Intelligent Wave Inc.TSE: 4847

Financial Results for Q3 FY06/24, presentation

May 10, 2024 at 3:32 AM UTC · Issued by Intelligent Wave Inc.

Financial Results for Q3 FY06/24

(July 1 to March 31, 2024)

[Non-Consolidated]

Intelligent Wave Inc.

Announced on May 10, 2024

Financial Results for Q3 FY06/24

Forecast for FY06/24

Key initiatives in FY06/24

Reference

Overview

Sales rose due to growth in system development, cloud services and security, and profits grew significantly, even following the large-scale hardware sales for the renewal of the FEP system* in the same period of the previous year. Orders received grew on an increase in security and system development orders, while cloud services orders declined on a long-termmulti-year contract in the previous year. Orders on hand increased significantly.

		Cumulative Q3	Cumulative Q3				Million yen

		FY06/23	FY06/24	Change
						(YoY)
			Sales		Sales
		Results	composition	Results	composition
			ratio		ratio
Net sales		9,896	-	10,751	-	＋855	＋8.6％

Gross profit		3,120	31.5%	3,478	32.4%	＋358	＋11.5％

SG&A expenses		1,984	20.0%	1,982	18.4％	(2)	(0.1％)

Operating income		1,136	11.5%	1,496	13.9％	＋360	＋31.7％

Ordinary income		1,157	11.7%	1,503	14.0％	＋346	＋29.9％

Net income		780	7.9%	1,027	9.6％	＋247	＋31.7％


Amount of orders	11,881	-	13,773	-	＋1,892	＋15.9％
Orders on hand	11,548	-	13,995 ｃ	-	＋2,447	＋21.2％

＊Front-end processor (FEP) system: Hardware and software with network connectivity, card usage authentication, and other functions required for credit card payment processing

Sales by Category

Sales in system development, cloud services, and security grew. Third-party products and services decreased YoY due to large-scale hardware sales for FEP* system renewal in the previous fiscal year.

					Million yen

	Cumulative Q3	Cumulative Q3	Change(YoY)
	FY06/23	FY06/24

Net sales	9,896	10,751	＋855	＋8.6％

Payment and finance	7,743	7,745		+2	％
		+0.0
	4,314	5,114	＋	800	+18.5
System development				％
	1,230	1,210	(20)	(1.6	)
Maintenance					％
In-house products and services	315	229	(86)	(27.3％)

Third-party products and	1,882	1,191	(691)	％	)
services (hardware, etc.)	(36.7


Cloud services	1,351	1,799	＋448	＋33.2％

Security	801	1,207	＋406	＋50.7％

＊Front-end processor (FEP) system: Hardware and software with network connectivity, card usage authentication, and other functions required for credit card payment processing

Sales by Business Domain

Payment systems, etc., an area of expansion in the payment business domain, grew due to a large-scale project for credit card company. FEP and fraud detection as well as Finance and others declined due to large-scale hardware sales in the previous year. Cloud services grew due to an expanded user base of our fraud detection cloud service. Security grew in the current financial year due to contributions from sales of key management solutions (HSM) and ID management solutions.

				Million yen

	Cumulative Q3	Cumulative Q3	Change(YoY)
	FY06/23	FY06/24


Net sales	9,896	10,751	＋855	＋8.6％

Payment and finance	7,743	7,745	+2		％
	+0.0
FEP and fraud detection	5,118	4,227	(891)	(17.4	％	)


	1,952	2,934	982	50.3
Payment systems, etc.			＋	＋	％
Finance and others	672	583	(89)	(13.2	％	)


Cloud services	1,351	1,799	＋448	＋33.2％

Security	801	1,207	＋406	＋50.7％

＊Front-end processor (FEP) system: Hardware and software with network connectivity, card usage authentication, and other functions required for credit card payment processing

Top Three Clients by Sales

As for DNP, sales increased, particularly for security products. System Integrator increased YoY due to large-scale project for credit card company. Credit card company increased YoY due to an expanded scale of system development in multiple areas.

Million yen

				Cumulative Q3	Cumulative Q3	Change	Main projects
				FY06/23	FY06/24	(YoY)

							TSP development (smartphone

1.	D	N	P	1,248	1,332	+84	payment)
System operation (24/365)
							Key management system

2.	System		824	1,205	＋380	System development for credit
	Integrator					card company
3.	Credit card	449	741	＋291	System development in multiple
areas (FEP, fraud detection, Digital
company
					transformation of payments)

Sales by Type (Recurring and Spot)

Recurring revenue is increasing steadily due to higher sales of cloud services. In the future, the company aims to expand the scale of its business in combination with the growth of flow sales such as system development.

…Spot

…Recurring

Million yen

Recurring ratio 50.4%

			2,216	2,175			1,681		1,920	1,888
			1,517	1,442	1,350

		1,634
	1,382
1,055

			1,442	1,470	1,625	1,664	1,796	1,808	1,867	1,917
1,196	1,252	1,312

1Q	2Q	3Q	4Q
	FY06/22

1Q 2Q 3Q 4Q FY06/23

1Q 2Q 3Q 4Q

FY06/24

Recurring: Categories with contracts that allow us to record sales of a fixed amount on a regular basis

Spot: Categories with contracts that are not fixed in terms of amount or timing

Operating income

Gross profit increased due to higher sales and improved gross margins in system development and cloud services. Selling, general and administrative (SG&A) expenses remained at the same level as in the previous year, thanks to cost optimization, and are progressing well against the full-year plan.

■ … Operating income ●… Operating margin

Gross profit	SG＆A expense	Operating income	Million yen

Gross profit margin	SG&A expense ratio	Operating margin

25.0%	1,496

1,600	27.5%	33.3%	34.4%	32.4%

1,400	21.9%	19.9%	18.7%	16.7%

31.1%	31.3%	32.2%	33.0%	30.2%
17.9%	21.2%	21.5%	20.9%	21.9%

32.8% 33.6% 40.0%

17.3%

16.7%

20.0%

15.0%

1,136

943

1,200	13.4%	15.7%	15.7%

	5.6%
1,000

13.2%	10.1%	10.7%	12.1%	8.3%

15.5%	16.9%
	0.0%
	-20.0%

13.9%

800

10.0% 12.0% 11.5%

5.0%

0.0%

Cumulative Cumulative Cumulative Q3 FY06/22 Q3 FY06/23 Q3 FY06/24

																	-40.0%
600						1,186	1,134						1,149	1,244	1,278
				1,015	985		1,000						644 -60.0%
			877									955
400													728
620				610	651	665	667	691	656
			550		634

	493	525	576	483											-80.0%
200	464							420		588
352		319	332	263

	126
0																	-100.0%


		1Q	2Q	3Q	4Q		1Q		2Q	3Q		4Q	1Q	2Q		3Q

											FY06/23
				FY06/22								FY06/24

Copyright © 2024, INTELLIGENT WAVE INC. All rights reserved.	8

Cloud Service Business

Net sales increased YoY due to an expanded user base (seven companies in total), mainly due to the fraud detection service IFINDS. Profits increased YoY due to changes in the service composition ratio. Orders received fell YoY, but orders on hand rose due to a long-termmulti-year contract in the previous year.

																										Million yen

																			FY06/23					FY06/24
																	Q1		Q2	Q3	Q4	Q1	Q2	Q3	Q4
					Amount of orders				507		822		2,794	297	614	969		890
										Net sales				434		447		469	515	592	587		618
					Orders on hand				4,214		4,589		6,913	6,695	6,717	7,098		7,371

									Gross profit				(4)		29		44	71	96	84		94

	Number of customers								Overview
			IOASIS		IFINDS	35							1		Service				Overview

40		30
IGATES		IPRETS
						1	9				Demand from existing customers for additional functionality and

											25							■
									1											IOASIS		expansion in response to increased transaction volumes increased.
									20					1	9
									9
			1									11				The number of companies introducing "FARIS Shared Scoring
20						15					6
9										6
						11						1	3					Service Powered by PKSHA Security", which prevents fraud by fraud-
									10							■ IFINDS
			5							2	2	4						data-sharing among issuers, increased. New services are launched
											5		3	3	10	11	11				progressively in	our next-generation fraud prevention project,
			10				11		3
0							4	5	5							"FARIS."
								0

																		We received a large-scale project for the development of a multi-user
		Cumulative
				Cumulative									■ IGATES
		Q3 FY06/23				Q3 FY06/24										platform. (The platform is scheduled to begin operating in autumn
																						2024.)

Amount of orders

The amount of orders rose in Payment and finance due to a large-scale project for a credit card company as well as a large-scale infrastructure construction and operation project. In Security, orders grew in existing security products along with key management solutions (HSM) and ID management solutions.

■ …Payment & Finance (System Development)

■ …Cloud Services

■ …Payment & Finance (Maintenance, Hardware, etc.)	Million yen

■ …Security

14,000				13,773

12,000	11,768	11,881	2,260
		741
	614

10,000				2,475
3,150
	4,123

8,000
				3,470
6,000	3,593	2,709
4,000
			5,566

	4,411
		4,307

2,000
0

						5,421
	4,686					286

	228	4,252	3,954
		299

	1,876	273	339	3,130	3,329	2,794
2,829		311	132		2,904

		1,930		322	822		273
86			507
				297

1,000			2,146
1,189
			903	945	864	807

476
1,267	1,393	1,750		1,398	1,430	1,477	1,527
	1,158

4,257

807

610

839

2,001

5,515

631

969 4,000

821

1,781

890

859

2,134

1,430

Cumulative			Cumulative		Cumulative
Q3 FY06/22			Q3 FY06/23		Q3 FY06/24


Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3
		FY06/22				FY06/23			FY06/24