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

Summary of Consolidated Financial Results

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

(Nine Months Ended May 31, 2022)

		[Japanese GAAP]
		July 14, 2022
Company name: SERAKU Co., Ltd.	Listing: Tokyo Stock Exchange (Prime Market)
Stock code:	6199	URL: http://www.seraku.co.jp
Representative:	Tatsumi Miyazaki, Representative Director
Contact:	Tomoharu Kozeki, Executive Director, General Manager of Corporate Management Division
	Tel: [phone]
Scheduled date of filing of Quarterly Report:	July 15, 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 Third Quarter Ended May 31, 2022 (Sep. 1, 2021 to May 31, 2022)

(1) Consolidated results of operations								(Percentages represent year on year changes)
																		Profit attributable
		Net sales				Operating profit	Ordinary profit			to owners of
																				parent
	Millions of yen		%	Millions of yen	%	Millions of yen				%	Millions of yen		%
Nine months ended May 31, 2022	13,123	16.0		695	(39.9)		1,132		(28.4)			717		(25.5)
Nine months ended May 31, 2021	11,313		12.0		1,155	55.7		1,582		111.7			963		107.8
Note: Comprehensive income (millions of yen)			Nine months ended May 31, 2022:	716	(down 25.5%)
						Nine months ended May 31, 2021:	961	(up 112.3%)
		Net income per share	Diluted net income
			per share
						Yen				Yen
Nine months ended May 31, 2022				51.53				51.24
Nine months ended May 31, 2021				69.82				69.18
(2) Consolidated financial position
		Total assets			Net assets		Equity ratio
		Millions of yen				Millions of yen						%
As of May 31, 2022				9,682				5,265				54.3
As of Aug. 31, 2021				8,730				4,616				52.8
Reference: Shareholders' equity (millions of yen)			As of May 31, 2022:	5,259	As of Aug. 31, 2021:	4,612
2. Dividends
										Dividend per share
						1Q-end		2Q-end	3Q-end		Year-end		Total
							Yen		Yen		Yen					Yen				Yen
Fiscal year ended Aug. 31, 2021							‒		0.00		‒			5.60				5.60
Fiscal year ending Aug. 31, 2022							‒		0.00		‒
Fiscal year ending Aug. 31, 2022 (forecast)													8.60				8.60

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

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 profit	Profit attributable to	Net income per share
		owners of parent
	Millions of yen		%	Millions of yen	%	Millions of yen	%	Millions of yen	%	Yen
Full year	17,800		16.6	860	(36.6)	1,400	(23.8)	910	(26.7)	65.33

Note: Revisions to the most recently announced consolidated earnings forecast: Yes

* Notes

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

Newly added: -

Excluded: -

1. Application of special accounting methods in the preparation of the quarterly consolidated financial statements: None
2. Changes in accounting policies and accounting estimates, and restatements
3. 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)
5. 1. Number of shares issued as of the end of the period (including treasury shares)

As of May 31, 2022:

13,940,000 shares

As of Aug. 31, 2021:

13,902,400 shares

1. Number of treasury shares as of the end of the period

As of May 31, 2022:	130	shares	As of Aug. 31, 2021:	130 shares
3) Average number of shares during the period
Nine months ended May 31, 2022:	13,923,466	shares	Nine months ended May 31, 2021:	13,800,333 shares

• 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.

	SERAKU Co., Ltd. (6199) Consolidated Financial Results for the Third Quarter of FY8/22
Contents of Attachments
1. Qualitative Information on Quarterly Consolidated Financial Performance	2
(1)	Explanation of Results of Operations	2
(2)	Explanation of Financial Position	4
(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
(3)	Notes to Quarterly Consolidated Financial Statements	9
	Going Concern Assumption	9
	Additional Information	9
	Significant Changes in Shareholders' Equity	9
	Changes in Accounting Policies	9
	Segment and Other Information	10
	Material Subsequent Events	11

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SERAKU Co., Ltd. (6199) Consolidated Financial Results for the Third Quarter of FY8/22

1. Qualitative Information on Quarterly Consolidated Financial Performance

(1) Explanation of Results of Operations

During the first nine months of the fiscal year under review, the Japanese economy was on a moderate recovery thanks to the easing of the difficult circumstances caused by the COVID-19 pandemic. However, the situation remained uncertain, given upward pressure imposed by rising resource prices attributable to the deterioration of the Ukraine crisis and the weakening of the yen associated with the widening gap in interest rates be tween Japan and the United States, in addition to slowing economic recoveries due to interest hikes following the tightening of monetary policy undertaken primarily in the United States, and the downside economic risks attributable to production constraints and product shortages linked to China's zero-COVID policy.

In Japan's IT sector, which is the primary business field where the Group provides its services, investor confidence in IT continues to be strong, reflecting the rapid expansion of the digital ec onomy, 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 i n 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 recruiti ng 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 Group's net sales increased 16.0% year on year, to 13,123,005 thousand yen, operating profit fell

39.9 % year on year, to 695,229 thousand yen, and ordinary profit declined 28.4 % year on year, to 1,132,943 thousand yen. Profit attributable to owners of parent decreased 25.5% year on year, to 717,507 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 unde r 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.

In the first nine months under review, as we expected to continue winning projects successfully, primarily in the fields of system development and operation, IT infrastructure design and building, and pro ject management, we focused on recruitment. We also actively expanded the use of external resources, strengthening cooperation with business partners. The Seraku Group (the "Group") focused its efforts on developing human resources by utilizing a project room for training with equipment that faithfully recreates actual workplaces, enabling inexperienced engineers to quickly develop the skills to be operational.

Net sales in this segment came to 9,532,454 thousand yen, up 18.4% year on year. Segment profit was 513,051 thousand yen, down 37.1% 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 nine months under review, the Group focused its efforts on recruiting engineers because demand was

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SERAKU Co., Ltd. (6199) Consolidated Financial Results for the Third Quarter of FY8/22

expected to continue growing in each technological area. In doing so, it strengthened the organizational structure.

In the customer success solution business, the Group worked to respond to an increase in composite demand for support for the widespread use of solutions including the Pardot B2B marketing tool and the Tableau analysis platform, while also boosting demand for support for the widespread use of Salesforce as usual. At the same time, it facilitated collaboration with NTT DATA Corporation and Resona Digital Hub Co., Ltd, among other companies. Through these efforts, it is in the process of further expanding this service.

Net sales in this segment came to 2,940,397 thousand yen, up 8.1% year on year. Segment profit was 245,179 thousand yen, down 28.5% 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.

In the first nine months under review, in the platform service, the Group bolstered alliances with sales agents, while in the solution service, it took steps to strengthen the development system by actively recruiting engineers to expand business with a view toward business expansion going forward.

Net sales in this segment amounted to 252,222 thousand yen, up 25.9% year on year. The segment loss was 47,472 thousand yen (segment loss of 37,258 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 the corporate sector, and provides technologies for the quality control of experiments and performance tests as well as those for communications system construction and telecommunications.

In the first nine months under review, a gradual recovery in demand was seen despite the impact of the COVID -19 pandemic on the market. The company expects to continue to win projects and actively recruit and cultivate human resources to expand its corporate size.

Net sales in the Mechanical Design and Engineering segment were 415,070 thousand yen, up 19.1% year on year. Segment loss was 12,521 thousand yen (segment profit of 35,179 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 .

The Group will move forward with initiatives to review how it should deal with the business going forward.

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 3,008 thousand yen (segment loss in the same period of the previous year was 925 thousand yen.)

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