アウトソーシング（2427） – Summary of Financial Results for the first quarter 2022

Disclaimer: This document is a translation of the Japanese original and does not constitute any guarantee. The Company will not compensate for any loss or damage resulting from actions taken based on this document. If there is any discrepancy between the Japanese original and this document, the Japanese original prevails. Consolidated Financial Results for the Three Months Ended March 31, 2022 (Under IFRS) Company name: Securities code: Representative: Contact: OUTSOURCING Inc. 2427 Haruhiko Doi, Chairman and CEO Masashi Umehara, Director and Executive General Manager in charge of Corporate Management Division TEL: +81-3-3286-4888 Listing: Tokyo Stock Exchange URL: https://www.outsourcing.co.jp/en/ May 9, 2022 Scheduled date to file quarterly securities report: Scheduled date to commence dividend payments: Preparation of supplementary material on quarterly financial results: Holding of quarterly financial results briefing: May 13, 2022 – Yes Yes (for institutional investors) (Yen amounts are rounded off to millions, unless otherwise noted.) 1. Consolidated financial results for the three months ended March 31, 2022 (From January 1, 2022 to March 31, 2022) a. Consolidated operating results (Cumulative) Revenue Operating profit Profit before tax Profit (Percentages indicate year-on-year changes.) Profit attributable to owners of parent Total comprehensive income Three months ended Million yen % Million yen % Million yen % Million yen % Million yen % Million yen % March 31, 2022 March 31, 2021 155,313 123,801 25.5 38.2 6,008 16.4 3,985 (30.3) 1,814 (46.7) 1,616 (47.2) 5,161 50.8 5,721 143.2 3,405 133.8 3,064 133.7 7,434 7,819 (4.9) － Basic earnings per share Diluted earnings per share Three months ended March 31, 2022 March 31, 2021 (Note) Since the provisional accounting treatments related to business combinations were finalized in the third quarter and fourth quarter of the fiscal year ended December 31, 2021, as well as in the first quarter ended March 31, 2022, the condensed quarterly consolidated financial statements for the first quarter ended March 31, 2021 were retrospectively adjusted. Yen 12.83 24.33 Yen 12.83 24.33 b. Consolidated financial position Total assets Total equity Equity attributable to owners of parent Ratio of equity attributable to owners of parent to total assets Equity attributable to owners of parent per share As of March 31, 2022 December 31, 2021 Million yen Million yen Million yen 372,562 351,576 74,843 72,484 69,730 65,850 (Note) Since the provisional accounting treatments related to business combinations were finalized in the first quarter ended March 31, 2022, the consolidated financial statements for the fiscal year ended December 31, 2021, were retrospectively adjusted. First quarter-end Second quarter-end Third quarter-end Fiscal year-end Total Annual dividends per share % 18.7 18.7 Yen 31.00 45.00 Yen 553.83 522.92 Yen 31.00 45.00 Yen － － 2. Cash dividends Fiscal year ended December 31, 2021 Fiscal year ending December 31, 2022 Fiscal year ending December 31, 2022 (Forecast) (Note) Yen － － Revisions to the forecast of cash dividends most recently announced: None Yen 0.00 0.00 3. Forecast of consolidated financial results for the fiscal year ending December 31, 2022 (From January 1, 2022 to December 31, 2022) Revenue Operating profit Profit before tax Profit Million yen % Million yen % Million yen % Million yen % Million yen Half-year Full year 323,000 695,000 22.1 22.1 10,500 (9.0) 9,300 (14.2) 5,600 (12.8) 32,000 33.4 29,600 150.7 19,300 832.5 Revisions to the financial results forecast most recently announced: None (Note) (Notes) (1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in the change in (Percentages indicate year-on-year changes.) Profit attributable to owners of parent Basic earnings per share % (7.4) － 5,200 18,500 Yen 41.30 146.93 scope of consolidation): None (2) Changes in accounting policies and accounting estimates (a) Changes in accounting policies as required by IFRS: (b) Changes in accounting policies due to other reasons: (c) Changes in accounting estimates: None None None (3) Number of issued shares (ordinary shares) (a) Number of issued shares at the end of the period (including treasury shares) As of March 31, 2022 125,926,800 As of December 31, 2021 125,926,800 (b) Number of treasury shares at the end of the period As of March 31, 2022 23,490 As of December 31, 2021 490 (c) Average number of shares outstanding during the period (cumulative from the beginning of the fiscal year) Three months ended March 31, 2022 125,908.421 Three months ended March 31, 2021 125,908,810 (Notes) * This summary of quarterly financial statements is not subject to quarterly review by certified public accountants or an auditing firm. * Statement regarding the proper use of financial forecasts and other special remarks: (Cautions concerning forward-looking statements) The forward-looking statements including financial forecasts in this summary are based on information currently available to OUTSOURCING Inc. (hereinafter, “the Company”) and on assumptions believed to be reasonable by the Company. These statements do not guarantee future performance of the Company, and various factors may cause the actual results to differ significantly from the forecasts. For details on the specific assumptions on which the forecasts are based and cautionary statements regarding the use of financial forecasts, please see “1. QUALITATIVE INFORMATION ON QUARTELY FINANCIAL RESULTS, (3) Explanation of Forecasts Including the Consolidated Financial Results Forecasts” on page 5 of the attached documents. Table of Contents for the Attached Documents (1) (2) (3) 1. QUALITATIVE INFORMATION ON QUARTERLY FINANCIAL RESULTS ……………………………………….. 2 Overview of Consolidated Operating Results …………………………………………………………………………….. 2 Overview of Consolidated Financial Position …………………………………………………………………………….. 4 Explanation of Forecasts Including the Consolidated Financial Results Forecasts ………………… 5 2. CONDENSED QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES . 6 Condensed Quarterly Consolidated Statement of Financial Position ……………………………………….. 6 Condensed Quarterly Consolidated Statement of Profit or Loss ………………………………………………. 8 Condensed Quarterly Consolidated Statement of Comprehensive Income ………………………………. 9 Condensed Quarterly Consolidated Statement of Changes in Equity …………………………………….. 10 Notes to Condensed Quarterly Consolidated Financial Statements………………………………………… 12 [Going Concern Assumption] ……………………………………………………………………………………………………………. 12 [Changes in Significant Subsidiaries] …………………………………………………………………………………………………. 12 [Segment Information] ……………………………………………………………………………………………………………………. 12 SUPPLEMENTARY INFORMATION ………………………………………………………………………………………………….. 15 (1) (2) (3) (4) (5) 3. 1 1. QUALITATIVE INFORMATION ON QUARTERLY FINANCIAL RESULTS (1) Overview of Consolidated Operating Results The business environment during the three months ended March 31, 2022 (the “current period”), gradually saw signs of improvement to recover from uncertainties caused by the unprecedented COVID-19 pandemic thanks to the wide-spread vaccinations. However, pervasive uncertainty still remained as myriad events with significant repercussions on international affairs continued, such as new variants of coronaviruses spreading infections and the Ukraine crisis. Although the economy in Japan started to pick up, the prolonged semiconductor shortage, which had been a headache even before the pandemic, disproportionately affected the recovery of major manufacturers, representing the Company’s main customers. Meanwhile, companies in the information technology (IT), construction, and service industries continued to show a strong need for hiring engineers on the back of serious labor shortage. A consistent gain in demand was also evident in the area of system engineering and digital transformation (DX). Restructuring activities, such as disposals of companies or businesses, in manufacturing and IT industries also accelerated during the current period. In response to such business environment in Japan, the OUTSOURCING Group (the “Group”) has pursued to reinforce the growth domain by smoothing out earnings. In the manufacturing field, part of the work performed by fixed-term workers are replaced by dispatching workers under a long-term dispatch contract to mitigate the effect of production adjustment. Also, the Group continues to expand a dispatched employee management system, called “Cloud Staffing Management (CSM),” an HR tech service aiming to improve the productivity of customers through digitalizing dispatch management tasks. In the auto industry, although the supply chain disruption including semiconductor shortage has tentatively affected the production line, the demand for automobiles remains high and production is expected to catch up. Thus, when looking at the auto industry over a span of one year, the effect on the Group business is expected to ease. In the administrative work outsourcing business for technical intern trainees, the number of foreign workers under management marked 18,510 as of March 31, 2022, which continues to represent the top share in Japan, despite restrictions on entering Japan and precarious conditions of inbound flights under the COVID-19 pandemic, thanks to positive feedback from customers for the Group’s efficient and appropriate management service. In the engineering field, the Group is promoting “Dispatch 2.0,” a business model to improve efficiency and reduce manpower at the same time by combining engineers and technology. Also, the Group has developed a business scheme utilizing KEN School, one of the Group companies specialized in offering training service. KEN School provides training to people with little experience to enable them to work not only in the engineering field but also in various industries, including IT, construction, and pharma. By keeping recruitment costs at a low level while increasing the number of hiring through this scheme, the Group has successfully grown the business. Further, in April 2022, more than 3,200 new hires have joined the Group, making it one of the leading companies in hiring new graduates. Besides the manufacturing field, which is more susceptible to macroeconomic dynamics, the Group is expanding businesses that are less affected by economic fluctuations. In particular, the business with U.S. military facilities continues to see a steady growth, as renovation and maintenance services for buildings and facilities are less affected by the COVID-19 outbreak. As bidders for U.S. military construction projects are generally required to place an equivalent amount of bonds (i.e., performance guarantee insurance), the Company has successfully stretched the credit line of bonds by leveraging its creditworthiness to win large projects with high profitability. Looking at the market overseas, the economy in developed countries gradually saw a recovery thanks to the promotion of a large-scale inoculation together with COVID-19 countermeasures; however, uncertainty still remained quite high under the following circumstances: sudden increase of geopolitical risks led by the Ukraine crisis; rise in energy price, ramping up inflationary pressures; and the quick spread of new variants of coronaviruses. Under such business environment, the Group has continued to make all-out effort to reinforce the growth domain by smoothing out earnings for its overseas businesses. In detail, in addition to expanding outsourcing businesses in the public sector, including government projects, which are less susceptible to economic fluctuations, the Group offers engineering outsourcing service in a remote working environment. Also, the Group is rolling out a scheme to mobilize human resource at a global level from countries that have plenty of work force to those that face labor shortage. Moreover, the Group has successfully provided services to central and local governments, including digital governments, and has also expanded e-commerce logistics businesses that support lifelines. In addition, foreign exchange rates have served as a favorable tailwind for the overseas business, as yen is getting weaker against other currencies when compared to the projected rate used for developing the financial results forecast. In January 2022, the Company signed an early purchase agreement for the remaining shares of OTTO Group 2 in the Netherlands. The difference between put option liability and the acquisition price of the remaining shares was recorded as finance cost of some 2.4 billion yen in the current period. As finance cost is not supposed to be reflected in tax calculations, profit before tax, profit for the period, and profit attributable to owners of parent were significantly understated by the equivalent amount. However, now that the Group is engaged to early acquire the entire shares of OTTO Group, such non-recurring finance cost related to OTTO Group will not arise in the following periods. As a result, the Group recorded revenue of 155,313 million yen on a consolidated basis for the first quarter ended March 31, 2022, up 25.5% year-on-year, exceeding its previous high for the quarter for the 13th consecutive year. Operating profit marked 6,008 million yen, up 16.4% year-on-year, profit before tax of 3,985 million yen, down 30.3% year-on-year, and profit attributable to owners of parent of 1,616 million yen, down 47.2% year-on-year. The Group places a high value on sustainable growth. As for the sustainability policy of the Group to promote Sustainable Development Goals (“SDGs”) management, the Group is committed to corporate activities that will create job opportunities and education opportunities for many people around the world, through which the Group will seek to tackle society’s challenges, develop businesses, and contribute to the benefit of stakeholders in a sustainable manner. The Group has set 2021 to be the first year to tackle SDG issues and explore SDGs management by taking bold initiatives, including the announcement of “The OUTSOURCING Group SDGs Declaration,” the establishment of a Sustainability Committee, participation as a signatory to the United Nations Global Compact (“UNGC”) and in Global Compact Network Japan, and participation as a signatory to the Women’s Empowerment Principles. The Group continues to pursue the goal of creating a system under which its business activities will widely benefit the society. Segment results are provided below. The Group has five reportable segments, namely “Domestic Engineering Outsourcing Business,” “Domestic Manufacturing Outsourcing Business,” “Domestic Service Operations Outsourcing Business,” “Overseas Engineering Outsourcing Business,” and “Overseas Manufacturing and Service Operations Outsourcing Business.” Revenue for all of the five reportable segments successfully rose to another high in the current period. [Domestic Engineering Outsourcing Business] The Domestic Engineering Outsourcing Business experienced limited negative effects of the COVID-19 pandemic and continued to see a large increase in both revenue and profit from a year earlier during the current period. Particularly, the profit posted a double-digit growth, high enough to absorb upfront investment on the new hires of 2,600 or so, who are expected to join the business in April 2022. While taking the anticipated new hires into account, recruitment was carefully controlled and continued to be supported by the business scheme utilizing KEN School, which provides training to people with little experience for dispatching purposes, thereby keeping recruitment costs at a low level while increasing the number of recruited people. The number of worksite employees as of March 31, 2022, totaled 22,085, up 3,836 from a year earlier, which marked the highest in the industry despite the Group being a latecomer. The business expanded services to IT, construction, and pharma fields, identified as the focus areas to mitigate the effect of economic fluctuations in the manufacturing industry. Based on the above, segment revenue and operating profit for the Domestic Engineering Outsourcing Business during the current period were 34,225 million yen, up 24.0% year-on-year, and 2,922 million yen, up 34.3% year-on-year, respectively. [Domestic Manufacturing Outsourcing Business] In the Domestic Manufacturing Outsourcing Business, dispatching and outsourcing services as well as fee-charging recruiting service of fixed-term employees in the manufacturing field were negatively affected by production adjustment on the back of semiconductor shortages and supply chain disruptions under the pandemic. Although the impact should be tentative given the expected catch-up in production, revenue declined in the current period due to factory closures and other reasons. The number of worksite employees as of March 31, 2022, totaled 21,506, up 2,892 from a year earlier, as the business controlled the recruitment on the back of a prolonged semiconductor shortage. The number of workers is expected to rise when factories resume production at full-scale. In the administrative work outsourcing business, the need for recruiting technical intern trainees continued to be stable among manufacturers, representing the Company’s main customers. That said, the business was sluggish during the current period mainly because foreign workers continued to face difficulties in entering Japan. However, thanks to positive feedback from customers for the Group’s efficient and appropriate management service, the number of 3 foreign workers under management marked 18,510 as of March 31, 2022, leading the Japanese market. Based on the above, segment revenue and operating profit for the Domestic Manufacturing Outsourcing Business during the current period were 27,033 million yen, up 17.6% year-on-year, and 1,493 million yen, down 11.8% year-on-year, respectively. [Domestic Service Operations Outsourcing Business] The Domestic Service Operations Outsourcing Business mainly provides services to U.S. military facilities, which are less susceptible to macroeconomic dynamics, unlike businesses in the manufacturing field. The business enjoyed a steady growth during the current period by offering renovation and maintenance services for U.S. military buildings and facilities without being significantly affected by the pandemic. As bidders for U.S. military construction projects are generally required to place an equivalent amount of bonds (i.e., performance guarantee insurance), the Company successfully stretched the credit line of bonds by leveraging its creditworthiness to win large projects with high profitability. Although segment profit in the current period decreased from a year earlier, this was due to the profit being especially high for the three months ended March 31, 2021, when acceptance inspections for a number of large-scale construction projects came up around the same time. In other words, this does not indicate any deterioration in the business profitability in the current period. Based on the above, segment revenue and operating profit for the Domestic Service Operations Outsourcing Business during the current period were 8,402 million yen, up 20.7% year-on-year, and 1,092 million yen, down 18.8% year-on-year, respectively. [Overseas Engineering Outsourcing Business] The Overseas Engineering Outsourcing Business saw a large increase in both revenue and profit from a year earlier during the current period. Although the outsourcing business for public debt collection in the UK saw a dent in collection rates in certain areas, businesses grew at a brisk pace in Ireland and the Oceania region. As a result, the business segment results exceeded the budget. The UK public debt collection business is expecting a recovery in the coming periods. Based on the above, segment revenue and operating profit for the Overseas Engineering Outsourcing Business during the current period were 36,731 million yen, up 39.4% year-on-year, and 1,697 million yen, up 61.8% year-on-year, respectively. [Overseas Manufacturing and Service Operations Outsourcing Business] In the Overseas Manufacturing and Service Operations Outsourcing Business, the e-commerce related business centered around major supermarkets in the Netherlands continued to grow. In the UK, the recruiting and placing business for governments and the Business Process Outsourcing (BPO) business for local governments performed well. In South America, security service and cleaning work for logistics and retailing companies also saw strong results. Meanwhile, segment profit went down due to the recording of impairment of goodwill of 460 million yen in the UK and 60 million yen in Brazil, and also due to extra costs required to take countermeasures against the quick spread of new variants of COVID-19. Based on the above, segment revenue and operating profit for the Overseas Manufacturing and Service Operations Outsourcing Business during the current period were 48,907 million yen, up 22.6% year-on-year, and 755 million yen, down 45.3% year-on-year, respectively. [Other Businesses] Included in Other Businesses are shared service of administrative work and sign language classes provided by disabled who work for the Group’s special subsidiary company, which went well during the current period. Based on the above, segment revenue during the first quarter ended March 31, 2022, marked 15 million yen, up 11.3% year-on-year, and operating profit of 109 million yen, a significant increase when compared to operating loss of 22 million yen posted in the same quarter of last year. (2) Overview of Consolidated Financial Position Total assets as of March 31, 2022 were 372,562 million yen, an increase of 20,986 million yen from December 31, 2021. This is primarily attributed to an increase in trade and other receivables, right-of-use assets, and goodwill. Total liabilities as of March 31, 2022 were 297,719 million yen, an increase of 18,627 million yen from December 31, 2021. This is primarily attributed to an increase in bonds and borrowings. 4 Equity as of March 31, 2022 was 74,843 million yen, an increase of 2,359 million yen from December 31, 2021, which is mainly affected by a decrease due to payment of cash dividends, more than offset by exchange differences and other reasons. (3) Explanation of Forecasts Including the Consolidated Financial Results Forecasts The financial results forecasts for the six months ending June 30, 2022, and the fiscal year ending December 31, 2022 have not changed from those that were originally announced on February 18, 2022. The forecasts represent forward-looking statements determined based on information available as of the time of the creation of this document and involve uncertainties to some degree. At this moment, it is difficult for the Company to predict precisely when the COVID-19 outbreak will settle down in countries where its foreign subsidiaries are located. Also, events across the globe, including rising tensions due to the Ukraine crisis in, soaring energy prices, and unprecedented inflationary environment, are threating the global economy to a great extent. Against this backdrop, the Company may revise the financial results forecasts, or the actual financial results may differ from the forecasts due to changes in the business situation or other reasons. 5 2. CONDENSED QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES (1) Condensed Quarterly Consolidated Statement of Financial Position (Million yen) As of December 31, 2021 As of March 31, 2022 Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Other financial assets Other current assets Total current assets Non-current assets Property, plant, and equipment Right-of-use assets Goodwill Intangible assets Investments accounted for using equity method Other financial assets Other non-current assets Deferred tax assets Total non-current assets Total assets 48,334 88,061 2,658 14,652 13,493 167,198 11,611 21,362 84,870 37,515 221 21,508 1,849 5,442 184,378 351,576 45,759 98,907 2,278 15,570 15,460 177,974 11,972 25,030 89,555 38,067 261 22,222 1,182 6,300 194,589 372,562 6 (Million yen) As of December 31, 2021 As of March 31, 2022 Liabilities and equity Liabilities Current liabilities Trade and other payables Bonds and borrowings Lease liabilities Other financial liabilities Income taxes payable Other current liabilities Total current liabilities Non-current liabilities Bonds and borrowings Lease liabilities Other financial liabilities Retirement benefit liability Provisions Other non-current liabilities Deferred tax liabilities Total non-current liabilities Total liabilities Equity Share capital Capital surplus Treasury shares Other capital surplus Other components of equity Retained earnings Total equity attributable to owners of parent Non-controlling interests Total equity Total liabilities and equity 62,398 88,396 20,395 9,383 4,654 27,286 212,512 15,645 27,157 8,321 3,309 1,212 735 10,200 66,580 279,092 25,230 26,663 (0) (12,887) 4,027 22,819 65,850 6,634 72,484 351,576 66,361 51,834 22,252 11,518 3,127 26,129 181,222 70,690 30,295 803 2,369 1,275 738 10,328 116,498 297,719 25,230 26,663 (0) (12,265) 9,209 20,894 69,730 5,114 74,843 372,562 7 (2) Condensed Quarterly Consolidated Statement of Profit or Loss (Million yen) For the three months ended March 31, 2021 For the three months ended March 31, 2022 Revenue Cost of sales Gross profit Selling, general and administrative expenses Other operating income Other operating expenses Operating profit Finance income Finance costs Share of profit (loss) of investments accounted for using equity method Profit before tax Income tax expense Profit for the period Profit attributable to: Owners of parent Non-controlling interests Profit for the period Earnings per share Basic earnings per share (Yen) Diluted earnings per share (Yen) 123,801 (100,085) 23,716 (20,283) 1,869 (141) 5,161 1,563 (1,053) 51 5,721 (2,316) 3,405 3,064 342 3,405 24.33 24.33 155,313 (126,806) 28,508 (23,984) 2,242 (758) 6,008 924 (2,987) 40 3,985 (2,171) 1,814 1,616 198 1,814 12.83 12.83 8 (3) Condensed Quarterly Consolidated Statement of Comprehensive Income (Million yen) For the three months ended March 31, 2021 For the three months ended March 31, 2022 Profit for the period Other comprehensive income Items that will not be reclassified subsequently to profit or loss: Remeasurements of defined benefit retirement plans Change in fair value of equity financial assets measured at fair value through other comprehensive income Total of items that will not be reclassified subsequently to profit or loss Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign operations Change in fair value of debt financial assets measured at fair value through other comprehensive income Total of items that may be reclassified subsequently to profit or loss Other comprehensive income, net of tax Total comprehensive income Comprehensive income attributable to: Owners of parent Non-controlling interests Total comprehensive income 3,405 357 119 476 3,937 1 3,937 4,414 7,819 7,386 433 7,819 1,814 319 (79) 240 5,380 － 5,380 5,620 7,434 7,118 317 7,434 9 (4) Condensed Quarterly Consolidated Statement of Changes in Equity For the three months ended March 31, 2021 (From January 1, 2021, to March 31, 2021) Equity attributable to owners of parent Balance at January 1, 2021 Profit for the period Other comprehensive income Total comprehensive income Dividends Transfer to retained earnings Other increase (decrease) Total contributions by (distributions to) owners Changes from business combination and others Total changes in ownership interests in subsidiaries Total transactions with owners (Million yen) Other components of equity Exchange differences on translation of foreign operations Change in fair value of debt financial assets measured at fair value through other comprehensive income Share capital Capital surplus Treasury shares Other capital surplus Million yen 25,214 – – 26,647 Million yen – – – – (0) – – Million yen – – – – (13,456) – – Million yen – – – – (1,518) – 3,845 Million yen 3,845 – – – 1 1 – Million yen – 1 – – – – – – – – – – – – – – – – – 548 548 548 – – – – – – – – 2 Non-controlling interests Total equity Equity attributable to owners of parent Other components of equity Remeasurements of defined benefit retirement plans Change in fair value of equity financial assets measured at fair value through other comprehensive income Total Retained earnings Total – – – – Balance at March 31, 2021 25,214 26,647 (0) (12,908) 2,328 Balance at January 1, 2021 Profit for the period Other comprehensive income Total comprehensive income Dividends Transfer to retained earnings Other increase (decrease) Total contributions by (distributions to) owners Changes from business combination and others Total changes in ownership interests in subsidiaries Total transactions with owners Balance at March 31, 2021 Million yen Million yen Million yen Million yen Million yen Million yen Million yen – – 357 357 – (357) – (357) – – (357) – 329 – 119 119 – – – – – – – 448 (1,187) – 4,322 4,322 – (357) – (357) – – 23,229 3,064 – 3,064 (1,259) 357 (18) (920) – – (357) 2,778 (920) 25,373 60,448 3,064 4,322 7,386 (1,259) – (18) (1,277) 548 548 (729) 67,104 5,998 342 91 433 (1,034) – – (1,034) 553 553 (480) 5,951 66,446 3,405 4,414 7,819 (2,293) – (18) (2,311) 1,101 1,101 (1,210) 73,055 10 For the three months ended March 31, 2022 (From January 1, 2022, to March 31, 2022) Equity attributable to owners of parent (Million yen) Other components of equity Exchange differences on translation of foreign operations Change in fair value of debt financial assets measured at fair value through other comprehensive income Share capital Capital surplus Treasury shares Other capital surplus Million yen 25,230 – – – 26,663 Million yen – – – – (0) – – – Million yen – – – – (12,887) – – – Million yen – – – (5) – 5,259 3,549 5,259 Million yen – – – – – – – 1 Million yen – – – – (5) 627 627 622 – – – – – – – – 1 – – – – Balance at January 1, 2022 Profit for the period Other comprehensive income Total comprehensive income Dividends Share-based remuneration transactions Transfer to retained earnings Other increase (decrease) Total contributions by (distributions to) owners Changes from business combination and others Total changes in ownership interests in subsidiaries Total transactions with owners Balance at March 31, 2022 25,230 26,663 (0) (12,265) 8,807 Equity attributable to owners of parent Other components of equity Remeasurements of defined benefit retirement plans Change in fair value of equity financial assets measured at fair value through other comprehensive income Total Retained earnings Total Non-controlling interests Total equity Million yen Million yen 477 Million yen 4,027 Million yen 22,819 Million yen 65,850 Million yen 6,634 Million yen 72,484 – 5,501 5,501 – – (319) – (319) – – 1,616 – 1,616 (3,904) – 319 44 – – 1,616 5,501 7,118 (3,904) (5) – 44 627 627 – (77) (77) – – – – – – – – 400 (319) 9,209 (3,541) 20,894 (3,238) 69,730 198 118 317 (1,124) – – – (713) (713) (1,837) 5,114 1,814 5,620 7,434 (5,028) (5) – 44 (86) (86) (5,075) 74,843 (3,541) (3,865) (1,124) (4,989) Balance at January 1, 2022 Profit for the period Other comprehensive income Total comprehensive income Dividends Share-based remuneration transactions Transfer to retained earnings Other increase (decrease) Total contributions by (distributions to) owners Changes from business combination and others Total changes in ownership interests in subsidiaries Total transactions with owners Balance at March 31, 2022 – – – – – – – – – – – – – – – – – 319 319 – – (319) – (319) – – (319) – 11 (5) Notes to C ondensed Quarterly Consolidated Financial Statements [Going Concern Assumption] Not applicable. [Changes in Significant Subsidiaries] Not applicable. [Segment Information] (a) Overview of Reportable Segments The reportable segments of the Group are its components for which discrete financial information is available and which are subject to periodical assessments by the Board of Directors to determine allocation of management resources and evaluate performance. The Group consists of segments categorized by description of business, with five reportable segments, namely “Domestic Engineering Outsourcing Business,” “Domestic Manufacturing Outsourcing Business,” “Domestic Service Operations Outsourcing Business,” “Overseas Engineering Outsourcing Business,” and “Overseas Manufacturing and Service Operations Outsourcing Business.” Major operations of each segment are as follows: Domestic Engineering Outsourcing Business: Subsidiaries of the Company provide the following: services to offer sophisticated technologies and know-how to assist manufacturers in their design/development and experiment/evaluation processes; development of telecommunication-related applications for websites, smartphones, etc., as well as development of e-commerce websites; various solution services for and development of foundational IT systems, infrastructure, and networks; outsourcing services for research and development operations specializing in medical- and chemical-related areas; services to offer expertise and know-how for construction management/design as well as for the design, construction, management, and the like of various plants; and IT schools. Domestic Manufacturing Outsourcing Business: The Company and its subsidiaries offer services to realize better production efficiencies by providing technologies and management know-how in response to manufacturers’ needs for outsourcing manufacturing processes. In addition, the Company and its subsidiaries offer comprehensive consignment services covering everything from outsourced recruitment of fixed-term employees to be directly employed by customers (fee-charging recruiting service), administrative work outsourcing including labor management and housing management for fixed-term employees, technical intern trainees, international students, etc., and job hunting support for workers whose employment terms have expired. Domestic Service Operations Outsourcing Business: Subsidiaries of the Company offer services to government offices such as U.S. military facilities and services for logistics companies and call centers. Overseas Engineering Outsourcing Business: Overseas subsidiaries of the Company offer dispatch and recruiting services of specialists, mainly in Europe and Australia, in the following areas: IT, finance, pharmaceuticals, life science, medicine, and healthcare. Government debt collection service using artificial intelligence is also provided. Overseas Manufacturing and Service Operations Outsourcing Business: Overseas subsidiaries of the Company mainly offer human resource services for manufacturing-related production outsourcing, dispatching and recruiting of personnel for administrative and service-related work, and payroll services in Asia, South America, Europe, and other areas. In addition, they offer other services, including BPO services and temporary worker dispatching for public institutions in Europe and Australia as well as cross-border employment services in Europe and Asia. Other Business: Subsidiaries of the Company provide administrative outsourcing services and the like. 12 (b) Segment Revenues and Results operating profit. Revenues and results by reportable segment are as shown below. Segment profit figures are based on For the three months ended March 31, 2021 (From January 1, 2021 to March 31, 2021) Domestic Engineering Outsourcing Business Domestic Manufacturing Outsourcing Business Reportable Segment Domestic Service Operations Outsourcing Business Overseas Engineering Outsourcing Business Overseas Manufacturing and Service Operations Outsourcing Business Other Business (Note 1) Total Total Adjustments (Note 2) Consolidated Revenue Million yen Million yen Million yen Million yen Million yen Million yen Million yen Million yen Million yen Million yen 27,597 22,992 6,960 26,353 39,884 123,787 13 123,801 － 123,801 722 602 51 260 420 2,055 2,427 (2,427) － Total 28,319 23,595 7,011 26,613 40,304 125,842 126,228 (2,427) 123,801 (26,144) (21,903) (5,666) (25,564) (38,923) (118,200) (407) (118,607) (33) (118,640) 2,176 1,691 1,345 1,049 1,382 7,643 (22) 7,621 (2,460) 5,161 － － － － － － － － － － － － － － － － － － － － － － － － － － － － 1,563 (1,053) 51 5,721 The category “Other Business” is an operating segment that is not included among the reportable segments, in which subsidiaries of the Company engage in administrative outsourcing services and the like. The adjustment of segment profit of (2,460) million yen includes acquisition-related cost related to business combinations of (747) million yen, corporate expenses of (1,664) million yen, profits or losses not allocated to any specific operating segment, and elimination of intersegment transactions. Intersegment revenues are based on prevailing market prices. － － － － Revenue from external customers Intersegment revenue (Note 3) Cost of sales and other income (expenses) Segment profit (Operating profit) (Reconciling items) Finance income Finance costs Share of profit (loss) of investments accounted for using equity method Profit before tax (Note 1) (Note 2) (Note 3) 372 385 － － － － 13 For the three months ended March 31, 2022 (From January 1, 2022 to March 31, 2022) Domestic Engineering Outsourcing Business Domestic Manufacturing Outsourcing Business Reportable Segment Domestic Service Operations Outsourcing Business Overseas Engineering Outsourcing Business Overseas Manufacturing and Service Operations Outsourcing Business Other Business (Note 1) Total Total Adjustments (Note 2) Consolidated Revenue Million yen Million yen Million yen Million yen Million yen Million yen Million yen Million yen Million yen Million yen 34,225 27,033 8,402 36,731 48,907 155,298 15 155,313 － 155,313 490 721 88 197 434 1,930 2,419 (2,419) － Total 34,715 27,754 8,490 36,928 49,340 157,228 157,733 (2,419) 155,313 (31,793) (26,262) (7,398) (35,231) (48,585) (149,269) (396) (149,664) 359 (149,305) 2,922 1,493 1,092 1,697 755 7,959 109 8,068 (2,060) 6,008 － － － － － － － － － － － － － － － － － － － － － － － － － － － － 924 (2,987) 40 3,985 The category “Other Business” is an operating segment that is not included among the reportable segments, in which subsidiaries of the Company engage in administrative outsourcing services and the like. The adjustment of segment profit of (2,060) million yen includes acquisition-related cost related to business combinations of (58) million yen, corporate expenses of (2,024) million yen, profits or losses not allocated to any specific operating segment, and elimination of intersegment transactions. Intersegment revenues are based on prevailing market prices. － － － － Revenue from external customers Intersegment revenue (Note 3) Cost of sales and other income (expenses) Segment profit (Operating profit) (Reconciling items) Finance income Finance costs Share of profit (loss) of investments accounted for using equity method Profit before tax (Note 1) (Note 2) (Note 3) 490 505 － － － － 14 3. SUPPLEMENTARY INFORMATION Revenue by segment and by industry for the three months ended March 31, 2022, is as follows: For the three months ended March 31, 2022 Percentage of total (%) Year-on-Year (%) Name of Segment Domestic Engineering Outsourcing Business Domestic Manufacturing Outsourcing Business Electrical & Electronics Transport Equipment Pharm. & Chemicals IT-related Construction & Plant-related Others Electrical & Electronics Transport Equipment Pharm. & Chemicals Metals & Construction Materials Foods Others Domestic Service Operations Outsourcing Business Retail Public Works Others Overseas Engineering Outsourcing Business Overseas Manufacturing and Service Operations Outsourcing Business Electrical & Electronics Transport Equipment Pharm. & Chemicals IT-related Metals & Construction Materials Construction & Plant-related Retail Public Works Finance Others Electrical & Electronics Transport Equipment Pharm. & Chemicals IT-related Metals & Construction Materials Construction & Plant-related Foods Retail Public Works Finance Others Amount (Million yen) 34,225 5,494 6,525 2,909 11,492 4,756 3,049 27,033 7,735 11,592 1,608 1,521 889 3,688 8,402 38 7,234 1,130 36,731 128 746 6,810 7,712 23 807 1,181 14,030 2,786 2,510 48,907 5,370 3,983 1,134 947 602 2,065 1,396 15,650 7,437 705 9,618 15 155,313 15 Other Business Total (Note 1) Intersegment transactions are offset and eliminated. (Note 2) Segments are classified based on the similarity of types and nature of businesses. 22.1 3.5 4.2 1.9 7.4 3.1 2.0 17.4 5.0 7.4 1.0 1.0 0.6 2.4 5.4 0.0 4.7 0.7 23.6 0.1 0.5 4.4 5.0 0.0 0.5 0.7 9.0 1.8 1.6 31.5 3.5 2.6 0.7 0.6 0.4 1.3 0.9 10.1 4.8 0.4 6.2 0.0 100.0 24.0 27.2 13.5 34.4 29.1 15.1 30.5 17.6 8.6 12.4 7.4 42.7 11.1 68.7 20.7 (26.8) 14.3 94.7 39.4 (1.1) 21.5 54.7 36.4 (25.0) 4.8 53.5 33.4 56.9 48.4 22.6 27.7 38.4 22.8 7.8 (24.7) 148.5 (31.7) 10.3 (1.2) 11.5 93.3 11.3 25.5 Revenue by region is as follows: Region Japan Europe Oceania North America South America Asia (excl. Japan) For the three months ended March 31, 2022 Amount (Million yen) Percentage of total (%) Year-on-Year (%) 69,675 62,940 15,213 1,092 3,581 2,812 44.9 40.5 9.8 0.7 2.3 1.8 21.0 29.4 24.4 － 37.2 1.9 25.5 Total 155,313 100.0 (Note) Intersegment transactions are offset and eliminated. 16