SUS Co.,Ltd. Q2 FY2026 earnings call

• Company Overview & Core Philosophy

  • Founded in September 1999, headquartered in Kyoto, Japan, with 2,409 employees as of end-September 2024, listed on the Tokyo Stock Exchange Growth market. Core business is engineer dispatch and development contracting across IT, mechanical, electrical/electronic, chemical/bio fields, with additional businesses including AR/VR solution development and training, AI solutions, ERP consulting, and regenerative medical support.
  • Core corporate philosophy is "We want to see smiles from people and companies", with three corporate mottos focused on high-level engineer education, continuous innovation, and supporting people growth to contribute to society.
  • Operates 7 locations nationwide (Kyoto, Osaka, Kobe, Nagoya, Tokyo, Yokohama, Okayama), with a new Fukuoka office planned for 2026 to expand into the Kyushu region.

• Market Environment Overview

  • Engineer dispatch service total market size is estimated at 1.1 trillion yen; the top competitor holds 10%+ share, and SUS holds 1.2% share. 83.1% of SUS's engineers are focused on IT, with specialization in advanced IT fields where demand is growing annually even as the overall market sees flat to slight growth.
  • ERP package license market is forecast to grow at a 10.5% CAGR; SUS notes its ERP offerings are complementary to generative AI, not replaceable by it.
  • Domestic enterprise XR content market is growing at a 9.0% CAGR, with projected 2030 market size of 4.4 billion yen, with slower-than-initial growth but long-term growth expected.

• 3-Year (FY2025-FY2027) Growth Strategy

  • Core strategic goal is to grow market share and lift operating profit margin to a stable 10%+ range by the September 2027 term, anchored by the core Solution and Consulting businesses, with new growth from AR/VR/AI development and strategic capital/business alliances.
  • Strengthening core business foundations: New Fukuoka office expansion, enterprise-wide generative AI capability building (covering all engineers, administrative and sales staff) as a 1-2 year upfront investment to drive efficiency gains and margin improvement, divestment of the HR consulting business within the Consulting segment (the divestment was based on the assessment that the business would create more value under the new owner, with SUS continuing to provide system maintenance support post-divestment).
  • Talent investment in AR/VR/AI: On track to reach 300 active AR/VR engineers and 100 active AI engineers within the current fiscal year; as of end-September 2025, SUS already has 287 AR/VR engineers and 76 AI engineers. Has launched generative AI-enabled development efficiency programs for mechanical, electrical, and chemical engineering fields, with a unique educational curriculum for AI-augmented design not offered by peer companies to create competitive differentiation.
  • New business creation via strategic alliances: Three capital alliances executed to date: (1) Skymatics: a leading remote sensing AI company for the construction industry, to expand into the new construction market via co-developing tool deployment and educational programs, (2) Curations: a top corporate unicorn spin-out consulting firm, to combine Curations' network with SUS's AI engineering capabilities, (3) ailead: a startup providing dialogue data auto-structuring and AI agent infrastructure for sales teams, to co-develop generative AI-enabled "supervisor AI" capabilities that replicate managerial roles using large aggregated dialogue datasets.
  • Regenerative medical support: Prime Road, SUS's regenerative medical subsidiary, has completed registration for its new Cell Processing Center (CPC) in Koto, Tokyo, and is currently building out contract processing capabilities, with plans to actively accept external contracts and strengthen partnerships with medical institutions to support patient burden reduction for regenerative medical treatments.
  • AR/VR training academy: Operates a government-approved AR/VR academy in Kyoto that offers participants 75-80% subsidy for courses, with growing external enrollment and plans to expand external training sales.

• Hiring Strategy

  • Will maintain annual hiring of ~400 total new and mid-career hires, focusing on quality over unplanned volume growth. Prioritizes hiring for mechanical, electrical/electronic, and AI fields, with a focus on developing engineers that combine traditional engineering skills with AI capabilities, which are less vulnerable to generative AI automation and have strong ongoing market demand. Expands internship programs to access top talent early and strengthens candidate engagement to improve hiring conversion.

• ESG & Initiatives

  • Has been certified as a Certified Health Management Outstanding Enterprise (Large Enterprise Category) for three consecutive years, prioritizing employee health support for employees and their families to improve talent retention and acquisition. Proactively supports disabled employment beyond legal requirements: currently meets the 2.5% legal employment requirement, operates a disability employment support business that runs an art program for disabled creators, which has produced award-winning work and commercialized art-based products to create new sustainable employment opportunities.

For the prior fiscal year ending September 2025 (full year):

• Consolidated total net sales: 15.0 billion yen, a 1.795 billion yen (13.6%) increase year-over-year, driven primarily by the core Solution segment. Total gross profit reached 3.914 billion yen, a 592 million yen increase year-over-year, with gross profit margin up 1.0 percentage point YoY. Operating profit reached 1.212 billion yen, a 383 million yen YoY increase, with operating profit margin of 8.1%, up 1.8 percentage points YoY. Net income attributable to parent company shareholders reached 915 million yen, a 313 million yen YoY increase.
• Solution Business (core segment): This is the company's core business, with over 2,100 engineers on staff, covering three service types: engineer dispatch, on-site project contracting, and in-house contracted development. For the dispatch sub-segment, YoY dispatch unit price increased 3.8% to 3,809 yen per hour, ending period registered engineers grew by ~200 people (hiring almost 400 new and mid-career hires total), and utilization held steady just below 95%. IT contracting within the Solution Business grew to exceed 1.0 billion yen in sales; this sub-segment has higher profitability than dispatch and also acts as an OJT expansion platform for new engineers.

• For the full fiscal year ending September 2026: Expects net sales of ~16.9 billion yen, a 1.887 billion yen (12.6%) YoY increase, with revenue growth expected across the Solution, AR/VR, and Other segments. Gross profit margin is expected to hold steady at ~26% in line with prior year levels. Operating profit is forecast at 1.365 billion yen, a 152 million yen YoY increase; ordinary profit is forecast at 1.397 billion yen, a 138 million yen YoY increase; net income attributable to parent shareholders is forecast at 991 million yen, a 75 million yen YoY increase, nearing the 1.0 billion yen threshold. Guidance already includes costs for generative AI investment, personnel expansion, and new Fukuoka office opening.
• For the first half of the 2026 September term: Expects lower profit YoY, driven by stronger-than-expected first half utilization in the prior year and timing lags for planned cost investments, but management confirms full year guidance remains on track. First quarter 2026 results are in line with plan, with cumulative progress toward first half targets reaching roughly 50% for all profit metrics, on track to hit full year targets.
• Dividend guidance: For the 2026 September term, management maintains a planned dividend of 50 yen per share, a 5 yen increase YoY, with a targeted payout ratio of 45%. SUS's dividend policy is to maintain stable, continuous shareholder returns balanced with internal reinvestment for mid-to-long term growth, with a goal of increasing dividends annually as business grows.
• 3-year target guidance: Reaffirms the target of reaching a stable 10%+ operating profit margin by the September 2027 term, with an ongoing target of 150 net new registered engineers annually, 20%+ return on equity, and +4.3% YoY dispatch unit price growth for the current term.

No explicit risks or operational failures are discussed in the provided transcript.

The transcript lists three planned Q&A topics (Company success goals and market valuation, Initiatives for disabled employment, CPC utilization outlook) but the full text of the questions and answers is not included in the provided content.