COMPANY RESEARCH AND ANALYSIS REPORTScala, Inc.
4845
Tokyo Stock Exchange Prime Market

17-Apr.-2023
FISCO Ltd. Analyst

Yuzuru SatoFISCO Ltd.
https://www.fisco.co.jp

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

Scala, Inc.
4845 Tokyo Stock Exchange Prime Market

17-Apr.-2023
https://scalagrp.jp/en/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Overview of 1H FY6/23 results. . ...................................................................................................................

01

2. Outlook for FY6/23.. .....................................................................................................................................

01

3. Progress of the mid-term management plan. ...............................................................................................

02■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. History................................................... ......................................................................................................

03

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

05

3. Management mission...................................................................................................................................

09■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 10
1. Overview of 1H FY6/23 results. . ............. ......................................................................................................

10

2. Trends by business segment. . ......................................................................................................................

12

3. Financial condition and business indicators.................................................................................................

18■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 19
1. Outlook for FY6/23.. .....................................................................................................................................

19

2. Progress of the mid-term management plan. ...............................................................................................

22■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 23

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

Scala, Inc.
4845 Tokyo Stock Exchange Prime Market

17-Apr.-2023
https://scalagrp.jp/en/ir/■ Summary
Co-creation projects being launched for healthcare and social
solutions; performance moving toward a next stage of growth
Scala, Inc. <4845> (hereinafter, “the Company”) is a holding company that creates and provides value for making
society more abundant and making people’s lives better through DX infrastructure. The Company, through its
subsidiaries, engages in the IT/AI/IoT/DX Business, Customer Support Business, HR & Education Business, EC
Business, Insurance Business and Incubation & Investment Business. Using M&A to expand its business domain andcreate synergies as one of its growth strategies, it is promoting proactive business operations to achieve the results
target (revenue of ¥500bn in FY6/30) promoted in COMMIT5000, its mid-term management plan. The Company
moved its listing to the Tokyo Stock Exchange (TSE) Prime Market in line with the TSE’s transition to new market
segments in April 2022.
1. Overview of 1H FY6/23 results
In ongoing businesses* in 1H FY6/23 (July–December 2022), revenue increased 52.7% year on year (YoY) to¥6,504mn and operating profit totaled ¥140mn (a loss of ¥78mn in the same period of the previous year). Personnel
costs went up due to an increase in co-creation development projects and upfront investment in new services also
increased, which led operating profit to fall short of the Company’s forecast (¥400mn), but revenue progressed
according to plan. Along with double-digit revenue growth in the EC Business and HR & Education Business,
EGG CO., LTD. and Nihon Pet Small-amount Short-term Insurance Company, which were made subsidiaries in
4Q FY6/22, also contributed to the revenue increase. At the same time, profits increased thanks to higher profits
in the EC Business, HR & Education Business, and IT/AI/IoT/DX Business and to a smaller loss in the Incubation& Investment Business. When based on the non-GAAP indicator that excludes temporary costs, operating profit
increased 116.5% YoY to ¥140mn.
*	Consolidated subsidiary Scala Works Inc. was classified as discontinued operations as a result of being discontinued anddissolved in 4Q FY6/22. For this reason, year-on-year comparisons of revenue and operating profit are based on ongoing
businesses.

2. Outlook for FY6/23
For FY6/23, the Company maintains its initial forecasts which call for revenue to increase 29.8% YoY to ¥13,000mn
and operating profit to total ¥1,000mn (a loss of ¥393mn the previous year). Revenue is projected to benefit froma full fiscal year’s contribution from EGG and Nihon Pet Small-amount Short-term Insurance Company as well as
expected continued growth in the EC Business and HR & Education Business. In addition, multiple new services
are being launched in healthcare, and these are expected to contribute to revenue. With regard to profits, temporary
costs recorded in the previous period will not be incurred this period and there is expected to be profit growth fromthe IT/AI/IoT/DX Business, HR & Education Business and EC Business. However, profits could fall short of forecasts
due to increases in personnel costs and upfront investment. In the Insurance Business, the Company is reforming
the business structure to strengthen profitability and is aiming to return to the black on a monthly basis in FY6/24.

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

Scala, Inc.

17-Apr.-2023

4845 Tokyo Stock Exchange Prime Market

https://scalagrp.jp/en/ir/

Summary

3. Progress of the mid-term management plan
The mid-term management plan COMMIT5000 calls for advancement of the value creation support business, IT/AI/
IoT-related business, and social issue-solving business. It targets revenue of ¥500bn and operating profit of ¥50bn
in FY6/30 (and revenue of ¥100bn and operating profit of ¥10bn in FY6/25). The plan positions the public-private
co-creation and healthcare as particular areas of focus which the Company intends to actively develop. In public-private co-creation, the Company is projecting an increase in new projects through the Gyaku Propo (reverse publicfundraising proposals)* matching platform. In healthcare, the Company developed the Smart Healthcare Platform for
health maintenance and promotion and plans to release it in 2023. It aims to expand the business while developing
it out horizontally. Upfront investment over the past one to two years will begin contributing on a full-fledged basis
in FY6/24, so the pace of earnings growth is expected to accelerate.
*	A co-creation service where companies indicate what social issues are interesting to them and local governments propose
ideas and plans for solving issues, and therefore a framework that reverses the conventional process for public offering
proposals and bidding.

Key Points
In 1H FY6/23, revenue increased substantially as a result of M&A and operating profit returned to the black
For FY6/23, profit may fall short of forecasts due to upfront investment, but the pace of growth is expected toaccelerate from FY6/24• Has planted the seeds for growth toward achieving the mid-term management targets; moving to a new growth
stage
•
•

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(¥mn)

(¥mn)

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Note: FY6/21 results are figures for ongoing businesses excluding SOFTBRAIN and its subsidiaries. The FY6/22 results are
figures for the ongoing businesses excluding SOFTBRAIN, its subsidiaries, and Scala Works
Source: Prepared by FISCO from the Company's financial results

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

Scala, Inc.
4845 Tokyo Stock Exchange Prime Market

17-Apr.-2023
https://scalagrp.jp/en/ir/■ Company profile
An IT development and services company that is expanding its
business areas through M&A and continuing to grow
1. History
The Company was founded in December 1991 with an initial start as a sales distributor of database systems. It
realized significant growth in 1999 by inheriting support services, including customers, for the Model 204* mainframe
database management system license from MITSUI KNOWLEDGE INDUSTRY CO., LTD.
*	Database management system (DBMS) that was developed by US-based Computer Corporation of America and Sirius
Software (now, Rocket Software). Customers were large companies in Japan such as the Bank of Japan <8301> andTokyo Electric Power Company Holdings, Inc. <9501>. Demand ceased due to changes in the market environment, andthe service was ended in the fall of 2016.

In 2000, the Company determined that it needed to change its business structure to continue growing amid themigration of corporate information systems from mainframes to client/servers, and started expanding its businessthrough M&A by utilizing funds obtained from its IPO in 2001. It widely developed its own SaaS/ASP services andsteadily increased earnings through its recurring-income earnings model, and as a result, its share listing was
designated to the Tokyo Stock Exchange (TSE) 1st Section in 2014.
As measures toward building a value co-creation platform promoted in the mid-term management plan COMMIT5000
starting in 2019, the Company established Scala Partners, Inc. in July of the same year, and then made wholly owned
subsidiaries of J-Phoenix Research Inc., which provides management consulting and IR support, in October and Grit
Group Holdings Co., Ltd., which provides HR & Education Business, in April 2020. More recently, the Company madesubsidiaries of EGG, an IT system developer, in February 2022, followed by Nihon Pet Small-amount Short-term
Insurance Company, which offers small-amount short-term insurance, in April 2022.
To conduct more flexible management, the Company switched to a holding company organization in 2004, and in
FY6/16, changed its accounting standards to IFRS to disclose its results. The Company moved its listing to the TSE
Prime Market in line with the TSE’s transition to new market segments in April 2022.

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

Scala, Inc.
4845 Tokyo Stock Exchange Prime Market

17-Apr.-2023
https://scalagrp.jp/en/ir/

Company profile

History
Date
December 1991
January 1999

Major event
Founded Database Communications (now, Scala, Inc.)
Formed sales distribution contracts for the Japanese market with US-based Computer Corporation of America and Sirius andstarted Model 204 support

May 2001

Listed on the Osaka Securities Exchange’s NASDAQ Japan market (now, TSE JASDAQ (Standard))

April 2003

Acquired Interscience’s patent management software (product name: PatentManager) with the aim of entering the intellectual
property system field

October 2003
April 2004
September 2004
June 2006
November 2010

Acquired Dbecs Co., Ltd. as a subsidiary to enter the CRM field
Acquired Vodamedia Inc. as a subsidiary with the aim of entering the IVR (interactive voice response) field
Renamed as Fusion Partners Co. in the transition to a holding company structure and established Database Communications(now, Scala Services Inc.) as a new company and transferred its businessMerged subsidiaries Vodamedia and Dbecs and changed the company name to Digi-Ana Communications Inc. (now, Scala
Communications Inc.)
Acquired NewsWatch Inc. as a subsidiary

April 2012

Merged subsidiaries Digi-Ana Communications and NewsWatch (now, Scala Communications Inc.)

May 2014

Listing transferred to the TSE Second Section

December 2014

Shares elevated to the TSE First Section

November 2015

Acquired TriAx Corp. as a subsidiary

January 2016
July 2016

Renamed subsidiary Database Communications as PAREL, Inc.
Acquired SOFTBRAIN Co., Ltd. as a subsidiary

December 2016

Changed trade name to Scala, Inc.

December 2016

Merged the subsidiaries Digi-Ana Communications and TriAx Corp. and changed the trade name to Scala Communications Inc.

August 2017

Acquired plube Co., Ltd. (now, Scala PLAYce, Inc.) as a subsidiary

March 2018

Acquired Leoconnect, Inc. as a subsidiary

October 2018

Acquired Connect Agency Inc. as a subsidiary

November 2018

Established Scala Next, Inc.

December 2018

Established the Scala Next, Inc., Mandalay branch (Myanmar)

July 2019
October 2019
November 2019

Established Scala Partners Inc.
Made a subsidiary of J-Phoenix Research Inc.
Established SCL Capital LLC.

April 2020

Made a subsidiary of Grit Group Holdings Co., Ltd.

June 2020

Invested in MyanCare, a health-tech company in Myanmar that provides remote medical services

August 2020

Established Scala Ace Co., Ltd. as a joint venture with ACE Data Systems Ltd., a major IT company in Myanmar (ownership ratio:
35%)

September 2020

Established Social Studio Inc. as a joint venture with Branding Technology Inc. in order to promote DX to the national and local
governments (ownership ratio: 51%)

November 2020

Developed the reverse public offering proposal service called “Gyaku Propo” specializing in SDGs for companies’ new businessdevelopment

March 2021

Excluded SOFTBRAIN Co., Ltd. from the scope of consolidation due to the transfer its shares

June 2021

Established Scala Truva, Inc.

August 2021

Made a subsidiary of readytowork Co., Ltd.

November 2021

Established SOCIALX, INC.

February 2022

Made a subsidiary of EGG CO., LTD.

April 2022

Moved its listing to the TSE Prime Market in line with the TSE’s transition to new market segments
Acquired Nihon Pet Small-amount Short-term Insurance Company

Source: Prepared by FISCO from the Company’s website and press releases

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04 23

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

Scala, Inc.
4845 Tokyo Stock Exchange Prime Market

17-Apr.-2023
https://scalagrp.jp/en/ir/

Company profile

Engaged in six business segments: the IT/AI/IoT/DX Business,
Customer Support Business, HR & Education Business, EC
Business, Insurance Business, and Incubation & Investment
Business
2. Business description
The Company reorganized its business segments into six segments—IT/AI/IoT/DX Business, Customer Support
Business, HR & Education Business, EC Business, Insurance Business, and Incubation & Investment Business—anddiscloses information on them.
On looking at the Group companies responsible for each business segment, the IT/AI/IoT/DX Business is comprisedof eight companies, centered on Scala Communications, Inc. Of these, Retool, Inc. plans, develops and sells cloud
activity management tools that visualize the various processes in corporate activities, however, its track record of
introductions is still small and its effects on results is negligible. Also, Social Studio Inc. was established in September
2020 as a joint venture with Branding Technology Inc. <7067> in order to support the promotion of DX and SDGs
to the national and local governments. In addition to above, EGG, which became a subsidiary in February 2022, isa pioneer that developed the first core system accompanying the start of the “Furusato Nozei” taxation system*,and its strengths include its network of many local governments (it has a track record of introducing the system tomore than 680 or a third of local governments in Japan).
*	System that enables local government workers to simply and accurately manage donor information and thank-you gifts
and create various related documents.

Leoconnect, Inc., which became a subsidiary in 2018, is engaged in the Customer Support Business, while four
companies in total (the three companies* of Athlete Planning, Inc., which became a subsidiary in 2020, Sports
Stories, Inc., and FourHands, Inc., as well as Broncos20 Co., Ltd. which was made a subsidiary by Sports Stories inMarch 2022) comprise the HR & Education Business. The EC Business is conducted by Scala PLAYce, Inc., whichbecame a subsidiary in 2017, while the Insurance Business is conducted by Nihon Pet Small-amount Short-term
Insurance Company, which became a subsidiary in April 2022. Moreover, the Incubation & Investment Businessare conducted by Scala Partners, Inc., J-Phoenix Research, Inc., SOCIALX.INC, SCL Capital LLC, and the SCSV-1
Investment Limited Partnership. The Group also includes the Company itself as the holding company.
*	These three companies were placed under the umbrella of Grit Group Holdings Co., Ltd. which was made a subsidiary of
the Company in April 2020, but currently exists as the Company’s subsidiaries. Grit Group Holdings changed its name to
Scala Works Inc. and was then liquidated at the end of June 2022.

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

Scala, Inc.

17-Apr.-2023

4845 Tokyo Stock Exchange Prime Market

https://scalagrp.jp/en/ir/

Company profile

Subsidiaries by business segment and business content
Business segment
IT/AI/IoT/DX Business

Customer Support
Business
HR & Education
Business

EC BusinessInsurance Business
Incubation &Investment BusinessSubsidiary
Scala Communications, Inc.
Scala Service, Inc.
Scala Next Inc.
readytowork Co., Ltd.
Connect Agency, Inc.
Retool, Inc.
Social Studio Inc.

Main business
Provision of SaaS/ASP services
Development of SaaS/ASP services, offshore development
Cloud-based PBX services
Planning, development, and sales of cloud activity management tools
Promotion of DX and SDGs to the national and local governments (joint
venture with Branding Technology, Inc.)
Systems development, maintenance, and network construction
Customer support consulting (call center operations, etc.)

EGG CO., LTD.
Leoconnect, Inc.
Athlete Planning, Inc.
Sports Stories, Inc.
FourHands, Inc.
Broncos20 Co., Ltd.
Scala PLAYce, Inc.

HR recruiting (new graduate recruiting, mid-career recruiting) support, etc.
Exercise education, sports school operation, etc.
Infant education, community development support, etc.
Basketball club team management
Management of an EC site for the buying and selling of battle-type trading
cards
Small-amount short-term insurance

Nihon Pet Small-amount Short-term
Insurance Company
Scala, Inc.
Scala Partners, Inc.
J-Phoenix Research Inc.

Group head office, holding company functions, investment business
Innovation, incubation, investment
Value creation management support (creation of analyst and integrated
reports, fund management support)
Planning and operation of the Gyaku Propo public-private co-creation
platform
Investment fund management
Investment fund

SOCIALX, INC.

SCL Capital LLC
SCSV-1 Investment Limited Partnership
Note: As of the end of June 2022
Source: Prepared by FISCO from the Company's results briefing materials

Looking at the composition of sales by business segment in 1H FY6/23, the IT/AI/IoT/DX Business provided 51.0%,
Customer Support Business 9.1%, HR & Education Business 12.5%, EC Business 15.9%, Insurance Business
9.7%, and Incubation & Investment Business 1.8%, making the IT/AI/IoT/DX Business the mainstay business which
accounts for more than half of sales.

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Source: Prepared by FISCO from the Company's financial results

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

Scala, Inc.
4845 Tokyo Stock Exchange Prime Market

17-Apr.-2023
https://scalagrp.jp/en/ir/

Company profile(1) IT/AI/IoT/DX Business
The IT/AI/IoT/DX Business develops and provides various types of IT services, including SaaS/ASP services(i-series), such as inquires via the Internet and telephone, information searches, and applications, and it is working
on increasing profitability and stability through a recurring-income business model. It is also using as a hook its
approaches made through easy-to-understand SaaS/ASP services and the Scala Group’s other business, and it
is advancing initiatives that will lead to orders for new development projects.
As a part of this series of initiatives, it is advancing DX that uses IT/AI/IoT (with a strong awareness of transformation in particular), and in order to accelerate the creation of new businesses and new services and to redefine its
existing business, it is actively advancing collaborations with partners that are experts in related technologies invarious industries. To give an example, for the planning and development of new services to respond to COVID-19
and to advance DX, and for introductions of the main services, it is implementing DX policies focused on regional
local governments and the finance industry, conducting demonstration experiments for next-generation digital
healthcare services through co-creation with a pharmaceutical company and a non-life insurance company, andadvancing initiatives to create services.
Going forward, the Company’s strategy is to accelerate growth by participating in many co-creation development
projects that will lead to solutions for social issues, while for SaaS/ASP services as well, it is projected that there
will be an increase in cases where it provides these services as one development project menu. The fees for
SaaS/ASP services are around ¥100,000 per month, but in the case of co-creation projects, fees are more than
¥2mn per month and it becomes a large-scale, recurring-income business. Lead times from the order to the startof service provision are becoming longer, but operating efficiency is improving, so overall profitability is expected
to increase as co-creation projects increase.
Description of the IT/AI/IoT/DX Business services
Type
Information searches
Content management

Content delivery

Various types ofreception
Inquiry management
Data management
IoT, big data

Product name

Description

i-search

Internal search engine for websites

i-ask

FAQ system

i-catalog

Product site management system

i-linkcheck

Link check services

i-linkplus

Service for displaying links to related pages

i-giftDigital gift service

FresheyeTM

Search portal site

Corporate news services

News distribution service for corporations

SaaS-type IVR

24-hour, 365-day automated voice response

Campaign website construction

Campaign website construction and reception

i-assist

Web chatbot system

i-livechat

Web chat system

PatentManager6

Latest patent management system

GripManager

Contract operations management system

Safe driving analysis

Processing and management of big data

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

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

Scala, Inc.
4845 Tokyo Stock Exchange Prime Market

17-Apr.-2023
https://scalagrp.jp/en/ir/

Company profile(2) Customer Support Business
The Customer Support Business, which is conducted by Leoconnect, provides consulting services for the
management of inbound call centers, from the receipt of inquiries about customer companies’ services andproducts through to the follow-up after responding to inquiries, and its main customers include the HIKARITSUSHIN <9435> Group and its agencies. The Company is currently working to raise call center productivity byprogressively introducing services such as i-livechat, i-assist, and SaaS-type IVR. Also, the Company is working
to improve profitability by constructing its own call centers in Okinawa and acquiring customers from outside of
the HIKARI TSUSHIN Group.
(3) HR & Education BusinessIn the HR & Education Business, about 60% of sales come from the HR business and about 40% of sales comefrom the education business. In the HR business, Athlete Planning provides services including a comprehensive
employment support system for physical education students, a job hunt support service specifically for female
students, and a second career support service for professional athletes. The source of earnings is from theplanning and management of corporate joint briefing meetings to recruit new graduates (including holding events
online). This service starts selling exhibition booths to companies in June every year for events scheduled to beheld from December to March of the following year.
In the education business, FourHands provides educational services with high added value targeting infants toelementary school students. Its services include the Minna no Hoikuen nursery schools, Universal Kids international
combination day care centers and preschool, UK Academy for cultivating an international sensibility among schoolchildren, and Largo KIDS daycare services, such as after-school activities specializing in exercise. Also, Sports
Stories provides sports classes, including the Fine’z baseball schools for children, the BEAUT soccer school, theDunkers basketball schools and Ballschule schools. A feature of these businesses is that they emphasize not
only athletic ability, but also growth of noncognitive skills. Broncos20, which was made a subsidiary by Sports
Stories in March 2022, manages THE SAITAMA BRONCOS, which belong to the third division of the B.LEAGUE
professional basketball league. It has continuously conducted profitable management, and in the future, will focus
on acquiring earnings through methods including managing fan club websites and dispatching coaches for club
activities in schools.
(4) EC BusinessIn the EC Business, Scala PLAYce buys and sells trading cards for battle-type games, and operates Card
Shop - Yuyu-Tei, a reuse EC site with the functions of a capture site. The site has high name recognition in thegaming industry and is influential to the extent that it is used as a reference indicator for the pricing of used cards,
so it is known as the industry’s No. 1 EC shop. From FY6/20, it also started purchases from overseas users andpurchases made by overseas users are on the rise.
(5) Insurance Business
The Insurance Business is conducted by Nihon Pet Small-amount Short-term Insurance Company, which wasmade a subsidiary in April 2022. It provides the Inu to Neko no Hoken (Insurance for Dogs and Cats) insurance for
pets, and the features of its unique insurance products include a 90% reimbursement rate. For the future, it plans
to expand its business from pet insurance into various other insurance areas, such as insurance for individuals
and in the financial area. It is also considering developing a service in the future to support the transfer of risksfacing companies, local governments and others by data analysis and risk analysis that use AI, developed as an
optimal risk transfer technology.

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

Scala, Inc.
4845 Tokyo Stock Exchange Prime Market

17-Apr.-2023
https://scalagrp.jp/en/ir/

Company profile(6) Incubation & Investment Business
The Incubation & Investment Business consists of business investment conducted by the Company and regional
revitalization-related services in collaboration with local governments. It also includes engagement in value creation management support by J-Phoenix Research, new business development by Scala Partners, and regional
revitalization-related services centered on the management of the KomfortaWorkation website to introduce
workation facilities. In addition, it includes the Gyaku Propo public sector-private sector co-creation platform
provided by SOCIALX; investments which is a value co-creation engagement fund managed by SCL Capital;
and improvements in value relating to other investments. The companies targeted for investment by the value
co-creation engagement fund are listed companies with a market capitalization of up to ¥10.0bn for which ROICof at least 15% is expected. The amount invested per company is in the ¥100-¥150mn range, and after making
an investment, the shares are sold at the stage when the company’s enterprise value has reached the expectedlevel. The proceeds from that sale are then used to acquire shares in the next company targeted for investment.
Gyaku Propo is a service private-sector companies, such as large or start-up companies, can use when theywant to speedily implement measures, such as ascertaining demand trends and verifying hypotheses, for a new
business that solves social issues. In a conventional public offering proposal, a company aiming to win a projectproduces and submits a project plan to a soliciting local government with a budget, and a third party evaluatesand selects a winner. Conversely, in Gyaku Propo, a company openly solicits local governments who may wantto participate in the theme for solving social issues that the company plans while shouldering the costs itself.
Local governments can participate by preparing and submitting proposal documents, such as demonstration
experiments, in accordance with the theme. As multiple local governments may be selected, companies can also
conduct many demonstration experiments. Budgets for the projects will be paid to selected local governmentsby companies participating in the public offering in the form of “donations.” While SOCIALX receives little revenue
directly from Gyaku Propo, it has received orders for system development projects utilizing Gyaku Propo, and has
positioned it as a tool for expanding public-private co-creating projects because it also increases opportunities
for receiving orders for projects such as DX support matched local governments.

Aims to extreme social contribution by providing value for “society”
and “the lives of individuals” based on DX
3. Management mission
The Company’s management mission is to aim for extreme social contribution by strengthening its three capabilities,
which are “the capability to determine real issues” (accurately understanding customer needs in direct sales), “thecapability to discover the hidden value of resources” (focusing only on functions that meet needs and developmentsthat create and customize the value of IT resources), and “the capability to maximize value by proposing andexecuting the optimal combination of issues and resources” (optimization, including of the cloud environment, anddispatching project managers as necessary who will contribute to maximizing the satisfaction of stakeholders), andthereby provide value for “society” and for “the lives of individuals” as a value co-creation platform.
The Group maximizes the value derived from its ability to solve problems based on DX by using IT/AI/IoT, including
through direct business investment, indirect investment through funds, and building human networks, and it isproviding services that eliminate the issues facing society and that make people’s lives better. It is accumulating trustfrom society and individuals through this track record of initiatives and thereby creating competitive advantages,
and it is aiming to circulate value and to achieve dramatic growth.

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

09 23

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

Scala, Inc.
4845 Tokyo Stock Exchange Prime Market

17-Apr.-2023
https://scalagrp.jp/en/ir/

Company profile

Providing value for society and for the lives of individuals based on DX

Source: The Company's results briefing materials■ Results trends
In 1H FY6/23, revenue increased substantially as a result of M&A andoperating profit returned to the black
1. Overview of 1H FY6/23 results
In the 1H FY6/23 consolidated results (ongoing business basis), revenue increased 52.7% YoY to ¥6,504mn,
operating profit amounted to ¥140mn (compared with loss of ¥78mn in the same period of the previous fiscal year),profit before tax amounted to ¥120mn (compared with loss of ¥87mn a year earlier), and profit attributable to ownersof parent amounted to ¥90mn (loss of ¥72mn a year earlier).
1H FY6/23 results (consolidated, IFRS, ongoing businesses)(¥mn)
1H FY6/22
Results

1H FY6/23

vs. revenue

Company
forecast

Resultsvs. revenue

YoY

vs. forecast

Revenue

4,259

-

6,500

6,504

-

52.7%

0.1%

Cost of sales

2,375

55.8%

-

3,940

60.6%

65.9%

-

SG&A expenses

1,890

44.4%

-

2,426

37.3%

28.4%

-

Other income/expenses

-2

-0.1%

-

3

0.1%

-

-

Operating profit

-78

-1.8%

400

140

2.2%

-

-65.0%

Profit before tax

-87

-2.1%

385

120

1.9%

-

-68.6%

Profit from discontinued operations

-1

0.0%

-

-0

-0.0%

-

-

Profit attributable to owners of parent

-72

-1.7%

255

90

1.4%

-

-64.5%

Note: Other income/expenses includes gain/loss on securities related to investment business
Source: Prepared by FISCO from the Company's financial results

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

10 23

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

Scala, Inc.
4845 Tokyo Stock Exchange Prime Market

17-Apr.-2023
https://scalagrp.jp/en/ir/

Results trends

Revenue reached the Company’s forecast as revenue declined only in the Customer Support Business and increasedin the IT/AI/IoT/DX Business and other businesses. A majority of the revenue increase in the IT/AI/IoT/DX Business
was the contribution of EGG, which was added in 4Q FY6/22, but revenue also increased on an existing businessbasis. The insurance business of Nihon Pet Small-amount Short-term Insurance Company was also added in 4Q
FY6/22, so there was an increase in revenue of nearly ¥2.0bn that resulted from M&A.

㻾㼑㼢㼑㼚㼡㼑㻌㼎㼥㻌㼎㼡㼟㼕㼚㼑㼟㼟㻌㼟㼑㼓㼙㼑㼚㼠㻝㻴㻌㻲㼅㻢㻛㻞㻞㻝㻴㻌㻲㼅㻢㻛㻞㻟

(¥mn)
㻟㻘㻟㻝㻤

㻟㻘㻡㻜㻜
㻟㻘㻜㻜㻜
㻞㻘㻡㻜㻜
㻞㻘㻜㻜㻜

㻝㻘㻥㻠㻡

㻝㻘㻡㻜㻜
㻝㻘㻜㻜㻜

㻣㻜㻜 㻡㻥㻝

㻢㻥㻣

㻤㻝㻝

㻤㻝㻡

㻝㻘㻜㻟㻡
㻢㻟㻞

㻡㻜㻜

㻥㻥

㻝㻝㻠

㻜
㻵㼀㻛㻭㻵㻛㻵㼛㼀㻛㻰㼄㻯㼡㼟㼠㼛㼙㼑㼞
㻿㼡㼜㼜㼛㼞㼠
㻮㼡㼟㼕㼚㼑㼟㼟

㻴㻾㻌㻒㻱㼐㼡㼏㼍㼠㼕㼛㼚㻮㼡㼟㼕㼚㼑㼟㼟

㻱㻯㻌㻮㼡㼟㼕㼚㼑㼟㼟㻵㼚㼟㼡㼞㼍㼚㼏㼑㻮㼡㼟㼕㼚㼑㼟㼟

㻵㼚㼏㼡㼎㼍㼠㼕㼛㼚㻌㻒㻵㼚㼢㼑㼟㼠㼙㼑㼚㼠㻮㼡㼟㼕㼚㼑㼟㼟

Source: Prepared by FISCO from the Company's financial results

Regarding operating profit, the loss in the Incubation & Investment Business, including temporary costs, contracted
and profit in the IT/AI/IoT/DX Business, HR & Education Business and EC Business increased, which offset losses
in the Customer Support Business and Insurance Business. A majority of the increase in the IT/AI/IoT/DX Business
was from the contribution of EGG, and on an existing business basis, operating profit remained level. While operating
profit was ¥260mn below the Company’s forecast of ¥400mn, this was mainly the result of personnel costs andoutsourcing costs increasing due to an increase in system co-creation development projects in the IT/AI/IoT/DX
Business, an increase in upfront investment in new services in the HR & Education Business and Incubation &Investment Business, and an increase in business structure reform costs for the medium- to long-term growthof the Insurance Business. Operating profit on a non-GAAP basis, which excludes temporary costs like gain/loss
on securities related to investment business, M&A-related costs and head office relocation costs for a subsidiary,
increased 116.5% YoY to ¥140mn.

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

11 23

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

Scala, Inc.
4845 Tokyo Stock Exchange Prime Market

17-Apr.-2023
https://scalagrp.jp/en/ir/

Results trends㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻌㼎㼥㻌㼎㼡㼟㼕㼚㼑㼟㼟㻌㼟㼑㼓㼙㼑㼚㼠㻝㻴㻌㻲㼅㻢㻛㻞㻞㻝㻴㻌㻲㼅㻢㻛㻞㻟㻝㻜㻡㻝㻞㻜 㻝㻟㻢(¥mn)

㻠㻜㻜㻞㻜㻝 㻞㻞㻤㻞㻜㻜㻥㻠㻜㻙㻝㻡 㻙㻟㻜

㻙㻤㻟

㻙㻞㻜㻜

㻙㻞㻝㻢
㻙㻠㻜㻜

㻙㻠㻣㻠

㻙㻢㻜㻜
㻵㼀㻛㻭㻵㻛㻵㼛㼀㻛㻰㼄㻯㼡㼟㼠㼛㼙㼑㼞
㻿㼡㼜㼜㼛㼞㼠
㻮㼡㼟㼕㼚㼑㼟㼟

㻴㻾㻌㻒㻱㼐㼡㼏㼍㼠㼕㼛㼚㻮㼡㼟㼕㼚㼑㼟㼟

㻱㻯㻌㻮㼡㼟㼕㼚㼑㼟㼟㻵㼚㼟㼡㼞㼍㼚㼏㼑㻮㼡㼟㼕㼚㼑㼟㼟

㻵㼚㼏㼡㼎㼍㼠㼕㼛㼚㻌㻒㻵㼚㼢㼑㼟㼠㼙㼑㼚㼠㻮㼡㼟㼕㼚㼑㼟㼟

Source: Prepared by FISCO from the Company's financial resultsDouble-digit growth in revenue and profits in IT/AI/IoT/DX Business,
HR & Education Business and EC Business2. Trends by business segment(1) IT/AI/IoT/DX BusinessIn the IT/AI/IoT/DX Business, revenue increased 70.6% YoY to ¥3,318mn, and operating profit increased 12.9%
to ¥228mn. Based on the non-GAAP indicator, operating profit before the allocation of Company-wide costs
increased 11.3% YoY to ¥556mn.
Looking by type of revenue, revenue from monthly billing increased 12.7% YoY to ¥1,386mn, revenue from usagebased billing rose 162.4% to ¥753mn, and temporary revenue, such as from contracted development projects,
increased 175.2% to ¥1,178mn. In each case, the increases were from the addition of sales related to EGG’s“Furusato Nozei” taxation system. EGG was contracted for a project to promote the use of the My Number Cardin Yonago City, Tottori Prefecture in September 2022, and this was in part responsible for the solid performance.
In existing businesses, revenue from Connect Agency’s cloud-based PBX services decreased, but this was offset
by increased revenue from mainstay i-series services.

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

12 23

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

Scala, Inc.
4845 Tokyo Stock Exchange Prime Market

17-Apr.-2023
https://scalagrp.jp/en/ir/

Results trends㻮㼞㼑㼍㼗㼐㼛㼣㼚㻌㼛㼒㻌㼞㼑㼢㼑㼚㼡㼑㻌㼍㼚㼐㻌㼛㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㼕㼚㻌㼠㼔㼑 㻵㼀㻛㻭㻵㻛㻵㼛㼀㻛㻰㼄㻌㻮㼡㼟㼕㼚㼑㼟㼟㻌㻔㼝㼡㼍㼞㼠㼑㼞㼘㼥㻕㻹㼛㼚㼠㼔㼘㼥㻌㼎㼕㼘㼘㼕㼚㼓㻌㼞㼑㼢㼑㼚㼡㼑㼀㼑㼙㼜㼛㼞㼍㼞㼥㻌㼞㼑㼢㼑㼚㼡㼑㼁㼟㼍㼓㼑㻙㼎㼍㼟㼑㼐㻌㼎㼕㼘㼘㼕㼚㼓㻌㼞㼑㼢㼑㼚㼡㼑㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠(¥mn)
㻝㻘㻤㻢㻤㻌

㻞㻘㻜㻜㻜㻝㻘㻢㻣㻞㻌

㻝㻘㻠㻡㻜㻌

㻝㻘㻡㻜㻜㻝㻘㻞㻡㻤㻌
㻝㻘㻜㻢㻤㻌㻝㻘㻜㻜㻜㻤 㻣 㻣㻌
㻝㻞㻠
㻝㻟㻤

㻟㻜㻠
㻝㻠㻥

㻢㻝㻠

㻢㻝㻢

㻠㻣㻠
㻠㻟㻞

㻡㻟

㻢㻟㻥

㻝㻤㻠
㻝㻠㻤
Includes an impairment loss of ¥252mn

㻙㻡㻜㻜
㻝㻽

㻠㻞㻜

㻝㻤㻢

㻡㻜㻜
㻜

㻣㻜㻠

㻡㻡㻝

㻞㻽

㻟㻽

㻣㻜㻞

㻠㻢㻟

㻞㻥㻜
㻢㻤㻡

㻣㻜㻝

㻤㻢

㻝㻠㻞

㻝㻽

㻞㻽

㻙㻝㻠㻥
㻠㻽

㻲㼅㻢㻛㻞㻞

㻲㼅㻢㻛㻞㻟

Source: Prepared by FISCO from the Company's results briefing materials

Recent co-creation projects are as follows.
a) Development of Smart Healthcare Platform
Scala Communications, Otsuka Pharmaceutical Co., Ltd. and Sompo Japan Insurance Inc. are developing the
Smart Healthcare Platform in the healthcare area. The platform targets customers who purchase foods for
specified health uses sold by Otsuka Pharmaceutical and is intended to help maintain and promote health throughimproved lifestyle habits by having users record their consumption, personal lifestyle practices (sleep time, exercise
time, etc.), and physical status (weight, etc.) in a smartphone app currently under development. Demonstration
experiments have already begun, and its release is planned going forward. The Company is conducting app
development and operation and will record monthly usage fees as sales. Otsuka Pharmaceutical will provide thetool and Sompo Japan Insurance will handle sales.
b) Commenced provision of eG Plus service
In January 2023, the Company began providing a livestock DX service, eG Plus, which is a system for utilizing
dairy cow genome test data to help increase the efficiency of dairy farm management. Using a smartphone app
jointly developed with Elite Genomics Co., Ltd., which has the top share of the dairy cow genome testing market
in Japan, test result data obtained from Igenity® Dashboard*, which is provided by Neogen, the largest genome
testing company in the U.S., can be searched and displayed in Japanese.
*	Dedicated genome analysis software that allows users to view and analyze genome testing results. Provides not only lists ofindividual results but also the ability to view distributions of herd performance and health traits as well as annual changes.

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13 23

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

Scala, Inc.
4845 Tokyo Stock Exchange Prime Market

17-Apr.-2023
https://scalagrp.jp/en/ir/

Results trendsc) Commenced provision of U-Medical Support
In January 2023, the Company began providing a livestock DX service called U-Medical Support, a comprehensive
medical treatment support tool with functions for remote treatment, electronic medical records and instructions.
It was jointly developed with desamis Co., Ltd., which develops and provides U-motion®*1, a cow behavior
monitoring system, and Mitsui Sumitomo Insurance Company, Limited. When changes in a cow’s health condition
are grasped through U-motion®, it is normally the case that an onsite visit from a veterinarian is requested, butthere have also been cases of the veterinarian’s treatment being delayed and the cow’s condition deteriorating.
Using U-motion® in combination with U-Medical Support, which has a remote medical treatment function, notonly enables such risk to be mitigated but also helps reduce the workload of veterinarians. There are around
1.37mn dairy cows in Japan, and U-motion® is used for around 100,000 of them, so, through desamis, theCompany intends to increase sales of U-Medical Support and eG Plus. With U-Medical Support, a fixed proportionof monthly usage fees*2 paid by veterinarians is recorded as the Company’s sales, so the contribution to results
immediately after its launch has been minimal, but the service is expected to contribute as a stable source ofrevenue as the number of facilities using it increases and through horizontal development.
*1	A service that grasps a cow’s health condition in real time by recording its primary actions, including rumination, movement, lying down and standing up, 24 hours a day, 365 days a year through a sensor attached to its neck.
*2	Monthly fees are ¥20,000 per account and ¥50,000 per business establishment, but dairy farmers can use the service forfree. It is possible that rates will change as functions are added. Incidentally, Japan has around 4,000 veterinary facilities
involved in treating livestock.

(2) Customer Support BusinessIn the Customer Support Business, revenue decreased 15.6% YoY to ¥591mn, the operating loss was ¥30mn (aloss of ¥15mn in the same period of the previous year), and the operating loss before allocation of Company-wide
costs based on the non-GAAP indicator was ¥26mn (a loss of ¥13mn). A factor in the revenue decline was theactivities of a major project being suspended to comply with amendments to the Telecommunications BusinessAct. Along with new project acquisitions falling short of plans, the pace of transfers to the Okinawa call center
slowed, and partially for these reasons, Company forecasts were not met.

㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼝㼡㼍㼞㼠㼑㼞㼘㼥㻌㼞㼑㼟㼡㼘㼠㼟㻌㼕㼚㻌㼠㼔㼑㻌㻯㼡㼟㼠㼛㼙㼑㼞㻌㻿㼡㼜㼜㼛㼞㼠㻌㻮㼡㼟㼕㼚㼑㼟㼟㻾㼑㼢㼑㼚㼡㼑㻌㻔㼘㼑㼒㼠㻕㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻕
(¥mn)

(¥mn)
㻠㻜㻜

㻟㻌

㻡

㻟㻞㻜

㻜

㻞㻠㻜
㻝㻢㻜

㻙㻡

㻙㻠㻌
㻟㻡㻥

㻟㻠㻝

㻟㻟㻜

㻟㻞㻣

㻟㻜㻟

㻞㻤㻤

㻙㻝㻞㻌

㻤㻜

㻙㻝㻡

㻙㻝㻠㻌

㻙㻝㻤㻌

㻙㻝㻢㻌

㻜

㻙㻞㻜
㻝㻽

㻞㻽

㻟㻽

㻠㻽

㻲㼅㻢㻛㻞㻞

㻝㻽㻞㻽㻲㼅㻢㻛㻞㻟

Source: Prepared by FISCO from the Company's results briefing materials



㻙㻝㻜



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

14 23

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

Scala, Inc.
4845 Tokyo Stock Exchange Prime Market

17-Apr.-2023
https://scalagrp.jp/en/ir/

Results trends(3) HR & Education BusinessIn the HR & Education Business, revenue increased 16.3% YoY to ¥811mn, operating profit rose 11.4% to¥105mn, and operating profit before allocation of Company-wide costs based on the non-GAAP indicatorincreased 3.5% to ¥134mn.

㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼝㼡㼍㼞㼠㼑㼞㼘㼥㻌㼞㼑㼟㼡㼘㼠㼟㻌㼕㼚㻌㼠㼔㼑㻌㻴㻾㻌㻒㻌㻱㼐㼡㼏㼍㼠㼕㼛㼚㻌㻮㼡㼟㼕㼚㼑㼟㼟㻾㼑㼢㼑㼚㼡㼑㻌㻔㼘㼑㼒㼠㻕㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻕
(¥mn)

(¥mn)
㻡㻜㻜

㻝㻝㻝

㻝㻜㻝

㻝㻞㻜

㻠㻜㻜

㻤㻜

㻟㻜㻜

㻠㻜

㻝㻟

㻙㻢
㻞㻜㻜

㻟㻥㻡

㻟㻤㻠

㻟㻤㻢

㻟㻜㻞

㻙㻢

㻠㻟㻝

㻜
㻟㻤㻜

㻝㻜㻜

㻙㻠㻜
㻙㻠㻢

㻜

㻙㻤㻜

㻝㻽

㻞㻽

㻟㻽

㻠㻽

㻲㼅㻢㻛㻞㻞

㻝㻽㻞㻽㻲㼅㻢㻛㻞㻟

Source: Prepared by FISCO from the Company's results briefing materials

In recruitment support services, companies participating in job fairs trended at a high level owing to the resumptionof economic activity post-pandemic and greater interest in recruiting activities against a backdrop of worker
shortages, and revenue increased 7.5% YoY to ¥460mn, continuing its upward trend. Regarding the number of
new graduates registering as job seekers, female students increased steadily, but the number of students joining
athletic clubs decreased due to the pandemic, and against this backdrop, student athlete numbers were stagnant.
In daycare and education services, revenue increased 30.2% YoY to ¥350mn through the contribution ofBroncos20, which was made a subsidiary in March 2022. Broncos20’s basketball schools performed well. Sales
from daycare services were equivalent to the same period of the previous year. However, Universal Kids Shinagawa(directly managed) and Universal Kids Bangkok (program provision only, under another company’s management)
opened preliminarily in September 2022 ahead of their official opening with the new school year in April 2023,
and these schools are expected to contribute to revenue starting in 4Q FY6/23.
(4) EC BusinessIn the EC Business, revenue increased 26.9% YoY to ¥1,035mn, operating profit rose 13.8% to ¥136mn, andoperating profit before the allocation of Company-wide costs based on the non-GAAP indicator increased 19.2%
to ¥168mn, as both revenue and profits continued to increase by double-digits, setting new record highs. Digitalmarketing initiatives, including SEO, paid dividends, and membership in the Card Shop – Yuyu-Tei e-commerce
website increased from 188,000 members at the end of the previous year to 215,000 members. Purchasing
activity by overseas members was also stimulated by continued yen depreciation.

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

15 23

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

Scala, Inc.
4845 Tokyo Stock Exchange Prime Market

17-Apr.-2023
https://scalagrp.jp/en/ir/

Results trends㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼝㼡㼍㼞㼠㼑㼞㼘㼥㻌㼞㼑㼟㼡㼘㼠㼟㻌㼕㼚㻌㼠㼔㼑㻌㻱㻯㻌㻮㼡㼟㼕㼚㼑㼟㼟㻾㼑㼢㼑㼚㼡㼑㻌㻔㼘㼑㼒㼠㻕㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻕

(¥mn)

(¥mn)

㻢㻜㻜

㻥㻜
㻣㻝

㻡㻜㻜
㻡㻥

㻢㻟

㻢㻝

㻢㻡

㻡㻢

㻠㻜㻜

㻢㻜

㻟㻜㻜
㻞㻜㻜

㻟㻥㻢

㻠㻝㻥

㻣㻡

㻠㻠㻝

㻟㻥㻤

㻡㻡㻜

㻠㻤㻡

㻠㻡
㻟㻜

㻝㻜㻜

㻝㻡

㻜

㻜

㻝㻽

㻞㻽

㻟㻽

㻠㻽

㻝㻽

㻲㼅㻢㻛㻞㻞

㻞㻽㻲㼅㻢㻛㻞㻟

Source: Prepared by FISCO from the Company's results briefing materials(5) Insurance BusinessIn the Insurance Business, revenue was ¥632mn, the operating loss was ¥83mn and the operating loss before
allocation of Company-wide costs based on the non-GAAP indicator was ¥65mn. With the pet-related industry
continuing to expand against the backdrop of stay-at-home demand and remote work becoming widespread,the Company has positioned FY6/23 as a recovery period and is carrying out various measures to strengthen
profitability.
As measures to increase revenue, the Company invested in marketing to acquire new contracts, including SEO
measures and online advertising, and is working to expand its sales channels. At the same time, it is working
to reform its cost structure by reviewing agencies with poor sales efficiency and streamlining operations as wellas to reduce the insurance loss ratio (claims paid divided by premium income). Of these measures, in reviewing
agencies, the Company is making adjustments those agencies, including pet shops, clinics and insurance
agencies, that have low policy renewal rates. This process will end in FY6/23, and from FY6/24 the Company is
expecting an increase in the number of insurance policies as a result of improvements to the policy renewal rate.
Regarding the insurance loss ratio, it will work to reduce the ratio by strengthening its checking function throughinsurance-related organizations.
(6) Incubation and Investment BusinessIn the Incubation & Investment Business, revenue grew 15.2% YoY to ¥114mn, the operating loss was ¥216mn (aloss of ¥474mn the same period of the previous year), and the operating loss before allocation of Company-wide
costs based on the non-GAAP indicator was ¥89mn (a loss of ¥164mn). Gyaku Propo matching numbers steadily
increased, and there was growth in the workation service*. In addition, the M&A advisory service and practicalsupport-type M&A promotion service made modest contributions to the increase in revenue. Regarding profits,
the Company continued to post a loss due to development costs for growth and upfront costs like personnel
costs, but investment costs have leveled off and the loss amount contracted.
*	A service to provide experiences that connect regions and people through preferred worksites and new work, which mainly
entails managing the KomfortaWorkation website that introduces workation facilities.

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16 23

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

Scala, Inc.
4845 Tokyo Stock Exchange Prime Market

17-Apr.-2023
https://scalagrp.jp/en/ir/

Results trends㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼝㼡㼍㼞㼠㼑㼞㼘㼥㻌㼞㼑㼟㼡㼘㼠㼟㻌㼕㼚㻌㼠㼔㼑㻌㻵㼚㼏㼡㼎㼍㼠㼕㼛㼚㻌㼍㼚㼐㻌㻵㼚㼢㼑㼟㼠㼙㼑㼚㼠㻌㻮㼡㼟㼕㼚㼑㼟㼟㻾㼑㼢㼑㼚㼡㼑㻌㻔㼘㼑㼒㼠㻕㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻕

(¥mn)

(¥mn)

㻝㻜㻜

㻜
㻙㻝㻜㻤㻌

㻙㻝㻜㻤㻌

㻤㻜

㻙㻝㻜㻜

㻙㻞㻜㻜㻌
㻢㻜

㻙㻞㻜㻝㻌

㻙㻝㻥㻝㻌
㻙㻞㻜㻜

㻙㻞㻣㻠㻌

㻠㻜

㻣㻡

㻙㻟㻜㻜

㻢㻥

㻡㻣

㻞㻜

㻡㻣
㻙㻠㻜㻜

㻟㻤
㻞㻠

㻜

㻙㻡㻜㻜
㻝㻽

㻞㻽

㻟㻽

㻠㻽

㻲㼅㻢㻛㻞㻞

㻝㻽㻞㻽㻲㼅㻢㻛㻞㻟

Source: Prepared by FISCO from the Company's results briefing materialsWith regard to Gyaku Propo, matches were made in the QUICK Corp. project*1 with eight municipal governments(Yamagata City, Yokohama City, Kosai City, Toyota City, Kaga City, Koryo Town, Ikoma City and Hirakata City) and in
the Oita Trinita (Oita football club) project*2 with Koryo Town in Nara Prefecture, as social solution projects throughpublic-private co-creation continue to make progress. With new offers continuing and increased name recognition
making a contribution, the number of matches continues to increase. In November 2022, Toyota City, Aichi Prefectureand SOCIALX entered into an agreement on public-private co-creation related to DX/CX promotion (for a period
lasting from November 2022 to March 2023). Utilizing the Gyaku Propo Concierge*3 function, DX promotion throughpublic-private partnership is being accelerated, and this will be tied to improving citizen services.
*1	A project to promote the use of open data for solutions to social issues. QUICK conducts work to format open data
possessed by municipalities to make it easy to use for private-sector companies. Compared to other projects, there weremany local governments with this theme as an issue and many that applied and participated.
*2	In this project, discussions are being held on co-creating new social value with the local government through the
combination of professional sports and social solutions, and new initiatives will be conducted for solving real issues
faced by the city’s government. Initiatives include providing training programs for health maintenance, rehabilitation andpreventative nursing care and holding events.
*3	A service that supports active partnerships with companies to solve issues by making a “concierge” available for consultations on the full range of concerns local governments may have related to public-private partnerships. The service
makes it unnecessary to establish an internal public-private partnership department, potentially reducing costs by up to
1/20 to 1/50.

Regarding the Specially Appointed Task Force for M&A*, a practical support-type M&A promotion service started
in July 2022, the Company entered into a strategic partnership with Mirai Works Inc. <6563> in October 2022. The
various professional HR resources needed for M&A operations will be secured through the network of Mirai Works
and tied to further service expansion. For customers of the Specially Appointed Task Force for M&A, the Company
will not only support M&A but also work to maximize earnings by making proposals for other services that lead tothe creation of value.
*	Utilizing know-how from M&A projects the Company has engaged in to date, this service for companies that do not haveresources for M&A execution offers support for practical operations on a hands-on basis as an internal team within theclient company for every stage of the M&A process, from strategy formulation to sourcing, negotiating terms with the otherparty, due diligence, and post-merger integration (PMI) after execution.

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17 23

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

Scala, Inc.
4845 Tokyo Stock Exchange Prime Market

17-Apr.-2023
https://scalagrp.jp/en/ir/

Results trends

Specially Appointed Task Force for M&A

Source: The Company's results briefing materials

Net cash declined moderately due to upfront investment andshareholder returns, but financial soundness is being maintained
3. Financial condition and business indicators
Looking at the financial condition at the end of 1H FY6/23, total assets were down ¥596mn compared to the endof the previous fiscal year to ¥20,220mn. In current assets, there were increases in trade and other receivables of¥271mn and reinsurance assets of ¥156mn, but cash and cash equivalents decreased by ¥951mn. In non-current
assets, other financial assets increased ¥120mn, and there were decreases in right-of-use assets of ¥141mn,
intangible assets of ¥49mn and property, plant and equipment of ¥34mn, respectively.
Total liabilities decreased ¥293mn from the end of the previous period to ¥11,516mn. Interest-bearing debt
decreased ¥124mn, and lease liabilities decreased ¥160mn. Total equity declined ¥302mn to ¥8,703mn. While
the Company recorded profit attributable to owners of parent of ¥90mn, the decrease was the result of outlays of¥310mn for dividend payments and ¥125mn to acquire treasury shares, among other factors.
Looking at management indicators, the ratio of equity attributable to owners of parent declined slightly from 41.7% at
the end of the previous year to 41.5%, while the interest-bearing debt ratio increased from 80.0% to 81.4%. Factors
were making upfront investment for future growth while also actively conducting shareholder returns, including
through the acquisition of treasury shares. Net cash (cash and cash equivalent minus interest-bearing debt) declined
from ¥2,674mn at the end of the previous year to ¥1,846mn, but it continues to be positive, and it can be judgedthat financial soundness is being maintained.

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18 23

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

Scala, Inc.

17-Apr.-2023

4845 Tokyo Stock Exchange Prime Market

https://scalagrp.jp/en/ir/

Results trends

Consolidated statement of financial position (IFRS)(¥mn)
FY6/20FY6/21

FY6/22

1H FY6/23

Change11,78012,991

12,03011,554-475(Cash and cash equivalents)

7,822

9,809

9,625

8,673

-951

(Trade and other receivables)

3,456

1,412

1,614

1,885

271

13,132

7,338

8,786

8,665

-120

Current assets

Non-current assets(Goodwill)

7,086

1,949

2,356

2,356

0

Total assets

24,912

20,33020,816

20,220-596

Total liabilities

14,5699,859

11,81011,516

-293

8,632

5,973

6,951

6,826

-124

10,343

10,470

9,006

8,703

-302

(Equity attributable to owners of parent)

7,402

10,162

8,687

8,385

-301

(Non-controlling interests)

2,940

308

318

317

0

Equity attributable to owners of parent ratio

29.7%

50.0%

41.7%

41.5%

-0.2ptInterest-bearing debt ratio

116.6%

58.8%

80.0%

81.4%

1.4pt

(Interest-bearing debt)
Total equity

Indicators(Stability)

Source: Prepared by FISCO from the Company's financial results■ Outlook
Profits in FY6/23 could fall short of forecasts due to upfront
investment, but growth is expected to accelerate from FY6/24
1. Outlook for FY6/23
In its outlook for FY6/23 consolidated results, the Company maintains its initial forecasts which call for revenue toincrease 29.8% YoY to ¥13,000mn, an operating profit of ¥1000mn (a loss of ¥393mn the previous year), profit
before tax of ¥970mn (a loss of ¥411mn) and profit attributable to owners of parent of ¥650mn (a loss of ¥523mn).
Regarding progress ratios as of 1H, revenue is trending according to plan at 50.0%, but operating profit is at 14.0%
due to increases in personnel costs related to new projects, development costs for new services, and businessrestructuring costs for the Insurance Business. Without contributions from large projects in 2H, FISCO believes it
is possible that the forecast will not be met. However, these costs are positioned as upfront investment costs for
future earnings expansion, so profit growth is expected to accelerate from FY6/24 when the investments begin to
generate returns.
FY6/23 consolidated results forecast (IFRS)(¥mn)
FY6/22
Results

FY6/23Company
forecast

AmountRatio-

13,000

-

2,984

29.8%

50.0%

Operating profit

-393

-3.9%

1,000

7.7%

1,393

-

14.0%

Profit before tax

-411

-4.1%

970

7.5%

1,381

-

12.5%

Profit attributable to owners of parent

-523

-5.2%

650

5.0%

1,173

-

13.9%

Basic earnings per share (¥)-29.66

vs. revenue

1H
progressratio

10,015

Revenuevs. revenue

Change38.56

Source: Prepared by FISCO from the Company's financial results

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19 23

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

Scala, Inc.
4845 Tokyo Stock Exchange Prime Market

17-Apr.-2023
https://scalagrp.jp/en/ir/

Outlook

Results forecast by business segment(¥mn)
FY6/22

FY6/23 forecast

1H progress ratio

Revenue

OperatingprofitRevenue

OperatingprofitRevenue

Operatingprofit

IT/AI/IoT/DX Business

4,875

236

6,100

900

54.4%

25.3%

Customer Support Business

1,357

-31

1,450

0

40.8%

-

HR & Education Business

1,468

61

1,650

180

49.2%

58.7%

EC Business

50.6%

1,654

239

1,900

270

54.5%

Insurance Business

452

-28

1,350

-140

46.9%

59.4%

Incubation & Investment Business

206

-866

550

-210

20.9%

103.0%

Source: Prepared by FISCO from the Company's results briefing materials(1) IT/AI/IoT/DX BusinessIn the IT/AI/IoT/DX Business, the forecasts are for revenue to increase 25.1% YoY to ¥6,100mn and operating
profit to rise 281.1% to ¥900mn. The 1H progress ratios are 54.4% for revenue and 25.3% for operating profit.
Revenue is trending according to plan owing to the full-year contribution of EGG’s results as well as to recording
multiple co-creation projects in healthcare and social solutions and steady growth in ASP services, including thei-series. For profits, however, the hurdle is fairly high.
Some recent topics are as follows. Joining with Nexway Co., Ltd. and TACT INC., EGG conducted a demonstration
experiment with three municipalities (Sanjo City, Niigata Prefecture and Kusatsu Town and Showa Village, Gunma
Prefecture) for a 24-hour, 365-day telephone reception system for local governments utilizing an interactive voice
response service (AI Call). The system is intended to improve communication between local governments anddonors when they apply for the Furusato Nozei taxation system’s “One Stop Special Exception”* as well as toreduce the workload of municipal employees and increase satisfaction with the service among Furusato Nozei
users. In the demonstration experiment, EGG’s Furusato Nozei system was combined with the one-stop direct
mail service and SMS service of Nexway and AI Call for local governments provided by TACT to respond to theinquiries of users 24 hours a day. Going forward, the system will be developed out to automate administrative
processes like resident response, and in this way local government DX will continue to be promoted.
*	A system that allows Furusato Nozei donations to be deducted without filing an income tax return when salary earners,
etc. who are not required to file a tax return participate in the Furusato Nozei program.

In healthcare, along with the Smart Healthcare Platform, EGG is involved in a frailty* early detection system.
This cloud service provides early detection of frailty when simple questions are answered using a computer or
smartphone. Amid the advancement of a super-aging society, the service supports preventative nursing carefor the extension of healthy life expectancy and reduction of social security expenses for local governments.
The system was put into operation in Nishihara Town, Okinawa Prefecture in May 2022, and a demonstration
experiment was conducted in Motomiya City, Fukushima Prefecture starting in July 2022, as inquiries from local
governments have been increasing. The contracting parties are local governments, so budgetary constraints
are a factor, but if introducing the service proves to have clear benefits, there is a good possibility of the system
becoming widespread in municipalities with large elderly populations.
*	A status between human health and a need for care, with declines in physical and/or cognitive functions.

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20 23

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

Scala, Inc.
4845 Tokyo Stock Exchange Prime Market

17-Apr.-2023
https://scalagrp.jp/en/ir/

Outlook(2) Customer Support BusinessIn the Customer Support Business, the forecasts are for revenue to increase 6.8% YoY to ¥1,450mn and operating
profit of ¥0mn (a loss of ¥31mn in the previous period). The 1H progress ratio for revenue is 40.8%. The Company
intends to increase sales personnel and acquire new projects and will also conduct sales activities in Tokyo. It plans
to increase the number of call center seats in Okinawa to increase the in-house production rate and also boost
business efficiency through the introduction of RPA tools with a view to returning to profitability starting in FY6/24.
(3) HR & Education BusinessIn the HR & Education Business, the forecasts are for revenue to increase 12.4% YoY to ¥1,650mn and operating
profit to increase 191.7% to ¥180mn. The 1H progress ratios are 49.2% for revenue and 58.7% for operating
profit. In recruitment support services, the number of events related to new graduate recruitment is increasing,and the Company is considering launching a new business to strengthen the area of referrals for mid-career-hirehuman resources. In daycare and education services, the Company will focus on attracting customers to daycare
centers scheduled to open in April 2023.
Some recent topics are as follows. Scala Partners, Inc. invested in UPBOND CORPORATION*1 in November
2022 with a view to starting a new NFT business in the Web3 field. For its first initiative, targeting members of
the Saitama Broncos fan club, the Company is planning to develop and operate an NFT service that allows forparticipation in sports team operations (a service that provides various benefits with the purchase of NFTs) anda fantasy sports*2 service that utilizes NFTs. A trial is being carried out in FY6/23 with the intention of launching
the services in the fall of 2023 when the B.League starts its season. The Company is also looking at utilizing
know-how in NFT service operation gained in the area of sports to horizontally deploy services to other fields inthe future, such as social solution-type businesses.
*1	Develops and sells the UPBOND wallet service and supports business creation using Web3 with the general aim ofincorporating Web3 technologies into society.
*2	A simulation game in which participants create fantasy teams by selecting actual existing players and then compete witheach other on points from individual games and throughout the season.

(4) EC BusinessIn the EC Business, the forecasts are for double-digit increases to continue, with revenue to rise 14.8% YoY to¥1,900mn and operating profit to increase 12.9% to ¥270mn. The 1H progress ratios are 54.5% for revenue
and 50.6% for operating profit, so progress has been steady. In terms of new initiatives that will lead to orders,the Company is developing a password-less login solution that is enhanced with strong security and an app forAndroid devices, and these are scheduled to be released before the end of FY6/23. Through these initiatives, theCompany is aiming to increase the number of members from 188,000 people at the end of FY6/22 to 250,000
people at the end of FY6/23 and 400,000 people at the end of FY6/25.
The Company is also considering opening physical stores targeting business scale expansion. Because physicalstores will be able to purchase trading cards directly from manufacturers, which will enhance product lineups,
the Company forecasts an increase in the distribution total on EC websites. For the future, the Company is also
looking into the possibility of producing card games related to the Group’s educational content.
(5) Insurance BusinessIn the Insurance Business, the forecasts are for revenue to increase 198.4% YoY to ¥1,350mn and an operating
loss of ¥140mn (a loss of ¥28mn in the previous period). With adjustments to agencies having an impact, the 1H
progress ratio is 46.9%. As previously been mentioned, the Company is positioning FY6/23 as a recovery period
and is executing various measures to strengthen profitability. It is aiming to return to the black on a monthly basis
in FY6/24.

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21 23

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

Scala, Inc.
4845 Tokyo Stock Exchange Prime Market

17-Apr.-2023
https://scalagrp.jp/en/ir/

Outlook(6) Incubation & Investment BusinessIn the Incubation & Investment Business, the forecasts are for revenue to increase 166.1% YoY to ¥550mn andan operating loss of ¥210mn (a loss of ¥866mn in the previous period). The 1H progress ratio for revenue is
20.9%, but the Company will work to achieve its forecast through the development of new services. Contributions
are expected from the revenue of Gyaku Propo and the newly launched services derived from Gyaku Propo(Concierge, Tour, and Learning), as well as from M&A-related services and the workation service. In profits, theloss will continue, but upfront costs will decline and the temporary costs will end, so the amount of the loss is
forecast to contract.

Has planted the seeds for growth toward achieving the mid-term
management targets; moving to a new growth stage
2. Progress of the mid-term management plan
In the Company’s COMMIT5000 mid-term management plan running up to 2030 which it announced in August
2019, the basic policy is to utilize the Company’s strengths, which are its three capabilities of “ability to determine
real issues” (the value creation support business), “ability to discover the hidden value of resources,” (the IT/AI/
IoT-related business), and “ability to maximize value by proposing and executing the optimal combination of issues
and resources,” (the social issue-solving business), and the strategy is to aim for mid- to long-term growth while
linking these capabilities together. In terms of numerical targets, the Company projects revenue of ¥100bn andoperating profit of ¥10bn for FY6/25, while it projects revenue of ¥500bn and operating profit of ¥50bn in FY6/30.
The Company’s aim is to grow and deepen existing businesses through its growth model of working with joint-development partners to build “models” for “value creation management support + DX support” and then horizontallydeveloping this model. In addition, the Company’s strategy is to accelerate growth by proactively advancing M&A as
well as new business and service development. In addition, growth factors will be the acquisitions of capital gains
from the investment fund and the accumulation of recurring-type income from building IT systems for the companies
it invests in and the provision of various services.
In particular, the Company is positioning the provision of services to local governments lagging behind in DX asa growth field. It plans to expand the scale of the business while building networks through Gyaku Propo andpromoting an alliance strategy. The Company has deployed the digital ID solutions using My Number Card that it
is advancing jointly with xID Inc. to help make government services more sophisticated, introduced workation andother initiatives to help revitalize regional areas and encourage population inflows to them, and conducted initiatives
to apply DX to various government services, starting with the Furusato Nozei taxation system.
New initiatives include livestock DX services (eG Plus and U-Medical Support), which were launched in January2023, and the development of the Smart Healthcare Platform, which the Company plans to release in FY6/23.
Of these, the Smart Healthcare Platform builds mechanisms for health maintenance and promotion by collecting
personal health records (PHR), so it is widely applicable and the scale of the business is expected to be expanded
through horizontal development.

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

22 23

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

Scala, Inc.

17-Apr.-2023

4845 Tokyo Stock Exchange Prime Market

https://scalagrp.jp/en/ir/

OutlookDue in part of the impact of COVID-19, although the progress made up to 1H FY6/23 was slower than initiallyplanned, the Company has begun laying the groundwork for new socially significant businesses. Starting in FY6/24,
it will move forward with further cultivation and horizontal development, and in areas with insufficient resources, itwill work to efficiently expand the business while incorporating an alliance strategy. The Company will continue toconsider M&A as well. It is reviewing business priorities as necessary and is aiming to achieve the targets in the
mid-term management plan by expanding the new business areas and by rapid management decision making on
selection and concentration.

■ Shareholder return policy
Proactive about returns to shareholders, and planning to pay higher
dividends for the 14th consecutive period in FY6/23
The Company’s basic shareholder return policy is to stably and continuously pay dividends while also securing theinternal reserves necessary to strengthen its financial structure and to develop its businesses in the future, and itaims to continually increase dividends under this policy. The Company is planning a per-share dividend for FY6/23
of ¥37.0 (payout ratio of 96.0%), an increase of ¥1.0 YoY. This would be the 14th consecutive year it has increased
its dividend. In the medium term, its policy is to increase profits and seemingly to keep the dividend payout ratio at
a level below 50%, while continuing to increase the dividend.
The Company has also been acquiring treasury shares in order to improve capital efficiency and so that it can
implement a flexible capital policy in response to its business environment. Recently, from May to August 2022,
it acquired 400,000 shares (2.26% of the total number of issued shares (excluding treasury shares)) for around¥300mn.

㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑
(¥)
㻠㻜㻚㻜
㻟㻡㻚㻜
㻟㻜㻚㻜
㻞㻡㻚㻜
㻞㻜㻚㻜
㻝㻡㻚㻜
㻝㻜㻚㻜

㻞㻠㻚㻜

㻟㻠㻚㻜

㻟㻢㻚㻜

㻟㻣㻚㻜

㻲㼅㻢㻛㻞㻝

㻲㼅㻢㻛㻞㻞

㻲㼅㻢㻛㻞㻟㻌㻱

㻞㻤㻚㻜

㻡㻚㻜
㻜㻚㻜

㻲㼅㻢㻛㻝㻥

㻲㼅㻢㻛㻞㻜

Source: Prepared by FISCO from the Company's financial results

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

23 23

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

◾ For inquiry, please contact: ◾

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