Koukandekirukun,Inc. Q3 FY2025 earnings call

Overall Business Positioning

• Koukan Dekiru-kun operates as a one-stop platform combining digital media for residential equipment information, EC sales, and in-house installation/construction services, creating integrated added value for customers.
• The group structure includes two core subsidiaries: KD Service (handles construction for the core business and expands BtoB construction as a second growth pillar) and IPS (acquired via M&A, leads in-house system development and also sells external IT development services to achieve independent profitability).

BtoB Growth Strategy

• BtoB business is a core pillar of the company's long-term growth strategy. The company prioritizes inclusive partnership frameworks with large leading enterprises instead of chasing individual small orders, focusing on three main business lines: equipment replacement for rental properties, small renovation work for existing owner-occupied homes, and construction/repair services for residential equipment manufacturers.
• Recently signed a business partnership with Nomura Real Estate to provide equipment replacement services for Nomura Real Estate's residential warranty program for existing homeowners. Recruited a former president of a major home electronics retail chain as an advisor to support alliance building and business foundation strengthening.

Replaform Platform Development

• The group is jointly developing the BtoB-focused Replaform platform, which enables partner companies to sell residential equipment online. The platform is expected to drive DX adoption across the residential replacement market, and increased market maturity will also benefit the core BtoC business by growing customer acceptance of online quotes and purchasing.

Capital and Governance Updates

• Completed a third-party allotment capital increase with Itochu Enex Home Life, raising 315 million yen (closed in January 2025) to support growth initiatives.
• Issued performance-linked stock options with vesting conditional on achieving performance targets between FY2026 March and FY2028 March; these targets serve as the base for the company's 3-year medium-term management plan.

1. Jusetsu DX Business (Residential Equipment DX Business): Cumulative 9-month sales reached 6.811 billion yen, up 28.9% year-over-year. It contributes 89.3% of total consolidated revenue. Q3 standalone sales hit 2.614 billion yen, up 33% YoY (a new all-time quarterly high). Gross margin maintained the same level as last year amid rising industry costs. 9-month operating profit was 151 million yen, down 10.5% YoY (a sharp improvement from over -80% YoY decline in Q2). Q3 BtoC construction volume hit an all-time high of 14,778 units, while BtoB construction volume reached 10,447 units (including volume from acquired Hamano Technical Works).
2. Solution Business: This segment was added via M&A in the prior year, so there is no YoY comparison. Cumulative 9-month sales reached 0.908 billion yen, contributing 11.9% of total consolidated revenue. Operating profit was 32 million yen, with both internal development for the parent company and external system development services performing steadily.

• The company is currently preparing a formal medium-term management plan, which is expected to be released alongside the next fiscal year's business plan.
• For Q4 FY2025 March, order growth slowed after December 2024 due to a warmer-than-expected winter that reduced demand for seasonal water heater products. The company expects demand to recover if colder weather arrives from February 2025 onward, and is strengthening sales promotion for non-seasonal products (toilets, dishwashers) to offset the softness in water heater demand.
• The company targets 100 billion yen in annual sales for FY2025 March, which is within reach, with a long-term target of 100 billion yen (correction: 1000 billion yen) in sales, a size that is achievable with a modest market share of the 2.8 trillion yen total residential equipment replacement market.
• For the post-FY2026 March period, the company will prioritize growing top-line sales and continuing branding investment to build brand awareness, rather than immediately shifting to prioritizing profit margin expansion. The company aims to balance delivering a certain level of profit while continuing to fund growth investments, aligned with the performance targets of the issued stock options.

• The slower-than-expected order growth in December 2024 and January 2025 driven by warmer winter weather that suppressed seasonal water heater demand creates near-term uncertainty for Q4 performance.
• The core challenge for the new Replaform platform is not the technical development of the platform itself, but supporting partner companies to successfully use the platform to grow their business, which requires customized advisory and promotion support that adds operational complexity.
• Development resources are split between core core system upgrades and the new Replaform platform development, creating ongoing pressure to maintain sufficient development capacity to deliver on both priorities.

Q: What is driving the consistent long-term increase in BtoC per-construction sales, and will this growth continue? / A: The increase comes from two factors: rising product prices from manufacturers that are passed through to selling prices, and a shift toward higher-end products as branding investment increases awareness among higher-income customers. Management expects this trend will not continue indefinitely, and per-construction sales will stabilize around current levels going forward, with moderate fluctuations.

Q: What is the expected impact of the Replaform platform on BtoB construction volume after launch? What are the key development challenges? / A: Growth of the platform depends on how actively partner companies use it to sell to their own end customers. Management prioritizes helping partners see tangible business results first, so large near-term sales contribution is not expected. However, broader DX adoption across the market will eventually benefit both BtoB and BtoC business long-term. The main challenge is not technical platform development, but helping partners effectively use and promote the platform to generate value, which is the current focus of development and go-to-market efforts.

Q: What is the company's approach to balancing growth investment and profit generation? / A: Management's strategy is to maintain a baseline level of profit while continuing to allocate capital to growth investments. The performance targets for the performance-linked stock options reflect this balanced approach: the company intends to continue growing, but also recognizes the need to deliver returns to investors, so it will not pursue growth at the cost of sustained zero or negative profit.

Q: What is the company's long-term target size for the business? / A: Having nearly achieved the FY2025 target of 10 billion yen (correction: 100 billion yen) in sales, management has set an initial long-term target of 1000 billion yen in sales. This target is reasonable given the total market size of 2.8 trillion yen for residential equipment replacement, as it only requires a modest market share.