Consolidated Financial Statements for
the Nine Months Ended September 30, 2019
These financial statements have been prepared for reference only in accordance with accounting principles and practices generally accepted in Japan.

November 14, 2019
Link and Motivation Inc.
Stock exchange listing: Tokyo
Code number: 2170
http://www.lmi.ne.jp/english
Representative: Yoshihisa Ozasa, Chairman and Representative Director
Contact: Shunichi Ohno, Director andGeneral Manager of Group Design Office
Phone: +81-3-6779-9494
Filing of Quarterly Report (Shihanki Hokokusho) (scheduled):
November 14, 2019
Start of distribution of dividends (scheduled):
December 25, 2019
Supplementary documents for quarterly results:
No
Quarterly results briefing:No(Amounts are rounded down to the nearest million.)

1. Consolidated Results for the Nine Months Ended September 30, 2019
(January 1, 2019 – September 30, 2019)(1) Revenues and Income
Revenues(¥ million)
Nine months ended
September 30, 2019
Nine months ended
September 30, 2018

(Percentages represent change compared with the same quarter of the previous year.)
IncomeOperatingNet
ChangeChangebeforeChangeChangeincomeincome(%)(%)
income taxes(%)(%)(¥ million)(¥ million)(¥ million)

28,566

(4.4)

1,936

(36.4)

1,865(38.1)

1,151(40.7)

29,875

10.3

3,042

30.0

3,014

33.8

1,939

28.8

Net income
attributable toowners of theparent(¥ million)

Change(%)

Comprehensive
income(¥ million)

Change(%)

Basic earnings
per share (¥)

Dilutedearnings per
share (¥)

1,154

(41.5)

969(61.1)

10.94

10.91

1,971

30.2

2,493

2.9

18.67

—

Nine months ended
September 30, 2019
Nine months ended
September 30, 2018

(2) Financial Position
Total assets(¥ million)
As of September 30, 2019
As of December 31, 2018

41,59927,664

Total equity(¥ million)
7,212
7,681

Equity attributableto owners of theparent(¥ million)
7,230
7,696

Ratio of equity
attributable to ownersof the parent to total
assets (%)
17.4
27.8

2. Dividends
Dividends per share
3rd Qtr.
Year-end
2018
1.70
1.70
2019
1.80
2019 (est.)
1.80
Note: Revisions since the most recently announced dividend forecast: No
1st Qtr.
1.70
1.80

2nd Qtr.
1.70
1.80

Total
6.80
7.20

3. Forecast of Consolidated Results for 2019 (January 1, 2019 – December 31, 2019)(Percentages represent change compared with the previous fiscal year.)
Net income
Basic
Net
Revenues
Operating income
attributable toearnings
incomeowners of the parent per share(¥ million)(%) (¥ million)(%)(¥ million)(%)(¥ million)(%)(¥)
Full-year
38,500(3.6)
1,880(50.9)
1,050(45.3)
1,030(47.1)
9.75
Note: Revisions since the most recently announced forecast of results: No

Notes(1) Changes in Significant Subsidiaries during the Period: No(2) Changes in Accounting Policies and Changes in Accounting Estimates(a) Changes in accounting policies required by IFRS: Yes(b) Changes in accounting policies other than (a) above: No(c) Changes in accounting estimates: No(3) Number of Shares Issued and Outstanding (Common Stock)(a) Number of shares at the end of the period (including treasury shares)
Nine months ended September 30, 2019: 113,068,000; Year ended December 31, 2018: 113,068,000(b) Number of treasury shares at the end of the period:
Nine months ended September 30, 2019: 7,935,700; Year ended December 31, 2018: 7,445,757(c) Average number of shares outstanding (cumulative with earlier quarters):
Nine months ended September 30, 2019: 105,552,043; Nine months ended September 30, 2018: 105,622,300* These Financial Statements Are Not Subject to Quarterly Review by a Certified Public Accountant or
Auditing Firm
 These “Consolidated Financial Statements for the Nine Months Ended September 30, 2019” are not subject toquarterly review procedures pursuant to the Financial Instruments and Exchange Act although, as of the date of
publication of these statements, the review procedures for quarterly financial statements pursuant to the Financial
Instruments and Exchange Act had been completed.
* Explanation of the Proper Use of Performance Forecasts and Other Special Instructions
 Consolidated forecasts and other statements regarding the future contained in this document are based on
information currently available to the Company and certain reasonable assumptions. Actual performance may differ
substantially due to numerous factors.

Contents of Attachments
1. Overview of Results of Operations and Other Information ............................................................................ 2(1) Overview of Results of Operations for the Nine Months Ended September 30, 2019 ............................ 2(2) Overview of Financial Condition for the Nine Months Ended September 30, 2019 ............................... 8(3) Overview of Cash Flow for the Nine Months Ended September 30, 2019 ............................................... 8(4) Forecast ......................................................................................................................................................... 8(5) Important Information Regarding Assumption of Going Concern ......................................................... 8
2. Condensed Consolidated Financial Statements and Main Notes ................................................................... 9(1) Condensed Consolidated Balance Sheets ................................................................................................... 9(2) Condensed Consolidated Statements of Operations andCondensed Consolidated Statements of Comprehensive Income .......................................................... 11(3) Condensed Consolidated Statements of Changes in Equity.................................................................... 15(4) Condensed Consolidated Statements of Cash Flow ................................................................................. 16(5) Notes to Condensed Consolidated Financial Statements ....................................................................... 17
Changes in Accounting Policies ........................................................................................................... 17
Notes Regarding Assumption of Going Concern ............................................................................... 18
Significant Subsequent Event .............................................................................................................. 19

1

1. Overview of Results of Operations and Other Information(1) Overview of Results of Operations for the Nine Months Ended September 30, 2019
The Link and Motivation Group (the “Group”) supports the transformation of numerous companies andindividuals using “Motivation Engineering,” which is the Group’s core technology, backed by psychology, behavioral
economics, social systems theory and other disciplines, under its corporate philosophy: “Through Motivation
Engineering, we provide opportunities to transform organizations and individuals and create a more meaningfulsociety.” The market grew moderately in industries related to the Group, with increased demand for higher laborproductivity and facilitation of personnel recruiting associated with the promotion of work style reform.
In this economic environment, revenues of the Group were ¥28,566 million (a 4.4% decrease compared with thesame period of the previous year), gross profit was ¥10,955 million (a 6.4% decrease), operating income was ¥1,936
million (a 36.4% decrease) and net income attributable to owners of the parent was ¥1,154 million (a 41.5% decrease).
The segment and business classifications of the Group are as shown below, and an overview of the first ninemonths of 2019 by segment and business follows.

Link and
Motivation Group

Organizational
Development Division

Individual
Development Division

Matching Division

Consulting &Outsourcing Business

Career School Business

ALT Placement Business

Link and Motivation Inc.

Link Academy Inc.

Link Interac Inc.

Link Global Solution Inc.

Dean Morgan K.K.

Link Relation
Engineering Inc.

Event & Media Business

Cram School Business

Personnel Placement &Temp Staff Business

Link Corporate
Communications Inc.

Motivation Academia Inc.

Link Staffing Inc.
Link-i Inc.

Link Event Produce Inc.
Link Japan Careers Inc.
a2media Corporation

2

Organizational Development Division
The Organizational Development Division offers corporate customers services that provide support for building andstrengthening relationships with a company’s stakeholders (employees, job applicants, customers and shareholders) using“Motivation Engineering,” which is the core technology of the Group.
In this segment, segment revenues for the first nine months of 2019 were ¥8,837 million (a 12.2% decrease) andsegment income was ¥5,825 million (a 12.6% decrease), both decreasing substantially compared with the same period of
the previous year. An overview of operating results by business for the first nine months of 2019 is as follows.
Consulting & Outsourcing Business
The Consulting & Outsourcing business acts under the concept of creating numerous “Motivation Companies” inwhich employee motivation is the growth engine of an organization. As its method of providing services, the business
diagnoses the state of motivation in an organization based on its original diagnostic framework and offers various onestop solutions for innovations related to organizations and personnel, including recruiting, training, frameworks andcorporate culture.
In this business, revenues for the first nine months of 2019 were ¥6,628 million (a 12.4% decrease) and gross profit
was ¥5,271 million (a 13.5% decrease). Results by product in the Consulting & Outsourcing business were as follows.
Table 1. Revenues by ProductProduct (¥ million)[Gross profit in brackets]
Consulting & Outsourcing Business
Consulting
Package
Member/database services
Outsourcing

Nine months ended
September 30, 2018
7,563
[6,093]
1,949
3,611
1,388
614

Nine months ended
September 30, 2019
6,628
[5,271]
1,762
2,435
1,948
480

YoY change
(%)
-12.4
-13.5
-9.6
-32.6
+40.3
-21.8

In the first nine months of 2019, revenues from Package and Consulting did not grow due to the impact ofinvestment of employees and other resources in Member/database services in the first half. However, Package andConsulting results for the third quarter alone appear to be on a recovery track in comparison with the first half due to theimpact of the increase in employees and other measures.
Revenues grew steadily for the Motivation Cloud series of cloud-based organizational improvement services, which
are part of the Member/database services category and are priority services for the Group. Progress in the number ofdeliveries and monthly fee revenue was as follows.
Table 2. Number of Deliveries and Monthly Fee Revenue for the Motivation Cloud Series at Quarter-End
2018
2019
March
June
September December
March
June
September
Number of deliveries
435
527
563
662
688
718
749
Monthly fee revenue(¥ thousand)
72,08692,998103,410130,663
140,201
153,064
167,497
The Motivation Cloud series is a group of cloud-based services in the field of HR Tech (human resources combinedwith technology) for managing employee engagement (mutual understanding, empathy and commitment between
companies and employees). We began providing this series of monthly pay-as-you-go products in July 2016. The numberof deliveries reached 749 as of the end of September 2019.
The recent environmental change of shifting to adapt to the labor market to target human resources, both employees
and job applicants, is a management issue for many companies. Amid these circumstances, improving employee
engagement through corporate organizational activities is a key management theme. However, the absence of a“yardstick” for visualizing the state of the organization and of a PDCA cycle for truly achieving organizational
improvements has been an issue for many organizational activities. Against this backdrop, capturing companies’ risingneeds for organizational transformation has led to growth in the number of deliveries of the Motivation Cloud series of3

services. The Motivation Cloud series is generating stable revenue, with total monthly fee revenue of ¥167,497 thousand
for September 2019. The Company expects further growth in revenue from the Motivation Cloud series due to the launchof a new optional service on July 8, 2019.
Event & Media Business
The Event & Media business produces events and media for various types of communication associated withbusiness activities to support the “creation of Motivation Companies” at corporations. In its event production, thebusiness assists in stimulating the interest and promoting the understanding of stakeholders through support for creationof forums such as anniversary events, recruiting presentations, promotional events and shareholders’ meetings. In its
media production, the business is involved in printed media such as company newsletters, corporate brochures and annual
reports for shareholders, as well as web-based media such as corporate websites and investor relations (IR) sites andvisual media such as videos that explain products and webcasts of shareholders’ meetings.
In this business, revenues for the first nine months of 2019 were ¥2,661 million (a 15.7% decrease) and gross profit
was ¥879 million (a 3.6% decrease). Results by product in the Event & Media business were as follows.
Table 3. Revenues by ProductProduct (¥ million)[Gross profit in brackets]
Event & Media Business
Event Production
Media Production

Nine months ended
September 30, 2018
3,158
[911]
1,358
1,799

Nine months ended
September 30, 2019
2,661
[879]
832
1,828

YoY change
(%)
-15.7
-3.6
-38.7
+1.6

In the first nine months of 2019, the Event & Media business focused on IR-related media with low sensitivity toeconomic swings and intentionally cut back substantially on event-related orders, which have a high cost ratio, in order tostabilize operations. As a result, revenues decreased substantially and gross profit decreased slightly.
The business will work for growth by developing products with greater advantages using “Motivation Engineering,”
the Group’s core technology.

4Individual Development Division
The Individual Development Division applies “Motivation Engineering,” which is the core technology of the Group,
to businesses in areas including career schools and cram schools, to offer individual customers “career navigation”
services, which provide total support for independent and autonomous career creation.
In this segment, due to solid performance in each business, segment revenues for the first nine months of 2019 were
¥6,001 million (a 0.9% increase) and segment income was ¥2,204 million (a 1.8% decrease). An overview of operating
results by business for the first nine months of 2019 is as follows.
Career School Business
The Career School business defines human resources who act independently and autonomously, without depending onan organization, as “i-Companies” and supports the production of numerous i-Companies. As for specific services, thebusiness provides one-stop services for individual career advancement, targeting mainly university students and working
adults, under the six service brands of “Aviva” personal computer schools, “Daiei” qualification schools, “Aviva Pro”
programming schools, and “Rosetta Stone Learning Center,” “Rosetta Stone Premium Club” and “Hummingbird” foreign
language schools.
In this business, revenues for the first nine months of 2019 were ¥5,502 million (a 1.6% increase) and gross profit was¥2,008 million (a 0.2% increase). Results by product in the Career School business were as follows.
Table 4. Revenues by ProductProduct (¥ million)
Nine months ended[Gross profit in brackets]
September 30, 2018
Career School Business
5,417[2,004]
Office2,299
Pro Series
739
Accounting courses
423
National exam courses
506
Civil servant courses
1,012
Education materials/other133
English conversation
303
coursesNine months ended
September 30, 2019
5,502
[2,008]
2,227
724
452
529
954
132

YoY change
(%)
+1.6
+0.2
-3.1
-1.9
+6.8
+4.7
-5.8
-0.4

482

+58.9

During the first nine months of 2019, revenues and gross profit both increased slightly compared with the same periodof the previous year due to steady sales of Accounting, National exam and English conversation courses.
The business will provide greater support for individual career planning by focusing on expanding sales of i-Company
Club, a subscription model service launched in November 2019 to support habits of self-improvement.

5

Cram School Business
Unlike typical cram schools, the Cram School business operates under the business concept of producing numerous “iCompanies” in addition to improving the academic ability of its students. Its services consist of operating “Motivation
Academia” cram schools for junior high and high school students to provide a place where students can not only prepare
for school entrance exams but also develop skills to play a role in society. The business also operates “SS-1,” anindividualized instruction cram school for students preparing for junior high school entrance exams. The Cram School
business will utilize the assets of the Group’s Career School business in programming education and English conversation
education to provide places for students from elementary school straight through to high school to develop skills that will
be of use in society.
In this business, revenues for the first nine months of 2019 were ¥502 million (a 5.6% decrease) and gross profit was¥197 million (a 18.0% decrease).
During the first nine months of 2019, revenues decreased and gross profit decreased substantially compared with thesame period of the previous year because new enrollment fell below the forecast beyond expectations in the first half.
This business has only one product.
By further applying the know-how in training adults that has been cultivated in the Consulting & Outsourcing
business, this business aims to achieve one-stop services unattainable by conventional cram schools, ranging fromelementary to high school students and adults.
Matching Division
The Matching Division provides services under the concept of matching organizations with hiring needs andindividuals who want to advance their careers through “motivation matching,” which applies “Motivation Engineering,”
the core technology of the Group, to personnel placement and temp staff dispatch.
In this segment, segment revenues for the first nine months of 2019 were ¥14,412 million (a 3.5% decrease) andsegment income was ¥3,543 million (a 3.5% decrease), both decreasing compared with the same period of the previous
year. An overview of operating results by business for the first nine months of 2019 is as follows.
ALT Placement Business
The ALT Placement business dispatches assistant language teachers (ALTs) of foreign languages to elementary,junior high and high schools throughout Japan and provides English-language instruction services on contract. In thisbusiness, where barriers to entry are extremely high due to the importance placed on relationships of trust with customers
and a company’s track record, the Group has established the predominant number-one share among private companies.
Japan’s English education market continues to expand due to the impact of the upcoming Tokyo Olympics and otherfactors.
In this business, revenues for the first nine months of 2019 were ¥9,274 million (a 4.7% increase) and gross profit was¥2,500 million (a 3.4% increase).
During the first nine months of 2019, revenues and gross profit both increased compared with the same period of theprevious year due to stable growth from precisely capitalizing on the expansion of English education promoted by the
Ministry of Education, Culture, Sports, Science and Technology (MEXT). This business has only one product.
The business will work to raise the quality of its foreign teachers with a view toward further growth in demand for
ALTs in Japan.

6Personnel Placement & Temp Staff Business
The Personnel Placement & Temp Staff business provides solutions in the form of introductions and temp staffing of
the human resources an organization needs to grow. The main businesses include a new graduate recruiting andintroduction business that connects university students looking for employment with company orientation meetings andinterviews, a mid-career introduction business that matches working adults looking to change jobs with companies, and atemp staff business that dispatches personnel for sales, clerical work, and other fields. In addition, to capitalize on risingneeds for employment of foreigners, the Personnel Placement & Temp Staff business also conducts a business thatprovides one-stop foreigner recruiting, training and labor support for companies that want to hire them.
In this business, revenues for the first nine months of 2019 were ¥5,715 million (a 12.9% decrease) and gross profit
was ¥1,481 million (an 8.0% decrease). Results by product in the Personnel Placement & Temp Staff business were as
follows.
Table 5. Revenues by ProductProduct (¥ million)[Gross profit in brackets]
Personnel Placement& Temp Staff BusinessStore sales temp staff
Office temp staff
Foreign worker support
Recruiting/introductions

Nine months ended
September 30, 2018
6,564
[1,610]
5,163
468
459
472

Nine months ended
September 30, 2019
5,715
[1,481]
4,272
438
510
493

YoY change
(%)
-12.9
-8.0
-17.3
-6.3
+11.0
+4.4

During the first nine months of 2018, revenues decreased substantially and gross profit decreased compared with thesame period of the previous year due to slow growth by Store sales temp staff, which accounts for the majority ofrevenues, resulting from a trend toward regular employment.
The business will raise matching efficiency and improve profitability through business synergy that links individuals
who have improved their skills through the Group’s Career School business to corporate dispatch and introductions.
Venture Incubation
In addition to its divisions, the Group conducts venture incubation. In venture incubation, the Group provides its
know-how in organizational and personnel consulting in addition to funding, as well as supporting growing venturecompanies on an organizational level with the aim of listing their stock. The two main criteria for selection of investees
are (1) sympathy with creating a “Motivation Company” and (2) aim to list stock. Gains on sales and other results
generated from venture incubation are recorded as other components of equity on the balance sheet.

7(2) Overview of Financial Condition for the Nine Months Ended September 30, 2019
Total assets as of September 30, 2019 were ¥41,599 million, an increase of ¥13,934 million from the end of theprevious year. This was mainly due to factors including a ¥15,970 million increase in property, plant and equipment due
to an increase in right-of-use assets and other items in connection with the application of IFRS 16.
Total liabilities as of September 30, 2019 were ¥34,386 million, an increase of ¥14,404 million from the end of theprevious year. This was mainly due to factors including a ¥16,213 million increase in interest-bearing and other financial
liabilities due to an increase in lease liabilities and other items in connection with the application of IFRS 16.
Total equity as of September 30, 2019 was ¥7,212 million, a decrease of ¥469 million from the end of the previous year.
This was mainly due to factors including a ¥640 million decrease in retained earnings at the beginning of the period in
connection with the application of IFRS 16.
(3) Overview of Cash Flow for the Nine Months Ended September 30, 2019
Cash and cash equivalents (“cash”) as of September 30, 2019 were ¥1,444 million, a decrease of ¥535 million during
the period.
Cash flow during the nine months ended September 30, 2019 was as follows.
Cash Flow from Operating Activities
Net cash provided by operating activities was ¥1,984 million, a decrease of ¥360 million compared with the same
period of the previous year. Principal factors included an increase of ¥1,391 million in depreciation and amortization to¥1,882 million, while income before income taxes decreased ¥1,149 million to ¥1,865 million.
Cash Flow from Investing Activities
Net cash provided by investing activities was ¥210 million. In the same period of the previous year, investing
activities used net cash of ¥684 million. Principal factors included a ¥960 million increase in proceeds from sale ofinvestment securities.
Cash Flow from Financing Activities
Net cash used in financing activities was ¥2,729 million, an increase of ¥1,166 million compared with the same periodof the previous year. Principal factors included a ¥1,374 million increase in repayment of lease liabilities.
(4) Forecast
For details, please refer to “Revision of Forecast of Consolidated Results for 2019,” announced on August 9, 2019.
(5) Important Information Regarding Assumption of Going Concern
None applicable82. Condensed Consolidated Financial Statements and Main Notes(1) Condensed Consolidated Balance Sheets(Millions of yen, rounded down to the nearest million)

ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current financial assets
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Goodwill
Intangible assets
Investments in associates
Other non-current financial assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets

9

As of
December 31, 2018

As of
September 30, 2019

1,979
4,533
278
9
1,015
7,817

1,444
4,179
297
32
730
6,683

1,851
6,551
1,841
3,080
5,821
440
260
19,847
27,664

17,821
6,551
2,082
3,121
4,439
648
251
34,91541,599(Millions of yen, rounded down to the nearest million)

LIABILITIES AND EQUITY
LIABILITIESCurrent liabilities
Trade and other payables
Contract liabilities
Interest-bearing and other financial liabilities
Income tax payable
Provisions
Other current liabilities
Total current liabilities
Non-current liabilities
Interest-bearing and other financial liabilities
Provisions
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
EQUITY
Equity attributable to owners of the parent
Share capital
Capital surplus
Treasury shares
Retained earnings
Other components of equity
Total equity attributable to owners of the parent
Non-controlling interests
Total equity
Total liabilities and equity

10

As of
December 31, 2018

As of
September 30, 2019

2,394
1,573
4,749
1,077
18
2,287
12,101

2,119
1,708
5,676
273
20
1,738
11,537

6,458
435
724
261
7,881
19,982

21,745460385
257
22,84934,386

1,380
1,989(1,373)
4,763
936
7,696
(15)
7,681
27,664

1,380
1,988(1,612)
5,305
167
7,230
(18)
7,212
41,599(2) Condensed Consolidated Statements of Operations andCondensed Consolidated Statements of Comprehensive Income
Condensed Consolidated Statements of Operations
Nine Months Ended September 30(Millions of yen, rounded down to the nearest million)

Nine months ended
September 30, 2018
Revenues
Cost of sales
Gross profit
Selling, general and administrative expenses
Other income
Other expenses
Operating income
Financial revenue
Financial expenses
Equity in earnings of associates
Income before income taxes
Income taxes
Net income(Attributable to)
Owners of the parent
Non-controlling interests
Total

Nine months ended
September 30, 201929,875
18,168
11,706
8,623
6
46
3,042
21
84
34
3,014
1,074
1,939

28,566
17,61010,955
8,990
12
41
1,936
22
133
40
1,865
714
1,151

1,971
(32)
1,939

1,154
(3)
1,151
(Yen)

Earnings per share attributable to owners of the parent
Basic earnings per share
Diluted earnings per share

18.67
—

11

(Yen)

10.94
10.91

Three months Ended September 30(Millions of yen, rounded down to the nearest million)

Revenues
Cost of sales
Gross profit
Selling, general and administrative expenses
Other income
Other expenses
Operating income
Financial revenue
Financial expenses
Equity in earnings of associates
Income before income taxes
Income taxes
Net income(Attributable to)
Owners of the parent
Non-controlling interests
Total

Three months ended
September 30, 2018

Three months ended
September 30, 2019

9,889
6,112
3,777
2,819
0
31
927
16
35
7
915
322
593

9,431
6,018
3,413
2,940
1
9
464
10
50
13
438
167
271

597
(3)
593

271
0
271
(Yen)

Earnings per share attributable to owners of the parent
Basic earnings per share
Diluted earnings per share

5.65
—

12

(Yen)

2.57
2.57

Condensed Consolidated Statements of Comprehensive Income
Nine Months Ended September 30(Millions of yen, rounded down to the nearest million)

Nine months
ended
September 30, 2018
Net income
Other comprehensive income
Items that will not be reclassified to profit or loss:
Net gain (loss) on revaluation of financial assets
measured at fair value through othercomprehensive income
Total items that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit orloss:
Exchange differences on translation of foreign
operations
Total items that may be reclassified subsequently to
profit or loss
Total other comprehensive income
Total comprehensive income(Attributable to)
Owners of the parent
Non-controlling interests
Comprehensive income

13

Nine months
ended
September 30, 2019

1,939

1,151

553
553

(180)
(180)

1

(0)

1
554
2,493

(0)
(181)
969

2,525
(32)
2,493

972
(3)
969

Condensed Consolidated Statements of Comprehensive Income
Three Months Ended September 30(Millions of yen, rounded down to the nearest million)

Three months
ended
September 30, 2018
Net income
Other comprehensive income
Items that will not be reclassified to profit or loss:
Net gain (loss) on revaluation of financial assets
measured at fair value through othercomprehensive income
Total items that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit orloss:
Exchange differences on translation of foreign
operations
Total items that may be reclassified subsequently to
profit or loss
Total other comprehensive income
Total comprehensive income(Attributable to)
Owners of the parent
Non-controlling interests
Comprehensive income

14

Three months
ended
September 30, 2019

593

271

167
167

(87)
(87)

1

0

1
168
762

0
(86)
184

766
(3)
762

184
0
184

(3) Condensed Consolidated Statements of Changes in Equity
Nine months ended September 30, 2018
(Millions of yen, rounded down to the nearest million)
Equity attributable to owners of the parent
Total equity
NonTotal
Other
controlling
Capital Treasury Retained
attributable
equitycomponents
interests
surplussharesearnings
to owners ofof equity
the parent
2,137(1,373)
3,426
1,121
6,692
4
6,697
1,971
—
1,971
(32)
1,939

Share
capitalJanuary 1, 2018
Net income
Other comprehensive
incomeTotal comprehensive
incomeAcquisition oftreasury shares
Changes inownership
interest in
subsidiaries
Dividends fromsurplusTransfer from othercomponents ofequity to retained
earnings
Total transactions withthe owners
September 30, 2018

1,380

—

—

—

1,971

(0)

554

554

—

554

554

2,525

(32)

2,493

—

(0)

(147)

—
1,380

(147)

(147)
1,989

(0)
(1,373)

(0)

7

(140)

(528)

—

(528)

(528)

80

(80)

—

—

(447)
4,950

(80)
1,595

(676)
8,542

7
(20)

(668)
8,522

Nine months ended September 30, 2019
(Millions of yen, rounded down to the nearest million)
Equity attributable to owners of the parent

January 1, 2019
Impact of change inaccounting policy
Balance at beginning of
period after reflectingchange in accounting
policyNet income
Other comprehensive
incomeTotal comprehensive
incomeAcquisition oftreasury shares
Dividends fromsurplusTransfer from othercomponents ofequity to retained
earnings
Total transactions withthe owners
September 30, 2019

SharecapitalCapitalsurplusTreasurysharesRetainedearnings

1,380

1,989

(1,373)

4,763

Other
componentsof equity

936

(640)

1,380

—

—
1,380

1,989

(1,373)

—

—

(1)

(238)

(1)
1,988

(238)
(1,612)

4,122
1,154

1,154

Total equity
attributableto owners of
the parent

Noncontrollinginterests

Total
equity

7,696

(15)

7,681

(640)

(640)

936
—

7,055
1,154

(15)
(3)

7,040
1,151

(181)

(181)

—

(181)

(181)

972

(3)

969

(239)

(239)

(559)

—

(559)

(559)

587

(587)

—

—

28
5,305

(587)
167

(798)
7,230

15

—
(18)

(798)
7,212

(4) Condensed Consolidated Statements of Cash Flow
(Millions of yen, rounded down to the nearest million)

Cash flow from operating activities
Income before income taxes
Depreciation and amortization
Loss on impairment
Financial revenues and financial expenses
Equity in (earnings) losses of associates
Decrease (increase) in trade and other receivables
Decrease (increase) in inventories
Increase (decrease) in trade and other payables
Other
SubtotalInterest and dividends received
Interest paid
Income tax refund
Income taxes paid
Net cash provided by operating activities
Cash flow from investing activities
Payments for acquisition of property, plant and equipment
Payments for acquisition of intangible assets
Payments for acquisition of investment securities
Proceeds from sale of investment securities
Payments for security deposits and guarantees
Proceeds from recovery of security deposits and guarantees
Other
Net cash provided by (used in) investing activities
Cash flow from financing activities
Net increase (decrease) in short-term financial liabilities
Proceeds from long-term financial liabilities
Repayment of long-term financial liabilities
Payments of cash dividends
Repayment of lease liabilities
Payments for acquisition of interest in subsidiary from
non-controlling interests
Payments for acquisition of treasury shares
Other
Net cash provided by (used in) financing activities
Cash and cash equivalents translation adjustment
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

16

Nine months
ended
September 30, 2018

Nine months
ended
September 30, 2019

3,014
491
20
63
(34)
345
(129)
4
(43)
3,731
8
(65)
17
(1,346)
2,344

1,865
1,882
12
111
(40)
355
(19)
(282)
(168)
3,715
8
(107)
62
(1,695)
1,984

(146)
(566)
(120)
267
(156)
58
(21)
(684)

(289)
(600)
(99)
1,227
(85)
113
(55)
210

606
600
(2,016)(530)—(1,400)2,285(1,442)(557)(1,374)

(140)
—
(83)
(1,563)
(0)
97
1,654
1,751

—
(239)
—
(2,729)
(0)
(535)
1,979
1,444

(5) Notes to Condensed Consolidated Financial Statements(Changes in Accounting Policies)
Significant accounting policies applied in these condensed consolidated financial statements are the same as those
applied to the consolidated financial statements for the previous fiscal year, except for the following.
Income taxes for the nine months ended September 30, 2019 are calculated using the estimated average annual
effective tax rate.
The Group has applied IFRS 16 “Leases” (issued in January 2016) (hereafter, “IFRS 16”) from the three months
ended March 31, 2019.
(1) Policies applied from the date of initial application
At the commencement of a contract, the Group determines whether the contract contains a lease. The lease liabilities
for lease transactions are measured at the present value of the remaining total lease payments at the commencement dateof the lease, discounted using the lessee’s incremental borrowing rate. The cost of right-of-use assets is initially measured
at the amount of the initial measurement of lease liabilities, adjusted by any initial direct costs and any lease incentives
received plus costs such as restoration obligation required under the contract, and depreciated over the term of the leaseon a straight-line basis.
The Group presents right-of-use assets in “property, plant and equipment” and “intangible assets,” and lease liabilities
in “interest-bearing and other financial liabilities” on the condensed consolidated statement of financial position.
The Group has elected not to recognize right-of-use assets and lease liabilities in accordance with the recognition
exemption provisions in IFRS 16 for short-term leases for which the lease term ends within 12 months and leases inwhich the underlying asset is of low value. The Group recognizes the lease payments associated with those leases as an
expense on a straight-line basis over the lease term.
(2) Impact of application of IFRS 16
As a transitional measure upon the adoption of IFRS 16, the Group applies this standard retrospectively without
restating comparative information, with the cumulative effect of initially applying this standard at the date of initial
application recognized in the balance of retained earnings at the beginning of the period.
In transitioning to IFRS 16, the Group has chosen the practical expedient detailed in IFRS 16 paragraph C3 andgrandfathered its assessments of whether contracts contain leases based on IAS 17 “Leases” (hereafter, “IAS 17”) andIFRIC 4 “Determining whether an Arrangement contains a Lease.” From the date of application, this assessment isdetermined based on the provisions of IFRS 16.
For leases that the Group as lessee previously classified as operating leases applying IAS 17, right-of-use assets andlease liabilities are recognized at the date of initial application. These lease liabilities have been measured at the present
value of the remaining lease payments discounted using the lessee’s incremental borrowing rate at the date of initial
application. The weighted average of the lessee’s incremental borrowing rates is 0.44%. Right-of-use assets are initiallymeasured at the initial measurement amount of the lease liability adjusted for the prepaid lease payments and other factors.
For leases that the Group as lessee previously classified as finance leases applying IAS 17, the carrying amounts ofright-of-use assets and lease liabilities at the date of initial application are the carrying amounts of lease assets and leaseliabilities, respectively, immediately before that date measured applying IAS 17.
The difference in amount between non-cancellable operating lease contracts applying IAS 17 as of December 31,
2018 and lease liabilities recognized in the condensed consolidated statement of financial position at the date of initial
application is mainly due to the difference in estimates for periods exceeding the non-cancellable period of the real estate.
Due to the application of IFRS 16, right-of-use assets increased ¥16,109 million and lease liabilities increased¥16,934 million at the beginning of the first quarter ended March 31, 2019, compared with the application of the previous
accounting standard. In addition, retained earnings decreased ¥640 million.
17

The Group uses the following practical expedient in the application of IFRS 16.


For contracts that include an option to extend or cancel a lease, the Group uses ex post facto judgment in calculating
the lease term.

(Notes Regarding Assumption of Going Concern)
None applicable18(Significant Subsequent Event)(Acquisition of Additional Shares of OpenWork Inc.)
At a Board of Directors meeting held on November 14, 2019, the Company resolved to acquire additional shares of
OpenWork Inc. (former name: Vorkers Inc.), an equity-method associate, and to make it a subsidiary, as detailed below.
1. Purpose of the Share Acquisition
In cooperation with the Company, OpenWork Inc. has been operating OpenWork Recruiting, which matches
individuals seeking jobs with companies that have high scores for their organizational conditions on OpenWork, aplatform operated by OpenWork Inc. that uses online employee reviews to provide information to job seekers.
The purpose of this share acquisition is to support corporate adaptation to the labor market to help realize a society
with many companies with high employee engagement together with OpenWork Inc.
With a rapid increase in the number of registrants for OpenWork, which is operated by OpenWork Inc., and anincrease in the number of online reviews of organizational conditions, corporate organizational conditions will become
more open. This is expected to accelerate polarization between companies with good organizational conditions, which job
seekers will choose to work for, and companies with poor organizational conditions, which job seekers will choose not towork for. As a result, the Company intends to use its Motivation Cloud series and consulting to support companies intheir efforts to further raise employee engagement in order to become companies that jobs seekers choose to work for.
The trend described above will overturn the previous ground rules in the labor market, in which companies that
conduct large-volume advertising attract applicants, and create new ground rules, in which companies with a high level of
employee engagement attract applicants. The Company also intends to support this course of events through OpenWork
Recruiting, which OpenWork Inc. operates in cooperation with the Company. The Company will accelerate this trend by
making OpenWork Inc. its subsidiary through this additional share acquisition, with the aim of helping to realize a society
with many companies with high employee engagement.
2. Overview of the Company Subject to the Share Acquisition (OpenWork Inc.)(1) Company Name

OpenWork Inc.

(2) Location

Shibuya, Shibuya-ku, Tokyo(3) Business Description

Operation of information service and fee-based introduction business for job seekers
using the Internet and other media(3) Paid-in Capital¥645 million

3. Number of Shares to Be Acquired, Acquisition Price and Equity Ownership after the Acquisition(1) Number of Shares to Be Acquired

163,000 shares(2) Equity Position before the Acquisition

20%(3) Equity Position after the Acquisition

56.22%(3) Business Combination

January 1, 2020

4. Funding and Payment Method
Allocated from funds on hand and borrowings from financial institutions
5. Impact on Business Results
This matter will have no impact on the Company’s consolidated business results for the fiscal year ending December
31, 2019.

19