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Disclaimer This document is a translation of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail in all respects. Summary of Consolidated Financial Results for the Six Months Ended November 20, 2021 [Japanese GAAP]* December 16, 2021 Company name: ASKUL Corporation Stock exchange listing: Tokyo Code number: 2678 URL: https://www.askul.co.jp/kaisya/ir/ Representative: Akira Yoshioka, President and chief executive officer Contact: Tsuguhiro Tamai, Director and chief financial officer Phone: 03-4330-5130 Scheduled date of filing quarterly securities report: December 28, 2021 Scheduled date of commencing dividend payments: January 17, 2022 Availability of supplementary briefing material on quarterly financial results: Yes Schedule of quarterly financial results briefing session: Yes (for institutional investors and analysts) 1. Consolidated Financial Results for the Six Months Ended November 20, 2021 (May 21, 2021 to November 20, 2021) (1) Consolidated Operating Results (% indicates changes from the previous corresponding period.) Operating profit Ordinary profit Net sales (Amounts of less than one million yen are rounded down.) Six months ended November 20, 2021 November 20, 2020 Million yen 209,038 206,452 (Note) Comprehensive income: Six months ended November 20, 2021: Six months ended November 20, 2020: Million yen 6,696 5,926 % 1.3 3.4 % 13.0 70.9 Million yen 6,716 5,908 ¥4,598 million ¥3,413 million % 13.7 74.1 [34.7%] [54.3%] Profit attributable to owners of parent Million yen 4,546 3,453 % 31.6 57.5 Six months ended November 20, 2021 November 20, 2020 Basic earnings per share Diluted earnings per share Yen 44.37 33.81 Yen 44.31 33.66 (Notes) 1 The Group has applied “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020), etc., effective the beginning of the current period. Accordingly, the above figures for the six months ended November 20, 2021 indicates the amounts after the application of the said accounting standard, etc. When calculating the figures for the six months ended November 20, 2020 in accordance with the same Accounting Standard, change ratio of net sales would be 2.5%. 2 ASKUL Corporation conducted a 2-for-1 stock split of common stock on May 21, 2021. “Basic earnings per share” and “Diluted earnings per share” are calculated on the assumption that the said stock split was implemented at the beginning of the preceding fiscal year. (2) Consolidated Financial Position As of November 20, 2021 May 20, 2021 Total assets Net assets Million yen 193,091 190,107 Million yen 62,287 59,203 Capital adequacy ratio % 32.0 30.9 (Reference) Equity: As of November 20, 2021: As of May 20, 2021: ¥61,827 million ¥58,777 million (Note) The Group has applied “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020), etc., effective the beginning of the current period. Accordingly, the above figures as of November 20, 2021 indicates the amounts after the application of the said accounting standard, etc. Disclaimer This document is a translation of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail in all respects. 2. Dividends Fiscal year ended May 20, 2021 Fiscal year ending May 20, 2022 Fiscal year ending May 20, 2022 (Forecast) 1st quarter-end Yen – – 2nd quarter-end Yen 19.00 15.00 Annual dividends 3rd quarter-end Yen – – Year-end Total Yen 30.00 15.00 Yen 49.00 30.00 (Notes) 1 Revision to the forecast for dividends announced most recently: No 2 ASKUL Corporation conducted a 2-for-1 stock split of common stock on May 21, 2021. The actual amounts of dividends before the said stock split are described for the fiscal year ended May 2021. 3. Consolidated Financial Results Forecast for the Fiscal Year Ending May 20, 2022 (May 21, 2021 to May 20, 2022) (% indicates changes from the previous corresponding period.) Net sales Operating profit Ordinary profit Profit attributable to owners of parent Basic earnings per share Full year Million yen 430,000 % Million yen 14,000 1.9 % Million yen 13,900 0.5 % Million yen 9,000 0.4 % 16.0 Yen 87.82 (Note) Revision to the financial results forecast announced most recently: No * Notes: (1) Changes in significant subsidiaries during the period under review (changes in specified subsidiaries resulting in changes in scope of consolidation): No (2) Accounting policies adopted specially for the preparation of quarterly consolidated financial statements: No (3) Changes in accounting policies, changes in accounting estimates and retrospective restatement 1) Changes in accounting policies due to the revision of accounting standards: Yes 2) Changes in accounting policies other than 1) above: No 3) Changes in accounting estimates: No 4) Retrospective restatement: No (4) Total number of issued shares (common shares) November 20, 2021: May 20, 2021: 102,518,800 shares 102,518,800 shares 1) Total number of issued shares at the end of the period (including treasury shares): 2) Total number of treasury shares at the end of the period: 71,796 shares 41,874 shares November 20, 2021: May 20, 2021: 3) Average number of shares during the period: Six months ended November 20, 2021: Six months ended November 20, 2020: 102,463,511 shares 102,149,706 shares (Note) ASKUL Corporation conducted a 2-for-1 stock split of common stock on May 21, 2021. “Total number of issued shares,” “Total number of treasury shares,” and “Average number of shares during the period” are calculated on the assumption that the said stock split was implemented at the beginning of the preceding fiscal year. * This Summary of Consolidated Financial Results is not subject to quarterly review. * Notes for using forecasted information and others Earnings forecasts and other forward-looking statements contained in this document are based on the information ASKUL has obtained to date and on certain assumptions it considers reasonable. As such, these forecasts and statements are not intended as a commitment by the Company to achieve them. Note also that actual results and other future events may differ materially from these forecasts and statements due to a variety of factors. For the assumptions on which earnings forecasts are based and notes and information on the use of earnings forecasts, see “1. Qualitative Information on Financial Results (3) Explanation of Consolidated Forecasts and Other Forward-Looking Information” on Page 4 of Attached Materials. Disclaimer This document is a translation of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail in all respects. Table of Contents for Attached Materials 1. Qualitative Information on Financial Results ……………………………………………………………………………………………………… 2 (1) Explanation of Operating Results ………………………………………………………………………………………………………………… 2 (2) Explanation of Financial Position …………………………………………………………………………………………………………………. 4 (3) Explanation of Consolidated Forecasts and Other Forward-Looking Information ………………………………………………… 4 2. Quarterly Consolidated Financial Statements ……………………………………………………………………………………………………. 5 (1) Quarterly Consolidated Balance Sheets ……………………………………………………………………………………………………….. 5 (2) Quarterly Consolidated Statements of Income and Comprehensive Income ……………………………………………………… 7 (3) Quarterly Consolidated Statements of Cash Flows ………………………………………………………………………………………… 9 (4) Notes to Quarterly Consolidated Financial Statements …………………………………………………………………………………..11 (Notes to Going Concern Assumption) …………………………………………………………………………………………………………..11 (Notes to Significant Changes in Shareholders’ Equity) …………………………………………………………………………………. 111 (Change in Accounting Policies) ……………………………………………………………………………………………………………………11 (Segment Information, etc.) ………………………………………………………………………………………………………………………… 12 3. Others ……………………………………………………………………………………………………………………………………………………… 134 Details of Selling, General and Administrative Expenses (Consolidated) …………………………………………………………… 13 1 Disclaimer This document is a translation of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail in all respects. 1. Qualitative Information on Financial Results (1) Explanation of Operating Results During the first six months of the fiscal year under review (from May 21, 2021 to November 20, 2021), Japan saw signs of economic recovery in some fields as states of emergency and other measures, taken intermittently in the face of COVID-19, were completely lifted at the end of September 2021. However, the outlook for the Japanese economy remains uncertain due to the fear of the spread of a new variant. The e-commerce market, in which the Group operates, keeps growing as it is strongly hoped that the market will play the role of allowing shopping activities where there is reduced contact among people with new lifestyles, which has been necessitated by the spread of COVID-19. On the other hand, competition in the industry for better service quality has continued. As a result, it has become a business management issue to realize sustainable growth in sales and profits while accommodating diverse customer demands. Under such circumstances, the Group positions the fiscal year ending May 20, 2022 as the time to cement the foothold to fulfil the Medium-term Management Plan (from the fiscal year ending May 20, 2022 to the fiscal year ending May 20, 2025). To this end, the Group will strive to secure operating profit and simultaneously and proactively make investments. The B-to-B business in the mainstay e-commerce business, taking the expansion of the e-commerce market as an opportunity, is pushing forward with its operations steadily. For example, it is expanding the range of products handled and constructing a new website, toward the fulfilment of the Medium-term Management Plan. The B-to-C business has been engaged in improving its earnings to ensure that LOHACO starts generating operating profit in the fiscal year ending May 20, 2023 and subsequently, continues growth. In the first six months of the fiscal year under review, the B-to-B business managed to secure a net sales increase due to growth in sales of living supplies and MRO (Note 1), which are growth fields, despite a decline in special demand for infection-prevention products and sluggish demand for office supplies. On the other hand, profit decreased due to a fall in gross profit margin, resulting from the special demand decrease and others, though the result is in line with the initial plan set at the start of the fiscal year. In the B-to-C business, net sales increased due to strengthened collaboration mainly with the Z Holdings Group, and the effort to improve earnings has made steady progress thanks to a reduction in fixed costs accompanying the renewal of “LOHACO Main Store” in addition to an improvement in the variable cost ratio (real value excluding the effects of adopting “Accounting Standard for Revenue Recognition” etc.). In the logistics business, earnings improved significantly primarily due to an expansion of the contract business of logistics. As a result, the financial performance of the Group for the first six months of the fiscal year under review was net sales of 209,038 million yen, a 1.3% increase year on year and a 2.5% increase year on year in real terms (Note 2), operating profit of 6,696 million yen, a 13.0% increase year on year, ordinary profit of 6,716 million yen, up 13.7% year on year, and profit attributable to owners of parent of 4,546 million yen, a 31.6% increase year on year. They each reached record highs for the first six months of a fiscal year. The Group has applied the “Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan (ASBJ) Statement No. 29, March 31, 2020; hereinafter referred to as the “Accounting Standard for Revenue Recognition”), etc. since the beginning of the first quarter of the current fiscal year. Accordingly, net sales for the first six months of the fiscal year under review decreased by 2,737 million yen. Operating results by segment are outlined below. In the B-to-B business, the mainstay business of the Group, net sales remained solid. Net sales in the first six months of the fiscal year under review increased as sales grew in living supplies, such as beverages consumed in diverse workplaces; MRO products, such as packing materials, whose demand rose due to increasing demand for e-commerce; and long tail products whose lineups are reinforced as a key effort although special demand for products to combat COVID-19, such as hand sanitizers and face masks, declined, and demand for office suppliers stagnated. With the customer base too on an expanding trend, the Group strives to add specialized products required by each area of medical care and nursing care, and manufacturing, in particular, that the Group focuses on strategically, thereby ensuring that customers continue to use the Group’s services. As a result, net sales in the B-to-B business grew by 678 million yen from a year earlier to 169,594 million yen, a 0.4% increase year on year and up 1.6% year on year in real terms. The B-to-C business relocated LOHACO Main Store to the system infrastructure that Yahoo Japan Corporation provided, and renewed and opened a new main store in June 2021. By utilizing the Z Holdings Group’s infrastructure, including the capacity to attract customers, site platforms, and payment systems, the Group will expand its customers 2 Disclaimer This document is a translation of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail in all respects. and reduce costs. At the same time, it will further concentrate management resources on its strengths, which are original products, logistics and communication with customers, thereby boosting further growth. During the first six months of the fiscal year under review, the functions of the renewed “LOHACO Main Store” were improved, and simultaneously, large-scale sales promotions were carried out in coordination with SoftBank Corporation and Yahoo Japan Corporation. As a result, LOHACO sales increased 919 million yen from a year earlier to 26,571 million yen, up 3.6% year on year and a 5.2% increase year on year in real terms. Consequently, net sales of the B-to-C business in total rose by 1,067 million yen from a year earlier to 34,819 million yen, a 3.2% increase year on year and up 4.7% year on year in real terms. As a result, net sales of the e-commerce business, combining the two businesses above, stood at 204,413 million yen, a 0.9% increase year on year and up 2.2% year on year in real terms. Gross profit-net stood at 50,604 million yen, down 1.2% year on year and a 0.2% decrease year on year in real terms, as the gross profit margin fell 0.5 points year on year (a 0.5 points decrease year on year in real terms), caused by lower sales of products with high profit ratios, including infection-prevention products. Operating profit increased to 6,752 million yen, a 1.8% increase year on year, as the ratio of selling, general and administrative expenses to net sales declined by 0.5 points year on year, a 0.5 points decrease year on year in real terms, resulting in selling, general and administrative expenses standing at 43,852 million yen. The decrease in the expenses was mainly due to improvements in the logistics costs of the B-to-B business, LOHACO and Charm, a consolidated subsidiary, and a cut in fixed costs accompanying the renewal of LOHACO Main Store. As a result of the application of the Accounting Standard of Revenue Recognition, etc., net sales decreased by 2,737 million yen. Net sales increased due to an expansion of the contracted business of logistics that ASKUL LOGIST Co., Ltd. received from outside the Group. In the first six months of the fiscal year under review, the operating profit and loss situation improved significantly year on year because of the reduced burden of expenses, such as rent for a distribution center in connection with the preparation period for the contracted business of logistics. As a result, net sales in the first six months of the fiscal year under review were 4,224 million yen, a 23.4% increase year on year, and operating loss was 78 million yen as opposed to an operating loss of 742 million yen a year earlier. There are no effects from the application of the Accounting Standard for Revenue Recognition, etc. Tsumagoimeisui Corporation increased net sales due to strong sales of its bottled water including LOHACO, but profits fell partly because of the cost for testing that occurred prior to the operation of a new production line. As a result, net sales for the first six months of the fiscal year under review were 735 million yen, a 5.4% increase year on year, and operating profit was 43 million yen, down 40.1% year on year. There are no effects from the application of the Accounting Standard for Revenue Recognition, etc. (Notes) 1. MRO is an acronym for Maintenance, Repair and Operations, and the term “MRO supplies” denotes indirect materials including consumables and repair supplies for use at factories, construction sites, and warehouses and others. 2. A year-on-year comparison assuming that the Accounting Standard for Revenue Recognition, etc. have been applied since the fiscal year ended May 20, 2021. 3 Disclaimer This document is a translation of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail in all respects. (2) Explanation of Financial Position (Assets) Total assets stood at 193,091 million yen at the end of the second quarter of the fiscal year under review, an increase of 2,984 million yen from the end of the preceding fiscal year. The primary factors behind the increase were an increase of 2,028 million yen in notes and accounts receivable-trade, an increase of 1,746 million yen in software in progress and an increase of 1,462 million yen in construction in progress as opposed to a decrease of 1,028 million yen in cash and deposits. (Liabilities) (Net assets) Total liabilities stood at 130,804 million yen at the end of the second quarter of the fiscal year under review, a decrease of 99 million yen from the end of the preceding fiscal year. The main factors behind the decrease were a decrease of 2,252 million yen in long-term borrowings (including the current portion thereof) and a drop of 1,219 million yen in accounts payable-other as opposed to an increase of 4,474 million yen in electronically recorded obligations-operating. Net assets stood at 62,287 million yen at the end of the second quarter of the fiscal year under review, an increase of 3,084 million yen from the end of the preceding fiscal year. The primary factor behind the rise was an increase of 3,002 million yen in retained earnings mainly due to recognition of profit attributable to owners of parent of 4,546 million yen as opposed to dividend payments of 1,537 million yen. Consequently, the capital adequacy ratio was 32.0% (30.9% at the end of the preceding fiscal year). (Status of cash flows) Cash and cash equivalents (hereinafter “funds”) stood at 65,231 million yen at the end of the period under review, a decrease of 1,028 million yen from the end of the preceding fiscal year. The status of each cash flow and factors behind changes in the period under review are as follows. (Cash flows from operating activities) Net funds provided by operating activities were 10,045 million yen, a 260.9% increase year on year. The main factors contributing to the increase were 6,860 million yen in profit before income taxes, an increase of 5,216 million yen in trade payables, and depreciation and amortization of software totaling 3,026 million yen despite the decreasing factors such as payment of 2,604 million yen in income taxes and an increase of 2,006 million yen in trade receivables. (Cash flows from investing activities) Net funds used in investing activities were 6,322 million yen, a 115.8% increase year on year. This was due to factors causing the decrease in funds, such as 3,410 million yen paid to purchase software and 2,167 million yen paid to purchase property, plant and equipment. (Cash flows from financing activities) Net funds used in financing activities were 4,751 million yen, a 123.3% increase year on year. This was due to factors causing a decrease in funds, such as repayments of long-term borrowings of 2,751 million yen, cash dividends paid of 1,537 million yen and repayments of lease obligations of 950 million yen. (3) Explanation of Consolidated Forecasts and Other Forward-Looking Information The forecast for the year ending May 20, 2022 (full year) announced on July 2, 2021, remains unchanged. 4 Disclaimer This document is a translation of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail in all respects. (Million yen) As of May 20,2021 As of November 20,2021 2. Quarterly Consolidated Financial Statements (1) Quarterly Consolidated Balance Sheets Assets Current assets Cash and deposits Notes and accounts receivable – trade Merchandise and finished goods Raw materials and supplies Costs on construction contracts in progress Accounts receivable – other Other Allowance for doubtful accounts Total current assets Non-current assets Property, plant and equipment Buildings and structures Accumulated depreciation Buildings and structures, net Land Leased assets Accumulated depreciation Leased assets, net Other Accumulated depreciation Other, net Construction in progress Total property, plant and equipment Intangible assets Software Software in progress Goodwill Other Total intangible assets Investments and other assets Investment securities Deferred tax assets Other Allowance for doubtful accounts Total investments and other assets Total non-current assets Total assets 5 66,259 45,582 17,925 266 35 12,013 1,242 (34) 143,291 8,587 (3,599) 4,987 132 19,787 (7,440) 12,346 10,539 (7,430) 3,108 4,391 24,966 5,983 3,350 1,614 88 11,036 183 4,043 7,365 (780) 10,812 46,815 190,107 65,231 47,610 17,359 304 103 11,948 1,481 (33) 144,006 8,823 (3,886) 4,937 119 20,138 (8,439) 11,699 10,781 (7,860) 2,920 5,853 25,530 5,998 5,096 1,492 84 12,671 143 3,477 8,020 (758) 10,882 49,084 193,091 Disclaimer This document is a translation of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail in all respects. (Million yen) As of May 20,2021 As of November 20,2021 Liabilities Current liabilities Notes and accounts payable – trade Electronically recorded obligations – operating Short-term borrowings Current portion of long-term borrowings Accounts payable – other Income taxes payable Accrued consumption taxes Provisions Other Total current liabilities Non-current liabilities Long-term borrowings Lease obligations Retirement benefit liability Asset retirement obligations Other Total non-current liabilities Total liabilities Net assets Shareholders’ equity Share capital Capital surplus Retained earnings Treasury shares Total shareholders’ equity Accumulated other comprehensive income Remeasurements of defined benefit plans Total accumulated other comprehensive income Share acquisition rights Non-controlling interests Total net assets Total liabilities and net assets 51,474 23,497 380 12,649 12,369 2,793 1,006 926 3,688 2,115 11,211 4,127 2,714 1,948 22,117 108,786 130,903 21,189 14,320 23,391 (81) 58,819 (42) (42) (5) 431 59,203 190,107 52,216 27,971 380 10,140 11,150 1,904 586 415 4,257 109,023 2,372 10,419 4,234 2,743 2,012 21,780 130,804 21,189 14,320 26,393 (39) 61,863 (36) (36) (17) 477 62,287 193,091 6 Disclaimer This document is a translation of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail in all respects. (2) Quarterly Consolidated Statements of Income and Comprehensive Income Quarterly Consolidated Statements of Income (For the six months) For the six months ended November 20,2020 For the six months ended November 20,2021 (Million yen) 209,038 158,114 50,924 – – 50,924 44,228 6,696 21 53 106 13 194 110 45 18 174 0 219 219 6 25 40 – – 3 75 6,860 1,705 562 2,268 4,592 45 4,546 206,452 155,163 51,288 26 31 51,283 45,357 5,926 20 94 59 22 197 115 88 12 216 1 – 1 0 12 48 24 1,000 0 1,086 4,823 1,463 (46) 1,417 3,406 (47) 3,453 5,908 6,716 Net sales Cost of sales Gross profit Reversal of provision for sales returns Provision for sales returns Gross profit – net Selling, general and administrative expenses Operating profit Non-operating income Interest income Rental income Subsidy income Other Total non-operating income Non-operating expenses Interest expenses Rental expenses Other Total non-operating expenses Ordinary profit Extraordinary income Gain on sales of non-current assets Insurance claim income Total extraordinary income Extraordinary losses Loss on sales of non-current assets Loss on retirement of non-current assets Loss on valuation of investment securities Loss on sales of shares of subsidiaries Provision of allowance for doubtful accounts Other Total extraordinary losses Profit before income taxes Income taxes – current Income taxes – deferred Total income taxes Profit Profit (loss) attributable to non-controlling interests Profit attributable to owners of parent 7 Disclaimer This document is a translation of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail in all respects. Quarterly Consolidated Statements of Comprehensive Income (For the six months) For the six months ended November 20,2020 For the six months ended November 20,2021 (Million yen) Profit Other comprehensive income Remeasurements of defined benefit plans, net of tax Total other comprehensive income Comprehensive income Comprehensive income attributable to Comprehensive income attributable to owners of parent Comprehensive income attributable to non-controlling interests 3,406 7 7 3,413 3,460 (47) 4,592 6 6 4,598 4,552 45 8 Disclaimer This document is a translation of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail in all respects. (3) Quarterly Consolidated Statements of Cash Flows (Million yen) For the six months ended November 20,2020 For the six months ended November 20,2021 4,823 1,638 1,353 51 187 1,039 705 205 (20) 115 – 48 12 (1) (9,837) (756) (436) 5,379 632 (297) (267) 4,576 20 (115) – (1,697) 2,783 (670) (1,855) (5) (3) 3 (1) 12 (0) (396) (5) (4) (2,929) 6,860 1,763 1,263 79 121 (22) (510) 116 (21) 110 (219) 40 25 6 (2,006) 459 64 5,216 (761) (420) 355 12,519 21 (110) 219 (2,604) 10,045 (2,167) (3,410) (69) (678) 4 (0) 1 – – – (1) (6,322) Cash flows from operating activities Profit before income taxes Depreciation Amortization of software Amortization of long-term prepaid expenses Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Increase (decrease) in provisions Increase (decrease) in retirement benefit liability Interest and dividend income Interest expenses Insurance claim income Loss (gain) on valuation of investment securities Loss on retirement of non-current assets Loss (gain) on sales of non-current assets Decrease (increase) in trade receivables Decrease (increase) in inventories Decrease (increase) in accounts receivable – other Increase (decrease) in trade payables Increase (decrease) in accounts payable – other Increase (decrease) in accrued consumption taxes Other, net Subtotal Interest and dividends received Interest paid Proceeds from insurance income Income taxes paid Net cash provided by (used in) operating activities Cash flows from investing activities Purchase of property, plant and equipment Purchase of software Purchase of long-term prepaid expenses Payments of guarantee deposits Proceeds from refund of guarantee deposits Loan advances Collection of loans receivable Purchase of investment securities Payments for sales of shares of subsidiaries resulting in change in scope of consolidation Payments for asset retirement obligations Other, net Net cash provided by (used in) investing activities 9 Disclaimer This document is a translation of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail in all respects. (Million yen) For the six months ended November 20,2020 For the six months ended November 20,2021 Cash flows from financing activities Proceeds from long-term borrowings Net increase (decrease) in short-term borrowings Repayments of long-term borrowings Repayments of lease obligations Payments for purchase of treasury subscription right to shares Proceeds from disposal of treasury shares Dividends paid Net cash provided by (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period – (50) (520) (907) (2) 322 (969) (2,127) (2,273) 63,260 60,986 499 – (2,751) (950) (11) – (1,537) (4,751) (1,028) 66,259 65,231 10 Disclaimer This document is a translation of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail in all respects. (4) Notes to Quarterly Consolidated Financial Statements (Notes to Going Concern Assumption) (Notes to Significant Changes in Shareholders’ Equity) Not applicable. Not applicable. (Change in Accounting Policies) (Application of the Accounting Standard for Revenue Recognition, etc.) The Group applied “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020; hereinafter referred to as “Accounting Standard for Revenue Recognition”), etc. at the beginning of the first quarter of the current fiscal year. Accordingly, the Group recognizes revenue in the amount expected to be received in exchange for promised goods or services at points where control over such goods or services is transferred to customers. Applying the alternative handling prescribed in paragraph 98 of the Implementation Guidance on Accounting Standard for Revenue Recognition, the Group recognizes revenue from the domestic sale of merchandise or finished goods at the point of their shipment in cases where control over the concerned merchandise or finished goods moves to customers in a normal period after their shipment. Main changes in the application of the Accounting Standard for Revenue Recognition, etc. are as follows. (1) Transaction as agent In transactions where the role of the Group in providing goods or services to customers falls under the category of agents, the Group recognized revenue in the gross amount received for goods or services from customers. However, the Group has switched to the method of recognizing revenue in the net amount after deducting the amount paid to the suppliers of the goods or services from the gross amount of the consideration. (2) Points of other companies The Group recorded points of other companies, granted to customers at the time of a sale, in selling, general and administrative expenses. However, the Group has switched to the method of recognizing revenue in the net amount after deducting the amount paid to suppliers from the amount received from customers. The application of the Accounting Standard of Revenue Recognition, etc. follows the provisional treatment stipulated in the proviso of paragraph 84 of the Accounting Standard of Revenue Recognition. The cumulative impact of the retroactive application of the new accounting policy prior to the beginning of the first quarter of the current fiscal year is added to or deducted from retained earnings at the beginning of the first quarter of the current fiscal year, and the new accounting policy is applied to this initial balance. As a result, net sales, cost of sales, and selling, general and administrative expenses for the first six months of the fiscal year under review decreased by 2,737 million yen, 2,237 million yen and 503 million yen respectively. However, there was no impact on operating profit, ordinary profit or profit before income taxes. There is no impact on the initial balance of retained earnings for the fiscal year under review. In accordance with the application of the Accounting Standard for Revenue Recognition, etc., returned assets and refund liabilities, which were presented in “Provision for sales returns” in “Current liabilities” of the consolidated balance sheet of the previous fiscal year, are presented by including them in “Other” in “Current assets,” and in “Other” in “Current Liabilities” from the first quarter of the current fiscal year. Contract liabilities, which were presented in “Provision for sales promotion expenses” in “Current liabilities” of the consolidated balance sheet of the previous fiscal year, are presented by including them in “Other” in “Current liabilities” from the first quarter of the current fiscal year. In accordance with the transitional treatment prescribed in paragraph 89-2 of the Accounting Standard for Revenue Recognition, the Group did not implement reclassifications that reflected the new method of presentation for the results of the previous consolidated fiscal year. 11 Disclaimer This document is a translation of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail in all respects. (Segment Information, etc.) [Segment Information] I. First Six Months of the Previous Fiscal Year (From May 21, 2020 to November 20, 2020) Information on net sales and profit (loss) by reporting segment Reporting Segment E-commerce business Logistics business Total Others (Note 1) Total Adjustments (Note 2) (Million yen) Amount recorded in quarterly consolidated statements of income (Note 3) – (335) (335) (35) – 206,452 5,926 (Million yen) Amount recorded in quarterly consolidated statements of income (Note 3) – – – – – – 169,594 34,819 4,224 399 209,038 209,038 – 209,038 6,696 202,667 3,422 206,090 362 206,452 206,452 Net sales Sales to external customers Intra-segment sales or transfer Total – – – 202,667 6,633 3,422 (742) 206,090 5,890 335 698 72 335 206,788 5,962 Segment profit (loss) (Notes) 1. “Other” represents business segments that do not fall under the Reporting Segment and includes the manufacturing business. transactions. 2. The adjustment of minus 35 million yen to segment profit (loss) represents an elimination in inter-segment 3. Segment profit (loss) is adjusted with operating profit reported in the quarterly consolidated statements of income. II. First Six Months of the Current Fiscal Year (From May 21, 2021 to November 20, 2021) 1. Information on net sales and profit (loss) and disaggregation of revenue by reporting segment Reporting Segment E-commerce business Logistics business Total Others (Note 1) Total Adjustments (Note 2) 169,594 34,819 4,224 399 209,038 – – – 399 399 335 735 43 169,594 34,819 – – – – 4,224 – 169,594 34,819 4,224 – 204,413 4,224 208,638 Net sales B-to-B business B-to-C business Logistics business Others Revenue from contracts with customers Sales to external customers Intra-segment sales or transfer Total 204,413 4,224 208,638 399 209,038 – 204,413 6,752 – 4,224 (78) – 208,638 6,673 335 209,374 6,716 (335) (335) (20) Segment profit (loss) (Notes) 1. “Other” represents business segments that do not fall under the Reporting Segment and includes the manufacturing business. transactions. 2. The adjustment of minus 20 million yen to segment profit (loss) represents an elimination in inter-segment 3. Segment profit (loss) is adjusted with operating profit reported in the quarterly consolidated statements of income. 2. Matters concerning changes to reportable segments, etc. As described in Change in Accounting Policies, the Company applied the Accounting Standard for Revenue Recognition, etc. and changed the accounting method for revenue recognition from the beginning of the first quarter of the current fiscal year. Accordingly, the Company changed the calculation methods for business segment profit (loss) in the same manner. As a result of this change, net sales in the e-commerce business decreased by 2,737 million yen in the first six months of the fiscal year under review, compared with those processed in the previous method. 12 Disclaimer This document is a translation of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail in all respects. 3. Others Details of Selling, General and Administrative Expenses (Consolidated) Item First Six Months of the Previous Fiscal Year (From May 21, 2020 to November 20, 2020) First Six Months of the Fiscal Year Under Review (From May 21, 2021 to November 20, 2021) (Reference) Fiscal Year Ended May 2021 (From May 21, 2020 to May 20, 2021) Amount (Million yen) Ratio to Sales (%) Amount (Million yen) Ratio to Sales (%) Year-on-Year Change (%) Amount (Million yen) Ratio to Sales (%) Personnel expenses *1 Shipment expenses Provision for sales promotion expenses *2 Subcontract expenses *3 Business consignment expenses Rents Provision of allowance for doubtful accounts Depreciation Amortization of software Other expenses 11,298 12,146 292 1,699 5,650 5,139 43 1,554 1,331 6,201 5.5 5.9 0.1 0.8 2.7 2.5 0.0 0.8 0.6 3.1 10,413 12,178 – 1,961 5,861 5,266 1,594 1,230 5,735 5.0 5.8 – 0.9 2.8 2.5 0.8 0.6 2.8 92.2 21,953 100.3 24,182 – 519 115.4 3,486 103.7 11,570 102.5 10,067 3,160 2,755 12,727 102.6 92.4 92.5 97.5 5.2 5.7 0.1 0.8 2.7 2.4 0.0 0.7 0.7 3.1 (14) (0.0) – 33 Total 45,357 22.0 44,228 21.2 90,455 21.4 *1. Compared with the same period of the previous fiscal year, personnel expenses decreased for the first six months of the fiscal year under review, and the main factor was the effect from a decrease in provision for term-end performance-linked bonuses and others. 2. Compared with the same period of the previous fiscal year, provision for sales promotion expenses for the first six months of the fiscal year under review decreased. This was due to the application of the Accounting Standard for Revenue Recognition, etc. 3. Compared with the same period of the previous fiscal year, subcontract expenses for the first six months of the fiscal year under review increased. This was due to the construction of the new website for the B-to-B business. 13
