Medium-Term Business Direction:
Wacom Chapter 3 Update
Secondary Report(The excerpt from Business Report announced on May 11, 2023)

Wacom Co., Ltd. (Prime Market, TSE Code: 6727)
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Technology Leadership

Tech. Innovation forsustainable society

Community Engagement
Wacom
Chapter 3

5 key initiatives

Meaningful Growth

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New core technology,
New core value proposition2

Summary of the 2nd Update Report of Wacom Chapter 3••

We set FY03/24-03/25 as “the period for transformation of business structure” and connect with further growth in Wacom Chapter 4 (FY03/26-03/29).
During FY03/24-03/25 amid projection of severe economic environment forward, we focus on “gross profit improvement” towards Wacom Chapter 4.

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2
Re-new of Products
Portfolio and GP
improvement①New value proposition②Price contributing GP③Cost reduction byvalue engineering

5Market development
in focused area
①Creative education②New workflow(remote/virtualization)③Solution based value
proposition

6
Expand customers
and pen & ink use case①de-facto standard②original HW(system/
pen/service) will be
developed to expand
the pen/ink use case.
2nd report

3

Enhance sales
channel management①Enhance B2B-Solution based sales-Direct engagement with
B2B customers②Enhance e-store-experience based sales-User engagement.

2nd report

Improveinventory management①Target to reduce 1/3
of current inventory(by the end of FY03/24)②Minimize additional
order of excessed items③Enhance monitoringof order status

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7Market developmentin General education① Solution
development for
general education②HW+SW+service will
be delivered as total
value proposition

4

Capital management
Return to shareholders①Capital allocation &investment for future②Additional treasury
stock acquisition(up to 10 billion yen
in additional)
2nd report

New service businessdevelopment①New service in 3 area
(A.I., XR and Security)②Investment plan.

Wacom Chapter 4(FY03/26-FY03/29)
・Double digit OP%from FY03/26
onwards
・New service businessofficial launch from
FY03/26 onwards

2nd report
Branded Business

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Short term goal:
Turn around of
Branded business in
FY03/24

All Corporate

Technology Solution Business3

1 Re-new of product portfolio and GP improvement

・Wacom Yuify service β started. (for IP protection)① Enhance value proposition of products portfolio
・Re-new all product portfolio of Branded business in FY03/24-FY03/25.
・All line-up will be enhanced including entry models on top of “pro products” already re-new started.
・New category of hardware product and new service solution for user experience will be added newly.
・Effect of strategic pricing is
implemented in FY03/24 business plan.

High End zone

②Pricing policy contributing to GP
improvement

Creative Pro
Higher creative education

・Pricing strategies to reflect cost increase
Service
Solution

Middle zone＋

Solution for remote workflow
Solution for protecting
Creators IP.

Creative Pro
DX in workflow
Higher creative education
High Armature＋New
category
products(already started in each region with caring
sales promotion period)
・Pricing of new products reflects value added
to each product.
・Some components are revised. (somecurrent model is reflecting this revision)

Entry zone
beginners
Art education

All Rights Reserved. Copyright © 2023 Wacom Co., Ltd③Improve cost structure by VE
・Task force approach co-worked by engineering andsupply chain teams.
・Improve the current model cost structure by runningchange (reviewing structure and components)4

2 -①Market development in focused area : Creative education
Regarding the access to education market by Branded Business, define “Creative Education” as theentrance of the market and the internal resource will be focused to this field.
••

Deliver the solution for Higher education sectors for creators (Career Tech Education, University)
Deliver the solution for K12 art education as the starting experience of creators and STEAM experience.

Enhancement/Focus

Curriculum
Developmentwith products(with partners)

Supporting
SW Tool(joint development with
SW partners)

Creative Education Potential market
・150M+ students (global)(High education & K12 art class)
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B2B channel
enhancement(regional enhancement)

Programsupporting
individual
learning
experience

Individual
purchase
support program
through e-store

Integration of Creative BU & Business
Solution BU into ONE BU as B2B teamenhancement.
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2 -②Market development in focused area : Remote/virtualization workflow
Focus the new trend of “ remote creative workflow and virtualized creative workflow” and establish
Wacom products and technology positioning as expanding business.
••

Deliver the solution enables seamless experience in creative remote workflow.
Deliver the new value proposition in virtualized creative workflow.

Enhancement/Focus
Driver Software
Technology
Optimized forremote workflow

Solution forminimizing
latency by remoteenvironment

Remote/virtualization market potential
・approx.5-10% of Creative workflow market.
・High growth rate 40%+ as strategic market.
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Strategic
engagementwith partners of
remote workflow
environment

Define the newvalue propositionin virtualized
environment

Beta version of remote solution has been launchedwith partners in 1st half of FY03/24. Targeting
commercial version launch in 2nd half of FY03/24.
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3Enhance sales channel management : B2B/e-store
Enhancement of B2B and e-store channel will be required for direct engagement with customers andusers which is mandatory for solution-based value proposition. Strategic pricing and optimizing channel
margin will contribute the improvement of gross profit.
••

Enhance B2B channel : Market development of creative education and new creative workflow.
Enhance e-store channel : Maximize the touch points with users and regional customization and new service
software implementation such as protection of creators’ IP.
*B2B : direct business with registered corporate/enterprise/Agency.
e-store : Wacom own e-store (Wacom Store). Engaging directly with users.

Enhancement/Focus
B2B

Solutiontechnology
for B2B as value
Proposition

B2B

B2B

Integration ofB2B talents
and resource

Enhancefield support
as solution
provider(ex. Remote service)

Current B2B business is around 25% (all Branded business)→ FY03/24 target : 30%+/-, further target will be definedin following fiscal years.

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Technology
forengagement

Platform
Enhancement for
flexible/regional
management.

(ex. Protection of IP)

Current e-store % is around 10%→FY03/24 target : 15%+/-, further
target will be defined in following years.

Integration of Creative BU and Business Solution BU into
ONE BU as optimized and enhanced B2B team.

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4

Improvement of inventory management
Target around 10 billion yen reduction by the end of FY03/24 comparedwith the end of Q3 FY02/23 (Dec. 2022)•••

Detail management of promotion for sell out and new product launch balance.
Minimizing the additional order for excessed materials.
Enhance the monitoring management of each gate for placing order.

7.6 billion yen* reduction (end of FY03/23) by corrective action.
B yen 350 ・Achieved
・Detailed bi-weekly of purchasing planning will target 20-30% DOI improvement.
30 ・Monitoring scheme with “Purchase confirmation session across regions”.
300
35

250
25
200
20
150
15
100
10
50
5
00

Achieved
reduction
TargetEnd
of FY36FY36末(FY03/19)

End
of FY37FY37末(FY03/20)* Including de-value and disposal of inventory.

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End
of FY38FY38末(FY03/21)

End
of FY39FY39末(FY03/22)

FY40
End of12月末
FY40 Q3(Dec. 2022)

End
of FY40FY40末(FY03/23)

Targetby the end
FY41末目標of FY41(FY03/24)* Inventories were evaluated at the end of each FY (quarter-end), andthe target will fluctuate due to changes in FX rates, etc.

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5Technology Solution: Expansion of customers
portfolio and pen/ink use case・Drive “De-facto standardization of Wacom technology” to maximize customers portfolio.
・E2E* Platform business model will be added which will deliver E2E pen experience withoriginal hardware (system/pen) and application/service to expand the pen/ink use case.
- On top of delivering technology module to OEM customers, E2E pen experience will open up new customer segment.
*E2E (End to End): Deliver the full pen experience to customers
according as specific pen use case with semi-completed solution, notonly just component and technology module delivery.

Enhancement/Focus

Continuous
innovation of criticalelement of pen
experience(IC/Pen/Sensor/SW)

Establish partner
community withlicense model(OEM customer can choose
non-Wacom IC: only AES
case)

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Deliver application
supporting specificuse case with digital
ink technology.
(note taking, sketching,learning support etc.)

Develop Pen specificplatform including
System/Pen/Apps/
Service as E2E
experience96Technology Solution: Expansion of general
education market
・Deliver educational solution for general education through OEM customers portfolio.
・Deliver the experience supporting each students learning with combination of hardware
and service software.

Enhancement/Focus

Establish the position
EDU field by withcustomers
education device(small garage pen, water
proof, optimized cost etc.)

Prove the benefit ofdetail ink in education
with Ed tech partners,
and try to expand to
public EDU field.

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Develop Digital ink
based service will bedelivered to support
adaptive learning
experience.
(across-region)

Develop Pen specificplatform including
System/Pen/Apps/
Service for general
education learning
experience107 Policy for Capital & Shareholders Return (FY03/2024- FY03/2025)
Policy for Capital Allocation
We will strive to focus on growth investment and strategic investment to create future corporate
value. In addition, we will aim to implement shareholders return from the perspective of capitalefficiency through financial leverage, ensuring financial soundness.
Cash outflow
Ordinary investment to continue ourbusiness such as metallic mold and tools,
etc.

R&D investment to be recorded in profit
and loss for the period
Capital cost consciousness
Investments for fixed assets such as
capital investment and IP acquisitions
Our priority is to maintain a stable per-share
dividend even with the attainment of ourguideline approx. 30% payout ratio.
Under the policy of treasury stockacquisition up to JPY 15 bn, we announced
to acquire treasury stock up to JPY 2 bn
today
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Cash inflow

Capital investment

Growthinvestment

We aim to increase operating cash
flow by improving gross profit andreducing inventory, etc.

Operatingcashflow（excl. R&D cost)

Operating profit (excl. R&D cost）
Normalization of inventory level

Strategic
investment
Shareholders
returnFinancial leverage,etc.

We will utilize financial leverage up
to a debt-to-equity ratio around 0.3
to 0.5, ensuring financial
soundness.
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7 Shareholders Return Policy for FY 03/24
Treasury stock acquisition and cancellation•

Based on “Wacom Chapter 3”, we recognize shareholder return as one of the most importantmanagement issues, and proposes to implement it upon comprehensive consideration of thecurrent investment opportunities, capital efficiency, etc.

Formulated a policy regarding additional treasury stock acquisition to improve
capital efficiency
In accordance with the resolution on January 31, 2023, we will accumulate treasury stockacquisition up to a total acquisition cost of JPY 20 billion during the period of “Wacom Chapter3”, utilizing interest bearing liabilities while taking financial soundness into account.
➢ The resolution on May 12, 2021*
・Formulated a policy for acquisition of treasury stock up to JPY 10 bn. from May 13, 2021 to March 31, 2025.
・Acquired treasury stock to a total amount of JPY 5.0 bn by March 31, 2023.*➢

The resolution on January 31, 2023*
・Formulated a policy for additional acquisition of treasury stock up to JPY 10 bn. by March 31, 2025.

➢

In case of implementation of specific acquisition of treasury stock, pursuant to Article 156 of Japanese Companies Act, ofwhich application is defined by both paragraph 1, Article 459 of the Companies Act and provisions of the Company’s
Articles of Incorporation, we will disclose after resolution at a meeting of Board of Directors.

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• Refer to each timely disclosure materials for details.

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7 Shareholders Return Policy for FY 03/24
Resolved Acquisition of Treasury Stock*Total number of shares to be acquired : Up to 4 million shares equivalent of 2.56% of outstanding
shares (excluding treasury stock)Total acquisition cost: Up to JPY 2 billion
Acquisition period: From May 12 to September 29, 2023

• Refer to the timely disclosure materials for details
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8

New service business development
R&D breakdown

Product
Development
Product/Technology module
development

Digital Ink/SW
Development
New core technology,、
Digital ink technology(AI, XR, Security, Remote).

approx.25%

approx.50%

Platform
Development

Digital Ink
ServiceThree Value proposition
generatedby common
technology
development

BrandedBusiness

Technology
Solution
Business

ASIC, Firmware, sensors

approx.25%
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Each business isleveraging each other14

8 Development digital ink service business
•
•
•
•
•
B yen

Transformation of “Hardware only business to Experience delivery business”.
Hardware business will be also driven by services experience as value addition.
Target to reach 5 billion yen scale with higher GP%.
FY03/24 will deliver actual business for lessons learned even with small scale.
Target to start booking ARR (Average Recuring Revenue) from FY03/26
Growth image of digital ink service : Revenue

6・Core component of service- AI, XR, Security related service- Solution for remote environment

5・Commercial service starts in FY03/24- Education service for Z-kai- Solution for remote environment

43・Growth driver will be education service.

2

1

0
FY03/24

FY03/25

FY03/26

FY03/27

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FY03/28

FY03/29

・ In XR service, on top of branded productsolution such as “Wacom VR pen”,
technology module business will be alsoplanned for OEM customers.
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Wacom Chapter 3
Update of Financial Policy Guidelines

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Financial Policy Guidelines•

Business efficiency➢ ROIC: recover to 10% or more in the fiscal year ending March 2025 as a guidefor business management (Prior to update: approximately 25-30%)
ROIC = Net operating profit after tax / Average of (Net working capital＋Business assets*) at the beginning and endof the term
*Business assets：Tangible fixed assets＋Intangible fixed assets＋Other assets (of which are defined as business use)•

Capital efficiency➢ ROE: assume approximately 10-15% in the fiscal year ending March 2025
(Prior to update: approximately 20%)

Shareholder return•➢

Strive to maintain a stable per-share dividend even with the attainment of our guideline
approximate 30% consolidated payout ratio, subject to also maintaining appropriate financial
soundness.
Flexibly consider treasury stock acquisition as a means of realizing capital efficiency withrespect to portions not covered by dividend payments, taking into account investment
opportunities and financial conditions.

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Wacom Chapter 4 direction

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Chapter 4 growth image (revenue)
180

160

B yen

Digital Ink service
Technology Solution Business
Branded Business

Digital ink service
Commercial service starts in FY03/24
Target to ramp up in FY03/26

potential①AI ②XR ③Security ④Remote

Total business
Target 150B yen(+/10%)
Drive business with 10%
OP range in Chapter 4

140

120

Technology Solution
New Platform businessmodel will be activated100(system/pen/application/service)

Target 5B yen scale ofdigital ink service withhigher GP%, which will
drive HW business too.

80

60

Technology Solution and
Branded Businessleverage each other with
common technology
platform

40

Branded Business will
focus specific use casewith the best class pen
experience as Wacom
symbol.

20

0FY03/20

FY03/21

FY03/22

FY03/23

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FY03/24

FY03/25

FY03/26

FY03/27

FY03/28

Chapter 4

FY03/29

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Chapter 3+Chapter 4 Operating profit image
B yen
16

Total Corporate business
Target OP 10% range ofbusiness in Chapter 4

14

12

Branded Business seg.
profit will be reached to
30% of total corporate
profit with step by step
recovery

10

8

6

4

2

0
FY03/20

FY03/21

FY03/22

FY03/23

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FY03/24

FY03/25

Chapter 4(FY03/26-FY03/29)

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Market Assessment

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Sustainable market domain for digital pen(double digit growth)

DigitalContents
Creation

Education DX
Edtechmarketmarket13.5%

CAGR(2022-30)
25 billion US$
2022
Source : Grand View Research
Global Digital Content
Creation Market Size

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13.6%

CAGR
(2022-30)
142 billion US$
2022
Source : Grand View Research
Education Technology(EdTech)WorkflowDXmarket16.9%

CAGR(2022-25)
200+ billion US$
2022
Source : IDC
FutureScape : Worldwide Digital Business
Strategies 2023 Predictions

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Market assessment : Creative Workflow

Creator Definition :Creating the original contents and share them via on-line.

Total Creator
Growth rate5%-10%2022 Creative workflow market estimation (# of seat)
TAM : Total Addressable Market
SAM : Serviceable Available Market

Pro 20-30%, armature 70-80%

TAM

900M+
seat

Visual Related

SAM 1

450M+
seat

High potential forPen related creative(illustration,animation,photo/movie
edition, graphics etc..)

SAM 2

60M-90M
seat
Remote user
(within SAM2)
small scale at this moment,
but expected high growth (40%+)

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Data source : Wacom estimation
Adobe Creators in the creator economy 23

Market assessment : Creative Education
Worldwide K12 students
TAM

2B+ seat

SAM 1

Accessible tointernet

650M+

Double digits growth
will be expected

seat
SAM 2

150M+
2022 Creative Education (seat #)TAM : Total Addressable Market
SAM : Serviceable Available Market

seat

Art class / Creative related(Assumption :around 25% of SAM 1)
Data source : Wacom estimation
UNICEF ITU report

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Disclaimer
Forward-looking statements regarding future events and performance contained in thispresentation are based on currently available information and involve risks and uncertainties,
including macroeconomic conditions, trends of the industry in which the company is engaged
and progress in new technologies. Please note that actual results could materially differ fromthose expressed or implied by the forward-looking statements in this presentation due tothese risks and uncertainties.
Investor Relations Inquiries
Wacom Co., Ltd.
Sumitomo Fudosan Shinjuku Grand Tower 31F,
8-17-1 Nishi-Shinjuku, Shinjuku-ku, Tokyo
160-6131, Japan
https://investors.wacom.com/en-jp/

All company names and product names are trademarks or registered trademarks of their respective owners.
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