Consolidated Financial Results for the Nine Months Ended September 30, 2021 [Japanese GAAP]

Note:This document is a translation of a part of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail.

Consolidated Financial Results

for the Nine Months Ended September 30, 2021

[Japanese GAAP]

	November 12, 2021
Company name: MEDLEY, INC.
Stock exchange listing: Tokyo
Code number: 4480
URL: https://www.medley.jp
Representative: Kohei Takiguchi	President and Chief Executive Officer
Contact: Yuta Tamaru	Director and Head of Corporate Division

Phone: [phone]

Scheduled date of filing quarterly securities report: November 12, 2021

Scheduled date of commencing dividend payments: -

Availability of supplementary briefing material on quarterly financial results: Yes

Schedule of quarterly financial results briefing session: Yes

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

1. Consolidated Financial Results for the Nine Months Ended September 30, 2021 (January 01, 2021 to September 30, 2021)

(1) Consolidated Operating Results				(% indicates changes from the previous corresponding period.)
	Net sales	EBITDA*	Operating profit	Ordinary profit	Profit attributable to
	owners of parent
Nine months ended	Million	%	Million	%	Million	%	Million	%	Million	%
yen	yen	yen	yen	yen
September 30, 2021	8,072	54.5	1,009	55.8	642	18.8	643	16.5	384	(16.8)
September 30, 2020	5,226	42.2	647	30.9	541	26.4	552	20.6	461	-

(Note) Comprehensive income:	Nine months ended September 30, 2021:	¥	386 million	[	(16.3) %]
			Nine months ended September 30, 2020:	¥	461 million	[	-%]
			Basic earnings		Diluted earnings per
			per share		share
Nine months ended			Yen		Yen
September 30, 2021			12.18		11.71
September 30, 2020			16.15		14.81
(Note)	EBITDA = Operating profit / loss + depreciation and amortization of goodwill + share-based compensation
	Because the Group has posted no amortization of goodwill during consolidated Q3 FY2020, it was not included in the

calculation of EBITDA. However, starting from consolidated Q1 FY2021, amortization of goodwill by newly consolidated subsidiaries is included in the calculation of EBITDA. Also, because there were no share-based compensation expenses during consolidated Q3 FY2020, such expenses are not included in the calculation of EBITDA.

(2) Consolidated Financial Position

		Total assets	Net assets	Capital adequacy ratio
As of		Million yen		Million yen	%
September 30, 2021		21,351		15,505	72.6
December 31, 2020		15,519		9,717	62.6
(Reference) Equity:	As of September 30, 2021:	¥	15,492 million
	As of December 31, 2020:	¥	9,715 million

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2. Dividends

				Annual dividends
	1st	2nd		3rd		Year-end	Total
	quarter-end	quarter-end	quarter-end
	Yen		Yen	Yen		Yen	Yen
Fiscal year ended December 31, 2020	-		0.00	-		0.00	0.00
Fiscal year ending December 31, 2021	-		0.00	-
Fiscal year ending December 31, 2021						0.00	0.00
(Forecast)
(Note) Revision to the forecast for dividends announced most recently:	No

3. Consolidated Financial Results Forecast for the Fiscal Year Ending December 31, 2021(January 01, 2021 to December 31, 2021) (% indicates changes from the previous corresponding period.)

												Profit attributable	Basic
			Net sales	EBITDA	Operating profit	Ordinary profit	earnings per
			to owners of parent
														share
			Million	%	Million	%	Million	%	Million	%	Million yen	%	Yen
			yen	yen	yen		yen
Full year			10,770	57.7	670	23.5	160	(59.6)		180	(57.4)	20	(95.6)	0.62
		～	～	～	～	～	～		～	～	～	～	～
			11,270	65.0	1,170	115.6	660	66.6		680	60.9	480	5.3	14.92
(Note) Revision to the financial results forecast announced most recently:	No
* Notes:
(1) Changes in significant subsidiaries during the nine months ended September 30, 2021
(Changes in specified subsidiaries resulting in changes in scope of consolidation):	Yes
New	2	(Company name: Pacific Medical, Inc., MEDiPASS Co., Ltd.				)
(Note)	As of April 01, 2021, consolidated subsidiary Pacific System Co., Ltd. changed its name to Pacific Medical, Inc.
(2) Accounting policies adopted specially for the preparation of quarterly consolidated financial statements:	Yes

(Note) For details, please refer to 2. Quarterly Consolidated Financial Statements and Important Notes (4) Important notes regarding quarterly consolidated financial statements (Application of special accounting methods in preparation for quarterly consolidated financial statements) on page 10.

1. Changes in accounting policies, changes in accounting estimates and retrospective restatement
2. 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: Yes
   4. Retrospective restatement: No

(Note) For details, please refer to 2. Quarterly Consolidated Financial Statements and Important Notes (3) Important notes regarding quarterly consolidated financial statements (Changes in accounting estimates) on page 10.

(4) Total number of issued shares (common shares)

1)	Total number of issued shares at the end of the period (including treasury shares):
	September 30, 2021:	32,177,900	shares
	December 31, 2020:	30,889,100	shares
2)	Total number of treasury shares at the end of the period:
	September 30, 2021:	3,000	shares
	December 31, 2020:	- shares
3) Average number of shares during the period:
	Nine months ended September 30, 2021:		31,565,810 shares
	Nine months ended September 30, 2020:		28,595,920 shares

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Quarterly financial results reports are exempt from quarterly review conducted by certified public accountants or an audit corporation.

* Cautionary statements with respect to forward-looking statements and other notes

This preliminary earnings report contains forward-looking statements such as earnings forecasts which are based on information currently available to the Group and certain assumptions deemed to be reasonable. The Group makes no guarantee regarding the accuracy of the forecasts contained herein. Because of variable factors, actual results may differ from the forecast figures. For information regarding assumptions upon which the Group's results forecasts are based and notes regarding the use of results forecasts, please refer to (3) Explanation regarding consolidated forecasts and forward-looking statements under 1. Qualitative information regarding quarterly results" on page 5.

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1. Qualitative information regarding quarterly results

(1) Explanation regarding operating results

During the third quarter of the consolidated fiscal year ending December 31, 2021 (consolidated Q3 FY2021), the Japanese medical and nursing industry continued to face human resource shortages and issues related to financial resources, and the ratio of job offers to applicants therefore trended at a level higher than the average for all industries. In addition, in response to the resumption of the spread of COVID-19, the Japanese government promulgated a state of emergency in April 2021, mainly focusing on major cities such as Tokyo and Osaka. The state of emergency was lifted in June 2021 except in Okinawa Prefecture. However, in July, another state of emergency was promulgated in Tokyo, followed in August by state of emergency declarations in Kanagawa, Saitama, and Chiba prefectures as well as in Osaka. These states of emergency remained in place after August. Also, vaccinations have begun nationwide, and this is expected to reduce the onset and progression of COVID- 19. Starting in April, the number of people receiving vaccinations began rising sharply.

Amid this business environment, although vaccinations resulted in hiring process delays mainly in the medical and nursing care fields at recruitment system JobMedley, sales in the Recruitment Platform Business grew owing to factors including the consolidation of the online training business of MEDiPASS Co., Ltd. Although the Medical Platform Business also saw an impact from the administration of vaccinations by medical institutions, sales in this business rose owing to steady products sales and the consolidation of Pacific Medical, Inc. and some of the businesses of MEDiPASS Co., Ltd. While the Group achieved sales growth, it also conducted investments aimed at expanding the scale of its business operations including continued investment in growth in the Recruitment Platform Business to develop systems functionality and increase the number of employees. The Group also made proactive investments in growth in the Medical Platform Business, such as strengthening its development teams.

Under these conditions, in consolidated Q3 FY2021, the Group posted net sales of ¥8,072,052 thousand (up 54.5% YoY), an EBITDA of ¥1,009,152 thousand (up 55.8% YoY), an operating profit of ¥642,881 thousand (up 18.8% YoY), an ordinary profit of ¥643,662 thousand (up 16.5% YoY), and a quarterly net profit attributable to owners of the parent company of ¥384,345 thousand (down 16.8% YoY).

The Recruitment Platform Business posts sales based on the hiring dates of persons using the Group's services to find employment at companies seeking employees. The posting of sales therefore tends to be concentrated in April, when Japanese companies tend to hire more employees (because this is often the beginning of Japanese companies' fiscal years). The posting of the Group's net sales therefore tends to be concentrated in Q2 (April-June) of its consolidated fiscal year (ending on December 31).

Earnings by business segment are as follows.

Intersegment eliminations and unallocated group-wide shared costs totaled ¥1,375,660 thousand (up 31.8% YoY).

1. Recruitment Platform Business

During consolidated Q3 FY2021, the recruitment system JobMedley continued to see some impact from delays in hiring processes associated with the administration of COVID-19 vaccines. However, the Group continuously improved the functionality of its service websites with the aim of improving user convenience, which resulted in growth in the number of job applicants. The number of customer offices grew 13.2% compared with the end of consolidated FY2020, surpassing 244,000, and the number of job offers listed rose by 9.5% over the same period, to over 235,000. The online training business of MEDiPASS Co., Ltd., which was consolidated (converted to a wholly owned subsidiary) in March 2021, was also integrated into the Recruitment Platform Business segment and has been performing smoothly.

As a result of the above, consolidated Q3 FY2021 segment net sales were ¥5,967,622 thousand (up 36.3% YoY) and segment profit before allocation of group-wide shared costs (operating profit) was ¥2,423,012 thousand (up 20.5% YoY).

2. Medical Platform Business

During consolidated Q3 FY2021, the Medical Platform Business saw some impact associated with the administration of COVID- 19 vaccines by medical institutions. However, owing to the consolidation in January 2021 of Pacific Medical, Inc., which develops and provides the electronic medical record system MALL to small and medium- sized hospitals, the number of customers served by the Medical Platform Business remained on the rising trend seen in the previous consolidated fiscal year, rising by 39.1% compared with the end of consolidated FY2020 and reaching 7,808. The Group also continued to update and expand content for MEDLEY, an online medical encyclopedia. In addition, some of the businesses of MEDiPASS Co., Ltd., which was consolidated (converted to a wholly owned subsidiary) in March 2021, were also integrated into the Medical Platform Business segment.

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As a result of the above, consolidated Q3 FY2021 segment net sales were ¥1,892,364 thousand (up 146.9% YoY) and segment loss before allocation of group-wide shared costs (operating loss) was ¥365,685 thousand (compared with an operating loss of ¥362,917 thousand in Q3 FY2020).

Factors behind the posting of an operating loss in the segment included 1) investments in growth aimed at securing new medical institution users and expanding the functionality of family pharmacy support system Pharms and increasing the functionality available to patients using CLINICS telemedicine system and 2) the amortization of goodwill associated with the consolidation of Pacific Medical, Inc. and MEDiPASS Co., Ltd.

3. New Services Segment

During consolidated Q3 FY2021, as in Q2 FY2021, the Kaigo-no Honne nursing facility search website business was impacted by postponement of facilities tours and limitations on accepting new patients and residents resulting from the spread of COVID-19. However, the Company continued to proactively conduct operations, including website upgrades, to expand content and increase the number of facilities that can be introduced using Kaigo-no Honne service.

As a result of the above, consolidated Q3 FY2021 segment net sales were ¥212,185 thousand (up 161.6% YoY) and the segment posted a loss before allocation of group-wide shared costs (operating loss) of ¥38,785 thousand (compared with an operating loss of ¥62,548 thousand in Q3 FY2020).

Factors behind the posting of an operating loss in the segment included investments in optimizing the earnings structure of our Kaigo-no Honne service.

1. Outline of financial position Assets
   Current assets as of end-consolidated Q3 FY2021 totaled ¥18,223,990 thousand, an increase of ¥3,688,326 thousand compared with the end of the previous consolidated fiscal year. This increase was mainly attributable to an increase of ¥3,007,237 thousand in cash and deposits and an increase of ¥471,079 thousand in accounts receivable (trade). Non-current assets as of end-consolidated Q3 FY2021 totaled ¥3,042,231 thousand, an increase of ¥2,108,761 thousand compared with the end of the previous consolidated fiscal year. This increase was mainly attributable to an increase of ¥1,630,648 thousand in tangible non-current assets and an increase of ¥371,730 thousand in investments and other assets. Deferred assets were ¥75,219 thousand, an increase of ¥34,361 thousand compared with the end of the previous consolidated fiscal year.

As a result of the above, total assets as of end-consolidated Q3 FY2021 totaled ¥21,351,441 thousand, an increase of ¥5,831,448 thousand compared with the end of the previous consolidated fiscal year.

Liabilities

Current liabilities as of end-consolidated Q3 FY2021 totaled ¥3,280,985 thousand, an increase of ¥337,156 thousand compared with the end of the previous consolidated fiscal year. This increase was mainly attributable to increases of ¥323,867 thousand in accounts payable, ¥186,912 thousand in income taxes payable, ¥108,286 thousand in the current portion of long-term borrowings, ¥96,117 thousand in advances received, and ¥88,495 thousand in the provision for bonuses and a decrease of ¥500,000 thousand in short- term borrowings. Non-current liabilities as of end-consolidated Q3 FY2021 totaled ¥2,565,235 thousand, a decrease of ¥293,333 thousand compared with the end of the previous consolidated fiscal year. This decrease was mainly attributable to a decrease of ¥484,929 thousand in long-term borrowings.

As a result of the above, total liabilities as of end-consolidated Q3 FY2021 totaled ¥5,846,220 thousand, an increase of ¥43,822 thousand compared with the end of the previous consolidated fiscal year.

Net assets

Net assets as of end-consolidated Q3 FY2021 totaled ¥15,505,220 thousand, an increase of ¥5,787,626 thousand compared with the end of the previous consolidated fiscal year. This increase was mainly attributable to increases of ¥2,696,428 thousand each in capital and capital surplus and an increase of ¥384,345 thousand in retained earnings.

(3) Explanation regarding consolidated forecasts and forward-looking statements

The Group has revised its forecast for consolidated FY2021, and its forecast now differs from the forecast included in Consolidated Financial Results for the Year Ended December 31, 2020 [Japanese GAAP] released on February 12, 2021. For details regarding these changes, please refer to "Notice Regarding Revision to Consolidated Financial Results Forecast for the Fiscal Year Ending December 2021" released on March 17, 2021.

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