Hakuten Corporation Q2 FY2025 earnings call

• Company Mission and Overview

  • Hakuten's core purpose is to solve corporate and social problems through creating experiences, and design communication between people and society to drive future growth. The company was founded in 1967 with roots in kabuki stage decoration, listed in 2008, and has expanded into digital and sustainability-focused services in recent years.
  • The company prioritizes direct client relationships to meet customer needs precisely, now serving over 740 clients. Total group headcount has grown past 600 employees, with steady growth in both new graduate and mid-career hiring.

• Key Operational Project Highlights

  • Sustainability-focused event project at CENTRAL MUSIC & ENTERTAINMENT FESTIVAL 2025 in Yokohama: Partnered with Gomi no Gakkou to operate a resource hub sorting visitor waste and distributing waste flowers as a thank you gift. This project expanded the company's sustainability expertise from event execution to participant-centered social impact initiatives.
  • Yuraku Seika (Black Thunder) new factory visitor facility: Led production of the visitor experience space and retail store at the new Toyohashi facility, designed to boost brand value, promote industrial tourism, and drive regional revitalization. The space was designed for multi-sensory brand immersion, adding new value to the client's business.
  • Audio-Technica booth at Star Wars Celebration Japan 2025 in Makuhari Messe (first holding in Japan/Asia in 17 years): Integrated the Star Wars universe with Audio-Technica's brand identity under a Japanese garden concept, and received high praise from both the client and event attendees, marking a successful new venture in fan business.

• Sustainability Initiatives

  • Orders for resource circular events remain strong, and the company is strengthening internal business unit structures to meet growing market demand.
  • Awarded a Bronze Medal by international sustainability assessor EcoVadis, awarded only to the top 35% of all assessed companies. The company's work in labor/human rights and environmental practice was specifically recognized.
  • ETHICAL DESIGN WEEK TOKYO 2025 will be held in October at Toranomon Hills, co-hosted to promote circular economy business models.

• Shareholder Returns

  • Under the target policy of a 30% annual payout ratio, the company upward revised its full-year dividend plan from an initial +1 yen increase to a total +3 yen increase from the prior year. Full-year dividend will be 22 yen per share (10 yen interim, 12 yen year-end).
  • Changed the shareholder benefit from planned invitation to JAPAN MOBILITY SHOW 2025 to invitation to the annual HAKUTEN OPEN STUDIO at the company's T-BASE production and co-creation space in Koto Ward, Tokyo, in response to widespread shareholder requests to tour the company's facilities. Shareholders will be able to view past projects and prototypes and experience the company's manufacturing process.

For the first half (2Q cumulative):

• Tokyo Metropolitan Area B2B Marketing Business: Decreased revenue year-over-year; gross margin improved from the prior year period.
• Tokyo Metropolitan Area B2C Marketing Business: Increased revenue year-over-year; gross margin improved 5.2pp to 32.8% from 27.5% year-over-year, driven by growth in high-value-added mid-to-mid-high price point projects leveraging the company's creative and production capabilities. This segment was the largest contributor to overall gross margin improvement in the period.
• National Small and Medium Exhibition Business: Increased revenue year-over-year; gross margin improved from the prior year period.
• Commercial Environment Business (newly separated in this fiscal year): Increased revenue year-over-year; gross margin improved from the prior year period.
• Other Business / Subsidiaries: Increased revenue year-over-year; gross margin improved significantly from the prior year period. This segment includes a group subsidiary focused on event digital transformation (which has inherently higher gross margins than core exhibition businesses) and a production subsidiary that secured large, technically complex fabrication projects in the period.

Aggregate cumulative first half results: Total revenue of 10.314 billion yen, gross profit of 3.408 billion yen, gross margin of 33% (up 3.4pp year-over-year), operating profit of 1.168 billion yen (up 160 million yen year-over-year), operating margin of 11.3% (up 1.3pp year-over-year), net income of 793 million yen. 2Q standalone results: Revenue of 6.075 billion yen, gross profit of 2.028 billion yen, gross margin of 33.3% (up 2.8pp year-over-year), operating profit of 872 million yen, operating margin of 14.3%, net income of 600 million yen. Cumulative orders received of 11.423 billion yen, order backlog of 8.472 billion yen, designated order revenue of 6.365 billion yen.

• Full-year earnings guidance was upward revised alongside the dividend increase, driven by stronger than expected first half results. First half progress against the revised full-year plan is 49.4% for revenue, 68.7% for operating profit, and 66.7% for net income, representing solid half-year progress.
• Seasonally, the third quarter (July-September) is typically a slow period, so Q3 revenue is expected to decrease compared to Q2, but the strong current order backlog means Q3 revenue will remain at a higher steady level than in prior years before Q4 revenue grows again. Management intends to execute on order backlog and delivery to hit the final year targets of the current medium-term management plan.
• Order backlog remains strong at 8.472 billion yen, with projects for the second half and next fiscal year accumulating steadily.

No specific risks or operational failures were discussed in the provided transcript.

The full question and answer summary is published separately on the company's IR website, and no Q&A content is included in the provided transcript.