リーフラス（LFS）2026年度第2四半期決算説明会：利益成長が売上高の伸びを上回る

リーフラス株式会社（NASDAQ: LFS）は、部活動支援事業やスポーツスクール会費の値上げなどが牽引し、2026年度上半期の売上高増加と利益成長の加速を発表しました。経営陣は通期見通しを維持する一方で、下半期の事業執行、規律あるM&A、および営業レバレッジの推進を強調しました。

主なポイント

• 上半期の売上高は前年同期比8.9%増の3,680万米ドル、営業利益は同35.9%増の60万米ドルとなりました。
• 買収関連費用30万米ドルを加戻した調整後営業利益は、105.6%増の90万米ドルとなりました。
• ソーシャルビジネス事業の売上高は部活動支援の拡大が牽引し、18.0%増の1,130万米ドル、セグメント利益は156.7%増の170万米ドルとなりました。
• スポーツスクールの会員数は0.9%減の68,873人となったものの、月会費の値上げや顧客単価の上昇が売上高とセグメント利益の成長を支えました。
• 受託部活動数は6.2%増の2,224件となり、支援対象の学校数は37.0%増の478校に達しました。
• 経営陣は、2026年度の売上高見通し（8,290万米ドル〜9,570万米ドル）および営業利益見通し（450万米ドル〜540万米ドル）を据え置きました。

主要業績

事業・運用業績

スポーツスクール事業

スポーツスクール事業の売上高は5.4%増の2,550万米ドル、セグメント利益は2.5%増の530万米ドルとなりました。月会費の値上げや顧客単価の上昇が、会員数の0.9%減少を補いました。

経営陣は会員数減少の要因として、卒業に伴う退会者の増加、新規開校や顧客獲得のタイミング変更、従業員研修の強化、フランチャイズ契約の終了などを挙げています。同社は、第3四半期および第4四半期に実施する会員獲得施策により回復が見込まれるとしています。

リーフラスは、ブラウブリッツ秋田との提携および大館市での共同スクール展開により、日本国内47都道府県すべてへの進出を完了しました。経営陣は既存都道府県での展開深化、対象競技の追加、M&Aの推進に加え、全国の指導員ネットワークを活用して部活動支援事業や海外展開を後押しする計画です。

東海スポーツの買収により、約1,185名の会員と約20箇所の提携幼稚園・保育園へサービスを提供する基盤が加わりました。また、リーフラスは「SIX SHOOT with ブルーロック」、「1v1 DRIBBLE ACADEMY D-UNLOCK」、ならびに複合スポーツプログラム「エルスポ」を導入しました。

ソーシャルビジネス事業

ソーシャルビジネス事業の売上高は18.0%増の1,130万米ドル、セグメント利益は156.7%増の170万米ドルとなりました。部活動支援が主な成長牽引役となりました。

2026年6月30日時点で、リーフラスの支援対象学校数は478校（37.0%増）、受託部活動数は2,224件（6.2%増）となりました。24の地方自治体にサービスを提供しており、既存クライアントである19の地方自治体すべてとの契約を継続しました。

当決算期末以降、札幌市、京都市、足立区、江戸川区で追加契約を獲得したことで、同社が参入を果たした自治体は、公募プロポーザルを実施した政令指定都市9市のうち5市、東京23区（公募実施14区）のうち10区に拡大しました。

リーフラスの放課後等デイサービス事業ネットワークは、買収を含めて前年同期比45%増の29拠点に拡大しました。同社はサッカーを中心とした療育に加え、運動学習、室内運動、自立学習、パソコンスキルへとサービス内容を拡充しています。

2026年7月1日付でSwift Japanが子会社化され、リーフラスの保育事業への本格参入が実現しました。経営陣は、保育施設をスポーツスクールや非認知能力測定サービスと連携させる方針です。

業績見通し（ガイダンス）

経営陣は、2026年度の連結業績見通しを据え置きました。

同社は、会員動向、イベント、地方自治体からの入金に伴う季節性により、通常、年間利益の大部分が下半期に偏重すると説明しています。なお、この見通しには今後実施される事業買収、組織再編、法的和解などは含まれていません。

リスクおよび注目領域

• 売上高が増加した一方でスポーツスクールの会員数は減少したため、下半期における顧客の獲得および定着率（リテンション）が重要な経営指標となります。
• 経営陣によると、多くの地方自治体が部活動の地域移行に対して慎重な姿勢を維持しており、受託機会の拡大ペースに影響を与える可能性があります。
• 一部の部活動公募案件では低価格を提示した事業者が選定される事例が見られます。リーフラスは単なる価格競争を避け、安定した運営、安全性、および適正な収益性の確保を優先する方針です。
• 安全管理コストが足元の利益率を圧迫しているものの、経営陣は売上高の成長、稼働率の上昇、および規模の経済によって中長期的な利益率拡大が支えられると見込んでいます。
• M&Aの加速に伴い、統合リスクが生じます。経営陣は、スポーツおよび教育に隣接する分野の対象企業に焦点を当て、デューデリジェンス、投資回収、PMI（買収後の統合プロセス）に関する明確な基準を適用すると述べています。
• 将来的なエクイティ・ファイナンス（株式による資金調達）は既存株主の株式希薄化をもたらす可能性があります。経営陣は、期待される価値創造が希薄化に見合うものであるかを考慮して資金調達を判断するとしています。

質疑応答の要約

少子化が進む日本において、スポーツスクール事業は成長を継続できますか？経営陣は、業界の集約や子ども向けサービスを提供する企業との提携を主要な成長ドライバーとして挙げています。小規模事業者の後継者不足や財務的な圧迫が買収機会を生み出すと見込んでいます。

今後の成長は主に単価アップに依存するのでしょうか？経営陣は会員数の拡大と顧客単価の向上の双方を追求する計画です。具体的な施策として、より低年齢層の獲得、地域密着度の向上、M&A、提携、ならびに価格改定を支えるサービス拡充などを挙げています。

受託部活動数よりも受託学校数の伸びが大きいのはなぜですか？経営陣によると、地域移行モデルにおいて複数校の生徒をまとめた合同活動が増加しているためです。また、売上高は部活動の数だけでなく、活動頻度、人員配置、および運営管理上の責任範囲にも依存します。

海外展開はどのように管理されますか？同社はカナダでの取り組みをテストマーケットとして位置づけています。経営陣は、既存の現地収益基盤を持つサービスに付加するモデルを活用し、追加資本を投入する前に現地の需要とユニットエコノミクスを検証する方針です。

経営陣は連結収益性をどのように改善する計画ですか？リーフラスはバックオフィス業務の標準化やデジタルトランスフォーメーション（DX）を通じて、管理費の増加率を売上高成長率以下に抑えることを目指しています。また、経営陣は稼働率向上やM&Aによる規模の経済が時間とともに営業レバレッジを改善すると期待しています。

決算説明会全文文字起こし

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good morning, and thank you for joining us. Welcome to Leifras' 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 Leifras filings with the U.S. Securities and Exchange Commission. Now I will turn the call over to Mr. Ito. Mr. Ito, please go ahead.

Kiyotaka Ito

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 9, marks exactly 1 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 Leifras 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 FY 2026.

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 FY 2026, 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 USD 74.8 million, a record high in the full year period shown since FY 2023 under U.S. GAAP. We have also been recognized as Japan's #1 provider in 4 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.

Next slide, please. Our operations consist of 2 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 noncognitive 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%.

Next slide, please. 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 FY 2026. In the first half of FY 2026, 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 5 metrics reached record highs for the first half of the fiscal year in the period shown since FY 2025, 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 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 3 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 childcare. 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.

Rei Yamamoto

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 FY 2026 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 USD 36.8 million, and gross profit increased 22.6% to $10.9 million. I would particularly like to highlight our strong operating leverage. Income from operations increased 35.9% to USD 0.6 million and net income increased 43.5% to $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. It supplements our 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 USD 0.6 million. Acquisition-related costs were $0.3 million. Adding back these costs, adjusted income from operations was $0.9 million or JPY 139.7 million, 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 USD 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.

Kiyotaka Ito

Thank you, Ms. Yamamoto. I will now discuss the progress we made on our growth strategies during the first half. Next slide, please. Let us turn to the Sports School business, the foundation of our operations. This slide provides an overview. I will cover our expansion to all 47 prefectures and the Tokai Sports acquisition in detail on the following slides. Higher monthly membership fees improved customer lifetime value, enabling us to achieve growth in both net revenue and segment profit despite a slight year-over-year decline in membership. Our CFO has already explained the specific financial results. We developed SIX SHOOT, a new sports competition in collaboration with the popular anime Blue Lock. We also launched 1v1 DRIBBLE ACADEMY D-UNLOCK, a soccer school specializing in dribbling under the supervision of Masakazu Okabe, known as the Dribble Designer. We signed an alliance agreement with Blaublitz Akita and opened a collaborative school in Odate City, Akita Prefecture, completing our expansion to all 47 prefectures. We also acquired approximately 1,185 members through the Tokai Sports acquisition.

I will explain these 2 developments on the following slides. In addition, we launched L-Spo, a multisport school for younger children and those seeking a more casual introduction to sports. Next slide, please. We have achieved a key goal set at our founding, establishing a presence in all 47 prefectures in Japan. The significance lies not simply in reaching every prefecture, but in completing a nationwide network of instructors and operating locations. With this nationwide instructor network in place, we are entering our second phase of growth. We will expand into underserved areas within each prefecture, pursue further M&A, offer additional sports in existing markets, scale our school club support business and expand overseas. Until now, our focus has been on establishing individual footholds. We will now build a broader presence around those footholds, increasing the density of our operations in each region to grow revenue and profit per region. Next slide, please.

Next, I will focus on the synergies from the Tokai Sports acquisition mentioned earlier. Through this transaction, we acquired a base of approximately 1,185 members, along with a business-to-business-to-consumer platform serving around 20 partner kindergartens and nursery schools. None of these partner institutions has terminated its contract over the past 3 years. By combining Tokai Sports' expertise in teaching athletic skills with our methods for developing noncognitive skills, we will provide an integrated environment that develops both sporting ability and personal character. This acquisition will help us expand market share, retain members seeking more competitive sports programs and attract customers at lower cost through the business-to-business-to-consumer model, thereby maximizing customer lifetime value.

Next slide, please. Here, I would like to explain the changes in the education market that support our business opportunities. As AI becomes more widely used, some cognitive skills such as memorization and calculation are increasingly susceptible to automation. At the same time, interest in noncognitive skills such as leadership, teamwork and perseverance is growing. In the June 2026 parent survey cited on this slide, only 1.7% of respondents selected academic ability and grades as their top priority. Since our founding, we have emphasized building inner strength, in other words, developing noncognitive skills. We will use this strength to expand our opportunities, both in acquiring individual sports school members and in providing solutions to educational institutions and other business customers. In our partnerships with tutoring schools, we began collaborating with Mainichi Kobetsu Juku 5 Days in 2020 and are also pursuing a partnership with Ando Juku in 2026. Our aim is to expand collaboration across the broader education sector beyond sports schools.

Next slide, please. Let us begin with an overview of the Social business. On the following slides, I will focus on school club activities, expansion into urban areas, childcare and after-school day care services in that order. In school club support, we serve 24 local governments and 7 private schools. We secured 5 new local government contracts, including 3 in Tokyo special wards and government-designated cities. We also retained all 19 existing local government clients, achieving a 100% retention rate. In after-school daycare services, we acquired 4 locations through the acquisition of Well Resource. We also added FLEI, which provides motor learning support, and ILFE, which provides independent learning support. Including M&A, our network expanded from 20 to 29 locations, up 45% year-over-year. As a result, the Social business as a whole achieved growth in both revenue and profit. I will now explain the progress in each area.

Next slide, please. Let me discuss our School Club Support business in more detail. As of the end of June 2026, we supported 478 schools and 2,224 school club activities under contract, up 37.0% and 6.2% year-over-year, respectively. We secured new contracts across a broad range of areas from major metropolitan regions to regional cities, including Ota Ward in Tokyo, Kawasaki City and Fujisawa City in Kanagawa Prefecture, Niiza City in Saitama Prefecture and Chiba City in Chiba Prefecture. After completing Phase 1, which focused on pilot programs and building a track record, we are now in Phase 2, expanding into government-designated major cities and Tokyo special wards. Starting in the Japanese fiscal year beginning April 2026, the National School Club activity reform initiative enters its implementation period. As the market is expected to expand significantly, we will build on our track record to further strengthen our competitive advantage.

Next slide, please. Our contracts in urban areas are also expanding steadily. As of the first half, we had secured contracts in 3 of the 7 government-designated major cities that had conducted public solicitations, representing a contract acquisition rate of 42.9%. Among Tokyo's 23 wards, we had secured contracts in 8 of the 12 wards that had conducted public solicitations, representing a rate of 66.7%. From July through September 2026, we also secured contracts in Sapporo and Kyoto among government-designated cities and in Adachi and Edogawa among Tokyo's 23 wards. Including these additions, we hold contracts in 5 of the 9 cities that have conducted public tenders, a win rate of 55.6% and 10 of the 14 wards, a win rate of 71.4%. By building our presence in densely populated urban areas with large numbers of schools, we will improve the efficiency of recruitment, staff deployment and operations, supporting further expansion.

Next slide, please. This slide shows how our business foundation has expanded over the past year. Between the end of June 2025 and the end of June 2026, the number of contracted local governments increased from 19 to 24. The number of contracted schools increased from 349 to 478 and the number of contracted club activities increased from 2,095 to 2,224. We also expanded our contracted service areas into Saitama, Chiba and Kanagawa prefectures. The key point is that we are increasing both the number of contracts and the geographic reach of our operations. Next slide, please. Next, let us look at our entry into childcare. We signed the share transfer agreement for Swift Japan on June 23, 2026, and it became our subsidiary on July 1, 2026. Through this acquisition, we added 5 small-scale licensed daycare centers, 1 corporate-sponsored daycare center and after-school care facility to our group, marking our full-scale entry into the childcare business.

This gives us a stable operating foundation supported by public funding while enabling us to establish relationships with children and their parents from infancy, earlier than in our existing businesses. Through collaboration with HR Produce, which partners with more than 10,000 preschools nationwide, the introduction of Milabo, a system for assessing noncognitive skills, and the opening of sports schools within childcare facilities, we will create synergies with our existing businesses and continue evolving into an education platform that supports children's development. Next slide, please. Our after-school daycare business now operates 29 locations, an increase of 9 locations or 45% year-over-year. In addition to our existing soccer-based therapeutic education programs, we are diversifying into indoor exercise and motor learning support as well as support for independent learning, including computer skills.

By broadening our developmental support options, we will address a wider range of needs while expanding into new areas and building concentrated networks of locations in local communities. Next slide, please. This slide illustrates our comprehensive business model in Aichi Prefecture. We offer multiple services tailored to children's stages of development, childcare through Swift Japan, partnerships with kindergartens and daycare centers, Leifras Sports Schools offering 13 sports, Tokai Sports, after-school daycare services, Nagoya Sports and Culture Community, after-school programs, Elementary School Club support in Nagoya and junior high school club support. As noted on this slide, Swift Japan became our subsidiary on July 1, 2026, after the first half reporting period. In Aichi, we are building a strong local presence by combining sports schools, school club activities, welfare services, childcare and after-school services. We will apply the expertise gained here to address more social challenges and replicate this model in other regions.

Rei Yamamoto

I will now discuss our consolidated financial position. Next slide, please. Let us review the highlights of our consolidated balance sheet. As of June 30, 2026, total assets were USD 30.4 million, up 5.6% from December 31, 2025. Total shareholders' equity was $11.8 million, up 4.2%. The increase in shareholders' equity reflected net income recorded during the period, supporting our sound financial foundation. We plan to continue to maintain a sound financial foundation as we pursue growth. As outlined in our capital allocation policy, we will prioritize M&A with rigorous assessment of strategic fit, synergies, investment rationale, risks and integration requirements.

Next slide, please. Next, let us review cash flow. Net cash provided by operating activities was USD 1.6 million compared with $1.9 million in the prior year first half. Net cash used in investing activities was $1.3 million compared with $0.3 million a year earlier. Net cash provided by financing activities was $0.2 million compared with a cash outflow of $1.9 million in the prior year period. Cash and cash equivalents increased by $0.4 million during the first half of FY 2026. Cash and cash equivalents at the end of the period were USD 15.9 million compared with $15.4 million at the end of the prior year first half. This supports the abundant liquidity highlighted on this slide.

Kiyotaka Ito

Finally, I will discuss our full year outlook for FY 2026. Our full year consolidated outlook for FY 2026 remains unchanged. As shown in the forecast table, we expect net revenue of USD 82.9 million to USD 95.7 million, representing growth of 10.8% to 27.9% compared with FY 2025. We expect income from operations of $4.5 million to $5.4 million, representing growth of 13.2% to 33.9%. Our expected operating margin is 5.5% to 5.6%. In the first half, both the Sports School and Social businesses achieved growth in revenue and profit, and we made steady progress on our growth strategies. Given that the majority of our profit is generated in the second half, we will continue to execute our second half initiatives and work toward achieving our full year targets. As stated in the presentation materials, this outlook assumes that no business acquisitions, restructuring transactions or legal settlements are entered into. That concludes my presentation.

Operator

Thank you, Mr. Ito and Ms. Yamamoto. We will now move on to the question-and-answer session to address the questions submitted in advance. Due to time constraints, we will focus on the most frequently asked questions. Let us begin with questions about M&A. Last year, you cited overseas expansion as one of the reasons for listing on NASDAQ. You have recently announced your first overseas initiative. How should we view its scale? And has there been any change in your strategy?

Kiyotaka Ito

There has been no change in our overseas expansion strategy. For the Canadian initiative, we deliberately chose this scale as a test market rather than taking on excessive risk. From the standpoint of financial discipline, our first step is to carefully assess how our approach to developing noncognitive skills can generate revenue overseas and to validate the unit economics or profitability per customer. Once we have confirmed that the business model is repeatable and identified a clear path to success, we intend to commit capital and scale up. This approach emphasizes capital efficiency over the medium to long term.

Operator

As you accelerate M&A, will you expand into industries where you have no prior experience? Could entering unfamiliar fields increase the risk of operational or integration failures after an acquisition?

Kiyotaka Ito

We do not intend to expand into unrelated industries without limits. Our investment focus is on areas adjacent to sports and education where we expect synergies with our existing businesses. We apply rigorous due diligence and investment recovery criteria. Regarding post-merger integration, we respect the strengths and expertise of acquired businesses while introducing our capabilities in personnel management, performance management and internal controls. We aim to integrate management systems at an early stage. We will select acquisition targets where we can enhance value, both financially and operationally.

Operator

Even if your Japanese approach to developing noncognitive skills is effective overseas, that does not necessarily mean parents will pay for it. How will you make your overseas school services a compelling choice for local families?

Kiyotaka Ito

Rather than building a business from scratch, we envisage an add-on model in which we enhance existing services that already have an established revenue base in the local market. Our financial objectives are to reduce customer churn by improving satisfaction and to maximize customer lifetime value. As service quality improves, we also see potential for appropriate pricing adjustments in the future. We will validate local needs and monitor KPIs that demonstrate a contribution to revenue.

Operator

Next, we will address questions about the Sports School business. Have membership and business performance in your core sports school business reached a plateau? Do you expect growth to slow from here?

Kiyotaka Ito

We explained the factors behind the membership trend earlier in the presentation. We are making a concerted effort to address these factors in the second half of this fiscal year. Overseas investors often ask us whether there is still room for a business serving children to grow in Japan given the declining birth rate. My answer is yes. We believe we can continue to grow. There are 2 main reasons. First, we will strengthen our M&A strategy. The declining birth rate creates a difficult business environment and many companies in our industry face financial challenges. Some have served their local communities for many years, but are reaching their limits, partly because of succession issues. As a result, acquisition opportunities have increased considerably. Our listing has placed us in a position to choose among these opportunities. We believe we can benefit from consolidation in the market and making effective use of those opportunities is our first growth driver.

Second, we will pursue alliances with companies in other industries. We cannot discuss specific initiatives at this stage, but major companies are showing strong interest in the market serving children from the perspective of customer lifetime value. These companies are interested in addressing social challenges as well as generating profits. Providing education and opportunities that help children who represent Japan's future overcome the challenges they face is an urgent social priority. With major companies that share this perspective, we can discuss practical solutions based on a common understanding. We see deeper collaboration with these companies as another part of the growth story for our Sports School Business.

Operator

We understand that pricing adjustments helped offset the lack of membership growth and supported revenue growth this time. Going forward, will growth be driven mainly by higher revenue per member? Or will you prioritize expanding membership?

Kiyotaka Ito

We intend to pursue both membership growth and higher revenue per member. To expand membership, we will implement the strategies discussed earlier, including attracting younger children, deepening our presence in existing markets, M&A and alliances. We also intend to increase revenue per member by enhancing the value we provide. We view tuition adjustments in response to inflation as a development that can occur across the education services industry. For parents who prioritize investment in their children's education, the value they receive matters alongside the price. By improving service quality and helping parents experience value that justifies the price, we believe we can earn their understanding of tuition adjustments. We will, therefore, improve the quality of instruction and use alliances with other companies to expand our services and the range of experiences we offer. Any price increase must be supported by corresponding value so that parents choose our services with confidence. By increasing both membership and the value we provide per member, we aim to achieve sustainable growth in revenue and profit.

Operator

We will now turn to questions about the Social business. The implementation period for the reform to move school club activities into community-based programs has begun. In this first year, how do you assess the gap between expectations and reality? Some municipalities, including Kobe and Toyota, are also pursuing their own approaches. Although the estimated economic impact has been described as JPY 500 billion, could the opportunities available to private companies be much smaller?

Kiyotaka Ito

As a leading operator, we have encountered a broad range of cases during the first year of the reform implementation period. Our candid impression is that relatively few local governments are willing to take the first step. Many are initially taking a wait-and-see approach. We discussed the number of public tenders earlier in the presentation. We also recognize that we need to act proactively rather than simply wait for opportunities, and that is the approach we are taking this fiscal year. Some municipalities are pursuing their own initiatives. At the same time, satisfaction among the municipalities we have served has been very high, and our repeat engagement rate is 100%.

We, therefore, believe there may also be opportunities to engage in discussions with municipalities currently pursuing independent approaches. The alliances with major companies that I mentioned earlier also extend to the transition of school club activities into community-based programs, an area attracting considerable attention. Depending on how these initiatives develop, we believe they could bring about a significant shift in this field.

Operator

Are you increasingly losing competitive tenders for school club activity support to providers offering lower prices? Could this affect future contract growth or profitability?

Kiyotaka Ito

In some tenders, providers offering lower prices are selected. However, we believe the competitive environment should be assessed not only in terms of price, but also in terms of whether a provider can consistently maintain stable operations. This is the first year of the reform implementation period, and municipalities are still evaluating providers' operational capabilities. After a contract is awarded, the provider must recruit and train instructors, cover staff absences, manage employment matters and maintain safety, among many other responsibilities. Even if the price is low, failure to maintain these functions can increase the burden on schools and municipalities.

We have, in fact, received inquiries concerning programs operated by other providers. We believe such experiences will give municipalities more opportunities to assess the importance of sustained operational capability. Our policy is not to win contracts by prioritizing price alone. We emphasize maintaining the necessary operating structure, securing an appropriate profit and providing stable services. As full-scale implementation progresses, we believe there will be more opportunities for municipalities to recognize the value of our workforce and organizational capabilities.

Operator

The number of contracted club activities has grown more slowly than the number of schools served. Does this simply mean that smaller contracts are increasing? Could growth in the number of schools fail to translate into revenue growth?

Kiyotaka Ito

To understand this trend, it is necessary to consider how operating models are changing as school club activities move into community-based programs. Under the traditional school-based model, each school has multiple club activities. A provider may be contracted to support several of those activities. So, an increase in schools can also lead to a substantial increase in the number of club activities. More recently, however, we are seeing more joint activities and community clubs that bring together students from multiple schools. In these cases, the number of schools served can increase without a corresponding increase in the number of activities or community clubs operated.

Therefore, slower growth in club activities relative to schools does not, by itself, indicate that contracts are becoming smaller or that growth is weakening. It partly reflects the shift from school-based to community-based activities. Revenue also depends on factors such as the frequency of activities, staffing levels and the scope of operational and administrative responsibilities. We will continue to support these community-based operating models and seek to translate the expansion of our services into revenue and profit growth.

Operator

Next, we will address questions about financial performance and profitability. Should investors expect your operating margin to remain around its current level?

Kiyotaka Ito

Our operating margin may appear modest, but this reflects our management policy of maintaining the spending on safety required to continue operating without serious accidents. We do not intend to lower that standard. That does not mean we have given up on improving our operating margin. Our business model has operating leverage. Once revenue covers a certain level of fixed costs, including the underlying cost of safety management, further revenue growth can generate a larger increase in profit. We intend to improve our operating margin over the medium to long term by increasing capacity utilization at existing schools and maximizing economies of scale through M&A and alliances.

Operator

Segment profits are substantial, but there is a large gap between those profits and consolidated operating profit. Could corporate expenses continue to rise as the business grows, leaving little profit for shareholders?

Kiyotaka Ito

It is true that corporate expenses, including spending to strengthen governance, have increased ahead of our expanding business scale. However, our key focus is to keep the growth rate of administrative expenses below the growth rate of revenue, thereby achieving operating leverage. Through the standardization of back-office processes and investment in digital transformation, we are developing a structure that can support business growth without excessive increases in administrative headcount. We expect these efforts to increasingly translate into consolidated profit and, ultimately, shareholder returns.

Operator

Finally, we will address questions about the timing of financial disclosures and shareholder value. There is an impression that your earnings announcements come relatively late. Can you announce your results earlier in the future?

Kiyotaka Ito

First, we have consistently made our financial disclosures well ahead of the applicable statutory deadlines. At the same time, as a NASDAQ-listed company, we benchmark our disclosure speed against leading U.S. companies. The recent changes to our U.S. audit firm arrangements are part of our efforts to further accelerate and streamline the disclosure process. Alongside further improvements to our internal financial reporting processes, we will continue to pursue timely disclosure that meets global standards.

Operator

If you issue additional shares to fund M&A or overseas expansion, existing shareholders' ownership will be diluted even if the company grows overall. How do you think about value per share?

Kiyotaka Ito

Growth in total revenue or profit does not necessarily mean that value per share has increased. When considering financing, we must take into account the impact on existing shareholders. We cannot comment on any unannounced financing plans. However, when evaluating financing, it is important to compare the intended use of funds, the terms and the amount required with the expected results of the investment. If financing involves issuing shares, we must assess whether the value created can justify the impact of dilution. Expanding the company's scale alone is not an appropriate basis for that decision. Our approach is to evaluate investment opportunities and financing terms together with an emphasis on translating corporate growth into higher value per share.

Operator

This concludes Leifras Company Limited's earnings briefing for the first half of FY 2026. Thank you for taking the time to join us today. We look forward to your continued support. Thank you again for joining us today.