NISSEN INC. Q2 FY2026 earnings call

• Core Business and Strategic Framework

  • Nissen operates two core business segments: Area Business focuses on marketing and service support for cable TV operators across Japan, centered on local community connections; Communication Business supports corporate problem-solving for specialized industries including housing, food service, and construction, focused on brand community connections with consumers.
  • Mid-term growth strategy is built on two core pillars: 1) Community Idea-based business growth and innovation, supporting clients to run marketing without relying on paid ad inventory; 2) Expansion into high-potential markets via M&A and investment, targeting acquisition of high-value clients, services, resources, and technology; A third supporting pillar focuses on strengthening human capital and advancing ESG management.
  • The leadership transition is framed as the company's 'Third Startup' after its founding and Tokyo Stock Exchange listing, positioned to drive bold transformation to adapt to changing market conditions and build a 100-year sustainable enterprise.

• New Business Launches and Growth

  • Launched the new Fan-Based Marketing (FBM) business, which activates fan power and leverages social media to drive client business growth. FBM's service scope covers all fan-building activities including social media follower growth, store design, fan program construction and operation, and product planning, and is seeing steady client growth primarily among food service chains, with full-year fiscal 2026 revenue targeted at 1.2 billion yen.
  • Launched CCG (Community Connecting Guide), an industry-first LINE-based customer communication tool for cable TV operators that combines digital program guide and CRM functionality, built to transform engagement between 340 cable TV operators and 16 million end customers. The company targets 60 contracted stations by the end of February 2026, with orders growing steadily to date.

• M&A, Investment and Human Capital Initiatives

  • Nissen has actively pursued M&A to acquire new clients (including manufacturers, general contractors, cable TV operators, and leading developers) and invested in technology firms. Past investment in SmartHR has generated significant market value growth, with a multi-hundred million yen return expected in the future.
  • Launched the Nissen Next Leaders Project (NLP) to develop management talent, offering total incentives of up to 0.12 billion yen for high-performing employees. 90% of the ~20-member FBM team are in their 20s, with many contributing strongly within their first year and promoted to management roles, making FBM a hub for young talent development that also improves recruiting appeal.
  • Built an in-house e-learning training program covering compliance, corporate history, and business content to improve employee capability and business understanding.

• ESG and Social Initiatives

  • Co-established Kuki New Power, the group's first municipal new power company, in November 2024, which will begin power supply in September 2025. The initiative advances the goal of local power production for local consumption and contributes to decarbonization and regional revitalization in partnership with the City of Kuki.

For the 2026 February Fiscal Year Second Quarter, total consolidated net sales hit 3.041 billion yen, with the following industry segment performance: 1. Home & Living Industry: Includes ~0.3 billion yen in revenue from Asty Co., acquired via M&A in December 2024, plus over 0.1 billion yen in organic year-over-year revenue growth, making it one of the top-performing segments driving overall growth. 2. Other Industries: Includes the newly launched Fan-Based Marketing (FBM) business, which is growing rapidly and is the other key driver of overall performance. 3. Medical & Healthcare Industry: Revenue fell below prior year levels due to the divestment of the Pacoma business in November 2024. Overall gross profit hit 0.823 billion yen, up 30.3% year-over-year, with operating profit of 0.243 billion yen (operating margin 8.0%, up 2.2pp year-over-year), recurring profit of 0.243 billion yen, and interim net profit of 0.164 billion yen (net margin 5.4%, up 2.5pp year-over-year), reaching all-time record highs for consolidated revenue and operating profit.

• Full-year 2026 February Fiscal Year guidance targets: total revenue of 7.0 billion yen, operating profit of 0.46 billion yen, recurring profit of 0.47 billion yen, and net profit attributable to parent company shareholders of 0.32 billion yen, which would set all-time record highs for all three key metrics (revenue, operating profit, recurring profit) and is on track to meet or exceed all targets set in the current mid-term management plan.
  • The company is currently reviewing full-year guidance in light of stronger-than-expected first half performance, and will promptly disclose any updates including an upward revision if needed. The current published full-year guidance already includes expenses for the NLP talent development initiative.
  • Dividend guidance calls for a full-year dividend of 29 yen per share, marking the third consecutive year of dividend increases, with a newly introduced 14 yen per share interim dividend and 15 yen per share planned year-end dividend.
  • A new shareholder benefit program has been introduced: shareholders holding 300+ shares for at least six consecutive months receive 5,000 yen in QUO cards twice per year, for a total annual benefit of 10,000 yen.
  • Long-term 2030 Vision targets consolidated revenue of 10.0 billion yen or higher, driven by continued execution of the company's community-focused growth strategy.

No material operational risks, failures, or new significant risk factors were explicitly discussed in the available transcript.

Q: Why did management choose this specific timing for the CEO transition? / A: This fiscal year is the final year of the current 3-year mid-term management plan, and the company is on track to hit all-time record revenue and operating profit, with share price recovering to above PBR 1x. This marks a natural milestone after 17 years of current CEO Otsu's tenure. Rapid changes in the operating environment including digitalization, AI advancement, and population decline require a generational leadership shift to adapt. Incoming CEO Hikawa built the company's 'Community Idea' strategic vision, launched the FBM business from scratch and led it to growth, making him the ideal candidate to lead the next phase. (338 characters)

Q: Will the company upwardly revise its full-year earnings guidance? / A: First-half performance is already running above the original plan, and management is currently conducting a detailed review of full-year results incorporating the latest performance trends. If any material updates including an upward revision are required, the company will disclose them promptly. The current published full-year guidance already accounts for all expenses related to the NLP talent development initiative. (282 characters)

Q: What are the core drivers of the improvement in first-half profit margin? / A: Profit margin increased primarily from two factors: first, strict cost control for the core Channel Guide business in the cable TV/communications sector delivered strong results. Second, the Home & Living segment saw an increase in high-margin production project orders. Additionally, higher-margin digital channel guides have grown as a share of the Channel Guide business, replacing lower-margin traditional printed guides, further boosting overall margin. (315 characters)