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

2-Oct.-2020
FISCO Ltd. Analyst

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

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

2-Oct.-2020
https://scalagrp.jp/en/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Overview of FY6/20 results.................... ......................................................................................................

01

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

01

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

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

03

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

05

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

08■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 09
1. Overview of FY6/20 results..........................................................................................................................

09

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

11

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

15■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 16
1. Outlook for FY6/21.. .....................................................................................................................................

16

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

19■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 22■Information security measure------------------------------------------------------------------------------------------------------------------------ 22

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

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

2-Oct.-2020
https://scalagrp.jp/en/ir/█ SummaryWill sell Softbrain shares and accelerate investment in highly
profitable projects
Scala, Inc., <4845> (hereafter, also “the Company”) is a leading provider of website search services, FAQ services,and other services for corporate websites. It is developing its businesses centered on the SaaS/ASP* business,
which has a business model with recurring (stock-type) income, and it continues to grow while expanding its
business areas through an M&A strategy. In August 2019, the Company announced the medium-term management
plan COMMIT5000. Based on this plan, it is building a value co-creation platform through its three capabilities (thecapability to determine real issues, the capability to discover the hidden value of resources, and the capability tomaximize value by proposing and executing the optimal combination of issues and resources), targeting revenueof ¥500bn in FY6/30. The Company has adopted International Financial Reporting Standards (IFRS) accounting.
*	Service that supplies application software functionality to customers over a network

1. Overview of FY6/20 results
In the FY6/20 consolidated results, revenue decreased 0.5% year-on-year (YoY) to ¥17,025mn and operating
profit declined 56.6% to ¥934mn. The main factors were that the results of the subsidiary Softbrain <4779> weregreatly affected by the novel coronavirus pandemic, and revenue and profits declined; that Grit Group Holdings
Co., Ltd.,* which became a consolidated subsidiary from the 4Q, recorded a loss of ¥127mn; and that in the SaaS/ASP business also, profits decreased due to the increase in upfront investment toward realizing the medium-term
management plan.
*	Grit Group Holdings and four other companies conduct businesses including a human-resources services business, aregional revitalization business, a child education business, and a foreigner employment support business.

2. Outlook for FY6/21
In FY6/21, how the novel coronavirus pandemic will develop remains uncertain, so the Company has announced
results forecasts in a range format. The forecasts are for revenue of ¥10,000 to ¥13,000mn and operating profitof ¥3,100 to ¥3,500mn. It plans to sell its Softbrain shares and this company will be removed from the scope of
consolidation from the 2Q onwards, which will be a factor reducing revenue by around ¥7.2bn and operating profit
by approximately ¥600mn. On the other hand, in accounting terms in the 3Q, it is expected to record around¥2.6bn as a gain on the sales of shares at the operating-profit stage. On an ongoing businesses basis excludingthese factors, the outlook is for results to steadily grow in each of the SaaS/ASP business, the customer support
business, and the EC business. Also, the value creation support business, which the Company is newly working on,
is a business to not only provide consulting for customer companies’ transitions to DX and to develop systems, butalso to provide total support, including IR support to increase enterprise value. Although there are many IT-related
consulting firms, no other firm provides combined support services as far as increasing enterprise value, and these
services are attracting attention for being able to differentiate Scala from its competitors. Also, it is consideredthat the Company will acquire the shares of these target companies at the same time as obtaining capital gains.
Currently, it is conducting specific investment negotiations with 10 listed companies with market capitalizations ona scale of up to ¥10bn, and from among them, it intends to invest in a maximum of around 5 companies in FY6/21.

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

01 22

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

2-Oct.-2020
https://scalagrp.jp/en/ir/

Summary

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, the AI/IoT/IT-related business, and the social issue-solving business–targeting
revenue of ¥500bn and operating profit of ¥50bn in FY6/30. To achieve these targets, it will actively work on M&A
and alliances in the future as well. Domestically, it is focusing on measures with xID Inc., with which it entered-intoa capital and business partnership in February 2020. xID is the developer of the xID digital identification applicationthat uses blockchain technology, and going forward, its use is expected to expand through the collaboration with My
Number. It is already receiving inquiries, such as from financial institutions and human resources services companies,
and introductions of xID combined with existing SaaS/ASP services are expected to increase. Also, as the social
issue-solving business, in addition to the regional revitalization business in Japan, the Company has also started
initiatives in Myanmar. Specifically, in June 2020, it invested in MyanCare Co., Ltd., a local health-tech company,
and by integrating both companies’ expertise, they are promoting the transition to DX in the healthcare industry in
Myanmar, including in the medical care and insurance fields, and the policy is to work to contribute to building asociety with vitality through promoting healthy lifestyles.
Key Points
In the FY6/20 results, profits decreased due to the increase in upfront investment costs and the impact of thenovel coronavirus pandemic• The outlook for the FY6/21 results is for revenue and profits to increase by at least 10% on an ongoing
businesses basis excluding the effects of Softbrain• The Company’s medium-term management plan targets revenue of ¥500bn and operating profit of ¥50bn in
FY6/30•㻾㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㻌㻔㻺㼛㼚㻙㻳㻭㻭㻼㻕㻾㼑㼢㼑㼚㼡㼑㻌㻔㼘㼑㼒㼠㻕(¥mn)

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)

㻞㻜㻘㻜㻜㻜

㻠㻘㻜㻜㻜㻝㻣㻘㻝㻝㻞

㻝㻣㻘㻜㻞㻡

㻟㻘㻟㻜㻜㻝㻡㻘㻜㻜㻜

㻟㻘㻜㻜㻜㻝㻞㻘㻤㻞㻥
㻝㻝㻘㻡㻜㻜

㻞㻘㻝㻡㻟㻝㻜㻘㻢㻢㻟
㻝㻜㻘㻜㻜㻜

㻞㻘㻜㻜㻜
㻝㻘㻟㻤㻥
㻝㻘㻡㻠㻢

㻡㻘㻜㻜㻜

㻝㻘㻜㻜㻜
㻝㻘㻜㻠㻡

㻜

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

㻲㼅㻢㻛㻞㻝㻱

Note: Shows average values, as the FY6/21 results forecasts were disclosed as ranges
Source: Prepared by FISCO from the Company's financial results

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

02 22

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

2-Oct.-2020
https://scalagrp.jp/en/ir/█ Company profile
The SaaS/ASP services in the CRM field is its core business andexpanded its business domain through an M&A strategy
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 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.

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&As utilizing funds obtained from its IPO in 2001. It began with the purchaseof PatentManager, a patent management software business from Interscience 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 otherfirms in the Internet domain as subsidiaries one after another. The Company is steadily expanding its SaaS/ASP
business, which is a business model with recurring income, as its core operations and bolstering its recruitment ofsystem engineers to enhance its own service development capabilities.
The Company made subsidiaries of Softbrain, a major sales support software company (as of the end of June 2020,
an ownership ratio based on voting rights of 50.2%) in July 2016; 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 uses 24 call centers to provide customer support consulting for thebrands 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 suchcustomers as the HIKARI TSUSHIN Group, in November 2018. Also, in December 2018, as part of the preparations
toward strengthening development capabilities and deploying the overseas business, the subsidiary Scala Next,
Inc., established a Mandalay branch in Myanmar, and it has started to recruit local engineers and will be a base foroffshore development.
As the measures since 2019 toward building the value co-creation platform in the medium-term management plan
COMMIT5000, the Company established Scala Partners, Inc., in July of the same year, and it then made wholly
owned subsidiaries of J-Phoenix Research Inc., which provides management consulting and IR support, in Octoberof the same year, and of Grit Group Holdings in April 2020.
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.

03 22

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

2-Oct.-2020
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

November 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
April 2020

Established Scala Partners Inc.
Made a subsidiary of J-Phoenix Research Inc.
Established SCL Capital LLC.
Made a subsidiary of Grit Group Holdings, Co. Ltd.

Source: Prepared by FISCO from the Company’s website

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

04 22

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

2-Oct.-2020
https://scalagrp.jp/en/ir/

Company profile

Subsidiaries by business segment and business content
Business segment

Subsidiary

Ownership ratio(%)

Main business

Scala Communications, Inc.

100.0

SaaS/ASP services and software development, sales, andmaintenance

Scala Services, Inc.

100.0

Provides solutions to enhance business efficiency and to
improve added value

Scala Next, Inc.

100.0

Development and operations of the SaaS/ASP services, aswell as planning and development of new businesses

Connect Agency Inc.

51.0

Cloud-based PBX services, telephone equipment for officeand call-center operations, and management of telephonelines, etc.

Softbrain Co., Ltd.

50.2

Sales of support-system licenses and provision of Cloud
services

Softbrain Service Co. Ltd.

98.7*

Sales consulting and sales-skills training

Softbrain Integration Co., Ltd.

100.0*

Support and consulting for introductions of iPads, etc., andeducation and operations support, etc.

Field marketingbusiness

Softbrain Field Co., Ltd.

85.6*

Field-activity operations, market research and otherservices

Customer support
business

Leoconnect, Inc.

66.0

Consulting service relating to customer support including
call center management and BPO

Other

Scala PLAYce Inc.

100.0

Management of an EC site for the buying and selling of
battle-type trading cards

Softbrain Offshore Co., Ltd.

100.0*

Outsourced development of software

Diamond Business Planning, Inc.

70.0*

Services including the planning, editing, and publishing ofbusiness books

Scala Partners Inc.

100.0

CSV innovation, CSV incubation, and CSV investment

SCL Capital LLC.

100.0

Investment fund management

SCSV No.1 Investment Limited Partnership

71.4

Investment fundJ-Phoenix Research Inc.

100.0

Management consulting, securities analyst reports,
investment fund management and support, etc.

Grit Group Holdings, Co. Ltd.

100.0

Athlete Planning Co., Ltd.

100.0

Sports Stories Inc.

100.0

Human resources recruitment, business development in
Myanmar, infant education, support for recruiting overseas
human resources, etc.

Retool Co., Ltd.

100.0

Fourhands Co., Ltd.

100.0

The SaaS/ASP
business

SFA business*A subsidiary of Softbrain Co., Ltd.
Note: as of the end of June 2020
Source: prepared by FISCO from the companies’ securities reports, results briefing materials, and business briefing materials.

Holds a leading share in the domestic market, including for i-search(an internal website search service) and i-ask (an FAQ service)
2. Business description
The Company discloses results divided into the mainstay SaaS/ASP business, in which it provides various IT
services that contribute to improving operating efficiency in companies’ CRM fields, and also the SFA (Sales Force
Automation) business conducted by the Softbrain Group, the field marketing business, the customer support
business conducted by Leoconnect, and other businesses (which are the Softbrain Group’s systems development
and publishing businesses, Scala PLAYce’s EC business, and also the businesses of J-Phoenix Research, Scala
Partners, SCL Capital, and Grit Group Holdings).

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

05 22

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

2-Oct.-2020
https://scalagrp.jp/en/ir/

Company profile

In the percentages of total net sales by business segment in FY6/20, the SaaS/ASP business provided 24.2%,
the SFA business 28.3%, the field marketing business 23.1%, the customer support business 13.3%, and otherbusinesses 11.1%. Looking at the percentages of segment profit also, the SaaS/ASP business provided 24.0%, theSFA business 50.7%, and the field marketing business 22.3%, so these three businesses provided a large portionof the total.

㻯㼛㼙㼜㼛㼟㼕㼠㼕㼛㼚㻌㼎㼥㻌㼟㼑㼓㼙㼑㼚㼠㻌㻔㻲㼅㻢㻛㻞㻜㻕㻿㼍㼍㻿㻛㻭㻿㻼

㻿㻲㻭㻲㼕㼑㼘㼐㻌㼙㼍㼞㼗㼑㼠㼕㼚㼓㻯㼡㼟㼠㼛㼙㼑㼞㻌㼟㼡㼜㼜㼛㼞㼠㻻㼠㼔㼑㼞㻝㻜㻜㻚㻜㻑
㻥㻜㻚㻜㻑
㻤㻜㻚㻜㻑

㻝㻝㻚㻝㻑

㻥㻚㻟㻑

㻝㻟㻚㻟㻑

㻞㻞㻚㻟㻑

㻣㻜㻚㻜㻑
㻢㻜㻚㻜㻑

㻞㻟㻚㻝㻑

㻡㻜㻚㻜㻑
㻠㻜㻚㻜㻑

㻡㻜㻚㻣㻑

㻞㻤㻚㻟㻑

㻟㻜㻚㻜㻑

㻞㻜㻚㻜㻑
㻝㻜㻚㻜㻑

㻞㻠㻚㻞㻑

㻞㻠㻚㻜㻑

㻜㻚㻜㻑

㻙㻢㻚㻟㻑

㻙㻝㻜㻚㻜㻑
㻾㼑㼢㼑㼚㼡㼑

㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠

Source: Prepared by FISCO from the Company's financial results(1) SaaS/ASP business
The main services in SaaS/ASP are the i-search website search service, i-ask FAQ service, IVR service, and news
distribution service. The i-search service was launched in 2007, and it currently holds the leading market shareat around 15% with more than 400 customers, particularly large enterprises. While the Company has over 10competitors, its i-search service offers better visibility by displaying images in search results and provides effective
guidance to users. The average usage fee per month is ¥100,000–150,000.
The Company launched the i-ask service around 2008 and it 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 their corporate sites. It helps to lower costs by reducing accesses to call centersand can improve customer satisfaction. The Company holds a roughly 15% market share, ranked second after
OKWAVE <3808>. The average usage fee per month is ¥200,000–300,000.
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.

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

06 22

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

2-Oct.-2020
https://scalagrp.jp/en/ir/

Company profile

Other than these businesses, the Company also provides various other services, including a news distribution
service for corporations, and a service for the planning, development, production, maintenance, and managementof websites according to customer needs, and one of its features is that it has a rich service lineup and it does
not rely upon a specific service. It also includes the Cloud PBX service provided by Connect Agency, which wasmade a subsidiary in October 2018.
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
Nipponkoa Insurance (now, Sompo Japan Insurance Inc.), and Portable Smiling Road, a smartphone app (forindividuals) *2. In these services, big data, 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 developedby 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 diving 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 contributes to the promotion of safe driving and accident prevention. It does so by using a smartphone app
to provide various functions for “peace of mind,” reporting accidents with a single push of a button should the driver bein an accident, and for “safety,” being useful for accident prevention including through driving analysis and the provisionof information in real time, and GPS for “convenience.”

Description of the SaaS/ASP business services
Type

Product name

Description

i-search

Site internal search engine

i-linkcheck

Link-loss detection system

i-print

Site print system

i-linkplus

Related link display servicei-ask

FAQ system

i-catalog

Product site management system

i-flow

Progress management and approval systemi-assist

Web chatbot system

i-livechat

Web chat system

i-giftDigital gift service

Telephone system service

SaaS-type IVR

24-hour, 365-day automated voice response

News distribution service

Corporate news

Monitoring important business information

Data management

PatentManager6

Latest patent management system

GripManager

Contract operations management system

Site operations business

FresheyeSearch portal site

IoT, Big Data

Safe driving analysis

Processing and management of Big Data

Site assistance service

CMS service

CRM service

Source: Prepared by FISCO from the Company's business briefing materials(2) The Softbrain Group's businesses
The Softbrain Group’s businesses can be divided into the SFA business, field marketing business, and otherbusinesses. The SFA business is mainly the development and sales of e-Sales Manager, which is SFA/CRM
software, but also includes a consulting service to solve sales issues, skills training, and a service to support the
introduction of smart devices into companies. In addition, e-Sales Manager has an excellent reputation as being
No. 1 for usability. It is the industry-leading product from domestic SFA vendors, and it has been introduced bya total of more than 5,000 companies.

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

07 22

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

2-Oct.-2020
https://scalagrp.jp/en/ir/

Company profile

The field marketing business is mainly for consumer goods manufacturers, and involves conducting field activities,
market research, and other activities in stores utilizing registered staff, who are mainly housewives aged in their
30s to 50s. As of the end of June 2020, the Company has approximately 94,000 registered staff nationwide
who cover more than 190,000 stores, centering on convenience stores and drugstores, and it is deploying thisbusiness on the largest scale within Japan. Recently, field activities have expanded to encompass the B-to-B
domain (sales agent) as well as B-to-C.
The systems development business and publishing business are included in the other businesses segment. But
even for both businesses combined, their annual sales have trended around ¥700mn to ¥800mn and operating
profit has been in the range of tens of millions of yen, so their impact on earnings is negligible.
(3) Customer support business
The customer support business conducted by Leoconnect provides consulting operations for the managementof inbound call centers (24 bases nationwide), from receiving inquiries about customer companies’ services andproducts through to the follow-up after the response, and its main customers include the HIKARI TSUSHIN Groupand its agencies. The Company is aiming to improve the call centers’ productivity by introducing technologies suchas i-livechat, i-assist, and IVR into call centers, and by introducing C7, which is a new core system that reflects
customer needs jointly developed with Scala Communications (launched in November 2019), while its policy isalso to expand the business through acquiring customers outside of the HIKARI TSUSHIN Group.
(4) Other businesses
Other businesses include the Softbrain Group’s systems development and publishing businesses, and Scala
PLAYce’s EC business, which manages “yuyu-tei,” an EC website for buying and selling battle-type tradingcards. The site has a high name recognition in the gaming industry and is influential to the extent that it isused 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, and starting in FY6/20, users will be able topurchase from overseas users as well. Other businesses also include the management consulting business of
J-Phoenix Research, which has newly been made a subsidiary, the CSV innovation (management and businessconsulting) business of newly established Scala Partners, the CSV investment business, SCL Capital’s investment
fund business. It includes the human-resources services business, the regional revitalization business, the childeducation business, foreigner employment support business, and other businesses of Grit Group Holdings, which
was made a subsidiary in April 2020.

Aims to differentiate itself from competitors by increasing
convenience through developments from the customer’s perspective
and providing a rich service menu
3. The Company’s strengths
One of the Company’s strengths in the SaaS/ASP 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.

08 22

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

Scala, Inc.

2-Oct.-2020

4845 Tokyo Stock Exchange First Section

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, andthis cross-selling helps to raise the average price per customer, boost customer satisfaction, as well as prevent
cancellations. The Company has done business with over 1,000 companies, including 400 listed companies.
The features of the SaaS/ASP 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. 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 is that the Company initially develops services customized to customer needs, and thendevelops them horizontally as general services, which enables it to keep development costs down eventually.
In the Company, these strengths are ascertained as three capabilities, of “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.

█ Results trends
In the FY6/20 results, profits decreased due to the increase in
upfront investment costs and the impact of the novel coronavirus
pandemic
1. Overview of FY6/20 results
In the FY6/20 consolidated results, revenue decreased 0.5% YoY to ¥17,025mn, operating profit declined 56.6%
to ¥934mn, profit before tax increased 57.5% to ¥907mn, and profit attributable to owners of parent decreased
66.1% to ¥321mn.
FY6/20 consolidated results(¥mn)
FY6/19FY6/20Resultsvs. revenue

Resultsvs. revenue

Revenue

17,112-

17,025-

YoY

Cost of sales

10,91363.8%

11,045

64.9%

1.2%

SG&A expenses

4,082

23.9%

4,998

29.4%

22.5%

-0.5%

36

0.2%

-47

-0.3%

-

Operating profit

2,153

12.6%

934

5.5%

-56.6%

Profit before tax

2,137

12.5%

907

5.3%

-57.5%

946

5.5%

321

1.9%

-66.1%

Other income/expenses

Profit attributable to owners of parent

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

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

09 22

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

2-Oct.-2020
https://scalagrp.jp/en/ir/

Results trends

For revenue, the new consolidations of Grit Group Holdings and J-Phoenix Research were an increase factor of¥252mn. However, in April 2020 the Japanese government issued a declaration of a state of emergency due to thenovel coronavirus pandemic, and because of the resulting restriction on sales activities, including voluntary restraint
on going outdoors, there occurred postponements and cancellations of projects, centered on the Softbrain Group’sbusinesses (SFA business, field marketing business, etc.), while in the customer support business, there were efforts
to review projects toward improving profitability. As a result, revenue declined slightly YoY.

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㻲㼅㻢㻛㻝㻥

(¥mn)

㻲㼅㻢㻛㻞㻜

㻢㻘㻜㻜㻜
㻠㻘㻤㻠㻠

㻡㻘㻜㻜㻜

㻠㻘㻜㻜㻜

㻟㻘㻥㻤㻜

㻠㻘㻤㻝㻠

㻠㻘㻝㻞㻟

㻟㻘㻥㻡㻡 㻟㻘㻥㻟㻢

㻞㻘㻣㻠㻠

㻟㻘㻜㻜㻜

㻞㻘㻞㻢㻝
㻞㻘㻜㻜㻜

㻝㻘㻡㻤㻣

㻝㻘㻤㻥㻜

㻝㻘㻜㻜㻜
㻜
㻿㼍㼍㻿㻌㻛㻭㻿㻼㻿㻲㻭㻲㼕㼑㼘㼐㻌㼙㼍㼞㼗㼑㼠㼕㼚㼓㻯㼡㼟㼠㼛㼙㼑㼞
㼟㼡㼜㼜㼛㼞㼠

㻻㼠㼔㼑㼞

Source: Prepared by FISCO from the Company's financial resultsConversely, for operating profit, profits declined in the Softbrain Group’s businesses. In addition, profits also fellin the SaaS/ASP business due to the implementation of upfront investment toward growth (investment in humanresources, in new business development, etc.). The newly consolidated subsidiaries (Grit Group Holdings, J-Phoenix
Research, Scala Partners, SCL Capital, etc.) were a profit-decrease factor of ¥168mn.

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㻲㼅㻢㻛㻝㻥

(¥mn)

㻝㻘㻜㻜㻜
㻤㻜㻜

㻲㼅㻢㻛㻞㻜

㻥㻞㻞
㻣㻜㻟

㻢㻜㻜

㻠㻣㻟㻌

㻠㻜㻜

㻟㻝㻥
㻞㻞㻠㻌

㻞㻜㻣㻌

㻞㻜㻜

㻢㻤

㻤㻢㻌

㻝㻟㻤

㻜
㻙㻡㻥㻌

㻙㻞㻜㻜
㻿㼍㼍㻿㻌㻛㻭㻿㻼㻿㻲㻭㻲㼕㼑㼘㼐㻌㼙㼍㼞㼗㼑㼠㼕㼚㼓㻯㼡㼟㼠㼛㼙㼑㼞
㼟㼡㼜㼜㼛㼞㼠

㻻㼠㼔㼑㼞

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

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

10 22

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

Scala, Inc.

2-Oct.-2020

4845 Tokyo Stock Exchange First Section

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

Results trends

Progressing measures in the mainstay SaaS/ASP business towardrealizing the medium-term management plan
2. Trends by business segment(1) SaaS/ASP businessIn the SaaS/ASP business, revenue increased 3.6% YoY to ¥4,123mn, which was a new record high. However,operating profit declined 68.1% to ¥224mn, decreasing for the first time in three fiscal periods. This was due tothe implementation of development investment toward growth and upfront investment, including to actively invest
in recruiting human resources. It was also because the impact of the novel coronavirus pandemic appeared in
the 4Q, including postponements of ordered projects. Another profit-decrease factor was that, alongside therelocation of the head office, temporary costs of ¥110mn were incurred (changes to the depreciation periodsof building ancillary equipment, costs to change PCs and to purchase equipment, and re-branding work costs
associated with the relocation).
SaaS/ASP business results by Group company(¥mn)
FY6/19Group company
Scala Communications
Scala Services

FY6/20YoY change amount

Revenue

OperatingprofitProfitmargin

Revenue

OperatingprofitProfitmargin

Revenue

Operatingprofit

3,586

1,305

36.4%

3,569

1,264

35.4%

-17

-40

393

32

8.4%

553

62

11.3%

160

29

0

-51

-

0

-118

-

0

-66

0

-611

-

0

-1,004-0-393

Connect Agency(was in the scope of consolidation for only 5 months inprevious period)
Scala Next
(upfront-investment stage)
Scala(upfront investment stage, head office functions)Inter-company transactions with other segments
Total

-

28

-

-

20

-

-

-8

3,980

703

17.7%

4,123

224

5.5%

143

-478

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

Looking at how results trended by Group company, as the totals for Scala Communications and Scala Services,
revenue decreased 0.5% YoY to ¥3,569mn and operating profit declined 3.1% to ¥1,264mn. The number ofcontracts steadily increased for the main SaaS/ASP services, particularly for the i-ask FAQ system and the i-assist
chatbot system on corporate websites, and monthly billing revenue increased. However, the decline in customized
development projects, which are temporary sales, was a revenue-decrease factor.
In the medium-term management plan, it is clarified that the Company’s policy is also to focus on regional
revitalization, and its track record of introductions for local governments, including simultaneous introductions ofi-ask and i-assist for Kobe City, Kitakyushu City, and others, has started to increase. It developed the “automotive
insurance 1 click insurance premium approximate estimate system,” which is a system enabling easy online
automotive insurance premium estimates, for E.design Insurance Co, Ltd., part of the Tokyo Marine Holdings<8766> Group, and this system received the Good Design Award in 2019. In this system, when the user requests
an estimate for insurance premiums online, it generates an approximate estimate from a single click by simplifying
the process that previously required around 30 clicks. After receiving the Good Design Award, inquiries increased
and one new order was acquired, while it is expected to be developed horizontally in the future. The digital giftservice i-gift has been introduced by Dyson K.K, as a campaign system, and it is demonstrating the effects of its
introduction, including leading to an increase in the number of applications.

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

11 22

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

2-Oct.-2020
https://scalagrp.jp/en/ir/

Results trends

Other than the above, as measures to leverage synergies between Group companies, a call system that connects
Connect Agency, which is a per-second-billing service provided by Connect Agency, and C7, which is a coresystem jointly developed by the Company and Leoconnect, has been introduced by NUWORKS Co. Ltd. Thissystem starts with a function that enables direct outbound calls from a Web system, and it is installed withfunctions that are highly convenient for call center operations. In the future, many introductions are expected bycompanies whose main operations are outbound call services. Also, as a collaborative project with Leoconnect,
its introduction is being steadily progressed for the HIKARI TSUSHIN Group and its agencies.
The main new customers for SaaS/ASP business services
Type

Product

Description

Customers

Site assistance service

i-search

Site internal search engine

Haluene Co., Ltd.*CMS servicei-ask

FAQ system

Haluene Co., Ltd.*, Fene Co., Ltd.*, hi-ho Inc.*, Community
Network Co., Ltd, Kobe City, Kitakyushu City, JAPAN POSTBANK Co., Ltd., MORINAGA & CO., LTD., Joshin Denki Co.,
Ltd., The Kiyo Bank, Ltd., etc.

CRM service

i-assist

Web chatbot system

Kobe City, Kitakyushu City, and SUMITOMO LIFE
INSURANCE COMPANY

i-livechat

Web chat system

Haseko Corporation and Chubu Electric Power Co., Inc.

i-giftDigital gift service

E.design Insurance Co., Ltd. and Dyson K.K.

SaaS-type IVR

Automated voice response service

Sompo Japan Insurance Inc.

Telephone systemservice*Collaborative projects with Leoconnect
Source: Prepared by FISCO from the Company's financial results and website

Connect Agency’s revenue was ¥553mn (¥393mn in the five-month period in the previous fiscal year,) and its
operating profit was ¥62mn (¥32mn). Revenue decreased because it progressed its response for Softphone, forwhich customer needs are high, but the operating margin rose from 8.4% in the previous period to 11.3%. Also,
Scala Next receives consignment development projects from Scala Communications and carries out the planningand development of new businesses and new services, so it receives no revenue from external customers and has
been positioned as something like a cost center. In FY6/20, the operating loss was ¥118mn (a loss of ¥51mn inthe previous period), with the main factor being the establishment of a development base in Myanmar (with morethan 30 engineers). Also, as previously stated the Company itself conducted upfront investment and relocated its
head office, resulting in an operating loss of ¥1,004mn (a loss of ¥611mn in the previous period).
(2) SFA businessIn the SFA business, revenue decreased 0.6% YoY to ¥4,814mn and operating profit declined 48.7% to ¥473mn.
On entering the 4Q, sales of the main product, the sales support software e-Sales Manager, were sluggish
due to the impact of the novel coronavirus pandemic. In addition, profit-decrease factors were the increase indevelopment costs and the postponements and cancellations, including of the provision and holding of one-to-one
education, consulting services, and seminars.
(3) Field marketing businessIn the field marketing business, revenue decreased 0.5% YoY to ¥3,936mn and operating profit declined 35.0%
to ¥207mn. The main reason for the lower earnings was that, due to the declaration of a state of emergency inApril and May, self-restraint was required for activities for regular field services and human resources dispatch
services, which are the main services for retail stores.

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

12 22

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

2-Oct.-2020
https://scalagrp.jp/en/ir/

Results trends(4) Customer support businessIn the customer support business conducted by Leoconnect, revenue declined 17.6% YoY to ¥2,261mn andoperating profit increased 27.2% to ¥86mn. Utilizing its expertise, including in inbound contact center operations
for various companies in the HIKARI TSUSHIN Group, this business newly received orders for comprehensive
consulting operations, including for call center operations for electric power retail operators, human resources
recruitment, and cost reductions, while it also acquired orders for customer support operations from customers
using Scala Communications’ consulting services. Therefore, the number of customers steadily increased. The
reason for the decline in revenue was that it is progressing switching from unprofitable projects to highly profitableprojects in order to improve profitability. This business is realizing a reduction in the number of incoming calls andimproved productivity by introducing services such as i-ask and IVR, and as a result, the operating margin rosefrom 2.1% in the previous period to 2.7%.
Going forward, the newly developed core system C7 will be sequentially introduced into Leoconnect’s customersof call center businesses, with the aims of further improving work efficiency and productivity. Introducing C7
enables call center businesses to expand their work-processing capabilities and therefore accept orders for
new projects. The Company is introducing these businesses to new customers other than those in the HIKARITSUSHIN Group. The usage fees for services such as i-ask, IVR, and C7 are proportionally divided into the SaaS/ASP business and the customer support business and recorded as revenue.
(5) Other businesses
In other businesses, revenue increased 19.1% YoY to ¥1,890mn and the operating loss was ¥59mn (a loss of¥138mn in the previous period). Looking at the breakdown by business, the EC business conducted by Scala
PLAYce benefitted from nesting (staying at home) demand, while buying and selling of battle-type trading cards
was active. As a result, revenue increased 14.9% to ¥986mn, while operating profit rose 13.9% to ¥131mn, as theincrease in development costs was absorbed by the higher revenue. Going forward, during 2020 it plans to release
the smartphone-app version of the card shop “yuyu-tei,” an EC website, and to install functions to automaticallyset prices through AI. The introduction of a native app will make it easier to buy and sell on smartphones, while
the installation of AI functions will make it possible for prices, which up to the present time have been set by
judgments by people, to be set automatically. Developments such as these are expected to further increase the
distribution monetary amount and to improve productivity.
In the systems development business conducted by the Softbrain Group, revenue increased 7.2% YoY to ¥459mn,
as projects from existing customers were strong. However, in the publishing business, revenue decreased 36.3%
to ¥191mn mainly because customers refrained from conducting activities due to the impact of the declarationof a state of emergency. It seems that profits declined for each business.

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

13 22

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

Scala, Inc.

2-Oct.-2020

4845 Tokyo Stock Exchange First Section

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

Results trends

Also, in Grit Group Holdings, which newly joined the Group from April 2020, revenue was ¥216mn and the operating loss was ¥127mn. Due to the impact of the novel coronavirus pandemic, customer companies suspended their
human resources recruitment activities, and therefore results were worse than was initially expected. However, itappears that recruitment activities have been rapidly recovering since July. In Scala Partners, which is conducting
businesses including CSV innovation (management and business consulting), CSV incubation and CSV investment,
revenue was ¥1mn and the operating loss was ¥44mn. As the track record of the CSV investment business, it
invested in VALT JAPAN Co., Ltd., in November 2019 and in xID in February 2020. VALT JAPAN is a start-up
company founded in 2014 that conducts various types of employment-support operations specializing in people
with disabilities. Also, the demonstration experiment of NEXT HERO, which is a support system for both “work andhealth management” for people who have difficulties finding employment, is being progressed in collaboration with
Kamakura City, and in the future, the Company Group will provide system development support for NEXT HERO.
Also, xID, the venture company established in 2012, is developing xID, which is a digital identity card app thatuses blockchain technology, and measures are being progressed to spread its use. In August 2020 in advanceof the rest of the country, coordination between a digital application service and xID was realized with Kaga City,
Ishikawa Prefecture. In the future, it is thought that the aim is to introduce it over a wide network, including into
the Company Group’s customer companies and local governments, and already inquiries have started to bereceived from financial institutions for xID as a method of identification, such as for when opening an account.
In addition, in March 2020, SCSV No. 1 Investment Limited Partnership was formed (investment amount, ¥700mn)
as an investment fund. The strategy for this fund’s “value co-creation engagement fund” is that in the future, it will
provide three kinds of support for the companies it invests in, of value-creation management support services, DX
support, and support for the acquisition of management resources, which will lead to improvements in enterprisevalue.
Results by Group company other than for the SaaS/ASP business(¥mn)
FY6/19Business segment

Group company

Revenue

Operating Profit
profitmargin

Revenue

FY6/20YoY change amountOperating Profit
profitmargin

Revenue

Operatingprofit

7.5%

-127

-598

SFA
Field marketing

Softbrain Group

9,529

Leoconnect, Ltd.

2,744

Scala PLAYce Inc.

858

Scala Partners, Inc.

-SCL Capital LLC.
SCSV No.1 Investment Limited
Partnership

1,305

13.7%

9,401

707

58

2.1%

2,261

61

2.7%

-482

3

115

13.4%

986

131

13.3%

127

15

-

-

1

-44

-

-

-

-

-

-

0

1

-

-

-

J-Phoenix Research Inc.

-

-

-

36

2

-

-

-

Grit Group Holdings Co. Ltd.

-

-

-

216

-127

-

-

-

Other
Customer support

Other

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

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

14 22

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

2-Oct.-2020
https://scalagrp.jp/en/ir/

Results trends

Although interest-bearing debt will increase due to the strategic
investment, net cash is expected to improve greatly due to the saleof Softbrain shares
3. Financial condition and business indicators
Looking at the financial condition at the end of FY6/20, total assets were up ¥6,217mn on the end of the previous
fiscal period to ¥24,912mn. Breaking down the change factors, in current assets, there were increases in cash
and cash equivalents of ¥1,429mn and trade and other receivables of ¥204mn. In non-current assets, right-of-use
assets increased ¥2,774mn following the adoption of IFRS No.16, while goodwill rose ¥894mn as a result of turningcompanies such as Grit Group Holdings into subsidiaries.
Total liabilities were up ¥5,483mn on the end of the previous fiscal period to ¥14,569mn. Interest-bearing debt
increased ¥2,653mn, while lease obligations rose ¥2,886mn following the adoption of IFRS No.16. Total equity
increased ¥734mn to ¥10,343mn. The main factors were increases in share capital of ¥113mn due to the exercisingof share acquisition rights, and in capital surplus of ¥346mn, mainly due to the exercising of share acquisition rights
and exchanges of shares, and also because while profit attributable to owners of parent of ¥321mn and profit
attributable to non-controlling interests of ¥288mn were recorded, a decrease of ¥448mn in retained earnings due
to dividend payments was also recorded.
Looking at the business indicators, the ratio of equity attributable to the owners of parent declined by 7.8 percentage
points (pp), from 37.5% at the end of the previous fiscal year to 29.7%. Of this decline, around 3.7pp was from theeffect of recording lease assets following the adoption of IFRS No.16, so on an actual basis, it only declined about
4pp. The main factor was the accumulation of interest-bearing debt for upfront investment costs toward realizing the
medium-term management plan, and the interest-bearing debt ratio rose from 85.3% at the end of the previous fiscal
period to 116.6%. But as net cash (cash and cash equivalents – interest-bearing debt) was kept at the equilibrium
level, the Company can be judged to be maintaining financial soundness.
In the 3Q FY6/21, the Company plans to sell all of its Softbrain shares to an investment fund company. At the endof June 2020, the Softbrain Group held total assets of approximately ¥7bn, of which, cash and deposits accounted
for around ¥3.7bn. So after the sale, these assets and goodwill will have been deducted from the financial condition.
Conversely, cash of around ¥10.5bn will be obtained from the sale of shares, and the Company will utilize thesefunds as new investment funds, while it also plans to allocate part of them to debt repayments, and net cash is
expected to greatly improve.

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

15 22

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

2-Oct.-2020
https://scalagrp.jp/en/ir/

Results trends

Consolidated statement of financial position (IFRS)(¥mn)
FY6/17

FY6/18

FY6/19FY6/20Change

7,167

8,120

10,165

11,780

1,614

4,999

4,950

6,393

7,822

1,429

7,774

8,112

8,529

13,132

4,603(Goodwill)

5,684

5,787

6,192

7,086

894

Total assets

14,941

16,233

18,69424,912

6,217

Total liabilities

7,021

7,587

9,086

14,569

5,483

4,768

4,793

5,978

8,632

2,653

7,919

8,645

9,608

10,343

734

1,934

2,196

2,597

2,940

342

Ownership ratio attributable to owners of parent

40.1%

39.7%

37.5%

29.7%

-7.8ptInterest-bearing debt ratio

79.7%

74.3%

85.3%

116.6%

31.3pt

ROE

60.4%

11.4%

14.1%

4.5%

-9.6pt

ROA

30.4%

9.9%

12.2%

4.2%

-8.0ptOperating margin

35.0%

12.1%

12.6%

5.5%

-7.1ptCurrent assets(Cash and cash equivalents)
Non-current assets(Interest-bearing debt)
Total equity(attributable to non-controlling interests)
Indicators(Stability)(Profitability)

Note: Based on IFRS
Source: Prepared by FISCO from the Company's financial results█ Outlook
The outlook for the FY6/21 results is for revenue and profits toincrease by at least 10% on an ongoing businesses basis excluding
the effects of Softbrain
1. Outlook for FY6/21
In terms of the outlook for the FY6/21 results, how the novel coronavirus pandemic will develop remains unclear,
while the Company plans to sell all of the shares of its main subsidiary Softbrain, so it will be removed from thescope of consolidation from the 2Q onwards. Therefore, it has disclosed range forecasts. Specifically, it is forecasting
revenue of ¥10,000mn to ¥13,000mn, operating profit and profit before tax of ¥3,100mn to ¥3,500mn, and profit
attributable to owners of parent of ¥2,900mn to ¥3,300mn. The monetary amounts from Softbrain being removed
from the scope of consolidated will be to decrease revenue by approximately ¥7.2bn and operating profit by around¥600mn*. Also, in accounting terms in the 3Q, around ¥2.6bn is expected to be recorded as a gain on the sales ofshares at the operating-profit stage. The outlook after excluding these Softbrain-related effects is that both revenue
and the profit items will increase by at least 10% YoY.
*	The consolidated results for October 2019 to June 2020 announced by Softbrain.

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

16 22

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

2-Oct.-2020
https://scalagrp.jp/en/ir/

Outlook

Outlook for FY6/21(¥mn)
FY6/20FY6/21Results

YoY

17,025-0.5%

10,000~13,000-41.3%~-23.6%

Operating profit934-56.6%

3,100~3,500

231.8%~274.6%

Profit before tax

907-57.5%

3,100~3,500

241.5%~285.5%

Profit attributable to owners of parent

321-66.1%

2,900~3,300

803.0%~927.5%

Revenue

Basic earnings per share (\)

18.46

Company target

YoY

165.62~188.47

Source: Prepared by FISCO from the Company's financial results(1) Will accelerate investment in highly profitable projects through the sale of Softbrain shares
The background to the Company’s sale of its Softbrain shares is that the two companies have been generating
hardly any business synergies and that the directions they are taking are not necessarily the same toward building
the “value co-creation platform” that the Company is aiming for. In the Company’s medium-term management plan,its policy is to actively promote the value creation support business and within this, to also invest in companies
with high growth potential. Therefore, it decided to sell the shares from a calculation taking a capital-efficiency
viewpoint. Rather than continuing to hold Softbrain shares, the Company will use the funds from the sale of sharesto invest in other highly profitable projects, and it is estimated that in the next two or three years, the shareholder
value amount will grow by four times. It is focusing on investment projects premised on having a Return on
Invested Capital (ROIC) of at least 15%.
Aiming for effects of increasing shareholder value from the sale of Softbrain shares

Source: The Company's results briefing materials

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

17 22

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

2-Oct.-2020
https://scalagrp.jp/en/ir/

Outlook

Already, centered on J-Phoenix Research, specific investment negotiations are being conducted with around 10
candidate companies. These companies will be provided with total support, from value creation management
support and AI/IoT consulting, through to support to transition to and implement DX. By providing consulting
services to increase enterprise value and various SaaS/ASP services to transition to DX, annual sales per companyof ¥100mn to ¥200mn are expected. Investment will be carried out through SCSV No. 1 Investment Limited
Partnership, which was formed in March 2020. The targeted companies are listed companies with market capitalizations of up to ¥10bn, and from among them, the aim is to invest ¥100mn to ¥150mn per company, up toa maximum of around five companies, during FY6/21. The investment policy after the investment is to sell at thestage when the anticipated enterprise value is reached and to allocate these funds to acquire the shares of thenext company to invest in. The Company is accumulating success case studies for the value creation support
business for SMEs, while in the future it also has in sight business development using the same scheme for large
companies.
(2) SaaS/ASP business
The outlook for the SaaS/ASP business in FY6/21 is for revenue and profits to increase by double digits. This isbecause SaaS/ASP monthly billing revenue, such as from i-ask and i-search, is accumulating, and also sales are
expected to increase of customized development projects, which decreased in the previous period. The insurance
recruitment system and the “1 click estimate system” were delayed due to the impact of the novel coronavirus
pandemic, and they are set to be developed horizontally, while xID is also expected to be introduced by financial
institutions and human resources services companies. It seems that human resources services companies are
considering utilizing xID in order to simplify work, such as to register dispatch staff. For the ongoing development
projects for Sompo Japan Insurance as well, a comparatively large project in the telematics field is scheduledfor FY6/21.
For developments, the outlook is that the outsourcing Cloud platform that the Company has been working on
since the previous period will start from around February 2021. Compared to previously, it will improve development productivity and can be utilized flexibility by outsourcing partners, and it will eliminate problems relating todevelopment resources. For engineer recruitment also, synergies are being generated from Grit Group Holdings
joining the Group. Grit Group Holdings conducts a human resources services business and it has a wide networkof agent companies, so the number of mid-career hires utilizing this route is increasing.
In Connect Agency also, revenue and profits are forecast to increase. It is growing sales of the call system thatlinks Connect Agency and the C7 core system to businesses whose main operations are outbound call services.
For the upfront investment by Scala Next and the Company, the plan for FY6/21 is to invest the same amountas in the previous period.
(3) Customer support businessContinuing on from the previous period, the customer support business is working to improving profitability byreviewing unprofitable projects and progressing acquisitions of new customers. Revenue may decrease, but theoutlook is for profits to increase due to the progress made in introductions of services such as C7 and i-ask. For
this business, the target is an operating margin of 10% in the future.

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

18 22

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

2-Oct.-2020
https://scalagrp.jp/en/ir/

Outlook(4) Other businesses
The forecasts for the EC business are for revenue and profit to continue to increase, because as a major EC tradingcard website, trading is expected to increase not only in Japan, but overseas as well. In addition, the previously
described developments, such as the launch of the smartphone app and the implementation of AI functions, will
also contribute to results. In addition, Grit Group Holdings will start corporate recruitment activities from July 2020
and is expected to contribute to earnings in FY6/21. In FY6/19, its recorded revenue of approximately ¥1,999mn
and operating profit of around ¥31mn. Grit Group Holdings also conducts a regional revitalization business andhas a wide network with local governments, so sales of SaaS/ASP services to local governments through thisnetwork are expected to grow.

In 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 “the capability to determine real issues”(the value creation support business), “the capability to discover the hidden value of resources,” (the AI/IoT/IT-related
business), and “the capability to maximize value by proposing and executing the optimal combination of issues andresources,” (the social issue-solving business), and the strategy is to aim for growth in the medium- to long-term
while coordinating these capabilities.
The plan’s numerical management targets for FY6/30 are revenue of ¥500bn and operating profit of ¥50bn. On
considering that the revenue forecast for FY6/20 is in a range of ¥10bn to ¥13bn, the revenue target appears
enormous. But the Company is focusing on two fields, “IT solutions, centered on AI/IoT” that has high growthpotential in the future, and “the social issue-solving business, including SGDs,” and it seems that it is aiming for
growth not just from its existing businesses, but also from deploying new businesses utilizing an M&A strategy andbusiness deployment for overseas markets.
Initiatives and Revenue Targets by Segment
Capabilities

Breakdown of¥500bnSegment involved

Main expertise and infrastructure built in FY6/20

1) Determine real issues

Value creation support
business• Contact around 200 companies as investment targets, and from among
them, conduct investment negotiations with 10 companies• A support system calling for empathy from top management for on-site andinformation systems• Double value creation capabilities from capital gains and the SaaS/ASP
business• Communications support for investors¥100bn2) D iscover hidden value ofresources

AI/IoT/IT-related
business• DX support from SaaS/ASP• Partner strategy for large-company reforms• Measures in Scala model I & Scala model II for billing with agile development• Digital ID solutions tailored to the new personal information activities era• Measures for new era call centers¥200bn to ¥300bn

3) M aximize value by
proposing and executing
optimal combinations ofissues and resources

Social-issue solving
business• Japan: regional revitalization (branding for local governments and network ofregional banks)• Myanmar: medical (remote medicine, medical data +AI diagnoses, andvarious types of health-tech)• Agriculture (IoT agriculture, production management + AI predictions, andvarious types of agri-tech)• Education (incubation centers and various types of education-tech)¥200bn to ¥300bn

Source: Prepared by FISCO from the COMMIT 5000 medium-term management plan and results briefing materials

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

19 22

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

2-Oct.-2020
https://scalagrp.jp/en/ir/

Outlook(1) Value creation support business
For the value creation support business, the long-term targets are revenue of ¥70bn to ¥110bn and operating profitof ¥15bn to ¥30bn. SCL Capital launched the No. 1 Fund in April 2020, and together with the investment, it is also
providing support, including to transition to DX and for IR. Going forward, it will invest in around 50 companies
over five years for a total investment amount of approximately ¥10bn, targeting capital gains of around three tofour times. Recurring-type earnings, including from the support to transition to DX, are expected to be ¥100mn
to ¥200mn per year per company, for five-year total revenue of ¥5bn to ¥7bn, which is forecast to contribute¥1bn to ¥1.5bn to operating profit.
Also, up to FY6/30, SCL Capital will invest in a cumulative total of around 300 companies in Japan and overseas
and acquire capital gains of an annual average of around ¥10bn, while for the DX support SaaS/ASP business, thetargets are revenue of ¥60bn to ¥100bn and operating profit of ¥6bn to ¥20bn. At the same time as supporting
companies’ transitions to DX, it will provide IR support and other support to increase enterprise value, which
will be provided in combination with the investment and other aspects. So it is aiming to grow this business bydifferentiating itself from consulting firms and other competitors through this highly original business model.
(2) AI/IoT/IT-related business
The AI/IoT/IT-related business is conducted on a line extending from the existing businesses. The revenue target
for FY6/30 is ¥200bn to ¥300bn. One growth strategy is to partner with large companies. It is difficult for large
companies in Japan to bear all of the risk from the launch of a new business to the establishment of that business,
which is a reason why innovative new businesses are not being created. In order to eliminate this problem, arisk-sharing scheme to launch new businesses is being constructed in the Company Group, focused on employees
who previously worked in large companies. In this scheme, human resources with ideas for new businesses areappointed and financial support provided to launch a new business, and at the point when the business has
been established to a certain extent, cooperation with large companies is initiated for further business growth.
Also, in addition to the conventional business model of accumulating monthly revenue through agile development(Scala model I), business scale will be further expanded by systemizing a new business model, of building the
optimal IT infrastructure to promote DX while utilizing the existing legacy IT management resources held bycustomer companies (Scala model II).
Moreover, as a digital ID solution tailored to the new era of using personal information, the Company plans todigitalize government services by utilizing xID and to introduce it into companies, including financial institutions,insurance firms, and human resources staffing services companies. In particular, regional local governments
are lagging behind in digitalization, and the potential here is enormous. It is proposing introductions of xID in
combination with its own SaaS/ASP services. Digitalization is also progressing rapidly for call center management,
including to respond to the strengthening of the regulations in the Act on the Protection of Personal Information,and the Company is aiming to grow earnings in the call center market based on its C7 core system with highcost performance.
(3) Social issue-solving business
The social issue-solving business is aiming for revenue of ¥100bn to ¥300bn and operating profit of ¥10bn to¥20bn through measures from a long-term perspective.

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

20 22

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

2-Oct.-2020
https://scalagrp.jp/en/ir/

OutlookDomestically, the Company is working on measures including branding of local governments on the theme ofregional revitalization, cooperation and matching services in order to develop new businesses between companies,
and media building to link the necessary human resources. In August 2020, it announced it had established a joint
venture, Social Studio Co., Ltd, with Branding Technology Inc. <7067> that provides “branding x digital marketing”
solutions, with the aim of progressing DX for the government and local governments. Going forward, the plan
is for both companies to utilize their expertise to deploy a business for digitalization and marketing support for
the government, local governments, and business companies. By progressing these measures, the aims are to
improve the administrative services of regional local governments and to create environments in which it is easier
to work and to live, which will lead to an increase in residents and the revitalization of regional companies that are
responsible for the future of the regions. Also, Grit Group Holdings is conducting measures on the axis of HR-tech,such as providing education services and building a mechanism for recruitment support to utilize overseas humanresources and deploying an infant education business that utilizes AI.
For overseas business development, the Company is advancing into Myanmar as the first phase. In June 2020, in
order to progress business development in the health-tech field, it announced it had invested in MyanCare, a local
health-tech company. MyanCare is a company that is developing call centers and a mobile application for remote
medical services, and it has 30 employees. On the one hand, Myanmar is undergoing remarkable economic
development, but on the other hand, it has the social problem of its medical system being underdeveloped evenin comparison to its neighboring countries. In order to help solve this problem, MyanCare is providing remote
medical services, centered on call centers with full-time doctors specializing in pediatrics, and remote medical
services via a smartphone app. For insurance also, the Company is collaborating with Prudential Life InsuranceCo., Ltd., and both companies are actively conducting business development, including starting joint sales andmarketing activities.
Elsewhere, the Company’s main customers in Japan include insurance companies, to which it provides a wide
range of services through IoT/ big data processing and analysis. It is at the stage of investigating how it should
contribute to the promotion of business in Myanmar of these insurance companies (since 2019, the restrictions
on foreign investment in the insurance industry have been eased, and the restriction on sales activities has been
lifted). Through the recent investment in MyanCare, it is activating the Myanmar healthcare industry as a whole,including the medical and insurance fields, by utilizing the Company’s expertise in big data processing and analysis
for the personal health care records (PHR) of MyanCare’s users. Or in other words, it is envisaging model cases
for transitions to DX in the healthcare field. The big data analysis of PHR makes it possible to manage healthconditions and to provide services useful for preventive medicine, while it also makes possible the developmentof the optimal health insurance system and insurance products.
Also, in August 2020, the Company announced it had established a joint venture company, SCALA ACE Co., Ltd.
(investment ratio, 35.0%), with ACE Data Systems Ltd., which is Myanmar’s largest IT company. In the future,both companies will leverage their expertise and utilize AI/IoT/IT in the education, medical, and agricultural fields,with the aim of contributing to solving Myanmar’s social problems. At the same time, they will work to build abusiness-creation foundation in order to continuously develop businesses. ACE Data Systems has an abundant
track record for Myanmar government-related IT projects, so it is also possible that they will collaborate on andpromote DX on a national strategy level, so we shall be paying attention to developments in the future.

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

21 22

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

Scala, Inc.

2-Oct.-2020

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
the internal reserves necessary to strengthen its financial structure and develop its businesses in the future. In
FY6/21, profits are forecast to increase at each profit-item stage, while it is aiming for revenue to accumulate in therecurring-revenue businesses, centered on the SaaS/ASP business, and for continued growth in the future fromthe effects of investment. Therefore, it plans to increase the dividend per share by ¥4.0 YoY to ¥32.0, which will be
the 12th consecutive fiscal period of higher dividends.

㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑
(¥)
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

㻲㼅㻢㻛㻝㻣㻱

㻲㼅㻢㻛㻝㻤

㻲㼅㻢㻛㻝㻥

㻲㼅㻢㻛㻞㻜

㻲㼅㻢㻛㻞㻝㻱

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.

22 22

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.
5-11-9 Minami Aoyama, Minato-ku, Tokyo, Japan 107-0062
Phone: 03-5774-2443 (Financial information Dept.)
Email: support@fisco.co.jp