Startia : Summary of Consolidated Financial Results for the Year Ended March 31, 2023

Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.

May 12, 2023

Summary of Consolidated Financial Results

for the Year Ended March 31, 2023 [Japan GAAP]

Name of Company:

Startia Holdings, Inc.

Stock Code:

3393

Stock Exchange Listing:

Tokyo Stock Exchange

URL:

https://www.startiaholdings.com/

Representative

Title:

Representative Director and President & CEO

Name:

Hideyuki Hongo

Contact Person

Title:

Director

Name:

Takao Uematsu

Tel:

[phone]

Date of regular general meeting of shareholders:

June 22, 2023 (tentative)

Date of commencement of dividend payment:

June 23, 2023 (tentative)

Date of filing of securities report:

June 22, 2023 (tentative)

Supplementary documents for financial results:

Yes

Financial results briefing:

Yes (for securities analysts, institutional investors and media

representatives)

(Yen in millions, rounded down)

1. Consolidated financial results for the fiscal year ended March 31, 2023 (April 1, 2022 - March 31, 2023)

(1) Result of operations (Consolidated)

(Percentage figures represent year-on-year changes)

Net sales

Operating profit

Ordinary profit

Profit (loss) attributable

to owners of parent

Million yen

%

Million yen

%

Million yen

%

Million yen

%

Fiscal year ended March 2023

20,004

24.9

1,724

400.0

1,844

233.1

1,212

26.5

Fiscal year ended March 2022

16,011

20.2

344

-

553

687.7

958

-

Note: Comprehensive income

Fiscal year ended March 31, 2023:

1,044 million yen (yoy 0.2%)

Fiscal year ended March 31, 2022:

1,042 million yen (yoy - %)

Earnings per share

Diluted EPS

Return on

Return on asset

Ratio of operating

equity

(ROA)

profit to net sales

Yen

Yen

%

%

%

Fiscal year ended March 2023

135.11

-

24.4

15.2

8.6

Fiscal year ended March 2022

100.02

-

21.8

5.5

2.2

Reference: Share of profit (loss) of entities accounted for using equity method

Fiscal year ended March 31, 2023:

21 million yen

Fiscal year ended March 31, 2022:

68 million yen

(Note) Diluted profit per share is not shown because there are no latent shares with a dilutive effect

(2) Consolidated financial position

Total assets

Net assets

Equity ratio

Net assets per share

Million yen

Million yen

%

Yen

As of March 31, 2023

12,912

5,691

44.1

609.63

As of March 31, 2022

11,378

4,233

37.1

484.26

Reference: Shareholders' equity

As of March 31, 2023:

5,691 million yen

As of March 31, 2022:

4,226 million yen

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(3) Consolidated cash flow

	Cash flows from			Cash flows from		Cash flows from		Increase/decrease in
					cash and cash
	operating activity			investing activity		financing activity
					equivalents
	Million yen				Million yen			Million yen			Million yen
Fiscal year ended March 2023		1,661				0			135				4,868
Fiscal year ended March 2022		(118)				(359)			276				3,055
2. Dividends
			Annual dividends			Aggregate	Payout ratio	Dividends/
	End of 1Q	End of 2Q	End of 3Q	End of FY	Annual	amount	(Consolidated)	net assets
											(annual)				(Consolidated)
	Yen		Yen			Yen		Yen	Yen	Million		%	%
											yen
Fiscal year ended March 2022	0.00		4.00		0.00		10.00	14.00	131		14.0	3.0
Fiscal year ended March 2023	0.00		5.00		0.00		36.00	41.00	393		30.3	7.5
Fiscal year ending March 2024	0.00		21.00		0.00		26.00	47.00			-
(forecast)
Note: Breakdown of the year-end	dividend for the fiscal year ended March 2022
Ordinary dividend: 7.00 yen	Commemorative dividend: 3.00 yen

3. Consolidated earnings forecasts for the fiscal year ending March 31, 2024 (April 1, 2023 - March 31, 2024)

(Percentage figures represent year-on-year changes)

	Net sales		Operating profit	Ordinary profit	Profit attributable to	Earnings
		owners of parent	per share
	Million yen		%	Million yen	%	Million yen	%	Million yen	%	Yen
First half	10,030		2.4	890	8.0	890	(6.3)	575	(14.5)	61.63
Full year	20,200		1.0	2,000	16.0	2,000	8.4	1,250	3.1	133.88

Notes:

1. Changes in significant subsidiaries during the period (Changes in specific subsidiaries accompanied by changes in the scope of consolidation): None

Newly included: N.A.

Excluded: N.A.

1. Changes in accounting policies, changes in accounting estimates, and restatements
2. 1. Changes in accounting policies accompanying revisions in accounting standards and other regulations: None
   2. Changes other than in (a): None
   3. Changes in accounting estimates: None
   4. Restatements: None
3. Number of outstanding shares (common shares)
4. 1. Total number of issued shares at the end of the period (including treasury shares)

As of March 31, 2023:	10,240,400 shares	As of March 31, 2022:	10,240,400 shares
(b) Number of treasury shares at the end of the period
As of March 31, 2023:	903,666 shares	As of March 31, 2022:	1,511,719 shares
(c) Average number of shares during the period
Fiscal year ended March 31, 2023: 8,973,673 shares	Fiscal year ended March 31, 2022: 9,582,718 shares

(Note) The number of treasury shares at the end of the period includes the Company's shares held by the trust account regarding the stock benefit trust (BBT・J-ESOP) (325,600 shares for the fiscal year ended March 2023 and 326,600 shares for the fiscal year ended March 2022). In addition, the number of the Company's shares held by the trust account regarding the stock benefit trust (BBT・J-ESOP) was included in the number of treasury shares, which was to be deducted from the calculation of the average number of shares during the period (325,823 shares for the fiscal year ended March 2023 and 336,162 shares for the fiscal year ended March 2022).

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(Reference) Overview of non-consolidated financial results
1. Non-consolidated financial results for the fiscal year ended March 31, 2023 (April 1, 2022 - March 31, 2023)
	(1) Result of operations (Non-consolidated)				(Percentage figures represent year-on-year changes)
		Operating revenue	Operating profit		Ordinary profit		Profit (loss)
		Million yen		%	Million yen		%		Million yen		%		Million yen		%
	Fiscal year ended March 2023	1,113			32.7	60		-	75		-	121		(47.5)
	Fiscal year ended March 2022	838			(24.4)	(109)		-	(55)		-	232		-
		Earnings per share	Diluted EPS
			Yen		Yen
	Fiscal year ended March 2023		13.58		-
	Fiscal year ended March 2022		24.24		-
	(Note) Diluted profit per share is not shown because there are no latent shares with a dilutive effect
	(2) Non-consolidated financial position
		Total assets	Net assets			Equity ratio		Net assets per share
		Million yen	Million yen		%				Yen
	As of March 31, 2023		9,873		3,047			30.9			326.35
	As of March 31, 2022		7,798		2,556			32.7			292.19
Reference: Shareholders' equity
	As of March 31, 2023:			3,047 million yen
	As of March 31, 2022:			2,550 million yen

• This financial report is not subject to the audit conducted by certified public accountants or auditing firms.
• Explanation of the proper use of these earnings forecasts and other matters (Note on forward-looking statements)
  The forward-looking statements such as earnings forecasts shown in this report are based on information currently available and certain assumptions that the Company regards as reasonable. The Company cautions that these statements do not guarantee future achievements. Actual results of operations may differ significantly from forward-looking statements for a number of reasons. Please refer to "1. Overview of results of operations (4) Outlook for the fiscal year ending March 2024" on page 10 for the suppositions that form the assumptions for earnings forecasts and cautions concerning the use thereof.

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1. Overview of results of operations

(1) Overview of results of operations in the fiscal year under review

During the first half of the fiscal year, there was another wave of the pandemic in Japan but pandemic restrictions gradually eased during the second half and economic activity began to recover. However, the outlook for the economy is still unclear because of monetary tightening in the United States and other developed countries, rising prices of energy and resources due to the Ukraine crisis and other events, the high cost of many materials because of inflation, and other concerns.

In this business environment, in the information technology industry, where the Startia Group operates, there is increasing demand for cybersecurity services and improving office network infrastructure environments. Interest in cybersecurity is high because many companies started using telework and shifting business processes to digital technologies for safety during the pandemic. Cybersecurity demand is strong in the digital transformation (DX) and other sectors too. Nevertheless, companies remain cautious about IT investments because of uncertainty about the economic outlook.

In the Digital Marketing business, the Company continues to provide "Cloud CIRCUS," a digital marketing tool, which helps customer companies to "increase and nurture their customers," as a subscription model (recurring billing type), working to increase the number of customer acquisitions and ARR (annual recurring revenue). In order to further enhance product functions and improve service quality of digital marketing tools, we raised the price of the SaaS tool's main plan and also focused on developing customer referrals and partner sales to expand sales channels.

In the IT Infrastructure business, the Group has been establishing solid relationships with the customer base of small and medium-size enterprises, or SMEs, and supported them to improve their productivity consistently by proposing and providing solutions to those customers. In a bid to lead their operations in a better direction, the Group uses IT technologies that cover core and indispensable facilities at offices and support for office work.

In the fiscal year under review, customers began some business activities to cope with the situation amid the COVID-19 pandemic and in the era after it, and both the Digital Marketing business and the IT Infrastructure business increased sales from the same period of the previous year. Particularly, in the IT Infrastructure business, sales of MFPs (multi-function printers) and network-related equipment, both main products in the segment, kept performing favorably following the third quarter, leading to a significant increase in consolidated operating profit in the fiscal year under review.

As a result, net sales for the fiscal year under review totaled 20,004,407 thousand yen (up 24.9% from the previous fiscal year).

The cost of sales increased 25.9% to 11,549,563 thousand yen mainly because of the acquisition of a business in the IT Infrastructure segment. Selling, general and administrative expenses increased 3.6% to 6,730,743 thousand yen. This was primarily the result of a decline in advertising expenses and increases in personnel and other selling and administrative expenses because of the newly acquired business in the IT Infrastructure segment.

As a result, operating profit was 1,724,100 thousand yen (up 400.0% from the previous fiscal year).

Ordinary profit was up 233.1% to 1,844,375 thousand yen in part because of a higher profit of equity-method

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companies due to the strong performance of these companies. Extraordinary profit totaled 452,830 thousand yen (down 40.4% from the previous year) mainly because of a 400,071 thousand yen gain on the sales of investment securities. The Company decided to record an asset impairment loss of 350,604 thousand yen in the fourth quarter of the fiscal year under review as an extraordinary loss.

Since the fiscal year ended March 2021, the Digital Marketing business ("this business") has been moving away from the business model of prior years that relied chiefly on only the sale of products and services. This business is concentrating resources on a subscription business model in which even a small sale results in a steady revenue stream. Activities also include strengthening development operations and investing in marketing activities. As a result, sales have been increasing consistently in this business. In the fiscal year ended March 2023, an organizational unit for implementing a product led growth (PLG) strategy was established in addition to the existing sales organization centered on sales activities. Basically, this strategy involves aiming for growth by embedding sales and marketing functions in SaaS products. However, shifting people in the sales-led growth (SLG) organization to the new PLG unit raised the percentage of new employees in the SLG unit. As a result, considerable time was required to train these new people as well as for starting PLG strategy activities. Furthermore, although monthly sales of SaaS tools increased consistently, subscription model sales slowed down because of cancellations of tool options. As a result, Digital Marketing performance was below the initial plan.

In the fiscal year ending March 2024 and following years, we will continue to make the subscription model the main business of this segment. Our goals are to make the Digital Marketing segment profitable in the fiscal year ending March 2024 and to improve the profitability of this segment.

Profit before income taxes was 1,937,927 thousand yen (up 47.5% from the previous fiscal year). Income taxes paid after application of tax effect accounting were 725,470 thousand yen (up 104.1% from the previous fiscal year). As a result, net profit attributable to owners of parent was 1,212,456 thousand yen (up 26.5% from the previous fiscal year).

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