FRONTEO, Inc. (NASDAQ:FTEO) (TSE:2158) ("FRONTEO" or the
"Company"), a leading provider of international litigation support
and big-data analysis services, announced today its unaudited
financial results for the fiscal fourth quarter (the "fourth
quarter” of 2017) and fiscal year ended March 31, 2017. All figures
are prepared in accordance with the generally accepted accounting
principles of Japan ("Japanese GAAP").
“We are pleased to have finished the year on a
strong note, making a number of strides in our business in fiscal
year 2017,” stated FRONTEO’s Chairman and Chief Executive Officer
Masahiro Morimoto. “We have been deeply focused on the development
of data analysis technologies that support the investigation of
illegal activities and international litigations since our
inception. As such, we are delighted that our net sales for
eDiscovery, legal and compliance professional services, and others
all finished with solid topline growth in the fourth quarter of
2017. Additionally, we successfully executed on two cross border
projects for our legal business in the third quarter of the fiscal
year, which clearly demonstrates our ability to complete M&A
transactions that will further enhance our business in the
future.
“In addition to providing solutions for the
legal field, we can also provide effective solutions for
enterprises in many other fields, including healthcare, business
intelligence, and digital communications, using our AI engine
KIBIT. In the fourth quarter, we introduced new management to our
AI business, which we believe have significantly strengthened our
organization and will accelerate our growth going forward.
Importantly, our AI services have been widely recognized, even from
conservative industries such as finance. We are encouraged by the
results we are seeing and are confident that we will continue to
grow our AI business in fiscal year 2018.
“In the past year, we have also made significant
progress in the development of our healthcare business, which we
consider to be the pillar of our mid-term growth driver.
Specifically, using our proprietary KIBIT AI engine, we began to
collaborate with the Japanese Foundation for Cancer Research on the
‘Cancer Precision Medicine AI System’ and co-developed the
‘Prediction of Patient Fall System’ with NTT Medical Center Tokyo.
Although both projects are still in their early stages of
investments, we believe there are tremendous growth opportunities
associated with these partnerships. We also aim to earn profits
through the commercialization of pharmacovigilance by the end of
fiscal year 2020. Looking ahead, leveraging our KIBIT AI engine, we
will continue to focus on the expansion of our legal business and
the further development of our AI business.”
Fourth Quarter 2017 Financial
Results
SALES: Net sales for the fourth
quarter 2017 came in at JPY3,245 million (US$29.1 million), as
compared to JPY2,953 million in the prior year period.
GROSS PROFIT: For the fourth
quarter 2017, gross profit was JPY1,331 million (US$12.0 million),
as compared to JPY1,202 million in the prior year period. Gross
margin was 41.0% in the fourth quarter 2017 as compared with 40.7%
in the prior year period.
OPERATING EXPENSES AND INCOME
(LOSS): Total operating expenses for the fourth quarter
2017 were JPY1,435 million (US$12.9 million), as compared to
JPY1,265 million in the prior year period. Operating loss for the
fourth quarter 2017 was JPY103 million (US$0.9 million), as
compared to an operating loss of JPY63 million in the prior year
period.
NET INCOME (LOSS): Net income
for the fourth quarter 2017 was JPY159 million (US$1.4 million), as
compared to a net loss of JPY92 million in the prior year
period.
EARNINGS (LOSS) PER SHARE: Net
loss per ordinary share (basic) for the fourth quarter 2017 was
JPY21.21 (US$0.19), as compared to a net loss per ordinary share
(basic) of JPY5.47 in the prior year period.
As of March 31, 2017, the Company had a total of
37,921,862 ordinary shares outstanding, or the equivalent of
18,960,931 ADSs. Each ADS represented two shares of the Company’s
common stock.
BALANCE SHEET: As of March 31,
2017, the Company’s cash and deposits were JPY4,536 million
(US$40.7 million).
Financial Outlook
Based on information available as of May 15,
2017, for the fiscal year ending March 31, 2018, the Company
expects its sales to be approximately JPY14,000 million (US$133.3
million), representing a year-over-year growth of approximately
21.8%; operating income to be approximately JPY200 million (US$1.9
million), ordinary income to be approximately JPY190 million yen,
and net income attributable to owners of the parent to be
approximately JPY90 million yen. These forecasts reflect the
Company’s current and preliminary view, which is subject to
change.
(Note) The above forecast for fiscal year 2018
is based on the exchange rate assumption of 1US$=JPY105.
Statement Regarding Unaudited Condensed
Financial Information
The unaudited financial information set forth
above is preliminary and subject to potential adjustments.
Adjustments to the consolidated financial statements may be
identified when audit work has been performed for the Company’s
year-end audit, which could result in significant differences from
this preliminary unaudited condensed financial information.
Exchange Rate
This announcement contains translations of
certain JPY amounts into U.S. dollars (“US$”) at specified rates
solely for the convenience of the reader. Unless otherwise stated,
all translations from JPY to US$ were made at the rate of JPY111.41
to US$1.00, the noon buying rate in effect on March 31, 2017 in the
H.10 statistical release of the Federal Reserve Board. The Company
makes no representation that the JPY or US$ amounts referred could
be converted into US$ or JPY, as the case may be, at any particular
rate or at all. For analytical presentation, all percentages are
calculated using the numbers presented in the financial statements
contained in this earnings release.
About FRONTEO, Inc.
FRONTEO, Inc. ("FRONTEO") (Nasdaq:FTEO)
(TSE:2158) supports the analysis of big data based on behavior
informatics by utilizing its technology, "KIBIT". FRONTEO's KIBIT
technology is driven by FRONTEO AI based on knowledge acquired
through its litigation support services. KIBIT incorporates
experts' tacit knowledge, including their experiences and
intuitions, and utilizes that knowledge for big data analysis.
FRONTEO continues to expand its business operations by applying
KIBIT to new fields such as healthcare and marketing. FRONTEO was
founded in 2003 as a provider of eDiscovery and international
litigation support services. These services include the
preservation, investigation and analysis of evidence materials
contained in electronic data, and computer forensic investigation.
FRONTEO provides eDiscovery and litigation support by making full
use of its data analysis platform, "Lit i View®", and its
Predictive Coding technology adapted to Asian languages. The
company name was changed from UBIC, Inc. to FRONTEO, Inc. as of
July 1, 2016.
For more information about FRONTEO, contact usinfo@fronteo.com
or visit http://www.fronteo.com/global/
Safe Harbor Statement
This announcement contains forward-looking
statements. These forward-looking statements are made under the
"safe harbor" provisions of the U.S. Private Securities Litigation
Reform Act of 1995. These statements can be identified by
terminology such as "will," "expects," "anticipates," "future,"
"intends," "plans," "believes," "estimates" and similar statements.
Among other things, the amount of data that FRONTEO expects to
manage this year and the potential uses for FRONTEO’s new service
in intellectual property-related litigation, contain
forward-looking statements. FRONTEO may also make written or oral
forward-looking statements in its reports filed with, or furnished
to, the U.S. Securities and Exchange Commission, in its annual
reports to shareholders, in press releases and other written
materials and in oral statements made by its officers, directors or
employees to third parties. Statements that are not historical
facts, including statements about FRONTEO’s beliefs and
expectations, are forward-looking statements. Forward-looking
statements involve inherent risks and uncertainties. A number of
factors could cause actual results to differ materially from those
contained in any forward-looking statement, including but not
limited to the following: FRONTEO’s goals and strategies; FRONTEO
expansion plans; the expected growth of the data center services
market; expectations regarding demand for, and market acceptance
of, FRONTEO’s services; FRONTEO’s expectations regarding keeping
and strengthening its relationships with customers; FRONTEO’s plans
to invest in research and development to enhance its solution and
service offerings; and general economic and business conditions in
the regions where FRONTEO provides solutions and
services. Further information regarding these and other risks
is included in FRONTEO’s reports filed with, or furnished to the
Securities and Exchange Commission. FRONTEO does not undertake any
obligation to update any forward-looking statement, except as
required under applicable law. All information provided in this
press release and in the attachments is as of the date of this
press release, and FRONTEO undertakes no duty to update such
information, except as required under applicable law.
CONTACT:
FRONTEO Global PR
FRONTEO USA, Inc.
Tel: (212) 924-8242
global_pr@fronteo.com
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