Poletowin Pitcrew : Consolidated Financial Results For the Six Months Ended July 31,2020

(Percentages indicate year-on-yearchanges.)

－

Yes

No

Name of the Listed Company: Listing:

Stock code: URL: Representative: Contact Person:

September 4, 2020

Consolidated Financial Results

For the Six Months Ended July 31, 2020

(Japanese Accounting Standards)

Poletowin Pitcrew Holdings, Inc.

First Section of Tokyo Stock Exchange 3657 https://www.poletowin-pitcrew-holdings.co.jp Teppei Tachibana, President & CEO

Joji Yamauchi, Director & CFO

Tel: [phone]

Scheduled date to file Quarterly Securities Report: September 10, 2020

Scheduled date to commence dividend payments:

Supplementary explanatory materials prepared:

Explanatory meeting:

(Millions of yen with fractional amounts discarded, unless otherwise noted.)

1. Consolidated financial results for the six months ended July 31, 2020 (from February 1, 2020 to July 31, 2020)

(1) Consolidated operating results

			Net sales		Operating profit	Ordinary profit	Profit attributable to
				owners of parent
	Six months ended	Millions of yen	%		Millions of yen		%	Millions of yen		%	Millions of yen	%
	July 31, 2020		12,399	-0.0		1,276		-20.8	1,474		-4.4	903	-5.3
	July 31, 2019		12,402	5.7		1,612		9.3	1,542		7.7	954	13.7
	(Note) Comprehensive income
	Six months ended July 31, 2020: ¥592 million / -35.3 %
	Six months ended July 31, 2019: ¥915 million / 27.9 %
			Net income		Diluted net income
			per share		per share
	Six months ended			Yen				Yen
	July 31, 2020			23.88				23.86
	July 31, 2019			25.23				25.20
(2) Consolidated financial position
			Total assets		Net assets	Equity ratio
	As of		Millions of yen		Millions of yen			%
	July 31, 2020			18,759				14,461			76.8
	January 31, 2020			17,763				14,320			80.1
	(Reference) Equity
	As of July 31, 2020	: ¥14,409million

As of January 31, 2020 : ¥14,230 million

－ 1 －

(Percentages indicate year-on-yearchanges.)

2. Cash dividends

		Cash dividends per share
	First quarter	Second quarter	Third quarter	Fiscal year-end	Annual
	Yen	Yen	Yen	Yen	Yen
Fiscal year ended January 31, 2020	-	0.00	-	12.00	12.00
Fiscal year ending January 31, 2021	-	0.00
Fiscal year ending January 31, 2021 (Forecasts)			-	13.00	13.00

(Notes) Change in dividend forecasts for the fiscal year ending January 31, 2021 during the six months ended July 31, 2020: No

3. Consolidated financial forecasts for the fiscal year ending January 31, 2021 (from February 1, 2020 to January 31, 2021)

	Net sales	Operating		Ordinary		Profit attributable	Net income
	profit		profit		to owners of parent	per share
	Millions	%	Millions		%	Millions		%	Millions	%	Yen
	of yen	of yen		of yen		of yen
Fiscal year ending	28,744	10.0	3,587		1.6	3,576		2.9	2,341	30.9	61.41
January 31, 2021

(Note) Change in financial forecasts for the fiscal year ending January 31, 2021 during the six months ended July 31, 2020: No

* Notes:

(1) Changes in significant subsidiaries during the six months ended July 31, 2020 (changes in specified subsidiaries

resulting in a change in the scope of consolidation)

: No

1. Use of particular accounting treatments in preparation of quarterly consolidated financial statements : Yes
2. Changes in accounting policies, changes in accounting estimates, and restatement of revisions

a. Changes in accounting standards due to revisions to accounting standards and other guidelines	: No
b. Changes in accounting policies due to reasons other than a. above	: No
c. Changes in accounting estimates	: No
d. Restatement of revisions	: No

1. Number of common shares issued

a. Total number of issued shares at the end of the period (including treasury stock)

As of July 31, 2020	: 38,124,000 shares
As of January 31, 2020	: 38,120,800 shares
b. Number of shares of treasury stock at the end of the period
As of July 31, 2020	: 269,734 shares
As of January 31, 2020	: 272,934 shares

c. Average number of shares (Cumulative)
For the six months ended July 31, 2020	: 37,851,813 shares
For the six months ended July 31, 2019	: 37,846,695 shares

• This report falls outside the scope of quarterly review procedures of a certified public accountant or an audit firm.
• Proper use of earnings forecasts, and other special matters

(Disclaimer to forward-looking statements)

The forward-looking statements, including earnings forecasts, contained in these materials are based on information currently available to the Company and on certain assumptions deemed to be reasonable. These statements do not guarantee that the Company will achieve its earnings forecasts. In addition, actual business and other results may differ substantially due to various factors. For details on the conditions assumed and the cautionary notes and items in the financial forecasts, please refer to (3) Qualitative Information on Consolidated Earnings Forecasts on page 3 of the Attachment Materials to this report.

(How to obtain supplementary materials explaining earnings for the quarter)

The Company discloses the Supplementary Information to the Financial Results on the TDnet on the same day. The Company intends on posting briefing video and material on the Company's website.

－ 2 －

1. Qualitative Information on Financial Results

(1) Analysis of Operating Results

During the second quarter of the consolidated fiscal year under review, conditions for the Japanese economy are expected to continue to pick up as social and economic activity stages are gradually raised, various policies are effective and preventive measures are taken against COVID-19. However, both Japanese and overseas economy warrant close attention towards impact of COVID-19. The impact on economic and financial market due to the torrential rainfalls in July also warrant close attention.

Under these economic conditions, Poletowin Pitcrew Holdings Group's core Testing/Verification & Evaluation Business saw order expansion for testing in multiple languages, localization, audio recording and customer support. This is because the related market for this segment is home game software and social games market and recently global deployment is main trend. Also, in order to prevent spread of COVID- 19, the number of people staying at home increased therefore the number of daily active user (DAU) also increased, thus resulting in expansion of game market.

For Internet Supporting Business, as the Japanese government is promoting cashless economy, the demands for anti-infringement monitoring for QR code mobile payment, identification verification, detection of anti-money laundering and spoofing related services increased. Likewise Testing/Verification

• Evaluation Business as the number of people staying at home increased, E-commerce expanded thus resulting in pushing up demand for monitoring check of regulation violation for exhibited merchandise, the review of Internet advertising based on the Pharmaceuticals and Medical Devices Act, the Act against Unjustifiable Premiums and Misleading Representations, and end-user inquiries. The Group provides checking, testing, monitoring and inspection services that requires human input on a contractual basis to corporate clients. The demand for such outsourcing services has been growing as client's business has diversified and have expanded overseas. Another reason behind this is that business processes have become more advanced and sophisticated. As new services are created in the market, both Testing/Verification & Evaluation Business and Internet Supporting Business, are seeing new business opportunities.
  During the second quarter of the consolidated fiscal year under review, the Group operated joint ventures for game development, management, publishing etc., and formed capital and business alliance with ViSUALIZE Co. Ltd in February, in order to receive profit distribution. Pole To Win Co., Ltd. absorbed and merged with its wholly owned subsidiary Pole To Win Networks Co., Ltd. in February, in order to aggregate and consolidate domestic Testing/Verification & Evaluation Business and improve service for clients. PTW International Holdings Limited newly established PTW Japan Co., Ltd. in February, in order to specially support domestic clients wanting to globally expand their business. Collaboration has stepped up between seventeen delivery centers in ten countries The Group promoted to globally provide a one- stop, full service platform in areas such as defect detection (finding bugs), localization, audio recording, game development & marketing support, internet monitoring, and customer support.
  As a result of these factors, consolidated net sales for the term were ¥12,399,500 thousand (down 0.0%). Operating profit was ¥1,276,424 thousand (down 20.8%). Ordinary profit was ¥1,474,675 thousand (down 4.4%) and Profit attributable to owners of parent was ¥903,966 thousand (down 5.3%). For further information on impact of COVID-19 please see (3) Qualitative Information on Consolidated Earnings Forecasts.

Results by segment were as follows.

Testing/Verification & Evaluation Business

By promoting collaboration between domestic and overseas group companies the group strived to support global deployment for domestic and foreign game makers, and promoted orders for outsourcing services such as defect detection, localization customer support (overseas) and voice recording, etc. for game software developers. In game market, business with overseas local companies increased and in non-game market orders for third party verification services increased. Due to COVID-19, some customer company's business was suspended or pushed back. CREST Inc. launched a game, "ARIA CHRONICLE" on Steam in July. The game had 10,000 downloads within 2 days of launch and is planning on having distribution on Nintendo Switch. During the first quarter of the consolidated fiscal year under review, PTW Japan Co., Ltd. (On February 3rd, 2020, PTW Japan Co., Ltd. was newly established by incorporation-type split with Pole To Win Co., Ltd., a consolidated subsidiary of the Group, as the splitting company.) and ENTALIZE CO., LTD. changed the fiscal year to December 31st, thus for both companies the consolidated financial statements reflects only the five months of February to June. As a result, Testing/Verification & Evaluation Business sales decreased by 1.3% year on year, to ¥9,243,455 thousand. Operating profit decreased by 25.2%, to ¥1,090,897 thousand.

－ 3 －

Internet Supporting Business

In the Internet Supporting Business, the Group increased orders for monitoring fraud for FinTech related services such as QR code settlement and virtual currency. Services related to identity verification, detection of anti-money laundering and spoofing also increased orders. Also, as people who stayed at home increased and usage of E-commerce sites also increased, thus resulting in pushing up demand for monitoring exhibited merchandise for regulation violation, outsourcing services such as customer support (domestic) services for end-users by phone call, e-mail, chat and chatbot for E-commerce sites. Collaborating sales activities with Testing/Verification & Evaluation Business enhanced business in customer support in game market. As a result, Internet Supporting Business sales increased by 4.7%, to ¥3,055,371thousand. Operating profit increased by 96.4%, to ¥227,837 thousand.

Others

Palabra Inc. provide services to produce barrier-free subtitles audio guides for television program and movies to prepare for the advent of barrier-free motion pictures. Due to COVID-19, new production of movies was retained and orders saw decrease. IMAid Inc. provides support services such as visa obtainment, school enrollment and daily life procedures for foreign personnel working in medical institutes. The sales resulted in a decrease of 14.6% to ¥100,672 thousand and operating loss of ¥68,071 thousand, down from operating loss of ¥2,524 thousand a year earlier.

1. Analysis of Financial Position
   Total Assets
   Current assets increased by ¥935,702 thousand or 6.4% from the previous fiscal year-end, to ¥15,641,030 thousand. This was mainly attributable to an increase of ¥434,889 thousand in cash and deposits, and ¥448,864 thousand in other current assets (mainly accounts receivable-other).
   Non-current assets increased by ¥60,328 thousand, or 2.0% from the previous fiscal year-end, to ¥3,118,847 thousand. The key factor was an increase of ¥200,000 thousand in other of intangible assets (copyrights, etc.), but offset by a decrease of ¥155,195 thousand in goodwill.
   As a result, total assets increased by ¥996,030 thousand, or 5.6％ from the previous fiscal year-end, to ¥18,759,878 thousand.

Liabilities

Current liabilities increased by ¥901,506 thousand, or 28.6% from the previous fiscal year-end, to ¥4,048,407 thousand. The key factors were rises of ¥494,624 thousand in short-term borrowings, of ¥150,216 thousand in accrued expenses, and ¥ 247,535 thousand in income taxes payable.

Non-current liabilities decreased by ¥46,398 thousand, or 15.7% from the previous fiscal year-end, to ¥249,918 thousand. This was mainly due to decrease of ¥55,377 thousand in deferred tax liabilities.

As a result, total liabilities increased by ¥855,108 thousand, or 24.8% from the end of the previous fiscal year-end, to ¥4,298,326 thousand.

Net assets

Net assets increased by ¥140,922 thousand or 1.0% from the previous fiscal year-end, to ¥14,461,552 thousand. This was mainly because there was a ¥449,792 thousand increase of retained earnings for profit attributable to owners of parent and dividend payment, offset by decrease in ¥111,109 thousand in valuation difference on available-for-sale securities and ¥162,697 thousand in foreign currency translation adjustment.

－ 4 －

(3) Qualitative Information on Consolidated Earnings Forecasts

During the second quarter of the consolidated fiscal year under review, state of emergency declaration or lockdowns was issued in many countries due to COVID-19. Many of the group's overseas subsidiaries continued business from WFH (work from home). The domestic subsidiaries continued business while taking prevention measures with some businesses continuing WFH. Although some businesses saw order increase as the number of people who stayed at home also increased, on the other hand some businesses saw cancellation or order delays. Therefore, for the forecast for second quarter of the consolidated fiscal year under review, both revenues and earnings were not achieved. For third quarter and onward, as games, apps and amusement equipment, etc. development may see delay or cancellation for the Group's clients, and there is possibility that the Group may also be impacted by this. But in turn, when development restarts there is chance that the Group may receive orders pushed back than originally expected. Again, orders for defect detection and customer support for existing operating game contents, monitoring fraud activity for E-commerce and QR code settlement etc. remains strong, and in perspective with disclosure standards defined by the Tokyo Stock Exchange, management retained the consolidated earnings forecasts that it disclosed on March 12, 2020.

Note, however, that the earnings forecasts are based on information currently available to the Company and on certain assumptions deemed to be reasonable. These statements do not guarantee that the Company will achieve its earnings forecasts. In addition, actual business and other results may differ substantially due to various factors.

－ 5 －

2. Consolidated Financial Statements

(1) Consolidated Balance Sheets

				(Thousands of yen)
			Fiscal 2020	2Q Fiscal 2021
			(As of January 31, 2020)	(As of July 31, 2020)
	Assets
	Current assets
	Cash and deposits		10,514,170	10,949,060
	Notes and accounts receivable - trade	3,669,689	3,646,688
	Merchandise and finished goods		8,009	7,012
	Work in process	63,797	145,395
	Other		453,236	902,100
	Allowance for doubtful accounts	(3,575)	(9,227)
	Total current assets		14,705,328	15,641,030
	Non-current assets
	Property, plant and equipment
	Buildings and structures	878,691	888,933
	Accumulated depreciation		(479,298)	(503,027)
	Buildings and structures, net	399,393	385,905
	Machinery, equipment and vehicles		23,065	23,027
	Accumulated depreciation	(14,180)	(14,969)
	Machinery, equipment and vehicles, net		8,884	8,057
	Tools, furniture and fixtures	1,470,181	1,515,643
	Accumulated depreciation		(1,159,574)	(1,199,712)
	Tools, furniture and fixtures, net	310,606	315,931
	Total property, plant and equipment		718,885	709,894
	Intangible assets
	Goodwill		725,510	570,315
	Software	153,066	174,946
	Other intangible assets		27,229	3,592
	Other	2,395	202,395
	Total intangible assets		908,202	951,249
	Investments and other assets
	Investment securities		587,131	592,202
	Leasehold and guarantee deposits	575,098	623,984
	Deferred tax assets		170,172	171,786
	Other	175,423	176,424
	Allowance for doubtful accounts		(76,394)	(106,694)
	Total investments and other assets	1,431,432	1,457,703
	Total non-current assets		3,058,519	3,118,847
	Total assets		17,763,847	18,759,878

－ 6 －

				(Thousands of yen)
			Fiscal 2020	2Q Fiscal 2021
			(As of January 31, 2020)	(As of July 31, 2020)
	Liabilities
	Current liabilities
	Short-term borrowings		10,299	504,924
	Current portion of long-term borrowings	6,536	7,620
	Accounts payable - other		1,725,334	1,687,197
	Accrued expenses	158,241	308,457
	Income taxes payable		387,666	635,202
	Provision for bonuses	30,458	84,661
	Other		828,363	820,344
	Total current liabilities	3,146,901	4,048,407
	Non-current liabilities
	Long-term borrowings	41,924	37,673
	Retirement benefit liability		76,303	84,154
	Deferred tax liabilities	93,066	37,689
	Other		85,022	90,401
	Total non-current liabilities	296,316	249,918
	Total liabilities		3,443,217	4,298,326
	Net assets
	Shareholders' equity
	Share capital	1,237,674	1,237,800
	Capital surplus		2,377,916	2,378,635
	Retained earnings	10,706,356	11,156,148
	Treasury shares		(169,686)	(167,696)
	Total shareholders' equity	14,152,260	14,604,887
	Accumulated other comprehensive income
	Valuation difference on available-for-sale securities		163,869	52,759
	Foreign currency translation adjustment		(85,133)	(247,830)
	Total accumulated other comprehensive income	78,735	(195,071
	Non-controlling interests		89,633	51,735
	Total net assets	14,320,629	14,461,552
	Total liabilities and net assets		17,763,847	18,759,878

－ 7 －

1. Consolidated Statements of Income and Consolidated Statements of Comprehensive Income
   Consolidated Statements of Income (Six-month period ended July 31, 2020)

				(Thousands of yen)
			Six months ended	Six months ended
			July 31, 2019	July 31, 2020
	Net sales		12,402,196	12,399,500
	Cost of sales	8,581,575	8,822,126
	Gross profit		3,820,620	3,577,373
	Selling, general and administrative expenses	2,208,511	2,300,948
	Operating profit		1,612,109	1,276,424
	Non-operating income
	Foreign exchange gains		－	39,432
	Subsidy income	11,117	46,668
	Surrender value of insurance policies		1,393	106,643
	Other	14,470	9,693
	Total non-operating income		26,981	202,437
	Non-operating expenses
	Interest expenses		－	1,246
	Foreign exchange losses	86,202	－
	Share of loss of entities accounted for using equity method		9,006	－
	Other	1,552	2,939
	Total non-operating expenses		96,761	4,186
	Ordinary profit	1,542,329	1,474,675
	Profit before income taxes		1,542,329	1,474,675
	Income taxes	587,568	608,404
	Profit		954,761	866,270
	Loss attributable to non-controlling interests		－	(37,695)
	Profit attributable to owners of parent		954,761	903,966

－ 8 －

Consolidated Statement of Comprehensive Income (Six-month period ended July 31, 2020)

				(Thousands of yen)
			Six months ended	Six months ended
			July 31, 2019	July 31, 2020
	Profit		954,761	866,270
	Other comprehensive income
	Valuation difference on available-for-sale securities		1,185	(111,109)
	Foreign currency translation adjustment	(40,540)	(162,899)
	Total other comprehensive income		(39,354)	(274,009)
	Comprehensive income	915,406	592,261
	Comprehensive income attributable to
	Comprehensive income attributable to owners of parent	915,406	630,159
	Comprehensive income attributable to non-controlling interests		－	(37,897

－ 9 －

(3) Consolidated Statements of Cash Flows

				(Thousands of yen)
			Six months ended	Six months ended
			July 31, 2019	July 31, 2020
	Cash flows from operating activities
	Profit before income taxes	1,542,329	1,474,675
	Depreciation		167,723	175,900
	Amortization of goodwill	128,949	130,307
	Increase (decrease) in allowance for doubtful accounts		15,632	53,243
	Increase (decrease) in provision for bonuses	44,840	55,694
	Increase (decrease) in retirement benefit liability		14,116	7,851
	Interest and dividend income	(1,445)	(1,343)
	Surrender value of insurance policies		－	(106,643
	Share of loss (profit) of entities accounted for using equity method	9,006	－
	Interest expenses		－	1,246
	Foreign exchange losses (gains)	21,484	(390)
	Decrease (increase) in trade receivables		(770,886)	(77,973)
	Decrease (increase) in accounts receivable - other	355	(38,181)
	Increase (decrease) in accounts payable - other		170,455	(78,497)
	Increase (decrease) in accrued expenses	81,196	156,556
	Increase (decrease) in accrued consumption taxes		(37,568)	(31,763)
	Increase (decrease) in deposits received	68,275	(150,034)
	Other, net		(20,965)	(310,925
	Subtotal	1,433,500	1,259,724
	Interest and dividends received		1,211	505
	Interest paid		－	(889)
	Income taxes paid		(429,186)	(436,275)
	Net cash provided by (used in) operating activities	1,005,525	823,064
	Cash flows from investing activities
	Purchase of property, plant and equipment	(101,854)	(133,208)
	Proceeds from sales of property, plant and equipment		1,818	－
	Purchase of intangible assets	(12,776)	(147,643)
	Purchase of investment securities		(100,112)	(185,907)
	Loan advances	(14,518)	(1,283)
	Collection of loans receivable		15,695	5,961
	Payments of leasehold and guarantee deposits	(34,498)	(80,023)
	Proceeds from refund of leasehold and guarantee deposits		8,522	4,353
	Other, net		－	135,314
	Net cash provided by (used in) investing activities		(237,724)	(402,437)
	Cash flows from financing activities
	Increase (decrease) in short-term borrowings		－	494,644
	Repayments of long-term borrowings		－	(2,708)
	Proceeds from issuance of shares		－	252
	Dividends paid	(416,311)	(454,174)
	Net cash provided by (used in) financing activities		(416,311)	38,014
	Effect of exchange rate change on cash and cash equivalents	(57,329	(23,752)
	Net increase (decrease) in cash and cash equivalents		294,159	434,889
	Cash and cash equivalents at beginning of period	9,345,965	10,514,170
	Cash and cash equivalents at end of period		9,640,125	10,949,060

－ 10 －

1. Notes to Consolidated Financial Statements
   (Notes on Going Concern Assumption) Not applicable

(Notes on Significant Changes in Shareholders' Equity) Not applicable

(Use of particular accounting treatments in preparation of quarterly consolidated financial statements) (Calculation of income taxes payable)

The tax expenses of the Group and certain consolidated subsidiaries are estimated reasonably based on effective tax rates after applying tax effect accounting for income before income taxes and minority interests for the consolidated fiscal year, including the second quarter under review, multiplying quarterly income before income taxes and minority interests by the relevant estimated effective tax rate.

－ 11 －

(Segment Information)

1. Six months ended July 31, 2019 (from February 1, 2019 to July 31, 2019)

1. Net sales and income (loss) by reporting segment

(Thousands of yen)

	Reporting segment						Per quarterly
	Testing/
	Internet			*1	Total	Adjustments	*2	consolidated
	Verification &	Supporting		Total	Others		financial
	Evaluation	Business							statements*3
	Business
Sales
Revenues from	9,365,693	2,918,630		12,284,323	117,873	12,402,196	－	12,402,196
external customers
Transactions with	2,428	19,053		21,482	154	21,636	(21,636)	－
other segments
Net sales	9,368,122	2,937,683		12,305,805	118,027	12,423,833	(21,636)	12,402,196
Segment profit (loss)	1,459,230	116,004		1,575,235	(2,524)	1,572,710	39,399	1,612,109

*Notes: 1. Others covers operations not included in reporting segments, and mainly encompasses the publishing, media and medical related businesses.

1. 1. Adjustment for segment profit (loss) of ¥39,399 thousand comprises elimination of intersegment transactions of ¥394,452 thousand and unallocated corporate expenses of - ¥355,053 thousand. Unallocated corporate expenses are mainly general administrative expenses.
   2. Segment profit (loss) is adjusted against the operating profit recorded in the consolidated statements of income.
2. Information regarding impairment losses on fixed assets and goodwill by reporting segment

Not applicable

2. Six months ended July 31, 2020 (from February 1, 2020 to July 31, 2020)

1. Net sales and income (loss) by reporting segment

(Thousands of yen)

	Reporting segment						Per quarterly
	Testing/
	Internet			*1	Total	Adjustments	*2	consolidated
	Verification &	Supporting		Total	Others		financial
	Evaluation	Business							statements*3
	Business
Sales
Revenues from	9,243,455	3,055,371		12,298,827	100,672	12,399,500	－	12,399,500
external customers
Transactions with	－	97,307		97,307	－	97,307	(97,307)	－
other segments
Net sales	9,243,455	3,152,679		12,396,135	100,672	12,496,807	(97,307)	12,399,500
Segment profit (loss)	1,090,897	227,837		1,318,734	(68,071)	1,250,662	25,761	1,276,424

*Notes: 1. Others covers operations not included in reporting segments, and mainly encompasses the publishing, media and medical personnel related businesses.

1. 1. Adjustment for segment profit (loss) of ¥25,761 thousand comprises elimination of intersegment transactions of ¥366,514 thousand and unallocated corporate expenses of - ¥340,752 thousand. Unallocated corporate expenses are mainly general administrative expenses.
   2. Segment profit (loss) is adjusted against the operating profit recorded in the consolidated statements of income.
2. Information regarding impairment losses on fixed assets and goodwill by reporting segment

Not applicable

－ 12 －