Step : Non-consolidated Financial Results for the First Quarter of the Fiscal Year Ending September 30, 2022

Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.

Non-consolidated Financial Results

for the First Quarter of the Fiscal Year Ending September 30, 2022

[Japanese GAAP]

January 27, 2022

Company name: STEP CO.,LTD.

Stock exchange listing: Tokyo Stock Exchange

Stock code: 9795

URL: https://www.stepnet.co.jp/

Representative: Yousuke Endou, Representative Director and President

Contact: Noriaki Arai, Director and Managing Executive Officer

Phone: [phone]

Scheduled date of filing quarterly securities report: February 1, 2022

Scheduled date of commencing dividend payments:

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Availability of supplementary briefing material on quarterly financial results： None

Schedule of quarterly financial results briefing session： None

(Amounts of less than one million yen are rounded down.)

1. Non-consolidated Financial Results for the First Quarter of the Fiscal Year Ending September 30, 2022

(October 1, 2021 to December 31, 2021)

(1) Operating Results

(% indicates changes from the previous corresponding period.)

Net sales

Operating profit

Ordinary profit

Profit

For the first quarter ended

Million yen

%

Million yen

%

Million yen

%

Million yen

%

December 31, 2021

3,432

7.4

1,096

14.6

1,112

13.5

767

13.7

December 31, 2020

3,197

1.5

956

(0.8)

979

0.0

674

0.0

Profit per share

Diluted earnings

per share

For the first quarter ended

Yen

Yen

December 31, 2021

46.48

―

December 31, 2020

40.86

―

(2) Financial Position

Total assets

Net assets

Equity ratio

Net assets per share

Million yen

Million yen

%

Yen

As of December 31, 2021

26,965

23,227

86.1

1,407.28

As of September 30, 2021

26,790

22,874

85.4

1,385.83

(Reference) Equity: As of December 31, 2021: ¥ 23,227million

: As of September 30, 2021: ¥ 22,874million

2. Dividends

Annual dividends

1st

2nd

3rd

Year-end

Total

quarter-end

quarter-end

quarter-end

Yen

Yen

Yen

Yen

Yen

Fiscal year ended September 30, 2021

―

20.00

―

25.00

45.00

Fiscal year ending September 30, 2022

―

Fiscal year ending September30, 2022

23.00

―

23.00

46.00

(Forecast)

(Note) Revision to dividend forecast announced most recently: None

3. Non-consolidated Financial Results Forecast for the Fiscal Year Ending September 30, 2022 (October 1, 2021 to September 30, 2022)

(% indicates changes from the previous corresponding period.)

	Net sales		Operating profit	Ordinary profit	Profit		Profit per share
	Million yen		%	Million yen	%	Million yen	%	Million yen		%	Yen
First half	6,857		8.7	1,995	16.8	2,024	15.7	1,362		13.0	82.52
Full year	13,644		7.1	3,644	13.6	3,692	12.2	2,501		10.5	151.52

(Note) Revisions from financial results forecasts announced most recently: None

Since the Company has applied the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020), etc. from the beginning of the fiscal year ending September 2022, the above forecasts are based on figures after the application of said accounting standard, etc. The rate of change from the previous fiscal year and the rate of change from the same quarter of the previous fiscal year were calculated based on the assumption that these accounting standard, etc. are applied in the fiscal year ended September 2021.

*Note

1. Application of special accounting treatment for the preparation of the quarterly financial statements: None
2. Changes in accounting policies, changes in accounting estimates and retrospective restatement

1. Changes in accounting policies due to the revision of accounting standards: Yes
2. Changes in accounting policies other than 1) above: None
3. Changes in accounting estimates: None
4. Retrospective restatement: None

1. Total number of issued shares (common shares)

1. Total number of issued shares at the end of the period (including treasury shares):

As of December 31, 2021: 16,670,000 shares

As of September 30, 2021: 16,670,000 shares

1. Total number of treasury shares at the end of the period: As of December 31, 2021: 164,583 shares
   As of September 30, 2021: 164,283 shares
2. Average number of shares during the period:

As of December 31, 2021: 16,505,433 shares

As of December 31, 2020: 16,506,017 shares

*These quarterly financial results are not subject to auditing by certified public accountants or audit firms.

*Explanation on the proper use of financial results forecast and other notes.

The statements regarding forecast of financial results in this report are based on the information that is available to the Company, as well as certain assumptions that are deemed to be reasonable by management, and they are not meant to be a commitment by the Company. Therefore, there might be cases in which actual results differ materially from forecast values due to various factors. For the suppositions that from the assumptions for earnings forecasts and cautions concerning the use thereof, please refer to "1.Qualitative Information on the Quarterly Financial Results (3) Financial Forecast for 2022 " on page 4 of this report.

Table of Contents of Appendix

1. Qualitative Information on the Quarterly Financial Results ……………………………………………………………2

1. Explanation of Operating Results ……………………………………………………………………………………2
2. Explanation of Financial Condition …………………………………………………………………………………3
3. Financial Forecast for 2022 …………………………………………………………………………………………4

1. Quarterly Financial Statements and Principal Notes ……………………………………………………………………5

1. Quarterly Balance sheets ………………………………………………………………………………………………5
2. Quarterly Statements of income ………………………………………………………………………………………7
3. Notes to Quarterly Financial Statements ……………………………………………………………………………8
   (Notes on going concern assumption) …………………………………………………………………………………8
   (Notes on significant changes in the amount of shareholders'equity) ………………………………………………8
   (Changes in accounting policies) ……………………………………………………………………………………8
   (Segment information, etc.) ……………………………………………………………………………………………8

1. Supplementary Information ………………………………………………………………………………………………8

1. Results of production and orders received …………………………………………………………………………… 8
2. Sales results ……………………………………………………………………………………………………………9

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1. Qualitative Information on the Quarterly Financial Results

(1) Explanation of Operating Results

In the first quarter (October to December) of the current fiscal year, we were in the second half of the academic year starting in April, and fluctuations in the number of students are relatively low. In the first quarter of the current fiscal year, the Company's total number of students in the high school entrance examination course (for elementary and junior high school students) and university entrance examination course (for high school students) combined was 31,690 students on average (up 9.9% from the same quarter of the previous fiscal year), showing steady growth.

The number of students has been increasing steadily since the fiscal year ended September 2020, which was greatly affected by COVID-19, through the fiscal year ended September 2021. However, since the beginning of January, COVID-19 infections have been spreading rapidly along with the spread of the Omicron variant, and we will continue to prepare for various contingencies, including an impact on our future business performance, while thoroughly implementing infection control measures.

The current public high school entrance examinations in Kanagawa Prefecture, which were drastically changed nine years ago, initially directed public attention to the changes in the system, such as the complication of the selection system and the introduction of a unique selection test called Tokushoku Kensa test, mainly for the so-called top schools. However, as the examination progressed, the questions on the academic achievement test and especially those on Tokushoku Kensa test became more difficult, and the public entrance examination in Kanagawa Prefecture has become an entrance examination in which the students' abilities on the day of the examination are more important. Popular schools are becoming more difficult to enter, and the entrance examination system is becoming more and more stressful for students. As a result, in the high school entrance examination course (for elementary and junior high school students), the percentage of students in the upper grades attending a cram school is on the rise, and an increasing number of schools see classes for 3rd junior high school students, who will take entrance examinations, and 2nd junior high school students fully attended. Thus, in areas where the classes for the upper grades are still fully attended, the enrollment of 1st junior high and elementary school students is being promoted.

In February during the second quarter, public high schools in Kanagawa Prefecture and private and national high schools in the Tokyo Metropolitan Area hold entrance examinations and announce passers all at once. The success of Step students in these entrance examinations will have a significant impact on the enrollment of students over the next year. In the previous term, we were number one for three consecutive years in terms of the number of students accepted to Yokohama-Suiran Senior High School, a prominent and influential high school in the Yokohama- Kawasaki area, and the number of students accepted to top public schools in Yokohama City. In the current fiscal year, we will continue to improve our academic guidance and provide highly accurate career guidance based on in- depth data in order to increase the track record of passing exams.

In the university entrance examination course (for high school students), we continue to strive to strengthen our system to meet the needs of high school students who want to enrich their multifaceted high school life, including club activities and school events, and pass the entrance examination for the university of their choice. For the entrance examination in 2021, we were able to significantly increase the track record of passing exams in the face of the introduction of a new entrance examination system (the Common Test for University Admissions) amid the COVID- 19 pandemic. In Kanagawa Prefecture, there has been a notable number of closures of major prep schools, but we

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will continue to proactively review our curriculum and other instructional systems to further enhance our teaching content. In addition, we will further strengthen our position as one of the leading live cram schools in the prefecture, focusing on public high school students.

In the after-school care course, the STEP Kids network was launched in March 2020 with the opening of two new schools: STEP Kids Tsujido Classroom (Tsujido Station on the JR Tokaido Line) and STEP Kids Chigasaki Classroom (Chigasaki Station on the JR Tokaido Line). In the first year of the two new schools, we were only able to enroll students in elementary school grades 1 and 2, but we added grade 3 last spring, and we will add grade 4 this spring. The number of students is expected to increase further as we will start accepting applications for all grades.

Currently, STEP Kids offer 14 annual programs: Science, English/English Proficiency Test, Arithmetic, Arithmetic Thinking, English Conversation, Language, Introductory Liberal Arts, Programming, Dance, Shogi (Japanese chess), Music, Physical Education, Sign Language, and Hyakunin Isshu (traditional Japanese card game). While refining this rich and diverse content, the three schools will accumulate and share their operational know-how to build a foundation for future expansion throughout the prefecture.

During the current fiscal year, three new schools in the high school entrance examination course (for elementary and junior high school students) are scheduled to open in March. Musashi-Nakahara School (Musashi-Nakahara Station on the JR Nambu Line, Nakahara-ku, Kawasaki City), Musashi-Shinjo School (Musashi-Shinjo Station on the JR Nambu Line, Nakahara-ku, Kawasaki City), and Mukogaoka-Yuen School (Mukogaoka-Yuen Station on the Odakyu Line, Tama-ku, Kawasaki City) will be all opened in the Kawasaki area, which will be the center of our dominant development in the future. Mukogaoka-Yuen School will be the third school along the Odakyu Line in Kawasaki City, following Shin-yurigaoka School and Ikuta School, which are both attracting students healthily. Musashi-Nakahara School and Musashi-Shinjo School will be opened in neighboring areas along the JR Nambu Line. This area is home to Nishi-Nakahara Junior High School, the largest public junior high school in the prefecture in terms of the number of students (1,296 students as of May 1, 2021), as well as other junior high schools with some of the largest student populations in the prefecture, and our goal is to capture a large share of the market here.

As a result, net sales in the first quarter of the current fiscal year were 3,432 million yen (up 7.4% year-on-year), operating profit was 1,096 million yen (up 14.6% year-on-year), ordinary profit was 1,112 million yen (up 13.5% year-on-year), and profit was 767 million yen (up 13.7% year-on-year).

1. Explanation of Financial Condition (Assets)

Total assets at the end of the first quarter of the current fiscal year were 26,965 million yen, up 175 million yen from the end of the previous fiscal year.

Current assets increased 153 million yen from the end of the previous fiscal year to 9,121 million yen, mainly owing to an increase in accounts receivable-trade.

Non-current assets increased 21 million yen from the end of the previous fiscal year to 17,844 million yen, mainly as a result of an increase in deferred tax assets.

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