Rise Consulting Group,Inc. Q3 FY2026 earnings call

Core KPIs

• Available consultants for assignment total 293.5 full-time equivalent positions, which missed internal plans; overall headcount growth momentum has improved, with agency fee hikes to market levels starting to deliver partial results
• Utilization rate reached 88% cumulative for the first 3 quarters, which is a high level by overall industry standards but down slightly from 90% year-over-year, and has declined gradually from the first quarter
• Average consultant billing rate is 2.56 million yen, flat quarter-over-quarter, and slightly below plan due to the higher share of lower-billing-rate junior consultants; the company has successfully raised billing rates for partner-level roles, and gross profit margins remain stable indicating proper pricing in a steady demand environment
• Turnover rate remains stuck at a high level in the 20% range, continuing to be a core management priority

Staffing Structure Challenge

• The company's target staffing composition for partners, managers, and members is 1:3:6; the current composition is 0.5:3:6.5, with a higher share of less experienced junior members and a clear shortage of partner-level senior roles
• Root causes include intensifying competition for talent in the booming consulting industry, and insufficient prior response to this trend. Fee hikes to recruitment agencies have not yet delivered sufficient results, with recruitment difficulties most pronounced for partner-level positions

Operational Improvement Initiatives

• Recruitment strategy reform: The company will refocus on targeted candidate pool building, actively leverage external recruitment services, revise channel strategy to attract aligned talent, explore AI-powered tools to shorten recruitment timelines, and strengthen relationships with recruitment agencies. A new cross-departmental coordination meeting between recruitment and sales teams has been launched to align hiring with business needs and improve utilization rates by matching talent to sales demand more effectively
• Retention improvement: The company is evaluating expanded welfare benefits alongside compensation improvements, and will conduct a full review of overall compensation to improve employee loyalty and reduce turnover
• Alliance and business development: The company has launched new alliance initiatives to offset partner shortages and expand sales lead generation. Inside sales growth is already on track, and new initiatives include:
  • Multiple new projects secured through the alliance with SHIFT, with joint service development underway and the first co-hosted seminar tracking to strong registrations; additional seminars are planned through the next year
  • Multiple co-development projects with clients to serve the clients' own end customers are under evaluation
  • The company recently joined the ServiceNow partner alliance, and will actively pursue additional alliances with leading DX/AI vendors to drive new deal flow

Capital Strategy and Shareholder Returns

• The planned dividend per share remains unchanged from the October 14, 2025 announcement: despite missed full-year performance targets, the company confirms sufficient capital to support dividends given clear operational challenges and ongoing implementation of countermeasures
• The company's board has approved a 0.7 billion yen share repurchase program, and has withdrawn its pending application for Prime Market segment transfer to remove regulatory restrictions on active capital strategy. This is a temporary measure; the company still aims to reapply for Prime Market transfer at an appropriate future date

Rise Consulting Group operates a single consulting business segment. For the 3rd quarter of the FY2026 February term:

• Sales revenue: 6.38 billion yen, +15.9% year-over-year
• Gross profit: 3.46 billion yen, +14.8% year-over-year
• Operating profit: 1.36 billion yen, +5.4% year-over-year
• Net quarterly profit: 970 million yen, +6.9% year-over-year
• Gross profit margin: 54.2% year-over-year, stable
• Total operating expenses (cost of sales + SG&A): 5.021 billion yen, +802 million yen compared to the prior period
  • Cost of sales increased by 432 million yen, driven by growing consultant headcount, salary increases for retention, and increased outsourcing utilization
  • SG&A increased by 370 million yen, driven by growing consultant headcount (salaries for non-billable consultants are recorded in SG&A), expanded sales and corporate functions Balance sheet position as of quarter end:
• Current assets: 3.845 billion yen, +281 million yen compared to prior period end
• Non-current assets: 5.639 billion yen, +3 million yen compared to prior period end
• Current liabilities: 1.418 billion yen, -114 million yen compared to prior period end
• Non-current liabilities: 919 million yen, -435 million yen compared to prior period end
• Total equity: 7.147 billion yen, with retained earnings increasing approximately 750 million yen compared to prior period end

• The company revised its full-year FY2026 February term guidance downward from the April 14, 2025 original forecast, cutting full-year sales revenue by 11.9% and full-year operating profit by 28.3%
• Revised full-year guidance under IFRS:
  • Sales revenue: 8.4 billion yen (projected to grow year-over-year)
  • Cost of sales: 3.83 billion yen
  • Gross profit: 4.57 billion yen
  • Operating profit: 1.64 billion yen (projected to decline year-over-year, due to higher than expected labor cost increases that will not be fully offset by sales growth)
• The revised guidance is set as a achievable target based on 3rd quarter progress from the prior year

• Intensified competition for talent in the consulting industry has led to a misbalanced staffing structure: persistent shortages of senior partner-level roles, and a higher share of lower-cost, less experienced junior members. This imbalance prevents the company from assembling client-requested project teams that include senior leadership, leading to missed deal opportunities and lower than planned utilization of junior staff
• Prior low-cost recruitment strategies relying on SNS, direct recruiting, and employee referrals have lost competitiveness as these channels have become commoditized alongside the company's growing recruitment scale
• Turnover remains stuck at a high level in the 20% range, which exacerbates staffing challenges
• The shortage of partner-level roles is currently impacting project team assembly, and creates a medium-term risk of reduced sales capability if not addressed
• The company has missed its original full-year performance guidance, leading to downward revision of forecasts and uncertainty around the timeline for correcting staffing imbalances

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