SB Technology : FY2023 First Quarter Consolidated Financial Report (Japanese GAAP)（564K）

Disclaimer:

This financial report is solely a translation of the "Kessan Tanshin" (in Japanese, including attachments), which has been prepared in accordance with accounting principles and practices generally accepted in Japan, for the convenience of readers who prefer an English translation.

July 27, 2023

SB Technology Corp.

Consolidated Financial Report for the First Quarter of Fiscal Year Ending March 31, 2024

(Three Months Ended June 30, 2023)

[Japanese GAAP]

Company name: SB Technology Corp. (Tokyo Stock Exchange/Code No. 4726)

(URLhttps://www.softbanktech.co.jp/)
Representative:	Shinichi Ata, President & CEO
Contact:	Masaaki Okazaki, Member of the Board, Executive Vice President & CFO
		Phone: [phone]
Scheduled date of filing of Quarterly Report:	August 10, 2023
Scheduled date of payment of dividend:	-
Preparation of supplementary materials for quarterly financial results:	Yes
Holding of quarterly financial results meeting:	Yes (for institutional investors and analysts)
	(All amounts are rounded down to the nearest million yen)

1. Consolidated Financial Results for the Three Months Ended June 30, 2023 (April 1, 2023 - June 30, 2023)

(1) Consolidated Results of Operations				(Percentages represent year-on-year changes)
	Net sales		Operating income	Ordinary income	Profit attributable to
		owners of parent
	Million yen	%	Million yen	%	Million yen	%	Million yen	%
Three months ended Jun. 30, 2023	15,958	2.6	1,057	△2.6	1,054	△1.4	505	△21.9
Three months ended Jun. 30, 2022	15,560	3.8	1,085	19.0	1,070	21.9	646	25.1

Note: Comprehensive income (million yen)	Three months ended Jun. 30, 2023:	557	(down 20.2%)
		Three months ended Jun. 30, 2022:	697	(up 25.7%)
	Net income per share	Diluted net income per share
		Yen	Yen
Three months ended Jun. 30, 2023		25.44	25.18
Three months ended Jun. 30, 2022		32.01	31.68

(2) Consolidated Financial Position

	Total assets	Net assets		Shareholders' equity	Net assets per share
		ratio
		Million yen	Million yen		%	Yen
As of Jun. 30, 2023		41,032	25,000		54.3	1,121.75
As of Mar. 31, 2023		45,466	25,167		49.4	1,131.42
Reference: Shareholders' equity (million yen)	As of Jun. 30, 2023: 22,283	As of Mar. 31, 2023: 22,475

2. Dividends

				Dividends per share
	1Q-end			2Q-end	3Q-end	Year-end	Total
		Yen	Yen	Yen	Yen	Yen
Fiscal year ended Mar. 31, 2023	－		25.00	－	35.00	60.00
Fiscal year ending Mar. 31, 2024	－
Fiscal year ending Mar. 31, 2024 (forecast)			30.00	－	30.00	60.00

Note: Revisions to the most recently announced dividend forecast: None

3. Forecast of Consolidated Financial Results for the Fiscal Year Ending March 31, 2024 (April 1, 2023 - March 31, 2024)

(Percentages represent year-on-year changes)

Net sales Operating income Ordinary income Profit attributable to Net income per share owners of parent

	Million yen	%	Million yen	%	Million yen	%	Million yen	%	Yen
Full year	68,000	1.1	5,900	6.2	5,750	4.6	8,200	134.5	412.79

Note: Revisions to the most recently announced consolidated forecast: None

* Notes

1. Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in changes in scope of consolidation): None
2. Application of special accounting for presenting quarterly consolidated financial statements: None
3. Changes in accounting policies and accounting estimates, and restatements
4. 1. Changes in accounting policies due to revisions in accounting standards, others: None
   2. Changes in accounting policies other than i. above: None
   3. Changes in accounting estimates: None
   4. Restatements: None
5. Number of outstanding shares (common stock)
6. 1. Number of shares outstanding at the end of the period (including treasury shares)

As of Jun. 30, 2023:

22,757,800 shares

As of Mar. 31, 2023:

22,757,800 shares

1. Number of treasury shares at the end of the period

As of Jun. 30, 2023:	2,892,968shares	As of Mar. 31, 2023:	2,892,930shares
iii. Average number of shares outstanding during the period
Three months ended Jun. 30, 2023:	19,864,851shares	Three months ended Jun. 30, 2022:	20,201,538shares

• This consolidated financial report is not subject to quarterly review procedures by a certified public accountant or audit company.
• Explanation for appropriate use of operating forecasts, and other special items

Cautionary statement with respect to forward-looking statements

Forecasts regarding future performance in this report are based on assumptions based upon valid and other reasonable information available to the Company at the time this report was created. This report is not promised by the Company regarding future performance. The actual performance may differ significantly from these forecasts for a variety of reasons.

How to view supplementary materials for quarterly financial results

The Company plans to hold a financial results meeting (online) for institutional investors and analysts on July 27, 2023. Supplementary materials for the quarterly financial results will be disclosed today (July 27, 2023), using the Timely Disclosure network (TDnet), and will be available on the Company's website (https://www.softbanktech.co.jp/corp/ir/).

SB Technology Corp. (4726) Financial Report

For the three-month period ended June 30, 2023

○Appendix Table of Contents

1. Qualitative Information on Financial Results of the Period Under Review ………………………………………………	2
(1) Explanation of Business Results ……………………………………………………………………………………	2
(2) Explanation of Financial Position ……………………………………………………………………………………	7
(3) Explanation on Consolidated Forecast and Other Forward-looking Statements ……………………………………	7
2. Quarterly Consolidated Financial Statements ……………………………………………………………………………	8
(1) Quarterly Consolidated Balance Sheet ………………………………………………………………………………	8

1. Quarterly Consolidated Statements of Income and Comprehensive Income ………………………………………… 10 (For the Three-month Period) ………………………………………………………………………………………… 10

(3) Notes to Quarterly Consolidated Financial Statements ……………………………………………………………… 11

(Going Concern Assumption) ………………………………………………………………………………………… 11

(Significant Changes in Shareholders' Equity) ……………………………………………………………………… 11

(Significant subsequent events) ………………………………………………………………………………… 11

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SB Technology Corp. (4726) Financial Report

For the three-month period ended June 30, 2023

１．Overview of Business Results

(1) Explanation of Business Results

During the first quarter under review, prices of energy resources and commodities soared due in part to concerns about the global situation and the weaker yen associated with higher interest rates overseas to control inflation. However, the Japanese economy saw continuous movement toward a recovery with social and economic activities normalizing and domestic economic activities revitalizing, albeit modestly, as a result of the reclassification of COVID-19 as a class 5 infectious disease.

In this operating environment, companies pursued a number of initiatives, including advancing digital transformation (DX) using digital technologies and promoting the use of the cloud to address workstyle changes, as well as enhancing security measures to address cyberattacks, toward their goal of transforming their business. As a result, Japanese corporate demand for investment in digital transformation (DX) has steadily increased.

In addition, moves to use state-of-the-art technologies to reduce cost, improve business efficiency and create new workstyles have been further revitalized, as exemplified by the attention that has been drawn to ChatGPT, a type of generative AI. The Company has developed a unique system that works together with the Azure OpenAI Service, generative AI provided by Microsoft. About 1,000 of the Company's employees began using this system from June 2023. The Company has linked this system to Microsoft Teams, the inquiry management system, and other systems, seeking to improve business efficiency and productivity.

Additionally, the number of cybercrimes targeting weaknesses in security measures continued to increase. The government made it mandatory for its contractors to take cybersecurity measures conforming to the US government standard within the fiscal year ending March 31, 2024. In these conditions, it has become apparent that both individual companies and entire supply chains need to take cyber security measures.

The Company and other ICT-related companies are expected to respond to rapid social changes through the promotion of DX accompanied with support for security measures, as well as develop human resources with high-level DX technology literacy.

Amid this business environment, the ICT services business remained strong, and full-year net sales, gross profit, operating income, and ordinary income all reached record highs.

・Telecommunication

Sales in the Telecommunication segment fell year on year as forecast at the beginning of the fiscal year, due to a decrease in vendor management projects for SoftBank Corp. and the impact of investment control. However, profit margins for the segment improved, reflecting the increased efficiency of system development.

・Enterprise

Both sales and profits increased in the Enterprise segment. A decline in profit margins that resulted from license sales for deepening business relationships with a group of key customers was more than offset by the steady growth of projects for developing cloud services, mainly for manufacturers and other key customers, as well as the Company's own Managed Security Services (MSS).

・Public Sector

Both sales and profits in the Public Sector segment grew year on year. Sales increased because large-scale projects, including projects for an electronic application platform and digital maps for the Ministry of Agriculture, Forestry and Fisheries and Local Government Information Security Cloud, entered the operation phase, and seasonal fluctuations in sales decreased. Profit margins also improved.

・Consumer

Both sales and profit in the Consumer segment sank year on year, impacted by changes in the contract with NortonLifeLock Inc. in the business operating e-commerce sites as an agent. The declines in sales and profits were in accordance with the Company's forecasts at the beginning of the current fiscal year.

The Group's financial results for the consolidated fiscal year under review were as follows.

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SB Technology Corp. (4726) Financial Report

For the three-month period ended June 30, 2023

			(Millions of yen)
	Three-month ended	Three-month ended	Change (Amount)	Change (Ratio)
	June 30, 2022	June 30, 2023
Net sales	15,560	15,958	397	2.6%
Gross profit	3,405	3,693	287	8.4%
Total selling, general and	2,320	2,636	315	13.6%
administrative expenses
Operating income	1,085	1,057	(28)	(2.6) %
Ordinary income	1,070	1,054	(15)	(1.4) %
Profit attributable to	646	505	(141)	(21.9) %
owners of parent
EBITDA(*)	1,494	1,505	11	0.7%
Net income per share	JPY 32.01	JPY 25.44	JPY(6.58)	(20.5) %

*Note: EBITDA=Operating income + Amortization of goodwill (Total selling, general and administrative expenses) + Depreciation

The Group operates in a single reportable segment of the ICT Services segment. Refer to "Segment Explanation" on page 6 for details on the content and performance of the solutions that comprise the ICT Services segment.

< Progress in the Fourth Medium-Term Management Plan >

The Company and its consolidated subsidiaries (the "Group") established the Fourth Medium-Term Management Plan covering three years from the fiscal year ending March 31, 2023 to the fiscal year ending March 31, 2025, and began implementing initiatives based on the Plan.

(i) Basic business policy

The Group's mission reads: "Information Revolution, Happiness for everyone - Technologies Design the Future-" It thus enhances its advanced technologies and creativity in an environment that supports diverse work styles and attempts in an aim to be a company that continues to offer new value to society. In line with this management philosophy, it formulated a long-term vision of becoming a leader of cloud consulting and service company to increase enterprise Japanese company's competitiveness. The Group has a management policy of creating a prosperous information society through the provision of ICT services.

Furthermore, the Group is addressing a range of social issues through its corporate activities for the realization of a sustainable society. The Group identified six material issues (important issues) as themes for advancing activities for the realization of sustainability. Please see the Company's website for more information about sustainability and the material issues. https://www.softbanktech.co.jp/corp/sustainability/

The Group has a management policy of creating a prosperous information society through the provision of ICT services.

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