Performance Trends of Hatchwork <148A>

1. Overview of Performance for the 2nd Quarter of the Fiscal Year Ending December 2024

For the second quarter of the fiscal year ending December 2024, revenue was 11,630 million yen (an increase of 14.6% compared to the same period last year), operating profit was 690 million yen (compared to a loss of 130 million yen in the same period last year), and net profit was 450 million yen (compared to a profit of 10 million yen in the same period last year), showing an increase in both revenue and profit. The operating profit turned into a surplus. Due to aggressive sales activities, strengthened advertising and publicity efforts, the number of contract companies using AP Cloud Services expanded, and the number of AP Cloud registrations also increased. As a result, stock-type revenue such as system usage fees received from management companies, settlement fees received from parking lot users, and arrears guarantee fees steadily accumulated. The revenue of the monthly parking innovation business was 6,780 million yen (a 29.0% increase compared to the same period last year) and progressed smoothly. The Building Innovation business, impacted by the COVID-19 pandemic, had been suppressing the development of new venues until 2023, resulting in revenue remaining almost flat at 4,840 million yen (a decrease of 1.0%). On the profit and loss side, as the costs of AP Cloud Services, which had been continuously invested in since 2020, stabilized and stock-type revenue accumulated as limited profit, the segment profit of the monthly parking innovation business extended to approximately three times that of the same period last year, making a significant contribution to turning the operating profit into surplus.

Segment trends by business:

(1) Monthly Parking Innovation Business

The revenue of the Monthly Parking Innovation Business for the second quarter of the fiscal year ending December 2024 increased by 290 million yen compared to the same period last year. Among them, revenue from AP Cloud Services increased by 475 million yen (a 43.5% increase compared to the same period) and extended. The number of AP Cloud registrations was 345 thousand units (a 32.1% increase from the end of the same period last year), the number of settlement agents was 136 thousand units (a 42.9% increase), and the number of delinquent guarantors was 56 thousand units (a 56.0% increase), steadily progressing. Revenue from stock-type income such as system usage fees, settlement fees, and delinquency guarantee fees accumulated. AP Solution Services also showed a steady increase in the number of visitors and contracts, with revenue growing by a slight 3.6%. Strengthening inside sales of AP Cloud Services, improving and enhancing the features of "At Parking Cloud," and focusing the company's management resources on the same service resulted in the expansion of parking lots introduced nationwide, further increasing their evaluation, and leading to a virtuous cycle of "At Parking Cloud" adoption. On the profit and loss side, the gross profit margin of AP Cloud Services was 76.3%, 3.1 percentage points higher than the same period last year, and the segment profit increased to 173 million yen, nearly three times that of the same period last year.

(2) Building Innovation Business

The revenue of the Building Innovation Business for the second quarter of the fiscal year ending December 2024 decreased by 10 million yen, a 1.0% decrease compared to the same period last year. Due to factors such as the closure of the Shinjuku South Exit Station meeting room in April 2023, meeting room services saw a 1.9% decrease in revenue compared to the same period last year. Demand for face-to-face meetings, seminars, and training recovered from the COVID-19 pandemic, and the utilization of rental meeting rooms progressed smoothly. However, the use of corporate explanation meetings, interviews, and other recruitment-related activities in March did not grow as planned. On the profit and loss side, with the recovery of demand for rental meeting rooms leading to an increase in usage hours, an increase in hourly utilization rates were implemented, and efforts to streamline meeting room operations through remote control of opening and closing room doors to achieve labor saving efficiency resulted in segment profit increasing to 137 million yen, a 3.0% increase compared to the same period last year.

3. Financial Condition and Management Indicators

The total assets at the end of the second quarter of the fiscal year ending December 2024 increased by 525 million yen compared to the end of the previous period and reached 23.63 billion yen. The main factors were an increase of 377 million yen in cash and deposits and an increase of 106 million yen in deposits. The cash flow from financial activities resulted in an income of 387 million yen, due to the issuance of new shares and the sale of treasury stock, as a result of the listing on the Tokyo Stock Exchange Growth Market in March 2024, which led to an increase in cash and deposits. The free cash flow (the sum of cash flows from operating and investing activities) was a spending of 10 million yen. The pre-tax interim net profit increased by 69 million yen, and the amount held in trust for rent collection increased by 61 million yen, while the amount deposited with the trust bank for rents increased by 106 million yen, resulting in a decrease in funds. The factor was the generation of normal working capital, and in the future, profits will accumulate and cash flow will improve.

The total liabilities increased by 99 million yen compared to the end of the previous period and reached 16.85 billion yen. The main factors were an increase of 14 million yen in long- and short-term borrowings and corporate bonds, and an increase of 61 million yen in deposits. The total net assets increased by 425 million yen, and the equity ratio exceeded the end of the previous period by 15.0 points, reaching 28.7%. The capital increased by 138 million yen due to the issuance of new shares, and the capital surplus (capital reserve + other capital surplus) increased by 234 million yen due to the issuance of new shares and the sale of treasury stock.

Note that the company has a deficit of 910 million yen in retained earnings at the end of the second quarter, but at the extraordinary shareholders' meeting to be held in September 2024, the agenda for "reduction of the amount of capital and disposal of surplus" will be proposed to make up for the deficit. In order to fill the deficit of the retained earnings surplus of 956 million yen at the end of the previous period, the capital will be reduced by 188 million yen and transferred to other surplus reserves, and then the surplus reserves of 956 million yen will be transferred to the retained earnings surplus. This is an accounting transfer and does not affect the shareholders. The capital will be 50 million yen.

(Author: FISCO Guest Analyst Shuji Matsumoto)