ADJUVANT HOLDINGS CO.,LTD. Q2 FY2026 earnings call

Company & Industry Overview

• Adjuvant Holdings is a cosmetics manufacturer centered on Adjuvant Cosme Japan, selling skincare and haircare products to beauty salons.
• The broader beauty salon market is ~2.6 trillion yen, up 5.3% year-over-year; the core beauty salon sub-market is ~1.3 trillion yen, flat (-0.1% year-over-year), with male customer usage growing 4.8% year-over-year.
• The professional cosmetics market for salons is just under 160 billion yen, and is expected to see slight gradual contraction long-term due to population aging and declining birth rates.

Interim Financial Performance

• Consolidated interim net sales came to 1.855 billion yen, a 10.8% year-over-year decrease (223 million yen decline).
• Consolidated operating loss was 21 million yen, a 77 million yen year-over-year decrease; lower gross profit from sales declines could not be offset by 58 million yen in total selling, general and administrative (SG&A) cost cuts (26 million yen in IT costs, 18 million yen in outsourcing fees, 14 million yen in R&D expenses).
• Net income attributable to parent company shareholders increased year-over-year due to gains on sales of investment securities and corporate tax adjustment items.

2026 Full Year Operational Initiatives

• Sales productivity improvements: 4 core priorities: expanded new customer acquisition promotions, in-salon retail activation, reduced repeat purchase opportunity loss and improved cross-selling, and efficiency through centralized information management.
  • Eliminated the prior 100 thousand yen minimum initial purchase requirement for new Adjuvant Salon contracts to attract more partner salons, and opened staff promotion programs to lower barriers to transaction.
  • Launched practical in-salon retail specialized seminars starting July 2025, focused on improving consulting and targeting skills for skincare, lapsed customers, and age-specific customer groups.
  • Leverages the ADJUVANT LINK e-commerce platform to reduce repeat purchase loss, improve cross-selling, run promotional campaigns, and enhance skincare outreach via the AI skin diagnosis tool Mite Photo. Launched a dedicated Adjuvant app for partner salons to centralize product, campaign, and seminar information.
  • Completed the integration of Sheer Professional into Adjuvant Cosme Japan, and is pursuing synergy opportunities in the professional hair color business.
• New product launches: Launched three new product lines in June: additional fashion and gray color shades for LOOP SHEERD. COLOR, the out-bath system treatment nyu by adjuvant, and the out-bath styling product muts totte.
• Digital and marketing outreach: Expanded Instagram outreach with two separate accounts: one for general consumers to build master brand awareness, and one for partner salons to share product approach and official seminar information.
• Capital and sustainability strategy: Aims to achieve 8% ROE and maintain PBR of 1x or higher to improve enterprise value aligned with capital cost and shareholder expectations. Launched a formal sustainability strategy with four core material issues: consideration for the global environment, social contribution, sustainable corporate growth, and a safe, secure and fair working environment.

Adjuvant Holdings operates two core product segments for beauty salons: 1) Skincare products: accounted for 33.2% of total interim revenue, with a 15.4% year-over-year decrease in cumulative interim sales for the 2026 March fiscal year. 2) Haircare products: accounted for 64.4% of total interim revenue, with a 5.6% year-over-year decrease in cumulative interim sales for the 2026 March fiscal year. Both segments recorded year-over-year sales declines in the first and second quarters of the period, with skincare seeing particularly sharp growth slowdown.

• Management maintained the original full year 2026 March fiscal year guidance, with no upward or downward revisions.
• Full year guidance targets: 4.365 billion yen in consolidated net sales (a 267 million yen year-over-year increase), 126 million yen in consolidated operating profit (flat year-over-year), and 73 million yen in net income attributable to parent company shareholders (a 33 million yen year-over-year increase).
• Management expects to hit full year targets via sales growth from new haircare product lines and new hair color launches, expanded digital content, and aggressive cost reduction across the business.
• Post-interim period (from Q3 onward) priorities include strengthening counseling content for existing partner salons, supporting salon adoption of the Mite Photo AI skin diagnosis tool, boosting sales support for June 2025 new products, and expanding repeat purchase opportunities via enhancements to ADJUVANT LINK.

• Long-term industry risk: The professional salon cosmetics market is expected to see gradual size contraction due to the impact of Japan's declining birth rate and aging population.
• Current performance risk: Both core product segments recorded year-over-year sales declines in the first half, leading to an operating loss in the interim period even after SG&A cost cuts.
• Capital performance risk: While recent ROE has improved, it has not yet reached the company's targeted equity cost level, and ROE has trended downward recently alongside lower net income.

No question and answer section was included in the provided earnings call transcript.