Computer Engineering nsulting : Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending January 31, 2023

(1) Consolidated Operating Results for the First Nine Months

Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending January 31, 2023

				December 9, 2022
Company Name:	Computer Engineering & Consulting Ltd.		Stock Listing: Tokyo Stock Exchange
Stock Code:	9692	URL https://www.cec-ltd.co.jp/en/
Representative:	(Name)	Hitoshi Ooishi	(Title) Representative Director & President
			(Title) General Manager,
Any Inquiry to:	(Name)	Yoshiyuki Nakamura	Accounting & Finance	Tel.: [phone]
			Division
Scheduled Date of Filing of	December 12, 2022	Scheduled Date of	-
Quarterly Report:		Dividend Payments:

Supplemental Materials Prepared for

Quarterly Financial Results: -

Yes

Briefing Held for Quarterly Financial

Results:

No

(Figures are rounded down to nearest million yen.)

1. Consolidated Earnings for the Third Quarter of the Fiscal Year Ending January 31, 2023 (February 1, 2022 to October 31, 2022) (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	%
3Q ended Oct. 2022	35,288		5.3	3,277	7.7	3,296		7.0	4,381	143.7
3Q ended Oct. 2021	33,527		(6.8)	3,043	(18.5)	3,081		(18.9)	1,798	(41.2)
(Notes) Comprehensive income	3Q ended Oct. 2022	4,156 million yen	88.7%	3Q ended Oct. 2021	2,202 million yen	(23.2%)
	Net income per share	Diluted net income per
	share
			Yen		Yen
3Q ended Oct. 2022			127.92		127.42
3Q ended Oct. 2021			51.39		50.99

(Note) The Company has applied the "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020) and relevant ASBJ regulations from the beginning of the first quarter of the fiscal year ending January 31, 2023, and the figures relating to the third quarter represent the amounts based on the aforementioned accounting standard and other relevant regulations.

(2) Consolidated Financial Position
	Total assets		Net assets		Equity ratio
		Million yen		Million yen		%
3Q ended Oct. 2022		45,691		36,404		79.5
FY ended Jan. 2022		45,147		35,736		78.7
(Reference) Total shareholders' equity	3Q ended Oct. 2022	36,336 million yen	FY ended Jan. 2022	35,534 million yen

(Note) The Company has applied the "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020) and relevant ASBJ regulations from the beginning of the first quarter of the fiscal year ending January 31, 2023, and the figures relating to the third quarter represent the amounts based on the aforementioned accounting standard and other relevant regulations.

2. Dividends

			Dividends per share
	1Q-end	2Q-end	3Q-end	FY-end	Total
	Yen	Yen	Yen	Yen	Yen
FY ended Jan. 2022	－	20.00	－	20.00	40.00
FY ending Jan. 2023	－	25.00	－
FY ending Jan. 2023				20.00	45.00
(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 ending January 31, 2023: Ordinary dividend 20.00 yen, special dividend

5.00 yen

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3. Consolidated Earnings Forecasts for Fiscal Year Ending January 31, 2023 (February 1, 2022 to January 31, 2023)

(Percentages indicate increase/decrease from the previous fiscal year.)

								Net income	Net income per
	Net sales		Operating income	Ordinary income	attributable to owners
		share
								of parent
	Million		%	Million	%	Million	%	Million		%	Yen
	yen		yen	yen	yen
Full year	48,000		6.1	4,500	7.0	4,540	6.0	5,200		71.1	152.66

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

2. The Company has applied the "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020) and relevant ASBJ regulations from the beginning of the first quarter of the fiscal year ending January 31, 2023, and the consolidated earnings forecasts above represent the amounts based on the aforementioned accounting standard and other relevant regulations.

*Notes

1. Significant changes in subsidiaries during the first nine months of the fiscal year ending January 31, 2023 (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
3Q ended Oct. 2022	37,600,000 shares	FY ended Jan. 2022	37,600,000 shares
	(including treasury stock)
2)	Number of treasury stock
3Q ended Oct. 2022	4,032,960 shares	FY ended Jan. 2022	2,606,760 shares
3) Average number of shares for each period
3Q ended Oct. 2022	34,254,047 shares	3Q ended Oct. 2021	34,993,261 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 briefing materials for the quarterly financial results will be available on our company website (https://www.cec-ltd.co.jp) on Friday, December 9, 2022.

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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 nine months ended October 31, 2022	8
	Quarterly Consolidated Statement of Comprehensive Income
	First nine months ended October 31, 2022	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.)	11

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1. Qualitative Information on Quarterly Financial Results

(1) Explanation on Operating Results

During the first nine months of the current fiscal year (from February 1, 2022 to October 31, 2022), the Japanese economy showed signs of moderate recovery thanks to various measures of the government. However, the future remains uncertain mainly due to concerns over new waves of COVID-19, soaring raw material prices with the acceleration of global inflation, and rapid depreciation of the yen, in addition to geopolitical risks.

The information service industry kept continuously strong DX-related demand aimed at improving productivity and enhancing competitiveness. In addition, against the backdrop of cyber-attacks that take advantage of supply chain vulnerabilities becoming a major threat, the importance of security services as corporate risk measures is increasing.

Under these circumstances, we at the CEC Group have worked to solve social and industrial issues through our business activities. We have done so by, for example, enhancing products and services for customers' focus investment areas and developing new business negotiations while taking advantage of synergies generated by the integration of business areas or geographical areas, with the aim of realizing "a sustainable society" and "sustained growth of the CEC Group."

As a result of these efforts, in the first nine months ended October 31, 2022, the operating status saw a recovery of customers' ICT investment in our core business, and generally progressed as planned also in the focused business. Consequently, net sales increased 1,760 million yen (5.3%) from the same period of the previous fiscal year to 35,288 million yen. In terms of profits, operating income was 3,277 million yen, up 234 million yen (7.7%) from the same period of the previous fiscal year, and ordinary income was 3,296 million yen, an increase of 215 million yen (7.0%) year-on-year. This was due to the favorable business environment although affected by an allowance for loss on orders received recorded in the first quarter. In addition, net income attributable to owners of parent was 4,381 million yen, an increase of 2,583 million yen (143.7%) from the same period of the previous fiscal year. This was due to a gain on sale of investment securities recorded in extraordinary income for the second quarter.

The Company has applied the "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020) and relevant ASBJ regulations from the beginning of the first quarter of the fiscal year ending January 31, 2023. As a result, net sales for the first nine months ended October 31, 2022 rose 180 million yen, and operating income, ordinary income, and profit before income taxes increased 21 million yen, respectively. 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."

Operating results by segment are as follows. (Digital Industry Business)

Sales of production and logistics solutions and mobility services, which are the focused business, progressed steadily due to the improvement of the business environment. In addition, in our core business, system development in the chubu and nishinihon districts went well, against the backdrop of active ICT investment in the manufacturing area, our major customer. As a result, net sales increased 674 million yen (5.8%) from the same period of the previous fiscal year to 12,309 million yen. In terms of profits, operating income came to 2,805 million yen, up 647 million yen (30.0%) from the same period of the previous fiscal year. This was because of the profit increase due to stronger net sales and further closing of highly profitable business negotiations.

(Service Integration Business)

As for the focused business in migration services and security services, migration to the cloud environment and security measure services grew, and maintained a favorable performance. In addition, services in cooperation with Microsoft continued to be solid with an increasing number of inquiries about DX promotion business negotiations. Furthermore, in the infrastructure construction business, which is one of our core businesses, the semiconductor supply shortage continued to see a recovery. As a result, net sales grew 1,086 million yen (5.0%) from the same period of the previous fiscal year to 22,978 million yen. In terms of profits, operating income came to 3,440 million yen, down 41 million yen (1.2%) from the same period of the previous fiscal year. This was because the impact of unprofitable projects that occurred in the previous fiscal year continued.

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1. Explanation on Financial Position (Total assets)
   Total assets as of the end of the third quarter were 45,691 million yen, an increase of 544 million yen from the end of the previous fiscal year. This was mainly due to an increase of 1,547 million yen in cash and deposits, and a decrease of 1,129 million yen in notes and accounts receivable-trade, and contract assets ("notes and accounts receivable-trade" for the previous fiscal year).

(Liabilities)

Total liabilities as of the end of the third quarter amounted to 9,287 million yen, down 123 million yen from the end of the previous fiscal year. This was mainly due to a decrease of 464 million yen in long-term accounts payable-other.

(Net assets)

Net assets as of the end of the third quarter were 36,404 million yen, an increase of 667 million yen from the end of the previous fiscal year. This was mainly due to an increase of 2,869 million yen in retained earnings, an increase of 1,841 million yen in treasury stock, and a decrease of 270 million yen in remeasurements of defined benefit plans.

(3) Explanation on Consolidated Earnings Forecasts and Other Forward-looking Information

There are no changes to the consolidated earnings forecasts for the fiscal year ending January 31, 2023 announced on July 29, 2022. When any adjustments to the earnings forecasts are deemed to be required based on future conditions and business trends, we will disclose them promptly.

*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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