KYORITSU MAINTENANCE CO.,LTD. Q4 FY2025 earnings call

Overall Macroeconomic and Business Context

• Inbound tourism to Japan has grown rapidly, with January-March 2025 seeing inbound traveler numbers exceed 10 million at the fastest pace on record, and April 2025 hitting a single-month record of over 3.9 million travelers (28.5% YoY increase). Management intends to capitalize on this growth trend.
• Despite continued cost inflation for ingredients, labor, utilities, and other operating costs, pricing optimization and strong demand absorption allowed the firm to deliver two consecutive years of record net profit growth.

Segment Operational Highlights

• Dormitory Business: Improved employment conditions and labor shortages drove significant growth in corporate dormitory contracted rooms. The business opened 8 new buildings (907 new rooms) during the period, and absorbed cost inflation via pricing adjustments to deliver steady growth. The 2025 March period opening occupancy rate was 97.0%, with total contracted rooms growing 370 YoY to 43,624 at period opening.
• Dormy Inn Business: Even with temporary headwinds from natural disaster (typhoon) booking cancellations and large-scale renovation work concentrated in Q4, strong inbound demand and rigorous revenue management drove a 9.6% YoY increase in RevPAR (to 13,655 yen), as average room rate rose 1,399 yen YoY. As of mid-May 2025, occupancy is 86.2%, average room rate is 17,048 yen, and RevPAR is 14,698 yen, indicating strong ongoing performance.
• Resort Business: Strong demand growth and pricing optimization drove an 8.3% YoY increase in RevPAR (to 38,336 yen), with occupancy up 1.4 percentage points YoY and average room rate up 2,881 yen YoY. Performance was partially offset by closure of the Noto Kaisyu property due to the Noto Peninsula earthquake and large-scale renovation costs. As of mid-May 2025, occupancy is 77.8%, average room rate is 50,283 yen, and RevPAR is 39,134 yen, indicating ongoing strong performance.

Capital Structure and Shareholder Return

• As of March 2025, total assets grew 30.5 billion yen YoY to 301.4 billion yen, interest-bearing debt grew 10.6 billion yen YoY to 149.2 billion yen, and Net D/E ratio stands at 1.24x, with equity ratio improving 1.0 percentage point YoY to 33.0%. Management continues working to reduce Net D/E to the pre-COVID target of 1.0x or below via profit growth and real estate securitization.
• FY2025 full-year dividend is planned at 38 yen per share, a 55.1% YoY increase (13.50 yen increase), with a payout ratio of 20.4%. The shareholder benefit program has been expanded: benefit amounts have roughly doubled, the validity period has been extended from 6 months to 12 months, and benefits have been converted to electronic ticketing (allowing 1-yen increments of use) to improve convenience and operational efficiency.

1. Dormitory Business: Revenue of 54.92 billion yen (5.0% YoY increase), operating profit of 6.07 billion yen (3.3% YoY increase). Contributes approximately 24.0% of total consolidated revenue. 2. Dormy Inn Business: Revenue of 83.8 billion yen (15.1% YoY increase), operating profit of 15.43 billion yen (21.8% YoY increase). Contributes approximately 36.6% of total consolidated revenue. 3. Resort Business: Revenue of 55.44 billion yen (5.1% YoY increase), operating profit of 3.06 billion yen (41.0% YoY increase). Contributes approximately 24.2% of total consolidated revenue. 4. Other Businesses (including Development, Comprehensive Building Management, Senior Life): Overall performance was roughly in line with the previous year, with the Development, Comprehensive Building Management, and Senior Life segments reporting increased profit, offset by higher unallocated head office costs and consolidation eliminations. Total consolidated revenue for FY2025 March was 228.9 billion yen (12.2% YoY increase), and total consolidated operating profit was 20.4 billion yen (22.6% YoY increase, marking the second consecutive year of record profit).

• FY2026 March Consolidated Guidance: Management projects total consolidated revenue of 274.0 billion yen and operating profit of 25.0 billion yen, representing another year of record profit after the FY2025 result. Excluding special factors (renovation reaction, opening cost fluctuations, real estate securitization impacts), the core cruising operating profit is projected at 22.7 billion yen, a 2.3 billion yen increase from FY2025 core operating profit. A full-year dividend of 46 yen per share is planned, a 21.1% YoY increase. The period is positioned as the "Year of Development and Opening" to resume new store expansion suppressed during COVID.
• Segment Guidance:
  • Dormitory Business: Revenue of 57.65 billion yen (5.0% YoY increase), operating profit of 6.2 billion yen (2.0% YoY increase), with 12 new buildings (1,364 new rooms) planned, including expanded entry into regional core cities for public university student housing.
  • Dormy Inn Business: Revenue of 91.03 billion yen (8.6% YoY increase), operating profit of 18.57 billion yen (20.3% YoY increase), with 4 new buildings (637 new rooms) planned, and projected 5.5% YoY RevPAR growth to 14,500 yen. Early period results through May 2025 are slightly above plan.
  • Resort Business: Revenue of 60.17 billion yen (8.5% YoY increase), operating profit of 3.48 billion yen (13.6% YoY increase), with 2 new buildings (306 new rooms) planned, including a high-end property near Ninnaji Temple in Kyoto and a flagship resort in Atami. Projected 9.4% YoY RevPAR growth to 41,800 yen.
• Mid-term Management Plan Progress: The 5-year "Kyoritsu GrowthVision Rise Up Plan 2028" is progressing 1 year ahead of the original schedule, with stronger than expected inbound recovery and pricing optimization driving early performance. As of FY2026, consolidated revenue is projected to reach 98% of the 2028 final target of 280.0 billion yen. Dormitory Business is at 99% of the 50,000 room target, Dormy Inn is at 100% of the 20,000 room target, and Resort Business is at 89% of the 5,500 room target. The total 5-year investment plan is maintained at 240.0 billion yen (an increase of 40.0 billion yen from the original plan), which remains fully fundable via stronger than projected operating cash flow, real estate securitization, and bank borrowing. Management plans to start drafting a new mid-term plan after achieving the current plan's targets early.

• Persistent macroeconomic uncertainty due to global trade policy shifts, exchange rate volatility, and sustained construction cost elevation creates uncertainty for long-term expansion planning.
• Ongoing cost inflation for ingredients, labor, utilities, and other operating costs creates pressure on margins, which management relies on pricing optimization and demand growth to absorb.
• Dormy Inn and Resort Business performance was negatively impacted in FY2025 by natural disasters (typhoons, the Noto Peninsula earthquake) that caused booking cancellations and prolonged property closures.
• The Net D/E ratio remains above the firm's long-term target of 1.0x, requiring continued deleveraging efforts to maintain financial discipline.

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