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

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

[Japanese GAAP] (Consolidated)

August 6, 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:

Executive Vice President and Manager of Group

Name: Sungil Lee

Phone: [phone]

Management Office

Date of filing of quarterly report:

August 13, 2021

Date of commencement of dividend payment:

−

Preparation of quarterly supplementary materials:

Yes

Convening of a quarterly results meeting:

Yes

(Amounts less than one million are rounded down)

1. Financial results for second quarter of fiscal year ending December 2021 (January 1, 2021 - June 30 , 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

%

Q2 FY2021

3,474

29.8

274

7.2

258

11.8

166

11.4

Q2 FY2020

2,676

64.1

255

85.8

231

68.4

149

68.3

(Note) Comprehensive income	Q2 FY2021: 164 million yen (12.9%)	Q2 FY2020: 145 million yen (63.7%)
		Profit per share	Profit per share fully
		diluted
		yen	yen
Q2 FY2021		40.37	37.51
Q2 FY2020		36.96	34.30
(2) Financial position (consolidated)
		Total assets	Net assets	Capital adequacy ratio
		million yen	million yen	%
Q2 FY2021		4,491	1,801	40.1
FY2020		4,290	1,732	40.3

(Reference)

Shareholders' equity

Q2 FY2021: 1,801 million yen

FY2020: 1,729 million yen

(Note)

During the first three months of the fiscal year ending December 2021, provisional accounting associated with business combination was

finalized, and the figures for the fiscal year ended December 2020 have been restated to reflect this.

2. Dividends

Dividend per share

End of Q1

End of Q2

End of Q3

End of FY

Total

yen

yen

yen

yen

yen

FY2020

−

0.00

−

0.00

0.00

FY2021

−

0.00

FY2021 (forecast)

−

0.00

0.00

(Note)

Revision to the most recently announced dividend 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 parent

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)

Revision 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	Q2 of year ending	4,271,400 shares	Year ended	4,197,400 shares
end of period	December 2021	December 2020
(b) Treasury shares at end of period	Q2 of year ending	127,765 shares	Year ended	87,658 shares
December 2021	December 2020
(c) Average number of shares during period	Q2 of year ending	4,133,410 shares	Q2 of year ended	4,053,392 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. Quantitative 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 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. Quantitative Information related to the Consolidated Business Results

(1) Explanation of Operating Results

During the first six months of the fiscal year (January 1 to June 30, 2021), the Japanese economy continued to struggle due to COVID-19. Although there were some sign of a recovery in imports and experts and in production activities, COVID-19 variants have emerged, so the future of the economy remains uncertain.

In the information services industry, which is the main business domain of our Group, 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 actively 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 six months of the fiscal year, we achieved net sales of ¥3,474.748 million (up 29.8% year on year), operating profit of ¥274.234 million (up 7.2% year on year), ordinary profit of ¥258.972 million (up 11.8% year on year), and profit attributable to owners of parent of ¥166.861 million (up 11.4% 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 amid favorable conditions created by robust demand for DX. 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 and Outlook Consulting Co., Ltd. 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 ¥3,359.184 million (up 29.7% year on year) and segment profit (operating profit) came to ¥250.047 million (up 11.1% 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 10,955 including both corporate and individual members as of June 30, 2021. This steady growth represents a 749-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. At the same time, we continued to invest in the development of our new CS Clip service and actively invested in expanding the profitability of existing services, including enhancement of our organizational structure and promotion of marketing activities.

As a result, net sales in the platform business came to ¥144.494 million (up 30.3% year on year), and the segment profit (operating profit) came to ¥24.186 million (down 21.5% year on year).

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(2) Explanation of Financial Position

Total assets at the end of the first six months of the fiscal year were ¥4,491.421 million, up ¥201.143 million from the end of the previous fiscal year. This was primarily due to a ¥171.072 million decrease in cash and deposits, a ¥121.741 million increase in accounts receivable - trade, and a ¥112.650 mill ion increase in investment securities.

Liabilities amounted to ¥2,690.094 million, up ¥132.363 million from the end of the previous fiscal year. This was primarily due to a ¥173.560 million decrease in long-term borrowings, and a ¥387.838 million increase in other (suspense receipts).

Net assets amounted to ¥1,801.326 million, up ¥68.779 million from the end of the previous fiscal year. This was primarily due to a ¥166.861 million increase in retained earnings and a ¥141.546 million increase in treasury shares. The equity ratio was 40.1%. 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 of the fiscal year. 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 second 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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