2332.T

Corporate Update & M&A Integration

• The acquisition of Sept in April added 106 employees, bringing total consolidated headcount to over 1,100, with 153 net total headcount increase year-over-year. Domestic operating locations increased to 7: a new location was opened in Kitakami to strengthen business with major semiconductor clients based in Iwate, and the existing Yokkaichi location was relocated and expanded to a new near-station building to accommodate team growth and improve working conditions.
• Management has maintained full strategic consistency with the 2024-2026 Phase 2 medium-term management plan. Sept was acquired specifically to serve as a capacity base for existing maintenance and operation services, allowing Quest to upskill its existing engineers for higher-value solution business without sacrificing existing revenue or profitability. Active talent rotation and cross-company collaboration between Quest and Sept is already underway, with shared strategy aligned to reduce opportunity loss and improve margins by deploying Sept staff on Quest projects. Back-office system integration (accounting, HR, attendance) is in progress, with full accounting system unification targeted for April 2026 to improve indirect operation efficiency.

Growth Initiatives

• Semiconductor business expansion is supported by the new Kitakami location, to better serve growing client demand in the region.
• High-value solution business is being expanded gradually, with management focusing on building real co-creation client track records one-by-one rather than announcing unproven service menus. Current focused areas include: (1) semiconductor and manufacturing sector support: generative AI-enabled knowledge utilization, code refactoring, and inventory control visibility solutions; (2) security-focused companion support services: the company recently co-hosted a promotional event with CyberReason to boost leads for its SOC services, and also promotes Spotfire data analysis as part of its data engineering service offering.
• The company's core competitive positioning is built on the value proposition of combining IT, OT (Operation Technology), and customer-focused service to deliver client satisfaction, aligned with its corporate slogan "The future of IT lies in 'thank you'".

• Full-year 2025 fiscal year guidance is maintained at 16.86 billion yen in revenue and 1.18 billion yen in operating profit. The lower first half profit is attributed solely to one-time non-recurring costs, which will not repeat in the second half, and the company's historical business model already has a natural profit bias toward the second half, so management confirms the full-year target is fully achievable.
• The 2024-2026 medium-term sales target is on track to be achieved ahead of schedule due to the Sept acquisition, and management expects to fully recover profit in the second half to meet medium-term targets.
• The full-year dividend is forecast at 55 yen per share, continuing the steady upward trend in shareholder returns.
• For the 2030 target of over 20 billion yen in revenue, management is targeting a 10% operating profit margin, with an internal expectation that results may even exceed this target, by growing the share of higher-margin solution business to 30% of total revenue.

1. Priority Growth Segment (Semiconductors & Manufacturing): On a 2-company consolidated basis (excluding Sept), revenue share increased 3 percentage points year-over-year, driven by growing new projects from semiconductor clients amid the semiconductor market recovery, with particularly strong growth in memory semiconductor projects. Including the newly acquired Sept, overall segment share remains aligned with prior year levels as Sept focuses primarily on finance and ICT projects. 2. Stable Growth Segment (Finance, Entertainment, Information & Communications): This segment makes up the majority of Sept's revenue, and overall segment share is largely unchanged year-over-year on a 3-company consolidated basis. 3. Social Issue Solutions Segment (Public, Logistics, Power Infrastructure): Absolute revenue remains small at this stage, with the company securing new infrastructure service projects primarily from power sector clients. Aggregate cumulative first half revenue is 8.8 billion yen, an increase of 1.6 billion yen (over 20%) year-over-year, primarily driven by the consolidation of Sept. Cumulative operating profit is 487 million yen, which missed the prior year result by approximately 10 million yen, a year-over-year decrease.

• Lower-than-expected progress on price pass-through to clients amid industry-wide wage increases could pressure profit margins.
• The company has struggled to hit its mid-career hiring target, with only around 50% of the goal achieved for multiple years, which could slow growth plans.
• Solution business build-out is still in an early phase, and current delivery capacity may not yet meet client expectations, which could impact market adoption.

Q: Why is Quest's profit margin lower than peers, and how is the company progressing on price negotiations to pass through rising wage costs to clients? / A: Management acknowledges the lower profit margin as a clear identified issue. Historically, price negotiations were handled by account managers with long-term client relationships, who often hesitated to push for price increases. Now, a cross-functional sales team leads price negotiations with formal guidelines, negotiating individually based on each client's circumstances. While 100% of desired price increases have not been achieved, some clients have already agreed to price hikes, others have agreed to implement increases at a future date, and progress is ongoing.

Q: What is the company's 2030 operating profit margin target for when revenue exceeds 20 billion yen? / A: The public target is a 10% operating profit margin, with internal management believing this may even be conservative. To achieve this, the company is growing the share of higher-margin, less labor-intensive solution business, targeting to grow this segment to 30% of total revenue by 2030. The current priority is training existing engineers from the traditional maintenance business to transition into solution roles and scale this new segment as quickly as possible.

Q: Why do major semiconductor clients continue to select Quest over other providers? / A: Quest's key advantage is that its engineers have deep domain expertise in semiconductor manufacturing and design processes, and can communicate with clients using shared industry-specific language. Major semiconductor clients prefer to work with a small number of trusted vendors for peripheral data work (such as data cleansing and master data management) that their internal IT teams do not want to handle, and Quest's deep domain knowledge makes it the ideal partner for this work, with no increased non-disclosure risk as Quest does not access clients' core confidential black-box manufacturing processes.

Q: What is Quest's solution business, how does it differ from competitors, and what is the strategic focus? / A: Quest is focused on four solution domains, with current priority on security and data engineering, especially for its core semiconductor and manufacturing clients. The company leverages its existing OT (operations technology) domain expertise to combine IT and OT, helping clients organize scattered plant data, improve efficiency using generative AI for tasks like automatic specification document creation, and provides companion co-creation services to solve client pain points. Many clients are already switching to Quest from existing IT vendors for this combined OT-IT offering, which is the company's key differentiator.