Vario Secure : Non-consolidated Financial Results for the Fiscal Year Ended February 28, 2022

Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the Japanese original shall prevail.

Non-consolidated Financial Results for the Fiscal Year Ended February 28, 2022

[IFRS]

April 13, 2022

Company name: Vario Secure Inc.

Stock exchange listing: Tokyo Stock Exchange Code number: 4494

URL:https://www.variosecure.net/ Representative: Yoshihiko Inami, CEO

Contact: Hideko Isoe, Director, General Manager, Office of the President Phone: [phone]

Scheduled date of Annual General Meeting of Shareholders: May 25, 2022 Scheduled date of commencing dividend payments: May 26, 2022 Scheduled date of filing annual securities report: May 25, 2022

Availability of supplementary briefing material on financial results: Available

Schedule of financial results briefing session: Scheduled (for institutional investors and analysts)

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

1. Non-consolidated Financial Results for the Fiscal Year Ended February 28, 2022 (March 1, 2021 to February 28, 2022)

(1) Non-consolidated Operating Results

(% indicates changes from the previous corresponding period.)

TotalRevenueOperating profit Profit before taxProfitcomprehensive income

Fiscal year ended	Million yen	%	Million yen	%
February 28, 2022	2,566	0.8	751 (1.6)	701 (0.9)	1.8	500	1.8
February 28, 2021	2,545	1.3	764 (3.1)	707 (2.2)

% Million yen

% Million yen

491 (1.3)

491 (1.3)

Basic earnings per share	Diluted earnings per share	Return on equity	Profit before tax to total assets	Operating profit to revenue
Fiscal year ended	Yen 132.29 131.78	Yen 127.12 123.97	% 12.1 13.4	% 9.8 9.9	% 29.3 30.0
February 28, 2022
February 28, 2021
Reference:Share of loss (profit) of investments accounted for using equity method Fiscal year ended February 28, 2022: ¥- million Fiscal year ended February 28, 2021: ¥- million

(2) Non-consolidated Financial Position

Total assets	Total equity	Total equity ratio	Total equity per share
As of February 28, 2022 As of February 28, 2021	Million yen 7,122 7,216	Million yen 4,323 3,949	% 60.7 54.7	Yen 1,137.83 1,048.52

(3) Non-consolidated Cash Flows

Cash flows from operating activities	Cash flows from investing activities	Cash flows from financing activities	Cash and cash equivalents at end of period
Fiscal year ended	Million yen 490 524	Million yen (108) (112)	Million yen (586) (450)	Million yen 389 593
February 28, 2022
February 28, 2021

2. Dividends

Annual dividends	Total dividends	Payout ratio	Dividends to total equity
1st quarter-end	2nd quarter-end	3rd quarter-end	Year-end	Total
Fiscal year ended February 28, 2021 Fiscal year ended February 28, 2022	Yen - -	Yen 0.00 0.00	Yen - -	Yen 39.44 40.44	Yen 39.44 40.44	Million yen 148 153	% 29.9 30.6	% 4.0 3.7
Fiscal year ending February 28, 2023 (Forecast)	-	0.00	-	40.50	40.50	-	29.3	-

3. Non-consolidated Financial forecast for the Fiscal Year Ending February 28, 2023 (March 1, 2022 to February 28, 2023)

Full year

Basic earnings
Revenue
per share
Million yen	%	Yen
2,650	4.9	138.23

% Million yen

(% indicates changes from the previous corresponding period.)Operating profitProfit before tax

% Million yen

Profit

3.2

785

4.4

756

7.9

• * Notes:

  • (1) Changes in accounting policies and changes in accounting estimates

    • 1) Changes in accounting policies required by IFRS: None

    • 2) Changes in accounting policies other than those in 1) above: None

    • 3) Changes in accounting estimates: None

  • (2) Number of shares issued (common shares)

    • 1) Total number of shares issued at the end of the period (including treasury shares):

      As of February 28, 2022: 3,799,413 shares

      As of February 28, 2021: 3,766,620 shares

    • 2) Total number of treasury shares at the end of the period:

      As of February 28, 2022: 29 shares

      As of February 28, 2021: - shares

    • 3) Average number of shares during the period:

  Fiscal year ended February 28, 2022: 3,783,176 shares Fiscal year ended February 28, 2021: 3,730,030 shares

• * These financial results are not subject to audit by certified public accountants or audit firms

• * Explanation of the proper use of financial forecast and other notes

  Notes regarding forward-looking statements:

  Financial forecasts and other forward-looking statements contained in this document are based on information currently available to the Company and certain assumptions that management believes to be reasonable and do not represent a commitment from the Company that they will be achieved. Actual results may differ substantially for various reasons. For the assumptions underlying the financial forecasts and other notices on the use of financial forecasts, please refer to "(4) Future Outlook" of "1. Overview of Operating Results, etc." in the accompanying materials.

Table of Contents

1. Overview of Operating Results, etc. ......................................................................................................................... 1

(1) Overview of Operating Results for the Fiscal Year under Review ....................................................................... 1

(2) Overview of Financial Position for the Fiscal Year under Review ....................................................................... 1

(3) Overview of Cash Flows for the Fiscal Year under Review ................................................................................. 2

(4) Future Outlook ..................................................................................................................................................... 2

2. Basic Approach to the Selection of Accounting Standards ...................................................................................... 2

3. Non-consolidated Financial Statements and Primary Notes in accordance with International Financial Reporting

Standards .................................................................................................................................................................. 3

(1) Non-consolidated Statements of Financial Position ............................................................................................. 3

(2) Non-consolidated Statements of Profit or Loss and Comprehensive Income ...................................................... 5

(3) Non-consolidated Statements of Changes in Equity ............................................................................................ 6

(4) Non-consolidated Statements of Cash Flows ....................................................................................................... 7

(5) Notes to Non-consolidated Financial Statements ................................................................................................. 8

1. Overview of Operating Results, etc.

• (1) Overview of Operating Results for the Fiscal Year under Review

  During the fiscal year ended February 28, 2022, the Japanese economy was expected to make a recovery thanks to the effects of various policies, despite continued harsh conditions resulting from restrictions on certain economic activities due to the spread of COVID-19 variants. Meanwhile, the outlook overseas continues to remain uncertain given surging resource prices worldwide, which reflect changes in the Russia-Ukraine situation.

  As for the environment in the security services market surrounding the Company, the investment demand for corporate security measures has continued expanding, due to increases in cyberattacks targeting supply chains and the threat of ransomware attacks (ransom-demanding-type viruses) targeting organizations such as general companies and hospitals.

  Furthermore, amidst major changes in the corporate system network environment as a result of an increase in teleworking due to the impact of COVID-19 and other factors, there has been a tendency for companies that have difficulty operating and managing their security to outsource operations and monitoring to security vendors, which has led to a steady expansion of the market, as a whole.

  In such an environment, the Company has expanded sales promotion of Vario Managed EDR, which detects signs of cyberattacks as an endpoint security measure, and data backup services (VDaP) that protect corporate information assets from the growing threat of ransomware attacks (ransom-demanding-type viruses), in addition to conventional gateway security, in order to support the development of a secure and safe business environment through multilayered defense against an increasing array of threats. The Company has also held various webinars and participated in events to explain the security services and products that the Company can provide.

  In addition, regarding the procurement of materials, the Company may be affected by a global shortage of semiconductors. At the moment, although the Company expects the effect of such a shortage to be minimal for the fiscal year ended February 28, 2022, it is difficult to rationally calculate the effect on the Company's performance for the fiscal year ending February 28, 2023 onward, and the Company will continue to monitor the situation.

  In such an environment, the Company reported stable sales thanks to the recurring revenue from Managed Security Services and a low cancellation rate (0.82%) (Note).

  As a result of the above, in the financial results on an IFRS basis for the fiscal year ended February 28, 2022, the Company reported revenue of ¥2,566,735 thousand (a year-on-year increase of 0.8%), operating profit of ¥751,778 thousand (a year-on-year decrease of 1.6%), profit before tax of ¥701,528 thousand (a year-on-year decrease of 0.9%), and profit of ¥500,481 thousand (a year-on-year increase of 1.8%).

  The results by segment are not stated, as the Company's segments comprise the single segment of Internet

  Security Services.

  Note: Cancellation rate (monetary basis) = Cancellation amount for the fiscal year ended February 28, 2022 / (Monthly revenue at the beginning of each fiscal year × 12)

• (2) Overview of Financial Position for the Fiscal Year under Review

  The financial position on an IFRS basis as of February 28, 2022 was as follows.

  Assets

  Total assets as of February 28, 2022 was ¥7,122,069 thousand, a decrease of ¥94,095 thousand from the end of the previous fiscal year. This was primarily due to increases of ¥98,361 thousand in inventories and ¥69,320 thousand in intangible assets, as well as decreases of ¥204,084 thousand in cash and cash equivalents and ¥86,505 thousand in property, plant and equipment.

  Liabilities

  Total liabilities as of February 28, 2022 was ¥2,799,011 thousand, a decrease of ¥467,787 thousand from the end of the previous fiscal year. This was primarily due to an increase of ¥1,416,913 thousand in borrowings under current liabilities, as well as decreases of ¥73,887 thousand in lease liabilities and ¥1,786,677 thousand in borrowings under non-current liabilities.

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