Good Com Asset Co.,Ltd. Q3 FY2025 earnings call

Overall 3Q Financial Results

• Consolidated sales: 24.9 billion yen, 26% decrease year-over-year
• Consolidated operating profit: 1.1 billion yen, 60% decrease year-over-year
• Consolidated ordinary profit: 0.9 billion yen, 60% decrease year-over-year
• Consolidated net profit: 0.5 billion yen, 67% decrease year-over-year
• Total units sold: 761 units across 20 buildings
• Higher selling, general and administrative (SG&A) expenses driven by: 200 million yen in M&A fees and due diligence costs for Livenup Group; 250 million yen in new TVCM production/airing and Tokyo Verdy sponsorship costs; 300 million yen for the first round of Fukuoka Stock Exchange listing commemorative shareholder benefits; 100 million yen in registration fees for expanded borrowing to fund increased property purchases. All SG&A increases are classified as growth-oriented upfront investments.

Operational Progress

• Real Estate Fund Business: 3 funds have been formed to date, holding 853 units across 21 buildings of the company's GENOVIA branded properties. After the Fourth Fund formation, total sales to real estate funds will reach 50 billion yen, with another 50 billion yen expected next fiscal year for a cumulative 100 billion yen. This will allow the company to move to Phase 2: launching a private REIT to expand assets under management and grow recurring stock revenue. A Phase 3 goal of launching a listed REIT follows this.
• Geographic Expansion: Capital and business alliance with Nissei Advance to expand property procurement in the Kansai region. Two properties have already been acquired, one is under review, with further active procurement planned. Osaka is prioritized due to persistent positive net migration, the ongoing Osaka-Kansai Expo and planned 2030 integrated resort opening driving expected economic growth.
• New Market Entry: Livenup Group, a leading firm in detached housing and used home resale, was acquired as a consolidated subsidiary, marking entry into the detached housing market. This expands the group's business scope, increases managed property count to grow recurring stock revenue, and adds M&A expertise to support the group's growth strategy. Livenup's detached housing focused on Tokyo's central and southern districts sees strong demand and steady sales.
• New Luxury Brand Development: Launched development of a new high-end condominium brand above the existing GENOVIA line. The brand focuses on 40-70 sqm units, with child-friendly tenant space (clinics, childcare support facilities) on the first two floors to address Japan's declining birthrate, underground parking for large vehicles, full glass exterior walls and open rooftop design for premium ambiance. Four buildings are scheduled to break ground within this calendar year, with further series expansion planned.
• Pipeline Expansion: As of September 12, 2025, the company has acquired 31 buildings (1,929 units) this fiscal year, double the full prior fiscal year's procurement volume. The company's procurement model only requires a deposit to secure properties, so only the deposit is recorded on the balance sheet. Total secured properties equal 118 billion yen in value, representing 77 buildings and 5,373 units total. The core GENOVIA brand is focused on Tokyo's 23 wards, with total supply of 205 buildings across Tokyo 23 wards, the Tokyo metropolitan area and Osaka.
• Governance and IR: Selected for the JPX-Nikkei Mid-Small Cap Index for 6 consecutive years, with a long-term goal of inclusion in the JPX-Nikkei Index 400. Participated in the 2025 Nikkei/TSE IR Fair to expand investor recognition and base. Completed dual listing on the Fukuoka Stock Exchange main market, with the goal of expanding property supply, financial partnerships and recognition in the Kyushu region.
• Shareholder Returns: Implemented commemorative shareholder benefits for the Fukuoka listing, with two rounds scheduled: the first distributed to May 2025 end shareholders, the second scheduled for October 2025 end shareholders. Benefits are 20,000 yen and 50,000 yen in digital gifts for holders of 500+ and 1,000+ shares respectively, with multiple redemption options. The company maintains a target 35% payout ratio and has increased dividends for 8 consecutive quarters since listing (dividends have grown 9x in 8 years), with a full-year dividend forecast of 45 yen per share. Actively repurchases treasury stock, which is used for share-based compensation and M&A share exchanges. One portfolio company supported by the company's investment and consulting services newly listed on the Sapporo Exchange Ambitious market, building the company's track record for future supporting deals.

5-Year Strategic Plan

The company targets 600 billion yen in sales and 60 billion yen in operating profit for the FY2030 October period. 200 billion yen will come from organic growth of existing new condominium supply and real estate fund business, with the remaining 400 billion yen to come from M&A expansion. The company is actively evaluating acquisitions of local condominium developers, buy-resale firms, detached home builders, hotel operators, senior housing operators, construction firms, property management firms and securities firms to expand scope via synergistic growth.

1. Retail Sales: Reported a segment loss of 0.6 billion yen, driven by declining sales to the core customer group of public servants amid rapid inflation, plus lower margins from selling newly acquired properties within the same reporting period to address inventory shortages. No revenue contribution percentage was specified for this segment.
2. Livenup Group: Added as a new reporting segment after being consolidated as a subsidiary in FY2025 3Q. Full-year full consolidation is scheduled for FY2026, with expected contribution to earnings growth from expanded business scope and increased stock revenue. No absolute financial results or revenue contribution percentage were reported for 3Q.
3. Real Estate Fund: The 11.1 billion yen Third Fund was successfully formed, though internal fund formation lowered overall segment margins. The 20 billion yen Fourth Fund (originally planned as two separate 4th and 5th funds, merged for cost efficiency) is scheduled for formation at end-September 2025. No separate 3Q absolute revenue or contribution percentage was specified.

• Full-year FY2025 operating profit is forecast at 5.8 billion yen, a 7.9% increase year-over-year, representing a conservative forecast that will update full-year record operating profit. Sales guidance is not disclosed due to large potential swings from active M&A activity.
• The 20 billion yen Fourth Fund is confirmed for formation at end-September 2025 with near 100% probability, and pre-signed building sales will be recorded in 4Q FY2025.
• Livenup Group will be fully consolidated for the full next fiscal year, and is expected to contribute materially to earnings growth.
• A full detailed medium-term management plan will be released at the end of the current fiscal year.
• The company will gradually shift retail sales focus to high-net-worth individuals, with a full 3-year phase-out of public servant-focused sales targeted.

• Internal real estate fund formation has lower profit margins than external third-party sales, dragging near-term profitability. The company has mitigated this by merging the planned 4th and 5th funds into a single larger fund to cut costs and improve margins.
• Rapid persistent inflation has reduced purchasing power among the core historical customer base of public servants, leading to a 0.6 billion yen segment loss in retail sales in 3Q. The company is addressing this via a strategic shift to high-net-worth customers, but the shift will take 3 years to complete and near-term retail sales may remain under pressure.
• Unexpected smaller fund sizes in earlier funds created the need to move properties to funds earlier than planned, which caused inventory shortages in retail and wholesale sales channels, forcing the company to sell recently acquired properties within the same period and depressing margins.
• Active M&A activity creates large potential swings in annual sales, making it impossible to provide a stable full-year sales forecast for investors.

Q: Were Good Com Asset's FY2025 3Q results in line with management expectations, and what are the key current challenges? / A: Management confirms results were exactly as expected. Lower profit in 3Q stemmed from intentional strategic moves: M&A, fund expansion and the retail segment shift. A key challenge identified was lower margins from internal fund formation, so management merged the planned 4th and 5th funds into a single 20 billion yen fund to cut fixed costs and improve profitability. The company also confirmed it has a strong commitment to aggressive M&A as part of its 5-year plan, with FY2025 as the plan's first year.

Q: Will the company discontinue sales to public servants and fully shift to high-net-worth retail sales? / A: Management plans to fully phase out public servant-focused retail sales over 3 years, gradually shifting the entire retail segment to target high-net-worth individuals, defined as those with over 500 million yen in assets and annual income over 20 million to 30 million yen. The new Wealth Consulting department dedicated to this segment was already launched in 4Q FY2025, and will be fully incorporated into next fiscal year's business plan.

Q: How many M&A deals does the company plan to do annually as part of its 5-year plan? / A: Management targets roughly 3 deals per year (including capital alliances), which translates to 15 to 20 total M&A deals across the entire 5-year plan. Organic growth of the existing business can only deliver up to 200 billion yen of the 600 billion yen 2030 sales target, so aggressive M&A is required to hit the remaining 400 billion yen in sales growth.

Q: Is the company's new luxury central Tokyo condominium brand targeted at investors? What is the core concept for the brand? / A: The new high-end brand will only be developed in Tokyo's 23 wards, positioned above the existing investment-focused GENOVIA line. It targets affluent residents amid growing income inequality in Tokyo, focusing on 40-70 sqm units with child-friendly commercial space on lower floors, guaranteed large vehicle underground parking and premium design features. Management does not plan to sell individual units; the brand will sell entire buildings or hold properties for recurring revenue, with total project costs exceeding 5 billion yen per building.

Q: How certain is the 4Q 2025 formation of the Fourth Fund? / A: Management states that the probability of completing the Fourth Fund formation by the end of September 2025 is close to 100%.