Risk of earnings volatility due to the timing of revenue recognition for large projects

「Meanwhile, some large STB projects scheduled for delivery in the fourth quarter required adjustments due to uncertainty over product delivery dates, as a result of supply constraints for memory semiconductors and other factors associated with the sharp increase in global demand for AI. Consequently, revenue recognition was pushed back to the next fiscal year.」

「Projects in each business are concentrated in the second half of the current fiscal year, and the company will work to steadily build revenue from these projects and achieve profitability for the full fiscal year.」

「Because the timing of revenue recognition for these projects is uneven, results for each period may fluctuate significantly when viewed by quarter or by a defined period within each fiscal year.」

「In the second quarter, deliveries of some server projects that had been delayed by the semiconductor shortage were almost completed in the third quarter. However, delivery of some STB orders is expected to be pushed back from the third quarter to the fourth quarter. As these deliveries will be concentrated in the fourth quarter together with other projects, the company will work to ensure delivery within the current fiscal year.」

「Because the timing of revenue recognition for these projects is uneven, results for each period may fluctuate significantly when viewed by quarter or by a defined period within each consolidated fiscal year.」

「Our group aims to expand its business, but because it is currently in a growth phase and its business scale is small, the uneven timing of revenue recognition for these projects could result in significant fluctuations in results for each period when viewed by quarter or by a defined period within each consolidated fiscal year.」

「The decline in sales of older-model STBs in the video distribution field and the impact of delayed deliveries due to production delays could not be offset by new products and services. As a result, revenue for the current consolidated fiscal year was ¥694.460 million, down 44.8% year on year, operating loss was ¥144.783 million, compared with operating profit of ¥251.873 million in the previous fiscal year, and ordinary loss was ¥146.733 million, compared with ordinary profit of ¥245.273 million.」

「As a result, for the third-quarter cumulative period of the current consolidated fiscal year, the IT business support services business secured revenue at a level close to that of the same period of the previous year. In the IoT solutions services business, however, revenue declined year on year to ¥348.291 million, down 51.3%, operating loss was ¥160.068 million, compared with profit of ¥87.280 million in the same period of the previous year, ordinary loss was ¥157.457 million, compared with ordinary profit of ¥79.809 million, and net loss attributable to owners of the parent was ¥170.570 million, compared with net income attributable to owners of the parent of ¥51.513 million.」

「However, sales of set-top boxes (STBs) for the video distribution field of the IoT solutions services business, which accounts for a large portion of revenue, received orders steadily in line with the initial plan during the first quarter of the current consolidated fiscal year. However, because terminal deliveries tend to be concentrated in the second and fourth quarters, deliveries of terminals to Value Added Resellers (VARs) were limited during the first quarter, and revenue remained sluggish. As a result, for the first-quarter cumulative period of the current consolidated fiscal year, revenue was ¥92.586 million, down 58.2% year on year, operating loss was ¥58.006 million, compared with operating profit of ¥19.098 million in the same period of the previous year, ordinary loss was ¥56.641 million, compared with ordinary profit of ¥19.922 million, and net loss attributable to owners of the parent was ¥56.641 million, compared with net income attributable to owners of the parent of ¥12.864 million in the same period of the previous year.」

「Because the timing of revenue recognition for these projects is uneven, results for each period may fluctuate significantly when viewed by quarter or by a defined period within each consolidated fiscal year.」