Id Holdings CorporationTSE: 4709

Consolidated Financial Results for the First Three Months of the Fiscal Year Ending March 31, 2025 (J-GAAP)

Aug 2, 2024 at 8:31 AM UTC · Issued by ID Holdings Corporation

Note: This document is an English translation of the "Kessan Tanshin" for the first quarter of the fiscal year ending March 31, 2025 and is provided solely for reference purposes. In the event of any inconsistency between the Japanese and English versions, the Japanese version will govern.

Consolidated Financial Results for the First Three Months of the Fiscal Year

Ending March 31, 2025 (J-GAAP)

														July 31, 2024
Company name:					ID Holdings Corporation
Listing:					Tokyo Stock Exchange, Prime Market
Securities code:					4709
URL:					https://www.idnet-hd.co.jp
Company representative:					Masaki Funakoshi, President, Representative Director and Group CEO
Direct inquiries to:					Naoko Hara, Corporate Officer
						Manager, Corporate Strategy Department
						Tel: +81 3-3262-5177
Scheduled date of dividend payment:			－
Preparation of supplementary materials on financial results: Yes
Presentation on results:					No
									(Amounts of less than ¥1 million are truncated)
1. Consolidated Financial Results for Q1 of FY2024 (April 1-June 30, 2024)
(1) Consolidated Business Results										(% indicates YoY changes)
		Net sales			Operating income	Ordinary income	Net income attributable to
				owners of parent

		¥ million		%		¥ million		%	¥ million		%	¥ million		%
Q1 FY2024		8,487		8.5		729		-11.5	799		-9.6	451		-12.1
Q1 FY2023		7,819		7.2		823		30.7	884		32.3	514		37.8
Note: Comprehensive income	Q1 FY2024	¥639 million	(-17.7%)		Q1 FY2023	¥776 million	(76.2%)

		Net income			Diluted net income	EBITDA	EPS before amortization
		per share			per share		of goodwill


				¥				¥	¥ million		%	¥			%
Q1 FY2024				26.97				－	893			-8.2	33.60			-10.8
Q1 FY2023				30.96				－	973		24.8	37.65			29.0

Note: Diluted net income per share is not listed, as the Group has no potential shares.

(2) Consolidated Financial Position

	Total assets	Net assets	Equity ratio
	¥ million	¥ million	%
Q1 FY2024	18,616	12,170	65.1
FY2023	20,061	12,010	59.6

Reference: EquityQ1 FY2024 ¥12,114 millionFY2023 ¥11,954 million

2. Dividends

			Annual dividends
	End of first quarter	End of second quarter	End of third quarter	End of fiscal period	Total
	¥	¥	¥	¥	¥
FY2023	－	25.00	－	25.00	50.00
FY2024	－

FY2024 (forecast)		25.00	－	30.00	55.00

Note: Revision of most recently published dividend forecast:	No
Breakdown of year-end dividend for FY2024 (forecast)
Ordinary dividend ¥25.00	Commemorative dividend	¥5.00

3. Forecasts of Consolidated Results for FY2024 (April 1, 2024-March 31, 2025)

(% indicates YoY changes)

Net income

Net sales

Operating income

Ordinary income

attributable to

per share

owners of parent

¥ million

FY2024

35,000

7.1

3,000

8.3

3,000

4.9

1,750

-1.5

104.55

(full fiscal year)

EPS before

EBITDA

amortization of

goodwill

¥ million

FY2024

3,550

3.8

127.49

- 4.2

(full fiscal year)

Note: Revision of most recently published results forecast:

*Notes

(1) Significant changes in the scope of consolidation during the period

(2) Adoption of special accounting treatments for quarterly consolidated financial statements:

(3) Changes in accounting policies, changes in accounting estimates and restatements:

(i)

Changes in accounting policies due to revisions of accounting standards, etc.:

(ii)

Changes in accounting policies other than (i):

(iii)

Changes in accounting estimates:

(iv)

Restatements:

Number of shares outstanding (common stock)
1. Number of shares outstanding (inclusive of treasury stock):
2. Amount of treasury stock:
3. Interim average number of shares (Consolidated total for the quarter)

Q1 FY2024	18,066,453	shares	FY2023	18,066,453	shares

Q1 FY2024	1,331,888	shares	FY2023	1,297,430	shares
Q1 FY2024	16,747,098	shares	Q1 FY2023	16,602,473	shares

Calculation of certain management indices
- EBITDA = Operating income + depreciation + amortization of goodwill
- EPS before amortization of goodwill = Net income after adjustments* ÷ interim average number of shares

*Net income after adjustments = Net income attributable to owners of parent + amortization of goodwill

Review of the attached quarterly consolidated financial statements by a certified public accountant or audit corporation: No
Qualitative information relating to the appropriate use of results forecasts, and other noteworthy items
Results forecasts are estimates based on information available as of the day the results were announced. Forecasts are inherently uncertain. The actual results, etc. may be different from the forecasts because of changes in business conditions, etc. See (3) Qualitative Information on the Consolidated Results Forecast under Section 1. Summary of Business Results, etc., on page 6 of the Attachment for the assumptions that form the basis of results forecasts and other things to remember when relying on results forecasts.
The ID Group has also introduced a board benefit trust (BBT) plan and Japanese employee stock ownership plan - restricted stock (J-ESOP-RS). Company shares held by Custody Bank of Japan, Ltd. (Trust Account E) as trust property for the BBT and J- ESOP-RS plans are included in treasury stock.

Contents

1. Summary of Business Results, etc	- 2 -
(1)	Summary of Business Results for the Period	- 2 -
(2)	Summary of Financial Condition for the Period	- 6 -
(3)	Qualitative Information on the Consolidated Results Forecast	- 6 -
2. Consolidated Financial Statements and Important Notes	- 7 -
(1)	Consolidated Balance Sheet	- 7 -
(2)	Consolidated Statement of Income and Comprehensive Income	- 9 -
(Consolidated Statement of Income)	- 9 -
(Consolidated First Quarter)	- 9 -
(Consolidated Statement of Comprehensive Income)	- 10 -
(Consolidated First Quarter)	- 10 -
(3)	Notes on Consolidated Financial Statements	- 11 -
(Notes on Assumptions Regarding Going Concern)	- 11 -
(Notes on Significant Changes (If Any) in Shareholders' Equity)	- 11 -
(Notes on Consolidated Balance Sheet)	- 11 -
(Notes on Consolidated Cash Flow Statement)	- 11 -
(Notes on Segment Information, etc.)	- 11 -
(Additional Information)	- 12 -
(Notes on Material Subsequent Events)	- 12 -

- 1 -

1. Summary of Business Results, etc.

Summary of Business Results for the Period

The consolidated fiscal quarter under review (Q1 FY2024: April 1 to June 30, 2024) was a period of mixed economic results. The Japanese economy continued a gradual recovery keynote, with improvements in the employment and income environments. However, the path forward remained unclear amid concerns regarding the impact of downside events in the global economy, such as continuing high interest rates in Western countries and worries about prospects for the Chinese economy, as well as downside risks in Japan such as rising resource prices, geopolitical tensions, and fluctuations in financial and capital markets, among other issues.

The information services industry, in which the ID Group is a participant, continued on a firm footing. Demand for IT investment related to digital transformation (DX), the use of digital technology to create new business models or transform existing ones, was firmly based. Ongoing growth in the fields of cloud services and generative AI drove heightened investment in construction of data centers in Japan. These positive trends are expected to persist.

Against this background, business results for the ID Group trended favorably in all services, including system management. Net sales rose to ¥8.487 billion (+8.5% YoY).

Earnings declined YoY across the board. Despite increasing revenues and expansion in the high-marginDX-related business, a range of costs increased, including returns to employees and strategic investments to train and retain personnel. Operating income declined to ¥729 million (-11.5% YoY) and ordinary income slid to ¥799 million (-9.6% YoY). Net income attributable to owners of parent retreated to ¥451 million (-12.1% YoY) and EBITDA slipped to ¥893 million (-8.2% YoY).

- 2 -

The Group's business consists of a single segment. Business results for each service are as follows.

					(Millions of ¥)
		Previous consolidated	Consolidated first	Compared with same period of
		previous fiscal year (YoY)
		first quarter	quarter under review

		(April 1, 2023 to	(April 1, 2024 to	Increase/	Rate of
		June 30, 2023)	June 30, 2024)	increase/
		decrease
			decrease (%)


System	Net sales	3,568	3,758	189	5.3
management

Gross profit	805	919	113	14.2


	Gross profit margin	22.6%	24.5%	1.9P	―

Software	Net sales	2,784	2,953	168	6.1
development

Gross profit	583	589	5	1.0


	Gross profit margin	20.9%	19.9%	-1.0P	―

IT infrastructure	Net sales	694	845	151	21.8


	Gross profit	241	245	3	1.5

	Gross profit margin	34.8%	29.0%	-5.8P	―

Cybersecurity,	Net sales	712	836	123	17.3
consulting and

Gross profit	235	223	-12	-5.1
training

	Gross profit margin	33.1%	26.8%	-6.3P	―

Others	Net sales	58	93	35	60.4


	Gross profit	2	6	4	150.3

	Gross profit margin	4.6%	7.2%	2.6P	―

Total	Net sales	7,819	8,487	667	8.5


	Gross profit	1,869	1,984	115	6.2

	Gross profit margin	23.9%	23.4%	-0.5P	―

(i) System management

Order acceptance expanded and new projects were won, including projects for the relocation of data centers for major IT vendors and clients in the financial sector. Unit prices were revised in view of increasing labor and outsourcing expenses. Net sales rose to ¥3.758 billion (+5.3% YoY).

(ii) Software development

Orders accepted from clients in the public and financial sectors swelled, while reinforced sales efforts aimed at major IT vendors led to expansion in transactions. Net sales grew to ¥2.953 billion (+6.1% YoY).

(iii) IT infrastructure

The Group enjoyed increases in transactions with major IT vendors and in orders accepted with clients related to finance, the public sector and shipping. Net sales leaped to ¥845 million (+21.8% YoY).

(iv) Cybersecurity, consulting and training

Orders accepted in cybersecurity and consulting broadened. Net sale improved to ¥836 million (+17.3% YoY).

(v) Others

Orders accepted for product sales expanded. Net sales rose to ¥93 million (+60.4% YoY).

- 3 -

Management Policy Initiatives

In the previous Mid-term Management Plan, the ID Group strove to upgrade its services in various fields by cultivating engineers with a thorough grounding in digital technology, thereby building a foundation for future growth. Beginning in the fiscal year ended March 31, 2023 (FY2022), the Group prepared "Next 50 Episode II: Ride on Time," the Mid-term Management Plan covering the period FY2022 through FY2024, to bolster profitability based on the following three basic themes:

Develop business models in line with our DX portfolio, which is focused on strengthening support for advancement of customers' DX and development of original solutions
Strengthen partnerships to create greater value-added
Upgrade management divisions and reallocate resources to the business divisions

Under this Mid-term Management Plan, the Group is pursuing four basic strategies to achieve the above three basic themes: an IT service strategy, a human resource strategy, a "new normal" strategy and a Sustainable Development Goals (SDGs) strategy.

Note: Business partners refers to IT partners collaborating with the Group on projects.

- 4 -

(i) IT Service Strategy

The Group identifies fields of technology where needs are strong and works with corporate partners to support customers in advancing DX and develop original solutions targeting growth fields. Aiming for further expansion in revenues in the high- margin fields of advanced operations and IT infrastructure, the Group is focusing on strategic placement of engineers and strengthening cooperation with business partners. In April 2024 the Group established a company focused on AI, ID AI Factory Co., Ltd. Supported by its amassed wealth of AI-related technologies, the Group is enhancing the sophistication of its service domains, namely system management, cybersecurity and software development. In June 2024, the Group launched an AI literacy training service. The service offers a curriculum ranging from basic knowledge of AI to methods of practical application, supporting customers in creating business opportunities and boosting productivity.

(ii) Human Resource Strategy

To expand its DX services and boost value-added, the Group is further enhancing its training programs, accelerating the development of mid- to senior-level engineers and planning-and-proposal staff. For example, the Group is deploying in-house training roadmaps for each role of personnel involved in advancing DX, promoting personnel development. We are providing technical training related to DX, including in security and AI, to support employees in obtaining qualifications. As a result, some 150 employees have taken the Generalist Test ("G-test"), which evaluates technical skill and basic knowledge of AI. Moreover, aiming to expand fields of advanced operations and IT infrastructure, the Group is moving vigorously forward with training of strategic IT infrastructure engineers and rotation of personnel.

(iii) New Normal Strategy

The ID Group is working to streamline and add value to operations through measures such as overhauling its core in-house systems and is constructing a smart management division. Among measures to further streamline the duties of the management division, the ID Group is actively deploying systems such as ID AI Concierge, an AI chatbot service. We are also transferring back-office functions to the Sanin Business Process Outsourcing Center and revising work processes as part of that endeavor.

(iv) SDGs Strategy

The Group takes concerted steps to advance sustainability through its business activities, aiming for a virtuous circle of solving social problems and enhancing corporate value. To create a supportive work environment in which employees can work enthusiastically and in good health, the Group offered health management seminars, an activity continued from the previous fiscal year, and provides support for those who wish to stop smoking. In two of several efforts to strengthen health management further, in the current fiscal year the Group launched a health advancement project and a subsidy for treatments to stop smoking. To support activities contributing to society, the Group continues to sponsor ID Group Blood Donation Day.

Research and Development Activities

During Q1 FY2024, Group expenditures on research and development activities totaled ¥65 million.

The ID Group is focusing intensively on research and development, determined to create innovative businesses that put state-of-the-art technologies to work. Principal among these efforts is a proof-of-concept (PoC) of a logging system that uses a patented blockchain technology developed by ID, which the Group is implementing in partnership with NTT Data Intellilink Corporation and SBI R3 Japan Co., Ltd. The purpose of this PoC is to use blockchain technology to strengthen transparency of log data and prevent tampering, thereby establishing a framework for highly reliable system operation.

Another key R&D initiative is ID-VROP, a virtual operation center that enables system operation in a virtual space. The Group is currently testing this product and intends to enhance it with major functional additions.

We are also conducting research in the AI space. Focusing on use of large language models (LLM), a field now growing at an eye-watering pace, the Group is committing resources to R&D on voice- and image-recognition technologies. At ID AI Factory Co., Ltd., a subsidiary established in April 2024, the Group is moving forward with development of AI services to contribute to the enhancement of its business domains.

- 5 -

Summary of Financial Condition for the Period (Assets)
Assets at the end of consolidated Q1 decreased by ¥1.444 billion from the end of the previous consolidated accounting period to ¥18.616 billion. Although contract assets increased by ¥419 million and accounts receivable-other rose by ¥152 million, cash and deposits fell by ¥1.124 billion and accounts receivable-trade decreased by ¥877 million.

(Liabilities)

Liabilities at the end of consolidated Q1 decreased by ¥1.604 billion from the end of the previous consolidated accounting period to ¥6.446 billion. Although other current liabilities increased by ¥296 million, short-term loans payable declined by ¥800 million, provision for bonuses decreased by ¥584 million, and income taxes payable fell by ¥506 million.

(Net Assets)

Net assets at the end of consolidated Q1 increased by ¥160 million from the end of the previous consolidated accounting period to ¥12.170 billion. Although payment of year-end dividends reduced net assets by ¥426 million, net income attributable to owners of parent increased to ¥451 million, valuation difference on available-for-sale securities rose by ¥97 million, and foreign currency translation adjustment increased by ¥83 million.

Qualitative Information on the Consolidated Results Forecast

There have been no changes to the full-year results projections as released by the ID Group on April 15, 2024.

- 6 -

2. Consolidated Financial Statements and Important Notes

Consolidated Balance Sheet

		(Thousands of ¥)
	Previous consolidated accounting	Consolidated first quarter under
	period	review
	As of March 31, 2024	As of June 30, 2024
Assets
Current assets
Cash and deposits	5,920,631	4,796,344
Accounts receivable-trade	6,029,880	5,151,978
Contract assets	793,644	1,212,779
Work in process	636	25,525
Accounts receivable-other	271,421	423,720
Other	886,256	976,704
Total current assets	13,902,470	12,587,052
Non-current assets
Property, plant and equipment	1,374,298	1,358,209
Intangible assets
Goodwill	859,665	748,547
Software	135,577	125,786
Other	754	754
Total intangible assets	995,997	875,088
Investments and other assets
Investment securities	2,457,655	2,620,806
Deferred tax assets	530,266	326,849
Guarantee deposits	328,933	376,845
Other	478,918	479,505
Allowance for doubtful accounts	-7,500	-7,500
Total investments and other assets	3,788,272	3,796,506
Total non-current assets	6,158,567	6,029,804
Total assets	20,061,038	18,616,856

- 7 -

		(Thousands of ¥)
	Previous consolidated accounting	Consolidated first quarter under
	period	review
	As of March 31, 2024	As of June 30, 2024
Liabilities
Current liabilities
Accounts payable-trade	1,211,827	1,197,386
Contract liabilities	111,302	119,051
Short-term loans payable	* 2,200,000	* 1,400,000
Current portion of long-term loans payable	200,000	200,000
Income taxes payable	634,985	128,513
Provision for bonuses	1,157,594	573,408
Provision for directors' bonuses	24,454	6,120
Other	1,519,504	1,816,017
Total current liabilities	7,059,670	5,440,496
Non-current liabilities
Long-term loans payable	150,000	100,000
Deferred tax liabilities	455,922	503,596
Provision for directors' retirement benefits	36,666	38,556
Net retirement benefit liability	22,569	26,267
Other	325,794	337,239
Total non-current liabilities	990,952	1,005,658
Total liabilities	8,050,623	6,446,155
Net assets
Shareholders' equity
Capital stock	592,344	592,344
Capital surplus	754,132	754,132
Retained earnings	9,743,914	9,769,438
Treasury stock	-762,970	-813,085
Total shareholders' equity	10,327,421	10,302,829
Accumulated other comprehensive income
Valuation difference on available-for-sale securities	1,176,088	1,273,358
Deferred gains or losses on hedges	－	3,433
Foreign currency translation adjustment	441,618	525,158
Remeasurements of retirement benefit plans	8,942	9,811
Total accumulated other comprehensive income	1,626,649	1,811,761
Non-controlling interests	56,344	56,109
Total net assets	12,010,415	12,170,700
Total liabilities and net assets	20,061,038	18,616,856

- 8 -

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