Orchestra : Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending December 31, 2021

Consolidated Financial Results

for the Third Quarter of the Fiscal Year Ending December 31, 2021

(Nine Months Ended September 30, 2021)

		[Japanese GAAP]
		November 12, 2021
Company name: Orchestra Holdings Inc.	Listing: Tokyo Stock Exchange, First Section
Stock code:	6533	URL: https://orchestra-hd.co.jp/
Representative:	Yoshiro Nakamura, President and Representative Director
Contact:	Naomi Iyogi, Director and CFO
	Tel: [phone]

Scheduled date of filing of Quarterly Report:	November 12, 2021
Scheduled date of payment of dividend:	-
Preparation of supplementary materials for quarterly financial results: Yes
Holding of quarterly financial results meeting:	None

(All amounts are rounded down to the nearest million yen)

1. Consolidated Financial Results for the First Nine Months of 2021 (January 1 to September 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
	Million yen		%	Million yen	%	Million yen	%	Million yen	%
Nine months ended Sep. 30, 2021	11,887		39.9	906	94.5	918	98.8	519	87.1
Nine months ended Sep. 30, 2020	8,494		26.4	466	26.0	462	22.7	277	31.9

Note: Comprehensive income (millions of yen)

Nine months ended Sep. 30, 2021:	741	(up 81.8%)
Nine months ended Sep. 30, 2020:	407	(up 93.7%)

	Basic earnings per	Diluted earnings per share
	share
	Yen	Yen
Nine months ended Sep. 30, 2021	53.06	52.90
Nine months ended Sep. 30, 2020	30.33	28.30

(2) Consolidated financial position

	Total assets	Net assets	Equity ratio
	Million yen	Million yen	%
As of Sep. 30, 2021		8,822	4,749	47.0
As of Dec. 31, 2020		4,689	1,885	38.9
Reference: Shareholders' equity (millions of yen)	As of Sep. 30, 2021: 4,143	As of Dec. 31, 2020: 1,823

2. Dividends

			Dividends per share
	1Q-end	2Q-end	3Q-end		Year-end	Total
	Yen	Yen	Yen		Yen	Yen
2020	-	0.00	-		7.00	7.00
2021	-	0.00	-
2021 (forecast)					8.00	8.00

Note: Revisions to the most recently announced dividend forecast: None

3. Consolidated Forecast for 2021 (January 1 to December 31, 2021)

(Percentages represent year-on-year changes)

	Net sales		Operating profit	Ordinary profit	Profit attributable to	Basic earnings per
		owners of parent	share
	Million yen		%	Million yen	%	Million yen		%	Million yen	%	Yen
Full year	15,620		32.1	1,131	64.8	1,124		64.6	702	61.2	71.69
Note: Revisions to the most recently announced consolidated forecast: None

* Notes

(1) Changes in significant subsidiaries during the period (change in scope of consolidation): None

Newly added: -

Excluded: -

1. Application of special accounting methods for presenting quarterly consolidated financial statements: None
2. Changes in accounting policies and accounting-based estimates, and restatements
3. 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-based estimates: None
   4. Restatements: None
4. Number of shares issued (common stock)
5. 1. Number of shares issued at the end of the period (including treasury shares)

As of Sep. 30, 2021:	9,793,600 shares	As of Dec. 31, 2020:	9,789,600 shares
2) Number of treasury shares at the end of the period
As of Sep. 30, 2021:	97 shares	As of Dec. 31, 2020:	97 shares
3) Average number of shares during the period
Nine months ended Sep. 30, 2021:	9,791,745 shares	Nine months ended Sep. 30, 2020:	9,157,012 shares

• The current financial report is not subject to quarterly review by certified public accountants or auditing firms.
• Cautionary statement with respect to forward-looking statements, and other special items
  Forecasts of future performance in this document are based on assumption judged to be valid and information currently available to the Company's management, but are not promises by the Company regarding future performance. Actual results may differ materially from the forecasts for a number of reasons. Please refer to "1. Qualitative Information on Quarterly Consolidated Financial Performance, (3) Explanation of Consolidated Forecast and Other Forward-looking Statements" on page 3 for forecast assumptions and notes of caution for usage.

	Orchestra Holdings Inc. (6533) Financial Results for the Third Quarter of 2021
Contents of Attachments
1. Qualitative Information on Quarterly Consolidated Financial Performance	2
(1)	Explanation of Results of Operations	2
(2)	Explanation of Financial Position	3
(3)	Explanation of Consolidated Forecast and Other Forward -looking Statements	3
2. Quarterly Consolidated Financial Statements and Notes	4
(1)	Quarterly Consolidated Balance Sheet	4
(2)	Quarterly Consolidated Statements of Income and Comprehensive Income	5
(3)	Notes to Quarterly Consolidated Financial Statements	7
	Going Concern Assumption	7
	Significant Changes in Shareholders' Equity	7
	Segment and Other Information	7
	Subsequent Events	9

1

Orchestra Holdings Inc. (6533) Financial Results for the Third Quarter of 2021

1. Qualitative Information on Quarterly Consolidated Financial Performance

(1) Explanation of Results of Operations

The shortage of IT professionals in Japan is becoming increasingly severe as progress continues in the IT sector and Japan's population ages and declines. According to an IT Professional Supply and Demand Survey conducted for the Ministry of Economy, Trade and Industry, Japan will have a shortage of about 450,000 IT engineers by 2030.

As the digital transformation (DX) advances, an increasing number of companies are adopting a "cloud first" strategy for improving productivity and the efficiency of business processes. In addition, more companies are utilizing public cloud services to solve urgent business process issues involving telework, stre ngthening digital business activities and other measures in response to the pandemic. Japan 's public cloud service market is expected to grow by 20.3% in 2021 to 1,508.7 billion yen. Furthermore, this market is forecast to grow about 130% to reach 2,913.4 billion yen by 2025, in an annual average growth rate of 18.4% between 2020 to 2025, according to the Japan Public Cloud Services Market Forecast by Service Segment 2021-2025 of International Data Corporation Japan.

In the digital marketing sector, internet advertising in Japan increased 5.9% to 2,229.0 billion yen in 2020 according to Dentsu Inc. There was a brief decline in internet advertising because of the pandemic, but this category subsequently recovered faster than other advertising media did as the internet category continued to grow. The market for programmatic advertising, which is the primary service of the Orchestra Group, increased 9.7% in 2020 to 1,455.8 billion yen according to Dentsu as this category continued to grow even during the pandemic. We believe that the digitalization of the advertising business will continue.

In the digital transformation business, we are continuing to make progress with making this a source of growth for the Orchestra Group. We are strengthening capabilities in the cloud integration sector and recruiting and training people to build a stronger infrastructure for technology and product development programs. In the digital marketing business, sales activities aimed at growth are continuing with emphasis on programmat ic advertising, the key service of this business. In addition, we strengthened the framework for providing assistance for the overall optimization of marketing activities, including support involving marketing automation and customer relationship management. In other businesses, there were promotions to attract new users in the platform business and investments for the growth of new businesses.

In the first three quarters of 2021, net sales increased 39.9% year on year to 11,887 million yen. Operating profit increased 94.5% to 906 million yen, ordinary profit increased 98.8% to 918 million yen, and profit attributable to owners of parent increased 87.1% to 519 million yen.

Business segment performance was as follows:

To more appropriately disclose the results of operations of the reportable segments, beginning with the first quarter of 2021, the method for allocating some expenses to individual segments has been changed to a standard that more accurately reflects the actual operations of each segment. Earni ngs and losses in the first three quarters of 2020 are also based on this revised allocation method.

1) Digital Transformation Business

Since the launch of this business, we have been using M&A and the recruitment of IT personnel in order to build a larger and stronger infrastructure for developing technologies and products. The demand for IT is increasing as the utilization of IT becomes more diverse and advanced. By targeting this demand, this business steadily received orders for cloud integration, the development of web systems and smartphone apps, and other services.

As a result, sales in the first three quarters were 3,017 million yen, up 23.0% year on year and segment profit (operating profit) increased 65.8% to 330 million yen.

2) Digital Marketing Business

As the internet advertising market continues to grow steadily, this business received a larger volume of orders from existing customers as well as orders from new customers, chiefly in the core programmatic advertising

2

Orchestra Holdings Inc. (6533) Financial Results for the Third Quarter of 2021

category.

As a result, sales were 8,438 million yen, up 48.2% year on year and segment profit (operating profit) increased 69.3% to 1,257 million yen.

3) Others

The platform business, which is mainly the Urara Chat Fortune Teller app, is the main component of this sector. Other activities are the development and sale of Skill Navi which is a comprehensive human resources management system for companies and other activities involving new businesses.

As a result, sales were 485 million yen, up 34.0% year on year and segment profit (operating profit) was 20 million yen, compared with a loss of 9 million yen one year earlier.

(2) Explanation of Financial Position

Assets

Total assets increased 4,132 million yen from the end of 2020 to 8,822 million yen at the end of the third quarter of 2021. This was mainly due to increases of 3,129 million yen in cash and deposits, 555 million yen in notes and accounts receivable-trade and 311 million yen in investment securities.

Liabilities

Total liabilities increased 1,268 million yen from the end of 2020 to 4,072 million yen. This was mainly due to a decrease of 208 million yen in borrowings, and increases of 734 million yen in income taxes payable and 487 million yen in accounts payable-trade.

Net assets

Net assets increased 2,864 million yen from the end of 2020 to 4,749 million yen. This was mainly due to increases of 1,670 million yen in capital surplus due to sales of part of shares of consolidated subsidiary Sharing Innovations Inc. and 450 million yen in retained earnings due to recording of profit attributable to owners of parent.

(3) Explanation of Consolidated Forecast and Other Forward -looking Statements

There are no revisions to the consolidated forecasts for 2021 announced on September 21, 2021 because the pandemic had only a negligible effect during the first three quarters on all businesses of the Orchestra Group.

However, there is a possibility that the pandemic will have a significant effect on business operations in many ways. Orchestra Holdings will continue to monitor the effects of the pandemic on business operations. An announcement will be made promptly if there is a need to revise the forecasts.

3