Funai Soken Incorporated : 2022 Half-year Financial Results Briefing

Funai Soken Holdings Incorporated

2022 Half-year Financial Results Briefing

August 9, 2022

2022 Half-year Financial Results Briefing

Funai Soken Holdings Inc.

Aug. 9, 2022

Hello everyone, my name is Nakatani, President and CEO of Funai Soken Holdings. Thank you for your continued support of our group.

Today, I will explain along with what you see on the screen. I will explain based on the financial results summary released on August 4, but since time is limited today, we have excerpted some information from the explanatory materials.

For the details of the materials, please visit our website or contact our investor relations and public relations office, which will be happy to provide you with a separate explanation.

I will now begin with an overview of the financial results for Q2 of the fiscal year ending December 31, 2022.

First, let me explain the revenue situation.

Sales were JPY12.258 billion, up 10.9% YoY.

Operating income was JPY3.749 billion, up 14.3% YoY.

Ordinary income was JPY3.779 billion, up 13.9% YoY.

Net income for the quarter was JPY2.596 billion, an increase of 15% YoY and a record high.

In the management consulting business, monthly support services and project-based consulting, as well as listing advertising operations, performed well. In addition, the logistics business continues to perform well, with performance increasing at a faster pace than planned for the current fiscal year.

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2022 Half-year Financial Results Briefing

Funai Soken Holdings Inc.

Aug. 9, 2022

In terms of profit, the Company continued to maintain a high operating margin of 30%, despite increased transportation expenses associated with the intensification of realistic sales activities for consulting activities, as well as increased consultant recruitment and personnel expenses.

Next, I would like to report on our progress toward the full-year forecast.

Since our planned figures for H1 of the year were net sales of JPY12.3 billion and operating income of JPY3.6 billion, net sales were almost in line with the plan, and operating income exceeded the plan.

As for sales, we believe that the 48.5% progress in H1 of the fiscal year is within the expected range, since our profit structure is such that sales accumulate more in H2 of the fiscal year.

Looking at Q2 alone, sales and operating income grew by only single digits at plus 7.9% and plus 4.1%, respectively.

One factor was the delay in setting up seminars in Q1 from January to March, which prevented an increase in the order backlog in Q1, which in turn affected sales in Q2. However, given the recent seminar and the fact that the order backlog at the end of June was at an all-time high, we still expect to achieve the planned double- digit growth in the end.

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2022 Half-year Financial Results Briefing

Funai Soken Holdings Inc.

Aug. 9, 2022

Next, I will explain the results by segment.

We have three segments, the core of which is the management consulting business. As shown in the graph on the right, the management consulting business, which accounts for the majority of both net sales and operating income, generated net sales of JPY9.182 billion, up 6.5% from the previous year. Operating income was JPY3.206 billion, up 6.2% YoY.

Next, the logistics business posted sales of JPY1.857 billion, up 40.3% YoY. Operating income was JPY248 million, up 66% YoY, representing a significant increase in both sales and income.

With respect to other businesses, profits increased significantly in the current fiscal year. The breakdown is as follows: the former direct recruiting business, which is included in other businesses from this fiscal year, generated an operating income of approximately JPY70 million in H1 of the fiscal year.

For this business, we saw an operating loss of approximately JPY14 million in the same period last year. The recruitment environment that has been fallen sharply due to COVID-19 has gradually improved, the cost of sales ratio and SG&A expenses have been controlled, and the unit price per client has increased.

In the current fiscal year, we have been able to shift to a structure that generates operating profit on a monthly basis, and finally in its fifth year, we have been successful in turning it into a profit, and it's expected to continue to contribute to profit the Group in the future.

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2022 Half-year Financial Results Briefing

Funai Soken Holdings Inc.

Aug. 9, 2022

This section shows sales by business category in the management consulting business.

Monthly support, our main source of revenue, continues to grow each fiscal year. In terms of amount, the increase was approximately JPY200 million YoY.

The management study group is a membership-based collective study group for business managers. New contracts and enrollments from seminars continue to struggle, but existing clients have remained mostly unchanged, partly due to the establishment of online meetings.

Sales of public seminars, which lagged behind in Q1, remained almost flat in Q2, as Funai Consulting put renewed effort into planning and holding seminars. The number of events and participants exceeded last year's figures, and orders are being received.

The purpose of the open seminars is to obtain consulting orders rather than stand-alone revenues.

Next, Online ad listing refers to services for online advertisement agency operations. This area has been growing more and more since COVID-19 and continues to expand steadily with a positive 25.9% growth in sales.

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