WORLD HOLDINGS CO.,LTD. Q4 FY2025 earnings call

Overall Company Positioning & Portfolio Strategy

• The company maintains a diversified multi-business portfolio that balanced performance through a challenging global economic environment marked by U.S. tariff policy volatility, inflation, rising interest rates, and geopolitical risk, enabling consecutive growth in revenue and profit.
• The company emphasizes precise budget planning and avoids repeated downward revisions followed by cosmetic upward revisions, focusing on steady organic growth to build investor confidence.

Current Medium-Term 5-Year Plan Progress (2022-2026)

• The completed large-scale M&A of 4 target companies (all but one via private negotiated transactions): Dimple (sales staffing, 2022), Nippon Technical Center (2023, bid acquisition, critical for manufacturing growth), Yamato Staff Supply (logistics joint venture with Yamato Holdings, 2023), enabling significant scale expansion.
• 2022 and 2023 delivered balanced revenue and profit growth, while 2024 and 2025 prioritized hitting 300 billion yen in total sales (the 5-year target), leading to profit coming in slightly below original budget. 2026 is planned as the final acceleration year for the plan.
• The company has focused on refining existing acquired businesses over the past 2 years to strengthen internal collaboration, which has resulted in increased inbound joint venture proposals from external customers.

Products HR Business Operational Highlights

• The company proactively reallocated personnel between sectors from Q2 2024 to early 2025 in anticipation of Trump tariff impacts, limiting the impact of policy changes. Growth was led by semiconductor-related services for AI server and data center clients, which performed at or above plan.
• 2025 was designated the 'AI Year' with targeted internal investment in AI and IT digitization, which delivered operational improvements.
• The company's longstanding 'co-sourcing' (collaborative sourcing) strategy delivered material progress: joint ventures with Toho Titanium (TOHO WORLD, acquired Toho Tech for titanium processing), joint venture SUBARU nw Sight with SUBARU and Nisso Kosan (started full operations in December 2025 to serve the entire SUBARU supply chain), and acquired product development/testing contracted business from Bridgestone Plant Engineering starting January 2026.
• The company leverages its 11 in-house technical training centers to deliver large-scale in-house reskilling (500-1000 employee batches) to support career advancement and meet client demand for skills.

Service HR Business Operational Highlights

• Growth drivers included expanded contracted operations at Yamato Staff Supply, growing foreign worker dispatch in logistics centers, strong Dimple customer service revenue from Osaka Expo, and the opening of a second company-operated logistics warehouse in Hisayama, Fukuoka (opened September 2025).
• Strategic priorities are horizontal expansion of integrated logistics warehouse contracting know-how, capitalizing on inbound tourism growth to expand the customer service/sales segment led by Dimple, and solving the industry-wide labor shortage via the company's labor management and system capabilities.

Real Estate Business Operational Highlights

• Core strategy is maintaining an appropriate business scale (target 40-50 billion yen annual revenue, no overexpansion) with industry-leading high capital turnover (1 rotation per year vs. the industry standard 2.5-3 years) and top-tier project profit margin of ~20% (vs. 6-7% industry average), enabled by the company's strength in land procurement and competitive pricing.
• The company mixes long, medium, and short-term projects to maintain steady turnover: long-term 5-10 year redevelopment projects (with controlled upfront investment), medium-term developments, and short-term 2 rotations per year renovated condominium sales. The company also accumulates stable stock revenue from rental properties.
• Opened the "Residential Yaesu Gallery" in July 2025 as a permanent brand hub for the company's residential condominium business, to strengthen brand competitiveness amid intensifying competition in central Tokyo urban markets. Three high-end Tokyo condominium projects (Residential Koenji, Residential Shinagawa-Ebaramachi, Residential Nakano-Saginomiya) are scheduled for delivery in 2026, with average per-tatami prices around 7 million yen, double the company's previous peak high.

Information Communications & Agricultural Park

• Information Communications: Downsized to improve profitability, continues to persevere in the communications/web space, with a growing profitable energy cost reduction consulting division for corporate clients.
• Agricultural Park: Short-term loss from weather and Osaka Expo impacts, but long-term renovations are underway to support future expansion into 6th-industry business models.

Overall company: Total net sales for FY2025 December was 284.35 billion yen, with operating profit of 10.82 billion yen, achieving record high all-time results with both revenue and profit growth.

1. Products HR Business (manufacturing-focused HR services):
   • 2025 actual revenue: 121.232 billion yen, up 10.884 billion yen (9.9% YoY), 1.4% above plan. Segment profit: 4.414 billion yen, up 1.106 billion yen (33.4% YoY), 0.3% above plan. Revenue contribution to total company: ~42.6%.
2. Service HR Business (logistics and customer service/sales HR services):
   • 2025 actual revenue: 90.552 billion yen, up 11.699 billion yen (14.8% YoY), 7.9% above plan. Segment profit: 2.293 billion yen, up 0.598 billion yen (35.3% YoY), 48.8% above plan. Revenue contribution to total company: ~31.8%.
3. Real Estate Business:
   • 2025 actual revenue: 57.128 billion yen, up 47% YoY, ~10% below plan. Segment profit: 3.654 billion yen, up 21.7% YoY, 1.8% above plan. Revenue contribution to total company: ~20.1%.
4. Other businesses (Information Communications, Agricultural Park):
   • Information Communications: Scaled down to 1/3 of original size as planned, now generates sufficient profit. The corporate energy cost reduction division continues to grow steadily.
   • Agricultural Park: Recorded a rare net loss in 2025 due to unseasonable bad weather (cold/snow in February, rain on peak weekends in spring/autumn) and negative spillover impact from Osaka Expo. Renovation work has been ongoing for 3-4 years, with another 3-4 years remaining, to support 20-30 years of future operation and enable new 6th-industry initiatives.

• Overall full-year 2026 guidance: Maintains the 5-year plan target of 300 billion yen in total sales, which the company confirms has sufficient potential to be achieved. The original 15 billion yen operating profit target could be achieved via a one-off real estate sale, but the company has adjusted the guidance down to 12.5 billion yen to reflect current planned growth, maintaining a forecast of full-year increase in both revenue and profit.
• Products HR Business 2026 guidance: Revenue of 133.375 billion yen (+12.143 billion yen, +9.9% YoY), segment profit of 5.106 billion yen (+0.692 billion yen, +15.7% YoY). Demand remains strong for semiconductor manufacturing equipment driven by U.S. 300mm wafer factory construction, and the automotive segment is seeing a recovery, though EV-related demand remains sluggish.
• Service HR Business 2026 guidance: Revenue of 99.493 billion yen (+8.941 billion yen, +9.9% YoY), segment profit of 2.538 billion yen (+0.244 billion yen, +10.7% YoY). The new Hisayama warehouse will contribute a full year of revenue in 2026.
• Real Estate Business 2026 guidance: Revenue of 50.692 billion yen (-11.3% YoY due to the prior year's large BIZIA Kokura project impact), segment profit of 4.102 billion yen (+12.3% YoY). The company will continue to focus on prudent development and optimal sales timing.
• The company has a natural concentration of real estate deliveries in Q4, and the 2026 full-year growth target remains fully achievable.

• Macroeconomic and political risks: Unprecedented high level of political impact on the global economy, with continued volatility from U.S. tariff policy, persistent inflation, rising interest rates, and geopolitical uncertainty, creating a challenging operating environment.
• Real estate market risks: Persistent high property prices, market bipolarization (across regions and customer income segments), rising construction costs driven by higher imported material prices from yen depreciation, and rising labor costs that have made rural development unprofitable even with free land. The company has observed a multi-year real estate bubble with no visible signs of correction, creating ongoing market risk.
• Business-specific risks: Agricultural Park operations are exposed to unavoidable weather-related volatility, as seen in the 2025 loss. EV-related demand in the manufacturing sector is currently experiencing sluggish growth.
• M&A risks: Large-scale public M&A markets have been highly competitive post-Lehman Shock, making large acquisitions difficult to complete on attractive terms, and the company is not competitive in public bidding against larger industry players.

Q: This year is the final year of the current 5-year plan, and results are on track to hit new peak profit, capping 5 years of steady growth. Management has focused on sales growth this period and laid important groundwork for future growth. What is the current vision and direction for the next 5-year plan, and what segments have positive outlooks right now? In particular, can you speak to direction for the human resources business amid AI and semiconductor growth, for the service business amid demand for employment expansion, and for real estate given the potential for further scale upside that was referenced earlier?

A: (Eikichi Iida, Chairman and CEO) Fundamentally, in the manufacturing-focused HR space, World Holdings is already the top industry player, and we are deepening our strategy to fulfill our role amid the current economic environment. I will hand off detailed comments to Kuriyama.

A: (Katsuhiro Kuriyama, HR Business Head) Right now, market uncertainty is extremely high, with unclear direction for yen exchange rates and ongoing structural decline in the working age population. We are building the next 5-year plan centered on how we can solve our clients' core management challenges amid this environment. Given our broad coverage across multiple industries and client segments, we have unique capabilities that no other competitor offers, including connecting clients to new business opportunities. We are also planning to place greater focus on overseas expansion, to jointly solve client challenges and drive our own business growth.

A: (Eikichi Iida) We plan to deepen our joint venture initiatives to clarify our core strengths. For example, Nippon Technical Center, which we acquired, is based in Himeji and positions us to capture growth in the heavy chemical industry. We also added Creative, a former Hitachi Zosen subsidiary focused on plant-related businesses, so we now cover from materials through heavy chemical. Nippon Technical Center now gives us in-house capability from conceptual design through manufacturing of equipment, including industrial robots, which greatly deepens the value we can deliver to clients. Additionally, Toho Tech (acquired last year) has titanium manufacturing, processing, and welding capabilities that also enable stainless steel processing; titanium is one of the strongest industrial materials, with wide-ranging applications including aerospace. We will continue to prioritize the semiconductor segment, but we are systematically planning for the next and subsequent waves of growth, and these plans are progressing almost on schedule. Materials-related growth is progressing in the same cautious, planned way. For real estate, to put it simply, the regeneration business has constant ongoing demand. Large companies are very concerned about hidden defect risk in older properties, and we specialize in taking on that risk and have full confidence in our capabilities. In particular, older buildings that would previously have been scheduled for reconstruction after 30-50 years are now seeing their usable life extended by 10-20 years, so building regeneration has become an increasingly important market. The same applies to land regeneration: there are many underutilized or damaged plots in Tokyo that large players will not touch, and we aim to be the number one player in this comprehensive regeneration space, which we will strengthen in the next 5-year plan. In human resources and education, we also aim to become number one across all segments including research, sales, and manufacturing contracting. We have pursued scale expansion because we need size to compete globally: to compete against large overseas firms, we need scale to reach the 500 billion yen to 1 trillion yen size required to compete. We have held back on aggressive expansion in the past, but we will now accelerate adding group companies as part of our growth strategy. The next 5-year plan will see an increase in our overseas exposure, and we are currently evaluating multiple initiatives to achieve this goal.