Strategies
The Group President and Chief Executive Officer
on Strategy

By applying our unique humanresource development strategy toentrepreneurial human resources,
we continue to create outstanding
businesses that empower bothpeople and industry.
Riding the Great Wave of Social Change to Further Growth
In 2000, the Septeni Group shifted the focus of its business from direct marketing to Internet
advertising. Even then, we were convinced that the Internet and digital technology were not short-term
fads, but major industries that would change the world in the long run. We have since grown into anorganization with more than 30 Group companies, 11 bases in 8 countries and about 1,500 employees
centered on the Internet Marketing Business, with a track record of one of the highest levels oftransactions in Japan, and the Media Content Business, which includes the Manga Content Business.
Over the past 18 years, we have seen the advent of a new industrial revolution due to digitaltechnology, and society has undergone a rapid digital shift. During that time, we quickly identified
and adapted to society’s emerging trends and growth areas, including smartphone, social media andvideo advertising, and have grown by flexibly reallocating management resources. In other words,
changes in society and our own progress have largely followed the same track.

Koki Sato
Representative Director and President, SEPTENI HOLDINGS CO., LTD.
Group President and Chief Executive Officer
1997	Entered SEPTENI HOLDINGS CO., LTD. (then-named SUB & LIMINAL CO., LTD.)
after graduating from university	Launched an Internet advertising agency in his third year after joining theCompany, developing it as a new business manager into one of Japan’s top
Internet advertising companies

2006	Appointed as President and Representative Director of the operatingcompany SEPTENI CO., LTD. with the transition to a holding company structure
2009	Appointed as Representative Director and President of SEPTENI HOLDINGS
CO., LTD. (current position)2017	Appointed as Group President and Chief Executive Officer (current position)
following the introduction of an entrusted executive officer system

13

SEPTENI HOLDINGS CO., LTD.

Society is now at the dawn of the Digital Industrial Revolution, which is certain to drastically change
society’s vision by connecting the real space we live in with every industry, including e-mobility,
medical care and retail stores. As a key player in the digital advertising market, the Septeni Groupintends to grow further by riding this great wave of social change.

Empowering People and Industry Is Our Reason for Existence
For companies like ours that are involved with Internet advertising and media content, investors may findit hard to imagine how the items on our balance sheet lead to profits. I believe that the most importantelement linking the Group’s balance sheet to its sales and profits is human capital. Based on this belief,
we have been proactively investing in people who possess a good sense of ownership and a strong
entrepreneurial spirit. By placing entrepreneurial individuals who can think and act for themselves at thecore of each of our organizations and establishing an environment and systems that make it easy forthem to create new services, we aim to be a group that can take the lead in social change. This is theGroup’s philosophy and the nucleus around which the unique Septeni culture has formed.
The low average age of our employees, 29, is another major strength of our human resources.
To provide our clients with the value of the unique strengths of a group of young people — including
adaptability to change and flexible thinking — we promote young talent and decisively delegate
authority.

Integrated Report 201814

Strategies: The Group President and Chief Executive Officer on Strategy

In addition, to bolster our activities in the fields of recruitment, development and management, we

operate an AI-based personnel system centered on machine learning that we developed in-house.
The rapid development of human resources into fully contributing members of the team from the useof this system and the resulting contribution to sales and profits are evidenced by our data.
Our unique philosophy and culture centered on young people and our AI-based personnel system
are the “operating system” of the Group, serving as the infrastructure that supports its growth. All of
us in management share an awareness that it is because of this infrastructure that we are able tocreate superior businesses, or “applications,” as it were.
The common strength of the Group’s businesses is empowering people and industry. It is also theessential value we create. Employees, each with a strong entrepreneurial spirit, creating businesses
that empower people and ultimately better society: This is the Septeni Group’s reason for existence.

Accelerating the Growth of Our Core Businesses through Organic
Growth and a Capital and Business Alliance with the Dentsu GroupIn the Group’s Midterm Business Policies for the period starting from the fiscal year ended September
2017, we set three basic policies: expand advertising business globally; enhance our own media;
and invest in what comes after the smartphone. The Midterm Business Policies also target non-GAAP
operating profit of ¥10 billion as soon as possible. In October 2018, we announced a capital andbusiness alliance with the Dentsu Group. Aiming to increase the value we provide to clients throughcollaboration between our two groups, we expect to generate synergies in areas including mutual
utilization of management assets and economies of scale from sharing knowledge and technologies.
For the fiscal year ending September 2019, the Septeni Group will significantly accelerate its growththrough the organic growth of its businesses and this alliance.
Midterm Business Policies (From the Fiscal Year Ended September 2017)

Earnings Target

Non-GAAP Operating Profit¥10 billion

Basic Policies
Expand advertising business globally
Enhance our own media
Invest in what comes after the smartphone

Internet Marketing BusinessIn the Internet Marketing Business in Japan, although we were impacted by factors including adecrease in advertising in existing projects, we worked to establish a robust organizationalfoundation through investment in human resources and to promote growth in the new field of brandadvertising, where demand has been growing. These measures will help to expand our business
operations. In addition, through our business alliance with the Dentsu Group, we will increase thevalue we provide to clients by jointly running the Dentsu Group’s digital advertising projects andestablishing an integrated system for proposing online and offline advertisements.
Revenue from overseas markets is increasing, mainly from Southeast Asia and Greater China, andthe ratio of overseas revenue to total revenue has reached approximately 13%. We will continue totake a two-pronged approach to global expansion through organic growth and M&A, with plans toincrease the ratio of overseas revenue to total revenue to about 50% for the entire Group over the
medium term.

Media Content BusinessWe have been promoting the Media Content Business under a policy of creating strong media andproducts to establish a new mainstay business alongside the advertising business. Currently, we arefocusing investments on expanding the media scale of our manga app “GANMA!”. As of September
15

SEPTENI HOLDINGS CO., LTD.

2018, the cumulative number of app downloads

reached 10.98 million, monthly page views
reached 3.16 billion and the number of users is
growing, mainly among young people in theirteens and twenties. Both the experiential value
for the people who access and post about
GANMA! on a daily basis and the long-term
profits that are generated will be substantial.
We will enhance the value of the Company’s
intellectual property by developing works inother genres such as comic books andtheatrical productions, and aim to increase revenue from advertising, in-app sales and sales of goods,
as well as to grow through global expansion.

Proactive Investment in Our Business Infrastructure
to Enhance Medium-to-Long-Term Competitiveness
The Group will actively invest in its business infrastructure (“operating system”) with a view toenhancing its medium-to-long-term competitiveness. During the fiscal year ended September 2018
in particular, we increased investment in the human resources field while conducting Group
operation of the AI-based personnel system I mentioned earlier. This system, which uses our vast
human resources database to make highly accurate predictions of each person’s degree of successin future employment, has become a robust part of our infrastructure after going through several
years of empirical verification and operation. It has generated remarkable results in eachorganization, eliminating mismatches in assigning employees to departments and getting them up to
speed earlier, and has been evaluated highly by external organizations.* Moreover, we are focusing
on using the AI-based personnel system in achieving the Midterm Business Policies in areas such as
discovering and hiring human resources with latent capabilities.
Our business concept of empowering people and industry applies not only to external stakeholders
but also to Group employees. I believe that clients want to patronize companies that have establishedenjoyable work environments that fill employees with positive emotions and energy, rather thancompanies that do not, and the results of the former will continue to grow. Every day, I can see formyself that a company with low-stress relationships and a good fit between individuals andorganizations experiences less friction when making management decisions.
As the transformation of industry through digital technology gains speed, the Group will combine
its unique human resource development strategy with the power of its human resources to offer newvalue by creating outstanding businesses that others cannot.

Return of Profits
Consolidated profits for the fiscal year ended September 2018 declined due to a decrease inadvertising in existing projects and higher costs mainly for investments in human resources aimed atenhancing competitiveness, among other factors. In the fiscal year ending September 2019, we will
aim for a V-shaped recovery in business results by returning to growth in our core businesses andstrengthening our profit structure through cost controls.
To return profits to our shareholders and investors, we are targeting a payout ratio of 15% of profit
for the period attributable to owners of the parent and have set a lower limit for dividends per shareof ¥2.0 in consideration of the continuity and stability of dividends. We will continue to allocate
profits appropriately in accordance with growth in our business results.
*	In August 2018, at the Third HR Technology Awards sponsored by the Ministry of Economy, Trade and Industry,
the Septeni Group received the Prize for Innovation in recognition of its efforts in using AI to optimize its entire HR flow,
including recruiting, employee dispatch, training and retirement.
	In the “Great Place to Work (in Japan)” rankings by the Great Place to Work® Institute Japan in February 2018,
the Septeni Group was selected as one of the best companies for the seventh consecutive year.

Integrated Report 201816

Strategies: Strategy by Business

Strategy by Business: Internet Marketing
The Internet Marketing Business harnesses the Internet to provide comprehensive marketing support services tocorporations. In addition to selling Internet advertising, this business also operates marketing platforms as an inhouse service, including cloud-based customer relation management (CRM) services and affiliate networks.

Overview of Results for the Fiscal Year Ended
September 2018

Revenue and Non-GAAP Operating Profit
Revenue•	Revenue from the flagship areas of video advertising and brandadvertising increased steadily.

海外収益
Overseas
Revenue

Non-GAAP operating proﬁt

13,40913,833

14,234

Note: Starting from the fiscal year ended September 2018, Company-wide
expenses are no longer allocated to each segment. In accordance withthis new reporting standard, non-GAAP operating profit for the fiscal
year ended September 2017 has been restated excluding Companywide expenses. Unrestated figures for the preceding fiscal years arepresented for reference only.

5,000

0

5,331

3,816

2015

4,026

2018

Video advertising revenue
Ratio of video advertising revenue to total revenue(Billions of yen)(%)(Index*)

15

15

20

150

12

12

16

120

9

9

12

90

6

6

8

60

3

3

4

30

0

0

0

0

13.2
10.7
1.87

1.0

0

6.3

1.48

0.84
2016
2017
2018
(Years ended September)

17.8
14.2

12.8

10.3
5.9
4.3
2016
2017
2018
(Years ended September)

143

100

2017
2018
(Years ended September)* Revenue in fiscal year ended September 2017 = 100

Strengths of the Business

Future Strategy

In addition to the foresight to uncover emerging growth fields before others and the flexibility to immediately allocate
management resources to those fields, we have a core competence in Internet advertising that we have cultivated since
the establishment of the business, creative capabilities and a superior position in smartphone advertising. By taking
advantage of these strengths, we can meet client needs with a comprehensive approach based on targets and their likely
outcomes.

For further business growth, we consider it important to develop new market categories in brand advertising and tostrengthen our positioning in this field, which is driving market expansion. For the past year or so, the Septeni Grouphas focused on expanding sales of brand advertisements on its own. Going forward, through our business alliancewith the Dentsu Group, we aim to raise the value of the services we provide and resolve our clients’ issues by offering
comprehensive proposals for online and offline advertising rather than simply delivering conventional discrete advertisements
as finished products.
In our overseas operations, we will also work to organically increase earnings, mainly in Southeast Asia and Greater China.

Business Model

Learn about the Septeni Group through Its People!
Internet Marketing Business
Advertising agency sales

Clients

Advertising sales

Service provision• Design of campaign structure• Consulting• Operation of advertisements• Establishment of creative content
etc.

SEPTENI HOLDINGS CO., LTD.

Advertisingpurchases

Internet media

Campaign implementation, operation,effectiveness measurement

Information dispatchetc.

Advertising
distribution,
display

Yusuke Shimizu
Group Executive Officer
President and Representative Director, SEPTENI CO., LTD. and Septeni Japan, Inc.

Users

In-house services• Cloud-based CRM services• Affiliate networks• Internet media

17

Brand Advertising Revenue

(%)

0.5
2016
2017
(Years ended September)•	Need for establishing a strong foothold forthe business by securing and promoting
development of human resources

2.5

1.5
5,468

Issues(Billions of yen)

2.0

11,096
10,000•	Growing sophistication and specializationof marketing methods

Video Advertising Revenue

Overseas revenue
Ratio of overseas revenue to total revenue(Millions of yen)

15,000•	Profit declined due to a decrease in advertising in some existing largescale projects, as well as increases in cost prices and personnel expenses.

•	Internet advertising’s share of Japan’s total
advertising expenditure is approaching TV
advertising’s share
Opportunities•	Acceleration toward a digital shift amongleading advertisers going forward

2006	Joined SEPTENI CO., LTD. after graduating from university
2018	Appointed as Group Executive Officer (current position)
	Appointed as President and Representative Director of SEPTENI CO., LTD. and Septeni Japan, Inc.
(current positions)Capturing the digital shift as an opportunity, the Internet advertising market is currently
expanding. Amid this expansion, it is becoming increasingly challenging to solve the problems
faced by clients due to the growing sophistication and specialization of marketing methods.
In this business, regardless of the job category, human resources are our greatest asset. The
Septeni Group has a culture of encouraging its employees to take on challenges and pursues
initiatives such as applying its AI-based personnel system to get the best from its humanresources. The Group is also investing in human resources with the aim of strengthening its
organizational foundation to secure medium-to-long-term competitiveness. In a market that is
becoming ever more complex, we aim to achieve further business growth by taking on new
challenges and establishing new partnerships to provide an even greater number of clients withsolutions to their problems.

Integrated Report 201818

Strategies: Strategy by Business

Strategy by Business: Media Content
The Manga Content Business fosters and supports manga artists and operates the manga app GANMA!, whichmainly features original works by exclusively-affiliated authors, with the aim of planning and developing theOpportunities

Company’s intellectual property (IP).

In addition, the Media Content Business conducts new businesses born from the in-house startup program, such as

the recruitment, social contribution, medical and childcare platform businesses.

Overview of Results for the Fiscal Year Ended
September 2018

Revenue and Non-GAAP Operating Profit (Loss)
Revenue•	The cumulative number of downloads for GANMA! reached 10.98 million
as of September 2018, and the number of monthly page views increased
to 3.16 billion.
•	In addition to robust sales growth for advertisements published on
GANMA!, app revenue, mainly consisting of advertising revenue, also
increased steadily due to the growth of in-app sales.
•	Operating loss was reduced due to control of advertising and publicity
expenses and efforts to strengthen content and product.

Non-GAAP operating proﬁt (loss)(Millions of yen)

1,500

1,163

1,000
500

1,324

601
207

0
(500)

Note: Starting from the fiscal year ended September 2018, Company-wide
expenses are no longer allocated to each segment. In accordance withthis new reporting standard, non-GAAP operating profit for the fiscal
year ended September 2017 has been restated excluding Companywide expenses. Unrestated figures for the preceding fiscal years arepresented for reference only.

(1,000)(1,500)

(530)

2015

(718)

•	Expanding market for manga apps, mainly
among the younger generation

Issues•	Increasing in-app sales and IP revenue
from in-house content

What is GANMA!?

GANMA! is a manga app featuring
over 160 original works ranging
from suspense to romance,
fantasy, action-adventure, horror
and comedy. Entire original series
can be read at no charge, andcontent is updated daily.

2016
2017
(Years ended September)(1,051)•	Need for engaging users who are notinfluenced by the external environment

Cumulative Number of GANMA!
App Downloads

累計 DL 数

アプリ収益（指数）(Millions of downloads)(Index*)

12

10.98

10

8.59

8
6
4

0

2018

App Revenue
600

559

500

445

400
300

3.77

2
(1,324)•	Intensification of competition for users
and authors due to competitors entering
the market

200
100

2016
2017
2018
(Years ended September)

100

0

2016
2017
2018
(Years ended September)*R evenue in fiscal year ended September 2016 = 100

Strengths of the Business

Future Strategy

The user base of the GANMA! manga app is growing, mainly among millennials (the generation currently in their teens
through thirties). Two points differentiate GANMA! from other services: most of the comics are works by artists nurtured
in-house, and they can be read for free. Amid declining television viewership among young people, we are establishing
the position of GANMA! as an advertising medium that reaches this demographic, which makes up the great majority of
the app’s users.

We intend to distribute the in-house content that is a distinctive feature of GANMA! on various platforms that are well-suited for manga(YouTube, Twitter, eBook stores) to create a decentralized traffic structure, thus strengthening growth in the number of users andmonetization. At the same time, having conducted a major update of the app in December 2018, we aim to increase subscription
revenue by enhancing the user interface and user experience to increase the retention rate and session time, monetizing works
produced completely in-house and presenting popular works based on intellectual property from outside the Company. In addition
to increased revenue from these sources, in-app sales of goods and expansion of cash points rewarded for merchandise sold, we will
enhance our ability to secure brand advertising budgets through our business alliance with the Dentsu Group.

Business Model
Manga artists

Cultivation
Providing works

g sales

Manga Content Business

Management ofmanga artists

Manga content app
GANMA!

Advertisin

Corporations/Groups/Medicalinstitutions

Provision of information
on job seekers

Activity support
Provision of solutions for
medical institutions

19

SEPTENI HOLDINGS CO., LTD.

Learn about the Septeni Group through Its People!

Media Content Business

Recruitment platform businessDistribution

Users
Registrationof information

ViViVitSocial contribution platform businessgooddoMedical platform businessPharmarket

Takefumi Okada

Support action on
the Internet

Director, COMICSMART, Inc.
Group Executive Officer
2003	Joined SEPTENI CO., LTD. after graduating from university
2018	Appointed as Director of COMICSMART, Inc. (current position)
2019	Appointed as Group Executive Officer (current position)

The shift in manga readership from printed to digital formats is accelerating, mainly among
young people, and manga services continue to grow, centered on apps. Although competition isintense in the manga app market, few companies produce original Internet content, and webelieve that our current role as a driver of market growth will give us an advantage over the
medium to long term.
GANMA! marked its fifth anniversary in 2018, and recognition of the service is increasing witha cumulative total of more than 10.98 million downloads. Initiatives we intend to introduce in thefiscal year ending September 2019 include a rollout of a multi-channel network (MCN) for
in-house content as an opportunity for inorganic growth. This will be the culmination of the firstchapter since the launch of this business. In addition, everyone in the business will work together
to help improve Group profitability.

Integrated Report 201820