GLOBAL LINK MANAGEMENT INC. Q3 FY2025 earnings call

• Strategic Goals

  • The long-term group policy "GLM1000" targets recurring profit exceeding 100 billion yen by 2040, targeting a 25% average annual growth rate of recurring profit, maintaining the 25%+ CAGR achieved from 2017 to 2024.
  • The first-phase mid-term plan "GLM100" (by 2027) targets 100.0 billion yen in revenue, 17.0 billion yen in gross profit, and 10.0 billion yen in recurring profit. The target market capitalization during GLM100 is 100.0 billion yen.
  • Financial KPIs require maintaining equity ratio above 30% and ROE above 25% to prioritize capital efficiency and financial health.

• Operational Performance

  • Q3 FY2025 achieved all-time record revenue of 51.924 billion yen and recurring profit of 5.632 billion yen, marking consecutive record results following Q2.
  • All three business segments exceeded profit targets driven by higher-than-planned gross margins, leading to an upward revision of full-year earnings guidance. The company already meets the Prime Market listing maintenance criteria for listed tradable shares with plenty of headroom, with a 50.7% tradable share ratio.
  • The company has proactively adjusted sales and acquisition timing across segments to smooth quarterly earnings and maintain financial discipline, with GLM100 on track to exceed targets.

• Shareholder Return

  • The core shareholder return policy maintains a 30% payout ratio and progressive dividends. Full-year dividend per share is increased from 77.5 yen to 80.5 yen following the upward earnings revision.
  • The ongoing share repurchase program is 50% complete as of end-October 2025 (151 million yen repurchased out of a 300 million yen cap), and will be completed by end-December as planned.

For the 2025 December fiscal year third quarter cumulative period: 1. Development Business: All 1,147 units (exceeding the initial plan of 1,100 units) have been contracted for sale. More than half of the units planned for sale in the next fiscal year are already contracted, with pipeline acquisition progressing smoothly. 2. Land Planning Business: 9 units were sold in the third quarter cumulative period, 11 units have already been contracted for sale in Q4, bringing the full-year planned sales to 23 units (upward revised from the initial 18 units). 3. Renovation Business: 1 building acquisition was settled in Q3, with 8 buildings contracted for acquisition cumulative in Q3; 4 are planned to be settled this fiscal year, and 4 in Q1 next fiscal year. Full-year sales plan was revised from 7 buildings to 4 buildings, and acquisition plan revised from 10 buildings to 5 buildings, with 5 building acquisitions postponed to next fiscal year for financial discipline. The gross margin of Renovation Business significantly exceeded the initial 20% target, while Development Business gross profit exceeded the 13% plan and Land Planning Business hit the 20% plan target.

• Full-year FY2025 guidance: Revenue is maintained at 72.0 billion yen, recurring profit is revised upward from 6.0 billion yen to 6.5 billion yen, and net income is revised upward from 4.1 billion yen to 4.3 billion yen.
• The FY2026 recurring profit target of 7.5 billion yen (from the mid-term plan) is maintained to ensure the 2027 10.0 billion yen recurring profit target is met. The 7.5 billion yen target is a conservative setting, and will be revised upward if 2027 target achievement becomes visible in advance.
• The company is open to advancing GLM100's 10.0 billion yen recurring profit target to 2026 if current favorable market conditions continue and sustainable 25% annual growth can be maintained after early achievement.

• Continuing construction cost increases driven by labor shortages create uncertainty for profit margins, depending on the ability to pass cost increases through to buyers and project timing. General contractors are increasingly selective on accepting new projects, which is expected to tighten new residential supply going forward, though this also increases GLM's market presence as a positive side effect.
• Exchange rate trends: Sustained yen depreciation is ongoing following political shifts toward expansionary fiscal policy, though strong overseas institutional investor demand for Japanese real estate may increase further if yen weakness continues. The company will continue monitoring demand trends closely.
• Interest rate volatility: Long-term interest rates have risen to around 1.7% amid expansionary fiscal expectations, with ongoing uncertainty from global factors. While rising rates have a potential negative impact on real estate prices, the market has already priced in gradual long-term rate increases, and current inflation-driven rent increases create a supportive environment for Japanese real estate values, confirmed by investor feedback.
• Foreign land acquisition regulation has almost no impact on GLM's business, as the company almost exclusively sells to domestic developers for land planning, and to foreign institutional funds/legal entities (not individual foreign investors) for other property segments.

Q: What is the driver behind the full-year upward earnings revision, and how are the three business segments progressing? / A: The upward revision comes from all three segments exceeding gross margin targets, led by the higher-margin growth drivers Land Planning and Renovation. Development hit a gross margin above the planned 13%, Land Planning hit the 20% target, and Renovation significantly outperformed the 20% target. The main underlying factor is broad market consensus that inflation has started, pushing up all asset prices and supporting stronger-than-expected demand for GLM's properties.

Q: How does the Renovation Business sales/ acquisition adjustment affect future earnings, and why has gross margin outperformed? / A: The 2025 full-year profit target was already achieved with only 4 of the planned 7 buildings sold, so the remaining 3 are postponed to 2026 to continue value-add improvements and adjust financial metrics. 5 of 10 planned acquisitions are also postponed to Q1 2026 to protect financial health, but all purchase contracts are already signed. The 2026 7.5 billion yen recurring target is maintained, and GLM will revise it if 2027's 10 billion yen target becomes achievable early. Gross margin outperformance comes from inflation tailwinds and successful value-add that will continue into 2026.

Q: Why are Land Planning sales heavily concentrated in Q4 FY2025, and will sales grow next year? / A: Concentrated sales resulted from extended evaluation of whether to sell land or develop it in the face of rising construction costs, with more projects ultimately decided to be sold as land plots in Q4. GLM will continue expanding the business next year, and is currently evaluating more transparent KPI reporting, given average project values vary significantly by lot.

Q: Can GLM actually control the timing of property sales to smooth earnings? / A: For Renovation and Land Planning, GLM aligns sale timing with buyer fiscal timelines, so sales can be adjusted between quarters within a range. This flexibility lets GLM smooth quarterly earnings, which is harder for pure development business that is tied to project completion timelines. The flexibility from the two new growth segments allows GLM to deliver consistent year-over-year earnings growth across all quarters.