NAC CO.,LTD. Q4 FY2026 earnings call

• Company Overview & Core Strengths • NAC was founded in 1971 as a Duskin cleaning product franchise dealer, and is currently listed on the Tokyo Stock Exchange Prime Market with 15 consolidated subsidiaries and 169 locations nationwide, 54 years after founding. • The company holds two core competitive strengths: a stable customer base of ~900,000 monthly active recurring customers (plus 400,000 additional occasional customers for an annual total of ~1.3 million), and a long-standing face-to-face direct sales model that quickly captures customer needs to rapidly bring trending products to market via partnerships, eliminating the need for in-house product development. • All 5 core business segments are centered on the company's core themes of

1. Clecula (Kurikura) Water Business: Increased revenue, decreased operating profit. It accounts for over 50% of total group revenue combined with the Rental business, and over 70% of total operating profit combined with the Rental business. The operating profit decrease came from concentrated upfront advertising and promotional investments for the fast-growing feel free filtered water server line. 2. Rental Business: Increased revenue, decreased operating profit. It accounts for over 50% of total group revenue combined with Clecula, and over 70% of total operating profit combined with Clecula. The operating profit decrease was driven by increased staffing costs from new store openings for the Duskin franchise business, and larger wage hike impacts as the business has the largest headcount among all segments. 3. Architectural Consulting Business: Operating profit grew significantly, driven by cost efficiency improvements including location consolidation and digitalization of deliverables to counter industry headwinds from a construction downturn. 4. Housing Business: Operating profit grew significantly, supported by J-Wood returning to profit for the first time in several years, and the addition of Shuwa Juken, the top-performing partner of NAC's Ace Home housing franchise, via M&A. 5. Beauty & Health Business: Growing steadily, with the Medicated Micro Bubble Lotion emerging as a second core hit product after the long-running bestseller Medicated Clear Estienne foundation.

• Long-term Vision 2035 targets 100.0 billion yen in total revenue and an 8% operating profit margin by 2035, with the core goal of maximizing customer lifetime value (LTV) by leveraging the company's last-mile delivery network. The intermediate target is to grow the base of recurring customers to over 1 million to improve customer density and delivery efficiency, while strengthening alliances and co-creation with external partner companies. • Mid-Term Management Plan 2028 is positioned as a 3-year investment phase to achieve the long-term vision. Management expects revenue to grow over the 3-year period while operating profit remains flat. • Aggressive investment will be focused on the three recurring customer businesses: Clecula, Rental, and Beauty & Health. The Architectural Consulting and Housing segments will maintain current scale while exploring entry to new fields; the Rental segment will expand operating areas via new store openings in new regions for the Duskin business. • The 2026 March year-end dividend is forecast to maintain the prior year's level of 22 yen per year, with no planned reduction to shareholder returns during the investment phase. NAC will maintain its policy of paying dividends twice a year targeting a 4% net asset dividend payout ratio within a 100% payout limit.

• Intense competition in the water server market, which has become a red ocean with the growth of disposable one-way bottles from large entrants and the rapid expansion of bottle-less filtered water servers. • Sustained cost inflation for key inputs including labor, fuel, raw materials and parts, which has pressured margins for the labor-intensive Clecula and Rental segments even after 2022 price increases. • Ongoing industry downturn in the construction sector driven by multiple headwinds including rising material costs, labor shortages, regulatory changes, and work style reform requirements. • Human resource constraints are a key bottleneck for the labor-intensive Clecula and Rental businesses, with talent retention and recruitment identified as the highest priority operational challenge.

Q: Why are Clecula and Rental segments growing revenue but seeing lower profit, while Architectural Consulting and Housing have growing profit? / A: For Clecula, lower profit comes from heavy upfront promotional investment for the fast-growing new filtered water server line which is gaining customers quickly. For Rental, lower profit comes from higher labor costs from new store openings and larger wage hike impacts as the segment has the most employees. For Architectural Consulting, profit grew from cost efficiency moves including location consolidation and digitization to counter the construction downturn. For Housing, profit grew from J-Wood returning to profitability and the acquisition of top franchise partner Shuwa Juken.

Q: What is the positioning of each business in NAC's portfolio, and what are the investment plans? / A: Clecula and Rental are core stable recurring-revenue businesses that still maintain revenue growth via new openings and cross-selling. All three businesses (Clecula, Rental, Beauty & Health) are in a 3-year investment phase for expansion. Management will actively introduce new products, partnerships, and collaborations that leverage the existing customer base, and will also evaluate relevant M&A opportunities.

Q: Is Clecula's annual server maintenance exchange charged, and does it lead to higher customer churn? / A: The annual maintenance is included in the monthly 460 yen safe support pack that most customers subscribe to. Non-subscribers are charged 5,500 yen per maintenance. The company's strong focus on safety messaging means the service actually reduces churn instead of increasing it, so churn impact is negligible.

Q: When does NAC plan to move to the profit harvesting phase after the current mid-term plan? / A: Management currently expects to move to the profit harvesting phase after the current mid-term plan, aligned with the 2035 long-term vision timeline. However, the plan is flexible to adapt to rapid external changes: if market conditions remain favorable, management may extend the investment period. NAC will adjust investment and portfolio strategy continuously based on progress and market conditions.