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.
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.
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).
|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 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 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%|
|Shares issued (year-end; '000)||263||263||263||26,340||26,340||26,340||26,340||26,340||26,340||26,340||26,340|
|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|
|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 current liabilities||765||1,147||1,007||881||1,150||1,373||2,252||2,523||3,058||2,951||2,912|
|Total long-term liabilities||246||296||301||307||497||591||609||599||601||618||661|
|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|
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:
|Tsukasa Iseki||Chairman and representative director|
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.
|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.|
|Gross profit margin||25.7%||27.9%||24.3%||30.7%||25.6%||27.1%||27.2%||32.1%||27.5%|
|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 margin||5.8%||8.6%||8.5%||15.2%||5.6%||9.9%||9.8%||15.2%||5.5%||8.6%|
|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.|
|Gross profit margin||25.7%||26.9%||25.9%||27.3%||25.6%||26.5%||26.7%||28.2%||27.5%|
|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 margin||5.8%||7.2%||7.7%||9.8%||5.6%||8.0%||8.6%||10.5%||5.5%||11.3%|
|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.|
|In-house packaged products||97||82||28||37||144||65||58||68||131||49.4%||265|
|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|
|In-house packaged products||-||-||-||-||48.5%||-20.7%||107.1%||83.8%||-9.0%||26.8%|
|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%|
|% of sales||100.0%||100.0%||100.0%||100.0%||100.0%||100.0%||100.0%||100.0%||100.0%|
|In-house packaged products||4.0%||3.2%||1.0%||1.2%||6.3%||2.2%||2.1%||2.2%||5.8%|
|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%|
|Financial Systems Solutions||2,243||2,284||2,617||2,713||-||-||-||-||-|
|Financial Systems Solutions||208||286||239||391||-||-||-||-||-|
|Operating profit margin||5.8%||8.9%||7.6%||14.5%||-||-||-||-||-|
|Financial Systems Solutions||9.3%||12.5%||9.1%||14.4%||-||-||-||-||-|
|Financial Systems Solutions||2,243||2,284||2,617||2,713||-||-||-||-||-|
|In-house packaged software||98||81||28||37||-||-||-||-||-|
|Third-party packaged software||61||34||53||72||-||-||-||-||-|
|In-house packaged software||49||13||7||20||-||-||-||-||-|
|Third-party packaged software||100||202||117||181||-||-||-||-||-|
|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.|
|In-house packaged products||97||179||207||244||144||209||267||335||131||32.8%||400|
|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|
|In-house packaged products||-||-||-||-||48.5%||16.8%||29.0%||37.3%||-9.0%||19.4%|
|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%|
|% of sales||100%||100%||100%||100.0%||100.0%||100.0%||100.0%||100.0%||100.0%||-||100.0%|
|In-house packaged products||4.0%||3.6%||2.7%||2.2%||6.3%||4.0%||3.3%||3.0%||5.8%||3.3%|
|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%|
|Financial Systems Solutions||2,243||4,527||7,144||9,858||-||-||-||-||-|
|Financial Systems Solutions||208||494||733||1,124||-||-||-||-||-|
|Operating profit margin||5.8%||7.4%||7.5%||9.5%||-||-||-||-||-|
|Financial Systems Solutions||9.3%||10.9%||10.3%||11.4%||-||-||-||-||-|
|Financial Systems Solutions||2,243||4,527||7,144||9,858||-||-||-||-||-|
|In-house packaged software||98||179||207||244||-||-||-||-||-|
|Third-party packaged software||61||95||148||220||-||-||-||-||-|
|In-house packaged software||49||62||69||89||-||-||-||-||-|
|Third-party packaged software||100||302||419||600||-||-||-||-||-|
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.
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.
|Category||Q1 FY06/22||% of total|
|Total one-time revenue||1,055||46.9%|
|In-house packaged products||128||5.7%|
|Third party packaged products||29||1.3%|
|Total recurring revenue||1,196||53.1%|
|Maintenance for third party products||142||6.3%|
|Services: third party||120||5.3%|
For details on previous quarterly and annual results, please refer to the Historical financial statements section.
|FY06/20 (parent)||FY06/21 (parent)||FY06/22(Parent)|
|(JPYmn)||1H||2H||FY||1H||2H||FY||1H Est.||2H Est.||FY Est.|
|Cost of sales||3,633||4,307||7,940||3,858||4,173||8,031|
|Gross profit margin||26.9%||27.7%||27.3%||26.5%||29.7%||28.2%|
|Operating profit margin||7.4%||11.2%||9.5%||7.7%||12.2%||10.1%||8.2%||13.0%||11.0%|
|Recurring profit margin||7.2%||12.0%||9.8%||8.0%||12.6%||10.5%||8.6%||13.3%||11.3%|
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.
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.
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)
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.
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.
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.
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.
|Act.||Act.||Est.||Est.||Est.||FY06/21 - FY06/24|
|System development, Hardware, in-house products, etc.||9,030||9,115||9,670||10,150||11,000||6.5%|
|Security measure products||1,063||1,131||1,200||1,350||1,500||9.9%|
|Operating profit margin||9.5%||10.1%||11.0%||13.0%||15.0%||-|
|Act.||Act.||Est.||Est.||Est.||FY06/19 - FY06/22|
|Operating profit margin||8.8%||9.5%||10.5%||10.4%||11.1%||-|
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).
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.
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.
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.
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.
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.
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.
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.
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).
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%).
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.
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.
|Act.||Est.||Est.||Est.||FY06/20 - FY06/23|
|Operating profit margin||9.4%||10.5%||10.4%||11.1%||-|
|Act.||Est.||Est.||Est.||FY06/19 - FY06/22|
|Financial Systems Solutions||9,337||9,400||9,900||10,600||4.3%|
|Operating profit margin||8.8%||9.4%||9.6%||10.0%||-|
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.
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.
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
|(JPYmn)||FY06/20||% of sales||FY06/21||% of sales||YoY|
|In-house packaged products||244||2.2%||397||3.6%||62.7%|
|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 margin||9.5%||-||10.5%||-||-|
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.
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.
|Retail Banking Online Systems||Financial Systems Solutions||Single reporting segment|
|Security Systems||Product Solutions|