ASMARQ Co.,Ltd. Q3 FY2025 earnings call

Core Corporate Strategy Progress

• Reinstated the original customer-first culture that shifted to an internal focus in recent years, which management identifies as the root cause of stagnant sales. Initiatives to re-deepen customer focus for the research business have not yet driven clear sales recovery, but recovery signals have emerged in Q4.
• Continued strengthening of global expansion, with corrected over-concentration of sales resources on domestic research after Q3 sales decline, now balancing resource allocation between domestic and overseas business.
• Continued investment in brand building for HR Tech, focusing on new client acquisition through event participation and web advertising, leveraging the segment's high stable repeat revenue base.
• Accelerated DX push, with ongoing development of a generative AI-powered research operation system, progressing toward an early release.
• Advanced M&A and alliance strategy: Started collaboration with data analytics firm Lean Nishikata after a Q2 business alliance, with 3 Asmarq employees training in big data analytics targeting independence in 6 months. Management is actively exploring M&A and alliances with companies that enable horizontal expansion of HR business into research-adjacent areas, with multiple deals in progress.

1. Marketing Research (MR) Business: Accounts for 95.8% of total revenue, with a 6.7% year-over-year sales decrease. Cumulative revenue through the third quarter contributed 3.189 billion yen of the total 3.328 billion yen cumulative revenue. The automotive and food industries saw sales growth from active new client development, while sales to research firms and advertising agencies continued to decline. Internet research demand from business clients is growing, but recruitment services for qualitative research subjects saw demand drop due to lower orders from research firms and agencies. Marginal profit margin remains at a high level, and average order value from business clients is trending upward.
2. HR Tech Business: Accounts for 4.2% of total revenue, with a 13.5% year-over-year sales increase. Approximately 70% of the segment's revenue comes from repeat sales, providing a stable growth base.
3. Global (Overseas) Research Business: Cumulative revenue through the third quarter saw a 6.3% year-over-year decrease.

• Full-year original budget achievement is assessed as very challenging given the remaining 1.5 months as of mid-October, but management does not plan to revise the full-year earnings forecast at the current Q3 stage, factoring in expected profit contribution from group companies in Q4.
• For the next fiscal year, management will develop a more realistic, appropriate budget and prioritize reliable plan achievement, targeting double-digit growth in both domestic and overseas research. To hit this goal, the sales headcount will be increased 1.3x (adding 15 people from the current 445), starting expansion in Q4.
• For HR Tech's Humap product, sales headcount will double from 3 to 6 people, and advertising budget will increase more than 2x from 12 million yen to 28 million yen to drive new client growth and overall segment expansion.
• Management expects Q4 cumulative monthly sales to be positive year-over-year, and believes sales have now bottomed after 1.5 years of year-over-year declines, with clear recovery momentum from rising quote requests and client inquiries over the past two months.

• Sales decline in the core domestic marketing research business driven by falling orders from research firms and advertising agencies has dragged overall profit down significantly, with Q3 operating income down 29.7% year-over-year, missing both plan and prior year results.
• A misallocation of sales resources: in a rush to rebuild domestic research business, management reassigned 40 sales staff who previously covered both domestic and overseas research to full-time domestic work, leaving only 3 dedicated overseas sales staff and causing a temporary 6.3% year-over-year sales decline for the global research segment, though the policy was corrected quickly in September.
• The core marketing research business's sales underperformance over the past one and a half years reflects internal cultural and structural issues that required organizational restructuring, which has not yet delivered full operational results as of Q3.

Q: What are the main drivers of the Q3 revenue and profit decline? / A: Management confirms two core factors. First, orders from research firms and advertising agencies in the domestic research business continued declining, with no recovery signal visible in Q3. Second, the global research business saw temporary slow growth from the resource reallocation for domestic restructuring. Management notes it is now working to restore overseas sales growth alongside domestic recovery. (201 characters)

Q: What are the growth strategy and targets for the HR Tech business going forward? / A: Management plans to double the Humap sales team from 3 to 6 people to resolve current response delays for growing inquiries, and more than double the advertising budget from 12 million yen to 28 million yen to expand new client acquisition. It also plans to pursue M&A and alliances with other HR firms to expand the business's service scope and drive further sales growth. (222 characters)

Q: Is the full-year budget achievable, especially given the ~1.5 billion yen Q4 sales target required to hit the full-year goal? / A: Management states that while the team is working at full capacity to maximize Q4 sales, hitting the full-year budget is realistically very challenging at this stage. However, no full-year forecast revision is planned at the Q3 stage, as the current outlook already accounts for expected Q4 profit contribution from group companies. Management adds sales have now bottomed after 1.5 years of declines, and it will set a more realistic budget for next year. (316 characters)

Q: Will the company cut its dividend this year given the weak performance? / A: Management confirms there is no change to the existing dividend policy at this time, and will continue to prioritize stable shareholder returns as its core policy. It will make an immediate public disclosure if any change to the planned dividend is made in the future. (140 characters)