Mksystem Corp. · TSE:3910
Mksystem — H1 FY3/22 Earnings Presentation
57 slides from Mksystem's earnings presentation, Nov 24, 2021
Slide 1: Presentation Materials for the Earnings Briefing
Presentation Materials for the Earnings Briefing for the First Half of the Fiscal Year Ending March 31, 2022 November 24, 2021
Slide 2: Table of contents
2 1 Group Overview and 5 Business Topics for the First- Business Activities half of FY3/22 Table of 2 Consolidated Financial Results for the First-half of FY3/22 6 Growth Strategies contents 3 Shalom Business 7 Consolidated Earnings Forecast for FY3/22 4 CuBe Business 8 Service Overview
Slide 3: Group Overview and Business Activities
3 Group Overview and 1 Business Activities
Slide 4: Company profile
4 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 ●Subsidiary Business Net Corporation Co., Ltd.
Slide 5: Mission and Vision
5 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 value Our services are user-friendly f
Slide 6: Segment structure
6 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 systems and payroll ledgers, etc. CuB
Slide 7: Consolidated Financial Results for the First-half of FY3/22
7 Consolidated Financial Results 2 for the First-half of FY3/22
Slide 8: Results highlight (consolidated)
8 Results highlight (consolidated) ● 2Q sales up 9.6% YoY to 658 million yen along with the build-up of steady revenue streams 1H earnings reached 42.9% against the full-year earnings forecast (1H of the previous fiscal year: 41.0%) ● Gross profit up 4.3% YoY to 328 million yen due to amortization e
Slide 9: Financial summary (consolidated)
9 Financial summary (consolidated) 2Q sales up 9.6% to 658 million yen 2Q operating profit: 39 million yen despite lower operating margin 2Q FY3/21 1Q FY3/22 2Q FY3/22 YoY change Vs. 1Q FY3/22 Net sales 600 583 658 +9.6% +12.9% Gross profit 315 274 328 +4.3% +20.0% Gross margin 52.5% 47.0% 50.0% (2.
Slide 10: Balance sheet (consolidated)
10 Balance sheet (consolidated) Fixed cost ratio up from the end of the previous fiscal year due to increased stock of software Stable financial base with an equity ratio of 61.4% FY3/20 2Q FY3/21 FY3/21 2Q FY3/22 Total current assets 1,196 1,073 1,172 1,052 Accounts receivable-trade 420 406 467 429
Slide 11: Cash flows (consolidated)
11 Cash flows (consolidated) Cash flow from operating activities increased 172.2% YoY to 210 million yen Stable investment for product development Dividend payment and debt repayment progressed as planned FY3/20 1H FY3/21 FY3/21 1H FY3/22 Cash flows from operating activities 814 77 340 210 Cash flow
Slide 12: Net sales (consolidated)
12 Net sales (consolidated) Total sales increased steadily at 9.6% YoY +9.6% 700 669 692 658 614 624 618 600 600 572 583 531 527 514 513 500 415 400 300 200 100 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q FY3/19 FY3/20 FY3/21 FY3/22 Unit: Millions of yen
Slide 13: Gross profit (consolidated)
13 Gross profit (consolidated) Gross profit up 4.3% YoY. However, gross margin declined 2.6pt compared with the same period a year earlier as the cost of sales rose due to higher amortization expenses, and labor costs associated with the bolstering system development. 400 Gross profit Gross margin 1
Slide 14: Operating profit (consolidated)
14 Operating profit (consolidated) Despite higher sales, operating profit fell 9.8% YoY mainly because we prioritized recruitment, relocated the Tokyo office, and accelerated sales promotion activities 160 145 140 129 120 107 100 92 86 80 70 -9.8% 57 60 46 44 39 40 30 31 20 8 0 -20 -9 1Q 2Q 3Q 4Q 1Q
Slide 15: Number of employees (consolidated)
15 Number of employees (consolidated) Number of employees increased by strengthening sales and development systems Number of employees Composition of employees 145 139 122 BNC Sales 110 112 Marketing Management 145 Customer success Development FY3/18 FY3/19 FY3/20 FY3/21 1H FY3/22
Slide 16: Personnel and promotion expenses (consolidated)
16 Personnel and promotion expenses (consolidated) Prioritized recruitment to strengthen sales and development systems Sales promotion expenses are associated with up-front investment to strengthen digital marketing Personnel expenses / labor cost Promotion expenses Personnel expenses Labor cost +16
Slide 17: IDC and software amortization expenses (consolidated)
17 IDC and software amortization expenses (consolidated) Internet Data Center (IDC) expenses rose in tandem with the growth in users Software is amortized over a three-year period by the straight-line method and is increasing along with the release of new software IDC expenses*1 Software amortizatio
Slide 18: Shalom Business
18 3 Shalom Business
Slide 19: Business highlight (Shalom Business)
19 Business highlight (Shalom Business) ● Introductions*1 ● IDs issued*1 ● Registered companies*1 ● Registered employees*1 3,246 11,709 952,000 23 companies IDs companies million ● ARPU*2 ● ARPA*3 ● DAU*4 ● Cancellation rate*5 43,500 12,100 10,445 0.27 yen yen IDs % *1: Number of introductions, IDs
Slide 20: Net sales (Shalom Business)
20 Net sales (Shalom Business) Steady revenue increased 10.4% YoY 600 Steady revenue Other sales *1 Steady revenue as pct. of net sales 100.0 84.3 90.0 500 83 80.0 74 64 79 80 94 55 70.0 400 87 67 78 87 60.0 67 58 67 300 50.0 40.0 425 440 445 200 395 403 414 360 369 378 30.0 325 347 303 316 282 20.0
Slide 21: Operating profit (Shalom Business)
21 Operating profit (Shalom Business) Operating profit declined 41.7% owing to higher level of amortization expenses and an increase in personnel expenses associated with the strengthening of software development team 140 117 119 120 107 100 91 87 80 76 69 70 70 -41.7% 60 56 47 46 40 27 19 20 0 1Q 2
Slide 22: Introductions of the Shalom series (Shalom Business)
22 Introductions of the Shalom series (Shalom Business) The number of Shalom series, our core product, increased steadily Number of introductions IDs issued +3.1% +9.5% 3,246 11,709 3,231 3,222 11,449 11,241 3,171 3,147 10,922 3,131 10,693 3,099 10,488 10,258 3,020 9,900 2,983 9,687 2,948 9,455 9,15
Slide 23: Electronic application (Shalom Business)
23 Electronic application (Shalom Business) Electronic applications, the core function of Shalom, are on the increase Employment insurance / Social insurance Labor insurance / Administration associations Employment insurance Social insurance Labor insurance Administration associations 2,400,000 60,0
Slide 24: Supports labor insurance administration association operations
24 Supports labor insurance administration association operations 23.4% of the 2,192 labor insurance administration associations have Commerce and industry SR management associations labor center No. of introductions No. of introductions installed Shalom Comparison of systems installed by administra
Slide 25: Introductions of MYNABOX series (Shalom Business)
25 Introductions of MYNABOX series (Shalom Business) Steadily increasing number of products linked to the Shalom series Number of introductions Share of MYNABOX*1 +2.5% 1,814 1,804 1,804 1,785 41.3 % 1,772 1,769 1,769 41.1 1,702 1,684 1,689 1,659 1,657 40.8 40.8 1,624 40.7 1,606 40.7 1Q 2Q 3Q 4Q 1Q
Slide 26: Other products (Shalom Business)
26 Other products (Shalom Business) Introductions of other products is also on the increase WEB-based year-end tax adjustment system WEB-based tax return filing system for employees 3,744 companies 353 companies Shalom-linked cloud service 8,918 companies 8,485 companies 4,900 companies Net de Meisa
Slide 27: CuBe Business
27 4 CuBe Business
Slide 28: Net sales (CuBe Business)
28 Net sales (CuBe Business) Semi-customized service sales are stable Increasing the number of steady revenue streams remains an issue to be addressed 250 Semi-customized services Other 12 200 8 21 1 23 150 19 7 7 10 23 213 100 192 179 167 7 6 8 146 4 125 126 130 118 50 106 80 80 77 61 0 1Q 2Q 3Q 4Q
Slide 29: Operating profit (CuBe Business)
29 Operating profit (CuBe Business) Despite stable costs, operating profit is unstable owing to volatility of sales 60.0 48.0 40.0 35.0 +22 24.0 20.0 20.0 20.0 15.0 2.0 0.0 -2.0 -9.0 -7.0 -20.0 -15.0 -22.0 -40.0 -36.0 -60.0 -53.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q FY3/19 FY3/20 FY3/21 FY3/22
Slide 30: Business Topics for the First-half of FY3/22
30 5 Business Topics for the First-half of FY3/22
Slide 31: New services 1
31 New services 1 Personnel management system “GooooN Jinzai Profile (with linkage to Shalom)” Would like to see improved Shalom human resources data. Would like to propose the HR Can labor and social security system to companies attorneys share Shalom’S HR considering installation of a HR managemen
Slide 32: New services 2
32 New services 2 Official Shalom RPA “ShaRobo Shalom V3.4” Net de Komon Mandatory Cloud-based social insurance and labor insurance application system + Robotic Process Automation (RPA) is a technology designed to A system to support electronic automate clicks, keyboard inputs, and other routine man
Slide 33: Promotion activities
33 Promotion activities Participation in major exhibitions and various seminars ● Participated in Online and Digitalization EXPO, Work from Home/Telework EXPO, and New Normal Office EXPO and HR EXPO The event was held with adequate COVID-19 infection protection measures, including body temperature m
Slide 34: Strengthen digital marketing
34 Strengthen digital marketing Sales promotion on SNS and other social media platforms Launch of new initiatives such as SNS (social media) advertising for seminars resulted in a rise in inquiries. Additionally, we increased the use of digital media (for example Google and other platforms) as a par
Slide 35: Growth Strategies
MKSYSTEM © — Growth Strategies
Slide 36: Steady-revenue businesses
36 Steady-revenue businesses Steady revenue business that builds a solid profit base A business model based on the monthly fee-based service Shalom 1Q generates stable income. Additional sales (Set-up charges) 4Q 4Q Additional sales Continuing sales (Set-up charges) (Monthly charges) 3Q 3Q Additiona
Slide 37: Target markets
37 Target markets Our target extends to all companies that outsource/not outsource to labor and social security attorneys Small payrolls Medium-size payrolls Large payrolls Of the 3.85 million potential client companies, labor and social security attorneys have formed administrative associations for
Slide 38: Target markets and strategies (1)
38 Target markets and strategies (1) Labor and social security attorney market End-Sep 2021 Offices with our systems introduced*2 2,560 offices YoY change +86 offices Large-scale offices Our market share 9.7％ (10 or more workers) 2,963 offices Number of clients registered in our systems 952,000 offi
Slide 39: Target markets and strategies (2)
39 Target markets and strategies (2) General corporate market End-Sep 2021 Introductions in 62,820 companies with 100 or more the Shalom Business 149 companies employees 5,000 or more employees Introductions in 636 companies 2,000 to less than 5,000 employees the CuBe Business 68 companies 1,375 com
Slide 40: Target markets and strategies (3)
40 Target markets and strategies (3) Product strategies For labor and social security attorney offices / labor insurance administration associations For general corporations ●For new customers ●For new customers Use campaigns and other measures A version for large companies to strengthen sales Add n
Slide 41: Consolidated Earnings Forecast for FY3/22
41 Consolidated Earnings 7 Forecast for FY3/22
Slide 42: Financial summary (consolidated)
42 Financial summary (consolidated) Sales expected to increase 18% because of demand involving the digital transformation Higher expenses lower the operating margin, but operating profit remains unchanged from one year earlier FY3/22 FY3/21 YoY Forecast Actual Change Net sales 2,892 2,439 +18.6% Gro
Slide 43: Dividend forecast for FY3/22
43 Dividend forecast for FY3/22 Our basic policy is to pay dividends while placing emphasis on the consistent distribution of earnings to shareholders The FY3/21 dividend was based on this earnings distribution policy (Yen) 20.0 60.0% Annual dividend per share Payout ratio 38.7% 40.0% 31.5% 31.4% 10
Slide 44: Service Overview
44 © — Service Overview
Slide 45: Our mainstay service (Shalom 1)
45 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 reports submitted to
Slide 46: Our mainstay service (Shalom 2)
46 Our mainstay service (Shalom 2) Lite Plan Plans and fees ✓ Considering e-application software ✓ Tasks usually performed by one person ✓ Use of business process software for the first time Lite Plan Basic Plan House Plan Selected functions Set-up charges: ¥50,000 Set-up charges: ¥100,000 Set-up ch
Slide 47: Our mainstay service (Shalom Company Edition 1)
47 Our mainstay service (Shalom Company Edition 1) 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 management/pay
Slide 48: Our mainstay service (Shalom Company Edition 2)
48 Our mainstay service (Shalom Company Edition 2) Benefits of using Shalom and a large customer base KAGOME CO., LTD. PERSOL HOLDINGS CO., LTD. Evaluation: All (2017) Reduction in time needed (2018) Down by 800 hours Improves quality of business processes Improvements Results Eliminates lost/missed
Slide 49: Our mainstay service (MYNABOX)
49 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 Tax office MYNABOX Flowchart MYNABOX CL Flowchart (MYNABOX for Clients) Labor and social Business operator security attorn
Slide 50: Our mainstay service (Net de Komon)
50 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 and linking with work attendance anytime (Smartphone access) Concerned about erroneous Can process with correct d
Slide 51: Our mainstay service (DirectHR)
51 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 e- applications
Slide 52: Our mainstay service (eNEN)
52 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,” “when to do,” and
Slide 53: Our mainstay service (Cloud Pocket)
53 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 important company
Slide 54: Our mainstay service (ShaRobo)
54 Our mainstay service (ShaRobo) An official Shalom RPA ShaRobo takes over the routine work (electronic application update, official document storage, etc.) normally the province of Shalom Automates the following processes Download official electronic application forms for just 30,000 yen/month (ex
Slide 55: Our mainstay service (CuBe Business)
55 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 the reform of hum
Slide 56: Our mainstay service (GooooN / Cube Business)
56 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, and supports human
Slide 57: We provide cloud solutions that benefit you
57 “We provide cloud solutions that benefit you” 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 f