Alpha-Win Company Research ReportYRGLM Inc. (3690 TSE Mothers)【Previous name: LOCKON CO., LTD.】● SummaryIssued: 12/13/2019

Research Dept., Alpha-Win Capital Inc.
http://www.awincap.com/

Business Description
・YRGLM Inc. (hereinafter referred to as the “Company”) is a marketing-technology company that plans,
develops, and sells software related to Internet marketing. It was founded in 2001 by president Iwata during hiscollege years. Its main product is its originally developed Internet advertising effect measurement system; it isa leading company in a niche field. The product is provided via the cloud to middle-sized and large companies.
The Company's main business is based on a subscription-based business model, meaning that although costs
precede and temporarily cause an overall loss upon the acquisition of new customers, after a certain period oftime, the initial costs are recovered and profit begins to steadily accumulate over time. By changing its businessmodel, selecting and focusing on a business portfolio, and effectively using its accumulated information assets,
the Company is beginning to enter a profitability-improvement phase. The Company became listed on TSE
Mothers in September 2014. On August 1, 2019, the Company changed its name from LOCKON CO., LTD.,
to YRGLM Inc.
Current Financial Performance・After becoming listed on Mothers, the Company had increased sales and stayed in the black. However, fromFY 2017 (the fiscal year ending in Sept. 2017), although sales continued to grow, profit declined consecutively
due to upfront investment for business expansion and expenses related to business restructuring. In FY 2018,
sales grew but a net loss was posted and dividend payment was stopped. In FY 2019 (last fiscal year), sales
increased by 22.1% to Y2,204 million and an operating profit of Y84 million was achieved, improving from theprevious operating loss. However, due to trademark-litigation-related expenses posted as an extraordinary loss,
the fiscal year resulted in a net loss of Y34 million. Compared to the forecast, which the Company discloses asa range, sales were below the lower end of the range but operating profit exceeded the higher end of the range(the same with Alpha-Win’s forecast). In sum, the results were positive, with the settlement of a lawsuit that
had been of concern and quarterly operating profit being maintained and becoming solid since the second
quarter (Jan-Mar 2019).
Competitiveness・The Company's strengths are the management skill of the president who has a deep knowledge of leading
technologies in this field, products with proven and strong functions, and possession of and potential to utilize
the big data that have been accumulated over the years. The Company’s two main products both have the largest
share in the domestic market. In the growing industry, the Company aims to further strengthen its products andsecure an extraordinarily large market share for its flagship products through a strategy that includes active
M&As, business acquisitions, and business alliances.
Business Strategy
・Under the Marketing Robot Strategy, which aims to automate and improve the efficiency of Internet marketing,
the Company plans to expand its business domain as a whole from advertising effect measurement to analysis
and utilization, as well as overseas development. It plans to achieve Y3 billion in sales in FY 2020. Toward thisend, the Company plans to accelerate its growth by actively pursuing M&As, developing business in related
fields, and forming alliances with other companies. Recently, the Company decided to purchase the ADPLAN
business from OPT, through which the Company’s market share is expected to expand.
Financial Forecast for This Fiscal Year and Over the Medium Term
・As with the previous fiscal year, the Company has not disclosed the financial forecast (sales, profit, anddividend) for this fiscal year or FY 2020, explaining that reasonable financial predictions are difficult due to thepresence of various uncertain factors. It plans to announce a forecast as soon as reasonable calculations become
possible. Alpha-Win Research Dept. revised the previous forecast in considering the rise in the unit price of AD
EBiS and the effect of the business acquisition. Sales were kept at Y2,750 million (+24.8% YoY), while
1/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate, or
fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from theuse of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual
property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

operating profit was raised to Y200 million (+138.1% YoY) and net profit was revised up to Y165 million(improvement from loss to profit). We expect the Company to disclose its forecast (most likely as a range ofvalues) after this first quarter’s results or the interim results come out, around February or May. In the current
fiscal year, increased sales of the main product AD EBiS and continued cost improvement are expected tocontribute to a double-digit sales growth, a significant rise in the profits, and an achievement of a net profit(improving from the previous net loss). With the great growth potential of the Internet-marketing-related fields,
an annual sales growth rate of 15-20% is expected over the medium to long term. Going forward, we believethat the Company will continue its “proactive” upfront investment as it expands business and actively selects
and focuses on its business portfolio for future growth. Therefore, although it would depend on the cost control,with the profit margins improving, we believe that the Company will be able to maintain a net profit and a profit
growth of 20-30% per year, a pace that is faster than the sales growth rate.
Stock Price and Characteristics
・ AdTech-related, domestic-demand-oriented growth stock. Reflecting the share buyback and recovery inperformance, the stock price rose from February 2019 to the summer of the same year, outperforming the index.
However, in a fallback from this rise, the stock price has been going through short ups and downs in the past
six months. The Company’s stock value does not seem cheap when valuation indicators are compared with
TOPIX and similar companies. However, since the Company’s results have bottomed out, improving fromoperating loss to profit, there is increasing anticipation for a v-shaped recovery in profit. Going forward, factorsthat may affect the stock price include the change in monthly sales, quarterly transition in profit and loss (change
in the amount of profit), announcements of M&As or alliances or new functions, contents of the next mediumterm business plan when it is announced, and forecasts on profit levels over the medium term. In particular, theunit price and the number of active accounts of the core AD EBiS business are key indicators (KPI) directly
linked to financial performance and should be closely followed.
Shareholder Return
・In the previous fiscal year and the fiscal year before the previous, the Company posted net losses and no
dividend was paid. Although the Company announced that this year's dividend is undetermined, the possibilityof a payment is low and the resuming of dividend payment is likely to be carried over into the fiscal year after
the next or later. The Company currently believes that, because it is in a growth phase, it should raise shareholder
value by recovering its financial performance through investments for growth rather than letting its cash flowout.
【3690 YRGLM Inc.
FY

2017
2018
2019
2020
2020
2021
2022

Sector: Information & Communication 】 Figure A

Sales

YOY

O.P.

YOY

R.P.

YOY

N.P.

YOY

EPS

BPS

Dividend(million Y)(%)(million Y)(%)(million Y)(%)(million Y)

(%)

(Y)

(Y)

(Y)

1,719
1,804
2,204

6.6
5.0
22.1

92
-62.6
106
-57.5
72
-56.8
11.56
-98
-115
-88
-14.0284 To profit
79 To profit
-34
-5.54
Not disclosed (although sales of Y3 billion targeted in medium-term plan)

2,750
3,150
3,600

24.8
14.5
14.3

CE
E
E
E

200
300
380

135.5
50.0
26.7

200
300
380

153.2
50.0
26.7

165
230
250

To profit
39.4
8.7

26.23
36.56
39.74

195.60184.97168.68

5.0
0.0
0.0

194.88231.44271.18

0.0
0.0
5.0

(Note) CE = the Company’s estimate (forecast); E = estimate (forecast) by Alpha-Win Research Dept. All fiscal years discussed inthis document are September-ending. For example, FY 2020 ends in Sept. 2020.

【 Stock Price and Valuation Indicators: 3690 YRGLM Inc.】

Figure B
Dividend Yield

Dividend Payout Ratio

7.5

0.0%

0.0%

6.5

0.0%

0.0%

0.0%

0.0%

12/6/2019

Item

P/E

Stock Price (Y)1,271Last FY (actual)-

Shares Outstanding (thou.)

6,372This FY (est.)

48.5

Market Capitalization (million Y)

8,099

Next FY (est.)

34.8

5.5

Item

Dilutive Shares (thou.)0

Equity Ratio at Last FY-End

P/B

51.4% Last FY's ROE-3.1%(Note) Forecasts/estimates were made by Alpha-Win Research Dept.

2/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate, or
fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from theuse of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual
property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18【 Stock Chart (end-of-week prices): 3690 YRGLM Inc.】
3,000

Figure C(Y)

1.20
Stock price (left axis)

2,500

1.10
1.00

Price relative to TOPIX(right axis)

0.90

2,000

0.80
0.70

1,500

0.60
0.50

1,000

0.40

(M
M
/Y
Y
)

08
/1
9

04
/1
9

12
/1
8

08
/1
8

04
/1
8

12
/1
7

08
/1
7

04
/1
7

0.30
12
/1
6

08
/1
6

500

【Performance】
PeriodReturn vs. TOPIX
1 month-1.8%-2.6%
3 months-4.1%-11.1%
6 months-26.7%-33.7%
12 months
29.0%
12.5%

(Note) From the fourth week of August 2016 to the first week of December 2019

(Note) Prepared by Alpha-Win Research Dept. The most recent stock price and TOPIX values are closing prices on 12/6/2019.
In the performance calculations for each period, the stock price and TOPIX at the end of each respective month werecompared with their most recent values.

3/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate, or
fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from theuse of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual
property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

Contents

1．Company Overview ........................................................................................................................ P5
Leading Company in a Niche Market ............................................................................................... P5
Business Philosophy .......................................................................................................................... P7
2．Business Description and Business Model .................................................................................... P8
Providing Proprietary Marketing Robot via the Cloud ..................................................................... P8
Restructuring and Strengthening of Business Portfolio .................................................................... P9
Details on the Business Contents .................................................................................................... P10
Subscription-Based Business Model ............................................................................................... P15
3．Shareholder Composition ............................................................................................................ P17
Change in Composition by Shareholder Type ................................................................................. P17
Major Shareholder Composition ..................................................................................................... P17
4．ESG .................................................................................................................................................. P19
Environment and Society ................................................................................................................ P19
Governance ...................................................................................................................................... P20
5．History of Growth ......................................................................................................................... P21
Company History ............................................................................................................................. P21
Transition in Past Financial Results ................................................................................................ P21
6．Business Environment .................................................................................................................. P23
Trends in Japan’s Advertising Industry ........................................................................................... P23
Competitors ....................................................................................................................................... P24
Effect of Strengthened Privacy Protection on Advertising Effect Measurement ............................ P25
7．Last Fiscal Year’s Results and This Year’s Forecast ................................................................ P27
Financial Results for FY 2019 (last fiscal year: FY 09/2019) ......................................................... P27
The Company’s Forecast for FY 2020 (this fiscal year: FY 09/2020) ............................................ P30
Topic: Transfer of the ADPLAN Business ....................................................................................... P32
8．Growth Strategy ............................................................................................................................ P33
The Company’s Medium-Term Business Plan and Strategy ............................................................ P33
Alpha-Win Research Dept.’s Financial Results Forecast for FY 2020 (this fiscal year) ................ P35
Alpha-Win Research Dept.’s Financial Results Forecast for the Medium Term ............................ P36
9．Analyst’s View ............................................................................................................................... P38
SWOT Analysis ............................................................................................................................... P38
Shareholder Return .......................................................................................................................... P38
Stock Price and Characteristic and Factors that May Affect Stock Price ....................................... P39
Note: Upon translating to English, when the page numbers differed from the original Japanese version, they were adjusted to those of the
English version of the Report.

4/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

1. Company Overview

w Marketing-technology
company. Developing theMarketing Robot businessto automate and improvethe efficiency of marketing
instead of humans.
Currently, the Internet
advertising effectmeasurement system,
which is a part of thisbusiness, is its main
product.
w As its main service, theCompany provides
Internet-marketing-related
platform as a SaaS (cloud).
(1) Internet advertising effectmeasurement system: A tool tocomprehensively measure theeffect of and evaluate various
Internet ads and SEO
strategies(2) SaaS (software as a service):
A service where software isused via the Internet (almost
synonymous with the cloud).
Does not need purchasing of
packaged products. Only thenecessary functions, contents,
and quantity of service areused via the Internet and paidfor.
w Changed the company
name and symbol. The
new name is YRGLM Inc.

◆ Leading Company in a Niche Market
YRGLM Inc. (hereinafter referred to as the “Company”) is an emerging
marketing-technology company that plans, develops, and sells software
related to Internet advertising and e-commerce. Susumu Iwata, theCompany’s president, started a web design business in Osaka as a college
student and, upon business expansion, established the Company in 2001.
The Company has grown through the full-scale development of theMarketing Robot (registered trademark of the Company) business,developing proprietary software that automatizes and improves theefficiency of marketing instead of humans. It is a giant leading company
in the niche market encompassing this business.
To date, it has grown its business in two areas – the marketing platform
and the EC platform. Its flagship product is AD EBiS, an Internet
advertising effect measurement system1 that is provided as a SaaS2(cloud) to companies (B2B).
The Company became listed on TSE Mothers in September 2014.
Currently, it has two head offices, one in Osaka and one in Tokyo. In
addition, for the purpose of promoting various workstyles not constrainedby work locations, the Company established the KYOTO Base (Kyoto
City) in August 2019 as another place to work. It plans to use the site forrecruitment of talents and R&D as well.
On August 1, 2019, the Company changed its name from “LOCKON”(CO., LTD.) to “YRGLM Inc.” Five years since becoming listed on themarket, the Company will reach a milestone next year (2020) – the 20th
anniversary of its founding which can be seen as its second start-up phase.
At this timing, the Company decided to reconfirm its goal and value
creation and aim for a further leap; it embedded this determination in its
new name.
The Company created the word “YRGLM” to mean “an ideal world thathas never been seen before” and made it its new name. “In order to present
the image of an ideal future that does not exist in this world yet, we used
‘a meaningless string of letters’ that does not have any origin in existingwords. It is a sole and unique name that we chose to reflect our goal to
become a sole and unique company [excerpt from the Company’s
website].”In addition, using “five rubber bands,” the Company
created a symbol to represent an organization aiming
to realize the ideal world YRGLM. The rubber bandsymbolizes infinite possibilities since it has various
meanings depending on the person who uses it. The
overlapping shape represents the strong harmony
among employees. Furthermore, the symbol
expresses the respect for the individuality of each
person and diversity and represents a strong andflexible organization that can elastically change.
5/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

w Its main products are its
originally developed AD
EBiS and EC-CUBE.

(3) Programmatic advertising:An advertising method where
optimization of ads is
conducted automatically or
supported immediately. After
submitting an ad, optimizationis conducted, leading to better
results.

The Company’s new vision is to “become a company that supports
corporate marketing activities around the world through data andtechnology to create happiness for sellers and buyers.”
The Company is specialized in providing the Marketing Robot and carries
out the following two businesses (main product names listed after thecolon).
(1) Marketing platform: AD EBiS and AdRepo (automatic report
generation tool for programmatic advertising3)(2) EC platform: EC-CUBE
The corporate group consists of a total of five companies: the Company,
two consolidated subsidiaries, one nonconsolidated subsidiary, and one
affiliate accounted for by the equity method. Below are the details:
Consolidated Subsidiaries
・LOCKON Vietnam Co., Ltd. (Vietnam Socialist Republic. An offshoredevelopment site. Conducts software development outsourced by theCompany. 100% owned by the Company.)
・EC-CUBE Co., Ltd. (Established in Osaka City Kita Ward in October
2018. The Company has a 100% stake. Succeeded the EC-CUBE businessfrom the parent company's EC platform business in January 2019.）
Nonconsolidated Subsidiary
・LOCKON Marketing of U.S.A (Established for information-gathering
purposes – a dormant company)
Affiliate Accounted for by the Equity Method
・SAI Co., Ltd. (LOCKON CO., LTD. acquired 20% of the shares in
September 2015 and transferred its EC outsourced development business)
・As for Radical Opti Co., Ltd., the Company acquired 20% of the sharesin May 2017 and then, like SAI, transferred its EC outsourced
development business. However, a part of the shares was sold during last
fiscal year, so this company is no longer an equity-method affiliate.

w Consolidated-to-parentcompany ratios had been
about 1 for both sales
and profit. Last FY, theratios improved thanks
to the subsidiaries.

The parent company’s sales and profit used to make up an extremely large
portion of the total for the entire corporate group, with the consolidatedto-parent-company ratios staying at around 1. Total recurring profit/lossof the consolidated subsidiaries had also been almost zero (Figure 1). In
the previous fiscal year, though, sales of the consolidated subsidiaries(consolidated minus parent) were Y193 million and recurring profit was
Y60 million – a significant improvement (in the fiscal year before theprevious, sales were Y0 million and there was a recurring loss of Y5
million). The EC-CUBE business contributed to this improvement, as it
had been carved out from the parent to a subsidiary and its performance
had improved.

6/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18【 Figure 1 】Comparison of Consolidated-to-Parent-Company Recurring Profit by Fiscal Year
(unit: million yen, %)
A
B
A-B＝C
C/B
A/B

Consolidated R.P.
Parent company R.P.
Consolidated R.P. parent company R.P.
Subsidiaries, etc.'s R.P. /parent company R.P.
Consolidated R.P. /parent company R.P.

FY 2014234
245

FY 2015352
359

FY 2016250
252

FY 2017
106
107

FY 2018-115-110

FY 2019
79
20

-12

-7

-2

-1

-5

60

-4.7%

-1.9%

-0.7%

-0.5%

-

304.9%

0.95

0.98

0.99

1.00

-

4.05

(Ref) Prepared by Alpha-Win Research Dept. from the Company’s securities report, financial results summary, financial results briefing
materials, website, etc.
(Note) Hereinafter, unless otherwise noted, reference may be omitted if it is the same as the above. Also, since we generally round off
the decimal places for the numbers used in this Report, the numbers may differ from those officially disclosed by the Company.
Results are consolidated starting in FY 2014 (the same applies to the rest of this document).

w As of the end of

September, the debt was
about the same as the cash
and deposits, meaning that
the Company is essentiallymostly debt-less.

After becoming listed, the Company had been debt-free, but in FY 2018,
the Company raised about Y800 million in long- and short-term loans as
an investment for the future. The Company commented that thisinvestment is for the development of the marketing platform and AIrelated fields and for future M&As.
Since the Company’s long- and short-term debt totaled Y740 million
while its cash and deposits were about Y770 million as of the end of
September 2019, the Company is essentially mostly debt-free. In addition,
while its total assets and market capitalization are relatively small – about
Y2.1 billion and Y8.4 billion, respectively, as of the end of September(the closing price was Y1,325 on September 30, 2019) – there is no
problem with its financial condition, with an equity ratio of 51% and acurrent ratio of 139%.
Intangible fixed assets, including goodwill (due to the acquisition of the
AdRepo business) and software, are Y590 million and deferred tax assets
are Y90 million, totaling Y680 million. This is smaller than the
Company’s net assets, which total Y1.06 billion, so there seems to be no
problem for the time being.

w The Company’s businessphilosophy◆ Business Philosophy
Under its mission, “Impact On the World,” the Company aspires forcompanies that provide unique values to develop together with the society.
This philosophy encompasses the Company’s idea that “We should
continue to impact to each thing that we are involved in, because theaccumulation of small impacts that move people’s heart will eventuallycreate a large momentum that will move the entire world.”
Also, the Company’s vision (future ideal) is to “become a company that
supports corporate marketing activities around the world through data
and technology to create happiness for sellers and buyers.”
As for its values (including action policy), the Company has decided on
the three policies of “Pursue until the very last moment,” “Reach beyond
the barriers of business domains,” and “Believe that we can truly do it.”

7/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

2．Business Description and Business Model◆ Providing Proprietary Marketing Robot via the Cloudw A B2B business,

providing originallydeveloped software via
the cloud as its main
business. Developing
businesses based on two
platforms. Focused on
the marketing platformbusiness.

Based on the concept that a “marketing robot” that solves problems
automatically and efficiently instead of humans is also necessary in thearea of Internet marketing due to the aging and declining population, theCompany provides the originally developed Marketing Robot software
via the cloud mainly to companies. The Company's business consists of
two business segments: (1) the marketing platform business and (2) theEC platform business. The former accounted for 88.5% of the total sales
in the previous fiscal year and is the driver of sales growth (shown by
fiscal year on Figures 2 and 3). Change in operating profit by businesssegment is shown below on Figure 4. Except during the businessrestructuring phase of FY 2017 and FY 2018, operating profit has kept
being posted in both platform businesses on a full-year basis.

【 Figure 2 】FY 2019 Full-Year Sales Breakdown
by Business Segment【 Figure 3 】Change in Full-Year Sales by Business
Segment (unit: million yen)
Marketing Platform

EC Platform Business

EC Platform

11.5%
253

526

477

Marketing Platform Business

539

465

422
666

88.5%

FY 2013

883

911

1,074

1,255

FY 2014

FY 2015

FY 2016

FY 2017

275

1,530

FY 2018

1,951

FY 2019(Ref) Figures 2-4 were prepared by Alpha-Win Research Dept. from the Company’s securities report, financial resultssummary, and financial results briefing materials.

【 Figure 4 】Change in Full-Year Operating Profit by Business Segment(million yen)

Marketing Platform

250

EC Platform

200
150
100
50
0
-50
-100
-150
FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

FY 2019

8/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18◆Restructuring and Strengthening of Business Portfolio

w Making progress withthe restructuring ofbusiness portfolio.
Concentrating businessresources on AD EBiS of
the marketing platformbusiness.

Since FY 2016, the Company has been actively restructuring andstrengthening its business portfolio, focusing on its core business (shifting
to AD EBiS in the marketing platform business) and separating its noncore business (EC platform business) (Figure 5). In the marketing
platform business, the Internet advertising effect measurement system AD
EBiS accounts for a little less than 80% of the total sales (last fiscal year’s
results). Going forward, the Company plans to concentrate businessresources on this product and related products to develop this business asan even greater driver of growth. The Company plans to consequently
acquire an extremely large share in the market.

【 Figure 5 】Business Restructuring and Segments(business segments that will be kept are highlighted)
Business Segment

Main Product/Service
1. AD EBiS
2. THREe(1) Marketing Platform 3. DMP
4. AdRepo
5. ADPLAN
1. EC-CUBE(2) EC Platform

2. SOLUTION → terminatedBusiness Subcategory

ChangeNote

Withdrawal planned (March 2020)
Transferred from SOLUTION; planned for shrinkage and withdrawal
Acquired (August 2018)
To be acquired (January 2020)

Parentcompany

Transferred to EC-CUBE Co., Ltd., on 1/1/2019

EC Outsourced Dev.
(DMP)

Transferred to SAI Co., Ltd. (equity method) and Radical Opti Co., Ltd. (nolonger equity method as of last FY)
Transferred to SOLUTION

Consolidated
Equity method(Ref) Prepared by Alpha-Win Research Dept. from the Company’s securities report, financial results summary, financial results briefing
materials, and interview.

(4) Cross-Device Function: A
function to visualize user
behavior across devices,
applications, and browsers(5) DMP: A method by whicha corporate client analyzes its
websiteSpecifically, in recent years, the Company has been conducting thefollowing strengthening and restructuring of business.
(i) Strengthened the products of the marketing platform business.
Offering products with enhanced capabilities by adding various
optional functions to the AD EBiS such as the artificial intelligence
functions Cross-Device Function4 (patent-pending; provided startingin August 2018) and Customer Journey Analysis Function(visualizes and evaluates the user behavior history; patent obtained).
(ii) Formed 31 new alliances with other companies against the target of30, which had been a high-priority target of the Company’s
development strategy (FY 2018). As a result, with the utilization of
external resources, the Company was able to obtain most of what isneeded for the three components – measurement, analysis, andutilization – crucial to the Marketing Robot.
(iii) Acquired EVERRISE CO., LTD.'s automatic report creation tool
AdRepo business in August 2018 and incorporated it into themarketing platform business.
(iv) Restructured the EC platform business, transferring the EC
outsourced development business (actual sales were Y246 million in
FY 2016) to its two equity-method subsidiaries and withdrawing
from the outsourcing business. Note that one of those subsidiaries,
Radical Opti Co., Ltd., is no longer an equity-method subsidiary asof last fiscal year.
(v) Also in EC platform business, the Company transferred its ECCUBE division to EC-CUBE Co., Ltd., its new consolidated
subsidiary, on January 1, 2019, by a company split-up. Began
providing the new version, EC-CUBE 4 (October 2018).
(vi) Similarly, the DMP5-related business of the EC platform business(last fiscal year's sales were Y51 million) was transferred to the
9/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18(6) Paid-listing ads: Also
referred to as searchadvertising. A method of
displaying ads related to
keywords searched or browsed
by Internet users. Effectively
displays ads in the users’ areasof interest. A highly effective
method for corporate
advertising.

Company's marketing platform business in the previous fiscal year
since it is closely related to AD EBiS.
(vii) Reinforced human resources to prepare for growth. From FY 2014
to FY 2019, the number of employees was increased from 68 → 71
→ 98 → 122 → 144 → 151 (the number of employees at theend of each fiscal year) through new-graduate and mid-career
recruitment. However, last fiscal year, the net increase in the numberof employees slowed down as the Company faced difficulties inrecruiting talented individuals amidst a tight labor market. Goingforward, it plans to continue to hire new employees at a stable pacein order to accelerate its growth. While the Company used to focus
on hiring sales representatives for strengthened sales and engineers
for software development, in recent years, it has shifted toward rolesin the area of customer success in an aim to enhance customer value.
This fiscal year, the Company plans to increase its staff through therecruitment of 11 new graduates as well as through mid-career
recruitment, aiming for about 160 employees by the end of the fiscal
year.
(viii) Decided to withdraw from the THREe business (an operating
platform for paid-listing ads6) (withdrawal planned at the end of
March 2020).
As a result of the above actions, since the second quarter (Q2) of FY 2019,
the Company (parent company) has been concentrating on the marketing
platform business. However, since EC-CUBE was transferred to a
consolidated subsidiary, on a consolidated basis, the Company’s businessis classified into the same two segments as before.

◆ Details on the Business Contents（1）Marketing Platform Business
The transition in the sales and profit of the marketing platform businessby fiscal year is shown below.

【 Figure 6 】Change in the Sales of the Marketing Platform Business and Its Operating Profit
Sales(million yen)
Marketing Platform
1. AD EBiS
2. THREeFY 2012parent545
499
46

3. (DMP)4. AdRepo
5. ADPLAN
Segment's O.P.
Segment's O.P. Margin-61-11.2%FY 2013
FY 2014
FY 2015
FY 2016
FY 2017
FY 2018
FY 2019parentconsolidated consolidated consolidated consolidated consolidated consolidated % of total
666
883
911
1,074
1,255
1,530
1,951
88.5%
567
722
822
1,012
1,200
1,402
1,747
79.3%
81
161
89
62
54
43
28
1.3%
84
51
2.3%
124
5.6%
(to be acquired)
-1
142
214
210
153
-121
46
-0.1%
16.1%
23.5%
19.5%
12.2%
-7.9%
2.4%

(Ref) Prepared by Alpha-Win Research Dept. from the Company’s securities report, financial results summary, financial results briefing
materials, and interview. Includes estimates.

w AD EBiS is the Company’s（注）サブスクリプションモデ
mainproduct as well as
ル：提供するサービスに対して
growthdriver that accounts
利用期間に応じで対価を支払う
forapproximately 79% of方式Company’s total sales
the(FY 2019).

The marketing platform business currently consists of four businesses: (1)AD EBiS (Internet advertising effect measurement system), (2) THREe(in-house operation platform for paid-listing ads), (3) DMP, and (4)AdRepo. By combining THREe, which enables automatic optimization
and automatic ad submission, and AD EBiS, which measures andanalyzes the effectiveness of Internet advertising, the Company provides
a one-stop platform for the three elements of marketing automation – from
effect measurement to optimization to purchase/ad-submission. If
10/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

business acquisition is conducted as planned, then (5) ADPLAN businesswill join this segment starting this fiscal year (see page 32 for details).
Increasingly diversified and dispersed consumer behavior of today’s
Internet society has led to a more sophisticated and complicatedmarketing and advertising, making technology-based operation more
important. The Company’s characteristic or strength is its ability to offer,
at a reasonable price, software that can accurately evaluate and utilize theeffect of Internet ads through various functions (ad measurement, analysis,
evaluation, etc.) and analysis methods, for which it can also provide
excellent support.

w AD EBiS is an Internet
advertising effectmeasurement system.
w Provides service as a SaaS,
based on the subscriptionbased business model.
(7) Impressions: The numberof times an ad was displayed.
(8) Clicks: The number oftimes an ad was clicked.
(9) Conversions: The numberof times that users, who visited
the site and clicked on an ad,
took actions that the advertiser
considers as achievement, suchas product purchase,information request, andinquiry.
(10) Subscription-based
business model: A businessmodel where users pay for theprovided service according to
the duration of use.
w Number-one share in thedomestic market for four
consecutive years(i) AD EBiSAD EBiS is the Company’s originally developed core product and is an
Internet advertising effect measurement system that allows the collective
management, effect measurement, analysis, and visualization of theeffect of Web ads, etc., to help assess the cost effectiveness of ads. It
comprehensively provides a one-stop marketing environment for
maximizing sales or acquiring prospective customers through proactive
marketing by “using” marketing data accumulated by the “effectmeasurement” function. AD EBiS makes possible the visualization ofmarketing strategy (evaluation, improvement, etc.), letting advertisers
measure and understand the series of behavior from the number ofimpressions7 of the ads displayed on PCs, smartphones, etc., and thecontacts, interests, and reactions toward the advertiser’s ads to thenumber and history of clicks8 for the paid-listing ads and the final
purchase made at the advertiser's website (the number of conversions9).

The service is provided as a SaaS under a subscription-based businessmodel10 (described in detail on page 15).
Since its release in 2004, AD EBiS has been installed by more than 10,000
users (as of August 21, 2019) and has had the largest share in the domestic
market for Internet advertising effect measurement systems for four years
in a row. Moreover, according to the Company’s financial results briefing
materials, the share seems to be increasing year by year from 36.0% in
FY 2015 to 40.0% in FY 2016, 42.9% in FY 2017, and 44.2% in FY 2018
(forecasted value).
It is a B2B business with its major customers being WOWOW, Lion,
MIKI HOUSE, Aiful, Noevir, Zwei, Z-kai, Yazuya, Setagaya
Shizenshokuhin, etc.
AD EBiS allows users to add a variety of optional functions (CrossDevice Function, access history analysis function, etc.) to the basic
function as necessary. In the past, its pricing plan was a pay-as-you-go
based on multiple parameters. However, starting in June 2018, theCompany simplified the plan and set up a pricing table with a flat rate fordifferent upper limits to the monthly number of clicks and PVs (pageviews), much like a mobile phone pricing plan. New contracts havealready been transferred to the new pricing system. In the new pricing
system, the implementation-support program and telephone support are
packaged together with the basic functions. Three main plans of S, M, and11/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

L (monthly basic charge: 100, 200, and 300 thousand yen, respectively)
are offered. Options (various external linkage functions such as reporting,etc.) can be added to any one of these plans.
As a reference, sales of AD EBiS are determined by average unit price ×
number of active users. Both figures are important indexes (KPIs) not
only for this business but also for the Company as a whole.

w AD EBiS’s number ofaccounts and average unit
price are the KPIs.
w With the transition to the
packaged plan with new
pricings, the unit pricerose significantly.

w A net decrease in AD
EBiS’s number of active
accounts. Cancellation
rates need to be improved.

The monthly average unit price (average unit price as of the end of the
final month of each quarter) rose in FY 2019. In the order of last fiscal
year’s Q1 (Oct-Dec 2018) ⇒ Q4 (Jul-Sept 2019), the price changed
from Y86,621 (+2.0% QoQ) → Y98,042 (+13.2% QoQ) → Y102,262(+4.3% QoQ) → Y107,143 (+4.8% QoQ) (Figure 7). Last fiscal year,
the simple average of the prices at the end of each quarter was Y98,517,
which is significantly greater than the Y78,938 of the year before theprevious by Y19,580 or 24.8%, thanks to the new pricing system. Also,
since October 2018, the average unit price of new contracts for AD EBiS
has been exceeding Y100,000. The rising trend in average unit price iscontinuing in Q1 of this fiscal year.

Meanwhile, the number of active accounts had been increasing until theend of Q1 FY 2019 (end of Dec 2018) based on end-of-the-quarter figures,but it has been declining since then for three quarters in a row. Contrary
to the trend for unit price, the number of active accounts decreased asfollows, in the order of last fiscal year’s Q1 (Oct-Dec 2018) ⇒ Q4 (JulSept 2019): 1,569 (+3.4% QoQ; so far the peak value) → 1,516 (-3.4%
QoQ) → 1,433 (-5.5% QoQ) → 1,425 (-0.6% QoQ) (Figure 8). In theprevious fiscal year, the simple average of the end-the-quarter numbers
was 1,486, only a slight increase from the 1,476 of the year before theprevious by 10 accounts or +0.6%, due to the new pricing system. Thisdecreasing trend has been continuing into this fiscal year; we need toevaluate when this decreasing trend will stop.
The rise in unit price and decline in the number of accounts are due to theincrease in cancellations by low-priced contracts and contracts made via
agencies since March 2019 when the existing customers' contracts weretransferred to the new pricing system.

w 20% sales growth rate
maintained.

Annual sales of the AD EBiS have been continuing to grow at a rate ofabout 20% YoY, since the rise in the unit price has been more than enoughto complement the slow growth in the number of accounts.
However, going forward, as the number of high-priced new customers
increases and new functions and services (including the increase inrevenue from providing option services through external partners) areadded, the unit price and the number of active accounts are expected toshow a trend of net increase.

12/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18【 Figure 7 】Change in the Average Unit Priceof AD EBiS(Y)

107,143

110,000【 Figure 8 】Change in the Number of Active

Accounts of AD EBiS(# of accounts)

1,600

1,518

1,500

100,000

1,425

1,400
90,00084,9181,300

80,0001,200
Change inpricing system

Q4→Q1
seasonal
variability

70,000

1,100
1,000

60,000900
50,000800
700

40,000Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FY 2015

FY 2016

FY 2017

FY 2018

FY 2019

Q1

Q2

Q3

FY 2015

Q4

Q1

Q2

Q3

FY 2016

Q4

Q1

Q2

Q3

FY 2017

Q4

Q1

Q2

Q3

Q4

Q1

Q2

FY 2018(Ref) Figures 7-8 were prepared by Alpha-Win Research Dept. from the Company’s securities report and financial results briefing materials.

w THREe's sales are verysmall. The Company has
decided to withdraw
from this business inorder to concentratebusiness resources on
AD EBiS.
(11) Human-like Portfolio: A
bidding function thatalgorithmizes the bidding
strategy of the operator. If
budget and efficiency target
are set, it will automatically
perform optimal bidding as if
operated by a person.

w Moved the DMP
business from the EC
platform business. Plans
for future withdrawal.

Q3

FY 2019(ii) THREe
THREe is also an originally developed product – an operation platform
for paid-listing ads. Of the many forms of Internet advertising,programmatic advertising is especially rapidly growing and is becoming
more complicated and advanced. Consequently, manual operation is
becoming difficult (about 70% of Internet ads are programmatic ads).
Using THREe, it is possible to analyze big data accumulated through AD
EBiS or other various media and automatically optimize and submit ads.
By enabling fully automatic operation (Human-like Portfolio11),
including the optimal adjustment of bid unit price and addition of
keywords, it can shorten the amount of time needed for operation andmanagement and realize optimization. It has been used by more than
5,000 users. THREe is also provided as a SaaS.

However, THREe accounted for merely 1% (approx.) of the total sales in
FY 2019. The Company had planned to shrink this business to concentratebusiness resources on AD EBiS, but it has now decided to shut down theservice at the end of March 2020.
(iii) DMP Business
The DMP business was transferred from the SOLUTION division of theEC platform business to a division of the marketing platform business inthe fiscal year before the previous since it is closely related to AD EBiS.
DMP is an abbreviation for “Data Management Platform.” The private
DMP provided by the Company is a method by which a corporate client
can analyze its website. For instance, a client can investigate and verify
the behavior history and stay time of users who visit its website. The
Company has several major clients for this business including Lion. Last
fiscal year, this business was only about 2% of the total sales. As with
THREe, the Company intends to incrementally scale down this businessand eventually withdraw from it.
13/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Q4

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

w Actively engaged in thedevelopment of the
AdRepo business,
hoping to create synergy
with AD EBiS(iv) AdRepo BusinessIn August 2018, the Company acquired the AdRepo business, anautomatic report-generation tool for programmatic advertising, and has
been fully developing this business since the beginning of last fiscal year.
Annual sales for last fiscal year were Y124 million. By acquiring newcustomers and creating synergy with AD EBiS, the Company plans todevelop this business as its growth business (we estimate that sales forthis fiscal year will be about Y140 million and the growth rate will be
about 10%). Its domestic market share is third place, following ATOM
(TechLoCo Co., Inc.: not listed) and glu (ATALA LLC: not listed, apartner of the Company).

AdRepo is a tool to fully automate the generation of reports and is a cloudservice developed to reduce the workload of advertising agencies increating reports for programmatic ads. By collaborating with key
advertising platforms such as Google AdWords, Yahoo! Promotional Ads,
Facebook Ads, and FreakOut, it can automate data aggregation and report
generation for programmatic ads. In addition, by strengthening its
coordination with AD EBiS, AdRepo enables the integrated managementof all data from data measurement to reporting and the automation ofdigital marketing work.
w The EC platform business
now consists of EC-CUBE
alone.

（2）EC Platform Business
Until FY 2018, the EC platform business had been composed of thefollowing two divisions: (i) EC-CUBE and (ii) SOLUTION (Figure 9).

【 Figure 9】Change in the Sales of the EC Platform Business and Its Operating Profit
Sales(million yen)
EC Platform
1. EC-CUBE
2. SOLUTION

FY 2012parent
323
150
174

(DMP)
Segment's O.P.
Segment's O.P. Margin

98
30.5%

FY 2013
FY 2014
FY 2015
FY 2016
FY 2017
FY 2018
FY 2019parentconsolidated consolidated consolidated consolidated consolidated consolidated % of total
422
477
526
539
465
275
274
12.4%
207
245
230
219
208
254
274
12.4%
214
232
296
319
257
20
0
0.0%
104
0.0%
75
107
136
38
-60
22
39
17.8%
22.5%
25.8%
7.1%
-12.9%
8.2%
14.2%

w アドレポの顧客は、広告代理(Ref) Prepared by Alpha-Win Research Dept. from the Company’s securities report, financial results summary, financial results briefing
店。自動化により運用型広告
materials, and interview. Includes estimates.
レポート自動作成が可能。

(12) Open source software:
The source code, which isequivalent to the blueprint ofsoftware, is made available
free of charge, letting anyone
improve and redistribute it.
(13) ASP: A service that rents
applications to customers
through the Internet.

(i) EC-CUBE
EC-CUBE is an open source software12 platform whereby users can create
and operate EC (e-commerce) websites on their own. The Company
provides EC-CUBE as free packaged software for web design tocompanies who wish to begin selling and providing products and serviceson the web. It is characterized by both the user-friendliness as an ASP13
and the convenience as a software enabling development – companies candirectly and freely customize the program source. It has the largest sharein the domestic market. EC-CUBE has features such as low cost, highcustomization (it can be changed according to the needs of users), anduser-friendly interface, and has become a standard platform.

14/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18(14) Freemium Model:“Freemium” is a coined wordthat combines “free” and“premium.” Refers to abusiness model that generates
revenue by offering basic
services free of charge whilecharging fees for moresophisticated or speciallyadded related services.

w The EC-CUBE businesshas been transferred to a
consolidated subsidiary.

w The SOLUTION business
was transferred toaffiliates accounted for by
the equity method.

w The Company’s main
business is based on a
subscription-based
business model. It lets theCompany acquire profit
continuously and stably bycharging fees for every
certain period of use.

w 新規契約締結直後は赤字だが、時間経過とともにコストを回収し利益を着実に積み上げていくモデル。

In EC-CUBE, in return for offering the software for free, the Company
has set up a Freemium Model14 where revenue is earned from peripheralservices. Through this system, the Company makes profit from royalties
from official partners in the Internet business (account settlement agent
business, hosting businesses, etc.), function-addition fee from plug-ins(program to add functions to software), sales revenue from commercial
license, etc. Other sales related to sales promotion and events are also
included in the net sales.

However, as part of the restructuring of the business domain of theCompany’s group, the EC-CUBE business was transferred to the 100%
consolidated subsidiary, EC-CUBE Co., Ltd., on January 1, 2019.
Because it is a fully consolidated subsidiary, there will be no effect on the
consolidated financial results. The Company plans for the subsidiary tofurther expand and develop the business as a separate corporate entity, forinstance, through partnerships with other companies. The development of
the new version, EC-CUBE4, has been completed, and it has been
provided since October 2018. With the release of the cloud version, theincrease in account settlement agent fees, etc., performance has been
improving steadily.
(ii) Former SOLUTION businessAlthough the SOLUTION business had been composed of several
businesses, with the restructuring of business, its main EC outsourced
development business had been transferred to affiliated companies ofwhich the Company owns 20% of shares each (reflected under nonoperating profit/loss as profit or loss accounted for by the equity method).
Since last fiscal year, this business no longer exists in the segments(consolidated sales categories).

◆ Subscription-Based Business Model
The marketing platform business, which accounts for approximately 90%of the Company's sales, is mostly based on the SaaS (cloud), flat-ratebilling model. It is a subscription-based business where users pay apredetermined fee for the service contents or the use of system services
such as AD EBiS during a certain contract period, such that the Company
can continue to earn revenue until contract cancellation. Althoughexpenses including marketing and sales expenses for customer acquisition
and R&D expenses will precede at the beginning of a new contract, overa period of about three years (the period from the start to the end of atransaction with a customer), revenue can be accumulated continuously
to increase the life time value (LTV: how much cumulative profit isgenerated within a customer’s lifetime). Therefore, it is a business modelthat enables stable growth.
Figure 10 on page 16 shows a model for the change in the Company's
cumulative profit and loss over the average contract period of three years
under the subscription-based business model. In the month that a newcontract is made, all of the expenses are recorded, so that an overall loss
is recorded for that month. However, since the Company then earns analmost fixed amount of sales revenue every month starting in the monthof contract, the cumulative break-even point (zero) is reached after eightmonths. From the ninth month, the cumulative profit and loss (LTV) turns
15/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

into a surplus and accumulates until the 36th month when cancellation is
expected. In other words, it is a model with a time lag; when the numberof contracts is increasing at an accelerating speed, there would seem to be
little contribution to profit in the first year but profit will then accumulate
on a continual and stable basis from the second year until the end of thecontract. The Company considers the upper limit of the initial cost to beabout 30% of the LTV (the final cumulative profit; the rightmost end of
the graph in Figure 10) and controls the initial cost related to new contract
acquisitions accordingly.

【 Figure 10 】Model for the Change in LTV per Customer (cumulative profit and loss)

LTV

 for
 Change


Model
in LTVper
Customer

1

2

3

4

5

6

7

8

9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

TimeFirst year

Investment phase
Expenses for customer
acquisition precede

Second year

Third year

Return phase

After investment payback, profit steadily accumulates over thelong term(Ref) Prepared by Alpha-Win Research Dept. from the Company’s financial results briefing materials

16/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

3． Shareholder Composition

w The shareholding ratio of
individuals is extremely
high at about 82%.

◆ Change in Composition by Shareholder TypeRegarding shareholder composition by shareholder type as of the end of
September 2019 (Figure 11), compared to the year before, the proportionof “individuals, etc.” has decreased from about 94% to about 82% of thetotal while “financial institutions, etc.” has increased from about 1% toabout 9% and “overseas corporate entities, etc.” has increased from 0.6%
to 5.9%.

【 Figure 11 】Change in Shareholder Composition by Shareholder Type (unit = %)
(%)

100
95
Individuals, etc.

90
85
80

~

10
9
8
7
6
5
4
3
2
1
0

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

FY 2019

Financial institutions,etc.
Overseas corporate
entities, etc.
Other corporate entities
Financial instruments
business operators
FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

FY 2019

at year-end(Ref) Prepared by Alpha-Win Research Dept. based on the Company’s securities report, etc.

◆ Major Shareholder Composition
w There have been no largechanges to the top major
shareholders. Persons
affiliated with theCompany, including
active and former
executive officers and theemployee stock
ownership plan, own
approx. 60% of theshares.

The major shareholders as of the end of September 2019 are shown on
Figure 12. The following is supplementary information. When data overpast periods are compared, we can see that the profiles of the major
shareholders have not significantly changed.
・ The largest shareholder owning greater than 40% of the shares is
Susumu Iwata, the current president, founder, and owner.
・The second and third largest shareholders are both former executive
officers of the Company (they have been gradually selling their shares).
The shares of the former and present executive officers of the Company,
plus the employee stock ownership plan at eighth place, amount togreater than 60% of the total shares.
・The fourth, fifth, and sixth largest shareholders are custodians including
trust banks, so the final investors’ names and purposes of investment
are unknown. They have been buying more shares and climbing up the
ranking of shareholders. Also, we have noticed that the “MHAM
Emerging Growth Stock Open” portfolio (also called “J-Frontier”)
managed by Asset Management One included 189.5 thousand shares of
the Company as of February 25, 2019 (equivalent to about 3% of
YRGLM Inc.’s outstanding shares; average price of the shares in the
17/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

portfolio = Y1,277). Since then, J-Frontier has purchased more shares,
submitting the Report of Possession of Large Volume (the “5%-rule”
report) on July 31, 2019, with 328,400 shares (5.15% of outstanding
shares). Although we could not clearly identify this investment as amajor shareholder, it is highly likely that this investment is being
conducted under the names of the trust banks.
・The tenth largest shareholder is Hakuhodo DT Media Partners Inc., theCompany’s distributor.
・The purposes and other details of UEDA YAGI TANSHI Co., Ltd., andRakuten Securities, Inc., are unknown.
・Currently, there seems to be no obvious activist-like activity among theinvestors.
At the end of September 2018, the number of treasury shares owned by
the Company was 983 shares. The Company then bought back some ofits shares in February and March of 2019 (a total of about Y100 million
with an average stock price of Y1,363), increasing its treasury shares. Asof the end of September 2019, the Company owned 81,423 treasury shares(equivalent to 1.28% of outstanding shares). The Company intends to use
the treasury shares for M&A and alliance strategies as well as stock-based
compensation for its executives and employees in the future.

【 Figure 12 】Major Shareholders’ Status
Unit for number of shares in the table: thou. shares

Susumu Iwata (president and CEO)Hiroichi Fukuda (former executive vice president)
Kanako Mataza (former director and senior executive officer)
Japan Trustee Services Bank, Ltd.
GOLDMAN SACHS INTERNATIONAL
Trust & Custody Services Bank, Ltd.
UEDA YAGI TANSHI Co., Ltd.,YRGLM Employee Stock Ownership Plan
Rakuten Securities, Inc.
Hakuhodo DY Media Partners Inc.
BNY GCM CLIENT ACCOUNT JPRD AC ISG (FE-AC)
Tomonori Yamada (indiv.)
Katsuyuki Ito (indiv.)
Akiko Takashima (indiv.)
Kenichiro Wade (former outside director)
Yoshio Takayama (indiv.)
Kayoko Nagano (indiv.)
SEPTENI CO., LTD
Matsui Securities Co., Ltd.
Japan Securities Finance Co., LTD
Yoichi Nishikawa (indiv.)
Akio Shiojiri (former director: audit committee member)(Number of treasury shares)(Ratio of treasury shares over all issued shares)

End of Sept.
2015

End of Sept.
2016

End of Sept.
2017

2,851
1,071
415
―
―
―
―
76
―
60
―
―
―
―
39
―
―
62
―
30
34
26
0

2,817
1,021
415
59
―
―
―
39
―
60
―
―
―
―
29
―
―
62
36
35
―
―
0

2,817
1,021
352
―
―
60
―
48
―
60
60
28
―
―
29
28
24
―
―
―
―
―
45
0.0007%

End of Sept.
2018

2,819
961
354
60
―
29
―
69
72
60
―
―
52
29
―
―
―
―
―
―
―
―
983
0.0155%%End of Sept.
2019

2,822
801
353
333
284
123
113
68
64
60
―
―
―
―
―
―
―
―
―
―
―
―
81,423
1.2777%←Shareholding % ←Ranking

44.8
12.7
5.6
5.2
4.5
1.9
1.8
1.0
1.0
0.9

1
2
3
4
5
6
7
8
9
10

(Ref) Prepared by Alpha-Win Research Dept. from the securities report, etc.

18/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

4． ESG

There have been no large changes to the ESG policies.

◆ Environment
The Company’s business is not the kind that harms the environment. It
aims to conserve energy by saving electricity, etc.

◆ Societyw Actively engaged in CSR.
Supporting future
entrepreneurs, nextgeneration humanresources development,
and women working in
the technology industry.

The Company is actively engaged in CSR (corporate social responsibility:
responsibility of a company to voluntarily contribute to society throughbusiness activities from an ethical point of view) and has been undertakingsocial initiatives based on the following view: “We believe that, regardlessof the size of the company, it is the minimal responsibility as a corporate
citizen to undertake social initiatives to the extent that is reasonably
possible for each company. We believe that such activities will promote acompany’s growth. By putting this corporate philosophy into action, we
will aim to heighten the value that we provide to our stakeholders including
our customers, shareholders, employees, and the local community.”
・“Osaka to the World” – regional development activities: Osaka Startups– providing a support program for startup companies and for those aiming
to start a company in Osaka.
・“Promotion of Women's Active Participation in Society” activities:
Girls in Tech Japan – supporting the improvement of the status of women
working in the technology industry based on the philosophy of Girls in
Tech (GIT: a nonprofit organization launched in 2007 in San Francisco,USA).
・ “Next-Generation Human Resources Development” activities:
providing opportunities for students to learn the programming skills
necessary for leading-edge technologies through actual job experience inorder to foster a young generation of talents.
In addition, the Company holds a general employee meeting twice a year
as well as holding monthly company parties where all employees gather
on the last Friday of each month. It also has clubs. Through these activities,
the Company provides opportunities for employees to exchange
information and strengthen their relationships.

(15) Great Place To Work®
Institute: An organization that
conducts surveys and presents“Great Places to Work” inabout 50 countries around theworld every year.

The Company also puts efforts into enhancing unique employee benefit
programs, such as the “Mountain-Retreat” Leave System where every
employee must take nine consecutive days of leave every year, theTraining Leave Program which allows employees to take leave for up to
two years for self-development, and the LOCK-Off which is a facility (ahouse) for employees to communicate with each other and learn freely.
Because of these efforts, the Company has been awarded with thefollowing awards:· Great Place to WorkⓇ15 Best Workplaces Ranking: Best Companies
Award (awarded for seven years in a row; a total of eight awards). Since
the Company has grown in size, the award category has changed from
19/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18“small-sized companies (25-99 employees)” to “medium-sizedcompanies (100-999 employees),” but it again received an award this year.
· Selected by the Ministry of Economy, Trade, and Industry as a Driving
Company for the Regional Future for Fiscal Year 2017
· The 2nd GOOD ACTION contest sponsored by Rikunabi NEXT: Best
Action Award· The 8th Deloitte Technology Fast 500 Asia Pacific Award· The 7th Japan Technology Fast 50 Award◆ Governance
The Company has adopted a company system with an audit andsupervisory committee and delegates decisions on executions ofimportant business matters to directors to enable quick decision-making.
In addition, by incorporating an executive officer system (six officers – a
new officer joined since last fiscal year), the Company aims to improve
management efficiency and speed by separating business execution andsupervision.
Of the five directors, three are outside directors who are also audit andsupervisory committee members (from Kobe Steel, Ltd. and MUFJ Bank,
Ltd.; certified public accountants). There is no woman among thedirectors or executive officers.
In addition, as a transfer-limited and stock-based compensation, theCompany has a program where shares are allotted to directors (including
directors who are audit and supervisory committee members), executive
officers, employees, etc., as an incentive.
Also, the Company has not adopted any anti-takeover measures.

20/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

5． History of Growth◆ Company History

w Founded by president
Iwata in 2001

President Susumu Iwata traveled around the world as a backpacker during
his college days. After returning home, he started a restaurant but
withdrew and then started a travel-related business. Through this business,he acquired the skills and know-how for Internet and web design. He thenindividually started a web design business. This business grew and, inJune 2001, when Mr. Iwata was 21 years old, he founded the Company.
After foundation, upon recognizing the business potential, interactivity,
and real-time nature of the Internet, as well as the importance of data
mining, he began to make a transition to a web integration business.

w Developed and launchedunique products that canbe differentiated fromother companies

In September 2004, the Company released the EBis (predecessor of AD
EBiS), an originally developed Internet advertising effect measurement
system based on the concept of “From ‘a Website to Show’ to ‘a Website
to Use.’” Then, in September 2006, it released Japan's first open platform
software EC-CUBE, and then released the paid-listing ad management
service THREe in October 2012. Amidst the rapid increase of Internet ads
and the related market needs for advertising effect measurement and EC,
the Company pioneered in the creation of unique products, steadily
expanding its business by cultivating a new market. It became listed on
the TSE Mothers market in September 2014.

w Became listed on Mothers
in September 2014

◆ Transition in Past Financial Results
w In FY 2015, record-highprofit was recorded. Alltime highs are being
consecutively achieved
every year for sales.

w Since FY 2016, theCompany has beenprioritizing businessrestructuring and upfront
investments, focusing on
future business growthrather than profit. A net
loss was recorded in FY
2018.
w In the previous fiscal year

(FY 2019), large sales
growth led to an
improvement fromoperating loss to profit
and recurring loss to
profit.

From FY 2010 to FY 2013, during which account settlement wasnonconsolidated, the Company increased sales for fourth consecutive
fiscal years. From FY 2014, when consolidated account settlement began,
record-high sales were achieved for five consecutive fiscal years up to FY
2019 (from what is available in the disclosure material, we can see thatsales have been hitting record highs for at least nine consecutive fiscal
years). During this period, sales increased by about three times from about
Y730 million to about Y2.2 billion. This success was brought by the rapid
expansion of the marketing platform’s AD EBiS business and the steady
growth of the EC platform’s EC-CUBE and SOLUTION businesses.
Meanwhile, regarding profit, the Company had sustained profitability
both on a nonconsolidated and consolidated basis until FY 2017. In FY
2015, a record-high operating profit of Y350 million and a record-highnet profit of Y231 million were achieved. However, since FY 2016, theCompany’s focus on business restructuring and upfront investment has
increased the expenses, leading to a consecutive decline in profit despite
increasing sales. In the fiscal year before the previous or FY 2018, theCompany recorded a net loss (of Y88 million) for the first time since
becoming listed on the market (see Figures 13 and 14) due to upfront
investments mainly in hiring more employees for development and sales.
In FY 2019 (last fiscal year), the rise in the average unit price of the coreproduct AD EBiS helped increase sales by 22% YoY, resulting in an
improvement from operating loss to profit and recurring loss to profit for
the full year. Details on the FY 2019 results will be described later.

21/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18【 Figure 13 】Transition in Past Financial Results (unit: million yen, %)

2,800

30.0%

Sales (left axis: million yen)

Recurring profit (left axis: million yen)
25.0%

Recurring margin (right axis: %)

2,300

20.0%
1,800

15.0%

1,300

10.0%
5.0%

800

0.0%
300

-5.0%

-200

-10.0%FY 2010

FY 2011

FY 2012FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

FY 2019(Ref) Prepared by Alpha-Win Research Dept. from the Company’s securities report and financial results summary(Note) Consolidated results starting in FY 2014; nonconsolidated prior to this point.

【 Figure 14 】 Change in the Number of Employees (unit: persons)Development

144

S&M
Support

122

20

98

18

21

13

15

15

25

Administration

71
11
10
12
38
FY 2015

29

151
21
29
35

14

56

64

FY 2016

FY 2017

74

66

FY 2018

FY 2019(Ref) Prepared by Alpha-Win Research Dept. from the Company’s financial results briefing materials

22/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

6． Business Environment

w The Internet advertisingexpenditure increased byabout 4.6x from 2005 to
2018. The average annual
growth rate (simple
average) is high at about
12.8%.

◆ Trends in Japan’s Advertising Industry
Total advertising expenditure in Japan in 2018 (calendar year; the same
applies to this entire chapter) was about Y6.5 trillion. The market has been
flat over the long term. However, since 2012, market growth has been
observed for seven years in a row, indicating that the market as a wholeis on a slight upward trend (the annual growth rate, based on a simple
average, is 1.9%). This growth was brought by the growth of the Japanese
economy supported by factors such as strong earnings of companies andimprovement in employment conditions. Internet advertising expenditureis also driving the growth of the overall advertising expenditure. Of thetotal advertising expenditure, Internet advertising expenditure (total of
medium cost and production cost) was about Y1.76 trillion (+16.5% YoY,
growing at a double-digit rate for five consecutive years), which is about
26.9% of the total (ref: Dentsu Inc.’s “2018 Advertising Expenditures inJapan”). Its share in the market is steadily increasing by 1-3% every year,
growing to a level close to the share of 29% for television advertising, thelargest among the four types of mass-media advertising (newspaper,magazine, radio, and television). Internet advertising expenditure hasgrown by about 4.6 times from 2004 (point of comparison, set at 100) to
2018, rapidly increasing at an average annual growth rate of about 12.8%(Figure 15).

【 Figure 15 】Change in Advertising Expenditure by Medium(index value: year 2005 set at 100)(Ref) Prepared by Alpha-Win Research Dept. from Dentsu Inc.’s “2018 Advertising Expenditures inJapan” (published every February)w Internet advertising is
expected to continue its
double-digit growth in the
future.

In fact, Internet advertising expenditure is expected to continue to growat a double-digit rate. According to the data on the number of Internet
users and population penetration rate disclosed by the Ministry of Internal
Affairs and Communications, 83.5% of Japan's population already uses
the Internet and the Internet has become a necessity of life. In the near
future, Internet ads are highly likely to become the most influential
advertising medium. Since more people are expected to use the Internet
23/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

as technology becomes more advanced in the future, demand for Internet
advertising is expected to grow.
In particular, of the Internet advertising expenditure, programmatic
advertising expenditure which is highly relevant to the Company's
business amounted to about Y1.2 trillion (+22.5% compared to theprevious year; approximately 70% of the total Internet advertisingexpenditure) and is growing at a higher rate than the average rate forInternet advertising. Since programmatic advertising makes possible thecontrol of budget, delivery period, and delivery method and allows users
to obtain data in real time, for the time being, the growth of this market is
expected to help keep the business environment favorable for theCompany in developing its business based on Internet advertising effectmeasurement and utilization.

◆ Competitors(16) Google Analytics: A
website access analysis tool
provided by Google targeting
SME users. Analysis is only
conducted within Google’s
website, and mostly the freeversion is popular. The highspec paid version seems to bein the high-price zone.
(17) Adobe Analytics: An
access analysis tool that is
installed in many large
websites. It can analyze
complicated and large data, ishighly customizable, and has
multiple and high-quality
functions, but the price is high.

There seems to be no Japanese listed company that could be directlycompared with the Company. Regarding advertising effect measurement
and analysis tools, the competing products are Google Analytics16 andAdobe Analytics17 widely used by domestic SMEs (small- and mediumsized enterprises), ADPLAN (implemented by a cumulative total of over
1,500 companies; the Company plans to acquire this business) offered by
the listed company OPT Holding Group (TSE First Section 2389;
hereinafter “OPT HD”), and Web Antenna (implemented by more than
600 companies, including major companies as well as venture companies)
provided by the unlisted company beBit, Inc. However, the othercompanies are not specialized in the field, and their products’ functions,
measurement targets, analysis contents, and support system are limited.
In comparison, the Company's products are superior in terms ofspecifications and the development and support system, which explains
why the Company has a large share and is number one in the market(Figure 16). Also, the Company’s target customer zone is the middle zone,
encompassing mid-tier companies as well as listed companies, which isdifferent from the high-end zone targeted by the paid versions of Google
Analytics and Adobe Analytics (with price settings that are estimated to
be about ten times greater the Company’s).

【 Figure 16】Each Vendor’s Share of Advertising Effect Measurement
Market by Sales Volume (forecast for 2018)その他

w AD EBiS – No. 1 in domestic
share for four consecutive
years. Its share is on an
increasing trend.

Other

23.1%

YRGLM Inc.
（株）ロックオンADEBiS
ADEBiS&M

44.2%

Company B

15.6%

Company A

17.0%(Ref) The Company’s financial results briefing materials

24/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

w Global-scale tightening of
personal information
protection regulations(18) ITP (Intelligent Tracking
Prevention)： A function that
restricts the use of cookies
after a certain period of time
for advertisements known astargeting ads that use browser
cookies.
w With the revision to the
Personal Information
Protection Law, Japan too
will move toward tighter
privacy protection. The
consent of individuals is
expected to become
obligatory when using
cookies.
(19) IP address: An
identification number assigned
to each computer orcommunication device
connected to a network suchas the Internet. It is used to
specify the data destination.
identify the data source, etc.
(20) Cookie: A code created on
the web browser side whenbrowsing a website. It is
temporarily stored and usedmainly for website user
identification. The website’svisit history and content
browsing status can be
identified. It is widely used inInternet marketing services
such as personalized
advertisement display andweb-based services.

w With its specialization andtechnology, the tighteningof privacy protection
regulations is a businesschance for the Company.

◆ Effect of Strengthened Privacy Protection on Advertising

Effect Measurement
Background: In response to the strengthening of the General Data
Protection Regulation (GDPR) in the European Union (EU), regulations
regarding the handling of data on personal information are being
strengthened and tightened in Japan as well as globally from theviewpoint of privacy protection.
Specifically, for instance, Apple added the Intelligent Tracking
Prevention18 (hereinafter referred to as “ITP”), a tracking preventionfunction, to its Safari browser; several browser companies are
increasingly moving toward limiting tracking using cookies by means
such as the ITP, since data such as IP addresses19 and cookies20 have also
become regarded as personal information when collecting user behavior
data on the web (currently, browsers such as Google Chrome and Internet
Explorer have not been changed or impacted).
In Japan as well, the government’s Personal Information Protection
Commission reviewed the Personal Information Protection Law andannounced the outline of the draft amendment of the Personal Information
Protection Law on November 29, 2019. According to this, whenproviding information such as the browsing history of an Internet site toanother company (providing to a third party), the user's consent isrequired if the individual can be identified in connection with the personal
information held by the provider.
Under the present circumstances, some advertisers and companies use anindividual’s information on gender, age group, orientation, interest, etc.,
predicted from his/her browsing history, to distribute advertisements thatmatch those data even when there is no consent from the individual. The
government aims to strengthen the protection of individual rights as largescale utilization of data becomes widespread especially among giant IT
companies – for example, Recruit Navi has been analyzing the offerdecline-rate of job-hunting students and providing such information to
recruiting companies.
Due to the new regulations, advertising-related companies that conduct
cross-site tracking to collect and track information across multiple
domains will be negatively impacted. For instance, they may not be able
to distribute retargeting ads (ads to visitors of the website) or may havetroubles with advertising effect measurement.
As a countermeasure, the Company has released CNAME Tracking(provided via the cloud), a new measurement method that can measure
the effectiveness of advertising with high accuracy while protecting user
privacy. It is a tool that acquires and retains information only for domainsthat have been approved by the advertiser, enabling accurate
measurement while protecting privacy (Figure 17).
In the future, protection regulations are expected to be further
strengthened, increasing the demand for highly accurate advertising effectmeasurement that makes consideration for user privacy. At the same time,increasingly sophisticated technologies are also expected to become
25/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

required. Since the Company has a specialized and industry-leading
technology development capability and support system, it candifferentiate itself from other companies that have difficulty in catchingup in technology (many of the competitors are predicted to encountertroubles catching up). Therefore, the tighter regulations will raise theCompany’s competitive advantage and would be more of a businesschance.

【 Figure 17 】Different Measurement Methods Using Cookies
Traditional third-party cookie/ pseudo-first-party cookie
measurement

The newly released first-party cookie
measurement method(in the case of www.yrglm.co.jp as an
example)ac.ebis.ne.jp↓

ac.ebis.ne.jp
WebsiteAD EBiS
serverAD EBiS meas. tag

Third-party cookie/
Pseudo-first-party cookie

Websitecname.yrglm.co.jp

AD EBiS
serverAD EBiS meas. tag

ac.ebis.ne.jp

Issued without the advertiser's consent;difficult for users to identify the source ofthe cookies

ac.ebis.ne.jp

First-party cookie
Redirected to the Company's measurement
domain to enable measurement using firstparty cookies(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing materials

Supplemental Information（21） First-party cookie /Third-party cookie:
Classification of cookies issued
by the cookie issuer. Cookies
issued by the domain (website)
visited by the user (domainspecific) are first-party, andcookies given by other third
parties (domain-crossing) are
third-party. First-party cookies
have the advantages of being
able to perform tracking andeffect measurements with highaccuracy and being less likely
to be blocked by the user, butthey put a load on the website.
On the other hand, third-party
cookies can be issued acrossmultiple websites (domains)
but raise concerns over privacy
protection and are easily
blocked by users, making
accurate measurement ofInternet ads difficult.

Traditional systems utilizing third-party cookies21 that allow
measurement across multiple websites and identification of users cancompromise user privacy. On the other hand, first-party cookies21 can bemeasured only in the domain approved by the advertiser, such that theuser's behavior history is not passed to a third-party vendor without
his/her consent. Therefore, compared to third-party cookies, first-party
cookies are permitted in more browsers and can be stored for a longer
period than third-party cookies.
With the Company's newly developed measurement method, customers
can change the setting to enable CNAME Tracking, switching to firstparty cookie measurement in the customer’s domain to make both privacy
protection and accurate measurement possible. Since this method uses
information that have been provided with the user’s consent, it is unlikely
to be directly affected by the tighter regulations.
(Excerpts from the Company's website and news release with revisions
and additions.)

26/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

7． Last Fiscal Year’s Results and This
Year’s Forecast◆ Financial Results for FY 2019 (last fiscal year: FY
09/2019)

w Had posted a loss due toupfront investment for
future growth but
achieved an operating
profit in the previous
fiscal year. Record-highsales have beenconsecutively achieved.

In the consolidated results for FY 2019 (October 2018 - September 2019),
sales were Y2,204 million (a new record high), having grown by 22.1%
YoY. Since the Company is based on a business model with a highmarginal profit ratio, the gross margin improved significantly from 65.9%
in the fiscal year before the previous to 70.8% in the previous fiscal year.
SG&A expenses grew by only 14.5%, which is lower than the sales
growth rate. The SG&A expenses ratio improved from 71.4% to 66.9%
in the same order and the operating margin also improved by 9.4 points
from -5.5% to +3.9%. An operating profit of Y85 million was obtained,
improving from the previous loss (a loss of Y98 million in the fiscal year
before the previous) and similarly a recurring profit of Y79 million wasachieved (a loss of Y115 million in the fiscal year before the previous).
However, the Company posted a net loss due to a total of Y79 million in
extraordinary loss, which included a litigation-related loss of Y60 million,
loss on retirement of fixed assets, and impairment loss.

w However, a net loss wasposted due toextraordinary loss.

w The main AD EBIS
business’s unit price roseand contributed to thesales growth.
w Sales were below theforecast but profit wasrevised up.

When the Company announced its first quarter results on February 6,
2019, it also announced last fiscal year’s forecast for sales and operating
profit as a range of values (recurring profit and net profit were notannounced). Compared to this forecast, sales were smaller than theforecast (forecasted range: 2,250-2,350 million yen) by -46 to -146
million yen, falling below the lower end of the target range. Meanwhile,
operating profit ended up exceeding the forecast (0-50 million yen) by 35
to 85 million yen, going above the upper end of the target range. Dividend,
whose payment had been undetermined, was not paid again (Figure 18).
Compared to our forecast, sales were below our expectation that was
similar to the lower end of the Company’s target range (Y2,260 million).
Meanwhile, operating profit was slightly more than the Y60 million that
we had expected, above the upper end of the Company’s target range.

【 Figure 18 】Comparison of and Change in the Past Five Year’s Financial Forecast Versus Actual Results
Sales
FY
FY 2015
Diff. from CE
FY 2016
Diff. from CE
FY 2017
Diff. from CE
FY 2018
Diff. from CE
FY 2019
Diff. from CE
FY 2019
Diff. from E

Forecast release date
11/10/2014 (CE)
Actual result (million yen)
Difference (%)
Difference (million yen)
5/12/2016 (CE)
Actual result (million yen)
Difference (%)
Difference (million yen)
5/9/2017 (CE)
Actual result (million yen)
Difference (%)
Difference (million yen)
2/6/2018 (CE)
Actual result (million yen)
Difference (%)
Difference (million yen)
5/8/2019 (CE)
Actual result (million yen)
Difference (%)
Difference (million yen)
5/8/2019 (E)Actual result (million yen)
Difference (%)
Difference (million yen)

1,545
1,437
-7.0
-108
1,600
1,612
0.75
12
1,650 to 1,700
1,719
1.1 to 4.2
19 to 69
1,800
1,804
0.2
4
2,250 to 2,350
2,204-6.2 to -2.0
-146 to -46
2,260
2,204
-2.5
-56

O.P.
R.P.
(Amount or %)
350
350
350
352
0.0
0.6
0
2
200
201
247
250
23.5
24.4
47
49
10 to 10092
106-8.0 to 820.0-8 to 82
-150
-98
-115
52
0 to 5085∞ to 70.0
35 to 85
60
85
41.7
20

N.P.
203
230
13.3
27
130
168
29.2
38
72
-88

79

-35

45
79
75.6
34

-25
-35
-10

(Ref) Prepared by Alpha-Win
Research Dept. based on the financial
results summary. CE = the Company’s
forecast/estimate. E = Alpha-Win
Research Dept.’s forecast/estimate.

27/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

The main factors that caused the difference between the Company’s
forecast or our forecast with the actual sales and operating profit aredescribed below:
Difference in sales
・ Acquisition of new contracts had been sluggish compared to the plan:
Temporary decline in sales force due to a staff shortage caused by delayed
recruitment in response to the resignation of mid-career sales
representatives (since mid-career recruitment was slow, hired new
graduates were trained to fit to the Company’s strategy, but theircontribution to the results were delayed).
・Contract cancellation by existing customers: The increase in prices
accompanying the change in the pricing system led to a decrease mainlyin the customers acquired via agencies, such that the improvement in thecancellation rate was slow.
・ DMP business’s sales decline: Although the decline was in line with
the Company’s original plan to shrink this business, a portion of its
customers cancelled contracts as they had found an alternative service.

w Sales were below target
due to the temporary
decline in sales force andcancellation by some of
the customers due tohigher prices.

Difference in profit and cost・ Efficient management of advertising expenses: Reduced cost byincreasing small events (held by the Company) rather than large events.
・ Partial review of the recruitment plan: Could not hire the expected
number of new employees, resulting in reduced personnel costs, etc.
・ Improvement of cost structure following the increased sales of themarketing platform business → Profit improvement due to the sales
growth more-than-expectedly exceeded the increase in cost.

w Profit was revised up
thanks to cost control.

w Rise in AD EBiS’s average
unit price was the main
factor contributing toincreased sales and profit.

【 Figure 19 】Last Fiscal
Year’s Financial Results

Last fiscal year, overall sales increased by Y399 million YoY. By
segment, the marketing platform business contributed largely to sales by
Y421 million. It also contributed to operating profit by Y167 million,
from a loss of Y121 million in the fiscal year before the previous to a
profit of Y46 million in the previous fiscal year (Figure 19). These
improvements were due to the fact that, although AD EBiS’s number ofactive accounts only slightly increased, its average unit price rosesignificantly due to the new pricing system. The full contribution of theacquired AdRepo also boosted the segment’s results. On the other hand,in the EC platform business, sales fell by 7.7% YoY (-21 million yen) due
to restructuring such as business transfers. However, operating profit rosefrom Y22 million in the fiscal year before the previous to Y39 million in
the previous fiscal year, due to the withdrawal from unprofitablebusinesses and the contribution by the subsidiary’s EC-CUBE.

(Unit: million yen, %)Total Sales
Marketing Platform
EC Platform(Ref) Prepared by
Alpha-Win Research
Dept. based on thefinancial results
briefing materials andsecurities report

Gross Profit
Gross Margin
SG&A Expenses
SG&A Expenses Ratio
Operating Profit (segment)
Marketing Platform
EC Platform

Operating Margin
Marketing Platform
EC Platform

Recurring Profit
Net profit

FY 2014Amount/%
1,360
883
477
867
63.8%
618
45.4%
249
142
107
18.3%
16.1%
22.5%
234
138

FY 2015
Amount/%
1,437
911
526
956
66.5%
606
42.1%
350
214
136
24.4%
23.5%
25.8%
352
231

FY 2016
Amount/%
1,613
1,074
539
1,044
64.7%
796
49.3%
248
210
38
15.4%
19.5%
7.1%
250
169

FY 2017
Amount/%
1,719
1,255
465
1,123
65.3%
1,030
59.9%
93
153
-60
5.4%
12.2%
-12.9%
106
73

FY 2018
Amount/%
1,805
1,530
274
1,190
65.9%
1,289
71.4%
-98
-121
22
-5.5%
-7.9%
8.2%
-115
-89

FY 2019
Amount/%% Change / Diff.
2,204
22.1%
1,951
27.5%
253
-7.7%
1,561
31.1%
70.8%
4.9%
1,476
14.5%
66.9%
-4.4%
85
46
To profit
39
73.3%
3.9%
9.3%
2.4%
10.3%
15.4%
7.2%
79
To profit-35
Smaller loss

28/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18【 Figure 20 】Reasons for Change in O.P. in FY 2019

【 Figure 21 】Transition in Margins and Ratios(unit: million yen)(unit: %)Inc.

(million yen)
350

Dec.

80.0

-21

300
250

-15

0

-53

15.4
5.4

10.0

23

-98

3.9
-5.5

0.0

-100
Marketing PF
FY商流PF2018
operating
売上の減少 sales growth
loss

42.1

18.3

20.0

84

92

EC PF
sales decline

Increased
personnel
expenseFees paid to
Increasd
agencies
depreciation
expense andgoodmill
amortization

Increased
cost of sales
such asserver costs

Increase inother expenses

Decreased
advertisingexpenseIncrease inproprietary
assets-10.0

FY 2019
operatingprofit

66.9

65.9

24.4

30.0

-75

50

71.4

49.3

45.4

40.0

-58

100

70.8
65.3

64.7

59.9

50.0
420

SG&A expenses ratio

60.0

-131

150

O.P. margin

66.5

63.8

70.0

200

-50

Gross margin

（ %）

Total

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

FY 2019(Ref) Figures 20 and 22 are from the financial results briefing materials. Figure 21 was prepared by Alpha-Win Research Dept. from the Company’s securities report.

w Thanks to sales growth andcost reduction, the margins
are on a clearly improving
trend.

Overall, the effect of sales growth was large, helping to significantly
improve the gross margin, SG&A expenses ratio, and operating margin(Figures 20 and 21). Personnel expense (including expenses related tohiring more employees) increased by Y131 million, cost of sales(including server costs) increased by Y75 million, and goodwill
amortization and depreciation expenses increased by Y58 million, butthese were absorbed by the sales growth.
SG&A expenses (ratio over sales; YoY change) were Y796 million(49.3%; +31.3%) in FY 2016 → Y1,030 million (59.9%; +29.5%) in FY
2017 → Y1,298 million (71.4%; +25.1%) in FY 2018, rising sharply.
However, in the previous fiscal year, SG&A expenses were Y1,476
million (66.9%; +14.5%), having increased at a rate that is slower than
the sales growth rate (+22.1% YoY) for the first time in four fiscal years
thanks to cost control, etc.

【 Figure 22 】Quarterly Transition in Operating Profit
Marketing Pl atform Business

EC Platform Business(million yen)

ReturnPhase

Investment Phase

120
100
35

80
60
40
20

43
9

33

11

22
67
35

69

41

13
77

4
36

45

52
25

0

17

17
60

50

-1

-8

14

-11

-20

33

30
15
-38

-44

Q4

Q1

-40

-37

9
3

12
-23

-15
-1

-21
-5

-3

-60
Q1

w Improved from operating
loss to profit for the firsttime in seven quarters.
Since then, both platforms
have been maintaining a
profit for three consecutive
quarters.

Q2

Q3

FY 2015

Q4

Q1

Q2

Q3

FY 2016

Q4

Q1

Q2

Q3

FY 2017Q2Q3FY 2018

Q4

Q1

Q2

Q3

Q4

FY 2019(Ref) Prepared by Alpha-Win Research Dept. from the Company’s securities report

The quarterly transition in operating profit/loss from Q4 FY 2017 (JulySeptember 2017) to Q4 FY 2019 (July-September 2019) is as follows: 23 → -48 → -23 → -12 → -16 → -26 → +47 → +12 → +50(unit: million yen). We can see that after having improved its results fromloss to profit for the first time in seven quarters, the Company has been
29/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

w Thanks to businessrestructuring andtransition to a flat-ratebilling model, businessbecame more stable with
reduced seasonalvariability.

maintaining a profit for three consecutive quarters since then (Figure 22).
This improvement was brought by increased sales due to AD EBiS,
withdrawal from unprofitable businesses, acquisition of promisingbusinesses, and business model transition from a pay-as-you-go to a flatrate billing system which helped eliminate seasonal variability andstabilize sales growth. Additionally, the improvement in SG&A expenses
ratio and gross margin since Q2 or Q3 of FY 2018, respectively, due tocost control contributed to profit.
On a semi-annual basis, free cash flow (FCF) continues to be negative(Figure 23). For now, improvement to positive FCF would be the nextchallenge. For the Company, about 300-500 million yen in cash would beenough as a normal working capital. Even if funding becomes requiredfor M&As, etc., the Company intends to deal with bank loans rather thanequity finance for the time being.

w Free cash flow is stillnegative.

【 Figure 23 】Semi-Annual Transition in Cash Flow
Unit: million yen
Operating CF ①
Investing CF ②
Financing CF
FCF（①+②）
Cash and Deposits (on B/S)FY 2015
H1
H2
15
148
-5
-27
-3
0
9
121
666
787

FY 2016
H1
H2
48
93
-80
-69
-16
3
-32
24
738
762

FY 2017
H1
H2
121
23
-88
-106
-31
-0
33
-83
764
681

FY 2018
H1
H2
7
9
-94
-118
169
542
-88
-110
760
1,194

FY 2019
H1
H2
7
201
-94
-432
169
-269
-88
-231
924
774

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary and securities report◆ The Company’s Forecast for FY 2020 (this fiscal year:
FY 09/2020)

w This fiscal year’s financial
forecast is not disclosed.
Medium-term sales target
is Y3 billion.

w Announcement of forecast

is expected to be aroundFebruary or May.

As with the previous fiscal year, the Company did not disclose the interim
and full-year forecasts and dividend plan at the beginning of the fiscal
year, explaining that “At present, there are many uncertain factors thatwill have an impact on the financial results for the fiscal year ending
September 2020. Therefore, making a reasonable estimate of performancefor the second quarter (cumulative) as well as for the full year is difficultat the moment. The consolidated financial forecast will be announced assoon as reasonable calculations become possible." However, since thecurrent fiscal year is the final year of the current medium-term businessplan, sales target for the year has been set at Y3 billion, a goal which has
not been changed up to this point. Although the medium-term businessplan does not describe profit targets, it does set a medium- to long-termtarget for the operating margin of the main marketing platform businessat 10-20%. Based on this information (and at a sales ratio of
approximately 90% over the total sales), the segment’s operating profit
would be about Y270 million to Y540 million.
The Company has generally announced sales and operating profit forecast(as a range) at same time as the announcement of the first quarter resultsin February or the interim results in May (Figure 18 shown previously on
page 27). Similar announcements are expected this fiscal year – webelieve that specific forecast figures will be announced when Q1 results
are announced on February 7, 2020 (planned) or at the announcement of
Q2 results in May, at the latest.
30/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

Figure 24 shows the transition in monthly sales for the current fiscal year
as announced by the Company. Total sales in October, the first month of
the first half of this fiscal year, showed a 13.2% growth YoY and total
sales in November grew by 12.8% YoY; although performance is positive,
the growth rate is slowing down. In particular, the marketing platform’s
sales are still maintaining a double-digit growth rate but appear to haveslowed down from a period of 20-30% growth rate (YoY). However, that
period was largely affected by how the sales of the acquired AdRepobusiness became included in the Company’s sales since last fiscal year’s
October. Taking this fact into consideration, the growth rate can be seen
as having consistently been at around 20%. We should continue to watch
the YoY growth rate of monthly sales in December and onward.

w Positive trend is currently

maintained for monthly
sales.

（22）UI: Abbreviation foruser interface. The part
directly touched by the user.
UX: Abbreviation for user
experience. Experience
gained by users upon using
products or services.

Meanwhile, sales of the EC platform had been on a downward trend due
to business transfer, etc., but after the negative effect ceased on a YoY
basis, sales returned to an increasing trend starting in July 2019.
The Company aims to create customer success by providing more value
to its existing customers and is planning to strengthen its business around
two areas – customer success and development. For the former, theCompany plans to reduce contract cancellation rate and reinforce hiring
and training for its customer success division. As for the latter, theCompany has stated that it will develop upsell products (more expensive
products and services) for its existing customers, improve UI/UX22, anddevelop a three-layer model for the Marketing Robot (measurement,
analysis, and utilization).

【 Figure 24 】Recent Monthly Transition in Sales (flash report)(upper row: sales: unit = thousand yen, decimal places cut off)
(lower row: YoY change: unit = %)10/2018 to 11/2019
Monthly Sales

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

This FY (YTD)

149,201

150,478

160,409

158,319

165,994

171,330

168,971

165,515

162,982

163,876

165,521

168,509

167,418

173,197

340,615

126.9

130.9

133.7

132.9

132.9

129.0

133.0

133.0

120.3

124.6

122.2

114.6

112.2

115.1

113.7

21,83918,68318,93625,06019,46021,99023,467

17,363

17,88330,223

19,341

19,01926,164

17,602

43,766

78.3

67.6

76.5

96.8

82.9

117.2

100.8

90.3

87.6

115.9

104.7

102.3

119.8

94.2

108.0

171,041

169,161

179,345

183,379

185,455

193,321

192,439

182,878

180,866

194,099

184,863

187,529

193,583

190,799384,382

117.6

118.6

124.0

126.4

125.0

127.5

128.0

127.3

116.1

123.2

120.1

113.2

113.2

112.8

113.0

Marketing Platform

EC Platform

Entire Company(Ref) Prepared by Alpha-Win Research Dept. from the news release on the Company’s website.
(Note) The values shown are preliminary data before auditing by an auditor and may be revised in the future.

31/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18◆ Topic: Transfer of the ADPLAN Businessw Announced the acquisitionof ADPLAN from OPT, its
rival in the field of
advertising effectmeasurement tools. Aims
for an extremely high sharewith customer transfer.

The Company has decided to conclude an agreement to acquire the
ADPLAN business from OPT (OPT Holding Group; securities code
2389; a wholly owned subsidiary listed on the First Section of the Tokyo
Stock Exchange), a competitor in the field of advertising effectmeasurement tools.
・ADPLAN is a web advertising "measurement" tool that OPT beganoffering in 2000. With a total of more than 1,500 companies having
installed the tool, it has a markedly strong record in Japan. ADPLAN has
established a firm position in the advertising effect measurement market,
only second to the Company’s AD EBiS. After business acquisition, thetwo companies’ total share is estimated to be extremely high at about 60%.
・Purpose: Acquire customers of ADPLAN to raise the share in theadvertising effect measurement market and enhance the Company’scompetitiveness in the market for business expansion.
・Purchase price: not determined yet (planned to be paid by cash)
・Schedule going forward (plan):Date of concluding the business transfer contract: late Dec. 2019
Planned date of business transfer: Jan. 2020

w Although still in theprocess of evaluation, theimpact on financial
performance is expected to
be about Y300 million for
full FY sales.

・Impact on financial performance: The business’s sales in FY 2018 were
Y286 million (its profit is undisclosed but it is estimated to be a profitablebusiness). The Company is still in the process of evaluating the business’s
impact on consolidated results, but assuming that nine months’ worth ofsales will be posted after acquisition, the contribution to sales growthduring this fiscal year is estimated to be just over Y200 million. The
purchase price is estimated to be several hundred million yen based on
the sales. Goodwill may also be posted in the future.
OPT and YRGLM also plan to start a strategic partnership in the data
marketing business and may also form other joint developments andalliances in other areas in the future. By selling the ADPLAN business,
which would require development efforts and cost to respond to thetighter privacy protection, OPT plans to shift its business resources to thedata marketing business which deals with data accumulation, analysis,
and utilization after measurement.
After the transfer of the business, the ADPLAN service will be continued
by YRGLM. After 2020, YRGLM plans to gradually shift the service
toward its advertising effect measurement tool AD EBiS. Going forward,
we should follow how the existing or potential customers of ADPLAN
will become absorbed by the Company (such as the contract continuation
rate, product switching, and unit price increase).

32/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

8． Growth Strategy

w Under the Marketing
Robot growth strategy, theCompany aims for sales ofY3 billion in FY 2020
(medium-term plan).
Towards this end, theCompany is steadily
expanding its business.
w Actively cooperating withother companies
w Focused on making
progress with thedevelopment of theMarketing Robot andenhancing the marketing& sales division(23) BI (Business Intelligence):
A method whereby businessdata accumulated by businessintelligence companies andothers in information systems
are analyzed and processed byusers as needed and utilized
for business and management.
Or, software and information
systems to practice thismethod.
(24) API (Application
Programming Interface): A
protocol that defines
procedures, data formats, etc.,
for accessing and using
functions of computer
programs and data to be
managed from other external
programs.

◆ The Company’s Medium-Term Business Plan andStrategy
There have been no changes to the medium- to long-term business planand business has been growing steadily as measures have been solidly
implemented in line with the Company’s plan. The Company isdeveloping its business along president Iwata's long-term business plan
as described by his words, “By creating a completely new product thatcan be differentiated from other companies in the field of Internet
marketing, we hope to acquire an extremely large market share in Japanand then develop our business globally to become a company with astrong presence.”
Specifically, the Company has been aiming for sales of Y3 billion in FY
2020 or this fiscal year (+36.1% compared to FY 2019) under its
Marketing Robot growth strategy (Figure 25). Specific figures for the
profit targets, though, have not been disclosed. To accelerate businessdevelopment, the Company has already created new alliances with 31
other companies (met the initial target of 30 companies) (Figure 26).
Reinforcement of alliance will increase AD EBiS 's product strength byenhancing its optional functions, leading to an increase in the number ofcontracts, an increase in unit price, and the prevention of contract
cancellation. Furthermore, the Company is working on the following
measures in order to achieve its goal.
(1) Focus on the development of the Marketing Robot and accomplish its
creation· Conduct big data analysis utilizing AI and actively cooperate withother companies to develop and sell new functions· Move engineers to the core business (AD EBiS) and cut off theother businesses· Increase development staff (esp. in AI, BI 23, and API24 sections)(2) Strengthen the marketing & sales division· Enhancement of the marketing system· Increase the number of experts and sales representatives(Hire 20-30 more people every year by new-graduate and mid-career
recruitment → not achieved)

FY 2020: Sales of Y3 billion
Toward global development

Utilization【 Figure 25 】Medium- to Long-Term Targets 【 Figure 26 】Progress with the 30 Alliances for the Marketing RobotAds

WEB Customer
Service

Access Analysis

MA/CRM

Email Delivery

Other

Enhance dev./sales divisions
Creation of the Marketing Robot

Expand the Group in
Asia
Rapid growth through
M&As

2020
Y3 billion

Measurement


Sales

Analysis8

Strengthen foundation for growth in
Japan

2020

2021

Reporting

DMP
Data Analysis

ChannelAnalysis

User Analysis

BI / Cloud Storage

Research Panel

TV/Offline Strategies(Demographics/interests andpreferences/surveys)

Data Acquisition
View

CLICK

SEARCHLOG

3rd Party Data

(Ref) Figure 25 and 26 were prepared from the financial results briefing materials

33/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

w Over the medium term, theCompany will strengthen
its domestic businessfoundation. Over the longterm, it will aim for global
expansion.

Furthermore, as its long-term strategy (from FY 2021 to FY 2023), theCompany plans to increase development and sales sites, mostly in Asia.
Also, the Company intends to accelerate its growth not only by organic
growth, but also by M&As, alliances, etc. However, specific targets
such as those concerning the breakdown of sales and the actual means
for achieving targets have not been announced. Since the Company has
been raising funds ahead of plan, it may continue to actively conduct
M&As or acquire businesses from other companies.
As a side note, the next medium-term business plan has not been created
yet but may possibly be announced early next fiscal year.
Regarding the cost structure of the core marketing platform business, thestructure is controlled in four parts and medium- to long-term target ratios
have been set for each (Figure 27).

w Will focus on its corebusiness (marketing
platform business)

For the marketing platform business, the Company had achieved highoperating margins of around 16-24% from FY 2014 to FY 2016. Then, in
FY 2017, because the Company increased the amount of investment
related to marketing & sales and the development of software functions,the operating margin began to decrease. However, in FY 2018, theoperating margin began to bottom out. In FY 2019, excluding thecustomer service expense and other indirect expenses, the ratios ofexpenses over sales for marketing & sales and development have alreadyreached the target ranges set out in the medium- to long-term plan. Ratiosof the customer service expense and other indirect expenses over sales arealso expected to decrease along with the completion of focusedinvestment and the increase in sales and will likely reach the target range
during the next fiscal year or later.

w Cost structure of themarketing platformbusiness is improving.

w Aiming for an O.P. marginof 10-20% over the
medium to long term

Over the medium to long term, the Company plans to increase sales andsignificantly lower the expenses for this business to stabilize the operating
margin of this business at around 10-20%. Since this level of operating
magin has been achieved in the past, it seems to be an achievable goal.
The lower end of the target range – an operating margin of 10% – may
become achieved during the current or next fiscal year depending on the cost
control.

【 Figure 27 】Cost Structure of the Marketing Platform (MPF) Business(actual and medium/long-term targets)
FY
2016

FY
2017

FY
2018

FY
2019

Medium- to
Long-Term
Targets

Marketing and
Sales

24％

29％

32％

26％

30％

Development

21％

24％

36％

29％*2

25-30％

Customer Sucecss(old name:"support")

11％

11％

11％

17％

10-15％

Other Indirect
Exp.

24％

25％

28％*1

26％

15-20％

Operating Profit 20％

12％

-8％

2％

10-20％MPF Business's

Expense-to-Sales
Ratio

Inc. Investment*1: Due to increased allocation of common expenses to the segment following the sales decline of the EC platform caused by businessrestructuring*2: Due to transfer of operation staff from development to CS(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing materials

34/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18◆ Alpha-Win Research Dept.’s Financial Results Forecast
for FY 2020 (this fiscal year)
Based on the results of the previous fiscal year and interview with theCompany, we revised our original full-year forecast for the current andnext fiscal year. In addition, we newly created a forecast for FY 2022 or
the fiscal year after the next. With major structural reforms of thebusinesses already mostly completed, going forward, we expect that theCompany will actively engage in upfront investments in the main andperipheral businesses for future growth.

w We predict sales growth,significant profit growth,and net profit(improvement fromprevious net loss) during
this fiscal year. Whether
the Company will achieve
its sales target of Y3
billion in FY 2020 would
depend on the situation
with the M&As andperipheral businesses.

Forecast for FY 2020, in the order of previous forecast → current
forecast, is as follows: sales of Y2,750 million (+24.8% YoY) → same;
operating profit of Y120 million (+42.9% YoY) → revised up to Y200
million (+135.5% YoY). The likelihood of the Company achieving the
medium-term target of Y3 billion in sales during the current fiscal year
seems to have become greater thanks to the acquisition of ADPLAN,
although the result would be affected by M&As and the development of
peripheral businesses. Also, although we had previously predicted that a
net profit of Y92 million will be achieved in an improvement from theprevious loss, we revised this prediction upward to Y165 million (reflects
carried-forward tax loss) because, during this fiscal year, we expect thatthe absence of most of the one-off costs incurred during the previous fiscal
year will lead to a reduced rate of increase in SG&A expenses, the grossmargin will be maintained at a high level, and there will be no nonoperating loss or extraordinary loss (Figure 28).

【 Figure 28 】Alpha-Win Research Dept.’s Forecast for This Fiscal Year and Over the Medium Term(million yen)

FY 2018 (A)SalesMarketing PF
EC PF
Gross Profit
Gross Margin
SG&A Expenses% over sales
Operating Profit% over sales
Recurring Profit% over sales
Net Profit

2,250-2,350

-115
-6.4%
-89

Not disclosed% over sales
-4.9%
KPI
Annual Average (A)AD EBiS: # of active accounts
1,476% change for the above
AD EBiS: average unit price
78,938% change for the above
Sales (YoY growth rate)
5.0%
Marketing PF
21.9%
EC PF
-41.1%
Gross Margin (diff. from last FY)-0.3%
SG&A Expense (growth rate)
25.1%
Operating Profit (growth rate)
To loss
Recurring Profit (growth rate)
To loss
Net Profit (growth rate)

FY 2019 (CE)

1,805
1,530
274
1,190
65.9%
1,289
71.4%
-98
-5.5%

To loss

0～50

Not disclosed

FY 2019 (E)FY 2019 (A)

2,260
2,020
250
1,560
69.0%
1,500
66.4%
60
2.7%

2,204
1,951
253
1,561
70.8%
1,476
66.9%
85
3.9%

45
2.0%
-25

79
3.6%
-35

-1.1%
-1.6%
Annual Average (E) Annual Average (A)
1,546
1,486
4.7%
0.7%
98,666
98,517
25.0%
24.8%
25.2%
22.1%
32.0%
27.5%
-8.8%
-7.6%
3.1%
4.9%
16.4%
14.5%
To profit
To profit
To profit
To profit
To profit

Smaller loss

FY 2020 (CE)3,000

FY 2020 (E)FY 2021 (E)FY 2022 (E)

2,750
2,470
280
1,900
69.1%
1,700
61.8%
200
7.3%

3,150
2,875
275
2,250
71.4%
1,950
61.9%
300
9.5%

3,600
3,290
310
2,560
71.1%
2,180
60.6%
380
10.6%

200
7.3%
165

300
9.5%
230

380
10.6%
250

6.0%
7.3%
6.9%
Annual Average (E) Annual Average (E) Annual Average (E)
1,550
1,650
1,750
4.3%
6.5%
6.1%
115,000
130,500
145,000
16.7%
13.5%
11.1%
24.8%
14.5%
14.3%
26.6%
16.4%
14.4%
10.6%
-1.8%
12.7%
-1.7%
2.3%
-0.3%
15.2%
14.7%
11.8%
135.5%
50.0%
26.7%
153.1%
50.0%
26.7%
To profit

39.4%

8.7%

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary. (Note) CE is the Company’s forecast/estimate. AD
EBiS’s average unit price and number of active accounts used in our forecast/estimate (E) are average values for the fiscal year and differ
from the values presented by the Company in its disclosure (averages of the values at the end of the last month of each quarter). The actual
result (A) is the simple average of figures at the end of each quarter.

w Profit expected to be
maintained during all
quarters this fiscal year

Also, since Q2 of the previous fiscal year, the Company has already beenachieving operating profit for three quarters in a row. Evaluating thiscurrent situation, we predict that an operating profit will again be posted
during all quarters of this fiscal year if the Company conducts appropriate
cost control with regards to hiring, development investment,
advertisement, etc. However, since the Company experiences a seasonal
35/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

variability in cost every year due to various internal events andrecruitment activities, operating profit in Q1 and Q3 may be slightly
weaker than in Q2 and Q4.

w Expecting continuous risein the unit price of AD
EBiS. On the other hand,the number of active
accounts had temporarily
slowed down – its rate ofincrease/decrease is a key
point in predicting future
performance.

The assumptions or estimates used in our full-year forecast for this fiscal
year are as follows:
Sales
・AD EBiS’s number of accounts are assumed to increase by 4% YoY,
taking into account the switching from ADPLAN, and its unit price is
expected to increase by about 17% due to enhanced functions andchange in the pricing system.
・For DMP, the current monthly sales are expected to be maintained as
its scale will be largely reduced following the sales decline. For THREe,
we assumed that results for the six months before the planned date ofservice termination date will be posted.
・AdRepo’s sales are expected to increase by about 10% YoY.
・For ADPLAN, contribution by the nine months after acquisition has
been estimated as a proportion of last fiscal year’s results (a little overY200 million).
・As a result, the marketing PF (platform) business’s sales are expected
to increase by about 27% to Y2,470 million.
・Meanwhile, for the EC PF, EC-CUBE’s sales are expected to slightly
increase to Y280 million.

Profits
・The gross margin is assumed to stay mostly the same.
・Rate of increase in SG&A expenses is expected to be about 15%, basedon assumptions that the net increase in the number of employees willbe 10-15, development costs and office rent will rise, costs will increase
from business acquisition, etc. Compared to last fiscal year when there
were one-time expenses from the change in the company name andlitigation (several dozen million yen), expenses for this fiscal year is
expected to largely decrease, leading to a decline in the SG&A expenses
ratio from 66.9% to about 62%.
・Operating margin is expected to improve by 3.4 points from last fiscal
year’s 3.9% to 7.3%.
・No non-operating loss/profit or extraordinary loss/profit is expected.
Carried-forward tax loss is assumed to be about Y100 million.
・The uncertain factors are sales and various costs related to company orbusiness acquisitions (for example, goodwill amortization and various
fees related to ADPLAN). The occurrence of these factors and themethod of their posting may cause loss/profit to change.

◆ Alpha-Win Research Dept.’s Financial Results Forecast
for the Medium Term
Although we have not made major changes to our basic views regarding
our previously-prepared medium-term business forecast for the years
starting next fiscal year, we have revised the full-year forecast for the next
fiscal year and newly created a forecast for the year after that (FY 2022).

36/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

w We updated our forecast.
We kept the sales forecast
the same but revised the
profits upward. Bothduring next fiscal year andthe year after that, we
expect that operating profit
will grow at a double-digit
rate.

w Sales expected to grow by
about 15-20% per year overthe medium termw Business model with ahigh marginal profit ratio.
Over the medium to longterm, the profit growth rate
(on a normalized basis) is
expected to be about 2030% per year, faster than
the sales growth rate.

Forecast for the next fiscal year (FY 2021), in the order of previous
forecast → current forecast (unit: million yen), is as follows: sales of
3,150 → same (+14.5% YoY); operating profit of 250 → 300 (+50.0%
YoY); and net profit of 155 → 230 (+39.4% YoY). Only the profits wererevised upward, mostly because the unit price of AD EBiS had risen to ahigher-than-expected level. We also took into account the expected
contribution to results by the rise in the number of active accounts as users
switch from the to-be-acquired ADPLAN and the profit improvement of
the acquired AdRepo business.
In the fiscal year after the next (FY 2022), we predict that sales will
increase to Y3,600 million (+14.3% YoY), operating profit will be Y380
million (+26.7% YoY), and net profit will rise to Y250 million (+8.7%
YoY) due to the rise in AD EBiS’s unit price in response to the additionof functions, increased number of accounts for AD EBiS throughcustomer development, and driving force of the marketing platform
created by M&As.
Over the medium to long term, as the advertising effect measurement
market expands, we expect AD EBiS’s unit price to continue to increase
and its number of active accounts to grow. Therefore, the marketing
platform business has a large growth potential and is expected to become
the growth driver, leading to an annual sales growth rate of around 15 to
20% over the medium to long term.
In terms of profit and loss, we expect that net profit will become firm
thanks to past investments and business restructuring. We also expect that
the Company will experience a clear, V-shaped recovery in profit since
its business has a high marginal profit ratio (about 70%). We are
expecting an annual profit growth rate (on a normalized basis) of 20% tonearly 30%, faster than the sales growth rate.
Although the business structure reform is complete, the Company is stillin the growth stage and is actively pursuing greater competitiveness,higher market share, and expansion into peripheral fields. Since it has anambitious attitude with regards to M&As, business alliances, and businessacquisitions, whether the Company will take those actions and thecontribution of those actions to profit are expected to affect the mediumto long-term sales and profits. In addition, since performance will be
influenced by the Company's cost control and amount of effort put into
achieving the bottom line of its targets, we made a somewhat conservative
forecast.
So far, the Company has been steadily expanding its business in line with
its plan. In fact, we believe that dividend payment may be resumed within
the next two to three years, record-high profit may be achieved over the
medium term (about three to five years), and the shareholder benefit plan
may also be resumed.
Over the long term, whether the Company can make an overall business
transition from its specialization in the Internet advertising measurement
system to the Marketing Robot is a crucial point in assessing theCompany’s business going forward.
37/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

9． Analyst’s View
◆ SWOT Analysis

w The Company's strengths
are the president's
management skills,
product strength, and thepotential to utilize
accumulated big data.
w Is in a position to be able
to enjoy the benefits offuture market expansion.
Plans to expand into new
business areas andoverseas through M&As
and business acquisitions.

The Company's SWOT analysis result is shown on Figure 29. The
Company’s main strengths are (1) its president’s management skill andexpertise with leading technologies in the Internet marketing field, (2) its
main products and support system with proven and strong functions, (3)its possession of big data accumulated over many years since the start ofits service and potential for utilization of such data, (4) its main business’s
focused investment and number-one technological skill (development
speed and responsiveness to changes that only a major specializedcompany can realize) and position in the industry, and (5) businessexpansion strategy that includes active M&As, business acquisitions, andalliances with other companies. In particular, the fact that president Iwata
himself possesses a deep knowledge of Internet-related techniques – hehas been building skills related to the field since the foundation of theCompany – is considered to be an advantage over other companies. In
addition, the Marketing Robot market has a high growth potential, andsince the Company is in an advantageous position in the market, it would
be able to benefit from the growth. The Company also seems to have thepotential to accelerate its growth through overseas development as wellas through the expansion of the scope of the Marketing Robot businessfrom the measurement of ads to analysis and utilization.
Meanwhile, the risks include new regulations in the use of personal
information (related to marketing effect measurements) due tostrengthened privacy protection, shortage of staff and capital, and theemergence of an alternative technology from the development ofadvanced AI technology.

【 Figure 29 】SWOT Analysis
Strength

Weakness

Opportunity

Threat・Big data accumulated since foundation; potential for use
・Well-known, strong customer base, experience, product strength (No. 1 in the Internet ad effect system
tool market with an extremely high share)
・The main marketing platform business is subscription-based so that stable revenue can be expected・Management skill of the president who has a deep knowledge of leading technologies in the business・Enhanced working environment; talents with specialized, leading-edge technology; accumulation of
know-how (development as a major, specialized company; advantageous in responding to demand)
・Specialized in a niche market; small in scale
・Business management is dependent on the president
・Employee shortage (engineers and sales reps)・Funding power (equity financing risk associated with continued upfront investment and future businessexpansion)・Potential for growth of Internet advertising marketing market and accelerated growth of existingproducts
・Business expansion through M&As and business acquisitions; utilization of resources of external
partners; collaboration
・Overseas development
・Development of new products and services
・Release of competing or alternative products/services, emergence of rivals, declining competitiveness ofexisting products
・Tighter regulations related to stronger privacy protection in the use of personal information
・Defects in prducts/services, delays in developing or providing services with new function
・Large system troubles such as computer system stoppage

w We expect that there willagain be no dividend
during this fiscal year andthat dividend payment
will be resumed in thefiscal year after the next.

◆(Ref) Prepared by Alpha-Win
Research Dept.

Shareholder Return

In the second fiscal year after becoming listed (FY 2015), the Company’s
dividend was Y4.5 per share. Dividend was then increased by Y0.5 in FY
2016 to Y5.0 per share per year. In FY 2017, dividend was paid for thethird year in a row, again at Y5.0 yen per share (Figure 30). However, in
FY 2018 and FY 2019, no dividend was paid since a net loss was posted
in both years, and the Company abolished the shareholder benefit plan as
38/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

well. Since the Company is currently in its growth phase, rather thanletting its cash flow out through dividends and benefit plans, the Company
hopes to increase shareholder value by focusing on investments for future
growth to recover its financial performance. Dividends for this fiscal year
are undetermined and, in the short term, dividend payment andshareholder benefit plan are unlikely to be resumed. Alpha-Win Research
Department believes that dividend payment may possibly be resumed in
FY 2022 (the fiscal year after the next) when net profit is expected to havebecome solid and carried-forward tax losses will be cleared.

【 Figure 30 】Change in Dividend and Dividend Payout Ratio
（ Y）

（％）

50.0

6.0

45.0

44.0

Dividend

40.0
35.0

4.0

30.0

Dividend payout
ratio

25.0
20.0
15.0

5.0
4.5

18.6

2.0

12.9
1.0

5.0

0.0

0.0

0.0
FY 2015w After significantly
outperforming the TOPIX,
the stock price is going
through short ups anddowns.
(26) P/S (Price to Sales Ratio):
Ratio of stock price to sales. A
valuation indicator where
market capitalization isdivided by annual sales. P/S isoften used as an indicator tomeasure the stock value of
emerging companies with ahigh growth potential or a net
loss.
w The Company’s current
valuation is not cheap. The
stock price seems to bepartially reflecting the
anticipation for recovery
in business performance.

3.0

5.0

10.0

(25) AdTech: Abbreviation forad technology. A generic term
for information technology
used in advertising business, it
refers to digital technology usedin Internet ads, etc.

5.0

FY 2016

FY 2017

FY 2018

0.0

0.0

FY 2019

Undeter-mined0.0

FY 2020 (est.)(Ref) Prepared by Alpha-Win Research Dept. from the securities report and financial results summary◆ Stock Price and Characteristic and Factors that May
Affect Stock Price
The Company’s stock is a small-cap, AdTech25-related stock listed on the
TSE Mothers market with a highly volatile stock price. Figure C on page
3 of this Report shows the stock price and relative stock price against
TOPIX for the past approximately three years and three months. Until one
year ago, the Company's stock price had been decreasing, largely
underperforming the TOPIX. Reasons for the decline in stock price may
be that (1) as seen from the TSE Mothers Index, the market environment
was unfavorable, with small- and medium-cap stocks in the emerging
markets being generally weak and (2) in order to achieve the goals of thegrowth strategy concerning the Marketing Robot, the Company had been
restructuring its business and conducting upfront investment to focus on
its core business, resulting in the posting of a net loss, no dividend,abolition of the shareholder benefit plan, etc. However, from the summerof 2018 to about the middle of 2019, the stock price rose in response to
the improvement from loss to profit and the share buyback. Since then, ina fallback from this rise and perhaps also because investors are still trying
to predict future performance, the stock price has been experiencing short
ups and downs.
As a reference, we compared the size, business contents, and valuation
indicators of 22 companies listed on the market, including the Company,
under the AdTech category or with a business partly similar to theCompany’s (Figure 31). In this comparison, as far as P/E, P/B, P/S26, anddividend yield based on this fiscal year’s figures are concerned, theCompany's valuation is not cheap. This may be due to the fact that the
39/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18(27) PEG Ratio (Price
Earnings Growth Ratio): A
valuation indicator thatmeasures the stock value while
taking into consideration acompany's medium-term
profit growth rate. It is
calculated by dividing the
expected price-earnings ratio(P/E) by the expected
medium-term profit growthrate (%) per share. Generally,a PEG ratio of less than 1means the stock isundervalued, and overvalued
if it is more than 2.

w Stock price going forward
will be affected by the
expected level of profit
during this FY and over the
medium termw For now, the key points ofinterest include the unit
price and # of active
accounts of AD EBiS,monthly sales, quarterly
profit/loss, M&A, andwhen dividend isresumed.

【 Figure 31 】
AdTech-Related Companies
Code
2159
2389
2461
2491
3134
3655
3688
3690
3923
4293
4395
4751
4784
6026
6045
6081
6094
6175
6533
6550
6553
6562

Company Name
Full Speedstock price reflects the anticipation of future recovery of businessperformance and growth to some extent.
Also, under the assumption that a PEG ratio27 of up to 2 is tolerated andthe medium-term growth rate for the normalized EPS will be 20%, theP/E comes out to be about 40 at maximum (60 if the growth rate is
assumed to be 30%). Calculating back from the current market
capitalization of about Y8.1 billion, we can deduce that the necessary net
profit (after income tax, based on ordinary tax rates for corporate tax, etc.)
is about Y200 million (Y130 million if P/E is 60). With the performancerecovery, the likelihood of the Company exceeding this level of profit
within several years have become greater – in response, the stock price
may also possibly rise sharply.
Looking ahead, we should continue to pay attention to changes in monthly
sales (YoY) as well as quarterly changes in net profit, the effect of M&As
and business acquisitions, when dividend payment is resumed, and theoverall trend of the Internet advertising market. In addition, as the mostimportant management indicators (KPI), we should continue to watch theunit price and the number of active accounts of AD EBiS, which are key
factors to the Company’s sales and indicative of the Company’s growthpotential. It is also speculated that news releases on M&As, businessalliances, new products and services, etc., will also affect the stock price.
Over the medium to long term, the Company's Marketing Robot business,
as well as the Internet advertising market, has much potential for growth;
the Company seems to be in a good position to be able to benefit from thegrowth. Going forward, we hope to continue to see the Company grow as
an AdTech-related and domestic-demand-related growth stock that is notdirectly affected by trade wars and exchange rates.

Comparison of Similar Companies (22 companies related to AdTech, etc.)

Markets: TSE1=TSE 1st Section, TSE2=TSE 2nd Section,
TM=TSE Mothers, JQS=JASDAQBusiness Area
MarketInternet marketing, AdTech (Internet Ad delivery tech)
TSE2

OPT Holding

Internet ad agency / ad measurement toolTSE1

F@N Communications

Affiliate (pay-per-performance) ad

ValueCommerce

Affiliate (pay-per-performance) ad

TSE1
TSE1

Hamee

Mobile accessories / EC cloud support

BrainPad

Internet marketing, data analysis

TSE1
TSE1

CARTA HD

Ad platformTSE1

YRGLM Inc.

Internet ad measurement tool

RAKUS

Cloud service, Email delivery, IT engineer dispatching

TM
TM

SEPTENI HD

Internet ad agency, smartphone marketing support

JQS

AccreteSMS delivery service

TM

CyberAgentInternet ad agency, smartphone, games

TSE1

GMO AD Partners

Internet ad agency and related platform

JQS

GMO TECH

App-installation-type charging ad, SEO

Rentracks

Pay-per-performance Internet ad service

Allied Architects

SNS-related marketing support

TM
TM
TM
TM
TSE1
TSE1
TM
TSE1
TM

FreakOut HD

Internet ad delivery (DSP)

Net Marketing

Pay-per-performance ad agency

Orchestra HD

Digital marketing for companies

Fringe81

Internet ad agency, media monetization support

SoldOut

Web marketing support for mid-tier companies/SMEs

GenieeAutomatic trading of media ad space, AdTech biz

22 AdTech-related companies: simple average
TOPIX (closing price on 12/6/2019): average

Unit: million yen
Market Cap.
8,128
41,46738,15771,286
21,03740,60533,263
8,099
184,025
38,755
4,423
486,110
6,669
2,187
3,781
5,940
26,243
15,47910,006
9,811
20,607
10,42551,242

Sales
21,400ND
34,20024,50010,9496,800
26,0002,750
ND19,0001,600
465,000
35,000
2,900
9,515
4,161
27,00016,302
9,500
7,295
20,00015,572
37,972%O.P.
O.P. Margin
1,350
6.3
ND
3,700
10.8
4,350
17.8
1,092
10.0
1,200
17.6
3,500
13.5
200
7.3
ND
2,500
13.2
270
16.9
30,000
6.5
560
1.6
30
1.0
191
2.0
-103
-2.5
200
0.7
813
5.0
570
6.0
-525
-7.2
850
4.3
23
0.1
2,539
6.5

Ratio
P/S
P/E
0.38
10.70
1.12
14.56
2.91
22.87
1.92
25.97
5.97
42.59
1.28
15.16
2.95
48.46
2.04
25.20
2.76
24.20
1.05
53.83
0.19
21.89
0.75
19.17
0.40
49.48
1.43 Loss - NA
0.97
0.95
27.23
1.05
25.40
1.34 Loss - NA
1.03
35.53
0.67 Loss - NA
1.56
28.89
15.93

%
P/B
Dividend Yield
2.18
0.00
1.52
0.00
1.83
3.83
6.35
1.35
5.05
0.50
13.65
0.00
1.47
1.22
7.53
0.00
38.14
0.16
2.38
0.72
4.57
0.00
6.12
0.86
1.31
2.29
2.53
2.61
1.80
1.90
4.62
0.00
5.89
0.00
6.16
0.57
7.82
0.52
8.07
0.00
7.29
1.02
4.22
0.00
6.39
0.80
1.25
1.89
(weighted 2.28)

Closing Price（ 12/6 ）Stock Price
522
1,741
496
2,068
1,307
5,670
1,309
1,271
2,031
279
801
3,845
398
1,987
474
423
1,650
1,052
1,154
995
1,970
582
1,713.36(Ref) Prepared by Alpha-Win Research Dept. from the companies’ websites, securities reports, financial results summaries, and financial results briefing materials.
(Note) Generally, each company’s forecasted values as of the latest financial results disclosure (latest quarterly financial results) or the most recent actual results(BPS, etc.) were used (based on disclosed data available as of December 6). For forecasts disclosed as ranges, as a general rule, the median was used for calculations.
Concerning dividend, if a company has not disclosed a forecast, the previous fiscal year’s actual dividend was used. For the Company, Alpha-Win Research Dept.’sforecast was used. For other companies, values not disclosed are marked by “ND” (not determined) or “-”. The average was calculated using only valid figures.

40/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 12/13/2019

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊

Disclaimers
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by AlphaWin-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented in this Report.
This Report is not to be construed as a recommendation or solicitation of investment. Alpha-Win
shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must maketheir own decisions on all investment matters and take full responsibility regarding theirinvestment.
This Report has been prepared with a focus on objectivity and neutrality based on the analysis ofgenerally accessible public information and supplemental information including interview(s) by the
analyst. Alpha-Win, the writer, and/or other persons involved in the publication of this Report may
already hold, or buy and sell in the future, the stock of the company presented in this Report.
Contents of this Report are based on information current as of the issue date and are subject tochange without notice. We do not warrant or represent that the information in this Report isaccurate, reliable, complete, appropriate, or fit for any purpose and do not accept any
responsibility or liability.
Copyright of this Report belongs to Alpha-Win and no part of the publication may be copied,photocopied, cited, or translated without our consent. For inquiries regarding this Report, please send us
an e-mail to info@awincap.com. However, Alpha-Win and the writer of this Report do not have any
obligation to reply to inquiries. FV20191212-13

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This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.