9709.T

Business Environment

• IT investment remains solid amid improving employment and income conditions, with recovering corporate capital expenditure.
• The "2025 Cliff" warning has accelerated momentum for legacy core system renewal, and demand for IT-enabled efficiency improvements is growing even among small and medium-sized enterprises amid labor shortages.

Core Business & Product Initiatives

• REVERSE PLANET: A core legacy system visualization tool that solves the common industry problem of missing/outdated documentation, helping engineers identify modification points and reduce system errors from missed fixes.
• AirsNeo migration offering: Promotes low-risk legacy system migration that moves existing system logic unchanged to a new environment before post-migration modifications, rather than full costly reconstruction. Increased demand for large-scale migration has led to centralization of common migration processes to enable parallel project execution.
• Generative AI integration for ReverseNeo: Has released a function that generates processing summaries and flow diagrams from existing program source code; a service to automatically generate missing basic design documents from source code via reverse engineering will be released soon. These tools also support creation of vendor RFP materials for system reconstruction projects.

Strategic Investment & Governance

• Mid-term management plan (2024-2026) targets 23 billion yen in full-year revenue and 2.8 billion yen in operating profit. Key ESG targets include 20% female manager ratio by 2026 (already reached 9.5% as of April 2025, long-term target 30%) and sustained 100% male parental leave uptake (achieved in 2024 and H1 2025).
• Four core strategic pillars: Strengthen existing business, build new long-term growth foundations (via internal startup and external collaborative ventures), invest in people with a focus on diversity, equity and inclusion, and return profits to shareholders.
• Growth investment focus: Commercializing post-migration operation and maintenance BPO services, leveraging generative AI documentation tools to handle customer demand for end-to-end migration support.

Human Capital & ESG

• Has implemented average 5% salary increases for two consecutive years, and paid a one-time 80 thousand yen cost of living special allowance to all employees in October 2025. Improved working conditions have cut average monthly overtime by 60% from 10 years ago to 10.5 hours, with average 17.2 days of paid leave taken annually.
• Recognized for the second consecutive year as a 2025 Excellent Health Management Corporation. Hired 64 new graduates in April 2025 and 10 mid-career hires in 2024, with no current difficulty meeting hiring targets.
• The internal startup program launched in H2 2020 has accumulated 145 approved projects, with multiple products commercialized and deployed.

Capital Return

• Announced a 2 billion yen share repurchase program in August 2025, with 530 thousand shares already acquired and a total of 1.4 million shares planned for repurchase over 12 months. A 3 million share cancellation is planned after repurchase completion.
• Increased total annual dividend to 55 yen (25 yen interim, 30 yen final), a 15 yen increase from the prior year, targeting a payout ratio of 45% or higher.

• Management upwardly revised full-year 2026 March fiscal year guidance to 21.3 billion yen in revenue, 2.6 billion yen in operating profit, representing an expected operating margin of 12.2%.
• Management noted that the original full-year budget was set conservatively to account for potential tariff impacts from US-China trade tensions, and actual impacts to date have been smaller than expected. Management stated it will consider a further upward revision if Q3 results are strong and full-year results are on track to exceed the current target.
• The company has achieved a 13.2% operating margin in the interim period, and expects full-year operating margin to remain above 12%. ROE is currently 15.9%, exceeding the long-term target of 10% or higher.

NCS&A divides its revenue into four segments for performance tracking: 1. In-house Solution: 3.4 billion yen in revenue, accounting for 31% of total interim revenue, with the company continuously growing this segment. 2. System Integration: Provides full-lifecycle services from development, implementation to 24/7 maintenance support; no separate absolute revenue or percentage contribution was disclosed. 3. Equipment & Package: Refers to standalone product sales; no separate absolute revenue or percentage contribution was disclosed. 4. Contract Development: Refers to development commissioned by large manufacturers; no separate absolute revenue or percentage contribution was disclosed. Total interim revenue for the period is 10.847 billion yen.

• Deteriorating Sino-Japanese relations have already led to halted export activity to China for some of NCS&A's Kansai-based clients, which could create downside risk for full-year results.
• 61% of all Japanese companies still operate legacy core systems, creating broad market opportunity but leaving the company exposed to shifts in customer DX investment timelines.
• The company relies on skilled engineering talent to validate and correct AI-generated code and documentation, and any sustained inability to hire qualified talent could limit growth.

Q: Given that H1 operating profit hit 1.432 billion yen, is a further upward revision of the 2.6 billion yen full-year target possible? What is the risk of downside from China-related headwinds? / A: The full-year budget was set conservatively to account for expected tariff impacts on clients with China operations, and impacts so far have been smaller than forecast. However, current strained Sino-Japanese relations have left some clients with stalled Chinese exports, creating potential downside risk. Management will review results after Q3, and will implement a further upward revision if performance remains strong enough to justify raising the target. The company has also worked to smooth revenue recognition across quarters via project progress accounting, so large end-of-year revenue concentration is no longer a norm, making quarterly performance more predictable.

Q: How does generative AI change your demand for engineers and hiring plans? Do you face difficulty hiring engineering talent? / A: Management does not believe generative AI reduces the need for skilled engineers. Generative AI requires clear human input requirements to produce code, and all AI-generated output needs human review, correction, and quality validation. The company continues to prioritize rigorous programming training for new hires and will maintain active hiring. Strong working conditions and competitive compensation have drawn strong applicant pools, and the company met 91% of its 2025 new graduate hiring target (64 hires out of a 70 person target) with no current hiring difficulties.