Avex : Q1 Financial Summary of March 2023

Consolidated Financial Summary for First Quarter of Fiscal Year Ending March 31, 2023

(Japanese Accounting Standards)

August 4, 2022

Avex Inc.

Tokyo Stock Exchange, Prime Market

Code No: 7860

(URL https://avex.com/jp/en/)

Representative: Katsumi Kuroiwa, President, CEO

Contact: Shinji Hayashi, Representative Director, CFO

TEL: [phone]

Scheduled date to submit the Quarterly Securities Report (Shihanki Houkokusho): August 8, 2022

Scheduled date for commencement of dividend payments: -

Supplementary documents for financial results: Yes

Financial results briefing: None

Note: All amounts are rounded down to the nearest million yen.

1. Consolidated operating results for the first quarter of fiscal year ending March 31, 2023

(April 1, 2022 to June 30, 2022)

(1) Consolidated operating results

Note: Figures in percentages denote the year-on-year change.

Net sales

Operating profit

Ordinary profit

Profit attributable to

owners of parent

million yen

%

million yen

%

million yen

%

million yen

%

First Quarter of Fiscal Year

28,473

46.6

2,288

772.1

2,250

977.1

1,675

-

Ending March 31, 2023

First Quarter of Fiscal Year

19,417

37.6

262

-

208

-

11

-

Ended March 31, 2022

(Note) Comprehensive income

First Quarter of Fiscal Year Ending March 31, 2023: ¥1,240 million (435.5%)

First Quarter of Fiscal Year Ending March 31, 2022: ¥231 million (-%)

Profit per share

Diluted profit per share

yen

yen

First Quarter of Fiscal Year

37.21

-

Ending March 31, 2023

First Quarter of Fiscal Year

0.27

0.27

Ended March 31, 2022

(2) Consolidated financial position

Total assets

Net assets

Shareholders' equity ratio

million yen

million yen

%

As of June 30, 2022

98,931

60,712

58.5

As of March 31, 2022

97,801

60,694

59.2

(Reference) Shareholders' equity

As of June 30, 2022:

¥57,908 million

As of March 31, 2022:

¥57,872 million

2. Status of dividend payments

Annual dividends

End of first quarter

End of second quarter

End of third quarter

End of year

Annual

yen

yen

yen

yen

yen

Year ended March 31, 2022

-

25.00

-

25.00

50.00

Year ending March 31, 2023

-

Year ending March 31, 2023

25.00

-

25.00

50.00

(forecast)

(Note) Revisions to dividend forecasts published most recently: None

3. Forecasts for consolidated operating results for the year ending March 31, 2023 (April 1, 2022 to March 31, 2023)

Note: Figures in percentages denote the year-on-year change.

	Operating profit	Profit attributable to	Profit per share
	owners of parent
Year ending	million yen	%	million yen	%	Yen
March 31, 2023	1,000	(61.3)	400	(56.5)	8.88

(Note) Revisions to earnings forecasts published most recently: None

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Avex Inc. (7860) Consolidated Financial Summary for First Quarter of Fiscal Year Ending March 31, 2023

• Notes
• 1. Changes in significant subsidiaries during term under review (changes in specific subsidiaries in conjunction with changes in scope of consolidation): None

New: - company (Company name) -

Excluded: - company (Company name) -

1. Application of particular accounts procedures to the preparation of quarterly consolidated financial statements: None
2. Changes in accounting policies and changes in or restatement of accounting estimates
   1. Changes in accounting policies in conjunction with revisions to accounting standards: Yes

2.	Changes in accounting policies other than 1:	None
3.	Changes in accounting estimates:	None
4.	Restatement:	None

(4) Outstanding shares (ordinary shares)
a. Shares outstanding at end of term (including treasury stock)
As of June 30, 2022:	45,440,100 shares
As of March 31, 2022:	45,440,100 shares
b. Treasury stock at end of term
As of June 30, 2022:	410,124 shares
As of March 31, 2022:	410,124 shares
c. Average number of share (quarter-to-date)
First Quarter of Fiscal Year Ending March 31, 2023:	45,029,976 shares
First Quarter of Fiscal Year Ended March 31, 2022:	42,070,804 shares

• This financial summary is outside the scope of audit procedures by certified public accountants and audit firm.
• Explanation for forecasts of business results and other notes
  The forecasts for business results and other forward-looking statements contained in this release are based on data and information that the Group has obtained so far and specific assumptions that the Group judges to be reasonable. Please note, therefore, that the actual results and others may greatly differ from the forecasts due to various factors.

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Avex Inc. (7860) Consolidated Financial Summary for First Quarter of Fiscal Year Ending March 31, 2023

1. Qualitative Information on Consolidated Results, etc. for the First Quarter of Fiscal Year Ending March 31, 2023

(1) Summary of Operating Results

(Unit: million yen)

	Fiscal year	Fiscal year	Fiscal year	Fiscal year	Fiscal year
First quarter results	ended March	ended March	ended March	ending March	ending March
	31, 2019	31, 2020	31, 2021	31, 2022	31, 2023
Net sales	32,276	29,028	14,108	19,417	28,473
Cost of sales	23,623	20,475	8,795	12,537	17,947
Gross profit	8,652	8,552	5,313	6,880	10,526
Gross profit margin	26.8%	29.5%	37.7%	35.4%	37.0%
Personnel expenses	2,934	2,836	2,633	2,545	3,241
Sales promotion and advertising	2,071	1,453	953	1,332	1,745
expenses
General expenses	3,491	3,896	2,780	2,739	3,251
Total SG&A expenses	8,497	8,186	6,367	6,617	8,237
Operating profit (loss)	155	366	(1,054)	262	2,288
Operating margin	0.5%	1.3%	-%	1.4%	8.0%

In the entertainment industry, to which the Group belongs, the production of music software, including music videos, was up 10.4% year on year, to 97,278 million yen (January to June 2022; according to a survey by the Recording Industry Association of Japan). Sales of paid music downloads were up 18.5% year on year, to 25,109 million yen (January to March 2022; according to a survey by the Recording Industry Association of Japan). In the video-related market, sales of video software fell 19.7% year on year, to 55,820 million yen (January to June 2022; according to a survey by the Japan Video Software Association). However, the digital video distribution market is expected to continue to grow, going forward, with video distribution services expected to become established and popular more broadly.

In this business environment, the Group sought to fulfill two missions, namely, i) the establishment of an earnings structure not dependent on the live performance market and ii) the entry into the global market and a new technology market. To establish a new earnings structure, the Group signed new contracts with parties who are popular among young people, namely, artists, celebrities and creative professionals, engaged in content production, launched online live performances through paid distribution services, and expanded sales channels for its music streaming services. In addition, the Group advanced initiatives to explore the potential of future entertainment in the global market and new technology market, such as the development and launch of new artists targeting the global market and sales of NFT content in the virtual world called the metaverse.

In the first quarter under review, consolidated net sales climbed to 28,473 million yen (up 46.6% year on year), consolidated operating profit jumped to 2,288 million yen (up 772.1% year on year), and consolidated profit attributable to owners of parent came to 1,675million yen (compared to 11 million yen in the same period of the previous fiscal year), reflecting increased sales in the music business.

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Avex Inc. (7860) Consolidated Financial Summary for First Quarter of Fiscal Year Ending March 31, 2023

(2) Summary of Financial Position

Assets totaled 98,931 million yen at the end of the first quarter under review after an increase of 1,129 million yen from the end of the previous consolidated fiscal year. This was chiefly attributable to increases of 912 million yen in Other in current assets and 706 million yen in notes and accounts receivable - trade, which more than offset a decline in investment securities.

Liabilities increased by 1,111 million yen from the end of the previous consolidated fiscal year, to 38,218 million yen. This was primarily due to an increase of 1,924 million yen in Other in current liabilities, despite decreases of 444 million yen in notes and accounts payable - trade and 204 million yen in provision for bonuses.

Net assets increased 18 million yen from the end of the previous consolidated fiscal year, to 60,712 million yen. This was mainly due to an increase of 560 million yen in retained earnings, which offset a decrease of 505 million yen in valuation difference on available-for-sale securities.

(3) Summary of Consolidated Financial Forecasts and Other Future Forecast Information

With respect to the summary of consolidated financial forecasts for the fiscal year ending March 31, 2023, the financial forecasts presented in the "Consolidated Financial Summary for the Year Ended March 31, 2022" announced on May 12, 2022 remain unchanged.

If any revision to the financial forecasts becomes necessary in the future, the Company will promptly disclose it.

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Avex Inc. (7860) Consolidated Financial Summary for First Quarter of Fiscal Year Ending March 31, 2023

2. Quarterly Consolidated Financial Statements and Major Notes

(1) Quarterly Consolidated Balance Sheets

			(Unit: million yen)
		As of March 31, 2022	As of June 30, 2022
(Assets)
Current assets
Cash and deposits	44,671	44,941
Notes and accounts receivable - trade	13,855	14,562
Merchandise and finished goods	1,058	1,154
Programs and works in progress	5,175	4,944
Raw materials and supplies	301	258
Other	10,436	11,348
Allowance for doubtful accounts	(172)	(181)
Total current assets	75,326	77,027
Non-current assets
Property, plant and equipment
Buildings and structures, net	1,945	2,173
Land	1,548	1,548
Other, net	860	710
Total property, plant and equipment	4,354	4,431
Intangible assets	4,156	4,099
Investments and other assets
Investment securities	8,564	7,877
Other	5,591	5,702
Allowance for doubtful accounts	(191)	(207)
Total investments and other assets	13,964	13,372
Total non-current assets	22,475	21,903
Total assets	97,801	98,931
(Liabilities)
Current liabilities
Notes and accounts payable - trade	2,556	2,111
Current portion of long-term borrowings	7	7
Accounts payable - other	16,052	15,911
Income taxes payable	264	491
Refund liabilities	2,446	2,278
Contract liabilities	46	53
Provision for bonuses	575	371
Provision for contingent loss	95	45
Other	13,407	15,332
Total current liabilities	35,451	36,603
Non-current liabilities
Long-term borrowings	9	7
Liabilities for retirement benefits	350	357
Other	1,295	1,249
Total non-current liabilities	1,655	1,615
Total liabilities	37,106	38,218

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