CREAL Inc. Q4 FY2025 earnings call

• Core Business & Mission

  • Creal is a proptech asset management DX company that builds in-house digital systems to democratize access to real estate investment, which is underpenetrated among individual Japanese investors (only 2.6% of individuals have experience, vs broad adoption by professional investors).
  • The company operates a vertically integrated (SPA-model) multi-product platform targeting all investor segments from entry-level retail to institutional investors.
  • CREAL Hotels and Creal Partners provide in-house pipeline sourcing and value-add functions, which the company views as a key competitive advantage as cheap buy opportunities become more scarce.

• Fiscal 2025 Key Operational Achievements

  • Full year profits across all levels significantly beat both original and revised guidance, with net profit reaching 1.35 billion yen, double year-ago levels, 158.8% of original guidance and 122.7% of revised guidance.
  • Completed two M&A transactions: took an equity stake in hotel operator TAT and acquired regional securities broker Usuki Securities. Launched CREAL Hotels in-house hotel operation.
  • Submitted applications for the highly anticipated Act on Specified Joint Real Estate Ventures (Ftokuhou) Type 3 and 4 licenses, entering the final 90-day approval countdown.
  • Initiated shareholder returns: started dividend payments and introduced new shareholder benefits. Approved a 1-for-5 stock split to attract individual investors, aligned with TSE requirements.
  • Expanded in-house DX development, completed systems for CREAL Hotels and started development for the upcoming CREAL ST product.
  • Led industry advocacy as a leading real estate crowdfunding firm, increased association activity and deepened policy collaboration with parliamentary groups.

• Strategic Goals for Medium-Term Plan (Game Changer 2030)

  • Expand the product lineup to serve all investor segments: entry-level via CREAL, experienced retail via CREAL PB + CREAL ST (security token real estate), institutional/affluent via CREAL PRO moving to CREAL ST, and add CREAL FUND for non-real estate alternative assets.
  • Implement a multi-asset strategy expanding beyond real estate to include private credit, PE, hedge funds, and investment trusts, while building in-house value-add capabilities for new real estate asset classes including serviced offices, renovated urban logistics facilities, and vacation rental residences.
  • Pursue continued M&A and strategic partnerships to drive non-organic growth. Prioritize growth investment first, maintain a 15% target payout ratio, and conduct opportunistic share buybacks to improve shareholder returns and capital structure.
  • Target improved profitability and balance sheet strength: aim for a 40% equity ratio by 2030 and maintain high ROE, which currently stands at 30.2%.

1. CREAL (retail entry-level crowdfunded real estate): Recorded 25.69 billion yen GMV (below the 30 billion yen target, but up 130% year-over-year), achieved its investor target of 33,000 new investors for a total of 97,065 registered investors. Gross profit grew far faster than planned, with a repeat investment rate holding near 90%, and the segment outperformed initial projected CAGR of 40%.
2. CREAL PRO (institutional/affluent investor real estate funds): Grew faster than CREAL, far exceeding original 40% CAGR plans. AUM and fee income grew strongly driven by the segment's competitive advantage in hotel asset underwriting and in-house operation backup, with continuous new hotel asset mandates.
3. CREAL PB (experienced retail investor long-term physical condominium investment): Is a mature segment targeted for 20% annual growth, and outperformed sales volume plans in fiscal 2025.
4. Rental Management and Hotel Operation (support segments): Increased revenue and profit driven by growing unit counts; CREAL Hotels began recognizing revenue in fiscal 2025, in line with expectations.

• Fiscal 2026 (March ending) Guidance:

  • Moved to non-disclosure of gross revenue to avoid investor confusion from differing accounting treatment for the old Ftokuhou Type 1/2 (gross property sale accounting) and new Type 3/4 (net fee accounting) models; will continue to disclose all profit-stage metrics. Expects over 30% gross profit growth year-over-year.
  • Targets 1.8 billion yen net profit (133.2% year-over-year growth), despite heavy planned upfront investment for new initiatives, balancing growth investment and profit growth.
  • Sets a conservative 40 billion yen GMV target (down from prior guidance to account for transition timing to the new Type 3/4 model, still representing 155% year-over-year growth), and targets 35,000 new registered investors.
  • Expects Type 3/4 business to start in mid-Q2, and plans to reinvest incremental profits from the new business into CREAL ST and CREAL Hotels development. Plans for increased selling, general and administrative expenses for hiring, system development, and advertising for new initiatives.

• 5-Year Medium-Term Guidance (fiscal 2026 to fiscal 2030):

  • Expects a compound annual growth rate of 50% for net profit, targeting 10 billion yen net profit and 27 billion yen gross profit in the 2030 March ending fiscal year.
  • Targets 250 billion yen annual GMV by 2030, with stepped growth to 80 billion, 140 billion, 190 billion, then 250 billion yen.
  • Planned annual gross profit CAGR by segment: 40% for CREAL/CREAL ST, 30% for CREAL PRO, and 20% for CREAL PB.

No explicit material risks or operational failures were discussed in the provided transcript. Management noted that the prior low-cost buy strategy is facing limits as market conditions have changed, which is why the firm is investing in in-house value-add capabilities for new asset classes. They also noted that the transition to the new Ftokuhou Type 3/4 model may create short-term timing lags that affect GMV performance, which was accounted for in the conservative 2026 guidance.

Q: Why is the 2026 net profit growth target 33% while the medium-term CAGR target is 50% — will growth accelerate in later years? / A: Management frames 2026 as a purposeful upfront investment year for new strategic initiatives including the Type 3/4 license launch, CREAL ST system buildout, and CREAL Hotels expansion. The conservative 2026 target intentionally budgets for these investments, with acceleration to the 50% annual CAGR target planned starting in 2027 as new initiatives come online and scale. On M&A, management says the company is actively pursuing targeted deals that align with its 4-quadrant strategic framework, and M&A will be a key driver of accelerated growth in future years.

Q: What revenue growth will the Type 3/4 license enable, and what benefits does it create for the company and investors? / A: For investors, Type 3/4 uses an SPC structure that provides bankruptcy remoteness for funds, improving safety, and allows the use of non-recourse bank leverage that can increase investor yields by approximately 1% compared to the existing model. For Creal, the license enables larger fund sizes via leverage, opens the segment to institutional and corporate investors that were previously unable to participate, moves funds off-balance sheet to improve the company's equity ratio, and creates more stable, front-loaded fee revenue instead of revenue only when properties are sold. Management expects this to drive sharp GMV and profit growth starting in the second half of 2026.

Q: What is the size and breakdown of planned upfront investments for 2026? / A: Most upfront investment will go to human capital: hiring for new business lines including CREAL ST, the expanded institutional fundraising team for CREAL PRO, in-house value-add teams for new asset classes (logistics, serviced offices), and CREAL Hotels. The second major category is system development for the new products, particularly CREAL ST. Management says the total investment is fully budgeted in the 2026 plan, and the 1.8 billion yen net profit target already accounts for these expenditures, so the plan balances investment and continued profit growth.