Carta : Financial Results for 2Q of FY2020

English Translation

This is a translation of the original release in Japanese.

In the event of any discrepancy, the original release in Japanese shall prevail.

Financial Results for the 2nd Quarter of the Fiscal Year Ending December 31, 2020 〔Japanese Standards〕（Consolidated）

Listed company name:	CARTA HOLDINGS, Inc.
Stock Code No.:	3688		URL:
Representative:	Title	Chairman	Name:
Contact:	Title	Director and CFO	Name:

Date to submit the Securities Report:

Scheduled date of dividend payments:

Availability of supplementary information

Holding investors' meeting:

	Aug 12, 2020
Listed stock exchange:	TSE first section
https://cartaholdings.co.jp/en/ir/
Shinsuke Usami
Hidenori Nagaoka	TEL [phone]

Aug 12, 2020

Sep 30, 2020

Yes

Yes

(For security analysts and institutional investors）

（Rounded down to million yen）

1. Consolidated Financial Results for FY 2020 First Six Months (January 1, 2020 - June 30, 2020)

(1)Consolidated results of operations (cumulative total)

（The percentage indicates year-on-year change）

Net sales

Operating income

Ordinary income

Net income

¥million

％

¥million

％

¥million

％

¥million

％

FY 2020 first six months

11,113

―

1,992

―

1,874

―

996

―

FY 2019 first six months

9,390

―

2,095

―

2,137

―

1,280

―

（Note）Comprehensive Income:

FY 2020 first six months: ¥1,027 million ―％

FY 2019 first six months: ¥1,298 million ―％

Net income

Diluted net income

EBITDA

per share

per share

¥

¥

¥million

%

FY 2020 first six months

39.36

39.17

2,453

―

FY 2019 first six months

68.94

68.28

2,470

―

(Note) The fiscal year ended December 31, 2019 was a transitional period for the change in accounting period, meaning an irregular accounting period that covered 15 months (October 1, 2018 to December 31, 2019), and as such, the consolidated financial results for the second quarter of the fiscal year ended December 31, 2019 represent October 1, 2018 through March 31, 2019. Consequently, the periods to be compared differ, and as such, the year-on-year change rate for the second quarter of the year ending December 31, 2020 is not stated.

• EBITDA noted above (earnings before interest, tax, depreciation and amortization) is calculated by adding interest expenses, depreciation, amortization, and amortization of goodwill to the Company's profit before income taxes.

1. Consolidated financial position

		Total assets		Net assets	Shareholders'	Net assets
			equity ratio	per share
		¥million		¥million	％	Yen
June 30, 2020		42,517		24,133	56.5	954.47
December 31, 2019		50,621		23,720	46.3	921.43
（Reference）Owned capital:	June 30, 2020: ¥24,019 million
	December 31, 2019: ¥23,444 million

1

2. Dividend status

			Annual dividends
	１Qend	２Qend	３Qend		4Qend	Fiscal	Total
		year-end
	Yen	Yen	Yen		Yen	Yen	Yen
FY 2019	―	―	8.00		―	8.00	16.00
FY 2020	―	8.00
FY 2020 (Forecast)			―		―	8.00	16.00

(Note) Revisions to dividend forecast for the current quarter: No

3. Forecast of Consolidated Financial Results for FY 2020（January 1, 2020 － December 31, 2020）

Net sales

Operating

Ordinary

Net income

Net income

EBITDA

income

income

per share

¥million

％

¥million

％

¥million

％

¥million

％

Yen

¥million

%

Full year

23,000

―

2,500

―

2,500

―

1,600

―

62.88

3,700

―

(Note) Revisions to performance results forecast for the current quarter: No

Since the fiscal year ended December 31, 2019 was an irregular accounting period of 15 months due to the change of fiscal year end, year-on-year change rate is not stated.

• Notes

(1)	Changes in significant subsidiaries during the period	: None
	(Change of specified subsidiaries that lead to a change in the scope of consolidation)
(2)	Specific accounting procedures	: Yes

Please see page 12, "2. Consolidated Financial Statements (4) Notes to Condensed Interim Consolidated Financial Statements (Adoption of Accounting Method Specific to Preparation of Quarterly Consolidated Financial Statements)".

(3) Changes in accounting policies, changes in accounting estimates, corrections and restatements and retrospective restatements

1) Changes in accounting policy resulting from revisions to accounting standards	: None
2) Changes in accounting policy other than above	: None
3) Changes in accounting estimates	: None
4) Retrospective restatements	: None

1. Number of shares issued (common stock)
2. 1. Number of shares issued and outstanding (including treasury stock)

As of June 30, 2020	25,465,652	As of December 31, 2019	25,444,052
2) Number of treasury stock issued and outstanding
As of June 30, 2020	301,018	As of December 31, 2019	584
3) Average number of shares during the period (quarterly consolidated cumulative accounting period)
Six months ended June 30, 2020	25,312,400	Six months ended June 30, 2019	18,579,221

• Notice regarding audit procedures

This financial result is excluded from audit procedures.

• Explanations related to appropriate use of the performance forecast other special instructions(Note on forward-looking statements)
  Earnings forecasts and other forward-looking statements in this report are based on information currently available and certain assumptions judged to be reasonable. Therefore, these statements do not constitute a guarantee of achievement. Actual results may differ materially for various reasons.
  Please refer to the section of "1. Qualitative Information on Quarterly Financial Results for the Period under Review (3) Explanation of Consolidated Performance Forecast and Other Forward-looking Information" on page 5 of the attached documents.

(Supplementary materials)

Supplementary materials on quarterly financial results are on our website (in English and Japanese).

2

Attachment

Contents

1. Qualitative Information on Quarterly Financial Results for the Period under Review
   (1) Analysis of Operating Results
   (2) Analysis of Financial Position
   (3) Explanation of Consolidated Performance Forecast and Other Forward-looking Information
2. Consolidated Financial Statements

1. Consolidated Balance Sheets
2. Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

(Consolidated Statements of Income)

(Consolidated Statements of Comprehensive Income)

1. Overview of Cash Flows for the Fiscal Year under Review
2. Notes to Condensed Interim Consolidated Financial Statements

(Going Concern Assumption)

(Notes on Significant Changes in the Amount of Shareholders' Equity)

(Adoption of Accounting Method Specific to Preparation of Quarterly Consolidated Financial Statements)

(Changes in Accounting Policies) (Changes in Accounting Estimates) (Segment Information)

3

1. Qualitative Information on Quarterly Financial Results for the Period under Review

(1) Analysis of Operating Results

From the fiscal year ended December 31, 2019, the Company changed its fiscal year end from September 30 to December 31. Consequently, the year-on-year change is not stated as the period under review (January 1, 2020 to June 30, 2020) covers a different six-month period from the second quarter of the previous fiscal year (October 1, 2018 to March 31, 2019).

With regard to the online advertising market where the Group operates its mainstay business, according to research by Dentsu Inc., in 2019, internet advertising spending reached ¥2,104.8 billion, buoyed by growth in performance-based advertising costs and market expansion in product sales-based EC platform advertising costs.

Performance-based advertising costs amounted to ¥1,326.7 billion, or 115.2% year on year, representing high growth with a particular focus on large-scale platformers. In addition, costs for digital advertising, which arose from the four traditional types of mass media, amounted to ¥71.5 billion, or 122.9% year on year, in what points to further progress in the digital transformation of mass media companies.

Under these economic circumstances, the Group worked to develop its business in three segments: 1) the "Partner Sales Business" which provides advertising sales and solutions mainly through a media rep; 2) the "Ad Platform Business" which operates ad distribution platforms; and 3) the "Consumer Business" which plans and operates its owned media, its EC-related services, and its HR-related services.

Despite the impact from the shift to telecommuting and waning advertising demand due to the novel coronavirus outbreak, the Ad Platform Business remained robust, and cost controls were also fully implemented.

As a result, the Group posted net sales of ¥11,113 million, operating income of ¥1,992 million, ordinary income of ¥1,874 million, and profit attributable to owners of parent of ¥996 million in the period under review.

Financial results for each segment were as follows. Sales of each segment include intersegment sales and transfers.

1) Partner Sales Business

The Partner Sales Business sells advertising space and provides solutions mainly through a media rep. In reserved advertising, as the media's shift to performance-based advertising accelerates, in addition to working with existing media, the Group actively carried out sales measures etc. to emerging media, including media for the youth demographic. In performance-based advertising, the Group built an optimal trading desk system using abundant audience data in line with targets as well as multiple DSPs and ad exchanges. Furthermore, the Group strengthened its relationships with solution vendors with the goal of more aggressively responding to the diversifying needs of advertisers as well as securing "brand safety" (advertisers' brand safety by ensuring the quality of advertising sites).

As a result, the Partner Sales Business recorded net sales of ¥4,320 million, and segment income of ¥896 million in the period under review.

2) Ad Platform Business

The Ad Platform Business operates the SSP "fluct", the services for advertisers "Zucks" and "BEYOND X", as well as "PORTO", an ad platform for brand advertising, among others. Results for "Zucks" were robust, thanks to efforts to expand functions and services in the business and also capture demand from corporate clients. In addition, in May 2020, we started providing "PORTO tv", a next-generation TV marketing platform that enables users to easily order, produce, and test the effects of TV commercials online, and in June 2020, we made KAIKETSU, Inc., a company developing the social media influencer marketing business, a consolidated subsidiary.

As a result, the Ad Platform Business recorded net sales of ¥3,577 million, and segment income of ¥840 million in the period under review.

3) Consumer Business

In the Consumer Business, in addition to the operation of its owned media that utilizes points, primarily "EC Navi" and "PeX", the Group is aggressively investing in the EC and HR fields as growth areas in order to create businesses that will be the next pillar in the medium- to long-term.

4

As a result, the Consumer Business recorded net sales of ¥3,215 million, and segment income of ¥255 million in the period under review.

1. Analysis of Financial Position
2. 1. Assets, Liabilities and Net Assets (Assets)
      Consolidated assets as of the end of the period under review totaled ¥42,517 million, a decline of ¥8,103 million from the end of the previous fiscal year. This was mainly attributable to declines in accounts receivable - trade and goodwill.

(Liabilities)

Consolidated liabilities as of the end of the period under review amounted to ¥18,384 million, down ¥8,516 million from the end of the previous fiscal year. This was mainly attributable to declines in accounts payable - trade and provision for bonuses.

(Net Assets)

Consolidated net assets as of the end of the period under review stood at ¥24,133 million, an increase of ¥412 million from the end of the previous fiscal year. This was primarily owing to an increase in retained earnings due to the recording of profit attributable to owners of parent, offsetting a decline caused by the purchase of treasury shares.

2) Cash Flows

Cash and cash equivalents at the end of the period under review (hereinafter, "funds") totaled ¥15,511 million. The following is the status and factors of each cash flow during the period under review.

(Net cash flows from operating activities)

Net cash flows provided by operating activities amounted to ¥1,159 million. The main positive factors included a decrease in notes and accounts receivable - trade, a decrease in accounts payable - other and the recording of profit before income taxes, while the main negative factors included a decrease in notes and accounts payable - trade.

(Net cash flows from investing activities)

Net cash flows provided by investing activities amounted to ¥466 million. The main positive factors included proceeds from sales of investment securities.

(Net cash flows from financing activities)

Net cash flows used in financing activities amounted to ¥632 million. The main negative factors included the purchase of treasury shares and the payment of cash dividends.

(3) Explanation of Consolidated Performance Forecast and Other Forward-looking Information No revisions have been made to the full-yearconsolidated performance forecast announced

in "Financial Results for the Fiscal Year Ended December 31, 2019" on February 12, 2020. Results in the period under review progressed steadily. However, given the expectations for a continued impact from the novel coronavirus outbreak and the uncertain effect on the online advertising industry from the restrictions placed on the use of IDFA (Identifier for Advertisers used in advertising distribution in iOS) in iOS 14 that Apple Inc. plans to release in autumn 2020, the Company has decided to maintain its consolidated performance forecast for the full fiscal year.

5

2. Consolidated Financial Statements

(1) Consolidated Balance Sheets

							(Millions of yen)
					As of December 31, 2019		As of June 30, 2020
	Assets
	Current assets
	Cash and deposits	14,546	15,511
	Accounts receivable - trade	18,477	11,580
	Securities				－	65
	Merchandise	17	21
	Supplies	419	505
	Other	2,908	1,710
	Allowance for doubtful accounts	(86)	(52)
	Total current assets			36,283	29,343
	Non-current assets
	Property, plant and equipment	1,691	1,618
	Intangible assets
	Goodwill	3,021	2,481
	Other	3,725	3,386
	Total intangible assets			6,747	5,867
	Investments and other assets
	Investment securities	4,246	4,108
	Deferred tax assets	176	143
	Other	1,477	1,437
	Allowance for doubtful accounts	(0)	(0)
	Total investments and other assets			5,899	5,688
	Total non-current assets			14,338	13,174
	Total assets			50,621	42,517
	Liabilities
	Current liabilities
	Accounts payable - trade	18,110	10,931
	Provision for bonuses	1,380	600
	Provision for directors' bonuses	27		－
	Provision for point card certificates	505	539
	Deposits received	2,742	2,675
	Short-term loans payable	19	19
	Current portion of long-term loans				195		103
	payable
	Other	2,037	1,650
	Total current liabilities			25,019	16,520
	Non-current liabilities
	Long-term loans payable	208	257
	Asset retirement obligations	536	536
	Deferred tax liabilities	874	838
	Other	262	232
	Total non-current liabilities			1,881	1,864
	Total liabilities			26,900	18,384

6

							(Millions of yen)
					As of December 31, 2019		As of June 30, 2020
	Net assets
	Shareholders' equity
	Capital stock	1,096	1,104
	Capital surplus	12,016	12,024
	Retained earnings	9,642	10,462
	Treasury shares	(0)	(264)
	Total shareholders' equity			22,754	23,327
	Accumulated other comprehensive income
	Valuation difference on available-for-sale				704		703
	securities
	Foreign currency translation adjustment	(15)	(11)
	Total accumulated other comprehensive				689		691
	income
	Share acquisition rights			7	7
	Non-controlling interests	268	106
	Total net assets			23,720	24,133
	Total liabilities and net assets			50,621	42,517

7

1. Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Consolidated Statements of Income)

					(Millions of yen)
			Six months ended		Six months ended
			March 31, 2019		June 30, 2020
Net sales	9,390	11,113
Cost of sales	1,034	1,547
Gross profit	8,356	9,566
Selling, general and administrative expenses	6,260	7,573
Operating profit	2,095	1,992
Non-operating income
Interest income and dividends income	13	16
Gain on investments in partnership	8	5
Business commission fee	12	10
Rent income	9	11
Insurance dividend	21	17
Other	2	9
Total non-operating income	66	69
Non-operating expenses
Share of loss of entities accounted for using		5		83
equity method
Loss on investments in partnership	6	67
Foreign exchange losses	9	35
Other	3	2
Total non-operating expenses	24	188
Ordinary profit	2,137	1,874
Extraordinary income
Gain on sales of investment securities		－	166
Gain on sales of investments in subsidiaries		－	46
Other	0	14
Total extraordinary income	0	227
Extraordinary losses
Loss on retirement of non-current assets	7	57
Loss on sales of shares of subsidiaries and	54	77
associates
Loss on valuation of investment securities		－	31
Other	1	10
Total extraordinary losses	63	177
Profit before income taxes	2,075	1,924
Income taxes	762	903
Profit	1,312	1,021
Profit attributable to non-controlling interests	31	25
Profit attributable to owners of parent		1,280	996

8

(Consolidated Statements of Comprehensive Income)

				(Millions of yen)
		Six months ended		Six months ended
		March 31, 2019		June 30, 2020
Profit	1,312	1,021
Other comprehensive income
Valuation difference on available-for-sale	(9)		(1)
securities
Foreign currency translation adjustment	－	(0)
Share of other comprehensive income of	(4)		7
entities accounted for using equity method
Total other comprehensive income		(13)	6
Comprehensive income		1,298	1,027
Comprehensive income attributable to
Comprehensive income attributable to	1,267		1,002
owners of parent
Comprehensive income attributable to non-	31	25
controlling interests

9

(3) Overview of Cash Flows for the Fiscal Year under Review

					(Millions of yen)
	Six months ended		Six months ended
		March 31, 2019		June 30, 2020
Cash flows from operating activities
Profit before income taxes	2,075	1,924
Depreciation			306	384
Amortization of goodwill			79	143
Increase (decrease) in allowance for doubtful accounts			－	(34)
Share of (profit) loss of entities accounted for using equity method			5	83
Decrease (increase) in notes and accounts receivable - trade				6,784
Decrease (increase) in inventories			164	(91)
	ሺ3,401ሻ
Increase (decrease) in notes and accounts payable - trade	4,645	(7,112)
Increase (decrease) in provision for bonuses			334	(746)
Increase (decrease) in provision for directors' bonuses			27	(27)
Increase (decrease) in provision for point card certificates			5	34
Loss (gain) on sales of investment securities			54	(89)
Loss (gain) on sales of investments in subsidiaries			－	(46)
Loss on retirement of non-current assets			7	57
Interest and dividend income			(13)	(16)
Decrease (increase) in accounts receivable - other	134)	1,056
Other, net		ሺ	109	(642)
Subtotal	4,265	1,663
Interest and dividend income received			14	16
Interest expenses paid				(0)
Income taxes (paid) refund	(238)	(519)
		ሺ0ሻ
Net cash provided by (used in) operating activities	4,040	1,159
Cash flows from investing activities
Purchase of property, plant and equipment	(151)	(31)
Purchase of intangible assets				(89)
Purchase of investment securities	123	(222)
	ሺ145ሻ
Proceeds from sales of investment securities		ሺ	195	480
	ሻ
Payments for lease and guarantee deposits	(485)	(1)
Purchase of loans receivable			(45)	(135)
Proceeds from loans receivable	4,936	11
Proceeds from purchase of shares of subsidiaries resulting in change			－	16
in scope of consolidation
Proceeds from sales of shares of subsidiaries resulting in change in			－		358
scope of consolidation
Other, net			0	79
	4,180	466
Net cash provided by (used in) investing activities

10

		(Millions of yen)
	Six months ended	Six months ended
	March 31, 2019	June 30, 2020
Cash flows from financing activities
Net increase (decrease) in short-term loans payable	5	－
Repayments of long-term loans payable		(136)
Proceeds from exercise of share options	0	1
ሺ122ሻ
Cash dividends paid	(1)	(203)
Purchase of treasury shares	(0)	(265)
Repayments of lease obligations payable	－	(30)
Other, net	－	2
Net cash provided by (used in) financing activities	(118)	ሺ632ሻ
	1
Effect of exchange rate change on cash and cash equivalents
	ሺ28ሻ
Net increase (decrease) in cash and cash equivalents	8,104	964
Cash and cash equivalents at beginning of period	5,679
	14,546
Cash and cash equivalents of acquired company at beginning of period	(5,679)	－
Cash and cash equivalents of acquiring company at beginning of period	238	－
Cash and cash equivalents received by share exchange	4,972	－
Cash and cash equivalents at end of period	13,314	15,511

11

1. Notes to Condensed Interim Consolidated Financial Statements (Going Concern Assumption)
   None

(Notes on Significant Changes in the Amount of Shareholders' Equity)

Based on a Board of Directors' meeting held on February 12, 2020, the Company acquired 300,000 shares of common stock. As a result, in the period under review, treasury shares increased ¥264 million, and as of the end of the period under review, treasury shares had amounted to ¥264 million.

(Adoption of Accounting Method Specific to Preparation of Quarterly Consolidated Financial Statements)

Tax expenses for the period are calculated by multiplying net income before income taxes for the period by the reasonably estimated annual effective tax rate after applying tax effect accounting which is calculated based on the estimated net income before income taxes for the entire fiscal year.

(Changes in Accounting Policies)

None

(Changes in Accounting Estimates)

None

12

(Segment Information)

I For the six-month period ended March 31, 2019 (October 1, 2018 to March 31, 2019)

1. Information on sales and income or loss by reportable business segment

						(millions of yen)
		Reportable Segments		Adjustment		Consolidation
	Partner Sales	Ad Platform	Consumer	Total		(Note)
	Business	Business	Business
Sales
Outside Sales	5,869	1,894	1,626	9,390	－		9,390
Intersegment Sales	－	3	－	3	(3)		－
or Transfer
Total	5,869	1,898	1,626	9,394	(3)		9,390
Segment Income	1,928	135	32	2,095	－		2,095

(Note) Segment income is adjusted with operating income on the quarterly consolidated statements of income.

2. Information concerning impairment loss on non-current assets, goodwill and other items by reportable business segment

(Material impairment loss on non-current assets) None

(Material changes in goodwill)

In connection with the Management Integration as of January 1, 2019, for goodwill, ¥2,416 million in Ad Platform Business and ¥761 million in Consumer Business were recorded.

(Material profit from negative goodwill) None

1. For the six-month period ended June 30, 2020 (January 1, 2020 to June 30, 2020)
   1. Information on sales and income or loss by reportable business segment

						(millions of yen)
		Reportable Segments		Adjustment		Consolidation
	Partner Sales	Ad Platform	Consumer	Total		(Note)
	Business	Business	Business
Sales
Outside Sales	4,320	3,577	3,215	11,113	－		11,113
Intersegment Sales	0	15	－	15	(15)		－
or Transfer
Total	4,320	3,593	3,215	11,129	(15)		11,113
Segment Income	896	840	255	1,992	－		1,992

(Note) Segment income is adjusted with operating income on the quarterly consolidated statements of income.

2. Information concerning impairment loss on non-current assets, goodwill and other items by reportable business segment

(Material impairment loss on non-current assets) None

(Material changes in goodwill) None

13

(Material profit from negative goodwill) None

14