Fibergate Inc. Q2 FY2025 earnings call

Overall Financial Result

• The company reported year-over-year revenue growth but net profit decline for the quarter; overall full-year progress is slightly behind plan, but cash flow improved significantly, with 0.92 billion yen in second quarter free cash flow surplus.
• The shift to selling Wi-Fi equipment to property owners instead of holding it as fixed capital reduces future property tax obligations, simplifies business processes, cuts indirect overhead, and reduces investment cash outflow, leading to higher free cash flow. The company is gradually shifting from an investment-led cash flow pattern to an operating cash flow-led model.

Cross-selling Strategy for Home Use

• The company offers 9 out of 11 key digital tools for rental properties (including security cameras, bundled internet, intercoms, parcel lockers, solar power systems), which increases customer touchpoints, deepens client relationships, and drives future order growth. Upcoming cross-selling priorities include EV charging stations and parcel locker installation services, which are supported by government subsidies.

Strategic Transformation

• The company is transforming into a "premises infrastructure integrator" (its own terminology), proving that venture firms can deliver on-premises communication infrastructure (historically dominated by large firms with high capital requirements). The next phase is combining communications and renewable energy to complete the business transformation.

Operational Capability Building

• Sales Force Strengthening: The company faces a shortage of sales personnel due to tight labor markets and limited candidate supply for experienced mid-career hires. It is prioritizing expansion via new recruitment programs including alumni hiring and senior hiring, and is allocating investment budget to proactively secure talent.
• Strategic Growth Investment: The company is strengthening communication construction capabilities and expanding into operations and maintenance (O&M) for renewable energy, prioritizing service quality differentiation. It is also open to M&A to acquire capabilities and accelerate growth, improve service quality, and raise customer satisfaction.
• Back-office digital transformation (DX) is underway in parallel with sales expansion.
• Mid-term target: Increase operating profit per employee from the current 10 million yen to 15 million yen, which will enable corresponding salary increases for staff.

New Operational Pilots

• The company launched a pilot test of on-bus Wi-Fi on all vehicles of Kumamoto Electric Railway's route bus fleet, to measure impacts on customer satisfaction and inform future product development for the transport segment.
• The company is running pilots and tests to prepare for the launch of on-premises Virtual Power Plant (VPP) services, an unexplored market space.

1. Home Use Business: Performed solidly with continued accumulation of recurring revenue (stock). Total connected residences reached 650,000 units, with the share of new construction projects in newly opened units rising from 38% year-over-year to 55%. Cross-selling of additional digital tools accounts for just under 15% of segment revenue, with steady traction, and ARPU per unit/building is gradually increasing. No absolute revenue figures are provided in the transcript.
2. Business Use Business: Recurring revenue (stock) is growing steadily, but one-time flow revenue struggled in the first half, with large high-value projects concentrated in the second half. The segment focuses on three core verticals: medical/nursing care (steady performance), public/transport/logistics, and tourism. Tourism is seeing growing inbound-driven capital inflow, and the segment is prioritizing expansion into ICT projects for secondary transport (buses, taxis, hire cars). No absolute revenue figures are provided in the transcript.
3. Renewable Energy Business: The business is in early stages, having started cross-selling to existing customers via existing sales channels this fiscal period, with order growth concentrated in new construction projects. No absolute revenue contribution is provided.

• Full-year 2025 June fiscal year guidance is maintained, with a target of 14.3 billion yen in total revenue. The company is committed to achieving this target despite first half progress reaching only 37%, requiring 63% of full-year revenue to be delivered in the second half, when large Business Use projects are concentrated.
• The Home Use business retains a full-year target of 700,000 connected residences, putting the company on track to reach its long-term target of 1 million connected residences.
• The company approved a share repurchase program of up to 150,000 treasury shares, with a maximum total value of 0.17 billion yen, running from approval through the end of the 2025 fiscal year. The program is intended to improve ROE/ROIC and reduce WACC, and increase shareholder returns.
• The previously planned interim dividend of 13.5 yen per share will be implemented as scheduled, despite operating profit reaching only 37% of full-year guidance.

• Labor market tightness is more severe than expected, leading to insufficient supply of experienced sales candidates, which could constrain growth if hiring efforts do not succeed.
• The Business Use business has a longer lead time from order to delivery than the Home Use business, so slower-than-expected order conversion or delivery could negatively impact full-year results, given the heavy second half weighting of full-year revenue.
• Profitability was negatively impacted in the quarter by the shift to selling equipment (rather than holding it as fixed assets), which recognizes full cost immediately rather than depreciating over time, reducing near-term gross profit even with the same revenue.
• Renewable energy and VPP services are new, unproven markets with no guarantee of commercial success.

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