■Performance Trends of BB Systems ＜4447＞

1. Performance trends for the fiscal year ending 2024/9

As for the financial results for the fiscal year ending 2024/9, sales rose 7.1% from the previous fiscal year to 3107 million yen, operating profit increased 20.1% to 362 million yen, ordinary profit increased 22.5% to 362 million yen, net income increased 24.5% to 255 million yen, sales and full-year operating income hit record highs, and other stages of profit also reached a significant increase from the previous fiscal year. As for sales, the acquisition of large-scale projects for SaaS businesses contributed greatly, and an increase in sales was achieved for the third consecutive term. Large-scale projects bundled with Citrix software contributed, and hybrid cloud infrastructure construction projects compatible with cyber attacks and BCP (business continuity plans) were also doing well. Note that the sales structure by region is 40.76% in the Kyushu suburbs and 59.24% in the Tokyo metropolitan area.

Sales fell slightly short of the initial plan (sales 3200 million yen, operating income 347 million yen, ordinary income 346 million yen, net income 237 million yen). The reason is that actual machine sales and metaverse projects planned by the Emotional Systems Division fell far short of sales plans due to the fact that they did not progress as expected. Meanwhile, operating profit increased 4.4% from the plan, ordinary profit increased 4.7%, and net income increased 7.9%, and profit at each stage slightly exceeded the plan. On the profit side, in addition to an increase in sales of high value-added products in the secure cloud business, the realization of manufacturing cost optimization through in-house manufacturing associated with an increase in personnel contributed. Furthermore, the number of employees at the end of the fiscal year was a net increase of 65, an increase of 11 from the previous fiscal year, and it can be said that the retention of human resources that had been closely watched was also going well.

2. Financial Status for the Fiscal Year Ending 2024/9

Total assets at the end of the 2024/9 fiscal year were 2872 million yen, an increase of 892 million yen from the end of the previous fiscal year, total liabilities were 1436 million yen, an increase of 717 million yen, and total net assets were 1436 million yen, an increase of 174 million yen. While cash and deposits decreased by 206 million yen, there was an increase in notes receivable, accounts receivable, and contract assets (992 million yen). This is due to the fact that large-scale projects have moved into the fourth quarter. In addition, there was an increase in accounts payable (802 million yen), a decrease in products and products (27 million yen), a decrease in long-term loans (24 million yen), an increase in retained earnings due to net income (255 million yen), and a decrease (80 million yen) due to the acquisition of treasury stock. As a result, the capital adequacy ratio as of the end of the 2024/9 fiscal year was 50.0%, a decrease of 13.7 points from the end of the previous fiscal year, but in addition to being at a high level compared to the information and communication industry average value of 31.4% (Japan Exchange Group) of the Tokyo Stock Exchange Prime Market for the 2024/3 fiscal year, the liquidity ratio also maintains an approximate 200% level, so there is no particular concern.

High-performance products are growing in the main business, and the emotional systems business is struggling but is responding well for the next fiscal year

3. Performance trends by segment for the fiscal year ending 2024/9

As for the fiscal year ending 2024/9, sales of the Secure Cloud Systems business increased 8.8% from the previous fiscal year to 3060 million yen; segment profit increased 31.9% to 395 million yen; sales of the emotional systems business fell 46.7% to 47 million yen; and segment profit and loss of 33 million yen (same profit of 1 million yen).

In the secure cloud system business, by completing the final inspection of large projects that had been delayed, progress progressed as scheduled throughout the fiscal year, and continued increase in sales was achieved. We received orders for large-scale projects with a sales scale of 1 billion yen, including Citrix license sales in the 2024/9 fiscal year, and sold most of them. There is a backlog of orders of about hundreds of millions of yen for the same project, and contributions to the 2025/9 fiscal year are also expected. In the “2025 Cliff Problem,” not only was there a response to lack of OS support, but there was also a lot of demand for associated hardware updates, centering on core systems, and they contributed to business results by reliably seizing opportunities. In addition to servers, demand for switching to highly functional communication devices continues, and sales of high-value-added products (gross profit margin of 25% or more) for the 2024/9 fiscal year increased by 21.5% from the previous fiscal year to 650 million yen. Furthermore, the company expects this trend to continue for several years, and is adding it to its plans for the 2025/9 fiscal year. Regarding cloud infrastructure, as a result of continuing to focus on hybrid cloud proposals requiring advanced SI technology, which is the company's strength, sales of associated hardware increased 41.8% from the same period to 835 million yen, which contributed greatly to business results. In addition, resilience-related solutions that respond to cyber attacks and BCP (business continuity plans), which have been issues in recent years, and in the Kyushu area where the company is based, in addition to projects for semiconductor-related companies, we have expanded the range of customer base, such as receiving orders for core system migration projects etc. for the local food manufacturing industry, etc., and are responding flexibly to customer needs.

Regarding the emotional system business, in addition to 360-degree 3D theater operation at the Okinawa Prefecture Yonabaru Otsunabiki Museum in the 2nd quarter and adoption of MetaWalkers at the “Super Experience NHK Festival 2024 in SHIBUYA,” stock revenue from existing customers contributed mainly in the entertainment area, but small projects took center stage, and planned actual machine sales and metaverse projects did not proceed as planned, so sales declined It fell into the red. Meanwhile, although customer interest was high in mental training products for companies that planned to be deployed in the 2024/9 fiscal year, it did not lead to demand acquisition at the expected level. As a result, we landed behind both the previous fiscal year and the planned ratio. However, in addition to the head office showroom, MetaWalkers demo machines have been placed at the Tokyo branch office, and customer contact points have been expanded, so it seems that the company is grasping the response more than ever before. Since demand is overwhelmingly high in the metropolitan area, the effect of preparing a demonstration environment is enormous, and expectations on the technical side are also high, such as reading potential needs from customer voices and immediately reflecting them and making improvements. Also, MetaWalkers has two system lineups, standard and advanced, and significant improvements to support GPU video processing have been added to advanced, and higher image quality has been achieved. In addition, development of a live compatible option for projecting images taken with a 360-degree camera in real time using a 5G connection has also been completed, and it is now possible to experience it in the headquarters showroom.

Note, the backlog of orders was 771 million yen, down 22.0% from the previous fiscal year in the secure cloud system business. In addition to receiving orders for high value-added hardware for SaaS businesses in the fourth quarter of the 2024/9 fiscal year, sales of Citrix products for the manufacturing industry and core system migration projects for the food manufacturing industry were acquired. In the stock business, orders are stably secured in connection with cyber attacks. As for the emotional system business, we have accumulated a balance of orders of 12 million yen, an increase of 23.7% from the previous fiscal year. As a result, the total balance of orders received at the end of the 2024/9 fiscal year for both businesses landed at 784 million yen, down 21.5% from the end of the previous fiscal year. However, although there seems to be a drastic decrease compared to the previous fiscal year, it seems that we have already shown a strong start, such as infrastructure net projects of local public bodies and new orders for customizer divisions since entering the 2025/9 fiscal year, and our company is not particularly concerned.

(Author: FISCO Analyst Tomokazu Murase)