Istyle : Summary of Financial Results for the 1st Quarter, FY2023

November 4, 2022

Summary of Consolidated Financial Results

for the First Quarter of the Fiscal Year Ended June 30, 2023

(Three Months Ended September 30, 2022)

		[Japanese GAAP]
Company name:	istyle Inc.	Stock exchange listings: Prime Market of the TSE
Securities code:	3660	URL: https://www.istyle.co.jp/en
Representative:	Tetsuro Yoshimatsu, Representative Director, CEO
Contact:	Kei Sugawara, Director, CFO	Tel: [phone]
Scheduled date of filing of Quarterly Report:	November 10, 2022
Scheduled date of dividend payment:	-
Preparation of supplementary materials for financial results:	Yes
Holding of financial results briefing:	None

(All amounts are rounded off to the nearest million yen)

1. Consolidated Financial Results for the Three Months Ended September 30, 2022 (July 1, 2022 - September 30, 2022)

(1) Consolidated results of operations									(Percentages represent year-on-year changes)
																			Net income
					Net sales				Operating income		Ordinary income	attributable to
									owners of the parent
																			company
				Million yen	%		Million yen		%		Million yen	%		Million yen		%
	Three months ended September 30, 2022		9,200	18.2		237		-		158		-	101		-
	Three months ended September 30, 2021		7,784	3.7		(229)		-		(238)		-	(52)		-
	Note: Comprehensive income (million yen)	Three months ended September 30, 2022:	(66) (-%)
					Three months ended September 30, 2021:	(27) (-%)
					Net income		Diluted net income
					per share		per share
					Yen				Yen
	Three months ended September 30, 2022			1.40					1.22
	Three months ended September 30, 2021			(0.73)					-
(2) Consolidated financial position
			Total assets			Net assets				Equity ratio
			Million yen			Million yen				%
	As of September 30, 2022				27,784			9,729						33.7
	As of June 30, 2022				22,168			8,652						38.1
Reference: Total equity	As of September 30, 2022: 9,376 million yen
		As of June 30, 2022: 8,454 million yen
2. Dividends
								Dividend per share
					1Q-end	2Q-end	3Q-end	Year-end	Total
					Yen		Yen	Yen		Yen	Yen
	Fiscal year ended June 30, 2022	-	0.00	-			0.00	0.00
	Fiscal year ending June 30, 2023	-
	Fiscal year ending June 30, 2023 (forecasts)		0.00	-			0.00	0.00

Note: Revisions to the most recently announced dividend forecast: None

3. Consolidated Forecast for the Fiscal Year Ending June 30, 2023 (July 1, 2022 - June 30, 2023)

								(Percentages represent year-on-year changes)
								Net income		Net income
	Net sales		Operating income	Ordinary income	attributable to owners
		per share
								of the parent company
	Million yen		%	Million yen	%	Million yen	%	Million yen		%	Yen
Full year	40,000		16.3	500	-	170	-	30		-	0.40
Note: Revisions to the most recently announced earnings forecast: None

• Notes
• 1. Changes in significant subsidiaries during the period (changes in the scope of consolidation): None
  2. Application of special accounting methods for presenting quarterly consolidated financial statements: None
  3. Changes in accounting policies and accounting-based estimates, and restatements
  4. 1. Changes in accounting policies due to revisions in accounting standards, others: Yes

2)	Changes in accounting policies other than 1) above:	None
3)	Changes in accounting-based estimates:	None
4)	Restatements:	None

1. Number of shares outstanding (common shares)
2. 1. Number of shares issued (including treasury shares) at end of period

As of September 30, 2022:	77,963,593 shares
As of June 30, 2022:	74,146,800 shares

2) Number of treasury shares at end of period

As of September 30, 2022:	2,693,567 shares
As of June 30, 2022:	2, 693,567 shares

• 1. Average number of shares outstanding during the period Three months ended September 30, 2022: 72,448,918 shares Three months ended September 30, 2021: 71,453,233 shares
• The current quarterly summary report is not subject to the quarterly review procedures by certified public accountants or auditing corporations.
• Cautionary statement with respect to forecasts and other matters (Note concerning forward-looking statements)
• • Earnings forecasts and other forward-looking statements in this report are based on assumptions judged to be valid and information available to the Company at the time of this report's preparation. Actual performance may differ significantly from these forecasts for a number of reasons. For the assumptions underlying the forecasts herein and other notice on the use of earnings forecasts, please refer to "1. Operating Results and Financial Position (3) Consolidated Operating Results Forecast and Information about Future Predictions" on page 4 in the accompanying materials.
• This financial report is solely a translation of the original Japanese "Kessan Tanshin" document, which has been prepared in accordance with accounting principles and practices generally accepted in Japan, for the convenience of readers who prefer an English translation.

Accompanying Materials - Contents

1. Operating Results and Financial Position	2
(1)	Analysis of Operating Results	2
(2)	Consolidated Financial Position	3
(3)	Consolidated Operating Results Forecast and Information about Future Predictions	4
2. Consolidated Financial Statements and Relevant Notes	5
(1)	Consolidated Balance Sheets	5
(2)	Consolidated Statements of Income and Comprehensive Income	7
(3)	Notes on Consolidated Financial Statements	9
	(Notes on the Going-concern Assumption)	9
	(Notes on Significant Changes in the Amount of Shareholders' Equity)	9
	(Changes in Accounting Policies)	9
	(Additional Information)	9
	(Segment Information)	10

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1. Operating Results and Financial Position

(1) Analysis of Operating Results

Business sentiment in the cosmetics industry remains deeply negative due to the impact of the novel coronavirus (COVID- 19), which has resulted in reduced consumer willingness to make purchases, fewer opportunities to wear cosmetics as consumers refrain from outings to prevent the spread of the virus, and the disappearance of demand from overseas visitors to Japan. We expect, however, that the domestic cosmetics market will gradually revive as the impact of COVID-19 slowly wanes, and that the performance of the istyle Group's client cosmetics brands will also recover.

The istyle Group will leverage the retail sales and sales promotion capabilities of our Beauty Service segment, which provides retail services such as EC and retail stores in Japan, not only to increase sales in this business but also to contribute to the performance of our client cosmetics brands. We will form a virtuous cycle by increasing advertising placement in our media, utilization of our solution services, and use of our EC and in-store sales promotion services, which will also lead to sustainable growth of the On Platform business. With these efforts, we will continue to focus on growing the On Platform and Beauty Service segments, which are our earnings pillars, with the goal of further boosting earnings and turning profitable for the full year at the operating income level.

In this first quarter, consolidated net sales were up 18.2% year on year. Although seasonal factors such as typhoons and a resurgence in COVID-19 cases had a negative impact, this was offset by strong performance led by the Beauty Service segment's stores. There were also contributions to earnings from increasing cosmetic brand utilization of On Platform segment platforms, and the continued growth of E-Commerce in the Beauty Service segment.

Operating income also increased 466 million yen year on year to return to profitability largely due to increased sales in Beauty Service segment stores and the On Platform segment.

As a result, the consolidated operating performance for this first quarter ended September 30, 2022, was as follows:

Net sales:	9,200 million yen (7,784 million yen in previous fiscal year; 18.2% year-on-year
	increase)
Operating income:	237 million yen (229 million yen loss in previous fiscal year)
Ordinary income:	158 million yen (238 million yen loss in previous fiscal year)
Income before income taxes:	158 million yen (110 million yen loss in previous fiscal year)

Net income attributable to owners 101 million yen (52 million yen loss in previous fiscal year) of the parent company:

1) On Platform segment

The On Platform segment comprises services based on the beauty portal site @cosme, including B-to-B services and B-to-C services.

Although the business environment remained difficult as clients continued to tighten their budgets in response to the pandemic, sales were up year on year in this first quarter due to increases in transaction volume and transaction unit prices as a result of increased utilization of our services by cosmetics brands.

Operating income was up year on year due to increased sales as well as reduced personnel expenses due to recruitment delays.

As a result, operating performance for this first quarter was as follows:

Net sales:	1,967 million yen (1,862 million yen in previous fiscal year; 5.6% year-on-yearincrease)
Operating income:	393 million yen (240 million yen in previous fiscal year; 63.6% year-on-yearincrease)

2) Beauty Service segment

The Beauty Service segment comprises mainly retail services in Japan, such as the operation of the domestic E-Commerce site @cosme SHOPPING and cosmetics specialty shops including @cosme STORE and the large flagship store @cosme

TOKYO.

The Beauty Service segment's EC sales were up 10.7% year on year, sustaining its double-digit EC sales growth. This was the result of new customers acquired through EC events becoming established users, and the success of ongoing measures to enhance merchandizing. The segment's store sales were up 39.5% year on year due to increased customer traffic thanks to store events and a sharp recovery in the movement of people compared with the previous fiscal year despite negative factors such as typhoons and a resurgence in COVID-19 cases. The large flagship store also posted record-high net sales.

Operating income returned to profitability, increasing 261 million yen due to the increase in store sales. As a result, operating performance for this first quarter was as follows:

Net sales:	5,902 million yen (4,645 million yen in previous fiscal year; 27.1% year-on-yearincrease)
Operating income:	226 million yen (35 million yen loss in previous fiscal year)
3) Global segment
	2

The Global segment comprises business operations outside Japan, such as E-Commerce & Wholesale, retail stores, and media and other services.

EC & Wholesale sales were down year on year due to the lingering impact on the cross-border EC business in China of local lockdowns that remained in place until June (in the fourth quarter of the previous fiscal year). The business's performance is gradually improving, however, and sales are up compared with the immediately preceding quarter. Although three unprofitable stores in Hong Kong were closed down in the previous fiscal year, sales of the three remaining stores in Hong Kong are recovering, with sales virtually unchanged year on year. As a result, overall sales for the Global segment were down only slightly year on year.

The consolidated operating loss of 5 million yen was due to a slump in the South Korean business, whose Statements of Income was consolidated in the second quarter of the previous fiscal year. When excluding that business's results, the segment has returned to profitability. Through ongoing earnings structure improvements, the segment is on the verge of recovering to profitability.

As a result, operating performance for this first quarter was as follows:

Net sales:	1,024 million yen (1,053 million yen in previous fiscal year; 2.7% year-on-yeardecrease)
Operating loss:	5 million yen (35 million yen loss in previous fiscal year)

4) Others

The Others segment consists of a temporary staffing agency for beauty consultants and salespersons, and investment and consulting projects for companies in various stages of development, including new startups.

Temporary staffing agency sales were up year on year due to the gradual waning of the impact of COVID-19, and efforts to expand and enhance the operational workforce.

Operating income was temporarily in the red due to upfront personnel expenses for the temporary staffing agency's workforce expansion and enhancement, but the segment as a whole achieved profitability due to a gain on sales of operational investment securities.

As a result, operating performance for this first quarter was as follows:

Net sales:	307 million yen (224 million yen in previous fiscal year; 37.1% year-on-yearincrease)
Operating income:	1 million yen (12 million yen in previous fiscal year)

1. Consolidated Financial Position (Assets)
   Total assets as of September 30, 2022, were 27,784 million yen, an increase of 5,616 million yen from June 30, 2022. Current assets as of September 30, 2022, totaled 18,482 million yen, an increase of 5,554 million yen from June 30, 2022.
   This was mainly due to increases of 4,611 million yen in cash and deposits; 268 million yen in notes and accounts receivable
   - trade and contract assets; and 607 million yen in merchandise.
   Fixed assets as of September 30, 2022 were 9,303 million yen, an increase of 62 million yen from June 30, 2022. This was mainly due to an increase of 345 million yen in tangible assets offsetting a decrease of 307 million yen in investment securities.

(Liabilities)

Total liabilities as of September 30, 2022, were 18,056 million yen, an increase of 4,540 million yen from June 30, 2022. Current liabilities increased by 409 million yen from June 30, 2022 to 12,095 million yen. This was largely due to an

increase of 621 million yen in notes and accounts payable - trade offsetting a decrease of 124 million yen in the current portion of long-term debt.

Fixed liabilities as of September 30, 2022 were 5,961 million yen, an increase of 4,131 million yen from June 30, 2022. This was mainly due to an increase of 4,000 million yen in bonds with convertible bond type warrants.

(Net Assets)

Total net assets as of September 30, 2022, were 9,729 million yen, an increase of 1,076 million yen from June 30, 2022. This was primarily due to increases of 500 million yen in capital stock and 500 million yen in capital surplus resulting from the Triple Four Investment Partnership exercising its right to have its bonds in the 3rd Series of Unsecured Bonds with Convertible Type Bond Warrants converted into new shares.

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