Insource : 3Q FY2021 Consolidated Financial Results

Disclaimer: This document is a translation of the

Japanese original for reference purposes only.

3Q FY2021 Consolidated Financial Results [JGAAP]

											July 25, 2022
Company Name:	Insource Co., Ltd.						Stock Exchange Listing: Tokyo
Code number:	6200	URL:	https://www.insource.co.jp/index.html
Representative:	Takayuki Funahashi, Representative Director, President and CEO
Contact:	Shigeo Fujimoto, Director, Executive Officer, and CFO	TEL. [phone]
Scheduled date to submit the Quarterly Securities Report: August 12, 2022
Scheduled date to commence dividend payments: ―
Availability of supplementary briefing material on quarterly results: Yes
Scheduled date of Quarterly Results Briefing Session: Not scheduled
							(Amounts are rounded down to the nearest million yen)
1. 3Q FY21 Consolidated Financial Results (October 1, 2021 - June 30, 2022)
(1) Consolidated Financial Results (cumulative)						(% indicates changes from the previous year)
		Net sales		Operating profit		Ordinary profit	Profit attributable to
				owners of parent
		mil yen		%	mil yen		%		mil yen	%	mil yen	%
3Q FY21		6,872		24.0	2,437		40.7		2,414	37.9	1,653	43.9
3Q FY20		5,544		47.9	1,731		298.8		1,751	305.4	1,149	339.6

(Note) Comprehensive income:	3Q FY21 1,653 million yen	(43.6%) 3Q FY20 1,151 million yen (347.2%)
		Earnings per share	Fully diluted earnings
			per share
		yen sen		yen sen
3Q FY21		39.29		39.28
3Q FY20		27.40		27.38

(Note) We conducted a stock split on January 1, 2021, whereby each share of common stock was split into two shares. In the above, "Earnings per share" and "Fully diluted earnings per share" are calculated on the assumption that the said stock split was conducted at the beginning of the previous consolidated fiscal year.

(2) Consolidated Financial Position
		Total assets		Net assets		Equity ratio
		mil yen			mil yen		%
3Q FY21			7,540			5,543		73.5
FY20 (Full-year)			6,766			4,500		66.5
(Reference) Shareholders' equity:	3Q FY21	5,543 million yen	FY20	4,500 million yen
2. Dividends
				Annual cash dividends per share
		End of 1Q	End of 2Q		End of 3Q	Year-end		Annual
		yen sen		yen sen		yen sen	yen sen		yen sen
FY20 Full-year		－	0.00			－	15.50		15.50
FY21 Full-year		－	0.00
FY21 (forecast)						－	17.00		17.00

(Note) Revisions of dividend forecast from recently announced figures: None

3. Consolidated Financial Forecast for FY21 (October 1, 2021 - September 30, 2022)

(% indicates changes from the previous year)

	Net sales		Operating profit	Ordinary profit	Profit attributable to	Earnings per share
								owners of parent
	mil yen		%	mil yen	%	mil yen	%	mil yen	%	yen sen
FY21 Full-year	9,300		24.0	3,220	33.9	3,190	32.0	2,200	40.0	52.26

(Note) Revisions of the forecast of financial results from recently announced figures: Yes

• Notes
• 1. Significant changes in subsidiaries during 3Q FY21

(changes in specific subsidiaries involving changes in the scope of consolidation): None

(2) Specific accounting methods for quarterly consolidated financial statements: Yes

(Note) For details, please refer to "2. Quarterly Consolidated Financial Statements and Notes (3) Notes to Quarterly Consolidated Financial Statements (Application of Special Accounting Methods for the Preparation of Quarterly Consolidated Financial Statements)" on page 7 of the attached materials.

1. Changes in accounting policies, estimates, and restatements

(i)	Changes in accounting policies due to the revision of accounting standards	: Yes
(ii)	Changes in accounting policies other than (3)-(i)	: None
(iii)	Changes in accounting estimates	: None
(iv)	Restatements	: None

1. Total number of issued shares (common stocks)
2. 1. Total number of issued shares at the end of the period (including treasury stocks)
   2. Total number of treasury stocks at the end of the period
   3. Average number of shares during the period

3Q FY21	42,621,500 shares	FY20	42,621,500 shares
3Q FY21	523,345 shares	FY20	529,534 shares
3Q FY21	42,094,877 shares	3Q FY20	41,941,339 shares

(Note) We conducted a stock split on January 1, 2021, whereby each share of common stock was split into two shares, and the above calculations are based on the assumption that the stock split was conducted at the beginning of the previous consolidated fiscal year.

• These quarterly consolidated financial results are outside the scope of an audit by certified public accountants and audit corporations.
• Explanation for the appropriate use of financial forecasts and other special notes:

(Cautionary note on forward-looking statement)

The statements regarding the forecast of financial results in this report are based on the information that is available to the Company, as well as certain assumptions that are deemed to be reasonable by management, and they are not meant to be a commitment by the Company. Therefore, there might be cases in which actual results differ materially from forecast figures due to various factors. For details, please refer to "1. Qualitative Information on Quarterly Financial Results (3) Consolidated Financial Forecasts" on page 3 of the attached materials.

(How to obtain supplementary explanatory materials for financial results)

Supplementary briefing material on quarterly results is disclosed via TDnet on the same day.

Table of Contents

1. Qualitative Information on Quarterly Financial Results…………………………………………………………………….. 2
2. 1. Overview of Business Results……………………………………………………………………………………………. 2
   2. Overview of Financial Position…………………………………………………………………………………………... 2
   3. Consolidated Financial Forecasts…………………………………………………………….…………………………... 3
3. Quarterly Consolidated Financial Statements and Notes…………………………………………………………………..... 4
4. 1. Quarterly Consolidated Balance Sheets………………………………………………………………………………….. 4
   2. Quarterly Consolidated Statements of Income and Comprehensive Income…………………………………………...... 5
      Quarterly Consolidated Statements of Income
      Consolidated Period of 3Q………………………………………………………………………...…………………... 5
      Quarterly Consolidated Statements of Comprehensive Income
      Consolidated Period of 3Q………………………………………………………………………...…………………... 6
   3. Notes to Quarterly Consolidated Financial Statements…………………………………………………………………... 7 (Notes related to the Going Concern Assumption)……………………………………………………………………...... 7

(Notes to Significant Changes in the Amount of Shareholders' Equity)……………………………………………….....	7
(Application of Special Accounting Methods for the Preparation of Quarterly Consolidated Financial Statement)	7
(Changes in Accounting Principles)………………………………………………………………………………………	7
(Additional Information) …………………………………………………………………………………………………	7
(Segment Information) ……………………………………………………………………………………………………	7
(Significant Subsequent Events) ………………………………………………………………………………………...	7

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1． Qualitative Information on Quarterly Financial Results

(1) Description of Business Results

Since many companies are making efforts to improve the productivity and re-skilling of their workforce, as well as the growing interest in human capital management which leads to upgrading the medium-andlong-term corporate value, there is a solid need in the career training market. Although the market shrank temporarily due to the COVID-19 pandemic, the career training market has been recovering during the third cumulative period (October 1, 2021 to June 30, 2022) because of the spread of online training, as well as an increase in face-to-face training in the On-Site Training business following the decline in the number of infected people since April.

In response to this situation, we are not only strengthening non-face-to-face services such as online training, "Leaf" (LMS, HR support system (*1)), e-Learning and videos, but also strengthening sales of face-to-face training and new training development.

The status of each business segment during the third quarter is as follows.

About On-Site Training business, face-to-face trainings increased for both private and public sectors, and DX trainings increased mainly for private sectors. As a result, the number of training conducted increased 21.1% YoY. Online training accounted for 30.1% of the total.

Regarding Open Seminars business, the total number of attendees increased 20.5% YoY due to the strong performance of DX trainings such as "Python Academy" and an increase in face-to-face trainings. The percentage of online training remained high at 75.3%.

About IT Services, the number of paid organizations of "Leaf" increased to 498 (+123, +32.8% YoY). The number of users exceeded 2.04 million as of June 30, 2022, and Leaf monthly subscription fees (MRR*2) increased steadily, resulting in annual recurring revenue (ARR*3) of 596 million yen (+ 28.0% YoY).

In Other Businesses, the Web marketing business contributed to sales and e-Learning/video contents related to DX and IT sold very well.

In addition to the overall increase in sales, operating profits increased as a result of the curbing of personnel expenses due to the lower number of consolidated employees than planned.

As a result of the above, for the consolidated cumulative third quarter of the current fiscal year, net sales are 6,872,875 thousand yen (+24% YoY), operating profit is 2,437,687 thousand yen (+40.7% YoY), ordinary profit is 2,414,428 thousand yen (+37.9% YoY), and profit attributable to owners of parent is 1,653,885 thousand yen (+43.9% YoY).

*1:LMS (Learning Management System): A system necessary for implementing e-learning.

*2:MRR: Monthly Recurring Revenue

*3:ARR: Annual Recurring Revenue. Calculated by multiplying the MRR of the last month of each term by 12.

■Net sales by business for the third quarter of FY21		(Unit: thousand yen)
Business	3Q FY21	YoY (%)	3Q FY20
(Oct. 1, 2021 - Jun. 30, 2022)	(Oct. 1, 2020 -June. 30, 2021)
On-Site Training	3,403,261	119.1	2,857,018
Open Seminars	1,594,854	117.0	1,362,641
IT Services	883,471	122.4	721,623
Other Businesses	991,287	164.4	602,999
Total	6,872,875	124.0	5,544,283

(Note)1. Since our Group has a single business segment, which is the education service business, the information herein is presented by business category instead of the segment.

1. Overview of Financial Position (Assets)
   Total assets at the end of the third quarter of the current fiscal year increased by 773,798 thousand yen compared to the end of the previous fiscal year to 7,540,504 thousand yen, mainly due to an increase of 461,889 thousand yen in cash and deposits. (Liabilities)
   Total liabilities at the end of the third quarter of the current fiscal year increased by 269,482 thousand yen compared to the end of the previous fiscal year to 1,996,798 thousand yen, mainly due to a decrease of 361,801 thousand yen in accrued income tax.
2. • 2 -

Net assets at the end of the third quarter of the current fiscal year increased by 1,043,280 thousand yen compared to the end of the previous fiscal year to 5,543,705 thousand yen. This was mainly due to an increase of 1,001,460 thousand yen in retained earnings.

(3) Consolidated Financial Forecasts

The Company has revised upward its full-year consolidated business forecasts for FY21 in terms of sales and profit, which were previously announced. Details are as described in the "Notice: Revision of Consolidated Financial Forecasts for Full FY21" released today. The forecasts are based on currently available information, and actual results may differ from the forecasts due to various factors in the future.

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