Lib Work Co.,Ltd. Q2 FY2025 earnings call

Strategic Vision and Positioning

• The company aims to transform from a traditional homebuilder to a HOUSE TECH COMPANY and housing industry platform operator, acting as a hub to partner with regional builders and compete against large national homebuilders, similar to how SBI partners with regional banks against major megabanks.
• The company mission is to drive innovation in housing through sustainability and technology, with the slogan "Change living, change the world, create the future."

Core Marketing and Digital Capabilities

• Shifted KPI focus from just total online lead generation to converting internet leads to in-person model home visits, which grew over 40% year-over-year. Growth in visits will flow through to revenue 9-12+ months later. Digital marketing achieves customer acquisition at 1/10 the cost of traditional in-person outreach.
• Operates a 120,000 subscriber YouTube channel with high per-video view counts, to reach younger customers who no longer consume traditional TV/CM media, and owns a portfolio of niche housing-focused websites for lead generation.
• Leverages long-standing expertise in CG and VR for home design proposals, which forms the foundation for platform product offerings to partner builders.

New Business Development

1. Strategic Partnership with Teijin: Entered a strategic partnership to develop homes using Teijin's LIVELY WOOD, a new carbon-infused Japanese cedar material that doubles wood strength and supports a circular forest economy by utilizing mature domestic cedar and enabling new reforestation. Two model homes of the LIVELY VILLA Noki flat-house concept are under construction in Fukuoka and Kumamoto, opening between May and June 2025. Target is 10 units in the current fiscal year, 30 units next year, and hundreds of units within 5 years, with future franchise expansion to partner builders across Japan.
2. Shopping Mall Model House Expansion: Opened its 4th model house in AEON Mall Kumamoto, following prior openings in Fukuoka, Oita, and Makuhari Shintoshin. Confirmed strong order conversion from initial mall openings, addressing the industry-wide decline in attendance at traditional suburban exhibition sites. The company will accelerate mall expansions nationally, and eventually package mall access for its platform partner builders, as local firms cannot meet the high entry requirements for mall openings on their own.
3. 3D Printer House (Lib Earth House): Started construction of the 100 sqm Model B prototype in November 2024, which is Japan's largest soil-based 3D printed home, now scheduled for completion in March 2025 (one month delay due to an unforeseen issue). Model B uses zero cement, is fully recyclable back to soil, has 5x the strength of the prior Model A, and has obtained official building code approval, meaning it can be built legally across Japan. The company is also exploring expansion to Indonesia, where large-scale demand for affordable 3D printed housing may exist due to favorable market conditions from yen depreciation and local preference for non-wood construction. Over 170 builder executives from across Japan will visit the company to learn about the 3D printer business and other platform offerings in February 2025.
4. My Home Robo (Platform SaaS): A SaaS subscription service for builders that provides a database of over 8,000 pre-built home floor plans paired with 40,000+ CG/VR images, allowing builders to generate customer proposals in minutes instead of the 1-2 weeks required for in-house design. Priced at 68,000 yen per account per month, it is far cheaper than employing a full-time designer. One recent customer signed on for 30 accounts, generating 25-30 million yen in annual recurring revenue, and the company sees large upside from widespread adoption across Japan's tens of thousands of regional builders.
5. IP Licensing (Platform Business): A low-capital, high-margin business that licenses branded home concepts to partner builders, currently with the lifestyle brand niko and ... for the niko and ... EDIT HOUSE concept. Only 2-3 staff manage the entire business for the current 12 franchise locations, collecting 6-7 million yen per location per year in license fees, with profits split 50/50 with the brand partner. The business can scale to hundreds of locations with minimal additional staffing, and model houses are already operational across 6 prefectures, with new locations opening continuously.

Internal Operational Strengths

• Ranks as the number one most popular employer in the Kyushu housing/real estate industry despite its rural location, attracting strong new graduate talent due to its innovative strategy, enabling sustained growth.
• Uses small unit management, digitalized knowledge sharing that allows new hires to become productive quickly, employee stock ownership for all staff to align incentives, and active diversity management to address industry-wide labor shortages.

Overall consolidated results: Total revenue is 8.07 billion yen, operating profit is 378 million yen, ordinary profit is 385 million yen, and net profit is 224 million yen, with slight year-over-year increases in both revenue and profit. The company does not currently report formal segment-level absolute financials or revenue contribution percentages, and plans to publish segmented data including new platform businesses from next fiscal year. The core traditional residential business (custom-built and pre-built homes) faced severe headwinds from weak industry demand, but turned in a profitable result after restructuring subsidiary Takuei Home: the subsidiary completed liquidation of unsold pre-built inventory in the Yokohama/Kanagawa area, reduced inventory holdings significantly, and returned to profitability from a prior loss position. The new platform business segment is growing rapidly, and its high margin expansion offset the core residential business revenue miss and maintained overall group profit in line with prior forecasts.

• Management expects the custom-built housing industry to remain very challenging through the current fiscal year, following weak demand since summer 2024.
• The company missed the prior revenue guidance of 8.9 billion yen by 830 million yen (a nearly 10% miss), but maintained profit in line with guidance due to improved gross margins and strong growth from high-margin new platform businesses.
• The company expects the pre-cut lumber factory acquisition completed two years ago will eventually deliver up to a 5% further increase in group gross margin through ongoing cost reduction.
• The company plans to begin publishing segmented financial results for its new platform businesses starting from the next fiscal year.
• The platform businesses have significant long-term upside: if just 10% of Japan's tens of thousands of regional builders adopt My Home Robo with 3 accounts per location, the business will generate very large recurring profit.

• The overall custom-built housing industry faces severe headwinds from weak consumer demand, with many competing homebuilders already reporting net loss results.
• 3D printed soil-based homes were found to be vulnerable to freezing temperatures below zero, which slowed the prototype construction by one month as the company conducts urgent testing to resolve the issue. Management notes this issue was identified before national expansion, avoiding larger future liabilities.
• The traditional business model of relying on large suburban housing exhibition centers for customer acquisition is no longer viable due to declining attendance, creating a structural risk for competitors that have not adapted their model.

Q: Will the company continue its shareholder dividend program regardless of performance? / A: Management views the shareholder program as a key tool to improve corporate value, and has already budgeted for the program long-term, so it will continue for the foreseeable future. Changes will only be considered if the company's market capitalization exceeds 500 billion yen, when management will consult with institutional investors. The company's current market cap is 16 billion yen, so no changes are planned for the foreseeable future.

Q: What are the expected price point and design strategy for the 3D printer house, and does the futuristic design in IR materials reflect the company's end goal? / A: Final pricing has not been set, but the company will follow a Tesla-like strategy: launch with a higher price point targeting affluent customers first, rather than mass-market low pricing. This approach avoids quality and reputational issues that could come from rushing unproven technology to a large volume of customers. The company will pursue innovative, futuristic designs to position 3D printed homes as a forward-looking housing option, matching the concept shown in IR materials.

Q: What is the reasoning behind opening a model house at AEON Mall Makuhari Shintoshin in Chiba so early in the national expansion? / A: The Makuhari location was chosen for two key reasons: first, it is the flagship AEON Mall location near AEON's corporate headquarters, and the company was already expanding into the Chiba/Kanto region, so this was a natural high-visibility next step. Second, it provides a convenient location for partner builders from across Japan to visit the model house, since the company's headquarters in Kumamoto is difficult for many eastern Japan builders to access.