ASANTE INCORPORATED Q4 FY2025 earnings call

• Overall Financial Results • Consolidated net sales for FY2024 reached 14.02 billion yen, +2.4% year-over-year. Operating income hit 1.22 billion yen, +29.5% year-over-year, with operating margin up 1.8pp to 8.7%. Results missed prior guidance, with 98% sales achievement, 86% operating income achievement, and 81% net income achievement due to external headwinds and slower-than-planned hiring. • Total application and inspection volumes grew more than 10% year-over-year to 9,900 cases, returning to the same level as the first year of the COVID-19 pandemic. The average number of employees fell 3.7% year-over-year to 980 amid tight labor markets, but revenue per employee rose 6.3% year-over-year due to higher volumes and digital-led efficiency gains.

• Strategic Initiative Progress • Sales Promotion Infrastructure & Organizational Strengthening: Advanced digital marketing, expanded corporate partnerships to 750 firms (+20% year-over-year), expanded existing operational areas via new JA (Agricultural Cooperative) partnerships in 6 prefectures, and opened the new Chugoku-Shikoku Branch to oversee 6 new western Japan sales offices to drive further geographic expansion. Actively evaluates M&A targets to strengthen existing business or expand home maintenance service areas. • Productivity Improvement: Completed development of an electronic map system, and is rolling out tablet conversions for field sales to improve activity speed and management accuracy. Is developing new systems to cut contract drafting time and improve accuracy, and is working to leverage customer data for more efficient sales and staff training. • Customer-Centric Service Expansion: Expanded pest/vermin control, historically a corporate-focused service, to individual customers, reaching 13 prefectures in FY2024; application volumes grew 2.7x year-over-year, with expansion planned for FY2025. • Human Capital Development & Utilization: Redesigned personnel systems, added new roles for young employees, clarified career paths to improve retention, expanded manager and leadership training, expanded in-house skill certification programs, and increased training days for new hires. Application volumes for open roles have already begun to rise as a result of these changes. • Social Contribution Through Business: Expanded high-insulation construction services to include ceiling insulation in half of its operating areas to support energy efficiency and CO2 emissions reductions, and has reduced scope 1 and 2 CO2 emissions via electric vehicle adoption and internal energy-saving initiatives. • Corporate & Capital Strategy: Completed a 1.25 million share tender offer for treasury stock to acquire all shares held by the founding family's asset management company. Management estimates cost of equity at 4%-5%, with a current medium-term ROE target of 10%+ to improve PBR which currently stands at 1.6x, below pre-COVID levels and the industry average. The 2024 year-end dividend is 31 yen per share, for a full-year 62 yen per share dividend (93.9% payout ratio), with the same 62 yen per share dividend planned for FY2025.

1. Termite control: 5.95 billion yen, +3.1% year-over-year, 42% of total revenue. Growth was driven by increased application and inspection volumes and higher renewal cases for both new and renewal services. 2. Moisture control: 2.82 billion yen, +2% year-over-year, 20% of total revenue. Growth aligned with increases in new termite control services (which it often accompanies) and stronger outreach to existing customers. 3. Earthquake countermeasures: 3.49 billion yen, -1.1% year-over-year, 25% of total revenue. The high-price service grew in the first half on rising disaster preparedness awareness but saw no growth in the second half amid soft consumer sentiment, resulting in a flat full-year result. 4. Other services: 1.75 billion yen, +8.3% year-over-year, 13% of total revenue. Growth was driven by expanded service areas for growing individual customer pest/vermin control, and revenue growth at subsidiary Heartful Home.

• FY2025 (ending March 2026) guidance calls for 14.9 billion yen in net sales (+6.2% year-over-year), 1.32 billion yen in operating income (+7.6% year-over-year), and 820 million yen in net income (+19.2% year-over-year). Management expects average headcount to grow by 19 employees, with a 50 thousand yen per month increase in revenue per employee driving 870 million yen in incremental sales. • For the 2025-2027 rolling medium-term plan, management targets 14.2% total sales growth and 47.6% total operating growth over the three-year period, with 2027 projected to reach 16.02 billion yen in sales and 1.81 billion yen in operating income, pushing operating margin into the 11% range. • To hit medium-term targets, management will prioritize expanding top-line growth via continued investment in marketing/PR, corporate partnerships, geographic expansion, early M&A completion, and new service rollouts; improve profitability via accelerated digitalization, operational streamlining, and advanced customer data management to raise revenue per employee; and grow headcount via improved working conditions, revised compensation/incentive structures, and expanded training and development opportunities.

• Persistently high inflation for daily goods has softened consumer demand for invisible home maintenance services, including Asante's core offerings. • Tight labor markets have resulted in slower-than-planned hiring, leading to lower headcount than targeted and missing the original FY2024 performance guidance. • Following frequent media coverage of rogue part-time robbery incidents from autumn 2024 onward, customer wariness of door-to-door sales rose, temporarily reducing sales efficiency and leading to slower sales growth in the second half of FY2024. • Fuel and raw material costs have remained elevated, while costs for employee compensation are rising to attract and retain talent, leading to sustained upward pressure on overall operating costs.

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