MIGALO HOLDINGS Inc. Q2 FY2026 earnings call

• Opening Statement and Corporate Overview

• CEO acknowledges the recent share price drop following the public offering of new shares and takes the issue very seriously, stating that the company will use the proceeds to accelerate growth of its three core businesses to deliver value to shareholders.
• Migaro Holdings was founded in October 2023, has approximately 600 employees, and is headquartered in Nishi-Shinjuku, Tokyo, targeting full-year revenue of 60 billion yen.

• Core Business Highlights

• FreeiD face recognition platform: Condominium installations increased 146 buildings year-over-year to 264 buildings (approximately double the prior year level), with 40,000 platform users (up 1.6x year-over-year) and 1.7x growth in connected device volume. The company launched Japan's first 'all-face-recognition condominium' with no physical keys, and 97% of residents rate the system as convenient, with 94% saying they would choose a face-recognition condominium for their next home. Four new patents are pending approval, two of which are high-impact industry-relevant patents that will remain undisclosed during the 6-month objection period. Pilot smart city projects have been launched at locations including Sanga Stadium, Kamikawa Town (Hokkaido), and Aeon Mall Tokoname.
• Digital Integration (AI Solutions) Business: The business is being focused on AI solutions, which has seen stronger-than-expected demand for 1 million yen to 2 million yen class AI projects since launching in April. The company has already hired three data scientists and senior AI professionals to meet growing demand, and aims to position itself as a 'Tier 0' partner that collaborates with clients from the early conceptual stage of DX/AI productivity improvement projects, rather than operating as a lower-tier subcontractor.
• DX Real Estate Business: Total membership of prospective real estate buyers grew by 6,000 people year-over-year. 775 units were sold during the quarter, 38 units lower than the prior year, while average selling prices rose due to market rent increases. The business focuses on compact 1LDK/1K/1DK condominiums targeted at single professionals and DINK households, aligned with current demographic trends in urban Japan, and all company-developed condominiums come standard with FreeiD face recognition. Recurring revenue from rental and property management continues to grow steadily.

• Cross-Business Synergies and Internal Restructuring

• The company operates a three-business synergy model: in-house real estate expertise informs FreeiD product development for residential properties; digital integration delivers productivity improvements to the real estate business, and successful solutions are then sold to external clients. Per-employee sales volume at the group's real estate subsidiary has already increased materially due to these efficiency improvements.
• The company has completed internal group restructuring, merging two subsidiaries and consolidating back-office functions to the holding company to enable employee specialization and improve per-employee productivity, targeting a shift from 10 people delivering 100 units of output to 5 people delivering 200 units of output.

• Capital Raising Proceeds Allocation

• FreeiD: 1 billion yen for system and service development, 200 million yen for talent strengthening, 300 million yen for sales promotion (sales promotion activities are already underway).
• Digital Integration: Proceeds will be used to accelerate AI-focused talent recruitment.
• DX Real Estate: 770 million yen for condominium development to speed up land and existing property acquisitions, targeting 100 billion yen in revenue by the 2029 March fiscal year.

1. DX Promotion Business: Revenue increased 3.8% year-over-year on the back of rising new orders. Segment loss reached negative 83 million yen, which includes 60 million yen in one-time M&A costs; excluding this one-time expense, the operating deficit has shrunk due to improved profitability. Total IT personnel grew by 28 to 363 after the acquisition of U System Creation Co., Ltd. 2. DX Real Estate Business: Revenue decreased 1.4% year-over-year (overall broadly flat). Segment profit increased 12.7% year-over-year driven by a higher-margin new development portfolio and higher-than-expected selling prices. 3. Other: Revenue increased to 3.1 billion yen, which includes 1.9 billion yen from land sales; the remaining 1.2 billion yen is recurring stock revenue.

• Full-year fiscal 2026 (ending March 2026) operating profit is upwardly revised by 100 million yen, driven by better-than-expected first half performance and stronger-than-forecast selling prices in DX Real Estate. Net profit is revised upward by 1.5%, and ordinary profit is revised upward by 0.9% after accounting for moderately higher expected financing costs from rising interest rates. As of the end of the second quarter, the company has already reached 72.6% of the revised full-year operating profit target, 80.6% of the revised ordinary profit target, and 85.7% of the revised net profit target. • The annual dividend forecast is revised upward: the year-end dividend is increased by 0.5 yen to 5.5 yen per share, the interim dividend remains 3 yen per share, bringing the total annual dividend forecast to 8.5 yen per share, up from the prior forecast of 8 yen per share.

• Management acknowledges that the recent public offering led to a sharp short-term share price decline, which management takes very seriously as a business risk. • Pre-quarter end net D/E ratio was 2.19x, above the company's internal 2.0x target; post-offering leverage has fallen to 1.53x, mitigating this risk. • Pre-quarter end equity ratio was 23.4%, below the company's 25% internal target; post-offering equity ratio improved to 27.6%, reducing funding risk for the real estate business. • DX Real Estate revenue is subject to quarterly variability due to the timing of new development completion and closing, with the majority of full-year new property closings concentrated in the fourth quarter this fiscal year.

The provided transcript does not include a recorded question and answer section.