ValueCommerce : Q1 TSE Filingspdf

This filing was originally prepared and published by the company in Japanese as it contained timely disclosure information to be submitted to the Tokyo Stock Exchange (1st section). The English translation is for your reference only. To the extent there is any discrepancy between this English translation and the original Japanese filing, the Japanese filing will prevail. The following financial information was prepared in accordance with generally accepted accounting principles in Japan (JGAAP).

Financial Results (Consolidated) for Q1 of FY2020

		April 28, 2020
Corporate Name:	ValueCommerce Co., Ltd.	Listed: TSE 1st section
Ticker Symbol:	2491	URL: https://www.valuecommerce.co.jp/en/
Representative:	Representative Director, President and CEO	(Name) Jin Kagawa
Contact person:	Director of the Board, CFO	(Name) Masatomo Endo

						TEL: [phone]
Scheduled date of commencement of dividend payment:	-
Scheduled date of filing the securities report:		May 13, 2020
Results supplementary materials to be created:		Yes
An explanatory presentation to investors:		No
						(Amounts less than one million yen rounded down)
1. Consolidated Operating Results for the First Quarter of FY2020 (Jan. 1 to Mar. 31, 2020)
(1) Consolidated Operating Results		(Percentage figures refer to comparisons with the preceding fiscal year)
										Net income
	Revenue		Operating income		Ordinary income			attributable to owners
										of the parent
	Million Yen	%	Million Yen		%	Million Yen		%		Million Yen		%
Q1 FY2020	7,661	21.6	1,526		22.9	1,523		22.5		1,013		21.2
Q1 FY2019	6,300	34.7	1,242		50.2	1,242		51.3		836		51.8

(Note) Comprehensive income:	First quarter ended March 31, 2020:	1,073 million yen, 31.0%
		First quarter ended March 31, 2019:	819 million yen, 41.3%
		Basic EPS			Diluted EPS
	(Earnings per share)		(Diluted Earnings per share)
		Yen			Yen
Q1 FY2020		31.39			31.36
Q1 FY2019		25.91			25.88
(2) Consolidated Financial Positions
		Total assets		Net worth	Equity ratio	Book-value per share
		Million Yen	Million Yen	%	Yen
As of March 31, 2020	18,029	11,952	66.3	369.84
As of December 31, 2019	18,011	11,491	63.8	355.60
(Reference) Owners' equity:	As of March 31, 2020:		11,946 million yen
		As of December 31, 2019:	11,485 million yen

2. Dividends

				Dividend per share
	Q1		Q2	Q3	Q4	Total
		Yen	Yen	Yen	Yen	Yen
FY2019		－	14.00	－	19.00	33.00
FY2020		－
FY2020 (Forecast)			16.00	－	18.00	34.00

(Note) Revisions to dividends forecast published most recently: No

3. Consolidated Operating Forecast for the Fiscal Year Ended Dec. 31, 2020 (Jan. 1 to Dec. 31, 2020)(Percentage figures refer to comparisons with the preceding fiscal year)

								Net income		Basic EPS
	Revenue		Operating income	Ordinary income	attributable to owners	(Earnings
								of the parent		per share)
	Million Yen		%	Million Yen	%	Million Yen	%	Million Yen		%	Yen
Q1-Q2(cumulative) FY2020	14,300		16.1	2,550	7.5	2,550	7.0	1,670		5.1	51.70
FY2020	30,000		16.8	5,500	10.7	5,500	10.3	3,600		7.6	111.45

(Note) Revisions to operating forecast published most recently: No

• Notes

1. Significant changes in scope of consolidation during this year: No
2. Application of specific accounting treatment to the preparation of quarterly consolidated financial statements: No
3. Changes in accounting policies and accounting estimates, retrospective restatement

1.	Changes in accounting policies due to amendment of accounting standards, etc.	:	No
2.	Changes in accounting policies other than "1."	:	No
3.	Changes in accounting estimates	:	No
4.	Retrospective restatement	:	No

(4) Number of shares issued (Common stock)
1.	Common stock		as of	34,471,000	shares	as of	34,471,000	shares
	(including treasury stock)		Mar. 31, 2020	December 31, 2019
2.	Treasury stock		as of	2,169,828	shares	as of	2,170,779	shares
	Mar. 31, 2020	December 31, 2019
3.	Average number of shares issued		average during	32,300,689	shares	average during	32,288,531	shares
(cumulative period)		Jan. 1 to Mar. 31, 2020	Jan. 1 to Mar. 31, 2019

* Quarterly review

This outline of quarterly consolidated financial statements is not subject to the quarterly review.

• Note on proper use of the financial forecasts and other special notes (Note on future descriptions)
  This filing contains future description such as financial outlook. They are based on information currently available to the company and on certain assumptions we deem reasonable. They are not intended to constitute the company's guarantee that the outlook and description will be realized. The actual results may differ materially from those described in this filing due to various factors.

(Method to reach supplementary materials)

The supplementary materials on financial results will be posted on the company's website.

1. Qualitative Information Concerning Consolidated Business Results

1. Analysis of Operating Results

During the first quarter of the consolidated fiscal year under review, the Japanese economy was depressed as the spread of COVID-19 infection got worsened day by day. Though the end of the spread of COVID-19 infection is necessary for economic recovery, the uncertain situation is still to continue.

In this environment, the Group focus on providing effective marketing solution to maximize commerce business operators' performance, "Gross Merchandise Value (GMV)".

For the first quarter of the consolidated fiscal year under review, revenue was JPY 7,661,466 thousand (up 21.6% Y/Y). This was attributable to good performance in existing services at the beginning of the period and total impact of COVID-19 was limited despite there's the impact from the end of February. In addition, revenue of Dynatech inc. and B-SLASH Corporation, which are consolidated after the fourth quarter of last consolidated fiscal year, was accounted.

Selling, general and administrative expenses was JPY 1,298,211 thousand (up 64.3% Y/Y) due to selling, general and administrative expenses and amortization of goodwill of beforementioned subsidiary according to acquisition of its share.

Operating income was JPY 1,526,932 thousand (up 22.9% Y/Y) due to growth driven by existing services.

Ordinary income was JPY 1,523,061 thousand (up 22.5% Y/Y) due to recognizing operating losses on investment in partnership of JPY 9,385 thousand under non-operating expenses.

Net income attributable to owners of the parent was JPY 1,013,894 thousand (up 21.2% Y/Y) due to the recording of income taxes of JPY 510,465 thousand.

Segment performance was as follows:

(i) Marketing Solution Business

Marketing Solution Business provides solutions of customer attraction to commerce business operators' EC site. Main service is "Affiliate Marketing", pay-per-performance advertising.

During the first quarter of the consolidated fiscal year under review, performance was good at the beginning of the period and total impact of COVID-19 is limited despite there's the impact from the end of February in some parts of "Affiliate Marketing" such as Travel category, etc.

As a result, this segment attained revenue of JPY 4,595,401 thousand (up 1.6% Y/Y) and segment operating income of JPY 826,214 thousand (up 3.9% Y/Y).

(ii) EC Solution Business

EC Solution Business provides solutions of sales promotion on commerce business operators' EC site. Main services are "STORE's R∞", CRM tool for stores in the online shopping mall operated by Yahoo Japan Corporation, and "Storematch", pay-per-click advertising.

Also, EC Solution Business includes two subsidiaries, which the Company acquired all shares and consolidated;

-Dynatech inc. (develops and provides information system for accommodation facilities)

Its profit and loss and amortization of goodwill according to acquisition of its shares are accounted from the fourth quarter of 2019 consolidated fiscal year.

-B-SLASH Corporation (provides necessary solutions for EC operation solutions for EC operation)

Its profit and loss and amortization of goodwill according to acquisition of its shares are accounted from the first quarter of 2020 consolidated fiscal year.

During the first quarter of the consolidated fiscal year under review, service use of stores increased due to business measures by collaborating with Yahoo Japan Corporation in the online shopping mall operated by Yahoo Japan Corporation.

About operating results in services for stores in the online shopping mall operated by Yahoo Japan Corporation, there's little impact from the spread of COVID-19 infection. About Dynatech inc., which customer is accommodation facilities, there's no significant impact as its main business is a subscription model with monthly charges.

As a result, this segment attained revenue of JPY 3,066,065 thousand (up 72.5% Y/Y) and segment operating income of JPY 1,021,351 thousand (up 43.0% Y/Y).

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1. Analysis of Financial Positions

1. The status of assets, liabilities and net assets (Assets)

At the end of the first quarter of the consolidated fiscal year under review, total assets amounted to JPY 18,029,016 thousand, an increase of JPY 17,443 thousand from the end of the preceding consolidated fiscal year.

Current assets amounted to JPY 12,850,838 thousand, a decrease of JPY 621,687 thousand from the end of the preceding consolidated fiscal year. This was mainly due to a decrease in cash and deposits of JPY 511,938 thousand and notes and accounts receivable-trade of JPY 206,619 thousand.

Noncurrent assets amounted to JPY 5,178,178 thousand, an increase of JPY 639,131 thousand from the end of the preceding consolidated fiscal year. This was mainly due to 1; an increase in software of JPY 227,563 thousand, and 2; goodwill of JPY 364,776 thousand according to the acquisition and consolidation of 100% share of B-SLASH Corporation.

(Liabilities)

At the end of the first quarter of the consolidated fiscal year under review, total liabilities amounted to JPY 6,076,935 thousand, a decrease of JPY 442,716 thousand from the end of the preceding consolidated fiscal year.

Current liabilities amounted to JPY 5,966,194 thousand, a decrease of JPY 471,450 thousand from the end of the preceding consolidated fiscal year. This was mainly due to a decrease in accounts payable-other of JPY 414,276 thousand and income taxes payable of JPY 510,255 thousand despite an increase in accounts payable-trade of JPY 107,258 thousand and provision for bonuses of JPY 126,520 thousand.

Noncurrent liabilities amounted to JPY 110,740 thousand, an increase of JPY 28,733 thousand from the end of the preceding consolidated fiscal year.

(Net assets)

At the end of the first quarter of the consolidated fiscal year under review, net assets amounted to JPY 11,952,081 thousand, an increase of JPY 460,160 thousand from the end of the preceding consolidated fiscal year. This was mainly due to an increase in attributable to the recording of net income attributable to owners of the parent of JPY 1,013,894 thousand despite a decrease in retained earnings of JPY 613,704 thousand as a result of a dividend of surplus.

2. Cash Flows

At the end of the first quarter of the consolidated fiscal year under review, the balance of cash and cash equivalents amounted to JPY 7,350,973 thousand, a decrease of JPY 511,938 thousand from the end of the preceding consolidated fiscal year.

The cash flows during the first quarter of the consolidated fiscal year under review and their causes are as follows.

(Operating Cash Flows)

Net cash provided by operating activities amounted to JPY 803,551 thousand (compared to net cash provided of JPY 489,110 thousand in the preceding first quarter), mainly due to income before income taxes of JPY 1,524,359 thousand. Positive factors include depreciation of JPY 104,905 thousand, amortization of goodwill of JPY 115,731 thousand, a decrease in accounts receivable-trade of JPY 206,619 thousand and an increase in accounts payable-trade of JPY 107,258 thousand. Negative factors include a decrease in accounts payable-other of JPY 482,138 thousand and income taxes paid of JPY 1,005,111 thousand.

(Investing Cash Flows)

Net cash used in investing activities amounted to JPY 707,431 thousand (compared to net cash used of JPY 23,944 thousand in the preceding first quarter), mainly due to purchase of intangible assets of JPY 206,621 thousand and payment of acquisition of investments in subsidiaries resulting in change in scope of consolidation of JPY 537,032 thousand, despite proceeds from distribution of investment in partnership of JPY 92,776 thousand.

(Financing Cash Flows)

Net cash used in financing activities amounted to JPY 608,058 thousand (compared to net cash used of JPY 570,577 thousand in the preceding first quarter), mainly due to cash dividends paid of JPY 607,925 thousand.

(3) Information about Consolidated Financial Forecasts

The consolidated financial forecast has not changed from the Consolidated Financial Forecasts for FY2020 announced in the "Financial Results (Consolidated) for Fiscal Year of 2019" on January 29, 2020.

Impact of COVID-19 on each business is under examination as the Group estimates decline in revenue in some categories such Travel, Recruiting, etc. in "Affiliate Marketing" whereas increased online-shopping demand is observed in some categories.

The Group will announce the revision immediately if necessary.

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1. 3. Earnings Results for the Year Ended March 31, 2020

2. Consolidated Balance Sheet

			(Thousand yen)
		As of	As of
		December 31, 2019	March 31, 2020
(Assets)
Current assets
Cash and deposits	7,862,912	7,350,973
Notes and accounts receivable- trade	4,290,931	4,084,311
Accounts receivable- other	1,172,858	1,098,715
Other current assets	161,466	334,650
Allowance for doubtful accounts	-15,642	-17,812
Current assets in total	13,472,525	12,850,838
Noncurrent assets
Property, plant and equipment
Buildings and accompanying facilities, net	184,923	199,071
Tools, instruments and fixtures, net	156,582	142,342
Leased assets, net	7,731	18,131
Property, plant and equipment in total	349,237	359,545
Intangible assets
Software	847,031	1,074,594
Software in progress	1,010,539	1,035,863
Goodwill	1,321,103	1,685,880
Other intangible assets	11,010	11,032
Intangible assets in total	3,189,685	3,807,371
Investments and other assets
Investment securities	544,822	551,962
Guarantee deposits	311,369	311,502
Deferred tax assets	119,299	126,183
Other investments	25,626	22,603
Allowance for doubtful accounts	-993	-989
Investments and other assets in total	1,000,124	1,011,261
Noncurrent assets in total	4,539,047	5,178,178
Total assets		18,011,572	18,029,016

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			(Thousand yen)
		As of	As of
		December 31, 2019	March 31, 2020
(Liabilities)
Current liabilities
Accounts payable- trade	2,622,733	2,729,991
Accounts payable- other	2,278,599	1,864,322
Income taxes payable	1,063,905	553,649
Provision for bonuses	19,075	145,596
Other current liabilities	453,330	672,633
Current liabilities in total	6,437,645	5,966,194
Noncurrent liabilities
Other noncurrent liabilities	82,006	110,740
Noncurrent liabilities in total	82,006	110,740
Liabilities in total	6,519,652	6,076,935
(Net assets)
Shareholders' equity
Capital stock	1,728,266	1,728,266
Capital surplus	1,162,922	1,163,298
Retained earnings	8,976,301	9,376,491
Treasury stock	-530,161	-530,022
Shareholders' equity in total	11,337,329	11,738,034
Accumulated other comprehensive income
Valuation difference on available-for-sale securities	148,497	208,110
Accumulated other comprehensive income in total	148,497	208,110
Subscription rights to shares	6,093	5,936
Net assets in total	11,491,920	11,952,081
Liabilities and net assets		18,011,572	18,029,016

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(2) Consolidated Statement of Income and Comprehensive Income

		(Thousand yen)
	Year ended	Year ended
	March 31, 2019	March 31, 2020
	(Jan. 1 to Mar. 31, 2019)	(Jan. 1 to Mar. 31, 2020)
Revenue	6,300,301	7,661,466
Cost of revenue	4,267,203	4,836,322
Gross profit	2,033,097	2,825,143
Selling, general and administrative expenses	790,310	1,298,211
Operating income	1,242,787	1,526,932
Non-operating income
Gain on non-refundable commissions for publishers	6	4,162
Reversal of allowance for doubtful accounts	647	75
Others	1,636	1,594
Non-operating income in total	2,290	5,833
Non-operating expenses
Operating losses on investment in partnership	1,531	9,385
Foreign exchange losses	654	174
Others	31	144
Non-operating expenses in total	2,216	9,704
Ordinary income	1,242,860	1,523,061
Extraordinary income
Gain on liquidation of subsidiary	－	4,767
Extraordinary income in total	－	4,767
Extraordinary losses
Impairment losses	7,890	－
Expense on corresponding system failure	－	3,470
Extraordinary losses in total	7,890	3,470
Income before income taxes	1,234,970	1,524,359
Income taxes- current	370,718	543,658
Income taxes- deferred	27,698	-33,193
Income tax in total	398,416	510,465
Net income	836,554	1,013,894
(Break Down)
Net income attributable to owners of the parent	836,554	1,013,894
Net income attributable to non-controlling interests	－	－
Other comprehensive income
Valuation difference on available-for-sale securities	-16,901	59,612
Other comprehensive income in total	-16,901	59,612
Comprehensive income	819,652	1,073,506
(Break Down)
Comprehensive income attributable to
Comprehensive income attributable to owners of the parent	819,652	1,073,506
Comprehensive income attributable to non-controlling interests	－	－

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(3) Consolidated Statement of Cash Flow

			(Thousand Yen)
		Year ended	Year ended
		March 31, 2019	March 31, 2020
		(Jan. 1 to Mar. 31, 2019)	(Jan. 1 to Mar. 31, 2020)
Operating cash flows
Income before income taxes	1,234,970	1,524,359
Depreciation and Amortization	60,713	104,905
Amortization of goodwill	28,086	115,731
Increase (decrease) in allowance for doubtful accounts	-11,569	2,166
Loss (gain) on liquidation of subsidiary	－	-4,767
Interest income received	-42	-47
Interest expenses	－	103
Foreign exchange losses (gains)	178	－
Operating losses (gains) on investment in partnership	1,531	9,385
Impairment losses	7,890	－
Expense on corresponding system failure	－	3,470
Decrease (increase) in note and accounts receivable- trade	34,008	206,619
Increase (decrease) in accounts payable- trade	-46,781	107,258
Decrease (increase) in accounts receivable- other	-66,488	52,931
Increase (decrease) in accounts payable-other	-108,533	-482,138
Others, net	122,760	168,742
Subtotal	1,256,726	1,808,718
Interest income received	42	47
Interest expense paid	－	-103
Income taxes paid	-767,658	-1,005,111
Operating cash flows	489,110	803,551
Investing cash flows
Purchase of property, plant and equipment	-1,716	-37,909
Purchase of intangible assets	-48,109	-206,621
Purchase of investment securities	－	-33,381
Proceeds from liquidation of subsidiary	－	14,767
Proceeds from distribution of investment in partnership	25,881	92,776
Payments for guarantee deposits	－	-32
Payment of acquisition of subsidiaries' share resulting in change in	－	-537,032
scope of consolidation
Investing cash flows	-23,944	-707,431
Financing cash flows
Proceeds from disposal of treasury stock	3,889	463
Purchase of treasury stock	-89	-104
Cash dividends paid	-574,377	-607,925
Repayments of finance lease obligations	－	-491
Financing cash flows	-570,577	-608,058
Effect of exchange rate change on cash and cash equivalents	-178	－
Net increase (decrease) in cash and cash equivalents	-105,590	-511,938
Beginning balance of cash and cash equivalents	7,978,055	7,862,912
Ending balance of cash and cash equivalents		7,872,464	7,350,973

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1. Notes to Consolidated Financial Statement (Notes on the going concern premise)
   Not applicable.

(Note if there is a considerable change to shareholders' equity) Not applicable.

(Application of special accounting methods for preparing quarterly consolidated financial statements） Not applicable.

(Segment Information) Segment Information

I. For the first quarter of the Fiscal 2019 (Jan. 1 to Mar. 31, 2019)

1. Information on the amount of sales, profit/loss by reporting segment

										(Thousand yen)
			Reporting segment			Adjustment	Amount on
		Marketing		EC Solution			consolidated financial
			Total	(Note 1)
		Solution Business		Business	statements (Note 2)
Revenue
Revenue to clients		4,522,694		1,777,606		6,300,301		－		6,300,301
Inter-segment revenue		－		－		－		－		－
Total revenue		4,522,694		1,777,606		6,300,301		－		6,300,301
Segment operating income/loss		795,584		714,434		1,510,019		-267,232		1,242,787

(Note) 1. The adjustment to segment operating income of JPY -267,232 thousand is corporate expenses not allocated to any reporting segment.

2. Segment operating income/loss is adjusted to operating income in the consolidated financial statement.

2. Information on impairment loss of noncurrent assets, goodwill, etc. by reportable segment (Material impairment loss of noncurrent assets)

Not applicable.

(Material change in goodwill) Not applicable.

(Material gain on negative goodwill) Not applicable.

1. For the first quarter of the Fiscal 2020 (Jan. 1 to Mar. 31, 2020)

1. Information on the amount of sales, profit/loss by reporting segment

									(Thousand yen)
			Reporting segment			Adjustment	Amount on
		Marketing	EC Solution			consolidated financial
		Total	(Note 1)
		Solution Business	Business	statements (Note 2)
Revenue
Revenue to clients	4,595,401	3,066,065		7,661,466		－		7,661,466
Inter-segment revenue	－	－		－		－		－
Total revenue		4,595,401	3,066,065		7,661,466		－		7,661,466
Segment operating income/loss	826,214	1,021,351		1,847,566		-320,633		1,526,932
(Note) 1.	The adjustment to segment operating income of JPY -320,633 thousand is corporate expenses not allocated to any reporting
	segment.
2.	Segment operating income/loss is adjusted to operating income in the consolidated financial statement.

2. Information on assets by reportable segment

At the end of the first quarter of the consolidated fiscal year under review, assets on EC Solution Business increased JPY 1,106,742 thousand from the end of the preceding consolidated fiscal year, as B-SLASH Corporation has been consolidated.

The amount of assets of the segment is calculated tentatively based on information currently available to the company and on certain assumptions we deem reasonable since acquisition cost is not determined and not allocated to the other expenses yet.

3. Information on impairment loss of noncurrent assets, goodwill, etc. by reportable segment (Material impairment loss of noncurrent assets)

Not applicable.

(Material change in goodwill)

At the end of the first quarter of the consolidated fiscal year under review, goodwill on EC Solution Business increased JPY 480,507 thousand from the end of the preceding consolidated fiscal year, as B-SLASH Corporation has been consolidated.

The amount of goodwill of the segment is calculated tentatively based on information currently available to the company and

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on certain assumptions the company deem reasonable since acquisition cost is not determined and not allocated to the other expenses yet.

(Material gain on negative goodwill) Not applicable.

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