Tobila : Non-consolidated Financial Results for the First Quarter of the Fiscal Year Ending October 31, 2021

Non-consolidated Financial Results for the First Quarter of the Fiscal Year Ending October 31, 2021

(Three Months Ended January 31, 2021)

Company name: Tobila Systems Inc.

Securities code:
Representative:	Atsushi Akita, Representative Director and President
Contact:	Toshihito Goto, Managing Director and CFO
Tel: [phone]

4441

[Japanese GAAP]

March 10, 2021

Listing: Tokyo Stock Exchange, First Section URL:https://tobila.com

Scheduled date of filing of Quarterly Report:	March 10, 2021
Scheduled date of payment of dividend:	-
Preparation of supplementary materials for quarterly financial results:	Yes
Holding of quarterly financial results meeting:	Yes (Video distribution is planned)

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

1. Non-consolidated Financial Results for the First Quarter (November 1, 2020 - January 31, 2021) of the

Fiscal Year Ending October 31, 2021

(1) Results of operations

Three months ended Jan. 31, 2021

Three months ended Jan. 31, 2020

Net sales

Million yen 335 270

% 23.9 26.1

Operating profit	Ordinary profit	Profit
Million yen	Million yen	Million yen	%

% 22.7 (2.5)

123 100

(Percentages represent year-on-year changes)

Net income per share	Diluted net income per share
Three months ended Jan. 31, 2021 Three months ended Jan. 31, 2020	Yen 8.21 6.81	Yen 8.00 6.52

(2) Financial position

123 100

% 22.6 (2.5)

Total assets	Net assets	Equity ratio
As of Jan. 31, 2021 As of Oct. 31, 2020	Million yen 1,417 1,647	Million yen 1,129 1,347	% 79.7 81.7

Reference: Shareholders' equity (million yen) As of Jan. 31, 2021:

2. Dividends

1,129

As of Oct. 31, 2020:

84 21.9

69

3.8

1,347

Dividend per share
1Q-end	2Q-end	3Q-end	Year-end	Total
Fiscal year ended Oct. 31, 2020 Fiscal year ending Oct. 31, 2021	Yen - -	Yen 0.00	Yen -	Yen 10.80	Yen 10.80
Fiscal year ending Oct. 31, 2021 (forecasts)	0.00	-	11.70	11.70

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

3. Earnings Forecast for the Fiscal Year Ending October 31, 2021 (November 1, 2020 - October 31, 2021)

(Percentages represent year-on-year changes)

Net sales
Million yen	%	%	%
First half	681	15.5	241	(0.5)	240	11.4
Full year	1,410	14.2	517	3.7	515	9.3

Operating profit	Ordinary profit	Profit	Net income per share
Million yen	Million yen	Million yen	%	Yen
164	10.1	15.80
352	9.2	33.84

Note: Revision to the most recently announced earnings forecast: None

* Notes

• (1) Application of special accounting methods for presenting quarterly non-consolidated financial statements: None

• (2) Changes in accounting policies and accounting-based estimates, and restatements

  • 1) Changes in accounting policies due to revisions in accounting standards, others: None

  • 2) Changes in accounting policies other than 1) above: None

  • 3) Changes in accounting-based estimates: None

  • 4) Restatements: None

• (3) Number of outstanding shares (common shares)

  1) Number of shares outstanding at the end of the period (including treasury shares)

As of Jan. 31, 2021: 10,410,600 shares As of Oct. 31, 2020:

10,385,400 shares

• 2) Number of treasury shares at the end of the period

  As of Jan. 31, 2021:

  120,050 shares As of Oct. 31, 2020:

  50 shares

• 3) Average number of shares outstanding during the period

  Three months ended Jan. 31, 2021: 10,334,715 sharesThree months ended Jan. 31, 2020:

10,222,800 shares

* The current quarterly financial report is not subject to quarterly review by certified public accountants or auditing firms.

* Explanation of appropriate use of earnings forecasts, and other special items

Cautionary statement with respect to forward-looking statements

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

Contents of Attachments

1. Qualitative Information on Quarterly Financial Performance 2

(1) Explanation of Results of Operations 2

(2) Explanation of Financial Position 3

(3) Explanation of Earnings Forecast and Other Forward-looking Statements 3

2. Quarterly Non-consolidated Financial Statements and Notes 4

(1) Quarterly Non-consolidated Balance Sheet 4

(2) Quarterly Non-consolidated Statement of Income 5

(3) Notes to Quarterly Non-consolidated Financial Statements 6

Going Concern Assumption 6

Significant Changes in Shareholders' Equity 6

Segment and Other Information 6

Subsequent Events 7

1. Qualitative Information on Quarterly Financial Performance

(1) Explanation of Results of Operations

Teleworking is increasing in Japan, especially in metropolitan areas, as people become accustomed to new life styles created by the COVID-19 pandemic. As the number of people working home increased, there was a growing awareness of the vital role of telephones. In addition, companies are enacting business process reforms in ord er to achieve a digital transformation. All of these events are creating more interest in ICT tools and other items for improving the efficiency of business activities.

The number of fraud and spam activities using either phone calls or text messages (SMS phishing) targeting smartphone users and the resulting monetary losses are consistently high. Recently, fraud associated with the global spread of COVID-19 pandemic, is on the increase. Fraud activity that creates worries and threatens public safety is a constant problem. There is an increasing need for measures to maintain a safe communication environment that protects people from fraud, which is becoming increasingly frequent and sophisticated. As a result, there are growing expectations regarding our security products and services that are effective at protecting smartphone users from fraud.

We have continued to focus our resources on fraud and spam prevention services, our main source of revenue, based on our corporate philosophy "We open the door to a better future for our lives and the world." We have taken actions to enlarge service alliances, strengthen cooperation and increase MAU (Monthly Active Users) for more utilization of our fraud and spam prevention services. In addition, we focused on the sales of TobilaPhone Cloud, a cloud-based IP phone that started service at the end of March 2020.

As a result, net sales increased 23.9% year-on-year to 335,765 thousand yen in the first quarter of the fiscal year ending October 31, 2021. Operating profit increased 22.7% to 123,297 thousand yen, ordinary profit increased 22.6% to 123,138 thousand yen and profit was up 21.9% to 84,862 thousand yen.

Note: MAU is an important KPI for determining the contribution of our products and services to eliminating problems caused by fraud and spam activities. Our revenue is, however, not always directly affected by an increase or decrease in MAU because contracts with business clients such as telecommunications companies have different terms.

Business segment performance was as follows:

Fraud and spam prevention services

There are three service categories in this segment. A filtering service that blocks fraudulent and other malicious calls on mobile phones is the core business. The other categories are a filtering service for landline phones and TobilaPhone Cloud, a filtering service for phones used by businesses. We continued to focus on building an even larger and more powerful foundation for the provision of filtering services.

As a result, first quarter sales were 316,485 thousand yen, up 29.6% from one year earlier, and segment profit increased 14.9% to 198,524 thousand yen.

Others

Other services include a website design and operation support service, development projects outsourced by other companies and other activities. We do not intend to increase the scale of operations in this segment. First quarter sales decreased 27.8% to 19,279 thousand yen, and the segment profit was 11,613 thousand yen, up 3.4% from one year earlier.

Total operating profit is the sum of the profit of the two segments minus corporate expenses, which are not allocated to the reportable segment. Corporate expenses mainly consist of selling, general and administrative expenses thatare not attributable to the reportable segments. In the first quarter, corporate expenses increased 3.9% to 86,840 thousand yen mainly because of higher administrative expenses because of the larger scale of operations.

(2) Explanation of Financial Position

Total assets

Total assets decreased 230,617 thousand yen from the end of the previous fiscal year to 1,417,347 thousand yen at the end of the first quarter of current fiscal year. This was attributable mainly to a decrease of 273,617 thousand yen in cash and deposits and an increase of 30,039 thousand yen in investment securities.

Liabilities

Total liabilities decreased 13,452 thousand yen from the end of the previous fiscal year to 287,402 thousand yen. The main factors include a 48,374 thousand yen decrease in income taxes payable, a 70,932 thousand yen increase in advances received and a 33,164 thousand yen decrease in accounts payable-other.

Net assets

Total net assets decreased 217,164 thousand yen from the end of the previous fiscal year to 1,129,944 thousand yen. The main factors include the booking of profit of 84,862 thousand yen, a decrease of 112,161 thousand yen in retained earnings due to dividends paid and purchase of treasury shares of 195,240 thousand yen.

(3) Explanation of Earnings Forecast and Other Forward-looking Statements

We currently maintain the earnings forecast for the fiscal year ending October 31, 2021 that was announced on December 10, 2020.

2. Quarterly Non-consolidated Financial Statements and Notes

(1) Quarterly Non-consolidated Balance Sheet

(Thousands of yen)

FY10/20	First quarter of FY10/21
(As of Oct. 31, 2020)	(As of Jan. 31, 2021)
Assets
Current assets
Cash and deposits	1,218,358	944,741
Notes and accounts receivable-trade	150,496	160,673
Electronically recorded monetary claims-operating	-	429
Merchandise and finished goods	18,036	13,930
Raw materials and supplies	1,564	1,552
Other	25,539	29,208
Allowance for doubtful accounts	(66)	(281)
Total current assets	1,413,929	1,150,254
Non-current assets
Property, plant and equipment	65,249	61,368
Intangible assets
Software	96,958	103,837
Other	17,212	15,108
Total intangible assets	114,171	118,946
Investments and other assets	54,614	86,778
Total non-current assets	234,035	267,092
Total assets	1,647,964	1,417,347
Liabilities
Current liabilities
Accounts payable-trade	115	6,315
Income taxes payable	92,788	44,414
Provision for bonuses	-	11,673
Other	196,067	216,367
Total current liabilities	288,971	278,770
Non-current liabilities
Long-term borrowings	11,884	8,632
Total non-current liabilities	11,884	8,632
Total liabilities	300,855	287,402
Net assets
Shareholders' equity
Share capital	304,961	307,648
Capital surplus
Legal capital surplus	269,261	271,948
Total capital surpluses	269,261	271,948
Retained earnings
Other retained earnings
Retained earnings brought forward	772,977	745,677
Total retained earnings	772,977	745,677
Treasury shares	(90)	(195,330)
Total shareholders' equity	1,347,109	1,129,944
Total net assets	1,347,109	1,129,944
Total liabilities and net assets	1,647,964	1,417,347

(2) Quarterly Non-consolidated Statement of Income

For the Three-month Period

First three months of FY10/20	First three months of FY10/21
(Nov. 1, 2019 - Jan. 31, 2020)	(Nov. 1, 2020 - Jan. 31, 2021)
Net sales	270,950	335,765
Cost of sales	77,336	89,715
Gross profit	193,613	246,050
Selling, general and administrative expenses	93,159	122,752
Operating profit	100,454	123,297
Non-operating income
Cancellation income for services	-	139
Commission income	-	36
Other	0	0
Total non-operating income	0	176
Non-operating expenses
Interest expenses	54	34
Share issuance cost	-	129
Commission expenses	-	171
Total non-operating expenses	54	335
Ordinary profit	100,400	123,138
Extraordinary losses
Loss on retirement of non-current assets	83	45
Total extraordinary losses	83	45
Profit before income taxes	100,317	123,093
Income taxes-current	31,249	41,206
Income taxes-deferred	(558)	(2,975)
Total income taxes	30,690	38,231
Profit	69,626	84,862

(Thousands of yen)

(3) Notes to Quarterly Non-consolidated Financial Statements

Going Concern Assumption

Not applicable.

Significant Changes in Shareholders' Equity

In accordance with a resolution approved by the Tobila Systems Board of Directors on December 10, 2020, Tobila Systems repurchased 120,000 shares of its stock, resulting in an increase of 195,240 thousand yen in treasury shares during the first three months of the current fiscal year. The result of all these measures was treasury shares of 195,330 thousand yen at the end of the first quarter of the current fiscal year.

Segment and Other Information

Segment Information

I. First three months of FY10/20 (Nov. 1, 2019 - Jan. 31, 2020) Information related to net sales and profit or loss for the reportable segment

(Thousands of yen)

Reportable segment	Others (Note 1)	Total	Adjustment (Note 2)	Amounts shown on quarterly non-consolidated statement of income (Note 3)
Fraud and spam prevention services	Subtotal
Net sales External sales Inter-segment sales and transfers	244,241 -	244,241 -	26,709 -	270,950 -	- -	270,950 -
Total	244,241	244,241	26,709	270,950	-	270,950
Segment profit	172,770	172,770	11,235	184,005	(83,550)	100,454

statement

Notes: 1. Others represent the businesses which are not included in the reportable segment and includes a website design and operation support service and development projects outsourced by other companies.

• 2. The adjustment to segment profit includes corporate expenses that are not allocated to the reportable segment. Corporate expenses mainly consist of selling, general and administrative expenses that are not attributable to the reportable segment.

• 3. Segment profit is adjusted to be consistent with operating profit in the quarterly non-consolidated statement of income.

II. First three months of FY10/21 (Nov. 1, 2020 - Jan. 31, 2021) Information related to net sales and profit or loss for the reportable segment

(Thousands of yen)

Reportable segment	Others (Note 1)	Total	Adjustment (Note 2)	Amounts shown on quarterly non-consolidated statement of income (Note 3)
Fraud and spam prevention services	Subtotal
Net sales External sales Inter-segment sales and transfers	316,485 -	316,485 -	19,279 -	335,765 -	- -	335,765 -
Total	316,485	316,485	19,279	335,765	-	335,765
Segment profit	198,524	198,524	11,613	210,137	(86,840)	123,297

Notes: 1. Others represent the businesses which are not included in the reportable segment and includes a website design and operation support service and development projects outsourced by other companies.

• 2. The adjustment to segment profit includes corporate expenses that are not allocated to the reportable segment. Corporate expenses mainly consist of selling, general and administrative expenses that are not attributable to the reportable segment.

• 3. Segment profit is adjusted to be consistent with operating profit in the quarterly non-consolidated statement of income.

Subsequent Events

Disposal of Treasury Shares for the Purpose of Granting Restricted Stock

In accordance with a resolution approved by the Tobila Systems Board of Directors on January 21, 2021, Tobila Systems has implemented disposal of treasury shares, and payment was completed on February 19, 2021.

• 1. Disposal of treasury shares

  (1)Deadline for disposal	February 19, 2021
  (2)Type and number of shares to be sold	Tobila Systems common stock: 25,000 shares
  (3)Disposal price	1,325 yen per share
  (4)Total disposal price	33,125,000 yen
  (5)Allottee	41 employees of Tobila Systems: 25,000 shares
  (6)Other	Tobila Systems has submitted the Securities Registration Statement regarding this disposal of treasury shares in accordance with the Financial Instruments and Exchange Act.

• 2. Purpose and reason for the disposal of treasury shares

  On December 10, 2020, the Board of Directors of Tobila Systems has approved the resolution to establish a restricted stock compensation plan for its employees, who have fulfilled the requirements. There are two reasons for the establishment of this plan. First, the ownership of Tobila Systems stock will give employees a greater incentive to contribute to the sustained growth of corporate value. Second, holding this stock will further align the interests of employees with the interests of shareholders. Employees who have fulfilled the requirements use all monetary compensation claims received from Tobila Systems through this compensation plan as payment for receiving the Tobila Systems common stock.

This financial report is solely a translation of "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.