Wellnet : Financial Results for the Nine Months Ended March 31, 2022 (Non-consolidated)

Financial Results for the Nine Months Ended March 31, 2022

[Japanese GAAP] (Non-consolidated)

April 28, 2022

Company name: WELLNET CORPORATION

Stock exchange listing: Tokyo Stock Exchange Code number: 2428

URL:https://www.wellnet.co.jp

Representative: Kazuhiro Miyazawa, President and Representative Director

Contact: Tatsuya Igarashi, Executive Officer, General Manager of Administrative Division Phone: [phone]

Scheduled date of filing quarterly securities report: May 13, 2021 Scheduled date of commencing dividend payments: -

Availability of supplementary briefing material on quarterly financial results: None Schedule of quarterly financial results briefing session: No

(Amounts of less than one million yen are rounded down.)

1. Financial Results for the Nine Months Ended March 31, 2022 (July 1, 2021 to March 31, 2022)

(1) Operating Results

(% indicates changes from the previous corresponding period.)

Net sales	Operating profit	Ordinary profit	Profit
Nine months ended March 31, 2022 March 31, 2021	Million yen % 6,732 0.1 6,724 (5.5)	Million yen % 576 12.9 510 (27.0)	Million yen % 585 8.0 542 (23.2)	Million yen % 419 11.9 375 (23.4)

Basic earnings per share	Diluted earnings per share
Nine months ended March 31, 2022 March 31, 2021	Yen 22.28 19.94	Yen 22.20 19.87

(2) Financial Position

Total assets	Net assets	Equity ratio	Net assets per share
As of March 31, 2022 As of June 30, 2021	Million yen 25,051 21,257	Million yen 7,289 7,175	% 28.9 33.4	Yen 383.72 337.37

(Reference)

Equity:As of March 31, 2022:

As of June 30, 2021:

¥7,233 million ¥7,102 million

2. Dividends

Annual dividends
1st quarter-end	2nd quarter-end	3rd quarter-end	Year-end	Total
Fiscal year ended June 30, 2021 Fiscal year ending June 30, 2022	Yen - -	Yen 0.00 0.00	Yen -	Yen 15.47	Yen 15.47
-
Fiscal year ending June 30, 2022 (Forecast)	13.29	13.29

(Note) Revision of dividends forecast from recently announced figures: No

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

(% indicates changes from the previous corresponding period.)

Net sales	Operating profit	Ordinary profit
Full year	Million yen 9,600 % -	Million yen 730 % -	Million yen 730 % -

Profit	Basic earnings per share
Full year	Million yen 500 % -	Yen 26.56

(Notes)

• 1. This forecast is based on the expectation that the movement of people, especially in Japan, will recover to a certain degree, and will be greatly affected by the degree of recovery. The Company does not currently anticipate any extraordinary loss related to the handling of the former Sapporo office building or extraordinary loss related to the valuation of investment securities at this point in time. The Company will promptly announce any significant events that should be disclosed.

• 2. The Company has applied the "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29) and relevant ASBJ regulations from the beginning of the fiscal year ending June 30, 2022. Therefore, the financial results forecast above represents the amounts calculated by applying the said accounting standard and relevant regulations, and does not include year-on-year changes.

* Notes:

• (1) Adoption of special accounting procedures for preparing quarterly financial statements: No

• (2) Changes in accounting policies, changes in accounting estimates and retrospective restatement

  • 1) Changes in accounting policies due to the revision of accounting standards: Yes

  • 2) Changes in accounting policies other than 1) above: No

  • 3) Changes in accounting estimates: No

  • 4) Retrospective restatement: No

  (Note) For more details, please refer to "Changes in accounting policies, (3) Notes to Financial Statements, 2. Financial Statements and Significant Notes" on page 7 of the attached materials.

• (3) Total number of issued shares (common shares)

  • 1) Total number of issued shares at the end of the period (including treasury shares):

    As of March 31, 2022: 19,400,000 shares

    As of June 30, 2021: 1,940,000 shares

  • 2) Total number of treasury shares at the end of the period:

    As of March 31, 2022: 547,985 shares

    As of June 30, 2021: 577,865 shares

  • 3) Average number of shares during the period:

    Nine months ended March 31, 2022: 18,837,511 shares Nine months ended March 31, 2021: 18,812,203 shares

* These financial results are outside the scope of quarterly review procedures by a certified public accountant or an audit corporation.

* Explanation of the proper use of financial results forecast and other notes

The financial results forecast and dividends forecast above are based on certain assumptions judged to be reasonable based on information available to the Company at the time of the announcement of this document. Actual business performance and dividends may differ from the forecasts due to various factors that may arise in the future.

Table of Contents

1. Qualitative Information on Financial Results for the Period under Review ........................................................... 2

(1) Explanation of Business Results ........................................................................................................................ 2

(2) Explanation of Financial Position ...................................................................................................................... 4

(3) Explanation of Financial Results Forecast and Other Forward-looking Information ......................................... 4

2. Financial Statements and Significant Notes ........................................................................................................... 5

(1) Balance Sheet ..................................................................................................................................................... 5

(2) Statement of Income ........................................................................................................................................... 6

(Nine months ended March 31) .................................................................................................................... 6

(3) Notes to Financial Statements ............................................................................................................................ 7

(Notes on going concern assumption) ........................................................................................................... 7

(Notes to substantial change in the amount of shareholders' equity) ............................................................ 7

(Adoption of special accounting procedures for preparing quarterly financial statements) .......................... 7

(Changes in accounting policies) .................................................................................................................. 7

(Changes in accounting estimates) ................................................................................................................ 7

(Significant subsequent events) .................................................................................................................... 7

1. Qualitative Information on Financial Results for the Period under Review

(1) Explanation of Business Results

1) Analysis of Business Results

In the Japanese economy in the nine months of the fiscal year under review (July 1, 2021 to March 31, 2022), the impact of the novel coronavirus disease (COVID-19) has been prolonged, and the situation still remains unpredictable.

In the non-face-to-face payment market, the Company's business domain, there has been a sharp decline in the movement of people such as inbound and domestic travel, and with the impact on transportation-related businesses such as airlines, buses, and railroads at the end of March 2022, activity has not returned to pre-COVID-19 levels yet.

At the same time, DX (Digital Transformation) is being actively promoted in a variety of industries and business categories, and the non-face-to-face and non-contact services are increasing, and IT is playing an increasingly important role in society. In the midst of this paradigm shift, the Company has been promoting activities such as "Response to the age of electronic money" and "Bus IT Promotion Solution Project and the MaaS Business" as priority measures, with "paperless" and "cashless" as the keywords, and conducting activities considering a lifestyle-based fin-tech platform in this context. We also promoted content platforms for payments and more, such as the membership management system ekaiin.com, etc., and improved operational efficiency by consolidating back-office operations in our new Sapporo head office.

With respect to business results for the nine months ended March 31, 2022, the Company reported net sales of ¥6,732 million (up 0.1% year on year), operating profit of ¥576 million (up 12.9% year on year), ordinary profit of ¥585 million (up 8.0% year on year) and profit of ¥419 million (up 11.9 % year on year).

2) Changes in Environment Surrounding the Company and Response Strategy

The non-face-to-face payment market, the Company's business domain, is expected to continue achieving a certain level of growth in the future, and we are promoting the expansion of payments and more functionality, and collaboration with content cloud service providers for systems promoting going paperless and for payments systems.

A. "Smartphone payment service," Shiharai-Hisho during shift to paperless and cashless

The Shiharai-Hisho service, which carries out payments via bank-account-linked smartphone has already been introduced at eight electric power companies. In addition, the number of local taxation and public utility charges payments that can be made using the Shiharai-Hisho service is increasing, especially in areas where there are many affiliated banks, and in the bus and railway industry, where the Company is promoting DX mainly through Bus Mori, the number of routes on which customers can use Shiharai-Hisho to pay for smartphone commuter passes and coupon tickets is also increasing.

In February 2021, we released ekaiin.com, a membership management system that enables electronic billing and payment of various expenses using the Shiharai-Hisho service and credit cards in the area of membership management, which has not been digitized in the past. The system has been adopted by Higashi Honganji for soliciting donations, by Meiji University for selling PCs and rental gowns, by high schools for collecting alumni association fees, and for crowdfunding. In addition, we have completed the development of a new function, "non-stop payment," which is more advanced than the current one-stop payment function, and commenced marketing activities.

On the other hand, we have completed alliances with 36 banks, including Sumitomo Mitsui Banking Corporation and Japan Post Bank Co., Ltd. However, after completion of security measures related to identity verification due to a series of large-scale incidents of unauthorized use of fund transfer agent accounts connected with several banks, the Company is working to resume operations with them. As of March 31, 2022, the number of available banks has recovered to 19, and we will make continuous efforts to increase the number of available banks, including new ones.

• B. Driving forward our Bus IT Promotion Project

  Launched in August 2016, the smartphone electronic ticketing application Bus Mori! has expanded the types of electronic ticket to include single-trip tickets, coupon tickets, commuter passes, free passes, and discount passes, and now handles more than 470 routes. During the COVID-19 pandemic, the Company expanded smartphone commuter passes and smartphone coupon tickets, which can be purchased non-face-to-face. In addition, the Company continues to expand functions for ALTAIR triple star, a MaaS cloud service, which the Company has been developing for five years. ALTAIR triple star is an all-in-one total cloud service ticket sales system that can automate a series of operations, from inventory and timetable management for rides and events, ticket reservation, purchase, issuance, and authentication, to sales information aggregation and settlement processing. Especially in the case of MaaS, which is provided jointly by multiple operators, the Company recognizes that our extensive experience in the labor-intensive settlement operations is a major advantage.

  MaaS service DohNa!! was launched for use on Hakodate's trams, buses, and railroads from January 2020. The Company is actively responding to the strong demand for DX in the transportation industry by participating in Sendai MaaS in 2021, OkhoNavi in the Okhotsk area in January 2022, and JAL MaaS in February 2022.

• C. Current status of WELLNET's key product, Multi Payment Services

  Multi Payment Services are expected to have the potential to grow in the area of non-face-to-face payments. Various operators have been adopting the Company's payment services for over 30 years, and the Company will introduce smartphone payment services according to the needs. The Company aims to continue to provide payment gateway services that contribute to increase in convenience for both operators and consumers.

• D. Activities contributing to local communities and SDGs

  As part of our social contribution, we are providing support to many students through our WELLNET Scholarship, established to help financially struggling students at colleges of technology in Hokkaido. Many letters of gratitude were received from these students, which motivated our employees. Although many students across Japan were affected by COVID-19 in the fiscal year 2021 as in the previous fiscal year, we received reports that four colleges of technology in Hokkaido achieved a zero dropout rate as a result of our support. We will continue these activities moving forward.

  In addition, Sapporo City aims to become a sustainable city with a good living environment based on the revised Building Energy Conservation Law, and has established the Comprehensive Assessment System for Building Environmental Efficiency in Sapporo (CASBEE Sapporo) with the aim of spreading and promoting environmentally efficient buildings. Our new Sapporo head office, which was completed in June 2021, has already received the A rank under CASBEE Sapporo.

  Furthermore, with the completion of the new Sapporo head office, we are aiming to obtain the platinum rank of WELL Certification through office design and operation that consider the health and working environment of our employees. The WELL Certification is an advanced initiative that began in 2014 in the U.S. to evaluate and certify spaces including buildings and offices from the standpoint of human health. Recognizing that this initiative represents an investment in the Company's most important asset, our employees, and we believe that it will lead to increased corporate value in the form of increased productivity and workstyle reforms.

• E. Performance forecast and shareholder returns

The performance forecast is as presented in "3. Financial Results Forecast for the Fiscal Year Ending June 30, 2022 (July 1, 2021 to June 30, 2022)" in summary information. In addition, out of consideration for our shareholders, we plan for the dividend payout ratio to be 50% or more.