Intelligent Wave (IWI) primarily sells software solutions based on in-house developed packaged software. The main clients are in the financial services industry; core products focus on credit card transaction processing, low-latency secure communications, and data protection. Dai Nippon Printing Co., Ltd. (DNP; TSE1: 7912) holds 50%+ of the company shares.

IWI focuses mainly on software development for client companies in the financial services industry, adding value by integrating hardware and software to create specialized systems, and also providing maintenance services to keep those systems running. The company’s information processing technology is mainly used in online systems to provide reliable credit card transaction processing service around the clock and 365 days a year. In this field, IWI has three core products: NET+1, ACE-Plus, and OnCore. NET+1 is a self-developed packaged software product used for credit card authorization (authorization of a charge by the credit card issuer in response to an inquiry from a member store). NET+1 has the top domestic market share in this field, being used in roughly 70% of credit card authorization systems of Japan’s leading credit card companies. ACE-Plus is a software system for detecting and preventing fraudulent credit card use. OnCore, also developed in-house, provides the same network connection functions as NET+1 but can also be used for other payment applications as well, including connections for smartphone payments.

The company also offers value-added systems and maintenance services for various industries and sectors, with a focus on in-house developed packaged software for information security and third-party packaged software for cybersecurity. The company has a host of products including CWAT, an in-house developed software for information security and Traps, a third-party product for cybersecurity.

Starting in FY06/21, the company merged the two reporting segments it had been using, combining the Financial Systems Solutions segment (which had accounted for roughly 90% of sales and nearly all of its operating profit) with the Product Solutions segment. The merger of the two segments was accompanied by changes in the company’s organizational and management structures aimed at further advancing sales efforts by facilitating the creation of a unified approach to the utilization of the personnel resources and intellectual property that had previously been split between the two segments, as well as accelerating the development of new products and services.

Trends and outlook

In FY06/21, IWI reported sales of JPY11.2bn (+2.4% YoY), operating profit of JPY1.1bn (+9.1% YoY), recurring profit of JPY1.2bn (+9.0% YoY), and net income attributable to owners of the parent of JPY841mn (+10.4% YoY). By category, sales were JPY5.3bn (-9.0% YoY) for system development, JPY1.4bn (+8.9% YoY) for maintenance, JPY335mn (+37.3% YoY) for in-house packaged products, JPY942mn (+13.8% YoY) for cloud services, JPY1.6bn (+7.3% YoY) for hardware, JPY509mn (+131.4% YoY) for third-party packaged products, and JPY1.1bn (+6.4% YoY) for security measure products.

For FY06/22, IWI forecasts sales of JPY12.0bn (+7.3% YoY), operating profit of JPY1.3bn (+16.8% YoY), recurring profit of JPY1.4bn (+16.1% YoY), and net income attributable to owners of the parent of JPY940mn (+11.8% YoY). On August 4, 2021, the company revised its medium-term business plan and presented a new medium-term business plan (see the Management strategy and long-term outlook section for details). The company was not affected by the COVID-19 pandemic in FY06/21, and there was no material impact on the continuity of its systems development or systems operation activities. Its production activities were on track as of August 2021.

New medium-term business plan: The company decided to revise the medium-term business plan it announced on August 5, 2020 and formulated a new medium-term plan covering the years from FY06/22 through FY06/24. Under the new medium-term plan, the company has set final-year targets for sales of JPY15.0bn (+34.1% versus FY06/21 results), operating profit of JPY2.3bn (+99.1%), and operating profit margin of 15.0% (10.1% in FY06/21).

In addition to its legacy one-time revenue business model, the company is working to expand its stable earnings base by adding recurring-revenue businesses that can sustainably generate profits. Companies outside the financial industry are offering new payment and financial services to their customers in an effort to expand their business areas. Further, some of the company's clients are using cloud services to quickly launch new businesses. IWI has been transitioning its legacy on-premises systems, mainly for its credit card merchant acquiring and credit card fraud detection services, to cloud-based systems. By using the company's cloud services, clients can quickly launch new businesses without the need for large investment. As such, IWI is encouraging companies outside the financial industry and companies that have not been in the credit card business to enter the credit card business.

The cloud services business has grown to become an important business for the company in terms of new client acquisition and business expansion. The company expects this business to turn profitable in FY06/22 and to grow into a major source of earnings by FY06/24. In addition, the company is using the knowledge and experience it has gained from its development work in the financial industry to create new products for companies outside the financial industry, and is taking on the challenge of expanding into new markets. It aims to expand into new markets and develop new revenue streams by using its technology, which is based on real-time, high-speed processing of large amounts of data, to discover and solve underlying operational issues in different industries.

By providing IT and business services that actively utilize the cloud alongside its conventional on-premises products, IWI aims to move from being a "credit settlement system developer" to being an "IT service provider that supports business reliability in the settlement, finance, and security fields." In this context, business reliability means continually enhancing the reliability of both clients' businesses and the company's own businesses.

Strengths and weaknesses

Shared Research thinks the two main strengths of Intelligent Wave are its dominant position in the front-end credit card market and its cooperation with DNP. Weaknesses: its small size in a market where size matters, and a relatively weak sales channel (see Strengths and weaknesses).

Key financial data

Income statement		FY06/11	FY06/12	FY06/13	FY06/14	FY06/15	FY06/16	FY06/17	FY06/18	FY06/19	FY06/20	FY06/21	FY06/22
(JPYmn)		Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Parent	Parent	Parent	Parent	Parent	Est.
Sales		4,763	5,242	5,871	6,558	6,160	7,207	8,470	10,604	10,443	10,921	11,188	12,000
	YoY	-3.9%	10.1%	12.0%	11.7%	-6.1%	17.0%	17.5%	25.2%	-1.5%	4.6%	2.4%	7.3%
Gross profit		1,642	1,374	473	1,342	1,779	1,993	2,132	2,223	2,807	2,981	3,157
	YoY	-10.6%	-16.3%	-65.6%	183.4%	32.6%	12.0%	7.0%	4.2%	26.3%	6.2%	5.9%
	Gross profit margin	34.5%	26.2%	8.1%	20.5%	28.9%	27.7%	25.2%	21.0%	26.9%	27.3%	28.2%
Operating profit		321	132	-678	146	484	714	703	548	922	1,036	1,131	1,320
	YoY	-10.3%	-59.0%	-	-	232.8%	47.5%	-1.6%	-22.0%	68.3%	12.5%	9.1%	16.8%
	Operating profit margin	6.7%	2.5%	-11.5%	2.2%	7.9%	9.9%	8.3%	5.2%	8.8%	9.5%	10.1%	11.0%
Recurring profit		342	155	-587	184	490	731	766	574	954	1,075	1,171	1,360
	YoY	-11.8%	-54.8%	-	-	166.6%	49.0%	4.9%	-25.1%	66.2%	12.7%	9.0%	16.1%
	Recurring profit margin	7.2%	2.9%	-10.0%	2.8%	8.0%	10.1%	9.0%	5.4%	9.1%	9.8%	10.5%	11.3%
Net income		129	270	-349	87	471	479	547	377	684	762	841	940
	YoY	-38.9%	108.9%	-	-	443.2%	1.6%	14.3%	-31.0%	81.2%	11.4%	10.4%	11.8%
	Net margin	2.7%	5.2%	-5.9%	1.3%	7.6%	6.6%	6.5%	3.6%	6.5%	7.0%	7.5%	7.8%
Per-share data
Shares issued (year-end; '000)		263	263	263	26,340	26,340	26,340	26,340	26,340	26,340	26,340	26,340
EPS		491.5	1,026.9	-1,325.3	3.29	17.89	18.18	20.78	14.36	25.99	29.00	31.98	35.76
Dividend per share		500.0	500.0	500.0	5.0	5.0	6.0	7.0	7.0	9.0	10.0	13.0	14.00
Book value per share		17,866	18,680	16,884	169	184	192	215	217	242	266	288
Balance sheet (JPYmn)
Cash and cash equivalents		2,783	2,808	2,085	2,420	2,957	2,852	2,578	2,840	3,255	3,642	4,308
Total current assets		3,822	4,335	3,560	3,524	4,560	4,682	4,985	5,034	6,054	6,381	6,976
	Tangible fixed assets	388	327	307	290	277	401	420	520	541	538	733
	Investments and other assets	1,375	1,495	1,573	1,459	1,359	1,388	1,682	1,768	2,096	2,167	2,114
	Intangible assets	132	206	315	367	285	557	1,421	1,515	1,341	1,465	1,318
Total fixed assets		1,895	2,028	2,195	2,116	1,921	2,345	3,523	3,803	3,978	4,171	4,164
Total assets		5,717	6,363	5,755	5,640	6,482	7,027	8,508	8,837	10,032	10,552	11,140
	Accounts payable	249	617	377	192	321	363	553	543	332	627	431
	Short-term debt	0	9	10	10	12	34	28	36	35	29	10
Total current liabilities		765	1,147	1,007	881	1,150	1,373	2,252	2,523	3,058	2,951	2,912
	Long-term debt	0	35	29	18	17	102	74	74	39	10	6
Total long-term liabilities		246	296	301	307	497	591	609	599	601	618	661
Total liabilities		1,011	1,443	1,308	1,188	1,647	1,964	2,861	3,122	3,660	3,569	3,572
Total net assets		4,706	4,920	4,447	4,451	4,835	5,063	5,648	5,715	6,373	6,983	7,568
Total interest-bearing debt		0	44	39	28	29	136	102	110	74	39	16
Cash flow statement (JPYmn)
Cash flows from operating activities		795	252	-588	620	839	124	1,172	1,213	1,237	1,547	1,700
Cash flows from investing activities		-61	-25	3	-47	-263	-192	-1,151	-604	-602	-753	-743
Cash flows from financing activities		-132	-138	-142	-143	-143	-34	-198	-349	-220	-408	-292
Financial ratios
ROA (RP-based)		6.1%	2.6%	-	3.2%	8.1%	10.8%	9.9%	6.6%	10.1%	10.4%	10.8%
ROE		2.8%	5.6%	-	1.9%	10.1%	9.7%	10.3%	6.6%	11.3%	11.4%	11.6%
Equity ratio		82.3%	77.3%	77.3%	78.9%	74.6%	72.1%	66.4%	64.7%	63.5%	66.2%	67.9%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: The company performed a 100-for-1 stock split on January 1, 2014.
Note: On June 28, 2016, the company finished liquidating consolidated subsidiary Intelligent Wave Korea Inc. FY06/17 results apply only to the parent company and are not consolidated (YoY growth rate figures for FY06/17 are for reference).

Recent updates

Election of candidates for director positions and changes in the company's lineup of directors

2021-08-25

Intelligent Wave Inc. announced a decision to change its representative director.

At a meeting held on August 25, 2021, the company’s Board of Directors resolved to change the company’s representative director as follows:

Resigning representative director

Name	Current position
Tsukasa Iseki	Chairman and representative director

Details of the change

Tsukasa Iseki will resign from his position upon expiry of his term of office. Under a management structure headed by a single representative director, the company will target further business development and higher corporate value through the execution of its medium-term business plan.

Trends and outlook

Quarterly trends and results

		FY06/20 (parent)				FY06/21 (parent)				FY06/22 (parent)				FY06/22 (parent)
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	% of Est.	1H Est.
Sales		2,417	2,550	2,838	3,115	2,299	2,949	2,819	3,121	2,252				45.0%	5,000
	YoY	3.4%	-5.6%	7.1%	13.1%	-4.9%	15.7%	-0.7%	0.2%	-2.0%					-4.7%
Gross profit		622	712	689	958	589	801	766	1,001	620
	YoY	18.3%	6.0%	-22.1%	32.2%	-5.2%	12.4%	11.2%	4.5%	5.2%
	Gross profit margin	25.7%	27.9%	24.3%	30.7%	25.6%	27.1%	27.2%	32.1%	27.5%
SG&A expenses		480	485	472	507	455	529	493	549	493
	YoY	5.6%	2.4%	-1.3%	6.0%	-5.3%	9.2%	4.4%	8.2%	8.5%
	SG&A ratio	19.9%	19.0%	16.6%	16.3%	19.8%	18.0%	17.5%	17.6%	21.9%
Operating profit		141	228	217	451	134	271	273	452	127				30.9%	410
	YoY	100.1%	14.6%	-46.6%	83.1%	-4.8%	19.2%	25.9%	0.3%	-5.7%					1.1%
	Operating profit margin	5.8%	8.9%	7.6%	14.5%	5.8%	9.2%	9.7%	14.5%	5.6%					8.2%
Recurring profit		141	219	241	474	129	293	275	475	125				29.0%	430
	YoY	79.3%	7.9%	-40.7%	78.6%	-8.8%	33.5%	14.3%	0.2%	-2.8%					2.1%
	Recurring profit margin	5.8%	8.6%	8.5%	15.2%	5.6%	9.9%	9.8%	15.2%	5.5%					8.6%
Net income		91	146	161	364	84	202	185	370	83				27.6%	300
	YoY	89.6%	-6.9%	-38.4%	67.5%	-8.3%	38.4%	14.7%	1.8%	-0.9%					5.0%
	Net margin	3.8%	5.7%	5.7%	11.7%	3.6%	6.9%	6.6%	11.9%	3.7%					6.0%
Quarterly		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	FY Est.
Sales		2,417	4,967	7,805	10,921	2,299	5,248	8,067	11,188	2,252				18.8%	12,000
	YoY	3.4%	-1.4%	1.5%	4.6%	-4.9%	5.7%	3.4%	2.4%	-2.0%					7.3%
Gross profit		622	1,334	2,023	2,981	589	1,390	2,156	3,157	620
	YoY	18.3%	11.4%	-2.9%	6.2%	-5.2%	4.2%	6.6%	5.9%	5.2%
	Gross profit margin	25.7%	26.9%	25.9%	27.3%	25.6%	26.5%	26.7%	28.2%	27.5%
SG&A expenses		480	965	1,437	1,944	455	984	1,477	2,026	493
	YoY	5.6%	3.9%	2.2%	3.1%	-5.3%	2.0%	2.8%	4.2%	8.5%
	SG&A ratio	19.9%	19.4%	18.4%	17.8%	19.8%	18.8%	18.3%	18.1%	21.9%
Operating profit		141	369	586	1,036	134	406	679	1,131	127				9.6%	1,320
	YoY	100.1%	37.1%	-13.3%	12.5%	-4.8%	10.0%	15.9%	9.1%	-5.7%					16.8%
	Operating profit margin	5.8%	7.4%	7.5%	9.5%	5.8%	7.7%	8.4%	10.1%	5.6%					11.0%
Recurring profit		141	360	601	1,075	129	421	696	1,171	125				9.2%	1,360
	YoY	79.3%	27.8%	-12.7%	12.7%	-8.8%	17.0%	15.9%	9.0%	-2.8%					16.1%
	Recurring profit margin	5.8%	7.2%	7.7%	9.8%	5.6%	8.0%	8.6%	10.5%	5.5%					11.3%
Net income		91	237	398	762	84	286	471	841	83				8.8%	940
	YoY	89.6%	15.8%	-14.7%	11.4%	-8.3%	20.5%	18.1%	10.4%	-0.9%					11.8%
	Net margin	3.8%	4.8%	5.1%	7.0%	3.6%	5.4%	5.8%	7.5%	3.7%					7.8%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Company estimates based on most recent figures

Results by category

Quarterly		FY06/20 (parent)				FY06/21 (parent)				FY06/22 (parent)				FY06/22 (parent)
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	% of Est.	1H Est.
Sales		2,417	2,550	2,838	3,115	2,299	2,949	2,819	3,121	2,252				45.0%	5,000
	System development	1,251	1,323	1,808	1,409	1,113	1,324	1,273	1,562	1,170				43.1%	2,713
	Maintenance	301	305	320	320	315	332	345	365	360				49.7%	725
	In-house packaged products	97	82	28	37	144	65	58	68	131				49.4%	265
	Cloud services	178	212	219	219	224	246	232	240	243				49.7%	489
	Hardware	353	327	189	657	208	664	467	299	79				42.0%	188
	Third party packaged products	61	34	53	72	110	130	191	78	69				57.5%	120
	Security measure products	173	267	221	402	181	188	253	509	198				39.6%	500
	One-time revenue	1,935	2,033	2,299	2,577	1,756	2,371	2,242	2,516	1,055				27.9%	3,786
	Recurring revenue	479	517	539	539	539	578	577	605	1,196				98.5%	1,214
YoY		3.4%	-5.6%	7.1%	13.1%	-4.9%	15.7%	-0.7%	0.2%	-2.0%				-	-4.7%
	System development	-	-	-	-	-11.0%	0.1%	-29.6%	10.9%	5.1%					11.3%
	Maintenance	-	-	-	-	4.7%	8.9%	7.8%	14.1%	14.3%					12.1%
	In-house packaged products	-	-	-	-	48.5%	-20.7%	107.1%	83.8%	-9.0%					26.8%
	Cloud services	-	-	-	-	25.8%	16.0%	5.9%	9.6%	8.5%					4.0%
	Hardware	-	-	-	-	-41.1%	103.1%	147.1%	-54.5%	-62.0%					-78.4%
	Third party packaged products	-	-	-	-	80.3%	282.4%	260.4%	8.3%	-37.3%					-50.0%
	Security measure products	-	-	-	-	4.6%	-29.6%	14.5%	26.6%	9.4%					35.5%
	One-time revenue	-	-	-	-	-9.3%	16.6%	-2.5%	-2.4%	-					-8.3%
	Recurring revenue	-	-	-	-	12.5%	11.8%	7.1%	12.2%	-					8.7%
% of sales		100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%
	System development	51.7%	51.9%	63.7%	45.2%	48.4%	44.9%	45.2%	50.1%	52.0%
	Maintenance	12.5%	12.0%	11.3%	10.3%	13.7%	11.3%	12.2%	11.7%	16.0%
	In-house packaged products	4.0%	3.2%	1.0%	1.2%	6.3%	2.2%	2.1%	2.2%	5.8%
	Cloud services	7.4%	8.3%	7.7%	7.0%	9.7%	8.3%	8.2%	7.7%	10.8%
	Hardware	14.6%	12.8%	6.7%	21.1%	9.0%	22.5%	16.6%	9.6%	3.5%
	Third party packaged products	2.5%	1.3%	1.9%	2.3%	4.8%	4.4%	6.8%	2.5%	3.1%
	Security measure products	7.2%	10.5%	7.8%	12.9%	7.9%	6.4%	9.0%	16.3%	8.8%
	One-time revenue	80.0%	79.7%	81.0%	82.7%	76.4%	80.4%	79.5%	80.6%	46.8%
	Recurring revenue	19.8%	20.3%	19.0%	17.3%	23.4%	19.6%	20.5%	19.4%	53.1%
Old categories
Sales		2,417	2,550	2,838	3,115	-	-	-	-	-
	Financial Systems Solutions	2,243	2,284	2,617	2,713	-	-	-	-	-
	Product Solutions	174	266	221	402	-	-	-	-	-
Operating profit		141	228	217	451	-	-	-	-	-
	Financial Systems Solutions	208	286	239	391	-	-	-	-	-
	Product Solutions	-66	-59	-22	59	-	-	-	-	-
Operating profit margin		5.8%	8.9%	7.6%	14.5%	-	-	-	-	-
	Financial Systems Solutions	9.3%	12.5%	9.1%	14.4%	-	-	-	-	-
	Product Solutions	-	-	-	14.8%	-	-	-	-	-
Sales breakdown
Financial Systems Solutions		2,243	2,284	2,617	2,713	-	-	-	-	-
	System development	1,251	1,323	1,808	1,409	-	-	-	-	-
	Maintenance	301	305	320	320	-	-	-	-	-
	Hardware	353	327	189	657	-	-	-	-	-
	In-house packaged software	98	81	28	37	-	-	-	-	-
	Cloud services	178	212	219	219	-	-	-	-	-
	Third-party packaged software	61	34	53	72	-	-	-	-	-
Product Solutions		174	266	221	402	-	-	-	-	-
	System development	5	23	18	7	-	-	-	-	-
	Maintenance	17	27	80	152	-	-	-	-	-
	Hardware	1	0	0	43	-	-	-	-	-
	In-house packaged software	49	13	7	20	-	-	-	-	-
	Third-party packaged software	100	202	117	181	-	-	-	-	-

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: From FY06/21, IWI has combined its old reporting segments, Financial Systems Solutions and Product Solutions, into a single segment.
Note: The company records sales from categories under which agreements regularly generate sales on a measurable scale as “recurring revenue.” In contrast, it records sales obtained through categories under which agreements have unfixed sales values or timing (categories not labeled with “recurring” in the table above) as “one-time revenue.”
Note: Starting Q1 FY06/22, the company has revised its recurring/one-time revenue categories to show a more detailed classification of theses types of sales than before (no continuity vs. FY06/21).

Quarterly		FY06/20 (parent)				FY06/21 (parent)				FY06/22 (parent)				FY06/22 (parent)
(JPYmn)		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	FY Est.
Sales		2,417	4,967	7,805	10,921	2,299	5,248	8,067	11,188	2,252				18.8%	12,000
	System development	1,251	2,574	4,382	5,791	1,113	2,437	3,710	5,272	1,170				20.0%	5,850
	Maintenance	301	606	926	1,246	315	647	992	1,357	360				25.0%	1,440
	In-house packaged products	97	179	207	244	144	209	267	335	131				32.8%	400
	Cloud services	178	390	609	828	224	470	702	942	243				21.5%	1,130
	Hardware	353	680	869	1,526	208	872	1,339	1,638	79				4.6%	1,730
	Third party packaged products	61	95	148	220	110	240	431	509	69				27.6%	250
	Security measure products	173	440	661	1,063	181	369	622	1,131	198				165.0%	120
	One-time revenue	1,935	3,968	6,267	8,844	1,756	4,127	6,369	8,885	1,055				12.6%	8,350
	Recurring revenue	479	996	1,535	2,074	539	1,117	1,694	2,299	1,196				46.5%	2,570
YoY		3.4%	-1.4%	1.5%	4.6%	-4.9%	5.7%	3.4%	2.4%	-2.0%				-	7.3%
	System development	-	-	-	-	-11.0%	-5.3%	-15.3%	-9.0%	5.1%					11.0%
	Maintenance	-	-	-	-	4.7%	6.8%	7.1%	8.9%	14.3%					6.1%
	In-house packaged products	-	-	-	-	48.5%	16.8%	29.0%	37.3%	-9.0%					19.4%
	Cloud services	-	-	-	-	25.8%	20.5%	15.3%	13.8%	8.5%					20.0%
	Hardware	-	-	-	-	-41.1%	28.2%	54.1%	7.3%	-62.0%					5.6%
	Third party packaged products	-	-	-	-	80.3%	152.6%	191.2%	131.4%	-37.3%					-50.9%
	Security measure products	-	-	-	-	4.6%	-16.1%	-5.9%	6.4%	9.4%					-89.4%
	One-time revenue	-	-	-	2.1%	-9.3%	4.0%	1.6%	0.5%	-					-6.0%
	Recurring revenue	-	-	-	17.8%	12.5%	12.1%	10.4%	10.8%	-					11.8%
% of sales		100%	100%	100%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%				-	100.0%
	System development	51.7%	51.8%	56.1%	53.0%	48.4%	46.4%	46.0%	47.1%	52.0%					48.8%
	Maintenance	12.5%	12.2%	11.9%	11.4%	13.7%	12.3%	12.3%	12.1%	16.0%					12.0%
	In-house packaged products	4.0%	3.6%	2.7%	2.2%	6.3%	4.0%	3.3%	3.0%	5.8%					3.3%
	Cloud services	7.4%	7.9%	7.8%	7.6%	9.7%	9.0%	8.7%	8.4%	10.8%					9.4%
	Hardware	14.6%	13.7%	11.1%	14.0%	9.0%	16.6%	16.6%	14.6%	3.5%					14.4%
	Third party packaged products	2.5%	1.9%	1.9%	2.0%	4.8%	4.6%	5.3%	4.5%	3.1%					2.1%
	Security measure products	7.2%	8.9%	8.5%	9.7%	7.9%	7.0%	7.7%	10.1%	8.8%					1.0%
	One-time revenue	80.0%	79.9%	80.3%	81.0%	76.4%	78.6%	79.0%	79.4%	46.8%					69.6%
	Recurring revenue	19.8%	20.1%	19.7%	19.0%	23.4%	21.3%	21.0%	20.5%	53.1%					21.4%
Quarterly		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4
Sales		2,417	4,967	7,805	10,921	-	-	-	-	-
	Financial Systems Solutions	2,243	4,527	7,144	9,858	-	-	-	-	-
	Product Solutions	174	440	661	1,063	-	-	-	-	-
Operating profit		141	369	586	1,036	-	-	-	-	-
	Financial Systems Solutions	208	494	733	1,124	-	-	-	-	-
	Product Solutions	-66	-125	-147	-88	-	-	-	-	-
Operating profit margin		5.8%	7.4%	7.5%	9.5%	-	-	-	-	-
	Financial Systems Solutions	9.3%	10.9%	10.3%	11.4%	-	-	-	-	-
	Product Solutions	-	-	-	-	-	-	-	-	-
Sales breakdown
Financial Systems Solutions		2,243	4,527	7,144	9,858	-	-	-	-	-
	Software development	1,251	2,574	4,382	5,791	-	-	-	-	-
	Maintenance	301	606	926	1,246	-	-	-	-	-
	Hardware	353	680	869	1,526	-	-	-	-	-
	In-house packaged software	98	179	207	244	-	-	-	-	-
	Cloud services	178	390	609	828	-	-	-	-	-
	Third-party packaged software	61	95	148	220	-	-	-	-	-
Product Solutions		174	440	661	1,063	-	-	-	-	-
	Software development	5	28	46	53	-	-	-	-	-
	Maintenance	17	44	124	276	-	-	-	-	-
	Hardware	1	1	1	44	-	-	-	-	-
	In-house packaged software	49	62	69	89	-	-	-	-	-
	Third-party packaged software	100	302	419	600	-	-	-	-	-

Q1 FY06/22 results (out November 4, 2021)

Summary

In Q1 FY06/22, the company reported sales of JPY2.3bn (-2.0% YoY), operating profit of JPY127mn (-5.7% YoY), recurring profit of JPY125mn (-2.8% YoY), and net income of JPY83mn (-0.9% YoY).

Progress versus plan: Sales were 45.0% of the 1H company plan (43.8% in Q1 FY06/21 vs. 1H results), operating profit was 30.9% (33.1%), recurring profit was 29.0%(30.5%), and net income was 27.6% (29.3%). Compared to the full year plan sales, operating profit, recurring profit, and net income were 18.8% (20.5% in Q1 FY06/21 vs. full-year results), 9.6% (11.9%), 9.2% (11.0%), and 8.8% (9.9%), respectively. The results were in line with the company's plan and there was no change to the 1H or full-year plan.

Sales declined 2.0% YoY: Sales were JPY1.2bn (+5.1% YoY) for system development, JPY360mn (+14.3% YoY) for maintenance, JPY131mn (-9.0% YoY) for in-house packaged products, JPY243mn (+8.5% YoY) for cloud services, JPY79mn (-62.0% YoY) for hardware, JPY69mn (-37.3% YoY) for third-party packaged products, and JPY200mn (+9.4% YoY) for security measure products.

Operating profit decreased by 5.7% YoY: Sales were down YoY and SG&A expenses increased. On the plus side, profit margins for maintenance and cloud services improved as a result of steady progress in system development work. The gross profit margin improved by 1.9pp to 27.5%, and the SG&A ratio rose by 2.1pp to 21.9%, resulting in a 0.2pp decline in the operating profit margin to 5.6%.

FY06/22 will be the first year of the current medium-term business plan. For the final year of the plan, FY06/24, the company is targeting sales of JPY15.0bn (+34.1% vs. FY06/21), operating profit of JPY2.2bn (+99.1% vs. FY06/21), and an operating profit margin of 15.0% (vs. 10.1% in FY06/21). IWI refers to the effort to achieve sales of JPY15.0bn and OPM of 15.0% as "15ALL." After achieving 15ALL, the company aims to achieve further growth in the long term.

The cloud services business, which is the principal driver of the medium-term plan, is budgeting to make a profit in FY06/22 for the first time since its inception. Orders have been growing as a result of active business negotiations with new customers, and Q1 FY06/22, the company acquired approximately JPY1bn worth of new orders. The order backlog in the cloud services business grew from JPY1.9bn at the end of the previous year to JPY2.6bn at the end of Q1 FY06/22. The company plans to receive additional new orders in Q2, and these orders are expected to contribute to sales in FY06/23. It expects strong growth to drive sales to around JPY2.0bn in FY06/23.

In Q1, orders in the cloud services business grew due to orders from companies outside the financial industry that are newly entering the card acquiring business. In Q2, the company expects to benefit from new orders from non-financial industry companies and credit card companies. IWI's cloud services have become one of the leading options not only for existing financial services companies but also for new companies starting up their own credit card and payment businesses.

Recurring/one-time revenue

From FY6/22, the company has subdivided its category classifications and redefined its sales categories to show a more detailed classification of recurring and one-time revenue. Based on the type of contract and the status of the business concerned, projects that can generate a specified level of sales on a regular basis are classified as recurring revenue businesses, while those that cannot are classified as one-time revenue business. Typical recurring revenues are system usage fees and system operation fees related to the cloud services business, and maintenance fees for the company's and other companies' products. Cloud service usage fees are categorized as "Services: in-house." Typical one-time revenues include include fees for contracted development work and sales of the company's own products and products of other companies.

Recurring/one-time revenue (JPYmn)

Category		Q1 FY06/22	% of total
Total one-time revenue		1,055	46.9%
	Software development	888	39.4%
	In-house packaged products	128	5.7%
	System services	8	0.4%
	Third party packaged products	29	1.3%
Total recurring revenue		1,196	53.1%
	Maintenance	624	27.7%
	Maintenance for third party products	142	6.3%
	Services: in-house	308	13.7%
	Services: third party	120	5.3%
Total		2,251	100.0%

For details on previous quarterly and annual results, please refer to the Historical financial statements section.

Full-year company forecast

		FY06/20 (parent)			FY06/21 (parent)			FY06/22(Parent)
(JPYmn)		1H	2H	FY	1H	2H	FY	1H Est.	2H Est.	FY Est.
Sales		4,967	5,954	10,921	5,248	5,940	11,188	5,000	7,000	12,000
	YoY	-1.4%	10.2%	4.6%	5.7%	-0.2%	2.4%	-4.7%	17.9%	7.3%
Cost of sales		3,633	4,307	7,940	3,858	4,173	8,031
Gross profit		1,334	1,647	2,981	1,390	1,767	3,157
	YoY	11.4%	2.3%	6.2%	4.2%	7.3%	5.9%
	Gross profit margin	26.9%	27.7%	27.3%	26.5%	29.7%	28.2%
SG&A expenses		965	979	1,944	455	1,571	2,026
	SG&A ratio	19.4%	16.4%	17.8%	8.7%	26.5%	18.1%
Operating profit		369	668	1,036	406	725	1,131	410	910	1,320
	YoY	37.1%	2.3%	12.5%	10.0%	8.6%	9.1%	1.1%	25.5%	16.8%
	Operating profit margin	7.4%	11.2%	9.5%	7.7%	12.2%	10.1%	8.2%	13.0%	11.0%
Recurring profit		360	715	1,075	421	750	1,171	430	930	1,360
	YoY	27.8%	6.4%	12.7%	17.0%	4.9%	9.0%	2.1%	24.0%	16.1%
	Recurring profit margin	7.2%	12.0%	9.8%	8.0%	12.6%	10.5%	8.6%	13.3%	11.3%
Net income		237	525	762	286	555	841	300	640	940
	YoY	15.8%	9.6%	11.4%	20.5%	5.8%	10.4%	5.0%	15.2%	11.8%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Company estimates based on most recent figures
Note: On June 28, 2016, the company finished liquidating consolidated subsidiary Intelligent Wave Korea Inc. FY06/17 estimates apply only to the parent company and are not consolidated (YoY growth rate figures for FY06/17 are for reference).

Company forecast for FY06/22 (out August 4, 2021)

Overview

For FY06/22, the first year of the medium-term business plan (FY06/22–FY06/24), IWI forecasts sales of JPY12.0bn (+7.3% YoY), operating profit of JPY1.3bn (+16.8% YoY), recurring profit of JPY1.4bn (+16.1% YoY), and net income attributable to owners of the parent of JPY940mn (+11.8% YoY). It also targets operating profit margin of 11.0% (+0.9pp YoY).

On August 4, 2021, the company revised its medium-term business plan and presented a new medium-term business plan (see the Management strategy and long-term outlook section for details). The company was not affected by the COVID-19 pandemic in FY06/21, and there was no material impact on the continuity of its systems development or systems operation activities. Its production activities were on track as of August 2021.

Sales projections by category

System development: JPY5.9bn (+11.0% YoY); JPY2.7bn in 1H (+11.3% YoY), JPY3.1bn in 2H (+10.7% YoY)

Maintenance: JPY1.4bn (+6.1% YoY); JPY725mn in 1H (+12.1% YoY), JPY715mn in 2H (+0.7% YoY)

In-house packaged software: JPY400mn (+19.4% YoY); JPY265mn in 1H (+26.8% YoY), JPY135mn in 2H (+7.1% YoY)

Cloud services: JPY1.1bn (+20.0% YoY); JPY489mn in 1H (+4.0% YoY), JPY641mn in 2H (+35.8% YoY)

Hardware: JPY1.7bn (+5.6% YoY); JPY188mn in 1H (-78.4% YoY), JPY1.5bn (+101.3% YoY)

Third-party packaged software: JPY250mn (-50.9% YoY); JPY120mn in 1H (-50.0% YoY), JPY130mn in 2H (-51.7% YoY)

Security measure products: JPY1.2bn (+6.1% YoY); JPY500mn in 1H (+35.5% YoY), JPY700mn in 2H (-8.1% YoY)

In 1H FY06/22, the company expects sales to fall 4.7% YoY to JPY5.0bn due to slightly weaker orders for new projects, but forecasts a turnaround from 2H, resulting in a 7.3% YoY rise in sales to JPY12.0bn. In July 2021, the company won a relatively large cloud service order (IOASIS) that will contribute to sales from 2H, which will help to boost FY06/22 sales in the cloud services business by 20.0% YoY to JPY1.1bn. As of August 2021, new business negotiations for security measure products were progressing well and, depending on circumstances, the company says it may even exceed its FY06/22 projection for that business. In the hardware business, it expects to post sales from a large project around June 2022.

Cloud services business set to move into the black

IWI expects cloud services to generate profit from Q2 and move solidly into the black for full-year FY06/22. It sees cloud services as a growth driver in the medium term.

Projected sales of JPY1.1bn: JPY240mn in Q1 (+7.1% YoY), JPY248mn in Q2 (+5.5% YoY), JPY296mn in Q3 (+26.0% YoY), and JPY343mn in Q4 (+39.4% YoY)

Projected gross profit of JPY80mn: -JPY18mn in Q1 (loss of JPY37mn in Q1 FY06/21), JPY18mn in Q2 (loss of JPY12mn in Q2 FY06/21), JPY46mn in Q3 (loss of JPY28mn in Q3 FY06/21), and JPY33mn in Q4 (profit of JPY3mn in Q4 FY06/21)

New revenue recognition standards

With adoption of the new revenue recognition standards, whereas it had previously booked revenue using the completed-contract method, IWI will now apply the percentage of completion method for projects that exceed a certain number of contract units. In FY06/22, the company has no large projects lined up that exceed the designated number of contract units, so the impact on sales and profits will be negligible.

Management strategy and long-term outlook

New medium-term business plan (FY06/22--FY06/24) announced on August 4, 2021

Overview

New medium-term business plan: IWI decided to revise the medium-term business plan it announced on August 5, 2020 and formulated a new medium-term plan covering the years from FY06/22 through FY06/24.

Reason for revision

In FY06/21, the company achieved results mostly in line with the previous medium-term business plan. It reviewed the previous plan and formulated a new plan after thoroughly reviewing the business environment with the aim of further expanding its business and boosting profitability.

FY06/24 targets

For FY06/24, the final year of the medium-term plan, the company targets sales of JPY15.0bn (+34.1% versus FY06/21 sales), operating profit of JPY2.3bn (+99.1% YoY), and OPM of 15.0% (versus 10.1% in FY06/21). IWI refers to the effort to achieve sales of JPY15.0bn and OPM of 15.0% as "15ALL." With 15ALL as a milestone, the company aims for even greater growth in the long term.

New and previous medium-term business plans

New plan
(JPYmn)			FY06/20	FY06/21	FY06/22	FY06/23	FY06/24	CAGR
			Act.	Act.	Est.	Est.	Est.	FY06/21 - FY06/24
Sales			10,921	11,188	12,000	13,500	15,000	10.3%
	System development, Hardware, in-house products, etc.		9,030	9,115	9,670	10,150	11,000	6.5%
	Cloud services		828	942	1,130	2,000	2,500	38.5%
	Security measure products		1,063	1,131	1,200	1,350	1,500	9.9%
Operating profit			1,036	1,131	1,320	1,750	2,250	25.8%
	Operating profit margin		9.5%	10.1%	11.0%	13.0%	15.0%	-
Old plan
(JPYmn)		FY06/19	FY06/20	FY06/21	FY06/22	FY06/23		CAGR
		Act.	Act.	Est.	Est.	Est.		FY06/19 - FY06/22
Sales		10,443	10,921	11,000	12,000	13,500		4.7%
Operating profit		922	1,036	1,150	1,250	1,500		10.7%
	Operating profit margin	8.8%	9.5%	10.5%	10.4%	11.1%		-

Source: Shared Research based on company data

Expansion of stable earnings sources

In addition to its conventional one-time revenue business model, IWI is working to expand its stable earnings base by adding recurring-revenue businesses that can sustainably generate profits. Companies outside the financial industry are offering new payment and financial services to their customers in an effort to expand their business areas. Furthermore, some of the company's clients are using cloud services to quickly launch new businesses.

The company has been transitioning its legacy on-premises systems, mainly for its credit card merchant acquiring and credit card fraud detection services, to cloud-based systems. By using the company's cloud services, clients can quickly launch new businesses without the need for large investment. This being the case, IWI is encouraging companies outside the financial industry and companies that have not been in the credit card business to enter the credit card business.

The cloud services business (recurring revenue business) has grown to become an important business for the company in terms of new client acquisition and business expansion. IWI expects this business to turn profitable in FY06/22 and grow into a major earnings source by FY06/24.

Of the JPY15.0bn in sales the company is targeting for FY06/24, it estimates that some JPY4.2bn, about 28%, will be recurring revenue. In FY06/21, of JPY11.2bn in sales, JPY2.3bn was recurring revenue (20.6% of the total).

Redefined mission

To achieve further growth, IWI redefined its mission when formulating its new medium-term business plan. The company is using the knowledge and experience cultivated in its development work in the financial industry to develop new products for companies outside the financial industry as part of its efforts to open up new markets. With its technology based on real-time, high-speed processing of large data volumes, the company aims to identify and resolve potential problems in the operations of different industries, thereby opening up new markets and fostering them as new earnings pillars.

By providing IT and business services that actively utilize the cloud alongside its conventional on-premises products, IWI aims to move from being a "credit settlement system developer" to being an "IT service provider that supports business reliability in the settlement, finance, and security fields." In this context, business reliability (a term coined by the company) means continually enhancing the reliability of both customers' businesses and the company's own businesses.

Roadmap for achieving 15ALL

In response to rapidly changing markets, IWI aims to achieve 15ALL (Sales of JPY15.0bn and OPM of 15.0%) through three strategies: 1) development of hybrid IT infrastructure for the settlement market, 2) expansion into areas other than the settlement, finance, and security fields, and 3) synergies among DNP's group companies.

Cloud services: The company aims to expand sales from JPY942mn in FY06/21 to JPY2.5bn in FY06/24 (CAGR of 38.5%). It expects to receive two orders for large multi-year projects in FY06/22 (one was already received in July 2021), which should steadily contribute to earnings from 2H FY06/22 onward.

FY06/22 sales target: JPY1.1bn (+20.0% YoY)
FY06/23 sales target: JPY2.0bn (+77.0% YoY)
FY06/24 sales target: JPY2.5bn (+25% YoY)

New businesses: IWI expects new businesses to contribute sales of JPY1.5bn in FY06/24. The EoM (IP flow monitoring) solution for broadcasting companies has already begun to produce results, and the company has already begun taking on new challenges (developing new businesses) to follow EOM as it aims to create new growth pillars.

Development of hybrid IT infrastructure for the settlement market

The company aims to respond to client needs with a hybrid of on-premises and cloud services while expanding its operations as a whole.

IWI's business opportunities are expanding with promotion of a cashless society and the diversification of payment methods. At the same time, there is growing need for low-cost cloud services, since credit card companies are lowering their merchant fees and cutting costs. Alongside expansion of cloud services, which it has already been working on, the company will promote a cloud first position and develop new services to support consumers and client companies.

IWI will provide hybrid IT infrastructure that combines on-premises services, which have long been the company's forte, and cloud services, which are set to drive growth in the medium term. It will also enhance its existing fraud detection and nighttime monitoring services as it aims to provide one-stop service. The company hopes to develop the next generation of business process outsourcing services utilizing both its own and new technologies.

Expansion into new business areas

IWI intends to create IT infrastructure that supports digital transformation for the benefit of consumers and client companies, and to expand its business domain by leveraging the acceleration (high-speed processing) and analysis technologies it has cultivated in the financial industry.

The promotion of digital transformation and other factors are catalyzing global change that requires the real-time processing of large volumes of data in all industries. Using the acceleration and real-time analysis technologies it has cultivated in the financial industry, the company will create IT infrastructure to support digital transformation in mission-critical social infrastructure such as broadcasting, transportation, and electric power supply, thereby expanding its business domain.

IWI has been working on EoM, an IP flow monitoring solution geared toward the broadcasting industry for some time. EoM has been adopted by Yle (Finland's national public broadcasting company), proving that the company's technology is accepted on the world stage. In addition to developing domestic users such as TV Asahi, JDS, and QVC Japan, IWI will continue to promote an overseas strategy for EoM by enhancing sales efforts in the US and the EU. During FY06/22, it plans to announce a new solution for the broadcasting industry to follow on EoM's heels. In cooperation with overseas vendors, the company is conducting research and development to enter new industries.

*EoM: IP flow monitoring solution developed by IWI. It is geared toward the broadcasting industry and can handle internet protocol-based broadcasting which is essential for the 4K/8K era. With overseas broadcasting companies running ahead of Japanese peers when it comes to their use of IP-based broadcasting systems, the company is focusing its marketing efforts on the overseas market. This solution represents an application of a technology IWI had already been developing in response to demand from financial services companies for high-speed data transmission. IP flow monitoring solution identifies the data type and applies high-speed data analysis through Fast Event Streamer (FES), its self-developed complex event processing (CEP) engine, and processes the data to facilitate overall trend analysis. This solution focuses on stream (IP flow) monitoring and can visualize not only the bit rate or packet drop within every stream, but latency (or “jitter”) within every stream received.

Synergies among DNP's group companies

The company plans to use a combination of DNP assets and IWI technologies to transform its operations so as not to be confined to any specific business area.

With the trend toward cashless transactions, group synergies have so far been mainly in the area of payment settlement, but the company aims to use DNP assets and IWI technologies to transform its operations so as not to be confined to any specific business area (for example, not confining itself to the financial industry). The first step in this new approach is to promote a group synergy strategy in the area of operational technology (control and operation technology for production lines and systems to create smart factories) with a focus on factories owned by the DNP group. Smart factories require network connections, and security measures are essential. DNP's factories already use IWI's cutting-edge security products, which will also be rolled out to DNP's customers hereafter. In addition to fortifying the security environment, the company will support smart factories with infrastructure using its acceleration (high-speed processing) and real-time analysis technologies.

Organizational reform

Human resources are an important element of the company's business model. By respecting varying work styles and diverse personnel, the company hopes both to ensure the stable operation of its existing IT infrastructure, and to create new businesses.

Value: All employees are friends who grow together and teammates who share the same mission and vision, advancing together and taking on new challenges.

Utilizing diverse human resources
Pursuing positive work environment and job satisfaction
Promoting health management

IWI's approach to the Tokyo Stock Exchange prime market

Improve corporate value via implementation of the medium-term business plan

The company has stated that it aims to remain on the prime market and plans to improve its corporate value by executing its medium-term business plan and enhancing shareholder returns. By pursuing its 15ALL plan, it aims to double operating profit (it achieved JPY1.1bn in FY06/21 and projects JPY2.3bn in FY06/24).

Enhancing shareholder returns

Previously, the company targeted a moderate payout ratio of about 30%, but has now changed its shareholder returns policy to target 40% (it plans to pay a dividend of JPY13.0 per share for FY06/21, up JPY3.0 YoY for a payout ratio of 40.6%, and JPY14.0 per share for FY06/22, up JPY1.0 for a projected payout ratio of 39.8%).

Reference: Previous medium-term business plan: FY06/21–FY06/23 (out August 5, 2020)

Overview

In light of the COVID-19 pandemic, IWI decided to revise its previous medium-term business plan (announced on August 7, 2019) and formulate a medium-term plan for the years FY06/21 through FY06/23. Under the new medium-term plan, the company planned to accelerate investments in new businesses while transitioning its business model to one centered around cloud-based services with subscription-type payment models.

Under the medium-term plan, the company set a final-year target for sales of JPY13.5bn (+23.6% versus FY06/20), operating profit of JPY1.5bn (+44.8%), and operating profit margin of 11.1%. It stated that it will aim for a stable operating profit margin of at least 10% in the short term and 15% in the long term.

Reasons for revisions to medium-term business plan and performance targets

On the production side, the company’s systems development business and systems operations business are all doing well, having experienced no major disruptions as a result of the COVID-19 pandemic. On the marketing and sales front, however, opportunities for direct contacts with clients have declined and there are some delays in negotiations for new projects owing to the circumstances at client companies.

The company says it is hard to make precise estimates as to the impact of the pandemic on its businesses. However, it expected the possibility that the pandemic would slow the overall pace of sales growth because of delays in winning new project orders.

As for the operating environment, the company saw no major changes, with prospects still looking good for a continued rise in credit card transaction volumes over the long term, and this in turn promising continued growth opportunities for its own business. The company saw sales running basically flat YoY in FY06/21, then getting back on the growth track in FY06/22 and FY06/23 as it expected to wins orders for development projects from major credit card companies and from new client companies looking to move into the credit card business, as well as for new projects for cloud services. In terms of profitability, the company was looking to keep its operating profit margin consistently above 10% and push it up to around 11% in FY06/23 for operating profit of JPY1.5bn.

Long term, IWI set a target of an operating profit margin of 15%. It set its sights on gaining stable sales growth and improving profit margins by building on its profitable systems development business with various recurring-revenue and subscription-type businesses.

New (out August 5, 2020) and previous (out August 7, 2019) medium-term plans

New plan
(JPYmn)			FY06/20	FY06/21	FY06/22	FY06/23	CAGR
			Act.	Est.	Est.	Est.	FY06/20 - FY06/23
Sales			10,921	11,000	12,000	13,500	7.3%
Operating profit			1,036	1,150	1,250	1,500	13.1%
	Operating profit margin		9.4%	10.5%	10.4%	11.1%	-
Old plan
(JPYmn)		FY06/19	FY06/20	FY06/21	FY06/22		CAGR
		Act.	Est.	Est.	Est.		FY06/19 - FY06/22
Sales		10,443	10,600	11,200	12,000		4.7%
	Financial Systems Solutions	9,337	9,400	9,900	10,600		4.3%
	Product Solutions	1,106	1,200	1,300	1,400		8.2%
Operating profit		922	1,000	1,080	1,200		9.2%
	Operating profit margin	8.8%	9.4%	9.6%	10.0%		-

Source: Shared Research based on company data

Comparison of new and previous medium-term business plans: differences in underlying assumptions

Cloud services: For the cloud services, the new medium-term plan is targeting sales of JPY940mn in FY06/21 and JPY1.3bn in FY06/22; this compares with sales targets of JPY1.1bn for FY06/21 and JPY1.4bn for FY06/22 under the previous medium-term plan.

Systems development: For the systems development, the new medium-term plan is targeting sales of JPY9.0bn in FY06/21 and JPY9.5bn in FY06/22; this compares sales targets of JPY8.8bn for FY06/21 and JPY9.2bn for FY06/22 under the previous plan.

Security measure products (formally Product Solutions business): For security measure products, the new medium-term plan is targeting sales of JPY1.1bn in FY06/21 and JPY1.2bn in FY06/22; this compares sales targets of JPY1.3bn for FY06/21 and JPY1.4bn for FY06/22 under the previous plan.

Evolving in three dimensions

The company is looking to steadily advance in line with its guiding principle calling for expanding its scale of business, cultivating human resources, and improving its corporate culture.

In the process of expanding its scale of business, the company is looking to move away from its traditional contract development model over the medium term, increasing the proportion of total revenues derived from cloud-based service with subscription-type payment models and, with this recurring-revenue stream, bring its operating profit margin up to 15% and increase its enterprise value over the long term.

New sales categories

The company will use the following categories for reporting sales starting in FY06/21:

System development: Revenues from contract systems development work

Maintenance: Revenues from providing maintenance service for systems IWI developed

In-house packaged software: Revenues from sales of proprietary products

Cloud services: Revenues from leasing of IWI systems for specified timeframe

Hardware: Revenues from sales of servers and other hardware

Third-party packaged software: Revenues from sales of third-party products

Security measure products: Revenues from sales of both proprietary and third-party cybersecurity products

Breakdown of sales by new category: Results and initial FY06/21 company forecast

(JPYmn)	FY06/20	% of sales	FY06/21	% of sales	YoY
	Act.		Est.
Sales	10,921	100.0%	11,000	100.0%	0.7%
System development	5,791	53.0%	5,362	48.7%	-7.4%
Maintenance	1,246	11.4%	1,284	11.7%	3.0%
In-house packaged products	244	2.2%	397	3.6%	62.7%
Cloud services	828	7.6%	940	8.5%	13.5%
Hardware	1,526	14.0%	1,494	13.6%	-2.1%
Third party packaged products	220	2.0%	423	3.8%	92.3%
Security measure products	1,063	9.7%	1,100	10.0%	3.5%
Operating profit	1,036	9.5%	1,150	10.5%	11.0%
Operating profit margin	9.5%	-	10.5%	-	-

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Business

Business description

Software developer and member of the Dai Nippon Printing group; strength in credit card transaction processing

IWI’s business consists of system development and system product (hardware and software) sales. The company mainly sells software solutions based on in-house developed packaged software.

The main clients are in the financial services industry; core products focus on credit card transaction processing, low-latency secure communications (with quick response), and data protection

Dai Nippon Printing Co., Ltd. (DNP; TSE1: 7912) holds 50%+ of the company.

Main business segments

Starting in FY06/21, the company merged the two reporting segments it had been using, combining the Financial Systems Solutions segment with the Product Solutions segment. The impetus for this switch is outlined below.

IWI has had two reporting segments, the Financial Systems Solutions segment and the Product Solutions segment, and has managed operations accordingly. However, it has recently decided to step up its sales outreach and its product development efforts in both of these businesses to support further growth.

The company will expand its sales efforts by making use of client data that had formally not been shared between the two businesses, and expand its R&D staff in the area of cybersecurity technology to facilitate the development of new products and services.

Effective July 1, 2020, the company changed its organizational structure and made changes in its management organization scheme and, along with this, changed its reporting segmentation scheme.

The merger of the two segments was accompanied by changes in IWI’s organizational and management structures, as detailed below.

The sales department of the former Financial Systems Solutions business and sales team of the security department of the former Product Solutions business were merged to form a single sales department.

The development department of the former Financial Systems Solutions business and development team of the security department of the former Product Solutions business were merged to form a single development department.

The previous business segmentation scheme (the one used through FY06/20) reflected the company’s business activities and organizational structures and had two reporting segments: Financial Systems Solutions and Product Solutions. Prior to that, the company split its businesses into three reporting segments: Retail Banking Online Systems, System Solutions, and Security Systems.

Changes in reporting segments over the years

–FY06/14	FY06/15–FY06/20	FY06/21–
Retail Banking Online Systems	Financial Systems Solutions	Single reporting segment
System Solutions
Security Systems	Product Solutions
Other

Source: Shared Research based on company data

Business overview