HIP CORPORATION Q4 FY2025 earnings call

Overall Financial Performance

• Total company revenue reached 5.969 billion yen, up 5.5% year-over-year, hitting a new all-time high. Operating income was 565 million yen, up 2.0% year-over-year; ordinary income was 564 million yen, up 2.4% year-over-year; net income was 413 million yen, up 6.5% year-over-year. All profit metrics outperformed initial forecasts.
• Cost of sales increased 6.2% year-over-year, primarily driven by investments in employee benefits including base salary hikes (including entry-level new graduate pay) and increased bonus payouts.
• Net income grew faster than other profit metrics due to qualification for the wage increase promotion tax credit, resulting from the company's active employee benefit improvements.

Workforce & Operational Metrics

• Total number of engineers at period-end was 771, an increase of 23 (3.1%) year-over-year. Total annual hires were 80 (48 April new graduates, 3 October new graduates, 29 mid-career hires), roughly flat year-over-year, with higher mid-career recruitment and improved retention driving net headcount growth.
• Annual average utilization rate reached 94.6%, up 0.5 percentage points year-over-year, just below the company's 95% target utilization rate. Utilization started at 90.6% in April (typical for new graduate onboarding) and rose to 96.2% by period-end as new hires reached full operational capacity.
• Average technical fee per unit rose 3.1% year-over-year to 4,217 yen, marking a larger increase than the prior year, following successful fee negotiations with clients amid broad industry wage growth.
• Average daily working hours per engineer fell slightly to 8.63 hours (-0.04 hours year-over-year), consistent with recent trend between 8.6 to 8.7 hours, and no large future changes are expected.
• Revenue concentration ratio for the top 10 clients fell 0.3 percentage points to 25.0%, down from 34% 10 years ago. The company continues to prioritize expanding its client base to reduce reliance on any single customer or industry, stabilize earnings, and provide more diverse experience for engineers to build skills.

Strategic Direction

• The company will mark its 30th anniversary in September 2025, and is pursuing business model restructuring to achieve its long-term goal of becoming a 100-year company. Its core vision is to become a firm chosen by both engineers and clients, focused on supporting engineers' career growth.
• Four core strategic priorities for sustained growth:
  • People Investment: Continue to improve employee compensation, revise and invest in engineering training programs to build a growth-focused platform for engineers.
  • Recruitment Enhancement: Update PR tools and the corporate website to better communicate the company's value proposition to prospective applicants, and attract candidates aligned with its career development philosophy, amid intensifying competition for skilled technical talent.
  • Sales Enhancement: Leverage the company's nationwide office network to better support existing engineers and clients, and pursue new development project orders to build a foundation for continued engineer growth.
  • Profit Margin Improvement: Revise internal management systems, rules and frameworks to adapt to changing market conditions, and update operations to align with current business needs.

1. Transportation Equipment: Revenue increased 7.3% year-over-year, maintaining growth rate consistent with the prior term. It is the largest segment by revenue contribution, accounting for 32.3% of total company revenue. Growth is driven by sustained high demand for automotive-related projects, including increasing development work for EVs and PHVs, plus an 18% year-over-year revenue increase from defense-related development projects.
2. Information Processing & Software: Revenue increased 12.7% year-over-year, making it the fastest-growing segment. Growth is driven by rising project volumes in in-vehicle systems and communications-related development.

• For the Fiscal Year 2026 March Term, the company forecasts total revenue of 6.261 billion yen, up 4.9% year-over-year; operating income of 568 million yen, up 0.7% year-over-year; ordinary income of 569 million yen, up 0.8% year-over-year; and net income of 385 million yen, down 6.9% year-over-year. The company plans to maintain near-prior-term profit levels while pursuing active investments in people for long-term sustained growth.
• Operational guidance assumes utilization rate and average working hours will remain roughly flat at FY2025 levels. Recruitment plans include 38 new graduate hires joining in April 2025, 50 mid-career hires, and a target of 60 new graduate hires for April 2026 entry.
• The company updated its dividend policy in May 2025 to add a clear target payout ratio of 50%, with a commitment to progressive dividends aligned with business growth and active shareholder returns. For FY2025, the company upward revised its full-year dividend to 54 yen per share (up 4 yen from initial guidance), for a payout ratio of 51.1% and total shareholder return (including prior share buybacks) of 62.3%.
• For FY2026, to mark the company's 30th anniversary, management plans a total dividend of 70 yen per share, consisting of a 55 yen regular dividend plus a 15 yen commemorative special dividend, representing a 16 yen per share increase from FY2025, with a planned payout ratio above 70%.

• The impact of U.S. tariff policy remains uncertain at present, but management expects no immediate material impact on the company's core design and development business.
• The technical recruitment environment is undergoing rapid change, with client companies including manufacturers increasingly implementing targeted hiring programs such as job-based employment to compete for skilled talent, creating intensifying hiring competition for the company.

The provided transcript does not include a question and answer section.