Startia : Summary of Consolidated Financial Results for the First Three Quarters Ended December 2021

February 14, 2022

Summary of Consolidated Financial Results

for the First Three Quarters Ended December 2021 [Japan GAAP]

Name of Company:

Startia Holdings, Inc.

Stock Code:

3393

Stock Exchange Listing:

Tokyo Stock Exchange

URL:

https://www.startiaholdings.com/

Representative

Title:

Representative Director and President & Group CEO

Name:

Hideyuki Hongo

Contact Person

Title:

Director, Group Operating Officer

Name:

Takao Uematsu

Tel:

[phone]

Date of filing quarterly report (tentative):

February 14, 2021

Date of commencement of dividend payment (tentative):

-

Supplementary materials for quarterly financial report:

Yes

Information meeting for quarterly financial report:

None

(Yen in millions, rounded down)

1. Consolidated financial results for the first nine months ended December 31, 2021 (April 1, 2021 - December 31, 2021)

(1) Results of operations (cumulative)

(Percentage figures represent year-on-year changes)

Net sales

Operating profit

Ordinary profit

Profit (loss) attributable

to owners of parent

Million yen

%

Million yen

%

Million yen

%

Million yen

%

Nine months ended Dec. 2021

10,875

17.0

(40)

-

124

204.1

395

-

Nine months ended Dec. 2020

9,293

0.6

12

(96.4)

40

(89.3)

(63)

-

Notes: Comprehensive income

Nine months ended December 31, 2021: 614 million yen (yoy - %)

Nine months ended December 31, 2020: (3) million yen (yoy - %)

Profit per share

Diluted profit per share

Yen

Yen

Nine months ended Dec. 2021

40.08

-

Nine months ended Dec. 2020

(6.41)

-

(2) Consolidated financial position

Total assets

Net assets

Equity ratio

Million yen

Million yen

%

As of December 31, 2021

9,718

3,799

39.1

As of March 31, 2021

8,790

4,577

52.1

Reference: Shareholders' equity

As of December 31, 2021:

3,799 million yen

As of March 31, 2021:

4,577 million yen

2. Dividends

Annual dividends

End of 1Q

End of 2Q

End of 3Q

End of FY

Total

Yen

Yen

Yen

Yen

Yen

Fiscal year ended March 2021

-

3.00

-

7.00

10.00

Fiscal year ending March 2022

-

4.00

-

Fiscal year ending March 2022

10.00

14.00

(forecast)

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

Breakdown of year-end dividends for the fiscal year ending March 2022 (forecast)

Ordinary dividend: 7.00 yen

Commemorative dividend: 3.00 yen

1

3. Consolidated earnings forecasts for the fiscal year ending March 31, 2022 (April 1, 2021 - March 31, 2022)

(Percentage figures represent year-on-year changes)

	Net sales		Operating profit	Ordinary profit	Profit attributable to	Profit per
		owners of parent	share
	Million yen		%	Million yen	%	Million yen	%	Million yen	%	Yen
Full year	14,750		10.7	150	591.9	300	326.8	500	-	50.53

Note: Revisions to the most recently announced sales and earnings forecasts: None

• Notes
• 1. Changes in significant subsidiaries during the first three quarters ended December 31, 2021 (Changes in specific subsidiaries accompanied by changes in the scope of consolidation): Yes

Newly included: One (Company name) Startia Lead, Inc.

Excluded:

1. Use of accounting methods that are specific to the preparation of the quarterly consolidated financial statements: None
2. Changes in accounting policies, changes in accounting estimates, and restatements
3. 1. Changes in accounting policies accompanying revisions in accounting standards and other regulations: Yes
   2. Changes other than in (a): None
   3. Changes in accounting estimates: None
   4. Restatements: None
4. Number of issued shares (common shares)
5. 1. Total number of issued shares at the end of the period (including treasury shares)

As of December 31, 2021:	10,240,400 shares	As of March 31, 2021:	10,240,400 shares
(b) Number of treasury shares at the end of the period
As of December 31, 2021:	1,511,719 shares	As of March 31, 2021:	355,582 shares
(c) Average number of shares during the period (quarterly consolidated cumulative period)
Period ended December 31, 2021: 9,862,221 shares	Period ended December 31, 2020: 9,851,903 shares

(Note) The number of treasury shares at the end of the period includes the Company's shares held by the trust account regarding the stock benefit trust (BBT・J-ESOP) and those held by the trust regarding the stock benefit trust (employee stockholding association purchase-type) (326,600 shares for the third quarter of the current year and 355,500 shares for the fiscal year ended March 2021). In addition, the number of the Company's shares held by the trust account regarding the stock benefit trust (BBT・J-ESOP) and those held by the trust account regarding the stock benefit trust (employee stockholding association purchase-type) was included in the number of treasury shares, which was to be deducted from the calculation of the average number of shares during the period (339,291 shares for the third quarter of the fiscal year ending March 2022 and 388,440 shares for the third quarter of the fiscal year ended March 2021).

• This quarterly earnings report is not subject to the audit by certified public accountants or auditing firms
• Explanation of the proper use of these earnings forecasts and other matters
  The forward-looking statements shown in this report are based on information currently available and certain assumptions that the Company regards as reasonable. The Company cautions that these statements do not guarantee future achievements. Actual results of operations may differ significantly from forward-looking statements for a number of reasons. Please refer to "1. Qualitative information regarding earnings for the first three quarters of the fiscal year (3) Explanation of consolidated earnings forecasts and other forward-looking statements" on page 7 for the suppositions that form the assumptions for earnings forecasts and cautions concerning the use thereof.

2

1. Qualitative information regarding earnings for the first three quarters of the fiscal year

(1) Explanation of results of operations

In the first three quarters of the fiscal year ending March 2022, the Japanese economy remained in a very severe environment as personal consumption and corporate earnings kept worsening due to the continuing standstill and contraction of economic activities amid the impact of COVID-19, and the future outlook continued to be unclear.

In this business environment, there is the urgent need for management reforms using IT in the industries to which the Startia Group belongs, due to the introduction of teleworking and the progress of environmental arrangements for a digital shift to cope with COVID-19. While demand for IT-related investments increased in areas like digital transformation (DX), a cautious stance on such investments continues to be seen amid the unclear environment.

The Startia Group is promoting its businesses to achieve the targets of the "Medium-Term Management Plan, 'NEXT'S 2025" announced on May 15, 2020, a five-yearmedium-term management plan from the fiscal year ended March 2021 to the fiscal year ending March 2025.

Particularly, in the Digital Marketing business, the Group has launched initiatives to make a big turn in the fiscal year ended March 2021 to a SaaS type business model as a subscription model. By lowering the hurdle for customers who could not pay for our conventional flow type services with high unit prices, we have been striving to increase the number of customers and ARR, or annual recurring revenue.

In the IT Infrastructure business, the Group has been establishing solid relationships with the customer base of small and medium-size enterprises, or SMEs, and supported them to improve their productivity consistently by proposing and providing solutions to those customers. In a bid to lead their operations in a better direction, the Group uses IT technologies that cover core and indispensable facilities at offices and support for office work.

In the first three quarters of the fiscal year under review, while we were affected by the self-restraint on economic activities due to the effects of COVID-19, customers began some business activities to cope with the situation amid the pandemic and the era after it. In the Digital Marketing business, orders for the SaaS tool group, Cloud CIRCUS, remained firm, accumulating monthly recurring revenue, or MRR. In the IT Infrastructure business, while business activities of some customers stood still or shrank due to the effects of COVID-19, sales and segment profit increased substantially from the same period of the previous fiscal year. At a Board of Directors meeting on September 30, 2021, the Company resolved that its wholly-owned subsidiary, Startia Lead, Inc., will take over the IT infrastructure business operated by YOSHIDA STORE (Main office: Fukushima Prefecture, "YOSHIDA STORE") and Sharp Document 21yoshida (Main office: Miyagi Prefecture, "SD21"). The business transfer was conducted on November 1, 2021. With this business acquisition, the Startia Group is expected to expand its IT infrastructure-related business and customers and to operate the business nationwide. Moreover, the acquisition of this business is expected to reduce procurement and other costs, to increase rebates, and also to lead to cross-selling in the Digital Marketing Business. Therefore, we will accelerate the enhancement of the Group's corporate value through this business acquisition.

In the first three quarters of the fiscal year, ordinary income increased substantially on equity gains of affiliated companies, since our equity-method affiliates performed well, as well as the reporting of distribution from an investment partnership as our investment target. Furthermore, extraordinary profit also increased considerably as we reported 416 million yen in gain on the sale of an affiliate's shares in July in line with the establishment of the aforementioned joint venture company and 148 million yen in gain on the sale of part of investment securities in

3

August. Extraordinary profit increased further as we reported 185 million in gain on the sale of part of shareholdings among investment securities upon listing of the subject shares in December.

As a result, sales in the first three quarters of the fiscal year under review totaled 10,875,848 thousand yen (up 17.0% from a year before), operating loss of 40,668 thousand yen (operating profit of 12,843 thousand yen a year before), ordinary profit of 124,476 thousand yen (up 204.1% from a year before), and net profit attributable to shareholders of the parent of 395,319 thousand yen (net loss attributable to shareholders of the parent of 63,116 thousand yen a year before).

Business segment results were as follows.

In the current fiscal year under review, we reclassified the Overseas segment into the Others segment as we transferred all shares in our Chinese subsidiary, Startia Shanghai Inc., to other parties. In the year-on-year comparison below, we used the relevant figures in the same quarter of the previous year under the new segmentation.

(Digital Marketing)

In the Digital Marketing business, the Group provides "Cloud CIRCUS*," a group of SaaS tools that help solve issues in five areas to increase the number of customers: transmission of information, attracting customers, enhancing experienced value of customers, fostering potential customers and turning them into actual customers, and preventing cancellations of contracts and increasing repeated customers. Cloud Circus is an easy-to-use tool that everyone can start and use quickly even if he/she engages in digital marketing for the first time ever. We also provide freemium plans for the service. On top of Cloud Circus, we support marketing consulting and operations by customers based on our expertise for the management of advertising and establishment of websites. By providing comprehensive support for the evolution of marketing power, together with the tools, we respond to the potential need for shifting to digitalization and provide multiple services to a single customer.

In the first three quarters of the current fiscal year, we released the fourth round of commercials simultaneously on nationwide TV stations and in taxis in Tokyo, leading to the further recognition of Cloud CIRCUS and the penetration of the features and understanding of various tools. In addition, the API linkage between BowNow and "Beegle Data," provided by Net Business Support Ltd., enhanced the added value of the existing services, in addition to the functional development. As of November 30, 2021, the "Sokoiru" online exhibition business, which had been operated by Reflux, was transferred to Startia. On November 30, 2021, the Company released the β (beta) version of a 3D model creation tool as an option for the AR promotion tool "LESSAR". On December 20, 2021, we entered a capital and business alliance with mediaequity.co,Ltd, the operator of the NFT publishing services "HEXA." On top of these active investments for expanding our services, we also increased the scale of our new sales channels, signing distributorship agreements with DAIWABO INFORMATION SYSTEM CO., LTD. and KDDI Malaysia Sdn. Bhd.

* Cloud CIRCUS

Area of Issue	Tool to Be Provided	Service
	ActiBooK	E-book production software, video sharing
	BlueMonkey	WebCMS & generating owned media
Transmission of information	AppGoose	Operation of applications
	Plusdb	Establishing databases
	creca	Producing landing pages for smartphones

4

Consulting for attracting
customers and running	－	Consulting for marketing and for running ads
advertisements
Experience	COCOAR	AR production software
LESSAR	AR production software for web browsers
Enhancing experienced value of	IZANAI	Chatbot
customers
Fostering potential customers
and turning them into actual	BowNow	Marketing automation
customers
Acquisition of repeaters &	Fullstar	Customer success management
prevention of cancellations

As a result, segment sales in the first three quarters of the fiscal year under review totaled 1,947,053 thousand yen (up 9.5% from a year before) and the segment loss (operating loss) of 271,036 thousand yen (the segment loss (operating loss) of 69,093 thousand yen a year before).

(IT Infrastructure)

In the IT Infrastructure segment, the Group is in charge of the sale, construction or maintenance of information and communication equipment such as MFPs (multi-function printers), UTM (Unified Threat Management) equipment, network equipment and business phones. It also provides consistent SI services from installing servers to system operation and maintenance as well as maintenance of equipment. It also provides customers with the consulting service, helping them to choose and introduce optimum tools fitted for their issues from several RPA (Robotic Process Automation) products, such as "Robo-Pat" and "RoboTANGO," and assist them in using the introduced tools until they are accustomed to them. Moreover, while telework has been promoted due to the workstyle reforms and the spread of COVID-19, we provide an electronic signature tool that conducts all the process from the signatures and seals of contracting parties, to delivery, storage, and others on a cloud basis.

Since IT equipment and services have risen in capabilities and fallen in prices in recent years, SMEs, the targets of the IT Infrastructure segment, are in a management environment ready for increasing their sales and productivity by using such equipment and services.

However, a majority of SMEs face a challenge of failing to introduce and use IT equipment and services sufficiently as they cannot afford to establish IT departments or appoint IT-dedicated employees due to lack of human resources. In a bid to cope with such challenge, we have a mission of assisting the sound growth and survival of customers. We propose, sell and provide support for optimal IT equipment and services and related office environments from the standpoint of customers.

In the first three quarters of the current fiscal year, the outlook remained uncertain due to the effects of COVID-19. Under these circumstances, in the retail electric power service business, the electricity price surged on the Japan Electric Power Exchange (JEPX). Moreover, sales of business phones decreased on a shortage of inventories at business phone manufacturers due to the lack of semiconductors. However, sales of MFPs and network equipment, the core products in the business, remained strong.

5