COMPANY RESEARCH AND ANALYSIS REPORTScala, Inc.
4845
Tokyo Stock Exchange First Section

6-Apr.-2021
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 First Section

6-Apr.-2021
https://scalagrp.jp/en/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Overview of total 1H FY6/21 results....... ......................................................................................................

01

2. Outlook for FY6/21.. .....................................................................................................................................

02

3. Medium-term management plan and growth initiatives. ..............................................................................

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

03

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

05

3. The Company’s strengths...................... ......................................................................................................

09■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 10
1. Overview of total 1H FY6/21 results....... ......................................................................................................

10

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

12

3. Topics.................................................... ......................................................................................................

16

4. Financial condition and business indicators.................................................................................................

20■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 21
1. Outlook for FY6/21.. .....................................................................................................................................

21

2. Medium-term management plan............ ......................................................................................................

23■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 25■Information security measure------------------------------------------------------------------------------------------------------------------------ 25

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

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

6-Apr.-2021
https://scalagrp.jp/en/ir/█ SummaryStarted to see the type of growth to achieve the targets in themedium-term management plan
Scala, Inc. <4845> (hereafter, “the Company”) is the holding company of a group of IT services, human resourcesand education, and consulting companies that is aiming to contribute to society to a great extent through the broad
application in social businesses of its core technologies in the fields of IT/AI/IoT/EC in the form of “co-creation” with
its partner companies. In FY6/21, it reorganized its business segments into the IT/AI/IoT/DX business, customer
support business, human resources and education businesses, EC business, and investment and incubation
business. It is actively conducting investment using funds acquired from the gain on the sale of Softbrain Co., Ltd.
shares, aiming to achieve the results target (revenue of ¥500bn in FY6/30) set out in COMMIT5000, its medium-term
management plan.
1. Overview of total 1H FY6/21 results
In 1H FY6/21 (July to December 2020) in the ongoing businesses*1, revenue increased 17.5% compared to in thesame period in the previous fiscal year (year on year (YoY)) to ¥4,285mn, while operating profit decreased 87.8%
to ¥25mn. Revenue increased from the addition of ¥657mn from the human resources and education businessesof Grit Group Holdings, Inc.*2, which became a consolidated subsidiary from 4Q in the previous fiscal year. But
the main reasons for the decline in operating profit were that earnings in the mainstay IT/AI/IoT/DX businesstemporarily declined due to the rising awareness of reducing costs in companies in response to the impact of thenovel coronavirus pandemic (hereafter, “the coronavirus”), and that the human resources and education businesses
recorded an operating loss of ¥131mn, including due to the contraction of human resource recruitment events anda seasonal factor. Revenue and profits increased only in the EC business, rising by double digits due to the active
buying and selling of trading cards for a battle-type game as a result of nesting (staying-at-home) demand.
*1	Following the sale of shares of consolidated subsidiary Softbrain in November 2020, the businesses of this company
and its subsidiaries were classified as discontinued businesses, and revenue and operating profit show amounts basedon ongoing businesses and exclude discontinued businesses.
*2	Grit Group Holdings and its three subsidiaries conduct businesses including a human resource services business, childeducation business, and foreigner employment support business.

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

01 25

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

6-Apr.-2021
https://scalagrp.jp/en/ir/

Summary

2. Outlook for FY6/21
For the FY6/21 results based on ongoing businesses, the Company is forecasting revenue from ¥9,000mn to¥12,000mn and operating profit from ¥100mn to ¥500mn. Comparisons with the results of ongoing businesses in
the previous period, excluding the Softbrain Group, have not been disclosed as they are currently being compiled.
After excluding the consolidated results of Softbrain from the results in the previous period, revenue is estimatedto be around ¥7,500mn and operating profit approximately ¥140mn, so operating profit is expected to be at about
the same level as in the previous fiscal year. In 2H FY6/21, the outlook is that results will improve in both the IT/
AI/IoT/DX business and the human resources and education businesses, but the Company plans to conduct
upfront investment in order to strengthen the business foundation toward achieving the targets in the medium-term
management plan. The gain on the sale of Softbrain shares of approximately ¥2.6bn will be reflected in profit asprofit from discontinued businesses, and the forecast for profit attributable to owners of parent is expected to befrom ¥2,700mn to ¥3,100mn. Furthermore, funds of approximately ¥10.5bn acquired from the gain on the sale ofSoftbrain shares are scheduled to be allocated to investments toward realizing the medium-term management plan.
Regarding investment targets, the strategy is to reinvest in highly profitable projects, utilize the Company’s various
resources such as providing management support to investees and acquire capital gains as a result of enhanced
enterprise value.
3. Medium-term management plan and growth initiatives
Based on the medium-term management plan COMMIT5000, the Company is progressing three businesses—thevalue creation support business, IT/AI/IoT/-related business, and social issue-solving business—targeting revenueof ¥500bn and operating profit of ¥50bn in FY6/30. In FY6/21, it is practically creating “models” of new solution
services to realize these targets, and its strategy is to horizontally develop these services widely to listed companies
and local governments from FY6/22 onwards and thereby accelerate the pace of growth. Several examples of suchinitiatives have already started to appear, including the burgeoning adoption by financial institutions of a solutionthat combines the Company’s phone and SMS authentication services with xID, the digital ID of xID Inc., with which
the Company entered into a business partnership in February 2020. In addition, the Company has started to jointly
develop a real estate trust DX platform that utilizes xID with Shinoken Group Co., Ltd., <8909> a major seller ofapartments for investment purposes, and plans to horizontally develop this platform. In regional revitalization-related
services, the Company released a reverse public offering proposal service that specializes in SDGs jointly with
Public dots & Company in November 2020. This service, which uncovers potential DX needs hidden within local
governments, seems to have generated a greater number of inquiries from local governments than anticipated.
Through the launch of this service, we can expect the Company’s network with local governments to widen and for
it to have a positive effect on its existing services. Furthermore, Scala Partners, Inc., which conducts a relocation
support service in addition to general workation services, plans to develop various solutions in the future, including“educating transformational human resources through solving regional issues.” The focus will be on the pace ofgrowth of these businesses from FY6/22 onwards.
Key Points
In the 1H FY6/21 results, revenue increased, including from the effects of M&A, but profits declined due to theimpact of the coronavirus and increases in upfront investment costs• The outlook for FY6/21 is for results to improve from 2H due to an influx of new projects• The Company’s medium-term management plan targets revenue of ¥500bn and operating profit of ¥50bn in
FY6/30•We encourage readers to review our complete legal statement on “Disclaimer” page.

02 25

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

6-Apr.-2021
https://scalagrp.jp/en/ir/

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Note: Forecasts for the FY6/21 results show median values of disclosed ranges based on ongoing businesses and exclude
Softbrain Co., Ltd. and its subsidiaries
Source: Prepared by FISCO from the Company's financial results█ Company profile
With IT/AI/IoT as its core technologies, is integrating its consulting
capabilities, including for value creation management support
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.
*	Developed by US-based Computer Corporation of America and Sirius Software (now, Rocket Software). Major customers
were large companies in Japan such as the Bank of Japan <8301> and Tokyo Electric Power Company Holdings, Inc.
<9501>. Demand for it ceased due to changes in the market environment, and the service was ended in the fall of 2016.

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

03 25

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

6-Apr.-2021
https://scalagrp.jp/en/ir/

Company profile

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 distributed processing (client/servers), and it started
expanding its business through M&A utilizing funds obtained from its IPO in 2001. It began with the purchase of
PatentManager, a patent management software business from Interscience Co., Ltd. in 2003, and then acquired
Dbecs Co., Ltd. with the aim of entering the CRM field, Vodamedia Inc. with the goal of entering the IVR (interactive
voice response) field, the news distribution service provider NewsWatch Inc., the website developer TriAx Corp.,
and other firms in the internet domain as subsidiaries one after another. The Company is steadily expanding its IT/
AI/IoT/DX business (formerly the SaaS/ASP* business), which is a business model with recurring income, as its core
operations and bolstering its recruitment of system engineers to enhance its own service development capabilities.
*	A service that provides customers the functions of application software via a network.

The Company made subsidiaries of plube Co., Ltd. (ownership ratio: 100.0%, currently Scala PLAYce, Inc.), an EC
website management company, in August 2017 in order to enter the EC business; Leoconnect, Inc. (ownership
ratio: 66.0%), which provides customer support consulting for the brands and products of the HIKARI TSUSHIN<9435> Group, in March 2018; and Connect Agency, Inc. (ownership ratio: 51.0%), which provides a cloud PBX
service to companies and call centers making outbound calls for such customers as the HIKARI TSUSHIN Group, in
October 2018. Also, in December 2018, as part of the preparations toward strengthening development capabilities
and deploying the overseas business, subsidiary Scala Next Inc. established a Mandalay branch in Myanmar to act
as a base for offshore development and has started to recruit local engineers.
As measures toward building a value co-creation platform under medium-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 of thesame year and Grit Group Holdings, which provides human resources and educational businesses, in April 2020.
The Company is also intensifying efforts toward growth, such as by actively making capital and business alliances.
In November 2020, the Company sold its shares in Softbrain, a major sales support software group that was madea subsidiary in July 2016, to an investment fund, and removed from the scope of consolidation.
To conduct more flexible management, the Company switched to a holding company organization in 2004, and in
FY6/16, it changed its accounting standards to IFRS to disclose its results.

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

04 25

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

6-Apr.-2021
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. 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, Inc.

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 specializing in SDGs for companies’ new business development

Source: Prepared by FISCO from the Company’s website

In FY6/21, reorganized the business segments into five segments:
the IT/AI/IoT/DX business, customer support business, humanresources and education businesses, EC business, and investment
and incubation business
2. Business description
Following the removal of the Softbrain Group from the scope of consolidation, the Company reorganized the businesssegments into the IT/AI/IoT/DX business (formerly the SaaS/ASP business), customer support business, humanresources and education businesses, EC business, and investment and incubation business in FY6/21.

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

05 25

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

6-Apr.-2021
https://scalagrp.jp/en/ir/

Company profile

On looking at the Group companies responsible for each business segment, the IT/AI/IoT/DX business is comprisedof six companies, centered on Scala Communications, Inc. Of these, Retool, Inc. is a subsidiary of Grit Group
Holdings that develops and sells cloud 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.
is a subsidiary established in September 2020 as a joint venture with Branding Technology Inc. <7067> in order tosupport the promotion of DX to the national and local governments.
Other than the above, Leoconnect conducts the customer support business, while the human resources andeducation businesses are comprised of Grit Group Holdings and its three subsidiaries. The EC business is conductedby Scala PLAYce, while the investment and incubation business is conducted by J-Phoenix Research, Scala
Partners, SCL Capital LLC, and the SCSV-1 Investment Limited Partnership. The Group also includes the Company
itself as the holding company.
Subsidiaries by business segment and business content
Business segment

IT/AI/IoT/DX business

Customer support business

Human resources andeducation businesses

EC businessSubsidiary

Ownership
ratio (%)

Scala Communications, Inc.

100.0

Scala Service, Inc.

100.0

Scala Next Inc.

100.0

Development of SaaS/ASP services, offshore development

Connect Agency, Inc.

51.0

Cloud-based PBX services

Retool, Inc.

100.0

Planning, development, and sales of cloud activity management
tools

Social Studio Inc.

51.0

Promotion of DX to the national and local governments (joint
venture with Branding Technology Inc.)

Leoconnect, Inc.

66.0

Customer support consulting (call center operations, etc.)

Grit Group Holdings, Inc.

100.0

Athlete Planning, Inc.

100.0

Sports Stories, Inc.

100.0

FourHands, Inc.

100.0

Scala PLAYce, Inc.

100.0
-

Scala, Inc.
Investment and incubation
business

Main business
Provision of SaaS/ASP services

Human resource recruitment, infant education, fitness education,
support for the recruitment of overseas human resources, etc.

Management of an EC site for the buying and selling of battletype trading cards
Group head office, holding company functions, investment
business

Scala Partners, Inc.

100.0

Innovation, incubation, investment

J-Phoenix Research Inc.

100.0

Value creation management support (creation of analyst andintegrated reports, fund management support)

SCL Capital LLC

100.0

Investment fund management

SCSV-1 Investment Limited Partnership

71.4

Investment fundNote: As of the end of December 2020
Source: Prepared by FISCO from the companies’ securities reports, results briefing materials, and business briefing materials

Looking at the composition of sales by business segment in 1H FY6/21, the IT/AI/IoT/DX business provided 45.1%,
customer support business 24.2%, human resources and education businesses 15.3%, EC business 14.5%, andinvestment and incubation business 0.8%. Also, in terms of the composition of segment profit, the IT/AI/IoT/DX,
customer support, and EC businesses each recorded profits, with the IT/AI/IoT/DX business as the main pillar of
earnings.

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

06 25

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

6-Apr.-2021
https://scalagrp.jp/en/ir/

Company profile㻯㼛㼙㼜㼛㼟㼕㼠㼕㼛㼚㻌㼎㼥㻌㼎㼡㼟㼕㼚㼑㼟㼟㻌㼟㼑㼓㼙㼑㼚㼠㻌㻔㻝㻴㻌㻲㼅㻢㻛㻞㻝㻕㻝㻜㻜㻚㻜㻑

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Source: Prepared by FISCO from the Company's financial results(1) IT/AI/IoT/DX business
The main services in the IT/AI/IoT/DX business include various types of ASP services such as i-search, a searchservice that uses companies’ websites, and i-ask, an FAQ service. They also include IVR, an interactive voice
response system, and a news distribution service. The i-search service was launched in 2007, and it currently
holds the leading market share at around 15% with more than 400 customers, particularly large enterprises. Morethan 10 companies have entered this market, but the Company’s service has been highly evaluated by customers
for its convenience, including that users can be accurately guided to the target page using thumbnails displayed
in search results. The average usage fee per month is ¥100,000 to ¥150,000.
The Company launched the i-ask service around 2008 which is used by about 200 companies, mainly in thefinancial and insurance industries. This service lets users resolve issues on their own by listing frequently asked
questions and related answers on corporate sites. It helps to lower costs by reducing inquiries to call centersand can improve customer satisfaction. The Company holds a roughly 15% market share, ranked second after
OKWAVE, Inc. <3808>. The average usage fee per month is ¥200,000 to ¥300,000.
IVR is a system for voice-based automated responses at corporate phone help desks, and the Company's service
stands out for being provided in the SaaS format. Companies previously incurred large investment costs for IVR,
including the need to install a PBX (private branch exchange) system. However, the SaaS format enables them toaccess the service inexpensively and use it during limited periods, such as campaigns. Therefore, IVR is steadily
introduced by many companies as a service that is highly convenient.
Other than these businesses, various other services are offered, including a news distribution service for corporations and a service for the planning, development, production, maintenance, and management of websites
according to customer needs, and thus the Company features a rich service lineup and does not rely on a specificservice. They also include services such as the cloud PBX service provided by Connect Agency and the Retool
cloud activity management tool provided by Retool.

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

07 25

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

6-Apr.-2021
https://scalagrp.jp/en/ir/

Company profile

It also develops systems and provides services related to IoT and big data as customized development projects. Examples of this are Smiling Road, a safe-driving assistance service (for corporations)*1 sold by Sompo
Japan Insurance Inc., and Portable Smiling Road, a smartphone app (for individuals)*2. In these services, bigdata, such as driving-related data sent from the users’ dashboard cameras, is received by the server of Scala
Communications and is operated and managed by the web system developed by the Company.
*1	A service that contributes to the promotion of continuous safe driving and accident prevention. It does so by using a
website or smartphone app to provide various functions to facilitate safe driving, for example, processing of driving datacollected from dashboard cameras utilizing IoT technologies, providing safe driving analysis for drivers and administrators,
granting points to drivers rated highly in the driving evaluation system, and enabling them to apply for prizes.
*2	A service that provides “peace of mind” functions such as reporting accidents with the single push of a button in the eventthat the driver has an accident, “safety” functions useful for accident prevention such as driving analysis and provisionof information in real time, and “comfortability” functions such as GPS, all using a smartphone app.

Description of the IT/AI/IoT/DX business services
Type
Information searches

Content management

Content delivery

Various types of reception

Inquiry management
Member 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-loss detection system

i-flow

Progress management and approval system

Hosting services

Hosting services

i-print

Web page printing system

i-linkplus

Service for displaying links to related pages

i-giftDigital gift service

FresheyeSearch portal site

Corporate news

Monitoring important business information

SaaS-type IVR

24-hour, 365-day automated voice response

i-shopnavi

Store reservation support system

Campaign website construction

Campaign website construction and reception

i-assist

Web chatbot system

i-livechat

Web chat system

i-point

Point systems compatible with EC sites

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(2) Customer support business
The customer support business conducted by Leoconnect provides consulting operations for the management of
inbound call centers (24 bases nationwide), ranging from receiving inquiries about customer companies’ services
and products to follow-up after the response, and its main customers include the HIKARI TSUSHIN Group andits agencies. In addition to launching technologies such as i-livechat, i-assist, and IVR at each call center, theCompany is aiming to improve call center productivity by introducing C7, a new core system jointly developedwith Scala Communications that reflects customer needs (launched in November 2019), while expanding thebusiness by acquiring customers outside of the HIKARI TSUSHIN Group.
(3) Human resources and education businesses
The human resources and education businesses are conducted by Grit Group Holdings and its three subsidiaries,
and for sales, 65% are provided by the human resources business and 35% by the education business.

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

08 25

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

6-Apr.-2021
https://scalagrp.jp/en/ir/

Company profile

In the human resources business, Athlete Planning, Inc. provides services including a comprehensive employment
support system for physical education students, a job hunt support service specifically for female students, asecond career support service for professional athletes, and an overseas human resource recruitment service
focused on the nursing care field. Currently, the source of earnings is the planning and management of corporate
joint briefing meetings to recruit new graduates. This service starts selling exhibition booths to companies in Juneevery year for events scheduled to be held from December to March of the following year, presenting a seasonal
factor for results with earnings concentrated in 3Q.
In the education business, FourHands, Inc. 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 kindergartens, UK Academy for cultivating an international sensibility among
schoolchildren, and Largo KIDS day services, such as after-school activities specializing in exercise. Also, Sports
Stories, Inc. provides sports classes, including the Fine’z baseball schools for children, the BEAUT soccer school
and the Dunkers and Ballschule basketball schools. A feature of these businesses is that they emphasize not only
athletic ability, but also emotional growth.
(4) EC businessIn the EC business, Scala PLAYce buys and sells trading cards for battle-type games, and operates Card Shop
Yuyutei, a reuse EC site with the functions of a capture site. The site has high name recognition in the gaming
industry and is influential to the extent that it is used as a reference indicator for the pricing of used cards, and so
it is known as the industry’s No. 1 EC shop. Many of the purchases on the site are made by overseas users, andstarting in FY6/20, users will be able to purchase from overseas users as well.
(5) Investment and incubation business
The investment and incubation 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. Furthermore, it involves the SCSV-1 Investment Limited Partnership, the value co-creation engagement
fund operated by SCL Capital LLC, and improving the value related to its investments, engagements, etc.

Aims to differentiate itself from competitors by increasing
convenience through developments from the customer’s perspective
and providing a rich service lineup
3. The Company’s strengths
One of the Company’s strengths in the IT/AI/IoT/DX business is that it develops services from the customer’s
perspective. It handles most of its business as direct sales and 80% of revenue is from direct salesforces. It improves
service functions and develops new services by listening closely to customer needs and feeding this informationback to its development team, and its development policy is to meet 100% of customer requests. The Company
developed its core i-search and i-ask services thanks to this approach of meeting customer requests and its services
are characterized specially by their ease of use, and this has also enabled it to make smooth progress in expanding
sales to new customers.

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

09 25

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

6-Apr.-2021
https://scalagrp.jp/en/ir/

Company profile

Another strength is that the extensive lineup of services developed in this manner differentiates it from its competitors.
The ability to propose multiple services in packages enables the Company to satisfy diverse customer needs, and thiscross-selling helps to raise the average price per customer, boost customer satisfaction, and prevent cancellations.
The Company has done business with over 1,000 companies, including 400 listed companies.
The features of the IT/AI/IoT/DX business are that monthly billing revenue accounts for approximately 70% of revenue
and its recurring income business model, in which monthly revenue is accumulated in accordance with the numberof service contracts. The Company’s basic policy is to avoid usage-based billing as much as possible and to provide
services only from fixed monthly billing (With usage-based billing included, this business accounts for nearly 80%
of net sales). Also, the main services are maintaining high gross profit margins at around 80% (the margin is lower
for the news distribution service, at around 70%, because of the costs of purchasing content). A reason for this isthat the Company initially develops services customized to customer needs, and then develops them horizontallyas general services, which enables it to keep development costs down as a result.
In the Company, these strengths are ascertained as three capabilities: “the capability to determine real issues”(accurately understanding customer needs in direct sales), “the capability to discover the hidden value of resources”(focusing only on functions that meet needs and developments that create and customize the value of IT resources),and “the capability to maximize value by proposing and executing the optimal combination of issues and resources”(optimization, including of the cloud environment, and dispatching project managers as necessary who will contributeto maximizing the satisfaction of stakeholders). Its strategy is to further strengthen these three capabilities, and as
the value co-creation platform, to realize high growth through developing businesses over a wide range of fields
including not only companies but local governments and overseas markets as well.

█ Results trends
In the 1H FY6/21 results, revenue increased, including from theeffects of M&A, but profits declined due to the impact of thecoronavirus and increases in upfront investment costs
1. Overview of total 1H FY6/21 results
In the 1H FY6/21 consolidated results, revenue increased but profits decreased, with revenue rising 17.5% YoY to¥4,285mn, operating profit declining 87.8% to ¥25mn, profit before tax falling 96.2% to ¥7mn, and profit attributableto owners of parent decreasing 45.9% to ¥137mn. Following the sale of Softbrain’s shares in November 2020 and
its removal from the scope of consolidation, the group’s businesses were classified as discontinued businesses, andrevenue, operating profit, and profit before tax are compared to the same period in the previous fiscal year basedon ongoing businesses and exclude discontinued businesses. Profit from discontinued businesses was ¥278mn in
1H FY6/21, compared to ¥375mn in the same period in the previous fiscal year.

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

10 25

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

Scala, Inc.

6-Apr.-2021

4845 Tokyo Stock Exchange First Section

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

Results trends

1H FY6/21 consolidated results(¥mn)
1H FY6/20

1H FY6/21

Resultsvs. revenue

Resultsvs. revenue

3,646

-

4,285

-

17.5%

Operating profit

209

5.7%

25

0.6%

-87.8%

Profit before tax

197

5.4%

7

0.2%

-96.2%

Profit from discontinued businesses

375

10.3%

278

6.5%

-25.7%

Profit attributable to owners of parent

255

7.0%

137

3.2%

-45.9%

Revenue

YoY* Following the sale of shares of consolidated subsidiary Softbrain in November 2020, Softbrain and its subsidiaries were classified
as discontinued businesses, and revenue, operating profit and profit before tax show amounts based on ongoing businesses andexclude discontinued businesses.
Source: Prepared by FISCO from the Company's financial results

Revenue increased as a result of recording ¥657mn from the human resources and education businesses of Grit
Group Holdings, which became a consolidated subsidiary in 4Q in the previous fiscal year, and growth in the EC
business covered declines in revenue in the IT/AI/IoT/DX and customer support businesses.

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㻜㻵㻴㻌㻲㼅㻢㻛㻞㻝

㻔¥㼙㼚㻕
㻞㻘㻡㻜㻜

㻞㻘㻜㻡㻝
㻞㻘㻜㻜㻜

㻝㻘㻥㻟㻟

㻝㻘㻡㻜㻜
㻝㻘㻝㻜㻟 㻝㻘㻜㻟㻤

㻝㻘㻜㻜㻜
㻢㻡㻣
㻠㻤㻤

㻢㻞㻜

㻡㻜㻜
㻞

㻟㻢

㻜
㻵㼀㻛㻭㻵㻛㻵㼛㼀㻛㻰㼄㼎㼡㼟㼕㼚㼑㼟㼟

㻯㼡㼟㼠㼛㼙㼑㼞㻌㼟㼡㼜㼜㼛㼞㼠 㻴㼡㼙㼍㼚㻌㼞㼑㼟㼛㼡㼞㼏㼑㼟㼎㼡㼟㼕㼚㼑㼟㼟
㼍㼚㼐㻌㼑㼐㼡㼏㼍㼠㼕㼛㼚㼎㼡㼟㼕㼚㼑㼟㼟㼑㼟㻱㻯㻌㼎㼡㼟㼕㼚㼑㼟㼟㻵㼚㼢㼑㼟㼠㼙㼑㼚㼠㼍㼚㼐㻌㼕㼚㼏㼡㼎㼍㼠㼕㼛㼚㻌㼎㼡㼟㼕㼚㼑㼟㼟

Source: Prepared by FISCO from the Company's financial
 results
Conversely, for operating profit, although profits increased in the EC business, they declined in the IT/AI/IoT/DX
and customer support businesses, and the recording of a loss of ¥131mn in the human resources and education businesses also had a major impact. Generally, the Company is conducting investment toward building a
growth foundation for the future, and increases in upfront investment costs were also a factor in reducing profits.
Furthermore, a reason behind recording a loss in the results for the human resources and education businesses isthat earnings are concentrated in 3Q due to a seasonal factor.

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

11 25

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

6-Apr.-2021
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㻜

㻔¥㼙㼚㻕
㻡㻜㻜

㻵㻴㻌㻲㼅㻢㻛㻞㻝

㻠㻞㻝

㻠㻜㻜
㻟㻜㻡
㻟㻜㻜

㻞㻜㻜
㻝㻜㻜

㻝㻝

㻡㻜

㻣㻢

㻠

㻜
㻙㻝㻜㻜

㻙㻝㻟㻝

㻙㻞㻜㻜
㻵㼀㻛㻭㻵㻛㻵㼛㼀㻛㻰㼄㼎㼡㼟㼕㼚㼑㼟㼟

㻯㼡㼟㼠㼛㼙㼑㼞㻌㼟㼡㼜㼜㼛㼞㼠 㻴㼡㼙㼍㼚㻌㼞㼑㼟㼛㼡㼞㼏㼑㼟㼎㼡㼟㼕㼚㼑㼟㼟
㼍㼚㼐㻌㼑㼐㼡㼏㼍㼠㼕㼛㼚㼎㼡㼟㼕㼚㼑㼟㼟㼑㼟㻱㻯㻌㼎㼡㼟㼕㼚㼑㼟㼟

㻙㻝㻞㻤
㻙㻝㻣㻜
㻵㼚㼢㼑㼟㼠㼙㼑㼚㼠㼍㼚㼐㻌㼕㼚㼏㼡㼎㼍㼠㼕㼛㼚㻌㼎㼡㼟㼕㼚㼑㼟㼟

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

Revenue and profits increased by double digits in the EC business,but they declined in the mainstay IT/AI/IoT/DX business due to theimpact of the coronavirus
2. Trends by business segment(1) IT/AI/IoT/DX business
Revenue and profits decreased in the IT/AI/IoT/DX business, with revenue declining 5.8% YoY to ¥1,933mn andoperating profit falling 27.5% to ¥305mn. Due to the coronavirus, companies reduced costs and contracted
operations at contact centers and suspended and postponed marketing campaigns, which led to cancellationsof some related services. As a result, revenue from monthly billing, which is recurring income, fell slightly by 1%
YoY. Revenue from usage-based billing also slumped, down 2%. In addition, revenue from system development
projects, which is recorded in temporary revenue, declined 21% due to postponements of project plans.
However, major companies continued to newly introduce mainstay services such as i-ask, i-assist, and i-livechat.
Moreover, the individual authentication service using the xID smartphone app, which was launched as a newservice, has been expanded as a solution service by combining it with the Company’s phone (cloud-based PBX
service) and SMS authentication services. Furthermore, the Company is progressing development of a real estate
trust DX platform using the same technologies through its business partnership with Shinoken Group which was
conducted in October 2020, and this business is expected to grow in the future (details below).
For profits, in addition to the decline in revenue, factors decreasing profits were that the Company is conducting
upfront investment with a view to active business development in the future (to secure human resources in orderto launch new businesses, to transfer the head office, including branding for Group companies, etc.).

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

12 25

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

Scala, Inc.

6-Apr.-2021

4845 Tokyo Stock Exchange First Section

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㼟㻌㼕㼚㻌㼠㼔㼑㻌㻵㼀㻛㻭㻵㻛㻵㼛㼀㻛㻰㼄㻌㼎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㻔¥㼙㼚㻕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㻝㻘㻝㻢㻤㻌

㻝㻘㻞㻜㻜㻝㻘㻜㻜㻝㻌
㻝㻘㻜㻜㻜㻝㻘㻜㻞㻝㻌

㻝㻘㻜㻠㻤㻌

㻞㻜㻞

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㻞㻟㻜

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㻝㻟㻠㻝㻝㻞㻝㻘㻜㻞㻟㻌㻥 㻡 㻣㻌㻥 㻣 㻡㻌

㻞㻡㻞

㻝㻤㻣

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㻝㻞㻝

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㻝㻞㻤

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㻢㻠㻢

㻢㻠㻤

㻢㻠㻝

㻢㻞㻤

㻝㻣㻤

㻝㻠㻜

㻝㻞㻥

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㻞㻽

㻟㻽

㻠㻽

㻝㻽

㻢㻝
㻢㻞㻥

㻠㻜㻜
㻡㻤㻥

㻡㻞㻢
㻞㻜㻜

㻞㻠㻥

㻟㻡㻞

㻞㻟㻠

㻞㻠㻟
㻞㻜㻠

㻜
㻝㻽

㻞㻽

㻟㻽

㻠㻽

㻝㻽

㻲㼅㻢㻛㻝㻥

㻲㼅㻢㻛㻞㻜

㻝㻣㻟㻞㻽㻲㼅㻢㻛㻞㻝

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

Main new customers for IT/AI/IoT/DX business services (Total for 1H FY6/21)
Type

Product

Description

Customers

Information searches

i-search

Internal search engine for websites

Tokio Marine Nichido Anshin Life Insurance Co., Ltd., Meiji Yasuda AssetManagement Company Ltd., Sunstar Inc.

Content managementi-ask

FAQ system

ROHTO Pharmaceutical Co., Ltd., MEGMILK SNOW BRAND Co., Ltd.,SANYO DENKI CO., LTD., DIAMOND, Inc., JAPAN POST BANK Co., Ltd.,
Joshin Denki Co., Ltd., TOSHIBA LIFESTYLE PRODUCTS & SERVICESCORPORATION

i-assist

Web chatbot system

NIHON L'ORÉAL K.K.

i-livechat

Web chat system

Chubu Electric Power Miraiz Company, Incorporated

Inquiries management

Source: Prepared by FISCO from the Company’s results briefing materials and the companies’ press releases(2) Customer support businessIn the customer support business, revenue decreased 6.0% YoY to ¥1,038mn and operating profit declined 61.1%
to ¥4mn. The factors causing revenue and profit to fall were that during the coronavirus pandemic, launches of callcenter projects declined for sales of new products of companies in the HIKARI TSUSHIN Group and acquisitionsof new customers slumped.
As the strategy to expand this business, the Company intends to acquire new customers by strengthening thefunctions of C7, a core system specialized for small-scale outbound call centers, linking it to Connect Agency’s
IP-PBX and making it capable of handling large-scale outbound call centers. In addition, it is aiming to strengthen
profitability by incorporating the highly price-competitive BPO service for people with disabilities developed by its
capital and business partner VALT JAPAN CO., LTD. into its call center management operations.

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

13 25

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

Scala, Inc.

6-Apr.-2021

4845 Tokyo Stock Exchange First Section

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㼏㼡㼟㼠㼛㼙㼑㼞㻌㼟㼡㼜㼜㼛㼞㼠㻌㼎㼡㼟㼕㼚㼑㼟㼟㻾㼑㼢㼑㼚㼡㼑㻌㻔㼘㼑㼒㼠㻕

㻔¥㼙㼚㻕
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㻝㻤

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㻢㻡㻢

㻢㻤㻡

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㻢㻢㻟
㻡㻡㻠

㻡㻠㻥

㻝㻜㻌

㻢㻜㻜

㻡㻣㻣

㻡㻤㻝

㻡㻠㻢

㻝㻞

㻠㻥㻞
㻥㻌

㻠㻜㻜

㻟㻌

㻞㻜㻜

㻥㻌

㻢

㻤㻌

㻠㻌
㻜

㻞㻌
㻙㻢㻌
㻙㻠㻌

㻜

㻝㻽

㻞㻽

㻟㻽

㻠㻽

㻝㻽

㻞㻽

㻲㼅㻢㻛㻝㻥㻟㻽㻠㻽㻝㻽㻲㼅㻢㻛㻞㻜

㻙㻢㻞㻽㻲㼅㻢㻛㻞㻝

Source: Prepared by FISCO from the Company's results briefing materials(3) Human resources and education businesses
In the human resources and education businesses, revenue was ¥657mn and operating loss was ¥131mn. The
education business was impacted by the fact that for some services, overnight camps could not be held dueto the coronavirus, but overall results trended solidly. However, the human resources business was forced to
struggle as sales prices for event booths to exhibiting companies declined due to some joint briefing sessions
shifting to being held online.

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㼔㼡㼙㼍㼚㻌㼞㼑㼟㼛㼡㼞㼏㼑㼟㻌㼍㼚㼐㻌㼑㼐㼡㼏㼍㼠㼕㼛㼚㻌㼎㼡㼟㼕㼚㼑㼟㼟㼑㼟㻔¥㼙㼚㻕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

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㻙㻟㻜㻜㻞㻽㻲㼅㻢㻛㻞㻝

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

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

14 25

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

6-Apr.-2021
https://scalagrp.jp/en/ir/

Results trends(4) EC businessResults were strong in the EC business, with revenue increasing 27.1% to ¥620mn YoY and operating profit growing 52.9% to ¥76mn. Factors behind the major increases in revenue and profits were continuous improvements
to the user interface of the EC site, its optimization for smartphones and other mobile devices, and increased
demand for online trading due to the coronavirus. Regarding profits, in addition to the effects of the higher sales,an AI image processing system for automating card identification and pricing was introduced, contributing to theefficiency of back-end operations and improvements in profitability.

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㼎㼡㼟㼕㼚㼑㼟㼟㻾㼑㼢㼑㼚㼡㼑㻌㻔㼘㼑㼒㼠㻕㻔¥㼙㼚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

㻔¥㼙㼚㻕
㻠㻢

㻟㻡㻜

㻠㻥

㻟㻜㻜

㻠㻞

㻞㻡㻜
㻞㻜㻜

㻟㻜

㻞㻤
㻞㻠
㻞㻝

㻝㻤

㻝㻡㻜
㻝㻜㻜

㻞㻤

㻞㻞

㻞㻝

㻝㻥㻢

㻞㻝㻣

㻞㻝㻟

㻞㻟㻞

㻞㻡㻝

㻟㻡

㻞㻣

㻞㻟㻣

㻟㻜㻤

㻟㻝㻞

㻞㻢㻝

㻞㻟㻣

㻞㻝
㻝㻠

㻝㻠

㻡㻜

㻣

㻜

㻜

㻝㻽

㻞㻽

㻟㻽

㻠㻽

㻝㻽

㻞㻽

㻲㼅㻢㻛㻝㻥

㻟㻽㻲㼅㻢㻛㻞㻜㻠㻽㻝㻽㻞㻽㻲㼅㻢㻛㻞㻝

Source: Prepared by FISCO from the Company's results
 briefing materials(5) Investment and incubation businessIn the investment and incubation business, revenue increased from ¥2mn YoY to ¥36mn, while operating loss
contracted from ¥170mn to ¥128mn.
Revenue grew alongside steady increases in sales for value creation management support and DX support
projects by J-Phoenix Research, and Scala Partners’ workation service* also contributed. In addition, as the firstinvestment project of the SCSV-1 Investment Limited Partnership, in December 2020 it invested in ARCHITECTSSTUDIO JAPAN INC. <6085> (hereafter, ASJ; total investment amount ¥98mn, number of shares acquired 108,000
shares, percentage of voting rights 6.2%, ¥913 per share). ASJ utilizes Japan’s largest network of architects tobuild a platform that connects architects to construction companies and to provide services to realize homes,commercial facilities, and other buildings that customers want. J-Phoenix Research is providing ASJ with value
co-creation-type management support, including to promote DX, and IR strategy support. At the same time, it isworking to improve its enterprise value, such as by building a DX platform for optimal matching, providing online
marketing tools, and jointly developing CRM solutions that utilize IT for architects, construction stores, construction
material manufacturers, and owners of facilities.
*	A service to provide experiences that connect regions and people through excellent worksites and new work, and it mainly
entails managing the KomfortaWorkation website that introduces workation facilities.

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15 25

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

Scala, Inc.

6-Apr.-2021

4845 Tokyo Stock Exchange First Section

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㼕㼚㼢㼑㼟㼠㼙㼑㼚㼠㻌㼍㼚㼐㻌㼕㼚㼏㼡㼎㼍㼠㼕㼛㼚㻌㼎㼡㼟㼕㼚㼑㼟㼟㻾㼑㼢㼑㼚㼡㼑㻌㻔㼘㼑㼒㼠㻕㻔¥㼙㼚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

㻔¥㼙㼚㻕

㻢㻜

㻜
㻙㻞㻝㻌
㻙㻞㻤㻌

㻡㻜
㻠㻜

㻙㻠㻣㻌

㻙㻞㻜
㻙㻠㻜

㻙㻡㻢㻌

㻟㻜

㻙㻢㻜
㻙㻤㻝㻌

㻠㻥
㻙㻤㻥㻌

㻞㻜

㻙㻤㻜

㻙㻝㻜㻜㻌
㻞㻢

㻞㻞

㻝㻜

㻙㻝㻜㻜

㻝㻜

㻞
㻜

㻙㻝㻞㻜
㻠㻽

㻝㻽

㻲㼅㻢㻛㻝㻥

㻞㻽㻟㻽㻲㼅㻢㻛㻞㻜㻠㻽㻝㻽㻞㻽㻲㼅㻢㻛㻞㻝

Source: Prepared by FISCO from the Company's results briefing materialsStarted to create “model” services to realize the medium-term
management targets
3. Topics
To realize the targets in the medium-term management plan announced in 2019, the Company began working
on creating “model” services to serve as the growth engine in FY6/21, and will accelerate growth by horizontally
expanding the completed “models” from FY6/22 onwards. Progress regarding initiatives for services expected to
grow in the future is detailed below.
(1) Digital ID solutions
Use of xID, the digital ID app developed by the Company’s capital and business partner xID and linked to the My
Number Card, is expected to increase. xID is already being used by Kaga City, Ishikawa Prefecture, as a digitalapplication platform, and this app is attracting the most attention as a digital ID service, including that it has started
to be used to authenticate individuals for digital contract, crowdfunding, and other services.
Since 2020, the Company has been conducting proposal activities, mainly for financial institutions, for an individual
authentication service linked to xID. Already, the adoption of xID has been verified by a major life insurancecompany as a function for confirming individuals when receiving online applications. In addition, an increasing
number of regional banks are considering introducing the service linked to xID as a function for verifying individuals
when receiving applications to open bank accounts. Moreover, it has been decided to adopt its password-freelogin function when accessing membership registrations of CO-DO*, which is the public-private co-creation
platform to be provided to local governments that the Company is currently developing.
*	A communication platform to connect companies and local governments in order to promote DX by local governmentsthat was jointly developed with Public dots & Company, with which the Company entered into a business partnershipin September 2020. Based on the idea that co-creation between the public and private sectors is essential for local
governments’ DX, they developed CO-DO for the optimal matching of solutions and as a venue for communication, and it
will support the DX of local governments by receiving their individual development projects. The aim is to release it during
FY6/21.

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16 25

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

6-Apr.-2021
https://scalagrp.jp/en/ir/

Results trends

The Company is also releasing a new service through combining phone (IP-PBX) and SMS authentication functions
with xID, with the intention of meeting the various needs of customers. The targets for this new service are a basic
monthly fee per project of around ¥500,000* and approximately 50 orders in the nex two years, which converts
to annual sales of around ¥300mn.
*	Approximately 50% of the basic monthly fee will be the xID usage fee. In addition, usage-based fees will be generated
once a certain level of monthly transactions is exceeded, while temporary sales of ¥1mn to ¥1.5mn will be recorded at thetime of a new introduction.

(2) Real estate trust DX service
The Company concluded a business partnership agreement with Shinoken Group in October 2020. It hasannounced that they are progressing the joint research and development of a real estate trust DX platform utilizing
digital ID for real estate transactions and living support services.
Through utilizing digital ID solutions such as xID, this platform is an initiative to improve business efficiency andcustomer satisfaction through the digitalization of each aspect, from real estate contracts and applications forloans from financial institutions to ID verification in various types of living support services. Development of theplatform is planned to progress in phases, and they are targeting a release of the first phase around March 2021
with Shinoken Group as the initial users. After that, the plan is to advance external sales while enhancing theplatform’s functions, and sales on a scale of several hundreds of millions of yen are expected in the future. In thisproject, introductions to business-partner banks of a service linked to xID are expected through a DX conversion
project with Shinoken Group. The banks can expect to be able to speed up project management for credit
operations by introducing this service.
Real estate trust DX platform

Source: Reprinted from the Company’s press releaseWe encourage readers to review our complete legal statement on “Disclaimer” page.

17 25

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

6-Apr.-2021
https://scalagrp.jp/en/ir/

Results trends(3) Reverse public offering proposals
As a measure to support the DX of local governments, in November 2020, the Company, jointly with Public dots
& Company, developed and launched the reverse public offering proposal service specializing in SDGs, the firstsuch service in Japan. A reverse public offering proposal is a service private-sector companies, such as large
or start-up companies, can use when they want 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 project submits business plans to a soliciting local government with a budget,and a third party evaluates and selects a winner. Conversely, in a reverse public offering proposal, companies
openly solicit local governments who want to participate in the themes for solving social issues they propose. Local
governments that can participate prepare and submit 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 governments by companies
participating in the public offering in the form of “donations.”
Differences between reverse public offering and conventional public offering proposals

Source: Reprinted from the Company’s press release

As the first reverse public offering proposal project, five local governments entered an open call for participants
for a project on the theme of “Realizing a safer transportation environment and society” brought forth by E.design
Insurance Co., Ltd. After considering the options, it was announced that Kobe City and Hino Town, Shiga
Prefecture, had been selected. Going forward, Kobe City will progress a project on the theme of “Building aframework to disseminate information toward eliminating traffic congestion at Kikuseidai, Mt. Mayasan,” andHino Town on the theme of “Promoting the safe use of bicycles through safety classrooms and cycling events.”
E.design Insurance has said it has used the reverse public offering proposal in order to progress specific initiatives
to “realize a safer traffic environment and society” together with local governments as part of its CSR initiatives.

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

18 25

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

6-Apr.-2021
https://scalagrp.jp/en/ir/

Results trends

The second and third phases of the project will be announced in the future, and the plan is to open a service website in April 2021. The Company will receive matching fees from the companies using the reverse public offering
proposal service, and will take on system development if an IT system is needed for a project’s demonstration
experiment. The Company has been receiving inquiries from many local governments as a result of launching
the service, and it can be positively evaluated for its ability to build a network for expanding the business of local
governments in the future. In fact, it seems that even if they do not end up using this service, local governments
are still consulting with the Company on other IT services. Regarding such IT services for local governments, it isdifficult to breach the fortress of the major SIer companies, but it is thought there is still plenty of room to acquire
customers through this sort of proposal for new services.
(4) Workation services
Scala Partners, which conducts a business to support people who are relocating house, offers services to general
workation users through managing KomfortaWorkation, its website to introduce facilities to meet workation
demand. In addition, it is launching a series of services in cooperation with business partnerships focusing on
regional revitalization, including solution services and job transition support services to help resolve problems
facing companies during the coronavirus pandemic such as “educating transformational human resources throughsolving regional issues.” Going forward also, it plans to actively progress new initiatives, including developing andproviding services through business partnerships and other means that will enable people to “work anywhere,”“live anywhere,” and “study anywhere.”
Examples of business partnerships for workation services
PartnerPartnership
periodClass Japan Gakuen Co., Ltd.

Provision of online education services so that elementary, junior high school
students can study anywhere

January2021

Spice Up Japan Inc.

Based on the cooperation of regional facilities with which it partners for
KomfortaWorkation, the online provision of “transformational mindset educationand training,” a human resource development training program. It is a training
program in which participants work on solving issues and creating new
businesses in collaboration with regional companies and the employees who
work at them.

January2021

MarketEnterprise Co., Ltd.

For the members of Komforta, the provision of the Oikura service, which is areuse platform managed by MarketEnterprise. Leads to the solving of problems
for arranging unnecessary items that occur when relocating house.

November
2020

Mirai Works Inc.

For the members of Komforta, the provision of a job transition support service
for regional companies

January2021

Adecco Co., Ltd.

Through Scala Partners’ relocation support network of local governments
nationwide and collaborations with relocation concierge services, the provisionof relocation support and work referrals at the destination for Adecco
dispatch employees who want to move to a regional location. Moreover, forthe members of Komforta, through the provision of job search informationthat utilizes Adecco’s network of bases nationwide and support for local job
searches, supports the job search activities of people moving to or wanting tomove to regional locations.

September
2020“Study anywhere”“Live anywhere”

Content of partnership“Work anywhere”

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

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19 25

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

Scala, Inc.

6-Apr.-2021

4845 Tokyo Stock Exchange First Section

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

Results trends

Plans to actively invest the funds from the sale of Softbrain shares
4. Financial condition and business indicators
Looking at the financial condition at the end of 1H FY6/21, total assets were down ¥286mn compared to theend of the previous fiscal year to ¥24,626mn. In current assets, mainly due to the classification of Softbrain as a
discontinued business, cash and cash equivalents decreased ¥4,455mn and trade and other receivables declined¥2,002mn, while ¥13,705mn was recorded as assets held for sale. In non-current assets, Softbrain-related goodwill
decreased ¥5,136mn, while right-of-use assets declined ¥892mn and intangible assets fell ¥1,074mn.
Total liabilities were down ¥274mn compared to the end of the previous fiscal period to ¥14,295mn. Mainly due
to classifying Softbrain as a discontinued business, trade and other payables decreased ¥1,594mn. Furthermore,lease liabilities fell ¥941mn and interest-bearing debt declined ¥357mn, while ¥2,967mn was recorded as liabilities
directly associated with assets held for sale. Total equity declined ¥12mn to ¥10,331mn. This was because althoughprofit attributable to owners of parent of ¥137mn and profit attributable to non-controlling interests of ¥120mn wererecorded, dividend payments were ¥245mn.
Looking at management indicators, the ratio of equity attributable to owners of parent was unchanged comparedto the end of the previous fiscal year at 29.7%, while the interest-bearing debt ratio fell 3.4 percentage points to113.2%, so basically there were no major changes compared to the end of the previous fiscal year. Net interest-bearing debt (cash and cash equivalents – interest-bearing debt) deteriorated significantly due to the classification ofSoftbrain as a discontinued business. But due to the addition in 2H of funds of approximately ¥10.5bn from thegain on the sale of Softbrain shares, the forecast is for net interest-bearing debt to improve greatly by the end of
FY6/21. The Company plans to utilize the funds acquired from the sale of shares for new investment and to allocate
some of it to repay borrowings.
Consolidated statement of financial position (IFRS)(¥mn)
Current assets(Cash and cash equivalents)

FY6/18

FY6/19FY6/201H FY6/21

Change8,120

10,165

11,78018,950

7,169

4,950

6,393

7,822

3,367

-4,455---

13,705

13,705

8,112

8,529

13,132

5,676-7,455(Goodwill)

5,787

6,192

7,086

1,949

-5,136

Total assets

16,233

18,69424,912

24,626-286

Total liabilities

7,587

9,086

14,56914,295

-274

4,793

5,978

8,632

8,275

-357

-

-

-

2,967

2,967

8,645

9,608

10,343

10,331

-12

2,196

2,597

2,940

3,022

82

Ownership ratio attributable to owners of parent

39.7%

37.5%

29.7%

29.7%

-0.0ptInterest-bearing debt ratio

74.3%

85.3%

116.6%

113.2%-3.4pt(Assets held for sale)Non-current assets(Interest-bearing debt)(Liabilities directly associated with assets held for sale)
Total equity(attributable to non-controlling interests)
Indicators(Stability)* Assets and liabilities following Softbrain’s classification as a discontinued business
Source: Prepared by FISCO from the Company's financial results

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20 25

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

6-Apr.-2021
https://scalagrp.jp/en/ir/█ Outlook
The outlook for FY6/21 is for results to improve from 2H due to an
influx of new projects
1. Outlook for FY6/21
For the FY6/21 results based on ongoing businesses, the Company is forecasting revenue from ¥9,000mn to¥12,000mn, both operating profit and profit before tax from ¥100mn to ¥500mn, and profit attributable to ownersof parent from ¥2,700 to ¥3,100mn. Comparisons with the results of ongoing businesses in the previous period,
excluding the Softbrain Group, have not been disclosed as they are currently being compiled. After excluding theconsolidated results of Softbrain from the previous period, the approximate estimates are revenue of ¥7,500mn andoperating profit of around ¥140mn, so operating profit is expected to be around the same level as in the previous
fiscal year. In 1H, revenue was ¥4,285mn and operating profit was ¥25mn, however results will improve in 2H despite
these low levels. The Company’s policy is to continue to prioritize measures to build a growth foundation towardachieving the targets in the medium-term management plan, and it plans to actively invest, including in humanresources and development. The gain on the sale of Softbrain’s shares of approximately ¥2.6bn will be reflected in
profit as profit from discontinued businesses.
The outlook for 2H FY6/21 and the policy for initiatives is described below.
(1) Will accelerate investment in highly profitable projects through the sale of Softbrain shares
The Company plans to actively utilize funds of approximately ¥10.5bn acquired from the sale of Softbrain’s
shares in such ways as allocating them for reinvestment in the investment and incubation business and M&A. It
has already narrowed down the investment candidates to several companies, mainly carried out by J-Phoenix
Research, and is progressing negotiations for specific investments (having already invested in one company). By
providing value creation management support, AI/IoT consulting, and DX support and implementation, it aims
to elevate these companies to a stage of high earnings growth, while maximizing their enterprise value (market
capitalization). Among the major consulting companies, there are many companies providing services from theplanning of management strategies through to the building of information systems, but a factor that differentiates
the Company is that there are hardly any companies that provide a one-stop service, from investing through to
IR consulting services.
The Company is forecasting annual sales per company from ¥100mn to ¥200mn by providing consulting services
and various SaaS/ASP services through DX. The investments will be carried out through the SCSV-1 Investment
Limited Partnership, which was formed in March 2020. The companies targeted for investment are listed companies with a market capitalization of up to ¥10bn and with an expected return on invested capital (ROIC) of at least
15%. The Company plans to invest in a maximum of around five companies in FY6/21, and to invest from ¥100mn
to ¥150mn per company. As a post-investment management policy, companies will be sold when the expected
enterprise value is reached, and gains will be used to acquire shares of the next company in which it will invest. The
Company has accumulated a number of successful case studies for its value creation support business amongsmall and medium-sized companies, so it aims to develop the same scheme as a business for large companies.

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21 25

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

6-Apr.-2021
https://scalagrp.jp/en/ir/

Outlook(2) IT/AI/IoT/DX business
In FY6/21, revenue and profits are forecast to increase in the IT/AI/IoT/DX business from a recovery in 2H. In
addition to the main services such as i-ask and i-search, new introductions of digital ID services, including xID,
are expected, so monthly billing income is forecast to recover gradually after bottoming-out in 2Q. Customized
development projects, which have slumped due to the coronavirus, are also expected to recover in 2H. In
particular, the renewal project for the safe-driving assistance service of Sompo Japan Insurance and its derivative
projects are being progressed in multiple ways and annual sales of around ¥500mn are forecast in the next two
years (some sales to be recorded in 2H). After the start of this project’s management, the plan is to progress sales
to other companies in the same industry initiated by Sompo Japan Insurance. In the IT/AI/IoT/DX business, theCompany expects an annual growth rate of around 15% in the medium term as a result of companies’ strong
needs for DX and by enhancing services going forward.
(3) Customer support businessContinuing on from the previous period, the customer support business is working to improving profitability
by reviewing unprofitable projects and progressing acquisitions of new customers. For sales, the Company isprogressing the disposition of unprofitable projects for the HIKARI TSUSHIN Group, so it is highly possible that thesales decrease will continue. However, it is introducing services such as the C7 core system, i-ask, and IP-PBX,
while it also intends to improve profitability through working on measures to reduce costs through utilizing VALTJapan’s BPO services.
(4) Human resources and education businesses
In the human resources and education businesses, the human resources business struggled in 1H due to thecoronavirus, but it is heading toward a recovery in 3Q, which is the demand period. Also, going forward theCompany intends to recover earnings by strengthening the human resources referral service by taking it online.
A feature of the education business is that its kindergarten and day care services are highly unique targeting thehigh-end user group, and stable demand is expected. In the future, it will collaborate with real estate developers
and it has in sight contributing to community development from the aspect of the infant education environment.
Also, since the integration of Grit Group Holdings and subsidiaries, one year has been spent progressing in-Group
collaborations and improving cost efficiency. Efficiency is also being strengthened by accepting into the administration department some human resources from Grit Group Holdings and other companies.
(5) EC businessIn the EC business, the outlook for the full fiscal year is for the double-digit increases in revenue and profits
to continue. The Company will continue to improve the EC site with the aim of maximizing the distribution
monetary amount, while its policy is also to continuously improve back-end work efficiency by utilizing AI andother technologies.
(6) Investment and incubation business
Projects are steadily increasing, including J-Phoenix Research’s value creation management support and DX
support. Through the increase in projects for the reverse public offering proposal service previously described,
sales will continue to increase. However, the outlook is for losses to continue due to upfront investment. In
particular, the Company is aiming to open the public-sector private-sector co-creation platform CO-DO, which isa joint project with Public dots & Company, during FY6/21. It will be a communication platform to connect local
governments to companies, and it will be managed through acquiring monthly usage fees from local governments
and others. It will also be possible to obtain orders for IT systems development through this platform. Moreover,looking to the future, the Company has in sight participating in the public-sector human resources business (aservice to dispatch public-sector staff) through CO-DO.

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

22 25

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

6-Apr.-2021
https://scalagrp.jp/en/ir/

OutlookIn the medium-term management plan, is targeting revenue of¥500bn and operating profit of ¥50bn in FY6/30
2. Medium-term management plan
In August 2019, the Company announced its medium-term management plan to run up to 2030. The plan’s basic
policy is to utilize the Company’s strengths, which are its three capabilities of “determinining real issues” (thevalue creation support business), “discovering the hidden value of resources,” (the AI/IoT/IT-related business),and “maximizing value by proposing and executing the optimal combination of issues and resources,” (the social
issue-solving business), and the strategy is to aim for growth in the medium- to long-term while coordinating thesecapabilities. In terms of numerical targets, the Company projects revenue of ¥100bn and operating profit of ¥10bn
for FY6/25, while it projects revenue of ¥500bn and operating profit of ¥50bn in FY6/30.
Toward achieving the targets in the medium-term management plan COMMIT5000

Source: The Company's results briefing materials

In consideration of the revenue forecast for FY6/21 which calls for ¥9,000mn to ¥12,000mn, it may seem to be an
ambitious target. Yet as the growth model, the Company’s idea is to accelerate growth through building “models”
for “value creation + DX support” with joint-development partners, and then to horizontally develop this model. As
previously explained, the “models” it is building include the digital ID services using xID, and the real estate trust DX
platform being joint developed with Shinoken Group. The busines scale is growing through accumulating a numberof these case studies. In addition, growth factors will be the acquisitions of capital gains from the investment fundand the accumulation of recurring-type income from building IT systems for the companies it invests in and theprovision of various services.

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23 25

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

6-Apr.-2021
https://scalagrp.jp/en/ir/

OutlookSpecific image: joint development with Shinoken Group

Source: The Company's results briefing materials

Other than the above, for local governments, the Company is aiming to build a network and accumulate orders
through the reverse public offering proposal service and CO-DO. The policy is to grow earnings by building “models”
for these listed companies and local governments, and it will acquire recurring-type income on a scale of from tensof millions to hundreds of millions of yen per customer per year, and by acquiring capital gains from the investment
fund. By integrating the Company Group’s comprehensive IT/AI/IoT capabilities, the resources of J-Phoenix Researchthat is an expert in value creation for listed companies, and the resources of Public dots & Company that is an expert
in value creation for local governments, the Company will differentiate itself from competitors and aim for significant
growth in the next 10 years. The policy for the overseas market is to carefully conduct measures in a situationof increasing uncertainty about global conditions. But the plan is to continue to develop the social issue-solving
business, focusing on South East Asia, on the themes of the medical and health, agriculture and food, and education
fields.
Basic ideas to achieve the targets in the medium-term management plan COMMIT5000

Source: The Company's results briefing materials

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24 25

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

Scala, Inc.

6-Apr.-2021

4845 Tokyo Stock Exchange First Section

https://scalagrp.jp/en/ir/█ Shareholder return policy
In FY6/21, plans to pay a dividend per share of ¥32.0, the 12th
consecutive period of higher dividends
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 develop its businesses in the future. In FY6/21,
the Company is strengthening the financial structure, including from the gain on the sale of Softbrain’s shares, so
it plans to increase the dividend per share by ¥4.0 YoY to ¥32.0, which will be the 12th consecutive period it has
increased the dividend.

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㻔¥㻕
㻟㻡㻚㻜
㻟㻜㻚㻜
㻞㻡㻚㻜
㻞㻜㻚㻜
㻟㻞㻚㻜

㻝㻡㻚㻜

㻞㻤㻚㻜
㻞㻠㻚㻜

㻝㻜㻚㻜

㻝㻤㻚㻜

㻞㻜㻚㻜

㻡㻚㻜
㻜㻚㻜

㻲㼅㻢㻛㻝㻣

㻲㼅㻢㻛㻝㻤

㻲㼅㻢㻛㻝㻥

㻲㼅㻢㻛㻞㻜

㻲㼅㻢㻛㻞㻝㻌㻱

Source: Prepared by FISCO from the Company's financial results█ Information security measure
The Company’s mainstay business is SaaS/ASP services that utilize the internet, so information security is one of its
most important management issues. In terms of specific measures, all Group companies have been and continue
to work to acquire ISO/IEC27001 certification, which is the international standard for information security, and to
implement information security measures incorporating a global-standard third-party perspective. They also strive
to thoroughly manage the information assets owned by the Group based on an internal management system. Theyuse in-house servers and some private clouds for the information system, while also constructing backup systems.

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

25 25

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
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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.
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and the like, belong to FISCO, and any revision, reprocessing, reproduction, transmission,
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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