SB Technology Corp.
※It is translated by AI.
SB Technology Corp.
Overview of Earnings Results Briefing for FY2023
This is a transcript of the SB Technology Corp. FY 2023 2Q Results Briefing held on October 30, 2023.
Speaker: Mr. Shinichi Ata, President & CEO, SB Technology Corp.
SB TECHNOLOGY, Enterprise and Public Sector contributed to sales growth; net income increased 4.7x due to transfer of shares of subsidiaries.
Summary
Summary | | FY2023 Q2 |
FY23H1
Financial
Results
Orders Received
FY23
Forecast
Higher revenues in Public Sector& Enterprise, sales achieved record highs as H1 Operating income was flat due to restrained investment in Telecommunication and strengthened recruitment.
Q2 orders received fell by▲ ¥1.6 billion year on year, mainly due
to the impact of the Telecommunications,but the order backlog at the end of September was a record high of ¥30.3 billion.
Full-year forecast: Steady progress toward net sales of ¥68 billion and operating income of ¥5.9 billion
No changes were made from forecasts based on the effects of transfer of Fontworks, Inc.' stocks, etc.
3
Shinichi Ata: Hello everyone, I am Shinichi Ata, President & CEO of SB Technology. Thank you for participating in our financial briefing while you are very busy today. I would like to explain the outline of the results and the progress of the Medium-term Management Plan.
First is an overview of business results and a summary of financial results. Net sales reached a record high for the first half due to an increase in revenues in the Public Sector and Enterprise segment. Operating income was flat due to the impact of restrained investment in Telecommunication and the strengthening of recruitment.
Orders received declined ¥1.6 billion year on year in the second quarter, mainly due to the impact of the Telecommunication field, but the order backlog at the end of September was a record high of ¥30.3 billion.
SB Technology Corp.
※It is translated by AI.
We are making steady progress toward our full-year forecasts of net sales of ¥68 billion and operating income of ¥5.9 billion. Note that there is no change in this figure from the forecast of performance that incorporates the effects of the transfer of shares and others of Fontworks, Inc. on July 19, 2023.
Consolidated P/L (Apr-Sep cumulative)
Consolidated P/L (Apr-Sep Cumulative) | | FY2023 Q2 |
- Despite growth in Public Sector and Enterprise, operating income was flat due to restrained investment in Telecommunication and higher SG&A expenses.
- Increase of ¥4.9 billion in net profit due to increase of costs and sale of stock ofFontworks, Inc.
[Millions of yen] (Profit margin ) FY23H1 FY22H1 Change Change %
Net sales | 32,206 | 31,706 | 499 | 1.6 | |||||||
RecordHigh | |||||||||||
+ | + | % | |||||||||
Operating | 2,282 | 2,270 | |||||||||
RecordHigh | + | + | % | ||||||||
income | (7.1%) | (7.2%) | 12 | 0.6 | |||||||
2,182 | 2,222 | ||||||||||
Ordinary income | ▲ | 40 | ▲ | % | |||||||
(6.8%) | (7.0%) | 1.8 | |||||||||
Profit attributable | 6,272 | 1,346 | |||||||||
RecordHigh | + | + | % | ||||||||
to owners of parent | (19.5%) | (4.2%) | 4,926 | 365.9 | |||||||
Net profit | |||||||||||
EBITDA ※ | 3,156 | 3,093 | +63 | +2.1% | |||||||
RecordHigh | |||||||||||
4 | |||||||||||
*EBITDA =Operating income +Amortization of goodwill +Depreciation
This is consolidated PL. Net sales and operating income were ¥32.2 billion and ¥2.28 billion, respectively. Net sales increased by approximately ¥500 million year on year, and operating income remained almost unchanged.
Ordinary income was negative by approximately ¥100 million from operating income due to expenses associated with the transfer of shares of Fontworks, Inc., etc., but profit attributable to owners of the parent Net profit was ¥6.272 billion and net income increased by ¥4.9 billion year on year.
SB Technology Corp.
※It is translated by AI.
Net Sales and Gross Profit by Market
Net Sales and Gross Profit by Market
| FY2023 Q2
Net sales
31.7 32.2
2.0 1.8
5.3 6.7
14.5
16.0
9.8 7.5
FY22H1 FY23H1
Gross profit
〔Billions of yen 〕 (Profit margin )
6.94 | 7.59 |
(23.6%) |
(21.9%) 1.24
- 0.91
3.68 4.07
1.59 1.36
FY22H1 FY23H1
Consumer: Decrease in sales, and flat in profits
- Contract changes with NortonLifeLock Co., Ltd. were affected, but progress was largely as originally anticipated.
Public Sector: Increase in both sales and profits
- Projects for the Ministry of Agriculture, Forestry and Fisheries and the operation of Local Government Information SC proceeded smoothly, and the margin also improved.
Enterprise: Increase in both sales and profits
- Cloud projects for focus customer groups remained solid.
- MSS※2 sales continue to grow with YoY1.5 times
Telecommunication: Decrease in both sales and profits
- Despite lower sales due to a decrease in vendor management projects and the impact of restrained investment, profitability improved due to progress in efficiency improvement.
※1:Abbreviation for Security Cloud | 5 |
※2:Abbreviation for Managed Security Service |
Net sales and gross profit by market. In the graph of the slide, the lower number is Telecommunication area. As you can see, the sales from 9.8 billion last year was 7.5 billion yen this term, down about 25%. However, gross profit fell only by about 200 million yen from 1.5 billion yen to 1.3 billion yen.
This is an area that is improving margins by reducing low-margin vendor management deals, shifting to higher-margin locations and using offshore overseas.
The Enterprise domain has grown about 10% from ¥14.5 billion to ¥16 billion. Gross profit has also grown by about 10%, from 3.6 billion to 4 billion.
The Public Sector increases nearly 30% growth, from ¥5.3 billion to ¥6.7 billion. Gross profit also roughly tripled, from ¥300 million to ¥900 million. In the past, provisions have been posted for large- scale development projects, but in the current fiscal year, the operation of these projects has progressed steadily and the profit margin has improved.
The top orange part of the graph shows sales of Consumer. This includes NortonLifeLock Co., Ltd.'s anti-virus software sales and Fontworks, Inc.' sales profit.
As we announced in July, we transferred Fontworks, Inc.'s stocks and others in September, but during the first half of the fiscal year, we are subject to consolidated accounting.
SB Technology Corp.
※It is translated by AI.
Software sales of antiviruses are expected to have a negative impact on operating profit of approximately ¥400 million this year. This impact also appeared in the first half of the year, but due to the contribution of Fontworks, Inc. to its profits, gross profit was ¥1.2 billion, the same level as in the same period of the previous year.
Factors Behind Changes in Operating Income
営Factors業利益 Behind Changes in Operating Income | | FY2023 Q2 |
- Gross profit margin improved by 1.7 percentage points due to improved profitability in the Public Sector and Telecommunication.
-
SG&A expenses increased in line with hiring and strengthened resources, and operating income remained
3flat year on year.
3
2
2
1
2.27
0.54
0.11↑Improving
↑sales growth profitability
Net sales | +JPY 0.5 billion | Gross Profit Margin +1.7pts | |
Public sector | +JPY 1.48 billion | Public sector | +6.0pts |
Enterprise | +JPY 1.46 billion | Telecommunication | +1.9pts |
Telecommunication ▲JPY2.30 billion | |||
Consumer | ▲JPY0.14 billion |
0.64
- Increases in SG&A expenses
Personal expenses /Recruitment cost, etc. YoY +99 employees
2.28
(7.0%)
(7.1%)
1
+1.2 millions of yen(+0.6%) | |
0 | |
FY22H1 | FY23H1 |
〔 Billions of yen 〕 (Profit margin) | 6 |
This is the factors behind changes in operating income. Net sales increased by approximately ¥500 million in total. As shown on the slide, Public Sector and Enterprise sales grew by a little less than ¥3 billion, Telecommunication sales were negative ¥2.3 billion, and Consumer was negative ¥140 million. As a result, operating income increased due to the effect of higher sales of ¥110 million.
In terms of improved profitability, the gross profit margin rose 1.7 percentage points in the Telecommunication and Public Sector, which is a positive ¥540 million margin.
Selling, general and administrative (SG&A) expenses increased by ¥640 million from the previous year, partly due to an increase in the number of employees by approximately 100. As a result of the above, operating income was flat at ¥2.28 billion.
SB Technology Corp.
※It is translated by AI.
[Non-Consolidated] Orders Received/Order Backlog ( Except Consumer business)
[Non単体-Consolidated]受注残高 Orders Received/Order Backlog ( Except Consumer business ) | FY2023 Q2
Orders received | Order Backlog | Single order | |||||||
balance | |||||||||
■ Public Sector | (YoY basis) | ||||||||
■ Enterprise | JPY2.4billions UP | ||||||||
■ Telecommunication | +9% 30.3 | ||||||||
16.2 | +6% | ||||||||
▲26% | 26.4 | 27.9 | |||||||
4.9 | 12.0 | ▲13% | |||||||
10.4 | 17.5 | FY23Q2 Main orders | |||||||
14.7 | |||||||||
1.0 | 13.5 | ||||||||
0.2 | • | Enterprise:Increase in development | |||||||
5.8 | 6.1 | projects for solutions to improve operational | |||||||
6.5 | efficiency | ||||||||
• Telecommunication:Reduction in both | |||||||||
7.7 | 8.8 | 9.4 | |||||||
"Steady development of internal systems" | |||||||||
5.5 | 4.8 | 3.6 | 5.0 | and "Vendor management projects" | |||||
4.2 | 3.3 • | Approximately 60% of the order backlog is | |||||||
FY21Q2 | FY22Q2 | FY23Q2 | FY21Q2 | FY22Q2 | FY23Q2 | expected to generate sales in FY23 | |||
7 | |||||||||
〔 Billions of yen 〕 | |||||||||
The slide shows changes in orders received. Orders received in the second quarter were ¥16.2 billion in fiscal 2021, ¥12 billion in fiscal 2022 and ¥10.4 billion in fiscal 2023. In addition, the Telecommunication area at the bottom of the bar graph is ¥5.5 billion for fiscal 2021, ¥4.8 billion for fiscal 2022, and ¥3.6 billion for fiscal 2023.
In the Enterprise segment, growth has been modest, at ¥5.8 billion in fiscal 2021, ¥6.1 billion in fiscal 2022, and ¥6.5 billion in fiscal 2023. Public Sector orders for Information Security Cloud services for 10 prefectures increased in fiscal 2021, but there are usually not many orders in the first half of the fiscal year.
The order backlog increased steadily from fiscal 2021 to ¥26.4 billion, ¥27.9 billion, and ¥30.3 billion. Telecommunication has fallen, Enterprises have increased, and Public Sector orders have remained large because of the two-year operation at the end of the last year. In the second half of this fiscal year, we plan to see sales rise to just under 20 billion of the 30.3 billion yen backlog in fiscal 2023.
SB Technology Corp. | |
※It is translated by AI. | |
FY23 Full-year Earnings Forecasts | |
FY23 Full-year Earnings Forecasts | | FY2023 Q2 |
Not changed from forecasts of results taking into account the impact of the transfer of stock, etc. of Fontworks, Inc.
- Aiming to improve profitability by expanding in -house services and improving quality and productivity
FY23 earnings | FY23H1 | Progress rate | FY22 | YoY | |||
[Millions of yen] | (Profit margin ) | forecast | |||||
('23/7/19 revision) | |||||||
Net sales | 68,000 | 32,206 | 47.4% | 67,227 | 47.9% | ||
Telecommunication | 16,300 | 7,515 | 46.1% | 19,575 | 38.4% | ||
Enterprise | 35,400 | 16,020 | 45.3% | 30,356 | 52.8% | ||
Public Sector | 14,000 | 6,779 | 48.4% | 13,224 | 51.3% | ||
Consumer | 2,300 | 1,890 | 82.2% | 4,070 | 46.4% | ||
Operating income | 5,900 | 2,282 | 38.7% | 5,557 | 41.1% | ||
(8.7%) | (7.1%) | (8.3%) | |||||
Ordinary income | 5,750 | 2,182 | 38.0% | 5,499 | 39.7% | ||
(8.5%) | (6.8%) | (8.2%) | |||||
Profit attributable to | 8,200 | 6,272 | 3,497 | ||||
owners of parent Net | 76.5% | 179.4% | |||||
(12.1%) | (19.5%) | (5.2%) | |||||
profit | 8 | ||||||
* Fontworks | Inc. is not subject to consolidation after | Q3 |
This is the full year earnings forecasts. As revised in July 2023, we forecast net sales of ¥68 billion. The forecasts for operating income, ordinary income, and net income remain unchanged at ¥5.9 billion, ¥5.75 billion, and ¥8.2 billion, respectively. We intend to work toward the second half of the year in order to achieve this goal.
SB Technology Corp. | |||||
※It is translated by AI. | |||||
4th Medium-Term Management Plan | |||||
4th Medium-Term Management Plan | | FY2023 Q2 | ||||
FY24 | 1. | Operating income JPY 7.1 billion※ | |||
Management | 2. | Operating Income 9% range | |||
Indicators | 3. Cloud Security & Services Net sales over JPY 50 billion |
Consumer | 8.7% | 9% range | ||||
7.8% | 8.3% | 7.1 | ||||
Public Sector | Billionyen | |||||
5.9 | ||||||
5.6 | ||||||
5.2 | ||||||
Enterprise | ||||||
Telecommunication | FY21 | FY22 | FY23 | FY24 | ||
FY21 | FY24 |
Aiming for operating income of 7.1 billion yen/operating income margin in the 9% range through growth in Enterprise and PublicSector
※Adjusted to 8.0→7.1 billion yen due to transfer of subsidiary shares (Jul. 27, 2023)
10
Progress of the Medium-Term Management Plan. At present, half of the Medium-Term Management plan has passed. The 4th Medium-Term Business Plan sets three numerical targets.
We intend to achieve operating income of ¥7.1 billion, an operating income margin of over 9%, and net sales of over ¥50 billion for Cloud Security & Service.
Looking at operating profit in fiscal 2021, I think the target is 5.9 billion yen for this fiscal year and 7.1 billion yen for the next fiscal year, a 20% increase.
※It is translated by AI.
Business for Telecommunication
2020Business年年3月3期for月業績期Telecommunication見業通し績見通し
Transition of
Gross Profit Margin
SB Technology Corp.
- 2020年3|月FY2023期第1四半Q2期
Initiatives to Improve Profitability
14.9 14.2 14.8
16.8 17.5 18.5 18.0 18.3%
15.7
Shift from vendor management projects
Shift to | Vendor | FY22H1 | FY23H1 |
high-value-added | management | 40% | % |
projects | |||
projects | Sales mix | 30 |
11.9 | +1.5Pts |
Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | ||
FY21 | FY22 | FY23 |
Profit margin improved | ||
due to the impact of | ||
the composition ratio | ||
Offshore utilization status | ||
Offshore | As the end | As the end |
of 1Q | of 2Q | |
use |
Steady expansion of areas of offshore utilization
Steady improvement in gross profit margin due to expansion of high value -added projects and offshore utilization areas to improve profit margin
11
Although sales in the Telecommunication business have declined significantly, we have been working to improve the gross profit margin this fiscal year. As shown on the right side of the slide, there were 40% of low-margin projects in the first half of fiscal 2022. In the first half of fiscal 2023, however, we were able to improve our profit margin by reducing the proportion of these projects to 30%.
In addition, the gross margin was 18.3% in the second quarter, down slightly from 18% in the first quarter due to the use of offshore and the challenge to strategic areas. We intend to continue to increase our margins on a quarterly basis.
SB Technology Corp. | ||
※It is translated by AI. | ||
Progress of Security Business | ||
2020Progress年3of月Security期業績見Business通し | | 2020年3|月FY2023期第1四半Q2期 | |
年3月期業績見通し | ||
SBT Non-Consolidated Security -Related Business Sales | ||
Investment in the security business | ||
〔 Billions of yen 〕 | ||
- Local Government Information Security Cloud
■ Security for Enterprise | 3.45 | +7% 3.69 |
■ MSS (Managed Security Service) | ||
+23% | 0.70 | 0.74 |
2.81 |
Fostering security analysts
As of | As of | ||
FY22H1 | +20 person | FY23H1 | Steady progress in recruitment |
80 | 100 | and training led |
- +3% 2.35 +20% 0.21
- 0.15
2.32 2.32
1.98 2.01
2.30
to an increase in analysts | ||
Investment to expand services | ||
MSS for Vulunerability Management(VRM) | ||
Security measures | ||
in | Cloud Patrol | |
normal times |
+55% | +50% | ||||
+46% | +48% | 0.65 | |||
0.43 | |||||
0.28 | |||||
0.13 | 0.19 | ||||
FY19H1 FY20H1 FY21H1 FY22H1 FY23H1
Security | MSS for Microsoft Sentinel Advanced |
monitoring | |
MSS, the company's mainstay in-house service, grew by about 150% every year, maintaining its growth rate
Aggressive investment in development of human resources and services for future growth expansion
※Including sales of security equipment | 12 |
About Security Business. Net sales for fiscal 2019 were ¥2.28 billion, compared to ¥3.69 billion for fiscal 2023.
The blue in the middle of the graph indicates sales of security for Enterprise. Although we are building this part from network security or systems, growth in this part has stopped for three years.
On the other hand, MSS (Managed Security Service), shown in the purple part at the bottom, has grown by about 50% every year. Our basic strategy is to extend this part.
In addition, the grey part at the top is the Local Government Information Security Cloud. It was renewed in fiscal 2022 and is currently being provided to 12 prefectures, with some portions emerging.
Regarding the development of security businesses and MSS, it is not yet possible to complete them with AI, and in fact, without a security analyst, it is impossible to respond to early detection of incidents, quick response, and causal analyses.
For this reason, 80 security analysts were employed last year, but we are currently focusing our efforts on recruitment and training, with a goal of increasing the number to 100 and 150 by the end of the next fiscal year.
In order to expand security services, we have begun providing MSS for Vulnerability Management
SB Technology Corp.
※It is translated by AI.
(VRM), Cloud Patrol, and MSS for Microsoft Sentinel Advanced for security monitoring in normal times. These services are now being used to support customers' security measures.
Business for Enterprise (AI Related)
2020Business年3for月期Enterprise業績見通(しAI Related) | | 2020年3|月FY2023期第1四半Q2期 |
0年3月期業績見通し |
DailyAI
Main features of the service
1st
Phase Hand-held Data (My Data Utilization Plan)
To Be
Released Internal Data
(Internal Data Retrieval Plan)
SharePoint
Azure / | |
OneDrive | |
AWS | |
and so on… |
Instruct | Upload and use files to be analyzed from Web | |
handy data | browsers | |
Interface that meets your needs | in the | Allow analysis across multiple files, including |
Generated AI | ||
regular questionnaire results |
… | Rich security | | Provided as a customer-specific platform |
| Documents entered are not learned Generated AI | ||
functions | |||
Provision of log management functions for use | |||
Low-cost introduction to companies or organizations with | |||
large numbers of employees due to token -basedcharging | |||
rather than user counts (From 100 million token 0.1 million yen) | |||
Cost control | | Provision of a function to prevent unexpected | |
high-cost claims by the function to set an upper limit to the | |||
amount of token |
DailyAI (My Data Utilization Plan), a Generated AI service that utilizes hand-held data
through PoC with customers, is released as the firstphase.
13
About our AI related servicing. In October, we announced that we will begin offering a generation AI service-named "DailyAI." We plan to expand the use of the first and second phases.
In the first phase, various files such as Word, Excel, PowerPoint, PDF are imported into AI, and the results and directionality of textual summarization and inference are conveyed to users.
There is a Microsoft "Azure OpenAI Service" service, but you can prevent AI from learning the data, that is, from having or seeing the data. "DailyAI" is developed using this "Azure OpenAI Service" and can be used securely.
In addition, Microsoft has announced a "Microsoft Copilot" with the meaning of "first officer" and I think AI will help you in most cases when making materials using Office devices such as Word・ Excel ・PowerPoint. This is a global development, offered at US$30 per person per month, or approximately ¥4,500 when converted into Japanese yen.
Since this spring, we have been conducting PoC with more than one company's customers regarding the use of AI generated, but we feel that there are not so many companies that are introduced company- wide at once. Rather, it is often used by research institutions, sales planning departments, or groups
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SoftBank Technology Corporation published this content on 30 October 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 14 November 2023 13:40:19 UTC.