ホープ（6195） – [Delayed]Business Plan and Growth Potential

Business Plan and Growth PotentialDecember 6, 2021HOPE, INC.[6195]ContentsI. Company OverviewII. BusinessIII. Strengths and DifferentiationIV. Risk InformationV. 2020 VISIONCopyright (C) 2021 HOPE, INC.02I. Company OverviewCopyright (C) 2021 HOPE, INC.03HOPE Group Corporate PhilosophyProviding new value to citizens through local governments, and promoting growth of the company and its peopleCopyright (C) 2021 HOPE, INC.04Company OverviewCompany nameHOPE, INC.EstablishedFeb. 2005 (fiscal year-end: Jun.)RepresentativeTakayasu Tokitsu, CEOSecurities code6195 (listed on the TSE-Mothers/FSE Q-Board on Jun. 15, 2016)163 (as of the end of Sep. 2021, including temporary employees)Services created specifically for local governments(Advertising Business, Energy Business, Jichitai Works Business)MG Yakuin Building 1-14-5, Yakuin, Chuo-ku, Fukuoka, JapanEmployees(consolidated)BusinessHead officeHistoryFeb. 2005 FoundedJun. 2006 Launched SMART RESOURCE SERVICESep. 2013 Launched SMART CREATION SERVICE “Machilet”Jul. 2014 Launched “Machiiro,” an app that connects local governments and local residentsAug. 2014 Started B-to-G solutions businessJun. 2016 Listed on TSE-Mothers and FSE Q-BoardDec. 2017 Issued the first edition of“Jichitai Works”Mar. 2018 Registered as an electricity retailer and launched “GENEWAT”May 2020 Started Jichitai Works HAxSHOct. 2020 Established a wholly owned subsidiary HOPE ENERGY, INC.Nov. 2020 Developed AI for forecasting market prices of electricity (Energy Business) Mar. 2021 Announced participation in the private-sector trainee program of the city of Shijonawatein Osaka prefectureJun. 2021 Launched SMART FR CONSULTING SERVICE Launched the Jichitai Works Free Name Card service Sep. 2021 Announced actions for ending negative equityDec. 2021 Transferred to a Holding Company StructureCopyright (C) 2021 HOPE, INC.05Transfer to a Holding Company Structure• Announced the conversion of the Advertising and Jichitai Works businesses into subsidiaries.• Subsidiaries were established on December 1, 2021, by using a company split (simple spinoff).• Considering alliances and other types of partnerships with other companies, including the sale of some stock of these subsidiaries, to procure funds for the entire group.■ Purpose of becoming a holding company• The holding company structure will increase the speed and agility of business operations, enable the proper allocation of the group’s resources, and provide a framework for overseeing financial strategies and actions involving equity.• The holding company will consider alliances and other types of partnerships with other companies.■ Rights and obligations transferred to 　 the new subsidiaries• The two new subsidiaries will receive all assets, liabilities, and contractual and other rights and obligations involving the Advertising and Jichitai Works businesses.• Employees of these businesses will continue to be employed by HOPE, INC. and will be seconded to these subsidiaries.NameRepresentativeBusinessCapitalEstablishedMajor shareholderSales (Pct. of total HOPE, INC. sales) (FY2021)JICHITAI AD, INC.HOPE ENERGY, INC.JICHITAI WORKS, INC.¥1,719 million (6.0%)¥26,493 million (93.1%)¥228 million (0.8%)* On Sep. 28, 2021, shareholders approved a resolution for the spinoff of the electricity retail sales business and absorption by HOPE ENERGY, a wholly owned subsidiary of HOPE, INC., on Dec. 1, 2021. (Reference) For more information, see the news release dated Oct. 26, 2021 concerning the company split (simple spinoff) of the Advertising and Jichitai Works businesses and establishment of subsidiaries. https://ssl4.eir-parts.net/doc/6195/tdnet/2035126/00.pdfCopyright (C) 2021 HOPE, INC.06JICHITAI AD, INC.Takayasu Tokitsu, CEOAdvertising Business¥10 millionDec. 1, 2021HOPE, INC. 100%HOPE ENERGY, INC.Takayasu Tokitsu, CEOEnergy Business¥10 millionOct. 22, 2020HOPE, INC. 100%JICHITAI WORKS, INC.Takayasu Tokitsu, CEOJichitai Works Business¥10 millionDec. 1, 2021HOPE, INC. 100%II. Business1. Business Objective and Summary2. Advertising Business3. Energy Business4. Jichitai Works BusinessCopyright (C) 2021 HOPE, INC.07II. Business1. Business Objective and SummaryHOPE group provides services created specifically for local governments with all activities guided by the group corporate philosophy of Providing new value to citizens through local governments and promoting growth of the company and its people.We are a source of ideas for creating new sources of revenue other than taxes that helps local governments reduce expenses. Local governments that chose our services for an additional revenue source are using this income to upgrade services for residents. The objective of the businesses of the HOPE Group is to use these strengths to make possible the provision of new value to people throughout Japan as well as for the sustained growth of the group’s businesses.Copyright (C) 2021 HOPE, INC.08Business Segments and ServicesAdvertising BusinessSMARE RESOURCE SERVICESMART CREATION SERVICEAds in public info publications, banner ads, etc.MachiletEnergy BusinessJichitai Works BusinessJichitai WorksJichitai Works WebB-to-G solutionsJichitai WorksThe Jichitai Works Free Name Card serviceMachiiro*Beginning with FY2020, Machiiro has been moved from the Jichitai Works segment to others. Copyright (C) 2021 HOPE, INC.09Additional Local Government RevenueSince HOPE, INC.’s inception, the Advertising Business has generated revenue of about ¥ 8.83 billion for clients•SMART RESOURCE SERVICE has paid local governments about ¥ 7.94 billion•Machilet has reduced local government costs by about ¥ 0.88 billion(From HOPE, INC.’s inception through 1Q FY2022)Cost reduction of about ¥ 32.8 billion since the start of the Energy Business(Estimated cost reduction during the entire length of all current contracts)Copyright (C) 2021 HOPE, INC.10Consistent Sales Growth• Sales started increasing rapidly in FY2020 because of the launch of the Energy Business.)ney fo snoilliM(40,00035,00030,00025,00020,00015,00010,0005,0000512F Y 201234,85034,85028,444〈34,615〉12,470〈14,407〉6956351,1421,5921,7743,654〈3,862〉2,269F Y 2013F Y 2014F Y 2015F Y 2016F Y 2017F Y 2018F Y 2019F Y 2020F Y 2021Non-consolidatedF Y 2022(Plan)Consolidated(Reference) For more information, see the news release dated Aug. 24, 2021 concerning (Numerical and Other Corrections) Announcement of Corrections to Consolidated Financial Results for the 　　　　　 Fiscal Year Ended June 30, 2021.　 　　　　　 https://ssl4.eir-parts.net/doc/6195/tdnet/2022430/00.pdf* FY2014 was an irregular nine-month period because of a change in fiscal year-end.* < > is figures using the gross recognition method.Copyright (C) 2021 HOPE, INC.11Quarterly SalesOthersJichitai Works BusinessEnergy BusinessAdvertising Business14,00012,00010,000)ney fo snoilliM(8,0006,0004,0002,000012,978535310,3701111119,5699,5695,44580806,05232325,66638386,355464612,65112,6514,6224,6225,7215,7215,2675,2675,9345,9342,55123232,1002,1004264262Q2,80815152,3522,3524314313Q1,66514141,2631,2633863861QFY2020 (non-consolidated)FY20217427424Q2982983593593723726896891Q(non-consolidated)2Q(consolidated)3Q(consolidated)4Q(consolidated)2722721QFY2022(consolidated)Copyright (C) 2021 HOPE, INC.12Balance Sheet Highlights• Negative equity at the end of 1Q FY2022 was ¥1,701 million, about ¥796 million less than negative equity of ¥2,498 million at the end of FY2021.• YoY comparisons were used in prior years due to seasonal factors. In these highlights, prior-quarter comparisons are shown to facilitate comparisons of negative equity.(Millions of yen)Results Comp.Results Comp.Change4Q FY2021 (consolidated)1Q FY2022 (consolidated) Cash and depositsTrade receivables and contract assetsInventories Current assets Non-current assetsTotal assetsAccounts payable-tradeShort-term borrowingsCurrent portion of bondsCurrent portion of long-term borrowings Current liabilities Bonds payable Long-term borrowings Non-current liabilitiesTotal liabilitiesTotal net assetsTotal liabilities and net assets1,932＊7,33642910,39656710,96411,290950−36612,88010048258213,462(2,498)10,96417.6%66.9%3.9%94.8%5.2%100.0%103.0%8.7%−3.3%117.5%0.9%4.4%5.3%122.8%(22.8)%100.0%2,5428,28632111,54573312,27910,92595077533613,46910041051113,980(1,701)12,27920.7%67.5%2.6%94.0%6.0%100.0%89.0%7.7%6.3%2.7%109.7%0.8%3.3%4.2%113.9%(13.9)%100.0%+609+949(107)+1,148+166+1,314(365)+0+775(30)+589+0(71)(71)+518+796+1,314(Reference) For more information, see the news release dated Aug. 24, 2021 concerning (Numerical and Other Corrections) Announcement of Corrections to Consolidated Financial Results for the 　　　　　 Fiscal Year Ended June 30, 2021.　 　　　　　 https://ssl4.eir-parts.net/doc/6195/tdnet/2022430/00.pdf* Notes and accounts receivable-trade in 4Q FY2021Copyright (C) 2021 HOPE, INC.Copyright (C) 2021 HOPE, INC.6213FY2022 Plan (Income Statement)• There are no earnings forecasts at this time because the rapid increase in Japan Electric Power Exchange (JEPX) market prices that started in October makes it difficult to determine a reliable estimate. FY2020(Millions of yen)Results (non-consolidated)FY2021Results(consolidated)FY2022Plan(consolidated)YoY change34,850+22.5%Net salesGross profitSG&A expensesOperating profitOrdinary profitProfit attributableto owners of parentNet income per share12,470〈14,407〉2,2611,2401,0201,01266528,444〈34,615〉(5,841)1,053(6,895)(6,935)(6,978)117.97yen＊(1,109.09) yen(Reference) For more information, see the news release dated Aug. 24, 2021 concerning (Numerical and Other Corrections) Announcement of Corrections to Consolidated Financial Results for the 　　　　　 Fiscal Year Ended June 30, 2021.　 　　　　　 https://ssl4.eir-parts.net/doc/6195/tdnet/2022430/00.pdf * < > is figures using the gross recognition method. HOPE, INC. is using the new revenue recognition standard starting in FY2022, so gross figures are not shown for FY2022.* Net income per share is adjusted to reflect the 1-to-4 stock split effective on Jan. 1, 2020.For more information, see the news release dated Nov. 15, 2021 concerning the FY2022 forecast for consolidated sales and earnings. https://ssl4.eir-parts.net/doc/6195/tdnet/2050565/00.pdfCopyright (C) 2021 HOPE, INC.14FY2022 Business Segment Sales Plan• Most of the new Energy Business contracts in FY2021 are for the supply of electricity for one year starting in April 2021.• Energy Business sales will continue to increase in FY2022 due to the obligation to supply this electricity. Jichitai Works BusinessEnergy BusinessAdvertising Business Approx. ¥28.4 billion Approx. ¥28.4 billion〈34.6〉 Approx. ¥0.22 billion Approx. ¥0.22 billionApprox. ¥34.8 billion Approx. ¥0.43 billion Approx. ¥0.43 billion34.8 Approx. ¥26.49 billion Approx. ¥26.49 billion〈32.66〉〈32.66〉 Approx. ¥32.87 billion Approx. ¥32.87 billion)ney fo snoilliB(4035302520151050 Approx. ¥1.71 billion Approx. ¥1.71 billionFY2021 Approx. ¥1.53 billion Approx. ¥1.53 billionFY2022(Plan)* 〈 〉 is figures using the gross recognition method.Copyright (C) 2021 HOPE, INC.15Positioning of Business Units• Enlarge every business domain and increase actions for the expansion of HOPE, INC.’s core competence.Measures for providing valueAdditional local govt. revenuePublic-private sectorcollaborationLocal govt. DX…lEnargement of targeteddomans iLocalgovt.Govt.employeesAds in public info publications, banner ads, etcMachiletJichitai WorksSMART FR CONSULTINGMachiiroB-to-GsolutionsJichitai WorksJichitai Works WebThe Jichitai Works Free Name Card serviceThe govt. employee platform conceptCopyright (C) 2021 HOPE, INC.16II. Business2. Advertising BusinessBusiness summaryAdvertising is the original business of HOPE, INC. when the company started operations in 2005. We find companies that want to place advertisements in paper publications, websites and other media of local governments to create an additional source of revenue. This revenue is used to help cover expenses for producing pamphlets, which reduces expenses for local governments. Value providedA source of revenue for local governmentsAllows local governments to reduce expensesFY2021 sales: ¥1,719 million (6.0% of total sales)FY2021 segment profit: ¥328 million (no pct. due to FY2021 loss)Copyright (C) 2021 HOPE, INC.17Advertising BusinessCorporate PhilosophyProviding new value to citizensthrough local governmentsLocal govt. assetsUtilizationAdditionallocal govt. revenue•Public info publications, local government websites•Information distributed to residents•Use of media space•Free joint publications by local governments and HOPE, INC. ■ Value providedLocal govt.A sourceof revenueOpportunities for PRCompaniesJICHITAI AD,INC.Copyright (C) 2021 HOPE, INC.18Advertising Business 1SMART RESOURCE SERVICELocal governments sell ad space in their publicationsA new source of revenue for local governments■ Business modelLocal gov t.Purchaseof ad spaceSaleof ad spaceCompaniesSMARTRESOURCESERVICEPaymentfor ad spacePaymentfor ad space■ Examples of media■ Ad in a public info publication2021広報11XXXX■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■A d株式会社◯◯◯☎000-000-0000で下さい。構成を分かりやすコピーですお読みにならないで下さい。この文章はダミーコピーですお読みにならないています。この文章はダミーとは全く違った内容を記載し使用しています。本来の文言ています。この文章はダミーとは全く違った内容を記載し使用しています。本来の文言構成を分かりやすくするためお読みにならないで下さい。この文章はダミーコピーです構成を分かりやすくするため容を記載しています。お読みにならないで下さい。本来の文言とは全く違った内この文章はダミーコピーですくするため使用しています。容を記載しています。本来の文言とは全く違った内くするため使用しています。で下さい。構成を分かりやすコピーですお読みにならないで下さい。この文章はダミーコピーですお読みにならないています。この文章はダミーとは全く違った内容を記載し使用しています。本来の文言で下さい。構成を分かりやすコピーですお読みにならないで下さい。この文章はダミーコピーですお読みにならないています。この文章はダミーとは全く違った内容を記載し使用しています。本来の文言構成を分かりやすくするためお読みにならないで下さい。この文章はダミーコピーです構成を分かりやすくするため容を記載しています。お読みにならないで下さい。本来の文言とは全く違った内この文章はダミーコピーですくするため使用しています。容を記載しています。容を記載しています。本来の文言とは全く違った内本来の文言とは全く違った内くするため使用しています。くするため使用しています。で下さい。構成を分かりやすで下さい。構成を分かりやすコピーですお読みにならないコピーですお読みにならないで下さい。この文章はダミーで下さい。この文章はダミーコピーですお読みにならないコピーですお読みにならないています。この文章はダミーています。この文章はダミーとは全く違った内容を記載しとは全く違った内容を記載し使用しています。本来の文言使用しています。本来の文言構成を分かりやすくするため構成を分かりやすくするためお読みにならないで下さい。お読みにならないで下さい。この文章はダミーコピーですこの文章はダミーコピーです容を記載しています。容を記載しています。本来の文言とは全く違った内本来の文言とは全く違った内くするため使用しています。くするため使用しています。で下さい。構成を分かりやすで下さい。構成を分かりやすコピーですお読みにならないコピーですお読みにならないで下さい。この文章はダミーで下さい。この文章はダミーコピーですお読みにならないコピーですお読みにならないています。この文章はダミーています。この文章はダミーとは全く違った内容を記載しとは全く違った内容を記載し使用しています。本来の文言使用しています。本来の文言構成を分かりやすくするため構成を分かりやすくするためお読みにならないで下さい。お読みにならないで下さい。この文章はダミーコピーですこの文章はダミーコピーですAdこの文章はダミーコピーですお読みにならないで下さい。構成を分かりやすくするため使用しています。本来の文言とは全く違った内容を記載しています。この文章はダミーコピーですお読みにならないで下さい。この文章はダミーコピーですお読みにならないで下さい。構成を分かりやすくするため使用しています。本来の文言とは全く違った内容を記載しています。この文章はダミーコピーですお読みにPublic infopublicationsWebsitebannerPayslips forgovernment employeesOthersCopyright (C) 2021 HOPE, INC.19Advertising Business 2SMART CREATION SERVICE (Machilet)Production and supply of local governmentpamphlets for various fields with space for adsFree joint production of pamphlets with even more useful info■ Business modelLocal gov t.AgreementSaleof ad spaceCompaniesSMARTCREATIONSERVICEProductionand supply of pamphletsPaymentfor ad space■ Examples of pamphlets■ Ad in a pamphlet (child care information)Content(child care information)Advertisement (monetize space)Child careEmpty housesSenior careMy endingOthersCopyright (C) 2021 HOPE, INC.20SMART CREATION SERVICE (Machilet)(Publications)1,000839685694Advertising BusinessContracts with Local Governments and Number of Publications IssuedSMART RESOURCE SERVICE(Contracts)46230928025850040030020010008006004002000F Y 2018F Y 2019F Y 2020F Y 2021F Y 2018F Y 2019F Y 2020F Y 2021*For two or more different contracts with the same local government, each contract is counted separately.*The SMART CREATION SERVICE includes conventional pamphlets (Machilet) as well as Clear File and other special publications issued in each fiscal year. A revised definition is used for the actual number of these publications from FY2018 and these figures have been revised accordingly.171 Q F Y 2022572Plan49130(Issued in 1Q)1 Q F Y 2022SMART FR CONSULTING SERVICETwo local governments are using this new service that was launched in July 2021.(Reference) For more information, see the news release dated Jul. 29, 2021 concerning the start of providing this new consulting service for Fukuoka city; estimated effect of advertising revenue will contribute to effective and sustainable business operations of local governments.https://ssl4.eir-parts.net/doc/6195/tdnet/2005240/00.pdfCopyright (C) 2021 HOPE, INC.21Advertising BusinessMarket Summary• HOPE, INC. created a new market with its Advertising Business, the company’s original activity, and has provided advertising services to local governments for about 16 years.• HOPE, INC.’s share of this market is about 10.8%.The advertising market in JapanApprox. ¥5.3 trillion *1Approx. ¥13.8 billion *2Target marketApprox. ¥1.5 billion *3About 10.8% of the target market*1 Source: Survey of Selected Service Industries (May 2021), Ministry of Economy, Trade and Industry*2 Market size is estimated by HOPE, INC. using current advertising rates received and based on the assumption that SR/SC services will be used at a level reflecting the populations of municipalities. *3 FY2021 Advertising Business sales (excluding contract production of public info publications)Copyright (C) 2021 HOPE, INC.22Advertising BusinessFuture Goals• Improve profitability by positioning this business as a profit-generation business and achieving the • Aim for consistent earnings by raising productivity per employee while holding sales steady at an proper size of this businessappropriate levelStrategies for a Mature Market■ Gross profit per person in the Advertising BusinessNet sales *1Gross profit per person *2■ HOPE, INC. already has more than 10% of the local government ad market in Japan with annual revenue of about ¥13.8 billion.→ The goal is a higher profit margin rather than sales growth.■ Reduce the seasonality of this business to build a stronger profit structure by cutting expenses and raising efficiency.■ To increase profitability, improve productivi-ty with measures targeting the new perfor-mance indicator of gross profit per person2,5002,000)ney fo snoilliM(1,5001,00050002,1882,051●6,893●6,94210,912●1,546●9,5101,4009,0001,810●8,166*1 Advertising business sales (excluding contract production of public information publications)*2 Number of advertising employees is the average for every year and excludes advertisement designersFY2018FY2019FY2020FY2021FY2022Copyright (C) 2021 HOPE, INC.)ney fo sdnasuohT(15,00012,0006,0003,0000 23II. Business3. Energy BusinessBusiness summaryThe retail sale of electricity started in 2018 using the GENEWAT brand. This business submits bids for contracts to supply electricity to local governments and public-service facilities for a contract period. Based on the new perception of “electricity as a generic product,” this service makes it possible to buy electricity at lower rates than major utilities charge. Value providedAllows local governments to reduce expensesFY2021 sales: ¥26,493 million (93.1% of total sales)FY2021 segment profit: ¥(6,924) million (no pct. due to FY2021 loss)Copyright (C) 2021 HOPE, INC.24Energy BusinessCorporate PhilosophyProviding new value to citizensthrough local governmentsLocal govt. electricity useNew electricityserviceLower cost ofelectricity■ Value providedLocal gov t.Cost reductionCopyright (C) 2021 HOPE, INC.25Energy Business■ Business model■ GENEWAT users (mainly local governments)Electricity retail sales serviceGENEWAT uses the new perception of “electricity as a generic product” for supplying electricity at a lower price in order to help local governments reduce costs.Electricity• Sale of electricity*Business does not include generation and distributionLocal govt.Payments• HOPE, INC. posts sales/cost of sales based on monthly utilizationHospitalsSewageplantsSchoolsCity halls• • •Copyright (C) 2021 HOPE, INC.26Energy BusinessProfit Structure• Structure of the retail sale of electricity in the Energy Business is shown below.Open marketpurchasesDirectpurchases2) Procurement of electricity1) Bids submitted for contracts3) Supply of electricity (retail)Local govts.(customers)4) Payment for electricityHow the energy business purchases electricityOpen market purchases using the JEPXElectricity is purchased on the JEPX and prices are determined by seasonal factors as well as the weather and other considerations.Direct purchasesUses fixed-rate agreements with suppliers of electricity for the supply of electricity in the future. The cost of this electricity is usually higher than market prices.　Copyright (C) 2021 HOPE, INC.27Energy BusinessMarket Summary• Rapid growth since the launch of this business in 2018 that used HOPE, INC.’s expertise involving • Expect electricity supplied to reach a record high in FY2022, but have stopped bidding on new bidding on public-sector contractscontacts (see page 29 for more information)Japan’s electricity marketApprox. ¥15 trillion *1Electricity sales to local govts.Approx. ¥1 trillion *2Target marketApprox. ¥54.0billion *3HOPE, INC. serves approx. 5.4% of the target market*1 Source: Electricity and Gas Market Surveillance Commission*2 HOPE, INC. estimates using “Statistics on Energy Consumption” by Agency for Natural Resources and Energy*3 Expected total sales of energy supplied for contracts received in FY2021 (Includes one-year of multi-year contracts and excludes fuel adjustments and renewable energy fees)Copyright (C) 2021 HOPE, INC.28Energy BusinessFuture Goals• Downsize operations to reduce business risk exposure■ Assumptionsexpected.1) Electricity prices are usually low in the spring and fall (including October) but in 2021, JEPX prices were higher than 2) HOPE, INC. was unable to purchase the expected volume of electricity by using direct one-to-one transactions because payment terms did not match the HOPE Group’s desired terms. 3) There are concerns about a tight supply of electricity during the winter of 2021-2022 too.■ Continuation of the suspension of submitting bidsThe Energy Business is a large percentage of total sales. Due to the substantial market risk in this business, HOPE, INC. will not submit bids in the electricity retail sales business for new electricity supply contracts with local governments in order to improve the soundness of business operations. This suspension will continue until it becomes clear that this market risk will no longer have a significant effect on business operations. ■ Purpose of the spinoff of the electricity retail sales business to HOPE ENERGY, INC.• The electricity retail sales business will continue at HOPE ENERGY, INC. and actions will be taken to reduce risk exposure by downsizing this business in a manner that reflects the business climate.• The shift to a group management structure with more speed and flexibility will better facilitate the timely and proper manage-ment of risk and the best possible allocation of the HOPE Group’s resources.(Reference) For more information, see the Sep. 27, 2021 news release concerning measures to end negative equity. https://ssl4.eir-parts.net/doc/6195/tdnet/2026961/00.pdf For more information, see the Aug. 11, 2021 news release concerning the spinoff of the electricity retail sales business. https://ssl4.eir-parts.net/doc/6195/tdnet/2014535/00.pdfCopyright (C) 2021 HOPE, INC.29Energy BusinessGrowth Strategy• For the FY2022 earnings forecast, our estimates for major variable items in the Energy Business are as follows.Estimated regional composition of energy to be supplied in FY2022HokkaidoTohokuTokyoChubuHokurikuKansaiChugokuShikokuKyushuTotal12.34%4.32%26.48%35.30%1.51%7.33%8.91%2.62%1.19%100.00%■ Cost of open market purchases of electricity1• Forecast for cost of electricity purchased on the JEPX These estimates are weighted averages using the expected electricity prices and amount purchased by customers in each regionMarket price forecast(Yen/kWh)20212022Jul.9.82Aug.10.69Sep.9.50Oct.8.09Nov.8.30Dec.9.84Jan.11.07Feb.8.39Mar.7.47Apr.7.28May7.65Jun.7.75■ Fuel cost adjustment2• Forecast for the fuel cost adjustment These estimates are weighted averages using the expected electricity prices and amount supplied to customers in each region*The fuel cost adjustment allows revising electricity rates paid by customers in order to reflect an increase or decrease in the cost of imported fuel used at thermal power plants. The adjustment is based on the difference between the average price of fuel (using 3-month trade statistics for prices of crude oil, LNG and coal) and reference fuel prices.20212022Jul.Aug.Sep.Oct.Nov.Dec.Jan.Feb.Mar.Apr.MayJun.(2.73)(2.65)(2.57)(2.46)(2.38)(2.29)(2.21)(2.13)(2.06)(1.91)(1.92)(1.91)Weightedaverage fuel cost adjustment(Yen/kWh)* All prices include tax.Copyright (C) 2021 HOPE, INC.30II. Business4. Jichitai Works BusinessBusiness summaryThe first issue of Jichitai Works was issued in 2017 as HOPE, INC. started its media business. This business provides employees of local governments in all areas of Japan with the latest information for determining budgets through its own media research. Currently, the sales of this business are primarily from advertisements in Jichitai Works and the receipt of orders from companies for B-to-G solutions. Originally called the Media Business, this business was renamed the Jichitai Works Business in July 2021. Value providedPublic-private sector collaborationFY2021 sales: ¥228 million (0.8% of total sales)FY2021 segment profit: ¥58 million (no pct. due to FY2021 loss)Copyright (C) 2021 HOPE, INC.31Jichitai Works BusinessCorporate PhilosophyProviding new value to citizensthrough local governmentsUse the private sector to solve issuesLocal govt.Jichitai WorksOpportunity to collaborate with public sectorCompaniesPublic-private sector collaborationCopyright (C) 2021 HOPE, INC.32Jichitai Works Business 1A Government Magazine with New Info and IdeasJichitai Works• Use of advertisements to monetize publications• Starting in FY2022, increased to three the types of publications with all advertisements by a single advertiser; selling these publications as a B-to-G solutionA HOPE, INC. publication with useful info and ideas for the jobs of local government employeesLocal gov t.CollectinformationInteractionwith local govt.CompaniesJichitai Works■ Issued six times every year 《Standard Jichitai Works》ProvideinformationPaymentfor ad space123One of the largest circulations in JapanA comprehensive info magazine for local government employees; circulation of up to 70,000, one of the largest in Japan in this categoryExtensive coverageDistributed at no charge to 1,788 municipalities and all 47 prefectural governmentsUpgrading sharing of knowledgeMagazines include examples of innovative ideas, a variety of know-how and other content for improving government services throughout Japan■ Issued as needed 　 (Special issues / PICKS / INFO)Publications with a single advertiserLayout created specifically for each advertiser; three types depending on the number of pages■ Jichitai Works WebArticles in the printed edition of Jichitai Works magazine are also posted on the internet. Copyright (C) 2021 HOPE, INC.33Jichitai Works Business 1Jichitai Works Magazine Issues• In FY2021, the number of pages increased with every issue and content of the magazines was expanded and upgraded.• In FY2022, we are increasing the staff of the Jichitai Works Business with the goal of raising the number of magazines issued while maintaining the high quality of these publications. of which issuedof which issued( )（内1Q実績：1）in 1Q: 2in 4Q: 2•Tourism/Foreign Tourist Edition Vol. 2•Disaster Readiness/Crisis Management Edition Vol. 2•Education and ICT Edition•Tourism/Foreign Tourist Edition Vol. 3•Disaster Readiness/Crisis Management Edition Vol. 3Others Special editionsTopic-specific editionsStandard editionsof which issuedof which issued( )（内1Q実績：1）in 1Q: 1in 4Q: 2•Special edition for government employees44FY2020FY20211Q FY20221Copyright (C) 2021 HOPE, INC.34(Issue)121086420521511Jichitai Works Business 2B-to-G solutions• In the B-to-G solutions, local government relationships are used for surveys to identify needs and for holding seminars, and other activities. In addition, sales promotion and other promotion fees from companies and a revenue sharing model will be used for monetization.Support for marketing and promotional activities of companies with products and services for local governments Local gov t.Data collectionReports, other infoCompaniesB-to-GsolutionsSeminars, needs surveys, other servicesRequests for assistance■ Contracted service orders received• Seminars for local government employees and other serviceUse database to attract customersIdentify needs• Direct mail marketing• Telemarketing• Others* B-to-G solutions has two components: (1) B-to-G promotions (formerly B-to-G marketing), which receives orders that generate promotion fees, and (2) B-to-G comprehensive support, which receives orders with a revenue sharing structure.Copyright (C) 2021 HOPE, INC.35Jichitai Works Business 3Jichitai Works• A joint assistance platform for local governments and companiesJichitai WorksRegister their ownservicesSharing of informationof person whodownloaded theirdocumentsService searches andexaminationsDownload documents aboutservices of interestCompaniesproviding servicesPayment of feesRegister contactand otherinformationLocal govt.personnelCollaboration with local governments creates new opportunitiesSolve problems by using private-sector servicesCopyright (C) 2021 HOPE, INC.36Jichitai Works Business 4An App Linking Local Governments and ResidentsMachiiro• The app provides the latest info from registered local governments by giving users access to public info publications of local governments nationwide.• Distribution of content for local governments and regionsLocal govt.UploadResidentsMachiiroAgreementDistribution of governments information using an app*Machiiro screen sample 743,735 cumulative downloads945 cumulative local government contractsLocal governments share of about 52.9%*Total as of Sep. 30, 2021Copyright (C) 2021 HOPE, INC.37Jichitai Works BusinessMarket Summary• Substantial public-sector demand and still considerable growth potentialMarket for promotions targeting local govts.Approx. ¥15.2 billionThe market for promotions targeting local governments still has much more potential, including public-private sector matching and measures to become more competitiveLocal govt.Public-sector demand (except national govt., construction)CompaniesApprox. ¥8.68 trillion * 1Approx. ¥1.52 trillion * 2Potential marketApprox. ¥0.22 billion * 3Portion for companies operating nationwide1%Assumes about 1% is used for promotional activities(market for promotions targeting local governments.)Approx. ¥15.2 billion*1 Calculated by HOPE, INC. using Summary of Guide to Contracts in the Public Sector – FY2018, The Small and Medium Enterprise Agency*2 HOPE, INC. estimates based on FY2018 Administrative Project Review, Ministry of Internal Affairs and Communications*3 FY2021 Jichitai Works Business salesCopyright (C) 2021 HOPE, INC.38III. Strengths and DifferentiationCopyright (C) 2021 HOPE, INC.39Advertising BusinessStrengths and Differentiation• The use of the unique characteristics of the media we handle for building strong ties with prominent local companies and local governments makes it possible to provide reliable ideas for advertisements. StrengthsExplanationExpertise for submitting bidsSince its inception, the HOPE Group has been acquiring expertise concerning the submission of bids for public-sector contracts. This expertise sets us apart from competitors. We can participate in a large number of contract offers by quickly preparing bids, which require a high level of accuracy, while upgrading our capabilities involving these bids. Unique advertising mediaLocal government relationsThe HOPE Group publishes media specifically for local governments and other public-sector organizations. Ads can be placed on government information publications, websites banner, trash collection calendars, signs at government buildings, LCD panels and many other locations. The recognition and reliability of these media are very high because they involve a government. We handle advertisements in our home region of Fukuoka and Kyushu as well as all other areas of Japan.Machilet and other pamphlet production operations involve many departments of local governments to cover various themes, resulting in business relationships with people responsible for advertising and many other activities. This business uses consistent ties with local government employees to broaden relationships within individual govern-ments, such as by maintaining ties with people after they are transferred in order to receive orders for different types of publications.Relationships with prominent local companiesSome local companies do not use newspapers, magazines and other conventional media due to the high cost in relation to benefits. The unique characteristics of a local government publication make this an ideal channel for these companies to reach their targeted user segments. This makes it possible for us to establish relationships with local companies that large ad agencies and other big companies cannot serve. A unique position in the ad industryThe highly distinctive characteristics of our media and customers give us a position within the ad industry that unlike that of any other company. Furthermore, strong relationships with local government employees allows us to obtain timely information about current issues and other needs. Using this knowledge makes it possible to maintain a frame-work for developing and supplying media and services with themes that produce benefits quickly.Copyright (C) 2021 HOPE, INC.40Energy BusinessStrengths and Differentiation• The original plan was to use expertise involving public-sector bids to capture electricity supply contracts and then build on accomplishments for sustained growth. However, we have stopped submitting bids due to problems caused by price volatility risk. We are now conducting a thorough study to determine whether to continue operating the Energy Business, including the option of significantly downsizing this business, while taking into consideration the market conditions and other factors.StrengthsExplanationExpertise for submitting bidsPositionSince its inception, the HOPE Group has been acquiring expertise concerning the submission of bids for public-sector contracts. This expertise sets us apart from competitors. We can participate in a large number of contract offers by quickly preparing bids, which require a high level of accura-cy, while upgrading our capabilities involving these bids. When the Energy Business was started in 2018, we used bidding know-how acquired in the Advertising Business to quickly and efficiently start submitting bids for electricity contracts.An increasing number of local governments are switching from the use of major utilities to public offers for bids for the supply of electricity. This trend creates significant opportunities for the sale of electricity to local governments and public-sector users. Building a proven record of reliability allows meeting local government bidding requirements concerning the supply of electricity in the past to other users. More contracts support a positive cycle of enabling more first-time bids to local governments in the following year.Copyright (C) 2021 HOPE, INC.41Jichitai Works BusinessStrengths and Differentiation• Jichitai Works supplies useful information to local government employees and facilitates public-private sector collaboration to enable local governments to conduct an even broader range of activities.StrengthsExplanationThe powerful Jichitai Works brandLocal government employees nationwide receive this magazine to read about ideas, success stories and other information involving their jobs. Articles backed by thorough research and information collection cover disaster readiness, the pandemic, the digital transformation and many other themes involving local governments. All content is selected to be immediately useful for current issues. We have constantly issued this magazine and are upgrading the quality to make this brand even stronger as a source of vital information for local government personnel.Due to its reputation as a publication solely for local government employees, Jichitai Works attracts a constant flow of advertisements from companies seeking a marketing channel for reaching local governments.Effective support for sales activities targeting local governmentsJichitai Works is a valuable media for the many companies looking for ways to sell products and services to local governments. Establishing business ties with these governments is difficult without support due to numerous precondi-tions and specific procedures. Using the HOPE Group as an intermediary for relationships with local governments can enable companies to work with these governments more efficiently.A unique position in the local government media industryThere are other companies that produce information publications for local government employees. However, Jichitai Works does more than supply information. Articles also reflect current issues involving these employees and offer ideas for solutions in order to be an even more valuable source of information and support. Furthermore, strong relationships with local government employees allows us to obtain timely information about current issues and other needs. Using this knowledge makes it possible to maintain a framework for developing and supplying media and services with themes that produce benefits quickly.Copyright (C) 2021 HOPE, INC.42IV. Risk InformationThis section covers only significant risk factors associated with the characteristics of the business activities of the HOPE Group. Quarterly Reports. Information about other risk factors is in the Business Risk section of the Securities Report and the (Reference) For more information, see the Annual Securities Report released on Sep. 29, 2021. https://ssl4.eir-parts.net/doc/6195/yuho_pdf/S100MIFN/00.pdf For more information, see the Quarterly Report released on Nov. 15, 2021. https://ssl4.eir-parts.net/doc/6195/yuho_pdf/S100MW2E/00.pdfCopyright (C) 2021 HOPE, INC.43Long-term Risk FactorsRiskSummaryActionsRecruiting and training talented peopleIf we are unable to recruit and train people required to perform key roles within our organization, there may be a shortage of qualified management personnel in the future.Business growthIf problems occur that prevent us from establishing and accomplishing the goals of the plans for our businesses, there may be negative effects on our financial condition and sales and earnings.We have many activities for raising the business literacy of our employees and for maintaining and upgrading training programs and frameworks that give people skills needed to advance to management positions.We currently anticipate consistent demand from customers for the services of our Advertising Business and Jichitai Works Business. Our business plans are established and implemented based on this outlook. We are currently downsizing the Energy Business in order to minimize exposure to risk factors associated with this business.Copyright (C) 2021 HOPE, INC.44Short-term Risk FactorsRiskSummaryActionsThe need to improve cash flows and financial soundnessWorking capital has been high in the past two fiscal years because of the growth of the Energy Business. In addition, there was a very large imbalance fee in January 2021 (about ¥6.5 billion including tax), which created an urgent need for measures to meet the demand for funds.To procure these funds, there were a third-party allotment to sell stock, 11th share acquisition rights with an exercise price adjustment clause and unsecured bonds (private placement) on August 27, 2021. On December 1, 2021, the Advertising Business and Jichitai Works Business were each spun off as separate companies and we are considering activities involving these new subsidiaries, such as the use of business and equity alliances for the sale of some of the stock of these companies for the procurement of funds required by the HOPE Group. We will continue to consider various methods to procure funds in order to improve cash flows and financial soundness.Information about measures to return to positive equity is on the following page.The need for actions due to start of grace period for stock delistingThe delisting grace period for HOPE’s stock listing started on July 1, 2021 because of negative equity. The stock listing may be canceled if equity is still negative at the end of June 2022.The need for the proper size and consistent profitability of the Energy BusinessFor the retail sale of electricity, which is more than 90% of consolidated sales, the volume of electricity sold depends on the economy, the weather (hot summers, cold winters, etc.) and other factors. Furthermore, earnings in this business are vulnerable to price volatility risk involving the cost of purchasing electricity, the cost of fuel and the shifts in the balance between electricity supply and demand. If the cost of buying electricity increases more than expected, there may be a significant negative effect on the cost of sales.The sharp increase in the cost of purchasing electricity during the last winter highlighted this risk. Due to the current business climate, we have stopped submitting bids for electricity contracts until we determine that level of risk in the Energy Business is acceptable. We are downsizing this business to lower the volume of risk. In addition, in December 2021 we used a spinoff to transfer the retail electricity sales business of the Energy Business to subsidiary HOPE ENERGY, INC., which will focus exclusively on retail sales of electricity.Copyright (C) 2021 HOPE, INC.45Measures to End Negative Equity• Many activities are under way to return to positive equity.• Initiatives to increase equity and improve business operations have the goals of increasing financial soundness and profitability.■ Third-party allotment of stock and share acquisition rightsOn August 27, 2021, HOPE, INC. used a third-party allotment to sell stock and the 11th share acquisition rights with an exercise price adjustment clause. At the end of September 2021, net assets totaled negative ¥1,701 million, ¥796 million less than negative ¥2,498 million at the end of June 2021.■ Used spinoffs to establish subsidiaries; considering business/capital alliance or other measures for 　 these businesses (see page 6 for more information)■ Management improvements for stability of earnings(1) Reduce risk in the electricity retail sales business and take actions concerning business risk• In the electricity retail sales business, HOPE, INC. will not submit bids for selling electricity to local governments until this business has clearly reached the point where JEPX market risk no longer has a significant effect on the business operations of HOPE, INC. (39 bids were submitted for electricity contracts during 1Q FY2022 and then the Energy Business stopped all bids for these contracts.)• Plan to conduct a thorough study to determine whether to continue the Energy Business, including the option of significantly downsizing this business.(2) Use of a spinoff and absorption to transfer the electricity retail sales business to a subsidiary • On September 28, 2021, shareholders approved this spinoff and the spinoff took place on December 1, 2021. (3) Profitability of existing and new businesses• 1Q FY2022 earnings of the existing Advertising and Jichitai Works businesses were as planned.• Continuing activities for the launch of new businesses to create more sources of earnings. (Reference) For more information, see the news release dated Sep. 27, 2021 concerning measures to end negative equity.　https://ssl4.eir-parts.net/doc/6195/tdnet/2026961/00.pdfCopyright (C) 2021 HOPE, INC.46V. 2020 VISIONCopyright (C) 2021 HOPE, INC.47Expansion of Core Competence• Enlarge local government relations, HOPE, INC.’s core competence, to encompass the entire government employee sector.Current core competence(local govt. relations)・・・Local govt.Local govt.Local govt.・・・Govt. employeesGovt. employeesGovt. employeesThe govt. employee platform conceptCore competence enlargementCopyright (C) 2021 HOPE, INC.48Expansion of Core CompetenceexpansoniiBusness domani Govt. employeesLocal govt.Business domain expansionUse the enlargement of the core competence for the diversification of business activities in a domain expanded to include the government employee sectorBecome the leader in businesses and services for local governmentsCopyright (C) 2021 HOPE, INC.492020 VISIONF Y2030Net salesOperating profit Services¥100 billion¥10 billion10 servicesCopyright (C) 2020 HOPE, INC.Copyright (C) 2021 HOPE, INC.502020 VISION Initiatives• Start and implement initiatives for accomplishing the FY2030 goals of the 2020 VISION: Sales of ¥100 billion, operating profit of ¥10 billion and a business portfolio with at least 10 services.¥28.4billionFY20213 servicesAdvertisingEnergyJichitaiWorks¥100billionNewbusinessNewbusinessNewbusinessNewbusinessNewbusinessFY2030More than 10 servicesActions• Improve profitability of existing businesses• Develop new businesses• Use all existing businesses as a base for new businesses• M&A• Financial and investment strategiesCopyright (C) 2021 HOPE, INC.51The 2020 VISION• There are currently no revisions to the 2020 VISION because this is a long-term goal. • A new HOPE NEXT 3, which is a medium-term management plan, will be reestablished after completing measures to ensure that equity will be positive by the end of June 2022.■ Assumptionsof sales and earnings.• The original medium-term plan (announced on August 11, 2020) made the Energy Business a large share • Based on the performance of the Energy Business, a new framework, including a new medium-term plan, will be needed for making progress regarding the 2020 VISION. • We will reexamine the business portfolio, including new businesses, to establish a strategy for growth.■ Timing for reestablishing the HOPE NEXT 3 Medium-term Management Plan• In FY2022, we are focusing on making steady progress with measures to eliminate negative equity and achieving this goal by the end of June 2022.• We will reestablish a medium-term plan after achieving the goal of positive equity by the end of June 2022.■ Other items• There are no revisions to the expected business environment changes or business policies regarding the Advertising Business and the Jichitai Works Business.(Reference) Information about the Medium-term Management Plan before the reexamination is in “Medium-term Management Plan HOPE NEXT 3” announced on Aug. 11, 2020. https://ssl4.eir-parts.net/doc/6195/tdnet/1873672/00.pdfCopyright (C) 2021 HOPE, INC.52Board MembersTakayasu TokitsuCEOShimpei MoriCOOKensuke OhshimaCFOFeb. 2005Established HOPE CAPITAL LLC. (currently HOPE, INC.) Oct. 2020CEO, HOPE ENERGY, INC.Dec. 2021CEO, JICHITAI AD, INC. and JICHITAI WORKS, INC.Executive for: Regional Collaboration Business Dept. (Advertising Business), Business Development Div., Corporate Div.Apr. 2008Joined HOPE, INC. Nov. 2011Director, HOPE, INC.Dec. 2021Director, JICHITAI AD, INC. and JICHITAI WORKS, INC.Executive for: Jichitai Works Business Dept.Oct. 2011Joined HOPE, INC. Dec. 2013Director, HOPE, INC.Dec. 2021Director, JICHITAI AD, INC. and JICHITAI WORKS, INC.Executive for: Business Management Dept.Copyright (C) 2021 HOPE, INC.53Board MembersYusuke AraiOutside DirectorEri Hirata(Attorney)Outside DirectorApr. 2001Joined Kyokujitsu Electric Co., Ltd.Feb. 2002Joined Card Commerce Service Co., Ltd. (currently GMO Payment Gateway, Inc.)May 2005Director, Epsilon, Inc. (currently GMO Epsilon, Inc.)Jan. 2006President & CEO, Epsilon, Inc. (currently GMO Epsilon, Inc.) Dec. 2014Director, GMO Payment Gateway, Inc.Aug. 2018Director, GMO Medical Reservations Technology Co., Ltd.Dec. 2019President & Representative Director, SCALE, Inc. (current)Mar. 2020Outside Director, Givery, Inc. (current)Aug. 2020Outside Director, USA Real Estate Investment (current) Sep. 2020Outside Director, HOPE, INC.May 2021Representative Director, Enz Golf (current)Dec. 2012Registered as an attorney, joined Kitahama Partners May 2017Joined Nishimura & AsahiJan. 2019Nishimura & Asahi Fukuoka Office (current)Sep. 2021Outside Director, HOPE, INC.Copyright (C) 2021 HOPE, INC.54Board MembersTakaaki Matsuyama(Labor and social security attorney)Full-time Audit and Supervisory Board MemberYasuhiro Kawakami(Tax accountant, small and medium enterprise management consultant)Audit & Supervisory Board MemberKeishi Tokuomi(Professional name: Keishi Maeda)(Judicial scrivener)Audit & Supervisory Board MemberMar. 1974Joined Fukuoka Sogo Bank (currently The Nishi-Nippon City Bank, Ltd.)Jun. 2001Managing Director, General Manager of Sales Dept., Kyushu Leasing Service Co., Ltd.Jun. 2004Director, General Manager of General Affairs Dept., NCB Business Service Jun. 2006Audit & Supervisory Board Member, Kyusyu ServicerDec. 2014Registered as a labor and social security attorney (Fukuoka Labor and Social Security Attorney Association) Jun. 2015Audit & Supervisory Board Member, Beta SoftMar. 2017Audit & Supervisory Board Member, HOPE, INC.Apr. 2001Joined PIETRO Co., Ltd.Jan. 2007Joined Fukuoka Realty Co., Ltd.Jul. 2007Established Kawakami Tax Accountant Office (current)Apr. 2011Established Kawakami Small and Medium Enterprise Management Consultant Office (current)Nov. 2011Audit & Supervisory Board Member, HOPE, INC.Jul. 2020Auditor, General Incorporated Association Kyushu no Shoku (current)Aug. 2020Fukuoka Small and Medium Enterprise Management Consultant Association (current)Apr. 2002Joined Takefuji CorporationNov. 2009Joined Soeda Judicial Scrivener OfficeJan. 2014Established Maeda Legal Affairs Office, representative of the current Otemon Legal Affairs Office (current)Sep. 2015Audit & Supervisory Board Member, HOPE, INC.Copyright (C) 2021 HOPE, INC.55DisclaimerInformation in this presentation includes forward-looking statements that are based on the current outlook, forecasts and assumptions vulnerable to risk factors. As a result, this information incorporates uncertainties that may cause actual performance to differ from these statements.Risk factors and uncertainties include economic trends in Japan and other countries, such as changes in industries and markets, interest rates, and foreign exchange rates.Information in this presentation that does not concern the HOPE Group is based on information available to the public and other sources. We make no guarantee that this information is accurate or appropriate. We plan to announce updates of the information in this presentation when we announce results of operations for fiscal years, which end in June. These announcements are usually between the middle of August and end of September. If the new medium-term management plan is reestablished and announced prior to the announcement of fiscal year results of operations, the information in this presentation may be updated too because of the significant effect that a new business plan would have on the information in this presentation.Almost all the documents referenced in this presentation are in Japanese version only.- IR contact -HOPE, INC.E-Mail: ir@zaigenkakuho.comURL: https://www.zaigenkakuho.com/en/irCopyright (C) 2021 HOPE, INC.56