Gakken : Consolidated Financial Results for the Fiscal Year Ended September 30, 2021

Consolidated Financial Results

for the Fiscal Year Ended September 30, 2021

[Japanese GAAP]

November 12, 2021

Company name: Gakken Holdings Co., Ltd.

Stock exchange listing: Tokyo Stock Exchange

Securities code: 9470

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

Representative: Hiroaki Miyahara, President, Representative Director

Contact: Takashi Sawada, General Manager of Financial Strategy Office

Phone: [phone]

Scheduled date of Ordinary General Meeting of Shareholders: December 24, 2021

Scheduled date of filing annual securities report: December 24, 2021

Scheduled date of commencing dividend payments: December 27, 2021

Availability of supplementary briefing material on financial results: Available

Schedule of financial results briefing session: Scheduled (for institutional investors and analysts)

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

1. Consolidated Financial Results for the Fiscal Year Ended September 30, 2021 (October 1, 2020 to September 30, 2021)

(1) Consolidated Operating Results			(% indicates changes from the previous corresponding period.)
	Net sales		Operating profit	Ordinary profit		Profit attributable to
			owners of parent
Fiscal year ended	Million yen	%	Million yen	%	Million yen	%	Million yen	%
September 30, 2021	150,288	4.7	6,239	22.9	6,126	16.2	2,617	12.7
September 30, 2020	143,564	2.1	5,075	12.2	5,273	10.9	2,321	19.7

(Note) Comprehensive income: Fiscal year ended September 30, 2021: ¥3,923 million [90.5%] Fiscal year ended September 30, 2020: ¥2,059 million [114.1%]

	Profit per share	Diluted profit per	Rate of return on	Rate of return on	Operating profit
	share	equity	total assets	margin
Fiscal year ended	Yen	Yen	%	%	%
September 30, 2021	64.55	63.87	6.3	5.6	4.2
September 30, 2020	62.70	61.99	6.2	5.2	3.5

(Reference) Equity in earnings (losses) of affiliated companies: Fiscal year ended September 30, 2021: ¥(347) million Fiscal year ended September 30, 2020: ¥(64) million

Effective April 1, 2020, Gakken Holdings Co., Ltd. (the "Company") implemented a 4-for-1 stock split of its common shares. Reflecting this change, the profit per share and the diluted profit per share are calculated by hypothetically assuming that the stock split was executed at the beginning of the fiscal year ended September 30, 2020.

(2) Consolidated Financial Position

			Total assets	Net assets	Equity ratio	Net assets per share
			Million yen	Million yen	%	Yen
As of September 30, 2021		116,900	47,413	40.2	1,079.09
As of September 30, 2020		103,741	36,239	34.6	967.70
(Reference) Equity: As of September 30, 2021: ¥46,961 million
As of September 30, 2020: ¥35,895 million
(3) Consolidated Cash Flows
		Cash flows from		Cash flows from		Cash flows from	Cash and cash
				equivalents at end of
	operating activities		investing activities		financing activities
			period
Fiscal year ended		Million yen		Million yen		Million yen	Million yen
September 30, 2021		4,441		(18,112)		7,806	18,920
September 30, 2020		5,971		(1,588)		(22)	24,765

2. Dividends

		Annual dividends			Total	Payout ratio	Dividends to
	1st	2nd	3rd	Year-end	Total	dividends	(consolidated)	net assets
	(consolidated)
	quarter-end	quarter-end	quarter-end
Fiscal year ended	Yen	Yen	Yen	Yen	Yen	Million yen	%	%
September 30, 2020	－	40.00	－	10.00	－	741	31.9	2.0
September 30, 2021	－	11.00	－	11.00	22.00	956	34.1	2.1
Fiscal year ending
September 30, 2022	－	12.00	－	12.00	24.00		30.7
(Forecast)

The total amount of dividends does not include the dividends paid for the Company's shares held by The Nomura Trust & Banking Co., Ltd. (the dedicated trust account for Gakken Employees' Shareholding Association).

Effective April 1, 2020, the Company implemented a 4-for-1 stock split of its common shares.

Reflecting this change, the amount of the 2nd quarter-end dividend per share for the fiscal year ended September 30, 2020 represents the amount before the stock split and the total annual dividend is indicated with "-."

3. Consolidated Financial Results Forecast for the Fiscal Year Ending September 30, 2022 (October 1, 2021 to September 30, 2022)

(% indicates changes from the previous corresponding period.)

	Net sales		Operating profit	Ordinary profit	Profit attributable to	Profit per share
		owners of parent
	Million yen	%	Million yen	%	Million yen	%	Million yen	%	Yen
Full year	157,000	4.5	6,700	7.4	6,800	11.0	3,400	29.9	78.12

The first half performance forecast is omitted due to the nature of the Company's business which is characterized by fluctuations in the first half.

* Notes:

1. Changes in significant subsidiaries during the period under review (changes in specified subsidiaries resulting in changes in scope of consolidation): No

Newly added: - (Name) -

Excluded: - (Name) -

1. Changes in accounting policies, changes in accounting estimates, and retrospective restatement
2. 1. Changes in accounting policies due to the revision of accounting standards: No
   2. Changes in accounting policies other than 1) above: No
   3. Changes in accounting estimates: No
   4. Retrospective restatement: No
3. Total number of issued shares (common stock)
4. 1. Total number of issued shares at the end of the period (including treasury shares): September 30, 2021: 44,633,232 shares
      September 30, 2020: 42,383,232 shares
   2. Total number of treasury shares at the end of the period:

September 30, 2021: 1,113,082 shares

September 30, 2020: 5,289,352 shares

3) The average number of shares during the period:

Fiscal year ended September 30, 2021: 40,546,558 shares

Fiscal year ended September 30, 2020: 37,028,116 shares

Effective April 1, 2020, the Company implemented a 4-for-1 stock split of its common shares. The total number of issued shares at the end of the period, the total number of treasury shares at the end of the period, and the average number of shares during the period are calculated by hypothetically assuming that the stock split was executed at the beginning of the fiscal year ended September 30, 2020. The Company has a trust-type employee shareholding incentive plan in place. The total number of treasury shares at the end of the period includes the number of the Company's shares held under this plan by The Nomura Trust & Banking Co., Ltd. (the dedicated trust account for Gakken Employees' Shareholding Association): 375,600 shares at the end of the fiscal year ended September 30, 2021; and 515,000 shares at the end of the fiscal year ended September 30, 2020. The average number of shares during the period is calculated with the number of treasury shares deducted; the number of treasury shares deducted includes the number of the Company's shares held under the same plan by The Nomura Trust & Banking Co., Ltd. (the dedicated trust account for Gakken Employees' Shareholding Association): 450,531 shares at the end of the fiscal year ended September 30, 2021; and 570,600 shares at the end of

the fiscal year ended September 30, 2020.

(Reference) Summary of Non-consolidated Financial Results

1. Non-consolidated Financial Results for the Fiscal Year Ended September 30, 2021 (October 1, 2020 to September 30, 2021)

(1) Non-consolidated Operating Results				(% indicates changes from the previous corresponding period.)
			Net sales			Operating profit		Ordinary profit		Profit
Fiscal year ended			Million yen		%		Million yen	%		Million yen	%		Million yen	%
September 30, 2021		4,625		4.1		174	(71.8)		(16)	－		330	(55.4)
September 30, 2020		4,443		(3.8)		617	(30.7)		278	(58.5)		740	17.2
		Profit per share		Diluted profit per share
Fiscal year ended					Yen			Yen
September 30, 2021					8.14			8.05
September 30, 2020		19.99			19.77
(2) Non-consolidated Financial Position
			Total assets	Net assets	Equity ratio	Net assets per share
					Million yen		Million yen		%		Yen
As of September 30, 2021				76,407		38,529		50.1		879.00
As of September 30, 2020				64,809		30,033		45.9		802.24

(Reference) Equity: As of September 30, 2021: ¥38,254 million As of September 30, 2020: ¥29,758 million

*These consolidated financial results are outside the scope of audit by certified public accountants or an audit firm.

• Explanation of the proper use of financial results forecast and other notes (Note on forward-looking statements, etc.)
  Financial performance forecasts and other forward-looking statements herein are based on information currently available to the Company and certain assumptions it deems rational. The actual results may vary significantly due to various factors. With regard to the assumptions for the performance forecasts and the notes on the use of the performance forecasts, please refer to "1. Overview of Business Results, etc., (4) Future Outlook" on page 11 of the Attachments.

Table of Contents - Attachments
1. Overview of Business Results, etc. .................................................................................................................................. 2
(1)	Overview of Business Results for the Current Fiscal Year ..........................................................................................	2
(2)	Overview of Financial Position for the Current Fiscal Year ......................................................................................	10
(3)	Overview of Cash Flows for the Current Fiscal Year ................................................................................................	11
(4)	Future Outlook ...........................................................................................................................................................	11
2. Basic Stance Concerning Choice of Accounting Standards ...........................................................................................	11
3. Consolidated Financial Statements and Primary Notes .................................................................................................	12
(1)	Consolidated Balance Sheets .....................................................................................................................................	12
(2)	Consolidated Statements of Income and Comprehensive Income .............................................................................	14
(3)	Consolidated Statements of Changes in Equity .........................................................................................................	16
(4)	Consolidated Statements of Cash Flows ....................................................................................................................	18
(5)	Notes to the Consolidated Financial Statements ........................................................................................................	20
(Notes on Going Concern Assumption) ........................................................................................................................	20
(Changes in the Method of Presentation) .....................................................................................................................	20
(Segment Information, etc.) ..........................................................................................................................................	21
(Per Share Information) ................................................................................................................................................	25
(Significant Subsequent Events) ...................................................................................................................................	26
4. Other ............................................................................................................................................................................	27
Changes in Officers .......................................................................................................................................................	27

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1. Overview of Business Results, etc.

(1) Overview of Business Results for the Current Fiscal Year

In the educational domain where Gakken Group (the "Group") conducts its business, following educational reform, the government has required English language courses in the curriculum of the fifth and sixth grade of elementary school, as well as programming courses. In addition, the Common Test for University Admissions was held, replacing the previous National Center Test for University Admissions. Amid passing the peak of cases of COVID-19 after an explosive increase, demand for education's digitalization has increased further.

While demand for in-person learning remains high in the learning center market, countermeasures to prevent infection have become a turning point to spread online lessons not only in private tutoring but also in group lectures and learning support at home. Further, individually optimized learning tailored to each student is expanding through the delivery of AI-based learning plans and materials.

In the publishing industry, while the magazine market remained sluggish, the market as a whole appears to have bottomed out, owing mainly to stay-at-home demand for paper publications, massive hits in comic books, and substantial growth in e-book publishing due to more time spent at home. Distribution reform initiatives across industries have started in response to longstanding challenges such as consistently high rates of return of unsold goods and rising logistics costs.

In the school education industry, junior high school textbooks following the new revised Courses of Study have been used starting in the academic year 2021. Further, the GIGA (Global and Innovation Gateway for All) School Program that aims to develop the educational ICT environment has been expedited. While the distribution of learning devices to every student has been completed and the introduction of digital learning materials is progressing, on the other hand, information security measures and the lack of ICT education skills of teachers are issues to be addressed.

In the adult education industry, the e-learning market is growing as companies promote remote work and demand for remote education, such as online language training, has grown from increased time for self-learning.

In the elderly care business within the healthcare and nursing domain, needs for elderly care are increasing in association with the "2025 issue" (Japan's baby boomer generation will reach the late elderly age in 2025) and the growing population of the elderly with dementia. In this context, the Ministry of Health, Labour and Welfare is promoting the building of systems that provide comprehensive support and services to communities (Community-based Integrated Care System) that enable people to continue to live their lives in the communities that are familiar to them until the end of life. In terms of securing workers who support elderly care services at the front line, although progress is being made in staff retention due to improvements in employment conditions, the reduction of workers' operational burdens through IT utilization and the prevention and early detection of dementia and lifestyle-related and other diseases are significant issues.

In the child-care industry, the demand for child-care services is increasing due to the increase in households in which both parents work. The number of students admitted to nursery schools increased due to national measures to support child raising, such as the New Child-rearing Security Plan and the provision of free preschool education and child-care, and the spread of COVID-19 led to parents refraining from using nursery schools for children aged less than twelve months. This resulted in a decrease in the number of children on waiting lists for nursery schools, but there are many "hidden" wait-listed children, and the path to a solution to this problem remains distant. The shortage of after-school children's clubs still continues, and many companies from a wide variety of industries are entering the business.

Elderly care and child-care facilities are required more to ensure the safety of residents, children, parents and employees, as well as thorough measures to prevent the spread of COVID-19, including providing hygiene products.

Under these circumstances, the Group created the slogan "Establishment of a solid foundation for growth," and set out the following management policies based on "Gakken 2023," a three-year plan formulated in November 2020: in the educational domain, create new ways of learning and diverse learning opportunities; in

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