QB Net Holdings Co.,Ltd. Q3 FY2025 earnings call

Overall Group Performance

• Cumulative 3rd quarter consolidated group revenue is 18.768 billion yen, 102.7% year-over-year, with a growing positive trend quarter-over-quarter. 3rd quarter standalone consolidated operating profit recovered to 327 million yen, exceeding plan after weaker first half results from up-front capital expenditure, bad weather, and seasonal illness impacts.

Domestic Operational Highlights

• Price adjustments implemented in February 2025 had minimal impact on customer visits: no major change in visit patterns, with the monthly discount campaign offsetting temporary customer losses, resulting in stable retention within expected ranges. Lower 3rd quarter costs from accelerated new ticket vending machine rollout completed in the first half boosted profit.
• A balanced two-track people strategy combining experienced hire and trainee (育成人財) hiring delivered strong results: 3rd quarter hiring exceeded plan by 7 trainees and 3 experienced hires. Trainee recruitment hit a record projected 133 hires for the full year, with new graduate hiring reaching 37 hires vs a 30-person target, outperforming plan.
• Domestic store opening progress: 6 stores net added in the 3rd quarter, 9 net added cumulative through 3 quarters, with 13 more new stores planned for Q4 to hit the full year target of 22 net new domestic stores.
• Retention improved: cumulative 3rd quarter turnover rate stayed at a low 6.5%, reflecting sustained success in workplace environment improvements.

Overseas Operational Highlights

• Price adjustments in January 2025 for Hong Kong (14.2% increase) and the US (16.6% increase) resulted in only ~6% customer volume decline, lower than the previous round of price adjustments and within management expectations. Singapore turned profitable in the 3rd quarter, posting 7 million yen operating profit after 60 million yen of year-over-year improvement, driven by customer recovery, promotional app programs, and conversion to the higher-margin QB PREMIUM format.
• Overseas store opening progress: 2 net new stores added in the 3rd quarter, 6 net new cumulative through 3 quarters, with full year net growth projected at 12 stores (above initial plan), bringing total overseas stores to 140 by year end, including new market entry into Canada and Vietnam.

Capital Returns

• Management announced the introduction of a new shareholder benefit program: one free haircut voucher for holders of 100+ shares, and two vouchers for holders of 300+ shares for the 2025 June term, with additional benefits for long-term holders starting in 2026.

1. Domestic segment: Revenue reached 15.768 billion yen (102% year-over-year), representing ~84% of total group consolidated revenue. 3rd quarter standalone operating profit came in at 247 million yen, 33 million yen above plan, beating forecast due to lower-than-planned labor and capital expenditure costs. 2. Overseas segment: Revenue reached 3 billion yen (105.9% year-over-year), representing ~16% of total group consolidated revenue. 3rd quarter cumulative operating profit was 80 million yen, 32 million yen above plan. Despite one-time losses from delayed government subsidies in Singapore and pre-opening investment costs for new markets (Canada, Vietnam), existing market gains in Hong Kong and Taiwan more than offset these costs.

• Full year net store opening guidance is maintained at 22 net new domestic stores, and raised to 12 net new overseas stores (up from the original plan).
• Trainee hires deployed to full store roles are expected to start from the 2nd and 3rd quarters of the next fiscal year, aligned with planned future new store opening targets.
• Management expects customer numbers in Hong Kong and the US to recover gradually over the 12 months following January 2025 price adjustments, consistent with past experience.
• Management remains on track to hit the full year original consolidated profit plan, after Q3 performance reduced the cumulative plan gap to just 64 million yen.

• Lower-than-expected experienced hiring in the first half created temporary staffing gaps that pushed Q3 revenue 0.4% below plan, and staffing tightness could continue to impact near term operating performance if hiring slows.
• Price adjustments carry inherent risk of customer attrition; while current attrition is within expected ranges, sustained higher customer loss could pressure revenue and profit.
• Pre-opening investment for new market entry into Canada and Vietnam will temporarily pressure near term overseas operating profit, and new market expansion carries unproven demand and regulatory risks.
• Singapore experienced a one-time 8 million yen profit impact from delayed government subsidy receipts, and similar timing issues for government incentives could create quarterly profit volatility.

Q: What is the timing and expected size of the next round of price adjustments? / A: Management confirmed that no near-term additional price adjustments are planned. Current price adjustment impacts are tracking within expectations, and management will monitor customer retention and cost trends over the next 12 months before evaluating any future changes. No fixed target adjustment range has been set at this stage.

Q: What factors have driven improved turnover, and what is the target for future turnover rates? / A: The sustained low 6.5% turnover rate comes from long-term investments in stable working conditions and clear performance evaluation systems. Management views current turnover as already at a very good level, and will continue focusing on maintaining stable retention rather than targeting a specific lower number, as stable staffing is core to consistent service quality.

Q: What is the current status of launch operations in new markets Canada and Vietnam? / A: Pre-opening development is progressing on schedule for both new markets, with initial store locations confirmed and staffing training underway. The first stores are on track to open in Q4 as planned, and management will build out the market footprint gradually after initial launch to test local demand before scaling further.