Note: This document has been translated from a part of the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.
August 8, 2024
Consolidated Financial Results
for the Three Months Ended June 30, 2024
(Under Japanese GAAP)
Company name: | Japan Communications Inc. |
Listing: | Tokyo Stock Exchange: Prime Market |
Securities code: | 9424 |
URL: | http://www.j-com.co.jp/ |
Representative: | Naohisa Fukuda, Representative Director-President |
Inquiries: | Mitsuru Kodaira, Executive Officer and CFO |
Telephone: | +81-3-5776-1700 |
Scheduled date to commence dividend payments: | - |
Preparation of supplementary material on quarterly financial results: Yes | |
Holding of quarterly financial results briefing: | Yes (for institutional investors, analysts and |
the press) |
(Yen amounts are rounded down to millions, unless otherwise noted.)
1. Consolidated financial results for the three months ended June 30, 2024 (from April 1, 2024 to June 30, 2024)
(1) Consolidated operating results (cumulative) | (Percentages indicate year-on-year changes.) | ||||||||||
Net revenue | Operating profit | Ordinary profit | Profit attributable to | ||||||||
owners of parent | |||||||||||
Three months ended | Millions of yen | % | Millions of yen | % | Millions of yen | % | Millions of yen | % | |||
June 30, 2024 | 2,080 | 21.3 | 236 | △11.4 | 154 | △11.5 | 186 | △68.8 | |||
June 30, 2023 | 1,715 | 26.7 | 267 | 68.6 | 287 | 59.1 | 597 | 270.1 | |||
Note: Comprehensive income | For the three months ended June 30, 2024: | ¥164 million | [△71.4%] | ||||||||
For the three months ended June 30, 2023: | ¥574 million | [329.8%] | |||||||||
Basic earnings | Diluted earnings | ||||||||||
per share | per share | ||||||||||
Three months ended | Yen | Yen | |||||||||
June 30, 2024 | 1.12 | － | |||||||||
June 30, 2023 | 3.61 | 3.61 | |||||||||
(2) Consolidated financial position | |||||||||||
Total assets | Net assets | Equity-to-asset ratio | |||||||||
As of | Millions of yen | Millions of yen | % | ||||||||
June 30, 2024 | 4,516 | 3,149 | 65.3 | ||||||||
March 31, 2024 | 4,409 | 2,979 | 62.8 | ||||||||
Reference: Equity | |||||||||||
As of June 30, 2024: | ¥2,949 million | ||||||||||
As of March 31, 2024: | ¥2,768 million |
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2. Cash dividends
Annual dividends per share | |||||||||
First quarter-end | Second quarter-end | Third quarter-end | Fiscal year-end | Total | |||||
Yen | Yen | Yen | Yen | Yen | |||||
Fiscal year ended | - | 0.00 | - | 0.00 | 0.00 | ||||
March 31, 2024 | |||||||||
Fiscal year ending | - | ||||||||
March 31, 2025 | |||||||||
Fiscal year ending | 0.00 | - | 0.00 | 0.00 | |||||
March 31, 2025 | |||||||||
(Forecast) | |||||||||
Note: Revisions to the forecast of cash dividends most recently announced: None
Overview and management policy for the fiscal year ending March 31, 2025
To achieve the mission of carrying bit in safety and security, the Company provides mobile telecommunications service and mobile solution service, and operates the business that provides telecommunications and authentication infrastructure whose identification and authenticity are secured by FPoS, the Company's patented technology (hereinafter referred to as the "FPoS business"). FPoS is a technology which was recognized by the Financial Services Agency as conducive to ensuring security and improving convenience of financial transactions. In the mobile telecommunications service, the Company agreed with NTT DOCOMO, INC. (hereinafter referred to "DOCOMO") about the interconnection with DOCOMO's voice and SMS network in February 2024 and the Company plans to provide new service based on the interconnection in May 2026. Herewith, the Company will be able to develop new business as Neo-Carrier and the Company assumes to provide 10 million mobile telecommunications lines in 2034. In the FPoS business, its technical secureness and institutional reliability owing to accreditation under the Electronic Signatures Act have been so evaluated that it is expected to grow in geometric progression and the Company assumes to provide 100 million electronic certificates in 2034. The Company assumes that these service and business will bring us domestic net revenue of 240 billion yen and profit after tax of 36 billion yen in 2034.
First, the Company will proceed to prepare for the interconnection with DOCOMO's voice and SMS network for the launch of new service in May 2026 and will make efforts to expand customer base through actions to increase awareness at the same time, and the Company will continue to make efforts to establish evaluation of FPoS and to expand cases using FPoS.
2
* Notes
- Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in the change in scope of consolidation): None
- Adoption of accounting treatment specific to the preparation of quarterly consolidated financial statements: None
- Changes in accounting policies, changes in accounting estimates, and restatement
- Changes in accounting policies due to revisions to accounting standards and other regulations: None
- Changes in accounting policies due to other reasons: None
- Changes in accounting estimates: None
- Restatement: None
- Number of issued shares (common shares)
- Total number of issued shares at the end of the period (including treasury shares)
As of June 30, 2024
As of March 31, 2024
165,009,239 shares
165,009,239 shares
(ii) Number of treasury shares at the end of the period
As of June 30, 2024
As of March 31, 2024
15,004 shares
15,004 shares
- Average number of shares outstanding during the period (cumulative from the beginning of the fiscal year)
Three months ended June 30, 2024
Three months ended June 30, 2023
164,994,235 shares
164,994,235 shares
- Quarterly financial results reports are exempt from quarterly review conducted by certified public accountants or an audit corporation.
- Proper use of earnings forecasts, and other special matters
A financial results meeting will be held on Friday, August 9, 2024 for institutional investors, analysts and the press. The Company plans to post a video of this financial results meeting on its website promptly after the meeting is held.
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1. Explanation on operating results, etc.
- Explanation on operating results for the three months ended June 30, 2024
-
Mobile Telecommunications Service (MVNO/MVNE business)
Upon a ruling by the Minister of Internal Affairs and Communications in June 2020, since the Company launched the "Nihon Tsushin SIM" which provides flat-rate voice plans equivalent to that of major mobile phone operators in July 2020, the Company has continued to achieve growth both in the number of subscribed lines and quarterly revenue.
The "Nihon Tsushin SIM" lineup includes the "Reasonable Simple 290 Plan (1 GB; 290 yen per month + voice option of"all-you-can-calls" for calls no longer than 5 minutes (or 70 minutes of free voice calls); 390 yen per month)" for low data usage, the "Reasonable Minna-no Plan (10 GB + "all-you-can-calls" for calls no longer than 5 minutes (or 70 minutes of free voice calls); 1,390 yen per month)" for average data usage, and the "Reasonable 30-GB Plan (30 GB + "all-you-can-calls" for calls no longer than 5 minutes (or 70 minutes of free voice calls); 2,178 yen per month)" for slightly high data usage, and that enables customers to choose the most reasonable mobile communication billing plan for themselves.
In addition, the voice service of the "Nihon Tsushin SIM" is not provided in prefix method, which has been adopted by many of MVNOs, and the Company provides services of comparable call quality as major mobile phone operators, though the price of the service is the lowest in Japanese mobile telecommunications industry.
As the above products being evaluated, revenue from "Nihon Tsushin SIM" has been growing steadily for both individual and corporate subscribers. In addition, the number of customers for voice services under partner brands has also been increasing steadily, and as a result, the mobile telecommunication service has continued to see growth both in the MVNO business and the MVNE business.
Based on the above, the Company has strengthened the operation (SIM shipment and call center, etc.) of the "Nihon Tsushin SIM" to operate seven days a week, and has advertised ("We can't subtract any further. 290 yen" edition) on the Internet and television since the end of June 2024 as measure to increase awareness.
In addition, as the Company applied to DOCOMO for the interconnection with its voice and SMS network in June 2022 and agreed with DOCOMO about the interconnection in February 2024, the Company proceeds to prepare for a new service based on the interconnection with DOCOMO's voice and SMS network to be launched in May 2026 (scheduled). - Mobile Solution (MSP business)
In the telecommunications business through local mobile networks (local 4G/5G business) among the mobile solution (MSP business), the Company aims to build actual results in the U.S., where there are many advanced showcases, and leverage this experience to expand in Japan. The U.S. subsidiary of the Company operates a business that provides SIMs used for connections with local mobile networks in the U.S. market.
As announced in December 2023, the Company's U.S. subsidiary, JCI US Inc. (hereinafter referred to as "JCIUS"), entered into a contract with the State of Utah in the U.S. to implement a statewide Citizens Broadband Radio Service (CBRS) (local 4G/5G) for an educational and telehealth network. It means that JCIUS entered into a contract with the State of Utah through the University of Utah and the Utah Education and Telehealth Network (hereinafter referred to as "UETN") to provide the Company's Secure LTE Network Gateway Platform (NGP) services in its first major commercial implementation. The local 4G/5G networks envisioned in this contract will replace and expand the service requirements of Wi-Fi and provide secure (private/closed) networks for the current and future users of high-speed broadband services implemented by the University of Utah and UETN. JCIUS will provide all necessary SIMs and/or other Hardware Security Modules (HSM) to enhance connectivity to networks for the people of the State of Utah.
Through the U.S. subsidiary, the Company is accumulating technologies and expertise on the telecommunications business through local mobile networks (local 4G/5G business), and by taking advantage of these technologies and expertise, the Company provides SIMs that can connect to local mobile networks set up by partner and customer companies. The Company will continue to accumulate knowledge in Japan and the U.S., and will take advantage these knowledge to develop case examples in the local 4G/5G business.
-
Mobile Telecommunications Service (MVNO/MVNE business)
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In addition, the Company takes advantage of the technology and infrastructure of SIM authentication which the Company has developed in the U.S. to provide the new service based on the interconnection with DOCOMO's voice and SMS network.
-
FPoS business
As digital transformation (DX) underway in many areas of society and the economy, the importance of digital IDs is recognized again, and the Company is pushing forward with a business that will establish and provide digital IDs that can be used on smartphones using FPoS, which is the Company's patented technology and the technology being recognized by the Financial Services Agency as conducive to ensuring security and improving convenience of financial transactions. FPoS guarantees the identity (confirmation of the person's identity) and authenticity (confirmation that the person's intent is not falsified) of a customer by examining the combination of a public key contained in an electronic certificate issued to the customer's smartphone (iPhone and Android) by an electronic certification authority accredited under the Electronic Signatures Act and a private key generated in the customer's smartphone.
This is a mechanism similar to the solid identification by an Individual Number Card, as FPoS uses a smartphone instead of an Individual Number Card. FPoS has a high-level security equal to an Individual Number Card. While an Individual Number Card has restriction on its purpose of use and its range of use as a digital ID is limited to Myna-portal, etc., FPoS has no restriction on its purpose of use and it can be used as a digital ID in a wide range of areas by local governments and business operators.
When a customer uses a service through application(s) on a smartphone, there is a problem that the customer could be impersonated and the customer's data (including personal information) could be falsified, however, if that service is secured by FPoS, the customer could not be impersonated and the data could not be falsified, because FPoS has a security equal to an Individual Number Card. And there is also a problem that the customer cannot manage the business operators who have link to the customer's data (including personal information), however, if that service is secured by FPoS, the customer can confirm and manage the business operators who have link to the customer's data (including personal information) easily, because FPoS has a function of "Dynamic Opt-in" which displays the list of the business operators who have link to the customer's personal information and enables the customer to authorize or revoke the link to their personal information.
In order to demonstrate the above potential of FPoS, the Company cooperates with Mebuku Ground Inc., a private-public partnership company made up of Maebashi City, private-sector business enterprises and universities. Since October 2022, Mebuku Ground Inc. operates "Mebuku App" which issues "Mebuku ID," a digital ID using FPoS technology.
The "Mebuku ID" is not only far more secure than other IDs, but is also highly regarded by many local governments, companies, and organizations for its ability to link data across business operators, and for its Dynamic Opt-in function that provides information of which business operators or services are eligible to link the data.
In December 2023, "Mebuku Pay," Maebashi City's electronic local currency, was launched through "Mebuku ID" and "Mebuku App" (announced by Maebashi City and Mebuku Ground Inc. in September 2023). "Mebuku Pay" was designed and developed with the highest priority placed on giving back payment data to the local community by ensuring that it remains in the community and is utilized locally. The Company believes that "Mebuku ID" and "Mebuku Pay" can be an effective means to solve social issues, as they enable communities to reap the benefits of social and economic digitalization.
In addition, benefit money for nurturing and non-taxable family unit in Maebashi City can be paid in "Mebuku Pay." This is achieved because of the high-level security of "Mebuku ID" and ability to link personal information safely and surely owing to a consent of the person by a function of "Dynamic Opt-in."
Furthermore, the Company released "FPoS library" which is a component of the core functions of FPoS in May 2024. The business operators who provide services through the applications for smartphones can incorporate the FPoS library into their applications and enable their applications to have functions of identity verification, person authentication and data linking at the same level as "Mebuku ID".
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The Company will support the activity by Mebuku Ground Inc. and local horizontal activity by it continuously.
As a result of the above, the Group's consolidated net revenue for the three months ended June 30, 2024 was 2,080 million yen, an increase of 365 million yen (up 21.3%) compared to the three months ended June 30, 2023 (hereinafter referred to as the "same period of the previous year"). This was because of the growth of the flat-rate or semi-flat-rate voice services centered on "Nihon Tsushin SIM" in the MVNO business and the growth of the voice services of partner brands in the MVNE business.
Cost of revenue was 1,175 million yen, an increase of 224 million yen (up 23.6%) compared to the same period of the previous year. This was mainly due to an increase in mobile network procurement costs associated with the growth of "Nihon Tsushin SIM." The increase in cost of revenue can be contained because the mobile networks of both data and voice communications procured by the Company from DOCOMO have been set not to exceed the amount of the appropriate costs under efficient management plus appropriate profit.
As a result, gross profit was 905 million yen (764 million yen in the same period of the previous year), selling, general and administrative expenses was 668 million yen (497 million yen in the same period of the previous year), operating profit was 236 million yen (267 million yen in the same period of the previous year), and ordinary profit was 254 million yen (287 million yen in the same period of the previous year).
In addition, the Company posted 33 million yen which is the amount equivalent to depreciation balance of DOCOMO's existing interconnection equipment as extraordinary losses (burden charge of removing cost for telecommunication equipment) pursuant to DOCOMO's Terms and Conditions for the Interconnection, because DOCOMO needs to exchange the equipment for the interconnection of data communication with the Company as the Company strengthens the data communication networks procured from DOCOMO due to the growth of the mobile telecommunication service.
As a result of the above, profit attributable to owners of parent was 186 million yen (597 million yen in the same period of the previous year).
- Explanation on financial position for the three months ended June 30, 2024
- Assets, liabilities, and net assets
Assets
Current assets at the end of the current first quarter were 3,503 million yen, a decrease of 49 million yen compared to the end of the previous year. Non-current assets were 1,012 million yen, an increase of 156 million yen compared to the end of the previous year. This was mainly due to increases of 117 million yen in property, plant and equipment and 42 million yen in intangible assets.
As a result, total assets amounted to 4,516 million yen, an increase of 106 million yen compared to the end of the previous year.
Liabilities
Current liabilities at the end of the current first quarter were 1,247 million yen, a decrease of 54 million yen compared to the end of the previous year. This was mainly due to decreases of 132 million yen in income taxes payable and 15 million yen in deposits received while there was an increase of 120 million yen in accounts payable. Non-current liabilities were 119 million yen, a decrease of 7 million yen compared to the end of the previous year.
As a result, liabilities amounted to 1,367 million yen, a decrease of 62 million yen compared to the end of the previous year.
Net assets
Net assets at the end of the current first quarter were 3,149 million yen, an increase of 169 million yen compared to the end of the previous year. This was mainly due to recording 186 million yen in profit attributable to owners of parent.
As a result, the equity ratio was 65.3% (62.8% at the end of the previous year).
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(ii) Status of cash flows
Cash and cash equivalents at the end of the three months ended June 30, 2024 were 2,496 million yen, a decrease of 21 million yen compared to the end of the previous year.
The status of cash flows and their factors during the three months ended June 30, 2024 are as follows.
Cash flows from operating activities.
Net cash provided by operating activities totaled 152 million yen (an inflow of 45 million yen in the same period of the previous year). This was mainly due to payment of income taxes of 164 million yen, despite recording profit before income taxes of 222 million yen and a decrease in trade receivables of 107 million yen.
Cash flows from investing activities.
Net cash used in investing activities totaled 173 million yen (an outflow of 13 million yen in the same period of the previous year). This was mainly due to payment for purchase of property, plant and equipment of 144 million yen.
Cash flows from financing activities.
Net cash used in financing activities totaled 3 million yen (an outflow of 9 million yen in the same period of the previous year).
-
Explanation on future forecast information such as consolidated business forecast
To achieve the mission of carrying bit in safety and security, the Company provides mobile telecommunications service and mobile solution service, and operates the business that provides telecommunications and authentication infrastructure whose identification and authenticity are secured by FPoS, the Company's patented technology (hereinafter referred to as the "FPoS business"). FPoS is a technology which was recognized by the Financial Services Agency as conducive to ensuring security and improving convenience of financial transactions. In the mobile telecommunications service, the Company agreed with NTT DOCOMO, INC. (hereinafter referred to "DOCOMO") about the interconnection with DOCOMO's voice and SMS network in February 2024 and the Company plans to provide new service based on the interconnection in May 2026. Herewith, the Company will be able to develop new business as Neo-Carrier and the Company assumes to provide 10 million mobile telecommunications lines in 2034. In the FPoS business, its technical secureness and institutional reliability owing to accreditation under the Electronic Signatures Act have been so evaluated that it is expected to grow in geometric progression and the Company assumes to provide 100 million electronic certificates in 2034. The Company assumes that these service and business will bring us domestic net revenue of 240 billion yen and profit after tax of 36 billion yen in 2034.
First, the Company will proceed to prepare for the interconnection with DOCOMO's voice and SMS network for the launch of new service in May 2026 and will make efforts to expand customer base through actions to increase awareness at the same time, and the Company will continue to make efforts to establish evaluation of FPoS and to expand cases using FPoS.
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Quarterly consolidated financial statements
Quarterly consolidated balance sheets
(Thousands of yen) | ||
As of March 31, 2024 | As of June 30, 2024 | |
Assets | ||
Current assets | ||
Cash and deposits | 2,518,019 | 2,496,687 |
Accounts receivable - trade | 724,584 | 618,280 |
Merchandise | 69,063 | 67,902 |
Supplies | 68 | 45 |
Accounts receivable - other | 111,888 | 122,856 |
Other | 132,634 | 202,130 |
Allowance for doubtful accounts | △3,275 | △4,323 |
Total current assets | 3,552,984 | 3,503,579 |
Non-current assets | ||
Property, plant and equipment | ||
Buildings | 87,186 | 119,691 |
Accumulated depreciation | △75,030 | △75,598 |
Buildings, net | 12,156 | 44,093 |
Vehicles | 11,021 | 27,110 |
Accumulated depreciation | △7,181 | △4,862 |
Vehicles, net | 3,840 | 22,247 |
Tools, furniture and fixtures | 828,696 | 860,020 |
Accumulated depreciation | △672,218 | △693,343 |
Tools, furniture and fixtures, net | 156,478 | 166,676 |
Leased assets | 342,537 | 342,537 |
Accumulated depreciation | △288,421 | △293,094 |
Leased assets, net | 54,115 | 49,442 |
Land | － | 59,918 |
Construction in progress | 4,460 | 5,731 |
Total property, plant and equipment | 231,051 | 348,109 |
Intangible assets | ||
Trademark right | 3,308 | 3,198 |
Software | 290,865 | 289,040 |
Software in progress | 40,599 | 84,544 |
Total intangible assets | 334,773 | 376,783 |
Investments and other assets | ||
Investment securities | 149,841 | 155,753 |
Leasehold and guarantee deposits | 106,910 | 101,768 |
Other | 34,193 | 30,579 |
Total investments and other assets | 290,946 | 288,101 |
Total non-current assets | 856,771 | 1,012,993 |
Total assets | 4,409,755 | 4,516,573 |
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(Thousands of yen) | ||
As of March 31, 2024 | As of June 30, 2024 | |
Liabilities | ||
Current liabilities | ||
Accounts payable - trade | 356,786 | 347,764 |
Accounts payable - other | 122,801 | 243,336 |
Income taxes payable | 190,655 | 57,890 |
Unearned revenue | 113,829 | 110,657 |
Deposits received | 341,072 | 325,624 |
Other | 177,347 | 162,589 |
Total current liabilities | 1,302,492 | 1,247,863 |
Non-current liabilities | ||
Long-term accounts payable - other | 12,225 | 12,025 |
Long-term unearned revenue | 61,309 | 57,176 |
Lease liabilities | 53,829 | 50,473 |
Total non-current liabilities | 127,364 | 119,675 |
Total liabilities | 1,429,857 | 1,367,538 |
Net assets | ||
Shareholders' equity | ||
Share capital | 545,666 | 545,666 |
Capital surplus | 233,952 | 238,874 |
Retained earnings | 1,895,653 | 2,081,869 |
Treasury shares | △2,192 | △2,192 |
Total shareholders' equity | 2,673,080 | 2,864,218 |
Accumulated other comprehensive income | ||
Foreign currency translation adjustment | 95,854 | 85,189 |
Total accumulated other comprehensive | 95,854 | 85,189 |
income | ||
Share acquisition rights | 116,272 | 116,258 |
Non-controlling interests | 94,690 | 83,368 |
Total net assets | 2,979,898 | 3,149,035 |
Total liabilities and net assets | 4,409,755 | 4,516,573 |
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Quarterly consolidated statements of income and quarterly consolidated statements of comprehensive income Quarterly consolidated statements of income
(Thousands of yen) | |||
Three months ended | Three months ended | ||
June 30, 2023 | June 30, 2024 | ||
Net sales | 1,715,277 | 2,080,694 | |
Cost of sales | 950,762 | 1,175,579 | |
Gross profit | 764,515 | 905,114 | |
Selling, general and administrative expenses | 497,427 | 668,553 | |
Operating profit | 267,088 | 236,560 | |
Non-operating income | |||
Share of profit of entities accounted for | 6,673 | 5,911 | |
using equity method | |||
Foreign exchange gains | 13,919 | 12,500 | |
Miscellaneous income | 658 | 449 | |
Total non-operating income | 21,252 | 18,861 | |
Non-operating expenses | |||
Interest expenses | 212 | 522 | |
Miscellaneous losses | 191 | 0 | |
Total non-operating expenses | 404 | 522 | |
Ordinary profit | 287,935 | 254,899 | |
Extraordinary income | |||
Compensation for damage income | 75,869 | － | |
Reversal of provision for valuation reserve | 287,979 | － | |
for inventory purchase commitments | |||
Gain on sale of non-current assets | － | 150 | |
Gain on reversal of share acquisition rights | － | 14 | |
Total extraordinary income | 363,848 | 164 | |
Extraordinary losses | |||
Loss on retirement of communication | － | 33,000 | |
equipment | |||
Total extraordinary losses | － | 33,000 | |
Profit before income taxes | 651,784 | 222,064 | |
Income taxes - current | 65,952 | 47,170 | |
Total income taxes | 65,952 | 47,170 | |
Profit | 585,831 | 174,893 | |
Loss attributable to non-controlling interests | △11,298 | △11,322 | |
Profit attributable to owners of parent | 597,130 | 186,216 | |
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