Cube : FY2019 First-Quarter Investor Meeting transcription

V-cube, Inc.

Q1 Financial Results Briefing for the Fiscal Year Ending December 2019

May 16, 2019

Event Summary

[Company Name]	V-cube, Inc.
[Event Type]	Earnings Announcement
[Event Name]	Q1 Financial Results Briefing for the Fiscal Year Ending December 2019
[Fiscal Period]	FY2019 Q1
[Date]	May 16, 2019
[Number of Pages]	24
[Time]	16:00 - 16:46
	(Total: 46 minutes, Presentation: 44 minutes, Q&A: 2 minutes)
[Venue]	NBF Platinum Tower 16F
	1-17-3 Shirokane, Minato-ku, Tokyo 108-0072
[Venue Size]
[Participants]
[Number of Speakers]	2
	Naoaki Mashita	President & CEO
	Kazuki Yamamoto	CFO & General Manager

Support
Japan	03.4405.3160	North America	1.800.674.8375
Tollfree	0120.966.744	Email Support	[e-mail]

1

Presentation

Mashita: Hello, everyone. Thank you very much for coming to the financial results briefing for the first quarter of the fiscal year ending December 31, 2019. My name is Mashita, President & CEO of V-cube, Inc.

Yamamoto: My name is Yamamoto and I was appointed as CFO & General Manager of the Corporate Planning Division on April 1. Thank you very much.

Mashita: I would like to explain today a report for the first quarter and an update on this full year.

First of all, this is the topic that I will explain today. I would like to explain the results for the first quarter of the fiscal year.

This is on page 4. Net sales declined slightly from 1.728 billion yen to 1.715 billion yen.

The biggest factor was the sale of the electronic smartboard business, which had an impact of approximately 160 million yen. This decline was only slight due to steady progress in other businesses, despite a decline of 160 million yen.

Cost of sales and gross profit are also directly affected by the sale of the electronic smartboard business. The impact of the sale of the business will be explained in detail later, but this is partly due to a decline in selling,

Support
Japan	03.4405.3160	North America	1.800.674.8375
Tollfree	0120.966.744	Email Support	[e-mail]

2

general and administrative (SG&A) expenses. Operating income is still small at 28 million, but it is about twice the size of the previous year.

Ordinary income here is red, but this is a syndicated loan that was executed in March. The impact of commissions paid due to the implementation of this project is that while operating income is positive, ordinary income is negative.

In fact, I would like to explain in more detail the cost, SG&A expenses, and the loss of operating income in the first quarter. The chart on the left compares the first quarter of last year with the first quarter of this year.

I'm talking about this graph on the left. The left-hand side of this graph represents so-called fixed costs, and the orange on the right-hand side is variable costs.

In fact, the water fall diagram on the right shows how this affects operating income. Last year, operating income increased by 14 million yen, but this was attributable to an increase in marginal profit, that is, to an increase in revenue. This is about 30 million yen. Fixed costs also increased by approx. 28 million yen.

On the left, the color of light blue and green has changed dramatically, but this is due to organizational restructuring. Some departments were transferred from the so-called SG&A expenses department to the cost department. Fixed costs increased due to organizational restructuring, which amounted to 96 million yen. In fact, SG&A expenses declined due to organizational restructuring to 96 million yen. As a result of a change in department, gross profit, etc. has changed significantly, but there has been no impact on actual overall operating profit.

Support
Japan	03.4405.3160	North America	1.800.674.8375
Tollfree	0120.966.744	Email Support	[e-mail]

3

With regard to SG&A expenses, the cumulative total of 28 million yen in operating income was recorded in the first quarter due to the effect of reducing SG&A expenses by around 12 million yen due to the elimination of the electronic smartboard business. I think this will constitute operating income for the first quarter.

The balance sheet is described on page 6, and the consolidation of iStudy was excluded at the end of the first quarter. This figure is actually a temporary reduction because it is the B/S which is in the situation where iStudy was excluded from consolidation at the end of the first quarter.

However, we sold this investment in April, and are recovering this investment, so this will be reflected in the decision. I believe that the balance sheet at the end of March, which is written here, is temporary. I will not read this in detail, but in this context, a temporary contraction has been caused by the discontinuation of the Company's consolidated subsidiaries.

Overall, there wasn't anything noteworthy. However, the syndicated loan has been structured as a result of improved business performance and other factors. While bank loans had been used for a relatively short period of time, syndicated loans make it easier to manage the business by making it a stable and long-term loan. I believe that we have successfully achieved this stability at the end of March.

Support
Japan	03.4405.3160	North America	1.800.674.8375
Tollfree	0120.966.744	Email Support	[e-mail]

4