COMPANY RESEARCH AND ANALYSIS REPORT

Confidence Inc.
7374
Tokyo Stock Exchange Growth Market

4-Jul.-2022
FISCO Ltd. Analyst

Yoichiro Shimizu

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

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

Confidence Inc.
7374 Tokyo Stock Exchange Growth Market

4-Jul.-2022
https://confidence-inc.jp/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Overview of FY3/22 results.................... ......................................................................................................

01

2. FY3/23 forecast...........................................................................................................................................

01

3. Growth strategy...........................................................................................................................................

02

4. Shareholder return policy....................... ......................................................................................................

02■Business overview---------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. Market trends. . .............................................................................................................................................

03

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

04

3. Strengths.....................................................................................................................................................

06■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 08
1. Overview of FY3/22 results.................... ......................................................................................................

08

2. Financial condition and management indicators. .........................................................................................

10■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 11■Growth strategy----------------------------------------------------------------------------------------------------------------------------------------------------------- 12
1. Medium-term growth strategy.. ....................................................................................................................

13

2. Long-term growth strategy..........................................................................................................................

14■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 15

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

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

Confidence Inc.
7374 Tokyo Stock Exchange Growth Market

4-Jul.-2022
https://confidence-inc.jp/ir/■ SummaryRealized all-time highs in sales and profit in FY3/22, expecting
higher sales and profit again in FY3/23 with tailwind mainly from afavorable external environment
Confidence Inc. <7374> (hereinafter, the Company) was founded in August 2014 under the vision of envisioning thefuture together at the frontline of the creative industry. In its mainstay HR Solution business, the Company recruits
and hires creators and provides staffing, recruitment, and outsourcing services to the gaming industry. In Mediabusiness, the Company operates its own media sites and offers assistance service for media operation. Despite
being a latecomer to the industry, the Company has roughly 120 corporate clients and has cumulatively delivered
services to approximately 190 companies since its founding. It has business transactions with the majority of
medium-sized and larger gaming companies, including large firms such as Bandai Namco Studios Inc., Cygames,
Inc., and GREE, Inc. <3632>.
The Company’s competitive advantage is personnel matching capabilities supported by robust hiring and sales
capabilities. To maximize total matching volume through the maximization of job seeker volume and job opening
volume, the Company implements efficient organizational operation by designing the organization based on divisionof labor and standardization and simplifying operations as much as possible. As a result, it has realized high businessgrowth rates and profitability since August 2014, with a compound annual growth rate (CAGR) of 62.5% in net sales
and 72.0% in operating profit from FY3/17 to FY3/21. According to the Company, success in maintaining operating
profit margin at a high level of 16.8% in FY3/22, in contrast to 10% or less at a majority of other companies in the
HR industry, also demonstrates that the Company’s strengths contributing to a high business growth rate andprofitability.
1. Overview of FY3/22 results
In the FY3/22 consolidated results, the Company reported all-time high sales and profit at each level with net sales
increasing 24.0% year on year (YoY) to ¥4,425mn, operating profit increasing 23.3% to ¥745mn, ordinary profit
rising 22.3% to ¥737mn, and profit attributable to owners of parent up 32.9% to ¥530mn. Additionally, comparedto the forecast announced in June 2021, it overshot all indicators with an increase of 0.9% in net sales, 3.8% ingross profit, 3.5% in operating profit, 2.9% in ordinary profit, and 6.6% in profit attributable to owners of parent.
Mainstay HR Solutions business was steady due to efforts to deepen client relationships aimed at maximizing thenumber of people dispatched per client as set forth in the medium-term growth strategy. Among important KPI,
the number of creator staffing assignments, which serves as the foundation of the Company’s recurring income
model, steadily increased by 120 people to 740, compared to the initial forecast of 700, and the creator utilization
rate remained at a high level.
2. FY3/23 forecast
For the FY3/23 consolidated results, the Company is forecasting net sales of ¥5,200mn (up 17.5% YoY), operating
profit of ¥850mn (up 14.0%), ordinary profit of ¥848mn (up 14.9%), and profit attributable to owners of parent of¥585mn (up 10.3%). Management hopes to achieve future growth through continued pursuit of maximizing thenumber of people dispatched per client set forth in the medium-term growth strategy in consideration of steadytrends at major gaming companies even during the COVID-19 pandemic. In Media business, the Company presentsa policy of changing its primary source of revenue from advertising network income to outsourced promotional
services.

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

01 15

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

Confidence Inc.
7374 Tokyo Stock Exchange Growth Market

4-Jul.-2022
https://confidence-inc.jp/ir/

Summary

3. Growth strategy
The Company aims to achieve net sales of ¥10bn over the next three to five years with a medium-term growthstrategy of business expansion by establishing a virtuous cycle (ecosystem) of deeper client relationships andbusiness collaboration through the promotion of (1) broader and deeper client relationships, (2) diversified services,and (3) establishment of an ecosystem. Furthermore, as a long-term growth strategy, it advocates expansion oftarget markets and development in the digital entertainment field* through matching solutions and intends to develop
business in the digital entertainment field through promotion of (1) expansion of target markets, (2) knowledge
accumulation through expansion of outsourcing business, and (3) expansion and enhancement of matching scope.
*	This refers to a field that provides digitalized entertainment, including gaming, digital live events, digital broadcasts, social
media, and e-sports. It also includes services delivered in the metaverse.

As a medium-term growth strategy, the Company aims to maximize the number of people dispatched per client
by deepening client relationships and to further expand income with cross-selling of recruitment and outsourcing
business by utilizing the network built in HR Solution business. It aims to improve management efficiency by
establishing and reinforcing a virtuous cycle through mutual collaboration of staffing, recruitment, and outsourced
media businesses.
As a long-term growth strategy, the Company intends to accumulate knowledge through expansion of target markets
and outsourcing business and develop business in the digital entertainment field. Since the metaverse, which has
been rapidly becoming widespread in recent years, and skills in the gaming industry have a high affinity, FISCO
thinks it is highly likely that the Company can succeed at entering the digital entertainment field that leverages theknowhow possessed by the Company and creators. This is certainly a diversification strategy that utilizes existing
business assets and one that can be evaluated as an attractive growth strategy with a realistic future vision as well.
4. Shareholder return policy
The Company has adopted a basic policy of paying continuous and stable dividends while retaining necessaryinternal reserves for future business expansion and bolstering its financial standing, and targets a dividend payout
ratio of over 30% and DOE (dividend of equity ratio) of over 10%. In accordance with this basic policy, in FY3/22, it
paid a dividend per share of ¥40.0 (no dividend in the previous fiscal year), and positioned the dividend payout ratio
at 33.8% and DOE at 15.7%. In FY3/23, it plans to pay a dividend per share of ¥45.0 (an increase of ¥5.0 YoY) and
expects a 35.2% dividend payout ratio and 11.6% DOE.
Key Points
Realized all-time high results in FY3/22 led by mainstay HR Solution business
Targets higher sales and profit again in FY3/23 mainly on tailwind from a favorable external environment• Aims to reach ¥10bn in net sales over the next three to five years through deeper client relationships andestablishment of an ecosystem and plans to develop business in the digital entertainment field over the longterm
• Adopted goals of a dividend payout ratio of over 30% and DOE of over 10% and paid a dividend per share of¥40.0 in FY3/22••

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

02 15

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

Confidence Inc.

4-Jul.-2022

7374 Tokyo Stock Exchange Growth Market

https://confidence-inc.jp/ir/

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(¥mn)

(¥mn)

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Source: Prepared by FISCO from the Company’s financial
 statements and securities report■ Business overview
Mainly provides staffing and recruitment business that specializes in
the gaming industry
The Company, which was founded in August 2014 under a vision of envisioning the future together at the frontlineof the creative industry, provides staffing, recruitment, and outsourcing services to the gaming and entertainment
industries and assistance service for media operations. Despite being a latecomer to the industry, the Company
has roughly 120 corporate clients and has cumulatively delivered services to approximately 190 companies since
its founding. It has business transactions with the majority of medium-sized and larger gaming companies, including
large firms such as Bandai Namco Studios, Cygames, and GREE.
1. Market trends
The gaming industry, which is where the Company mainly provides services, has been trending upward and growing.
Content scale in the domestic gaming market* climbed by US$9,886mn in 2014 to US$16,586mn in 2018 and isforecast to reach US$21,249mn in 2023. Content scale in the global gaming market* is similarly achieving growthfrom US$75,592mn in 2014 to US$124,427mn in 2018 and a projected US$172,663mn in 2023. As for gaming
devices, meanwhile, the mobile gaming market is growing in scale. These expansion trends in the gaming market
are supporting steady growth in results at gaming companies, the Company’s main clients. Since the Company has
set its sights on future overseas development in this environment, in addition to the domestic market where steady
growth is expected, FISCO expects further increases to its results.
*	Source: “Overview of Global and Japanese Content Markets (February 2020)” by Ministry of Economy, Trade and Industry.

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

03 15

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

Confidence Inc.
7374 Tokyo Stock Exchange Growth Market

4-Jul.-2022
https://confidence-inc.jp/ir/

Business overview

From the standpoint of staffing business in the gaming industry, the Company’s operating profit margin is higher thanits competitors. For example, while the Company’s operating profit margin was 16.8% in FY3/22, its competitors
had operating profit margins of 8.2%, 0.8%, and 11.3%, respectively. This disparity indicates that the Company iseffectively leveraging its competitive advantage (details to follow).

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Note: Fiscal years end in February for Company A, November for Company B, and March for Company CSource: Prepared by FISCO from each company’s financial
statements and results briefing materials

Operates HR Solution business and Media business under a visionof envisioning the future together at the frontline of the creative
industry
2. Business description
The Company presents a vision of envisioning the future together at the frontline of the creative industry and aims
to jointly create a future in which creators achieve their dreams of career enhancement, the products in which they
were involved are well-received, which leads to the advancement of client organizations, the industry, and society.
Specifically, it supports creators in being involved in the entertainment industry and improving their careers to achieve
their dreams and supports client companies by providing information and core personnel who create entertainment
content.
HR Solution business, the Company’s main business, recruits and hires creators and delivers staffing, recruitment,
and outsourcing services to the gaming industry. It consists of staffing business, recruitment business, and outsourcing business. In Media business, the Company generates advertising income from running its own media sites
and also provides media operation assistance services via its subsidiary Dolphin.

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

04 15

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

Confidence Inc.
7374 Tokyo Stock Exchange Growth Market

4-Jul.-2022
https://confidence-inc.jp/ir/

Business overview

Business diagram

Source: From “Disclosure of a business plan and matters related to high growth potential”(1) HR Solution businessa) Staffing business, recruitment business
The mainstay staffing business dispatches human resources who have extensive knowledge of the gaming andentertainment industries and are ready to work on projects to gaming companies in accordance with client needs.
The Company hires creators from among job seekers on a wide range of levels from entry level employees topeople with substantial industry experience to address client requirements and has been expanding the numberof hired creators by matching the needs of clients and the skills of creators. The number of creators reached 740
at the end of March 2022. The Company strives to enhance the careers of creators with business skill training,
programs on knowledge and skills required in game development, and other training activities. In recruitment
business, meanwhile, the Company provides assistance throughout the entire process from initial research until
offer acceptance related to the recruitment of highly skilled personnel who take a central business role for gaming
companies and the IT and web industries. It also offers freelance service that offers access to professionals withextensive industry experience and advanced skills on a project basis.
Examples of creators at gaming companies cover a wide range of roles, including game producers overseeing
the entire project including the budget, schedule, and personnel composition, game directors managing the
production sites including schedule management, game planners designing the game, game programmers
handling programming for game development, scenario writers, and client support staff. Examples of creators
for the IT/web industry are broad as well, and include web producers overseeing the entire project such as
the delivery date, budget, and personnel composition, web directors controlling the production site, and web
designers handling the design.

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

05 15

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

Confidence Inc.
7374 Tokyo Stock Exchange Growth Market

4-Jul.-2022
https://confidence-inc.jp/ir/

Business overview

Supported positions and results

Source: From the Company’s websiteb) Outsourcing businessOutsourcing business handles game development and operational tasks that can be outsourced, and theCompany primarily receives consignments for debugging* game titles. Due to the high level of confidentiality ingame title debugging, the Company established a dedicated office in the Shinjuku-ku in April 2020. It strives toenhance sales and management operations while making preparations to expand the scope of the business.
Furthermore, the Company is working to increase the number of new project leads acquired through collaboration with the staffing business. Aside from debugging, it handles multilingual localization service in a variety oflanguages, including English, Chinese, and Korean, and customer support.
*	Refers to the task of finding and revising computer program bugs and defects and making changes to ensure operationin accordance with specifications.

(2) Media business
The Company obtains advertising income from operating media sites, such as Lovely, which is geared toward
women, Plush, for a fortune-telling, and GAMEMO, for gaming. Based on operational knowhow of media sites, it
handles promotion assistance, such as social media operation service, and accommodates not only the gaming
industry but a wide range of other industries. Although advertising income generates the majority of revenue
in the current income structure, the Company advocates a policy of pursuing sales expansion by focusing on
promotional assistance outsourcing.

Personnel matching capabilities supported by robust hiring andsales capabilities
3. Strengths
The Company’s competitive advantage is personnel matching capabilities supported by robust hiring and sales
capabilities. To maximize total matching volume through the maximization of job seeker volume and job opening
volume, the Company implements efficient organizational operation by designing the organization based on divisionof labor and standardization and simplifying operations as much as possible. As a result, it has realized high businessgrowth rates and profitability since August 2014, despite being a latecomer to the industry.

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

06 15

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

Confidence Inc.

4-Jul.-2022

7374 Tokyo Stock Exchange Growth Market

https://confidence-inc.jp/ir/

Business overview(1) Hiring capabilities
The Company efficiently attracts clients by specializing in the gaming industry and achieves stable hiring. While it
has many active entries due to the popularity of the gaming industry, the Company also maintains referral hiring(people hired through introductions from acquaintances) at a certain percentage and therefore receives roughly
10,000 applicants every year. Strong employee satisfaction contributes to hiring capabilities as well. The Company
introduces work from a wide range of industries even to unexperienced people and provides opportunities toenhance skills through actual jobs. It also limits the turnover rate and supports longer employment periods byconducting monthly interviews and other forms of communication that resolve the concerns and frustrations
expressed by creators at an early stage. Meanwhile, since the Company is familiar with the gaming industry, it
places job opening advertisements in response to changes in the human resources market environment andcontinually analyzes the cost performance of advertising media and suitably adjusts advertisement allocations. As
a result, the Company has built a framework that efficiently generates profits with hiring LTV * at roughly 19-fold.
*	Hiring LTV (Life Time Value) refers to the amount of gross profit acquired per person from their entry into the company toleaving versus the hiring cost per person.

(2) Sales capabilities
The Company realizes robust sales capabilities from management’s knowhow in the HR industry and early
accumulation of knowledge through specialization in the gaming industry. With salespeople occupying a highpercentage of all employees at roughly 40%, it is evident that the Company emphasizes the ability to develop
clients and job recruitments. In client development, the Company’s policy is to expand the number of clientcompanies to avoid reliance on certain clients. It distributes risk by having many clients and secures a certain levelof gross profit margin (in FY3/21, it had 102 corporate clients and the gross profit margin of staffing business was
32.7%). By continuously deepening client relationships, the Company has been raising the number of dispatchedpersonnel per client and successfully expanded volume per client from 2.36 people in FY3/17 to 5.77 in FY3/21.

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Source: Prepared by FISCO from “Disclosure of a business plan and matters related to high growth potential”

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

07 15

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

Confidence Inc.
7374 Tokyo Stock Exchange Growth Market

4-Jul.-2022
https://confidence-inc.jp/ir/

Business overview(3) Matching capabilities
The Company achieves high-precision matching through a process that factors in client needs and creatorskills based on knowledge of the gaming industry. Its abundant volume of job openings and creator volume also
contribute to high-precision matching. The Company has also built operations that finalize contracts in a shortperiod, and about 70% of job seekers are given assignments within a month of their interviews. As a result, theaverage annual utilization rate for its creators stands at an impressive 98.8% (April 2020 to March 2021).
(4) Efficient organizational operation
The Company realizes high business growth rates and profitability, despite being a latecomer to the industry,
through efficient organizational operation by designing the organization based on division of labor and standardization and simplifying operations as much as possible. Through standardization, it implements process managementwith defined business KPIs. In this way, the Company works to enhance productivity while discovering risks thatmay decrease earnings at an early stage and minimizing losses.
The Company has realized rapid growth, with a compound annual growth rate (CAGR) of 62.5% in net sales from
FY3/17 to FY3/21, a compound annual growth rate of 72.0% in operating profit, because of a business strategy
based on its competitive advantage and efficient organizational management. According to the Company, successin maintaining the operating profit margin at a high level of 16.8% in FY3/22, in contrast to a margin of 10% orless at a majority of other companies in the HR industry (according to the Company), also demonstrates that theCompany’s strengths help it to achieve a high business growth rate and profitability.

■ Results trends
Realized all-time high results in FY3/22 led by mainstay HR Solution
business
1. Overview of FY3/22 results
In the FY3/22 consolidated results, the Company reported all-time high sales and profit at each level with net sales
increasing 24.0% YoY to ¥4,425mn, operating profit increasing 23.3% to ¥745mn, ordinary profit rising 22.3% to¥737mn, and profit attributable to owners of parent up 32.9% to ¥530mn. Additionally, compared to the forecast
announced in June 2021, it overshot all indicators with an increase of 0.9% in net sales, 3.8% in gross profit, 3.5%in operating profit, 2.9% in ordinary profit, and 6.6% in profit attributable to owners of parent. Mainstay HR Solution
business was steady due to efforts to deepen client relationships aimed at maximizing the number of people
dispatched per client as set forth in the medium-term growth strategy.

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

08 15

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

Confidence Inc.

4-Jul.-2022

7374 Tokyo Stock Exchange Growth Market

https://confidence-inc.jp/ir/

Results trends

Outline of consolidated results for FY3/22(¥mn)
FY3/21Results

FY3/22% of net
sales

Forecast

Results

YoY% of net
sales

ChangeChange(%)

Versusforecast

Net sales

3,569

-

4,386

4,425

-

855

24.0%

0.9%

Gross profit

1,236

34.6%

1,473

1,528

34.5%

292

23.6%

3.8%

Operating profit

604

16.9%

720

745

16.8%

140

23.3%

3.5%

Ordinary profit

603

16.9%

717

737

16.7%

134

22.3%

2.9%

Profit attributable toowners of parent

399

11.2%

498

530

12.0%

131

32.9%

6.6%

Note: FY3/22 forecasts are figures announced in June 2021
Source: Prepared by FISCO from the Company’s financial statements and results briefing materials

Below is an outline by business segments.
Outline of FY3/22 results by segment(¥mn)
FY3/21Results
Net sales
HR Solution business

FY3/22Composition
ratio

Forecast

Results

Composition
ratio

Versusforecast

YoY

3,569

-

4,386

4,425

-

24.0%

3,496

98.0%

4,253

4,353

98.4%

24.5%

2.4%

72

2.0%

132

77

1.7%

6.6%

-41.5%Media business

0.9%

-

-

-

-6

-0.1%

-

-

1,236

34.6%

1,473

1,528

34.5%

23.6%

3.8%

1,186

33.9%

-

1,481

34.0%

24.9%

-

49

68.9%

-

46

60.4%

-6.5%

-

604

16.9%

720

745

16.8%

23.3%

3.5%

HR Solution business

937

26.8%

-

1,166

26.8%

24.4%

-

Media business

13

18.1%

-

13

17.5%

3.1%

-

Adjustments
Gross profit
HR Solution businessMedia business
Operating profit

Note: FY3/22 forecasts are figures announced in June 2021
Source: Prepared by FISCO from the Company’s financial statements and results briefing materials(1) HR Solution business
In HR Solution business, results were ¥4,353mn in net sales (up 24.5% YoY), ¥1,481mn in gross profit (up 24.9%),and ¥1,166mn in segment profit (up 24.4%). The segment sustained steady momentum while maintaining a highlevel of profits. Staffing business performed well thanks to not only emphasis on deepening relationships withexisting clients but establishing transactions with new clients as well, with the aim of expanding the number ofassigned personnel in the mainstay staffing business for gaming companies.
Among important KPI, the number of creator staffing assignments, which serve as the foundation of the Company’srecurring income model, steadily increased by 120 people to 740, compared to the initial forecast of 700, and thecreator utilization rate remained at a high level throughout the fiscal year at 99.4% in 1Q, 99.9% in 2Q, 99.7% in
3Q, and 99.6% in 4Q.
(2) Media businessNet sales were ¥77mn (up 6.6% YoY), gross profit was ¥46mn (down 6.5%), and segment profit was ¥13mn(up 3.1%). Although page views (PVs), an important KPI, was roughly unchanged YoY at a slight 0.4% increase
to 137,787,000 PVs, average price per PV declined YoY, and net sales decreased in the advertising network
business. To address this situation, the Company advocates a policy of changing its primary source of revenue
from advertising network income to outsourced promotional services.

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09 15

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

Confidence Inc.
7374 Tokyo Stock Exchange Growth Market

4-Jul.-2022
https://confidence-inc.jp/ir/

Results trends

No concerns about financial soundness
2. Financial condition and management indicators
Total assets at the end of FY3/22 increased ¥884mn from the end of the previous fiscal year to ¥2,437mn. Current
assets rose by ¥849mn to ¥2,268mn mainly due to increases of ¥784mn in cash and deposits and ¥69mn inaccounts receivable – trade. Non-current assets increased ¥34mn to ¥169mn.
Total liabilities at the end of FY3/22 decreased ¥133mn from the end of the previous fiscal year to ¥782mn. The main
factors were decreases of ¥90mn in borrowings and ¥56mn in income taxes payable. Total net assets increased¥1,018mn to ¥1,655mn due to the recording of ¥530mn of profit attributable to owners of parent.
Looking at management indicators, the equity ratio, which reflects management stability, increased 26.6pt comparedto the end of the previous fiscal year to 67.6% and additionally, the Company also has ¥1,724mn in cash anddeposits, so FISCO does not have any concerns about its financial soundness.
Consolidated balance sheet and management indicators(¥mn)
End FY3/21

End FY3/22

Change

1,418

2,268

849

Cash and deposits

940

1,724

784

Accounts receivable – trade

445

515

69

134

169

34

39

24

-15

Current assets

Non-current assets
Property, plant and equipment
Intangible assets

8

11

3

Investments and other assets

86

132

46

1,553

2,437

884

Current liabilities

802

759

-42

Non-current liabilities

113

22

-91

915

782

-133

Total assets

Total liabilities

230

761

530

637

1,655

1,018

41.0%

67.6%

26.6ptReturn on assets (ROA)

46.0%

37.0%

-9.0ptReturn on equity (ROE)

89.5%

46.5%

-43.0pt

Retained earnings
Total net assets
Management indicators
Equity ratio
Profitability

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

In FY3/22, net cash provided by operating activities was ¥461mn, with ¥733mn in profit before income taxes and¥267mn in income taxes paid as the main items. Net cash used in investing activities was ¥64mn with the main
factors being ¥10mn in purchase of intangible assets and ¥47mn in payments of leasehold and guarantee deposits.
Net cash provided by financing activities was ¥387mn, with the main factor being ¥473mn in proceeds from issuanceof shares. As a result, cash and cash equivalents rose by ¥784mn during the period to a balance of ¥1,724mn at
the end of the period. FISCO thinks the Company’s financial condition is sound, even with the negative cash flowfrom investing activities, because this amount can be offset by cash flow from operating activities.

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10 15

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

Confidence Inc.

4-Jul.-2022

7374 Tokyo Stock Exchange Growth Market

https://confidence-inc.jp/ir/

Results trends

Consolidated statement of cash flows(¥mn)
FY3/21

FY3/22

Cash flow from operating activities

486

461

Cash flow from investing activities

-9

-64

Cash flow from financing activities

-146

387

Net increase (decrease) in cash and cash equivalents

330

784

Cash and cash equivalents at end of period

940

1,724

Source: Prepared by FISCO from the Company’s financial statements■ Outlook
Forecasts higher sales and profit again in FY3/23 mainly on tailwind
from a favorable external environment
For the FY3/23 consolidated results, the Company forecasts net sales of ¥5,200mn (up 17.5% YoY), operating
profit of ¥850mn (up 14.0%), ordinary profit of ¥848mn (up 14.9%), and profit attributable to owners of parent of¥585mn (up 10.3%). In consideration of medium- to long-term growth, the Company formulated a business planwith 15-20% net sales growth, gross profit margin of over 30%, and operating profit margin of over 15% for FY3/23
financial targets. It will aim for further growth by continually maximizing the number of people dispatched per clientadvocated in the medium-term growth strategy considering the steady trends at major gaming companies evenduring the COVID-19 pandemic.
Consolidated results forecast for FY3/23(¥mn)
FY3/22
Results

FY3/23
ChangeChange (%)

4,425

-

5,200

-

774

17.5%

4,347

98.3%

5,070

97.5%

722

16.6%

77

1.7%

130

2.5%

52

68.5%

1,528

34.5%

1,787

34.4%

258

16.9%

Operating profit

745

16.8%

850

16.3%

104

14.0%

Ordinary profit

737

16.7%

848

16.3%

110

14.9%

Profit attributable to owners of parent

530

12.0%

585

11.3%

54

10.3%

Net sales
HR Solution businessMedia business
Gross profit% of net sales

Forecast

YoY% of net sales

Note: Figures do not include internal sales among segments.
Source: Prepared by FISCO from the Company’s financial statements and results briefing materials

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

11 15

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

Confidence Inc.
7374 Tokyo Stock Exchange Growth Market

4-Jul.-2022
https://confidence-inc.jp/ir/

Outlook

Forecasts for each business segment are as follows.
(1) HR Solution business
The Company forecasts that net sales will increase 16.6% YoY to ¥5,070mn. Since gaming companies’ results
have remained steady even during the COVID-19 pandemic and gaming companies are continuing to recruit forhuman resources required in game development, mainstay staffing business will work to expand the number of
dispatched creators. Additionally, the recruitment business will seek to expand the number of recruited people
against a backdrop of vibrant interest in hiring mainly at gaming companies and IT/web-related clients. In outsourcing business, the Company projects that it will sustain project volume through cross-selling that utilizes
the network in staffing business amid the prospect of continuation of a certain amount of demand mainly fordebugging projects from gaming companies.
(2) Media business
The Company forecasts that net sales will increase 68.5% YoY to ¥130mn. Meanwhile, the Company states thatas a result of the slowdown in the advertising market due to the COVID-19 pandemic and difficulty in forecasting
the impact of updates to Google’s search algorithm, it is unclear whether or not the average price per PV andnumber of PVs will continue to be stable. To address these conditions, the Company intends to transform its
profit structure by increasing outsourcing projects related to Media business, while striving to enhance the qualityof article production and increase the output of manga content.

■ Growth strategy
Aims to reach ¥10bn in net sales over the next three to five years
through deeper client relationships and establishment of an
ecosystem and plans to enter the digital entertainment field over thelong term
The Company formulated medium-term and long-term growth strategies in June 2021. It aims to reach ¥10bn in net
sales over the next three to five years with a medium-term growth strategy of business expansion by establishing avirtuous cycle (ecosystem) of deeper client relationships and business collaboration through promotion of (1) broader
and deeper client relationships, (2) diversified service scope, and (3) establishment of an ecosystem. Furthermore,as a long-term growth strategy, it advocates expansion of target markets and initiatives in digital entertainment field
through matching solutions and hopes to develop business in the digital entertainment field through promotion of(1) expansion of target markets, (2) knowledge accumulation through expansion of outsourcing business, and (3)expansion and enhancement of matching scope.

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

12 15

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

Confidence Inc.
7374 Tokyo Stock Exchange Growth Market

4-Jul.-2022
https://confidence-inc.jp/ir/

Growth strategy

1. Medium-term growth strategy(1) Broader and deeper client relationships
The Company intends to acquire new work opportunities for creators and maximize the number of people
dispatched per client by further deepening relationships with clients. Specifically, it intends to discover new
human resource needs by assessing future demand through hearing of game product development schedules
and referrals to other divisions at the same client companies. It aims to become the overwhelmingly No.1 staffing
business in the gaming industry by promoting these activities. FISCO believes the Company can fully maximize
the number of dispatched people per client through a business expansion by assured and efficient means ofdeeper client relationships.
(2) Diversified service scope
The Company previously was unable to effectively ascertain client needs and incurred latent opportunity losses
due to staffing, recruitment, and outsourcing businesses operating separately. For this reason, it aims to expand
income further through cross-selling of recruitment and outsourcing services by leveraging the network built in
staffing business. This approach will increase client contacts and facilitate acquisition of attractive job openings
in the recruitment business and support accurate identification of needs and provide services at suitable timingwith increased awareness of the development schedule in outsourcing business. The Company aims to expand
income per client by increasing contacts with clients and diversifying service provision.
(3) Establishment of an ecosystem
The Company hopes to improve management efficiency and increase opportunities to provide services to thegaming industry through mutual collaboration of staffing, recruitment, and outsourced media businesses andestablishment and expansion of a virtuous cycle. In establishing the ecosystem, it aims to increase client attraction
in staffing and recruitment businesses by using operation knowhow from the Media business and also promote
opportunities for unemployed creators to work on outsourcing projects, enhance their skills by on-the-job training
in outsourcing projects, and raise the average billing price per unit by finding employment for creators withadvanced skills. In expanding the ecosystem, the Company expects an increase in outsourcing projects andrecruitment results by leveraging the network built in staffing business. Additionally, it will promote increases instaffing opportunities and provision of promotional assistance to gaming companies utilizing client attraction
knowhow from the Media business, among other things. It also aims to enhance management efficiency bypossessing a virtuous cycle in this manner. FISCO thinks the Company is capable of improving profitability because
the utilization of its existing network is expected to reduce costs compared to developing new business.

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13 15

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

Confidence Inc.
7374 Tokyo Stock Exchange Growth Market

4-Jul.-2022
https://confidence-inc.jp/ir/

Growth strategy

Establishment and expansion of an ecosystem

Source: From “Disclosure of a business plan and matters related
to high growth potential”

Aims to accumulate knowledge through expansion of target markets
and outsourcing business and enter the digital entertainment field
2. Long-term growth strategy(1) Expansion of target markets
The Company intends to diversify and broaden industries, areas, and formats and move from specialization in thegaming industry to entry into web and entertainment fields. As a means of industry diversification, in addition to
the mainstay gaming industry, it will pursue HR Solution business in web and entertainment industries, which areperipheral fields. As a means of broadening areas, it plans to open sites in Fukuoka and Osaka within the next
one to three years with the goal of improving brand recognition and increasing business scale and also is setting
its sights on overseas opportunities in the future. As a means of format diversification, it will enter the freelance
segment, which uses a different contract format than staffing and recruitment. The Company envisions formationof teams of highly skilled people and provision of a wide range of services by building a network with freelancers.
FISCO has high hopes for its entry overseas. While the Company has not decided anything specifically such as thetiming of entering overseas markets at this point, FISCO thinks that an overseas entry through M&A is a possibility.
(2) Knowledge accumulation by expanding outsourcing businessOutsourcing business mainly handles game title debugging projects. However, the Company aims to provide awide range of human resources by expanding media-related outsourcing services and broadening the scale anddiversity of its pool of human resources. In terms of media-related outsourcing services, it envisions promotional
assistance (attracting clients via social media and influencers) when gaming companies release new titles anddevelopment and operation services for owned media targeting gaming companies or game titles. As a meansof broadening the scale and diversity of its pool of human resources, the Company will secure a pool of diverse
human resources by handling a variety of outsourcing services, such as promotional assistance, debugging,translation, and development. It also intends to create a laboratory that gives employees opportunities to mutuallyacquire new skills and delivers new services using the skills obtained through this initiative.

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

14 15

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

Confidence Inc.
7374 Tokyo Stock Exchange Growth Market

4-Jul.-2022
https://confidence-inc.jp/ir/

Growth strategy(3) Expansion and enhancement of matching scope
The Company aims to enter the digital entertainment field by broadening its matching solutions. Specifically, it aims
to enter the digital entertainment field by utilizing its network with gaming companies to match gaming industry
XR technology with companies from a variety of industries while knowledgeable personnel support the companies
after matching using knowhow accumulated in staffing and outsourcing businesses. The Company will approachcompanies in various industries by not only matching gaming companies, its existing clients, and companies fromother industries who want to leverage technology from gaming companies in their businesses but also by supplying
promotional services and human resource assistance. Due to high affinity between the metaverse, which has been
rapidly becoming widespread in recent years, and gaming industry skills, entry into the digital entertainment fieldleveraging knowhow possessed by the Company and creators, is likely to succeed. FISCO believes the additionsof directors with gaming industry knowledge or extensive knowledge of the IT industry announced on May 12,2022 indicate intent to enter these areas. This is certainly a diversification strategy that utilizes existing businessassets and makes use of new personnel channels, and one that can be evaluated as an attractive growth strategy
with a realistic future vision as well.
Entry into the digital entertainment field

Source: From “Disclosure of a business plan and matters related to high growth potential”■ Shareholder return policy
Targets a dividend payout ratio of over 30% and DOE of over 10%
and paid a ¥40.0 dividend per share in FY3/22
The Company has adopted a basic policy of paying continuous and stable dividends while retaining necessaryinternal reserves for future business expansion and bolstering its financial standing and targets a dividend payout
ratio of over 30% and DOE of over 10%.
In accordance with the basic policy, in FY3/22, it paid a dividend per share of ¥40.0 (no dividend in the previous
fiscal year), positioning the dividend payout ratio at 33.8% and DOE at 15.7%. In FY3/23, it plans to pay a dividend
per share of ¥45.0 (an increase of ¥5.0 YoY) and expects a dividend payout ratio of 35.2% and DOE of 11.6%.

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

15 15

Disclaimer
FISCO Ltd. (“FISCO”) offer stock price and index information for use under the approval of theTokyo Stock Exchange, the Osaka Stock Exchange and Nikkei Inc.
This report is provided solely for the purpose of offering information, and is not a solicitationof investment nor any other act or action.
FISCO prepared and published this report based on information which it considered reliable;
however, FISCO does not warrant the accuracy, completeness, fitness nor reliability of thecontents of this report or the said information.
The issuers’ securities, currencies, commodities, securities and other financial instruments
mentioned in this report may increase or decrease in value or lose their value due to influence
from corporate activities, economic policies, world affairs and other factors. This report does
not make any promises regarding any future outcomes. If you use this report or any information
mentioned herein, regardless of the purpose therefor, such use shall be made based on yourjudgment and responsibility, and FISCO shall not be liable for any damage incurred by you asa result of such use, irrespective of the reason.
This report has been prepared at the request of the company subject hereto based on theprovision of information by such company through telephone interviews and the like. However,
the hypotheses, conclusions and all other contents contained herein are based on analysis
by FISCO. The contents of this report are as of the time of the preparation hereof, and are
subject to change without notice. FISCO is not obligated to update this report.
The intellectual property rights, including the copyrights to the main text hereof, the data
and the like, belong to FISCO, and any revision, reprocessing, reproduction, transmission,
distribution or the like of this report and any duplicate hereof without the permission of FISCO
is strictly prohibited.
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