Avex : Q3 Financial Summary of March 2023

Note: Figures in percentages denote the year-on-yearchange.

Consolidated Financial Summary for the First Nine Months of Fiscal Year Ending March 31, 2023

(Japanese Accounting Standards)

	February 9, 2023
Avex Inc.	Tokyo Stock Exchange, Prime Market
Code No: 7860	(URL https://avex.com/jp/en/)
Representative: Katsumi Kuroiwa, President, CEO
Contact: Shinji Hayashi, Representative Director, CFO	TEL: [phone]

Scheduled date to submit the Quarterly Securities Report (Shihanki Houkokusho): February 13, 2023

Scheduled date for commencement of dividend payments: -

Supplementary documents for financial results: Yes

Financial results briefing: None

Note: All amounts are rounded down to the nearest million yen

1. Consolidated operating results for the nine-month period of fiscal year ending March 31, 2023 (April 1, 2022 to December 31, 2022)

(1) Consolidated operating results

		Net sales		Operating profit		Ordinary profit		Profit attributable to
					owners of parent
		million yen		%	million yen	%		million yen	%		million yen	%
Nine-Month Period of Fiscal		85,525		12.5	3,344	(14.8)		3,351	(16.5)		2,826	17.4
Year Ending March 31, 2023
Nine-Month Period of Fiscal		76,032		39.0	3,926	-		4,012		-		2,407	-
Year Ended March 31, 2022
(Note) Comprehensive income	Nine-Month Period of Fiscal Year Ending March 31, 2023:	¥2,630 million (-48.9%)
	Nine-Month Period of Fiscal Year Ended March 31, 2022:		¥5,150 million (-%)
		Profit per share		Diluted profit per share
					yen				yen
Nine-Month Period of Fiscal				62.67					-
Year Ending March 31, 2023
Nine-Month Period of Fiscal				54.67				54.66
Year Ended March 31, 2022

(2) Consolidated financial position

		Total assets			Net assets	Shareholders' equity ratio
			million yen		million yen	%
As of December 31, 2022		106,242		61,112	54.8
As of March 31, 2022		97,801		60,694	59.2
(Reference) Shareholders' equity	As of December 31, 2022:	¥58,174 million
	As of March 31, 2022:	¥57,872 million

2. Status of dividend payments

				Annual dividends
	End of first quarter	End of second quarter		End of third quarter	End of year	Annual
	yen	yen		yen	yen	yen
Year ended March 31, 2022	-	25.00		-	25.00	50.00
Year ending March 31, 2023	-	25.00		-
Year ending March 31, 2023					25.00	50.00
(forecast)
(Note) Revisions to dividend forecasts published most recently: None

3. Forecasts for consolidated operating results for the year ending March 31, 2023 (April 1, 2022 to March 31, 2023)

Note: Figures in percentages denote the year-on-year change.

	Operating profit		Profit attributable to	Profit per share
		owners of parent
Year ending	million yen	%		million yen	%	Yen
March 31, 2023	4,000	54.9		3,300	258.8	73.15
(Note) Revisions to earnings forecasts published most recently: None

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Avex Inc. (7860) Consolidated Financial Summary for Interim Period of Fiscal Year Ending March 31, 2023

• Notes
• 1. Changes in significant subsidiaries during term under review (changes in specific subsidiaries in conjunction with changes in scope of consolidation): None

New: - company (Company name) -

Excluded: - company (Company name) -

1. Application of particular accounts procedures to the preparation of quarterly consolidated financial statements: None
2. Changes in accounting policies and changes in or restatement of accounting estimates
   1. Changes in accounting policies in conjunction with revisions to accounting standards: Yes

2.	Changes in accounting policies other than 1:	None
3.	Changes in accounting estimates:	None
4.	Restatement:	None

(4) Outstanding shares (ordinary shares)
a. Shares outstanding at end of term (including treasury stock)
As of December 31, 2022:	45,558,800 shares
As of March 31, 2022:	45,440,100 shares
b. Treasury stock at end of term
As of December 31, 2022:	410,238 shares
As of March 31, 2022:	410,124 shares
c. Average number of share (quarter-to-date)
Nine-Month Period of Fiscal Year Ending March 31, 2023:	45,098,589 shares
Nine-Month Period of Fiscal Year Ended March 31, 2022:	44,036,807 shares

• This financial summary is outside the scope of audit procedures by certified public accountants and audit firm.
• Explanation for forecasts of business results and other notes
  The forecasts for business results and other forward-looking statements contained in this release are based on data and information that the Group has obtained so far and specific assumptions that the Group judges to be reasonable. Please note, therefore, that the actual results and others may greatly differ from the forecasts due to various factors.

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Avex Inc. (7860) Consolidated Financial Summary for Nine-Month Period of Fiscal Year Ending March 31, 2023

1. Qualitative Information on Consolidated Results, etc. for the Nine-Month Period of Fiscal Year Ending March 31, 2023

(1) Summary of Operating Results

(Unit: million yen)

	Fiscal year	Fiscal year	Fiscal year	Fiscal year	Fiscal year
Nine-month period results	ended March	ended March	ended March	ended March	ending March
	31, 2019	31, 2020	31, 2021	31, 2022	31, 2023
Net sales	122,621	100,312	54,707	76,032	85,525
Cost of sales	87,729	71,437	37,368	48,392	56,952
Gross profit	34,891	28,875	17,339	27,640	28,573
Gross profit margin	28.5%	28.8%	31.7%	36.4%	33.4%
Personnel expenses	9,936	8,860	8,047	8,516	9,309
Sales promotion and advertising	6,931	5,932	4,099	5,136	5,355
expenses
General expenses	12,070	11,732	8,803	10,060	10,563
Total SG&A expenses	28,938	26,526	20,950	23,713	25,228
Operating profit (loss)	5,952	2,349	(3,610)	3,926	3,344
Operating margin	4.9%	2.3%	-%	5.2%	3.9%

In the entertainment industry, to which the Group belongs, the production of music software, including music videos, was up 4.5% year on year, to 202,349 million yen (January to December 2022; according to a survey by the Recording Industry Association of Japan). Sales of paid music downloads were up 16.4% year on year, to 76,733 million yen (January to September 2022; according to a survey by the Recording Industry Association of Japan). In the video- related market, sales of video software fell 16.1% year on year, to 114,819 million yen (January to December 2022; according to a survey by the Japan Video Software Association). The digital video distribution market however is expected to continue to grow, going forward, with video distribution services expected to become established and popular more broadly.

In this business environment, the Group advanced initiatives in the implementation of the key strategy set out in the Avex Vision 2027 Medium-term Management Plan announced in May 2022, namely, "Seek to discover and develop "beloved" intellectual property in many different regions and fields."

In the nine-month period of the fiscal year under review, consolidated net sales climbed to 85,525 million yen (up 12.5% year on year), consolidated operating profit decreased to 3,344 million yen (down 14.8% year on year), and consolidated profit attributable to owners of parent came to 2,826 million yen (up 17.4% year on year), reflecting mainly increased sales in the music business.

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Avex Inc. (7860) Consolidated Financial Summary for Interim Period of Fiscal Year Ending March 31, 2023

(2) Summary of Financial Position

Assets totaled 106,242 million yen at the end of the third quarter under review after an increase of 8,440 million yen from the end of the previous consolidated fiscal year. This was chiefly attributable to increases of 4,865 million yen in notes and accounts receivable - trade, 2,239 million yen in other current assets, and 1,409 million yen in cash and deposits, respectively.

Liabilities increased by 8,022 million yen from the end of the previous consolidated fiscal year, to 45,129 million yen. This was primarily a result of increases of 5,932 million yen in accounts payable - other and 1,772 million yen in other current liabilities.

Net assets increased 417 million yen from the end of the previous consolidated fiscal year, to 61,112 million yen. This was chiefly attributable to an increase of 580 million yen in retained earnings.

(3) Summary of Consolidated Financial Forecasts and Other Future Forecast Information

With respect to the summary of consolidated financial forecasts for the fiscal year ending March 31, 2023, the financial forecasts presented in the "Consolidated Financial Summary for Interim Period of Fiscal Year Ending March 31, 2023" announced on November 10, 2022 remain unchanged.

If any revision to the financial forecasts becomes necessary in the future, the Company will promptly disclose it.

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Avex Inc. (7860) Consolidated Financial Summary for Interim Period of Fiscal Year Ending March 31, 2023

2. Quarterly Consolidated Financial Statements and Major Notes

(1) Quarterly Consolidated Balance Sheets

			(Unit: million yen)
		As of March 31, 2022	As of December 31, 2022
(Assets)
Current assets
Cash and deposits	44,671	46,081
Notes and accounts receivable - trade	13,855	18,721
Merchandise and finished goods	1,058	1,555
Programs and works in progress	5,175	4,535
Raw materials and supplies	301	305
Other	10,436	12,676
Allowance for doubtful accounts	(172)	(372)
Total current assets	75,326	83,503
Non-current assets
Property, plant and equipment
Buildings and structures, net	1,945	2,112
Land	1,548	1,548
Other, net	860	711
Total property, plant and equipment	4,354	4,372
Intangible assets	4,156	4,447
Investments and other assets
Investment securities	8,564	8,320
Other	5,591	5,640
Allowance for doubtful accounts	(191)	(42)
Total investments and other assets	13,964	13,918
Total non-current assets	22,475	22,738
Total assets	97,801	106,242

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