SHIFT (3697) Q1 2025 earnings summary

Executive summary

• Net sales for Q1 FY2025 rose 20.3% year-over-year to ¥30.17B, with a record-high Q1 gross profit margin of 33.2% driven by high utilization and hiring restraint.

• EBITDA surged 83.7% year-over-year to ¥4.32B, and operating profit nearly doubled to ¥3.52B, reflecting efficiency gains and SG&A optimization.

• Profit attributable to owners rose 80.7% year-over-year to ¥1.98B.

• All business segments reported strong double-digit sales and profit growth, with Software Testing and Software Development leading.

• Strategic initiatives, including organizational restructuring, AI-driven transformation, and the "SHIFT3000" vision, are underway to accelerate growth.

Financial highlights

• Gross profit increased 28.4% year-over-year to ¥10.02B; operating profit margin improved by 4.5pt to 11.7%.

• EPS for the quarter was ¥112.46 (basic), up from ¥62.20 a year earlier; comprehensive income nearly doubled to ¥2.03B.

• Q1 progress rates: 23.2% of full-year net sales target and 26.1% of operating profit target, both highest among recent years.

• SG&A expenses rose 8.6% year-over-year, but recruiting expenses dropped 51.5% due to hiring restraint.

• Total assets increased to ¥66.21B, mainly due to higher cash from borrowings; net assets rose to ¥35.61B.

Outlook and guidance

• FY2025 full-year targets: net sales ¥130B (+17.5%), GPM 33.5% (+1.5pt), operating profit ¥13.5B (+28.1%), and net income ¥7.9B (+54.1%).

• Progress rates for Q1: 23.2% of annual sales target, 26.1% of operating profit, 25.0% of net profit.

• Focus on further GPM improvement, utilization rate increases, and expansion of high-value projects, with AI and M&A as key growth drivers.

• A 15-for-1 stock split is scheduled for January 24, 2025, to enhance liquidity and broaden the investor base.