Earnings Briefing Materials for the First
Six Months of the Fiscal Year Ending
June 30, 2021
July 1, 2020 – December 31, 2020

February 12, 2021
User Local, Inc.
Securities code: 3984
https://www.userlocal.jp/

Initiatives to Promote DX Using Data and AI

Contents

1

Initiatives to Promote DX Using Data and AI

2Company Outline

3

Earnings Outline (1H FY6/21)

4

Future Focus Areas

2

Initiatives to Promote DX Using Data and AI

Increasing Importance of DX Promotion
People's social activities and patterns of consumption
have changed as a result of COVID-19

The utilization of digital technologies is becoming
essential for responding to changes in the businessenvironment and continuing to generate new value
DX (Digital Transformation)
When companies respond to rapid changes in the business environment and utilize data anddigital technologies to transform products, services, and business models based on the needsof customers and society, while at the same time transforming operations themselves, teams,
processes, and corporate culture, and thereby establishing competitive superiority
3

Initiatives to Promote DX Using Data and AI

Support Chatbot Supports DX Promotion
Democratizing AI and contributing to thepromotion of its introduction at many companies
Companies thathave undergone DX

Companies in the middle of DX

Eliminating labor
shortages

Enhancing labor

Supporting DX

Supporting DX

operation

promotion

productivity

Enhancing customer
satisfaction

With strengths related to its low price and ease of introduction, Support Chatbot
can be introduced at all companies, regardless of industry and size

Coordinating withexternal services
4

Initiatives to Promote DX Using Data and AI

DX Promotion with Chatbots
Achieving DX (digital transformation) byautomating helpdesk operations with AI

Customer support
operations

Support forinternal inquiries

E-commerce, recruitment, real estate,finance, education, etc.

Information systems, personnel,
general affairs, accounting, etc.

Support operations can become more
efficient, while also being available 24 hours aday. Chatbots are also effective in eliminating
the number of calls to call centers andreducing waiting times.

Eliminate communication costs by quickly
answering questions related to internal
procedures and operational regulations,such as expense applications.

5Initiatives to Promote DX Using Data and AI

Enhancing Functions for DX Promotion
Strengthening coordination with external communication tools such as Teamsand Zoom in response to rising demand for chatbots in the remote work
environment created by COVID-19

Teams

Zoom

Teams
Slack

Google
Chat

LINE
WORKS

Messenger

LINE

Chatwork

December 2020
Promoting DX at companies through coordination with Google Calendar

Making it possible to change calendar schedules
with chatbots and arrange meeting times

6Initiatives to Promote DX Using Data and AI

Introduction Examples
Ministry of Health, Labour and Welfare (MHLW)
December 2020
Began providing chatbots on special website
for the "Plan for Supporting the Activities ofthe Hiring Freeze Generation" operated by the
MHLW

Okasan Online Securities
December 2020
Support chatbots were adopted on Okasan
Online Securities' website to enhance search
performance and enable 24-hour support forinquiries
7

Initiatives to Promote DX Using Data and AI

User Local Chatbots Also Used at Government Agencies and Local Governments

Tondabayashi City, Osaka

Edogawa Ward, Tokyo

https://www.city.tondabayashi.lg.jp/

https://www.city.edogawa.tokyo.jp/8Company Outline

Contents

1

Initiatives to Promote DX Using Data and AI

2Company Outline

3

Earnings Outline (1H FY6/21)

4

Future Focus Areas

9Company Outline

Management Philosophy

Driving global evolution by
combining big data and AI
Solving social and corporate issues with data analysis andAI technologies
10Company Outline

Product Development to Drive Global Evolution

Data analysis tools
to support corporate digital marketing

AI chatbots
to automate responding to inquiries

Product development and sales utilizing big data, AI, andother IT technologies
11Company Outline

Company Outline
Name
Businesses
Paid-in
capitalUser Local, Inc.
Big data analysis, AI
1,132mn yen (as of June 30, 2020)

Employees

69 (as of June 30, 2020)

Head office

Shiba 5-20-6, Minato Ward, Tokyo
2008 Releases "User Insight" access analysis tool2012 Releases "Social Insight" social media analysis tool

History

2017 Releases "Support Chatbot" support operations support

system2017 Shares listed on TSE Mothers
2019 Listing changed to TSE First Section
12Company Outline

Management and Governance Structure to Drive Global Evolution
Masao Ito, Representative Director
Graduated from the Graduate School of Global Information and Telecommunication Studies, Waseda
University
Assumed his current role while at graduate school, after serving as a writer at Nikkei Business Publications,Inc.; Engineer, Producer, and in the New Business Development Office at Rakuten, Inc.; and Representative
Director at Minna no Shushoku Co., Ltd.

写真

Kazuyuki Watanabe,
Director and COO

Daisuke Iwamoto,Director and CFO

Graduated from the Faculty of Law,
Politics and Economics, Chiba University
Assumed his current role after working
at Rakuten, Inc.

Graduated from the Graduate School of Strategic
Business Administration, Chuo University
Assumed his current role after working at
METAWATER Co., Ltd.

Ryota Matsuzaki,
Outside Director

Taku Ito,
Outside Director

Representative Director of Kibidango, Inc.
Outside Director of Synchro Food Co., Ltd.

Attorney, Midosuji LPC
Outside Director of People Co., Ltd.
Outside Corporate Auditor of CDG Co., Ltd.

Shunsuke Mikami,
Executive Officer

Hiroshi Hongo,
Executive Officer

Graduated from Master's Program in
Computer Science, Systems andInformation Engineering, Graduate
School of Science and Technology,
University of Tsukuba

Graduated from Graduate School of Frontier
Sciences, University of Tokyo

13

Company Outline

User Local Strengths Driving Innovation
1

Providing in-demand services

2

Virtuous cycle of algorithm
improvements

3

Securing tech personnel

4

Big data and AI technology
R&D

5

Continuous growth based onhigh profitability
14

Company Outline

User Local Strengths Driving Innovation
1

2

3

Providing in-demand services
Observing user behavior using tools developed in-houseand creating services tailored to current demands

Virtuous cycle of algorithm improvements
As the number of users increases, the amount and typesof data increase, thereby enhancing AI precision andanalysis capabilities

Securing tech personnel
User Local is a youthful company, with an average
employee age of 27, and many employees with postgrad degrees working on R&D

User
Local

Big data and AI technology R&D
4

5

Promoting the enhancement of our AI algorithms, theapplication of our algorithm to existing services, and the
new development of AI services

Continuous stable growth based on high profitability
Achieving continuous stable growth based on highprofitability and low-cost operations with a client base ofwell over 2,000 companies in a wide-range of industries

15Company Outline

Business Development in Growth Markets of Big Data and AI
Marketing support with big data technologies

Website analysis

Social media analysis

Support automation with AI

Chatbot

16

Company Outline"Accumulation" → "Analysis" → "Visualization" of Large Amounts of Data

Services provided

Big data

PC website

News

Smartphone website

Social media data

Collection

Accumulation
Video data

Image data

User

Analysis
Visualization

Local
Utilization

Automation

Blog

Audio/voice data

Smartphone apps

Other data

17

Company Outline

User InsightAccess analysis tools to make PC andsmartphone websites easier to use
Where was users'
attention focused?

Viewing ratio per area

How much did users read?

Areas clicked

18

Company Outline

Social InsightSocial analysis tool for analyzing social media data

Covers all data required forsocial media marketing

19Company Outline

Enhancement of Marketing Support Services
Enhancement of automation functions to enable the broad utilization of"automatic marketing tools"

Analysis tools

Automatic marketing tools

Measurement, analysis,

Utilization and automation

visualization
Listening

Automatic alerts, report creation

Promotional campaign

Automatic promotional campaign

effectiveness measurement
Content valuation

functionsContent optimization

20

Company Outline

Support Chatbot
An AI tool to automate customer support operations andsupport increases in efficiency and user satisfaction
24-hour real-time responses

Also able to respond to demand related
to inquiries from internal parties working
at homeCan also work with expanded
functionality to enhance the efficiency of
support operations as a whole+ Voice+ Animation+ FAQ websites

21Company Outline

Also Suitable for Dialogue with Voice and Animation

22

Company Outline

Declining Domestic Labor Force is Becoming a Serious Issue'000 people

Up to 14140,000

15-64

65+

120,000
100,000
80,00060,00040,00020,000
0

1990

2000

2010

2020

2030

2040

2050

2060

Source: "National Census Results," Statistics Bureau of Japan up to 2015, and "Population Projection for Japan," National
Institute of Population and Social Security Research from 2020 onward

23Company Outline

Response to Issues Related to the Structure of Society in Japan
Society until the 20th century

Future projection

Enhancing labor
capabilities with AI

In response to the projected decline in the domestic working
population, Local User aims to use data and AI to enhance
productivity and achieve automation
24

Company Outline

Suitable for Various Industries and Operations
Internal use

Information systems
helpdesk

External use

Responding to
e-commerce andreservation website
inquiries

General affairs,
personnel, andaccounting
operations

Call center response
operations

Sales and marketing
supportPublic institution
contact point
responses

25Company Outline

Introduced by Well Over 2,000 Companies in a Broad Range ofIndustries, Thanks to Superior Service Capabilities
Introduction examples
Government agencies, etc.
Government agencies, local
governments, educational
institutions, etc.

Manufacturers
Electronic devices, automobiles, foodproducts, etc.

ICT
Software, information
communications, etc.

Financial institutions
Banks, securities, etc.

Media
Publishing, newspaper companies,
etc.

Other
26

Earnings Outline (1H FY6/21)

Contents

1

Initiatives to Promote DX Using Data and AI

2Company Outline

3

Earnings Outline (1H FY6/21)

4

Future Focus Areas

27

Earnings Outline (1H FY6/21)

1H FY6/21 Earnings Summary● Net sales and profit at each stage exceeded the same periodof the previous year
Net sales

973ｍn yen (25.3% YoY)

Operating profit

450ｍn yen (25.1% YoY)

● Making good progress on full-year targets for net sales andeach stage of profit
Net sales progress ratio

50.6%

Operating profit progress ratio

58.5%● Actively investing in R&D in order to develop new services

28

Earnings Outline (1H FY6/21)

Outline of Earnings Performance in 1H FY6/21
Net sales increased 25.3% YoY, and operating profit increased 25.1％ YoY(mn yen)

Net sales
OperatingprofitOrdinary
profitProfit1H FY6/20

1H FY6/21

YoY change

776

973

+25.3%

360

450+25.1%

330

447+35.2%

206

279+35.4%

29

Earnings Outline (1H FY6/21)

1H FY6/21 Net Sales(mn yen)
2,000
1,800

1,667

1,600

1,333

1,400
1,200

966

1,000

520

600
400

0

973

783

800

200

1,099

157
FY6/12

217

FY6/13

2Q

348

FY6/14

FY6/15

FY6/16

FY6/17

FY6/18

FY6/19FY6/201H
FY6/2130

Earnings Outline (1H FY6/21)

1H FY6/21 Ordinary Profit and Ordinary Profit Margin(mn yen)
900

46.0%

800
700

40.0%

41.4%

41.4%

41.7%

39.7%

39.0%

0.4

0.4

529

0.3

467

500
400

327

300

447

54

87

0.3

377
0.2

0.2

215

200

0

39.5%

658

34.6%

600

100

0.5

42.5%

2Q

144

0.1

0.1

0.0
FY6/12

FY6/13

FY6/14

FY6/15

FY6/16

FY6/17

FY6/18

FY6/19FY6/201H
FY6/2131

Earnings Outline (1H FY6/21)

1H FY6/21 Profit and Net Profit Margin(mn yen)
600

0.3

500

24.4%
400

25.1%

26.1%

25.6%

27.0%

28.7%

27.4%
24.4%

25.2%

419

20.2%

301

300

325

260

279

0.2

2Q

0.1

201

200

135
100

31
0

0.2

53

87

0.0
FY6/12

FY6/13

FY6/14

FY6/15

FY6/16

FY6/17

FY6/18

FY6/19FY6/201H
FY6/2132

Earnings Outline (1H FY6/21)

1H FY6/21 Financial Position
Net assets increased 311 mn yen, and the equity ratio remained
high, at 90.1％(mn yen)

FY6/20

Amount ofYoY change

1H FY6/21

4,211

4,515

+304

207

198

△9

Total assets

4,419

4,713

+294

Current liabilities

481

464

△17

Non-current liabilities

-

-

-

Total liabilities

481

464

△17

Net assets

3,938

4,249

+311

Current assets
Non-current assets

33

Earnings Outline (1H FY6/21)

1H FY6/21 Progress Toward Earnings Forecasts
Made good progress toward full-year targets for net sales and each stage of
profit(mn yen)

FY6/21 earnings
forecast

1H FY6/21

Progress

Net sales

1,923

973

50.6％

Operating profit

769

450

58.5％

Ordinary profit

769

447

58.1％

Profit

500

279

55.8％

34

Earnings Outline (1H FY6/21)

Number of Introductions Increasing in line with Increase in Services

Achieving sustainable growth by developing
new services
2017
Released Support Chatbot

AIrelatedContracts

2012
Released Social InsightSocial media analysis

Website analysis

35

Future Focus Areas

Contents

1

Initiatives to Promote DX Using Data and AI

2Company Outline

3

Earnings Outline (1H FY6/21)

4

Future Focus Areas

36

Future Focus Areas

Will AI Compete with Humans in Future?

VS.
Human doctor

AI doctor

VS.
Human attorney

AI attorney
37

In Fact, Competition will be Between People who Use AI

Future Focus Areas

and Those who Do Not
Hospital using AI

Hospital without AI

VS.
Attorney without AI

Attorney using AI

VS.
38

Future Focus Areas

Hiring AI Engineers and Strengthening Internal Education
There will be solid progress in the development of AI technologies
and their application in society over the next 10 years

In response to this demand, User Local will
increase the proportion of AI engineersamong in-house engineers to 70% (target for
FY6/21)

AI engineer tasks

30％

70%

・ AI algorithm development
・ Combining algorithms andimplementing them in products
・ Coordinating with cloud and edge
computing39

Future Focus Areas

Three Focus Areas(1)

Expansion of in-house AI algorithms(2)

Application of AI algorithms toexisting services(3)

New development of AI services

40

Future Focus Areas

Create Products from New Combinations of Individual AI Algorithms

Individual AI
algorithms

Big data andprocessing
infrastructure
already heldMore sophisticatedversions of existingproducts

Existing product line-up

New AI services

41

Future Focus Areas

Three Focus Areas(1) Expansion of in-house AI algorithms(2) Application of AI algorithms toexisting services(3) New development of AI services

42

Future Focus Areas: (1) Expansion of In-house AI Algorithms

Expansion of In-house AI Algorithms (Language and Image Processing)

Position inference AI

Line of sight inferenceAI

Expression InferenceAI

Automatic detection of skeletal
movement

Automatic detection of changes
in where one is looking

Reading of emotions fromfacial images

Facial recognition AI

Automatic text
summarization AI

Personal information
processing AI

Age and gender identificationfrom facial images

Extraction of key passages
from text

Processing of personal
information

43

Future Focus Areas (2) Application of AI Algorithms to Existing Services

Three Focus Areas(1) Expansion of in-house AI algorithms(2) Application of AI algorithms toexisting services(3) New development of AI services

44Three Focus Areas: (2) Application of AI Algorithms to Existing Services

Introduction of AI Algorithms in Big Data Analysis Products
Automatic forecasting of future
growth in page views and fannumbers

Optimization of content based onhashtag recommendations

Strengthening User Insight and Social Insight analysis capabilities45

Three Focus Areas: (2) Application of AI Algorithms to Existing Services

Introduction of AI Algorithms in Text Mining Tools
Application of emotional recognition basedon deep learning to text mining

AI uses text mining tools to process the results of surveys andcomment and review text, thus supporting marketing46

Future Focus Areas: (3) New Development of AI Services

Three Focus Areas(1) Expansion of in-house AI algorithms(2) Application of AI algorithms toexisting services(3) New development of AI services

47

Future Focus Areas: (3) New Development of AI Services

Character Analysis AI
All-in-one AIs capable of analyzing people's actions, expressions, attention, voice, andother information in a cross-sectional, multifaceted manner
By combining multiple functions, theseAIs can be used in various industries(Main utilization examples)

Store and facility visitor analysis
Genderinference

Age inference

Emotioninference

Identify
verification

Movie, game, and other content assessment
Attention and head
position inference

Emotioninference

Voice andemotionrecognition

Assessment of communication operations
Emotioninference

Voice andemotion inference

Teams

Sports, medicine, and healthcare fields
Position
inference

Education field
Position
inference

Emotioninference

Attention and head
position inference

Text emotion
recognition

Crime prevention and monitoring
Position
inference

Emotioninference48

Future Focus Areas: (3) New Development of AI Services

Character Analysis AIs: Example Usage

49

Future Focus Areas: (3) New Development of AI Services

Position Inference AI
Since 2020, the HULFT Track and Field Team at Saison Information Systems
has implemented analysis using "position inference AI," in order to enhance theefficiency and quality of data analysis

50

Future Focus Areas: (3) New Development of AI Services

AI for Automatic Classification of Document Categories
If document data is entered on a web browser, the AI immediately
automatically assesses what category the content matches and visualizes thisinformation in a radar chart

51

Future Focus Areas: (3) New Development of AI Services

Automatic Online Meeting Minutes Creation Service
Not only can this service automatically create minutes of online
meetings, which previously required significant work, but it can alsovisualize the flow of the meeting with text mining technology(1) Capable of voice recognitionof multiple speakers(2) Visualizes what sort of
topics came up frequently
during the meeting withtext mining(3) Able to assess the emotions
and positive/negative
sentiment in chronologicalorder with deep learning

52

Future Focus Areas: (3) New Development of AI Services

Voice Emotional Recognition AI for Reading Emotions from Voices

User Local has begun offering a "voice recognition AI" free ofcharge. This AI uses deep learning to read emotions from voices

53

Future Focus Areas: (3) New Development of AI Services

Cheating Prevention AI
Deep learning identifies cheating in exams
Uses attention inference, skeletal inference, and facial detection AI

For on-site exams

For online exams

Camera video is used to automatically detect identity fraud and cheating
54

Future Focus Areas: (3) New Development of AI Services

Self-driving AI Training / Car Image Processing AI
User Local holds seminars on developing skills for self-driving
software development and deep-learning technology application

Joined MONET Consortium
MONET Consortium
MONET Consortium is an organization established by MONET Technologies Inc., a joint venture
whose investors include SoftBank and Toyota Motor. MONET Consortium promotes
coordination between companies with the aim of promoting next-generation mobility services,
finding solutions to social issues related to transportation, and new value creation.

55

Future Focus Areas: (3) New Development of AI Services

Self-driving AI Training / Car Image Processing AI
The AI recognizes only the target vehicle and blurs number
plates and the background
Before processing

Assessment processing

After processing

Joined MONET Consortium
MONET Consortium
MONET Consortium is an organization established by MONET Technologies Inc., a joint venture
whose investors include SoftBank and Toyota Motor. MONET Consortium promotes
coordination between companies with the aim of promoting next-generation mobility services,
finding solutions to social issues related to transportation, and new value creation.

56

Future Measures to Accelerate the Growth of User Local

Future Focus Areas

in a Non-continuous MannerContinuously strengthen product lifecycles to create

new corporate value(1) R&D(2) Hardware(3) Actively expanding(Creation of new services)

investment

sales(Servers, SSDs, and GPUs)(Strengthening personnel andboosting awareness)

57

Future Focus Areas

Product Lifecycles
Entering new fields becomes possible with the growth of existing services
FY6/09~Upfront

Profitinvestment

contribution

Website analysis

FY6/12~
Upfront

Profitinvestment

contribution

Social media analysis

FY6/17~
Upfront

Profitinvestment

contribution

Chatbot

58

Future Focus Areas

Product Lifecycles
Entering new fields becomes possible with the growth of existing services
FY6/09~Upfront

Profitinvestment

contribution

Website analysis

FY6/12~Social media analysis

Upfront

Profitinvestment

contribution

FY6/17~
Upfront

Profitinvestment

contribution

Chatbot

AI product R&D(Natural language processing
and deep learning)

FY6/18~Upfront investment

59

Future Focus Areas

Expanding the Areas where Big Data and AI are Utilized

Future areas

Automatic text

Public administration

E-commerce customer

processing

supportservice support

Robot controls

Education support

Existing areas

Data aggregation

Website UXSocial media

and visualization

measurement

operation support

Fraud detection

Internal

management tools
アイコンContent

Image

Automatedassessment

recognition

responses

Privacy protection

Sales andmarketing support

60

Future Focus Areas

Virtuous Cycle of Algorithm Improvement from Increase in Users(1) Users
increase

Service quality
enhancements(2) Amount andtypes of data
increase(3) AI precision andanalysis capabilities
improve・ Machine learning
・ Deep learning
・ Natural language
processing
technology

61

Future Focus Areas

Promoting the "Democratization of AI"
Current status

TargetCertain companies overseas
have a monopoly on supply
Only companies withsignificant financial resources
can utilize AI

Drive evolution toward aworld where citizens enjoy
the benefits of automationand enhanced efficiency
from AI

Only some engineers canenjoy the benefits of AI

62

Future Focus Areas

ESG and SDG Initiatives
Enhance corporate value over the long-term by actively focusing on issues
related to ESG and SDGs
Main initiatives

Environment

Related SDGs

Introduction of energy-saving facilities

Move toward paperless operations

Social contribution through tools

Socialdeveloped in-house

Nurturing of diverse human resources

GovernanceThorough implementation of information

security measures63

Caution Regarding These Materials
User Local, Inc. (the "Company") created these materials to aid investors' understandingof the Company and circumstances currently surrounding the Company.
The information herein is based on generally accepted economic, social, and other trends
and certain assumptions judged reasonable by the Company, but it may be subject tochange without notice owing to changes in the business environment and other factors.

The materials and information provided in this announcement include so -called "forwardlooking statements."
These statements are based on current assumptions that include a degree of projection,
forecasting, and risk. They contain uncertainties that may lead to results that differ
substantially from the content of these statements.
These risks and uncertainties include general industry and market circumstances,
together with general domestic and international economic circumstances, includingchanges in interest rates and foreign exchange rates.
The Company bears no obligation to update or amend the "forward -looking statements"
herein, even in the event of new information or events occurring in future.

64

Origins of the company name
"User Local" incorporates the idea of a place where various tools are kept, in the same way as the "/usr/local" folder ona hard disk. At the same time, it also incorporates the idea of a "company that is close (local) to users."