Earnings Call: Q3 2026

Feb 5, 2026

Summary

Q3 performance advanced across segments, with Stock-type sales up 39% and gross profit up 56% YoY. Recurring earnings covered 131% of fixed costs and interest, while the FY2028 plan targets ¥135.0B net sales and ¥27.0B ordinary profit.

I am Hirahara, General Manager of the Corporate Planning Department. I'll walk you through the performance highlights up to page 16. First, let me explain the purpose of our group. Our altruistic values elevate the mindset of all employees and drive the growth of our business. As shown in the circle on the left, our three management pillars are mental management based on our philosophy, all employee participation management through the small-group profitability system, and business management based on the client's perspective. These three pillars interact with one another and foster sustainable growth. Going forward, we will continue to address social issues through the practice of our management philosophy while striving to maximize the corporate value of the group. Looking at our third-quarter performance summary, both net sales and profits increased significantly year-on-year. We've also reached about 70% of our full-year forecast at this point. As key highlights, we'd like to point to three items: the opening of three new Hiyori Hotels, two M&A transactions, and the publication of our first-ever integrated report. Based on the progress I mentioned on the previous slide, we are well on track to achieve our full-year forecast. One of the reasons for the significant year-on-year increase is that in the prior fiscal year, property sales were concentrated in the fourth quarter. While our equity ratio declined by 3.4 percentage points, it remains at a solid level of 43.4%. Going forward, we will continue to balance financial soundness with an appropriate level of leverage and further improve capital efficiency. This slide shows our consolidated statement of income. All segments achieved growth in both net sales and profits, with particularly strong performance in our Stock-type Businesses. In the real estate revitalization business, both net sales and gross profit have reached just under 60% of the full-year forecast. This is in line with our initial plan. In the real estate services business, group-wide synergies are taking hold, and both scale and profitability are growing steadily, led by our Rental Conference Room Business and property management businesses. In the hotel and tourism business, our operations segment continued to improve both occupancy rates and average daily rates. As a result, net sales has reached 70% of the full-year forecast, while gross profit has reached 91%. As for selling, general, and administration expenses, we continue to invest steadily in human capital to attract and retain top talent. This slide shows the trend in ordinary income. On a cumulative basis through the third quarter, we've achieved a record-high level, and we remain confident in our outlook to reach the full-year forecast of JPY 22.5 billion. Next, I will walk you through our consolidated balance sheet. Total assets increased by JPY 32.0 billion from the end of the previous fiscal year to JPY 250.2 billion. The main components of this change were a decrease of JPY 8.4 billion in cash and cash equivalents, while inventories increased by JPY 30.4 billion and fixed assets increased by JPY 7.6 billion, mainly due to strong property acquisitions and the impact of M&A. Turning to liabilities and equity, interest-bearing debt increased by JPY 28.0 billion from the end of the previous fiscal year, reaching JPY 120.5 billion. Our financial institutions continue to highly value the soundness of our financial position and the discipline of our purchasing standards. Backed by this investment capacity, we will continue to pursue proactive growth investments. Next, I'll move on to performance by business segment. Our core Replanning business, as mentioned on page 6, is expected to achieve our initial forecast while maintaining a profit margin of 30%, factoring in the outlook for the fourth quarter. In addition, the rental building business has returned to its normal profit margin as the impact of one-off expenses recorded in the previous fiscal year has been eliminated. As for the acquisition of Replanning properties, as you can see, purchases have built up to around JPY 70.0 billion, representing a roughly 40% increase year on year. We will continue to maintain our strict acquisition criteria while further strengthening our overall sourcing capabilities in the office segment, both at the individual and organizational levels. The pie chart on the left shows the JPY 64.3 billion in acquisitions for our real estate revitalization business this fiscal year, which I explained on the previous slide, broken down by asset type. The pie chart on the right shows the breakdown of our inventories by asset type. As you can see, we will continue to further strengthen our core products while also expanding into new asset types, advancing portfolio diversification at the same time. This slide shows the actual results and outlook for gross profit generated from inventories and property sales. As in previous years, we believe this clearly demonstrates both our track record of expanding the business while maintaining a high level of profitability as well as the strong feasibility of achieving future results. Our real estate services business is closely integrated with the Replanning business in a complementary relationship, serving as a platform that enables our group to provide a one-stop, high value-added value chain. In terms of progress against the full-year forecast, gross profit has reached 93% in businesses such as property management, building maintenance, and brokerage, and a strong 140% in the Rental Conference Room Business. In the development side of our hotel and tourism business, we are identifying and carefully selecting sites that fit our business model with a target of reaching 10,000 rooms. In the operation business, we have maintained a high segment profit margin of 25%, and gross profit has already reached 104% of the full-year forecast. Together with local communities, we will continue to create heartwarming and fun hotels that also contribute to regional revitalization. Finally, in our construction business, the Otake Kenso Group joined our group in October last year. To strengthen our overall group capabilities, we will work together to generate synergies through the shared practice of our philosophy. In addition, in our overseas development business in Vietnam, sales of our second development project, HIYORI Aqua Tower, will begin the sale in March this year. Going forward, we will continue to contribute to regional development in Vietnam, helping to create smiles, joy, and happiness for local communities. That concludes my presentation. I'm Saito, President and CEO. Now, I'd like to walk you through our growth strategy and the initiatives across each of our business. To begin, I'd like to share our view of the current business environment, which is summarized on this slide. According to the IMF's latest World Economic Outlook, global growth for this year is projected at 3.3%. This represents a slight upward revision from the October forecast, and overall, a gradual recovery is expected to continue. In Japan, meanwhile, the outlook will depend on future government leadership and policy direction. There are concerns about rising long-term interest rates driven by expansionary fiscal policies and tax cuts. In addition, ongoing inflation, potential interest rate hikes by the Bank of Japan, and geopolitical tensions such as issues involving China and Taiwan continue to make the economic outlook difficult to predict. Against this backdrop, both the office and hotel markets have remained solid in the near term. Office rents and hotel room rates are still on an upward trend, and although the pace of increase is slowing somewhat, we expect this trend to continue for some time. Going forward, while remaining well-prepared for uncertainty in the global economy and sudden changes in the financial environment, we will continue to execute our business steadily in line with our plans. Next, I'd like to outline our long-term vision and our medium-term management plan, which are summarized here. Under our medium-term management plan, we are implementing a range of strategies and initiatives based on our core policy of working to resolve social issues by promoting cooperation and diversification within core business, providing manufacturing through clients' point of view and heartwarming services. By the final year of the plan, the fiscal year ending March 2028, we aim to achieve net sales of JPY 135.0 billion and ordinary profit of JPY 27.0 billion. At the same time, while maintaining an equity ratio of around 45%, we are targeting an ordinary income margin of 20% and an ROE of 14% or higher. Through these efforts, we will continue to strengthen our financial foundation by balancing stability, profitability, and capital efficiency. Under our growth strategy, we are pursuing a business model that combines manufacturing and services. By making effective use of capital and circulating it efficiently, we aim to expand our business domains and accelerate growth. In the office segment, in addition to the revitalization of existing buildings, we are also placing greater emphasis on new construction projects. In our Replanning and fractional real estate business, we are expanding into new regions and are also taking on projects in Osaka. In the hotel segment, alongside new development and renovation projects, we are actively utilizing M&A as we work to increase the number of hotels under operation. In the residential segment, we have also begun developing new rental apartment projects in Tokyo. At the same time, as we expand and grow these businesses, we are also working to transform our earnings structure. In our Flow-type Businesses, we are promoting diversification across asset types, while in our Stock-type Businesses, we are expanding into related fields. By steadily growing overall net sales, we also aim to increase the proportion of Stock-type Businesses, which are more resilient to market fluctuations. Under our current medium-term management plan, we are targeting total net sales growth of 35% over 3 years. Of this, we expect growth of 21% in Flow-type Businesses and 53% in Stock-type Businesses. As a result, we plan to increase the share of Stock-type Businesses in total net sales to 35%. Next, turning to our capital allocation plan, we are planning total capital investment of JPY 310.0 billion over the 3-year period. This includes JPY 200.0 billion invested in Replanning-related business, JPY 21.0 billion in small-lot real estate investment products, and JPY 70.0 billion in hotel development. In addition, we plan to invest JPY 10.0 billion in areas such as M&A. In executing these investments, we will continue to rigorously assess each project from a cost of capital perspective while proactively investing to accelerate future growth. Next, I'd like to walk you through our recent performance and the progress of each business. Let me start with the performance of our Stock-type Businesses. This chart shows the trends in net sales and gross profit for businesses that do not involve property sales, such as our real estate service and hotel operation. Thanks to strong performance across the board, all of our Stock-type Businesses continue to grow, achieving increases in both net sales and profit and reaching new record highs. For this nine months ended December 31, 2025, total net sales reached JPY 33.2 billion, up 39% year-on-year, while gross profit amounted to JPY 11.9 billion, representing a 56% increase. In terms of progress against our full-year plan, net sales has reached 93%, and gross profit has exceeded our initial forecast, reaching 110%. Looking ahead to the fourth quarter, from January through March, growth rates are expected to ease slightly due to some seasonal winter factors, but we expect performance to continue to build steadily. Next, let me go over the progress of our Flow-type Businesses. This chart shows net sales and gross profit, combining only the sales of properties held for sale, such as Replanning properties and hotel assets. For this fiscal year's progress to date, the figures include not only actual results through the end of December, but also properties for which sales were completed between January and the date of yesterday's earnings announcement, as well as those already under contract and scheduled to close by the end of March. Taking all of this into account, progress against the full-year forecast stands at 74% for net sales and 80% for gross profit. As profit margins have exceeded our initial plan and remain at a high level, profit is progressing ahead of net sales. Looking toward the year-end outcome, we plan to respond flexibly while also taking next fiscal year's sales plan into consideration. Next, I'd like to discuss the coverage ratio of company-wide expenses by our Stock-type Businesses. This chart shows how much of our fixed costs, such as selling, general and administration expenses, and interest payments, are covered by earnings from our stock-based businesses and how this has evolved over time. Three years ago, the coverage ratio was around 70%. This increased to 90% in the previous fiscal year, and as of the end of the third quarter this year, it has reached 131%. Based on recent trends, we believe that even on a full-year basis, we can establish a stable earning structure in which our expenses are covered by recurring businesses without relying on gains from property sales. Next, I'd like to explain in a bit more detail the initiatives we are undertaking in both our Flow-type and Stock-type Businesses. Let me start with our Replanning business, which is part of our Flow-type operations. This is our core business, and since our founding, we have built a track record of 524 projects in total. As a recent example, we would like to introduce one such project. The property is a 7-story building in Minato Ward, approximately 35 years old, with a total floor area of about 250 tsubo. It represents a typical example of the small to mid-sized urban office buildings where we have particular strength. By drawing out the building's potential value, such as its ability to bring in natural light from three sides, we created an open and bright space that makes full use of natural light. We also designed the layout to include meeting rooms and other features, creating an office that combines convenience from the tenant's perspective with strong design appeal. As a result, tenant leasing progressed smoothly, rental levels improved significantly, and we were ultimately able to sell the property as a fully occupied, highly profitable building. As an additional highlight, three Replanning properties that are currently being prepared for commercialization have been selected for a Model Survey Project by Japan's Ministry of Land, Infrastructure, Transport and Tourism. This initiative, formally known as the Model Survey Project to Promote Value-Enhancing Renovation Investment in Small and Medium-Sized Buildings, aims to address the fact that although many buildings are reaching the stage where renovation is needed, value-enhancing renovations that respond to social challenges have yet to become widespread. The project focuses on identifying effective renovation approaches and assessing their impact and then sharing those findings more broadly. Through these efforts, the Ministry seeks to encourage greater investment in value-enhancing renovations for small and medium-sized buildings. In this second phase of the program, 12 projects were selected in total, and three of them are Replanning properties from our company. All of these projects align with our core business of enhancing the usability of existing office buildings through renovation and revitalization. Key reasons cited for their selection include investments that address social issues, such as correcting non-compliance with regulations, upgrading aging facilities, obtaining environmental performance certifications, and providing setup offices. These efforts were also recognized for their potential to enhance real estate value, including improved asset liquidity, stronger leasing competitiveness, and better rental income performance. Next, let me talk about our new office building development business. Leveraging the high value-added renovation expertise we have built through our Replanning business, we are developing new office buildings primarily in Tokyo's five central wards. At present, we are working on a total of 14 new development projects. The photo on the right shows an office building currently under construction in Chūō Ward, which is scheduled for completion next month. Located along Nihonbashi Sakura-dori, the building enjoys a prime location and has been designed as a highly functional and comfortable office, featuring spaces for interaction such as a lounge, as well as views from a rooftop terrace. Next, let me turn to our fractional real estate business. In this business, we primarily attract tenants that are closely tied to local communities, such as daycare centers and medical clinics, and operate the properties under long-term lease arrangements. We then sell these buildings as fractional real estate investment products. While the recent outline of tax reform includes revisions to methods for valuing real estate assets, the clinic mall building in Nishinomiya that was on sale was fully sold out as planned in December. Going forward, we will continue to develop and sell fractional real estate projects as investment products characterized by stable rental income. Next, let me update you on the progress of our residential business. We are developing single-building rental apartment projects primarily in Tokyo's 5 central wards and the 7 adjacent wards. This business has only been running for about 2 years, and we currently have 5 projects underway, as shown here. Of these, the apartment building in Nishi-Ochiai, Shinjuku Ward, was completed in January. As this is a soundproof-type apartment building, leasing has been progressing smoothly, and we plan to begin sales later this month. Next, let me talk about our apartment Replanning business in New York. We launched this business in 2019, and to date we have acquired a total of 13 properties, carried out renovation and revitalization projects, and sold 8 of them. In the current fiscal year, we have completed sales of 2 properties, one of which will be recorded in the fourth quarter. Next, I'd like to explain the current status of our Stock-type Businesses. Let me start with our real estate services business. This business spans a wide range of services, including leasing brokerage, sales brokerage, property management, building management, and rent guarantees. These services work together in an integrated manner to form a multilayered business model. In our leasing brokerage business, we opened a new Ueno branch last October, bringing our total number of locations to 13. In our property management business, the number of managed buildings increased by 22 this fiscal year, reaching a total of 564 buildings as of the end of December. In our Rental Conference Room Business, supported by strong performance, we have been expanding our operating floor space. Most recently, we opened the Tameike-Sannō location on February 1st. Including this new site, we now operate 19 locations in total, with an aggregate floor area of 10,413 tsubo. Next, I'll move on to our hotel operation business, which is also part of our Stock-type Businesses. This business has also been growing steadily, thanks to strong performance. In the current fiscal year, we added a total of 4 hotels, 3 through new openings and 1 through M&A. As a result, we are now operating 32 hotels, with a total of 3,649 guest rooms. We have also been steadily advancing the rebranding of hotels previously acquired through M&A. Last week, on February 1st, we rebranded and reopened the Joytel Hotel in the Shinsekai area of Osaka as a Hiyori Hotel. In addition, a hotel in the Dōtonbori area is scheduled to be rebranded and reopened next month. This slide shows a list of hotels that are currently in operation, as well as those scheduled to open in the future. In the next fiscal year, we plan to open 7 new hotels, adding a total of 1,392 guest rooms. Looking further ahead, when we include not only hotels currently in operation but also those for which we have already acquired development sites and are in the planning stage, we expect to expand to a total of 48 hotels with 6,188 guest rooms over the next 3 years. Next, this slide shows the performance trends of our hotel operations business. Both occupancy rates and average room rates continue to trend upward, and performance has been growing steadily. While we have seen some impact from reduced inbound travel from China at certain hotels, such as those in Osaka and Tokoname, the effect has been limited so far, and overall performance remains solid. Going forward, while responding flexibly to changes in the business environment, we will continue to refine our service capabilities under our philosophy of a heartwarming and fun hotels delivered through heartfelt hospitality and further grow the business. Next, let me turn to our construction business. In October last year, we acquired 100% of the shares of the Otake Kenso Group through an M&A transaction. As a result, in the third quarter, approximately JPY 1.2 billion to JPY 1.3 billion in net sales for a 3-month period was added to our Stock-type Businesses. Going forward, we will further strengthen collaboration across the group, with the aim of expanding our business foundation in the construction-related fields and driving further growth in performance. That concludes my overview of our recent initiatives across each business area. Finally, last September, we published our first-ever integrated report. The report provides a comprehensive overview of our company, covering not only our management philosophy and growth strategy, but also non-financial information such as our approach to sustainability management. It serves as an important guide that outlines our path toward enhancing long-term corporate value, so we hope you will take the time to have a look. That concludes my presentation.