MTI : Financial Results Presentation with note for Q2 FY2023

Financial Results Briefing

for Q2 FY2023

May 12, 2023

This report contains forward-looking statements on business performance based on the judgments, assumptions, and beliefs of management using the information available at the time. Actual results may differ materially due to changes in domestic or overseas economic conditions or changes in internal or external business environments or aspects of uncertainty contained in the forecasts, latent risks or various other factors. In addition, risk and uncertainty factors include unpredictable elements that could arise from future events.

Contents

P.01 Financial Results			P.20 Approach in Q3 and beyond
	Overview for Q2 FY2023
02	Financial highlight	21	Basic policies and priority issues
03	Consolidated P/L		for FY2023
04	Consolidated SG&A	22	Cloud drug record service
06	Difference between earning	24	Maternal and child health handbook app
	forecast and the actual for Q2		+ Childcare DX services
07	Revision of earnings forecast of FY2023	31	School DX business
08	Performance by segment	34	Image of medium-term profit

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Financial Results Overview

for Q2 FY2023

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I would now like to give you an overview of the results for the second quarter of the fiscal year ending September 2023.

・Operating income: ¥(18) million

Financial highlight

• Operating income declined and was below the forecast.
  Main cause: Loss-making projects in DX support business for major companies.

・Net sales: ¥13,613 million (+¥638 million, YoY, Performance forecast comparison: +¥913 million)

(-¥617 million, YoY, Performance forecast comparison: -¥218 million)

・Ordinary income: ¥187 million (-¥105 million, YoY, Performance forecast comparison: +¥187 million)

2 The full-year forecasts are revised.

(only operating income is revised downward)

・Net sales: ¥26,800 million (Compared to the previous forecast +¥800)

・Operating income: ¥200 million	(Compared to the previous forecast -¥600)
・Ordinary income: ¥400 million	(Previous forecast unchanged)

3 Healthcare business and School DX business: Results improved as planned.

Other business: Loss-making projects in the DX support business for major companies continued being dealt with the aim of winding them down in the course of this fiscal year.

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Here are the financial highlights.

First half operating income declined and was below the forecast. This decline is mainly attributable to loss-making projects in the DX support business for major companies.

Consolidated net sales increased 4.9% year on year to 13,613 million yen, and the operating loss was 18 million yen.

Loss attributable to owners of parent came to 326 million yen.

In view of the variance between the first-half forecast and results as well as recent conditions, we are revising our full-year forecast. We are raising our net sales forecast by 800 million yen from the previous forecast, to 26,800 million yen and lowering our operating income forecast by 600 million yen from the previous forecast, to 200 million yen. Our ordinary income forecast remains the same as before.

Our main achievements in the first half are as follows.

In the healthcare business and the school DX business, results improved as planned.

In other business, we are still dealing with loss-making projects in part of the DX support business for major companies, looking to resolve this issue over the course of the current fiscal year.

I will be discussing our initiatives in each area in greater detail, later on.

Consolidated P/L

Net sales : increased

Operating income : decreased

（Unit：Mil yen）

	FY2022
	Q2
Net sales	12,975
Cost of sales	3,814
（ratio)	29.4%
Gross profit	9,160
（ratio）	70.6%
SG&A	8,561
（ratio）	66.0%
Operating income	599
（ratio）	4.6%
Ordinary income	292
（ratio）	2.3%
Profit attributable to	123
owners of parent
（ratio）	1.0%

YoY

Amount Percentage

+638 +4.9%

+666 +17.5%

(28) (0.3)%

+589	+6.9%

(617) -%

(105) (36.1)%

(449)	-%

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Q1: Posting of spot sales of the video- streaming service

Posting of spot cost of sales of the video- streaming service

Increase in outsourcing expenses. (School DX business) Increase in advertising expenses (AdGuard)

Q1: Posting of income taxes associated with the transfer of shares between Group companies

3

I would now like to discuss the consolidated P/L.

Net sales increased 4.9% year on year to 13,613 million yen.

In the content business, while the number of paying subscribers has decreased, net sales increased overall due to strong spot sales from video distribution in the subsidiary Video Market, as well as the successful performance of original comics and security-related applications. Additionally, the healthcare business and school DX business have been progressing well.

Gross profit remained stable year on year at 9,132 million yen, primarily due to an increase in the cost of sales of some DX support businesses for companies.

Operating income posted losses of 18 million yen, primarily due to an increase in selling and administrative expenses attributed to the rise in advertising and promotion expenses as well as outsourcing costs.

Ordinary income stood at 187 million yen due to the recording of equity-method investment profit of 174 million yen.

Loss attributable to owners of parent came to 326 million yen, reflecting the posting of corporate taxes associated with the transfer of shares between Group companies in the healthcare business in October 2022, which offset the recording of a gain on change in equity of 139 million yen under extraordinary income.