ポールトゥウィン・ピットクルーホールディングス（3657） – [Delayed]Consolidated Financial Results for the Fiscal Year Ended January 31, 2022

March 14, 2022 Consolidated Financial Results for the Fiscal Year Ended January 31, 2022 (Japanese Accounting Standards) Poletowin Pitcrew Holdings, Inc. First Section of Tokyo Stock Exchange 3657 https://www.poletowin-pitcrew-holdings.co.jp Teppei Tachibana, President & CEO Joji Yamauchi, Director & CFO Tel: +81-3-5909-7911 Name of Listed Company: Listing: Stock code: URL: Representative: Contact Person: Scheduled date of General Shareholders’ Meeting: April 21, 2022 Scheduled date to file Securities Report: April 22, 2022 Scheduled date to commence dividend payments: April 22, 2022 Supplementary explanatory materials prepared: Explanatory meeting: Yes No (For analysts and institutional investors) 1. Consolidated financial results for the fiscal year ended January 31, 2022 (Millions of yen with fractional amounts discarded, unless otherwise noted.) (from February 1, 2021, to January 31, 2022) (1) Consolidated operating results Net sales Operating profit (Percentages indicate year-on-year changes.) Profit attributable to owners of parent Ordinary profit Fiscal year ended January 31, 2022 January 31, 2021 Millions of yen 34,252 26,729 % Millions of yen 3,305 3,217 28.1 2.3 % Millions of yen 3,382 3,595 2.7 -8.9 % Millions of yen 2,241 2,119 -5.9 3.5 % 5.7 18.6 (Note) Comprehensive income For the year ended January 31, 2022: ¥2,581 million (43.1%) For the year ended January 31, 2021: ¥1,803 million (-7.5%) Fiscal year ended January 31, 2022 January 31, 2021 Net profit per share Diluted net profit per share Yen － 55.96 Yen 59.16 55.99 Return on equity (ROE) Ordinary profit /total assets Operating profit ratio % 13.5 14.2 % 15.9 18.8 % 9.6 12.0 (Reference) Equity in earnings of affiliates For the year ended January 31, 2022: ¥ -67 million For the year ended January 31, 2021: ¥ – million (2) Consolidated financial position Total assets As of January 31, 2022 January 31, 2021 (Reference) Equity Millions of yen 22,281 20,389 Millions of yen 17,646 15,675 As of January 31, 2022: ¥17,638 million As of January 31, 2021: ¥15,671 million － 1 － Net assets Equity ratio Net assets per share Yen 467.17 413.64 % 79.2 76.9 (3) Consolidated cash flows Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Cash and cash equivalents at end of year Millions of yen 1,844 2,040 Millions of yen -2,661 -963 Millions of yen -659 -468 Millions of yen 9,735 11,158 Fiscal year ended January 31, 2022 January 31, 2021 2. Cash dividends Fiscal year ended January 31, 2021 Fiscal year ended January 31, 2022 Fiscal year ending January 31, 2023 (Forecasts) Six months ending July 31, 2022 Fiscal year ending January 31, 2023 First quarter Yen Cash dividends per share Fiscal Third Second year-end quarter quarter Yen Yen Yen Total amount of dividends (annual) Payout ratio (consolidated) Dividends on net assets (consolidated) Annual Yen Millions of yen – – – 0.00 0.00 0.00 – – – 13.00 13.00 14.00 14.00 15.00 15.00 492 528 % 23.2 23.7 23.6 3. Consolidated financial forecasts for the fiscal year ending January 31, 2023 (from February 1, 2022, to January 31, 2023) Operating profit Net sales Ordinary profit Millions of yen % Millions of yen % Millions of yen % (Percentages indicate year-on-year changes.) Profit attributable to owners of parent Millions of yen % Net profit per share 18,739 21.0 1,409 -6.8 1,371 -11.4 712 -21.5 40,088 17.0 4,002 21.1 3,926 16.1 2,428 8.3 * Notes: (1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in a change in the scope of consolidation) : No (2) Changes in accounting policies, changes in accounting estimates, and restatement of revisions a. Changes in accounting standards due to revisions to accounting standards and other guidelines b. Changes in accounting policies due to reasons other than a. above c. Changes in accounting estimates d. Restatement of revisions : No : No : No : No (3) Number of common shares issued a. Total number of issued shares at the end of the period (including treasury shares) % 3.3 3.2 Yen 18.69 63.64 As of January 31, 2022 As of January 31, 2021 : 38,156,000 shares : 38,156,000 shares b. Number of shares of treasury stock at the end of the period : 400,502 shares : 269,734 shares As of January 31, 2022 As of January 31, 2021 c. Average number of shares For the year ended January 31, 2022 For the year ended January 31, 2021 : 37,881,028 shares : 37,865,200 shares － 2 － (Reference) Summary of non-consolidated operating results Non-consolidated financial results for the fiscal year ended January 31, 2022 (from February 1, 2021, to January 31, 2022) (1) Non-consolidated operating results (Percentages indicate year-on-year changes) Fiscal year ended January 31, 2022 January 31, 2021 Net sales Operating profit Ordinary profit Net profit Millions of yen 1,858 1,563 % Millions of yen 879 872 18.9 29.8 % Millions of yen 274 422 0.8 65.7 % Millions of yen 446 78 -35.1 -1.5 % 466.9 -73.6 Fiscal year ended January 31, 2022 January 31, 2021 Net profit per share Diluted net profit per share Yen 11.79 2.08 Yen － 2.08 (2) Non-consolidated financial position As of January 31, 2022 January 31, 2021 (Reference) Equity Total assets Net assets Equity ratio Millions of yen 6,471 5,664 Millions of yen 5,438 5,609 Net assets per share Yen 144.05 148.07 % 84.0 99.0 As of January 31, 2022: ¥5,438 million As of January 31, 2021: ¥5,609 million * Financial statements are not subject to audit * Proper use of earnings forecasts, and other special matters (Disclaimer to forward-looking statements) The forward-looking statements, including earnings forecasts, contained in these materials are based on information currently available to the Company and on certain assumptions deemed to be reasonable. These statements do not guarantee that the Company will achieve its earnings forecasts. In addition, actual business and other results may differ substantially due to various factors. For details on the conditions assumed and the cautionary notes and items in the financial forecasts, please refer to “Earnings forecasts for the fiscal year ending January 31, 2023,” under “Overview of Operating Results” in this report. (How to obtain Supplementary Information to the Financial Results and details of the earnings results briefing) The Company discloses the Supplementary Information to the Financial Results on the TDnet on the same day. Along with the earnings presentation materials, streaming video of content are scheduled to be promptly posted on the Company’s website. － 3 － Table of Contents 1. Overview of Operating Results ………………………………………………………………………………………………………………………. 5 (1) Analysis of Operating Results …………………………………………………………………………………………………………………… 5 (2) Analysis of Financial Position …………………………………………………………………………………………………………………… 6 (3) Cash flows ……………………………………………………………………………………………………………………………………………… 7 (4) Earnings forecasts for the fiscal year ending January 31, 2023 ………………………………………………………………………. 7 2. Basic Policy on Selection of Accounting Standards…………………………………………………………………………………………… 8 3. Consolidated Financial Statements………………………………………………………………………………………………………………….. 9 (1) Consolidated Balance Sheets …………………………………………………………………………………………………………………….. 9 (2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income …………………………. 11 Consolidated Statements of Income …………………………………………………………………………………………………………… 11 Consolidated Statement of Comprehensive Income ……………………………………………………………………………………… 12 (3) Consolidated Statements of Changes in Net Assets …………………………………………………………………………………….. 13 (4) Consolidated Statements of Cash Flows ……………………………………………………………………………………………………. 15 (5) Notes to Consolidated Financial Statements ………………………………………………………………………………………………. 16 (Notes on Going Concern Assumption) ……………………………………………………………………………………………………… 16 (Segment Information) …………………………………………………………………………………………………………………………….. 16 (Per share information) …………………………………………………………………………………………………………………………….. 21 (Significant Subsequent Events)………………………………………………………………………………………………………………… 21 － 4 － 1. Overview of Operating Results (1) Analysis of Operating Results During the consolidated fiscal year under review, conditions for the Japanese economy are expected to continue to pick up as various policies are effective, overseas economics are recovering and preventive measures are taken against COVID-19. However, we need to pay close attention to the impact of COVID-19, supply constraints, and downside risks due to trends in raw material prices, and we need to watch the impact of fluctuations in financial and capital markets. Under these economic conditions, in the markets related to Poletowin Pitcrew Holdings Group’s core Testing/Verification & Evaluation Business, the game software market is expanding due to voluntary restraint from going out as a result of the global spread of COVID-19, while the hardware market is being affected by the shortage of semiconductors. On the other hand, in the related markets of the Internet Support Business, similarly, the e-commerce and cashless settlement markets, which are non-face-to-face and contactless services, are expanding. In addition, the spread of COVID-19 is encouraging schools to move classes online, and the government’s GIGA school initiative’s importance is increasing. The Group provides checking, testing, monitoring and inspection services that requires human input on a contractual basis to corporate clients. The demand for such outsourcing services has been growing as client’s business has diversified and have expanded overseas. Another reason behind this is that business processes have become more advanced and sophisticated. As new services are created in the market, both Testing/Verification & Evaluation Business and Internet Supporting Business, are seeing new business opportunities. During the consolidated fiscal year under review, the Company relocated its head office and increased the floor space in February in order to consolidate the sales and administrative departments of the Company and its major subsidiaries into the same office. In addition, the Company absorbed and merged with Pacer Inc., an intermediate holding company, in March in order to improve operating efficiency. In February, Pole To Win Co., Ltd. transferred its business related to tuning game balance and other aspects and development support to CREST Inc., with the aim of expanding its media contents-related business. In July, MSD Holdings Inc. became a subsidiary, for the purpose of undertaking software and system development other than games, as well as third-party verification services. In January, Ninjastars Inc. became a subsidiary, with the aim of developing a service that combines testing business and security diagnosis services. In April, QBIST Inc. and CREST Inc. relocated their headquarters to the same building and increased the floor space in order to improve synergy in the media contents business field of both companies. QBIST Inc. made Panda Graphics Inc. a subsidiary in August with the aim of increasing its share of the game art outsourcing market. In August, ENTALIZE CO., Ltd. made Delfi Sound Inc. a subsidiary in order to improve its capacity to handle voice recording. PITCREW CO., LTD. opened the Niigata Service Center in July and relocated and increased the floor space of the Sendai Service Center in anticipation of increased orders in the future. PITCREW CO., LTD. also absorbed and merged IMAid Inc. to consolidate and streamline operating resources. Overseas, OneXP LLC (a U.S. subsidiary), OneXP UK Limited (a U.K. subsidiary), 1518 Studios Rus LLC (a Russian subsidiary), and SIDE France SAS (a French subsidiary) were established for the purpose of business expansion. Through the collaboration between domestic bases and 21 overseas bases in 12 countries, we promoted the provision of “one-stop full services” such as testing, localization, voice recording, game development and marketing support, monitoring, and customer support on a global scale. As a result of these factors, consolidated net sales for the term were ¥34,252,376 thousand (up 28.1%). Operating profit was ¥3,305,200 thousand (up 2.7%). Ordinary profit was ¥3,382,780 thousand (down 5.9%) and Profit attributable to owners of parent was ¥2,241,103 thousand (up 5.7%). Results by segment were as follows. Testing/Verification & Evaluation Business By promoting collaboration between domestic and overseas group companies the group strived to support global deployment for domestic and foreign game makers, and promoted orders for outsourcing services such as defect detection, localization customer support (overseas) and voice recording, etc. for game software developers. At QaaS Inc., orders for third-party verification services in the non-game market increased. At QBIST Inc., colorful Inc., Panda Graphics Inc. and CREST Inc. promoted the expansion of media contents business related to art, game, and animation production. In addition, MIRAIt Service Design co. ltd. received orders from a government administration office to develop a system to accept various types of applications related to infectious diseases. As a result, Testing/Verification & Evaluation Business sales increased by 31.3 % year on year, to ¥26,439,240 thousand. However, due to an increase in one-time expenses related to M&A and upfront expenses related to the expansion of the media content business, including game and animation production, operating profit decreased by 7.1% to ¥2,461,133 thousand yen. － 5 － Internet Supporting Business In the Internet Supporting Business, orders increased for monitoring fraud for FinTech related services such as QR code settlement and virtual currency. Services related to identity verification, detection of anti-money laundering and behaviour method also increased orders. Also, there was an increase in orders for data recognition evaluation in AI-related services and customer support for the game market through collaborating sales activities with Testing/Verification & Evaluation. In addition, PITCREW CO., LTD. received orders for ICT environment design and other services as a school ICT support provider under the government’s GIGA School Project. As a result, Internet Supporting Business sales increased by 17.7%, to ¥7,580,748 thousand. Operating profit increased by 34.0%, to ¥819,736 thousand. Others Palabra Inc. provide services to produce barrier-free subtitles audio guides for television program and movies to prepare for the advent of barrier-free motion pictures. PITCREW CO., LTD. has taken over the business of the former IMAid Inc. and provides support services such as visa obtainment, school enrollment and daily life procedures for foreign personnel working in medical institutes. The sales resulted in an increase of 46.6% to ¥232,387 thousand and operating loss of ¥15,902 thousand, down from operating loss of ¥139,666 thousand a year earlier. (2) Analysis of Financial Position Assets Current assets decreased by ¥762,518 thousand or 4.5% from the previous fiscal year, to ¥16,340,029 thousand. This was mainly due to a decrease of ¥1,423,330 thousand in cash and deposits, despite increases of ¥436,826 thousand in notes and accounts receivable-trade and ¥171,726 thousand in other current assets (mainly advance payments). Non-current assets increased to ¥5,941,459 thousand, ¥2,654,682 thousand or 80.8% higher than the previous fiscal year. Key factors were decrease of ¥199,531 thousand in other of intangible assets (copyrights, etc.), but a ¥143,797 thousand increase in tools, furniture and fixtures, a ¥1,865,511thousand increase in goodwill, and a ¥280,648 thousand increase in other intangible assets, a ¥148,066 thousand increase in investment securities, and a ¥305,413 thousand increase in deferred tax assets. As a result, total assets increased 1,892,163 thousand or 9.3% year on year, to ¥22,281,489 thousand. Liabilities Current liabilities decreased by ¥295,366 thousand, or 6.6% from the previous fiscal year-end, to ¥4,158,641 thousand. This was mainly due to decreases of ¥327,947 thousand in income taxes payable and ¥290,791 thousand in other current liabilities (mainly advance received), despite increases of ¥344,352 thousand in accrued expenses. Non-current liabilities increased ¥216,350 thousand or 83.1%, to ¥476,579 thousand. This was mainly due to increase of ¥217,024 thousand in long-term borrowings. As a result, total liabilities decreased ¥79,015 thousand or 1.7% year on year, to ¥4,635,220 thousand. Net assets Net assets increased ¥1,971,179 thousand or 12.6%, to ¥17,646,268 thousand. This was mainly due to increases of ¥1,748,582 thousand in retained earnings, ¥125,405 thousand in treasury shares, and ¥365,335 thousand in foreign currency translation adjustment as a result of profit attributable to owners of parent. － 6 － (3) Cash flows Cash and cash equivalents (hereinafter referred to as “cash”) as of January 31, 2022, were ¥9,735,217 thousand, down ¥1,423,330 thousand from the previous fiscal year. Cash flows for each activity and the reasons behind them are as follows. Cash flows from operating activities Operating activities provided net cash of + ¥1,844,490 thousand compared to ¥2,040,365 thousand provided in the previous fiscal year. The main contributors were + ¥3,241,419 thousand in profit before income taxes, +¥492,796 thousand in depreciation, + ¥249,367 thousand in impairment loss, + 400,659 thousand in amortization of goodwill, – ¥230,813 thousand in gains on sales of property, plant, and equipment, ＋¥316,924 thousand decrease of trade receivables, – ¥646,504 thousand decrease of accounts payable–other,＋¥217,164 thousand increase in accrued expense, – ¥134,141 thousand decrease in deposits received, and – ¥1,751,940 thousand in income taxes paid. Cash flows from investing activities Investing activities used net cash of – ¥2,661,898 thousand compared to – ¥963,219 thousand used in the previous fiscal year. The main uses were, -¥571,736 thousand in purchase of property, ＋¥230,813 thousand in income from the sale of intangible assets, -¥284,245 thousand in purchase of investment securities, -¥1,529,015 thousand in purchase of shares of subsidiaries resulting in change in scope of consolidation, – ¥477,539 thousand in expenditure of business transfer, ＋¥117,164 thousand in payments of leasehold and guarantee deposits. Cash flows from financing activities Financing activities used net cash of – ¥659,830 thousand from – ¥468,688 thousand used in the previous fiscal year. The main factor in this change was – ¥492,521 thousand in cash dividends paid and – ¥ 125,405 thousand in expenditure on the acquisition of treasury stock, and so on. (4) Earnings forecasts for the fiscal year ending January 31, 2023 For the fiscal year ending January 31, 2022, with the increase in new consolidated subsidiaries including MSD Holdings Inc., sales increased and the service area was expanded. Regarding the company structure, as a result of our efforts to improve business synergies and improve management efficiency, we have consolidated and abolished two subsidiaries of our company, consolidating the functions of our services and simplifying our systems. For the fiscal year ending January 31, 2023, the three companies of Pole To Win Co., Ltd., PITCREW CO., LTD. and QaaS Co., Ltd., will merge in February. The four companies of MIRAIt Service Design co., ltd., SOFTWISE Corporation, MSD Secure Service Inc., and Seitatsu Technology Inc, will also merge in February. In May, Pole To Win Co., Ltd. and Daiichi Shorin Co., Ltd., will merge, and Entalize Co., Ltd. and PTW Japan Co., Ltd. will merge. While M&A is promoting the expansion of the service area as well as the efficiency of management within the Group, it is becoming difficult to reflect the business reality of the Group in the conventional segment categories, “Testing/Verification & Evaluation Business,” “Internet Supporting Business,” and “Others.” Therefore, from the fiscal year ending January 2023, the Group decided to change its business to a single segment of the “Service Life Cycle Solution Business” in accordance with the current business situation of the Group. Beyond the framework of testing/verification and internet support, we will provide solution services that meet the challenges with each process of planning, development, release, operation, and improvement which are the life cycle of the client’s services and products. The service lifecycle solution business is divided into three business categories: 1. Domestic Solution Domestic subsidiaries provide testing business, customer support, localization, and overseas expansion support services for the game market; third-party software verification, environment construction, server monitoring, data center operation, and kitting services for the technology market; monitoring, customer support, and fraud prevention services for the e-commerce market. 2. Overseas Solution Overseas subsidiaries provide services related to testing, localization, voice recording, customer support, product development, and art production. 3. Media Contents Domestic subsidiaries provide services related to art production, game publishing, animation production, marketing support, and barrier-free subtitling and audio guide production. － 7 － As a result of these factors, for the year ending January 31, 2023, the Group projects consolidated net sales of ¥40,088 million (up 17.0%), operating profit of ¥4,002 million (up 21.1%), ordinary profit of ¥3,926 million (up 16.1%), and profit attributable to owners of parent of ¥2,428 million (up 8.3%). The earnings forecasts are based on information currently available to the Company and on certain assumptions deemed to be reasonable. These statements do not guarantee that the Company will achieve its earnings forecasts. In addition, actual business and other results may differ substantially due to various factors. 2. Basic Policy on Selection of Accounting Standards Considering the comparability of consolidated statements across periods and among companies, the Group has a policy of preparing its consolidated financial statements in accordance with Japanese Accounting Standards. Regarding the application of International Financial Reporting Standards, the Group will respond appropriately, taking into account circumstances in Japan and abroad. － 8 － (Thousands of yen) As of January 31, 2021 As of January 31, 2022 3. Consolidated Financial Statements (1) Consolidated Balance Sheets Assets Current assets Cash and deposits Notes and accounts receivable – trade Merchandise and finished goods Work in process Other Allowance for doubtful accounts Total current assets Non-current assets Property, plant and equipment Buildings and structures Accumulated depreciation Buildings and structures, net Machinery, equipment and vehicles Accumulated depreciation Machinery, equipment and vehicles, net Tools, furniture and fixtures Accumulated depreciation Tools, furniture and fixtures, net Other Total property, plant and equipment Intangible assets Goodwill Software Other intangible assets Other Total intangible assets Investments and other assets Investment securities Leasehold and guarantee deposits Deferred tax assets Other Allowance for doubtful accounts Total investments and other assets Total non-current assets Total assets 11,158,548 4,504,541 861 172,920 1,308,165 -42,488 17,102,548 893,190 -544,376 348,814 23,081 -15,860 7,221 1,616,860 -1,294,048 322,812 15,306 694,154 511,654 225,961 － 202,538 940,155 654,071 751,910 195,008 128,470 -76,994 1,652,466 3,286,776 20,389,325 9,735,217 4,941,367 203 262,767 1,479,892 -79,419 16,340,029 1,107,978 -689,863 418,115 23,486 -17,741 5,744 2,013,467 -1,546,857 466,610 － 890,470 2,377,166 263,463 280,648 3,007 2,924,286 802,137 753,945 500,422 135,491 -65,294 2,126,702 5,941,459 22,281,489 － 9 － (Thousands of yen) As of January 31, 2021 As of January 31, 2022 Liabilities Current liabilities Short-term borrowings Current portion of long-term borrowings Accounts payable – other Accrued expenses Income taxes payable Provision for bonuses Other Total current liabilities Non-current liabilities Long-term borrowings Retirement benefit liability Deferred tax liabilities Other Total non-current liabilities Total liabilities Net assets Shareholders’ equity Share capital Capital surplus Retained earnings Treasury shares Total shareholders’ equity Accumulated other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Total accumulated other comprehensive income Non-controlling interests Total net assets Total liabilities and net assets 4,540 7,620 2,067,679 216,301 970,324 56,339 1,131,201 4,454,007 34,365 96,572 31,950 97,340 260,228 4,714,236 1,239,064 2,379,899 12,372,175 -167,696 15,823,442 48,373 -200,676 -152,303 3,950 15,675,089 20,389,325 － 48,394 1,987,729 560,653 642,376 79,077 840,410 4,158,641 251,389 120,856 16,626 87,706 476,579 4,635,220 1,239,064 2,379,899 14,120,757 -293,102 17,446,619 27,063 164,658 191,721 7,926 17,646,268 22,281,489 － 10 － (2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income Consolidated Statements of Income (Thousands of yen) Fiscal year ended January 31, 2021 Fiscal year ended January 31, 2022 Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating profit Non-operating income Interest income Dividend income Foreign exchange gains Surrender value of insurance policies Subsidy income Gain on adjustment of account payable Other Total non-operating income Non-operating expenses Interest expenses Foreign exchange losses Share of loss of entities accounted for using equity method Other Total non-operating expenses Ordinary profit Extraordinary profit Gain on sales of property, plant, and equipment Total extraordinary profit Extraordinary losses Loss on disposals of property, plant, and equipment Loss on valuation of investment securities Impairment loss Total extraordinary losses Profit before income taxes Income taxes – current Income taxes – deferred Total income taxes Profit Loss attributable to non-controlling interests Profit attributable to owners of parent 26,729,396 18,721,803 8,007,593 4,789,914 3,217,679 3,335 745 64,718 124,595 151,418 8,645 32,370 385,829 2,748 － － 5,034 7,783 3,595,725 － － － － 132,440 132,440 3,463,284 1,455,126 -26,125 1,429,000 2,034,283 -85,709 2,119,993 34,252,376 24,535,211 9,717,164 6,411,964 3,305,200 3,989 2,173 － － 122,465 8,081 37,679 174,387 1,636 10,724 67,028 17,417 96,807 3,382,780 230,813 230,813 59,788 63,018 249,367 372,175 3,241,419 1,299,616 -295,171 1,004,444 2,236,974 -4,129 2,241,103 － 11 － Consolidated Statement of Comprehensive Income Profit Other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Share of other comprehensive income of affiliates accounted for by the equity method Total other comprehensive income Comprehensive income Comprehensive income attributable to Comprehensive income attributable to owners of parent Comprehensive income attributable to non-controlling interests (Thousands of yen) Fiscal year ended January 31, 2021 Fiscal year ended January 31, 2022 2,034,283 -115,496 -115,517 － -231,013 1,803,270 1,888,953 -85,682 2,236,974 -21,309 342,384 23,130 344,204 2,581,179 2,585,129 -3,950 － 12 － (3) Consolidated Statements of Changes in Net Assets Fiscal 2021 (From February 1, 2020, to January 31, 2021) Shareholders’ equity (Thousands of yen) Balance at beginning of period Changes of item during period Issuance of new shares Dividends of surplus Profit attributable to owners of parent Disposal of treasury shares Net changes in items other than shareholders’ equity Share capital Capital surplus Retained earnings Treasury shares 1,237,674 2,377,916 10,706,356 -169,686 1,390 1,390 -454,174 2,119,993 592 1,989 Total changes of items during period 1,390 1,983 1,665,818 1,989 1,671,182 Balance at end of period 1,239,064 2,379,899 12,372,175 -167,696 15,823,442 Accumulated other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Total accumulated other comprehensive income Non-controlling interests Total net assets 163,869 -85,133 78,735 89,633 14,320,629 Total shareholders’ equity 14,152,260 2,780 -454,174 2,119,993 2,582 2,780 -454,174 2,119,993 2,582 -316,722 1,354,459 15,675,089 Balance at beginning of period Changes of item during period Issuance of new shares Dividends of surplus Profit attributable to owners of parent Disposal of treasury shares Net changes in items other than shareholders’ equity Total changes of items during period Balance at end of period -115,496 -115,496 48,373 -115,543 -115,543 -200,676 -231,039 -231,039 -152,303 -85,682 -85,682 3,950 － 13 － Fiscal 2022 (From February 1, 2021, to January 31, 2022) Shareholders’ equity Share capital Capital surplus Retained earnings Treasury shares 1,239,064 2,379,899 12,372,175 -167,696 (Thousands of yen) Total shareholders’ equity 15,823,442 Balance at beginning of period Changes of item during period Dividends of surplus Profit attributable to owners of parent Disposal of treasury shares Net changes in items other than shareholders’ equity Balance at beginning of period Changes of item during period Dividends of surplus Profit attributable to owners of parent Disposal of treasury shares Net changes in items other than shareholders’ equity Total changes of item during period Balance at end of period Total changes of item during period － － 1,748,582 Balance at end of period 1,239,064 2,379,899 14,120,757 Accumulated other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Total accumulated other comprehensive income Non-controlling interests Total net assets 48,373 -200,676 -152,303 3,950 15,675,089 -492,521 2,241,103 -492,521 2,241,103 -125,405 1,623,177 17,446,619 -125,405 -125,405 -293,102 -492,521 2,241,103 -125,405 348,001 1,971,179 17,646,268 -21,309 -21,309 27,063 365,335 365,335 164,658 344,025 344,025 191,721 3,976 3,976 7,926 － 14 － (4) Consolidated Statements of Cash Flows Cash flows from operating activities Profit before income taxes Depreciation Impairment loss Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Increase (decrease) in provision for bonuses Increase (decrease) in retirement benefit liability Interest and dividend income Surrender value of insurance policies Subsidy income Interest expenses Foreign exchange losses (gains) Share of loss (profit) of entities accounted for using equity method Gain on sales of property, plant, and equipment Loss on disposals of property, plant, and equipment Loss (gain) on valuation of investment securities Decrease (increase) in trade receivables Increase (decrease) in accounts payable – other Increase (decrease) in accrued expenses Increase (decrease) in accrued consumption taxes Increase (decrease) in deposits received Other, net Subtotal Interest and dividends received Proceeds from subsidy income Interest paid Income taxes paid Net cash provided by (used in) operating activities Cash flows from investing activities Purchase of property, plant and equipment Proceeds from sales of property, plant and equipment Purchase of intangible assets Proceeds from sales of intangible assets Purchase of investment securities Purchase of shares of subsidiaries resulting in change in scope of consolidation Purchase of shares of subsidiaries and associates Payments for acquisition of business Loan advances Collection of loans receivable Payments of leasehold and guarantee deposits Proceeds from refund of leasehold and guarantee deposits Other, net Net cash provided by (used in) investing activities Cash flows from financing activities Net increase (decrease) in short-term borrowings Repayments of long-term borrowings Proceeds from issuance of shares Dividends paid Payments for purchase of treasury stock Net cash provided by (used in) financing activities Effect of exchange rate change on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period － 15 － (Thousands of yen) Fiscal year ended January 31, 2021 Fiscal year ended January 31, 2022 3,463,284 361,896 132,440 273,956 39,526 27,095 20,269 -4,081 -124,595 -151,418 2,748 -5,920 － － － － -910,097 414,065 53,547 114,885 -139,420 -740,985 2,827,199 3,791 151,418 -2,613 -939,430 2,040,365 -261,583 － -343,190 － -182,172 -153,262 -64,999 － -7,828 11,315 -234,337 34,856 237,982 -963,219 -10,759 -6,536 2,780 -454,174 － -468,688 35,920 644,377 10,514,170 11,158,548 3,241,419 492,796 249,367 400,659 -5,477 -4,763 24,284 -6,162 － -122,465 1,636 -38,214 67,028 -230,813 59,788 63,018 316,924 -646,504 217,164 -36,851 -134,141 -439,627 3,469,066 7,828 122,465 -2,928 -1,751,940 1,844,490 -571,736 2,510 -80,385 230,813 -284,245 -1,529,015 － -477,539 -6,048 12,100 -75,516 117,164 － -2,661,898 -13,081 -28,822 － -492,521 -125,405 -659,830 53,907 -1,423,330 11,158,548 9,735,217 (5) Notes to Consolidated Financial Statements (Notes on Going Concern Assumption) Not applicable Segment Information and others (Segment Information) 1. Overview of reporting segments The Company’s reporting segments are the compositional units of the Company for which separate financial information is available. They are periodically examined by the Board of Directors for the purpose of deciding on allocation of management resources and evaluating business results. The Company consists of two main businesses: Testing/Verification & Evaluation Business that carries out defect detection (finding bugs) in support of improvement in product quality of software and hardware, and Internet Supporting Business that detects illegal or harmful information in Web content, and improper use of the Web, in order to support sound Internet growth. As a result, the Company is composed of two reporting segments with separate organizations and service characteristics: The Testing/Verification & Evaluation Business, and the Internet Supporting Business. In the Testing/Verification & Evaluation Business, the Company provides defect detecting (finding bugs), verification and evaluation, and translation services. In Internet Supporting Business, the Company provides Internet monitoring and Customer Support services. 2. Calculation methods for net sales, income and loss, assets and liabilities and other items by reporting segment The accounting methods used for the reported business segments are in line with ” Significant Items Regarding the Preparation of Consolidated Financial Statements”. Segment income (loss) for reporting segments represents operating income (loss). Intersegment sales and transactions are based on prevailing market prices. － 16 － 3. Net sales, income (loss), assets and other items by reporting segment Fiscal year ended January 31, 2021 (From February 1, 2020, to January 31, 2021) Reportable segments Testing/Verification and Evaluation Business Internet Supporting Business Reportable segments (Thousands of yen) Other *1 Total Reconciliation items *2, 3, 4 Per consolidated financial statements*5 20,129,809 6,441,040 26,570,850 158,546 26,729,396 － 26,729,396 2,577 184,181 186,758 － 186,758 -186,758 － 20,132,386 6,625,222 26,757,609 158,546 26,916,155 -186,758 26,729,396 2,647,865 611,603 3,259,468 -139,666 3,119,802 97,876 3,217,679 15,948,012 2,451,731 18,399,743 450,322 18,850,066 1,539,259 20,389,325 288,306 45,746 334,052 12,470 346,522 15,373 361,896 344,137 10,794 354,931 214,433 569,364 15,507 584,872 Sales Revenues from external customers Transactions with other segments Net sales Operating profit (loss) Assets Other items Depreciation Increase in property, plant and equipment and intangible assets *Notes: 1. Others covers operations not included in reporting segments, and mainly encompasses the publishing, media businesses and medical related businesses. 2. Adjustment for segment income of ¥97,876 thousand comprises elimination of intersegment transactions of ¥785,225 thousand and unallocated corporate expenses of – ¥687,348 thousand. Unallocated corporate expenses are mainly general administrative expenses. 3. Adjustment for segment assets of ¥1,539,259 thousand comprises elimination of intersegment transactions of – ¥16,818 thousand and unallocated corporate assets of ¥1,556,078 thousand. Major components of the unallocated corporate assets are surplus operating funds (cash and deposits), long-term investment funds (investment securities) and assets pertaining to administrative divisions. 4. Adjustment for depreciation and amortization of ¥15,373 thousand is unallocated and part of corporate depreciation and amortization. 5. Segment income (loss) is adjusted against the operating profit recorded in the consolidated income statement. － 17 － Fiscal year ended January 31, 2022 (From February 1, 2021, to January 31, 2022) Reportable segments Testing/Verification and Evaluation Business Internet Supporting Business Reportable segments (Thousands of yen) Other *1 Total Reconciliation items *2, 3, 4 Per consolidated financial statements*5 26,439,240 7,580,748 34,019,988 232,387 34,252,376 － 34,252,376 10,134 216,366 226,501 97 226,598 -226,598 － Net sales 26,449,374 7,797,114 34,246,489 232,485 34,478,975 -226,598 34,252,376 2,461,133 819,736 3,280,870 -15,902 3,264,967 40,232 3,305,200 Assets 18,115,395 2,683,728 20,799,123 179,135 20,978,259 1,303,229 22,281,489 Depreciation 409,198 51,742 460,941 16,803 477,744 15,051 492,796 Sales Revenues from external customers Transactions with other segments Operating profit (loss) Other items Increase in property, plant and equipment and intangible assets 525,787 36,405 562,193 15,206 577,400 117,041 694,441 *Notes: 1. Others covers operations not included in reporting segments, and mainly encompasses the publishing, media businesses and medical related businesses. 2. Adjustment for segment income of ¥40,232 thousand comprises elimination of intersegment transactions of ¥869,425 thousand and unallocated corporate expenses of – ¥829,193 thousand. Unallocated corporate expenses are mainly general administrative expenses. 3.Adjustment for segment assets of ¥1,303,229 thousand comprises elimination of intersegment transactions of – ¥1,023,355 thousand and unallocated corporate assets of ¥2,326,585 thousand. Major components of the unallocated corporate assets are surplus operating funds (cash and deposits), long-term investment funds (investment securities) and assets pertaining to administrative divisions. 4. Adjustment for depreciation and amortization of ¥15,051 thousand is unallocated and part of corporate depreciation and amortization. 5. Segment income (loss) is adjusted against the operating profit recorded in the consolidated income statement. － 18 － (Related information) Fiscal year ended January 31, 2021 (From February 1, 2020, to January 31, 2021) 1. Product and services-specific information Not presented, as information similar to segment information is already presented. 2. Geographical information (1) Net Sales Japan Asia North America Europe Total 19,502,003 750,345 4,212,781 2,264,265 26,729,396 Note: Sales are categorized by country or region based on customer locations. (Thousands of yen) (2) Property, plant and equipment Japan Asia North America Europe Total 339,822 142,638 104,421 107,272 694,154 (Thousands of yen) 3. Key customer information Not presented, as no customer accounts for more than 10% of sales in Consolidation Income Statements. Fiscal year ended January 31, 2022 (From February 1, 2021, to January 31, 2022) 1. Product- and services-specific information Not presented, as information similar to segment information is already presented. 2. Geographical information (1) Net Sales Japan Asia North America Europe Total 24,371,791 1,215,296 5,797,410 2,867,879 34,252,376 Note: Sales are categorized by country or region based on customer locations. (Thousands of yen) (2) Property, plant and equipment Japan Asia North America Europe Total 466,288 136,864 154,074 133,242 890,470 (Thousands of yen) 3. Key customer information Not presented, as no customer accounts for more than 10% of sales in Consolidation Income Statements. － 19 － (Information about impairment losses on property, plant and equipment by reporting segment) Fiscal year ended January 31, 2021 (From February 1, 2020, to January 31, 2021) Testing/ Verification & Evaluation Business Internet Supporting Business (Thousands of yen) Others Corporate and Eliminations Total Impairment losses 132,440 － － 132,440 Fiscal year ended January 31, 2022 (From February 1, 2021, to January 31, 2022) Testing/ Verification & Evaluation Business Internet Supporting Business (Thousands of yen) Others Corporate and Eliminations Total Impairment losses 4,862 － 244,505 － 249,367 (Information about amortization of goodwill and amortized balance by reporting segment) Fiscal year ended January 31, 2021 (From February 1, 2020, to January 31, 2021) Testing/ Verification & Evaluation Business Internet Supporting Business 243,160 30,795 447,497 64,157 Amortization of goodwill Amortized balance (Thousands of yen) Others Corporate and Eliminations Total － － 273,956 511,654 Note: During the consolidated fiscal year under review, for the segment Testing/Verification & Evaluation Business recorded 132,440 thousand yen in impairment loss. Fiscal year ended January 31, 2022 (From February 1, 2021, to January 31, 2022) (Thousands of yen) Testing/ Verification & Evaluation Business Internet Supporting Business 369,864 30,795 2,343,804 33,361 Amortization of goodwill Amortized balance Others Corporate and Eliminations Total － － 400,659 2,377,166 (Information about negative goodwill gains by reporting segment) Fiscal year ended January 31, 2021 (From February 1, 2020, to January 31, 2021) Fiscal year ended January 31, 2022 (From February 1, 2021, to January 31, 2022) Not applicable Not applicable － － － － － 20 － Per share information Fiscal year ended January 31, 2021 Fiscal year ended January 31, 2022 Net assets per share Net profit per share Diluted net profit per share ¥413.64 ¥55.99 ¥55.96 ¥467.17 ¥59.16 – Note: 1. Diluted net profit per share for this fiscal year ended January 31 2022, is not shown in the above table, as there are no dilutive shares. 2. The basis for calculating net profit per share and diluted net profit per share is as follows. Net profit per share Profit attributable to owners of parent (thousands of yen) Amount not attributable to common stockholders (thousands of yen) Profit attributable to owners of parent per share of common stock (thousands of yen) Average number of shares of common stock outstanding during period Diluted net profit per share Adjustment for profit attributable to owners of parent (thousands of yen) Increase in number of shares of common stock (Subscription rights to shares) Because there was no dilutive effect, net profit per share was not included in the calculation of diluted net profit per share Significant Subsequent Events Not applicable Fiscal year ended January 31, 2021 Fiscal year ended January 31, 2022 2,119,993 2,241,103 2,119,993 2,241,103 37,865,200 37,881,028 － － 18,393 (18,393) － － － (－) － － 21 －