NISSO HOLDINGS Co.,Ltd. Q3 FY2025 earnings call

Overall Financial Performance

• Achieved the highest net profit for a third quarter since listing, including the listing history of Nisso Kosan. Consolidated revenue increased 5.3% YoY, and consolidated operating profit increased 30% YoY. Cumulative operating profit through Q3 is 2.662 billion yen. For the standalone Q3, revenue is 26.175 billion yen and operating profit is 1.182 billion yen, 9.2% YoY increase, following the typical seasonal pattern of higher second-half performance.
• Tsuna Group joined as an equity-method affiliate during the current fiscal year; no new group affiliates were added in Q3.
• The main drivers of profit growth are increased billing rates and expanded headcount in the high-margin engineer segment. Selling, general and administrative expenses increased YoY due to required higher promotional investment for the company website amid a tighter recruitment market.

Industry Strategy

• NISSO focuses on three core industries: Automotive (automobile and EV-related), Semiconductor (semiconductors and semiconductor manufacturing equipment), and Electronics (communication equipment and electronic components). Automotive revenue grew only 2.2% YoY, with headcount declining, as demand varies sharply between different manufacturers, which is the main cause of slower overall revenue growth. Semiconductor and Electronics segments both grew steadily overall, with the company's focused priority manufacturers in semiconductors performing solidly, and Electronics tracking roughly in line with plan despite performance variation between different end customers and use cases.
• All three core industries are expected to expand capital expenditure, while automotive sees a mix of recovery and stagnation in workforce demand; the company will prioritize focusing on areas with strong client demand going forward.

Recruitment and Talent Development

• Q3 promotional efforts successfully increased monthly average applicants even in the tight labor market, but monthly average new hires and hiring rate declined. The key challenge going forward is improving matching, as more job seekers prioritize roles in specific regions aligned with the geographic variation in client demand. The company will leverage a recruitment consortium with over 150 peer companies to improve matching, and monetize candidates placed via referrals even if they do not join NISSO directly.
• NISSO operates 9 in-house training facilities across Japan, and participates in regional consortiums to strengthen industry-academia-government collaboration. Engineer training participation increased from 1,057 YoY to 1,465, and external corporate training participation increased from 148 YoY to 279.
• New strategic partnerships were executed: a collaboration agreement for semiconductor talent development with Kumamoto Prefectural Technical College, and a fifth partnership with a Vietnamese educational institution, Ho Chi Minh City University of Technology, with the first cohort of students scheduled to arrive for work placement in Japan in FY2026. VR-based safety training was launched to let workers experience factory hazards, with portable devices that can be deployed across NISSO locations and client facilities. The company's e-learning tool "Start engineer" continues to receive steady orders.
• NISSO won first place overall for the third consecutive year in the Oricon customer satisfaction survey, with high ratings across all six evaluated categories this year.
• The company is actively promoting internal career change to grow engineer headcount, with transfers from manufacturing production roles to engineer roles driving the decline in manufacturing headcount, a strategic intentional shift.

• Manufacturing Production Human Resources Services: 77% of total revenue contribution, 0.5% YoY revenue increase. Gross profit margin of 17.6%, 0.9 percentage points YoY improvement. Average monthly revenue per employee is 445 thousand yen, 2.6% YoY increase. Registered headcount decreased by 414 YoY, with a stable low turnover rate of 3.7%.
• Engineer Human Resources Services: 11% of total revenue contribution, 33% YoY revenue increase. Gross profit margin of 21.1%, which is 3.5 percentage points higher than manufacturing production services, down slightly from Q2. Average monthly revenue per employee is 531 thousand yen, 7.2% YoY increase. Registered headcount is 1,976, 471 YoY increase, with turnover below 2%, a very low stable level. Combined headcount of manufacturing and engineer segments totals 16,525, with engineer segment accounting for 12% of the combined headcount, up as planned.
• Clerical & Other Human Resources Services: Clerical segment revenue increased 2.7% YoY, registered headcount of 555, nearly flat YoY. Other services revenue is 1.633 billion yen, up more than 100 million yen YoY, driven primarily by Nikon NISSO Prime.
• Care & Welfare Services: Increased revenue with decreased profit YoY. Profit decreased 0.3% YoY due to rising costs such as utility expenses, while maintaining a very high occupancy rate of 96.0% at 6 operated facilities.

• Management maintained the full-year 2025 March fiscal year guidance unchanged: 106 billion yen revenue, 3.8 billion yen operating profit, 3.8 billion yen ordinary profit, and 2.4 billion yen net profit. The company is currently executing Q3 performance against this target.
• The planned annual dividend is maintained at 22 yen per share, consistent with the company's base policy of maintaining a payout ratio of 30% or higher.

• Labor market tightness: The overall recruitment market is increasingly competitive, leading to higher promotional investment costs and declining hiring conversion rates despite growth in applicant volume.
• Uneven industry demand: Demand in the core automotive segment varies sharply between manufacturers and regions, leading to stagnant revenue and headcount growth for the segment overall.
• Rising input costs: Utility and other operating cost increases have pushed down profit for the care and welfare segment even as revenue grows and occupancy remains high.
• Strategic profit tradeoff: The company is currently placing engineers across semiconductor manufacturing roles regardless of billing rate to build experience for future growth, leading to a temporary slight decline in the engineer segment margin.

No formal Question and Answer section was included in the provided transcript.