My name is Oyama, and I'm the President and CEO of Broadleaf Co., Ltd. Thank you very much for attending our financial results briefing today. The materials used for this presentation are available on our IR website under the title, "FY2024 Second Quarter Financial Results Briefing Materials." We will proceed according to the table of contents listed on page 2, so I ask for your kind cooperation. Now, let me begin by highlighting our performance for the first half of the fiscal year. Please skip a page and look at page 4. Regarding sales in the first half of the fiscal year, the progress rate toward the full year sales forecast was 47.8%, which is at the same level as the same period last year, indicating steady progress toward achieving the forecast.
The operating profit and loss also broke even in the first half, and we returned to profitability in the second quarter. As for profitability, the phase of recording planned losses due to the shift to a subscription-based business model ended in the first quarter of this fiscal year, and from the second quarter, we have shifted to a phase of accumulating profits. Regarding cash flow, despite continuing to invest in development, the increase in operating cash flow led to a positive turn in free cash flow. As a result, the performance for the first half of the fiscal year landed on a favorable note. Next, I'll provide an overview of our financial performance. Please look at page 5. Revenue increased by 14% compared to the same period last year.
Operating profit saw a significant improvement compared to the same period last year, driven by both increased revenue and enhanced cost reduction efforts. Additionally, due to gains from the revaluation of investment securities, financial income increased, resulting in a positive pre-tax profit for the first half of the fiscal year. Next, I'll discuss the quarterly performance trends. Please look at page 6. The revenue growth trend is due to the continued increase in subscription contracts. The shift to subscriptions as lease contracts for packaged software expire, has been a key factor in the revenue increase. This revenue growth factor is expected to continue until 2028, when all customers of packaged software transition to cloud software. As for the operating profit, the first quarter was a phase of decreasing quarterly losses, but by the second quarter, we turned profitable, marking the shift to a profit accumulation phase.
Next, I'll explain the breakdown of changes in operating profit for the first half of the fiscal year. Please look at page 7. While development costs subject to cost reduction decreased, procurement costs increased due to the rise in hardware sales. Additionally, depreciation costs increased as the scope of cloud services expanded. Furthermore, although personnel costs and IT infrastructure procurement costs increased, we worked to control expenses, particularly by promoting the efficiency of sales activities and reducing administrative costs. As a result of these efforts, the operating profit improved by JPY 1.067 billion compared to the same period last year. Next, I'll discuss the status of the BS. Please look at page 8. In terms of assets, intangible assets increased due to software development investments. On the liability side, contract liabilities increased, which is due to advance payments for five-year lump sum payments for cloud software.
Therefore, you can consider the increase in contract liabilities as a positive indicator of cash flow. Additionally, this has the effect of reducing the ease of cancellation, which is a weakness of subscriptions, leading to an improvement in customer retention rates. Regarding capital, although there were impacts from reflecting the profit and loss for the first half and the payment of dividends, we have maintained the same level as at the end of the previous fiscal year. Next, I'll discuss the cash flow situation. Please look at page nine. Operating cash flow increased due to the growth in the number of customers with subscription contracts. The increase in contract liabilities, which corresponds to advance payments for cloud software, also contributed to the rise in income.
Investment cash flow continued to show expenditures due to ongoing development investments focused on cloud software, but there was also income from the recovery of these investments. As a result, free cash flow turned positive. Financial cash flow reflected changes in borrowings. I would also like to report regarding major investment sales, that the total sales amount was approximately JPY 330 million, with a gain in sales of about JPY 220 million. Next, I'll explain the full year earnings forecast. Please look at page 10. There are no changes to the forecasts for revenue and operating profit. Considering the situation in the first half of the year, we have reviewed the balance between the cost of sales and SG&A expenses.
Additionally, reflecting the financial income recorded in the first half, we have revised our forecast for profit before tax and profit for the period upwards. Next, let's look at the breakdown of changes in operating profit and loss. Please look at page 11. The reduction in development costs during the first half will continue to contribute positively throughout the full year. Additionally, with the continued strengthening of hardware sales, we expect an increase in procurement costs and other expenses. The expansion of cloud service offerings will also lead to higher depreciation expenses. On the other hand, we will continue to promote the efficiency of sales activities and reduce expenses, particularly in administrative costs, to curb the increase in SG&A expenses.
As a result, revenue growth will make a significant contribution, and cost control efforts will lead to a substantial improvement in operating profit and loss by JPY 2.215 billion compared to the previous fiscal year, forecasted to turn profitable. Next, let me explain about the dividends. Please look at page 12. For the fiscal year ending December 2024, we plan to increase the annual dividend by 1 JPY, bringing it to 2 JPY per share. In 2022 and 2023, we experienced net losses, but considering the progress of our medium-term management plan and the status of retained earnings, we implemented an annual dividend of 1 JPY. In 2024, although the current profit is almost flat in terms of revenue, we foresee a turnaround to profitability and thus plan to implement an annual dividend of 2 JPY.
Next, I will explain the situation of our cloud business. Please look at page 14. Customers in the mobility industry are gradually transitioning to cloud software. This transition will continue until 2028, when all customers are expected to have switched to cloud software. Since the transition began in 2022, the rate of cloud adoption and the number of licenses has been steadily increasing. Additionally, the average monthly revenue per license is rising as planned, and the customer retention rate remains high. This upward trend has accelerated into the second quarter, which is a highlight of the first half of the year. Given this situation, customer demands are becoming more diverse and sophisticated, and this trend is detailed on page 15.
Since last year, in response to various occurrences in the mobility industry, there has been a growing demand for digital transformation aimed at preventing fraud and restoring consumer trust, which has diversified the needs for our software. This fiscal year, there has been an increased demand for DX solutions to improve operational efficiency, such as automating supply chains, particularly for cloud software targeting parts suppliers. This has led to a heightened demand for our software. Additionally, with the introduction of the new vehicle inspection system starting in October, some maintenance providers have faced delays in resolving operational issues identified during pre-operation testing, leading to extended time for specification adjustments with our software. Specifically, regarding vehicle inspections, changes in regulations from the Ministry of Land, Infrastructure, Transport, and Tourism were announced, with modifications disclosed only after April.
The tight schedule for vendors to adapt also affected the adjustment time for our software. However, this is not expected to be a major issue. Once the maintenance for customers is completed, they will transition to our cloud software as scheduled. Due to these situations, some planned cloud transition projects for this fiscal year will be deferred to the next fiscal year. However, we have agreed with our customers to continue using their current monthly contracts until the transition to cloud software is complete. Furthermore, we have shifted some sales resources previously focused on cloud transitions to focus on hardware sales, software options, and new customer acquisition. The results of this adjustment have already begun to appear from the second quarter, and we will further intensify efforts to acquire new small and medium-sized businesses in the second half of the fiscal year.
As will be explained later, the initial KPI targets for the end of 2024 were 16,000 licenses and a 30% cloud adoption rate. However, due to changes in customer needs and further amendments to legal regulations, we have revised our sales strategy to target 13,000 licenses and a 25% cloud adoption rate. Despite this, customer numbers are increasing, with a retention rate of over 99.6%, and the overall figures are expected to be as originally planned. The revision of the sales strategy is not a negative change, but an adjustment of the overall mix to ensure company-wide targets, and the plan to transition all customers to cloud software by 2028 remains unchanged. Please do not be concerned. Next, I will explain the release schedule for cloud software. Please look at page 16.
There are no differences from what was explained in the first quarter. We began sales of cloud software for automotive maintenance and sheet metal repair industries at the end of Q4, 2021. And since then, we have continued to expand the target industries and develop additional features. The cloud software for parts suppliers, which was initially scheduled to be released in June, is currently being adjusted to be market ready by Q3, as explained previously. We apologize for the inconvenience to customers waiting for cloud software. We aim to respond to the increasingly diverse and sophisticated customer demands by aligning with a customer-centric approach, ensuring that we release products that meet these needs. Please be assured that expansions for non-parts suppliers are proceeding as scheduled. Next, I will explain the sales by service category based on the release schedule and sales strategy. Please look at page 17.
Sales of cloud services for the first half increased by 63.4% compared to the same period last year. The switch from packaged software to monthly subscriptions upon expiration of utilization periods, as well as the adoption of various monthly subscription products, contributed to the increase in software services revenue. As a result of these changes, sales of packaged systems decreased by 6.2%. Lease sales of packaged software were only for non-mobility industries, and there was no reactionary decline from the strong performance of the previous year, maintaining software sales at the same level as the previous year. Additionally, customers using packaged software for the mobility industry switched to cloud software, leading to a decrease in operations and support revenue. In terms of budget versus actual, software services fell short due to updates in the sales strategy.
However, the results of measures initiated from Q2 on the packaged system side have exceeded the shortfall, thus compensating for the unmet targets. Next, let's look at the quarterly sales trend graph. Please look at page 18. The software services within cloud services consist of revenue from subscriptions, including cloud software. For each customer, the switch from packaged software to cloud software results in a decrease in packaged system sales, but contributes to an increase in cloud services revenue. Furthermore, this revenue increase will continue until 2028, when all customers are expected to have completed their switch. Next, I will explain the full year revenue forecast by service category. Please look at page 19. The forecast for cloud services revenue has been revised downward by JPY 250 million.
This adjustment is due to a reassessment of the number of cloud software sales by major medium-sized repair shops, which is a key volume zone for us. As a result, the cloud adoption rate at the end of this fiscal year is now expected to be 25%, with 13,000 licenses, temporarily falling short of the planned 30% and 16,000 licenses. However, we anticipate that the cloud adoption rate will reach 100%, and the number of licenses will continue to grow until 2028, when the switch to cloud software is completed. Additionally, the average monthly unit price per license is expected to be JPY 24,000 by the end of this fiscal year as planned. We will work to ensure that there is no impact on performance in the following fiscal years by promptly transitioning to the cloud after product release.
On the other hand, the forecast for packaged system revenue has been revised upward by JPY 250 million. This revision reflects the results of measures such as strengthened hardware sales and upselling through packaged software ancillary services. Next, I'll explain the progress of the medium-term management plan. Please look at page 21. Most of the software services revenue comes from customers transitioning from packaged software to cloud software. Therefore, based on existing customer assets, achieving a 100% cloud adoption rate is expected to meet the cloud services revenue plan by 2028. Currently, there is an increase in the number of customers who temporarily switch to monthly usage of packaged software rather than directly moving to cloud software. However, these customers will gradually transition to cloud software once the migration environment is ready, so there are no changes to the revenue plan.
Additionally, for this fiscal year and the next, we will enhance the likelihood of achieving the plan by implementing countermeasures early and effectively. The profit plan based on this revenue plan is detailed on page 22. This fiscal year, we have transitioned to operating profit, and the plan to set a record high in 2026 remains unchanged. We are aiming for an operating profit of JPY 13 billion in the final year of 2028. If we can introduce cloud software to the market according to schedule, we will be able to achieve this plan. Therefore, we will proceed with the utmost caution to ensure that development does not introduce new risks. Finally, I will explain the expansion of services as part of our midterm management plan.
Please look at page 23.... The goal of migrating our core business software to the cloud is not only to upgrade its features and performance and to improve product quality and increase market share and customer value through subscription models. Another goal is to seamlessly integrate data with not only our secondary products, but also other company systems and social infrastructure systems, enabling unified management of all data transactions within and between customers. This approach ensures that all transactions, including data storage, reception, transmission, extraction, processing, and transformation, occur on our cloud platform, which serves as a key value point for our company. Thus, our vision for the medium-term management plan is not merely to become a leading SaaS provider, but to establish ourselves as a unique data exchange platform, creating added value through data.
Like the examples provided, we aim to be a platform provider that offers a common platform for customers to utilize all services offered, achieving smooth and stress-free data exchange. We appreciate the continued support from our shareholders and investors for our initiatives. Moving on to the next page. I would like to say that based on the explanations provided so far, our company's role is highly specialized. Although our focus is on the mobility industry, through our cloud systems, we aim to integrate various systems and business processes that customers engage with from the start of their workday to its end, involving employees and their tasks. By seamlessly connecting all these elements, we aim to enhance customer convenience and contribute to the growth of their businesses. This policy is central to our approach.
Therefore, while we previously provided functional systems, such as packages for maintenance estimates and other similar functions, our true goal, as outlined in our midterm plan, is to achieve comprehensive digital transformation for our customers' businesses on our platform. Therefore, while comparisons often focus on specific maintenance systems, our approach involves implementing cloud systems to achieve overall digital transformation for our customers. By managing and leveraging customer data to provide added value, we aim to support the development of their businesses. This is the direction in which we are operating. As we continue to advance in this manner, comparing individual functions such as maintenance or sheet metal will become increasingly challenging. However, the growth of the entire cloud system remains unchanged. We ask for your continued attention to this point and hope you will support us in overseeing and advancing this industry together. Thank you very much.
That concludes my presentation, and we will now move on to the Q&A session. Thank you. We have a question from Mr. Yamada of Toyo Keizai. The question is about the reason for maintaining the full-year forecast. Are there any expectations for the third quarter and beyond, specifically regarding operating profit and operating income? First, regarding the cloud services and other aspects, we are proceeding according to the planned schedule. We are also selling software specifically for non-mobility industries. We are making every effort to positively influence demand and order backlog, and the sales plan remains unchanged. Therefore, the forecasted revenue from cloud services is already incorporated into our projections, and there are no major factors expected to cause significant increases or decreases. However, regarding the sales of package software, we currently do not have high certainty information that guarantees an increase in operating profit.
Therefore, considering this situation, we have decided to maintain the forecast for operating profit at this time. If the concern is whether there are any specific worries for Q3 and beyond, there are none. However, since we are discussing operating profit forecasts, while the cloud side remains relatively stable, package sales can significantly impact operating profit if they perform well or fall short of expectations. This risk has been a consistent factor for many years. Therefore, with the current sales plan, the cloud segment remains unchanged, and the operating profit forecast for package sales is maintained based on the current outlook. There are no major new factors influencing this decision. That is all. Yes, thank you for your question. Thank you, Mr. Kanamori from Sumitomo Mitsui. To be clear, the answer is that there is actually no decrease.
In the case of existing software, such as package software. Each system, maintenance, sheet metal, and vehicle sales, is counted as one license each. When transitioning to cloud software, instead of categorizing systems like maintenance and sheet metal separately, they are now provided in a more integrated form, as mentioned earlier, closer to a total management system. Consequently, features related to used car sales, which were previously separate, are now integrated as options within the maintenance and sheet metal systems. As a result of temporarily organizing licenses in the first quarter, it may appear that there has been a decrease. However, customer inflow is continuing, and the actual number of license contracts is increasing. When preparing this material, we overlooked this aspect, which may have caused concern. Rest assured, the number of licenses is indeed increasing. We apologize for any worry this may have caused and appreciate your understanding.
We apologize for any confusion caused by discrepancies in our aggregation methods and the lack of detailed explanation. Thank you for your questions. As there appear to be no additional questions at this time, we will conclude the presentation. For any further individual inquiries, please contact the IR department. I would like to conclude by reiterating something I briefly explained earlier. In the previous system, there were separate systems for maintenance, sheet metal, and vehicle sales. Even though vehicle sales licenses were counted, they were actually added as an option to the maintenance system. For smaller customers, there is a mini vehicle sales option available in the maintenance system we have introduced. When these customers switch to this new system, the vehicle sales license that was previously included as an add-on with the maintenance system will temporarily disappear.
It will be replaced by a vehicle sales option within the maintenance and sheet metal system, so the previous vehicle sales component will be removed. However, you might ask how much the vehicle sales component license cost was. Essentially, the vehicle sales option for small businesses is almost an additional add-on license. Therefore, there is no significant cost risk or reduction related to the changes in the license count. We hope you understand this point as well. I apologize for any lack of clarity in my explanation. If you have any further questions, please feel free to contact us. Thank you very much for participating today.