2180.T

• Overall Business Overview

  • The company operates three business segments: core Brand Communication, Food Branding, and new business-focused Business Development. In January 2026, the company announced the full share acquisition of Billcom, which will be classified into the Business Development segment. The acquisition aims to integrate existing services with Billcom's SaaS tools to improve service added value, and the company plans to make renewal investments to expand SaaS functionality.
  • The company completed the sorting out of unprofitable businesses and integration of loss-making subsidiaries, transforming into a structure where all businesses generate profit, with improving profitability from historical 2-3% operating margin to a projected 9.7% for the 2026 June fiscal year, approaching the 10% target.
  • The first half of the 2026 June fiscal year achieved record-high revenue and all levels of profit. Revenue growth absorbed increased costs, upselling policies were effective, and profitability improved.

• Happyくじ Business Highlights

  • "Happyくじ" is the company's own branded product planning business, mainly developed for convenience store clients. The team collaborates with clients to identify target customer groups, selects IP content based on trends and client needs based on long-standing trusted relationships with IP holders, and designs products that fit client channels and target customer demand.
  • The business has an established growth model: switching to the company's own brand has enabled sustained growth, and related non-lottery promotional campaigns also perform well across multiple client partnerships. While large hits create some volatility, the business is in a growth phase with a sustainable growth trajectory.

• M&A Strategy and Billcom Acquisition Highlights

  • After completing the integration of 3 subsidiaries in September 2023 (which consolidated previously acquired companies under the Sunny Side Up brand and improved profit margins), the company identified PR technology as a long-standing gap (it was likely the only listed PR company without in-house PR tech capability). Instead of lengthy in-house development, the company chose M&A to acquire PR tech capability, and acquired Billcom, which operates SaaS PR tools and PR agency services.
  • Billcom provides cloud-based PR effect measurement tool PR Analyzer and an advertising media database. The acquisition enables cross-selling of combined services with the company's existing offerings, drives mutual customer referrals, and expands revenue. The company plans to promote PR Analyzer adoption among its existing client base, make renewal investments to add new features and expand functionality beyond effect measurement.
  • The acquisition is expected to close in March 2026, with a deemed acquisition date of end of March 2026 for consolidation. Goodwill will be determined after discussion with the auditor and amortized going forward. The company will use disposed treasury stock (from previous buyback) for part of the payment, combined with bank borrowings and on-hand cash, and will amortize and recover goodwill while using leverage.
  • No M&A brokerage fees were incurred for this transaction, as the connection came through an internal introduction, and Billcom's management will continue to lead the business while holding a portion of the company's stock.

• Strategic Investment

  • The company has allocated 1.5 billion yen for strategic investment over 3 years. Human resources investment is progressing smoothly, with both new graduate and mid-career hiring advancing, and improved retention.
  • Client development focuses on relationship building, expanding outreach beyond PR departments to marketing department leadership, which has driven strong results. Billcom's addition will further enable upselling opportunities.

• Full-year 2026 June fiscal year guidance has been revised upward: projected full-year revenue is 23.2 billion yen, projected operating profit and ordinary profit are both 2.25 billion yen, and projected net profit per share is 86.76 yen. The impact of the Billcom acquisition on full-year consolidated results is still under review and will be reflected once confirmed.
  • The original medium-term management plan targeted a 20% average annual profit growth over 3 years, with a full-period (final year) operating profit target of 2.0 billion yen. The initial 2026 June fiscal year (final year of the medium-term plan) forecast was 1.9 billion yen operating profit, which has now been revised upward to 2.25 billion yen. The likelihood of exceeding the original medium-term quantitative target has increased significantly. If the benefits of the Billcom acquisition are realized earlier, further upside growth is possible.
  • Dividend guidance: The company maintains a policy of 30% payout ratio based on net profit attributable to parent shareholders. Interim dividend is maintained at the initial forecast to preserve capital for M&A, while year-end dividend is revised upward from 13 yen per share to 15 yen per share, representing a 4 yen annual increase. Between August and November 2025, the company repurchased treasury stock totaling 199 million yen, with a total shareholder return payout ratio of 45.6%.
  • The medium-to-long term target is to build an end-to-end service system covering all communication-related fields, targeting the entire brand communication market including traditional PR, consulting, and large-scale advertising.

1. Brand Communication Business: This is the company's core business. In the first half of the 2026 June fiscal year, year-over-year revenue grew from 6.2 billion yen to 8.0 billion yen (an increase of 1.8 billion yen), and operating profit grew from approximately 0.7 billion yen to approximately 1.0 billion yen (an increase of approximately 0.3 billion yen). PR services achieved 4 consecutive quarters of revenue growth, with improved profitability driven by successful upselling policies and an increase in end-to-end projects from strategy development to implementation, which lifted profit margins. The in-house branded product planning project "Happyくじ" saw its revenue double in the second quarter, with half-year revenue reaching the full-year size of previous periods, driven by strong demand for new IP content collaborations. However, product planning and sales promotion services have relatively low profit margins due to their business model (overseas production and procurement), which pulls down the segment's overall profit margin. Cosmetics & fashion is the largest revenue contribution segment for PR services, followed by commercial facilities & hotels, sports (which contributed from Osaka-Kansai World Expo PR contracts), healthcare, and regional revitalization. 2. Food Branding Business: All segments achieved growth in both revenue and profit. Revenue grew steadily driven by increases in both customer traffic and average order value from menu revisions. The business operates the all-day dining brand "bills" in Japan and South Korea (directly operated in South Korea), and has recently started franchise development of the miso stewed udon brand "山本屋" in South Korea. 3. Business Development Business: New business development segment, consulting service orders have increased, and Billcom will be added to this segment after acquisition. This segment achieved growth in both revenue and profit.

• Sales promotion and product planning businesses rely on overseas production (primarily in China), so they are exposed to exchange rate fluctuation risks that compress profit margins. The company has mitigated this risk through measures such as forward exchange contracts, and does not expect major negative impacts at this time.
  • Large hit products in the "Happyくじ" business can create revenue volatility, though the company has an established growth model that absorbs this volatility over time.
  • Goodwill from the Billcom acquisition will require amortization, and the exact impact on near-term profit is still under review, with no definitive estimate available as of the call.

Q: There has been very high year-over-year growth since the fourth quarter of the 2025 June fiscal year. Is this driven by specific projects/conditions or generally strong demand and successful business initiatives? Can you share more background?

A: Multiple factors have combined to drive this strong performance. A key driver is the strong growth of the product planning business "Happyくじ", and orders for sales promotion product campaigns have also contributed to revenue expansion. In addition, PR service pricing has increased: the company has shifted from only winning standalone PR budgets to taking on end-to-end inclusive projects starting from upstream strategy, allowing the company to win larger budget sizes. While consulting orders are still limited to a portion of business, handling everything from strategy development to implementation has improved profit margins. There is no single driving factor, but multiple combined forces.

Q: For the Brand Communication business, in the first half of the fiscal year revenue grew 1.8 billion yen year-over-year (from 6.2 billion yen to 8.0 billion yen), but profit only grew ~0.3 billion yen (from ~0.7 billion yen to ~1.0 billion yen). Why is the marginal profit lower than expected, and are there specific unusual cost items?

A: This lower overall margin is caused by the revenue mix shift: product planning and sales promotion services have inherently higher cost ratios and lower profit margins due to their business model (planning, client approval, overseas production, import, delivery). As this lower-margin business grows, it pulls down the segment's overall reported profit margin. To mitigate exchange rate risk from overseas procurement, we have implemented measures like forward exchange contracts, so we do not expect major negative exchange rate impacts.

Q: What factors have allowed the company to exceed the original medium-term management plan targets?

A: The original planned initiatives were all implemented as scheduled, and product planning grew faster than initially expected. For PR services, clients accepted price increases to cover higher personnel costs for improved service quality, which was a major contributing factor.

Q: Is "Happyくじ" the company's own in-house product, and do you proactively propose it to IP holders?

A: Yes, "Happyくji" is a Sunny Side Up brand, and we do proactively propose the concept to IP holders and clients. We work closely with convenience store clients to define target customer groups, analyze current trends, select IP that will resonate with targets based on our trusted relationships with IP holders, and build campaigns that fit client needs. This focus on fit and target resonance is key to the business's success, and both clients and IP holders trust our planning capabilities and track record.

Q: Do you see "Happyくじ" as temporary demand or sustainable long-term growth?

A: We see it as sustainable long-term growth. After switching to our own brand from supporting third-party projects, we have achieved sustained growth. Related non-lottery promotional campaigns also perform well across multiple client deployments, driving growth. While large hits create some volatility, the growth model is fully established, and the business is in a phase of sustained expansion as new successful products are added.

Q: Billcom fills the PR technology gap, but are there other areas the company wants to strengthen via additional M&A?

A: For 41 years, PR effect measurement was limited to counting media exposure and calculating advertising equivalent value, which was a major industry-wide challenge and unmet client demand. Adding Billcom's PR Analyzer fills this critical gap, and we can contribute our 41 years of client-centric know-how to improve the tool further, with room to add new features and expand functionality, so there is still room for technology area enhancement.

Q: How did the connection with Billcom come about, and was the company already known to you?

A: We already knew Billcom as a competing PR agency, not just a tech company. Billcom's CEO has a prominent background as chairman of the Word-of-Mouth Marketing Association and holds a PhD, so we were already familiar with him. The introduction came from our newly appointed Sunny Side Up CEO who knew the CEO of Billcom personally. Billcom was not looking to sell, they were focused on independent growth, but we reached a mutual agreement to join the group, so no M&A brokerage fee was incurred.

Q: How will the Billcom acquisition contribute to future financial performance, via technology improvement or cross-sales to drive Billcom's growth?

A: The acquisition creates an opportunity to offer PR effect measurement tools to our existing client base, and we have set a target to drive double-digit percentage adoption among our clients this year, which will drive group-wide revenue growth. In the past, we lost some bids because we could not offer in-house effect measurement, so having this capability in-group is a major competitive advantage that expands business opportunities. Billcom also operates its own PR agency business with different PR expertise than our company, so we can now jointly sell to clients, which will drive growth for Billcom's PR agency business. We can also leverage our group's existing capabilities in IP utilization, commercial production, fashion PR, and influencer casting to strengthen Billcom's sales capability, creating synergies.

Q: Can you give concrete examples of high value-added initiatives in the Brand Communication business?

A: Traditionally, we would only get the PR budget for discrete tasks like press conferences and press release distribution. We now move upstream to provide consulting before these activities: for example, for a major family restaurant chain, we can participate from the product planning stage, leveraging our 18 years of experience operating bills to help the client develop menu items targeted to younger women that align with current trends, plan Instagram-friendly "photo-worthy" items, and develop end-to-end plans including product design, press conferences, and influencer engagement. By offering a full package instead of discrete PR tasks, we create more added value and win larger budgets.

Q: Is the high value-added initiative progressing as planned, and is there room for further improvement?

A: We have moved into a phase where we can grow the number of successful cases and expand from offering only standalone PR to offering full proposals including upstream consulting, so progress is on track.

Q: Are you seeing results from your large human resources investment, and have issues like hiring difficulty and retention improved?

A: We have focused on new graduate hiring for several years, and new hires by their third year are already handling their own clients and delivering results. We have also strengthened mid-career hiring, and have successfully hired experienced professionals from large companies who can bring new clients to the group. Retention has improved, and hiring difficulties have eased.

Q: What are your future M&A plans, what is your budget, and what types of targets are you looking for?

A: M&A was paused after COVID, but we have now restarted, starting with Billcom, and we are actively evaluating additional companies to join the group. We will only target companies closely related to the marketing and communication field, we are not looking to enter unrelated businesses. We prefer M&A that creates collective growth, where existing management continues to operate their business as part of the group, rather than M&A for exit by the target's management.

Q: What do you look for in an M&A target?

A: We look for capabilities in the marketing and communication field that we do not currently have, that can become new competitive weapons and add complementary value to our group. Billcom's PR Analyzer is a perfect example of this, and we will continue to select targets that fit this criteria going forward.

Q: What is the background and business model of the Food Branding business, why does a PR group operate this business?

A: We do not see ourselves as operating restaurants, we see ourselves as doing food branding business. We started the business similarly to our historical sports talent management business: we managed the profile of Bill Granger, the founder of bills, starting with PR, then developed the "world's best breakfast" branding that made the business a hit. bills itself is a client of our PR business, and this 18-year track record has led to inquiries from other new-to-Japan food brands looking for similar branding support, which aligns with our core capabilities. The business model builds on our PR strengths by creating real-world branding case studies that support our core PR business.