English Translation
This document is a translation of the Japanese original. The Japanese original has been disclosed in Japan in accordancewith Japanese accounting standards and the Financial Instruments and Exchange Act. This document does not contain orconstitute any guarantee and the Company will not compensate any losses and/or damage stemming from actions taken
based on this document. In the case that there is any discrepancy between the Japanese original and this document, theJapanese original is assumed to be correct.

Consolidated financial results (Japanese Accounting Standards)
for the Third Quarter of the fiscal year ending March 31, 2021
Company name:IMAGICA GROUP Inc.

Securities code:

6879

Filing date: February 4, 2021
Stock exchange listing: Tokyo 1st section
URL:

https://www.imagicagroup.co.jp/en/

Representative:
Nobuo Fuse, President
Inquiries:
Masakazu Morita, Director and Managing Executive Officer
Quarterly report filing date (as planned):
February 4, 2021
Dividend payment date (as planned):－
Supplemental material of quarterly results:
Yes
Convening briefing of quarterly results:
No

Tel:+81-3-6741-5742(Millions of yen, rounded down)
1. Consolidated Financial Results for the Third Quarter of the fiscal year ending March 31, 2021
(April 1, 2020 – December 31, 2020)(1) Consolidated Operating Results(Percentage represents change from the same period of the previous fiscal year.)Net sales

9 months ended Dec. 31, 2020
9 months ended Dec. 31, 2019

(Note) Comprehensive income:Operating income

Net income attributableto owners of the parent

Ordinary income

Millions ofyen%Millions of yen%

Millions of yen%

Millions of yen%

58,670(13.0)(2,369)－(2,729)

－

(663)

－

67,405

6.3

357

－

(310)

－

815

－

3rd quarter ended December 31, 2020: (1,135) millions of yen /－%3rd quarter ended December, 2019: 142 millions of yen /－%Diluted earnings
per share ofcommon stock

Earnings per share ofcommon stock
Yen

Yen

9 months ended Dec. 31, 2020

(14.96)－9 months ended Dec. 31, 2019

18.49

－

(2) Consolidated Financial Position
Total assets

Net assets

Shareholders' equity
ratio to total assets

Millions of yen

Millions of yen%

3rd quarter ended Dec. 31, 2020

71,387

24,64531.0

As of March 31, 2020

62,15427,47840.3(Reference) Shareholders’ equity:

As of December 31, 2020: 22,099 millions of yen
As of March 31, 2020: 25,066 millions of yen

English Translation
2. Dividends
Dividend per share

1st quarter- end

2nd quarter- end

Year ended March 31,2020

－

0.00

－

Year ending March 31,2021

－

0.00

－

yen

3rd quarter- end

yenYear-end

yen

Year ending March 31,2021(Forecast)(Note)

Annual

yen

yen

5.00

5.00

0.00

0.00

Changes in dividends forecast from the latest disclosed information: None

3. Consolidated forecast for the fiscal year ending March 31, 2021
(April 1, 2020 - March 31, 2021)(Percentage represents change from the same period of the previous fiscal year.)Net salesYear ending March 31,2021(Note)

Operating income

Net income
attributableto owners of theparentOrdinary income

Earnings per
shareof commonstock

Millions of yen%

Millions of yen%

Millions of yen%

Millions of yen%

yen

84,000(10.7)(2,200)－(2,650)－(1,150)－(25.91)

Changes in earnings forecast from the latest disclosed information： None

*Notes:(1) Material changes in subsidiaries during this period (changes in scope of consolidations resulting from change insubsidiaries): Yes(Name) Pixelogic Holdings, LLC(2) The application of specific accounting of the consolidated quarterly financial statements: None
(3) Changes in accounting policies, accounting estimates and retrospective
1) Changes in accounting policies based on revisions of accounting standards: None
2) Changes in accounting policies other than ones based on revisions of accounting standards: None
3) Changes in accounting estimates: None
4) Retrospective restatement: None
(4) Number of issued and outstanding shares (common stock)1) Number of issued and outstanding shares at the end of fiscal year (including treasury stock)
As of December 31, 2020

44,741,467 shares

As of March 31, 2020

44,741,467 shares

As of March 31, 2020

468,341 shares

2) Number of treasury stock at the end of fiscal year
As of December 31, 2020

353,231 shares

3) Average number of shares
As of December 31, 2020

44,338,006 shares

As of December 31, 201944,087,258 shares*Consolidated quarterly financial results are exempted from quarterly review by a public certified accountant or an
auditing firm.
(Explanation regarding the appropriate usage of financial forecasts and other special instructions)
Forward-looking statements, such as financial forecasts, presented in this document are based on information available andcertain assumptions deemed to be reasonable to the Company at the time of publication, and are not to be read as
guarantees of future performance by the Company. For preconditions of the assumptions and special instructions regarding
the appropriate use of financial forecasts, please refer to “1. Qualitative Information on Results in the Third Quarter, (3)Explanation of Consolidated Financial Forecast and Forward-looking Statements” on page 3 of the supplemental material.

English Translation

Table of Contents
Qualitative Information on Results in the Third Quarter .................................................................................... 2

1.
(1)

Explanation of operating results .............................................................................................................2(2)

Explanation of Financial Position ............................................................................................................4(3)

Explanation of consolidated forecasts and other forward-looking information ......................................................... 4
Quarterly Consolidated Financial Statements ................................................................................................ 5

2.
(1)

Quarterly Consolidated Balance Sheets ..................................................................................................... 5(2)

Quarterly Consolidated Statements of Income and Statements of Comprehensive Income .......................................... 7(3)

Notes to Quarterly Consolidated Statements .............................................................................................. 9(Notes regarding ongoing concern assumption) ............................................................................................... 9(Notes concerning material changes in the amount of shareholders’ equity) .............................................................. 9(Segment information and others) ..............................................................................................................91

English Translation

1.

Qualitative Information on Results in the Third Quarter(1) Explanation of operating results(Overview of the first three quarters of consolidated fiscal year ending March 31, 2021)
The business environment in Japan showed signs of a gradual recovery from October onward, owing to emergency economic measures designed tocombat the spread of the novel coronavirus (COVID-19), and the resumption of economic activities. Improvement in the performance of the
IMAGICA Group was also seen, but we expect the severe business environment to persist as recent signs of further spread of COVID-19 have been
seen.
The Group’s financial performance for the first three quarters of consolidated fiscal year ending March 31, 2021 resulted in net sales of 58,670
million yen (a decline of 13.0% year-on-year), an operating loss of 2,369 million yen (compared to operating income of 357 million yen in the same
period of the previous fiscal year), and an ordinary loss of 2,729 million yen (compared to an ordinary loss of 310 million yen in the same period of
the previous fiscal year). Net loss attributable to owners of the parent was 663 million yen (compared to a profit of 815 million yen in the same
period of the previous fiscal year), due to 2,091 million yen recorded as a gain on step acquisitions in extraordinary income.

(Performance by business segment)
The financial results by business segment are as follows.
Please note that Production Services and Media Localization were integrated from the first quarter of consolidated fiscal year ending March 31,
2021, thereby reducing the four reportable segments to three: Content Creation, Production Services, and Imaging Systems & Solutions.
1) Content Creation
The financial performance of the Content Creation Business Segment in the first three quarters of consolidated fiscal year ending March 31, 2021
resulted in net sales of 13,888 million yen (a decline of 30.7% year-on-year) and an operating loss of 562 million yen (compared to an operating lossof 203 million yen in the same period of the previous fiscal year).
Stagnation in the number of TV commercial projects, a decline in the number of TV animation series produced, and changes in delivery schedules
and TV program broadcasting schedules continued. However, sales showed signs of a rebound from October onward from the release of live action
films and anime feature film productions that had been postponed, as well as the commencement of OTT streaming of drama planned andproduced by the Group’s subsidiary. While live music performance recordings were suspended or postponed, streaming of live performances
without audiences has become a mainstream practice and the number of such performances is increasing.
As a result, the Content Creation Business Segments saw a decline in sales and an expansion of the operating loss in the first three quarters ofconsolidated fiscal year ending March 31, 2021 despite current signs of improvement in performance.
2) Production Services
The financial performance of the Production Services Business Segment in the first three quarters of consolidated fiscal year ending March 31, 2021
resulted in net sales of 32,743 million yen (a decline of 8.2% year-on-year) and an operating loss of 2,308 million yen (compared to an operating lossof 550 million yen in the same period of the previous fiscal year).
Media and post-production services continued to secure orders for post-production services for TV programs. Post-production services for TV
commercials and animation saw signs of a rebound in orders. While digital cinema saw sluggish orders due to the decline in new projects, orders forencoding and other services were firm on the back of growth in OTT projects. Orders for video streaming, and archiving services grew mainly due tothe resumption of sports events and shift toward streaming of live recording.
In international media services, dubbing studios gradually resumed operations and orders are showing signs of rebounding. However, conditions in
Europe and the U.S. remain severe.
In human talent services, companies continued to place restrictions on new hiring activities and this resulted in a decline in demand in the creative
talent dispatch and referral business compared to the previous year. In the digital content business, the number of new projects in the debugging
business increased and Game 3DCG production was also firm.
The performance described above resulted in a decline in sales and an expansion of the operating loss for the Production Services Business Segment
as a whole during the first three quarters of consolidated fiscal year ending March 31, 2021, despite current signs of improving performance.
*1 Media and post-production services: Refers to the entire range of services relating to video production technology, including post-production
services, E2E services*2, filming, and archiving services.
*2 E2E services: Refers to an integrated end-to-end (E2E) service that covers the entire post-editing process from localization (subtitling/dubbing) to
distribution*3 of feature films, TV dramas, and other source videos.
*3 Distribution refers to a comprehensive service which includes the creation of data from the original version of the completed work, QC and2

English Translation

distribution tailored to the requirements of release/delivery format of visual contents (theater, VOD, DVD/BD, etc.), and the management of theprocess and source materials.
Companies in the international media services area have a fiscal year-end of December 31. The financial performance for this area during the first
three quarters of fiscal year ending March 31, 2021 therefore reflects the results for January 1 through September 30, 2020.
*3

English Translation

3) Imaging Systems & Solutions
The financial performance of the Imaging Systems & Solutions Business Segment in the first three quarters of consolidated fiscal year ending March
31, 2021 resulted in net sales of 12,997 million yen (an increase of 1.7% year-on-year) and operating income of 842 million yen (a decline of 43.0%
year-on-year).
In the video systems business area, the online delivery system for TV commercials saw an increase in the number of commercials delivered due toexpanding market needs, securing growth in sales. However, some projects for broadcasting stations declined or shrunk in size.
In the imaging business area, conditions remained tough for high-speed cameras in Japan, Europe, and the U.S., while sales showed signs ofrebounding in the Asian region. Sales of video and image processing LSI for Taiwan and China continued to remain firm. In the mobile solutions area,
continued expansion of demand for mobile data communications achieved a substantial increase in sales.
The performance described above resulted in an increase in sales for the Imaging Systems & Solutions Business Segment as a whole during the first
three quarters of consolidated fiscal year ending March 31, 2021. However, operating income was lower than the same period in the previous fiscal
year, mainly due to the timing of decrease in order for large projects.

(2) Explanation of Financial Position(Assets Statement)
Current assets decreased by 224 million yen (or 0.6%) from the end of the previous consolidated fiscal year to 35,070 million yen. This was mainly
due to a fall in notes and accounts receivable- trade.
Non-current assets increased by 9,457 million yen (or 35.2%) from the end of the previous consolidated fiscal year to 36,317 million yen. This was
mainly due to an increase in goodwill.
Consequently, total assets increased by 9,232 million yen (or 14.9%) from the end of the previous fiscal year to 71,387 million yen.
(Liabilities Statement)
Current liabilities increased by 6,584 million yen (25.6%) from the end of the previous consolidated fiscal year to 32,347 million yen. This increase
was mainly due to an increase in short-term loans payable which more than compensated for a decrease in income taxes payable, and notes andaccounts payable-trade.
Non-current liabilities increased by 5,480 million yen (61.5%) from the end of the previous consolidated fiscal year to 14,394 million yen. This
increase was mainly due to an increase in long-term loans payable.
The above factors resulted in total liabilities of 46,741 million yen, an increase of 12,065 million yen (34.8%) from the end of the previous
consolidated fiscal year.
(Net Assets)
Net assets declined by 2,832 million yen (10.3%) from the end of the previous consolidated fiscal year to 24,645 million yen.
This was mainly due to a decrease in capital surplus and retained earnings.

(3) Explanation of consolidated forecasts and other forward-looking information(Extraordinary income recorded)
As we disclosed in a notice entitled “Notice of transfer of equity-method affiliated company (consolidation)” on August 7, 2020, we acquired
additional shares in the equity method affiliate, Pixelogic Holdings, LLC, making the company and its four subsidiaries consolidated subsidiaries. A
gain of 2,091 million yen associated with the step acquisition was recorded as extraordinary income.
(Impact on performance)
The extraordinary income recorded is incorporated into the financial forecast for consolidated fiscal year ending March 31, 2021 disclosed on
October 30, 2020, and the financial forecast remains unchanged.

4English Translation

2.

Quarterly Consolidated Financial Statements(1) Quarterly Consolidated Balance Sheets(Thousands of yen)March 31, 2020

December 31, 2020

AssetsCurrent assets
Cash and deposits

7,339,777

7,641,972

Notes and accounts receivable- trade16,609,098

15,631,902

Inventories

9,734,028

8,965,152

Other

1,665,660

2,931,255

Allowance for doubtful accounts(53,471)(100,157)

35,295,092

35,070,124

Buildings and structures

3,343,459

3,510,191

Machinery and equipment

133,153

108,676

Total current assets
Non-current assets
Property, plant and equipment

1,705,819

1,705,819

Lease Assets

Land735,973

627,449

Construction in progress

341,285

219,148

Other

1,563,637

1,926,021

Total Property, plant and equipment

7,823,328

8,097,307

Intangible assets
Software1,242,332

1,120,887

Goodwill

3,167,870

15,480,725

Other

4,085,856

3,849,219

Total Intangible assets

8,496,059

20,450,832

Investment securities

2,296,170

2,668,782

Stocks of subsidiaries and affiliates

2,691,296

1,066,611

Long-term loans receivable

1,986,264

277,014

Lease and guarantee deposits

1,466,390

1,649,235

Deferred tax asset

1,852,835

1,850,202

Other375,336

377,878

Allowance for doubtful accounts(128,070)(120,801)

Total Investments and other assets

10,540,222

7,768,921

Total Non-current assets

26,859,610

36,317,062

62,154,703

71,387,186

Investments and other assets

Total assets

5English Translation(Thousands of yen)March 31, 2020

December 31, 2020

Liabilities
Current liabilities
Notes and accounts payable- trade

6,060,774

4,943,842

Short-term loans payable

5,004,318

14,002,546

Accounts payable

3,027,865

3,970,364

Income taxes payable

1,504,588

138,612Advances received

4,939,345

4,437,674

Provision for bonuses

1,245,383

406,449

Provision for directors compensations based on profit

106,568－

Provision for loss on order received

218,878

79,784Other

3,654,716

4,367,837

Total current liabilities

25,762,438

32,347,112

5,510,940

10,278,112

Long-term accounts payable-other

174,097

148,018

Deferred tax liabilities

283,3121,049,301

Net defined benefit liabilities

1,233,649

1,309,110

Other

1,711,796

1,609,827

Total non-current liabilities

8,913,796

14,394,371

34,676,235

46,741,484

Capital stock

3,306,002

3,306,002

Capital surplus

14,871,552

12,562,840

Retained earnings

7,730,081

6,845,317

Treasury stock(479,516)(361,659)

Total shareholders’ equity

25,428,120

22,352,500

Valuation difference on available-for-sale securities

187,009451,832

Revaluation reserve for land

(17,933)(17,933)

Foreign currency translation adjustment(529,312)(685,670)

Re-measurements of defined benefit plans(1,082)(1,218)(361,318)(252,989)

Non-current liabilities
Long-term loans payable

Total Liabilities
Net assets
Shareholders’ equity

Accumulated other comprehensive income

Total accumulated other comprehensive income
Stock acquisition right

11,484

11,484Non-controlling Interests

2,400,180

2,534,706

Total Net assets

27,478,467

24,645,702

Total liabilities and Net assets

62,154,703

71,387,186

6

English Translation(2) Quarterly Consolidated Statements of Income and Statements of Comprehensive Income
Quarterly Consolidated Statements of Income
9 months ended
December 31, 2019

(Thousands of yen)

9 months ended
December 31, 2020

Net sales

67,405,791

58,670,351

Cost of sales

50,485,820

45,738,026

Gross profit

16,919,971

12,932,325

Selling, general and administrative expenses

16,562,348

15,302,107

357,622(2,369,782)

Interest income

124,313

198,568

Dividend income

31,27023,407

Other

123,372

142,896

Total non-operating income

278,956

364,872

Interest expenses

255,916

227,305

Equity in losses of affiliates

460,583

344,200

Foreign exchange losses

91,58048,944

Other

139,093

103,863

Total non-operating expenses

947,173

724,314

Ordinary loss

(310,595)(2,729,224)

1,650,441

2,770

－

2,091,698

Operating income (loss)
Non-operating income

Non-operating expenses

Extraordinary income
Gain on sales of non-current assets
Gain on step acquisitions
Other
Total extraordinary income

37,813122,042

1,688,254

2,216,511

Extraordinary losses
Loss on sales of non-current assets
Loss on retirement of non-current assets
Impairment loss－

263

19,31040,411－

75,525

Loss on sales of investment securities

13,650－Other

26,89338,430Total extraordinary losses

59,854

154,631

Net income (loss) before income tax

1,317,804(667,344)

Income taxes

1,001,906

502,486

Net income (loss)

315,898(1,169,831)

Net loss attributable to non-controlling interests(499,177)(506,432)

Net income (loss) attributable to owners of the parent

815,076(663,398)

7

English Translation

Quarterly Consolidated Statements of Comprehensive Income
9 months ended
December 31, 2019

(Thousands of yen)

9 months ended
December 31, 2020

315,898(1,169,831)

Valuation difference on available-for-sale securities

59,768264,180

Deferred gains or losses on hedges

1,613

－

Foreign currency translation adjustment(232,477)(229,996)

Re-measurements of defined benefit plans(2,642)(136)

Total other comprehensive income(173,737)

34,046Comprehensive income

142,160(1,135,784)

Comprehensive income attributable to owners of parent

703,923(555,069)

Comprehensive income attributable to non-controllinginterests(561,763)(580,714)

Net income (loss)
Other comprehensive income(Breakdown)

8English Translation(3) Notes to Quarterly Consolidated Statements(Notes regarding ongoing concern assumption)
No relevant matters to be noted.
(Notes concerning material changes in the amount of shareholders’ equity)
The Group acquired additional shares in a consolidated subsidiary during the second quarter of consolidated fiscal year ending
March 31, 2021. This decreased the capital surplus by 2,237,130 thousand yen.
The Group also granted 115,110 shares of treasury stock as restricted stock compensation, based on the resolution passed by the
Board of Directors on June 30, 2020. This decreased the capital surplus by 71,582 thousand yen and treasury stock by 117,856
thousand yen.
The above changes resulted in a capital surplus of 12,562,840 thousand yen and 361,659 thousand yen in treasury stock as ofDecember 31, 2020.
(Segment information and others)
I.

[Segment Information]
For the 9 months ended December 31, 2019 (from April 1, 2019 to December 31, 2019)1.

Information regarding net sales and profit (loss) by reportable segment(Thousands of yen)Content Creation

Production
Services

Imaging Systems &Solutions

Sub total

Net sales
Sales to externalcustomers
Inter-segment sales
or transfers
Total
Segment income (loss)

19,959,876

34,981,687

12,455,848

67,397,412

78,594681,447

328,711

1,088,753

20,038,471

35,663,134

12,784,560

68,486,166(203,206)(550,237)

1,478,415

724,972

Adjustments(Note 1)

Amount in the
Quarterly
Consolidated
Statements of Income(Note 2)

Net sales
Sales to externalcustomers
Inter-segment sales
or transfers
Total
Segment income (loss)

8,379

67,405,791(1,088,753)－(1,080,374)

67,405,791(367,349)

357,622

Notes:
1.
The segment income (loss) adjustment of (367,349) thousand yen consists of 1,284,431 thousand yen in incomes of holding companies(consolidated financial statement-submitting companies) and intersegment transaction eliminations of (1,651,781) thousand yen.
2.
The segment income (loss) adjustment is based on the operating profit item in the Quarterly Consolidated Statements of Income.

9English TranslationII.

For the 9 months ended December 31, 2020 (from April 1, 2020 to December 31, 2020)
1.

Information regarding net sales and profit (loss) by reportable segment(Thousands of yen)
Production
Services

Content Creation

Imaging Systems &Solutions

Sub total

Net sales
Sales to externalcustomers
Inter-segment sales
or transfers
Total
Segment income (loss)

13,828,736

32,150,368

12,678,822

58,657,927

60,220593,403

318,638

972,261

13,888,956

32,743,772

12,997,460

59,630,189(562,949)(2,308,059)

842,133(2,028,875)

Adjustments(Note 1)

Amount in the
Quarterly
Consolidated
Statements of Income(Note 2)

Net sales

12,42358,670,351(972,261)

－

Total

(959,837)

58,670,351

Segment income (loss)(340,907)(2,369,782)

Sales to externalcustomers
Inter-segment sales
or transfers

Notes:
1.
The segment income (loss) adjustment of (340,907) thousand yen consists of 1,250,985 thousand yen in incomes of holding companies(consolidated financial statement-submitting companies) and intersegment transaction eliminations of (1,591,892) thousand yen.
2.
The segment income (loss) adjustment is based on the operating loss item in the Quarterly Consolidated Statements of Income.

2.

Note concerning changes in reportable segments
The IMAGICA GROUP previously had four business segments: Content Creation, Production Services, Media Localization, and Imaging Systems &Solutions. The Production Services and Media Localization business segments were integrated from the first quarter of consolidated fiscal year
ending March 31, 2021, thereby reducing the number of reportable business segments to three: Content Creation, Production Services, andImaging Systems & Solutions.
The figures provided in “Information regarding net sales and profit (loss) by reportable segment” for the third quarter of the previous
consolidated fiscal year show the figures after the changes to the reportable segments were made.

3.

Information on assets by reportable segment
Additional shares were acquired in Pixelogic Holdings, LLC, which was an equity method affiliate, during the third quarter of consolidated fiscal
year ending March 31, 2021, including the company and its four subsidiaries in the scope of consolidation. This resulted in an increase of
13,659,705 thousand yen in Production Services segment assets as of December 31, 2020 compared to the end of the previous consolidated
fiscal year (March 31, 2020).

10English Translation

4.

Information on impairment losses, goodwill, etc. by reportable segment(Material impairment loss on non-current assets)
An impairment loss of 75,525 thousand yen on non-current assets was posted in Production Services.
(Material changes in goodwill amount)
Additional shares were acquired in Pixelogic Holdings, LLC, which was an equity method affiliate, during the third quarter of consolidated fiscal
year ending March 31, 2021, including the company and its four subsidiaries in the scope of consolidation. This resulted in an increase of
12,777,550 thousand yen in goodwill in Production Services. This goodwill amount is the provisional amount because the allocation of theacquisition price was not completed as of the end of the third quarter of consolidated fiscal year ending March 31, 2021.

11