Wellnet : Financial Results for the Six Months Ended December 31, 2021 (Non-consolidated)

Financial Results

for the Six Months Ended December 31, 2021 [Japanese GAAP] (Non-consolidated)

February 2, 2022

Company name: WELLNET CORPORATION

Stock exchange listing: Tokyo Stock Exchange

Code number: 2428

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

Representative: Kazuhiro Miyazawa, President and Representative Director

Contact: Tatsuya Igarashi, Executive Officer, General Manager of Administrative Division

Phone: [phone]

Scheduled date of filing quarterly securities report: February 14, 2022

Scheduled date of commencing dividend payments: -

Availability of supplementary briefing material on quarterly financial results: Available

Schedule of quarterly financial results briefing session: Yes

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

1. Financial Results for the Six Months Ended December 31, 2021 (July 1, 2021 to December 31, 2021)

(1) Operating Results									(% indicates changes from the previous corresponding period.)
				Net sales				Operating profit			Ordinary profit			Profit
Six months ended		Million yen	%		Million yen	%				Million yen	%		Million yen	%
December 31, 2021		4,452		(2.1)				385	14.4				386		8.2	282	14.2
December 31, 2020		4,550		(5.6)				336	(29.7)				357		(25.9)	247	(26.3)
			Basic earnings per share		Diluted earnings per
							share
Six months ended					Yen						Yen
December 31, 2021					14.98						14.93
December 31, 2020					13.14						13.09
(2) Financial Position
				Total assets				Net assets		Equity ratio		Net assets per share
						Million yen					Million yen				%				Yen
As of December 31, 2021				26,705					7,149				26.6				376.28
As of June 30, 2021				21,257					7,175				33.4				377.37
(Reference)	Equity:		As of December 31, 2021:	¥7,093 million
				As of June 30, 2021:			¥7,102 million
2. Dividends
													Annual dividends
						1st				2nd			3rd		Year-end		Total
						quarter-end		quarter-end				quarter-end
							Yen			Yen			Yen				Yen		Yen
Fiscal year ended June 30, 2021				-			0.00				-				15.47		15.47
Fiscal year ending June 30, 2022				-			0.00
Fiscal year ending June 30, 2022												-				13.29		13.29
(Forecast)

(Note) Revision of dividends forecast from recently announced figures: No

3. Financial Results Forecast for the Fiscal Year Ending June 30, 2022 (July 1, 2021 to June 30, 2022)

(% indicates changes from the previous corresponding period.)

	Net sales		Operating profit		Ordinary profit
	Million yen	%	Million yen	%	Million yen	%
Full year	9,600	-	730	-	730	-
	Profit		Basic earnings per share
	Million yen	%		Yen
Full year	500	-		26.56

(Notes)

1. This forecast is based on the expectation that the movement of people, especially in Japan, will recover to a certain degree, and will be greatly affected by the degree of recovery. The Company does not currently anticipate any extraordinary loss related to the handling of the former Sapporo office building or extraordinary loss related to the valuation of investment securities at this point in time. The Company will promptly announce any significant events that should be disclosed.
2. The Company has applied the "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29) and relevant ASBJ regulations from the beginning of the fiscal year ending June 30, 2022. Therefore, the financial results forecast above represents the amounts calculated by applying the said accounting standard and relevant regulations, and does not include year-on-year changes.

* Notes:

1. Adoption of special accounting procedures for preparing quarterly financial statements: No
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: Yes
   2. Changes in accounting policies other than 1) above: No
   3. Changes in accounting estimates: No
   4. Retrospective restatement: No

(Note) For more details, please refer to "Changes in accounting policies, (4) Notes to Financial Statements, 2. Financial Statements and Significant Notes" on page 9 of the attached materials.

1. Total number of issued shares (common shares)
2. 1. Total number of issued shares at the end of the period (including treasury shares): As of December 31, 2021: 19,400,000 shares
      As of June 30, 2021: 19,400,000 shares
   2. Total number of treasury shares at the end of the period:

As of December 31, 2021: 547,985 shares

As of June 30, 2021: 577,865 shares

3) Average number of shares during the period:

Six months ended December 31, 2021: 18,830,417 shares

Six months ended December 31, 2020: 18,807,344 shares

• These financial results are outside the scope of quarterly review procedures by a certified public accountant or an audit corporation.
• Explanation of the proper use of financial results forecast and other notes

The financial results forecast and dividends forecast above are based on certain assumptions judged to be reasonable based on information available to the Company at the time of the announcement of this document. Actual business performance and dividends may differ from the forecasts due to various factors that may arise in the future.

Table of Contents
1. Qualitative Information on Financial Results for the Period under Review ...........................................................	2
(1)	Explanation of Business Results ........................................................................................................................	2
(2)	Explanation of Financial Position ......................................................................................................................	4
(3)	Explanation of Financial Results Forecast and Other Forward-looking Information.........................................	5
2. Financial Statements and Significant Notes ...........................................................................................................	6
(1)	Balance Sheet .....................................................................................................................................................	6
(2)	Statement of Income...........................................................................................................................................	7
	(Six months ended December 31) .................................................................................................................	7
(3)	Statement of Cash Flows ....................................................................................................................................	8
(4)	Notes to Financial Statements ............................................................................................................................	9
	(Notes on going concern assumption)...........................................................................................................	9
	(Notes to substantial change in the amount of shareholders' equity) ............................................................	9
	(Adoption of special accounting procedures for preparing quarterly financial statements)..........................	9
	(Changes in accounting policies) ..................................................................................................................	9
	(Changes in accounting estimates)................................................................................................................	9
	(Significant subsequent events) ....................................................................................................................	9

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1. Qualitative Information on Financial Results for the Period under Review

(1) Explanation of Business Results

1) Analysis of Business Results

In the Japanese economy in the six months of the fiscal year under review (July 1, 2021 to December 31, 2021), the impact of the novel coronavirus disease (COVID-19) has been prolonged, and the situation remains unpredictable.

In the non-face-to-face payment market, the Company's business domain, there has been a sharp decline in the movement of people such as inbound and domestic travel, and with the impact on transportation-related businesses such as airlines, buses, and railroads, especially during the year-end and New Year holidays, activity has not returned to pre-COVID-19 levels.

At the same time, DX (Digital Transformation) is being actively promoted in a wide variety of industries and business categories, and the provision of services and purchase of products through non-face-to-face and non-contact means is increasing, and IT is playing an increasingly important role in society. In the midst of this paradigm shift, the Company has been promoting activities such as "Response to the age of electronic money" and "Promotion of Bus IT Promotion Solution Project and the MaaS Business" as priority measures, with "paperless" and "cashless" as the keywords, and aiming to provide a lifestyle-basedfin-tech platform in this context. We also promoted payments and more, such as the membership management system ekaiin.com, and improved operational efficiency by consolidating administrative departments in our new Sapporo head office. As a result, with respect to business results for the six months ended December 31, 2021, the Company reported net sales of ¥4,452 million (down 2.1% year on year), operating profit of ¥385 million (up 14.4% year on year), ordinary profit of ¥386 million (up 8.2% year on year) and profit of ¥282 million (up 14.2% year on year).

2) Changes in Environment Surrounding the Company and Response Strategy

The non-face-to-face payment market, the Company's business domain, is expected to continue achieving a certain level of growth in the future, and we are promoting the expansion of payments and more functionality, and collaboration with content cloud service providers for systems promoting going paperless and for payments systems.

A. "Smartphone payment service," Shiharai-Hisho during shift to paperless and cashless

The Shiharai-Hisho service, which carries out payments via bank-account-linked smartphone has already been introduced at eight electric power companies. In addition, the number of local taxation and public utility charges payments that can be made using the Shiharai-Hisho service is increasing, especially in areas where there are many affiliated banks, and in the bus and railway industry, where the Company is promoting DX, the number of routes on which customers can use Shiharai-Hisho to pay for smartphone commuter passes and coupon tickets is also increasing.

In February 2021, we released ekaiin.com, a membership management system that enables electronic billing and payment of various expenses using the Shiharai-Hisho service and credit cards in the area of membership management, which has not been digitized in the past. In addition, we have completed the development of a new function, "non-stop payment," which is more advanced than the current one-stop payment function, and commenced marketing activities.

On the other hand, we have completed alliances with 36 banks, including Sumitomo Mitsui Banking Corporation and Japan Post Bank Co., Ltd. However, after a series of large-scale incidents of unauthorized use of fund transfer agent accounts connected with several banks, the Company is working to resume operations with them after completion of security measures related to identity verification. As of the end of January 2022, the number of available banks has recovered to 15, and we will continue our efforts to increase this number.

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B. Driving forward our Bus IT Promotion Project

Launched in August 2016, Bus Mori! has been expanded to handle more than 450 routes, including smartphone tickets, smartphone coupon tickets, smartphone commuter passes, smartphone free passes, and discount passes. Introduction of smartphone commuter passes and coupon tickets has been active amidst declining demand during the COVID-19 pandemic. In addition, the Company is promoting the additional development of functions for ALTAIR triple star, a MaaS cloud service, which the Company started the development five years ago.

ALTAIR triple star is an all-in-one total cloud service ticket sales system that aims to automate a series of operations, from bus seat inventory management, reservation and purchase acceptance, ticket issuance and lifecycle management, to sales information aggregation and inter-operator settlement processing.

MaaS service DohNa!! was launched for use on Hakodate's trams, buses and railroads from January 2020, with the service subsequently expanded to excursion tickets and for use in the Sendai City MaaS project. OkhoNavi, a free pass sales service in the Hokkaido Okhotsk area, was launched in January 2022. The Company will actively develop services to meet the strong demand for DX in the transportation industry.

C. Current status of WELLNET's key product, Multi Payment Services

Multi Payment Services are expected to have the potential to grow in the area of non-face-to-face payments. Various operators have been adopting the Company's payment services for over 30 years, and we announced successive introduction of the smartphone payment applications PayPay, LINE Pay, au PAY, and "d Payment" in January 2022. The Company aims to provide payment gateway services that meet the needs of both operators and consumers for increased convenience.

D. Activities contributing to local communities and SDGs

As part of our social contribution, we are providing support to many students through our WELLNET Scholarship, established to help financially struggling students at colleges of technology in Hokkaido. Many letters of gratitude were received from these students, which motivated our employees. Although many students across Japan were affected by COVID-19 in the fiscal year 2020, we received reports that four colleges of technology in Hokkaido achieved a zero dropout rate as a result of our support. We will continue these activities moving forward.

In addition, Sapporo City aims to become a sustainable city with a good living environment based on the revised Building Energy Conservation Law, and has established the Comprehensive Assessment System for Building Environmental Efficiency in Sapporo (CASBEE Sapporo) with the aim of spreading and promoting environmentally efficient buildings. Our new Sapporo head office, which was completed in last year, has already received the A rank under CASBEE Sapporo.

Furthermore, with the completion of the new Sapporo head office, we are aiming to obtain the platinum rank of WELL Certification through office design and operation that consider the health and working environment of our employees. The WELL Certification is an initiative that began in 2014 in the U.S. to evaluate and certify spaces including buildings and offices from the standpoint of human health. It is a cutting edge initiative in Japan, with only a few cases registered. This initiative represents an investment in the Company's most important asset, our employees, and we also believe that it will lead to increased corporate value in the form of increased productivity, and workstyle reforms.

E. Performance forecast and shareholder returns

The performance forecast is as presented in "3. Financial Results Forecast for the Fiscal Year Ending June 30, 2022 (July 1, 2021 to June 30, 2022)" in summary information. In addition, out of consideration for our shareholders, we plan for the dividend payout ratio to be 50% or more.

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