Nihon M&A Center Holdings Inc. Q2 FY2026 earnings call

• Dividend Irregularity & Governance: Management apologized for prior interim dividends exceeding distributable amounts due to verification process deficiencies. A special investigation confirmed no intentional misconduct. Directors voluntarily returned 10-30% of compensation, but no legal liability will be pursued if recurrence prevention measures are implemented. The final dividend remains at ¥29 per share.
• Recruitment & Human Capital: Headcount grew from 626 to 640, with 56 more expected soon. The company shifted from monthly to quarterly onboarding to improve retention and training efficiency. Mid-career recruitment has doubled compared to last year, though new graduate hiring declined. President Takeuchi personally oversees interviews to ensure quality.
• AI & Digital Transformation: AI Brain Partners (AIBP) was converted into a subsidiary to integrate AI capital with human talent. The strategy focuses on building an organization that operates hand-in-hand with AI rather than just adopting tools.
• Market Position & Branding: Celebrating its 35th anniversary as a 'second founding,' the company held major networking events attended by regional bank presidents and strategic buyers. It retained its Guinness World Record for most M&A cases in one year (1,150 cases).
• Strategic Alliances: Formed a business alliance with Reinos (a headhunting firm) for post-merger integration (PMI) services. Established J Capital for fund business expansion. Strengthened overseas presence in ASEAN (Singapore, Malaysia, Indonesia, Thailand, Vietnam) and formed a US alliance with Generational Group.

Total sales for the first half of FY2026 were ¥22.599 billion, a 0.1% year-over-year increase. The company closed 478 transactions in H1, with an average M&A sales value of ¥45.6 million per transaction. In Q2 specifically, 290 transactions were closed, and mid-cap mandates increased significantly to 34 deals (up from 19 in Q1). Cost of sales decreased by 1.2% to ¥8.494 billion. However, SG&A expenses rose by 11.1% to ¥6.208 billion, driven primarily by a 38.7% increase in commission expenses and higher advertising costs related to recruitment and anniversary events. Ordinary profit declined due to these elevated personnel and marketing investments.

• Full-year forecast and mid-term management plan remain unchanged.
• Management anticipates a recovery in financial performance starting from the third quarter, citing strong leading indicators and pipeline growth.
• Approximately ¥500 million worth of mid-cap deals concluded in October are expected to contribute to Q3 earnings.
• Management expects the peak period for deal closures to occur around December.

• Corporate Governance Failure: Deficiencies in verifying distributable amounts led to excessive dividend payments, damaging stakeholder trust despite no evidence of fraud.
• Talent Retention & Turnover: High turnover rates previously hindered growth; while improving, retaining new hires through adequate education and follow-up remains a critical operational challenge.
• Increased Competition: Harsher competition in the M&A advisory sector and broader talent market is driving up acquisition costs (commissions and advertising), pressuring margins.
• Deal Closure Delays: Structural changes in negotiation processes have extended lead times, temporarily impacting revenue recognition timing.

Q: Is the delay in transaction closures a structural change or a one-time factor? / A: Management attributes the longer lead time (approx. 340-380 days) to enhanced quality checks by administrative headquarters reviewing deals closely. They view this as a transitory factor where frontline staff are adapting to stricter quality standards, which they believe will stabilize without negatively impacting long-term closure rates.

Q: What is driving the double-digit growth in mid-cap deals, and is it linked to minimum taxation? / A: While minimum taxation acts as a tailwind, management emphasizes a demographic shift: owners in their 40s and 50s are increasingly divesting to accelerate growth rather than aging successors transferring businesses. This structural trend in mid-cap divestment is considered durable and not solely dependent on tax policy changes.

Q: Which is more critical for future growth: increasing headcount or improving productivity? / A: Management states both are interconnected and mutually necessary. Pure productivity gains are insufficient for 10% growth without adding headcount. Conversely, hiring alone fails without improving education and reducing turnover. The strategy relies on creating a positive cycle where quality recruitment reduces churn and boosts per-head productivity.

Q: How confident is management regarding Q3 financial performance? / A: Management expressed confidence in a recovery track starting Q3, citing that commissions have already been accounted for and leading indicators (new mandates) are strong. They expect to close pending negotiations and capitalize on a strong pipeline to reach peak earnings around December.