SB Technology : Overview of Earnings Results Briefing for FY2022（547K）

SB Technology Corp.

※It is translated by AI.

SB Technology Corp.

Overview of Earnings Results Briefing for FY2022

This is a transcript of the SB Technology Corp. FY 2022 Results Briefing held on April 27, 2023. Speaker: Mr. Shinichi Ata, President & CEO, SB Technology Corp.

Achieved record highs for SB Technology from net sales to ordinary income, and forecast a 15% increase in profits in the current fiscal year, achieving the Medium-term management plan target of an operating income of 9%

Table of contents

Table of contents

１. Financial Results	P. 2
２. Progress of Medium-Term Management Plan
	P. 9
３. Appendix	P. 20
４. Corporate Information	P. 36

3

Shinichi Ata: Hello everyone, I am Shinichi Ata from SB Technology. Thank you for participating in our financial briefing while you are very busy today.

Today, after explaining the outline of the results and the progress of the Medium-term management plan, we receive questions based on the attached calculation materials and company information.

SB Technology Corp.

※It is translated by AI.

Summary

Summary

｜ FY2022 Q4

FY22

Financial

Results

Orders

Received

FY23

Forecast

Net sales, operating income, and ordinary income achieved record highs

Operating income improved 0.5 of a percentage point year on year to 8.3%

Received orders for large-scale operational projects from central ministries and agencies in several years

Achieving record-high orders and order backlog to FY23

Full-year forecast net sales ¥69 billion operating income ¥6.4 billion Aiming for growth in high -value-addedservices such as security and improvements in quality and productivity, the operating income will be in the 9% range ahead of the medium -termplan target

7

Summary of performance. In fiscal 2022, net sales, operating income, and ordinary income achieved record highs. The operating income improved 0.5 percentage points from fiscal 2021 to 8.3%. We received orders for several years for large-scale operation projects in central ministries and agencies. We have achieved record-high orders and backlog, and have entered fiscal 2023.

This is a forecast of business results for the current term. The full-year forecasts are for net sales of ¥69 billion and operating income of ¥6.4 billion. Aiming to grow high-value-added services such as security and improve quality and productivity, we intend to realize an operating income of 9% ahead of the Medium-term management plan target during the current fiscal year.

SB Technology Corp.

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Consolidated P/L （Full year cumulative)

Consolidated P/L （Full year cumulative)

｜ FY2022 Q4

• Public Sector and Enterprise projects increased, offsetting lower Telecommunication revenues
• Achieved record-high net sales and operating income, and net profit decreased due to the impact of the gain on sales of investment securities in the previous fiscal year of approximately ¥600 million

[Millions of yen] (Profit margin )	FY22	FY21	Change	Change ％
Net sales	RecordHigh	67,227	66,183	＋1,044	＋1.6%

Operating income

RecordHigh	5,557	5,152
	＋404	＋7.8%
(8.3%)	(7.8%)

			5,499	5,133
Ordinary income		RecordHigh	＋365	＋7.1%
		(8.2%)	(7.8%)
Profit attributable to			3,497	3,630	▲133	▲3.7%
owners of parent			(5.2%)	(5.5%)
Net profit
EBITDA ※		RecordHigh	7,217	6,702	＋514	＋7.7%	9

*EBITDA ＝Operating income ＋Amortization of goodwill ＋Depreciation

Consolidated PL. Net sales are ¥67.227 billion, operating income is ¥5.557 billion ordinary income is ¥5.499 billion, net profit is ¥3.497 billion, and EBITDA is ¥7,217 million. As shown on the slide, it is a record high, excluding net profit.

In fiscal 2021, the sale of investments in securities had an impact of approximately ¥0.6 billion. As a result, Apple to Apple net income for the fiscal year under review was approximately ¥3 billion, a substantial increase in income.

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Net Sales and Gross Profit by Market

Net Sales and Gross Profit by Market

SB Technology Corp.

• FY2022 Q4

Net sales

67

66

44

1. 13

1. 30

1. 19

Gross profit

〔Billions of yen 〕 （Profit margin ）

15.1

13.9 (22.6%)

(21.1%)	2.6
2.5
1.3
1.1

7.1 7.9

3.2 3.3

Consumer： Flat in sales, and Increase in profits

• The impact of the change in the contract with NortonLifeLockCo., Ltd. is delayed from the initial forecast
• Profits increased due to the acquisition of large-scale projects by FontworksInc.

Public Sector： Increase in both sales and profits

• Growth in sales through projects for the Ministry of Agriculture, Forestry and Fisheries and the operation of Local Government Information SC*
• Securing increased profits despite the cost of responding to the municipal information-related SC disruption

Enterprise： Increase in both sales and profits

• Steady growth in Managed Security Service
• Strong growth in cloud construction for the manufacturing industry

Telecommunication： Decrease in sales, and Increase in profits

• Profit margin improvement due to improved efficiency, despite a decrease in sales due to a shift to high-value-

FY21

FY22

FY21

FY22

added areas by narrowing down vendor management
projects	11
※SC：Abbreviation for security cloud

I will explain net sales and gross profit by market. The graph on the left side of the slide shows net sales and the middle is gross profit. Net sales in the Telecommunication area amounted to ¥19.5 billion in fiscal 2022, down approximately ¥3 billion from ¥22.8 billion in fiscal 2021. Gross profit increased by ¥0.1 billion, despite a shift from conventional vendor management projects to high-value-added areas, which resulted in lower sales.

In the Enterprise area, net sales increased from ¥28.9 billion in fiscal 2021 to ¥30.3 billion in fiscal 2022, and gross profit increased from ¥7.1 billion to ¥7.9 billion.

Net sales in the Public Sector are increased by 3 billion to 13.2 billion in fiscal 2022 from 10.2 billion in fiscal 2021. Gross profit increased by ¥0.2 billion from ¥1.1 billion to ¥1.3 billion. While net sales grew due to the operation of Local Government Information Security Cloud and for the Ministry of Agriculture, Forestry and Fisheries, many customers were inconvenienced by the accident that occurred on March 18, 2022 and the equipment breakdown and response that occurred in August. We believe that this will have an impact in the current fiscal year and beyond, and as we provided a reserve of more than ¥0.5 billion at the end of fiscal 2022, the extent of the increase in profits will be small.

For the Consumer area in fiscal 2022, we assumed that the change in the agreement with NortonLifeLock Co., Ltd. would have a negative impact on earnings of about ¥0.4 billion. However, this was a little less than ¥0.1 billion as they pushed back from expectations. Conversely, the reason for the growth in gross profit was the acquisition of a large-scale project by Fontworks Inc., a consolidated 100% subsidiary, in the fourth quarter.

SB Technology Corp.

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Factors Behind Changes in Operating Income

営Factors業利益 Behind Changes in Operating Income

｜ FY2022 Q4

• Gross profit margin improved by 1.5 points due to improved the efficiency in Telecommunication area, and increased security services
• Despite an increase of 820 million in SG&A expenses due to an increase in the number of employees,

• operating income increased by 400 million (+7.8%)

6			1.00		0.82
	0.22				↓ Increases in
5		↑Improving
	↑sales growth		profitability	SG&A expenses

4

3

5.15

• (7.8%)

1

Net sales	＋JPY1.04 billion	Gross Profit Margin +1.5pts
Public sector	＋JPY 2.99 billion	Telecommunication +3.1pts
Enterprise	＋JPY1.36 billion	Enterprise +1.5pts

Telecommunication ▲JPY3.31billion

Personal expenses /Recruitment cost, etc.

YoY＋43 employees

5.55

(8.3%)

＋0.4（＋7.8%）

0

FY21	FY22
〔 Billions of yen 〕 （Profit margin）	13

The factors behind changes in operating income. Net sales increased by ¥2.99 billion in the Public Sector area, decreased by ¥3.31 billion in the Telecommunication area, and increased by ¥1.36 billion in the Enterprise area. Overall, net sales increased by ¥1.04 billion, resulting in an increase in sales of ¥0.22 billion.

The gross profit margin improved by 3.1 percentage points for the Telecommunication area and by 1.5 percentage points for the entire company, resulting in an improvement in monetary value of ¥1 billion. In addition, due to an increase of 43 employees during this period, SG&A expenses, including personnel expenses and activity expenses, increased by ¥820 million. As a result, operating income was ¥5.55 billion.