Nihon M&A Center Holdings Inc.

Thank you very much for joining our earnings briefing session for the fiscal year 2025. This earnings briefing session is provided in both Japanese and English languages to the audience from the entire world. I believe it's early in the morning for people living in Europe and it should be at midnight in the US. And for people in Asia, it's the evening. Thank you very much for joining this session despite the time difference. I am Suguru Miyake, the president and representative director, together with me, Mr. Naraki and Takeuchi. Hello, I am Naraki. Thank you for your time. I am Takeuchi. Thank you for joining this session. Now, let's get started with our earnings briefing session. We would like to start with some congratulatory or the remarks of appreciation. On the 25th of anniversary, we celebrated the 35th anniversary of our founding, since our founding. Our company was founded in April 1991, and we got listed on the mother section in October 2006, and we got listed on the first section of the TSC in December 2007. This is all thanks to your support. Thank you very much for your continued support. We would like to have regrowth as a company. We had our accounting inappropriate incident in FY21, and then after that, we've had introduction, development, change, and conclusion. We experienced these four phases. And through these four phases, we renewed ourselves. And in the fiscal year 2025, I think that we made enough preparation for our next journey. When you look at our ordinary profit, we had $16.8 billion at the time of the accounting incident, and that went down. And after that, we had a growth from 15.4. And on the fourth year, this time we've had 19.1 billion ordinary profit, a major growth. And the new fiscal year, we are celebrating the 35th anniversary. And we are going to have the second founding as a company next Genesis. In 2032, We would like to achieve $30 billion in ordinary profit in that year. That's vision 300 next Genesis. And under this vision, we would like to make a huge growth. Now, for the fiscal year 2025, I would like to call this the current year. And I am going to call FY26 the ongoing fiscal year. I would like to provide the executive summary of the fiscal year 2025. Now, we've had a hard time after the inappropriate accounting incident. But after a recovery phase, finally, we were able to end this fiscal year with growth in both sales and profit. And our sales ended at $50.25 billion. up by 14% year-on-year and ordinary profit was $19.15 billion up by 13.2% year-on-year. We have regained our momentum that allows us to achieve our target ahead of the plan towards our mid-term target. And also our original performance achievement cycle of reaching a peak in December and spending the fourth quarter to prepare for the year after. We are recovering towards this cycle and I think that we've had a good transition toward the new phase of regrowth. About the current fiscal year or the FY26, the full year guidance of sales, 52.8 billion and ordinary profit of 19.3 billion was set and we are going into a growth phase so the premise we have for this target is that we're going to exceed this target and since it's the 35th anniversary since founding we set vision 300 as the start of the second founding phase and in fiscal year 2032 we would like to reach ordinary profit of 30 billion yen this is the target that we have set And to get there, I think that employees and executives should share the same values together with investors. We should all be on the same boat. That's the reason why we've decided to introduce a new stock-type stock compensation plans, new trust-type stock compensation plans, rather. And in order to introduce this, we have to get approval at the coming general shareholders meeting to be held in June. And also, we have formulated our new vision and core value that's based on our purpose. About shareholder return contribution, 29 yen per share of dividend is planned to be continued. Other reporting. Batons is one of our equity method affiliate. And this company, Batons, on April 21st, got listed on the growth segment or section of the TSE. Compared to the opening price, or offering price, 660 yen, the opening price was 1,674 yen. Batons has received huge expectation for the future growth. Let's start with the summary of FI25. Starting with positive factors. I believe that we restored fully to the performance achievement cycle of reaching a peak in December and preparing for the next fiscal year in the fourth quarter. We got back to this original cycle And the mandates we received should be prepared early on so we can match the mandates with other ones. And I think that we did well on this. And also, we have to do thorough management of the progress by holding kickoff meeting and thoroughly managing the progress, et cetera. And we've been doing this fully as well. With these initiatives, we are starting to see really good signs. For example, Budget achievers and budget-achieving departments grew significantly in number, especially the number of the departments that achieved budget. The ratio was only 29.7% last fiscal year, but this fiscal year, this ratio increased to 67.4%, more than two-thirds. This improves the momentum of the company. Employees talk and departments talk with each other about the status of each other and they encourage each other. And we achieved 80% of the whole year target at the end of the third quarter. And I believe that this creates positive momentum for the fiscal year 2026, the ongoing fiscal year. We're not saying that we are free of any issues. For example, we had a really small but a slight decline in the number of transactions closed. And also, we had a decline in new sales side mandates year on year. However, I think that you can see these items positively. And also, M&A consultants declined in number this time. But this is an item that we've been taking actions already with enough sense of an issue. And I'm going to elaborate this later. The reason why we've had smaller number of the new cell site mandates is because we are now more focusing on the quality of the mandates we receive. To improve the quality, we started to not accept the kind of mandates that we used to receive. And thanks to this new policy, I believe that we now have been accepting a growing number of the mandates with high likelihood of being closed in the future. And we used to be not able to be focused enough on trying to grow or develop people with tenure of no more than three years. And we have been reflecting back on this that we should have done better, and we have to take necessary actions. And about actual reports, sales-wise, we achieved 108.5% in sales compared to target, and ordinary profit was 12.7%. And we achieved 49% of the whole year target by the end of the first half, and 50.4% when it comes to ordinary profit. And at the end of December, 82% in sales, and 92% in ordinary profit were achieved compared to the full year target. I think that with this we can say that we are now fully back to the original cycle of achieving performance. As I've been saying, sales were $50.2 billion, up by 14%. The number of transactions closed was 1,061. This indicates that 17 less transactions closed compared to the year before. and 45.7 million is the M&A sales per transaction, up by 15%, and we closed 115 large transactions. This was up by 45.6%. Especially mid-cap mandates and large mandates were closed a lot, and that contributed a lot to multiple points, for example, M&A sales per deals. And about cost of sales, $19.9 billion, up by 15%. I think that this should be considered as a positive news because we have received enough mandates from the partner network, which is good news. And SG&A was $11.5 billion, up by 15%. We've been making IT investments and other kinds of positive forward-looking investments, so please consider this as a positive investment result. And ordinary profit was $19.1 billion, up by 13%. This is our income statement with more exact and clear numbers. This page shows the status of our various leading indicators that I think many investors are interested in. The decline in the number of new sales type mandates, I believe that there are some and many investors who are worried about this. But in the fiscal year 2024, the last fiscal year, we focused on more volume to improve the motivation level of the entire company. Therefore, we kind of welcomed all sorts of mandates back then. And as a result, we had the largest volume of mandates since the founding. And I think that that was effective in the sense of creating the momentum of the company. And based on that, this fiscal year, our focus is now on closing more deals and having a breakthrough. That has been the target of the current fiscal year. And in the first half of the fiscal year, we aimed to have a rocket start to the extent where we could have upward revision. And when it comes to receiving mandates, we didn't have too much focus on that. And at the same time, small mandates, the kind of mandates with the seller's annual sales of less than 100 million, we started to shift these mandates to buttons. Therefore, the volume of the mandates we received declined. And about the second half of the fiscal year, we had a turnaround in policy. We started to accept and receive mandates that we think we can enclose. and we started to be more responsible of the final result, that has been the new policy. For example, insolvent and loss-making company, this can be a company that we find it difficult to be fully responsible. For example, in the financing or the likelihood of not being able to release the warranty of the owner could be higher than other mandates. So we started to avoid these kind of mandates. We started to be more focused on promising companies or promising deals. So the mandate number, the volume may have declined, but we have been focusing more on quality. So we don't think that this is actually a decline. We are bringing this toward improvement. So please think of this as a positive factor. About sell-side mandates, there is a decline, minus 11%. But when you look at pipeline volume, this increased year on year. So no concern is needed for the first quarter of fiscal year 2026. About new sell-side mandates, I have explained already, and what I've explained is summarized on this page. And this page shows the transition, quarterly transition of closings and mandates. So you can read the major trends.

Next is the balance sheet. I will pass the floor over to Naraki-san to explain here. Here's the balance sheet information talking about financial status. the top half the asset side so the total is 66 billion 223 million yen and that was a total assets a line three as a accounts receivable a year ago it was 2.633 billion yen and as a balance but this year in march 2026 we had it decreased down to 808 million yen so we completed that delivery and tried to complete the settlement by the end of the fiscal year, and that actually resulted to see the huge reduction of the receivable. And the liabilities and net assets. And net assets was 15.643 billion yen. And so the percentage within the total liabilities and net assets is about 76.5%. Thank you. Next. About the number of employees, this is also another important KPI. As I mentioned, the number of headcounts at the end of the year, the M&A consultants changed from 630 to 626, so it was a decrease. And there is a need for us to take actions to address this shop, especially for those who are within three years. since joining the company, we see increasing number of people leaving. And people who are with us for three years or more are increasing, and so we have been able to capture them. So let me elaborate more on the net increase. This is the most important element for us because in M&A, this requires the people engagement, so excellent employees, We need to have the net increase of excellent talents, not just having net increase. While it's important to also reduce the turnover rate at the same time to have the net increase. So this is directly supervised under President Takeuchi. We are taking action to address this situation. So the current fact, we haven't really improved. the turnover rate for those employees less than three years with us. And we weren't able to accomplish the target and increase because of this situation. So as a background, for the last four years, we were quite focused on recovering our performance. So not being able to pay enough attention to new employees. Also because of the misconduct, some of the mid-career employees left, and that actually weakened the support for developing talents and resources. And since we were also focused on recovering the business, so we weren't able to set up a solid mid- and long-term vision for growth. And for those who are less than three years with us, it was difficult for them to picture and align their own growth along with the future career path inside the company. So we consider those are the reasons for the current situation. So therefore, this year, from the second half of this year, we have started to make changes. One is the midterm plan, the next genesis, is now clearly set up and established. It's been a while. since we have clarified the midterm vision. By having a solid midterm vision, employees will have a good understanding of the growth the company is thinking, and now we have been able to give more dream and vision for them. And the budget for the employees with no more than three years of tenure, we have revised the budget. And we also revised the follow-up and framework for them. And we are reinforcing recruitment activities. So through this, And we will make sure to accomplish the net increases in the coming years along with the solid, you know, contents and results. And next, talking about the business performance forecast and the mid-term management plan. Starting with guidance numbers, the year, this year, For fiscal 2026, the sales target is to be 52.8 billion yen. Compared to this year actual, it will be the 5% increase. Compared to last year guidance, it will be up by 14%. The ordinary profit would be 19.3 billion yen. Compared to the actual, the past fiscal year, it will be increased by 0.8 percentage points. And compared to last year forecast, it's going to be increasing by 13%. So we always show The first guidance and first forecast number to be quite conservative of the number that we are sure to accomplish set out as the guidance. So that's why original guidance tends to be conservative. But first we set out the sales forecast to be 5% increase from the year before. But we want to promise that we will go beyond this growth and we will run the business to make sure we can outperform this guidance number. Regarding ordinary profit, we expect the ordinary profit margin could be slightly declining because we need to make some, you know, advanced investment, things into human resources or in IT. And also branding. This year will be our 35th anniversary, so we want to take this opportunity to focus more on branding, so to improve our brand image. So we'll be spending in those areas. That's why we will tend to see a somewhat conservative ordinary profit. But if the sales go stronger than the forecast, then we should see an increase in ordinary profit. So that's why we want to make sure to outperform this forecast in sales first. And the mid-term management plan. So what we have announced in the past, this year, we were looking at $17 billion net ordinary profits. But we came up to be 19.1 billion yen. So the 12% increase and the sales went up to 50 billion yen from 46 billion. So it's up by 8%. The current year, we originally expected the order profit to be 18 billion yen. We want to bring it up to 19.3 billion, meaning up by 7%. the sales to be $54 billion from $50 billion, it would be up by 5% in our new guidance. The year-on-year, since we had pretty good results last year, so we hope that we can outperform this fiscal year from what we see here. And next genesis, what is this next genesis that we just announced? out of this misconduct. Finally, we were able to recover our business in fiscal 26. This is actually the starting year of our second foundation and renewed growth. There are two parts within this second founding year. I became 74 years old this year. So gradually, I know I'm still good and healthy, but I'm starting to think of a succession plan so we can gradually transfer the business over to the next generation. Second, now it's been 35 years since we started this business. Things have changed a lot. There was no Internet 35 years ago. The mobile phones were starting to be seen back then among the elite businesses. but now AI has become quite common as a course of nature. And, of course, we're going to have to change our business model, and that is the second founding year. And from the regional revitalization over to the renewal of Japan, then to be the number one M&A company in the world. So we want to go over 30 billion yen as an ordinary profit in the year ending March 2033. However, this takes many different actions to accomplish. One is the trust-type stock compensation plan. So with this system, the management, employees, and yourself, like shareholders and investors, will be on the same boat. And second is the expansion and relocation of the headquarters. thirdly we are redesigning our corporate vision and core values regarding trust type stock compensation plan so our we will put our treasury stocks in a trust and for the target employees and senior management we will give a you know the grant points to them once the targets are met then we will provide the shares in line with the points provided. Regarding the head office expansion, currently our sales team at head office are actually spread among four different floors. So we will consolidate them into two floors and at the same time sales team to be consolidated on a single floor to allow them to have real communication to be more productive So that's how we can drive our innovation. And the mission framework, the new vision or values. So we were talking about corporate ethos, purpose, and philosophy. Through the M&A business, we contribute to preservation and sustainable growth. There's no change. And purpose, to bring best-in-class M&A ever closer. No change on this. we broke down the philosophy into two parts. Vision, starting with regional revitalization driving the renewal of Japan and ultimately becoming the world's number one integrated M&A company. So we have clarified the vision. To realize this vision, we are talking about this core value to be a professional. At most respect for our clients and swing the pendulum and pull. And if you swing the pendulum and pull, that could create potential risks. That's why the right things in the right way is also needed. So those are defined as our core values. Regarding sales force, sales organization, in the past, we also made a change on here. We had actually organized the sales team by channels. So we actually consolidated them into three groups. So the alliance division will be talking to mega bank and accounting firms and regional banks and securities business. So we collaborate with them and then get the business through referral. So we put them together into a single division. Second, a corporate business division. This is mainly for the seller, buyers, sorry, the sellers. We will have more detailed growth strategy for the selling businesses so we can implement the solid matching. And thirdly, regional and industry strategy division. Right now, there is no point of just sending out direct emails to anybody around there, so we need to focus on specific industry and specific regions, and that's what they're doing here. And there are different size of businesses within this pyramid, large size and mid-size and small sizes. And small businesses could be handled by our group company buttons. But mid-size business will be handled by M&A Center ourselves. And for accomplishing further growth, so the capital market division will bring them into the Tokyo Pro Market. Then also listed businesses will be covered by IB and strategy division. IB coverage team will be looking at midsize listed companies. Then we'll make proposal to them as well. And strategy division will be looking at the FAS businesses, including various kinds of financial advisory businesses.

29 yen dividend per share is planned to be kept. About 60% dividend payout ratio, we have promised this. So the HC is over this, has declined from 7 to 6, but an ROE has been hovering above 20%. And There is no major change to shareholder mix. As a related business, Batons is now listed on the growth market, and our total per market business has been quite successful. Of 176 companies listed on the TPM, 49 got listed with our support, and we would like to expand this business further. About PMI consulting business, With PMI, M&A becomes successful for the first time. So companies that are proactive in PMI, it's only our company who does that. And we exceeded more than 40% in growth year on year, and we received 132 mandates. And this is quite a big growth. We would like to grow this further so we can create an era where PMI is taken for granted. And about overseas business, This is the 10th year since we founded our base abroad. So the third phase starts from the new fiscal year of authentic profit generation. This comes at the same timing as our second founding phase. So we are going into the third phase from this fiscal year. It's the same as fund business. We have finally built our base. J Capital, an intermediate boarding company, was established.