Information Services International Dentsu : Presentation Material of Financial Results for the Second Quarter of FY2022 (ending December 31, 2022)

PRESENTATION MATERIAL OF FINANCIAL RESULTS

FOR THE SECOND QUARTER OF FY2022

(FROM JANUARY 1, 2022 TO JUNE 30, 2022)

July 28, 2022

Information Services International-Dentsu, Ltd.

Note: This English translation is solely for reference purposes and not a legally definitive translation of the original Japanese text.

In the event a difference arises regarding the meaning herein, the original Japanese version will prevail as the official authoritative version.

Outline of financial results for the Second Quarter of FY2022

Note:

We have applied the "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020), etc. from the beginning of the first quarter of the current fiscal year. Major management indicators, etc. related to the second quarter of the current fiscal year are indicators after applying the said accounting standard, etc.

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FY2022 2nd Quarter Financial Highlights

• Net sales and profits exceeded the initial plan, and both sales and profits increased.
• • Announced revisions to Q2 earnings forecast on July 15
• Revised full-year earnings forecast based on progress up to Q2.
• The year-end dividend is expected to revise from ¥33 to ¥45. Annual dividend of ¥78 per share, planned to increase for 10 consecutive years.

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1. Consolidated Results for the Second Quarter of FY2022

• Revenues and profits increased due to the strong performance of all segments and the impact of the adoption of the accounting standard for revenue recognition ー Net sales +1,954 million yen, Operating profit +1,030 million yen ー.

（Unit : Millions of yen）

			YoY			Vs. initial forecast
	2Q of FY2022			(announced on February 9, 2022) *
	(cumulative)	Forecast	Variance	% change	2Q of FY2021	Variance	% change
		(cumulative)
Net sales	61,458	54,293	+7,165	+13.2	59,000	+2,458	+4.2
Gross profit	22,974	19,020	+3,954	+20.8	21,054	+1,920	+9.1
Profit margin	37.4%	35.0%	+2.4p	－	35.7%	+1.7p	－
Selling, general and	13,339	12,494	+845	+6.8	13,954	-615	-4.4
administrative expenses
Operating profit	9,634	6,525	+3,109	+47.6	7,100	+2,534	+35.7
Operating margin	15.7%	12.0%	+3.7p	－	12.0%	+3.7p	－
Ordinary profit	9,645	6,443	+3,202	+49.7	7,100	+2,545	+35.8
Profit attributable to owners of	7,028	4,392	+2,636	+60.0	5,000	+2,028	+40.6
parent
Number of employees at the end	3,342 people	3,199 people	+143 people	+4.5
of the fiscal year
					* Announced revisions to Q2 earnings forecast on July 15

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2-1. Factors for Increase/Decrease in Operating Profit (YoY)

YoY

+31.1

Operating

profit

65.2

2Q of FY2021 (cumulative) result

Impact of increase in gross profit margin +11.0

Effect of	Increase
in sales	+18.2
		Excluding the impact of the accounting
		standard change, the gross profit margin
		was 36.9%, an improvement of +1.9p.
		Improved profitability, especially in-house
		software products.

(Unit: 100 million of yen)

Impact of the accounting		Increase in SG&A
standard change +10.3			expenses	-8.4

Operating

profit

Increase in personnel expenses 96.3 mainly due to an increase in the

number of employees and performance-linked bonuses.

2Q of FY2022 (cumulative) result

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2-2. Factors for Increase/Decrease in Operating Profit (vs. initial forecast)

(Unit: 100 million of yen)

Vs. initial
forecast
+25.3	Effect of	Increase
	in sales	+6.7

Impact of increase in gross profit margin +8.2

Decrease in SG&A

expenses +6.1

Impact of the accounting
standard change	+4.3

Mainly due to decreases in R&D expenses, outsourcing expenses, and travel expenses.

Operating

profit

96.3

Operating

profit

71.0

2Q of FY2022 (cumulative) initial forecast

(announced on February 9, 2022)

※Difference from initial forecast related to changes in accounting standards.

2Q of FY2022 (cumulative) result

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3. Net Sales and Operating Profit by Reportable Segment

							（Unit : Millions of yen）
Reportable segment	2Q of FY2022			YoY	Vs. initial forecast
	(cumulative)	Variance	% change	Overview	Variance	% change
	Net sale		13,635	+1,831	+15.5	Net sales and operating profit increased due to the	+397	+3.0
Financial	Operating					strong performance of DX support projects for the
	1,069	+549	+105.6	banking industry, mainly in the area of customer	－	－
Solutions	profit		contact reform, and the expansion of custom
	%		7.8	+3.4p	－	system development projects for the credit card	－	－
		and leasing industries.
	Net sale		8,723	+1,005	+13.0	Net sales and operating profit increased due to the	+799	+10.1
Business	Operating		2,277	+1,046	+85.0	expansion of the sales and introduction of four
	focused solutions, POSITIVE, STRAVIS, Ci*X and	－	－
Solutions	profit
						CCH Tagetik, mainly in the transportation
	%		26.1	+10.2p	－	equipment and service industries.	－	－
	Net sale		17,339	+1,702	+10.9	Net sales and operating profit increased due to the	+217	+1.3
	Operating					expansion of projects for the introduction of the
Manufacturing		2,045	+534	+35.3	Teamcenter, a PLM solution that supports the	－	－
profit		digitization of engineering chains, mainly in the
Solutions						transportation equipment industry and the electric and
	%		11.8	+2.1p	－	precision industries, as well as steady growth in	－	－
						projects for the process manufacturing industry.
	Net sale		21,759	+2,627	+13.7	Net sales and operating profit increased due to an	+1,045	+5.0
Communication						expansion of customer DX support projects in the
Operating		4,242	+981	+30.1	marketing and core business areas to the service	－	－
IT	profit		and pharmaceutical industries, as well as an
	%		19.5	+2.5p	－	expansion of projects for the introduction of SAP	－	－
		solutions to the service industry.
* POSITIVE : human capital management solution	STRAVIS: consolidated accounting software Ci*X : financial solution system CCH Tagetik : business management solution Teamcenter : PLM (Product Lifecycle Management) solution	7

Ref.) Consolidated Results for the 2Q (April - June) of FY2022

■ Consolidated Results

■ Reportable Segment

（Unit : Millions of yen）

（Unit : Millions of yen）

	2Q of FY2022		YoY
	(April - June)	2Q of FY2021	Variance	% change
Net sales	31,476	26,797	+4,679	+17.5
Gross profit	11,681	9,425	+2,256	+23.9
Profit margin	37.1%	35.2%	+1.9p	－
Selling, general and	7,352	6,627	+725	+10.9
administrative
expenses
Operating profit	4,328	2,798	+1,530	+54.7
Operating margin	13.8%	10.4%	+3.4p	－

Reportable segment	2Q of FY2022			YoY
(April - June)		Variance	% change

	Net sale	6,887	+1,417	+25.9
Financial	Operating profit	292	+419	－
Solutions
	%	4.2	+6.5p	－
	Net sale	4,552	+290	+6.8
Business	Operating profit	1,138	+216	+23.4
Solutions
	%	25.0	+3.4p	－
	Net sale	8,632	+1,215	+16.4
Manufacturing	Operating profit	636	+215	+51.1
Solutions
	%	7.4	+1.7p	－
	Net sale	11,404	+1,758	+18.2
Communication	Operating profit	2,259	+677	+42.8
IT
	%	19.8	+3.4p	－

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4. Net Sales by Service Category and the Dentsu Group

					（Unit : Millions of yen）
Service category	2Q of FY2022	YoY		Vs. initial forecast
(cumulative)	Variance		% change	Variance	% change
Consulting Services	3,520	+271		+8.3	-167	-4.5
Custom System Development	16,182	+2,718		+20.2	-341	-2.1
In-house Software	11,769	+328		+2.9	+538	+4.8
Third-party Software	19,612	+3,160		+19.2	+1,963	+11.1
Outsourcing, Operation and	7,082	+1,492		+26.7	+1,323	+23.0
Maintenance Services
IT Equipment Sales and Others	3,291	-803		-19.6	-857	-20.7
Counterparty	2Q of FY2022	YoY
(cumulative)	Variance		% change
Dentsu Group Inc. and it's subsidiaries	11,874	+25		+0.2

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5. Net Sales by Industry

					（Unit : Millions of yen）
		2Q of FY2022 (cumulative)	YoY
	Industry	Net Sales	Composition Ratio	Variance	% change
		(%)
	Banks	9,619	15.6	+492	+5.4
	Other financial institutions	3,880	6.3	+1,413	+57.3
	Financial	13,500	21.9	+1,906	+16.4
	Transportation equipment	9,028	14.7	+729	+8.8
	Electric appliances	6,196	10.1	+720	+13.1
	Precision instruments
	Machinery	3,868	6.3	+382	+11.0
	Other products	5,603	9.1	+1,378	+32.6
	Manufacturing	24,697	40.2	+3,209	+14.9
	Services and public offices	18,289	29.8	+1,494	+8.9
	Distributions and others	4,971	8.1	+557	+12.6

* As we reviewed some of our client industries, we used reclassified figures for comparative purposes for the same period last year.	10