9332.T

• Overall Consolidated Performance

  • Consolidated revenue increased 8.1% year-over-year, driven by positive M&A impacts that also increased total headcount and expanded business scale. Selling, general and administrative expenses (SG&A) increased 1.159 billion yen year-over-year due to M&A-related costs. Gross profit increased 694 million yen year-over-year, but the large SG&A increase pressured profits, leading to a 465 million yen year-over-year decrease in consolidated operating profit.
  • Revenue turned positive starting from Q2 due to M&A impacts, while operating profit remained under severe pressure through the first half of the fiscal year. Q3 operating profit finally reached and surpassed prior year levels, after large year-over-year declines in Q1 and Q2. Automotive and semiconductor industry progress has lagged original plans, but has finally bottomed out and begun to catch up to plan. Delayed production and headcount increase plans also bottomed out in Q3, and are expected to gradually recover starting from Q4.
  • Revenue and profit are concentrated in the second half of the fiscal year, as previously communicated. Weak demand in automotive has impacted headcount growth and revenue, while delayed semiconductor-focused engineer projects have led to underutilization that significantly pressured operating profit.

• Industry Updates

  • Automotive: U.S. tariff impacts have finally stabilized, and automakers are pushing to increase production volume and secure profits for the next fiscal year. The outlook has improved from cloudy to cautiously positive.
  • Semiconductor: While project progress remains delayed relative to original plans, activity related to AI and data centers is growing. Preparation for cutting-edge semiconductor manufacturing has begun in the Kumamoto area, which is expected to positively drive future segment growth. The long-term growth outlook remains unchanged from the prior quarter update.

• Human Capital Development

  • NISSO maintains a nationwide network of technical and training centers with no major changes to the footprint this quarter.
  • Engineer training volume decreased 65 trainees year-over-year, as management slowed training intake in response to currently underutilized semiconductor engineer capacity. External corporate training (supporting client new hire onboarding and employee reskilling, a targeted growth area) increased sharply from 279 trainees in the prior year period to 842 trainees this period. Management plans to continue scaling this training business as it receives positive market feedback.

• Strategic & ESG Updates

  • NISSO won the overall first place ranking in the Oricon Customer Satisfaction Ranking for 4 consecutive years, an award based on feedback from workers placed by production-focused human resource firms. Management plans to leverage this award for employer branding to attract new applicants.
  • The company published the "NISSO Group Sustainability Report 2025", which highlights initiatives to address social issues, with a specific focus on expanding disabled worker employment opportunities. The report includes a talk by the CEOs of incumbent group firm Nisso Pyua and newly added Man to Man Animo on the future of disabled employment, available via the URL published in the presentation materials.

• Management has downwardly revised full-year FY2026 (March term) guidance, now expecting full-year revenue to come in 3 billion yen below the initial full-year forecast, and operating income to come in 700 million yen below the initial full-year forecast.
  • The downward revision is driven by two core factors: 1) Domestic automotive production has been even weaker than management's already cautious pre-season forecast that incorporated U.S. tariff impacts, and the expected recovery in domestic automotive production has been pushed back, creating a large negative impact on the company's external labor sourcing business; 2) Startup of new semiconductor customer factories has been delayed, volume growth for 2027 mass production projects has been pushed back, and U.S.-China geopolitical tensions have negatively impacted semiconductor manufacturing equipment demand, pushing expected revenue and profit growth back relative to the original planned timeline.
  • Management notes positive recent trends: Automakers and automotive component manufacturers have begun issuing new headcount increase orders starting around the year-end holiday period, market conditions bottomed out in the late 2025 to early 2026 period and have begun to reverse upward. Management expects to begin recovering lost ground from this point. The company's strategy to actively deploy engineers in semiconductor and select automotive segments is finally ready to launch, and management expects to begin aggressive growth going forward.
  • Share repurchase and dividend policy: Despite a nearly 20% downward revision to full-year profit, management will maintain the previously committed dividend of 25 yen per share, resulting in a projected payout ratio of 44.4%. Management considers the maintained dividend appropriate given the expected upcoming recovery, and will continue to prioritize dividend payout ratio as a core management metric while building a framework to sustain future dividend increases.
  • Foreign worker promotion initiative: Management's ongoing push to expand employment of foreign workers is expected to be a positive growth driver during the upcoming recovery, with foreign workers expected to contribute primarily in engineer roles.

By service segment:

1. Manufacturing & Production Human Resources Services: Revenue and headcount increased following the inclusion of Man to Man Holdings in the group starting from Q2. Gross profit margin remained under pressure but has gradually improved from 17.0% in Q1, with early signs of recovery. Average monthly revenue per employee exceeds the prior year period driven by positive pricing increases, even amid weak utilization, and revenue has grown gradually year-over-year. Turnover rate remains largely flat compared to the prior year, with no major issues.
2. Engineer Human Resources Services: Revenue grows steadily year-over-year, but the core challenge this period has been low gross profit margin. As semiconductor-related projects have begun moving forward and utilization gradually recovers, profitability has improved quarter-over-quarter. Average monthly revenue per employee remains lower than the prior year, but the gap has narrowed gradually, indicating utilization is moving toward normalization. Turnover rate is approaching prior year levels, with a target of further reduction by fiscal year end.
3. Office & Other Human Resources Services: Office segment revenue has been on a gradual downward trend amid AI advancement. The other sub-segment has seen an increase in the number of disabled employees year-over-year following the inclusion of Man to Man Animo in the group. The senior worker (Prime Employee) active area is primarily led by the joint venture with Nikon Nisso Prime.
4. Other Services (Nursing Care, Welfare, Security, etc.): This segment includes the company's existing nursing care and welfare services, security services added after the inclusion of All Japan Guard, and contracted manufacturing system development from Man to Man Holdings affiliated companies. Revenue has grown steadily, and gross profit margin has improved significantly due to the high profitability of newly added group services. Occupancy at nursing care facilities remains at a very high 94%.

By industry segment:

1. Automotive Industry (Automobile & EV Related): Accounts for approximately 40% of total consolidated revenue. Revenue decreased 2.4% year-over-year amid weak demand driven by U.S. tariff impacts.
2. Semiconductor Industry (Semiconductor & Semiconductor Manufacturing Equipment Related): Revenue increased 13.1% year-over-year, but growth did not meet management's original expectations, despite the ramp-up of new domestic semiconductor factories and semiconductor manufacturing equipment utilization. This growth was not sufficient to offset the revenue decline in the automotive segment.
3. Electronics Industry (Communication Equipment & Electronic Components): Revenue was largely flat year-over-year. Management expects this segment to see strong future growth as semiconductor adoption expands.

• Weak demand in the automotive industry, which makes up ~40% of total revenue, driven by U.S. tariff impacts, has significantly pressured overall revenue and profit this quarter, and the recovery in automotive production has been delayed.
  • Semiconductor industry project ramp-up has been slower than expected: New semiconductor customer factory startups have been delayed, semiconductor equipment manufacturers have not reached planned utilization levels, and U.S.-China geopolitical tensions have further hurt equipment demand, leading to lower than expected engineer utilization and an inability to recover human resource development costs this period.
  • Intensified competition for talent in the hiring market has reduced hiring efficiency across segments, adding cost and pressure to growth plans.
  • Amid depopulation and aging in Japan, severe labor shortages in service, hospitality, and inbound tourism sectors have made it significantly more difficult to attract and secure workers for the manufacturing sector, which is NISSO's core market. Management notes an increasing need to develop new solutions to address this challenge.
  • Office segment human resources services are facing secular downward pressure driven by AI advancement, which is reducing demand for office labor.

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