Nomura Research Institute,Ltd. (4307) Q1 2027 Earnings Call Transcript

（Tokyo-30th July, 2026）

Nomura Research Institute, Ltd. The First Quarter of FY March 2027 Financial Results Briefings Q&A Session Speakers:

Masaaki Yamazaki Senior Executive Managing Director, Member of the Board, Representative Director Junji Hatoya Senior Managing Director

First Inquirer (Analyst) Q1: Regarding the overseas business, excluding the impact of business withdrawals and foreign exchange fluctuations, what was the actual order environment in North America and Australia, respectively, in the first quarter? Also, looking ahead to the second quarter and beyond, do you expect the loss to continue narrowing steadily on a year-on-year basis? Please also share the measures you are taking to improve earnings so as to reach break-even for the full year. A1: The overseas business environment remains challenging, and even on a local-currency basis, orders received declined year on year. This reflects the impact of the business structural reforms implemented in the previous fiscal year, as well as our decision to prioritize earnings improvement over revenue growth by selectively accepting projects with higher profitability. The decline in orders was anticipated, and first-quarter results are progressing in line with plan. While we are not at a stage where we can specify in which quarter operating profit will improve significantly, there is no change to our plan to return to break-even on a full-year basis, and progress toward that goal is on track. Q2: Could you provide additional detail on the order and demand environment in North America and Australia, respectively? A2: In North America, our impression is that major IT services companies in particular are struggling to win orders. Our business is smaller in scale than those companies, and we feel we are in an environment that is just as challenging, if not more so. Australia is by no means a favorable environment, but we have been narrowing our client focus to the 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.

financial and healthcare sectors, and within that scope the situation is not particularly bad. That said, looking across all industries, the environment remains difficult. Q3: Orders in the domestic Industrial IT Solutions segment have been strong. Is this driven by the acquisition of new clients or by existing clients? Also, you explained that the decline in profit was due to lower profitability stemming from a high proportion of upstream-phase projects. When do you expect margins to improve? A3: An increase in projects from new clients offset the reduction in investment by existing clients. We are currently in the early stage of deepening our understanding of these new clients, and since many projects are in the upstream phases of system development, profitability is low. As projects progress into the middle and later phases, they will shift to more profitable stages, so we expect margins to improve progressively from the second quarter onward. Q4: Are these new clients primarily in retail, trading companies, and transportation? A4: That is correct. Projects for multiple new clients, centered on domestic demand–oriented industries, contributed to the revenue increase.

Second Inquirer (Analyst) Q1: The loss in the overseas business is narrowing. If you break this down between improvement in the underlying business and the reduction in amortization expenses resulting from the impairment, what would the split be? A1: Isolating the amortization expense alone, it represents a positive profit impact of approximately ¥0.5 billion year on year. Q2: I believe the overseas business posted a loss of several billion yen in the fourth quarter of the fiscal year ended March 2026. Is it correct to understand that there has been substantial improvement since then? A2: Looking at the quarterly trend, compared with the third quarter of the fiscal year ended March 2026 and thereafter—when performance deteriorated—there is an improving trend even after deducting the reduction in amortization burden. So yes, as you note, the bottom line has improved. Q3: Going forward, will earnings improvement be driven more by revenue growth or by further cost reductions? A3: We are not currently considering additional cost-reduction measures. Since we are 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.

narrowing the scope of our business, we aim to increase profit through winning highermargin projects and enhancing the added value of existing businesses, rather than through revenue growth. Q4: What specifically do you mean by higher value-added projects in the North American business? A4: Our network business in North America has a broad client base, and we believe we can deliver greater value by incorporating cybersecurity services into it. Specifically, we plan to integrate NRI SecureTechnologies' North American operations into NRI North America in the second half of this fiscal year. This will allow us to offer additional cybersecurity services to clients already using our network services, thereby improving profitability. Q5: Is it correct to understand that the change in profit in the Consulting segment was due to a decline in utilization rates? And do you plan for utilization to recover in the second and third quarters? A5: Utilization declined slightly because we are in a preparatory stage for winning high valueadded AI projects, and because the acquisition of public-sector projects was somewhat delayed relative to plan. We intend to raise utilization by steadily winning AI projects. Q6: You explained that Financial IT Solutions performed well due to revenue growth and AIdriven development. Is it fair to assume this is not something that will lose momentum in the second and third quarters? A6: We are not concerned. Projects are becoming larger in scale, and we expect performance to remain stable. Q7: Regarding the new projects in Industrial IT Solutions, you said profitability is low because they are in the upstream phase. Is "new" a matter of new technology, or of new industries entailing higher learning costs, or is it that certain large projects have low profitability? A7: Including the burden of learning costs, we believe that in upstream phases we should prioritize building strong client relationships even at some sacrifice to profitability. As for industries, our client base has been steadily expanding through our sales and proposal activities, with new client acquisition progressing mainly in construction, real estate, retail, and transportation. This is not a matter of dependence on a particular large client; rather, several clients of a certain scale or larger have been added. The types of projects are wide-ranging, including SaaS implementations, website renewals, and legacy 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.

modernization projects such as core system replacements. Q8: Is it correct to understand that this is not so much about rolling out new services to specific industries and accumulating know-how, but rather that new clients have increased across multiple industries? A8: As things currently stand, that is correct. On the other hand, in the "Social Co-Creation Services" area, we are working to provide standardized services within Industrial IT Solutions. In this area, we are progressively rolling out various solutions, centered on My Number–related services. The scale is not large at present, but we have high expectations for its contribution to earnings going forward.

Third Inquirer (Analyst) Q1: What lies behind the simultaneous start of multiple projects in Industrial IT Solutions? Did the launch of the new Medium-Term Management Plan this fiscal year bring a change in policy, such as expanding the client base without regard to profitability? A1: There has been no change in policy. Even previously, when developing new clients, we have made decisions to win business in the initial phase even at some sacrifice to profitability. However, such projects are not numerous—they account for a healthy, limited proportion. We are not developing new clients by overextending ourselves or significantly changing our policy; please understand that profitability simply declined somewhat when viewed at the specific point in time of this first quarter. Q2: So, in the first quarter, it just happened that several low-margin projects for new clients coincided? A2: Dividing between existing and new clients, projects for new clients increased by roughly 10%, and that is what is reflected in the current figures. Q3: Your presentation contained some strong comments on performance. What was the strongest element? Please be specific—whether it is a sense that the overseas business has bottomed out, new clients in Industrial IT Solutions, the solid performance of Financial IT Solutions, cybersecurity demand, and so on. A3: This fiscal year, our order backlog is stable and other areas of concern have decreased substantially, with each segment growing in a well-balanced manner. In particular, we have high expectations for the increase in AI consulting projects. Consulting projects are a leading indicator, and we are seeing an increase in high-quality projects (full-scale management transformation projects). AI projects command higher unit prices than 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.

other consulting projects, and CxO-level projects command higher prices still, with a tendency to develop into large-scale projects. Because we are in a position to have expectations for follow-on business, I described performance as strong.

Fourth Inquirer (Analyst) Q1: You mentioned results exceeded plan. By how much did revenue and operating profit each exceed your expectations? And which areas drove the upside? A1: We will refrain from providing quantitative details this time, but we believe you can get a general sense by comparing with the growth rates in our full-year forecast. The main drivers were two segments: Financial IT Solutions and IT Infrastructure Services. Q2: In the Consulting segment, how large was the impact of reduced orders due to the delay in government budget decisions? A2: In terms of first-quarter orders received, the private sector was roughly flat year on year, while the public sector was down. In other words, in terms of the composition of the year-on-year decline, it was almost entirely attributable to the public sector. Q3: Is it correct to understand that you will recover the roughly ¥2.0 billion shortfall in the public sector from the second quarter onward? A3: As I mentioned, we intend to cover much of the public-sector shortfall with private-sector AI and CxO projects. That said, public-sector orders are placed throughout the year, so even when we fail to win projects we had anticipated at the start of the year, we will engage in sales activities during the year to recover them, as we do every year. We do not have a firm plan to recover the entire ¥2.0 billion in the public sector, but we do expect to recover a certain portion there, as in past years. In addition, we have been increasing the mobility of our human resources since last fiscal year, and since the public sector shares many domains with the private sector, we can redeploy surplus publicsector personnel to projects secured in the private sector. Accordingly, we believe we can gradually cover this ¥2.0 billion from the second quarter onward. Q4: The Consulting segment targets 10% revenue growth for the full year, and while the order backlog at the end of the first quarter was up 9.9% year on year, from the outside it is hard to be optimistic. Should we take it that you have no concerns? A4: We are not being optimistic either. However, we routinely make proactive proposals to clients addressing advanced needs, and based on our experience to date, with the order backlog up around 10% at this point in time, we feel confident we can achieve the 10% 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.

revenue growth plan over the remaining three quarters.

Fifth Inquirer (Analyst) Q1: I am concerned that orders received in both Consulting and Financial IT Solutions declined year on year. Should this be viewed as within the range of normal quarterly fluctuation? Or has something changed compared with the past? A1: In Consulting, we are seeing more cases where the time required to win an order takes longer, and we believe this is due to the trend toward larger-scale projects. Q2: And what about Financial IT Solutions? A2: In the previous fiscal year, projects grew larger in Other financial and Banking sectors, and orders received were at a high level. Client appetite for investment remains robust, so we view this as purely a matter of order timing. Q3: Regarding orders in the IT Infrastructure Services segment: I recognize that the growing threat of AI-driven hacking represents a considerable risk for companies. Is this the main area behind the significant growth in first-quarter orders and the improvement in the operating margin? There would also appear to be room for upside to your full-year forecast—could you share your outlook, including any resource constraints on your side? A3: Demand for vulnerability assessments and consulting is expanding, and our capacity to respond will be key going forward. At present, responses are being required particularly across the 15 critical infrastructure industries, and under government guidance this is progressing first in the financial sector. We have strengths in the financial sector, and by leveraging the expertise we have gained in building robust systems, we plan to build a track record with financial institutions in the frontier AI domain as well and then expand to other industries. At the moment, we are at the stage of advancing consulting and vulnerability responses while handling urgent requirements. We expect the range of target industries to expand going forward, but for the time being we will prioritize ensuring client safety, and we anticipate providing some services with somewhat constrained profitability. Note that the shift to the operations and modernization domain shown on the right side of the diagram on p.16 of the presentation materials is expected to take at least six months to one year. Q4: My understanding is that the Financial Services Agency formally requested financial institutions to take action around late May. Orders appear to have grown rapidly since 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.

then—should we understand that orders are coming in considerably above your initial plan? A4: Because clients themselves are in a situation requiring urgent action, we believe we need to respond carefully. Rather than aggressively pursuing large projects, we place priority on first responding closely to clients' sense of urgency, while at the same time providing services suited to a broad range of clients.

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.