LEIFRAS Co., Ltd.

Ladies and gentlemen, thank you very much for taking the time out of your busy schedules to attend Lee Frost's full year financial results briefing for the fiscal year ending December 31st, 2025. During today's call, all participants will be in a listen-only mode. This conference is being recorded today, Tuesday, April 14th, 2026. Before we begin, please review the disclaimer. I would like to remind you that some information discussed on this call will contain forward-looking statements which involve risks and uncertainties that may cause actual results to differ materially. Further information regarding these and other risks, uncertainties, or factors is included in the company's filings with the U.S. Securities and Exchange Commission. Today, the company's representative director and CEO, Mr. Kiataka Ito, and Director and CFO, Ms. Rei Yamamoto, will present Lefrost's financial results for the fiscal year ending December 31, 2025, and the company's future growth strategy. After the presentation, we will address questions submitted in advance, so we would appreciate it if you could stay with us until the end. Now, Mr. Ito, I'll hand the call over to you.

Hello, everyone. I am Kiyotaka Ito, the CEO. Thank you very much for taking the time out of your busy schedules to join us today. I would like to express my sincere gratitude for your continued warm support and consideration for our business activities and growth. Now, I will explain... things in order following the index in the materials you have in front of you. Our corporate philosophy is to change and design sports, and we practice sports and social business to address various social issues through sports. Since our founding in 2001, we have strived to transform Japan's traditional physical education into true sports and have continued to grow over the past 25 years. As a result, we have established a solid position as number one in Japan in terms of number of sports school members and number of school club activity contracts. Thanks to the steady growth of both businesses in 2025, we recorded our best performance. next regarding our business model our business is broadly divided into two segments our sports school business accounts for over 70 percent of our sales rather than simply teaching sports techniques we offer a unique program that cultivates non-cognitive skills such as leadership and teamwork which are highly valued in modern education furthermore through our proprietary system milabo developed in collaboration with sports psychology experts we have established a mechanism to visualize the growth of these non-cognitive skills which were previously only intuitive This has received extremely high praise from parents. Thanks to this, we have been ranked number one in Japan for both the number of members and the number of schools for four consecutive years. Next, on the right side of the slide is our social business, which accounts for approximately 30% of our sales. This business has expanded strongly as a new growth driver for our company. with its sales contribution increasing by three percentage points since fiscal year 2023, two years ago. In this area as well, we have achieved the number one position in Japan for the number of schools contracted to provide club activities for two consecutive years. Next, here is the executive summary. In terms of earnings highlights, strong growth in both segments resulted in record highs across all key metrics. Net revenue increased by 13.5% year-on-year to $74.8 million and income from operations increased by 20.7% to $4 million. Adjusted income from operations, which indicates the fundamental earning power of the core business, excluding one-time IPO-related costs, increased significantly by 41.8% year-on-year to $4.4 million. Next, here is a supplementary explanation of the financial highlights on page seven. The three indicators, net income, number of school members, and number of commissioned club activities only showed slight increases or decreases. In short, these are the results of a strategic selection and focus aimed at future growth. first regarding the slight increase in net income. This is mainly due to one-time expenses for growth investments and an increase in tax expenses. Specifically, this includes recording fees for syndicated loans in preparation for M&A, et cetera, as non-operating expenses. Additionally, the tax benefits from listing expenses that were present in the previous year have decreased and the effective tax rate has returned to normal levels, resulting in an increase in corporate taxes. However, above all, the profitability of our core business is growing steadily. Secondly, regarding the slight increase in the number of school members, the primary reason is the concentration of resources on large-scale club activity projects. We quickly took over a stalled project in Nagoya City and also secured new large-scale projects in Sweeter City and Shibuya Ward. Because we concentrated our personnel on these as top priorities, the opening of new sports schools was temporarily suppressed. However, as a result of the success of these projects, we have established an advantage in the club activity sector. Finally, the third point concerns the slight decrease in the number of commissioned club activities from fiscal year 23 to fiscal year This is primarily due to our commitment to compliance in order to play a central role in national policy with the aim of establishing a solid track record and building relationships with local governments nationwide. for future business expansion, we have accepted important projects from the Japan Sports Agency. However, to prevent conflicts of interest, we have decided to forego contracts with some local governments. Furthermore, regarding the eight wards in Nagoya City that were previously handed over to other companies, we immediately took over six of them following the bankruptcy of the previous operators. As a result, the actual decrease in wards is limited to only two, and we maintain a strong foundation. Overall, these temporary plateaus in top-line metrics are not a sign of slowing growth, but rather a positive step towards capturing a larger market. Here are some highlights from our social business school club activities program that demonstrate how the strategic selection and focus I mentioned earlier is leading to tangible results. Please look at the left side of the slide. This national policy, which is the biggest tailwind for our company, will finally enter the reform implementation period starting this year in fiscal year 2026, marking a historic turning point that will lead to rapid market growth. The new contract received in fiscal year 2025 on the right side is proof that our company is surely riding this massive wave. As you can see, we have seen a steady increase in new contracts from local governments and other organizations in fiscal year 2025. We have secured contracts all over Japan, from Hokkaido to Fukuoka Prefecture. Notably, we have received requests not only from major metropolitan areas such as Shibuya Ward, Shinagawa Ward, Nagoya City, and Kyoto City, but also from prestigious private schools such as Waseda University Senior High School. This is nothing less than proof of the scalability of our operational scheme. From fiscal year 2026 onward, we will fully leverage the tailwinds of this powerful national policy to accelerate further business growth as the undisputed top runner. Next, I'll hand it over to our CFO, Ms. Yamamoto, who will provide a detailed explanation of the specific financial figures.

Thank you, Mr. Ito. I am Ray Yamamoto, CFO. I will now report on our results, focusing on our record-breaking performance and the underlying quality of our evolving earnings structure. I will go over our PL highlights. As Mr. Ito mentioned earlier, we achieved record highs across all metrics this term, from net revenue to every level of profit. I would like to add some further context regarding our enhanced profitability. While revenue achieved double-digit growth of 13.5% to $74.8 million, please note that gross profit rose by 17.6% and income from operations increased by 20.7% to $4.0 million. The fact that our profit growth exceeded our revenue growth is clear evidence of positive operating leverage, as the operational efficiency of our personnel and facilities has improved and economies of scale are firmly taking effect. Regarding net income, we secured a record high of $2.8 million. This result was achieved even after accounting for financing costs for future M&A and the normalization of our effective tax rate, which followed a decrease in the tax benefits from our listing preparations. The reason net income growth appears more moderate compared to operating profit is purely due to these strategic investments and technical tax factors. Nonetheless, the fundamental earning power of our core business remains exceptionally strong. I would like to direct your primary attention to adjusted income from operations, which our management team considers the most critical indicator of our core profitability. For the current period, we have excluded non-recurring IPO related expenses that were expensed on the income statement. as distinguished from those capitalized directly against equity under U.S. GAAP. On this basis, profits reached $4.4 million, marking a significant 41.8% increase year on year. As shown in this waterfall chart, we have clearly entered a phase where revenue growth is reliably and efficiently converted into profits at a high multiplier. Moving into fiscal year 2026 and beyond, we remain committed to maintaining this high conversion efficiency while driving further expansion of our profit margins. Turning to slide 12 for our segment-based summary, both our foundational school business and our growth-driving social business achieved record high revenues, increasing by 7.8% and 32.8% respectively, demonstrating ideal hybrid growth across our portfolio. While this slide primarily highlights our top line results, more comprehensive financial data, including profit trends for each segment, is detailed in the segment information notes of our annual report. I highly encourage you to review the report to see how our social business is evolving into a robust revenue base and to gain a deeper understanding of the specific improvement processes driving our long-term profitability.