STORAGE-OH Co.,Ltd. Q2 FY2026 earnings call

Overall Financial Performance

• Total first-half (through 2Q) revenue was 1.285 billion yen, 1.8% above plan, with a narrowed operating loss of 105 million yen (35 million yen better than plan), a narrowed ordinary loss of 110 million yen (36 million yen better than plan), and a net loss of 67 million yen (79 million yen better than plan). Improvements were driven by delayed selling, general and administrative expense timing; net loss improvement was also impacted by tax effect accounting. 4.514 billion yen total assets as of end-2Q, with 346.2 million yen in total liabilities, mostly from increased borrowing for property acquisitions that will be repaid after property sales.

Store Network and Development Progress

• 208 total stores nationwide spanning from Akita to Okinawa, totaling 12,004 rooms, with 7,890 occupied rooms. Occupancy for stores older than 2 years is 77.7%, a 2 percentage point drop year-over-year caused by store closures and a higher share of large new stores; total occupied rooms still grew from 7,442 to 7,890, confirming continued demand growth.
• 15 container-type (outdoor) stores opened in 1H, including the first 3 locations in Akita Prefecture, totaling 583 new rooms (average 39 rooms per store). Container-type has faster break-even, lower upfront investment as 80% are built on leased land, with only container investment required, leading to faster payback.
• The 195-room large indoor Nishi-Shinjuku location opened in September 2025 in a high-demand area with growing new residential construction. The firm is expanding its focus to include near-workplace demand in central Tokyo, in addition to its historic focus on near-home locations.

Sustainability and Leasing Initiatives

• The company completed its first verified container reuse project, relocating a used container from Yazaike to Fukai-Minato. The project cut CO2 emissions by 64,335 kg, equivalent to the annual emissions of 17 passenger cars, demonstrating the environmental benefit of container reuse. The company will continue this resource-efficient practice going forward.
• The firm launched a pilot of the R-LOOP box-based unwanted clothing collection system in its storage locations, an industry-first initiative that lets customers dispose of unwanted clothing during closet reorganization for recycling, reducing customer disposal effort and supporting circular economy goals. The pilot will be expanded to more locations if successful.
• Additional 1H outreach includes an investor interview on FISCO TV, an industry conference presentation at SELF STORAGE EXPO ASIA 2025, and a local school outreach class.

1. Operations Management Business: Revenue is 523 million yen (40.7% of total first half revenue), with a 22% year-over-year increase driven by same-store sales growth and new store openings. The segment reported an operating loss of 31 million yen, a 120% worsening year-over-year caused by opening losses from the large Minami Sunako store opened in January 2025. 2. Development and Sales Business: Revenue is 405 million yen (31.5% of total first half revenue), with a 295% year-over-year increase driven by the completion of the Shitaya project and the sale of 2 container projects. There was no material change in operating profit versus plan and the prior year. 3. Other Business: Revenue is 356 million yen (27.7% of total first half revenue), almost entirely from the sale of the company-owned hotel in Kasai, Hyogo Prefecture to a real estate investor. There was no material change in operating profit versus plan and the prior year.

• Full-year 2026 January term guidance is maintained with no revisions. The company targets 4.4 billion yen in full-year revenue and 185 million yen in positive operating profit, and confirmed that performance is on track to meet plan as of 2Q.
• Four large indoor properties (Toritsu-Daigaku, Shakujii-dai, Kawasaki-Oda, Motosumiyoshi) are on track to be completed and sold at fiscal year-end (January 2026), which will drive full-year profitability after an expected 1H operating loss from the lack of large property sales and ongoing SG&A. This seasonal concentration of completions is driven by the timing of land purchases (most good properties are listed during the December and March closing seasons, leading to 10-month construction timelines that deliver in January the following year), which has not been resolved this fiscal year but the company is working to spread out completions more evenly over time.
• Container-type development target is 40 locations for the full year, with 15 completed and 6 additional locations committed as of 1H, putting the plan on track to meet its target. The firm is accelerating container-type development due to its strong steady demand and low upfront investment profile.
• Two additional indoor properties (Setagaya-Seijo and Okusawa) have had land purchase contracts signed, with completion and sale targeted for the 2027 January term, and are currently in active development.

• Seasonal concentration of large property sales at year-end creates predictable 1H operating losses and investor uncertainty around full-year performance, though this pattern is well-established and the company expects to deliver full-year profitability as planned.
• Overall occupancy has declined 2 percentage points year-over-year due to a higher share of newly opened large stores, which take longer to reach target occupancy, though long-term demand growth remains intact.
• Increased short-term and long-term borrowing to fund property acquisitions increases leverage ahead of planned year-end property sales, which will be used to pay down the debt per the company's current plan.

Q: Can you provide more details on the recent change in the controlling shareholder, and what impact this will have on the business and related party transactions? / A: The former top shareholder Develop sold 24.08% of total shares to KLI, a 100% subsidiary of Kyushu Lease Service, which has been a pre-IPO shareholder and existing business partner that already owns multiple of the company's developed storage properties. Combined, Kyushu Lease Service now holds 26% of shares. Management believes the block trade was structured as an off-market transfer to avoid downward stock price pressure from a large market sale. There is no material impact on current business operations. All related party transactions will follow strict approval processes: new transactions get board approval, confirm equal pricing with third parties, and have annual reporting to the board, so no unfair terms are expected.

Q: Why is storage room penetration so much lower in Japan than in the US, and will Japanese demand continue to grow? / A: Penetration is less than 1% of households in Japan versus 10% in the US, making the US market over 20 times larger. Key reasons for the difference include: 1) the US has a well-established culture of storage use from college student moving habits, 2) the US has larger land price gaps between urban and suburban areas, allowing cheaper storage rents, 3) US users primarily use storage for long-term holding, while Japanese users make regular trips for seasonal items. Despite lower penetration, the Japanese storage market grows 4-5% annually, driven by limited storage space in high-priced urban condominiums and steady repeat demand with low churn. Management expects continued market growth going forward.

Q: What are the core differences between container-type and indoor-type storage properties from an investor perspective? / A: Indoor properties are larger (100-200 rooms per location, ~500 million yen per site investment) and are almost always purchased by professional real estate investors. Container-type properties are smaller (~40 rooms per location, 30-50 million yen per site investment for just the container assets), mostly purchased by business owners looking for alternative real estate investments. Container-type also reaches break-even occupancy faster than indoor-type due to its smaller size. The company develops and sells both formats to serve different investor segments.