■ Future Outlook for Netyear Group <3622>

1. Performance Outlook for March 2025

For the fiscal year ending March 2025, a revenue increase of 12.9% year-on-year is expected, reaching 4,100 million yen, with operating profit anticipated to rise by 107.0% to 300 million yen, ordinary profit expected to increase by 107.5% to 299 million yen, and net income projected to grow by 8.4% to 115 million yen. Although the progress rate until the second quarter was somewhat low, due to seasonal factors where sales typically peak in the fourth quarter and anticipated revenue contributions from new large projects aimed at major retail chains in the latter half of the year, as well as improvements in order rates and operation rates resulting from a review of the sales system, the company currently considers the achievement of these targets to be generally feasible. It plans to support the planning, development, and operational assistance of promotional measures that include social media for these new large projects. Additionally, starting from the fiscal year ending March 2025, efforts are being made to strengthen collaborative frameworks with three group companies including NTT Data to acquire collaborative projects, and project creation is expected.

In terms of profit, the gross profit margin is expected to rise from last year's 22.5% to 23.8% due to an increase in personnel utilization rates accompanying revenue growth and the suppression of outsourcing costs. Selling, general and administrative expenses are expected to increase by 13 million yen compared to the previous year due to rising development costs for new products, but the ratio to revenue is projected to decrease from last year's 18.5% to 16.7% due to the effect of increased sales, and operating margin is expected to rise from 4.0% to 7.3%. The number of mid-career hires will continue to be controlled based on order conditions.

It is noteworthy that in June 2024, Ryuuzou Hironaka was appointed as the new President and CEO. After graduating from university, Hironaka spent 11 years at a major bank's research institute, engaging extensively in consulting services in the information sector. He joined the company when invited in 2001, having previously been a subject of investigation, and after being with the company until 2009, he established his own venture. With rich experience across numerous projects including digital marketing initiatives for large enterprises, and a deep understanding of the company's strengths, he emerged as the ideal choice.

Upon returning as president for the first time in 15 years, the new president felt that while there are excellent employees, the previously energetic and aggressive corporate culture has shifted to a somewhat more conservative one. Therefore, he intends to lead by example with aggressive actions to reform employee consciousness and aim for a transformation of the conservative corporate culture. Additionally, in business, he plans to further strengthen collaboration with the NTT Data Group, as well as actively incorporate advanced technologies such as generative AI and blockchain technology into their services, to differentiate from competitors. Initially focused primarily on developing corporate websites, the company realized that projects often resulted in minimal ongoing operational support after delivery, leading to one-time revenue contributions; thus, it now intends to focus on primary business systems (such as sales systems) that promise continuous revenue. By handling the planning, proposal, operation, evaluation, and improvement processes in a PDCA cycle, the aim is to increase projects that can ensure ongoing revenues. Consequently, the SES business involving sending engineers to project sites will also be strengthened.

Through these initiatives, it aims to create around 10 clients with annual revenues of about 0.5 billion yen, targeting an operating margin of over 10%. Strengthening recruitment and development of human resources is crucial for business expansion; efforts will be made not only to source from LULL, a partner staffing company, but also to promote that joining the company will lead to skill enhancement, enticing potential talent through human resource service companies to bolster career hiring. Specific measures and management numerical targets will be summarized in the mid-term management plan currently in preparation, and its details are drawing attention.

(Written by FISCO guest analyst, Jo Sato)