Nihon M&A Center Holdings Inc. Q1 FY2026 earnings call

• Q1 FY2027 is the first quarter under the company's new mid/long-term strategy NextGenesis Vision 300, launched for the company's 35th anniversary. The goal of Vision 300 is to reach 30 billion yen in ordinary profit by fiscal year ending March 2032.
• Leading operational indicators were very strong, setting up positive performance for the remainder of the fiscal year:
  • New sell-side mandates hit a first-quarter record high of 347, up 20.1% YoY. Mid-cap mandates grew 31% YoY to 76, accounting for 21.9% of total new sell-side mandates. 61% of new mandates are from high-value urban central areas, a favorable trend.
  • New buy-side mandates were 351, up 4.8% YoY.
  • Total open transactions under negotiation grew 17% YoY to a record high 480 pairs as of end-June. Interim/entry fees received grew 17% YoY to 1.358 billion yen, confirming strong active pipeline volume.
  • The company shortened average pre-due diligence preparation lead time from 90 days to 56 days, increasing transaction throughput capacity.
• Organizational and headcount updates:
  • Total M&A consultant count grew from 626 to 635, with 55 additional accepted offers pending onboarding. The company targets at least 10% net annual growth in consultant headcount, with enhanced recruiting and retention programs (including reduced turnover via structured onboarding). Corporate staff grew from 201 to 236 to support a new dedicated operation management department focused on enhanced compliance and process review.
• Strategic expansion:
  • The fund business has been reorganized under intermediate holding company J Capital, with three core product lines (J Growth Fund, A2G Overseas Fund, JSearch Search Fund) positioned as a second core business pillar alongside domestic M&A. Search Funds developed in partnership with regional banks are seeing particularly strong early growth.
  • PMI (post-merger integration) consulting track record has grown to 132 completed projects, with a new joint research initiative launched with Kansai Gakuin University to advance practice.
  • Overseas M&A business is celebrating its 10th anniversary, with a new strategic alliance with US-based Generational Group and expanded network across ASEAN, South Korea, the UK, and other markets, positioned for long-term growth.
  • AI adoption is a priority: the company is building a proprietary internal database of recorded client interviews (with consent) to train AI tools, which are already being used to reduce pre-client meeting research time from 30-90 minutes to just a few minutes, improving productivity. The company also continues its regional direct marketing strategy via seminars and local partnerships.
• Shareholder return policy: The company maintains a target dividend payout ratio of over 60% through March 2028, and confirms a full-year dividend of 29 yen per share (including a 4 yen special dividend) for FY2027, unchanged from the prior year. ROE is targeted to stay between 24% and 25% through the mid-term plan period, with 24.4% forecast for FY2027.

Core M&A intermediary business: Reported net sales were 9.1 billion yen, up 0.9% year-on-year. 180 transactions closed, down 11.3% year-on-year due to intentional closure timing delays. Ordinary profit from core operations was 2.252 billion yen, down 11.1% year-on-year. Pre-tax profit was 3.156 billion yen, up 24.6% year-on-year. Fund business segment: A 780 million yen extraordinary gain on sale of an investment from ATG Capital (overseas investment subsidiary under intermediate holding company J Capital) was recorded. If this gain were included in core sales, total adjusted sales would have been 9.891 billion yen (up 9.7% YoY), and adjusted ordinary profit would have been 3.39 billion yen (up 20% YoY). The fund business contributed an 800 million yen profit in the quarter, making it a material contributing segment. Revenue contribution from the fund business was approximately 8.6% of reported total sales, and 24.7% of total reported pre-tax profit.

• The company reaffirms its full-year FY2026 (ending March 2027) dividend guidance of 29 yen per share, unchanged from prior year, with a 60% payout ratio at the current profit guidance level.
• Management maintains mid-term ROE guidance of 24% to 25% through March 2028, with 24.4% forecast for FY2027.
• The long-term Vision 300 target of 30 billion yen in ordinary profit by March 2032 is reaffirmed, with management noting this target is conservative and achievable via domestic M&A business growth alone, with fund and overseas business contributing upside.
• Management expects solid performance in coming quarters, supported by the record high transaction pipeline, and is confident of overachieving the first half sales target (which has a baseline 45% of full-year sales allocated to H1, 55% to H2).

• The M&A intermediary industry has seen massive new entry, with total players growing from 30-40 to 450-500, with 85% of new entrants launched in the past 3 years. Aggressive low-quality direct outreach by new entrants has lowered overall customer response rates for direct marketing across the industry.
• A new national mandatory M&A advisor qualification and registration system will be implemented in 2027, requiring all consultants to pass certification, which could temporarily draw time away from sales activity during the transition period.
• The fund business has inherent uncertainty around capital accumulation and returns, requiring a longer-term outlook for growth.

Q: The share of mandates from network partners is growing, which means the share of no-fee direct mandates is falling. Is this trend negative for profitability? / A: Direct market response rates have dropped 10-20% due to aggressive outreach by new industry entrants, and direct mandates have a lower closure rate. Network partners (banks, accounting firms) have long-term client relationships and provide higher quality, higher closure rate mandates, leading to better overall productivity even after paying referral fees. The company will continue a dual matrix strategy of high-quality focused regional/industry direct teams paired with network partner sourcing, balancing the two approaches. (318 characters)

Q: Was there an unusual increase in deal closing delays in Q1, and what is the value of delayed deals compared to last year? / A: There was no material increase in delays compared to prior years. Last year Q1 had 25 delayed deals totaling ~290 million yen, this year Q1 had 16 delayed deals totaling ~140 million yen, so delays are actually lower than last year, and the record high open pipeline is not driven by excess delayed deals. (249 characters)

Q: Is the 30 billion yen Vision 300 target achievable only with domestic M&A, what is the outlook for fund and overseas business by 2032? / A: Management states the 30 billion yen target is conservative and fully achievable via domestic M&A growth from increased headcount and higher per-head productivity (from training, lower turnover, AI). Fund and overseas business will be upside incremental to this base. Overseas business is targeting 10% of total profit long-term. The Search Fund line of the fund business, developed with regional banks, has particularly high growth potential and the company plans to expand the model across all 47 Japanese prefectures. (417 characters)

Q: Will the new 2027 M&A qualification and stricter compliance regime hurt sales activity by taking time away from selling? / A: Management views the new regulation as a tailwind, not a headwind. It raises industry standards, and the company already has established training and knowledge infrastructure that gives it an advantage over smaller, less prepared new entrants. Any time spent studying for qualifications will be offset by productivity gains from AI, which the company has already invested in to cut administrative and research time for consultants. (324 characters)

Q: Why did you change the definition of new negotiation starts, and what was the number under the old definition? / A: The change was made to provide more accurate reporting: previously, one sell-side mandate matched with multiple buyers was counted as multiple transactions, now it is counted as one (the actual final closed deal structure), which is a more accurate representation of pipeline volume. Management did not have the adjusted old-definition number immediately available at the call. (276 characters)