イントラスト（7191） – [Delayed]Fiscal Year Ending March 31, 2022 Third Quarter Results Briefing Information Materials

Fiscal Year Ending March 31, 2022Third Quarter Results Briefing Information MaterialsEntrust Inc.Securities Code: 7191Copyright © Entrust Inc. All Rights Reserved.Copyright © Entrust Inc. All Rights Reserved.1. Fiscal Year Ending March 31, 2022 –Third Quarter Business Results2. Company Plan for the Fiscal Year Ending March 31, 20223. Company InformationCopyright © Entrust Inc. All Rights Reserved.11. Fiscal Year Ending March 31, 2022 –Third Quarter Business ResultsCopyright © Entrust Inc. All Rights Reserved.2Overview of Performance (compared to previous fiscal year)Revenues progressed as plannedOperating income increased by absorbing bad debt costs and costs related to the opening of new centers.Revenues increased to 117.3%Operating income increased to 102.4% Sales increased significantly from the previous fiscal year as a result of growth in property rent guarantees (139.2% year-on-year) Bad debt costs increased due to an increase in advances paid as a result of growth in property rent guarantees Margins declined temporarily due to one-time expenses related to the opening of the Tokyo Head Office Ichibancho ANNEX and Hamamatsu Solution Center.Copyright © Entrust Inc. All Rights Reserved.(Million yen)RevenuesOperating incomeOrdinary income2020/122021/12Actual3,061841Actual3,590Year-on-year117.3%861102.4%(Margin)27.5%24.0%844864102.4%(Margin)27.6%24.1%Net income55854297.2%(Margin)18.2%15.1%—3Revenues by QuarterSales in the guarantee business maintained substantial growthYear on Year 118% (+190 million yen)(Million yen)Solution servicesGuarantee services858 845 866 898 466 428 432 444 771 397 1,016 1,012 1,004 1,043 525 464 460 464 374 391 417 434 453 491 548 544 579 621 679 728 776 3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3QFY2020/3FY2021/3FY2022/3+18%1,142 1,160 1,195 458 467 481 520 1,234 Solution business Some contracts shifted from the C&O service to the guarantee business98.7% (-6 million yen) year on yearGuarantee businessThe guarantee business grew due to continued growth in property rent guarantees and increased renewal guarantee fees133.9% (196 million yen) year on year1,2501,0007505002500Copyright © Entrust Inc. All Rights Reserved.4Analysis of Change in Operating IncomeSpending on core systems and opening of centers in preparation for growth in property rent guarantees and business growth, and following up with continuous business improvement in the next fiscal year and beyondOutsourcing feesGrew in connection with increased revenues from property rent guarantees(Million yen)1,6001,4001,2001,0008006004002000Insurance premiums(guarantee related costs)Decreased due to an adjustment of guarantee fees in medical care expense guaranteesBad debt + guarantee performanceIncreased due to an increase in subrogation payments and delinquencies of some high value propertiesPersonnel expensesIncreased in line with increase in personnelOtherIncreased due to new core systems, costs related to collections, costs related to opening centers, etc.Copyright © Entrust Inc. All Rights Reserved.841176951119712287171Previous FY operating incomeGuarantee revenuesSolution revenuesOutsourcing feesInsurance premiums (guarantee related)Bad debt + guarantee performancePersonnel expensesOtherCurrent FY operating income861 5Operating Income and Operating Income Ratio by QuarterAbsorbed costs related to the opening of the center, and operating income increased steadily (operating income ratio: 22.3%)Center opening and start-up costs 32 million yen+0.8%(Million yen)Operating incomeOperating income ratio265 31%217 261 251 238 30%28%28%28%350300250200150100500280 287 270 273 308 302 283 275 29%28%27%27%26%25%24%22%40%35%30%25%20%3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3QFY2020/3FY2021/3FY2022/3Copyright © Entrust Inc. All Rights Reserved.6Number of Contracts in Property Rent Area by QuarterThe number of contracts has grown steadily, continuing to increase since the Company was founded, Steady progress against plan25,769(Number of contracts)Guarantee servicesSolution services334,327 340,679 348,740 99,552 99,990 101,622 359,392 364,136 370,522 376,522 385,833 392,351 398,016 402,291 101,002 102,696 104,677 108,793 113,283 119,369 126,271 134,328 415,700 133,700 234,775 240,689 247,118 258,390 261,440 265,845 267,729 272,550 272,982 271,745 267,963 282,000 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4QFY2020/3FY2021/3FY2022/3[Estimate][Plan]7Copyright © Entrust Inc. All Rights Reserved.400,000350,000300,000250,000200,000150,000100,00050,0000Medical Care & Eldercare Expense Guarantee Sales by QuarterDespite the impact of the coronavirus, sales activities are intensifyingThe number of affiliated medical facilities continues to increaseRevenue is on a temporary downward trend reflecting a decline in the unit price per hospital guarantee due to a decrease in medical accounts receivablePartner dataCo-signer Agent System Smahosu61 medical facilities (5 compared with the end of the previous fiscal year)16,409 hospital bedsHospitalization set with medical care expense guarantee and other products172 medical facilities (14 compared with the end of the previous fiscal year)34,404 hospital bedsEldercare expense guarantees205 eldercare service providers (6 compared with the end of the previous fiscal year)1009080706050403020100Copyright © Entrust Inc. All Rights Reserved.(Million yen)Medical Care & Eldercare Number of Hospitals(Implementing Smahosu & Hospitalization set with guarantees)97 97 12012412791 92 82 84 82 8610754 695935 172426 1320 1010 411 43Q4Q1Q4Q1Q2Q3QFY2020/32Q3QFY2021/34Q1Q2QFY2022/33Q* Smahosu is a medical care expense guarantee product with the guarantee fee paid covered by the hospital.(No.)1201008060402008Other Financial Data (Balance Sheet)2020/12(Previous fiscal year)2021/12(Current fiscal year)Change in amount(Million yen)Current assetsCash and depositsAccounts receivable and contract assetsAdvances paidOtherAllowance for doubtful accountsNon-current assetsProperty, plant, and equipmentIntangible assetsInvestments and other assetsCurrent liabilities(Contract liabilities)(Guarantee performance provisioning)Non-current liabilitiesNet assetsTotal assets4,1982,8242031,389302-522839542395451,26483482543,7205,0384,8953,0142011,925412-658953902596031,5341,085111954,2185,848696189-1536109-1361133519582702502941498810Increased in connection with expanded sales of advance payment-type products in the property rent areaContact liabilities increased as new* Sources of earnings from the next fiscal yearcontracts in property rent guarantees increased (30% increase)⇒ Growth rate is stable due to increase in sales of monthly renewal guarantee typeCopyright © Entrust Inc. All Rights Reserved.92. Company Plan for the Fiscal Year Ending March 31, 2022Copyright © Entrust Inc. All Rights Reserved.10Summary Plan for the Entire Fiscal Year Ending March 31, 2022Achieve growth that exceeds the sales growth trend for the fiscal year ended March 31, 2021Ensure a certain level of operating income while actively investing in long-term growth It is assumed that the impact of the coronavirus will mainly be in the first half and that a moderate recovery will occur after that(Million yen)RevenuesOperating income(Margin)Ordinary income(Margin)FY03/2021FY03/2022(Actual)(Plan)(Year-on-year)H1 plan4,2031,1495,000118.9%2,3401,270110.4%59027.4%25.4%25.2%1,1531,275110.5%59227.4%25.5%25.3%Net income760835109.8%390(Margin)18.1%16.7%16.7%—Copyright © Entrust Inc. All Rights Reserved.11Revenues by Year and PlanSteadily achieve sales targets in the first year of the Medium-term Management Plan(Million yen)5,000Solution servicesGuarantee services4,0003,0002,0001,00004,204 1,909 3,626 1,830 2,951 3,136 1,487 1,644 1,464 1,492 1,796 2,294 2018/32019/32020/32021/35,000 2,005 2,995 2022/3[Plan]Copyright © Entrust Inc. All Rights Reserved.12Annual Targets for Revenues (Details)(Million yen)5,0004,0003,0005,000 50 124 Doc-onInsurance desk Solution businessDoc-on service Continue to expand salesInsurance desk services4,203 4987Accelerate growth centered on small-amount short-term 1,831C&Oinsurance policiesC&O service1,771 Continue growth centered on schemes requiring no co-signers2,00038702021/3[Actual]2022/3[Plan]Copyright © Entrust Inc. All Rights Reserved.440 New guarantee business fields, etc.(medical care, eldercare, and child rearing)2,555 Property rent guaranteesGuarantee businessProperty rent guaranteesExpecting significant growth targeting major management companiesMedical care expense guaranteesExpect a decrease in guarantee fees due to the adjustment of arrears Intensified new business development due to the trend of the in existing contracts coronavirus subsidingseminars for hospitalsEldercare expense guaranteesIncrease efforts to expand sales as the coronavirus subsidesChild rearing expense guaranteesSteadily execute investment and establish a business base for improving the content of products131,0001,906 Engage in full-scale efforts to expand sales, including participation in Operating Income and Operating Income Ratio by Year and PlanContinue stable growth of income while conducting up-front investment such as system investment, taking into consideration the impact of the coronavirusImpact of expenses from up-front investment New core systems (depreciation) Call center expansion-39 million yen-54 million yen Up-front investment such as advertising for child rearing expense guarantees (increase) -19 million yen842 1,3001,2001,1001,000900800700600500(Million yen)Operating incomeOperating income ratio25.4%28.2%27.4%26.9%1,270 1,1491,022 2019/32020/32021/32022/3[Plan]Copyright © Entrust Inc. All Rights Reserved.14Dividends by Year and PlanDividend planned to increase by 1 yen to 12 yen based on shareholder return policyDividend payout ratio of 30% to 40%(Yen)14121086420DividendPayout ratio29.1%27.5%32.3%32.1%9 7 11 12 (Plan)2019/32020/32021/32022/332%27%22%17%12%Copyright © Entrust Inc. All Rights Reserved.153. Company InformationCopyright © Entrust Inc. All Rights Reserved.16Company Profile (As of December 31, 2021)● Company Name: Entrust Inc.● Date of establishment : March 2006● Capital: 1,044 million yen● Fiscal year: 12 months to March● Representative director: Yutaka Kuwabara● Head office location : 1-4 Kojimachi, Chiyoda-ku, Tokyo● Major branch offices: Akita, Sendai, Toyama, Nagoya, Osaka, Fukuoka, Tokyo Head Office ANNEXYokohama Solution Center, Hamamatsu Solution Center● Number of employees : 231 (including part-time workers)● Business lines: guarantee business and solution businessCopyright © Entrust Inc. All Rights Reserved.17Business LinesDeveloping the guarantee business to take on risks and the solution business to meet needsGuarantee businessGuarantee service + riskSolution businessProvide professional servicesProperty rent guaranteesMedical care expense guaranteesEldercare expense guaranteesChild rearing expense guaranteesC&O serviceInsurance desk servicesDoc-on serviceBtoBProperty management companiesMedical institutionsEldercare service facilities, etcBtoCIndividual customersBtoBProperty management companiesInsurance companiesCredit companies, etc.Copyright © Entrust Inc. All Rights Reserved.18Business LinesGuarantee businessAssume debt delinquency risk and provide various services pertaining to guaranteesFor example,in the case of property rent guaranteesTenantsOwners Rollout to other businessesEldercareMedical careChild rearing expenseCopyright © Entrust Inc. All Rights Reserved.19Business LinesSolution businessProviding a unique business support service based on know-how cultivated in the field of property rent guaranteesScreening servicesContract managementCollecting agencyDelinquency managementSending SMSInvestigative visitsLegal action supportPromoting insurance enrollmentUnpaid items informationCall centerSettlement functionSolve unique customer needs with professional servicesCopyright © Entrust Inc. All Rights Reserved.20Source of growth potentialToward a society in which guarantors guarantee the credit of individuals as companies, something previously supported by the local ties or relativesSociety as it has beenTransformation of societyRevision of Civil CodeManagement companies, hospitals, etc.Requiring unlimited personal joint and several guaranteesThe need to set the maximum amount of guaranteesIn actuality, collection of debts from co-signers is not always possible, and the problem of accounts receivable is also acuteMay lead to lost opportunities due to inability to properly assess creditworthinessIn some cases, administrative burden for personal cosigners will increase due to the revision of the Civil CodeCollection of debts in excess of the maximum amount will become more difficult than everUser(Individual)Secure guarantors, which has always been difficultIt will be more difficult to secure a guarantor・”I don’t want others to know my illness”・Difficult to get a cosigner for various reasons such as weakening of human relationshipsMeanwhile, there are cases of bankruptcy due to having taken on the role of cosignerIt may be harder than ever to ask to be a cosigner. By presenting the maximum amount of the guarantee, you may be refused by the other person, saying, “I can’t pay that much.”Copyright © Entrust Inc. All Rights Reserved.New SocietySocial systems guarantee the creditworthiness of individuals.・ Guarantors guarantee individuals as companies・ Diversification of risk by underwriting multiple guarantees・ Appropriate assessment by screening system・ A solid financial foundation to preserve trustAsymmetries between lenders and borrowers will be eliminated throughout society to stimulate all transactionsImproving the overall efficiency of society21Profit structure for guaranteesAbout 120,000 casesDelinquency rate:Approx. 6.5%Number of guaranteed leasesPayment in subrogation(Advance payment)Delinquency recovery rate:97% or moreLegal responseControl delinquency rates by dealing with quality customers and through proper screeningConduct proper collection of delinquent payments, many of which are recoveredCopyright © Entrust Inc. All Rights Reserved.This gap is the source of profitThree key factors that generate profitsAssess-ment• Precise management through accurate risk assessment• Improved economics (high profit margins) by selecting quality lenders/borrowers rather than reckless expansion• Create a cycle of customer base expansionCollection• Compliance-driven collection(Certified by the strict screening for the listing)• Steadily carry out legitimate legal procedures• Efficient recovery schemes by professional staff and IT/infrastructure to support them• Build up screening and collection know-how (expertise)Expertise• Free client (property management companies, hospitals, etc.) staff from tasks they are not familiar with• Resolve needs by proposing solutions22The medical cost guarantee market shows expanding demandAccelerate implementations in hospitals in cooperation with a major non-life insurance companyTotal number of medical facilitiesApprox. 180,000Average account receivable per hospitalApprox. 4.5 million yen *In-house researchNumber of hospitals nationwideEntrust Inc. targetApprox. 8,300Our results127External factors for expanding demandRevision of Civil CodeIncrease in the number of foreign visitors to JapanIncrease in out-of-pocket medical costs Copyright © Entrust Inc. All Rights Reserved.23Key KPIs and financial structure of the guarantee businessKey KPIsNumber of new contracts・New move-ins・ New contractsGuarantee rent, elderly care, and child rearing expensesInitial guarantee fee・XX% of rent・ XX% of child rearing expenseNumber of existing customersRenewal guarantee feeGuarantee fee revenues* Prorated over warranty periodMedical care expense guaranteesNumber of hospital contractsAnnual guarantee feeAverage3 million yen / hospitalNumber of users of hospitalization setsSmahosuHospitalization set product that comes with the guaranteeGuarantee feeGuarantee fee revenues* Prorated over warranty periodFinancial structureCorporate revenuesGuarantee fee revenuesCost of business outsourcing fees, etc.Copyright © Entrust Inc. All Rights Reserved.Total gross profitGross profit from guarantee feesBad debt +Selling, general and administrative expenses including guaranteeperformance provisioningOperating revenue and expenses24Entrust provides social infrastructure through its guarantee schemes, contributing to the invigoration of services and distribution.Entrust Inc.Copyright © Entrust Inc. All Rights Reserved.25The statements concerning business results projections stated in thesematerials are based on judgments derived from information available at thattime, and actualresults may differ materially from those projected,depending on a variety of factors. Factors that have the potential to affectactual business results include a deterioration in the business environmentor economic conditions, trends surrounding laws, regulations, and relatedrules, and unfavorable rulings in litigation.If you have any comments or questions regarding these materials or anyother IR-related matters, please contact us at the contact point for inquiriesbelow.Contact for inquiries: Entrust Inc. IREmail:ent-ir@entrust-inc.jpCopyright © Entrust Inc. All Rights Reserved.26