Thank you for joining the presentation on our financial results in Q1.
I’m tsutomu kudo, CEO of f-code,inc.
P1
I’d like to start with our public offering that we completed last month.
Finally we succeeded in funding 2.4 billion yen with 12.2 percent dilution.
We strengthened our balance sheet and it enables us to take out further loans and invest them on further acquisitions for our further rapid growth.
And the reason for the offering is there.
We’ve aimed to grow as rapidly as possible,
so after becoming a listed company 2 years ago,
we funded 1.8 billion yen by public offering last year and took out loans of 9.5 billion yen.
Then we invested 7.3 billion yen on purchasing 11 growing and profitable companies
and gained 1.5 billion yen ebitda per year,
so in our acquisitions our ev/ ebitda multiple was about 5 times.
By the aquisitions and our organic growth,
We succeeded in doubling our sales and profits every year.
And we think our equity ratio should be 20-25 percent in order to keep our balance sheet strength and take out further loans for our further acquisitions,
so we did a public offering last month and we’re happy with successful funding
and from now we will try to take out further loans and invest on purchasing growing and profitable companies in order to grow as rapidly as possible.
P2
And this is the summary of financial results in Q1 2024.
Our sales increased about 2.7 times and our operating income increased 2.9 times on the year.
We’re happy to start with financially successful results in Q1.
P3
and then, I’d like to explain in more detail.
this is today’s agenda includes our company and business overview, financial results, a summary of our finance and M&A investments , and our strength and prospects.
P5
We provid our clients with comprehensive digital transformation and digital marketing services, such as engeering and creative services, marketing services, and data science and technology services.
p6
our engineering and creative service helps our clients to develop their websites, applications, digital services, and so on.
our marketing services helps attract customers through digital ad and social media.
and our data science and technology service helps convert users to loyal customers and manage customer relationships.
p7
most of our services are provided directly to our clients
and most of our revenue is monthly recurring revenue.
So our revenue is very stable.
p9
We are supporting more than 2000 clients including mainly commerce, travel, and financial sectors.
p10
This is our company’s history.
our company was founded in 2006 as a digital consulting company and expanded into our saas, technology business in 2013.
then we became a listed company in 2021, and we have acquired 11 companies and businesses in order to grow rapidly.
p11
this is our company overview.
our sales more than doubled and our profit increased 5 times last year.
and we have 6 subsidiaries and 160 employees.
p19
let’s move on to our financial results in Q1.
our sales revenue and operating income about tripled on the year.
our sales revenue reached about 1 billion yen per quarter and our operating income reached more than 300 million yen.
p20
our gross profit and ebitda also increased at a high rate on the year despite temporary costs like m and a cost.
p21
we’ve already doubled our sales and profit every year, over the past two years, and according to our earnings forecast, we’re expected to double our sales and profit also this year.
p22
and we’ve made good progress in our financial performance, revenue, ebitda, and so on in Q1 to our earnings forecast.
p25
this is our investment and growth strategy.
I’d say it’s important to reduce capital cost and improve our eps at the same time, so we’ve tried to take a loan firstly and invest it on our acquisitions,
and after improving our performance and market capitalization, we should offer equity finance in order to strengthen our balance sheet, get further loans and further acquisitions.
p26
So after becoming listed company in the end of 2021,
We gained a 1.8 billion yen loan and invested 2 billion yen on acquisition, and gained 0.4 billion yen ebitda per year.
Then our market cap increased to 10 billion yen, so we got 1.8 billion equity and 7.3 billion yen loan and 1.1 billion ebitda per year.
So ev ebitda multiple on our acquisitions have been about 5 times.
These debt/equity ratio and ev ebitda multiple have been our key figures.
and then, we gained 2.4 billion yen last month through our public offering and from now we try to take out further loans and invest them on further acquisitions to grow rapidly, favorably at the same or better rate.
p27
This offering purpose is to strengthen our balance sheet and accelerate our acquisition, as I mentioned.
we think our equity ratio should be 20-25 percent and the ratio became less than 25 percent in january because of our m and a and taking full loans.
so we decided our public offering.
p28
with acquisitions and organic growth, our sales revenue, operating income, and ebitda have doubled every year, and we’d like to grow rapidly by using money that we gained by this public offering.
p29
Certainly a number of our shares increased by our public offering last year and this year, but our eps has increased every year.
So We’d like to make the same or preferably faster growth from this offering.
p30
this is the review of our m and a in two years.
There were 2 phases in our acquisitions.
We became a listed company as a marketing saas company, so in 2022 we got 5 saas businesses to strengthen our saas business and increase our clients.
Then in 2023, we got related, adjacent businesses, such as creative, marketing, and so on, in order to expand our capabilities horizontally and improve our revenue per clients, because the Japanese saas total market is limited, but marketing and IT markets are bigger than saas market.
and we’d like to accelerate our acquisitions with the same policy and the funding money we gained.
p31
we became a listed company with only our saas business and through our acquisitions, we expanded our business solutions quickly.
now we can provide our comprehensive and integrated digital transformation and digital marketing services to our clients.
p32
and we aim to create a lot of synergy among our groups, such as product development, introducing clients mutually, m and sourcing, recruiting, and so on.
p33
for example, engineering company Ragnarock,inc that joined our group in April, already has succeeded in accelerating our product development and reducing development costs.
In addition, marketing company craft,inc have provided their marketing and creative services to f-code clients, and they have produced further value for the clients.
and we’ve gained a lot of deal sources of m and a from our subsidiaries network.
p34.35
and of course, we’ve generated a lot of sales synergies, so called cross selling, that means that we provide multiple services to one client.
for example, this is the case of Suntory, japanese big beverage company, and this is the case of Honda, big Japanese motorbike company.
p36
And in many cases, after acquisition, founders of subsidiaries leave their company in japan, but in our company, most of the founders keep working with us.
We think it is very important for our continuous growth, and actually the founders give us a lot of new business ideas, specialized skills, and a lot of acquisition opportunities from their human relationships.
p37
This is our M&A strategy and targets, focused on related adjacent industries, profitable companies, reasonable ev/ebitda multiple, in order to grow rapidly.
We focus on purchasing marketing saas, digital marketing, and engineering companies.
And we check their growth rate, profitability, recurring revenue, and client figures.
And our purchasing ev ebitda multiple has been about 5 times.
p38
Our sourcing figures also improved.
We have a lot of m and a specialists and we can execute all of the acquisition process by ourselves.
And our souring figures doubled last year, because of a lot of m and a agencies network and many referrals.
There are a lot of profitable and growing IT companies in japan, and they’ve come to want to sell their companies, because tokyo stock exchange, especially growth market isn’t attractive for growing
companies from a financial perspective, as you know.
And in our industry, there aren’t strong buyers other than us, so we hope to get many profitable and growing companies as we did, also from now.
p40
this is a problem of the Japanese dx market.
As you know, the Japanese dx market is growing, but most of our clients are suffering from a lack of digital skilled staff.
p41
So our employees have increased about 5 times by recruiting and acquisition, in order to meet our client’s demand.
p42
And we have a lot of experienced marketing executives from like major advertising agencies, big tech, and so on.
We also have many skilled corporate staff from private equity funds, consulting firms, and accounting firms.
p43
And we should avoid labor intensive businesses in order to be highly profitable, so our businesses core is set on our saas business and stocked marketing data.
p45
Then we’ll try to increase our client figures by our organic growth and further acquisitions.
And at the same time we aim at improving our revenue per client by providing multiple products and services to one client.
p46
in order to gain more clients, we often held our product seminars,
p47
and also we’ll hold a big conference on social media marketing that will be one of the largest conferences in japan.
p48
of course we also often publish our success cases of our clients
p49
and also released the news that we got a lot of awards.
p50
We are also trying to encourage alliances with distribution partners.
p51
we’ve also created a lot of cross selling cases and you can see them on following pages.
That’s all of my presentation and thank you for listening.
We’d like to grow rapidly and keep profitable as we did.
thank you so much.
