Performance / Finance

Business results summary

Amount of Sales7,215 One million yenYoY change rate
34.0 % OFF
Operating income△1,361 One million yenYoY change rate
-
Ordinary profit△1,292 One million yenYoY change rate
-
Net income attributable to owners of parent company△1,701 One million yenYoY change rate
-
Net income per share△43.27 YenYoY change rate
-

Business results

Based on our corporate philosophy of ``Achieving Bright Value - Providing solutions that do not overlook risks and opportunities hidden in records, and realizing fairness in the information society,'' our group uses our proprietary artificial intelligence (AI) engine, `` We utilize advanced information analysis technology using KIBIT (*) to provide necessary and appropriate support in a variety of fields, including our original business of international litigation support, fraud investigations, manufacturing, finance, retail, distribution, and the medical field. We are contributing to the realization of a fair world where people can find information and solving social issues.

(*) From April 2023, 4, in order to further pursue FRONTEO's AI design philosophy and promote awareness among customers, "KIBIT" and "Concept", which have been used as AI engine names, will be introduced. Encoder (concept encoder)" and "LoocaCross" are no longer used together, and the name has been unified to "KIBIT", and each product name has the same name. "KIBIT" is an AI engine that achieves compact and highly accurate analysis by expressing human thought processes and judgments using a mathematical approach, which is FRONTEO's AI design philosophy, and intentionally allowing for "ambiguity." is.

In the AI ​​drug discovery field within the life science AI field, we have launched the "FRONTEO Drug Discovery AI Factory" (hereinafter referred to as DD-AIF) concept and are making preparations for its launch.
In the general drug discovery process, the bottleneck in improving drug discovery ability is the target identification process, which is the most upstream step of the drug discovery process, but it takes a lot of time to improve this process using existing methods. It is said to be costly. Therefore, drug discovery researchers have a desire to create innovations that break through existing methods in order to improve the efficiency and sophistication of the target identification process in order to improve drug discovery capabilities.
The above-mentioned thoughts of drug discovery researchers, the realization of FRONTEO's philosophy of fairness, and our core competency, our unique language analysis AI "KIBIT," have combined to create a top-class drug discovery research team in Japan. Researchers gathered at FRONTEO and launched the DD-AIF concept. DD-AIF is comprised of drug discovery researchers, biologists, data scientists, the AI ​​engine "KIBIT" and various in-house developed applications equipped with "KIBIT".
At DD-AIF, we use FRONTEO's unique five drug discovery technology methods (Drug Discovery Best Known Method, hereinafter referred to as DD-BKM) to respond to orders for target molecule discovery and selection from pharmaceutical companies, drug discovery ventures, etc. By making full use of a recipe that combines DD-BKM and DD-BKM, we perform comprehensive and non-biased exploration and evaluation, creating an innovative contract service that is dozens of times more efficient than the normal drug discovery process. We will begin full-scale operation of the service.
In addition, the number of target diseases evaluated for target genes and molecules analyzed by KIBIT liGALILEO, one of the applications that make up DD-AIF, has been increased from the previous 1,500 diseases to 1. We are making steady progress in strengthening the functions of DD-AIF, including expanding it to other diseases, and we will move forward with the expansion of the AI ​​drug discovery business.
Continuing on, regarding the "Conversational Dementia Diagnosis Support AI Program" in the medical device field, as announced in the second quarter of the consolidated fiscal year, we will develop a program that uses conversational audio as input data (a program with an automatic voice transcription function). ), and we are steadily proceeding with development. In addition, we will also proceed with the development of consumer products in parallel, making use of the high-quality data sets and development know-how collected during the development process.
Furthermore, we are proceeding smoothly with the development of other products such as the "Schizophrenia Diagnosis Support AI Program" and the "Depression Diagnosis Support AI Program".

In the business intelligence field, orders for the email and chat auditing system "KIBIT Communication Meter" remained steady, and "KIBIT WordSonar for VoiceView" We believe that the superiority of our AI technology will continue to be strong, as we are continuing discussions with multiple companies regarding the introduction of ``Voice View''. Furthermore, during the current fourth quarter consolidated accounting period, we announced "KIBIT Eye," a peacetime audit system equipped with a new AI engine. "KIBIT Eye" uses AI to reproduce the excellent intuitive judgment ability of humans, making it even more accurate than conventional products. We will continue to support the efficiency and sophistication of routine audit operations at client companies and contribute to the prevention and early detection of fraud and scandals.

Sales in the business intelligence field for the current fiscal year increased compared to the previous year, but due to delays in promoting human resources investment to strengthen the sales system, sales did not increase as much as originally expected. I couldn't reach it. Although we have made some progress in strengthening our sales structure in the current fourth quarter, we will continue to invest in human resources commensurate with the increase in sales for the next fiscal year. We recognize that the market promoting DX will continue to be strong, and we believe that the market will continue to grow. In this market environment, we will continue to expand our business by increasing our company's recognition and building up our pipeline.

In the area of ​​economic security, the Economic Security Promotion Act was enacted in May 2022, and both government agencies and private companies are becoming more interested in economic security, and inquiries are on the rise. In the current consolidated fiscal year, we are making progress toward full-scale business operations, such as obtaining multiple patent decisions in the economic security field. We will continue to strive to expand our business by understanding the needs of each company in each location and providing accurate solutions.

In the Legal Tech AI business, there were few large-scale projects, and sales in this business in the fourth quarter consolidated accounting period were lower than in the third quarter consolidated accounting period, and remained sluggish. Although there was a delay in promoting human resources investment to strengthen our sales system, we have made some progress in strengthening our sales system during the current fourth quarter consolidated accounting period. In order to recover sales next fiscal year, we will strengthen and expand our customer base by increasing the amount of marketing and sales activities using our portal site "FRONTEO Legal Link Portal."

As a result of the above, consolidated results for the current fiscal year were as follows: net sales of 7,215,270 thousand yen (down 34.0% year-on-year), operating loss of 1,361,990 thousand yen (operating income of 1,721,714 thousand yen for the same period last year), ordinary loss of 1,292,518 thousand yen (ordinary income of 1,687,434 thousand yen for the same period last year), and net loss attributable to shareholders of the parent company of 1,701,317 thousand yen (net income attributable to shareholders of the parent company of 1,308,760 thousand yen for the same period last year). Net loss attributable to shareholders of the parent company was 54,648 thousand yen (net income attributable to shareholders of the parent company of 258,876 thousand yen in the same period of the previous year), a decrease from the same period of the previous year. In addition, insurance income of 223,997 thousand yen for unauthorized access countermeasure expenses was recorded as extraordinary income, and structural reform expenses of XNUMX thousand yen for the purpose of cost structure optimization associated with strategic downsizing of non-AI business and information security countermeasure expenses of XNUMX thousand yen to deal with unauthorized access were recorded as extraordinary losses. The Company recorded an extraordinary loss of XNUMX thousand yen for structural reform expenses to optimize the cost structure in accordance with the strategic downsizing of the non-AI business. Translated with DeepL.com (free version)

Business segment (quarterly cumulative period)

Unit (million yen)
Segment nameThird quarter
(1Q)
Third quarter
(2Q)
Third quarter
(3Q)
Third quarter
(4Q)
Legal Tech AI1,5813,1824,3135,364
AI solution5309691,4091,850

Financial situation summary

Total assets9,145 One million yenCompared to the end of the previous period
22.6 % OFF
Net worth5,050 One million yenCompared to the end of the previous period
21.5 % OFF
Capital adequacy ratio53.1 %Compared to the end of the previous period
-0.2 points

Financial situation

(assets)
Total assets decreased by 2,679,900 thousand yen compared to the end of the previous consolidated fiscal year, to 9,145,229 thousand yen.
Current assets decreased by 2,278,263 thousand yen compared to the end of the previous consolidated fiscal year, to 3,663,138 thousand yen. This was mainly due to a decrease of 1,985,728 yen in cash and deposits due to dividend payments, loan repayments, incident-related payments, and upfront investments in human resources and security enhancement. there is.
Fixed assets decreased by 401,636 thousand yen compared to the end of the previous fiscal year to 5,482,091 thousand yen. This was mainly due to a decrease in right-of-use assets of 244,353 thousand yen due to depreciation and the closure of offices and data centers due to structural reforms at the US subsidiary.

(liabilities)
Total liabilities decreased by 1,289,020 thousand yen compared to the end of the previous fiscal year, to 4,095,178 thousand yen.
Current liabilities decreased by 390,667 thousand yen compared to the end of the previous fiscal year to 2,209,173 thousand yen. This is mainly due to the fact that short-term loans payable increased by 500,000 yen due to borrowings, while accrued corporate taxes decreased by 255,246 yen, long-term loans due within one year decreased by 1 yen, and lease obligations decreased by 93,442 yen. , Other (accrued expenses, accrued consumption tax, etc.) decreased by 172,637 thousand yen.
Fixed liabilities decreased by 898,353 thousand yen compared to the end of the previous fiscal year to 1,886,004 thousand yen. This was mainly due to decreases in long-term loans payable of 729,815 thousand yen and lease obligations of 162,522 thousand yen due to transfer to current liabilities.

(Net assets)
Total net assets decreased by 1,390,879 thousand yen compared to the end of the previous fiscal year to 5,050,051 thousand yen. This was mainly due to the impact of the weaker yen, which increased foreign currency translation adjustment by 474,882 yen, while retained earnings decreased by 1,976,510 yen due to the recording of a net loss attributable to owners of the parent company and the reversal of dividends. This is due to a number of things.

Cash flow status summary

Cash flow from operating activities△914 One million yen
Cash flow from investing activities△625 One million yen
Cash flow from financing activities△606 One million yen
Ending balance of cash and cash equivalents1,471 One million yen

Cash flow status

(Cash flow status)
Cash and cash equivalents (hereinafter referred to as "funds") at the end of the current consolidated fiscal year amounted to 1,471,656 thousand yen.

The status of each cash flow and its main factors at the end of the current consolidated fiscal year are as follows.

(Cash flow from operating activities)
Funds decreased from operating activities amounted to 914,615 yen (a decrease in income of 3,290,946 yen compared to the same period last year). This was mainly due to the recording of a net loss before taxes and other adjustments and the payment of information security measures costs.

(Cash flow from investment activities)
Funds spent on investment activities amounted to 625,060 yen (an increase of 6,852 yen in expenditures compared to the same period last year). This was mainly due to expenditures of 452,292 thousand yen for the acquisition of intangible fixed assets.

(Cash flow from financing activities)
Funds used in financing activities amounted to 606,324 yen (a decrease in expenditures of 853,399 yen compared to the same period last year). This was mainly due to expenditures of 823,258 thousand yen for repayment of long-term loans payable and expenditures of 275,193 thousand yen for dividend payments.