Core Concept Technologies Inc. Q2 FY2025 earnings call

Overall Financial Performance

• For the second quarter of the 2025 fiscal year, total revenue reached 10.168 billion yen, gross profit was 2.779 billion yen, operating profit hit 1.073 billion yen (exceeding plan), operating margin was 10.6%, and net quarterly profit was 0.762 billion yen. Gross margin held steady at 27.3% year-over-year, with controlled outsourcing costs at 57.2% of revenue.
• Full-year progress is on schedule, as the company’s full-year plan is weighted toward the second half. Balance sheet health is strong, with a 62.3% equity ratio and net assets of 4.962 billion yen, near the 5 billion yen listing requirement for the Prime market, with sufficient capital available for potential M&A.

Productivity and Workforce

• Overall per-employee revenue productivity has improved gradually, with a slight seasonal dip in the second quarter due to the addition of new graduate hires; productivity is expected to rebound in the second half as new hires become fully productive.
• Total group employee count reached 609 (439 at the parent company), with 58 new graduates joining the group in April (49 at the parent company). All new graduates completed training without departures and have been assigned to departments. Mid-year hiring has already met full-year requirements, prioritizing quality over quantity, with 9 new graduates assigned to IT Resourcing Support sales, expected to contribute as full workforce by Q4.

Customer Base Growth

• Total customer count reached 437. There are now 2 customers with half-year transactions over 500 million yen (up from 0 in the prior year period), and 27 customers with transactions between 100 million yen and 500 million yen, showing steady growth in the mid-to-large customer segment.

DX Support Restructuring

• The 2025 full-year core goal is to reset the business after 2024’s unprofitable projects and slowing top-line growth. The division completed an organizational restructuring split into two teams:
  • First Team: Focused on new customer acquisition, staffed with veteran experienced talent to deliver high-quality initial projects to build customer trust. Main Force: Focused on existing customers (which generate ~90% of total revenue and profit), to deepen customer trust, improve internal processes from First Team work, drive talent development and new graduate utilization, and balance top-line growth with stable profit.
• For new customer acquisition in manufacturing (DX Support’s key challenge), business discussion volume increased from 72 to 91 and lead generation increased from 62 to 78 year-over-year. While more leads are stalled before proposal (rising from 20 to 35, lengthening lead times), shifting to senior management-led proposal processes improved the order conversion rate, and order volume increased from 7 to 16. The company is now working to reduce lead times and increase proposal volume to grow orders further.

IT Resourcing Support Operational Improvements

• Previously, sales staff spent significant time on field and partner follow-up work, which became a growing burden as headcount increased. The company restructured to have on-site team leaders take over follow-up duties, allowing sales staff to focus on core sales activities. This improvement is expected to increase sales productivity, expand sales capacity, and drive further revenue growth. Operational improvements are proceeding in line with or slightly above plan.

1. DX支援 (DX Support): Revenue was roughly flat quarter-over-quarter from Q1, with a 10%+ year-over-year increase, adding approximately 500 million yen in year-over-year revenue. Gross profit margin is 39.0%, and gross profit control has been maintained. Order backlog decreased slightly quarter-over-quarter to 2.046 billion yen, down from 2.373 billion yen in Q1. It contributed 39.0% of total company gross profit, with a revenue share not explicitly stated.
2. IT人材調達支援 (IT Resourcing Support): Revenue increased quarter-over-quarter from Q1, with a 10%+ year-over-year increase, adding approximately 500 million yen in year-over-year revenue. Gross profit margin is 17.5%, and the segment has seen steady order backlog growth. It contributed 17.5% of total company gross profit, with a revenue share not explicitly stated.

Management maintained the full annual plan, with progress toward full-year targets on schedule as of the second quarter, since the company’s plan is structured to be weighted toward the second half of the fiscal year. Management expects per-employee productivity to resume its upward trend in the second half of 2025 after the seasonal dip from new graduate hiring, once new hires are fully integrated into operations.

• DX Support has not hit order growth targets in the first half of 2025, with order backlog decreasing slightly quarter-over-quarter in Q2. A higher share of generated leads are stalling before reaching the proposal stage, lengthening sales lead times and limiting near-term order growth.
• Seasonal increased selling, general and administrative costs from new graduate onboarding and training reduced Q2 operating margin to 9.3%, though this is an expected seasonal impact.

Q: Why has subsidiary headcount growth been stagnant, and what is the company's hiring policy for subsidiaries?

A: The call transcript does not include CCT management's full response to this question, only noting the question topic.

Q: How does the slow order growth in DX Support impact the company's full-year plan?

A: The call transcript does not include CCT management's full response to this question, only noting the question topic. Both key Q&A exchanges listed in the transcript metadata are cut off in the provided source text.