for Startups,Inc. Q2 FY2026 earnings call

Financial Summary

• The company achieved an all-time record first half performance, with consolidated revenue of 2.258 billion yen (+33% YoY), operating profit of 328 million yen (+110.3% YoY), and order intake of 2.678 billion yen (+27.9% YoY).
• Excluding the venture capital valuation loss, Q1 and Q2 revenue and profit were at roughly the same stable level.

Core Business Operational Improvements

• The Human Capital business shifted strategy from prioritizing quality (selection conversion rate) to prioritizing volume (number of candidate interviews), while increasing the total number of open job listings handled.
• This shift improved training speed and consultant productivity, leveraging the company's core strength in startup-candidate matching accuracy to grow placement volume while maintaining and increasing average placement fees.
• Total headcount is slightly down year-to-date, in line with the company's productivity-focused growth strategy. Some additional turnover occurred in the Open Innovation business amid strategic changes, and the company plans to ramp up mid-career hiring in the second half to strengthen the organization.

Mid-term Strategic Progress

• The company is building a "Growth Industry Support Platform" centered on becoming the #1 startup HR service by both quality and volume.
• Q2 new initiatives: (1) Established Arikata Co., Ltd., a subsidiary focused on AI talent career support and building AI-powered operational workflows; (2) Launched the new radio program Startups Prime on Tokyo taxi media to improve brand awareness; (3) Integrated STARTUP DB with global startup database Dealroom to add translated data on up to 1 million US startups and investors, increasing service value.
• Existing partnerships with Sumitomo Mitsui Banking Corporation, Deel, GO Job, and Strike are progressing steadily.

Mid-term Financial & Capital Allocation Strategy

• After the current year (first year of the mid-term plan) upward revision, full-year 2026 revenue is already near the 2027 fiscal year lower target, and operating profit already exceeds the 2027 lower target. Updated mid-term targets will be disclosed at the full-year earnings announcement.
• Capital allocation priority: 1) Investment in existing businesses, 2) M&A and new business development, 3) Shareholder returns, focused on sustained corporate value growth.

1. Human Capital Business: This is the core growth-driving segment. First half revenue grew 37.3% year-over-year, order intake grew 43.3% year-over-year, with both Q2 revenue and order intake hitting all-time record highs. Revenue contribution makes up the large majority of consolidated revenue growth of 33% year-over-year. Key metrics: average placement fee per hire hit an all-time high of 4.11 million yen, new jobseeker interviews grew 90.9% YoY, unique users with scheduled interviews grew 46.1% YoY, and placements per consultant grew 17.7% YoY.
2. Open Innovation Business: Revenue and order intake are progressing ahead of initial plan, with improved profitability. Profit is weighted toward the second half, and the segment is on track to deliver significantly higher full-year profit than last year. Key sub-services STARTUP DB and Public Affairs are performing well, with conference bookings also accumulating steadily.
3. Venture Capital Business: A 93 million yen valuation loss on investment securities was recorded in cost of goods sold in the first half, per accounting rules (losses are recognized upfront, while unrealized gains on profitable investments are not recognized yet). The company holds a ~20% stake in the fund it manages, so ~80% of the loss is added back to net income attributable to parent shareholders.

• The company upward revised full-year 2026 (March fiscal year) guidance: full-year revenue to 4.85 billion yen, operating profit to 850 million yen, ordinary profit to 770 million yen, and net income attributable to parent shareholders to 610 million yen.
• The upward revision reflects stronger-than-planned first half performance and order intake in the core Human Capital business, driven primarily by higher-than-expected average placement fees. Management intentionally set conservative guidance because average placement fees have inherent volatility, so there is visible upside to the current forecast if first half pricing trends continue into the second half.
• The mid-term target achievement is already ahead of plan, and updated higher mid-term targets will be released at the full-year 2026 earnings announcement.
• Management confirmed that the company has exited its recent period of stagnant growth and entered a new phase of high growth, with further room for productivity improvement in the core HR business.

• Average placement fees in the core Human Capital business have inherent volatility, which creates uncertainty for forecasting if recent upward pricing trends do not continue.
• While the global trend of AI-driven layoffs at Western tech firms has not meaningfully impacted Japanese startups to date, it remains a potential risk factor for future startup hiring demand.
• The startup operating environment is rapidly changing (e.g. updated listing requirements on the Tokyo Stock Exchange Growth market), though management currently views these changes as net positive for the company's business.
• The Venture Capital business has front-loaded loss recognition per accounting rules, which can create volatility in reported quarterly earnings even when the overall investment portfolio has unrealized gains on successful investments.

Q: What is the progress on the new startup M&A service? / A: The company launched sales operations for the new M&A service one month prior to the call. It is currently gathering deal information from the venture capital network, evaluating how to close M&A deals using its existing network, and collaborating with partner Strike to leverage Strike's strength in small and mid-sized M&A. It also is leveraging its existing partnership with Sumitomo Mitsui Banking Corporation to diversify exit opportunities for startups. The company aims to deliver first results this fiscal year and build the business to contribute to next fiscal year's growth targets.

Q: Why is the upward revision conservative, and why isn't the strong first half pricing trend fully baked into the full year guidance? / A: The first half upside was driven primarily by a large increase in average placement fee, which hit an all-time high of over 400,000 yen. Management acknowledges that average placement fees have inherent volatility, so they maintained the original planned order intake trajectory for the second half in the revised guidance. If the first half pricing trend continues, there is meaningful additional upside to the current full year forecast. Management is focusing on both delivering record full year results and preparing for growth in future fiscal years.

Q: Could AI-driven layoffs at Western tech firms become a risk for your HR business, and what impact do you see on Japanese startups and your future performance? / A: Management does not see large layoff or hiring slowdown trends from AI impacting Japanese startups at this point. Management views the current environment positively overall: the new Japanese administration is prioritizing new industry creation and has increased government grant and investment funding for startups and growth industries. As a top HR provider focused on the startup ecosystem, the company is well positioned to capture this growth and remains positive on its longer-term performance outlook.

Q: Is the strong September order intake and high quarterly growth reflective of actual underlying performance, or just monthly volatility? / A: Monthly volatility does exist, but it is smoothed out on a quarterly basis, and the current high level of KPIs and order intake reflects the company's actual underlying strength. Management expects the core Human Capital business will soon hit the milestone of over 100 monthly placements, and expects consultant productivity can grow from current levels to 1 placement per consultant per month long-term, leaving significant room for further growth. When combined with new businesses like M&A, this will drive even higher performance in coming periods.