Strike : ［Delayed］Non-Consolidated Financial Results For the Nine Months Ended May 31, 2021

July 13, 2021 None Available

No physical session planned (video of briefing session to be distributed)

	Non-Consolidated Financial Results
	For the Nine Months Ended May 31, 2021
	[Japanese GAAP]
Company name:	Strike Co., Ltd.
Stock exchange listing: First Section, Tokyo Stock Exchange
Code number:	6196
URL:	https://www.strike.co.jp/
Representative:	Kunihiko Arai, President and CEO
Contact:	Koichi Nakamura, Director, Executive Officer and CFO
Phone:	[phone]

Scheduled date of filing quarterly securities report: Scheduled date of commencing dividend payments:

Availability of supplementary briefing material on quarterly financial results: Schedule of quarterly financial results briefing session:

MEMBERSHIP

June 30, 2021

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

1. Financial Results for the Nine Months Ended May 31, 2021 (September 1, 2020 to May 31, 2021)

(1) Operating Results

(Percentages indicate year-on-year change.)

	Net sales		Operating profit			Ordinary profit		Profit
Nine months ended	Millions of yen		%	Millions of yen		%		Millions of yen		%		Millions of yen	%
May 31, 2021	5,597		12.4	2,035		-4.5		2,038		-4.3		1,371	-12.4
May 31, 2020	4,979		45.9	2,130		77.6		2,130		77.5		1,565	95.4
	Basic earnings	Diluted earnings
	per share		per share
Nine months ended			Yen			Yen
May 31, 2021			71.79			71.38
May 31, 2020			81.96			81.55
(2) Financial Position
	Total assets	Net assets				Equity ratio
	Millions of yen	Millions of yen					%
As of May 31, 2021			9,016			8,049					89.2
As of August 31, 2020			9,045			7,091					78.3
(Reference) Equity: As of May 31, 2021: ¥8,046 million
As of August 31, 2020: ¥7,087 million
2. Dividends
								Annual dividends
				1st		2nd			3rd			Fiscal		Total
				quarter-end	quarter-end	quarter-end	year-end
				Yen				Yen		Yen			Yen		Yen
Fiscal year ended August 31, 2020		―			0.00		―		24.00		24.00
Fiscal year ending September 30, 2021		―			0.00		―
Fiscal year ending September 30, 2021 (forecast)									27.00		27.00

(Note) Changes in dividend forecast subsequent to most recent announcement: None

3. Earnings Forecasts for the Fiscal Year Ending September 30, 2021 (September 1, 2020 to September 30, 2021)

(Percentages indicate year-on-year change.)

Net sales

Operating profit

Ordinary profit

Profit

Basic earnings per

share

Millions of yen

%

Millions of yen

%

Millions of yen

%

Millions of yen

%

Yen

Full year

8,368

―

3,081

―

3,083

―

2,069

―

108.35

(Note) Changes in earnings forecasts subsequent to most recent announcement: None

Note: Due to a change in fiscal year-end, the fiscal year ending September 30, 2021 is a 13-month period, from September 1, 2020 to September 30, 2021.

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Notes:

1. Application of special accounting treatment in preparing the quarterly financial statements: None
2. Changes in accounting policies, changes in accounting estimates, and retrospective restatement
3. 1. Changes in accounting policies due to the revision of accounting standards: None
   2. Changes in accounting policies other than 1) above: None
   3. Changes in accounting estimates: None
   4. Retrospective restatement: None
4. Total number of issued shares (common shares)
5. 1. Total number of issued shares at the end of the period (including treasury shares):

As of May 31, 2021: 19,354,200 shares

As of August 31, 2020: 19,354,200 shares

1. Total number of treasury shares at the end of the period: As of May 31, 2021: 231,983 shares
   As of August 31, 2020: 250,183 shares
2. Average number of shares outstanding during the period:

For the Nine months ended May 31, 2021: 19,111,865 shares

For the Nine months ended May 31, 2020: 19,104,111 shares

• The quarterly financial statements are outside the scope of quarterly review by a certified public accountant or auditing firm.
• Explanation of the proper use of earnings forecasts and other notes

The earnings forecasts and other forward-looking statements herein are based on information currently available to the Company and certain assumptions deemed reasonable by the Company, and are not intended to be construed as assurance that they will be accomplished in the future. Actual results may differ significantly from these forecasts due to a wide range of factors.

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Contents of Attached Materials
1. Qualitative Information on Quarterly Financial Results......................................................................................................	4
(1)	Explanation of Business Results ..................................................................................................................................	4
(2)	Explanation of Financial Condition ...............................................................................................................................	5
(3)	Explanation of Earnings Forecasts and Other Forward-Looking Information ...............................................................	5
2. Quarterly Financial Statements and Primary Notes...........................................................................................................	6
(1)	Balance Sheet ..............................................................................................................................................................	6
(2)	Statement of Income ....................................................................................................................................................	7
(3)	Notes to the Quarterly Financial Statements ................................................................................................................	8
(Notes on going concern assumption)............................................................................................................................	8
(Notes in the event of significant changes in shareholders' equity) ................................................................................	8

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1. Qualitative Information on Quarterly Financial Results

(1) Explanation of Business Results

During the first nine months of the fiscal year ending September 30, 2021, the Japanese economy faced severe conditions due to impact from the COVID-19 pandemic. Economic measures implemented by the Japanese government have led to temporary recovery, but the appearance of COVID-19 variants has also resulted in the virus's further spread, and the economic outlook remains uncertain as the third state of emergency has been declared in parts of Japan.

Strike operates in an M&A market that involves small and medium-sized enterprises (SMEs) and is currently on a medium- to long-term growth path thanks in part to the effective implementation of proactive measures by the Japanese government to address SME owners who are struggling to find successors. According to the "2021 White Paper on Small and Medium Enterprises in Japan," approximately 60% of the 49,000 companies that were shuttered or dissolved in 2020 had reported profits during their most recent financial years. This underlines the importance of facilitating a smooth passage of business into the hands of a subsequent generation of motivated managers to avoid squandering precious management resources for lack of appropriate successors. In April 2021, the Small and Medium Enterprise Agency formulated its "Promotion Plan for M&A among Small and Medium-sized Enterprises" to promote improved production through expansion in the scales of SMEs and encourage the establishment of businesses through the acquisition of third-party management resources. The formulation of this plan demonstrates that efforts to promote M&A among SMEs are underway in both the public and private sectors. Moving forward, M&A will likely play an increasingly prominent role as a solution for management issues facing SMEs.

Against this backdrop, while making effort to prevent the spread of COVID-19, we worked to attract new customers and close deals by hosting online seminars and making use of meetings via online conferencing systems. Our online seminars are designed to unearth a wide range of M&A needs, with different monthly themes, such as seminars for specific industries or seminars for startups. Owing to these efforts, the third state of emergency did not have a large impact on our sales activities. However, the COVID-19 pandemic's prolonged spread has had an impact on the operating results of a growing number of SMEs. This trend has also had an effect on our M&A negotiations, causing an ongoing increase in the number of projects (especially small-scale projects) that require relatively long lengths of time to work out terms and search for appropriate matches. Additionally, we have experienced difficulties in selling businesses according to desired terms, primarily in cases of contracts that we acquired prior to the start of the pandemic. Consequently, we encountered more sale cancellations than we had initially expected. On the other hand, we have also achieved steady progress through many large M&A deals despite incurring impact on business performance, and have consequently seen a rise in sales generated per deal closed.

On the sales front, the Company strengthened its M&A support system through collaboration. We accepted personnel from partner financial institutions and trained them so that they would be able to execute M&A operations with greater effectiveness once they return to their respective companies.

In terms of recruitment, we actively strove to add new employees with the goal of expanding our business performance and successfully recruited 37 new M&A consultants during the first nine months of the fiscal year under review.

As a result, during the nine months ended May 31, 2021, there were 99 deals closed (Note 1) (versus 97 a year ago), and 190 contracts closed (Note 2) (versus 189). We closed 11 large M&A deals (generating ¥100 million or more in sales per deal) (versus 12 a year ago). Additionally, we accepted 285 new contracts (Note 3) (versus 254 a year ago).

(Note 1) Number of deals closed:

Number M&A transactions in which Strike provides brokerage or advisory services (i.e., number of deals). (Note 2) Number of contracts closed:

Number of contracts on closed M&A deals in which Strike provides brokerage or advisory services (i.e., number of companies). In brokerage services, each deal counts as two contracts (one for the seller and one for the buyer), while in advisory services, each deal counts as one contract.

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(Note 3) New contracts:

Number of new brokerage service contracts signed with sellers (or in the case of advisory services, contracts signed and services effectively commenced).

While the number of deals closed was essentially flat year on year, net sales rose to ¥5,597 million, up 12.4% year on year, thanks to an increase in sales generated per deal closed. Cost of sales grew 21.9% year on year to ¥2,073 million due in part to a rise in incentives paid that accompanied the increase in sales, an uptick in introduction fees paid in connection with new contracts, and expansion in personnel expenses caused by the addition of new M&A consultants. SG&A expenses climbed to ¥1,489 million, up 29.8% year on year, due primarily to growth in recruiting expenses caused by the active employment of consultants, an upturn in advertising expenses stemming from a rise in the number of seminars held, an increase in general overhead expenses resulting from sales activity enhancement, and a rise in rent expenses on land and buildings caused by the relocation of our headquarters. Consequently, operating profit fell 4.5% year on year to ¥2,035 million. Ordinary profit came to ¥2,038 million, down 4.3% year on year. In addition, whereas the Company booked a ¥225 million gain on sale of investment securities as extraordinary income a year ago, the absence of that extraordinary income in the nine months ended May 31, 2021 resulted in bottom-line profit of ¥1,371 million, down 12.4% year on year.

Net sales, the number of deals closed, contracts closed, and new contracts recorded during the period under review, as well as the corresponding targets we plan to achieve for the full year, are as follows:

	Cumulative Q3	Cumulative Q3	FY09/21 (target)	Achievement of the
	FY09/21 (actual)	FY09/21 (target)	full-year target
Number of deals closed	99	134	191	51.8%
Number of contracts closed	190	264	375	50.7%
Number of new contracts	285	322	482	59.1%
Net sales (millions of yen)	5,597	6,334	8,368	66.9%

Business results by segment are omitted, as the Company includes only the single M&A brokerage business segment.

1. Explanation of Financial Condition
2. 1. Status of assets, liabilities, and net assets (Assets)
      As of May 31, 2021, current assets stood at ¥7,942 million, down ¥268 million from August 31, 2020. This decline occurred despite an uptick of ¥97 million in accounts receivable-trade and primarily reflected a decrease of ¥387 million in cash and deposits.
      Non-current assets amounted to ¥1,074 million, up ¥239 million from August 31, 2020. This was mainly attributable to a rise of ¥221 million in property, plant and equipment that stemmed primarily from an increase in buildings and other facilities.
      (Liabilities)
      As of May 31, 2021, current liabilities came to ¥966 million, down ¥988 million from August 31, 2020. This decline was primarily attributable to a ¥718 million decrease in other current liabilities stemming mainly from the payment of accrued bonuses at the end of the previous fiscal year and a downturn of ¥539 million in income taxes payable, which offset an increase of ¥307 million in provision for bonuses.
      (Net assets)
      As of May 31, 2021, net assets totaled ¥8,049 million, up ¥958 million from August 31, 2020. This mainly reflected an upward impact of ¥1,371 million on retained earnings that stemmed from bottom-line profit and offset a downward impact of ¥458 million on retained earnings that was inflicted by the payment of dividends.
3. Explanation of Earnings Forecasts and Other Forward-Looking Information

Our earnings forecasts for the fiscal year ending September 30, 2021 are unchanged from the figures announced on September 30, 2020.

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