RenetJapanGroup,Inc. Q3 FY2025 earnings call

• Corporate Restructuring Progress

  • The unprofitable Cambodia finance business is nearly fully exited: a basic agreement for the sale of the remaining Mobility Finance leasing business has been signed, and the segment exit is almost complete
  • The Social Care segment has divested its franchise group home business to focus on directly operated facilities, improving overall profitability of the segment
  • All business segments are now profitable after the exit of unprofitable units
  • The balance sheet has been streamlined: total assets are reduced by 1.9 billion yen year-over-year to 6.548 billion yen

• GIGA School Terminal Recycling Special Demand Update

  • Approximately 9.5 million GIGA School terminals deployed to Japanese elementary and middle schools in 2020 are now entering their replacement cycle, creating a large, one-time recycling special demand spanning the next two fiscal years
  • Renet Japan holds recycling agreements with 736 local governments (covering 89 million people, including 20 designated cities), giving it a strong competitive position in the bidding process
  • The company has accumulated an order backlog in the third quarter, with all booked orders already guaranteeing over 1 billion yen in group profit for the 2026 September fiscal year
  • Bidding for the large first wave of contracts will peak between February and August 2026, with a 2-3 month delay from the original schedule due to local government coordination to avoid the widespread disruption seen during the 2020 initial deployment
  • The company is expanding its recycling center processing floor by 2x to handle the increased volume, with sufficient capacity and staffing prepared

• "Kanpuku Renkei (Environment-Welfare Linkage) Model" Growth Strategy

  • The core long-term strategy combines urban mining recycling with the creation of 10,000 new jobs for people with disabilities across Japan
  • A landmark three-party partnership has been signed with Toda City and JR East Green Partners (JR East's disability employment special subsidiary) to create new disability employment through GIGA terminal recycling
  • Leverages the upcoming increase in the legal mandatory disability employment rate from 2.5% to 2.7%: the company will support large corporations in meeting their new employment obligations by integrating recycling work into local operations, generating new service revenue in addition to core recycling revenue
  • The company will shift from a focus on B2C consumer recycling to growing B2B corporate recycling and disability employment support services

• Social Care (Group Home) Expansion Plan

  • Currently operates 66 directly operated group homes for people with disabilities, primarily for mild cases
  • Will focus expansion on daytime service support-type group homes for moderate to severe cases, planning to open 3-5 new facilities next fiscal year, with a 10-year target of 200 total facilities
  • Has partnered with SBI Regional Business Succession Investment to explore roll-up M&A in the group home industry

• Shareholder Improvements

  • Expanded shareholder benefits for the company's 25th anniversary: a new 30,000 yen digital gift benefit for shareholders holding 300+ shares, and expanded annual benefits to 60,000 yen total for shareholders holding 1,000+ shares, with a benefit yield of close to 10%
  • A free copy of the CEO's book on the Kanpuku Renkei model will be distributed to all shareholders holding 100+ shares, with free PDF downloads available on the company website

1. Reuse segment: 1.499 billion yen in revenue for the 3-month third quarter, 106.0% year-over-year, contributed 19% of total consolidated revenue. 2. Recycling segment: 0.71 billion yen in revenue for the 3-month third quarter, 111.0% year-over-year, contributed 9% of total consolidated revenue; GIGA School terminal orders received this quarter will be recognized next fiscal year. Combined Reuse & Recycling segment cumulative year-to-date revenue is 6.32 billion yen, with 0.81 billion yen in operating profit. 3. Social Care segment: 0.395 billion yen in revenue for the 3-month third quarter, 54.2% year-over-year (due to franchise divestment), contributed 5% of total consolidated revenue; cumulative year-to-date revenue is 1.53 billion yen, with 0.14 billion yen in operating profit. 4. Foreign Human Resources segment: 0.038 billion yen in revenue for the 3-month third quarter, 138.9% year-over-year, contributed 0.5% of total consolidated revenue. Total cumulative consolidated revenue for the first nine months is 7.866 billion yen, with 0.211 billion yen in operating profit, 0.28 billion yen in ordinary profit, and 0.173 billion yen in net income.

• 2025 September full fiscal year: On track to hit the full-year sales target of 10 billion yen (78.7% achieved after three quarters), and is on track to hit the full-year operating profit target of 0.3 billion yen, with all segments profitable and able to maintain consistent quarterly black ink
• 2026 September fiscal year (next fiscal year): The company guides at least 1 billion yen in operating profit and at least 1 billion yen in ordinary profit, based only on already received orders; this is a guaranteed minimum floor, and significant upside is possible if additional bidding goes well, with profit potentially reaching 2-3x the current guidance. The first peak of bidding will occur between February and August 2026, and the company will update guidance based on accumulated orders each quarter starting from February 2026
• Long-term financial target: The company targets reaching a 20% equity capital ratio (from the current 10%) as soon as possible, to improve financial stability and enable better bank financing for growth
• Long-term strategic guidance: The company will focus exclusively on its two core segments (reuse/recycling and social care group homes) and will not pursue new unrelated business opportunities. It targets 5-10% annual growth for the mature reuse segment

• Many local governments have not yet secured budget for compliant GIGA terminal disposal, and are waiting to see other regions' actions; there is significant regional variation in awareness of data security requirements for terminal disposal. Unqualified local providers are often selected for lower cost, which increases the risk of public data breach incidents. While a breach would eventually drive more municipalities to secure budget and hire qualified providers like Renet, it creates near-term uncertainty for order growth
• GIGA terminal bidding is scheduled 2-3 months later than originally planned, which could delay revenue and profit recognition to later quarters
• The current 10% equity capital ratio is lower than the target 20%, which could limit financing capacity for large working capital needs for GIGA terminal purchases
• While the company has already secured preliminary agreements for bank financing for GIGA working capital needs, full details have not yet been finalized and disclosed
• Bidding competition is expected to increase as the large special demand attracts more market participants, which could pressure win rates and margins

Q: How does Renet approach local governments that cannot budget for proper PC disposal? / A: Most municipalities are currently watching peers' actions to decide whether to allocate budget, as this is the first large-scale GIGA terminal replacement. Data breach risk is the key concern, and Japanese government regulators have issued strict security guidelines that require proper budgeting for compliant disposal. Renet is currently conducting outreach to educate municipalities on these risks and requirements. Multiple data breach incidents have already occurred in GIGA disposal projects, and if more occur, it will push more municipalities to formalize budgets and contract qualified providers.

Q: Can you elaborate on the Kanpuku Renkei model and its link to disability employment? / A: Renet already has extensive experience employing people with disabilities in its recycling operations, with a 20% disability employment rate at its recycling subsidiary, far above the national requirement. Starting in 2026, the mandatory disability employment rate for large firms will rise from 2.5% to 2.7%, which requires large firms like JR East to hire hundreds of additional disabled workers. Renet will help large firms integrate recycling processing for their end-of-life IT assets into in-house operations, creating new disability positions that count toward the firms' legal requirements. This creates a new, high-margin revenue stream for Renet beyond core recycling, and the company plans to expand this B2B offering broadly. More details will be shared at the full-year earnings call in November.

Q: Is the 1 billion yen next fiscal year profit target a floor, and is there real upside? / A: Yes, the 1 billion yen figure is calculated solely from already secured orders, so it is a guaranteed minimum. Bidding will accelerate substantially starting in February 2026, and if the company continues to win orders at the current pace, significant upside is very possible, with potential for 2-3x the current profit target. Management will update the guidance each quarter as new orders are accumulated.

Q: What is the status of the share price reservation transaction with EVO FUND, and are there capital adequacy concerns? / A: Renet has already transferred 0.3 billion yen to EVO FUND as part of the forward transaction agreement, and no additional future capital outlay is required for this scheme. The company has already secured preliminary commitments from banks for the working capital needed for GIGA terminal purchases, and an announcement on the full financing plan is expected in November. All necessary preparations are complete, and there is no near-term cash flow concern.