Broadleaf : 2Q FY12/2023 Financial Results

The following information was originally prepared and published by the Company in Japanese as it contains timely disclosure materials to be submitted to the Tokyo Stock Exchange. This English translation is for your convenience only. If there is any discrepancy between this English translation and the original Japanese version, please refer to the Japanese version.

Summary of Financial Results for the Second Quarter of the Fiscal Year Ending December 31, 2023 [IFRS] (Consolidated)

Broadleaf Co., Ltd Stock listing: Representative:

Scheduled date of commencement of dividend payout Earnings Supplementary Explanatory Documents Earnings Results Briefing:

Tokyo Stock Exchange Prime Market

Representative Director, President and CEO Kenji Oyama

‐

Yes

Yes (For institutional investors and analysts)

(Amounts of less than JPY one million are rounded)

1. Consolidated Financial Results for the 2Q FY2023 (January 1, 2023 to June 30, 2023)

(1) Consolidated Operating Results (Cumulative)

(Percentage below represents increase (decrease) from the same period of previous year)

													Profit attributable	Total
	Revenue	Operating profit	Profit before tax		Profit	to owners of the	comprehensive
													parent		income
	Millions	%	Millions		%	Millions		%		Millions	%	Millions		%	Millions		%
	of yen		of yen			of yen				of yen		of yen			of yen
2Q FY2023	7,390	13.3	-1,111		-	-1,102		-		-844	-	-826		-	-635		-
2Q FY2022	6,520	-34.4	-1,398		-	-1,458		-		-1,109	-	-1,109		-	-1,083		-
	Basic earnings per share	Diluted earnings per share
			Yen					Yen
2Q FY2023			-9.33						-9.33
2Q FY2022			-12.57						-12.57
(2) Consolidated Financial Position
	Total assets			Total equity			Owners of the parent		Owners of the parent
				Equity attributable			Percentage of equity
		Millions of yen			Millions of yen			Millions of yen					%
2Q FY2023			35,728						23,090				23,077						64.6
FY2022			33,535						23,662				23,632						70.5
2. Dividends
							Dividend per share
	End of 1Q	Interim		End of 3Q		Year-end	Total
		Yen				Yen			Yen			Yen				Yen
FY 2022		-				0.00			-			1.00				1.00
FY 2023		-				0.00
FY2023 (forecast)									-			1.00				1.00

(NOTE) Revisions to the latest announced dividend forecasts: None

3. Consolidated Earnings Forecast FY2023 (January 1, 2023-December 31, 2023)

(Percentage below represents increase (decrease) from the same period of previous year)

	Revenue		Operating profit		Profit before tax		Profit attributable to	Basic earnings per
				owners of the parent	share
	Millions of		%	Millions of		%	Millions of		%	Millions of	%	Yen
	yen			yen			yen			yen
FY2023	15,300		10.6	-2,200		-	-2,300		-	-1,900	-	-21.42

(NOTE) Revisions to the most recently announced earnings forecasts: Yes

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The following information was originally prepared and published by the Company in Japanese as it contains timely disclosure materials to be submitted to the Tokyo Stock Exchange. This English translation is for your convenience only. If there is any discrepancy between this English translation and the original Japanese version, please refer to the Japanese version.

• Notes

1. Changes in significant subsidiaries during the current period (changes in specified subsidiaries with changes in the scope of consolidation): None
2. Changes in accounting policies and changes in accounting estimates

• 1. Changes in accounting policies required by IFRS: None
  ② ① Changes in accounting policies other than the above: None
  ③ Changes in accounting estimates: None

(3)Number of shares outstanding (common stock)

• 1. Number of shares outstanding (including treasury shares)

• 2. Number of shares of treasury shares

• 3. Average number of shares outstanding (during the period)

2Q FY2023	97,896,800	Shares	FY 2022	97,896,800	Shares
2Q FY2023	9,095,224	Shares	FY 2022	9,507,349	Shares
2Q FY2023	88,600,610	Shares	2Q FY2022	88,212,462	Shares

• * Summary of financial statements is outside the scope of audit procedures by certified public accountants and audit firm.
• * Comments regarding appropriate usage of earnings forecasts, and other special notes

(Notes on forward-looking statements)

The forward-looking statements such as earnings forecasts contained in this document are based on the information currently available to the Company and certain assumptions which are regarded as legitimate. The Company makes no warranty as to the achievability of what is described in the statements. Actual results may differ from these forecasts due to various factors.

(Availability of earnings supplementary explanatory documents and information on earnings results briefings)

The Company plans to hold an online live presentation for institutional investors and analysts on Thursday, August 10, 2023. The materials used at the meeting will be posted on its website.

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	The following information was originally prepared and published by the Company in Japanese as it contains timely disclosure
	materials to be submitted to the Tokyo Stock Exchange. This English translation is for your convenience only. If there is any
	discrepancy between this English translation and the original Japanese version, please refer to the Japanese version.
○Table of Contents of the Attached Material
1. Qualitative Information on Quarterly Financial Results for the First Six Months Ended June 30, 2023………………..	4
(1)	Explanation of Operating Results…	4
(2)	Explanation of Financial Position	5
(3)	Explanation of Consolidated Earnings Forecasts and Other Forward-Looking Information………………………..	6
2. Condensed Quarterly Consolidated Financial Statements and Major Notes…………………………………………….	7
(1) Condensed Quarterly Consolidated Statements of Financial Position……………………………………………….	7
(2)	Condensed Quarterly Consolidated Statements of Income	8
(3) Condensed Quarterly Consolidated Statements of Comprehensive Income………………………………………...	9
(4)	Condensed Quarterly Consolidated Statements of Changes in Equity	10
(5) Condensed Quarterly Consolidated Statements of Cash Flows……………………………………………………...	12
(6)	Notes to the Condensed Quarterly Consolidated Financial Statements	14
	(Notes on the going concern)	14
	(Segment information)	14

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The following information was originally prepared and published by the Company in Japanese as it contains timely disclosure materials to be submitted to the Tokyo Stock Exchange. This English translation is for your convenience only. If there is any discrepancy between this English translation and the original Japanese version, please refer to the Japanese version.

1. Qualitative Information on Quarterly Financial Results for the First Six Months Ended June 30, 2023

(1) Explanation of Operating Results

During the first six months of the current fiscal year (January 1, 2023 to June 30, 2023) under review, Japanese economy was gradually picking up with normal economic development due to the lessening of the impact of COVID-19. On the other hand, The Russian military's invasion of Ukraine has become protracted, and price of things and items have continued to rise. Therefore, the economic outlook remains uncertain.

Under such social and economic conditions, companies have been increasingly moving toward digital transformation (hereinafter "DX"), such as automating and streamlining business processes and responding to new digital infrastructures. In the domestic Mobility industry, where many of our customers belong, Broadleaf Co., Ltd group (hereinafter "the Group") has seen a positive stance toward investing in IT that not only improves operational productivity, but also enhances the added value of products and services provided to consumers and leads to the creation of new businesses.

Based on the Group's corporate philosophy of "Gratitude and Happiness", the Group implements our Medium-Term Management Plan (2022-2028) (hereinafter "the Plan"). The Group's performance targets for the fiscal year ending December 31, 2028, the final year of the plans, which are consolidated revenue of 32.5 billion yen, operating income of 13 billion yen (operating margin of 40%), and profit attributable to owners of the parent of 8 billion yen. The Group promotes two growth strategies, "Cloud Penetration" and "Service Expansion."

In the previous fiscal year (fiscal year ending December 31, 2022), the first year of the Plan, the Group has started offering cloud services and shifted to a monthly subscription-type business model as a foundation for revenue growth. In the current fiscal year (fiscal year ending December 31, 2023), the second year of the Plan, the Group was able to actively propose cloud- based software that will lead to customer DX, resulting in a significant rise in the number of monthly subscriptions and steady progress in recurring sales accumulation. As a result of the steady progress of these measures, the Group believes that revenue has shifted to a Growth Trend.

In parallel with these efforts to achieve the performance targets in the Plan, the Group will incorporate OPEN AI's "ChatGPT" and Broadleaf's proprietary Large-sized Language Model*1, which utilizes the knowledge the Group has cultivated in the Mobility industry to date, as well as the generation Artificial Intelligence (hereinafter "AI") function developed by combining Knowledge Databases*2, into ".c Series" of cloud information and other software. By utilizing this function, customers can help to improve productivity by streamlining operations in the Mobility industry, and resolve issues such as chronic labor shortages. At the same time, by developing our products and services and having customers use them, the Group will promote the DX transformation of the entire Mobility industry.

In addition, the Group has a Knowledge Database possessed, including information on vehicle models, parts information, and maintenance history of automobiles. Based on this Knowledge Database, the Group has developed an analytical AI function to detect business irregularities and fraud, and plan to develop it as a new Infrastructure Services. As a result, the Group will contribute to restoring the credibility of the Mobility industry as a whole by providing safe and secure maintenance and repair procedure services from a neutral standpoint such as a third-party organization. By implementing these measures, the Group aims to create a society where car owners can enjoy a safe, secure and fulfilling car life.

Amid the steady progress of various proposals and measures for these customers, in the second quarter of the current fiscal year under review, the Group strengthened sales of monthly subscription-type software, centered on the mainstay cloud-based software product ".c Series". As a consequence, recurring sales has increased as the total number of customers has increased. Orders for packaged software, mainly for Non-mobility industry, also progressed steadily. In terms of costs, the Group continued to make upfront investments to prepare for future service expansion, such as strengthening the infrastructure for providing cloud- based software.

As a result of the above, in the consolidated first six months of the current fiscal year, revenue was 7,390 million yen (up 13.3% year on year), operating loss was 1,111 million yen (operating loss of 1,398 million yen in the same period of the previous fiscal year), loss before income taxes was 1,102 million yen (loss before income taxes of 1,458 million yen in the same period of the previous fiscal year), and loss attributable to owners of the parent was 826 million yen (loss attributable to owners of the parent of 1,109 million yen in the same period of the previous fiscal year).

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The following information was originally prepared and published by the Company in Japanese as it contains timely disclosure materials to be submitted to the Tokyo Stock Exchange. This English translation is for your convenience only. If there is any discrepancy between this English translation and the original Japanese version, please refer to the Japanese version.

The Group only has a single segment of IT Services, but the breakdown of revenues by service category is as follows. (Millions of yen)

	First six months of FY2022	First six months of FY2023
Classification	(January 1, 2022	(January 1, 2023	YoY ratio
	To June 30, 2022)	To June 30, 2023)
Cloud services	1,046	2,141	104.7%
Packaged system	5,474	5,248	-4.1%
Total	6,520	7,390	13.3 %

Cloud Services

Revenue from cloud services consists of usage fees for ".c Series" and other monthly subscription-based software, as well as usage fees or commissions related to platforms for ordering automotive aftermarket parts.

Monthly subscription-based software is primarily sold to Mobility industry, and customers using legacy packaged software gradually switch to ".c Series" as usage rights expire (mostly for 6 years). ".c Series" has also increased the number of new customers because it is highly convenient, and the menu system is flexible.

Furthermore, secondary products such as the "Dencho.DX" which is covered Electronics Book Storage Act, and other DX solutions offered increased. With the number of new customers for these monthly subscription-based software, revenue from cloud services increased 104.7% year on year.

Packaged system

Revenue of packaged system consist of sales proceeds from sales of industry-specific packaged software (lease sales or bulk sales) for Non-mobility industry such as manufacturing, mobile phone shops, travel services, bus operators, and machine tool trading companies, and commissions for various services for packaged software, and the sales price of equipment such as PCs and supplies.

In packaged system revenue, in addition to support services related to the use of packaged software, sales of packaged software and equipment for Non-mobility industry were favorable. On the other hand, the Group has terminated the leasing of packaged software for Mobility industry by our distributors. As a result, packaged system revenue decreased 4.1% year on year.

*1 Large-sized Language Model: A type of AI model used in the field of natural language processing. It is designed to perform tasks such as understanding, generating, and translating natural languages by learning large amounts of text data.

*2 Knowledge Database: A database for collecting, organizing, and managing knowledge and information on specific areas and themes.

1. Explanation of Financial Position
2. 1. Analysis of financial condition (Assets)
      Assets at the end of the second quarter of the current fiscal year increased by 2,192 million yen from the end of the previous fiscal year to 35,728 million yen. Current assets increased 135 million yen to 6,690 million yen, while non-current assets increased 2,058 million yen to 29,038 million yen. The increase in current assets was mainly due to increases of 107 million in other current assets and 104 million in trade and other receivables, despite a decrease of 71 million in cash and cash equivalents. The increase in non-current assets was mainly due to increases of 1,034 million yen in intangible assets, 592 million yen in property, plant and equipment, 337 million yen in other financial assets, and 167 million yen in deferred tax assets.

(Liabilities)

Liabilities at the end of the second quarter of the current fiscal year increased by 2,765 million yen from the end of the previous fiscal year to 12,638 million yen. Current liabilities increased 2,683 million yen to 9,265 million yen, while non-current liabilities increased 82 million yen to 3,373 million yen. The increase in current liabilities was mainly attributable to increases of 1,747 million yen in short-terminterest-bearing debt and 911 million yen in contract liabilities. The increase in non-current liabilities was mainly attributable to an increase of 79 million yen in long-terminterest-bearing debt.

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