Summary of Business Results for the Third Quarter Ended December 31, 2020 (Consolidated)

Summary of Business Results for the Third Quarter Ended December 31, 2020

[Japan GAAP] (Consolidated)

February 12, 2021

Results briefing: None

1. Consolidated business results for the nine months ended December 2020

(April 1, 2020 through December 31, 2020)

(1) Consolidated results of operations

(% change from the previous corresponding period)

Nine months ended December 2020: 1,274 million yen (41.0%) Nine months ended December 2019: 903 million yen (82.6%)

(2) Consolidated financial position

As of December 31, 2020: 10,569 million yen As of March 31 2020: 9,636 million yen

2. Dividends

3．Forecast of consolidated business results for the fiscal year ending March 2021

(April 1, 2020 through March 31, 2021)

(% change from the previous corresponding period)

*Notes

• (1) Changes in significant subsidiaries during the period: None

• (2) Application of accounting procedures specific to preparation of the consolidated quarterly financial statements: None

• (3) Changes in accounting policies, accounting estimates and restatement

  ① Changes in accounting policies associated with revision of accounting standards:	: None
  ②Changes in accounting policies other than ①	: None
  : None
  ③Changes in accounting estimates
  : None
  ④Restatement
  (4) Shares outstanding (common stock)
  ① Number of shares outstanding at the end of period (treasury stock included)

  As of December 31, 2020	87,849,400 shares
  As of March 31, 2020	87,849,400 shares
  ②Treasury stock at the end of period
  As of December 31, 2020	380,707 shares
  As of March 31, 2020	380,707 shares

  ③Average number of stock during period (quarterly cumulative period)

Nine months ended December 2020 87,468,693 shares

Nine months ended December 2019 87,704,383 shares

(Note) The number of treasury stock deducted for the calculation of the number of treasury stock at the end of period and the average number of stock during period includes the company's shares held by Trust & Custody Services Bank, Ltd. as trust property of "Stock Benefit Trust (Employee Stock Ownership Plan)".

*Quarterly financial summary is not subject to the quarterly review procedures by certified public accountants or auditing firms.

*Appropriate use of financial forecasts and other important matters ∙ Forecasts regarding future performance in this material are based on information currently available to the Company and certain assumptions that the company deems to be reasonable at the time this report was prepared. Actual results may differ significantly from the forecasts due to various factors. For information regarding the assumptions that form the basis for the business results forecasts and notes about using business forecasts, please refer to "1. Qualitative Information on Quarterly Financial Results (3) Consolidated Earnings Forecasts" (Page 3).

〇 Table of Contents of the Appendix

1. Qualitative Information on Quarterly Financial Results ………………………………………… 2

(1) Results of Operations ………………………………………………………………………… .. 2

(2) Financial Position ……………………………………………………………………………… 3

(3) Consolidated Earnings Forecasts ……………………………………………………………… . 3

2. Quarterly Consolidated Financial Statements …………………………………………………… . 4

(1) Quarterly Consolidated Balance Sheets ……………………………………………………… .. 4

(2) Quarterly Consolidated Statements of Income and Statements of Comprehensive Income…... 6

(3) Notes on Quarterly Consolidated Financial Statements ……………………………………… .. 8

(Notes on going concern assumption) ………………………………………………………… . 8

(Notes if there is a significant change in the amount of shareholders' equity) ………………… 8

1. Qualitative Information on Quarterly Financial Results (1) Results of Operations

In the third quarter of the current fiscal year, the Japanese economy rapidly deteriorated due to restrictions on domestic and international economic activities caused by the spread of COVID-19. Although there were signs of recovery through the government's various measures since the State of Emergency was lifted in late May 2020, the outlook remains uncertain as the spread of the disease has not been halted from the beginning of autumn.

Meanwhile, in regard to the child-raising service business, the environment surrounding childcare is rapidly changing, as evidenced by the increase in dual-income households, the problem of children on waiting lists, a shortage of nursery school teacher, and the shift to free child education and childcare. In addition, on December 21, 2020, the government announced the "New Child-rearing security Plan", which aims to reduce the number of children on the waiting list. In order to cope with the increase in female employment rate, the government plans to provide childcare services for approximately 140,000 children over the four-year period from 2021 to the end of 2024. The role of child-raising services in society is becoming increasingly important.

Under these severe situations, the Company established a COVID-19 Control Headquarters as measures against COVID-19 infections. While coordinating with local governments, the Company gives top priority to ensuring the safety of children as well as the safety of parents, business partners and employees. Each facility establishes its own strict safety standards. These include body temperature measurement every morning, hand washing, gargling and alcohol disinfection, as well as wearing masks. The head office and Tokyo Headquarters have introduced flexible work hours and telework systems to ensure quick response.

In addition, following the resolution at the 28th Ordinary General Meeting of Shareholders held on June 25, 2020, the Company has made a new management system with a majority of outside directors who are experts with deep knowledge and knowledge for education, finance, legal affairs and governance. The Group long considered the strengthening of corporate governance to be an important initiative to ensure transparency, fairness, and prompt and decisive decision-making. To further strengthen the structure, the Company has shifted from a Company with Auditors to a Company with an Audit and Supervisory Committee. By further strengthening the audit and supervisory functions of the Board of Directors and realizing speedy decision-making, the Company aims to further strengthen corporate governance and increase corporate value through sustainable growth.

Under the new management structure, we have adopted "selection and concentration" and "organizational revitalization" as management reform policies. Specific initiatives include improving profitability and operational efficiency by optimizing the number of children accepted at existing facilities and the allocation of personnel. We have also expanded child education, research and development of digital transformation systems that incorporates changes in the social environment, and reduction of operational and indirect costs by introducing new systems and reviewing operations. Through these efforts, we have been able to curtail employee turnover rates by improving a comfortable work environment.

As for the new facility openings, the Group has opened a total of 9 facilities during the third quarter of the current fiscal year according to the plan, including 4 nursery schools (4 in Tokyo) and 5 school clubs (5 in Tokyo).

(Nursery school)

Wakuwaku Yon-iwa Hiroba/Yon-iwa Elementary School Icho Club No. 2 (Apr. 1, 2020)

*1: As of April 1, 2020, with the opening of Wakuwaku Yanagida Hiroba/Yanagida Midori Club No.2, Wakuwaku Yanagida Hiroba was renamed as Wakuwaku Yanagida Hiroba/Yanagida Midori Club No.1. With the opening of Wakuwaku Yon-iwa Hiroba/Yon-iwa Elementary School Icho Club No.2, Wakuwaku Yon-iwa Hiroba was renamed as Wakuwaku Yon-iwa Hiroba/Yon-iwa Elementary School Icho Club No.1. With the opening of Mitaka City Yon-sho School Club B, Mitaka City Yon-sho School Club was renamed as Mitaka City Yon-sho School Club A.

*2: Separate from the above, the following changes have been made as of April 1, 2020: Asc Higashiojima Nursery School, which had been running since April 1, 2008 as an existing Tokyo Licensed Nursery School, was changed into a licensed nursery school; Obu City Kyowahigashi Nursery School, which had been running since April 1, 2010, as public nursery school under private management, was changed into a private facility under private management and is now run as Asc Kyowahigashi Nursery School.

*3: The three private school clubs operated by Amenity Life, Inc. (Elfikids Tsurugamine, Elfikids Futamatagawa, and Elfikids Ryokuentoshi)

were closed at the end of March 2020.

*4: COHAS VIETNAM CO.,LTD, which operated the kindergartens in Vietnam, completed the transition to local licensing on October 29, 2020 and transferred it to C2C Global Education Group Co., Ltd..

As a result, the Group came to have 213 nursery schools, 77 school clubs, 11 children's houses, 1 private school club, making a total of 302 facilities for supporting child-raising at the end of December 2020.

The Group's consolidated net sales were 24,228 million yen (up 3.3% year on year), operating income was 1,362 million yen (up 41.2% year on year), ordinary income was 1,831 million yen (up 36.8% year on year), and net income attributable to owners of parent was 1,143 million yen (up 34.6% year on year).

The major factors are as follows:

Net sales increased year on year due to the opening of new facilities, the transition from Tokyo licensed nursery school to licensed nursery school, and an increase in the number of children admitted to existing facilities, despite a decrease in school lunch fees and revenues from merchandise sales associated with the sale of photographs collected directly from parents, mainly due to the temporal closure of some facilities following the State of Emergency to prevent the spread of COVID-19 during the period from its declaration on April 7, 2020 to its lifting at the end of May.

Operating income increased year on year owing to an increase in gross profit and a reduction in selling, general and administrative expenses as a result of efforts to reduce foodstuff costs and other expenses related to school lunches due to the temporal closure of some facilities at the request of local governments, in addition to the above-mentioned factors that contributed to the increase in net sales, despite a decrease in sales associated with the prevention of the spread of COVID-19.

In addition, ordinary income increased year on year thanks to an increase in operating income and increased subsidies associated with an increase in users of the corporate dormitory.

Net income attributable to owners of parent increased year on year, as an extraordinary gain of 34 million yen was recorded due to the transfer of assets of 1 company-led nursery school at the end of December 2020, and the increase in ordinary income mentioned above, despite the fact that an extraordinary loss of 119 million yen was recorded due to the closure of 5 Tokyo licensed nursery schools (4 at the end of the current fiscal year and 1 at the end of the next fiscal year) and 1 company-led nursery school (at the end of December 2020) due to deteriorating earnings caused by changes in the environment, including the situation of children on the waiting list in the region.

(2) Financial Position

As for the financial position at the end of the third quarter of the current fiscal year, the total assets amounted to 28,373 million yen (up 2,250 million yen from the end of the previous fiscal year).

Current assets totaled 13,063 million yen (up 3,274 million yen), mainly reflecting an increase of 2,877 million yen in cash and deposits and a decrease of 63 million yen in inventories.

Fixed assets totaled 15,310 million yen (down 1,024 million yen). This was mainly due to an increase of 185 million yen in investment securities, while there were decreases of 347 million yen in buildings and structures, 295 million yen in construction in progress, 289 million yen in deferred tax assets, 121 million yen in long-term loans receivable.

Total liabilities amounted to 17,803 million yen (up 1,317 million yen from the end of the previous fiscal year).

Current liabilities totaled 7,132 million yen (up 1,212 million yen), mainly due to increases of 1,377 million yen in the current portion of long-term loans payable, 394 million yen in others, and 78 million yen in accounts payable - other, while there were decreases of 408 million yen in provision for bonuses, 232 million yen in income taxes payable, and 52 million yen in notes and accounts payable-trade.

Fixed liabilities totaled 10,670 million yen (up 105 million yen), mainly due to increases of 83 million yen in obligations for retirement plan and 29 million yen in asset retirement obligation.

Total net assets at the end of the third quarter were 10,569 million yen (up 933 million yen), mainly due to 802 million yen increase in retained earnings and a 111 million yen increase in valuation difference on securities.

(3) Consolidated Earnings Forecasts

The full-year consolidated earnings forecasts have not been revised from the announcement on May 13, 2020, but actual results may be different from the forecast according to the changes in business situations, etc.

If there are any changes, the Company will disclose them properly.

Since the timing of the containment of COVID-19 remains uncertain, there is a possibility that it will have a major impact on consolidated results depending on the spread and containment of the infection and other factors in the future.

2. [Quarterly Consolidated Financial Statements] (1) [Quarterly consolidated balance sheets]

(2) [Quarterly Consolidated Statements of Income and Statements of Comprehensive Income]

[Quarterly Consolidated Statement of Income]

[Third Quarter of FY3/21]

[Quarterly Consolidated Statement of Comprehensive Income]

[Third Quarter of FY3/21]

(3) Notes on Quarterly Consolidated Financial Statements

(Notes on going concern assumptions)

Current Third Quarter (April 1, 2020 - December 31, 2020)

Not applicable

(Notes on significant changes in shareholders' equity)

Current Third Quarter (April 1, 2020 - December 31, 2020)

Not applicable