Hakuten Corporation Q1 FY2025 earnings call

• Company Overview & Purpose

  • Hakuten was founded in 1967, originated from kabuki stage decoration carpentry, listed in 2008, and has expanded into digital and sustainability-focused business lines in recent years
  • The firm maintains a focus on direct client relationships to meet customer needs granularly, now serving over 740 clients, with total group headcount exceeding 600 employees
  • Corporate purpose is to design meaningful communication between people and society to create momentum for shared future growth

• Completed Key Projects

  • Delivered multiple projects for 2025 Osaka-Kansai World Expo, including total end-to-end delivery (planning, design, construction, operations) for the Kanadevia pavilion focused on resource circularity, with construction support from recently acquired subsidiary Hiramiya, which also produced exterior components for the Kuwait Pavilion
  • Designed and constructed the Bridgestone booth at Tokyo Auto Salon 2025, and order intake for the upcoming Japan Mobility Show is progressing well with strong inbound interest from the broader mobility industry
  • Led the renovation of AIST-Cube, the permanent exhibition facility for the National Institute of Advanced Industrial Science and Technology in Ibaraki Prefecture

• Strategic & Sustainability Updates

  • Established the new Commercial Environment Business Division this fiscal year to build permanent spaces (corporate showrooms, offices) as a new core business pillar, leveraging the firm's existing creative and experiential design capabilities
  • Obtained ISO 20121 (event sustainability management system) certification in January 2025, strengthening organization-wide sustainability promotion beyond individual project-level efforts
  • Order intake for resource circularity-focused events remains strong, and the firm is expanding its capabilities to meet growing market demand
  • Preparing for a market segment change application to the Tokyo Stock Exchange Standard Market; views the shift as a tool for corporate value improvement rather than an end goal, and will proceed carefully by selecting an appropriate timing amid large changes in the external environment
  • Maintains a shareholder return policy targeting a 30% annual payout ratio, with planned annual dividends of 20 yen per share (an increase from the prior year)

• Key Overall Q1 Financial Results

  • Total revenue: 4.239 billion yen (down 222 million yen year-over-year); gross profit: 1.38 billion yen (up 109 million yen year-over-year); gross margin increased 4.1pp to 32.6%
  • Operating profit: 296 million yen (up 10 million yen year-over-year); operating margin increased 0.6pp to 7.0%; net profit was 192 million yen, roughly flat year-over-year
  • Revenue decrease was driven by lower order volume for small-to-medium sized projects (10 million to 50 million yen price range), but improved per-project profit management drove margin expansion
  • Q1 order intake was 5.833 billion yen, growing strongly year-over-year; ending order backlog hit a record high 8.957 billion yen (equivalent to ~5 months of revenue), with backlog converting to revenue starting from Q2
  • Overall designated order rate was 58.3%; existing client designated order rate rose to 65.3%, while new client designated order rate fell to 35.2% (a volatile metric quarter-to-quarter, so management notes it is for reference only)
  • Repeat order rate remained strong at 76.7%, though repeat revenue decreased in Q1, with management targeting a recovery in subsequent quarters

Hakuten reorganized its business segments this quarter, spinning off the new Commercial Environment segment from the former Tokyo Metropolitan Area B2B and B2C Marketing segments. Comparable year-over-year figures for the new standalone Commercial Environment segment are not available. Segment performance (year-over-year change, all in yen):

1. Combined Tokyo Metropolitan Area B2B Marketing + B2C Marketing: 115 million yen decrease in revenue, 74 million yen increase in gross profit
2. Chubu/West Japan: 154 million yen decrease in revenue, 23 million yen decrease in gross profit
3. National Small and Medium-sized Exhibitions: 107 million yen increase in revenue, 34 million yen increase in gross profit
4. Other Businesses / Subsidiaries: 61 million yen decrease in revenue, 24 million yen increase in gross profit Overall group revenue decreased by 222 million yen year-over-year, while overall group gross profit increased by 109 million yen year-over-year.

• As of Q1, full-year revenue, operating profit, and net profit are all ~20% of the full-year target, which is slightly below the typical mid-quarter pace, but management remains focused on hitting full-year targets through continued active order intake and profit management
• Management expects full-year overall revenue to be close to prior year levels, and expects the historical seasonal trend to hold: Q2 will see strong growth, Q3 will be seasonally slow, and Q4 will rebound again
• The firm's top priorities are to secure strong margin in Q2, and build order backlog for Q3 and Q4 to reduce the magnitude of seasonal volatility between quarters

• External market conditions have changed significantly since the firm first announced preparation for the Standard Market shift, so the timing of the application is uncertain
• Seasonal quarterly revenue volatility remains a structural challenge for the business, with Q3 typically seeing weak performance
• Q1 repeat revenue declined from prior year levels, requiring recovery in subsequent quarters
• New client designated order intake is volatile quarter-to-quarter

The full question and answer summary is hosted on Hakuten's IR website, and no substantive Q&A content was included in the provided transcript.