Alpha-Win Company Research ReportYRGLM Inc. (3690 TSE Mothers)【Previous name: LOCKON CO., LTD.】● SummaryIssued: 6/1/2020

Alpha-Win Capital Inc. Research Dept.
http://www.awincap.com/

Business Description
・YRGLM Inc. (hereinafter referred to as the “Company”) is a marketing technology company that plans, develops,
and sells software related to Internet marketing. President Iwata started the business during his college years and thenfounded the Company in 2001.
・Its main product is the Internet advertising effect measurement system that it originally developed. It is a leading
company in a niche field. Its product is provided via the cloud to middle-sized and large companies. The Company's
main business is based on a subscription-based business model. Under this model, where customers continuously pay
a flat rate, the Company can stably and continuously expand sales and profit as its number of customers increases.
・The Company had been working on the transformation of its business model and the selection and concentration ofits business portfolio, but now that the upfront investment phase is mostly complete, it is starting to enter a
profitability-improvement phase.
・It became listed on TSE Mothers in September 2014. On August 1, 2019, it changed its name from LOCKON CO.,LTD., to YRGLM Inc.
Competitiveness・The Company's strengths are the management skills of its president with a deep knowledge of leading technologies
in the relevant field, products with proven and strong functions, and how it possesses and can leverage the big datathat it has continuously accumulated over the years. It has been acquiring related businesses with synergy potential
one after another. Its advertising effect measurement system tool (AD EBiS) has been No. 1 in the market for fiveconsecutive years. Recently, the Company purchased the ADPLAN business from OPT, which raised its market shareto an exceptionally high 65.9%. Going forward, the Company is expected gain greater price leadership.
Business Strategy
・Over the medium to long term, the Company plans to execute business according to its Marketing Robot Strategy,
aiming to automate and improve the efficiency of Internet marketing. It plans to expand its overall business domainfrom advertising effect measurement to analysis and utilization as well as through global expansion. It also plans toaccelerate growth by actively pursuing M&As, expanding business into related fields, and forming alliances withother companies.
Financial Results for H1 of This Fiscal Year and Forecasts for the Full Year and Over the Medium Term
・In the consolidated results for the first half (H1) of this fiscal year (Q2 FY 2020 YTD; note that the Company’s fiscal
years are September-ending), both sales and profit grew significantly: sales grew by 14.2% YoY to Y1,235 million
and operating profit increased by 239.2% YoY to Y71 million yen. In last fiscal year’s H1, a net loss of Y46 million
was posted due to an extraordinary loss, but it turned a net profit of Y45 million in this fiscal year’s H1.
・The Company has not made changes to its full-year forecast announced on February 7 of this year that sales will be
Y2.7 billion, operating profit will be Y200 million, net profit will be Y130 million, and year-end dividend is yet to
be determined. Progress in H1 in terms of the full-year company plan was 45.7% for sales (49.0% in last fiscal year’s
H1) and 35.7% for operating profit (25.0% in last fiscal year’s H1). Although the Company has not disclosed its H1
forecast, the achieved results seem to be mostly in line with the Company’s plan.
・AD EBiS, the core product of the marketing platform business, has incorporated the ADPLAN business, which helped
steadily increase the number of accounts. The price revision also raised this product’s average unit price. These two
factors have driven the Company’s growth.
・The impact of the COVID-19 outbreak on the Company’s financial performance has been minimal since the demand
for greater efficiency in advertising effects has grown especially from non-face-to-face businesses such as EC, its
business is sustainable and stable thanks to its subscription-based business model, and its business operations arehighly compatible with remote work.
・In the second half (H2), in addition to the sales growth of the flagship product AD EBiS, the Company is expected
to further improve its cost. Therefore, over the full year, we expect the Company to achieve a double-digit sales
1/29This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate, or
fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from theuse of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual
property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

growth, realize a substantial profit growth, and turn a net profit, at about the same level as the Company’s forecasts.
・The Company concentrates its business resources on areas related to Internet marketing. Over the medium to longterm, since these areas will continue to have a high growth potential, the Company’s sales are expected to growannually at a double-digit rate. Also, the Company will likely continue to conduct upfront investment over the
medium to long term in preparation for business expansion. Therefore, although it would depend on the cost control,
we believe that the margins will generally improve and profit may potentially grow faster than sales at an annual
growth rate of 20-30%.

Stock Price and Characteristics
・AdTech-related and domestic-demand-oriented growth stock. The stock price, which had been on a downtrend during
the business restructuring phase due to the posting of profit declines and net losses, bottomed out in response to therecovery in financial performance in recent years and has stayed within the range of 1,000-2,000 yen since then. The
downside risk has become lower since the recent financial performance from January to April 2020 has been solid,
the Company did not revise its full-year forecast despite the difficult economic situation with the COVID-19 crisis,
and a V-shaped profit recovery has become more likely to occur. In the stock price rebound phase following theplunge due to COVID-19, the Company has been outperforming TSE Mothers and TOPIX. Based on this fiscal year’s
figures, its valuation does not seem cheap compared to other similar companies. Going forward, we expect that stock
price will be affected by the trend in quarterly profit/loss, announcement of M&As and alliances, medium-term profit
forecast, and when dividend is resumed.
Shareholder Return
・In the previous fiscal year and the year before that, the Company posted net losses and therefore no dividend waspaid. It announced that this fiscal year's dividend is still undetermined. Mostly likely, dividend will not be resumed
this year, and we will need to wait until at least the year after the next before it becomes paid again. The Company
believes that since it is currently in a re-growth phase, it should raise shareholder value by recovering its financial
performance through investments for growth rather than letting its cash flow out.
【3690 YRGLM Inc.
FY

2017
2018
2019
2020
2020
2021
2022
2019
2020
2019
2020
2019
2020
2019
2020

Sector: Information & Communication 】

Figure A

Sales

YOY

O.P.

YOY

R.P.

YOY

N.P.

YOY

EPS

BPS

Dividend(million Y)(%)(million Y)(%)(million Y)(%)(million Y)

(%)

(Y)

(Y)

(Y)

-56.8
Smaller loss
To loss
To profit
To profit
53.8
27.5
Smaller loss
To profit
Smaller loss
To profit
Smaller loss
To profit
To profit
616.4

11.56
-14.02
-5.54
20.62
20.59
31.68
40.40
-5.72
3.04
-1.66
4.22
-7.38
7.26
1.84
13.36

195.60184.97168.68

CE
E
E
E
Q1
Q1
Q2
Q2
H1
H1
H2
H2 CE

1,719
1,804
2,204
2,700
2,650
3,010
3,390
520
585
562
650
1,082
1,235
1,123
1,465

6.6
5.0
22.1
22.5
20.2
13.6
12.6
20.0
12.7
26.3
15.6
23.2
14.2
21.1
30.5

92
-62.6
-98
To loss
84
To profit
200
135.5
200
135.5
300
50.0
380
26.7
-27 Smaller loss
25
To profit48
To profit
47
-2.0
21
To profit
71
239.2
64
To profit
129
101.3

【 Stock Price and Valuation Indicators: 3690 YRGLM Inc.】
Item

5/29/2020

P/E

-

1,328

Last FY (actual)

Shares Outstanding (thou.)

6,372This FY (est.)

Market Capitalization (million Y)

8,463

Next FY (est.)

0

72
-88
-34
130
130
200
255
-36
19
-10
27
-47
46
12
84

188.67220.35260.75179.12
171.69166.83180.12

5.00
0.00
0.00
ND
0.00
0.00
5.00
0.0
0.0
0.0
0.0
0.00
0.00
0.00
ND

Figure B

Item

Stock Price (Y)Dilutive Shares (thou.)

106
-57.5
-115
To loss
79
To profit
190
140.4
190
140.4
290
52.6
370
27.6
-30 Smaller loss
25
To profit47
To profit46-2.8
17 To profit
71
310.5
62
To profit
119
93.1(Note) CE = the Company’s
estimate (forecast)E = estimate (forecast) by
Alpha-Win Research Dept.
ND = not determined
All fiscal years discussed in thisdocument are Septemberending. For example, FY
2020 ends in Sept. 2020.
Q1: Oct-Dec
Q2: Jan-Mar
H1: Oct-Mar
H2: Apr-Sept

Dividend Yield

Dividend Payout Ratio

7.9

0.0%

0.0%

64.5

7.0

0.0%

0.0%

41.9

6.0

0.0%

0.0%

P/B

Equity Ratio at this FY's Q2-End【 Stock Chart (end-of-week prices): 3690 YRGLM Inc.】

46.8% Last FY's ROE(Note) Forecasts/estimates were made by
Alpha-Win Research Dept.

-3.1%

Figure C

(Y)

3,000

1.20
Stock price (left axis)

2,500

1.10

Price relative to TOPIX (right axis)

1.00
0.90

2,000

0.80
0.70

1,500

0.60
0.50

1,000

【Performance】
PeriodReturn vs. TOPIX
1 month39.8%
30.9%
3 months
35.5%
30.9%
6 months
2.6%
11.5%
12 months-24.8%-27.3%(Note) Prepared by Alpha-Win
Research Dept. The most recent
stock price and TOPIX values areclosing prices on 5/29/2020. In theperformance calculations for eachperiod, the stock price and TOPIXat the end of each respective month
were compared with their mostrecent values.

0.40
0.30

08
/1
6
11
/1
6
02
/1
7
05
/1
7
08
/1
7
11
/1
7
02
/1
8
05
/1
8
08
/1
8
11
/1
8
02
/1
9
05
/1
9
08
/1
9
11
/1
9
02
/2
0

(M
M
/Y
Y
)

500

(Note) From the fourth week of August 2016 to the fifth week of May 2020

2/29
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate, or
fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from theuse of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual
property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

Contents

1．Company Overview ........................................................................................................................ P4
A Leading Company in a Niche Market ............................................................................................ P4
2．Business Description and Business Model .................................................................................... P6
Providing the Originally Developed Marketing Robot via the Cloud ............................................... P6
Restructuring and Strengthening of Business Portfolio .................................................................... P7
Details of Its Business Contents (1) Marketing Platform Business .................................................. P7
Details of Its Business Contents (2) EC Platform Business ............................................................ P11
3．Shareholder Composition ............................................................................................................ P13
Major Shareholder Composition ..................................................................................................... P13
4．History of Growth ......................................................................................................................... P14
Transition in Past Financial Results ................................................................................................ P14
5．Business Environment .................................................................................................................. P15
Trends in Japan’s Advertising Market ............................................................................................ P15
Competitors ..................................................................................................................................... P16
6．Topics ............................................................................................................................................. P17
Impact of COVID-19 and the Company’s Response ..................................................................... .P17
Impact of the Strengthened Regulation on Personal Information Protection
and the Company’s Response. .............................................................................................. P17
7．This Fiscal Year’s H1 Results and Full-Year Forecast ............................................................. P18
Financial Results for Q2 FY 2020 (first half) ................................................................................. P18
The Company’s Financial Forecast for FY 2020 (full year) ........................................................... P21
Alpha-Win Research Dept’s Financial Forecast for FY 2020 (full year) ........................................ P22
8．Growth Strategy ............................................................................................................................ P24
The Company’s Medium-Term Business Plan and Strategy .......................................................... P24
Alpha-Win Research Dept.’s Financial Forecast for the Medium Term ......................................... P26
9．Analyst’s View ............................................................................................................................... P27
Shareholder Return .......................................................................................................................... P27
Stock Price and Characteristic and Factors that May Affect Stock Price ....................................... P27
Disclaimers ........................................................................................................................................... P29
Note: 1) Upon translating to English, when the page numbers differed from the original Japanese version, they
were adjusted to those of the English version of the report. 2) The Company’s fiscal year is September-ending; i.e.
FY 2020 ends in September 2020.
3/29
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

1. Company Overview

w Marketing technology
company. Developing theMarketing Robot Businessto automate and improve
marketing efficiency onbehalf of humans. Thisbusiness includes theInternet advertising effectmeasurement system – its
main product.

w Founded by president
Iwata. Listed on TSE
Mothers.

w Changed the company
name and symbol. New
name: YRGLM Inc.
w Main service: Internetmarketing-related platform
as SaaS (cloud).
w The originally developed
AD EBiS is its main
product.
(1) Internet advertising effectmeasurement system: A tool tocomprehensively measure theeffect of and evaluate various
Internet ads and SEO
strategies.
(2) SaaS (software as a service):
A service where software is used
via the Internet (almost
synonymous with the cloud).
Does not need purchasing of
packaged products. Only thenecessary functions, contents,
and quantity of service are used
via the Internet and paid for.
(3) Programmatic advertising:An advertising method where
optimization of ads is
conducted automatically or
supported immediately. After
submitting an ad, optimizationis conducted, leading to better
results.
w Consolidated-to-parentcompany ratios had been
about 1 for both sales andprofit. Last FY, the ratios
improved thanks to thesubsidiaries.

◆ A Leading Company in a Niche Market
Company Overview
YRGLM Inc. (hereinafter referred to as the “Company”) is a marketingtechnology company that plans, develops, and sells software related toInternet advertising and e-commerce. It has grown through the full-scale
development of the Marketing Robot Business (registered trademark of theCompany) where it develops original software to automate and improve theefficiency of marketing on behalf of humans. The Company has an
exceptionally high share in the Internet marketing measurement tools market.
History
Susumu Iwata, the Company’s president, started a web design business inOsaka as a college student. Upon business expansion, he established theCompany in 2001. The Company became listed on TSE Mothers in
September 2014. Currently, it has two head offices, one in Osaka and one inTokyo.
Change in the Company Name
On August 1, 2019, the Company changed its name from “LOCKON” (CO.,LTD.) to “YRGLM Inc.” The Company also decided on a new vision:“Become a company that supports corporate marketing activities around theworld through data and technology to create happiness for sellers and buyers.”
Main Business Contents
Currently, the Company carries out business in two areas: the marketing
platform business and the EC platform business. Its flagship product is AD
EBiS, an Internet advertising effect measurement system1 that is provided as
SaaS2 (cloud) to other companies (B2B). (Names of the main products arelisted after the colon.)(1) Marketing platform:
AD EBiS and ADPLAN (Internet ad effect measurement systems)
AdRepo (automatic report generation tool for programmatic
advertising3)(2) EC platform: EC-CUBE
Consolidated Companies and Trends in Consolidated Financial Results
The Company’s corporate group consists of a total of five companies: theCompany, two consolidated subsidiaries, one nonconsolidated subsidiary,and one affiliate accounted for by the equity method.
The parent company’s sales and profit used to account for an extremely highproportion of the total for the entire corporate group. The consolidated-toparent-company ratios had stayed around 1 and the total recurring profit/lossof the consolidated companies excluding the parent was nearly zero (Figure
1 on page 5). Last fiscal year, there was a significant improvement as the salesof the consolidated companies excluding the parent (consolidated minus
parent) reached Y193 million and recurring profit reached Y60 million (inthe fiscal year before the previous, sales of Y0 million and a recurring loss of
Y5 million were recorded). The reason for this improvement is that the EC4/29

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

CUBE business was carved out of the parent company to the subsidiaries andthe performance of this business had turned around.

【 Figure 1 】Comparison of Consolidated-to-Parent-Company Recurring Profit by Fiscal Year
(unit: million yen, %)A
B

Consolidated R.P.
Parent company R.P.
Consolidated R.P. A-B＝C
parent company R.P.
Subsidiaries' R.P. / parent
C/B
company R.P.
Consolidated R.P. /A/B
parent company R.P.

FY 2014234
245

FY 2015352
359

FY 2016250
252

FY 2017
106
107

FY 2018-115-110

FY 2019
79
20

-12

-7

-2

-1

-5

60

-4.7%

-1.9%

-0.7%

-0.5%

-

304.9%

0.95

0.98

0.99

1.00

-

4.05

(Ref) Prepared by Alpha-Win Research Dept. based on materials including the Company’s securities report, financial results summary,financial results briefing materials, and website.
(Note) Since the decimal places of the values used in this report have generally been round off, they may differ from those officiallyannounced by the Company. Results have been consolidated starting in FY 2014 (the same applies to the rest of this report).

w Had been debt-less, but its
debt exceeded its cash anddeposits as of the end of
March. However, there is no
issue with its financial
standing.

Financial Situation
The Company had kept itself debt-free after becoming listed, but in FY
2018 (note that the Company’s fiscal year is September-ending) it raised
about Y800 million in loans as capital for future investment (for businessacquisition, etc.). As of the end of March 2020, its long- and short-termloans totaled about Y1,130 million, which is greater than its cash anddeposits of about Y850 million. However, although the Company isrelatively small in scale with total assets of about Y2.5 billion and a market
capitalization of about Y5.9 billion (based on the closing stock price on
3/31/2020, at Y920), there does not seem to be an issue with its financial
standing since its equity ratio is 44.9% and current ratio is 164.3%.
Its intangible fixed assets, including goodwill (from the acquisition of the
AdRepo and ADPLAN businesses) and software, are Y860 million and its
deferred tax assets are Y120 million. These total Y980 million but should notpose a problem for the meanwhile since this total is still smaller than the net
assets of Y1,140 million.

w High reputation from outside
the company; chosen as Best
Company in the Best
Workplaces Ranking for the
8th consecutive year for a
total of 9 awards(4) Great Place To Work®
Institute: An organization that
conducts surveys and presents“Great Places to Work” in about
50 countries around the world
every year.

Awards and Reputation
The Company won the Best Companies Award in the Japan division of the2020 Best Workplaces Ranking for Medium-Sized Companies (100 to 999
employees) from the Great Place to WorkⓇ Institute4 Japan (winning anaward for the eight years in a row; a total of nine awards received in the past).
The Company has also won various awards from other organizations in thepast; this high reputation is valuable since it helps attract new, talented
employees who are crucial to the kind of business that the Company engages
in.

5/29
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

2．Business Description and Business Model◆Providing the Originally Developed Marketing Robot via
the Cloudw A B2B business, providing
originally developed
software via the cloud.
Developing businesses
based on two platforms.
The marketing platform is
its core business.

The Company’s concept is that a “Marketing Robot” that solves problems
automatically and efficiently on behalf of humans is also necessary in thearea of Internet marketing due to the aging and declining population.
Based on this concept, the Company provides such tools in the form oforiginally developed software, mainly to other companies in cloud format.
The Company's business consists of two segments: the marketing
platform business and the EC platform business. The marketing platformbusiness accounted for about 90.9% of the total sales in H1 of this fiscal
year (Figure 2); it has been the driver of the Company’s overall sales
growth for many years (Figure 3). The transition in operating profit foreach segment is shown in Figure 4. Excluding FY 2017 and FY 2018 during
which business restructuring was conducted, both segments have posted an
operating profit during each full fiscal year.

【 Figure 3 】Change in Full-Year Sales by Business
Segment (unit: million yen)

【 Figure 2 】H1 FY 2020 Sales Breakdown by
Business Segment
EC Platform
Business

Marketing Platform

9.1%

253

EC Platform

275
465
539
477

Marketing Platform Business

526

112
126

1,951

422

1,530

90.9%
883

911

FY 2014

FY 2015666

FY 20131,074

FY 2016

1,255

1,123

956

FY 2017

FY 2018

FY 2019

H1
H1FY
FY20192019

H1 FY
FY 2020
2020(Ref) Figures 2-4 were prepared by Alpha-Win Research Dept. based on the Company’s securities report, financial resultssummary, and financial results briefing materials.

【 Figure 4 】Change in Operating Profit by Business Segment(million yen)

250

Marketing Platform

EC Platform

200
150
214

100
142
50
0

75

107

210
153

136

22

46 39

FY 2018

FY 2019

38
-1

9

12

67

4

-60

-50

-121

-100
-150
FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

H1
H1FY
FY2019
2019

H1
H1FY
FY20202020

6/29This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18◆ Restructuring and Strengthening of Business Portfolio

w Actively restructuring its
business portfolio.
Concentrating businessresources on AD EBiS of themarketing platform business.
Strengthening business bypurchasing businesses inperipheral areas.
w AD EBiS is its main productas well as growth driver that
accounts for approx. 80% of
the total sales.

Since FY 2016, the Company has been actively restructuring andstrengthening its business portfolio, becoming concentrated on its corebusiness (shifting to AD EBiS of the marketing platform business) andseparating its non-core business (EC platform business) (Figure 5; see thereport issued on 12/13/2019 for details on the recent restructuring andstrengthening of business).
In the marketing platform business, the Internet advertising effectmeasurement system AD EBiS accounts for about 80% of the total sales(actual result for this fiscal year’s H1). Going forward, the Company plans toconcentrate business resources on this product and related products to further
develop this business as a growth driver.

【 Figure 5 】Business Restructuring and Segments (withdrew from the highlighted businesses)
Business Segment

Business Subcategory(1) Marketing
Platform

Main Product/Service① AD EBiS② THREe③ DMP→ Professional Service④ AdRepo⑤ ADPLAN① EC-CUBE(2) EC Platform② SOLUTION → abolishedEC Outsourced Dev.

ChangeWithdrew (end of March 2020)
Transferred from SOLUTION; will scale downWill expand AD-EBiS-related software development project
Acquired (August 2018)
Acquired (January 2020)
Transferred to EC-CUBE Co., Ltd., on 1/1/2019(DMP)

Transferred to SAI Co., Ltd. (equity method) and Radical Opti
Co., Ltd. (no longer equity method as of last FY)
Transferred to SOLUTION

NoteParent company

Consolidated
Equity method(Ref) Prepared by Alpha-Win Research Dept. from the Company’s securities report, financial results summary, financial results briefing
materials, and interview.

(5) Paid-listing ads: Also referred
to as search advertising. A
method of displaying ads related
to keywords searched or browsed
by Internet users. Effectively
displays ads in the users’ areas ofinterest. A highly effective method
for corporate advertising.
(6) DMP (Data Management
Platform): A method by which a
corporate client can analyze its
websiteChanges during this fiscal year are so far as follows (the numbers inparentheses and circles match the numbers in the graph).
(1) ② Withdrew from the THREe business, an operating platform for paidlisting ads5 (completed as of the end of March 2020).
(1) ③ Scaled down the previously transferred DMP6-related business.
Plans to develop the Professional Service business around the developmentof software closely related to AD EBiS.
(1) ⑤ Acquired the ADPLAN business from OPT, Inc., a consolidated
subsidiary of OPT Holding Group (TSE First Section 2389; hereinafter “OPTHD”) in January 2020 (this fiscal year’s Q2) for Y315 million. ADPLAN
used to have the second largest share in the market, behind the Company.
Aims to merge this business with AD EBiS in the future.
Since Q2 FY 2019, the Company (parent company) has been primarily
focused on the marketing platform business. However, since EC-CUBE wastransferred to a consolidated subsidiary, on a consolidated basis, theCompany’s business is still classified into the same two segments as before.

◆ Details of Its Business Contents (1) Marketing Platform
Business
The transition in the sales and profit of the marketing platform business by
fiscal year is shown in Figure 6 on page 8.

7/29This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18【 Figure 6 】Change in the Sales and Operating Profit of the Marketing Platform Business Segment
Sales(million yen)
Marketing Platform➀ AD EBiS② THREeFY 2012parent545
499
46③ Professional Service (DMP)④ AdRepo⑤ ADPLAN
Segment's O.P.

Segment's O.P. Margin-61-11.2%FY 2013
FY 2014
FY 2015
FY 2016
FY 2017
FY 2018
FY 2019
H1 FY 2020
parentconsolidated consolidated consolidated consolidated consolidated consolidated consolidated% of total
666
883
911
1,074
1,255
1,530
1,951
1,123
90.9%
567
722
822
1,012
1,200
1,402
1,747
1,029
83.3%
81
161
89
62
54
43
28
7
0.6%
84
51
17
1.4%
124
70
5.7%
(acquired in Jan 2020; announced in combination with AD EBiS's sales) ↑
NA
-1
142
214
210
153
-121
46
67
93.8%
-0.1%
16.1%
23.5%
19.5%
12.2%
-7.9%
2.4%
6.0%
% of O.P. ↑(Ref) Prepared by Alpha-Win Research Dept. from the Company’s securities report, financial results briefing materials, and interview.
Includes estimates.

w The main businesses of themarketing platform segment
are AD EBiS and ADPLAN.
Both are Internet advertising
effect measurement systems.

The marketing platform segment currently consists of four businesses: theInternet advertising effect measurement systems ① AD EBiS and ⑤
ADPLAN; ③Professional Service (including DMP); and ④AdRepo. The
ADPLAN business joined AD EBiS after its acquisition in January 2020.
With the increasingly diversified and dispersed consumer behavior of today’s
Internet society, marketing and advertising over the Internet has also become
more sophisticated and complicated, raising the importance of the use oftechnology in their operation. The Company’s characteristic or strength is its
ability to offer, at a reasonable price, software that can accurately evaluate
and leverage the effect of Internet ads through various methods of analysis
and comes with various functions (ad measurement, analysis, evaluation, etc.).
Another strength is its ability to provide excellent support for the software.

w The originally developed AD
EBiS has the top share in thedomestic market.

w A subscription-based
business model. Its flat-rate
subscription system lets theCompany acquire profit
continuously and stably.
(7) Subscription-based businessmodel: A business model whereusers pay for the provided service
according to the duration of use.

w AD EBiS’s number ofaccounts and average unit
price are the KPIs.

①AD EBiS & ⑤ADPLANAD EBiS, the Company’s Proprietary Product
AD EBiS is the Company’s main product (top domestic share), which it hadoriginally developed, and is an Internet advertising effect measurement
system that allows the collective management, measurement, analysis, andvisualization of the effect of Web ads, etc., to help users assess the costeffectiveness of ads. It comprehensively provides a one-stop marketing
environment where users can “utilize” marketing data accumulated by the“effect measurement” function to maximize sales or acquire prospective
customers in proactive marketing.

Merging ADPLAN with AD EBiSThe Company will continue the ADPLAN service after its acquisition but theservice will be gradually transferred to and merged with YRGLM’s AD EBiS
to improve the efficiency of system development and updates.
Business Model
Both services are provided as SaaS based on a subscription-based businessmodel7 (see pages 15-16 in the report issued on 12/13/2019 for details).
Since AD EBiS and ADPLAN are both businesses based on flat-rate,
subscription-based pricing, their sales are determined by average unit price ×
number of active accounts. Both elements are key performance indicators(KPI) for the entire company as well as for each business.

8/29
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

Customers
These are B2B businesses. AD EBiS’s main customers include WOWOW,
Lion, MIKI HOUSE, Aiful, Noevir, Zwei, Z-kai, Yazuya, and Setagaya
Shizenshokuhin. More than 100 companies use ADPLAN (the number ofaccounts) and many of them are large, blue-chip companies that sell branded
products throughout the country.
Price System
AD EBiS’s pricing plan used to be a pay-per-use based on multiple
parameters. However, in June 2018, the Company introduced a new priceplan based on a flat-rate price table with basic functions and support packaged
together. Options (various external linkage functions such as reporting, etc.)
can be added to a plan. New contracts have already been transferred to thisnew price system, and price revision has also been made since then.

w With the transition to the
packaged plan with new
pricings, the unit price rosesignificantly.

Transition in the Average Unit Price
Transition in the average unit price at the end of each quarter (price at the endof each final month) is shown in Figure 7. Quarterly trends used to show asignificant seasonal variability, but since the transition to a subscriptionbased business model, an upward and linear trend has been observed. The
average unit price has been rising for nine consecutive quarters since Q2 FY
2018. The average monthly unit price at the end of H1 FY 2018 (end of Dec.
2018) was Y75,846 ⇒ Y98,042 at the end of H1 FY 2019 (+29.3% or+Y22,196 YoY) ⇒ most recently, Y120,070 at the end of H1 FY 2020(+22.5% or +Y22,028 YoY) (Figure 7). During the most recent Q2, theaverage unit price rose thanks to the price revision in February 2020 and theincorporation of ADPLAN (average unit price of approx. Y170,000). Also,
since January 2020, the average unit price of new contracts has been greaterthan Y140,000. During this Q3, too, the average unit price of the existing
contracts seems to be on a rising trend.

w AD EBiS’s average unit priceincreasing at a double-digitrate【 Figure 8 】Change in the Number of Active【 Figure 7 】Change in the Average Unit
Price of AD EBiS

Accounts of AD EBiSADPLANacquired(Y)

130,000

120,070

ADPLANacquired

Change inprice system(# of accounts)

1,600

1,543

120,000

1,500
110,000

111,587
107,143

100,000
90,00080,000Change in pricesystemQ4→Q1
seasonal
variability

102,262

1,479

1,400

1,516
1,438

1,433

1,425

1,300
1,200

98,042

1,100

75,84670,0001,000

60,000900

50,000800

40,000Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
FY 2015

FY 2016

FY 2017

FY 2018

FY 2019

FY 2020700
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
FY 2015

FY 2016

FY 2017

FY 2018

FY 2019(Ref) Figures 7-8 were prepared by Alpha-Win Research Dept. from the Company’s securities report and financial results briefing materials.

9/29This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

FY 2020

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18
w AD EBiS’s number of active
accounts grew significantly
thanks to the incorporation of
ADPLAN. Improvement ofcancellation rate is the nextchallenge.

w AD EBiS’s sales (by amount)continuing to grow at a
double-digit rate

Number of Active Accounts
Based on end-of-the-quarter figures, the number of active accounts had
consecutively increased until the end of Q1 FY 2019 (end of Dec 2018), after
which it declined for three quarters in a row due to contract cancellations in
response to a price revision. However, during Q1 of this fiscal year, the trend
was reversed, and the number of accounts slightly increased to 1,438 (+13 or+0.9% QoQ). In Q2, a sharp rise was seen as the number reached 1,543 (+105
or +7.3% QoQ), partly due to the incorporation of contracts from ADPLAN(more than 100).
Sales
The rise in unit price and temporary decline in the number of accounts
occurred due to the increase in cancellations by low-priced contracts andcontracts made via agencies since Q3 FY 2018 when the existing customers'
contracts were transferred to the new pricing system.
However, sales of AD EBiS have been growing each year at a rate of about
20% YoY, since the rise in the unit price has been more than enough tocompensate for the periods of slow growth in the number of accounts.
Going forward, the Company expects an increase in the number of highpriced new customers, addition of new functions and services (including
option services provided through external partners that will contribute to anincrease in revenue), up-selling and cross-selling of products, and a greater
price leadership. As a result, it expects the unit price to keep rising and thenumber of active accounts to continue to increase in small increments.

w AD EBiS: top share in thedomestic market for 5 years ina row. Exceptionally highshare of 65.9%.

w ADPLAN will be mergedwith AD EBiS.

Market Share
Since its release in 2004, AD EBiS has been installed by more than 10,000
users and has had the largest share in the domestic Internet advertising effectmeasurement system market for five years in a row. Furthermore, according
to the Company’s financial results briefing materials, its share has been
increasing year by year from 36.0% in FY 2015 to 40.0% in FY 2016, 42.9%
in FY 2017, and 44.2% in FY 2018. In FY 2019, an exceptionally high shareof 65.9% (estimate) was gained thanks to the acquisition of ADPLAN (Figure9). However, in order to improve the efficiency of system development andupdates, the Company plans to merge ADPLAN with AD EBiS. Key points
going forward will be the contract continuation rate of ADPLAN’s customers
and cross-selling strategies targeting those customers.

【 Figure 9 】Share of Amount of Sales in the Internet Effect Measurement
Market by Vendor (prediction for 2019)

YRGLM

65.9％
2019 Estimate(Ref) Financial results briefing materials
Source: ITR - “ITR Market View: Mail / Web Marketing
Market 2020” (prediction for 2015-2019)
Note: Combined sales of AD EBiS and ADPLAN
purchased from OPT, Inc. in January 2020

10/29
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18
w Withdrew from THREe toconcentrate businessresources on AD EBiS.

②THREeTHREe, an operating platform for paid-listing ads, had also been originallydeveloped by the Company. However, since it only contributed about 1% to
the total sales in FY 2019, the Company stopped providing this service at theend of March 2020 in order to concentrate its business resources on AD EBiS.

w Moved the DMP businessfrom the EC platformbusiness. Plans for future
withdrawal.

③Professional Service
Currently, most of the sales of this business comes from DMP. DMP is amethod by which a corporate client can analyze its website. For instance, aclient can investigate and verify the behavior history and stay time of users
who visit its website. The Company has a few major clients for this businessincluding Lion.

Last fiscal year, DMP only contributed about 2% to the Company’s overallsales. The Company plans to scale down this business in steps and eventually
withdraw from it. Going forward, for the Professional Service, it plans to
expand the software development project for new software related to AD
EBiS.
w AdRepo’s customers are ad
agencies. Automation
technology enables automatic
creation of reports for
programmatic advertising.
w Intend to actively expand the
AdRepo business to createsynergy with AD EBiS

④AdRepo
In August 2018, the Company acquired the AdRepo, an automatic reportgeneration tool for programmatic advertising. It has been fully developing
this business since the beginning of FY 2019. Annual sales for last fiscal year
were Y124 million. By acquiring new customers and creating synergy withAD EBiS, the Company plans to develop and enhance this business as its
growth business (we estimate that the full-year sales for this fiscal year will
be about Y140 million and the growth rate will be about 10%). Its domestic
share is third in the market, behind ATOM (TechLoCo Co., Inc.: not listed)
and glu (ATALA LLC: not listed, the Company’s partner).

AdRepo is a tool for fully automating the generation of reports. It is a cloudservice that had been developed to reduce the workload of advertising
agencies in creating reports for programmatic ads.

◆ Details of Its Business Contents (2) EC Platform Business
Until FY 2018, the EC platform business had been composed of the following
two divisions: ①EC-CUBE and ②SOLUTION (Figure 10).

【 Figure 10】Change in the Sales and Operating Profit of the EC Platform Business Segment
Sales(million yen)
EC Platform①EC-CUBE②SOLUTION

FY 2012parent
323
150
174

(DMP)
Segment's O.P.
Segment's O.P. Margin

98
30.5%

FY 2013
FY 2014
FY 2015
FY 2016
FY 2017
FY 2018
FY 2019
H1 FY 2020
parentconsolidated consolidated consolidated consolidated consolidated consolidated consolidated% of total
422
477
526
539
465
275
253
112
9.1%
207
245
230
219
208
254
253
112
9.1%
214
232
296
319
257
20
0
0
0.0%
104
0.0%
75
107
136
38
-60
22
39
4
6.2%
17.8%
22.5%
25.8%
7.1%
-12.9%
8.2%
14.2%
4.0%
% of O.P. ↑(Ref) Prepared by Alpha-Win Research Dept. from the Company’s securities report, financial results summary, financial results briefing
materials, and interview. Includes estimates.

11/29
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18(8) Open source software: The
source code, which is equivalent
to the blueprint of software, ismade available free of charge,
letting anyone improve andredistribute it.

(9) Freemium Model:“Freemium” is a coined word thatcombines “free” and “premium.”
Refers to a business model thatgenerates revenue by offering
basic services free of charge whilecharging fees for moresophisticated or specially-added
related services.
w The EC-CUBE business has
been transferred to a
consolidated subsidiary.

w The SOLUTION business wastransferred to affiliates
accounted for by the equity
method.

① EC-CUBE
EC-CUBE is an open source software8 platform whereby users can create andoperate EC (e-commerce) websites on their own. The Company provides ECCUBE as free packaged software for web design to companies that will begin
selling and providing products and services online. Characterized by low cost,high customization, and user-friendly interface, it has the largest share in thedomestic market and has become the standard platform.
In EC-CUBE, in return for offering the software for free, the Company has
set up a Freemium Model9 where revenue is earned from peripheral services.
Through this system, the Company makes profit from royalties from its
official partners in the Internet business (account settlement agent business,hosting businesses, etc.), function-addition fee from plug-ins (program to add
functions to software), sales revenue from commercial licenses, etc.
However, as part of the restructuring of the business domain of theCompany’s group, the EC-CUBE business was transferred to the 100%
consolidated subsidiary, EC-CUBE Co., Ltd., on January 1, 2019. Because it
is a fully consolidated subsidiary, there will be no effect on the consolidated
financial results. The Company expects this subsidiary to further expand anddevelop the business as a separate corporate entity, for instance, throughpartnerships with other companies. The development of the new version, ECCUBE4, has been completed and was released in October 2018. With also therelease of the cloud version, the increase in account settlement agent fees
received, and other positive factors, financial performance has been
improving steadily.

② Former SOLUTION businessAlthough the SOLUTION business had been composed of a few businesses,with the restructuring of business, its main EC outsourced development
business had been transferred to affiliated companies that the Company owns
20% of shares each (reflected in non-operating profit/loss as profit or loss
accounted for by the equity method). Since last fiscal year, this business is nolonger part of the segments that are reflected in the consolidated sales.

12/29
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

3．Shareholder Composition◆ Major Shareholder Composition

w No large changes to the
top-ranking major
shareholders. Persons
affiliated with theCompany, including
active and former
executive officers and theemployee stock
ownership plan, own
approx. 60% of the shares.
w Shares owned by AssetManagement One havedecreased from the peakof over 5%. Invested byseveral other funds
managed by othercompanies.

Major shareholders as of the end of March 2020 are shown in Figure 11. The
following is supplementary information. The major shareholders have notsignificantly changed.
・However, BNY GCM CLIENT ACCOUNT AC ISG appeared in the
ranking for the first time as the fifth largest shareholder (the account invests
in at least about 200 Japanese small-, mid-, and large-cap stocks). The namesof the final investors and the purpose of investment are unknown.
・ The MHAM Emerging Growth Stock Open portfolio (also called “JFrontier”; open-end fund with AUM of Y63 billion that invests in emerging
Japanese stocks with high growth potential) managed by Asset Management
One (“AMO”) owned 189.5 thousand shares of the Company’s stock (about
3% of all outstanding shares) as of 2/25/2019. AMO later purchased moreshares for this fund, as well as for its MONEX Japan Growth Fund; according
to the Report of Possession of Large Volume (the “5%-rule” report)
submitted on 7/31/2019, it possessed a total of 328.4 thousand shares (5.15%
of outstanding shares). According to the Change Report, some of the shareswere later sold so that on 1/31/2020 it owned 249.3 thousand shares (3.91%
of outstanding shares).
The Company’s stock is also incorporated in Japan Emerging Equity Openmanaged by Nikko Asset Management and The 2020 Vision managed by
Commons Asset Management (as of 12/18/2019 for both).

w Treasury shares are a little
less than 1% of all issued
shares.

・The investment purposes of SBI SECURITIES Co., Ltd., which appeared
at sixth place, and Rakuten Securities, Inc., at eighth, are unknown but arelikely related to their customers’ position.
・As of the end of March 2020, the Company owned 59,700 shares of its own
stock (0.93% of all outstanding shares). The Company intends to use thesetreasury shares for M&A and alliance strategies as well as stock-based
compensation for its executives and employees in the future.

【 Figure 11 】Current Major Shareholders
Unit for number of shares in the table: thou. shares
End of Sept.
2015

End of Sept.
2016

End of Sept.
2017

2,851
1,071
415
―
―
―
―
―
76
60
―
―
―
―
―
39
―
―
62
―
30
34
26
0

2,817
1,021
415
59
―
―
―
―
39
60
―
―
―
―
―
29
―
―
62
36
35
―
―
0

2,817
1,021
352
―
60
―
60
―
48
60
―
―
28
―
―
29
28
24
―
―
―
―
―
45
0.0007%

Susumu Iwata (president and CEO)Hiroichi Fukuda (former executive vice president)
Kanako Mataza (former director and senior executive officer)
Japan Trustee Services Bank, Ltd.
BNY GCM CLIENT ACCOUNT JPRD AC ISG (FE-AC)
SBI SECURITIES Co., Ltd.
Trust & Custody Services Bank, Ltd.
Rakuten Securities, Inc.
YRGLM Employee Stock Ownership Plan
Hakuhodo DY Media Partners Inc.
GOLDMAN SACHS INTERNATIONALUEDA YAGI TANSHI Co., Ltd.
Tomonori Yamada (indiv.)
Katsuyuki Ito (indiv.)
Akiko Takashima (indiv.)
Kenichiro Wade (former outside director)
Yoshio Takayama (indiv.)
Kayoko Nagano (indiv.)
SEPTENI CO., LTD
Matsui Securities Co., Ltd.
Japan Securities Finance Co., LTD
Yoichi Nishikawa (indiv.)
Akio Shiojiri (former director: audit committee member)(Number of treasury shares)(Ratio of treasury shares over all issued shares)

End of Sept.
2018%
End of Sept.
2019

2,819
961
354
60
―
―
29
72
69
60
―
―
―
52
29
―
―
―
―
―
―
―
―
983
0.0155%

2,822
801
353
333
―
―
123
64
68
60
284
113
―
―
―
―
―
―
―
―
―
―
―
81,423
1.2777%

End of Mar
2020

2,825
801
353
311
286
142
104
80
79
60

←Shareholding %

44.7
12.7
5.6
4.9
4.5
2.2
1.6
1.3
1.3
1.0

←Ranking

1
2
3
4
5
6
7
8
9
10

59,7000.9369%(Ref) Prepared by Alpha-Win Research Dept. based on materials including the securities report.

13/29
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

4．History of Growth◆ Transition in Past Financial Results

w Developed and launchedunique products that can bedifferentiated from othercompanies. Have grown
rapidly by predicting andmeeting the needs of society
ahead of others.

w In FY 2015, record-high profit
was recorded. All-time highs
are being consecutively
achieved every year for sales.
w Since FY 2016, the Company
has been prioritizing
business restructuring andupfront investments,
focusing on future businessgrowth rather than profit. A
net loss was recorded in FY
2018.
w In the previous fiscal year (FY2019), a large sales growth let
the Company turn an
operating profit and arecurring profit.

From FY 2010 to FY 2013, during which account settlement wasnonconsolidated, the Company increased sales for four consecutive fiscal
years. From FY 2014, when consolidated account settlement began, theCompany has been achieving record-high sales for five consecutive fiscal
years through FY 2019 (from what is available in the disclosure material, we
can see that sales have been hitting record highs for at least nine consecutive
fiscal years). During this period, sales increased by about three times fromabout Y730 million to about Y2.2 billion. This success was brought by the
rapid expansion of the marketing platform’s AD EBiS business and the steady
growth of the EC platform’s EC-CUBE and SOLUTION businesses.
Regarding profit, the Company had sustained profitability both on anonconsolidated and consolidated basis until FY 2017. In FY 2015, a recordhigh operating profit of Y350 million and a record-high net profit of Y231
million were achieved. However, since FY 2016, the Company’s focus on
business restructuring and upfront investment has increased the expenses,
leading to a consecutive decline in profit despite increasing sales. In the fiscal
year before the previous or FY 2018, the Company recorded a net loss (ofY88 million) for the first time since becoming listed on the market due toupfront investments mainly in hiring more employees for development andsales (see Figures 12 and 13).
In the financial results for FY 2019 (last fiscal year), the rise in the average
unit price of the core product AD EBiS had helped increase sales by 22%
YoY, so that the Company was able to turn both an operating profit and arecurring profit for the full year.

【 Figure 12 】Transition in Past Financial Results【 Figure 13 】 Change in the Number of Employees(unit: million yen, %)(unit: persons)

Sales (left axis: million yen)
2,300

Development
SupportNew business development

30.0%

2,800
Recurring profit (left axis: million yen)

Recurring margin (right axis: %)S&M
Administration

25.0%

144

20.0%
1,800

98

15.0%
10.0%

1,300

5.0%

800

0.0%
300

-200
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
E

68

71

11
8
14

11
10
12

-5.0%

35

38

-10.0%FY 2014

FY 2015

13
15
14

8
23

21

29

30

29

35

34

20

18
25

160

21

122
15

151

56

64

74

66

65

FY 2016

FY 2017

FY 2018

FY 2019

H1 FY
FY 2020
2020(Ref) Figure 12-13 were prepared by Alpha-Win Research Dept. from the Company’s securities report and financial results summary(Note) Consolidated results starting in FY 2014; nonconsolidated prior to this point.

14/29
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

5．Business Environment

w Internet advertisingexpenditure increased byabout 5.6x from 2005 to 2019.
The average annual growthrate (simple average) is highat about 13.3%.

◆ Trends in Japan’s Advertising Market
Total Advertising Expenditure
Total advertising expenditure in Japan in 2019 (calendar year; the same
applies to this entire chapter) was about Y6.9 trillion. From a long-term
perspective, the market has been flat. However, since 2012, market growthhas been observed for eight years in a row, indicating that the market as awhole is on a slight upward trend (the annual growth rate, based on a simple
average, is about 2.5% during this period).
Internet Ad Market
As the Internet is rapidly becoming used by more people for more purposes,
Internet advertising expenditure has also rapidly increased and has been
driving the growth of the total advertising expenditure. Internet advertisingexpenditure had increased significantly from 2005 (point of comparison, set
at 100) to 2019 by about 5.6 times (annual growth rate of about 13.3%, on asimple average). Growth has especially been great over the past five years,
during which the growth rate accelerated year after year (Figure 14).
Internet advertising expenditure (sum of medium cost and production cost),
which is about Y2.1 trillion (+19.7% YoY, growing at a double-digit rate forsix consecutive years), accounts for about 30% of the total advertisingexpenditure (ref: Dentsu Inc.’s “2019 Advertising Expenditures in Japan”).
Its share in the market has been steadily increasing by 1-3% every year,
becoming the largest advertising medium in 2019 after beating the share of
television (27%), the largest among the four mass-media advertising(newspaper, magazine, radio, and television).

【 Figure 14 】Change in Advertising Expenditure by Medium(index value: year 2005 set at 100)
600%
Internet ads

550%

The four mass media

500%

Total advertising expenditure

450%

Sales promotion

400%
350%
300%
250%
200%
150%
100%
50%
0%
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

(Ref) Prepared by Alpha-Win Research Dept. from Dentsu Inc.’s “2019 Advertising Expenditures in Japan”(published every February)w Internet advertising is
expected to continue to growat a double-digit rate. A
tailwind for the Company.

Current Situation
Due to the impact of COVID-19, the overall advertising expenditure seems
to be held down. However, since EC demand has increased with more people
buying goods while staying at home, the Internet advertising market seems
to be growing at a solid pace. Internet use is expected to continue to expand
15/29This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

as technology develops, so Internet advertising expenditure will likely
continue to grow at a double-digit rate. Therefore, for the meanwhile, themarket environment is expected to stay favorable for the Company indeveloping its business in Internet advertising effect measurement andutilization.

w No major competitor with asimilar service price range(10) Google Analytics: A website
access analysis tool provided by
Google targeting SME users.
Analysis is only conducted within
Google’s website, and mostly thefree version is popular. The highspec paid version seems to be in
the high-price zone.
(11) Adobe Analytics: An accessanalysis tool that is installed inmany large websites. It cananalyze complicated and large
data, is highly customizable, andhas multiple and high-quality
functions, but the price is high.

◆ Competitors
There seems to be no similar Japanese listed company that could be directlycompared with the Company. Its rival product used to be ADPLAN (total
installation by more than 1,500 companies) of the listed company OPT HD
Group, but this has already been acquired by the Company. Therefore, theCompany no longer has a major competitor with a similar price range.
Similarly, regarding advertising effect measurement and analysis tools, thecompeting products are Google Analytics10 and Adobe Analytics11 widelyused by domestic SMEs (small- and medium-sized enterprises) and Web
Antenna (installed by more than 600 companies, including major companies
as well as ventures) provided by the private company beBit, Inc. However,these other companies are not specialized in the field, and their products’
function, measurement target, analysis content, and support system arelimited. In comparison, the Company's products are superior in terms ofspecifications, development system, and support system, which explains why
the Company has an exceptionally large share as number one in the market.
The Company’s target customer zone is the middle zone, encompassing midtier companies as well as listed companies. This is different from the highend zone targeted by the paid versions of Google Analytics and Adobe
Analytics (with price settings that are estimated to be about ten times greater
the Company’s).
Although it is not a competitor, the U.S.-based company HubSpot, Inc.
(NYSE: HUBS) is a listed company with a similar subscription-based
business model (for details, see page 15 of the report issued on 5/31/2019).
HUBS provides a platform that links together software for marketing, sales,
and customer service.

16/29
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

6．Topics◆ Impact of COVID-19 and the Company’s Responsew Started remote work for allof its employees

w Minimal impact fromCOVID-19
w Cancellation of AD EBiS bysome of the customers inthe staffing, travel,
entertainment, education,bridal, securities, andfinance industries who
were affected by COVID19. This was almost entirely
offset by the brisk demand
from customers in ECrelated businesses due tomore people buying goods
from home.

(12) Tightened regulations: To
strengthen privacy protection, theEU adopted the GDPR (General
Data Protection Regulation). A
tracking prevention function wasadded to Apple’s Safari. Google
also plans to eliminate the use ofthird-party cookies from its
Chrome within two years.
(13) CNAME Tracking: a newmeasurement method that canmeasure the effectiveness ofadvertising with high accuracy
while protecting user privacy.
Uses first-party cookies. For
details, see page 26 of the reportissued on 12/13/2019.
“Tracking” means identifying
visitors of websites or users of
online services on the Internet torecord and track their visiting
history or activities within
websites.

Response
Starting on 3/31/2020, all employees began remote work. Almost all businessactivities including sales, customer success, customer support, development,
and management have been continued online. The Company’s business isinherently highly compatible with remote work, so the Company has notencountered major problems in smoothly conducting business.
ImpactAs described later, H1 results had shown a steady growth and the Company
has experienced almost no impact from COVID-19.
If the COVID-19 crisis is prolonged, there may be some effect on the sales
activities, such as new customer acquisition, but even in such case, theCompany believes that it will be able to sustain its growth. In fact, it said that
“Since the end of March, we have seen increased service cancellations andaccount deactivation by customers whose industry has been highly impacted
by COVID-19. However, since we have seen strong demand from non-faceto-face businesses such as EC, the overall demand has not waned.” Because
the Company’s flagship product AD EBiS is a tool for optimizing costs
through ad effect measurement, the current situation may be more of abusiness chance since the shift in consumption toward EC due to COVID-19
will increase the demand for ad effects with more efficient appeal tocustomers.

◆ Impact of the Strengthened Regulation on Personal
Information Protection and the Company’s Response
Response
Due the global trend to strengthen regulations on personal information
protection12, Japan too strengthened the Personal Information Protection Law.
In response to this, the Company began providing CNAME Tracking13, a newmeasurement method for AD EBiS that does not use third party cookies. In
the three months following its release around the middle of this year’s January,
more than 300 companies have installed it.
The Company has declared that its purpose is to improve corporate value andprivacy-protected user experience through the power of data and technology.
It also announced the six principles of its privacy statement, declaring itself
as a company that values and complies with information protection in acommitment to maintain reliability and safety for users as well as the society
as a whole.
ImpactThere seems to be many companies, or competitors, that cannot meet thedemands of the strengthened regulations on personal information protection.
Specialized in advertising effect measurement, the Company’s ability todevelop technology and adjust to changes is high. We believe that theCompany will gain a greater competitive advantage relative to othercompanies in this business area.

17/29
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

7. This Fiscal Year’s H1 Results and Full-Year
Forecast◆ Financial Results for Q2 FY 2020 (first half)
Overview
The consolidated financial results for Q2 FY 2020 (October 2019 to March
2020) show that both sales and profit grew significantly; in H1, sales
increased by 14.1% YoY to Y1,235 million and operating profit increased by
239.2% YoY to Y71 million (Figure 15). In the previous H1, it posted a net
loss of Y47 million due to an extraordinary loss, but it turned a net profit of
Y46 million in this fiscal year’s H1. Record-high H1 sales were achieved.

w Record-high H1 sales
w Also turned a net profit

H1 Progress Rate
Progress in H1 in terms of the full-year plan was 45.7% for sales (49.0% in
the same period of the previous year) and 35.7% for operating profit(previously 25.0%). The Company has not disclosed the forecast for H1, but
the results seem have been in line with the plan.

w H1 results were in line withthe plan; firm progress

w The main AD EBiS businesshas been successful. Rise in
the unit price and in thenumber of accounts due tothe acquisition of ADPLAN
also contributed to theresults.

Trends in Financial Performance by Segment
By business segment, sales of the marketing platform business increased by
17.5% from Y956 million in the previous H1 to Y1,122 million this H1.
Operating profit increased by 658.1% from Y9 million to Y67 million; profit
improved significantly. This improvement was due to the increase in thenumber of accounts and average unit price of its main business AD EBiS (seeFigures 7 and 8 on page 9). The ADPLAN business, which was acquired in
January and incorporated into this segment, also contributed to the results in
Q2 in terms of the rise in both the number of accounts and the unit price.

w Due to a delay in some of thecontract renewals, EC
platform’s sales temporarily
decreased.

In the other segment, or the EC platform business, due to a delay in some of
the contract renewals (these renewals have been completed as of the date ofthis report), sales decreased by 10.7% from Y125 million in the previous H1
to Y112 million this H1. Consequently, operating profit also fell from Y12
million to Y4 million by 63.5%.

【 Figure 15 】Comparison of H1 or Quarterly Results
Q1 (Oct-Dec), Q2 (Jan-Mar),Q2 YTD (Oct-Mar)(Unit: million yen)
Total Sales
Marketing Platform
EC Platform

Gross Profit
Gross Margin
SG&A Expenses
SG&A Expenses Ratio
Operating Profit (segment)
Marketing Platform
EC Platform

Operating Margin
Marketing Platform
EC Platform

Recurring Profit
Net profit

FY 2019
Q1
520
460
59
344
66.1%
370
71.3%
-27
-21
-5
-5.1%
-4.6%
-9.2%
-30
-36

FY 2020
Q2
563
496
67
404
71.8%
356
63.3%
48
30
18
8.4%
6.1%
26.6%
47
-10

Q1
585
524
62
407
69.5%
382
65.2%
25
16
9
4.2%
3.0%
14.5%
25
19

Q2
650
599
51
432
66.5%
386
59.3%
47
51
-4
7.2%
8.5%
-8.8%
46
27

FY 2019

FY 2020Q2 FY 2020 YTD YOY

Q2 YTD
1,083
956
126
748
69.1%
727
67.1%
21
9
12
1.9%
0.9%
9.7%
17
-47

Q2 YTD
1,235
1,123
112
839
67.9%
767
62.1%
71
67
4
5.8%
6.0%
4.0%
71
46

Diff. in amount % Change / Diff.
153
14.1%
167
17.5%
-14
-10.7%
91
12.2%
41

5.6%

50
58
-8

239.2%
658.1%-63.5%

53
92

310.5%-197.8%(Ref) Prepared by Alpha-Win Research Dept. based on the securities report

18/29
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

Trends in Margins and Profit/Loss
Despite sales growth in the marketing platform business, the gross margin
slightly worsened from 69.1% in the previous H1 to 67.9% this H1 due toinvestments to prepare the infrastructure for increasing the capacity of themarketing platform business and decreased sales of the EC platform business(Figure 16). However, since the SG&A expenses only increased by 12.2%,
which is less than the increase in sales (14.1%), the SG&A expenses ratio fell
sharply from 67.1% to 62.1% during the same period. As a result, theoperating margin improved by about 3.9 points from 1.9% to 5.8%. The
previous fiscal year’s H1 resulted in a net loss due to an extraordinary loss ofa total of Y71 million, which included Y60 million in litigation-related
expenses as well as loss on retirement of fixed assets. This H1, though, no
extraordinary loss was recorded and a net profit was gained.

w SG&A expenses ratio
decreased and operating
margin significantly
improved.

w With no more extraordinary
loss, the Company was able toturn a net profit.

【 Figure 16 】Transition in Margins and Ratios【 Figure 17 】Factors Affecting O.P. in H1 FY 2020

(unit: %)(unit: million yen)

Gross margin

（%）

80.0
70.0

63.8

66.5

O.P. margin

64.7

50.0
40.0
30.0
20.0

59.9
45.4
18.3

71.4
65.9

200

67.9

69.1

62.1

61.6

42.1

-39

120

-16

3.9

5.8

7.5

-5.5

0.0
FY 2017

FY 2018

-6

-2
-16

21

0

FY 2019

H1
H1 FY
FY 2020
2020 FY 2020 E

H1 FY 2019 Marketing
PF salesoperatinggrowthprofitEC PF
sales
declineIncreased Increased Increasd
Increase in Increased Increase Increase
Decreased Decreased H1 FY 2020
server personnel depreciation transfer ofin feesrent
operatingin other advertising
dev.
cost
expense expense and proprietary
paid to expenses
profitexpenseexpenseassetsgoodwill
agencies
amortization(Ref) Figures 16-17 were prepared by Alpha-Win Research Dept. based on the securities report and financial results summary

w Profit increased thanks tosales growth and cost
suppression

w After turning an operating
profit for the first time in 7
quarters, the Company has
been maintaining an
operating profit for 5 quarters
in a row.
w With business restructuring
and transition to a flat-rate,
subscription-based businessmodel, its business became
more stable with small
seasonal variations.

71

18
-20

40
20

10

-33

60

15.4

FY 2016

Decrease

-13

160

80

24.4

FY 2015

Increase100

5.4

FY 2014

167

180

140

66.9

49.3

10.0
-10.0

70.8

65.3

60.0

(million yen)

SG&A expenses ratio

Factors that Increased/Decreased Profit in H1
An analysis of the factors that increased or decreased H1 profit is shown in
Figure 17 above. In terms of cost, the increase in server-related expenses by
Y39 million, depreciation expense and goodwill amortization by Y33 million,
and personnel expense by Y16 million were the main factors that decreased
profit. The increase in server costs came from securing and increasing theinfrastructure capacity of the marketing platform business. The otherexpenses were for positive investment purposes. For instance, the increase indepreciation expense and goodwill amortization was due to the amortizationof goodwill from the acquisition of ADPLAN. The increase in personnel
expense was also for increasing the number of employees to work on the new
businesses. On the other hand, although the decrease in advertising expense
by Y18 million and the decrease in recruitment cost by Y10 million helped
increase profit, much of the overall profit growth came from the sales growthof the marketing platform business.
Quarterly Transition in Results
In both the first quarter (Q1) and the second quarter (Q2) of the current fiscal
year, a double-digit YoY sales growth and record-high sales were achieved.
Looking at the quarterly transition in operating profit (Figure 18 on page 20),
the Company had posted net losses from Q4 FY 2017 (July-Sept 2017) to Q1
FY 2019 (Oct-Dec 2019). Then, in Q2 FY 2019, it turned a profit for the first
19/29

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

time in seven quarters. Since then, it has been maintaning an operating profit
for five consecutive quarters through Q2 FY 2020 (Jan-Mar 2020) (Figure18). This recovery had been brought by the sales growth of AD EBiS, thewithdrawal from unprofitable businesses, the acquisition of promisingbusinesses, the transition in business model from a pay-per-use to a flat-rate,
subscription-based price system, and the improvement in gross margin and
SG&A expenses ratio through cost control.

【 Figure 18 】Quarterly Transition in Operating Profit
Marketing Platform Business

EC Platform Business(million yen)

Investment Phase120

Return
Phase

100
35

80
60
40
20

43
9

33

11

22
67
35

13
77

4

69

41

36

45

50

52
25

0

17

17
60

-1

-8

15

14

-11

-20

-38

-40

-44

-37

30
12
-23

-15
-1

33
9
3

8

51

15
-4

-21
-5

-3

-60
Q1

Q2

Q3

Q4

Q1
Q1 Q2
Q2 Q3
Q3 Q4
Q4

FY 2015

FY 2016
2016
FY

Q1
Q1 Q2
Q2

Q3 Q4

FY 2017
2017
FY

Q1
Q1 Q2
Q2 Q3
Q3 Q4

Q1

FY 2018
2018
FY

Q2
Q2 Q3
Q3 Q4
Q4 Q1
Q1 Q2Q2
FYFY
2019
2019

FY 2020
FY 2020(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary and securities report

w No change to financial
forecast for this fiscal year.
Planning to increase bothsales and profit, turn a net
profit, and achieve recordhigh sales.

Current Situation
As mentioned on page 17, the Company has experienced little impact fromthe COVID-19 outbreak on the H1 results because of the firm demand fromnon-face-to-face businesses such as EC for more efficient advertising effects,
its mainly subscription-based business model, and high compatibility of its
business operations with remote work.
The period from January to March was especially difficult for many
companies, with about a quarter of all listed companies posting net losses as
the emergency declaration in response to the COVID-19 outbreak caused an
economic stagnation. More than half of the companies whose fiscal year ends
in March have announced that this fiscal year’s financial results are still
undetermined; the Company’s strong fundamentals in contrast to thosecompanies became clear, although its fiscal year ends on a different month.

w Current sales are solid.

w Free cash flow is stillnegative. Making thispositive is the next challenge.

Semi-Annual Transition in Cash Flow
Looking at the semi-annual transition in cash flow, investing cash flow aswell as free cash flow (FCF) has been negative because the Company has
been continuously and actively conducting investment (Figure 19). Turning
the FCF positive would be the Company’s next challenge for the meanwhile.

【 Figure 19 】Semi-Annual Transition in Cash Flow
Unit: million yen
Operating CF ①
Investing CF ②
Financing CF
FCF（①+②）
Cash and Deposits (on B/S)FY 2015
H1
H2
15
148
-5
-27
-3
0
9
121
666
787

FY 2016
H1
H2
48
93
-80
-69
-16
3
-32
24
738
762

FY 2017
H1
H2
121
23
-88
-106
-31
-0
33
-83
764
681

FY 2018
H1
H2
7
9
-94
-118
169
542
-88
-110
760
1,194

FY 2019
FY 2020
H1
H2
H1
99
109
92
-368
-158
-409
162
-262
391
-269
-50
-317
924
774
847

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary

20/29
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18◆ The Company’s Financial Forecast for FY 2020 (fullyear)
Full-Year Forecast
The Company has not made revisions to its forecast for this full fiscal year
announced on February 7: sales of Y2.7 billion (+22.5% YoY), operating
profit of Y200 million (+135.5% YoY), recurring profit of Y190 million(+140.4%), net profit of Y130 million (a turnaround), and undetermined yearend dividend. Full-year sales and operating profit for each segment, as wellas the overall gross margin and SG&A ratio, have not been disclosed. Also,
the Company is expected to become subject to a normal corporate tax rate.

w This fiscal year’s forecast was
kept the same. Expects fullyear sales to reach a record
high and operating profit to
double.

For the current fiscal year, or the final year of the current medium-term plan,
the Company had previously set a sales target of Y3 billion, but it announced
that it had revised this to Y2.7 billion.
Recent Monthly Sales
Figure 20 shows the transition in monthly sales during this fiscal year as
announced by the Company. Total sales in April, the first month of the second
half of this year, were Y217 million, up 12.6% YoY. Since October 2018, it
has been maintaining a double-digit sales growth for 17 consecutive months.
The growth slowed down to a high single digit in March but returned to adouble digit after that.

w Still maintaining solid sales
in April, the first month ofH2.

The marketing platform business segment, which accounts for more than 90%of the Company's total sales, has maintained strong sales; its sales were about
Y198 million in April, up 17.2% YoY. On the other hand, sales of the EC
platform business segment in April were about Y19 million, down 20.9%
YoY, due to delays in contract renewals, etc.
Cumulative overall sales for the seven months of this fiscal year including
April (October 2019 to April 2020) were Y1,452 million, up 13.9% YoY.
This is a 53.8% progress rate in terms of the full-year company sales plan of
Y2.7 billion (last fiscal year, the progress rate of the same period over the fullyear was 57.8%).

【 Figure 20 】Recent Monthly Transition in Sales (flash report)(upper row: unit for sales = thousand yen, decimal places cut off)
(lower row: unit for YoY change = %)Calendar Year

2018

2019

Fiscal Year
Monthly Sales
MarketingPlatform
EC Platform

Entire Company

FY 2019
Oct

Nov

Dec

Jan

Feb

Mar

Apr

June

July

Aug

Sept

149,201

150,478

160,409

158,319

165,994

171,330

168,971

165,515

162,982

163,876

165,521

168,509

126.9

130.9

133.7

132.9

132.9

129.0

133.0

133.0

120.3

124.6

122.2

114.6

21,83918,68318,93625,06019,46021,99023,467

17,363

17,88330,223

19,341

19,019

78.3

67.6

76.5

96.8

82.9

117.2

100.8

90.3

87.6

115.9

104.7

102.3

171,041

169,161

179,345

183,379

185,455

193,321

192,439

182,878

180,866

194,099

184,863

187,529

118.6

124.0

126.4

125.0

127.5

128.0

127.3

116.1

123.2

120.1

113.2

117.6

Calendar Year

2019

2020

Fiscal Year
Monthly Sales
MarketingPlatform
EC Platform

Entire Company

May

10/2019 - 4/2020

FY 2020

This FY (FY 2020)

Oct

Nov

Dec

Jan

Feb

Mar

Apr

H1 YTD

This FY YTD

167,418

173,197

183,085

200,850

197,252

200,976

198,072

1,122,778

112.2

115.1

114.1

126.9

118.8

117.3

117.2

117.5

117.4

26,164

17,60218,01926,041

16,1268,450

18,569112,402130,971

1,320,850

119.8

94.2

95.2

103.9

82.9

38.4

79.1

89.2

87.6

193,583

190,799

201,105

226,891

213,378

209,427

216,642

1,235,183

1,451,821

113.2

112.8

112.1

123.7

115.1

108.3

112.6

114.2

113.9

(Ref) Prepared by Alpha-Win Research
Dept. from the monthly disclosurematerials on the Company’s
website.
(Note) The values shown are
preliminary data before auditingby an auditor and may be revisedin the future.

21/29
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

w This H2, the Company
expects a 30.5% YoY growthin sales and a large 101.3%
YoY growth in O.P. These arebased on the assumptions
that the SG&A expenses ratio
will significantly improveand the margins will rise.

w In H2, plans to make progresswith new businessdevelopment, while refining
its areas of focus andstrengthening cost control.

H2 PlanBy subtracting the H1 results from the full-year forecast, we can obtain what
would essentially be the Company's forecast for H2: sales of Y1,465 million(+30.5% YoY), operating profit of Y129 million (+101.3% YoY), recurring
profit of Y119 million (+93.1% YoY), and net profit of Y84 million(+616.4% YoY). Compared with the same period of the previous year or H1of this year (18.6% increase in sales and 80.1% increase in operating profit),
the Company seems to be expecting large increases in sales and profits.
Regarding the operating margin, the Company expects it to improvesignificantly from 1.9% in the H1 of the previous year to 5.7% in the H2 ofthe same year, 5.8% in this year’s H1, and 8.8% in this year’s H2. An
improvement in the gross margin and a significant improvement in the SG&A
expenses ratio are expected to contribute to this rise.
H2 Strategy
In H2, the Company plans to change crisis into opportunity under a businessstrategy that can be flexibly revised as needed. Specifically, it will (1) refine
its areas of focus and accelerate the speed at which it provides services thatmatch the market transformation, (2) conduct stricter cost control to prepare
for further economic downturns, and (3) promote the new working stylebrought by the crisis to improve productivity. Through this strategy, theCompany hopes to become closer to achieving its full-year targets –especially the one for profit. It also plans to allocate resources to work on new
business development.

◆ Alpha-Win Research Dept.’s Financial Forecast for FY
2020 (full year)
w Alpha-Win Research Dept.
revised sales for this fiscal
year slightly downward.
Profit was kept the same,
having judged that thedownside risk is low due tostrengthened cost control.
Predicts profits to be about
the same level as theCompany’s plan.
w Risk factor: prolonged impact
of COVID-19 such as asecond wave

Revisions to This Fiscal Year’s Forecast
Based on the H1 results and interviews with the Company, we made a small
downward revision to this full fiscal year’s sales. However, we did not change
the forecast for this year’s profit. The potential prolongation of economic
stagnation in Japan due to a second wave of COVID-19 remains a risk factor.
The Company's sales forecast of Y2.7 billion seems to be within an
achievable range as long as the new businesses contribute to the results as
expected. However, we revised the forecast to a more conservative one
concerning the impact of COVID-19 and the sales of the Professional
business and the EC platform business.
On the other hand, with regard to the profit forecast, even if sales fall
somewhat short of the target for AD EBiS (including ADPLAN) and the new
business development, we believe that there is unlikely to be a large downsiderisk in profit for the following reasons.
・The Company’s subscription-based business model allows it to firmly andsteadily accumulate profit (in H2, ADPLAN will fully contribute).
・It is gradually strengthening its control over various expenses. For instance,
it revised the fees paid to agencies (reviewed the system concerning
distributing agents).
Assumptions used in our full-year forecast are as follows, although they havenot changed significantly since the previous forecast.

22/29
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

Assumptions for Sales
・We had expected the number of accounts (annual average) of AD EBiS to
increase by 4% YoY with customers switching from ADPLAN, but werevised this upward by about 1% after taking into account the current situation.
For the unit price, we had expected a rise of about 17% but revised thisupward to about 27% since the price revision has been more effective than
we had anticipated. As a result, we revised AD EBiS's sales slightly upward.
・For the new businesses including the Professional Service, although theCompany had planned for their expansion, progress seems to be somewhat
delayed partly due to COVID-19. Therefore, we made a conservative sales
prediction.
・In sum, we revised our sales prediction for the marketing PF (platform)
from Y2,470 million (27% growth) to Y2,400 million (23% growth).
・For the EC PF, we had forecasted EC-CUBE’s sales to be Y280 million,
but revised this to Y250 million, which is about the same as the previous
fiscal year.
・ We had predicted full-year sales to be Y50 million greater than the
Company’s forecast, but revised this to account for the H1 results and thefactors explained above (previously predicted Y2,750 million → now
predicting Y2,650 million).
Assumptions for Profit
・Since the Company revised its system concerning distributing agents, we
expect that the fee rate will gradually improve in H2 of the current fiscal year
and the next fiscal year, leading to an improvement in the profit margin overthe next year or so by a few points.
・Starting this fiscal year, the Company will be subject to a normal corporate
tax rate.
・Sales and various costs associated with company or business acquisitions(e.g. goodwill amortization and fees related to new acquisitions) remain
uncertain. Whether such events will occur and how they will be recorded inaccounting will affect profit and loss. However, we believe that there will be
no additional M&A this fiscal year in H2.

【 Figure 21 】Alpha-Win Research Dept.’s Forecast for This Fiscal Year and Over the Medium Term(million yen)

FY 2018 A

FY 2019 A

FY 2020 CE

Sales

1,805

2,204

Marketing PF
EC PF
Gross Profit

1,530
274
1,190
65.9%
1,289
71.4%
-98
-5.5%

Gross Margin
SG&A Expenses% over sales
Operating Profit% over sales
Recurring Profit% over sales
Net Profit% over sales
KPI
AD EBiS: # of active accounts% change for the above
AD EBiS: average unit price (yen)% change for the above
Sales (YoY growth rate)
Marketing PF
EC PF
Gross Margin (diff. from last FY)
SG&A Expense (growth rate)
Operating Profit (growth rate)
Recurring Profit (growth rate)
Net Profit (growth rate)

FY 2020 E

FY 2021 E

FY 2022 E

2,700

2,650

3,010

3,390

1,951
253
1,561
70.8%
1,476
66.9%
85
3.9%

200
7.4%

2,400
250
1,830
69.1%
1,630
61.5%
200
7.5%

2,750
260
2,100
69.8%
1,800
59.8%
300
10.0%

3,120
270
2,400
70.8%
2,020
59.6%
380
11.2%

-115
-6.4%
-89

79
3.6%
-35

190
7.0%
130

190
7.2%
130

300
10.0%
200

380
11.2%
255

-4.9%
Annual Average (A)
1,476

4.8%

5.0%
21.9%
-41.1%-0.3%
25.1%
To loss
To loss-1.6%
Annual Average (A)
1,486
0.7%
98,517
24.8%
22.1%
27.5%
-7.6%
4.9%
14.5%
To profit
To profit

4.9%
Annual Average (E)
1,500
0.9%
125,000
26.9%
20.2%
23.0%
-1.3%
-1.7%
10.5%
135.5%
140.4%

6.6%
Annual Average (E)
1,550
3.3%
135,000
8.0%
13.6%
14.6%
4.0%
0.7%
10.4%
50.0%
57.9%

7.5%
Annual Average (E)
1,600
3.2%
145,000
7.4%
12.6%
13.5%
3.8%
1.0%
12.2%
26.7%
26.7%

To loss

Smaller loss

To profit

53.8%

27.5%

78,938(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary.
(Note) CE is the Company’s forecast/estimate. AD EBiS’s average unit price and number of active accounts used in our forecast/estimate (E) areaverage values for the fiscal year and differ from the values announced by the Company (which are averages of the values at the end of the lastmonth of each quarter). The actual result (A) is the simple average of figures at the end of each quarter.

23/29
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

8．Growth Strategy◆ The Company’s Medium-Term Business Plan andStrategy

w Aims to create a solid
domestic foundation over the
medium term and expand
globally over the long term

There have been no major changes to the medium- to long-term business plan.
The Company has been steadily executing measures in line with its plan. It
has been developing its business according to president Iwata's long-termbusiness plan as described by his words, “By creating a completely new
product that can be differentiated from other companies in the field ofInternet marketing, we hope to acquire an exceptionally large market sharein Japan and then develop our business globally to become a company witha strong presence.”

w Conducting business under
the Marketing Robot growthstrategy. The sales target for
FY 2020 (medium-term plan)
was revised from Y3 billion toY2.7 billion.

Medium-Term Strategy
The Company’s medium-term goal in the Marketing Robot growth strategy
was to achieve sales of Y3 billion in FY 2020 or this fiscal year (+36.1%
compared to FY 2019). However, it has recently announced that it had revised
this goal to Y2.7 billion considering the current situation (Figure 22). The
Company has already finished forming new alliances with 31 othercompanies for the purpose of accelerating business development. It has beendeveloping its business with a focus on developing and creating theMarketing Robot and strengthening the marketing & sales division.

w Actively cooperating withother companies

w Focused on making progresswith the development of theMarketing Robot andenhancing the marketing &sales division【 Figure 22 】Medium- to Long-Term Plan
To global
expansion
Strengthen the foundation
for growth in Japan

Expand theGroup in Asia
Rapid growththrough M&As

Enhance dev/sales divisions
Creation of the Marketing
Robot

FY 20203➝2.7
billion yen

Sales～ FY 2020

FY 2021 ～(Ref) Supplemental briefing materials, partially added and reworked by Alpha-Win Research Dept.

Long-Term Strategy
As its long-term strategy (from FY 2021 to FY 2023), the Company plans toincrease development and sales sites mostly in Asia. Also, the Company
intends to accelerate its growth not only through organic growth but also
through M&As, alliances, etc. However, specific targets such as those forthe sales breakdown and the actual means for achieving the targets have notbeen announced. Since the Company has been raising funds ahead of plan,
if the economic situation returns to normal, it may continue to actively
conduct M&As or acquire businesses from other companies in the next
fiscal year and onward.
The cost structure of the marketing platform, its core business, had been
controlled in four parts, but it now consists of five with the addition of “new24/29This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

business development” starting this fiscal year. Medium- to long-term target
ratios have been set for each (Figure 23).

w Aiming for an operating
margin of 10-20% over the
medium to long termw Cost structure of the mainmarketing platformbusiness segment is
improving

Targets of Cost Control
In the medium- to long-term business plan, the Company has not disclosed
the target profit values that it plans to achieve. However, it did set themedium- to long-term operating margin target for the main marketing
platform business at 10-20%.
In the marketing platform business, the Company had achieved highoperating margins of around 16-24% from FY 2014 to FY 2016. Then, in FY
2017, because the Company increased the amount of investment related tomarketing & sales and the development of software functions, operating
margin began to decrease. However, after hitting the bottom in FY 2018,
operating margin began to improve. In FY 2019, excluding the customer
service expense and other indirect expenses, the ratios of expenses over sales
for marketing & sales and development have already reached the target
ranges set out in the medium- to long-term plan. Ratios of the customer
service expense and other indirect expenses over sales are also expected todecrease proportionately with the completion of investment and sales growth
and will likely reach the target range in the next fiscal year or later.
Over the medium to long term, the Company plans to expand sales andsignificantly reduce the expenses of this business in order to stabilize its
operating margin within the range of 10-20%. Since this level of operating
magin has already been achieved in the past, the Company is likely to be able
to achieve it again. The lower end of the target range – an operating marginof 10% – may become achieved next fiscal year depending on the success of
cost control. This H1’s operating margin was 5.8% and the full-year forecast
is 7.4%. An operating margin close to the 10% goal would have beenachieved if the Company had not allocated 4% of its resources to new
business development in H1.

【 Figure 23 】Cost Structure of the Marketing Platform (MPF) Business(actual and medium/long-term targets)Marketing PF's
Expense-to-Sales
Ratio
Marketing and
Sales

Development
Customer Sucecss(old name:"support")

FY
2016

FY
2017

24%

UP

21%

UP

28％
24％

UP

UP

Q2
FY 2020

Medium- to
Long-Term
Targets

26％

24％

25-30％

29％*2

31％

25-30％

17％15％

10-15％

4％

5％

FY
2018

FY
2019

33％
36％

11%

11％

11％

New Business
Development

―

―

―

―

Other Indirect
Exp.

24％

25％

28％

26％*1

20％

15-20％

Operating Profit 20％

12％

-8％

2％

6％

10-20％UP

UP*1: Due to increased allocation of common expenses to the segment following the sales decline of the EC platform caused bybusiness restructuring*2: Due to transfer of operation staff from Development to Customer Success
UP: Increased from strengthening the category(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing materials

25/29
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18◆ Alpha-Win Research Dept.’s Financial Forecast for the
MediumTerm

w Alpha-Win Research Dept.
made revisions to its previous
medium-term forecast. Sales
were revised slightly
downward but O.P. and R.P.
forecasts were kept the same.

w Margins are improving withstronger cost control

w Double-digit sales and profit
growth expected over the
medium term.

Revisions to the Medium-Term Forecast
We revised our previous prediction of the medium-term results for the next
fiscal year and later (Figure 21 on page 23), but our basic line of thinking has
not changed. While we revised up the predicted unit price of AD EBiS, we
made a conservative prediction of the growth in the number of accounts. We
also predicted only modest values for the marketing platform’s sales and theEC platform’s sales growth, so the overall sales were consequently revisedslightly downward. However, with AD EBiS as the growth driver, sales ofthe marketing platform are expected to continue to grow at a double-digit rate.
Since the effect of cost control is expected to become more prominent in the
future, we kept the same forecast for operating profit for each year in themedium-term period. We also revised the net profit based on the assumptionthat a normal corporate tax rate will start to be applied.
Medium- to Long-Term Growth Potential
We believe that the Company will announce the next medium-term businessplan at the same time as the announcement of this fiscal year’s results around
November 2020, along with the forecast for next fiscal year (FY 2022). Overthe medium to long term, as the advertising effect measurement market
expands, we expect that the Company’s exceptionally high share and highreliability will help AD EBiS’s unit price to continue to grow and its numberof active accounts to increase modestly, thereby contributing to businessexpansion. In addition, the growth potential of its businesses is large, since
the Company can up-sell and cross-sell its products as well as offer new
services to its existing customers through distributing agencies. With thesefactors as the growth driver, we anticipate an annual sales growth of 15 to
20% over the medium to long term.
In terms of profit and loss, since the upfront investment phase has settled
down and the Company is starting to shift from sales-focused to cost- andprofit-focused management, and since its business has a high marginal profit
ratio (estimated to be 70%), we expect to see a clear V-shaped recovery as
the Company begins to consecutively post net profits with its sales growth.
We are expecting a high annual profit growth rate (on a normalized basis) of
20-30%, which is greater than the sales growth rate. So far, the Company has
been steadily expanding its business in line with its plan, so we believe that
dividend payment may be resumed within the next two to three years. Overthe medium term (about three to five years), record-high profit may beachieved and the shareholder benefit plan may come back.

w Whether there will be M&As
or business acquisitions andwhether they will be
successful are points that may
affect the results. Over the
medium to long term, theCompany hopes to maintain a
net profit.

Points to Keep Note of Regarding the Medium- to Long-Term Forecast
Going forward, the Company is expected to actively conduct upfront
investments in its core and peripheral businesses in preparation for future
growth, although this will probably happen after the COVID-19 crisis ends.
The Company has shown an eager attitude toward increasing competitiveness,increasing market share, and expanding into peripheral fields, so it may
continue to engage in M&As, business alliances, and business acquisitions in
the future. Therefore, whether these measures will be taken, whether they will
succeed, and how much they will contribute to profit will likely influence themedium- to long-term sales and profits. Financial performance will also beaffected by the Company's success in cost control and how much effort it puts
into achieving the bottom line of its targets. However, even if it conducts
upfront investment in the future, the Company hopes to still keep a net profit.
26/29

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

9． Analyst’s View◆

Shareholder Return

In the second fiscal year after becoming listed (FY 2015), the Company’s
dividend was Y4.5 per share. Dividend was then increased by Y0.5 in FY
2016 to Y5.0 per share per year. In FY 2017, dividend was paid for the thirdyear in a row, again at Y5.0 yen per share (Figure 24). However, in FY 2018
and FY 2019, no dividend was paid since a net loss was posted consecutively
for those years, and the Company also abolished the shareholder benefit plan.
w Most likely to be no dividend
gain this fiscal year. Dividend
is expected to be resumed in
the fiscal year after the nextor later.

Since the Company is currently in its growth stage, rather than letting its cash
flow out through dividend and benefit plans, it hopes to increase shareholder
value by focusing on investments for future growth to recover its financial
performance.

w Hopes to increase shareholder
value through recovery offinancial performance

Dividend for this fiscal year is undetermined, and dividend payment and theshareholder benefit plan are unlikely to be resumed in the short term. We
believe that dividend payment may possibly be resumed in FY 2022 (thefiscal year after the next).

【 Figure 24 】Change in Dividend and Dividend Payout Ratio
(%)

(Y)

50.0

6.0

45.0

44.0

40.0
35.0
30.0
25.0
20.0
15.0

Dividend

5.0

Dividend payout
ratio

4.0
3.0

5.0
4.5

18.6

5.0
2.0

12.9

10.0

1.0

5.0

0.0

0.0

0.0
FY 2015

FY 2016

FY 2017

FY 2018

0.0

0.0

FY 2019

Undeter-mined0.0

FY 2020 (E )(Ref) Prepared by Alpha-Win Research Dept.

◆ Stock Price and Characteristic and Factors that May
Affect Stock Price(14) AdTech (ad technology): A
generic term for information
technology used in advertisingbusiness, it refers to digitaltechnology used in Internet ads,
etc.
w Highly volatile stock price.
Has been solid in the recent
rebound due to the solid
financial performance.

Stock Price and Trend
The Company’s stock is a small-cap, AdTech14-related stock listed on TSE
Mothers. Since becoming listed, the volatility of its stock price has been high(max of 5,260 yen in May 2016 and min of 677 yen in August 2016).
When the Company’s financial performance was worsening, its stock pricegradually fell, but has been bottoming out with the recovery of earnings. Overthe past three years, the stock price has been within the range of about 1,000
to 2,000 yen. The downside risk has become lower since the recent financial
performance in January to April 2020 has been firm, the Company did not
make revisions to its full-year forecast despite the difficult economic situation
caused by COVID-19, a V-shaped profit recovery is become more likely, andthe COVID-19 crisis is anticipated to settle down. In the rebound phase after
27/29

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18
the plunge in stock price due to COVID-10 (from 3/16, the most recent low
w Solid performance after
based on the closing price, to 5/29), the Company has been outperforming
bottoming out from the
TSE Mothers and TOPIX (Figure 25).
recent low【 Figure 25 】Comparison of Performance Since theMost Recent Low (based on the closing price)

2020
YRGLM
TSE Mothers
TOPIX

Mar 16750.00559.541236.34

May 291328.00
982.431563.67

Performance
77.1%
75.6%
26.5%

(Ref) Prepared by Alpha-Win based on stock data.

w The Company’s valuation
does not seem cheap basedon this FY’s figures. Goingforward, stock price will be
influenced by medium-term
profit levels.
(15) P/S (Price to Sales Ratio):
Ratio of stock price to sales. A
valuation indicator where market
capitalization is divided byannual sales. P/S is often used as
an indicator to measure the stock
value of emerging companies
with a high growth potential or a
net loss.

w For now, key points include
the monthly sales, quarterly
trends (profit/loss and AD
EBiS’s unit price and numberof active accounts), M&A,
and when dividend becomes
resumed.

w Growth potential seems
large, being able to benefit
from market expansion.

Valuation
Based on this fiscal year’s figures, the Company’s valuation does not seem
cheap compared to other similar companies. As a reference, we compared theoverall scale, business content, and valuation of 24 companies listed on themarket, including the Company, under the AdTech category or with abusiness partly similar to the Company’s (Figure 26 on page 29).
In this comparison, as far as P/E, P/B, P/S15, and dividend yield based on thisfiscal year’s figures (estimates by each company) are concerned, theCompany's valuation does not seem cheap. We believe that this is because
the current stock price already reflects the anticipation of growth in businessperformance over the medium term to some extent. As the Company begins
to turn a net profit and becomes subject to a normal corporate tax rate,comparison of its P/E with other companies become possible. We should thentake into consideration the valuation based on the expected EPS for next fiscal
year and the year after the next when considering investments (our predicted
P/E in our forecast is 41.9 for next fiscal year and 32.9 for the year after that).
Upcoming Key Points
Looking ahead, factors that may affect stock price are the changes in monthly
sales (YoY), quarterly trend (profit growth rate, profit margins, and AD
EBiS’s average unit price and number of active accounts), announcements of
M&As or alliances or new functions, launching of new services or products,
contents of the next medium-term business plan to be announced, the next
medium-term profit forecast, and whether dividend will be resumed.
Over the medium to long term, since the Internet advertising market is
expected to keep growing, the Company's Marketing Robot business has alarge growth potential. The Company’s position in the market will most likely
let it benefit from such market growth. Going forward, we hope to see theCompany grow as an AdTech-related and domestic-demand-related growthstock that is unlikely to be directly affected by COVID-19, trade wars, andexchange rates.

28/29
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research ReportYRGLM Inc.【Previous name: LOCKON CO., LTD.】(3690 TSE Mothers)

Issued: 6/1/2020

2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18【 Figure 26 】

Markets: TSE1=TSE 1st Section, TSE2=TSE 2nd Section,
Unit: million yen
TM=TSE Mothers, JQS=JASDAQ
Company NameBusiness Area
Market Market Cap.
Sales
Full Speed
Internet marketing, AdTech (Internet Ad delivery tech)
TSE2
6,618
21,400
OPT Holding
Internet ad agency / ad measurement tool
TSE1
36,417ND
F@N Communications
Affiliate (pay-per-performance) ad
TSE136,61934,300
ValueCommerce
Affiliate (pay-per-performance) ad
TSE192,86530,000
Hamee
Mobile accessories / EC cloud support
TSE1
20,70011,288BrainPad
Internet marketing, data analysis
TSE1
36,424
6,600
CARTA HD
Ad platform
TSE1
27,30523,000YRGLM Inc.
Internet ad measurement tool
TM
8,463
2,650
Asteria
Packaged software
TSE1
8,921
ND
RAKUS
Cloud service, Email delivery, IT engineer dispatchingTM
195,079
ND
SEPTENI HD
Internet ad agency, smartphone marketing support
JQS
30,42317,000AccreteSMS delivery service
TM
4,799
1,650
CyberAgentInternet ad agency, smartphone, games
TSE1
686,496
465,000
GMO AD Partners
Internet ad agency and related platform
JQS
6,703
36,000
GMO TECH
App-installation-type charging ad, SEO
TM
1,708
3,100
iid
Contents marketing platform
TM
4,175
5,200
Rentracks
SNS-related marketing support
TM
3,812
9,758
Allied Architects
Internet ad delivery (DSP)
TM
4,353
4,556
FreakOut HD
Pay-per-performance ad agency
TM
19,42727,000Net Marketing
Digital marketing for companies
TSE1
10,089ND
Orchestra HD
Internet ad agency, media monetization support
TSE1
11,794
11,300Fringe81
Web marketing support for mid-tier companies/SMEs
TM
5,940
7,295
SoldOut
Automatic trading of media ad space, AdTech biz
TSE1
23,20523,000
GenieeAutomatic trading of media ad space; Adtech biz
TM11,547ND
24 AdTech-related companies: simple average
55,75438,952AdTech-Related Companies
Code
2159
2389
2461
2491
3134
3655
3688
3690
3853
3923
4293
4395
4751
4784
6026
6038
6045
6081
6094
6175
6533
6550
6553
6562

Comparison of Similar Companies (24 companies related to AdTech)%
O.P.
O.P. Margin
1,350
6.3
ND
3,750
10.9
5,500
18.3
1,427
12.6
1,080
16.4
2,500
10.9
200
7.5
ND
ND
1,250
7.4
300
18.2
30,000
6.5
280
0.8
50
1.6
200
3.8
169
1.7
101
2.2
200
0.7
ND
600
5.3
-525
-7.2
800
3.5
ND
2,591
6.7

Ratio
P/S
P/E
0.31
8.71
1.07
13.82
3.10
24.17
1.83
20.95
5.52
44.42
1.19
17.06
3.19
64.40
1.79
38.49
2.91
23.28
1.48
76.08
0.19
32.10
0.55
85.42
0.80
31.27
0.39
53.41
0.96
0.72
1.04
31.87
0.81 Loss: NA
1.01
1.52
37.70

%
P/B
Dividend Yield
1.62
0.00
1.44
0.00
1.81
3.99
7.28
1.26
4.25
0.51
9.45
0.00
1.17
1.49
7.37
0.00
1.81
0.00
37.57
0.15
1.83
0.91
4.46
1.15
8.62
0.61
1.29
1.58
2.11
0.59
1.33
0.00
1.81
1.88
2.83
0.00
4.23
0.00
3.79
0.88
8.25
0.54
6.17
0.00
7.69
0.00
4.55
0.00
5.53
0.65

Closing Price（ 5/29 ）Stock Price
425
1,529
476
2,694
1,284
4,945
1,073
1,328
510
2,153
219
869
5,430
400
1,552
834
478
310
1,221
682
1,288
602
2,218
643

(Ref) Prepared by Alpha-Win Research Dept. from the companies’ websites, securities reports, financial results summaries, andfinancial results briefing materials.
(Note) Generally, each company’s forecasted values as of their latest financial results announcement (latest quarterly financial
results) or the most recent actual results (BPS, etc.) were used (based on data disclosed and available as of May 29). For forecasts
disclosed as ranges, the median was generally used for calculations. For the Company, Alpha-Win Research Dept.’s estimates wereused. For other companies, in the case that sales, operating profit, EPS, or planned dividend are not disclosed, they were marked with
“ND” (not determined) or “-”. The average was calculated using only valid figures.

＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊

Disclaimers
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-WinCapital Inc. (hereinafter “Alpha-Win”) on the request of the company presented in this Report.
This Report is not to be construed as a recommendation or solicitation of investment. Alpha-Win shallnot be liable for any consequences including direct or indirect loss, lost profit, or damage resulting
from the use of or reliance on this Report. Investors who read this report must make their own
decisions on all investment matters and take full responsibility regarding their investment.
This Report has been prepared with a focus on objectivity and neutrality based on the analysis of generally
accessible public information and supplemental information including interview(s) by the analyst. AlphaWin, the writer, and/or other persons involved in the publication of this Report may already hold, or buy andsell in the future, the stock of the company presented in this Report.
Contents of this Report are based on information current as of the issue date and are subject to change
without notice. For the latest (updated) report, please see our website (http://www.awincap.com/). We
also do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability.
Copyright of this Report belongs to Alpha-Win and no part of the publication may be copied, photocopied,cited, or translated without our consent. For inquiries regarding this Report, please send us an e-mail to
info@awincap.com. However, Alpha-Win and the writer of this Report do not have any obligation to reply toinquiries.
MV20200613-1600

29/29
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.