INTELLIGENT WAVE INC. INTELLIGENT WAVE INC. | 4847
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Sessa Investment Research
OP rebounded sequentially on strong sales
GPM ticked up on cloud sales offsetting increased labor cost
SUMMARY
- IWI announced 3Q cumulative (9M) FY23/6 financial results at 15:30 on Wed. 5/10. Headline numbers were net sales ¥9,896mn (+26.3% YoY) and OP ¥1,136mn (+20.4% YoY), with GPM decreasing from 32.1% → 31.5%, and OPM decreasing from 12.0% → 11.5%. Actual 9M and 3Q-only results are shown in the table below. The YoY quarterly trend of net sales is 1Q +62%, 2Q +19% and 3Q +5%. The YoY quarterly trend of OP is 1Q +282%, 2Q -9% and 3Q -28% (see graphs on the right). Relative to 5-year average cumulative 3Q (9M) progress ratios for net sales, operating income and ordinary income of 71.8%, 63.8% and 62.9%, respectively, actual 9M FY23/6 progress ratios were 73.3%, 63.1% and 62.9%, respectively. IWI left full-term guidance unchanged.
- The consecutive slowdown in the YoY quarterly trend of net sales is largely a function of the YoY base effect relative to high growth in hardware sales starting in the 3Q of last term related to large-scale FEP system replacement orders (hardware is included in Third-party products below). The short-term deterioration in profit growth and profit margins is in part due to the unexpected cost overrun for focus strategic growth area cloud service business, and increased deployment of personnel expense. One-of-a-kind IOASIS merchant-acquiring service in particular has a relatively higher amount of labor- intensive customization work. Here it is worth noting that GPM actually ticked up sequentially from the 2Q to the 3Q (31.8% → 32.2%), and OPM (10.4% → 10.7%), as growth in cloud service sales increased to offset the rise in labor cost (cloud service is included in Own services below).
- To explain these two key takeaway points through figures, Third-party product sales which includes hardware were ¥1,454mn (+121.4% YoY), but ¥1,038mn was in the 1Q, and 3Q-only was ¥234mn (-53.2% YoY). Cloud service sales (included in Own services) were ¥1,351mn (+70.4% YoY), while cloud service GP was down -27.4% YoY.
IWI FY23/6 9M and 3Q-onlyNon-consolidated Financial Results Summary
JPY mn, % | FY22/6 | FY23/6 | CHG | PCT | FY22/6 | FY23/6 | CHG | PCT |
[J-GAAP] | 9M act | 9M act | AMT | YOY | 3Q act | 3Q act | AMT | YOY |
Net sales | 7,835 | 9,897 | 2,062 | 26.3 | 2,947 | 3,107 | 159 | 5.4 |
• Software development | 3,046 | 3,508 | 462 | 15.2 | 1,067 | 1,161 | 94 | 8.8 |
• In-house products | 339 | 154 | (185) | (54.7) | 53 | 43 | (10) | (19.6) |
• System service | 31 | 20 | (11) | (34.8) | 14 | 5 | (10) | (67.9) |
• Third-party products | 657 | 1,454 | 797 | 121.4 | 499 | 234 | (266) | (53.2) |
FLOW total | 4,073 | 5,136 | 1,063 | 26.1 | 1,635 | 1,442 | (192) | (11.8) |
• Maintence | 1,952 | 2,305 | 353 | 18.1 | 673 | 808 | 134 | 20.0 |
• Maintence of 3P products | 457 | 542 | 84 | 18.4 | 150 | 190 | 40 | 26.7 |
• Own services | 990 | 1,526 | 537 | 54.2 | 365 | 529 | 164 | 44.9 |
• Other services | 363 | 388 | 25 | 6.9 | 124 | 138 | 14 | 11.0 |
STOCK total | 3,762 | 4,761 | 999 | 26.6 | 1,313 | 1,665 | 352 | 26.8 |
Gross Profit | 2,513 | 3,121 | 608 | 24.2 | 1,016 | 1,000 | (15) | (1.5) |
GPM (%) | 32.1% | 31.5% | ― | ― | 34.5% | 32.2% | ― | ― |
Operating income | 944 | 1,136 | 192 | 20.4 | 465 | 333 | (132) | (28.4) |
OPM (%) | 12.0% | 11.5% | ― | ― | 15.8% | 10.7% | ― | ― |
Ordinary income | 965 | 1,157 | 192 | 19.9 | 465 | 333 | (132) | (28.4) |
Net income | 659 | 781 | 122 | 18.5 | 321 | 223 | (98) | (30.6) |
Source: compiled by SIR from TANSHIN financial statements.
3Q Flash
Net sales | YoY |
4,000 | 64 |
3,500 | 56 |
3,000 | 48 |
2,500 | 40 |
2,000 | 32 |
1,500 | 24 |
1,000 | 16 |
500 | 8 |
0 | 0 |
(8) | |
(16) |
OP | OPM |
600 | 18 |
500 | 15 |
400 | 12 |
300 | 9 |
200 | 6 |
100 | 3 |
0 | 0 |
Source: compiled by SIR from TANSHIN
financial statements. Units: JPY million, %
Chris Schreiber CFA
Company Specialist research@sessapartners.co.jp
This report was prepared by Sessa Partners on behalf of INTELLIGENT WAVE INC. Please refer to the legal disclaimer at the end for details.
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IWI - Intelligent Wave Inc. published this content on 16 May 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 May 2023 00:59:01 UTC.
