poletowin pitcrew holdings, inc. · 2015. 5. 29. · 1 poletowin pitcrew holdings, inc. annual...

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Poletowin Pitcrew Holdings, Inc.

Annual Review 2015 For the Year Ended January 31, 2015

◆Company Profile

Poletowin Pitcrew Holdings, Inc., was formed in February 2009 as the holding company of Pole To Win

Co., Ltd. (PTW), founded in 1994 as Japan’s first independent testing outsourcee, and PITCREW CO.,

LTD., established in 2000 as the industry’s first Internet monitoring specialist company. Poletowin

Pitcrew Holdings, listed on the First Section of the Tokyo Stock Exchange, had 19 consolidated

subsidiaries as of April 1, 2015.

The Group provides various support services guided by the corporate philosophy of “Create Customer

Value.” The Group’s mission is to make effective use of high-quality systems, yet ultimately rely on

human capabilities to perform checks, in contributing to the business growth of client companies.

The Group consists of two main businesses: A Testing/Verification & Evaluation Business that carries

out defect detection (finding bugs) in support of improvement in product quality of software and

hardware, and an Internet Monitoring Business that supports healthy development of the Internet by

detecting any fraudulent activity, as well as any illegal or harmful information, that may be embedded in a

variety of content.

◆Corporate Philosophy

・Create Customer Value: All that a person is capable of, all that a technology is capable of

◆Vision

・Global Excellence: From foremost in Japan to foremost in the world

・Create Added Value: Provide services maximizing proprietary systems

and all that a person is capable of

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◆Overview of Fiscal Year Ended January 31, 2015

1. Factors in higher revenues and earnings

Net sales increased 6.3%, to a record ¥14,753 million. Overseas sales rose on solid orders

from overseas game developers and a lower yen. The Company also benefited from

expanded business process outsourcing work amid e-commerce market growth. Operating

income decreased 13.2%, however, to ¥1,861 million, owing to reduced domestic

testing/verification & evaluation business revenues and investments in domestic and Asian

business units.

2. Segment Highlights

Testing/Verification & Evaluation Business sales increased 4.7% year on year, to ¥11,278

million. Operating income was down 10.0%, to ¥1,775 million. The Company steadily

expanded business units in Europe, United States, and India, supporting major global

deployments for overseas game developers. Orders were lower in the defect detection

business because development lead times stretched out for PlayStation 4 titles, while a

change in pachi-slot testing regulations pushed back defect detection orders.

Sales in the Internet Monitoring Business were up 9.1%, to ¥3,325 million, although

operating income fell 33.6%, to ¥121 million. Demand rose for merchandise checks amid

growing Internet shopping and auction traffic, for Internet advertising reviews based on

the Pharmaceutical Affairs Act and the Act against Unjustifiable Premiums and Misleading

Representations, and for user support. The operating income decline stemmed from the

Group extensively opening, relocating, or adding floor space at business sites to expand

operations and streamline efficiency.

3. Shareholder returns

The Company maintains a basic policy of targeting a consolidated payout ratio of 25%.

The annual dividend for the year was ¥16.00 per share.

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◆Consolidated Financial Highlights

(Millions of yen) FY2011/1 FY2012/1 FY2013/1 FY2014/1 FY2015/1

Net sales 6,865 8,364 10,866 13,879

,,86

14,753

Operating income 770 1,275 1,835 2,144 1,861

Ordinary income 769 1,280 1,885 2,290 1,879

Net income 381 651 932 1,205 1,000

Comprehensive income － 652 930 1,613 1,226

Net assets 2,479 4,353 6,154 7,494 8,421

Total assets 3,535 5,415 7,866 9,228

10,518

Net assets per share (¥) 13,710.07 511.44 324.85

394.28 442.27

Net income per share (¥) 2,111.19 86.01 53.35

63.55 52.60

Diluted net income per share (¥) － 82.56 51.86

61.82 51.84

Equity ratio (%) 70.1 80.4 78.2 81.2 80.1

Return on equity (ROE) (%) 16.7 19.1 17.7 17.7 12.6

P/E multiple － 14.5 15.3 26.5 15.2

Cash flows from operating activities 612 803 1,199 1,239 1,326

Cash flows from investing activities (114) (119) (1,561) (256) (686)

Cash flows from financing activities (55) 1,014 848 (274) (298)

Cash and cash equivalents at end of period 2,018 3,712 4,199 4,959 5,343

Number of employees (persons) 336 341 562 558 775 Notes: 1. Net sales exclude consumption and other taxes.

2. Diluted net income per share for the 2nd term ended January 31, 2011, was omitted as the Company stock was unlisted at the time and average market capitalization of the balance of stock options during the period was unavailable as a result.

3. P/E multiples for the 2nd term were omitted as the Company stock was unlisted at the time.

4. The Company conducted a stock split on July 13, 2011, at a ratio of 20 shares of common stock per share of common stock. 5. From the 4th term, the Company applied the Accounting Standard for Earnings Per Share (Accounting Standards Board of Japan (ASBJ)

Statement No. 2, June 30, 2010), the Guidance on Accounting Standard for Earnings Per Share (ASBJ Guidance No. 4, June 30, 2010), and Practical Solution on Accounting for Earnings Per Share (ASBJ Practical Issues Task Force No. 9, June 30, 2010).

6. The Company conducted stock splits in the fiscal years ended January 31, 2013 and 2014, at a ratio of two shares of common stock per share of

common stock. However, the figures for net assets per share, net income per share and diluted net income per share were calcu lated on the assumption that these stock splits were conducted at the beginnings of the previous fiscal years.

Forward-looking statements: Earnings forecasts in this Annual Review are based on information currently available to the Company and on certain assumptions deemed to be

reasonable. These statements do not guarantee that the Company will achieve its earnings forecasts. In addition, actual business and other results may differ substantially due to various factors.

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◆Message from the President

In the fiscal year ended January 31, 2015, the

Testing/Verification & Evaluation Business Steadily

expanded social game defect detection orders and

transactions with overseas clients. The Internet

monitoring business generated growth in e-commerce

support operations amid market expansion. The

Company thus posted record consolidated net sales.

Net income declined, however, owing to reduced

domestic operational rates and investments in

domestic and Asian business units. The annual

dividend for the year was ¥16.00 per share.

In the year ahead, we will leverage our robust

business ties in the video game, Internet and

e-commerce sectors to generate growth by going

beyond the Testing/Verification & Evaluation and

Internet Monitoring business frameworks to cultivate

business process outsourcing services for those

clients.

We look forward to the ongoing support and

encouragement of our shareholders for these efforts.

Naoto Konishi

President


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◆Interview with the President about Group Business Strategies

Q1: Consolidated net sales rose 6.3% to a record ¥14,753 million in the fiscal year ended

January 31, 2015, but operating income declined 13.2% to ¥1,861 million. Tell us about the

factors in this performance and about the business climate.

A1: In the Testing/Verification & Evaluation Business, which accounted for around three quarters of

revenues, overseas sales exceeded projections because European, American, and Indian business units

steadily expanded transactions with local clients. A weaker yen also contributed to performance. In Japan,

major consumer electronic game console manufacturers entered the social game market, resulting in solid

orders for mobile content defect detection (finding bugs) services. At the same time, there was a

temporary slowdown in the development pace among manufacturing customers owing to modified

◆Future Business Strategies

1. Bolster business process outsourcing services, for which demand is strong among

existing clients, establishing a strong position in that area in the video game,

Internet, and e-commerce sectors

⇒Bolster services beyond Testing/Verification & Evaluation and Internet

Monitoring Frameworks

2. Develop new markets for core Testing/Verification & Evaluation and Internet

Monitoring services

⇒Advance into the education, appliance, publishing, life and non-life insurance,

and other fields

3. Bolster business development in overseas video game market, which offers great

growth potential

⇒Draw on the experience with large orders in leveraging capabilities of nine

studios in six countries, languages, and time differences to drive growth

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pachi-slot model testing approaches at the designated testing institution, pushing back defect detection

orders for pachi-slot equipment. The Group received defect detection orders for game software for

consumer electronic game consoles centered on titles for the Nintendo 3DS and PlayStation 3, and

gradually secured more orders for PlayStation 4 titles. Orders were lower than anticipated, however, as

new consumer electronic game software development lead times frequently stretched out.

Testing/Verification & Evaluation Business sales therefore increased 4.7% year on year, to ¥11,278 million.

Operating income was down 10.0%, to ¥1,775 million, however, reflecting lower contributions from highly

profitable domestic operations and investments in Asian business units.

In the Internet Monitoring Business, another key operating segment Internet Monitoring Business, the

Group increased user support services in merchandise checks for Internet shopping, auction sites, and free

market apps and in reviews of advertisements based on the Pharmaceutical Affairs Act.

Internet Monitoring Business sales thus rose 9.1% to ¥3,325 million. Segment operating income was

down 33.6%, however, to ¥121 million, reflecting site openings, relocations, and floor space additions at

business sites to expand and streamline operations.

Q2: In January 2015, you acquired a company from a field outside the Group’s traditional

business areas. Please outline that purchase and your business strategies for the future,

including those overseas.

A2: The Testing/Verification & Evaluation Business traditionally focused on the video game sector, while

the Internet monitoring business centered on online services. Both businesses cover the social games area

that has emerged in recent years, blurring that distinction. The two businesses also serve the amusement

equipment and e-commerce in keeping with Group efforts to provide a one-stop, full service platform.

The market environment is rapidly changing for the Group, so its business strategies will encompass the

following three approaches. The first is to go beyond current business frameworks to bolster business

process outsourcing services, for which demand is strong among existing clients in the video game,

Internet, and e-commerce sectors where the Group already has robust business ties. We would endeavor

to increase our business process outsourcing services shares in those sectors. As part of that approach, we

made QBIST Inc. a consolidated subsidiary in January 2015. That company produces instruction manuals

and playing guides. We seek to shift away from our focus on Testing/Verification & Evaluation and

Internet Monitoring services to position ourselves as a strong business process outsourcing service

provider for the video game, Internet, and e-commerce sectors.

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The second approach is to cultivate core Testing/Verification & Evaluation and Internet Monitoring

services in new markets. There is strong demand outside the sectors that we already accommodate. In

recent years, we have expanded services to encompass the education, appliances, publishing, life and nonlife

insurance, and other sectors. The Group will continue to leverage core services in which it has the most expertise

to cultivate new markets and serve more sectors while expanding its business.

The third approach is to step up marketing in the overseas video game market, which offers great growth

potential. Although it focused initially on serving Japanese companies in deploying operations

internationally, the Group has increased business with locally based companies through M&As and other

means, thus steadily increasing overseas sales. Foreign video and social game software developers offer

far greater scope for localization and user support services than Japanese counterparts. The Group will

therefore expand transactions with existing clients while reinforcing new business development.

◆Future Business Strategy Approaches

3. Future Business Strategies

3-5. Future Business Strategy Approaches (3)

Ne

w m

ark

ets

Exis

ting

ma

rke

ts

Existing services New services

! Cultivate new markets with core services

Go beyond video game and Internet sectors with core defect detection and monitoring services

Cultivate new businesses

Including medical

professional recruitment,

barrier free-related

businesses, and B2C

businesses Education E-learning materials defect detection

Appliances Digital appliance verification

Publishing E-book defect detection

Life/non-life insurance Agency website reviews

! Expand shares of existing markets

Expand shares in existing markets, particularly cultivating e-commerce and overseas game markets

Video games

Amusement equipment

Online media

E-commerce

Defect detection User experience Localization Post monitoring Call centers Advertising reviews Server monitoring

Cultivate new business process outsourcing services in new markets

Video games Instruction manual and playing guide production

Amusement equipment Development assistance and new model reputation surveys

Online media Facebook and Twitter support

E-commerce Free market apps, cross-border e-commerce, and back office representation

! Reinforce business process outsourcing services in existing markets

Cultivate these services comprehensively in core sectors beyond testing/verification and Internet monitoring frameworks

Barrier-free tools

Information provision

sharing tools

• Looking to generate an average 20% annual growth over next three years • Seeking to boost revenues and earnings by expanding business areas based on

growth strategies

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◆Business Segments and Business Companies

Business Segments Key Businesses Company Names

Testing/Verification &

Evaluation Business

Pre-launch defect detection (finding bugs), including for consumer electronic games, social games, smartphone applications, pachinko and pachi-slot machines, and IT appliances, and localization of in-game text, manuals, and other materials for overseas game titles

Pole To Win Co., Ltd. Pole To Win Shanghai Co., Ltd. SARUGAKUCHO Inc. Pole To Win America, Inc. Pole To Win Networks Co., Ltd. Pole To Win Asia Pte. Ltd. Pole To Win Europe Glasgow Limited Pole To Win India Private Limited Pole To Win Europe Limited Pole To Win Korea Co., Ltd. QBIST Inc. GAME MASTER Inc.

Internet Monitoring Business

Checking merchandise and reviewing advertisements for Internet shopping and auctions, providing support for inquiries from end-users of games and e-commerce sites, and checking youth Internet usage

PITCREW CO., LTD. PITCREW X-LAB CO., LTD. PITCREW COREOPS CO., LTD.

Others Producing barrier-free subtitles and providing medical staffing services

Pacer CO., Ltd. Daiichi Shorin Co., Ltd. IMAid Inc. Palabra Inc.

－

Operations ancillary and pertaining to the control and management of business activities of the Company and the Group’s 19 consolidated subsidiaries


◆Business Bases in Testing/Verification & Evaluation and Internet Monitoring

11 business units in Japan and 9 overseas

4-7. Business Sites

Shanghai

(China) San Francisco (U.S.)

London (U.K.)

!11 business units in Japan and 9 overseas

Austin (U.S.)

Glasgow (U.K.)

Singapore

Baltimore (U.S.)

4. Corporate Data

Gwangju

(Korea)

(As of January 31, 2015)

Sapporo

YokohamaNagoya

Gifu

Kyoto

Osaka

Fukuoka

KitakyushuTokyo

Okinawa

Sendai

Bangalore (India)

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◆Group Business Overview

During the year under review, the Japanese economy remained somewhat weak but looked set for a mild

recovery owing to an ongoing improvement in the employment and income climates and the impacts of

lower oil prices and government policies. At the same time, the nation faced such downward risks as

weakening consumer sentiment and slowdowns in economies overseas.

It was against that backdrop the Poletowin Pitcrew Holdings Group’s core Testing/Verification &

Evaluation Business experienced ongoing growth in the social games market, which major developers of

software for consumer electronic game consoles also entered, amid the rising popularity of smartphones

and tablet PCs. To increase opportunities to steadily recoup their development expenses, social game

developers increasingly deployed their offerings globally, just as has happened with consumer electronic

game software. As a result, demand expanded for localization in multiple languages and for user support,

augmenting services in detecting defects (bugs). At the same time, sales were favorable in the consumer

electronic game market for new next-generation game consoles launched around the world. Looking

ahead, the launch of new content for each platform is expected to expand globally as game platforms

diversify, as exemplified by the distribution of games using game consoles, smartphones and tablet PCs,

as well as via the cloud.

In markets related to the Group’s Internet Monitoring Business, online shopping, flea market apps,

video, e-book, and other forms of e-commerce are catching on. This, in turn, is pushing up demand for

monitoring postings and other types of user support services to make safe and reliable Internet access

ubiquitous. In the e-commerce market, there is growing demand for handling merchandise checks, the

review of Internet advertising based on the Pharmaceutical Affairs Act, the Act against Unjustifiable

Premiums and Misleading Representations, and other laws and regulations, and for handling the rights

infringement investigations and end-user inquiries and so forth. A recent rise in the incidence of Internet

usage problems among the young has prompted municipal boards of education to put efforts into

monitoring youth Internet usage and providing Internet literacy education for students, parents and

guardians. As a result, monitoring work has increased, as have educational activities, including through

seminar lecturers.

The Group provides checking, testing, monitoring and inspection services that require human input on

a contractual basis to corporate clients. The demand for such services has been growing as these clients

have diversified and expanded overseas, and as business processes have become more advanced and

sophisticated. During the period under review, Pole To Win Co., Ltd., relocated its Sapporo Studio to

larger premises in August to accommodate order expansion. PITCREW CO., LTD., established its Sendai

Support Center in April, its first site in the Tohoku region, and moved its Sapporo Support Center to a

location with more floor space. PITCREW COREOPS CO., LTD, opened the Sendai BCP Center in April

and relocated and increased floor space at the Okinawa BCP Center in May to secure more people outside

Metropolitan Tokyo and accommodate operational growth. Overseas, Pole To Win America, Inc., moved

its Hunt Valley studio to Baltimore in April, while Pole To Win India Private Limited increased floor

space in December. One of the Company’s business strategies is to expand overseas sales by accelerating

its global deployment. Collaboration has thus stepped up between nine delivery centers in six countries

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and Japanese Group companies to provide a one-stop, full service platform in such areas as defect

detection (finding bugs), localization (translation), Internet monitoring, and user support.

As a result of these factors, consolidated net sales for the term were ¥14,753 million (up 6.3%). Operating

income was ¥1,861 million (down 13.2%), however, reflecting increased personnel spending and the

establishment, relocation, and expansion of business units in Japan and abroad. Ordinary income was

¥1,879 million (down 17.9%), largely because of lower foreign exchange gains. Net income was ¥1,000

million (down 17.0%), owing to a temporary loss stemming from office relocations.

◆Overview of Segment Performance

●Testing/Verification & Evaluation Business

Overseas revenues exceeded 20% of segment sales during the period under review, reflecting

collaboration between nine delivery centers in six countries and Japanese Group companies in supporting

the global deployments of domestic and foreign game makers. The Group received defect detection orders

for game software for consumer electronic game consoles centered on titles for the Nintendo 3DS and

PlayStation 3, and gradually secured more orders for PlayStation 4 titles. Orders were lower than

anticipated during the term, however, as new software development lead times frequently stretched out.

In defect detection work for finding bugs in amusement (pachinko and pachi-slot) equipment, makers

worked eagerly on new models with enhanced entertainment features to secure end user support,

generating stable orders. That said, they had to accommodate modified pachi-slot model testing

approaches at the designated testing institution, pushing back defect detection orders for pachi-slot

equipment.

The growing popularity of smartphones has resulted in a sharp increase in the social games that users

download directly as native applications. Major developers of software for consumer electronic game

consoles are also creating social games. These trends led to the Group securing solid orders for mobile

content defect detection (finding bugs) services.

As a result, Testing/Verification & Evaluation Business sales increased 4.7% year on year, to ¥11,278 million.

Operating income was down 10.0%, to ¥1,775 million, reflecting lower contributions from highly profitable

domestic operations and increased personnel expenses. ●Internet Monitoring Business

In the Internet Monitoring Business, the Group received increased orders for e-commerce support

services from Internet companies, reflecting their vigorous efforts to cultivate business in the e-commerce

market. The orders were for merchandise check services for Internet shopping, auction sites, and free

market apps and for reviews of advertisements based on the Pharmaceutical Affairs Act, the Act against

Unjustifiable Premiums and Misleading Representations, and other laws and regulations, and also

reflected increased demand for handling charges and product arrival inquiries from end-users. Also up

were user support orders for major social games.

During the term, the Group received orders from 22 municipal governments and four private schools

for services to monitor online bullying among the young. It also obtained a mandate from the Ministry of

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Economy, Trade and Industry to assist with a survey on developing a proper Internet usage environment

for the young as part of information and services infrastructure for the national economy and society.

PITCREW Co., Ltd., and Pole to Win Networks CO., LTD., launched the One-Stop Debugging

(Testing) and Customer Support Service as part of efforts to bolster business process outsourcing services

for the video game, Internet, and e-commerce sectors.

Internet Monitoring Business sales thus rose 9.1% to ¥3,325 million. Operating income was down 33.6%,

however, to ¥121 million, reflecting site openings, relocations, and floor space additions at business sites to

expand and streamline operations. ●Others

In this segment, Palabra Inc. instituted a subtitle training curriculum to prepare for the advent of

barrier-free motion pictures, producing barrier-free subtitles audio guides for television program and

video production firms on contract. IMAid Inc. offers medical staffing services.

Segment sales increased 145.5% to ¥148 million. There was an operating loss of ¥23 million, down from

¥104 million a year earlier.

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◆Management Structure

●Corporate Governance

Recognizing the need to conduct Group-wide management reflecting the Company’s structure as a

holding company, we aim to practice corporate governance optimal to developing the Group’s business.

To this end, we believe that it is important to fulfill our social responsibilities through our business

activities, while seeking to enhance our corporate value over the long term, as we build relationships of

trust with all stakeholders, including shareholders, suppliers, employees and local communities. From this

perspective, we consider our key corporate governance priorities to be the following: ensuring corporate

management premised on compliance with laws and regulations and all other relevant rules; enhancing

the appropriateness, soundness and transparency of management; and establishing a framework for timely

and appropriate disclosure of information. We are developing a corporate governance structure with

emphasis on these key priorities.

●Corporate Governance Structure

In accordance with the Companies Act of Japan, the Company has a Board of Directors, Board of

Corporate Auditors, and Independent Auditor, along with an Internal Audit Office. In addition, the

Company receives advice on its corporate governance system as necessary from a lawyer with whom it

has entered into an advisory agreement.

The Board of Directors comprises eight directors, and holds regular monthly meetings to ensure

effective management oversight among the directors. In addition, extraordinary meetings of the Board of

Directors are convened as necessary to facilitate rapid decision-making. Barring any special reasons,

these meetings are held with full attendance by directors and corporate auditors. Group companies also

hold regular monthly meetings of their respective boards of directors.

As stated above, the Board of Directors serves as a check on the business execution of the directors.

Oversight of the operation of the Board of Directors and the business execution of the directors is also

conducted through audits by the corporate auditors.

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In regard to the Company’s internal control system, the Company ensures the appropriateness of business

operations by establishing decision-making and reporting systems through the formulation and

implementation of various internal rules.

The Company has established the Rules on Legal Compliance stipulating the handling of compliance

issues for the purpose of rigorously enforcing compliance and enhancing public trust in the Company.

The Group has also entered into advisory agreements with external experts on legal affairs, taxation, labor

affairs and other matters in order to put in place a framework for obtaining guidance and advice in the

daily course of business.

●Internal and Independent Audits

The Internal Audit Office acts based on annual auditing plans and under the direct supervision of the

president. The office has one person. Its audits cover compliance, risk management, and the adequacy and

efficiency of business processes for the Company and all Group operations.

The office exchanges information with independent auditors and cooperates with them by providing

them with periodic reports about internal auditing progress.

The Company maintains a Board of Corporate Auditors system in which there are one full-time and

three part-time members; three of these people are external. These auditors attend meetings of the Board

of Directors and monitor director performance. These auditors additionally attend board and other

important meetings of Group companies and strictly monitor director performance while exchanging

information and opinions with each other, deliberating on important matters for all Group companies and

assessing business conditions for the Company and Group companies while sharing issues relating to

them.

The Internal Audit Office and independent auditors periodically exchange information and cooperate

to enhance the implementation of audits.

●Financial Audits

The Company’s Independent Auditor is Ernst & Young ShinNihon LLC. ●Outside Director and Auditors

Outside the Company are one director and three auditors.

To ensure that the outside director and auditors can monitor management objectively, the Company

maintains a system in which the Internal Audit Office and Independent Auditor periodically exchange

information, thereby helping to enhance oversight and audit implementation.

●CSR

The Group fulfills its corporate social responsibilities in the course of business and ensures that it

contributes to the communities in which it operates.

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Barrier-free Initiatives

Examples of these efforts include Pole To Win Co., Ltd., supporting the activities of

SALSAGUMTAPE, a barrier-free rock band, and Palabra Inc. helping to sponsor film festivals

through its production of subtitles. Information Literacy

PITCREW CO., LTD., draws on more than a decade of experience in Internet monitoring to teach

junior and senior high school students about information literacy relating to Internet usage. Social Contributions

Following the March 2011 Great East Japan Earthquake through September that year, we ran a service

that provided homestay opportunities for displaced people.

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◆Management’s Discussion and Analysis

●Net Sales and Earnings

Net Sales

Net sales increased ¥873 million, or 6.3%, to ¥14,753 million. In the Testing/Verification & Evaluation

Business, the main contributor to this rise was that overseas subsidiaries steadily expanded transactions

with local clients. This offset the impact of a change in pachi-slot testing regulations that pushed back

defect detection orders for amusement equipment. The prime drivers in the Internet Monitoring Business

were that orders rose for merchandise check services for Internet shopping, auction sites, and free market

apps, for reviews of advertisements, and user support services owing to vigorous efforts to cultivate

business in the e-commerce market.

Gross Profit

The cost of sales increased ¥752 million, or 8.3%, to ¥9,864 million. This was because personnel

expenses rose with sales and that there was higher spending on business establishments, relocations,

expansions, and floor space costs at domestic and overseas business units.

Gross profit thus increased 2.5%, to ¥4,888 million.

Operating Income

Selling, general and administrative expenses increased ¥404 million, or 15.4%, to ¥3,027 million, a key

factor being. Factors in this rise included higher startup expenses for a Korean business unit.

Operating income thus decreased 13.2%, to ¥1,861 million.

Ordinary Income

Non-operating income decreased ¥118 million, or 81.3%, to ¥27 million, mainly because foreign

exchange gains declined. There were ¥9 million in non-operating expenses, compared with none a year

earlier, as the Company incurred compensation expenses.

Ordinary income therefore decreased 17.9%, to ¥1,879 million. Net Income

The Company posted ¥4 million in extraordinary income, compared with an extraordinary loss a year

earlier, reflecting a gain on donation of non-current assets. Extraordinary losses decreased ¥59 million, or

59.2%, to ¥40 million. This was because of the absence of another impairment loss, which outweighed

higher business site relocation expenses.

Income before income taxes and minority interests was thus ¥1,843 million. After adjusting for

deferred income taxes, total income taxes were ¥842 million. Net income therefore decreased 17.0%, to

¥1,000 million.

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●Cash Flows

Cash and cash equivalents (hereinafter referred to as “cash”) as of January 31, 2015, were ¥5,343 million,

up ¥383 million from January 31, 2014.

Net cash provided by operating activities was ¥1,326 million, from ¥1,239 million in the previous

fiscal year. The main contributors to cash were ¥1,843 million in income before income taxes and

minority interests, partly offset by ¥1,017 million in income taxes paid.

Net cash used in investing activities was ¥686 million, from ¥256 million a year earlier. The main uses

of cash were ¥248 million in purchase of property, plant and equipment and a ¥262 million purchase of

investments in subsidiaries.

Net cash used in financing activities was ¥298 million, from ¥274 million in the previous fiscal year.

The main factor in this change was ¥304 million in cash dividends paid. ●Financial Position

Total Assets

Current assets rose ¥924 million or 13.1% from January 31, 2014, to ¥7,960 million. This was mainly

attributable to a ¥383 million increase in cash and deposits and a ¥430 million increase in notes and

accounts receivable-trade. Noncurrent assets stood at ¥2,557 million, ¥365 million or 16.7% higher than at January 31, 2014. Key

factors were increases of ¥128 million in property, plant and equipment, ¥106 million in investment

securities, and ¥80 million in goodwill.

As a result, total assets increased by ¥1,290 million or 14.0% year on year, to ¥10,518 million.

Liabilities

Current liabilities stood at ¥2,036 million at January 31, 2015, ¥356 million or 21.2% higher than at

January 31, 2014. This was mainly attributable to increases of ¥250 million in accounts payable-other and

¥172 million in other (including accrued consumption taxes), which offset a ¥164 million decrease in

income taxes payable.

Noncurrent liabilities increased ¥6 million or 12.1%, to ¥60 million. This was due mainly due to a ¥51

million increase in the net defined benefit liability, which exceeded a ¥44 million decrease in the

provision for retirement benefits.

As a result, total liabilities increased ¥362 million or 20.9% year on year, to ¥2,097 million.

Net assets

Net assets increased ¥927 million or 12.4%, to ¥8,421 million. This was mainly attributable to

increases of ¥696 million in retained earnings and ¥221 million in foreign currency translation

adjustments.

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●Basic Policy on Earnings Distribution

The Company considers shareholder returns an important management issue. Management is taking into

account the Group’s overall financial position, including by factoring in the internal reserves needed to

cultivate its businesses to maintain growth in the years ahead, in maintaining a basic policy of targeting a

consolidated payout ratio of 25% on net income for the payment of one yearly dividend at the end of the

year.

Management aims to allocate retained earnings to invest for future business development.

●Outlook for the Fiscal Year Ending January 31, 2016

The Testing/Verification & Evaluation Business traditionally focused on the video game sector, while the

Internet monitoring business centered on online services. Both businesses cover the emerging social

games area, blurring that distinction. The two businesses also serve the amusement equipment and

e-commerce in keeping with Group efforts to provide a one-stop, full service platform. We will go beyond

the Testing/Verification & Evaluation and Internet Monitoring service frameworks to develop and provide

business process outsourcing services for game development and management and e-commerce. This

approach underpinned our January 2015 move to make QBIST Inc. a consolidated subsidiary. That

company produces instruction manuals and playing guides. We seek to expand business process

outsourcing services in existing markets, establishing strong positions for such capabilities in the video

game, Internet, and e-commerce arenas. Segment projections for the year ending January 31, 2016, are as follows.

●Testing/Verification & Evaluation Business

In Japan, we seek to expand our shares in the amusement equipment, smartphone apps and social games,

and consumer electronic game console markets. The pace of pachi-slot equipment development is set to

pick up after slowing in the previous fiscal term owing to revised in model testing regulations, and we

anticipate higher defect detection orders in the year ahead. Leading developers of software consumer

electronic game consoles are working intensively on social games, so we look to boost defect detection

operations for native applications. We will strive to bolster our sales capabilities in the marketplace and

deploy human resources policies that enable us to build close ties with customers and enhance our

services, thereby ensuring that we can sustainably and stably deliver top-quality services.

Overseas, we will strengthen collaboration between nine delivery centers in six countries and with

domestic delivery centers to assist with the global business expansions of overseas and Japanese

companies. We will take advantage of prospects for further globalization in games and Internet services

by expanding orders for testing/verification, localization, and user support services by local staffers. We

will extend our marketing of core testing/verification and user support services beyond the games arena.

18

●Internet Monitoring Business

The number of users of Internet shopping and auction, flea market apps, e-book, and other e-commerce

services has increased with the spread of smartphones and tablet PCs. E-commerce markets represented

just 3% of sales in Japan and 7% of sales in the United States, and have significant upside potential.

Given that the future of the e-commerce business depends on the security and convenience of site

operations, the Group seeks to expand orders for merchandise checks, advertising representation reviews,

and end-user inquiries. While we have primarily provided inbound user support to date, we aim to boost

the capabilities of our call and contact centers to accommodate the growing need to deliver active support

and outbound services in response to consumer feedback through Facebook, Twitter, and other social

media channels. We will cultivate and hire people who can identify customer needs and plan and deliver

high-value-added services in the fast-changing Internet sector. ●Others

In its Cinematheque Movie Classes, Palabra Inc. is training subtitle creators to prepare for the advent of

barrier-free motion pictures, and has started producing barrier-free subtitles for television program and

video production firms under contract. IMAid Inc. is offering medical staffing services. We will explore

and cultivate new businesses in the medical field.

As a result of these factors, for the year ending January 31, 2016, the Group projects consolidated net

sales of ¥17,881 million (up 21.2%), operating income of ¥2,293 million (up 23.2%), ordinary income of

¥2,304 million (up 22.6%), and net income of ¥1,387 million (up 38.6%).

The earnings forecasts are based on information currently available to the Company and on certain

assumptions deemed to be reasonable. These statements do not guarantee that the Company will achieve

its earnings forecasts. In addition, actual business and other results may differ substantially due to various

factors.

19

◆Consolidated Balance Sheets

(Millions of yen)

Fiscal 2014

(As of January 31, 2014) Fiscal 2015


Assets

Current assets

Cash and deposits 4,959 5,343

Notes and accounts receivable-trade 1,698 2,128

Deferred tax assets 76 63

Other 301 429

Allowance for doubtful accounts (0) (4)

Total current assets 7,036 7,960

Noncurrent assets

Property, plant and equipment

Buildings and structures 239 379

Accumulated depreciation (82) (137)

Buildings and structures, net 156 241

Machinery, equipment and vehicles 2 3


Machinery, equipment and vehicles, net 0 0

Tools, furniture and fixtures 497 657


Tools, furniture and fixtures, net 138 183

Total property, plant and equipment 295 424

Intangible assets

Goodwill 1,425 1,506

Software 28 33

Software in progress － 12

Other 2 2

Total intangible assets 1,456 1,554

Investments and other assets

Investment securities 50 157

Lease and guarantee deposits 314 370

Deferred tax assets 68 42

Other 16 20

Allowance for doubtful accounts (10) (11)

Total investments and other assets 440 579

Total noncurrent assets 2,191 2,557

Total assets 9,228 10,518

20

(Millions of yen)

Fiscal 2014

(As of January 31, 2014) Fiscal 2015


Liabilities

Current liabilities

Accounts payable-other 865 1,115

Accrued expenses 44 68

Income taxes payable 527 363

Provision for bonuses 11 34

Other 231 454

Total current liabilities 1,680 2,036

Noncurrent liabilities

Provision for retirement benefits 44 －

Net defined benefit liability － 51

Deferred tax liabilities 7 6

Other 1 2

Total noncurrent liabilities 53 60

Total liabilities 1,734 2,097

Net Assets

Shareholders’ equity

Capital stock 1,233 1,236

Capital surplus 1,279 1,282

Retained earnings 4,579 5,276

Total shareholders’ equity 7,092 7,794

Accumulated other comprehensive income

Valuation difference on available-for-sale securities 11 15

Foreign currency translation adjustments 389 611

Total accumulated other comprehensive income 401 626

Total net assets 7,494 8,421

Total liabilities and net assets 9,228 10,518

21

◆Consolidated Statement of Income and Consolidated Statement of Comprehensive Income

(Millions of yen)

Fiscal 2014

(From February 1, 2013, to January 31, 2014)

Fiscal 2015 (From February 1, 2014,

to January 31, 2015)

Net sales 13,879 14,753

Cost of sales 9,112 9,864

Gross profit 4,767 4,888

Selling, general and administrative expenses 2,622 3,027

Operating income 2,144 1,861

Non-operating income

Interest income 1 1

Dividends income 0 0

Foreign exchange gains 120 1

Consumption tax adjustment 1 2

Insurance premiums refunded cancellation 5 3

Subsidy income 1 4

Insurance proceeds 3 －

Commission fees

Gain on adjustment of accounts payable

Other

2

－

8

3

6

3

Total non-operating income 145 27

Non-operating expenses

Compensation expenses － 9

Other － 0

Total non-operating expenses － 9

Ordinary income 2,290 1,879

Extraordinary income

Gain on retirement of noncurrent assets － 0

Gain on donation of non-current assets － 4

Other － 0

Total extraordinary gains － 4

Extraordinary losses

Loss on retirement of noncurrent assets 0 12

Office transfer expenses 8 27

Loss on cancellation of development 36 －

Impairment loss 46 －

Other 8 1

Total extraordinary losses 100 40

Income before income taxes and minority interests 2,190 1,843

Income taxes-current 1,016 796

Income taxes-deferred (31) 46

Total income taxes 984 842

Income before minority interests 1,205 1,000

Net income 1,205 1,000

22

◆Consolidated Statement of Comprehensive Income

(Millions of yen)

Fiscal 2014

(From February 1, 2013, to January 31, 2014)



Income before minority interests 1,205 1,000

Other comprehensive income

Valuation difference on available-for-sale securities 3 3

Foreign currency translation adjustments 404 221

Total other comprehensive income 408 225

Total comprehensive income 1,613 1,226

Comprehensive income attributable to:

Owners of the parent 1,613 1,226

23

◆Consolidated Statements of Changes in Net Assets

Fiscal 2014 (From February 1, 2013, to January 31, 2014)

(Millions of yen)


Capital stock Capital surplus Retained earnings Total shareholders’ equity

Balance at the beginning of current period 1,228 1,275 3,657 6,161

Changes of items during the period

Issuance of new shares 4 4 9

Dividends from surplus (284) (284)


Net changes of items other than

shareholders’ equity

Total changes of items during the period 4 4 921 930

Balance at the end of current period 1,233 1,279 4,579 7,092


Total net assets

Valuation difference on available-for-sale

securities

Foreign currency translation adjustment

Total accumulated other comprehensive

income

Balance at the beginning of current period 8 (15) (6) 6,154


Issuance of new shares 9

Dividends from surplus (284)

Net income 1,205


shareholders’ equity 3 404 408 408

Total changes of items during the period 3 404 408 1,339

Balance at the end of current period 11 389 401 7,494

24

Fiscal 2015 (From February 1, 2014, to January 31, 2015)

(Millions of yen)


Capital stock Capital surplus Retained earnings Total shareholders’ equity

Balance at the beginning of current period 1,233 1,279 4,579 7,092


Issuance of new shares 2 2 5

Dividends from surplus (304) (304)



shareholders’ equity


Balance at the end of current period 1,236 1,282 5,276 7,794


Total net assets

Valuation difference on available-for-sale

securities

Foreign currency translation adjustment

Total accumulated other comprehensive

income

Balance at the beginning of current period 11 389 401 7,494


Issuance of new shares 5

Dividends from surplus (304)

Net income 1,000


shareholders’ equity 3 221 225 225


Balance at the end of current period 15 611 626 8,421

25

◆Consolidated Statements of Cash Flows (Millions of yen)





Cash flows from operating activities

Income before income taxes and minority interests 2,190 1,843

Depreciation and amortization 145 177

Amortization of goodwill 195 178

Impairment loss 46 －

Increase in allowance for doubtful accounts 6 5

Increase in provision for bonuses 0 23

Increase in provision for retirement benefits 2 －

Increase in retirement benefits liability － 6

Interest and dividends income (1) (1)

Foreign exchange (gains) losses (68) (1)

Loss on retirement of noncurrent assets 0 12

Increase in notes and accounts receivable-trade (334) (265)

Increase in accounts receivable-other (8) (16)

Increase in accounts payable-other 56 144

Increase in accrued expenses 7 21

Increase in deposits received 0 64

Other, net 90 148

Subtotal 2,330 2,341

Interest and dividends income received 1 1

Income taxes paid (1,091) (1,017)

Net cash provided by operating activities 1,239 1,326

Cash flows from investing activities

Purchase of property, plant and equipment (176) (248)

Purchase of intangible assets (13) (31)

Purchase of investments in subsidiaries resulting in change in

scope of consolidation － (262)

Purchase of investment securities (0) (100)

Payments of loans receivable (1) (0)

Collection of loans receivable 1 2

Payments for lease and guarantee deposits (78) (68)

Proceeds from collection of lease and guarantee deposits 11 23

Net cash used in investing activities (256) (686)

Cash flows from financing activities

Proceeds from issuance of common stock 9 5

Cash dividends paid (284) (304)

Net cash provided by (used in) financing activities (274) (298)

Effect of exchange rate change on cash and cash equivalents 51 43

Net increase in cash and cash equivalents 760 383

Cash and cash equivalents at beginning of period 4,199 4,959

Cash and cash equivalents at end of period 4,959 5,343

26

◆Company Information (As of January 31, 2015)

●Company Name: Poletowin Pitcrew Holdings, Inc.

●Date of Establishment: February 2, 2009

●Listing Date: October 26, 2011 (changed stock market listing to the

First Section of the Tokyo Stock Exchange in November 6, 2012)

●Business Year: From February 1 to January 31

●Paid-in Capital: 1,236 million yen

●Number of Employees: 2,387 (including 775 full-time employees)

●Head Office: 11th Floor, Shinjuku NS Building, 2-4-1, Nishi-Shinjuku,

Shinjuku-ku, Tokyo 163-0811, Japan

●Telephone: +81-3-5909-7911

●Consolidated Subsidiaries: Pole To Win Co., Ltd.

(As of April 1, 2015) PITCREW CO., LTD.

Pacer CO., Ltd.

SARUGAKUCHO Inc.

Pole To Win Networks Co., Ltd.

Pole To Win Shanghai Co., Ltd. (Local subsidiary in China)

Pole To Win America, Inc. (Local subsidiary in the U.S.)

Pole To Win Asia Pte. Ltd. (Local subsidiary in Singapore)

Pole To Win Europe Glasgow Limited (Local subsidiary in the U.K.)

Pole To Win India Private Limited (Local subsidiary in India)

Pole To Win Europe Limited (Local subsidiary in the U.K.)

Pole To Win Korea Co., Ltd. (Local subsidiary in Korea)

PITCREW X-LAB CO., LTD.

PITCREW COREOPS CO., LTD.

Daiichi Shorin Co., Ltd.

IMAid Inc.

Palabra Inc.

QBIST Inc.

GAME MASTER Inc.

◆Directors and Corporate Auditors (As of April 23, 2015)

●Chairman Tamiyoshi Tachibana

●President Naoto Konishi

●Directors Mitsutaka Motoshige

Kozo Matsumoto

Tetsuji Tsuda

Teppei Tachibana

Joji Yamauchi

Hajime Saito (outside)

●Standing Corporate Auditor Kiyoshi Ohuchi

●Corporate Auditors (outside) Hideo Takada

Tadao Tsuya

Hisaaki Shirai

http://www.poletowinamerica.com/index.html

http://www.poletowinasia.com/

http://www.poletowininternational.com/

http://www.poletowineurope.com/

27

◆Stock Information (As of January 31, 2015)

●Number of Shares Authorized: 56,000,000

●Number of Shares Issued: 19,041,200

Note: The exercise of subscription rights to shares increased the number of issued and outstanding shares by 34,000.

●Number of Shareholders: 6,343 (up 3,267 from the end of the previous term)

●Major Shareholders (Top 10)

Shareholder name Number of shares held Share-holding ratio

(Thousands) (%)

Tamiyoshi Tachibana 1,960 10.30

Mitsutaka Motoshige 1,925 10.11

Japan Trustee Services Bank, Ltd. 1,231 6.47

(Securities Investment Trust Account)

Kozo Matsumoto 1,216 6.39

The Master Trust Bank of Japan, Ltd. 811 4.26

(Trust Account)

Teppei Tachibana 603 3.17

The Nomura Trust & Banking Co., Ltd. 526 2.77

(Trust Account)

Masuo Uesugi 351 1.85

Tetsuji Tsuda 344 1.81

THE BANK OF NEW YORK 133524 317 1.67

●Share Distribution

*Note: Excluding 3,000 fractional shares. *Note: Excluding 103 shareholders

owning only fractional shares.

poletowin pitcrew holdings, inc. · 2015. 5. 29. · 1 poletowin pitcrew holdings, inc. annual...

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