Poletowin Pitcrew : Consolidated Financial Results For the Nine Months Ended October 31, 2021

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Poletowin Pitcrew Holdings, Inc. (3657) Consolidated Financial Results for the Nine Months Ended October 31, 2021

December 3, 2021

Consolidated Financial Results

For the Nine Months Ended October 31, 2021

(Japanese Accounting Standards)

Poletowin Pitcrew Holdings, Inc.

First Section of Tokyo Stock Exchange 3657 https://www.poletowin-pitcrew-holdings.co.jp Teppei Tachibana, President & CEO

Joji Yamauchi, Director & CFO

Tel: [phone]

Scheduled date to file Quarterly Securities Report: December 9, 2021

Scheduled date to commence dividend payments:

Supplementary explanatory materials prepared:

Explanatory meeting: No

(Millions of yen with fractional amounts discarded, unless otherwise noted.)

1. Consolidated financial results for the Nine months ended October 31, 2021 (from February 1, 2021 to October 31, 2021)

(1) Consolidated operating results

(Percentages indicate year-on-year changes.)

Attributable to:

Net sales

Operating income

Ordinary income

Shareholders of the parent

company

Net income per share

Nine months ended

Millions of yen

％

Millions of yen

％

Millions of yen

％

Millions of yen

％

October 31, 2021

24,334

26.7

2,422

8.6

2,428

- 1.6

1,624

5.8

October 31, 2020

19,203

1.9

2,231

- 13.2

2,468

- 0.6

1,535

4.1

(Note) Comprehensive income

Nine months ended October 31, 2021: ¥1,883 million yen / 52.1%

Nine months ended October 31, 2020: ¥1,237 million yen / -16.6%

Net income

Diluted net income

per share

per share

Nine months ended

Yen

Yen

October 31, 2021

42.87

－

October 31, 2020

40.55

40.53

(2) Consolidated financial position

Total assets

Net assets

Equity ratio

As of

Millions of yen

Millions of yen

％

October 31, 2021

22,443

17,065

76.0

January 31, 2021

20,389

15,675

76.9

(Reference) Equity

As of October 31, 2021: ¥17,065 million yen

As of January 31, 2021: ¥15,671 million yen

Poletowin Pitcrew Holdings, Inc. (3657) Consolidated Financial Results for the Nine Months Ended October 31, 2021

2. Cash dividends

		Cash dividends per share
	First quarter	Second quarter	Third quarter	Fiscal year-end	Annual
	Yen	Yen	Yen	Yen	Yen
Fiscal year ended January 31, 2021	-	0.00	-	13.00	13.00
Fiscal year ending January 31, 2022	-	0.00	-
Fiscal year ending January 31, 2022 (Forecasts)				14.00	14.00

(Notes) Change in dividend forecasts for the fiscal year ending January 31, 2022 during the Nine months ended October 31, 2021: No

3. Consolidated financial forecasts for the fiscal year ending January 31, 2022

(from February 1, 2021 to January 31, 2022)

(Percentages indicate year-on-year changes.)

	Net sales	Operating		Ordinary	Profit attributable	Net income
	profit		profit		to owners of parent	per share
	Millions	%	Millions		%	Millions		%	Millions	%	Yen
	of yen	of yen		of yen		of yen
Fiscal year ending	33,224	24.3	3,535		9.9	3,539		- 1.6	2,157	1.7	56.53
January 31, 2022

(Note) Change in financial forecasts for the fiscal year ending January 31, 2022 during the Nine months ended October 31, 2021: No

* Notes:

(1) Changes in significant subsidiaries during the Nine months ended October 31, 2021 (changes in specified subsidiaries

resulting in a change in the scope of consolidation)

: No

1. Use of particular accounting treatments in preparation of quarterly consolidated financial statements : Yes
2. Changes in accounting policies, changes in accounting estimates, and restatement of revisions

a. Changes in accounting standards due to revisions to accounting standards and other guidelines	: No
b. Changes in accounting policies due to reasons other than a. above	: No
c. Changes in accounting estimates	: No
d. Restatement of revisions	: No

1. Number of common shares issued

1. Total number of issued shares at the end of the period (including treasury stock) As of October 31, 2021 : 38,156,000 shares
   As of January 31, 2021 : 38,156,000 shares
2. Number of shares of treasury stock at the end of the period

As of October 31, 2021 : 270,702 shares
As of January 31, 2021 : 269,734 shares
c. Average number of shares (Cumulative)
For the Nine months ended October 31, 2021	: 37,886,118 shares
For the Nine months ended October 31, 2020	: 37,858,126 shares

• This report falls outside the scope of quarterly review procedures of a certified public accountant or an audit firm.
• Proper use of earnings forecasts, and other special matters

(Disclaimer to forward-looking statements)

The forward-looking statements, including earnings forecasts, contained in these materials are based on information currently available to the Company and on certain assumptions deemed to be reasonable. These statements do not guarantee that the Company will achieve its earnings forecasts. In addition, actual business and other results may differ substantially due to various factors. For details on the conditions assumed and the cautionary notes and items in the financial forecasts, please refer to "Qualitative Information on Consolidated Earnings Forecasts" on page 5 of this report.

(How to obtain supplementary materials explaining earnings for the quarter)

The Company discloses the Supplementary Information to the Financial Results on the TDnet on the same day.

	Poletowin Pitcrew Holdings, Inc.
	(3657) Consolidated Financial Results for the Nine Months Ended October 31, 2021
〇Table of Contents
1. Qualitative Information on Financial Results ...................................................................................................................	2
(1)	Analysis of Operating Results.....................................................................................................................................	2
(2)	Analysis of Financial Position ....................................................................................................................................	3
(3)	Qualitative Information on Consolidated Earnings Forecasts .....................................................................................	3
2. Consolidated Financial Statements...................................................................................................................................	4
(1)	Consolidated Balance Sheets ......................................................................................................................................	4
(2)	Consolidated Statements of Income and Consolidated Statements of Comprehensive Income..................................	6
Consolidated Statements of Income .............................................................................................................................	6
	(Nine-monthperiod ended October 31, 2021) ............................................................................................................	6
Consolidated Statement of Comprehensive Income .....................................................................................................	7
	(Nine-monthperiod ended October 31, 2021) ............................................................................................................	7
(3)	Notes to Consolidated Financial Statements ...............................................................................................................	8
(Notes on Going Concern Assumption) .......................................................................................................................	8
(Notes on Significant Changes in Shareholders' Equity) .............................................................................................	8
(Use of particular accounting treatments in preparation of quarterly consolidated financial statements) ....................	8
(Segment Information) .................................................................................................................................................	9

Poletowin Pitcrew Holdings, Inc. (3657) Consolidated Financial Results for the Nine Months Ended October 31, 2021

1. Qualitative Information on Financial Results

(1) Analysis of Operating Results

During the third quarter of the consolidated fiscal year under review, the Japanese economy is expected to pick up, partly due to the effects of various policies and improvements in overseas economies, while taking thorough countermeasures against COVID-19 and promoting vaccinations. However, it is necessary to pay close attention to downside risks due to the impact through the supply chain, and the impact of trends in COVID-19 in Japan and overseas, as well as fluctuations in financial and capital markets.

Under these economic conditions, in the markets related to Poletowin Pitcrew Holdings Group's core Testing/Verification & Evaluation Business, the game software market is expanding due to voluntary restraint from going out as a result of the global spread of COVID-19, while the hardware market is being affected by the shortage of semiconductors. On the other hand, in the related markets of the Internet Support Business, similarly, the e- commerce and cashless settlement markets, which are non-face-to-face and contactless services, are expanding. In addition, the spread of COVID-19 is encouraging schools to move classes online, and the government's GIGA school initiative's importance is increasing.

The Group provides checking, testing, monitoring and inspection services that requires human input on a contractual basis to corporate clients. The demand for such outsourcing services has been growing as client's business has diversified and have expanded overseas. Another reason behind this is that business processes have become more advanced and sophisticated. As new services are created in the market, both Testing/Verification & Evaluation Business and Internet Supporting Business, are seeing new business opportunities. During the third quarter of the consolidated fiscal year under review, the Company relocated its head office and increased the floor space in February in order to consolidate the sales and administrative departments of the Company and its major subsidiaries into the same office. In addition, the Company absorbed and merged with Pacer Inc., an intermediate holding company, in March in order to improve operating efficiency. In February, Pole To Win Co., Ltd. transferred its business related to tuning game difficulty and other aspects and development support to CREST Inc., with the aim of expanding its media contents-related business. In July, MSD Holdings Inc. became a subsidiary, for the purpose of undertaking software and system development other than games, as well as third-party verification services. In April, QBIST Inc. and CREST Inc. relocated their headquarters to the same building and increased the floor space in order to improve synergy in the media contents business field of both companies. QBIST Inc. made Panda Graphics Inc. a subsidiary in August with the aim of increasing its share of the game graphics contract development market. In August, ENTALIZE CO., Ltd. made Delfi Sound Inc. a subsidiary in order to improve its ability to handle voice recording. PITCREW CO., LTD. opened the Niigata Service Center in July and relocated and increased the floor space of the Sendai Service Center in anticipation of increased orders in the future. PITCREW CO., LTD. also absorbed and merged IMAid Inc. to consolidate and streamline operating resources. Overseas, OneXP LLC (a U.S. subsidiary), OneXP UK Limited (a U.K. subsidiary), 1518 Studios Rus LLC (a Russian subsidiary), and SIDE France SAS (a French subsidiary) were established for the purpose of business expansion. Through the collaboration between domestic bases and 21 overseas bases in 12 countries, we promoted the provision of "one-stop full services" such as testing, localization, voice recording, game development and marketing support, monitoring, and customer support on a global scale.

As a result of these factors, consolidated net sales for the term were ¥24,334,894 thousand (up 26.7%). Operating profit was ¥2,422,613 thousand (up 8.6%). Ordinary profit was ¥2,428,968 thousand (down 1.6%) and Profit attributable to owners of parent was ¥1,624,160 thousand (up 5.8%).

Poletowin Pitcrew Holdings, Inc. (3657) Consolidated Financial Results for the Nine Months Ended October 31, 2021

Results by segment were as follows.

Testing/Verification & Evaluation Business

By promoting collaboration between domestic and overseas group companies the group strived to support global deployment for domestic and foreign game makers, and promoted orders for outsourcing services such as defect detection, localization customer support (overseas) and voice recording, etc. for game software developers. At Qaas Inc., orders for third-party verification services in the non-game market increased. At QBIST Inc., colorful Inc., Panda Graphics Inc. and CREST Inc. promoted the expansion of media contents business related to graphics, game, and animation production. CREST Inc. released "ARIA CHRONICLE" (Nintendo Switch version) in July and "METALLIC CHILD" (Nintendo Switch and Steam versions) in September. In addition, Pole To Win Co., Ltd. received orders to create ICT environment at schools for the GIGA School Project. Specifically, preparing kitting service for tablets. As a result, Testing/Verification & Evaluation Business sales increased by 29.3 % year on year, to ¥18,641,108 thousand. However, due to an increase in one-time expenses related to M&A and upfront expenses related to the expansion of the media content business, including game and animation production, operating profit decreased by 3.9% to ¥1,821,667 thousand yen.

Internet Supporting Business

In the Internet Supporting Business, the Group increased orders for monitoring fraud for FinTech related services such as QR code settlement and virtual currency. Services related to identity verification, detection of anti-money laundering and behaviour method also increased orders. Also, there was an increase in orders for data recognition evaluation in AI-related services and customer support for the game market through collaborating sales activities with Testing/Verification & Evaluation. In addition, PITCREW CO., LTD. received orders for ICT environment design and other services as a school ICT support provider under the government's GIGA School Project. As a result, Internet Supporting Business sales increased by 18.0%, to ¥5,498,496 thousand. Operating profit increased by 62.7%, to ¥604,802 thousand.

Other

Palabra Inc. provide services to produce barrier-free subtitles audio guides for television program and movies to prepare for the advent of barrier-free motion pictures. PITCREW CO., LTD. has taken over the business of the former IMAid Inc. and provides support services such as visa obtainment, school enrollment and daily life procedures for foreign personnel working in medical institutes. The sales resulted in an increase of 51.6% to ¥195,289 thousand and operating loss of ¥24,507 thousand, down from operating loss of ¥97,535 thousand a year earlier.

1. Analysis of Financial Position
   Total Assets
   Current assets decreased by ¥391,080 thousand or 2.3% from the previous fiscal year-end, to ¥16,711,468 thousand. This was mainly due to a decrease of ¥1,393,828 thousand in cash and deposits, despite increases of ¥743,838 thousand in notes and accounts receivable-trade and ¥227,543 thousand in other current assets (mainly advance payments).
   Non-current assets increased by ¥2,445,550 thousand, or 74.4% from the previous fiscal year-end, to ¥5,732,327 thousand. The key factor was an increase of ¥1,912,084 thousand in goodwill and ¥339,937 thousand in deferred tax assets.
   As a result, total assets increased by ¥2,054,469 thousand, or 10.1% from the previous fiscal year-end, to ¥22,443,795 thousand.

Liabilities

Current liabilities increased by ¥419,514 thousand, or 9.4% from the previous fiscal year-end, to ¥4,873,521 thousand. This was mainly due to increases of ¥472,029 thousand in accounts payable-other, ¥359,621 thousand in accrued expenses, and ¥201,728 thousand in provision for bonuses, despite decreases of ¥504,774 thousand in income taxes payable and ¥134,848 thousand in other current liabilities (mainly advance received). Non-current liabilities increased by ¥244,285 thousand, or 93.9% from the previous fiscal year-end, to ¥504,514 thousand. This was mainly due to an increase of ¥238,180 thousand in long-term borrowings.

As a result, total liabilities increased by ¥663,799 thousand, or 14.1% from the end of the previous fiscal year, to ¥5,378,036 thousand.