Performance outlook for No.1 <3562>.

1. Performance forecast for the fiscal year ending February 2025

Regarding the consolidated performance financial estimates for the fiscal year ending February 2025, the company maintains its initial estimates, expecting revenue to increase by 4.8% year-on-year to 14,100 million yen, operating profit to decrease by 24.3% to 930 million yen, ordinary profit to decrease by 24.8% to 915 million yen, and net income attributable to shareholders to decrease by 35.3% to 573 million yen due to the impact of strategic growth investments despite an increase in revenue.

The company will continue to work on the strong sales of information security equipment and the accumulation of "No.1 business support," while the consolidated effects of OZ MODE are expected to contribute to increased revenue.

On the other hand, the temporary decrease in profit is due to the policy of prioritizing the establishment of a foundation for enhancing corporate value, which involves active investments in human resources, systems, new business, and M&A, and the operating margin is also maintained at the initial assumption of 6.6% (compared to 9.1% in the previous period).

Based on the recovery of the previous period's performance (especially in the fourth quarter) and the current economic situation, we see that the company's performance forecast is easily achievable. Same-store sales (monthly) in March, when the company started, is also on track with a 111.3% increase compared to the same period last year. The rebranding of "3S HOTEL ATSUGI" is also expected to increase sales and profits. However, the somewhat unsatisfactory impression of the top line growth is mainly due to the end of the COVID-19 recovery in addition to having reduced new store openings in recent years. The plan for opening new stores in the 2025 February period is limited to four stores, and it is expected that the company will continue to prioritize the transition to a muscular earnings structure and financial improvement. On the other hand, it should be noted that the increased profitability is a positive point, and going forward, the balance between top-line growth and profits is a point of focus. On the strategic side, we should also pay attention to innovative moves unique to the company, such as the development of new business formats that lead to the creation of brand value and the strengthening of group management power through DX promotion, including collaboration with Google Cloud.

To achieve the full-year financial estimates, a revenue of 7,276 million yen and operating profit of 451 million yen are required in the second half. Considering the persistent demand for information security equipment and the accumulation of recurring revenue, achieving the revenue estimates is deemed quite possible. On the other hand, while the achievement of profit estimates can be judged as not difficult based on the progress in the first half, it can be said that it will depend on the allocation of upfront costs, considering that this year is positioned as a preparation period. Therefore, looking ahead to accelerating growth in the coming periods, attention should be paid to what areas and how much cost will be allocated.

(Written by Fisco Guest Analyst Ikuo Shibata)