For the sake of improved understanding of the Company’s financial performance for non-Japanese
investors, this earnings release is prepared in a different format from the Japanese original TSE filingdocument released on Novembert 11, 2019. In the event of any discrepancy between this English
document and the Japanese original, the original shall always prevail.
November 14, 2019
OPT Holding, Inc. (TSE 2389)
Consolidated Financial Results for the Nine Months Ended September 30, 2019 (J-GAAP, Unaudited)Tokyo, November 14, 2019, OPT Holding, Inc. (“the Company”) announced today its consolidated financial results for thethree month ended on September 30, 2019. (From July 1 to September 30, 2019, “2019 Q3”)
(Amount are rounded down to the nearest million yen)
Consolidated Operating Results for 2019 Q3(in million yen, unless otherwise stated)

Three months ended on September 30

Nine months ended on September 30

2019

2018

2019

2018

20,877

20,314

2.8%

62,57364,069(2.3)%

Operating Income or loss

(420)

134

-

*3

(542)

1,223

-*3

Ordinary Income

(358)

418

-

*3

(372)

1,260

-*3

*3

(325)

2,541

-*3

Revenue

EBIT*

1

YoY(%)

YoY(%)

(44)

520

-

EBITDA*

622

2,176

(71.4)%(1,060)4,837(78.1)%Net income(loss) attributable to owners of parent

(16)

56

-

*3

(370)

1,236

-*3

-

*3

-(

54.13

-*3

-

*3

(16.18)

54.59

-*3

2

Earnings per share- diluted (yen)-Earnings per share- basic (yen)2.05(0.72)

2.51

Note:
1.
2.
3.

EBIT= Net income (loss)before taxes and other adjustment＋interest paid－interest received
EBITDA = EBIT + other financial related gains (losses)+ depreciation + amortization of intangible assets + amortization of
long-term prepaid expenses + Non-cash gain(loss)
Figures were omitted due to relevant amounts in reporting or the previous period are negative.

Consolidated Balance Sheet Data
(in million yen, unless otherwise stated)

As of September 30, 2019

As of December 31, 2018

Total assets*

56,56656,551

Net assets

30,635

27,133Equity attributable to owners of parent*

26,31623,476

Ratio of equity attributable to owners of parent (%)

46.5%

41.5%

25,32021,2183

3

Assets under management (AUM) *

4

Note:

4.

5.
6.

Partial amendments to Accounting Standards for Tax Effect Accounting (ASBJ statement No.28, February 16, 2018) wereapplied from the beginning of first quarter in 2019, and total assets and ratio of equity attributable to owners of parent as ofDecember 31, 2018 which were revised retrospectively.
6
AUM: Aggregate amount of (1) book value of subsidiaries’ and affiliates’ stocks and (2) fair market value (FMV* ) of operational
investment securities and invested securities.
FMV (Fair market value): an estimated market value of a property or a liability, based on third-party transaction between aknowledgeable and willing buyer and a knowledgeable and willing seller

The AUM calculation is prepared with guidance and advice by KPMG AZSA LLC.
Appropriate use of earnings forecast and forward-looking statement
Although forward-looking statements contained in this document are based upon what management of the Company believes are reasonable assumptions, there can be no assurance
that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The Company
undertakes no obligation to update forward-looking statements if circumstances or management’s estimates or opinions should change except as required by applicable securities laws.
The reader is cautioned not to place undue reliance on forward-looking statements.
The information contained in this material is carefully scrutinized before presentation as it is intended to facilitate your understanding of the Company’s business, management policies
and plans, financial position, etc. However, we do not guarantee its accuracy, completeness, effectiveness, or security. None of the information herein is prepared to solicitate
investment. The final decision on investing should be made by you, under your own responsibility. We will not be responsible or liable for any consequences resulting from investments
made by you in reference to, or by use of, the information.
Any information herein other than past or present facts represents our future outlook developed based on the input currently available, and includes various risks and uncertainties.
Thus, please note that actual business results released at a later date may differ due to such factors
Please see page 9, of this document for appropriate use and note on assumptions for earnings forecast. .

1

3. Dividends
2019

2018

End of Q1 (yen)End of Q2 (yen)-2019 Forecast
0.00-

End of Q3 (yen)--End of Q4 (yen)

19.00

-

19.00

Total

The Company sets a consolidated payout ratio target of 20% of profit attributable to owners of parent before amortization of goodwill fromthe year ended December 31, 2017. The Company does not make a forecast for annual dividend for the year ending December 2019.

4. Forecast for the year ending December 31, 2019(in million yen)

2019

YoY(%)

Marketing Business
Revenue

86.500

7.4%

EBIT

2.950

(22.7)%EBITDA

3.450(27.8)%

Synergy Investment Business
AUM (Range)

15~20%

Internal Rate of Return; IRR (Range)

15~20%

Corporate Function cost
Selling, general & administration cost

2,300

Note: Revision from the previous earnings forecast: Revised
EBIT and EBITDA forecasts of Marketing Business are before Corporate Function cost allocation
For the details of IRR calculation: See page 9 of footnote for Management Discussions and Analysis.
The Marketing Business earnings forecast for the year ending December 2019, announced on February 7, 2019, was revised on August
8, 2019. For details, please refer to the “Notice Concerning Revision of Earnings Forecast” announced on August 8, 2019.

For more information: URL: https://www.optholding.co.jp/en/ir/
Coming Schedule for IR events and documents
Quarterly financial report (in Japanese): November 14, 2019
Effective Date of dividend payment: Additional materials and events 2019 Q3 results
Supplementary document for the results meeting: Available
Earnings conference for analysts and institutional investors: Held on November 14, 2019
Video streaming of results meeting: Available immediately after earnings conference in Japan
Changes in material subsidiaries for the reporting period
There was no material change in specific subsidiaries accompanying a change in scope of consolidation
Changes in accounting policies and changes in accounting estimates(1) Changes in accounting policies required by amendments to accounting standards, etc.: None
(2) Other accounting policies except for item (1): None
(3) Accounting estimates: None
(4) Retrospective restatements: None
Number of shares issued –Common stock2019 Q3
Number of shares issued including treasury shares
Number of treasury shares

23,817,700
917,7052019 Q3

Average number of shares during the period

22,899,995

2018
23,817,700
917,7052018 Q3
22,646,522

Change in monetary unit on financial statements
From the beginning of this reporting period, the unit amount shown on quarterly financial statements and other items has
been changed to JPY million from JPY thousand.
2

Table of Contents
1. Management Discussion and Analysis....................................................................................................................... 4
Results of Operations………………………………………………………………………………………………………... 4
Overview of the Financial Position………………………………………………………………………………………….10
Consolidated Cash Flows…………………………………………………………………………………………………

10

Earnings Forecast for Year ending December 31, 2019………………………………………………………............. 12
2. Quarterly Consolidated Financial Statements and Primary Notes……………………………………………………. 14(1) Quarterly consolidated balance sheets……………………………………………………………………………........ 14(2) Quarterly consolidated statements of income and comprehensive income………………………………………… 16
Quarterly consolidated statements of income……………………………………………………………………… 16
Quarterly consolidated statements of comprehensive income……………………………………….................. 17(3) Quarterly consolidated statements of cash flows…………………………………………………………………........ 18(4) Notes on Quarterly Consolidated Financial Statements……………………………................................................ 21
Notes on the premise of a going concern...........................................................................................................
21
Notes on significant changes in the amount fo shareholder’s equity………………………………………………….......................... 21
Additional information……………………………………………………………………………………………........ 21
Information on reporting segments ……………………………………………………………………………....... 21
Business integration…………………………………………………………………………………………….....

323

1. Management Discussion and Analysis(1) Results of Operations
OPT group (hereinafter “the Group”) set the management policy to maximize corporate value and cash flows by leading
any and all corporate "digital shift" in response to the rapidly advancing digital industrial revolution, based on the missionof "support, innovate, and create digital industrial revolution.”
In addition to internet ad agency business, which is our current pillar, we, as a Digital Shift (DS) company, are developing
our strategy in the following three dimensions (so called “3DS (Digital Shift) strategy”). The first is "Support DS for clients.”
The Group will serve for corporate clients to provide broader range of marketing solutions from 1P (“Promotion”, which wecurrently provide) to 7Ps (Promotion, Price, Product, Place, Personnel, Process and Physical Evidence). By providing 7Ps,
the Group will extend the coverage of services and products.
The second is “Innovate DS with clients”. The Group aims to take a role to accelerate corporate digital shift and toinnovate through the alliance with client companies or establishing JVs with them. The third is "Create DS by Ourselves",
which aims to create digital services from zero to one which is free from conventional business formats and ways ofoperating. Through these three dimensions, the Group aims to realize our business model diversification.
Also, in our core management policy, maintaining strong financial foundation is essential to increase our corporate value,at the same time, we will proactively utilize management resources, especially cash. We set at least 10% IRR (internalrate of return) as our targeted return from the investments, however, we are aiming to maximize shareholders’ return byaccelerating mid-to-long term EPS growth through following measures. We plan to implement around JPY 20 billion
investment on existing businesses related to digital shift and, different from this investment, M&A for digital shift creation
for the next three years or so.
The results of operation for the three month ended on September 30, 2019 (hereinafter 2019 Q3) were as follows.
(in million yen unless otherwise stated)2019 Q3

Year-on-year change (%)
6

ActualRevenue
Gross profit

Adjusted*

Actual

20,8773,152

4.5%(20.1)%

2.8%(21.8)%

Operating income or loss

(420)

-*

7

-*

Ordinary loss

(358)

-*

7

-*

308

7

-*

-*

(44)

-*

7

-*

EBITDA (Non-GAAP) *2

622(13.4)%(71.4)%Net income (loss)attributable to owners of parent

(16)

-*

7

-*

-

(5.8)pts

7-*

Extraordinary loss
1

EBIT (Non-GAAP) *3

ROE* (Last twelve months; LTM, %)

1.17%

7
7
7
7

7

Free cash flow* (Non-GAAP)

4-

Earnings per share- diluted (yen)

-

-

-

(0.72)

7

7

Earnings per share- basic (yen)

-*
-*

7

-*

Note:
1.
EBIT= Net income (loss)before taxes and other adjustment＋interest paid－interest received
2.
EBITDA = EBIT + other financial related gains (losses)+ depreciation + amortization of intangible assets + amortization of longterm prepaid expenses + Non-cash gain(loss)
3.
Return on equity (ROE): Net income attributable to owners of parent in last twelve months/average amount of equity as of the endof reporting quarter and the same quarter in previous year
4.
Free cash flow (FCF)=Operating cash flow+ investing cash flow ±one-off cash flow items
5.
Earnings per share-diluted for 3Q of the fiscal year ended December 31, 2019 is not presented as the earnings per share for thequarter was a net loss although dilutive potential common shares exist
6.
Figures are compared to excluding the impact of the business transfer implemented during 2018 Q3. Approx. 1.7% of quarterly
consolidated sales for 2018 Q3 was by video streaming business, operated by relaid Inc., (formally Skill-up Video Technology,
Inc.,).
7.
Figures were omitted as relevant amounts in reporting or the previous period are negative

Results by reporting segment is as follows:
The Group analyses and reports financial results for two reporting segments, Marketing Business and Synergy Investment
Business and Corporate Function costs. Earnings of Marketing Business and Synergy Investment Business are shown
before Corporate Function cost allocation.

4

Marketing Business
Marketing Business consists of two sub-segments: Large Corporations, which includes OPT, Inc. and seven otherconsolidated subsidiaries providing online advertising, digital marketing, and related services to enterprise clients. And
Local SMEs, which includes , Inc(hereinafter, “SoldOut”, securities code: 6553), and five other subsidiaries providing avariety of digital marketing solutions in regional areas.
The table below shows 2019 Q3 results of Marketing Business.
(in million yen unless otherwise stated)2019 Q3
ActualYear-on-year change (%)
Adjusted*1

ActualRevenue
Gross profit

20,5763,437

7.8%(2.5)%

5.9%(4.9)%

Operating income

669
3,437
672

(14.4)%(11.3)%(15.0)%(12.0)%

(79)
669
592
678
768

2

-*

-*

39.9%

(34.4)%(22.1)%(68.5)%

Ordinary profit
Extraordinary loss
EBIT(Non-GAAP)EBITDA(Non-GAAP)

2

Note:
1.
To provide a more accurate comparative analysis of earnings, changes are shown adjusted to exclude the impact of any
businesses not included in the current quarter's earnings due to such as business sell-off during the previous year. The reporting
period excludes earnings from video streaming business of relaido, Inc. in Large Corporations sub-segment (the business wastransferred after company-split in 2018 Q3. Recorded JPY 343 million of revenue in 2018 Q3).
2.
Figures were omitted due to relevant amounts in reporting or the previous period are negative.

The demand for Internet ad in Japan has continued to grow through the replacement of traditional media such as TV andflyers. In addition, demands for digital marketing and digital shift by corporate clients have continued to increase. On theother hand, similarly to 2019 Q1 and Q2, the trend of reduction in advertising budgets by a portion of our existing clientshas also continued.
In this market environment, the Group has made efforts for not only continuing existing marketing business but also
proposal sales and solution development heading to digital shift support for corporate clients, and development of our own
products, in addition to acquiring new clients.
In the Q3 consolidated accounting period, the Marketing Business recognized revenue of JPY 20,576 million (up 5.9%
YoY), gross profit of JPY 3,437 million (down 4.9% YoY), operating profit of JPY 669 million (down 11.3% YoY), ordinary
profit of JPY 672 million (down 12.0% YoY), extraordinary loss of 79 million (up JPY 139 million YoY) , EBIT of JPY 592
million (down 34.4% YoY), and EBITDA of JPY 768 million (down 68.5% YoY).
The key changes excluding the impact of businesses transfer in the previous Q3 consolidated accounting period were:sales increased by 7.8%, gross profit decreased by 2.5%, operating income decreased by 14.4%,ordinary profit
decreased by 15.0%, EBIT increased by 39.9%, and EBITDA decreased by 22.1%.
After excluding results of relaido, Inc.’s video streaming business from 2018 Q3, the reasons for the changes in the key
items were as follows.
(1)

In the Large Corporations sub-segment, revenue for 2019 Q3 was JPY 15,452 million (up 3.1% YoY) as a result of
focusing on the acquisition of large-scale new project orders mainly from national clients since the first half of 2019,
even though certain existing clients continued to reduce advertising budgets. In the Local SMEs sub-segment,
revenue was JPY 5,268 million (up 24.3% YoY) due to the acquisition of new clients and an increase in advertisingbudgets by existing clients. As a result, revenue for the overall Marketing Business segment was JPY 20,576 million(up 7.8% YoY).

(2)

In the Large Corporations sub-segment, gross profit was JPY 2,465 million (down 6.1% YoY) due to the decline inprofit margins mainly for newly acquired projects. In the Local SMEs sub-segment, gross profit was JPY 965 million(up 9.7% YoY), mainly due to significant growth in revenue, partially offset by low profit margins in certain projects
other than the operational agency service. As a result, gross profit for the overall Marketing Business segment was
JPY 3,437 million (down 2.5% YoY).

(3)

In the Large Corporations sub-segment, operating income was JPY 465 million (down 16.1% YoY) due to thedecrease in profit margins mainly for newly acquired projects, in spite of continuing efforts to reduce selling, generaland administrative expenses from the first half of 2019. In the Local SMEs sub-segment, operating incomewas
JPY 204 million (down 10.2% YoY) due to an increase in selling, general, and administrative expenses and low
profit margins of certain projects other than the operational agency service, in spite of an increase in operating profit
based on a significant growth in revenue. As a result, operating profit for the overall Markeitng Business segment
was JPY 669 million (down 14.4% YoY).

(4)

In the Large Corporations sub-segment, EBIT was JPY 471 million (increase of JPY 277 million as compared to2018 Q3) due to the impairment loss recognized for noncurrent assets in 2018 Q3. In the Local SMEs subsegment, EBIT was JPY 127 million (down 44.9% YoY) due to the loss on valuation recognized for certain
5

investments in 2019 Q3. As a result, EBIT for the overall Marketing Busines segment was JPY 598 million (down
41.5% YoY).
(5)

In the Large Corporations sub-segment, EBITDA was JPY 538 million (down 26.8% YoY) as a portion of
extraordinary loss recognized for the reversal of valuation loss on noncurrent assets and other impairment. In 2018
Q3, an extraordinary loss of JPY 520 million was recorded for valuation losses for noncurrent assets and other
impairment. In the Local SMEs sub-segment, EBITDA was JPY 237 million (down 8% YoY). As a result, EBITDA for
the overall Marketing Business segement was JPY 775 million (down 21.5% YoY).
The table below shows the 2019 Q3 results of the Marketing Business.
（in million yen unless otherwise stated）
Year-on-year change (%)

2019 Q3
ActualAdjusted*1

ActualRevenue

60,1441.8％(0.7)％

Gross profit

10,143(4.5)％(7.4)％

Operating profit

1,829(38.0)％(35.2)％

Ordinary profit

1,842(37.8)％(35.1)％

Extraordinary loss

(151)

－*2

－*2

EBIT（Non-GAAP）

1,690(33.5)％(43.3)％EBITDA（Non-GAAP）

2,135(40.9)％(57.5)％

Note:
1. To provide a more accurate comparative analysis of earnings, the year-on-year changes are adjusted to exclude
the impact of any results not included in the current quarter’s earnings, such as the sale of businesses during theprevious year. The current reporting period excludes earnings from the video streaming business of relaido, Inc.,
which was under the Large Corporation sub-segment (the business was transferred after the company-split in2018 Q3 had revenue of JPY 557 million in 2018 Q3).
2.Figures were omitted as relevant amounts in the current or previous period are negative.

As a result, in the Q3 cumulative consolidated accounting period of the Marketing Business, revenue was JPY 60,144
million (down 0.7% YoY), gross profit was JPY 10,143 million (down 7.4% YoY), operating profit was JPY 1,829 million(down 35.2% YoY), ordinary profit was JPY 1,842 million (down 35.1% YoY), extraordinary loss of 151 million(extraordinary gain of JPY 137 million in 2018 Q3) EBIT was JPY 1,690 million (down 43.3% YoY), EBITDA was JPY
2,135 million (down 57.5% YoY).
After adjustment of the streaming business results of relaido Inc. in the previous year, revenue in 2019 Q3 was 1.8%
higher YoY, gross profit was 4.5% lower YoY, operating profit was 38.0% lower YoY, ordinary income was 37.8% lower YoY,
EBIT was 33.5% lower YoY, and EBITDA was 40.9% lower YoY. (Extraordinary profit were omitted due to the amounts inreporting and previous period are negative.)
The major activities in the Marketing Business for this fiscal year were as follows.
•

Actions for acquiring large-scale new clients such as manufacturers and retail distributors were taken principally
through OPT, Inc.
OPT, Inc.'s activity highlights:-

Conducted a corporate split-up of the performance marketing business and the social media marketingbusiness of Crossfinity Inc. and merged the businesses into OPT, Inc. In addition, executed a corporate
reorganization through a split-up of its website consulting business and merged the business into Heartlass,Inc., to optimize the allocation of management resources to the focus areas.

SoldOut’s activity highlights:-

On July 1, 2019, Search Life, Inc. and TechLoCo, Inc. the consolidated subsidiaries of SoldOut, merged andcommenced operations as “SO Technologies Co., Ltd.” In pursuit of the vision “To create a digital customer
6

acquisition platform that makes it easy for anyone and anywhere in Japan to transform passion into earning
power,” the new entity will develop and provide higher-value services by harnessing accumulated know-how
and technology.
List of awards and certifications by media type (as of the end of September 2019)
StatusMedia TypeAwardsOPT Inc.

SoldOut, Inc

GoogleSearch Innovation Award1－

Finalist in the Search
Advertising Division

GoogleGrowing Businesses Online
Awards2－

Ranked first domestically in
Japan

Yahoo!JAPANSpecial Certified Partner3Advertising Operations
Partner

Advertising Operations
Partner

Yahoo!JAPANSearch Advertising Award4－

First place in the Hokkaido
areaYahoo!JAPAN

Preferred Partner Program5－

ATOM Certified

CriteoCriteo Certified Partners6

Four stars（★★★★）

Two stars（★★）
SilverLINE Ads Platform Division
LINE

SilverCertified as the Best SMB
Partner

Diamond－Silver－－First place

Sales Partner7
LINE Account Connect
Division

LINE

Technology Partner7
LINE Account Connect
Division

LINE

Sales Partner7

Indeed2019 first half Strategic
Products Award Featured
Employer Division8*1 The Search Innovation Award is presented in the Premier Partners Awards 2018 event sponsored by Google
Partners.
*2 The award is presented to agencies honored with a Premium Badge in the global Google AdWords Agency
Contest.
*3 A “Special Certified Partner” conducts marketing methods requiring specialization and advertising operations
under the “Yahoo! Marketing Solutions Partner Program” certified by Yahoo Japan Corporation.
*4 The “Search Advertising Award” is sponsored by Yahoo Japan Corporation, certifying agencies that
continuously sell ad products.
*5 The “Preferred Partner Program” is a system supporting the operational efficiency of Yahoo! promotional
advertisements presented by Yahoo Japan Corporation.
*6 Agencies that continuously sell ad products offered by CRITEO and pass a certification test are certified as
Criteo Certified Partners (star agency system)7*7 he award is presented under the “Line Biz-Solutions Partner Program” division to partners certified for sales
and development of corporate services offered by Line Corporation*8 The award recognizes achievement in the proposals/operations for the “Featured Employer” provided byIndeed Japan Co., Ltd.

Synergy Investment Business
The Synergy Investment Business consists of the Business Development and Financial Investments sub-segments. The
Business Development consists of SIGNATE, Inc.,(“SIGNATE”) which is involved mainly in AI business, and of the China
cross-border business, while the Financial Investments consists of OPT Ventures # 1 and # 2 funds and investment
businesses managed by OPT America, etc.,. It also includes the Overseas Marketing Business.
The table below shows 2019 Q3 results and KPIs of Synergy Investment Business. There is no item to be adjusted in thesame period of previous year.
(in million yen unless otherwise stated)2019 Q3

Year-on-year change (%)

Revenue
Gross loss

320
(278)

(65.1)%
2-*

Operating loss

(545)

-*

Ordinary loss

(485)

-*

Extraordinary profit

389

-*

EBIT(Non-GAAP)

(96)

-*

EBITDA (Non-GA

311

119.4%

AUM*

1

1

IRR*
AP)

2
2
2
2

25,320(6.2)%

11.3%(1.7)pts

Note:1.
AUM and IRR compare the recent previous quarter (2019 Q3). The details for calculation are disclosed in footnote on page 9.
2.
Figures were omitted due to relevant amounts in reporting or the previous period are negative.

In 2019 Q3, the Synergy Investment Business recognized revenue of JPY 320 million (down 65.1% YoY), gross loss of
JPY 278 million (JPY 444 million in 2018 Q3), operating loss of JPY 545 million (JPY (154) million in 2018 Q3), ordinary
loss of JPY 485 million (JPY 123 million in 2018 Q3), EBIT of JPY (96) million (JPY 57 million in 2018 Q3), and EBITDA of
JPY 311 million (JPY 141 million in 2018 Q3).
The reasons for the difference from the second quarter of FY2018 are as follows.
(1)

In the Synergy Investment Business, revenue was JPY 320 million (down 65.1% YoY) due to the impact of the saleand deconsolidation of an overseas subsidiary, eMFORCE Inc. (hereinafter, “eMFORCE”) in July 2019.

(2)

Gross loss was JPY 278 million as compared to gross profit of JPY 444 million in the same period of the previous
fiscal year, due to the impact of the sale and deconsolidation of an overseas subsidiary, eMFORCE, and recording ofa loss on valuation recognized for fund investments.

(3)

Operating loss increased by JPY 391 million from JPY 154 million to JPY 545 million as compared to the same
period of the previous fiscal year mainly due to a decrease in gross profit, in spite of a decrease in the selling,
general and administrative expenses as a result of the sale of the overseas subsidiary, eMFORCE, and exclusion of
the company from the consolidation.

(4)

Ordinary loss was JPY 485 million, a deterioration of JPY 608 million as compared to ordinary profit of JPY 123
million in the same period of the previous fiscal year, mainly due to a deterioration in operating loss and a decrease
in investment income to JPY 25 million from JPY 272 million in the same period of the previous fiscal year in spite of
improvement of JPY 45 million of investment gain on equity method..

(5)

Extraordinary profit increased by JPY 435 million to JPY 389 million mainly due to the gain recognized on the sale ofthe shares of a subsidiary in South Korea, eMFORCE, in July 2019 and the shares of an affiliated company, Chai
Communication Co., Ltd. (hereinafter Chai), in September 2019. After the sale, Chai is no longer accounted forunder the equity method.

(6)

EBIT was negative JPY 96 million (as compared to negative JPY 57 million in the same period of the previous fiscal
year) due to deterioration of ordinary profit/loss in spite of the extraordinary income recognized mainly on the sale ofa overseas subsidiary and affiliate as mentioned in the note 5.

(7)

EBITDA increased by 119.4% YoY due to the extraordinary income recognized on the sale of a overseas subsidiary
and affiliate, as mentioned in note 5.
8

As a result, in the cumulative consolidated Q3 of the Synergy Investment, revenue was JPY 2,458 million (decreased by
32.1% YoY), gross loss was JPY 707 million (decreased by 63.1% YoY), operating loss was JPY 736 million (operating
loss of JPY 236 million in 2018 Q3), ordinary loss of JPY 424 million (ordinary loss of JPY 261 million in 2018 Q3),
extraordinary loss of 63 million (down 94.8% YoY) , EBIT was JPY (363) million (JPY 959 million in 2018 Q3), and
EBITDA was JPY 327million (down 70.9% YoY).

The major activities in Synergy Investment Business for this fiscal year were as follows.
•

In financial investment sub-segment, OPT Ventures # 2 Investment
In October 2019, a JPY 3 billion investment contract was signed with the Organization for Small & Medium
Enterprises and Regional Innovation, JAPAN. companies such as Wealth Navi Co., Ltd. that operate an asset
management robot advisor “WealthNavi” for individuals•

In business development sub-segment, SIGNATE, Inc.
Solves companies’ AI development using open innovation, with a membership base consisting of office workers
and students possessing AI developmental skills. Participation of these members will expand the scope of the
explanatory analysis, which has a significant influence on the accuracy of AI models, and will make theprocurement of advanced AI possible. The number of registrants has increased, exceeding 23,000 users
increase of XX users as compared to the end of June, 2019)
Launched “SIGNATE Quest,” an AI human resource development online course for corporations, aimed not
only to develop data scientists who implement AI but also to develop business-related human resources that
promote AI projects. Planning to introduce 100 companies in the first year and 400 companies in three years.

•

Overseas marketing
Sold all of the shares of a subsidiary in South Korea, eMFORCE, to Digital Advertising Consortium Co., Ltd. In
addition, sold all of the shares of the affiliated company, Chai, to the company Chai and the president Mr.
Young Sup Choi.

The Company discloses AUM (Assets Under Management) and IRR (Internal Rate of Return) to enhance thetransparency of investment returns. At the end of the Q2 consolidated accounting period, AUM was JPY 27,004 million(down 10.1% compared to 2019 Q1), due to the decrease in market value of Raksul Inc., and impairment losses incurredfrom overseas investments. IRR after tax at the end of June 2019 was 13.0 %, and decreased by 2.7 point at the end of
the 1Q consolidated accounting period in relation to the decline in market value of SoldOut Inc.. (Please see footnotes on
page 10 for detailed calculation method applied to AUM and IRR)
Corporate Function cost.
The table below shows 2019 Q3 results of Corporate Function cost.
(in million yen unless otherwise stated)2019 Q3

Difference from 2018 Q3*

Selling and administrative expense
Operating income or loss

(535)
(548)

(85)
(97)

EBIT(Non-GAAP)

(543)

(220)

EBITDA(Non-GAAP)

(460)

(172)

Note: Negative amount means increase of expense on this table.

The Corporate Functions acknowledges recruiting and development of human resources as an important management
agenda to realize the medium-term management plan. Moreover, in September 2018, as a result of introducing a
restricted stock compensation plan as an incentive to improve its corporate value, SG&A costs in the Corporate Function
for 2019 Q3 was JPY (535) million, (JPY (450) million in 2018 Q3), and EBITDA was JPY (460) million (JPY (288) million
in 2018 Q3).
As a result, in the Q3 of cumulative consolidated period of the Corporate Function, SG&A expenses were JPY (1,613)
million (JPY (1,359) million in 2018 Q3), EBITDA was JPY (1,385) million (JPY (1,198) million in 2018 Q3).

9

(2) Overview of the Financial Position
Partial amendments to Accounting Standards for Tax Effect Accounting (ASBJ) statement No. 28, February 16, 2018)
were applied from the beginning of the 2019 Q1 consolidated accounting period, and the financial position is compared to
the retroactively revised figures of the previous consolidated fiscal year end.
(Assets)
Total assets at the end of 2019 Q3 consolidated accounting period were JPY 56,566 million, an increase of JPY 14 million
from the end of the previous consolidated fiscal year.
Current assets were JPY 50,764 million, an increase of JPY 673 million from the end of the previous fiscal year. This ismainly due to the decrease of JPY 2,963 million in cash and deposits and decrease of JPY 2,713 million in notes andaccounts receivable-trade, offset by the increase of JPY 5,639 million in operating investing securities and increase of
JPY 861 million in other current assets including income taxes receivable.
Noncurrent assets were JPY 5,802 million, a decrease of JPY 658 million from the end of the previous fiscal year. This ismainly due to the increase of JPY 136 million in lease and guarantee deposits, offset by the decrease of JPY 387 million
in shares of associate companies and decrease of JPY 267 million in investment securities.
(Liabilities)
Total liabilities at the end of 2019 Q3 were JPY 25,930 million, a decrease of JPY 3,487 million from the end of theprevious consolidated fiscal year.
Current liabilities were JPY 15,491 million, a decrease of JPY 3,087 million from the end of the previous fiscal year. This isdue to the decrease of JPY 1,617 million in other current liabilities including accrued consumption taxes and decrease of
JPY 1,572 million in notes and accounts payable-trade.
Noncurrent liabilities were JPY 10,439 million, a decrease of JPY 399 million from the end of the previous fiscal year.
This is mainly due to the increase of JPY 1,846 million in deferred tax liabilities resulting from the valuation of operating
investment securities offset by the decrease of JPY 2,050 million in long-term loans payable.
(Net assets)
Total net assets at the end of 2019 Q3 consolidated accounting period were JPY 30,635 million, an increase of JPY 3,501
million from the end of the previous fiscal year.
This is mainly due to the increase of JPY 3,776 million in the valuation difference on available-for-sale securities.

(3) Consolidated Cash Flow
Cash and cash equivalents (hereinafter referred to as “Cash”) at the end of the 2019 Q3 consolidated accounting period
were JPY 16,668 million, a decrease of JPY 2,930 million from the end of the previous fiscal year due to cash outflows
from operating, investing, and financing activities.
The following is the status of cash flows from major factors of each activity:
2019 Q3 (FromJanuary 1, 2019 to
September 30, 2019)2018 Q3 (FromJanuary 1, 2019 to
September 30, 2019)

Difference from2018 Q3

Cash flows from operating activities(2,008)(811)(1,196)

Profit (loss) before income taxes

(49)

513

(562)

Decrease(increase) in notes andaccounts receivable - trade

(400)

11

(412)

(402)

143

(545)

(1,156)(1,480)

324

409

2,366

(1,956)

544

180

364

－

2,164

(2,164)

Increase (decrease) in accrued
consumption taxes
Other, net
Cash flows from investing activities
Proceeds from sales ofinvestment securities
Proceeds from sale of businesses

10Decrease in lease and guarantee

61Other, net

（141）

20

Free cash flow

(1,599)1,554(3,153)Adjustment*1

－

－

－

(1,599)1,554(3,153)

Cash flow from financing activities

218

(396)

614

Repayment of long-term loans
payable(400)(5,790)

5,390

666

13

653

(48)

5,380

(5,429)

1

63

(61)

(1,379)1,220(2,600)deposits

Adjusted free cash flow

Proceeds from payments from
non-controlling shareholders
Other
Effect of exchange rate change on
cash and cash equivalents
Cash and cash equivalents*1 Adjustment ＝nonrecurring cash flow item

11

5
（162）

OPT Holding, Inc. (TSE2389)
2019 Q3 Financial Results(4) Earnings Forecast for Year ending December 31, 2019
The consolidated earnings forecast for the full fiscal year ending December 31, 2019, released on February 7, 2019, wasrevised on August 8, 2019. For details, please refer to the “Notice Concerning Revision of Earnings Forecast” released on
August 8, 2019.
(in million yen unless otherwise stated)

Full year of earnings forecasts for FY2019

Revenue

EBIT

EBITDA

Original forecasts (A)Revised forecasts (B)93,50086,500

5,000
2,950

5,550
3,450

Difference from original forecast (B-A)(7,000)(2,050)(2,100)Change (%)(7.5)%(41.0)%(37.8)%

Reference: FY2018 (C) *80,579

3,814

4,780

Difference YoY (B-C)

5,921

(864)

(1,330)Change (%)

7.3%(22.7)%(27.8)%

Note: Figures exclude the performance from video streaming business of relaido, Inc.(formally Skill-up Video Technology,Inc.) because the business was transferred in FY2018 Q3

2nd(in million yen unless otherwise stated)

half of earnings forecast for FY2019

Revenue

EBIT

EBITDA

Original forecasts (A)Reference: FY2018 (B) *46,93340,581

1,853
1,664

2,084
2,311

Difference YoY (B-C)

6,352

189

(227)

Change (%)

15.7%

11.3%

(9.8)%

Note: Figures exclude the performance from video streaming business of relaido, Inc.(formally Skill-up Video Technology,Inc.) because the business was transferred in FY2018 Q3
For key items, the factors for increases/ (decreases) compared to the earnings forecasts from February 8, 2019 are noted
below.
(1)

With regard to revenue, the Large Corporations sub-segment has acquired large projects through proactive sales
activities centering on participating the competitions to acquire new large clients focused on brand advertisers andretailers. On the other hand, the trend seen in 2019 Q1 that some large clients reduce their advertising budget,
contrary to initial beginning of the year forecasts, is expected to continue in 2019 Q2 and thereafter. As a result, in the
Large Corporations sub-segment, while the revenue growth rate after 2019 Q3 is expected to recover toapproximately 14%, it is difficult to cover the decline in revenue to 2019 Q2. Similarly for the Local SMEs sub-segment,
as result of scrutinizing the full fiscal year revenue forecast, although the revenue growth rate for 2019 Q3 andthereafter is expected to recover to approximately 24%, it is expected to be difficult to cover the transaction volume
decline in some large clients during 2019 Q1 through the full fiscal year, and the revenue forecast for the entire
Marketing Business is revised to JPY 86,500 million for a decrease of 7.5 % from original forecast.

(2)

EBIT and EBITDA are expected to decrease by JPY 900 million in the Large Corporations sub-segment, and JPY 500
million in the Local SMEs sub-segment due to a decrease in gross profit from a decline in revenue, for a total
decrease of approximately JPY 1,400 million. Further, for new projects in the Large Corporations sub-segment, due toreduction of margins in the advertising agency business resulting from price competition with rival companies andreduction in revenue incentives from media in connection with a slowdown in the revenue growth, gross profit isexpected to decrease by approximately JPY 1,600 million yen compared with original forecasts. In addition, in spite ofefforts to reduce SG&A expenses, as the Company continues to hire new graduates and provides training to achieve
long-term growth, the upward revision from original forecasts in EBIT and EBITDA is expected to remain at JPY 900
million. Accordingly, forecasted EBIT and EBITDA for the Marketing Business are revised to JPY 2,950 million (down
41.0% from original forecasts) and to JPY 3,450 million (down 37.8% from original forecasts) respectively.

The Company will take countermeasures blow and make efforts for profit recovery from FY2020 onward.
•

The Company will promote further BPR & BPO to reduce the business operating costs (e.g. automation of operations,
utilization of nearshore/offshore etc.), and utilize AI technologies for work saving.

•

The Company will expand training programs of the HR Development Center to increase sales per person throughearly sales force enablement/ development of human resources.

There are no changes in the outlook for the Synergy Investment Business and the HD management costs.

－

12 －

OPT Holding, Inc. (TSE2389)
2019 Q3 Financial Results

Footnotes for the definitions for KPIs
Assets Under Management (AUM)
AUM is defined as aggregate amount of 1) book value of subsidiaries’ and affiliates’ stocks and 2) fair market value of
operational investment securities and invested securities. For assets categorized 2), impairment will be reflected to thevalue to be aggregated.
(1)

Shares of subsidiaries and affiliates; book value is applied(2)

Operational investment securities and investment notes and securities: each notes and security’s FMV is
calculated depending on the classification shown below;i.

Notes or securities of which investment amount is small: acquisition priceii.

Listed companies’ shares: closing price at the end of reporting periodiii.

Securities with financing in recent period: based on value of relevant financing

iv.

Other securities estimated by comparable multiple, DCF, or net asset valuation depending on eachcompany’s performance

The AUM calculation is prepared with guidance and advice by KPMG Azsa.

Internal Rate of Return (IRR)
Prerequisites for calculation (Un-sold securities are calculated as if they are sold)

Subject to : Those the Company has invested in from 2003 to the end of June 2019 (including securities ofoperational investment securities, investment securities, shares of subsidiaries and shares of affiliates)

The reference date for calculation: June 30, 2019

1.

Impaired investment: Calculated as if they were sold at the net asset value after impairment.

2.

Investment with recent financing: Calculated as if they were sold at the finance valuation.

3.

IPOed investment: Calculated as if they were sold at the market value as of the reference date.

4.

Fund: Calculated with the amount collected until the end of the reporting period and the book value as ofthe end of reporting period.

5.

Others: Any other investment with no change in their acquisition cost due to sale, impairment, financing,
IPO or the like are calculated as if they were sold on the reference date at the acquisition cost.

Income tax are included

Method:－13 －OPT Holding, Inc. (TSE2389)
2019 Q3 Financial Results

Quarterly Consolidated Financial Statements and Primary Notes(1)

Quarterly consolidated balance sheets(Unit: yen in millions)
As of December 31, 2018

As of September 30, 2019

AssetsCurrent assets
Cash and deposits

19,631

16,668Notes and accounts receivable-trade

13,652

10,939Operational investment securities

15,33721,026

252

30

1,266

2,128

(49)

(28)

50,091

50,764

299

246

Other

1,498

1,617

Total intangible noncurrent assets

1,498

1,617

0

-

Shares of affiliate companies

1,027

640

Investment securities

2,208

1,940

Lease and guarantee deposits

731

867

Other

775

536

Allowance for doubtful accounts

(80)

(47)

Total investment and other assets

4,662

3,937

Total noncurrent assets

6,460

5,802

Total assets

56,55156,566Inventories
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Tangible noncurrent assets
Intangible noncurrent assets

Investments and other assets
Shares of subsidiary companies

－

14 －

OPT Holding, Inc. (TSE2389)
Q2 Financial Results(Unit: yen2019
in millions)

As of December 31, 2018

As of September 30, 2019

Liabilities
Current liabilities
Notes and accounts payable-trade

12,163

10,591

Short-term loans payable

1,300

2,300

Income taxes payable

557

113

Provision for bonuses

727

273

Other

3,829

2,211

Total current liabilities

18,57815,491

8,700

6,650

200

-

1,831

3,678

104

110

1

0

Total noncurrent liabilities

10,83910,439Total Liabilities

29,41825,930Capital stock

8,212

8,212

Capital surplus

3,915

3,918

Retained earnings

5,442

4,701

Treasury stock

(698)

(698)

16,872

16,133

6,214

9,990

390

191

6,604

10,18200Non-controlling interests

3,656

4,319

Total net assets

27,13330,635

Total liabilities and net assets

56,55156,566

Noncurrent liabilities
Long-term loans payable
Liabilities on retirement benefits
Deferred tax liabilities
Asset retirement obligations
Other

Net assets
Shareholders’ equity

Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Total accumulated other comprehensive income
Subscription rights to shares(2) Quarterly consolidated statements of income and consolidated statements of comprehensive income
Quarterly consolidated statement of income for three month ended on September 30, 2019

－

15 －

OPT Holding, Inc. (TSE2389)
Q2 Financial Results(Unit: yen2019
in millions)2018 Q3

2019 Q3(From January 1 to(From January 1 to

September 30, 2018)

September 30, 2019)

Revenue

64,06962,573

Cost of sales

51,23651,758Gross profit

12,833

10,815

Selling, general and administrative expenses

11,60911,357

Operating income or loss

1,223

(542)

Investment gain on equity method-

88

Gain on investments in partnership

37

120

Gain on valuation of derivatives

56

-

Other

55

24

Total non-operating income

149

233

25

18

-

28

Loss on investments in partnership

50-

Investment loss on equity method

36

17

Other

112

63

1,260

(372)

-

116

1,219

450

506

-

0

2

1,726

569

Loss of retirement of non-current asset

62

36

Impairment loss

377

44

Loss on sales of investment securities

10

421

Loss on valuation of investment securities

15

22

Other

1

10

466

536

Quarterly net income (loss)before taxes and otheradjustments

2,520

(338)

Total income (loss)taxes

1,066

492

Quarterly net income(loss)

1,453

(831)

217

(460)

1,236

(370)

Non-operating income

Non-operating expenses
Interest expenses
Foreign exchange losses

Total non-operating expenses
Ordinary income
Extraordinary income
Gain on change in equity
Gain on sales of investment securities
Other
Total extraordinary income
Extraordinary losses

Total extraordinary losses

Quarterly net income (loss)attributable to noncontrolling interests
Quarterly net income(loss) attributable to owners ofparent－16 －OPT Holding, Inc. (TSE2389)
2019 Q2 Financial Results

Quarterly statement of comprehensive income for three month ended on June 30,
2019(Unit: Yen in millions)2018 Q3

2019 Q3(From January 1 to(From January 1 to

September 30, 2018)

September 30, 2019)

Net income(loss)

1,453

(831)

10,8603,773

Foreign currency translation adjustment

(37)

(105)

Share of other comprehensive income of associates
accounted for using equity method

(8)

(95)

Total other comprehensive income

10,814

3,573

Comprehensive income

12,267

2,742

12,050

3,207

217

(464)

Other comprehensive income
Valuation difference on available-for-sale securities

Comprehensive income attributable to:
Owners of parent
Non-controlling interests

－

17 －

OPT Holding, Inc. (TSE2389)
2019 Q2 Financial Results(3)

Quarterly consolidated statements of cash flows(Unit: Yen in millions)2018 Q3

2019 Q3(From January 1 to
September 30, 2018)(From January 1 to
September 30, 2019)

Cash flows from operating activities
Profit (loss) before income taxes

2,520

(338)

Depreciation

594

399

Amortization of goodwill

237-

Loss (gain) on investments in partnership

(37)

(120)

(1,203)(428)

Loss (gain) on valuation of investment securities

10

421

Share of loss (profit) of entities accounted for using equity method

50

(88)

Loss (gain) on valuation of derivatives

(56)

-

Impairment loss

377

44

Loss on retirement of non-current assets

62

36

Loss (gain) on transfer of business

(506)

-

7

(13)

(160)

(461)

Increase (decrease) in net defined benefit liability

45

22Interest and dividend income

(4)

(4)

Interest expenses

25

18

Decrease (increase) in notes and accounts receivable – trade

382

1,430

Decrease (increase) in investment securities for sale

(401)

(279)

Decrease (increase) in inventories

(343)

221

Increase (decrease) in notes and accounts payable – trade

(189)

(913)

Increase (decrease) in accrued consumption taxes(20)(1,349)Other, net

142

464

Subtotal

1,529

(937)

3

4

(24)

(18)

(1,019)(1,616)

Income taxes refund

40

21

Cash flows from operating activities529(2,545)

Payments into time deposits

(198)

-

Proceeds from withdrawal of time deposits

285-

Purchase of property, plant and equipment

(31)

(55)

Purchase of intangible assets

(646)

(571)

Purchase of investment securities

(321)

(140)

Proceeds from sales of investment securities

238

595

Proceeds from withdrawal of investment securities

378

258

2,164

-

Loss (gain) on sales of investment securities

Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses

Interest and dividend income received
Interest expenses paid
Income taxes paid

Cash flows from investing activities

Proceeds from transfer of business－

18 －OPT Holding, Inc. (TSE2389)
2019 Q2 Financial Results

Payments for sale of businesses

-

(177)

(57)

-

-

292

Proceeds from derivative settlement

524-

Payments for lease and guarantee deposits

(33)

(257)

Payments for return and guarantee deposits

784

13

Payments of loans receivable

(15)

0

Collection of loans receivable

73

18

Other, net

(38)

(6)

3,105

(31)

Payments for sales of investments in subsidiaries resulting in change
in scope of consolidation
Proceeds from sales of investments in subsidiaries resulting inchange in scope of consolidation

Cash flows from investing activities

－

19 －

(Unit: Yen in millions)2018 Q3

2019 Q3(From January 1 to
September 30, 2018)(From January 1 to
September 30, 2019)

Cash flows from financial activities
Net increase (decrease) in short-term loans payable

(16)

-

Repayment of long-term loans payable

5,500

-

Proceeds from payments from non-controlling shareholders(6,535)(1,050)

Repayments of finance lease obligations

454

1,310

Repurchase of treasury shares

(44)

0

0

-

Cash dividends paid

(146)

(12)

Cash dividends paid to non-controlling interests

(272)

(434)

Payments from changes in ownership interests in subsidiaries that do
not result in change in scope of consolidation

(24)

(44)

Other

(135)

-

(3)

(48)

(1,224)

(279)

(14)

(74)

Cash and cash equivalents at beginning of period

2,396(2,930)

Increase (decrease) in cash and cash equivalents resulting fromchange of scope of consolidation

15,417

19,598Cash and cash equivalents at end of period

74-

Cash and cash equivalents at end of period

17,887

16,668Purchase of subsidiary’s treasury shares

Cash flows from financial activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents

(4) Notes on Quarterly Consolidated Financial StatementsInQ3(Note on the premise of a going concern)
Not applicable.
(Notes on significant changes in the amount of shareholders' equity)
Not applicable.

(Additional information)(Partial amendments to Accounting Standards for Tax Effect Accounting)Partial amendments to Accounting Standards for Tax Effect Accounting (ASBJ statement No.28, February 16,2018) were applied from the beginning of this reporting quarter, three months ended on March 31, 2019.
Deferred tax assets are classified in investments and other assets and deferred tax liabilities are classified in noncurrent
liabilities.
(Disposal of Shares of a Material Subsidiary)
Deferred tax liability of JPY 85 million was recognized during this reporting period because the Company decided totransfer all interests held in its consolidated subsidiary, eMFORCE Inc. In 2019 Q3, extraordinary income of JPY 250
million and income taxes of JPY 88 million will be recorded due to the transaction of the interest transfer.

(Information on reporting segments)
I. For the three month ended on September 30, 2018 (2018 Q3)
1. Revenue and profit or loss by reporting segments for the three month ended on June 30, 2018
(Unit: Yen in millions)

Reporting Segment
Synergy
Investment

MarketingBusiness

Adjustment*1

Consolidated

Total

Business

Revenue
Revenue from third parties

60,512

3,557

64,069-64,069

28

61

90

(90)

-

60,5403,619

64,159(90)

64,069

2,979

959

3,938

(1,397)

2,541

5,026

1,127

6,154

(1,316)

4,837Intersegment revenue ortransfer
Total
Profit (loss) of segment*2

EBITDA*3

Interest paid – Interest received

21

Net income before taxes and other adjustments

2,520

Total income taxes

1,066

Income taxes – current

1,280

Income taxes - deferred, etc.

(213)

Net income attributable to non-controlling interests

217

Net income attributable to owners of parent

1,236

Notes:
1.

The adjustment amount of JPY (1,397 million) for segment profit includes elimination of intersegment transaction
and JPY (1,359 million) of Corporate Function cost which were not allocated to reporting segments and JPY 56
million of gain on valuation of derivatives for the Company’s stock forward trading.

2.

Segment profit and loss is denoted in EBIT (Net income before taxes and other adjustment ＋ interest paid －interest received)

3.

EBITDA = EBIT + other financial related gains (losses)+ depreciation + amortization of intangible assets +amortization of long-term prepaid expenses + Non-cash gain(loss)

2. Information on assets of each reportable segment
The assets of each reportable segment for the 3rd quarter consolidated accounting period under review significantly
changed from the end of the previous consolidated fiscal year. This is outlined as follows.
The major factor is that the segment assets increased by 14,621 yen in millionsdue to the fair market valuation associatedwith new listing of Raksul Inc. an investee of the Company during the second quarter consolidated accounting period
under review.

3. Impairment loss of noncurrent asset or goodwill, etc., by reporting segments(Significant impairment loss of noncurrent asset)
Not applicable(Significant change in amount of goodwill)
Not applicable(Significant gain on negative goodwill)
Not applicable

II. For the three month ended on September 30, 2019 (2019 Q3)
1. Revenue and profit or loss by reporting segments for the three month ended on March 31, 2019
(Unit: Yen in millions)
Reporting Segment
Synergy
Investment
Business

MarketingBusiness

Adjustment*1

Consolidated

Total

Revenue
Revenue from third parties

60,1382,434

62,573-62,573

6

24

30

(30)

-

60,1442,458

62,603(30)

62,573

1,690

(363)

1,326

(1,651)

(325)

2,135

327

2,463

(1,402)

1,060

Intersegment revenue ortransfer
Total
Profit (loss) of segment*2

EBITDA*3

Interest paid – Interest received

13

Net income before taxes and other adjustments(338)

Total income taxes, etc.

492

Income taxes – current

292

Income taxes – deferred(200)

Net income attributable to non-controlling interests(460)

Net income attributable to owners of parent(370)

Notes:
1.

The adjustment amount of JPY (1,651 million) for segment profit includes elimination of intersegment
transaction and JPY (1,650 million) of Corporate Function cost which were not allocated to reporting
segments.

2.

Segment profit and loss is denoted in EBIT (Net income before taxes and other adjustment ＋ interest paid
－interest received)

3.

EBITDA = EBIT + other financial related gains (losses)+ depreciation + amortization of intangible assets +amortization of long-term prepaid expenses + Non-cash gain(loss)

2. Information on assets by reportable segment
There is no applicable information to be disclosed.

3. Impairment loss of noncurrent asset or goodwill, etc., by reporting segments(Significant impairment loss of noncurrent asset)
Not applicable(Significant change in amount of goodwill)
Not applicable(Significant gain on negative goodwill)
Not applicable(Business integration)(Disposal of shares of a material subsidiary)
In the Board of Directors meeting held on June 20, 2019, the Company decided to transfer all shares held of its,
consolidated subsidiary, eMFORCE Inc. to Digital Advertising Consortium Inc. On July 1, 2019, a Share Purchase andSale Agreement (hereafter referred to “the Agreement”) was closed between the Company and Digital Advertising
Consortium Inc. and was expected to be executed on July 31, 2019.
Based on the Company's decision of the share transfer, deferred tax liability of JPY 85 million was recognized during thisreporting period. In 2019 Q3, extraordinary income of JPY 250 million and income taxes of JPY 88 million are expected tobe recorded due to the transaction.

1.

Reason for the share transfer

eMFORCE Inc. is a Korean internet-based advertisement agency with strengths in programmatic advertising based on
search advertisement.
As internet advertising has swiftly expanded domestically in Japan, our Group’s tools and marketing know-how have been
deployed overseas. In 2005, with the objective of developing our Group, the group acquired shares of eMFORCE Inc. andit was accounted for as our consolidated subsidiary. As approximately 14 years have passed since the share acquisition,
eMFORCE Inc. has steadily developed its business in Korea. However, synergies with our Group’s Japan based
Marketing Business had continued to fall short of initial expectations.
As a result of deliberate examination of the direction of our Group’s Overseas Digital Marking Business and allocation ofmanagement resources, the group has determined that reassessing certain aspects of our Overseas Digital Marketing
Business and focusing on the Marketing Business in Japan where digital shift is demonstrating acceleration, judged that it
contributes to the enhancement of our Group’s corporate value.

2. Counterparty to the share transfer
Digital Advertising Consortium Inc.

3. Date of the share transfer
July 31, 2019

4. Name of subsidiary, business, relationship with our company(1) Name

eMFORCE Inc.

(2) Business

Internet Advertising Business(3) Relationship with our Company

No specific items to report

5. Number of shares before and after transfer, price of the share transfer, and income/loss on transfer(1) Number of shares held prior to the transfer

483,880 shares (percentage of voting rights 96.78%)(2) Number of shares transferred

483,880 shares (percentage of voting rights 96.78%)(3) Number of shares held after the transfer(4) Price of the share transfer

0 shares (percentage of voting rights 0%)
JPY 774 million(5) income / Loss of transaction
An extraordinary income JPY 255 million is expected to be recognized in the consolidated accounting period of 2019 Q3.