Open Up Group Inc. Q4 FY2026 earnings call

Company Overview

• Open Up Group was formed from the 2021 merger of Yumezane Holdings and BNX Group, renamed in 2024 and retains the original ticker 2154. Its corporate purpose is "Open up individual potential through rewarding work".
• Core business is high-margin permanent employment engineer派遣 for construction, mechanical, electrical, and IT sectors, with daily rates of 3,000 to 6,000 yen, far higher than general clerical or manufacturing派遣.

Market Environment

• Japan has an unusually high outsourcing rate for engineers (72% for IT talent, 55%+ for manufacturing talent), driven by persistent lifetime employment norms that make firms prefer flexible external hiring, and rapid technological innovation that requires access to specialized external skills.
• The engineer派遣 market has grown at a steady ~9% annual rate since the 2000s, with resilient demand even during recessions, as outsourcing is now deeply embedded in Japanese production and development processes.
• Experienced engineer hiring is extremely difficult across the industry, with experienced IT engineer job opening ratios reaching 11.93x, and over 6x for construction and mechanical/electrical sectors.

Differentiated Business Model

• Unlike traditional industry "customer-first" pull models that match pre-existing engineer talent to customer requests, Open Up Group runs an "engineer-first" push model focused on hiring and upskilling inexperienced young candidates, then matching them to roles aligned with their skills and career goals.
• The company operates dedicated in-person training facilities for all segments: hands-on IT training in Akihabara, simulated clean room training for semiconductor roles in Kiden, and simulated construction site training for construction engineers. Training lengths vary from 2 weeks for construction to 7-8 months for IT embedded development roles.
• The company explicitly encourages and approves engineer transfers to client companies when requested by both parties, with 473 transfers in the last fiscal year (up from 404 the prior year). This creates a positive recruitment cycle by demonstrating clear career progression for new hires, and transfers go to major blue-chip firms including leading automakers, semiconductor manufacturers, general contractors, and SIers.
• This model has delivered the highest compound annual growth rate for engineer headcount among major Japanese engineer派遣 peers, outperforming slower-growing competitors focused on experienced hiring.
• The company has achieved 13 consecutive years of dividend increases, with a core shareholder return policy of targeting a 50%+ payout ratio.

Recent Strategic Actions

• Completed a full business portfolio restructuring by 2025: exited all low-margin non-core businesses (domestic manufacturing and overseas blue-collar派遣), and executed a swap M&A with UT Group to acquire non-core construction and Kiden/IT businesses, concentrating all management resources on the high-margin core engineer segments.
• The 2024 overtime regulation for construction led to a 5-6 hour monthly reduction in overtime, but the company's pre-emptive price hike absorbed nearly all negative revenue impact.

Open Up Group currently operates two core product segments after completing its business portfolio restructuring:

1. Construction Engineer Segment: Has approximately 9,000 enrolled engineers, equal to 37.5% of the company's total engineer headcount. Post the 2024 overtime cap regulation for the construction industry, the company implemented a price hike in October 2023 that has been nearly fully adopted, and the reduction in billable hours from lower overtime is almost fully offset by higher unit pricing. The company holds the industry-leading position in this segment, with more than double the enrolled engineer count of the second-largest competitor, and added approximately 10 billion yen in annual revenue from recent acquisitions of UT Construction and IRL Co., Ltd. The segment's operating rate is 94% to 95%.
2. Mechanical, Electrical, and IT (Kiden/IT) Engineer Segment: Has over 15,000 enrolled engineers, equal to 62.5% of the company's total engineer headcount. The Kiden sub-segment has a very high operating rate of 97% to 98%, while the overall IT segment has an operating rate of 92% to 93% due to longer pre-placement training requirements.

The divested low-margin segments included a UK blue-collar派遣 business sold in March 2025 with annual revenue of ~35 billion yen and an operating margin of only 1.5%, and a domestic manufacturing派遣 segment sold to UT Group in 2023, also due to low profitability.

• For the 2025 June fiscal year, full-year revenue guidance was revised downward by 8 billion yen from the original forecast, due to the sale of the low-margin UK overseas business. Operating profit guidance was revised slightly downward from 16 billion yen to 15.5 billion yen, but the overall operating profit margin is projected to land near 10%, an improvement from prior projections due to the exit of low-margin assets.
• The full-year annual dividend is maintained at 75 yen per share (30 yen interim, 45 yen year-end), in line with the original forecast, with an expected payout ratio of 59.3%, maintaining the company's 50%+ payout policy and 13 consecutive years of increases.
• Three recently acquired companies (two from UT Group, one construction-focused acquisition) have not yet reached the company's target margin, but are expected to drive profit growth from fiscal 2026 onward as integration synergies are realized.
• The company's medium-term target for the 2026 June fiscal year is to achieve an operating profit margin of 10% or higher, with 10%+ annual growth for both revenue and operating profit, 10%+ annual growth in domestic engineer headcount, and continued prioritization of shareholder returns with flexible optimization of capital efficiency.

• Persistent industry-wide difficulty in hiring experienced engineers, which has slowed growth for peer firms that rely on experienced candidate recruitment, though Open Up Group's inexperienced-focused model mitigates this exposure.
• Newly acquired companies have not yet reached the company's target operating margin, creating near-term downward pressure on group-wide profitability until integration is completed.
• The 2024 overtime regulation for the construction industry created a structural reduction in billable overtime hours, which could have negatively impacted revenue if price hikes were not accepted by clients, though this risk has been largely mitigated by the successful full rollout of higher pricing.

The provided transcript does not include a transcribed question and answer section, only a note that a Q&A session was held.