SHIKIGAKU' Business Strategies and Earnings Reviewed by BIR

Expand the "Shikigaku" theory to solve the low labor productivity issue in Japan! Aim for continued sales growth of at least 30%,and continue to invest heavily for growth.

TOKYO,Aug. 17,2022 --SHIKIGAKU Co.,Ltd. (TOKYO:7049),the company that primarily provides management consulting and platform services based on "Shikigaku," an organizational management theory grounded in original and unique logical concepts,recently has been reviewed by Borderless IR Co.,Ltd.(BIR),an independent research and investor relations support company providing reports on various publicly traded Japanese companies. In this report,BIR provides analysis of the company's business model and earnings.

Report Highlights

SHIKIGAKU CO.,LTD (7049 TSE Growth) was founded in March,2015 in the Shibuya ward of Tokyo,with a capital investment of 500 million yen under the corporate vision of "Disseminate Shikigaku and maximize people's potential". "Shikigaku" is a proprietary theory developed by analyzing the structure of human consciousness,and researching the causes of misunderstandings and misperceptions that impede behavior.

Business activities consists of five reporting segments: Management Consulting,Sports Entertainment,Contract Development,VC Funds,and Hands-On Support Funds. The core organization consulting business branch is classified broadly into two sectors,Management Consulting and Platform Services. Management consulting is a service that raises organizational productivity through the implementation and subsequent penetration of Shikigaku theory into the clientele organization based on Master Training,which was created by the Company. Platform Services consist of three components: "Shikigaku Basic Services",which provide ongoing operational support until organizational management grounded in its Shikigaku theory take hold; "Shikigaku Cloud",a web-based cloud service that supports clients; and "Shikigaku Members",a low-cost service that provides ongoing Shikigaku training and promotes the penetration and establishment of organizational management through exchanges with other members. Regarding other areas,in the Sports Entertainment business,the Company fulfills its function as a community-based club by conducting initiatives aimed at stimulating and expanding interest in local sports while also striving to facilitate strengthening the team in pursuit of promotion to the B1 League level. In the VC Fund business,the Company conducts investments focused on establishing and expanding organizational power and becoming a growth-generating organization. Meanwhile,it also operates venture capital funds that support growth by facilitating organizational improvements at companies in which they invest by implementing the Company's Shikigaku theory. In the Hands-On Support Fund business,the Company operates hands-on support funds that provide organizational improvement and finance support and draw income from capital gains generated through investment exit (IPO,M&A,etc.).

As of May,2022,the number of companies that have utilized the management consulting service provided by Shikigaku has reached the 3,000 benchmark,and the number of publicly traded companies that have implemented the service has broken through the 100 company mark. Based on the current average amount of sales generated per customer,the Company estimates growth potential in the domestic market at 1.1 trillion yen (internal company estimate),and there is substantial room for development in regard to the 3.59 million companies in Japan. Shikigaku theory can be utilized in an extremely wide range of circumstances because of the ability to be implemented within any industry while also being applicable to non-corporate organizations. In recent years,comparatively low labor productivity has become a pressing issue in Japan,and there are expectations that Shikigaku theory will attract attention as a consulting method for improving labor productivity in Japan over the medium to long term. As part of its mid-term management plan,the Company has positioned the period from FY 2023/02 to FY 2025/02 as a period of investment,and intends to aggressively implement investments while generating a certain level of profit. There was a shift to a policy of expanding operating income while making the large investments necessary for medium to long term growth.The sales growth rate is specified as the most important management index,and as such the goal is to maintain a sales growth rate of 30% and above. The Company aims to achieve sales of 11 billion yen and operating income of 1.5 billion yen in the fiscal year ending FY 2026/02

Through the cumulative consolidated first quarter of the fiscal year ending February 28,2023,the climate surrounding Shikigaku shows the market is demonstrating strong need for improvement in organizational productivity achieved through means such as results-based employee management and rule-oriented organizational management that generates results regardless of the workplace being utilized. Accordingly,demand for the Company's services remains robust.For the first quarter of the current consolidated fiscal year (1Q FY 2023/02) the Company reported net sales of 1,102 million yen,(+30.6% YoY). EBITDA (net sales + taxes + interest expense + depreciation + amortization) totaled 49 million yen (-43.7% YoY). Operating profit totaled 33 million yen (-52.9% YoY). Ordinary profit totaled 20 million yen (65.2% YoY). Net profit attributable to owners of the parent totaled 26 million yen (compared to net profit attributable to owners of the parent for the same period of the previous year was 21 million yen). The full-year consolidated earnings forecast for the fiscal year ending February 28,2023 is net sales of 4,962 million yen (+29.8% from the previous year),operating income of 400 million yen (+11.3% from the previous year),and ordinary income of 382 million yen (+10.4% from the previous year). Net income attributable to owners of the parent company was 204 million yen (-9.1% from the previous year).

The Company considers continuous expansion of corporate value and the return of profits to shareholders to be important management issues. The dividend policy planned moving forward is to return profits to shareholders through profit distribution; taking into consideration the operating results and financial position of each fiscal year,while maintaining a sound financial structure and balancing retained earnings to prepare for future business expansion. For the time being however,the Company's policy is to prioritize large-scale investments for growth and continue to pay no dividends.

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