Computer Engineering nsulting : Consolidated Financial Results for the First Quarter of the Fiscal Year Ending January 31, 2024

Consolidated Financial Results for the First Quarter of the Fiscal Year Ending January 31, 2024

						June 9, 2023
Company Name:	Computer Engineering & Consulting Ltd.		Stock Listing: Tokyo Stock Exchange
Stock Code:	9692	URL https://www.cec-ltd.co.jp/en/
Representative:	(Name)	Takashi Himeno	(Title) Representative Director & President
Any Inquiry to:	(Name)	Yoshiyuki Nakamura	(Title) General Manager,		Tel.: [phone]
Accounting & Finance Division
Scheduled Date of Filing of	June 12, 2023	Scheduled Date of	-
Quarterly Report:		Dividend Payments:
Supplemental Materials Prepared for	Yes
Quarterly Financial Results:
Briefing Held for Quarterly Financial	No
Results:
				(Figures are rounded down to nearest million yen.)

1. Consolidated Performance for the First Quarter of the Fiscal Year Ending January 31, 2024 (February 1, 2023 to April 30, 2023)

(1) Consolidated Operating Results for the First Three Months	(Percentages indicate increase/decrease from the same quarter of
				the previous fiscal year.)
	Net sales		Operating income	Ordinary income	Net income attributable
		to owners of parent
	Million yen		%	Million yen	%	Million yen	%	Million yen	%
1Q ended Apr. 2023	13,222		12.0		1,842	104.6	1,853	104.2	1,286	53.6
1Q ended Apr. 2022	11,801		2.8		900	(35.0)	907	(34.9)	837	(12.3)

(Note) Comprehensive income

1Q ended Apr. 2023

1,302 million yen 59.1%

1Q ended Apr. 2022 818 million yen (29.6%)

Net income per share

Diluted net income per

share

Yen

Yen

1Q ended Apr. 2023

38.33

38.24

1Q ended Apr. 2022

24.02

23.84

(2) Consolidated Financial Position

Total assets

Net assets

Equity ratio

Net assets per share

Million yen

Million yen

%

Yen

1Q ended Apr. 2023

47,779

38,013

79.5

1,130.04

FY ended Jan. 2023

46,333

37,379

80.5

1,111.48

(Reference) Total shareholders' equity

1Q ended Apr. 2023

37,987 million yen

FY ended Jan. 2023

37,309 million yen

2. Dividends

Dividends per share

1Q-end

2Q-end

3Q-end

FY-end

Total

Yen

Yen

Yen

Yen

Yen

FY ended Jan. 2023

－

25.00

－

20.00

45.00

FY ending Jan. 2024

－

FY ending Jan. 2024

25.00

－

25.00

50.00

(Forecast)

(Notes) 1. Adjustments from the dividend forecasts announced most recently: No

2. Breakdown of dividends at the end of the second quarter of the fiscal year ended January 31, 2023: Ordinary dividend 20.00 yen, special dividend

5.00 yen

3. Consolidated Earnings Forecasts for Fiscal Year Ending January 31, 2024 (February 1, 2023 to January 31, 2024)

(Percentages indicate year-on-year increase/decrease.)

	Net sales		Operating income	Ordinary income	Net income attributable	Net income per
		to owners of parent	share
	Million yen		%	Million yen	%	Million yen	%	Million yen	%	Yen
First half	25,600		9.0	3,000	52.3	3,010	51.4	2,070	(40.8)	61.62
Full year	51,000		5.8	5,550	26.9	5,570	26.2	3,840	(25.9)	114.40

(Note) Adjustments from the earnings forecasts announced most recently: Yes

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Notes

1. Significant changes in subsidiaries during the first three months of the fiscal year ending January 31, 2024 (Transfer of particular subsidiaries following a change in the scope of consolidation): None
2. Application of special accounting methods in the preparation of quarterly consolidated financial statements: None
3. Changes in accounting rules, procedures, or method of presentation relating to the preparation of the consolidated financial statements:
4. 1. Changes based on revision of accounting standards: Yes
   2. Changes other than 1) above: None
   3. Changes in accounting estimates: None
   4. Restatements: None

(Note) For details, please refer to "(3) Notes to Quarterly Consolidated Financial Statements (Changes in accounting policies )" in "2. Quarterly Consolidated Financial Statements and Major Notes" on page 10 of the accompanying material of the quarterly report.

(4) Number of shares issued and outstanding (common stock)
1)	Number of shares issued and outstanding	1Q ended Apr. 2023	37,600,000 shares	FY ended Jan. 2023	37,600,000 shares
	(including treasury stock)
2)	Number of treasury stock	1Q ended Apr. 2023	3,983,860 shares	FY ended Jan. 2023	4,032,960 shares
3) Average number of shares for each period	1Q ended Apr. 2023	33,569,798 shares	1Q ended Apr. 2022 34,870,767 shares

*The quarterly financial results are not subject to audit by certified public accountants or auditing firms.

*Proper use of forward-looking statements and cautionary statement: (Matters to be noted regarding statements about the future)

Forward-looking statements including earnings forecasts contained in this document are based on information currently available to the Company and certain assumptions deemed to be reasonable. Actual results may vary from forecasts due to a variety of factors. For the conditions serving as assumptions underlying the earnings forecasts and notes on using the earnings forecasts, please see "Explanation on Consolidated Earnings Forecasts and Other Forward-Looking Information" on page 5 of the accompanying material of the quarterly report.

(Method of obtaining supplementary briefing material on quarterly financial results)

Supplementary materials for the quarterly financial results will be available on our company website (https://www.cec-ltd.co.jp) on Friday, June 9, 2023.

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Table of Contents for Accompanying Material
1. Qualitative Information on Quarterly Financial Results	4
(1)	Explanation on Operating Results	4
(2)	Explanation on Financial Position	5
(3)	Explanation on Consolidated Earnings Forecasts and Other Forward-looking Information	5
2. Quarterly Consolidated Financial Statements and Major Notes	6
(1)	Quarterly Consolidated Balance Sheet	6
(2)	Quarterly Consolidated Statement of Income and Quarterly Consolidated Statement of Comprehensive Income	8
	Quarterly Consolidated Statement of Income
	First three months ended April 30, 2023	8
	Quarterly Consolidated Statement of Comprehensive Income
	First three months ended April 30, 2023	9
(3)	Notes to Quarterly Consolidated Financial Statements	10
	(Notes to going concern assumption)	10
	(Notes on substantial changes in the amount of shareholders' equity)	10
	(Changes in accounting policies)	10
	(Segment information, etc.)	10
3. Others	11
	Orders received and orders in hand	11

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1. Qualitative Information on Quarterly Financial Results

(1) Explanation on Operating Results

During the first quarter of the fiscal year ending January 31, 2024 (from February 1, 2023 to April 30, 2023), the Japanese economy showed signs of recovery as economic activities normalized due to the effects of various policies under the stance of coexisting with COVID-19. However, there is a risk of the Japanese economy declining due to downturns in overseas economies amid continued global monetary tightening. In addition, there is a need to closely monitor domestic price increases, supply constraints, fluctuations in financial and capital markets and other factors, and the future remains uncertain.

In the information service industry, DX-related investment continued to be strong owing to growing needs for operational reforms accompanied by system reforms to enhance productivity and competitiveness as well as for business models and business structure reforms. This happened even as companies were cautious in making decisions on business performance due to the impact of rising raw material prices and other factors caused by prolonged geopolitical risks. Furthermore, many companies are investing in security measures as a management issue in order to respond to the ever-growing sophistication of cyber-attacks, and demand for cyber security products and services is increasing.

Under these circumstances, the CEC Group pursued its business under the basic policy of "strengthening business capabilities," "strengthening human resources and technical capabilities," and "strengthening management foundation." This is based on its three-yearmedium-term management plan from the fiscal year ended January 2023 to the fiscal year ending January 2025, and has the aim of realizing "a sustainable society" and "the sustained growth of the CEC Group." During the first three months ended April 30, 2023, we strived to unearth new business opportunities and acquire highly profitable business opportunities by cultivating major customers through promoting cross-selling and up-selling across the whole company. In addition, we introduced a new personnel system and improved working conditions in order to strengthen the recruitment of new graduates and experienced personnel, while boosting the satisfaction of young and mid-career employees and retaining skilled engineers.

From the perspective of sustainability management, as part of our efforts to resolve social issues through our business activities, we introduced virtually CO2-free electricity at three facilities in Kanagawa Prefecture. These facilities accounted for about 80% of the Company's total CO2 emissions. In this way, we achieved 100% green power. Furthermore, to ensure fairness and transparency, as well as to increase corporate value, we have introduced a compensation system for the Company's Directors consisting of fixed compensation and performance-linked compensation as an incentive to achieve sustainable growth.

As a result of these efforts, in the first three months ended April 30, 2023, ICT investment remained strong primarily among manufacturing companies which are our main customers. The operating status remained above plan in both our focused business areas*1 and our core business*2. Consequently, net sales increased 1,421 million yen (12.0%) from the same period of the previous fiscal year to 13,222 million yen. In terms of profits, income increased as a result of higher revenue as well as a reactionary increase related to allowance for loss on orders received posted in the same period of the previous fiscal year. As a result, operating income was 1,842 million yen, up 942 million yen (104.6%) from the same period of the previous fiscal year, ordinary income came to 1,853 million yen, up 945 million yen (104.2%) from the same period of the previous fiscal year, and net income attributable to owners of parent recorded 1,286 million yen, up 449 million yen (53.6%) from the same period of the previous fiscal year.

*1 The Company defines its six focused business areas as:

1. Production and logistics solutions, (2) Mobility services, (3) Services in cooperation with Microsoft Japan,

1. Migration services, (5) Security services, and (6) DX cloud platform.

*2 Core business: The Company defines its core business as the stable and foundation business that supports the Company, including commissioned development, which is our revenue base, provision of ICT infrastructure using data centers, construction and operations business, development of car-mounted and built-in devices, and verification business.

Operating results by segment are as follows.

(Digital Industry Business)

In mobility services, which is one of our focused business areas, big data and smartphone application development in the MaaS field performed well. Production and logistics solutions performed steadily, thanks to strong needs for development of production management systems for DX promotion of customers' plants and an increase in inquiries on ICT solutions for enhancing logistics efficiency on the back of strong needs for automation ranging from berth management to warehouse operations. In addition, in our nishinihon and chubu services of our core business, system development remained strong, against the backdrop of active ICT investment by customers in the manufacturing industry. As a result, net sales increased 545 millio n yen (13.3%) from the same period of the previous fiscal year to 4,642 million yen. In terms of profits, operating income came to

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1,171 million yen, up 136 million yen (13.2%) from the same period of the previous fiscal year, due to higher profits in line with stronger sales.

(Service Integration Business)

Migration services, one of our focused businesses, performed well due to a growing trend in needs for migration services against the backdrop of DX promotion. In security services, sales fell due to a decline in stocking and sales, despite strong demand for product services. In the core business, the impact of unprofitable projects in the ongoing process remained within the expected range, and the ICT infrastructure construction business performed well as the semiconductor supply system normalized. As a result, net sales increased 875 million yen (11.4%) from the same period of the previous fiscal year to 8,580 million yen. In terms of profits, operating income came to 1,668 million yen, up 744 million yen (80.6%) from the same period of the previous fiscal year. This was due to higher profits in line with stronger sales as well as a reactionary increase rel ated to allowance for loss on orders received posted in the same period of the previous fiscal year.

1. Explanation on Financial Position (Total assets)
   Total assets as of the end of the first quarter were 47,779 million yen, an increase of 1,445 million yen from the end of the previous fiscal year. This was mainly due to an increase of 2,315 million yen in cash and deposits and a decrease of 1,113 million yen in notes and accounts receivable - trade, and contract assets.
   (Liabilities)
   Total liabilities as of the end of the first quarter amounted to 9,765 million yen, up 811 million yen from the end of the previous fiscal year. This was mainly due to an increase of 585 million yen in provision for bonuses and a rise of 391 million yen in contract liabilities included in others under current liabilities.
   (Net assets)
   Net assets as of the end of the first quarter were 38,013 million yen, an increase of 634 million yen from the end of the previous fiscal year. This was mainly due to an increase of 615 million yen in retained earnings.
2. Explanation on Consolidated Earnings Forecasts and Other Forward-looking Information

The CEC Group is promoting a medium-term management plan covering the three-year period from the fiscal year ended January 31, 2023 to the fiscal year ending January 31, 2025, with the fiscal year ending January 31, 2024 being the second year of the plan. Based on the three pillars of our basic policies of (1) strengthening business capabilities, (2) strengthening human resources and technical capabilities, and (3) strengthening the management foundation, we are striving to solve social and industrial issues through our business activities and continuously improve our corporate value. For the consolidated earnings forecasts for the first six months ending July 31, 2023 and for the full year of the fiscal year ending January 31, 2024, please refer to "Notice Concerning Adjustments to Earnings Forecasts" announced today.

• The forecast figures signify projections made based on currently available information and are not intended to guarantee the achievement of those projections by the Company. Actual results, etc. may differ from the forecast figures due to changes in business conditions and other factors.

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