Hope : Consolidated Financial Results for the Fiscal Year Ended June 30,2021

Consolidated Financial Results for the Fiscal Year Ended June 30, 2021

		[Japanese GAAP]
		August 11, 2021
Company name: HOPE, INC.	Listing: TSE-Mothers/FSEQ-Board
Stock code:	6195	URL: https://www.zaigenkakuho.com/
Representative:	Takayasu Tokitsu, CEO
Contact:	Kensuke Ohshima, CFO	Tel: [phone]

Scheduled date of Annual General Meeting of Shareholders:	September 28, 2021
Scheduled date of filing of Annual Securities Report:	September 29, 2021
Scheduled date of payment of dividend:	-
Preparation of supplementary materials for financial results:	Yes
Holding of financial results meeting:	Yes (for institutional investors and analysts)
	(All amounts are rounded down to the nearest million yen)

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

(1) Consolidated results of operations					(Percentages represent year-on-year changes)
	Net sales		Operating profit		Ordinary profit		Profit attributable to
				owners of parent
	Millions of yen		%	Millions of yen		%	Millions of yen		%	Millions of yen		%
Fiscal year ended Jun. 30, 2021	34,617		-	(6,897)		-	(6,937)		-	(6,963)		-
Fiscal year ended Jun. 30, 2020	-		-	-		-	-		-	-		-

Note: Comprehensive income (millions of yen)		Fiscal year ended Jun. 30, 2021:	(6,960)	(-%)
			Fiscal year ended Jun. 30, 2020:	-	(-%)
	Net income per	Diluted net	Return on equity	Ordinary profit to	Operating profit to
	share	income per share			total assets	net sales
	Yen		Yen	%			%	%
Fiscal year ended Jun. 30, 2021	(1,106.57)		-	-		(63.4)	(19.9)
Fiscal year ended Jun. 30, 2020	-		-	-			-	-
Reference: Equity in earnings of affiliates (millions of yen)	Fiscal year ended Jun. 30, 2021: -

Fiscal year ended Jun. 30, 2020: -

Notes: 1. Diluted net income per share is not presented because net loss was posted although there were outstanding dilutive shares.

1. 2. Year-on-year changes for the fiscal years ended June 30, 2021 and 2020 and figures for the fiscal year ended June 30, 2020 are not presented because HOPE started preparing consolidated financial statements from the fiscal year ended June 30, 2021. In addition, the return on equity and ordinary profit to total assets were calculated based on the shareholders' equity and total assets at the end of the fiscal year, respectively, since this is the first fiscal year the consolidated financial statements were prepared.

2. Consolidated financial position

	Total assets	Net assets		Equity ratio	Net assets per share
	Millions of yen	Millions of yen		%	Yen
As of Jun. 30, 2021	10,941	(2,482)		(23.0)	(324.46)
As of Jun. 30, 2020	-	-		-	-
Reference: Shareholders' equity (millions of yen)	As of Jun. 30, 2021: (2,514)	As of Jun. 30, 2020: -

Note: Figures as of June 30, 2020 are not presented because HOPE started preparing consolidated financial statements from the fiscal year ended June 30, 2021.

(3) Consolidated cash flows

	Cash flows from	Cash flows from	Cash flows from	Cash and cash equivalents at
	operating activities	investing activities	financing activities	end of period
	Millions of yen	Millions of yen	Millions of yen	Millions of yen
Fiscal year ended Jun. 30, 2021	(2,847)	4	3,475	1,921
Fiscal year ended Jun. 30, 2020	-	-	-	-

Note: Figures for the fiscal year ended June 30, 2020 are not presented because HOPE started preparing consolidated statement of cash flows from the fiscal year ended June 30, 2021.

2. Dividends

		Dividend per share			Total	Dividend	Dividends on
							payout ratio		equity
	1Q-end	2Q-end	3Q-end	Year-end	Total		dividends
		(consolidated)	(consolidated)
	Yen	Yen	Yen	Yen	Yen	Millions of yen	%	%
Fiscal year ended Jun. 30, 2020	-	0.00	-	15.00	15.00	89	-	-
Fiscal year ended Jun. 30, 2021	-	0.00	-	0.00	0.00	-	-	-
Fiscal year ending Jun. 30, 2022	-	-	-	-	-			-
(forecasts)

Notes: 1. The year-end dividend for the fiscal year ended June 30, 2020 is a commemorative dividend of 15.00 yen. The consolidated dividend payout ratio and consolidated dividends on equity for the fiscal year ended June 30, 2020 are not presented because HOPE started preparing consolidated financial statements from the fiscal year ende d June 30, 2021.

2. The dividend forecast for the fiscal year ending June 30, 2022 is to be determined.

3. Consolidated Earnings Forecast for the Fiscal Year Ending June 30, 2022 (July 1, 2021 to June 30, 2022)

(Percentages represent year-on-year changes)

	Net sales		Operating profit		Ordinary profit		Profit attributable to	Net income per share
				owners of parent
	Millions of yen		%	Millions of yen		%	Millions of yen		%	Millions of yen		%	Yen
First half	22,126		57.5	(46)		-	(82)		-	(95)		-	(9.72)
Full year	34,850		0.7	479		-	424		-	398		-	32.18

* Notes

1. Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in changes in scope of consolidation): Yes

Newly added: 1 (HOPE ENERGY, INC.)

Excluded: -

1. Changes in accounting policies and accounting estimates, and restatements
2. 1. Changes in accounting policies due to revisions in accounting standards, others: None
   2. Changes in accounting policies other than 1) above: None
   3. Changes in accounting estimates: None
   4. Restatements: None
3. Number of shares outstanding (common shares)
4. 1. Number of outstanding shares as of the end of the period (including treasury shares)

As of Jun. 30, 2021:

7,775,100 shares

As of Jun. 30, 2020:

6,002,800 shares

1. Number of treasury shares as of the end of the period

As of Jun. 30, 2021:	24,981 shares	As of Jun. 30, 2020:	24,960 shares
3) Average number of outstanding shares during the period
Fiscal year ended Jun. 30, 2021:	6,292,514 shares	Fiscal year ended Jun. 30, 2020:	5,637,136 shares

Note: HOPE conducted a 4-for-1 common stock split effective on January 1, 2020. The number of outstanding shares as of the end of the period, the number of treasury shares as of the end of the period and the average number of outstanding shares during the period have been calculated as if this stock split had taken place at the beginning of the previous fiscal year.

(Reference) Overview of Non-consolidated Financial Results

Non-consolidated Financial Results for the Fiscal Year Ended June 30, 2021 (July 1, 2020 to June 30, 2021)

(1) Non-consolidated results of operations						(Percentages represent year-on-year changes)
		Net sales			Operating profit	Ordinary profit	Profit
		Millions of yen			%	Millions of yen	%	Millions of yen	%	Millions of yen	%
Fiscal year ended Jun. 30, 2021	34,617		140.3	(6,894)	-	(6,925)	-	(6,951)	-
Fiscal year ended Jun. 30, 2020	14,407		273.0	1,020	-	1,012	961.9	665	779.9
		Net income per		Diluted net
		share		income per share
		Yen		Yen
Fiscal year ended Jun. 30, 2021		(1,104.74)		-
Fiscal year ended Jun. 30, 2020		117.97		109.33

Note: Diluted net income per share is not presented because net loss was posted although there were outstanding dilutive shares in the fiscal year ended June 30, 2021.

(2) Consolidated financial position

	Total assets	Net assets		Equity ratio	Net assets per share
	Millions of yen	Millions of yen		%	Yen
As of Jun. 30, 2021	10,953	(2,471)		(22.9)	(322.97)
As of Jun. 30, 2020	6,519	1,259		19.1	208.57
Reference: Shareholders' equity (millions of yen)	As of Jun. 30, 2021: (2,503)	As of Jun. 30, 2020: 1,246

Note: HOPE conducted a 4-for-1 common stock split effective on January 1, 2020. Net assets per share have been calculated as if this stock split had taken place at the beginning of the previous fiscal year.

• The current financial results are not subject to the audit by certified public accountants or auditing firms. .
• Explanation of appropriate use of earnings forecasts, and other special items
• • Forecasts of future performance in these materials are based on assumptions judged to be valid and information available to the management of HOPE at the time these materials were prepared. Actual results of operations may differ from forecasts due to uncertainty involving these judgments and assumptions or to changes in business operations and market conditions. HOPE does not guarantee the certainty of any forward-looking statements.

	HOPE, INC. (6195) Consolidated Financial Results for FY6/21
Contents of Attachments
1. Overview of Results of Operations	2
(1) Results of Operations	2
(2) Financial Position	5
(3) Cash Flows	5
(4) Outlook	5
2. Basic Approach to the Selection of Accounting Standards	6
3. Consolidated Financial Statements and Notes	7
(1)	Consolidated Balance Sheet	7
(2)	Consolidated Statements of Income and 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	12
(5)	Notes to Consolidated Financial Statements	14
	Going Concern Assumption	14
	Segment and Other Information	15
	Additional Information	16
	Per-share Information	17
	Material Subsequent Events	18

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HOPE, INC. (6195) Consolidated Financial Results for FY6/21

1. Overview of Results of Operations

(1) Results of Operations

The COVID-19 pandemic continued to severely restrict economic activity in Japan and other countries in the fiscal year ended June 30, 2021 and the outlook for the Japanese economy remains unclear.

All business activities are based on the HOPE corporate philosophy of "providing new forms of value to citizens through local governments and aiming for more growth of our busines s and our people." Since HOPE's establishment, cumulative additional local government revenue generated by the advertising business is about 8,440 million yen as of the end of June 2021 and the energy business has reduced expenses of local governments by about 32,500 million yen (estimate of saving during the entire length of all contracts received since the energy business started). These savings have made a significant contribution to local governments throughout Japan as well as the residents of these communities.

On August 11, 2020, HOPE announced HOPE NEXT 3, a three -yearmedium-term management plan beginning in the fiscal year that ended in June 2021. To accomplish the goals of this plan, many business activities with the aim of medium-term growth are under way. Between the middle of December 2020 and late January 2021, the price of electricity on the Japan Electric Power Exchange (JEPX) was very high. This big increase in the cost of electricity had an enormous negative impact on the performance of the energy business, which is HOPE's largest business segment. A number of organizations made announcements concerning the probable causes of this sharp increase in the price of electricity. According to the Ministry of Economy, Trade and Industry, the primar y causes are a big increase in demand for electricity due to several cold waves and limitations on the output of liquefied natural gas (LNG) power plants due to a decline in the inventory of LNG, which was partially the result of problems involving gas liquefaction plants. According to a Comprehensive Renewable Energy Regulations Inspection Task Force, the problem began with restrictions of an unusually magnitude and length on LNG and petroleum, which account for a large share of electricity generated in Ja pan. This situation created a big gap at JEPX between the volume of bids to buy and sell electricity, resulting in an unprecedented surge in the price of electricity.

Reference: "Interim Report on Examination of Tight Supply and Demand Balance of Electricity and the Price Surge in the Wholesale Electricity Market during Fiscal 2020 Winter" page 3

The 36th Electricity and Gas Basic Policy Subcommittee, Electricity and Gas Industry Committee, the Advisory Committee for Natural Resources and Energy (June 15, 2021)

Agency for Natural Resources and Energy, the Ministry of Economy, Trade and Industry https://www.meti.go.jp/shingikai/enecho/denryoku_gas/denryoku_gas/pdf/036_04_03.pdf

Reference: "Recommendations for Power System Restructuring " page 4 (April 27, 2021)

The 8th Comprehensive Renewable Energy Regulations Inspection Task Force, Cabinet Office https://www8.cao.go.jp/kisei-kaikaku/kisei/conference/energy/20210427/210427energy07.pdf

The high cost of wholesale electricity significantly raised the cost of el ectricity purchased by HOPE. As a result, January 2021 imbalance fees (see note) were about 6,500 million yen, including taxe s. Due to the loss in the fourth quarter (April to June 2021) of the current fiscal year, we used a third-party allotment of stock and other measures to procure funds. These activities were announced in a press release titled "Notice of Sale of Stock Through a Third-party Allotment, and Issuance of Ninth Share Acquisition Rights with Exercise Price Adjustment Clause and Unsecured Bonds (Japanese version only)." In addition, energy business earnings were expected to recover in the spring, which is normally a profitable season of the year for this business. However, the cost of electricity on the JEPX remained high in the fourth quarter and the energy business was still unable to produce the level of earnings that we had anticipated.

HOPE has several core strengths. One is the expertise to reproduce new businesses in a broad range of fields based on a large number of relationships with local governments established over many years of business operations and legal frameworks consisting of new and amended laws and regulations. Another is the expertise to easily reproduce business expansion in the local government business domain. Our objective is to use these two strengths for growth of the three existing businesses and creation of new businesses. Making advertising a profit-generating business is one goal. We are continuing to improve profitability by making changes to achieve the proper size of this business and working on reducing over the next several years the high percentage of fiscal

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HOPE, INC. (6195) Consolidated Financial Results for FY6/21

year earnings of this business in the fourth quarter. These steps are aimed at making this business more cost efficient and receiving higher rates for advertising services. In the energy business, which we position as a driver of growth, our goals are more growth in the scale of this business and consistent profitability. Our short and medium-term strategy has two elements. First is to continue existing measures for growth centered on using competitive bids to capture new contracts. Second is to reduce vulnerability to the price volatility risk concerning the cost of electricity we purchase. This involves achieving the most suitable combination of fixed -price procurement using one-to-one transactions and the purchase of electricity at current market prices on the JEPX. However, the sharp increase in the price of electricity on the JEPX forced us to alter this strategy. In the Jichitai Works business (former media business), the market for promotions targeting local governments still has much potential for more public-private sector collaboration and measures to become more competitive. Our goal is to position ourselves at the very top of upstream information flows in order to capitalize on opportunities involving this potential. This business is upgrading content, strengthening information dissemination capabilities and reinforcing the ability to keep up with the latest information. The objective is firmly esta blishing the value of the Jichitai Works brand in order to stimulate more growth of the market for promotions targeting local governments. In addition, we believe that these activities will make possible even more public -private sector collaboration based on government information circulation centered on HOPE as well as the use of local government information databases for strengthening, supporting and creating business activities. We will use many activities to accomplish these goals. These measures will include upgrading and expanding our content production capabilities, increasing activities for B-to-G solutions (former B-to-G marketing) and making extensive use of Jichitai Works HA×SH, which is an internet platform for supporting public -private sector collaboration.

In the fiscal year ended June 30, 2021, net sales were 34,617 million yen. The operating loss was 6,897 million yen, the ordinary loss was 6,937 million yen, and there was a loss attributable to owners of parent of 6,963 million yen.

Note: An imbalance fee is paid when a company selling electricity is unable to supply the required amount of electricity over any 30-minute period and must purchase electricity from a utility to cover the shortfall. This fee is included in the cost of sales of the energy business.

Business segment performance was as follows.

1) Advertising Business

In this business, the Smart Resource service purchases a variety of advertising space from local governments by submitting competitive bids and then sells this space to companies. The Smart Creation service jointly produces with local governments Machilet publications for residents at no cost and sells advertising space in these publications to companies. During the current fiscal year, there were measures to achieve the proper size of the Machilet service. Machilet, which is the primary medium of the advertising business, is operating in all areas of Japan while concentrating on six themes: marriage, raising children, senior nursing care, measures involving vacant houses, end-of-life messages, and condolence messages.

An advertising business for the Japan Meteorological Agency website is a prime example of the operations of the Smart Resource service in the fourth quarter of the current fiscal year. This business provides its own advertisement distribution system that was developed jointly with Geniee, Inc. based on a business alliance with this company. We plan to expand this system to make it possible to offer this advertisement distribution service to local governments throughout Japan.

We started providing the Smart FR ("Financial Resources") Consulting service during the current fiscal year. This service encompasses consulting for every step from assistance for attracting advertisements to the creation and utilization of media. Our goal is to use this new service to take the advertising business beyond simply providing assistance for advertisements in order to be a source of a broad range of ideas and support concerning advertisements to secure financial resources. Smart FR Consulting was launched in June 2021 and we have received a consultation contract from the city of Fukuoka.

Segment sales were 1,719 million yen and segment profit was 328 million yen.

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