ENDO Lighting : The first quarter ended June 30, 2022

1. Qualitative Information on Business Performance for the First Quarter Ended June 30, 2022

(1) Analysis of Business Performance

The Japanese economy during this first quarter consolidated cumulative period ended June 30, 2022 approached normalization of economic activities due to the easing of COVID-induced activity restrictions, but the economic condition was recovered only at a sluggish pace, impacted by the tight supply-demand balance of components, as typified by semiconductors, and rising prices on the back of a weaker yen. On the global economic front, the outlook also remained uncertain due to soaring prices of natural resources such as crude oil and natural gas and disrupted marine transportation caused by the growing tension in Ukraine.

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 and providing new values to create the future of lighting friendly to the Earth and humans on the assumption that manufacturers are responsible for continuous improvements in energy efficiencies of products.

Additionally, in manufacturing departments, the Group endeavored to promote continued activities involving product quality improvement and cost reduction with the aim of providing environment-friendly and responsible products, while reducing selling, general and administrative expenses on a Company-wide basis.

As a result, the Group's net sales for the three months ended June 30, 2022 increased 9.0% from a year earlier to ¥10,135 million, and operating profit decreased 36.7% from a year earlier to ¥637 million. The Group's ordinary profit decreased 19.7% from a year earlier to ¥935 million, and profit attributable to owners of parent decreased 61.3% from a year earlier to ¥351 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 published the catalog, LEDZ Pro. 5, and 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. In the environment where calls are growing for power saving due to power price hikes and tight power supply- demand situations, 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 worked to make major enhancements to 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 worked hard on sales activities leveraging the Synca U/X Lab, the interactive Tokyo office.

In overseas markets, we published the catalog, S15, and bolstered customer-oriented sales efforts in the United Kingdom. In Asia, we strived to cultivate existing customers and opened up the luxury building market through our Asia-focused "sync" products and our strategic Synca products.

As a result, the Lighting Fixtures segment's net sales for the three months ended June 30, 2022 increased 7.9% from a year earlier to ¥9,024 million (including intersegment sales; hereinafter the same applies), and segment profit (operating profit; hereinafter the same applies) decreased 36.0% from a year earlier to ¥701 million.

2) Environment-Related Business Segment

In the Environment-Related Business segment, as the countermeasure to the sense of stagnation felt in daily life during the prolonged COVID-19 pandemic, the Company put its energies into activities to propose the creation of stores where visitors can feel "fun and comfort" through the effects of lighting and signage, based on the theme of "a personalized and exciting store." In particular, our proposals for distribution stores, such as grocery stores, have received acclaim for their consideration to comfort and power consumption savings, which led to the adoption of Synca, our next-generation wireless light and color modulating series.

We also 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 increase in both rental contracts and device sales from a year earlier.

As a result, the Environment-Related Business segment's net sales for the three months ended June 30, 2022 increased 7.5% from a year earlier to ¥1,911 million, and segment profit rose 24.1% from a year earlier to ¥181 million.

3) Interior Furniture Segment

In the Interior Furniture segment, supply-side conditions continue to be severe on the back of soaring raw materials and logistics costs, despite growing expectations for revitalization of economic activities with an eye on the post-COVID-19 era.

Under these circumstances, in addition to sales to existing customers mainly consisting of commercial facilities, the Company strengthened sales efforts targeted at office dealers and suppliers. Collaborating with the Lighting Fixtures segment, which also focuses on the office market, we are working to establish our brand recognition in the market.

In terms of costs, we are striving to reduce overall costs by continuing to thoroughly investigate cost performance.

As a result, the Interior Furniture segment's net sales for the three months ended June 30, 2022 increased 2.3% from a year earlier to ¥213 million. A segment loss of ¥23 million was recorded against the segment loss of ¥16 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 decreased ¥12 million from the end of the previous fiscal year to ¥55,583 million.

The primary factor contributing to this result was an increase of ¥690 million in other current assets (forward exchange contracts, etc.) and a decrease of ¥719 million in cash and deposits.

b. Liabilities

The Group's consolidated liabilities at the first quarter under review decreased ¥1,278 million from the end of the previous fiscal year to ¥26,074 million.

The primary factor contributing to this result was a decrease of ¥1,071 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 ¥1,265 million from the end of the previous fiscal year to ¥29,509 million.

This was primarily due to profit attributable to owners of parent of ¥351 million, an increase of ¥15 million in deferred gains or losses on hedges, an increase of ¥1,118 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, 2022, we have revised the forecast announced on April 28, 2022. For details, please refer to the "Notice of Revisions to the Consolidated Financial Results Forecast for the Fiscal Year Ending March 31, 2023" released today.

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