Gakken : Consolidated Financial Results for the Three Months Ended December 31, 2021

Consolidated Financial Results

for the Three Months Ended December 31, 2021

[Japanese GAAP]

February 10, 2022

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 filing quarterly securities report: February 10, 2022

Scheduled date of commencing dividend payments: ―

Availability of supplementary briefing material on quarterly financial results: Available

Schedule of quarterly financial results briefing session: None

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

1. Consolidated Financial Results for the Three Months Ended December 31, 2021 (October 1, 2021 to December 31, 2021)

(1) Consolidated Operating Results			(% indicates changes from the previous corresponding period.)
	Net sales		Operating profit	Ordinary profit	Profit attributable to
		owners of parent
Three months ended	Million yen	%	Million yen	%	Million yen	%	Million yen	%
December 31, 2021	36,888	3.1	1,324	(31.4)	1,134	(35.5)	702	(25.7)
December 31, 2020	35,766	3.0	1,929	67.8	1,759	63.4	946	91.5

(Note) Comprehensive income: Three months ended December 31, 2021: ¥680 million [(32.9)%]

	Three months ended December 31, 2020: ¥1,014 million [(27.1)%]
	Profit per share	Diluted profit per share
Three months ended	Yen	Yen
December 31, 2021	16.14	15.98
December 31, 2020	25.50	25.21

(2) Consolidated Financial Position
		Total assets		Net assets		Equity ratio
		Million yen			Million yen		%
As of December 31, 2021	123,262			47,659		38.3
As of September 30, 2021	116,900			47,413		40.2
(Reference) Equity: As of	December 31, 2021: ¥	47,209 million
As of September 30, 2021: ¥46,961 million
2. Dividends
				Annual dividends
		1st quarter-end	2nd quarter-end	3rd quarter-end	Year-end	Total
Fiscal year ended		Yen		Yen		Yen	Yen	Yen
	－	11.00			－	11.00		22.00
September 30, 2021
Fiscal year ending		－
September 30, 2022
Fiscal year ending
September 30, 2022			12.00			－	12.00		24.00
(Forecast)

(Note) Revision of dividends forecast since the last announcement: None

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	78.08
(Note) Revision of	financial results	forecast	since the last	announcement: None

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. Application of special accounting treatments in preparing quarterly consolidated financial statements: Yes
2. Changes in accounting policies, changes in accounting estimates, and retrospective restatement
3. 1. Changes in accounting policies due to the revision of accounting standards: Yes
   2. Changes in accounting policies other than 1) above: No
   3. Changes in accounting estimates: No
   4. Retrospective restatement: No
4. Total number of issued shares (common stock)
5. 1. Total number of issued shares at the end of the period (including treasury shares):

December 31, 2021: 44,633,232 shares

September 30, 2021: 44,633,232 shares

1. Total number of treasury shares at the end of the period: December 31, 2021: 1,048,386 shares September 30, 2021: 1,113,082 shares
2. The average number of shares during the period:

Three months ended December 31, 2021: 43,546,162 shares

Three months ended December 31, 2020: 37,107,515 shares

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): 310,500 shares at the end of the three months ended December 31, 2021; and 375,600 shares at the end of the fiscal year ended September 30, 2021. 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): 349,325 shares at the end of the three months ended December 31, 2021; and 501,250 shares at the end of the three months ended December 31, 2020.

• These quarterly consolidated financial results are outside the scope of quarterly review 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. Qualitative Information on Financial Results for the Period under Review, (3) Consolidated Financial Results Forecast and Other Forward-looking Statements" on page 8 of the Attachments.

Table of Contents - Attachments
1. Qualitative Information on Financial Results for the Period under Review ....................................................................	2
(1)	Explanation of Business Results ..................................................................................................................................	2
(2)	Explanation of Financial Position ................................................................................................................................	8
(3)	Consolidated Financial Results Forecast and Other Forward-looking Statements ......................................................	8
2. Quarterly Consolidated Financial Statements and Primary Notes .................................................................................	10
(1)	Quarterly Consolidated Balance Sheets .....................................................................................................................	10
(2)	Quarterly Consolidated Statements of Income and Comprehensive Income .............................................................	12
(3)	Notes to the Quarterly Consolidated Financial Statements ........................................................................................	14
(Notes on Going Concern Assumption) ........................................................................................................................	14
(Notes When There is Significant Changes in Amounts of Equity) .............................................................................	14
(Application of Special Accounting Treatments in Preparing Quarterly Consolidated Financial Statements) .............	14
(Changes in Accounting Policies) .................................................................................................................................	14
(Segment Information, etc.) ..........................................................................................................................................	16
(Significant Subsequent Events) ...................................................................................................................................	17

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1. Qualitative Information on Financial Results for the Period under Review

(1) Explanation of Business Results

In the educational domain where Gakken Group (the "Group") conducts its business, following educational reform, new Courses of Study will be rolled out to senior high schools. As new cases of COVID-19 are increasing rapidly due to the appearance of a new variant, 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 increase online lessons not only in private and group tutoring, but for schools with stringent entrance exams as well. 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 remains sluggish, the market as a whole appears to have bottomed out, owing mainly to stay-at-home demand for paper publications and substantial growth in e- book publishing. Distribution reform initiatives across industries are progressing in response to longstanding challenges such as consistently high rates of return of unsold goods and rising logistics costs. Global media-mix initiatives for intellectual property (IP) are also spreading worldwide not only for publishing, but also for such diverse media as movies, animation, and video games.

In the school education industry, 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 recurrent education and e-learning markets are growing.

In the healthcare and nursing domain, government and corporate policies are advancing moves to increase hiring and retention of workers who support elderly care and child-care services at the front line by improving their compensation.

In the elderly care business, needs for elderly care are increasing in association with the "2025 issue" (Japan's baby boomer generation will reach the late elderly age (75 years old or older) 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. 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. This resulted in a decrease in the number of children on waiting lists for nursery schools, but the need for nursery schools remains high in major cities. 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.

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 the healthcare and nursing domain, contribute to the creation of sustainable communities as we aim to be a leading company; and for the Group as a whole, accelerate the digital transformation (DX) and expand global business.

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Classification of the Group's products and services is as follows:

Educational		Operation of Gakken Classroom for a range of children from
Domain	Classroom and	preschoolers to junior high school students (mainly elementary school
	students)
	learning center
	Operation of classes for toddlers and children
	business
	Operation of learning centers for a range of children from elementary
		school students to senior high school students
		Publishing and sale of publications including children's books and study-
		aid books through distributors and bookstores
	Publishing and content	Development and sale of learning materials for learning centers
	Publishing and sale of books on nursing and medicine, sale of e-learning
	business
	for training programs targeting nurses
		Development and sale of digital content linked with publishing and
		educational toys
		Production and sale of publications, child-care products, equipment, and
		playground equipment for kindergartens, nursery schools, and children's
	Kindergarten and	daycare centers, as well as clothing for teachers
	Production and sale of textbooks, instruction guides for teachers,
	school business
	supplementals, ICT learning materials, special needs education materials,
		short essay mock exams, etc.
		Operation of recruitment support services and corporate training programs
Healthcare	Elderly housing	Planning, development, and operation of serviced apartments for the
and Nursing	business	elderly, bases for elderly care services, etc.
Domain	Group homes for the	Planning, development, and operation of various services including group
	elderly with dementia
	homes for the elderly with dementia
	business
	Child raising support	Planning, development, and operation of nursery schools, children's
	business	daycare centers, after-school children's clubs, etc.

Based on the three-year plan "Gakken 2023," the Group is advancing the following concrete measures. (Educational domain)

• Increase the added value of classrooms and learning centers by striking a balance between offline and online, and engage in areas we have yet to cultivate
• Win the top market share of children's books in addition to study-aid books
• Roll out digital learning using publishing and content
• Digitize medical and nursing texts, and accelerate the growth of e-learning targeting nurses
• Enhance sales of goods targeting kindergartens, nursery schools and children's daycare centers (e.g. picture books, supplies needed for new semesters, and equipment such as desks), and improve services in facility operations through ICT
• Create new services for schools using Group content, and reorganize the sales system
• Roll out digital services in adult education and corporate training domains
• Review unprofitable businesses

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