Entrust Inc. Q2 FY2026 earnings call

• Core Business Performance
  • Consolidated total revenue grew 15.8% YoY (double-digit growth), and operating profit grew 122.4% YoY
  • The key driver of outsized profit growth was a net decrease in allowance for bad debts and guarantee performance reserves, driven by improved collection performance and improved credit quality at integrated PRL/RR, against the expectation that bad debt allowances would normally rise with revenue growth
  • The company holds no interest-bearing debt, cash holdings continue to grow steadily, and unearned revenue increased 11.6% YoY, indicating stable operations
• M&A Integration
  • PRL, which acquired RR via M&A, completed the absorption merger of RR, and after strengthening underwriting standards and collection capabilities, it now contributes solidly to consolidated profit, with improved credit quality of its existing customer portfolio
• New Segment Progress
  • Medical Expense Guarantee has entered a formal growth phase after an initial period of customer education, with the hospital-paid Sumahosu product as the mainstream offering; the long-term target is to acquire 10-20% of the over 8,000 eligible hospitals in Japan
  • Nursing Care Expense Guarantee is seeing rapidly growing inquiries, so the company is allocating additional personnel resources to support continued growth, with accident-insurance-inclusive nursing guarantee as the core offering
• Strategic Partnerships
  • The regional bank partnership model leverages regional banks' existing local relationships with real estate management companies and owners to expand rent guarantee business efficiently without Intrust needing to build out its own regional branch network, with 4 banks already partnered and strong ongoing interest from additional banks

1. Guarantee Business: This is the core growth segment of the company. The largest sub-segment, Rent Debt Guarantee, saw steady growth in both new contracts and renewal fees; the M&A-acquired Racoon Rent (RR) has been integrated into Premier Life (PRL) and now contributes steadily to consolidated profit, and total outstanding contracts continue to grow steadily. Medical Expense Guarantee grew 141.6% YoY, with 239 contracted medical institutions and a 95% retention rate. Nursing Care Expense Guarantee grew 155.4% YoY, with 115 contracted nursing operators and rapid quarterly sales growth. Child Support Guarantee is also being developed as an additional new guarantee segment. 2. Solution Business: The segment is seeing a slight decline in revenue as legacy solution products are transitioned to higher-fee guarantee products, which is a planned product shift rather than underlying business weakness. A new offering, the Regional Bank (Chigin) Rent Guarantee System Model, had 2 new regional bank partners added this fiscal half, bringing total partners to 4; Intrust acts as a partner rather than competitor, providing guarantee know-how and systems for initial consulting fees plus ongoing service fees.

• Full-year 2026 March fiscal year guidance is maintained at 12 billion yen revenue and 2.6 billion yen operating profit. First half progress is 48.8% of the full-year target, which is considered on track for full-year achievement
• The long-term strategic direction remains unchanged: as a comprehensive guarantee service company, it will continue to center on rent guarantee (residential and commercial), and strategically expand into medical, nursing, and child support guarantee, growing these segments to become the company's second and third core business pillars
• For shareholder returns, the company maintains its target of reaching a 60% payout ratio. The 2026 March fiscal year payout ratio is on track to hit 50.5% (meeting the current commitment), with a planned 47 yen per share dividend (achieving 60% payout ratio) targeted for the next fiscal year (the final year of the current medium-term plan)
• Management expects the current medium-term plan target of 15 billion yen revenue and 3.0 billion yen operating profit is within reach and likely to be achieved
• The next 3-year medium-term plan will be prepared and announced as early as possible next year, with a target of delivering higher growth than the current plan
• The company continues to work toward relisting on the Tokyo Stock Exchange Prime Market, addressing the key requirements of trading distribution ratio, distributed market capitalization, and 250 billion yen market capitalization threshold through steady progress, with updates to be provided via future IR announcements

• Rapid growth in demand for nursing and medical guarantee could lead to personnel shortages if resource allocation is not managed appropriately, requiring proactive capacity planning
• For medical expense guarantee, lower delinquency rates at partner hospitals could lead to temporarily lower guarantee fees under the current performance-based pricing model, though management expects this effect to level off as delinquency rates stabilize
• The company still needs to meet multiple regulatory requirements to complete relisting to the Prime Market, including distributed share ratio and market capitalization thresholds, which require ongoing work to achieve
• While the solution to guarantee product transition is planned, it creates a temporary drag on solution segment revenue during the transition period

Q: What are the drivers of the sharp operating profit growth this quarter? / A: The first driver is solid top-line revenue growth across core business segments. The second major driver is a reduction in the allowance for bad debts. Strong collection performance across PRL, RR and Intrust's core business meant bad debt reserves did not grow in line with revenue, and the reduced reserve had a direct positive impact on the profit and loss statement, leading to sharp profit growth.

Q: Can the strong growth of medical and nursing guarantee continue, and what concerns does management have for these segments? / A: Nursing guarantee has a similar business model to rent guarantee, with more straightforward reserve setting and case resolution. For medical guarantee, pricing is performance-based so lower delinquency can temporarily reduce guarantee fees, but management sees that delinquency declines are already leveling off, so steady revenue growth is expected from this segment going forward. Both segments are positioned for continued growth.

Q: What is the revenue structure of the regional bank partnership model? / A: The model works by regional banks launching their own rent guarantee business via a subsidiary, and Intrust provides its existing system, underwriting know-how and operational support. Intrust collects an initial one-time setup fee for system and know-how access, plus ongoing recurring fees for continued service provision. Four regional banks are already partnered, and there is strong additional interest from other regional banks.

Q: What is Intrust's differentiation from other rent guarantee competitors? / A: Most competitors offer relatively similar products, but Intrust's core differentiation is its longstanding focus on strict underwriting to control delinquency. This focus has created stable bad debt performance, and it has attracted partnerships with top regional and national real estate management companies that share this focus on stable credit quality. Intrust continues to also focus on meeting customer requirements for pricing, underwriting speed, and collection compliance.