Thank you very much for gathering for our earnings briefing session for the second quarter of FY 2026.
Thank you indeed. Today, we have myself and Mr. Naraki and Mr. Takeuchi. We have the three members to present.
I am Naraki. Nice to see you.
I am Takeuchi.
To start off, we need to start with an apology. In the prior years, we paid interim dividends, and there is a matter regarding that. Part of the dividends exceeded distributable amount according to our findings, and we have already announced our press release about that. With the disclosure of this release, we apologize to stakeholders, including our shareholders and investors, that we have caused significant concern and inconvenience. About the content and the result of the investigation, Mr. Naraki is going to explain in detail. The detail about this matter arises.
Today, October 30th, we have made a release about that titled Notice Regarding Receipt of the Investigation Report from the Special Investigation Committee and Future Actions. Please look at this notice, and I would like to provide an outline of what happened. This is a matter regarding interim dividends in prior fiscal years. Facts and investigational findings. First of all, regarding the interim dividends of prior years, we confirmed that there were deficiencies in the verification process of calculating distributable amount, and it was found that part of the dividends exceeded distributable amounts in accordance with the Companies Act. We established Special Investigation Committee and conducted investigation about the background. Investigation of the third-party committee did not find intentional acts or misconduct of officers and employees, and we have confirmed that the primary cause was basically the deficiencies in the verification process.
If provisional financial statements were appropriately created and approved, we would have been able to secure enough source of dividends in accordance with the Companies Act. Recurrence prevention measures. We are going to clarify the processes for calculating, confirming, and verifying distributable amount. Also, we are going to enhance the check and supervision functions at the board of directors and Audit and Supervisory Committee. Also, we are going to conduct trainings to executives and employees, and also we are going to develop the framework for confirming using the help of external specialists. About impact on our financial performance and our shareholder actions wise, our direction is not to seek repayment for this dividend in question to shareholders. Impact from this matter on the consolidated financial performance will be minimal, and there will not be a major impact on our future business operation and our shareholder returns policy.
Together with it, there is a topic on voluntary return of executive compensation. This is to clarify the managerial responsibility. Current directors, including the President and Representative Director, as well as Senior Vice President and Director, they have said that they are going to voluntarily return 10%-30% of their monthly compensation in accordance with their respective roles and responsibilities. At the board meeting held today, October 30th, our Audit and Supervisory Committee said that legal liability of our directors on this matter, upon the report from the Special Investigation Committee, there was a discussion at the Supervisory and Audit Committee, and the failures of the directors and the future actions were considered. Based on the assumption that recurrence prevention measures will be implemented going forward, this Audit and Supervisory Committee reached a conclusion that they are not going to hold directors liable.
For the restoration of the trust, we are going to implement recurrence prevention measures. We are going to enhance our corporate governance, and we will do our best. We once again apologize for the inconvenience that we have caused. Continuing on the topic of dividend, as part of our shareholder returns program, as originally planned, we plan to pay JPY 29 dividend per share. The direction has not changed. This JPY 29 includes JPY 4 of special dividend. The estimated dividend for March 2027 is JPY 29 per year. This is 71.3% as dividend payout ratio. On the right-hand side of this chart, you can see the inclusion of JPY 4 special dividend included in JPY 29, so no change to the initial plan of our dividend. Thank you very much.
Well then, allow me to move over to explain the results for the first half of FY 2026. First of all, as to the executive summary of this, the sales was JPY 22.599 billion. This is 42.8% of progress for the full year. This is an increase by 0.1% year-over-year. The number of transactions closed was 478 cases per transaction. The M&A sales had been JPY 45.6 million. Therefore, the number of transactions as well as the M&A sales per transaction is almost the same as last year. The mid-cap is trending well on the increase, that is. Ordinary profit is on the decline, however. That is very much attributable to the fact that we are reinforcing the recruitment of the talent coinciding our anniversary. This is why we have been advertising ourselves and also organizing events.
As for AI, DX, investment is proceeding from this year to the next and to the future beyond. We are making the advanced investment ahead of the time. We want to make sure to, of course, get a return on investment that we make. In fact, the leading indicators are remaining to be strong. The pipeline is also expanding. As for the number of new sell-side mandates, they are 699 year-over-year growth of 13.5%. Whereas the mid-cap mandates is at 155 cases. This is growing at the pace of 30.3% year-over-year, which means that we are allowing ourselves to make sure that we can keep this M&A sales per transaction. The number of new sell-side mandates is also increasing as compared to the year before, 22% increase, that is, and that is a record high.
In the month of December, March, in other words, at the time of third quarter, fourth quarter, we hope that these will be closed so that they will constitute our earnings. Also, at the same time, for the second quarter, there are some gap in terms of the accrual, but in the third quarter, there are some delays into the third quarter in the month of October, so about JPY 500 million worth of mid-cap that has been concluded or closed.
Therefore, the third quarter, so we hope to be able to enjoy the peak period around December. In other words, this is going to be really the closing in actual fact for the fiscal year, so far as the sales department is concerned, and that is how we are working hard. Especially in the pipeline, where the negotiation is underway, it is trending really well. Therefore, the third quarter, we would make sure that we will be able to uplift all numbers in all regard. As for the P&L for the first half, Naraki is going to explain the details of the numbers.
The first line, first of all, with regard to the sales, JPY 22.599 billion, and that is almost the same as the last year's level. You can see that the slight decline in terms of the numbers of transaction closed, but that we managed to generate the sales amount that is almost the same as last year, and 478 has been closed, and 290 in the second quarter, that is. We managed to accelerate the speed of the closure of these transactions, but unfortunately, it was a decline on a year-over-year basis.
M&A sales per transaction is JPY 45.6 million, so we did manage to keep this level up at the high level. As for the mid-cap transactions closed, 43 cases or deals, and as to the contents, the first quarter, 19, 34 for the second quarter. In the second quarter, we did manage to accelerate the speed and exceeded the last year's level. That was the result. The next page, we have shown the expenses. As for the cost of sales, JPY 8.494 billion, and this is a decline by 1.2% year-over-year. As for the personnel cost, consultant mainly, JPY 4.6 billion, and this is an increase by 3.6%, JPY 4.763 billion in actual fact. Referral fees and outsourcing expenses, JPY 2.83 billion and negative by 11.6%.
Direct deals had risen, and as a result, the referral fee had declined by 1.7% year-over-year, from 14.2% to 12.5%. SG&A, JPY 6.208 billion, increased by 11.1%. One of the attributing factor to this is the personnel cost, JPY 2.068 billion. It is a decline by 0.4% year-over-year. Commission expenses, JPY 559 million. Last year was just over JPY 400 million, so an increase by 38.7%. IT-related costs, JPY 598 million, and JPY 517 million, that was in the last year, so it had 15.5% of an increase year-over-year.
As for the advertising expenses, JPY 457 million, JPY 347 million, that was in the last year, so 31.3% of an increase year-over-year. IT-related costs, as well as advertising, as well as the marketing, on page 20 to 24, there are further details which we would like to elaborate on later stage. P&L summary is just that I have explained, so in order to avoid redundancy, allow me to go over to the next page.
This is Q2 alone, the three month worth results, and we show you a year comparison. One point to note is the number of transactions closed, 290. For the three months, we closed 290 transactions. 188 was the number for Q1, and Q2 was 290. Mid-cap mandates, 34 in the month of Q2, in the three months of Q2. Q1 was 19, and that became 34. This is in accordance with the flow of M&A deals, starting from receiving mandates to closing. We show some leading indicators in accordance with this flow. First of all, seller companies. We start the process from receiving mandates from potential sellers. We close advisory agreements with them. The new sell-side mandates this time was 352. This indicates an increase of 7.6%. Additionally, of them, mid-cap mandates, so middle-sized mandates, was 79. This increased by 29.5% year-on-year.
We received mandates, and the mandate number was quite solid. The quality or the contents of the mandates were, 61.8% were in the central area, the large city areas. Mandates in these areas are easy to sell, easy for closing, and the ratio of such central area mandates exceeded 60%, so we believe that the quality was high as well. After receiving mandates, there will be corporate valuation, and there will be creation of the teaser document as well, besides the valuation documents. Before matching seller and buyers, we examine the companies quite closely, and the number of days required for the process used to be three months previously, but we are reducing that period, and it is 60 days basically now. It is almost basically two months required recently. With shorter lead time, we have better productivity, and more timely matching is possible with that.
This is indeed a really good trend. After that process, the next step is finding the matching buyer. We make proposal to potential buyers, and we also close advisory agreements with buyer companies. We have about 400 of them. We have received 400 of new buy-side mandates, and this 400 is an increase of 3.1%. These leading indicators show good signs, really good signs. We will have the third quarter, fourth quarter, and the Q1 next fiscal year. We would like to lead these mandates into closure in the coming quarters.
We would like to have more higher-quality matchings, we will have higher-quality negotiations, and we would like to improve our successful closure rate. This is how we believe we can improve our financial performance. About the number of closures and the new mandate numbers, we have been showing these trends every time, so please look at our trend. Next of all, balance sheet. I will hand over to Mr. Naraki.
We start with an asset on the right, on the first top half. JPY 60,860,000,000 was total assets, and net assets was JPY 51,278,000,000 , standing at 84.3% in ratio. Last year was JPY 50,643,000,000 . From the end of the previous fiscal year, there was an increase of net assets by JPY 635 million. We believe that we are keeping quite healthy balance sheet. Next topic is the transition of our number of employees. Our business-wise, our revenue is decided based on the number of transactions closed time, M&A sales per deal, and also, we can calculate that by per head times the number of people.
Productivity times our headcount determines our revenue. In that sense, headcount growth is very important for the company to grow. Last year, we failed in growing the number of employees, and we actually had a net decline for the past two to three years, recruiting and retention-wise. We believe that we were not successful in recruiting and turnover, and we see this quite seriously. Starting from the previous fiscal year, this recruiting has been supervised as a matter right under Mr. Takeuchi. At the moment, 626 became 640 as headcount, and already we have people who have joined our company after the start of October, that is 29, and 27 have accepted our offer. There are 56 to be added, and this indicates a growth. Also, we have been enhancing our recruiting activities. Honestly speaking, there is great news to share.
On a quarterly basis, so July, October, January, and April, we have been solidifying the new join numbers. Previously, we used to be joined by new people on a monthly basis, but we have consolidated that entry timing to a quarterly timing. Last month, employees who joined our company in October, there were 29 of them. Targeting the 29, I implemented my first training to them, spending 90 minutes, and I feel that the atmosphere has changed. Starting from this fiscal year, we have been trying to improve the quality of recruitment as a matter directly supervised by our president, and there are a few reasons that have led to higher turnover or high turnover.
For example, not being able to provide enough follow-up to the new people, not providing good education, and also bad quality of the people as well, and that leads to increase in turnover. We are now improving the quality of recruiting, and we have been doing more in education and follow-up to the new people. As I did the training to the newly joined people, I feel that their reaction has changed. The atmosphere is different from before. Recruiting-wise, I feel that the quality has improved quite significantly, and I feel that this recruiting is a matter that we can count on to improve going forward.
Allow me to talk about some of the topics that is to be noted. On October 13th this year, we are celebrating the 35th anniversary of our founding. So 35th anniversary, and we take it as the Next GENESIS or the second founding. This is why we had held a major event 35 years ago. As compared to 35 years ago, the environment of the market had changed very much, and of course, the mindset of our customers, clients had changed dramatically as well. Therefore, the sense of responsibility on our part had further enhanced, or it has become much more profound, which meant that we had to be changing our business model. We felt the need to build a management team that is capable to carry through this task.
This is why, from the time of original genesis, those membership, the leadership, that had accounted responsible in creating the foundation of the businesses. However, there are many changes that is taking place, therefore, we need to build a new business model. This is why we needed to start this new genesis or Next GENESIS, or the new leadership. I am very happy to say that many key figures from various different sectors had attended these major events. For example, in our network, or through our network, there were a number of accounting firms, financial institutions, the representatives and partners of those firms had attended. Also, the regional banks, as many as 30 regional bank presidents, they personally had attended physically to these events.
Of course, mega banks, major bulge bracket, in other words, brokerage houses, top management had taken their time out of their busy schedule to attend these events. The strong buyers, strategic buyers, representative of different regions of Japan, potential buyers, also the representatives of private equity funds, also financial advisors as well, some of the financial advisors. The key figures of our industry, key representatives of our business model had participated in these events. I was able to thank everyone who had attended these events for the 35 years history, also I have recapped on the history, the chronicles of our company. Also, at the same time, I was able to share the future of these businesses, especially that was done by Mr. Takeuchi.
Of course, having done that, we have entertained and provided the opportunity for everyone to engage themselves in a networking at the time of reception, so that this Next GENESIS was to be opened up. We were able to create the ambiance, also it was a wonderful kind of kickstart together with all these wonderful partners and friends of ours. It is not just organizing this wondrous event, but also at the same time, we have started the transit ad. Also, we have been carrying an advertisement on major newspapers as well. Also, we have nominated ambassadors, Yoshito Okubo, who is a former national soccer team member as well. Therefore, we are trying to celebrate this 35th anniversary in all regards.
Also, what is kind of symbolic of our 35th anniversary, AI Brain Partners, AIBP, had been converted to be our subsidiary as well, to mark this anniversary. This is something that I deem to be a great pleasure of mine, because from here down the road, we have to focus very much on acquisition of human capital, also AI capital, also token asset. In other words, human talent capital, also AI asset would have to be built internally and to manage it well, I think. That would determine the success of our business. It is not just adaptation of an AI. We need to create an organization that is capable to run together with, operate along with AI, together with AI, hand in hand.
This is, from the time of the start, we need to form such a relationship as opposed to just introducing or adopt the AI, because once it gets started, it is difficult to change this formal partnership. This is why I am very happy that we were able to create this wonderful organization as our subsidiary so that the human capital and [inaudible] would be the most important of all in bringing about the brighter future. AI and the human capital, internally, we are positioned nicely to foster the both at the same time. Of course, from long time back, DX, digital transformation, and AI had been utilized in order to become a data-driven entity so that we will be able to generate good enough earnings, and also we will be focusing on the real market too. We focus very much on the network.
We do put a lot of emphasis. Also, through the means of different media such as YouTube, we try to acquire leads. More than anything, we really want to win the hearts of the business owners so that we will be able to invite them to take part in seminars. In 25 locations, we have been organizing future design seminars, a learning opportunity that we provide, and we want as many people as possible to participate. This is why we have been inviting celebrities to take part in these talk sessions or fireside chat talks. As a result of the combination of different efforts, we have been successful inviting many to participate. Just last week, I was, no, I think it was this week. I was in Okinawa organizing this seminar, nationwide seminar, and more than 250 attendants, they were participants. 250.
Can you imagine? In Okinawa Prefecture. Physically, they had attended, and I was able to engage in a dialogue with the 250 people. Also, last year, we held a similar kind of event in Okinawa as well, and one of the participant had led to providing us with a mandate. This person who had provided us with a mandate had shared that because he or she was very happy to have attended a seminar last year, and there, this person was in order to thank me. This person said that this person had led to kind of solidifying the resolve in order to engage in the M&A activity, and that this person had extended the hand, so we were able to shake hand, and it was wonderful.
I really want to bring about many happy M&A cases, and I was very happy I was able to go back to my prime point, and that, in fact, is the beauty of this real or physical marketing effort. On the other hand, I have to admit that the competition is getting harsher. Against such a backdrop, we do not want to just carry out the physical marketing in a wild and in a frantic manner. We try to, of course, focus on the regions, the geographical regions, as well as some certain sectors, and we do it in a very targeted manner so that these activities of winning the mandates will be very efficient. So, together with the community and sectors, we try to have them meet against each other and also win trust from the community.
At the same time, we have to equip ourselves with profound knowledge, the expertise of a specific sector and the industry, so that we will be able to carry out very efficient and knowledgeable activities. At the same time, with regard to the brand equity, six consecutive years, we were recognized by Guinness World Records. M&A financial advisory industry, we were chosen to be the best-selling mergers and acquisition advisory company with 1,150 cases transactions in 2025. Even if it was to be one more person or one more company, we really want to deliver the best possible M&A. This is our philosophy that we embrace and we want to execute. With regard to related activities, there are no major activities.
If I am to pick some, this time, on the topic of PMI, Raynos, a headhunting company, and our company formed business alliance contract. In the areas of PMI and post-merger integration, under the 100-day plan, we provide consultation services. There are voices requesting managerial resource, managerial people, request for plant managers, request for CFOs, request for sales general managers. We receive such requests. Unfortunately, we cannot do such referral of people on our own. Therefore, Raynos, who has the best record in Japan, they have supported us quite a lot, and we have formed business alliance with them. After the PMI activities, we would like to know how much effects have come out. About that, together with Kwansei Gakuin University, we do joint research to measure the effect of PMI. We have actually started such measurement-related research. Also, new activities in our overseas business.
We are celebrating 10th anniversary of opening our overseas locations. In Singapore, we have opened our first office with a single employee from our end, and it has been finally 10 years since then. In Singapore, after 10 years, we have held a major event. More than 350 people gathered at the event from the various countries in ASEAN. Currently, Singapore, Malaysia, Indonesia, Thailand, Vietnam. In these five countries, we have our local entities. Our local entities are having really good performance, and they have been quite active. There are companies who would like to expand their business abroad, and we invite them, and then our sessions are filled up quite easily because of strong demand. Besides ASEAN, with a U.S. company, we have formed a business alliance agreement. That is Generational Group. They are among the U.S. top 10 that is focused on mid-cap intermediation or mid-cap advisory.
As a mid-cap-related business in the U.S., I believe that this company is number one in reality. When a Japanese company expands its business to the U.S., it is not easy for them to acquire a large company from the beginning. They have to acquire a middle-sized company first to expand their business in the U.S.
We feel that with this startup partnership, we can now provide more information, and we would like to expand the target to Europe after we have expanded from Asia to the U.S. Fund business-wise, we have established J-Capital, which is an intermediate holding company, and we are about to grow this business on a full-fledged basis. Now, with regard to FY 2026 full-year forecast and midterm management plan, there are no changes, let me skip this part. That is all for myself, so far as the first half earnings is concerned, and also the second quarter earnings result. Thank you very much for your attention.
Mr. Miyake, thank you very much. We would like to move on to Q&A session at this point in time. Please make use of the chat function in order to post your questions. In the interest of time, we may not be able to entertain all the questions that you may pose. We ask for your understanding in this regard. Let us start the Q&A. While we wait for your questions to be posted, we would like to cover some of the frequently asked questions and provide you with the response of our company.
So the question. With regard to the recruitment of the M&A consultant, while the talent market is becoming very highly competitive, what is the recruitment environment like right now? Also, by introducing onboarding every three months, has there been any kind of changes with regard to the retention of the people as well as the fostering of the talent?
I would like to hand over to Takeuchi, who is taking the lead in this initiative.
This is Takeuchi. Thank you for the opportunity. First of all, with regard to the talent recruitment as well as the fostering of these talent, I am growing my confidence. It has been some months since we have started to introduce this new kind of initiative. In terms of the mid-career, we have been successful in recruiting more than double of the numbers of the people at the mid-career level.
However, having said that, as compared to last year, the new grads recruitment may have been on the decline, as compared to last year, that is. Also, at the same time, allocation of the people to a non-consultant job or task has been done in a proactive manner. Also, at the same time, the net increase of the consultant has been on and around 6%. That is our expectation. As for the mid-career recruitment, from the non-M&A industry, I really feel that the competition is getting harsher and harsher. For sure, the head-to-head kind of competition is taking place within the M&A industry. More than 100 or so interview has been conducted with myself attending, but in fact, the yield gets better as I personally take part in these interview sessions, I feel.
Being one of the major M&A players, I think we are beginning to feel a strength in acquiring these individuals, and also search overseas, and also strategic consultant, not just limited to M&A players. We are beginning to kind of display the vision in order to attract more talents, and I think that has been leading ourselves in becoming more successful in recruitment. Also, we have been recruiting every quarter, whereas in the past, it was every month, so to speak. But now, onboarding has now become quarterly, and that has been bringing about a positive impact. Because it is every quarter, like 25 or so people will be joining as a mid-career, as a group, as opposed to inviting them to be on board in a very fragmented manner.
There is this psychology that works as a group, and they have this peerage kind of intimacy or the friendship, a comradeship that they can enjoy. Administrative kind of works, as well as accounting, and also legal matters, that is done as a group, these training sessions are. As a result of concentrating on not monthly, but the quarterly, I feel that the productivity has been increasing. From the time of the recruitment to the training, I think we have a very good kind of conversion, and that's my gut feeling or hands-on feeling. Of course, there is a turnover, the churn that we have to watch over the development for, so that we will be able to continue to increase these talents on a net basis. Thank you very much.
Next question. About the most recent number of transactions closed. The company mentions a delay in the closure timing, just like in the previous quarter. Is this really a one-time factor, or do you feel that there's a structural change going on, such as longer negotiation period? Could you share with us your take on this?
Right. I also feel that Mr. Takeuchi is the right person to talk about this.
About the delays in the closure timing, that is indeed one of the major cause. The lead time is getting longer, but administrative headquarters, we have a new member, Saito-san, and checking each deal one by one closely. Such postures and attitude have led to longer delays or longer lead times. However, we've been establishing the right check system, but that means a change to the frontline people, and that leads to longer lead time.
However, when we look at the most recent second quarter, the lead time, in terms of the number of days. Until two years ago, it was about 340 days from receiving mandates to the closure, but it became like 380 days in the fourth quarter, and in the second quarter, it went down to about 340 days. We believe that we now have higher quality processes, and our frontline people are catching up with such changes. The longer lead time is improving, and we will guarantee our quality enough while managing our lead time. I think that's what we're doing already, so we do think that this is a one-time transitory factor. Thank you.
The next question. The mandate as well as the closure of the deals, the mid-cap deals are increasing by double digit. Do you think that there is an impact from minimum tax? Other than an impact from minimum tax, is there any kind of initiative that was carried out by your company in order to increase the numbers of mid-cap deals?
Takeuchi will be responding to this question.
With regard to the minimum tax, as a whole industry, for sure, it is a tailwind that we can enjoy, and we are very mindful of this minimum tax for each and every businesses, and it is becoming a kind of a trigger, for sure. But as a Nihon M&A Center, I really feel that the trend is changing dramatically. Whereas the mid-cap management in their 60s and 70s, they were trying to have someone succeed in the businesses or transferring their businesses, and they were taking the lead. Whereas nowadays, we are seeing those management in their 40s and 50s.
Maybe the percentage breakdown is in 60 versus 40, and they are now, rather than just because of aging, they are not trying to divest their businesses, but rather in order for them to accelerate the growth of their businesses. So, this is why we have this long-standing data, but in the industry, we have the buy-side. In other words, those acquisition team, and they will be on the side of those buyers buying businesses.
Now, of course, buying is one thing, but of course, they may consider transferring their businesses as well, at the same time divesting their businesses. So, we have all those information building up on top of each other, and we stick out our antenna, and mid-cap mandates being converted to acquisition or even divestment. In addition to this tailwind of minimum tax, I think these mid-cap deals are on the increase. That is our take.
But if you were to look at the whole industry, of course, the minimum tax may be of a great benefit, which may go away in the next year, but the number of touchpoint that we can enjoy, the younger generation transfer of the businesses, divestment of the businesses, in fact, is not going to be affected very much. The trend will not reverse in the next year. I mean, this is my take, so I would continue to watch over the development for this.
As a matter of fact, I do agree to what has been said by Mr. Takeuchi. The minimum tax bubble is not what I describe the current trend to be. So, in the second quarter, you could see that this minimum tax's impact was not there, but then the mid-cap was on the increase. Therefore, minimum tax is not impacting very much. So, this increase of the mid-cap deals, that's my understanding.
Next question. For your future growth, which is more important, growing headcount or improving productivity?
For this question, I think that the two are interconnected, so I cannot decide on one. For example, as a company, if we want to grow by 10% as a company, productivity improvement alone is quite not enough to grow 10% as a company. So, we have to add people as well. That's a must. Headcount growth is a must. However, if we just recruit new people, that will not be successful. Because we have to think about churn rate or the turnover rate. For example, when we have 100 persons growth in headcount, if we hire 300 new people and lose 200 people from our existing workforce, that's not good, because the number of people who can do the M&A business will be less in net. So, productivity goes down as a result.
With that kind of headcount change or the headcount mix change, we cannot grow. We have to grow in our headcount. We also have to improve the quality of the people as well. We will have to improve the quality of education, and we will have to decrease the number of departures. Also, it is important that each individual can do more and leave good results. Otherwise, they will leave our company. Using AI and using DX, we will make it easier for our employees to have good results, and we will improve our productivity per head that way.
I believe that that will lead to reducing turnover rate in our company. The two are interconnected, and when we get into a positive cycle, they both will improve. When we are in a vicious or the bad cycle, we cannot grow as a company. Connecting the two factors, we would like to grow as a company, and we need a strategy for that.
In the interest of time, we would like to answer the last question, and this is going to be referring to the current leading indicators and the status of the sales pipeline and the transaction under negotiation. Could you please tell us how confident you are regarding financial performance for the third quarter and beyond?
With regard to this, I would like Takeuchi to answer the question.
Well, thank you for the question. We have made a mention in this earnings briefing document. We have already accounted this performance commission. Therefore, we could feel, I think we are gaining confidence that we are on the recovery track from the third quarter. With regard to the deals that are under negotiation, we will try our best to close them.
Also, at the same time, the leading indicator, the new mandates, for example, the number of mandates, and we have been organizing ourselves very much from the last year, so that we will be able to win the mandates of quality and also yield, and also the productivity enhancement has been achieved as a result of this. Therefore, what we are facing right now in front of us, we would watch over the development and also watching over the trend of the leading indicator as well. Thank you very much.
So the third quarter. I think we will be able to start rotating this positive cycle of our businesses and be able to enjoy the peak of our earnings. It is the M&A that we, in fact, provide is not a buildup of decision-making by the organization. After all, the selling business, in fact, will be determined by, the decision will be made by the management, and so will it be for the selling business as well. Very often, they may experience marriage blue and melancholic kind of emotions. Therefore, if you were to just focus on the timing, that is very much, very often experienced by the major businesses, then we will not be able to enjoy a good enough trend. This is why we try to enjoy the peak of our earnings in December, and that is exactly what had happened back last year.
Therefore, that would allow us to go back to this cycle that could be deemed to be virtuous for us. This is why we are now trying to build up the momentum in order to enjoy the peak period in December. We really think that we are on the right track, and that we have now come back to or recovered to this growth trajectory, I think, which we will be able to present to you.
Today, thank you very much for attending. Many of you had attended, kindly taking time out of your busy schedule to attend the second quarter earnings, and this is translated simultaneously into English language. Many of you are attending from different corners of the world. One-on-one meetings will be organized from here down the road. We are happy to entertain your request. Please, if you have any requests, please put them forward to our IR department. I would like to thank you all for your participation today. Thank you.