Broadleaf : FY12/2022 Financial Results

Summary of Financial Statements for FY2022 [IFRS] (Consolidated)

February 10, 2023

Broadleaf Co., Ltd Stock listing: Representative:

Scheduled date of Annual General Meeting of Shareholders 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

March 24, 2023

March 27, 2023

Yes

Yes (For institutional investors and analysts)

(Figures are rounded to the nearest million yen)

1. Consolidated Results for FY2022 (January 1, 2022 to December 31, 2022)

(1)Consolidated Operating Results							(Percentage below represents increase (decrease) from the same period of
														previous year)
	Revenue			Operating profit	Profit before tax	Profit	Profit attributable to	Total comprehensive
			owners of the parent	income
	Millions of		%	Millions of	%	Millions of		%	Millions of	%	Millions of			%	Millions of	%
	yen			yen	yen		yen	yen			yen
FY 2022	13,833		-33.0		-2,897	-	-3,005		-	-2,432	-	-2,431			-	-2,320	-
FY2021	20,652		-2.4		3,395	-17.9	3,233		-15.4	2,174	-11.8	2,173		-11.9	2,201	-3.2
	Basic earnings per share	Diluted earnings per share			Return on equity		Return on assets			Operating margin
			Yen			Yen				%			%				%
FY 2022			-27.54			-27.54				-9.8			-8.8				-20.9
FY2021			24.72			24.32				8.6			9.7				16.4
(Reference) Share of profit or loss of entities accounted for using equity method		FY2022: -1 million yen
												FY2021: -6 million yen
(2)Consolidated Financial Position
									Equity attributable to		Percentage of equity		Equity attributable to
	Total assets			Total equity			attributable to owners of	owners of the parent per
				owners of the parent
											the parent			share
	Millions of yen		Millions of yen			Millions of yen			%				Yen
FY 2022			33,535			23,662				23,632			70.5				267.36
FY2021			34,476			26,114				26,114			75.7				296.77

(3)Consolidated Cash Flows Status

		Cash flow from operating		Cash flow from investing		Cash flow from financing		Cash and cash equivalents
			activities			activities			activities		at end of period
			Millions of yen		Millions of yen			Millions of yen			Millions of yen
FY 2022				1,606				-2,910			1,237			3,457
FY2021				3,783				-3,388			-108			3,522
2.Dividends Status
						Dividend per share								Ratio of
													dividends to
														Dividend payout	equity
			End of 1Q	Interim	End of 3Q		Year-end	Total		Total dividend	ratio	attributable to
							(Consolidated)	owners of the
															parent
															(consolidated)
			Yen	Yen	Yen		Yen	Yen		Millions of yen	%	%
FY2021		-	4.00	-		4.70	8.70		795	35.2	3.0
FY2022		-	0.00	-		1.00	1.00		92	-	0.4
FY2023 (forecast)		-	-	-		-	-				-

(NOTE)Dividend forecasts for FY2023 are currently undetermined.

3. Consolidated Earnings Forecasts for FY2023 (January 1, 2023 to 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 share
										owners of the parent
	Millions of		%	Millions of		%	Millions of		%	Millions of	%	Yen
	yen		yen		yen		yen
1H FY2023	6,700		2.8	-2,150		-	-2,200		-	-1,900		-	-21.45
FY2023	15,000		8.4	-2,700		-	-2,800		-	-2,400		-	-27.07

※ 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. Other changes in accounting policies: None
3. Changes in accounting estimates: None

(3)Number of shares outstanding (common stock)
1. Number of shares outstanding (including treasury
FY2022	97,896,800 shares	FY2021	97,896,800 shares
shares)
2. Number of shares of treasury shares	FY2022	9,507,349 shares	FY2021	9,901,018 shares
3. Average number of shares during the period	FY2022	88,301,684 shares	FY2021	87,904,113 shares

(Reference) Summary of Non-consolidated Financial Results

1. Non-consolidated financial results for FY2022 (January 1, 2022 to December 31, 2022)

(1) Non-Consolidated Operating Results					(Percentage below represents increase (decrease) from the same period of
								previous year)
		Net sales		Operating income	Ordinary income		Net income
	Millions of yen		%	Millions of yen		%	Millions of yen		%	Millions of yen		%
FY2022		12,313		-33.9		-2,224		-	-2,173		-	-2,816		-
FY2021		18,639		-3.8		2,672		-27.0	2,435		-29.2	731		-59.2
	Earnings per share	Diluted earnings per share
				Yen				Yen
FY2022				-31.89				-
FY2021				8.32				8.19
(2)Non-consolidated Financial Position
		Total assets		Net assets		Equity Ratio		Net assets per share
		Millions of yen		Millions of yen			%			Yen
FY2022				25,948				16,826			64.8			190.36
FY2021				27,049				19,875			73.5			225.87
Reference: Shareholders' equity	FY2022: 16,826 million yen	FY2021: 19,875 million yen

non-consolidated results from the results of the previous fiscal year>

In the current fiscal year, the Group changed the sales method of its mainstay business software from a multi-year lease contract to a monthly subscription contract. As a result, differences in the amount of recognized sales compared with the previous fiscal year arose due to differences in contract methods.

※The financial results are outside the scope of audits by a certified public accountant or an auditing 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 Group and certain assumptions which are regarded as legitimate. The Group 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 Group plans to hold a briefing for institutional investors and analysts in an online live format on February 10, 2023. The materials used at the meeting will be posted on its website.

○Table of Contents of the Attached Material

1.Overview of Operating Results, etc. .........................................................................................................................................

1. Overview of operating results for the current fiscal year ..........................................................................................
2. Overview of financial position for the current fiscal year .........................................................................................
3. Basic policy on profit distribution and dividends for the current and next fiscal years ......................................................
   2.Basic policy on selection of accounting standards ....................................................................................................................
   3.Consolidated financial statements and major notes ...................................................................................................................

1. Consolidated statements of financial position .....................................................................................................................
2. Consolidated Statements of Income and Consolidated Statements of Comprehensive Income .........................................
   Consolidated statements of income ..................................................................................................................................
   Consolidated statements of comprehensive income .........................................................................................................
3. Consolidated statements of changes in equity .....................................................................................................................
4. Consolidated statements of cash flows ................................................................................................................................
5. Notes regarding consolidated financial statements .............................................................................................................

(Notes on going concern) ..................................................................................................................................................

(Segment information) ......................................................................................................................................................

(Profits per share) ..............................................................................................................................................................

(Significant subsequent events) ........................................................................................................................................

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1. Overview of Operating Results, etc.

1. Overview of operating results for the current fiscal year
2. • Qualitative information on financial Current management results

During the current fiscal year under (January 1, 2022 to December 31, 2022), COVID-19 restrictions were gradually lifted, leading to normalization of social and economic activities. On the other hand, there were growing concerns about inflation in the world and reactionary changes in policy of each country's monetary authorities which may result in significant exchange rate fluctuations. Therefore, it was necessary to closely monitor the downside risks to the economy.

Amid these social conditions, in addition to the accelerating digitization of social infrastructures, corporate DX (digital transformation) needs were growing against the backdrop of strengthening investments to change products/services and business models. In Japanese mobility industry, where many of the Group's clients belong, there was a growing need for DX not only in terms of business process using digital technology and operational efficiency of the work styles, but also in terms of reforming existing businesses and creating new businesses.

Based on its corporate philosophy of "Gratitude and Happiness," the Group continued its activities to contribute to its clients' business continuity and business creation. At the same time, the Group focused on the two priority measures outlined in the Medium-Term Management Plan (2022-2028): "Penetration of the Cloud-based products" and "Expansion of Services." During the current fiscal year, the Group placed ".c Series," a cloud-based software service that has evolved into a total management system, as its main product, and also supported clients to further improve DX by providing "Dencho.DX," which is a cloud service for the revised Electronic Book Storage Act. In addition, the Group equipped ".c Series" with the loan functions provided by Toyota Finance Corporation, formed a capital-and-business alliance with SALES GO Corporation, and implemented joint development in AI field with Fujitsu Ltd.. Through these measures, the Group promoted the expansion of its services with "Broadleaf Cloud Platform" as the starting point.

As a result of these efforts, progress was made as planned in the current fiscal year, which is the first year of the Medium-Term Management Plan (2022-2028), and the base for the transition to a monthly subscription-type business model has been established.

The shift of mainstay products to ".c Series" will stabilize the Group's revenue, and the provision of new services such as "Dencho.DX" will lead to an increase in revenue over the medium to long term. Furthermore, the availability of ".c series" under a flexible pricing structure resulted in favorable new contract acquisition, and the total number of clients increased.

In terms of costs, while upfront expenses for future business growth increased, such as investment in the development of services and strengthening of the services provision infrastructure, the Group worked to improve the efficiency of sales promotion activities.

As a result, the Group's consolidated financial results for the current fiscal year were revenue of 13,833 million yen (down 33.0% year-on- year), operating loss of 2,897 million yen (operating income of 3,395 million yen in the previous fiscal year), loss before income taxes of 3,005 million yen (profit before income taxes of 3,233 million yen in the previous fiscal year), and loss attributable to owners of the parent of 2,431 million yen (profit attributable to owners of the parent of 2,173 million yen in the previous fiscal year).

The Group has a single segment of IT Services Business, but the breakdown of revenue by service category for the current fiscal year was as follows.

			(Millions of yen)
	FY2021	FY2022
Category	(January 1, 2021	(January 1, 2022	YoY ratio
	to December 31, 2021)	to December 31, 2022)
Cloud service	1,791	2,628	46.7%
Packaged system	18,860	11,205	-40.6%
Total	20,652	13,833	-33.0%

Cloud service

The category consists of usage fees for ".c Series" and other monthly subscription-type software, as well as usage fees or commissions related to platforms for ordering auto repair parts.

From the current fiscal year, when the usage right (mostly 6 years) of packaged software ".NS Series" for auto maintenance shops and auto body shops expires , the Group switched to ".c Series" in general. The Group also launched "Dencho.DX," a new cloud service for the revised Electronic Book Storage Act, As a result, revenue from the Cloud service increased by 46.7% year on year.

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Packaged system

The category consist of sales of ".NS Series" and other packaged software (lease contract or sell out), fees for ancillary services required for using packaged software, and sales of PC and other devices and supplies.

Starting from the current fiscal year, the Group switched to the provision of ".c Series" for auto maintenance shops and auto body shops, as described above. Accordingly, revenue from Cloud service increased, but revenue from Packaged system, which is recorded in a lump sum at the time of sales, decreased significantly, resulting in a year-on-year decline of 40.6%.

• Outlook for the Next Fiscal Year

Consolidated earnings forecasts for FY2023 (January 1, 2023-December 31, 2023) are revenue of 15,000 million yen, operating loss of 2,700 million yen, loss before tax of 2,800 million yen, and loss attributable to owners of the parent of 2,400 million yen.

The monthly subscription software contract acquired in FY2022will be recorded as revenue for the full year in FY2023. In addition, the Group expects revenue growth for cloud services to accelerate through the second half of the fiscal year, as existing clients will gradually switch to ".c Series" throughout the year. On the other hand, packaged system sales are expected to decline due to the progress in the transition of mainstay products. However, because the increase in sales of Cloud service will offset the decrease, revenue for FY2023 is expected to increase by 1,167 million yen from the previous fiscal year. In addition, the Group will strengthen sales promotions mainly for mainstay products which will lead to sales growth, while working to improve the efficiency of SG&A expenses, etc. As a result, operating loss is expected to decrease by 197 million yen from the previous fiscal year.

1. Overview of financial position for the current fiscal year
2. • Financial position

Total assets at the end of the current fiscal year decreased by 940 million yen from the end of the previous fiscal year to 33,535 million yen (down 2.7% year-on-year). Current assets decreased by 1,849 million yen to 6,555 million yen (down 22.0% year-on-year), and non-current assets increased by 909 million yen to 26,980 million yen (up 3.5% year-on-year). Current assets decreased mainly due to a decrease of 1,691 million yen in trade and other receivables. The increase in non-current assets was mainly due to increases of 1,223 million yen in intangible assets, 409 million yen in deferred tax assets, and 123 million yen in other financial assets, despite decreases of 613 million yen in goodwill and 235 million yen in property, plant and equipment.

Total liabilities at the end of the current fiscal year increased by 1,511 million yen from the end of the previous fiscal year to 9,873 million yen (up 18.1% year-on-year). Current liabilities decreased by 930 million yen to 6,583 million yen (down 12.4% year-on-year), while non- current liabilities increased by 2,441 million yen to 3,291 million yen (up 287.3% year-on-year). Current liabilities decreased mainly due to decreases of 895 million yen in trade and other payables, 397 million yen in income taxes payable, and 210 million yen in short-term interest- bearing debt, despite an increase of 572 million yen in contract liabilities. The increase in non-current liabilities was mainly attributable to a 2,540 million yen increase in long-terminterest-bearing debt.

Total equity at the end of the current fiscal year decreased by 2,452 million yen from the end of the previous fiscal year to 23,662 million yen (down 9.4% year-on-year). The main factors for the decrease in total equity were an increase of 157 million yen in other components of equity, a decrease of 118 million yen in treasury shares, and a decrease of 2,832 million yen in retained earnings.

As a result, percentage of equity attributable to owners of the parent decreased by 5.2% from 75.7% at the end of the previous fiscal year to 70.5%.

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