■Summary

TDC Software, an independent system integrator specializing in IT solutions for the financial industry, has been supported by a solid technical foundation that has underpinned the history of Japan's IT industry. The financial IT solution sectors for banks, Crediting, and Insurance account for nearly half of its revenue. The company also aims to expand into new business areas while building on its existing system integration (SI) business. It is promoting "high value-added SI services" utilizing the latest element technologies, resulting in steady growth of next-generation SI business and continued high growth in the IT consulting & services sector.

1. Overview of Results for the Second Quarter of the Fiscal Year Ending March 2025

For the second quarter of the fiscal year ending March 2025, the performance included revenue of 21,349 million yen (a 13.2% increase year-on-year), operating profit of 2,401 million yen (a 29.2% increase), ordinary profit of 2,442 million yen (a 26.5% increase), and net income attributable to shareholders of the parent company of 1,652 million yen (a 26.1% increase), showing significant revenue and profit growth compared to the previous year's same period. In November 2024, due to strong performance, the company upwardly revised its full-year performance forecast, with the revised estimates showing a progress rate of 48.5% for revenue, 50.6% for operating profit, 50.4% for ordinary profit, and 50.7% for net income attributable to shareholders of the parent company. Amid robust IT investment for digital transformation (DX) in both public and private sectors, the company continued to secure projects based on its accumulated achievements in various business fields, resulting in steady growth. Revenue by sector showed an increase of 8.7% year-on-year in the IT consulting & services sector, 11.6% in the financial IT solution sector, 16.6% in the public corporation IT solution sector, and 18.6% in the platform solution sector. Regarding "pursuit of high value-added SI services," one of the main strategies in the medium-term management plan, the next-generation SI business revenue grew significantly by 14.8% to 4,939 million yen, driven by agile development, cloud sector, and migration projects. On the profit side, strict project management ensured the profitability of each project in response to the increase in development projects due to increased orders.

2. Performance Outlook for the Fiscal Year Ending March 2025

In November 2024, the full-year performance forecast for the fiscal year ending March 2025 was upwardly revised, projecting revenue of 44,000 million yen (a 10.8% increase from the previous year), operating profit of 4,750 million yen (a 24.7% increase), ordinary profit of 4,850 million yen (a 14.0% increase), and net income attributable to shareholders of the parent company of 3,260 million yen (a 5.5% increase). Due to growth exceeding initial plans for order intake and revenue in the first half, and through rigorous project management to ensure profitability, it was determined that the strong demand trend could continue in the second half, leading to the upward revision of the performance forecast. As of the end of the second quarter for the fiscal year ending March 2025, order intake reached 21,984 million yen (a 13.6% increase year-on-year), and the backlog of orders stood at 10,766 million yen (a 25.4% increase). Revenue by sector showed significant increases, with revenue from banks up 22.5%, revenue from Manufacturing up 21.9%, and revenue from government and organizations up 36.4%. There is a solid demand outlook for the second half, and the company feels confident, indicating a high probability of achieving the full-year performance forecast. Additional investments will also be made against the backdrop of strong performance. Investments will be directed toward education of new graduates hired at the beginning of the period, acquiring new element technologies for next-generation SI business expansion (such as obtaining licenses and developing environments), as well as investments aimed at enhancing marketing and branding. The policy is to allocate the results obtained from the business evenly between growth investments and shareholder returns, with significant growth expectations from a long-term perspective.

3. Progress of the Medium-Term Management Plan "Shift to the Smart SI Plus".

The medium-term management plan "Shift to the Smart SI Plus" (FY2022-FY2024), which started in the fiscal year ending March 2023, set "pursuit of high value-added SI services" and "promotion of SI model transformation" as key strategies, along with "expansion of business areas" as a Plus. In pursuing "high value-added SI services," agile development and Security-related businesses are positioned as key strategic fields to promote business expansion and high profitability. By capturing customers' latent needs and utilizing the latest element technologies such as agile and Security, the next-generation SI business, which provides integration services that balance the delivery of high value-added services and the reduction of user costs, including time and effort, is steadily expanding. As a result, revenue from this business accounted for 23.1% of total sales in Q2 of the fiscal year ending March 2025, and profitability improved due to the expansion of sales related to the business and cost reduction efforts. In response to the steady increase in revenue from the agile development business, the company also aims to expand businesses in cloud and Security-related sectors through cross-selling to existing customers, steadily increasing revenue from total Security solution services. It is expected to achieve the target figures for revenue of 43,000 million yen and operating profit of 4,300 million yen by achieving the full-year performance forecast for the final year of the fiscal year ending March 2025.

■Key Points

In the second quarter of the fiscal year ending March 2025, all business sectors performed well, and projects in the next-generation SI business are also expanding smoothly.

Actively run investments related to acquiring the latest technologies and securing and developing human resources.

By executing the performance forecasts for the fiscal year ending March 2025, the achievement of the medium-term management plan's goals is on track.

(Writer: FISCO analyst Tomoichi Murase)