Excluding TV advertising, business profit up over +30% YoY; management sees traction in JPY 1T GMV vision and the US business emerging as a third pillar

Summary

3Q standalone net sales revenue was JPY 13,016M (+23.5%) and business profit JPY 1,859M (+6.7%). Cumulative 9M progress toward full-year business profit stands at just 57%, but on an adjusted basis — excluding mass-marketing spend and the headquarters consolidation costs booked in 1Q — progress is 74%, in line with the 75% average of the past two fiscal years. Full-year business profit guidance of JPY 10B is unchanged. On the call, management noted that business profit would also have grown more than +30% YoY had the TV campaign not been run, framing this year's advertising outlay as up-front investment to lift GMV on RENOSY from roughly JPY 300B today to JPY 1T. The US business posted 3Q business profit of JPY 169M, remaining profitable, and is approaching the point where it can be viewed as a third pillar alongside RENOSY and ITANDI, with revenue tracking toward over JPY 17B.

Key Points (Earnings Highlights and Growth Initiatives)

• Management Strategy And Market View
  • Management continues to frame the real estate industry's core problems as information asymmetry, fragmented data, and low operational productivity, and to pursue structural change through AI plus data.
  • In the AI era, the differentiator is execution capability and proprietary first-party data rather than UI/UX. The company cited as an edge the fact that it handles statutory disclosure under the Real Estate Brokerage Act, contracting, and loan arrangement in-house.
  • Both RENOSY and ITANDI hold transaction data, property data, and workflow data — first-party information that does not exist on the open web.
  • Rising brand recognition in AI has strengthened recruiting competitiveness; management noted it now rarely loses senior-level hires to competitors.
• Current Business Progress And Drivers
  • Despite a macro backdrop of declining YoY transaction volumes for pre-owned condominiums, five consecutive months of inventory growth, and the first decline in transacted price per square meter in 73 months, management sees no adverse impact on its key KPIs.
  • Management argued that transaction volumes would slow not because of interest rates but only if the competitiveness of the RENOSY marketplace itself deteriorated, and that no threatening platform player has emerged to date.
  • Average rent on managed properties (STUDIO) is in the JPY 90,000s nationwide, with a rent-increase realization rate on tenant turnover of over 96% and recent average increases of around JPY 10,000 — equivalent to rent growth of 11–12%.
  • Margin improvement in the Marketplace is driven primarily by wider product lineup, which is lifting cross-sell and repeat purchases.
• Key Strategic Initiatives And Inflection Points
  • With the business integration of SPC Securities Group completed, it has been consolidated into the RENOSY segment from 3Q, and Asset Management is now disclosed separately as a third revenue pillar.
  • The electronic transaction license for fractionalized products is expected to be obtained around early autumn, with the full effect coming through in the second half of next fiscal year.
  • ITANDI captures roughly 1.1M of the estimated 2.6–2.7M annual rental applications in Japan and is expanding into utility/lifeline services (ARR +64% YoY).
  • On the same day as results, the company disclosed receipt of JPY 3,820M in dividends from three consolidated subsidiaries, with no impact on consolidated results.

Outlook and Strategy

• Full-year guidance is maintained at net sales revenue of JPY 55,900M (+26.4%) and business profit of JPY 10,000M (+37.6%), with 4Q advertising spend planned below the usual seasonal level.
• From next fiscal year, the plan is to generate profit from 1Q, returning to a smoother quarterly earnings profile. Management explicitly stated there are no plans for another large mass-marketing push that would push 1Q back into the red in a few years' time.
• TV advertising spend was roughly JPY 1.5B this year; after a full PDCA cycle, management aims to achieve the same effect next year at roughly 40% lower cost, with the total marketing budget broadly unchanged YoY. The advertising expense ratio to net sales revenue is planned to decline both next year and the year after.
• In the US, the restructuring required to reach profitability is complete this year, and the business will shift to growth investment funded within earnings from next year. Cross-border transactions (US investors buying Japanese properties and Japanese investors buying US properties) are embedded in the plan.
• Unlike REITs, fractionalized products can offer transparency on the underlying asset and terms plus capital gains upside. Management believes only RENOSY, which has buyers, sellers, brand awareness, and data, can create this market.
• AI investment is the top priority. Alongside this, the company is investing in a company-wide purpose/mission training program and GA Values training aimed at a mindset shift to double output per employee. M&A will be limited to areas offering data ownership and execution capability.

Positive Factors

• ITANDI's net sales revenue growth of +23.7% plus a core business profit margin of 22.6% sums to 46.3% (our estimate), above the Rule of 40 threshold on an operating basis.
• ITANDI ARR reached JPY 5,976M (+25%) with 6,072 customers (+22%) and a churn rate stable at a low 0.43%. A high multi-product adoption ratio creates room for further ARPU expansion.
• The US business posted net sales revenue of JPY 1,520M (+160.8%) and business profit of JPY 169M, staying profitable. At the time of the acquisition two years ago revenue was JPY 4B with a JPY 1.1B loss; last year revenue was JPY 8B with a JPY 400M loss; this year revenue is tracking near JPY 17B with full-year business profit now essentially assured.
• RENOSY membership, owner count, and subscription units all expanded, validating the circular model spanning purchase, management, and resale. Subscription delivered revenue and profit growth even after absorbing one-off gains booked in the prior year.
• CCC is 16 days, or 22 turns per year (based on FY25/10 inventory turnover), versus an average of 365 days and one turn for Japan's top 20 real estate companies and 144 days and three turns for Opendoor/Offerpad in the US — indicating high resilience to market swings.
• Under the FY2026 medium-term plan, the subscription business profit margin, number of ITANDI products adopted, and overseas revenue targets have already been achieved, with managed units at 97% of target — on track.

Concerns and Risks

• With cumulative 9M progress toward business profit at 57%, roughly 43% must be delivered in 4Q, which presupposes a heavier-than-usual 4Q concentration of profit relative to prior years.
• The Marketplace core business profit margin fell from 35.5% to 30.4%, and 3Q business profit declined to JPY 2,393M (from JPY 2,532M a year earlier). The timing of payback on mass-marketing investment is the key focus from here.
• At ITANDI, costs will run ahead of revenue as implementation and customer success capacity is built out to meet demand; the full-year core business profit margin is planned to decline to 17.4% (from 20.8% last year).
• Inventories rose to JPY 25,189M (+JPY 9,734M) and interest-bearing debt to JPY 39,325M (+JPY 14,862M). Management characterized this as a strategic and temporary build for fractionalized products, with the discipline of keeping CCC within 30 days unchanged.
• With the policy rate on a further upward path, mortgage rates for investment property loans at partner financial institutions are trending higher, so the impact on customer purchasing capacity warrants ongoing monitoring.
• Management itself flagged as issues that the company's value is not fully understood by investors and that analyst coverage remains thin.

Performance Highlights

3Q standalone net sales revenue was JPY 13,016M (+23.5%), business profit JPY 1,859M (+6.7%), and the core business profit margin 14.3% (16.6% a year earlier). Profit growth was temporarily muted by roughly JPY 500M of TV advertising in 3Q; excluding mass-marketing and related costs, adjusted business profit was JPY 2,350M. Cumulative 9M progress on net sales revenue was 69%, in line with the past two fiscal years, and full-year guidance is unchanged.

Segment Results (3Q standalone)

• RENOSY members (cumulative): 677,772 (+16%)
• Existing owners: 18,458 (+14%)
• Subscription units (Japan): 40,905 (+32%)
• Closed transactions (trailing 12 months): 8,225 (+874)
• Net sales revenue per transaction (trailing 12 months): JPY 4,136K (+8.6%, our estimate)
• Property pipeline (trailing 12 months): JPY 5.0T (+JPY 1.1T)
• ITANDI ARR: JPY 5,976M (+25%)
• ITANDI SaaS customers: 6,072 (+22%)
• ITANDI churn rate (trailing 12-month average): 0.43%
• Rent-increase realization rate on tenant turnover (July): 96.6%, average increase of JPY 10,205
• CCC (end of 3Q): 26.3 days (24.2 days a year earlier)

Q&A List

• Q: On full-year guidance — progress toward business profit through 3Q is around 57%, yet the JPY 10B full-year target is unchanged. How do you expect to build profit in 4Q, and how confident are you in achieving it?
  A: In past years we concentrated advertising spend in 4Q, but this year we spent from the start of the year; adjusting for that, progress is 74% on a like-for-like basis. The premise is that spending previously made in 4Q for the following year was instead made in 1Q this year, so we believe securing the business profit target is achievable.
• Q: I recall that until last year the policy was to reduce quarterly earnings volatility. Could you explain your approach to the earnings profile from this year onward?
  A: The plan still assumes continued improvement in quarterly volatility. This year's mass-marketing investment was not aimed at lifting awareness for this year, but for next year and the year after. RENOSY's GMV this year is JPY 300B — that is the volume of matching taking place on RENOSY. We are targeting the JPY 1T GMV milestone on RENOSY, and this year's mass-marketing spend is the investment toward that JPY 1T. We invested heavily in 1Q this year, but from next year we will work toward smoothing again. We have no plans to make another large mass-marketing investment two or three years out that would push 1Q back into the red. Going forward we will plan for profit from 1Q. On marketing, the advertising expense ratio to net sales revenue will decline next year and the year after. Our plan assumes that at JPY 1T GMV, the advertising ratio to net sales revenue will be lower than it is today.
• Q: You said growth can be sustained even in a rising rate environment. For the Marketplace, how do you intend to grow transaction volumes versus average transaction value, and where will the emphasis be?
  A: In the Marketplace, both transaction count and average transaction value are key KPIs. A higher unit price is not enough if volume does not grow, so in short we are focused on both. Within that, on the RENOSY marketplace we are following the Amazon model: Amazon started with books and then expanded into appliances and daily goods. The purpose was TAM expansion and a higher conversion rate. A site that only sells books behaves very differently from one selling appliances and daily goods in terms of dwell time and conversion. Similarly, we started with pre-owned compact condominiums as our core product and have since added new-build compact condominiums, new-build apartment buildings, pre-owned apartment buildings, new-build single-family homes, pre-owned single-family homes, overseas real estate, and fractionalized products — simply to expand TAM and lift conversion. Transaction count rises because conversion improves as the lineup broadens. As transaction count and product breadth increase, LTV rises. Margins on the RENOSY marketplace are improving because a wider product lineup has raised productivity. And because both the seller and buyer bases have reached a certain scale, repeat purchases and multi-product cross-selling are now occurring within the marketplace, which is what is driving the margin improvement.
• Q: On the effectiveness of mass marketing — you spent roughly JPY 1.5B in advertising from the start of the year, including around JPY 500M on TV advertising in 3Q. How do you assess the traction so far, and will you continue next year?
  A: We originally targeted customer segments resilient to rising interest rates and produced TV creative designed to resonate with them. The result has been greater awareness and membership growth among exactly the customers we targeted, so we think it has played out as intended. Having been able to run a PDCA cycle on it, although we are spending around JPY 1.5B on TV advertising this year, we believe we can achieve the same effect next year at roughly 40% lower cost. In terms of the marketing budget, we expect to be able to run the business at broadly the same level this year and next.
• Q: SPC Securities, which you acquired, was consolidated from 3Q. When do you expect the fractionalization initiative to accelerate further? Please give us a sense of timing.
  A: We expect to obtain the electronic transaction license for fractionalized products from autumn onward, so we think the effect will come through meaningfully from next year. AI is the area of focus right now, but in real estate, blockchain and security tokens hold significant business potential. We take pride in having built a JPY 300B market that did not previously exist on the RENOSY marketplace, using accumulated data and AI. And if our goal is to make wealth-building through real estate the norm, fractionalization is a major enabler of that. With security tokens, transactions become even simpler, so we want to build the market out to that point — and we believe we are the ones who can. Fractionalization itself is possible for anyone who obtains a license under MLIT's Real Estate Specified Joint Enterprise Act or an FSA financial instruments business license. But that is like saying you can build the Amazon website — the question is whether you have buyers, sellers, brand awareness, and data. Because we already have buyers, sellers, awareness, data, and AI, fractionalization can genuinely work and scale like equity investing. As for how it differs from REITs: people who are not finance professionals do not really understand REITs to begin with. There is no transparency on which properties are held, what the algorithm is, or what the output looks like. On top of that there is no capital gain, so we see our fractionalization initiative as completely different from REITs. We believe we can make it work for office buildings — a market said to be worth tens of trillions of yen in Japan — as well as residential. That would allow a wide range of people to invest in real estate, not only domestically but also overseas investors buying Japanese real estate in smaller lots. The reverse also applies: Japanese investors buying overseas investment properties in small lots. Real estate is said to be a larger asset class than the equity market. Real estate is called "immovable" because it does not move; if AI and blockchain can make it move, the potential is enormous. We believe RENOSY is the only platform standing on that foundation, so we feel very positive about the future and see the business opportunity expanding.
• Q: Is the restructuring in the US business complete? Is there nothing further to be executed in 4Q of FY10/26?
  A: Naturally, as a management team we are always improving operations, even if we do not call it restructuring. But in terms of the restructuring needed to move from loss to profit, that ends this year. From next year, while we are already growing, we want to invest more for growth. By investment, we do not mean plowing all the profit back in and going through another J-curve; we mean investing properly within the bounds of earnings.
• Q: When will you start fractionalization and expand payment options in the US business? Please be specific.
  A: Fractionalization in the US is of course within our scope. We believe our value lies in enabling cross-border real estate transactions — US investors buying Japanese investment properties in small lots and Japanese investors buying US properties in small lots — so that is included in our plan.
• Q: You will likely accelerate fractionalization from next year. As the business model shifts, what happens to your CCC and inventory discipline?
  A: CCC is what we regard as our greatest strength, so our approach to it — the sub-30-day principle — will not change. That holds even if we run funds. The reason is that our strength is having buyers and sellers on the RENOSY marketplace, plus data and AI, which is precisely what allows us to shorten CCC and inventory turnover. In short, that policy will not change.
• Q: This is the final year of the medium-term plan. Looking back over the three years, what went better than expected and what challenges remain?
  A: When we announced the plan, business profit was around JPY 2B. When we announced the JPY 10B target, most investors probably doubted it and many did not factor it into their valuation, but we have in fact reached a position where we can solidly deliver JPY 10B this year. There are very few companies on the Growth Market exceeding JPY 10B, so — while it is not over yet — we think we have executed the plan as laid out. Looking back, we went from a downward revision and a business loss in 2021 to JPY 10B in about five years. That JPY 10B did not happen by chance; it reflects management's commitment to restructuring delivering results. We believe this gives you a track record, so confidence in our next medium- to long-term targets should be higher. In terms of what went well: the fact that the numbers we committed to proved achievable. And in making AI technology our top priority, we have been able to recruit strong senior-level talent, which also went well. What has not gone well is that we have not adequately communicated our company's value to investors — that is a reflection point for us.
• Q: When and around what themes will you present the next medium-term plan? Please share your thinking, your growth picture from next year, and what we should focus on in terms of business growth and investment.
  A: Going forward, as we have said, we have invested in AI and will continue to invest firmly. In addition, starting with the 3Q results presentation we have simplified our KPIs, having sought investors' views — that is part of our effort to help you understand our value. Beyond that, overseas investors in particular tell us there are too few analyst reports, so we will engage actively with analysts to increase coverage. We are also actively conducting IR for overseas investors, domestic institutions, and domestic retail investors, and we are treating that as the next challenge. On the business side, we feel we are able to do what we want to do, so while continuing to improve, we intend to keep delivering solid business growth.