COPRO-HOLDINGS.Co.,Ltd. Q2 FY2026 earnings call

• Core Strategic Goal: The firm aims to become the "undisputed No.1 in the construction technical staff dispatch industry", prioritizing both scale expansion and service quality, with organic in-house growth as the base of growth. It will continue to invest heavily in growth centered on the construction dispatch segment to achieve growth above the industry average.
• Sales Strategy: Shift focus from new client acquisition to deep cultivation of existing target clients (top 5 super general contractors and leading mid-sized general contractors). Implement the team dispatch model: place 5+ Copro technicians at the same site, add new junior hires to these existing teams, and appoint a veteran team leader to support junior staff, which will improve junior retention. Accelerate expansion in the Kanto region (Japan's largest construction market, which accounts for over 40% of the firm's sales), after relocating the core sales strategy team from Nagoya to Tokyo in April 2025.
• Recruitment Strategy: Strengthen the firm's core competitive advantage of low-cost recruitment (independent of external recruiting agencies). Continue to prioritize hiring large volumes of inexperienced workers (including new graduates) to build up the mid-level technician cohort, training them in-house before dispatching them to clients. 1H FY2026 Q1/Q2 hiring hit 699 and 717 hires respectively, but average hiring cost rose from 395 thousand yen to 481 thousand yen, and the firm is working to improve hiring yield and control costs.
• Training & Retention Strategy: Open the "Kantoku no Tane Tokyo Training Center" in April 2025, which has already delivered 488 in-person practical training sessions for new hires. Focus on improving retention for technicians with 1-2 years tenure, which has already shown quarter-over-quarter improvement. The firm's core challenges identified in 1H: (1) Poor matching between hired worker profiles and client order requirements led to higher idle labor costs and a 2 percentage point drop in utilization rate; (2) Total hiring volume is up 12.3% YoY but still below full-year plan; (3) Sales per head (PH) growth is stagnant because veteran high-rate technicians have retired, replaced by lower-rate new inexperienced hires.

1. Construction Technical Staff Dispatch (Copro Construction): This is the core segment, delivering 14.3% YoY growth in operating profit driven by sales growth and improved gross profit. It contributes the majority of the firm's consolidated revenue. 2. Mechanical/Electronic, Semiconductor, and IT Technical Staff Dispatch (Copro Technology): The segment saw sales growth and reduced fixed costs including labor expenses, leading to an improved operating loss that is 29 million yen smaller YoY. Growth has stagnated in this segment, with little to no growth in the number of active technical staff, and IT segment headcount has even declined at points. Overall group consolidated results for the half-year: Total sales = 16.98 billion yen (19.3% YoY growth), operating profit = 1.481 billion yen (19.7% YoY growth), Non-GAAP operating profit = 1.739 billion yen (20.8% YoY growth), net income = 935 million yen (17.3% YoY growth), all of which are new all-time highs. Group total technical headcount reached 5,402, up 20.5% YoY.

• The full-year FY2026 (ending March 2026) earnings guidance is maintained unchanged from the original release. Targets are: group technical headcount +29% YoY to 6,271; consolidated sales +26.6% YoY to 38.0 billion yen; operating profit +37.5% YoY to 3.8 billion yen; net income +35.7% YoY to 2.47 billion yen, which would set a new all-time high.
• Management confirms that while 1H results were below the original forecast, the gap is fully recoverable in 2H, as the construction industry has a seasonal pattern where most activity and revenue is concentrated in 2H around the March fiscal year end, and the 39% 1H operating profit progress rate is in line with the 6-year historical average. The firm will accelerate hiring, improve matching accuracy, and push deep cultivation of target clients to recover the 1H shortfall.
• The dividend forecast is maintained unchanged, following the 1-for-2 stock split in October 2025: full-year annual dividend is 40 yen post-split (equivalent to 80 yen pre-split, a 20 yen increase from the prior year), marking 7 consecutive years of dividend increases since listing. Management reaffirmed the commitment to no dividend cuts during the current mid-term plan (to FY2027) and targets a consolidated payout ratio of 50% or higher.

• Industry-wide: The construction sector faces structural labor shortages from population aging, and competition for experienced technicians is intense. The industry is in an active period of consolidation with large private equity firms (such as Blackstone) acquiring peer companies, increasing competitive pressure.
• Operational: Stagnant growth in the non-construction (mechanical/electronic, semiconductor, IT) segment, due to a mismatch between client demand for full-time dispatched staff and most job seekers preferring freelance work. Kanto region expansion faces high competition from established local peers, and the firm has not yet delivered meaningful results after the relocation of the sales team.
• Internal: The growth in technician headcount has been slower than planned, and rising hiring costs have pressured margins. Higher idle labor costs from poor matching have pulled down utilization, and net hiring growth has slowed as the overall headcount base grows and retirements/separations increase in line with scale.

Q: If full-year results miss the earnings target, will the company cut the dividend? / A: Management confirmed that the committed dividend policy of no dividend cuts through the end of the current mid-term plan (FY2027) still stands. The interim dividend will be paid as planned, and the company has no intention to cut the planned year-end dividend even if full-year results miss the original forecast, based on current internal reserve levels. The 50%+ payout target is maintained.

Q: Why has technical headcount growth stagnated in the mechanical/electronics and IT segments? What is the strategy for this business going forward? / A: Management acknowledged that these segments have stalled after entry, while construction segment growth remains solid. The company will now transfer the sales, recruiting, and operational know-how built in construction to these non-core segments to turn them into a second growth pillar. The core mismatch is client demand for direct hire dispatch vs. most candidates preferring freelance work, so the firm will focus on converting freelance-oriented candidates to direct hire roles to improve matching.

Q: Will IT and AI adoption reduce demand for dispatched construction technicians? / A: Management stated IT/AI/Digital transformation in construction is meant to improve productivity and offset the existing labor shortage, not eliminate positions. Construction is a custom project-based industry where every project is unique, unlike repetitive manufacturing, so it is not possible for AI/automation to fully replace human construction supervisors and technicians. Therefore, demand for dispatched technical staff will remain strong.

Q: What is your view on Blackstone's acquisition of a peer company, and how will industry consolidation impact Copro? / A: Management acknowledged the industry is in the middle of a wave of consolidation, with large capital-backed financial players acquiring more industry players. The company will position itself as a core independent player in the industry, actively gather information on consolidation opportunities, and aim to become a consolidator itself. The company also noted that M&A success depends on post-acquisition organic growth and synergy realization, so it will focus on strengthening its own organic growth base to avoid being swallowed by industry consolidation.