Prored Partners <7034> is engaged in management consulting, environmental consulting, PE funds, etc.

The consulting business provides services in two forms of compensation: performance-based and fixed compensation. In the performance-based approach, it specializes in cost management such as reducing indirect materials and logistics costs, while in the fixed compensation model, it provides execution support services on a wide range of themes including cost management, M&A, DX promotion, and personnel development. As of the second quarter of the fiscal year ending October 2024, there were 48 consultants in the performance-based model compared to 60 in the fixed compensation model, showing a recent focus on the fixed compensation approach. The company has established a new model in fixed-fee consulting by introducing an "investment phase" before entering into a paid contract. After signing a basic contract with the client, multiple consultants are stationed on-site for 1-3 months, proposing solutions based on the information gathered on-site, and then entering into a paid contract to address the issues. Different from general consulting firms, they are able to provide valuable execution support by getting involved at the ground level. In addition, they also offer the SaaS product Prosign CRE, currently invoicing 61 companies (as of the second quarter of October 2024). Although the feature expansion is going smoothly, an extended lead time for orders has been observed due to price adjustments.

The cumulative revenue for the third quarter of the fiscal year ending October 2024 increased by 27.5% to 2443 million yen compared to the previous year, and the operating profit turned into a profit of 158 million yen. Along with the third quarter results, an upward revision in the full-year performance forecast was announced, with the full-year revenue expected to increase from the previous estimate of 2546 million yen to 3100 million yen, representing a 14.2% increase from the previous year, and the operating profit is expected to significantly shrink from a loss of 917 million yen to a loss of 120 million yen. The fixed compensation consulting business has been performing well, exceeding the initial expectations, and continuous cost reviews seem to be paying off.

While the company's performance deteriorated temporarily post the COVID-19 pandemic, recent results indicate a recovery in progress. The top line is back on a growth trajectory, and although this fiscal year is projected to have an operating loss, the significant upward revision in the third quarter suggests a sharp recovery on the profit side as well. Concentrating resources on fixed compensation consulting has allowed the company to solidify customer demand. The establishment of a new model with an "investment phase" before the paid contract has led to fewer mismatches with customers, ensuring a higher chance of project acquisition. By focusing on talent acquisition for further project acquisition, it seems likely that the company will continue its trend towards profitability in the upcoming periods. Additionally, the company's group, Brupass Capital, also runs PE funds. By investing in domestic companies with enterprise values ranging from 0.5 to 2.5 billion yen, and EBITDA of 2 to 2 billion yen, as a leading shareholder, they are committed to enhancing corporate value. There is also a possibility of future gains from investment business unit operations. Overall, it is worth paying attention to the future developments of the entire company, which seems to be at a turning point in its performance.