IKK Holdings Inc. Q2 FY2025 earnings call

• **Financial and Operational Performance Highlights

  • First half revenue and profit both exceeded original plan, with the domestic wedding business hitting a new all-time high average construction unit price driven by stronger catering and apparel pricing
  • Improved gross margin across the wedding and photo businesses, paired with targeted cost cutting of non-essential expenses, drove upside to profit targets
  • Completed large-scale renewal of 3 existing wedding stores (Tosu, Fukuoka, Mito), all three have recorded solid order growth post-renewal
  • Backlog order volume has improved following strategic advertising investment and store renewal work, building volume for future periods

• **Strategic and Corporate Initiatives

  • Won 1st place for 3 consecutive years in the popularity ranking for companies headquartered in the Kyushu-Okinawa region, and 1st place for 11 consecutive years in the national wedding/funeral service industry ranking, supporting strong talent recruitment
  • Signed comprehensive partnership agreements with 3 additional local governments (Dazaifu City Fukuoka, Arita Town Saga, Hasami Town Nagasaki), bringing the total to 6 partnered local governments. Initiatives include offering free pre-wedding photography giveaways to newly registered couples to build engagement for future wedding bookings, plus participation in local tourism and community activation events
  • Launched an in-house sweets production and R&D facility (Sweets Lab) for the food business, which began full operations in April 2025. The facility has completed testing and started shipping products including baumkuchen
  • Launched a new card-style catalog gift brand "Tashinabi" for wedding customers in January 2025, offering over 100 products across the company's original brands "Bannichi Hiyori" and "morinoiro"
  • Confirmed new wedding store openings in Tokyo (Ariake waterfront area) and Fukuoka (prime location near Tenjin with coastal/natural access), both scheduled to open in winter 2026. Temporary salons are under preparation to begin accepting pre-openings orders in the current fiscal year
  • The hotel business is in active evaluation and development, with multiple scenic location proposals under review, as part of the company's long-term strategy to build an integrated tourism business combining wedding, food, and hotel operations

• **Financial Health

  • Capital structure remains stable, with a 54.8% equity ratio and 15.8% dependency on interest-bearing debt

1. Domestic Wedding Business: The segment reported a 5.8% year-over-year revenue decrease, reaching 101.3% of plan revenue. It recorded 2,272 construction units, a 10% year-over-year decrease and 99% of plan targets. The average construction unit price hit an all-time high of 4.143 million yen, a 4.2% year-over-year increase and 102% of plan. Segment operating profit reached 116% of plan, driven by higher unit prices and effective cost control despite increased marketing investments. This business contributed ~96% of total consolidated first half revenue.
2. Photo Business: The segment grew 16.1% above plan, with existing locations in Osaka and Nagoya performing strongly. It contributed approximately 4% of total first half consolidated revenue.
3. Overseas Business (Indonesia): Operations have not yet recovered to pre-COVID-19 levels. Management is currently strengthening digital marketing with weekly PDCA cycles and actively searching for new real estate for expansion.
4. Consolidated Total (First Half): Total revenue hit 10.55 billion yen, a 4.5% year-over-year decrease and 1.5% above plan. Operating profit was 0.36 billion yen, a 62.4% year-over-year decrease but 20.3% above plan. Net profit attributable to parent shareholders was 0.197 billion yen, a 68.4% year-over-year decrease and 97.5% above plan. Backlog orders stood at 4,708 units as of the end of April 2025, a 2.5% year-over-year decrease.

• Full-year 2025 October term guidance is maintained at the same levels announced at the start of the period, with overall revenue and profit planned to decline year-over-year due to expected lower wedding construction volume and upfront pre-opening investments for new strategic initiatives
  • Full-year revenue guidance is 22.9 billion yen, a 1.6% year-over-year decrease. The average wedding construction unit price is planned to increase 56,000 yen year-over-year to 4.042 million yen, but total construction volume is still expected to come in below prior year levels
  • Full-year operating profit guidance is 1.8 billion yen, a 27.7% year-over-year decrease. The decline is driven by lower revenue plus pre-opening expenses for the new Tokyo 2nd branch, Fukuoka 2nd branch, new Photo business locations, and the new in-house food production facility
  • Full-year net profit attributable to parent shareholders is guided at 1.11 billion yen, a 34.8% year-over-year decrease, with an expected operating margin of 7.9%
  • Total capital expenditure is planned at 0.472 billion yen, focused on existing store renewal and costume inventory purchases, with ongoing cost discipline for non-essential spending paired with targeted strategic investment
  • No new wedding store openings are planned for the current fiscal year, and a full-year dividend of 24 yen per share is maintained, balancing internal retention for long-term growth with performance-aligned shareholder returns

• Domestic wedding construction volume has declined year-over-year in the first half, and full-year volume is projected to remain below prior year levels, creating top line pressure for the core wedding business
• Indonesia overseas operations have not yet recovered to pre-COVID-19 levels, creating uncertainty for this segment's near-term performance
• Upfront pre-opening and investment costs for new strategic initiatives (new stores, new production facility, new business lines) will pressure full-year 2025 profitability, though these investments are intended to drive long-term growth
• Sustained cost increases for utilities and raw materials remain an ongoing headwind that the company must actively manage to hit plan targets

Q: What is the current progress of the hotel business entry, and what is the target opening timeline?

A: The company is actively evaluating multiple incoming proposals for hotel development in scenic locations, with several projects currently in early development. No specific opening timeline has been confirmed yet, as the business remains in the exploratory phase. The hotel business is a core part of the company's long-term strategy to build an integrated tourism offering combining its existing wedding and food business strengths.

Q: What factors have driven the company's 3 consecutive first place rankings in the Kyushu-Okinawa region job seeker popularity ranking, and how will this benefit the business?

A: The ranking reflects the company's long-term focus on living its core corporate philosophy and investing in human capital management. Strong employer branding from this recognition will help the company secure high-quality talent, which is a core pillar for sustained long-term business growth. The company will continue leveraging this recognition to improve brand awareness and recruitment outcomes.

Q: What are the key pillars of the company's future growth strategy?

A: The company's near-term focus is on increasing average wedding unit prices and growing backlog order volume through existing store renewal and targeted marketing investment. Key mid-term growth drivers are the new Tokyo and Fukuoka wedding store openings launching in winter 2026, continued expansion of the fast-growing photo business (including the planned Tokyo entry in fall 2025), and product development for the food business. The long-term strategy is to expand into the integrated tourism industry via new hotel business entry, building on the company's existing wedding and food brand equity. Management views the current fiscal year as a seeding period for long-term growth, focused on laying groundwork for future stable profit gains.