Decollte Holdings Corporation Q4 FY2025 earnings call

Overall Financial Results:

• Delivered record-high total revenue of 6.046 billion yen, up 8.2% year-on-year, 0.9% above initial forecast. Operating profit reached 294 million yen, up 34.3% year-on-year, 5.5% above forecast. Net profit was 140 million yen, up 37.1% year-on-year, 22.3% above forecast, even after absorbing a 140 million yen impairment loss from unprofitable anniversary photo store closures in Q4.

Strategic Partnership and Customer Acquisition Expansion:

• The capital and business alliance with IBJ Group has delivered results: July-September 2025 referral volumes exceeded agreed targets. IBJ is conducting a tender offer for DeColte shares to increase its stake from under 33% to a maximum of 50.1%, with DeColte management endorsing the transaction (while remaining listed). Additional referral partnerships have been established with domestic wedding operators and jewelry retailers, expanding non-website customer acquisition channels. Due to a 3-month lead time from booking to shooting, revenue contributions from these new referrals will be reflected starting from the 2026 September period.

Photography Business Improvements:

• Photo Wedding: Refreshed sales workflows and manuals, improved service quality, which lifted closing rates and customer satisfaction. Resolved most cross-store personnel imbalances, reduced turnover, and tested diversified store opening formats, including a low-investment conversion opening in Utsunomiya that repurposed an existing building. The new registration photo service "Maripic!" is growing steadily and has already converted some customers to full photo wedding bookings. Original high-priced wedding dresses are gaining strong customer traction.
• Anniversary Photo: Launched a dual-brand test of HAPISTA and the new Ashery brand at the Nishinomiya store to target diverse customer preferences for children's photography. Shifted acquisition strategy to prioritize local community promotion over digital advertising, which has delivered positive early results. Closed all identified unprofitable locations, and the new HAPISTA store at Tachikawa Tachihi opened in 2025 September period with a strong start.

Brand and Inbound Growth:

• Company photographers won consecutive awards at the international SWPP contest, the Japan Wedding Photo Grand Prix, and the Fujifilm commercial photo contest, strengthening brand credibility. Inbound shooting volumes grew 62.1% year-on-year, with the partnership with I-Primo Hong Kong exceeding first-year customer acquisition targets for the Hong Kong and Macau markets. The company is expanding outreach to other Southeast Asian markets via trade fair participation.

1. Photo Wedding Service: Revenue increased by 413 million yen year-on-year, reaching a total of ~57.4 billion yen for the full year 2025 September period, accounting for approximately 95% of total company revenue. Full-year shooting volume and average shooting price both exceeded year-ago levels, with full-year revenue up 7.6% year-on-year. 2. Anniversary Photo Service: Revenue increased by 50 million yen year-on-year, with 6 unprofitable stores closed (3 in 2024 September period, 3 in 2025 September period), and profitability has improved after store rationalization. 3. Fitness Business: Decreased revenue by 6 million yen year-on-year due to the closure of 1 store.

• For the 2026 September fiscal year, management forecasts total revenue of 6.481 billion yen, representing 7.2% year-on-year growth. Operating profit is forecast to reach 453 million yen, up 53.9% year-on-year, with operating margin increasing 2.1 percentage points to 7.0% following the completion of unprofitable anniversary photo store closures.
• The company will accelerate new store openings: 2 new photo wedding stores (one in an untapped regional city, one in an underserved high-potential existing market) and 2 new anniversary photo stores in the high-population Tokyo metropolitan area, for a total of 4 new openings in 2026 September period, up from 2 new openings in 2025 September period.
• The medium-term strategic plan to 2028 September period remains unchanged, with a final target of 9.0 billion yen in total revenue and 10% operating margin.
• The company targets expansion into new life photography segments across all age groups, including children's photography, coming-of-age ceremonies, and senior celebration events, to build a full life-stage photography company with a total addressable market estimated at approximately 1 trillion yen.

• The photo wedding business has large seasonal swings in demand, with the Q2 (winter) and Q4 (summer) quarters historically being weak demand off-seasons.
• Personnel recruitment remains a persistent challenge for some regional stores, despite overall progress in resolving cross-store personnel imbalances.
• Current referral volumes from IBJ are heavily concentrated in IBJ's directly operated locations, with very low contribution from IBJ's non-affiliated franchise partner locations, which is a key barrier to accelerating overall referral growth.
• Inbound revenue still accounts for a very small share of total revenue, and scaling this segment will require sustained additional investment and market development.

Q: What share of total sales currently come from IBJ referrals and inbound business? / A: Due to the 3-month lead time between booking and shooting, revenue from IBJ referrals will not be reflected until the 2026 September period, so no clear share can be provided at this stage. Inbound sales also still account for a very small share of total revenue, and growing this segment is a core priority for future efforts.

Q: How do referral fees impact overall profit margins for partner-sourced customers? / A: DeColte pays referral fees to all partner companies including IBJ. The company's annual advertising spend is consistently below 10% of revenue, and referral fees are set at a similar level to existing customer acquisition costs. As a result, there is no material difference in profit margin between partner-referred and website-acquired customers.

Q: Has the process of closing unprofitable anniversary photo stores been completed, or will more closures happen? / A: A total of 6 unprofitable anniversary photo stores have been closed over the past two fiscal years (3 in 2024, 3 in 2025). Management believes the rationalization process is now fully completed. Going forward, the company will focus entirely on opening new profitable stores and growing sales and profit for the anniversary photo segment.

Q: Is there still room to improve utilization rates at existing stores? / A: Management believes there is ample room to increase utilization and shooting volumes at existing stores. Through continued personnel training and optimized cross-store personnel allocation, the company can accommodate further growth in customer demand.