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

Good afternoon. My name is Takeshi Masumoto, Representative Director, President and Group CEO of CURVES HOLDINGS. Thank you for taking the time off your busy schedules to view today's presentation covering the company's consolidated results of operations for the fiscal year ended August 31, 2025, and the company's medium-term vision. The agenda will follow the order outlined in the presentation materials. Today's presentation will run longer than usual as we believe it's important to provide a complete understanding of our business and results. We, therefore, encourage you to stay for its entirety. Here is the agenda we will be following today. Let's start with the full-year results summary for the fiscal year ended August 31, 2025. We recorded JPY 37.5 billion in sales, JPY 6.3 billion in operating profit, JPY 4.3 billion in net profit and JPY 85.6 billion in chain-wide sales. The total membership count stood at 863,000, and there were 1,996 Fitness for Curves -- for Women clubs. CURVES Group delivered new record highs across the board for the line items of sales, operating profit, net profit and chain-wide sales. We are proud to announce that we have met and exceeded all 4 financial commitments initially announced for the August 2025 fiscal year. We will also distribute a total annual dividend of JPY 17 per share, in line with the forecast. Specifically, the interim dividend has already been paid out to shareholders, and we will be distributing JPY 9 per share as a year-end dividend. Let's dive into the result details for the fiscal year ended August 31. First up is a review of the consolidated statement of income. Sales increased by 5.9% on a year-on-year basis to JPY 37.5 billion. Gross profit increased by 6% during the same period to JPY 16 billion. Operating profit increased by 16.2% to JPY 6.34 billion, while ordinary profit grew by 18.4% to JPY 6.48 billion. Lastly, net profit increased by 20.6% on a year-on-year basis to JPY 4.3 billion. Let's now dig a little deeper into the consolidated statement of income and see how it compares to the forecast and on a year-on-year basis. Sales actually came in slightly below the forecast. I will provide context as to why in a moment. In terms of year-on-year growth, sales increased by JPY 2.1 billion, just under 6%. The membership count grew at a steady clip and above company estimates. Specifically, while we expected 850,000 members, total club membership saw a net increase of 46,000, closing the fiscal year with 863,000 members. Again, we will be delving into the details in a moment, but revenue from merchandise sales fell slightly short of the forecast. We have formulated a specific target for new subscriptions for December 2024 within the scope of our month of diet counseling initiative, but this number was not achieved. While the number of new subscriptions then recovered, in 2025 in the third quarter, this wasn't enough to fully offset the impact of the December 2024 results. So ultimately, overall revenue from merchandise sales fell short of the forecast. That said, both merchandise sales and the number of subscribers reached record highs in the August 2025 fiscal year. This performance underscores a strong momentum that puts us in a strong position this year as well. Operating profit results exceeded company expectations, growing by 16.2% on a year-on-year basis, which is equivalent to JPY 883 million. This increase in operating profit was driven by gross profit, which rose by JPY 903 million, thanks to higher sales. Despite an increase in personnel expenses resulting from investment in human capital and expenses related to system investment to improve efficiencies, we kept SG&A expenses under control, in line with the plan. Ultimately, an increase in gross profit and discipline on the SG&A front translated into a year-on-year operating profit increase of JPY 883 million. This table compares fourth quarter results with a third quarter baseline and with the same period in fiscal year 2024. Let's now look at the sales and operating profit results in the domestic and international segments. The domestic segment still accounts for the bulk of our operations. And while the business climate has improved considerably in the overseas segment, this business still posted an operating loss. I would now like to go over the composition of sales for the domestic segment. In broad strokes, domestic income at CURVES Group is divided into 2 types. The first is spot income, consisting of onetime incomes from franchise agreement, license fees and sales of new fitness equipment for new club openings. In short, this is a form of onetime income CURVES Group receives every time a new club opens. The second type of income is base income, which consists of ongoing incomes proportional to the number of clubs and members. In other words, this is a form of recurring income. Base income contains 2 important income pillars, the first one being income from royalty fees, et cetera, received from franchisees, and this income is correlated to the number of members. The majority of our club footprint spanning approximately 2,000 locations consisted of clubs operated by CURVES franchisees. In other words, this income is proportional to franchisee sales and the number of club members. The second pillar is merchandise sales to members. These are direct sales of health products like our protein offerings by the CURVES Group to club members, meaning these sales accrue directly to us. In terms of the breakdown of sales, revenue from royalties increased by 6.4% on a year-on-year basis, totaling JPY 7.388 billion. Merchandise sales to members increased by 3.9% during the period under review, totaling JPY 23.08 billion. I'm sure many of you are deeply familiar with the intricacies of our sales structure, but allow me to address a common point of concern, namely perceived overreliance on merchandise sales, which account for close to 60% of total revenues. The pie chart on the left shows the category breakdown for chain-wide sales, which includes everything, including the results for franchisee clubs. Broadly speaking, chain-wide sales come from membership fees and merchandise sales to members. Delving into the numbers, membership fees and dues incomes totaled JPY 62.6 billion in the August 2025 fiscal year and accounted for 73.2% of the total. Sales of protein products and other merchandise sales to members totaled JPY 22.9 billion and accounted for just under 27% of total chain-wide sales. The pie chart on the right shows the breakdown of consolidated group sales, which totaled JPY 37.56 billion. The CURVES Group receives a portion of membership fees and dues incomes generated by franchisees as per the franchise agreement. CURVES records this as royalty fee income, which accounted for just under JPY 7.4 billion of group sales or approximately 20% of total group sales. Now if you'll remember, CURVES directly retails merchandise to members. In the August 2025 fiscal year, these transactions totaled approximately JPY 23 billion. In other words, this framework allows us to record close to the full amount associated with these transactions, corresponding to just over 60% of total group sales. In summary, membership fees and dues income account for approximately 73% of chain-wide sales, while merchandise sales account for the remaining approximately 27%. Moving on to the consolidated balance sheet. The current asset balance increased by JPY 1.4 billion to JPY 16.9 billion between the fiscal years ended August 2024 and 2025. This was primarily due to an increase in cash and deposits and in notes and accounts receivable. On the other hand, the noncurrent asset balance decreased by just under JPY 3.6 billion during the same period and stood at approximately JPY 22.3 billion. We carried out the acquisition of CURVES' headquarters in the United States, Curves International, in 2018. In the process acquiring goodwill and trademark rights, we recorded depreciation totaling approximately JPY 1.5 billion associated with said goodwill and trademark rights. This, coupled with exchange rate fluctuation expenses resulting from a stronger yen and totaling approximately JPY 2.2 billion, was the main factor behind the decrease in the company's noncurrent asset balance. All put together, the total assets balance decreased by just under JPY 2.2 billion and stood at JPY 39.2 billion. Current liabilities decreased by approximately JPY 200 million, down to JPY 11.4 billion, while noncurrent liabilities decreased by JPY 2.7 billion, down to just under JPY 7.6 billion. All in all, total liabilities decreased by JPY 2.9 billion, down to JPY 19 billion. This decrease was primarily due to the repayment of just under JPY 3.3 billion in interest-bearing debt. Putting all of these factors together, total net assets increased by JPY 750 million to JPY 20.1 billion. Within this, shareholders' equity increased by JPY 2.7 billion to JPY 15.8 billion. Let's now look at the consolidated statement of cash flows. We recorded a cash inflow from operating activities of JPY 6.2 billion and an outflow of JPY 727 million from investing activities. Outflows from financing activities came in at just under JPY 4.9 billion, primarily as a result of the repayment of long-term borrowings and dividend payments. The overall effect was a net increase in cash and cash equivalents of JPY 381 million for a balance at the end of the period of JPY 8.38 billion. Allow me to skip forward to Page 21, skipping over the club and membership count trends, which we invite you to review at your convenience later. Looking at the trend, while chain-wide sales took quite a big hit because of COVID, membership numbers and merchandise sales to members have been on a steady and robust recovery trend since. In fact, total chain-wide sales are at a record high. I will now be discussing the business outline and updates for the fiscal year ended August 2025. Allow me to start with membership growth. We have scored 2 significant wins here, steadily but surely lowering the membership attrition rate. In other words, exercising has become an important part of our club members' routine, and they choose CURVES as their preferred venue. We pride ourselves on our commitment to customer service, and our efforts once again bore fruit as according to the JCSI, Japanese Customer Satisfaction Index, survey, CURVES ranked #1 in the fitness club industry for the 11th consecutive year in 2025. Customer satisfaction has translated into an average monthly attrition rate just above 2%, a historically low level. The second strategic prong is membership growth. We hold membership drive campaigns 3 times per year at CURVES. These efforts have been successful, allowing us to steadily grow club membership numbers. Circling back to what I said earlier, we grew our membership count from 817,000 to 863,000 members between fiscal years 2024 and 2025. This represents a net increase of 46,000 members. The second topic is the expansion of merchandise sales. CURVES employs a two-pronged strategy premised on both membership growth and an increase in merchandise sales to members, leading to higher spending per member. As I mentioned earlier, merchandise sales to members reached a new record high of JPY 23 billion. Additionally, we offer the overwhelming majority of our products through subscription plans. The number of product subscribers has also reached a new record high. That said, actual merchandise sales to members came in slightly short of the target. Allow me to delve into the details. We carry out 2 concentrated dietary counseling campaigns in the month of December, which corresponds to the start of the second quarter and May, the final month of the third quarter. During these months, our instructors offer personalized diet counseling to members, recommending our protein and Healthy Beauty product offerings to members who might benefit and are interested in such products. The number of new product subscribers fell short of the target for our campaign in December of last year at the start of the second quarter. This underperformance was clearly the result of a strategic miscalculation on our part. Specifically, we suggested 2 different products over the course of a single month, and this caused some confusion. This was a learning experience for us, and we incorporated these insights into our Week of Diet Counseling campaign held in May 2025. Specifically, we narrowed our focus to protein intake counseling and our ultra-protein offering. We replicated this campaign in July, also lasting a week, this time with a focus on counseling to improve members' nutrient balance and on our new Healthy Beauty product. These efforts have translated into a steady increase in the number of product subscribers. Case in point, the number of new product subscribers to Healthy Beauty, CURVES' new strategic product offering, were up by 20% from a December 2024 baseline. Thanks to these efforts, the number of product subscribers reached a record high as of the end of the August 2025 fiscal year. This puts us in a strong position in fiscal year 2026 despite a slight underperformance versus the forecast. These 2 pages show the trends in merchandise sales and subscription rates over time. We invite you to review the numbers at your convenience later, but the key takeaway is that we continue seeing robust growth year in, year out. Topic number three is our efforts to enhance our online programs. Our Ouchi-de-Curves Dual Plan is a hybrid plan, combining fitness services at our brick-and-mortar clubs with online fitness. This plan has been especially well received by younger club members. Currently, 54,000 members use our online programs, and we will continue working to promote and expand these initiatives. Curves App, our free app for members, now boasts over 500,000 users. This is a free app with major functions for workout habit building support and for helping members maintain healthy dietary habits. The app also has a great community element to it, which has been very well received, with members across Japan being able to post their achievements and encourage each other's progress. Lastly, another advantage is that it helps reduce instructors' workload. So this app is gradually becoming an important strategic product. Allow me to give you an update on our collaboration with local governments and medical institutions. In 2025, as part of our ongoing health promotion efforts, CURVES signed partnership agreements with the cities of Hekinan in Aichi, Tagajo in Miyagi and Kuki in Saitama. We are working together with the people in these cities in health promotion efforts. Another milestone was the certification of 60 additional Curves clubs in Kanagawa Prefecture as prevention centers for preventive health. This is a continuation of CURVES' work together with Kanagawa Prefecture and its local municipalities, which carry out a number of prevention and health promotion efforts. CURVES already has partnerships with more than 50 other municipalities nationwide through which we offer health promoting services. We also collaborate with medical institutions across Japan, for example, in the area of cardiac rehabilitation for patients with heart disease who would benefit from exercise therapy. CURVES also collaborates with clinics and hospitals in the area of orthopedic surgery through things like therapeutic exercise programs for joint issues. We will continue expanding our partnership and collaboration efforts. Naturally, these types of initiatives are motivated by a desire to help people in local communities across Japan. So there's a strong social element to it. Not only that, but these efforts have the added advantage of acting as touch points with senior citizens who might potentially develop an interest in our CURVES services if they hear of the concept. It is also a way to improve brand awareness as we continue building a strong track record of helping people. This cements our position as a trustworthy brand, and this is backed up by survey data. In summary, over the medium to long term, we position these partnerships and collaborations as very important strategies within our larger marketing framework and intend to enhance these efforts going forward. Topic #5 is Curves Food Drive, which is an annual volunteer initiative carried out in a community-based fashion. This initiative has taken place every year since 2007 with the help of 800,000 Curves members throughout Japan. The Curves Food Drive initiative received the Minister of the Environment Award at the 2025 Food Loss and Waste Reduction Promotion Awards. Every year, between late January and February, we enlist the help of Curves' club members and other people in the community to bring nonperishable food items to our clubs so that these items can be donated to local welfare institutions nationwide. Curves' instructors and franchise club owners deliver these items to children's care facilities and mother-children facilities throughout Japan. This annual food drive has been running for 18 years since 2007. Over the past 18 years, over 2.2 million people have participated in this cause, donating over 3,000 tons of food, which were delivered to more than 11,000 facilities and groups. This long track record and this initiative's positive impact on reducing food waste was the reason CURVES received this award. Naturally, reducing food waste is important, but perhaps even more important is knowing we are meaningfully improving people's lives. This initiative is also really popular with Curves members, especially since many people do want to help make the world a better place and help their local communities, but find it difficult or don't know how to go about taking that first step into the world of volunteering. Our food drive program offers a way to help through the familiar setting of our clubs, which is why this program is always well received, with more and more people participating with each passing year. In summary, this has been another avenue allowing us to further improve customer satisfaction. Allow me to update you on our new business of Men's Curves. We opened 6 new clubs, reaching 25 Men's Curves clubs by the end of the August 2025 fiscal year. Both new and existing clubs are showing tremendous strength. So fiscal year 2026 is when we will start the full-scale deployment of this line of fitness clubs for men. Topic #7 is our new brand X, the existence of which we first announced to the public back in April. We will be exploring the actual details behind brand X during our discussion of the medium-term vision in a moment. But for now, allow me to state that we now operate 37 of these health care facilities. CURVES Group has been able to expand brand X's footprint at a fast clip, and we will continue efforts to further expand the number of facilities over the course of the ongoing fiscal year and beyond. Next are our overseas segments. As you are aware, our key markets overseas correspond to the countries covered by the European franchise headquarters we acquired back in 2019. There are a total of 124 clubs operating in Europe. While this is still a relatively small footprint, membership per club and sales continue breaking new records, underscoring very strong results. Starting in 2026, we will shift our strategy to focus on enhancing multi-location operations by franchisees and the opening of directly operated clubs. This concludes our overview of the results for the fiscal year ended August 2025. Let's now proceed to the forecast for the fiscal year ending August 2026. We are guiding for JPY 41.3 billion in sales, corresponding to a year-on-year increase of just under 10%. The operating profit target is JPY 7.3 billion, corresponding to a year-on-year increase of just over 15%. The ordinary profit target is JPY 7.25 billion, corresponding to a year-on-year increase of approximately 12% Lastly, we expect JPY 4.7 billion in net profit, corresponding to a year-on-year increase of 9.2%. These forecasts are based on a number of premises. Specifically, we expect a net increase of over 40,000 in the Women's Curves membership count, which we forecast at between 900,000 and 910,000 by the end of the August 2026 fiscal year. We have started including Men's Curves and brand X in our club number estimates. We expect to have a total of 2,124 club locations across our 3 brands. In terms of the breakdown, we expect to have 2,007 Women's Curves locations, representing a net increase of 11 clubs. The projected net increase for Men's Curves is 20 clubs, growing to a total of 45 clubs and 35 for our new brand X, which we expect to have a club footprint of 72 locations by the end of the August 2026 fiscal year. Regarding merchandise sales to members, sales of our protein offering have a clear linear relationship with the total membership count. Additionally, we'll be focusing on growing the percentage of members subscribed to our new Healthy Beauty product, and these efforts factor into the forecasts shown here. Starting this fiscal year, we now include quarterly forecasts. Looking at the forecast for the first quarter, we are guiding for a year-over-year increase in sales of 6.2% compared to the same period last fiscal year. Conversely, we project a 5.2% decrease in operating profit, driven by the continued high cost of raw ingredients for our core protein product with merchandise sales to members. Ongoing yen weakness is another factor. So our forecast is premised on worsening gross profit margins. Furthermore, we will continue expanding investments in human capital and further system investment to improve productivity at our clubs. So we are expecting higher costs. We expect this trend to reverse starting in the second quarter, thanks to growth in club membership and in merchandise sales of our protein offering, continuing to deliver year-on-year growth in the third and fourth quarters. Let's now review the financial commitment for the next 5 years. Our baseline CAGR and ROIC lower bound threshold targets remain in place as we are focused on delivering upside to stakeholders. Our core strategies focus on membership growth, the expansion of merchandise sales and enhancing human capital. In fact, over the past 3 years, we at CURVES have been working on a key chain-wide strategy to ensure great employee engagement and overall working conditions to our employees and franchisees, including when it comes to franchise fees. We will be exploring this in greater detail during our discussion of the medium-term vision in a moment. Other elements of our strategy are full-fledged efforts at multi-location expansion for new businesses, and we believe the time is also right for expansion in the overseas business. Allow me to share with you the latest membership count. We are doing our fall membership drive in September and October. Our efforts on this front have been very successful, with a total membership count of 892,000 members by the end of September. Note that this figure refers exclusively to Women's Curves club memberships. September saw the largest ever single month net membership increase, of 29,000 members. We're also seeing strong results in October. Specifically, we expect a return to our pre-COVID club footprint exceeding 2,000 Women's Curves. The pandemic forced over 100 clubs to close, but ever since, our club network has been gradually recovering and the 2,000 club mark is now in sight. Furthermore, we expect the membership count to exceed 900,000 in October. CURVES has started revising monthly membership fees to reflect the cost of inflation and raise wages, including franchisee earnings. The revised fee took effect for new members in September 2025. Existing members have been granted a 6-month grace period with their JPY 300 increase scheduled for April 2026. Both the gross profit and gross profit margins, especially that of franchisees, are expected to improve with the higher membership fees. The majority of these profits are earmarked for wage raises and for investment to ensure better overall working conditions. This has been the policy over the past 3 years, and we intend to continue. Further improving overall working conditions enhances CURVES' ability to attract talent and makes us a stronger organization. Lastly, allow me to discuss the dividend forecast for the fiscal year ending August 2026. We are guiding for an annual dividend of JPY 25 per share, which includes a JPY 5 per share commemorative dividend to mark the 20th anniversary of the Curves chain's founding. This corresponds to a consolidated dividend payout ratio of 49%, and we will continue distributing a QUO card worth JPY 500 per person within our shareholder incentive program. This concludes our overview of the results and initiatives during the fiscal year ended August 2025 and the forecast for the ongoing fiscal year. I would now like to outline the CURVES Group's medium-term vision and business plan. The basic outline of our growth strategy is, as I discussed at the start of last fiscal year. If you remember, we first focused on steady growth to be achieved through our 30-minute Fitness for Women's Curves clubs, which are our core business, especially through existing clubs. Then, the ongoing fiscal year involves expanding our Men's Curves footprint and the footprint associated with our brand X. We can now reveal the details behind brand X. It's a network of physical movement recovery centers under the name Pint-UP. In short, we will work to increase the number of Men's Curves and Pint-UP members and expand multi-location operations. Here are the quantitative targets for the CURVES Group's medium-term vision for the fiscal year ending August 2030. Across all 3 brands, we are targeting a total location footprint of 2,600 clubs, 1.2 million members and JPY 130 billion in chain-wide sales. In terms of group consolidated results, we are guiding for JPY 56 billion in sales and JPY 10.3 billion in operating profit. We have also formulated targets for the fiscal year ending August 2035, 10 years from now. First, let's start with our basic commitment, which represents a very strong assurance we make to investors. As our baseline commitment, we are targeting a location footprint consisting of 3,150 clubs, 1.4 million members and JPY 180 billion in chain-wide sales. Within this scenario, we are guiding for JPY 78 billion in group consolidated sales and JPY 18 billion in operating profit. We have also formulated an internal target at CURVES Group. Within this, we are aiming for 3,500 clubs, 1.5 million members and JPY 200 billion in chain-wide sales. Regarding group consolidated results, this model calls for JPY 85 billion in sales and JPY 20 billion in operating profit. We are guiding for a CAGR of around 12% and above as we seek to continue delivering strong growth. These 2 tables show the total club and membership count and the chain-wide sales target for each of our brands within the scope of our vision for 2030 and 2035. We will be going over each brand individually, so we invite you to review the tables at your convenience later. The 5-year financial commitments remain a CAGR of at least 10% and the maintenance of a ROIC of at least 12%, aiming for 15%. Circling back to what I said earlier, our medium-term strategy is premised on a multiple brands strategy. In other words, this is a 3-pronged strategy that extends outside of our core business of Curves for Women to include Men's Curves and our new Pint-UP brand. Over the years, CURVES Group has developed and perfected competition strategies without competing. Specifically, our policy is to never compete with other companies, but rather to carve out entire new markets from scratch where we have a unique position of unrivaled dominance. We are executing this strategy with Men's Curves and now with our new Pint-UP brand. We believe the health market will see a significant expansion going forward. This diagram shows Japan's population pyramid by age. Approximately 50 million people out of Japan's total population already fall into the 50 to 79 age bracket. Age-wise, the 2 baby boomer generations are now becoming the largest sections of the pyramid. All members of the first baby boomer generation are now over the age of 75, meaning that seniors in this age group have a keen interest in health matters and in ways to stay healthy and active. Specifically, we are seeing an expansion of the market for elderly care and frailty prevention as a result of this change in Japan's population pyramid. Then we have the second baby boomer generation, which currently accounts for close to 10 million people in Japan right now. More and more people in this generation have started turning 50 by 2025, with many being in their early 50s. Members of the second baby boomer generation are even more interested in health matters and careful about their health. This segment of the population is also increasingly at risk of metabolic syndrome and lifestyle-related diseases. This trend underscores growing new health market opportunities. This is, therefore, a very expansive landscape, both in quantitative and qualitative terms. And this market of people aged 50 and up is likely to continue to grow going forward. Against this backdrop, allow me to explain our growth strategy for each business, starting with our flagship 30-minute Women-only Wellness Fitness Club, Curves clubs. The growth strategy for Curves for Women is as follows. We are guiding for steady growth as we are targeting the opening of between 20 and 30 new clubs per year. A key strategic element is ensuring the growth of existing clubs. Specifically, we want to increase per club metrics like memberships and merchandise sales. The third prong of this strategy is driving and further solidifying a one-and-only business strategy through improvements to labor productivity, combined with investment in human capital. Let us now try to estimate how much room for growth there is for existing clubs. Simply put, we believe we can grow our membership count by over 200,000 members, even with only our current existing club footprint of 2,000 clubs. In other words, we believe this alone can allow us to go from around 900,000 to approximately 1.1 million members. We estimate that this membership growth alone will translate into an increase to chain-wide sales of slightly below JPY 15 billion. This is equivalent to slightly above JPY 1.5 billion in sales for CURVES Group, including annual royalty fees. We also estimate that expanding our lineup of existing products alone can add approximately JPY 15 billion to merchandise sales to members. All put together, we believe that there is, at the very least, room for growth, JPY 30 billion in chain-wide sales over the next few years and approximately JPY 16.5 billion to our consolidated net sales. Several data points corroborate these ideas. We recorded a net membership growth of over 46,000 between fiscal years 2024 and 2025. Most of this growth actually comes from existing rather than new clubs. What's more, a comparison reveals that clubs operated by franchisees still have room for growth compared to equivalent corporate-owned operations. Specifically, as of August 31, 2025, the average corporate-owned store has, on average, a membership count of 563. The average count around 431 was lower for franchisee-operated locations. And the difference between the 2 types of clubs was a non-trivial 132 members. In other words, various market analyses have converged on the idea that there is probably room to grow the average membership count for clubs operated by franchisees by around 100. The same trend also holds true in terms of monthly merchandise sales, which stood at around JPY 1.42 million at corporate-owned clubs and considerably lower, only JPY 1 million at franchisee locations. This indicates that there is room for growth in terms of merchandise sales to the tune of JPY 420,000 per franchisee club. Allow me to use this opportunity to outline the strengths of the CURVES Group, which are the common denominator across our 3 businesses and brands and which we seek to leverage in the execution of our respective growth strategies. Our first strength consists of management that continues to increase customers' lifetime value, or LTV, and this is something we've pursued from the very beginning. It goes without saying that raising satisfaction is key in minimizing customer attrition, with the overwhelming majority of customers continuing to choose our brands as their preferred location to exercise. As you can see from the graph, we have successfully and systematically reduced customer attrition rates over the years, bringing our nationwide monthly average attrition rate to just above 2%. Further improving customer satisfaction allows us to grow customer loyalty. To this end, we have expanded beyond mere fitness to offer support for healthy dietary habits on the part of our members. We coupled this dietary advice with merchandise sales of ultra protein and Healthy Beauty to club members who show an interest in these products and who we think can benefit from their use. The vertical bar chart on the right shows the trend in the number of product subscriptions. As you can see, this metric has grown steadily and consistently over time. In summary, we have succeeded in improving customer satisfaction and thus retention, allowing us to maximize brand loyalty and LTV. This is one of the core principles that makes up our management strategy. Our second strength is a successful marketing strategy, allowing us to create new customers in new markets. In 2025, the number of members acquired through marketing efforts had increased by 25% from a 2022 baseline. What's more, the cost per member acquisition is actually down 30%. So this means we are now able to grow our club membership 25% faster than in 2022 and then only 70% of the cost. This success isn't exclusively the result of advertising, but rather the fruit of extensive improvements made over the years and across the entirety of our marketing capabilities. There are various elements to this, starting with word-of-mouth marketing resulting from superior service and engendering deep customer loyalty. Additionally, other prongs include community-based health events and the collaboration with local governments and medical institutions I referenced earlier. These efforts boost our brand image, increasing favorability and trust among target prospective customers. To use a marketing term, these initiatives raise customer preference for our services. We consistently carry out initiatives of this nature with a special focus on word-of-mouth effects resulting from high customer satisfaction. Another layer is drumming up interest through intensive TV ad campaigns and collaborations. In order to tap into this segment of the population, who already have a favorable impression of the CURVES brand, each year, we run intensive TV ad campaigns over a 2-month period, 3 times a year. These campaigns are highly targeted, focusing on women over the age of 50, a demographic we then segment further into 3 granular categories. Various health concerns and personal hurdles often prevent potential customers from beginning an exercise routine. We have all this data and know our target customers very well, and this allows us to put together very engaging TV commercials with a strong call to action. Another important strategy is the use of collaboration campaigns several times a year. For example, we have an ongoing campaign with Sanrio's Hello Kitty character, which started in August. Now you might be wondering what the rationale is for using the Hello Kitty character in a promotional campaign for a fitness club. We have done extensive homework on this front, allowing us to identify different characters we can leverage for specific marketing and brand promotion purposes. Campaigns at this level of granularity are made possible through our deep understanding of our target audience and customer demographics. Case in point, this collaboration campaign with the Hello Kitty IP has resulted in a surge in word-of-mouth referrals throughout September and October. We topped this off with 3 annual promotional campaigns offering a strong value proposition. Specifically, these campaigns involve direct web marketing and community-based sales promotion activities on a per club basis. Another important element is referrals from friends and acquaintances who are existing club members. These various efforts translate into an increase in new member sign-ups. Our strategy is simple. We sow the seeds of future customer interest through the activities listed here and then reap the benefits in the form of new member sign-ups. In summary, our comprehensive and integrated approach to marketing is another one of our strengths. Our third strength comes in the form of a strong presence in the field with a deep sense of mission. Our business has a strong human capital component and ensuring the highest quality of instructor service across our nationwide network of fitness clubs is key to our success. CURVES has a strong engagement with the 350 companies that make up our network of franchisees. These companies share our sense of mission to spread health and our focus on customer satisfaction and on providing excellent overall working conditions, driving employee engagement. Every year, around October and November, we conduct an annual survey targeting management at our network of franchisees. The results for 2024 show that 99% of franchisees surveyed are either very satisfied or somewhat satisfied with the CURVES business. Furthermore, 92% of all franchisees view CURVES' headquarters as a highly regarded management partner. This is a detailed survey covering a diverse array of questions. Every year, we review the contents of this survey so that we can better understand the challenges our franchisees face and help them address these hurdles. The idea is to foster a symbiotic relationship between CURVES' headquarters and our network of franchisees so that we can both grow. Within this context, we employ an iterative process every year to determine optimal ways to drive engagement, and these efforts have been successful. Another key asset is talent working on the front lines. That's 8,000 CURVES coaches with a strong sense of mission. As I mentioned, we offer good benefits and comfortable working conditions to ensure talent retention. From the very beginning, we have always offered full-time employment contracts, 2 days off a week and have a strict closing-hours policy, meaning employees can go home by around 7:30 p.m. This gives our female instructors the ability to continue working with us even after important milestones like marriage and childbirth. In other words, we offer stable and reliable employment opportunities, and we continue gradually raising wages. Employees also get Sundays and public holidays off, making for a better work-life balance. Against this backdrop, we use a systematic and practical on-the-job training system and offer consistent and sustained opportunities for skill and professional development. Another important factor is how this is a line of work where people with a strong sense of motivation and personal growth can excel. We do an annual coach job satisfaction survey through which we measure things like motivation and engagement. We still need to boost these numbers a bit, but 84% of respondents find it highly rewarding and fulfilling to be helpful to customers. Furthermore, 86% feel day-to-day growth through their work. Generally speaking, these results indicate high engagement and motivation. We leverage these surveys every year in the process of formulating and updating our medium- to long-term human resources strategy and use this together with input from franchisees to come up with a number of measures and initiatives. I would now like to discuss initiatives to further improve our human capital capabilities. As I've mentioned multiple times, we have focused on increasing the number of members and merchandise sales per club. In fact, we have already achieved these improvements even without increasing our clubs' human resources. We usually have around 3 to 4 instructors per club, but we found that we can increase the number of members and merchandise sales even without the need to allocate any extra personnel. This was possible through the investment in DX carried out during COVID to streamline work processes. Each instructor is issued an iPad that they can use to get a bird's eye view of everything going on in the club, to understand the needs and challenges a specific club member is facing, to see how long a specific club member has been with us, et cetera. In other words, this is a very comprehensive system, allowing our instructors to offer highly personalized guidance and one that systematizes and automates a lot of managerial and paperwork tasks. Additionally, we continue improving our operations in order to derive further improvements in labor productivity. The systematic nature of this approach allows us to grow sales while simultaneously reducing man hours. This translates into higher added value per person that is into an improvement in labor productivity. These are rough estimates, but as you can see, CURVES boasts employee productivity levels, revenue generated and added value that are anywhere between double or triple the industry average, which, in our case, is the overall customer service industry. Against this backdrop, over the past number of years, we have further enhanced investment in human capital with a systematic move toward higher wages and better compensation. Simultaneously, we are also working to improve work conditions and to offer personalized job training, including through the use of online platforms. We are leveraging these initiatives in order to improve our ability to secure and retain talent and provide an environment where talented professionals can live up to their potential. Improvements in instructor and employee satisfaction lead to better service quality and greater customer satisfaction. In turn, these improvements translate into an increase in memberships and merchandise sales to members per club. In summary, we focused on this flywheel effect. This concludes our overview of the Curves for Women business and the overview of our group's overall strengths. I would now like to move on to our new businesses, starting with Men's Curves. Circling back to what I said earlier, the fiscal year ending August 2026 marks a significant expansion of our Men's Curves business. Specifically, we are aiming for a club footprint of at least 180 locations by 2030 and between 400 and 500 clubs by 2035. We expect to have over 200,000 members by 2035. The rationale behind this planned expansion lies in very strong results and growth at existing clubs. As you can see, the vertical bar graph shows the number of members per existing club between the fiscal years ending August 2023 and 2025. This number has grown by around 28% over the past 2 years. The pie chart shows the breakdown of member sign-up routes for Men's Curves. Marketing currently accounts for 35% of sign-ups and referrals for 27%. 90% of these are word-of-mouth referrals from Curves for Women clubs who recommend our clubs to their husbands, family members and friends. Lastly, local community health events account for 21% of sign-ups. Back in 2023, the marketing route was minuscule as sign-ups either came from referrals from Curves for Women members or from local events. We've ramped up our marketing efforts over the past 2 years and successfully increased the number of sign-ups through this route. The marketing and referral routes actually bring us club members from different demographics. Specifically, sign-ups after referrals from Curves for Women members tend to be people in their 60s and 70s. Sign-ups from the marketing route tend to be young seniors in their 50s and early 60s. In light of this, we secured new members from this younger demographic through marketing while also simultaneously growing the category of seniors through word-of-mouth referrals from Curves for Women members. In summary, we now have in place a well-balanced portfolio consisting of non-overlapping customer acquisition channels. Thanks to this framework, we saw strong launches for clubs opened last fiscal year. Club membership 3 months in increased by close to 25% over the past 2 years. In fact, over the past 6 months, the Men's Curves brand has achieved launches that exceed the levels achieved with our regular Women's Curves brand. These results pertain to the first 3 months after launch, which is when Men's Curves clubs now exceed the breakeven point on a single month basis. These results indicate strength. So next year and beyond, we will be approaching existing Women's Curves franchisees and suggest the launch of Men's Curves locations in the same geographical area as part of efforts to expand our network of clubs. Last, allow me to discuss our plans for Pint-UP, formerly known as brand X, which is our brand of physical movement recovery centers. Here's what our Pint-UP facilities look like. Now while these are exercise facilities, our Pint-UP facilities are a novel concept. Our target demographic consists of individuals aged 50 and over who have back, knee, shoulder and joint issues. Pint-UP has been growing fast and currently has a footprint of 37 clubs. We are guiding for between 35 and 40 new club openings next year, and we expect to reach between 380 and 400 clubs by the fiscal year ending August 2030. Lastly, over the next decade, we seek to grow our facility footprint to between 700 and 800 clubs. In summary, this brand is now entering the phase of accelerated club openings. Let's explore this market. Approximately 40 million people in Japan suffer from back, knee and shoulder-related issues. In essence, Pint-UP follows a unique business model that didn't exist before and which was created based on CURVES' 20 years of experience and a 6-year development effort. Moreover, it has zero overlap with Women's and Men's Curves fitness clubs and targets people who are unable to use our regular CURVES services because of things like joint issues. To reiterate, Women's Curves, Men's Curves and this new Pint-UP initiative operate in different markets in a complementary manner within our larger portfolio. This new brand has the following features. First, CURVES Group developed a unique exercising program in-house, which we have termed Physical Movement Conditioning. This program leverages our extensive expertise in the domain of conditioning training. Second, we developed patented exercise equipment in-house to ensure the safe and efficient application of this conditioning training program. Third, Pint-UP facilities make use of DX and the latest technologies to help club members and support club instructors. Fourth, exercise guidance is provided by dedicated instructors in order to ensure customer satisfaction. This unique exercise program designed to resolve these problems is the result of 6 years of development through extensive trial and error. Our Physical Movement Conditioning program was designed to help adjust poor posture and movement habits, which can cause joint issues. This program has 3 main concepts: one, enhancing muscle flexibility; two, improving core stability, for example, in the abdominal region; and three, improving brain-body coordination. Like with our 2 CURVES brands, support offered by expert instructors is vital. Pint-UP facilities have dedicated instructors offering personalized exercise instructions and support based on the customers' specific issues. We are ramping up human resource development efforts so that we can train more instructors and offer the highest quality training. CURVES is carrying out joint research together with Saitama Medical University, the Tokyo Metropolitan Geriatric Hospital and Institute of Gerontology and Ina Hospital to verify the effects of this exercise program. The official description is, "Verifying the effects of exercise program in improving physical pain and movement." These are studies based on randomized and controlled trials, which are considered the gold standard of evidence. This concludes our overview of the growth strategies for our 3 businesses and brands. Last, allow me to use this opportunity to briefly touch upon the foundational philosophy behind our strategy. As you are aware, Japan has an aging population. In fact, although this problem isn't as severe as in Japan, other countries we are growing our club footprint in, such as England, Spain and Italy, also face similar challenges. A big ancillary concern is the difference between longer average lifespans and people's healthy lifespans. This difference is already 12 years for women, meaning 12 years spent with medical problems and requiring nursing care. The leading concern after reaching old age is maintaining health. And as the population continues to age, this extra demand puts a strain on the existing medical and nursing care infrastructure. Simply put, this has created a severe supply-demand imbalance, leading to systemic challenges with capacity and chronically low profitability in these sectors. These are massive challenges, but they also present opportunities of an equal magnitude. It is against this backdrop that CURVES Group is attempting to solve social issues with prevention-based innovation. In other words, our goal is to run a profitable business all the while, having a positive impact on society. "Exercise is medicine," is a well-known phrase in the United States, especially in the sports medicine community. Whether through our 2 CURVES brands or through our new Pint-UP initiative, CURVES Group prides itself on offering exercise programs premised on the principles of evidence-based medicine. Exercise enhances well-being and improves quality of life and helps minimize and optimize medical and nursing care expenses. This has tangible benefits such as a decrease in concerns about the future and an increased labor participation rate. The latter is especially relevant for Men's Curves since many club members report being able to reenter the workforce after joining our clubs. These factors boost consumption and thus help stimulate Japan's economy. In summary, our vision centers around this concept of prevention and its associated benefits when adopted widely within society. We have developed strong cash-generating capabilities by being a one and only business, having a solid customer base and achieving franchise expansion. CURVES will leverage these strengths to achieve a free cash flow CAGR of 10% or higher and target a consolidated payout ratio of 50%. This concludes my presentation. Thank you for your time today. [Statements in English on this transcript were spoken by an interpreter present on the live call.]