日本通信（9424） – [Delayed][Summary]Consolidated Financial Results for the Fiscal Year Ended March 31,2022（Under Japanese GAAP）

May 10, 2022 Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.Consolidated Financial Results for the Fiscal Year Ended March 31, 2022 (Under Japanese GAAP) Japan Communications Inc. Company name: Tokyo Stock Exchange: Prime Market Listing: 9424 Securities code: URL http://www.j-com.co.jp/ URL: Naohisa Fukuda, Representative Director-President Representative: Mitsuru Kodaira, Executive Officer and CFO Inquiries: Telephone: +81-3-5776-1700 Scheduled date of ordinary general meeting of shareholders: Scheduled date to commence dividend payments: Scheduled date to file annual securities report: Preparation of supplementary material on financial results: Holding of financial results briefing: June 28, 2022 – June 29, 2022 Yes Yes (for institutional investors, analysts and the press) (Yen amounts are rounded down to millions, unless otherwise noted.) 1. Consolidated financial results for the fiscal year ended March 31, 2022 (from April 1, 2021 to March 31, 2022) (1) Consolidated operating results (Percentages indicate year-on-year changes.) Net sales Operating profit Ordinary profit Profit attributable to owners of parent Fiscal year ended March 31, 2022 March 31, 2021 Millions of yen % Millions of yen%Millions of yen% Millions of yen%4,634 3,497 32.5 (0.4) 279 (248) – – 298 (242) – – 294 (273) – – Note: Comprehensive income For the fiscal year ended March 31, 2022: For the fiscal year ended March 31, 2021: ¥254 million ¥(270) million [–%] [–%] Basic earnings per share Diluted earnings per share Return on equity Ratio of ordinary profit to total assets Ratio of operating profit to net salesFiscal year ended March 31, 2022 March 31, 2021 Yen 1.79 (1.66) Yen1.77 – %% %64.2 (68.7) 15.7 (14.5) 6.0 (7.1) Reference: Share of profit (loss) of entities accounted for using equity method For the fiscal year ended March 31, 2022: For the fiscal year ended March 31, 2021: ¥5 million ¥10 million (2) Consolidated financial position As of March 31, 2022 March 31, 2021 Reference: Equity Total assets Net assets Equity-to-asset ratio Net assets per share Millions of yen Millions of yen1,944 1,857 785 341 % 33.6 14.2 Yen3.971.60As of March 31, 2022: As of March 31, 2021: ¥652 million ¥263 million (3) Consolidated cash flows Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Fiscal year ended March 31, 2022 March 31, 2021 Millions of yen Millions of yenMillions of yen Millions of yen21 419 (271) (53) 150 6 928 1,025 Cash and cash equivalents at end of period 2. Cash dividends Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 Fiscal year ending March 31, 2023 (Forecast) – – – Annual dividends per shareFirst quarter-end Second quarter-end Third quarter-endFiscal year-endTotal Total cash dividends (Total) Payout ratio (Consolidated) Ratio of dividends to net assets (Consolidated)Yen Yen YenYenYen Millions of yen 0.00 0.00 0.00 – – – 0.00 0.00 0.00 0.00 0.00 0.00 ––% – – – %–– 3. Overview and management policy for the fiscal year ending March 31, 2023 Since its founding in 1996, the Company has propounded and implemented the MVNO business model, an innovative form of telecommunications business, having developed its business with the mission of transferring (communicating) data safely, securely, and conveniently. Specifically, the Company is engaged in three businesses: mobile communications business (SIM business), communications business through local mobile networks (local 4G/5G), as well as digital ID (FPoS : Fintech Platform over SIM) business for use on smartphones. The Company plans to build a stable revenue stream by continuing the evolution of the SIM business, as well as to develop the local 4G/5G business and FPoS business to become the pillar of future earnings by investing in the two businesses. In the local 4G/5G business, the Company aims to build advanced showcases in the U.S. and leverage the experience to expand in Japan. In the FPoS business, the Company has acquired certification under the Digital Signature Act for “my Digital Certificate” (the issuing entity is my FinTech Inc., a subsidiary of the Company.) based on its patented FPoS technology, and are working on its actual use as a digital ID that can be used safely, securely, and conveniently on smartphones. With the surrounding situation above described, the management of the Company perceives a market capitalization of 500 billion yen as the growth business scale in three to five years from the launch of commercial service of FPoS(expected within this fiscal year). * Notes (1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in the change in scope of consolidation): None (2) Changes in accounting policies, changes in accounting estimates, and restatement (i) Changes in accounting policies due to revisions to accounting standards and other regulations: Yes (ii) Changes in accounting policies due to other reasons: None (iii) Changes in accounting estimates: None (iv) Restatement: None (3) Number of issued shares (common shares) (i) Total number of issued shares at the end of the period (including treasury shares) (ii) Number of treasury shares at the end of the period As of March 31, 2022As of March 31, 2021As of March 31, 2022As of March 31, 2021(iii) Average number of shares outstanding during the period Fiscal year ended March 31, 2022 Fiscal year ended March 31, 2021 164,258,239 shares164,258,239 shares15,004 shares15,004 shares164,243,235 shares164,243,235 shares Fiscal year ended March 31, 2022 March 31, 2021 As of March 31, 2022 March 31, 2021 Reference: Equity [Reference] Overview of non-consolidated financial results 1. Non-consolidated financial results for the fiscal year ended March 31, 2022 (from April 1, 2021 to March 31, 2022) (1) Non-consolidated operating results (Percentages indicate year-on-year changes.) Net sales Operating profit Ordinary profit Profit Fiscal year ended March 31, 2022 March 31, 2021 Millions of yen % Millions of yen%Millions of yen% Millions of yen%4,510 3,371 33.8 1.7 352(329)– – 345(201)– – 316(205)– – (2) Non-consolidated financial position Basic earnings per share Diluted earnings per share Yen 1.92 (1.25) 2,118 2,088 Yen1.90– 645299Total assets Net assets Equity-to-asset ratio Net assets per share Millions of yen Millions of yen% 27.3 12.5 Yen3.511.58As of March 31, 2022: As of March 31, 2021: ¥577 million ¥261 million * Financial results reports are exempt from audit conducted by certified public accountants or an audit corporation. * Proper use of earnings forecasts, and other special matters A financial results meeting will be held on Wednesday, May 11, 2022 for institutional investors, analysts and the press. The Company plans to post a video of this financial results meeting on its website promptly after the meeting is held. 1. Operating results and financial position (1) Operating results of the year ended March 31, 2022 Since its founding in 1996, the Company has propounded and implemented the MVNO business model, an innovative form of telecommunications business, having developed its business with the mission of transferring (communicating) data safely, securely, and conveniently. Specifically, the Company is engaged in three businesses: mobile communications business (SIM business), communications through local mobile networks business (local 4G/5G), as well as digital ID (FPoS: Fintech Platform over SIM) business for use on smartphones. The Company plans to build a stable revenue stream by continuing the evolution of the SIM business, as well as to develop the local 4G/5G business and FPoS business to become the pillar of future earnings by investing in the two businesses. (i) Mobile Communications Business (SIM business) In the MVNO business model that the Company has created, the Company has continued its efforts to ensure a fair competitive environment and has evolved them through repeated deregulation. In particular, the June 2020 ruling by the Minister for Internal Affairs and Communications that allows the Company to procure voice communications services from NTT DOCOMO, INC. on a cost basis has contributed significantly to its earnings. In the SIM business, the Company has been able to offer competitive tariff plans, such as flat-rate tariff for voice communications services and lower basic monthly fees, and since July 2020, for seven consecutive quarters leading up to the end of the current fiscal year, both the number of its line subscriptions and quarterly sales revenue have continued to grow, resulting in a profit for the first time in seven years in the current fiscal year. (ii) Local 4G/5G Business through Local Mobile Networks In the local 4G/5G business, the Company aims to build advanced showcases in the U.S. and leverage the experience to expand in Japan. In the U.S., the Company has for a long period of time offered businesses that provide secure communications for financial transactions, such as mobile leased line services for ATMs, and in parallel, has begun offering SIMs for the Citizens Broadband Radio Service (CBRS), the local mobile network system in the U.S. CBRS is a unique network that is built and operated in a specific environment, including universities or offices, and is positioned as an alternative to WiFi, but unlike WiFi, it requires authentication by a SIM. The expansion of CBRS has also created demand, and the Company’s U.S. subsidiary has joined forces with its key partners to expand its business. (iii) Digital ID (FPoS) Business for Use on Smartphones In the FPoS business, the Company has acquired certification under the Digital Signature Act for “my Digital Certificate” (the issuing entity is my FinTech Inc., a subsidiary of the Company.) based on its patented FPoS technology on November 10, 2021, and the business has received a lot of interest from banks and other financial institutions, as well as local governments. This is attributed to the fact that the Ministry of Internal Affairs and Communications Ordinance was amended on September 29, 2021, limiting the method of electronic application for residence certificates, etc. to the method of identification by the applicant’s digital signature and digital certificate (a digital certificate for the My Number Card or a digital certificate certified under the Digital Signature Act). Such a move brought the situation to the attention of all those concerned, as the so-called “smartphone ID” method of application, which had hitherto been used by some local governments, was no longer allowed, and the acceptance of applications thereof was suspended. Although some have argued that this revised Ordinance of the Ministry of Internal Affairs and Communications runs counter to the trend towards digitization, it has provided an opportunity to reaffirm the broad recognition of online means of identification. As a result of the above, the Group’s consolidated net sales for the current fiscal year were 4,634 million yen, an increase of 1,136 million yen (up 32.5%) compared to the previous fiscal year (hereinafter referred to as the “previous year”). This was mainly due to growth in the MVNO business resulting from increased sales of voice and data communications services centered on “Nihon Tsushin SIM,” as well as growth in the Enabler business, which includes voice and data communications services provided under partner brands. Cost of sales was 2,782 million yen, an increase of 559 million yen (up 25.2%) compared to the previous year. This is because, while there was an increase in costs due to bandwidth acceleration measures with NTT DOCOMO, INC., along with an increase in users, mainly “Nihon Tsushin SIM” users, 1) inter-connection fees per unit with carriers for data communication services dropped and 2) the cost ratio improved owing to the Minister of Internal Affairs and Communications ruling that voice communications services from NTT DOCOMO, INC., can now be procured on a cost basis. As a result, gross profit amounted to 1,852 million yen, an increase of 577 million yen (up 45.3%) compared to the previous year. Operating profit was 279 million yen (248 million yen loss in the previous year), and profit attributable to owners of the parent was 294 million yen (273 million yen loss in the previous year), resulting in a full-year profit for the first time in seven years. Financial results by business are as follows Net sales For the year ended March 31, 2021 For the year ended March 31, 2022Year-on-year changes (Millions of yen) Year-on-year changes (%) MVNO Business Enabler Business Total 1,874 1,623 3,497 2,488 2,146 4,634 613 522 1,136 32.7 32.2 32.5 Sales of 123 million yen (126 million yen in the previous year) from overseas operations in the segment information are included in the Enabler Business. (2) Financial position of the year ended March 31, 2022 Assets Current assets at the end of the current fiscal year were 1,410 million yen, a decrease of 111 million yen compared to the end of the previous year. This was mainly due to a decrease of 96 million yen in cash and deposits. Non-current assets were 531 million yen, an increase of 201 million yen compared to the end of the previous year. This was mainly due to increases of 37 million yen in property, plant and equipment and 156 million yen in intangible assets. As a result, total assets amounted to 1,944 million yen, an increase of 86 million yen compared to the end of the previous year. Current liabilities at the end of the current fiscal year were 1,106 million yen, a decrease of 386 million yen compared to the end of the previous year. This was due in large part to decreases of 353 million yen in accounts payable-trade, 60 million yen in accounts payable-other, and 36 million yen in unearned revenue. Non-current liabilities were 53 million yen, an increase of 29 million yen compared to the end of the previous year. This was mainly due to an increase of 26 million yen in long-term unearned revenue. As a result, liabilities amounted to 1,159 million yen, a decrease of 356 million yen compared to the end of the previous year. Liabilities Net assets Net assets at the end of the current fiscal year were 785 million yen, an increase of 443 million yen compared to the end of the previous year. As a result, the equity ratio was 33.6% (14.2% at the end of the previous year). (3) Status of cash flows for the year ended March 31, 2022 Cash and cash equivalents at the end of the current fiscal year were 928 million yen, a decrease of 96 million yen compared to the end of the previous year. The status of cash flows and their factors during the current fiscal year are as follows. Cash flows from operating activities Net cash provided by operating activities totaled 21 million yen (an inflow of 419 million yen in the previous year). This was due primarily to a 355 million yen in decrease in notes and accounts payable-trade, while recording profit before income taxes of 299 million yen. Cash flows from investing activities Net cash used in investing activities totaled 271 million yen (an outflow of 53 million yen in the previous year). This was due primarily to payments for purchase of property, plant and equipment of 97 million yen and purchase of intangible assets of 171 million yen. Cash flows from financing activities Net cash provided by financing activities totaled 150 million yen (an inflow of 6 million yen in the previous year). This was due primarily to 160 million yen of proceeds from share issuance to non-controlling shareholders. (4) Outlook for the fiscal year ending March 31, 2023 and beyond Since its founding in 1996, the Company has propounded and implemented the MVNO business model, an innovative form of telecommunications business, having developed its business with the mission of transferring (communicating) data safely, securely, and conveniently. Specifically, the Company is engaged in three businesses: mobile communications business (SIM business), communications business through local mobile networks (local 4G/5G), as well as digital ID (FPoS: Fintech Platform over SIM) business for use on smartphones. The Company plans to build a stable revenue stream by continuing the evolution of the SIM business, as well as to develop the local 4G/5G business and FPoS business to become the pillar of future earnings by investing in the two businesses. In the local 4G/5G business, the Company aims to build advanced showcases in the U.S. and leverage the experience to expand in Japan. In the FPoS business, the Company has acquired certification under the Digital Signature Act for “my Digital Certificate” (the issuing entity is my FinTech Inc., a subsidiary of the Company.) based on its patented FPoS technology, and are working on its actual use as a digital ID that can be used safely, securely, and conveniently on smartphones. With the surrounding situation above described, the management of the Company perceives a market capitalization of 500 billion yen as the growth business scale in three to five years from the launch of commercial service of FPoS(expected within this fiscal year). 2. Basic concept regarding the selection of accounting standards The Group prepares its consolidated financial statements in accordance with Japanese GAAP, in light of the comparability of periods of consolidated financial statements and between companies, as well as the burden of preparing consolidated financial statements under International Financial Reporting Standards (IFRS). The Company’s policy is to take an appropriate response with respect to the timing of the adoption of IFRS, taking into consideration various conditions in Japan and overseas. As of March 31, 2021 As of March 31, 2022 (Thousands of yen)3. Consolidated Financial Statements (1) Consolidated Balance Sheet Assets Current assets Cash and deposits Accounts receivable – trade Merchandise Supplies Accounts receivable – other Other Allowance for doubtful accounts Total current assets Non-current assets Property, plant and equipment Buildings Vehicles Accumulated depreciation Buildings, net Accumulated depreciation Vehicles, net Tools, furniture and fixtures Accumulated depreciation Tools, furniture and fixtures, netLeased assets Accumulated depreciation Leased assets, net Construction in progress Total property, plant and equipment Intangible assets Patent right Trademark right Software Software in progress Total intangible assets Investments and other assets Investment securities Leasehold and guarantee deposits Other Total investments and other assets Total non-current assets Deferred assets Share issuance costs Bond issuance costs Total deferred assets Total assets 1,025,466338,68874,997514286,139△3,7171,521,66882,357△82,357－9,794△9,794－749,510△730,27719,232263,727△263,727－65,47784,7102,57394726,17520,18449,88056,990138,642120195,753330,3441,4324,0515,4831,857,497928,688378,64147,5527157657,440△2,6921,410,27784,111△83,2928187,027△4,8812,145795,689△766,96928,719263,727△263,727－90,093121,7773,8342,09773,999125,984205,91663,281140,335456204,073531,7673761,9372,3131,944,359 Liabilities Current liabilities Accounts payable – trade Current portion of long-term borrowings Accounts payable – other Income taxes payable Unearned revenue Deposits received Valuation Reserve For Inventory Purchase Commitments Other Total current liabilities Non-current liabilities Long-term accounts payable – other Long-term unearned revenue 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 Foreign currency translation adjustment Total accumulated other comprehensive income Share acquisition rights Non-controlling interests Total net assets Total liabilities and net assets As of March 31, 2021 As of March 31, 2022 (Thousands of yen)775,0329,600145,50051,846154,77026,942218,829109,6561,492,178－23,96923,9691,516,1474,528,4402,868,630△7,272,002△2,192122,876140,788140,78838,69038,994341,3491,857,497421,105－85,27062,055117,78527,918263,951127,9921,106,0782,14950,92053,0701,159,1494,528,4402,977,376△6,977,888△2,192525,737126,815126,81567,86464,792785,2101,944,359(2) Consolidated Statements of Income and Comprehensive Income Consolidated Statement of Income (Thousands of yen)Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating profit (loss) Non-operating income Interest income Share of profit of entities accounted for using equity method Foreign exchange gains Miscellaneous income Total non-operating income Non-operating expenses Interest expenses Amortization of share issuance costs Amortization of bond issuance costs Foreign exchange losses Share acquisition rights issuance costs Miscellaneous losses Total non-operating expenses Ordinary profit (loss) Extraordinary income Gain on sale of non-current assets Total extraordinary income Extraordinary losses Settlement payments Total extraordinary losses Profit (loss) before income taxes Income taxes – current Total income taxes Profit (loss) Loss attributable to non-controlling interestsProfit (loss) attributable to owners of parent 3,497,9332,223,0051,274,9281,523,909△248,9802910,271－4,56414,8642451,8692,2382,8256492838,111△242,227－－28,12228,122△270,3494,6304,630△274,980△1,390△273,5904,634,3792,782,1081,852,2701,572,745279,5252155,83417,2635,72829,043521,0552,114－－6,4079,630298,938100100－－299,03830,42930,429268,608△25,505294,114Consolidated Statement of Comprehensive Income (Thousands of yen) Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 Profit (loss) Other comprehensive income Foreign currency translation adjustment Total other comprehensive income Comprehensive income Comprehensive income attributable to Comprehensive income attributable to owners of parent Comprehensive income attributable to non-controlling interests △274,9804,2784,278△270,702△269,311△1,390268,608△13,972△13,972254,636280,142△25,505(3) Consolidated Statement of Changes in Equity Previous fiscal year (From April 1, 2020 to March 31, 2021) Share capital Capital surplus Retained earningsTreasury shares Shareholders’ equity (Thousands of yen)Total shareholders’ equity 4,528,440 2,868,630△6,998,412△2,192 396,466△273,590△273,590Total changes during period － －△273,590－ △273,590Balance at end of period 4,528,440 2,868,630△7,272,002△2,192 122,876Accumulated other comprehensive incomeForeign currency translation adjustment Total accumulated other comprehensive income Share acquisition rights Non-controlling interests Total net assets136,509 136,509－15,885 548,861Balance at end of period 140,788 140,7884,278 4,278 4,2784,27838,69038,69038,690△273,59023,109 66,07823,109 38,994 △207,511341,349 Balance at beginning of period Changes during period Profit (loss) attributable to owners of parent Net changes in items other than shareholders’ equity Balance at beginning of period Changes during period Profit (loss) attributable to owners of parent Net changes in items other than shareholders’ equity Total changes during period Current fiscal year (From April 1, 2021 to March 31, 2022) Share capital Capital surplus Retained earningsTreasury shares Shareholders’ equity (Thousands of yen)Total shareholders’ equity 4,528,440 2,868,630△7,272,002△2,192 122,876294,114108,746Total changes during period － 108,746294,114－ Balance at end of period 4,528,440 2,977,376△6,977,888△2,192 Accumulated other comprehensive incomeForeign currency translation adjustment Total accumulated other comprehensive income Share acquisition rights Non-controlling interests Total net assets140,788 140,78838,69038,994 341,349 294,114108,746402,860525,737294,114108,746 Balance at beginning of period Changes during period Profit (loss) attributable to owners of parent Change in ownership interest of parent due to transactions with non-controlling interests Net changes in items other than shareholders’ equity Balance at beginning of period Changes during period Profit (loss) attributable to owners of parent Change in ownership interest of parent due to transactions with non-controlling interests Net changes in items other than shareholders’ equity △13,972 △13,97225,798 40,999Total changes during period △13,972 △13,972Balance at end of period 126,815 126,81525,798 64,792 443,860785,21029,17429,17467,864 (4) Consolidated Statement of Cash Flows (Thousands of yen)Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 Cash flows from operating activities Profit (loss) before income taxes Depreciation Interest and dividend income Interest expenses Share of loss (profit) of entities accounted for using equity method Foreign exchange losses (gains) Decrease (increase) in trade receivables Decrease (increase) in inventories Increase (decrease) in trade payables Decrease (increase) in accounts receivable -other Increase (decrease) in unearned revenue Increase (decrease) in Long-term unearned revenue Increase/decrease in consumption taxes payable/consumption taxes refund receivableOther, net Subtotal Interest and dividends received Interest paid Income taxes refund (paid) Settlement paid Net cash provided by (used in) operating activities Cash flows from investing activities Purchase of property, plant and equipment Purchase of intangible assets Payments of leasehold and guarantee depositsProceeds from refund of leasehold and guarantee deposits Other, net Net cash provided by (used in) investing activities Cash flows from financing activities Repayments of long-term borrowings Proceeds from issuance of share acquisition rights Repayments of lease liabilities Proceeds from share issuance to non-controlling shareholders 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 △270,3498,311△29245△10,2712,794△32,03028,959456,637128,706△10,2042,31073,07274,283452,43629△245△4,480△28,122419,617△19,132△36,506△221,765△10△53,906△21,6004,047△52524,5006,4221,913374,047651,4191,025,466299,03822,562△21552△5,834△16,733△36,42625,527△355,377△524△39,24322,8152,366108,43326,441215△52△4,631－21,973△97,421△171,698△2,303－△336△271,759△9,600－－160,050150,4502,557△96,7781,025,466928,688