Freee K K : Financial Results for Q4 FY2022.6

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 Fiscal Year Ended June 30, 2022

[Japanese GAAP]

August 12, 2022

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 of ordinary general meeting of shareholders:

Scheduled date to commence dividend payment: Scheduled date to file annual securities report:

Preparation of supplementary materials on financial results: Holding of financial results meeting:

September 29, 2022

-

September 29, 2022 Yes

Yes (for institutional investors and analysts)

(Millions of yen with fractional amounts rounded down, unless otherwise noted)

1. Consolidated financial results for the fiscal year ended June 30, 2022 (from July 1, 2021 to June 30, 2022)

(1) Consolidated operating results

(Percentages indicate year-on-year changes.)

Adjusted

Profit attributable

Net sales

Operating profit

Ordinary profit

to owners of

operating profit

parent

Fiscal

year

Millions of

％

Millions of

Millions of

％

Millions of

％

Millions of

％

ended

yen

yen

yen

yen

yen

June 30,

14,380

40.2

(2,250)

－

(3,042)

－

(3,085)

－

(11,609)

－

2022

June 30,

10,258

48.8

(2,301)

－

(2,441)

－

(2,719)

－

(2,756)

－

2021

Notes:

1.

Comprehensive income

For the fiscal year ended June 30, 2022:

(11,598)

million

(

－％)

For the fiscal year ended June 30, 2021:

(2,758)

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	Return on	Ordinary profit	Operating
		earnings per	shareholders'	profit to net
		per share	to total assets
		share	equity		sales
Fiscal year ended	Yen	Yen			％		％	％
June 30, 2022	(208.22)	－		(28.1)		(6.0)	(21.2)
June 30, 2021	(54.88)	－			(9.2)		(7.4)	(23.8)
Reference:	Share of profit (loss) of entities accounted for using equity		Fiscal year ended June	－million
method					30, 2022:
						Fiscal year ended June	－million
						30, 2021:
Note:	Diluted earnings per share is not stated because basic loss per share was recorded.

1. Consolidated financial position

	Total assets	Net assets	Equity-to-asset ratio	Net assets per share
As of		Millions of yen	Millions of yen	％	Yen
June 30, 2022		47,413	36,428	76.1	636.68
June 30, 2021		55,286	46,871	84.2	849.99
Reference: Equity
As of June 30, 2022:		36,095 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.

1. Consolidated cash flows

	Cash flows from	Cash flows from	Cash flows from		Cash and cash
		equivalents at the
	operating activities	investing activities	financing activities
		end of period
Fiscal year ended	Millions of yen	Millions of yen	Millions of yen	Millions of yen
June 30, 2022		(1,069)			(4,483)		451		42,046
June 30, 2021		(192)			(3,180)		35,380		47,143
2. Dividends
		Annual dividends				Payout	Dividends
			Total		to net
									ratio
	First	Second		Third	Fiscal		Total	dividends		assets
			(consolidated)
	quarter-endquarter-endquarter-end	year-end			(consolidated)
Fiscal year ended	Yen	Yen	Yen	Yen		Yen	Millions of		％	％
	yen
June 30,
－	0.00		－	0.00		0.00	－		－	－
2021
June 30,	－	0.00		－	0.00		0.00	－		－	－
2022
Fiscal year ending	－	0.00		－	0.00		0.00			－
June 30,
2023(Forecast)

3. Consolidated earnings forecasts for the fiscal year ending June 30, 2023 (from July 1, 2022 to June 30, 2023)

For the fiscal year ending June 30, 2023, we forecast net sales of 18,821 million yen (up 34.6% compared to net sales for Platform business(1) for the fiscal year ended June 30, 2022) backed by the expansion of customer base in the SaaS business, enhancement in customer value, etc,. On the other hand, adjusted operating loss(2) is expected to be 7,452 - 6,802 million yen due to investment for sustainable growth over the mid to long-term. Compared to consolidated financial results for the fiscal year ended June 30, 2022 (including the Shikaku Square sold on December 1, 2021), net sales for the fiscal year ending June 30, 2023 will increase by 30.9%.

For details, please refer to "1. Qualitative information regarding results for the period, (4) Explanation of consolidated earnings guidance and other forward-looking statements."

(Percentages indicate year-on-year changes.)

	Net sales		Adjusted operating profit
Fiscal year ending	Millions of yen	％	Millions of yen	％
18,821	30.9	(7,452)	△39.6
June 30, 2023	〜(6,802)	〜△36.1

Notes:1. Platform business: Business consisting of the integrated cloud ERP offering for small businesses and financial services, etc.

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.

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 : None resulting in the change in scope of consolidation)
2. Changes in accounting policies, changes in accounting estimates, and retrospective restatement
   a. Changes in accounting policies due to revisions to accounting standards and other : Applicable regulations

b. Changes in accounting policies other than a. above	:	None
c. Changes in accounting estimates	:	None
d. Retrospective restatement	:	None

1. Number of issued shares (Common stock)
   a. Total number of issued shares at the end of the period (including treasury stock)

	Fiscal year ended June 30,	2022		56,695,564	shares
b.	Fiscal year ended June 30,	2021		54,778,125	shares
Number of treasury stock at	the end	of the period
	Fiscal year ended June 30,	2022		2,431	shares
c.	Fiscal year ended June 30,	2021			－
Average number of outstanding shares	during the period
	Fiscal year ended June 30,	2022		55,753,339 shares
	Fiscal year ended June 30,	2021		50,224,204 shares

(Reference) Overview of non-consolidated financial results Non-consolidated financial results for the fiscal year ended June 30, 2022 (from July 1, 2021 to June 30, 2022)

(1)	Non-consolidated operating results	(Percentages indicate year-on-year changes.)
		Net sales	Operating profit	Ordinary profit	Profit
Fiscal year ended	Millions of yen	％	Millions of yen	％	Millions of yen		％	Millions of yen		％
June 30, 2022	13,517	31.2	(1,624)	－	(1,666)		－	(11,527)		－
June 30, 2021	10,300	48.7	(2,296)	－	(2,540)		－	(2,884)		－
		Basic earnings per share	Diluted earnings per share
Fiscal year ended			Yen			Yen
June 30, 2022		(206.76)			－
June 30, 2021		(57.43)			－
Note:	Diluted earnings per share is not stated because basic loss per share was recorded.
(2)	Non-Consolidated financial position
		Total assets	Net assets	Equity-to-asset ratio	Net assets per share
As of		Millions of yen		Millions of yen			％			Yen
June 30, 2022		46,480			36,506			77.9			639.04
June 30, 2021		53,896			46,916			86.5			850.80
Reference: Equity
	As of June 30, 2022:				36,229 million
	As of June 30, 2021:				46,605 million

• Financial results reports are exempt from audit 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	4
(3)	Explanation of cash flows	4
(4)	Explanation of consolidated earnings guidance and other forward-looking statements	5
2. Basic concept regarding selections of accounting standards	6
3. Consolidated financial statements and significant notes thereto	7
(1)	Consolidated balance sheet	7
(2)	Consolidated statement of income and consolidated statement of comprehensive income	9
	Consolidated statement of income	9
	Consolidated statement of comprehensive income	10
(3)	Consolidated statement of changes in equity	11
(4)	Consolidated statement of cash flows	13
(5)	Notes to consolidated financial statements	15
	Notes on going concern assumption	15
	Changes in accounting policies	15
	Business combination	15
	Segment information	18
	Per share information	18
	Significant subsequent events	19

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 less than 1,000 employees and self-employed that use accounting software, the adoption rate of cloud accounting software is only 26.3% (*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. "
  In the current fiscal year, to realize our mission, we, the freee Group, made investments to improve the functionality of our primary services, "freee Accounting" and "freee HR". To make the service available to more customers in the Mid segment (*5), we have enhanced the fixed asset management and automatic invoice processing functions and released "freee Expense Management" and "freee Time Tracking Plus" to make it easier to introduce our services. Further, we have released "freee Card Unlimited" to meet the growing financing needs of our customers, especially in the Mid segment. Also, to strengthen our network with accounting firms, the most critical partner in the small business, we made Mikatus Inc. a subsidiary, which provides A-SaaS, the crowd-based tax, accounting, and payroll system for accounting firms.

For the Platform business (*6), ARR (*7) increased by 33.6% year-on-year to 15,057 million yen at the end of the fiscal year, as well as the number of paying customers (*8) by 29.4% to 379,404, and ARPU (*9) by 3.3% to 39,686 yen. Moreover, for the Platform business in the fiscal year ended June 30, 2022, net sales increased by 36.4% to 13,987 million yen year-over-year and adjusted operating loss (*10) was 2,343 million yen (2,301 million yen in the previous fiscal year). Considering the M&As conducted during the fiscal year (ARR from Mikatus Inc. is 715 million yen), ARR amounted to 15,772 million yen.

As a result, for the consolidated fiscal year under review, net sales increased by 40.2% year-over-year to 14,380 million yen, adjusted operating loss was 2,250 million yen (2,301 million yen in the previous fiscal year, and the same applies hereafter), operating loss was 3,042 million yen(2,441 million yen), ordinary loss was 3,085 million yen (2,719 million yen). As stated in the "Announcement Regarding Mid to Long-term Strategy and Booking of Impairment Loss Based on the Strategy" disclosed today, we recognized an impairment loss of 9,088 million yen. As a result, loss attributable to owners of parent resulted in 11,609 million yen (2,756 million yen).

Trends in ARR, Number of Paying Customers and ARPU

	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2022
ARR (¥ million)	2,986	5,273	7,898	11,268	15,057
Number of	115,808	160,132	224,106	293,296	379,404
paying
customers
ARPU (¥)	25,786	32,930	35,246	38,419	39,686

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 3 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 less than 1,000 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

2