5257.T

• Company Overview & Core Culture

  • Nova System focuses on providing system development services primarily to enterprise clients in infrastructure-reliant sectors including insurance companies and financial institutions, leveraging deep industry expertise and specialized domain knowledge. The company is positioned as a trusted partner amid widespread shortages of advanced IT talent in the Japanese enterprise market, with its ability to deliver high-quality systems tailored to industry-specific practices cited as a key competitive strength.
  • The company's core corporate culture, centered on the principles of "work smart, learn well, play well to approach dreams and ideals" and "work based on ability", is the source of the company's competitive advantage, designed to maximize employee creativity and productivity.

• 2025 December Fiscal Year Performance Review

  • Full-year 2025 consolidated net income was 234 million yen. Profit decreased year-over-year due to the negative impact of unprofitable projects. The unprofitable projects negatively impacted full-year profit margins, but margin recovery was achieved in the fourth quarter, and a path to full normalization of these projects has been confirmed.
  • The company had to reallocate personnel to resolve the unprofitable projects, which caused the company to miss opportunities to acquire new projects and expand existing business areas. As a result, progress against the 2024 original mid-term business plan is delayed by approximately one full fiscal year.

• Long-Term Growth Strategy

  • The company set a 2030 December fiscal year target of 15 billion yen in revenue and a 15% operating profit margin.
  • Two core strategic pillars are defined to hit the long-term targets:
    1. Shift to higher-value contracts: The company targets a 60% ratio of contracted (turnkey) projects, which enable easier productivity improvement through internal effort and higher profit margins, aligned with a broader shift to higher average-value projects matching market demand.
    2. AI capability expansion: The company is making growth investments to train AI engineers, with the dual goals of expanding AI project order intake and improving overall productivity via AI adoption, to build a solid position in the AI market.

• Shareholder Return Policy

  • The company commits to a 105 yen per share dividend for the 2026 December fiscal year, which is below the dividend outlined in the 2024 mid-term business plan. If operating profit exceeds the 2026 full-year forecast, the company will raise the payout ratio to 35% to implement a dividend increase. The company plans to continue improving shareholder returns going forward, with a long-term target payout ratio of 50%.

• Short-term 2026 December fiscal year guidance: Operating profit is forecast to be approximately 1.9x higher than 2025 full-year operating profit, with a forecast operating profit margin of 8.2% for the full year. This forecast follows the confirmation of normalization plans for the prior year's unprofitable projects.
• The first quarter of 2026 is already projected to come in above plan, and the first half of the fiscal year is also expected to exceed the original plan. The resolution of unprofitable projects will free up resources to execute expansion plans in the second half, so management believes the full-year 2026 guidance is fully achievable.
• Short-term profit margin target: Reach 10%+ operating profit margin in the near term, progressing toward the 15% target by 2030.
• Long-term 2030 target guidance: Maintain the target of 15 billion yen in full-year revenue and 15% operating profit margin. Management confirms this target is achievable based on projected headcount growth and average contract pricing. The company also maintains its target of 60% contracted project ratio and expanding AI engineer headcount to over 100 by 2030.

The provided transcript does not break out financial performance by individual product segments. Only consolidated full-year results for the 2025 December fiscal year are reported: consolidated net income was 234 million yen, with a year-over-year decrease in profit driven by unprofitable projects. No revenue contribution percentages for individual segments are provided.

• Unprofitable projects in 2025 caused a full-year profit decline and delayed progress against the mid-term business plan by 1 year, as personnel had to be reallocated away from new business growth to resolve the issues.
• Expanding partner company engineer headcount to hit the 2030 total 1,400 operating headcount target is identified as a known challenge.

Q: What is the basis and underlying assumptions for the 2030 December fiscal year 15 billion yen revenue target?

A: For 2030, Nova System projects total operating headcount of 1,400: 700 in-house engineers and 700 partner company engineers. Multiplying 1,400 headcount by the current average contracted project price of 1 million yen per month and 12 months gives an approximate total capacity of 16.8 billion yen. Based on this calculation, management views the 15 billion yen revenue target as fully achievable.

Q: The company has acknowledged that the share price has been weak since announcing this year's plan that does not include a dividend increase, which was previously expected to be a share price-focused policy. What is your view of the current share price valuation, and is further dividend increases an option to lift the share price?

A: Management agrees that the current share price is depressed due to the very poor 2025 full-year results. The highest priority to lift the share price is to improve EPS and grow operating profit. As previously communicated starting in 2024, the company's long-term target is a 50% payout ratio. Management will advance growth strategies to hit EPS and operating profit growth targets to support this long-term commitment.

Q: What are the assumptions to reach the total 1,400 operating engineer headcount target by 2030 that was cited in the revenue target explanation?

A: Nova System currently has 500 in-house engineers. Based on past performance, the company has consistently delivered a net increase of approximately 40 in-house engineers per year, so management expects to hit the 700 in-house engineer target by 2030. Growing partner company engineer headcount to 700 is a known challenge, but the company has launched its "VISION 2030" initiative to expand the pool of participating partner companies, and plans to build out the 700-person partner ecosystem through this program.

Q: What is your plan to increase AI engineer headcount from the current 40 to over 100 by 2030?

A: The company plans to reach this target primarily through in-house training of existing employees. First, the company will train new AI engineers via on-the-job training (OJT) on ongoing AI projects. Second, the company will upskill employees through AI adoption initiatives in existing projects, which simultaneously improves overall productivity while building in-house AI expertise. Through these two channels, the company expects to train and secure 100 in-house AI engineers to hit the target.