Performance Trend 1. Overview of performance for FY3/2024 Consolidated performance for FY3/2024 of G-7 Holdings <7508> was 192,992 million yen in increased operating income of 9.1% over the previous year, and increased ordinary income of 7.4% to 7,318 million yen, and attributed to the parent company's net income of 5,175 million yen, an increase of 35.3% over the previous year. Sales were driven by the Business Supermarket Business and the Meat Business, and continued to set a new record high, exceeding the company's plan by 4.3%. However, in terms of profits, the automobile-related business was affected by a decrease in profits due to poor sales of winter tires due to a warm winter, and could not reach the company's plan, it turned to a profit increase for the second time due to the growth of other businesses centered on the Business Supermarket business. The sales cost ratio has increased by 0.8 points over the previous year due to changes in the sales composition ratio; however, the selling, general and administrative expense ratio decreased by 0.7 points due to the effect of increased earnings, and the operating margin decreased by 0.1 points to 3.6%. The main reasons for the increase/decrease of selling, general and administrative expenses were a decrease of 600 million yen in energy costs due to subsidies from rising electricity prices, and an increase of 1 billion yen in labor costs due to improvements in employee treatment and increased education costs. In addition to this, depreciation expenses increased by nearly 600 million yen due to rising construction material costs and rising costs of opening stores etc. The EBITDA margin has increased by 0.1 points from the previous year. Also, the reason for the large increase in the net income of the parent company's shareholders attributable to the current period is due to the elimination of 500 million yen in retirement benefits paid to executives that were recorded as special losses in the previous year, a decrease of 455 million yen in impairment losses, and a gain of 127 million yen on the sale of investment securities in FY3/2024.

2. Trends by Service Prodilite <5580> is a single segment of the actual voice solution business, but it explains the situation by service division for easy understanding of the business. In the system service, due to the continued strong demand for customer DX needs and the success of the sales agency system Partner Program, which has signed contracts with new major partners, the number of accounts for INNOVERA has steadily increased. As a result, the sales revenue of the system service was 352 million yen (an increase of 15.5% year-on-year), and the gross profit was 198 million yen (an increase of 6.5% year-on-year). In the line service, although there was a decrease in the number of channels due to cancellations by customers due to business restructuring using the 0ABJ-type IP telephone line service, there was an increase in the total number of channels of IP-Line due to an increase in INNOVERA accounts and added channels due to the expansion of existing customers' businesses/facilities. As a result, the sales revenue of the line service was 554 million yen (an increase of 7.4% year-on-year), and the gross profit was 236 million yen (an increase of 6.5% year-on-year). In terminal sales, large-scale orders were received for MAXHUB, a large display for web conferences, and sales revenue was solid at 1.23 billion yen (an increase of 6.2% year-on-year), but gross profit for sales declined by 2.6% year-on-year to 380 million yen due to sluggish sales of certain Yealink products. Due to its stock-type business model, the company aims to increase the number of INNOVERA accounts (the number of devices used) and the number of channels for IP-Line (number of simultaneous users with the same phone number), and keep the cancellation rate of accounts and channels low to achieve stable revenue expansion. Therefore, it considers the increase in INNOVERA accounts and cancellation rate, increase in IP-Line channel and cancellation rate, and the recurring (continuous) sales ratio as important management indicators. In the second quarter, the strengthening of the Partner Program contributed to the continued high growth of INNOVERA account number (36,152 accounts, an increase of 18.5% compared to the same period last year) and IP-Line channel number (67,285 channels, an increase of 15.0% compared to the same period last year), and the average monthly cancellation rate maintained a low level of less than 1% for INNOVERA at 0.76% and IP-Line at 0.95%, and the recurring rate, which indicates expectations for continuous revenue, also continued steadily at 81.3% (an improvement of 0.5 points compared to the same period last year).

Prodilite <5580> is a single segment of the actual voice solution business, but it explains the situation by service division for easy understanding of the business.

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The company aims to increase the number of INNOVERA accounts and IP-Line channels, and keep the cancellation rate low to achieve stable revenue expansion. Therefore, it considers the increase in INNOVERA accounts and cancellation rate, increase in IP-Line channel and cancellation rate, and the recurring sales ratio as important management indicators. In the second quarter, INNOVERA account number reached 36,152 (an increase of 18.5% compared to the same period last year), and IP-Line channel number reached 67,285 (an increase of 15.0% compared to the same period last year) due to the success of the Partner Program. The monthly cancellation rate of INNOVERA and IP-Line remained low at less than 1% at 0.76% and 0.95%, respectively. The recurring rate also continued to show steady growth at 81.3% (an improvement of 0.5 points compared to the same period last year), indicating expectations for continuous revenue.

(Author: FISCO guest analyst Nobumitsu Miyata)