GLOBAL LINK MANAGEMENT INC. Q2 FY2025 earnings call

Long-term and Mid-term Strategic Goals

• The company has established the long-term group strategy "GLM1000" targeting 100 billion yen in ordinary profit by 2040, with a target of sustained 25% average annual growth, consistent with the 25% CAGR achieved from 2017 to 2024.
• The first phase of this long-term plan is the 2025 mid-term management plan "GLM100", which targets 100 billion yen in revenue, 17 billion yen in gross profit, and 10 billion yen in ordinary profit by the 2027 December fiscal year.

Core Business Strategy

• The company uses an investor demand-driven business model, expanding business by diversifying asset types across segments. Development business is the core growth foundation, while Land Planning and Renovation businesses are being built as new core profit pillars to improve overall profitability.
• The company targets maintaining a 30%+ equity ratio and 25%+ ROE, balancing capital efficiency optimization and financial soundness.
• It pursues productivity growth per employee and wage increases via synergy with its DX business and promotion of human capital management.

Capital Market Updates

• Following the completed secondary share offering, the floating share ratio rose to 50.8% as of June end, and floating market capitalization reached 18.2 billion yen as of August 7, meeting and exceeding the Tokyo Stock Exchange Prime Market listing maintenance requirements.
• The share offering saw approximately 6x oversubscription, allowing the company to expand its investor base to a broad group of new individual investors and previously untapped institutional investors. The offering also removes the company from the status of a specified closely-held corporation under Japanese tax law, eliminating the retained earnings tax.
• The company maintains a base dividend policy of 30% payout ratio with progressive dividends, and announced an upward dividend adjustment from 72.5 yen to 77.5 yen per share alongside the May 2025 net profit upward revision.

Cost and Expense Updates

• Second quarter expenses increased year-over-year, driven by higher shareholder benefit costs and performance-based commissions tied to strong results. Q3 expenses are expected to fall back to Q1 levels as shareholder benefit costs drop and performance-based pay declines from Q2 levels.

Overall cumulative second quarter results: Total revenue reached 35.672 billion yen, an increase of 98.5% year-over-year; total ordinary profit reached 4.181 billion yen, which is 4.5 times the year-over-year level. Both metrics hit all-time record highs and exceeded internal forecasts, driven by higher-than-expected gross margins across all business segments.

1. Development Business: Gross margin came in at 16.3%, a more stable level than the first quarter, which is still on track to exceed the full-year plan of 13.1% amid slightly improved business environment from the prior year. All 1,147 planned units (exceeding the initial full-year target of 1,100 units) have completed sales contracts as of the first half. Pipeline preparation for future periods is progressing smoothly, and a hotel scheduled for completion in 2026 was sold in the second quarter.
2. Land Planning Business: 5 sales were completed in the cumulative first half, in line with internal targets despite 2 projects shifting to the second half. 3 additional sales have already been contracted for the third quarter, out of a full-year target of 18 total sales. As of the end of the second quarter, 8 out of the 18 planned full-year sales have completed contracts.
3. Renovation Business: 3 sales and 5 acquisitions were completed in the cumulative first half, meeting the plan. The full-year target is 7 total sales and 10 total acquisitions, and 6 acquisitions have been contracted as of the end of the second quarter. 2 sales and 3 more acquisitions are planned for the third quarter.

• The company's net profit forecast for the full 2025 fiscal year was previously upward revised in May 2025, as the elimination of the retained earnings tax is expected to reduce corporate tax expenses by approximately 0.3 billion yen, increasing net income attributable to parent shareholders. Net profit for the 2026 and 2027 fiscal years (the remainder of the GLM100 plan period) is also expected to see corresponding increases from the tax change.
• While first half results exceeded internal plans, the company has maintained its previously announced full-year and second half earnings guidance to account for expected future upfront investment in the second half. Full-year guidance is now 72 billion yen in revenue (up from the prior 64.4 billion yen) and 6 billion yen in ordinary profit (up from the prior 5.1 billion yen).
• The company will disclose any necessary adjustments to guidance once future performance becomes more certain.

• Foreign exchange: While the yen has traded in a stable 145-150 range against the US dollar recently and demand from overseas institutional investors remains strong, continued exchange rate volatility could impact future investor demand, and the company will monitor movements closely.
• Construction costs: Construction labor shortages tied to 2024 industry reforms have driven continued construction cost increases, which could impact profitability depending on the company's ability to pass through costs and the timing of construction projects.
• Interest rates: Long-term Japanese interest rates have risen to the 1.5-1.6% range, and policy uncertainty remains around future Bank of Japan rate moves. While rising rates have a potential negative impact on real estate prices, the market has already priced in expected long-term rate increases, and rising inflation-driven rent growth is supporting real estate values, with investors still viewing Japanese real estate as an attractive asset class.
• The Chiyoda Ward speculative condominium transaction regulation (noted in the Q&A agenda) may introduce additional downside risk to Tokyo central business district real estate transactions, though the full impact was not detailed in the provided transcript.

Q: Given that development business contract volumes have already exceeded plan and gross margins are above expectations across all segments, can investors expect an upward full-year earnings revision? / A: Management reiterated that while first half results are tracking above internal forecasts, the company maintains its current full-year guidance to account for potential upfront investments planned for the second half. The company will issue an immediate public disclosure if and when a revision becomes necessary based on finalized performance projections.

Q: What is the current progress on the mid-term plan's goal to build Land Planning and Renovation into new core profit pillars? / A: Both segments are progressing in line with current full-year plans, with contract volumes tracking as expected. The company continues to prioritize profitability and capital efficiency in decision-making for these segments, while working to grow their contribution to overall group profit over the mid-term.

Q: What impact will Chiyoda Ward's new speculative condominium transaction regulation have on GLM's business? / A: The company noted that it will continue to monitor the impact of the regulation on the Tokyo central real estate market, but has not observed material impact on its current pipeline or sales projections as of the earnings call.

Q: What is the status of share buyback activity and what are the company's future plans for buybacks? / A: A complete answer to this question was cut off in the provided transcript. Management typically addresses share buybacks in the context of the company's 30% dividend payout progressive dividend policy and focus on capital return alongside growth investment, but no specific details are available from the provided text.