2173.T

• Company Overview & Core Purpose

  • The company's stated purpose is to create the driving force that connects heart-to-heart communication between people and society, and links this to the future. The company was founded in 1967, rooted in manufacturing with strong production capabilities, expanded sales and creative capabilities to drive growth, and was listed in 2008.
  • The company focuses on direct client engagement to meet fine-grained client needs against industry conventions, and currently has direct transactions with over 820 clients. It has prioritized human capital investment early, with steady growth in both new graduate and mid-career hiring, and will continue to prioritize talent strengthening.
  • The company expanded into digital and sustainability-focused business areas in recent years.

• Full-Year & Q4 2025 Financial Performance

  • Full-year total sales reached 23.336 billion yen (+4.49 billion yen YoY), gross profit was 7.49 billion yen (+1.797 billion yen YoY), gross margin improved 1.9 percentage points YoY to 32.1%, operating profit hit 2.592 billion yen (+1.199 billion yen YoY / +86% YoY), operating margin increased 3.7 percentage points YoY to 11.1%, and net profit was 1.913 billion yen (+914 million yen YoY). All profit metrics saw substantial year-over-year growth.
  • Q4 2025 sales hit 8.385 billion yen, marking the first time a single quarter exceeded 8 billion yen. Approximately 30% of Q4 sales came from large projects over 100 million yen, with a healthy volume of medium-sized projects between 50 million and 100 million yen. Q4 gross profit was 2.546 billion yen with a 30.3% gross margin, and operating profit was 1.02 billion yen, the first time a single quarter exceeded 1 billion yen, with a 12.2% operating margin and net profit of 850 million yen.
  • Full-year order intake was 23.655 billion yen, ending order backlog was 7.682 billion yen, and nominated order sales was 13.222 billion yen. Nominated (non-competitive bid) sales account for 58.2% of total sales by revenue, and 82% of total projects by volume, which forms the core of the company's stable profit base. Repeat sales rate held steady at 75.4%.
  • Strong sales growth and improved gross margin were the main contributors to operating profit growth, and the company was able to absorb large ongoing talent investments to hit the full-year profit target. Key financial metrics: EPS 122.6 yen (+58.1 yen YoY), ROE 45.8% (+12.5 percentage points YoY), payout ratio 24.5%, equity ratio 49.1%, free cash flow 2.651 billion yen, end-of-period market capitalization 13.779 billion yen.

• Notable Completed Projects

  • Supported Yazaki Corporation's booth at Japan Mobility Show 2025 from concept development through production, creating an immersive multi-sensory theater as the main attraction that effectively communicated Yazaki's brand mission to attendees.
  • Partnered with leading Japanese haunted house producer Hirofumi Gomi to renew the permanent "Kurayami Kontoi: Ugomeku Ichizoku" haunted house attraction at Tokyo Dome City after 8 years, handling PR, logo design, art direction, production, performance, and music to create an interactive full-sensory horror experience.

• Sustainability Progress

  • Orders for resource-recycling events remain strong. The company's booth design for Sharp at CEATEC 2025 won an Excellence Award for excellence in combining sustainability and creativity. It achieved 74% resource circulation rate for booth materials using recycled plastic, and cut CO2 emissions through improved transport efficiency, earning high industry recognition.

• Mid-Term Management Plan 3-Year Review

  • The full 3-year plan was achieved, with FY25 results far exceeding the original mid-term targets, driven by three core factors:
    1. Expansion of nominated orders from client recognition of the company's experiential value: Non-price competitive nominated orders have grown steadily and become a core driver of profit improvement. The company will continue refining its value to convert competitive bid projects into future nominated orders.
    2. Strict per-project profit and cost management: Continuous cost control from order intake through delivery allowed the company to capture all profit improvement opportunities, and achieved the dual goal of sales expansion and margin improvement that drove the over-fulfillment of the plan. However, the company notes there is still room for improvement in project delivery processes, and will make company-wide efforts to improve delivery quality.
    3. Strong performance across all group companies: All group subsidiaries delivered very strong results, including special demand factors, that lifted group-wide profit levels and supported the achievement of record high full-year profit. The company had previously focused on improving individual subsidiary capabilities, and will now shift to a new phase focused on strengthening internal group collaboration.

• Shareholder Return

  • Annual dividend is set at 30 yen per share, consisting of a 16 yen end-of-period dividend plus a 4 yen special dividend, representing an 11 yen per share increase year-over-year. The company targets a 30% annual payout ratio, and will continue to balance stable dividends with future investment strategy.
  • Shareholder benefits were adjusted: the benefit was changed from a JCB Premo Card to a JCB Gift Card with an increased value, and a previously announced experiential content event for shareholders was held successfully with positive participant feedback.

• For FY25 (ending December 2025), the company issued two upward revisions to guidance during the fiscal year, and final full-year results beat the last revised guidance: sales reached 103.7% of the revised target, while both operating profit and net profit exceeded 120% of the revised target, outperforming all expectations.
• For FY26 (ending December 2026), management targets moderate, steady sales growth: after FY25 saw a high concentration of large global events that lifted results, fewer large-scale events are expected in FY26, so the company projects full-year sales of 23.75 billion yen, an increase of 413 million yen year-over-year.
• To support future long-term growth, the company plans to continue increasing talent investment in FY26, and will also make targeted system investments including network upgrades to prepare for larger future growth. These planned investments will impact short-term profit.
• Management guidance for FY26 projects operating profit of 2.248 billion yen (a decrease of 344 million yen year-over-year) and net profit of 1.638 billion yen (a decrease of 275 million yen year-over-year).
• The company ended FY25 with an end-of-period order backlog of 7.682 billion yen, which is higher than the prior year's end backlog, building a solid base to start FY26 even without the tailwind of large global events.

All business units achieved year-over-year growth in both sales and gross profit. The standout performer is the Tokyo Metropolitan Area B2C Marketing business, which recorded full-year sales of 8.095 billion yen, a year-over-year increase of approximately 2.2 billion yen, representing 34.7% of total company full-year sales. The gross profit margin for this segment also improved 3.5 percentage points year-over-year from 26.9% to 30.4%. The Other Business / Subsidiaries segment generated nearly 1 billion yen in gross profit, reaching 976 million yen, showing improved profitability across the group.

The only operational challenges noted by management are:

• There are still a large volume of competitive bid projects that the company wins, and the company needs to continue refining its service value to convert these into future nominated (direct, non-competitive) orders.
• There is still room for improvement in the project execution and delivery processes, and the company will implement company-wide initiatives to improve delivery quality. Prior to FY25, the company faced an imbalance between order intake and delivery activity, where delivery backlogs would slow down new order acquisition; this issue was resolved in FY25 through better balanced management.

The full question and answer summary from this earnings call is published on Hakuten's official IR website. No transcribed Q&A content is included in the provided transcript.