LANDNET Inc. Q2 FY2025 earnings call

Core Business Model & Competitive Advantages

• Direct Real Estate Sourcing: The company prioritizes direct outreach to property owners, with 73% of inventory coming from direct purchases or direct owner listing brokerage. Direct sourcing secures fairly-priced, high-quality properties, and the company has ranked No.1 in direct condominium purchase volume among Japanese peer firms for 4 consecutive years. 60% of inventory is sold to end consumers, 40% to other real estate firms, with the strategic goal of growing direct-to-consumer sales.
• Anshin Warranty Service: A customer confidence program including up to 3 years of defect liability (exceeding the legal 2-year requirement), up to 3 years of 50% coverage for post-handover equipment repair costs, and up to 6 months of rent default guarantee for purchased investment properties.
• In-House System Development (RCP Core Platform): The in-house built Real estate Cloud Platform (RCP) aggregates national property transaction and market data, enables real-time information sharing for sales teams, supports early ramp-up for new hires, and drives operational efficiency. System development started with basic tools built by the CEO and has scaled to an in-house team adding AI functionality for document processing, digital payment reconciliation, and electronic contracting to support national and future international transactions.
• Operational efficiency: Inventory turnover days reached 88.36 days for the second quarter, far faster than industry peers, supporting a 23.0% return on equity (vs. 8.7% industry average) as of the 2024 full fiscal year.

Operational Expansion Highlights

• Product scope expansion: The company has expanded from older studio condominiums to newer units, family-type condominiums, single-family homes, and apartments, with early-stage expansion into full-building condominiums and office buildings aligned with its medium-term growth plan.
• Geographic and branch expansion: Shibuya branch opened in November 2024, with existing branches expanded/relocated in Ikebukuro, Yokohama, Osaka, and Fukuoka to support hiring growth. Total employee count reached 380 as of the second quarter, on track to hit 461 for the full year, with 21% of employees in the system development department.
• Sales for individual investors: The company is strengthening direct sales to individual investors, expanding renovated property sales, and running a dedicated investment property portal (LSEED Real Estate Investment).

1. Condominium segment: In the 2025 July fiscal year second quarter, family-type condominions account for 48.8% of total transaction count by volume, and contribute 70.9% of total segment gross profit. Higher-priced, well-located family-type and newer condominiums in prime Tokyo districts (Minato, Chiyoda, Chuo) have grown transaction share, pushing up overall average sales prices and gross margins. 2. Single-family home & apartment segment: Transaction volume is growing, average unit price is increasing, and the segment currently focuses on the Tokyo metropolitan area and Kinki region with plans for national expansion. 3. Real estate crowdfunding (LSEED Kurafan): The 11th offering is currently open for subscription, with a 6-month holding period and 4% target annual dividend yield, positioned as a third core funding channel for the business. 4. Rental property management: Managed unit count continues to grow, with recent occupancy holding above 99%.

• Full-year 2025 July fiscal year guidance was upward revised: Revenue was raised from 96.2 billion yen to 98.2 billion yen; operating profit from 3.26 billion yen to 3.84 billion yen; ordinary profit from 2.82 billion yen to 3.43 billion yen; net income from 1.88 billion yen to 2.33 billion yen.
• First half revenue progress hit 47.2% of the revised full-year target, and first half ordinary profit progress hit 53.2% of the revised full-year target; the company expects stronger performance in the second half consistent with its historical seasonal trend.
• Annual dividend per share was upward revised from the prior forecast to 19.55 yen, a 3.8 yen increase from the prior guidance, representing continued shareholder return growth.
• Medium-term: The company targets becoming the top player in Japan's secondary real estate distribution market, with long-term plans for potential expansion into the U.S. and Asian markets, currently in the research and preparation stage.

• The company notes that industry-wide risks exist from high market prices leading to potential slow inventory turnover for firms that overpay for properties; the company mitigates this via its direct sourcing model and fast inventory turnover, reducing exposure to bad inventory.
• Renovation of older pre-owned properties carries inherent operational and reputation risks, including disputes with small renovation contractors over scope and quality, which the company mitigates via direct control of the renovation process.
• Crowdfunding business is still in an early growth stage, with unproven long-term scalability, and the company is still developing systems and user acquisition for the segment.

Q: The upward guidance revision is tied to rising average sales prices. What segments are driving this higher price and margin growth? / A: Landnet has expanded its product scope from older studio units to include high-priced, prime-located family-type condominiums in central Tokyo (Minato, Chiyoda, Chuo wards) as well as apartments. These higher-value units have become a growing share of transactions. Direct sourcing allows Landnet to avoid third-party brokerage fees, giving it price competitiveness when bidding for these properties, and growing investor demand for these asset classes has supported volume and margin growth. Overall gross margin has improved alongside this shift in the product mix.

Q: What is the status of the LSEED crowdfunding business as a funding channel? / A: LSEED crowdfunding is being developed as Landnet's third core funding pillar alongside bank loans and equity. The 11th offering is currently open for subscription, with the platform gradually adding features like referral rewards to grow its investor base. The business is still in early-stage development, but management expects it to mature into a stable funding source over time to support growing property acquisition volume.

Q: What are your initiatives to grow direct sales to end consumers? / A: Landnet already has strong direct sourcing capabilities, and management targets a 10 percentage point increase in direct-to-consumer sales from current levels. Key initiatives include the Anshin Warranty program to build end buyer confidence, strengthened marketing to individual investors via the LSEED portal, and growing the share of renovated turnkey properties that match end buyer and investor demand.