Sato : Financial Result (Kessan Report) for 1st Quarter of FY2025

Consolidated Financial Report

for the First Three Months of Fiscal Year Ended June 2025

August 12, 2025

Company code: 6287

Website: https://www.sato-global.com

Shares traded on: TSE Prime

Executive position of legal representative: Hiroyuki Konuma, Representative Director,

President and Group CEO

Please address all communications to: Osamu Masuko, Vice President and CFO

Phone: +81-3-6628-2423

Commencement date of dividend payments: -Supplementary explanatory materials for financial results: Available

Holding of meeting to explain financial results (for analysts and institutional investors): Yes

1. Consolidated operating results for Q1 (April 1, 2025 to June 30, 2025)

   1. Consolidated financial results (cumulative)

      (Percentage figures show year-on-year change)

      	Net sales		Operating income		Ordinary income
      Three months ended	Millions of yen	%	Millions of yen	%	Millions of yen	%
      June 30, 2025	37,829	0.4	2,359	(17.6)	1,885	(21.8)
      June 30, 2024	37,674	10.8	2,864	32.6	2,411	16.4

      (Note) Comprehensive income: Three months ended June 30, 2025: ¥2,142 million (63.6%)

      Three months ended June 30, 2024: ¥5,892 million 95.2%

      	Net income attributable to owners of parent		Basic earnings per share	Diluted earnings per share
      Nine months ended	Millions of yen	%	Yen	Yen
      June 30, 2025	1,211	1.1	37.31	37.30
      June 30, 2024	1,197	(8.2)	36.95	36.94

   2. Consolidated financial position

   	Total assets	Net assets	Equity ratio	Net assets per share
   As of	Millions of yen	Millions of yen	%	Yen
   June 30, 2025	140,162	81,145	55.1	2,378.96
   March 31, 2025	139,757	80,237	54.8	2,357.76

   (Note) Total equity: As of June 30, 2025: ¥ 77,233 million As of March 31, 2025: ¥ 76,540 million

2. Dividends

   	Annual dividend per share
   	Q1	Q2	Q3	Year-end	Total
   Fiscal year 2024	Yen –	Yen 37.00	Yen –	Yen 38.00	Yen 75.00
   Fiscal year 2025	–
   FY 2025 (Forecast)		38.00	–	38.00	76.00

   (Note) Revision to recently announced dividend forecast: None

3. Consolidated forecasts for FY 2025 (April 1, 2025 to March 31, 2026)

(Percentage figures show year-on-year change, numbers in parentheses represent negative values)

(Note) Revision to recently announced consolidated forecast: None

1. Significant changes in the scope of consolidation during the term: None

2. Application of special accounting procedures for preparing the quarterly consolidated financial statements: None

3. Changes in accounting policies and estimates, and restatement of prior-period financial statements after error corrections

   1. Changes in accounting policies due to revisions to accounting standards: None

   2. Changes in accounting policies due to other reasons: None

   3. Changes in accounting estimates: None

   4. Restatement of prior-period financial statements after error corrections: None

4. Number of issued common shares

   1. Number of issued shares, including treasury shares, at the end of term: As of June 30, 2025: 33,635,942 shares

      (As of March 31 2025: 33,635,942 shares)

   2. Number of treasury shares at the end of term:

      As of June 30, 2025: 1,170,613 shares

      (As of March 31 2025: 1,172,623 shares)

   3. Average number of shares during the term, cumulative from the beginning of the fiscal year:

Three months ended June 30, 2025: 32,463,678 shares

(Three months ended June 30, 2024: 32,414,047 shares)

Forward-looking statements, including the consolidated forecasts stated in these materials, are based on information currently available to the Company and certain assumptions deemed reasonable. Any statements herein do not assure particular results by the Company. Results may differ from the consolidated forecasts due to various factors. Please refer to section 1-(3) “Explanation of consolidated forecasts and other projections” (page 5) of the attached materials for assumptions behind the consolidated forecasts and other information.

1. Q1 Financials and FY 2025 Outlook 2

   1. Overview of Q1 financial performance 2

   2. Overview of Q1 financial position 4

   3. Explanation of consolidated forecasts and other projections 5

2. Consolidated Financial Statements and Significant Notes Thereto 6

   1. Consolidated balance sheets 6

   2. Consolidated statements of (comprehensive) income 8

      Consolidated statements of income 8

      Consolidated statements of comprehensive income 9

   3. Consolidated statements of cash flows 10

   4. Notes to consolidated financial statements 11

Going concern assumption 11

Notes in the event of material changes in amount of shareholders’ equity 11

Changes in accounting policies 11

Segment information 11

Business combination 12

1. Q1 Financials and FY 2025 Outlook
   1. Overview of Q1 financial performance

      Overview of Q1 financial performance

      The SATO Group, with its vision to “be the customer’s most trusted partner for mutual growth, and always essential in an ever-changing world,” runs business based on management principles, growth strategies and business targets defined in its current Medium-term Management Plan (MTMP) for FY 2024 to 2028. Through this plan, we aim to take tagging to the next level and pursue “Perfect and Unique Tagging” to “give every ‘thing’ its own ID so it connects with the world.”

      The first two years of the MTMP are designated to rebuild profitability, and the next three years set to restart growth investments. During the initial phase, we will strengthen our core business. In Japan, we will aim to get the business profiting at a higher level again, whereas overseas we will seek sustainable and efficient growth. In the subsequent phase, we will allocate profits generated from the recovered revenue base to advance solutions for Perfect and Unique Tagging, with the aims of accelerating growth and establishing a new profit base. Throughout the MTMP period, we will also focus on strengthening corporate management, improving capital efficiency, and applying sustainable business practices, to reinforce our fundamentals.

      Having returned to profitability ahead of schedule in FY 2024, the first year of the MTMP, we plan to resume growth investments from FY 2025 onward.

      As a result, the SATO Group posted net sales of ¥37,829 million (up 0.4% compared with the same period of the previous fiscal year), operating income of ¥2,359 million (down 17.6%), ordinary income of ¥1,885 million (down 21.8%), and h attributable to owners of parent of

      ¥1,211 million (up 1.1%). Performance by segment is as follows.

      Auto-ID solutions (Japan)

      Mechatronics sales increased by capturing investment related to efficiency improvements in the manufacturing market and demand generated by compliance with the amended logistics efficiency legislation in the logistics market. Consumable sales also grew, supported by generally solid performance across all markets. Higher sales and a more favorable product mix led to an increase in operating income.

      Under these circumstances, net sales increased 4.0% to ¥19,091 million yen, and segment profit increased 364.8% to ¥864 million yen, compared with the previous fiscal year.

      For information on our sales performance by market, please refer to our financial results briefing materials online.

      https://www.sato-global.com/ir/library/settlement/

      Auto-ID solutions (Overseas)

      Outside Japan, our companies specializing in primary labels recorded higher sales due to currency effects, despite a decline in demand in Russia following changes in tax policy. Meanwhile, our base business remained stable across all regions, but reported lower sales due to currency effects, resulting in an overall decline in the overseas business. In addition to the decline in sales, the impact of the appreciation of the local currency in Russia by companies specializing in primary labels and the increase in costs led to a decline in profits for the overseas business as a whole.

      Under these circumstances, net sales decreased 3.0% to ¥18,737 million (a 1.2% increase excluding foreign exchange effects), and segment profit declined 37.0% to ¥1,629 million, compared with the same period of the previous fiscal year.

      For a detailed breakdown of financial performance by (i) base and primary labels businesses and

      (ii) region, please refer to the financial results briefing materials available on our website. https://www.sato-global.com/ir/library/settlement/

   2. Overview of Q1 financial position

      At the end of the first quarter, the balance of current assets was 90,917 million yen (91,558 million yen at the end of the previous fiscal year), a decrease of 640 million yen. This was mainly due to a decrease in notes and accounts receivable-trade and contract assets (1,836 million yen) and an increase in merchandise and finished goods (1,121 million yen). The balance of non-current assets was 49,244 million yen (48,198 million yen at the end of the previous fiscal year), an increase of 1,045 million yen. This was mainly due to an increase of 292 million yen in machinery, equipment and vehicles in property, plant and equipment and an increase of 686 million yen in software suspense account in intangible assets.

      The balance of current liabilities decreased by 10 million yen to 41,667 million yen (41,677 million yen at the end of the previous fiscal year). This was mainly due to an increase in electronically recorded obligations - operating (479 million yen), an increase in short-term borrowings (666 million yen), a decrease in accounts payable - other (935 million yen), and a decrease in income taxes payable (337 million yen). Non-current liabilities totaled 17,350 million yen (17,842 million yen at the end of the previous fiscal year), a decrease of 492 million yen. This was mainly due to deferred tax liabilities(518 million yen) included in other.

      Net assets increased by 907 million yen to 81,145 million yen at the end of the first quarter (80,237 million yen at the end of the previous fiscal year). This was mainly due to an increase in accumulated other comprehensive income (716 million yen).

      Cash flows

      Cash and cash equivalents at the end of the first quarter of the current fiscal year dereased by 1,208 million yen from the end of the previous fiscal year to 24,674 million yen.

      The status of each cash flow and their factors during the three months ended June 30, 2025 are as follows.

      Cash flows from operating activities

      Net cash provided by operating activities totaled 1,851 million yen.

      The main factors for the increase were profit before income taxes of 1,819 million yen, depreciation of 1,406 million yen, and a decrease in accounts receivable-trade and contract assets of 2,001 million yen. The decrease was mainly due to an increase of 1,657 million yen in prepaid expenses and a decrease of 1,049 million yen in accounts payable - other

      Cash flows from investing activities

      Net cash used in investing activities decreased by 2,085 million yen.

      The main factor for the increase was proceeds from withdrawal of time deposits of 652 million yen. The main factor for the decrease were payments into time deposits of 636 million yen, Purchase of property, plant and equipment of 1,238 million yen, and purchase of intangible assets of 838 million yen.

      Cash flows from financing activities

      Net cash used in financing activities totaled 978 million yen.

      The main factor for the increase was an increase of 640 million yen in short-term loans borrowings, while the main factor for the decrease was 393 million yen in repayments of lease liabilities and 1,211 million yen in dividends paid.

   3. Explanation of consolidated forecasts and other projections

   No changes have been made to the consolidated forecasts for the fiscal year ending March 2026, which were announced on May 15, 2025.

2. Consolidated Financial Statements and Significant Notes Thereto

(Millions of yen)

As of March 31, 2025 As of June 30, 2025

Assets

Current assets

(Millions of yen)

As of March 31, 2025 As of June 30, 2025

Comprehensive income attributable to non-controlling interests

657 214

1. Consolidated statements of cash flows

   (Millions of yen)

   	Three months ended June 30, 2024		Three months ended June 30, 2025
   Cash flows from operating activities
   Income before income taxes		2,404		1,819
   Depreciation		1,271		1,406
   Amortization of goodwill		38		3
   Loss (gain) on sale of non-current assets		(3)		(9)
   Loss on retirement of non-current assets		10		16
   Loss on business restructuring		—		58
   Losses on net monetary position		492		153
   Increase (decrease) in provision for bonuses		(155)		(178)
   Increase (decrease) in allowance for doubtful accounts		(169)		(6)
   Increase (decrease) in retirement benefit liability		1		24
   Interest and dividend income		(143)		(129)
   Interest expenses		109		203
   Foreign exchange losses (gains)		(72)		34
   Decrease (increase) in accounts receivable - trade, and contract assets	893		2,001
   Decrease (increase) in inventories	(1,128)		(450)
   Increase (decrease) in trade payables	(60)		3
   Increase (decrease) in accounts payable - other	185		(1,049)
   Decrease (increase) in prepaid expenses	(1,279)		(1,657)
   Other, net	639		146
   Subtotal	3,033		2,390
   Interest and dividends received	143		129
   Interest paid	(109)		(186)
   Income taxes paid	(123)		(422)
   Payments for business restructuring	—		(58)
   Net cash provided by (used in) operating activities	2,944		1,851
   Cash flows from investing activities
   Payments into time deposits	(822)		(636)
   Proceeds from withdrawal of time deposits	375		652
   Purchase of property, plant and equipment	(1,886)		(1,238)
   Purchase of intangible assets	(686)		(838)

   Other, net 19 (45)

   Proceeds from sale of property, plant and equipment and intangible assets

   5 20

   Net cash provided by (used in) investing activities (2,994) (2,085)

   Cash flows from financing activities
   Net increase (decrease) in short-term borrowings	261	640
   Repayments of long-term borrowings	(228)	(14)
   Repayments of lease liabilities	(386)	(393)
   Dividends paid	(1,176)	(1,211)
   Purchase of treasury shares	(0)	(0)
   Other, net	54	0
   Net cash provided by (used in) financing activities	(1,475)	(978)
   Effect of exchange rate change on cash and cash equivalents	823	4
   Net increase (decrease) in cash and cash equivalents	(702)	(1,208)
   Cash and cash equivalents at beginning of period	24,102	25,883
   Cash and cash equivalents at end of period	23,399	24,674

2. Notes to consolidated financial statementsGoing concern assumption

   None

   Notes in the event of material changes in amount of shareholders’ equity

   None

   Changes in accounting policies

   None

   Segment information

   1. Three months ended June 30, 2024

      1. Information on net sales and profit or loss by reportable segment

         Millions of yen, numbers in parentheses represent negative values

         	Auto-ID solutions (Japan)	Auto-ID solutions (Overseas)	Total
         Net sales
         External customer sales	18,353	19,321	37,674
         Intersegment sales and transfer	2,171	3,294	5,466
         Total	20,524	22,616	43,141
         Segment profit (loss)	186	2,586	2,772

      2. Difference between the total amount of profit or loss for reportable segments and the amount recorded on the consolidated statements of income, and a major breakdown of the difference (Matters related to difference adjustment)

         Millions of yen, numbers in parentheses represent negative values

         Profit	Amount
         Reportable segments total	2,772
         Intersegment eliminations	0
         Adjustment of inventories	92
         Operating income on the consolidated statements of income	2,864

      3. Matters related to changes in reportable segments None

      4. Information on impairment loss of non-current assets, goodwill and negative goodwill, etc. by reportable segment

         None

   2. Three months ended June 30, 2025

      1. Information on net sales and profit or loss by reportable segment

         Net sales
         External customer sales	19,091	18,737	37,829
         Intersegment sales and transfer	3,177	4,443	7,621
         Total	22,269	23,181	45,450
         Segment profit (loss)	864	1,629	2,494

         Millions of yen, numbers in parentheses represent negative values Auto-ID solutions (Japan) Auto-ID solutions (Overseas) Total

      2. Difference between the total amount of profit or loss for reportable segments and the amount recorded on the consolidated statements of income, and a major breakdown of the difference (Matters related to difference adjustment)

         Millions of yen, numbers in parentheses represent negative values

         Profit	Amount
         Total of reportable segments	2,494
         Intersegment eliminations	0
         Adjustment of inventories	(134)
         Operating income on the consolidated statements of income	2,359

      3. Matters related to changes in reportable segments None

      4. Information on impairment loss of non-current assets, goodwill and negative goodwill, etc. by reportable segment

         None

         Business combination

         Absorption-type merger of wholly owned subsidiary

         At the Company’s board of directors meeting held on April 9, 2024, the Company resolved to conduct an absorption-type merger, with the effective date of April 1, 2025 between SATO Corporation, a wholly owned subsidiary of the Company, as a surviving company and SATO

         1. Outline of business combination

            1. Name and business description of the disappearing company in the absorption-type merger

               Name of disappearing company in the absorption-type merger: SATO Corporation Business description: Auto-ID solutions

            2. Date of business combination April 1, 2025

            3. Legal form of the business combination

               Form of absorption-type merger in which the Company is the surviving company and SATO Corporation is disappearing company

            4. Name of entity after business combination

               The Company has changed its trade name to SATO Corporation.

            5. Other items regarding overview of the transaction

            By integrating the head office functions with SATO Corporation, which performs the main functions of the Group's businesses, we will change the fragmented organization into a simpler structure. Our objective is to develop a system that facilitates expeditious decision-making and the selection and concentration of management resources by elucidating responsibilities and authorities.

         2. Overview of accounting treatment

In accordance with the "Accounting Standard for Business Combinations" (ASBJ Statement No. 21, January 16, 2019) and the "Implementation Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures" (ASBJ Guidance No. 10, January 16, 2019), we accounted for the business combination as a transaction under common control.