MKSystem : Summary of Consolidated Financial Results for the Fiscal Year Ended March 31, 2022

May 9, 2022

Summary of Consolidated Financial Results for the Fiscal Year Ended March 31, 2022 [Japanese GAAP]

Company name:	MKSystem Corporation	Listing: Tokyo Stock Exchange
Stock code:	3910	URL: https://www.mks.jp
Representative:	Noboru Miyake, Representative Director and President
Contact:	Masaki Yoshida, Executive Officer, General Manager of Business Administration Division
	Tel: [phone]
Scheduled date of Annual General Meeting of Shareholders:	June 21, 2022
Scheduled date of payment of dividend:	June 22, 2022
Scheduled date of filing of Annual Securities Report:	June 21, 2022
Preparation of supplementary materials for financial results:	Yes
Holding of financial results meeting:	None

(All amounts are rounded down to the nearest million yen)

1. Consolidated Financial Results for the Fiscal Year Ended March 31, 2022 (April 1, 2021 - March 31, 2022)

(1) Consolidated operating results					(Percentages represent year-on-year changes)
		Net sales		Operating profit	Ordinary profit	Profit attributable to
			owners of parent
		Million yen	%	Million yen	%	Million yen	%	Million yen	%
Fiscal year ended Mar. 31, 2022		2,742	12.5	145	(33.8)	129	(40.8)	91	(33.8)
Fiscal year ended Mar. 31, 2021		2,439	2.5	219	(30.2)	218	(30.0)	138	(30.0)

Note: Comprehensive income (million yen)

Fiscal year ended Mar. 31, 2022:	92	(down 34.4%)
Fiscal year ended Mar. 31, 2021:	141	(down 26.9%)

	Basic earnings per		Diluted earnings	Return on equity	Ordinary profit	Operating profit
	share		per share		on total assets	to net sales
	Yen		Yen	%	%	%
Fiscal year ended Mar. 31, 2022	16.84		-	6.6	5.8	5.3
Fiscal year ended Mar. 31, 2021	25.41		-	10.5	9.8	9.0
Reference: Equity in earnings of affiliates (million yen)	Fiscal year ended Mar. 31, 2022: -	Fiscal year ended Mar. 31, 2021: -

(2) Consolidated financial position

	Total assets	Net assets	Equity ratio	Net assets per share
	Million yen	Million yen	%	Yen
As of Mar. 31, 2022	2,231	1,424	63.5	261.17
As of Mar. 31, 2021	2,241	1,402	60.9	251.47

Reference: Shareholders' equity (million yen) As of Mar. 31, 2022: 1,417 As of Mar. 31, 2021: 1,364

(3) Consolidated cash flows

	Cash flows from	Cash flows from	Cash flows from	Cash and cash equivalents
	operating activities	investing activities	financing activities	at end of period
	Million yen	Million yen	Million yen	Million yen
Fiscal year ended Mar. 31, 2022	493	(472)	(177)	461
Fiscal year ended Mar. 31, 2021	340	(381)	(64)	617

2. Dividends

		Dividend per share			Total	Payout ratio		Dividend on
								equity
	1Q-end	2Q-end	3Q-end	Year-end	Total	dividends	(consolidated)
	(consolidated)
	Yen	Yen	Yen	Yen	Yen	Million yen	%	%
Fiscal year ended Mar. 31, 2021	-	0.00	-	8.00	8.00	43	31.5	3.3
Fiscal year ended Mar. 31, 2022	-	0.00	-	8.00	8.00	43	47.5	3.1
Fiscal year ending Mar. 31, 2023	-	0.00	-	8.00	8.00			-
(forecast)

3. Consolidated Earnings Forecasts for the Fiscal Year Ending March 31, 2023 (April 1, 2022 - March 31, 2023)

(Percentages represent year-on-year changes)

	Net sales		Operating profit	Ordinary profit	Profit attributable to	Basic earnings per
		owners of parent	share
	Million yen		%	Million yen	%	Million yen	%	Million yen	%	Yen
First half	1,418		14.3	37	25.9	42	343.9	22	-	4.17
Full year	3,115		13.6	272	87.6	282	118.3	175	92.6	32.42

* Notes

1. Changes in significant subsidiaries during the period (changes in scope of consolidation): None
2. Changes in accounting policies and accounting-based estimates, and restatements
3. 1. Changes in accounting policies due to revisions in accounting standards, others: Yes
   2. Changes in accounting policies other than 1) above: None
   3. Changes in accounting-based estimates: None
   4. Restatements: None
4. Number of issued shares (common stock)
5. 1. Number of shares issued at the end of period (including treasury shares)

As of Mar. 31, 2022:	5,428,000 shares	As of Mar. 31, 2021:	5,428,000 shares
2) Number of treasury shares at the end of period
As of Mar. 31, 2022:	506 shares	As of Mar. 31, 2021:	506 shares
3) Average number of shares during the period
Fiscal year ended Mar. 31, 2022:	5,427,494 shares	Fiscal year ended Mar. 31, 2021:	5,427,505 shares

Reference: Summary of Non-consolidated Financial Results

Non-consolidated Financial Results for the Fiscal Year Ended March 31, 2022 (April 1, 2021 - March 31, 2022)

(1) Non-consolidated operating results								(Percentages represent year-on-year changes)
	Net sales				Operating profit		Ordinary profit	Profit
	Million yen	%			Million yen		%		Million yen	%	Million yen	%
Fiscal year ended Mar. 31, 2022	2,156	11.7			124		(43.6)		120	(46.6)	85	(43.5)
Fiscal year ended Mar. 31, 2021	1,929	8.2			221		(38.2)		225	(37.8)	151	(38.3)
	Basic earnings per share	Diluted earnings per share
		Yen					Yen
Fiscal year ended Mar. 31, 2022		15.78				-
Fiscal year ended Mar. 31, 2021		27.93				-
(2) Non-consolidated financial position
	Total assets		Net assets			Equity ratio	Net assets per share
	Million yen		Million yen				%		Yen
As of Mar. 31, 2022		2,279					1,564				68.7		288.31
As of Mar. 31, 2021		2,281					1,522				66.7		280.54
Reference: Shareholders' equity (million yen)	As of Mar. 31, 2022:	1,564		As of Mar. 31, 2021:	1,522

• The current financial report is not subject to audit by certified public accountants or auditing firms.
• Explanation of appropriate use of earnings forecasts, and other special items
  Forecasts of future performance in this report are based on assumptions judged to be valid and information available to the MKSystem's management at the time the materials were prepared but are not promises by MKSystem regarding future performance. Actual results may differ significantly from these forecasts for a number of reasons.

	MKSystem Corporation (3910) Financial Results for FY3/22
Contents of Attachments
1. Overview of Results of Operations, etc.	2
(1)	Results of Operations	2
(2)	Financial Position	3
(3)	Cash Flows	4
(4)	Outlook	4
2. Basic Approach to the Selection of Accounting Standards	6
3. Consolidated Financial Statements and Notes	7
(1)	Consolidated Balance Sheet	7
(2)	Consolidated Statements of Income and Comprehensive Income	9
(3)	Consolidated Statement of Changes in Equity	11
(4)	Consolidated Statement of Cash Flows	12
(5)	Notes to Consolidated Financial Statements	13
	Going Concern Assumption	13
	Changes in Accounting Policies	13
	Segment and Other Information	14
	Per Share Information	15
	Subsequent Events	15

1

MKSystem Corporation (3910) Financial Results for FY3/22

1. Overview of Results of Operations, etc.

(1) Results of Operations

During the fiscal year ended March 31, 2022 (hereinafter "the current fiscal year"), the promotion of vaccination against COVID-19 continued to bring about a pick up in the Japanese economy; however, considering new threats from variants, semiconductor shortage, surges in resource prices stemmed from the Russian and Ukraine situation, and supply chain disruption, the impact of such factors on the domestic and foreign economies still remained unpredictable.

In the domestic information service industry and the field of personnel and labor management, in which MKSystem Corporation and its group companies (hereinafter collectively "the Group") are involved, the government has promoted the work-style reform, the rapid transition to teleworking as a measure against the COVID-19 infections, or furtherance of DX (digital transformation) to improve business efficiency. On these backgrounds corporate investment demand remained increasing, though companies are being cautious about investing and postponing new investment considering the impact of COVID-19 situation, which repeatedly worsens and improves, on corporate performance.

Under these circumstances, the Group worked to further enhance our customers' satisfaction, by actively utilizing online seminars and remote meetings so that customers could improve their operational efficiency and create added value.

As a result, for the current fiscal year, the Group reported net sales of 2,742 million yen (up 12.5% year on year), cost of sales of 1,468 million yen (up 18.5% year on year), the ratio of cost of sales to net sales of 53.5% (up 2.8 percentage points year on year), gross profit of 1,274 million yen (up 6.2% year on year), operating profit of 145 million yen (down 33.8% year on year), the ratio of operating profit to net sales of 5.3% (down 3.7 percentage points year on year), ordinary profit of 129 million yen (down 40.8% year on year), and profit attributable to owners of parent of 91 million yen (down 33.8% year on year). In addition, the return on equity (ROE), one of the KPIs for the Group, was 6.6% (down 3.9 percentage points year on year) on a consolidated basis and 5.5% (down 4.8 percentage points year on year) on a non-consolidated basis.

Results by business segment were as follows.

The Shalom Business

A growing number of companies as well as labor and social security attorney offices, our main customers, are motivated to introduce relevant systems from an increasing need for operational efficiency for the work-style reforms including teleworking. At the same time, we expect an intensified competition and pricing pressure as we witness active entries in the market.

Under these circumstances, in the Shalom Business, we promoted quality improvement and function enhancement of the product lines, including Shalom, "ShaRobo," an official Shalom RPA, and "Cloud Pocket," an official documents distribution system. For services for labor and social security attorneys, the "Shalom" series, our mainstay service, saw an increase in the number of contracts for the House Plan. This is thanks to a campaign to discount the initial cost and the adoption of the subsidies under the Project to Support Introduction of IT for Improvement of Service Productivity, which lead to increased inquiries from potential customers every year. For corporate services, we boosted sales with an increase in new orders of "eNEN," a web-basedyear-end tax adjustment system and a resulting increase of the number of employees using the system. At the same time, in addition to our continued action to publish an article about the Shalom Company Edition on "IT Trend," we held small seminars to find potential demand for peripherals and related products, thereby striving for acquiring higher potential projects.

As a result, sales of the cloud services, which consist of ASP services and system construction services, were 2,025 million yen (up 13.3% year on year). This was attributable to sales of ASP services amounted to 1,818 million yen (up 10.9%) due to accumulated monthly usage fees in line with increases in the number of IDs issued and the number of customers who use our main services of Shalom brand products, and sales of system construction services amounted to 207 million yen (up 39.3%) mainly due to an increase in the number of Shalom House Plan

2

MKSystem Corporation (3910) Financial Results for FY3/22

contracts. In addition, sales of system products were 99 million yen (down 3.5%).

On the other hand, personnel and labor costs increased due to the active recruitment in conjunction with strengthening of sales and development systems. In addition, promotion expenses increased due to the strengthening of digital marketing aimed at increasing customer acquisition.

Consequently, the segment recorded net sales of 2,156 million yen (up 11.7% year on year), gross profit of 1,083 million yen (up 7.7%) and operating profit of 124 million yen (down 43.6%). The ratio of operating profit to net sales, one of the KPIs for the Group, was 5.8% (down 5.7 percentage points).

The CuBe Business

We have been engaged in the contracted development of front-end systems, customized to needs of an individual company, for the personnel and general affairs divisions of large companies to improve their business processes. The CuBe Business also provides cloud services that bring the convenience to small- and medium-sized companies by leveraging our know-how gained through the contracted development of systems for large companies.

In the contract development of front-end systems, customers of large companies and local governments have been actively investing in system renewal for the purpose of work-style reform, teleworking promotion, and personnel system reform. Responding to such a situation, we strengthened our sales system and stimulated our clients into ordering, which brought about several large-scale development projects that we have not seen in recent years and a significant increase in sales. In the cloud service business, on the other hand, we strove to develop new sales channels for "GooooN" and win new users.

On the cost front, efforts to improve development efficiency and reduce the cost of sales ratio on a project-by- project basis have resulted in improved profit margin compared to that for the previous fiscal year.

As a result, the segment recorded net sales of 615 million yen (up 11.8% year on year), gross profit of 194 million yen (down 0.2%) and operating profit of 9 million yen (compared with operating loss of 5 million yen for the previous fiscal year). Operating profit of the CuBe Business reflects amortization of goodwill of 38 million yen.

Sales and composition by segment

		Amount (Millions of yen)	Composition (%)
Shalom Business	2,136	77.9
	Cloud service	2,025	73.9
	System product sale	99	3.6
	Other services	11	0.4
CuBe Business	606	22.1
	Total	2,742	100.0

1. Financial Position Assets

The balance of current assets at the end of the current fiscal year was 1,056 million yen (down 9.9% from the end of the previous fiscal year), consisting primarily of 468 million yen in cash and deposits and 475 million yen in accounts receivable-trade.

The balance of non-current assets was 1,174 million yen (up 9.9% from the end of the previous fiscal year), consisting primarily of 438 million yen in software, 174 million yen in goodwill, 162 million yen in guarantee deposits, and 124 million yen in buildings.

As a result, the balance of total assets was 2,231 million yen (down 0.4% from the end of the previous fiscal year).

Liabilities

The balance of current liabilities at the end of the current fiscal year was 751 million yen (up 28.1% from the end of the previous fiscal year), consisting primarily of 197 million yen in current portion of long-term borrowings, 156 million yen in accounts payable-other, and 86 million yen in advances received.

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