1. overview of management performance...unearned revenue and other current liabilities grew ¥7,197...

－ 1 －

Consolidated Financial Results for the Fiscal Year Ending February 29, 2020

[Japanese GAAP] April 21, 2020

Company name: TKP Corporation Stock exchange listing: Tokyo Stock Exchange Code number: 3479 URL: https://www.tkp.jp Representative: Takateru Kawano, CEO and Representative Contact: Koji Nakamura, CFO Telephone: +81-3-5227-7321 Scheduled date of filing quarterly securities report: April 21, 2020 Scheduled date of commencing dividend payments: None Availability of supplementary briefing material on quarterly financial results: Yes Schedule of financial results briefing session: None (only video transmission)

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

1. Consolidated financial results for the ended February 29, 2020 (March 1, 2019 to February 29, 2020) (1) Consolidated operating results (Percentage figures indicate year-on-year changes)

Net sales Operating profit Ordinary profit Profit attributable to owners of parent

Million yen % Million yen % Million yen % Million yen %

Fiscal year ended February 29, 2020 54,343 53.0 6,325 47.5 4,761 17.5 1,743 (7.9)

Fiscal year ended February 28, 2019 35,523 23.8 4,289 24.3 4,053 26.6 1,893 (8.6) (Note) Comprehensive Income: Fiscal year ended February 29, 2020: ¥1,706 million (-16.6%)

Fiscal year ended February 28, 2019: ¥2,046 million (1.1%)

Basic earnings per share Diluted earnings per share

Yen Yen

Fiscal year ended February 29, 2020 50.41 49.46

Fiscal year ended February 28, 2019 58.06 56.89

(2) Consolidated financial position

Total assets Net assets Equity ratio Net assets per share As of Million yen Million yen % Yen

February 29, 2020 117,473 35,802 30.4 951.09 February 28, 2019 51,066 10,763 21.0 327.52 (Reference) Equity: As of February 29, 2020: ¥35,715 million As of February 28, 2019: ¥10,699 million (3) Consolidated cash flow

Cash flow from operating activities

Cash flow from investing activities

Cash flow from financing activities

Cash and cash equivalents at the end of the year

As of Million yen Million yen Million yen Million yen

February 29, 2020 6,756 (58,544) 49,141 9,131 February 28, 2019 2,485 (11,283) 15,064 11,967

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2. Dividends Annual dividends

1st quarter-end

2nd quarter-end

3rd quarter-end Year-end Total

Yen Yen Yen Yen Yen

Fiscal year ended February 28, 2019 － 0.00 － 0.00 0.00 Fiscal year ended February 29, 2020 － 0.00 － 0.00 0.00 Fiscal year ending February 28, 2021 (forecast) － 0.00 － 0.00 0.00 (Note) Changes in dividend forecast subsequent to most recent announcement: None 3. Consolidated financial results forecast for the fiscal year ending February 28, 2021 (March 1, 2020 to February 28, 2021)

(Percentage figures indicate year-on-year changes)

Net sales Operating profit Ordinary profit Profit

attributable to owners of parent

Basic earnings per share

Million yen % Million yen % Million yen % Million yen % Yen

Full year ⁻ ⁻ ⁻ ⁻ ⁻ ⁻ ⁻ ⁻ ⁻ Notes: The business forecast for the fiscal year ending February 2021 is undecided because it is difficult to reasonably calculate the

impact of the spread of the COVID-19 at this stage.

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*Notes

(1) Significant changes in scope of consolidation (changes in scope of consolidation of specified subsidiaries): Yes Newly consolidated: 4th (company name) TKPSPV-9 Ltd. Regus Japan K.K. Open Office K.K. IWG Holdings Japan K.K.

(2) Changes in accounting policies and accounting estimates 1. Changes in accounting policies due to the revision of accounting standards: No 2. Changes in accounting policies other than those in 1: No 3. Changes in accounting estimates: No 4. Retrospective restatement: No (3) Number of shares issued (common stock)

1. Number of shares issued (including treasury stock )

As of February 29,2020 38,056,985 shares As of February

28,2019 33,171,600 shares

2.Number of shares of treasury stock As of February 29,2020 504,779 shares As of February

28,2019 504,700 shares

3.Number of average shares outstanding during twelve-month period (March-February)

As of February 29,2020 34,583,526 shares As of February

28,2019 32,614,270 shares

(Reference) Summary of Non-consolidated Financial Results 1. Non-consolidated Financial Results for the Fiscal Year Ended February 29.2020 (March 1,2019 to February 29, 2020)

(1)Non-consolidated Operating Results (% indicates changes from the previous corresponding period) Net sales Operating income Ordinary income Net income Fiscal year ended Million yen % Million yen % Million yen % Million yen % February 29,2020 38,131 15.4 5,792 33.2 5,168 21.5 2,844 31.1 February 28,2019 33,036 23.3 4,349 21.9 4,253 24.7 2,170 18.2

Net income per share Diluted net income per share

Fiscal year ended Yen Yen February 29,2020 82.24 80.69 February 28,2019 66.56 65.22

(2)Non-consolidated Financial Position

Total assets Net assets Equity ratio Net asset per share As of Million yen Million yen % Yen February 29.2020 99,673 36,537 36.6 972.47 February 28,2019 47,291 10,471 22.1 320.14 (Reference) Equity As of February 29,2020 36,518 Million yen As of February 28, 2019 10,457 Million yen

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1. Overview of management performance

(1) Overview of management performance for the year 1) Overview of operating performance for the year

In the fiscal year ended February 29, 2020, the TKP Group experienced an increase in demand for more flexible office spaces, buoyed by ongoing and active corporate initiatives aimed at work style reform and more efficient office operations.

Against this backdrop, on May 31, 2019 the Company converted Regus Japan1 (one of the largest providers of serviced offices in Japan) to a wholly owned subsidiary. In this way, the Company strove to create a structure for the provision of highly convenient and optimized services throughout Japan to meet increasingly segmented business demand. To achieve this, we began offering hourly office space rental, short-term rentals, and subscription agreements, in addition to the TKP Group’s existing rental conference rooms and other facilities. On September 30, 2019, we converted Regus Taiwan2 to a wholly owned subsidiary, expanding our rental office network overseas.

As a result, performance grew substantially, with net sales of ¥54,343 million (up 53.0% year on year), EBITDA3 of ¥10,132 million (up 95.6%), and operating profit of ¥6,325 million (up 47.5%). Ordinary profit amounted to ¥4,761 million (up 17.5% year on year), affected significantly by temporary commissions and financing costs related to the acquisition of Regus Japan. Profit attributable to owners of parent was ¥1,743 million (down 7.9% year on year), as the actual rate of corporate and other taxes increased due to such factors as the amortization of goodwill related to the acquisition of Regus Japan and the amortization of customer-related and other intangible assets. In addition, the growing COVID-19 pandemic began affecting consolidated operating performance, mainly from February, having an estimated negative impact on sales of around ¥700 million. Nevertheless, net sales, EBITDA, operating profit, and ordinary profit for the fiscal year all reached record levels, due to the inclusion of Regus Japan in the scope of consolidation from the second quarter and the inclusion of Regus Taiwan from the fourth quarter. 1. “Regus Japan” refers collectively to the 55 companies operating the Regus business in Japan.

2. “Regus Taiwan” refers collectively to the 13 companies operating the Regus business in Taiwan.

3. EBITDA is calculated by adding depreciation, goodwill amortization, and the amortization of customer-related and other intangible assets to

operating profit.

Consolidated performance (Million yen)

Fiscal year ended February 28, 2019


YoY change

Net sales 35,523 54,343 53.0％

EBITDA 5,180 10,132 95.6％

Operating profit 4,289 6,325 47.5％

Ordinary profit 4,053 4,761 17.5％

Profit attributable to owners of parent

1,893 1,743 (7.9％)

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2) Overview of performance by business units The TKP Group has a single business segment, the space regeneration and distribution business. The following business unit-specific details are provided for reference.

(Million yen)

Main TKP Group4 Regus Japan5 Regus Taiwan6

Fiscal year ended February 28,

2019

Fiscal year ended February 29,

2020 YoY change



Net sales 35,523 41,194 16.0% 12,843 305

Gross profit 13,722 16,353 19.2% 4,335 32

SG&A expenses 9,433 10,482 11.1% 3,791 122

EBITDA 5,180 7,198 39.0% 2,809 124

Operating profit 4,289 5,871 36.9% 543 (89)

4. Consolidated Group performance minus operating performance from Regus Japan and Regus Taiwan

5. Calculated as nine months of operating performance at Regus Japan, commencing from the date of consolidation at the start of the second quarter

(June 2019), with the amortization of goodwill related to the acquisition and the amortization of customer-related and other intangible assets added to

SG&A expenses

6. Calculated as three months of operating performance at Regus Taiwan, commencing from the date of consolidation at the start of the fourth quarter

(December 2019), with the amortization of goodwill related to the acquisition added to SG&A expenses

Main TKP Group

Large-scale facilities opened in the fiscal year ended February 28, 2019 led to the robust operation of existing facilities during the fiscal year ended February 29, 2020, contributing to higher sales and profits, as did the opening of new business hotels. The year saw year-on-year improvements in the operating margin, at 14.3% (up from 12.1% in the previous year) and the EBITDA margin, at 17.5% (14.6%). These rises were the result of improved operating efficiency at our facilities as we made efforts to hold down initial costs and SG&A expenses by curtailing new openings (45,500 square meters in 22 facilities, compared with approximately 64,500 square meters in 44 facilities in the fiscal year ended February 28, 2019, including floor expansions for both years) in a domestic real estate market characterized by tight supply. The newly opened business hotels also performed favorably. Sales per square meter, a key performance indicator (KPI) for the rental conference room business, rose year on year from the first through third quarters. In the fourth quarter, however, the growing COVID-19 pandemic caused a major falloff in demand in February (typically the highest-demand month) for entrance exams, with sales per square meter decreasing approximately 13.0% year on year, to ¥11,605.

Sales per square meter of meeting room floor space (Yen)

Q1 average Q2 average Q3 average Q4 average December January February


42,436 35,424 37,342 37,378 34,257 33,803 44,074


42,696 37,762 40,339 36,012 35,058 34,614 38,363

YoY comparison

＋0.6％＋6.6％＋8.0％ (3.7%) ＋2.3% ＋2.4% (13.0%)

Note: Sales are the total of meeting room rental fees and ancillary charges, such as optional and catering fees. Regus Japan

The Company brought Regus Japan into the scope of consolidation in June 2019, at the start of the second quarter. Accordingly, consolidated performance for the fiscal year ended February 29, 2020 includes nine months of results from Regus Japan. In the fiscal year ended February 29, 2020, high occupancy rates at existing facilities and favorable progress on opening new locations (14 locations totaling approximately 12,000 square meters) boosted sales to ¥12,843 million, outpacing initial expectations of ¥12,700 million. The occupancy rate, which is a KPI for Regus, averaged 75.9% across all facilities as of

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February 29, 2020. Regus Japan maintains a high occupancy rate (83.1%) at facilities it has opened in February 2018 (two years since launch) or earlier, providing a stable earnings structure. Excluding goodwill amortization related to the acquisition of Regus Japan and the amortization of customer-related and other intangible assets (¥1,788 million), this business generated operating profit of ¥543 million. The Company has completed its purchase price allocation (PPA) on the Regus Japan acquisition, recognizing customer-related assets in part of goodwill. Accordingly, the Company plans to amortize annual amounts of ¥2,396 million for the first 11 years and ¥1,905 million for the next nine years on the combination of goodwill and intangible assets (including customer-related assets). Regus Taiwan

TKP brought Regus Taiwan into the scope of consolidation in December 2019, at the start of the fourth quarter, so this business contributed to three months of consolidated performance in the fiscal year ended February 29, 2020. Although we had initially planned to include Regus Taiwan in consolidated accounting from October, the start was postponed to December to coincide with accounting integration. As a result, this business contributed ¥305 million to consolidated sales for the fiscal year, below the initially anticipated figure of ¥600 million. Due to temporary expenses related to the integration and the amortization of goodwill related to Regus Taiwan, during the year this business generated an operating loss of ¥89 million. 3) Outlook for the fiscal year ending February 28, 2021 and beyond

The expanding COVID-19 pandemic is causing customers to curtail events, reducing the use of rental conference rooms and banquet facilities. This situation prompted us to announce, on March 6, 2020, revisions to the medium-term business plan we unveiled on August 16, 2019. We revised downward our forecast for the fiscal year ending February 28, 2021, and withdrew our plan for the fiscal year ending February 28, 2022. Subsequently, the Japanese government declared a state of emergency on April 7, 2020. As it is unclear when the COVID-19 pandemic will end and the pandemic’s effect on our business is uncertain, we have suspended our medium-term business plan (including overseas expansion), and our outlook for the fiscal year ending February 28, 2021 is undetermined.

In response to this sudden shift in the social situation, the TKP Group has begun offering conference rooms that provide COVID-19 countermeasures, giving thorough consideration to sanitization, ventilation, and the prevention of crowding. We also provide support for web-based meetings and videoconferences and have begun offering inexpensive office space that can be used flexibly for teleworking and as satellite offices, launching a business that supports companies’ business continuity planning (BCP) efforts. For the foreseeable future, we plan to open no new facilities. We are also considering the possibility of downsizing or discontinuing operations at existing facilities and selling some properties. Through such measures, we aim to maintain a sound financial base, construct a system that will enable us to respond to changes in the social situation, and continue working to become “Japan’s leading corporate group in the flexible office market and an infrastructure company that supports corporate work style reform.”

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(2) Explanation of financial position

Note: In the text below, “subsidiaries newly acquired” refers to Regus Japan Holdings K.K. (as well as its 54 subsidiaries; below, “Regus Japan”), Taipei Regus Business Centre Co., Ltd. (and 12 other entities; below, “Regus Taiwan”), and Shinagawa Haizennin Shokaijo Y.K.

1) Status of assets, liabilities, and net assets (Current assets)

As of February 29, 2020, total assets were ¥16,854 million, up ¥106 million from a year earlier. The overall increase was due mostly to the inclusion in the scope of consolidation of subsidiaries newly acquired during the year. At the same time, the rise was slight, as cash and cash equivalents decreased ¥2,835 million year on year due to the acquisition of property, plant and equipment. (Non-current assets)

Non-current assets amounted to ¥100,618 million, up ¥66,300 million, mainly for the following reasons. 1. The inclusion in the scope of consolidation of subsidiaries newly acquired during the year

Goodwill increased ¥39,559 million; property, plant and equipment (including buildings and ancillary equipment) rose ¥4,672 million*; and customer-related assets grew ¥5,031 million.

2. The acquisition of non-current assets to open new locations Buildings and structures rose ¥9,900 million (including *), and leasehold and guarantee deposits increased ¥6,730 million.

(Current liabilities) As of February 29, 2020, current liabilities came to ¥20,221 million, up ¥10,922 million from one year earlier. The

overall increase was due mostly to the inclusion in the scope of consolidation of subsidiaries newly acquired during the year. Unearned revenue and other current liabilities grew ¥7,197 million, stemming from prepaid usage fees in the Regus Japan and Regus Taiwan businesses. Fund-raising prompted a ¥2,388 million increase in the current portion of long-term borrowings, and ¥4,238 million in profit before income taxes led to a ¥1,115 million rise in income taxes payable.

(Non-current liabilities)

Non-current liabilities amounted to ¥61,448 million, up ¥30,445 million. Key contributors to this rise were ¥27,037 million higher long-term borrowings and a ¥1,610 increase in asset retirement obligations associated with the inclusion of Regus Japan and Regus Taiwan in the scope of consolidation.

(Net assets)

Net assets came to ¥35,802 million on February 29, 2020, up ¥25,039 million from one year earlier. Notably, in line with capital increases through a public offering and third-party allocation, share capital rose ¥11,738 million, the capital surplus increased ¥11,738 million, and retained earnings expanded ¥1,743 million.

(3) Status of cash flows

Cash and cash equivalents totaled ¥9,131 million as of February 29, 2020, down ¥2,835 million from one year earlier. (Cash flows from operating activities)

Net cash provided by operating activities was ¥6,756 million (171.8% more than in the preceding fiscal year). Principal items were ¥4,238 million in profit before income taxes, ¥4,634 million in adjustments in non-cash items, ¥2,192 million in income taxes paid, and a ¥638 million increase in accounts receivable stemming from the inclusion in the scope of consolidation of subsidiaries newly acquired during the year and an increase in sales.

(Cash flows from investing activities) Net cash used in investing activities was ¥58,544 million (up 418.8%). Major factors included ¥45,658 million for the purchase of shares of subsidiaries resulting in a change in the scope of consolidation, ¥9,808 million for the purchase of property, plant and equipment associated with the opening of new locations, and ¥4,104 million in payments of leasehold and guarantee deposits.

(Cash flows from financing activities) Net cash provided by financing activities totaled ¥49,141 million (up 226.2%). Notably, a public offering provided ¥23,418 million, and proceeds from long-term borrowings provided ¥34,304 million. Meanwhile, repayments of long-term borrowings and the redemption of bonds used ¥8,411 million.

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(4) Outlook The spreading COVID-19 pandemic is having a profound impact on corporate offices and working styles. As one aspect of

their BCPs, we expect companies to begin diversifying their head office locations, prompting a greater demand for more flexible office space. The TKP Group will respond to this need by providing companies with highly convenient and flexible office space at its TKP and Regus facilities.

Following the Japanese government’s declaration of a state of emergency on April 7, 2020 and uncertainty about when the COVID-19 pandemic will end, we are currently unable to rationally forecast operating performance for the fiscal year ending February 28, 2021.

(5) Fundamental policy on the distribution of profits, and dividends for the fiscal years ended February 29, 2020 and ending

February 28, 2021 The TKP Group is currently in an investment phase. For this reason and given the need to retain capital to expand the

business and respond to changes in the social environment, we intend to forego dividend payments for the foreseeable future. Rather, we will retain earnings and invest the capital as needed to expand our operations. In line with this policy, the Group has refrained from the payment of dividends since the time of its establishment. However, we recognize the return of profits to shareholders as an important management issue, so will consider the payment of dividends, taking our operating performance and the financial condition into overall account.

2. Fundamental perspective on the selection of accounting standards

After taking into consideration such factors as the burden of putting in place a system to prepare consolidated financial statements in accordance with international accounting standards, the Company has prepared its consolidated financial statements based on Japan GAAP.

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3. Quarterly consolidated financial statements and primary notes (1) Quarterly consolidated balance sheet

(Million yen)


(As of February 28, 2019)


(As of February 29, 2020) Assets

Current assets Cash and deposits 11,967 9,131 Accounts receivable–trade 3,355 4,114 Other 1,448 3,620 Allowance for doubtful accounts (24) (12) Total current assets 16,747 16,854

Non-current assets Property, plant and equipment

Buildings and structures, net 12,316 22,216 Tools, furniture and fixtures, net 416 1,041 Land 8,425 10,932 Construction in progress 3,784 3,452 Other, net 16 1,405 Total property, plant and equipment 24,959 39,049

Intangible assets Goodwill 112 39,671 Customer related assets - 5,031 Other 142 172 Total intangible assets 254 44,875

Investments and other assets Investment securities 966 631 Leasehold and guarantee deposits 6,416 13,147 Deferred tax assets 468 1,835 Other 909 1,079 Total investments and other assets 9,103 16,694

Total non-current assets 34,318 100,618 Total assets 51,066 117,473

Liabilities Current liabilities

Accounts payable–trade 672 917 Income taxes payable 673 1,789 Current portion of bonds 1,040 1,015 Current portion of long-term borrowings 4,540 6,929 Other 2,371 9,569 Total current liabilities 9,299 20,221

Non-current liabilities Bonds payable 5,505 4,490 Long-term borrowings 24,826 51,863 Asset retirement obligations 404 2,015 Other 267 3,079

Total non-current liabilities 31,003 61,448 Total liabilities 40,302 81,670

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(Million yen)


(As of February 28, 2019)


(As of February 29, 2020) Net assets

Shareholders’ equity Share capital 314 12,052 Capital surplus 2,329 14,067 Retained earnings 7,892 9,635 Treasury shares (17) (17) Total shareholders’ equity 10,518 35,738

Accumulated other comprehensive income Valuation difference on available-for-sale securities 190 67 Deferred gains or losses on hedges (40) (178) Foreign currency translation adjustment 30 87 Total accumulated other comprehensive income 180 (22)

Share acquisition rights 13 19 Non-controlling interests 50 67 Total net assets 10,763 35,802

Total liabilities and net assets 51,066 117,473

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(2) Quarterly consolidated statements of income and comprehensive income (Quarterly consolidated statement of income) fiscal year ending February 29, 2020

(Million yen)

Fiscal year ended February 28,2019

(March 1 to February28,2019)



Net sales 35,523 54,343 Cost of sales 21,801 33,620 Gross profit 13,722 20,722 Selling, general and administrative expenses 9,433 14,396 Operating profit 4,289 6,325 Non-operating income

Interest income 3 4 Dividend income 55 8 Exchange gain － 26 Reversal allowance for doubtful accounts 0 16 Refund of income taxes － 31 Others 36 68 Total non-operating income 95 156

Non-operating expenses Interest expenses 186 411 Interest on bonds 24 24 Commission expenses 51 1,206 Bond issuance cost 46 － Other 23 77 Total non-operating expenses 331 1,720

Ordinary profit 4,053 4,761 Extraordinary income

Gain on sales of investment securities 15 397 Gain on sales of shares of subsidiaries and associates 10 － Government subsidy － 17 Total extraordinary income 25 414

Extraordinary losses Loss on valuation of investment securities 821 215 Loss on sales of shares of subsidiaries and associates 23 － Loss on retirement of fixed assets 65 58 Impairment loss 15 663 Total extraordinary losses 925 937

Profit before income taxes 3,152 4,238 Income taxes–current 1,300 2,970 Income taxes–deferred (47) (641) Total income taxes 1,252 2,328 Profit 1,900 1,909 Profit attributable to non-controlling interests 6 166 Profit attributable to owners of parent 1,893 1,743

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(Quarterly consolidated statement of comprehensive income) fiscal year ending February 29, 2020

(Million yen)





Profit 1,900 1,909 Other comprehensive income

Valuation difference on available-for-sale securities 182 (122) Deferred gains or losses on hedges (33) (137) Foreign currency translation adjustment (2) 56 Total other comprehensive income 146 (202)

Comprehensive income 2,046 1,706 (Breakdown)

Comprehensive income attributable to owners of parent

2,039 1,540

Comprehensive income attributable to non-controlling interests

7 166

（３）Statement of consolidate shareholders’ equity Previous consolidated fiscal year (March 1,2018 to February28,2019)

（Million yen） Shareholder

s’ equity Capital stock Additional paid-in

capital Accumulated earnings Treasury shares Total shareholders’ equity

Balance at beginning of current period 287 2,302 5,998 (17) 8,571 Amount of changes during the period

Issuance of new shares ( Exercise of new share reservation rights )

26 26 53

Comprehensive income attributable to owners of parent 1,893 1,893

Net changes of item other than株shareholders’ equity

Amount of changes during the period 26 26 1,893 － 1,946

Balance at end of current period 314 2,329 7,892 (17) 10,518

Accumulated other comprehensive income

New share reservation rights

Non-controlling interests Total net assets

Valuation difference on available for sale securities

Deferred gains or losses on hedges

Foreign currency translation adjustment

Total amount of accumulated other comprehensive income

Balance at beginning of current period 8 (7) 34 34 5 43 8,655 Amount of changes during the period


53

Comprehensive income attributable to owners of parent 1,893

Net changes of items other than shareholders’ equity 182 (33) (3) 145 7 7 161

Amount of changes during the period 182 (33) (3) 145 7 7 2,107

Balance at end of current period 190 (40) 30 180 13 50 10,763

－ 13 －

Consolidated accounting period (March 1, 2019 to February 29, 2020) (Million yen) Shareholders’ equity

Capital stock Additional paid-in capital Accumulated earnings Treasury shares Total shareholders’

equity Balance at beginning of current period 314 2,329 7,892 (17) 10,518 Amount of changes during the period

Issuance of new shares 11,709 11,709 23,418


28 28 57

Comprehensive income attributable to owners of parent 1,743 1,743

Sales of shares of consolidated subsidiaries (0) (0)

Treasury shares (0) (0)

Net changes of items other than shareholders’ equity －

Amount of changes during the period 11,738 11,738 1,743 (0) 25,219

Balance at end of current period 12,052 14,067 9,635 (17) 35,738

Accumulated other comprehensive income

New share reservation rights

Non-controlling interests Total net assets

Valuation difference on available for sale securities

Deferred gains or losses on hedges

Foreign currency translation adjustment

Total amount of accumulated other comprehensive income

Balance at beginning of current period 190 (40) 30 180 13 50 10,763 Amount of changes during the period

Issuance of new shares 23,418


57

Comprehensive income attributable to owners of parent 1,743

Sales of shares of consolidated連subsidiaries (0)

Treasury shares (0)

Net changes of items other than shareholders’ equity (122) (137) 56 (203) 5 17 (180)

Amount of changes during the period (122) (137) 56 (203) 5 17 25,039

Balance at end of current period 67 (178) 87 (22) 19 67 35,802

－ 14 －

(4) Quarterly consolidated statement of cash flows (Million yen)




(March 1 to February29,2020) Cash flows from operating activities

Profit before income taxes 3,152 4,238 Depreciation 813 1,830 Depreciation expense of customer related assets － 368 Amortization of goodwill 32 1,528 Loss on retirement of non-current assets 65 58 Loss (gain) on sales of investment securities (15) (397) Loss (gain) on sales of shares of subsidiaries and associates

13 －

Impairment loss 15 663 Loss (gain) on valuation of investment securities 821 215 Increase (decrease) in allowance for doubtful accounts 0 (29) Bond issuance cost 46 － Interest and dividend income (58) (13) Interest expenses 186 411 Interest expenses on bonds 24 24 Decrease (increase) in trade receivables (485) (638) Decrease (increase) in prepaid expenses (352) (1,026) Increase (decrease) in trade payables 81 509 Increase (decrease) in accounts payable–other 20 0 Increase (decrease) in accrued expenses 41 386 Increase (decrease) in advances received (13) 480 Other, net (25) 757 Subtotal 4,364 9,368 Interest and dividends received 58 13 Interest paid (208) (432) Income taxes paid (1,728) (2,192) Cash flows from operating activities 2,485 6,756

Cash flows from investing activities Purchase of property, plant and equipment (9,515) (9,808) Proceeds from sales of property, plant and equipment 4 5 Purchase of shares of subsidiaries resulting in change in scope of consolidation

－ (45,658)

Proceeds from sales of shares of subsidiaries resulting in change in scope of consolidation

45 －

Purchase of investment securities (9) (50) Payments of leasehold and guarantee deposits － 399 Guarantee deposits receive － 262 Payments of leasehold and guarantee deposits (1,656) (4,104) Proceeds from refund of leasehold and guarantee deposits

199 542

Other, net (351) (132) Cash flows from investing activities (11,283) (58,544)

Cash flows from financing activities Proceeds from long-term borrowings 16,543 34,304 Repayments of long-term borrowings (3,490) (7,371) Proceeds from issuance of common shares － 23,418 Proceeds from issuance of subscription rights to shares 53 57 Proceeds from issuance of bonds 2,953 － Redemption of bonds (990) (1,040) Proceeds from share issuance to non-controlling shareholders

－ 13,000

Payments of refund to non-controlling interests － (13,000) Dividends paid to non-controlling interests － (149) Other, net (3) (76)

－ 15 －

(Quarterly consolidated statement of comprehensive income) fiscal year ending February 29, 2020

(Million yen)





Cash flows from financing activities 15,064 49,141 Effect of exchange rate change on cash and cash equivalents

(4) (189)

Net increase (decrease) in cash and cash equivalents 6,261 (2,835) Cash and cash equivalents at beginning of period 5,706 11,967

Cash and cash equivalents at end of period 11,967 9,131

(5) Notes to the consolidated financial statements

(Notes concerning the going concern assumption) No applicable matters to report

(Additional information) (Financial covenants) The financial covenants indicated below were attached to a syndicated loan agreement the Company entered into on

January 29, 2020 to refinance the funding raised to acquire Regus Japan.

(1) The consolidated net leverage ratio* shall be below the values outlined in the figure below as of the end of the second and fourth quarters of fiscal years from the fiscal year ended February 29, 2020 (including the fiscal year ended February 29, 2020, and with each being for the most recent 12-month period), with both values remaining positive.

Net leverage ratio: α

Fiscal year ended February 29, 2020: α 6.50 First half ending August 31, 2020: α≦6.25

Fiscal year ending February 28, 2021: α≦6.00 First half ending August 31, 2021: α≦5.75




* Net leverage ratio = (net interest-bearing debt − (accounts receivable + inventories - accounts payable)) / (operating profit + depreciation (including lease depreciation) + goodwill amortization + amortization of long-term prepaid expenses + acquisition-related costs − repayment of lease obligations)

(2) Total net assets stated in the consolidated balance sheet as of the end of the second and fourth quarters of fiscal years from the fiscal year ended February 29, 2020 (including the fiscal year ended February 29, 2020) shall be maintained at 80% or more of the value of total net assets as of the end of the preceding second and fourth quarters, respectively, and at least ¥24.7 billion.

(3) Total net assets stated in the consolidated balance sheet as of the end of the second and fourth quarters of fiscal years

from the fiscal year ended February 29, 2020 (including the fiscal year ended February 29, 2020) shall be maintained at 30% or more of total assets for the corresponding periods.

(4) Ordinary profit as of the end of the second and fourth quarters of fiscal years from the fiscal year ended February 29,

2020 (including the fiscal year ended February 29, 2020) shall not be negative on a consolidated basis.

The contract amount and balance of debt under this agreement are outlined below.

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Contract amount Balance of debt

Current portion of long-term borrowings Long-term borrowings

¥25,000 million ¥2,004 million

¥22,829 million

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1. Overview of business combination (1) Name of acquired company and its business

Name of acquired company: Regus Japan Holdings K.K. (includes 54 consolidated subsidiaries) Business: Management and operation of serviced offices, virtual offices, co-working spaces, etc.

(2) Primary reasons for business combination Starting with our business of managing conference rooms and banquet facilities, we are effectively utilizing idle

real estate and expanding our space regeneration and distribution business, which adds and creates new value. While increasing our number of conference rooms and other rental facilities in Japan (2,152 rooms as of May 31, 2019), we have worked to grow our business by providing services derived from our rental conference room management business, including food and beverage, catering and lodging services.

Headquartered in Switzerland, IWG was established in 1989. It is listed on the London Stock Exchange and is the largest workspace provider in the world. IWG is developing a diverse range of brands around the world, including Regus, the world’s top brand of serviced offices, and provides motivating, professional work environments as well as community services. Its network serves more than 2,500,000 customers (as of May 2019) and includes more than 3,300 locations in over 1,100 cities in more than 110 countries worldwide.

TKP Corporation acquired the shares of Regus Japan, which, as IWG’s Japan business, has the largest network in the country and is the biggest company in the rental office space industry. As of March 2019, Regus Japan operated in over 140 locations in about thirty cities throughout Japan. In September 1998, it launched its business in Japan, which involves managing facilities such as serviced offices, virtual offices and co-working spaces through a diverse range of brands that includes Regus, Open Office and SPACES.

Simultaneously with the acquisition of Regus Japan, which allowed us to increase our number of existing locations, we established a long-term partnership in Japan with IWG by reaching an agreement that provides us with exclusive operating rights for all IWG brands in Japan. This agreement enables us to expand our service bases while utilizing IWG’s brand portfolio, global network, overseas sales marketing team, infrastructure and back-office support as its exclusive partner in Japan.

TKP Corporation has been considering genuine short- to mid-term expansion into the flexible office space market for some time because rental conference rooms and offices have a highly compatible and complementary relationship. We made, and ultimately carried out, the resolution to acquire Regus Japan because we are accelerating our expansion into this market, which we forecast will enable us to create further value.

We believe that this acquisition will give rise to two specific synergies: First, it will enable us to expand our network of locations through joint openings and by converting our existing facilities. Second, it allows us to raise the quality of our customer services by merging our resources with those from Regus Japan.

(3) Date of business combination May 31, 2019 (assumed acquisition date)

(4) Legal form of business combination Acquisition of shares

(5) Name of the company following the business combination Regus Japan Holdings K. K.

(6) Percentage of voting rights acquired 100.0%

(7) Grounds for determining acquiring company TPK Corporation acquired shares in compensation for cash.

2. Period of business performance of the acquired company which is included in the consolidated financial Statements

From Jun 1, 2019 to February 29, 2020.

3. Breakdown of acquisition cost for the acquired company and each type of payment

Acquisition price Cash £300 million (¥42,383 million)

Acquisition cost £300 million (¥42,383 million)

4. Main details and amount of acquisition-related expenses Advisory and other expenses: ¥294 million

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5. Amount of goodwill that arose, reasons for incidence, and amortization method and period (1) Amount of goodwill that arose

¥37,866 million Goodwill has been calculated on a provisional basis because the allocation of acquisition costs has not been

completed as of the first three months of the fiscal year ending February 29, 2020. (2) Reasons for incidence

Goodwill arose due to projections of excess earning power resulting from future business expansion (3) Amortization method and period

Straight-line method over a period of 20 years

6. Amount of assets received and liabilities undertaken on the date of the business combination, and their breakdown Million yen

Current assets 335 Non-current assets 13,939 Total assets 14,274 Current liabilities 5,084 Non-current liabilities 4,673 Total liabilities 9,757

The result of allocation of acquisition cost, identified intangible fixed asset is customer related assets 5,400 million yen, and that will evenly charge off for 11years.

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(Significant subsequent events) 1. Significant borrowings

The company has entered into the following borrowing agreements. 1) Commitment line agreement with Mizuho Bank, Ltd. (1) Lender Mizuho Bank, Ltd. (2) Amount of agreement ¥5,000 million (3) Date of agreement April 6, 2020 (4) Commitment period April 6, 2020 to March 31, 2021 (5) Collateral Unsecured and unguaranteed (6) Use of funds Short-term working capital 2) Special overdraft agreement with Sumitomo Mitsui Banking Corporation (1) Lender Sumitomo Mitsui Banking Corporation (2) Overdraft amount ¥10,000 million (3) Date of agreement April 10, 2020 (4) Agreement period April 10, 2020 to March 31, 2021 (5) Collateral Unsecured and unguaranteed (6) Use of funds Short-term working capital

1. overview of management performance...unearned revenue and other current liabilities grew ¥7,197...

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