LEIFRAS Co., Ltd.

Good morning, and thank you for joining us. Welcome to LIFRA's first half of fiscal year 2026 earnings conference call. My name is Tsuruku, and I will be your moderator today. Today, we will discuss our first half results, our core sports school and social businesses, and the progress of our growth strategies, including mergers and acquisitions. Joining us on today's call are Mr. Kiyotaka Ito, our representative director and chief executive officer, and Ms. Rei Yamamoto, our director and chief financial officer. Before we begin, please review the disclaimer on this slide. Some of the information presented today includes forward-looking statements regarding our future performance. These statements reflect our current expectations and assumptions and are subject to risks and uncertainties. Actual results may differ materially. Further information regarding these and other risks, uncertainties, or factors is included in the LFRAS filings with the U.S. Securities and Exchange Commission. Now, I will turn the call over to Mr. Ito. Mr. Ito, please go ahead.

Hello, everyone. I am Kiyotaka Ito, the company's CEO. Thank you for taking the time to join us today. I would also like to express my sincere appreciation for your continued support of our business and growth. Tomorrow, October 9th, marks exactly one year since Leifras was listed on NASDAQ. One year ago, we took a new step as a Japanese sports company entering the global capital markets. Over the past year, with the support of our shareholders, investors, and many other stakeholders, we have worked to grow our business and enhance corporate value. We see our NASDAQ listing as the starting point for further growth rather than the completion of our journey. During this year, we have steadily built the foundation for our next phase of growth by expanding our sports schools to all 47 prefectures in Japan, growing our school club support business, and entering new business areas through M&A. Today, as LAFRAS prepares to enter its second year as a NASDAQ-listed company, I will explain the growth we aim to achieve, alongside our results for the first half of FY2026. Next slide, please. We will begin with an overview of our business, followed by an executive summary, our consolidated results for the first half of FY2026, progress on our growth strategies, our consolidated financial position, and our full-year outlook. Next slide, please. Let us begin with our company profile. Let me start with a brief introduction to our company. At Leifras, our corporate philosophy is to change and design sports. We operate a sports and social business that uses sports to address a wide range of social challenges. Since our founding in 2001, we have expanded our operations around our sports school business. In 2013, we launched our school club support business. In FY 2025, net revenue reached 74.8 million U.S. dollars, a record high in the full year period shown since FY 2023 under U.S. GAAP. We have also been recognized as Japan's number one provider in four major categories. The nationwide customer base, workforce, and network of local government relationships that we have built over the past 25 years form a critical foundation for our growth today. Our operations consist of two main segments, the sports school business and the social business. In the sports school business, our teaching philosophy is to recognize, praise, encourage, and inspire children. We provide distinctive sports programs that develop not only athletic skills, but also non-cognitive skills, such as courtesy and good manners, leadership, teamwork, self-management, and problem solving. Our social business centers on school club support and after-school daycare services that provide developmental support for children with disabilities. In FY 2025, the sports school business accounted for 73% of revenue and the social business accounted for 27%. Before we review our first half figures, I would like to explain the seasonality of our business. Due to the nature of our operations, we typically generate the majority of our annual profit in the second half of the fiscal year. In the sports school business, membership temporarily declines during the graduation season in March, then increases from April through June as the new school year begins. Event revenue also peaks during school holidays in March, August, and December through January. The social business also has seasonal cash flows, as payments under some local government contracts are made in March. Please keep these seasonal patterns in mind as we review our first half results. Next slide, please. I will now present the executive summary for the first half of FY2026. In the first half of FY2026, both revenue and profit grew steadily, driven by our school club support business and our sports school business. The key message on this slide is that five metrics reached record highs for the first half of the fiscal year in the period shown since FY2025. Net revenue, income from operations, adjusted income from operations, net income, and the number of contracted club activities. Our CFO, Ms. Yamamoto, will explain the specific income statement figures shortly. Sports school membership, meanwhile, stood at 68,873, down 0.9% year-over-year. I will explain the reasons on the next slide. The number of school club activities under contract increased to a record 2,224. Overall, the first half brought improvements in profitability alongside top line growth. Next slide please. Sports school membership declined by 0.9% year over year. The main reasons were an increase in graduating members as existing members reached higher grades and a strategic shift in the timing of new member acquisition to strengthen service quality. In particular, we strengthened new employee training and shifted the timing of new class openings and customer acquisition. The termination of one franchise agreement also reduced membership. Meanwhile, revised monthly membership fees and higher average spending per customer enabled the sports school business to achieve growth in both net revenue and segment profit despite the slight decline in membership. Both measures reached record highs for the first half of the fiscal year in the period shown since FY 2025 under U.S. GAAP. We expect membership to recover in the third and fourth quarters through new initiatives. Next slide, please. Next, let us look at the key developments in the first half. We made concrete progress across three areas, the sports school business, the social business, and M&A. In the sports school business, we expanded our presence to all 47 prefectures and broadened our business foundation through new services, alliances, and M&A. In the social business, we increased our school club support contracts and diversified our after-school daycare services. Through M&A, we strengthened our existing businesses and took steps toward entering child care. We signed the share transfer agreement for Swift Japan on June 23, 2026, and the company became our subsidiary on July 1, 2026, after the first half reporting period. I will discuss these developments in detail in the Growth Strategy section. I will now hand over to our CFO, Ms. Yamamoto, to review the financial results.

Thank you, Mr. Ito, and good morning, everyone. I am Rei Yamamoto, the company's CFO. I will discuss our consolidated results for the first half of FY2026, in which we delivered strong top-line growth and profit growth that significantly outpaced it. Next slide, please. Let us begin with the consolidated income statement. The earlier summary provided an overview. I will now take you through the figures. Net revenue increased 8.9% year-over-year to US$36.8 million, and gross profit increased 22.6% to US$10.9 million. I would particularly like to highlight our strong operating leverage. Income from operations increased 35.9% to US$0.6 million and net income increased 43.5% to US$0.5 million. Profit growth substantially outpaced revenue growth. Net revenue, gross profit, income from operations, operating margin, adjusted income from operations, and net income all reached record highs for the first half of the fiscal year in the period shown since FY 2025. Our operating margin increased from 1.2% to 1.5%, an improvement of 0.3 percentage points. The key highlight is the further improvement in the profitability of our core operations. Next slide, please. Next, let us look at adjusted income from operations, a non-GAAP measure that we use to assess the profitability of our core business. Its supplements are U.S. GAAP results and should be considered alongside them. The definition and reconciliation are provided in the appendix. First half income from operations was 0.6 million U.S. dollars. Acquisition-related costs were 0.3 million dollars. Adding back these costs, adjusted income from operations was 0.9 million dollars or 139.7 million yen, up 105.6% year-over-year. This compares with $0.4 million in the first half of FY 2025 when there were no acquisition-related costs to add back. The profitability of our core business continued to improve, providing a foundation for second-half growth. Next slide, please. Let us now review segment performance. In the sports school business, higher monthly membership fees contributed to increased customer lifetime value. Net revenue rose 5.4% year-over-year to $25.5 million, and segment profit increased 2.5% to $5.3 million. This business continues to provide a stable earnings base for our growth. In the social business, the expansion of school club support contracts drove strong growth. Net revenue rose 18.0% to $11.3 million and segment profit increased 156.7% to $1.7 million. Both businesses reached record highs within the first half comparison shown from FY 2025 onward under U.S. GAAP and contributed to our overall performance. I will now hand the presentation back to Mr. Ito to discuss the progress of our growth strategies in more detail.