RenetJapanGroup,Inc. Q2 FY2025 earnings call

• Overall Performance
  • The company has exited last fiscal year's losses and is on track to achieve full-year profitability this fiscal year. First half results have exceeded opening plan forecasts, with total revenue reaching 52.2% of the full-year forecast, a higher progress rate than the 42.8% in 2023 September fiscal and 49.8% in 2024 September fiscal.
  • The balance sheet has improved: total assets have been reduced by 1.97 billion yen from the previous period, net assets stand at 725 million yen, and the equity ratio has improved 6.9 percentage points to 9.9%, with an ordinary profit margin of 4.8%.
• Strategic Focus
  • The company will focus on its "ES Model" long-term growth strategy, with Environment (small home appliance recycling) and Social (social care services for people with disabilities) as the two core growth drivers, and will not pursue expansion into other new business areas.
• Recycling Segment Operations
  • As of the end of April 2025, the company has already secured confirmed orders for approximately 100,000 units of GIGA School terminal recycling for next fiscal year. The GIGA School terminal replacement cycle is just starting, with a projected 4.74 million units to be replaced in 2025 fiscal (Japan fiscal) and 4.55 million units in 2026 fiscal, with large tender and order growth expected from autumn to winter that will contribute significantly to next fiscal's revenue and profit.
  • The company holds partnerships with 732 local governments covering 71.7% of Japan's population, is a certified small home appliance recycler under Japanese law, and has been selected as an official recycling partner by Google to work together on GIGA School terminal recycling.
• Social Care Segment Operations
  • The company spun off the franchise segment of acquired Anispi Holdings, now focusing 100% on directly managed group homes for people with disabilities, and has completed consolidation and closure of unprofitable facilities, driving a 568 million yen improvement in ordinary profit for the segment.
  • As of the second quarter, the company operates 69 directly managed group homes: 59 in the Tokyo metropolitan area inherited from Anispi, and 10 in Aichi Prefecture. It will pursue a dominant strategy focused on the three major metropolitan areas (Tokyo, Chubu, Kansai), targeting 200 total group homes over 10 years.
  • The company is shifting focus from group homes for people with mild disabilities to newly built daytime service support type group homes for people with moderate to severe disabilities, which generate an expected operating profit of 25 million yen per building, targeting 5 billion yen in annual operating profit from this segment once the 200-building target is reached.
• Cambodia Financial Business Exit
  • Almost all share transfers for exiting the Cambodia financial business are complete, and a basic agreement has been signed for the sale of the remaining mobility finance lease business. The company is working to complete all procedures for a full exit as soon as possible.
• Employee and Shareholder Initiatives
  • The company is aggressively expanding its employee stock ownership plan, offering a 30% company matching contribution (a high level among Japanese listed firms), and targets 90% employee participation by December 2025, aligning employee and shareholder interests.

For the 2025 September Fiscal Year first half (first half):

• Combined Reuse + Recycling: Total revenue of 4.11 billion yen, total ordinary profit of 510 million yen
  • Reuse: Revenue of 1.469 billion yen, 108.4% year-over-year, hitting a new all-time high for second quarter revenue, contributing 28.1% of total consolidated revenue
  • Recycling: Revenue of 639 million yen, 107.3% year-over-year, contributing 12.2% of total consolidated revenue
• Social Care: Revenue of 416 million yen, 65.9% year-over-year (after spinning off the unprofitable franchise segment), ordinary profit of 180 million yen, contributing 8.0% of total consolidated revenue. All core operating segments achieved profitability
• Foreign Human Resources: Revenue of 43 million yen, 152.8% year-over-year, contributing 0.8% of total consolidated revenue
• Total consolidated first half revenue: 5.221 billion yen, operating profit of 109 million yen, ordinary profit of 250 million yen, net income of 151 million yen

• Full-year 2025 September fiscal profitability is on track to be achieved as planned, with current progress exceeding expectations and upside potential for profit.
• Management maintained the original full-year guidance and did not implement an upward revision at this stage, despite stronger-than-expected first half progress.
• For next fiscal year (2026 September fiscal), management expects over 1 billion yen in operating and ordinary profit, driven by large contributions from GIGA School recycling demand and growing recurring revenue from social care group homes.
• The company targets an early recovery to a market capitalization of over 10 billion yen, and plans to roll out multiple shareholder return initiatives within this fiscal year to support share price improvement.
• The social care segment targets 200 directly operated group homes over 10 years, building to 5 billion yen in annual operating profit from recurring revenue.

• The company's equity ratio is still low at 9.9%, which leaves a relatively weak financial buffer against unexpected operational or market shocks.
• Aggressive expansion of moderate to severe disability group homes carries execution risks, including construction delays, cost overruns, and challenges recruiting and training sufficient qualified staff to support new facilities.
• GIGA School recycling revenue and profit are dependent on public tender results and the pace of government terminal replacement, which may not meet current expectations for growth over the next two fiscal years.
• The company is still completing exit procedures for its Cambodia financial business, with residual operational and financial risks pending final transaction close.

Q: Are mild disability group homes not expected to generate profit, will no new ones be opened, and what synergies exist between mild and moderate/severe facilities?

A: The company will not aggressively increase the number of mild disability group homes going forward, but will open a small number to establish a local presence and build staff and community trust before expanding into moderate/severe facilities in new regions. Synergies come from a model management calls "environmental-welfare collaboration": mild disabled residents can work on GIGA School terminal recycling projects, creating local employment that connects the company's recycling and social care business segments, turning local recycling volume into local jobs for disabled residents. This aligns with the core ES Model strategy of combining environmental and social business goals.

Q: Why didn't management upwardly revise the full-year guidance after the stronger-than-expected first half progress?

A: Management kept guidance unchanged because the company's business is still historically heavily weighted to the second half of the fiscal year, and management prefers to maintain conservative guidance until full-year results are more certain, even though current progress is above plan and there is visible upside potential to full-year profit.

Q: Why did the company shift its group home targeting from mild to moderate and severe disabilities?

A: The shift is driven by stronger profitability per facility for moderate/severe focused daytime service support group homes, which also aligns with unmet demand for higher-support disability housing in major Japanese metropolitan areas. The existing 59 mild disability facilities inherited from Anispi still play an important strategic role for market entry and synergies with recycling operations, so they will continue to be operated, but new expansion will prioritize the higher-margin moderate/severe segment.