COPRO-HOLDINGS.Co.,Ltd. Q3 FY2025 earnings call

Overall Business Status

• The company continues to make strong progress toward a major upward revision of its mid-term management plan performance targets. High growth in the core construction technical staff dispatch business continues, with favorable industry tailwinds (driven by overtime work cap regulations boosting demand) unchanged.
• The third quarter consolidated results are broadly in line with plan, despite soft performance in IT dispatch; all profit metrics are on track to meet the full-year guidance.
• Fiscal 2026 (ending March 2026) is the critical year that will determine the final outcome of the mid-term management plan, which runs from fiscal 2023 to fiscal 2027.

Core Growth Strategy for Construction Segment

• Sales Strategy: Focus on deepening sales at large client companies to expand market share, and promote team/set dispatch to the same construction site. As of the third quarter, 48% of dispatched teams use this model, which also helps improve retention for young technicians. The target large client assignment ratio is 89.5% currently, with a goal of reaching the 95% range.
• Hiring Strategy: Strengthen the company's core competitive advantage of low-cost in-house hiring (no reliance on external recruitment agencies), continuously improve the hiring process and yield, and expand channels including the company's own job site "Best Carry Construction" and referral hiring. The company prioritizes hiring inexperienced candidates (78.6% of cumulative third quarter hires are inexperienced) to avoid competition for experienced workers, and trains them in-house to meet client demand. The company has increased hiring investment in the second half of fiscal 2025 to build a higher base for next fiscal year's growth.
• Retention Strategy: Prioritize improving retention for technicians with 1-2 years of tenure, who now make up ~70% of total headcount due to strong hiring growth. The third quarter 1-2 year retention improved 0.1pp year-over-year to 92.0%, showing a gradual improving trend from the second quarter. The company is opening a new training center in Shinagawa, Tokyo in April 2025, which will offer hands-on practical training and expanded qualification support for construction certifications to improve technician quality and long-term retention.

Operational Highlights

• The sales headquarters of Coproc Construction will be relocated from Nagoya to Tokyo (Tokyo Station area) in April 2025, to expand share and secure talent in the Kanto region, which accounts for 1/3 of Japan's total construction investment. The company currently ranks 4th in Kanto construction technician dispatch and aims to become the clear market leader in just a few years, rather than over a 5-6 year timeline.

1. Construction Technical Staff Dispatch (Coproc Construction): This segment saw strong hiring results, with increased gross profit driven by sales growth and improved profitability from lower fixed cost ratios. Operating profit increased 36.7% year-over-year, and the segment is the core driver of the company's overall growth. Cumulative hiring in the first three quarters reached 1,854 people, up 20.5% year-over-year, beating internal plans; the third quarter utilization rate improved to 95.3%, matching the previous year's level. This segment accounts for the majority of the company's total revenue.
2. Mechatronics/Semiconductor Technical Staff Dispatch (Copuro Technology): New semiconductor dispatch business contributed to sales, and active advertising investment drove a 57.6% year-over-year increase in total revenue. The segment reported an operating loss of 51 million yen, as the business is in an active investment phase focused on hiring and business expansion, with management expecting a quick shift to profitability as sales grow. End-of-period headcount reached 310 people, up 52.0% year-over-year, and 100 people have completed training at the company's semiconductor training center 11 months after opening.
3. IT Technical Staff Dispatch (Copuro Technology): The company's job site "Best Carry IT" gained traction, with applicant numbers up 50.0% year-over-year. However, client project acquisition has not kept pace with applicant growth, so technician headcount only grew 22.7% year-over-year, and the segment underperformed relative to plan. Overall consolidated results: Total consolidated revenue was 22.025 billion yen, up 25.9% year-over-year; operating profit was 2.148 billion yen, up 52.8% year-over-year; Non-GAAP operating profit was 2.481 billion yen, up 54.0% year-over-year; net income was 1.374 billion yen, up 46.7% year-over-year; total consolidated technician headcount was 4,684, up 26.3% year-over-year. All profit metrics hit all-time record highs.

• Full-year fiscal 2025 (ending March 2025) guidance: The company maintained its previous full-year forecast, with no revisions. The full-year targets are: 5,168 total consolidated technicians (up 31.5% year-over-year), 30.0 billion yen consolidated revenue (up 24.5% year-over-year), 2.7 billion yen operating profit (up 26.1% year-over-year), 3.162 billion yen Non-GAAP operating profit (up 29.7% year-over-year), and 1.755 billion yen net income (up 19.9% year-over-year). The company will continue growth-focused investment primarily in hiring while accelerating scale expansion.
• Dividend guidance: The company forecasts a full-year annual dividend of 60 yen per share (20 yen interim, 40 yen year-end), representing a 10 yen per share increase year-over-year, with an expected payout ratio of 65.2%. The company's policy is to avoid dividend cuts during the mid-term plan period and target a consolidated payout ratio of 50% or higher.
• Mid-term management plan guidance: The company is currently formulating the fiscal 2026 (ending March 2026) budget, which will be announced alongside full-year fiscal 2025 results. The fiscal 2026 revenue budget will come in above the original mid-term plan target of 33.0 billion yen, with profit growing in line with revenue. The company says a major upward revision to the final mid-term plan (fiscal 2027 ending March 2027) targets of 40.0 billion yen revenue and 5.0 billion yen Non-GAAP operating profit is now within sight.
• The company is actively evaluating M&A opportunities to achieve non-organic growth that is not included in the original mid-term plan.

• Overall retention for the business dipped 0.4pp year-over-year to 78.1%, and improving retention remains the company's top operational priority. Higher than expected turnover would offset hiring growth and limit revenue expansion.
• The overall utilization rate fell 1.4pp year-over-year to 93.4%, driven partially by the 1-month training period required for new semiconductor technicians, which temporarily reduces utilization as the semiconductor business scales.
• Average sales unit price fell 4.5% year-over-year due partially to external overtime regulation impacts, though hiring growth has more than offset this decline to drive overall revenue growth. While the industry faces long-term structural labor shortages that should support future price increases, failure to raise unit prices over the medium term could compress margins.
• IT technician dispatch has underperformed, as client project acquisition has not kept pace with applicant growth, limiting near-term growth and profitability for the segment.
• The semiconductor and IT segments are still in an investment phase, and a slower-than-expected shift to profitability could drag on overall group results.

There is no question and answer section included in the provided earnings call transcript.