FP Partner Inc. Q1 FY2025 earnings call

• Quarterly Core KPI Performance

  • Total sales employees: 2,546, up 6% YoY
  • New contracted cases: 56,931, down 1.1% YoY; potential insurance customers: 36,347, down 9.4% YoY due to intentional efficiency-focused cuts to partner-led customer acquisition
  • Total held contracted cases: up 18.4% YoY to 1.791 million; total held customers: up 13.3% YoY, growing steadily
  • In-house customer acquisition: up 14.7% YoY, showing consistent progress
  • Life insurance commission revenue began declining from 4Q 2024 after 15 years of consistent quarterly growth

• Profit Impact Explanation

  • Lower sales of high-margin protection-focused insurance products, driven by shifting customer demand toward savings products and regulatory guideline preparation uncertainty that reduced frontline sales activity for protection products
  • Lower protection product sales reduced the overall business quality support premium rate, leading to a 450 million yen shortfall in business quality support revenue against 1Q plan
  • The discontinued advertising business reduced 1Q revenue by 48 million yen
  • Growth investments in systems and hiring increased selling, general and administrative expenses as planned

• Short-Term Recovery Initiatives

  • Shift hiring focus from inexperienced new hires to immediately available experienced talent, cutting average time to active deployment from 55 days to 50 days; referral hiring for experienced producers is prioritized to improve new hire quality, with applicant volume up 130% YoY
  • Assign unassigned in-house held contracts (approximately 100,000 total) to sales employees specialized in customer follow-up to pursue new and additional contracts from existing customers
  • Complete full system overhaul to standardize data management and strengthen customer follow-up processes, paired with upgraded sales training to drive new contract growth

• Long-Term Growth Strategy

  • Expand contract transfer business: ongoing strong inbound inquiries from agencies amid new insurance industry guideline development, with 29 ongoing negotiations in 1Q, targeting 100,000 total transferred cases this term
  • Expand Money Doctor Premier in-store consultation business: target 50 stores by 2026 November term, currently all stores are fully booked on weekends
  • Expand non-life insurance as a new recurring (stock) revenue stream
  • Grow IFA business by leveraging cross-selling opportunities from the existing customer base
  • Launch new financial literacy education business "Manesuku", currently deployed as a employee benefit at 8 large corporations

• Corporate Governance & Capital Strategy

  • Maintained ROE above the 12.49% cost of equity at 31.9% in the 2024 full term; will continue prioritizing growth investment for contract transfer, DX, and human capital, paired with stable shareholder returns
  • Introduced progressive dividends, targeting a 45% payout ratio; maintained planned dividend of 47 yen interim / 47 yen final (94 yen total) and shareholder benefit program unchanged
  • Addressed Tokyo Stock Exchange Prime Market listing maintenance requirements: raised the floating share ratio to 35.06% as of February 2025, and will continue stabilizing it above 35% via equity incentive grants and gradual selling by large shareholders

Overall company net sales for the 1Q 2025 November term reached 8.332 billion yen, a 0.005% decrease year-over-year. Operating profit was 797 million yen, down 41.5% YoY; ordinary profit was 805 million yen, down 42.2% YoY; and quarterly net profit was 529 million yen, down 43.6% YoY. The company operates 4 core growth product/segment areas, with the following performance and targets: 1) Contract transfer business: 4,981 agreed transfer cases in 1Q, a large YoY drop caused by a one-off 23,000-case large transfer in the prior-year quarter, which is in line with internal plan. The full-year target is 100,000 transferred cases, with a 1 billion yen target for new contracted annualized net premium. 2) Money Doctor Premier business: 30 stores currently operating across major Japanese cities, with full-year new contract target of 2.5 billion yen. 3) Non-life insurance business: 47,221 agreed transferred contracts achieved in the prior full year, with full-year commission revenue target of 1.389 billion yen. 4) IFA business: 7,794 securities accounts and 29.4 billion yen in assets under management as of 1Q, growing rapidly after the launch of new NISA.

• Management maintains the original full-year 2025 November term earnings guidance, with 1Q achievement rates of 20.7% for revenue, 13% for operating profit, 13.1% for ordinary profit, and 13.1% for net profit
• Management expects that the three core recovery initiatives (experienced-focused hiring, existing contract follow-up, system/education upgrade) will drive performance improvement starting from 2Q, and that the full-year guidance target is achievable
• The 700 full-year new hiring target is still expected to be met, despite delayed start dates for some new hires from negative press impacts, as delayed hires are scheduled to join in the second half of the fiscal year
• All long-term segment growth targets (100,000 contract transfers, 1 billion yen new ANP for contract transfer, 2.5 billion yen new contracts for Money Doctor Premier, 1.389 billion yen non-life insurance commission) are maintained

• Negative press coverage and ongoing regulatory inspections have caused delayed onboarding for accepted new hire candidates, though the impact on full-year hiring targets is expected to be limited
• Ongoing changes to insurance industry regulatory guidelines have created uncertainty for frontline sales teams, leading to slower sales activity for protection-focused products in 1Q
• Shifting customer demand toward savings-focused products amid market and interest rate changes has reduced the proportion of high-margin protection products in the sales mix, pulling down overall profitability
• The company's floating share ratio was only marginally above the 35% Prime Market requirement as of February 2025, requiring continued actions to maintain compliance

Q: Is the 1Q profit shortfall caused by a worse-than-expected product sales mix? Can we expect rapid improvement in the product mix after 2Q, given planned hiring growth? / A: The main driver of the profit miss is a drop in sales of high-margin protection-focused insurance products. Business quality support premium rates are 3-4x higher for protection products than for savings products, and the rate is calculated based on recent new protection sales volume. The large drop in protection sales pulled down the overall premium rate, leading to a 450 million yen revenue shortfall even as overall level payment new business was solid. Current uncertainty around new industry guidelines has also created frontline sales hesitation that reduced protection product sales. Management confirms there is room for product mix improvement, and will focus on educating customers on the need for protection coverage while adapting to new guidelines to restore profitability through the second half of the year.