i-plug,Inc. Q2 FY2026 earnings call

• Overall Financial Results

  • Consolidated revenue reached 2.391 billion yen, up 15.5% year-over-year. Total order value was 4.295 billion yen, up 16.4% year-over-year.
  • The firm reported an operating loss of 100 million yen, expanding from a 48 million yen loss year-over-year; operating loss was narrower than planned, driven by front-loaded strategic investments.
  • Contract liability reached 3.137 billion yen, up 18.0% year-over-year, indicating steady accumulation of future revenue.
  • 2Q standalone operating profit was 183 million yen, remaining profitable for the second consecutive year despite higher promotional costs.

• Key Operational KPIs

  • Cumulative registered companies reached 21,462, up 12.9% year-over-year, with steady growth in new client acquisition and repeat usage.
  • Registered students: 2026 graduates reached 234,344 (up 12.6% YoY), 2027 graduates reached 136,031 (up 23.0% YoY), with 2027 graduate growth outpacing prior year cohorts driven by targeted promotional investment aligned with early summer internship trends.
  • Offer send volume to 2027 graduates is growing 2x to 3x year-over-year, reflecting strong corporate demand for early recruitment outreach. Total offer approvals grew sharply year-over-year for both graduate cohorts, confirming the platform's growing value.
  • Cumulative hiring placements for 2026 graduates reached 7,211 by 2Q end, up 10.6% year-over-year. As of October end, placements reached 7,600, already exceeding full-year placements for 2025 graduates.

• Capital Expansion and Cost Investments

  • Headcount grew to 357 consolidated employees, up 17 year-over-year and 14 from 1Q end. The firm will continue expanding headcount to support business growth.
  • HR-related costs increased by 155 million yen year-over-year, driven by accelerated hiring and higher payroll to support expansion. Promotion costs increased by 201 million yen year-over-year, concentrated in 2Q to acquire 2027 graduate students aligned with the early activity trend.

1. OfferBox Early Fixed-price Plan: Total cumulative order value for the first half is 3.538 billion yen, up 18.8% year-over-year, accounting for the majority of the firm's total revenue. The segment's revenue increased year-over-year driven by rising corporate demand for early recruitment services. 2. Success-based Fee Plan: Revenue decreased by 250 million yen year-over-year. While total hiring placements continued to grow, more placements are now counted against the hiring quota included in early fixed-price plans, leading to lower revenue for this segment. 3. Aptitude Testing and Other Businesses: Both segments performed steadily with solid year-over-year results.

• Management maintained the full-year operating profit guidance of 700 million yen. 2Q revenue came in at 97.7% of plan, slightly below target due to lower-than-planned success-based fee revenue, but full-year revenue progress reached 39.2%, which is faster than the prior year's progress, indicating front-loaded revenue recognition.
  • 2Q operating loss was significantly narrower than planned, and management expects full-year results to land in line with original guidance, with the narrower 2Q deficit driven by timing differences in budget execution.
  • Management expects to return to cumulative operating profit by the end of the 3rd quarter, consistent with the firm's historical trend of higher operating profit in the second half of the fiscal year.
  • The firm revised its 2026 March fiscal year year-end dividend forecast from 0 yen per share to 54 yen per share, marking the firm's first ever dividend payment. A new shareholder benefit program will also be introduced this fiscal year.

• The overheated seller's market for new graduates has led to a sharp increase in offers per student, pushing down offer approval rates as students receive more outreach than they can respond to.
  • Early recruitment trends and the overheated market have increased the number of offer declines from students who hold multiple acceptances, creating pressure on client satisfaction.
  • The early fixed-price model's revenue recognition rules front-load costs and defer revenue recognition to the second half of the fiscal year, creating interim period operating losses that do not reflect full-year performance.
  • Higher-than-planned investment in promotion and hiring has expanded the interim operating deficit, though the deficit remains within planned ranges.

Q: 2027 graduate offer volume is growing 2-3x year-over-year, which has increased offers per student and pushed down approval rates. How does management assess this issue, what improvements are planned, and is there client dissatisfaction or churn to referral-focused platforms? / A: Management recognizes falling approval rates as a critical core issue for the OfferBox service. Structurally, approval rates fluctuate based on the product of active student numbers and total offer volume, so the firm is prioritizing growing total student numbers via increased promotion as a fundamental solution. 2027 graduate registrations are already up 23% YoY as a result of this investment. The firm is also improving platform features to boost matching accuracy and approval rates, and has not observed significant client dissatisfaction or churn to date.

Q: To hit the 100 billion yen market capitalization target, M&A and alliances will likely be needed alongside organic growth. What segments, firm sizes, and capabilities are targeted, and how does management view the recent trend of increased HR M&A? / A: Management is actively evaluating opportunities exclusively in the HR sector, and receives a steady pipeline of potential deals. The top priority is targets with services that complement the core OfferBox platform; the mid-career recruitment space is also an active area of search. Management cannot disclose details on target size due to deal risks, but updates on M&A and alliance strategy are published regularly in the firm's IR note magazine for investors.

Q: What is the background for setting a 10% target for Dividend on Equity (DOE) as the shareholder return metric? / A: The firm currently holds a large cash balance with almost no debt, giving it substantial remaining borrowing capacity. Combined with the achievement of stable consistent profit growth, management determined that a 10% DOE target is achievable even after accounting for required growth investments. The firm's capital allocation policy remains unchanged: growth investment is still the top priority, and excess capital remaining after funding all attractive growth opportunities will be actively returned to shareholders, which is the reasoning behind the 10% DOE target.