Startia : Summary of Consolidated Financial Results for Q1FY2022

August 10, 2022

Summary of Consolidated Financial Results

for the First Quarter Ended June 2022 [Japan GAAP]

Name of Company:

Startia Holdings, Inc.

Stock Code:

3393

Stock Exchange Listing:

Tokyo Stock Exchange

URL:

https://www.startiaholdings.com/

Representative

Title:

Representative Director and President & Group CEO

Name:

Hideyuki Hongo

Contact Person

Title:

Director, Group Operating Officer

Name:

Takao Uematsu

Tel:

[phone]

Date of filing quarterly report (tentative):

August 10, 2022

Date of commencement of dividend payment (tentative):

-

Supplementary materials for quarterly financial report:

Yes

Information meeting for quarterly financial report:

None

(Yen in millions, rounded down)

1. Consolidated financial results for the first three months ended June 30, 2022 (April 1, 2022 - June 30, 2022)

(1) Results of operations (cumulative)

(Percentage figures represent year-on-year changes)

Net sales

Operating profit

Ordinary profit

Profit (loss) attributable

to owners of

parent

Million yen

%

Million yen

%

Million yen

%

Million yen

%

Three months ended June 2022

4,635

35.0

192

-

254

-

163

-

Three months ended June 2021

3,433

24.5

(39)

-

10

-

(34)

-

Notes: Comprehensive income

First three months ended June 30, 2022:

99 million yen (yoy -%)

First three months ended June 30, 2021:

(39) million yen (yoy -%)

Profit per share

Diluted profit per share

Yen

Yen

Three months ended June 2022

18.75

-

Three months ended June 2021

(3.49)

-

Note: Diluted profit per share is not shown because there are no latent shares with a dilutive effect

(2) Consolidated financial position

Total assets

Net assets

Equity ratio

Million yen

Million yen

%

As of June30, 2022

9,970

4,242

42.5

As of March 31, 2022

11,378

4,233

37.1

Reference: Shareholders' equity

As of June 30, 2022:

4,235 million yen

As of March 31, 2022:

4,226 million yen

2. Dividends

Annual dividends

End of 1Q

End of 2Q

End of 3Q

End of FY

Total

Yen

Yen

Yen

Yen

Yen

Fiscal year ended March 2022

-

4.00

-

10.00

14.00

Fiscal year ending March 2023

-

Fiscal year ending March 2023

5.00

-

7.00

12.00

(forecast)

Notes:

1. Revisions to the most recently announced dividend forecast: None
2. Breakdown of the year-end dividend for the fiscal year ended March 2022

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Ordinary dividend: 7.00 yen

Commemorative dividend: 3.00 yen

3. Consolidated earnings forecasts for the fiscal year ending March 31, 2023 (April 1, 2022 - March 31, 2023)

(Percentage figures represent year-on-year changes)

	Net sales		Operating profit	Ordinary profit	Profit attributable to	Profit per
		owners of parent	share
	Million yen		%	Million yen	%	Million yen	%	Million yen	%	Yen
First half	8,600		23.0	270	111.7	270	(0.6)	162	(58.9)	18.56
Full year	18,000		12.4	700	103.0	700	26.4	420	(56.2)	48.12

Note: Revisions to the most recently announced sales and earnings forecasts: None

• Notes
• 1. Changes in significant subsidiaries during the first three months ended June 30, 2022(Changes in specific subsidiaries accompanied by changes in the scope of consolidation): None

Newly included:

Excluded:

1. Use of accounting methods that are specific to the preparation of the quarterly consolidated financial statements: None
2. Changes in accounting policies, changes in accounting estimates, and restatements
3. 1. Changes in accounting policies accompanying revisions in accounting standards and other regulations: None
   2. Changes other than in (a): None
   3. Changes in accounting estimates: None
   4. Restatements: None
4. Number of issued shares (common shares)
5. 1. Total number of issued shares at the end of the period (including treasury shares)

As of June 30, 2022:	10,240,400 shares	As of March 31, 2022: 10,240,400 shares
(b) Number of treasury shares at the end of the period
As of June 30, 2022:	1,511,019 shares	As of March 31, 2022: 1,511,719 shares
(c) Average number of shares during the period (quarterly consolidated cumulative period)
Period ended June 30, 2022: 8,729,267 shares	Period ended June 30, 2021: 9,888,533 shares

(Note) 1. The number of treasury shares at the end of the period includes the Company's shares held by the trust account regarding the stock benefit trust (BBT・J-ESOP) (325,900 shares for the first quarter ended June 2022 and 326,600 shares for the fiscal year ended March 2022).

• 2. As for the average number of shares during the period, for the first quarter ended June 2022, the Company's shares held by the trust account regarding the stock benefit trust (BBT・J-ESOP), totaling 326,013 shares, were included in the number of treasury shares, which were to be deducted from the calculation of the average number of shares during the period. For the first quarter ended June 2021, the Company's shares held by the trust account regarding the stock benefit trust (BBT・J-ESOP) and those held by the trust account regarding the stock benefit trust (employee stockholding association purchase-type), totaling 351,784 shares, were included in the number of treasury shares, which were to be deducted from the calculation of the average number of shares during the period.

• This quarterly earnings report is not subject to the audit by certified public accountants or auditing firms
• Explanation of the proper use of these earnings forecasts and other matters

(Note on forward-looking statements)

The forward-looking statements shown in this report are based on information currently available and certain assumptions that the Company regards as reasonable. The Company cautions that these statements do not guarantee future achievements. Actual results of operations may differ significantly from forward-looking statements for a number of reasons. Please refer to "1. Qualitative information regarding earnings for the first quarter of the fiscal year (3) Explanation of consolidated earnings forecasts and other forward-looking statements" on page 7 for the suppositions that form the assumptions for earnings forecasts and cautions concerning the use thereof.

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1. Qualitative information regarding earnings for the first quarter of the fiscal year

(1) Explanation of results of operations

During the first quarter of the fiscal year ending March 2023, economic activities in Japan remained uncertain due to the combination of the re-expansion of new coronavirus infections (COVID-19), the tapering of monetary easing in the United States and other developed countries, soaring crude oil prices, the shortages of supply of semiconductors and other products, and the strained situation in Ukraine. The future of economic activities is still uncertain.

In this business environment, there is an urgent need for management reforms using IT in the industries to which the Startia Group belongs, due to the introduction of teleworking and the progress of environmental arrangements for a digital shift to cope with COVID-19. While demand for IT-related investments increased in areas like digital transformation (DX), a cautious stance on such investments continues to be seen amid the unclear environment.

In the Digital Marketing business, the Company provides "Cloud CIRCUS," a digital marketing tool, which helps customer companies to "increase and nurture their customers," as a subscription model (recurring billing type), working to increase the number of customer acquisitions and ARR (annual recurring revenue).

In the IT Infrastructure business, the Group has been establishing solid relationships with the customer base of small and medium-size enterprises, or SMEs, and supported them to improve their productivity consistently by proposing and providing solutions to those customers. In a bid to lead their operations in a better direction, the Group uses IT technologies that cover core and indispensable facilities at offices and support for office work.

In the first quarter of the fiscal year ending March 2023, while we were affected by the partial self-restraint on economic activities due to COVID-19, customers began some business activities to cope with the situation amid the pandemic and in the era after it, and both the Digital Marketing business and the IT Infrastructure business increased sales from the same period of the previous year. Particularly, in the IT Infrastructure business, sales of network-related equipment, one of its main products, kept performing favorably, leading to a significant increase in consolidated operating profit for the first quarter of the current fiscal year.

As a result, sales in the first quarter of the current fiscal year totaled 4,635,328 thousand yen (up 35.0% from a year before), operating profit of 192,779 thousand yen (operating loss of 39,695 thousand yen a year before), ordinary profit of 254,292 thousand yen (ordinary profit of 10,909 thousand yen a year before), and net profit attributable to shareholders of the parent of 163,632 thousand yen (net loss attributable to shareholders of the parent of 34,539 thousand yen a year before).

Business segment results were as follows.

(Digital Marketing)

In the Digital Marketing business, the Group provides "Cloud CIRCUS*," a group of SaaS tools that help solve issues in five areas to increase the number of customers: transmission of information, attracting customers, enhancing experienced value of customers, fostering potential customers and turning them into actual customers, and preventing cancellations of contracts and increasing repeated customers. Cloud Circus is an easy-to-use tool that everyone can start and use quickly even if he/she engages in digital marketing for the first time ever. We also provide freemium plans for the service. On top of Cloud Circus, we support marketing consulting and operations

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by customers based on our expertise for the management of advertising and establishment of websites. By providing comprehensive support for the evolution of marketing power, together with the tools, we respond to the potential need for shifting to digitalization and provide multiple services to a single customer.

In the first quarter of the fiscal year ending March 2023, we started offering plans for the online exhibition system as "CrowdBooth," we had acquired in the previous fiscal year. For the "BowNow" MA tool, we managed to expand the number of free users further as the distribution of e-mail became available in its free plan. Previously, we established and promoted an organizational structure under a Sales-Led Growth (SLG) strategy led by the sales team. However, as a result of the expansion of these tools and the increase in potential customers, we have started to build a new organizational structure by combining the SLG strategy with a Product-Led Growth (PLG) strategy, led by the product team, in the current fiscal year. By doing so, we are working to establish a customer acquisition pipeline and aim to obtain high unit-price orders with combined products, while we increase customers for single products reducing the unit cost for acquiring them. In the first quarter of the current fiscal year, we saw a slowdown in MRR (monthly recurring revenue) in SaaS of Cloud CIRCUS as a result of focusing on the launch of the new organizational structure as planned, but sales increased year on year. On the other hand, the Company has been investing in new growth businesses targeting corporate customers, that provides a one-stop support service for their projects utilizing NFT (Non-Fungible Token), a technology that proves the irreplaceability and uniqueness of a product by using blockchain technology.

* Cloud CIRCUS

Area of Issue	Tool to Be Provided	Service
	ActiBooK	E-book production software, video sharing
	BlueMonkey	WebCMS & generating owned media
Transmission of information	AppGoose	Operation of applications
	Plusdb	Establishing databases
	creca	Producing landing pages for smartphones
Consulting for attracting
customers and running	－	Consulting for marketing and for running ads
advertisements
	COCOAR	AR production software
Experience	LESSAR	AR production software for web browsers
	CrowdBooth	Online exhibition system
Enhancing experienced value of	IZANAI	Chatbot
customers
Fostering potential customers
and turning them into actual	BowNow	Marketing automation
customers
Acquisition of repeaters &	Fullstar	Customer success management
prevention of cancellations

Consequently, segment sales in the first quarter of the fiscal year ending March 2023 totaled 693,577 thousand yen (up 16.5% from a year beffore) , and the segment loss (operating loss) of 95,869thousand yen compared with the segment loss (operating loss) of 87,890 thousand yen in the same period in the previous year.

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(IT Infrastructure)

In the IT Infrastructure segment, the Group is in charge of the sale, construction or maintenance of information and communication equipment such as MFPs (multi-function printers), UTM (Unified Threat Management) equipment, network equipment and business phones. It also provides consistent SI services from installing servers to system operation and maintenance as well as maintenance of equipment. In addition, it provides "RoboTANGO," an original RPA (Robotic Process Automation) solution tool to automate back-office operations, as well as AI-OCR and an electronic signature tool.

In the first quarter of the current fiscal year, in addition to promoting the expansion of the customer base through mergers and acquisitions, the accumulation of customer and asset information through a customer and sales management system has enabled the visualization of information, which has allowed us to conduct cross-selling of products and services, and their replacement at the appropriate time. Furthermore, the systematic development of the customer approach mechanism through marketing has enabled the development of a customer follow-up system both by the sales staff, and by the Wakayama Contact Center and Customer Success (CS). During the previous fiscal year, we established the structure composed of organization and system, in which not only the sales staff, but also the Wakayama Contact Center, and Customer Success (CS) can handle the series of processes from an approach, negotiation/proposal, order receipt, to delivery, resulting in an improvement in the sales turnover rate and enabling us to get to a great start in the first quarter of the current fiscal year. In particular, sales and profit increased due to strong sales of network equipments, centering on UTM (Unified Threat Management) instruments, information security products that meet the needs for information security measures of small and medium-sized enterprises. Sales of MFPs also remained firm, mainly through partner sales, resulting in an increase in sales and profit.

Consequently, segment sales totaled 3,941,717 thousand yen (up 38.9% from a year before) and the segment profit (operating profit) of 277,528 (up 278.0% from a year before).

(CVC)

The CVC business conducted no fresh investment during the period.

Consequently, the segment reported no sales and the segment loss (operating loss) of 249 thousand yen compared with the segment profit (operating profit) of 65 thousand yen in the same period in the previous year.

1. Explanation of financial condition
   Total assets were 9,970,416 thousand yen at the end of the first quarter, 1,408,256 thousand yen less than at the end of the previous fiscal year. This was attributable primarily to the decreases of 635,640 thousand yen in cash and deposits, 453,563 thousand yen in notes and accounts receivable - trade and contract assets, and 352,716 thousand yen in other assets, despite the increase of 61,299 thousand yen in inventories.
   Liabilities were 5,728,350 thousand yen at the end of the first quarter, 1,417,203 thousand yen less than at the end of the previous fiscal year. This was attributable primarily to the decreases of 560,307 thousand yen in income taxes payable, 463,741 thousand yen in accounts payable-trade, 118,260 thousand yen in provision for bonuses and 150,099 thousand yen in long-term borrowings.
   Net assets were 4,242,066 thousand yen at the end of the first quarter, 8,946 thousand yen more than at the end of the previous fiscal year. This was attributable primarily to net profit attributable to shareholders of the parent of

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