StemCell Institute Q2 FY2026 earnings call

Corporate Update & Shareholder Return

• Introduced a new shareholder benefit program, offering a 3,000 yen digital gift per shareholder, at a total current annual cost of 9 million yen. The program has room for future expansion, with projected costs remaining below 60 million yen even if the benefit is raised to 10,000 yen and shareholder count doubles.
• Transitioned to consolidated accounting this term, adding the 50% owned Singaporean subsidiary (total capitalization 0.8 billion yen) and 100% owned Milcare subsidiary (now handling front-end sales of culture supernatant products) to the consolidated group. All planned overseas investments were already included in the original standalone budget, so no changes to full-year guidance.

Domestic Growth Strategy

• Core domestic goal is to scale annual new storage specimens from the current 8,000-9,000 to 20,000, supported by a new three-pillar marketing structure:
  1. Strengthening existing hospital/medical institution network: a slow-moving relationship-building approach that will continue steadily.
  2. Refining existing digital web advertising, which has already lifted pregnant consumer awareness from 10-20% pre-COVID to nearly 100% currently, but has hit growth limits as a standalone channel.
  3. Expanding new face-to-face outreach as a third pillar: hosting/attending direct-to-consumer events (e.g., maternity fairs, pregnancy-related shrine events) to improve understanding of cord storage benefits, which has already driven strong growth in information requests.

Global Expansion (Southeast Asia)

• Singapore is positioned as the regional hub for global expansion, with good access to all major ASEAN cities. Specimens collected in Jakarta (Indonesia) will be transported to the Singapore lab for processing, which is operationally feasible based on the company's domestic experience with long-distance specimen transport. Initial focus will be on the high-density Jakarta metro area for Indonesian expansion.
• Lab construction in Singapore is on track: lab fitout will start between end of 2025 and January 2026, completion expected between April and May 2026, with regulatory inspection and licensing expected in June 2026, putting full commercial launch on track for Q1 of the next fiscal year.
• Singapore has an existing 4.8-5.0 billion yen umbilical cord storage market, with 20% penetration (6,000 new customers per year) and average storage prices double Japanese levels. The incumbent market leader (50% market share) has already faced a 9-month license suspension after a 2023 operational incident, and faces a potential additional 12-month suspension, creating a major market opportunity. Stem Cell Institute targets an early 20% market share, with a long-term goal of capturing a majority share, and is accelerating launch plans to capitalize on this opportunity. No additional Japanese capital infusion is planned, as the 0.8 billion yen 50/50 joint venture capital is sufficient for current plans.
• Long-term expansion plans cover the entire Southeast Asia region, followed by India, the Middle East, and potentially Africa, with Singapore serving as a talent hub for regional expansion (strong access to highly-skilled, English-speaking local talent).

Adjacent Business Development

• Continuing investment in adjacent business areas, including a joint research project with iPS Portal to develop pre-stored patient-specific iPS cells from stored umbilical cord blood, which is technically feasible and could become a new future service line. The company also holds minority investments in prenatal ultrasound rental services and unmarried female egg storage services, a fast-growing segment aligned with the company's core customer base.

The transcript does not provide full breakdown of absolute financial results or revenue contribution percentages for individual product segments. It confirms that total company revenue hit new all-time highs in both Q1 and Q2 of the current fiscal year, with total contract volumes also reaching a new record. The core umbilical cord blood/cord storage segment currently averages ~400 new storage requests per month, with 8,000-9,000 new annual domestic storage specimens. The culture supernatant service segment, operated through 100% owned subsidiary Milcare, has shown steady revenue growth as more early storage customers move to utilize stored cord products. The Singaporean 50/50 joint venture for Southeast Asian expansion is still in pre-launch preparation and has not generated meaningful revenue yet.

• Management maintains the original full-year fiscal 2026 guidance announced at the start of the term; the transition to consolidated accounting does not change the full-year numerical target. The company will make a full push to meet the original full-year plan, with no downward guidance revision.
• October 2025 recorded a new all-time high monthly revenue, and November is tracking at high levels, making it almost certain that Q3 will also deliver a new all-time high quarterly revenue. There are no visible factors that would push full-year results significantly below plan, though full-year Q4 results cannot be fully forecasted at this time.
• Mid-term, management expects that once domestic revenue growth continues and the Southeast Asian business reaches scale, current upfront investment in talent and infrastructure will be fully absorbed, driving significant improvement in consolidated profit margins.
• The release of the company's new mid-term management plan has been pushed back to the full-year earnings announcement (end of fiscal year) to allow for more time to incorporate updated Southeast Asian expansion developments.

• The Q2 2025 results were slightly below internal expectations, with a temporary drop in conversion rates in September that led to Q2 total specimen volumes coming in flat quarter-over-quarter, despite stronger than expected results in July and August.
• Near-term, upfront investment in domestic and overseas hiring and infrastructure will pressure short-term profits, though this is expected to pay off in mid-term growth.
• If the incumbent leading cord storage provider in Singapore is suspended for an additional year, the entire Singaporean cord storage market will likely shrink temporarily due to widespread consumer distrust created by the incident, even as it creates a long-term opportunity for new entrants.
• Indonesia's geography (large, spread-out archipelago) makes widespread regional expansion challenging, so the company will focus initial efforts exclusively on the high-density Jakarta metro area.

Q: The upper half was behind plan, with a temporary September conversion drop; 20% YoY growth is needed in the lower half to hit the full-year target. Is the target achievable, or will growth focus shift to next year? / A: While Q2 did not hit internal growth expectations, sequential improvement is clear: last year the second half trended downward after the new HOPECELL plan launch, this year Q1 and Q2 both posted record revenue and total contracts. October hit a new monthly record, November is holding high, Q3 is almost certain to hit a new record. There are no visible negative headwinds for full-year results, and the company will push to hit the original full-year target while continuing to invest in mid-term growth infrastructure. Short-term investment costs will be monitored closely on a consolidated basis, and the company remains committed to balanced growth.

Q: Will face-to-face event outreach produce fast results for domestic growth? / A: The approach does have immediate impact, and the company was inspired by the high 50% conversion rate for event-generated leads in Singapore, compared to the 30% conversion for existing domestic channels. Domestic events have already produced 50+ information requests per event, and scaling to 100+ events per year could generate 5,000 new leads, translating to ~1,500 new contracts at 30% conversion, a meaningful uplift. This channel also delivers strong synergy with existing web marketing, and results should start to appear within ~6 months, as event attendees are typically 2-3 months from delivery.

Q: How will lower half costs be impacted by Singaporean expansion, and is the cost increase already budgeted? / A: The Singaporean subsidiary uses a calendar fiscal year, so it will be consolidated with a 3-month lag. Currently only initial deposits for the lab and co-working space costs have been incurred; lab rent will not start until next year, and the company secured a 6-month rent-free period. Downside hiring costs of 40-50 million yen are already budgeted, so no unexpected large cost increases are expected this term. Full operating costs will start to hit next year. The mid-term plan release is delayed to full-year earnings to incorporate updated cost projections.

Q: If the leading Singaporean cord storage player is suspended for another year, can Stem Cell Institute immediately capture its market share with its current unfinished launch preparations? / A: The incident has created massive consumer uncertainty in the Singapore market, so the market will likely shrink temporarily even as the opportunity opens up. However, this period of uncertainty is an opportunity for the company to build trust, leveraging high consumer confidence in the Japanese brand. Singaporean consumers are very likely to choose the company over the remaining smaller competitors given the current industry distrust, and there is a strong chance to capture significant share long-term once the company launches.