Avant : Consolidated Summary Report under Japanese GAAP for the Fiscal Year ended June 30, 2020

This is an unofficial translation. In case of any difference in meaning between the original Japanese text and the English translation, Japanese text shall prevail.

Consolidated Summary Report under Japanese GAAP

For the Fiscal Year ended June 30, 2020

	AVANT CORPORATION				August 3, 2020
Name of listed company	Listed stock exchanges	Tokyo
Stock code	3836			URL	https://www.avantcorp.com/
Representative	(Title)	President and Group CEO	(Name)	Tetsuji Morikawa
Contact	(Title)	Director and Group CFO	(Name)	Naoyoshi Kasuga	(TEL)	03-6388-6739
Scheduled date of General Meeting of Shareholders:	September 23, 2020	Scheduled date of commencement of dividend payment	September24, 2020
Securities report issue date:			September23, 2020
Supplementary materials for financial results: Available

Explanatory meeting to be held: Yes (for analysts)

(Millions of yen, rounded down to the nearest unit)

1. Consolidated results for the fiscal year ended June 30, 2020

(1) Consolidated results of operation

(Percentages indicate year-on-year changes)

			Revenue	EBITDA※	Operating income	Ordinary income	Net profit attributable to
			owners of parent company
			Millions of			Millions of				Millions of			Millions of			Millions of
Fiscal Year	ended June 30,	yen	%		yen		%		yen		%	yen		%	yen	%
15,691	11.5		2,505		17.4		2,277		15.8	2,280		15.6	1,529	16.1
2020
Fiscal Year	ended June 30,	14,077	16.2		2,133		19.4		1,966		20.5	1,972		20.8	1,317	24.0
2019
(Reference) Comprehensive income:			Fiscal Year ended June 30, 2020: 1,554 million yen (18.0%)	Fiscal Year ended June 30, 2019: 1,316 million yen (23.1%)
			Net Income per	Diluted Net Income	Ratio of Net Income	Ratio of Ordinary	Ratio of Ordinary
			Share (Note)		per share			to Shareholders'	Income to Total	Income to Revenue
										Equity		Assets
Fiscal Year	ended June	30,		yen				yen				%			%		%
	40.71				-				23.4			20.6		14.5
2020
Fiscal Year	ended June	30,		35.06				-				24.6			20.5		14.0
2019

• EBITDA (operating income + depreciation and amortization + amortization of goodwill)

(Note) The Company conducted a 2-for-1 common stock split on December 1, 2019. Net income per share is calculated as if this stock split had taken place at the beginning of the previous fiscal year.

(2) Consolidated financial position

		Total assets	Net assets	Equity ratio	Net Assets per
		Share
		Millions of yen	Millions of yen	%	Yen
Fiscal Year ended June 30, 2020		11,773		7,186	61.0	191.20
Fiscal year ended June 30, 2019		10,415		5,898	56.6	157.00
(Reference) Shareholders' equity	Fiscal Year ended June 30, 2020: 7,186 million yen	Fiscal Year Ended June 30, 2019: 5,898 million yen

(Note) The Company conducted a 2-for-1 common stock split on December 1, 2019. Net income per share is calculated as if this stock split had taken place at the beginning of the previous fiscal year.

(3) Consolidated cash flows

					Cash flows from		Cash flows from		Cash flows from		Cash and cash
								equivalent at the
					operating activities		investing activities	financing activities
						end of the year
					Millions of yen			Millions of yen		Millions of yen			Millions of yen
Fiscal Year ended June 30, 2020				1,890			(420)			(294)			6,370
Fiscal year ended June 30, 2019				1,320			(455)			(232)			5,195
2. Dividends on common stock
			Dividends per share					Total	Dividend		Dividend on
	1st		2nd		3rd	Fiscal		Annual		Dividends	payout ratio		net assets ratio
	quarter-end		quarter-end	quarter-end	year-end			(Annual)	(Consolidated)		(Consolidated)
Fiscal Year Ended	yen		yen		yen	yen	yen		million yen			%		%
June 30, 2019	-		0.00	-	15.00	15.00		281		21.4		5.3
June 30, 2020	-		0.00	-	9.00	9.00		338		22.1		5.2
June 30, 2021	-		0.00	-	10.00	10.00					27.8
(Forecast)

(Note) The Company conducted a 2-for-1 common stock split on December 1, 2019. For the year ended June 30, 2019, the actual amount of dividends prior to the stock split is stated.

3. Consolidated earnings forecasts for the fiscal year ending June 30, 2021

(Percentages indicate year-on-year changes)

	Revenue		Operating income	Ordinary income	Profit attributable to	Net income per
		owners of parent
			share
								company
	Millions of yen		%	Millions of yen	%	Millions of yen	%	Millions of yen		%	Yen
Fiscal Year	16,110		2.7	2,330	2.3	2,330	2.2	1,561		2.0	41.53

(Note) Since we manage our business on an annual basis, we have omitted the consolidated earnings forecasts for the second quarter ：None (accumulated). For details, please refer to "1. Overview of business results, etc. (4) Earnings Forecasts" on page 9.

Notes
(1) Changes of important subsidiaries during the period	： None

(Changes in specified subsidiaries accompanied by changes in the scope of consolidation)

Newly added - cos (Name)/Excluded- cos (Name)

(2) Changes in accounting policies and changes or restatement of accounting estimates

(i) Changes in accounting policies caused by revision of accounting standards	： None
(ii) Changes in accounting policies other than (i)		： None
(iii) Changes in accounting estimates		： None
(iv) Restatement		： None
(3) Number of shares outstanding (common stock)
(i) Number of shares outstanding including treasury stock	As of June 30, 2020	37,586,982	shares	As of June 30, 2019	37,570,188	shares
(ii) Number of treasury stock
As of June 30, 2020	2,911	shares	As of June 30, 2019	2,842	shares
(iii) Average number of shares	Fiscal Year ended June 30,	37,579,157	shares	Fiscal Year ended June 30,	37,561,940	shares
2020	2019

(Note) Effective December 1, 2019, the Company conducted a 2-for-1 common stock split. The number of shares outstanding (common stock) is calculated as if this stock split had taken place at the beginning of the previous fiscal year.

• Consolidated Summary Report is not subject to review by certified public accountants or auditing firms.
• Explanations and other special notes concerning the appropriate use of business performance forecasts

Forward-looking statements in this report, including earnings forecasts, are based on information currently available to the Company and on certain assumptions deemed to be reasonable. These statements are not promises by the Company regarding future performance. Actual results may differ materially from the forecast depended on a range of factors. Please refer to "Earnings Forecasts" on page 9 for the assumptions for earnings forecasts and notes for using earnings forecasts.

On October 17, 2019, the Company issued new shares as restricted stock compensation. Net income per share (forecast) is calculated based on the average number of shares outstanding during the period after reflecting the issuance of new shares.

Accompanying Materials - Table of Contents
1. Qualitative Information on Financial Results for the Current Fiscal Year ………………………………………	2
(1) Management's Discussion on Business Operations ………………………………………………………………	2
(2) Discussion on Financial Condition …………………………………………………………………………………	7

1. Discussion on Cash Flows ………………………………………………………………………………………… 7
2. Earnings Forecasts ………………………………………………………………………………………………… 9

2. Basic Rationale for Selection of Accounting Standards ……………………………………………………………… 9

3. Unaudited Consolidated Financial Statements and Notes …………………………………………………………… 10

1. Consolidated Balance Sheets ……………………………………………………………………………………… 10
2. Consolidated Statements of Income and Consolidated Statements of Comprehensive Income …………………… 12
3. Consolidated Statement of Changes in Shareholders' Equity, etc. ………………………………………………… 14
4. Consolidated Statements of Cash Flows …………………………………………………………………………… 16
5. Notes to Consolidated Financial Statements ……………………………………………………………………… 18 (Notes on the Going Concern Assumption) ………………………………………………………………………… 18 (Changes in Basis of presentation) ………………………………………………………………………………… 18 (Segment Information) ……………………………………………………………………………………………… 19 (Per share Information) ……………………………………………………………………………………………… 22 (Subsequent events) ………………………………………………………………………………………………… 22

―1―

1. Qualitative Information on Financial results for the Current Fiscal Year

1. Management's Discussion on Business Operations

The consolidated results for the fiscal year ended June 30, 2020 are as follows.

		(Millions of yen, rounded down to the nearest unit)
	Fiscal Year ended	Fiscal Year ended	Year on Year Change
	June 30, 2019	June 30, 2020	Amount	%
Revenue	14,077	15,691	1,613	11.5
Operating income	1,966	2,277	310	15.8
Ordinary income	1,972	2,280	308	15.6
Net Profit attributable to owners	1,317	1,529	212	16.1
of parent company

Consolidated revenue was 15,691 million yen (up 11.5% year on year), achieving double-digit growth. While the Business Intelligence Business and the Outsourcing Business both recorded significant growth, the Consolidated Accounting-related Business also grew mainly due to the continuation of large-scale projects with additional sales, which were scheduled to level off in the fiscal year under review.

In the mid-term management plan announced in September 2018, one of the management targets was to increase the ratio of recurring revenue (e.g. software maintenance fees, among other continuously generated revenue). While some of the results have begun to emerge, such as an increase in cloud sales in the Consolidated Accounting-related business, there was also a favorable impact from non-recurrent revenue, mainly in the Business Intelligence business. As a result, the total amount of recurrent revenue increased 15.9% year on year, but the ratio of recurrent revenue to total revenue remained almost unchanged at 32.6%.

Operating income increased 15.8% year on year to 2,277 million yen, and ordinary income increased 15.6% year on year to 2,280 million yen, and profit attributable to owners of parent company increased 16.1% to 1,519 million yen, all increased for the fifth consecutive years and set their records. While there was an upward trend in costs associated with the increase in the level of employee compensation to improve competitiveness and the opening and expansion of offices, we continued our focus on accumulating new orders for highly profitable projects and our efforts to improve quality and productivity of existing projects. Since the spread of COVID-19 began, the Company set out efforts to reduce nonessential expenses in preparation for future uncertainties.

Some companies in Japan have begun to postpone or some seriously affected have suspend IT investment as a result of the expansion of COVID-19, and some of the orders received by the Group have been affected, but the impact on operating results for the fiscal year under review is limited.

The status of each reportable segment is as follows.

(i) Revenue

		(Millions of yen, rounded down to the nearest million yen)
	Fiscal Year ended	Fiscal Year ended	Year on Year Change
	June 30, 2019	June 30, 2020	Amount	%
Consolidated Accounting	8,034	8,485	451	5.6
Business Intelligence	4,990	5,767	776	15.6
Outsourcing	1,629	2,062	432	26.5
Elimination of inter-segment	(576)	(624)	(47)	－
transactions
Consolidated net sales	14,077	15,691	1,613	11.5

―2―

(ii) Operating income

		(Millions of yen, rounded down to the nearest million yen)
	Fiscal Year ended	Fiscal year ended	Year on Year Change
	June 30, 2019	June 30, 2020	Amount	%
Consolidated Accounting	1.293	1,616	323	25.0
Business Intelligence	636	692	55	8.8
Outsourcing	318	364	45	14.4
Corporate Expenses and Elimination	(281)	(396)	(114)	－
of inter-company transaction
Consolidated operating income	1,966	2,277	310	15.8

In the Consolidated Accounting-related business, at the beginning of the fiscal year, we anticipated that the large-scale projects that had contributed greatly to revenue up to the previous fiscal year would level off. However, during the year under review, we continue to receive additional sales from this client. At the same time, we saw solid new sales in areas other than large-scale projects, and segment revenue increased 5.6% year on year to 8,485 million yen. Personnel expenses rose due to an increase in the number of employees, and expenses rose due to the renovation of an existing office and opening of a new office. Despite these increases in expenses, we were able to improve overall profitability as a result of our efforts to improve project quality and productivity, and since the spread of COVID-19 began, the Company set out efforts to reduce nonessential expenses in preparation for future uncertainties. As a result, operating income increased 25.0% year on year to 1,616 million yen.

In the Business Intelligence business, we continue to observe favorable market environment where corporations invest heavily in visualizing corporate management information as part of their efforts to promote digital transformation. As a result, net sales increased to 5,767 million yen (up 15.6% year on year). On the other hand, operating income increased only slightly to 692 million yen (up 8.8% year on year), due in part to an increase in personnel expenses accompanying an increase in remuneration levels and an increase in the number of employees, as well as an increase in expenses related to the opening of a new office.

In the Outsourcing business, demand continued to be strong as enterprise clients continue strengthen and examine the group governance system and review the roles of the accounting department in their organization. In addition, sales in other than consolidated accounting and disclosure fields such as treasury management solutions increased, and segment revenue increased significantly or 26.5% year on year to 2,062 million yen. Despite an increase in expenses such as office floor space accompanying an increase in the number of employees, and expenses incurred for the maintenance of the office environment in order to continue providing high-quality services to customers while ensuring the health and safety of employees despite the spread of COVID-19, operating income increased to 364 million yen (up 14.4% year on year).

―3―

The number of employees on a consolidated basis was 1,055 at the end of the fiscal year, an increase of 117 from the beginning of the fiscal year.

			Quarterly trends of number of employees of the Group
													(person)
1,100													1,055
1,000											950	965	963
										938
900									855	874
								832
800								806
							755
						735	734
700						709
					649
				615	627
			603
600
560	554	570
500
400
300
200

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

FY16/06

FY17/06

FY18/06

FY19/06

FY20/06

―4―

Orders and sales by segment for the current fiscal year are as follows;

(i) New orders and outstanding orders

(Millions of yen, rounded down to the nearest unit)

	Fiscal Year ended	Fiscal Year ended	YoY
	June 30, 2019	June 30, 2020	Increase (decrease)
	New Orders	Outstanding	New Orders	Outstanding	New Orders	Outstanding
	Orders	Orders	Orders
Consolidated Accounting	7,774	2,173	8,313	1,999	539	(173)
Business Intelligence	5,265	1,204	5,417	854	151	(350)
Outsourcing	1,807	852	2,160	950	352	97
Elimination of inter-	(676)	(303)	(533)	(208)	142	94
segment transactions
Total	14,171	3,927	15,357	3,595	1,186	(332)

(ii) Sales results

(Millions of yen, rounded down to the nearest unit)

	Fiscal Year Ended	Fiscal Year ended	YoY
	June 30, 2019	June 30, 2020	Increase	Rate of
			(decrease)	change (%)
Consolidated Accounting	8,034	8,485	451	5.6
Business Intelligence	4,990	5,767	776	15.6
Outsourcing	1,629	2,062	432	26.5
Elimination of inter-	(576)	(624)	(47)	－
segment transactions
Total	14,077	15,691	1,613	11.5

(Note) The amounts in (i) and (ii) above do not include consumption taxes.

―5―

Revenue and operating income by quarter are as follows.

Revenue and operating income for the last four quarters

(Millions of yen, rounded down to the nearest unit)

		Fiscal Year ended June 30, 2020
	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
Revenue	3,714	4,019	4,050	3,906
Operating income	514	574	598	589
Operating profit	13.8	14.3	14.8	15.1
margins (%)

Quarterly trends of revenue, operating income and operating margins

(millions of yen)

Revenue

Operating Income

OP Margin

4,500

25%

4,000

3,500

20%

3,000

15.1%

15%

2,500

2,000

10%

1,500

1,000

5%

500

0

0%

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

FY16/06

FY17/06

FY18/06

FY19/06

FY20/06

―6―

(2) Discussion on Financial Position

Total assets at the end of the fiscal year under review amounted to 11,773 million yen, an increase of 1,358 million yen from the end of the previous fiscal year. This was mainly attributable to an increase in current assets of 1,105 million yen due to an increase in cash and deposits of 1,175 million yen mainly attributable to owners of parent company and a decrease in accounts and notes receivable-trade of 181 million yen, as well as an increase in property, plant and equipment of 192 million yen mainly due to expansion of offices and network improvements, and an increase in intangible assets of 26 million yen mainly due to improvements in the IT infrastructure environment, resulting in an increase in non-current assets of 252 million yen.

Total liabilities amounted to 4,587 million yen, an increase of 69 million yen from the end of the previous fiscal year. This was mainly due to an increase in unearned revenue of 218 million yen, a decrease in accounts payable-trade of 83 million yen, and a decrease in accounts payable-other and accrued expenses of 43 million yen.

Total net assets amounted to 7,186 million yen (up 1,288 million yen from the end of the previous fiscal year), due to the recording of 1,529 million yen in profit attributable to owners of parent and the payment of 281 million yen in dividends from surplus. As a result, the equity ratio improved by 4.4% points from the previous fiscal year to 61.0% (56.6% at the end of the previous fiscal year). We believe that we are maintaining a stable financial balance without interest-bearing debt.

(3) Discussion on Cash Flows

Cash and cash equivalents (hereinafter, "cash") at the end of the fiscal year under review increased by 1,175 million yen from the end of the previous fiscal year to 6,370 million yen. The status of each type of cash flow and its factors are as follows.

(Cash flows from operating activities)

Net cash provided by operating activities was 1,890 million yen. (Acquired 1,320 million yen in the previous fiscal year) Major inflows included income before income taxes of 2,280 million yen, depreciation of fixed assets of 227 million yen, an increase in unearned revenue of 218 million yen, and an increase in notes and accounts receivable-trade of 181 million yen. Major outflows included income taxes paid of 799 million yen and an increase in accounts payable-other and accrued expenses of 124 million yen.

(Cash flows from investing activities)

Net cash used in investing activities was 420 million yen. (Use of 455 million yen in the previous consolidated fiscal year) Major expenditures included the purchase of property, plant and equipment of 236 million yen due to an increase in the floor space of offices and network improvements, the purchase of intangible assets of 121 million yen due to improvements in the IT infrastructure, and the payment of lease and guarantee deposits of 138 million yen.

(Cash flows from financing activities)

Net cash used in financing activities was 294 million yen. (Use of 232 million yen in the previous consolidated fiscal year)

The main expenditure was cash dividends paid of 281 million yen.

―7―

In our group, cash flows from operating activities in the first quarter are low due to income taxes paid and performance- linked bonuses paid to officers and employees. These cash flows gradually increase from the second quarter onward, and are generally positive on a full-year basis. In the consolidated accounting-related business, maintenance fees and commissions paid in the outsourcing business are paid annually in advance before the provision of services. As a result, the business model does not require much working capital. On the other hand, in the Business Intelligence segment, outsourcing expenses and other payments are made ahead of schedule, so demand for working capital will increase as sales grow. However, there are no concerns about cash management at this point, as the Group holds cash available for seamless intra-group financing, and has established a commitment line with each bank with a total amount of 3.5 billion yen in addition to the amount of cash held by the Group. Rather, the Company intend to put the cash into strategic investment.

Quarterly Trends of Operating Cash Flow (millions of yen)

2,000

1,500

1,000

500

0
1Q	2Q	3Q	4Q	1Q	2Q	3Q	4Q	1Q
-500	FY2018			FY2019
-1,000

2Q 3Q 4Q FY2020

-1,500

Operating cash flow (accumulated)

Operating cash flow (quarter)

• accumulated cash f low f rom operation f or the second quarter of FIscal Year ending June 30, 2020 was use of 13 million

―8―

(4) Consolidated Earnings Forecasts

In September 2018, we announced our new medium-term management plan, a five-year plan for the year ending June 2023. In fiscal year ending June 2021, the third year of the plan, we plan to continue to grow our three existing businesses while also promoting various activities aimed at dramatically increasing the ratio of recurrent revenues, which is one of the key goals of our medium-term management plan.

As a result of the expansion of COVID-19, domestic companies are postponing their IT investment, and there are concerns about the impact of this on the Group's business results, particularly in the first half of the fiscal year. Nevertheless, with the exception of some industries where the impact is enormous, the need for Digital Transformation (DX) is becoming stronger, and the needs of the Group for products and services themselves have not declined or disappeared. Rather, we believe that the need for DX is rising over the medium to long term.

As a result, we expect to achieve net sales of 16,110 million yen (up 2.7% year on year) and operating income of 2,330 billion yen (up 2.3%). These forecasts are based on the assumption that the effects of the spread of COVID-19 will converge to some extent by the end of 2020 and the economic activities of domestic companies will normalize by 2021. If the impact of COVID-19 is prolonged or a second wave arrives, the Group's operating results may deteriorate more than anticipated.

In accordance with our previous policy, we will raise the dividend over equity ratio, keeping in mind that it will always exceed the average for all listed companies. At the same time, we will pay a stable dividend (in principle, dividends per share should not be lower than the previous fiscal year's level). For the fiscal year under review, we plan to propose a dividend of 9 yen per share (after adjusting for the stock split on December 1, 2019) at our general meeting of shareholders on September 23, 2020.

Regarding dividends for the next fiscal year, although the policy itself remains unchanged, as the dividend on equity ratio has already exceeded the average for all listed companies, the Company is not strongly aware of the need to raise the dividend for the next fiscal year, and it is forecasting a dividend of 10 yen per share in consideration of stable dividends despite the uncertain economic situation.

Trends of dividends (adjusted for stock splits)

(yen/share)
						10.0
					9.0
				7.5
			6.0
		4.0
2.25	2.75
2015	2016	2017	2018	2019	2020	2021
					(Plan)	(Forecast)

2. Basic Rationale for Selection of Accounting Standards

For the time being, the Group continue to prepare consolidated financial statements on generally accepted accounting principles in Japan. With regard to the adoption of IFRS, the Group will respond appropriately, taking into consideration various domestic and international circumstances.

―9―

3. Unaudited Consolidated Financial Statements

(1) Consolidated Balance Sheets

					(thousands of yen)
				End of previous fiscal year	End of current fiscal year
				(As of June 30, 2019)	(As of June 30, 2020)
	Assets
	Current assets
	Cash and deposits		5,160,507	6,335,623
	Notes and accounts receivable - trade	2,525,653	2,343,951
	Securities		－	10,783
	Work in process	178,271	140,960
	Raw materials and supplies		16,584	15,587
	Prepaid expenses	482,079	552,356
	Other			40,668	110,772
	Allowance for doubtful accounts	(5,296)	(5,610)
	Total current assets		8,398,467	9,504,425
	Non-current assets
	Property, plant and equipment
	Buildings	361,585	501,574
	Accumulated depreciation		(215,623)	(201,938)
	Buildings, net		145,962	299,636
	Vehicles		－	440
	Accumulated depreciation		－	(146)
	Vehicles, net		－	293
	Tools, furniture and fixtures		639,336	733,399
	Accumulated depreciation		(515,429)	(563,937)
	Tools, furniture and fixtures, net		123,906	169,462
	Construction in progress		7,228	－
	Total property, plant and equipment		277,096	469,392
	Intangible assets
	Software	164,304	190,781
	Other		782	744
	Total intangible assets		165,087	191,526
	Investments and other assets
	Investment securities	397,868	428,261
	Long-term prepaid expenses		14,468	21,088
	Leasehold and guarantee deposits	687,567	674,355
	Deferred tax assets		392,827	363,200
	Other	91,437	121,013
	Allowance for doubtful accounts		(9,591)	－
	Total investments and other assets		1,574,578	1,607,918
	Total non-current assets		2,016,762	2,268,837
	Total assets		10,415,229	11,773,262

―10―

						(thousands of yen)
			End of previous fiscal year		End of current fiscal year
			(As of June 30, 2019)		(As of June 30, 2020)
	Liabilities
	Current liabilities
	Notes and accounts payable - trade	511,503			428,418
	Lease obligations	3,515		14,299
	Accounts payable - other, and accrued expenses	377,355			333,990
	Income taxes payable	296,693	122,624
	Unearned revenue	1,857,288			2,075,741
	Provision for bonuses	723,591	719,089
	Provision for bonuses for directors (and other	138,778			120,998
	officers)
	Provision for loss on order received	60,058		15,887
	Other		379,272			483,988
	Total current liabilities	4,348,056	4,315,039
	Non-current liabilities
	Lease obligations	6,862		45,297
	Asset retirement obligations	162,262			226,810
	Total non-current liabilities	169,124		272,107
	Total liabilities	4,517,181			4,587,146
	Net assets
	Shareholders' equity
	Share capital	295,525	303,271
	Capital surplus	232,325			240,071
	Retained earnings	5,362,527		6,610,448
	Treasury shares	(404)			(476)
	Total shareholders' equity	5,889,973		7,153,315
	Accumulated other comprehensive income
	Valuation difference on available-for-sale	11,067		35,859
	securities
	Deferred gains or losses on hedges	3			6
	Foreign currency translation adjustment	(2,995)		(3,065)
	Total accumulated other comprehensive income	8,075			32,800
	Total net assets	5,898,048		7,186,115
	Total liabilities and net assets	10,415,229			11,773,262

―11―

1. Consolidated Statements of Income and Consolidated Statements of Comprehensive Income Consolidated income statement

										(thousands of yen)
					Previous fiscal year			Current fiscal year
					(period from July 1, 2018 to June 30,			(period from July 1, 2019 to June 30,
			2019)			2020)
	Net sales				14,077,976					15,691,533
	Cost of sales	7,779,392			8,525,446
	Gross profit			6,298,583					7,166,086
	Selling, general and administrative expenses
	Remuneration for directors (and other officers)			286,139					312,705
	Employees' salaries and bonuses	1,049,858			1,288,199
	Provision for bonuses			723,591					714,902
	Provision for bonuses for directors (and other	138,778		120,998
	officers)
	Legal welfare expenses			170,081					195,932
	Outsourcing expenses	48,429			66,538
	Rent expenses on land and buildings			303,661					268,049
	Utilities expenses	150,092			95,883
	Commission expenses			452,307					480,165
	Depreciation	103,830			159,639
	Research and development expenses				215,633					409,398
	Other	689,725			776,389
	Total selling, general and administrative			4,332,129					4,888,803
	expenses
	Operating profit		1,966,453		2,277,283
	Non-operating income
	Interest income	507			421
	Dividend income			3,573					5,376
	Gain on investments in investment partnerships			－		371
	Foreign exchange gains			416					－
	Subsidy income	990			2,220
	Compensation for transfer			8,137					－
	Other		437				937
	Total non-operating income			14,062					9,326
	Non-operating expenses
	Interest expenses			149					744
	Loss on investments in investment partnerships	2,571				－
	Commission expenses			2,649					4,755
	Foreign exchange losses			－		17
	Share issuance costs			942					413
	Compensation for damage	1,620				－
	Other				－					3
	Total non-operating expenses		7,933		5,934
	Ordinary profit			1,972,583					2,280,675
	Extraordinary income
	Settlement received			31,200					－
	Total extraordinary income		31,200				－
	Profit before income taxes			2,003,783					2,280,675
	Income taxes - current		766,968		727,795
	Income taxes - deferred			(80,233)					23,203
	Total income taxes		686,734		750,999
	Profit				1,317,048					1,529,676
	Profit attributable to non-controlling interests			－			－
	Profit attributable to owners of parent			1,317,048					1,529,676

―12―

Consolidated Statements of Comprehensive Income

								(thousands of yen)
					Previous fiscal year	Current fiscal year
					(period from July 1, 2018 to June 30,	(period from July 1, 2019 to June 30,
			2019)		2020)
	Profit				1,317,048			1,529,676
	Other comprehensive income
	Valuation difference on available-for-sale			2,943			24,791
	securities
	Deferred gains or losses on hedges	(34)		2
	Foreign currency translation adjustment			(3,221)			(69)
	Total other comprehensive income		(313)		24,724
	Comprehensive income		1,316,735			1,554,401
	Comprehensive income attributable to
	Comprehensive income attributable to owners of			1,316,735			1,554,401
	parent
	Comprehensive income attributable to non-			－		－
	controlling interests

―13―

1. Consolidated Statement of Changes in Net Assets Previous Fiscal Year (period from July 1, 2018 to June 30, 2019)

						(thousands of yen)
		Shareholders' equity
	Capital stock	Capital surplus	Retained earnings		Treasury stock	Total
		shareholders'
							equity
Balance at the beginning of the	288,400	225,200	4,270,775			(301)	4,784,074
year
Changes for the year
Issue of new shares	7,125	7,125					14,250
Dividends			(225,295)				(225,295)
Net income attributable to			1,317,048				1,317,048
shareholders of parent company
Purchase of treasury stock						(103)	(103)
Net changes of items other than
shareholders' equity
Total changes for the year	7,125	7,125	1,091,752			(103)	1,105,899
Balance at the end of the year	295,525	232,325	5,362,527			(404)	5,889,973
	Accumulated other comprehensive income
	Valuation		Foreign			Total	Total
	difference	Deferred		accumulated
	currency			net assets
	on available-for-	gains or losses		other
	translation
	sale	on hedges		comprehensive
	adjustments
	securities			income
Balance at the beginning of the	8,124	37	226			8,388	4,792,462
year
Changes for the year
Issue of new shares							14,250
Dividends							(225,295)
Net income attributable to							1,317,048
shareholders of parent company
Purchase of treasury stock							(103)
Net changes of items other than	2,943	(34)	(3,221)			(313)	(313)
shareholders' equity
Total changes for the year	2,943	(34)	(3,221)			(313)	1,105,586
Balance at the end of the year	11,067	3	(2,995)			8,075	5,898,048

―14―

Current Fiscal Year (period from July 1, 2019 to June 30, 2020)

						(thousands of yen)
			shareholders' equity
	Capital stock	Capital surplus	Retained earnings		Treasury stock	Total
		shareholders'
							equity
Balance at the beginning of the	295,525	232,325	5,362,527			(404)	5,889,973
year
Changes for the year
Issue of new shares	7,746	7,746					15,492
Dividends			(281,755)				(281,755)
Net income attributable to			1,529,676				1,529,676
shareholders of parent company
Purchase of treasury stock						(71)	(71)
Net changes of items other than
shareholders' equity
Total changes for the year	7,746	7,746	1,247,921			(71)	1,263,342
Balance at the end of the year	303,271	240,071	6,610,448			(476)	7,153,315
	Accumulated other comprehensive income
	Valuation		Foreign			Total	Total
	difference	Deferred		accumulated
	currency			net assets
	on available-for-	gains or losses		other
	translation
	sale	on hedges		comprehensive
	adjustments
	securities			income
Balance at the beginning of the	11,067	3	(2,995)			8,075	5,898,048
year
Changes for the year
Issue of new shares							15,492
Dividends							(281,755)
Net income attributable to							1,529,676
shareholders of parent company
Purchase of treasury stock							(71)
Net changes of items other than	24,791	2	(69)			24,724	24,724
shareholders' equity
Total changes for the year	24,791	2	(69)			24,724	1,288,066
Balance at the end of the year	35,859	6	(3,065)			32,800	7,186,115

―15―

(4) Consolidated Statements of Cash Flows

									(thousands of yen)
					Previous fiscal year		Current fiscal year
					(period from July 1, 2018		(period from July 1, 2019
					to June 30, 2019)		to June 30, 2020)
	Cash flows from operating activities
	Profit before income taxes	2,003,783		2,280,675
	Depreciation			167,080				227,944
	Share-based remuneration expenses	3,562		8,623
	Increase (decrease) in allowance for doubtful			866				(9,277)
	accounts
	Increase (decrease) in provision for bonuses	161,824		(4,501)
	Increase (decrease) in provision for bonuses for			24,294				(17,779)
	directors (and other officers)
	Increase (decrease) in provision for loss on order	55,748		(44,171)
	received
	Interest and dividend income			(4,080)				(5,797)
	Compensation for forced relocation	(8,137)			－
	Interest expenses			149				744
	Commission expenses	2,649		4,755
	Share issuance costs			942				413
	Compensation for damage	1,620			－
	Settlement received			(31,200)				－
	Loss (gain) on investments in investment	2,571		(371)
	partnerships
	Subsidy income			(990)				(2,220)
	Decrease (increase) in trade receivables	(512,541)		181,707
	Decrease (increase) in inventories			(84,168)				38,307
	Decrease (increase) in prepaid expenses	(28,377)		(66,011)
	Increase (decrease) in trade payables			77,404				(83,085)
	Increase (decrease) in accounts payable - other,	24,533		(124,547)
	and accrued expenses
	Increase (decrease) in accrued consumption taxes			37,548				152,446
	Increase (decrease) in unearned revenue	182,593		218,453
	Increase in long-term accounts receivable			－				(34,706)
	Other, net	(4,807)		(38,902)
	Subtotal				2,072,870				2,682,699
	Interest and dividends received		4,138		6,021
	Interest paid		(149)				(744)
	Proceeds from compensation for forced relocation	5,695			－
	Compensation for damage paid		(1,620)				－
	Settlement package received	31,200			－
	Proceeds from subsidy income		990				2,220
	Income taxes paid		(792,905)		(799,440)
	Net cash provided by (used in) operating activities		1,320,217				1,890,755
	Cash flows from investing activities
	Proceeds from redemption of securities		33,780				－
	Purchase of property, plant and equipment	(127,242)		(236,147)
	Purchase of intangible assets		(54,554)				(121,077)
	Purchase of investment securities	(90,911)		(10,837)
	Proceeds from refund of leasehold and guarantee			138				89,687
	deposits
	Payments of leasehold and guarantee deposits	(215,592)		(138,666)
	Purchase of insurance funds		(4,459)				(4,459)
	Other, net		3,502		1,071
	Net cash provided by (used in) investing activities		(455,340)				(420,430)
	Cash flows from financing activities
	Repayments of finance lease obligations		(3,414)				(8,771)
	Commission fee paid	(2,252)		(3,696)
	Purchase of treasury shares		(103)				(71)
	Dividends paid	(225,295)		(281,755)
	Other, net		(942)				(413)

―16―

	Net cash provided by (used in) financing activities	(232,007)	(294,708)
	Effect of exchange rate change on cash and cash		(4,607)			105
	equivalents
	Net increase (decrease) in cash and cash equivalents	628,261	1,175,722
	Cash and cash equivalents at beginning of period			4,566,875			5,195,137
	Cash and cash equivalents at end of period		5,195,137	6,370,860

―17―

(5) Notes to the Consolidated Financial Statements

(Notes on Going-Concern Assumptions) Not applicable

(Changes in Basis of presentation)

[Consolidated statement of income statement]

"Subsidy income," which was included in subsection "Others" under "Non-operating income" in the previous fiscal year, is presented as a separate item from the fiscal year under review because it exceeded ten percent of total non-operating income. To reflect this change in presentation, the consolidated financial statements for the previous fiscal year have been reclassified.

As a result, 1,427 thousand yen presented as "Other" under "Non-operating income" in the Consolidated Statements of Income for the previous fiscal year has been reclassified as 990 thousand yen of "Subsidy income" and 437 thousand yen of "Other."

[Consolidated cash flow statement]

"Subsidy income," which was included in "Income before income taxes and minority interests" under "Cash flows from operating activities" in the previous fiscal year, is presented separately from the fiscal year under review due to an increase in monetary materiality. To reflect this change in presentation, the consolidated financial statements for the previous fiscal year have been reclassified.

Accordingly, "Subsidy income" is presented separately in the "Subtotal" column of "Cash flows from operating activities" below. To reflect this change in presentation, the consolidated financial statements for the previous fiscal year have been reclassified.

As a result, 2,073,860 thousand yen presented as "Subtotal" under "Cash flows from operating activities" in the Consolidated Statements of Cash Flows for the previous fiscal year has been reclassified as 990 thousand yen as "Subsidy income" (990) thousand yen as "Subsidy received," and 2,072,870 thousand yen as "Subtotal."

"Proceeds from collection of lease and guarantee deposits," which was included in "Other" under "Cash flows from investing activities" in the previous fiscal year, is presented separately from the current fiscal year due to an increase in monetary materiality. To reflect this change in presentation, the consolidated financial statements for the previous fiscal year have been reclassified.

As a result, 3,640 thousand yen presented as "Others" under "Cash flows from investing activities" in the Consolidated Statements of Cash Flows for the previous fiscal year has been reclassified as 138 thousand yen of "Proceeds from collection of lease and guarantee deposits" and 3,502 thousand yen of "Other."

―18―

(Segment Information and Others)

1. Summary of reportable segments

(1) Reason to determine the report segment

The Group's reportable segments was set up so that the Board of Directors can monitor regularly the separate financial information among our constituent units and make decisions on allocation of management resources and evaluate results of operations.

The Group is working to make management information "usable (Consolidated Accounting business)," "visible (Business Intelligence business)" and "reliable (Outsourcing business)" and thus measures performance of the three business portfolios; "Consolidated Accounting business", "Business Intelligence business" and "Outsourcing business" as reportable segments.

(2) Products and services included in each reportable segment

In Consolidated Accounting business, DIVA Corporation sells licenses and offer consulting service to implement the packaged software called DivaSystem, an internally developed package software for consolidated management and consolidated accounting. After the implementation, the Company also provide maintenance services, including software upgrades. Its consulting services also includes solutions related to IFRS, advanced management solutions, and budget management / management accounting solutions.

Consolidated Accounting business also reflects results of Internet Disclosure Co., Ltd. which offers search engines on disclosure information to audit corporations.

In the Business Intelligence business, ZEAL Corporation offers system integration services for effective management of various information among corporations, which is generally called Business Intelligence (BI). Through integration and organization of a large amount of data in a company's operating system, the Company can offer that information in reports and graphs and the management of the company can make decisions. In another words, the Company's system integration service is designed to help customers improve their ability to use information.

In the Outsourcing business, FIERTE Corporation offers outsourcing services on consolidated accounting and consolidated tax payment operations. While acting on behalf of the customers, the Company's solution can promote task diversification among employees and eliminate bottleneck, so that customers can devote more time on value-creating operations such as analysis and utilization of various information, and thus create value to their operations and management.

2. Formula to calculate revenue, profit or loss, assets, liabilities and other items by reportable segment

The reported method of accounting for operating segments is the same as formula generally used in the preparation of consolidated financial statements.

Profits for reportable segments are based on operating income. Intersegment sales and transfers are based on market prices.

―19―

3. Information on ordinary revenue, income or loss, assets and liabilities, and others by reporting segment

Previous Fiscal Year (July 1, 2018 to June 30, 2019)

(Thousands of yen)

				Reportable segments	Total
			Consolidated	Business	Outsourcing
			accounting	Intelligence
Revenue
Sales to customers		8,005,563	4,939,485	1,134,927	14,077,976
Intersegment sales		30,956	50,894	495,036	576,888
	Total		8,034,520	4,990,380	1,629,964	14,654,864
Segment profit		1,293,140	636,362	318,399	2,247,901
Segment Assets		4,726,842	2,365,146	958,819	8,050,809
Segment Liabilities		3,268,109	1,486,644	551,303	5,306,057
Other items
Depreciation		77,939	15,286	9,558	102,784
Increase	in tangible	fixed
assets and	intangible	fixed	28,295	48,247	24,325	100,869
assets

Current Fiscal Year (July 1, 2019 to June 30, 2020)

(Thousands of yen)

				Reportable segments	Total
			Consolidated	Business	Outsourcing
			accounting	Intelligence
Revenue
Sales to customers		8,464,307	5,741,190	1,486,035	15,691,533
Intersegment sales		21,383	26,070	576,665	624,118
	Total		8,485,690	5,767,260	2,062,700	16,315,651
Segment profit		1,616,772	692,060	364,277	2,673,110
Segment Assets		5,331,390	2,129,530	1,091,408	8,552,329
Segment Liabilities		3,668,219	1,201,247	647,440	5,516,907
Other items
Depreciation		102,561	20,035	29,182	151,779
Increase	in tangible	fixed
assets and	intangible	fixed	273,732	78,206	61,600	413,539
assets

―20―

4. The difference between the total amount of reportable segments and the amount recorded in consolidated financial statements and the main contents of the difference (differences related to adjustments)

		(thousands of yen)
Revenue	Previous Fiscal Year	Current Fiscal Year
Total amount of reportable segments	14,654,864	16,315,651
Elimination of transaction between the Company and segment	(576,888)	(624,118)
Revenue reported in consolidated financial statements	14,077,976	15,691,533
		(thousands of yen)
Profits	Previous Fiscal Year	Current Fiscal Year
Total amount of reportable segments	2,247,901	2,673,110
Elimination of transaction between the Company and segment	703,749	707,124
Corporate expenses (Note)	(977,867)	(1,104,008)
Others	(7,329)	1,056
Operating Income reported in consolidated financial statements	1,966,453	2,277,283

(Note) Corporate expenses mainly consist of general and administrative expenses not attributable to the reporting segments.

		(thousands of yen)
Assets	Previous Fiscal Year	Current Fiscal Year
Total amount of reportable segments	8,050,809	8,552,329
Elimination of transaction between the Company and segment	(2,369,062)	(1,762,448)
Corporate assets (Note)	4,762,084	5,041,670
Others	(28,600)	(58,289)
Total assets reported in consolidated financial statements	10,415,229	11,773,262

(Note) Corporate assets mainly consist of assets not attributable to the reporting segments.

		(thousands of yen)
Liabilities	Previous Fiscal Year	Current Fiscal Year
Total amount of reportable segments	5,306,057	5,516,907
Elimination of transaction between the Company and segment	(1,311,727)	(1,323,236)
Corporate liabilities (Note)	546,654	447,961
Others	(23,803)	(54,485)
Total liabilities reported in consolidated financial statements	4,517,181	4,587,146

(Note) Corporate liabilities mainly consist of liabilities not attributable to the reporting segments.

(thousands of yen)

					Amounts reported in
	Reported segments	Adjustments (Notes)	consolidated financial
Other items					statements
	Previous	Current	Previous	Current	Previous	Current
	Fiscal Year	Fiscal Year	Fiscal Year	Fiscal Year	Fiscal Year	Fiscal Year
Depreciation	102,784	151,779	64,296	76,164	167,080	227,944
Increase in tangible fixed assets	100,869	413,539	112,144	43,484	213,013	457,024
and intangible fixed assets

(Notes) Adjustment for depreciation and amortization mainly refers to depreciation and amortization for assets not attributable to the reportable segments.

Adjustments to increases in tangible fixed assets and intangible fixed assets mainly relate to assets not attributable to reporting segments.

―21―

(Per-share Information)
	Previous Fiscal Year	Current Fiscal Year
	(period from July 1, 2018	(period from July 1, 2019
	to June 30, 2019)	To June 30, 2020)
Net assets per share	157.00	yen	191.20 yen
Net income per share	35.06	yen	40.71 yen

Note 1. Diluted net income per share is not provided as there are no potential shares.

1. The stock split was conducted on December 1, 2019, at a ratio of 2 shares of common stock per 1 share of common stock. net assets per share and net income per share are calculated assuming that the stock split was conducted at the beginning of the previous fiscal year.
2. The basis for calculating net assets per share is as follows;

			Items					Previous Fiscal Year	Current Fiscal Year
							(As of June 30, 2019)	(As of June 30, 2020)
	Total of net assets (thousands of yen)			5,898,048	7,186,115
	Amount	deducted from	total of net	assets	-	-
	(thousands of yen)
	Net assets	attributable	to	common	stock	5,898,048	7,186,115
	(thousands of yen)
	Number	of	common stock	outstanding	for	37,567,346	37,584,071
	calculating net assets per share (shares)
4. The basis for calculating net income per share is as follows;
								Previous Fiscal Year	Current Fiscal Year
			Items					(Period from July 1, 2018 to	(Period from July 1, 2019 to
								June 30, 2019)	June 30, 2020)
	Net income attributable to shareholders of parent	1,317,048	1,529,676
	company (thousands of yen)
	Amounts	not	attributable	to	shareholders	of	-	-
	common stock (thousands of yen)
	Net income attributable to shareholders of
	common stock of parent company (thousands of	1,317,048	1,529,676
	yen)
	Average number of common stock outstanding	37,561,940	37,579,157
	(shares)
(Subsequent Events)
Not applicable

―22―