MIGALO HOLDINGS Inc. Q4 FY2025 earnings call

• Corporate & Capital Market Updates

  • The company met the Tokyo Stock Exchange Prime Market 100 billion yen circulating market capitalization listing requirement, reaching 29.4 billion yen as of March 31, 2025, up from 4.4 billion yen the prior year, and will continue to maintain compliance going forward. It achieved 24 consecutive years of revenue growth, with full-year revenue and profit exceeding initial guidance, all core profitability metrics posting over 100% achievement versus forecast.

• Human Capital & Productivity Improvement

  • Exceeding sales expectations for investment used condominiums was driven by a 1.35x to 1.4x increase in per-employee productivity, achieved via KPI alignment, DX-enabled workflow improvements, and a focus on human capital management. The company hired three new C-suite executives (COO, CHRO, CMO/CCSO) in the past six months to fill gaps in rolling out human capital management, and launched Project PJ AXiS to tie together AI and human capital management to boost per-employee productivity. The long-term goal is to cut white-collar labor costs in half and achieve 3x industry average productivity, targeting a comparable level to leading high-productivity Japanese firms.

• Business Development Updates

  • Smart City AI Face Recognition (FreeiD): Cumulative number of condominium buildings with FreeiD installed grew 2.4x year-over-year, with total face recognition revenue more than doubling over two years, exceeding expectations. The company is running a pilot of FreeiD Pay facial payment service with Aeon, which received positive feedback: users find checkout convenient, and pilot data showed increased consumer spending, which benefits retail partners. The business is expanding beyond residential properties to build a full platform covering offices, retail, and mobility for smart city projects, with total FreeiD users and installed devices growing nearly 2x year-over-year.
  • Generative AI / Cloud Integration: The company released an AI video analysis tool for real estate sales teams that automatically transcribes, summarizes, and inputs Zoom meeting data into Salesforce (cutting 20 minutes of work per meeting) and uses AI to objectively score lead potential, reducing labor and boosting sales productivity. Existing enterprise clients have already requested adoption of the tool, and the company will cross-sell it to its existing B2B customer base. A company-wide AI initiative is in place to encourage 300 engineers to pursue AI upskilling and reskilling.
  • DX Real Estate: The company is positioned as an agent for high-income clients, with consistent new brand messaging, internal training, and updated marketing and sales scripts. Customer acquisition cost per user has already fallen over the past six months, with early signs of efficiency gains from AI + human capital management initiatives.
  • M&A: The company acquired Terra Web Create, a firm with ~20 engineers (many Salesforce-certified) and an existing client base of major western Japanese power utilities that was previously underpenetrated by Migaro. The company expects to turn the acquired firm profitable within 1-2 years by applying Migaro's operational framework, and will continue to pursue M&A to add engineering capacity and expand customer reach for the cloud integration business.

1. DX Promotion Business: Revenue reached 3.765 billion yen, exceeding the initial target range of 3.0 billion to 3.5 billion yen, with a 43.2% year-over-year increase. Segment profit came in at 75 million yen. This segment accounts for approximately 7.3% of total consolidated revenue. The company prioritized investment over profit growth in this period, and maintains the target of reaching 5.0 billion yen in revenue and turning profitable. 2. DX Real Estate Business: Revenue grew 19.8% year-over-year, with segment profit increasing due to higher-than-expected selling prices. This segment accounts for approximately 92.7% of total consolidated revenue. Broken out by product line: investment new build condominiums decreased by ~70 units (intentionally shifted to the next period), investment used condominiums increased by ~200 units, compact residential condominiums saw a slight increase, and apartments grew roughly 2x year-over-year. Total consolidated revenue for the full year was 51.709 billion yen, with operating profit of 2.713 billion yen.

• Full-year Fiscal 2026 (ending March 2026) guidance: Revenue is projected at 60.0 billion yen, a 16.0% year-over-year increase; operating profit is projected at 2.8 billion yen, a 3.2% year-over-year increase; ordinary profit is projected to increase 1.3% year-over-year. Profit guidance is conservative to account for continued investment and rising interest-related financial costs.
• Profit attributable to parent shareholders is projected to fall 6.5% year-over-year, as the prior year saw a large one-time gain from the sale of listed equities held by the company; excluding this one-time gain, underlying profit growth is on track.
• The DX Promotion Business' 5.0 billion yen revenue target is moved forward from Fiscal 2027 (ending March 2027) to Fiscal 2026 (ending March 2026); the target of turning profitable starting the next fiscal year remains unchanged. Management has committed to consider introducing shareholder benefits if the accelerated revenue target is achieved.
• DX Real Estate maintains its medium-term target of 100.0 billion yen in revenue by Fiscal 2029 (ending March 2029), with a possible acceleration of the timeline dependent on the company's capital position, specifically the improvement of the equity ratio.
• Dividend guidance: Annual dividend is increased to 8 yen per share (3 yen interim + 5 yen year-end), a 1 yen increase year-over-year. The company maintains a policy of consistent dividend increases rather than targeting a specific payout ratio.
• A 1-for-2 stock split will go into effect June 1, 2025, with the total authorized share count increased from 80 million to 160 million shares.
• Quarterly revenue skew is expected to be moderate-moderate-low-high, with heavy concentration in the fourth quarter similar to historical patterns.

• The company's equity ratio stood at 20% as of period-end, below the internal management target of 25%. This current level stems from larger-than-planned purchases of used investment condominiums, steady land acquisitions, and the intentional shifting of new build investment condominium sales to the next period. Management will prioritize improving the equity ratio to hit the 25% target.
• Rising interest rates have led to increased financial costs, which pressured ordinary profit growth in the reported period, and guidance incorporates conservative assumptions for further increases in financial burden.
• The full operational benefits of the new C-suite hires and Project AXiS productivity initiative have not yet been realized, with implementation just starting, and results are dependent on successful execution.

No formal Q&A section is transcribed in the provided material.