USEN Corporation

Summary of First Quarter of Fiscal YearEnding August 2015
January 7, 2015

Contents

1. Results of Operations…………………………

P2

2. Financial Indicators…………………………

P7

3. Operating Highlights…………………………

P12

4. First Quarter Topics…………………………

P19

5. Disclaimer…………………………

P22

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|| Results of Operations || First Quarter Financial Highlights• Despite of a small decrease in business systems, sales increased ¥120 million
from one year earlier by a growth in other business segments sales.
• There were small declines in earnings at all levels because of expenditures forvarious purposes, including activities aimed at future growth in all business segments.
Net Sales
■売上高

＋0.7%
17.05

Operating Income
Billion yen■営業利益

Ordinary Income

Billion yen

■経常利益

2.65

1Q
FY8/2014■当期純利益Billion yen

17.17

▲4.6%

FY14-1Q

Billion yen

Net Income

FY15-1Q

1Q
FY8/2015

FY14-1Q

1Q
FY8/2014

▲2.1%
2.53

2.42

FY15-1Q

1Q
FY8/2015* Monetary amounts are not rounded; percentages are rounded to the nearest tenth.

-2-

▲1.5%

2.37
1.99

1.96

FY14-1Q
1Q

FY15-1Q
1Q

FY14-1Q
1Q

FY15-1Q
1Q

FY8/2014

FY8/2015

FY8/2014

FY8/2015

|| Results of Operations || First Quarter Financial Highlights
Business Segment Sales
・音楽配信事業・業務用システム事業

Music Distribution
Billion yen

・その他

・ICT事業ICT Services

Business Systems
Billion yen

OthersBillion yen

Billion yen

＋0.6%
10.09

10.15
individual

▲1.5%
3.75

3.69

＋0.9%
2.41

commercial

2.43＋18.3%
0.82

0.97

FY14-1Q
1Q

FY15-1Q
1Q

FY14-1Q
1Q

FY15-1Q
1Q

FY14-1Q
1Q

FY15-1Q
1Q

FY14-1Q
1Q

FY15-1Q
1Q

FY8/2014

FY8/2015

FY8/2014

FY8/2015

FY8/2014

FY8/2015

FY8/2014

FY8/2015

Sales higher due to growth incommercial sales; sales toindividuals down slightly

Small sales decline due mainly toa decrease in deliveries tohospitals and restaurants

Sales increased due to a larger
lineup of services and an increasein the number of services provided(Ref.) USEN uses commercial sales and consumer sales as one of its performance indicators.
* In FY8/2014, there was a sales deduction of ¥20 million for inter-segment transactions.
* In FY8/2015, there was a sales deduction of ¥70 million for inter-segment transactions.

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Sales up due to growth of themarketing support business

|| Results of Operations || First Quarter Financial Highlights
Business Segment Operating Income
・音楽配信事業

Music Distribution

・業務用システム事業

Billion yen
2.36

・ICT事業ICT Services

Business Systems
Billion yen

・その他

OthersBillion yen

Billion yen

▲3.6%
2.27

▲7.3%
0.46

0.42

▲4.3%
0.17

0.17

FY14-1Q
1Q

FY15-1Q
1Q

FY14-1Q
1Q

FY15-1Q
1Q

FY14-1Q
1Q

FY15-1Q
1Q

FY8/2014

FY8/2015

FY8/2014

FY8/2015

FY8/2014

FY8/2015

Mainly the result of expenditures,
including for growth-oriented
activities

Higher gross margin raised grossprofit but operating income wasdown because of higher costs

Basically unchanged fromone year earlier* In FY8/2014, there was an operating income deduction of ¥260 million for inter-segment transactions.
* In FY8/2015, there was an operating income deduction of ¥260 million for inter-segment transactions.

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▲ 0.1

▲ 0.1

1Q
FY8/2014

1Q
FY8/2015

Basically unchanged fromone year earlier

|| Results of Operations || First Quarter Performance vs. Forecast

FY Forecast

1Q Actual

Progress

（A）

（B）

（B÷A）

Net Sales

70.00

17.17

24.5%

Operating Income

8.60

2.53

29.5%

Ordinary Income

8.00

2.37

29.6%

Net Income

6.00

1.96

32.8%

Billion yen

First quarter sales were generally as expected but
earnings were higher than the forecast at all levels.

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|| Results of Operations || Quarterly Consolidated Performance
Billion yen
250

50

Net Sales
200

16.6

16.6

17.4

17.4

17.0

Operating Income

17.4

17.9

Net Income
40

16.8

17.1

150～
～

30

2.3

100

1.9

1.9
50

1.3

2.6

2.4

1.4

1.9

2.9
2.5
2.0

1.4

2.5
1.4

1.6
1.2

3Q FY8/2014

4Q FY8/2014

20

1.9
10

0.5
0

0
1Q FY8/2013

2Q FY8/2013

3Q FY8/2013

4Q FY8/2013

1Q FY8/2014

2Q FY8/2014

1Q FY8/2015

First quarter sales were higher than in the first quarters of the previous two fiscal years.
Operating income and net income were about the same as one year earlier.
* All figures are not rounded.

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|| Financial Indicators || Cash Flows
Billion yen

14.0
10.0

15.6
12.2

1.6

16.2

Operating CF

Total CF

10.5
3.7

1.8

2.0

3.0

1.6

0.2

-0.3

-0.5
FY8/2012

Free CFFY8/2013

FY8/2014

1Q FY8/2014

1Q FY8/2015

3.7
▲ 1.7
▲ 2.3

3.0
▲ 1.4
▲ 1.4

* Free CF = Operating CF + Investing CF ; Total CF = Free CF + Financial CF

Operating CF

14.0
Investing CF ▲ 4.0
Financial CF ▲ 10.5

15.6
▲ 3.3
▲ 10.5

16.2
▲ 5.6
▲ 8.6

Operating cash flows were down ¥700 million mainly because of lower earnings,
higher tax payments and cash used for working capital. But total cash flows
increased ¥500 million as cash used in investing and financing activities decreased.

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|| Financial Indicators || Leverage Ratio
Billion yen , Times
Debt
EBITDA

42.7

Leverage ratio

32.3
25.0
17.0

16.5

16.9

23.7
16.9

2.5
2.0
FY8/2012

FY8/2013

1.5

1.4

FY8/2014

1Q FY8/2015* EBITDA = Operating income + Depreciation + Depreciation of goodwill* EBITDA is for the most recent 12-month period* Leverage ratio = Debt / EBITDA for past 12 months

EBITDA was steady, remaining about the same as one year earlier.
The leverage ratio decreased to 1.4 times as debt continued to decline.

-8-

|| Financial Indicators || Equity Ratio
Billion yen , %Assets

73.3

～
～

67.4

～
～
20.2%

11.9%

～
～

28.9%

19.4

Equity ratio

67.1～～31.7%
21.3

13.6

8.7
FY8/2012

67.3

EquityFY8/2013

FY8/2014

1Q FY8/2015* Equity = Net assets – Stock acquisition rights

There was almost no change in assets from the end of August, but the equity
ratio increased to more than 30% because equity increased due to higher
retained earnings.

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|| Financial Indicators || Return on Equity
Sales/Net Income Ratio
9.7%

Asset Turnover Ratio

Financial Leverage

9.6%

7.1%
5.0%

1.03

1.03

0.97

0.88

11.0

6.3

FY8/2012

FY8/2013

FY8/2014

1Q FY8/2015

FY8/2012

FY8/2013

FY8/2014

1Q FY8/2015

FY8/2012

FY8/2013

4.1

3.6

FY8/2014

1Q FY8/2015

Return on Equity
48.7%

FY8/2012

43.3%

40.6%

FY8/2013

FY8/2014

36.2%

1Q FY8/2015* Return on equity (ROE) = Sales/Net income ratio x Asset turnover ratio x Financial leverage* Sales and net income are for the last 12-month period and assets and equity are the averages of the amounts at the ends of the current and previous FY

The sales/net income ratio and asset turnover ratio were about the same asat the end of August. Financial soundness improved as financial leverage
decreased and the ROE, although lower, remains high.

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|| Financial Indicators || Return on Assets
Billion yen , %Total Assets

76.9

～

70.3

10.3%

8.2

7.2

FY8/2012

67.3

～

10.7%

Ordinary Income

FY8/2013

Return on Assets

67.1～12.4%～12.4%

8.3

8.2

FY8/2014

1Q FY8/2015* Ordinary income return on assets (ROA) = Ordinary income / Average FY assets x 100* Ordinary income is for the last 12-month period.
* Assets are the average of the amounts at the ends of the current and previous FY.

The ROA was 12.4%, the same as in the previous fiscal year, as ordinary income
was basically unchanged due to the consistent profitability of business activities.

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|| Operating Highlights （Music Distribution） || New Tuners
October 2014 – The new tuner , “EZ-MESSE II” , for commentary broadcasts received
a Good Design Award
This tuner was recognized for having all the broadcasting functions needed to serve as a commentary broadcast tuner
at business locations. Furthermore, simple operations allow this tuner to be used with ease even at a single store. The
tuner can be switched easily between recording general commentary used for business operations and providing BGM.
Users can also program the unit to provide broadcasts based on a schedule. These features enable businesses to use
the “EZ-MESSE II” for advanced and exacting applications. In addition, the exterior is designed for ease of operation sothat even store personnel with little experience with broadcasts will not be afraid to operate this tuner.

 Capable of handling more than 200 types of comments and chimes and includes an original recording function
 Allows businesses to operate an annual broadcasting schedule to implement a 52-week merchandising program Not affected by changes in the weather and a 5-inch color LCD screen makes operations easy
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|| Operating Highlights （Music Distribution） || A New Supplementary Service

USEN SPOT Enterprise sales started in October 2014 – A free Wi-Fi service
designed specifically for chain store operators
USEN SPOT Enterprise was created as a supplementary service for chain stores, in addition to a free Wi-Fi service forstores that was launched in January 2014. This new service is structured for companies that operate at least 50 stores.
The goal is to capture synergies with the music distribution business by telling potential users about how this service
offers benefits for both store operators and customers.
‒

Users can offer this Wi-Fi service with their own brands and make other changes in order toshow customers the originality of the service.

‒

Compatibility with any carrier and device allows use with smartphones, tablets, notebook PCs
and other Internet-accessing equipment.

‒

The Foreigner SSID service for access by foreign tourists in Japan is included with USEN
SPOT Enterprise.

‒

The registration screen includes the top 11 languages of foreign visitors to Japan in fiscal
2013.

‒

An effective tool for sales promotions (coupons, etc.) and attracting customers because
operations can be overseen by a company’s head office- 13 -

|| Operating Highlights （Music Distribution） || New Alliance

Equity investment and business alliance with Singapore company in November 2014
USEN has made an investment in Express in Music Pte. Ltd. (EIM) and established a business alliance with thiscompany. Based in Singapore, EIM operates a music distribution business in Singapore, Malaysia and so on.
USEN will provide EIM with consulting, sales support and other assistance that leverage its expertise gained
from more than 50 years of experience in Japan. One goal is to increase EIM’s corporate value. USEN also
aims to use this alliance to start its own operations in Southeast Asia.

Profile(1) Name : Express in Music Pte. Ltd.
(2) Activities : Music distribution in Singapore, Malaysia and so on(3) Established : January 28, 2009
(4) Representative : Jerry Chen Yongjie(5) Capital : S$254,837

USEN Investment in EIM(1) Amount : S$600,000(2) Ownership : About 10% (including common stock equivalents)- 14 -

|| Operating Highlights （Business Systems） || Sales Composition■Quarterly Sales
OthersHospitalBusiness Hotel

Billion yen

Boutique Hotel

4.06

4.24

4.06

4.58
3.88

3.75

3.62

3.69

3.23

1Q FY8/2013

2Q FY8/2013

3Q FY8/2013

4Q FY8/2013

1Q FY8/2014

2Q FY8/2014

3Q FY8/2014

4Q FY8/2014

1Q FY8/2015■Year on Year
1Q FY8/2014

1Q FY8/2015
～５％

～１０％

Boutique HotelBusiness Hotel
Hospital
その他

As in prior years, first quarter sales were lower than in theprevious quarter.
‒

Sales were down from prior quarter just as in the previous
two fiscal years.

‒

Combined sales in the three main business sectors wereabout the same as one year earlier, but total segment sales
decreased slightly because of weakness in the others
sector.

～２５％
～２５％
～５０％

～５５％
～１５％

～１５％

3.75 Billion yen

3.69 Billion yen- 15 -

|| Operating Highlights （ICT Services） || Sales Composition■Quarterly Sales
MobileBillion yen

OthersCommission

Network/Option

2.30

2.31

2.38

2.40

2.41

2.43

2.46

2.48

2.43

1Q FY8/2013

2Q FY8/2013

3Q FY8/2013

4Q FY8/2013

1Q FY8/2014

2Q FY8/2014

3Q FY8/2014

4Q FY8/2014

1Q FY8/2015■Year on Year
1Q FY8/2014

Sales were lower than in the previous quarter but

1Q FY8/2015
～５％

～５％
～５％
～１０％

～５％
～１０％

Network/Option
MobileCommission
Othersslightly higher than one year earlier- Sales continue to grow in the core network/optional service

category, but total segment sales were down from theprevious quarter because of weakness in others

～８０％

～８０％

- A small increase in sales compared with one year earlier- Markets in this segment continue to be extremely competitive

2.41 Billion yen

2.43 Billion yen- 16 -

|| Operating Highlights （Others） || Marketing Support Sales Composition■Quarterly Sales

Billion yen
0.64
0.58

0.34

0.36

0.38

1Q FY8/2013

2Q FY8/2013

3Q FY8/2013

0.46

0.48

1Q FY8/2014

2Q FY8/2014

0.42

4Q FY8/2013

0.52

3Q FY8/2014

4Q FY8/2014

1Q FY8/2015

Consistent sales growth since FY8/2013- In 4Q FY8/2012, the new “Hitosara” brand was launched for USEN’s gourmet website toclearly express the site’s focus on chefs（person：”hito”） and food（dishes：”sara”）- Since then, sales have been increasing steadily as the website became an increasingly powerful
medium and sales were generated from bundling with services of other companies- 17 -

|| Operating Highlights （Others） || New service of Sales Support Segment
Debut on October 31 of “bangs” – A search site for hair stylists
Women today want to choose stylists as well as hair salons
The “bangs” search site advances the search for a salon for cutting and styling hair to the level of locating a
specific individual to perform these services. Visitors to this website can look for a stylist based on extensive
information on the techniques, approaches and other characteristics of more than prominent 500 stylists at
about 100 hair salons in the most popular districts of Tokyo.

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|| First Quarter Topics ||>> Marketing Support (“Hitosara”)
September 2014

The number of chefs in the Chef Directory of the “Hitosara” gourmet
information website topped 5,000>> Other publicity activities
November 2014

In association with Japan’s Act for Measures to Support the Development of
the Next Generation, USEN established an action plan with the goal of earning“Kurumin” certification. This is given to companies with measures to support
families and maintain the proper balance between work and personal lives.

>> Investor relations
November 2014

Annual meeting of shareholders and approval of amendment to the Articles ofIncorporation- 19 -

|| First Quarter Topics || “Hitosara” Gourmet Website
On September 2, 2014, the number of chefs on the “Hitosara” Chef Directory
topped 5,000.
(1) Started Chef’s Table on Oct. 3(2) Second issue of MOOK on Nov. 14“Chef’s Table” is a program in which chefs talkabout their restaurants and cuisine. This newservice is part of “Sumaho de USEN”, a fixedrate music distribution service for smartphone
subscribers.

“Hitosara” was launched as a gourmet website for
distributing information about chefs that people canuse with confidence. A key feature is enabling people
to see pictures of the chefs. Due to the strong supportof users, the website now lists more than 5,000 chefs.

Following on the success of the firstissue of MOOK, USEN has publisheda second issue that is now inbookstores throughout Japan.

- 20 -

|| First Quarter Topics || Others of PR、IR
Action plan and two-year action period (Sept. 2014 to Aug. 2016) for earning “Kurumin”
certification under Japan’s Act for Measures to Support the Development of the Next
Generation
USEN is dedicated to enabling all employees to realize their full potential. The company has created an
action plan for creating a workplace environment with the proper balance between employees’ jobs andtheir families, such as by providing time off for taking care of children and other family requirements.

Annual meeting of shareholders and approval of amendment to the
Articles of Incorporation
At the annual meeting of shareholders on November 27, shareholders approved the first five proposals, all ofwhich were submitted by USEN. The next four proposals, which were submitted by shareholders, were notapproved. Approval of the second proposal amended the Articles of Incorporation to add “travel business andtravel agent business in accordance with the Travel Agency Act” to the purposes of business.

Proposals submitted to shareholders
1. Appropriation of retained earnings

4. Election of two corporate auditors

2. Amendment to the Articles of Incorporation

5. Election of one alternate corporate auditor

3. Election of five directors

6-9. Shareholder proposals

Proposals 1 to 5 were approved with no revisions and all proposals submitted by shareholder were not approved.

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|| Disclaimer ||This presentation was prepared by using numbers and other data that are
believed to be reliable. However, USEN makes no guarantee that thisinformation is accurate or complete.
Statements about USEN’s plans, strategies and other items that are not historicalfacts are forward-looking statements that are based on the judgments ofmanagement using currently available information. Actual results of operations
may differ from these statements for a number of reasons.
This presentation was prepared solely for the purpose of providing informationthat can be helpful for making investment decisions. No information in thispresentation is provided for the purpose of soliciting an investment.

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