Wagokoro co.,ltd. Q3 FY2025 earnings call

• Overall Financial Performance

  • For the 2025 3Q cumulative period, the company reported 2.023 billion yen in consolidated revenue (27.4% year-over-year growth), 449 million yen in operating profit (41.6% year-over-year growth, already exceeding full-year 2024 operating profit), and 466 million yen in net income (47.0% year-over-year growth). The operating margin improved 2.2 percentage points to 22.1% year-over-year, hitting a new record high profit for the second consecutive quarter.
  • For the single third quarter (July-September 2025), consolidated revenue was 726 million yen (27.5% year-over-year growth), operating profit was 177 million yen (41.6% year-over-year growth), and net income was 199 million yen (65.6% year-over-year growth), with operating margin improving 2.4 percentage points to 24.3%.

• Inbound MD Business Operational Updates

  • The segment has shifted from opportunistic site selection to targeted strategic site expansion, with improved new store opening success rate. New stores in Asakusa and Kyoto's Kiyomizu-Ninenzaka area started strong and quickly entered the top 10 performing stores company-wide. The company now operates 35 stores across Japan, with a 9-month average payback period for new store initial investment enabled by the in-house end-to-end "Super SPA Model" covering product development, manufacturing, store design/construction, and marketing.

• Corporate Infrastructure Upgrades

  • HR and recruiting overhaul is led by the new CFO, with the CEO participating weekly to align with frontline teams; back-office functions (marketing, production management, design) are now operating stably.
  • As of the end of September 2025, cash and deposits exceed 500 million yen, the equity ratio improved from 40.7% to 60.6%, and borrowing capacity has increased significantly, providing sufficient capital for future growth investment.
  • The company has transitioned from an unstable incremental growth model to a robust structure supporting stable long-term growth.

• Growth Strategy

  • New business development is in the exploration and validation phase, with dedicated resources under the CEO's office pursuing a slow, deliberate approach to growing new opportunities rather than rushing for quick hits.
  • The company is actively exploring M&A opportunities, with a focus on targets that offer high synergy with existing businesses; no definitive deals have been reached at this stage.

• Other Segment Operational Updates

  • Anime & Game MD Business: delivered 263 orders (6% year-over-year growth) totaling 221,780 units in the period, serving major clients including NHK Enterprises, KADOKAWA, and Bandai; it holds a unique position in the low-competition Japanese miscellaneous goods niche. Growth will slow in 2025-2026 as resources are prioritized for the Inbound MD Business, with accelerated expansion planned for 2027 after sales team hiring and training is completed.
  • Sauna & Vacation Rental Business: operates differentiated high-quality sauna accommodation, with standardized operations enabling fast, low-cost expansion and early profitability. Two new locations opened in 2025 (Kanazawa in April, Shibuya in September), leveraging existing Inbound MD business resources and synergy to capture tourist and inbound demand.

For the 2025 3Q cumulative period (January-September), total segment revenue before corporate overhead allocation was 2.02 billion yen, with the following segment performance: 1. Inbound MD Business: 1.55338 billion yen in revenue, accounting for 76.9% of total segment revenue; 527 million yen in operating profit before allocation, accounting for 85.0% of total segment operating profit, and remains the core profit driver of the company. The segment achieved a 77.3% gross margin and 33.8% operating margin for the period. 2. Anime & Game MD Business: 288.86 million yen in revenue, accounting for 14.3% of total segment revenue; 61.38 million yen in operating profit before allocation, accounting for 9.9% of total segment operating profit. 3. Sauna & Vacation Rental Business: 139.38 million yen in revenue, accounting for 6.9% of total segment revenue; 22.32 million yen in operating profit before allocation, accounting for 3.6% of total segment operating profit, with pre-opening idling costs included in the current period's results. 4. IT Business: 32.32 million yen in revenue, accounting for 1.6% of total segment revenue; 9.3 million yen in operating profit before allocation, accounting for 1.5% of total segment operating profit. 5. Other: 4.04 million yen in revenue, accounting for 0.2% of total segment revenue; 1.24 million yen in operating profit before allocation, accounting for 0.2% of total segment operating profit. All business segments maintained profitability in the period.

• The company maintained its full-year 2025 consolidated guidance, keeping forecasts unchanged at 2.8 billion yen for revenue and 520 million yen for operating profit, versus 2024 full-year actuals of 2.09 billion yen revenue and 410 million yen operating profit.
• The unchanged (held back) guidance reflects management's plan to make strategic pre-spending on recruitment/training, R&D, and facility upgrades to support future growth, even though the core Inbound MD business is performing ahead of plan.
• Long-term growth guidance targets non-linear growth via expansion of existing core businesses plus investments in new business development and M&A.
• The company does not plan to initiate dividends at this stage, and aims to reach a stage where it can balance growth investment and shareholder returns in the near future by continuing to strengthen operating cash flow and its financial base.

• Inbound tourism demand, the core driver of the company's largest business, is highly vulnerable to external shocks. In July-August 2025, an unforeseen social issue caused a sharp drop in inbound visitor numbers, which highlighted the inherent volatility of tourism-focused business.
• While the company's results hit initial budget targets despite the Q3 demand shock, internal expectations were higher, leaving some unmet growth ambition for the quarter.
• The company is still in a growth phase, and has not yet built up sufficient capital reserves to cover all planned growth investments and shareholder returns simultaneously, so dividend initiation is deferred to a later stage.

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