COMPANY RESEARCH AND ANALYSIS REPORT

USEN-NEXT HOLDINGS Co., Ltd.
9418
Tokyo Stock Exchange First Section

13-Jan.-2021
FISCO Ltd. Analyst

Kimiteru Miyata

FISCO Ltd.
https://www.fisco.co.jp

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Creating synergies and promoting growth with music distribution as the main business.............................

01

2. Built operations for in-depth support of a wide range of businesses. ..........................................................

01

3. FY8/20 attained interim goals from the medium-term management plan two years ahead of time. .............

01

4. Focus on expanding IoT product sales and video distribution growth in FY8/21. ........................................

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

03

2. History................................................... ......................................................................................................

03

3. Business overview................................. ......................................................................................................

04■Financial results trends---------------------------------------------------------------------------------------------------------------------------------------- 08
1. FY8/20 results..............................................................................................................................................

08

2. FY8/20 results by segment..........................................................................................................................

10

3. Progress with the medium-term management plan......................................................................................

14■Company guidance-------------------------------------------------------------------------------------------------------------------------------------------------- 16
1. Group management policies in FY8/21.. ......................................................................................................

16

2. FY8/21 outlook...................................... ......................................................................................................

18■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 20
1. Dividend policy...................................... ......................................................................................................

20

2. Shareholder benefit program................. ......................................................................................................

20■Information security------------------------------------------------------------------------------------------------------------------------------------------------ 22

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/█ Summary
Booking higher sales and profits despite COVID-19 through rising
IoT/DX demand and video distribution in an earnings growth phase
1. Creating synergies and promoting growth with music distribution as the main business
USEN-NEXT HOLDINGS <9418> provides equipment and services needed in operation of stores and facilities
with music distribution as the main area to commercial stores such as restaurants and retailers, and facilities suchas hotels, hospitals, and offices. The Company also provides “U-NEXT,” a flat-rate video distribution service toconsumers. USEN and U-NEXT reintegrated and renamed the company in December 2017. The reintegration
aims to circulate funds from the cash-cow music distribution business to flat-rate video distribution service, store
operation solutions, and other businesses with substantial growth leeway and thereby promote growth in the various
businesses. It also seeks to create group synergies through by closely linking group company strengths, including
the customer base, music and video contents, and IoT equipment, and sales channels of each company andcross-selling mainstay products of group companies, thereby maximizing sales per customer, a major overall goal.
2. Built operations for in-depth support of a wide range of businesses
The Company operates six businesses. In store services business, it distributes music to commercial stores and retailfacilities, manages music copyrights, and also supplies all types of solution services related to store management,such as IoT products and peripheral services. The communications business sells broadband Internet lines tobusinesses and mobile communication (MVNO) services to individuals, as along with other services. The businesssystems business provides automated payment machines and front desk management systems to hotels andhospitals, among other users. The content distribution business distributes videos, e-books, and other digital content
to individuals. In energy business, the Company sells electricity and gas, and in media business, it offers customer
recruitment assistance service to restaurants and other locations. Despite the broad scope of its business domains,
it has built operations for in-depth support of changes in conditions and new requirements and generates synergies.
3. FY8/20 attained interim goals from the medium-term management plan two years ahead of time
In the FY8/20 results, net sales were ¥193,192mn (up 9.9% year-on-year (YoY)) and operating profit was ¥10,883mn(up 32.1%). While FY8/20 was a year of progress in building the income foundation of the Company’s various
businesses, the impact of the COVID-19 outbreak (“COVID-19”) in 2020 spread to customer stores and facilities.
Trends differed among businesses in this environment with healthy activity in contents distribution and IoT/DX aided
by stay-at-home demand and wider use of telework versus struggles in restaurant and hotel businesses due tothe state of emergency declaration. The Company successfully curtailed the impact of COVID-19 with the portfolio
effect of its businesses and attained FY8/22 interim profit goals from the medium-term management plan two years
ahead of time.

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/

Summary

4. Focus on expanding IoT product sales and video distribution growth in FY8/21
The Company targets ¥202,000mn in net sales (+4.6% YoY) and ¥11,000mn in operating profit (+1.1%) in FY8/21.
While it is likely to update interim goals at the very least, we do not expect major changes in business policies. During
FY8/21, the plan is focused on a strategy of promoting deployment of customer infrastructure in the store services
business, increased sales of IoT and DX products in the business systems business, and further acceleration ofhigh growth in the content distribution business. Furthermore, communication business is receiving a tailwind fromdigital transformation (DX) in store, office, and personal residence segments, while content distribution business isentering a new stage of earnings growth. Even though some businesses are still facing a difficult environment due
to the impact of COVID-19, the overall recovery momentum is expected to grow.
Key Points
Posted a double-digit profit increase in FY8/20, even with COVID-19, due to the portfolio effectAttained interim profit goals of the medium-term management plan two years ahead of time
• Plans to focus on expanding IoT/DX product sales and video distribution growth in FY8/21••

Results trends
Net sales (left)（¥mn）

Operating profit/loss (right)

250,000
193,192

200,000

202,000
12,000175,769
10,883150,000
114,291

107,932

100,000
50,000（¥mn）
15,00045,846

5,867

11,000

8,239

9,000
6,000

6,006
3,000

0

0
-396

-50,000-3,000FY12/16

FY12/17

FY8/18FY8/19FY8/20FY8/21 (E)Note: The December 2017 management integration of U-NEXT and USEN resulted in an eight-month fiscal year for FY8/18.
For USEN, the FY12/17 fiscal period covered the nine-month period (March 2017–November 2017), while FY8/18
covers the nine-month period from December 2017 through August 2018. For FY12/16 and earlier periods, the figures
are for U-NEXT prior to the integration.
Source: Prepared by FISCO from the Company’s financial results

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02 22

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/█ Company profile
Assisting store operations, distributing videos to individuals
1. Company profile
The Company provides assistance tools, solutions, and other products and services needed to operate storesand facilities, particularly music distribution (its founding business), through subsidiary companies under a holding
company format to restaurants, retailers, and other commercial stores and various retail facilities. It also runs a
service that distributes videos under a flat-rate program to individuals. The Company has a base of roughly 750,000
customers, while its group companies possess strengths in music and video contents, commercial store assistanceknowhow, network infrastructure, and sales capabilities including direct sales operations, telemarketing, and a
network of distributors. It creates synergies through cross-selling of each company’s major products and promotes
a dynamic growth strategy that incorporates next-generation technologies such as 5G, IoT, and AI.
On entering 2020, COVID-19 has been dealing a blow to societies and economies on a global scale. Companies
in Japan have also been fully affected, and the Company’s customers, many of which are SMEs, are no exception
to this. However, since the group portfolio effect disperses business risk, there was not only a negative impact for
the Company but a positive one as well. Progress in building the revenue base also helped to keep the impact of
COVID-19 relatively minimal compared to other companies. The Company’s presence delivered significant support
particularly to smaller businesses. Although results currently appear to be in the process of recovering, we will givea full explanation about the impact of COVID-19 in the review of results.

Rapid expansion of profitability spurred by the reintegration of USEN
and U-NEXT
2. History
Mototada Uno founded USEN in 1961 as Osaka Yusen Broadcasting and subsequently built a wired broadcast
network nationwide. When Yasuhide Uno took over as President in 1998, he promoted store assistance services
and broadband service using the Company’s existing customer base and infrastructure, and pursued diversificationand digitalization, including video distribution, electronic books, and other content provision services. U’s Broad
Communications (now, U-NEXT), a broadband service provider, a USEN subsidiary, took over the TV paid video
distribution service and sales agent business for personal optical lines and other communication lines and spunoff from USEN in December 2010. However, USEN and U-NEXT reintegrated in December 2017 with the aim ofleveraging respective customer bases and other management resources and creating synergies. The Company
is currently promoting enhancement of profitability through consolidation of shared group functions and otherimprovements in operation efficiency.

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/

Company profile

Pursuing synergies among businesses and promoting improvementsin the profitability of various businesses
3. Business overview
The Company has six business segments: store services, communications, business systems, content distribution,energy, and media. It mainly consists of businesses that cater to companies and individual business owners andother smaller commercial stores and supplies them to these customers through subsidiaries. The store services
business provides music distribution services to restaurants and other stores, engages in sales and installationof distribution equipment, manages music copyrights, and provides store IoT and other store operation solution
services. The energy and media businesses provide such customers with sales of electricity and gas, as well
as services like “Hitosara” that use media to help attract customers. The business systems business provides
automated payment machines and front desk management systems to hotels, hospitals, and other customers. In
communication business, the Company sells broadband Internet lines to companies and MVNO service and otherofferings to individuals. In content distribution business, it distributes digital content, such as videos and e-books,
to individuals. Furthermore, the Company is pursuing not only synergies among its business but also profitability
improvement its various businesses by shifting from one-time profit at the time of the sale to recurring income
obtained through monthly usage fees.
Business description of consolidated subsidiaries
Business

Operating company

Business description

Store services
business

USEN CORPORATION, CANSYSTEM. CO., LTD., U’SMUSIC Co., Ltd., USEN Techno-Service Co., Ltd.

Provides, sells, and implements store solutions, including
for music distribution, and manages and develops music
copyright, etc.

Communications
business

USEN NETWORKS Co., Ltd., U-NEXT Co., Ltd., USENICT Solutions CORPORATION, USEN Smart WorksCORPORATION, USEN-NEXT LIVING PARTNERS Inc.,
U-MX co., LTD., Next Innovation Co., Ltd., Y.U-mobile Co.,
Ltd., and two other companies minimini-NEXT Corporation(equity-method affiliate)

A sales agency for broadband Internet lines, and it
proposes and sells office ICT environment builds, provides
the U-mobile MVNO service, and also provides and sells
broadband Internet lines for individuals

Business systems
business

ALMEX INC.

Develops, manufactures, and sells business management
systems and automated payment machines for hotels,
hospitals, golf courses, etc.

Content distribution
business

U-NEXT, TACTProvision, operation, and sales of U-NEXT movies
distribution service to individuals

Energy business

USEN CORPORATION

As part of the lineup of services for business sites andcommercial facilities, sells energy-saving services, such as
for high and low voltage electric power and gas

Media business

USEN Media CORPORATIONManages the “Hitosara” customer-attraction service
for restaurants, and publishes online magazines, freemagazines, etc.

USEN-NEXT Design

Call center consignment business

USEN-NEXT Financial (equity-method affiliate)

Credit card business, comprehensive credit purchasearrangement, and personal credit purchase arrangementbusiness

Other businesses

15 other companies

Source: Prepared by FISCO from the Company’s financial results, news releases, and the website

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/

Company profile(1) Store services business
The store services business provides solution services mainly related to the Group’s music distribution business,
which is the Company’s original business, and to store management. The Company has more than 50 yearsof experience in the music distribution business, and it provides the USEN service that broadcasts music andinformation for stores and facilities throughout the country, ranging from specialist channels, such as for J-POP andWestern music, through to request channels. The majority of its customers are business sites, and a particularlyhigh percentage of them are restaurants, retailers, beauticians, and clinics, while there are also a wide variety ofchain stores, ranging from nationwide chains to community-based chains. The Company has over 9.5mn songs
and can make playlists suited to any type of industry or business format. It also provides 1,000 types of store
announcements for customers, employees, and others as part of the standard package. The Group has a strong
support network comprised of 170 bases, 1,100 sales personnel, and 900 engineers, and its approach is to handle
everything, from installation and construction through to after-sales care. In addition, when considering that for amonthly fee of ¥4,000 to ¥5,000, customers can eliminate tasks such as installing CD players, continuous softwarepurchases and song selections, and dealing with troublesome copyrights, the cost performance is extremely high,which is the reason for the service’s long-lasting popularity. As a result, it currently has 750,000 customers andboasts an overwhelming share in the store and facility BGM market at more than 90%. The Company leverages
this potent revenue base to support the group’s growth strategy with funding.
As services peripheral to the music distribution business, the Group provides various solutions services for store
management, including products and services relating to stores, the installation and construction of equipment
and interiors, music copyright management, support to acquire human resources, development support, building
business environments, and sales promotions. In recent years, progress has been made in introducing IT into theretail and services industries also, but as the hurdles are high for SMEs to introduce cutting-edge equipment andsystems by themselves, the Company provides its customers with a one-stop service so they don’t have to do itby themselves. Even among these services, growth has been particularly high for the “U Regi” tablet POS register
service and the “U Pay” cashless payment service. Against a backdrop of inroads by wireless LAN and additionof IoT capabilities to business equipment, the Company launched USEN IoT PLATFORM, a one-stop solution
for smarter store operations that combines Wi-Fi, store BGM, cameras, and an analysis service. Key services
are U AIR, U MUSIC, and U EYES. “U AIR” is a Wi-Fi service for businesses that does not require installation
work and can be used right away. “U MUSIC” provides BGM with songs selected by AI and also includes various
announcements and a communications feature. “U EYES” is an AI camera unit that combines crime prevention
measures and store traffic analysis. The Company hopes to leverage USEN IoT PLATFORM installations to
expand cross selling. We discuss USEN IoT PLATFORM in more detail below because of its important role in the
Company’s business strategy in FY8/21.
New services in the store services businessCommunications

Music + announcements + communications

Camera + analysis

New store Wi-Fi that can be used
immediately without installation

All-in-one AI BGM, announcements,
and communications

AI camera unit that combines crime
prevention measures and analysis

Source: From the Company’s website

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05 22

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/

Company profile(2) Communications businessIn communication business, the Company supplies USEN GATE 02, an ICT solution, and USEN Hikari broadband
Internet line service for corporate customers, an optical line service for commercial stores, and y.u mobile MVNO
service and U-NEXT Hikari 01 broadband Internet line service for individual customers. The ICT solution offers ICT
products and services, such as Google, Cybozu <4776>, and other cloud services, mobile service, data center
services and other SaaS and is steadily accumulating results. The strengths of the Company, which provides
services to more than 40,000 companies in the ICT industry that is constantly and continuously changing anddeveloping, include its extensive lineup of services and its provision of high levels of convenience, in that it isable to respond to all customer needs relating to the network environment from a single contact point. We thinkfavorable assessment of these initiatives helped in enabling the Company to obtain telework demand during the
COVID-19 outbreak. In services for individuals, the Company addressed MVNO service, which remains a highly
competitive market, by overhauling U-mobile service, which had a complicated and hard-to-understand fee
structure, and relaunching it as y.u mobile, a new low-cost SIM service with a simple concept. While this might
be a minor change, it is an important item in building the USEN IoT PLATFORM explained below.
(3) Business systems businessSubsidiary ALMEX INC. solely handles the business systems business. This business supplies automated payment
machines and lodging facility management systems to business hotels, city hotels, and leisure hotels, automatedpayment machines and automated patient check-in machines to general hospitals and other medical institutions,and automated payment machines and check-in machines to golf courses. It also sells ordering terminals andoperating systems to restaurants. While automatic payment machines might be considered an area for major
electric equipment manufacturers, ALMEX holds the top market share, including shares of 85% for leisure hotels,
65% for business hotels, 65% for large medical entities, and 70% for golf courses. As a fabless manufacturer,
it develops, sells, and provides maintenance for equipment and systems on its own, which is a strength, whichmakes it a unique presence within the group. In addition, it is not only improving the efficiency of customers’
operations, such as through labor saving, it has also established a strong reputation for developing productsthat target convenience for facility users, which is a significant differentiating factor. In the “Sma-pa series,” atotal solution for medical entities, it recently released “Sma-pa Myna Touch,” a card reader with facial recognition
that supports online confirmation of qualifications, in anticipation of the use of personal ID cards as insurance
certificates beginning in March 2021.
“Sma-pa Myna Touch” card reader with facial recognition that
supports online confirmation of qualifications
Speaker8-inch LCD

2.5-dimension camera
Photography LED light
OCR camera

IC card reader

Source: The Company’s results briefing materials

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/

Company profile(4) Content distribution business
Through “U-NEXT,” the Company provides Video on Demand, (VOD) services to individuals. For a monthly
fee, users can watch video content, such as movies and TV programs, and also read e-books and listen tomusic, on devices such as their TVs, PCs, and smartphones via the Internet. The most prominent feature is anindustry-leading content line-up of more than 200,000 items. This service offers 180,000 content items withunlimited viewing and fast distribution fully loaded with the latest content. Furthermore, since it packages 570,000
e-books too, users enjoy service for two types of content on a single contract. It is also the only service thatprovides adult content, and the importance of carrying adult content as the key to growing demand to adults canbe understood from the overwhelming victory by TSUTAYA Co., Ltd., over US-based major Blockbuster LLC during
the growth years in rental videos. Furthermore, even though the ¥1,990 monthly usage fee might seem high at
first, it is not actually expensive because a single account allows viewing by up to four people and the real charge
works out to ¥790 after factoring in provision of ¥1,200 points per month. As explained above, one might saythat the Company is the only domestic video distribution company capable of competing with not only domestic
boutique-type video distribution services, but also Amazon <AMZN> Prime Video and Netflix <NFLX> services
that invest massive amounts of money to create original products and are rapidly expanding their presence. The
video distribution market has entered an era of joint use of 2-3 distribution services, and the pattern of selecting
the Company, Netflix, and one other company appears to be increasing.
Ranked first in the number of unlimited viewing anime titles and anime episodes*Data compiled by GEM Partners: As of December 2019
• The total number of anime titles and episodes, including foreign movies, Japanese movies, overseas TV andOV, and domestic TV and OV• Only the content displayed on the company websites of the main video distribution service providers iscounted.
• In order to be able to analyze the lineups’ content types across the various video distribution services, thenames in GEM Partners’ proprietary database have been aggregated and re-classified.
Source: The Company’s press release(5) Energy businessIn energy business, the Company sells high-voltage and low-voltage electricity and city gas procured from Tokyo
Electric Power Company (TEPCO) Holdings, Inc. <9501>, with which it has a business alliance, to commercial
stores and retail facilities located outside of the TEPCO area. It also offers consulting services such as for energy
savings. This service functions as a “hook” product that is a catalyst for acquisition of new customers in the store
services business and cross-selling. The Company only launched the service in September 2016 following theliberalization of electricity sales and, while it is a stable business that reliably obtains spread, one could argue thatprofit margin is low because it is a resale business. Nevertheless, the Company reached profitability in FY8/20.
It intends to continue pursuing increased sales as a hook product, though is reviewing measures to deal withgrowing competition from regional power companies in various areas at the timing of contract renewal.

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/

Company profile(6) Media businessIn media business, the Company utilizes “Hitosara,” its original gourmet restaurant information site, to delivercustomer recruitment assistance services to restaurants. It also functions as a sales agent for other gourmet
sites. “Hitosara” focuses on cooks (hito) and cuisine (sara) and differentiates itself by narrowing down its targets torelatively high-end restaurants, thereby securing a fixed market position. The Company’s media business actively
engages in media collaboration, including operation of the SAVOR JAPAN gourmet site for foreigners visiting
Japan, business alliances with companies that deliver services to foreigner travelers in Japan, and publishing ofrelated books. In FY8/20, however, it encountered a very difficult environment due to steep decline of inboundtraffic from 1H and the COVID-19 outbreak in 2H. The Company therefore switched its business model fromflat-rate to volume-based billing and is trying to revive business.
(7) Other business (financial business)
Besides the six main businesses, the Company established USEN-NEXT Financial, a joint venture with Shinsei
Bank, Limited, and started offering financial services in August 2020. The services include business credit (installment credit and installment payments) for individual business owners and companies that have transactions with
the Company, including customers who are starting new businesses, and a business credit card. Business credit
supports evening out of payment burden for facilities and equipment needed to start a business through paying
in installments. The business credit card can be used to pay for procurement and expenses and also improves
the efficiency of spending management by consolidating expenses on the credit card. These services are likely
to greatly boost convenience for the Company’s customers. USEN-NEXT Financial is currently preparing otherproducts too, such as vendor leasing and lending.

█ Financial results trends
Posted sharply higher operating profit in FY8/20 despite the COVID19 outbreak
1. FY8/20 results
The Company reported FY8/20 results with ¥193,192mn in net sales (+9.9% YoY), ¥10,883mn in operating profit(+32.1%), ¥10,093mn in ordinary profit (+50.6%), and ¥4,909mn in profit attributable to owners of the parent(-19.1%). Despite incurring impact from the COVID-19 outbreak for much of 2H, it posted upbeat results exceeding
period-start guidance, and operating profit, ordinary profit, and profit attributable to owners of the parent attainedinterim goals (FY8/22) from the medium-term management plan that lasts through FY8/24 two years ahead of time.
While profit attributable to owners of the parent dropped YoY, this reflected increase in the corporate tax as thetax rate returned to normal on non-recurrence of the tax effect accompanying the sales of fixed assets in FY8/19.

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/

Financial results trends

FY8/20 results(¥mn)
FY8/19FY8/20% of change

Results% of net sales

Results% of net sales

Net sales

175,769

100.0%

193,192

100.0%

9.9%

Gross profit

69,753

39.7%

76,586

39.6%

9.8%

SG&A expenses

61,51335.0%

65,703

34.0%

6.8%

Operating profit

8,239

4.7%

10,883

5.6%

32.1%

Ordinary profit

6,702

3.8%

10,093

5.2%

50.6%

Profit attributable toowners of parent

6,069

3.5%

4,909

2.5%

-19.1%

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

Individual owners and small and very small companies are the main operators of commercial stores that are theCompany’s customers, and many faced difficulties due to store and retail facility closures and shorter operating hours
during the state of emergency period prompted by the COVID-19 outbreak. Recovery after the state of emergency
period, though slow, and the Go To campaign and other measures have restored activity to some extent. However,things have not improved to the point of full-fledged restoration of economic activities yet. Due to these conditions,the Company delivered a variety of assistance, including no-cost provision of messages to prevent COVID-19
infections to hospitals, supermarkets, and restaurants nationwide, take-out delivery support for restaurants, andno-charge provision of cloud camera service to stores as a crime prevention measure at suspended stores. It
bolstered the line-up of new IoT services for stores to meet non-face-to-face and contactless needs. While results inbusiness with commercial stores faces these challenges, video distribution to individuals, a segment with increased
needs due to expansion of staying indoors and telework, corporate ICT solutions drove sales growth. Gross margin
only fell slightly, despite struggles in high-margin store services and commercial systems, thanks to coverage with
communication and video distribution services. Furthermore, the Company was successful in projects to improve
productivity promoted prior to the COVID-19 outbreak and also enhanced productivity through revision double
costs in its organization bloated by the merger and at CANSYSTEM CO., LTD. acquired as a subsidiary. It liftedsales promotion efficiency as well through digitalization of sales promotions for commercial stores and adjustments
to listing and affiliate activities that lacked clear effect. SG&A expenses growth trailed the sales expansion pace,lowering the SG&A expenses ratio.

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

09 22

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/

Financial results trends

The impact of COVID-19 differed depending on the business
2. FY8/20 results by segment
While FY8/20 was a year of progress in building the income foundation in the Company’s various business segments,
inbound traffic dropped sharply in 2020 and business conditions significantly eroded at customers following issuanceof the state of emergency declaration in April due to COVID-19. Corporate ICT solutions and content distribution
to individuals grew and opportunities in the store services business expanded under these conditions. Meanwhile,difficulties at some commercial stores and other sites weakened growth in business system and energy sales
businesses. Inbound traffic declined too. Business trends and earnings progress deviated among businesses inthis environment. The Company still posted higher profits on an overall basis thanks to its business portfolio effect.
Segment results were store services business at ¥52,204mn in net sales (+7.2% YoY) and ¥8,840mn in operating
profit (+14.8%), communication business at ¥43,984mn in net sales (+9.9% YoY) and ¥4,034mn in operating profit(+52.7%), business systems business at ¥20,291mn in net sales (-0.7% YoY) and ¥3,451mn in operating profit(-1.7%), content distribution business at ¥45,863mn in net sales (+36.2% YoY) and ¥746mn in operating profit(+73.1%), energy business at ¥29,453mn in net sales (-1.9% YoY) and ¥98mn in operating profit (vs. a ¥368mn
loss in the previous fiscal year), and media business at ¥4,112mn in net sales (-21.8% YoY) and a ¥36mn operating
loss (vs. a ¥355mn profit in the previous fiscal year). Below, we take a detailed look at income conditions in thesebusinesses.
FY8/20 results by segment (before adjustment)(¥mn)
FY8/19Results

FY8/20% of net sales

Results% of net sales% of changeStore services business

48,69927.3%

52,204

26.6%

Communications business

40,02722.5%

43,984

22.5%

9.9%

Business systems business

20,434

11.5%

20,291

10.4%

-0.7%

Content distribution business

33,66718.9%

45,863

23.4%

36.2%

Energy business

30,022

16.9%

29,453

15.0%

-1.9%

Media business

5,256

3.0%

4,112

2.1%

-21.8%

Results

Profit ratio

Results

Profit ratio

Store services business

7,703

15.8%

8,840

16.9%

14.8%

Communications business

2,643

6.6%

4,034

9.2%

52.6%

Business systems business

3,512

17.2%

3,451

17.0%

-1.7%

Content distribution business

431

1.3%

746

1.6%

73.1%

Energy business

-368

-1.2%

98

0.3%

Became profitable

Media business

355

6.8%

-36

-0.9%

Dropped to a loss

FY8/19FY8/20

7.2%% of change

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

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10 22

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/

Financial results trends(1) Store services businessIn stores services business, the Company bolstered its line-up of store and retail facility services for commercial
stores and chain stores and actively recruited IoT/DX needs. It also promoted total solution support that covers
opening assistance, cultivation of the business environment, customer recruitment and sales promotion withemphasis on music distribution and IoT areas. Given these efforts, the Company’s “U Regi” multi-function, lowprice tablet POS registers and “U Pay” payment service fared well amid heightened needs to support the reduced
tax rate and cashless payments related to revision of the consumer tax rate in October 2019. “U Regi” sales rose
substantially with a 46% YoY increase. Additionally, as measures targeting inbound business, it provided public
wireless LAN access service in public spaces, such as shopping streets, large retail facilities, parks, and train
stations, and “USEN Omotenashi Cast” indoor announcements in four languages (Japanese, English, Chinese,and Korean). This segment booked strong results in 1H FY8/20 based on these activities.
However, the state of emergency declaration prompted by the COVID-19 outbreak resulted in very difficult
income conditions for stores and retail facilities, the Company’s customers. This led to an acceleration of contract
terminations, mainly by restaurants heavily affected by the steep drop in inbound traffic, and customer volume
had a net decline of 20,000 customers in May 2020. Meanwhile, the Company proposed smarter store operations
and rolled out measures to address non-face-to-face and contactless needs, such as adding temperature checksensors to its line-up, introducing “U Regi FOOD” tablet POS registers for restaurants in an alliance with LINE,and starting LINE Pokeo, a takeout service that handles store search, order placement, and prepayment entirelyon the LINE smartphone app. It continued provision of services tailored to commercial stores, including “tenant
rent guarantee service” and “USEN subsidy diagnosis service.” As a result, business conditions started recoveringin June 2020, and the Company gradually moved forward in reversing May’s decline. While revision of the BGM
tuner depreciation period added ¥1,124mn to earnings, the segment reported higher profit even without this item.
Monthly trend in major product contracts in FY8/20

Source: The Company’s results briefing materials

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11 22

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/

Financial results trends(2) Communications business
Sales agent business for broadband Internet lines proceeded smoothly with small-scale businesses as the main
customers, and the Company advanced in income structure reforms for a shift from one-shot to running businesson a healthy 19% YoY rise in sales of “USEN Hikari plus,” its own optical line service. With the USEN GATE 02
brand, it provided one-stop provision of network-related services, cloud services, and data center services. It also
supported office work formats through arrangement of a variety of cloud services and built ICT environments at
customer offices. It therefore was able to obtain demand related to changes in work formats, such as remote workand online meetings, despite impact from COVID-19. The Company renewed the MVNO service for individuals andis focusing on this business again. While it started MVNO service through an alliance with Yamada Holdings Co.,
Ltd. <9831>, the Company was unable to effectively differentiate its service due to having the same cost-heavy
approach using agents and direct-sales shops as the many other MVNO services that appeared with liberalizationof the domestic communication service business. It revised the alliance method with Yamada Holdings andswitched to a more clear-cut fee menu with direct acquisition of lines from NTT DOCOMO, INC.. We also expectthat monetization will become easier because of inclusion in the USEN IoT PLATFORM (described below) andprovision to commercial stores.
(3) Business systems businessIn 1H FY8/20, heightened demand for rollout of IT solutions at hotels, an important customer area, ahead of
the planned Tokyo Olympics, sustained expansion of inbound traffic, increase in hotel volume, related tougher
competition and manpower shortages, and a shift to cashless payments lifted deployments of hotel management
systems, automated payment machines, and other products. For hospitals, the segment sold next-generation
kiosks with face authentication using AI and insurance certificate confirmation that leveraged technology andknowhow cultivated over many years to general hospitals and others and broadened its domain to small hospitals
with development of a payment machine for clinics and dental offices. In 2H, however, equipment deployments
did not progress as planned as occupancy rates at hotels fell significantly on decline in inbound traffic and direct
impact by the state of emergency related to COVID-19. In response, the Company developed a payment systemthat realizes fully unmanned payments for restaurants struggling with high costs and released the “Myna Touch”
card reader with facial recognition that is capable of confirming certification online (approved by the Ministry of
Health, Labour and Welfare). Thanks to the “Go To campaign” effect, the hotel occupancy rate that dropped to
the 10-20% level in Apr-July 2020 has rebounded to over 50% recently, and subsidiary ALMEX’s results have
moved into a recovery path.

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12 22

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/

Financial results trends

Business systems business – Monthly sales in the three main industries

Source: The Company’s results briefing materials(4) Content distribution business
Entry by leading foreign-capital firms has stimulated the video distribution services market, while U-NEXT steadily
increased subscriber volume by continuing to improve the user experience, enhance content, and develop themarket and bolstering TV commercials and web advertising. Contract volume climbed even faster between April
and June 2020 with the boost from “stay-at-home” demand driven by COVID-19. This upswing lifted volume above
2mn subscribers, the medium-term goal, at the end of FY8/20, and the Company is still stably raising volume
without a downturn. In content, U-NEXT remains the industry leader in the number of titles available for unlimited
viewing through expansion of its line-up. It is also enhancing music genres and distributed the crowd-less live showby the Southern All Stars at the Yokohama Arena, a first-time initiative, on June 25, 2020. In device strategies, itfocused on viewer satisfaction with a U-NEXT Button for direct activation from a remote control and support for
Panasonic Corporation’s <6752> DIGA Blu-ray disk recorder.
Monthly trend in U-NEXT billed users

Source: The Company’s results briefing materials

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13 22

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/

Financial results trends(5) Energy businessIn energy business, the Company faced pressure from decline in electricity consumption volume due to customer
store and retail facility closures and shortened hours as the impact of curtailed economic activities accompanying
the state of emergency declaration. While it had a net increase in overall supply contract volume (high-voltage+ low-voltage contracts) and intends to retain positioning as a “hook” product for store services business andother areas, issues have emerged with tougher competition in high-voltage service and relative decline in pricecompetitiveness. The Company is in the process of addressing these issues with drastic measures such as fee
negotiations with TEPCO Holdings and revisions to sales operations.
(6) Media business
Since many restaurants directly impacted by closures and shortened operating hours and decline in foreigners
visiting Japan due to COVID-19 were among the Company’s customers, the Company prepared assistancemeasures under Hitosara service and started an initiative that enables stores listing takeout information to receive
food orders from Instagram. It also began “Online Restaurant,” a new eating experience, and “restaurant rental”
services. The Company was able to shrink losses, despite difficult business conditions, by curtailing promotion
costs.

Already attained interim goals from the “NEXT for 2024” mediumterm management plan
3. Progress with the medium-term management plan
The Company formulated the “NEXT for 2024” five-year medium-term management plan with a slogan of “Brighten
the future” in June 2019. It contains five fundamental strategies – 1) fully leverage customer assets and build a stable
income base, 2) further reinforce cash-cow business and aggressively invest created funds into growth areas, 3)
improve productivity and raise business efficiency through revisions to the work environment, 4) optimize the financialbalance, and 5) make sustainable growth investments and provide continuous shareholder return. By dividing thebusinesses into three portfolios*, it intends to carry out a well-balanced strategy. Additionally, the Company plans
to use ROE, the most important management indicator, and its constituent factors (shareholders’ equity and profit
attributable to owners of the parent) as benchmarks and therefore set FY8/24 goals of ¥270bn in net sales, ¥13bn
in operating profit, and high-quality financial balance. It also expressed intent to raise the dividend payout ratio to
30% as soon as possible. In FY8/20, it already attained interim goals for FY8/22 two years ahead of time. We think
it is likely to update interim goals at least, but it is unclear whether this will extend to revising the medium-term
management plan itself in the absence of an outlook for the COVID-19 situation settling down (at a minimum, it
seems difficult to revamp the plan in the near term). We thus expect focus on achieving FY8/21 guidance for thetime being.
*	Business portfolio categories: Cash-cow stable high earnings business with a solid customer base (music distribution
business), stable growth business likely to continue gains by meeting stable needs (business systems and corporate ICT/
SaaS service businesses), and high growth business with potential as a future earnings source (content distribution andstore IoT/DX service businesses)

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14 22

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/

Financial results trends

Three portfolios

Source: The Company’s materials

Progress toward “NEXT for 2024” interim goals(¥100mn)
FY8/19FY8/20FY8/22 interim goals

1,758

1,932

2,300

Operating profit

82

109

100

Ordinary profit

67

101

90

Profit attributable to owners of parent

61

49

45

EBITDA

175

195

200

Net sales

106

117

100

ROE

33.6%

21.0%

15.0%

Equity ratio

EBITDA-CAPEX

14.9%

18.6%

20.0%

Leverage ratio

4.2

3.6

3.0

Debt equity ratio

3.5

2.7

2.0

4.9%

9.8%

10~30%

Payout ratio

Source: P repared by FISCO from the Company’s medium-term management plan briefing materials, results
briefing materials, securities report, and financial results

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15 22

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/█ Company guidance
FY8/21 group management policies – “forming an organization for
a new era,” “accelerating growth in IoT/DX materials,” “achieving
sustainable earnings growth”
1. Group management policies in FY8/21
We think FY8/21 is a moderately unique period because of COVID-19 in FY8/20 and attainment of interim goals
from the medium-term management plan two years ahead of time. The Company added “now is the time” to the“Brighten the future” slogan to express the sentiment of keeping the focus on growth while continuing to deal with
COVID-19. It defined group business policies for FY8/21 under the new slogan of “forming an organization for a newera,” “accelerating growth in IoT/DX materials,” “achieving sustainable earnings growth.” In “forming an organization
for a new era,” it intends to pursue and assess productivity, consolidate new strength with a new work format,
and form speed capabilities. In “accelerating growth in IoT/DX materials,” it aims to increase customer accounts,
promote customer infrastructure deployments, expand IoT/DX product sales, and develop new technology products.
In “achieving sustainable earnings growth,” it hopes to revive and sustain high earnings business, revamp the unit
cost structure, and further accelerate high growth businesses. The Company has specific goals for each of thesethree business policies. In particular, it will focus on promoting customer infrastructure deployments, expanding IoT/DX product sales, and further acceleration of high growth businesses.
(1) Promoting customer infrastructure deployments and expanding IoT/DX product sales
In fact, the Company completed the “USEN IoT PLATFORM” as a platform in the store services business withabove-mentioned rollout of new services U AIR, U MUSIC, and U EYES. The communication environment is central
to the platform, and the overall system constitutes a formation to promote DX at real-world stores. In setting up
the communication environment, a vital component, Wi-Fi availability is obviously important and an MVNO service
SIM might be a strong weapon depending on the store environment. This accelerates the timing of single-monthprofitability for the Company’s optical line service used by commercial stores by one year (vs. the medium-term
management plan) to FY8/21. Regarding “U Regi,” which also served as a “hook” product for cashless payments
and other services, while income was flat in FY8/20 due to the impact of COVD-19, the Company expects renewed
increase in momentum.
The Company wants to expand sales of IoT/DX products to medical entities and pharmacies. Medical-related
entities are scheduled to deploy personal ID card readers based on facial recognition starting in March 2021
with support from national subsidies aimed at promoting use of personal ID cards as insurance certificates(confirming online qualifications). While general hospitals obtain support via the Company’s advanced “Sma-pa
series,” the Company developed “Sma-Pa Myna Touch” for smaller medical-related entities. Only three companies
have received approval from the Ministry of Health, Labour and Welfare at this point – the Company, Fujitsu
Japan Limited, and Panasonic System Solutions Japan Co., Ltd. The Company’s “Sma-Pa Myna Touch” has anadvantage in its ability to read various paper certificates. With over 200,000 medical-related entities (clinics, dentist
offices, and pharmacies) nationwide that offer new growth potential, the Company established USEN Healthcare
Inc., a marketing company that specializes in the market and intends to bolster sales activities.

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16 22

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/

Company guidance

USEN IoT PLATFORM

Source: Prepared by FISCO from the Company’s materials(2) Further acceleration of high growth business
Content distribution, which is deemed to be a high growth business, started taking off with “stay-at-home” demand
as a catalyst. As mentioned earlier, despite clear differentiation in the content line-up and other aspects, Amazon
Prime Video and Netflix are starting to leverage their funding advantage and other companies are putting up stiff
resistance. The Company therefore redefined its positioning of content distribution business and revised the growthstrategy. As positioning, it is pursuing value as a library, rather than differentiation through production of originalcontent. It comprehensively handles content from a wide range of genre, including the latest titles, and aims for aposition as a rental shop replacement service. As the growth strategy, given the prospect of stable sales growth,
it intends to expand customer volume and achieve earnings growth by continuing to allocate promotional costs
to acquire new users while actively using content procurement costs to sustain existing users. It plans to fully
engage in distribution of live music events, such as the Southern All Stars concerts aired in the midst of COVID-19,
harnessing its knowhow cultivated in music distribution and industry relationships. It also wants to bolster various
genres. The Company expects to accelerate growth in content distribution business with these efforts.

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17 22

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/

Company guidance

Positioning of the Company’s growth business

Source: Prepared by FISCO from the Company’s medium-term management plan briefing materials

Guides for higher sales and profits in FY8/21, though slightly
conservative
2. FY8/21 outlook
The forecasts for the Company’s FY8/21 results are for net sales of ¥202,000mn (+ 4.6% YoY), operating profit of¥11,000mn (+ 1.1%), ordinary profit of ¥10,200mn (+ 1.1%), and profit attributable to owners of parent of ¥5,000mn(- 1.8%). While it is difficult to assess because the impact of COVID-19 has both positive and negative aspects, wethink guidance is slightly conservative considering activities at commercial stores, the recovery trend in businessconditions, and other factors.
FY8/21 outlook(¥mn)
FY8/20FY8/21 (E)% of net sales% of change

Results% of net sales

Value

Net sales

193,192

100.0%

202,000

100.0%

4.6%

Gross profit

76,586

39.6%

-

-

-

SG&A expenses

65,703

34.0%

-

-

-

Operating profit

10,883

5.6%

11,0005.4%

1.1%

Ordinary profit

10,093

5.2%

10,2005.0%

1.1%

Profit attributable toowners of parent

4,909

2.5%

5,000

2.5%

1.8%

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

Since the integration, the Company has strengthened its business resources, including a customer base of 750,000
contracts, video and music content, IoT products, network infrastructure, and robust sales capabilities (mainly
direct sales), and achieved synergies. Recently, it quickly tapped into market needs and business opportunities byaddressing rapid and substantial changes in consumption behavior, corporate activity, technology, and social environment due to the impact of COVID-19 and applying IT technologies, such as IoT and AI, with fast decision-making.
In FY8/21 as well, it is dealing with changes in the various businesses with the aim of fulfilling the slogan of “now is
the time to brighten the future.”
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18 22

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/

Company guidance

Segment outlook for FY8/21 (prior to adjustments)(¥mn)
FY8/20Results

FY8/21 (E)% of net sales

Value% of net sales% of changeStore services business

52,20426.6%

51,000

24.9%

-2.3%

Communications business

43,98422.5%

43,500

21.2%

-1.1%

Business systems business

20,291

10.4%

20,500

10.0%

1.0%

Content distribution business

45,86323.4%

56,000

27.3%

22.1%

Energy business

29,45315.0%

30,500

14.9%

3.6%

Media business

4,112

2.1%

3,500

1.7%

-14.9%

FY8/20FY8/21 (E)
Value

Profit ratio% of change

Results

Profit ratio

Store services business

8,840

16.9%

7,700

15.1%

Communications business

4,034

9.2%

4,200

9.7%

4.1%

Business systems business

3,451

17.0%

3,300

16.1%

-4.4%

Content distribution business

746

1.6%

2,700

4.8%

261.9%

Energy business

98

0.3%

200

0.7%

Media business

-36

-0.9%

-500

-14.3%-12.9%

104.1%
Dropping to a loss

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

In store services business, the Company expects continued closures of pubs and other national chain stores andtherefore anticipates continuation of difficult conditions in 2H FY8/20. It also factors in non-recurrence of profit
related to accounting policy change that occurred in FY8/20 and decline in recurring income from cancellation of
20,000 contracts in May 2020. These trends underpin guidance for a decline in profit. While the near-term outlook
is challenging, we think the outlook uses cautious assumptions considering strong commercial store support for theCompany, inclusion of just 0-1,000 contracts as the monthly net increase in customer contracts, and replacement bypharmacies, prepared food stores, and other businesses when sites are open up after closures. In communications
business, the Company projects higher sales and profits based on build-up of recurring income from sales of office
software to small businesses and its own optical lines to commercial stores amid the corporate DX trend. In businesssystems business, it expects recovery throughout FY8/21, even with the large number of struggling hotels andother customers, because of the Go To campaign and Tokyo Olympics and Paralympics events which were delayed
from the previous year. The Company plans to bolster sales activities in the regional high-end inn segment, which
it had not covered much up to now, that is doing well but trailing in IT support. In content distribution business, theCompany recognizes that it has entered an earnings growth phase and expects increase in customer contracts
by putting costs toward promotions and content and therefore sharply higher profits. In energy business, despite
issues from tougher competition and fee negotiations with TEPCO Holdings, it continues to target expansion inother products with this business as a “hook” offering. In media business, it intends to renew efforts through a shift
in the business model from flat-rate to volume-base service amid curtailment of advertising costs by commercial
stores due to the impact of COVID-19. This implies a wider loss because of utilizing operational costs. While theCompany projects differing profit trends among the various businesses in FY8/21 as explained above, it predicts
an overall increase in earnings thanks to the business portfolio effect.

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19 22

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/█ Shareholder return policy
Is expected to enhance the shareholder return policy in the medium
term
1. Dividend policy
With regard to dividends, the Company has a fundamental policy of allocating surplus funds once a year at period-end based on results assessed comprehensively in terms of the financial position, profit situation, new investment
plans, and other factors, and the shareholder general assembly is the decision-making body for the dividend payment
from surplus funds. The Company views return of earnings to shareholders as a key corporate policy and paid an ¥8
period-end dividend in FY8/20 as the result of an overall assessment of results and other factors in according withthe fundamental policy. It plans to pay ¥8.5 as the FY8/21 annual dividend. In the “NEXT for 2024” medium-term
management plan, it is aiming for a 10-30% dividend payout ratio.

Trends in dividend per share and payout ratio
Dividend par share (left)（¥）

Aiming for a 10-30% dividend
payout ratio

Payout ratio (right)

10.00

8.00

（%）

35.0

8.50

8.00

28.0

6.00

21.0

5.00

4.00

9.8

10.2

4.9

2.00

14.0
7.0

0.00

0.0
FY12/16 FY12/17

FY8/18FY8/19FY8/20FY8/21(E)

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

Robust shareholder benefit program
2. Shareholder benefit program
The Company offers a shareholder benefit program to show appreciation to shareholders for their support, deepen
understanding of business content by using group services, and enhance investment appeal of its shares andencourage long-term ownership. The current benefits consist of “U-NEXT” content distribution service and the“Premium Benefit Club.”We encourage readers to review our complete legal statement on “Disclaimer” page.

20 22

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/

Shareholder return policy

For shareholders holding from 100 to 999 shares, they receive 90 days of free use of the “U-NEXT” video distribution
service and ¥1,000 worth of points and shareholders with at least 1,000 shares will now receive one year’s worth ofusage fees for the “U-NEXT” service and ¥1,800 worth of points each month. The Premium Benefit Club allocatesshareholder benefit points based on the number of shares owned to shareholders who own 500 or more shares.
Members can exchange the points for food, electronic products, gifts, travel, experience services, and other choices
worth 2,000 points or more at the USEN-NEXT HOLDINGS Premium Benefit Club site exclusively for shareholders.
The shareholder benefit points have been established in detail according to the number of shares held, and if theshares are held for at least one year, the number of points is increased to 1.1 times the number in the first year.
Shareholders who qualify for shareholder benefits are those own one unit (100 shares) or more of the stock basedon listing or registration in the shareholder ledger on the final day of February and final day of August each year.
Shareholders who qualify for the Premium Benefit Club are those who own five units (500 shares) or more of thestock based on listing or registration in the shareholder ledger on the final day of February each year.
In the Premium Benefit Club, shareholders can exchange their benefit points for WILLsCoin, a benefit coin forcommon shareholders. These coins are exchanged for benefit products on the Premium Benefit Club Portal, an
individual shareholder membership site. WILLsCoin are valid for a period of 12 months from the final exchange(benefit points and WILLsCoin exchange or WILLsCoin and benefit product exchange). Shareholders can extend
the valid period by using benefit points to acquire WILLsCoin or using WILLsCoin to acquire benefit products during
the valid period. Furthermore, it is possible to extend the valid period for one year from the transaction date of apurchasing by credit card on the Premium Benefit Club Portal or registration of a Premium Benefit Club Gift Card.
Examples of products that points can be exchanged for in the “USEN-NEXT HOLDINGS Premium Benefits Club”

Source: The Company’s results briefing materials

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21 22

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

USEN-NEXT HOLDINGS Co., Ltd.

13-Jan.-2021

9418 Tokyo Stock Exchange First Section

https://usen-next.co.jp/ir/█ Information security
Carefully managing security for work-style reforms
The Company is strengthening personal information protection capabilities and continues to implement educational programs. However, it cannot give a guarantee of complete protection and there is always risk of personal
information leaks due to improper access from an external source, system trouble, insider crime, human mistakes,
and management mistakes at outsourcing and service provision partners. Given these challenges, the Company
manages the information system at a data center, employs a firewall, and continually assesses vulnerability in web
applications as a more proactive information security effort. The Company allocates notebook PCs and smartphones
to individuals as part of work-style reforms. It greatly reduces security risk by equipping notebook PCs with a security
chip (TPM) and utilizing MDM in smartphones.

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

22 22

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
not make any promises regarding any future outcomes. If you use this report or any information
mentioned herein, regardless of the purpose therefor, such use shall be made based on yourjudgment and responsibility, and FISCO shall not be liable for any damage incurred by you asa result of such use, irrespective of the reason.
This report has been prepared at the request of the company subject hereto based on theprovision of information by such company through telephone interviews and the like. However,
the hypotheses, conclusions and all other contents contained herein are based on analysis
by FISCO. The contents of this report are as of the time of the preparation hereof, and are
subject to change without notice. FISCO is not obligated to update this report.
The intellectual property rights, including the copyrights to the main text hereof, the data
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FISCO and its affiliated companies, as well as the directors, officers and employees thereof,
may currently or in the future trade or hold the financial instruments or the securities of issuersthat are mentioned in this report.
Please use the information in this report upon accepting the above points.

◾ For inquiry, please contact: ◾

FISCO Ltd.
5-11-9 Minami Aoyama, Minato-ku, Tokyo, Japan 107-0062
Phone: 03-5774-2443 (Financial information Dept.)
Email: support@fisco.co.jp