IMAGICA : Consolidated financial results (Japanese Accounting Standards) for the First Quarter of the fiscal year ending March 31, 2023

This document is a translation of the Japanese original. The Japanese original has been disclosed in Japan in accordance with Japanese accounting standards and the Financial Instruments and Exchange Act. This document does not contain or constitute any guarantee and the Company will not compensate any losses and/or damage stemming from actions taken based on this document. In the case that there is any discrepancy between the Japanese original and this document, the Japanese original is assumed to be correct.

Consolidated financial results (Japanese Accounting Standards) for the First Quarter of the fiscal year ending March 31, 2023

			Filing date: August 2, 2022
Company name:	IMAGICA GROUP Inc.		Stock exchange listing: Tokyo Prime
Securities code:	6879	URL:	https://www.imagicagroup.co.jp/en/
Representative:	Nobuo Fuse, Representative Director, President	Tel:[phone]
Inquiries:	Masakazu Morita, Director, Senior Managing Executive Officer
Quarterly report filing date (as planned):	August 2, 2022
Dividend payment date (as planned):	－
Supplemental material of quarterly results:	Yes
Convening briefing of quarterly results:	None

(Millions of yen, rounded down)

1. Consolidated Financial Results for the First Quarter of the fiscal year ending March 31, 2023 (April 1, 2022 - June 30, 2022)

1. Consolidated Operating Results

			(Percentage represents change from the same period of the previous fiscal year.)
	Net sales		Operating income		Ordinary income		Net income attributable
				to owners of the parent
	Millions of
	yen	%	Millions of yen	%	Millions of yen	%	Millions of yen	%
3 months ended June 30, 2022	19,861	28.9	271	－	306	－	53	(89.3)
3 months ended June 30, 2021	15,414	(8.6)	(255)	－	(285)	－	499	－

(Note) Comprehensive income: 1st quarter ended June 30, 2022: 740 millions of yen / (43.3) %

1st quarter ended June 30, 2021: 1,306 millions of yen /－%

	Earnings per share of	Diluted earnings
	per share of
	common stock
	common stock
	Yen		Yen
3 months ended June 30, 2022	1.20		－
3 months ended June 30, 2021			－
11.25
(2) Consolidated Financial Position
	Total assets	Net assets	Shareholders' equity
	ratio to total assets
	Millions of yen	Millions of yen	%
As of June 30, 2022	77,832	34,160	40.1
As of March 31, 2022	73,384	34,025	42.4

(Reference) Shareholders' equity: As of June 30, 2022: 31,190 millions of yen As of March 31, 2022: 31,149 millions of yen

2. Dividends

				Dividend per share
		1st quarter- end	2nd quarter- end		3rd quarter- end	Year-end	Annual
		yen	yen		yen	yen	yen
Year ended March 31,2022		－	0.00		－	15.00	15.00
Year ending March 31,2023		－
Year ending March 31,2023			0.00		－	15.00	15.00
(Forecast)
(Note) Changes in dividends	forecast from the latest	disclosed information: None

3. Consolidated forecast for the fiscal year ending March 31, 2023 (April 1, 2022 - March 31, 2023)

(Percentage represents change from the same period of the previous fiscal year.)

							Net income		Earnings per
	Net sales		Operating income	Ordinary income	attributable		share
		to owners of the	of common
							parent		stock
	Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions of yen	%	yen
Fiscal year ending March 31,	88,000	9.7	3,600	5.3	3,300	(16.1)	2,100	(23.0)	47.30
2023

(Note) Changes in earnings forecast from the latest disclosed information： None

*Notes:

1. Material changes in subsidiaries during this period (changes in scope of consolidations resulting from change in subsidiaries): None
2. The application of specific accounting of the consolidated quarterly financial statements: Yes
3. Changes in accounting policies, accounting estimates and retrospective
4. 1. Changes in accounting policies based on revisions of accounting standards: Yes
   2. Changes in accounting policies other than ones based on revisions of accounting standards: Yes
   3. Changes in accounting estimates: None
   4. Retrospective restatement: None
5. Number of issued and outstanding shares (common stock)
6. 1. Number of issued and outstanding shares at the end of fiscal year (including treasury stock)

As of June 30, 2022	44,741,467 shares	As of March 31, 2022	44,741,467 shares

2) Number of treasury stock at the end of fiscal year

As of June 30, 2022	345,938 shares	As of March 31, 2022	345,938 shares

3) Average number of shares

As of June 30, 2022	44,395,529 shares	As of June 30, 2021	44,386,657 shares

*Consolidated quarterly financial results are exempted from quarterly review by a public certified accountant or an auditing firm.

(Explanation regarding the appropriate usage of financial forecasts and other special instructions)

Forward-looking statements, such as financial forecasts, presented in this document are based on information available and certain assumptions deemed to be reasonable to the Company at the time of publication, and are not to be read as guarantees of future performance by the Company.

Table of Contents
1.	Qualitative Information on Results in this Quarter .............................................................................................	2
(1)	Explanation of operating results..............................................................................................................	2
(2)	Explanation of financial position .............................................................................................................	3
(3)	Explanation of consolidated forecasts and other forward-looking information..........................................................	3
2.	Quarterly Consolidated Financial Statements ..................................................................................................	4
(1)	Quarterly Consolidated Balance Sheets .....................................................................................................	4
(2)	Quarterly Consolidated Statements of Income and Statements of Comprehensive Income............................................	6
(3)	Notes related to quarterly consolidated financial statements .............................................................................	8
	(Notes regarding ongoing concern assumption) ...............................................................................................	8
	(Notes in the event of significant changes in shareholders' equity) ..........................................................................	8
	(The application of specific accounting of the consolidated quarterly financial statements) ..............................................	8
	(Changes in accounting policies).................................................................................................................	8
	(Segment information and others) ..............................................................................................................	9

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1. Qualitative Information on Results in this Quarter

1. Explanation of operating results

• Overview of the first quarter of the consolidated fiscal year ending March 31, 2023

In the imaging-related business, the Group's main business domain, the market environment is undergoing dizzying changes, including rapid technological innovation, the emergence of online live shows and new forms of entertainment utilizing the metaverse due to social changes caused by the COVID-19 pandemic, and fiercer competition among video streaming service providers.

Viewing this environment as an opportunity for growth, the Group has launched its mid-term plan "G-EST 2025." In the fiscal year ending March 31, 2023, the second year of the plan, we plan to "continue to build the foundation for conversion to a high profitability Group" and will maintain our efforts to promote various initiatives based on our four key strategies.

The Group's financial performance for the first quarter of the consolidated fiscal year ending March 31, 2023, resulted in net sales of 19,861 million yen (up 28.9% year over year), operating income of 271 million yen (compared to an operating loss of 255 million yen in the first quarter of the previous fiscal year), and ordinary income of 306 million yen (compared to an ordinary loss of 285 million yen in the first quarter of the previous fiscal year). On the other hand, net income attributable to owners of the parent was 53 million yen (down 89.3% year over year) due to an extraordinary loss of 219 million yen and an increase in income taxes due to deferred tax assets.

• Performance by business segment

Financial results by business segment are as follows.

Effective from the first quarter of the consolidated fiscal year ending March 31, 2023, one consolidated subsidiary (IMAGICA EEX Inc.), which was previously included in "Adjustments," was reclassified to the Content Creation business segment because of an increase in its importance.

Comparisons and analyses for the first quarter of the consolidated fiscal year ending March 31, 2023, are based on the new classification.

1) Content Creation business

For the first quarter of the consolidated fiscal year ending March 31, 2023, the Content Creation business segment saw net sales of 4,149 million yen (up 5.0% year over year) but an operating loss of 193 million yen (compared to an operating loss of 28 million yen in the first quarter of the previous fiscal year).

For feature film productions and TV dramas, business was healthy as there was an increase in the number of delivered products. Orders for TV commercials also remained strong. On the other hand, for anime productions, both net sales and income declined due to the postponement of the delivery of some productions to the second quarter or later. For the publishing business, both net sales and income fell for the first quarter of the current fiscal year as a result of the strong earnings for the first quarter of the previous fiscal year when new young-adult fiction novels were released.

IMAGICA EEX Inc. which is included in the Content Creation business segment from this fiscal year, is engaged in the "live entertainment business," which forms one of the key strategies set forth in the mid-term plan, and orders were firm as a result of cooperation in the development and movie direction of "NeoMe," a virtual live platform provided by PIA Corporation.

These developments resulted in improved net sales and income for the overall Content Creation business segment.

2) Production Services business

For the first quarter of the consolidated fiscal year ending March 31, 2023, the Production Services business saw net sales of 11,955 million yen (up 37.6% year over year), and operating income of 355 million yen (compared to an operating loss of 174 million yen in the first quarter of the previous fiscal year).

For the domestic E2E service*1, post-production service for large feature films and drama series, and feature animation films were firm, and orders for digital cinema services also increased. In addition, through collaboration with Pixelogic Holdings LLC, we continued to win orders from video streaming service providers, resulting in firm sales related to encoding, such as compression and conversion of video files, and localization.

For overseas E2E services, demand for localization for video streaming service providers remained strong, and net sales grew. As for post-production services for TV programs and TV commercials, etc., sales remained firm as a result of a steady stream of

orders.

In game production and personnel services etc. orders for game 3DCG production and debugging, etc., were also strong. As a result, net sales and income grew for the overall Production Services business.

*1 E2E services: End-to-end services. Refers to an integrated end-to-end (E2E) service that covers the entire post-production process for feature films, dramas, animation, and other audio/video content through to media services for localization (subtitling/dubbing) and distribution of these through all kinds of media, including theaters, TV, and video streaming via the

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Internet.

• Overseas E2E services have a settlement date of December 31, so E2E earnings from January 1, 2022, to March 31, 2022, are reflected in the results for the first quarter of the consolidated fiscal year ending March 31, 2023.

3) Imaging Systems & Solutions business

For the first quarter of the consolidated fiscal year ending March 31, 2023, the Imaging Systems & Solutions business saw net sales of 4,225 million yen (up 34.1% year over year) and operating income of 325 million yen (up 214.6% year over year).

Orders for high-speed cameras remained steady in Japan and overseas, but the shortage of semiconductors caused delays in some deliveries. On the other hand, broadcasting video systems contributed to an increase in both net sales and income thanks to orders related to large projects. Sales of online delivery of TV commercials remained strong, and sales of video and image processing LSIs continued to be strong in Japan and overseas (especially in Asia).

Therefore, net sales and income rose for the overall Imaging Systems & Solutions business.

(2) Explanation of financial position

• Assets

Current assets decreased 59 million yen (0.1%) from the previous fiscal year to 41,007 million yen.

This was mainly due to decreases in notes and accounts, receivable-trade, contract assets, and cash and deposits even though inventories increased.

Non-current assets increased 4,507 million yen (13.9%) from the previous fiscal year to 36,824 million yen. This was mainly due to an increase in lease assets.

As a result, total assets increased 4,447 million yen (6.1%) from the previous fiscal year to 77,832 million yen.

• Liabilities

Current liabilities increased 1,085 million yen (3.4%) from the previous fiscal year to 33,364 million yen. This was mainly due to an increase in contract liabilities even though notes and accounts payable decreased.

Non-current liabilities increased 3,227 million yen (45.6%) from the previous fiscal year to 10,307 million yen. This was mainly due to an increase in other non-current liabilities.

As a result, total liabilities increased 4,312 million yen (11.0%) from the previous fiscal year to 43,671 million yen.

③ Net assets

Net assets increased 135 million yen (0.4%) from the previous fiscal year to 34,160 million yen.

This was mainly due to an increase in foreign currency translation adjustment even though retained earnings decreased.

(3) Explanation of consolidated forecasts and other forward-looking information

There are no revisions to the full-year forecasts for the consolidated fiscal year ending March 31, 2023, from those announced on May 13, 2022.

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