Avant : Consolidated Summary Report under Japanese GAAP for the first quarter of the fiscal year ending June 30, 2024

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

Consolidated Summary Report under Japanese GAAP for the first quarter of the fiscal year ending June 30, 2024

			October 31, 2023
Company Name:	AVANT GROUP CORPORATION	Stock exchange listings: Tokyo
Code Number:	3836		URL: https://www.avantgroup.com/
Representative:	(Title) President, Group CEO	(Name) Tetsuji Morikawa
For inquiry:	(Title) Director, Group CFO	(Name) Naoyoshi Kasuga	TEL: [phone]

Securities report issue date: November 10, 2023	Dividend payment date: -
Supplementary information for financial statements: Available
Explanatory meeting to be held: No
	(Millions of yen, rounded down to the nearest unit)
1. Consolidated Financial Results for the Three Months Ended September 30, 2023
(1) Consolidated results of operations	(Percentages indicate year-on-year changes)

	Net sales		EBITDA*	Operating profit	Ordinary profit
Three months ended		%		%			%		%
September 30, 2023	5,646	12.3	798	12.5		681	10.8	679	13.0
September 30, 2022	5,025	24.2	709	36.7		614	33.2	601	36.1
Comprehensive income (loss)	for the three months ended September 30, 2023	483 million yen (31.4%)	for the three months ended September 30, 2022

Profit attributable to

owners of parent

%

1. 30.2

1. 41.5

367 million yen (35.4%)

	Net profit per	Diluted net
	share	profit per share
Three months ended	yen	yen
September 30, 2023	12.86	-
September 30, 2022	9.86	-

(Note) EBITDA is derived by adding depreciation and amortization of goodwill to operating profit.

(2) Consolidated financial condition

	Total assets		Net assets	Equity ratio
As of					%
September 30, 2023	17,942		11,797	65.8
June 30, 2023	18,705		12,328	65.9
(Reference) Net assets attributable to the company's shareholders	As of September 30, 2023	11,797 million yen	As of June 30, 2023	12,328 million yen

2. Dividends on Common Shares

		Dividends per share
	1st	2nd	3rd	Fiscal	Annual
	quarter-end	quarter-end	quarter-endyear-end
	yen	yen	yen	yen	yen
Fiscal year ended June 30, 2023	-	0.00	-	15.00	15.00
Fiscal year ending June 30, 2024	-
Fiscal year ending June 30, 2024 (Forecast)		0.00	-	19.00	19.00

(Note) Revisions to the most recently announced dividend forecast: None

3. Consolidated Earnings Forecasts for the Fiscal Year Ending June 30, 2024

			(Percentages indicate year-on-year changes)
Net sales	Operating profit	Ordinary profit	Profit attributable to	Net profit
owners of parent	per share

Fiscal year	million yen	%	million yen	%	million yen	%	million yen	%
ending June 30, 2024	24,000	12.0	3,850	17.0	3,850	17.9	2,500	19.4

(Notes) Revisions to the most recently announced earnings forecast: None

Since the Company manages its operations on an annual basis, the consolidated earnings forecasts for the second quarter (cumulative) are not provided.

yen

66.89

Notes

1. Changes in significant subsidiaries during the period (changes in "Specified Subsidiaries" (Tokutei Kogaisha) accompanying changes in scope of consolidation): No

Newly added to the scope of consolidation: nil Newly deleted from the scope of consolidation: nil

(2) Application of accounting procedures specific to the preparation of quarterly consolidated financial statements: none

(3) Changes in accounting policies, accounting estimates and restatement:

(i) Changes in accounting policies due to revision of accounting standards: No

(ii) Changes in accounting policies due to reasons other than item (i) above: No

(iii) Changes in accounting estimates: No

(iv) Restatement: No

(4) Number of issued shares (common shares)
(i) Total number of issued shares including	As of September 30, 2023	37,645,851 shares	As of June 30, 2023	37,645,851 shares
treasury shares
(ii) Number of treasury shares held	As of September 30, 2023	326,398	shares	As of June 30, 2023	2,998	shares
(iii) Average number of shares	Three months ended September 30, 2023	37,549,160	shares	Three months ended September 30, 2022	37,622,503	shares

(Note) The Company has introduced the Employee Benefit Trust from the first quarter of the fiscal year ending June 30, 2024. Shares of the Company held by the Trusts are included in the number of treasury shares held and the average number of shares.

• This report is exempt from the audits of CPAs or Audit firms.
• Explanation of the appropriate use of earnings forecasts and other special notes

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 promised by the Company regarding future performance. Actual results may differ materially from the forecast depending on a range of factors. Please refer to "Earnings Forecasts" on page 8 for the assumptions for earnings forecasts and notes for using earnings forecasts.

Accompanying Materials - Table of Contents
1. Qualitative Information on Financial Results for the Current Quarter	2
(1) Management's Discussion on Business Operations	2
(2) Discussion on Financial Position	6
(3) Earnings Forecasts	8
2. Quarterly Consolidated Financial Statements and Notes	9
(1) Quarterly Consolidated Balance Sheets	9
(2) Quarterly Consolidated Statements of Income and Statements of Comprehensive Income	11
Quarterly Consolidated Statements of Income	11
Quarterly Consolidated Statements of Comprehensive Income	12
(3) Quarterly Consolidated Statements of Cash Flows	13
(4) Notes to Quarterly Consolidated Financial Statements	14
(Notes on the Going Concern Assumption)	14
(Notes on Substantial Changes in the Amount of Shareholders' Equity)	14
(Additional Information)	14
(Segment Information)	15
(Revenue Recognition)	16
(Significant Subsequent Events)	16

- 1 -

1. Qualitative Information on Financial Results for the Current Quarter

(1) Management's Discussion on Business Operations

Consolidated financial results for the three months ended September 30, 2023 are as follows.

			(Millions of yen, rounded down to the nearest unit)
		Three months ended	Three months ended	Year-on-Year Change
		September 30, 2022	September 30, 2023	Amount	%
Net sales		5,025	5,646	620	12.3
Operating profit		614	681	66	10.8
Ordinary profit		601	679	78	13.0
Profit attributable	to owners of	370	482	112	30.2
parent

Consolidated net sales were 5,646 million yen (up 12.3% year-on-year) as a result of the Outsourcing Business maintaining its high growth rate, in addition to significant growth in the Digital Transformation Business in particular, against the background of investment needs among Japanese companies, our customers, to maintain and strengthen competitiveness by "upgrading corporate management and activities using data and digital technology," which is becoming a mid- to long-term trend.

From this first quarter, the Company has revised the method used to categorize its business segments to date and changed from the previous reportable segments of "Group Governance Business," "Digital Transformation Business," and "Outsourcing Business" to "Consolidated Financial Disclosure Business," "Digital Transformation Promotion Business," and "Corporate Management Solutions Business." In light of this change, the results for each reportable segment for the first quarter of the previous fiscal year have been restated according to the reportable segments after the change.

The Consolidated Financial Disclosure Business supports value creation through the disclosure of corporate information with the development and maintenance of DivaSystem, a proprietary software package for consolidated management support and consolidated accounting, and providing outsourcing services for consolidated and non- consolidated financial results using DivaSystem. In terms of this segment's position within the Group, we aim to establish a business model that is a combination of its software and outsourcing businesses.

The Consolidated Financial Disclosure Business also includes information retrieval services for disclosure documents provided mainly to audit firms by Internet Disclosure, Inc.

The Digital Transformation Promotion Business supports the promotion of companies' digital transformation and data-driven management by providing, through consulting and system development, everything from data platforms for utilising all kinds of data surrounding companies to AI and BI solutions for analysing, predicting and visualising data. From major cloud vendors to multi-cloud compatible software, you will learn about the latest information utilization methods and generation AI specializing in data utilization, as well as train engineers and develop your own data utilization platform products. We also aim to expand our group's products.

The Corporate Management Solutions Business has as its objective the visualization and maximization of companies' "invisible value," with a focus on group management, consolidated accounting, and business administration, and offers one-stop support ranging from consulting to system planning, building, installation, and maintenance. In addition to developing software in-house, this business also combines such software with software developed by other companies. The role of this business is to make maximum use of the Group's assets to continuously generate solutions that will provide management information useful for the enhancement of corporate value.

As for profits, despite increases in fixed personnel expenses caused by an increase in headcount, outsourced processing expenses in response to increased demand from customers, and development expenses for new products that we plan to launch, due to the decline in temporary expenses accompanying the group reorganization in the previous fiscal year, effect of increased sales in the Digital Transformation Promotion Business, and other factors, we recorded operating profit of 681 million yen (up 10.8% year-on-year), ordinary profit of 679 million yen (up 13.0% year-on-year), and profit attributable to owners of parent of 482 million yen (up 30.2% year-on-year).

- 2 -

The status of each reportable segment is as follows.

(i) Net sales

Consolidated Financial Disclosure Business

Digital Transformation Promotion Business

Corporate Management Solutions Business

Elimination of inter-segment transactions Consolidated Net sales

	(Millions of yen, rounded down to the nearest unit)
Three months	Three months	Year-on-Year Change
September 30, 2022	September 30, 2023	Amount	%
1,631	1,747	115	7.1
1,613	2,171	558	34.6
1,851	1,863	11	0.6
(70)	(135)	(65)	-
5,025	5,646	620	12.3

(ii) Operating profit

Consolidated Financial Disclosure Business

Digital Transformation Promotion Business

Corporate Management Solutions Business

Corporate Expenses and Elimination of inter-segment transactions Consolidated operating profit

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

Three months	Three months	Year-on-Year Change
September 30, 2022	September 30, 2023	Amount	%
358	364	5	1.7
196	348	151	76.9
309	148	(161)	(52.0)
(249)	(180)	69	-
614	681	66	10.8

In the Consolidated Financial Disclosure Business, the software business is in the process of making improvements through the review of pricing strategies under the new organization, and while on the one hand, the outsourcing business has maintained its high growth rate, contributing to the increase in revenue. As a result, net sales increased to 1,747 million yen (up 7.1% year-on-year). In terms of profitability, as the pricing strategies in the software business are not yet at a stage in which they are reflected in profits, operating profit was 364 million yen (up 1.7% year-on- year), which was a limited increase compared with the increase in net sales.

In the Digital Transformation Promotion Business, the need among customers to utilize data for decision-making related to management and business promotion continues to accelerate, and a marked increase in projects focused on the provision of cloud data platforms significantly pushed up revenue. As a result, net sales increased to 2,171 million yen (up 34.6% year-on-year). Although personnel expenses to secure service provision staff increased and there was a continuing trend of outsourcing expenses to supplement them remaining high, this was offset by the effect of higher sales, and operating profit was 348 million yen (up 76.9% year-on-year), significantly higher than the same period in the previous fiscal year.

In the Corporate Management Solutions Business, net sales were 1,863 million yen (up 0.6% year-on-year). Although sales growth was constrained by the impact of temporary restraints on sales activities accompanying the reorganization, the increase in revenue in the CPM solutions business resulted in a small year-on-year increase for the segment as a whole. As a result of the increase in net sales remaining at the low-growth level due to the aforementioned factors, and in addition, the increase in personnel expenses due to headcount increases and an increase in depreciation costs accompanying software investments, operating profit decreased to 148 million yen (down 52.0% year-on-year).

- 3 -

The number of employees on a consolidated basis was 1,414 at the end of the first quarter, up 25 from the end of the previous fiscal year.

Quarterly Trends of Number of Employees of the Group

The status of orders received and sales by segment for the first quarter of the fiscal year under review is as follows.

(i) Orders Received

			(Millions of yen, rounded down to the nearest unit)
	Fiscal Year ended	Fiscal Year ending	Year-on-Year Change
	June 30, 2023	June 30, 2024
	First quarter	First quarter	Amount
	Orders	Outstanding	Orders	Outstanding	Orders	Outstanding
	Received	Orders	Received	Orders	Received	Orders
Consolidated Financial	1,697	3,482	1,821	4,023	124	541
Disclosure Business
Digital Transformation	1,676	1,121	2,026	1,560	350	439
Promotion Business
Corporate Management Solutions	1,492	2,638	1,623	2,873	130	234
Business
Elimination of inter-segment	(125)	(1,457)	(48)	(1,659)	77	(202)
transactions
Total	4,741	5,785	5,423	6,798	682	1,012

(ii) Net Sales

		(Millions of yen, rounded down to the nearest unit)
	Fiscal Year ended	Fiscal Year ending	Year-on-Year Change
	June 30, 2023	June 30, 2024
	First quarter	First quarter	Amount	%
Consolidated Financial	1,631	1,747	115	7.1
Disclosure Business
Digital Transformation	1,613	2,171	558	34.6
Promotion Business
Corporate Management Solutions	1,851	1,863	11	0.6
Business
Elimination of inter-segment	(70)	(135)	(65)	-
transactions
Total	5,025	5,646	620	12.3

- 4 -

Quarterly trends in net sales and operating profit are as follows.

Net sales and operating profit for the last four quarters

			(Millions of yen, rounded down to the nearest unit)
		Fiscal Year ended		Fiscal Year ending
		June 30, 2023		June 30, 2024
	Second quarter	Third quarter	Fourth quarter	First quarter
Net sales	5,497	5,664	5,236	5,646
Operating profit	1,178	1,127	368	681
Operating profit margin (%)	21.4	19.9	7.0	12.1

Quarterly trends of net sales, operating profit and operating profit margin

- 5 -

1. Discussion on Financial Position
   (i) Financial position

Total assets at the end of the first quarter were 17,942 million yen (down 763 million yen from the end of the previous fiscal year). This was mainly due to a 551 million yen decrease in current assets, which was mainly attributable to a 1,241 million yen decrease in cash and deposits and a 189 million yen increase in prepaid expenses.

On the other hand, total liabilities amounted to 6,144 million yen (down 232 million yen from the end of the previous fiscal year). This was mainly due to a 621 million yen decrease in provision for bonuses.

Total net assets amounted to 11,797 million yen (down 530 million yen from the end of the previous fiscal year), mainly due to the recording of 482 million yen in profit attributable to owners of parent, 449 million yen in purchase of treasury shares, and the payment of 564 million yen in dividends of surplus. As a result, the equity ratio was 65.8% (65.9% at the end of the previous fiscal year), and the Company believes it maintains a highly stable financial balance with low interest-bearing debt.

(ii) Cash Flow

Cash and cash equivalents (hereinafter referred to as "net cash") at the end of the first quarter decreased by 1,238 million yen from the end of the previous fiscal year to 9,642 million yen. The status of each cash flow and its factors are as follows.

< Cash flows from operating activities >

Net cash used in operating activities totaled 128 million yen (491 million yen used in the same period of the previous year).

The main factors of increase were profit before income taxes of 679 million yen, an increase in accounts payable - other, and accrued expenses of 408 million yen, and increase in deposits received of 611 million yen, while the main factors of decrease were a decrease in provision for bonuses of 621 million yen, decrease in provision for bonuses for directors (and other officers) of 142 million yen, increase in notes and accounts receivable - trade and contract assets of 266 million yen, decrease in contract liabilities of 208 million yen, increase in prepaid expenses of 188 million yen, and income taxes paid of 670 million yen.

< Cash flows from investing activities >

Net cash used in investing activities totaled 93 million yen (111 million yen used in the same period of the previous year).

The main accounts of cash outflow were 43 million yen for purchase of property, plant and equipment, 17 million yen for purchase of investment securities, and 27 million yen for payment of leasehold and guarantee deposits.

< Cash flows from financing activities >

Net cash used in financing activities totaled 1,019 million yen. (493 million yen used in the same period of the previous year)

The main components of cash outflow were 564 million yen in dividends paid and 449 million yen in purchase of treasury shares.

- 6 -

In the Group, cash flow from operating activities in the first quarter is at a low level due to the payment of income taxes and the payment of performance-based bonuses to officers and employees, gradually increasing from the second quarter onward, and is typically positive for the full fiscal year.

Maintenance fees in the Corporate Management Solutions Business and commissions paid in the Consolidated Financial Disclosures Business are prepaid for the year in advance of the provision of services, so as a result, the original business model has almost no need for working capital. On the other hand, in the Digital Transformation Promotion Business, as outsourcing costs and other expenses are paid in advance, working capital demand will increase as sales grow. However, by concentrating the excess funds of the Group as a whole in the holding company, the Group is able to smoothly extend funds across the Group. In addition to the total amount of cash held, the Group has established a commitment line totaling 3.5 billion yen with banks with which it does business. Accordingly, at present there are no concerns about funding, and rather, we intend to use the excess funds for strategic investment in the future.

Quarterly trends of Operating cash flow (Millions of yen)

Operating cash flow (quarter)

Operating cash flow (accumulated)

- 7 -

(3) Earnings Forecasts

In August 2023, the Company announced a five-year plan (target to be achieved in five years), which ends in the fiscal year ending June 2028, as its new Medium-Term Management Plan, and the fiscal year ending June 2024 is the first year of the plan. Ahead of the start of the new Medium-Term Management Plan, we have defined the materiality of the Avant Group as "to become a software company that helps enhance corporate value." As a concrete measure to clarify what we aim to become during the period of the new Medium-Term Management Plan and realize this materiality, we have reorganized the group and been developing business activities as the new Avant Group on October 1, 2022. Through such initiatives, we have clarified the direction of each operating company. At the same time, by positioning each operating company in growth markets, we have created a structure that will enable us to achieve sustainable sales growth. On the other hand, we do not believe that we are at the stage of reaping the full benefits of the Group's reorganization in the early stage of the period of the new Medium-Term Management Plan. Rather, we expect that the effects will gradually become apparent over a period of five years. In addition, while the restructuring associated with the Group's reorganization has been completed, it is our policy to continuously and flexibly make growth investment that is required for realization of materiality.

Unstable factors such as inflation caused by soaring raw material prices and a concern over economic slowdown on the back of financial tightening pose a risk of affecting the Group's performance, which, on the contrary, is considered to lead to more companies seeking to strengthen data-driven management and group governance, and therefore we believe that demand for the Group's business will continue to increase over the medium to long term.

As a result, the Company expects to achieve net sales of 24,000 million yen and operating profit of 3,850 million yen in the current fiscal year.

In accordance with our existing dividend policy, we will raise the ratio of dividends to net assets, always being conscious of exceeding the average of all listed companies, while at the same time striving to maintain stable dividends (in principle, dividends per share should not fall below the level of the previous fiscal year). There will be no change to the policy itself, and we forecast a dividend of 19 yen per share for the current fiscal year, in the hope of achieving the target of a ratio of dividends to net assets of 8% that we have set to achieve within the period of the new Medium-Term Management Plan.

Trends of dividends (adjusted for stock splits)

(yen/share)

- 8 -