Future Architect : Announcement of Consolidated Operating Results for FY2015 3rd Quarter

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Press Release

Company name: Future Architect, Inc.

October 28, 2015

Code: 4722, Tokyo Stock Exchange, Section 1 Representative: Yuji Higashi, President and COO Contact: Yoshihiko Nakajima, Executive Officer (Tel.: [phone])

Notice on Consolidated Earnings Results for the First Nine Months of FY2015

1. Consolidated earnings results for the first nine months of FY2015

   The Group's consolidated earnings results for the first nine months of FY2015 (from January 1, 2015 to September 30, 2015) were as follows.

   Net sales 25,788 million yen (up 1.4% year-on-year) Operating

   income 3,188 million yen (down 1.1% year-on-year)

   Ordinary

   income 3,100 million yen (down 5.5% year-on-year)

   Net income 1,743 million yen (down 3.0% year-on-year)

   
   

   Details of the performance of each segment, before adjusting for internal sales or transfers among segments, are as follows.

   Effective from the first quarter of the fiscal year under review, Future Inspace, Inc. ('Future Inspace'), which mainly provides maintenance and operation services for clients of the Company, changed segments from the Package & Service Business to the IT Consulting Business, while Life Science Computing Corporation, which saw growth in its cloud computing services for the electronic medical records of clinics, changed segments from the IT Consulting Business to the Package & Service Business. Year-on-year changes are calculated after adjusting the previous third quarter to take account of the segment changes.

   
   

2. IT Consulting Business

   New orders for restructuring and integrating IT systems increased in the manufacturing, distribution and service industries, and we won a number of clients for cloud computing services for financial institutions (SKYBANK). We also succeeded in acquiring clients in the online securities, distribution and service industries. In addition, the profitability of each project improved due to company-wide development of a project management method (fraqta), which automates the monitoring of projects

   and quality control through databases of activities and results, as well as to the control of subcontracting costs. However, during the first nine months under review, there was a period between the completion of several existing projects and the start of several new projects, and sales and operating income decreased, although orders received were strong.

   In Southeast Asia, both net sales and operating income for the first nine months under review declined at subsidiaries in Singapore and Thailand. However, the Malaysian subsidiary's performance was strong. As a result, total operating income of subsidiaries in Southeast Asia improved from a year earlier, despite a decrease in total net sales.

   Consequently, net sales of this segment were 15,575 million yen, down 2.2% from a year earlier, and operating income decreased 1.9% year-on-year to 2,975 million yen.

   
   

3. Package & Service Business

   Future One, Inc. ('Future One'), which merged part of the business of former Ascendia Inc. ('Ascendia') through a company split in October 2014, promoted the resultant integrated business during the nine-month period under review. As a result, compared with the aggregate results of Future One and the former Ascendia for the first nine months of the previous fiscal year, the operating income margin improved for the period under review and operating income increased, although net sales dropped.

   Micro CAD Co., Ltd. ('Micro CAD'), which has been contributing on a consolidated basis since the first quarter of the fiscal year under review, saw both sales and profits continue to be almost as planned, due to strong sales of its comprehensive intellectual property management system.

   Consequently, net sales of this segment were 3,118 million yen, up 7.5% from a year earlier, and operating income, which reflects the amortization of the goodwill of Micro CAD, jumped 30.9% year-on-year to 216 million yen.

   
   

4. New Media & Web Service Business

   eSPORTS Co., Ltd. ('eSPORTS') saw sales increase from the corresponding period of the previous fiscal year due to the robust online sales of sports, outdoor and fitness gear as well as a rise in the ratio of sales of private brand products to total sales. Meanwhile, the operating income margin fell partly owing to intensified competition with respect to the point system.

   Tokyo Calendar Inc. ('Tokyo Calendar') saw the monthly number of page views of its website accessed by personal computers and smartphones, which started in January, reach 6.30 million in September, and posted revenues from advertising on its website and smartphone applications. Thus, Tokyo Calendar promoted the establishment of a structure to generate earnings from web services. However, it is still recording operating loss at present.

   As a result, net sales of this segment were 3,719 million yen, up 15.1% from a year ago, and operating loss, which reflects the amortization of the goodwill of eSPORTS, was 60 million yen,

   against an operating income of 14 million yen a year earlier.

   
   

5. Corporate Revitalization Business

Uoei Corporation ('Uoei'), which operates a grocery supermarket, strove to increase net sales and improve gross profit margin. To this end, Uoei managed inventory properly by reflecting, through the use of IT, sales of each product and data on the inventory volume of each store in purchases of products.

Consequently, net sales of this segment were 3,400 million yen, up 0.4% from a year earlier, and operating income was 16 million yen, against an operating loss of 16 million yen a year ago.




6. Outlook for the future

1. IT Consulting Business

   It is said that at a considerable number of companies, conventional IT systems have been transformed into black boxes and there are no specifications and manuals for such systems, making it difficult for these companies to improve such systems. Thus, they cannot respond to changes in business, and operational costs for maintaining the status quo remain high. Against this backdrop, the Group is renovating and reconstructing existing large-scale systems using a scientific method (Future Formula), as well as provides IT platforms that process sales and profit/loss information for individual products in real-time based on components made in-house. Our track record in this area has been highly rated, and we have received a large number of inquiries from corporations that wish to realize a rapid decision-making process by aggregating management information through the integration and renovation of IT systems. We have started a number of new related projects thus far in the current fiscal year.

   In addition, regarding SKYBANK, which is a new public relations and finance support system, we have received orders for new projects from regional financial institutions covering not only cloud but also onsite services, which use the framework of the cloud service. We enhance services for clients that have already introduced our services by adding bank service functions for individuals concerning assets in custody, etc., as well as tablet features. Furthermore, we have received an increasing number of inquiries about IT systems for financial institutions other than banks, mainly from online brokerage houses. Accordingly, we will do business for not only the banking industry but also the whole financial industry.

   Regarding maintenance and operation services after systems start operating, we provide an optimum maintenance and operation structure for clients and also offer an optimum IT infrastructure, including the use of cloud computing services, under cooperation between the Company and Future Inspace.

   
   

2. Package & Service Business

   Future One aims to increase customer satisfaction by improving the features of its software

   packages and further improving product quality, and strengthening business partnerships to expand sales channels. It will also offer the ERP packages of other companies and solutions related to

   e-commerce if they provide an optimum environment for clients. Through these efforts, it aims to increase sales and profits.

   Micro CAD is steadily increasing the number of clients for its comprehensive intellectual property management system. It will further expand its customer base by enhancing the functions of this system and working closely with the Company.

   
   

3. New Media & Web Service Business

   eSPORTS will aim to further increase sales and profits by expanding strategic purchases of sports, outdoor and fitness products, as well as making greater efforts on private brand (PB) products, while continuing to improve user services. Furthermore, it will strive to further grow by strengthening its partnership with Tokyo Calendar.

   Tokyo Calendar will aim at the No. 1 spot in website services among all monthly magazines by providing services that are differentiated from those of other websites, as a website offering information on high-quality restaurants and gourmet experiences, and endeavor to secure more income from operations, including advertising, restaurant reservations and electronic commerce services.

   Furthermore, we will expand the scope of web services, for example, by providing IT education services, mainly on an online basis, through CodeCamp Inc., which has recently joined the Group.

   
   

4. Corporate Revitalization Business

Uoei will aim to increase sales and improve profitability. To this end, it will closely analyze sales of individual product and inventory data using IT systems, provide a product lineup that meets customers' preferences, and minimize disposal losses and discount sales.




Our previous earnings forecasts remain unchanged for the full term of the fiscal year ending December 2015, which were announced on July 29, 2015, in light of the trend of orders received in the third quarter of the fiscal year under review.




• Any questions relating to the above press release should be directed to: Investor Relations, Future Architect, Inc.

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