Dream Incubator Inc. Q2 FY2026 earnings call

Overall Business Shift

• The company completed its structural reform period by the 2025 March fiscal year, after active talent investment to secure sufficient headcount. Starting this fiscal year, the core Business Production segment is expanding its service domain to pursue sustained profit growth while maintaining steady revenue growth.

5-Year Strategic Targets for Business Production

• Target 15%+ compound annual revenue growth over 5 years, reaching 11 billion yen+ in revenue (double the current scale) and 15%+ operating margin 5 years from now.

Three Core Growth Initiatives

• Expand into existing business transformation: Leverage know-how built from new business creation to support comprehensive client transformation projects, incorporating technologies like generative AI for topics such as intellectual property DX and anti-money laundering. This aligns with growing client demand for meaningful existing business change, and skills from new business creation are well-suited to this work.
• End-to-end support from planning to execution: Move beyond pure strategy development to provide hands-on accompaniment through project execution, drawing on incubation skills. Examples include end-to-end support for India M&A (from strategy to post-merger integration) and post-creation business incubation for major infrastructure clients. Longer project durations increase client touchpoints and strengthen stable revenue bases.
• Develop industry-level ecosystem building: Continue working on large-scale industry-wide projects, including participation in a Yamaguchi Prefecture task force for GX transformation of industrial complexes and revitalization of the shipbuilding industry, and collaboration with JICA to develop a roadmap for hydrogen/ammonia adoption in Indonesia.

People Strategy

• Slowed hiring pace in the first half of the fiscal year after sufficient hiring in prior years; will accelerate hiring in the second half to align with strong sales growth.

Incubation Segment Strategy

• Focus on realizing latent gains and reducing portfolio book value to lower future earnings volatility. Reduced total portfolio book value from 7.9 billion yen (end-March 2022) to 2.2 billion yen (end-September 2025), and will continue this trend going forward.

Balance Sheet Update

• Total net assets decreased from 13.1 billion yen (end-March 2025) to 10.9 billion yen (end-September 2025) following a 3.0 billion yen prior-year dividend payout and 0.7 billion yen net profit recognition. The company will continue working to improve capital efficiency.

1. Business Production (core segment): Revenue = 2.89 billion yen, accounting for 78.3% of total consolidated revenue, with 31% year-over-year growth; operating profit = 0.31 billion yen. Growth is driven by increased projects focused on existing business transformation and improved productivity of newly hired talent.
2. Incubation (venture investment segment): Revenue = 0.79 billion yen, accounting for 21.4% of total consolidated revenue; operating profit = 0.45 billion yen. This result reflects an impairment charge on an investee fund booked in the second quarter. Total company consolidated results: Revenue = 3.69 billion yen, operating profit = 0.76 billion yen, net profit = 0.73 billion yen.

• Full-year 2026 March fiscal year consolidated profit and dividend guidance are maintained unchanged: the Business Production segment full-year target is 6.2 billion yen revenue and 0.3 billion yen+ operating profit, and the year-end dividend forecast remains 106 yen per share. The Incubation segment full-year plan remains non-disclosed per long-standing policy.
• Business Programming is currently 47% of its full-year revenue target at the half-year mark, which management considers extremely on-track given the segment's historical tendency for sales to concentrate in the second half.
• Management expects the second half of the fiscal year will perform well, in line with historical sales concentration in the second half driven by client budget timing.
• Management confirms that the Business Programming segment is currently on track to meet its full-year targets.
• While the Business Programming segment has already hit its full-year operating profit target at the half-year mark, management has not implemented an upward guidance revision at this time, but will consider an upgrade if conditions warrant it after monitoring future performance.

The call transcript does not contain explicit discussion of material operational risks or failures. The only risk referenced is the inherent volatility of the Incubation venture investment segment, which the company is actively mitigating by reducing portfolio book value and realizing latent gains.

Q: What makes Dream Incubator (DI) competitive in non-new-business areas like existing business transformation, outside its traditional core? / A: Most clients seeking existing business transformation have already tried internal changes that failed, and need an external, outside-in approach to shift organizational behavior and drive meaningful change. DI's existing skills from new business creation—including ability to work outside traditional frameworks, sense of speed, and strong project drive to deliver results—align perfectly with this need, which is why clients increasingly choose DI for these projects.

Q: What is DI's priority for growth across its different service lines? / A: DI currently prioritizes resource allocation to two service lines: Strategy & Installation, and Technology & Amplify, which are seeing the strongest near-term growth. However, DI's main goal is not to grow individual lines in isolation, but to create greater value through cross-service line fusion and pursue overall expansion through coordinated collaboration between all offerings.

Q: Since DI already hit the full-year Business Production operating profit target of 0.3 billion yen+ at the half-year mark, will management raise the guidance? / A: While an upward revision is possible in the future, management wants to carefully monitor remaining performance for the full year before making a change. It will continue tracking business progress and consider an adjustment if appropriate later.

Q: What is DI's outlook for second half fiscal year performance? / A: DI's business has a consistent historical pattern of sales weighting toward the second half, driven by client budget execution timing. Given the strong half-year performance, management expects the second half will also deliver solid results.