Fibergate Inc. Q3 FY2025 earnings call

Exchange Listing Update

• The company has applied to list on the Tokyo Stock Exchange Standard Market, after being listed on the Prime Market. Management determined the Standard Market is a more appropriate market segment for the company's current status, and is moving forward with the application process.

Operational Progress

• Stock revenue continues to grow steadily across both core business segments.
• In 3Q, quarter-over-quarter revenue decline was driven by the absence of large one-off real estate sales that were recorded in 2Q; excluding this impact, revenue increased sequentially. Year-over-year, revenue is also higher after adjusting for prior year 3Q real estate sales.
• A new partnership with Sony Network Communications has been established to launch a new direct-to-consumer high-speed fiber service, addressing unmet demand from multi-family occupancy for faster, premium-tier connections.

Growth Regeneration Strategy for FY2026/6

• Address ongoing manpower shortages through continued hiring paired with structured employee training, to expand customer reach and develop new solutions aligned with changing market conditions.
• Continue company-wide productivity improvement initiatives through system overhauls and improvements to construction expertise and change management capabilities.
• Restructure the sales organization from separate business-unit segmented teams to a unified regional structure, enabling cross-segment sharing of expertise and capturing synergies between home-use and business-use operations.
• Expand into new direct-to-consumer (B2C) services and usage-based billing models, responding to diversified customer demand that existing services do not address.
• Freeze the existing medium-term plan targeted at FY2027/6, and will release a new updated medium-term plan at a later date.

1. Home-use (ホームユース) Business: Connected unit growth maintained an average pace of over 20,000 units per quarter, reaching a cumulative total of 671,000 connected units. 61% of deliveries in 3Q were for new construction, a continued increase in share, while existing property growth has slowed. Cross-sell accounted for 12.7% of flow revenue, with a higher share than the prior year period. Profitability has been temporarily pressured by higher-than-expected volumes of outright sales of communication equipment, increasing near-term costs. Revenue contribution to 3Q cumulative total is not explicitly stated, but cumulative stock revenue continues to grow steadily.
2. Business-use (ビジネスユース) Business: Operating margin recovered to 21.5% in 3Q, up from lower levels in prior periods but still below the high profitability levels seen in late 2024. Flow revenue reached 632 million yen, approaching prior year levels, while stock revenue continues to grow and exceeded prior year levels. Infrastructure communication services for institutional clients remain on a steady growth trajectory, with education institutions driving growth in 3Q, while tourism-related demand softened in the quarter. High-margin project volumes are still lower than targeted, with pipeline development taking longer than expected.
3. Renewable Energy Business: The business is gradually scaling, but has underperformed initial expectations due to gaps in personnel and expertise relative to plan. Total company cumulative 3Q revenue is 9.822 billion yen, up 3% year-over-year, while ordinary profit is down 20.3% year-over-year overall. EBITDA margin remains at 29.3%, holding near the 30% level.

• Full-year FY2025/6 revenue guidance is maintained at 12.7 billion yen, representing a slight year-over-year increase, while ordinary profit guidance is revised downward from 2.6 billion yen to 1.74 billion yen (a 860 million yen downward revision), representing a 27% year-over-year decline, which will be the first decline in profit since the company's listing.
• Home-use connected unit full-year target is revised downward from 700,000 units to 685,000 units, due to slower-than-expected cumulative net growth.
• Business-use full-year flow revenue target is revised downward from 1.4 billion yen to 755 million yen, while stock revenue guidance is maintained with a slight upward adjustment, as stock growth remains on track.
• Renewable energy business full-year profit contribution is revised downward by 100 million yen, due to underperformance from personnel and know-how gaps.
• Despite the downward revision to full-year earnings, the year-end dividend guidance is maintained as originally planned, citing stable free cash flow, a strengthened healthy balance sheet, and a commitment to prioritizing shareholder returns.

• Home-use business profitability is facing temporary downward pressure from higher-than-expected volumes of outright communication equipment sales, which increases near-term costs more than originally forecast.
• Business-use business faces slower-than-expected development of high-margin project pipelines; delivery of large, complex targeted projects is delayed, and sales pipeline build-out requires more time than initially planned.
• The company continues to face manpower shortages, even amid ongoing hiring, requiring additional investments in personnel training to scale customer reach and develop new products aligned with market changes.
• Renewable energy business operations are underperforming initial expectations due to insufficient personnel and accumulated operational know-how.
• Existing construction capabilities and internal systems require ongoing improvement to match market changes and maintain operational efficiency.

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