NISSO HOLDINGS Co.,Ltd. Q2 FY2026 earnings call

Recent M&A and Group Integration

• Added 6 companies from Man to Man Holdings and 1 company from All Japan Guard to the NISSO Group, with results consolidated starting in the second quarter. The acquisitions drove a 6% YoY increase in total consolidated revenue.
• The two new acquisitions brought expanded service scope, including disabled employment services in software and high-margin security services.

Industry Segment Performance

• Automotive (automobile/EV manufacturing): Revenue decreased YoY due to the impact of US tariffs, with continued weak performance centered on major manufacturers. The outlook remains uncertain.
• Semiconductor manufacturing: Revenue increased 13.7% YoY due to higher billing rates and increased headcount, but performance is weaker than initial management forecasts, though the segment is seeing a gradual recovery trend.
• Electronics manufacturing: Revenue saw a slight upward trend YoY due to a modest recovery in operating levels.

Profitability Overview

• Consolidated operating profit decreased YoY, driven by higher goodwill amortization from M&A, unabsorbed first-quarter new graduate engineer training costs, and increased costs associated with expanded operations. First-half (mid-period) operating profit totaled 981 million yen, with profits heavily weighted to the second half due to calendar effects, and current operating profit is below initial forecast levels.

Talent Development Initiatives

• Opened the Nisso Technical Center Aichi in October to fully launch training for automotive-focused engineers, addressing growing demand for skilled workers amid accelerating automation and robot adoption driven by population aging.
• The center is equipped with XR (AR/VR) training capabilities, and serves as a hub for training XR development engineers and expanding customer-facing software development. It also provides training for both NISSO Group employees and client company employees.
• Trained 56 more engineers than last year (1,047 total this year, up from 991 last year), and external employee training increased 262 people YoY to 430 total, driven by growing demand for new hire and career upskilling training from manufacturers.

Corporate and Brand Initiatives

• Published NISSO Group's first integrated report, which includes management's commitment to hitting mid-term strategic targets, details of the business portfolio transformation for sustainable growth, and leadership interviews.
• Launched a new brand CM starring actor Takumi Saito, focused on expanding the engineer services segment, with the goal of improving brand awareness to boost both recruiting and sales results.

1. Manufacturing Production Personnel Services: Revenue increased 13.9% YoY, adding 2.69 billion yen, with a 1,349 person increase in headcount YoY and a 16 thousand yen increase in average monthly revenue per person. Gross margin decreased 0.4 percentage points, but management expects it to return to previous levels as operations normalize. This segment's overall contribution share to total revenue remained largely unchanged after the M&A integration.
2. Engineer Personnel Services: Revenue increased 369 million yen YoY, driven by increased headcount. Gross margin dropped significantly YoY due to unabsorbed new graduate training costs and ongoing on-the-job training for new hires, plus weaker-than-expected performance in the semiconductor segment. Average monthly revenue per person is currently down, but management expects it to recover once new engineers are fully deployed to frontline roles. This segment's overall contribution share to total revenue remained largely unchanged after the M&A integration.
3. Clerical & Other Personnel Services: The addition of Man to Man Animo from the new M&A brought total disabled employee headcount to 274, expanding opportunities for disabled workers to work in the software field. This segment's overall contribution share to total revenue remained largely unchanged after the M&A integration.
4. Other Services (Nursing Care, Welfare, Security, etc.): The addition of All Japan Guard led to a large increase in revenue, reaching 921 million yen for the quarter. Profitability improved significantly due to the high margin of the security business. In institutional nursing care, occupancy has stabilized around 95% with 380 residents. This segment's overall contribution share to total revenue remained largely unchanged after the M&A integration.

• Management maintained the full-year 2026 March fiscal year consolidated earnings forecast, despite the mid-year operating profit miss, as management believes full-year performance can still be recovered in the second half with corrective actions.
• The company will expand sales into industries less exposed to US tariff impacts on the automotive sector, and grow industry offerings that align with job seeker demand to improve new hire conversion and increase headcount.
• The company will actively expand global talent recruitment focused primarily on Vietnam and other Asian markets, building out pre-arrival education and cultural training programs to develop foreign workers into ready-to-deploy talent, as a new growth engine to hit mid-term strategic targets.
• A new CM promotion will be used to grow engineer headcount and improve overall profitability.
• The shareholder return policy remains unchanged, maintaining a target payout ratio of 30% or higher, with a continued focus on stable growth in annual dividend amounts.

• Weak performance in the automotive industry driven by US tariffs remains a core risk, and management will continue to monitor the impact of any future price pass-through of tariffs to end consumers.
• The semiconductor industry has not yet recovered to expected performance levels, weighing on current profitability for the engineer personnel services segment.
• Manufacturing industry average hourly wages have not risen alongside service sector wage growth, creating a hiring headwind for manufacturing-focused personnel services that is also impacting peer companies industry-wide.
• Gross margins are currently under pressure from unabsorbed new graduate engineer training costs and goodwill amortization from recent M&A activity, though these pressures are expected to be temporary.

No Q&A section was included in the provided earnings call transcript.