ABIST Co.,Ltd. Q1 FY2025 earnings call

• New Branch Expansion:
  • Relocated the Kyoto sales office to open a new Osaka Branch in March 2025, positioned as a core strategic hub alongside Tokyo and Nagoya. The branch will strengthen recruitment capacity in the Kansai region, improve communication with clients and potential hires, and provide a productivity-enhancing work environment for employees.
• 1Q 2025 Financial Results Overview:
  • Total revenue hit 2.602 billion yen, up 4.8% year-over-year, driven by increased operating personnel and unit price improvements in the core design and development outsourcing business. Operating income was 309 million yen, down 3.3% year-over-year, due to higher labor costs from an average 8.37% wage increase implemented in the prior fiscal year. Net income came to 173 million yen, down 14.8% year-over-year.
• Profitability Improvement Initiatives:
  • Management has identified two core challenges: reduced profitability from wage increases, and talent acquisition. To improve margins, the company continues to pursue ongoing unit price reviews aligned with domestic price and wage inflation, and has formed a dedicated working group to strengthen sales capabilities to secure more high-difficulty, appropriately priced projects. It is also expanding technical training to increase the number of engineers qualified for high-unit-price work. The company is commercializing AR/AI and design solution tools for external sale to drive new revenue, and using internal efficiency tools to reduce contract work costs. Cross-functional R&D meetings have replaced siloed departmental development to speed up product delivery. Overall, per person per month revenue has increased 44 thousand yen year-over-year in 1Q, continuing an upward trend since the mid-term plan launch.
• Talent Acquisition Initiatives:
  • Strengthened recruiting teams and engaged recruitment consultants, which allowed the company to hit its 2025 new graduate hiring target, with new graduate hiring best practices applied to mid-career hiring. Expanded technical training curricula have enabled early placement of new graduate engineers and improved utilization; new training programs for inexperienced workers have also opened up expanded hiring pools. Ex-new graduate engineer utilization remains steady at ~95%.
• Business Portfolio Optimization:
  • Discontinued the unprofitable 3D printing business in the prior fiscal year, and plans to establish a new subsidiary in Vietnam in the current fiscal year to drive growth.
• Digital Solution Development:
  • Co-developing an automatic design check tool with an automotive parts manufacturer that automatically verifies drawing compliance. DiffAR, an AR program that identifies real-time shape differences between physical objects and 3D-CAD models, has a patent pending and is being improved and pitched to existing clients. The company is also developing AI solutions including human body 3D modeling apps and automatic license transcription tools. Internal efficiency tools (automatic design section creation, interference check tools) are already in internal use, with ongoing work to improve accuracy to lower internal design costs and improve quality.
• Shareholder Return Policy:
  • The company maintains a policy of continuing stable dividends, with a target payout ratio of at least 35% of net income per period, balancing internal reserves for growth investment with dividend expansion. It also operates a shareholder benefit program, with points awarded to 2024 September-end shareholders, and hydrogen water gifts planned for 2025 March-end shareholders.

1. 派遣 segment: Revenue grew 0.4% year-over-year, with per person per month revenue of 678 thousand yen, an increase of 29 thousand yen year-over-year. Growth was driven by strategic personnel reallocation and unit price improvements, amid sustained high corporate production activity and expanding development investment. 2. 請負 (Contract) segment: Revenue grew 9.0% year-over-year, with per person per month revenue of 826 thousand yen, an increase of 56 thousand yen year-over-year. This segment maintains a 57% revenue contribution share of total company revenue. Growth came from progress on unit price negotiations and careful selection of high-unit-price projects, as client project difficulty and requirements rise annually.

• The company maintains its previously revised 2027 September period mid-term management plan target of 12.5 billion yen in total revenue and 1.3 billion yen in ordinary profit, with no changes to the targets.
• Management expects that the implementation of current profitability and talent acquisition initiatives will put the company back on a growth trajectory starting from the 2026 September period (FY21).
• Unit price improvement negotiations are ongoing for the April 2025 contract renewal round, building on the current upward trend in unit prices.

• Stagnant growth in the number of technical engineers poses a risk of slower revenue growth, as headcount is the core driver of revenue for the outsourcing business.
• Persistently low unit prices for projects that do not align with the technical skill level of assigned engineers, and unupdated legacy contract prices, continue to pressure margins even as wage costs rise with broader market inflation.
• The company already operates at a ~95% utilization rate for non-new graduate engineers, leaving limited room to increase revenue from existing personnel, making successful talent acquisition critical to growth.

The provided earnings call transcript does not include a question and answer section, so there are no exchanges to summarize.