FinTech Global Incorporated Q2 FY2025 earnings call

• Overall Consolidated Performance

  • Total consolidated revenue increased 3.7% YoY to 6.797 billion yen
  • Gross profit increased 11% YoY to 4.294 billion yen
  • SG&A expenses increased 14% YoY, so operating profit increased 6.9% YoY to 1.759 billion yen, and ordinary profit increased 7.8% YoY to 1.711 billion yen
  • Profit attributable to parent company shareholders remained flat YoY at 1.291 billion yen, due to the absence of the 241 million yen negative goodwill special gain recorded in the prior year period
  • Total assets increased 3.007 billion yen from the fiscal year-end to 23.676 billion yen, net assets increased 531 million yen to 11.284 billion yen

• Core Business Progress

  • PE investment for business succession deals continued to drive growth: H1 revenue from business succession related deals reached 2.5 billion yen, up 500 million yen YoY. Full-year revenue is projected to reach 4.3 billion yen, 300 million yen above the prior year's actual result. New investment in small and medium-sized deals progressed smoothly in Q2, and the company secured priority negotiation rights for new large acquisition deals to build pipeline for future growth
  • Entertainment business turnaround: The Metsä complex (including Moomin Valley Park) recorded an 11.1% YoY increase in visitor numbers to 376,000 visitors. Pricing adjustments (cutting child one-day pass advance ticket prices from 2,000 yen to 1,000 yen and expanding child pricing to middle and high school students) boosted visitor numbers and lifted overall customer spend including merchandise and food and beverage. Off-season marketing events also drove visitor growth, combined with cost reduction initiatives to deliver the first profitable segment result
  • Talent investment: To address industry-wide labor shortages, the company raised average full-time employee salaries by approximately 30% starting April 2025, and increased entry-level university graduate starting monthly salary from 265,000 yen to 350,000 yen
  • Capital management: The company completed a 300 million yen share repurchase in February 2025, and approved a second round of repurchase with a 300 million yen upper limit in May 2025 for shareholder returns, improving capital efficiency, strategic M&A use and restricted stock compensation delivery

• Strategic Priorities

  • ROE is positioned as a key management metric to maximize shareholder value, with a target of sustainably maintaining ROE above 20% (ROE was 21.6% in FY2023, 18.8% in FY2024)
  • Business succession investment is the core growth driver, with increasing inbound deal referrals from financial institutions, accumulated origination expertise, growing team size and improved fundraising capacity, positioning the business for continued expansion

1. Investment Banking Business: Segment revenue was flat year-over-year. Gross profit increased 6.2% YoY to 3.781 billion yen, driven by growth in high-margin private equity investment revenue. Selling, general and administrative (SG&A) expenses rose 16.7% YoY to 1.522 billion yen, due to initial costs for the newly opened Hyper Museum Hanno in Metsä Village and increased advertising spend for Metsä. Segment profit grew only 0.2% YoY to 2.258 billion yen, accounting for approximately 96% of total consolidated segment profit. Within this segment, private equity investment saw growing revenue and profit from smooth investment exits, business succession related deal origination was on track but overall revenue fell YoY due to timing of large deal upfront fee recognition and the prior year's large deal exit compensation. Vehicle operating leasing sales more than doubled YoY to exceed one quarter of total contracted business revenue. Asset investment revenue decreased YoY following the sell-out of small-lot real estate products in 2024. Aviation business recorded decreased gross profit for technical inspection services due to extended lease contracts from aircraft shortages, but completed 2 aircraft leaseback transactions, with 2 more planned for H2. As of Q2 end, total investment and loan balance increased 16% QoQ to 9.13 billion yen, with principal investment up 22.2% QoQ to 3.462 billion yen. Accumulated PE fund formation for business succession deals in H1 was 29.9 billion yen, down 9.4% YoY. Asset management AUM increased 2.1% from end-December 2024 to 163 billion yen.
2. Public Consulting Business: Revenue increased 4.3% YoY on growth in administrative planning support services. Increased headcount for business expansion pushed up personnel costs, resulting in a segment loss of 18 million yen. This segment accounts for less than 1% of total consolidated revenue.
3. Entertainment & Service Business: Revenue increased 21.4% YoY to 1.467 billion yen, driven by higher visitor numbers and increased ticket, merchandise and food and beverage sales following price adjustments. The segment improved its segment result by 240 million yen to a profit of 97 million yen, turning to net positive profit. This segment accounts for approximately 21.6% of total consolidated revenue.

• Full-year 2025 September fiscal year consolidated guidance is maintained, unchanged from the prior announcement in November 2024
• Full-year revenue is projected to be 12.3 billion yen, down 10.9% YoY, due to the completion of most real estate development and small-lot real estate investment product sales in the prior fiscal year
• Full-year operating profit is projected to be 3.1 billion yen, up 20.6% YoY, driven by increasing PE investment returns from business succession deals
• Full-year dividend guidance is maintained at 3 yen per share, a 1.5 yen per share increase from the prior fiscal year, following the resumption of dividends in the prior period
• Business succession deal full-year revenue is projected at 4.3 billion yen, 300 million yen above prior year actual results, with the projection only including confirmed investment exit amounts as of the Q2 earnings release
• Two additional aviation leaseback transactions are projected to close in the second half of the fiscal year

• The investment exit revenue from the large PE deal originated in Q1 has not been confirmed as of the Q2 earnings release, creating uncertainty around the timing and amount of related revenue recognition
• Higher SG&A expenses from the April 2025 salary increase and other rising cost pressures create downward risk to full-year profit
• The public consulting business is currently in a pre-profit investment stage, with near-term losses expected as the company expands headcount and grows the business
• Aviation business profitability is pressured by extended aircraft lease contracts that reduce the volume of technical inspection services at lease return
• Operating cash flow was negative in H1, driven by increasing receivables from revenue growth and upfront investment for growth, though this is fully covered by increased borrowing from financial institutions

No question and answer section was included in the provided earning call transcript.