Slide 1: Presentation Materials for the Earnings Briefing
Presentation Materials for the Earnings Briefing for the Fiscal Year Ended March 31, 2022 May 31, 2022
Slide 2: Table of contents
2 1 Group Overview and 5 Business Topics for FY3/22 Business Activities Table of 2 Consolidated Financial Results for FY3/22 6 Growth Strategies contents 3 Shalom Business 7 Consolidated Earnings Forecast for FY3/23 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.,
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 FY3/22
7 Consolidated Financial Results 2 for FY3/22
Slide 8: Results highlight (consolidated)
8 Results highlight (consolidated) ● Sales up 12.5% YoY to 2,742 million yen along with the build-up of steady revenue streams Sales were 94.8% of the initial fiscal year forecast, a shortfall of 149 million yen ● Gross profit up 6.2% YoY to 1,274 million yen due to amortization expenses associated
Slide 9: Financial summary (consolidated)
9 Financial summary (consolidated) Sales up 12.5% to 2,742 million yen Operating profit: 145 million yen despite lower operating margin FY3/20 FY3/21 FY3/22 Vs. FY3/20 Vs. FY3/21 Net sales 2,380 2,439 2,742 +15.2% +12.5% Gross profit 1,196 1,200 1,274 +6.6% +6.2% Gross margin 50.3% 49.2% 46.5% (3.8)
Slide 10: Balance sheet (consolidated)
10 Balance sheet (consolidated) An YoY increase of 102.5% in advances received, a source of future sales and earnings Stable financial base with an equity ratio of 63.5% FY3/20 FY3/21 2Q FY3/22 FY3/22 Total current assets 1,196 1,172 1,052 1,056 Accounts receivable-trade 420 467 429 475 Total non-cu
Slide 11: Cash flows (consolidated)
11 Cash flows (consolidated) Cash flow from operating activities increased 45.1% YoY to 493 million yen Stable investment for product development Dividend payment and debt repayment progressed as planned FY3/20 FY3/21 1H FY3/22 FY3/22 Cash flows from operating activities 814 340 210 493 Cash flows f
Slide 12: Net sales (consolidated)
12 Net sales (consolidated) 4Q consolidated sales increased steadily at 6.2% YoY +6.2% 800 766 735 692 700 669 658 614 624 618 600 600 572 583 531 527 514 513 500 415 400 300 200 100 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY3/19 FY3/20 FY3/21 FY3/22 Unit: Millions of yen
Slide 13: Gross profit (consolidated)
13 Gross profit (consolidated) 4Q gross profit down 7.0% YoY. 4Q gross margin declined 5.9pt compared with the same period a year earlier as the cost of sales rose due to higher amortization expenses and an increase in license fee. 400 Gross profit Gross margin 100.0 360 348 90.0 350 338 334 328 317
Slide 14: Operating profit (consolidated)
14 Operating profit (consolidated) Despite higher sales, 4Q operating profit fell 69.5% YoY mainly because of higher cost of sales and sales promotion activities 160 145 140 129 120 107 -69.5% 100 92 86 88 80 70 57 60 46 44 39 40 31 30 26 20 8 0 -20 -9 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Slide 15: Number of employees (consolidated)
15 Number of employees (consolidated) An appropriate level of staffing was maintained for sales operations and development operations Number of employees Composition of employees 139 138 122 BNC Sales 110 112 Marketing Management 138 Customer success Development FY3/18 FY3/19 FY3/20 FY3/21 FY3/22
Slide 16: Personnel and promotion expenses (consolidated)
16 Personnel and promotion expenses (consolidated) Prioritized recruitment to strengthen sales and development systems Promotion expenses increased because of participation in major exhibitions and the update and redesign of the website for products Personnel expenses / labor cost Promotion expenses
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 and an increase in license fee Software is amortized over a three-year period by the straight-line method and is increasing along with the release of new software IDC
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 3,312 12,024 968,000 23.8 companies IDs companies million ● ARPU*2 ● ARPA*3 ● DAU*4 ● Cancellation rate*5 44,200 12,200 11,068 0.23 yen yen IDs % *1: Number of introductions, ID
Slide 20: Net sales (Shalom Business)
20 Net sales (Shalom Business) 4Q steady revenue increased 11.6% YoY Steady revenue was 84.4% of net sales 600 Steady revenue Other sales*1 Steady revenue as pct. of net sales 100.0 84.4 90.0 102 87 500 83 80.0 74 64 79 80 94 55 70.0 400 87 67 78 87 60.0 67 58 67 300 50.0 475 40.0 440 445 456 200 40
Slide 21: Operating profit (Shalom Business)
21 Operating profit (Shalom Business) 4Q operating profit declined 39.9% YoY owing to higher level of amortization expenses and an increase in personnel expenses associated with the strengthening of sales and development systems 140 117 119 120 107 100 91 87 80 76 69 70 70 -39.9% 60 56 47 49 46 40 2
Slide 22: Introductions of the Shalom series
22 Introductions of the Shalom series (Shalom Business) The number of Shalom series, our core product, increased steadily Number of introductions IDs issued +2.5% +7.0% 3,312 3,277 12,024 3,231 3,222 3,246 11,709 11,831 11,449 3,171 11,241 3,131 3,147 10,922 3,099 10,693 10,488 10,258 3,020 2,983 9,
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 70,0
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
25 Introductions of MYNABOX series (Shalom Business) Steadily increasing number of products linked to the Shalom series Number of introductions Share of MYNABOX*1 +1.9% 41.7 1,839 1,835 1,804 1,804 1,814 41.5% 1,785 1,772 1,769 1,769 41.3 41.1 1,702 1,684 1,689 1,659 1,657 40.8 1,624 40.8 40.7 1,606
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 4,427 companies 461 companies Shalom-linked cloud service 11,393 companies 10,493 companies 6,202 companies Net de Mei
Slide 27: CuBe Business
27 4 CuBe Business
Slide 28: Net sales and operating profit (CuBe Business)
28 Net sales and operating profit (CuBe Business) Sales remain flat and operating margin largely improved Net sales Operating profit +2.5% +7.0% 700 60 628 615 48 50 600 567 550 40 33 500 30 20 400 10 300 0 200 -10 -7 -20 100 -30 0 -40 -33 FY3/19 FY3/20 FY3/21 FY3/22 FY3/19 FY3/20 FY3/21 FY3/22 Unit
Slide 29: Business Topics for FY3/22
29 5 Business Topics for FY3/22
Slide 30: New services 1
30 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 31: New services 2
31 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 32: Promotion activities 1
32 Promotion activities 1 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
Slide 33: Promotion activities 2
33 Promotion activities 2 Numerous activities ● Launch of the Shalom magazine This magazine has valuable information for sales activities and other seasonal topics that readers are certain to find useful. ● ShaRobo LINE Sticker Sales have started for a LINE sticker featuring ShaRobo, the official ro
Slide 34: Strengthen digital marketing 1
34 Strengthen digital marketing 1 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 p
Slide 35: Strengthen digital marketing 2
35 Strengthen digital marketing 2 Update and redesign of product websites ＼ Shalom series for labor and social security attorney offices ／ ＼ Product lineup for labor insurance administration associations ／ The section for the core Shalom products and other sections of the MKSystem website have revis
Slide 36: Growth Strategies
36 6 Growth Strategies
Slide 37: Steady-revenue businesses
37 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 38: Target markets
38 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 39: Target markets and strategies 1
39 Target markets and strategies 1 Labor and social security attorney market End-Mar 2022 Offices with our systems introduced*2 2,619 offices Vs. 2Q +59 offices Large-scale offices Our market share 9.9％ (10 or more workers) 2,963 offices Number of clients registered in our systems 968,000 offices Ot
Slide 40: Target markets and strategies 2
40 Target markets and strategies 2 General corporate market End-Mar 2022 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 73 companies 1,375 compa
Slide 41: Target markets and strategies 3
41 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 new
Slide 42: Consolidated Earnings Forecast for FY3/23
42 Consolidated Earnings 7 Forecast for FY3/23
Slide 43: Financial summary (consolidated)
43 Financial summary (consolidated) Forecast 14% sales growth due to increasing application service provider (ASP) sales Forecast an 88% increase in operating profit in part because of a higher operating margin resulting from cost controls FY3/23 FY3/22 YoY Forecast Actual Change Net sales 3,115 2,7
Slide 44: Dividend forecast for FY3/23
44 Dividend forecast for FY3/23 Our basic policy is to pay dividends while placing emphasis on the consistent distribution of earnings to shareholders The FY3/22 dividend was based on this earnings distribution policy (Yen) 20.0 60.0% Annual dividend per share Payout ratio 47.5% 40.0% 31.5% 10.0 22.
Slide 45: Service Overview
45 8 Service Overview
Slide 46: Our mainstay service (Shalom 1)
46 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 47: Our mainstay service (Shalom 2)
47 Our mainstay service (Shalom 2) Lite Plan Plans and fees ✓ Considering e-application software ✓ Tasks usually performed by one person Lite Plan Basic Plan House Plan ✓ Use of business process software for the Set-up charges: ¥50,000 Set-up charges: ¥100,000 Set-up charges: ¥1,500,000 first time S
Slide 48: Our mainstay service (Shalom Company Edition 1)
48 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 49: Our mainstay service (Shalom Company Edition 2)
49 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) Down by 800 hours Improves quality of business processes Reduction in time needed (2018) Improvements Results Eliminates lost/missed
Slide 50: Our mainstay service (MYNABOX)
50 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 51: Our mainstay service (Net de Komon)
51 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 52: Our mainstay service (DirectHR)
52 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 53: Our mainstay service (eNEN)
53 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 54: Our mainstay service (Cloud Pocket)
54 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 55: Our mainstay service (ShaRobo)
55 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 25,000 yen/month Log
Slide 56: Our mainstay service (CuBe Business)
56 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 57: Our mainstay service (GooooN / CuBe Business)
57 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 58: We provide cloud solutions that benefit you
58 “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