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

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

[Japanese GAAP] (Consolidated)

			November 5, 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	Phone: [phone]
Management Office	Name: Sungil Lee
Date of filing of quarterly report:	November 12, 2021
Date of commencement of dividend payment:	-
Preparation of quarterly supplementary materials:	Yes
Convening of a quarterly results meeting:	None
		(Amounts less than one million are rounded down)

1. Financial results for third quarter of fiscal year ending December 2021 (January 1, 2021 - Septembe r 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	%
Q3 FY2021		5,324		30.3	444		14.6	424	24.8	262	19.8
Q3 FY2020		4,086		62.5	388		85.4	340	63.5	219	71.1
(Note) Comprehensive income	Q3 FY2021: 260 million yen (22.5%)	Q3 FY2020: 212 million yen (65.9%)
		Profit per share	Profit per share fully
		diluted
				yen			yen
Q3 FY2021				63.31			59.15
Q3 FY2020				54.03			49.80
(2) Financial position (consolidated)
		Total assets		Net assets		Capital adequacy ratio
		million yen	million yen		%
Q3 FY2021				4,658			1,932		41.5
FY2020				4,290			1,732		40.3

(Reference) Shareholders' equity Q3 FY2021: 1,932 million yenFY2020: 1,729 million yen

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

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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

1. Number of shares outstanding (common shares)
2. 1. Shares outstanding (including treasury shares) at end of period
   2. Treasury shares at end of period
   3. Average number of shares during period

Q3 of year ending	4,336,700 shares	Year ended	4,197,400 shares
December 2021	December 2020
Q3 of year ending	127,802 shares	Year ended	87,658 shares
December 2021	December 2020
Q3 of year ending	4,148,609 shares	Q3 of year ended	4,058,138 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. Qualitative 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. Qualitative Information related to the Consolidated Business Results

(1) Explanation of Operating Results

During the first nine months of the fiscal year (January 1 to September 30, 2021), the Japanese economy continued to struggle due to COVID-19. Despite the recovery trend seen in the economy from the progress with vaccine rollouts and effects of stimulus measures, 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 nine months of the fiscal year, we achieved net sales of ¥5,324.455 million (up 30.3% year on year), operating profit of ¥444.870 million (up 14.6% year on year), ordinary profit of ¥424.482 million (up 24.8% year on year), and profit attributable to owners of parent of ¥262.667 million (up 19.8% 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. We expanded our business in the Shizuoka and Tokai area by making SOFTEC Co., Ltd. a consolidated subsidiary and promoted digital transformation in the administrative domain by entering a business alliance with Loglass Inc and Outlook Consulting Co., Ltd. Furthermore, we moved ahead with innovative projects in the field of DX, including development of an AI- driven automated shelving planning algorithm jointly with Kao Group Customer Marketing Co., Ltd.

Also, we actively communicated information on our services by publishing books, holding seminars, and more, with the aim of increasing our visibility and strengthening branding.

As a result, net sales in the professional services business came to ¥5,141.724 million (up 29.9% year on year) and segment profit (operating profit) came to ¥406.497 million (up 14.5% 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 11,248 including both corporate and individual members as of September 30, 2021. This steady growth represents a 1,042-member increase over the end of the previous year. Net sales trended strongly due to increased matching in conjunction with growth of our member base and changes in the rate plans for Assign Navi and Consultant Job aimed at further activation. At the same time, we continued to invest in the development of our new CS Clip service, as well as conducted more aggressive marketing activities aimed at monetization and reinforced our organizational structure for boosting the profitability of existing services.

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As a result, net sales in the platform business came to ¥234.506 million (up 40.3% year on year), and the segment profit (operating profit) came to ¥38.372 million (up 15.6% year on year).

(2) Explanation of Financial Position

Total assets at the end of the first nine months of the fiscal year were ¥4,658.051 million, up ¥367.773 million from the end of the previous fiscal year. This was primarily due to a ¥178.920 million increase in accounts receivable - trade, a ¥99.935 million increase in work in process, and a ¥97.842 million increase in investment securities.

Liabilities amounted to ¥2,725.769 million, up ¥168.037 million from the end of the previous fiscal year. This was primarily due to a ¥246.101 million decrease in long-term borrowings, and a ¥388.137 million increase in other (suspense receipts).

Net assets amounted to ¥1,932.282 million, up ¥199.735 million from the end of the previous fiscal year. This was primarily due to a ¥262.667 million increase in retained earnings, a ¥36.710 million increase in share capital, a ¥44.484 million increase in capital surplus, and a ¥141.694 million increase in treasury shares. The equity ratio was 41.5%.

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 third 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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