LTS : Summary of Financial Results for First Quarter of the Year Ending December 2021

Summary of Financial Results for First Quarter of the Year Ending December 2021

[Japan GAAP] (Consolidated)

May 14, 2021

Name of Company:

LTS, Inc.

Stock Exchange Listing: Tokyo

Stock Code:

6560

URL

https://lt-s.jp/

Representative:

Title: President and CEO

Name: Hiroaki Kabashima

Contact Person:

Title: Executive Officer and Manager of Group

Name: Hiroyuki Komatsu

Phone: [phone]

Management Office

Date of filing of quarterly report:

May 14, 2021

Date of commencement of dividend payment:

−

Preparation of quarterly supplementary materials:

Yes

Convening of a quarterly results meeting:

No

(Amounts less than one million are rounded down)

1. Financial results for first quarter of fiscal year ending December 2021 (January 1, 2021 - March 31, 2021)

(1) Operating results (consolidated)

(Percentage figures represent year-on-year change)

Net sales

Operating profit

Ordinary profit

Profit attributable to

owners of parent

million yen

%

million yen

%

million yen

%

million yen

%

Q1 FY2021

1,742

26.9

172

7.4

178

16.5

121

19.6

Q1 FY2020

1,373

59.6

160

38.2

153

32.2

101

32.7

(Note) Comprehensive income

Q1 FY2021: 121 million yen (22.2%)

Q1 FY2020: 99 million yen (29.6%)

Profit per share

Profit per share fully

diluted

yen

yen

Q1 FY2021

29.39

27.31

Q1 FY2020

25.00

23.28

(2) Financial position (consolidated)

Total assets

Net assets

Capital adequacy ratio

million yen

million yen

%

Q1 FY2021

4,190

1,868

44.5

FY2020

4,290

1,732

40.3

(Reference) Shareholders' equity

Q1 FY2021: 1,866 million yen

FY2020: 1,729 million yen

2. Dividends

Dividend per share

End of Q1

End of Q1

End of Q1

End of Q1

End of Q1

yen

yen

yen

yen

yen

FY2020

−

0.00

−

0.00

0.00

FY2021

−

FY2021 (forecast)

0.00

−

0.00

0.00

(Note) Revisions to the most recently announced earnings forecast: No

3. Forecast for the fiscal year ending December 2021 (January 1, 2021 - December 31, 2021)

(Percentage figures represent year-on-year change)

	Net sales		Operating profit		Ordinary profit	Profit attributable to	Profit per share
			owners of patent
	million yen		%	million yen	%		million yen	%	million yen	%	yen
Full year	7,000		26.0	580	21.2		530	18.5	341	26.1	82.97
(Note) Revisions to the most recently announced earnings forecast: No

(Note) There is no first half forecast.

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*Notice:

1. Changes in main subsidiaries during year to quarter end (Changes in specific subsidiaries accompanied by changes in the scope of consolidation): No

New consolidations:

company(ies) (Company name(s)); Exclusions:

company(ies) (Company name(s))

1. Application of accounting treatment specific to the preparation of the consolidated quarterly financial statements: No
2. Changes in accounting policies, accounting estimates, and restatements
3. 1. Changes in accounting policies due to revision of accounting standards: No
   2. Changes in accounting policies other than those in (a): No
   3. Changes in accounting estimates: No
   4. Restatements: No
4. Number of shares outstanding (common shares)

(a) Shares outstanding (including treasury shares) at	Q1 of year ending	4,231,400 shares	Year ended	4,197,400 shares
end of period	December 2021	December 2020
(b) Treasury shares at end of period
Q1 of year ending	87,733 shares	Year ended	87,658 shares
	December 2021	December 2020
(c) Average number of shares during period
Q1 of year ending	4,128,958 shares	Q1 of year ended	4,058,795 shares
	December 2021	December 2020

*Quarterly financial results summaries are not subject to audit.

*Cautionary statement regarding business results forecasts and special notes

The financial forecasts and other forward-looking statements herein are based on currently available information and assumptions considered by the Company to be reasonable and do not represent a commitment from the Company that they will be achieved. Actual results may differ substantially due to various factors.

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• Contents of Accompanying Materials

1. Qualitative Information related to the Consolidated Business Results...................................................................................................	4
(1)	Explanation of Operating Results.....................................................................................................................................................	4
(2)	Explanation of Financial Position ....................................................................................................................................................	5
(3)	Explanation of Consolidated Earnings Forecasts and Other Future Projections...............................................................................	5
2. Quarterly Consolidated Financial Statements and Main Notes..............................................................................................................	6
(1)	Quarterly Consolidated Balance Sheet .............................................................................................................................................	6
(2)	Quarterly Consolidated Statement of Income and Quarterly Consolidated Statement of Comprehensive Income ..........................	8
(3)	Notes to the Quarterly Consolidated Financial Statements ............................................................................................................	10
(Notes Related to Going Concern Assumptions) .............................................................................................................................	10
(Notes on Significant Changes in Shareholders' Equity) .................................................................................................................	10
(Segment Information).....................................................................................................................................................................	10
(Notes - Business Combinations).....................................................................................................................................................	11
(Additional Information)..................................................................................................................................................................	11

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1. Qualitative Information related to the Consolidated Business Results

(1) Explanation of Operating Results

During the first three months of the fiscal year (January 1 to March 31, 2021), the Japanese economy continued to struggle due to COVID-19. Although there were some signs of a recovery in imports and exports and in production activities, COVID-19 variants that could pose a new threat have emerged, so the future of the economy remains uncertain.

In the information services industry, which is the main business domain of our Group (the Company and its consolidated subsidiaries, the same applies hereinafter), COVID-19 has had a prolonged impact on corporate management. Digital transformation (DX) continues to attract a high level of attention for addressing changes in the social environment during and after the COVID-19 pandemic. As such, demand remains strong for providing support for such internal reform activities as work style reform, including introducing task performing robots such as AI and RPA (robotic process automation) and promoting telecommuting.

Under these circumstances, the Group has established a medium-term business plan with this year as the first year of the plan and has been developing a professional services business and a platform business as a company that supports and promotes corporate transformation and work style reform. In our professional services business, we enter our customers' work sites and deliver expected solutions, utilizing robotics, AI, and business process management to provide one-stop support catered to the customer's unique challenges and reform objectives. We promoted partnerships with outside companies and new projects via telecommuting while also actively hiring and training human resources. In our platform business, we solve IT personnel shortages and, in addition to rolling out existing Assign Navi and Consultant Job services, we promoted development of our new CS Clip service that matches operating companies with DX companies.

As a result of the above, during the first three months of the fiscal year, we achieved net sales of ¥1,742.609 million (up 26.9% year on year), operating profit of ¥172.147 million (up 7.4% year on year), ordinary profit of ¥178.494 million (up 16.5% year on year), and profit attributable to owners of parent of ¥121.358 million (up 19.6% year on year).

A summary of financial results by segment (net sales includes internal sales) is provided below.

(Professional Services Business)

In our professional services business, the environment surrounding our IT division is undergoing drastic changes due to various restrictions on corporate activities. In the midst of these circumstances, we steadily acquired traditional consulting projects (operational analysis/design, IT introduction support, on-site deployment) based on our strength of visualizing and improving operations utilizing business process management. This was a result of actively promoting business development addressing strong demand for reform. We also promoted closer collaboration with technology companies and other outside companies. In addition to expanding our business in the Shizuoka and Tokai area by making SOFTEC Co., Ltd. a consolidated subsidiary, we promoted digital transformation in the administrative domain by entering a business alliance with Loglass Inc. Furthermore, we actively communicated information on our services by publishing books, holding seminars, and more.

As a result, net sales in the professional services business came to ¥1,681.817 million (up 26.8% year on year) and segment profit (operating profit) came to ¥157.529 million (up 15.2% year on year).

(Platform Business)

In the platform business, the number of members in the Assign Navi platform, which provides business matching and a learning forum specialized for the IT industry, grew to 10,599 including both corporate and individual members as of March 31, 2021. This steady growth represents a 393-member increase over the end of the previous year. Our track record with Assign Navi and Consultant Job matching and member services has also expanded in conjunction with growth of our member base, and sales were strong. Meanwhile, in addition to developing and growing our existing services, we continued to invest in the development of our new CS Clip service and actively invested in expanding future profitability, including enhancement of our organizational structure and dynamic sales activities.

As a result, net sales in the platform business came to ¥73.114 million (up 24.3% year on year), and the segment profit (operating profit) came to ¥14.617 million (down 38.1% year on year).

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(2) Explanation of Financial Position

Total assets at the end of the first three months of the fiscal year were ¥ 4,190.339 million, down ¥ 99.939 million from the end of the previous fiscal year. This was primarily due to a ¥265.058 million decrease in cash and deposits and a ¥149.809 million increase in accounts receivable - trade.

Liabilities amounted to ¥2,321.613 million, down ¥236.118 million from the end of the previous fiscal year. This was primarily due to a ¥103.439 million decrease in income taxes payable, an ¥85.566 million decrease in accounts payable - other, and a ¥72.383 million decrease in long-term borrowings.

Net assets amounted to ¥1,868.725 million, up ¥136.179 million from the end of the previous fiscal year. This was primarily due to a ¥121.358 million increase in retained earnings. The equity ratio was 44.5%.

The business combination with SOFTEC Co., Ltd., which was conducted on December 3, 2020, was provisionally accounted for in the previous fiscal year, but the accounting was finalized during the first quarter under review. In conjunction with the finalization of this provisional accounting treatment, the revision of the allocation of acquisition costs has been reflected in the comparative information contained in the quarterly consolidated financial statements for the first quarter under review. Additionally, for comparison and analysis with the end of the previous fiscal year, the amounts reflect the revision of the initially allocated acquisition cost made when finalizing the provisional accounting treatment.

(3) Explanation of Consolidated Earnings Forecasts and Other Future Projections

In regard to the consolidated earnings forecast for the fiscal year ending December 2021, no changes have been made to the full-year consolidated earnings forecast announced on February 12, 2021.

The impact of COVID-19 on the Group's business results is currently limited, but we will continue to monitor any changes in the situation and will engage in prompt disclosure in the event that there is a need to revise the earnings forecast.

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