4076.T

• Overall Consolidated Performance

  • Total revenue for the 2nd quarter of 2025 May fiscal year was 3.364 billion yen, up 2.0% year-over-year, driven by Digital Innovation Promotion Business and recovering Big Data Analytics Business.
  • Gross profit was 0.803 billion yen, down 1.9% year-over-year due to increased labor costs from base salary raises and regular step increases implemented at the start of the fiscal period.
  • Operating profit was 0.226 billion yen, down 30% year-over-year. Gross profit decline plus higher sales, general and administrative costs from increased consultant hiring (all new hires were at management levels, counted as SG&A) and higher back-office outsourcing costs drove the decrease; this was partially offset by a 15 million yen reduction in PR costs from the completion of prior year rebranding initiatives.
  • Operating cash flow decreased by 83 million yen mainly due to lower business profit; investment cash flow had an 181 million yen outflow for new office deposit and guarantee payments, which shifted cash and deposits to fixed assets on the balance sheet.

• Growth Strategy Progress

  • Personnel capability building: As of the 2nd quarter, total engineers reached 223, with 22 new graduate hires joining in April 2025; continued mid-career hiring for engineers and consultants is planned. Number of certified technical professionals increased across all segments, with 70 additional certifications for U-Way-related system infrastructure roles. Company-wide technical and business skills training is ongoing.
  • HR and institutional reform: Redesign of grading, evaluation, compensation, and training systems is underway, targeting launch next fiscal year; the reform aims to enable higher pay for top talent and align work with individual employee goals to improve competitiveness for skilled staff.
  • Customer growth: Revenue from key clients including NTT DATA Group and Nomura Research Institute Group grows annually; ServiceNow-related partnership and revenue growth exceeds prior year half-year levels, with growing partner and client base. The company's proprietary U-Way service reached nearly 200 million yen in revenue half-year, with a medium-term target of 2 billion yen, and management targets full-year revenue well above prior year.
  • Solution expansion: Launched the OCI DB Model MySQL-compatible version of U-Way Lite in January 2025, a lower operational cost alternative to traditional Oracle database services. Building a new DX diagnostic support service in the consulting segment to help customers map their DX progress and identify opportunities for CNS to deliver capability.
  • Cross-organizational sales enablement: Launched a cross-company sales task force in June to address growing demand for integrated cross-segment solutions. As of the 2nd quarter, the task force has secured 8 existing client and 19 new client commercial negotiations, with over 30 expected orders in the second half, with many expected to close in later fiscal years.

• Maintains full-year 2025 May fiscal year guidance of 7.562 billion yen in total revenue and 0.66 billion yen in operating profit, with a second-half weighted revenue and order profile that aligns with ongoing strong demand for generative AI projects, U-Way/VMware migration solutions, and economic security projects.
• Management plans to complete price negotiations to recover the cost of base salary increases in the second half, and target additional profit growth across all segments through these negotiations.
• Maintains the initial dividend forecast of 49 yen per share, with a projected 29.1% payout ratio; management will review the dividend based on second-half performance, targeting a 30%+ payout ratio to continue its progressive dividend policy aligned with profit growth.

• Digital Innovation Promotion Business: Driven growth from new ServiceNow-related customer acquisition, expanded cashless payment and generative AI projects, with double-digit year-over-year revenue growth; no absolute revenue value is provided in the transcript.
• Big Data Analytics Business: Revenue reached 120% of the prior year period, but gross profit margin declined due to rising labor costs.
• System Infrastructure Business: Revenue saw a slight year-over-year decline; gross profit remained flat. Increased inquiries for U-Way Oracle Cloud VMware Solution and new government cloud projects were offset by completed existing client projects and delayed planned large projects, with most new client projects starting smaller than expected.
• Business System Integration Business: Revenue decreased 4.9% year-over-year; gross profit margin improved. Growth from expanded economic security-related projects and increased securities system construction projects was offset by an uncovered large reduction in existing client operation and maintenance project scope.
• Consulting Business: Restructured to a leaner small-team model, so year-over-year comparison is not meaningful; currently reports negative gross profit due to restructuring costs and upfront internal DX investment.

• Big Data Analytics Business has not completed price increases to offset higher labor costs, putting downward pressure on gross margins until negotiations finalize.
• System Infrastructure Business has delayed large planned client projects to the second half, and new government cloud initiatives have not yet scaled to offset prior revenue declines.
• U-Way's 2 billion yen medium-term revenue target is described as a high hurdle, requiring successful capture of VMware migration demand to meet the goal.
• Cross-organizational commercial deals secured by the new task force often require long pre-sales cycles, with many orders not expected until fiscal 2026 or later, creating near-term revenue uncertainty from this initiative.

No substantive Q&A section is included in the provided transcript.