MINATO HOLDINGS INC. Q4 FY2025 earnings call

Overall Consolidated Performance

• Full year consolidated revenue reached 24.54 billion yen, exceeding the upwardly revised full year forecast of 23.0 billion yen, hitting 106.7% of the target.
• Full year consolidated operating profit reached 767 million yen, hitting 104.4% of the 735 million yen full year forecast. Reported net profit fell year-over-year because the prior year included large gains from a business sale and strong profitability from the ROM writing business, which did not repeat this year.
• Total assets stood at approximately 17.5 billion yen, with net assets of 5.91 billion yen, resulting in a price-to-book ratio of 1.3x based on current market valuation.

New Acquisitions

• Blaine and Daiki Sound were added as consolidated subsidiaries effective May 1, 2025, with a combined annual revenue of approximately 2.0 billion yen. The two companies add digital content production, digital promotion, and editing capabilities, expanding the scope of the company's digital consortium strategy. Consolidated accounting inclusion will start from the second quarter of FY2026.

Strategy Implementation

• The company continues to advance its Digital Consortium (DC) Initiative, which focuses on partnering and conducting M&A with digital-focused companies to build synergies, expand into new markets, and drive sustainable growth. A dedicated M&A page was newly launched on the corporate website to showcase past M&A successes and attract potential targets.
• The company is progressing toward the goals of its Mid-Term Management Plan 2027, which has three core pillars: expanding existing business segments, investing in new business areas via M&A and venture investment, and pursuing global expansion focused on Asia and the U.S. The plan targets 48.0 billion yen in revenue, 2.5 billion yen in operating profit, and already achieved the targets of 15%+ ROE and 30%+ equity ratio.

Shareholder Returns and IR

• The company has steadily increased dividends since resuming payments in FY2019, reaching 14 yen per share in FY2025. Shareholder return is structured around three pillars: dividends, share buybacks, and shareholder benefits, with a target total payout ratio of 30% or higher. The company executed a record 191 million yen share buyback in FY2025, pushing the annual payout ratio to 80%. The company is also expanding IR activities, including increasing 1-on-1 meetings with institutional investors and participating in IR events for individual investors.

1. Digital Devices Segment: Revenue of 14.0 billion yen, accounting for 57% of total consolidated revenue. Driven by large spot memory orders across three consecutive quarters, the segment achieved over 1.5 billion yen in operating profit, more than doubling year-over-year, with operating margin increasing from 8.8% to 10.6%.
2. Digital Engineering Segment: Revenue of 2.8 billion yen, accounting for 11.4% of total consolidated revenue. The segment reported an operating loss of 74 million yen, dragged down by lower volumes in the ROM writing service business and increased depreciation expenses from new head office building and equipment investments. This is expected to be a temporary downturn.
3. ICT Products Segment: Revenue of 7.5 billion yen, accounting for 30.6% of total consolidated revenue. Driven by large order intake and new product launches in digital-related equipment, the segment achieved 191 million yen in operating profit, with growing profitability on the back of easing yen depreciation pressures.
4. Other Segments: Revenue declined sharply year-over-year due to the deconsolidation of a formerly owned system development company, but existing businesses still delivered positive operating profit.

• For FY2026 (ending March 2026), management expects a slight year-over-year revenue decrease to 24.0 billion yen (almost flat), with operating profit growing more than 10% to 850 million yen, ordinary income growing nearly 30% to 750 million yen, and net profit growing nearly 30% to 480 million yen.
• The annual dividend per share is targeted to increase 7% to 15 yen, from 14 yen in FY2025.
• Depreciation expenses for the ROM writing service business are expected to fall by approximately 200 million yen in FY2026, with an additional 150 million yen decline in the following fiscal year, which is expected to put the business back on a growth trajectory for revenue and profit.
• The Mid-Term Management Plan 2027 maintains its original targets of 48.0 billion yen in total revenue and 25.0 billion yen in operating profit by 2027.

• Uncertainty from U.S. tariff policies (including the Trump administration's tariffs) creates near-term business outlook uncertainty.
• The Digital Engineering segment faces ongoing pressure from lower ROM writing service volumes, which weighed heavily on profitability in FY2025.
• Increases in inventory and accounts receivable have driven a moderate increase in total borrowing, which now stands at 8.4 billion yen combining short-term and long-term debt.

Q: Will the large spot memory projects that drove Digital Devices segment growth in FY2025 continue into FY2026?

A: Management confirms that while large spot orders are inherently irregular, the company maintains strong relationships with memory suppliers and will continue to actively pursue similar high-margin large spot opportunities. These orders are a supplemental volume driver rather than a core base business, so the FY2026 guidance already accounts for potential fluctuation in this line.

Q: What is the outlook for the ROM writing service business after the weak FY2025 performance?

A: The profit decline was driven by temporary factors: high depreciation from the recent new head office investment and lower customer order volumes that management expects to recover gradually. Depreciation expenses will decline by 200 million yen in FY2026 and another 150 million yen the following year, which will significantly reduce cost pressure and support a return to profit growth.

Q: What is management's overall approach to M&A, and are there additional targets planned after adding Blaine and Daiki Sound?

A: The company's M&A strategy is core to the Digital Consortium Initiative, focused on adding digital-focused businesses that complement existing segments and create synergies. Management is actively evaluating potential targets, particularly in adjacent digital areas that fit the consortium model, and will continue to pursue acquisitions incrementally rather than large risky transformative deals.

Q: How does management view the current stock price, and what is the commitment to shareholder returns going forward?

A: Management acknowledges that the stock price is set by market supply and demand, and remains committed to delivering steady growth to drive long-term shareholder value. The company will maintain its target total shareholder payout ratio of 30%+, continue steady dividend growth, and will consider additional share buybacks when appropriate based on available cash flow.