Company Research and Analysis Report
FISCO Ltd.
http://www.fisco.co.jp

Voltage Inc.
3639 Tokyo Stock ExchangeFirst Section

14-Dec.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

伪伪Announced the Three-Year Strategy. Aiming forresults to leap forward in FY6/19, is embarking on
drastic reforms to its business model
Voltage Inc. <3639> (hereafter, “the Company”) is a supplier of mobile content. Based on its corporate
philosophy of “Art & Business,” it has established a new genre of story-based entertainment called“Drama Apps” that are different from both games and manga. It has narrowed down its content themes
to “Drama on Love and Challenge” and has an overwhelming presence in the field of Romance Apps.
In July 2016, Mr. Yuzi Tsutani, the Company founder and Chairperson and CEO, returned to theCompany as President, and the Three-Year Strategy, which is the plan to reform its business model,
was formulated based on his leadership. The background to this would seem to be the Company’s
recognition that, despite having opened up a new frontier for Romance Apps and achieved
rapid growth, it needed to reform its business model to escape from the period of stagnation it
had experienced over the previous two years. Toward implementing the reforms, the Company
had previously clarified the outline of the reforms in the June 2016 full fiscal year financial results
announcement, and then in the current 1Q FY6/17 financial results announcement, its explanation
took the form of rewording a series of stories about the Three-Year Strategy, including course
corrections for implementing the reforms.
The starting point for the formulation of the Three-Year Strategy was the sense of crisis arising fromthe current situation, of a slowdown in the sales growth rate from the business model that had been
the pillar of the Company, and also the forecast that it will decrease in the future. In terms of thechanges to the business environment in the future, the Company envisages “fierce competition in theentertainment industry” and the “globalization of competition” So within a rapidly changing external
environment, even the Company, which up to the present time has achieved a high growth rate as apioneer in the mobile contents market for females, is presently being required to transform its business.
The entry point to the Three-Year Strategy was the decision to rearrange the business segments andto reconstruct the organization. The number of business segments was changed from the former two
to three, and their management methods are also to be separated into forms appropriate for each. The
organization will promote growth in the form of multiple autonomous organizational units, focused on
the next generation of leaders. For this, it is expected that improvements to the production process
and operational efficiency will be progressed at the same time as the development of leaders.
With regard to the names of the business segments, below, based on the names to be adopted from
FY6/17, “core model (existing development)” shall be written as “existing development” and “core model(new development)” as “new development,” while “new model” remains unchanged as “new model.”Also, in the current financial results announcement, the Company described the specific business
policies for “new development” and “new model,” and also for “new location,” which is a new businessarea. For the product series for the “new development” and “new model” business segments that
the Company intends to generate profits, while keeping the previous keywords of “minimum” and“little by little,” it clarified its approach for policies to create the mechanism to generate profits in the
future. Furthermore, in the business area that it has named “new location,” the Company presented a
direction to search for businesses in completely different fields than in the past, including to develop
contents utilizing high-tech technologies like Virtual Reality (VR), and for the real business, in which
its content assets will be deployed in real venues, such as for stage.
In the Three-Year Strategy, the Company will spend the next two years on the sweeping reforms of
its business model, aiming to make a leap forward in its FY6/19 results. At FISCO, we evaluate thefollowing three points of the Three-Year Strategy as effective and for which effects can be expected;1) the various measures are consistent and they are logically connected, 2) the measures are strongly
focused on “profits” (not sales), and 3) the reforms extend not just to organizational restructuring andbusiness-process improvements, but to the entire Company, including to the personnel evaluation
system.

We encourage readers to review our complete legal statement on “Disclaimer” page.
1

伪伪Check Point• The entry point to the Three-Year Strategy was the decision to rearrange the businesssegments and restructure the organization• It is implementing measures to generate profits from “new development” and “new model”
and seeking business possibilities in “new location”• It will not prioritize only earnings in FY6/17, but also advancing the business restructuring

Voltage Inc.
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Important disclosuresand disclaimers appear
at the end of this document.

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Hiroyuki Asakawa㻞㻥㻡㻝㻜㻘㻜㻤㻞

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Source: Prepared by FISCO from Company materials伪伪Announcement of the Three-Year Strategy, the plan
to reform the business model
Reform of business model in line with changes to theenvironment. Back on the growth path.
(1) Review of results and the background to the formulation of the Three-Year Strategy

Source: 1Q FY6/17 financial results briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.
2

■■Announcement of the Three-Year Strategy, the plan to reform the business modelAs explained above, since its foundation the Company has steadily achieved growth, but during
this period environmental changes have occurred that have weeded-out many mobile content
manufacturers. Specifically, these changes include the rise of social games and that the main device
has changed from the feature phone to the smartphone. In particular, the appearance and rapid
spread of the smartphone has caused the distribution platforms (PF) to shift from social-only PF to
OS-based PF (App Store and Google Play), and in addition, it has accelerated the transition fromapp-type Web applications to native applications.

Voltage Inc.
3639 Tokyo Stock ExchangeFirst Section

14-Dec.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

In the three year period up to FY6/16, the Company has been progressing content for smartphones
based on its slogan of “OS-based First.” For a mobile contents supplier like the Company, the impact
of changes to the delivery PF and app technologies are enormous, and there have been quite a few
suppliers that have been unable to respond to the wave of changes and have been weeded-out of theindustry. Yet even in such a situation, although its growth rate has slowed, the Company has still beenable to somehow respond to the environmental changes and has continuously achieved higher sales.
Conversely in terms of profits, a situation has continued in which it has been unable to set a newhigh for profits since they peaked in FY6/12. Also, on the point of the extent to which it has achieved
its initial forecasts, in FY6/14 the results exceeded the target, but in the two fiscal years after that,of FY6/15 and FY6/16, the results were below the initial forecasts. The reason why the Company’s
profit growth has stagnated in the last few years is that it has found hits harder to come by in its
Japanese-version Romance Apps, and that in this situation, the Suspense Apps and English-version
Romance Apps business, which are expected to become the next generation sources of growth,
have made sluggish starts.
Mr. Yuzi Tsutani, who returned to the Company as President in July 2016, reached the conclusionthat the cause of the slow starts of the new businesses in terms of generating profits could be traced
back to the timing of the public offering. In June 2010, the Company was listed on the Tokyo Stock
Exchange (TSE) Mothers market, and then one year later, its listing was reassigned to the TSE First
Section. The timings of these listings were during a period in which the new market of RomanceApps was rapidly expanding, which for the Company as the leader of this market, created a situationin which “if it released a romance app, it would sell well.” Based on this success experiences, it had
applied the same production and sales methods to its new businesses of English-version RomanceApps and Suspense Apps, which Chairman Tsutani analyzed to be the biggest reason why these
new businesses have not taken off. Moreover, he also concluded that the cause of their slow starts
was the Company’s lack of expertise in developing and launching these businesses and that it lacked
human resources with the experience of launching new businesses.

Reviewing the business segments and aiming for organizational
restructuring toward a further leap forward in FY6/19(2) Overview of the Three-Year Strategy
What President Tsutani was first aiming for was to rearrange the businesses, which up to thattime had been categorized by target market, and also to develop leaders to be responsible for the
next-generation businesses. Until recently, the Company had two business segments, which it has
rearranged into three segments according to customer group and the degree of technological novelty.
It resolved on various measures, such as to address the fact that the organization had become rigid
and for the segmentation of product development, and took the decision to create 15 autonomous
organizational units and to develop 15 employees to serve as the heads of these units as the leadersof the next-generation businesses.
Based on the leadership of President Tsutani, the Company formulated the Three-Year Strategy, theplan to reform the business model, as the entry point to realize these aims. This strategy covers awide area, including product development and the methods of managing these developments, theapproaches for the teams and organizational units that will implement these methods, the internal
key performance indicators (KPI), and the personnel evaluation system. The Three-Year Strategy
name is derived from the fact that the 2 year period of FY6/17 and FY6/18 will be used to steadily
achieve structural reforms, and that in the third year of FY6/19, the aim is to achieve a leap forward
in results in a form that can be clearly seen.
The Three-Year Strategy covers a wide range of areas, and so the Company first outlined thestrategy in the FY6/16 full fiscal year financial results announcement, and then following that in
the 1Q FY6/17 financial results, it announced an image of the reforms as a whole and also detailsof the reforms relating to the “new development” and “new model” segments. Furthermore, it isexpected to continue to explain any course corrections and additional items in its financial results
announcements from 2Q onwards.

We encourage readers to review our complete legal statement on “Disclaimer” page.
3

■■Announcement of the Three-Year Strategy, the plan to reform the business model(3) Details of the Entry Point to the Three-Year Strategy

Voltage Inc.

While there are specific measures for each business that directly affect the recovery of profitability
and growth potential, the Company still needs to takes steps for that part that will serve as thefoundation of these measures in order that they may function efficiently. Also, if this foundation part is
not properly created, then its essential strength as an organization will not be realized. The reforms ofthis foundation part in the Three-Year Strategy correspond to two reforms; the rearrangement of thebusiness segments and the restructuring of the organization into 15 autonomous organizational units.

3639 Tokyo Stock ExchangeFirst Section

14-Dec.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

Source: 1Q FY6/17 financial results briefing materialsa) Rearranging the business segments
Up until recently, the Company kept the markets in mind as the targets and developed its businessin a two-segment system, of Japanese-version Romance Apps as the “core business” and Englishversion Romance Apps and Suspense Apps as the “new business.” This reflects its adoption of astrategy in which, after establishing Romance Apps as the source of earnings in the “Japaneseversion market for females,” in order to expand the market it selected the “English-version market”
and the “market for males” as the new targets, and aimed to develop for each of these respective
targets with English-version Romance Apps and Suspense Apps, respectively.
Previous market expansion image for Voltage

Source: FY6/16 financial results briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.
4

■■Announcement of the Three-Year Strategy, the plan to reform the business model

Voltage Inc.
3639 Tokyo Stock ExchangeFirst Section

14-Dec.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

In contrast to this, in the Three-Year Strategy the business model has been reformed into threemodels depending on the customer group (horizontal axis) and the degree of technological novelty(vertical exist) of the “core model (existing development),” the “core model (new development)” andthe “new model,” with each being allocated into nine cells in a matrix. Looking at the customer
group, we see that as a result of rearranging the business segments, positioned in the “new model”
is mixture of titles, of US REAL and DRAGON titles that target the “English-version and females”
groups, and Suspense titles that targets the “Japanese-version and males” groups. But conversely,
although targeting the same groups of “English-version and females,” L10N, which is closer togenerating profits, is positioned in “new development.”
In technological terms, Romance Apps, which previously have been the mainstay product, havebeen positioned in “existing development”, while romance drama titles like “Doubt – Who is the
Liar” (hereafter, “Doubt”) which includes investigative and judgment elements, have been madeindependent as a new series known as Seek and categorized in “new development.” Also, Puzzle
Action Games like “LOVE☆Scramble” and titles such as Motion which is scheduled to be launchedin the future, have been categorized in “new model.” In addition, in the 1Q FY6/17 financial results
announcement, the cell with the highest level of novelty was filled with the new business areas of“high-tech” and “real” that belong to “new location.”
At first glance, these changes to the business segments do not appear to be very significant and seemto be nothing more than a confirmation of the current situation and changes to the wording, but this isabsolutely not the case. The new business segments comprised of nine cells can be said to condense
various elements, – such as the Company’s recognition of the current situation for its markets andeach of its products, its outlook and direction for the future, and its business strategy – into a single
reform. Starting with the structural reforms described below, all of the Company’s Three-Year Strategy
is based on these business segments. In other words, understanding the changes to the businesssegments is the first step toward analyzing and understanding the Company in the future.
With regard to the business segments, it is considered that the nine-cell framework itself does notchange under the Three-Year Strategy, but that the contents of each cell are expected to change.
Indeed, at FISCO we think that they must be changed. In this sense, each of the businesses inthe “new model” cell are expected to generate profits at an early stage and be moved to the “newdevelopment” cell, and therefore new businesses and product series will have to be added to the“new model” cell.
b) Restructuring the organization into 15 autonomous organizational units
For the organization also, the Company presented its restructuring of the organization into
15 autonomous organizational units according to the previous described business segments,
operations processes, and functions (including production, design, and attracting customers). Its
policy is to launch new products and services and strengthen the generation of earnings throughoptimizing the management of these organizational units. The number 15 has two meanings; it is
the number extracted from the needs for business and product classifications, operations processes,
and functions, and it is also the number of leaders that the Company considers it requires in order torealize sustainable growth in the future. The 15 leaders will manage teams of from 10 to a maximumof 100 people. The Company, which has many young employees (the average age of its employees
is in the late twenties), expects its employees to acquire work skills through their experiences oflaunching businesses.
What is required of each autonomous organizational unit is to set and establish the optimum “local
rules” for each business segment. The opposing concept to local rules are “Uniform rules.” Aspreviously stated, from the public offering up until FY6/12, which is when the Company recorded its
record-high profits, was a period when in actual terms, the Japanese-version Romance Apps was
the only source of earnings, and at the same time, when this business achieved remarkable growth.
At that time, the Company used an approach of conducting the series of tasks, including production,
launch, management, and publicity, in accordance with its “Uniform rules.” But presently, based on its
analysis of the past, it has concluded that the reason for its recent stagnation is that it has continued
to adopt unchanged unified rules for its new products and new businesses. Therefore, in the ThreeYear Strategy, while retaining the unified rules for those parts of its business that still need them, it
requires that the 15 autonomous organizational units establish local rules that are to be applied inlight of the content of their respective businesses. “The word “autonomous” is derived from this point.

We encourage readers to review our complete legal statement on “Disclaimer” page.
5

■■Announcement of the Three-Year Strategy, the plan to reform the business model

Voltage Inc.
3639 Tokyo Stock ExchangeFirst Section

14-Dec.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

At FISCO, we evaluate the organizational restructuring into 15 autonomous organizational units to bean effective policy that conceals great possibilities. The establishment of the previously mentioned
local rules will be the most fundamental part of the launches of new businesses and products, and it
is an extremely important point in terms of profit and loss management. Therefore, the significanceof clarifying this point is great. But on the other hand, it is a fact that the establishment of local rules
is an extremely difficult task (for precisely this reason, it can be said that up to the present time theCompany has relied on unified rules). Each of the leaders of the 15 autonomous organizational
units will be tasked with setting and establishing the local rules, and at FISCO we think this willlead to them accumulating practical experience that will facilitate their development as leaders, andtherefore we will be paying close attention to the Company’s organizational reforms.
Also, based on this approach, the figure shows what the Company thinks about the growth potentialof the businesses in the future. With regards to “existing development” that is currently the source of
earnings, it is clearly extremely interesting that it is anticipating negative growth. It seems likely that theanswers to the question of why the Company considers this to be the fate of “existing development”
in the future and what steps it will take in response will be clarified when it updates the Three-Year
Strategy in the future. “New development” and “new model” are the two business segments for which
it has the greatest expectations to become the next generation sources of earnings. The growth fromboth is expected to compensate for the negative growth in “existing development” and to grow the
Company as a whole. As is explained below, here are the reasons why the specific measures forboth have been presented first.

Creating a mechanism to generate profits from “newdevelopment” and “new model”(4) The specific measures to strengthen “new development” and “new model”
In the 1Q FY6/17 financial results announcement, the Company described the specific measures
to strengthen “new development” and “new model.” The current situation in “new development”
is that there are two corresponding products; L10N, which is a Japanese-version Romance Apps
that is being translated unchanged for the North American market, and Seek, which, based on thespecifications of “Doubt,” adds investigative and judgment elements to the story. These titles havemonths in which they are profitable on a single-month basis and have been positioned as the titles
that will be generate profits the soonest.
“New model” includes DRAGON that the Company has been working on for the last few years,
the US REAL series for the North American market, and Suspense intended for males in Japan. In
addition, it includes the Puzzle Action Games that was newly launched in Q4 FY6/16, and Motion,
which is scheduled to be launched in the future. Compared to “new development,” it will still takesome time before these titles are generating profits.
A point shared by both “new development” and “new model” would seem to be the delay in themgenerating profits due to the Company adopting the same methods as it did for “existing development,”
in which the success pattern for the way of conducting the business was established. Therefore, theCompany has considered up to the point of the final generation of profits, adopted a policy of “small
search” and “small experiment/selection,” and based on the keywords of “large-scale deployment,” isthoroughly implementing an approach to business management that keeps down risk.

Source: 1Q FY6/17 financial results briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.
6

■■Announcement of the Three-Year Strategy, the plan to reform the business model

Voltage Inc.
3639 Tokyo Stock ExchangeFirst Section

14-Dec.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

Specifically, in “small search,” up to the present time it has not been unusual for the initial production
costs for the launch of new contents to be close to ¥100mn. Instead, first this amount is kept down
and the contents launched onto the market, and then they are updated and improved while observing
the responses of users. In other words, the style has been changed so that instead of producing andlaunching a product with a score of 90 out of a possible 100, it is launched on the level of around 50
to 60 points, and then improved up to 90 points by observing the responses to it. “Small experiment/
selection” means judging the business potential of prototypes produced for small amounts, and fromwithin them, selecting and developing those that will become profit models. It also indicates that at thedevelopment stage, thorough rules will be clearly set, and that the businesses will be developed andmanaged while keeping down risks that would cause losses to swell unnecessarily. This approach
does not stop only at production, and the Company intends to thoroughly apply it to all of the seriesof processes, including advertising and publicity. Finally, “large-scale deployment” aims to maximize
profits by developing the series of profit models created up to the present time, and in addition, throughthe concentrated investment of the management resources of money and people into models that will
be highly profitable in the future, advancing the generation of earnings at a single stroke.
At FISCO, we expect the measures for “new development” and “new model” to be extremely
effective. One reason we think this is that we highly evaluate the fact that these measures have been
precisely matched to the analysis of the causes of past failures. In addition, a second reason is that
the Company is conducting the organizational reforms as previously explained, of further segmenting
the business segments and establishing 15 autonomous organizational units, as the mechanismsthat will serve as the basis for implementing these measures. We think the greater the reform, themore consistent the layers need to be. For these reasons, we are optimistic about the reforms thatwill be carried out in the Three-Year Strategy in the future.
In order to take on this difficult challenge, the Company may feel it is moving in the direction of risk on
the point that it must develop its human resources at the same time is implementing the reforms. But
at FISCO, we think that a young enterprise like the Company must at some point invest in (or bear
the risk of) developing its human resources, and for precisely this reason, we evaluate as effective its
business-promotion measures based on the concepts of “minimum” and “Phase-in,” which assumesa trial-and-error approach up to the point that profits are generated.

Embarking on business development defined as a “new location”(5) Specific measures to search for potential businesses in “new location”
As a new topic in the 1Q FY6/17 financial results announcement, the Company defined “newlocation” as a new business area and explained that it had begun measures to search for potential
businesses in this area.

Source: 1Q FY6/17 financial results briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.
7

■■Announcement of the Three-Year Strategy, the plan to reform the business model

Voltage Inc.
3639 Tokyo Stock ExchangeFirst Section

14-Dec.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

In addition to the previously described three segments, the Company has defined a new businessarea it calls “new location.” In the Company’s business-segment matrix, this area corresponds tothe “new model” from both the aspects of customer group and technologies. In terms of its specificbusiness content, it is aiming to generate profits from two areas; a business to advance into fields
fusing high-tech technologies, including VR, and a real business, of using the company’s drama
apps in real venues, such as for stage. Within the Company, the former is called “high-tech” and thelatter “real.”
The Company made a fully fledged start on the “new location” businesses of “high-tech” and “real” inFY6/17. The details are as yet unclear, but in “high-tech,” it has already attracted attention for the VRcontents using its own titles that it exhibited for the first time at the Tokyo Game Show in September
2016. In “real” also, it has been searching for and considering several business developments,
and already some of its contents have been used in a stage performance in October 2016. For
goods sales also, it exhibited at Anime Expo 2016, an overseas event in July 2016, and in Japan, in
November 2016, at the Anime Girls Festival 2016. With regard to these fields, the Company, insteadof attempting to recklessly expand the core competence that it currently possesses, is aiming tobroaden its business scope by collaborating with specialized companies, and its plans to create
prototypes and conduct test marketing toward exploring the possibilities for the business itself.
At FISO, we think that while it will take a little more time and information before the “new location”
business can be evaluated in detail and incorporated into the results forecasts, it constitutes one
important part of the Three-Year Strategy and that its contribution to profits can be expected to bematerialized in FY6/19, the final year of the strategy. The concepts of “minimum” and “Phase-in” in“new development” and “new model” can be replaced with the keywords of “test production” and “testsales” in “high-tech.” This reduces the risk while verifying the business potential, and also incorporates
the awareness of the objective of “try it out first (at low cost) and accumulate expertise.” While theCompany has clarified its attitude of “taking the necessary risks” for new business development, within
the situation in which it is strengthening its awareness of internal income-and-expenditure management,
our evaluation at FISCO is that its attitude of taking risk is greater than its anxiety about doing so.
In the real business, we are paying attention to the point that it is expected to be based oncollaborations with other companies. The Company’s hit title “Tenka Toitsu Koi no Ran - Love Ballad”
was performed on stage by the Bancho Boys theater company (performed October 13 to 16, 2016).
As this symbolizes, the Company’s drama app contents are appealing to be developed over a wide
range of areas, including for stage. There is also the possibility of unexpected hits being created byits partners, so will be paying attention to developments in this area in the future.

Strengthening internal income-and-expenditure management(6) ”Time profit” and strengthening income-and-expenditure management
From the interview conducted by FISCO, we understand that the Company is taking steps tostrengthen internal income-and-expenditure management in relation to the Three-Year Strategy.
The concept of “time profit” has been introduced as the core aspect of this. Previously, it prioritizedincreasing sales and its awareness of profits was low. To say this in an easy to understand way, insome cases it would spend more than 10 to achieve 10 sales. This particularly occurred in existingdevelopment in which higher sales leads directly to profits, so to a certain extent it was tolerated.
To correct this point, the Company is requiring that all employees act with a clear awareness of the
input costs, the anticipated sales, and the resulting operating profit. At the same time, it is seeking
that employees change their awareness about ways of working and of using time, aiming to reduce
working hours and to improve efficiency compared to the past. The concept of “time profit” wascreated from this approach, and the Company’s policy is to strengthen income-and-expenditure
management with this as the slogan.
In order to make this policy effective, the Company is also reforming its personnel system andpersonnel evaluation system. For the personnel system, it has created a mechanism to allocate
employees to levels of seniority, functions, and positions, and to enable them to be appointed
to managerial positions within the Company once they reach a certain level of seniority. For the
personnel evaluation system, there has been a major change of course, from evaluations based onsales to evaluations based on profits. Our understanding at FISCO is that the combination of thesetwo changes is essentially a transition to a personnel system that prioritizes abilities, and it can be
expected to support the Company’s recovery of profitability and growth potential.

We encourage readers to review our complete legal statement on “Disclaimer” page.
8

■■Announcement of the Three-Year Strategy, the plan to reform the business model

Aiming to achieve both the optimization of the approach totargets and expansion of scale(7) The Goal of the Three-Year Strategy: the Evolution of the Group Structure

Voltage Inc.
3639 Tokyo Stock ExchangeFirst Section

14-Dec.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

Source: 1Q FY6/17 financial results briefing materials

The Three-Year Strategy is still at the stage in which the overall picture is being clarified, and the form
that the Company will take once the reforms to the business model have been completed remains
uncertain. However, we will next briefly touch on the “Evolution of Group Structure” that the Company
presented as one direction it will take in the FY6/16 full year financial results announcement, and in
addition, the events that seem likely to occur as part of this.
The Company plans to “Evolve of Group Structure” prior to reforming the organizational structure,developing leaders, creating businesses, and producing a framework for generating profits. The
explanation for this is that it is “Aiming to achieve both the optimization of the approach to targets
and expansion of scale by establishing several strategic subsidiaries for different target groups andcontents expertise.” That is to say, it has conceived a business structure that will be easier to steer
by segmenting the organization according to business segment and product series.
In terms of the development to support this, in July 2016 the Company established Volmo, lnc, as a
strategic subsidiary responsible for producing motion-type contents. In addition, in November 2016,
it inherited the business relating to the puzzle action game “LOVE☆Scramble” through a company
split, and it established Volsta, Inc., to be responsible for the production of collecting-and-nurturingtype contents for females.
At FISCO, we cannot judge at the current point in time whether group management by a holding
company is optimal for the Company. But we feel that there is a strong sense of awareness among
the management team of a standalone profitability system for each business and product series orautonomous organizational unit. There is no doubt that this is one of the most essential tasks for
the Company. The “Evolution of Group structure” needs to be closely related to the 15 autonomous
organizational units’ ways of working, and we think that changes to the organization structure in the
future will be an important point that we will need to pay attention to.

We encourage readers to review our complete legal statement on “Disclaimer” page.
9

伪伪Business results trends
Sales fell in 1Q FY6/17 due to a decline in “existingdevelopment,” but the loss was lessened by cost reductions

Voltage Inc.
3639 Tokyo Stock ExchangeFirst Section(1) 1Q FY6/17 results
In the 1Q FY6/17 results, net sales were ¥2,469mn (down 11.2% YoY), the operating loss was¥51mn (compared to an operating loss of ¥75mn in the same period in the previous fiscal year), therecurring loss was ¥62mn (recurring loss of ¥83mn), and the net loss attributable to the owners of theparent company was ¥57mn (net loss of ¥75mn).

14-Dec.-16

Net sales declined YoY due to the impact of sales in “existing development,” which is the source of
earnings, falling 25.5% to ¥1,752mn. Sales increased in both “new development” and “new model,”but not enough to compensate for the decline in “existing development.”

Important disclosuresand disclaimers appear
at the end of this document.

In terms of profits, based on Three-Year Strategy that began from this fiscal period, the Company
worked to minimize costs and succeeded in reducing the loss from each profit item, including theoperating loss, compared to in the same period in the previous fiscal year. By cost item, advertisingcosts were reduced by 54.0% YoY, which contributed greatly to the overall reduction in costs.

FISCO Ltd. Analyst
Hiroyuki Asakawa

Breakdown of net sales and operating profit by business segment (management-accounting basis)
FY6/16
FY6/17
Q1 results
Q1 results
Net sales Core model (existing development)
2,351
1,752
Core model (new development)
414
530
New model
16
187
Total
2,782
2,469
Operating Core model (existing development)
188
204
profitCore model (new development)
-122
-125
New model
-141
-130
Total
-75
-51
Source: Prepared by FISCO from the 1Q FY6/17 financial results briefing materials(Unit: ¥mn)
YoY

-25.5%
27.9%
1051.3%-11.2%
8.5%-

The background to the decline in sales in “existing development” includes that in “F2P,” although it
introduced in this Q1 new horizontal measures to replace the horizontal measures terminated in Q4
FY6/16, they were not picked-up as far as the anticipated line. Another factor behind the decrease
was that in “P2P” also, sales from titles that the Company has stopped updating declined to an extent
greater than expected. Conversely, operating profit increased YoY due to factors including costs,
such as for TV commercials, being kept down.
In “new development,” “Doubt” maintained its strong performance, which absorbed the slump insome of the L10N titles and ensured an increase in sales YoY. The operating loss was due to anincrease in costs, including for TV commercials for “Doubt,” and this loss was basically the same asin the same period in the previous fiscal year.
In “new model,” sales increased significantly YoY due to the higher sales from “Suspense” and also
the accumulation of sales from “LOVE☆Scramble,” a Puzzle Action Games launched in Q4 FY6/16.
In profits, the operating loss was about the same as in the same period in the previous fiscal year
because of the higher costs associated with the launch of “LOVE☆Scramble.”

We encourage readers to review our complete legal statement on “Disclaimer” page.
10

■■Business results trends

Will not actively pursue higher earnings in FY6/17 and instead
will advance the business-model reforms(2) Outlook for the FY6/17 full year

Voltage Inc.
3639 Tokyo Stock ExchangeFirst Section

14-Dec.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

For FY6/17, the Company is forecasting net sales of ¥11,300mn (up 0.7% YoY), operating profit of¥600mn (up 13.0%), recurring profit of ¥600mn (up 22.9%), and net profit attributable to the ownersof the parent company of ¥340mn (up 61.6%).
The Company is formulating and executing its business strategy in accordance with the new businesssegments from FY6/17. The outlook by business segment from 1Q FY6/17 and beyond is as follows.
In FY6/17, “existing development” will correspond to “F2P” and “P2P” Japanese-version RomanceApps, and currently it is the source of earnings for the Company. “F2P” is distributed on the OSbased PF and the social-only PF, and “P2P” is distributed on the OS-based PF and official carrierPF, but earnings from both are mainly from the OS-based PF. In terms of the steps taken to increase
earnings, the Company’s policy for “F2P” is to aim to improve ARPPU through the horizontal
dissemination of successful measures and to prepare for the next IP titles, and for P2P, to enhance
ARPPU and strengthen the customer-attracting model through implementing new events.
In FY6/17, “new development” corresponds to Seek and L10N, both of which are close to generating
profits. The Company is aiming to serialize Seek by utilizing “Doubt” to produce new titles, while itintends to maximize sales by improving L10N based on existing titles and launching “Liar!” (title inJapan, “Doubt”) in October 2017.
“New model,” is a series group with a different target group and production technologies to “coremodel,” and in FY6/17 it will correspond to the English-version Romance Apps DRAGON and US
REAL, and also “Suspense,” “Puzzle Action Game,” and “Motion”. For the time being, the Company
is aiming to generate profits at an early stage through various measures, while continuing in asituation of spending on upfront costs.
Important tasks from Q2 FY6/17 onwards

Source: 1Q FY6/17 financial results briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.
11

■■Business results trends

In FY6/17, the outlook is for a situation of spending on upfront costs in the two business segments of“new development” and “new model”. As “existing development” will continue to remain the sourceof earnings in a one-pillar earnings structure, the net sales growth rate will be 0.7%. For profits,
the Company is aiming to keep down costs by thoroughly implementing “small search” and “small
experiment/selection” described in the Three-Year Strategy, and it expects to maintain the increasein profits YoY, if only a small one.

Voltage Inc.
3639 Tokyo Stock ExchangeFirst Section

14-Dec.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Hiroyuki Asakawa

FY6/17 is the first fiscal year of the Three-Year Strategy and it will be difficult for the Company toprioritize increasing earnings during this period of various reforms. It will simultaneously carry out
major reforms since its foundation in a number of areas, including organizational reforms, developing
leaders, reforms to the ways of conducting businesses, and moreover changes to the personnel
evaluation system. This may have an adverse impact in terms of improving results, but the Company
itself anticipated this point from the time it formulated the strategy. Therefore at FISCO, we think thatrather than focusing on the results’ numerical values, the important point for FY6/17 is the progress
made in reforming the business model.
Simplified Income Statement & Major Management Indicators

Net sales
YoY
Gross profit
Gross margin
SG&A cost
SG&A ratio
Operating profit
YoY
Operating profit margin
Recurring profit
YoY
Net profit attributable toowners of the parent company
YoY

FY6/14
10,082
10.9%
6,699
66.4%
6,083
60.3%
616
108.7%
6.1%
646
88.1%

EPS (¥)
Dividend (¥)
BPS (¥)

FY6/15
10,599
5.1%
6,697
63.2%
6,229
58.8%
467
-24.2%
4.4%
485-24.9%

FY6/16
11,219
5.8%
6,855
61.1%
6,324
56.4%
530
13.6%
4.7%
488
0.6%

1Q FY6/17
2,469-11.2%
1,431
57.9%
1,482
60.0%
-51
-2.1%
-62
-

(Unit: ¥mn)
FY6/17 E
11,300
0.7%
600
13.0%
5.3%
600
22.9%

291

232

210

-57

340

107.0%-20.3%

-9.5%

-

61.6%

57.37
19.00
701.0045.31
15.00
731.6740.66
15.00
744.49-11.27
-

66.61
未定
-

Simplified Balance Sheet

Current assets
Cash and deposits
Accounts receivable
Other current assets
Fixed assets
Tangible fixed assets
Intangible fixed assets
Investments and other fixed assets
Total Assets
Current liabilities
Accounts payable
Other current liabilities
Fixed liabilities
Shareholders' equity
CapitalCapital surplus
Retained earnings
Accumulated other comprehensive
incomeExisting share options
Total Net Assets
Total Net Assets & Liabilities

FY6/14
4,123
2,201
1,836
85
908
241
364
302
5,031
1,445
155
1,289
3,545
908
874
1,762
17

FY6/15
3,687
1,820
1,722
144
1,311
343
555
412
4,999
1,209
194
1,015
3,707
922
887
1,897
63

FY6/16
3,705
2,237
1,290
177
1,199
209
473
516
4,905
1,037
188
848
3,868
936
901
2,031
0

(Unit: ¥mn)
1Q FY6/17
3,464
2,060
1,197
205
1,203
223
463
516
4,667
1,038
207
830
3.633
936
901
1,895
0

23
3,586
5,031

18
3,789
4,999

3,868
4,905

3.629
4.667

Statements of Cash Flow

Cash flow from operating activities
Cash flow from investment activities
Cash flow from financing activities
Cash and deposits translation adjustment, etc.
Change in cash and deposits
Cash and deposits at start of fiscal year
Cash and deposits at end of fiscal year

FY6/14

894
-414
-74
11
417
1,783
2,201

FY6/15

424
-763
-90
48
-380
2,201
1,820

(Unit: ¥mn)
FY6/16
920
-372
-69
-61
417
1,820
2,237

We encourage readers to review our complete legal statement on “Disclaimer” page.
12

伪伪Distribution of profits
In addition to dividends from surplus, the Company acquires
treasury stock

Voltage Inc.
3639 Tokyo Stock ExchangeFirst Section

14-Dec.-16

Important disclosuresand disclaimers appear
at the end of this document.

(1) Dividends from surplus
The Company’s basic dividend policy is to aim to achieve a balance between securing sufficientinternal reserves to develop its businesses in the future and to strengthen its financial position, while
also returning profits to shareholders
The Company paid a dividend of ¥15 in FY6/16, the same as in the previous fiscal year. As net
profit attributable to the owners of the parent company declined 9.5% YoY, the dividend payout
ratio increased from 33.1% in the previous fiscal year to 36.9%. At this initial stage, the Company
has not yet determined the dividend for FY6/17, and going forward it is expected to determine it inaccordance with the above-described basic policy, while also taking into consideration progress
made in results and other factors.

㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼑㼍㼞㼚㼕㼚㼓㼟㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻘㻌㼐㼕㼢㼕㼐㼑㼚㼐㼟㻌㼍㼚㼐㻌㼐㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛FISCO Ltd. Analyst
Hiroyuki Asakawa

㻰㻼㻿㻘㻌㼍㼐㼖㼡㼟㼠㼑㼐㻌㼒㼛㼞㻌㼟㼠㼛㼏㼗㻌㼟㼜㼘㼕㼠㻌㻔㼘㼑㼒㼠㻌㼍㼤㼕㼟㻕㻱㻼㻿㻌㼍㼒㼠㼑㼞㻌㼍㼐㼖㼡㼟㼠㼙㼑㼚㼠㻌㼒㼛㼞㻌㼟㼔㼍㼞㼑㻙㼟㼜㼘㼕㼠㻌㻔㼘㼑㼒㼠㻌㼍㼤㼕㼟㻕㻼㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻌㻔㼞㼕㼓㼔㼠㻌㼍㼤㼕㼟㻕

(¥)
㻝㻞㻜㻚㻜

㻤㻜㻚㻜㻑
㻝㻜㻟㻚㻠

㻢㻣㻚㻠㻑

㻣㻜㻚㻜㻑

㻝㻜㻜㻚㻜

㻢㻜㻚㻜㻑

㻤㻜㻚㻜
㻡㻣㻚㻠

㻢㻜㻚㻜

㻟㻟㻚㻝㻑

㻟㻟㻚㻝㻑
㻠㻜㻚㻜
㻞㻜㻚㻜

㻝㻤㻚㻠㻑
㻝㻥㻚㻜

㻟㻢㻚㻥㻑

㻠㻡㻚㻟

㻢㻡㻚㻠

㻠㻜㻚㻜㻑
㻟㻜㻚㻜㻑

㻠㻜㻚㻢

㻞㻤㻚㻞

㻝㻥㻚㻜

㻝㻥㻚㻜

㻡㻜㻚㻜㻑

㻞㻜㻚㻜㻑
㻝㻡㻚㻜

㻝㻡㻚㻜

㻲㼅㻢㻛㻝㻡

㻲㼅㻢㻛㻝㻢

㻝㻜㻚㻜㻑

㻜㻚㻜

㻜㻚㻜㻑

㻲㼅㻢㻛㻝㻞

㻲㼅㻢㻛㻝㻟

㻲㼅㻢㻛㻝㻠

㻲㼅㻢㻛㻝㻣㻌㻱

Source: Prepared by FISCO from the Company's FY6/16 financial results summary(2) Acquisition of treasury stock
The Company acquired treasury stock from August 19 to 26, 2016. Its reasons for doing so are
considered to be to improve capital efficiency, to return profits to shareholders, and also to facilitate acapital policy that is able to respond flexibly to changes to the business environment.
Status of acquisition of treasury stock
Type of stock acquired
Total number of shares acquired
Total price of shares acquired
PeriodAcquisition method

The Company’s common stock
91,300 shares¥99,942,800
August 19 to 26, 2016 (contract base)
Purchased on the market based on a discretionary investment contractconcluded with a securities company
Source: Prepared by FISCO based on the Company press release of August 26, 2016

We encourage readers to review our complete legal statement on “Disclaimer” page.
13

Disclaimer
FISCO Ltd. (the terms “FISCO”, “we”, mean FISCO Ltd.) has legal agreements with theTokyo Stock Exchange, the Osaka Exchange,and Nikkei Inc. as to the usage of stock
price and index information. The trademark and value of the “JASDAQ INDEX” are theintellectual properties of the Tokyo Stock Exchange, and therefore all rights to them belong
to the Tokyo Stock Exchange.
This report is based on information that we believe to be reliable, but we do not confirm or
guarantee its accuracy, timeliness,or completeness, or the value of the securities issued bycompanies cited in this report. Regardless of purpose,investors should decide how to use
this report and take full responsibility for such use. We shall not be liable for any result of its
use. We provide this report solely for the purpose of information, not to induce investment
or any other action.
This report was prepared at the request of its subject company using information provided
by the company in interviews, but the entire content of the report, including suppositions andconclusions, is the result of our analysis. The content of this report is based on informationthat was current at the time the report was produced, but this information and the content
of this report are subject to change without prior notice.
All intellectual property rights to this report, including copyrights to its text and data, areheld exclusively by FISCO. Any alteration or processing of the report or duplicationsof the report, without the express written consent of FISCO, is strictly prohibited. Anytransmission, reproduction, distribution or transfer of the report or its duplications is also
strictly prohibited.
The final selection of investments and determination of appropriate prices for investment
transactions are decisions for the recipients of this report.
FISCO Ltd.