7059.T

Overall Third Quarter Consolidated Performance

• All core financial and operating metrics hit all-time record highs, with double-digit revenue and profit growth year-over-year maintaining strong growth momentum
• Total group technical workers: 5,422 people, +15.8% year-over-year
• Consolidated revenue: 25.998 billion yen, +18% year-over-year
• Operating profit: 2.449 billion yen, +14% year-over-year, operating margin 9.4%
• Non-GAAP operating profit: 2.82 billion yen, +13.7% year-over-year, Non-GAAP operating margin 10.8%
• Ordinary profit: 2.453 billion yen, +13.5% year-over-year, ordinary margin 9.4%
• Net income: 1.538 billion yen, +11.9% year-over-year, net margin 5.9%
• Gross profit margin increased 0.3% year-over-year to 27.8%

Sales Strategy for Core Construction Segment

• Strictly enforced assignment rules for non-target customers to refocus on deepening relationships with large client companies, resulting in improved target customer assignment ratios
• Prioritizes young worker retention via the "same-site assignment" strategy, which places new young workers at sites with existing veteran/senior Copro workers; "team dispatch" is defined as assigning 5+ workers to the same site, which management believes improves retention. Same-site assignment ratio currently stands at 49.8% (down from above 50% in H1), and team dispatch ratio declined marginally to 11.3% — management will continue efforts to raise both ratios
• In April 2025, the entire sales headquarters including the head of Copro Construction relocated from Nagoya to Tokyo to capture share in the high construction investment Kanto region, with the Copro Construction CEO leading direct on-the-ground strategy. The Kanto region has delivered resilient growth that offsets slower growth in regional areas, and will continue to target steady gradual growth while working to improve sales growth in underperforming regional markets

Recruitment and Training Strategy

• The company continues to strengthen its core competitive advantage of in-house low-cost recruitment that does not rely on external recruiters. Third quarter single-period hiring was 530 people (+4.7% YoY), but lower yield increased hiring cost per hire to 521 thousand yen from the prior quarter. Cumulative hiring through three quarters was 2,076 people (+12% YoY), with an inexperienced new graduate hire ratio of 77.5%
• Launched the "Kantoku no Tane Tokyo Training Center" in April 2025 to improve retention for 1st and 2nd year workers. Early data shows initial signs of reduced short-term turnover among trained workers; management will continue to refine curricula to match on-site demand and improve long-term retention, which supports higher revenue per worker as workers gain experience beyond 3 years of tenure

Strategic Acquisition of Toright and Toright Engineering

• The company will acquire 100% of the shares of Toright and Toright Engineering from Carlyle Group's special purpose company, for an acquisition price of 29.243 billion yen, closing scheduled for March 1, 2026. Funding will come from existing cash on hand plus bank borrowing, maintaining a healthy balance sheet post-transaction
• Transaction structure splits the existing Toright Group into construction and non-construction businesses, with only the construction dispatch entities joining the Copro Group
• Strategic rationale: 1) Accelerates technician base growth: combines organic low-cost inexperienced hiring with Toright Engineering's 2,443 experienced technicians to reach over 7,300 total construction technicians, just behind industry leader OpenUp Group and closing in on the top industry position; 2) Creates scale synergies: overlapping customer bases will increase negotiating leverage to raise contract rates, allowing the company to pass through wage increases to technicians amid broader industry wage growth of 5-6%; 3) Lays groundwork for further industry consolidation, aligning with the company's goal of becoming the leading player in the consolidating construction dispatch industry
• Synergy summary: Copro's core strengths are low-cost inexperienced hiring, rigorous training systems, and a strong footprint in major urban centers. Toright Engineering's core strengths are leading digital marketing via its in-house job site "Seikoukanri Job," specialized experienced hiring, an established recruitment agency business, and a nationwide branch network. The highly complementary strengths of the two firms will be integrated to drive group growth
• Post-acquisition financial outlook: For FY2027 (March ending), large business scale expansion will be offset by one-time goodwill amortization and integration costs, leading to temporarily suppressed operating profit. Starting from FY2028 (March ending), the company will adopt IFRS, which eliminates goodwill amortization and one-time integration costs fall away, leading to a material improvement in earnings structure
• The Copro CEO will personally serve as CEO of Toright Engineering to lead post-merger integration (PMI) and drive growth

Strategic Carve-Out of IT SES Business

• To focus management resources on the core construction segment and the second growth pillar of mechatronics/semiconductor, the company has agreed to carve out its IT SES (IT technical dispatch) business to listed firm Japaniasu via absorption split, for a planned transfer price of 0.73 billion yen, closing scheduled for March 27, 2026

Shareholder Return and Finance Policy

• The company will maintain its existing dividend policy outlined in the mid-term management plan "Build the Future 2027": no dividend cuts during the plan period, targets a consolidated payout ratio of 50% or higher, and delivers stable dividends aligned with profit growth from strategic investment. This policy will be maintained after the Toright acquisition
• The company will maintain a flexible balance sheet to enable rapid strategic investment including future M&A, and will evaluate capital structure and consider optimal funding methods as needed, while maintaining financial soundness and considering impacts on shareholders

IFRS Adoption

• The company plans to adopt IFRS on a voluntary basis starting FY2028, in conjunction with the Toright acquisition

• For FY2026 (March ending), acquisition-related advisory costs will be incurred from the Toright transaction, and the impact of consolidation on full-year earnings is still under review — any material updates will be disclosed promptly
• Full-year FY2026 (March ending) guidance: Total group technical workers 6,271 people (+29% YoY); consolidated revenue 38 billion yen (+26.6% YoY); operating profit 3.8 billion yen (+37.5% YoY), operating margin 10%; Non-GAAP operating profit 4.425 billion yen (+32.9% YoY), Non-GAAP operating margin 11.6%; ordinary profit 3.8 billion yen (+36.5% YoY), ordinary margin 10%; net income 2.47 billion yen (+35.7% YoY), net margin 6.5%. All metrics are guided to hit new all-time record highs
• FY2026 (March ending) year-end dividend guidance is 25 yen per share, and the existing dividend policy will be maintained for FY2027 post-acquisition

1. Construction Technical Worker Dispatch Segment: Cumulative hiring for the third quarter was 2,076 people, +12% year-over-year. End-of-period registered technical workers stood at 4,904 people, +16.4% (+692 people) year-over-year. Third quarter utilization rate was 92.1%, flat sequentially from the second quarter. Sub-company Copro Construction achieved 2-digit operating profit growth of +12.7% year-over-year, as gross profit gains from higher revenue absorbed increased selling, general and administrative costs.
2. Mechatronics & Semiconductor Technical Worker Dispatch/Contracting Segment: End-of-period registered technical workers stood at 371 people, +19.7% (+61 people) year-over-year, including 156 semiconductor technicians (+35 YoY) and 215 mechanical design technicians (+26 YoY). Retention rates are significantly higher than the core construction segment, and the segment delivered a swing to operating profit profitability driven by higher revenue and lower fixed costs such as personnel expenses. Sub-company Copro Technology recorded this profitable performance.
3. IT Technical Worker Dispatch (SES) Segment: End-of-period registered technical workers stood at 147 people, a decline of 15 people year-over-year.

• Overall group hiring has faced some headwinds: group retention is down 2.5% year-over-year, utilization has declined from 93.4% to 92.1% year-over-year, driven by lower matching accuracy between new hires and received orders in the third quarter
• The mechatronics/semiconductor segment has struggled to meet full-year hiring targets: while candidate pools have been built, offer acceptance rates remain low. Management is currently conducting yield analysis and monitoring to identify and resolve bottlenecks in the hiring process
• There is performance variability across sales branches and sales representatives in the construction segment; management is working to standardize operations in Q4 to improve productivity and minimize non-working technician time
• Same-site assignment ratio and team dispatch ratio for construction retention have both declined marginally from H1 levels, requiring ongoing focused effort to raise these metrics
• Regional sales growth has been sluggish, offset by resilient Kanto region performance, and the company must balance investment in Kanto growth with efforts to improve regional market performance

No question and answer section was included in the provided earnings call transcript.