Consolidated Financial Results for the First Quarter of

the Fiscal Year Ending March 31, 2021

[J-GAAP]

July 30, 2020

Company name: eGuarantee, Inc.

Listing: Tokyo Stock Exchange

Securities code: 8771 URL: https://www.eguarantee.co.jp/english/index.html

Representative: Masanori Eto, President and Chief Executive Officer

Contact: Nozomu Murai, Director, General Manager of Corporate Administration Dept.

TEL +81-03-6327-3609

Date of submitting quarterly securities report: August 7, 2020

Availability of supplementary briefing materials for quarterly financial results: No

Schedule of quarterly financial results briefing: No

(Amounts of less than one million yen are rounded down.)

1. Consolidated performance for the first quarter of FY2020 (April 1, 2020 to June 30, 2020)

(1) Consolidated operating results (cumulative)

(Percentages indicate year-on-year change)

Net sales

Operating profit

Ordinary profit

Profit attributable to

owners of parent

Million yen

%

Million yen

%

Million yen

%

Million yen

%

Three months ended

1,688

17.6

731

18.7

737

18.1

411

(24.3)

June 30, 2020

Three months ended

1,435

7.0

616

9.2

624

8.8

544

59.2

June 30, 2019

Note: Comprehensive income: 1Q FY2020: 438 million yen (-21.7 %) 1Q FY2019: 559 million yen (36.4%)

Earnings per share

Diluted earnings

per share

Yen

Yen

Three months ended

9.69

8.92

June 30, 2020

Three months ended

12.81

12.17

June 30, 2019

(2) Consolidated financial position

Total assets

Net assets

Equity ratio

Net assets per share

As of:

Million yen

Million yen

%

Yen

June 30,2020

16,514

12,583

68.9

267.62

March 31, 2020

16,444

12,798

70.3

271.94

Reference: Equity As of June 30, 2020: 11,375 million yen

As of March 31, 2020:

11,558 million yen

2. Dividends

Annual dividends

1Q-end

2Q-end

3Q-end

Year-end

Total

Yen

Yen

Yen

Yen

Yen

Fiscal year ended

―

0.00

―

14.00

14.00

March 31, 2020

Fiscal year ending

―

March 31, 2021

Fiscal year ending

0.00

―

14.00

14.00

March 31, 2021

(forecast)

Note: Revisions from recently announced dividend forecast: None

3. Consolidated performance forecast for FY2020 (April 1, 2020 to March 31, 2021)

(Percentages indicate year-on-year change)

Net sales

Operating profit

Ordinary profit

Profit attributable to

Earnings per share

owners of parent

Million yen

%

Million yen

%

Million yen

%

Million yen

%

Yen

First half

3,500

20.4

1,440

11.4

1,450

11.1

950

(18.6)

22.35

Full year

7,700

29.3

2,980

9.6

3,000

9.1

1,950

(15.3)

45.88

Note: Revisions from recently announced financial results forecast: None

* Notes:

  1. Changes in significant subsidiaries during the period under review (Change in specified subsidiaries resulting in change in scope of consolidation): None
  2. Application of special accounting treatment to the preparation of quarterly consolidated financial statements: Yes

*For details, please refer to "Application of Special Accounting Methods in the Preparation of Quarterly Consolidated Financial Statements" on page 7 of the Appendix.

  1. Changes in accounting policies, accounting estimates or retrospective restatement
    1. Changes in accounting policies pursuant to changes in accounting standards, etc.: None
    2. Changes in accounting policies other than 1) above: None
    3. Changes in accounting estimates: None
    4. Retrospective restatement: None
  3. Number of shares issued and outstanding (common shares)
  1. Number of shares issued at the end of the period (including treasury shares)
  2. Number of treasury shares at the end of the period
  3. Average number of shares during the period(cumulative)

As of June 30,

42,506,400

As of March 31,

42,506,400

2020

2020

As of June 30,

1,414

As of March 31,

1,385

2020

2020

As of June 30,

42,504,989

As of June 30,

42,505,067

2020

2019

*These quarterly financial results are outside the scope of audits by certified public accountants or audit firms.

*Guidance on the appropriate use of performance forecasts and other special notes

Notes on forward-looking statements

Performance forecasts and other forward-looking statements in this document are based on information currently available to the Company and certain assumptions deemed reasonable, and the Company does not guarantee their achievement. Actual performance and other results may be significantly different from the forecasts due to various factors. For details on the assumptions for performance forecasts and notes on the use of performance forecasts, etc., refer to "Explanation of Consolidated Earnings Forecasts and Other Future Projections" on page 3 of the attachment.

  • Contents of the Attachment

1. Qualitative Information related to the Consolidated Business Results ........................................

2

(1)

Explanation of Operating Results............................................................................................

2

(2)

Explanation of Financial Position ...........................................................................................

2

(3)

Explanation of Consolidated Earnings Forecasts and Other Future Projections ....................

3

2. Quarterly Consolidated Financial Statements and Main Notes .....................................................

4

(1)

Quarterly Consolidated Balance Sheets ..................................................................................

4

(2)

Quarterly Consolidated Statements of Income and Comprehensive Income ..........................

5

(3)

Notes to the Quarterly Consolidated Financial Statements .....................................................

7

(Notes on Going Concern Assumption) ..................................................................................

7

(Notes on Significant Changes in Shareholders' Equity) ..... ..................................................

7

(Application of Special Accounting Methods for Preparation of

Quarterly Consolidated Financial Statements) ....................

7

1

1. Qualitative Information related to the Consolidated Business Results

(1) Explanation of Operating Results

During the first quarter consolidated cumulative period under review, there were the spread of COVID-19 and the following requests to stay inside and requests for closures since March, and the declaration of a state of emergency in April. And that caused restrictions on consumer spending and corporate activities and consequent Japan's economy deteriorated rapidly.

The outlook for the economy is expected to remain severe for the time being due to the impact of infectious diseases. The risk of a further downturn in the domestic and foreign economies and the effects of fluctuations in the financial and capital markets have to be closely monitored and the situation remains uncertain.

As for the environment surrounding eGuarantee, Inc. (the "Company") and its subsidiaries (collectively, the "Group"), corporate bankruptcies decreased by 8.9% year on year to 1,852 cases in the first quarter consolidated cumulative period under review (source: TEIKOKU DATABANK, Ltd.), due to the impact of the stalled legal liquidation process in May as a temporary special factor, as a result of the declaration of a state of emergency due to COVID-19. However, with the recent significant increase in payment delays, the number of bankruptcies is expected to increase in the future.

In this environment, the Group reviewed the risk assessments of each of its guaranteed counterparties to take into account the future impact of COVID-19 on the economy, and raised guarantee rates for new clients, resulting in an increase in guarantee fees for new contracts. For existing customers, the Group has set a guarantee fee rate that reflects the review of the risk assessment, and the Group has also reviewed the guarantee amount and reset the amount to reflect the risk assessment.

As a result, at the end of the first quarter under review, guarantee obligations amounted to 434.1 billion yen (up

8.6 % year on year), and net sales were 1,688,072 thousand yen (up 17.6%) while operating profit was 731,938 thousand yen (up 18.7%), ordinary profit was 737,743 thousand yen (up 18.1%), and profit attributable to owners of parent was 411,892 thousand yen (down 24.3%).

Of this, profit attributable to owners of parent was significantly increased in the first quarter of the previous year as a result of a temporary special factor, which was a significant reduction in the rate of income taxes after the application of tax effect accounting due to the tax-deductibility of ESOP trust distributions.

In the first quarter consolidated cumulative period under review, it has decreased compared to the same period of the previous year due to the absence of such temporary special factors.

In addition, the progress of ordinary profit and profit attributable to owners of parent for the first quarter consolidated cumulative period under review against the consolidated earnings forecast for the fiscal year ending March 31, 2021, was 24.6% and 21.1%, respectively.

  1. Explanation of Financial Position Assets

Total assets at the end of the first quarter under review increased by 0.4% from the end of the previous fiscal year to 16,514,814 thousand yen.

Current assets increased by 0.8% from the end of the previous fiscal year to 13,747,943 thousand yen. This is mainly due to an increase in cash and deposits of 337,478 thousand yen.

Non-current assets decreased by 1.2% from the end of the previous fiscal year to 2,766,871 thousand yen. This is mainly due to a decrease in investment securities of 49,999 thousand yen.

Liabilities

Total liabilities increased by 7.8% from the end of the previous fiscal year to 3,931,580 thousand yen.

Current liabilities increased by 8.1 % from the end of the previous fiscal year to 3,816,297 thousand yen. This is mainly due to an increase in advances received of 130,278 thousand yen.

Non-current liabilities remained at the same amount as at the end of the previous fiscal year. Net assets

Total net assets decreased by 1.7% from the end of the previous fiscal year to 12,583,234 thousand yen. This is mainly due to a decrease in retained earnings of 183,177 thousand yen.

2

(3) Explanation of Consolidated Earnings Forecasts and Other Future Projections

No revision has been made to the full-year consolidated financial results forecast released on May 14, 2020: net sales of 7,700 million yen, operating profit of 2,980 million yen, ordinary profit of 3,000 million yen, and profit attributable to owners of parent of 1,950 million yen. In the future, if economic conditions and business performance require a review of the full-year forecast, the Group will promptly disclose it.

.

3

2. Quarterly Consolidated Financial Statements and Main Notes

(1) Quarterly Consolidated Balance Sheets

(Thousand yen)

As of March 31, 2020

As of June 30, 2020

Assets

Current assets

Cash and deposits

9,232,731

9,570,209

Accounts receivable - trade

58,440

66,504

Securities

2,602,474

2,401,030

Prepaid expenses

1,152,221

1,395,244

Accounts receivable - other

358,833

215,572

Income taxes receivable

139,527

592

Other

100,895

98,788

Total current assets

13,645,123

13,747,943

Non-current assets

Property, plant and equipment

1,392,105

1,393,016

Intangible assets

77,068

93,000

Investments and other assets

Investment securities

855,250

805,250

Deferred tax assets

151,287

151,287

Other

323,907

324,316

Total investments and other assets

1,330,445

1,280,853

Total non-current assets

2,799,619

2,766,871

Total assets

16,444,743

16,514,814

Liabilities

Current liabilities

Accounts payable - trade

7,889

9,094

Income taxes payable

2,693

92,141

Advances received

3,059,366

3,189,645

Provision for settlement

216,981

221,144

Provision for bonuses

124,148

77,262

Deposits received

24,541

83,240

Other

95,682

143,768

Total current liabilities

3,531,305

3,816,297

Non-current liabilities

Long-term accounts payable - other

115,282

115,282

Total non-current liabilities

115,282

115,282

Total liabilities

3,646,588

3,931,580

Net assets

Shareholders' equity

Share capital

1,643,135

1,643,135

Capital surplus

1,053,135

1,053,135

Retained earnings

8,863,119

8,679,941

Treasury shares

(774)

(824)

Total shareholders' equity

11,558,616

11,375,388

Share acquisition rights

135,065

139,231

Non-controlling interests

1,104,472

1,068,614

Total net assets

12,798,155

12,583,234

Total liabilities and net assets

16,444,743

16,514,814

4

(2) Quarterly Consolidated Statements of Income and Comprehensive Income

Quarterly Consolidated Statements of Income

First three months of the fiscal year

(Thousand yen)

For the three months ended

For the three months ended

June 30, 2019

June 30, 2020

Net sales

1,435,167

1,688,072

Cost of sales

308,075

386,919

Gross profit

1,127,092

1,301,153

Selling, general and administrative expenses

510,461

569,215

Operating profit

616,630

731,938

Non-operating income

Interest income

5,514

5,027

Share of profit of entities accounted for using equity

2,138

276

method

Other

525

500

Total non-operating income

8,178

5,805

Ordinary profit

624,809

737,743

Extraordinary losses

Loss on retirement of non-current assets

32,256

―

Loss on valuation of investment securities

―

49,999

Total extraordinary losses

32,256

49,999

Profit before income taxes

592,553

687,743

Income taxes

32,662

249,500

Profit

559,850

438,243

Profit attributable to non-controlling interests

15,500

26,350

Profit attributable to owners of parent

544,390

411,892

5

Quarterly Consolidated Statements of Comprehensive Income

First three months of the fiscal year

(Thousand yen)

For the three months ended

For the three months ended

June 30, 2019

June 30, 2020

Profit

559,890

438,243

Comprehensive income

559,890

438,243

Comprehensive income attributable to:

Comprehensive income attributable to

544,390

411,892

owners of parent

Comprehensive income attributable to

15,500

26,350

non-controlling interests

6

  1. Notes to quarterly Consolidated Financial Statements (Notes on Going Concern Assumption)

Not applicable.

(Notes on Significant Changes in Shareholders' Equity) Not applicable.

(Application of Special Accounting Methods for Preparation of Quarterly Consolidated Financial Statements)

(Calculation of tax expense)

Income taxes are calculated by applying a reasonably estimated effective tax rate for the full fiscal year to income before income taxes for the end of the first quarter under review. The effective tax rate is determined by estimating the effective tax rate for the full fiscal year, which includes the end of the first quarter under review, after taking into account the effect of deferred tax accounting.

NOTICE: For the convenience of capital market participants, the Company makes efforts to provide English translations of the information disclosed in Japanese, provided that the Japanese original prevails over its English translation in the case of any discrepancy found between documentation.

7

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eGuarantee Inc. published this content on 07 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 August 2020 01:33:07 UTC