Slide 1: Presentation Materials for the Earnings Briefing for FY Ended March 31, 2024
Presentation Materials for the Earnings Briefing for the Fiscal Year Ended March 31, 2024 May 31, 2024 MKSystem Corporation (stock code: 3910)
Slide 2: Table of contents
Presentation Materials for the Earnings Briefing for the Fiscal Year Ended March 31, 2024 Table of contents 1 Group Overview and Business Activities ・・・・ 2P 6 Measures to Upgrade Security ・・・・・・・・・・・27P 2 Consolidated Financial Results for FY3/24・・・・ 6P 7 Growth Strategies ・・・・・・・・・・・・・・・・・・・・・36P
Slide 3: Company profile
Group Overview and Business Activities Company profile ●Company name: MKSystem Corporation ●Representative: Noboru Miyake ●Location: Osaka Head office 30F, Umeda Center Bldg., 2-4-12, Nakazaki-nishi, Kita-ku, Osaka, Japan ●Bases: Tokyo; Nagoya; Fukuoka; Ninohe, Iwate Prefecture; and Matsuyama ●Sub
Slide 4: Mission and vision
Group Overview and Business Activities Mission and vision MISSION VISION Management Philosophy Management Policies We provide cloud solutions that benefit you Provide comprehensive services in the field of the personnel and labor management Streamlines operations and supports the creation of added
Slide 5: Segment structure
■Group Overview and Business Activities Segment structure Divided our business into two segments: Shalom Business and CuBe Business Shalom Business ● ASP service ● System construction service Monthly system service fee and initial setup fee, etc. ● System product sale Sales of working time recording
Slide 6: Table of contents
Presentation Materials for the Earnings Briefing for the Fiscal Year Ended March 31, 2024 Table of contents 1 Group Overview and Business Activities ・・・・・・2P 6 Measures to Upgrade Security ・・・・・・・・・・・27P 2 Consolidated Financial Results for FY3/24・・・・6P 7 Growth Strategies ・・・・・・・・・・・・・・・・・・・・・36P
Slide 7: Results highlight (consolidated)
■Consolidated Financial Results for FY3/24 Results highlight (consolidated) ● Sales down 7.9% YoY to 2,639 million yen due to the ransomware incident on June 5, 2023. ● Gross profit down 36.4% YoY to 858 million yen due to lower sales and an increase in Internet Data Center (IDC) expenses.* *Expense
Slide 8: Financial summary (consolidated)
■Consolidated Financial Results for FY3/24 Financial summary (consolidated) Sales were down 7.9% YoY to 2,639 million yen because of the ransomware incident. Ransomware was also responsible for operating loss of 348 million yen. Returned to profitability in the fourth quarter (see page 13). FY3/22 F
Slide 9: Balance sheet (consolidated)
■Consolidated Financial Results for FY3/24 Balance sheet (consolidated) Non-current assets down mainly due to a withdrawal of Internet Data Center Non-current liabilities increased due to bank loans Equity ratio decreased to 31.6% due to loss FY3/21 FY3/22 FY3/23 FY3/24 Total current assets 1,172 1,
Slide 10: Cash flows (consolidated)
■ Consolidated Financial Results for FY3/24 Cash flows (consolidated) Negative operating cash flow because of the loss before income taxes Bank loans were used to procure funds. FY3/21 FY3/22 FY3/23 FY3/24 Cash flows from operating activities 340 493 617 (316) Cash flows from investing activities (3
Slide 11: Net sales (consolidated)
■Consolidated Financial Results for FY3/24 Net sales (consolidated) Consolidated sales decreased 7.9% YoY due to the ransomware incident. Sales recovered in the fourth quarter and were higher than one year earlier. -7.9% 900 851 785 800 766 735 746 692 710 700 658 671 618 625 608 600 583 600 527 509
Slide 12: Gross profit (consolidated)
■Consolidated Financial Results for FY3/24 Gross profit (consolidated) The gross profit and gross margin decreased because of lower sales and higher IDC expenses. As sales recovered in the fourth quarter, the gross profit and gross margin in the quarter recovered to the level one year earlier. 450 G
Slide 13: Operating profit (consolidated)
■ Consolidated Financial Results for FY3/24 Operating profit (consolidated) Operating losses in the first nine months because of the ransomware incident but earnings started to recover in the fourth quarter. Actions are needed regarding the increase in IDC and other expenses. 150 100 100 86 88 78 67
Slide 14: Number of employees (consolidated)
■Consolidated Financial Results for FY3/24 Number of employees (consolidated) The recruitment of new college graduates is continuing but the number of employees decreased because of resignations. Priorities are the recruitment and training of development and support personnel. Number of employees Co
Slide 15: Personnel and promotion expenses (consolidated)
■Consolidated Financial Results for FY3/24 Personnel and promotion expenses (consolidated) Personnel expenses down due to a smaller workforce →Salary increase in April 2024 Temporarily reduced promotional activities while responding to the ransomware incident →Started returning to normal promotional
Slide 16: IDC and software amortization expenses (consolidated)
■Consolidated Financial Results for FY3/24 IDC and software amortization expenses (consolidated) IDC expenses increased significantly because of expenses for reinforcing security and starting the use of a cloud server. Software amortization expenses increased as investments continued for product dev
Slide 17: Table of contents
Presentation Materials for the Earnings Briefing for the Fiscal Year Ended March 31, 2024 Table of contents 1 Group Overview and Business Activities・・・・・・2P 6 Measures to Upgrade Security ・・・・・・・・・・・27P 2 Consolidated Financial Results for FY3/24 ・・・・6P 7 Growth Strategies ・・・・・・・・・・・・・・・・・・・・・36P
Slide 18: Business highlight
Shalom Business Business highlight ● Introductions*1 ● IDs issued*1 ● Registered companies*1 ● Registered employees*1 3,180 12,029 1010,000 24.58 companies IDs companies million *4 ● ARPU *2 ● ARPA *3 ● DAU 53,100 14,000 19,273 yen yen IDs *1: Number of introductions, IDs issued, companies registe
Slide 19: Net sales
Shalom Business Net sales The recovery from the service suspensions and sales downturn caused by the ransomware incident started in the third quarter. In the fourth quarter, sales were higher than one year earlier. 700 Steady revenue Other sales*1 Steady revenue as pct. of net sales 100.0 90.0 600
Slide 20: Operating profit
Shalom Business Operating profit Operating loss in the first nine months because of the ransomware incident. Sales started recovering in the third quarter and there was a small operating profit in the fourth quarter. 100 70 73 73 56 49 51 47 46 50 27 27 21 19 8 0 -4 -50 -100 -150 -144 -200 -197 -2
Slide 21: Table of contents
Presentation Materials for the Earnings Briefing for the Fiscal Year Ended March 31, 2024 Table of contents 1 Group Overview and Business Activities ・・・・・2P 6 Measures to Upgrade Security ・・・・・・・・・・・27P 2 Consolidated Financial Results for FY3/24・・・・6P 7 Growth Strategies ・・・・・・・・・・・・・・・・・・・・・36P
Slide 22: Net sales and operating profit
CuBe Business Net sales and operating profit Higher sales and earnings due to growth of contracted development type semi-customized services Net sales Operating profit 700 60 615 606 600 561 48 550 50 500 40 400 33 30 28 300 19 20 200 100 10 0 0 FY3/21 FY3/22 FY3/23 FY3/24 FY3/21 FY3/22 FY3/23 FY3
Slide 23: Table of contents
Presentation Materials for the Earnings Briefing for the Fiscal Year Ended March 31, 2024 Table of contents 1 Group Overview and Business Activities ・・・・・ 2P 6 Measures to Upgrade Security ・・・・・・・・・・・27P 2 Consolidated Financial Results for FY3/24・・・・ 6P 7 Growth Strategies ・・・・・・・・・・・・・・・・・・・・・36
Slide 24: Shalom updated and replaced with Shalom FOREVER
■ Business Topics for FY3/24 Shalom updated and replaced with Shalom FOREVER Shalom FOREVER, a system that will follow Shalom V5.0, will be released soon. Shalom FOREVER – Outstanding efficiency and intuitive operations MKSystem has significantly revised and upgraded Shalom V5.0, which is currently
Slide 25: Promotion activities 1
■ Business Topics for FY3/24 Promotion activities 1 The MKSystem booth at HR EXPO 2024 MKSystem again had a booth at the spring HR EXPO along with subsidiary Business Net Corp. Visitors learned about a variety of products, with emphasis on Shalom Company Edition. ＼HR EXPO 2024／ The booth uses orange
Slide 26: Promotion activities 2
■ Business Topics for FY3/24 Promotion activities 2 /Compatibility with new program/New products Tax reduction program compatibility An information meeting by development personnel was held to explain how Shalom/eNEN/DirectHR provide compatibility with the 2024 tax reduction program for individuals.
Slide 27: Table of contents
Presentation Materials for the Earnings Briefing for the Fiscal Year Ended March 31, 2024 Table of contents 1 Group Overview and Business Activities ・・・・・2P 6 Measures to Upgrade Security・・・・・・・・・・ 27P 2 Consolidated Financial Results for FY3/24・・・・ 6P 7 Growth Strategies ・・・・・・・・・・・・・・・・・・・・・36P
Slide 28: Basic policy for upgrading security (1)
■Measures to Upgrade Security Basic policy for upgrading security (1) CIS Control Version 8 The policy was established by using the CIS Controls (V8) of the U.S. Center for Internet Security as the basis. Control 01. Inventory and Control of Enterprise Assets Control 13. Network Monitoring and Defen
Slide 29: Basic policy for upgrading security (2)
■Measures to Upgrade Security Basic policy for upgrading security (2) Main security initiatives of MKSystem All actions have been ＼ completed／ No Action Description Full utilization of AWS security functions + 1 Upgrade network security Addition of multi-factor authentication Virus protection softwa
Slide 30: Amazon Web Services
■Measures to Upgrade Security Amazon Web Services Fully utilize all security capabilities of AWS Web Application Firewall Detective This service detects security issues and performs analysis and investigations to quickly This service protects web applications from attacks that cannot determine the r
Slide 31: Multi-factor authentication (1) Use by certificate authorities
■Measures to Upgrade Security Multi-factor authentication (1) Use by certificate authorities Multi-factor authentication using a certificate authority A certificate is distributed to a device connected to Shalom in advance that allows a connection with only the hardware where the certificate in inst
Slide 32: Multi-factor authentication (2) Use for two-factor authentication
■Measures to Upgrade Security Multi-factor authentication (2) Use for two-factor authentication Two-factor authentication for an internet-linked system using virtual device authentication Uses a random six-digit number generated by a smartphone to verify the legitimacy of the connection by entering
Slide 33: EDR (Endpoint Detection and Response)
■Measures to Upgrade Security EDR (Endpoint Detection and Response) Use of EDR What is EDR? EDR is a security solution that detects suspicious behavior at the user’s PC or server (the end point) and provides support for an immediate response. →Protection against unknown threats that cannot be handle
Slide 34: Reexamine the security framework
■Measures to Upgrade Security Reexamine the security framework Penetration test What is penetration test? By performing a simulated cyberattack using existing technologies, this test can identify vulnerability in the defenses of a computer system connected to a network. Plan for penetration testing
Slide 35: A stronger organization
■Measures to Upgrade Security A stronger organization Reexamine the framework for security operations Established the Digital Architecture Design Department • The Product Planning Department infrastructure section has been upgraded to a separate More department and given a larger staff. specializati
Slide 36: Table of contents
Presentation Materials for the Earnings Briefing for the Fiscal Year Ended March 31, 2024 Table of contents 1 Group Overview and Business Activities・・・・・・2P 6 Measures to Upgrade Security ・・・・・・・・・・・27P 2 Consolidated Financial Results for FY3/24・・・・ 6P 7 Growth Strategies ・・・・・・・・・・・・・・・・・・・・36P
Slide 37: Steady-revenue businesses
■Growth Strategies Steady-revenue businesses Steady revenue business that builds a solid profit base 1Q Additional A business model based on the monthly fee-based service sales (Set-up Shalom generates stable income. charges) 4Q 4Q Additional Continuing sales sales (Set-up (Monthly Monthly fees star
Slide 38: Target markets
■Growth Strategies Target markets Our target extends to all companies that outsource/not outsource to labor and social security attorneys. The goal is cross-selling by increasing the use of products associated with the Shalom series. Small payrolls Medium-size payrolls Large payrolls Of the 3.85 mil
Slide 39: Target markets and strategies
■Growth Strategies Target markets and strategies 1 Labor and social security attorney market End-Mar 2024 Offices with our systems introduced*2 2,404 offices Vs. End-Mar 2023 -332 offices Corporate Offices 2,688 offices Our market share 8.8％ Number of clients registered in our Private Offices system
Slide 40: Target markets and strategies: general corporate market
■Growth Strategies Target markets and strategies 2 General corporate market End-Mar 2024 Introductions in 62,820 companies with 100 or more the Shalom Business 108 companies employees 5,000 or more employees Introductions in 636 companies 2,000 to less than 5,000 employees the CuBe Business 118 comp
Slide 41: Table of contents
Presentation Materials for the Earnings Briefing for the Fiscal Year Ended March 31, 2024 Table of contents 1 Group Overview and Business Activities ・・・・・2P 6 Measures to Upgrade Security ・・・・・・・・・・・・27P 2 Consolidated Financial Results for FY3/24・・・・ 6P 7 Growth Strategies ・・・・・・・・・・・・・・・・・・・・・・3
Slide 42: Financial summary (consolidated)
Consolidated Earnings Forecast for FY3/25 Financial summary (consolidated) Forecast a recovery from the FY3/24 sales and earnings downturn caused by the ransomware incident. Aiming for growth of cloud service sales and earnings by adding new services and taking other actions. FY3/24 FY3/25 YoY Act
Slide 43: Dividend forecast for FY3/25
Consolidated Earnings Forecast for FY3/25 Dividend forecast for FY3/25 Our basic policy is to pay dividends while placing emphasis on the consistent distribution of earnings to shareholders. Despite a loss in FY3/24, dividend was based on this earnings distribution policy. Unit: Yen 20.0 Annual di
Slide 44: Table of contents
Presentation Materials for the Earnings Briefing for the Fiscal Year Ended March 31, 2024 Table of contents 1 Group Overview and Business Activities ・・・・・ 2P 6 Measures to Upgrade Security ・・・・・・・・・・・27P 2 Consolidated Financial Results for FY3/24・・・・ 6P 7 Growth Strategies ・・・・・・・・・・・・・・・・・・・・・36
Slide 45: Our mainstay service (Shalom 1)
Service Overview Our mainstay service (Shalom 1) A system for labor and social security attorney offices For number one and two tasks performed solely by social security attorney offices Tasks performed by labor and social security attorneys No. 1 tasks No. 2 tasks No. 3 tasks Preparation of repor
Slide 46: Our mainstay service (Shalom Company Edition)
Service Overview Our mainstay service (Shalom Company Edition) A version of Shalom for companies that is fully compatible with making e- applications mandatory at large companies Allows performing internally all application procedures for unemployment and social security insurance Shalom Personnel
Slide 47: Our mainstay service (MYNABOX)
Service Overview Our mainstay service (MYNABOX) A personal ID number management system that can be used with Shalom Links with a variety of procedures and a use history and other capabilities MYNABOX Flowchart MYNABOX CL Flowchart Tax office (MYNABOX for Clients) Labor and social Business operator
Slide 48: Our mainstay service (Net de Komon)
Service Overview 48 Our mainstay service (Net de Komon) A web application for use with Shalom Use with master data recorded in Shalom Net de Komon One step payroll calculation by Can be accessed anywhere linking with work attendance and anytime (Smartphone Concerned about erroneous Can process wit
Slide 49: Our mainstay service (DirectHR)
Service Overview Our mainstay service (DirectHR) Centralized management using the cloud for all applications submitted by employees during their entire time at the company, including for events like childbirth. Smartphones and PCs can be used for applications. Handles everything from data input to
Slide 50: Our mainstay service (eNEN)
Service Overview Our mainstay service (eNEN) Fully supporting year-end tax adjustment operations by reducing tax filling input and implementing progress management function 1. It makes the operation easy to understand! Enhanced control with authority settings The screen guides you “what to do,” “w
Slide 51: Our mainstay service (Cloud Pocket)
Service Overview Our mainstay service (Cloud Pocket) For the safe and easy distribution and receipt of official documents. Greatly simplifies the distribution of job separation forms, benefit receipt qualification confirmation notices, workplace accident forms and other official forms as well as i
Slide 52: Our mainstay service (CuBe Business)
Service Overview Our mainstay service (Contracted development type semi-customized services / CuBe Business) Business process design + semi-customized system development Accurate and flexible like the one for custom-built houses Used by half a million major company employees. Your IT partner for t
Slide 53: Our mainstay service (GooooN / CuBe Business)
Service Overview Our mainstay service (GooooN / CuBe Business) A cloud service for personal job performance evaluation system that supports job performance management of half million employees at major companies GooooN coordinates three business operations, deepens communication with employees, an
Slide 54: Forward-looking statements notice
The plans, estimates and other forward-looking statements contained in this material are forecast based on information available at the time this material was prepared, and these statements include risk and uncertainty. Actual performance may differ from these statements due to changes in business e