FreeBit Co., Ltd.
Earnings Call
September 13, 2019

Presentation
Tanaka: I am Tanaka from FreeBit. Today, we will announce our financial results for the first quarter of the
fiscal year ending April 2020.

First of all, we will report on the consolidated results for the first quarter of the fiscal year under review. Sales
totaled 13.386 billion, EBITDA sales totaled 803 million, operating income was 333 million, ordinary income
was 286 million, and net income for the current period was negative 180 million. Compared with the previous
year, net sales increased by 28.3%, and the trend of a significant increase in net sales continues in the current
period.
Operating income decreased by 17% compared with the same period of the previous year. As I would like totalk about in more detail later, in the EdTech business, which started from the third quarter of last year, profits
decreased in the current period since it is structured to be in the red in the first quarter but is supposed tomake it up and go into the black in the fourth quarter. This is as planned, and I would like to report that weare not currently in a situation where you need to be worried about it.
Ordinary income amounted to 286 million yen, an increase of 66.1% compared with the same period of theprevious fiscal year, and the equity in losses of affiliates decreased. As a result, operating income has increased
substantially.
As in the previous year, net income for the first quarter was in the red. Operating income was slightly lower
than the previous period, and a deficit in net income for the current period also expanded slightly. However,SupportJapan
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operating income will be accumulated every quarter, so in the process, we will increase profitability and get
closer to our targets for the current period. Negative 180 million yen for the first quarter is in line with theplan, and we are not worried about this situation. We would like you to understand this.

Regarding the topics, as I mentioned before, the result was a 28.3% year-on-year increase in net sales. The
reason for this is that the EdTech business, which we began last year, acquired ALC Press, Inc., and withsignificant growth, the Real Estate Tech business tends to expand significantly. These two factors contributed
to the result of a 28.3% increase.
Operating income declined by 17% from the previous quarter due to the large impact of the loss in the firstquarter in the EdTech business, which I mentioned earlier. However, this is in line with the plan.
Looking at the topics by segment, in the Real Estate Tech business, net sales of internet for apartments
significantly increased as in the previous year, and in terms of the segment as a whole, sales have increased
by 57.1% on a year-on-year basis. Thus, we have continued to enjoy extremely large growth in this segment.
In addition, the HealthTech business continued to perform favorably. Sales of subsidiary FreeBit EPARK HealthCare, Inc., increased by 14.9% on a year-on-year basis.
In terms of segment profit/loss, FreeBit itself started to provide systems for nursing care facilities in the
HealthTech business. This service has been focused in anticipation of future growth, and expenses haveincreased in terms of profit and loss, resulting in a year-on-year increase of 24 million in losses. Overall, thegrowth of FreeBit EPARK Health Care has been offset to some degree.

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In addition, the EdTech business contributed to the expansion of consolidated results because net sales were
purely added to the results from a year-on-year point of view, but again, as profits were in the red in the firstquarter, this is a negative factor for consolidation. However, in the fourth quarter, we plan to make a recovery
during the current period and contribute to consolidated earnings as well since it is an educational business,
which is expected to largely increase sales during the fourth quarter in March and April.

Looking at changes of the results by quarter, you may be worried about the decline in profits in the firstquarter. However, as shown in the graph, operating income in the previous quarter, which is the fourth
quarter of the fiscal year ended April 2019, was 1.352 billion. Compared to the previous quarter, we had morethan doubled the profit recorded in this final quarter.
In the current fiscal year also, the fourth quarter is expected to be the most profitable. Although investors
may be slightly worried at this moment, as you can see from the past trends, we can see that we will be able
to steadily increase profits in the future. Therefore, we will be paying close attention to this graph as well.

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Looking at the sales distribution, the distribution ratio has changed over the last few years, and the Real Estate
Tech business grew the most and made progress recently with a sales increase of 57.1% year-on-year. As aresult, the contribution of profits to earnings has become extremely large.
Moreover, HealthTech and EdTech, which are relatively new businesses, have also been added. The overallbusiness structure generated more than 13 billion in the first quarter.

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4Compared with the same period of the previous fiscal year, an analysis of factors reveals that the EdTechbusiness purely made an addition and increased by 1.3 billion, while the continued expansion of the Real
Estate Tech business increased by 1.1 billion. The growth rate of AdTech was lower than in the past, but sales
still increased by 340 million. In addition, each business is also showing positive growth, and the overallbusiness has grown from 10.4 billion to over 13 billion.

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Next, looking at operating income. Operating income in this segment totaled 401 million yen in the previous
fiscal year, but operating income of 291 million yen from the Real Estate Tech business was added. This is anextremely significant factor behind the increase in profits. On the other hand, profits in the InfraTech businessdeclined by about 100 million yen from the previous year, and although sales in the AdTech business grew
due to various changes, such as the strengthening of the system, operating profit was negative 70 million yen.
At this stage, HealthTech has reduced its operating income by 24 million as a result of strengthening the
FreeBit business, and accordingly, the operating income is 489 million after the offset.
In other words, profits from existing businesses increased from 401 million yen to 489 million yen. Despite
this increase in profits, the first quarter of the EdTech business recorded more than negative 150 million as aseasonal factor, resulting in an operating income of 333 million.
As a result, while there are a number of existing businesses that are growing and not growing, there will be
an increase in these businesses as a whole. The EdTech business has a business model that can make a profit
in the fourth quarter, so if it moves into the black, then both will be positively affected.

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Looking at the profit structure as shown in this graph, we can see that the business scale of this first quarterhas expanded significantly compared to the previous quarter. Although the growth rate was not so highcompared to the previous period and the period before the previous period, it is growing at an extremely highrate in the current fiscal year.

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With regard to SG&A expenses, since the EdTech business was launched, personnel expenses have increasedin accordance with, in short, an increase of personnel due to the acquisition. Therefore, SG&A expenses rose,and goodwill associated with acquisitions also rose by a certain amount. The amount of depreciation was also
higher than the previous year, and the total amount of depreciation increased by 41.7% compared with thesame period of the previous year.

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The number of employees increased slightly in existing businesses, but this is due to, compared with the same
period of the previous fiscal year, the increased number of companies that were acquired for the EdTechbusiness.

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9Regarding ordinary income, last year's ordinary income amounted to 172 million. There was an increase inoperating income, which added 88 million. As I mentioned at the beginning, the equity in losses of affiliates
decreased, which was a decrease of 191 million. As a result, we have posted an ordinary income of 442 million,
and we have seen a significant increase in profits so far. However, the negative amount of the EdTech business,
which I have repeatedly mentioned, was subtracted, and therefore, the ordinary income resulted in 286
million.
In total, ordinary income has increased significantly as a whole, so the continuous expansion of the existing
businesses is used as an indicator of increasing profits as a whole.

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The bottom line slightly fluctuated from negative 147 million to negative 180 million. Please understand that
this was almost completely affected by negative results of the EdTech business regardless of a profit increase.

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The balance sheet shows a comparison on a quarter basis, so for this first quarter, no significant fluctuations
have occurred compared with the end of the previous fiscal year.

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12This section reports on the progress of each business segment. In the InfraTech business, segment profit/loss
decreased by 45.1% due to a slight increase in sales. TA continuous traffic increase related to the fixed-line
networks partly increases costs. Although costs are currently rising, we plan to change our contracts with
telecom carriers every certain period or to change our network structure. Therefore, we will not continue to
see a decline in segment profit/loss, and our business structure will be revised every certain period. For thetime being, sales will not increase significantly, but we would like you to understand that the profit structureis expected to gradually improve in the future.

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In July, we entered into a business alliance with Alps Alpine regarding the InfraTech business. This is a mobilityrelated service, and currently, it is a concept-based comprehensive alliance. Over time, however, we plan topursue technological and business development through an alliance with Alps Alpine to achieve large business
together.

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In the Real Estate Tech business, net sales increased 57.1% year-on-year, continuing to grow significantly, andsegment income also increased accordingly. In the previous years, a large number of orders were made during
the fourth quarter, and as a reaction, not much profit was generated during the first quarter. However, in thecurrent fiscal year, we have been able to properly record profits from the first quarter in accordance with the
expansion of the business scale.
In terms of the outlook for the future, profits will be accumulated in the second, third, and fourth quarters,
as in the previous year. The Real Estate Tech business is currently the main growth in a segment of ourconsolidated group, and we believe it will continue to grow in the future.

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15This Real Estate Tech business will expand as the number of units installed and the number of units supplied
to house builders increase. We expect the total number of units to exceed 590,000 in the current period. In
terms of internet services for apartments, including OEM, which is not our brand, we have reached almost
the second-ranked in the industry, and we assume that we have established a marketing foothold where we
aim to become the first-ranked company in the industry in the future.

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The AdTech business recorded an 8.3% year-on-year increase in sales. However, segment profit/loss
decreased by 27.9%.
The internet advertising market has continued to grow at a faster pace than the mass media market. On theother hand, the competitive environment has become more intense than before due to the growth of themarket and the overall growth of the market. However, the dominance of large platforms, such as Google andFacebook, is increasing. In order to grow and generate profits, it is necessary to devise and sell services withhigh additional value. We will continue to develop these services and contribute to the profits of ourcustomers, thereby expanding our business. We believe that we are currently in a period in which expenses
for system enhancement, etc., are invested in order to achieve our goal. Therefore, we would like you tounderstand that this profit margin will be improved in the medium term.

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In the course of progress of this business, there are many themes, and as for our group, not only the Japanesemarket but also the businesses in ASEAN and Southeast Asia are becoming increasingly prominent. Therefore,
we would like to grow not only within Japan, but also in these markets.

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The following pages refer to our businesses across ASEAN. In addition to conventional performance-based
marketing services, we are aiming to promote inbound marketing, offshore development, or businesses
handled by healthcare-related groups.

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19This is the HealthTech business. A subsidiary called FreeBit EPARK Health Care continues to grow andcontributed to a 14.9% year-on-year increase in sales. However, segment profit/loss declined by 24 million,
and the main reason for this decline is that the HealthTech business, which is conducted by FreeBit itself, iscurrently in a period of strengthening the system rather than acquiring revenue. Its cost increase caused
negative results and a decline in profits on a year-on-year basis.
However, the HealthTech business operated by FreeBit itself actually provides the largest company in theindustry with services, so we will continue to expand this business. Assuming that, in addition to expanding
our offerings, we develop our businesses horizontally within the industry based on results of such businessexpansion. This business area will achieve significant growth and so the business will be handled by FreeBit. I
would like to inform you that there may be a period in which profits continue to fluctuate somewhat inaccordance with the sales expansion, rather than move in tandem for the time being. However, we expectthat we will experience considerably large growth.

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For topics, the number of companies with which FreeBit EPARK Health Care, as our original business, has arelationship and the number of alliances with pharmacies increased, and the number of reservations also
increased.

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The cumulative number of downloads of e-pharmacy handbooks has exceeded 750,000, and the field ofelectronic pharmacy handbooks is well known. We hope to continue to expand this field.

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22This is the EdTech business. This is currently centering on ALC Press, Inc., and businesses of ALC Press Inc.,
which we acquired. As I have explained several times, this business in in the red since profits wereconcentrated in the fourth quarter, in short in March and April. However, the progress of the business isproceeding very smoothly as planned, and this trend will continue toward the fourth quarter.
Also, for the fourth quarter of the previous fiscal year, operating income of 230 million was recorded in thequarter. While we kept the same level of profits for this year, we are currently preparing educational services
that leverage our technological strengths in the medium term since the business is now under our group. We
have various services in progress, so we would like you to expect good results for the future.
Up to this point, we have reviewed the individual conditions of each consolidated segment. From here, wewill explain the focus of the current fiscal year.

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In the InfraTech business, the major theme is to promote a proper collaboration with Alps Alpine.
The Real Estate Tech business has already expanded through an alliance with an extremely large company,
and the theme is to conduct proper operations so that we can further expand this business without any
troubles.
Regarding AdTech, as I mentioned earlier, it is necessary to provide services with high additional value, andthis is what we should do faithfully. We want to introduce services with high profit margins while recording
sales.
In the HealthTech business, the number of downloads of pharmacy handbooks and the number of affiliatedpharmacies or the number of reservations is still increasing, so we will keep this trend and extend our businesscentering on expanding our share of the market for nursing care providers that are operated by FreeBit itself.
Since the EdTech business became part of our group from the third quarter of the previous year, we are stillat the preparation stage at this point with respect to adding technology services. However, we are preparing
technical resources and also planning to acquire an online English conversation app, which will be our starting
point for adding technology services. The time when we present our new businesses will come soon. Thus,
we are currently solidifying our initial foundation to grow them into our core businesses. This is the progressof our key measures.

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Under these circumstances, according to the figures in the first quarter of the current fiscal year, the progress
rate is as shown in this table with sales of 23.5%, which is about 1/4, and profits are 8.3% and 7.5%, which are
extremely low when divided by four. Some shareholders may be worried, but as I explained in the first half of
this report, many of our businesses generate significant profits in the fourth quarter. At this point, the results
exceed our plans, so we hope you can be confident of this situation.
I would like to ask for your continued support as we work as a team to ensure that the second, third, andfourth quarters will be in line with our plans.
This was the report on our financial results for the first quarter of the fiscal year ending April 2020. We
appreciate your continued support. Thank you.
[END]______________
Document Notes
1.
2.

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This document has been translated by SCRIPTS Asia.

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