Inter Action : Consolidated Financial Results for the First Quarter of the Fiscal Year Ending May 31, 2024

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Disclaimer: This is a Japanese-English translation of the summary of financial statements of the Company produced for your convenience. Since no auditor audited this report, officially only the Japanese version is assumed to be the summary of financial statements of the Company. This summary does not constitute any guarantee and the Company will not compensate any losses and/or damage stemming from actions taken based on these statements. Should there be any discrepancy between the Japanese and English versions, the Japanese version is assumed to be correct.

October 12, 2023

Consolidated Financial Results

for the First Quarter of the Fiscal Year Ending May 31, 2024

Listed company:	INTER ACTION Corporation
Listed stock exchange: Tokyo
Securities code:	7725
URL:	https://www.inter-action.co.jp/en/
Representative:	Nobuo Kiji, CEO & President
Contact:	Kaori Kawaguchi, Chief, Business Planning Team
Telephone number:	[phone]

Submission of quarterly report: October 13, 2023

Dividend payment commencement date: -

Preparation of explanatory materials for quarterly financial results: Yes

Holding of a briefing on quarterly financial results: Yes (For Institutional Investors, Analysts)

(Amounts of less than one million yen are truncated)

1. Consolidated Financial Results for the Cumulative First Quarter of the Fiscal Year Ending May 31, 2024 (June 1, 2023 to August 31, 2023)

(1) Consolidated operating results (Cumulative)		(% figures show year-on-year change)
		Net sales		Operating profit	Ordinary profit	Profit attributable to
			owners of parent
		Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions of yen	%
	Three months ended	1,740	(8.8)	211	(55.7)	239	(53.8)	150	(57.2)
	August 31, 2023
	Three months ended	1,907	10.9	476	10.8	519	19.6	351	22.6
	August 31, 2022

(Note) Comprehensive income: Three months ended August 31, 2023: ¥168 million / (52.9)% Three months ended August 31, 2022: ¥358 million / 27.4%

	Basic earnings
	per share
	Yen
Three months ended August 31, 2023	13.90
Three months ended August 31, 2022	32.38

(2) Consolidated financial position

Diluted earnings

per share

Yen

―

―

	Total assets	Net assets	Shareholders' equity ratio
	Millions of yen	Millions of yen	%
As of August 31, 2023	12,225	10,026	82.0
As of May 31, 2023	12,610	10,132	80.4

(Reference) Shareholders' equity: As of August 31, 2023: ¥10,026 million As of May 31, 2023: ¥10,132 million

2. Dividends

					Annual dividends
			First quarter-end	Second quarter-end		Third quarter-end	Fiscal year-end	Total
			Yen	Yen		Yen	Yen	Yen
	Fiscal year ended May 31, 2023		−	0.00			−	25.00		25.00
	Fiscal year ending May 31, 2024		−
	Fiscal year ending May 31, 2024			10.00			−	25.00		35.00
	(Forecast)
(Note) Amendment to forecasts of dividends recently announced: Yes

3. Forecast of Consolidated Financial Results for the Fiscal Year Ending May 31, 2024 (June 1, 2023 to May 31, 2024)

(% figures show year-on-year change for the full year and quarter)

	Net sales		Operating profit	Ordinary profit	Profit attributable to	Profit per share
							owners of parent
	Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions of yen	%	Yen
Full year	7,058	2.9	1,037	(28.4)	1,025	(31.8)	655	(33.2)	60.49

(Note) 1. Amendment to forecasts of financial results recently announced: None

2. The Company has implemented an ESOP and Directors' stock compensation plan both in the form of stock benefit trusts. Accordingly, profit per share is calculated based on the average number of shares during the fiscal year, excluding the number of treasury shares, which includes Inter Action stock held by the stock benefit ESOP trust accounts and Directors' compensation stock benefit trust accounts.

• Notes

1. Change in significant subsidiaries during three months ended August 31, 2023 (changes in specified subsidiaries affecting the scope of consolidation): None

New: -

(Company name:

) Excluded: -

(Company name:

)

1. Application of special accounting for preparing quarterly consolidated financial statements: None
2. Changes in accounting policies and estimates, and retrospective restatements
3. 1. Changes in accounting policies in accordance with revision of accounting standards: None
   2. Changes in accounting policies other than item (i) above: None
   3. Changes in accounting estimates: None
   4. Retrospective restatements: None
4. Number of shares issued (common shares)
5. 1. Number of shares outstanding at end of period (including treasury shares)

	As of August 31, 2023	11,510,200 shares
	As of May 31, 2023	11,510,200 shares
(ii) Number of treasury shares at end of period
	As of August 31, 2023	672,507 shares
	As of May 31, 2023	672,507 shares
(iii) Average number of shares during period
	For the three months ended August 31, 2023	10,837,693 shares
	For the three months ended August 31, 2022	10,863,037 shares

(Note) The Company has implemented an ESOP and Directors' stock compensation plan both in the form of stock benefit trusts. Accordingly, treasury shares, as stated, include Inter Action stock held by the stock benefit ESOP trust accounts and Directors' compensation stock benefit trust accounts.

• Quarterly financial results are not subject to auditing by a certified public accountant or an audit firm.
• Proper use of earnings forecasts, and other special matters
  The above forecasts of consolidated financial results are based on certain assumptions on economic situation, market trends, etc. deemed to be reasonable when the forecasts were made. Consequently, actual results may differ from the forecasts due to a variety of future factors. For details of the above forecasts, refer to"(3) Explanation of forward-looking information including consolidated earnings forecasts" under "1. Qualitative Information on Quarterly Results" (page 3) of the Attached Materials.

[Attached Materials]

Index

1. Qualitative Information on Quarterly Results…………………………………………………………………………………	2
(1) Explanation of consolidated operating results ……………………………………………………………………………	2
(2) Explanation of financial position ……………………………………………………………………………………….…	2
(3) Explanation of forward-looking information including consolidated earnings forecasts …………………………………	3
2. Quarterly Consolidated Financial Statements and Notes……………………………………………………………………	4
(1) Quarterly consolidated balance sheets …………………………………………………………………………….………	4
(2) Quarterly consolidated statements of income and consolidated statements of comprehensive income……………………	6
(Quarterly consolidated statements of income)
June 1, 2023 - August 31, 2023 ……………………………………………………………………………….………	6
(Quarterly consolidated statements of comprehensive income)
June 1, 2023 - August 31, 2023 ……………………………………………………………………………….………	7
(3) Note regarding the quarterly consolidated financial statements …………………………………………………..………	8
(Notes on premise of going concern) ………………………………………………………………………….…………	8
(Notes on significant changes in the amount of shareholders' equity) …………………………………………..………	8
(Additional information) ………………………………………………………………………………………...………	8
(Segment information) ………………………………………………………………………………………………..…	9
(Revenue recognition-related information) …………………………………………………………………………...…	11
3. Supplementary explanation of consolidated financial results for the first quarter of the fiscal year ending May 31, 2024….	12
(1) Status of orders ……………………………………………………………………………………………………………	12

- 1 -

1. Qualitative Information on Quarterly Results

1. Explanation of consolidated operating results
   Net sales in the Inter Action Group's financial results for the first three months of the consolidated fiscal year under review fell year on year. This is mainly due to sluggish sales in the Internet of things related works segment.
   Operating profit also fell year on year. This is mainly due to weak sales of high-profit products in the Internet of things related works segment.
   Note that we expect net sales in the consolidated fiscal year under review to be weighted toward the second half, and in the first three months, therefore, net sales have generally progressed as budgeted.
   As a result of these business activities, the Inter Action Group's financial results for the first three months of the consolidated fiscal year under review were as follows. Net sales fell by 8.8% to 1,740 million yen (compared with 1,907 million yen in the previous fiscal year); gross profit fell by 34.0% to 631 million yen (compared with 956 million yen in the previous fiscal year), largely due to the decrease in net sales; operating profit fell by 55.7% to 211 million yen (compared with 476 million yen in the previous fiscal year); ordinary profit fell by 53.8% to 239 million yen (compared with 519 million yen in the previous fiscal year); and profit attributable to owners of parent excluding income taxes fell by 57.2% to 150 million yen (compared with 351 million yen of profit attributable to owners of parent in the previous fiscal year).
   The overall performance of each business segment was as follows.
   (Internet of things related works)
   During the first three months of the consolidated fiscal year under review, net sales to this segment's external customers fell by 18.1% year on year to 977 million yen (compared with 1,193 million yen in the previous fiscal year), and segment profit decreased by 46.2% to 356 million yen (compared with 663 million yen in the previous fiscal year). This reflects sluggish sales of the highly profitable inspection illuminators for overseas customers, in contrast with strong sales of inspection illuminators and pupil lens modules for domestic customers.
   (Environmental energy related works)
   During the first three months of the consolidated fiscal year under review, net sales to this segment's external customers rose by 21.0% to 288 million yen (compared with 238 million yen in the previous fiscal year), and segment profit was 16 million yen (0 million yen in the previous fiscal year). This is attributable to robust sales of high-value main units in the drying deodorizer area and robust sales also of high-profit maintenance projects in the exhaust gas treatment system area.
   (Promotion business of Industry 4.0)
   During the first three months of the consolidated fiscal year under review, net sales to this segment's external customers decreased by 0.3% to 474 million yen (compared with 476 million yen in the previous fiscal year), and the segment recorded a profit of 5 million yen (an 88.5% decrease compared with 46 million yen in the previous fiscal year). This decrease, despite robust sales of precision vibration isolation systems, reflects sluggish sales of gear testing systems whose profitability is high in comparison with that of precision vibration isolation systems.
2. Explanation of financial position
   As of the end of the first quarter of the consolidated fiscal year under review, net assets amounted to 12,225 million yen, a decrease of 384 million yen compared with the end of the previous consolidated fiscal year.
   Current assets amounted to 10,938 million yen, a decrease of 358 million yen compared with the end of the previous consolidated fiscal year. This is mainly attributable to decreases respectively of 250 million yen in cash and deposits, 178 million yen in notes and accounts receivable - trade, and 223 million yen in work in progress, although there was an increase of 362 million yen in electronically recorded monetary claims - operating.
   Non-current assets amounted to 1,287 million yen, a decrease of 26 million yen compared with the end of the previous consolidated fiscal year.
   As of the end of the first quarter of the consolidated fiscal year under review, liabilities amounted to 2,199 million yen, a decrease of 278 million yen compared with the end of the previous consolidated fiscal year. This is mainly attributable to a decrease of 235 million yen in income taxes payable.
3. • 2 -