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1 This PDF document is an updated note on the company. A comprehensive version of the report on the company, including this latest update, is available on our website and various professional platforms. On May 1, 218, Synchro Food Company Limited announced its full year financial results for FY3/18. Cumulative FY3/16 FY3/17 FY3/18 FY3/18 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 % of FY FY Est. Revenue , ,6 1, % 1,27 YoY % % 29.9% 3.6% 33.3% 3.9% 2.7% Gross profit ,234 YoY % 28.6% 28.6% 31.6% 28.8% GPM % 9.7% 91.% 9.8% 91.% 89.8% 89.6% 89.6% 89.6% SG&A expenses YoY % 29.3% 25.1% 23.3% 25.9% SG&A ratio % 46.5% 47.6% 48.9% 48.2% 46.3% 45.6% 45.2% 46.4% Operating profit % 483 YoY % % 27.9% 32.4% 41.4% 32.1% 7.2% OPM % 44.3% 43.4% 41.9% 42.8% 43.6% 44.% 44.5% 43.2% 38.% Recurring profit % 459 YoY % % 29.3% 35.1% 46.1% 34.7% 8.4% RPM % 43.8% 39.% 38.3% 4.2% 43.6% 4.3% 42.% 41.4% 36.1% Net income % 289 YoY % % 26.7% 38.2% 47.3% 37.6% 9.3% Net margin % 27.8% 24.% 24.1% 25.1% 27.2% 25.4% 26.7% 26.4% 22.8% Quarterly (JPYmn) Q1 FY3/16 Q2 Q3 Q4 Q1 FY3/17 Q2 Q3 Q4 Q1 FY3/18 Q2 Q3 Q4 Revenue YoY % 31.3% 38.8% 24.8% Gross profit YoY % 28.6% 37.8% 21.8% GPM % 91.2% 9.3% 91.7% 89.8% 89.4% 89.7% 89.5% SG&A expenses YoY % 21.3% 19.7% 32.9% SG&A ratio % 48.6% 51.5% 46.6% 46.3% 44.9% 44.4% 49.6% Operating profit YoY % 37.% 61.8% 1.4% OPM % 42.6% 38.9% 45.1% 43.6% 44.5% 45.3% 39.9% Recurring profit YoY % 42.2% 69.7% 1.2% RPM % 34.3% 37.% 45.1% 43.6% 37.2% 45.3% 39.8% Net income YoY % 53.4% 65.6% 16.3% Net margin % 2.3% 24.4% 27.7% 27.2% 23.7% 29.1% 25.8% Notes: Figures may differ from company materials due to differences in rounding methods. Note: The company adopted consolidated accounting from FY3/18, so YoY figures show comparison with FY3/17 results for the parent. Seasonality: revenue tends to increase in Q4 The company s businesses are seasonal, and Q4 revenue tends to be several percentage points higher than in other quarters, as more restaurants open in March and April and post more help-wanted ads in February and March in preparation. For example, in FY3/17, revenue in each of the first three quarters was around 24% of the annual total, but Q4 revenue was 28.3%. Similarly, quarterly operating profit in Q1 and Q2 was around 24% of the annual total (in Q3, it was around 21% due to cost increases), while Q4 was 29.8% of the total. In addition to job postings, the company s websites list information on properties and interior contracting aimed at operators planning to open restaurants, so the timing of booking revenue and operating profit is affected by when restaurants are opened. Q1 Q3 results tend to be similar, with Q4 performance being about 4 5pp higher. 1/5

2 Sales trends by quarter Operating profit trends by quarter (JPYmn) 1,4 1,2 1, ,377 1, FY3/16 FY3/17 FY3/18 (JPYmn) FY3/16 FY3/17 FY3/18 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Note: Consolidated figures shown for FY3/18. Total number of members (left) and number of member realtors (right) (') 2, , 1,5 1,58 1,639 1,511 1,517 1,944 1,855 1,89 1,737 1,994 2,52 6 1, FY3/16 FY3/17 FY3/18 End-Jun. End-Sep. End-Dec. End-Mar. FY3/16 FY3/17 FY3/18 End-Jun. End-Sep. End-Dec. End-Mar. FY3/18 results (published on May 1, 218) Earnings trends: Revenue at 18.4% and operating profit at 123.3% of company s FY3/18 forecasts For FY3/18, revenue was JPY1.4bn (+3.9% YoY, versus FY3/17 result for the parent), operating profit was JPY595mn (+32.1%), recurring profit was JPY57mn (+34.7%), and net income was JPY364mn (+37.6%). The company has a single segment (Online Media) so it does not disclose earnings by segment. However, breaking down revenue by service category, Operating Services had JPY1.1bn (+37.1%), Opening/Closing Services JPY28mn (+8.9%), and Other Services JPY96mn (+23.1%). Registration by restaurant operators and restaurant-related companies: Steadily increasing, with fee-paying user count also growing According to a December 217 survey on dining trends by the Japan Foodservice Association, although costs are rising due to a personnel shortage and the rising cost of ingredients, food service industry revenue increased slightly YoY. The company s inshokuten.com website, which provides support for restaurant openings and operation, had 129,69 registered restaurant operators as of end-fy3/18 (+14.9% YoY), showing steady growth. Fee-paying users *1, an important management index, continued to show steady growth, rising to 7,35 users *1 (+1.1%). *1 This is the number of user accounts as of FY3/18 using paid services: inshokuten.com restaurant property search, job.inshokuten.com, and inshokuten.com kitchen equipment purchasing. Financial status: Cash and deposits increasing as revenue and profit increases Synchro Food adopted consolidated accounting from FY3/18. Total consolidated assets as of end-fy3/18 were JPY2.6bn. For the parent, total assets were JPY2.5bn (up JPY448mn YoY). Of this increase, JPY267mn stemmed from increase in current assets, 2/5

3 primarily increase in cash and deposits (+JPY248mn). The company had fixed assets of JPY252mn (+JPY181mn). The main driver of this increase was a JPY154mn increase in investment securities in subsidiaries and affiliates. As of end-fy3/18, total liabilities on consolidated basis were JPY399mn, while total liabilities for the parent were JPY375mn (up JPY72mn from end-fy3/17). Total consolidated net assets were JPY2.2bn, and also JPY2.2bn for the parent (up JPY375mn from end-fy3/17). The main reason for this increase was an increase in total retained earnings (up JPY368m YoY). Wit Limited was newly consolidated. 3/5

4 FY3/219 company forecasts Company forecasts FY3/16 (parent) FY3/17 (parent) FY3/18 (consolidated) FY3/19 (consolidated) (JPYmn) 1H Act. 2H Act. FY Act. 1H Act. 2H Act. FY Act. 1H Act. 2H Act. FY Act. 1H Est. 2H Est. FY Est. Revenue , , ,846 YoY % % 3.6% 31.2% 3.9% % Cost of revenue Gross profit , GPM % 91.% 91.1% 91.% 89.6% 89.6% 89.6% - - SG&A expenses SG&A ratio % 47.6% 48.8% 48.2% 45.6% 47.1% 46.4% - - Operating profit YoY % % 32.4% 31.9% 32.1% % OPM % 43.4% 42.3% 42.8% 44.% 42.5% 43.2% % Recurring profit YoY % % 35.1% 34.4% 34.7% % RPM % 39.% 41.4% 4.2% 4.3% 42.4% 41.4% % Net income YoY % % 38.2% 37.2% 37.6% % Net margin % 24.% 26.2% 25.1% 25.4% 27.4% 26.4% % Notes: Figures may differ from company materials due to differences in rounding methods. For consolidated full-year FY3/19 results, Synchro Food forecasts revenue of JPY1.8bn (+34.% YoY), operating profit of JPY661mn (+11.%), recurring profit of JPY661mn (+15.9%), and net income of JPY444mn (+22.%). In its outlook, the company aims to offer an innovative platform for the food industry, with a focus on the following three points. 1) Strengthening platform capabilities: Aims to strengthen the platform s range of capabilities through developing new services targeting all aspects of the restaurant operations business; expanding the number of members and operators served; and providing marketing data and analysis to users and operators, to become the foremost supplier of restaurant-related services to the industry. 2) Geographic expansion and deepening: Aims to strengthen its sales structure at the Tokyo head office, and Osaka and Nagoya branch offices to expand its market shares in each of these regions. In addition, it aims to develop inshokuten.com s range of services, conducting market research on opportunities for overseas expansion with a view of localization. 3) Development into peripheral businesses related to restaurant operations: Looks to expand into restaurant-related industries, such as catering and food supply area and recruitment/outplacement services to provide support for chef/dietician/managerial dietician, leveraging the inshokuten.com platform with its newly consolidated subsidiary, Wit playing the center role Shared Research plans to update details on the FY3/18 results and the FY3/19 forecasts following interviews with the company. This note is the most recent addition to the full report. 4/5

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