Financial Results for Q1 FY2022.6

(Percentages indicate year-on-yearchanges.)

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.

	Consolidated Financial Results
	for the Three Months Ended September 30, 2021
	[Japanese GAAP]
	November 12, 2021
Company name:	freee K.K.
Listing:	Tokyo Stock Exchange
Securities code:	4478
URL:	http://www.freee.co.jp
Representative:	Daisuke Sasaki, Representative Director and CEO
Inquiries:	Sumito Togo, Director and CFO
TEL:	[phone]

Scheduled date to file quarterly securities report:	November 12, 2021
Scheduled date to commence dividend payment:	-
Preparation of supplementary materials on financial results:	Yes
Holding of financial results meeting:	Yes (for institutional investors and analysts)
	(Millions of yen with fractional amounts rounded down, unless otherwise noted)

1. Consolidated financial results for the first three months of the fiscal year ending June 30, 2022 (from July 1, 2021 to September 30, 2021)

(1) Consolidated operating results

		Net sales		Adjusted		Operating profit		Ordinary profit		Profit attributable to
			operating profit				owners of parent
Three months ended	Millions of yen			%Millions of yen			%Millions of yen			%Millions of yen			%Millions of yen		%
September 30, 2021	3,392		52.5	(329)		-	(501)		-	(495)		-	(500)		-
September 30, 2020	2,225		49.2	(269)		-	(272)		-	(268)		-	(271)		-
Notes:	1.	Comprehensive income			Three months	ended	September 30, 2021:		¥(500) million [-%]
					Three months ended September 30, 2020:	¥(271) million [-%]

2. Adjusted operating profit is the sum of the operating profit, stock-based compensation expenses, expenses for amortization of acquisition-related intangible assets, and one-time cost.

			Basic earnings	Diluted earnings
			per share	per share
Three months ended			Yen		Yen
September 30, 2021	(9.10)		-
September 30, 2020	(5.60)		-
Note:	1.	Diluted earnings per share is not stated because, although potential shares exist, basic loss per share was recorded.
(2) Consolidated financial position
			Total assets		Net assets	Equity-to-asset ratio
As of			Millions of yen		Millions of yen	%
September 30, 2021	54,270		46,565	85.2
June 30, 2021		55,286		46,871	84.2

Reference:	Equity
	As of September 30, 2021:	¥46,227 million
	As of June 30, 2021:	¥46,560 million

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.

2. Dividends

				Annual dividends
		First quarter-end	Second quarter-end	Third quarter-end	Fiscal year-end	Total
		Yen	Yen	Yen	Yen	Yen
Fiscal year ended		-	0.0	-	0.0	0.0
June 30, 2021
Fiscal year ending		-
June 30, 2022
Fiscal year ending
June 30, 2022			0.0	-	0.0	0.0
(Forecast)
Note:	Revisions to the forecast of dividends most recently announced: None

3. Consolidated earnings forecasts for the fiscal year ending June 30, 2022 (from July 1, 2021 to June 30, 2022)

For the fiscal year ending June 30, 2022, we forecast net sales of 13,971 million yen (up 36.2% compared to net sales in the fiscal year ended June 30, 2021) and adjusted operating loss(*2) of 2,561 million yen (compared to a loss of 2,301 million yen in the fiscal year ended June 30, 2021) for Platform business(*3), reflecting the expansion of the customer base and enhancement of customer value in the SaaS business and other factors. Adjusted operating profit margin is expected to improve by 4.1 pts to negative 18.3% from the previous fiscal year on the back of an increase in subscription net sales.

We have revised the guidance for Other businesses(*4) for the fiscal year ending June 30, 2022, because of the sale of the Shikaku Square business operated by our consolidated subsidiary Sight Visit Inc., announced on October 15, 2021, for which the Shikaku Square business will be deconsolidated at the end of November 2021.

For details, please refer to "1. Qualitative information regarding results for the period, (3) Explanation of consolidated earnings guidance and other forward-looking statements."

(Percentages indicate year-on-year changes.)

Platform business

Other businesses

Consolidated

Net sales

Adjusted

Net sales

Adjusted

Net sales

Adjusted

operating profit

operating profit

operating profit

Fiscal year

Millions of yen

%Millions of yen

%Millions of yen

%Millions of yen

%

Millions of yen

%Millions of yen

%

ending

13,971

36.2

(2,561)

-

390

-

100

-

14,361

40.0

(2,461)

-

June 30, 2022

Notes:

1.

Revisions to

the earnings forecasts most recently announced: Yes

1. Adjusted operating profit is the sum of the operating profit, stock-based compensation expenses, expenses for amortization of acquisition-related intangible assets, and one-time cost.
2. Platform business: Business consisting of the integrated cloud ERP offering for small businesses and financial services, etc.
3. Other businesses: Businesses other than Platform business (Shikaku Square provided by Sight Visit Inc.).

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.

* Notes

1. Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in the change in scope of consolidation): None
2. Application of specific accounting for preparing the quarterly consolidated financial statements: None
3. Changes in accounting policies, changes in accounting estimates, and retrospective restatement
4. 1. Changes in accounting policies due to revisions to accounting standards and other regulations: Applicable
   2. Changes in accounting policies other than a. above: None
   3. Changes in accounting estimates: None
   4. Retrospective restatement: None
5. Number of issued shares (Common stock)
6. 1. Total number of issued shares at the end of the period (including treasury stock)

As of September 30, 2021	55,159,647 shares
As of June 30, 2021	54,778,125 shares

b. Number of treasury stock at the end of the period

As of September 30, 2021	-
As of June 30, 2021	-

c. Average number of outstanding shares during the period

Three months ended September 30, 2021	54,961,601 shares
Three months ended September 30, 2020	48,434,487 shares

• This consolidated financial results are exempt from quarterly review conducted by certified public accountants or audit firms.
• Proper use of earnings forecasts, and other special matters

Forward-looking statements, including the consolidated forecasts stated in these materials, are based on information currently available to the Company and certain assumptions deemed reasonable. The achievement of said forecasts cannot be promised. Results may differ materially from the consolidated forecasts due to various factors.

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.

Table of contents
1. Qualitative information regarding results for the period	2
(1)	Explanation of operating results	2
(2)	Explanation of financial position	3
(3)	Explanation of consolidated earnings guidance and other forward-looking statements	3
2. Quarterly consolidated financial statements and significant notes thereto	4
(1)	Quarterly consolidated balance sheet	4
(2)	Quarterly consolidated statement of income and quarterly consolidated statement of comprehensive
	income	6
(3)	Notes to quarterly consolidated financial statements	8
	Notes on going concern assumption	8
	Notes on significant changes in the amount of shareholders' equity	8
	Changes in accounting policies	8
	Significant subsequent events	8

1

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.

1. Qualitative information regarding results for the period

(1) Explanation of operating results

We estimate that the TAM(*1) for cloud accounting and HR software for small businesses(*2) is around 1.2 trillion yen(*3). At present, however, among SMBs with 1,000 or fewer employees and self-employed that use accounting software, the adoption rate of cloud accounting software is only 25.2%(*4). We believe that this relatively low adoption rate represents an opportunity for us to further expand the use of cloud ERP software among SMBs. In line with our corporate mission "Empower Small Businesses to Take Center Stage," we develop and offer services aimed at realization of "Integrated Management Platform for Everyone to Manage Business Freely."

During the first quarter of the fiscal year, to further expand our customer base, we expanded our direct sales organization, strengthened relationships with financial institutions and partner companies, and we have supported scanner storage for all plans of "freee Accounting" for self-employed and corporate customers in preparation for the amendment of the Electronic Books Maintenance Act enforced from January 2022. We also released a beta version of a linkage function for "freee Founding" with Mynaportal, an online service managed by the government of Japan which allows several kinds of administrative procedures online.

Additionally, we invested in development to improve the functions of our core services, "freee Accounting" and "freee HR," and released the functional linkage between "freee Accounting" and "NINJA SIGN by freee," as well as the mobile app for "freee Project Management" to enhance customer value for achieving our mission.

As a result of initiatives including the above, as of the end of the first quarter, for Platform business(*5), ARR(*6) increased year-over-year by 41.3% to 12,085 million yen, the number of paying customers(*7) by 34.2% to 313,206, and ARPU(*8) by 5.3% to 38,586 yen. Moreover, for the first three months of Platform business, net sales increased by 41.7% to 3,151 million yen year-over-year and adjusted operating loss(*9) was 398 million yen (269 million yen in the same period of the previous fiscal year).

As a result, for the first three months of consolidated fiscal year under review, net sales increased by 52.5% year-over-year to 3,392 million yen, adjusted operating loss was 329 million yen (269 million yen in the same period of the previous fiscal year, and the same applies hereafter), operating loss was 501 million yen (272 million yen), ordinary loss was 495 million yen (268 million yen). Loss attributable to owners of parent resulted in 500 million yen (271 million yen in the previous fiscal year).

Trends in ARR, Number of Paying Customers and ARPU for Platform business

			Jun 30, 2019	Jun 30, 2020	Jun 30, 2021	Sep 30, 2020	Sep 30, 2021
ARR (¥ million)	5,273	7,898	11,268	8,550	12,085
Number of paying	160,132	224,106	293,296	233,341	313,206
	customers
	ARPU (¥)		32,930	35,246	38,419	36,645	38,586
Notes:	1.	TAM: Total Addressable Market. This figure represents our estimate of our maximum market opportunity and is not intended as an
		objective indicator of the actual size of the market for our businesses as of the date of submission of this report. Our estimate of the
		TAM for accounting software and HR software for small businesses is based on certain assumptions and was calculated using statistical

data and publications from external sources by the calculation method shown in 2 below. Actual market size may differ from this estimate due to the limitations peculiar to such statistical data and publications in terms of their accuracy.

1. Small Businesses refers to businesses with 1,000 or fewer employees as well as self-employed individuals.
2. Total annual spending of all potential customers assuming that all potential customers in Japan adopted freee Accounting and freee HR. All potential customers are the total of self-employed and SMBs with less than 1,000 employees. (Number of businesses in each category among all potential customers of freee Accounting and freee HR ("Tax Statistics 2019" by National Tax Agency and "Economic Census for Business Activity, June 2016" by Ministry of Internal Affairs and Communications) × Annual base charge of freee Accounting and freee HR for each category) + (Estimated average number of employees in each category ("Employment Status Survey, 2017" by Ministry of Internal Affairs and Communications) × Annual charge per ID).
3. International Data Corporation(IDC), "Worldwide Public Cloud Services Spending Guide Software Add On: V2 2021."
4. Figures represent the Group's overall business, excluding the Shikaku Square business, operated by our consolidated subsidiary Sight Visit Inc., scheduled to be sold in December, 2021.
5. ARR: Annual Recurring Revenue. Monthly Recurring Revenue for last month of relevant period, multiplied by 12. Monthly Recurring Revenue is defined as the amount of fees contracted to be paid by customers on a monthly basis as of the end of a particular month (excludes one-time fees).
6. Refers to both self-employed and corporations that use our services.

2