SERAKU : Summary of Consolidated Financial Results for the Second Quarter of the Fiscal Year Ending August 31, 2022

Summary of Consolidated Financial Results for the Second Quarter of the Fiscal Year Ending August 31, 2022

(Six Months Ended February 28, 2022)

[Japanese GAAP]

April 13, 2022

Company name: SERAKU Co., Ltd.

Stock code:

6199

Listing: Tokyo Stock Exchange (First Section) URL:http://www.seraku.co.jpRepresentative: Tatsumi Miyazaki, Representative DirectorContact:

Tomoharu Kozeki, Executive Director, General Manager of Corporate Management Division Tel: +81-(0)3-3227-2321

Scheduled date of filing of Quarterly Report: April 14, 2022 Scheduled date of payment of dividend: -

Preparation of supplementary materials for quarterly financial results: Yes Holding of quarterly financial results meeting: Yes

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

1. Consolidated Financial Results for the Second Quarter Ended February 28, 2022

(Sep. 1, 2021 to Feb. 28, 2022)

(1) Consolidated results of operations

(Percentages represent year on year changes)Net sales

Six months ended Feb. 28, 2022

Six months ended Feb. 28, 2021

Millions of yen 8,485 7,268

16.7 11.0

% Millions of yen 391 (45.3)

% Millions of yen 694 (37.5)

Profit attributable to owners of parent

Millions of yen

% 457 (34.9)

716

62.3

1,110

148.9

5,000

3. Consolidated Earnings Forecast for the Fiscal Year Ending August 31, 2022 (Sep. 1, 2021 to Aug. 31, 2022)

(Percentages represent year on year changes)Net sales

Operating profit Ordinary profitFull year

Millions of yen 19,000

% Millions of yen % Millions of yen 24.5 1,550 14.3 1,900

% Millions of yen

3.4

Net income per share

1,250

Yen 89.91

Note: Revisions to the most recently announced consolidated earnings forecast: None

* Notes

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

  Newly added: -

  Excluded: -

• (2) Application of special accounting methods in the preparation of the quarterly consolidated financial statements: None

• (3) Changes in accounting policies and accounting estimates, and restatements

  • 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 estimates: None

  • 4) Restatements: None

• (4) Number of shares issued (common shares)

  • 1) Number of shares issued as of the end of the period (including treasury shares)

    As of Feb. 28, 2022: 13,938,000 shares As of Aug. 31, 2021: 13,902,400 shares

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

* The current 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

Forecasts of future performance in these materials are based on assumptions judged to be reasonable and information available to the management of Seraku at the time these materials were prepared and do not represent guarantees of future performance. Actual results may differ materially from these forecasts for various reasons. For discussion of the assumptions and other factors considered by Seraku in preparing the above projections, please refer to page 4 of the attachments 1. Qualitative Information on Quarterly Consolidated Financial Performance, (3) Explanation of Consolidated Earnings Forecast and Other Forward-looking Statements.

Contents of Attachments

1. Qualitative Information on Quarterly Consolidated Financial Performance 2

(1) Explanation of Results of Operations 2

(2) Explanation of Financial Position 3

(3) Explanation of Consolidated Earnings 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 7

Quarterly Consolidated Statement of Income

(First Six-month Period) 7

Quarterly Consolidated Statement of Comprehensive Income

(First Six-month Period) 8

(3) Quarterly Consolidated Statement of Cash Flows 9

(4) Notes to Quarterly Consolidated Financial Statements 10

Going Concern Assumption 10

Additional Information 10

Significant Changes in Shareholders' Equity 10

Changes in Accounting Policies 10

Segment and Other Information 11

Material Subsequent Events 12

1. Qualitative Information on Quarterly Consolidated Financial Performance

(1) Explanation of Results of Operations

During the first half under review, the number of new COVID-19 cases gradually decreased chiefly given an increase in the vaccination rate and the effects of measures to curb infections, and there were expectations that economic activities would resume. However, the number of new cases rose again with the emergence of a new variant, and the future of the Japanese economy remained uncertain. Moreover, heightened international tensions with the materialization of geopolitical risk in late February led to uncertainty about the direction of the global economy. Concern over the impact on the Japanese economy increased.

In Japan's IT sector, which is the primary business field where the Seraku Group provides its services, investor confidence in IT continues to be strong, reflecting the rapid expansion of the digital economy, and demand for IT investment associated with an increase in digital transformation (DX) using advanced technologies such as cloud computing, AI, IoT, big data, and RPA will likely remain strong. An optimal IT infrastructure plays an important role in supporting companies' business strategies, and the need for recruiting and cultivating high-quality IT engineers to respond to corporate demand is increasing.

In this environment, the Group sought to enhance the value of its services by actively recruiting and cultivating high-quality engineers. The Group also continued to focus on increasing share in the agricultural IT sector through Midori Cloud, which is intended to introduce digital transformation (DX) in primary industry.

As a result, the Seraku Group's net sales increased 16.7% year on year, to 8,485,726 thousand yen, operating profit fell 45.3% year on year, to 391,856 thousand yen, and ordinary profit declined 37.5% year on year, to 694,765 thousand yen. Profit attributable to owners of parent decreased 34.9% year on year, to 457,989 thousand yen.

Results by business segment were as follows.

With the addition of Midori Cloud as a reportable segment in the first quarter of the fiscal year under review, the reportable segments have been changed from the conventional three segments, including System Integration, Digital Transformation, and Mechanical Design and Engineering, to four segments consisting of System Integration, Digital Transformation, Midori Cloud, and Mechanical Design and Engineering. Accordingly, in the year-on-year comparisons below, the figures for the same period of the previous year have been restated to reflect the new segment classification.

1) System Integration

In the system Integration segment, we are promoting support for IT technologies in the existing technical domain, while providing a broad array of services, including IT infrastructure and cloud technologies, business domains with long-term stability, digital creative services, web operations, web system development, and application software development.

In the first half, as we expected to continue winning projects steadily, primarily in the fields of the design and building of IT infrastructure and cloud infrastructure, the operation, maintenance and monitoring of servers and cloud systems, and the development of software and applications, we actively worked on recruitment and technical education. We also expanded the use of external resources, participating in joint projects and strengthening technical cooperation with business partners.

Net sales in this segment stood at 6,160,267 thousand yen, up 17.0% year on year. Segment profit was 273,306 thousand yen, down 46.4% year on year.

2) Digital Transformation

The Digital Transformation business provides services such as cyber security to protect companies' information assets and customer success solutions centering on support for the widespread use of Salesforce.

In the first half under review, the Group continued to promote the DX shift of engineers engaging in the System Integration business while also focusing on organizational expansion through active recruitment of human resources.

In the customer success solution business, the Group worked to expand its human resource development scheme to respond to an increase in demand for support for the widespread use of Salesforce and Tableau, a leading analysis platform.

Net sales in this segment came to 1,890,068 thousand yen, up 14.5% year on year. Segment profit was 161,880 thousand yen, down 23.5% year on year.

3) Midori Cloud

The Midori Cloud business provides a platform service, including Midori Cloud and Farm Cloud, to support the DX of the agriculture, livestock, and fisheries sectors using IT and a solution service to solve individual issues, particularly those faced in primary industries. It also conducts research and development to add value to platforms.

During the first half under review, in the platform service, the Group took steps to accumulate orders by strengthening alliances with sales agents. In the solution service, the Group expanded services by developing the function of collaboration with other companies' products and services and jointly developing a system to digitize management data in the livestock industry.

The Group actively recruited engineers to expand business and strove to strengthen the development system.

Net sales in this segment amounted to 169,239 thousand yen, up 33.3% year on year. The segment loss was 24,615 thousand yen (segment loss of 27,841 thousand yen in the same period of the previous year).

4) Mechanical Design and Engineering

In the Mechanical Design and Engineering business, P's Engineering, a consolidated subsidiary, provides 3D CAD technologies, designs machines, dies and other items for other companies, and provides technologies for the quality control of experiments and performance tests.

In the first half under review, the Group approached new industries such as communication infrastructure construction and information and communication for carriers in the machinery design field while the market was yet to fully recover to support project development due to continued stagnation caused by the COVID-19 pandemic.

Projects have been increasing in the new fields, and the Group is actively working on its recruitment and technical education.

Net sales in this segment amounted to 273,751 thousand yen, up 20.4% year on year. The segment loss was 16,591 thousand yen (segment profit of 22,511 thousand yen in the same period of the previous year).

5) Others

This segment is the operations of consolidated subsidiary Seraku ECA, which is primarily engaged in paid job placement and temporary staffing services and services for training IT engineers.

Because the market continues to slow due to the impact of COVID-19 in the first half under review, the Group has allocated resources of this business to other focal businesses while paying attention to the timing of market recovery.

This resulted in zero net sales in this segment (segment net sales of 2,835 thousand yen in the same period of the previous fiscal year). Segment loss was 2,123 thousand yen (segment profit in the same period of the previous year was 38 thousand yen.)

(2) Explanation of Financial Position

1) Assets, Liabilities and Net Assets

Assets

Total assets increased 200,114 thousand yen from the end of the previous fiscal year to 8,930,795 thousand yen as of the end of the second quarter of the fiscal year under review. This was a result primarily of increases of 241,783 thousand yen in notes and accounts receivable-trade and contract assets ("notes and accounts receivable-trade" in

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