ZERO : Financial Results for the First Quarter of FY2024

1. Summary of operating results

1. Summary of operating results for this quarter of the consolidated cumulative period

During the first quarter of the consolidated cumulative period, while some regions of Japan's economy showed signs of weakness, the overall trend has been one of gradual recovery or improvement.

In the domestic automobile market, the total number of new vehicle sales increased to 101.3% (statistical data of the Japan Automobile Manufacturers Association) compared to the same quarter from the previous year (hereinafter referred to as the same quarter from the previous year). Although some finished vehicle manufacturers continued to be affected by shipment suspensions due to issues of misconduct, sales of new models were strong for certain manufacturers, resulting in an overall increase in domestic sales. As for used vehicle registrations and sales, export demand for used vehicles remained robust, and the increase in new vehicle sales led to a rise in trade-in vehicles, pushing the number of used vehicle sales to 101.2% compared to the same quarter from the previous year.

*1 Calculated from Japan Automobile Industry Association Statistics *2 Calculated from Japan Automobile Importers' Association statistics *3 Calculated from Japan Automobile Dealers Association statistics

*4 Calculated from Japan Mini Vehicles Association statistics*5 Trial calculated from the number of export deleted registered vehicles in the Japan Automobile Dealers Association statistics

Based on these market conditions, the performance of our group for this quarter was as follows: revenue was 34,312 million yen (108.3% compared to the same quarter from the previous year) and operating profit was 2,724 million yen (242.2% compared to the same quarter from the previous year). Also, profit before tax was 2,715 million yen (238.5% compared to the same quarter from the previous year), and the quarterly profit attributable to shareholders of the parent company was 1,887 million yen (266.2% compared to the same quarter from the previous year).

―2―

The segment business results are as follows.

• Domestic automotive related businesses

Revenue and segment profit increased in the domestic automobile-related business as a whole. In the core business of vehicle transportation, we managed to increase the number of contracts by maintaining our transportation capability despite the enforcement of driver working hour regulations in accordance with the 2024 logistics problem, by promoting the division of labor among drivers, strengthening driver hiring, and increasing unit price paid to subcontractors. On the other hand, we have been affected by the cost coping with 2024 logistics problem and rising cost of hiring and unit labor costs against the backdrop of higher consumer price indexes and minimum wages, as well as increased vehicle and maintenance costs for carrier cars. In such an environment, (1) We have been implementing sales activities focusing on gross profit, such as promoting the acquisition of return cargo to maximize daily revenue per carrier car by preventing the occurrence of empty routes,(2) We have successfully completed the post-merger integration of ZERO-PLUS IKEDA CO., LTD which became a consolidated subsidiary in May 2022 and had acquired So-ing CO., LTD. as a consolidated subsidiary from November 2023, (3)We had raised transportation rates for new and used cars sequentially since January 2024.

As a result, the domestic automobile-related business reported revenue of 16,696 million yen (118.1% compared to the same quarter from the previous year) and segment profit of 2,485 million yen (248.4% compared to the same quarter from the previous year).

In the vehicle transportation business, under the medium-term management plan through the fiscal year ending June 2027, we are focusing on the theme of "Returning to the Basics of Quality" We are advancing initiatives such as "Further Responses to the '2024 Logistics Problem'-Reviewing the Role and Operations of Logistics Centers, Securing Transport Capacity," "Reducing and Addressing Accidents and Complaints," and "Promoting Digitalization."

Regarding "Further Responses to the '2024 Logistics Problem'-Reviewing the Role and Operations of Logistics Centers, Securing Transport Capacity," we will continue to maintain driver driving hours per person and control overall working hours by further promoting the division of labor in loading/unloading vehicles and locating vehicles for auction at logistics centers and auto auction sites.

Additionally, as a result of the reduction in daily driving distances due to the shortened working hours of drivers, we will review the locations of logistics centers and optimize the number of drivers and the type and number of car carriers at each logistics center. As for reviewing transportation methods, we will clarify the division of roles between our company and subcontractors, and we will consider revising marine transportation routes.

Regarding "Reducing and Addressing Accidents and Complaints," we are enhancing safety and quality from both hardware and software aspects. This includes installing rearview monitors on car carriers, expanding the number of safety instructors, and fostering safety awareness through the introduction of a driver group system (small group activities) for drivers. Additionally, to improve quality and hospitality in last-mile transportation, where we directly collect or deliver vehicles to individual customers, we have launched and are promoting the Self-Driving Reform Project.

In terms of "Promoting Digitalization," we continue to reduce paperwork and ease the burden on crew members by using smartphone and tablet devices equipped with our specially developed vehicle transportation application "moℓa". Furthermore, we are working on projects aimed at improving customer convenience, such as the digitization of vehicle transportation orders and system integration for order processing.

• Human resource businesses

In the pick-up service business, revenue increased due to fee revisions at low-profit sites, along with the acquisition of new contracts and an increase in vehicles for the MaaS (Mobility as a Service) business through revising its driver recruitment methods. The staffing services business saw an increase in revenue

―3―

due to the rise in the number of dispatched drivers, while the airport-related staffing business also experienced revenue growth thanks to the recruitment of foreign workers, which increased the number of dispatches. As a result of the increased revenue in each business, segment profit also increased.

As a result, the Human Resources business recorded revenue of 5,705 million yen (107.4% compared to the same quarter from the previous year) and segment profit of 231 million yen (126.6% compared to the same quarter from the previous year).

• General cargo businesses

In the port cargo handling business, revenue decreased due to disruptions in the ship schedules caused by unfavorable weather, which impacted cargo handling operations. The transportation / warehousing business also saw a decline in revenue due to a decrease in cargo handling volume from key customers and in the number of chartered vehicles in accordance with the 2024 logistics problem. As a result, the overall general cargo business experienced a decline in revenue.

In terms of segment profit, the port cargo handling business saw a decline in profit due to reduced revenue. However, in the transportation / warehousing business, the launch of new projects and the acquisition of new customers, which filled vacant floor space in warehouses, led to an increase in profit, resulting in an increase in profits for the overall general cargo business.

As a result, the general cargo business reported revenue of 1,554 million yen (96.4% compared to the same quarter from the previous year) and segment profit of 315 million yen (101.7% compared to the same quarter of the previous year).

• Overseas Related Businesses

In the used vehicle export business, despite maintained top market share as a result of customer satisfaction improvement activities and continued strong demand in Malaysia, delays in shipments at the end of September 2024 led to a decrease in revenue. On the other hand, the vehicle transportation business in China saw an increase in revenue due to the acquisition of new contracts with Chinese car manufacturers while Japanese car manufacturers are struggling.

Regarding segment profit, the used vehicle export business saw an increase in profit due to the choice of inexpensive marine transportation as a result of securing more shipping slots. In contrast, the vehicle transportation business in China experienced a decline in profit due to a decline in the volume of return cargo from Japanese car manufacturers. However, the overall overseas-related business saw an increase in profit.

As a result, the overseas-related business recorded revenue of 10,356 million yen (97.6% compared to the same quarter from the previous year) and segment profit of 260 million yen (154.1% compared to the same quarter of the previous year).

Additionally, corporate expenses not included in the above-reported segments (expenses related to the company's administrative departments), are recorded under "adjustment amount" as stated in "2. Summary of Quarterly Consolidated Financial Statements and Major Notes (Segment Information)," totaling 568 million yen.

1. Summary of financial position for this quarter of the consolidated cumulative period Assets, Liabilities, and Equity
   (Assets)
   Current assets increased by 628 million yen (1.9%) compared to the end of the previous consolidated fiscal year, reaching 33,623 million yen.
   This was mainly due to a decrease in trade and other receivables of 1,407 million yen, while cash and cash equivalents increased by 467 million yen, and inventories increased by 1,805 million yen.
   Non-current assets decreased by 591 million yen (1.6%) compared to the end of the previous consolidated fiscal year, totaling 37,147 million yen.

―4―

This was primarily due to a decrease of 755 million yen in tangible fixed assets from depreciation of right-of-use assets, although goodwill and intangible assets increased by 193 million yen due to the acquisition of new software.

As a result, total assets increased by 37 million yen (0.1%) compared to the end of the previous consolidated fiscal year, reaching 70,770 million yen.

(Liabilities)

Current liabilities decreased by 280 million yen (1.2%) compared to the end of the previous consolidated fiscal year, amounting to 23,865 million yen.

This was mainly due to decreases in trade and other payables by 855 million yen and unpaid corporate income taxes by 988 million yen, although borrowings increased by 1,700 million yen.

Non-current liabilities decreased by 658 million yen (7.6%) compared to the end of the previous consolidated fiscal year, totaling 8,055 million yen.

This was mainly due to a decrease in lease liabilities by 684 million yen.

As a result, total liabilities decreased by 938 million yen (2.9%) compared to the end of the previous consolidated fiscal year, amounting to 31,921 million yen.

(Equity)

Total equity increased by 976 million yen (2.6%) compared to the end of the previous consolidated fiscal year, reaching 38,849 million yen.

This was mainly due to an increase in retained earnings by 1,055 million yen.

(3) Summary of cash flow for this quarter of the consolidated cumulative period

Cash and cash equivalents (hereafter referred to as "funds") at the end of the first quarter of the consolidated fiscal period increased by 467 million yen compared to the end of the previous consolidated fiscal year, amounting to 11,784 million yen.

Each cash flow status category during the consolidated cumulative period of the first quarter and their causes are as follows.

(Cash flow from operating activities)

Funds provided by operating activities was 1,280 million yen (1,772 million yen in the same period of the previous year).

The main cause of the increase in funds were quarterly profit of 1,895 million yen, a decrease in trade receivables of 1,743 million yen, and depreciation and amortization expenses of 1,255 million yen which are non-operating expenses; the main cause of the decrease in funds were an increase in inventories of 1,806 million yen and corporate income tax payments of 1,780 million yen.

(Cash flow from investment activities)

Funds used in investing activities was 983 million yen (expenditures of 798 million yen used in the same period of the previous year).

The main itemization breakdown for expenditures were 840 million yen for the acquisition of tangible fixed assets and investment properties, and 144 million yen for the acquisition of intangible assets.

(Cash flow from financing activities)

Funds provided by financing activities was 239 million yen (1,158 million yen in the same period of the previous year).

The main itemization breakdown for expenditures were 688 million yen for lease liability repayments and 772 million yen for dividend payments, while the main itemization breakdown for income was a net increase of 1.700 million yen from short-term borrowings.

(4) Future outlook

There have been no revisions to the consolidated earnings forecast published on August 8, 2024.

―5―

2. Summary of the consolidated financial statements and major notes

1. Summary of quarterly consolidated statement of financial position

―6―

―7―

(2) Summary of quarterly consolidated profit and loss statement

(Units: Million yen)

―8―