VarioSecure : Non-consolidated Financial Results for the Three Months Ended May 31, 2021

Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the Japanese original shall prevail.

Non-consolidated Financial Results

for the Three Months Ended May 31, 2021

[IFRS]

July 13, 2021

Company name: Vario Secure Inc.

Stock exchange listing: Tokyo Stock Exchange

Code number: 4494

URL: https://www.variosecure.net/

Representative: Yoshihiko Inami, CEO

Contact: Hideko Isoe, Director, General Manager, Office of the President

Phone: [phone]

Scheduled date of filing interim securities report: July 15, 2021

Scheduled date of commencing dividend payments: ―

Availability of supplementary briefing material on interim financial results: Available

Schedule of interim financial results briefing session: Not scheduled

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

1. Non-consolidated Financial Results for the Three Months Ended May 31, 2021 (March 1, 2021 to May 31, 2021)

(1) Non-consolidated Operating Results		(% indicates changes from the previous corresponding period.)
														Total
	Revenue		Operating profit	Profit before tax		Profit		comprehensive
														income
Three months	Million yen		%	Million yen		%	Million yen	%	Million yen		%	Million yen		%
ended
May 31, 2021	647		3.1	184	(13.4)	171	(13.9)	118		(14.4)	118		(14.4)
May 31, 2020	628		-	213		-	198	-	138		-	138		-
	Basic earnings per share			Diluted earnings per share
Three months				Yen					Yen
ended
May 31, 2021				31.37					29.90
May 31, 2020				37.06					37.06

Notes: Since interim financial statements were not prepared for the three months ended May 31, 2019, percentage changes, as compared with the corresponding period in the previous fiscal year for the three months ended May 31, 2020, have not been stated.

(2) Non-Consolidated Financial Position

	Total assets	Total equity	Total equity ratio
	Million yen	Million yen	%
As of May 31, 2021	7,044	3,927	55.8
As of February 28,	7,216	3,949	54.7
2021

2. Dividends

Annual dividends

1st

2nd

3rd

Year-end

Total

quarter-end

quarter-end

quarter-end

Yen

Yen

Yen

Yen

Yen

Fiscal year ended

-

0.00

-

39.44

39.44

February 28, 2021

Fiscal year ending

-

February 28, 2022

Fiscal year ending

February 28, 2022

-

0.00

-

40.44

40.44

(Forecast)

Note: Revision to the forecast for dividends announced most recently: None

3. Non-consolidated Financial Results Forecast for the Fiscal Year Ending February 28, 2022 (March 1, 2021 to February 28, 2022)

(% indicates changes from the previous corresponding period.)

	Revenue		Operating profit	Profit before tax	Profit		Basic earnings
			per share
	Million yen		%	Million yen	%	Million yen	%	Million yen		%	Yen
Full year	2,649		4.1	782	2.4	732	3.4	507		3.3	134.79

Note: Revision to the financial results forecast announced most recently: None

• Notes:
• 1. Changes in accounting policies and changes in accounting estimates
  2. 1. Changes in accounting policies required by IFRS: None
     2. Changes in accounting policies other than those in 1) above: None
     3. Changes in accounting estimates: None
  3. Number of shares issued (common shares)
  1. Total number of issued shares at the end of the period (including treasury shares): As of May 31, 2021: 3,771,440 shares
     As of February 28, 2021: 3,766,620 shares
  2. Total number of treasury shares at the end of the period:

As of May 31, 2021: 29 shares

As of February 28, 2021: - shares

3) Average number of shares during the period:

Three months ended May 31, 2021: 3,768,531 shares

Three months ended May 31, 2020: 3,726,600 shares

• These interim financial results are not subject to interim review by certified public accountants or audit firms
• Explanation of the proper use of financial results forecast and other notesNotes regarding forward-looking statements:
  Financial results forecasts and other forward-looking statements contained in this document are based on information currently available to the Company and certain assumptions that management believes to be reasonable and do not represent a commitment from the Company that they will be achieved. Actual results may differ substantially for various reasons. For the assumptions underlying the financial results forecasts and other notices on the use of financial results forecasts, please refer to "(4) Explanation of Non-consolidated Financial Results Forecast and Other Forward-looking Information" of "1. Qualitative Information on Interim Financial Results for the Period under Review" in the accompanying materials.

Table of Contents
1. Qualitative Information on Interim Financial Results for the Period under Review ................................................	1
(1)	Explanation of Business Results...........................................................................................................................	1
(2)	Explanation of Financial Position.........................................................................................................................	1
(3) Analysis of Cash Flows ........................................................................................................................................	1
(4)	Explanation of Non-consolidated Financial Results Forecast and Other Forward-looking Information .............	2
2. Interim Condensed Non-consolidated Financial Statements and Primary Notes .....................................................	3
(1)	Interim Condensed Non-consolidated Statements of Financial Position..............................................................	3
(2)	Interim Condensed Non-consolidated Statements of Profit or Loss and Comprehensive Income .......................	5
(3)	Interim Condensed Non-consolidated Statements of Changes in Equity .............................................................	6
(4)	Interim Condensed Non-consolidated Statements of Cash Flows........................................................................	7
(5)	Notes to Interim Condensed Non-consolidated Financial Statements..................................................................	8

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

(1) Explanation of Business Results

During the three months ended May 31, 2021, there had been expectations for the development of vaccines by major pharmaceutical companies and an increase in vaccinations for preventing the spread of COVID-19. However, no end of the pandemic was yet in sight. The outlook of the Japanese economy continues to remain uncertain due to concerns regarding the faltering economy, as the number of new COVID-19 cases is again increasing, and the pandemic has become prolonged.

As for the environment in the security services market surrounding the Company, the investment demand for corporate security measures has continued expanding due to diversifying cyberattacks and attacks targeting the teleworking environment, which has become increasingly common as a measure to prevent the prolonged spread of COVID-19.

In particular, in conjunction with the nationwide expansion of teleworking needs, demand not only from super-large and large companies, which had previously been the drivers of such demand, but also new demand for adoption from mid-sized companies and SMEs, which were relatively reluctant toward security measures in the past, has increased. There has been a tendency for companies that have difficulty operating and managing their security to outsource operations and monitoring to security vendors, which has led to a steady expansion of the market, as a whole.

In addition, regarding the procurement of materials, the Company may be affected by a global shortage of semiconductors. Although it is difficult to rationally calculate the effect on the Company's performance at the moment, the Company will continue to monitor the situation.

In such an environment, the Company reported stable sales, exceeding those of the corresponding period of the previous fiscal year, thanks to the recurring revenue from Managed Security Services and a low cancellation rate (0.76%) (Note). Each level of profit under operating profit declined year on year, due to an increase in cost of sales in conjunction with the increased revenue, construction costs of a security operation center, and investments for future growth such as recruitment aimed at strengthening of sales and management departments.

As a result of the above, in the financial results on an IFRS basis for the three months ended May 31, 2021, the Company reported revenue of ¥647,882 thousand (a year-on-year increase of 3.1%), operating profit of ¥184,801 thousand (a year-on-year decrease of 13.4%), profit before tax of ¥171,343 thousand (a year-on- year decrease of 13.9%), and profit of ¥118,229 thousand (a year-on-year decrease of 14.4%).

The results by segment are not stated, as the Company's segments comprise the single segment of Internet

Security Services.

Note: Cancellation rate (monetary basis) = Cancelation amount for the three months ended May 31, 2021 / (Monthly revenue at the beginning of each fiscal year × 3)

(2) Explanation of Financial Position

The financial position on an IFRS basis as of May 31, 2021 was as follows. Assets

Total assets as of May 31, 2021 was ¥7,044,848 thousand, a decrease of ¥171,316 thousand from the end of the previous fiscal year. This was primarily due to an increase of ¥26,613 thousand in inventories and a decrease of ¥187,470 thousand in cash and cash equivalents.

Liabilities

Total liabilities as of May 31, 2021 was ¥3,117,316 thousand, a decrease of ¥149,481 thousand from the end of the previous fiscal year. This was primarily due to an increase of ¥51,295 thousand in other current liabilities, as well as decreases of ¥78,823 thousand in income taxes payable, ¥18,418 thousand in lease liabilities, and ¥93,226 thousand in borrowings under non-current liabilities.

Equity

Total equity as of May 31, 2021 was ¥3,927,531 thousand, a decrease of ¥21,835 thousand from the end of the previous fiscal year. This was primarily due to an increase of ¥118,229 thousand in retained earnings as a result of reporting profit, and a decrease in retained earnings as a result of reporting dividends of ¥148,555 thousand.

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