ENDO Lighting : Overview of Business Performance for the Three Months Ended June 30, 2023

1. Qualitative Information on Business Performance for the First Quarter Ended June 30, 2023

(1) Analysis of Business Performance

The Japanese economy during this first quarter consolidated cumulative period ended June 30, 2023 progressed normalization of economic activities due to the easing of COVID-19-induced activity restrictions despite of anxiety factors such as rising prices and exchange rate fluctuation risk. On the global economic front, the outlook also remained uncertain due to soaring prices of raw materials and energy on account of the prolongation of Russian- Ukraine situation as well as sharp fluctuations in exchange rates impacted by interest rate trends in the U.S..

Amid these conditions, the Endo Lighting Corporation Group (the "Group"), as a corporate group that creates high value-added spaces, has focused on the development, manufacture, and sales of new products that offer enhanced quality of light to create customer value in addition to excellent power-saving performance, aiming to realize a sustainable and better society.

Since converting our products to LED as the pioneer in the business field, we have been developing lighting fixtures with higher efficiency, on the belief that it is the manufacturers' responsibility to continuously improve energy efficiencies of products. We have also established a Sustainability Committee to promote sustainability management in order to create lighting of the future friendly to the Earth and humans.

In manufacturing departments, the Group endeavored to promote continuous activities for product quality improvement and cost reduction with the aim of providing environment-friendly products, and reduce selling, general and administrative expenses.

As a result, the Group's net sales for the three months ended June 30, 2023 increased 16.0% from a year earlier to ¥11,758 million, operating profit increased 35.3% from a year earlier to ¥862 million, ordinary profit increased 7.1% from a year earlier to ¥1,001 million, and profit attributable to owners of parent increased 116.5% from a year earlier to ¥760 million.

The Group's business performance by segment was as follows.

1) Lighting Fixtures Segment

The Group achieved to offer the industry's widest variety of products in the field of LED lighting fixtures for business use, and strived to establish high brand recognition.

In the domestic market, we focused on sales promotions for the wireless lighting control system, Smart LEDZ

Fit/Fit Plus, and the wireless light and color modulating fixture, Tunable LEDZ. Against a backdrop of electricity rate hikes and the social demand for sustainability, we reinforced measures to capture demand from newly constructed commercial facilities and other large-scale facilities such as offices, in addition to the demand for the replacement of existing lighting fixtures.

In addition, we greatly expanded the product lineup for Synca, the next-generation wireless light and color modulating fixture series in which three functions are incorporated: natural light, color production, and tone modulation, and ran active sales promotions leveraging the Synca U/X Lab FUKUOKA, the interactive Fukuoka office, the follow-up interactive Tokyo office.

In response to the impact on the cost of sales due to the rapid depreciation of the yen and the steep rise in raw material prices, we adjusted our prices and continued efforts to reduce cost and selling, general and administrative expenses.

In overseas markets, we published the catalog, S16, in May 2023, and bolstered customer-oriented sales efforts in

the United Kingdom. Moreover, as a provider of innovative products and services, we received the official UK awards,

The King's Awards, which has a history of over half a century dating back to 1965. Furthermore, in Asia, we worked

to establish a premium brand image and increase brand recognition through the consecutive release of new products in

the sync series, which meet the demands of customers in the luxury building market. With the release of the sync4

online catalog in June 2023, we continued our efforts to cultivate existing customers in depth and develop the luxury

building market.

As a result, the Lighting Fixtures segment's net sales for the three months ended June 30, 2023 increased 16.4% from a year earlier to ¥10,507 million (including intersegment sales; hereinafter the same applies), and segment profit (operating profit; hereinafter the same applies) increased 47.7% from a year earlier to ¥1,036 million.

2) Environment-related Business Segment

In the Environment-related Business segment, we focused on proposal for LED lighting update particularly for retail stores.

In order to solve the issues of recent rapid hike in electricity rates and maintenance costs for initial-type LED

lighting, we proposed replacement of existing LED lighting with the latest LEDs, which contributed to enhancing the store experience value and to reducing power consumption. In particular, the proposal to replace LED lighting in existing stores with light and color modulating lighting to change color and brightness of light in the period of time: morning, noon, and night received acclaim as a solution considered both comfort and power consumption savings, which led to the adoption of Synca, our next-generation wireless light and color modulating system.

In addition, we focused on sales activities that took advantage of digital tools, such as the redistribution of the presentation video played at an exhibition. Our efforts to streamline sales operations led to have a strong record of both rental contracts and device sales.

As a result, the Environment-related Business segment's net sales for the three months ended June 30, 2023 increased 22.2% from a year earlier to ¥2,335 million, and segment profit increased 21.8% from a year earlier to ¥220 million.

3) Interior Furniture Segment

In the Interior Furniture segment, we focused our efforts on developing the office market, and expanded our activities to establish our brand recognition in this market. We also produced original furniture, cultivated new suppliers and then proposed products made of eco-friendly materials.

We reprinted the "Abita Style 12 Revised Edition," the catalog featuring a wider range of office-friendly tables and chairs, original stools produced in collaboration with other manufacturers, products made of eco-friendly materials, and other items, in efforts to further enhance recognition of the Abita Style brand.

In addition, we strengthened our hotel-related sales activities in response to the population flow recovery attributed to the easing of restrictions on activities. Furthermore, we actively promoted activities to win orders for sound-absorbing panels in response to the increasing number of problems related to sound environment caused by the diversification of offices.

As a result, the Interior Furniture segment's net sales for the three months ended June 30, 2023 increased 6.7% from a year earlier to ¥228 million. A segment loss of ¥40 million was recorded against the segment loss of ¥23 million in the same period of the previous fiscal year.

(2) Analysis of Financial Position

Status of Assets, Liabilities and Net Assets a. Assets

The Group's consolidated assets at the end of the first quarter under review increased ¥2,428 million from the end of the previous fiscal year to ¥59,771 million.

The primary factors included an increase of ¥1,385 million in cash and deposits, an increase of ¥257 million in notes and accounts receivable - trade, and an increase of ¥531 million in inventories.

b. Liabilities

The Group's consolidated liabilities at the end of the first quarter under review increased ¥948 million from the end of the previous fiscal year to ¥26,756 million.

The primary factor was an increase of ¥881 million in notes and accounts payable - trade.

c. Net assets

The Group's consolidated net assets at the end of the first quarter under review increased ¥1,479 million from the end of the previous fiscal year to ¥33,014 million.

This was primarily due to profit attributable to owners of parent of ¥760 million, an increase of ¥111 million in deferred gains or losses on hedges, an increase of ¥814 million in foreign currency translation adjustment, and a decrease of ¥221 million due to the payment of dividends.

(3) Analysis of Future Prospects such as the Forecast of Consolidated Financial Results

As a result of reviewing the forecast of financial results in consideration of the results in this first quarter consolidated cumulative period ended June 30, 2023, we have revised the forecast announced on April 28, 2023. For details, please refer to the"Notice of Revisions to the Consolidated Financial Results Forecast for the Fiscal Year Ending March 31, 2024" released today.

If it becomes necessary to revise the forecast, we will disclose the revision promptly.