Nihon M&a Center Holdings In Aktie

Hello, everyone. Thank you very much for gathering for our briefing session -- earnings briefing session for the second quarter of the fiscal year 2026. Thank you, indeed.

Today, we have myself and Mr. Naraki and Mr. Takeuchi, we have the 3 members to present.

I am Naraki. Nice to see you.

I am Takeuchi.

To start off, we need to start with an apology. In the prior years, we paid interim dividends, and there's a matter regarding that. Part of the dividends exceeded distributable amount according to our findings. And we've already announced our press release about that. And with the disclosure of this release, we apologize to stakeholders, including our shareholders and investors that we have caused significant concern and inconvenience.

About the content and the result of the investigation, Mr. Naraki is going to explain in detail.

The detail about this matter arise. Today, October 30, we have made a release about that titled Notice regarding Receipt of the investigation report from the Special Investigation Committee and Future Actions. Please look at this notice. And I would like to provide an outline of what happened. This is a matter regarding interim dividends in prior fiscal years.

Facts and investigational findings. First of all, regarding the interim dividends of prior years, we confirmed that there were deficiencies in the verification process of calculating distributable amount, and it was found that part of the dividends exceeded distributable amount in accordance with the Company's Act. And we established a special investigation committee and conducted investigation about the background. And the investigation of the third-party committee did not find intentional acts or misconduct of officers and employees, and we have confirmed that the primary cause was basically the deficiencies in the verification process.

If provisional financial statements were appropriately created and approved, we would have been able to secure enough source of dividends in accordance with the Company's Act.

Recurrence prevention measures. We're going to clarify the processes for calculating, confirming and verifying distributable amount. And also, we're going to enhance the check and supervision functions at the Board of Directors and Audit and Supervisory Committee. And also, we're going to conduct trainings to executives and employees. And also, we're going to develop the framework for confirming using the help of external specialists and about impact on the financial performance and our shareholder actions wise. Our direction is not to seek repayment for this dividend in question to shareholders. And impact from this matter on the consolidated financial performance will be minimal. And there will not be a major impact on our future business operation and our shareholder returns policy.

Together with it, there is a topic on voluntary return of executive compensation. This is to clarify the managerial responsibility. Current Directors, including the President and Representative Director as well as Senior Vice President and Director, they have said that they're going to voluntarily return 10% to 30% of their monthly compensation in accordance with their respective roles and responsibilities.

And at the Board meeting held today, October 30, our Audit and Supervisory Committee said that legal liability of our Directors on this matter upon the report from the Special Investigation Committee, there was a discussion at the Supervisory and Audit Committee and the failures of the directors and the future actions were considered. And based on the assumption that recurrence prevention measures will be implemented going forward, this Audit and Supervisory Committee reached the conclusion that they're not going to held -- hold Directors liable.

For the restoration of the trust, we're going to implement recurrence prevention measures, and we're going to enhance our corporate governance, and we will do our best. We once again apologize for the inconvenience that we have caused.

Continuing on the topic of dividend. As part of our shareholder returns program, as originally planned, we plan to pay JPY 29 dividend per share. The direction has not changed. And this JPY 29 includes JPY 4 of special dividend and the estimated dividend for March 2027 is JPY 29 per year, and this is 71.3% as dividend payout ratio.

And on the right-hand side of this chart, you can see the inclusion of JPY 4 special dividend included in JPY 29. So no change to the initial plan of our dividend. Thank you very much.

Well then, allow me to move over to explain the results for the first half of FY 2026. First of all, as to the executive summary of this, the sales was JPY 22.599 billion, and this is 42.8% of progress for the full year, and this is an increase by 0.1% year-by-year. And the number of transactions closed was 478 cases per transaction, and the M&A sales had been JPY 45.6 million. So therefore, the number of transactions as well as the M&A sales per transaction is almost the same as last year. The mid-cap is trending well on the increase that is ordinary profit is on the decline, however.

And that is very much attributable to the fact that we're reinforcing the recruitment of the talent, coinciding our anniversary. And this is why we have been advertising ourselves and also organizing events. And as for AI, DX investment is proceeding. And from this year to the next and to the future beyond, so we are making the advanced investment ahead of the time, and we want to make sure to, of course, get a return on investment that we make.

So in fact, the leading indicators are remaining to be strong. The pipeline is also expanding. As for the number of new sell-side mandates, they are 699 year-over-year growth of 13.5%. And whereas the mid-cap mandate is at 155 cases, and this is growing at the pace of 30.3% year-over-year and which means that we are allowing ourselves to make sure that we can keep this M&A sales per transaction. And the number of new sell-side mandates is also increasing as compared to the year before, 22% increase, that is, and that is a record high.

So in the month of December, March, in other words, at the time of third quarter, fourth quarter, we hope that these will be closed so that they'll constitute our earnings. Also at the same time, for the second quarter, there are some gaps in terms of the accrual. But in the third quarter, there are some delays into the third quarter. In the month of October, so about JPY 500 million worth of mid-cap that has been concluded or closed. So therefore, the third quarter, so we hope to be able to enjoy the peak period around December.

So in other words, this is going to be really the closing in actual fact for the fiscal year, so far as the sales department is concerned, and that's how we are working hard. And especially in the pipeline where the negotiation is underway, it is trending really well. So therefore, the third quarter, we would make sure that we will be able to uplift all numbers in all regard.

And as for the P&L for the first half, Naraki is going to explain the details of the numbers.

And the first slide, first of all, with regard to the sales, JPY 22.599 billion and that is almost the same as the last year's level. And you can see that the slight decline in terms of the numbers of transactions closed, but we managed to generate the sales amount that is almost the same as last year and 478 has been closed. And so, 290 in the second quarter, that is.

So we managed to accelerate the speed of the closure of these transactions. But unfortunately, it was a decline on a year-by-year basis. So M&A sales per transaction is JPY 45.6 million. So we did manage to keep this level up at the high level. And as for the midterm transactions closed, 43 cases or deals. And as to the content, the first quarter 19, 34 for the second quarter. So in the second quarter, we did manage to accelerate the speed and exceeded the last year's level. So that was the result.

And the next page, we have shown the expenses. And as for the cost of sales, JPY 8.494 billion, and this is a decline by 1.2% year-on-year. As for the personnel costs, consultant mainly, so JPY 4.6 billion, and this is an increase by 3.6%, JPY 4.763 million in actual fact. Referral fees and outsourcing expenses, JPY 2.83 billion and negative by 11.6%. Direct deals had risen. And as a result, so the referral fee has declined by 1.7% year-over-year from 14.2% to 12.5%. SG&A, JPY 6.208 billion increased by 11.1%.

One of the attributing factor to this is the personnel costs, JPY 2.068 billion, so it is a decline by 0.4% year-over-year. Commission expenses, JPY 559 million. So last year was just over JPY 400 million, so an increase by 38.7%. IT-related costs, JPY 598 million. And so JPY 517 million that was in the last year. So 15.5% of an increase year-over-year. As for the advertising expenses, JPY 457 million, JPY 347 million that was in the last year, so 31.3% of an increase year-over-year. IT-related costs as well as advertising as well as marketing.

On Page 20 to 24, there are further details, which we would like to elaborate on later stage. P&L summary is just that I have explained. So in order to avoid redundancy, allow me to go over to the next page.

This is Q2 alone, the 3-month worth results, and we show year-on-year comparison. One point to note is the number of transactions closed, 290. So for the 3 months, we closed 290 transactions, 188 was the number for Q1 and Q2 was 290. And mid-cap mandates, 34 in the month of Q2 in the 3 months of Q2. Q1 was 34, and that became -- Q1 was 19 and that became 34.

Okay. So this is in accordance with the flow of M&A deals starting from receiving mandates to closing. We show some leading indicators in accordance with this flow. First of all, seller companies, we start the process from receiving mandates from potential sellers. We closed advisory agreements with them. And the new sell-side mandate this time was 352. This indicates an increase of 7.6% Additionally, of them, mid-cap mandates, so middle-sized mandates was 79. This increased by 29.5% year-on-year. So we received mandates and the mandate number was quite solid. And the quality or the content of the mandates were 61.8% were in the central area, the large city areas. And mandates in these areas are easy to sell, easy for closing and the ratio of such central area mandates exceeded 60%. So we believe that the quality was high as well.

And so after receiving mandates, there will be corporate valuation and there will be creation of the teaser document as well besides the valuation documents. Before matching sellers and buyers, we examine the companies quite closely. And the days -- number of days required for the process used to be 3 months previously, but we are reducing that period, and it's 60 days basically now. So it's almost basically 2 months required recently.

With shorter lead time, we have better productivity and more timely matching is possible with that. So this is indeed a really good trend. And after that process, the next step is finding the matching buyer. And we make proposal to potential buyers. And we also close advisory agreements with buyer companies. And we have about 400 of them. We've received 400 of new buy-side mandates, and this 400 is an increase of 3.1%. So these leading indicators show good signs, really good signs.

So we will have the third quarter, fourth quarter and the Q1 next fiscal year. We would like to lead these mandates into closure in the coming quarters. We would like to have more higher-quality matchings. We will have higher quality negotiations, and we would like to improve our successful closure rate. And this is how we believe we can improve our financial performance. About the number of closures and the new mandate numbers, we've been showing this trend every time. So please look at our trend.

Next of all, balance sheet. I will hand over to Mr. Naraki.

Right. We start with an asset on the right -- on the first top half, JPY 60.860 billion was total assets and net assets was JPY 51.278 billion, standing at 84.3% in ratio. Last year was JPY 50.643 billion. So from the end of the previous fiscal year, there was an increase of net assets by JPY 635 million. We believe that we are keeping quite healthy balance sheet.

Next topic is the transition of our number of employees. Our business-wise, our revenue is decided based on the number of transactions closed time M&A sales per deal. And also, we can calculate that by per head times the number of people. So productivity times our headcount determines our revenue. And in that sense, headcount growth is very important for the company to grow. Last year, we failed in growing the number of employees, and we actually had a net decline. For the past 2 to 3 years, recruiting and retention wise, we believe that we were not successful in recruiting and turnover. And we see this quite seriously.

Starting from the previous fiscal year, this recruiting has been supervised as a matter right under the Mr. Takeuchi. At the moment, 626 became 640 as headcount. And already, we have people who have joined our company after the start of October, that's 29. And 27 have accepted our offer. So there are 56 to be added -- I mean 56, and this indicates a growth. And also, we have been enhancing our recruiting activities.

And honestly speaking, there's a great news to share. On a quarterly basis, so July, October, January and May -- sorry, in April, we've been solidifying the new join numbers. Previously, we used to be joined by new people on a monthly basis, but we have consolidated that entry timing to a quarterly timing. And last month, employees who joined our company in October, there were 29 of them. And targeting the 29, I implemented my first training to them, spending 90 minutes. And I feel that the atmosphere has changed.

Starting from this fiscal year, we've been trying to improve the quality of recruitment as a matter directly supervised by our President. And there are a few reasons that have led to higher turnover or high turnover, for example, not being able to provide enough follow-up to the new people, not providing good education and also bad quality of the people as well, and that's leading to -- that leads to increase in turnover. So we are now improving the quality of recruiting, and we've been doing more in education and follow-up to the new people.

And so as I did the training to the newly joined people, I feel that their reaction has changed. The atmosphere is different from before. So recruiting-wise, I feel that the quality has improved quite significantly. And I feel that this recruiting is a matter that we can count on to improve going forward.

Allow me to talk about some of the topics that is to be noted. So on October 13, this year, we celebrate -- we are celebrating the 35th anniversary of our founding. So 35th anniversary, and we take it as the Next GENESIS or the second founding. So this is why we had held a major event 35 years ago, as compared to 35 years ago, the environment of the market has changed very much. And of course, the mindset of our customers' clients have changed dramatically as well.

So therefore, the sense of responsibility on our part had further enhanced or it has become much more profound, which meant that we had to be changing our business model. So we felt the need to build a management team that is capable to carry through this task. And this is why from the time of original GENESIS, those membership, the leadership that was -- that accounted responsible in creating the foundation of the businesses. However, there are many changes that is taking place. So therefore, we need to build a new business model. And this is why we needed to start this New GENESIS or Next GENESIS or the new leadership.

And I'm very happy to say that many key figures from various different sectors that attended these major events. For example, in our network, or through our network, there were a number of accounting firms, financial institutions, the representatives and partners of those firms had attended and also the regional banks, as many as 30 regional bank presidents, they personally had attended physically to these events.

And of course, mega banks, broker major bulge bracket, in other words, brokerage houses, top management had taken their time out of their busy schedule to attend these events and the strong buyers, strategic buyers, representatives of different regions of Japan, potential buyers and also the representatives of private equity funds and also financial advisers as well, some of their financial advisers. The key figures of our industry, key representatives of our business model had participated in these events.

So -- and I was able to thank everyone who had attended these events for the 35 years history. And also, I have recapped on the history, the chronicles of our company. And also at the same time, I was able to share the future of these businesses, especially that was done by Mr. Takeuchi. And of course, having done that, we have entertained and provided the opportunity for everyone to engage themselves in our networking at the time of reception. So that this Next GENESIS was to be opened up. So we were able to create the ambience and also, it was a wonderful kind of kickstart together with all these wonderful partners and friends of ours.

So it is not just organizing this wonder event, but also at the same time, we have started the transit ad. Also, we have been carrying advertisement on major newspapers as well. And also, we have nominated ambassadors, Yoshito Okubo, who is a former national soccer team member as well. And so therefore, we are trying to celebrate the 35th anniversary in all regards.

And also what is kind of symbolic of our 35th anniversary, AI Brain Partners, AIBP had been converted to be our subsidiary as well to mark this anniversary. And this is something that I deem to be a great pleasure of mine because from here down the road, we have to focus very much on acquisition of human capital and also AI capital and also token asset. So in other words, human talent capital and also AI asset would have to be built internally and to manage it well, I think. That would determine the success of our business.

So it is not just adaptation of an AI. We need to create an organization that is capable to run together with -- operate along with AI, together with AI, hand-in-hand. So this is from the time of the start, we need to form such a relationship as opposed to just introducing adopt the AI because once it gets started, it's difficult to change this formal partnership. So this is why I'm very happy that we were able to create this wonderful organization as our subsidiary so that the human capital and nose and health would be the most important of all in bringing about the brighter future. So AI and the human capital internally, we are positioned nicely to foster the both at the same time.

Of course, from a long time back, DX, digital transformation and AI have been utilized in order to become a data-driven entity so that we'll be able to generate good enough earnings. And also, we will be focusing on the real market, too. We focus very much on the network. We do put a lot of emphasis. And also through the means of different media such as YouTube, we try to acquire leads.

But more than anything, we really want to win the hearts of the business owners so that we'll be able to invite them to take part in like seminars in 25 locations. We have been organizing future designs, seminars, a learning opportunity that we provide, and we want as many people as possible to participate. And this is why we have been inviting celebrities to take part in these talk sessions or fire chat talks. And as a result of the combination of different assets, we have been successful in inviting many to participate.

Just last week, I was -- oh, no, I think it was this week, I was in Okinawa organizing this seminar, nationwide seminar, and more than 250 attendants. There were participants, 250, can you imagine in Okinawa prefecture. And physically, they had attended, and I was able to engage in a dialogue with the 250 people also.

Last year, we held a similar kind of event in Okinawa as well. And one of the participants had led to providing us with a mandate. And this person who has provided us with the mandate had shared that because he or she was very happy to have attended a seminar last year and this person was in order to thank me. So this person said that this person had led to kind of solidify the result in order to engage in the M&A activity and this person had extended this -- the hand. So we were able to shake hand and it was wonderful. And I really want to bring about happy -- many happy M&A cases. I was very happy. I was able to go back to my prime point. And that, in fact, is the beauty of this real or physical marketing effort.

But on the other hand, I have to admit that the competition is getting harsher. And against such a backdrop, we do not want to just carry out the physical marketing in a wild and in a frantic manner. We try to, of course, focus on the regions, the physical -- the geographical regions as well as some certain sectors. And we do it in a very targeted manner so that these activities of winning the mandate will be very efficient. So together with the community and sectors, we try to have them meet against each other and also win trust from the community. And also at the same time, we have to equip ourselves with a kind of profound knowledge, the expertise of a specific sector and the industry so that we'll be able to carry out very efficient and knowledgeable activities.

And also at the same time, with regard to the brand equity, 6 consecutive years, we were recognized by Guinness World Records. So M&A financial advisory industry, we were chosen to be the best-selling mergers and acquisition advisory company with 1,150 cases transactions in 2025. So even if it was to be one more person or one more company, we really want to deliver the best possible M&A. And this is our philosophy that we embrace and we want to execute.

So with regard to related activities, there are no major activities. If I'm to take some -- this time, on the topic of PMI, Reid, a headhunting company and our company formed business alliance contract. And in the area of the PMI and post-merger integration, under the 100-day plan, we provide consultation services.

And there are voices requesting managerial resource, managerial people, requests for plant managers, requests for CFOs, requests for sales general managers. We received such requests. And unfortunately, we cannot do such referral of people on our own. Therefore, Raynos, who has the best record in Japan, actually, they have supported us quite a lot, and we've formed business alliance with them. And after the PMI activities, we would like to know how much effects have come out. And about that, together with Kwansei Gakuin University, we do joint research to measure the effects of PMI. And we've actually started such measurement-related research.

And also new activities in our overseas business. So we are celebrating 10th anniversary of opening our overseas locations. In Singapore, we've opened our first office with a single employee from our end, and it's been finally 10 years since then. And in Singapore, after 10 years, we have held a major event. And more than 350 people gathered at the event from the various countries in ASEAN. Currently, Singapore, Malaysia, Indonesia, Thailand, Vietnam, in these 5 countries, we have our local entities. And our local entities are having really good performance, and they've been quite active. There are companies who would like to expand their business abroad, and we invite them. And then our sessions are filled up quite easily because of strong demand.

And besides ASEAN, with the U.S. company, we formed a business alliance agreement. That's generational group. they are among the U.S. top 10 that's focused on mid-cap intermediation or mid-cap advisory. For the mid-cap related business in the U.S., I believe that this company is #1 in reality. So when a Japanese company expands its business to the U.S., it's not easy for them to acquire a large company from the beginning. They have to acquire a middle-sized company first to expand their business in the U.S. And we feel that with this startup partnership, we can now provide more information. And we would like to expand the target to Europe after we have expanded from Asia to the U.S. And fund business-wise, we've established J Capital, which is an intermediate holding company. And we are about to grow this business on a full-fledged basis.

Now with regard to FY 2026 full year forecast and midterm management plan, there are no changes. So let me skip this part. And I'd like to -- and that is all for myself so far as the first half earnings is concerned and also the second quarter earnings results. Thank you very much for your attention.

Thank you very much. So we'd like to move on to Q&A session at this point in time. [Operator Instructions] So let us start the Q&A. So while we wait for your questions to be posted, we'd like to cover some of the frequently asked questions and provide you with the response of our company. So the question.

So with regard to the recruitment of the M&A consultant, while the talent market is becoming very highly competitive, what is the recruitment environment like right now? And also by introducing onboarding every 3 months, has there been any kind of changes with regard to the retention of the people as well as the fostering of the talent? So I would like to hand over to Takeuchi, who is taking the lead in this initiative.

So this is Takeuchi. Thank you for the opportunity. So first of all, with regard to the talent recruitment as well as the fostering of these talent, I feel more -- I am growing my confidence. And it's been some months since we have started to introduce this new kind of initiative. In terms of the mid-career, we have been successful in recruiting more than double of the numbers of the people at the mid-career level.

However, having said that, as compared to last year, the new grads recruitment may have been on the decline as compared to last year, that is. And also at the same time, allocation of the people to a non-consultant job or task has been done in a proactive manner. And also at the same time, the net increase of the consultant has been on and around 6%. That is our expectation.

So as for the mid-career recruitment, in the -- so from the non-M&A industry, I really feel that the competition is getting harsher and harsher. And for sure, the head-to-head kind of competition is taking place within the M&A industry. More than 100 or so interview has been conducted with myself attending. But in fact, the yield gets better as I personally take part in these interview sessions, I feel.

And being one of the major M&A players, I think we are beginning to feel strength in acquiring these individuals and also search overseas and also strategic consultants, not just M&A players. So we are beginning to kind of display the vision in order to attract more talent. And I think that has been leading ourselves in becoming more successful in recruitment.

And also, we have been recruiting every quarter, whereas in the past, it was every month, so to speak. But now onboarding has now become quarterly, and that has been bringing about a positive impact because it is every quarter, so like 25 or so people will be joining as a mid-career as a group as opposed to inviting them to be on board in a very fragmented manner, there is this psychology that works as a group, and they have this period kind of intimacy or the friendship, a comradeship that they can enjoy.

So like administrative kind of works as well as accounting and also legal matters that is done as a group, these training sessions are. And as a result of concentrating on not monthly, but quarterly, I feel that the productivity has been increasing. And from the time of the recruitment to the training, I think we have a very good kind of conversion, and that's my gut feeling or hands-on feeling. And -- but of course, there is a turnover, the churn that we have to watch over the development for so that we'll be able to continue to increase these talents on a net basis.

Next question, about the most recent number of transactions closed. The company mentioned a delay in the closure timing, just like in the previous quarter. Is this really a onetime factor? Or do you feel that there is a structural change going on such as longer negotiation period? Could you share with us your take on this? Right. I also feel that Mr. Takeuchi is the right person to talk about this.

About the delays in the closure timing, that is indeed one of the majors cause. The lead time is getting longer. But at administrative headquarters, we have a new member, Saito-san and checking each deal one by one closely. And such postures and attitudes have led to longer delays or longer lead times. However, we've been establishing the right check system, but that means a change to the frontline people, and that leads to longer lead time.

However, when we look at the most recent second quarter, the lead time in terms of the number of days, until 2 years ago, it was about 340 days from receiving mandates to the closure. But it became like 380 days in the fourth quarter. And in the second quarter, it went down to about 340 days. So we believe that we now have higher quality processes and our frontline people are catching up with such changes. So the longer lead time has improved -- is improving. And we will guarantee our quality enough while managing our lead time. I think that's what we're doing already. So we do think that this is a onetime transitory factor.

So the next question -- so the mandates as well as the closure of the deals, the mid-cap deals are increasing by double digit. Do you think that there is an impact from minimum taxation other than an impact from minimum taxation, is there any kind of initiative that was carried out by your company in order to increase the numbers of mid-cap deals? Takeuchi will be responding to this question.

So with regard to the minimum taxation, as a whole industry, for sure, it is a tailwind that we can enjoy, and we are very mindful of this minimum taxation for each and every businesses. And it is becoming a kind of a trigger for sure. But as a Nihon M&A Center, I really feel that the trend is changing dramatically, whereas the mid-cap management in their 60s and 70s, they were trying to have someone succeeding the businesses or transferring their businesses, and they were taking the lead.

Whereas nowadays, we are seeing those management in their 40s and 50s. Maybe the percentage breakdown is in 60 versus 40s. And they are now -- rather than just because of aging, they are not trying to kind of divest their businesses, but rather in order for them to accelerate the growth of their businesses. So this is why we have this long-standing data. But in the industry, we have the buyers side. In other words, those acquisition team, and they will be on the side of those buyers buying businesses. Of course, buying is one thing. But of course, they may consider transferring their businesses as well at the same time, divesting their businesses.

So we have all those information building up on top of each other, and we seek out our antenna and mid-cap mandates being converted to acquisition or even divestment. And in addition to this tailwind of minimal taxation, I think this mid-cap deals are on the increase. That is our take. But if you were to look at the whole industry, of course, the minimum taxation may be of a great benefit, which may go away in the next year. But the number of touch points that we can enjoy, the younger generation transfer of the businesses, divestment of the businesses, in fact, is not going to be affected very much. The trend will not kind of reverse in the next year. I mean this is my take. So I would continue to watch over the development for this.

As a matter of fact, I do agree to what has been said by Mr. Takeuchi. The minimum taxation bubble is not what I describe the current trend to be. So in the second quarter, you could see that the minimum -- this minimum taxation impact was not there, but then the mid-cap was on the increase. So it is -- so therefore, minimum taxation is not impacting very much. So this increase of the mid-cap deals, that's my understanding.

Next question. For your future growth, which is more important, growing headcount or improving productivity?

For this question, I think that the 2 are interconnected, so I cannot decide on one. For example, as a company, if we want to grow by 10% as a company, productivity improvement alone is quite not enough to grow 10% as a company. So we have to add people as well. That's a must. Headcount growth is a must. However, if we just recruit new people, that will not be successful because we have to think about churn rate or the turnover rate.

For example, when we have 100 persons growth in headcount, if we hire 300 new people and lose 200 people from our existing workforce, that's not good because the number of people who can do the M&A business will be less in net. So productivity goes down as a result. So with that kind of headcount change or the headcount mix change, we cannot grow. So we have to grow in our headcount. We also have to improve the quality of the people as well. We will have to improve the quality of education, and we will have to decrease the number of departures.

And also, it's important that each individual can do more and lead good results. Otherwise, they will leave our company. So using AI and using DX, we will make it easier for our employees to have good results. And we will improve our productivity per head that way. And I believe that, that will lead to reducing turnover rate in our company. The 2 are interconnected. And when we get into a positive cycle, the both will improve. And when we are in a vicious or the bad cycle, we cannot grow as a company. So connecting the 2 factors, we would like to grow as a company, and we need a strategy for that.

In the interest of time, we would like to answer to the last question, and this is going to be referring to the current leading indicators and the status of the sales pipeline of the transaction under negotiation. Could you please tell us how confident you are regarding financial performance for the third quarter and beyond? With regard to this, I would like Takeuchi to answer to the question.

Well, thank you for the question. So we have made a mention in this earnings briefing document. So we have already accounted this performance commission. And so therefore, we could feel -- I think we are gaining confidence that we are on the recovery track from the third quarter. And with regard to the deals that are under negotiation, we will try our best to close them. And also at the same time, the leading indicator, the new mandates, for example, the number of mandates, and we have been kind of organizing ourselves very much from the last year so that we'll be able to win the mandates of quality and also yield and also the productivity enhancement has been achieved as a result of this. So therefore, what we are facing right now in front of us, we would watch over the development and also watching over the trend of the leading indicator as well.

So the third quarter, so I think we'll be able to start rotating this positive cycle of our businesses and be able to enjoy the peak of our earnings. And it's the M&A that we, in fact, provide is the buildup of -- is not the buildup of a decision-making by the organization. After all, the selling business, in fact, will be determined by -- the decision will be made by the management, and so would it be for the selling business as well. So very often, they may experience marriage blues, the melancholic kind of emotions.

And so therefore, if you were to just focus on the timing that is very much, very often experienced by the major businesses, then we will not be able to enjoy a good enough trend. So this is why we try to enjoy the peak of our earnings in December, and that is exactly what happened last year. And so therefore, that would allow us to go back to this cycle that could be deemed to be virtuous for us. So this is why we are now trying to build up the momentum in order to enjoy the peak period in December. So we really think that we are on the right track, and we have now come back to or recovered to this growth trajectory, I think, which we will be able to present to you.

So today, well, thank you very much for attending. Many of you had attended kindly, taking time out of your busy schedule to attend the second quarter earnings. And this is translated simultaneously into English language. So many of you are attending from different corners of the world. So one-on-one meetings will be organized from here down the road. We are happy to entertain your requests. Please, if you have any requests, please put them forward to our IR department. I'd like to thank you all for your participation today. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Hello. Thank you very much for joining us today. We would like to begin the financial results presentation for the first quarter of the fiscal year ending March 2027. Today, we are broadcasting this presentation with simultaneous interpretation to audience of the entire world. I believe that there are some people who are listening to this presentation early in the morning or at midnight. Thank you very much for joining this session despite time difference. Please present our resume for the session.

Nihon M&A Center Holdings has a purpose. It's to bring best-in-class M&A ever closer. We have been running our business with this purpose. Many investors, I believe, are already aware that in this first quarter, this has been a very important quarter for us. It's in the sense that in FY 2022, we had to announce our incident in appropriate accounting incident. It's been 4 years after that. 2022, '23, '24 and '25, for these 4 years, we implemented improvement measures, and we have recovered. And in the fiscal year that ended in March 2026, we had our record sales and ordinary profit.

We achieved record high in both of them. A full-fledged recovery was made, we believe. And finally, starting from the current fiscal year, we are founding our company once again, and we are starting Vision 300, Next Genesis. And the first quarter that we are announcing our results today is the very first quarter under this new Vision 300. That's why the first quarter has been a very important quarter for us. So we are announcing and explaining the results of that very important first quarter for us. Starting with the overall summary.

I believe that the results this time was very satisfactory for us. Three reasons for that. The first reason, we had very solid growth in sales and profit. And the second reason is the other pillar, which is the fund business, we recorded enough and solid gains from the fund business. And the third one is the most important one. This is related to leading indicators, leading indicators that shows the prospect for Q2 to Q4. We had very strong leading indicators. These are the 3 factors that have led to the satisfactory results in Q1.

Starting with sales, JPY 9.1 billion, up 0.9% year-on-year and 188 transactions were closed. This count was down by 11.3%, but ordinary profit was JPY 2.252 billion, down by 11.1% year-on-year and pretax profit was JPY 3.156 billion, up by 24.6% year-on-year. However, we sold an investment target from AtoG Capital, which is our fund business, and that was JPY 780 million, almost JPY 800 million. And this gain on sale of investment was recorded as extraordinary gain. And we had to handle this as extraordinary gain due to accounting principles.

But as a business, this is almost equal to recording sales -- additional sales. Therefore, if we could have recorded this as part of our total sales, then the actual sales, JPY 9.1 billion would have been JPY 9.891 billion, up by 9.7% and ordinary profit was JPY 3.390 billion, up by 20% and pretax profit would have been JPY 3.156 billion, up by 24.6%. So we would have been -- we would have been able to grow more strongly in both sales and profit if we could account this as part of our sales, et cetera.

And one factor that led to this is that from April, J-Capital has been our intermediate holding company, and there's a contribution from this fund sector, more specifically from J-Capital. This has been the -- or the AtoG Capital that makes investment mainly in overseas projects, and that generated a profit of about JPY 800 million. And I believe that the fund business made quite a big contribution this time that captures people's attention. And the third factor, once again, is leading indicators that were solid this time.

Starting with new sell-side mandates, that was 347, up by 20.1% compared to the same time last year. This, as the first quarter was the best in our history and of which mid-cap mandates were 76. The 76 mid-cap mandates acquired was up by 31% year-on-year. So keeping M&A sales per deal, I believe, is quite possible at solid level. And also, we have transactions under negotiation. And that stock is at record high level. As of the end of June, such stock or the negotiations or the transactions under negotiation was 17% up compared to the same month last year, 17% increase.

And in the first quarter, we had interim fee received and interim fee received in Q1 was 17% higher compared to the same time last year. So transactions under negotiations are the transactions that are experiencing negotiations that are in pipeline. These are the transactions that are going to be closed and will be impacting our sales and profit. And so we will have the second quarter up to September and the third quarter up to December.

We believe that the solid number of transactions under negotiations are going to lead to solid results in Q2 and Q3. And new sell-side mandates that I mentioned at the beginning of the session. So for the third quarter results up to December and the fourth quarter results to March, I believe that these 2 quarters are going to benefit significantly from the new sell-side mandates. And we have had really good leading indicators. And that's the summary.

In the previous fiscal year, we had the record high sales and profit. So in March, we have kind of felt that we have done all the best that we could because we had best-in-class sales and profit. But I believe that the -- putting ourselves in a good business cycle in the previous fiscal year didn't drag us in the first quarter this time.

We believe that we made good preparation for achieving our target this fiscal year because we have enough pipelines and enough mandates. So we're going to use them fully, so we can leave good results in the second and the third quarter, and we're going to reach a peak in progress acceleration. And this is how we plan to get us back to the customary cycle of performance achievement.

Now we will move on to balance sheet and income statement. And I will hand over to Mr. Naraki for the explanation.

Hello. This is Naraki. I'm going to first touch on income statement, more specifically sales. As was mentioned by Mr. Miyake, we have all the figures listed on this page. And as you can see, increasing M&A sales per transaction and decreasing number of transactions closed are the 2 major points. But in the second row, you can see the number of transactions closed, and I have to talk about this.

There was a postponement of the closure timing. Therefore, the number of transactions under negotiation at the end of June was at record high level. And according to our internal document, transactions under negotiation that are big to a certain extent grew by 17% compared to the same time last year. And in the first quarter, we received interim fee, and that was JPY 1.358 billion compared to JPY 112 million recorded last year, there was an increase of 17%. So we have that many active mandates this time. And you can find the same detail in our tanshin report. Next page, please.

Now on to expense and profit. Starting with personnel cost. So personnel cost as part of cost of sales, this is the personnel fee for M&A consultants and front office staff that was JPY 2.2 billion, up by 6.5% year-on-year. And in the second box, there is a different type of personnel cost. This includes support people that includes sales staff, and that was down by 3% at JPY 1.051 billion.

And as you can see at the top about referral fees and outsourcing expenses, compared to the same time last year, this was down by 16.1%, so ratio of direct mandates out of total transactions closed increased. Therefore, referral fee ratio out of sales went down by 2.2 points from 13% to 10.8%. There was a decline of 2.2 points of referral fee ratio.

And as you can see under the section of SG&A expenses, there was IT-related expense of JPY 314 million. This was up by 22.5%. And also, we spent advertising expense of JPY 259 million, which was up by 62.5% year-on-year. So you can -- you may feel that this is quite a big increase year-on-year. However, compared to the budget, these are actually on pace with our budget.

And also, you can see ordinary profit of JPY 2.252 billion. As we explained, we have the AtoG Capital-related contribution of JPY 787 million included in extraordinary gain of JPY 903 million that's included in pretax profit. And this is from our fund business, which is considered to be our main business. So that's how we could have interpreted this. However, we had to focus on formalities, and this was considered to be the gain on sales of an investment from the company that we fully own. So we have to treat this as extraordinary gain.

And about P&L summary, there's a -- this is going to be a repetition of what I've explained already, so I'm going to skip this page. And finally, on balance sheet, we've been keeping healthy balance sheet. In the top row, we have asset data as of the end of the first quarter, JPY 54.442 billion total assets we had and net assets was JPY 47.732 billion, and the ratio of net assets was 87.7%. That indicates that we are maintaining a healthy balance sheet.

Thank you for the explanation. Now we will move on to the topic about which we receive a lot of questions from investors. And this is about leading indicators. This is -- these are important to understand or estimate our future results. And as we've explained before, along the flow of our deal process, we're going to take you through our leading indicators, starting with the number of new sell-side mandates that was 347, up by 20.1% and of which mid-cap mandates were 76, up by 31% year-on-year.

And new buy-side mandates. The count was 351, up by 4.8%. And of sell-side mandates, there were mandates in central areas, more urban areas. And the central area ratio was 61%. I believe this is a favorable trend for us. And even after we acquire mandates, if we cannot do enough pre-due diligence for those mandates, we cannot do good matching. So our company puts focus on solid pre-due diligence in what we call a preparatory phase. So we have to do preparation before matching.

And the process of preparation used to take 90 days previously, but we shortened that to -- or we have been trying to shorten that to 60 days. This has been a major project for us. And as a result, our preparatory phase is less than 60 days at 56 days. Lead time is now shorter, which means that we can handle more transactions, more mandates now. So the number of transactions closed and other financial performance will improve with the shortened lead time.

The next point is on the number of transactions closed and the number of mandates acquired. At the bottom, we have the number of new sell-side mandates. Please pay attention to this number. In the first quarter, from March 2024, 280, 327 and then 289. And this time, this first quarter, we acquired 347 new sell-side mandates. So this 347 was the record high of the first quarter results. For the second, third and the fourth quarter, I believe that we made good preparation.

And there's another important leading indicator, which is the number of employees. M&A consultants, we had 626 consultants at the end of the previous fiscal year. And the most recent number is 635. There was an increase. And also, there are people who already joined our company after or the number of people who accepted our offer and those people are 55 in count. And going forward, we're going to accelerate our recruiting efforts. And please pay attention to corporate staff. From 201 to 236, there was an increase in corporate staff.

In the past few years, we reduced corporate staff and we had a project of improving direct and indirect divisions. Despite such project, we had an increase in corporate staff count. And I have to explain this. This is because -- we used to do operation management that was done by M&A support department previously. And this team is now escalated to an operation management department and this is now included in the corporate segment. And we have more than 20 people that do the work. So that led to the meaningful increase in corporate staff.

And to explain what this work is about for the past few years, we started to take more responsibility about our results, what we do, outcome of generating best-in-class M&A. That has been the focus of our management. Focus of our target of accountability. It's because Lucian, MJG and other similar inappropriate buyer issues have been uncovered. Fraudulent buyer issues have been uncovered in the past few years. And also due to risky scheme, there were some M&As that broke off, and we saw many of such transactions. So we accepted the facts, and we decided to take more responsibility about the outcome of what we do to realize best-in-class M&A.

And what we decided to do is to do enough examination at the time of accepting mandates. And after that, there is negotiation process. And in that negotiation process, we've decided to do more confirmation of whether we have done enough due diligence and whether we have taken enough processes and enough steps.

We also started to examine more about the scheme, et cetera. And we also have been checking more thoroughly about whether seller owners' guarantee is released, et cetera. These work are done by the people of the operation management, and these people are going to be part of the headquarter going forward.

Next, let us move into our midterm management plan. This fiscal year's first half and second half, when you look at the sales balance, it's 45% against 55%. First half, we want to overachieve this in terms of performance. Fortunately, pipeline, we have many deals that are currently in discussion. So we will continue to properly manage our business. Last fiscal year, the midterm management plan up to fiscal year '27, we were able to achieve JPY 19 billion ordinary profit against the original target of JPY 17 billion in fiscal year '25. With that momentum, in fiscal year 2026, we aim to deliver upside results in a very solid manner.

And Next Genesis Vision 300 to achieve ordinary profit of JPY 30 billion in fiscal year 2032. In order to achieve that, we will continue to accelerate our efforts. Now what exactly is Next Genesis? I would like to explain this. Our company from this fiscal year, we have started our second founding. Our second founding means 2 things. One, it is about succession, passing on things to the next generation. But the larger meaning and significance.

Our company has reached its 35th anniversary in this year. We are celebrating our 35th anniversary. Compared against 35 years ago or even compared against 5 years ago, 10 years ago, the world has greatly changed. M&A has transformed from a B2B job. It's now transferring into a B2C type job. M&A has not been that special. And it is -- we are now moving into an age of AI. We are trying to properly handle this and create a new business model. This is Vision 300 Next Genesis and our second founding.

Now in order to achieve this, the entire company needs to unite together. And in order to do that, we have started a trust-type stock compensation plan. Shareholders, investors and management and employees. We all get on the same ship. We all make efforts towards the same purpose. That is what we want to achieve. And as a symbol of that, we will also relocate our head office. We are planning to relocate our head office. This current head office is split across 4 different floors. It is difficult to have real physical communication with each other. We are now planning to relocate to a building where a single floor is very wide.

And the consultant team, the sales team will be consolidated into one single floor, and we will maximize real communication. And that is how we will do our succession, but also create innovation at the same time. So we can achieve that will become the symbol to achieve the true purpose of our second founding. And the background is our mission framework that has been redesigned. Vision, starting with regional revitalization, driving the renewal of Japan and ultimately become the world's #1 integrated M&A company. In order to achieve that, we have core values via professional, that is our core value.

And our sales organization has greatly transformed too. In the past, we have been mainly focusing on small SMEs, but it's not just SMEs. In listed companies, too, there's a lot of business reorganization carve-outs, attempts to focus on where you can win. And in order to handle that situation, IB coverage division, strategy division, we have created those divisions, so we can respond to the needs of listed companies too.

Next, let us move on to shareholder, equity shareholder breakdown. Naraki will explain.

I will explain the pages on shareholder equity and shareholder breakdown. Just like in the previous year, we plan to continue the dividend payment of JPY 29 that includes JPY 4 of extraordinary or special dividend. And as you see at the bottom of this page, during the period of midterm plan, so up to March 2028, we are going to have more than 60% dividend payout ratio. This has been upheld as our basic policy of shareholder returns. And if you look at the right-hand side of the top, we have the forecast for March 2027, the current fiscal year, total JPY 29 and special dividend is JPY 4. So ordinary dividend is JPY 25 accordingly.

So at the profit level of our current guidance, so if we do a calculation based on that current guidance level, the dividend payout ratio has become 60% based on the JPY 25. And we're going to avoid cutting dividend. So for March 2027, we have added special dividend of JPY 4. So total is JPY 29, which will be the same as the year before, March 2026 in terms of the absolute amount of dividend. And as a result, as you see at the top of this page, for FY 2026, the expected dividend on payout ratio will be 71.3%, including the JPY 4 special dividend.

Next page. This is about our ROE. It has been above 20%. In the current fiscal year, March 2027, this is expected to be 24.4%. Under the current midterm plan period, so about March 2028, the next fiscal year, we are planning to keep at least 24% ROE between 24% to 25%. The page after, this page shows shareholder structure and the transition of our market cap. That's it. Thank you.

Now we will move on to related activities. I'm going to share with you some important topics. TOKYO PRO Market, the number of IPO support for TOKYO PRO Market has reached 60. And from TOKYO PRO Market to growth and standard such general market, there have been companies that step up to those general markets, and that led to -- and it's not just the TOKYO PRO Market, Sapporo, Fukuoka, they have started a similar market. And regarding this, we have also got certification as an adviser.

And what is notable is PMI, PMI consulting, the SME agency, the FSA, they want to drive successful M&As. They want PMIs to be more solid. That is what they have instructed to us. But out of various boutiques, we are the only company that really is dedicated to PMI. There is a lot of need, track record of providing PMI 55, 66, and now it's at 132, but we want to turn it to 200, 250, 300. That is what we aspire for. And we want to do even more advanced PMIs.

We need to do joint research with academia to do this. We now have launched joint research with Kwansei Gakuin University. And when you look at our overseas activities, this year, finally, we have achieved our 10th anniversary. Very happy to achieve this. We are smoothly growing our business and a larger portion -- this will be a larger portion of our business into the future. We will continue to grow this business.

And we announced this other day, with Generational in United States, we also signed a strategic alliance with this company, 5 countries in ASEAN and Korea. And America, we will kind of spread this sort of a network. And over to the right, you see we were able to do an M&A with a U.K. company. That is another very notable topic.

And when you look into our fund business, this is something that we want to make a pillar that stands along with M&A, and we have established J-Capital as an intermediate holding company. And underneath J-Capital, we have the AtoG search funds. So we can do kind of comprehensive fund businesses under J-Capital in this way.

And when you look into some other topics, AI is a big topic nowadays. I believe this is very critically important. In order to utilize AI, you need to have -- it's about how much you can accumulate unique data. You really need data-driven business management. And in order to do that, in terms of data collection, that's something that we have been focusing on in a very full manner, sellers, potential buyers, the interviews, business interviews. With agreement from customers, we have been recording those conversations, and we are now turning that into a database.

We also have real marketing, marketing roadshows. Seminars are something that we are very good at. We are doing seminars throughout the entire country. And in terms of regional marketing, we are also doing seminars. This photo is a radio broadcast in Ibaraki Prefecture. I was doing a radio broadcast program that features me. And in terms of direct marketing, we have a regional focus and industry specialization, an industry kind of strategy. So regional industry strategy. With that matrix for the structure, we will also continue to grow direct marketing in a very solid way.

And this year is our 35th anniversary. It's a great opportunity. So we want to utilize this for our sales, so we can do many promotional activities. That is what we aspire to do. And through those efforts, the Guinness World Records for 5 consecutive years have recognized us the Best-selling mergers and acquisitions company. That is how we have been recognized.

And when you go into industry trends, there's just one item I would like to explain. That's the latest information. There was a qualification system that starts from 2027. This is going to be implemented as a law and regulation. And not just that, supporting agencies are now registered to SME agency. And that registration system is also going to be legalized. And so more strict registration system will be in place going forward. So we have examination system and registration system that's going to be codified in laws and regulations. And I believe that this is going to put us in a more favorable or advantageous position.

And that's the end of our presentation, and we will start taking your questions with the 3 of us. We will welcome your questions.

President Miyake, thank you very much for the presentation. Now we will move on to Q&A. Please understand that we may not be able to answer all of your questions due to time constraints. We will start taking your questions. And before we start receiving your questions, we're going to share with you some of the questions that we receive often from investors together with our answers.

First question. As a way of continuing to improve the qualities of the new sell-side mandates, the ratio of mandates acquired through our partners is growing year-on-year. But I believe that this means at the same time that the ratio of direct mandates where you don't have to be -- you don't have to pay referral fee is declining. Please talk about the advantages of growing the mandates that you acquire through partners that could be lower in gross margin.

Right. This is a great question. And this is also a question about a very important theme for us because we have been focusing on acquiring mandates from our network channels. One of the reasons for that is that the direct market is not stable because 10 years ago, in our industry of M&A intermediaries, there were only 30 to 40 players in the market. But currently, there are 450 to about 500 of such players.

There was a significant increase in the number of players. And 85% of the current players were established in the recent 3 years or so. And those kind of new companies do not have their network. So they have to focus on direct marketing. They have to send a lot of direct mails. They have to make calls to acquire new mandates. And the outcome of their activities is that our potential sellers and buyers receive calls and approaches almost every day. And so our potential customers are set up with such approach.

Therefore, even when we focus on such direct sales and marketing, the response rate has gone down by a single digit or even double-digit percent. And so we believe that at this point in time, it's better for us to focus on acquiring mandates that we gain from network partners. And another reason is because of such situation, mandates in the direct market has lower rate of eventual closing of transactions. In our network, we have accounting offices and banks. These companies have been looking at the financial results of the potential targets for many years, and our network partners have the long history of tens of years of working with the President.

So our partners have not only quantitative information, but also qualitative information such as the character of the President and strength and weakness of the potential sellers and buyers. As a result, acquiring mandates through partners give us better successful closure rate. If we acquire mandates from direct market, as you said, we don't have to pay referral fee. That's true. However, the ratio of closing the direct mandate is lower. As a result, when we think about the productivity, productivity is better from network channel.

However, we are not contended with that current situation. We have been thinking about how we can acquire more higher-quality mandates, and we've been thinking about how to improve the customer response rate. And that has been addressed by focus on some regions and having teams focused on some regions and teams focused on some industries. And these teams have been enjoying really good response rate because they have the strong trust from customers, and they've been doing consulting sales activities. So customers' response rate is very good.

And also, they can talk about really specialized technical topics. And these teams are well penetrated in the target regions. So closure rate is very good with these departments. So we are going to implement -- continue to implement these 2 strategies as a metric.

Next question. You did mention that the closing of multiple deals was delayed to the next quarter or beyond. Does this mean that there were more delays compared to the usual years? Compared against the prior year first quarter, how much did these delays increase in this first quarter? Could you explain that using monetary value?

Thank you for this question. So these number of delays and how they go up and down. I don't think it's that much of an increase compared to the prior fiscal year. The deal delays, there were 25 last year, about JPY 290 million or so. This year, 16 and JPY 140 million. So that does not mean there are a lot of those delay deals in the pipeline. Last third quarter, fourth quarter, we did solid matching, and that has grown our pipeline compared to last year, pipeline has increased 17%. We have more transactions under negotiation, and that's because we were able to do solid matching. So these delays themselves have not increased that significantly.

Next question. At the end of June, the company had 635 M&A consultants. How many of them were new graduates? Do you have many turnover -- many people who left our company, although they're young. So does this -- so do you have the continued net decline in the number of consultants, excluding new graduates? And when can we expect to have net increase in the number of people planned to join the company after July? So when can we start to have a net increase?

Thank you. Recruiting and retention has been the most important item for us to improve, and we've been sincerely addressing this since last year. And this has been addressed by Takeuchi-san as a central figure, and he's going to share with us the actual reality as well.

So this is Takeuchi. To talk about new graduates, new graduates are included in 635 and 46 new graduates this time. And last year, we had 55 people, 56 people, new graduates. And last year as well, new graduates were included as well. So overall, we believe that the new graduates and other numbers have been growing solidly. And in terms of the net increase, actually, we had a net increase as of the end of April. But full year, we plan to have at least 10% net increase. And I actually feel that it's possible based on the actual activities of recruiting and retention.

And I myself have been joining 70% to 80% of the final interview. And from 50 recruiting agents, I get direct contacts. So I directly talk with them to shorten lead time. That's how our company has been focusing on improving recruiting. But as a President, I shouldn't just focus on that. So we record interviews, and we get lessons from that and apply the learnings to future interviews for the year after and the year after as well. So we have such system in place.

And to talk about turnovers, we also feel that our measures to reduce people who leave our company has been effective so far. We have 48 sales headquarters -- I mean, 48 general managers and sales headquarters and 64 group leaders, total 112. And to new employees, role playing has been provided and role playing has been done together with group leaders and above. This is a system that we call stamp rally system. So we have been making sure that enough close communication has been made with upper level people for new people who join our company.

And also at least 60 points are needed from the role playing out of 100. And then 1 stamp can be provided and 15 stamp is required at least. And so when new people join our company, their passion is really high that they are the most excited when they join our company. So it's important to set target when they are most excited about our work. And that's what we have been trying to do, and we have been providing enough opportunity to make communication with general managers and group leaders.

And we believe that this kind of measures have been effective in improving penetration rate. And we have members who joined our company in April and July, and they have been enjoying the work. We see their smiles. So net increase of at least 10% this fiscal year, I believe, is possible, well possible.

Thank you for that response. Next question. In order to achieve Vision 300, in addition to the domestic M&A intermediary business, you've also stated that you would like to expand your business areas. When you look at the JPY 30 billion target, is that something that is only achievable through only the domestic M&A business? Also, please tell us the outlook of the fund business and the overseas business up to 2032.

Thank you for this question. JPY 30 billion, that is kind of a word play to by 2033, March, the month of 3 and JPY 30 billion. So we have a lot of 3s lined up there. So -- and if we had JPY 3,000 share price, we'd have 3 -- five 3s in a row, it would feel very fortunate, but that's also something that the market is to determine, but '33 March, JPY 30 billion, we'd like to have four 3s.

I personally believe this is a very conservative number. And we can achieve this with just our domestic business. When we increase headcount and when we increase the productivity per head, have more people and achieve more through per head. And in order to achieve more per head, training, reducing turnover and utilizing AI to provide support, those things can improve what we achieve per head. And when that grows and when the headcount grows, we can then achieve the JPY 30 billion.

And then when we have -- we can then add on the fund business and the overseas businesses add-ons, that is the ideal state that we want to achieve. Now when you look at the overseas business, we have achieved our 10th anniversary. And from this fiscal year, we are now working on a growth strategy. My vision, 10% share overall of our business, that is something that I have been wishing for. And as the first step, we first like to aim for 10%. And in order to do that, it's not just ASEAN, Americas, Europe kind of moving into there is also going to be very important.

The fund business, it's about how much funds we can accumulate. There's a lot of uncertainty. We need even further mid- to long-term viewpoint for this business. But the J-Fun, the growth strategy fund and the AtoG overseas fund and J-Search, the Search fund, all 3 of those have very solid signs of growth. And among those, the Search fund, I believe it has a very high probability of success. And when it grows, I believe it also has the potential to expand. There's a lot of potential when it grows too.

We are working to build this with regional banks. In regional areas, there is a lack of people that is more prominent than the lack of funds. We work with the Hokuriku region in the Search fund. We work with Higo Bank, or Kagoshima Bank, Miyazaki Bank, we work for the South Kyushu Search fund. And we want to spread this out to the 47 prefectures throughout Japan. And when we do that, we have a lot of breadth width when you do that and achieving success here can turn into large potential. That is what I am thinking.

Next question. In this past year, M&A sales per deal has been at high level. Can we understand that it has stabilized at the level of JPY 45 million?

This is a good question. I don't think that JPY 45 million is the level that this M&A sales per deal has stabilized at because we have microcap mandates, microcap transactions that are handled by BATONZ's platform covering the kind of businesses that could be mom-and-pop family businesses. So through such efforts, we've been trying to improve our M&A sales per deal, but the number of transactions closed, I believe, is not growing enough yet. We have to add more transactions we close. And when we close more transactions, I assume that M&A sales per deal will go down a bit.

We are struggling to grow in the number of transactions closed. And that's the reason why I believe that the M&A sales per deal is relatively at high level. And based on my gut feeling, we have to add more transaction closures. And the appropriate M&A sales per deal, I believe, is above JPY 40 million. If possible, we don't want to go down 40 million as average M&A sales per deal. But our focus should be on growing transactions we close.

Next question. Qualification systems and stronger compliance. Through that, we can expect a more healthy industry. But does that have any potential impact to your sales activities or to your deal closing processes, especially when you look into the qualification examinations for individuals, this is likely to become a national certification, but could people need to spend so much time for that to prepare? And could that restrict those sales activities?

Thank you for the question. This also is a very important question. Conclusion-wise, no impact. I would rather say this would push us into a better direction. So the qualification system, I fully practice, I am fully agreeing with this. And in our company, we are already starting to study for this. And internally, we also have started some examinations inside the company. So we are already trying to improve the level of our people in advance, and we are kind of building in a habit to study, to prepare for exams, and we are trying to make that take root inside our company.

Once this qualification comes in, we will then fully focus on responding to that sort of a system. But everyone will also improve their skills up to that point in time. I believe there will be no major impact. But Takeuchi-san, you take care of the front lines. Do you have any thoughts about this?

I completely agree. I believe this is a tailwind for us. When you look into the M&A industry, customers -- well, the M&I industry has been democratized. So there's more knowledge in people because people are learning more and more about M&A deals. And then the knowledge required to us consultants, we need to study 2x, 3x more to really keep up with that trend of increasing knowledge. We have accumulated data, learning training functions from the past that is going to be an advantage for us.

But as we heard in the question, when you spend more time to learn and study, the time you spend on sales activities could be lost. I think that's where your concern comes from. However, that is why AI, Gen AI needs to be completely introduced so we can improve our productivity. For example, I'm sidetracking a little bit, but let's say, a single salesperson, when they visit a customer, they do a lot of research. They spend maybe 30 minutes, 1 hour, 1.5 hours to do the research they need to visit that customer.

Nowadays, so we have developed AI. We can build publicly available information into AI. There is this castle close to the customer history. All of that information, of course, goes in, but the latent information, what are the deals that happened close to that area? What are the trends of the deals in that particular area? All of that potential kind of information also gets captured. And a single salesperson can then look at that single page report or 2-page report and then have a very smart ice break process with the customer, very productive. They can reduce 30 minutes, 1 hour of time, and then they can spend that time to improve their knowledge and study.

So what I'm feeling right now is when you look at large companies, they can use the power of size, companies that have accumulated data, those can win even more at this time. So we need to continue to improve our knowledge with the industry, and we are also doing some early investments into AI, but doing those AI investments to improve our efficiency is also going to be very important.

Next question. Please share with us that a balance of negotiation open mandates at the end of June. And please talk to us about the background of changing the definition of the number of new negotiation starts. And also please disclose the same count according to the old definition.

I will hand this over -- hand over to Naraki-san for this question.

At the end of June, the balance of negotiation open mandates was 480 pairs, 480 pairs. The same time last year was 409. This was an increase of 17%. And earlier, there was a question about an increase or decrease in the number of delayed mandates or the delayed transactions. In the case of our -- the delay in our company, the delays are often due to missing some information in documents also or not being able to receive payments by the deadline, et cetera. But this time, on our IR document, we simply wrote that there was a delay in the timing of recognizing the sales, et cetera.

These are the -- not really the project that we were not able to close because of not having good documents, et cetera. It's rather because of the real delay in the process and so one indicator is the leading indicator. After the start of matching, sales buy-side negotiation or advisory starts, et cetera. And as a result of all those processes, there was 17% increase in the negotiation open balance.

And on tanshin, we disclosed about the interim fee we received in the first quarter, and that was JPY 1.358 billion compared to JPY 1.162 billion last year -- same time last year. Interim fee received was up by 17%. This indicates that we have a lot of transactions that are under negotiation.

And to talk about the next question, on Page 10, in the center, we have some detailed information. And this is related to the second part of this question. Starting from this year, we have changed the definition of new negotiation starts. To talk about this. So the question is about the background, and this is on the third row. For the same sell-side mandate, there are cases where they are negotiated with multiple parties. And in those cases, we started to count them as a single transaction or a single mandate. So these are the cases for which multiple buyers have raised their hand.

However, eventually, when the deal is closed, there is only one buyer, one-to-one kind of deal. So that has been the method of counting. But compared to that, we believe that it's more accurate when we count them as a single transaction. That's why we have started to change the definition to communicate more accurate situation to investors.

To talk about the final part of this question, this question is what the number was according to the former definition of, for example, what the count was when we had 3 buy-side mandates for a single sell-side mandates. And about this question, I have to apologize, I don't have the answer that's really available immediately.

Since we have reached a planned time to end this session, the next question is going to be the final one for us. So after the first quarter results, please share your determination and enthusiasm towards achieving your guidance for the first half of the year.

So the first quarter results, financials, the very beginning, as I mentioned, the leading indicators are in a very good situation. That is what I believe. First, the number of back orders, 17% higher compared to the previous year. And the interim compensation, we have a basic agreement that's also increased by 17%. So there are various transactions, negotiations and process where you are finding deals. We have many of those mandates. So for September, we are going to solidly close all of those, so we can then generate good numbers. In our company, we are also properly managing the process itself. So we are very progress -- confident of making progress in this way.

And in terms of new mandates, those are also coming in, and those will go into influence the December and March results in a very positive manner. So we want to maintain the current momentum. So the first half, the second quarter, we can add up very solid results. So we are very confident. Please continue to cheer us.

So thank you so much for your participation. And thank you for the many questions. Institutional investors, we also want to meet you in one-on-one meetings. Please try to reach out to us. We will try to respond to your expectations, we will solidly manage our business so we can meet your expectations. Please continue to cheer our business. Thank you so much for your participation today.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

First of all, this fiscal year marks our 35th anniversary since founding. We were established in April 1991, listed on the Mothers section of the Tokyo Stock Exchange in October 2006 and then upgraded to the first section in December 2007. We have been able to continue for 35 years, thanks entirely to your support, and I would like to express my deepest gratitude.

Amidst this, in the fiscal year ended March 2022, our company experienced an inappropriate accounting incident. We sincerely apologize for the significant inconvenience and concern this caused. Following that, we have worked towards recovery through the 4 phases of introduction, development, change and conclusion.

While we announced a misconduct in FY 2021, in FY 2022, we made a major shift toward compliance-focused management. We implemented disciplinary measures on approximately 80 employees. As a result, the company inevitably became somewhat somber. So in the following year, we took steps to brighten things up.

For example, we established our own health insurance association and created 100 employee clubs. Then last year, building on that momentum, we aimed to achieve record high number of new sell-side mandates and successfully achieved that in the market.

This fiscal year, based on those mandates, we achieved record high performance. Our results have finally recovered, and we are hopeful that we can now move forward on a growth trajectory. Now regarding this fiscal year's performance, we closed 1,061 transactions. The average fee per deal was JPY 45 million, up 15% from a year before.

As a result, revenue rose 14% to JPY 50.2 billion and ordinary profit increased 13% to JPY 19.1 billion. During our growth phase, we were able to create a peak in the third quarter, December, and we successfully achieved that. Unlike M&A between listed companies, M&A among SMEs does not proceed simply through bold decisions.

Deals may be delayed at the last minute because sellers feel hesitation, sometimes described as pre-up shutouts or a buyer's president may suddenly need to travel overseas, causing delays. Therefore, if we target March, sales recognition timing can be delayed beyond March. So we set December as the peak instead of March.

At last, a positive cycle has returned. This fiscal year, we achieved 81% of full year revenue target and 92% of profit target by December. We would like to continue this cycle going forward. As a key leading indicator for our performance in the ongoing fiscal year, we recorded 1,283 new sell-side mandates with 227 of those coming from the mid-cap segment.

Mid-cap refers to SMEs that generate fees of JPY 50 million or more. We also secured 1,400 new buy-side mandates. The preparatory period on this page, formerly called the pre-due diligence period, is a preparation period for matching when we create company valuation reports and company overview documents.

We successfully shortened the lead time from 90 days to 59 days. Regarding our balance sheet, current assets totaled JPY 43 billion, including JPY 40 billion in cash and deposits. Net assets as well as equity stand at JPY 50.6 billion. With total liabilities and net assets of JPY 66.2 billion, our equity ratio is 76%, indicating sound financial health.

As for shareholder returns, our medium-term policy targets a 60% dividend payout ratio. In addition, we provide special dividends and have maintained a dividend of JPY 29 per share. By paying a dividend of JPY 29 per share, our payout ratio has remained at a high level, trending at 84%, 73% and 71%.

For shareholder returns in the fiscal year ended March 2024, we implemented JPY 7.3 billion in dividends, along with JPY 14 billion in share buybacks. Annual dividend totaled JPY 9.2 billion in the previous fiscal year, and we maintained the same level for the current fiscal year.

Furthermore, we recognize that proactive IR activities are essential to increasing our market cap. With institutional investors, we held 321 one-on-one meetings throughout the year. It's also very important to attract overseas investors. So I personally visited investors in Europe and the United States and conducted 56 one-on-one meetings there.

We also hold company briefings for individual investors and posted recorded videos like this on our website. As a result, our shareholder composition is well balanced, 32% individual investors, 29% institutional investors and 27% foreign investors. However, to further increase our market capitalization, we aim to attract more long-term foreign investors who will hold our shares stably.

As for the challenges ahead, we are currently in the middle of our medium-term plan. But the 4 phases of introduction, development, change and conclusion have been completed. As we move into a new growth phase, we have established the Next Genesis Vision 300. Next Genesis refers to our second founding.

We have published a vision of what the company aspires to become, starting with regional revitalization, driving the renewal of Japan and ultimately becoming the world's #1 integrated M&A company. Guided by this mission, we have set a clear target of achieving JPY 30 billion in ordinary profit by the fiscal year ending March 2033. Isn't this catchy? Fiscal year ending March 2033, JPY 30 billion, 4 3s in a row, making it very memorable. We sincerely hope for your continued support.

The most important challenge in realizing this vision is human resources. However, our HR policy failed this fiscal year. As a result, headcount decreased from 630 to 626. Under Next Genesis, we aim to increase the number of consultants by about 10% annually starting from the ongoing fiscal year.

M&A is fundamentally about people. So talent is our most critical asset. The primary reason for the HR failure this time was high turnover among employees with tenure of no more than 3 years. During the misconduct period, many mid-level employees were disciplined, leaving a gap in experienced staff. Therefore, over the past 4 years, we have focused on developing mid-level employees and preventing their turnover.

As a result, mid-level employees are performing well, but our delayed response to the newer employees has led to the decline in headcount. This is a critical issue, and it is now being directly overseen by President Takeuchi of Nihon M&A Center.

Mandates are also an important issue. The number of new sell-side mandates has slightly decreased this fiscal year. This is because we are in a transitional period. Of the 4 phases of introduction, development, change, and conclusion, the former 3 are done. Last year, we focused all our efforts on securing as many mandates as possible.

As a result, we acquired many mandates, but we also accepted deals from very small companies as well as loss-making companies with negative net assets that were difficult to sell. We recognize this as a mistake. Accepting unsellable mandates benefits no one. Seller companies get disappointed at our inability to match them with buyers, and our costs rise while productivity declines. So this year, we are shifting very small deals to Batonz under our new sell-side mandate policy.

For loss-making and/or insolvent companies, we carefully assess whether they are essential for regional revitalization and whether there is a high likelihood of finding a buyer before accepting mandates. As we have just shifted our policy, the number of new sell-side mandates has temporarily declined. However, the number of effective mandates or sellable mandates has not decreased. In fact, we believe it has increased.

The number of M&A transactions closed is also important. On this topic, lead times and negotiations have become somewhat longer. This is partly due to an issue with problematic buyers in the past 2 years. This issue made seller companies feel uneasy. As a result, they began to seek third-party opinions at key points and take more time to consider decisions, which lengthens lead times and reduces the number of closed deals.

To address this, we now hold an internal kickoff meeting or analysis meeting at the start of negotiation to identify potential issues and share them between buyers and sellers. This helps prevent concerns from arising during negotiations and leads to smoother deal processes. Lead times will become shorter and the deal completion rate will increase.

In M&A, clearly identifying issues at the outset greatly contributes to improving the success rate. As with anything, if SMEs are given a heads-up about potential issues at the beginning of the overall process, even if those issues actually occur, they can accept them without major concern.

However, if such issues are discovered later during due diligence, they may feel shocked and say things like, "We were deceived," or, "Was this hidden from us?" which can cause deals to break down or significantly extend lead times. To avoid this, we conduct kickoff meetings, and we are seeing strong positive effects from this.

In addition, we have launched a deal record system equipped with AI functions, which we believe will significantly help increase the number of completed transactions. Now our guidance for the ongoing fiscal year. The guidance is JPY 51.8 billion (sic) [ JPY 52.8 billion ] in sales and JPY 19.3 billion in ordinary profit.

Compared to our medium-term targets of JPY 50 billion sales and JPY 18 billion ordinary profit, we are aiming 5.6% and 7.6% higher, respectively. This year, we achieved JPY 19 billion profit against a target of JPY 17 billion and JPY 50 billion sales against JPY 46.3 billion target.

For the ongoing period, we aim to achieve JPY 52.8 billion against JPY 50 billion and JPY 19.3 billion against JPY 18 billion. We want to firmly build this momentum this year. Of course, some may worry that renewed momentum could lead to another scandal. We have firmly established a compliance framework, and we will continue to focus on compliance in our management.

Now regarding our business strategy, under our holding company, we have 2 core businesses, the M&A business and the fund business. In the M&A business, we hold M&A strategic meetings and Mr. Takeuchi oversees and manages the M&A center as well as other units such as the Corporate Value Laboratory and the Japan PMI Consulting.

For the fund business, we have established a holding company called J-Capital. By creating this holding structure, we can visualize the fund business earnings, and we aim to make it one of the two major pillars of the Next Genesis going forward. So we established J-Capital. In the M&A business, we believe the market will expand significantly, really significantly over the next 5 to 7 years. Why? First, there are currently 3.2 million companies in Japan -- of 3.2 million companies in about -- or about 1 million companies have presidents who are over 70 years old.

Moreover, the rate of companies without successors remains high at 60%. So there are still strong demand for business successions. As a result, last year, 70,000 companies closed down. In addition, 10,000 companies went bankrupt, meaning a total of 80,000 companies were lost in Japan last year.

Going forward, closures and bankruptcies are expected to increase with concerns that 1 million companies could be lost over the next decade. That would be a serious situation. If 1/3 of companies disappear, for example, homes cannot be built. This is because companies responsible for the foundation work or wallpaper installation would no longer be available. We must somehow prevent this.

Furthermore, the working age population will decline sharply. Over the next 20 years, 15 million workers are expected to disappear. As a result, regional and SME companies will struggle to hire workers. They will need to be acquired by larger groups to do capital expenditure or they'll need to leverage the buyers' brand to recruit talent.

In addition, the impact of a weaker yen, currently over JPY 160 per dollar. Before COVID-19, it was around JPY 105 against the dollar. This has driven up the cost of construction and other materials and parts. SMEs are unable to pass on these costs, leading to a decline in profits. They are increasingly uncertain whether they can survive over the next 5 to 10 years.

And then there is the advancement of AI. Large companies can improve productivity using AI, but SMEs struggle to do so. This is widening the productivity gap. Companies are facing these challenges. So how about our company? Business succession type M&A involving owners in the '60s and '70s will continue to grow until around 2045. It will not grow sharply, but increase mildly.

Meanwhile, owners in the '40s and '50s are increasingly seeking our services due to rising concerns. Their M&A need is surpassing that of older generations. The owners in the '40s and '50s often wish to join larger corporate groups due to uncertainty about the future. Such cases continue to increase. There are also growth-oriented companies who still aim to expand despite challenging conditions. Companies that have declared a goal of reaching JPY 10 billion are finding it difficult to achieve this through organic growth alone, given the current headwinds.

As a result, they are increasingly choosing to grow through corporate acquisitions. High-quality companies are becoming local stars on the TOKYO PRO Market and evolving into local conglomerates. Listed companies are also increasingly diversifying old businesses and acquiring future-oriented businesses. We aim to support all of these deals.

In this context, leveraging AI is highly effective for improving our productivity. We use AI across all stages, preparatory phase, matching and negotiation. Productivity gains are particularly expected in matching and negotiation phases.

We have already established systems for AI use and are collecting data. But we expect results to emerge in 1 to 2 years or even 2.5 years. AI cannot function effectively without a sufficient accumulation of data. It's not enough to simply use data lying around. We are accumulating effective M&A data to fully utilize AI. So we would like to accumulate more and use them for AI.

We have developed our overseas business over the past decade. We have nurtured the overseas business carefully and patiently. We were not in a hurry. We have been thinking that it would be fine if it blossomed significantly 10 years from now.

In the first phase, we entered the local market and established a local subsidiary. Second phase, we expanded locally. And now in the third phase, we have finally reached a stage where we have the organizational strength and the manpower to achieve our budget targets. We are truly entering the phase of full-scale growth. We plan to expand from ASEAN into Europe and the United States.

We have signed a strategic alliance MOU with U.S. M&A advisory group, Generational Group. It is a boutique company that's wonderful. We plan to introduce their abundant sell-side opportunities to Japanese companies. And conversely, we plan to have their buyer clients consider acquiring our seller clients who are Japanese and ASEAN firms. We also plan to expand into Europe and to do the second round next.

The second pillar is the fund business. Under a new intermediate holding company, J-Capital, we operate funds such as the J-Fund. This is a growth-oriented fund. They acquire companies and develop them into larger, stronger businesses.

We also run search fund business. This is a model where we recruit individuals in their 30s to 40s who want to run a business. They are called searchers. We ask them to acquire companies, but searchers look for acquisition targets themselves. They further step in as management and grow the business.

We operate this in collaboration with regional banks. In regional areas, the biggest shortage right now is human resources. Talented individuals go to universities in Tokyo and then find jobs there, often not returning to their hometowns. What regional areas need most is not money, but people. Therefore, we are running the Minami Kyushu Search Fund #1 with Higo Bank, Miyazaki Bank and Kagoshima Bank and the NOBUNAGA Search Fund #1 in Gifu with Juroku Bank.

We're also opening a search fund with our bank in Shikoku. The third business is AtoG Capital. This is a fund focused on cross-border deals. When a listed company acquires a company in ASEAN, for example, buying a Vietnamese company for the first time, they may lack confidence.

They worry whether they can manage it properly after acquisition or whether there might be issues like accounting irregularities or environmental problems. So first, AtoG acquires the target company, operates it for about a year to fully understand it and then sells it to a listed company.

In other words, it functions as a bridge fund. Since many things cannot be understood until after acquisition, AtoG first acquires the company, performs solid PMI and then transfers it to a listed company. This is what AtoG is. That concludes the explanation of our 3 fund businesses.

Now some good news. Batonz, an equity method affiliate, was successfully listed on April 21. Thank you. Listing it had been our dream. This company handles small-scale deals. For example, small shops, local hair salons or taxi companies with only 3 vehicles.

Maintaining these businesses is extremely important for local communities because if they disappear, essential local infrastructure is lost. We understand these needs, but it is difficult to address them within the Nihon M&A center. Therefore, we established Batonz as an online matching platform. We are very pleased that this dream of Batonz's listing has been realized.

We also believe it has a significant social role. It's said that about 1 million companies will close down in the future and 80% to 85% of them are regional businesses, small enterprises or local shops. Batonz has a social mission to save these companies through matching. We believe it can become part of the social infrastructure going forward.

Now as I mentioned earlier, we are committed to firmly achieving our Next Genesis Vision 300. We want to regain the momentum we had in the past and are determined to fully restore it. This is how we are thinking about it. To achieve this, we will first reinforce our corporate ethos.

Our corporate ethos remains unchanged. We contribute to the preservation and sustainable growth of businesses through M&A. And our purpose is to bring the best-in-class M&A ever closer. These 2 are permanent. In addition, we have newly established a vision, starting with regional revitalization, driving the renewal of Japan and ultimately becoming the world's #1 integrated M&A company.

How we will do this is through core value of everybody becoming a professional, utmost respect for our clients, swinging the pendulum in full and doing the right things in the right way. We are committed to executing this firmly while preventing incidents.

And to support that, we plan to introduce a trust-type stock compensation system. I believe it is important that employees, managers, executives and investors are on the same boat. By consistently doing the right things the right way, we will improve our performance and enhance our corporate value and market capitalization.

To ensure that everybody can move forward together as one and that management, employees and investors are aligned, we will implement this trust-type stock compensation plan. In addition, as part of today's proposal to be resolved, we plan to reduce the amount of nondistributable capital reserve and transfer it to distributable other capital surplus.

Without other capital surplus, we cannot pay dividends or conduct share buybacks. To seriously consider or increase our market capitalization, that is to enhance our corporate value, we believe it is necessary to have measures such as timely share buybacks and flexible dividend policies. To enable this, we plan to transfer JPY 3 billion to other capital surplus so that we can implement timely capital policies.

Finally, I believe the SME M&A market and industry trends topic is also extremely important. During overseas IR roadshows, we often receive the following feedback from the local investors. The M&A center itself may continue to grow, but what about industry? If the industry doesn't improve, your corporate value won't increase.

First, regarding the market and the industry, a large number of new M&A intermediary firms have emerged. 10 years ago, there were roughly 30 intermediary firms nationwide, but now there are about 500. About 80% of them are small, and they tend to be emerging boutique firms with 5 or fewer employees.

In addition, last year or the year before, there were cases of inappropriate buyers, including those engaging in fraudulent conduct. As a result, there has been growing demand for greater soundness and integrity in the industry. In response, the Small and Medium Enterprise Agency revised SME M&A guidelines and created a skill map for SME M&A specialists. This was based on concerns that those involved in M&A may lack sufficient skills and principles. So the required competencies and values were clearly defined in the skill map.

Based on this framework, a national qualification exam for SME M&A will be launched next year. Through these measures, efforts are being made to improve the overall industry. We also established a self-regulatory body, the M&A Advisers Association. Within the association, a list of potentially problematic buyers or specified entities is maintained and shared.

While not all of them are necessarily malicious, this monitoring system serves as a strong deterrence. Since misconduct leads to being listed, the number of inappropriate buyers has decreased dramatically over the past year. In fact, it may be safe to say that there has been no new problematic buyer since the list creation.

The industry is also establishing self-governance rules and promoting talent development. In addition, we aim to strengthen collaboration among industry, government and academia. Industries that are growing tend to have strong collaboration among these sectors. For example, in the medical field, the MHLW or the government sets direction, universities conduct various advanced research on iPS cells, cancer, et cetera, and private hospitals practice it.

The same applies to the automotive industry. However, in the M&A industry, collaboration among industry, government and academia had not been there until recently. Over the past 4 to 5 years, we have finally built solid cooperation with the government. Going forward, we also need to strengthen ties with academia.

As part of this, we supported the establishment of Small and Medium-sized M&A Research and Education Center at Kobe University. We have made a donation to the center and are actively involved in its research activities. We are also conducting joint research on corporate evaluation with Kyoto University. In addition, the M&A research group was established for the first time last April. It is an academic society.

Research on M&A is now becoming increasingly active. For example, at Kwansei Gakuin University, M&A has been designated as a priority research area. Similar activities are spreading across various institutions. As a company, we will continue to promote collaboration among industry, government and academia.

At the center of this effort is our CPA (sic) [ CPAO ] or Chief Public Affairs Officer. This initiative is led by Mr. Yokoi, a lawyer who also holds a doctoral degree. Thanks partially to his efforts, the industry has been undergoing significant transformation. Now the industry is completely changed. 3 to 4 years ago, many small boutique firms emerged one after another, sending large volumes of direct mails and making numerous phone calls to potential clients.

Unfortunately, many of them also placed phishing-style advertisements. For example, ads like "There is a company willing to buy yours for JPY 1 billion, please call us." In reality, they were soliciting clients using fictitious buyers. Since we must uphold high ethical standards, we were at a disadvantageous position compared to them.

However, customers have now grown tired of such practices. At the same time, inappropriate buyers have appeared and there is concern that engaging carelessly could lead to being introduced to such buyers and even forced into bankruptcies. We believe this is leading to an era where we are chosen more often than before.

We do not regard companies as mere commodities. A company is a place where many people form lasting bonds. For owners, the company is their life itself. And for employees, craftsmen and their families, it is an integral part of their lives. Therefore, our goal is not just to close deals, but to deliver truly successful M&A that everybody can feel good about.

With this focus, we receive retainer fees and enter into exclusive agreements. Afterwards, we provide various services such as closing ceremonies, creating biographies for selling owners and provide automatic insurance coverage. Through these services, we aim to become a truly chosen company, and we want to deliver the best M&A services across Japan. I apologize for speaking at length. Finally, we have prepared a video to help you better understand M&A. It's a short video of about 3 minutes. Please take a look.

[Presentation]

Thank you very much for watching. In the video earlier, you may have noticed that several people were holding a bird plush toy. You may also have seen the same bird flying across the screen. Its name is MAPY, a combination of M&A or MA and Happy. It's our company's mascot. Remaining matters to be reported are as stated in the slides and the notice of convocation. I will omit the detailed explanation. We sincerely ask for your continued support and encouragement going forward. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Good afternoon, everyone. 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 U.S. 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 are 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 April, we celebrated the 35th anniversary since our founding. Our company was founded in April 1991 and we got listed on the Mothers Section in October 2006 and we got listed on the First Section of the TSE 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 FY '21 and then after that; we've had introduction, development, change and conclusion. We experienced these 4 phases and through these 4 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 JPY 16.8 billion at the time of the accounting incident and that went down and after that, we had a growth from JPY 15.4 billion.

And on the fourth year, this time we've had JPY 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 JPY 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 FY '26, 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 corporate accounting incident. But after a recovery phase, finally we were able to end this fiscal year with growth in both sales and profit. Our sales ended at JPY 50.25 billion, up by 14% year-on-year and ordinary profit was JPY 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 midterm target.

And also our original performance achievement cycle of reaching the peak in December and spending the fourth quarter to prepare for the year after. We are recovering towards the cycle and I think that we had a good transition toward the new phase of regrowth. About the current fiscal year or the FY '26, the full year guidance of sales JPY 52.8 billion and ordinary profit of JPY 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 JPY 30 billion. 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 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 upcoming 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, JPY 29 per share of dividend is planned to be continued. Other reporting: Batonz is one of our equity-method affiliate. And this company, Batonz, on April 21 got listed on the Growth Segment or Section of the TSE. Compared to our offering price JPY 660, the opening price was JPY 1,674. Batonz has received huge expectation for future growth.

Let's start with a summary of FY '25. 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 receive 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 our 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 2/3. This improves the momentum as a 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 sell-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 sell-side 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 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 3 years. And we have been reflecting back on this that we should have done better and we are taking -- we have to take necessary action.

And about actual results: sales-wise we achieved 108.5% in sales compared to target and ordinary profit was 112.7%. And we achieved 49% of whole full 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 targets. 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 JPY 50.2 billion, up by 14%. The number of transactions closed was 1,061. This indicates 17 less transactions closed compared to the year before.

And JPY 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 deal. And about cost of sales JPY 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 a good news. And SG&A was JPY 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 JPY 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 sell-side 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 aim to have a rugged 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 sellers' annual sales of less than JPY 100 million, we started to shift these mandates to Batonz. 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 close 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 the 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 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 JPY 66.223 billion and that was the total assets. Line 3, the accounts receivable; a year ago it was JPY 2.633 billion as a balance. But this year March 2026, we had decreased down to JPY 808 million. So we completed the delivery and trying 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. Net assets was JPY 50.643 billion and so the percentage within the total liabilities and net assets is about 76.5%.

Next, about the number of employees. This is also another important KPI. As I mentioned, the number of headcount at the end of the year, the M&A consultants changed from 630 to 626. So it was a decrease and there was a need for us to take actions to address this drop. Especially for those who are within 3 years since joining the company, we see an increasing number of people leaving. And people who are with us for 3 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 talent not just having net increase. Well, 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 actions to address the situation. So the current fact, we haven't really improved the turnover rate for those employees less than 3 years with us and we weren't able to accomplish the target in net increase because of this situation.

So as a background: for the last 4 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 have 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 3 years with us, it was difficult for them to picture and align their own growth along with a 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 and 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. The budget for the employees with no more than 3 years of tenure, we have revised the budget and we also revised a follow-up framework for them and we are reinforcing recruitment activities.

So through these efforts, we will make sure to accomplish the net increases in the coming years along with the solid contents and results. And next, talking about the business performance forecast and the midterm management plan. Starting with guidance numbers. This year for fiscal 2026, the sales target is to be JPY 52.8 billion. 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 will be JPY 19.3 billion. 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 our original guidance tends to be conservative. First, we set out the sales forecast to be 5% increase from the year before. 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 ordinary profit margin could be slightly declining because we need to make some advance 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. So 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 the increase in ordinary profit. So that's why we want to make sure to outperform this forecast in sales first. In the midterm management plan so what we had announced in the past, this year we were looking at JPY 17 billion ordinary profit, but we came out to be JPY 19.1 billion so the 12% increase.

And the sales went up to JPY 50 billion from JPY 46 billion so it's up by 8%. The current year, we originally expected the ordinary profit to be JPY 18 billion. We want to bring it up to JPY 19.3 billion meaning up by 7%. The sales to be JPY 54 billion from JPY 50 billion, it would be up by 5% in our new guidance year-on-year. Since we had a pretty good result the 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.

Fiscal '26, this is actually the starting year of our second foundation, renewed growth. There are 2 parts within the second founding year. I became 74 years old this year so gradually -- I know I'm still good and healthy, but I am starting to think of the succession plan so we can gradually transfer the business over to next generation. Second, now it's been 35 years since we started this business. Things have changed a lot. There were no Internet 35 years ago. The mobile phones were started to be seen back then among the elite people.

But now AI has become quite common as a cautious nature and of course we're going to have to change our business model and that is the second founding year. So from the regional revitalization over to the renewal of Japan, then to be the #1 M&A company in the world. So we want to go over JPY 30 billion 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; 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 we will put our treasury stocks in a trust and for the target employees and senior management, we will grant the points to them. Once the targets are met, then we will provide the shares in line with the points provided. Regarding head office expansion, currently our sales team at head office are actually spread among 4 different floors. So we will consolidate them into 2 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 core value. 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 2 parts.

Vision starting with regional revitalization driving the renewal of Japan and ultimately becoming the world's #1 integrated M&A company. So we have clarified the vision. To realize this vision, we are talking about the core values to be a professional, utmost respect for clients and swing the pendulum in full. And if you swing the pendulum in full, 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 3 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, corporate business division. This is mainly for the sellers. So we will have a more detailed growth strategy for the selling businesses so we can implement a solid matching.

And thirdly, regional and industry strategy division. Right now there is no point on just sending out direct mails to anybody around there. So we need to focus on specific industry and specific regions and that's what they are doing here. And there are different size of businesses within this pyramid, large size and midsize and small sizes. And small businesses could be handled by our group company Batonz, but midsized business will be handled by M&A Center ourselves and for accomplishing further growth.

So the Capital Market division, we'll 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 midsized listed companies, then we'll make proposal to them as well. And Strategy division will be looking at the SaaS businesses, including various kinds of financial advisory businesses. JPY 29 dividend per share is planned to be kept. About 60% dividend payout ratio, we have promised this. So the exceed over this has declined from 7% to 6%, but our ROE has been hovering above 20%.

And there is no major change to shareholder mix. As a related business, Batonz is now listed on the Growth Market and our total core 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 holding company was established. So we have all the funds underneath this J-Capital and so this is again the second founding phase.

So now we are moving into the growth phase where we want to accomplish a huge leap and so we can make this fund business as the second pillar. Topics, let me skip topics section and let me talk about the industries. As you know, SME agency 2 years ago announced a skill map and based on the skill map, this collocation exam for small or SME M&A is announced and we now got more details about the exam. And it's going to be basically a national qualification system going forward and a company that that operation is being gathered and looked for and it's in a bidding process.

So this qualification is going to be a national qualification system. This is indeed a really good news for us, for our company, and it's going to contribute a lot to having a more sound industry. So the inappropriate buyer. So we have reinforced a lot to take measures against them and we have really -- we started to hear a little about those businesses and now we hear less and less about them on magazines and newspapers. But we can't [indiscernible] lower the situation, could be a possibility of start seeing some new methodologies. So we want to continue watching as an industry.

And as a leading business in this area, we are taking efforts to prevent those problems. And with the collaboration among the business industry, academic and government; we are reinforcing the situation. We are seeing the spread of understanding within academia and we are seeing a stronger level of understanding by them. And also basically M&A was actually picked as the major research area by the Kansai University. So M&A, this is a place where employees and families still form lasting bonds. So no failures allowed.

We have to accomplish the best M&A and we will consider this as the major pillar to support the business. Starting from management all the way through the compensation system, we need to have a solid backbone to support the business. So from the completed mandate over to the success. So we'll make sure to solidify the contract, then we also execute the proper PMI. Then the person or the buyer to be the legendary business owner. So making sure buyers will not be in trouble. We need to have a smooth PMI, then we will also provide automatic insurance at the same time for the representation of warranty insurance.

And we want to support the second life of the seller present so we can make everyone involved happy. Not just about completing the contract, we also want to accomplish the success in the course of M&A process. I know I exceeded the time a little bit. But for March 2026 year, we shared our financial results and the guidance for the year under review so far. And from this fiscal year, we are now back on to the growth trajectory. And through fiscal 2032, we have set major targets in Next Genesis. So we are starting the second founding phase and we are going back to the growth business. That's what we explained today. Thank you for your attention.

Thank you, President Miyake, for the presentation.

We will start Q&A session. We accept your questions through the chat function at the bottom of the screen. Due to time constraints, we may not be able to cover all of the questions we receive. While we wait for receiving your questions, we would like to start with some of the questions that we often receive from investors in our IR meetings so far.

First question about your initiatives about hiring and retaining M&A consultants. Please talk to us about the issues that you think you have now and how that initiative is progressing. Also, please talk about the net increase plan in M&A consultants going forward. This is indeed one of the FAQs.

In order for us to receive investments, investors should be interested in where we will be in 3 years' time or 5 years' time and that will be determined by how effective we will be able to secure our resource. And since this is an initiative that's right under the supervision of the President Takeuchi, I would like to hand over to him.

Sure. This is Takeuchi. Recent hiring status and retention of employees as well as issues and plans about having a net increase in the number of consultants. I feel that -- we feel the effect of what we've been implementing. Since this is a matter right under the supervision of myself, the President, I've been involved in the recruiting and when it comes to final interview, basically almost all the final interviews are covered by myself. So I leave the entire day of Fridays for the final interviews and also I make myself available on Saturdays as well to have final interviews.

And with personnel agents, I disclose my own address to them so they can have direct communication with me to shorten lead time. And in the final interview, I try to talk about the vision I have with my own words. And we have been selective in recruiting the good personnel. And for that, it's really effective that I do the final interview and I feel that it's been effective so far. And to talk about development of the personnel we have hired, General Manager of the sales division and group leaders face and names, I know all of them.

So I think that important point about improving retention is that we hire matching personnel. We hire people who share the same mission as our company's mission. So matching is really important to have good retention. And by myself doing the assignment, I think that we have made some improvement or major improvement rather. But to talk about an issue, I think it's not good that I continue to do this all by myself as President. So I always require an attendance of channel General Manager and also we try to record the final interview or to record interviews with the agreement of the candidate.

So we can leave data of why we decided to not hire the person or what the performance was after hiring, et cetera. So I believe that we've been making good initiatives in doing effective hiring and retention. And about the net increase plan, 10% net increase is the plan that we have under fiscal year 2026 and we are fully committed to this. But the 10% net increase is the plan, but what's important is to have 20% in growth and we also have to be ready for 10% of the resignation so the net increase is 10%. And in the current fiscal year or FY '26, our plan is to have 25% growth through recruitment, 15% designation, so net increase can be 10%.

But we want to narrow the gap and that leads to productivity improvement of the company. And I think that making sure that the newly hired people are highly attached, emotionally attached to our company, that's very important. And we would like to do all these things together at the same time.

Next question. So among your partners, due to the difference in the conditions, is there a risk for them to maybe shift a collaboration with other M&A supporting company? What do you think about this possibility?

Thank you for the question. Let me answer this question. We are receiving attacks. So other players in the market, they are basically not able to implement direct marketing. And because they made calls too much directly, they send e-mails too much so the customers are fed up with such a direct marketing. And from customer perspective, receiving direct mails from tens of different companies, they had no idea where to talk to. And actually that situation -- so basically 3 or 4, 5 companies could be sent out as a nondedicated company and through that trying to find a partnership and that's what we are starting to see among the regional banks and accounting firms.

But first, regarding financial institutions, I believe we will be able to protect our business pretty much all of them because having business through the financial institution isn't that easy. Of course they will collaborate with you, but whether they will actually refer you over to any projects or not will all depend on the long-lasting relationship. Also from top management all the way down to the people on the field, you need to have the trust relationship at every level. And with the regional banks, I also talk to the head of those regional banks and the executive of regional banks and have meetings and have dinners with them quite a lot.

So such a relationship that I built has been there since I was with the previous business. So I have such a quite long relationship with them. So it's not that easy for others to break this relationship. And we are doing a lot for their sake not really for their merit like a qualification system and also award system for them. So many things that we're doing for them so we should be able to protect. Accounting firms, I think you can get the business if you could actually get the intention of the accountants. If you bring good conditions, for example with M&A Center, we actually provide this is the ratio that you receive. But if you work with us, we can give more than that.

That's what happens and the accountants, they will go for the better deals. But the accounting firm, not many of them are actually quite business person because they have the philosophy to run their accounting firms. So they want to actually be of help to the mid- and small-sized businesses. They also want to protect the regional businesses. They have such a high philosophy to become the tax accountants or the basically accountant business, corporate accountants. And so a lot of them are like that. Of course it's not just a condition, but also we actually talk to them with the philosophy and mission-driven business is what we offer.

We always think of what's the best practice for the sake of clients. For clients, who will be the best choice for the clients. That's what we value the most. It's not for the purpose of making revenue for the accounting firm. If they will look for other partner, then that can actually be a conflict of interest for them. The top rank accountants and tax accountants qualification hate to see that conflict of the interest. They want to focus first what's best for the customer and we will be there to allow that to happen and to accomplish that philosophy.

Of course we may lose 1 or 2 deals from certain situation. There are about 1,500 accounting firms, those core accounting firms. We basically are protecting our business likely not to be attacked by the others or we're even expanding our network. The other day we held a major conference gathering a lot of accounting firms in March. I think it was on the 18th of March, we held a major conference called as Accountant Hour. 2,600 participants we had. So by executing these actions, we should be able to capture the accounting firms as well.

Next question. Is there going to be any impact on the business from the development of the generative AI? Please talk to us about the threats and possibilities or potentials that AI have?

Okay. I would like to take this question together with Mr. Takeuchi. I think that AI can be a huge potential for us. I am very excited about what AI can do for us. I think that almost 0 negative effect we may receive from AI. Because when it comes to generative AI, they -- when it comes to AI gathering generic data, we can use AI at the same condition as a boutique company that's run by a single person. But what's more effective is more specific individual information. And here we have 600 M&A consultants who visit our clients' office every day and they gather data.

And we have been building a huge database with the data and we can use the database. And when it comes to negotiation with our clients; sometimes we succeed, sometimes we have a breakup of the negotiations. But we built all the knowledge or all the experience in the database. And with AI, we can enhance the level of the database we have. We can also improve productivity with AI. So I feel that potential that AI has is unlimited. What do you think, Mr. Takeuchi?

I feel exactly the same way. AI is indeed a tailwind for our company. M&A is a theme that could be important, but it could be low when it comes to emergency level. And when it comes to AI, I think that it doesn't drive the final decision-making. It should be human who makes the final ultimate decision-making when it comes to M&A. That should be the way of using AI in our field. And what I think is important is to accumulate potential information as much as possible. And we've been building 7,000 companies' or 9,000 companies' data. And we also built the information that's in the brains of the company owners of such companies. And I think it's really important that we stay ahead in using AI with AI-driven measures.

Next question. Talking about the decrease in number of transactions closed. If you were to continue to focus on quality, I believe it's possible to see a continuous decline on the number of closed transactions. So is it -- what is the view how you can actually increase the number of closed transactions while focusing on quality?

Thank you for the question. Takeuchi-san, can you maybe answer this question as well?

Great question. I believe it is exactly true. But there are 2 points to the answer. First, of course we'll continue to focus on quality. How do we increase the number of closed transaction? Quite natural. Well, throughout the whole process, we just want to have to take 1 step forward in a solid manner. So there is a value promotion department who will improve -- who will go through the potential risks and identifying them and then if there is a bid, then how do we move forward the project. So we'll take more meticulous actions by analyzing the data and set up a rule.

So that way last year after we conclude the agreement and up to the closure, we were able to actually improve the ratio by 10% up to 80%. So that is one thing to improve the ratio of completion. For receiving mandate, I believe we kind of hit the bottom already right now. That's what I'm feeling. So the year before last year, we tried to focus on the volume of mandates. The market -- so if we take the mandates whatever they are, we just take them. And if we were to be successful in closing transactions of large enough like JPY 100 million or the revitalization project, then we'll be also responsible for the result and outcome.

So we just also need to be selective in choosing the right project and mandates. So instead of -- we are thinking of increasing the number of closed transactions in a V-shaped manner or the U-shaped manner. So we want to focus on the quality mandates, the quality project and then increase the number of completion by 10%. And that's what we want to accomplish as part of the vision in the second funding phase.

Next question. Could you share with us the number of negotiation open deals at the end of March 2026, the number of active pipeline projects?

About back orders or open sell-side mandates. In March last year, it was 2,200 and at the end of the last month, it was 2,500. So this is not the number of negotiations. Back orders was 113% of what it was a year ago. So we have a lot of ingredients for future negotiations. And the question we have received, the number of pipeline deals or pipeline projects, it's growing as well. The number of pipelines last fiscal year was 305 and it became 425 this time, a growth of 20%. Especially we have 425 that's during or in negotiation now. So we are going to close them in Q1 and Q2.

Next question. For March 2027 regarding the forecast, the guidance number, the operating profit is expected to increase by 3% year-on-year whereas net income is expected to grow by 7%, which is larger. So can you explain this growth?

So the fund business AtoG exit, extraordinary profit is going to be posted which is actually increasing the amount of net income. Naraki, anything else?

Yes, that is exactly the reason why we see bigger growth of net income.

Since there is no additional question, we would like to make the next question the final question for today. Please talk to us about your initiatives toward FY 2032.

This is indeed a very important theme for us. I would like first Mr. Takeuchi to take this question.

I am simply excited about what lies ahead of us. In the 4 years since the financial misconduct, we had a lot of learnings in the good sense. And the M&A industry itself is having a major turnaround period and we started to take actions ahead of others. And we've transformed our entire company. And our headquarter system improved with the establishment of the administration headquarter as well. So we can stop what we should stop and we can proceed what we should proceed. We think that we have really a strong base now. So we would like to achieve JPY 30 billion in ordinary profit in 7 years' time and we would like to make a huge leap under this Vision 300.

About 2032, I am really excited about where we will be. We have fully recovered from the misconduct. We have some relatively minor issues such as talent issue, et cetera. But in the huge sense I think that we have made a full recovery since the misconduct. So this fiscal year is going to be the first year of the second founding and we're going to once again put ourselves on the growth track for huge growth. And I indeed enjoy this process and the necessary strategy and tactics for us to get there. We have refined the strategy and tactics that are required. We have put a lot of time on preparing them.

And to employees, a new stock-based compensation system is planned to be introduced. And with that, investors, employees and our executives will be on the same boat with the introduction of this new system. And we would like to realize what we formulate under the vision partially with the system. And we would like to be able to have a huge jump in the next 30 years and 50 years even. So maybe consultation targeting listed companies can start in M&A. And in our overseas business, I think that we will be able to grow significantly.

And fund business is going to be developed into a second major business or second major pillar rather. We're going to expand our business this way without failure and we plan to have a huge jump in both sales and profit. Please look forward to the story we have ahead. Please enjoy our journey together with us. Thank you for staying with us till the end and thank you for taking your time out of your busy schedule.

Thank you for being with us till the end for the earnings session for the March 2026. Participants in Japan, participants in Asia, the U.S., Europe; we thank all of you indeed. And besides that, we've been focusing on IR and we will continue to do that so you can fully understand where we are. And we welcome one-on-one IR meetings. We would like to have enough communications with investors to expand our market cap and our corporate value. Thank you and please continue to support our company. Thank you indeed.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Good afternoon, ladies and gentlemen. Thank you very much for coming to our third quarter results briefing for the fiscal year ending March 2026. And today, we also have a simultaneous translation. So we are communicating all around the world. For those in Europe, it must be in early morning. For those from the U.S., but I bet you are in very late at night. Thank you very much for joining this call for those hours. So I am the President of the company. And also, we also have Naraki-san and Takeuchi-san with me.

I am the Vice President for the company. My name is Naraki.

And I am a Senior Managing Director. I am Takeuchi.

Okay. So let's get started. In 2026, we are having the 35th anniversary of the company. So we made the anniversary logo, which we put on the front page. The bird in the middle is a Mascot character. She is called MAppy, M and A and happy. And those 2 words were combined together to be named as MAppy.

And let me first start with the summary. In this Q3, showing the 9 months total and Q3 alone, basically, we recorded the highest sales and recurring profit ever, and we were able to surpass 40% for our recurring profit margin. For 9-month total, we accomplished JPY 37.7 million, which is increasing by 26.5% year-on-year. And the recurring profit went up by 46.8% to be JPY 15.7 billion. The OP margin was 41.7%, which is up by 5.8 percentage points. The number of transactions closed increased by 9.8% to be 810 deals and also M&A sales per transaction increased by 15.3% to accomplish JPY 45 million.

On a Q3 alone results was JPY 15.1 billion revenue, and that was a record high number, up by 34.6% year-on-year. And ordinary profit was JPY 7.1 billion, which increased by 51.5% and OP margin was 47.2%. And number of transactions closed was 322 deals, which are progressing pretty good. And M&A sales per transaction was JPY 45 million, maintained at a very high level.

So where are we at for the overall against the guidance numbers? I think that is important to note it. And for the sales, our target was JPY 46.3 billion. We are at JPY 37.7 billion, which is 81.5% progress. And ordinary profit against the forecast of JPY 17 billion, we are at 15.7% with 92.5% progress. And even more, we are quite pleased to see a very steady progress in returning back to our growth cycle. So M&A jobs, we do see many different conditions and situations, and we do see a lot of extension of the deals. So in Q4, March, if we were to trying to target at Q3 to accomplish the target, then we tend to see some delays into the next year. So we need to accomplish the certain business performance while satisfying customers. We will need to bring up the high performance as much as possible in Q3. So we can work on more preparation work in Q4, so we can have a rocket start for the next fiscal year and matching and also receiving a lot of commission work. And so that way, we can accomplish the stable growth.

And finally, I believe we were able to come back to such a business cycle, and that is the most pleasing information that I have for this time briefing results. And let me go one by one, a little bit more in detail on the sales of 37.7% -- sorry, JPY 37.7 billion. And of course, we saw increases both in the number of transactions closed and also the unit sales, and that helped to see a substantial increase in the sales. The best part was the number of consultants who accomplished budget. We saw a substantial increase in such a number, such members and also department who accomplished the budget increased drastically. At the same time, Takeuchi-san, who is the President of M&A Center, always talks about each individual will need to accomplish the target to be happy and also each department to accomplish the target to be happy.

And as a result, the company to accomplish the budget to be happy. So he is always pursuing to accomplish both the individual and the whole group. And such a policy and thinking is now being understood and spreading among the employment -- employees, and that was accomplished this time. And I think now we were able to build a very solid foundation to accomplish that. And the number of transactions closed. I think we were quite successful in implementing a very scientific approaches. It wasn't the result of a coincidence to increase the number of success rate and also on time closure of the deals, and we implemented 2 measures to accomplish them.

One, when we start the deal negotiation, we had -- we are now having kickoff meetings, both sellers and from the buyers, the person in charge and their managers and accountants, lawyers and tax accountants and all these professionals, they all got together to confirm the schedule. We also confirm the stakeholders, and we also confirm the challenges, which is more important. So we identified those challenges ahead of the project kickoff, and that is very important. And we are making a smooth flow in the deal procedure. We conducted an M&A audit. And if we were to find the challenges at the time, then that could actually cause a situation that people might wonder, maybe they were hiding this information or they were deceiving us. And such a concern will be rising.

So at the beginning of the whole deal, we need to assume what the challenges are so that way, both sellers and buyers can prepare themselves to be able to take action towards them. And that will actually increase the trust in us and also trust in between sellers and buyers, and that helps to have a smooth process going forward. The other thing is, and since this scandal we had, we actually increased the number of managers drastically. Of course, some of the -- a lot of managers are still not fully experienced, but we created a role for the deal management in place. So every Monday, we instructed them to give right instruction of the deals to their subordinates. So those are the 2 actions we implemented, which supported us to have such successful results, which were led by the President Takeuchi as well as the sales General Manager and their leadership actually worked quite well to permit this type of thinking among all the staff members to increase the number of transactions closed as well.

And we are also able to maintain a very high M&A sales per transaction. And as I've been talking in the past, we're not trying to grow the sales per transaction. That's not our main purpose. Our target is to maintain around JPY 40 million per deal. But as we grow the number of deals, the unit sales goes down. So to stop that, we basically trying to capture the mid-cap business deals as much as possible, and that was quite successful, and that's also sustaining good unit prices. And the number of large deal was 85 cases. We did see a huge increase, increased by 66%. So our volumes on the midsized deals are properly secured. And but also for small deals, actually, we passed those deals over to our affiliate companies, the companies by the equity method, the patents. We have patents to handle those smaller deals.

And I think that was also effective at the same time. And because of that, the percentage of smaller deals are now declining with us, and that is actually helping to see a stronger performance. That's how we understand right now.

And talking about the cost and expenses, I pass the floor over to Naraki-san.

On this page, so we are showing the cost of sales and SGA expenses. So those costs and SGAs for this year, starting from March 2026, we have changed the classification of human resources that actually changed some of the number changes. And so we are talking about comparison after the reclassification change. Then cost of sales was increased by 19.1% to be JPY 13.7 billion. SGA expenses was JPY 8.37 billion, increased by 7.7%. Referral fees ratio was 13.1%, increased by 0.9 percentage point. For the SGA expenses, the IT cost was JPY 848 million, and it increased by 46.7%.

And let me also touch on the overview of the expenses and numbers. This is the total income statement. And towards the top on the cost level in total as Line 3, JPY 13.725 billion, and it was 36.4% of the sales. Last year, it was 38.6% and this ratio went down year-on-year. And 2 lines down from here. the SGA and operational cost, so it was 22.5% with JPY 8.49 billion. It was 25.6% last year. So percentage reduced this year because of the sales increase. So as I mentioned, ordinary profit came out to be 41.7%. So now it's back in the 40s.

And next is talking about the commission status. So it's very important to understand how many that we are receiving as mandates. In total, we received 328 mandates, which is down by 3% year-on-year. Of that mid-cap mandates were the 58 deals, which is down by 10.8%. For the buy-side mandate was 383 mandates, which is down by 6.6%. And number of new transaction negotiations was 295 deals, which is down by 13.2% compared to last year. I will have more details to come later on. This is nothing really negative. Actually, in the first half last year, we did have a huge amount of mandates that we received. And based on that, we decided to focus on the business performance. We wanted to revive our business performance. That was the main purpose of this fiscal year.

So the number of transactions closed, and we try to focus also on the track record of the closed contracts. So we did not focus too much on receiving mandates in the first half. But second half, we will focus more on the quality of the mandates. And that was the policy we had in the second half. For those with no possibility of getting concluded, we try not to pursue to conclude them and close them. And so that is why the number is declining, but this is not because of a negative situation. So I hope you can understand this is still a result of positive effort, and this is the overall flow.

Mandates in the central area are in green. These are the mandates in the city areas. We've been acquiring city area mandates quite well and local area mandates are about 45% of the total. So revitalizing the local economy and also contributing to the central area I believe that we have a really good balance of achieving mission and achieving good results at the same time. And about the fourth quarter, when it comes to receiving mandates or matching, we will put in bigger efforts. So I believe that we will be able to have overall good performance in the whole year. And the summary of the status of acquiring mandates is this. These are detailed figures. So please take a look at this later. And about the number of new mandates we have acquired, we believe that we're not experiencing a deterioration. We think that we are in a transitional period.

About last year, we, as a company, were finally trying to be revitalized. So our focus back then was on acquiring more mandates. We were going after volume. However, since the start of this fiscal year, our focus is more on closing mandates and eliminating troubles. Therefore, when it comes to acquiring mandates, we've been refraining from the mandates with limited possibility of closing them after -- later on. And also, there can be inappropriate buyers. So really delegate projects that are close to renewal type of mandates, we've been cautious in receiving those mandates to improve customer satisfaction rate and also to improve our productivity. So we've been raising our productivity, and we've also been trying to improve customer satisfaction. And also, we plan to further improve the quality of the mandates we receive. And at the same time, we plan to improve the quality of our business and our service and the customer satisfaction level. This is going to be our direction.

And I would like to hand over to Naraki-san for summary.

Okay. About our balance sheet assets. JPY 60.011 billion. And below that, total net assets, JPY 48.257 billion. So ratio of this was 80.4%. And we have the same for the previous fiscal year on the right-hand side, JPY 47.5 billion in net assets. The ratio of net asset was 77%. So there is an increase by 3.4%. And about headcount, as I said, we had a reclassification of employees. So at the top of this table, we have the role for M&A consultants. These are the sales representatives belonging to the sales headquarter of Nihon M&A Center and the sales staff at local -- foreign local entities. And as I said, we've been doing effective hiring in M&A consultants. However, we have the increase in turnover of our employees with tenure of less than 3 years. So we've been implementing measures to improve retention of our employees. And we plan to provide more information about that later.

Next page, Page 14. This one is about our current fiscal year. This fiscal year, we've been showing numbers both as reported and both -- and also on a reclassified basis as well.

Thank you. About our headcount. We've been doing a lot of things. And headcount is the area -- the only area where we feel there's an issue, especially turnover ratio of the employees with tenure of no more than 3 years is declining or rather it's worsening this fiscal year. So we have already started taking measures to address this. However, we have a lead time, about half year's lead time until we start to benefit from these initiatives. So until then, we are going to continue root cause analysis, and we've been taking measures. And we have multiple issues, but the issue of the increase in the turnover of the people with tenure of less than 3 years, this is the largest issue we think we have in our company.

So we want to address this immediately. We want to reduce turnover. We want to have a net increase in sales representatives. Just having a net increase itself is not good because when there are a lot of turnover, that means that we have relatively beginners -- more beginners in the company that leads to lower productivity. So we have to reduce turnover while securing enough personnel. And we've been taking measures. So we think that we'll be able to have major improvement next fiscal year.

Next, let me touch on the shareholder returns. So for this fiscal year, we try to face the change in the external environment and trying to go back to the accomplishing cycle that we used to do in the past. So we intend to continue sustaining the dividend JPY 29 same year. So we had JPY 29 for March 2025. Therefore, for March '26, we intend to go with JPY 29 with no change from the beginning. In during the midterm plan period, the dividend payout ratio is to be 60% or higher. So we maintain this basic policy as well.

And next, the ROE trend. In 2024 March, we conducted share buybacks. And with that, we were able to get back on 20% -- and also March 2026, we expect to be at 22.9%. And next, shareholder situation and also the market cap trend. And shareholder mix is shown here. Individuals are decreasing. And now we see increases from institutional investors in this pie chart. Individuals showed 30.7%. And last year, a year ago, it was 33%, but it came down to 30.7%, down by 3.2 percentage points. For financial institutions, sales 30.2%. Last year, it was 25.1%. So it increased by 5.1 percentage points. The foreign investors -- foreign institutional investors was 28.9%. The last year, it was 30.4%. So it went down by 1.5%.

And next, talking about the forecast number, there is no change to our forecast numbers. We maintain the same number. And so we can move forward according to the guidance numbers. In a midterm target, there is no change in our midterm target. And of course, we will make sure to have an upside to the midterm target to be accomplished. So we ensure to accomplish them, and we will try to have as much upside as possible so we can lead to the next phase from there on.

And related activities. Currently, the other sales is about JPY 1.2 billion. This is only about 3.3% within total sales that's coming from fund business and PMI business. And so this is still a small business, and our intention is to grow this with other business. And also TOKYO PRO Market, we are making good progress. And this year, the number of IPOs were not that many. The listing to the market, it takes about 2 to 3 years for preparation. So those deals that came 3 years ago and 4 years ago are going to be IPO this year. With the scandal, right after the scandal, TPA commissioned project have decreased. So therefore, we see less IPOs this year, but we intend to accelerate the number of IPOs, and we do have enough backlog of the potential IPOs to come in, in the coming years.

The most important thing is the PMI. Both FSA and SME agencies, they say not just closing M&A. What they need is having a successful PMI activities as well. That's their direction. And we think that we are the only company in Japan who is doing M&A consulting, but is also doing PMI support activities. And the plan for this fiscal year is to receive 120 mandates, and we have already acquired 95 mandates. 120. We think that we're going to -- we'll exceed 120 this fiscal year. And we think that this is going to be a major differentiating factor going forward for our company. So we're going to do more aggressive sales activities. And at the same time, we would like to enrich our activities or enrich our support to customers, but we cannot do this on our own.

Therefore, we would like to do more collaborations of private, public and academia collaboration. And we have ASEAN-based local entities. And they have been working really well. they closed their financial years in December. And this fiscal year, they achieved their budget sufficiently. So from the next fiscal year, they are going to enter into the next stage of growth.

So I have been really counting on this overseas business, and I am excited to see the development of this business going forward. And about our fund business, its contribution in terms of profit may be limited. However, A2G Capital, J-Search and Japan Investment Fund, they are all going quite successfully, respectively. And about J-Search, they have already established companies in 4 locations, and they've been working together with local banks. And Japan Investment Fund, they have launched their second fund that's been working effectively. And roll-up activities are done, which are the add-ons of generating synergies with companies with good affinity after acquiring a company. And we have done 2 of such roll-ups this fiscal year at the Japan Investment Fund.

Topics. DX and AI usage, especially AI-based activities have expanded quite significantly. And Takeuchi-san has been talking about data-driven management. Bring out is a name of our analysis soft of conversations and discussions. With this AI-based software, we've been collecting a huge volume of various information that's used for our sales approach improvement. And we've been also accumulating customers' qualitative information. When it comes to quantitative information, we can accumulate the data by receiving financial documents. But when it comes to qualitative information, we have to do interviews to customers.

And just like in human marriage, qualitative information can be more important than quantitative information. This is the same in M&A. So when we get more qualitative information, eventually, we believe that we will be able to have more accurate AI-based auto matching. So activities that we've been doing based on DX and AI are -- have huge potentials, and we've been doing all of what we can do. And about seminars, we've been holding physical marketing, and we've been getting a lot of applications. We had 80% more applications compared to the same time last year for these kind of events and 2 major reasons. One is that our planning has been quite getting better. And the second is that customers' interest in M&A are growing. And in the next fiscal year, we would like to do such real marketing more actively. And we've been having successful area marketing activities as well.

For example, signage advertising that you often see at stations, railway stations, like you can find in the photo on this page, we've been doing advertising there. For example, in Tokyo, Osaka, Nagoya, Fukuoka, Hiroshima, Hokkaido, Okinawa as well. And it seems that we have one at Haneda Airport. I saw the video of our ad there. And also, we've been doing things that are based on the local communities. For example, local representative office with discussion desk. We now have one Yamaguchi, Niigata, Miyagi, Ibaraki, Shizoka and Yamaguchi finally. This is the fifth one that we have established.

Thanks to customers' support and thanks to our efforts. We are recognized by Guinness World Records for 5 consecutive years. The number of closures last year was 1,088. This was the highest in the world. We would like to use such track records and awards for our branding activities. And the next one is about integrated report that I hope everybody will read. We publish them or we have published them at the same time in Japanese version and English version. And we plan to do the same in the same manner this year as well. And this is not just about senior management thinking.

We have been including the dialogues and stories and thinking of the various people, including external directors, executive offices, et cetera. I hope that you will feel our culture and momentum. And about our industry trends, we are experiencing increasing the number of intermediary agencies and SME agency had the second revision of their guidelines and also introduction of qualification systems. So in such initiatives, they announced their skill map and qualification system committee was established and inappropriate buyers. We've been enhancing our activities to avoid getting involved by them at the M&A association. And also, we would like to be an exemplified or we would like to be a model in this industry. And our 3-party collaboration, tri-party collaboration, we've been doing that quite widely with University of Kobe, Kyoto, Waseda, Hitotsubashi, et cetera. We've been doing joint research with them. And also with Kwansei Gakuin University, we're going to do the same going forward. So we've been inviting many universities to do this.

So the company is not an object. It is a place where we create and look at the lives of many different people. It's not just completing all the contract to be closed, but we hope to be able to be successful in accomplishing the best M&A to make everyone involved to be happy. So in order to accomplish such a success and the best closure, we intend to implement various measures, as I mentioned.

So this is all for the results briefing. And now we want to move on to a Q&A session.

Thank you very much. So let's move on to the Q&A session. [Operator Instructions]. While we are waiting for your questions, first, we want to pick up some of the major questions that we received in our shareholder interviews in the Q&A session.

This is a question first. So regarding your initiatives to maintain high retention, is there any issue in your hiring policy and hiring environment?

Okay. Thank you for the question. This is the only challenge I am feeling the most and also the largest challenge that we are facing. And we are making a very detailed analysis and taking various actions. So we want to have Takeuchi-san to explain more details on this.

Thank you very much. Regarding the hiring environment, in the last time results briefing, so we are getting a good response in terms of receiving applications. But of course, we need to look at the conditions in market. So we have a close watch on the market situation. But currently, we are receiving good application, and we are selecting the right candidate. When it comes to hiring policy, so the turnover rate is on the rise. So -- what we did to address that for the past 6 months or 3 months, we try to understand the reason why they left the company and where they went. And what was the reason they decided to leave the company. So I myself went into more details to understand one by one.

And the major reason for leaving the company was that they had an expectation for M&A Center before joining the company. But after joining the company, they saw a huge gap against the ideal they had. That's what we found, let's say, they thought, okay, they could do more, they could work a lot and hard. But due to the compliance and the governance, it wasn't really giving enough flexibility to do a lot of work. And some people thought this was a large company, but why do we have to be bound by certain behavioral rules. So those gaps, we thought that they were in the different directions.

So basically, the major challenge was that in a final interview with those candidates, we needed to communicate our company core value to the full extent to them. So therefore, since February, every Friday, and I spent half day every week, I decided to be part of the final interview with a potential candidate, every interview. And we also had the channel General Manager as well. So in the final interview session, first, I'm trying to eliminate those gaps that they may have in the future. So that's why I'm now involved in a hiring process that we are able to improve the hiring situation. That is where we focus the most.

May I add one more? Yes, there is one more thing. This is the biggest challenge I'm facing right now. So the other thing is once they join the company, once they start working, and then those who decide to leave the company. Of course, if they are not able to perform fully during the first year, they tend to leave. And what is the definition of being successful? So I think the important thing is to have closing the deal within a year. So last year, also the year before and even this year, for those who joined the company for the past year and only 60% of those members have accomplished closing deals. So we first want to raise this percentage to 80%. For those members who accomplished the first closure, those 60 members are not leaving. But the remaining 40 are the ones who are leaving.

So that's why we are focused on increasing the number of success rate up to 80% during the first year. So as you can read on the slide, of course, I look at all the members, I see all the members through the hiring process interview. And then I myself will have an interactive communication with all the people so I can give them more confidence. And a year later, even with the channel General Manager, if they are having hard time getting closer, then we think about reassigning them to a different channel. So we want to show the value to those employees for the first year as a part of the flow. So we need to pay extra attention and proper care of those who joined -- who just recently joined the company and so we can develop their capability, and this will be led and adopt top-down manner.

Next question. M&A sales per deal has been trending at a high level. Is this a onetime trend? And how reproducible are mid-cap mandate-related initiatives? How do you see your current M&A sales per deal and the level you'd like to be in the future?

Thank you. I have always been talking about JPY 40 million as our target M&A sales per deal. Our social mission is to grow in volume so we can save as many companies as possible. When we have more volume, it's natural that, that sacrifices our M&A sales per deal. That means lower productivity. So we want to acquire mid-cap mandates, both them so we can maintain M&A sales per deal. This is what we've been trying to do as mid-cap measure. And this measure has been actually been more successful than we had anticipated. Fortunately or unfortunately, it's not really coming from the mid-cap mandates per se. It's rather coming from the fact that we have established a team of mid-cap dedicated consultants and targeting all sales representatives, these mid-cap -- we have established a system where they can educate and instruct about acquiring mid-cap mandates.

Actually, companies have only 2 ways of closing their business or getting acquired. These are the 2 only scenarios they have. However, with us, they have new options, for example, fund option and others or maybe handing over the business to their sons, owner, sons and so on, IPO possibly. So in order to convince customers, we need to create proposal documents and however, beginners are shy about those options. And we have established a consultant team that can make such proposal documents when they receive referrals about those mid-cap potential mandates. So this has been working effectively and leading to the improvement of our closure rate.

Things have been more smoother -- more smooth than we had anticipated. And of course, increase in M&A sales per deal is something that we welcome. But we want to maintain this. And the level that we would like to be is JPY 40 million, in my opinion, basically JPY 40 million. So maybe JPY 42 million, JPY 43 million should be enough as our M&A sales per deal. So when it comes to JPY 45 million or JPY 46 million, I think that's too good for us.

Next question. Could you tell us the number of the deals under negotiation, which are left open at the end of December?

Thank you for the question. So the number of deals under negotiation, currently, there are about 944 -- right now, 449 deals, 449 deals are under negotiation. and 295 are newly opened deals. I believe this is a pretty good condition. We are coming to the end of the fiscal year in March. We are able to have enough negotiation. We have secured enough pipelines, which are those deals under negotiation. And for the next year, to have a rocket start in Q1, we want to actually increase more of such a pipeline. So in Q4, in February and March, we will be working more on matching activities that is going to be quite important.

Next question, leading indicators that determine your business results from the next fiscal year. So the number of new negotiation starts and the number of consultants, these indicators are deteriorating for 2 consecutive quarters. Is there going to be any negative impact from this on the likelihood of exceeding your budget in the midterm plan?

I don't have a concern about this because our productivity is increasing and our closure rate has been growing solidly, meaning that we are more capable of doing effective management than before. And also, the quality of our pipeline mandates or pipeline projects are improving as well. So I do not have a concern or anxiety about not being able to exceed our budget under the midterm plan. And about the number of new negotiation starts, I think there is limited possibility of not being able to achieve this indicator target. And even so, the shortfall -- potential shortfall can be covered enough by good closure rate. And also the number of consultants, I have a major concern about that. So we're going to reduce turnover rate enough, and we will establish a system where new people can grow sufficiently. And at the same time, we want to do more recruitment so we can have net increase.

This cycle is something that we have been establishing in the recent 3 months. And we think that the level of success in this measure will impact the level of how much we can achieve our midterm guidance -- midterm plan targets. So we will do more about this.

Next question. Regarding the decrease in number of sell-side mandates, do you think SME agency policy is affecting because they encourage the regional banks to be the intermediary for M&As. So can you tell us the current status of the direct network ratio in the sell-side mandates? And what do you think is the forecast?

Regarding the first part, that is nothing to do with the situation. Actually, their policy is working on a positive way. The SME agency and FSA and they are talking regional banks to work on revitalizing regional economy and trying to accelerate M&As and also asking them to develop the businesses, which is making more than JPY 10 billion. And so regional banks are actually collaborating and working in tandem with us. So that's why the regional bank team in our company are going quite well so far. They're receiving a lot of mandates and having a lot of closures as well. So the decrease in number of sell-side mandate is because in the first half, as I mentioned earlier, so this year, we had -- this year will be almost a conclusion year coming out of the scandal. So it's going to be the year for recover from -- fully from the scandal 4 years ago.

So first, we wanted to focus on the number of closures and also the amount, the yen amount as well. And so that's where we focused on first half. And that was affecting the result in the first half. But second half, now we are focusing on improving quality of the mandates, and that's what's also putting some pressure on the number of mandates. And so that's also causing a slight decline. But there is no major impact by them. And rather, we see a much positive impact on our business with those policies by the governments. And so the ratio between direct and network, the network is increasing for the mandates.

And right now, in Q3 of fiscal '25, regarding sell-side mandates, in ratio-wise, 37% versus -- no, correction. 74% versus 26%. Network, 74% and 26% for direct. So ratio for network is increasing. And the network is increasing more. Of course, we need to increase the ratio -- direct ratio. But recently, pretty recently, direct market is exposed to very fierce competition. So, so many, too many boutiques out there in the market. And it's very difficult to obtain mandates. So that's why for network channels, we pretty much have an exclusive relationship, and we receive also the retainer fee as well from them. So we are receiving good revenue through the network. So that's where we can leverage on our strength.

Next question. About dividend, do you have a plan to change your dividend of paying JPY 29, including special dividend of JPY 6?

Thank you for the question. Of course, we have to make a decision to announce. So we cannot say anything definite on this occasion. But to share with you my thinking, we're not planning to cut dividends. At least when we are steadily growing and when our share price and our market cap are growing steadily, we would like to make sure that shareholders can enjoy capital gains. And until we go into that phase, we're not going to cut our dividends at least. So I would like our shareholders to be believed about the possibility of dividend cut.

Next question. And so regarding returning to your normal performance achievement cycle, how do you think its repeatability or continuity for next year onward? Takeuchi-san, can you answer this question?

We next year beyond, repeatability and continuity have such a cycle. So this year, we are looking at this progress. And the answer could be a little abstract, but I think the people in the field did great work. You don't misunderstand this -- my comment, but I think it was actually too good to be true, but still, we are making such a great progress so far. And we have taken every strategy measures that we are able to take in details. The important thing is not to rush too much. If you rush too much, if you just try to accelerate the performance, that can actually cause too much pressure or the burden on the field members. So we need to avoid that. We need to focus on completing good quality M&A.

And so the whole industry is focused more on safety and security and the responsibility accountability for the result. So we need to be seriously addressing that trend and what's been required by the society, and that will lead us over to a strong performance. So repeatability and continuity will be accomplished by pursuing this policy.

Next question. Your interim fee grew by 28% year-on-year. When does that lead to you receiving contingency fee or a success fee? If you go along with the flow that you were in, in the recent few years, I can assume that this level -- this increase in interim fee will lead to an increase in success fee in the next quarter. However, since your company seems to be able to get back to the customary cycle of achieving results earlier than planned, do you think that -- do you plan to carry this over to Q1 next fiscal year?

This is not something that we're going to make a decision about because for M&A, we need a buyer and a seller. These are our customers and they have their schedule. They have their conveniences and they have emotions as well. So timing is not something we adjust. They determine the timing of M&A closure. So in accordance with the normal cycle, we tend to close deals in the following quarter. However, unlike major M&A, like an M&A between listed companies, they actually make decisions at respective Board meetings. So there is no change basically. But when it comes to M&A among SMEs, there can be pretty natural doubts. There can be a half month or 1 month deferral of closure and also buyer can be involved in a sudden major trouble and President of the buyer may have to go on a business trip to foreign country.

So there are many cases where there is about a 1-month lag in closing deals. This can happen to us as well. There can be deals that can be closed smoothly by the end of this fiscal year. Takeuchi-san, what do you think?

I completely agree with what he has said. It's our customers who form and decide on market results. So of course, we pay attention to the expected results on a quarterly basis, but we pay attention to our customers. Our senior management will, at the same time, closely monitor our results. So I completely agree with what Miyake-san has said. Thank you.

Today, thank you very much for staying with us for a long time. We have explained our results for the third quarter, and we had a Q&A session as well. Thank you for staying with us till the end. And finally, from the appropriate incident, we experienced many things. And in FY '22, we had a shift to a compliance-based management, and we implemented many prevention measures. And in FY '23, we tried to be a more united company and a more cheerful company. And in FY '24, we received a huge volume of mandates in this fiscal year '25 is about recovering in our financial results and getting back to the primary customary cycle of achieving results.

This has been the direction of our company's management. And thanks to these efforts, we had a rocket start, really good start in Q1 this fiscal year. And we had an upward revision in the second quarter. And in the third quarter, I think that we had good enough results that matches with what we have been doing, and we are now almost back to the customary cycle and the level of enthusiasm among our employees is quite high. It's been rising. And of course, we have some issues, including an issue of higher turnover rate. There can be some potential issues. However, we are trying to be transparent to shareholders and investors and we've been discussing with them about our issues. And we will continue to do the same as our manager company going forward. And our Q4, the next briefing session will be the full year briefing session -- full year results briefing session. So our company will be united and make efforts and also acquiring mandates, so we will be able to have a rocket start next fiscal year. We will not ease up on our efforts for that.

Please continue to support us. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

[Audio Gap]

[Interpreted]

Sales stood at JPY 22.5 billion, and this was an increase year-on-year by 21.5%. Ordinary profit this time was JPY 8.1 billion, and this was up by 43.1%. And as a result, we released an upward revision on our forecast for the first half of October 23.

This page shows our progress compared to our whole-year forecast. And as you see, our sales and ordinary profit are almost 50% of our target for the whole year.

To talk about the breakdown of sales and so on, I would like to talk about the number of transactions closed and M&A sales per transaction. We closed 488 transactions, up by 7.5% year-on-year.

M&A sales transaction was JPY 44.6 million, and this was an increase of 12.6% and part of the factors that led to the increase in M&A sales per transaction is the number of large transactions closed, which was 46 this time, up by 58.6%

About the factors that have led to these results, we believe that the fact that we've ensured thorough project management from the start of negotiations through to closure worked well.

About the improvement in M&A sales per transaction, we believe that this is a result of providing a company-wide support system through a specialized department, which is the Growth Strategy Development Center.

Next page. I would also like to report on the cost of sales and SG&A. As we reported when we released our results for the first quarter, we have done a reclassification of what we record as cost of sales and what we record as SG&A, and this reclassification has been applied since the beginning of the current fiscal year.

As a result of the reclassification, the cost of sales declined by 943 million, while the same amount increased in the category of SG&A expenses for the first half of FY 2024.

In the first half, our cost of sales was 8.601 billion, and the cost of sales ratio was 38.1%. And at the same time, the previous year was 7.502 billion at 40.4%. And this indicates that, thanks to growth in sales and other factors, our cost-of-sales ratio declined.

Of the items included in the cost of sales, our referral fee and outsourcing expenses stood at JPY 3.2 billion this time, and the ratio of that out of sales was 14.2%.

Compared to that, the same time last year was JPY 2.562 billion at 13.8%. This indicates a slight increase in the ratio of referral fees out of sales.

About our SG&A expenses this time, they were JPY 5.586 billion at this time, at 24.7% out of the sales. And the same for the previous fiscal year was JPY 5.164 billion at 27.8%. So the SG&A expenses amount increased while the ratio of SG&A out of sales declined.

Summary of the stand-alone quarter of the second quarter. The summary is as we've written at the top, that the further benefits occurred from the implementation of policies for mid-cap companies, resulting in a significant increase in M&A sales production.

To talk about our leading indicators on the next page, about the number of our new sell-side mandates, this was 327, and this is a decrease of 15.9% year-on-year.

About the number of new buy-side mandates, that was 388, down by 4%. Below that, the number of new transaction negotiations was 297, down by 4.8%.

The reason why we have declined in the number of new mandates, be it sell side or buy side, is a result of our focus we put in Q1 and Q2 on growing sales and the number of transactions we closed.

Another factor that I should mention is that to increase the success rate of completing transactions, some sales channels became far structured in screening new mandate opportunities.

This means that out of the many more mandates that we could have accommodated, we decided to be more selective and decided to choose the mandates that we believe have a higher ratio, a higher likelihood of getting closed eventually. So we have to have a more thorough or more strict screening process.

However, in order to generate solid results in the second half and for the next fiscal year onward, it is necessary that we have a recovery in the new mandate numbers.

Therefore, we have launched a campaign that's active this month and the month after, especially targeting young employees or consultants with relatively limited tenure at our company. So they'll acquire more new mandates.

Please move on to Page 12. On the balance sheet, total assets stood at 60.520 billion, which was an increase compared to 10x last year. And our net assets this time were 48.341 billion.

This was an increase of 752 million compared to the end of the previous fiscal year.

The ratio of the net assets this time was 79.9% which was an increase of 2.9% compared to the end of the previous fiscal year.

I'll talk about headcount on the page after. In talking about headcount, we first would like to talk about the transition of our headcount in accordance with the new classification we've introduced from the first quarter of the current fiscal year.

Then on the right-hand side, we have a table of the different categories of our personnel. The top row says M&A consultants. This is a category that includes our sales representatives at Nihon M&A Center, as well as the sales representatives at our overseas local subsidiaries or local entities.

At the end of the second quarter, the number of M&A consultants that came into this category was 640, an increase of only 10 compared to the end of the previous fiscal year.

To share with you the breakdown of the net increase in people, during the first half of the fiscal year, 97 people joined our company.

However, there was a decrease of 87, which includes 73 people who left our company and 14 people who got classified into other areas because of department shuffling. And as a result, we had a net increase of 10 in M&A consultants.

There are people who come into the cost of sales category of M&A support. Who comes to the category of M&A support cost of sales, this includes people at their promotion headquarters, these are people, for example, who are lawyers or CPA, the M&A Deal Dedicated Professionals.

Other people who are included in the cost of sales of M&A support are Japan PMI consulting people, people at the TPM division, people at the Corporate Value Laboratory, and the Special People Association.

After the reclassification, other people's sites to be classified as SG&A expenses of M&A support. And this page shows our transition of headcount in accordance with the previous classification method.

So starting from the current fiscal year, or for the current fiscal year rather, we are releasing the headcount transition and the breakdown in accordance with the previous and the new reclassification or classification method.

Before I wrap up my presentation, I will talk about shareholder return and shareholder structure. There is no change to the dividend forecast we have for the current fiscal year.

We're still planning to pay JPY 29 per share for the current fiscal year, which is the same as the amount we paid in the previous fiscal year. And this is translated into our dividend payout ratio of 83.6%.

Our policy of dividend payout ratio of 60% or more will be continued during the midterm management plan period. And our ROE this time is planned to be 22.9% and our ROE has been progressing over 20%.

On the left-hand side of this page shows our share ownership structure. There was a bit of a change to the share ownership structure. The ratio of individuals or individual investors declined slightly, while the ratio of financial institutions and foreign institutions increased.

This is the end of the summary of our performance this time.

[Operator Instructions] [Interpreted] To translate the first question from the audience. This is about headcount. The number of consultants decreased in the first quarter.

Is this because there are many people who left your company with a tenure of less than 1 year? And what about the transition of the ratio of consultants with tenure of 3 years or longer? And what about the turnover rate this time?

Turnover rate in the second quarter was 18.7% and this 18.7% is a 2.5-point increase compared to the previous turnover rate of 16.2%.

About the type of people who have decided to leave our company or who have actually left our company, the main people are the people with limited tenure at our company.

As a result, relatively experienced consultants, the kind of consultants who have been with us for more than 3 years, are 45.3% of the total.

The same ratio in the second quarter last fiscal year was 40.2%. So the ratio increased by 5.1%. About the fact that we are having more inexperienced people leaving our company, we've been taking action.

The action is for our Miyake-san and Takeuchi-san to have periodical communication, bilateral communication with relatively new people at the points of 7 months after or 7 months after and 12 months after joining our company, through holding meetings such as one-on-one meetings and group meetings.

When 12 months pass and after a new employee joins our company, we decide to do a review of what to do with the employee, especially for the employees who have not been able to generate good results at that moment. And the options include assigning them to a more appropriate department and assigning more appropriate pauses.

Does anybody have additional question?

Since this is a very good opportunity, we welcome and appreciate your questions. But if there are no more questions, then we can close this session early.

We've one more question, so we continue. You have explained that the focus of the efforts up to the third quarter is on growing sales and not much on acquiring new mandates.

But do you believe that by acquiring more orders from the fourth quarter, you'll be able to convert them into your sales by the end of the next fiscal year?

When we started this fiscal year, we had to lower our budget, and that was the last thing that we could do. So we were desperate when we started out this fiscal year.

Accordingly, our focus was on growing sales and on closing as many transactions as possible. As a result, we started to gain bigger confidence from around the middle of the second quarter that we'll be able to close the second quarter or the first half in a very good state.

We are not waiting until the fourth quarter to start acquiring more mandates. We've already started to put a bigger focus on new mandates acquisition from August. And this is especially targeting the employees with tenure of no less than 3 years at our company, and targeting these people, we've launched a campaign to acquire at least 3 mandates starting from October, and we are making company-wide movements to acquire more mandates.

Therefore, we are hoping to have a new mandate number recovery from the third quarter.

Another factor that we should explain is that the way that we've been acquiring new mandates is completely different in nature compared to before, in the sense that, be it buy-side mandates or sell-side mandates, when we acquire new mandates, we decide which mandates to receive and which mandates to rather decline at our sales department and marketing department.

And the threshold has become tighter or more careful, and we are being more selective than before in choosing which mandates to receive.

At any rate, for the current fiscal year, we're going to strike an even better balance among creating good results for the current fiscal year in terms of sales and closing transactions, but also with creating pipelines, which will be converted into closures in the next fiscal year after.

The next question is, what's the likelihood of achieving the continued double-digit growth going forward, and the likelihood of achieving the forecast you have going forward?

We have an explanation of our midterm plan targets on Page 21 of the presentation material.

Of course, we are trying to achieve double-digit growth, but we have minimum must targets that we have to achieve, and they are on this page.

Our first focus is on making sure that we will be able to achieve at least 7% to even higher than 10% growth. And also, we will try to exceed these targets.

The next question. Even in the case of recovery in your financial performance, is it safe to assume that the company plans to continue to pay commemorative dividends and other sorts of dividends?

About this, we are going to consider this in our company going forward. It was in the previous fiscal year that we introduced dividends, and that was also at the time when we discontinued the policy of providing shareholder benefits.

The reason why we are keeping this dividend guidance for the current fiscal year as well is because we believe that we have not been able to contribute to shareholders in terms of income gain.

So, since we believe that we have not been able to sufficiently contribute to shareholders in terms of income gains, we are going to make a decision on whether or not we will continue to pay dividends or not.

In making the decision, we're going to take into consideration TSR or total shareholder return.

We welcome additional questions.

[Operator Instructions]

Since we are receiving no more questions, we're closing this session. And before we close this session, we have a comment from Mr. Naraki, and his comment is going to be on the timing delay that he mentioned at the end of the presentation briefing session yesterday.

This is a topic that the company receives questions about in every presentation briefing, basically. And in the second quarter, the amount of the project that experienced a time lag was worth JPY 150 million.

JPY 150 million is far less compared to JPY 560 million experienced in the second quarter last year. Although we have been making our deal progress more complex and complicated than before, including our screening process, we feel that in the second quarter, our sales representatives and consultants have become more mature.

And we believe that that's part of the reason why we had limited the amount of the project that we didn't get to close this time.

About the changes in the environment that the entire industry is facing, we believe that we have been taking the necessary and appropriate actions. So we would ask investors to count on us to deliver solid results in the second half as well.

Thank you very much for being with us through the end today.

[Interpreted] Hello, everyone. Today, we are holding a financial results briefing session for the first quarter of FY 2025. Thank you very much for joining this session. This session is broadcasted simultaneously to audiences in the entire world.

I believe it's midnight in the U.S., and it should be early in the morning in Europe. Thank you very much for joining this session despite the time difference.

Today, including myself, we have the Vice President and the CFO of the Holdings, Mr. Naraki. And also, we have the Senior Managing Director of the Holdings and the President of Nihon M&A Center, Mr. Takeuchi. So we have 3 members to explain our results. Could you introduce yourself?

Sure. I am Naraki. I am the Vice President and the Director of the Holdings. Thank you.

I am Takeuchi. I am the Senior Managing Director of the Holdings.

Thank you for the introduction. We have 3 members today. So we hope to provide brief explanations. We would also like to communicate how the atmosphere is, and we would also like to talk about our financial positions, and we hope to receive such questions.

To start with, we would like to talk about the summary of how we have performed. For the first half of FY 2025, both sales and ordinary profit performed strongly. This is indeed thanks to the network people and the shareholders' support.

We indeed thank all those who support. And as a result, on October 23, we announced an upward revision to the first-half earnings forecast.

Compared to the last year, we have had a significant increase in both revenue and profit, and we substantially exceeded the original earnings forecast.

Sales, JPY 22.5 billion, which is 21.5% higher year-on-year. And compared to our original forecast or compared to our forecast, our achievement rate is 112.4%, and ordinary profit was JPY 8.5 billion, which is up by 43.1% year-on-year. The achievement rate in ordinary profit is 126%.

Ordinary profit ratio, the margin was 37.9%, up by 5.7 points year-on-year. We think that these results are quite favorable. About sales, we attribute this to closing many transactions and the average sales per M&A.

Both of these factors improved, and that worked to improve sales. About ordinary profit, since we grew in sales, that was positive for ordinary profit. And at the same time, we optimized cost, and we also optimized the ratio of client-facing employees.

To talk about our performance in the first half, we think it's really important to compare the first half to the whole year forecast. At the bottom of this graph, in green, we indicate our full-year forecast.

The full-year forecast for the sales is JPY 46.3 billion. And compared to that, we've achieved 48.8% in the first half. And about ordinary profit, our whole year forecast is JPY 17 billion, and we've achieved 50.4% of that.

Therefore, in the second half, we're going to manage our company even more strongly. To break down how we did in the first half, sales, JPY 22.5 billion, were 21.5% higher year-on-year.

One of the reasons for this is the number of transactions closed, which was 488. This number was higher year-on-year by 7.5%. This was quite significant.

Also, M&A sales per transaction also improved, and that was JPY 44.6 million, and this figure was higher by 12.6% year-on-year. About the reason why we have a higher number of transactions closed, in the Nihon M&A Center, they employed quite successful tactics.

Improving the successful closing rate was the focus and the reason why they held kickoff meetings at the beginning of negotiations to talk about the schedule to make sure that all the stakeholders are on the same page, and also to identify potential issues in the process.

Relatively inexperienced consultants can handle projects well, thanks to these kinds of initiatives, and also sell-side owners, due to the issue of inappropriate buyers, they are more cautious than before.

Therefore, we have to present solutions to many issues earlier than previously. Otherwise, there are cases where we cannot close deals. And we think that we've been taking the right actions.

Also, about the improvement in M&A sales per transaction, we've established a specialized department receiving mid-cap mandates, and this is a supporting department.

This department gives suggestions to all departments. And thanks to their effort, we believe that we have received many mid-cap mandates quite successfully, and that contributed to the improvement in M&A sales per transaction.

About the small-scale deals, we've been introducing and referring them to Batonz. So there will be online handling of such cases. These factors were translated into a favorable ordinary profit.

Of course, we've paid attention to optimizing cost. Starting from this year, Naraki-san is Vice President and also CFO, and he's been paying attention from those positions to optimize costs. About our results in the first half, I would like to ask our CFO, Mr. Naraki, to explain.

Sure. Sales, cost of sales and ordinary profit, and SG&A, I think that we have explained quite a lot. But from the first quarter, as you see on the right-hand side, we have changed the classification of cost of sales and SG&A.

As a result, as you see on the right-hand side, about cost of sales, minus JPY 943 million, and SG&A increased by JPY 943 million in the first half of the previous fiscal year.

We used to include in the costs those that are not about our sales representatives. However, we've reclassified our personnel, so those people are now recorded as SG&A.

On to the next page, despite that kind of reclassification, to show you our income statement for the first half, if you look at the cost of sales, the third row from the top, we have JPY 8.6 billion in cost of sales this year. And this is 38.1% in the ratio.

Last year was JPY 7.5 billion in the first half. The cost of sales ratio in the first half of last year was 40.4%. This is partially thanks to our favorable sales progress. But we are having favorable sales progress, and we are also improving in the cost-of-sales ratio.

About the referral fees, this time, the referral fee and outsourcing expenses ratio was 14.2%, slightly higher than last year. If you pay attention to the SG&A, this time, 24.7% last year compared to 27.8% last year, the SG&A this time was JPY 5.5 billion compared to JPY 5.1 billion last year.

We've been reducing the ratio of the SG&A compared to the same time last year. 

Next is a summary. This is for mid-cap. We have been able to achieve results for mid-cap companies, and we have been able to achieve upside by far for M&N sales per transaction.

Looking at fiscal 2025 March, sales per transaction were JPY 47.6 million. And compared to last year, it was JPY 40.4 million. This is an increase of 17.7%.

M&A sales per transaction out of this, large transactions closed were 32. Last year, it was JPY 19. This is an increase of 68.4%, which is a significant increase. Thank you very much. 

Next, I would like to continue to talk about the leading indicators. First, looking at the number of new sell-side mandates, it was 327. Year-on-year, it was a decrease of around 16%.

Looking at the mid-cap mandate, it also decreased. And they have decreased. But I don't perceive this as something that's so negative. I believe there are 2 topics. 

One, in the first half of this fiscal year, we had to focus on performance. We had sufficient outstanding mandates, and therefore, we wanted to achieve results first. And this year should be a year to revive the performance.

We focused 100% on achieving performance. Therefore, we're not paying as much attention as we should have to new mandates. Therefore, for the second half and towards the next fiscal year, we would like to recover this. And therefore, we are not so worried.

The other topic is that we are relatively selective about the transactions, very small transactions, or poor performance companies. 

So, for companies that are hard to sell, we are selective because both companies will become unhappy if a transaction is closed. Having such mandates means harboring wrong expectations.

If the company is not sold, then our actions will be delayed and delayed, and that will cause unfortunate results. So M&A is difficult. We need to communicate that first. 

Also, for our side, when we receive mandates and accept mandates, we do matching appropriately, and we need to achieve results and close transactions. Otherwise, there will be so much burden on our work, and then we will fall into a loss-making business.

So for both companies, this is not favorable. Therefore, we are very selective. We have negotiations and discussions and receive mandates. And going forward, this trend will increase. That's what I expect. So we'll be narrowing down and focusing and being selective about mandates. 

For the companies that come to us to consult with us, we will not cause them trouble. We will be able to improve our productivity at the same time. This is what we would like to continue, but this is just something that we have just started, and there is such an impact.

This impact, I expect to become bigger going forward. And for mandates, we are not worried. For buy-side mandates, it's a slight decrease. It was 388, and it was a negative 4% year-on-year. As a result, a number of new transaction negotiations were 297. It was negative 5% year-on-year. 

I would like to use this diagram. This is a usual diagram, but it has been simplified a bit to make it easier to see. Looking at the new sell-side mandate, it has decreased by around 16%.

In the matching phase, new buy-side mandates show a slight decrease. In the negotiation phase, new transaction negotiations were roughly negative 5% year-on-year. 

However, looking at the bottom right of the slide, there is a lead time. We are doing great here. So, for the preparatory period, it used to take more than 90 days, but we have decided to reduce this to 60 days, and we have been able to achieve that.

Looking at the matching phase lead time, we would like to shorten this. We would like to start taking initiatives for this. This is something I always talk about. This is a number. So please refer to it by yourself. I would like to omit explaining this. 

From this point onwards, I would like to hand over to Mr. Naoki to talk about the balance sheet. 

About the balance sheet, please pay attention to the top half about the total assets at the end of the second half, JPY 60.5 billion we had in total assets.

At the end of the previous fiscal year, at the end of March 2025, this was JPY 61.7 billion. So there was a decline of JPY 1.2 billion. Compared to the end of the previous year, there are more outstanding payments, including incentives, and that's the reason why there is a decline in assets.

But we also would like you to pay attention to the latter half, the liabilities plus net assets. 

At the end of the second quarter, the total of net assets was JPY 48.3 billion compared to the end of the previous fiscal year. There was a positive JPY 752 million. So there was a 3% improvement in net assets.

To talk about the number of employees, headcount, as we've written, the recurring status of M&A consultants is quite favorable. However, there is an increase in turnover, especially among employees with tenure of no more than 3 years. So this remains our issue. 

On the right-hand side, we are presenting a new classification of our personnel, especially for M&A consultants at the end of the previous fiscal year. Compared to the end of the previous fiscal year, there was a net increase of 10 M&A consultants this time. 97 people joined our company during this period.

However, turnover or reshuffling of departments occurred, and there was a decline of 87 from that. And therefore, the net increase was 10. 

I would also like to talk about the new classification. According to the new classification, M&A consultants, as you see in the notes, are the pure sales representatives at Nihon M&A Center and the overseas local entities.

The next category, M&A support, they are the people who are recognized as our cost of sales, and they are the people at our value promotion department who the specialized CPA and so on. 

Also, we have Japan PMI Consulting, TPM division, and also corporate value laboratory and Special People Association, SPA, who do the valuation work who provide support.

These people are recorded as our cost of sales, and the remaining M&A support is recorded as SG&A. So once again, we reclassified our personnel, and that's been applied from the first quarter. 

On the next page, we are showing how we were according to the previous classification. We're making sure we show our personnel transition according to the former classification. And you can compare this with the new classification. 

Next, I'd like to talk about shareholder equity and shareholder breakdown. Looking at shareholder return contribution, we are providing dividends of JPY 29, including a special dividend of JPY 6.

We are going to continue this from last year. And as a result, the payout ratio for the fiscal year ending March 2026 is expected to be 83.6%.

Continuing on from last fiscal year, we are maintaining a high level. As described at the very bottom, during the midterm management plan period, we will continue with a dividend payout ratio of 60% or more. 

This is about ROE. As the chart shows, for the fiscal year ending March 2026, we are expecting to land at 22.9%, which is a 20% level. In March 2024, we have done a buyback of JPY 1.4 billion, JPY 14.9 billion, and we are going to be maintaining a 20% level.

This is about share ownership. The individual shareholders' ratio has declined, and the institutional investors' ratio has increased. In the pie chart at the right top, we have an individual ratio. It stands at 30.7%.

Compared to the last time, it decreased by 3.6%. Against that, looking at financial institutions, it stands at 32.2%, which is an increase of 3.6%. And for foreign institutions, 28.9%, which is a 0.9% increase compared to the last time. That is all from me. 

Thank you very much. And now we'd like to talk about the midterm management plan and others. This fiscal year, in terms of the forecast, compared to last fiscal year's forecast, we have lowered our forecast this fiscal year.

There are 2 objectives. One, we'd like to return to our customary cycle of attaining results targets. In the second quarter, we have been able to recover very much. And now we are going into the third quarter.

We'd like to make collective efforts as a company to achieve results. It's not that we will be able to fully recover in 1 year. But as much as possible, we would like to return to our customary cycle of attaining results targets.

We'd like to bring a peak in the Q3 and take pressure off in Q4 to be able to prepare for next fiscal year. So we'd like to return to such business management.

The second is to regain stakeholder confidence, especially employees, by reaching targets and gaining confidence. I think this is something that's extremely important.

In that sense, in Q2, we have been able to achieve good results. I do believe that many employees have regained confidence. Going into Q3, we'd like to accelerate this process. 

As a result, the midterm management plan, which was announced, we are aiming to achieve upside. We'd like to continue to achieve more and more.

First, sales, I believe, are the most important. And therefore, we'd like to generate sales. And this time, we have been able to make an upward revision with sales increase, and I'm very happy about this. As a result, profit, we will be achieving upside, and we would like to build such a structure. 

Since we are a holding company, we have other related businesses besides Nihon M&A Center. And about the updates on related activities, we believe that these kinds of relevant activities are starting to be more favorable. That is non-M&A sales ratio has been growing little by little.

To look at each item one by one, TOKYO PRO Market is quite successful. There are many J-Adviser companies, and of all the J-Adviser companies, we've been the top in supporting the largest number of TPM IPOs for 2 consecutive years.

We would like to generate star companies nationwide to contribute to local and national regeneration. Therefore, local banks and accounting firms have been supporting and cooperating with us. And we believe that that's part of the reason why we've got this result.

The PMI consulting business is the most important for us in this category. This business is really growing well. If we can have more people, we believe that this business can grow faster. 

SME agency established the PMI guidelines for SME, and the FSA also wants SME/M&A to be more active. So they've also revised their guidelines. And we've been doing the PMI consulting business from the early phase in the industry.

Therefore, we've been improving our track record of providing PMI from 66% to 93%. This year's target is quite high at 93%. But already in the first half, we've done 59%.

We hope to achieve this target this fiscal year. The new buy side, we would like all the new buy sides to receive PMI consulting service. That way, we believe that the transactions will be successful. 

About our overseas business, we feel that our overseas business is quite steady this year. And overseas business closed their fiscal year in December. So they finished the third quarter, and in the fourth quarter, we are expecting good results to come out.

Starting from this fiscal year, we believe that our overseas business will get back on the growth track. Our operation in Singapore is having its 10th anniversary.

Therefore, I visited 5 countries, and I would like to learn more about those operations. The fund business is also going quite well, be it the Japan Investment Fund or the search fund. We now have 3 search funds. And also, we have 2 in negotiation.

By the end of this fiscal year, we believe that we will be able to have 6 or 5, or 6 to be established. 

About our A2G capital, the preparation for exit is going on, as features, DX, digital transformation, and AI transformation, and full usage adoption of AI. This month, Salesforce, Dream Horse, we had around 4 people participate from our company.

In the past 3 years, we have been participating every year, and we are receiving great stimulation and direction as well. DX and AI, we'd like to continue to promote them. 

Seminars, we are making good progress as well. And number of participants compared to last year was totally different. There are so many participants. They are much more serious. And this is something that we observed.

Next year, we'd like to host much more enriched seminars to identify direct mandates and continue to hold seminars. For direct, it's a challenging situation right now.

The response rate is very low for direct. Therefore, we would like to do area marketing or industry marketing. This is what we're doing. And area marketing, regional marketing, we are very successful, especially in Ibaraki. It's very, very interesting.

We have a radio. We have our personality. And the personality, I'm talking about Miyagi [Suguru's] business management paradise, and we invite famous business management and top management, and we are building a network of business owners and managers.

We are starting to see success in some of the regions already. As for branding, Guinness, we have been recognized by Guinness World Records for 5 consecutive years. And we'd like to continue with this for the coming 5 years, 10 years, and more. 

We'd like to continue to make efforts and integrate the report. I think it's next week or the week after, they will be released both in Japanese and English at the same time. We are putting a lot of focus on this. 

I would like to ask the investors, you can choose Japanese or English. Please take a look at our integrated report. We have dedicated a lot of effort to this. And last of all, this is the industry trend. I have talked about this many times already.

M&A intermediaries are increasing. And against such a backdrop, morale is declining, or quality is declining. In order to discuss that, the SME agency will be revising the guidelines for the second time. Not only for the companies, individual players, M&A players, skills, how should they be?

A skill map has also been developed by SME agencies. The major trend will be from this year to next year. Based on the skill map, the qualification system may be launched. That's how I feel. This is something I perceive as positive.

Also, about inappropriate buyers, it's been talked about in the media. So, as an industry, we are taking quite strong actions. For example, creating the format of contract documents and creating a list of inappropriate buyers. These are the actions we're taking.

And of course, as a leading company, we would like to do even more, and we are doing even more than that. We should not be satisfied with being aware of these issues. We should fulfill our accountability.

However, just providing an explanation is not good enough. We should also leave results, good results, and we have to be responsible about delivering good results as well.

About delivering good results, it could be about releasing the personal guarantee, but that's not the whole. We want to make sure that everybody becomes happy in M&A.

The keyword here is a success. So success is the keyword for the responsibility we have. Therefore, we're going to, of course, take action on inappropriate buyers. And besides that, PMI representation, warranty insurance, and on other fronts, we're going to take more comprehensive measures.

Also, in the industry, academia, and government collaborations, we believe that we have to utilize such collaborations to take comprehensive measures. CPA or Chief Public Affairs Officer is Yokoi-san.

We've established this position, and he's been quite powerful. We feel that we've been receiving much guidance from him and also from the SME agency. And on the academia front, in April, the M&A research group was established as an academic society.

By enhancing our collaboration of trip parties of industry, government and academia, we would like to develop this industry into a more healthier one, more healthy one.

Last but not least, the company for the seller is the life of the seller itself. And there are employees working for that company. These people spend their lives at their company.

Therefore, it's important that everybody becomes happy through the M&A we support. We have to protect as many companies as possible. In that sense, we would like to deliver the optimum and the best M&A.

We would like to have the best transaction closure, and we would like to close as many as possible of such successful closures. And we hold impressive and emotional closing ceremonies, and we take the lead in the PMI activities.

Also, we support management in creating their autobiography. And we want to make sure that the buyers can manage the company with that confidence through the provision of representation and warranty insurance.

We would like to support the second life of the former seller through the NEX Navi. This is how we would like to achieve the M&A so that our customers can be satisfied with it.

This is the end of our presentation, and now we are going into the Q&A section.

Thank you very much for the presentation. Now we are going into the Q&A. We accept questions through the chat function. And due to time constraints, we may not be able to respond to all the questions.

Now we're going to start the Q&A part. We believe that you are still writing questions. So, based on the questions we have received in the past interviews, we have prepared some questions. So we would like to go through the questions we have received in advance.

The guideline was revised at the end of August last year. It's been a year since then. Are things settled down now, including the procedure of the internal procedures and the impact on productivity? And do you feel that the quality of the business has improved when you look at the entire industry?

I would like to provide a brief answer to this. And then, Takeuchi-san is going to provide his own experience.

I believe that the productivity issue is basically settled because it's a matter of how much time is spent and getting accustomed to it. About the business quality, I believe the business quality cannot improve suddenly. However, we feel that the employee morale has improved.

However, there is still a long way to go. Therefore, as a director and also as a leading company, we would like to continue to make efforts. However, at many boutique companies, they need to improve the quality of the business and their morale, their awareness.

About this, we feel that each management of the boutique companies now has better awareness and better morale. We have to make the entire industry an even better one, and that requires efforts on the side of each company.

This is the sense of awareness that the management of boutique companies now has, and that's how I feel. However, that does not directly lead to an immediate improvement in the quality of the business and the morale. Therefore, we would like to continue to do what we've been doing, including education and so on.

What do you think about the impact of the revision on productivity?

Okay. To talk about how things are at Nihon M&A Center about important contractual terms and about risk items at Nihon M&A Center, we've been explaining these already before the introduction of the revision.

However, with the revision, these contents are now documented, and now we have a format. And we've been introducing those revisions. But this is not a new thing to us. So we don't see any impact from the revision.

Rather, we believe that we now have better visibility, which is better for the awareness of the entire employees. So we believe that we have now become more lean compared to before. That's the atmosphere I feel in the company.

The next question. It seems like M&A consultants' retention has some issues. What are the factors? What are the countermeasures you're thinking of? Also, are there any issues with the recruiting environment? Have there been any changes in the attributes of the applicants?

This is a very important topic. First, I would like to answer. Looking at the hiring environment, it hasn't gotten worse.

Rather, looking at new graduates as of now, for the graduates who will be graduating in 2026, the Thinktank Research Consulting segment, we are #4 in terms of popularity.

Daiwa Research, Ain Consulting, Accenture. And then after that, we follow. And then Nomura and then Nomura Institute and Mitsubishi Research Institute. We are very popular.

Looking at this year's internship applications, we have received more than 6,000 applicants. It was close to 7,000 applicants. That's what I'm hearing. Therefore, our company remains to be very popular and very high.

Therefore, in terms of the environment, there are not many environments. But for mid-career, the reputation of the industry there is an issue with that. 3 to 4 years ago, the M&A industry had social missions and looked cool and good income, blue ocean; it used to be a very, very popular segment.

But there is a media report about inappropriate buyers. And there are many companies that are trying to generate so much money.

How is the morale, and how did such reputations start to emerge?

At around the same time, for example, consulting companies like Bakerrent, Accenture, and others, had hired people massively.

Nihon M&A's advantages, we are different. We need to communicate that to the mid-carriers market. We have come to an era where marketing is very important.

Against such a backdrop, we are taking measures. For example, I myself or Takeuchi-san, or Suzuki-san explained in the explanatory session ourselves and agents' explanatory sessions, we host them ourselves sometimes.

We are taking measures as such. And also referrals, we are focusing on this as well. Therefore, we do not have such a big concern. And the first part of the question about retention is an issue indeed.

Compared to last year, looking at the people who left, it has deteriorated slightly. There are 2 reasons, I believe. This is not always bad. What I mean is that the mode of the company is recovering to how it used to be, our company.

We are very particular about numbers. We want to grow. We are a growth-oriented company. This is because of 35 years of history, and this is exactly our DNA in the past 35 years.

However, in 2021, there was a scandal, and from 2022 to 2024, during these periods, there was low growth, a stagnation era for us. During this time, members who joined during this time with less than 3 years' tenure believe this is how the company is.

They believe this is the DNA, and this is the essence of our company. However, in 2025, we have moved on to a new chapter. We have a slogan to start growing again.

We are accelerating, and we are recovering to how we used to be. And then they are surprised. So in the past 2 to 3 years, these new joiners have become surprised. So they think what happened to this company? The atmosphere is different compared to before, and then they leave.

So this is what is happening. People who have been with us for less than 3 years are the ones who are leaving the most. And one point is that compared to our speed, we need to replace people who are slower compared to our pace.

This is something we capture as something that's positive. But misunderstanding and people who are really high performance, when they leave, that's a problem.

Therefore, from the second half, we'd like to follow up fully. For example, after 6 months of joining the company, Takeuchi-san, we call it key talk.

Any questions will be given to Takeuchi-san, and he will respond to all the questions, or even for the first-year joiners, we hold such sessions. And for the second year and third year joiners, I will be answering all the questions.

They can ask any questions. We will follow up very much in detail, and people who are passionate, who are high performance, we would like to make sure that we prevent them from leaving.

Takeuchi-san, would you like to add anything?

There might be some overlap. Simply said, for hiring, we have confidence. In mid-carriers in a year, 5,000 applications are sent to us.

We'd like to be selective and concentrate on talented people. For the M&A industry overall, there might be some concerns, but we are the biggest company in the industry.

This is a very big branding. And this is a very big advantage in terms of recruitment. I have very strong confidence about this. But on the other hand, looking at people who leave, this is a big challenge. We recognize this, especially in the past 2 years, people who left, we are plotting them.

Members who have joined us less than 3 years they account for 2/3, 66% of the people who leave. That about half are changing jobs to another industry.

Nihon M&A Center hires people who are not experienced, who are inexperienced in the M&A industry. We develop these talents to be able to do work in M&A. And they come from a different industry. And then within 3 years, they leave to go to work for another industry, which means in one word, they're not successful in hopping jobs.

So, as Miyake-san mentioned earlier, after 6 months of joining, this is a very big break point. The top players are the people we hire from different industries. And within 6 months, if they are not able to achieve performance, they lose confidence.

They start to feel that, oh, maybe I'm not good at this industry, so I should change. That's how I was myself. So after 6 months. So starting this month, every month, I will be having meetings with all the members to generate confidence.

Another point is 1 year later after joining. One of the major reasons why they changed jobs is that they like M&A. They like the M&A center very much.

But the department they're working at or the mission, they don't really match, or the sense of value does not match with the boss or the people they are working with.

So, 1 year after joining the channel, general managers will be taking the lead to hold matching meetings. We will have such thorough discussions. By introducing this from the second half of this year, the volume zone of the people who leave, these are the joiners within 3 years' time.

We need to take such measures and how a net increase expectation in the second half. So this means we can just increase the number of new hires, but this is a risk.

Of course, we can continue to hire more and more. But if we do that, then, of course, we need to develop these talents after hiring. 3 persons per department would be the right standard per department, I think.

As of now, there is a challenge because many people are leaving. And if we try to increase the number of new hires, then next year and the year after, there will be some impact on the development of such talents.

Therefore, we would like to maintain the hiring to achieve the target, plus 10% or so. And we'd like to stop people from leaving the top management, so we have to commit to that. I think this is something that we need to commit to right away. Therefore, we'd like to take measures.

Next question. You have kept your full-year forecast unchanged. Is there a lack of transparency or an issue with the second half forecast?

About our full-year forecast, that's not changed. That means things are going as planned, although slightly exceeding our initial plans. That's the reason why we've kept our full-year forecast unchanged.

If we are to accelerate our actual results, we're going to make timely disclosures. If we sense deterioration, we're going to disclose potential downward revision. However, to talk about how things are at the moment, I can only communicate the facts and how things are.

I am quite positive about the forecast for the second half because, first of all, of the pipeline results or the pipeline numbers, the number of negotiations we have, and also available for matching or the open sell-side mandates. These have been accumulated successfully. 

So, about December and March, we think that we have enough pipeline to generate good results. And this is a fact. Besides that, employees' motivation level we feel that this has improved quite a lot.

We believe that it's good enough to the level where I can report about this with strong confidence. We used to be at the bottom in 2022 or so, and we have improved step by step. 

And finally, we are united as a company. And that's the DNA we used to have as Nihon M&A Center that we are starting to see once again. In September, there was a strong momentum. And all our employees are quite enthusiastic. We didn't have to create this kind of momentum. 

In December, we have incentive travel planned based on the results for December. So, I believe that the employee momentum and enthusiasm are going to be strengthened further.

I hope to have a peak in December. About the lack of transparency or issue, I do not see that based on what I see in the front lines. 

Next question. M&A sales per transaction are improving substantially. Do you believe you will be able to maintain this high level in Q3 and onwards? Going forward, what is the level you are aiming for? 

Thank you for the question. I, myself, as holdings, it's not that we are aiming for such higher M&A sales per transaction. Rather, we'd like to maintain the M&A sales per transaction.

As we increase the number, the M&A sales per transaction decrease. In order to prevent that from happening, we'd like to make the pyramid overall larger, not just the bottom, because if the bottom part increases, only the M&A sales per transaction will decrease. 

And this time, the M&A sales per transaction are very good. The JPY 45 million, JPY 50 million, it's not that we are aiming for such numbers. We are aiming for JPY 40 million plus/minus alpha is good enough. That's my idea.

In terms of the number, the number multiplied by sales per transaction would be the performance. So, we'd like to maintain this level of M&A sales transactions. 

Takeuchi-san, how do you feel as the President of Nihon M&A Center? 

As for mid-cap, looking at the mandates from last year, this is increasing. Overall, mandates, we are selective. We are concentrating on loss-making companies.

We are not going to accept mandates. And in terms of sales, we are assuming that so high transaction price mandates are pulling up the overall, and the small amount of M&A sales per transaction is not dragging our feet. 

So, we'd like to increase the number of transactions. But rather than increasing the M&A sales per transaction, we'd like to maintain it. We'd like to maintain it at around the JPY 40 million level. And I think this is one of the key points. 

Next question. Can you share with us the number of negotiation open project at the end of September? 

Thank you for the question. We're checking this number. First of all, about the number of mandates, 2,360 an active contract we had in September.

In September 2024, compared to September back then, it was 1,960. So, the number increased by 10% or 20%. The number of mandates that are available for matching grew by 120%.

So, we believe that there are ample chances for negotiations. The mandates that have come into the pipeline compared to the same time last year is 102% at 420. 

The next question. Looking at new sell-side mandates, it's continuing to decline year-on-year. Both are decreasing directly and network. Are they seeing big decreases? 

Thank you for the question. There are 2 factors, as I mentioned earlier. Takeuchi-san, can you comment?

Thank you for the question. It is continuing to see a decrease year-on-year, both direct and network; they are decreasing at around the same rate.

However, I am not that worried about these mandates. We are very selective about this. And that, in the end, will lead to productivity improvement for everything. 

For example, loss or excess debt or getting mandates for small companies, then Nihon M&A Center will do value promotion, and the headquarters. And so, many members will be involved in this transaction, and that will decrease the productivity overall. 

So, there is an inappropriate buyer. And for the M&A industry, at Nihon M&A Center, we are looking at each of the transactions very much in detail. And if we receive mandates for companies that we cannot sell, that will hinder our productivity and worsen our productivity. And this is a different note compared to the question. 

Then what are we focusing on very much? 

I'd like to talk about this. For the sell-side mandate, close to 50% will be closed. And out of the remaining 50%, 25% will remain.

The remaining 25%, we stop the contract. This is a waste. And M&A industry inactive mandates are around 25%. So, we'd like to put more effort into inactive transactions.

This is where we are allocating the most resources. We'd like to improve the closing rate, and that will lead to an increase in sales, not just the new mandates. 

But then, after KPIs, we should be taking measures for this part. I think this is an inflection point. This is a paradigm shift. Things are changing very much right now. And we need to control to be able to achieve the midterm plan while taking measures here. This is what is required the most for us right now. 

When we achieve numbers, we'd like to report to you in the future.

Direct and network, looking at the ratio between the 2, last year first half, direct was 34%, referral was 66%. And now it's 38:62. So 35% to 65% is the rough ratio, 35% to 65%, plus/minus 2% to 3%. So direct is increasing just slightly. That is the current situation. 

Next question. Average M&A sales per deal increased. How many large transactions did you close? 

About large deals, the number that we've closed in the second quarter this year was 46 pairs. Q2 last year was 27. So, the number increased by 19 in pairs.

Next question. I'm hearing that the M&A loan screening is becoming stricter at financial institutions. Are there any impacts on the lead time? Are you taking any countermeasures? 

Yes, we are taking measures against this. Interest rate does exist nowadays and financial institutions.

But before, there were no interest rates hardly. And therefore, loans for M&As, they could get some interest, and it was very positive, and a quick screening was done before.

However, the CapEx loans, financial institutions are able to charge interest. Therefore, for M&A loans, the screening has become stricter, and it is taking a bit longer. And it does impact our lead time. 

But with our internal efforts, I do believe it's possible for us to shorten the lead time with a number of financial institutions. We had discussions. And also from financial institutions, we have experienced members who we have invited from financial institutions. And having them as a contact person, we are discussing how to shorten the lead time.

There are 2 processes in the screening. One is a collection of documents. The other is screening itself and the collection of documents; it does require some time, like registration or financial results have to be collected, and due diligence results are needed. And these are documents that we have internally.

Therefore, it's a loan package. We compile them as a loan package. And financial institutions no longer need to collect documents because we can already submit the documents.

So once the interview is done, they can start screening right away. And if we are well prepared, then financial institutions will be able to do the screening quickly. 

So screening can be accelerated. As such, we are making efforts to shorten the lead time. This is something we are already taking action on.

We need to apologize that, due to time constraints, the next question is going to be the final one that we're taking up today. 

About leading indicators on your presentation material, there's basically only talk about volume, and all of such volume figures are negative year-on-year. And you say that, that's the result of your selective screening. So you do not have a concern there. So I would like to ask how things are in leading indicators based on values, not in volume.

According to Tanshin, the intermediary fee is JPY 2.4 billion in the first half. Q2 alone was JPY 1.3 billion, which is up by 19% year-on-year. I believe that this figure is more meaningful as a leading indicator. Is my understanding correct? 

Thank you very much for pointing out a very important theme for us. As we've said, our leading indicators are going down. However, we've said that there are 2 themes behind this.

One is that we were fully focused on generating results in the first half. So in the second half, we're going to put a bigger focus on acquiring more mandates, and that's why we don't have much concern about these leading indicators. And we have a very strong capability in acquiring mandates.

Therefore, as long as we put enough focus on trying to acquire mandates, we are confident that we can acquire many. And this is based on our track record of 35 years' experience. 

Another theme is that we've been selective in acquiring mandates. About being selective, we're going to be even more selective going forward. Therefore, there is going to be a potential decline in the mandate volume.

However, we can, at the same time, expect an improvement in quality, and that will eliminate unnecessary processes in our company, which improves our productivity and eventually our overall performance. 

Therefore, when it comes to leading indicators, we may need investors to review our leading indicators from a different perspective than before. So we would like to consider what better KPIs we should be presenting, and we are considering exactly that. 

About value-based, we're not tracking value-based figures, or rather, we don't have the values that we can readily present to you immediately. However, I basically assume that the values change in line with the volume.

Therefore, at the moment, I believe it's safe to assume that, in terms of value as well, we have negative leading indicators, but we're going to recover this. 

About interim fees, thank you for pointing this out. This is a positive topic that we've been successfully closing on LOI. So, as a leading indicator, this intermediary fee can be considered to be the topic that will be converted into closure.

However, the success rate after closing LOI, I mean, since we've received intermediary fees and retainer fees from the sellers, we have enough information that's with.

Therefore, we believe that the successful closure rate is quite high. However, we cannot close all of the mandates we've received through this process.

However, the 19% increase in intermediary fee is very positive news, and we will do our best in schedule management to convert this into actual closure. And we're going to perform some checks in line based on the schedule. 

Thank you very much for being with us through the end of this session despite your busy schedule. We've talked about the first half results for the current fiscal year.

Before we wrap, from Mr. Naraki and Mr. Takeuchi, we're going to give a bit of comment to share with you the ambiance on the front lines. 

So, to talk about the topic that has not been covered today, there is usually a question about the time lag and about the time lag in the second quarter; we had a very limited time lag, one of the smallest in recent years.

We now have a more complex deal process compared to before, but our employees are taking the right actions and making the right communications. I believe that this can be considered as positive materials leading to positive results in the future. 

What about Mr. Takeuchi?

So thank you always for your time. As usual, it's the first time in 3 years that we have been able to make an upward revision this time.

I am very happy about this. And I feel a bit secure as well. Our employees are very happy about this, and they're very excited, and they are very much encouraged.

And based on this happiness, in the third quarter, we'd like to continue to do our best. Q3, Q4, we'd like to accelerate and promote our performance. And I ask for your continued support. Thank you very much.

In the first half, we have been able to come up with an upward revision. And towards December and for the full year, we'd like to leave this good momentum to be able to live up to your expectations.

We will continue to do our best. And I ask for your continued support. Thank you very much for your time today.