Nomura Research Institute,Ltd. (4307) Q3 2026 Earnings Call Transcript

（Tokyo-29th January, 2026）

Nomura Research Institute, Ltd. The Third Quarter of FY March 2026 Financial Results Briefings Q&A Session Speakers:

Masaaki Yamazaki Senior Corporate Managing Director, Member of the Board Takao Yamaguchi Senior Managing Director

First Inquirer (Analyst) Q1: Overseas business performance deteriorated in the third quarter. Please provide details, especially for North America and Australia. You explained that the scope of the structural reforms would be expanded — what do you currently envisage for that scope? A1: For the nine-month period to the third quarter, overseas revenue decreased by ¥4.3 billion year-on-year. Of that, about ¥2.7 billion was due to foreign exchange; on an operational (constant-currency) basis, the revenue decline was roughly ¥1.6 billion. In local currency terms, North America grew by about 8%, Australia decreased by about 7%, and Asia was roughly flat year-on-year. In North America, network business rebounded in the first half following a weak prior year, but it has now settled back to a normalized level. Although the cloud business has increased its pipeline through stronger sales capability, customers’ decision-making speed has not picked up, so full recovery is expected to take time. In Australia, Consulting and IT managed services are weak. We are implementing a business-model shift from IT staffing business to higher value-added services, but results have not yet become apparent. The structural reforms under consideration will cover major regions and principal sites. We are also broadening the scope in terms of which business areas to reform, and are determining which business domains require fundamental restructuring. Q2: Is the timing for implementing the structural reforms still unchanged from the initial assumption of the fourth quarter of FY March 2026? A2: We do not expect a change in the timeline. We will implement the structural reforms in 1 / 7 These materials were prepared for the sole purpose of providing information to use as reference in making investment decisions, and are not intended as a solicitation for investment. Copyright（C） Nomura Research Institute, Ltd. All rights reserved.

the fourth quarter, and at the time we announce the medium-term management plan scheduled for April 2026, we will explain the results of those reforms. Q3: How do you view the impact of rising memory prices — and related increases and shortages in server and other hardware — on software demand and project progress? Please include your countermeasures. A3: For hardware, we plan to reflect higher procurement prices in our proposal pricing to customers. At the application layer and in upstream phases, we recognize that component shortages could cause delivery delays going forward. Therefore, we adjust implementation schedules from the proposal stage and make appropriate proposals to customers based on demand outlooks. That said, purchases and deliveries of goods represent a relatively small proportion of our overall business. Most projects implement systems in cloud environments, so businesses that heavily depend on hardware procurement are limited. For that reason, the impact of rising memory prices and component shortages is minor on a company-wide basis and is not expected to cause major problems.

Second inquirer (Analyst) Q1: At the second quarter briefing you said you would implement overseas structural reforms in the fourth quarter. For the third quarter results, can we understand that no structural reform costs were recorded and that the deterioration in profits was due to weak revenue? A1: The profit decline in Australia includes costs for a small-scale personnel reorganization. That is a short-term measure to improve profitability and is distinct from the (nowdiscussed) structural reforms. No material costs associated with the structural reforms were recorded in the third quarter. Q2: Are you assuming that costs related to overseas structural reforms will fit within the fullyear guidance, or will you record necessary costs regardless of domestic upside and not offset them by domestic outperformance? A2: We are not determining the scale of reforms based on a prespecified cost amount, nor are we planning to book costs only up to the level of domestic upside. We will steadily implement the reforms that need to be made to improve profitability from FY March 2027 onward. Therefore, we will not adjust the scale or timing of reforms merely to keep results within the FY March 2026 forecast range. 2 / 7 These materials were prepared for the sole purpose of providing information to use as reference in making investment decisions, and are not intended as a solicitation for investment. Copyright（C） Nomura Research Institute, Ltd. All rights reserved.

Third inquirer (Analyst) Q1: Even though structural reform costs were not recorded in the third quarter, overseas business profitability deteriorated significantly. Exchange effects alone do not explain this. What are the main causes of profit margin deterioration? A1: The main cause is a decline in demand for IT managed services and Consulting, particularly a marked stagnation in IT staffing business. Against a backdrop of inflation and rising labor costs, customers are increasingly inclined to bring IT work in-house, and demand for IT staffing services has fallen substantially. Q2: To what extent will the overseas structural reforms be completed by FY March 2026? Is there a possibility that costs will be carried into FY March 2027? Please also comment on any impact on the next medium-term management plan. A2: The structural reforms will be implemented by the end of March 2026. Based on these reforms, we will formulate the next medium-term management plan and drive earnings improvements from FY March 2027 onward. Q3: At the second quarter briefing, you mentioned booking structural-reform costs out of domestic upside. Do you still maintain that approach, or will you, irrespective of domestic outperformance, recognize various costs including goodwill within this fiscal year? A3: We no longer plan to limit actions to the range of domestic upside. We will finalize the details and costs of the structural reforms by FY March 2026 so that we can smoothly link them to the next medium-term management plan starting in FY March 2027. Q4: Orders for domestic Industrial IT solutions were sluggish on a standalone third quarter basis, but cumulative third quarter orders were up 9% year-on-year, so this does not appear to be a major problem. Please provide the status of new customer acquisition and the situation by industry. A4: We have acquired new customers in several manufacturing companies as well as in service, energy-related, and retail sectors. Among existing customers, obvious signs of recovery are visible in manufacturing, service, and distribution, and we expect these to contribute to future revenue. Compared with FY March 2025, our outlook is much stronger now, and growth in Industrial IT solutions is accelerating.

3 / 7 These materials were prepared for the sole purpose of providing information to use as reference in making investment decisions, and are not intended as a solicitation for investment. Copyright（C） Nomura Research Institute, Ltd. All rights reserved.

Fourth inquirer (Analyst) Q1: Third quarter orders for Industrial IT solutions grew by just 3.9%, which looks modest. If Consulting-led deals are moving into manufacturing execution phases, one might expect stronger numbers. Why is growth limited? A1: Looking only at the third quarter, the 3.9% increase may appear underwhelming, but the primary reason is that there were no large orders at this time in the current fiscal year. Projects acquired up to the second quarter have been progressing into subsequent phases, and we have no major concerns. Q2: Gross profit margin for the third quarter alone was 37%, roughly the same as the prioryear period. If overseas is weak and domestic is strong, given their relative scales, one might expect overall gross profit margin to improve. Why did it not improve, and what is the outlook? A2: Although the overseas revenue ratio is not large, in the prior fiscal first quarter personnel costs were temporarily light due to cost reductions associated with structural reforms, which had a rebound effect. We view current costs as having returned to cruising speed. For the full year, we plan revenue to increase 5.9% year-on-year and cost of sales to increase 3.6% year-on-year, and we believe revenue growth is being achieved while controlling costs. Therefore, a third quarter gross profit margin of 37% represents adequate profitability. The prior fiscal third quarter’s gross profit margin was temporarily at a high level, which explains the comparison. We will continue to maintain a lean structure and secure a stable gross profit margin. Q3: Regarding comments about order shortfalls in the North American cloud business, which specific businesses are underperforming and what are the causes of the order decline? A3: In North America we have two main businesses: network and cloud. The network business centers on product sales and has relatively low added value. The cloud business is a high value-added service that captures customer requirements in upstream phases and provides design, construction, and delivery of software in cloud environments; it is often a recurring-revenue model that retains high added value for us. Currently growth in the high value-added cloud business has slowed while the proportion of lower-margin network business has risen. As a result, revenue can increase while profit declines. The cloud infrastructure we use is provided by hyperscalers, and by combining those services to create an optimal architecture for each customer we deliver higher added value than with the network business.

4 / 7 These materials were prepared for the sole purpose of providing information to use as reference in making investment decisions, and are not intended as a solicitation for investment. Copyright（C） Nomura Research Institute, Ltd. All rights reserved.

Fifth inquirer (Analyst) Q1: Domestic Consulting’s operating profit margin has declined year-on-year, while Financial IT solutions’ operating profit margin has improved but by less than in the first and second quarters. Please explain the background for each. A1: Consulting did increase revenue and profit, but internal plans set higher targets. We proceeded with hiring and personnel allocations in line with those plans, but publicsector project awards were below plan, so the balance between staff increases and revenue growth did not align, resulting in a somewhat disappointing margin. For Financial IT solutions, there is no factor that significantly impairs profitability. The relatively smaller margin improvement in the third quarter compared with the first and second quarters is due to differences in project composition, and there has been no major change in the business structure or external environment. Q2: You explained that profitability deteriorated due to slower orders in the overseas cloud business. Compared with network equipment sales, cloud projects tend to be long-term. Why did performance shift so much in three months? For example, did short-term license revenue decrease, etc.? Please explain the business composition and revenue structure. A2: The rise in the proportion of the network business and the decline in the proportion of the high value-added cloud business are the key factors. The former is mainly product sales with a relatively low gross profit margin. The latter is a high value-added service that covers requirements definition through design, construction, and cloud delivery, often with recurring billing. New cloud project acquisition has been below plan, reducing gross profit margin. This is less a sudden disappearance of demand in three months and more a timing shift in orders as customers delay decision-making. Q3: I assume you are using generative AI for modernization of your proprietary software in Financial IT solutions. What is the progress? A3: Regarding modernization, we conducted R&D in FY March 2025 and achieved substantial delivery time reductions and productivity improvements. From October 2025, we began applying these approaches to End of Service (EOS) projects for the financial business platform. We are simultaneously evaluating productivity improvements and progress is steady. We are also considering how to expand this know-how to other projects. For generative AI utilization, we plan to invest approximately ¥17 billion in FY March 2026, and progress is currently about 75% complete. 5 / 7 These materials were prepared for the sole purpose of providing information to use as reference in making investment decisions, and are not intended as a solicitation for investment. Copyright（C） Nomura Research Institute, Ltd. All rights reserved.

Sixth inquirer (Analyst) Q1: Is the slump in Australia’s IT staffing business due to industry structural changes such as AI, or is it simply customers cutting costs amid a deteriorating macro environment? Please summarize what is happening overseas. A1: The primary cause is inflation and rising labor costs. As prices and labor costs increase, customer companies are showing stronger tendencies toward in-house IT work. Consequently, demand for IT staffing business has been suppressed and orders for us have declined. At this stage, it is less that AI is directly substituting demand and more that in-house shifts as part of cost-structure reviews are having a larger impact. Q2: Regarding generative AI use beyond Financial IT solutions, particularly in Industrial IT solutions, what is your view on applicability and how you are promoting it internally? A2: Across the company we are building high-productivity platforms leveraging AI, not limited to specific segments. We plan to make these in-house standards and deploy them horizontally; Industrial IT solutions are also considering and implementing AI use to improve productivity. In the next medium-term management plan, we intend to position AI utilization as a company-wide productivity-improvement framework rather than on an individual project basis and will report the outcomes. Q3: For domestic Consulting order and revenue growth, although public-sector projects have decreased, how is private-sector demand? Please comment on differences by industry. A3: Private-sector demand is firm. With rising labor and other costs, needs for structural reform are prominent and Consulting demand is strong across industries. In particular, inquiries related to cost-structure reform and business-process reform have increased, and private-sector demand overall is healthy.

Seventh inquirer (Analyst) Q1: The deterioration in overseas business was probably not anticipated at the start of the fiscal year. In the explanations up to the second quarter, we did not hear that it would worsen to this extent. To what extent did you foresee the rapid recent deterioration? A1: The deterioration in overseas market conditions has been evident for some time, and our response speed was insufficient. Based on conditions up to the second quarter, we announced overseas structural reforms at the second quarter earnings announcement. 6 / 7 These materials were prepared for the sole purpose of providing information to use as reference in making investment decisions, and are not intended as a solicitation for investment. Copyright（C） Nomura Research Institute, Ltd. All rights reserved.

At the beginning of the fiscal year, we had not anticipated the degree of deterioration experienced in the third quarter. Q2: Overseas Financial IT solutions have been solid in FY March 2025 and continued to perform well in FY March 2026. Can we expect overseas Financial IT solutions to remain robust? A2: Most overseas revenue for Financial IT solutions comes from Australia. Although the scale is not large, we operate a business-platform model there similar to domestic Financial IT solutions. Profitability has been firm, and we expect it to remain robust going forward.

7 / 7 These materials were prepared for the sole purpose of providing information to use as reference in making investment decisions, and are not intended as a solicitation for investment. Copyright（C） Nomura Research Institute, Ltd. All rights reserved.