COMPANY RESEARCH AND ANALYSIS REPORT

Wacom Co., Ltd.
6727
Tokyo Stock Exchange Prime Market

17-Jun.-2024
FISCO Ltd. Analyst

Ikuo Shibata

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

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

Wacom Co., Ltd.
6727 Tokyo Stock Exchange Prime Market

17-Jun.-2024
https://investors.wacom.com/en-jp/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. FY3/24 results..............................................................................................................................................

01

2. FY3/25 results outlook.................................................................................................................................

01

3. Revision of update on “Wacom Chapter 3,” the medium-term business direction. ......................................

02■Business overview---------------------------------------------------------------------------------------------------------------------------------------------------- 03■Business and major product features---------------------------------------------------------------------------------------------------- 04
1. Branded Business.................................. ......................................................................................................

04

2. Technology Solution Business............... ......................................................................................................

05■Financial highlights-------------------------------------------------------------------------------------------------------------------------------------------------- 06
1. FY3/24 results..............................................................................................................................................

06

2. Results overview by business......................................................................................................................

08

3. Key takeaways of FY3/24 results........... ......................................................................................................

09■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 09
1. FY3/25 results outlook.................................................................................................................................

09

2. Key considerations for FISCO......................................................................................................................

11■Progress on update of “Wacom Chapter 3” (revised),
the medium-term business direction------------------------------------------------------------------------------------------------------ 12
1. Basic direction and history to date. . ....... ......................................................................................................

12

2. Progress on the update plan (revised) (as of April 2024). .............................................................................

13

3. Awareness of issues and direction of additional plans for the Branded Business. .......................................

15■Preliminary guidance of the next medium-term business direction(Wacom Chapter 4)--------------------------------------------------------------------------------------------------------------------------------------------------- 16
1. Preliminary guidance (summary)............ ......................................................................................................

16

2. Revenue scale and profitability.............. ......................................................................................................

16■Results trends in past years---------------------------------------------------------------------------------------------------------------------------- 17■Initiatives for society----------------------------------------------------------------------------------------------------------------------------------------------- 20■Shareholder returns------------------------------------------------------------------------------------------------------------------------------------------------- 21■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 22

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

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

Wacom Co., Ltd.
6727 Tokyo Stock Exchange Prime Market

17-Jun.-2024
https://investors.wacom.com/en-jp/■ SummaryIn FY3/24, sales and profits increased due to growth of theTechnology Solution Business with the impact of the yen’s
depreciation and growth in OEM demand. The Branded Business
continued to struggle due to changes in the market environment,
but the liquidation of negative legacy assets progressed to a certain
extent, with plans to implement further structural transformation
Wacom Co., Ltd. <6727> (hereafter, also “the Company”) is a global leading manufacturer aiming to create value
for customers based on technologies in the field of digital pen and ink. It has high brand clout and market share,
supported by professional creators such as designers and animators who work in studios for movie production
or industrial design studios. Its two business segments are the Branded Business, in which it sells its proprietary
Displays (LCD pen tablets) and Pen Tablets and other products, and the Technology Solution Business, in which
it supplies proprietary digital pen technology as a component to manufacturers of finished products, including
smartphones and tablet and notebook PCs.
1. FY3/24 results
In FY3/24, sales and profits increased, with net sales increasing 5.4% YoY to ¥118,795mn and operating profit
increasing 250.6% to ¥7,058mn. This performance reflected a contribution from growth in sales of the Technology
Solution Business supported by the effect of the yen’s depreciation and brisk OEM demand. However, the Branded
Business continued to struggle due to rapid changes in the market environment. On the earnings front, profits
increased substantially due to factors such as a decline in one-time costs (cost of sales) associated with growthin the Technology Solution Business, the liquidation of negative legacy assets, and reduction in SG&A expenses(excluding the weaker yen impact), even while the Company continued to actively invest in R&D. In terms of activities,
the Company achieved some success in areas such as technology development for the proposal of new use cases,
although new products introduced to the market in 2023 were slow to take off.
2. FY3/25 results outlook
For the FY3/25 consolidated results outlook, the Company expects net sales to increase 1.0% YoY to ¥120,000mn,
and operating profit to increase 20.4% to ¥8,500mn. Looking ahead to the next medium-term business direction(Wacom Chapter 4), which will begin in FY3/26, the Company plans to establish an earnings base that will serve as afoundation for business growth, while also advancing the structural transformation of the Branded Business. In termsof net sales, the Company will increase the market penetration of its new product portfolio in the Branded Business.
Concurrently, it maintains a cautious outlook for the Technology Solution Business, with net sales expected to remain
largely unchanged at this time. On the earnings front, the Company expects to generate increased profits throughfurther enhancing profitability by improving gross profit in the Branded Business (initial forecasts do not anticipate
the additional expenses associated with the liquidation of negative legacy assets and related items, resulting insmaller losses), while continuing to actively invest in R&D.

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

01 22

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

Wacom Co., Ltd.
6727 Tokyo Stock Exchange Prime Market

17-Jun.-2024
https://investors.wacom.com/en-jp/

Summary

3. Revision of update of “Wacom Chapter 3,” the medium-term business direction
The Company has been promoting initiatives under “Wacom Chapter 3” (FY3/22 to FY3/25), its four-year medium-term business direction. The new direction will promote specific value propositions and sustainable growth,inheriting the vision of “lifelong ink,” and redefining five key strategic initiatives as well as six main streams fortechnology innovation to implement the policy. In particular, the Company’s leading strategy is to select three fields
that have a high affinity with its existing technologies–AI, XR, and Security–and realize new value propositions in thesefields using new core technologies and business models; and this basic direction has not been revised. However,in addition to responding to external factors such as the recent rapid changes in the market environment, theCompany has room for improvement in its own structure in areas such as renewing the product portfolio, improving
gross profit, and strengthening sales channel management in the Branded Business. Accordingly, the Company has
positioned the latter two years of the medium-term business direction (FY3/24 to FY3/25) as a period for businessstructure transformation to ensure business growth in the next phase, “Wacom Chapter 4.” The Company has
announced a policy of focusing on gross profit improvement and growth foundation construction (update plan).
While subsequently revising the policy based on conditions, it has been undertaking structural transformation in
preparation for “Wacom Chapter 4.” In May 2024, the Company announced the preliminary guidance of “Wacom
Chapter 4.” It provided a roadmap for centralizing management resources, and for commercialization and market
implementation of technology that serves as next-generation growth engines. (The final draft is scheduled to beannounced in May 2025.)
Key Points
In FY3/24, sales and profits increased due to growth of the Technology Solution Business with the impact of the
yen’s depreciation and growth in OEM demand, while the Branded Business has continued to struggle since
the previous fiscal year, impacted by changes in the market environment. However, the liquidation of negative
legacy assets has progressed to a certain extent• Regarding the FY3/25 consolidated results outlook, the Company expects to generate increases in sales andprofits, while advancing structural transformation in the Branded Business• Under the next medium-term business direction, which will begin in FY3/26, the Company will work to centralize
management resources, while aiming for commercialization and market implementation of technology thatserves as next-generation growth engines•

Result trends
Net sales (left)
13,407
13,024(¥mn)
140,000

Operating profit (right)(¥mn)
14,000120,000

12,000100,000
80,000108,531108,790

112,730

118,795

120,000
8,500

7,058

88,5808,000

60,00040,00010,000

6,000
5,567

4,000

20,000

2,000
2,013

0

0
FY3/20FY3/21

FY3/22

FY3/23

FY3/24

FY3/25 (E)Source: Prepared by FISCO from the Company’s financial results

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

02 22

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

Wacom Co., Ltd.
6727 Tokyo Stock Exchange Prime Market

17-Jun.-2024
https://investors.wacom.com/en-jp/■ Business overview
Global leader aiming to create value for customers based ontechnologies in the field of digital pen and ink
The Company is a global leader aiming to create value for customers based on technologies in the field of digital
pen and ink. It sells products in more than 150 countries worldwide and has high brand clout and market share,
supported by professional creators such as designers and animators who work in studios for movie production orindustrial design studios. Furthermore, as a Technology Leadership Company, it broadly supplies the latest digital
pen technology to partner companies manufacturing smartphones, tablet PCs, digital stationery, and other products,
and is fostering a business field that specializes in education with partners from the educational industry.
The Company is also striving to create new growth opportunities by rebuilding product line-ups and further evolving
the business model amid major changes in the market environment. These changes include negative factors suchas competition with Chinese manufacturers in mid- to low-priced models and a shift in demand to other categories(iPad and other devices) in the entry-level zone, along with trends such as the evolution of user needs and workflow,
as well as the spread of online education and teleworking accompanying advances in digital technologies (VR/MR,
AI, and others) and the communications environment (mobile, cloud, 5G, and others).
Its two business segments are the Branded Business, which sells the Company’s proprietary Displays, Pen Tablets
and other products, and the Technology Solution Business, which supplies proprietary digital pen technology as acomponent to manufacturers of finished products, including smartphones and tablet PCs.
The Branded Business has an overseas sales ratio (overseas local entity sales ratio) of about 84%*1, and transaction
prices for the Technology Solution Business (sales area is categorized as Japan) are denominated in US dollars.
Therefore, close consideration should be given to the impact of foreign exchange market fluctuations on earnings(a weaker yen has a positive impact*2).
*1	In FY3/24, the United States accounted for 31.9% of the sales of the Branded Business, followed by Europe (Germany)
at 30.5%, Asia/Oceania at 21.6%, and Japan at 16.0%.
*2	Segment profit (loss) in the Branded Business is impacted by fluctuations in the euro-yen rate with a positive impact bya weaker yen, being offset by the US dollar-yen rate with a negative impact by a weaker yen, whereas segment profit(loss) in the Technology Solution Business is impacted by the US dollar-yen rate with a positive impact by a weaker yen.

While development sites are practically all concentrated in Japan, excluding developments of digital ink and security-related software (which are mainly in Europe) and driver software (which is mainly in the US), the Company
consigns production to multiple overseas partners (which are mostly major electronics manufacturing service
companies owned by either Japanese or Taiwanese with production sites in mainland China). However, from aperspective of mitigating regional concentration risk in the supply chain, the Company is proceeding to disperse its
production sites into the surrounding Southeast Asia region, such as its site in Vietnam.

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

03 22

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

Wacom Co., Ltd.
6727 Tokyo Stock Exchange Prime Market

17-Jun.-2024
https://investors.wacom.com/en-jp/■ Business and major product features
Promoting updates in the product portfolio that address changes
in the business environment and de facto standardization of
proprietary technologies
1. Branded Business
The Company has a broad lineup for target customers and product types. It sorts products into two categories: (1)Creative Solution and (2) Business Solution.
(1) Creative Solution
This business has played a pivotal role since the dawn of the digital content market and possesses strong
brand clout and market share with professional creators. Product types* include Displays and Pen Tablets, andunderstanding their difference is important in assessing the competition environment and growth potential.
*	Up until now, the Company had divided its products into three categories: Displays, Pen Tablets, and Mobile, others;
however, to facilitate a more appropriate discussion of earnings suited to the changed environment, from FY3/24, thecategory scope has changed, and for Mobile, others, the results pertaining to Mobile have been incorporated into Displays,
and those pertaining to others have been incorporated into Pen Tablets.

a) Displays
This category covers products that use an LCD panel as the tablet* and allow the user to directly write on an LCD
screen with a digital pen. Meanwhile, they are also known as PC peripherals, similar to Pen Tablets as an input
device that does not have an OS or storage feature. Prices for larger products range from around ¥300,000 to¥500,000. Users are mainly professionals and advanced amateurs, and the Company holds an overwhelming
share in this market. In response to market changes (such as expanded scope in digital handwriting (drawing)users and demand shift from Pen Tablets), it released multiple new models including an approximately 16-inch
entry-level model with an actual sales price in the ¥60,000 to ¥70,000 range (sales price excluding tax at the timeof launch; same below) in January 2019, a 22-inch model (actual sales price in the ¥100,000 to ¥110,000 range)in July 2019, and an approximately 13-inch model for beginners (actual sales price in the ¥30,000 to ¥40,000
range) in January 2020. The Company is gaining a stronger presence even in the entry-level model segment
where it faces tough price competition from other companies (Chinese manufacturers, etc.). But in light of recent
trends such as a decline in consumer sentiment and a shift in demand to other categories, the Company has
continued to struggle in mid- to low-priced models. In response, the Company is updating its product portfolio
by narrowing down its product line-up and making new value propositions (new use cases and others) througha return to basics centered on professional and creative specialized education.
*	Sometimes referred to as “LCD pen tablets” as well.

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

04 22

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

Wacom Co., Ltd.
6727 Tokyo Stock Exchange Prime Market

17-Jun.-2024
https://investors.wacom.com/en-jp/

Business and major product featuresb) Pen Tablets
The most basic device* consists of a digital pen and tablet (blackboard type) and has contributed to the Company’s
results as a mainstay product. It is a PC peripheral used over a connection to a PC, similar to a mouse or
keyboard. The Company offers a broad lineup that ranges from professional to beginner products thanks to asimple configuration. While it is sustaining competitiveness in the professional high-end market as joint use with
Displays is viewed as a use case, demand has declined due to aging since the products were announced, andcompetition has emerged with other companies (Chinese manufacturers and others) in the mid- to low-price range,
where differentiation is difficult. Furthermore, although the Company will continue to meet customer needs for
Pen Tablets, it is strategically shifting its management resources toward Displays, where demand is shifting due
to their more intuitive operability and lower prices.
*	Sometimes referred to as “opaque tablets” as well.

2) Business Solution
The Company sells business-use products that are capable of direct drawing and character entry (signature) on an
LCD screen. Usage is increasing in digital signature (hotel check-in, credit card payments, opening bank accounts,
concluding insurance policies, etc.) and medical (medical document management and electronic medical records,
informed consent etc.) areas, as well as the public field (government administration services such as application
forms at service desks, emergency assistance, electronic voting support, etc.).
2. Technology Solution BusinessThis business is divided into two segments, AES Technology Solution and EMR Technology Solution* 1 based on digital pen technologies*2. It supplies pen sensor systems to smartphone and tablet and notebook PC manufacturers.
Business has been growing, centered on sales for the Samsung Electronics (Galaxy series), which has adopted EMR.
Moreover, it has formed business relationships with major PC manufacturers, including Lenovo <HKG:0992> andFujitsu <6702>, which have adopted AES, along with customers in China, such as Xiaomi Corp <HKG:1810>. The
Company aims to expand business scale through promotion of its proprietary digital pen technology as a de facto
standard, while expanding the scope of users. Manufacturers also appear to highly rate the Company’s technology,
as it has been early to implement foldable devices (folding-type smartphones and PCs, etc.) and compatibility with
devices that use electronic paper technology.
*1	To facilitate an explanation of performance more suited to the changed environment, the segment names were partiallychanged from FY3/24, and the others previously included in EMR Technology Solution, others sales have been omitted.
*2	The Company’s technologies consist of Active ES (proprietary electrostatic coupling, battery required for pen) format
technology and EMR (electro-magnetic resonance) rapid, high-precision positioning sensors (battery not required).

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

05 22

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

Wacom Co., Ltd.
6727 Tokyo Stock Exchange Prime Market

17-Jun.-2024
https://investors.wacom.com/en-jp/■ Financial highlights
In FY3/24, sales and profits increased due to growth of theTechnology Solution Business with the impact of the yen’s
depreciation and growth in OEM demand. The Branded Business
continued to struggle due to changes in the market environment,
but the liquidation of negative legacy assets has progressed to acertain extent
1. FY3/24 results
In the FY3/24 consolidated results, sales and profits increased, as net sales increased 5.4% YoY to ¥118,795mn,
operating profit rose 250.6% to ¥7,058mn, ordinary profit climbed 243.6% to ¥9,853mn, and profit attributable toowners of parent (hereinafter, “net profit”) grew 154.5% to ¥4,562mn. These results exceeded the upwardly revised
forecasts announced on March 29, 2024.
Net sales increased due to growth in the Technology Solution Business, supported by the effect of the yen’s depreciation* and brisk OEM demand. However, the Branded Business experienced declining demand for professional
display products (existing models) while low-priced models continued to struggle due to a deterioration in consumer
sentiment.
*	This factor increased the Company’s overall sales by approximately ¥7.5bn.

On the earnings front, operating profit increased due to growth in the Technology Solution Business, including theimpact of the yen’s depreciation*1 and a decline in one-time costs*2 from the previous fiscal year, even while theCompany continued to actively invest in R&D*3. However, in the Branded Business, the Company continued to record
a segment loss due to factors such as the posting of valuation reserve for inventory purchase commitments* 4, as well
as a decline in earnings due to lower sales. Net profit increased substantially, as the posting of increased operating
profit and foreign exchange gains (non-operating income) of ¥2.9bn outweighed the impact of an extraordinary
loss of ¥4.1bn*5.
*1	This factor boosted overall operating profit by approximately ¥1.2bn (most of which was due to the Technology Solution
Business).
*2	The total (net amount) of one-time expenses related to the posting of valuation reserve for inventory purchase commitments arising from rapid changes in the market environment and the posting (and reversal) of loss on valuation of inventory
was ¥2.2bn. This marked a decrease by ¥2.5bn from total one-time expenses of ¥4.7bn recorded in the previous fiscal
year.
*3	R&D expenses increased to ¥7,676mn (up ¥996mn YoY).
*4	Valuation reserve for inventory purchase commitments is a liability reserve, allocating the amount of expected losses
following a deterioration in market conditions, etc. against long-term purchase commitments for inventories aimed at
generally ensuring stable procurement of materials.
*5	Extraordinary losses recorded in connection with settlement payments of ¥2.5bn made to certain suppliers for surplus
parts and materials related to long-term purchase commitments in the Branded Business, as well as the recording of
impairment losses on non-current assets of ¥0.9bn and business restructuring expenses of ¥0.6bn related to the Branded
Business.

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

06 22

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

Wacom Co., Ltd.

17-Jun.-2024

6727 Tokyo Stock Exchange Prime Market

https://investors.wacom.com/en-jp/

Financial highlights

Looking at the Company’s financial position, total assets increased by 5.8% from the end of the previous period to¥79,620mn, mainly reflecting increases in cash and deposits and in accounts receivable–trade due to higher sales,
despite a decrease in inventories due to progress on inventory management*1 (optimization). Equity decreased by
11.2% to ¥35,968mn, as negative factors (acquisition of treasury stock*2) outweighed positive factors (increase
in retained earnings and increase in foreign currency translation adjustment). As a result, while the equity ratio
decreased to 45.2% (53.8% at the end of the previous period), ROE, which reflects capital efficiency, improved
dramatically to 11.9% (4.3% at the end of the previous period).
*1	As of the end of FY3/24, the amount of inventories (total of finished goods and merchandise, work in process, rawmaterials and supplies) had decreased significantly by 40% from the end of FY3/23 to ¥13.1bn. This represents a
decline of around ¥16.0bn compared to the end of December 2022, when the amount of inventories reached a peak.
The Company generated more than ¥10.0bn in cash as a result of this decrease in inventories.
*2	The Company acquired treasury stock in the total amount of approximately ¥7.5bn (11.04 million shares) in FY3/24.

FY3/24 financial results(¥mn)
FY3/23Results

FY3/24% of net sales

112,730

Net sales

Results

Change% of net sales

Amount118,795

%

6,065

5.4%

Branded Business

41,161

36.5%

33,81428.5%-7,347-17.8%

Technology Solution Business

71,56963.5%

84,981

71.5%

13,412

18.7%

Cost of sales

81,556

72.3%

82,028

69.1%

472

0.6%

SG&A expenses

29,16025.9%

29,709

25.0%

549

1.9%

Operating profit

2,013

1.8%

7,058

5.9%

5,045

250.6%

Branded Business-3,981-9.7%-4,520-13.4%-539-

Technology Solution Business

10,75615.0%

16,481

19.4%

5,725

53.2%

Adjusted amount-4,762--4,902--140-

Ordinary profit

2,868

2.5%

9,853

8.3%

6,985

243.6%

Profit attributable to owners of parent

1,792

1.6%

4,562

3.8%

2,770

154.5%

ChangeEnd of FY3/23

End of FY3/24

Total assets

75,27979,620

4,341

5.8%

Shareholders’ equity

40,49035,968-4,522-11.2%

Equity ratio

53.8%

45.2%

-8.6pt-Amount%Source: Prepared by FISCO from the Company’s financial results

Breakdown of SG&A expenses(¥mn)
ChangeFY3/23

FY3/24

Personnel expenses

11,061

11,07919

0.2%

R&D expenses

6,680

7,676

996

14.9%

Sales promotion and advertising expenses

2,211

1,805

-406

-18.4%

Freight and packing expenses

1,573

1,368

-205

-13.0%

Outsourcing expenses

1,544

1,511

-32

-2.1%

431

472

41

9.5%

Other

5,661

5,798

136

2.4%

Total

29,16029,709549

SG&A expenses ratio

25.9%

25.0%

Depreciation and amortization

Amount%1.9%-0.9ptSource: Prepared by FISCO from the Company’s results briefing materials

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

07 22

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

Wacom Co., Ltd.

17-Jun.-2024

6727 Tokyo Stock Exchange Prime Market

https://investors.wacom.com/en-jp/

Financial highlights

2. Results overview by business
1) Branded BusinessNet sales decreased, and the Company recorded a segment loss, with net sales down 17.8% to ¥33,814mn
and segment loss of ¥4,520mn (loss of ¥3,981mn for the previous fiscal year). Net sales declined, reflecting
lower sales of display products and pen tablet products in the mainstay Creative Solution due to changes in themarket following deterioration in consumer sentiment, and so forth. These impacts were partially offset by thebeneficial effect of the yen’s depreciation (approximate ¥2.0bn increase in sales). On the other hand, net sales in
Business Solution rose from the previous fiscal year amid the effects of changes in fluid market conditions andprogress on projects. On the earnings front, the segment reported a larger loss, reflecting a depressive effect onearnings from lower sales and the recording of expenses for valuation reserve for inventory purchase commitments(approximately ¥2.0bn), although the Company recorded a gain on reversal of loss on valuation of inventory(approximately ¥1.9bn) along with implementing measures such as reducing SG&A expenses. In its activities,
although the Company introduced new products* to revamp its product portfolio, these new products were slow
to take off since inventory reduction promotions for existing models (discounted sales) had to be balanced withnew product sales.
*	In August 2023, the Company unveiled an LCD pen tablet with new functions and services for the Wacom One (entry-level
model). Additionally, in the Wacom Cintiq Pro (for professionals) line, the Company announced the Wacom Cintiq Pro 17
and the Wacom Cintiq Pro 22 in October 2023.

Earnings breakdown in the Branded Business(¥mn)
ChangeFY3/23

FY3/24Creative Solution

36,94829,170-7,778-21.1%

Displays

21,65017,496-4,154-19.2%

Pen Tablet

15,298

11,674-3,624-23.7%

Business Solution

4,213

4,644

431

10.2%

Amount%Source: Prepared by FISCO from the Company’s financial resultsa) Creative Solution sales
Net sales decreased 21.1% YoY to ¥29,170mn. By product, in Displays, sales decreased due to declining demandfor existing models, while new products, particularly professional models and low-priced models, contributed tosales. In Pen Tablets, sales decreased due to declines in demand for professional models and mid-priced existingmodels, despite a contribution to sales from mid-priced new products.
b) Business Solution sales
Net sales increased by 10.2% YoY to ¥4,644mn. Although sales were affected by fluid changes in market
conditions and progress on projects, sales rose over the previous fiscal year.
(2) Technology Solution BusinessThis segment recorded increases in sales and profits, with net sales rising 18.7% YoY to ¥84,981mn and segment profit increasing 53.2% to ¥16,481mn. Net sales benefitted from the impact of the yen’s depreciation(approximately ¥5.4bn increase in sales), while increase in demand for OEM partners in EMR Technology Solution
contributed to the increase in sales. In AES Technology Solution, the Company delivered increased sales despitechanges in the market environment. On the earnings front, earnings increased for several reasons, such as theabsence in FY3/24 of the expenses for valuation reserve for inventory purchase commitments (approximately¥2.0bn) recorded in FY3/23; the effect of increased sales on boosting earnings; and the positive effect of the yen’s
depreciation (a positive impact of approximately ¥1.3bn).

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

08 22

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

Wacom Co., Ltd.
6727 Tokyo Stock Exchange Prime Market

17-Jun.-2024
https://investors.wacom.com/en-jp/

Financial highlights

Earnings breakdown in the Technology Solution Business(¥mn)
ChangeFY3/23

FY3/24

AES Technology Solution

23,38326,263

2,880

12.3%

EMR Technology Solution

48,18658,718

10,532

21.9%

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

3. Key takeaways of FY3/24 results
To summarize FY3/24, while the Company achieved higher sales and profits due to growth in the Technology
Solution Business, supported by brisk OEM demand, the Company’s performance included a mix of factors including
the yen’s depreciation, which was a positive factor, and the impact of one-time expenses, which was a negative
factor, making its earnings results difficult to evaluate. Excluding those factors, a reasonable perspective would
be that in reality, the environment remained difficult, particularly in the Branded Business. As described later, 1) adelay in recovery from the “future demand consumption” that occurred during the spread of the COVID-19 virus(hereinafter, the “COVID-19 pandemic,” 2) a continued trend of “purchasing restraint” among consumers, and 3)
a trend of demand shifting to other categories (diversification of user options) can be cited as factors. However, itis necessary to discriminate clearly between business cycle factors such as 1) and 2) and structural changes suchas 3), while paying close attention to megatrends such as the penetration of new technologies and trends in digitaltransformation (DX). Looking back at the Branded Business from FY3/21 onwards, the scale of the ebb and flow
between the rapid growth in results during the COVID-19 pandemic and the stall caused by the recoil from thisexpansion is notable. However, it may be more appropriate to consider this variability as being smoothed out overtime. Instead, the most important themes of “Wacom Chapter 3” were supposed to be that the Company would
identify its targeted market domains in anticipation of megatrends and prepare to enter those domains. In this regard,
FISCO would like to positively evaluate the Company’s achievements in making a certain extent of progress on theliquidation of negative legacy assets and clearly establishing its preliminary guidance for the future. Furthermore,
the Company has achieved specific successes in terms of preparing a foundation for the future, such as proposing
new use cases, addressing the digital transformation (DX) of creative workflows, and launching a Digital Ink Service.
Those successes are another commendable achievement in our view.

■ Outlook
Continued increases in sales and profits expected for FY3/25, while
implementing additional structural transformation in preparation for“Wacom Chapter 4”
1. FY3/25 results outlook
For the FY3/25 consolidated results outlook, the Company expects an increase in profit (except ordinary profit)and sales with net sales to increase 1.0% YoY to ¥120,000mn, operating profit to increase 20.4% to ¥8,500mn,
ordinary profit to decrease 13.7% to ¥8,500mn, and profit attributable to owners of parent (hereinafter, “net profit”)
to increase by 35.9% to ¥6,200mn.

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09 22

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

Wacom Co., Ltd.

17-Jun.-2024

6727 Tokyo Stock Exchange Prime Market

https://investors.wacom.com/en-jp/

Outlook

Looking at net sales, the Branded Business has made progress to a certain extent on the liquidation of negative
legacy assets caused by surplus parts and materials procurement and production. The Branded Business anticipates
increased sales while implementing additional structural transformation in anticipation of a return to profitability in
FY3/26, so that it can address structural changes in the market environment. On the other hand, the Technology
Solution Business is expected to generate mostly flat sales at this time.
On the earnings front, the Company expects the amount of losses in the Branded Business to decrease due tothe alleviation of one-time expenses that had weighed on profits until the previous fiscal year, as well as structuraltransformation (improved gross profit, cost optimization and other measures), despite continuing proactive R&D
investment. The smaller extent of losses is expected to contribute to higher operating profit. The decrease in ordinary
profit is attributable to the absence of foreign exchange gains. However, because extraordinary losses will not berecorded, net profit is expected to increase.
Forecasts for FY3/25(¥mn)
FY3/24
Results

FY3/25% of net sales

118,795

Net sales

Forecast

Change% of net sales

120,000

Amount

%

1,205

1.0%
3.5%

Branded Business

33,81428.5%

35,000

29.2%

1,186

Technology Solution Business

84,981

71.5%

85,000

70.8%

19

0.0%

7,058

5.9%

8,500

7.1%

1,442

20.4%

Branded Business-4,520-13.4%-2,000

-5.7%

2,520

-

Technology Solution Business

16,481

19.4%

16,000

18.8%

-481

-2.9%

Operating profit

Adjustment-4,902--5,500--598-

Ordinary profit

9,853

8.3%

8,500

7.1%

-1,353-13.7%

Profit attributable to owners of parent

4,562

3.8%

6,200

5.2%

1,638

35.9%

Source: Prepared by FISCO from the Company’s financial results(1) Branded BusinessNet sales are expected to increase 3.5% YoY to ¥35,000mn, and segment loss is expected to be ¥2,000mn(segment loss of ¥4,520mn in the previous period). Although efforts will be made to expand market penetration of
the updated product portfolio, the Company expects only a small increase in net sales based on a conservative
assessment of factors such as changes in the market environment. On the earnings front, the Company expects
to post smaller losses, assuming the alleviation of one-time expenses recorded until the previous fiscal year, andthe currently identifiable effects of structural transformation. In the Branded Business, the Company will advancestructural transformation in order to return to profitability in the first fiscal year (FY3/26) of the next medium-termbusiness direction (“Wacom Chapter 4”).
(2) Technology Solution BusinessNet sales are expected to remain flat YoY at ¥85,000mn, while segment profit is expected to decrease by 2.9%
to ¥16,000mn. At this time, the Company expects to maintain the same level of net sales as in the previous fiscal
year, given the need to cautiously assess trends around OEM partners. On the earnings front, while one-time
expenses recorded until the previous fiscal year will be alleviated, the Company expects segment profit to decrease
modestly due to continuing proactive R&D investment for the future.

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10 22

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

Wacom Co., Ltd.
6727 Tokyo Stock Exchange Prime Market

17-Jun.-2024
https://investors.wacom.com/en-jp/

Outlook

2. Key considerations for FISCO
There remains a need for caution regarding the impacts of foreign exchange rate trends and the uncertain outlook
for economic conditions. However, FISCO believes that the Company has made reasonable assumptions for its
consolidated results forecasts, and we consider the forecasts to be fully achievable. It should also be noted thatgrowth in the Technology Solution Business and the market penetration of own new products released in theprevious fiscal year could provide an upside to performance. Furthermore, on the earnings front, the liquidation ofnegative legacy assets has progressed to a certain extent around the balance sheet, so now the key is likely to be
how to effectively advance the optimization of operational expenses on the profit and loss statement. Meanwhile,
the Company must continue to invest for the future, and we hope to see it conduct strategic business operations
with a focus on clear priorities.
From a medium- to long-term perspective, we would like to focus on the progress of the transformation of businessstructure (revised plan) set forth in the “Wacom Chapter 3” update. The update also lays out more specificallywhat the Company should do going forward, and we would like to follow up on the results of each of these efforts
to see how they will be linked to growth acceleration in “Wacom Chapter 4.” In particular, the combination withnew core technologies (AI, XR, Security, as well as others including remote technology) and the launch of a new
business model are an important basis for forecasting the Company’s medium- to long-term direction and future
prospects. For this reason, the Company’s success is likely to be determined not only by its inhouse technology
development, but also by the degree to which it can deliver value through new services based on collaboration
with other companies. Furthermore, the Company has so far provided the different elements of the pen experience(hardware, software, technology, community and others) on a standalone basis and built up a track record for eachelement. Going forward, we believe that the Company’s advantages will grow if it provides those elements as a
unified “integrated pen experience.” With regard to new value propositions using digital ink and AI, movement has
already started in the education field, and there is potential for various other sectors as well. If the Company canaccumulate data and expertise ahead of other companies, it will be able to support individual users on a deeper level
using AI’s deep learning functionality. By generating new experiences and value from this area, the chances of it being
able to establish an unrivaled position in innovative domains will be much greater. The Company targets three market
domains, namely Digital Content Creation, Education DX, and Workflow DX, where the potential is growing in various
directions. Maintaining a solid position in technology and brand clout will be critical for capitalizing on this potential.

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11 22

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

Wacom Co., Ltd.
6727 Tokyo Stock Exchange Prime Market

17-Jun.-2024
https://investors.wacom.com/en-jp/■ Progress on update of “Wacom Chapter3” (revised), the medium-term businessdirection
The Company will promote business structure transformation toaccelerate growth in the next “Wacom Chapter 4.” It has announced
additional plans for the Branded Business1. Basic direction and history to date
The Company has been promoting initiatives in line with the four-year medium-term business direction “Wacom
Chapter 3” (FY3/22 to FY3/25). The new direction will continue the vision of “lifelong ink* 1,” and redefine five
key strategic initiatives. In addition, the new direction has defined six main streams for technology innovation to
implement the direction, and will promote specific value propositions and sustainable growth*2. In particular, theCompany’s leading strategy is to select three fields*3 that have a high affinity with its existing technologies–AI, XR,
and Security–and realize new value propositions in these fields using new core technologies and new businessmodels. Moreover, the direction also calls for initiatives to increase the quality of management through corporate
governance reforms and for engagement with society and communities through the Company’s unique approaches.
There has been no change in these basic directions (storyline).
*1	“Continuing to provide ‘meaningful human experiences’ to customers and society over a long time period based on
Wacom’s technology”*2	We have omitted a description of the overall image of “Wacom Chapter 3” (update plan) from this explanation, including
the five key strategic initiatives (technology leadership, community, engagement, new core technology/new value
proposition, technology innovation for sustainable society, meaningful growth for people and society) and the six mainstreams for technology innovation (pen technology, pen and paper technology, digital ink technologies, AI × Digital ink,
XR × Digital ink, and Security × Digital ink)
*3	Remote technology has been added to the three fields.

However, the Branded Business has experienced a greater downturn than expected, mainly due to a sharp decreasein consumer sentiment following the current deterioration of the economic environment. Moreover, the Company’s
own structure appears to have room for improvements, including strengthening the product portfolio and sales
channel management. For this reason, the latter two years of the medium-term business direction (FY3/24 to
FY3/25) have been positioned as a period for business structure transformation to ensure business growth in thenext phase, “Wacom Chapter 4,” and the Company has announced a policy (the update plan) of focusing on grossprofit improvement and growth foundation construction (announced in May 2023). In addition, the Company has
judged that further structural transformation is needed in the Branded Business. It therefore announced a revisionof the update plan*.
*	Among the factors that led to the revision of the update plan were the following: 1) recovery from the “future demand
consumption” that occurred during the spread of the COVID-19 pandemic was delayed further than expected, 2) apersistent trend of “purchasing restraint” among consumers as part of general market conditions in specific regions (China
and others), and 3) in the entry-level zone for pen tablet products, alternative options other than pen tablet products havediversified, causing a slight shift in demand towards other categories.

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12 22

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

Wacom Co., Ltd.
6727 Tokyo Stock Exchange Prime Market

17-Jun.-2024
https://investors.wacom.com/en-jp/

Progress on update of “Wacom Chapter 3” (revised), the medium-term business direction

2. Progress on update plan (revised) (as of April 2024)(1) Recent trends in the market environment1) Branded Business
The potential importance of Wacom products has grown with the digital transformation (DX) of creative workflows. Even so, users have assigned a relatively lower priority to replacement purchases of Wacom products as
the technology infrastructure for professional creative workflows has been successively updated. This has led
to the emergence of longer and more protracted procurement cycles. In the entry-level zone, a trend toward ashift in demand to other categories (iPad and others) is underway. The trend of purchasing restraint in specificregions (China and others) continues. While the “future demand consumption” that occurred during the COVID-19
pandemic is improving, difficult conditions persist.
2) Technology Solution Business
While the smartphone market as a whole is expanding only slightly, growth is expected for high-value-added
and sophisticated models. On the other hand, while the PC and tablet market is in recovery mode, the trend indemand for pen-enabled models is different for each type of customer. Demand for e-books and e-notebooks
using e-paper is expected to continue increasing going forward.
(2) Outline and progress on the update plan (revised)
1) Product portfolio renewal and gross profit improvement (Branded Business)
The Company is working to improve its cost structure through i) new value proposition (entry level to professional),ii) pricing policy to improve gross profit, and iii) value engineering. With regard to i), the Company is sequentiallyintroducing a new product portfolio that provides a new value proposition. Two new product models were launchedin 3Q. New products* that create new use cases were introduced in April 2024. However, with regard to ii), while
price hikes contributed to a partial improvement in the gross profit margin, the effect of the improvement wasdiminished by a drop in gross profit due to inventory reduction promotions. Based on the above, the Company
has assessed its progress in this area as “undershooting.”*	“Wacom Movink” that creates Portable Creative (a portable and drawing specific experience)2) Market development in focused areas (Branded Business)
The Company is working on i) concentrating on the creative area, ii) responding to new work flows (virtualization /remote), and iii) systems for providing solution-based value propositions. With regard to i), the Company is working
on a variety of creative education projects*1. With regard to ii), the Company officially introduced a commercial
version of a remote solution*2. With regard to iii), the Company is examining solution-based value propositions foreach region. Based on the above, the Company has assessed its progress in this area as “in progress.”*1	Products were introduced to a Florida state technical college, an education program for training Webtoon* creators incollaboration with KENAZ, and HAL College of Technology & Design (Tokyo, Osaka, Nagoya), among others*2	Initiated the commercial launch of Wacom Bridge, a solution for cloud / remote environments, in January 2024.

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

13 22

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

Wacom Co., Ltd.
6727 Tokyo Stock Exchange Prime Market

17-Jun.-2024
https://investors.wacom.com/en-jp/

Progress on update of “Wacom Chapter 3” (revised), the medium-term business direction3) Enhance sales channel management (Branded Business)
The Company is working i) to enhance B2B channels (cultivation of direct customers for provision of solution-basedvalue propositions) and ii) to enhance its e-store channel (maximize user engagement through experience-based
services, etc.). With regard to i), the Company is striving to develop direct customers and the B2B ratio hasreached its target of 30%*. With regard to ii), the Company has started introducing Wacom Adventure, anexperience-based service and has worked to secure channels to an e-store through a dedicated e-store version
and services. The e-store ratio improved to over 13% (from around 10% in the previous full-year period). However,overall sales have declined and have not led to an improvement in gross profit. For this reason, the Company has
assessed its progress in this area as “undershooting.”*	The Company has achieved successes such as delivering solutions to an online school in Pennsylvania, providing workflow
support for hospitals, and supporting online banking services.

4) Improving inventory management (Companywide)
The Company is working i) to reduce the inventory balance at the end of December 2022 (approximately ¥30.0bn)
by approximately one-third, ii) to pare down additional new purchasing, and iii) to strengthen the monitoring ofexcessive ordering. With regard to i), as of March 31, 2024, inventories had been reduced to ¥13.1bn (book value),enabling the generation of more than ¥10.0bn in cash. With regard to ii) and iii), orders for existing products arealmost nil, and the Company will continue working to strengthen monitoring over ordering. Based on the above,
the Company has assessed its progress in this area as “achieved.”
5) Expanding customers and applications (Technology Solution Business)
The Company is working i) to drive further de facto standardization in the industry and ii) to develop proprietary
hardware (main units, pens, and services) to expand applications. With regard to i), initiatives are steadily being
implemented, and the number of customers and projects are on an uptrend*. With regard to ii), the Company iscurrently considering plans for the development of proprietary hardware. Based on the above, the Company has
assessed its progress in this area as “in progress.”*	Includes support for the New Galaxy S pen, and the introduction of a universal pen experience, etc.

6) Business development in the field of general education (Technology Solution Business)
The Company is working i) to develop solutions for general education and ii) to develop services in addition to
hardware. With regard to i), the Company is currently developing next-generation solutions for general education.
With regard to ii), it officially launched an updated version of its commercial education services. Based on theabove, the Company has assessed its progress in this area as “in progress.”7) Capital policy/Shareholder returns (Companywide)
The Company is working i) to invest in future technology and pursue its capital policy and ii) to acquire treasury
stock. In regard to i), the Company invested ¥7.7bn as R&D spending in FY3/24, with ¥8.0bn expected in FY3/25.
With regard to ii), in line with its policy of acquiring a total amount of treasury stock of up to ¥20.0bn during theperiod of “Wacom Chapter 3,” by the end of March 2024, the Company had acquired a cumulative total of ¥12.5bn
in treasury stock. Based on the above, the Company has assessed its progress in this area as “in progress.”

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14 22

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

Wacom Co., Ltd.
6727 Tokyo Stock Exchange Prime Market

17-Jun.-2024
https://investors.wacom.com/en-jp/

Progress on update of “Wacom Chapter 3” (revised), the medium-term business direction

8) Digital Ink Service launch and investment (Companywide)
The Company is working i) to launch businesses in three core value fields (AI, XR, and Security), and ii) torecover its investments in technology development. With regard to i), in addition to the three fields of AI (started
commercialization in the education field*1), XR (planning commercialization for FY3/25), and Security (announced
market release of Wacom Yuify beta version*2), the Company is also promoting projects in remote technology(officially introduced commercial version of remote solution). Based on the above, the Company has assessed its
progress in this area as “in progress.”*1	Released “Searching Experience CHIENOWA” (knowledge graph-based learning experience triggered by handwriting),
an educational service using digital ink.
*2	A solution for certifying creators’ rights of artworks

3. Awareness of issues and direction of additional plans for the Branded Business
The Branded Business continues to struggle due to the impact of rapid changes in the market environment. As
described earlier, the Branded Business missed its target for achieving profitability in FY3/24 due to delays inproduct portfolio renewal and gross profit improvement, and enhancing sales channel management, among otherareas. A segment loss is expected to continue in FY3/25. The Company has announced an additional structuraltransformation plan including far-reaching reductions in fixed costs and operational costs, in preparation for “Wacom
Chapter 4.” It intends to address four themes: 1) product portfolio, 2) focused business areas, 3) sales channel
and regional operation, and 4) organizational structure. With regard to 1), the Company will work to establish the
new use case Portable Creative and shift to solution-based value propositions. With regard to 2), the Company will
focus on professional and creative specialist education, while the K12 (elementary, middle, and high school) creativeeducation market will be covered by the Technology Solution Business. Regarding (3), the Company will focus on
e-store, B2B, and communication engagement and strive to achieve an asset light and minimized operation throughdrastic aggregation and integration of operations. Regarding 4), the Company will pursue transformation under
new leadership*, along with optimization and aggregation of development and operations. By working to optimize
operational costs (approximately ¥2.0bn) the Company aims to restore segment profitability in FY3/26 (the firstfiscal year of Chapter 4), while striving to increase sales from FY3/27 onward and maintain and improve its brandposition in the creative community.
*	The leadership of the Branded Business was revamped as of April 1, 2024.

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

15 22

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

Wacom Co., Ltd.
6727 Tokyo Stock Exchange Prime Market

17-Jun.-2024
https://investors.wacom.com/en-jp/■ Preliminary guidance of the next medium-

term business direction (Wacom Chapter 4)
Presenting the preliminary guidance of the next medium-termbusiness direction (“Wacom Chapter 4”). Evolving to a phase ofcommercializing next-generation engines and implementing them inthe market
1. Preliminary guidance (summary)
The Company has presented the preliminary guidance of its next medium-term business direction (“Wacom Chapter4”), which will begin in FY3/26. (The final draft is scheduled to be announced in May 2025.) The Company recognizes
that business opportunities for digital pens are associated with market domains*1 where sustainable growth can beachieved, such as the digital content creation market, the Education DX Edtech market, and the Workflow DX market.
Based on this recognition, in order to capitalize on this growth, the Company seeks to evolve from the preparation
period of “Wacom Chapter 3” to an implementation period (commercialization of technology development that serves
as next-generation growth engines and market implementation). The Company has defined the sources of its value
propositions as an “Evolving technology roadmap” and “Community (user, customer, technology) engagement.”
Concurrently, the Company will implement an “integrated pen experience” composed of various new technology
elements*2 it has so far developed. Furthermore, in addition to existing target use cases, the Company will explore
new use cases such as Portable Creative, K12 creative education, and mission-specific use cases. It intends todeliver the integrated pen experience to the target use cases via the shortest path possible*3.
*1	The average growth rates (2024 to 2030) are forecast to be 16.3% for the Digital Content Creation market, 13.4% for the
Education DX Edtech market, and 24.1% for the Workflow DX market. (The forecasts are from the Company’s earnings
results briefing materials.)*2	Includes pen input technology and sensor modules, as well as digital ink technology (a combination of AI, security, XR
space and cloud).
*3	The Company will work to achieve an asset light operation for Wacom branded product solutions focusing on e-store/
B2B. Additionally, for OEM partners, the Company will provide platforms (technology platforms delivering an integrated
pen experience with hardware, software, service, user interface) in addition to device parts modules.

2. Revenue scale and profitability
For now, the Company has maintained its currently projected scenario, which was announced in May 2023. It
expects to manage business operations with net sales of around ¥150.0bn (within a range of around plus orminus 10%), and an operating profit margin of around 10% in the final fiscal year (FY3/29). (These assumptions arescheduled to be updated in May 2025 together with other KPIs.)

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16 22

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

Wacom Co., Ltd.
6727 Tokyo Stock Exchange Prime Market

17-Jun.-2024
https://investors.wacom.com/en-jp/■ Results trends in past years
Technology Solution Business driving growth over the past few
years due to increase in demand from OEM partner manufacturers
for smartphones, etc.
Looking at how sales trended up to FY3/20, prior to the COVID-19 pandemic, the sudden, large slump in FY3/17
occurred because of the combined impacts of yen appreciation, excessive internal IT infrastructure investment,
product cycle movement, and other factors. Since then, however, sales recovered with growth in the Technology
Solution Business. Nevertheless, Branded Business sales have been trending lower with the structure of positive
growth in the Technology Solution Business continuing to offset its decline. The Branded Business experienced
rapid growth in sales in FY3/21, mainly due to stay-at-home demand including online education amid the COVID-19
pandemic, while in FY3/22 despite the end of a surge in stay-at-home demand, growth in display products for
professionals and the Technology Solution Business resulted in new record high net sales for a second consecutive
year. Since entering FY3/23, the Branded Business (especially low- to mid-priced models) experienced a significant
downturn due to a sharp drop in consumer sentiment caused by the global economic slump and decline of special
demand related to COVID-19, but the growth of the Technology Solution Business secured an increase in sales.

Trends in net sales by business
Branded Business(¥mn)

Technology Solution Business

140,000
120,000
100,000
80,00060,00051,85356,14956,67852,641

71,56984,98185,00041,16133,81435,000FY3/23

FY3/24

FY3/25 (E)45,99340,00020,00042,5870
FY3/20FY3/21

FY3/22

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

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

17 22

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

Wacom Co., Ltd.

17-Jun.-2024

6727 Tokyo Stock Exchange Prime Market

https://investors.wacom.com/en-jp/

Results trends in past years

Sales trends in major products(¥mn)

Pen Tablets

Displays

Mobiles, others

27,581

30,00023,54825,00020,00021,65023,393

18,411

17,49622,901
15,29815,00017,581

11,67410,000
5,000

2,481

1,963

1,796

FY3/20FY3/21

FY3/220
FY3/23

FY3/24

Note: The category scope has changed from FY3/24. Results for Mobiles, others were reclassified into Displays and Pen
Tablets. Figures for FY3/23 were retrospectively restated.
Source: Prepared by FISCO from the Company’s financial results

In earnings, since incurring an operating loss in FY3/17, the operating profit margin has improved gradually fromthe 4% level to the 6% level while the Company conducted aggressive R&D and new product development. In
FY3/21 and FY3/22, the Company retained a high profit margin for two consecutive years due to factors such as
higher profits atop an increase in sales, improvements in the product mix, and optimization of SG&A expenses.
Since FY3/23, the Branded Business has recorded a segment loss for two consecutive years, and the overall profit
margin has decreased significantly.

Trends in operating profit margin
14.0%

12.4%

12.0%

12.0%
10.0%
7.1%

8.0%
5.9%
6.0%
6.3%
4.0%

2.0%
1.8%

0.0%
FY3/20FY3/21

FY3/22

FY3/23

FY3/24

FY3/25 (E)Source: Prepared by FISCO from the Company’s financial results

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18 22

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

Wacom Co., Ltd.
6727 Tokyo Stock Exchange Prime Market

17-Jun.-2024
https://investors.wacom.com/en-jp/

Results trends in past years

In financial standing, while the equity ratio temporarily slipped in FY3/17 on a hefty net loss due to recording
impairment losses on IT assets, it has steadily improved since then with buildup of retained earnings and has moved
close to 60%. However, the equity ratio has been on a downtrend since FY3/23 due to the acquisition of treasury
stock and other factors. ROE, which reflects capital efficiency, and ROIC, which reflects efficiency of businessactivities, have been at high levels. However, ROE and ROIC temporarily experienced significant declines in FY3/23
along with the drop in profits. However, in FY3/24, they both started improving and cash flows have also improved
due to progress on reducing surplus inventories. Against the backdrop of an increasingly robust growth foundationin the Technology Solution Business, the Company has judged that it can now focus on the optimal rebalancingof equity and liabilities on the balance sheet. Accordingly, the Company has indicated that it intends to promotebusiness management with awareness of capital efficiency through the use of financial leverage up to a D/E ratioof around 0.3x to 0.5x from FY3/24 to FY3/25, while ensuring financial soundness. As of the end of FY3/24, theD/E ratio stood at just under 0.4x, which indicates that the Company has retained a good balance. Going forward,
allocation of cash flow generated through proper management of operating capital, particularly inventories, andbusiness profits to investments and shareholder returns, will also be important financial indicators for determining
if the Company is maintaining its sound financial state, and should be monitored in conjunction with the D/E ratio.

Trends in equity ratio, ROE and ROIC
Equity ratio

ROE

ROIC

70.0%
59.3%
60.0%

54.2%

53.8%

52.9%

45.2%

50.0%
39.4%
40.0%

29.7%

30.0%
20.0%
10.0%

15.6%

31.3%
13.9%

27.0%
4.3%

14.7%

11.9%

0.0%
FY3/20FY3/21

FY3/22

3.7%
FY3/23

FY3/24

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

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

19 22

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

Wacom Co., Ltd.
6727 Tokyo Stock Exchange Prime Market

17-Jun.-2024
https://investors.wacom.com/en-jp/■ Initiatives for society
Supporting a sustainable society through provision of “lifelong ink;”
Publishing the “Wacom Story Book” in May 2023 to communicate
the Company’s philosophy and value creation mechanisms
The Company places emphasis on initiatives that contribute to ESG improvements and a sustainable society. It
discloses its fundamental views and specific activities on “Social Initiatives” on the Company website. We think theCompany’s use of a concept of “lifelong ink” to describe its technology stands out. This reflects awareness of theorigins of its significance and value creation in support for a sustainable society by facilitating writing and drawing
experiences that accumulate throughout a person’s life and communicating them to future generations. Together withvarious community partners, the Company is pursuing the potential of “lifelong ink*,” not only in people’s everyday
lives, but also in fields ranging from the creative to business and education. In this way, the Company’s direction
should lead to sustainable growth for users and for the Company itself.
*	For example, in the education field, together with partners it is developing AI Ink for Education, which provides a learning
environment tailored to individuals by analyzing the learning characteristics of individual students from line-of-sight dataand pen movements made during learning.

Moreover, the Company values relationships made between the local communities and individual staff members
working in its bases around the world, while working to develop operations and products that are sensitive to theenvironment. The Company intends to continue making proposals for the future image of society together with thecommunity, such as Ars Electronica*1 rather than just as a single company. Moreover, the Company also intends
to conduct social implementation of technology services such as STEAM education*2 and exploratory learning*3.
*1	Ars Electronica, a global creative entity, has been continuously proposing “new creativity and future societal concepts
facilitated by cutting-edge technologies” over 40 years from its location in Austria.
*2	Science, technology, engineering, art, and mathematics (STEAM) education is a gradually increasing trend in society. In
the art domain, which is a component of STEAM, using AI to enable visualization of the creative activity by creators canhelp to promote learning by others in creative activities.
*3	For example, combining programming education and digital pen and using AI to analyze the tracks of an individual
student’s ink data enables the development of logical thinking skills.

The Company also considers responding to climate change to be an important issue in environmental management.
It has joined the Japan Climate Initiative (JCI) and announced CO2 emissions targets to be reached by fiscal 2030
by reducing its CO2 emissions by an annual rate of 4% (reference year: FY2014). This initiative will include efforts
to publish environmental performance information, such as the reduction of greenhouse gases (GHGs) and CO2
emissions (Scope 1, Scope 2, and Scope 3). At the same time, the Company will conduct business activities basedon analysis of the risks and opportunities to the business environment created by climate change. In addition, as
an action that will lead to a reduction in CO2 emissions in the value chain as a whole, it requires that its suppliers
support and implement the Wacom Suppliers Code of Conduct. The Company is also progressing the formulation of
a BCP to respond to the risk of a restriction to corporate activities due to floods and other natural disasters, which
are increasing year by year. Based on these activities, the Company announced its support for the TCFD (Task Forceon Climate-related Financial Disclosures) recommendations on April 13, 2023.

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

Wacom Co., Ltd.
6727 Tokyo Stock Exchange Prime Market

17-Jun.-2024
https://investors.wacom.com/en-jp/

Initiatives for society

The Company launched the “Wacom Story Book”* in May 2023, a booklet that covers some elements from theintegrated report, primarily ESG, and tells a series of stories about the Company’s philosophy, the thoughts of its
employees, and the feedback of its users.
*	Beginning with an introduction to the Company’s most important values, it also features team member discussions on
the Company’s product planning and technology development trajectory, as well as feedback, artworks, and examples ofvarious community partners and artists.

■ Shareholder returns
The Company paid a dividend of ¥20.0 per share for FY3/24,
the same amount as the previous period, based on a policy ofcontinuing stable dividends. It is actively engaged in the acquisitionof treasury stock
The Company’s basic policy towards shareholder returns is to pay steady dividends on its profits after considering
the amount of funds to be retained for future business development and a sound financial base. With regard to
dividends, the Company has set a guide for a consolidated dividend payout ratio of around 30%, keeping in mind
the need to ensure financial soundness. Even if dividends exceed that level, the Company intends to maintainsteady dividends per share in principle and aims to return profits through increasing dividends per share over the
medium- to long-term. Also, the Company only pays dividends once at the end of the fiscal period in considerationof keeping down administrative costs. With regard to acquisition of treasury stock, the Company intends to executea flexible capital policy in response to changes in the management environment, giving consideration to investment
opportunities and its financial status, among other factors. For the period covered by “Wacom Chapter 3” (FY3/22
to FY3/25), the Company’s treasury stock acquisition policy has an upper limit of ¥20.0bn in total (by March 31,
2024, the Company had completed the acquisition of cumulative amount of ¥12.5bn in treasury stock).
With regard to dividends for FY3/24, the Company paid a dividend of ¥20.0 per share, the same amount as theprevious fiscal year (dividend payout ratio of 67.5%). The Company acquired treasury stock in the total amount ofapproximately ¥7.5bn (11.04 million shares).
In addition to forecasting a dividend of ¥20.0 per share (dividend payout ratio of 46.9%) for FY3/25, the Company
has also resolved on May 9, 2024, to acquire treasury stock* up to a total amount of ¥3.0bn (up to 6 million shares),and to cancel 6 million shares of its treasury stock (cancelled on May 16, 2024).
*	The acquisition period of the Company’s treasury stock acquisition under this resolution is from May 10, 2024 to September
30, 2024.

In achieving a balance between R&D related investments, including collaboration with partners, and shareholder
returns through dividend payout and treasury share acquisitions, the Company still intends to continue making
effective use of cash flows while keeping an eye on capital-use efficiency (ROE) and business operation efficiency(ROIC).

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

21 22

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

Wacom Co., Ltd.
6727 Tokyo Stock Exchange Prime Market

17-Jun.-2024
https://investors.wacom.com/en-jp/

Shareholder returns

Trends in EPS, dividend, and dividend payout ratio
EPS (left)(¥)

Dividend per share (left)

Dividend payout ratio (right)

90.00

176.4%

180.0%

80.00

160.0%

70.00

140.0%

60.00

120.0%

50.00

100.0%
67.5%

40.00
62.95

30.00
20.00

10.00

80.0%

67.98

46.9%
29.4%

29.0%
24.12
7.00

30.2%
19.00

20.00

FY3/20FY3/21

FY3/22

29.64
20.00
11.34

20.00

42.69
20.00

0.00

60.0%
40.0%

20.0%
0.0%

FY3/23

FY3/24

FY3/25 (E)Source: Prepared by FISCO from the Company’s financial results■ Company profile
Established in 1983, the Company established the pen tablet market
for creators and has grown to become the leading company intechnology and the market leader
The Company was established in 1983 in Ageo City, Saitama Prefecture. Its name derived from “world” and“computer,” while “wa” includes the meaning of “harmony between people and computers”, and “COM” includes“communication” and recently “community.” In 1984, it announced the world’s first cordless pen tablet. In 1987,
it launched the SD Series of graphic pen tablets for professionals, which were used by the Walt Disney Company<DIS> in the US for film production. Subsequently, it constantly enhanced its products, and in the creative pen tablet
market for creators, it has consistently kept a leading position on a global basis since the 2000s.
In 1991, it entered into the pen sensor components field (currently, the Technology Solution Business). The Company
conducts OEM supply of digital pens, control ICs, touch panels, and other parts and modules to finished productmanufacturers. It has achieved rapid growth amid expansion of tablet, notebook PC, and smartphone markets.
In the securities market, after listing on the Japan Securities Dealers Association’s JASDAQ market in April 2003, theCompany became listed on the Tokyo Stock Exchange’s First Section in December 2005, where it remains today.
(From April 2022, the Company transitioned to the Tokyo Stock Exchange’s Prime Market.)

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.
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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.
5-13-3 Minami Aoyama, Minato-ku, Tokyo, Japan 107-0062
Phone: 03-5774-2443 (IR Consulting Business Division)
Email: support@fisco.co.jp