Ad-Sol Nissin Corporation Q4 FY2025 earnings call

• Overall Financial Performance • Both total revenue and operating profit hit consecutive all-time record highs, exceeding two upward revisions issued during the fiscal year. Growth was led by expanding client ICT investment in the energy, public, and service sectors. • Operating profit grew 19% year-over-year to 1.71 billion yen, with operating profit margin rising 0.9pp to 11.1%. Increased selling, general and administrative expenses from the Kyushu branch relocation/renovation and talent investments were more than offset by growing gross profit. • Recurring profit grew 18.9% year-over-year to 1.766 billion yen, with return on equity (ROE) improving 3pp year-over-year to 17.2%.

• Capital Strategy and Shareholder Returns • Set a new medium-term target of 22% ROE to be achieved by the March 2029 fiscal period, alongside increased focus on cost of capital and share price-conscious management. • Implemented a 2-for-1 stock split effective April 1, 2025, acquired 494,000 additional treasury shares in February 2025 (following 100,000 shares acquired in May 2024), and canceled 450,000 treasury shares as of March 2025. • Increased the payout ratio target to 50% or higher starting from the March 2026 fiscal period, and set a new target of 6% or higher for return on equity (DOE).

• Mid-Term Strategy Progress • The "New Canvas 2026" mid-term management plan achieved its financial targets one year ahead of schedule, with the existing strategic direction maintained going forward. • The company is shifting business focus toward higher-margin, high-growth sectors and key clients, expanding direct client engagement and geographic reach to grow core businesses like power/gas energy and payment services.

• Human Capital Strengthening • Expanded hiring for both new graduate and mid-career engineers: 49 new employees joined in April 2025, with hiring of 70+ new graduates planned for April 2026 entry. • Implemented a third consecutive round of compensation revisions with an average pay increase of 7%, and has consistently raised entry-level starting pay. The company maintains a low 5.8% annual turnover rate (including retirement) below industry averages.

• Next-Generation SI Business Model Buildout • Upstream Consulting Expansion: Selected 58 employees for dedicated consulting training starting in FY2025, and already secured multiple consulting project wins. Aims to build a 100+ consultant team during the current fiscal year, with plans to partner with other firms and expand global development capacity to support end-to-end project delivery. • Global Development in Vietnam: Is building toward a 1,000 highly skilled IT engineer workforce in Danang, Vietnam, centered on its affiliate Techzen which specializes in flexible agile development (rather than traditional waterfall offshoring). Partners with Danang National University to train local talent, and expects expanded engagement with major clients in FY2026. • AI Business Deepening: Runs AI R&D through its in-house AI research lab, with participation in national AI quality improvement projects and industry-academia collaboration with the University of Tokyo. Has built an in-house generative AI tool (AdsolChat) for all employee use, and now has over 100 AI experts with practical implementation experience serving client projects. • Data Utilization Business Expansion: Launched a dedicated data business unit in January 2025 to grow its D×D Leap data management service and develop new offerings, with a target of 50 trained data scientists. Focuses on supporting "true DX" that drives data-based business transformation and new service development. • Next-Generation Energy: Leverages its existing experience in power system development, disaster prevention systems, and IoT, paired with an alliance with Schneider Electric, to deliver full-service energy management systems (from consulting through monitoring, control, and microgrid resilience building) for high-energy consumers. • Smart Infrastructure/Life: Uses its Digital Innovation Labs and dedicated GIS Technical Center to pursue growing demand for geographic information systems for smart city development, with over 650 lab visitors and growing order flow from these initiatives to date.

1. Social Infrastructure Business: Revenue increased 17.6% year-over-year to 9.731 billion yen, contributing 63% of total company revenue. Growth was driven by strong performance in the power and gas energy segment, paired with solid revenue growth in the public sector. 2. Advanced Industry Business: Revenue decreased 1.2% year-over-year to 5.731 billion yen, contributing 37% of total company revenue. The temporary decline was caused by client-driven project timeline shifts and a lull between projects in the manufacturing and enterprise segments. Overall consolidated revenue for the fiscal year was 15.463 billion yen, an increase of 9.8% year-over-year. Total order intake increased 3.4% year-over-year to 15.37 billion yen, while ending order backlog decreased to 3.246 billion yen due to completion of large projects during the period, a shift to smaller phased client ordering, and some order shifts to the new fiscal year following organizational client changes.

• The company expects continued strong demand for DX transformation centered on the energy and payment/card service segments, even as it continues to make significant investments in talent development.
• Fiscal 2026 (ending March 2026) guidance targets total revenue of 16.4 billion yen, operating profit of 1.9 billion yen, and an operating profit margin of 11.6%, which would mark the third consecutive year of record revenue, profit, and margin.
• The company expects to achieve 16 consecutive years of increased dividends, with a planned annual dividend of 37 yen per share for FY2026, a 7 yen per share increase from the prior fiscal year. The company will also commit to at least 1 yen of dividend growth per year starting in FY2026, alongside the new 50%+ payout ratio and 6%+ DOE targets.

No specific material risks or operational failures were discussed in the available transcript. The temporary 1.2% revenue decline in the Advanced Industry Business was explicitly noted as being driven by client-side project timing shifts and a lull between projects, with no fundamental issues affecting the segment.

Q: What is the status of the company's Vietnam offshore development order book? / A: The company continues to steadily grow its Danang development team and has already secured project flow from major domestic clients. Broader adoption with large clients is expected to expand further in the 2026 fiscal year, aligned with the buildout of local talent capacity. The agile-focused development model is a key differentiator from traditional Japanese offshore development operations in Vietnam.

Q: What is the timeline and outlook for hitting the 22% ROE target? / A: ROE currently stands at 17.2%, up 3pp year-over-year, driven by improved margins and higher per-employee revenue growth. The company targets 22% ROE by the March 2029 fiscal period, with progress driven by continued revenue expansion, higher value-added service offerings, and capital efficiency improvements from enhanced shareholder return policies.

Q: What is the medium-term sales outlook for AI-related business? / A: AI projects are already growing rapidly, with multiple client consulting and development wins secured to date. The company's in-house experience with its own generative AI tool has helped build practical expertise that translates directly to client projects, and AI will be a core driver of long-term growth as part of the broader data utilization and DX business expansion. The company did not provide a specific fixed sales target, but expects AI to contribute meaningfully to future growth.