Insource Co., Ltd.

Q3 FY19 Cumulative Consolidated Financial Results (October 1,2019 to June 30, 2020)

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trademarks of Insource Co., Ltd.

0

Disclaimer Regarding Forward-looking Statements

  • This report contains estimates and targets pertaining to the future plans and business results of the Insource Group (Insource Co., Ltd and our affiliated companies). Such statements are based on information available at the time of the report's production and based on potential risks and uncertainties. Actual results may differ materially from estimates and targets contained herein.
  • Unless otherwise noted, financial statements contained herein are presented in accordance with generally accepted accounting principles in Japan.
  • The Group assumes no obligation to update or revise any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect new information, changes in our expectations or the occurrence of anticipated or unanticipated events or circumstances.
  • Information in this report regarding companies other than the Group is quoted from public and other sources. We do not guarantee the accuracy of this information.
  • This report does not constitute an invitation or solicitation of an offer to subscribe for or purchase any securities (herein referred to as "solicitation activities") and neither this report nor anything contained herein shall form the basis for any contract or commitment whatsoever.

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1

Contents

Chap. 01 The impact of coronavirus crisis on Insource Group and our group's response as of July 27, 2020

Chap. 02 3Q FY19 Cumulative Consolidated Financial Highlights and Forecast for FY19 (ending September 30, 2020)

Chap. 03 3Q FY19 Cumulative Consolidated Financial Results

Chap. 04 To improve our performance from 4Q onwards

Company Profile & Business Activities

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2

Chap. 01 The impact of coronavirus crisis on Insource Group and our group's response as of July 27, 2020

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3

Performance of 3Q FY19 - Showing Signs of Recovery from June

Sales increased by 117 million yen from previous month after hitting the bottom at 50.7% YOY in May and recovering to 64.5% YOY in June.

April MOM

May

MOM

June

MOM July*1 MOM

Consolidated

370

▲2

177

▲192

295

+117

370

net sales

+74

(▲251)

(▲172)

(▲162)

(▲153)

YOY

(59.6%)

(50.7%)

(64.5%)

(70.8%)

Net sales:

▲93

+55

209

On-Site

175

+89

81

136

+73

Training

(▲192)

(▲139)

(▲138)

(▲123)

(47.7%)

(36.8%)

(49.7%)

(62.8%)

YOY

Net sales:

124

+80

43

▲81

88

+45

81

Open

▲7

Seminars

(▲80)

(▲56)

(▲50)

(▲72)

(60.8%)

(43.6%)

(63.9%)

(52.9%)

YOY

*1 The numbers shown for July are the forecast figures as of July 22.

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4

Status of Training Businesses

Both On-Site Training and Open Seminars show signs of recoveries after hitting the lowest in May. The number of On-Site Training and the number of attendees at Open Seminars, both conducted online, change at the same level. It is expected that a certain number of trainings will be conducted online for a while.

April

MOM

May

MOM

June

MOM

July1)

MOM

On-Site Training:

+401

▲438

+279

+407

Number of trainings

703

265

544

951

conducted(times)

%)

%)

%)

%)

YOY

44.2

24.4

42.9

61.4

Among above, number

+169

+20

▲5

+24

of online

172

192

187

211

trainings(times)

24.5%)

72.5%)

34.4%)

22.2%)

composition ratio

Open Seminars:

+

+

+

Number of

5,396

1,992

3,404

2,898

3,286

3,417

906

388

Attendees(attendees)

66.0

%)

42.0

%)

47.4

%)

44.0

%)

YOY

Among above, number

of people who took

4,642

-

1,971

▲2,671

2,008

+37

1,386

▲622

online(attendees)

86.0

%)

98.9

%)

69.3

%)

42.2

%)

(composition ratio)

*1 The figures for July are estimated as of July 22. They are subject to additions and cancellations.

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5

Our Efforts for 3Q FY19

  • Enhanced non-face-to-face services with "speed and focus" in the coronavirus c risis

April Offered new employees' trainings online on a massive scale,

Developed an online training management system promptly

Started from full-fledged online trainings for new employees (conducted 1,197 times, 25,237 people attended during 3Q)

Promoted IT adoption to manage Online Trainings (by automating operations specific to online services such as sending Meeting IDs) Developed contents to solve social issues targeting the post-coronavirus crisis

Started online seminars "Insource Energy Forum - Japan Solution" for free

May Offered only Online Trainings mostly, Enhanced non-face-to-face services

Almost all of the Trainings continued taking place online due to the extension of state of the emergency

Enforced management services for Online Trainings started offering services which made attendees possible to print out textbooks at convenience stores "7-Eleven"*))

40 Sales Reps. were transferred to other Departments temporarily, among whom 12 are now officially in IT Service Department which may not likely be affected by the coronavirus crisis, and we enforced non-face-to-face services.

June Resumed normal sales activities, Re-started Open Seminars where attendees are actually present at the seminar classrooms (We also continue online trainings)

Since the state of the emergency was lifted entirely, businesses related to HR departments have returned to normal gradually and business negotiations have resumed

In parallel with Online Trainings, Open Seminars where attendees are present physically started again nationwide

Video trainings developed in-house started fully at Insource in addition to those services already done by Mitemo Co., Ltd

July Started BPO and video services using our own technologies

Started offering new services by making use of our own technologies, such as supporting face-to-face trainings into online and offering e-Learning rental contents for one-week

Enforced new services targeting at "After Corona/ With Corona" by expanding a l ineup of IT trainings to 48 kinds

* 7-Eleven is a registered trademark.

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6

Chap. 02 3Q FY19 Cumulative Consolidated Financial Highlights and Forecast for FY19 (ending September 30, 2020)

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7

3Q FY19 Cumulative Consolidated Financial Highlights

1Q-3Q19.10-20.6

Net sales:

Decreased by 6.0% (237 million yen)YOY to 3,749 million yen.

The breakdown consists of 1,981 million yen (15.5%) for On-Site Training, 965 million yen (9.9%) for Open Seminars and 802 million yen (+41.0%) for Other Businesses.

Gross profit:

Decreased by 6.3% (175 million yen) YOY to 2,617 million yen. Gross profit margin fell by 0.3 points YOY to 69.8%.

Operating profit:

Decreased by 54.0% (510 million yen) YOY to 434 million yen. Operating profit margin decreased by 12.1 points YOY to 11.6%.

3Q20.4-20.6

Net sales:

Decreased by 41.0% (587 million yen) YOY to 843 million yen.

The breakdown consists of 392 million yen (54.5%) for On-Site Training, 257 million yen (42.1%) for Open Seminars and 193 million yen (+56.5%) for Other Businesses.

Gross profit:

Decreased by 46.2% (468 million yen) YOY to 544 million yen. Gross profit margin decreased by 6.3 points YOY to 64.5%.

Operating profit:

Decreased YOY to 567 million yen and operating loss was 190 million yen.

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FY19 Revised Consolidated Earnings Forecast

  • Assumptions of forecasts

This forecast is calculated based on the actual situation of sales activities as of July 22, 2020 and current situation of the coronavirus infection.

Earnings Forecasts

Net sales: 5,160 million yen, 8.0% decrease YOY(330 million yen from the previous forecast)

Operating profit: 760 million yen, 41.7% decrease YOY (125 million yen from the previous forecast)

Net profit: 465 million yen, 44.3% decrease YOY (100 million yen from the previous forecast)

Whole Business

The changes in 3Q FY19 are almost in line with our expectations made as of May 14. As for 4Q, the changes are expected to be about 90% YOY.

By Business

4Q sales of training business, especially Open Seminars, will have slower recovery than expected. On the other hand, 4Q sales of Other Businesses will be slightly below the previous forecast, but with the growing needs for home learning due to the coronavirus crisis, sales for e-Learning and term-end customization of LMS (Learning Management System; LMS*1) will be expected to increase.

July

August

September

4Q Total

Consolidated net sales

70%

75%

110%

90%

Net Sales: On-Site Training

60%

80%

105%

85%

Net Sales: Open Seminars

50%

65%

80%

65%

*Figures show the approximate number of sales compared to the previous year

*1 LMS (Learning Management System): Management system necessary for conducting e-learning

9

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FY19

Revised Consolidated Earnings Forecast

Net sales decreased by 330 million yen to 5,160 million yen from the previous forecast

(448 million yen YOY)

Operating profit decreased by 125 million yen to 760 million yen from the previous forecast

(543million yen YOY)

FY19

Unit: million yen

FY18

Previous

Revised

Changes

YOY

Actual

forecast

forecast

Change rate

Net sales

5,608

5,490

5,160

▲330

▲448

▲6.0%)

▲8.0%)

Gross profit

3,959

3,860

3,610

▲250

▲349

▲6.5%)

▲8.8%)

(Gross profit margin)

(70.6%)

(70.3%)

(70.0%)

(▲0.3pt)

(▲0.6pt)

Operating

1,303

885

760

▲125

▲543

profit

▲14.1%)

▲41.7%)

(Operating profit margin)

(23.2%)

(16.1%)

(14.7%)

(▲1.4pt)

(▲8.5pt)

Ordinary

1,298

870

750

▲120

▲548

profit

▲13.8%)

▲42.2%)

(Ordinary profit

(23.2%)

(15.8%)

(14.5%)

(▲1.3pt)

(▲8.7pt)

margin)

Net profit

835

565

465

▲100

▲370

▲17.7%)

▲44.3%)

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10

Shareholder Dividends Policy & Next Mid-Term Management Plan

Dividends

We plan to pay dividends in line with our original forecast as business activities are returning to normal.

FY18

FY19

FY19

(Actual)

(Previous forecast)

(Revised forecast)

Dividend per share

16 yen 00 sen

18 yen 50 sen

18 yen 50 sen

after stock split) *

Stock split

336 million yen

388 million yen

387 million yen

Payout ratio (consolidated)

40.3%

68.8%

83.6%

* As of September 1, 2019, we split stock per share of common stock at 1.25-to-1 ratio.

Revision of the mid-term management plan, "Road to Next 2022"

We will disclose the next medium-term management plan (for FY20 to FY22) when the financial results for FY19 are announced.

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11

Chap. 03 3Q FY19 Cumulative Consolidated Financial Results

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Consolidated Profit & Loss Statement Overview

1Q-3Q19.10-20.6

Net sales decreased by 6.0% YOY to 3,749 million yen

Operating profit decreased by 54.0% YOY to 434 million yen

Recorded an extraordinary loss of 38 million yen due to impairment of investment securities

Unit: million yen

FY17

FY18

FY19

FY19

FY19

FY19

FY19

1Q-3Q(Actual)1Q-3Q(Actual)

1Q-3Q(Actual)

1Q-3Q(YOY)

3Q(Actual)

3Q(YOY)

(Revised target)

Net sales

3,294

3,986

3,749

843

Changed

5,160

▲6.0%

▲41.0%

▲330

(YOY)

(+672)

(+692)

(237)

(587)

(Progression rate:72.7%)

Gross profit

2,264

2,793

2,617

544

▲6.3%

▲46.2%

▲250

3,610

Changed

(YOY)

(+514)

(+529)

(▲175)

(▲468)

(Progression rate:72.5%)

(Gross profit

(68.7%)

(70.1%)

(69.8%)

(▲0.3pt)

(64.5%)

(▲6.3pt)

(70.0%)

margin)

Operating

697

944

434

190

760

▲54.0%

Changed

profit

-

▲125

(+278)

(+247)

(▲510)

(▲567)

(YOY)

(Progression rate:57.1%)

(Operating profit

(21.2%)

(23.7%)

(11.6%)

(▲12.1pt)

(▲22.6%)

(▲48.9pt)

(14.7%)

margin)

Ordinary

689

940

431

750

▲54.1%

191

Changed

profit

▲120

(YOY)

(+254)

(+250)

(▲508)

(▲566)

(Progression rate:57.6%)

(Ordinary profit

(20.9%)

(23.6%)

(11.5%)

(▲12.1pt)

(▲22.7%)

(▲48.9pt)

(14.5%)

margin)

Net profit

464

621

261

▲57.9%

159

-

465

▲100

Changed

(YOY)

(+179)

(+156)

(▲359)

(▲407)

(Progression rate:56.2%)

13

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Consolidated Profit & Loss Statement (by business) 1Q-3Q19.10-20.6

Unit: million yen

FY17

FY18

FY19

FY19

FY19

FY19

FY19

1Q-3Q(Actual)

1Q-3Q(Actual)

1Q-3Q(Actual)

1Q-3Q(YOY)

3Q(Actual)

3Q(YOY)

(Revised target)

Net sales

3,294

3,986

3,749

843

Changed

▲6.0%

▲41.0%

330

5,160

Whole

(

(YOY)

(+672)

(+692)

( 237)

587)

(Progression rate:72.7%)

Business

Changed

3,610

Gross profit

2,264

2,793

2,617

▲6.3%

544

▲46.2%

250

(Progression rate:72.5%)

(Gross profit margin)

(68.7%)

(70.1%)

(69.8%)

(64.5%)

(70.0%)

( 0.3pt)

( 6.3pt)

Net sales

2,035

2,345

1,981

392

Changed

2,760

On-Site

▲15.5%

▲54.5%

130

(YOY)

(+300)

(+310)

( 364)

(

470)

(Progression rate:71.8%)

Training

Gross profit

Changed

2,030

1,473

1,683

1,477

▲12.2%

294

▲52.5%

110

(Progression rate:72.8%)

(Gross profit margin)

(72.4%)

(71.8%)

(74.6%)

(+2.8pt)

(75.0%)

(+3.1pt)

(73.6%)

Net sales

841

1,072

965

257

Changed

1,260

Open

▲9.9%

▲42.1%

140

(YOY)

(+210)

(+230)

(

(Progression rate:76.6%)

Seminars

( 106)

187)

Gross profit

Changed

770

551

691

586

▲15.2%

128

▲57.5%

120

(Progression rate:76.1%)

(Gross profit margin)

(65.5%)

(64.5%)

(60.7%)

(▲3.8pt)

(50.0%)

(▲18.2pt)

(61.1%)

Net sales

418

569

802

41.0%

193

56.5%

Changed60

1,140

Other

(YOY)

(+162)

(+150)

(+233)

(+69)

(Progression

rate:70.4%)

Businesses Gross profit

239

418

554

32.3%

120

36.3%

Changed

810

20

(Progression rate:68.4%)

(Gross profit margin)

(57.3%)

(73.6%)

(69.1%)

(▲4.5pt)

(62.5%)

(▲9.2pt)

(71.1%)

* Our gross profits by business were not audited by Ernst & Young ShinNihon LLC.

14

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Composition RatioProgress Rate of Sales (by businessby quarter)

& Operating Profit 1Q-3Q(19.10-20.6)

Sales composition

On-Site Training

Open Seminars

Progress rate of

Other Businesses

Unit: million yen

ratio by business

% represents composition ratio

operating profit

3,986

3,749

569

14.3%

FY19

(Target)

3,294

802

21.4%

760

418

12.7%

1,072

26.9%

841

25.5%

965

25.8%

FY18

(Actual)

1,303

2,035

2,345

58.8%

52.8%

61.8%

1,981

FY17

(Actual)

937

FY17

FY18

FY19

1Q-3QActual

1Q-3QActual

1Q-3QActual

Unit: million yen

% represents progress rate

FY19

1Q-3QActual

434

57.1%

FY18

1Q-3QActual

944

72.5%

FY17

1Q-3QActual

697

74.3%

Composition ratio

1Q

2Q 3Q

4Q

Unit: million yen

and progress rate of

% represents composition ratio

or progress rate

sales by quarter

FY19 Progress rate

31.5%

24.8%

16.4%

Forecast

5,160

1,625

1,280

843

FY18 Composition ratio

23.1%

22.5%

25.5%

28.9%

5,608

1,294

1,261

1,430

1,621

FY17 Composition ratio

23.3%

22.4%

26.9%

27.4%

4,536

1,055

1,018

1,220

1,242

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Consolidated Profit & Loss Statement Breakdown of SG&A expenses

SG&A expenses increased by 18.1% YOY to 2,183million yen due to hiring more employees SG&A ratio increased significantly to 58.2%, due to a decline in sales. Office & system expenses increased due to cloud usage of Other Businesses

Unit: million yen

Breakdown of

FY17

FY18

FY19

FY19

FY19

SG&A

1Q-3Q(Actual)

1Q-3Q(Actual)

1Q-3Q(Actual)

1Q-3Q(YOY)

(Revised target)

Personnel

1,222

1,432

1,703

18.9%

2,230

40

expenses *1

Changed

(YOY)

(+270

Rent expenses

87

93

101

8.1%

130

15

Changed

(YOY)

(+7

Office & system

147

83

117

26.2%

Changed

190

expenses

10

(YOY)

(+30

Other expenses

173

204

230

12.5%

300

60

Changed

(YOY)

(+25

Total SG&A

1,567

1,849

2,183

18.1%

2,850

125

expenses

Changed

(YOY)

(+334

(SG&A expense

(47.6%)

(46.4%)

(58.2%)

-

(55.2%)

ratio)

* 1 Total personnel expenses include wages, recruitment, training, and benefit expenses.

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Consolidated Balance Sheet

Current assets decreased by 38.9% YOY to 2,535 million yen due to a decline in cash and deposits caused by acquisition of the company's building (547 million yen), payment of corporation tax (435 million yen) , dividend payments (336 million yen) and buying back treasury stock (297 million yen)

Unit: million yen

FY17

FY18

(Actual)

(Actual)

Current assets

3,434

4,150

Fixed assets

524

806

Total assets

3,959

4,957

Current

979

1,787

liabilities

Fixed

89

86

liabilities

Net assets

2,889

3,082

Total liabilities

3,959

4,957

and net assets

FY19

FY18 vs. FY19

3QActual

Changes

YOY

2,535

▲1,615

▲38.9%

1,378

572

71.0%

3,913

▲1,043

▲21.1%

1,131

▲656

▲36.7%

81

▲5

▲6.4%

2,700

▲381

▲12.4%

3,913

▲1,043

▲21.1%

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Unit: million yen

On-Site Training 3Q(20.4-20.6)

  • The number of trainings conducted decreased largely and net sales fell by 54.5% YOY due to the declaration of state of the emergency

The average unit price per training increased by 18.8% YOY to 259.9 thousand yen as online trainings are mainly offered to private companies

FY18

FY19

FY19

FY19

FY19

FY19

Revised target

1QActual

3Q(YOY)

1Q-3Q(Actual)

Actual

2Q Actual

3Q Actual

Net sales

3,279

1,006

581

392

▲54.5%

1,981

2,760

Changed

(Progression

(YOY)

▲470

(▲364)

▲130

rate:71.8%)

Gross profit *

2,341

742

440

294

▲52.5%

1,477

2,030

(YOY)

Changed

(Progression

▲326

(

206)

▲110

rate:72.8%)

(Gross profit

(71.4%)

(73.8%)

(75.7%)

(75.0%)

(+3.1pt)

(74.6%)

(73.6%)

margin)

Changed

Total number

▲800

11,600

of trainings

14,873

4,471

2,480

1,512

▲61.7%

8,463

conducted

(Progression

rate:73.0%)

(unit:times)

Average unit

225.0

234.3

259.9

price

220.5

+18.8%

234.1

237.9

(unit:Thousand yen)

* Our gross profits by business were not audited by Ernst & Young ShinNihon LLC.

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18

Open Seminars 3Q20.4-20.6

Gross profit margin decreased by 18.2pt YOY to 50.0% due to an increase in expense rate for the use of external venues, which had been prepared in anticipation of increasing demands for new employee trainings

The average unit price rose by 7.3% YOY due to the increase of long-term IT Trainings whose average unit prices are high

Unit: million yen

FY18

FY19

FY19

FY19

FY19

FY19

FY19

(Actual)

1Q(Actual) 2Q(Actual)

3QActual

3Q(YOY)

1Q-3Q(Actual)

(Revised target)

Changed

Net sales

1,527

419

289

▲140

257

▲42.1%

965

1,260

(YOY)

▲187

(▲106)

Progression rate: 76.6%

Gross profit*

128

586

Changed

770

▲57.5%

▲120

(YOY)

1,011

284

172

(▲174)

(▲105)

Progression rate: 76.1%

(Gross profit

(66.2%)

(67.9%)

(59.7%)

(50.0%)

(▲18.2pt)

(60.7%)

(61.1%)

margin)

Total number

Changed

▲8,900

72,107

21,132 13,717

10,286

▲46.0%

45,135

58,700

of attendees

Progression rate: 76.9%

(unit:attendees)

Average unit

price

21.1

19.8

21.0

25.0

7.3%

21.3

21.4

(unit:Thousand yen)

* Our gross profits by business were not audited by Ernst & Young ShinNihon LLC.

19

Copyright © Insource Co., Ltd. All rights reserved. insource」「Leaf」「Plants」「WEBinsourceare registered trademarks of Insource Co., Ltd.

Other Businesses - Net Sales/Gross Profit 3Q(20.4-20 .6)

Net sales steadily increased by 56.5% YOY, as the non-face-to-face service was hardly affected by coronavirus crisis

Net sales for e-Learning and video production rose by 90.2% YOY due to the increased use of STUDIO (cloud-basede-learning contents)

Gross profit margin decreased by 9.2pt YOY to 62.5% due to the increased communication costs for introducing

highly-graded server FY18

Unit: million yen

FY19

FY19

FY19

FY19

FY191Q-3Q1Q-3Q

Revised target

Actual

3QActual

3Q(YOY)

(Actual)

(YOY)

1Q Actual

2Q Actual

Changed

Net Sales

801

199

409

193

56.5%

▲60

80241.0%

1,140

(YOY)

(+72)

(+90)

(+69)

Progression rate: 70.4%

610

IT Services

431

106

232

94

53.8%

43338.9%

Progression rate: 71.0%

Monthly subscription

-

57

59

73

-

191

-

-

Customization

-

37

76

18

-

128

-

-

Stress Check Support

-

12

97

3

-

114

-

-

Service

e-Learning/

218

49

78

72

20021.6%

Changed

360

Video Production

90.2%

▲40

Progression rate: 55.8%

Consulting

Changed

120

85

19

51

18

1.2%

9063.9%

10

Progression rate: 75.4%

Gross Profit

605

134

298

120

36.3%

55432.3%

Changed▲ 20

810

Gross profit margin

(75.5%)

(67.4%)

(73.0%)

(62.5%)

(▲9.2pt)

(69.1%)

(▲4.5pt)

Progression rate: 68.4%

* Our gross profit margins by business were not audited by Ernst & Young ShinNihon LLC.

Copyright © Insource Co., Ltd. All rights reserved. insource」「Leaf」「Plants」「WEBinsourceare registered trademarks of Insource Co., Ltd.

20

Other Businesses KPIs

Monthly subscription

FY17

FY18

FY19

3Q Progression

FY19 (Revised target)

model

Actual

Actual

Q(

Actual

rate against FY19

(FY18 vs. FY19)

3

Total number of Leaf

IT

224

Changed

250

Paid subscribers*1)

92

162

70.5%

103

Services

(organizations)

(+

62

(+

88

(YOY)

Total number of

IT

77

organizations using on-the-

26

50

56.3%

98

Services

web appraisal form service

+27

(+

48

(organizations)(YOY)

Direct-selling model

FY17

FY18

FY19

YOY

FY 19

3QActual

Revised target

3Q Actual

3Q Actual

Total number of organizations

270

IT

2)

80

16

33.3%

Changed

implementing Stress Check

0

12

Services

Progression rate

Total 241

Support Service

89.3%

Total number of Video

Changed

e-Learning/

11

18

14

▲22.3%

30

90

Video

production Solutions

Production

Total 71

%)

Total number of consulting

Progression rate

78.9

20

24

16

▲33.3%

120

Consulting

services

Total 95

79.2

%)

Progression rate

Periodical payment model

FY17

FY18

FY19

YOY

FY 19

Actual

3QActual

3QActual

(1-3Q total YOY)

(Revised target)

3Q

Total number of e-Learning

Changed

e-Learning/

20,899

21,874

39,464

80.4%

15,000

Production

(STUDIO & STUDIO

Video

Powered by Leaf) IDs per year ※31-3Qtotal:28,337

1-3Q total34,113)

1-3Q total

(+57.7%)

60,000

Progression rate

end of Sep. FY17 34,566

end of Sep. FY18

40,548

53,787

%)

89.6

*1 Total number as of the end of the year * 2 The number of Stress Check Support implemented since 2Q FY18

is based on the number of orders delivered.

*3 Since 1Q FY19, the annual total number of e-learning subscription IDs has been calculated based on the periodical payment system (the number of IDs used during a certain period), including the

21

monthly subscription system.

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Business model of Leaf - Subscription Customization

1Reasonable monthly fee (Subscription)

In order to make implementation easier, basic monthly fee are set reasonable.

2 Variety of customizations

(1)Customize available to meet the needs of our customer`s personnel system

  1. 20 different optional functions have been developed, allowing customers to add more at a lower cost

Realized a service model that is less likely to be cancelled

Future Prospects for Leaf Expanding sales targets

3Sales promotion with low advertising costs

(1)Cross-selling to existing clients by sales reps.

in charge of trainings and only cost little additional sales expense

(2)Sales using digital marketing (web and email), no mass advertising.

  • Achieving low-cost promotion
  • With points 1-3 above, high profit rate is secured

1.Expansion of sales targets to medium-sized and growing companies

Currently, our targets are mainly large companies, but with expansion of services for medium-sized and growing companies, we will flexibly respond to different needs.

For large companies

Packaged and sold as an LMS that can withstand the high load of a large organization

For medium-sized and

Packaged and sold as a one-stop ASP, human resource management, evaluation

growing companies

and LMS

2.Expansion of sales target to universities, colleges and high schools Academic Leaf

Customized Leaf (Learning Management System) for universities, colleges and high schools to meet the

new learning management needs of implementing online education (increasing burdens for teaching sides such as checking homework assignments, sending reminders to students who have not submitted their work, and management of whether students have taken e-learning courses or not, etc.).

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22

Number of Employees

We will curb the recruitment of mid-career employees expect engineers for FY19, but are planning to employ 30 newcomers in spring 2021

  • To improve productivity, we will continue to train all employees to be skillful in IT and advance DX

FY17

FY18

FY19

3Q Progression

FY19

3QActual

rate against

(revised target)

Actual

Actual

(FY18 vs. FY19)

FY19 target

(FY18 vs. FY19)

476

480

Total number of employees

379

443

89.2%

Changed

(+33

5

(+37

296

321

86.2%

325

Number of full-time employees

249

(+25

(+29

155

Changed

155

Number of part-time employees

130

147

100.0%

5

(+8

(+8

Transition of

quarterly number

Full-timers

Part-timers

of employees

480

476

379

443

147

155

155

130

249

296

321

325

FY17

FY18

3Q FY19

FY19

Actual

Actual

Actual

(Revised target

Copyright © Insource Co., Ltd. All rights reserved. insource」「Leaf」「Plants」「WEBinsourceare registered trademarks of Insource Co., Ltd.

23

FY19 KPIs

  • Corresponding to "After Corona/ With Corona", we have developed multiple new trainings/services.

FY18

3Q FY19

3Q progression

FY19

Actual)

(Actual)

rate against

(Revised target)

(Changes)

FY19 target

(Changes)

Total number of business sites

22

23

100.0%

23

+1

(+1

Total number of permanent classrooms

41

48

100.0%

48

(+7

(+7

Total number of new contracts

Changed

2,165

for WEBinsource (organizations)

2,771

1,679

77.6%

250

(11,335)

13,014

13,500

Cumulative contracts

Number of new programs/content types

239

243

319

for On-Site training

76.2%

(2,821)

3,064

3,140

(Total number)

Number of new programs/content types

297

254

301

for Open Seminars

84.4%

(2,589)

2,843

2,890

(Total number)

Number of new content types

74

30

73

for e-learnings

41.1%

(307)

337

380

(Total number)

Total number of Core solution plans *

-

136

90.7%

150

Number of new webpages

3,123

4,000

2,830

78.1%

Changed

(Total number)

(14,171)

17,294

991

18,171

Total number of sessions

1,712

1,375

66.7%

2,062

(Thousand times)

* Core solution plan is a one-stop service that solves organizational challenges by providing a unique mix of multiple trainings and services tailored to clients' specific needs by subject, industry or job

function(former name: package plan).

24

Copyright © Insource Co., Ltd. All rights reserved. insource」「Leaf」「Plants」「WEBinsourceare registered trademarks of Insource Co., Ltd.

Chap. 04 To improve our performance from 4Q onwards

It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.

(Charles Darwin)

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25

Market Forecast for Career Development Education Year 2020 & 2021

1Demands from organizations which outsource trainings are expected to stay almost the same

The number of organizations who carry out trainings have been changing around 50% in the last 10 years despite economic fluctuations (52.9% in 2018) *1

Training expense per person has been changing around 13,000-21,000 yen in the last 10 years 14,000 yen in 2018*1

2Market sizes for 2020 and 2021 is expected to be 270 and 350 billion yen respectively

We calculated the market size of 2020, assuming that the impact of the coronavirus crisis will continue for over seven- month from March to September (25% between March and June, 75% between July and September) , and then

will return to normal level

As for the market size for 2021, we calculated that the number of organizations conducting trainings would decrease by 2% and training expense per person would fall by 1,000 yen, referring to the market size 391.9 billion yen in 2018*2

Our Group's sales was 5.6 billion yen (FY18) and we still have huge market opportunity

Market Size of Training

Training expense per person

(Training expense per person:

4,500

Service

Rate of organizations conducted trainings

100.0%

thou. yen

25

391.9 bill.yen

4,000

350 bill . yen

90.0%

2011.3

A year

A year after

the Great East

3,500

80.0%

after global

the Great East

20

Japan Earthquake

financial crisis

Japan Earthquake

3,000

270 bill. yen

70.0%

60.0%

52.9%

15

2,500

50.0%

2,000

40.0%

10

1,500

30.0%

13

13

15

14

13

14

17

21

17

14

1,000

20.0%

5

500

10.0%

0.0%

0

0

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

*1 The survey done by Ministry of Health, Labour and Welfare from 2009 to 2018

(Forecast) (Forecast)

*2This figure is calculated based on the surveys done by Ministry of Health, Labour and Welfare (2018) and Ministry of Internal Affairs and Communications

26

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Respond Quickly to Environmental Changes to Achieve Recovery

Seeing coronavirus crisis as an opportunity for business expansion, we aim for new growth

1. Strengthening online-related services

~Leveraging the nationwide spread of online education as an opportunity for business expansion

Online trainings are spreading and expanding from private companies to the rest of the country. We will establish a system that will allow at least 30% of the trainings to be offered online even after the coronavirus crisis is resolved

Starting online training support (BPO) services by leveraging our online training management know-how and IT infrastructure

Starting individualized follow-up services for each attendee

2. Enhancement of IT Services which are hardly affected by environmental Changes

We will expand Leaf's sales target (to medium-sized companies and schools), build a strong sales structure, and develop new IT services and strengthen sales system

3. Enhancement of developing and promoting training programs to meet new needs

~Working from home, DX, web marketing etc.

We will enhance developing new trainings for managing remote employees, productivity improvements,

training DX personnel, new non-face-to-face sales styles such as inside sales and web marketing

4. Expansion of video/e-Learning education ~Diversifying contents and delivery methods

In addition to the traditional subscription model, we are diversifying our e-Learning delivery methods

to include rental and buy-out services, and strongly promoting the use of more than 3,000 types of video contents

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27

Company Profile & Business Activities

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28

Company Profile

Company name

Date of foundation

Headquarters

Affiliated companies

Representative

Insource Co., Ltd.Takayuki Funahashi director and president

November, 2002

Capital

800,623 thousand yen

Kandabashi Park Bldg. 5F 1-19-1 Kanda Nishiki-cho,Chiyoda-ku. Tokyo

Mitemo Co., Ltd, Rashiku Corporation, MIRAISOUZOU & COMPANY, Inc., Insource Digital Academy Cooperation, Double Work Management Co., Ltd

Branch Offices & Business Sites

Kyoto Office

Osaka

Branch

Kobe Office

Okayama

Office

Chu-Shikoku Branch

Kyushu

Branch

25 places nationwide

Tohoku

Branch

Niigata

Office

Nagoya Branch

Nagoya Branch Annex

Seminar Rooms

48 Classrooms in 10 Cities

Online training booths

40 booths*

*As the of end of June,2020

Hokkaido

Branch

Tsuchiura

Office

Urawa

Office

Utsunomiya Office

Makuhari

(opened on March 9, 2020)

Office

Head Office

IT Media Lab

Surugadai Office

Ikebukuro Office (Kanto Branch)

Shinjuku Office

Shibuya Office

Nihonbashi Office

Hamamatsucho Office

Akasaka Office

Machida Office

Yokohama

Branch

Branches with Seminar Rooms.

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29

Management Policy

We will continue to aim for sustainable growth by increasing market share

Strategy Accelerating growth with speed and focus

Accelerate growth by implementing business and organizational restructuring with fast speed while adapting to the external environment

Work on major issues, and solve them by making proactive decisions from a company-wide perspective.

Strategy Practicing diversity

-Expediting business expansion and

new business development through diversity

Achieve higher results through the collaboration of diverse workforce

Develop contents and expand business by maintaining and enlarging diverse workforce in the organization

Strategy Continuing ESG Management

Contribute to society by offering various trainings to help revitalize the Japanese economy in the post-corona era since our business itself is deeply related to solving social problems

Proactively disclose non-financial information and ensure highly transparent management

* We reallocate our resources in the organization speedily and concentrate staff on divisions which contribute to sales and growth.

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30

Speed and Focus -Implementing Online Training Business

Structuring and Systematization of Implementing Online Training business in 10 Days

The issues were identified and developed by the entire company, and System Department worked together to develop the system. Tests were conducted immediately and the system was put into operation.

PLAN

Insource is incorporating the essence of

*What is OODA Loop?

OODA Loop into its training programs.

OODA Loop is a simple practical framework inspired by US Marine Corps' decision-making process. By practicing OODA Loop, you can deal flexibly with changing situations at high speed.

Mid-Term

Management Plan, "Road to Next 2022"

DO Practice OODA Loop

Changing

situation

OODA Loop

決断

決断

OODA Loop

決断

OODA Loop

OODA Loop

By flexibly changing the strategy depending決断

on situations with "speed and focus",

we will be able to grow in response to the external environment.

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31

Diverse Workforce

  • Ratio of female employees in managerial positions: 28.0%
    Employment rate of people with disabilities: 3.11%

Total

Female employees

Total number

476

279

Ratio of female

of employees

(58.6%)

employees in managerial

*2

Total number

positions:

125

35

14.9% *1

of managerial

(28.0%)

(Source: The Gender Equality

positions

Bureau of the Cabinet Office)

(As of the end of June, 2020 (consolidated))

Foreign

4

Seniors

13

LGBTs

4

People with

9

nationals

Disability employment rate:

(aged over 60)

disabilities

※4

3.11% *3

Legal employment rate: 2.2%

Actual employment rate: 2.11%

(Source: "2019 Disability Persons' Employment Status" released by the Ministry of Health, Labour and Welfare)

Workforce by job function: Diverse specialists work at Insource.

Content Creators

Digital

marketers

138

29

Sales

Representatives

AI /RPA

Engineers

157

10

IT Engineers

Designers

71

16

*1

Administrative and managerial workers include board members, managers or above, administrative civil servants.

*2

Directors, auditors and corporate officers are excluded. *3 Non-consolidated (Insource only)

*4

"Foreign nationals" refers to employees with foreign nationalities . This includes naturalized Japanese.

32

Copyright © Insource Co., Ltd. All rights reserved. insource」「Leaf」「Plants」「WEBinsourceare registered trademarks of Insource Co., Ltd.

Balancing ESG + P (performance) The Importance of Performance

A company's existence is to continue to improve its performance while being conscious of ESG.

Environment/Social

EnvironmentCompany-wide power saving / LED installation

150 courses

"Japanese Economy Revitalization Campaign"

More than

Social

We offer trainings at up to 50% off to help organizations turn around and expand their business in the "After Corona/ With Corona" world.

Practicing diversity at work

The number of employees Female 279 Seniors13

(As of the end of June, 2020 )

Governance

Active disclosure of non-financial information on a monthly basis

Newly developed training programs

No. of Open Seminar attendees

No. of Leaf monthly paying subscribers (organizations)

No. of On-Site training conducted

No. of WEBinsource subscribers

No. of organizations implementing Stress Check Support Service

Disclose earnings forecasts frequently depending on the situation

We will disclose the situation as soon as it becomes apparent so that the right decision can be made for us in the ever-changing environment.

Performance

We contribute to society by solving social issues through trainings. In addition, we will continue to improve our performance by providing trainings at a low cost through our IT capabilities and systematization.

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33

Concept of Insource's Service

Our core value of product and service provision

Challenging

Perfect fit

Pursuing what the customer wants

Speed

Immediate response to the environment and customer

Developing training that meets

Something new

Constantly improving and creating

the latest social trends

Full force and energy

No compromises

Empathy

Practical, realistic Sincere, helpful

High quality

Contributing to

Solving the challenges for all workers

development

Making organization strong

Delivering cost effective trainings

Cost effective

Cost-effectiveSustainable

and putting empathy to workers

Diversity

Valuing diversity To all workers

Professional

Sophisticated service production

Reliable,

Provable to every customer's needs

Everything

Completeness

Anything can be found

C omprehensive product lines

Universal

Solving social issues

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34

Business Activities Clients and Average growth rate by business

Composition ratio of clients by industry

The total number of clients who used our services from June 2003 to March 2020

31,883 organizations

  • Utility Service 1.2%

Finance/Banking 2.8%

Others 5.3%

Transportation/Warehouse 2.9%

Manufacturing

20.9

Educational Services/ 5.9%

%

Academic institution

Logistics/ Trading 6.0%

Government

Health/Medical 6.8%

15.1 /Public administrations

%

8.0%

12.9

Construction/Real state

12.2

%

Telecommunications

%

Service/Hospitality

/IT services

Compound annual growth rate by business (Target)

FY17

FY18

FY19

CAGR

(Actual)

(Actual)

(Revised forecast)

FY17-FY19

Whole Business

4,536

5,608

5,160

12.9%

On-Site Training

2,827

3,279

2,760

5.2%

Open Seminars

1,166

1,527

1,260

12.0%

Other Businesses

541

801

1,140

53.5%

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35

needs promptly
Meet our client's

Business Activities Trainings

  • Hands-onapproach: Attendees can make the most use of what they have learned immediately. Programs mainly consist of exercises (60%)

Positive feedback

95.2%

Positive feedback

93.8%

Positive feedback rates from training attendees rate (trainings)

rate (trainers)

*As of the end of March,2020

By using IT technologies, we can provide high quality trainings frequently and nationwide

On-Site Training

52.8%

Open Seminars

25.8%

Offer on-site trainings tailored to organizations' needs

Separate trainers from content development and utilize IT technologies

Specialized divisions create contents in-house and trainers concentrate on giving trainings

Utilizing IT technologies and systematic development system enables us to offer uniform services nationwide

Clients

Develop over 200

contents a year

Trainers

Sales reps

Content creators

334

157

138

*Unit: persons

* As of the end of June 2020

Annual total number of

14,971 *From April 2019 to March 2020

trainings conducted:

Out of the total number of trainings conducted:

Total number of online Total number of online trainings conducted: 502 attendees:16,619

* As of the end of June 2020

Offer open seminars that each person from various organizations can attend

Hold seminars quite frequently nationwide

Seminars can be attended at a reasonable fee and

anywhere in the

country

Demands for our unique package deal "HRD SmartPack"

Hokkaido

are high mainly by large companies.

10 cities 48 classrooms

Sendai

Utsunomiya

Osaka

Makuhari

Tokyo

Hiroshima

Kawasaki

Fukuoka

Nagoya

* As of the end of June 2020

Annual total number of

75,654 *From April 2019 to March 2020

attendees

Out of the total number of trainings conducted:

Total number of online Total number of online trainings conducted:695 attendees:8,701

* As of the end of June 2020

* Figures in parentheses indicate percentage of 1Q~3Q FY19 sales ratio

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36

Copyright © Insource Co., Ltd. All rights reserved.

Business Activities Other Businesses

We are expanding content lineup since we aim to offer services essential for HR departments.

Other BusinessesLeaf (HR support system), e-Learning, Consulting, Staffing & Recruitment Services) (21.4%)

IT Services

e-Learning / Video production (Mitemo Co., Ltd)

Leaf (HR support system)

STUDIO (Cloud-basede-Learning system) *3

Integrates every service line on our in-house platform,

Video Production

Earning revenue from monthly subscription fees

'Leaf', including training scheduling, stress check ing

and personnel appraisal.

(subscription model) and direct-selling model

Leaf earns revenue from monthly subscription fees

Total number of e-Learning

90subjects 337contents

(subscription model) and customization fees*2.

contents

Total number of e-learning

39,464 IDs

Demands for LMS by large companies and use of on-

subscription IDs per year

the-web appraisal form service by mid-sized

* As of the end of March 2020

Actual no. of active subscription IDs (Jan - Mar 2020)

companies increased

Consulting

Total number of Leaf paid

224 organizations

Establishing personnel appraisal service

subscribers

Assessment services

Total number of organizations

77 organizations

using on-the-web appraisal form

Staffing & Recruitment Services

service

Recruitment promotion

Total number of organizations

241 organizations

Staffing services for (potential) returners,

implementing Stress Check

short-time workers with regular employment

Support Service

  • As of the end of June 2020
    Actual no. of Stress Check Support Service applied (Oct 2019 - June2020)

*1 Figures in parentheses indicate percentage of 1Q~3Q FY19 sales ratio. *2 Direct-selling model *3 STUDIO is powered by Leaf partly.

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37

4 Major Pillars to Achieve Our Goals and Visions

A wide range of industries

Strong client

Robust in-house developed

Contents

base

Linkage of sales force

In-house IT systems and

and digital marketing

AI-driven tools

Strong sales

Information

power

Technologies

Systematic cross-functional cooperation through IT utilization

Inquiries via our website

WEB pages 17,294 pages

Update

our website

No. of Designers 16

Develop new

trainings/ services

No. of Content creators 138

Approach

Acquire new

nationwide clients

WEBinsource

quickly

subscribers

We are also actively engaged in online sales via Zoom.

No. of business sites: 23

No. of Sales reps: 157

Our services

Open

Seminars

New needs and

On-Site

Other

opportunities

Businesses

Training

Leaf

e-Learning

* As of the end of June 2020

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38

Insource's 4 Pillars to Achieve High Profitability

  • "Strong client base""Mixed approach"

A wide range of industries

Number of Clients: 31,883 organizations *1

Strong client base

Total Number of WEBinsource Subscribers: 13,014 organizations

*1 Total number of clients who used our services from June 2003 to March 2020-.

Mixed approach to keep high profitability by sharing information cross-functionally.

Robust in-house developed

Contents

  • Linkage of sales force and digital marketing

Strong sales power

  • In-houseIT systems, AI-driven tools & DX

Information

Technologies

  • Separate content creations from trainers.

138 Content Creators produce more than 200 new titles a year.

  • Provide the best suitable options with 23 business site nationwide and 157 Sales Representatives.

29 Digital Marketers will offer proposals effectively by emails and WEB system.

71 IT engineers and 10 AI/RPA engineers provide in-house developed ASP services while maximizing business efficiency

and achieve significant cost reductions.

* As of the end of June 2020

Copyright © Insource Co., Ltd. All rights reserved. insource」「Leaf」「Plants」「WEBinsourceare registered trademarks of Insource Co., Ltd.

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Insource Co. Ltd. published this content on 27 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 July 2020 07:35:19 UTC