ENDO Lighting : Overview of Business Performance for the Fiscal Year Ended March 31, 2024

1. Overview of Business Performance

(1) Overview of Business Performance for the Fiscal Year under Review

The Japanese economy during the consolidated fiscal year ended March 31, 2024 was a mild recovery mainly due to an increase in inbound demand and expansion of capital investment, despite anxiety factors such as rising prices and exchange rate fluctuation risks. On the global economic front, the outlook remained uncertain due to heightened geopolitical risks against a backdrop of the unstable international circumstances and concerns over sharp fluctuations in exchange rates on account of changes in interest rate policies of each country.

Amid these conditions, the Endo Lighting Corporation Group (the "Group"), as a corporate group that creates high value-added spaces, has focused on the development, manufacture, and sales of new products that offer enhanced quality of light to create customer value in addition to excellent power-saving performance, aiming to realize a sustainable and better society.

Since converting our products to LED as the pioneer in the business field, we have been developing lighting fixtures with higher efficiency, on the belief that it is the manufacturers' responsibility to continuously improve energy efficiencies of products. Further, by realizing lighting of the future friendly to the earth and humans, we are promoting sustainability management with the aim of making people's lives not only shined brighter, but also richer and happier.

In the manufacturing department, we endeavored to promote continuous activities for product quality improvement and cost reduction with the aim of providing environment-friendly products, while reducing selling, general and administrative expenses.

As a result, the Group's net sales for the fiscal year ended March 31, 2024 recorded the highest ever and increased by 13.1% from a year earlier to ¥51,706 million. Operating profit increased by 68.3% from a year earlier to ¥5,203 million, ordinary profit increased by 57.7% from a year earlier to ¥5,724 million, and profit attributable to owners of parent increased by 57.0% from a year earlier to ¥4,649 million.

The Group's business performance by segment was as follows.

1. Lighting Fixtures Segment
   The Group achieved the industry's widest variety of products in the field of LED lighting fixtures for business use and strived to

establish high brand recognition in the lighting control solutions field.

In the domestic market, we focused on sales promotions for the wireless lighting control system, Smart LEDZ Fit/Fit Plus, and the wireless light and color modulating fixture, Tunable LEDZ. Against a backdrop of electricity rate hikes and the social demand for sustainability, we reinforced measures to capture demand from newly constructed commercial facilities and other large-scale facilities such as offices, in addition to the demand for the replacement of existing lighting fixtures.

In addition, we greatly expanded the product lineup for Sync, the next-generation wireless light and color modulating fixture series in which three functions are incorporated: natural light, color production, and tone modulation. We renovated the interactive Tokyo office, and introduced Since U/X Lab Connect exploring the future of lighting as well as Since U/X Lab FUKUOKA at Fukuoka office. In addition, we published a catalog for offices, "LIGHTING+FOR WORKSPACE," and ran active sales promotions.

In response to the impact on the cost of sales due to the rapid depreciation of the yen and the steep rise in raw material prices, we adjusted the prices and continued efforts to reduce cost and selling, general and administrative expenses.

In overseas markets, we published the S16 catalog in May 2023, and bolstered customer-oriented sales efforts in the United Kingdom. Furthermore, in Asia, we worked to establish a premium brand image through the consecutive release of new products in the sync series which meet the demands of customers in the luxury building market and the advance overseas release of the DALI Converter controlling Synca with DALI signals. We also worked to increase brand recognition through the release of Virtual Concepts as a web lighting presentation tool for high-end housings. We published the sync4 catalog in July following the online announcement in June 2023

and continued our efforts to cultivate existing customers in depth and to develop the luxury building market.

As a result, the Lighting Fixtures segment's net sales for the fiscal year ended March 31, 2024 increased 12.2% from a year earlier to ¥45,774 million (including intersegment sales; hereinafter the same applies), and segment profit (operating profit; hereinafter the same applies) increased 73.1% from a year earlier to ¥5,624 million.

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2) Environment-related Business Segment

In the Environment-related Business segment, we focused on proposals for LED lighting updates, energy savings, and increased comfort, particularly for retail stores.

Leveraging the unique expertise that we have accumulated in lighting modulating color and light for different areas and times of day, we began offering a new Rental Plus service which realized bulk remote operation of multiple stores, energy savings, and space staging, thus contributing to the improvement of store environment.

In our sales activities, in addition to launching proposals for the rental of private solar power generators to promote the conversion to zero energy, we focused on activities that took advantage of digital tools, such as the redistribution of the presentation video played at an exhibition in our efforts to streamline sales operations. These activities led to a strong record of both rental contracts and device sales.

As a result, the Environment-Related Business segment's net sales for the fiscal year ended March 31, 2024 increased 16.2% from a year earlier to ¥10,272 million, and segment profit rose 9.1% from a year earlier to ¥897 million.

1. Interior Furniture Segment
   In the Interior Furniture segment, the Group focused primarily on developing the office market and expanded our activities to establish

our brand recognition in this market. We actively promoted activities to win orders for sound-absorbing panels in response to the increasing number of problems related to sound environment caused by the diversification of offices, while at the same time, publishing a new catalog "Booth & Green" in December 2023, and developing relaxation spaces incorporating green offices.

In addition, we reprinted the "Abita Style 12 Revised Edition," the catalog featuring a wider range of office-friendly tables and chairs, original stools produced in collaboration with other manufacturers, products made of eco-friendly materials, and other items, made more frequent sales visits and stepped up the development of new products for a new catalog in efforts to further enhance recognition of the Abita Style brand, and worked on the production of original furniture and the development of new suppliers.

Further, hotel demand is returning with the population flow recovery attributed to the easing of restrictions on activities, bringing an increase in inquiries for the replacement of chairs and other furniture.

As a result, the Interior Furniture segment's net sales for the fiscal year ended March 31, 2024 increased by 24.4% from a year earlier to ¥1,174 million. A segment loss of ¥210 million was recorded against the segment loss of ¥98 million in the same period of the previous fiscal year.

1. Overview of Financial Position for the Fiscal Year under Review

1. Status of Assets, Liabilities and Net Assets

a. Assets

The Group's consolidated assets at the end of the fiscal year under review increased ¥5,410 million from the end of the previous fiscal year to ¥62,753 million.

The primary factors contributing to this result included an increase of ¥4,322 million in cash and deposits, an increase of ¥1,458 million in notes and accounts receivable - trade, and a decrease of ¥602 million in inventories.

b. Liabilities

The Group's consolidated liabilities at the end of the fiscal year under review decreased ¥1,621 million from the end of the previous fiscal year to ¥24,186 million.

The primary factors contributing to this result included an increase of ¥754 million in notes and accounts payable - trade, an increase of ¥459 million in deferred tax liabilities, and a decrease of ¥2,650 million in short-term borrowings.

c. Net Assets

The Group's consolidated net assets at the end of the fiscal year under review increased ¥7,032 million from the end of the previous fiscal year to ¥38,567 million.

This was primarily due to profit attributable to owners of parent of ¥4,649 million, an increase of ¥2,749 million in foreign currency translation adjustment, and a decrease of ¥480 million due to the payment of dividends.

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

The Group's consolidated cash and cash equivalents at the end of the fiscal year under review amounted to ¥16,163 million, compared with ¥11,847 million at the end of the previous fiscal year.

a. Cash flows from operating activities

Net cash provided by operating activities during the fiscal year under review was ¥10,152 million, compared with net cash provided by operating activities of ¥3,901 million for the previous fiscal year. The primary cash increasing factors included a ¥5,723 million profit before income taxes, ¥2,975 million in depreciation, and a ¥1,480 million decrease in inventories.

b. Cash flows from investing activities

Net cash used in investing activities during the fiscal year under review was ¥2,904 million, compared with net cash used in investing activities of ¥2,789 million for the previous fiscal year. The primary factors included purchase of property, plant and equipment of ¥2,843 million.

c. Cash flows from financing activities

Net cash used in financing activities during the fiscal year under review was ¥4,094 million, compared with net cash used in financing activities of ¥461 million for the previous fiscal year. The primary increasing factors included proceeds from issuance of bonds of ¥1,000 million. The primary cash decreasing factors included repayments of long-term borrowings of ¥4,944 million.

(4) Future Outlook

The Group has expanded the possibilities of lighting to pursue the creation and provision of new value in lighting space with the vision "Becoming the No.1 Company for Ethical Solutions." "Ethical" in the mind of Endo Lighting means considering the impact on the global environment and society, while at the same time bringing more comfort, convenience, and good health to people's lives, and exploring added value to light environment. Through lighting and solutions that apply lighting, we will contribute to the realization of a sustainable earth and society.

Further, amid rising social demands for sustainability, we expect demand for high energy-saving LED lighting fixtures and lighting solutions related to well-being to remain strong, given soaring energy prices and progress in social initiatives for zero carbon. However, since the global surge of raw material prices and tight supply-demand balance, as well as sharp exchange rate fluctuations are risk factors for our supply chain, we expect the outlook remains uncertain.

Under these circumstances, the Lighting Fixtures segment will focus on developing new products that appeal to the market, as represented by the next-generation wireless light and color modulating fixture series Synca, in which three functions are incorporated: natural light, color production and tone modulation. We will also continue a commitment to conducting stringent cost control and expense management to establish a stable business revenue base.

In Japan, in addition to expanding the series of wireless color modulation equipment in the LEDZ Pro.6 catalog published in April 2024, we will launch new products, including series of more efficient products and lighting control system-related products. As well as expanding sales of lighting fixtures targeted at commercial facilities, we will continue to strongly promote the business structure establishment to accommodate the demand for lighting fixtures throughout the lighting market.

Overseas, we will actively invest management resources to reinforce its business foundation, in an effort to secure appropriate positions in the respective markets.

For the Environment-Related Business segment, we will move forward on developing products through collaboration with lighting- related fields and networks, while reinforcing activities to propose solutions for each customer as well as further developing the market for retail stores.

For the Interior Furniture segment, we will strive to unearth new markets by proactively pushing forward with development into new fields such as offices, while focusing on acquisition of projects from commercial facilities.

For the consolidated fiscal year ending March 31, 2025, the Company forecasts net sales of ¥53,000 million, an increase of 2.5% from a year earlier, operating profit of ¥5,300 million, an increase of 1.8% from a year earlier, ordinary profit of ¥5,500 million, a decrease of 3.9% from a year earlier, and profit attributable to owners of parent of ¥4,200 million, a decrease of 9.7% from a year earlier.

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2. Basic Policy Regarding Selection of Accounting Standards

Taking into account the comparability of consolidated financial statements between periods and companies, the Group intends to prepare consolidated financial statements in accordance with the Japanese standards in the foreseeable future.

Regarding the adoption of International Financial Reporting Standards, we intend to respond appropriately in consideration of various circumstances at home and abroad.

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