CURVES : Consolidated Financial Results for the Nine Months Ended May 31, 2022

Consolidated Financial Results

for the Nine Months Ended May 31, 2022 [Japanese GAAP]

July 8, 2022

Company name: CURVES HOLDINGS Co., Ltd.

Stock exchange listing: Tokyo Stock Exchange Prime Market

Stock code: 7085

URL: https://www.curvesholdings.co.jp/

Representative: Takeshi Masumoto, Representative Director and President

Contact: Shinya Matsuda, Director and General Manager, Administration Division

Tel: [phone]

Scheduled date of filing quarterly securities report: July 12, 2022

Scheduled date of commencing dividend payments: -

Availability of supplementary briefing material on quarterly financial results: Available

Schedule of quarterly financial results briefing session: Not scheduled

(Amounts of less than one million yen are rounded down.)

1. Consolidated Financial Results for the Nine Months Ended May 31, 2022 (September 1, 2021 to May 31, 2022)

(1) Consolidated Operating Results		(% indicates changes from the previous corresponding period.)
			Net sales		Operating profit		Ordinary profit		Profit attributable to
						owners of parent
	Nine months ended		Million yen	%	Million yen	%		Million yen			%	Million yen	%
	May 31, 2022		20,449	12.5	2,432	85.0		2,710	90.7	1,799		118.1
	May 31, 2021		18,170	(7.1)	1,314	(23.9)		1,421	(18.0)	824		(26.5)
(Note) Comprehensive income: Nine months ended May 31, 2022: 3,141 million yen [up 162.2%]
			Nine months ended May 31, 2021: 1,197 million yen [down 3.5%]
			Earnings per share	Diluted earnings
			per share
	Nine months ended			Yen		Yen
	May 31, 2022			19.32		-
	May 31, 2021			8.79		-
(2) Consolidated Financial Position
			Total assets	Net assets		Equity ratio
	As of		Million yen		Million yen					%
	May 31, 2022		35,961		10,259			28.5
	August 31, 2021		36,284		9,163			25.3
(Reference) Equity: As of May 31, 2022:	10,259 million yen
		As of August 31, 2021: 9,163 million yen
2. Dividends
							Annual dividends
					1st	2nd	3rd			Year-end		Total
					quarter-end	quarter-end	quarter-end
					Yen		Yen		Yen			Yen			Yen
	Fiscal year ended August 31, 2021		-	0.00		-			5.00			5.00
	Fiscal year ending August 31, 2022		-	3.50		-
	Fiscal year ending August 31, 2022 (Forecast)								3.50			7.00

(Note) Revision to the forecast for dividends announced most recently: No

3. Consolidated Financial Results Forecast for the August 31, 2022)

Fiscal Year Ending August 31, 2022 (September 1, 2021 to (% indicates changes from the previous corresponding period.)

	Net sales		Operating profit	Ordinary profit	Profit attributable to	Earnings per share
							owners of parent
	Million yen	%	Million yen	%	Million yen	%	Million yen	%	Yen
Full year	27,300	10.6	2,700	66.4	3,230	88.1	2,150	90.3	23.15

(Note) Revision to the financial results forecast announced most recently: Yes

For the consolidated financial results forecast, please see the "Notice of Revisions to the Full-Year Financial Results Forecast" released today (July 8, 2022).

* Notes:

1. Changes in significant subsidiaries during the nine months ended May 31, 2022 (changes in specified subsidiaries resulting in changes in scope of consolidation): No

Newly added: ― (Name:

)

Excluded: ― (Name:

)

1. Accounting policies adopted specially for the preparation of quarterly consolidated financial statements: No
2. Changes in accounting policies, changes in accounting estimates and restatements
3. 1. Changes in accounting policies due to the revision of accounting standards: Yes
   2. Changes in accounting policies other than 1) above: No
   3. Changes in accounting estimates: No
   4. Restatements: No
4. Total number of issued shares (common shares)
5. 1. Total number of issued shares at the end of the period (including treasury shares):

May 31, 2022:	93,857,493 shares
August 31, 2021:	93,857,493 shares
2) Total number of treasury shares at the end of the period:
May 31, 2022:	1,800,121 shares
August 31, 2021:	121 shares

3) Average number of shares during the period (cumulative from the beginning of the fiscal year):

Nine months ended May 31, 2022:	93,137,372 shares
Nine months ended May 31, 2021:	93,857,372 shares

(Note) The total number of treasury shares at the end of the period include shares of the Company (1,800,000 shares on May 31, 2022 and 0 shares on August 31, 2021) held by Custody Bank of Japan, Ltd. (Trust Account E). In addition, shares of the Company held by Custody Bank of Japan, Ltd. (Trust Account E) are included in treasury shares that are subtracted in calculating the average number of shares during the period. (720,000 shares during the nine months ended May 31, 2022 and 0 shares during the nine months ended May 31, 2021)

• This summary of the quarterly financial results is outside the scope of quarterly review by certified public accountants or audit firms.
• Explanation of the proper use of financial results forecast and other notes(Note on forward-looking statements, etc.)
  The financial results forecast and other forward-looking statements contained in this document are based on information currently available to the Company and certain assumptions deemed reasonable by the Company. Such forward-looking statements are not intended to represent a commitment on the part of the Company to achieve them. Actual results may vary significantly due to various factors. See "(3) Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information" in the section, "1. Qualitative Information on Quarterly Financial Results for the Period under Review," on page 4 of the attached material for the assumptions used in the financial results forecast and precautions for using the financial results forecast.

(How to obtain supplementary briefing material on the financial results)

The Company has posted supplementary briefing material on the financial results for this quarter on TDnet and the Company's website (https://www.curvesholdings.co.jp/).

Table of Contents
1. Qualitative Information on Quarterly Financial Results for the Period under Review ..................................	2
(1)	Explanation of Operations Results .............................................................................................................	2
(2)	Explanation of Financial Position ..............................................................................................................	3
(3)	Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information ..........	4
2. Quarterly Consolidated Financial Statements and Primary Notes .................................................................	6
(1)	Quarterly Consolidated Balance Sheets .....................................................................................................	6
(2)	Quarterly Consolidated Statements of Income and Comprehensive Income .............................................	8
(3)	Notes to Quarterly Consolidated Financial Statements ............................................................................	10
	(Notes on going concern assumption) ......................................................................................................	10
	(Notes in the case of significant changes in shareholders' equity) ...........................................................	10
	(Changes in accounting policies) ..............................................................................................................	10
	(Additional information) ...........................................................................................................................	11

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

(1) Explanation of Operations Results

The Group (the Company and consolidated subsidiaries, hereinafter referred to as the "Group") has been striving to contribute to the extension of health life expectancy through its core business, Curves, a 30-minute fitness club for women. The Group has endeavored to enhance the satisfaction of its members and expand membership by strengthening customer services as "community-based health infrastructure" that contributes to solving social issues.

It is the Group's understanding that the market environment during and after the COVID-19 pandemic will change dramatically in the following two ways:

1. Growth of the health market: The pandemic forced people to focus on their lives and health, and the trend toward taking care of their own health will gain momentum over the medium- to long-term, promoting substantial growth of the disease-prevention and health market.
2. Growing demand for contactless services: Extending beyond the end of the COVID-19 pandemic, consumer sentiment, society and the economy will remain "scared" by COVID-19, and qualitative changes will occur, such as an increase in demand for non-contact services.

In this management environment, the Group aims to achieve a business recovery and establish business models in the new management environment by the end of December 2022. It is pursuing strategies positioning the fiscal year ending August 31, 2022 (from September 1, 2021, to August 31, 2022) as the fiscal year for ensuring that such goals are achieved.

The net increase in the number of members, the most important indicator of the Group's business recovery, was 43K from 693K as of the end of the previous fiscal year and totaled 737K (including online members).

Looking at the third quarter under review (March 2022 to May 2022), the Group broadcast new TV commercials in March and April 2022 and conducted a media mix-oriented marketing campaign that included online advertising. Consequently, net number of members increased 18K from the level at the end of the previous quarter. This indicates steady progress in the top priority issue, enabling the number of members to recover as quickly as possible. In addition, by further increasing customer satisfaction, the Group succeeded in maintaining the monthly membership attrition rate below the pre-COVID-19 level. However, with social activity stagnant through late March, mainly due to the spread of the Omicron variant and the enforcement of COVID-19quasi-emergency measures, the acquisition of new members, particularly senior members (65 years old or above), remained slow, causing the number of members at the end of the first nine months under review to fall below initial expectations.

Sales of merchandise to members continued to be strong during the third quarter of the fiscal year under review and surpassed expectations, chiefly reflecting a rise in the number of members who entered into protein products subscription contracts and growth in per-customer spending due to the offering of new highly functional products introduced during the second quarter of the fiscal year under review.

The Group proceeded with the closure and merging of the clubs that have been severely affected by COVID-19, and approximately 70% of the members of closed and merged clubs have moved to other clubs.

Accordingly, the number of Curves facilities (excluding Men's Curves) and membership in Japan as of May 31, 2022 were as follows.

2

Number of Curves facilities (excluding Men's Curves) and membership in Japan

		As of May 31, 2022
	As of August
		Changes from end of
	31, 2021
		previous fiscal year
Number of facilities	1,958 facilities	1,948 facilities	A decrease of	(0.5)%
10 facilities
Of which, number of	75 facilities	75 facilities	‒	‒
corporate operated facilities
Number of franchisee	1,883 facilities	1,873 facilities	A decrease of	(0.5)%
facilities	10 facilities
Membership	693K	737K	43K	6.3%

• Reference: Numbers before COVID-19 As of February 29, 2020

2,014 facilities

65 facilities

1,949 facilities

832K

(Notes) 1. In the third quarter of the fiscal year under review, the number of new club opening was 3 and the number of clubs closed and merged was 6.

2. Curves membership in Japan includes the number of members of online fitness program, Ouchi de Curves (Curves at Home).

Regarding Men's Curves, a physical exercise facility for men, the Group opened its 10th facility in the Katahira campus of Tohoku University (Sendai, Miyagi Prefecture) in March 2022. Going forward, it will expand the area of its joint research with Tohoku University.

In overseas business, the Group considers Europe where it acquired the franchiser operations in July 2019 to be its priority market. As of the end of the first nine months of the fiscal year under review (March 31, 2022 (two- month lag due to difference in fiscal year end)), there were 153 Curves facilities in Europe (UK, Italy, Spain and five other countries, all facilities are franchisees' facilities).

Selling, general and administrative expenses increased 519 million yen compared to the second quarter of the fiscal year under review and 99 million yen compared to the second quarter of the previous year, mainly due to increase in advertising and marketing expenses to roll out the strategic marketing activities.

As a result, net sales for the first nine months of the fiscal year under review were 20,449 million yen (up 12.5% year on year), leading to operating profit of 2,432 million yen (up 85.0% year on year). Ordinary profit was 2,710 million yen (up 90.7% year on year) due to the generation of foreign exchange gains at Curves International, Inc., which did not have an impact on changes in cash. Profit attributable to owners of parent was 1,799 million yen (up 118.1% year on year) mainly due to the posting of income taxes - current of 1,022 million yen.

Since the Group operates in a single business segment, the Curves business, the segment information is omitted.

1. Explanation of Financial Position (Assets)
   Total assets as of May 31, 2022 decreased by 323 million yen, compared to the end of the previous fiscal year to 35,961 million yen (down 0.9% from the end of the previous fiscal year).
   Current assets decreased by 1,415 million yen to 13,546 million yen (down 9.5% year on year). This was mainly due to a decrease of 2,002 million yen in cash and deposits.
   Property, plant and equipment decreased by 33 million yen to 472 million yen (down 6.6% year on year). Intangible assets increased by 1,192 million yen to 21,320 million yen (up 5.9% year on year). This was
   primarily due to an increase of 997 million yen in trademark right, which resulted from currency exchange fluctuations.
   Investments and other assets decreased by 66 million yen to 622 million yen (down 9.7% year on year). Total non-current assets increased by 1,091 million yen to 22,415 million yen (up 5.1% year on year).

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