Medley : Consolidated Financial Results for the Three Months Ended March 31, 2021

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 Three Months Ended March 31, 2021

[Japanese GAAP]

													May 14, 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: May 14, 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 Three Months Ended March 31, 2021 (January 01, 2021 to March 31, 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
Three months ended		Million		Million			Million			Million			Million
	yen	%	yen		%	yen		%	yen		%	yen	%
March 31, 2021		2,125	70.1	(73)		-	(138)		-	(133)		-	(132)	-
March 31, 2020		1,249	-	(177)		-	(210)		-	(211)		-	(213)	-

(Note) Comprehensive income:	Three months ended March 31, 2021:
	Three months ended March 31, 2020:

¥	(131)	million	[	-%]
¥	(213)	million	[	-%]

	Basic earnings		Diluted earnings
	per share		per share
Three months ended		Yen	Yen
March 31, 2021		(4.27)	-
March 31, 2020		(7.59)	-

(Note) 1. Regarding diluted net earnings per share, while dilutive shares existed, because a per-share net loss was posted, no data is provided.

1. 2. EBITDA = Operating profit / loss + depreciation and amortization of goodwill + share-based compensation expenses Because the Group has posted no amortization of goodwill during consolidated Q1 FY2020, it was not included in the calculation of EBITDA. However, starting from consolidated Q1 FY2021, amortization of goodwill by two newly consolidated subsidiaries is included in the calculation of EBITDA. Also, because there were no share-based compensation expenses during consolidated Q1 FY2020 or consolidated Q1 FY2021, 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	%
March 31, 2021		15,882		9,672	60.8
December 31, 2020		15,519		9,717	62.6
(Reference) Equity:	As of March 31, 2021:	¥	9,661 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	-
Fiscal year ending December 31, 2021			0.00	-		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 to	Basic
	Net sales	EBITDA	Operating profit	Ordinary profit	earnings per
									owners of parent	share
	Million		Million		Million		Million
	yen	%	yen	%	yen	%	yen	%	Million yen	%	Yen
Full year	10,770	57.7	670	23.5	160	(59.6)	180	(57.4)	20	(95.6)	0.64
～	～	～	～	～	～	～	～	～	～	～
	11,270	65.0	1,170	115.6	660	66.6	680	60.9	480	5.3	15.45
(Note) Revision to the financial results forecast announced most recently:	No

* Notes:
(1) Changes in significant subsidiaries during the three months ended March 31, 2021
(changes in specified subsidiaries resulting in changes in scope of consolidation):	Yes
New	2	(Company names: 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 "(3) Important notes regarding quarterly consolidated financial statements (Application of
	special accounting methods for quarterly consolidated financial statements)" under "2. Quarterly Consolidated Financial
	Statements and Important Notes" on page 10.

1. Changes in accounting policies and 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: No
   4. Retrospective restatement: No
3. Total number of issued shares (common shares)
4. 1. Total number of issued shares at the end of the period (including treasury shares):

March 31, 2021:	31,068,000	shares
December 31, 2020:	30,889,100	shares
2) Total number of treasury shares at the end of the period:
March 31, 2021:	-	shares
December 31, 2020:	- shares

3) Average number of shares during the period:
Three months ended March 31, 2021:	30,966,075	shares
Three months ended March 31, 2020:	28,169,825	shares

• 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

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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 first quarter of the consolidated fiscal year ending December 31, 2021 (consolidated Q1 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 its second state of emergency in January 2021, mainly focusing on major cities such as Tokyo and Osaka. However, after a period of extension, the state of emergency was fully lifted in March 2021.

Amid this business environment, as the impact on sales in the Recruitment Platform Business from the second state of emergency was limited, sales in this business increased in consolidated Q1 FY2021. Sales in the Medical Platform Business also showed strong growth in consolidated Q1 FY2021 on continued strong demand for the Group's telemedicine system and the consolidation of Pacific Medical, Inc. in January 2021. 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 Q1 FY2021, the Group posted net sales of ¥2,125,171 thousand (up 70.1% YoY), a negative EBITDA of ¥73,424 thousand (a negative EBITDA of ¥177,608 thousand in Q1 FY2020), an operating loss of ¥138,836 thousand (an operating loss of ¥210,929 thousand in Q1 FY2020), an ordinary loss of ¥133,849 thousand (an ordinary loss of ¥211,612 thousand in Q1 FY2020), and a quarterly net loss attributable to owners of the parent company of ¥132,221 thousand (a quarterly net loss attributable to owners of the parent company of ¥213,869 thousand in Q1 FY2020).

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 groupwide shared costs totaled ¥470,246 thousand (up 34.0% YoY).

1. Recruitment Platform Business

During consolidated Q1 FY2021, there was no major impact on operations from the promulgation of the second state of emergency in response to the spread of COVID-19. We were therefore able to continuously improve the functionality of the Group's service websites with the aim of improving user convenience, which resulted in growth in the number of job applicants and the number of customer offices grew 4.6% compared with the end of consolidated FY2020, surpassing 226,000. However, the number of job offers listed increased by only 0.6% (to over 216,000) during the same period. Also, in consolidated Q1 FY2021, the Group invested in television advertising aired in some regions of Japan, aiming to increase the number of medical and healthcare professionals making use of the Group's services to find employment.

As a result of the above, consolidated Q1 FY2021 segment net sales were ¥1,491,821 thousand (up 37.6% YoY) and segment profit before allocation of groupwide shared costs (operating profit) was ¥441,702 thousand (up 50.7% YoY).

2. Medical Platform Business

During consolidated Q1 FY2021, amid increased interest in telemedicine and online drug administration guidance as measures to prevent the spread of COVID-19, sales from the Group's cloud-based CLINICS medical support system and its Pharms, pharmacy window support system, were strong. In addition, owing to the consolidation in January 2021 of Pacific Medical, Inc., which develops and provides MALL, electronic medical record system, to small and medium-sized hospitals, the number of customers served by the Medical Platform Business continued to increase, rising by 431.5% compared with the end of consolidated FY2020 and reached 6,756. Also, NaCl Medical, Inc., which was converted into a consolidated (wholly owned) subsidiary in March 2019, is entrusted with the development of Online Receipt Computer Advantage (ORCA) medical accounting software. The Group also continued to update and expand content for MEDLEY, online medical encyclopedia. In addition to running its pharmacy business, OTO, Inc., which was converted into a consolidated subsidiary (wholly owned subsidiary) in December 2020, operated its location as a center for proof-of-concept testing with the aim of expanding the functionality of its pharmacy window support system and developing new products.

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As a result of the above, consolidated Q1 FY2021 segment net sales were ¥605,818 thousand (up 349.8% YoY) and segment loss before allocation of groupwide shared costs (operating loss) was ¥96,356 thousand (an operating loss of ¥137,071 thousand in Q1 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 Pharms and 2) the amortization of goodwill associated with the conversion of Pacific Medical, Inc. into a consolidated subsidiary.

3. New Services Segment

During consolidated Q1 FY2021, we continued to expand content and proactively conduct operations to increase the number of facilities that can be introduced using our Kaigo-no Honne service.

As a result of the above, consolidated Q1 FY2021 segment net sales were ¥27,531 thousand (down 9.2% YoY) and the segment posted a loss before allocation of groupwide shared costs (operating loss) of ¥13,935 thousand (an operating loss of ¥16,089 thousand in Q1 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 Q1 FY2021 totaled ¥12,836,817 thousand, a decrease of ¥1,708,846 thousand compared with the end of the previous consolidated fiscal year. This decrease was mainly attributable to a decrease of ¥2,209,231 thousand in cash and deposits and an increase of ¥505,706 thousand in accounts receivable (trade). Non-current assets as of end-consolidated Q1 FY2021 totaled ¥3,008,385 thousand, an increase of ¥2,074,915 thousand compared with the end of the previous consolidated fiscal year. This increase was mainly attributable to an increase of ¥1,831,753 thousand in intangible non-current assets and an increase of ¥142,237 thousand in investments and other assets.

As a result of the above, total assets as of end-consolidated Q1 FY2021 totaled ¥15,882,330 thousand, an increase of ¥362,337 thousand compared with the end of the previous consolidated fiscal year.

Liabilities

Current liabilities as of end-consolidated Q1 FY2021 totaled ¥3,236,179 thousand, an increase of ¥292,349 thousand compared with the end of the previous consolidated fiscal year. This increase was mainly attributable to an increase of ¥116,766 thousand in the current portion of long-term borrowings payable, an increase of ¥116,206 thousand in accounts payable, and an increase of ¥56,815 in advances received. Non-current liabilities as of end-consolidated Q1 FY2021 totaled ¥2,973,571 thousand, an increase of ¥115,002 thousand compared with the end of the previous consolidated fiscal year. This increase was attributable to an increase of ¥185,025 thousand of other non-current liabilities resulting from increase in non-current payables and decrease of ¥70,023 thousand in long- term borrowings.

As a result of the above, total liabilities as of end-consolidated Q1 FY2021 totaled ¥6,209,750 thousand, an increase of ¥407,352 thousand compared with the end of the previous consolidated fiscal year.

Net assets

Net assets as of end-consolidated Q1 FY2021 totaled ¥9,672,579 thousand, a decrease of ¥45,014 thousand compared with the end of the previous consolidated fiscal year. This decrease was mainly attributable to increases of ¥38,963 thousand each in capital and capital surplus and a decrease of ¥132,221 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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