Fujitsu Q2 Fiscal Year 2024 Financial Results Report

Fujitsu Ltd. (TYO: 6702), a global information and communication technology company, announced its financial results for the second quarter of the fiscal year 2024. The company recorded a slight revenue increase of 0.9% year-over-year, reaching ¥1,696.6 billion, with the Service Solutions segment being a significant growth driver.

Fujitsu's adjusted operating profit for the quarter saw a substantial rise of 56.6% from the previous year, achieving record highs. CFO Takeshi Isobe highlighted the company's focus on profitability improvement and growth initiatives, particularly in national security-related deals and digital transformation services.

Key Takeaways

• Fujitsu's revenue increased by 0.9% to ¥1,696.6 billion, with Service Solutions leading the growth.
• Adjusted operating profit surged by 56.6% to a record ¥88.7 billion.
• The company experienced a 69% revenue increase in the modernization business and over 30% growth in Fujitsu Uvance orders.
• Despite international revenue decline, the firm expects further growth, especially in national security-related deals.
• Fujitsu maintains its full-year revenue forecast at ¥3,760 billion and an adjusted operating profit target of ¥303 billion.

Company Outlook

• Fujitsu anticipates growth in the second half of the fiscal year, particularly from large-scale national security-related deals.
• Revenue target for Uvance is set at ¥450 billion for FY 2024 and ¥700 billion by FY 2025.
• The firm is actively investing in growth initiatives and focusing on profitability improvement across its segments.

Bearish Highlights

• International revenue declined by 4% due to the carveout of low-profit businesses.
• Hardware Solutions segment experienced a 4.4% revenue decline.
• Ubiquitous Solutions saw a 16.9% drop in revenue.

Bullish Highlights

• Service Solutions segment reported a 7% revenue increase in Japan.
• Adjusted operating profit margin improved to 4.7%.
• Device Solutions revenue grew by 3.3%, with a profit increase of ¥4.1 billion.

Misses

• The company recorded a one-time loss of ¥20 billion due to the expansion of the self-produced support system for human resource transformation.
• Demand recovery in the Device Solutions segment was slower than expected.

Q&A Highlights

• Consolidated results and market demand for service solutions met expectations.
• Orders in Japan for the first half were similar to the previous year, and no significant changes in demand are anticipated for the second half.
• The financial forecast for FY 2024 remains unchanged, with expected revenue of ¥3,760 billion and adjusted operating profit of ¥303 billion.

Fujitsu's commitment to enhancing digital transformation is evident in its plan to implement an ERP system in service solutions by FY 2024. The company's focus on improving profitability and executing its midterm business plan is expected to drive performance in the coming periods. Despite some setbacks, Fujitsu's overall strategy and projections suggest that it is on track to meet its initial goals and enhance corporate value.

Full Transcript – None (FJTSF) Q2 2025:

Takeshi Isobe

Good afternoon, ladies and gentlemen. My name is Isobe, CFO. I'd like to give you the outline of the Financial Results for Second Quarter. Please go to Page 3. I will start by presenting our financial highlights for the first half of fiscal ‘24. Most important segment is Service Solutions, which continue to post steady improvements and higher revenue and operating profit. Revenue for the first half was ¥1,017.5 billion, an increase of 3.4% over the last year's first half. For business in Japan, demand continued to be strong. All digital transformation modernization services and revenue in Japan wrote 7% outside of Japan. However, because of the carveout of low profitability business, revenue declined by 4%. Excluding the carveout, revenue was essentially unchanged. Adjusted operating profit for Service Solutions was ¥88.7 billion, an increase of ¥25.2 billion compared to the first half of fiscal ‘23. In addition to the impact of higher revenue, there has been steady progress over profitability improvement. Adjusted operating profit margin improved by 2.3% up to 8.7%. In terms of first half results, in both cases, there were record results for Fujitsu. Total consolidated revenue was ¥1,696.6 billion 0.9% higher than the previous year. And the revenue declined in Hardware Solutions and Ubiquitous Solutions. Adjusted operating profit was ¥79.5 billion, ¥20.7 billion up from the previous year. Adjusted operating profit margin was 4.7%, up 1.7 percentage points.

In terms of the first half results, adjusted operating profit was a record for Fujitsu, showing an increase of 56.6% over the last year's first half. Page 4 shows the overview of the financial results for each business segment. I will discuss the results for each segment starting from the next page, but this gives you an overall view. As I touched upon just now, Service Solutions, our growth driver had a higher revenue and strong pace of progress and profitability improvement. Hardware Solutions, both revenue and profit fell as there was a pullback from last year's large-scale deals and the negative impact of the weak yen. Results in the Device Solutions, on the other hand, benefited from the weak yen, both revenue and profit increased. The inter-segment eliminations and corporate reduction in the inventories led to improvement in unrealized gains. From Page 5, we will show you the result of each segment.

Page 6, the Service Solutions, revenue was ¥1,017.5 billion, an increase of 3.4% from the previous year. Primarily in Japan there were continued increases in demand for digital transformation and modernization services. Revenue from our business in Japan rose by 7% from the prior year. Adjusted operating profit was ¥88.7 billion, up ¥25.2 billion from the prior year, and adjusted operating profit margin was 8.7%, improvement of 2.3 percentage points compared to the previous year.