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

26-Apr.-2018
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

26-Apr.-2018https://scalagrp.jp/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Sales and profits increased in FY6/18 1H based on non-GAAP standards. .................................................

01

2. Forecasts double-digit increases in sales and profits in FY6/18 based on non-GAAP standards. ...............

01

3. Focusing on expanding the sales of new services and collaborating with Leoconnect................................

02

4. Will continue to increase dividends, assuming earnings growth. .................................................................

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

03

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

04

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

07■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 08
1. Summary of FY6/18 1H results.............. ......................................................................................................

08

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

09

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

12■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 13
1. Outlook for FY6/18.. .....................................................................................................................................

13

2. Measures for 2H.. .........................................................................................................................................

15■Medium- to long-term growth strategy------------------------------------------------------------------------------------------------ 17■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 18■Information security measure------------------------------------------------------------------------------------------------------------------------ 18

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

26-Apr.-2018https://scalagrp.jp/ir/██Summary
While progressing a growth strategy utilizing M&A,
the outlook for FY6/18 is double-digit increases in sales and profits
based on non-GAAP standards that exclude temporary earnings
Scala, Inc. <4845> (hereafter, also “the Company”) is a leading provider of website search services, FAQ services,and other services for corporate websites. It provides a wide range of services using the latest technologies, mainly
a stock-type business model SaaS/ASP service* and services related to the Internet of Things (IoT) and big data. It
leverages contracts with customers from direct sales to reflect their needs in development activities and has steadily
expanded its service lineup to achieve steady growth. The Company is actively utilizing M&A to expand its businessarea, and in July 2016, it made a subsidiary of Softbrain Co., Ltd. <4779> (percentage of voting rights: 50.23%), a
major sales support software company. It also made subsidiaries of plube Co., Ltd. (ownership ratio: 100%), an EC
website management company, in August 2017 and Leoconnect, Inc. (ownership ratio: 66.0%), which carries out
customer support consulting via call centers operated by HIKARI TSUSHIN, INC. <9435>, in March 2018. From
FY6/16, the Company adopted IFRS accounting.
* Service that supplies application software functionality to customers over a network

1. Sales and profits increased in FY6/18 1H based on non-GAAP standards
In FY6/18 1H (July-December 2017) consolidated results based on non-GAAP standards that exclude temporary
earnings, sales revenue increased 10.7% year on year (YoY) to ¥5,854mn and operating profit rose 12.2% to¥822mn. This was because despite a decline in profits in the businesses of Softbrain, which include SFA and field
marketing, the SaaS/ASP business performed strongly and achieved double-digit increases in sales and profits. In
addition to the steady rise in the number of contracts for main services, such as i-search and i-ask, development of
the Big Data processing and management system of Driving! (a safe-driving support service for individuals provided
by Sompo Japan Nipponkoa Insurance Inc.) contributed to earnings. plube, which was made a subsidiary in August
2017, recorded sales revenue of ¥225mn and operating profit of ¥26mn.
2. Forecasts double-digit increases in sales and profits in FY6/18 based on non-GAAP standards
The outlook for FY6/18 consolidated results based on non-GAAP standards is for sales revenue to increase 21.0%
YoY to ¥12,900mn and operating profit to grow 15.1% to ¥1,600mn. Due to the lowering of expectations for
Softbrain’s results within the initial forecasts (sales revenue of ¥12,600mn and operating profit of ¥1,710mn), theoperating profit forecast has been slightly downwardly revised, but this will be covered by the strong performanceof the SaaS/ASP business. In addition, Leoconnect, which was made a subsidiary in March 2018, is expected tocontribute sales revenue of ¥900mn.

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

Scala, Inc.

26-Apr.-2018

4845 Tokyo Stock Exchange First Section

https://scalagrp.jp/ir/

Summary

3. Focusing on expanding the sales of new services and collaborating with Leoconnect
The Company is focusing on expanding the sales of new services, which include i-gift (a digital gift service) andi-livechat (a web chat system) to further accumulate stock earnings. Also, by making Leoconnect a subsidiary, it will
expand sales by introducing the Company’s IVR (interactive voice response) and other service into call centers ofthe HIKARI TSUSHIN Group. The two companies will also jointly develop new services with high added value thatcombine the telephone and the web. Leoconnect is also targeting earnings growth through developing customers
other than those in the HIKARI TSUSHIN Group.
4. Will continue to increase dividends, assuming earnings growth
The Company’s basic dividend policy is to stably and continuously pay dividends while retaining the internal reserves
necessary to strengthen its financial structure and to develop its businesses in the future. In FY6/18, it plans to
pay a dividend per share of ¥20, up ¥2 YoY, for the ninth consecutive fiscal year of higher dividends. It also aims tocontinue to increase the dividend in the future alongside the growth in earnings.
Key Points
The corporate cloud service is its core business and it is expanding business scale through an M&A strategy
Aiming for earnings growth through expanding sales of new services, including i-gift and i-livechat, andcollaborating with Leoconnect• Targeting further growth through developing new business areas, while steadily implementing an M&A strategy••㻾㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㼟㻔¥㼙㼚㻕㻿㼍㼘㼑㼟㻌㼞㼑㼢㼑㼚㼡㼑㻌㻔㼘㼑㼒㼠㻕㻝㻡㻘㻜㻜㻜

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

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

26-Apr.-2018https://scalagrp.jp/ir/██Company profile
The corporate cloud service is its core business andit is expanding business scale 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. In May 2001, it was listed on the
Osaka Securities Exchange’s NASDAQ Japan Market (now the TSE’s JASDAQ; it is currently listed on the TSE First
Section).
* DBMS was developed by US-based Computer Corporation of America and Sirius Software (now, Rocket Software). Major
customers were large companies in Japan like 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.

The Company determined that it needed to change its business structure to continue growing amid the migrationof corporate information systems from mainframes to small-scale open servers, and it started acquiring information
service firms through M&As utilizing funds obtained from its IPO. It began with the purchase of PatentManager, apatent management software business from Interscience in 2003, and then acquired Dbecs Co., Ltd. with the aim ofentering the CRM field, Vodamedia Inc. with the goal of entering the IVR field, the news distribution service provider
NewsWatch Inc., the website developer TriAx Corp., and others as subsidiaries one after another. The Company issteadily expanding its SaaS/ASP business as its core operations and bolstering its recruitment of system engineers
to enhance its own service development capabilities.
Recently, the Company made subsidiaries of Softbrain (ownership ratio based on voting rights as of the end ofJune 2017: 50.23%), a major sales support software company, in July 2016; plube (ownership ratio: 100.0%), an
EC website management company that conducts trading of battle game trading cards, in August 2017 in order toenter the EC business; and Leoconnect (ownership ratio: 66.0%), which uses 24 call centers to provide customer
support consulting for the brands and products of the HIKARI TSUSHIN Group, in March 2018.
The Company switched to a holding company organization in 2004 to conduct more flexible management, and in
FY6/16, it changed its accounting standards to IFRS to disclose its results.

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

26-Apr.-2018https://scalagrp.jp/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, PAREL, 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

Source: Prepared by FISCO from the Company’s website

Holds the 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’s mainstay businesses can be broadly dividend into its existing business of SaaS/ASP services, which
enhance convenience for users to corporate websites, and the Softbrain Group’s SFA business (sales innovation
business), field marketing business, and other businesses. Other businesses also now include the EC business ofplube, which was made a subsidiary in August 2017. The percentages of total sales by business in FY6/18 1H were27.3% from the SaaS/ASP business, 34.9% from the SFA business, and 27.8% from the field marketing business,so these three businesses provide 90% of total sales.

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

26-Apr.-2018https://scalagrp.jp/ir/

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Source: Prepared by FISCO from the Company’s results briefing materials(1) The SaaS/ASP business
The Company provides SaaS/ASP services as its core business. The main services are the i-search website searchservice, 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 share at around 15% withmore than 360 customers, particularly large enterprises. While the Company has over 10 competitors, its i-searchservice 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 160 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.

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

26-Apr.-2018https://scalagrp.jp/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 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 (forcorporations)*1 sold by Sompo Japan Nipponkoa Insurance, and Portable Smiling Road, a smartphone app (forindividuals)*2. In these services, big data, such as driving-related data sent from the users’ drive recorders, isreceived by the server of Scala Communications Inc. 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 data collected from drive
recorders 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 toprovide various functions for “peace of mind,” reporting accidents with a single push of a button should the driver be in an accident
for “safety,” being useful for accident prevention including through driving analysis and the provision of information in real time, andGPS for “convenience.”

Service content
Type

Product name

Description

i-search

Site internal search engine

i-linkcheck

Link-loss detection system

i-print

Site print service

i-linkplus

Related link display servicei-ask

FAQ system

i-catalog

Product site management system

i-learninge-learning service

i-flow

Progress management and approval system

LaCoonWeb system building platform

i-entry

Comprehensive questionnaire CRM service

dbecs

High-performance web mailer

i-assist

Virtual assistancei-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

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

SFA service

e-Sales Manager

SFA/CRM software

Field marketing business

Field activities, market research, etc. Market research, store field activities

EC

Online card shop

Site assistance service

CMS service

CRM service

Data management

Operations for the online buying and selling oftrading cards and related products

Source: Prepared by FISCO from Company materials

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

26-Apr.-2018https://scalagrp.jp/ir/

Company profile(2) The Softbrain Group’s businesses and other businesses
The Softbrain Group’s businesses can be divided into the SFA business (e-Sales Manager-related business), field
marketing business, and other businesses. The SFA business is mainly the development and sales of e-SalesManager, 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. e-Sales Manager has an excellent
reputation as being No. 1 for usability. It is the industry-leading product from domestic SFA vendors, and has
been introduced by a total of more than 4,500 companies.
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. The Company has approximately 74,000 registered staff nationwide who cover more than 140,000
stores, and it is deploying this business on the largest scale within Japan. It is also developing businesses for the
dispatch and referral of retailer quality counselors who conduct field activities.
The other businesses include the Softbrain Group’s systems development and publishing businesses, and plube’s
EC business, which was added in August 2017. They contribute around 10% of total sales.

Aims to differentiate itself from competitors
by increasing convenience through developmentsfrom 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 its business as direct sales and 80% of sales 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.
Another strength is that its extensive lineup of services developed in this manner differentiates it from its competitors.
While many competitors offer SaaS/ASP services for corporate websites, most of these companies only supply
standalone services and few can provide multiple services as the Company does. The ability to propose multiple
services as a package enables it to meet diverse customer needs, and this cross-selling helps to raise the average
price per customer and customer satisfaction. It has a track record of transactions with over 1,000 companies,
including 400 listed companies.
A feature of the SaaS/ASP business is that monthly billing revenue accounts for approximately 70% of sales revenue
and it has established a stable, stock-type earnings base. The Company’s basic policy is to avoid usage-based billingas much as possible and to provide services only from fixed monthly billing. Also, the main services are maintaininga high level of profitability, with the 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 initiallydevelops services customized to customer needs, and then develops them horizontally as general services, whichenables it to keep development costs down.

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

Scala, Inc.

26-Apr.-2018

4845 Tokyo Stock Exchange First Section

https://scalagrp.jp/ir/██Results trends
Sales and profits increased in FY6/18 1H basedon non-GAAP standards
1. Summary of FY6/18 1H results
In FY6/18 1H consolidated results based on non-GAAP standards that exclude temporary earnings and costs, sales
revenue increased 10.7% YoY to ¥5,854mn, operating profit rose 12.2% to ¥822mn, pretax profit climbed 11.8% to¥815mn, and net income attributable to owners of the parent increased 20.0% to ¥372mn, for double-digit increases
in sales and profits. The positive results were mainly because while Softbrain Group’s results were slightly lower than
expected, the SaaS/ASP business performed strongly, and there were also the additions of sales revenue of ¥225mn
and operating profit of ¥26mn from plube entering the scope of consolidation in August 2017. FY6/17 1H IFRS
results included a gain of ¥2,633mn relating to the step acquisitions of Softbrain’s shares* under operating profit.
* The gain on the difference between the market value of the relevant subsidiary at the time it entered the scope of consolidation andthe acquisition cost of the shares

FY6/18 1H consolidated results(¥mn)
FY6/17 1H
Results(IFRS)

FY6/18 1H

Results
Ratio to sales(Non-GAAP)

Company
targetResults
Ratio to sales(Non-GAAP)

YoY

vs target

Sales revenue

5,286

5,286

-

6,000

5,854

-

10.7%

-2.4%

Operating profit

3,366

733

13.9%

830

822

14.0%

12.2%

-0.9%

Pretax profit

3,363

730

13.8%

830

815

13.9%

11.8%

-1.7%

Net income attributable toowners of the parent

2,943

310

5.9%

540

372

6.4%

20.0%

-31.1%

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

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

Scala, Inc.

26-Apr.-2018

4845 Tokyo Stock Exchange First Section

https://scalagrp.jp/ir/

Results trends

The SaaS/ASP business is performing strongly, but growth
has temporarily stalled in the SFA and field marketing businesses
2. Trends by business segment(1) SaaS/ASP businessIn the SaaS/ASP business, sales revenue increased 21.7% YoY to ¥1,602mn, and operating profit based on
non-GAAP standards rose 113.6% to ¥298mn. Looking by type of sales revenue, the number of contracts for thevarious services for monthly and usage-based billing revenue steadily increased, up 8.6% to ¥1,066mn. One-timesales revenue also grew greatly, up 60.5% to ¥536mn, from the contribution of the development of the Driving!
Big Data processing and management system*, a safe-driving support service for individuals provided by Sompo
Japan Nipponkoa Insurance.
* It is a service that fully supports a safe and secure car life by providing security when driving through the installation of a dedicateddrive recorder with communication functions equipped with the Safe Driving Support Function. After driving, the Safe Driving
Diagnosis and Visual Function Training features allow users to self-maintain driving skills. Also, should an accident occur, the service
provides an Accident Report Function and Accident Scene Emergency Assistance Service.

Looking at the YoY growth in sales revenue by service, sales were positive for the mainstay i series, with i-searchup 15.7% and i-ask up 16.6%, while a track record of introductions is also starting to appear for the new servicesof i-gift and the chatbot system. Companies are steadily introducing i-gift, which is intended for property insurancecompanies. For web services also, orders for website production increased, up 11.4%. Sales of services related
to IoT and big data grew greatly, up 133.6%, mainly due to the development of the Driving! Big Data safe-driving
support service. Operations of the Driving! Big Data service were launched in January 2018, and from 3Q, itsmonthly billing will be recorded in operations management revenue. Other than these, sales of IVR and othertelephone system services and the news distribution service performed steadily, increasing 3.1% and 1.9%,
respectively. The Model 204 service ended in the fall of 2016, and the effect of the end of this service was a
decline in sales revenue of ¥47mn.

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㻝㻡㻜
㻝㻜㻜

㻞㻜㻜

㻡㻜

㻜

㻜
㻲㼅㻢㻛㻝㻣㻌㻝㻴㻲㼅㻢㻛㻝㻣㻌㻞㻴㻲㼅㻢㻛㻝㻤㻌㻝㻴

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

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

09 18

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

26-Apr.-2018https://scalagrp.jp/ir/

Results trends

Sales by service(¥mn)
FY6/17 1H

FY6/18 1H

ChangeYoY

i-search

191

i-ask

175

221

30

15.7%

204

29

i-entry

16.6%

51

48

-3

-5.9%

Web services

185

206

21

11.4%

Services related to IoT/big data

137

320

183

133.6%

Telephone system service

131

135

4

3.1%

News distribution service

206

210

4

1.9%

Other

237

255

18

7.6%

Total

1,317

1,602

285

21.6%

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

Looking at the factors causing operating profit to change, those causing an increase were the higher sales
revenue of ¥285mn and the effects of cost reductions, including ¥32mn in advertising costs, while those causing
a decrease were rises in outsourcing costs of ¥116mn, personnel costs within SG&A expenses of ¥30mn, andaudit costs of ¥11mn. Due to the effects of the higher sales, the operating margin rose greatly, from 10.6% in theprevious fiscal year to 18.7%.

㻲㼍㼏㼠㼛㼞㼟㻌㼍㼒㼒㼑㼏㼠㼕㼚㼓㻌㼛㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻌㼕㼚㻌㼠㼔㼑㻌㻿㼍㼍㻿㻛㻭㻿㻼㻌㼎㼡㼟㼕㼚㼑㼟㼟㻌㼞㼑㼟㼡㼘㼠㼟㻌
㻔¥㼙㼚㻕
㻡㻜㻜
+32
㻠㻜㻜
㻟㻜㻜

+285

-116
㻰㼑㼏㼞㼑㼍㼟㼑㻌㼕㼚㻌㼍㼐㼢㼑㼞㼠㼕㼟㼕㼚㼓㻌㼍㼚㼐㻌㼛㼠㼔㼑㼞㻌 㻵㼚㼏㼞㼑㼍㼟㼑㻌㼕㼚㻌㼏㼛㼟㼠㼟㼛㼡㼠㼟㼛㼡㼞㼏㼕㼚㼓㻌

-30

㼏㼛㼟㼠㼟

㻞㻜㻜

㻝㻟㻥

-11

㻞㻥㻤

㻵㼚㼏㼞㼑㼍㼟㼑㻌㼕㼚㻌㼍㼡㼐㼕㼠㻌
㼏㼛㼟㼠㼟

㻝㻜㻜
㻜
㻲㼅㻢㻛㻝㻣㻌㻝㻴㻿㼍㼘㼑㼟㼞㼑㼢㼑㼚㼡㼑

㻻㼠㼔㼑㼞㻯㼛㼟㼠㻌㼛㼒㻌㼟㼍㼘㼑㼟 㻼㼑㼞㼟㼛㼚㼚㼑㼘㼑㼤㼜㼑㼚㼟㼑㼟

㻯㼛㼙㼙㼕㼟㼟㼕㼛㼚 㻲㼅㻢㻛㻝㻤㻌㻝㻴㼒㼑㼑㼟

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

(2) SFA businessIn the SFA business, sales revenue increased 6.3% YoY to ¥2,040mn and operating profit decreased 21.3% to¥350mn. Results were strong due to the acquisition of large projects for e-Sales Manager, which is the mainstay
product, while they also trended steadily for consulting focusing on sales problems and skills training. However,operating profit declined due to active investment in developing e-Sales Manager toward realizing medium- tolong-term growth.

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

10 18

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

Scala, Inc.

26-Apr.-2018

4845 Tokyo Stock Exchange First Section

https://scalagrp.jp/ir/

Results trends㻿㻲㻭㻌㼎㼡㼟㼕㼚㼑㼟㼟㻌㼞㼑㼟㼡㼘㼠㼟㻌
㻔¥㼙㼚㻕

㻞㻘㻡㻜㻜

㻺㼑㼠㻌㼟㼍㼘㼑㼟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

㻡㻜㻜

㻠㻠㻡

㻞㻘㻜㻜㻜

㻟㻡㻜

㻟㻟㻤

㻝㻘㻡㻜㻜

㻝㻘㻜㻜㻜

㻔¥㼙㼚㻕

㻠㻜㻜
㻟㻜㻜

㻞㻘㻜㻠㻜

㻝㻘㻥㻤㻞

㻝㻘㻥㻝㻥

㻡㻜㻜

㻞㻜㻜
㻝㻜㻜

㻜

㻜
㻲㼅㻢㻛㻝㻣㻌㻝㻴㻲㼅㻢㻛㻝㻣㻌㻞㻴㻲㼅㻢㻛㻝㻤㻌㻝㻴

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

(3) Field marketing businessIn the field marketing business, sales revenue decreased 0.2% YoY to ¥1,626mn and operating profit declined
13.3% to ¥118mn. Results of the stock-type businesses, which include lump-sum contracts for field activities
and the dispatch business, trended at around the same level YoY, and the reason for the decline in sales was the
reduction in short-term spot proposals, such as for store surveys. Profits declined as a result of active investment
in strengthening the sales structure toward realizing further growth and the creation of a new market based on
the new business concept of “field crowdsourcing.” However, sales and profits both increased compared to
FY6/17 2H.

㻲㼕㼑㼘㼐㻌㼙㼍㼞㼗㼑㼠㼕㼚㼓㻌㼎㼡㼟㼕㼚㼑㼟㼟㻌㼞㼑㼟㼡㼘㼠㼟
㻔¥㼙㼚㻕
㻝㻘㻤㻜㻜
㻝㻘㻢㻜㻜

㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻝㻘㻢㻞㻤㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻕
㻝㻘㻡㻢㻥

㻝㻘㻢㻞㻢

㻝㻤㻜
㻝㻢㻜

㻝㻟㻢

㻝㻘㻠㻜㻜

㻔¥㼙㼚㻕

㻝㻝㻤

㻝㻘㻞㻜㻜

㻝㻠㻜
㻝㻞㻜

㻤㻤

㻝㻘㻜㻜㻜

㻝㻜㻜

㻤㻜㻜

㻤㻜

㻢㻜㻜

㻢㻜

㻠㻜㻜

㻠㻜

㻞㻜㻜

㻞㻜

㻜

㻜

㻲㼅㻢㻛㻝㻣㻌㻝㻴㻲㼅㻢㻛㻝㻣㻌㻞㻴㻲㼅㻢㻛㻝㻤㻌㻝㻴

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

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

11 18

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

Scala, Inc.

26-Apr.-2018

4845 Tokyo Stock Exchange First Section

https://scalagrp.jp/ir/

Results trends(4) Other businesses
In the other businesses, sales revenue increased 39.0% YoY to ¥584mn and operating profit rose 429.5% to¥54mn. The increase factors were the recovery of book sales in the publishing business, and also the additionsof sales revenue of ¥225mn and operating profit of ¥26mn following plube, which is an EC website managementcompany, entering the scope of consolidation.

Other businesses’ results㻔¥㼙㼚㻕㻺㼑㼠㻌㼟㼍㼘㼑㼟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

㻔¥㼙㼚㻕

㻡㻤㻠

㻤㻜

㻢㻜㻜

㻡㻠

㻡㻜㻜

㻢㻜

㻠㻞㻜
㻠㻜㻜

㻠㻜
㻟㻟㻡

㻟㻜㻜

㻝㻜

㻞㻜

㻞㻜㻜

㻜
㻙㻞㻢

㻝㻜㻜

㻙㻞㻜

㻜

㻙㻠㻜

㻲㼅㻢㻛㻝㻣㻌㻝㻴㻲㼅㻢㻛㻝㻣㻌㻞㻴㻲㼅㻢㻛㻝㻤㻌㻝㻴

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



Keeping the equity ratio in the 40% range andmaintaining financial soundness
3. Financial condition and business indicators
Looking at the financial condition at the end FY6/18 1H, total assets increased ¥719mn from the end of the previous
fiscal year to ¥15,660mn. The main factors were that, in current assets, cash and deposits increased ¥109mn andoperating receivables and other receivables rose ¥394mn. Also, in non-current assets, deferred tax assets deceased¥101mn, while there were increases in other long-term financial assets of ¥143mn, property, plant and equipmentof ¥62mn, goodwill of ¥74mn, and intangible assets of ¥51mn.
Total liabilities increased ¥250mn from the end of the previous fiscal year to ¥7,272mn. The main factors were thatinterest-bearing debt increased ¥413mn and operating debt and other payables decreased ¥300mn. Also, total
equity increased ¥468mn from the end of the previous fiscal year to ¥8,388mn, with the main factors being therecording of net income attributable to owners of the parent of ¥372mn, net income attributable to non-controllinginterests of ¥191mn, and dividend payments of ¥150mn.

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

12 18

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

Scala, Inc.

26-Apr.-2018

4845 Tokyo Stock Exchange First Section

https://scalagrp.jp/ir/

Results trends

Looking at the business indicators, the interest-bearing debt ratio rose to 82.7% from 79.7% at the end of theprevious fiscal year as a result of the proactive M&A strategy. But the earnings increased by M&A so the equity ratio
was 40.0%, almost flat YoY. On the other hand, net cash (cash and deposits minus interesting-bearing debt) was
also basically kept on an even keel, so it can be judged that the Company is maintaining its financial soundness.
However, goodwill accounts for approximately 37% (¥5,758mn) of total assets, and it is necessary to be awarethat there is the risk that its financial condition could worsen should the earnings of Softbrain, which provides the
majority of this goodwill, deteriorate and it require impairment treatment. Currently, Softbrain’s results are trending
stably, and at FISCO, we think the possibility of this risk materializing is extremely low. The Company has expressed
its intention to gradually reduce the level of interest-bearing debt in the future.
Consolidated balance sheet(¥mn)
FY6/16
year-end

FY6/17
year-end

FY6/18 1H-end

5,470

7,167

7,656

488

5,060

4,999

5,108

109

4,160

7,774

8,004

230

(Goodwill)

477

5,684

5,758

74

Total assets

9,631

14,941

15,660719

Current assets(Cash and deposits)
Non-current assets

Change

3,300

4,768

5,181

413

Total liabilities

5,720

7,021

7,272

250

Total equity

3,910

7,919

8,388

468

Equity ratio (shareholders’ equity ÷ total assets)

40.6%

40.1%

40.0%

Interest-bearing debt ratio(interest-bearing debt ÷ shareholders’ equity)

84.4%

79.7%

82.7%

(Interest-bearing debt)

Management indicators* Based on IFRS
Source: Prepared by FISCO from the Company’s financial results██Outlook
The forecasts for FY6/18 consolidated earnings are double-digit
increases in sales and profits, based on non-GAAP standards
1. Outlook for FY6/18
In a comparison based on non-GAAP standards, the outlook for FY6/18 results is for sales revenue to increase
21.0% YoY to ¥12,900mn, operating profit to rise 15.1% to ¥1,600mn, pretax profit to grow 15.8% to ¥1,600mn,
and net income attributable to owners of the parent to increase 23.1% to ¥680mn, for double-digit increases insales and profits.
Compared to the initial forecasts, sales revenue will rise ¥300mn, operating profit and pretax profit will decrease¥110mn, and net income attributable to owners of the parent will fall ¥40mn. The main factor behind sales revenue
exceeding the initial forecast is the consolidation of Leoconnect, which was made a subsidiary in March 2018, adding
its sales of ¥900mn. On excluding the effect of this, sales revenue will decrease ¥600mn. But this is because in the
Softbrain Group’s results, sales revenue and profits are both trending slightly below initial expectations. The outlook
for the SaaS/ASP business is for results to be basically in line with initial forecasts.

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13 18

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

Scala, Inc.

26-Apr.-2018

4845 Tokyo Stock Exchange First Section

https://scalagrp.jp/ir/

Outlook

Outlook for FY6/18 consolidated earnings(¥mn)
FY6/17

FY6/18IFRS

Non-GAAP

Initial forecast

Revisedforecasts

YoY*

Sales revenue

10,663

10,663

12,60012,90021.0%

Operating profit

3,736

1,389

1,710

1,600

15.1%

Pretax profit

3,728

1,381

1,710

1,600

15.8%

Net income attributable toowners of the parent

2,987

552

720

680

23.1%

Earnings per share

177.52

32.82

42.64

40.27

* YoY growth rates for FY6/18 are comparisons with non-GAAP indicators
Source: Prepared by FISCO from the Company’s financial results

Looking on a fiscal half-year basis, sales revenue, which was ¥5,854mn in 1H, will grow greatly to ¥7,046mn in 2H,and even when excluding the effects of Leoconnect, sales are expected to increase by around 5.0%. On the other
hand, operating profit is forecast to decrease 5.0%, from ¥822mn in 1H to ¥778mn in 2H. Leoconnect is expected
to have hardly any effect on profits, but the Company will collaborate with Leoconnect on new measures, including
developing new services so the forecasts appear conservative in terms of costs.
The outlook for the SaaS/ASP business is for the double-digit growth to continue through the accumulation of stockearnings, centered as before on the i series. On the other hand, Softbrain’s forecasts for FY12/18 1H (January-June2018) are for strong results, with net sales to increase 9.1% YoY to ¥4,300mn and operating profit to grow 9.7% to¥480mn. Higher sales and profits are expected in both the SFA and field marketing businesses. Also, compared to
2H in the previous fiscal year (July-December 2017), net sales will increase 4.0% and operating profit will decrease
6.0%, which do not seem incompatible with the basic trend in the Company’s consolidated results.
plube’s EC business is forecast to contribute around ¥400-500mn in sales for the full fiscal year. It is not anticipated
to contribute much to profits at the initial stage, but it is performing steadily, including recording profits of ¥26mn in
1H, so it is expected to contribute to profits for the full fiscal year.

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14 18

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

26-Apr.-2018https://scalagrp.jp/ir/

OutlookAiming for earnings growth through expanding sales of new services,
including i-gift and i-livechat, and collaborating with Leoconnect
2. Measures for 2H(1) Strengthening sales of new services
In 2H, the Company is focusing on expanding sales of new services, including i-gift, i-livechat, and the chatbot
system. i-gift is a digital gift service for product exchanges at conventional stores, in which companies conducting
sales promotion campaigns for new products or gifts can send customers an SMS or email (electronic message
with an ID, such as a QR code) that can be presented at stores to receive a product. As the billing system is acombination of usage-based billing according to the number of IDs issued and fixed monthly billing, the greater thenumber of IDs issued, the more the Company’s sales revenue will increase. As the mechanism itself is simple, there
are many competitors. Therefore, the key to increasing earnings is determining how to acquire client companies
that have customer bases and handle many products. Up to December 2017, the service had been introducedby three companies, including two insurance companies, and the Company intends to acquire new customers
in FY6/18, aiming at sales revenue of ¥20mn.
i-livechat is a web chat service that enables site operators, such as in a customer support center, to guide users
in solving problems they may face and addressing their questions or concerns through real-time chat. By linking
and checking users’ i-search and i-ask history, site operators are able to respond while confirming content on
the chat response screen. i-livechat is attracting attention as a service that contributes to improving customer
satisfaction. It is anticipated that it will be introduced mainly at call centers, with an expected minimum monthly
usage fee between ¥150,000-200,000.
In terms of other web chat systems, Zopim Chat from Zendesk in the U.S. (launched in Japan in 2012) has alreadybeen introduced by more than 40,000 companies worldwide. Within Japan, Chamo from Chamo Co., Ltd. has
been introduced by more than 2,500 companies, so the Company is a latecomer. But the Company plans to
expand its market share as it is making progress in enhancing functions that offer high levels of convenience andlinking i-search, i-ask, and other services.
The chatbot system is a system that uses proprietary language analysis technology to analyze what site users ask
by keyword or natural sentences, and then answers automatically in a chat format. In addition to answering FAQs
registered on the management site, it can also answer questions in a conversational style. It was introduced forthe first time in December 2017 by Koyo Electric Co., Ltd.* through a joint proposal between IBSystem Co., Ltd.
and Toppan Forms Co., Ltd., and it has been favorably received. There have been many inquiries regarding thisservice from companies’ CRM managers aiming to reduce their work load and improve customer satisfaction, andthe number of contracts is expected to increase in the future. The service fee is ¥200,000-300,000 per month.
* Changed its company name to SymEnergy, Inc. on April 1, 2018

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15 18

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

26-Apr.-2018https://scalagrp.jp/ir/

Outlook(2) Collaboration with Leoconnect
HIKARI TSUSHIN Group established Leoconnect on December 1, 2017 with an aim to create customer operations
head office and supervise all of its group company’s call center operations. Currently, it is using 24 call centers toprovide customer support consulting for the HIKARI TSUSHIN Group’s brands and products. It has 22 employees.
Its strengths include expertise in effectively constructing and proposing customer support operations that cover
multiple sales channels and products. It has a track record of outsourcing for 190 brands and services for 456
types of customer service counters.
As background to the Company’s objectives in making a subsidiary of Leoconnect is that in the call center industry
in the last few years, various services have been launched, such as chatbot services and business consulting
utilizing the big data of VOC (voice of customer) data, and therefore business opportunities are expanding.
Through its collaboration with Leoconnect, which is knowledgeable of needs at work sites, the Company is aiming
to develop new value-added services for call centers and expand earnings from this field. It also has a lineup of
customer support-related services, including IVR and i-ask, but it has no track record of introducing them at thecall centers of the HIKARI TSUSHIN Group, so sales are expected to increase in the future. On the other hand,
Leoconnect has not previously conducted sales activities other than for the companies in the HIKARI TSUSHINGroup, so it also expects to acquire new customers from joining the Company’s Group.
If they are able to develop highly competitive new services in the customer support field by integrating Scala’s
IT development capabilities and Leoconnect’s consulting capabilities, the Company’s earnings growth can be
expected to accelerate.

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16 18

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

26-Apr.-2018https://scalagrp.jp/ir/██Medium- to long-term growth strategy
Targeting further growth through developing new business areas,
while steadily implementing an M&A strategy
As its medium- to long-term growth strategy, the Company is aiming to realize further growth by stably growing its
existing SaaS/ASP business (cloud service), and moreover based on this service, to open up new business areasthat facilitate communication between people and between companies (including the areas of robots and AI), while
actively utilizing M&A and business alliances.
The targets for the M&A and business alliances can be summarized into the following four types of companies: 1)
companies with the expertise and technologies to develop new services, 2) companies with a large customer basethat will lead to expansions in market share for the Company’s existing services, 3) companies that will enhance theCompany’s service lineup and that have expertise and technologies it does not possess and will contribute to theevolution of its existing services and improved competitiveness, and 4) companies with many excellent engineers
who will strengthen the Company’s development capabilities.
The Company made plube a subsidiary in August 2017 with the aim of absorbing its EC business management
expertise. In addition, it made a subsidiary of Leoconnect in March 2018 in order to expand the market shares of
its existing services, enhance its service lineup and increase its competitiveness. So it can be said to be steadily
implementing an M&A strategy.
It is also expected to achieve sustainable growth in its existing businesses, as it is aiming to raise the unit priceper customer through cross-selling its various i series products, and also by working to acquire new customers.
Future direction

Source: The Company’s results briefing materials

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17 18

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

Scala, Inc.

26-Apr.-2018

4845 Tokyo Stock Exchange First Section

https://scalagrp.jp/ir/██Shareholder return policy
Plans to increase the FY6/18 dividend per share by ¥2 YoY to ¥20,and its policy is to continuously increase dividends
The Company’s basic policy on returning profits to shareholders is to stably and continuously pay a dividend while
also retaining the internal reserves necessary to strengthen its financial structure and develop its businesses in
the future. In FY6/18, it plans to increase the dividend per share by ¥2 YoY to ¥20, for the ninth consecutive fiscal
year of higher dividends. It has also indicated its intention to continuously increase dividends in the future, if profits
continue to grow.

㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻔¥㻕㻰㼕㼢㼕㼐㼑㼚㼐

㻯㼛㼙㼙㼑㼙㼛㼞㼍㼠㼕㼢㼑㻌㼐㼕㼢㼕㼐㼑㼚㼐

㻞㻡㻚㻜
㻞㻜㻚㻜
㻞㻜㻚㻜

㻝㻤㻚㻜
㻝㻠㻚㻜

㻝㻡㻚㻜
㻝㻜㻚㻜

㻝㻞㻚㻜
㻤㻚㻜

㻞㻚㻜
㻝㻤㻚㻜

㻞㻜㻚㻜

㻝㻠㻚㻜
㻡㻚㻜

㻤㻚㻜

㻝㻜㻚㻜

㻜㻚㻜
㻲㼅㻢㻛㻝㻠

㻲㼅㻢㻛㻝㻡

㻲㼅㻢㻛㻝㻢

㻲㼅㻢㻛㻝㻣

㻲㼅㻢㻛㻝㻤㻌㻱

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.

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Disclaimer
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This report is based on information that we believe to be reliable, but we do not confirm or
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