Living Platform,Ltd. Q4 FY2025 earnings call

Overall Financial Performance

• Consolidated revenue grew 15.3% year-over-year, exceeding budget due to successful price pass-through and collection of additional service compensation. Operating income was 0.341 billion yen, which missed the original plan, but showed a steady quarter-over-quarter upward trend.
• EBITDA grew steadily, with continued profit realization, and the selling, general and administrative (SG&A) revenue ratio has gradually declined to ~9% driven by DX investments, with further reductions expected going forward.

Operational Improvement

• 7 underperforming facilities are seeing steady improvement: Library Sendai Odawara reached over 90% occupancy at end-March 2025, Library Nerima Tanihara is near breakeven with occupancy over 70%, and Bluestar Kitamaruyama is on track to exceed 90% occupancy by mid-2025. The most challenged site, Library Shimura Sakagami, is targeted to reach breakeven to drive large overall profit improvement.
• The number of high-cost contracted temporary staff has declined steadily, with temporary staff in the core care business expected to be almost eliminated in FY26.3.
• Specific skill foreign worker recruitment: 100 workers hired in FY25.3, with a target of 150 in FY26.3. This has stabilized staffing, reduced hiring and labor costs, and the company plans to double its in-house training capacity for these workers to support long-term retention and career progression.
• Digital and marketing improvements: DX has supported steady occupancy growth, and expanded owned website channels have increased move-in contracts while reducing marketing costs. The company is now shifting focus from performance marketing to corporate branding to further improve efficiency.

Strategic Initiatives

• Mid-term strategic priorities: 1) Build a high-margin business model resilient to inflation; 2) Expand diversified hiring and improve retention to build a stable workforce; 3) Unify internal databases and fully leverage data for operational efficiency; 4) Strengthen corporate branding to lift all business lines.
• Expansion of new business areas: Launching medically insured home-visit nursing care, expanding new types of disabled support services (living care, mobility assistance), developing disabled-focused paid nursing homes, and planning an entry into in-house agriculture to stabilize food costs.

1. Care Business: Generated 82% of total consolidated revenue. Total consolidated revenue for FY25.3 exceeded 19.0 billion yen, grew 15.3% year-over-year, while operating income came in at 0.341 billion yen. Seven underperforming care facilities dragged operating income down by approximately 0.27 billion yen in the period.
2. Nursing Care Support Business: Revenue size has become approximately equal to the Nursery Business, and has been the company's fastest growing segment. Current segment operating margins are 13.8% for Continuous Employment Support Type B, 8.9% for disabled group homes, and over 20% for disabled-focused paid nursing homes. Aggressive new expansion has pressured near-term profits due to delayed hiring and low initial occupancy rates.
3. Nursery Business: Revenue size is similar to the Disabled Support Business, with no planned organic expansion and a focus on strengthening existing operations.

• Revenue: The company expects to exceed 20.0 billion yen in consolidated revenue for FY26.3, maintaining a target of 10% annual revenue growth through FY28.3, with actual growth expected to be in the mid-teens percentage range for the next two fiscal years.
• Profitability: Maintains a target of 8% operating margin to be achieved early in the 3-year mid-term plan. Operating profit forecasts for FY26.3 and FY27.3 are revised downward from original plans to prioritize accelerated expansion in the disabled support segment, which will drive near-term investment costs, with a planned +21.5% development growth for care business and +168.0% development growth for disabled support business by FY28.3.
• Target metrics: Explicitly targets a 20% equity capital ratio to be achieved early, to navigate the current high interest rate environment.
• Shareholder returns: Introduced shareholder benefits this year, and is now actively considering initiating a dividend payout, with a commitment to continued shareholder return improvements.
• New business targets: Medically insured home-visit nursing is expected to reach ~0.1 billion yen in revenue in FY26.3 with solid profitability.

• Inflation and rising costs: Rising construction prices and utility costs have pressured margins, though the company has passed most inflation costs through to customers. Electricity prices remain exposed to policy and regulatory uncertainty, even as the company expects future reductions from restarted nuclear power plants.
• Operational risk from underperformance: Low initial occupancy at newly opened facilities and delayed performance improvements at seven legacy underperforming facilities held back FY25.3 operating income. While improvements are ongoing, a slower-than-expected recovery would continue to pressure profits.
• Staffing risk: Hiring delays for new facilities (including for specific skill foreign workers, which have a 6-10 month lead time from request to arrival) have slowed occupancy ramp-up at new disabled support facilities. The nursery business still faces ongoing staffing challenges that could pressure performance.
• M&A market conditions: Current market valuations for potential acquisition targets are elevated, limiting near-term M&A opportunities for growth.

Q: What is the achievement probability of the current FY26.3 business plan, after last year's profit miss?

A: The lower FY26.3 profit forecast already fully incorporates the drag from delayed improvement at existing underperforming facilities and the costs of new expansion. Management expects that as occupancy improves at low-performing sites and new facilities ramp up, the plan is achievable, with sequential profit growth through the fiscal year.

Q: What is the company's approach to M&A going forward?

A: Current valuations for available targets are excessively high, so the company is not pursuing large M&A activity at this time. If fairly valued, high-synergy opportunities emerge, especially for the disabled support segment, the company will actively consider acquisitions to accelerate growth.

Q: How much profit contribution do you expect from new business areas, like disabled-focused nursing homes and home visit nursing?

A: Disabled-focused paid nursing homes have a tested proven model that already delivers operating margins over 20% from the Sendai pilot, and will scale starting from FY27.3. Medically insured home-visit nursing will deliver solid profitable growth starting in FY26.3, with higher margins and pricing than standard care services, contributing incremental profit as it scales. While the business will not reach the extremely high pricing of some controversial market players, compliant operations will deliver stable, attractive long-term profits.