COMPANY RESEARCH AND ANALYSIS REPORTScala, Inc.
4845
Tokyo Stock Exchange First Section

17-Oct.-2019
FISCO Ltd. Analyst

Yuzuru SatoFISCO Ltd.
http://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.
4845 Tokyo Stock Exchange First Section

17-Oct.-2019https://scalagrp.jp/en/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Overview of FY6/19 results.................... ......................................................................................................

01

2. Outlook for FY6/20.. .....................................................................................................................................

01

3. Medium-term management plan............ ......................................................................................................

02■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. History................................................... ......................................................................................................

03

2. Business description. . ..................................................................................................................................

05

3. The Company’s strengths............................................................................................................................

08■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 08
1. Summary of FY6/19 results. . ........................................................................................................................

08

2. Trends by business segment. . ......................................................................................................................

10

3. Financial condition and business indicators.................................................................................................

14■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 15
1. Outlook for FY6/20.. .....................................................................................................................................

15

2. Mid-term management plan. . .......................................................................................................................

17■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 21■Information security measure------------------------------------------------------------------------------------------------------------------------ 21

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.
4845 Tokyo Stock Exchange First Section

17-Oct.-2019https://scalagrp.jp/en/ir/██Summary
Medium-term management plan aims for sales revenue of ¥500bn in
10 years
Scala, Inc. <4845> (hereafter, also “the Company”) is a leading provider of website search services, FAQ services,and other services for corporate websites. It continues to develop its businesses and achieve sustainable growth,
centered on SaaS/ASP*1 businesses, which are a business model with recurring (stock-type) income. It also actively
conducts M&A to expand its business area, and in July 2016, it made a subsidiary of Softbrain Co., Ltd. <4779>,
which is a major sales support software company. It also made subsidiaries of plube Co., Ltd., an EC website
management company, in August 2017; of Leoconnect, Inc., which provides customer support consulting to callcenters operated by the HIKARI TSUSHIN <9435> Group, in March 2018; and of Connect Agency Inc., which
provides a Cloud PBX service*2, in November 2018. The Company has adopted International Financial ReportingStandards (IFRS) accounting.
*1	Service that supplies application software functionality to customers over a network*2	An IP phone service with a service design that generates call fees every second. Compared to the usual, three-minutefees, this service offers a cost benefit for companies that make a lot of calls that last a very short time, such as outboundcalls.

1. Overview of FY6/19 results
FY6/19 consolidated results were strong, as sales revenue increased 33.4% year on year (YoY) to ¥17,112mn
and operating profit rose 39.2% to ¥2,153mn. Both results exceeded the Company’s forecasts (sales revenue of¥16,600mn and operating profit of ¥2,000mn). Higher sales and profits were achieved in all the business segments,
especially in the mainstay SaaS/ASP business and Softbrain’s SFA business. In addition to the emergence ofsynergies (acquiring new customers, etc.) in conjunction with making HIKARI TSUSHIN Group’s Leoconnect andConnect Agency subsidiaries in 2018, in the SFA business demand for e-Sales Manager, a tool to improve sales
productivity, was strong, as companies energized their efforts at workstyle targeting reforms.
2. Outlook for FY6/20
The Company is not disclosing results forecasts for FY6/20 due to the large impact of new businesses which theCompany will focus on going forward. However, for existing businesses alone, the Company is forecasting sales
revenue to increase 16.9% YoY to ¥20,000mn and operating profit to increase 11.4% YoY to ¥2,400mn. In the SaaS/ASP business, double-digit growth in sales revenue is expected to continue, due to the build-up of fixed monthly
revenue for i-ask and other services, as well as the new introduction and cross-selling of new services such as the
Web-chat system i-livechat, the web chat bot system i-assist (virtual assistance), and the digital gift service i-gift. In
addition, contributions to profits are expected from the planned introduction of a cloud-based core system which theCompany is newly developing in the customer support business. Elsewhere, the Company is forecasting continued
growth in Softbrain’s SFA business and field marketing business.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.
4845 Tokyo Stock Exchange First Section

17-Oct.-2019https://scalagrp.jp/en/ir/

Summary

3. Medium-term management plan
In August 2019, the Company announced a new medium-term management plan. The plan calls for the Company tofully utilize people, knowledge, assets, and other external resources in the Company’s three capabilities (the capability
to determine real issues, the capability to discover hidden value of resources, and the capability to maximize value by
proposing and executing optimal combination of issues and resources) and to implement these capabilities into thethree segments of the Value Creation Support Business, the IT/AI/IoT–related Business, and the Social Issue-solving
Business. Numerical targets include sales revenue of ¥100bn and operating profit of ¥10bn by FY6/25 and sales
revenue of ¥500bn and operating profit of ¥50bn by FY6/30. In the Value Creation Support Business, due to thefact that management consulting know-how is necessary, the business will be grown by newly establishing Scala
Partners and building a network of external partners (specialists). The money needed to expand the business will
come from borrowings, the issuance of corporate bonds, as well as the creation of funds.
Key Points
The SaaS/ASP services in the CRM field is its core business and it is expanding business domain through an
M&A strategy• Results forecasts for FY6/20 are not disclosed, but the outlook is for continued double-digit growth in revenue
and profit in existing businesses• The Company’s medium-term management plan targets revenue of ¥500bn and operating profit of ¥50bn in
FY6/30•Results trend (Non-GAAP)
Sales revenue (left)(¥mn)

Operating profit (right)

(¥mn)
2,400

25,000

2,500

2,153
20,000

2,000

1,546
1,389

15,0001,500

10,00020,00012,82910,663

5,000

1,000

17,112

616

500

2,693
0

0
FY6/16

FY6/17

FY6/18

FY6/19FY6/20 E

Note: FY6/20 results forecasts have not been disclosed
Source: Prepared by FISCO from the Company's financial results and medium-term management plan

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.
4845 Tokyo Stock Exchange First Section

17-Oct.-2019https://scalagrp.jp/en/ir/██Company profile
The SaaS/ASP services in the CRM field is its core business and it isexpanding business domain through an M&A strategy
1. History
The Company was founded in December 1991 with an initial start as a sales distributor of database systems. It
realized significant growth in 1999 by inheriting support services, including customers, for the Model 204* mainframe
database management system license from Mitsui Knowledge Industry Co., Ltd.
*	Developed by US-based Computer Corporation of America and Sirius Software (now, Rocket Software). Major customers
were large companies in Japan like as Bank of Japan <8301> and Tokyo Electric Power Company Holdings, Inc. <9501>.
Demand for it ceased due to changes in the market environment, and the service was ended in the fall of 2016.

In 2000, the Company determined that it needed to change its business structure to continue growing amid themigration of corporate information systems from mainframes to distributed processing (client/servers), and it started
expanding its business through M&As utilizing funds obtained from its IPO in 2001. It began with the purchaseof PatentManager, a patent management software business from Interscience in 2003, and then acquired Dbecs
Co., Ltd. with the aim of entering the CRM field, Vodamedia Inc. with the goal of entering the IVR field, the news
distribution service provider NewsWatch Inc., the website developer TriAx Corp., and other firms in the Internet
domain as subsidiaries one after another. The Company is steadily expanding its SaaS/ASP business, which is abusiness model with recurring income, as its core operations and bolstering its recruitment of system engineers toenhance its own service development capabilities.
The Company made subsidiaries of Softbrain (ownership ratio based on voting rights as of the end of June 2019:50.2%), a major sales support software company, in July 2016; plube (ownership ratio: 100.0%), an EC website
management company, in August 2017 in order to enter the EC business; and Leoconnect (ownership ratio: 66.0%),
which uses 24 call centers to provide customer support consulting for the brands and products of the HIKARITSUSHIN Group, in March 2018, and Connect Agency, which provides a cloud PBX service to companies and callcenters making outbound calls for such customers as the HIKARI TSUSHIN Group, in November 2018.
To conduct more flexible management, the Company switched to a holding company organization in 2004 and in
FY6/16, it changed its accounting standards to IFRS to disclose its results.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.
4845 Tokyo Stock Exchange First Section

17-Oct.-2019https://scalagrp.jp/en/ir/

Company profile

History
Date
December 1991
January 1999

Major event
Founded Database Communications (now, Scala, Inc.)
Formed sales distribution contracts for the Japanese market with US-based Computer Corporation of America and Sirius andstarted Model 204 support

May 2001

Listed on the Osaka Securities Exchange’s NASDAQ Japan market (now, TSE JASDAQ (Standard))

April 2003

Acquired Interscience’s patent management software (product name: PatentManager) with the aim of entering the intellectual
property system field

October 2003
April 2004
September 2004
June 2006
November 2010

Acquired Dbecs Co., Ltd. as a subsidiary to enter the CRM field
Acquired Vodamedia Inc. as a subsidiary with the aim of entering the IVR (interactive voice response) field
Renamed as Fusion Partners Co. in the transition to a holding company structure and established Database Communications(now, Scala Services Inc.) as a new company and transferred its businessMerged subsidiaries Vodamedia and Dbecs and changed the company name to Digi-Ana Communications Inc. (now, Scala
Communications Inc.)
Acquired NewsWatch Inc. as a subsidiary

April 2012

Merged subsidiaries Digi-Ana Communications and NewsWatch (now, Scala Communications Inc.)

May 2014

Listing transferred to the TSE Second Section

December 2014

Shares elevated to the TSE First Section

November 2015

Acquired TriAx Corp. as a subsidiary

January 2016
July 2016

Renamed subsidiary Database Communications as PAREL, Inc.
Acquired Softbrain Co., Ltd. as a subsidiary

December 2016

Changed trade name to Scala, Inc.

December 2016

Merged the subsidiaries Digi-Ana Communications and TriAx Corp. and changed the trade name to Scala Communications Inc.

August 2017

Acquired plube Co., Ltd. as a subsidiary

March 2018

Acquired Leoconnect, Inc. as a subsidiary

November 2018

Acquired Connect Agency Inc. as a subsidiary

November 2018

Established Scala Next, Inc.

December 2018

Established the Scala Next, Inc., Mandalay branch (Myanmar)

Source: Prepared by FISCO from the Company’s website

Main affiliates
Consolidated subsidiary

Ownership ratio(%)

Main business

Scala Communications Inc.

100.0

SaaS/ASP services and software development, sales, and maintenance

Scala Next

100.0

Development and operations of services for the SaaS/ASP services the Scala Group provides,
as well as planning and development of new businesses

Scala Services Inc.

100.0

Solution services for business processes relating to communication between corporations andindividuals

plube Co., Ltd.

100.0

EC site management

Softbrain Co., Ltd.

50.2

Development, sales, and consulting service to support the introduction of sales support software

Leoconnect, Inc.

66.0

Customer support consulting relating to call center management

Connect Agency

51.0

Cloud PBX service

Source: Prepared by FISCO from the Company’s business briefing materials

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.
4845 Tokyo Stock Exchange First Section

17-Oct.-2019https://scalagrp.jp/en/ir/

Company profile

Holds the leading share in the domestic market, including for i-search(an internal website search service) and i-ask (an FAQ service)
2. Business description
The Company divides and discloses information on its businesses into its 4 mainstay businesses: The SaaS/ASP
business, which provides IT services that contribute to improving operational efficiency in the corporate CRM area;
the Softbrain Group's SFA business; the field marketing business; and Leoconnect's customer support business,
and also the other businesses (Softbrain Group's systems development and publishing business and plube's EC
business). In FY6/19, the percentages of total sales by business were 23.3% from the SaaS/ASP business, 28.3%
from the SFA business, 23.1% from the field marketing business, 16.0% from the customer support business,and 9.3% from the other businesses. In the percentages of segment profit to total profit, the SaaS/ASP businessprovided 32.7%, the SFA business 42.9%, and the field marketing business 14.8%, so these 3 businesses provided
approximately 90% of the total.

Composition by segment (FY6/19)
SaaS/ASP
100.0%

90.0%
80.0%

SFA

Field marketing

Customer support

9.3%

6.4%
3.2%

16.0%

14.8%

Other

70.0%
60.0%

23.1%
42.9%

50.0%
40.0%

28.3%

30.0%
20.0%
10.0%

32.7%

23.3%

0.0%
Sales revenue

Operating profit

Source: Prepared by FISCO from the Company's financial results(1) SaaS/ASP business
The main services in SaaS/ASP are the i-search website search service, i-ask FAQ service, IVR service, and news
distribution service. The i-search service was launched in 2007, and it currently holds the leading market shareat around 15% with more than 400 customers, particularly large enterprises. While the Company has over 10competitors, its i-search service offers better visibility by displaying images in search results and provides effective
guidance to users. The average usage fee per month is ¥100,000-150,000.
The Company launched the i-ask service around 2008 and it is used by about 200 companies, mainly in thefinancial and insurance industries. This service lets users resolve issues on their own by listing frequently asked
questions and related answers on their corporate sites. It helps to lower costs by reducing accesses to call centersand can improve customer satisfaction. The Company holds a roughly 15% market share, ranked second after
OKWAVE <3808>. The average usage fee per month is ¥200,000-300,000.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.
4845 Tokyo Stock Exchange First Section

17-Oct.-2019https://scalagrp.jp/en/ir/

Company profile

IVR is a system for voice-based automated responses at corporate phone help desks, and the Company’s service
stands out for being provided in the SaaS format. Companies previously incurred large investment costs for IVR,
including the need to install a PBX (private branch exchange) system. However, the SaaS format enables them toaccess the service inexpensively and use it during limited periods, such as campaigns.
Other than these businesses, the Company also provides various other services, including a news distribution
service for corporations, and a service for the planning, development, production, maintenance, and managementof websites according to customer needs, and one of its features is that it has a rich service lineup and it does
not rely upon a specific service. It also includes the Cloud PBX service provided by Connect Agency, which wasmade a subsidiary in October 2018.
It also develops systems and provides services related to IoT and big data as customized development projects.
Examples of this are Smiling Road, a safe-driving assistance service (for corporations)*1 sold by Sompo Japan
Nipponkoa Insurance, and Portable Smiling Road, a smartphone app (for individuals)*2. In these services, bigdata, such as driving-related data sent from the users’ dashboard cameras, is received by the server of Scala
Communications and is operated and managed by the web system developed by the Company.
*1	A service that contributes to the promotion of continuous safe driving and accident prevention. It does so by using a
website or smartphone app to provide various functions to facilitate safe driving, for example, processing of driving datacollected from dashboard cameras utilizing IoT technologies, providing safe diving analysis for drivers and administrators,
granting points to drivers rated highly in the driving evaluation system, and enabling them to apply for prizes.
*2	A service that contributes to the promotion of safe driving and accident prevention. It does so by using a smartphone app
to provide various functions for “peace of mind,” reporting accidents with a single push of a button should the driver bein an accident, and for “safety,” being useful for accident prevention including through driving analysis and the provisionof information in real time, and GPS for “convenience.”

Description of the SaaS/ASP business services

Source: Company material

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.
4845 Tokyo Stock Exchange First Section

17-Oct.-2019https://scalagrp.jp/en/ir/

Company profile(2) Softbrain Group's businesses
The Softbrain Group’s businesses can be divided into the SFA business, field marketing business, and otherbusinesses. The SFA business is mainly the development and sales of e-Sales Manager, which is SFA/CRM
software, but also includes a consulting service to solve sales issues, skills training, and a service to support the
introduction of smart devices into companies. e-Sales Manager has an excellent reputation as being No. 1 forusability. It is the industry-leading product from domestic SFA vendors, and has been introduced by a total ofmore than 5,000 companies.
The field marketing business is mainly for consumer goods manufacturers, and involves conducting field activities,
market research, and other activities in stores utilizing registered staff, who are mainly housewives aged in their
30s to 50s. As of the end of June 2019, the Company has approximately 90,000 registered staff nationwide whocover more than 180,000 stores, including convenience stores and drugstores, and it is deploying this businesson the largest scale within Japan. Recently, field activities have expanded to encompass the B-to-B domain (sales
agent) and not just B-to-C.
The systems development business and publishing business are included in the other businesses segment. But
even for both businesses combined, their annual sales have trended around ¥700mn to ¥800mn and operating
profit has been in the range of tens of millions of yen, so their impact on earnings is negligible.
(3) Customer support businessThis is the business of Leoconnect, which was made a subsidiary in March 2018. It provides consulting services
for the management of the inbound call centers (24 centers nationwide) for customers including the HIKARITSUSHIN Group and its agencies, from accepting enquiries about customer companies’ services and products
through to the follow-ups after the responses. For the time being, it is improving productivity by introducing its
services, such as i-livechat and i-assist, into call centers, and it is jointly working with Scala Communications on
developing a new core system reflecting customers’ needs, and this core system is expected to be completed
in FY6/20. Going forward, it plans to develop support services not only for the HIKARI TSUSHIN Group but also
for the Company’s customers.
(4) Other businesses
The other businesses include Softbrain’s systems development business and the publishing business. They also
include plube’s EC business, which manages “yuyu-tei,” an EC website for buying and selling battle-type tradingcards. The site has a high name recognition in the gaming industry and is influential to the extent that it is used
as a reference indicator for the pricing of used cards, and it is known as the industry’s No. 1 EC shop. Many ofthe purchases on the site are made by overseas users, and starting in FY6/20 users will be able to purchasefrom overseas users.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.
4845 Tokyo Stock Exchange First Section

17-Oct.-2019https://scalagrp.jp/en/ir/

Company profile

Aims to differentiate itself from competitors by increasing
convenience through developments from the customer’s perspective
and providing a rich service menu
3. The Company’s strengths
One of the Company’s strengths in the SaaS/ASP business is that it develops services from the customer’s perspective. It handles most of its business as direct sales and 80% of sales revenue is from direct salesforces. It improves
service functions and develops new services by listening closely to customer needs and feeding this informationback to its development team, and its development policy is to meet 100% of customer requests. The Company
developed its core i-search and i-ask services thanks to this approach of meeting customer requests and its services
are characterized specially by their ease of use, and this has also enabled it to make smooth progress in expanding
sales to new customers.
Another strength is that the extensive lineup of services developed in this manner differentiates it from its competitors.
The ability to propose multiple services in packages enables the Company to satisfy diverse customer needs, andthis cross-selling helps to raise the average price per customer, boost customer satisfaction, as well as prevent
cancellations. The Company has done business with over 1,000 companies, including 400 listed companies.
The features of the SaaS/ASP business are that monthly billing revenue accounts for approximately 70% of sales
revenue and its recurring income business model, in which monthly revenue is accumulated in accordance with
the number of service contracts. The Company’s basic policy is to avoid usage-based billing as much as possible
and to provide services only from fixed monthly billing. Also, the main services are maintaining high gross profit
margins at around 80% (the margin is lower for the news distribution service, at around 70%, because of the costsof purchasing content). A reason for this is that the Company initially develops services customized to customer
needs, and then develops them horizontally as general services, which enables it to keep development costs down.

██Results trends
In the FY6/19 results, sales and profits increased by double digits
and exceeded the Company forecasts
1. Summary of FY6/19 results
In the FY6/19 consolidated results, sales revenue increased 33.4% YoY to ¥17,112mn, operating profit rose 39.2%
to ¥2,153mn, pretax profit grew 39.1% to ¥2,137mn, and net income attributable to owners of the parent increased
33.8% to ¥946mn. So sales and profits increased by double digits, and moreover every result exceeded theCompany forecasts.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.

17-Oct.-20194845 Tokyo Stock Exchange First Section

https://scalagrp.jp/en/ir/

Results trends

Both sales revenue and operating profit increased in all business segments. With respect to the M&A effects,
Leoconnect (customer service business), which was brought into the Group in FY6/18 3Q, and Connect Agency(SaaS/ASP business), which was brought into the Group From FY6/19 2Q, together appear to have boosted theCompany’s sales revenue by over ¥2.0bn and its operating profit by just under ¥100mn, and existing businesses
alone posted double-digit growth in both sales revenue and operating profit. Due to the increase in subsidiaries,
the cost of sales ratio increased 3.4 percentage points YoY, but the operating margin rose 0.5 percentage points
YoY to 12.6% due to the impact of higher sales. The growth in net income attributable to owners of the parent was
lower than that for pretax profit. The reason for this was that net income attributable to non-controlling interests
increased 44.5% YoY to ¥511mn, due to the increase in profit for Softbrain Group and other non-100% subsidiaries.
FY6/19 consolidated results(¥mn)
FY6/18Results

FY6/19vs. sales

Company
targetResults

vs. sales

YoY

vs target

Sales revenue

12,829-16,60017,112

-

33.4%

3.1%

Cost of sales

7,744

60.4%

-

10,913

63.8%

40.9%

-

SG&A expenses

3,531

27.5%

-

4,082

23.9%

15.6%

-

Operating profit

1,546

12.1%

2,000

2,153

12.6%

39.2%

7.7%

Pretax profit

1,535

12.0%

1,990

2,137

12.5%

39.1%

7.4%

707

5.5%

890

946

5.5%

33.8%

6.3%

Net income attributable toowners of the parent

Source: Prepared by FISCO from the Company's financial results

Net sales by business segment 
FY6/18(¥mn)

Net income by business segment

FY6/19

1,000

6,000
5,000
4,000

800

3,955
3,423

922
703
649

600

559

2,744
400

2,000

1,000

FY6/19

4,844
4,190
3,980
3,141

3,000

FY6/18

(¥mn)

856

1,587
1,217

319
262
138

200

68
7

67

0

0

Source: Prepared by FISCO from the Company's financial results

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.

17-Oct.-20194845 Tokyo Stock Exchange First Section

https://scalagrp.jp/en/ir/

Results trends

The mainstay SaaS/ASP business and SFA business both posted
double-digit growth in sales revenue and operating profit
2. Trends by business segment(1) SaaS/ASP businessIn the SaaS/ASP business, sales revenue increased 26.7% YoY to ¥3,980mn and operating profit rose 25.6%
to ¥703mn, which were record highs for both once again. Looking at sales revenue by type, all types of sales
revenue increased considerably. Monthly billing revenue increased 17.8% to ¥2,377mn due to the penetration ofcross sales among existing customers and the progress made in acquiring new customers, while usage-based
billing revenue rose 154.9% to ¥441mn in conjunction with the addition of Connect Agency’s sales from 2Q.
One-time sales revenue grew 22.7% to ¥1,161mn due to the new introduction of a PIM (Product Information
Management) system that enables centralized management of product information to Sanyo Electric <6516>.
Connect Agency’s results have been included in consolidated results since November 2018, and this seems tohave added ¥300-400mn in net sales and somewhere around ¥30mn in profit.

SaaS/ASP business results
Sales revenue (left)

Operating profit (right)

(¥mn)

(¥mn)

4,000

800
703

3,000

600

559

396
2,000

3,980
3,141

2,807

1,000

200

0

0
FY6/17

FY6/18

FY6/19Source: Prepared by FISCO from the Company's results briefing materials



400



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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.
4845 Tokyo Stock Exchange First Section

17-Oct.-2019https://scalagrp.jp/en/ir/

Results trends

SaaS/ASP quarterly sales revenue
Monthly(¥mn)

Usage-based

One-time

1,168

1,200

1,001
1,000

816

786

800
290

247

600

202

298

256

223

186

112
50

44

40

39

843

791

747

969

405

134

134

629

633

3Q

4Q

61

400
200

487

498

1Q

2Q

516

517

526

589

3Q

4Q

1Q

2Q

0
FY6/18

FY6/19Source: Prepared by FISCO from the Company's results briefing materials

By service, while sales generally increased for all services, the i-ask service in particular saw an increase in sales
due to progress in cultivating new customers. Also, i-gift*1, which was released as a new service in 2017, as
well as i-assist*2 and i-livechat*3 were steadily introduced, primarily in financial institutions. Synergies are also
starting to emerge through joint proposals with Leoconnect, such as the service introductions into Haluene Co.,
Ltd., Hi-Bit Inc., as well as service introductions into Last One Mile Co., Ltd. and other HIKARI TSUSHIN Group
companies and their agencies.
*1	i-gift is a digital gift service in which digital gifts (electronic messages with IDs such as QR codes) that are exchangeablefor products are sent to customers through SMS or e-mail when companies are conducting sales promotion campaigns
and gift campaigns for new products. Customers who received a digital gift can bring it to a store to receive a product.
As the billing system is a combination of usage-based billing according to the number of IDs issued and fixed monthly
billing, the greater the number of IDs issued, the more the Company’s sales revenue will increase.
*2	i-assist is a chatbot system that utilizes AI.
*3	i-livechat is a web chat service that enables site operators, such as in a customer support center, to guide users in solving
problems they may face and addressing their questions or concerns through real-time chat. By linking and checking
users’ i-search and i-ask history, site operators are able to respond while confirming content on the chat response screen.
i-livechat is a service that contributes to improving customer satisfaction. It is anticipated that it will be introduced mainly
at corporate call centers.

The main new customers for SaaS/ASP business services
Type
Site assistanceservice

CMS service

CRM service

Telephone systemservice

Product namei-search

Description

Customers

Site internal search OSAKA PALCOOP, NISHIMATSUYA CHAIN Co., Ltd.,
engineHaluene Co., Ltd.

i-ask

FAQ system

SUMITOMO LIFE INSURANCE COMPANY, DX Antenna Co., Ltd. LIFENET INSURANCECOMPANY, The Nanto Bank, Ltd., ORIX Credit Corporation, SymEnergy Inc., E.design
Insurance Co.,Ltd., Sanrio Company, Ltd., JFR CARD Co., Ltd., HASEKO Corporation,
DIAMOND, Inc., UNIMAT LIFE CORPORATION, Haluene Co., Ltd., Maxsupport, Fene
Co. ,Ltd., Salespartner Inc., Hi-Bit Inc., hi-ho Inc.

i-assist

Virtual assistance

The Nishi-Nippon City Bank, Ltd., Daiwa Securities Co. Ltd., The Gunma Bank, Ltd.,Hi-Bit Inc., Last One Mile Co., Ltd., AXCELL

i-livechat

Web chat system

Sony Assurance Inc.

i-giftDigital gift service

MONEY PARTNERS CO., LTD, SAISON AUTOMOBILE&FIRE INSURANCE CO., LTD.

SaaS-type IVR

Automated voice
response service

R-bies, INC.

Note: Red text indicates collaborative projects with Leoconnect.
Source: Prepared by FISCO from the Company’s financial results and website

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11 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.
4845 Tokyo Stock Exchange First Section

17-Oct.-2019https://scalagrp.jp/en/ir/

Results trends(2) SFA businessIn the SFA business, sales revenue increased 15.6% YoY to ¥4,844mn and operating profit rose 42.2% to¥922mn, which were new record highs. As more companies implement workstyle reform measures to deal with
the increasingly severe personnel shortages, there has been an increase in the number of companies using SFA
tools in order to improve sales productivity. Sales of e-Sales Manager, which has been rated No. 1 for ease ofuse, were strong, particularly for the cloud service. The profit margin also rose by 3.5 percentage points YoY
to 19.0%, as the effects of the higher sales of e-Sales Manager absorbed the increases in personnel costs anddevelopment costs.

SFA business results
Sales revenue (left)(¥mn)

Operating profit (right)
922

5,000

(¥mn)
1,000

783
4,000

800
649

3,000

600
4,844

2,000

4,190

3,901

400

1,000

200

0

0
FY6/17

FY6/18

FY6/19Source: Prepared by FISCO from the Company's results briefing materials(3) Field marketing businessIn the field marketing business, sales revenue increased 15.6% YoY to ¥3,955mn, and operating profit rose 21.8%
to ¥319mn. The main reasons for the higher sales and profits were that orders for spot projects, such as store
construction, increased due to the change to the sales organization structure and from the effects of focusing
on new customer acquisition, as well as strong performance in lump-sum contract projects for field activities forexisting customers. In terms of new initiatives, progress is being made on carrying out third-party sales services
in the B-to-B field, and orders received have gradually begun to increase.

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12 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.
4845 Tokyo Stock Exchange First Section

17-Oct.-2019https://scalagrp.jp/en/ir/

Results trends

Field marketing business results
Sales revenue (left)(¥mn)

Operating profit (right)

(¥mn)

5,000

500

4,000

400
319
262

3,000

300

225
2,000

200

3,955
3,423

3,198
1,000

100

0

0

FY6/17

FY6/18

FY6/19Source: Prepared by FISCO from the Company's results briefing materials(4) Customer support business
Sales revenue increased 220.3% YoY to ¥2,744mn and operating profit increased 770.4% to ¥68mn. Because
this business segment was included in consolidated results since FY6/18 3Q, steady progress is being made on
initiatives utilizing Group synergies, although no comparisons can be made for the period in question. In addition
to handling inbound call center operations from HIKARI TSUSHIN Group companies, the Company contracts incustomer consulting operations for a leading new energy company and a large telecommunications company,
as well as customer support operations for a customer that uses Scala Communications’ service (SaaS/ASP
business). The profit margin was a low 2.5%, but progress is currently being made on the joint development of acore system with Scala Communications, and the Company will work to increase the profit margin by enhancing
productivity and cultivating new clients, among other efforts.

 business results (quarterly)
Customer support
Sales revenue (left)(¥mn)

Operating profit (right)

(¥mn)

1,000

50

800
600

Only onemonth’sworth posted

654

740

685

656

40
663
24

18

400

30
20

15
11

202

6

200

10

1
0

0
3Q

4Q

1Q

2Q

FY6/183Q

4Q

FY6/19Source: Prepared by FISCO from the Company's results briefing materials

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13 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.

17-Oct.-20194845 Tokyo Stock Exchange First Section

https://scalagrp.jp/en/ir/

Results trends(5) Other businesses
In other businesses, sales revenue increased 30.4% YoY to ¥1,587mn and operating profit rose 106.5% to¥138mn. Looking at the breakdown of sales revenue, in the EC business sales jumped 56.8% YoY to ¥858mn due
to vigorous buying and selling of trading cards. Meanwhile, in the systems development and publishing business,sales revenue increased 9.0% YoY to ¥729mn as a result of increased revenue in the systems development
business. Profit increased due to the improvement in profit in the systems development and publishing business,while profit in the EC business was also solid.

Other businesses' results
Systems development and publishing (left)
EC (left)
Operating profit (right)
138

(¥mn)
2,000

(¥mn)

1,500

150

100
67
858

1,000

50

547

500

0

756
669

729

FY6/18

FY6/19-16
0-50
FY6/17

Source: Prepared by FISCO from the Company's financial results and results briefing materialsInterest-bearing debt increased, but the net cash equilibrium
maintained a healthy financial condition
3. Financial condition and business indicators
Looking at the financial condition at the end of FY6/19, total assets were up ¥2,461mn on the end of the previous
fiscal year to ¥18,694mn. Breaking down the main change factors, in current assets, cash and cash equivalents
increased ¥1,443mn and operating receivables and other receivables rose ¥411mn, while in non-current assets,
goodwill increased ¥404mn.
Total liabilities increased ¥1,498mn from the end of the previous fiscal year to ¥9,086mn. The main factor wasinterest-bearing debt increased by ¥1,185mn. Total equity increased ¥962mn from the end of the previous fiscal
year to ¥9,608mn, with the main factors being the recording of net income attributable to owners of the parent of¥946mn, net income attributable to non-controlling interests of ¥511mn, and dividend payments of ¥372mn withthe decline in retained earnings.

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14 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.
4845 Tokyo Stock Exchange First Section

17-Oct.-2019https://scalagrp.jp/en/ir/

Results trends

Looking at the business indicators, the ratio of equity attributable to the owners of the parent declined by 2.2 PP,from 39.7% at the end of the previous fiscal year to 37.5%. Mainly due to the increase in interest bearing debt,
the interest-bearing debt ratio rose from 74.3% at the end of the previous fiscal year to 85.3. But since net cash
(cash and cash equivalents – interest-bearing debt) is being kept at the equilibrium level, it can be judged that theCompany is maintaining its financial soundness. However, goodwill accounts for approximately 33% (¥6,192mn)
of total assets, and it is necessary to be aware that there is the risk that its financial condition could worsen should
the earnings of Softbrain, which provides the majority of this goodwill, deteriorate due to it requiring impairment
treatment. But currently Softbrain’s results are trending stably, and at FISCO, we think the possibility of this riskmaterializing is extremely low.
Consolidated balance sheet(¥mn)
FY6/16

FY6/17

FY6/18

FY6/19Change

5,470

7,167

8,120

10,165

2,045

5,060

4,999

4,950

6,393

1,443

4,160

7,774

8,112

8,529

416

(Goodwill)

477

5,684

5,787

6,192

404

Total assets

9,631

14,941

16,233

18,694

2,461

Total liabilities

5,720

7,021

7,587

9,086

1,498

3,300

4,768

4,793

5,978

1,185

3,910

7,919

8,645

9,608

962

-

1,934

2,196

2,597

401

Ownership ratio attributable to ownersof the parent

40.6%

40.1%

39.7%

37.5%

-2.2ptInterest-bearing debt ratio

84.4%

79.7%

74.3%

85.3%

11.0pt

ROE

28.1%

60.4%

11.4%

14.1%

2.7pt

ROA

18.2%

30.4%

9.9%

12.2%

2.3pt

Operating margin

22.9%

35.4%

12.1%

12.6%

0.5pt

Current assets(Cash and cash equivalents)
Non-current assets(Interest-bearing debt)
Total equity(attributable to non-controlling interests)
Indicators(Stability)(Profitability)

Note: Based on IFRS
Source: Prepared by FISCO from the Company's financial results██Outlook
Outlook for FY6/20 results are not disclosed, but existing businesses
are expected to continue to post double-digit growth in sales
revenue and operating profit
1. Outlook for FY6/20
In its medium-term management plan, the Company made it clear that it will be engaging in new businesses from
FY6/20. However, because these new businesses will have a large impact on results, the Company has decided not
to disclose results forecasts for FY6/20. Still, for its existing businesses, the Company is expecting sales revenue toincrease 16.9% YoY to ¥20,000mn, and forecasting operating profit to rise ¥11.4% to ¥2,400mn, with both sales
revenue and operating profit expected to increase in all business segments.

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15 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.
4845 Tokyo Stock Exchange First Section

17-Oct.-2019https://scalagrp.jp/en/ir/

Outlook(1) SaaS/ASP businessIn the SaaS/ASP business, the Company aims to achieve a double-digit increase in both sales and profit. It willcontinue to focus on sales in its flagship i-series service, the IVR+SMS service which simplifies guidance fromphone to Web services, and Web service which constructs customized Web systems based on companies’ needs,
as it looks to build up monthly fixed revenue, as well as focus on expanding introductions of new services likei-livechat, i-assist, and i-gift and engaging in cross sales. The Company will continue to cultivate customers in the
HIKARI TSUSHIN Group and its agencies through joint proposals with Leoconnect. There are 200-300 companies
in the HIKARI TSUSHIN Group, and if companies in which it has not invested, such as agencies, are included, thisnumber increases to several thousand companies. This pool of companies represents the Company’s promisingpotential customers. In addition, as a new initiative, the Company will focus energy on a service whereby it will
make proposals as a set with comprehensive value creation advisory incorporating AI-based natural language
analysis, and with understanding from senior management, provide design, introduction, and operation of AI/IoT
in a one-stop manner.
(2) SFA businessIn the SFA business, sales revenue and operating profit are expected to increase 10-20%. With the implementationof the Act on the Arrangement of Related Acts to Promote Work Style Reform in April 2019, limits on overtime
hours were established for large companies, and limits will go into effect for SMEs from April 2020. SMEs face
more severe personnel shortages than large companies, and therefore demand for e-Sales Manager, which helps
companies increase sales productivity, is expected to further increase going forward. Softbrain started selling
e-Sales Manager Remix MS, which is a self-serve version intended for SMEs, from 2018. Softbrain has beengathering user needs to improve the UI and revise functions. The final form is almost ready, and Softbrain plans
to expand sales in earnest from 2020. Close attention will be paid to sales trends.
(3) Field marketing businessIn the field marketing business, sales and profit are expected to increase 10-20% YoY. Consumer goods manufacturers, the key customers, are increasingly outsourcing sales promotion operations due to a shortage of
personnel. This shortage of human resources is particularly serious in regional cities and other such places, andthis would seem to provide a tailwind for the Company, which has built a network of approximately 90,000 field
staff across the country. Concerning B-to-B third-party sales services, there has been an increase in new projects,
such as introducing cashless payment systems in stores and lodging facilities, and this is expected to contributeto an increase in profits going forward.
As a new service, collecting consumer receipt information and adding additional information, such as the purchasereason, to create a database, and developing a POB (Point of Buy) business to sell to companies. Currently, POS
information data is in widespread use, but as additional data, for example on the purchase reason and consumer
attributes, is still unclear, it seems possible for the Company to profit from this by adding this type of additional
information. In terms of scale, the goal is to build a collection system that collects three million receipts per month,and the plan is to build up a business base by working with companies possessing member bases to expand the
network. In the near term, the target is to collect one million receipts by the end of 2019.

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16 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.
4845 Tokyo Stock Exchange First Section

17-Oct.-2019https://scalagrp.jp/en/ir/

Outlook(4) Customer support businessIn the customer support business, the Company is forecasting flat sales revenue but higher operating profit due tohigher profit margin. The Company will aim for an increase in productivity and enhance profitability by continuing
to handle inbound call center operations for customers of HIKARI TSUSHIN Group companies and advancing
the introduction of the various SaaS/ASP services (IVR+SMS, i-assist, etc.) for the Company's call centers. The
Company also plans to work on contracting customer support operations for customer companies using SaaS/ASP services. Furthermore, the Company is currently working with Scala Communications to develop a cloudbased core system reflecting customer needs, and there are already plans in place for the system to be introduced
at multiple companies, which is expected to contribute to FY6/20 results. Going forward, the Company plans tofocus on the development and provision of new services that improve operational efficiency while utilizing AI/IoT
technology, and aims to achieve an operating margin of 10% in the future.
(5) Other businesses
The EC business is expected to continue to post double-digit growth in FY6/20. In order to further grow the EC
site “yuyutei,” in addition to starting to develop a smartphone app version, users also began being to be able topurchase trading cards from overseas. Going forward, the Company aims to expand its business as the EC sitewhere the most trading card game users gather, while expanding the number of game titles handled and providing
timely game tips. Plube has built all the processes necessary for the operation of EC sites such as logistics,
systems, sales, purchases, and marketing internally, and the Company plans to leverage plube’s know-how as it
develops the Group’s EC business going forward.
Meanwhile, with respect to the systems development and publishing business, there are no plans to aggressively
expand the business within the Softbrain Group, so results are expected to be on par with the previous year.

The newly-formulated medium-term management plan targets sales
revenue of ¥500bn and operating profit of ¥50bn in FY6/30
2. Mid-term management plan
In August 2019, the Company announced its medium-term management plan that runs until 2030. As results
continue to grow steadily and stabilize, including the financial base, the plan redefines the management philosophy
targeting further growth to raise employee motivation and drive growth.
(1) New Management Philosophya) Vision (Aim): Contribute to the happiness and prosperity of all mankind
The Company will achieve its management vision by realizing a society overflowing with value. Specifically, theCompany will aim to discover people who recognize value and deliver this to them at the right time, as wellas continue to create things that exceed existing value and promote a cycle that gives birth to new value andtechnology.
The Company is touting Scala Co-creating Shared Value (SCSV), which entails spreading its philosophy ofbalancing business and social contribution around the world through “co-creation,” and has indicated its plan todevelop business together with companies that possess the same philosophy.

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17 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.
4845 Tokyo Stock Exchange First Section

17-Oct.-2019https://scalagrp.jp/en/ir/

Outlookb) Mission (Role to Play): Become an ideal company for the world
In addition to direct social contributions in the IT business domain, the Company will contribute indirectly topeople’s happiness in a variety of domains, both in Japan and the rest of the world. The Company aims to discoverhidden value using its unique mechanisms, and accelerate the speed of development around the world, as wellas create the necessary communication tools and services, striving to become the world's top business with thisnew business model using IT.
c) Value (Values and Action Guidelines): Provide unlimited possibilities for those who continue to challenge
anything
As values and action guidelines for employees in order for them to achieve goals, the Company has establishedthe four key phrases of “realize your dream,” “fair and square,” “don’t give up,” and “raise one another up.”
The Company’s strategy is to strive for growth by building and expanding a value creation platform to realize asociety full of value including communication promotion and making value visible utilizing IT/AI/IoT technology,
human resources including external resources, knowledge held by companies and individuals, and capital frominvestment funds, etc.
(2) Basic Strategy
As the basic strategy in the medium-term management plan, the Company has sorted its own capabilities as“determining real issues,” “discovering hidden value of resources,” and “maximizing value by proposing andexecuting optimal combinations of issues and resources,” and has included plans and will develop businesses foreach capability. In particular, the Company plans to focus on fields related to AI/IoT which are based on existing
businesses and fields related to SDGs* (Sustainable Development Goals).
*	Sustainable Development Goals (SDGs): As a follow-up to the Millennium Development Goals (MDGs) adopted in 2001,
the SDGs are goals of the international community between 2016 and 2030 included in the 2030 Agenda for Sustainable
Development adopted at the UN Summit in September 2015. The SDGs comprise 17 goals and 169 targets in order toachieve a sustainable world, and pledge “to leave no one behind.”

Mid-term management plan
Basic Strategy• Aim for dramatic growth with three capabilities
Capabilities

Future Strategy

1) Determine real issues

Expand targets not only to Japanese, but also to global companies, governments, municipalities, andNPOs. Widen scope of activities to sales and management consulting and media platform domains.

2) Discover hidden value of resources

Utilize internal and external resources as well as AI/IoT technology, and provide “people, assets, capitaland knowledge” involved in solving problems.

3) Maximize value by proposing andexecuting optimal combinations ofissues and resources

Expand the scope of activities to operation of AI-based matching platform and investor relations
support to maximize corporate value, not only for customers and the Scala Group, but for all related
stakeholders, and provide various solutions.

Source: Prepared by FISCO from the Company's results briefing materials(3) Numerical management targets
The Company is targeting sales revenue of ¥100bn and operating profit of ¥10bn in FY6/25, and sales revenueof ¥500bn and operating profit of ¥50bn in FY6/30. In FY6/19, sales revenue was ¥17.1bn and operating profit
was ¥2.1bn, so the Company is considering carrying out new businesses in addition to existing businesses aswell as expanding the business area to overseas as well as in Japan. Business segments are classified into eachcapability.

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18 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.
4845 Tokyo Stock Exchange First Section

17-Oct.-2019https://scalagrp.jp/en/ir/

Outlook

Initiatives and Sales Revenue Targets by Segment
Segment
involved

Capability

Initiatives

Sales revenue target
FY6/25

FY6/301) Determine real issues• Value creation comprehensive advisory (consulting)
Value creation • Engagement fundsupport business • Launch CVC• Investor communications support¥30bn¥180bn2) Discover hidden value ofresources• Proposal-type solutions• AI/IoT introduction support
IT/AI/IoT-related• Development of IT/AI/IoT engineers
business• Matching with venture companies• Development of communication tools for the knowledge-creation cycle¥60bn¥220bn¥10bn¥100bn3) Maximize value by
proposing and executing
optimal combinations ofissues and resources• Health and education in developing countries
Social-issue• Business targeting environmental issues
solving business • Business related to regional revitalization

Source: Prepared by FISCO from the Company's results briefing materialsa) Value creation support business
The value creation support business includes comprehensive advisory of value creation (consulting), engagement
funds*, corporate venture capital (CVC), and investor communications support services. A high level of expertiseis required for this business, so the Company will conclude contracts with external partners to carry out thebusiness. Scala Partners Co., Ltd., the subsidiary that will actually engage in this business, was established inJuly 2019 (ownership ratio: 100%), and partner agreements have been concluded with around 10 specialists.
*	Engagement funds seek to be investment funds that carry out bilateral dialogue with investee companies to ensure thatinvestee companies’ commitments align with those of the fund. When necessary, engagement funds introduce business
partners and/or customers, propose M&A deals, and otherwise support the management of investee companies andprovide them with advice.

Scala Partners plans to engage in three businesses: the CSV innovation business, which together with clientcompanies will pursue the launch of innovative new businesses that look ahead to the future; the CSV incubation
business, which will discover entrepreneurs, support business start-ups, and help develop companies; and the
CSV investment business, which will search for possibilities to increase latent company value, nurture businesses
through investment, invest, and provide value creation consulting services. In the near term, the six fields of focus
will be “food and health, healthcare, education, environment, regional revitalization, and finance.” In these six fields,
efforts will be focused on working with companies and research institutes involved in these fields, as well as local
governments and other entities to utilize AI/IoT technologies to increase corporate value and solve social problems.
In addition, in the investor communications support business, the Company has announced that it will convert
J-Phoenix Research Inc. into a wholly-owned subsidiary in September 2019, and this service will be carried out
through this company. J-Phoenix Research produces integrated reports and securities analyst reports from theperspective of securities analysts, and provides value creation management advisory services. Sales have recently
reached approximately ¥60mn. Going forward, jointly with J-Phoenix Research, the Company will utilize IT/AI/IoT
to carry out services that contribute to the enhancement of corporate value. The Company has already started
developing an automatic generation system for securities analyst reports using AI.
In this business, the Company is targeting sales revenue of ¥30.0bn in FY6/25 and ¥180.0bn in FY6/30. In the CSV
innovation business, the key to growth will be the extent to which large companies can be acquired as customers.

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19 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.
4845 Tokyo Stock Exchange First Section

17-Oct.-2019https://scalagrp.jp/en/ir/

Outlookb) IT/AI/IoT-related business
The IT/AI/IoT-related business will be an extension of the existing business. For this business, the Company istargeting sales revenue of ¥60bn in FY6/25 and ¥220bn in FY6/30. This comes to an average growth rate of 23%
per year over the six years until FY6/25. In its next three-year medium-term management plan starting FY12/21,
Softbrain is targeting annual sales growth of 20-30%, and this target seems sufficiently reachable if one considers
the growth prospects for the company’s SaaS/ASP business and new business development, along with otherfactors.
Future initiatives include not only the development of SaaS/ASP service proposal-type solutions and support for
the introduction of AI /IoT solutions, but also the training of engineers who will serve as the foundation for businessexpansion, and the development of matching services for large companies and venture companies, as well as
new communication tools for the knowledge-creation cycle. In terms of training engineers, in Myanmar, where abranch office was opened in 2018, the Company is currently training about 20 engineers, and plans to expand
this to several hundred engineers over the next two to three years.
c) Social Issue-solving businessIn the social issue-solving business, the Company will engage in enhancing the health/insurance and education
environments in developing countries, and businesses related to environmental problems and regional revitalization. The Company is targeting sales revenue of ¥10bn in FY6/25 and ¥100bn in FY6/30.
With respect to enhancing health/insurance in developing countries, the Company has partially launched amodel business at its Myanmar Branch. Since there are few hospitals in Myanmar, and the insurance system isundeveloped, it costs ¥30,000 yen to receive treatment for a common cold, so many people do not go to thehospital and their symptoms worsen. For this reason, we promote health promotion activities from the standpointof food and are creating a system to collect personal health data via smartphone apps. If such big data can becollected over a wide area, it will become the basis of insurance data and it will be possible to commercialize theinsurance business. When the business is commercialized, engagement funds and subsidies from the government
will be used to do so, and actual services will be advanced jointly with insurance companies.
In terms of environmental issues, the Company will establish a comprehensive information platform with an issue
database, resources database, and matching advisory function, based on the theory of biotechnology-based
resource circulation, and plans to collaborate with related organizations, research institutes, large companies,
and other entities to carry out the business.
Also, targeting local cities in Japan and overseas, the Company will collaborate with local governments, regional
financial institutions, and SMEs to support local culture succession issues, thereby revitalizing regional areas. The
Company does not yet have any detailed plans, but it is assumed that the Company will develop its businesses
by establishing a matching platform for human resources, monetization and culture dissemination and building a
network of young personnel and a network of local culture successors.

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20 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Scala, Inc.

17-Oct.-20194845 Tokyo Stock Exchange First Section

https://scalagrp.jp/en/ir/██Shareholder return policy
The Company plans to continually increase its dividend going forward
The Company’s basic policy on returning profits to shareholders is to stably and continuously pay a dividend while
also retaining the internal reserves necessary to strengthen its financial structure and develop its businesses in the
future. In FY6/20, the Company plans to increase the dividend per share by ¥4.0 YoY to ¥28.0. This will be the 11th
consecutive fiscal year of higher dividends, and it is also expected to continue to increase the dividend in the future,
if earnings continue to grow.

Dividend per share
(¥)
30.0
25.0

20.0
15.0

28.0
24.0

10.0

18.0

20.0

14.0
5.0
0.0
FY6/16

FY6/17

FY6/18

FY6/19FY6/20 E

Source: Prepared by FISCO from the Company's financial results██Information security measure
The Company’s mainstay business is SaaS/ASP services that utilize the Internet, so information security is one of its
most important management issues. In terms of specific measures, all Group companies have been and continue
to work to acquire ISO/IEC27001 certification, which is the international standard for information security, and to
implement information security measures incorporating a global-standard third-party perspective. They also strive
to thoroughly manage the information assets owned by the Group based on an internal management system. Theyuse in-house servers and some private clouds for the information system, while also constructing backup systems.

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21 21

Disclaimer
FISCO Ltd. (“FISCO”) offer stock price and index information for use under the approval of theTokyo Stock Exchange, the Osaka Stock Exchange and Nikkei Inc.
This report is provided solely for the purpose of offering information, and is not a solicitationof investment nor any other act or action.
FISCO prepared and published this report based on information which it considered reliable;
however, FISCO does not warrant the accuracy, completeness, fitness nor reliability of thecontents of this report or the said information.
The issuers’ securities, currencies, commodities, securities and other financial instruments
mentioned in this report may increase or decrease in value or lose their value due to influence
from corporate activities, economic policies, world affairs and other factors. This report does
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