Curves Holdings Co., Ltd.TSE: 7085

Consolidated Financial Results for the Nine Months Ended May 31, 2021

Jul 16, 2021 at 6:32 AM UTC · Issued by Curves Holdings Co., Ltd.

Consolidated Financial Results

for the Nine Months Ended May 31, 2021

[Japanese GAAP]

July 9, 2021

Company name: CURVES HOLDINGS Co., Ltd.

Stock exchange listing: Tokyo Stock Exchange Section 1

Stock code: 7085

URL: https://www.curvesholdings.co.jp/

Representative: Takeshi Masumoto, Representative Director and President

Contact: Shinya Matsuda, Director and General Manager, Administration Division

Tel: +81-3-5418-9922

Scheduled date of filing quarterly securities report: July 13, 2021

Scheduled date of commencing dividend payments: -

Availability of supplementary briefing material on quarterly financial results: Available

Schedule of quarterly financial results briefing session: Not scheduled

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

1. Consolidated Financial Results for the Nine Months Ended May 31, 2021 (September 1, 2020 to May 31, 2021)

(1) Consolidated Operating Results		(% indicates changes from the previous corresponding period.)
		Net sales		Operating profit	Ordinary profit	Profit attributable to
			owners of parent


	Nine months ended	Million yen	%	Million yen	%	Million yen	%	Million yen	%
	May 31, 2021	18,170	(7.1)	1,314	(23.9)	1,421	(18.0)	824	(26.5)
	May 31, 2020	19,559	-	1,728	-	1,732	-	1,122	-

(Note) Comprehensive income: Nine months ended May 31, 2021: 1,197 million yen [down 3.5%]
		Nine months ended May 31, 2020: 1,241 million yen [‒%]
		Earnings per share	Diluted earnings
		per share


	Nine months ended		Yen		Yen
	May 31, 2021		8.79		-
	May 31, 2020		13.09		-

(Note) Changes from the previous corresponding period for nine months ended May 31, 2020 are not available due to the quarterly consolidated statements having started to be published since the 1st quarter of FY 8/2020.

(2) Consolidated Financial Position
		Total assets	Net assets		Equity ratio

	As of		Million yen		Million yen				%
	May 31, 2021		36,488		8,871		24.3
	August 31, 2020		36,837		8,142		22.1

(Reference) Equity: As of May 31, 2021: 8,871 million yen
	As of August 31, 2020: 8,142 million yen
2. Dividends
						Annual dividends

				1st	2nd	3rd		Year-end	Total
				quarter-end	quarter-end	quarter-end


				Yen		Yen	Yen			Yen	Yen
	Fiscal year ended August 31, 2020		-	0.00	-		5.00	5.00
	Fiscal year ending August 31, 2021		-	0.00	-

	Fiscal year ending August 31, 2021 (Forecast)						4.00	4.00

(Note) Revision to the forecast for dividends announced most recently: Yes

3. Consolidated Financial Results Forecast for the Fiscal Year Ending August 31, 2021 (September 1, 2020 to August 31, 2021)

(% indicates changes from the previous corresponding period.)

	Net sales		Operating profit	Ordinary profit	Profit attributable to	Earnings per share
							owners of parent
	Million yen	%	Million yen	%	Million yen	%	Million yen	%	Yen
Full year	24,400	(2.7)	1,500	28.5	1,590	36.5	953	24.6	10.15

(Note) Revision to the financial results forecast announced most recently: Yes

For the consolidated financial results forecast, please see the "Notice of Revisions to the Full-Year Financial Results Forecast and the Forecast for Dividends" released today (July 9, 2021).

* Notes:

(1) Changes in significant subsidiaries during the nine months ended May 31, 2021 (changes in specified subsidiaries

resulting in changes in scope of consolidation): No
Newly added: ― (Name:	)	Excluded: ― (Name:	)

Accounting policies adopted specially for the preparation of quarterly consolidated financial statements: No
Changes in accounting policies, changes in accounting estimates and restatement
1. Changes in accounting policies due to the revision of accounting standards: No
2. Changes in accounting policies other than 1) above: No
3. Changes in accounting estimates: No
4. Restatements: No
Total number of issued shares (common shares)
1. Total number of issued shares at the end of the period (including treasury shares):

May 31, 2021:	93,857,493 shares
August 31, 2020:	93,857,493 shares
2) Total number of treasury shares at the end of the period:
May 31, 2021:	121 shares
August 31, 2020:	121 shares

3) Average number of shares during the period (cumulative from the beginning of the fiscal year):

Nine months ended May 31, 2021:	93,857,372 shares
Nine months ended May 31, 2020:	85,766,037 shares

This summary of the quarterly financial results is outside the scope of quarterly review by certified public accountants or audit firms.
Explanation of the proper use of financial results forecast and other notes(Note on forward-looking statements, etc.)
The financial results forecast and other forward-looking statements contained in this document are based on information currently available to the Company and certain assumptions deemed reasonable by the Company. Such forward-looking statements are not intended to represent a commitment on the part of the Company to achieve them. Actual results may vary significantly due to various factors. Please refer to "(3) Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information," on page 4 of the attached material for the assumptions used in the financial results forecast, as well as precautions for using the financial results forecast.
(How to obtain supplementary briefing material on the financial results)
The supplementary briefing material on the financial results for this quarter is posted on TDnet and the Company's website (https://www.curvesholdings.co.jp/).

Table of Contents
1. Qualitative Information on Quarterly Financial Results for the Period under Review ..................................	2
(1)	Explanation of Operations Results .............................................................................................................	2
(2)	Explanation of Financial Position ..............................................................................................................	4
(3)	Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information ..........	4
2. Quarterly Consolidated Financial Statements and Primary Notes .................................................................	6
(1)	Quarterly Consolidated Balance Sheets .....................................................................................................	6
(2)	Quarterly Consolidated Statements of Income and Comprehensive Income .............................................	8
(3)	Notes to Quarterly Consolidated Financial Statements ............................................................................	10
	(Notes on going concern assumption) ......................................................................................................	10
	(Notes in the case of significant changes in shareholders' equity) ...........................................................	10
	(Additional information) ...........................................................................................................................	10

1. Qualitative Information on Quarterly Financial Results for the Period under Review

(1) Explanation of Operations Results

The Group (the Company and consolidated subsidiaries, hereinafter referred to as the "Group") has been striving to contribute to the extension of health life expectancy through its core business, "Curves," a 30-minute fitness club for women. The Group has endeavored to enhance the satisfaction of its members and expand membership by strengthening customer services as "community-oriented health infrastructure" that contributes to solving social issues.

It is the Group's understanding that the market environment during and after the COVID-19 pandemic will change dramatically in the following two ways:

Growth of the health market: The pandemic forced people to focus on their lives and health, and the trend toward taking care of their own health will gain momentum in the medium and long term. This is a golden opportunity for the growth of the health market.
Growing demand for contactless services: Extending beyond the end of the COVID-19 pandemic, consumer sentiment, society and the economy will remain "scared" by COVID-19, and qualitative changes will occur, such as an increase in demand for non-contact services.
Under these operating conditions, the Group aims to achieve business recovery and establish business models in the new management environments by the end of 2022, in other words, in around two years' time, and is pursuing strategies positioning the fiscal year ending August 31, 2021 (from September 1, 2020 to August 31, 2021) as the fiscal year for getting firmly on track towards this goal.
In the third quarter of the fiscal year under review (March 2021 to May 2021), the Group actively carried out media mix marketing, including TV commercials launched in April 2021 and web advertising, aiming to achieve a rapid recovery in membership, the top priority issue. Moreover, it launched the online fitness program, Ouchi de Curves (Curves at Home), as part of its initiatives to create new business models that combine online platforms with bricks-and-mortar facilities.
The number of new members recovered steadily, despite the state of emergency declared by the government on April 23, 2021, and the attrition rate was reduced to below the level before the COVID-19 pandemic. As a result, membership (including online members) increased by 39K, from 641K recorded at the end of the first six months of the fiscal year under review, to 681K. However, progress toward achieving the projection announced on April 9, 2021 of 700K members (excluding online members) at the end of the fiscal year ending August 31, 2021 has been delayed, as the number of new members fell short of the plan.
Because of the impact of the state of emergency, there were club closures in some large-scale facilities subject to administrative requests for a suspension of operations (a maximum of 31 facilities). However, approximately 70% of the members of said clubs continued with their exercise routines by using nearby facilities or the online fitness program, Ouchi de Curves (Curves at Home), and refund of membership fees and other impact were minimal.
The Group also proceeded with the closure and merging of the clubs that have been severely affected by COVID-19, and more than 70% of the members of closed and merged clubs have moved to other clubs.
Accordingly, the number of Curves facilities (excluding Men's Curves) and membership in Japan as of May
31, 2021 were as follows.

1. Number of Curves facilities in Japan

	As of August 31,	As of February	As of May 31, 2021

		Compared to the end of
	2020	28, 2021
		the second quarter


Number of facilities	2,020 facilities	1,988 facilities	1,974 facilities	A decrease of	(0.7)%
14 facilities


Of which, number of	70 facilities	75 facilities	75 facilities	‒	‒
corporate operated facilities


Number of franchisee	1,950 facilities	1,913 facilities	1,899 facilities	A decrease of	(0.7)%
facilities	14 facilities

2. Curves membership in Japan

	As of August 31,	As of February	As of May 31, 2021

		Compared to the end of
	2020	28, 2021
		the second quarter


Active memberships	600K	641K	681K	39K	6.2%
excluding absentee members

(Notes) 1. In the third quarter of the fiscal year under review, the number of new club opening was 3 and the number of clubs closed and merged was 17.

Special Absentee Program ended as of March 31, 2021.
Curves membership in Japan include the number of members of online fitness program, Ouchi de Curves (Curves at Home).

With regard to "Men's Curves" for men, the Group opened the seventh location in May.

In overseas business, the Group considers Europe where it acquired the franchiser operations in July 2019 to be its priority market. As of the end of the third quarter of the consolidated fiscal year under review (March 31, 2021 (two-month lag due to difference in fiscal year end)), there were 159 Curves facilities in Europe (UK, Italy, Spain and five other countries, all facilities are franchisees' facilities), of which 108 facilities were closed due to government directives, including lockdowns.

In terms of costs, SGA expenses in the third quarter of the fiscal year under review decreased 258 million yen compared to the first quarter, mainly due to a decrease in financial aid to franchisees associated with closures and absentees, while marketing expenses were aggressively allocated, taking the current market environment into account. Compared to the second quarter when marketing expenses were significantly contained, however, SGA expenses increased by 686 million yen.

As a result, net sales for the first nine months of the fiscal year under review were 18,170 million yen (down 7.1% year on year), leading to operating profit of 1,314 million yen (down 23.9% year on year). Ordinary profit was 1,421 million yen (down 18.0% year on year) due to the generation of foreign exchange gains at Curves International, Inc., which did not have an impact on changes in cash. Profit attributable to owners of parent was 824 million yen (down 26.5% year on year) mainly due to the recording of income taxes - current of 835 million yen.

The Ad Fund (collected from franchisees) that was included in net sales up to the previous fiscal year is not included in net sales as from the first quarter of the current fiscal year. When compared with net sales for the previous corresponding period excluding the ad fund sales, net sales for the nine months ended May 31, 2021 are 1.7% down year-on-year. This change was necessitated due to a revision in the franchise agreement to the effect that any excess of advertising expenses Curves Japan has spent over the total ad funds income actually collected from franchisees would not be additionally charged to franchisees, but be recorded as SGA expenses.

Since the Group operates in a single business segment, the Curves business, the segment information is omitted.

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