1417.T

Overall Financial Performance

• All-time record H1 results for order backlog, revenue, and gross profit, with year-over-year (YoY) revenue and profit growth
• Total order value: 341.7 billion yen, 22.5 billion yen higher YoY; 80% of growth came from non-carrier business, with NEXT GIGA School orders leading strong performance in ICT Solutions
• Operating profit: 7.9 billion yen, 3.2 billion yen higher YoY; operating margin improved 1.2pp to 3.1%
• Net profit: 4.6 billion yen, 3.2 billion yen higher YoY
• EBITDA: 14.7 billion yen, up from 11.1 billion yen in the prior period, showing steady improvement in core earnings power

Strategic Shift from Additive to Multiplicative Group Management

• After expanding via M&A (Seibu Construction, Kokusai Kogyo) as an additive growth strategy, the company now prioritizes cross-company synergy creation (multiplicative connected management) to expand customer value and business areas
• Established a group CMO role to lead customer-centric marketing and sales expansion, to accelerate customer-oriented transformation

Business Area Expansion Initiatives

• Y2S Acquisition and O&M Business Expansion: Acquired cloud maintenance firm Y2S in October 2025 to establish a combined "cloud + on-site maintenance" structure. The company plans to expand managed operation monitoring services, and eventually extend O&M beyond ICT to solar power, energy storage, ZEB, and urban development infrastructure
• Containerized Data Center Business for AI Demand: Leveraging strong AI-driven data center demand, the company offers end-to-end containerized data center development (site survey, design, construction, maintenance) across air-cooled, large-format, and water-cooled variants, partnering with Morgenrot for software services. The business operates two models: GPU resource-only access for customers, and full containerized data center ownership. It targets 7 billion yen in orders by fiscal year end, up from 1 billion yen last fiscal year

5 Changes Strategic Transformation Progress

• Change 1: Human-Centric Management: Over 800 employees have relocated to growth areas, on track to hit the 2026 target of 1,000+. All other H1 targets (Mirai College utilization, engagement score improvement, new graduate hiring) have been met
• Change 2: Accelerate Business Growth: Green energy business is only 20% complete H1 due to seasonal revenue concentration in H2, but orders have been secured for EV and energy storage projects. Trilateral synergy between Seibu Construction, Kokusai Kogyo, and MIRAIT ONE delivered 12.4 billion yen in H1 orders, already exceeding last full year's 9.1 billion yen, on track to hit the 20 billion yen full year target. Total data center-related H1 orders hit 31 billion yen across containerized projects, Lantrovision regional expansion, electrical construction, and UPS orders
• Change 3: Profitability Improvement: Communication infrastructure domain gross margin improved 1.1pp YoY H1 and 1.4pp vs 2022 full year, with continued value chain reform and organizational restructuring planned to drive further improvement
• Change 4: Data Insight Management: A secure generative AI platform has been rolled out to 41 group companies, with 60% of total employees (9,577 monthly users) accessing the service. 25 custom internal applications (including project risk assessment tools) are used 6,912 times per month to reduce unprofitable projects and improve on-site productivity. The company targets AI agent deployment across all business functions to accelerate reform
• Change 5: Strengthen ESG Governance: Progressing on GHG reduction and industrial waste final disposal rate reduction targets, restructured the ESG committee into a sustainability committee, signed the UN Global Compact, and acquired multiple ESG and workplace equality certifications

Shareholder Return

• Maintains target total payout ratio of 50% to 70%, with stable dividend growth and flexible treasury stock purchases. Planned full year dividend is 85 yen, a 10 yen increase YoY. H1 treasury purchases of 3 billion yen put the current total payout ratio at 50%, with further returns to be evaluated based on market and performance conditions

• Management maintains the full year 2025 fiscal year guidance unchanged: total order value of 630 billion yen, revenue of 620 billion yen, EBITDA of 48 billion yen (EBITDA margin 7.7%), operating profit of 34 billion yen (operating margin 5.5%), net profit of 21 billion yen
• ROE is guided to ~8% for the full year, which is on track to be achieved as of H1, aligned with the medium-term target of 10%+
• EPS is guided to 236 yen, a 25% increase YoY
• Containerized data center business guidance remains 7 billion yen in orders for the current fiscal year
• Trilateral synergy order target of 20 billion yen for the full year remains unchanged

For the first half (H1) of the 2025 fiscal year (2026 March year end):

1. Environment and Social Innovation Business: Revenue of 82.9 billion yen, 2.2 billion yen lower year-over-year (YoY), accounting for 32% of total company revenue. Electrical and HVAC services grew, while planning/consulting remained flat YoY; revenue decreased due to large projects shifting revenue recognition to the full year end.
2. ICT Solutions Business: Revenue of 69.9 billion yen, 7.7 billion yen higher YoY, accounting for 27% of total company revenue. Growth was driven by strong performance from global subsidiary Lantrovision (data center cabling), growth in LAN/software sales, and large expansion from NEXT GIGA School related product sales.
3. NTT Business: Revenue of 90.3 billion yen, 4.9 billion yen higher YoY, accounting for 34.9% of total company revenue. Growth came from increased fixed-related work and continued expansion of 5G quality improvement investments for mobile.
4. Multi-carrier Business: Revenue of 15.7 billion yen, 1.5 billion yen lower YoY, accounting for 6.1% of total company revenue. 5G base station construction-related work declined due to continued order reduction from prior years, partially offset by growth in fixed/CATV related work.

By domain: Non-carrier business (enterprise/environmental social infrastructure domain) accounted for 59% of total revenue, while the priority growth "Mirai Domain" accounted for 41% of total revenue. Total company revenue was 258.8 billion yen, 8.9 billion yen higher YoY.

• Large size projects in environment/social innovation and other segments have a higher concentration of revenue recognition in H2, creating a risk of project completion delays pushing revenue recognition to the next fiscal year
• Rebuilding construction capacity for Docomo's 3x increase in capacity improvement work after prior capacity downsizing presents execution challenges
• NEXT GIGA School-related product sales have lower gross margin, which weighed on H1 ICT Solutions profitability
• Green energy business has a strong H2 revenue bias, so H1 progress is slower than full year target

Q: ICT Solutions gross margin hit 13.4% in H1, below the full year target. What drives the H1/H2 difference, and can the full year target be met? / A: The lower H1 margin is caused by the high volume of low-margin NEXT GIGA School product orders concentrated in the first half. In the second half, higher-margin projects will make up a larger share of revenue recognition, allowing the company to recover and hit the full year gross margin target.

Q: How will Docomo and NTT East/West trends impact NTT Business performance over the medium term? Can the company handle the 3x increase in Docomo's H2 capacity work? / A: Docomo plans to increase capacity improvement work 3x from H1 to H2, and this elevated pace will likely continue for around 3 years starting 2026. For NTT East/West, metal-to-fiber migration and metal line removal work will run through 2035, providing steady medium-term work. While the absolute volume of work is large, and rebuilding capacity after prior downsizing is challenging, the company has nearly secured sufficient resources and is working closely with Docomo to level-loading work over several years, so execution is on track. NTT Business will remain steady through the end of this fiscal year and for the next 2-3 years.

Q: What is driving Lantrovision's strong H1 performance, and can this growth continue? What is the profitability situation for Seibu Construction, and can it improve going forward? / A: Lantrovision's growth comes from three factors: AI-driven demand growth from its core cloud and foreign finance clients, expansion across 12 Asian countries with particularly strong growth in India's fast-growing data center market, and steady growth from its Singapore electrical infrastructure business. This strong performance is expected to continue into H2 and next fiscal year. For Seibu Construction, the 146 million yen H1 net loss is entirely from goodwill amortization from the M&A; pre-amortization profit is positive and has improved YoY. Seibu's order backlog is at an all-time high, with near-full year orders already secured H1 via group synergy, and the company targets to improve full year profit over last year in H2.

Q: What is the demand trend for NEXT GIGA School, and will gross margin improve in H2? / A: Demand is broadly in line with original forecasts, with H1 order volume meeting targets driven by municipal bidding schedules. This fiscal year is expected to be the peak for renewal demand, with some carryover into next year. Since low-margin product orders are concentrated in H1 due to municipal bidding timelines, H2 will have a lower share of these sales, so overall ICT Solutions gross margin will improve in H2. The company also plans to pursue additional DX project orders from municipalities it has already worked with for NEXT GIGA School to drive further growth.