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 containor constitute 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 thisdocument, the Japanese original is assumed to be correct.

Consolidated financial results (Japanese Accounting Standards)
for the First Quarter of the fiscal year ending March 31, 2022

Company name:IMAGICA GROUP Inc.

Securities code:

6879

Filing date: August 3, 2021
Stock exchange listing: Tokyo 1st section
URL:

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

Representative:
Nobuo Fuse, Representative Director, President
Inquiries:
Masakazu Morita, Director, Managing Executive Officer
Quarterly report filing date (as planned):
August 3, 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 First Quarter of the fiscal year ending March 31, 2022
(April 1, 2021 – June 30, 2021)(1) Consolidated Operating Results(Percentage represents change from the same period of the previous fiscal year.)
Net income attributable
Ordinary income
to owners of the parent

Net sales

Operating income

Millions ofyen%Millions of yen%

Millions of yen%

Millions of yen

%

(285)
(1,942)－－499(1,213)－－－3 months ended June 30, 2020－
(Note) Comprehensive income: 1st quarter ended June 30, 2021: 1,306 millions of yen / －%3 months ended June 30, 2021

15,414
16,855(8.6)(22.5)(255)(1,868)

1st quarter ended June 30, 2020: (1,413) millions of yen /－%Diluted earnings
per share ofcommon stock

Earnings per share ofcommon stock
3 months ended June 30, 2021
3 months ended June 30, 2020

Yen

Yen

11.25
(27.41)－－(2) Consolidated Financial Position
Total assets
As of June 30, 2021
As of March 31, 2021

Net assets

Millions of yen

Millions of yen

60,73560,44631,311
29,832(Reference) Shareholders’ equity: As of June 30, 2021: 28,883 millions of yen
As of March 31, 2021: 27,450 millions of yen

Shareholders' equity
ratio to total assets

%

47.6
45.4

English Translation

2. Dividends
Dividend per share
1st quarter- end
Year ended March 31,2021

2nd quarter- end

3rd quarter- end

yen

yen

yen

Year-endyen

Annual
yen

－

0.00

－

0.00

0.00

0.00

－

5.00

5.00

－

Year ending March 31,2022
Year ending March 31,2022(Forecast)(Note) Changes in dividends forecast from the latest disclosed information: None

3. Consolidated forecast for the fiscal year ending March 31, 2022
(April 1, 2021 - March 31, 2022)(Percentage represents change from the same period of the previous fiscal year.)Net sales

Fiscal year ending Mar.2022

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

75,000(13.5)

1,500

－

2,000

－

2,000

(42.1)

45.06(Note) Changes in earnings forecast from the latest disclosed information： Yes
Operating income includes 1,600 million yen as goodwill amortization etc.
Operating income before goodwill amortization includes: Operating income, goodwill amortization and amortization of intangible fixed assets accompanying
M&A.

*Notes:(1) Material changes in subsidiaries during this period (changes in scope of consolidations resulting from change insubsidiaries): Yes(2) The application of specific accounting of the consolidated quarterly financial statements: No(3) Changes in accounting policies, accounting estimates and retrospective
1) Changes in accounting policies based on revisions of accounting standards: Yes
2) Changes in accounting policies other than ones based on revisions of accounting standards: Yes
3) Changes in accounting estimates: Yes
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 June 30, 2021

44,741,467 shares

As of March 31, 2021

44,741,467 shares

355,844 shares

As of March 31, 2021

353,231 shares

44,386,657 shares

As of June 30, 2020

44,273,126 shares

2) Number of treasury stock at the end of fiscal year
As of June 30, 2021

3) Average number of shares
As of June 30, 2021

*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
and certain 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 First
Quarter, (3) Explanation of Consolidated Financial Forecast and Forward-looking Statements” on page of the supplemental
material.

English Translation

Table of Contents
1.

2.

Qualitative Information on Results in the First Quarter

2(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(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(Changes in accounting policies)

9(Segment information and others)

111English Translation

1. Qualitative Information on Results in the First Quarter(1) Explanation of operating results(Overview of the first quarter of consolidated fiscal year ending March 31, 2022)
The business environment surrounding the IMAGICA GROUP saw changes in the social environment due to the novel coronavirus (COVID-19)
pandemic, in addition to rapid technological innovations. These factors are bringing about many changes in our imaging-related businesses such as
the emergence of the online live market and video streaming market. The IMAGICA GROUP formulated G-EST 2025, our new mid-term plan, basedon our view that these changes present growth opportunities. We have positioned fiscal year ending March 31, 2022, the initial year of this plan, as
the year in which we will build the foundation for transforming into a highly profitable business, and are pursuing initiatives aimed at achieving theplan in each business segment.
The Group’s financial performance for the first quarter of consolidated fiscal year ending March 31, 2022 resulted in net sales of 15,414 million yen(down 8.6% year-on-year), an operating loss of 255 million yen (compared to operating loss of 1,868 million yen in the first quarter of the previous
fiscal year), and an ordinary loss of 285 million yen (compared to an ordinary loss of 1,942 million yen in the first quarter of the previous fiscal year).
Net profit attributable to owners of the parent was 499 million yen (compared to a loss of 1,213 million yen in the first quarter of the previous fiscal
year).
The decline in net sales resulted from the implementation of the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, revised
March 31, 2020; hereafter, the “Revenue Recognition Accounting Standard”) and related guidance from the beginning of the first quarter ofconsolidated fiscal year ending March 31, 2022, and the sales of all shares held in SDI Media Group, Inc. at the end of last fiscal year, removing itfrom consolidation.
See “(Changes in accounting policies, etc.),” and “(Segment information and others), [Segment Information], 2. Notes concerning changes inreportable segments” under “2. Quarterly Consolidated Financial Statements, (3) Notes to Quarterly Consolidated Statements” for further details
on the impact of the implementation of the Revenue Recognition Accounting Standard and related guidance on the financial status and operating
results of the IMAGICA GROUP.

(Performance by business segment)
The financial results by business segment are as follows.
One subsidiary (IMAGICA LIVE Corp.), which was previously included in the Production Services business segment, was reclassified to the Imagining
Systems & Solutions business segment from the first quarter of consolidated fiscal year ending March 31, 2022. The consolidated fiscal year
comparisons for the first quarter are based on the new classification.
1) Content Creation
The financial performance of the Content Creation business segment in the first quarter of consolidated fiscal year ending March 31, 2022 resulted
in net sales of 3,928 million yen (up 34.0% year-on-year) and an operating loss of 30 million yen (compared to an operating loss of 469 million yen
in the first quarter of the previous fiscal year).
Orders received for TV animation and other productions were firm, despite the fact that net sales of some feature film productions and TV dramas
will be posted in the second quarter or later. Orders for TV commercials and other advertising show signs of rebounding, and orders were alsostrong for online streaming of live music performances and shooting music videos.
The above factors resulted in an increase in both sales and operating income in the Content Creation business segment.

2

English Translation

2) Production Services
The financial performance of the Production Services business segment in the first quarter of consolidated fiscal year ending March 31, 2022
resulted in net sales of 8,687 million yen (down 17.4% year-on-year) and an operating loss of 174 million yen (compared to an operating loss of
1,267 million yen in the first quarter of the previous fiscal year).
Domestic E2E services*1 saw growth in orders for digital cinema, in addition to post-production for large projects such as feature films and drama
series and theater animation due to the reopening of theaters and other factors. This segment saw growth in the number of productions delivered
to video streaming service providers, due in part to collaboration with Pixelogic Holdings LLC, which became a consolidated subsidiary last fiscal
year. Orders for video file compression, conversion, and other encoding and localization services grew, and sales were steady.
International E2E services saw substantial sales growth due to firm orders for localization for video streaming service providers, despite a decreasein orders for digital cinema services, owing to the delayed release of feature films by Pixelogic Holdings LLC in Europe and the U.S.
In post-production services for TV programs and TV commercials, etc.*2, sales for post-production services for TV programs trended on par with lastyear. With the activation of the advertising market, the number of orders for TV commercials increased year-on-year, and demand for the online
delivery system also expanded.
In game production, human talent services, etc.*3, the creative talent dispatch and referral business continued to experience severe conditions.
However, strong orders for 3DCG production and debugging led to improvement in sales.
Sales for the Production Services business segment as a whole declined due to the sale of all shares held in SDI Media Group, Inc., removing thesubsidiary from consolidation. However, the structural reform completed last fiscal year led to improvement in the operating loss.
*1 E2E services: Refers to an integrated end-to-end (E2E) service that covers the entire post-production process for feature films, dramas, animation,and other audio/video content up to media services for localization (subtitling/dubbing) and distribution of these through all kinds of media, including
theaters, TV, and video streaming via the Internet.
*2 As part of the restructuring of the Production Services business, the description of services collectively called “media and post-production services”

up to last fiscal year has been revised to “E2E services” and “post-production services for TV programs and TV commercials, etc.”*3

The names of “human talent services” and “digital content” used up to last fiscal year have been revised to “game production, human talent
services, etc.”* Companies in the international E2E services area have a fiscal year-end of December 31. The financial performance for this area during the firstquarter of fiscal year ending March 31, 2022 therefore reflects the results for January 1 through March 31, 2021.

3) Imaging Systems & Solutions
The financial performance of the Imaging Systems & Solutions business segment in the first quarter of consolidated fiscal year ending March 31,
2022 resulted in net sales of 3,151 million yen (down 11.9% year-on-year) and operating income of 103 million yen (compared to an operating lossof 46 million yen in the first quarter of the previous fiscal year).
High-speed cameras saw a rebound in demand in Asia, Europe, and the U.S., despite continued sluggish sales in Japan. Projects for broadcastingstations continued to struggle as the number of projects declined and the size of projects shrank. The online delivery system for TV commercials
continued to see strong sales due to expansion in market needs, while video and image processing LSI saw a rebound in demand in Japan andstrong sales in Europe, the U.S., and South Korea.
Moreover, IMAGICA LIVE Corp. was included in the Imaging Systems & Solutions business in the first quarter of consolidated fiscal year ending
March 31, 2022 due to segment reclassification. It achieved growth in both orders and sales of live sports relay and streaming services for archived
videos.
The full amount received from customers for sale of mobile communication lines was previously recognized as revenue. However, theimplementation of the Revenue Recognition Accounting Standard and related guidance has resulted in a decrease in net sales due to the change inthe method of recognizing revenue for the net amount after amounts paid to suppliers are deducted from the total amount of the sale.
The above factors resulted in a decrease in sales and an increase in profit in the Imaging Systems & Solutions business segment.

3

English Translation(2) Explanation of Financial Position(Asset)Current assets decreased by 1,384 million yen (4.5%) from the end of the previous consolidated fiscal year to 29,056 million yen. This decrease wasmainly due to a decrease in notes and accounts receivable-trade and contract assets, which exceeded an increase in inventories.
Non-current assets increased by 1,674 million yen (5.6%) from the end of the previous consolidated fiscal year to 31,679 million yen. This was
mainly due to an increase in goodwill, and lease and guarantee deposits, which exceeded the decline in stocks of subsidiaries and affiliates.
Consequently, total assets increased by 289 million yen (0.5%) from the end of the previous fiscal year to 60,735 million yen.
(Liabilities Statement)
Current liabilities decreased by 727 million yen (3.3%) from the end of the previous consolidated fiscal year to 21,389 million yen. This was mainly
due to a decrease in short-term loans payable.
Non-current liabilities decreased by 461 million yen (5.4%) from the end of the previous consolidated fiscal year to 8,034 million yen. This decrease
was mainly due to a decrease in long-term loans payable.
The above factors resulted in total liabilities of 29,424 million yen, a decrease of 1,189 million yen (3.9%) from the end of the previous consolidated
fiscal year.
(Net Assets)
Net assets increased by 1,478 million yen (5.0%) from the end of the previous consolidated fiscal year to 31,311 million yen. This was mainly due toan increase in foreign currency translation adjustment and retained earnings.

(3) Explanation of consolidated forecasts and other forward-looking information
We have revised the full-year forecasts for fiscal year ending March 31, 2022, announced on May 13, 2021. See the news release disclosed on
August 3, 2021, entitled “Notice concerning recognition of non-operating income and revision of financial forecasts” for further details.

4English Translation

2.

Quarterly Consolidated Financial Statements(1) Quarterly Consolidated Balance Sheets(Thousands of yen)

June 30, 2021

March 31, 2021

AssetsCurrent assets
Cash and deposits

6,908,657

5,799,588

Notes and accounts receivable- trade

15,159,083－－

11,943,834

Inventories

6,499,812

8,913,366

Other

1,918,018

2,444,241

Notes and accounts receivable - trade, and contract assets

Allowance for doubtful accounts(44,735)(44,756)

30,440,836

29,056,275

Buildings and structures

3,065,365

3,038,042

Machinery and equipment

85,810117,002

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

Land1,705,819

1,705,819

Lease Assets

475,187

427,712Construction in progress

526,880

927,274

Other

1,365,805

1,476,228

Total Property, plant and equipment

7,224,868

7,692,078

Goodwill

12,048,747

12,727,301

Other

2,464,367

2,645,760

Total Intangible assets

14,513,115

15,373,061

Investment securities

3,163,483

3,289,768

Stocks of subsidiaries and affiliates

1,095,950

326,643

Lease and guarantee deposits

1,641,911

2,211,464

Deferred tax asset

2,154,662

2,581,885

328,808

321,464

Intangible assets

Investments and other assets

Other
Allowance for doubtful accounts(117,446)(116,923)

Total Investments and other assets

8,267,369

8,614,303

Total Non-current assets

30,005,354

31,679,444

Total assets

60,446,190

60,735,719

5English Translation(Thousands of yen)March 31, 2021

June 30, 2021

Liabilities
Current liabilities
Notes and accounts payable- trade5,416,309

5,352,658

Short-term loans payable

7,402,726

5,904,362

Accounts payable

1,212,857

927,640

Income taxes payable

211,609

136,356

Advance received

2,811,112－

Contract liabilities－

3,861,189

Provision for bonuses

977,286

695,977

Provision for loss on order received

79,66024,021

Provision for loss on litigation

531,408

593,788

Other

3,474,389

3,893,600

Total current liabilities

22,117,359

21,389,595

Non-current liabilities
Long-term loans payable

5,384,905

4,977,526

Long-term accounts payable-other

148,018

140,056

Net defined benefit liabilities

550,324484,293

1,219,724

1,246,686

627,722647,324Deferred tax liabilities
Asset retirement obligations
Other565,200

538,588

Total non-current liabilities

8,495,895

8,034,475

Total Liabilities

30,613,255

29,424,070

Capital stock

3,306,002

3,306,002

Capital surplus

13,238,832

13,239,662

Retained earnings

10,966,151

11,555,343

Treasury stock(361,659)(361,659)

Total shareholders’ equity

27,149,326

27,739,348

880,107956,080

Revaluation reserve for land

(17,933)(17,933)

Foreign currency translation adjustment(559,947)

207,018

(688)

(855)

Net assets
Shareholders’ equity

Accumulated other comprehensive income
Valuation difference on available-for-sale securities

Re-measurements of defined benefit plans
Total accumulated other comprehensive income

301,538

1,144,310

Stock acquisition right

11,484

11,484Non-controlling Interests

2,370,585

2,416,505

Total Net assets

29,832,935

31,311,648

Total liabilities and Net assets

60,446,190

60,735,719

6

English Translation(2) Quarterly Consolidated Statements of Income and Statements of Comprehensive Income
Quarterly Consolidated Statements of Income
3 months ended
June 30, 2020

(Thousands of yen)

3 months ended
June 30, 2021

Net sales

16,855,763

15,414,113

Cost of sales

13,497,809

11,028,031

Gross profit

3,357,953

4,386,082

Selling, general and administrative expenses

5,226,879

4,642,006

Operating loss

(1,868,925)(255,924)

Interest income

64,811260

Dividend income
Rent income

14,702

13,22917,175

15,832Foreign exchange gains

Non-operating income

58,145－

Other28,175

16,534

Total non-operating income

183,00945,856

Interest expenses

79,38352,165Equity in losses of affiliates

135,767

208

Non-operating expenses

Foreign exchange losses

－

2,767

Other

41,101

19,976

Total non-operating expenses

256,251

75,117(1,942,167)(285,186)

Gain on sales of non-current assets

659

794

Gain on sale of shares of subsidiaries and associates－

357,963

Total extraordinary income

659

358,757

Ordinary loss
Extraordinary income

Extraordinary losses
Loss on sales of non-current assets

263－

Loss on retirement of non-current assets

4,948

4,039

Impairment loss

73,135－

Other

12,06968

Total extraordinary losses

90,4184,107(2,031,926)

69,464

Net income (loss) before income tax
Income taxes
Net income (loss)
Net loss attributable to non-controlling interests
Net income (loss) attributable to owners of the parent

7(621,680)(395,136)(1,410,245)

464,601(196,914)(34,651)(1,213,331)

499,252

English Translation

Quarterly Consolidated Statements of Comprehensive Income
3 months ended
June 30, 2020

(Thousands of yen)

Net income (loss)

3 months ended
June 30, 2021

(1,410,245)

464,601

Valuation difference on available-for-sale securities

163,833

75,973Foreign currency translation adjustment(167,523)

765,850

248

(167)

(3,441)

841,656(1,413,687)

1,306,257(1,144,411)

1,342,023(269,275)(35,766)

Other comprehensive income

Re-measurements of defined benefit plans
Total other comprehensive income
Comprehensive income(Breakdown)Comprehensive income attributable to owners of parent
Comprehensive
interests

incomeattributabletonon-controlling8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)
No relevant matters to be noted.
(Changes in accounting policies, etc.)(Changes in accounting policies)(Changes accompanying implementation of the Accounting Standard for Revenue Recognition and related guidance)
The Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, revised March 31, 2020; hereafter, the “Revenue
Recognition Accounting Standard”) and related guidance were implemented from the beginning of the first quarter ofconsolidated fiscal year ending March 31, 2022. Under this standard, the amount the company expects to receive in
exchange for goods and services is recognized as revenue when control over the promised goods or services is transferred tothe customer. The main changes from implementation of the Revenue Recognition Accounting Standard and related
guidance are as follows:(1) Recognition of revenue on product export sales
For export sales of imaging equipment, etc., revenue was previously recognized when the goods cleared customs. Thishas changed to the method of recognizing revenue once control over the asset is deemed to have transferred to thecustomer, according to the transaction terms.
(2) Recognition of revenue on transactions involving multiple fulfillment obligations in a single contract
In the Content Creation business, revenue on transactions involving multiple fulfillment obligations in a single contract
was previously recognized once all obligations were completely fulfilled in cases where the obligations were highlyinterrelated. For transactions in which the customer performs an inspection for each of the fulfillment obligations, thishas changed to the method of recognizing revenue for each fulfilled obligation once the customer has performed theinspection and deemed each individual obligation fulfilled.
(3) Recognition of revenue on agency transactions
For mobile communication lines, revenue was previously recognized on the total amount of the sale received from thecustomer. This has changed to the method of recognizing revenue for the net amount after deducting payments to
suppliers from the full amount. This resulted from determining the company’s role (provided directly or as an agent)in providing the goods or services to the customer.
The implementation of the Revenue Recognition Accounting Standard and related guidance follows the transitional
treatment in the exception clause of Paragraph 84 of the Revenue Recognition Accounting Standard. The new accounting
standard was applied to the balance of retained earnings from the beginning of the period and retained earnings were
adjusted for the cumulative impact assuming application of the new accounting standard retroactively before the beginningof the accounting period for the first quarter of consolidated fiscal year ending March 31, 2022.
However, we have applied the method specified in Paragraph 86 of the Revenue Recognition Accounting Standard and have
not retroactively applied the new accounting policy to contracts for which nearly all of the revenue recognized prior to thebeginning of the first quarter of consolidated fiscal year ending March 31, 2022, was handled according to the previous
accounting method.
These changes resulted in a decrease in retained earnings at the beginning of the first quarter of consolidated fiscal year
ending March 31, 2022 of 9,934 thousand yen. It also resulted in decreases of 1,577,039 thousand yen in net sales and1,578,443 thousand yen in cost of sales for the same consolidated period. The ordinary loss and operating loss decreased by
1,404 thousand yen, respectively, and net income before income tax increased by 1,404 thousand yen.
Due to implementation of the Revenue Recognition Accounting Standard and related guidance, “Notes and accounts
receivable-trade,” which was presented in “Current assets” in the Quarterly Consolidated Balance Sheets for the previous
fiscal year, is included in “Notes and accounts receivable-trade and contract assets” from the first quarter of consolidated
fiscal year ending March 31, 2022. Likewise, “Advances received,” which was presented in “Current liabilities,” is included“contract liabilities” from the first quarter of consolidated fiscal year ending March 31, 2022. In accordance with thetransitional treatment specified in Paragraph 89-2 of the Revenue Recognition Accounting Standard, the new method ofpresentation has not been retroactively applied to the previous consolidated fiscal year. In accordance with the transitional
treatment specified in Paragraph 28-15 of the Accounting Standard for Quarterly Financial Reporting (ASBJ Statement No.
12, Revised March 31, 2020), a breakdown of revenues arising from contracts with customers during the first quarter of theprevious consolidated fiscal year has not been provided.
(Changes accompanying implementation of the Accounting Standard for Fair Value Measurement)
The Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019; hereafter, “Fair Value
Accounting Standard”) and related guidance were implemented from the beginning of the first quarter of consolidated fiscal

9English Translation

year ending March 31, 2022. In accordance with the transitional treatment specified in Paragraph 19 of the Fair Value
Accounting Standard and Paragraph 44-2 of the Accounting Standard for Financial Instruments (ASBJ Statement No. 10, July4, 2019), the new accounting policy specified in the Fair Value Accounting Standard and related standards were applied
prospectively. The change did not have any impact on the quarterly consolidated financial statements.
(Changes in accounting policies that are difficult to differentiate from changes in accounting estimates)
The IMAGICA GROUP and its domestic subsidiaries have mainly used the declining balance method of depreciation forproperty, plant, and equipment (excluding lease assets). We have changed this to the straight-line depreciation methodfrom the first quarter of consolidated fiscal year ending March 31, 2022.
In light of the change from an era in which state-of-the-art equipment functions and editing services were strengths to an
era in which we are called upon to perform an integrated range of complex work in a secure environment for worldwide
simultaneous release, the IMAGICA GROUP response up to fiscal year ended March 31, 2021 included revising theinternational strategy, undertaking structural reform and Group business reorganization, using fixed assets effectively, andinvigorating creative talent by establishing an office environment that accommodates new workstyles.
We took advantage of the opportunity presented by implementing the measures mentioned above to consider the status ofproperty, plant, and equipment use. This revealed that the risk of rapid technological and economic obsolescence is now
lower and property, plant, and equipment can be expected to operate stably over the remaining useful life, based on our
New Mid-Term Plan "G-EST 2025.” We therefore decided that the equal allocation of costs under the straight-line
depreciation method is a more reasonable reflection of the actual usage of property, plant, and equipment.
This change resulted in a decrease of 27,277 thousand yen in the operating loss and ordinary loss, respectively, and anincrease of 27,277 thousand yen in income before income tax for the first quarter of consolidated fiscal year ending March
31, 2022.

10

English Translation(Segment information and others)[Segment Information]
I.
For the 3 months ended June 30, 2020 (from April 1, 2020 to June 30, 2020)
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 loss

2,932,062

10,413,883

3,507,008

16,852,955

30

105,236

70,216

175,482

2,932,093

10,519,120

3,577,224

17,028,438(469,437)(1,267,718)(46,212)(1,783,368)

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 loss

2,808

16,855,763(175,482)－(172,674)

16,855,763(85,557)(1,868,925)

Notes:
1.
The segment loss adjustment of (85,557) thousand yen consists of 1,493,674 thousand yen in income of the Company and intersegment
transaction eliminations of (1,579,231) thousand yen.
2.
The segment loss adjustment is based on the operating loss item in the Quarterly Consolidated Statements of Income.

2. Information on impairment losses, goodwill, etc. by reportable segment(Material impairment loss on non-current assets)
An impairment loss of 73,135 thousand yen on non-current assets was posted in the Production Services business segment.

11English TranslationII.

For the 3 months ended June 30, 2021 (from April 1, 2021 to June 30, 2021)
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)

3,897,955

8,443,751

3,044,891

15,386,599

30,517

244,006

106,164

380,6883,928,473

8,687,758

3,151,056

15,767,287(30,610)(174,833)

103,511(101,932)

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)

27,514

15,414,113(380,688)－(353,174)

15,414,113(153,992)(255,924)

Notes:
1.
The segment income (loss) adjustment of (153,992) thousand yen consists of 922,735 thousand yen in income of the Company and intersegment
transaction eliminations of (1,076,727) thousand yen.
2.
The segment income (loss) adjustment is based on the operating loss item in the Quarterly Consolidated Statements of Income.

2. Notes concerning changes in reportable segments(Changes in reportable segments)
One consolidated subsidiary (IMAGICA LIVE Corp.) was previously included in the Production Services segment. It has been reclassified andincluded in the Imaging Systems & Solutions segment from the first quarter of consolidated fiscal year ending March 31, 2022.
The figures provided in “Information regarding net sales and profit (loss) by reportable segment” for the first quarter of the previous
consolidated fiscal year show the figures after the changes to the reportable segments were made.
(Changes in accounting policies)
As stated in “Changes in accounting policies,” the Revenue Recognition Accounting Standard and related guidance were implemented from the
beginning of the first quarter of consolidated fiscal year ending March 31, 2022. The changes in the method of accounting for revenue
recognition also resulted in the same changes in the method of calculating business segment income or loss.
Compared to the previous method, this change resulted an increase of 12,885 thousand yen in sales for Content Creation, an increase of 3,531
thousand yen in sales for Production Services, and a decrease of 1,593,455 thousand yen in sales for Imaging Systems & Solutions. It also
increased segment losses by 2,127 thousand yen for Content Creation and by 3,531 thousand yen for Production Services.
(Change in property, plant, and equipment depreciation method)
As stated in “Changes in accounting policies that are difficult to differentiate from changes in accounting estimates,” the Group and its domestic
consolidated subsidiaries previously used the declining balance method for depreciating property, plant, and equipment (excluding lease assets).
The method of depreciation was changed to the straight-line method from the first quarter of consolidated fiscal year ending March 31, 2022.
Compared to the previous method, this change resulted in decreases of 2,571 thousand yen in the segment loss for Content Creation, 9,508
thousand yen in the segment loss for Production Services, and 7,102 thousand yen in adjustments for the first quarter of consolidated fiscal year
ending March 31, 2022. Segment profit increased by 8,095 thousand yen for Imaging Systems & Solutions.

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