Nihon M&A Center Holdings Inc
TSE:2127
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
557.5
1 045.5
|
| Price Target |
|
We'll email you a reminder when the closing price reaches JPY.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Nihon M&A Center Holdings Inc
Earnings Call Analysis
Q2-2024 Analysis
Nihon M&A Center Holdings Inc
Company leadership, represented by President Suguru Miyake and Senior Managing Director Naraki, presented a detailed account of FY '23 second quarter results, expressing satisfaction with significant strides made in a variety of key performance areas. The company's declaration to connect hopes and dreams with the best M&A experience sets an ambitious tone.
Noteworthy is a robust 15.7% increase in the number of transactions, climbing to 266. Out of these, there was a whopping 137.5% increase in large-scale transactions. This aligns with the company's target of boosting revenue per transaction, which indeed saw a 19% increase. The result of these improvements is an upsurge in sales of 32.5% to JPY 10.9 billion, surpassing the forecast by 8.9%. This success was further buoyed by disciplined cost management, leading to a significant reduction in SG&A expenses and a stellar 172% leap in ordinary profit to JPY 4.4 billion.
A crucial highlight is the burgeoning ordinary profit margin, which now sits at 40% for the first half, rising from a previous 19.9%. With a particular emphasis on the nonconsolidated basis, ordinary profit recovery has been remarkable, clocking in at 40.9%.
Despite outstripping sales forecasts with JPY 19.171 billion in revenue, a year-over-year comparison indicates a slight shortfall of 4.6%. The company remains just shy of the previous year's JPY 20 billion mark. Nonetheless, the focus remains steadfast on increased efforts to bridge this gap and meet the full year's target. As sales on a nonconsolidated basis remained stable at JPY 10.9 billion, there's a tempered optimism in the company's trajectory.
While the number of transactions held steady compared to the prior year at 496, there was a minor dip in the second quarter by 1.5%. Encouragingly, cost of sales is on a recovery trend, and the second quarter witnessed a drop in the cost of sales ratio to 41.2%, down from 50% in the previous quarter.
The company has taken sizable steps in its digital transformation journey, with Salesforce playing a key role in centralizing data management and enhancing operational efficiency. Additionally, there is notable adoption of AI in improving matching between buyers and sellers, a testament to the company's commitment to leveraging technology. In fact, the company's proficiency in Salesforce has been recognized with a national championship win in the large company category.
A tough challenge the company faced — post-misconduct incident — is a rise in the turnover rate. However, determined efforts to rejuvenate the culture and build a more positive work environment are underway. This is part of a broader strategy to increase the consultant workforce to 700 by fiscal year-end, laying a robust foundation for future growth.
Governance strength is a significant vector of investor confidence. In Forbes Japan's latest governance ranking, the company secured 16th place, underpinned by having two external female directors and achieving a diverse board. This achievement aptly concludes the presentation, underlining the company's commitment to environmental, social, and corporate governance (ESG) principles.
Looking ahead, the company acknowledges challenges in fulfilling total sales guidance of JPY 24.8 billion, with an ordinary profit margin of 44% considered difficult to achieve. However, there is a plan to exceed sales targets and aim for a revised ordinary profit margin between 42% to 43%. This will involve accelerating sales initiatives, shortening lead times for mandate matching, and maintaining rigorous focus on client timelines, all aimed at improving the closure rate of transactions and ultimately boosting sales and margins.
You don't have any saved screeners yet
Again, good evening, everyone and welcome to our FY '23 second quarter earnings conference call. I am Miyake Suguru, President and Representative Director.
And I am Naraki, Senior Managing Director.
Thank you very much indeed for joining us today. So we have just -- we would like to give you the report on the first half of fiscal year '23. And of course, for this first half, our slogan was to connect hopes and dreams for the best M&A experience in Japan and then the world. Let me just give you the latest report on the results. In terms of the number of transactions, compared to the first quarter's result, it increased to 266 from 230, so it increased 15.7%. And of that 266, the large-scale transaction closed increased to 19 from 8 in the first quarter. It's up by 137.5%. Our target was to increase the revenues per transaction. So I think we could see some progress on that. And M&A sales was JPY 33 million, and it went up by 19% from JPY [ 33,000 ] (sic) [ 33 million ] in the first quarter. And as a result, the sales was from JPY 8.2 billion increased to JPY 10.9 billion, up by 32.5%.
And SG&A expenses, we have been working to reduce that. And we could reduce by 15% from JPY 2.4 billion to JPY 2 billion. And as a result, ordinary profit increased to JPY 4.4 billion from JPY 1.6 billion, up by 172%. Ordinary profit margin, we always want to keep this ordinary margin in the first half of 40%, and it increased and reached to 40% level from 19.9% in the first quarter. And as a nonconsolidated basis, we made a huge progress on the ordinary profit recovery to 40.9%.
And next is about sales. Sales was JPY 19.171 billion, and the forecast was JPY 17.6 billion. So it increased or the progress was 108.9%. So we exceeded expectation or forecast for which we appreciate for your support. However, of course, our raise is 40% in the first half and 60% in the latter half. And we reached JPY 20 billion in this last year, but this year, only JPY 19 billion, so minus 4.6%. So, so -- although we achieved the budget, but still, we are little behind compared to the previous year. And ordinary profit is compared to last year, it's only JPY 6.1 billion against JPY 7.9 billion of last year, minus 23.4%. So we would like to make more efforts to achieve the full year target.
And the number of transactions, this was exactly the same number after last year, 496. This is one of the most important KPIs for me. So I think we have to be pleased with this result of transactions closed. And this was the first half's results. And the second quarter's results, sales on the nonconsolidated basis, it was JPY 10.9 billion. Last year was JPY 11 billion. So it was almost the same, although it was negative 1%. And ordinary profit, the JPY 4.4 billion from JPY 4.3 billion of last year, so plus 1.7%. And transaction closed was a negative growth by 1.5%. Although this gap was very slight because it was 270 last year, and this year, only 266. So it's a slight difference.
And now let's take a look at the expenses. Now cost of sales itself is on its way for recovery -- oh, excuse me, let's take a look at this slide and it's still cost of goods at JPY 8.6 billion. So it is increased by 5.3% against the previous year. However, in the first quarter, JPY 4.1 billion, it was JPY 4.5 billion in the second quarter. However, the cost of sales decreased and first quarter was 50 -- Oh, I'm sorry, this was 50%. So cost of sales ratio was 50% in the first quarter, but it went down to 41.2% in the second quarter and referral fee ratio is also making a steady recovery.
And SG&A, we spent JPY 2.4 billion in the first half. However, we spent only JPY 2 billion in the second quarter. So I think we could make a focused way of spending our expenses. It decreased by JPY 370 million compared to the first quarter. And as a result, ordinary profit, we made a huge recovery in the second quarter from the JPY 1.6 billion JPY 4.4 billion compared to the first quarter. And then the ordinary profit ratio also increased from 19.9% in the first quarter to 40% to 40.9% in the second quarter. So I think we can make a steady -- slow but steady recovery.
This was about the second quarter. So let's see how we could develop in the third quarter and beyond. I think that is crucial point. So first off, the number of new transaction negotiation starts, it was 282 during these 3 months, and we call it a negotiation starts, and this is very steady growth. And in terms of the large mandates, [ inflow ] is also making a good progress, the one with more than JPY 100 million. It used to be 76 cases now, but we increased 100 cases. And of that, the one that with success fee of JPY 150 million and above increased to 54 cases from 26 cases. So it shows that steady increase of large-scale mandates. So we believe that the revenue per transaction will also go up in line with this trend. As a result, the M&A sales per transaction made a huge recovery from JPY 33 million to JPY 40 million. Through the year, usually, JPY 37 million is the feeling that we could achieve, but we already achieved JPY 40 million in the second quarter. That's a very big progress. And total number is 496, so it is the same. But if you look at the second quarter only, we increased by 4 cases from -- I'm sorry, we reduced by 4 cases from 270 of last year to 266 of this year's second quarter. We have to work hard on that.
And regarding balance sheet, there is no big change, significant change but we conducted a buyback for JPY 7 billion. So our treasury stock increased as much as possible, at the very best timing, we would like to take actions to return to shareholders. And in terms of the structure of the entire balance sheet, we believe that we are confident that a healthy balance sheet has been maintained. And this -- we will continue a very active recruitment. And in the second quarter, we didn't increase the number of consultants so much. But in the third quarter, we are going to -- we are having a lot of people in October.
Just recently, we did the training, and I participated in the training to mid-career onboarding training. It was about nearly 20 people. Everyone was very excellent, is very excellent and the training was very exciting. And we would like to recruit the consultants very actively. And at the same time, the -- as much as possible, we would like to control the number of new hires of support staff and administration internal audit office. So that the indirect and direct ratio will be more balanced, and we have more ratio of consultants, meaning customer-facing employees because our job is to face customers, and we -- our consultants needs a skill of sales. And so this direct and indirect ratio and not just about the cost, but also the number of employees have to be focused in terms of balance of direct and indirect ratio. So this is one of the big challenges and issues for us to address going forward.
In September, we closed our first half and I feel that the company has a very good atmosphere. Two years ago, we -- inconvenience to very much with our misconduct last year, we took actions to preventive such misconduct to change our DNA. So we shifted our management to compliance-oriented management. And we set our conduct policy and also introduced different initiatives to change our DNA or mindset. Of course, these initiatives are very important. But we have to have more positive and bright atmosphere because these initiatives are more defense measures. So this year, starting April, we decided to change the company atmosphere to be more brighter or more fun so that we can make our company to dream for the brighter future.
We introduced the system Talent Palette so that we can actually review the profile of hobbies and something good about of each employee has been databased. And we decided to have 100 club activities, including basketball, dog club or wine club. So we decided to create 100 clubs. Of course, based on universities they graduated or something else could be the basis for new clubs. And the first -- the most -- the biggest club is basketball team with about 125 members. And myself and Naraki are in the Orchestra music club with about 60 members.
So like this, our company atmosphere has become brighter. So on October 7, we did a sort of a company-wide townhall to penetrate corporate vision. We changed the venue instead of using the meeting room, we used this theater in Ginza. First of all, I looked back the 30 years of history when the company was established, I was the only staff in Osaka, and we started operation in Osaka. So I talked about that. And then reviewed 30 years and we grew as a company, but we had the misconduct and then we shifted our management into a more compliance-oriented management. So I talked about that. And then we talked about new vision.
Now the fund business has been on the right track, is growing very steadily. So I talked about many different new visions. And as a second establishment of the company, we have to have a mind that all of the employees have to have a mindset of company founder. So we did the penetration session of this vision in order to encourage employees' engagement. And at night on the day, we had a party to reinforce this decisions. And at this party, everybody seated according to the prefecture they love. And I am born -- I was born in Kobe in Hyogo Prefecture. So I was seated at the table of prefecture. And Asian Tigers, the baseball play team won the season. So the table was very excited and the members at the table was very excited.
And since of unity among employees is regarded as the first step for me. So as a foundation, we have to steadily and continually grow the company and market capitalization has to grow on a steady manner. That's my desire. So for that first step was to recover the unified workforce and we formulated corporate purpose and philosophy. And by doing this, we can improve the transactions closed.
And last fiscal year's fourth quarter, we already saw the recovery in transactions closed. And in the first quarter of this fiscal year, as well as in the second quarter, we saw a good progress of the transactions closed. Then the next step is the improvement of revenues per transaction. By doing that, we could improve sales. And in the second quarter, we already witnessed the good achievement in this step. Then we have to -- next step is to improve profit margin by reviewing expenses and having a balanced direct and indirect personnel and employees. And we have to -- of course, now we have a lot of levers, but we have to increase direct mandates. Otherwise, we keep having increased referral fee.
So those are the initiatives to improve margin. And the next initiative is to lower turnover rate as well as steady recruitment to create good employee base. And we also need regular sell-side mandate flow, sustainable flow. And we should not just get the mandates, but we have to shorten the lead time until they're emerging. And then by having accuracy or the most appropriate matching, we have to increase the conversion or closing rates. If we could do that, we could achieve or we could return to continuous growth track or sustainable growth. We are taking every step necessary for that. And while we are doing that, we would continue appealing to investors.
First, the shareholders' capital considerations. Their dividend has to be most appropriate and ideal for you. And we keep on looking at the possibilities and opportunities to share buyback. And of course, those initiatives have to be understood by the market. So we have to emphasize on IR activity. And we are conducting about 400 IR meetings per year. And in June, I visited the United States on overseas road show. And this year, in November, London, Edinburgh and Paris and the Switzerland are areas where I am going to visit and give a direct explanation about the business by myself. So having this cycle in a balanced manner, we can ensure the sustainable growth and we would be able to have higher valuation in the market. So the first step is to recover even further the sense of unity among employees.
On to dividend policy and shareholder breakdown, no major change since the last time. First of all, dividend per share it's going to be JPY 23 per share according to our plan this fiscal year. And as to buyback, we conducted buyback for JPY 7 billion already. And our total return to shareholders will be about 132% in our forecast. And we're going to make sure that we will pay out JPY 23 per share of dividend. And about the total dividend payment amount and dividend payout ratio, these two numbers have been going up steadily. So as to our shareholder returns, we think that we are making steady progress. And -- but we're not satisfied. We're going to improve our shareholder returns. So our shareholders will be able to take advantage of our good business results. And when you look at the trends of our market capitalization, this is not something satisfactory. And we are apologetic about this trend. And at the end of today, JPY 669.5, so this was up by about 3 points or so, but it is still low and JPY 220 billion is our market cap. Compared to our past performance, this is a low level we need to admit and price to equity ratio is 20% and a 4.9% for price-to-book ratio. So we need to improve these indices, and we're going to make efforts as senior management and we have already explained the scenario of how we're going to bring an improvement.
Now as to the ratio of individual investors, the number of shareholders in total exceeded 100,000. I believe that there are individual investors who are listening to this earnings release presentation. Thank you very much for having an interest in becoming our shareholders, and we are going to have steady management of our business so we can meet your expectations, and we would like to increase our market cap. However, the ratio of foreign investors is going down. It has gone down. And we sincerely think that we need to improve this foreign investor ratio because the ratio of foreign investors should increase, they tend to be long-term investors. So it's important to increase this ratio to increase our share price. So our Investor Relations activities will be important. We went to the U.S. in June once again. And partially thanks to these activities, we have got good feedback. Many investors are interested.
And we basically have about 8 meetings per day during IR roadshow, and we were able to fill all of those 8 slots, and that was not enough. Therefore, we had breakfast meeting. So we can meet more investors. What I want to say is that there are many investors who are highly interested in our business. And from the end, the latter half of November, I am going to Europe for another investor roadshow. And as of now, we already have almost all of our slots occupied with reservations already. And European investors have often come to Japan and have meetings with us. So it's our turn to physically go there to see our investors, and we are very much looking forward to seeing them. And we would like to bring as many good news as possible to them by the time that we physically visit Europe. In that way, we hope to maintain a stable shareholder composition and to improve our market cap.
Now onto our business forecast and midterm management goals, no change for now. On a full year basis, we are planning to increase in sales and profit. And the contribution ratio is 40% in the first half and 60% in the second half. Fortunately, as to our top line, we were able to exceed this forecast 40% contribution in first half. However, it's not the case for ordinary profit. Therefore, in the second half, we are going to grow our top line further. In that way, we believe that our ordinary profit ratio will increase. And we are going to secure a solid number of ordinary profit this way. And also, we're going to cut some expenses together with some other initiatives. There's a guideline that we published at the beginning, and we're going to make sure and we're going to take every measure to definitely achieve against the guideline.
We are on a recovery trend, but we do not have enough momentum to make a commitment. As to our midterm management goals of meeting JPY 30.5 billion ordinary profit in FY 2027, we still have this target. And to achieve this target, we need to resolve HR issues, recruiting issues, education issues, DX issues. We need to and we have been actively addressing these issues. And it will continue this year, next year, the year after, and we are confident that these initiatives will be successful. We have a strong conviction that these initiatives will be successful.
And about the progress of these initiatives, we would like to report result, the outcome of these initiatives as the time comes. And we cannot sit back and do nothing to be successful. That's what I feel. And these 3 are important. First, to recruit excellent people and also to educate the recruited people. And not just that, we need to do a digital transformation to transform our business. IT is not the objective of visual transformation. Breaking down our business to a very small unit and we're going to make sure that we can achieve optimal and maximum productivity for each of these detailed business unit. And human power alone is not enough to transform our business. That's why we use the power of digital.
In Japan, many people say DX, when they talk about digital translation -- digitalization, and we're going to do this. We're going to improve productivity, and we will reduce lead time through this digital transformation. About our personnel, we will do DX initiatives, but we know that the work that our employees are doing cannot be done just by DX because our employees may need to convince others and they may need to do enlightenment to others and help other people's dream come true. Therefore, from the layer of graduates, new recruits to selected new recruits, future leaders, management, senior executives, there are various layers, but including myself, from the members who are having the first month at our company to more higher level people. We're going to provide the maximum trainings in education and to the extent possible, we're going to make sure that our yielding returns are high enough so that our employees will stay at our company for as long as possible.
About improving attrition rate or turnover rate, this is a very important theme for us. Until the incident, we knew that the -- some employees left our companies, but the ratio was only 12% or 13%. The type of employees that we definitely did not want to leave our company basically stayed at our company. So then not many people left our company before incident. However, after the incident, some of the employees that we wanted to keep left our company as well. And little and relatively well experienced employees also left our company, and we need to sincerely accept this fact. And we have been making efforts to bring an improvement and also, we are going to turn ourselves into a more positive company, and we are taking many actions to do this. And I know that this is the most important part.
Now on to DX-related initiatives, I believe that we have come a long way around DX-related initiatives. We used Salesforce to centralize database management and data management. For example, in managing the M&A project progress and management of client information and also, we're creating a database for the strategy, for the buyers and we also manage the sales activities of our sales representatives using this Salesforce database. And this database based on Salesforce is almost completed, but just creating database is not enough. We need to make sure that this will be used.
And we have decided that all of our employees become professional in Salesforce, and we have introduced internal qualification system. The target is that all of our employees become able to, have done a full capability to use Salesforce. And we even held internal competition to foster improved business processes. So we have been doing a lot of Salesforce related activities. And as a result of such activities, we became #1 in Salesforce User National Championship in large company category. So we became the winner. We received a gold medal. And at the same time, we commissioned independent assessment of our digital transformation initiatives to a third party. And we recently got the result. So basing on the result, we're going to form more digital transformation-related project.
And then database, the database is growing every day. And using this database, we're going to use more and more of AI technology. At our company, we have been using AI to a good extent already. For example, we're using matching recommendation system for matching buyers and sellers. And also recently, we went to Salesforce headquarter in San Francisco and we held a discussion about our company's DX strategy with the executives at Salesforce in charge of AI. And the executives said that our initiatives are amazing. They said that in about 2 to 3 years' time, we will be able to achieve a significant level of transformation. So we gained confidence from the discussion with the Salesforce headquarter people. And I would like you to take a look at something interesting. I'll be away for a while.
[Presentation]
Now I'm going to take over here. Hello, everyone. I'm an AI-generated version of Suguru Miyake. Nice to meet you. Nihon M&A Center is actively working on improving productivity and enhancing business processes through digital transformation. In particular, database development and the utilization of AI are the areas that we are expecting the most. This year, we were honored to be invited to attend Dreamforce, one of the world's largest software events, as the last year's Japanese champion in the large enterprise category of Salesforce user group cap. By the way, this video was entirely generated using AI. This AI generated Suguru Miyake is much more fluent in English than I am in the real world. Our in-house teams created this video by having AI learn my facial features, expressions and voice. We look forward to sharing further productivity in [ Tier tubes ].
Thank you. I am back. Please continue to pay attention to our technologies and our usage of AI. Thank you. This video was created by our AI team. In the previous earnings release, we recorded our previous earnings release meeting, and that was learned by AI. The AI learned my face and voice and that began the basis for this video. And I spoke English. And my mouth moved exactly as if I say hello. So facial expression as well I believe that my -- the movement of my lips were exactly as if I was speaking in English, I don't speak English to this extent. So this English was much more wonderful than mine. But what I wanted to say is that the capability level of my AI team is already very high. So -- and we are not just playing with this type of technology. For our business process, we have various business process, but we have been using DX for each of these business process. For example, we use V Compass, M Compass, D Compass, et cetera.
Now let me touch upon related activities. Compared to M&A sales, other sales is still limited. However, the activity wise, it's been very activated. For example, online M&A support platform Batonz. First of all, user registrations number increased from 220,000 to 257,000 and a number of transactions in 6 months, it increased 1,290 from 3,739 to 5,036. So this is for -- to support the small companies with less than annual turnover of JPY 100 million. But actually, this accounts for 85% of the industry. So the market is huge, and we are trying to be a very good platform to support them. And the support for IPM business is also making a big, good progress. This is an assessment service, GO PUBLIC, before IPO, and we signed a contract with 82 companies and we have received a good mandates as well as the consignment work for IPO support. And also, there was a promotion from the TBO to the major market. We have supported 3 companies to do that to graduate from TPM to upper market, major market.
As to topics, we have been actively holding seminars. This fiscal year, we plan to hold seminars to accommodate 10,000 people. And we have been holding various seminars covering various themes at various areas. And already, in the first half, we received applications from as many as 6,500 people. And in the second half, we plan to -- we will like to hold something called Management Activation Forum in December, and we plan to invite many people to this event and areas and industries. These are like vertical and horizontal axis, but for area following Niigata, in Miyazaki we have just established local representative office with discussion desk. And TV commerce, TV commercial, newspaper, advertisement and highway advertisement, we have been taking a launch on a lot of advertisement to gain more mandates.
And also for industry, food and beverage, IT and housings are the areas of our special focus together with medical and hospitals, but we have formed a specialist teams to cover such industries. And also at the beginning, I mentioned the mid-cap mandate acquisition. We are increasing in the number of mid-cap mandates with relatively higher M&A sales per transaction. And I believe that this is thanks to our company-wide initiatives. We established Center for Growth Strategy Development, accounting firms, financial institutions, in other corporations and on other divisions, we have various divisions under sales headquarter. And these multi-divisions take care of mid-cap mandates working together. And they propose schemes, they create proposal documents and they provide matching related support across the company for a more efficient mandate acquisition and a more -- or rather -- and the higher likelihood of closing transactions.
And also we have seen some interesting progress in fund-related activities. For example, Search Fund. I know that the -- in the U.S., Search Fund has become very much popular. I know that there is no statistics because there are many activities there, but there are many new search funds in the U.S., and Search Fund has become a more popular as a form of business succession, and we have been focusing more and more on this area. And we just had our first portfolio exit. In March 2022, Ares company was acquired as business succession. And in October 2023, so in just 1.5 year's time, this Ares company, he had an exit to a company called GENDA.
We believe that this exit was a very efficient one, and buyer, GENDA says that they want to acquire the company together with searcher. And I believe that this was a very successful one. And on the right-hand side, you can see the name, Shikoku Railway Company. This used to be a nationally owned railway, however, the nationally owned railway was -- became a private company and became smaller by region and became -- one of them became Shikoku Railway Company. And for the past one year, we helped this company, Shikoku Railway Company do acquisition. However, to activate the entire Shikoku region that was not enough. So they have decided to establish a fund Shikoku Relationship fund. And this is thanks to our proposal.
JPE or Japan Private Equity is our affiliated company. This company became JP and Shikoku Railway Company made an investment to establish Shikoku Relationship Fund. And then another topic is winning Guinness World Record for the 3 consecutive years, and we are very happy about this news. About JPX, we were reselected as JPX-Nikkei 400 constituent once again. I know that there are many stock-related indices in the world. And we will continue to make efforts to be selected by more of these indices. And we want to provide a peace of mind to long investors in foreign countries. So this -- so there is less hesitance to buy our company shares. And we would like to end with the good news. There is a company Forbes Japan. And in the latest issue of Forbes Japan, New Good Company 100 ranking is listed. And we ranked in the governance ranking. We got 16th spot. Stakeholder capitalism, natural capital, human capital, governance, these are the 4 areas that they issue ranking. And in the governance ranking, we ranked in the governance action because we have, for example, 2 external female directors. And also, we have quite a big range in age among our directors. In this way, we have good level of diversity, and we have skill metrics. In this way, our company was highly appreciated in the governance. The first company -- the top companies recruit and they got 78 points and we have only 72.6%. So we would like to further improve to get better score and to improve our ranking. This is the end of our financial results presentation for the second quarter 2023.
Now we would like to move on to Q&A section. I know that this is a very precious opportunity. So we welcome your questions.
Thank you very much. Now we would like to move on to QA session. We take your questions through chat. However, we may not be able to cover every question we receive because of the time constrained. Thank you very much for your understanding. We prepared a list of questions that we always receive. So let's give you the answers to this. The question is that regarding the new head of departments as well as new group leaders. I believe that they have accustomed to the new work and management. So you have a robust structure in the third quarter and onwards.
Yes. Absolutely. In the first quarter, they were not used to day-to-day work. For example, their forecasts were not very accurate. Their forecast was not really accurate, and we couldn't really make the results in line with the forecast. And that was one example as well as the training of their subordinates as well as the management of their team members, were lenient. So one solution we took is that to send out the unified guideline to train these new members. And not just that, once every week, we introduced a breakfast coaching session. With new department heads, they come -- they spend about 1 hour and a half from 7:30 to 9:00, and then we listen -- the management listened to these people's comments and then give advice and suggestions. And I myself participate in this session.
So thanks to those efforts, the -- we finally see the more accurate forecast in the second quarter. So the forecast at the beginning of July and the forecast, which came out in August and then in September, and the results of -- at the end of September were more or less the same, didn't have a huge gap. So towards the third quarter, we can really push this momentum, and I am very confident in that.
The next question. The number of consultants decreased by 2 people on a quarterly basis, a quarter-over-quarter. Is it because it is more difficult to recruit people? Or is it because there were more levers than anticipated?
Naraki San can explain details, but I think this is a timing issue. The timing of when new people enter our company, et cetera. About the difficulty of recruitment, it is not more difficult than before. Because, fortunately, our industry of M&A in Japan is slightly newer than in the rest of the world. And we can say that our industry enjoys a very high level of population among job seekers. And I forgot the name of a particular company, but there's a ranking. And in the consulting section, I think that our company ranked #4 in some ranking whose name I forgot. And experienced employees and new graduates both apply -- I mean, a very significant number of people applying to our company from both of these sections. It's because for job seekers who want to do M&A, they first apply for our company. They want to learn at our company. They want to get solid result at our company to be more excellent M&A banker. And as to the movement of people or the number of people who left our company, Narak San can add more information.
This is Naraki. And about this slide, this question is the number of consultants declined by 2, then I do not understand. On the right-hand side, you can see the number of consultants at the end of the second quarter. And that's 648 and 622 is a number of consultants at the end of March, And at the end of Q1, 648. So it did not increase nor decrease quarter-on-quarter. So the number of consultants was actually flat. And we plan to be joined by 10 people or rather we were joined by 10 people on the 1st of October and also at the end of this fiscal year, about 600 consultants.
This is going to be the number of consultants that we are going to have 700 at the end of this fiscal year. So we see no issue. We have no concerns about the number of consultants and hiring activities.
Next question, please tell us the number of new hiring and the number of people who left the company during July to September. Again, Mr. Naraki will answer to that question.
So during July, September, so as I said earlier, so this is just as far as consultant number is concerned, 648, there was no change. And so to be more specific, [indiscernible] hired and also transferred, 29 people joined and unfortunately, the number of people who left was the same, so the number remain the same.
And other than that, according to this chart, you can see the support staff and the administrative staff and internal audit. There were some slight decline in the numbers.
Next question. Basing on the full year guidance, it is necessary that the company achieves JPY 24.8 billion sales in the second half, together with operating profit, JPY 10.9 billion and ordinary profit margin 44%. It is expected that expenses will grow in the second half with more and bigger incentive payment to consultant. So what is going to be the measure for you to achieve profit [ finance ] ?
Thank you for the question. For sales, it's JPY 24.8 billion that we need to achieve, but we will need to outperform this number, we think. And as the ordinary profit margin, 44%, we think that this may be difficult. I don't have a detailed number on my hand. But based on my gut feeling, I think that ordinary profit margin 42% to 43% would be the more appropriate target for us.
As to sales, we would like to exceed this number, JPY 24.8 billion mentioned. And to do it, we have been implementing very active sales-related initiatives. For example, for mandates received, there are sometimes needed until matching is done, and this is lead time. And we're going to reduce this lead time. In this way, we will be able to close transactions earlier than conventionally, let's say, before December or end of March.
It is necessary to shorten lead time, but we are going to maintain our focus on clients. And also, we will pay attention to the time line that customers have on their mind. And to do that, we're going to shorten the lead time until matching the time spent on waiting. In this way, we'll be able to shorten the entire time horizon, the time line. And this way, we are going to increase the number of transactions that can be closed by the end of December and March. And this way, we will increase sales. And we are hoping that this will lead to an improvement in ordinary profit margin.
But of course, we're going to actively do other things such as expense cutting.
Of that 298 of the new sell-side mandates in the second quarter, please tell us the ratio between direct and referral.
Thank you very much for the question. As in the second quarter of 2023, the 64% was through network and direct mandates was 36%. So about 2/3 came from the network. Just for your information. In the fiscal year 2021, FY '21, network accounted for 58% and direct mandates accounted for 42%. So 58% increased to 64%, and 42% went down to 36%.
So this is because a good progress on the side of network referrals, but -- and it is okay that we spend referral fee. However, we have to really have more revenues from direct mandates. But this was damaged due to the conduct misconduct, especially to the department who is working on mid-cap and direct sales. So we have to work on harder on this area.
The next question. First half tax rate exceeded 39%, I believe, and it's higher than the plan. If there is any potential swing factors that may raise this tax rate above 35% forecast, please let us know. Naraki-san will take this question.
Simply put, the factor would be, that the -- for foreign cross-border projects are slightly behind. So slightly lower performance in the foreign business department led to a loss-making, loss made there. Therefore, the tax rate is higher than planned at above 39%. However, we are going to have a recovery in the second half. So -- and we think that this more than 39% tax rate is the peak. And we believe that the actual tax rate is going to be around 35% by the end of this year.
For foreign business, we have a new officer who is in charge of this foreign business, and this officer said that the foreign business is quite in a good mode -- good mood. And we heard that the acceleration is expected in Q3, Q4. So I am relieved with this report.
Next question, regarding SG&A expenses. The -- it went down from the first quarter. Why is that? Mr. Naraki, please.
So the SGA expenses. Yes, this page is correct. So from the first quarter to the second quarter, it went down by about JPY 400 million. The biggest reason is the transportation cost as well as entertainment and internal meetings, I mean the entertainment sort of meeting were controlled. So not just to control the direct fees, we decided to suspend the unnecessary cost spending. And I think this effort was penetrated among the whole employees.
At this point of time, in this area, we made a very good effort and made a good progress, for example, TV commercials. When it comes to TV commercials, we asked the production companies to reduce the cost and also for our owned media, we introduced some devices to reduce expenses. And also, we reviewed sales activity. For example, those who have joined the company recently, and when they have to go remote areas to Kyushu Island or Hokkaido, this could be a waste of transportation expenses as well as their time because when you make a business trip, you have to have some sort of results. So we made a very thorough instructions on that part.
We used to be a more free -- company sales personnel were very flexible in terms of doing whatever the sales activities they thought was appropriate. But in order to reduce the waste. And of course, mid-career people are okay, but for the new hired people, we, for example, monitor their business trips to restrict their move to remote areas to cut back the expenses. And also for the entertainment expenses, we make sure that, that kind of entertainment would have a good result. So -- to, for example, include something surprising effect. And so by just having 1 or 2 entertainment occasions, we made sure that we can get certain results and outcomes. And so the people from administrative headquarters, they received a lot of complaints from sales headquarters, but they worked very thoroughly. I mean, the administration headquarters members worked very hard so that we can really spend our money in a most efficient manner.
The next question, please tell us about the SG&A level from Q3 onward. Naraki-san, I would like you to take this one.
Yes, we will stay on this page about this SG&A. In Q1, JPY 2.4 billion and JPY 2 billion in Q2. So total in first half, JPY 4.4 billion was spent and JPY 9.1 billion is the annual budget for SG&A. So we believe that we are exactly going in line with this budget. That's it. Thank you.
For budget we spend about 1/12 each month. And I know it was quite tough in the first half from -- because a 40% contribution in the first half for sales. However, in the second half, once we start to recognize more sales, in the second half, we think that the -- this level of spending -- with this level of spending, people will start to feel better.
Revenue per transaction in the second quarter is way higher than that of the first quarter. Maybe this is due to the delayed booking of sales from the first quarter. Is the lead time getting longer? If that's the case, what are the reasons for that?
Well, that's not the case. The lead time has not become longer because while making sure that customer satisfaction is met, we are working to shorten the lead time. Having said that, we started a process monitoring division to make sure that every step is taken. For example, skipping the audit of case should not be done because, of course, lead time could be shortened, but then the failure to conversion could be higher.
So for example, the basic agreement or LOI should be signed properly, has to be done. And just by making sure that every step is taken, we haven't seen any longer lead time. And also according to the -- this is my feeling, but even if we -- if I -- when I looked at the numbers, I received -- I made sure that there is no trend to have a longer lead time, I was reported from the Strategy Department.
The next question, please share with us the direct and referral transactions closed for second half -- for the second quarter, rather. Naraki-san, please answer this one.
To answer this question, Q2, the ratio of direct and referral is 39% versus 61%. And in the same time, previous year, direct was 40% and referral was 60%. So the ratio of referral increased by 1 point.
Next question. New transaction negotiations start was 282 in the second quarter, it declined from 292 in the first quarter. So is it possible to accelerate the sales in the third and fourth quarter? Or will it be at the same level as the second quarter?
Of course, if you take a look at the number of transactions, negotiation starts, yes, it went down by 2. But as much as possible for smaller mandates, we try to close them as much as fast as possible. So for example, those with less than JPY 100 million, we are now leading those companies to register at Batonz, our affiliated companies platform.
And by doing that, we can find more lucrative customers or potential -- high potential customers more. So in terms of the numbers, it's not growing so much, but the company is with like an annual turnover of JPY 80 million, decreasing for us. So in terms of the revenue per transaction is growing. So the number of transaction starts are not decreasing.
It's just that we are diverting some of the small mandates to Batonz. So that's why we see this number. And revenues per transaction is growing and the number of mid-cap transactions are increasing. So in the third and fourth quarter, I believe I'm confident that we can drive the speed of growth in sales.
The next question, please talk to us about the turnover ratio before -- and before the incident and the current one.
This is Naraki. About turnover -- employee turnover ratio. For pre-incident, I believe that's FY '21. For fiscal year 2021 -- or rather FY 2020, this is completely before incident. This is the year that ended in March 2021. Back then, turnover ratio was 11.8%. And during -- for FY 2021, 24%. And then 14.9% the following year. In this way, compared to the pre-incident time, turnover ratio has been somewhat higher. However, we believe that this turnover ratio has basically hit the ceiling. However, in 2018, we had 13.9% turnover ratio and 14% in 2019. And only in 2020, turnover ratio was 10.8%. And -- and '21 was 13.7% and then 14.9%.
So we have been hovering around 13% to 14%. So no major change since then. FY '21 was 13.7%. No major change in the mid to long term, but the content of this turnover employees have changed. After the incident, relatively middle layer employees and employees that we wanted to retain left our company. And we have introduced thorough measures for retention.
For other initiatives, we have been considering to introduce a new scheme. So mid-layer employees want to stay at our company more with a bigger sense of comfort. So when I take a look at the content of the employees who left our company, we have seen a clear deterioration, and we are taking actions.
The majority of the transactions closed so far is based on the mandates received up until the end of last fiscal year. So do you have enough pipeline to have a good progress in the profit in the latter half?
Well, this really in terms of the quality and the quantity of mandates, I have a confidence. And in the second quarter, yes, these are based on the mandates received last fiscal year. But for the full year basis, because the transaction value is increasing and the quality of each transaction has been improved. And furthermore, we are now focusing to shorten the lead time until the matching phase. So the mandates received in the first and second quarter with a high potential success fee.
Well, actually, in the these sort of types of mandates have started to increase in the fourth quarter last year. So I believe that those received in the first and second quarter, we are trying to really expedite the process so that we can book the revenues in the third quarter. So I think we confidence to make a recovery of profit in the third quarter.
But of course, we have to be really thorough in monitoring and the compliance because this kind of negotiation could stop and discontinue at any point. So we would like to create an organization that we would make sure that, that doesn't happen.
The next question. What was the biggest factor that led to a reduction in staff head count by 6 compared to Q1?
This is because to improve our ratio of client-facing employees, we have not been making progress around recruitment whenever there we made a reduction. And we are trying to be more creative, so we can continue to do the work without adding people.
For example, doing DX and reviewing the content of the work to reduce burden on existing employees. And also, we are trying to not increase the number of employees and such initiatives have been successful.
Anything else to add about this?
For this page, on the right-hand side, you can see the most recent number. We have 648 consultants, and the total number, total head count is 1,111. In this way, 53.8% for the top consultants. And then at the end of last year, I would say that there was 1% improvement in the number of client-facing employees. And we will continue to take actions to improve ratio of client-facing employees.
Next question. The number of large-scale transactions closed in the first quarter was 8, but how many were there in the second quarter?
The number of large-scale transactions closed, yes, it was 8 transactions. So more than JPY 100 million of a success fee is a large scale, and it increased to 19 transactions in the second quarter,19.
The next question. Isn't there going to be a negative impact from Q3 onwards from the increase -- the relatively large increase in the number of transactions closed and mandates in Q2?
So the number of transactions closed and new mandates in Q2 grew quarter-on-quarter. We don't think that there is a negative impact from this growth because we have rich pipeline. We have about 1,900 pipeline projects. So we don't see any potential negative impact. And for very small new mandates, we pass them over to Batonz. And also, we are seeing an increase in average revenue per transaction. So we only expect to improve.
Next question, because of the sales competition, don't you have any plan to change the pricing. For example, if you change the scheme to the -- based on the acquisition price, will your earnings deteriorate?
Well, we have conducted different simulations. But I don't think that any competition -- there is no fierce competition so far because we don't get beaten by the pricing in bid or in the competitions with competitors. Of course, the competition is getting fierce but the M&A market is huge. So we don't usually directly compete with others. And at the same time, each individual M&A intermediary company has different features. In our case, we take -- we receive retainer fees from both side, sellers and buyers. And we make sure that they are serious about the negotiation and then so that they can be prepared very well to starting start the negotiations. That's why the quality and satisfaction rates are high and closing rate and conversion rate is very high with us.
And I'm not saying this is one and only right method. I think it's okay to have a different way of doing this business. For example, some companies just have a lot of mandates in a very short period of time and like a high turnaround type. They don't receive any retain fee. They just keep receiving a lot of mandates, and they do a lot of matching. And if they don't work out, they don't care. But that's one of the business models. And I think that is -- that is okay.
But in our case, it's different. We believe that M&A is once-in-a-lifetime occasion and opportunity because sometimes the companies were built by the owner who spend almost whole life. And when the owner wants to sell his company, we are very committed to different aspects of M&A. So for example, the closing ceremony, we always make sure that the ceremony will be perfect. And we even take care of their second life. I mean the owners who sold the companies and so that they can really become the manager, a legendary manager of local companies. So therefore, I don't believe that there is any company who has exactly the same business model as ours. So while keeping a good quality of our service, we also would like to ensure our pricing.
But of course, we would like to be flexible. If the market and situation change, then we are willing to be flexible. One of the indicators and proves [indiscernible] Batonz, and we were the first company who introduced that kind of new platform, and we have no objection or ill feeling towards taking new initiatives.
The next question. The company conducted buyback in May. Is there a plan to conduct additional buyback?
We do not deny this possibility for an additional buyback. As I reported today, about shareholder return, we will continue to review our shareholder return program, about dividend payout ratio, for example, and also about dividend payment amount as well as buyback such as whether or not to conduct buyback, and if we decide to conduct buyback, when would be the most effective timing.
About these things, we always discuss. And depending on the need and timing, in addition to dividend payment, we would like to actively consider conducting additional buyback.
At the end of September, what is the number -- outstanding number of the sale side mandate?
About 1,900, and it was 1,880 at the end of June and it was -- at the end of March, it was 1,850. So it is growing from 1,850 to 1880 and 1900. So I mean, I don't see it as a huge problem to have decline about 50. And it is not declining. And content is good because the revenues per transaction is growing and the smaller mandates are diverted to Batonz. So with all these initiatives, I think the all-in all the situation is good and the number of these mandates is not declining.
The next question, the number of individual investors is -- or shareholders is increasing. Is there a plan to review shareholder hospitality program?
Every year, we have been reviewing our shareholder hospitality program or shareholder benefit program. We discussed what would be the most optimum form of the shareholder benefit. And there is some meaningful impact on our balance sheet and P&L. And also, we need to consider shareholder satisfaction, and there is some impact on shareholder from the shareholder benefit. So we consider all those factors. And every year, we consider the content of the shareholder benefit. Dividend payout ratio, dividend payment amount, buyback and shareholder hospitality program. About these factors, we always review for better program.
Next question. The support staff, which is the SG&A expenses, how long are you going to control the number? Any target?
Well, we do not have any deadline. We hire the people who we need, but the business grew very rapidly. So we had some unnecessary staff. And I don't mean to boast, of course, everybody is very enthusiastic and everybody is very passionate to work. And sometimes, we provided excessive quality or we had duplicate checking systems. So we saw some waste and unnecessary work, which tend to happen at large companies. So we decided to simplify such work and work processes. And for the areas where we do not need, we just discontinue the contract with the support staff and slow down the recruitment of support staff. And for me, the direct and indirect ratio is 55% versus 35%. So [indiscernible] facing customers should be 65%. I mean of course, 70% versus 30% will be ideal, but I don't know compliance governance have to be secured and labor management is another important factor. And in many aspects, the DX team is necessary. And we comprehensive M&A company. That is the -- our one and only feature in the world. And that could be a reason, that has been the reason why customers select us.
So we -- I'd like to increase the value as a comprehensive M&A companies. So in that regard, 70% versus 30% may not be good. So 65% versus 35% should be ideal. So first target is to make it 60% versus 40%.
The next question, what is different this Q3 and Q3 last year? How are things different? Last year's Q2 was very good, while in Q3, partially led by lower average transaction value, sales and profits were significantly lower than expectation?
Thank you for this question. We know that the results for December last fiscal year was below many people's expectations. And we're regretful about the Q3 results last year. And it's because of the lack of middle management. That's a big impact.
Last year, for many reasons or on many fronts, in Q1, we had to take actions to some employees, so they leave. And we experienced a significant decline in the number of middle manager -- middle management people. But we had pipeline all ready. So immediately after that, Q2, we were fine. However, in Q3, we suffered from a lack of middle managers. So our actual numbers were far off from forecast. And we were shortsighted and we tried to realize actual pipelines into results, basically focusing on small project.
However, the major change this time is the addition in the number of the middle managers and the development of the existing middle managers. And you can see from Q2 that they have been achieving forecast, with their capability of management and leadership, we are seeing an improvement. And in Q3 this year, we're planning to see further improvement.
So last year, we were declining. But this year, we are growing. This is a major change this time.
Next question. New mandates in the second quarter declined compared to same period last year. I understand that sales activity was not so active last year, but why there is no improvement compared to the last year?
Thank you for the question. This is our focus. As you pointed out last year. We slowed down sales activity, including direct mails, we checked all the direct mails and we reduced the number of direct mails in order to shift to compliance-oriented management. So we scrutinized our direct mails and reduced the number by 2/3 of the past. And we didn't hold seminars last year. So I have to admit that the impact was obvious in this year.
And also the -- we are still on the way to train new staff and direct mail and seminars were recovered to a certain extent in this year. Not just a simple recovery in terms of the numbers, but we introduced new initiatives to make these seminars and marketing to be more appropriate to the current market and direct team, the members of the direct team are developing. So we see a very good progress. So in terms of the number of new mandates, we are not worried. And it looks as if the number is declining. That is because the smaller mandates are transferred to Batonz because we believe that will be more customer-friendly. So they are excluded from this new mandates number.
So in reality, the number is not declining. It's rather is increasing, I think. So the actual situation is better than before.
Do you plan to do M&A for your further growth?
We always consider a potential for us to do M&A, and there are a lot of plans. For example, direct investment from our company into another company. We have been doing such investment from our company and also acquisition. From last year to this year, we have considered acquisition for multiple companies. And they were not realized, so we didn't get to acquire them.
However, we consider many options. And whenever we see an opportunity, we would love to do acquisition and merger. We are M&A -- comprehensive M&A company, and there are many points that we need to improve on. And as to M&A process, there are some processes that we need to further strengthen. And about M&A opportunity with which we can reinforce those areas, we would like to actively consider the potential.
Next question, how AI can contribute to the shorter lead time and productivity improvement? Please give us an example. Do you -- can you see the effect immediately? Or does it take to see the effect from AI?
There are several answers to that or examples to that. One is for -- during the pre-due diligence. So we -- something like that ChatGPT can be used very efficient manner to see a very early effect because in the past -- for the past 32 years, we have accumulated data in the database that is called knowledge database. The accountants and lawyers among our employees. So such knowledge compared to other competitors, we -- the database is huge in our company. So using something like a ChatGPT, we can conduct pre-due diligence to provide appropriate advice to the person in charge.
For example, for A industry, industry A, like a soil contamination could happen. Or in the industry B, like idle inventory could be left attended. Or in industry C, like window dressing accounting could be seen in such and such cases. So these analysis could be extracted from due diligence AI system. So the person in charge could pay attention to go through due diligence. So the pre-due diligence period is shortened and closing rate goes up.
And the -- when the definitive agreement is signed, the same thing happens. So from the results of the acquisition M&A analysis, then you have to formulate the letter of intent or the definitive agreement in a shorter period of time. Currently, the lawyers and scrutineers spent a lot of time to formulate these documents. But the first and second check could be conducted by AI, such as ChatGPT, that's our idea.
And the most important phase to use AI is the matching phase. It will take longer to really use AI in this phase because, of course, there are a lot of AI-like system. So we used to use AI-like systems for recommendation. Then there are other companies, many companies who use this kind of AI-like system. But to use a real AI requires the accumulation data as well as the establishment of logic. So the sales force in San Francisco, the AI Einstein's team, we had a discussion with the executive of that team. So they actually endorsed our way of using this matching system. And in the second generation, probably this system, our system would really be able to do the excellent matching, but it would take probably 2 or 3 more years to utilize genuine AI in matching.
We apologize, but we will need to close this meeting. So the next question will be the final question for today. Small and medium enterprise agency reviewed guidelines for M&A intermediation. How will this impact your company and your industry?
[indiscernible] on SME M&A guideline, we have been involved in the process to and revise it. So we understand the objective of this M&A guideline. And small and medium enterprise agency. Well, 2.45 million companies will have done an age of the President and exceeding the level considered to be senior. And we will need to save about 600,000 companies should be saved from such situation. according to their announcement. And this small and medium enterprise agency has announced various types of subsidies. For example, M&A fee or commission related subsidies that part of such commissions to be paid by the national government.
Another subsidy is that when capital investment is made by buyer, some tax benefit can be received. In this way, we see many introduction of new initiatives from the national government. And that has led to an increase in the number of new M&A boutiques who came into this market. The number of the companies registered to small and medium enterprise agency is almost 3,000 now. And of that, M&A boutique is about 600. There are 600 or so, but I believe that only 400 also are active M&A boutiques. And majority of 600, maybe 80% to 85% of them are within 2 to 3 years since founding and less than maybe 5 people in head count.
However, we do admit that some of those boutique type companies have high-level motivation. And they may have very experienced bankers.
However, there are other types of boutiques who just go after profit? So the picture is quite mixed. And sometimes there are issues around the contradictory profit and also fee-related troubles. So we see many troubles including the conflict of interest. And avoid such problems and stop this situation, small and medium enterprise agency reviewed the guideline to be stricter than previous guidelines. And I think that this is very important to restore this industry to be a more healthy level. Because this will impact the future of Japan, we'll need to see many companies, and that's the mission of M&A boutique.
And it is necessary that this industry becomes more healthy. And this is exactly why small and medium enterprise agency made their guidelines even stricter. And this is something that we should be welcoming. And there will be boutiques who will still be able to follow such guidelines. And some boutiques may be forced to revise the way they operate, et cetera, and some boutiques who cannot follow guidelines will need to stop their business. That will be the outcome.
And as to industry groups, we are going to keep a very close collaboration with this agency. So we will do even better than guidelines, and that's a voluntary guideline. So the plan is that the industry association will announce this voluntary industry guideline. I believe this will be announced soon. For our industry to grow in a healthy manner, there are some code of conduct necessary. For example, there are many exaggerating advertisement, et cetera, and also about the way that people work and about operations, some boutiques have many issues. So as an industry group or industry organization, it is necessary to introduce regulations to protect the industry. This is my view. Therefore, this change in the guideline for small and medium enterprise agency. This will be the basis for the healthy development of the industry. And this will only give a positive impact on our company and on our industry.
For companies who do inappropriate M&A intermediary services or some boutique companies, or some companies who plays ads that cannot be accepted socially, I believe that the guidelines will be stronger or rather stricter for such companies and operations. But we are confident that we already have satisfied all those sorts of guidelines. So there is no negative impact on our company. We should welcome this change. Industry, academia and government collaboration. We have good relations with academia, et cetera. And we even have the small- and medium-sized M&A center. And I have been giving guidance as a visiting professor or visiting scholar and also with University of [indiscernible], there is a plan to do a joint research.
As an industrial group, and also on the academia front and the government front, including the Ministry of Finance or [indiscernible] small and medium enterprise agency. With the collaboration among the 3, we are going to make efforts to make this industry more healthy. And in such environment, we will aim to deliver even higher growth. And we would like to ask for your guidance. And also through our investor relations activities, we often receive advice including some advice about how we look from external person's point of view, and we welcome such advice.
Thank you very much for staying with us. To understand the results of the Q2 this fiscal year, not just Japan, but U.S., Europe, we provided the content of today's presentation with simultaneous translation. Some people maybe listening to this presentation early in the morning or late at night. I believe that there are many investors who are listening late at night or early in the morning, but thank you very much, and we are going to close this session. Thank you.
[Statements in English on this transcript were spoken by an interpreter present on the live call]