Business results summary

Amount of Sales

3,448 One million yen

YoY change rate 17.0 % OFF

Operating income

△558 One million yen

YoY change rate -

Ordinary profit

△492 One million yen

YoY change rate -

Net income attributable to owners of parent company

△511 One million yen

YoY change rate -

Net income per share

△13.00 Yen

YoY change rate 21.8 % OFF

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 an artificial intelligence (AI) engine developed in-house. We utilize advanced information analysis technology using KIBIT to provide necessary and appropriate information in various fields such as our original business, international litigation support, fraud investigation, manufacturing, finance, retail, distribution, and medical fields. We are contributing to the realization of a fair world where people can meet each other and to solving social issues.

■The activity status of each business for the first quarter of the current consolidated cumulative period is as follows.
(AI solution business)
In the AI ​​drug discovery field within the life science AI field, we launched the “Drug Discovery AI Factory” (hereinafter referred to as DD-AIF) business on July 2023, 7.
Today, research and development of new drugs is becoming increasingly difficult, decreasing the probability of success, and increasing costs at an accelerating pace. In order to succeed in the research and development of innovative drugs under these circumstances, major pharmaceutical companies actively collaborate with academia, venture companies, and AI drug discovery companies, and focus on decision-making on selecting appropriate target molecules. It is designed to do so. Hypotheses are the key to advancing this drug discovery process. Hypotheses can be said to be the blueprint for drug development, and play an extremely important role in the various phases of development, from target discovery to clinical research and market launch, and determine the success or failure of drug development. Traditionally, drug discovery researchers have read many related papers and omics data over a long period of time, and have spent a great deal of effort formulating hypotheses. FRONTEO's DD-AIF business has succeeded in achieving high-throughput high-quality hypothesis generation by combining AI specialized in hypothesis generation with the knowledge of drug discovery researchers, and has succeeded in generating evidence-based hypotheses in a short period of time and in large quantities. It is now possible to produce with high precision. The process specialized in hypothesis generation provided by DD-AIF will be developed by developing new services that support efficiency, acceleration, and success rate improvement of drug research and development through wide-ranging applications such as target search and drug repositioning. We aim to establish FRONTEO DD-AIF as a new value chain and make FRONTEO DD-AIF an indispensable presence in the pharmaceutical industry.

Regarding the "Conversational Dementia Diagnosis Support AI Program" in the AI ​​medical device field, development is progressing toward clinical trials for a program that uses conversational audio as input data (a program with an automatic voice transcription function). In addition, following the "Conversational Dementia Diagnosis Support AI Program," we have also agreed to exclusive development and sales of the "Depression Diagnosis Support AI Program" with our joint research partner, Keio University School of Medicine, in September 2023. Ta. With this agreement, we will continue to work with our partners toward practical application and full-scale commercialization. Furthermore, development of other products such as the "Schizophrenia Diagnosis Support AI Program" is progressing smoothly, and we will work to expand our development pipeline.

In the business intelligence field, sales are trending steadily. The promotion of DX in companies continues to play a vital role, and during the second quarter of the current consolidated cumulative period, Bank of Mitsubishi UFJ, Ltd. (hereinafter referred to as Bank of Mitsubishi UFJ) announced that an AI solution equipped with "KIBIT" was introduced. did. In addition, investment needs are particularly high for compliance, and the fraud detection system “KIBIT Eye” announced in March 2 has contributed to consolidated sales for the same period as in the first quarter, and has contributed to multiple We are continuing to discuss the introduction of our AI solutions with several companies, and the social implementation of our AI solutions is making steady progress.
Furthermore, in terms of product development, the development and improvement of products such as "KIBIT WordSonar for VoiceView" and "KIBIT WordSonar for AccidentView" is progressing smoothly. We are making progress in achieving this goal and will promote our business by providing output that meets customer needs.

In the field of economic security, due to the social background surrounding companies, such as the ever-changing international situation and the fierce competition to develop cutting-edge technology, regulations in the supply chain, procurement and human rights risks, control by investment, and confidential information are becoming more and more important. As the risk of data leaks increases, it has become urgent to assess the health of your company's and business partners' supply chains, and to take measures against information leaks using cutting-edge technology. In the second quarter of the current consolidated cumulative period, amid the US-China conflict, the US Customs and Border Protection (hereinafter referred to as CBP) has tightened logistics security regulations regarding maritime cargo, and Japanese companies are trying to avoid CBP import suspensions. As a countermeasure for this, demand for supply chain analysis using "KIBIT Seizu Analysis" has increased. In addition, with the scenario of a prolonged war in Ukraine, regulations against Russia in Europe and other countries are being further tightened, and Japanese companies are also receiving orders for global supply chain visualization in an effort to stabilize overseas business. It is on the rise. During the second quarter of the current consolidated cumulative period, we added new functions to our supply chain analysis solution to support conflict minerals due diligence and began operation. We will continue to strive to expand our business by providing accurate solutions to provide multifaceted support to companies promoting economic security measures.

(Legal tech AI business)
The Legal Tech AI business is actively promoting marketing activities such as our portal site "FRONTEO Legal Link Portal", study sessions, and webinars. As a result of these activities, the number of inquiries and orders from our clients, law firms and companies, has steadily increased, but it is taking time for them to contribute to sales. In order to achieve our sales targets for the year, we will continue to work to recover sales by actively increasing our marketing and sales activities, as well as by starting a PC maintenance service for retirees.

Financial situation summary

Total assets

8,844 One million yen

Compared to the end of the previous period 3.2 % OFF

Net worth

5,007 One million yen

Compared to the end of the previous period 0.8 % OFF

Capital adequacy ratio

54.4 %

Compared to the end of the previous period 1.3 points

Financial situation

(assets)
Total assets decreased by 301,017 yen compared to the end of the previous consolidated fiscal year, to 8,844,212 yen. Current assets decreased by 273,322 yen compared to the end of the previous fiscal year, to 3,389,816 yen. This was mainly due to a decrease in accounts receivable-other of 299,379 thousand yen, while cash and deposits increased by 538,142 thousand yen.
Fixed assets decreased by 27,695 thousand yen compared to the end of the previous fiscal year, to 5,454,395 thousand yen. This was mainly due to an increase of 33,892 yen in guarantee deposits, 58,043 yen in goodwill due to exchange rate effects, and 47,665 yen in customer-related assets. This was due to a decrease of 73,383 thousand yen in clothing.

(liabilities)
Total liabilities decreased by 258,253 thousand yen compared to the end of the previous fiscal year, to 3,836,925 thousand yen.
Current liabilities increased by 207,089 thousand yen compared to the end of the previous fiscal year to 2,416,262 thousand yen. This was mainly due to an increase in short-term loans payable of 300,000 thousand yen due to borrowings.
Fixed liabilities decreased by 465,342 thousand yen compared to the end of the previous fiscal year to 1,420,662 thousand yen. This was mainly due to a decrease in long-term loans payable of 362,991 thousand yen due to transfer to current liabilities.

(Net assets)
Total net assets decreased by 42,764 thousand yen compared to the end of the previous fiscal year to 5,007,286 thousand yen. This was mainly due to the recording of a quarterly net loss attributable to owners of the parent company, while foreign currency translation adjustments increased due to the impact of the weaker yen.

Cash flow status summary

Cash flow from operating activities

581 One million yen

Cash flow from investing activities

△288 One million yen

Cash flow from financing activities

△60 One million yen

Ending balance of cash and cash equivalents

1,770 One million yen

Cash flow status

Cash and cash equivalents (hereinafter referred to as "funds") at the end of the current second quarter consolidated cumulative period amounted to 2 yen.
The status of each cash flow and its main factors during the current second quarter consolidated cumulative period are as follows.

(Cash flow from operating activities)
Funds increased from operating activities amounted to 581,059 yen (an increase in income of 1,262,950 yen compared to the same period last year). This is mainly due to non-cash items such as depreciation, goodwill amortization, and impairment loss.

(Cash flow from investment activities)
Funds spent on investment activities were 288,434 thousand yen (a decrease in expenditures of 16,700 thousand yen compared to the same period last year). This was mainly due to expenditures of 200,517 thousand yen for the acquisition of intangible fixed assets.

(Cash flow from financing activities)
Funds used in financing activities amounted to 60,863 yen (a decrease in expenditures of 680,678 yen compared to the same period last year). This was mainly due to expenditures of 300,000 thousand yen for repayment of long-term loans, while income from short-term loans was 365,351 thousand yen.