Lead Real Estate Co., Ltd

Greetings and welcome to the LEED Real Estate Full Fiscal Year Ended June 30, 2024 Financial Results Conference Call. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may press star one to be placed into question queue at any time. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Jared Whalen, Investor Relations. Jared, please go ahead.

Thank you, Operator, and thank you, everyone, for joining us on this call. Before we begin, I would like to read you our forward-looking statements provision. During today's conference call, company representatives may make forward-looking statements. Any statements made in this presentation about future operating results or other future events are forward-looking statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Please note that actual results achieved by the company may differ materially from such forward-looking statements. A discussion of factors that could cause such differences appears in the risk factors section of the company's 20F. And now, Lead Real Estate CEO, Mr. Ije Nagahara. Nagahara-san?

Thank you, Jared, and thank everyone for joining us on this call. I'm happy to say that in the fiscal year 2024, our company generated top-line and bottom-line growth worldwide, up a single digit growth in real estate sales. Our management team believes that our company's inclusive, focus on condominium development versus single-family home development will help drive future growth. Also, we feel that our growing hotel business will be our future success. Tokyo continues to be a popular destination for business travelers as well as domestic and international tourists. Our entrance line of hotels and guesthouses were positioned to benefit from these trends. In general, as a real estate company, we feel optimistic as the interest rate improvement provides relatively favorable tailwinds. Japan's interest rates remain the lowest in the G20 and Asia. At this point, I would like to introduce our Chief Financial Officer Daisuke Takahashi. Takahashi-san.

Thank you, Nagahara-san. Let's review our financial performance for our fiscal year 2024, which ended June 30th. Total revenue was 18.9 billion yen versus 17.4 billion yen for the previous year. Real estate sales, the major component of revenue, increased to 18.5 billion yen from 17.1 billion yen, 8.1% year-over-year. Gross margins slightly decreased to 15.6% in the fiscal year ended June 30, 2024, compared to 15.8% in the fiscal year ended June 13, 2023, preliminary driven by increased construction costs such as labor and materials. Selling general and administrative expense were up to 2.05 billion yen from 1.81 billion yen As a result, operating income decreased by 4.3% year-over-year to 898.5 million yen in the fiscal year ended June 30, 2024, from 930 to 39.2 million yen in the per-year fiscal year, and operating profit margin increased to 5.0% from 5.3% in the prior fiscal year. Interest expense increased to 18.2 million yen from 16.7 million yen in the fiscal year ended June 30, 2023, due to a gradual rise in interest rates. Other income was 73.7 million yen compared to other income of 6.2 million yen for the previous fiscal year, preliminary due to cancellation penalties. As a result of the foregoing, our net income attributable to ordinary shareholders increased by 2.5% to 626.9 million yen, or 46.93 yen earning per share in the fiscal year ended June 30, 2024 from 611.918 million yen or 48.96 yen earning per share in the fiscal year ended June 30, 2023. Net income attributable to ordinary shareholders increased by 2.5% year-over-year to 626.9 million yen or 46.93 yen earning per share from 611.918 million yen or 48.96 yen earning per share. Cash and cash equivalents were 1.3 billion yen versus 786.3 million yen for the previous period. The number of total ordinary shares outstanding was 13,641,900 and 12,498,900 as of June 30, 2024 and 2023, expectably higher. Please note the net income attributable to ordinary shareholders increased. The slight decrease in earnings per share year over year was mostly due to the increase in ordinary shares outstanding. If you would like additional data on our fiscal 2024 financial performance, please consult our Form 20-F, located in the Investor Relations section of our website. With that, I'll return the floor to Nagahara-san.

Thank you. In summary, we feel optimistic about the future of our company. During the pandemic-related lockdowns, people migrated out of Tokyo to rural areas. They failed to suffer in areas with low population. and literally work remotely, surface free, from anywhere when lockdown measures were removed in 2023. Employees were ordered to return to the office, leading to an influx back to Tokyo. At the same time, couples in white color, two carriers, Households have driven demand for condominiums in Tokyo. Metropolitan area currently we see higher interest in condominiums than in single-family homes. Strong social media coverage and current foreign exchange rate improvement continue to support strong post-pandemic tourism. These factors help support our growth growing hotel business. Continuing this trend, we urge investors to stay current on our exciting future developments in our hotel business. And now we would welcome your questions.

Thank you. We'll now be conducting a question and answer session. If you'd like to be placed into question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one. One moment, please, while we poll for questions. At this time, I'd like to turn the floor back over to management for any further questions or comments.

Thank you, operator. This is Scott Powell, president of Skyline Corporate Communications Group. We have a few previously prepared questions for management that we would like to present to the management team. The first previously prepared question for the real estate management is what are some of the company's growth plans for 2025?

Mr. Scott, do you have any questions?

First of all, can you tell us a little bit about the growth plan of the company for 2025? First of all, we are preparing to expand our hotel business.

The new Opus Hotel will be held in Ginza and Asakusa. I'm sure of that. To be specific, the hotel will be opened in Ginza in December of this year. In February of next year, it will be opened in Asakusa. Yes, as far as our hotel business, we plan to continue expanding our business and

We have the Ginza Hotel that we are opening. And then Asakusa, we have another hotel that will be there. Those are both confirmed. As far as Ginza, that's going to be opening in December. And the one in Asakusa, Asakusa Bashi, to be more specific, that's planned to be opened in February. And furthermore, we plan to continue expanding our business in other key areas.

Thank you.

And the next previously prepared question for lead real estate management is about international expansion. Does the company have further plans for continued international growth, or will it focus more on domestic growth within Japan?

Okay. Can you tell us a little bit about that? Or, if you don't have one, an expansion plan within the country. Can you tell us a little bit about that?

Right now, in Tokyo, it's a super-unique area. It's the best area. About 5 million to 10 million people, one at a time, designers... I'm going to start building houses in the future. I hope that the business model will be implemented in California and Los Angeles in the U.S. I'm thinking about it. I want to enter the business model as it is. To be specific, in Los Angeles, Manhattan Beach, about 5 million to 10 million people So right now, we have our single-family home business.

We have where we build single-family homes in really high-end, top real estate areas in Tokyo, which... And U.S. dollars generally cost around $5 to $10 million. And we plan to apply that formula, that methodology, to certain areas in the L.A., California area. More specifically in Manhattan Beach, that's where we are focusing on. And, again, we plan to apply that approach to U.S.

Manhattan Beach area great thank you and then the final previously prepared question is about margins what tactics or strategies does the company plan to employ to achieve greater margin growth or margin expansion for the business

Finally, I would like to ask you about margin growth. What kind of strategies are you taking to achieve that margin growth in the future? To be specific, by selling the hotels we have now to the funds little by little,

It means that you can get a lot of development benefits. Also, as I mentioned earlier, it is a very profitable business model to make and sell high-end housing for 500 million or 100 million yen. I would like to focus on these two points and expand the profit and loss. Yes.

With regards to margin growth, there would be two points, basically. With regard to the hotel business, as we continue to expand that hotel business, we'll also look to sell some of those hotels. And so we can increase margin growth through that process. So we'll do that slowly. And then at the same time, what I just mentioned earlier about our single-family, the high-end designer, where the house costs generally from the $5 million to $10 million range. So we'll focus on that business, and those are also high revenue. And so we'll look to stress that business as well and look to increase our margin growth through those two approaches.

Great. Thank you.

Thank you, Nagahara-san, and thank you, Daisuke-san. Those are all of the previously prepared questions for this real estate earnings call. If any investors or anyone else on the call has any additional questions following this earnings conference call, please feel free to email your questions to info at guyline.com. ccg.com at any time. I'd now like to turn the call back to Mr. Nagahara-san for closing remarks. Mr. Nagahara-san?

Hi. Thank you.

Thank you, Scott-san. Thank you again to everyone for taking the time to join us this morning. We appreciate your interest in our company and we invite you to visit our website and follow our progress in fiscal year 2025. We hope you have a great day.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.