FreeBit Co., Ltd.
Financial Results Briefing for the First Quarter of the Fiscal Year Ending April 2019
September 7, 2018

Presentation

Tanaka: I am Tanaka of FreeBit Co., Ltd. Today I will provide an explanation of the financial results from thefirst quarter of the fiscal year ending April 2019.
In today’s executive summary, before I present the regular first quarter performance, I would like to explain
one topic. Allow me to amend the forecast for the fiscal year ending April 2019. There are two major topics
here, so I will amend them in a form to incorporate them. The first has already been announced, which is theincrease in revenue and profit from making ALC Press Inc. a subsidiary. This is expected to have an impact on
performance from the third quarter so this has been incorporated. The other is the occurrence of nonoperating expenses due to additional investment in Tone Mobile, an affiliated company, and this is also
incorporated. The details of the non-operating expenses due to additional investment in Tone Mobile and theinvestment loss due to the equity method are disclosed on a separate sheet.
Regarding the figures, the initial forecast for the entire fiscal year ending April 2019 was 45 billion yen, but weare amending that to 48 billion yen, which is an increase of 3 billion yen. The percentage change here is apositive 6.7%. With respect to operating income, we have increased by 10% to 2.75 billion yen from the initial
forecast of 2.5 billion yen. Ordinary income is 2.4 billion yen, an increase of 50 million yen against the initial
2.35 billion yen. This is only 2% compared to the operating income increase of 10% and is a small amount, but
the Tone Mobile investment loss of approximately 190 million yen will be incorporated so by reducing about
200 million yen from the portion of operating income resulting from the acquisition of ALC, we anticipate an
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1investment loss of 200 million yen against the acquisition effect of 250 million yen in ALC so we are forecastinga 50 million yen increase in profits. Net profits remain at 250 million yen, which is what we are announcing at
this time.
The additional investment in Tone Mobile is accompanied by loss this time, but we are conducting the TONE
Platform business in conjunction with Alpine and expect the business to make new progress and havetherefore made an additional investment. CCC, Tone Mobile’s parent company, also invested at this time, andas CCC is the parent company their investment is even bigger than ours. This is what comprised the joint
investments from the two companies.

Going back to the discussion of ALC we announced the acquisition of ALC shares on August 21. The processing
is progressing smoothly, and the final payment will be made on September 28, which will give us 100% of theirshares. Our purpose in acquiring this company is to develop a new business, EdTech, or Education Technology.
FreeBit’s current business is internet infrastructure service, but in addition to that we would like to create
new industries that utilize our current business. In particular, for existing industries, there are projects tocreate new value using IT. Most recently we have launched a HealthTech business. Following that, we are now
attempting to launch an EdTech business. We have made ALC Press Inc. a subsidiary so that it may act as thecore company from where we will start.

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ALC Press Inc. was established 50 years ago and is extremely well known in the language learning industry so
I think our investors are familiar with it as well. Its business content consists of language learning publishing.
This includes publishing textbooks for the TOEIC exam, correspondence education, the 1000-hour Hearing
Marathon, and other extremely high-profile services. Its digital contents include the Eijiro service, which iswell known as an online search service for looking up English sentences and is often used among English
language learners. We aim to combine these things with our internet technology and infrastructure to create
a new service and develop that further.

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3Regarding how we will do this in concrete terms, we will provide an explanation as we develop the various
services, but the basic plan is to promote language learning, not only on paper as has been done thus far, butusing AI, mobile devices and new efficient language support services utilizing big data analysis. As our groupalready possesses a foundation in ad technology, we would like to use this to try and do things like dramaticallyincrease the number of students studying languages.

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4This is the overall direction, and in addition there is a major opportunity in language learning right now as
there is educational reform coming in 2020 and with that there will be new opportunities for this ALC business.
Language learning itself is going to include not only reading and writing, as it has thus far, but also speaking
and listening. A lot of new progress can be expected and when there are new changes, opportunities always
come with them. Especially in the case of ALC, they have a very long history of creating footholds in thislanguage education market and they have accumulated content. They also have a large number of employees
who are extremely knowledgeable about language education and we want to use this opportunity to try andcreate a new business. It is there we can use the IT and ICT technology we provide as FreeBit in this new
educational industry.

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As I stated briefly before on the Tone Mobile front, we have deployed a TONE Platform service and arecollaborating with a variety of companies. Among them, Alpine was the first to collaborate with us and today
Tone Mobile released its new pick-up assistance service. I hope those of you with an interest will check it out
on the internet.
That is all for the new topics in this quarter of this fiscal year. Regarding the figures, they will be reflected in
the third quarter of this year, so I have incorporated those numbers in today’s plan and amendments.

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Continuing, I will explain the regular first quarter results for the fiscal year ending April 2019. First, as aqualitative topic, regarding sales, condominium internet continues to show strong growth and the adtechnology business is also steadily progressing. In addition, the HealthTech business is entering a very large
growth stage and adding these all together they show a 10.5% increase in revenue year-on-year. Regarding
operating profits, the mobile business improved its income and the HealthTech business was in the red forthe entirety of the previous fiscal year, starting to show a single month surplus from the fourth quarter and,as reported earlier, has continued to operate in the black since the beginning of this fiscal year. This has
resulted in a 64% increase when compared to the last fiscal year.
From the perspective of individual businesses, regarding the broadband business, as I just mentioned, thecondominium internet business continues to expand. Meanwhile, we continue to strengthen our structure to
expand in the future, so looking at this term alone, the gross profit is on a downward trend.
Regarding the mobile business, at the end of every fiscal year the changes to the access charge for carriers
takes place and last year the earnings structure improved as a result of the cost lowering more than was
initially expected, but we also reduced the unit price offered to MVNO operators in alignment with thechanges to the market environment, so sales fell slightly. However, just as has happened thus far, the earning
structure will improve as the scale expands, therefore as we will continue to pioneer new high value-added
services, we want to differentiate ourselves from carriers and acquire more users in the future.
Regarding the HealthTech business compared to last year there was a significant 249% increase in sales. Firstof all, the biggest reason for this is the FreeBit EPARK Health Care company alone is going very well. Dispensing

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7pharmacies, drugstores, and other customers like these are rapidly increasing. The end users during thistiming are patients and the usage environment is improving actual sales and profitability.
Regarding the company that conducts digital signage in the form of medical information infrastructure, it is in
the process of changing business models from the business it took over in the past and is currently operatingin the red, but the business model changeover is going well. This is the qualitative change situation.

These are the figures for these results. The net sales were 10.435 billion yen, which is a 991 million yen
increase year-on-year of 10.5%. EBITDA was 709 million yen, which is a 15% increase from 615 million yen.
The operating income was 401 million yen and compared to last year’s figure of 244 million yen, that is a 64%
increase meaning both sales and profits are growing very smoothly. Ordinary profit was 172 million yen, andas I explained earlier there was an equity method investment loss, but this was absorbed for a 160 million yen
increase compared to last year. Regarding this quarter, sales, operating profit, ordinary profit, and final profit
are in the red, but there is a 150 million yen increase year-on-year so we feel that everything is moving
smoothly.

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8This graph shows the trend of actual results this quarter. Looking from the previous quarter, the operating
profit seems to be declining, but the operating profits for our businesses often tend to be heavily weighted in
the fourth quarter therefore this fiscal year as well the profits will increase in the quarters in the latter halfover the first quarter. Speaking from the perspective of the first quarter, we feel that everything is moving
forward according to plan.

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Continuing, this graph shows the sales composition ratio, and although there has not yet been a significant
change in the quarter, I think the topic is that the HealthTech business accounts for about 6% of the entire
amount. In terms of variance analysis, regarding sales, condominium internet has increased 675 million yen
compared to the previous year, and the HealthTech business increased 450 million yen so the situation restson these two businesses.

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Continuing, regarding operating profit, the biggest factor was the increase over last year in the mobile
business. Currently, we have posted profits, and although the absolute amount is not that much, the year-onyear surplus is 200 million yen. FreeBit EPARK Health Care also had a year-on-year increase in revenue of 180
million yen. In short, there was a deficit in the upfront investment period in the previous fiscal year, but
compared to the previous year it contributed significantly to the profits. As condominium internet increases
the gross profit also rises so we expect the earnings to continue to steadily increase.
Meanwhile, if you look to the right, these are the factors for the decline in profits. One is the old fixed net iscurrently slightly declining in sales, and the amount of sales decline is causing a decline in gross profit. Next
are two positive investments, AdTech and condominium internet, these businesses are currently growing
significantly, and we continue to strengthen the system as we look toward future profit earnings. In terms ofyear-on-year there was an 87 million yen and 190 million yen cost increase becoming factors for the deficit,
but these are investments for the future. In addition, regarding system enhancements, AdTech, and the Giga
Prize Group, they have all settled so I think we will be seeing a break in costs somewhere.

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12This is the profit structure graph and each term it is growing bigger and bigger and looking at the graph’s size
you can see that comparing year-on-year it Is significantly larger for this term ending April 2019. This is moving
toward our goal of a consolidated operating profit of 5 billion yen for the next fiscal year ending April 2020,
so we are prioritizing sales expansion as we work towards that. In addition, to ensure we can expand sales weare working to strengthen the structure at the same time. The structure strengthening is almost complete thisfiscal year and regarding next year, we are not going to increase costs that much and the system expansionof the sales we have built up thus far is going well so we are currently aiming for a structure that will increase
profitability while expanding sales.

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We always attach network-related expenses, but the mobile earning structure will change at the end of theterm, therefore this absolute amount is less than the fourth quarter figure. SG&A expenses are also rising
currently. I have said this repeatedly, but the main reason for this is the current structure strengthening. From
the third quarter on, ALC will be incorporated 100% so there will be major changes that include everything,even SG&A expense sales, but for now there is a slight rise. The employee graph represents this as well. Since
the year before last when we began strengthening the structure, just as the graph shows, the number of
employees increased significantly, but it has gradually settled down as you can see.

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Regarding the difference in ordinary profit, the main reason for this is the growth in operating profit, so it isentirely dependent on that. For the losses on equity method investments, last year we also recorded a deficit,
so compared to that, while we did post less than 200 million yen, the actual loss has decreased compared tolast year.

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Regarding net income this term, pre-tax profits have increased, but compared to last year the negative span
has decreased. As the coming quarters progress, we plan to get closer and closer to our final profit goal of 250
million yen, so this term we are in the red, but this is exactly according to plan.

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The consolidated balance sheet and financial situation are a continuation from the end of the last fiscal year,
so debt is increasing. Each company in each group is securing the funds for growth. FreeBit, the parent
company has the biggest increases borrowing, but that is in order to increase in-hand liquidity to give priority
to securing low-interest funds followed perhaps by investment or M&A, but we are preparing for that byincreasing our liquidity at hand.

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Now I will give a summarized explanation of the individual situation for each business segment. First,
regarding the broadband business, compared to the same period last year, sales have increased 21% and thesegment profit and loss has decreased 44%. There have been no major changes to the land line phone sales
system so this is the increase and decrease seen in the condominium internet business that the Giga PrizeGroup is conducting. At any rate, sales are currently steadily growing. These growing sales are the
manifestation of the system strengthening undertaken to ensure sales grow properly, so there is reallynothing to be concerned about regarding this situation and you can expect further future growth.

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The reasons for these numbers are based on new condominium internet hookups in the broadband business.
The graph has a very steep rise to it and we are receiving an extremely large number of orders, there is a lotof construction and completion going on, so we expect the trend seen on this graph to continue for a while.

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In addition, the Giga Prize Group has begun a new real estate Tech business connected to the increase in user
numbers. As the user base increases it becomes very easy to develop new businesses so we are partneringwith companies such as VR companies, private vacation rental companies, and smart key companies in a stepby-step approach, and moving forward to develop the next new model as a group company.
In addition, we have been collaborating with Aeon on the Aeon Housing business and Giga Prize is looking at
this as a major sales channel for the future as it proceeds with its business with Aeon. Within that, we havecreated a new base and have already opened shops in conjunction with VR and IoT companies, as I justmentioned, and other affiliated companies we have already invested in.

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Continuing, looking at the mobile business, the segment profits based on this quarter show that we havereached a surplus. Regarding sales, as I said earlier, Docomo’s access charge was reduced so we had to change
the unit price in sales, so sales have not grown that much, but I think we can say that the business structure
has improved.

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Continuing, the ad technology business has increased sales by 2.4% on year-on-year basis, and the segment
profit and loss has decreased 23%. Although the rate of increase in sales is not as large as that of thecondominium internet business, there are still many big opportunities for growth, so we are strengthening
the structure here. We not only want to increase sales focusing on the Full Speed Group, but we are also trying
to create business in new areas so that upfront investment is also included here.

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We have several various businesses. For example, we have been providing DMP service in our ad technology
business from before, but the DSP and DMP businesses geared toward companies that deal in B to B in
particular, are doing very well right now. And then we have ALC, which I mentioned in the beginning. We are
expecting the collaboration with ALC to be from an AdTech perspective even within the Full Speed Group. Ourpurchase of ALC will be finalized on September 28 so we can begin moving forward with concrete plans from
October, but the Full Speed Group also foresees some major business opportunities here.

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The cloud business is continuing along the same trend it has been for some time, but with the reduction of
the legacy service, income also continues to decrease. However, since we are moving at a relatively strong
pace, we will continue to advance our cloud business offering it to external customers by supporting our cloudinfrastructure within the group and using it well internally maintaining our superiority compared to othercompanies in terms of technology and price.

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27Here we have sales for our current growing business the HealthTech business, and as the graph indicates there
is a growing trend. This business currently focuses on the dispensing pharmacy business called FreeBit EPARK
Health Care. We have a newly acquired nursing care software business from this first quarter transferred fromTEAC and these numbers are rapidly coming in. In terms of facility numbers, we exclusively run nursing caresoftware geared toward the nursing facilities of the biggest company in the industry. In addition, the nursing
care industry is an extremely big industry, so we hope to contribute to the nursing care industry throughhorizontal expansion using the track record and knowledge of industry’s No. 1 company coupled with the fact
this service has been adopted by the No. 1 company in the industry. In addition, we are currently planningcollaborations with FreeBit EPARK Health Care’s dispensing pharmacy business, and regarding the HealthTechbusiness, even the most recent projects alone are showing a rising trend, so we think there is a possibility for
major developments here.

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29This graph displays the number of EPARK Health Care downloads. It is a cumulative graph, but it continues torise rapidly. We also have a service for pharmacy reservations, and on an individual monthly basis the numberof reservations is growing quickly every month. There are some slight seasonal factors related to when people
go to pharmacies, so the highest number of reservations is actually during hay fever season, but as there areseasonal factors, there are some discrepancies from month to month on the graph, but in terms of the overall
trend I think you can see that it is growing quite well.

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Finally, I amended the figures regarding the consolidated earnings forecast today, but from a qualitative
progress perspective, condominium internet under the broadband business continues to show major growth
and with regard to services for individuals, we are often behind the scenes when it comes to expanding user
numbers, but we will continue to proceed with IPoE and IPv6 connection services.
In our mobile business, we are looking to increase our share by discovering an area that MNOs will find difficultand acquire new users. Regarding the mobile business, sales of the IP phone service are actually rapidly
increasing right now, but the numbers are not yet currently reflected. We have received a 0600 designation
for Japan’s first FMC dedicated number. We have prepared this as a service tool in order to offer new original
services in the future.
Continuing, in the ad technology business, we are trying to strengthen the network of distributors along with
our own sales network for the AdTech business DSP and DMP that we developed to increase sales. We arealso investing in AdTech alone and most recently we invested in a company called Ruby Development. Despite
the fact it is extremely difficult to secure IT engineers right now, we were able to collaborate with a company
that has some of the best domestic engineers.
Regarding our cloud service, by security and services geared specifically toward Japanese companies we havemade some steady progress. Regarding the HealthTech business, FreeBit EPARK Health Care saw a monthly
surplus last fiscal year, but this fiscal year we aim to have a yearly surplus and as we try to acquire both growthand profits, as I mentioned earlier, we are looking at how we can develop business in the nursing care field as
we brought a business geared toward the nursing care app industry’s No.1 company into the group we arereviewing how we can move forward with this at the core.
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As I mentioned in the beginning regarding the numbers, the rate of progress for sales and operating profits is
as shown in the tables, 21%, 14%, and 7.2%. In the case of our company, sales and profits tend to beconcentrated in the fourth quarter so the rate of progress is not one quarter here, but this is as according toplan for our company, so please do not be concerned. With proper execution this fiscal year we are working
steadily toward our goal of 50 billion yen in sales and 5 billion yen in operating profits for the fiscal year ending
April 2020, so your continued support in helping us achieve that is greatly appreciated.
This concludes today’s briefing of the first quarter financial results. Thank you very much.
[END]______________
Document Notes
1. Portions of the document where the audio is unclear are marked as follows: [Inaudible].
2. This document has been translated by SCRIPTS Asia

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