Koukandekirukun,Inc. Q3 FY2026 earnings call

Segment Structure Update from M&A

• The company updated its segment reporting structure this quarter, adding two new acquired companies to the existing Jusetsu DX and Solution segment framework: IMI (operating warranty services for housing equipment and dental medical devices) and Kitchen Works (a Sapporo-based renovation company with annual sales of approximately 0.9 billion yen). KCS, which announced its group addition recently, is not included in this quarter's results.
• IMI changed its revenue recognition method upon joining the group, spreading revenue from 10-year warranty contracts evenly over 10 years, so its impact on current quarter sales remains small, though it is expected to contribute meaningfully to profits over the medium to long term.
• Internal group structure: Koukan Dekiru Kun handles marketing and order acceptance, while KD Service manages construction, artisan scheduling, and B2B business from sales to construction.

Recent Operational Initiatives

• M&A Strategy: All M&A deals except the first acquisition of Hamano Technical Works are completed without M&A intermediaries, sourced via management networks and inbound inquiries from target companies, to avoid high intermediary costs and failed acquisition processes. All acquired companies are growing steadily, with no employee or executive turnover issues reported to date.
  • Hamano Technical Works, acquired in July 2024 and merged into KD Service, is a repair-specialized business that handles service technician scheduling for manufacturer maintenance, processing 30,000 to 40,000 cases annually. It has expanded its client base from one initial manufacturer to multiple new manufacturers using the group's sales capabilities.
  • A new 34-employee company with existing trading ties to IPS will join the group soon, with high strategic fit expected to drive future growth.
• Talent Development: The Koukan Skill Academy was founded in November 2024 to train housing equipment construction artisans called

Consolidated net sales for the first nine months of the fiscal year was 8.994 billion yen, an 18% increase year-over-year. Overall operating profit, ordinary profit, and net income reached a breakeven balance at the end of the third quarter.

1. Jusetsu DX Business: Net sales grew 19.7% year-over-year (approximately 20% growth), reaching 123.3% of the prior year period sales including the newly acquired Kitchen Works. Excluding Kitchen Works, the core Koukan Dekiru Kun business still delivered positive growth. Gross profit margin was 9.9%, and is currently in a recovery trend returning to historical levels. Cumulative operating profit for the fiscal year through the third quarter reached 130 million yen. After accounting for ongoing branding investment, system development investment for B2B platform Replaform, and costs related to M&A and capital alliance initiatives, this result was almost exactly in line with management expectations. Operating profit for the segment was nearly flat at the end of the third quarter. Construction order volume (excluding Kitchen Works) grew steadily alongside sales, with overall volume maintaining an upward trend, and B2B business (including both equipment replacement and repair-focused services) expanding steadily despite low monthly sales volume.
2. Solution Business: Net sales grew 4.1% year-over-year, with gross profit increasing accordingly. However, due to upfront expenses related to the addition of KCS to the group, operating profit remained flat year-over-year. The business has an inherent characteristic of concentrating full-year profits in the fourth quarter, which explains the current profit trend. Talent acquisition has been very successful, and headcount continues to grow, positioning the business for strong sales growth in the next fiscal year.

Full-Year Fiscal 2026 (March ending) Guidance

• The full-year consolidated sales target remains 12.2 billion yen, with approximately 10 billion yen contributed by the core B2C Jusetsu DX business and KD Service, and the remaining ~2 billion yen contributed by IPS and partial consolidation of Kitchen Works.
• A sharp rebound in market demand trends starting in late December 2025 is expected to drive strong growth in the fourth quarter: after the overall housing equipment market search volume was 90-95% of prior year levels from April to mid-December 2025, demand has risen sharply, and the company expects this rebound to translate to strong fourth quarter profitability, with gross profit margin also improving alongside the demand recovery.

Medium-Term Guidance

• Management feels confident about the achievability of the 3-year medium-term management plan targets. While the targets are challenging, the core Jusetsu DX business already has a solid foundation, and management is progressing initiatives dynamically to achieve the targets through adding new growth drivers to the core business.
• The solution business is expected to grow gradually, with a focus on building a high-margin business model rather than just rapid top-line growth, and it is positioned to contribute stable profits to the group over time.

• While overall market demand for housing equipment was sluggish from April to mid-December 2025, with total search volume down 5-10% year-over-year, the company still delivered growth in this period, and demand has rebounded sharply starting in late December, so this is no longer viewed as a material ongoing risk.
• Current AI tools can only generate rough estimates for housing equipment replacement quotations, and cannot yet handle the detailed custom requirements that come with variable site conditions, so full AI automation of the end-to-end quotation process remains a long way off, though the company is actively testing and adopting AI for applicable workflow steps.

Q: Why has the company not achieved full consolidated profitability yet?

A: The company is currently prioritizing large-scale upfront investment in advertising and branding, particularly TV and taxi ads to increase brand awareness. These investments do not generate immediate proportional profit returns, as they first build awareness before translating to future sales growth, and the company is investing 300 million yen or more annually in this area. Investment is concentrated in the seasonally slower first and second quarters, leading to temporary deficits that are offset by third quarter profitability (the core business is already profitable in the third quarter). Without this upfront investment, the company could achieve 7-8% operating profit margin on an operating basis today, but management has chosen to invest now to scale the business larger for long-term growth. Fourth quarter profitability is also expected given the current strong demand trend. Additional investment related to M&A, capital strategies, and system development also contributes to the current breakeven result.

Q: What specific initiatives have you implemented to improve profit margin?

A: Key initiatives include reviews of sales pricing, prioritization of high-performing products for sales focus, and optimization of procurement costs.

Q: What is the current status of the partnership with Cainz?

A: The partnership is focused on leveraging the company's existing services to strengthen Cainz's renovation business. The three core areas of collaboration are: 1) use of the company's Replaform B2B platform, 2) use of the Koukan Skill Academy for artisan training, 3) use of the company's housing equipment warranty services. The company is currently preparing for a launch in spring 2026, with detailed operational planning ongoing, and the service is expected to launch within a few months.

Q: What is the competitive environment, particularly against Kinraiser?

A: Kinraiser is a highly respected company, but the company does not view it as a direct competitor. Kinraiser focuses on specific product categories such as water heaters, while the company's business has a broader scope, and the company is currently seeing very strong demand for water heaters itself with insufficient construction capacity to meet demand, so there is almost no negative impact from Kinraiser's activity. The overall competitive landscape is fragmented with many diverse players rather than dominated by any single competitor.

Q: How confident are you in achieving medium-term targets, given industry trends?

A: Management feels sufficient confidence in the achievability of the targets. While the targets are challenging and not yet fully guaranteed, the core Jusetsu DX business already has a solid foundation, and management is actively progressing initiatives to add new growth drivers to hit the targets.

Q: What is the origin of Koukan Dekiru Kun?

A: Founder Masashi Kurihara founded the company in November 1998, initially focusing on plumbing repair. In the early 2000s, with the rise of e-commerce platforms like Rakuten and Yahoo Shopping, Kurihara, who had experience with personal computing, launched a website to enter the housing equipment business. At the time, e-commerce mostly focused on product sales, but housing equipment requires custom selection, quoting, and installation, which created a niche for the company's integrated service model that the company has operated in ever since.

Q: What synergies do you expect from IPS?

A: There are two core objectives for the acquisition of IPS, a system development company. First, IT is the core foundation of the company's business, and acquiring IPS strengthens the company's in-house development capabilities, secures necessary engineering talent, and ensures stable long-term operation of the company's IT infrastructure amid industry-wide engineering shortages and the need to adopt new generative AI tools. Second, the broader renovation industry is still underpenetrated in terms of digital transformation, which creates a market opportunity for the company to offer IT development services to the industry. IPS is already accumulating renovation industry expertise, and currently handles contracted system development for specific housing equipment manufacturers, with plans to expand to target IT companies and real estate companies for system development work going forward.

Q: Can you share more details on the Cainz partnership?\nA: Amid expected declines in new housing starts, housing-related companies and home improvement retailers need to adapt to market changes and find new growth areas, and the renovation market is a key attractive growth opportunity. However, renovation is complex, hard to standardize, and difficult to generate profits with, which is a pain point for many retailers. Cainz partnered with the company to leverage the company's proven profitable integrated model for renovation services, and both companies share a common goal of growing the renovation industry together through collaboration. The company is providing support as part of the capital alliance, with deepening collaboration planned going forward.

Q: What new business areas do you plan to expand into next?

A: The company has now largely built out the core capabilities it has planned since its IPO, so it is currently shifting to a phase focused on monetizing the existing diversified business portfolio rather than adding large numbers of new business lines. The company will still evaluate attractive M&A opportunities of meaningful scale if they arise, but the current priority is commercializing and scaling the existing base of initiatives.

Q: How do you view the impact of AI development on your business, particularly for quoting?

A: It is currently uncertain whether AI will be an overall positive or negative, but management believes that the company's approach is aligned with industry trends and AI will ultimately be positive for the business. Usage of AI chat tools is already growing among customers, but current AI can only generate rough quotations, and cannot handle the custom detailed requirements of housing equipment replacement that depend on site-specific conditions. While full AI automation of end-to-end quoting is still far off, there are many steps across the order-to-delivery workflow where AI can be effectively used already. The company is continuously evaluating adding AI capabilities to its big data systems, though large-scale model training requires massive amounts of data, so there is no material immediate impact. AI is already being used in multiple parts of the company's operations, and the company plans to continue proactively adopting useful AI tools.

Q: What is the outlook for the Solution business?

A: While some market growth is expected for system development overall, the company's priority for the Solution business is not just top-line growth, but building a stable, profitable business with strong fundamentals. The core strategy is to provide high value-added development and IT services to businesses in adjacent sectors that have not yet completed digital transformation. The core goal is to generate profits that contribute to the group's overall results, which is the standard applied to all group businesses including the Solution segment.