators in Kanamic cloud services, the company can elevate the services to a level that satisfies these providers. Small operators can benefit from the expertise of the majors.

In December 2018, Kanamic established a wholly owned development subsidiary in Dalian China. The aim was to strengthen its software development resources and reduce development costs.

Platform services

Internet advertising

Kanamic operates an advertising service comprising a B2B business that targets Kanamic cloud services users (doctors, home visit nurses, care managers, helpers, and community-based integrated care centers) and a B2B2C business catering to service recipients (those in need of long-term care and their families). Advertised products include items such as drugs, medical equipment, health foods, sanitary products, building materials, and assistive devices.

Doctors, home visit nurses, and care managers are busy day to day and have limited opportunities to obtain information on the latest drugs or assistive devices. The company provides useful product information in real time based on user attributes.

Characteristics

From the advertiser’s perspective, Kanamic’s ad service is reliable in that the ads target the company’s cloud services users who are registered under their real names and are actually involved in serving patients and those needing long-term care. The data on the users’ scope of work also adds to the strength of Kanamic’s service.

Ads can be targeted according to attributes (e.g. for doctors or for nurses) and by community.

In addition to improving the frequency of system use, the company has been working to make the web screens more user friendly so that it can increase the number of clicks or interaction time for its ads. In this business, the company also offers marketing support through user meetings and other real-world events as well as online surveys.

Number of page views, conversion rates, and average unit prices are important indicators in advertising, but the company does not disclose these figures publicly.

Fee structure

The company mainly charges on a cost per click (CPC) basis.

Ensuring advertising quality

In addition to selling advertising directly, the company also has a business alliance with a major advertising agency which helps it choose advertisers that appeal to its system users.

Kanamic reviews the content of ads ahead of time, and ensures that no inappropriate content is provided on its platform.

Web development

As an ancillary business, the company produces, operates, and manages websites on contract mostly through the Care Work Foundation and also operates and manages a long-term care job listing site.

Launch of the staffing service and advanced salary payment service for the healthcare, nursing, and long-term care industries

Kanamic started providing a staffing service and advanced salary payment service for the health, nursing, and long-term care industries in January 2020 to help alleviate severe labor shortages in these industries. The health and long-term care industries are plagued by difficulty in hiring, low retention rates, and high turnover rates. To address these issues, Kanamic will provide a low-commission staffing service and a comprehensive service for job seekers wanting to be paid in advance. It also plans to provide a service supporting the digitization of advanced salary payment systems as part of its Kanamic cloud services

It has become commonplace for healthcare and LTC service providers to utilize employment agencies and staffing services, and related fees have become a large burden. Many temporary staff positions in the LTC profession require up-front salary payments, which obstructs those employed in these positions from becoming full-time employees, many of whom are hired for positions with monthly salaries. Healthcare and LTC service providers need to pay temporary staff before regular paydays, which increases their administrative workloads. The company will respond to these issues by providing a staffing service and an advanced salary payment service for healthcare and LTC service providers using Kanamic cloud services.

Kanamic’s staffing service differs from those of other companies because its recruitment charges are lower and because it generates earnings on a recurring basis by collecting these charges along with advanced salary payment service fees. The company aims to increase profits generated by its staffing service but can also enhance the value provided by Kanamic cloud services by raising retention rates for staff employed by healthcare and LTC service providers using these services. In contrast, other staffing agencies typically generate earnings through recruitment volume (one-time revenue model), and higher retention rates cause their sales to decline.

Many users of Kanamic cloud services are health or LTC service providers of medium size or larger that wish to raise their staff retention rates and stably expand their places of business. Consequently, the company forecasts that its staffing service will be highly appealing to these companies. The company bills each place of business for its cloud services, so associated sales rise when customers establish additional places of business. Under this billing system, customer success leads the success for the company as well.

The company incurs some collection risk in association with its advanced salary payment service. The company does not anticipate that this risk will become large because it is able to track the credit conditions of medical companies and care providers through their use of Kanamic cloud services.

Sales of COVID-19 infection prevention products

The company is working to improve safety in its customers’ industries of medical and nursing care. To this end, it commenced sales of the UVC Air Clean Manager indoor ultraviolet air disinfection devices manufactured by Comrack (unlisted) in April 2020. In addition, to help reduce the shortage of sanitary products such as masks, the company entered a collaborative sales agreement with Piala (TSE Mothers: 7044). However, the number of competing COVID-19 infection prevention products is increasing, and the competitive environment is becoming increasingly challenging as a result.

Other services

The company also provides other services including customized development for major customers, projects outsourced from the MHLW and Ministry of Internal Affairs, as well as consulting for regional revitalization projects and other services ancillary to the Kanamic cloud services.

The company is participating in a test project aimed at establishing an information-sharing system for specialists across various disciplines in the home healthcare and home visit care fields using the information platform of the Ministry of Internal Affairs. The goal is to provide effective and efficient services in these fields. The project also aims to build a platform that enables the sharing and analysis of data across different systems. Kanamic is managing the overall ICT related aspects of the project.

Other services make up only a small portion of the company’s overall revenue, just 3.8% in FY09/21. The company said that the profit margins of some projects that fall under this category are not as high as that of the Kanamic cloud services. However, some projects may evolve into models adopted by social infrastructure initiatives. In addition, feeding back knowledge gained from them can improve the cloud services. As such, the company aggressively bids for projects it thinks are important.

Kanamic will respond to customer requests for customization, but it is not aggressively pursuing this business. The company prefers a cloud service business model to a contract development business model.

Development conducted through other services is usually short-term development that is completed within a year and, in many cases, associated sales are recorded using the complete contract method of accounting.

Evolution of the company’s services

Before the Long-Term Care Insurance Act, long-term care services were provided primarily by municipalities and public entities, but after the passing of the act, a variety of private companies and other entities were authorized to enter the industry. Since then, the long-term care market has expanded, leading to the emergence of a software market targeting the private-sector companies.

Kanamic’s services began with the 2001 release of a care plan network system that connected care managers and service providers, and subsequently developed and grew following a number of turning points.

2005: Community-based integrated care centers under revised Long-Term Care Insurance Act

Under the revised Long-Term Care Insurance Act of 2005, community-based integrated care centers were established under the aegis of local governments in individual regions. The trigger was fraudulent invoicing in long-term care insurance, so the local government took over the creation of care plans for light long-term care. Separating the care plan creator and service provider made fraudulent activity more difficult. However, due to a shortage of care managers who know how to create the care plans, this activity was subcontracted to the private sector, which the local government organization would then check. For this reason, it became necessary for government organizations, private-sector care managers, and long-term care operators to share information, which spurred the take-up of Kanamic cloud services in Chiba and nationwide. In the process, the company acquired a patent (No. 4658225) for the information platform used in community-based integrated care.

2011: Kashiwa (urban) model launched

The Kashiwa model is a joint project by the University of Tokyo’s Institute of Gerontology, Kashiwa city, and the Urban Renaissance Agency (a semipublic agency that provides housing) aimed at connecting healthcare and long-term care via the cloud. The objectives of the project were to promote home healthcare, encourage the shift from inpatient treatment to home treatment, cut healthcare costs by shortening hospital stays, and improve bed occupancy rates.

According to the company, Tokyo University took an interest in Kanamic cloud services and invited the company to the project. Participation in the project also gave the company access to the healthcare field. Further, involvement in a model infrastructure for community-based integrated care boosted Kanamic’s profile and helped in its branding.

2015: Cooperation between home healthcare and long-term care under revised Long-Term Care Insurance Act

The revised Long-Term Care Insurance Act aimed to promote cooperation between home healthcare and long-term care. In light of this development, local governments spearheaded initiatives ahead of the target date of April 2018. The company saw this as an opportunity to accelerate rollout of the integrated healthcare and long-term care system it fostered through the Kashiwa model project.

2016: Listing on the TSE Mothers market

The stock market listing was significant in that it heightened Kanamic’s credibility and opened doors to government advisory committees and industry-academia collaborations. According to the company, the move to TSE First Section in 2018 also helped boost trust in the company.

2019 and thereafter: Work underway for the Hokkaido (rural) model

The Kashiwa model caters to urban areas where long-term care facilities and medical institutions are relatively concentrated, but it would be difficult to roll this out to rural areas or overseas where these facilities are more dispersed. To bridge the gap, the company decided, along with Asahikawa Medical University in Hokkaido, to establish a Joint Research Chair* that aims to build a global model using IoT and the cloud. In this research, the company assumed responsibility for conducting R&D into new categories of information sharing and support systems related to telemedicine and telenursing support.

2019: Design and development of “Tokyo multi-occupational collaboration portal site” commissioned by the Tokyo Metropolitan Government

In October 2019, the company was commissioned by the Tokyo Metropolitan Government to design and develop the “Tokyo multi-occupational collaboration portal site.” The subject portal site will be developed as a third layer on top of the information-sharing platform and the LTC management system of the Kanamic cloud services, and will be made accessible to Kanamic and other companies via an Application Programming Interface (API).

Medical practitioners and care providers who offer home treatment in the Greater Tokyo Area use information-sharing platforms to share patient information, but it is not uncommon for neighboring regions to use different systems. This creates a situation in which different systems need to be managed concurrently to share information, complicating operations on the ground. In addition, when medical institutions coordinate hospital transfers, a lack of information about transfer destinations can prolong the process required to select the appropriate institution. Meanwhile, medical institutions that accept transferred patients also need a system to connect with transferring medical institutions about the reception of such patients. The project undertaken by Kanamic aims to resolve such challenges by building a shared portal site that promotes collaboration between medical practitioners and care providers in all areas of the Greater Tokyo area.

Because other prefectures struggle with the same challenges as the Greater Tokyo Area, Kanamic plans to expand its achievements with the portal site in the Greater Tokyo Area to other prefectures, and increase the number of communities using Kanamic cloud services accordingly.

Future of business utilizing data

It is common for cloud service providers to consider business development leveraging the various data they accumulate via the cloud. In the case of Kanamic, it has useful healthcare and long-term care data regarding patients, the care they received, and the outcomes of such care. Additionally, the concept of personal health record (PHR)* comprising medical treatment and health information is starting to spread in Japan.

Looking to the future, Shared Research understands the company could take steps toward selling anonymized data or strengthening its platform using the data it holds. However, under legislation to protect personal data in Japan, using personal information would require the permission of the patient, and this becomes an obstacle to a data-driven business. We believe Kanamic will accelerate development of a business that leverages its data if a broader social consensus is created to enable the use of anonymized data, likely stemming from perceived benefits of data analysis to patients or the Japanese community at large. In April 2021, the Japanese government announced unified rules for businesses that provide services related to the management and analysis of personal health information. Moving forward, the company plans to consider classifications of data it can utilize in accordance with these rules and proper procedures to apply when utilizing this data.

Market and value chain

Japan’s long-term care insurance system

The elderly population in Japan increased from 9.1% in 1980 to 17.3% in 2000 (MHLW, Health and Welfare Bureau for the Elderly, 2016: Regarding Japan’s long-term care insurance system). Long-term care needs were in a continuous uptrend due to rising numbers of elderly people requiring care and longer care periods. Meanwhile, the rise in nuclear-family households and the aging of family members involved in nursing led to changes in the family environment that had previously supported the elderly, and the former old-age welfare and old-age healthcare system had reached its limits. In light of these circumstances, a framework for the society as a whole to support long-term care of the elderly (long-term care insurance) became necessary, and in 1997 the Long-Term Care Insurance Act was passed and came into effect in 2000.

Long-term care insurance system

Basic concepts of long-term care insurance

Support for independence: Going beyond simply providing personal care to the elderly, the idea is to support the elderly to maintain their independence.

User oriented: Under this system, users can receive comprehensive health, medicine, and welfare services from a diverse range of entities based on their own choice.

Social insurance system: Adopts a social insurance system, in which the relation between benefits and burdens is clear.

Overview of the system

Municipalities (insurers) manage the system.

Persons aged 40 and over are covered by long-term care insurance.

Persons aged 65 and over can receive services at any time if they are certified for long-term care under the certification process carried out by municipalities.

Persons aged 40 through 64 can receive long-term care services if they are certified as needing such care for specified maladies covered by long-term care insurance (age-related diseases such as early-stage dementia and cerebrovascular diseases).

From April 2015, among preventive benefits in long-term care insurance (services for those needing assistance), home visit care and daycare were transferred to the community support projects (general projects) of municipalities.

General projects comprise support projects, which were traditionally the preventive home visit care and daycare services for those requiring support (and those judged to require support according to a basic checklist), as well as general preventive care projects such as providing gym classes to those aged 65 and older.

Procedures to receive long-term care

Application for long-term care requirement certification

In order to receive long-term care services, one must first apply for long-term care certification.

Application requires a long-term care insurance card.

People aged 40 to 64 (Category 2 insured) need a healthcare insurance card to apply.

Investigation and doctor’s opinion

An investigator from the municipality visits the home or care facility of the applicant to check the individual’s mental and physical health condition. The municipality also asks the family physician for a written opinion. In the absence of a family physician, an examination by a doctor specified by the municipality is required.

Certification of long-term care

Investigation results and some items from the doctor’s opinion are input to a computer system to judge the applicant’s care level using a standard nationwide evaluation method (primary evaluation). Based on the primary evaluation and doctor’s opinion, a long-term care certification committee makes a decision on the care level (secondary evaluation). The municipality certifies the need for long-term care based on the committee’s decision and informs the applicant. In general, notification occurs within 30 days of the initial application. There are seven levels of certification: Preventive Support Level 1 and 2, and Long-term Care Level 1 through 5. An applicant may also be denied certification.

Creation of care plans

A care recipient must have a care plan drafted in order to receive long-term care or preventive care services. Individuals with Preventive Support Level 1 or 2 certification can consult with their community-based integrated care centers for a care plan. Those with certification of Long-term Care Level 1 or above must place a request with a care manager at the home care support offices designated by the prefectural governor. The care manager receiving the request carefully considers the wishes of the care recipient and his/her family along with the recipient’s mental and physical health conditions to create a care plan on which services are to be provided and how.

Care plan
A care plan is a plan, which determines what sort of long-term care services are required, when, and how much. When using long-term care services, first a care plan is created, matching various services covering the required long-term care or assistance. Based on the care plan, the service recipient signs a contract with the long-term care operator and services begin.

Receiving long-term care (preventive care) services

The following are some of the services offered to care recipients based on their care plans. There are 25 types of operators and facilities offering 51 types of services regulated under the Long-Term Care Insurance Act.

Consultations regarding long-term care service use and care plan creation

At-home housework assistance

Day care at facilities

Short stay and long stay at facilities (overnight stays)

Combination of home visit, outpatient, and short stay formats

Services associated with use of assistive devices

Service use procedure flowchart