MarketEnterprise : Consolidated Financial Results for the First Quarter of the Fiscal Year Ending June 30, 2022

Disclaimer:

This financial report is solely a translation of the "Kessan Tanshin" (in Japanese, including attachments), 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.

Consolidated Financial Results

for the First Quarter of the Fiscal Year Ending June 30, 2022

(Three Months Ended September 30, 2021)

		[Japanese GAAP]
		November 12, 2021
Company name: MarketEnterprise Co., Ltd.	Listing: Tokyo Stock Exchange
Securities code:	3135	URL: http://www.marketenterprise.co.jp/
Representative:	Yasushi Kobayashi, President, CEO
Contact:	Kenichi Imamura, Director, CFO
	Tel: [phone]
Scheduled date of filing of Quarterly Report:	November 15, 2021
Scheduled date of payment of dividend:	-
Preparation of supplementary materials for quarterly financial results: Yes
Holding of quarterly financial results meeting:	None

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

1. Consolidated Financial Results for the First Quarter of the Fiscal Year Ending June 30, 2022 (July 1, 2021 to September 30, 2021)

(1) Consolidated results of operations			(Percentages represent year-on-year changes)
	Net sales		Operating profit	Ordinary profit	Profit attributable to
		owners of parent
	Millions of yen		%	Millions of yen	%	Millions of yen	%	Millions of yen	%
Three months ended Sep. 30, 2021	2,607		(9.2)	(165)	-	(161)	-	(121)	-
Three months ended Sep. 30, 2020	2,870		10.5	163	(4.2)	160	(6.2)	84	(9.4)

Note: Comprehensive income (millions of yen)

Three months ended Sep. 30,	2021:(121)	(- %)
Three months ended Sep. 30,	2020: 100	(down 10.9%)

	Net income per share	Diluted net income per
	share
	Yen	Yen
Three months ended Sep. 30, 2021	(23.00)	-
Three months ended Sep. 30, 2020	16.12	15.30

(2) Consolidated financial position

	Total assets	Net assets		Equity ratio
	Millions of yen	Millions of yen		%
As of Sep. 30, 2021	3,297	1,532		40.0
As of Jun. 30, 2021	3,461	1,653		41.5
Reference: Shareholders' equity (millions of yen)	As of Sep. 30, 2021: 1,318	As of Jun. 30, 2021: 1,437

2. Dividends

			Dividend per share
	1Q-end	2Q-end	3Q-end	Year-end	Total
	Yen	Yen	Yen	Yen	Yen
Fiscal year ended Jun. 30, 2021	-	0.00	-		0.00		0.00
Fiscal year ending Jun. 30, 2022	-
Fiscal year ending Jun. 30, 2022		0.00	-		0.00		0.00
(forecasts)
Note: Revisions to the most recently announced dividend forecast: None

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

(Percentages represent year-on-year changes)

	Net sales		Operating profit		Ordinary profit		Profit attributable to	Net income per share
				owners of parent
	Millions of yen		%	Millions of yen		%	Millions of yen		%	Millions of yen		%	Yen
Full year	12,000		10.3	(400)		-	(405)		-	(440)		-	(83.10)
Note: Revisions to the most recently announced earnings forecast: None

* Notes

(1) Changes in significant subsidiaries during the period (changes in scope of consolidation): None

Newly added: -

Excluded: -

1. Application of special accounting methods for presenting quarterly consolidated financial statements: None
2. Changes in accounting policies and accounting-based estimates, and restatements
3. 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
4. Number of shares outstanding (common shares)
5. 1. Number of shares outstanding as of the end of the period (including treasury shares)

As of Sep. 30, 2021:

5,296,200 shares

As of Jun. 30, 2021:

5,295,300 shares

1. Number of treasury shares as of the end of the period

As of Sep. 30, 2021:	349 shares	As of Jun. 30, 2021:	349 shares
3) Average number of shares outstanding during the period
Three months ended Sep. 30, 2021:	5,295,176 shares	Three months ended Sep. 30, 2020:	5,226,087 shares

• This summary report is not subject to quarterly review by certified public accountants or auditing firms.
• Explanation of appropriate use of earnings forecast, and other special items

Cautionary statement with respect to forecasts

Forecasts of future performance in these materials are based on assumptions judged to be valid and information available to MarketEnterprise's management at the time these materials were prepared, but are not promises by MarketEnterprise regarding future performance. Actual results may differ significantly from these forecasts for a number of reasons.

MarketEnterprise Co., Ltd. (3135) Financial Results for the First Quarter of FY6/22

Contents of Attachments
1. Qualitative Information on Quarterly Consolidated Financial Performan ce	2
(1)	Explanation of Results of Operations	2
(2)	Explanation of Financial Position	4
(3)	Explanation of Consolidated Forecast and Other Forward -looking Statements	4
2. Quarterly Consolidated Financial Statements and Notes	5
(1)	Quarterly Consolidated Balance Sheet	5
(2)	Quarterly Consolidated Statements of Income and Comprehensive Income	6
(3)	Notes to Quarterly Consolidated Financial Statements	8
	Going Concern Assumption	8
	Significant Changes in Shareholders' Equity	8
	Changes in Accounting Policies	8
	Segment Information	8
	Revenue Recognition	9

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MarketEnterprise Co., Ltd. (3135) Financial Results for the First Quarter of FY6/22

1. Qualitative Information on Quarterly Consolidated Financial Performance

(1) Explanation of Results of Operations

1) First quarter overview of the economy and business environment

In the first quarter of the fiscal year ending in June 2022, states of emergency and other measures to combat the pandemic restricted economic activity and consumer spending in Japan nationwide. Although the Japanese economy was sluggish, benefits of vaccinations and other actions concerning the pandemic are emerging. The government is reducing restrictions on various activities, but the outlook is still uncertain and the economic climate remains challenging.

Japanese consumers continue to hold down spending and purchase lower-priced items. But emphasis on economizing and seeking low prices is not the only defining characteristic of consumer spending. Purchasing activity by consumers in Japan is becoming more diverse as the range of ways people spend their money expands in order to reflect the different values and preferences of consumers. These trends are most pronounced with regard to purchases made using the internet.

In this social environment, activities of the MarketEnterprise Group ("the Group") are guided by the "optimized trading company" vision that reflects the growing diversity of consumption behavior and the increasing interest in smart consumption and gives everyone the best options for purchasing products and services. We are also developing our business to play a role in the development of the circular economy, which is an economic activity aimed at the realization of SDGs, that has become a global trend in recent years .

2) First quarter results of operations

The Group's vision is to operate as an "optimized trading company for the creation of a sustainable society." Group companies are dedicated to providing products and services that match the increasingly diverse range of consumption behavior and styles of people and, for some products and services, companies. Activitie s include use of the internet to give customers a selection of purchasing channels in order to match their needs. On August 13, 2021, we announced a medium-term management plan covering the three-year period ending in June 2024. The goals for the plan's final year are net sales of 20 billion yen and an operating profit of 1.2 billion yen. Numerous initiatives are under way for accomplishing these goals.

In the first quarter, there were many up-front expenditures, primarily involving the second-hand online business, for achieving medium-term growth. Examples include substantial marketing expenditures to increase the number of items submitted for purchasing in the personal second-hand field, new business sites for agricultural equipment operations, and expenditures for recruiting activities and IT systems for building a base to support growth in earnings. In the media business, there were maintenance activities for articles in this business to reflect updated search engine algorithms. Due to this maintenance and other activities, there are signs of a recovery in search rankings for highly profitable keywords from the low levels of the previous fiscal year. In the mobile & telecommunications business, a new rate plan was introduced and activities focused on selli ng new subscriptions in order to build a sound base for generating recurring income for a medium term.

Due to activities that placed priority on building a framework for the medium -term generation of earnings, mainly in the second-hand business, net sales were 2,607 million yen, 9.2% lower than in the first quarter of the previous fiscal year. Operating loss was 165 million yen, compared with profit of 163 million yen one year earlier, ordinary loss was 161 million yen, compared with profit of 160 million yen one year earlier, and loss attributable to owners of parent was 121 million yen, compared with profit of 84 million yen one year earlier.

3) Overview by Business Segment

• Second-HandOnline Business

This business, which is the core business of the Group, buys and sells second-hand merchandise by using only the internet and operating no brick-and-mortar stores.

To purchase second-hand merchandise, this business operates the takakuureru.com comprehensive purchasing website for all types of merchandise as well as other purchasing websites for specific categories of merchandise.

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MarketEnterprise Co., Ltd. (3135) Financial Results for the First Quarter of FY6/22

Second-hand merchandise is sold using the internet by posting goods simultaneously on many websites, including YAHUOKU!, Rakuten, Amazon, ReRe, our own e-commerce site, and others. The main targets of this business are large or expensive merchandise and merchandise in large quantities. These types of merchandise are not suitable for C2C transactions because of the difficulty of packaging and sending these items. Using the C2B2C structure instead gives people confidence about the quality of merchandise and other aspects of these transactions due to the inclusion of a reputable company as an intermediary. This business uses a cross-bordere-commerce platform for agricultural equipment, which is sold to companies. We provide one-stop convenience by handling every step from the receipt of orders from customers in other countries to export procedures required for shipping equipment to these customers. In addition, we are diversifying the second-hand online business by utilizing synergies with existing operations of this business such as Oikura, a nationwide platform that matches sellers and buyers (second-hand stores throughout Japan).

To accomplish the goals of the medium-term management plan, there were many up-front expenditures during the first quarter. Examples include substantial marketing expenditures to increase the number of items submitted for purchasing, new business sites for agricultural equipment operations, and expenditures for recruiting activities and IT systems. In addition, Oikura, an internet platform that matches people who want to sell items with second-hand stores throughout Japan, conducted a large volume of sales activities to increase the number of member stores that use this platform.

Due to these large up-front expenditures, sales decreased 11.6% to 1,472 million yen and segment loss was 4 million yen, compared with profit of 228 million yen.

• Media Business

The media business uses internet media to distribute useful information concerning purchasing activities to people interested in smart consumption. This business operates eight internet media in five categories.

• iPhone Kakuyasu SIM Tsushin and SIMCHANGE, which have information about mobile & telecommunications
• Takakuureru.com Magazine and Oikura Magazine, which have information about selling and disposing items
• Beginners and Outlet Japan, which have information about buying items
• Saiyasu-Syuuri.com,which has information about repairing items
• Used Agricultural Equipment Market UMM, a platform for buying and selling used agricultural equipment

In the first quarter, there were maintenance activities for articles in this business to reflect updated search engine algorithms. Due to this maintenance and other activities, there are signs of a recovery in search rankings for highly profitable keywords. There is also a recovery in revenue received for directing customers to our own services involving telecommunications. There was also strong revenue for directing customers to media outside the MarketEnterprise Group in sectors other than telecommunications. Despite these activities, sales and earnings were down from one year earlier when all keywords had high search rankings. As a result, sales decreased 25.7% to 126 million yen and segment profit decreased 29.9% to 67 million yen.

• Mobile & Telecommunications Business

Consolidated subsidiary MEmobile Co., Ltd. is the primary component of this business. This company provides telecommunication services that are less expensive, simpler and easier to understand. The main service, which uses the Kashimo brand (an abbreviation for the words "smart mobile" in Japanese), is an internet connection service that uses a mobile Wi-Fi router.

In the first quarter, signs of a recovery began to appear concerning the number of customers sent to this business from our own telecommunications media operated by the media business. As a result, the number of new subscriptions is improving, chiefly for the new WiMAX 5G service. A new rate plan was introduced to build a base for the medium-term generation of recurring income. The new plan temporarily reduces earnings recorded when a new subscription is sold but increases monthly earnings over the entire subscription period. This new rate plan lowered the profitability of this business in the first quarter because the plan spreads earnings over a longer

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