HIMACS,Ltd. Q2 FY2026 earnings call

• Mid-term Strategic Direction (NEXT C4 Plan)

  • Core goal: Become a company that consistently provides technology capability backed by strong implementation expertise centered on digital technology, growing alongside clients to build a sustainable future.
  • Key strategic targets: Maintain the share of non-financial and end-user transactions at 30%+ of consolidated revenue, and grow DX projects to 25% of total revenue.
  • Growth enablers: Invest in human capital for DX capabilities, expand development headcount including business partner companies, and actively explore capital alliances and M&A to drive business expansion.

• Operational Initiatives

  • Generated AI adoption: Launched in-house development of the conversational AI tool "Skill Booster" for new hire training, which identifies knowledge gaps, provides guidance to improve problem-solving skills, and allows trainers to focus on high-value core coaching while delivering personalized follow-ups via machine learning. The company also started using generative AI for end-to-end software development from requirements definition to implementation and documentation, to streamline workflows and drastically speed up development. Framework standardization will enable easy deployment across multiple projects to improve scalability, with strict risk management for information security, copyright, and data protection to establish a new human-AI collaborative development model.
  • Human capital investment: Implemented a company-wide average 7.5% increase in monthly base salaries starting April 2025. Expanded internal incentive programs to encourage technical certification acquisition, with cumulative DX-related certifications reaching 291 to date. Established a dedicated division for DX projects to grow the number of DX specialists and certified DX technical personnel, and continues investing to increase the number of project leaders company-wide.
  • Target achievement: Hit both mid-term targets in the reporting period, with 31.6% share for non-financial/end-user transactions and 25% share for DX projects. DX project backlog increased 4% YoY, with backlog growth in financial, end-user, and DX segments overall.

By service segment: 1. System & Solution Service (SSS): Revenue of 3.324 billion yen, an increase of 91 million yen year-over-year, driven by expanded DX projects for insurance and other industries, accounting for 37.1% of total revenue. 2. System Maintenance Service (SMS): Revenue of 5.625 billion yen, an increase of 41 million yen year-over-year, driven by bank-focused security enhancement projects, accounting for 62.9% of total revenue. By customer type: 1. Transactions via SIer: Revenue down 1.6% YoY, accounting for 68.4% of total revenue, as some life insurance and public sector projects concluded. 2. End-user transactions: Revenue up 8.9% YoY, accounting for 31.6% of total revenue, with growth in financial (securities, credit) and non-financial (aviation, specialized trading company) projects. By industry segment: 1. Financial segment: Revenue accounts for approximately 68.4% of total consolidated revenue, with growth in bank security enhancement and DX projects, offset by project delays primarily in the life insurance segment. 2. Non-financial segment: Revenue accounts for approximately 31.6% of total consolidated revenue, with growth in new projects from major food manufacturers and DX projects for specialized trading company end-users. DX projects specifically reached 2.238 billion yen in revenue, accounting for exactly 25% of total consolidated revenue, hitting the mid-term target in the first half.

• Full year 2026 March fiscal year consolidated guidance is maintained: Total revenue is projected at 20 billion yen, representing a 10.7% increase year-over-year.
• Profit guidance is maintained: Projected operating income of 1.82 billion yen, ordinary income of 1.838 billion yen, net income of 1.245 billion yen, and earnings per share of 107.20 yen.
• Industry revenue composition guidance: Financial segment projected at 65% of total revenue, non-financial segment projected at 35% of total revenue. Growth in the financial segment is expected from bank security projects, exchange-related securities projects, and insurance restructuring DX projects.
• Dividend guidance is maintained: Full year dividend per share set at 46 yen, representing a 1 yen increase year-over-year and marking the 5th consecutive year of dividend increases. The projected payout ratio based on full year earnings is 42.9%, aligned with the company's target payout ratio of ~40%.

• Project execution delay risk: Primarily in the life insurance segment, delayed launch of upcoming projects and client scope reviews caused some planned projects in the reporting period to be pushed to future periods. This resulted in total order value and order backlog coming in slightly below prior year levels.
• Cost pressure: Higher personnel costs and increased subcontracting unit prices drove up total operating expenses, offsetting profit gains from revenue growth and selling price improvement, leading to a 15.2% YoY decrease in operating profit for the half year.
• Generative AI operation risk: Potential risks related to information protection, copyright infringement, and cybersecurity exist for generative AI adoption, which the company is managing via strict internal controls.

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