CURVES HOLDINGS Co., Ltd. (7085) Earnings Call Transcript & Summary

Good morning, everyone. Thank you for taking the time off your busy schedules to view today's financial results presentation for the fiscal year ended August 31, 2024. Today's presentation will follow the order outlined in the presentation materials. We will be covering 4 agenda items today. First is the overall results summary. We registered JPY 35.46 billion in sales and JPY 5.45 billion in operating profit. CURVES HOLDINGS defines chain-wide sales as the total sales of the chain, including all franchisees and refers to the sum total of membership fees, dues income and merchandise sales income. Chain-wide sales stood at JPY 80.97 billion, of which JPY 58.91 billion comes from membership fees and dues income and JPY 22.06 billion from merchandise sales to members. In summary, we reached an all-time record high in terms of sales, operating profit, ordinary profit and chain-wide sales. The total member count stood at 817,000, which represents a net growth of 40,000 members compared to fiscal year 2023 results, while the total club count stood at 1,978, a net growth of 16 clubs during the same period. In light of this strong performance and as previously disclosed by the company, we have raised the annual dividend guidance from an initial forecast of JPY 12 per share to JPY 15 per share, which represents a dividend increase of JPY 3 per share. We already completed the distribution of a midterm dividend of JPY 6 per share. So we have now raised the year-end dividend guidance from JPY 6 per share to JPY 9 per share. This brings the expected consolidated payout ratio to 38.7%. Next are the results, details of the fiscal year ended August 2024 pertaining to the consolidated statement of income and the balance sheet. Allow me to go over the results details of the fiscal year ended August 2024. The consolidated statement of income for the August 2024 fiscal year is as follows: we registered JPY 35.465 billion in sales, up 18.1% from the comparable period last fiscal year; JPY 15.145 billion in gross profit, up 18.3%; JPY 5.458 billion in operating profit, up 41.7%; JPY 5.472 billion in ordinary profit, up 42.4%. And lastly, JPY 3.566 billion in net profit, up 39.8%. The operating profit ratio grew from 12.8% last fiscal year to 15.4% as we reached an all-time record high in terms of sales, operating profit and ordinary profit. Next, we compare the consolidated statement of income to the forecasts. In the fiscal year ended August 2024, we registered JPY 35.465 billion in sales, an overperformance of JPY 465 million versus the forecast. This was thanks to an increase in the number of members, which grew in line with the plan, going from 777,000 at the end of the August 2023 fiscal year to 817,000 as of the end of the August 2024 fiscal year. Additionally, revenue from merchandise sales exceeded the forecast. So this was another important factor. This increase in merchandise sales, in turn, was the result of strong sales of our new 2 products released in December 2023, Ultra Protein and Healthy Beauty. We registered JPY 5.458 billion in operating profit for an overperformance of JPY 358 million versus the forecasts. In addition to the aforementioned increase in sales, we took measures to counter rising raw material costs, thus allowing us to keep the cost of sales under control and achieve gross margins for merchandise to members in excess of the forecast. Investment in future developments for the company resulted in an increase in personnel and other expenses and thus in overall SG&A. Lastly, as previously disclosed, we allocated additional advertising expenses in the second half as we judged the timing to be opportune in light of growing membership numbers. It should be noted, however, that we had accounted for this increase in advertising spend in our forecasts, meaning we don't view this as unexpected. Next is a year-on-year comparison for the consolidated statement of income. Consolidated sales stood at JPY 35.46 billion, up JPY 5.44 billion on a year-on-year basis. This was primarily due to a net increase in total membership of 40,000 members from 777,000 at the end of the August 2023 fiscal year to 817,000 by the end of the August 2024 fiscal year. This net increase translated into an increase in royalty fee income received from franchisees as well as in merchandise sales to members, which went from JPY 17.48 billion last fiscal year to JPY 22.21 billion, a year-on-year increase of JPY 4.7 billion. This increase was primarily the result of strong sales of our new 2 products released in December 2023, Ultra Protein and Healthy Beauty. Consolidated operating profit during the period under review grew by JPY 1.6 billion on a year-on-year basis and reached JPY 5.45 billion. The operating profit ratio improved by 2.6 percentage points during the period under review, rising from 12.8% to 15.4%. The main factor behind this increase in operating profit are as listed here on Page 9. On Page 10, we have prepared an overview of the consolidated statement of income for the 3-month period corresponding to the fourth quarter compared to the preceding quarter and the fourth quarter last fiscal year. We welcome you to review these figures at your convenience later on. We have also prepared an overview of the original performance for the current consolidated fiscal year, including comparisons with the same period last year and the fourth quarter results. We welcome you to review these figures at your convenience later on. I would now like to go over the composition of sales for the Domestic segment. In broad strokes, income at CURVES HOLDINGS is divided into 2 types. The first is spot income consisting of onetime incomes from new club openings and from the renewal of franchise agreements. The second type of income is base income, which consists of ongoing incomes associated with the number of clubs and members. Base income contains 2 important income pillars, the first one being income from royalty fees and membership administrative fees, et cetera, received from franchisees and this income is almost entirely correlated to the number of members. The second pillar is merchandise sales to members. These are direct sales by the CURVES Group to club members whom we position as the end users of our services and to which we offer a variety of products. We, therefore, required merchandise sales to members under base income. More specifically, the CURVES Group carries out the direct sale of these products to club members and then we pay a fee, which we record as a cost on our end to the club where the sale originated. Next is the breakdown of sales for the consolidated fiscal year ended August 2024. Base income grew by JPY 5.349 billion to JPY 34.195 billion. Looking within base income, income from royalties, et cetera, grew by JPY 427 million to JPY 6.946 billion, while merchandise sales to members grew by JPY 4.722 billion to JPY 22.21 billion. We believe many of you are already familiar with this information, but allow me to guide you through the differences in the way we record sales for membership fees and dues income as royalty income and merchandise sales to members. The pie chart on the left shows the breakdown of chain-wide sales that is total sales, including franchisees sales. Out of JPY 80.978 billion, membership fees and dues income account for 72.7% of chain-wide sales, which corresponds to JPY 58.91 billion. On the other hand, merchandise sales to members account for the remaining 27.3% of sales, which corresponds to JPY 22.067 billion. The pie chart on the right shows the sales breakdown for the CURVES Group. Membership fees and dues income aren't directly recorded in their entirety as revenue for the CURVES Group. Rather, the CURVES Group receives a portion, not the whole amount of membership fees and dues income from franchisees as per the franchise agreement. As such, we receive these as royalty fee income, which accounts for 19.6% of the JPY 35.465 billion in total group sales. Additionally, we also carry out merchandise sales to members in the form of, for example, subscription purchases of protein products, et cetera. CURVES Group subsidiaries directly retail such merchandise to members with 100% of the sale being recorded by the CURVES Group. The group then pays a merchandise sales fee to the franchisee running the club associated with the sale, and we record these payments as costs. Following this structure, we record as group sales, the entire amount associated with the sale of merchandise to members, which accounts for 62.6% of a total of JPY 35.465 billion in group sales. These are the differences in the way we record sales depending on the business model and the various flows of products and income. I would now like to go over the consolidated balance sheet results. Current assets increased by JPY 1.151 billion on a year-on-year basis to JPY 15.49 billion. Of this, cash and deposits increased by JPY 161 million to JPY 8.296 billion. Noncurrent assets increased by JPY 1.111 billion on a year-on-year basis to JPY 25.884 billion. Ultimately, total assets increased by JPY 2.263 billion to JPY 41.374 billion. Current liabilities increased by JPY 967 million on a year-on-year basis to JPY 11.654 billion. Additionally, progress in the repayment of borrowings allowed us to reduce the noncurrent liabilities balance by JPY 3.043 billion, down to JPY 10.311 billion. Total net assets increased by JPY 4.339 billion on a year-on-year basis to JPY 19.409 billion. Of this, shareholders' equity was up JPY 2.536 billion to JPY 13.158 billion. Next, I would like to go over the consolidated statement of cash flows. Cash flows from operating activities increased by JPY 505 million on a year-on-year basis to JPY 5.426 billion. Cash flows from investing activities decreased by JPY 75 million and came to an outflow of JPY 967 million. Cash flows from financing activities decreased by JPY 235 million and came to an outflow of JPY 4.327 billion. As a result of these various cash flows, cash and cash equivalents saw a net increase of JPY 147 million, resulting in a cash and cash equivalents balance at the end of the period of JPY 8.002 billion. Lastly, free cash flow increased by JPY 430 million on a year-on-year basis and stood at JPY 4.459 billion. We registered a net growth of 16 clubs in terms of the total count in Japan for the period under review, which stood at 1,978. We registered a net growth of 40,000 members in terms of the total membership count for the period under review, which stood at 817,000. CURVES HOLDINGS recorded a new all-time high of JPY 80.97 billion in chain-wide sales in the fiscal year ended August 2024. This represents a year-on-year increase of JPY 9.59 billion or 13.4%. Next is a breakdown of chain-wide sales. CURVES HOLDINGS recorded a new all-time high of JPY 58.91 billion in membership fees and dues income. This represents an increase of JPY 4.93 billion or 9.1%. We also recorded a new all-time high in merchandise sales, which came to JPY 22.06 billion. This represents an increase of JPY 4.65 billion or 26.8%. Last, allow me to go over shareholders' distribution for the fiscal year ended August 31, 2024. In light of strong corporate results, the company has declared a dividend increase of JPY 3 per share from the initial forecast, bringing the annual dividend to JPY 15 per share. Additionally, all shareholders of record as of August 31, 2024, holding at least 100 shares will be awarded a Quo card worth JPY 500. This concludes the results summary for the CURVES Group for the fiscal year ended August 31, 2024. Allow me to proceed to the next agenda item, business outline and updates for the August 2024 fiscal year. Please turn to Page 26, which outlines 8 topics for the August 2024 fiscal year. Topic #1 is elevating customer satisfaction. The service productivity and innovation for growth center periodically carries out surveys and compiles the Japanese customer satisfaction index. In fact, this is considered the largest also at the academic level and most authoritative source in the country. CURVES has ranked #1 for 10 consecutive years in the fitness club industry, setting a new record. Various efforts on our part to further enhance the quality of our services have allowed us to keep the average monthly attrition rate at 2.2%. 2.2% is not just below pre-COVID-19 pandemic levels. It also represents a historically low attrition rate percentage. In other words, this is the lowest of the attrition rate as ever been, which is a positive thing for us. Topic #2 is enhancing marketing activities for the purpose of new customer acquisition. As in previous years, we executed 3 membership drive campaigns over the course of the fiscal year ended August 2024. We saw particular success in terms of our marketing efforts directed at the demographic group of young seniors in their 50s and 60s. And these efforts have allowed for a steady and stable inflow of new membership sign-ups. Over the course of these 3 membership drive campaigns, we executed a nationwide concentrated TV ad campaign, web marketing campaigns and also regional promotions by our franchisees. Another important vector and one we are rather proficient at is word-of-mouth marketing. CURVES HOLDINGS, therefore, combines these various vectors into a concentrated marketing strategy. Additionally, towards the latter half of last fiscal year, we started seeing an improvement in engagement with our marketing campaigns targeting seniors. This highlights a positive change in the overall post-COVID-19 pandemic market environment and points to an improvement in the strength of the overall market. Against this backdrop, we registered a net increase of 40,000 in the total membership count, which had grown to 817,000 by the end of the August 2024 fiscal year. These results were more or less in line with company forecasts. Topic #3 is upgrading our diet counseling and advice. More specifically, we seek to enhance our merchandise sales efforts. We launched 2 new products released in December of 2023. The first is the full renewal of our flagship protein products. And the second, which we named Healthy Beauty is a product we worked to improve over the course of a number of years during the COVID-19 pandemic and one tailored to the demographic of young seniors in their 50s and 60s. We are seeing very strong sales for both of these products. Our products are only available to members through our recurring subscription product. In other words, club members enter a subscription purchase agreement with us according to which we deliver products to their homes every month and receive payment for this service. This payment takes place alongside the membership fees they pay to their local club. The total number of purchasers for subscription-based products and sales is at a record high. As we reported earlier, sales were up 27% on a year-on-year basis, reaching JPY 22.0 billion. Our new protein product contains a proprietary amino acid formulation and includes various active ingredients. And we market this product as a food with function claims. More specifically, Ultra Protein helps members grow their muscle mass without the need to consume large amounts of protein powder and has a variety of health-promoting effects. For this reason, this product has been very well received. Regarding our second product, we developed Healthy Beauty in order to help young seniors improve their diets. Allow me to expand upon the background behind the development of this product. CURVES defines the senior demographic as club members over the age of 65 and into their 70s and early 80s. During the COVID-19 pandemic, while we were able to keep the attrition rate for this demographic under control, we struggled massively in terms of new member acquisitions in this age group. This was due to the fact that many in this age group stayed home throughout the pandemic as going outside and contracting the virus pose the risk of health complications. We saw this play out not just in the fitness industry, but also in other leisure-related industries like travel and tourism, and this dynamic led to a rapid contraction of the market for these types of services targeting the senior demographic. Starting in the latter half of 2020, to combat this trend, the CURVES Group started enhancing its marketing efforts directed at young seniors in their 50s and 60s. The idea was, therefore, to increase sign-ups from people in this younger demographic bracket. Concurrent with this, we also worked on lowering the attrition rate for our members in younger demographics. We, therefore, combined new member acquisitions with efforts toward member retention. And over a 3-year period, we developed a new product offering tailored to these new members joining our clubs. We carried out large-scale dietary surveys to identify negative issues associated with people's diets and nutritional deficiencies and the detailed analysis of the data collected ultimately translated into the birth of our new Healthy Beauty product. Healthy Beauty has been very well received by customers in this young senior demographic. Against this backdrop, we have been able to put in place a robust management foundation, allowing us to raise the lifetime value, LTV for short, of members in this age demographic which, in fact, now actually extends to people in their late 40s as we're seeing a growing number of sign-ups from people in this age bracket. Next is topic #4. The past year has been a tumultuous one for the health foods industry as a result of the Beni-Koji health scare. That said, while CURVES HOLDINGS was mildly affected in the immediate aftermath of this health scare, the overall effect has been more or less negligible as we didn't see any discernible increase in subscription cancellations over the past year. In fact, quite the opposite has happened as we have been able to post very significant sales growth. The reason behind our success is CURVES' high-quality assurance standards. Without getting too bogged down in the specifics, one example of this excellence is the fact that our products are manufactured on an OEM basis, exclusively at factories that have acquired NSF-GMP certification. This has been our operating principle from the very beginning of our corporate activities. The Beni-Koji health scare prompted the Consumer Affairs Agency and the Ministry of Health, Labor and Welfare to revise the Food Labeling Act to require all food products with functional claims to be manufactured at GMP-certified facilities. NSF is an international standard that is actually stricter than GMP. And this is the standard used by, for example, the FDA in the United States within the context of supplement products. NSF offers a very high standard of safety and monitoring, which are used at the facilities that produce CURVES' products. Many members are now familiar with CURVES' high-quality standards, and therefore, feel secure in the continued use of our products. Additionally, more and more, we believe we are seeing a trend of rising consumer discernment with consumers now willing to pay a bit of a premium to make sure they get safe, high-quality products. In fact, while our product lineups are priced higher than products sold at mass retailers, consumers can feel the difference in quality and does have a positive impression of our offerings. In summary, we believe that this overall trend toward greater scrutiny of manufacturing standards has therefore been a tailwind for us. Topic #5 is enhancing our online programs. During the COVID-19 pandemic, we offered members an exclusively online program. But following the end of the pandemic, it has become clear that many people enjoy a hybrid program combining online fitness done from home with workouts at our physical club locations. As of the end of the August 2024 fiscal year, 47,000 members use our hybrid service programs. We also offer a free app for members, especially targeting the younger user demographic. This Curves App is now used by 460,000 members, and we have enhanced features that make it especially useful in helping members establish exercise habits and improve their diets. The app has been very well received, and it allows us to enhance our touch points with customers using the online space and sow the seeds for future business expansion. Topic #6 is collaboration with local governments and medical institutions. We have expanded our collaboration with local governments, this time by signing a partnership agreement with Kashiwara-shi, Osaka and Chikusei-shi, Ibaraki for the partnership of promoting health. Over time, we have signed partnership agreements with more than 30 other municipalities nationwide and have carried out marketing initiatives to promote health and grow the number of people with healthy exercise habits. We believe these efforts to be particularly important, especially when targeting the demographic of seniors, since online marketing is ineffective with people in their 70s and 80s. What does work are events to promote health held by local communities in collaboration with CURVES. CURVES sponsors many of these events, which are a good opportunity to earn customers' trust and create high-quality, long-lasting touch points. Going forward, we intend to further strengthen these activities. Topic #7 is our new business of Men's’ Curves. Two new clubs opened in the fiscal year ended August 31, 2024, bringing the total club count to 19. While the club count is still low, we view the August 2024 fiscal year as a turning point for this business as we were able to refine various points of service expertise in a way that has allowed us to achieve a net increase in the number of members to a degree surpassing that scene at our Women's Curves' clubs. We're also making good progress across the board when it comes to new club openings. And we have perfected the business model and operations to such an extent that these clubs can now achieve operating profitability in just 2 or 3 months. Starting from the fiscal year ending August 31, 2025, we intend to steer towards a strategy of expanding with a large number of new club openings. Topic #8 is our Overseas segments. We position 8 European countries, including Southern European countries like Italy and Spain as well as countries located in Northern Europe, such as the United Kingdom and Ireland as key markets. The total number of clubs has dwindled to 130 as a result of disruption caused by the COVID-19 pandemic, but the August 2024 fiscal year, nevertheless, saw record high sales and memberships per club, dwarfing previous record numbers and providing a strong foundation for our club chain. In each country, we are currently trialing clubs operating under a new business model and have been seeing a very positive and encouraging response from customers. As such, we are currently in the process of rebuilding our strategy toward future growth going forward. Following Men's Curves, 2 or 3 years from now, we expect to be able to carry out a significant number of new club openings within the scope of our Overseas operations. Next, I would like to discuss the forecasts and strategies for the fiscal year ending August 31, 2025, and beyond. Allow me to start by briefly outlining the market opportunities for the health and fitness industries and our outlook on this front. The subtitle for this slide reads 2 baby-boomer generations and the health challenges and market opportunities beyond 2025. As you are aware, Japan's population is dominated by 2 large age groups. One of these 8 groups is the first baby-boomer generation born in the aftermath of World War II. This entire generation will all be elderly, defined as over the age of 75 by next year, making 2025 an epoch-making year in this regard. Going back 20 years to the year 2005, when CURVES was initially founded, this year marked the transition of this first baby-boomer generation into their late 50s and then a gradual progression into their 60s, 70s and so forth. This period was, therefore, already the harbinger of a new never-before-seen health and fitness market and the reason CURVES began operating as a business. Over the years, we were able to grow our total membership and club count in sync with this demographic trend and this constituted our basic strategy through to the outbreak of the COVID-19 pandemic. After the COVID-19 pandemic, this first baby-boomer generation will all be over the age of 75. And what's more, many people had to stay indoors to an extent we think was perhaps too excessive and this has caused problems such as a significant drop in physical stamina and/or the worsening of preexisting medical conditions. Starting around 2023, the data is starting to reflect an increase in the number of people requiring nursing care. So from a market perspective, one can say we are seeing an expansion in the market for elderly care and frailty prevention. Frailty being defined as a decline of muscular strength resulting in a variety of impediments to everyday life and activities. We, therefore, expect services helping people avoid requiring elderly care and frailty prevention to become key services going forward. We expect this market to grow considerably, so we intend to execute tangible measures to capture this demand growth. During the COVID-19 pandemic, we started focusing our marketing efforts on the age demographic of young seniors, which corresponds to the generation after the first baby-boomer generation in Japan's population pyramid. And this allowed us to stage a recovery in our membership count. That said, this generation has small population numbers, meaning that this portion of the population pyramid is actually rather narrow. Below this, we have the second baby-boomer generation, more and more of which are turning 50 between 2023 and 2025, and which corresponds to the second largest population area in Japan's demographic pyramid, CURVES for women from age 50. So this means this second baby-boomer generation has now entered the range of our target demographic. In fact, we went to significant efforts during the pandemic to carry out successful marketing campaigns targeting young seniors and grow the number of club members in this age range. And in fact, these marketing efforts are actually very well geared toward the second baby-boomer generation as well. We are aware of this and our efforts have borne fruit as starting in the latter half of last fiscal year, in the summer, we started seeing a growing number of new sign-ups from people in their late 40s. As they approach and enter their 50s, a growing number of these club members will be at risk of metabolic syndrome and other lifestyle-related diseases. We, therefore, expect further growth in this new market for health and fitness services. In fact, compared to the first baby-boomer generation, this generation shows a much greater interest and literacy towards the topic of health. Thanks to this second baby-boomer generation, we expect increased participation in fitness activities and significant growth in the health market. Over the next 3 fiscal years, we will steadily open new CURVES' clubs for women raising the number of club openings from 20 per year to 30 per year. On occasion, I get asked whether CURVES will really be able to deliver growth under this slow and steady pace of new club openings. In reality, we believe that even from existing clubs alone, there is still plenty of room for us to grow in terms of an increase in memberships and merchandise sales. Last fiscal year, we registered a net increase of 40,000 members in terms of the total membership count, the majority of which coming from existing clubs. Naturally, we look at each club individually and ascertain how much room for further growth there is. But for the sake of simplicity, the vertical bar graphs here on Page 38 show our results comparison within the context of further room for growth, between our 76 corporate-owned clubs and 1,871 clubs operated by franchisees. The graph on the left shows the number of members per club. The cutoff for this data is August 31, 2024. And after this, we saw a net increase of around 20 members in the data for the month of September. But as of the end of August 2024, the average for corporate-owned clubs was 527 members per club. The average was lower for clubs operated by franchisees and stood at 410, meaning there is an average gap of 117 members per club between the 2 categories, representing room for growth. This also holds true for monthly merchandise sales per club, which stood at JPY 1,340,000 for corporate-owned clubs and JPY 960,000 for franchisee-owned clubs. And this implies there is at least JPY 380,000 in terms of room for growth. These results match individual club and retail area potential analysis. As we believe our existing 1,871 clubs have the potential to add a further 200,000 more members and a further JPY 8 billion to JPY 10 billion in annual merchandise sales growth potential, even only with our 2 products of Ultra Protein and Healthy Beauty and without releasing any new products. We will be premising our growth strategy on these projects, although while creating new markets through new businesses like Men's Curves and through these draw up a medium- to long-term growth strategy. I would now like to discuss the forecast for the fiscal year ending August 31, 2025, which incorporates the aforementioned results and projections. We expect to deliver JPY 38 billion in sales, JPY 6.3 billion in operating profit, JPY 6.25 billion in ordinary profit and JPY 4 billion in net profit. We are guiding for a total membership count of between 840,000 and 850,000 by August 2025 and 1,991 CURVES' clubs for women. In terms of Men's Curves, we forecast at least 10 new club openings, bringing the total club count to 29. Allow me to use this opportunity to go over the results for the month of September, which is the first month of the first quarter. As of September 30, 2024, the total membership count stood at 843,000 which represents a record net increase of 26,000 members on a single month basis. CURVES had carried out various marketing efforts starting in the summer and overall market conditions as well were a tailwind for us. So these factors came together to help us deliver a record single month net increase. Results in October so far have also been very positive. So we aim to further increase the membership numbers this fall and into the end of the year. In addition to the forecast for the August 2025 fiscal year, we have also formulated financial commitments for the next 5 years, shown here on Page 41. We formulated 2 commitments, the first being a CAGR of at least 10% for operating profit, EBITDA and free cash flow. An annual growth rate of 10% is our target internally for any given year. And although there can be some degree of variance from year-to-year, over the course of the relevant period, we are committed to a CAGR of at the very least 10%. In other words, 10% is our minimum CAGR threshold at the end of this 5-year period. Second, we are committed to maintaining a ROIC 12% or more and aiming for 15%. Lastly, the table at the bottom shows a comparison of realized results in the August 2024 fiscal year with the results guidance for the fiscal year ending August 2025. And as I just stated, ROIC is one of our financial targets and is calculated according to the equation shown at the bottom of Page 41. More specifically, ROIC is derived by dividing operating profit after tax by invested capital. Invested capital is, in turn, defined as working capital plus noncurrent assets. Merchandise sales to members are on an upward trend and have higher working capital requirements when compared to income from royalty fees. More specifically, these are direct sales by the CURVES Group to club members, which means we need to hold these merchandise items in the form of inventory, hence, the need for more working capital. We also prioritized liquidity for our franchisees. So we wait a little bit longer before collecting these merchandise fees after a sale is made. This arrangement allows clubs run by franchisees to offer merchandise for the customer's sake and without the need to hold inventories. There is, therefore, a need for us to try and keep working capital requirements within acceptable levels. We are also working to raise productivity at the club level and to this end, we are currently raising our investment in system infrastructure. Our business model is liable to see an increase in noncurrent assets. So we want to strike the right balance between investment and the return on investment this brings, hence the use of ROIC as a key indicator. Next are the strategies for the ongoing fiscal year. Within our strategy of membership growth, we seek to achieve a further improvement in customer satisfaction, further reducing the attrition rate and increasing customer lifetime value. We will also further enhance our membership marketing drives held 3 times annually and designed to acquire new members. Another strategy is the expansion of merchandise sales. Growth in merchandise sales from protein products has a very high correlation with new sign-ups. Healthy Beauty is a new product release that is yet to reach full member adoption. This product was released fairly recently in December of last year. So we believe there is plenty of room for further growth in terms of an increase in member merchandise subscriptions. As such, over the course of the fiscal years ending August 2025 and 2026, we will work to grow Healthy Beauty to reach the same level as Ultra Protein. Another strategy is enhancing human capital. Starting around 2 years ago, we positioned enhancing human capital as a key theme across the entire chain and have been promoting initiatives to enhance employee benefits, including for franchisees. We seek to improve motivation across the entire chain, both in terms of satisfaction and benefits and achieved the #1 position in the customer service industry and we are carrying out a number of reforms to this end. CURVES HOLDINGS' headquarters intends to help franchisees improve profitability in a way that allows them to raise employee wages. Particularly important within this context is improving the added value per employee and worker productivity, and we are executing initiatives to this end. Furthermore, we will be carrying out preparations toward the full-fledged expansion of new businesses, including Men's Curves, as after a period of 2 or 3 years, we expect to be able to greatly increase the number of new club openings. Last is the forecast of dividends for the fiscal year ending August 2025. We have set the annual dividend forecast at JPY 17 per share, as we expect to deliver JPY 43.45 in earnings per share, corresponding to a consolidated dividend payout ratio of 39.1%. Going forward, we will continue efforts to meet shareholder expectations by further improving our corporate value and achieving and maintaining a healthy financial structure by securing retained earnings. Simultaneously, we will aim for a consolidated payout ratio of 50%. This concludes my presentation. Thank you very much for joining us. [Statements in English on this transcript were spoken by an interpreter present on the live call.]