OPT Holding, Inc. (TSE2389)
2019 Q1 Financial Results

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 May 13, 2019. In the event of any discrepancy between this English document
and the Japanese original, the original shall always prevail.
May 13, 2019
OPT Holding, Inc (TSE 2389)
Consolidated Financial Results for the Three Month Ended March 31, 2019 (J-GAAP, Unaudited)Tokyo, May 13, 2019, OPT Holding, Inc (“the Company”) announced today its consolidated financial results for the threemonth ended on March 31, 2019. (From January 1 to March 31, 2019, “2019 Q1”)
(Amount are rounded down to the nearest million yen)
Consolidated Operating Results for 2019 Q1(in million yen, unless otherwise stated)

Three month ended on March 31
2019

Revenue

2018

YoY(%)

21,555

22,773(5.3%)

Operating Income

406

1,007

(59.7%)

Ordinary Income

449

873

(48.5%)

443

893(50.4%)EBITDA*

685

1,265

(45.8%)Net income attributable to owners of parent

242

515

(52.9%)

Earnings per share- diluted (yen)

10.59

22.60

-

Earnings per share- basic (yen)

10.60

22.79

-

EBIT*

1
2

Note:
1.
2.

EBIT= Net income before taxes and other adjustment＋interest paid－interest received
EBITDA = EBIT + other financial related gains (losses)+ depreciation + amortization of intangible assets + amortization of longterm prepaid expenses + Non-cash gain(loss)

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

As of March 31, 20193

As of December 31, 2018

Total assets*

64,86656,670Net assets

34,147

27,133Equity attributable to owners of parent*

30,36823,476

Ratio of equity attributable to owners of parent (%)

46.8%

41.4%

30,03521,2183

4

Assets under management (AUM) *
Note:

3.

4.
5.

Partial amendments to Accounting Standards for Tax Effect Accounting (ASBJ statement No.28, February 16, 2018) wereapplied from the beginning of this reporting quarter; three month ended on March 31, 2019, and total assets and ratio of equity
attributable to owners of parent as of December 31, 2018 which were revised retrospectively.
5
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.

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

OPT Holding, Inc. (TSE2389)
2019 Q1 Financial Results

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)
Marketing Business2019

YoY(%)

Revenue

93,500

14.0%

EBIT

5,000

18.6%

EBITDA

5,550(10.1%)

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: None.
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.

For more information: URL: https://www.optholding.co.jp/en/ir/
Coming Schedule for IR events and documents
Quarterly financial report (in Japanese): May 13, 2019
Effective Date of dividend payment: Additional materials and events 2019 Q1 results
Supplementary document for the results meeting: Available
Earnings conference for analysts and institutional investors: Held on May 13, 2019
Video streaming of results meeting: Available immediately after earnings conference in Japan
Changes in important 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 Q1
Number of shares issued including treasury shares
Number of treasury shares

23,817,700
917,7052019 Q1

Average number of shares during the period

22,899,995

2018
23,817,700
917,7052018 Q1
22,617,601

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

OPT Holding, Inc. (TSE2389)
2019 Q1 Financial Results

Table of Contents
1. Management Discussion and Analysis....................................................................................................................... 4
Results of Operations………………………………………………………………………………………………………... 4
Quarterly Consolidated Operating Results for Three Month ended on March 31,2019….….…………….. 4
Consolidated Financial Position…………………………………………………………………………………………….. 8
Consolidated Cash Flows…………………………………………………………………………………………………… 8
Earnings Forecast for the Year ending December 31, 2019………………………………………………………......... 8
2. Quarterly Consolidated Financial Statements and Primary Notes……………………………………………………. 10(1) Quarterly consolidated balance sheets……………………………………………………………………………........ 10(2) Quarterly consolidated statements of income and comprehensive income………………………………………… 12
Quarterly consolidated statements of income……………………………………………………………………… 12
Quarterly consolidated statements of comprehensive income……………………………………….................. 13(3) Quarterly consolidated statements of cash flows…………………………………………………………………........ 16(4) Notes on Quarterly Consolidated Financial Statements……………………………................................................ 16
Going concern assumption.............................................................................................................................. 16
Notes in case of significant change in equity amounts………………………………………….......................... 16
Additional information……………………………………………………………………………………………........ 16
Segment information, etc…………………………………………………………………………………………...... 16
Subsequent event………………………………………………………………………………………………….......18

3

OPT Holding, Inc. (TSE2389)
2019 Q1 Financial Results

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 mission of"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 totake a role to accelerate corporate digital shift and to innovate 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 freefrom conventional business formats and ways of operating. Through these three dimensions, the Group aims to realize ourbusiness model diversification.
Also, in our core management policy, maintaining strong financial foundation is essential to increase our corporate value, atthe same time, we will proactively utilize management resources, especially cash. We set at least 10% IRR (internal rate 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.
As part of our engagement in digital shift during this reporting period, we established Digital Shift Academy, Inc., to provide
digitalization training programs with clients’ employees, and also established OPT China, Inc., providing support services
for Japanese SMEs to export and promote their products in Chinese market (Effective from April 1, 2019).
The results of operation for the three month ended on March 31, 2019 (hereinafter 2019 Q1) were as follows.
(in million yen unless otherwise stated)2019 Q1

Year-on-year change (%)
5

ActualRevenue
Gross profit

Adjusted*

Actual

21,5554,178(3.0%)(7.5%)(5.3%)(10.0%)

406(60.5%)(59.7%)

443(51.5%)(50.4%)EBITDA (Non-GAAP) *685(42.5%)(45.8%)Net income attributable to owners of parent

242(56.4%)(52.9%)

Operating income
1

EBIT (Non-GAAP) *

2

3

7.2%

－

+1.4pts

Free cash flow* (Non-GAAP)

4

(328)

－

－*

Earnings per share- diluted (yen)

10.59

Earnings per share- basic (yen)

10.60

-

-(12.19)

ROE* (Last twelve month; LTM, %)6(12.01)Note:
1.
EBIT= Net income before taxes and other adjustment＋interest paid－interest received
2.
EBITDA = EBIT + other financial related gains (losses)+ depreciation + amortization of intangible assets + amortization of long-term
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.
Figures are compared to excluding the impact of the business transfer implemented during 2018 Q3. Approx. 3% of quarterly
consolidated sales for 2018 Q1 was by video streaming business, operated by relaid Inc., (formally Skill-up Video Technology, Inc.,).
6.
Figures were omitted due to relevant amounts in reporting or the previous period are negative.

4

OPT Holding, Inc. (TSE2389)
2019 Q1 Financial Results

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.
Marketing Business
Marketing Business consists of two sub-segments: Large Corporation, which includes OPT, Inc. and six other consolidated
subsidiaries providing online advertising, digital marketing, and related services to enterprise clients. And Local SMEs,
which includes Soldout, Inc., and five other subsidiaries providing a variety of digital marketing solutions in regional areas.
The table below shows 2019 Q1 results of Marketing Business.
(in million yen unless otherwise stated)2019 Q1

Year-on-year change (%)

ActualAdjusted*

Actual20,2983,564(1.9%)(4.8%)(4.5％)(7.8％)

Operating income

855(40.4%)(39.5％)EBIT(Non-GAAP)

859(40.1%)(39.3％)EBITDA(Non-GAAP)

970(39.7%)(42.9％)

Revenue
Gross profit

Note:
To provide a more accurate comparative analysis of earnings, changes are shown adjusted to exclude the impact of any businesses notincluded 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 Corporation sub-segment (the business was transferred after company-split in 2018
Q3. Recorded JPY 557 million of revenue in 2018 Q1).

Demand for Internet ad in Japan has continued to grow by replacing traditional media such as TV and flyers. In addition,
associated with diversification of Internet media, demands for digital marketing and digital shift by corporate clients havebeen further increased. On the other hand, part of our clients began to constrain their marketing budget, as growthappeared to be slowing down in some industries.
In this market environment, the Group made efforts not only existing marketing business but also proposal sales heading todigital shift support for corporate clients, solution development and our own products in addition to acquiring new clients.
In 2019 Q1, the Marketing Business had revenue of JPY 20,298 million (down 4.5% YoY), gross profit of JPY 3,564 million(down 7.8% YoY), operating profit of JPY 855 million (down 39.5% YoY), EBIT of JPY 859 million (down 39.3%), and
EBITDA of JPY 970 million (down 42.9% YoY).
Changes excluding the impact of business transfer, etc., during 2018 were: sales down 1.9%, gross profit down 4.8%,
operating income down 40.4%, EBIT down 40.1%, and EBITDA down 39.7%.
After excluding earnings of the transferred video streaming business from 2018 Q1, the reasons for the differences in themain items were as follows.
1) In Large corporation sub-segment, aggressive sales activities have been developed with the focus of acquiring newclients such as brand advertisers and retail distributors. We participated in competitions and resulted in receiving several
large-size orders. However, these orders started to contribute revenue growth from the third quarter of this year, and part oflarge-scale clients especially real estate and HR service companies cut back on advertising costs. As a result, quarterly
Large Corporation sub-segment revenue was JPY 16,177 million, down by 4.3%. The Local/SMEs sub-segment was
impacted by lower sales in partial large-scale clients’ projects, however, revenue rose by 7.4% YoY to JPY 4,263 million by
new orders, mainly from EC advertisers, as it captured the demand for "digital shift" from local SMEs’ clients. Consequently,
the Marketing Business as a whole saw sales fall by 1.9% YoY to JPY 20,298 million.
2) Operating income was hit by a rise in SG&A costs in both the Large Corporation and Local SMEs segments, as hiring
and training were stepped up in anticipation of growth in Q2 onwards. In the Large Corporation, the income fell by 34.4%
YoY to JPY 767 million as gross profit was depressed by lower sales. In the local SMEs sub-segment, gross profit was
66.8% down by declined income by sales incentive paid by media. As a result, operating income in the Marketing Businessas a whole fell by 39.5% YoY to JPY 855 million.
3) EBITDA fell by 35.3% YoY to JPY 848 million in Large Corporation due to the decline in operating income and by 58.9%
to JPY 121 million in Local SMEs for the same reason, resulting in a 39.7% fall in EBITDA to JPY 970 million for theMarketing Business as a whole.
The major activities in 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.
5

OPT Holding, Inc. (TSE2389)
2019 Q1 Financial Results

OPT, Inc.'s activity highlights:•-

Began offering creative production packages optimized for TikTok's unique outlook, in order topromote sales of TikTok's advertising services. Strengthened marketing support services for wide
range of generation especially for young people.

-

Certified as a “five-star agent of Criteo Certified Partners”, the highest rank in Japan, for four
consecutive periods (certified in half a year).

-

Launched new marketing support program utilizing CDP for promoting digital shift for real store
operators. CDP (Customer Data Platform) is a platform to collect, accumulate, and integrate individualuser’s profile and behavioral data without specific private information. Every user touching point data
will be integrated into single user ID and it leads better services by sales personnel and promotion
activities. OPT is the first agent among Japanese agencies to register “ US CDP association” andaims to be a leading company in this field by actively holding events and seminars and introducing
cases of CDP usage inside and outside of Japan.

-

Started to provide a newly developed analytic tool. It is an analytic tool for consumer insights; byconstructing unique database with 37 profiles, 63 items, and log data which were obtained from asurvey about purchase information and personal values toward more than 10,000 panels. With thistool, OPT will support more efficient marketing activities by providing concrete image of target users.

-

Awarded Gold in Technology Partner and Sales Partner in LINE Account Connect division and also
awarded Silver in Sales Partner of LINE Ad Platform division in LINE Biz-Solutions Partner ProgramstAward 2019 1 half, which certify their partners for their corporate service division. .

Implemented sales activities and new client acquisition at 21 sites in Japan, by SoldOut Inc., (hereinafter,“SoldOut”, securities code: 6553).and other subsidiaries in Local/SMEs segment.

SoldOut’s activity highlights:-

Switched to the TSE First Section on March 22 2019.

-Awarded the LINE Ads Platform Bronze Sales Partner Award in the LINE Biz-Solutions Partner
Program 2019 1st half awards.

-

TechLoCo, Inc., a consolidated subsidiary of SoldOut released “lycle GMB (Google My Business,“GMB”),” a tool to enter and control registration, updates, and improve efficiency on GMB fromthe LINE Talk Screen. The strength of this service is seamless controllability realized by joint
development with LINE Corporation and Google. This service support store operators’ marketing
activities such as promoting recognition and customer attraction through widely spreading their
attractive information with accuracy and easy-to-use operating system.

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 Q1 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 Q1

Revenue
Gross profit

Year-on-year change (%)
1,260
617

(18.5%)(20.2%)

Operating income

86166.1%EBIT(Non-GAAP)

115

-*

EBITDA (Non-GAAP)

157

280.4%

2

1

AUM*

30,035

41.6%

2

15.7%

+1.7pts

IRR*

Note:

1.
2.

Figures were omitted due to relevant amounts in reporting or the previous period are negative.
AUM and IRR compare the recent previous quarter (2018 Q4). The details for calculation are disclosed in footnote on page 9.

In 2019 Q1, the Synergy Investment Business had revenue of JPY 1,256 million (down 18.5% YoY), gross profit of JPY 617
million (down 20.2% YoY), operating income of JPY 86 million (up 166.1% YoY), EBIT of JPY 115 million (compared to aloss of JPY 40 million in 2018 Q1), and EBITDA of JPY 157 million (up 280.4% YoY).
The reasons for the difference from the previous year’s first quarter are as follows.
1) Revenue in the Synergy Investment Business fell by 17.5% YoY to JPY 1,256 million, as they were boosted by JPY 333
million from the sale of operational investment securities held, but were impacted by the deconsolidation of Writeup Co., Ltd.
(“Writeup”),and the sale and liquidations of overseas subsidiaries.
6

OPT Holding, Inc. (TSE2389)
2019 Q1 Financial Results2) Gross profit fell by 20.2% YoY to JPY 617 million. Although JPY 311 million gain by the sale of operational investment
securities was recorded, gross profit was declined by Writeup’s deconsolidation, and by worsened earnings and inventory
devaluation in China cross-border EC business.
3) EBITDA rose by 280.4% to JPY 157 million, as, despite the decline in gross profit, SG&A costs decreased mainly
associated with the sale and liquidations of overseas subsidiaries.
The major activities in Synergy Investment Business for this fiscal year were as follows.
•

Completed the first close of OPT Ventures # 2 Investment Partnership LLC and invested on Sider Inc., a providerof an AI tool for code review, as the first investee and on Zainar, Inc., an American company who involves sellingand developing system to identify and synchronize real-time location using wireless technology as the second
investee.

•

Sold all the shares of Writeup, an existing investee.

•

SIGNATE released “Aldebaran,” a platform for supporting to manage, operate, and re-learn of AIs and machinelearning models support manage. Corporate users become able to use AI and machine learning model from the
API without preparing compiling environment for them with initial setting supervised by SIGNATE’s data
scientists. SIGNATE will provide one-stop service from “development” of AIs and machine learning models,
which SIGNATE have been providing, to “management, operation, and re-learning” of the developed programs.

•

The Company established OPT China, Inc. by incorporation-type of company split to take over the China
businesses operated by OPT Holding, in order to expand its earnings and to realize efficient group management(effective from 1 April 2019) . OPT China has changed its business model from conventional cross-border eCommerce where sales contact is limited to special EC site to general trading model. In addition, OPT China isaiming to expand its business by changing its main vendors to Japanese SMEs with exclusive selling rights in
China granted to OPT China, and by creating a structure to develop best-selling products with the manufacturers.

The company discloses AUM and IRR of the invested assets for improving transparency of its investment return. AUM at
the end of 2019 Q1 was up by 41.6% from the last quarter; 2018 Q4, at JPY 30 billion, thanks to a rise in the market valueof Raksul, Inc, etc. IRR after tax at the end of March 2019 was 15.7%, an improvement of 1.7 point on the end of 2018 Q4.
(Please see footnotes on page 9 for detailed calculation method applied to AUM and IRR).
Corporate Function cost.
The table below shows 2019 Q1 results of Corporate Function cost.
(in million yen unless otherwise stated)2019 Q1

Difference from 2018 Q1*

Selling and administrative expense
Operating income or loss

(538)
(538)

(91)
(94)

EBIT(Non-GAAP)

(534)

(46)

EBITDA(Non-GAAP)

(441)

17

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

As for corporate functions, the Group sees recruiting and developing human resources as an important management
agenda to realize the medium-term management plan. Moreover, in September 2018, the Group introduced the restricted
stock compensation plan and an employees’ shareholding association as an incentive to improve its corporate value．As aresult, selling, general and administrative expense in Corporate Function cost for 2019 Q1 was negative JPY 538 million,(negative JPY 447 million in 2018 Q1), EBITDA was negative JPY 441 million (negative JPY 459 million in 2018 Q1).

Consolidated Results of Operations for 2019 Q1
As a result of segment earnings, consolidated revenue for 2019 Q1 was JPY 21,555 million (down 5.3% YoY), gross profitof JPY 4,178 million (down 10.0% YoY), operating income of JPY 406 million (down 59.7% YoY), EBIT of JPY 443 million(down 50.4%), and EBITDA of JPY 685 million (down 45.8% YoY), giving a net profit attributable to parent company
shareholders of JPY 242 million (down 52.9% YoY).
Excluding the earnings of the transferred video streaming business from consolidated results for 2018 Q1, consolidated
revenue in 2019 Q1 was 3.0% lower YoY, gross profit was 7.5% lower, operating profit 60.5% lower, EBIT 51.5% lower,
EBITDA 42.5% lower, and net profit attributable to parent company shareholders 56.4% lower.

7

OPT Holding, Inc. (TSE2389)
2019 Q1 Financial Results(2) Consolidated Financial Position
Partial amendments to Accounting Standards for Tax Effect Accounting (ASBJ statement No.28, February 16, 2018) wereapplied from the beginning of this reporting period; three month ended on March 31, 2019, and consolidated financial
position were compared to the figures as of the end of the previous fiscal year which were revised retrospectively.
Assets:Total assets increased by JPY 8,195 million from the end of the previous fiscal year to JPY 64,866 million as of the end of2019 1Q.
Current assets were JPY 58,431 million, an increase of JPY 8,340 million from the end of the previous fiscal year. This ismainly because of JPY 10,228 increase in operational investment securities despite of JPY 1,036 decrease in cash anddeposits and JPY 752 decrease in notes and accounts receivables.
Noncurrent assets were JPY 6,434 million, a decrease of JPY 144 million from the end of the previous fiscal year. This ismainly because JPY 298 million decrease of other noncurrent assets including deferred tax assets.

Liabilities
Total liabilities as of the end of the period were JPY 30,718 million, an increase of JPY 1,182 million from the end of theprevious year.
Current liabilities were JPY 17,092 million, a decrease of JPY 1,486 million from the end of the previous year. This is mainly
due to a decrease of JPY 478 million of provision for bonuses, a decrease of JPY 474 million in income taxes payable anda decrease of JPY 467 million of notes and payable.
Noncurrent liabilities were JPY 13,626 million, an increase of JPY 2,668 million from the end of previous year due tofollowing factors. Long-term loan payable was decreased by JPY 400 million, on the other hand, deferred tax liabilities wereincreased by JPY 3,064 million.
Net assets
Total net assets as of the end of period under review increased by JPY 7,013 million from the end of the previous year to
JPY 34,147 million. This is mainly because of JPY 7,140 million increase in valuation difference on available-for-salesecurities.

(3) Consolidated Cash Flow
Cash and cash equivalents (hereinafter referred to as “Cash”) were JPY18,562 million as of the end of the reporting quarter,a decrease of JPY1,035 million from the end of the previous year because the cash were used for operating and investing
activities. The followings are status of cash flow and major factors of each activities
Cash flows from operating activities
The decreased amount of cash used for operating activities was JPY 131 million (JPY 486 million increase for the samequarter of the previous year). This is mainly by following factors. Cash were generated by the decrease of receivables by
JPY 682 million and recorded JPY 438 million of quarterly profit before tax and other adjustments and JPY 128 million ofdepreciation; however, cash were decreased by JPY 501 million of income tax paid, JPY 484 million of decrease inprovision for bonuses and JPY 460 million decrease in payables.
Cash flows from investing activities
The cash decreased as a result of investing activities was JPY 373 million (JPY 878 million increase for the same quarter ofa year earlier). This is mainly because of JPY 177 million payment for a business transfer and of JPY172 million for thepurchase of intangible asset.
Cash flows from financial activities
The decrease in cash as a result of financial activities was JPY 527 million (JPY 565 million decrease in 2018 Q1).
This is mainly because of JPY 206 million of proceeds from non-controlling shareholders; the proceeds were offset by JPY
431 million of cash dividend payment and by JPY 250 million of repayment of term loan.

(4) Earnings Forecast for Year ending December 31, 2019
Consolidated revenue and profit items for this reporting period (2019 Q1) were lower than the same period last year,
however; we do not change, at this moment, our initial forecasts for our two reporting segment and Corporate Function costannounced on February 6, 2019 due to following reasons. For Marketing Business, we anticipate sales from existing clientsto gradually recover in the second quarter. In addition, we succeeded to receive several large-scale new business win,which will start revenue contribution from Q3, thanks to intensive efforts on new client acquisition activities by participatingcompetitions held by brand advertisers and retail distribution industry clients. For Synergy Investment Business andCorporate Function cost, there is no factor to change our outlooks as of today.

8

OPT Holding, Inc. (TSE2389)
2019 Q1 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.
ii.
iii.
iv.

Notes or securities of which investment amount is small: acquisition price
Listed companies’ shares: closing price at the end of reporting period
Securities with financing in recent period: based on value of relevant financing
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 March 2019 (includes business
investments)

The reference date for calculation: March 31, 2019

1.
2.
3.
4.

Impaired investment: Calculated as if they were sold at the net asset value after impairment.
Investment with recent financing: Calculated as if they were sold at the finance valuation.
IPOed investment: Calculated as if they were sold at the market value as of the reference date.
Fund: Calculated with the amount collected until the end of the reporting period and the book value as ofthe end of reporting period.
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:5.
9OPT Holding, Inc. (TSE2389)
2019 Q1 Financial Results

Quarterly Consolidated Financial Statements and Primary Notes(1)

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

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Operational investment securities
Inventories
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Tangible noncurrent assets
Intangible noncurrent assets
Other
Total intangible noncurrent assets
Investments and other assets
Shares of subsidiary companies
Shares of affiliate companies
Investment securities
Lease and guarantee deposits
Other
Allowance for doubtful accounts
Total investment and other assets
Total noncurrent assets
Total assets

As of March 31, 2019

19,631
13,652
15,337
252
1,266
(49)
50,091

18,595
12,90025,565
32
1,385
(48)
58,431

299

285

1,498
1,498

1,538
1,538

0
1,027
2,208
731
893
(80)
4,781
6,579
56,670

0
1,040
2,264
773
595
(64)
4,610
6,434
64,866

10

OPT Holding, Inc. (TSE2389)
2019 Q1 Financial Results(Unit: yen in millions)
As of December 31, 2018
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Income taxes payable
Provision for bonuses
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Liabilities on retirement benefits
Deferred tax liabilities
Asset retirement obligations
Other
Total noncurrent liabilities
Total Liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Foreign currency translation adjustment
Total accumulated other comprehensive income
Subscription rights to shares
Non-controlling interests
Total net assets
Total liabilities and net assets

As of March 31, 201912,163
1,300
557
727
3,829
18,578

11,696
1,450
82
249
3,613
17,092

8,700
200
1,950
104
1
10,95729,536

8,300
202
5,014
107
1
13,62630,718

8,212
3,915
5,442
(698)
16,872

8,212
3,875
5,250
(698)
16,6406,214

13,354

390
6,604
0
3,656
27,13356,670374
13,7280
3,778
34,14764,866

11

OPT Holding, Inc. (TSE2389)
2019 Q1 Financial Results(2) Quarterly consolidated statements of income and consolidated statements ofcomprehensive income

2018 Q1(From January 1 to March 31,
2018)22,773
18,132
4,640
3,632
1,007

(Unit: yen in millions)2019 Q1(From January 1 to March 31,
2019)21,555
17,376
4,178
3,771
406

－
－
56
17
74

16
9
－
30
56

8
77

6
－

52

－

Investment loss on equity method
51
Other
17
Total non-operating expenses
208
Ordinary income
873
Extraordinary income
Gain on sales of investment securities
12
Total extraordinary income
12
Extraordinary losses
Loss of retirement of non-current asset
0
Other
0
Total extraordinary losses
0
Quarterly net income before taxes and other886
adjustments
Total income taxes
244
Quarterly net income
641
Quarterly net income attributable to non-controlling
125
interests
Quarterly net income attributable to owners of parent
515
Quarterly consolidated statement of income for three month ended on March 31, 2019

－
6
13
449

Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Investment gain on equity method
Gain on investments in partnership
Gain on valuation of derivatives
Other
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Loss on investments in partnership

－
－
10
0
11
438
207
231
(11)
242

12

OPT Holding, Inc. (TSE2389)
2019 Q1 Financial Results

Quarterly statement of comprehensive income for three month ended on March 31, 2019
(Unit: Yen in millions)

Net income
Other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Share of other comprehensive income of associates
accounted for using equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to:
Owners of parent
Non-controlling interests

2018 Q1(From January 1 to March 31,
2018)2019 Q1(From January 1 to March 31,
2019)

641

231

(10)
(190)

7,140
(9)

(15)

(3)

(216)
425

7,126
7,358

308
116

7,369
(11)

13

OPT Holding, Inc. (TSE2389)
2019 Q1 Financial Results

3)

Quarterly consolidated statements of cash flows(Unit: Yen in millions)2018 Q1
2019 Q1(From January 1 to March (From January 1 to March
31, 2018)
31, 2019)

Cash flows from operating activities
Quarterly net income before taxes and other adjustments
Depreciation
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in liabilities on retirement benefits
Interest and dividends income
Interest expenses
Investment loss (gain) on equity method
Loss (gain) on investments in partnership
Loss (gain) on sales of investment securities
Loss (gain) on valuation of derivatives
Loss of retirement of non-current asset
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in operational investment securities
Decrease (increase) in inventories
Decrease (increase) in notes and accounts payable-trade
Increase (decrease) in accrued consumption taxes
Other
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Income taxes refund
Cash flows from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales of investment securities
Proceeds from refund of investment securities
Payment of transfer of business
Proceeds from settlement of derivatives
Payments of lease and guarantee deposits
Proceeds from collection of lease and guarantee deposits
Payment of loans receivable
Proceeds from collection of loans receivable
Other
Cash flows from investing activities

886
200
83
15
(313)
26
(1)
8
51
52
(12)
(56)
0
(1,406)
(156)
(80)
1,409
(74)
259
892
1
(8)
(398)
0
486

438
128
－
(16)
(484)
5
(1)
6
(16)
(9)
－
－
10
682
31
219
(460)
(255)
97
373
1
(5)
(501)
－
(131)

(5)
(245)
(153)
58
－
－
524
(6)
761
(15)
7
(48)
878

(8)
(172)
(67)
51
34
(177)
－
(51)
7
－
9
1
(373)

14

OPT Holding, Inc. (TSE2389)
2019 Q1 Financial Results(Unit: Yen in millions)2018 Q1
2019 Q1(From January 1 to March (From January 1 to March
31, 2018)
31, 2019)
Cash flows from financial activities
Net increase (decrease) in short-term loans payable
Repayment of long-term loans payable
Proceeds from payments from non-controlling shareholders
Repayments of finance lease obligations
Repurchase of treasury shares
Purchase of subsidiary’s treasury shares
Cash dividends paid
Cash dividends paid to non-controlling interests
Other
Cash flows from financial activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase (decrease) in cash and cash equivalents resulting fromchange of scope of consolidation
Cash and cash equivalents at end of period

(16)
(305)
50
(15)
(0)
－
(255)
(23)
(1)
(565)
(118)
680
15,417

－
(250)
206
(0)
－
(12)
(431)
(40)
－
(527)
(3)
(1,035)
19,59861－

16,15918,562

15

OPT Holding, Inc. (TSE2389)
2019 Q1 Financial Results(4) Notes on Quarterly Consolidated Financial Statements(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 (ASBJ statement No.28, February 16,2018) were applied from the beginning of this reporting quarter; three month ended on March 31, 2019, anddeferred tax assets are categorized in other of investment and other assets, deferred tax liabilities are
categorized in noncurrent liabilities.
(Information on Reporting Segments)
I. For the three month ended on March 31, 2018 (2018 Q1)
1. Revenue and profit or loss by reporting segments for the three month ended on March 31,, 2018
(Unit: Yen in millions)
Reporting Segment
Synergy
Investment
Business

MarketingBusiness

Adjustment *Total

Consolidated

Revenue
Revenue from third
partiesIntersegment revenue ortransfer

21,2491,523

22,773－

22,773

5

22

28

(28)

－

Total

21,255

1,546

22,801(28)

22,773

Profit (loss) of segment
**

1,415

(40)

1,374

(481)

893

EBITDA***

1,676

39

1,716

(457)

1,258

Interest paid – Interest received

7

Net income before taxes and other adjustments

886

Total income taxes

244

Income taxes – current

263

Income taxes - deferred, etc.

(18)

Net income attributable to non-controlling interests

125

Net income attributable to owners of parent

515

Notes:
1.
2.
3.

The adjustment amount of JPY (481 million) for segment profit includes elimination of intersegment transaction and JPY(409 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.
Segment profit and loss is denoted in EBIT (Net income 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)

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

16

OPT Holding, Inc. (TSE2389)
2019 Q1 Financial Results

II. For the three month ended on March 31, 2019 (2019 Q1)
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
Revenue
Revenue from third
partiesIntersegment revenue
or transfer
Total

Adjustment*

Total

Consolidated

20,2981,256

21,555－21,555

－

3

3

(3)

－

20,2981,260

21,558(3)

21,555

Profit of segment**

859

115

974

(531)

443

EBITDA***

970

157

1,127

(441)

685

Interest paid – Interest received

4

Net income before taxes and other adjustments

438

Total income taxes, etc.

207

Income taxes – current

56

Income taxes – deferred151

Net income attributable to non-controlling interests(11)

Net income attributable to owners of parent

242

Notes:
1.
2.
3.

The adjustment amount of JPY (531 million) for segment profit includes elimination of intersegment transaction and JPY(538 million) of Corporate Function cost which were not allocated to reporting segments.
Segment profit and loss is denoted in EBIT (Net income 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)

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

17

OPT Holding, Inc. (TSE2389)
2019 Q1 Financial Results(Important subsequent event)(Incorporation-type of company split)
The Company resolved to split the business run by Overseas Business (China) Development Office of the Company(hereinafter, “the Business”) and to establish OPT China, Inc., which is newly established company (herein after “the New
Company”), to succeed the Business and to become the New Company a wholly owned subsidiary of the Company at theBoard of Directors Meeting held on February 21, 2019.
1. Purpose of the company split
OPT Group set the mid-term management policy to maximize its corporate value and its cash flow based on the corporate
philosophy of “Support, Innovate and Create Digital Industrial Revolution” as a leader of any and all digital shift in rapidly
expanding digital economy.
Under such aspiration, the Company has transferred holding company system since April 1, 2015 aiming to establish
optimized business operation structure for further improvement of corporate value.
Regarding the Business in our group has been working for establishing business foundation for improved profitability andstrengthening the competitiveness; however, as a result of reconsideration of its strategy, the Company has decided tochange its model from conventional cross-border e-Commerce where sales contact is limited to special EC site to general
trading model. In addition, OPT China, with exclusive selling rights in China, is aiming to expand its business by changing
its main vendors to Japanese SMEs and by creating a structure to develop best-selling products with the manufacturers.
2. Summary of the company split(1) Schedule for this company split
Resolved at Board of Directors Meeting: February 21, 2019
Effective date: April 1, 2019
Note: Since this company split is applicable to incorporation-type of company split stipulated in the Company Act Article 805, has been
implemented without a resolution of shareholders’ meeting.

(2) Method of company split
Incorporation-type of company split; Company is the subject to be split and OPT China, Inc., which is the newly
established, is the succeeding the Business.
(3) Allocation of shares regarding the incorporate-type of company split and its basis of its valuation
The New Company issued 1,100 of common share for this incorporation, and the all shares are allocated to the Company.
The New Company’s share price was determined by considering its amount of capital, etc., without reviewing the third
party valuation because this split is independently implemented by the Company, thus, all the share issued by the New
Company is allocated to the Company.

3. Description and its size of the Business(1) Description of the Business
Marketing support for Chinese consumers business and BtoB support business, etc.,(2) Financial result by the division Revenue：JPY 1,347 million (FY2018)

4. Outline of the New Company
Name
Location

OPT China, Inc.,
6 Yonbancho Chiyoda, Tokyo

Name of the representative
Business description

Representative Director and President Nobuhito NakanishiMarketing support business for Chinese consumer and B2B supporting business, etc.,

Capitalization
Date of foundation

JPY 110 million
April 1, 2019

# of shares issued
Fiscal year end

1,100 shares
December 31

Assets and liabilities items and its amount to be split
Total assets：JPY 279 million
Total liabilities：JPY 162 million

18