MEDIROM Healthcare Technologies Inc. Announces Financial Results for Fiscal Year 2023
Medirom Healthcare Technologies (NASDAQ: MRM) announced its financial results for fiscal year 2023, reporting net profit and positive adjusted EBITDA for the second consecutive year. Key contributors were its directly-operated wellness salons, the sale of 30 wellness salons, and growth in its Lav digital wellness app.
Revenues totaled $48.5 million, slightly down by 1.8% from 2022. The Relaxation Salon segment saw a modest revenue increase of 1.5%, but the Digital Preventative Healthcare segment saw a 48.1% decline. Operating expenses rose by 5.3%, leading to an operating loss of $2.8 million. Net income fell 22.8% to $816,000.
Despite the profit, adjusted EBITDA dropped by 19.5% to $2.2 million. Key factors were increased payroll, outsourcing costs, and interest expenses due to convertible bonds. Medirom launched full-scale operations of its REMONY Monitoring System and worked on expanding its B2B sales of healthtech platforms like MOTHER Bracelet and Gateway.
- Net profit and positive adjusted EBITDA for two consecutive years.
- Revenue from Relaxation Salon segment increased by 1.5%.
- Successful sale of 30 wellness salons.
- Growth in Lav digital wellness app.
- Launch of full-scale operations of REMONY Monitoring System.
- Total revenue decreased by 1.8%.
- Digital Preventative Healthcare segment revenue declined by 48.1%.
- Operating loss of $2.8 million.
- Net income decreased by 22.8% to $816,000.
- Adjusted EBITDA declined by 19.5% to $2.2 million.
- Increased payroll and outsourcing costs.
- Interest expenses rose by 276.2% due to convertible bonds.
Medirom Healthcare Technologies Inc. has shown a mix of positive and concerning financial metrics in its recently announced fiscal year results. The company's net profit of
The revenue remained nearly flat with a
Moreover, the interest expense saw a significant jump due to the recognition of interest on convertible bonds, escalating by
The Adjusted EBITDA margin reduction from
Medirom’s performance in its Relaxation Salon Segment appears stable, driven by increased sales per customer. Yet, it should be noted that the Digital Preventative Healthcare segment faced a substantial revenue decline of
The company's focus on expanding its B2B sales through its healthtech systems like the REMONY Monitoring System and MOTHER Gateway is a strategic move that can drive future growth. Nonetheless, actual traction in this segment will need to be observed over the upcoming quarters to confirm if this strategy will contribute significantly to their revenue streams.
Investors should be aware of the competitive landscape in the holistic healthcare technology sector, which includes rapid technological advancements and evolving customer preferences. Medirom's ability to launch and scale new technological products will be important in determining its market positioning and long-term success.
The company’s emphasis on its REMONY Monitoring System and other digital wellness products signifies its commitment to innovation in healthcare technology. However, the reported delays in development and the subsequent impact on revenue indicate potential challenges in their R&D processes or market readiness. Addressing these issues will be essential for sustained success.
The launch of the Lav app and the increase in participants in the Health Guidance Program are encouraging signs, showcasing Medirom's capability to attract users to its digital platforms. However, consistent updates and improvements to these platforms will be necessary to maintain user engagement and market relevance.
Investors should closely watch the company’s execution on these fronts and the actual uptake of their digital solutions by corporate clients.
TOKYO, June 25, 2024 (GLOBE NEWSWIRE) -- MEDIROM Healthcare Technologies Inc. (NASDAQ: MRM) (“Medirom” or the “Company”), a holistic healthcare company based in Japan, announced it filed its Annual Report on Form 20-F for the year ended December 31, 2023 with the U.S. Securities and Exchange Commission ("SEC"), including consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), on June 18, 2024.
Kouji Eguchi, Chief Executive Officer of the Company, stated, “I am very pleased to announce that during a period of significant investment and development in our healthcare technology systems and products in FY 2023 and FY 2022, as well as recovering in a post-pandemic environment, we generated net profit and positive adjusted EBITDA for two consecutive years. The profitability of our directly-operated wellness salons, sales of 30 wellness salons, and growth of our digital wellness healthcare technology app, Lav, primarily led to the net profit and adjusted EBITDA in 2023. We believe remaining a profitable company while developing and beginning to commercialize our healthcare technology is a significant milestone for Medirom. In 2023, we focused on further developing our digital wellness healthtech products and services with the launch of full scale operations of the REMONY Monitoring System. We continue to work to expand our B2B sales by selling our healthtech systems and products as a health data central management platform across the MOTHER Bracelet, MOTHER Gateway, and REMONY Monitoring System.”
Summary of Consolidated Financial Results for 2023
The following is a comparison of certain of our operating results for the years ended December 31, 2023 and December 31, 2022.
(in thousands, except change % data and Adjusted EBITDA margin) | Year ended December 31, | Change (2023 vs 2022) | |||||||||||||||
Consolidated Statement of Operations: | 2023($) | 2023(¥) | 2022(¥) | $ | ¥ | % | |||||||||||
Revenues: | |||||||||||||||||
Relaxation Salon | $ | 43,002 | ¥ | 6,059,851 | ¥ | 5,972,913 | $ | 617 | ¥ | 86,938 | 1.5 | ||||||
Luxury Beauty | 4,029 | 567,695 | 594,761 | -193 | ¥ | -27,066 | -4.6 | ||||||||||
Digital Preventative Healthcare | 1,422 | 200,397 | 386,383 | -1,320 | ¥ | -185,986 | -48.1 | ||||||||||
Total revenue | 48,453 | 6,827,943 | 6,954,057 | -895 | ¥ | -126,114 | -1.8 | ||||||||||
Cost of revenues and operating expenses: | |||||||||||||||||
Cost of revenues | 37,320 | 5,259,075 | 5,051,600 | 1,472 | ¥ | 207,475 | 4.1 | ||||||||||
Selling, general and administrative expenses | 13,912 | 1,960,447 | 1,805,490 | 1,100 | ¥ | 154,957 | 8.6 | ||||||||||
Total cost of revenues and operating expenses | 51,232 | 7,219,522 | 6,857,090 | 2,572 | ¥ | 362,432 | 5.3 | ||||||||||
Operating income (loss) | $ | -2,779 | ¥ | -391,579 | ¥ | 96,967 | $ | -3,467 | ¥ | -488,546 | -504 | ||||||
Other income (expenses): | |||||||||||||||||
Dividend income | — | 2 | 2 | — | — | — | |||||||||||
Interest income | 8 | 1,111 | 6,072 | -35 | ¥ | -4,961 | -81.7 | ||||||||||
Interest expense | -262 | -36,868 | -9,800 | -192 | ¥ | -27,068 | 276.2 | ||||||||||
Gain from sales of salons | 2,936 | 413,678 | — | 2,936 | 413,678 | — | |||||||||||
Other, net | 243 | 34,278 | 86,533 | -371 | ¥ | -52,255 | -60.4 | ||||||||||
Total other income | 2,925 | 412,201 | 82,807 | 2,337 | ¥ | 329,394 | 397.8 | ||||||||||
Income tax (benefit) expense | -670 | -94,427 | 30,809 | -889 | ¥ | -125,236 | — | ||||||||||
Net income (loss) | 816 | 115,049 | 148,965 | -241 | ¥ | -33,916 | -22.8 | ||||||||||
Adjusted EBITDA(1) | $ | 2,173 | ¥ | 306,324 | ¥ | 380,464 | $ | -526 | ¥ | -74,140 | -19.5 | ||||||
Adjusted EBITDA margin(1) | 4.50 | % | 4.50 | % | 5.50 | % | -1.0 |
(1) Non-GAAP measure. See the section below captioned “Non-GAAP Measures” for more details, and see the table below captioned “Reconciliation of non-GAAP measures” for a reconciliation of Adjusted EBITDA to net income, the most comparable U.S. GAAP measure.
Revenues
Revenues derived from our Relaxation Salon Segment were JPY6,059,851 thousand (US
Cost of Revenues
For the years ended December 31, 2023 and 2022, the cost of revenues was JPY5,259,075 thousand (US
Selling, General, and Administration Expenses
For the years ended December 31, 2023 and 2022, the selling, general, and administration expenses were JPY1,960,447 thousand (US
Interest Expense
Interest expense increased from JPY9,800 thousand (US
Income Tax (Benefit) Expense
Income tax benefit for 2023 was JPY94,427 thousand (US
Net Income and Adjusted EBITDA
Our consolidated net income in the year ended December 31, 2023 was JPY115,049 thousand (US
Non-GAAP Measures
Adjusted EBITDA. We define Adjusted EBITDA as net income (loss), adjusted to exclude: (i) dividend and interest income, (ii) interest expense, (iii) gain from bargain purchases, (iv) income tax expense, (v) depreciation and amortization, (vi) losses on sales of directly-owned salons to franchisees, (vii) gains (losses) on disposal of property and equipment, and other intangible assets (viii) impairment loss on long-lived assets and (ix) stock-based compensation expense. Management considers Adjusted EBITDA to be a measurement of performance which provides useful information to both management and investors. Adjusted EBITDA should not be considered an alternative to net income or other measurements under GAAP. Adjusted EBITDA is not calculated identically by all companies and, therefore, our measurements of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
We use Adjusted EBITDA to enhance our understanding of our operating performance, which represents our views concerning our performance in the ordinary, ongoing and customary course of our operations. We historically have found it helpful, and believe that investors have found it helpful, to consider an operating measure that excludes certain expenses relating to transactions not reflective of our core operations. Stock-based compensation expense represents non-cash charges related to equity awards granted by us. We recognized stock-based compensation expense in 2021. Our management believes the measurement of these amounts can vary considerably from period to period and depend substantially on factors that are not direct consequences of the performance of our Company and are not within our management’s control. Therefore, our management believes that excluding these expenses facilitates comparisons of our operational results and financial performances in different periods, as well as comparisons against similarly determined non-GAAP financial measures of comparable companies.
The information about our operating performance provided by this financial measure is used by our management for a variety of purposes. We regularly communicate Adjusted EBITDA results to our board of directors, and we discuss with the board our interpretation of such results. We also compare our Adjusted EBITDA performance against internal targets as a key factor in evaluating our periodic operating performance at each salon level, segment level, and consolidated level, largely because we believe that this measure is indicative of how the fundamental business is performing and is being managed.
Adjusted EBITDA Margin. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA for a period by total revenue for the same period.
Reconciliation of non-GAAP measures: | Year ended December 31, | ||||||||||||
(in thousands, except Adjusted EBITDA margin) | 2023($) | 2023(¥) | 2022(¥) | ||||||||||
Net income (loss) | $ | 816 | ¥ | 115,049 | ¥ | 148,965 | |||||||
Dividend income and interest income | (8 | ) | (1,113 | ) | (6,074 | ) | |||||||
Interest expense | 262 | 36,868 | 9,800 | ||||||||||
Income tax expense (benefit) | (670 | ) | (94,427 | ) | 30,809 | ||||||||
Depreciation and amortization | 1,792 | 252,595 | 184,056 | ||||||||||
Losses on sales of directly-owned salons to franchisees | — | — | — | ||||||||||
Losses on disposal of property and equipment, net and other intangible assets, net | (19 | ) | (2,648 | ) | 12,908 | ||||||||
Impairment loss on long-lived assets | — | — | — | ||||||||||
Stock-based compensation expense | — | — | — | ||||||||||
Adjusted EBITDA | $ | 2,173 | ¥ | 306,324 | ¥ | 380,464 | |||||||
Adjusted EBITDA margin | 4.5 | % | 4.5 | % | 5.5 | % |
Forward-Looking Statements
Certain statements in this press release are forward-looking statements for purposes of the safe harbor provisions under the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements may include estimates or expectations about the Company’s possible or assumed operational results, financial condition, business strategies and plans, market opportunities, competitive position, industry environment, and potential growth opportunities. In some cases, forward-looking statements can be identified by terms such as “may,” “will,” “should,” “design,” “target,” “aim,” “hope,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “project,” “potential,” “goal,” or other words that convey the uncertainty of future events or outcomes. These statements relate to future events or to the Company’s future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, levels of activity, performance, or achievements to be different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company’s control and which could, and likely will, affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects the Company’s current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to the Company’s operations, results of operations, growth strategy and liquidity. Some of the factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements in this press release include:
- the Company’s ability to achieve its development goals for its business and execute and evolve its growth strategies, priorities and initiatives;
- the Company’s ability to sell certain of its owned salons to investors, and receive management fees from such sold salons, on acceptable terms;
- changes in Japanese and global economic conditions and financial markets, including their effects on the Company’s expansion in Japan and certain overseas markets;
- the Company’s ability to achieve and sustain profitability in its Digital Preventative Healthcare Segment;
- the fluctuation of foreign exchange rates, which affects the Company’s expenses and liabilities payable in foreign currencies;
- the Company’s ability to hire and train a sufficient number of therapists and place them at salons in need of additional staffing;
- changes in demographic, unemployment, economic, regulatory or weather conditions affecting the Tokyo region of Japan, where the Company’s relaxation salon base is geographically concentrated;
- the Company’s ability to maintain and enhance the value of its brands and to enforce and maintain its trademarks and protect its other intellectual property;
- the financial performance of the Company’s franchisees and the Company’s limited control with respect to their operations;
- the Company’s ability to raise additional capital on acceptable terms or at all;
- the Company’s level of indebtedness and potential restrictions on the Company under the Company’s debt instruments;
- changes in consumer preferences and the Company’s competitive environment;
- the Company’s ability to respond to natural disasters, such as earthquakes and tsunamis, and to global pandemics, such as COVID-19; and
- the regulatory environment in which the Company operates.
More information on these risks and other potential factors that could affect the Company’s business, reputation, results of operations, financial condition, and stock price is included in the Company’s filings with the SEC, including in the “Risk Factors” and “Operating and Financial Review and Prospects” sections of the Company’s most recently filed periodic report on Form 20-F and subsequent filings, which are available on the SEC website at www.sec.gov. The Company assumes no obligation to update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ from those anticipated in these forward-looking statements, even if new information becomes available in the future.
About MEDIROM Healthcare Technologies Inc.
MEDIROM, a holistic healthcare company, operates 307 (as of May 31, 2024) relaxation salons across Japan, Re.Ra.Ku® being its leading brand, and provides healthcare services. In 2015, MEDIROM entered the health tech business and launched new healthcare programs using an on-demand training app called “Lav®”, which is developed by the Company. MEDIROM also entered the device business in 2020 and has developed a smart tracker “MOTHER Bracelet®”. In 2023, MEDIROM launched REMONY, a remote monitoring system for corporate clients, and has received orders from a broad range of industries, including nursing care, transportation, construction, and manufacturing, among others. MEDIROM hopes that its diverse health-related product and service offerings will help it collect and manage healthcare data from users and customers and enable it to become a leader in big data in the healthcare industry. For more information, visit https://medirom.co.jp/en.
Contacts
Investor Relations Team
ir@medirom.co.jp
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