MKSystem : Summary of Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending March 31,2022

(Percentages represent year-on-yearchanges)

February 4, 2022

Summary of Consolidated Financial Results

for the Third Quarter of the Fiscal Year Ending March 31, 2022

(Nine Months Ended December 31, 2021)

		[Japanese GAAP]
Company name:	MKSystem Corporation	Listing: Tokyo Stock Exchange (JASDAQ)
Stock code:	3910	URL: https://www.mks.jp
Representative:	Noboru Miyake, Representative Director and President
Contact:	Masaki Yoshida, Executive Officer, General Manager of Business Administration Division
	Tel: [phone]

Scheduled date of filing of Quarterly Report:	February 7, 2022
Scheduled date of payment of dividend:	-
Preparation of supplementary materials for quarterly financial results:	None

Holding of quarterly financial results meeting:

None

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

1. Consolidated Financial Results for the Third Quarter Ended December 31, 2021 (April 1, 2021 - December 31, 2021)

(1) Consolidated operating results

	Net sales		Operating profit	Ordinary profit	Profit attributable to
		owners of parent
	Million yen		%	Million yen	%	Million yen	%	Million yen	%
Nine months ended Dec. 31, 2021	2,007		14.9	119	(11.0)	100	(24.6)	69	(3.1)
Nine months ended Dec. 31, 2020	1,746		(0.6)	133	(35.4)	133	(35.1)	72	(43.2)

Note: Comprehensive income (million yen)

Nine months ended Dec. 31, 2021:	75	(down 6.9%)
Nine months ended Dec. 31, 2020:	70	(down 42.2%)

	Basic earnings per share	Diluted earnings per share
	Yen	Yen
Nine months ended Dec. 31, 2021	12.88	-
Nine months ended Dec. 31, 2020	13.29	-

(2) Consolidated financial position

	Total assets		Net assets	Equity ratio
		Million yen		Million yen	%
As of Dec. 31, 2021		2,142		1,434	64.9
As of Mar. 31, 2021		2,241		1,402	60.9
Reference: Shareholders' equity (million yen)	As of Dec. 31, 2021:	1,391	As of Mar. 31, 2021:	1,364

2. Dividends

			Dividend per share
	1Q-end	2Q-end		3Q-end		Year-end	Total
	Yen	Yen		Yen		Yen	Yen
Fiscal year ended Mar. 31, 2021	-	0.00		-		8.00	8.00
Fiscal year ending Mar. 31, 2022	-	0.00		-
Fiscal year ending Mar. 31, 2022 (forecast)						8.00	8.00

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

3. Consolidated Earnings Forecasts for the Fiscal Year Ending March 31, 2022 (April 1, 2021 - March 31, 2022)

(Percentages represent year-on-year changes)

	Net sales		Operating profit	Ordinary profit	Profit attributable to	Basic earnings per
		owners of parent	share
	Million yen		%	Million yen	%	Million yen	%	Million yen	%	Yen
Full year	2,892		18.6	220	0.2	219	0.2	138	0.2	25.47

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

* Notes

1. Changes in significant subsidiaries during the period (changes in scope of consolidation): None
2. Application of special accounting methods for presenting quarterly consolidated financial statements: None
3. Changes in accounting policies and accounting-based estimates, and restatements
4. 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-based estimates: None
   4. Restatements: None
5. Number of issued shares (common stock)
6. 1. Number of shares issued at the end of period (including treasury shares)

As of Dec. 31, 2021:	5,428,000 shares	As of Mar. 31, 2021:	5,428,000 shares
2) Number of treasury shares at the end of period
As of Dec. 31, 2021:	506 shares	As of Mar. 31, 2021:	506 shares
3) Average number of shares during the period
Nine months ended Dec. 31, 2021:	5,427,494 shares	Nine months ended Dec. 31, 2020:	5,427,508 shares

• This 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
  Forecasts of future performance in this report are based on assumptions judged to be valid and information available to the MKSystem's management at the time the materials were prepared but are not promises by MKSystem regarding future performance. Actual results may differ significantly from these forecasts for a number of reasons. Please refer to "1. Qualitative Information on Quarterly Consolidated Financial Performance, (3) Explanation of Consolidated Earnings Forecasts and Other Forward-looking Statements" on page 4 for forecast assumptions and notes of caution for usage.

	MKSystem Corporation (3910) Financial Results for the Third quarter of FY3/22
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 Forecasts 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
(3)	Notes to Quarterly Consolidated Financial Statements	9
	Going Concern Assumption	9
	Significant Changes in Shareholders' Equity	9
	Changes in Accounting Policies	9
	Segment Information	10

1

MKSystem Corporation (3910) Financial Results for the Third quarter of FY3/22

1. Qualitative Information on Quarterly Consolidated Financial Performance

(1) Explanation of Results of Operations

During the first nine months of the fiscal year ending March 31, 2022 (hereinafter "the period under review"), while the promotion of vaccination against COVID-19 was expected to bring about a pick up in the Japanese economy, the impact of the development of infections on the domestic and foreign economies still remained unpredictable due to factors such as the new threat from the variant.

In the domestic information service industry and the field of personnel and labor management, in which MKSystem Corporation and its group companies (hereinafter collectively "the Group") are involved, the government has promoted the work-style reform, the rapid transition to teleworking as a measure against the COVID-19 infections, or furtherance of DX (digital transformation) to improve business efficiency. On these backgrounds corporate investment demand remained increasing, though companies are being cautious about investing and postponing new investment considering the impact of COVID-19 situation, which repeatedly worsens and improves, on corporate performance.

Under these circumstances, the Group worked to further enhance our customers' satisfaction, by actively utilizing online seminars and remote meetings so that customers could improve their operational efficiency and create added value.

As a result, for the period under review, the Group reported net sales of 2,007 million yen (up 14.9% year on year), cost of sales of 1,044 million yen (up 18.7% year on year), the ratio of cost of sales to net sales of 52.0% (up 1.6 percentage points year on year), gross profit of 963 million yen (up 11.1% year on year), operating profit of 119 million yen (down 11.0% year on year), the ratio of operating profit to net sales of 5.9% (down 1.7 percentage points year on year), ordinary profit of 100 million yen (down 24.6% year on year), and profit attributable to owners of parent of 69 million yen (down 3.1% year on year). In addition, the return on equity (ROE), one of the KPIs for the Group, was 5.1% (compared with 5.6 percentage points for the same period of the previous fiscal year) on a consolidated basis and 4.2% (compared with 8.0 percentage points for the same period of the previous fiscal year) on a non-consolidated basis.

Results by business segment were as follows.

The Shalom Business

A growing number of companies as well as labor and social security attorney offices, our main customers, are motivated to introduce relevant systems from an increasing need for operational efficiency for the work-style reforms including teleworking. At the same time, we expect an intensified competition and pricing pressure as we witness active entries in the market.

Under these circumstances, in the Shalom Business, we promoted quality improvement and function enhancement of the product lines, including Shalom, "eNEN," a web-basedyear-end tax adjustment system, and "ShaRobo," an official Shalom RPA. For services for labor and social security attorneys, the "Shalom" series, our mainstay service, saw an increase in the number of contracts for the House Plan. This is thanks to a campaign to discount the initial cost and the adoption of the subsidies under the Project to Support Introduction of IT for Improvement of Service Productivity, which lead to increased inquiries from potential customers every year. For corporate services, we boosted sales with an increase in new orders of "eNEN," a web-basedyear-end tax adjustment system and a resulting increase of the number of employees using the system. At the same time, we, as a new action to acquire higher potential projects, published an article about the Shalom Company Edition on "IT Trend," one of the largest websites in Japan providing information to compare IT products and allowing the website users to request information materials.

As a result, sales of the cloud services, which consist of ASP services and system construction services, were 1,493 million yen (up 12.7% year on year). This was attributable to sales of ASP services amounted to 1,342 million yen (up 10.6%) due to accumulated monthly usage fees in line with increases in the number of IDs issued and the number of customers who use our main services of Shalom brand products, and sales of system construction services amounted to 150 million yen (up 35.3%) mainly due to an increase in the number of Shalom House Plan

2

MKSystem Corporation (3910) Financial Results for the Third quarter of FY3/22

contracts. In addition, sales of system products was 73 million yen (down 5.1%).

On the other hand, personnel and labor costs increased due to the active recruitment in conjunction with strengthening of sales and development systems. In addition, promotion expenses increased due to the strengthening of digital marketing aimed at increasing customer acquisition.

Consequently, the segment recorded net sales of 1,593 million yen (up 11.4% year on year), gross profit of 811 million yen (up 6.1%) and operating profit of 97 million yen (down 44.6%). The ratio of operating profit to net sales, one of the KPIs for the Group, was 6.1% (down 6.2 percentage points).

The CuBe Business

We have been engaged in the contracted development of front-end systems, customized to needs of an individual company, for the personnel and general affairs divisions of large companies to improve their business processes. The CuBe Business also provides cloud services that bring the convenience to small- and medium-sized companies by leveraging our know-how gained through the contracted development of systems for large companies.

In the contract development of front-end systems, customers of large companies and local governments have been actively investing in system renewal for the purpose of work-style reform, teleworking promotion, and personnel system reform. Responding to such a situation, we strengthened our sales system and stimulated our clients into ordering, which brought about several large-scale development projects that we have not seen in recent years and a significant increase in sales. In the cloud service business, on the other hand, we strove to develop new sales channels for "GooooN" and win new users.

On the cost front, efforts to improve development efficiency and reduce the cost of sales ratio on a project-by- project basis have resulted in improved profit margin compared to that for the previous fiscal year.

As a result, the segment recorded net sales of 438 million yen (up 25.7% year on year), gross profit of 156 million yen (up 53.7%) and operating profit of 16 million yen (compared with operating loss of 44 million yen for the same period of the previous fiscal year). Operating profit of the CuBe Business reflects amortization of goodwill of 29 million yen.

1. Explanation of Financial Position Assets

The balance of current assets at the end of the period under review was 1,047 million yen (down 10.7% from the end of the previous fiscal year), consisting primarily of 376 million yen in cash and deposits and 538 million yen in accounts receivable-trade.

The balance of non-current assets was 1,094 million yen (up 2.4% from the end of the previous fiscal year), consisting primarily of 441 million yen in software, 184 million yen in goodwill, and 163 million yen in guarantee deposits.

As a result, the balance of total assets was 2,142 million yen (down 4.4% from the end of the previous fiscal year).

Liabilities

The balance of current liabilities at the end of the period under review was 611 million yen (up 4.2% from the end of the previous fiscal year), consisting primarily of 213 million yen in current portion of long-term borrowings, 122 million yen in accounts payable-other, 27 million yen in accrued expenses, and 68 million yen in advances received.

The balance of non-current liabilities was 97 million yen (down 61.5% from the end of the previous fiscal year), consisting solely of 97 million yen in long-term borrowings.

As a result, the balance of total liabilities was 708 million yen (down 15.6% from the end of the previous fiscal year).

Net assets

3