インソース（6200） – Q1 FY21 Consolidated Financial Results [JGAAP]

Q1 FY21 Q1 FY20 Q1 FY21 Q1 FY20 2. Dividends FY20 Full-year FY21 Full-year FY21 (forecast) Disclaimer: This document is a translation of the Japanese original for reference purposes only. Q1 FY21 Consolidated Financial Results [JGAAP] Company Name: Insource Co., Ltd. Code number: Representative: Takayuki Funahashi, Representative Director, President and CEO Contact: Shigeo Fujimoto, Director, Executive Officer, and CFO URL: https://www.insource.co.jp/index.html 6200 Scheduled date to submit the Quarterly Securities Report: February 14, 2022 TEL. +81-3-5577-2283 January 24, 2022 Stock Exchange Listing: Tokyo Scheduled date to commence dividend payments: ― Availability of supplementary briefing material on quarterly results: Yes Scheduled date of Quarterly Results Briefing Session: Not scheduled 1. Q1 FY21 Consolidated Financial Results (October 1, 2021 – December 31, 2021) (1) Consolidated Financial Results (% indicates changes from the previous year) (Amounts are rounded down to the nearest million yen) Net sales Operating profit Ordinary profit mil yen 2,192 1,814 % 20.8 11.7 mil yen 775 646 % 20.0 56.1 mil yen 765 659 % 16.1 58.9 Profit attributable to owners of parent mil yen 522 452 % 15.5 63.7 (Note) Comprehensive income: Q1 FY21 520 million yen (14.9%) Q1 FY20 453 million yen (63.7%) Earnings per share Fully diluted earnings per share yen sen 12.42 10.81 yen sen 12.41 10.80 (Note) We conducted a stock split on January 1, 2021, whereby each share of common stock was split into two shares. In the above, “Earnings per share” and “Fully diluted earnings per share” are calculated on the assumption that the said stock split was conducted at the beginning of the previous consolidated fiscal year. (2) Consolidated Financial Position Q1 FY21 FY20 Full-year (Reference) Shareholders’ equity: Q1 FY21 mil yen 6,460 6,766 Total assets Net assets Equity ratio mil yen 4,368 4,500 % 67.6 66.5 4,368 million yen FY20 4,500 million yen End of Q1 End of Q2 Year-end Annual Annual cash dividends per share End of Q3 yen sen － － yen sen 0.00 0.00 yen sen － － yen sen 15.50 17.00 yen sen 15.50 17.00 (Note) Revisions of dividend forecast from recently announced figures: None 3. Consolidated Financial Forecast for FY21 (October 1, 2021 – September 30, 2022) Net sales Operating profit Ordinary profit Q2 FY21 (Cumulative) FY21 Full-year % 14.0 18.6 (Note) Revisions of the forecast of financial results from recently announced figures: None mil yen 4,190 8,900 mil yen 1,230 2,600 mil yen 1,230 2,600 % (2.2) 8.1 % (3.4) 7.6 * Notes (1) Significant changes in subsidiaries during Q1 FY21 (changes in specific subsidiaries involving changes in the scope of consolidation): None (% indicates changes from the previous year) Profit attributable to owners of parent Earnings per share yen sen mil yen 19.47 830 41.53 1,770 % 0.8 12.7 (2) Specific accounting methods for quarterly consolidated financial statements: Yes (Note) For details, please refer to “2. Quarterly Consolidated Financial Statements and Notes (3) Notes to Quarterly Consolidated Financial Statements (Application of Special Accounting Methods for the Preparation of Quarterly Consolidated Financial Statements)” on page 7 of the attached materials. (3) Changes in accounting policies, estimates, and restatements (i) Changes in accounting policies due to the revision of accounting standards (ii) Changes in accounting policies other than (3)-(i) (iii) Changes in accounting estimates (iv) Restatements : Yes : None : None : None (4) Total number of issued shares (common stocks) (i) Total number of issued shares at the end of the period (including treasury stocks) (ii) Total number of treasury stocks at the end of the period Q1 FY21 42,621,500 shares FY20 42,621,500 shares Q1 FY21 530,311 shares FY20 529,534 shares (iii) Average number of shares during the period Q1 FY21 42,090,063 shares Q1 FY20 41,859,179 shares (Note) We conducted a stock split on January 1, 2021, whereby each share of common stock was split into two shares, and the above calculations are based on the assumption that the stock split was conducted at the beginning of the previous consolidated fiscal year. * These quarterly consolidated financial results are outside the scope of an audit by certified public accountants and audit corporations. * Explanation for the appropriate use of financial forecasts and other special notes: (Cautionary note on forward-looking statement) The statements regarding the forecast of financial results in this report are based on the information that is available to the Company, as well as certain assumptions that are deemed to be reasonable by management, and they are not meant to be a commitment by the Company. Therefore, there might be cases in which actual results differ materially from forecast figures due to various factors. For details, please refer to “1. Qualitative Information on Quarterly Financial Results” on page 2 of the attached materials. (How to obtain supplementary explanatory materials for financial results) Supplementary briefing material on quarterly results is disclosed via TDnet on the same day. Table of Contents 1. Qualitative Information on Quarterly Financial Results…………………………………………………………………….. 2 (1) Overview of Business Results……………………………………………………………………………………………. 2 (2) Overview of Financial Position…………………………………………………………………………………………… 3 (3) Consolidated Financial Forecasts…………………………………………………………….…………………………… 3 2. Quarterly Consolidated Financial Statements and Notes…………………………………………………………………….. (1) Quarterly Consolidated Balance Sheets………………………………………………………………………………….. (2) Quarterly Consolidated Statements of Income and Comprehensive Income……………………………………………… 5 Quarterly Consolidated Statements of Income Consolidated Period of Q1……………………………………………………………………………………………… 5 Quarterly Consolidated Statements of Comprehensive Income Consolidated Period of Q1……………………………………………………………………………………………… 6 (3) Notes to Quarterly Consolidated Financial Statements…………………………………………………………………… 7 (Notes related to the Going Concern Assumption)………………………………………………………………………… 7 (Notes to Significant Changes in the Amount of Shareholders’ Equity)………………………………………………….. 7 (Application of Special Accounting Methods for the Preparation of Quarterly Consolidated Financial Statement) (Additional Information) ………………………………………………………………………………………………… (Segment Information) …………………………………………………………………………………………………… 7 (Significant Subsequent Events) ………………………………………………………………………………………… 8 4 4 7 7 – 1 – 1． Qualitative Information on Quarterly Financial Results (1) Description of Business Results In the first quarter of the current fiscal year (October 1, 2021, to December 31, 2021), although the number of new COVID-19 infections continued to decline, the career training market is still undergoing a structural change in which organizations choose the best education method that suits their environment, such as online training and e-learning/videos, in addition to the traditional face-to-face training. In response to this situation, the Group strengthened the development of training content that matches the needs of the corporate scale. Also, the Group enhanced non-face-to-face services such as online training, ‟Leaf”(HR support system, LMS (*1)), and e-learning/videos, as well as face-to-face trainings. As for the On-Site Training business, the number of online training conducted in the private sector increased and the number of training conducted increased by 12.4% YoY, which reached a record high. For Open Seminars business, although the impact of COVID-19 remained at beginning of the term, the number of attendees began to recover from November and the total number of attendees increased by 10.5% YoY. About IT Services, the number of paid organizations for Leaf (HR supporting system, LMS) increased to 432 (+134, + 45% YoY). Total users exceed 1.84 million as of the end of December 2021, and Leaf`s monthly subscription fees (MRR(*2)) has increased steadily, with ARR(*3) increasing 53.9% YoY to 586 million yen. In Other Businesses, the Web marketing business, which was introduced in the previous quarter, contributed to sales. Also, sales of new e-learning products with high unit prices increased. As a result of the above, for the first quarter of the fiscal year, net sales is 2,192,609 thousand yen (+ 20.8% YoY), operating profit is 775,470 thousand yen (+ 20.0% YoY), ordinary profit is 765,713 thousand yen (+ 16.1%YoY), and profit attributable to owners of parent is 522,734 thousand yen (+ 15.5% YoY), and both net sales and profits reached record highs for the quarter. *1:LMS (Learning Management System): A system necessary for implementing e-learning. *2:MRR: Monthly Recurring Revenue *3:ARR: Annual Recurring Revenue. Calculated by multiplying the MRR of the last month of each term by 12. ■Net sales by business for the first quarter of FY21 (Unit: thousand yen) Q1 FY21 (Oct. 1, 2021 – Dec. 31, 2021) YoY (%) Q1 FY20 (Oct. 1, 2020 -Dec. 30, 2021) Business On-Site Training Open Seminars IT Service Other Businesses Total 1,248,796 507,230 203,533 233,048 2,192,609 117.1 113.5 135.6 154.5 120.8 1,066,397 447,008 150,149 150,860 1,814,415 (Note)1. Since our Group has a single business segment, which is the education service business, the information herein is presented by business category instead of the segment. 2. Consumption tax is not included in the above amounts. – 2 – Overview of Financial Position (2) (Assets) Total assets at the end of the first quarter of the current fiscal year decreased by 305,955 thousand yen compared to the end of the previous fiscal year to 6,460,749 thousand yen, mainly due to a decrease of 315,987 thousand yen in cash and deposits. (Liabilities) Total liabilities decreased by 174,218 thousand yen compared to the end of the previous fiscal year to 2,092,061 thousand yen, mainly due to a decrease of 491,396 thousand yen in income taxes payable. (Net Assets) Net assets decreased by 131,736 thousand yen compared to the end of the previous fiscal year to 4,368,688 thousand yen. This was mainly due to a decrease of 129,690 thousand yen in retained earnings. (3) Consolidated Financial Forecasts There is no change to the full-year consolidated financial forecast for FY21 from the forecast announced on November 4, 2021. The forecasts are based on information available at the time of preparation and actual results may differ from these forecasts due to various factors in the future. – 3 – 2. Quarterly Consolidated Financial Statements and Notes (1) Quarterly Consolidated Balance Sheets (Unit: thousand yen) FY20 (As of Sep. 30, 2021) Q1 FY21 (As of Dec. 31, 2021) Assets Current assets Cash and deposits Accounts receivable – trade Inventories Other Allowance for doubtful accounts Total current assets Non-current assets Property, plant, and equipment Land Other, net Total property, plant, and equipment Intangible assets Leasehold interests in land Goodwill Software Other Total intangible assets Investments and other assets Total non-current assets Total assets Liabilities Current liabilities Accounts payable – trade Short-term borrowings Accounts payable – other Income taxes payable Advances received Provision for bonuses Provision for bonuses for directors (and other officers) Other Total current liabilities Non-current liabilities Asset retirement obligations Other Total non-current liabilities Total liabilities Net assets Shareholders’ equity Share capital Capital surplus Retained earnings Treasury stocks Total shareholders’ equity Accumulated other comprehensive income Valuation difference on available-for-sale securities Total accumulated other comprehensive income Total net assets Total liabilities and net assets – 4 – 2,624,111 882,846 51,283 203,441 (1,994) 3,759,687 1,179,658 700,019 1,879,678 305,984 53,120 92,624 951 452,680 674,658 3,007,017 6,766,705 114,029 2,340 399,621 758,874 599,026 － － 328,417 2,202,311 59,504 4,465 63,969 2,266,280 800,623 854,983 3,313,927 (472,612) 4,496,921 3,503 3,503 4,500,424 6,766,705 2,308,123 911,104 64,843 200,248 (1,182) 3,483,137 1,179,658 719,805 1,899,464 305,984 48,869 98,264 152 453,271 624,876 2,977,612 6,460,749 106,367 502,340 168,809 267,478 569,590 169,405 7,752 242,401 2,034,144 54,037 3,880 57,917 2,092,061 800,623 848,822 3,184,237 (466,445) 4,367,237 1,450 1,450 4,368,688 6,460,749 (2)Quarterly Consolidated Statements of Income and Comprehensive Income (Quarterly Consolidated Statements of Income) (For the three months ended December 31, 2021) (Unit: thousand yen) Q1 FY20 (Oct. 1,2020- Dec. 31, 2020) Q1 FY21 (Oct. 1,2021- Dec. 31, 2021) Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating profit Non-operating income Interest income Dividend income Foreign exchange gains Subsidies for employment adjustment Subsidy income Income from sales of goods Other Total non-operating income Non-operating expenses Interest expenses Foreign exchange losses Loss on extinguishment of stock-based compensation expenses Total non-operating expenses Ordinary profit Extraordinary losses Loss on valuation of investment securities Total extraordinary losses Profit before income taxes Income taxes Profit Profit attributable to owners of parent 1,814,415 423,796 1,390,619 744,132 646,486 2 68 － 12,100 1,011 － 101 13,284 124 105 － 229 659,541 459 459 659,082 206,546 452,535 452,535 2,192,609 513,674 1,678,934 903,463 775,470 3 75 217 － － 1,444 815 2,556 131 － 12,182 12,313 765,713 － － 765,713 242,978 522,734 522,734 – 5 – (Quarterly Consolidated Statements of Comprehensive Income) (For the three months ended December 31, 2021) (Unit: thousand yen) Q1 FY20 (Oct. 1,2020- Dec. 31, 2020) Q1 FY21 (Oct. 1,2021- Dec. 31, 2021) Profit Other comprehensive income Valuation difference on available-for-sale securities Total other comprehensive income Comprehensive income Comprehensive income attributable to Comprehensive income attributable to owners of parent Comprehensive income attributable to non-controlling interests 452,535 656 656 453,191 453,191 － 522,734 (2,052) (2,052) 520,682 520,682 － – 6 – (3) Notes to Quarterly Consolidated Financial Statements (Notes related to the Going Concern Assumption) Not applicable (Notes to Significant Change in the Amount of Shareholders’ Equity) Not applicable (Application of Special Accounting Methods for the Preparation of Quarterly Consolidated Financial Statement) (Calculating Tax Expense) Tax expenses are calculated by reasonably estimating the effective tax rate after applying tax effect accounting to income before income taxes for the fiscal year, including the first quarter under review, and multiplying quarterly income before income taxes by the effective tax rate. (Changes in Accounting Principles) (Application of Accounting Standard for Revenue Recognition, etc.) The Company has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31,2020) (hereinafter referred to as “Revenue Recognition Accounting Standards”), etc. from the beginning of the first quarter of FY21 and recognizes revenue as the amount expected to be received in exchange for the promised goods or services when the control of the goods or services is transferred to the customer. This has no impact on the quarterly consolidated financial statements. (Application of Accounting Standard for Fair Value Measurement, etc.) The Company has applied the “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4,2019) (hereinafter, “Fair Value Measurement Accounting Standards”), etc. from the beginning of the first quarter of FY21. In accordance with the transitional treatment stipulated in Paragraph 19 of the Fair Value Measurement Accounting Standards and Paragraph 44-2 of the “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, July 4, 2019), the Company will apply the new accounting policies set forth in the Fair Value Measurement Accounting Standards, etc. at a future date. This has no impact on the quarterly consolidated financial statements. (Additional Information) In assessing the possibility of impairment of non-current assets and the recoverability of deferred tax assets, the Company has assumed that the impact of the COVID-19 pandemic in the Group’s training business will continue for a certain period in FY21, but that demand will recover in the second half of FY21. However, results based on actual results in the future may differ from these estimates and assumptions. (Segment Information) This information is omitted because the Group operates in a single segment of the education service business. – 7 – 1. (1) (2) (3) (4) (5) (Significant subsequent events) (Disposal of Treasury Stock for Restricted Stock Compensation) The Company, at a meeting of its Board of Directors held on January 12, 2022, resolved to dispose of its treasury stock (hereinafter the “Disposal of Treasury Stock” or the “Disposal”) for the restricted stock compensation. Overview of the Disposal Disposal date February 1, 2022 Class and number of stock to be disposed of Common stock of the Company: 9,100 shares Disposal Amount 2,344 yen per share Total Disposal Amount 21,330,400 yen Allottees and Number thereof, Number of Stocks to be Disposed of 5 Directors (excluding Outside Directors) 5,720 shares 12 Executive Officers (excluding concurrent posts as a director) 2,800 shares 3 Representative directors of its Subsidiaries: 580 shares The Disposal of Treasury Stock is conditioned on the Securities Registration Statement taking effect by the Financial Instruments and Exchange Act. (6) Others 2. Purposes and Reasons for Disposal The Company decided, at the Board of Directors meeting held on November 25, 2021, to provide a restricted stock compensation plan (hereinafter the “plan”) for its directors (excluding outside directors. Hereinafter the “eligible directors”) to provide them with incentives to continuously improve the value of the Company and to further promote shared value with shareholders. And at the General Meeting of Shareholders held on December 17, 2021, it was approved that the annual amount of remuneration for directors shall be 200 million yen or less (including 20 million yen or less for outside directors), the total amount of compensation to be paid to the eligible directors shall be within 40 million yen per year within the range of the revised amount of remuneration and that the restricted period on stock transfer shall be 3 years dated from the receipt of the allotted share. The following presents the overview of the plan. 【Outline of the Plan】 The eligible directors will pay all of the monetary compensation claims paid by the Company under the compensation plan as contribution in kind and receive the issuance or disposal of the Company’s common stock. The total number of shares of the Company’s common stock to be issued or disposed of under the plan shall be within 17,500 shares per year. The price to be paid in for restricted stock to be issued or disposed of under the compensation plan shall be determined by the Board of Directors of the Company based on the closing price of the Company’s common stock on the Tokyo Stock Exchange on the business day immediately preceding the day of the resolution of the Board of Directors of the Company (or the closing price of the most recent business day if no trading on the day above), to the extent that the amount is not particularly advantageous to the eligible directors. If the Company issues or disposes of shares of the Company’s common stock under this compensation plan, the Company and the eligible directors shall enter into an allotment agreement of restricted stock (hereinafter the “Allotment Agreement”), which shall include the following matters: ① The eligible directors may not transfer, grant security interests in, or otherwise dispose of the common stock of the Company allotted to them under the Allotment Agreement for a predetermined period. ② Following the resolution of the General Meeting of Shareholders to approve the plan for eligible directors, the Company has decided to introduce the same restricted stock compensation plan for the Company’s executive officers and representative directors of the Company’s subsidiaries. (hereinafter the “plan”). And the company’s directors, executive officers, and representative directors of subsidiaries are referred to as “eligible directors, etc.” If certain events occur, the Company may acquire the relevant common stock without compensation. Under the resolution of the Board of Directors meeting held today, the Company has decided to provide the total sum of the monetary compensation claims of 19,970,880 yen for 5 directors (excluding outside directors) and 12 executive officers, and 1,359,520 yen for 3 representative directors of its subsidiaries. (hereinafter the “Total Monetary Compensation Claims”). The eligible directors, etc. will receive 9,100 shares of the Company’s common stock as all the monetary compensation claims by contribution in kind under the compensation plan. The amount of the monetary compensation claim is determined by the Board of Directors of the Company and consultation with directors of subsidiaries, after upon the receipt of the report by the Nomination and Compensation Committee response to the consultation, considering various factors such as the business performance of the Company and the responsibilities of each eligible director, etc. and others. In addition, the monetary compensation claims will be paid according to the terms of the below allotment agreement concluded between the eligible directors, etc., and the Company. – 8 – 3. Overview of the Allotment Agreement (1) Transfer restriction period: From February 1, 2022, to January 31, 2025 During the above period of transfer restriction (hereinafter the “restriction period”), the eligible directors, etc. shall not be able to assign, pledge, grant a security interest in, give a living will to, bequeath, or otherwise dispose of any allotted shares (hereinafter the “allotted shares”), to any third party. (Hereinafter the “Transfer Restriction”) (2) Conditions for removing transfer restriction The Company will remove the restriction on transfer of the allotted shares upon expiration of the restriction period, provided that the eligible directors, etc. have continuously served as any of the positions of director, executive officer of the Company, and representative director of the subsidiaries. However, if the eligible director, etc. retires from the above-mentioned position before the expiration of the restriction period with the justifiable reason that is deemed by the Board of Directors of the Company, the number of the allotted shares and the time to be removed the transfer restriction shall be reasonably adjusted as necessary. (3) Acquisition of restricted stock without compensation If the eligible directors, etc. resign from his or her position as director, executive officer of the Company, and representative director of the subsidiaries before the expiration of the restriction period except there is a justifiable reason that is deemed by the Board of Directors of the Company, the Company shall acquire all or part of the allotted shares without compensation. In addition, the Company will naturally acquire without compensation such the allotted shares of which the transfer restrictions have not been removed regardless of the expiration of the period, with conditions stipulated in the overview of the allotment agreement (2). (4) Treatment in the event of organizational restructuring, etc. If a matter concerning the organizational restructuring, etc. of the Company, such as a merger agreement whereby the Company will be the non-surviving party to the merger, or a share exchange agreement or share transfer plan whereby the Company will become a wholly-owned subsidiary of another entity, is approved at the Company’s General Meeting of Shareholders (or by the Company’s Board of Directors if such organizational restructuring, etc. does not require approval at a Company’s General Meeting of Shareholders) during the transfer restriction period, the Company will remove the transfer restriction on the allotted shares on a date before the effective date of such organizational restructuring, etc. In the case stipulated above, the Company will naturally acquire the allotted shares without consideration at the time immediately after the transfer restriction is removed, where the transfer restriction has not yet been removed. (5) Management of the allotted shares To prevent the allotted shares from being transferred, collateralized, or otherwise be disposed of during the transfer restriction period, the allotted shares shall be managed by a specified securities firm during the transfer restriction period in a dedicated account opened by each eligible director, etc., at Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. 4． Basis for Calculating the Amount to be Paid and its Specific Details To avoid arbitrary pricing, the disposal price for the disposal of treasury stock shall be set at 2,344 yen, which is the closing price of a share of the Company’s common stock in the Tokyo Stock Exchange on January 11, 2022 (the business day immediately preceding the day of the resolution of the Board of Directors of the Company). This is the market share price immediately before the date of the resolution, and the Company believes that it is a reasonable and not particularly advantageous price. – 9 –