Alpha-Win Company Research ReportYRGLM Inc. (3690 TSE Mothers)【Previous name: LOCKON CO., LTD.】● SummaryIssued: 12/7/2020

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

Business Description
・YRGLM Inc. (hereinafter referred to as the “Company”) is a technology company that plans, develops, and sells
software related to Internet marketing. President Iwata started the business during his college years and then founded
the Company in 2001. Its main product is an Internet advertising effect measurement system (AD EBiS) that it hadoriginally developed. It is the leading company in the niche field.
・Its services are provided via the cloud to mid-tier and large companies. Its main business is based on a subscriptionbased business model (87% of total sales). Under this model, initial costs associated with customer acquisition are
offset as revenue is gained from flat-rate payment by customers, resulting in a continuous and stable accumulation of
profit.
・The Company had been working on business model transition and the selection and concentration of its businessportfolio, strengthening is business foundation for the next level of growth. Currently, by leveraging its accumulated
know-how and assets, it is beginning to enter a phase of earning power improvement.
・It became listed on TSE Mothers in September 2014. Its name was changed from LOCKON CO., LTD., to YRGLM
Inc. in August 2019.
Past Trends in Financial Performance・After becoming listed on the Mothers market, the Company had increased sales and stayed in the black. However,from FY 2017 (note that the Company’s fiscal year is September-ending), although sales had continued to grow, profit
had declined consecutively due to upfront investment for business expansion and expenses related to businessrestructuring. In FY 2018, a net loss was posted despite a sales growth, and dividend payment was stopped.
・Then, in FY 2019 (the FY before the previous), the Company posted an operating profit in a turnaround thanks tothe structural reforms. However, due to litigation-related expenses that were recorded as extraordinary loss, a net loss
was posted again. Since Q2 FY 2019 (Jan-Mar 2019), though, the Company has been continuously posting a net profit
for each quarter, both sales and profit have been growing, and a V-shaped recovery curve is becoming apparent.

Competitiveness・The Company's strengths are the management skill of the president with expertise in leading-edge technologies ofthis field, products and support systems with proven and strong functions, its stable subscription-based business model,
and an agile business strategy including M&As. Its two main products both have the top share in the domestic market.
Its Internet ad effect measurement system is especially strong, having established an extremely solid position byacquiring ADPLAN, which has the second largest share in the market.
Business Strategy
・Under the “MXP Strategy,” the Company aims to contribute to the DX of customers by supporting data integration,
analysis, and utilization and plans to thus comprehensively expand its business scope from ad effect measurement toother areas. In the new medium-term business plan announced in November of this year, it set out its goal to achievesales of Y5 billion, operating margin of 15%, and DOE of 3% or more (all on a consolidated basis) in the final yearof this plan or FY 2023. It intends to accelerate its growth by continuing to enhance and expand its core businesses
and creating new businesses including businesses for advertising agencies and platform businesses in new fields. It isa rapidly changing industry, but the Company aims to further strengthen its products/services and expand its businessby actively conducting M&As, business acquisitions, and business alliances.
Financial Forecast for This Fiscal Year and Over the Medium Term
・The Company did not disclose its financial forecast (sales/profit) for the current fiscal year (FY 2021) because, likelast fiscal year, there are various unpredictable factors such as the impact of COVID-19 which makes it difficult toprepare a rational forecast at this point. Like most other years, the announcement of a company plan is predicted to bemade in February upon the announcement of Q1 results.
1/40This 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: 12/7/2020

・Alpha Win Research Dept. made a forecast of financial results for the three fiscal years starting this FY upon
considering the previous FY’s results and the current situation. For this FY, we made no changes to our previous
forecast that sales will be Y3,010 million (+15.0% YoY), operating profit will be Y300 million (+8.7% YoY), and net
profit will be Y200 million (+9.3% YoY). Continued growth is expected for both AD EBiS, the Company’s main
product that is scheduled for a major update, and EC-CUBE, which may benefit from the EC market boom. In addition,
costs are predicted to be held down, so that sales, profit, and dividend are likely to increase again this FY.
・With the large growth potential of Internet-marketing-related fields, an annual sales growth rate of 10-20% is
expected over the medium to long term. Also, we believe that the Company will continue with “proactive” upfront
investment as it selects, focuses, and expands its business portfolio so that it can achieve growth while also adapting
to changes. It has also been conducting a strict cost control, which has been helping to improve the profit margins.
Therefore, (under normal conditions without the impact of COVID-19,) we believe that the Company will be able toachieve a profit growth of about 20-30% per year, a higher rate than its sales growth rate.

Stock Price and Characteristics
・Recognized as an AdTech-related, domestic-demand-oriented, and small-cap growth stock. Since profit was revised
up and dividend was resumed, stock price has been outperforming the TOPIX and the TSE Mothers Index since thebeginning of the year. IT stocks, and especially AdTech stocks, tend to be traded at a premium due to their high growthpotential. The Company’s stock price currently does not seem cheap compared to TOPIX and similar companies basedon our prediction of its P/E, its P/B, and expected dividend yield.
・By establishing the new business model, the Company has started to be able to firmly post a net profit, and its
likelihood of achieving profit growth over the medium to long term is becoming greater. Going forward, medium/shortterm changes in financial performance are expected to be reflected in the stock price. We should continue to closely
watch the following factors that may affect the stock price: tightening of regulations related to personal information
protection, trends in monthly sales, quarterly trends in profit/loss, announcement of M&As or alliances or new
functions, and the unit price and the number of active accounts of AD EBiS which are key indicators (KPIs) directly
linked to financial performance.
Return to Shareholders
・The Company had initially announced that the previous FY’s dividend was undetermined, but due to the sharp
improvement in financial performance, it later announced that it will resume dividend payment for the first time in 3
fiscal years. It also recently announced a new dividend policy to decide dividend based on the DOE. This was positive
news since dividend will now be automatically and directly raised when profit grows. The Company is in its growthphase, but it plans to return profit to shareholders while continuing with investments for growth at the same time toalso contribute to increasing shareholder value through the achievement of greater financial results.

【3690 YRGLM Inc.
FY

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)

11.56

195.605.00-14.02184.970.00

168.68

0.00

2017

A

1,719

6.6

92

-62.6

106

-57.5

72

-56.8

2018

A

1,804

5.0

-98

To loss-115

To loss

-88

2019

A

2,204

22.1

84

To profit79

To profit-34 Smaller loss

-5.54

2020

CE

2,700

22.5

200

135.5

190

140.4

130

To profit

20.62

2020

E

2,630

19.3

235

176.7

225

184.7

155

To profit

24.55

193.74

3.80

2020

A

2,618

18.8

276

226.1

261

230.5

183

To profit

29.09

202.20

4.00

2021

CE

2021

E

3,010

15.0

300

8.7

290

11.1

200

9.3

31.68

229.07

4.50

2022

E

3,390

12.6

380

26.7

370

27.6

255

27.5

40.40

264.15

5.30

2023

E

3,860

13.9

480

26.3

470

27.0

320

25.5

50.69

305.52

9.30

2023

Medium-term CE

5,000

To loss

3.80

Not disclosed

4.50

750

(Note) A: actual results. CE: the Company’s estimate (forecast). E: estimate (forecast) by Alpha-Win Research Dept.
Note that the Company’s fiscal year is September-ending. For example, FY 2021 ends in Sept. 2021.

2/40
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)【 Stock Price and Valuation Indicators: 3690 YRGLM Inc.】
Item

Figure B

Item

11/30/2020

Issued: 12/7/2020

P/E

P/B

Dividend Yield

Dividend Payout Ratio

Stock Price (Y)1,840Last FY (actual)

63.3

9.1

0.2%

13.8%

Shares Outstanding (thou.)

6,372This FY (est.)

58.1

8.0

0.2%

14.2%

Market Capitalization (million Y)

11,725

Next FY (est.)

45.5

7.0

0.3%

Equity Ratio at End of Last FY

46.4%

Last FY's ROE

1.20【Performance】
PeriodReturn vs. TOPIX
1 month8.9%-2.0%
3 months
10.5%
1.9%
6 months
38.6%
23.5%
12 months
42.2%
18.6%

0

Dilutive Shares (thou.)

13.1%
15.7%

(Note) Forecasts/estimates were made by Alpha-Win Research Dept.

【 Stock Chart (end-of-week prices): 3690 YRGLM Inc.】

Figure C

(Y)

3,000
Stock price (left axis)

1.10

Price relative to TOPIX (right axis)

2,500

1.00
0.90

2,000

0.80
0.70

1,500

0.60
0.50

1,000

0.40

7

7

7

8

8

8

9

9

9

0

08
/1

12
/1

04
/1

08
/1

12
/1

04
/1

08
/1

12
/1

04
/2

0
(M
M
/Y
Y
)

6

04
/1

08
/2

6

12
/1

0.30

08
/1

500

(Note) Prepared by Alpha-Win Research
Dept. Reflects stock price and TOPIX
values through the closing price on
11/30/2020 (most recent value). In thecalculation of performance for eachperiod, the stock price and TOPIX at theend of the last month of each period werecompared with their most recent values.

(Note) From the fourth week of Aug 2016 to the fifth week of Nov 2020 (through the closing price on Nov 30)＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊

Disclaimers
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 this Report.
This Report is not to be construed as a recommendation or solicitation of investment. Alpha-Win shall not beliable 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. Alpha-Win, the writer,
and/or other persons involved in the publication of this Report may already hold, or buy and sell in the future, thestock 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, ortranslated 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 to inquiries.
FV2020-1210-1700

3/40
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: 12/7/2020

Contents
1．Company Overview ........................................................................................................................ P5
A Leading Company in a Niche Market ............................................................................................ P5
Business Philosophy ............................................................................................................................ P7
2．Business Contents and Business Model ........................................................................................ P8
Providing Originally Developed Marketing Tools via the Cloud ..................................................... P8
Restructuring and Strengthening of Business Portfolio .................................................................... P9
Detailed Business Contents (1) Marketing Platform Business ........................................................ P10
Detailed Business Contents (2) EC Platform Business ................................................................... P15
Subscription-Based Business Model ................................................................................................. P17
3．Shareholder Composition ............................................................................................................ P18
Change in Composition by Shareholder Type ................................................................................. P18
Major Shareholder Composition ..................................................................................................... P18
4．ESG .................................................................................................................................................. P20
Environment, Society, and Governance ............................................................................................ P20
5．History of Growth ......................................................................................................................... P21
Transition in Past Financial Results ................................................................................................ P21
6．Market Environment .................................................................................................................... P22
Trends of Japan’s Advertising Market ............................................................................................ P22
Competitors ..................................................................................................................................... P23
Impact of Strengthened Personal Information Protection on Advertising Effect Measurement ..... P24
7．Last Fiscal Year’s Results and Forecast for This Fiscal Year .................................................. P25
Financial Results for FY 2020 (last fiscal year) ................................................................................ P25
The Company’s Financial Forecast for FY 2021 (this fiscal year) ................................................... P29
Alpha-Win Research Dept’s Financial Forecast for FY 2021 (this fiscal year) .............................. P30
8．Growth Strategy ............................................................................................................................ P32
Previous Medium-Term Business Plan/Strategy and Its Results ...................................................... P32
New Medium-Term Business Plan and Strategy ............................................................................. P33
Alpha-Win Research Dept.’s Forecast for Financial Results over the Medium Term .................... P34
9．Analyst’s View ............................................................................................................................... P37
SWOT Analysis ............................................................................................................................... P37
Shareholder Return .......................................................................................................................... P37
Stock Price and Characteristics and Factors that May Affect Stock Price ...................................... P38
Note: Upon translating to English, when the page numbers differed from the original Japanese version, they were adjusted to those of the
English version of this Report. Note that the Company’s fiscal year is September-ending (i.e. FY 2021 ends in September 2021).

4/40
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: 12/7/2020

1. Company Overview
w Marketing technology

company. Working with the“MXP Strategy” where it
aims to contribute to the DX
of its customers bysupporting data integration,
analysis, and utilization.
Currently, the Internet ad
effect measurementbusiness, which is a part ofthis strategy, is its main
business.

w As its main service, it
provides Internetmarketing-related platform
as SaaS (cloud).
w Founded in Osaka in 2001.
Became listed on TSE
Mothers in 2014.

w Changed the company nameand logo. New name:YRGLM Inc.

w Its main products are its
originally developed AD
EBiS and EC-CUBE.
(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 (mostly synonymouswith the cloud). Does not needpurchasing of packaged products.
Only the necessary functions,contents, and quantity of service
are used via the Internet and paidfor.

◆ A Leading Company in a Niche Market
Company Overview
YRGLM Inc. (hereinafter referred to as “the Company”) is an emerging
marketing technology company that plans, develops, and sells software
related to Internet advertising and e-commerce.
It has grown through the full-scale development of its business of improving
the efficiency of marketing through originally developed software. The
Company has an extremely high share in the Internet ad measurement tools
market and is the obvious top player in the niche field. Currently, it is working
on the “MXP (Marketing Transformation Platform) Strategy” where it aims
to contribute to the DX of its customers through data integration, analysis,
and utilization.
History
Susumu Iwata, the Company’s president, started a web design business inOsaka as a college student. Following business expansion, he established theCompany in 2001. The Company became listed on TSE Mothers in
September 2014. Currently, it has two headquarters, 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.” It created a new company logo at the same time.
Main Businesses
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 andservices are listed after the colon.)(1) Marketing platform segment: includes AD EBiS, ADPLAN, AdRepo,
Ad-Knowledge, and Advertising Agency Referral Service(2) EC platform segment: EC-CUBE
Consolidated Companies and Trends in Consolidated Financial Results
The YRGLM Group consists of a total of five companies: the Company, twoconsolidated subsidiaries, one nonconsolidated subsidiary, and one equity
method affiliate.
(1) Two Consolidated Subsidiaries
・YRGLM Vietnam Co., Ltd. (Vietnam Socialist Republic. An offshoredevelopment site. Conducts software development outsourced from theCompany. Wholly owned by the Company.)
・ EC-CUBE Co., Ltd. (established in Osaka City in October 2018; theCompany currently owns 100% of its shares): The EC-CUBE business wastransferred from the parent company's EC platform business segment to thissubsidiary in January 2019. It started out as a wholly owned subsidiary, but
5/40This 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)
w Its key consolidated
subsidiary is EC-CUBE Co.,
Ltd. which works on the EC
platform business. In
November, Orico signed abasic agreement to acquire
10% of its shares to form analliance.

Issued: 12/7/2020

in November 2020, a basic agreement was made with Orient Corporation(TSE First Section; securities code 8585; hereinafter “Orico”) to transfer 10%
of its shares to Orico to form a capital alliance.
(2) One Nonconsolidated Subsidiary
・ LOCKON Marketing of U.S.A (established for information-gathering
purposes – a dormant company)(3) One Equity Method Affiliate
・SAI Co., Ltd. (the Company acquired 20% of the shares in September 2015
and transferred its EC contract development business)
The parent company’s sales and profit both used to account for an extremely
high proportion of the total for the entire YRGLM Group. The consolidatedto-parent-company ratios had stayed around 1 and the total recurring
profit/loss of the consolidated companies excluding the parent had been close
to zero (Figure 1).

w Financial performance ofconsolidated companies
other than the parent
company is also improving.

During FY 2019 (note that the Company’s fiscal year is September-ending),
the EC-CUBE business was separated from the Company (parent company)
in a carve-out (became a consolidated subsidiary after the carve-out).
Following this, the balance between the parent company’s results andconsolidated results has changed. Since EC-CUBE Co., Ltd. has been postinga net profit with solid financial performance, the overall financial
performance of the consolidated companies excluding the parent(consolidated minus parent) have been improving too.

[Figure 1] Comparison of Consolidated vs. Parent Company’s Sales and Recurring Profit by Fiscal Year
Unit: million yen, %Consolidated sales
Parent company sales
Consolidated sales - parent
A-B＝C
company sales
Subsidiaries' sales / parent
C/B
company sales
Consolidated sales / parent
A/B
company sales
A
Consolidated R.P.
B
Parent company R.P.
Consolidated R.P. - parent＝
A-B C
company R.P.
Subsidiaries' R.P. / parent
C/B
company R.P.
Consolidated R.P. / parent
A/B
company R.P.
A
B

FY 2014
1,360
1,360

FY 2015
1,437
1,437

FY 2016
1,613
1,613

FY 2017
1,719
1,719

FY 2018
1,804
1,804

FY 2019
2,204
2,010

FY 2020
2,618
2,317

0

0

0

0

0

194

301

0.0%

0.0%

0.0%

0.0%

0.0%

8.8%

11.5%

1.00

1.00

1.00

1.00

1.00

1.10

1.13

234
245

352
359

250
252

106
107

-115
-110

79
19

261
165

-12

-7

-2

-1

-5

60

96

-4.7%

-1.9%

-0.7%

-0.5%

-

315.9%

58.2%

0.95

0.98

0.99

1.00

-

4.16

1.58

(Ref) Prepared by Alpha-Win Research Dept. based on the securities report(Note) Since the decimal places of the values used in this Report have generally been rounded off, they may differ from the values
officially announced by the Company (applies to the rest of this Report). Results have been consolidated starting in FY 2014.

Financial Standing
The Company had stayed debt-free for many years after becoming listed,
but in FY 2018, it raised about Y800 million in short/long-term debt for
future investment. This capital was raised for investment in the developmentof the marketing platform and AI-related fields and for future M&As.
w As of the end of September,its debt balanced out with
its current cash anddeposits.

As of the end of September 2020, its long/short-term debt totaled about
Y1,080 million and its cash and deposits were about Y1,120 million.
Therefore, the Company is essentially mostly debtless. Its total assets wereabout Y2.8 billion and market capitalization was about Y10.8 billion (based
6/40

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: 12/7/2020

on the closing price of Y1,695 on 9/30/2020), both relatively small. However,its equity ratio was 46% and current ratio was 217% so there does not seemto be any issue with its financial standing.
w Goodwill and software
increased in the assets
category. Intangible fixed
assets are about Y830
million in total, but still
smaller than the net assets.

w Has earned a high public
reputation. Chosen as Best
Company in the “BestWorkplaces Ranking” forthe 8th consecutive year fora total of 9 awards.
(3) 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.
w Its main products have also
earned a top-level, highreputation.

Due to the increase in goodwill (from succeeding the AdRepo business andacquiring the ADPLAN business) and software, intangible fixed assets
increased to Y830 million and deferred tax assets increased to Y130 million,
totaling Y960 million. However, since this total is smaller than the
Company’s net assets of Y1.28 billion, there does not seem to be an issue atthis moment.
Awards and Reputation
The Company won the Best Companies Award in the Japan division of the“2020 Best Workplaces Ranking for Medium-Sized Companies (100 to 999
employees)” from the Great Place to WorkⓇ Institute3 Japan (winning anaward for eight years in a row and for a total of nine awards). The Company
has also won various other awards from external organizations in the past.
This high reputation is valuable since it helps attract talents, which are
crucial to the Company’s type of business.
Its products have also earned a high reputation. AD-EBiS won the “High
Performer” award in the “Access Analysis and Attribution” division of the“ITreview Grid Award 2020 Fall” by the IT product review platform“ITreview” (review site for real users of IT products and cloud services
targeting corporations) operated by ITclowd Corp (headquartered in
Minato-ku, Tokyo).
Furthermore, its EC open platform “EC-CUBE” provided through the ECCUBE business, which is the main business of the EC platform segment,
was ranked as “the most used shopping cart system by online stores withmonthly sales of 10 million yen or greater” in a survey on online store
trends conducted in October 2020 by EC&Marketing Co., Ltd.
(headquartered in Minato-ku, Tokyo) (an especially high evaluation since it
won by a large difference from 2nd place – more than 2.5x).

◆ Business Philosophy
w 同社の経営理念

Under its mission, “Impact on the World,” the Company aspires to realize asociety where companies can grow together with society by creating uniquevalues. This philosophy encompasses the Company’s idea that “We shallcontinue to impact to each and every thing that we are involved in, because
the accumulation of small impacts that move people’s heart will eventuallycreate a large momentum that will move the entire world.”
Also, the Company’s vision (for the future) is to “become a company that
supports corporate marketing activities around the world through data andtechnology to bring happiness to both the sellers and the buyers.”

7/40
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: 12/7/2020

2．Business Contents and Business Model◆Providing Originally Developed Marketing Tools via the
Cloud
w A B2B business, providing
originally developed tools(software) via the cloud.
w Has been developing
business based on two
platforms. Had been
focused on the marketing
platform, but business
opportunities are increasing
for the EC platformbusiness too with the EC
market boom.

The Company’s concept is that tools for solving issues efficiently and quickly
will also become necessary in the field of Internet marketing as the population
ages and declines. Based on this concept, the Company has been providing
originally developed, cloud-based software mainly to companies.
The Company's business consists of two segments: (1) the marketing
platform business and (2) the EC platform business. The marketing platformbusiness accounted for about 88.5% of the total sales in the previous fiscal
year and was the growth driver for sales (Figures 2 and 3). The transition in
operating profit for each segment is shown below in Figure 4. Excluding FY2017 and FY 2018, during which business restructuring was conducted, bothsegments have been posting an operating profit for each full fiscal year.

[Figure 2] FY 2020 Sales Breakdown by
Business Segment[Figure 3] Transition in Sales by Business Segment(unit: million yen)
Marketing Platform

EC Platform

301

EC Platform
Business Segment
253

11.5%
539

477

526

883

911

FY 2014

FY 2015

465

666

88.5%

FY 2013

2318

1,951

422

Marketing Platform
Business Segment

275

1,074

FY 2016

1,255

FY 20171,530

FY 2018

FY 2019

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

[Figure 4] Transition in Operating Profit by Business Segment(million yen)

Marketing Platform

250

EC Platform

200
150
100
50
0
-50
-100
-150
FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

FY 2019

FY 2020

8/40
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: 12/7/2020◆ Restructuring and Strengthening of Business Portfolio
w Working on restructuring

its business portfolio.
Concentrating businessresources on AD EBiS of themarketing platformbusiness.

Since FY 2016, the Company has been actively restructuring andstrengthening its business portfolio. It has been increasing its focus on its corebusinesses (shifting to AD EBiS of the marketing platform business) andseparating its non-core businesses (EC platform business) (Figure 5; see thereport issued on 12/13/2019 for details on past restructuring of business).
In the marketing platform business, the Internet advertising effectmeasurement system AD EBiS is especially significant, accounting for about
81% of the total sales. Going forward, the Company plans to concentratebusiness resources on this product and related products to further develop thisbusiness as a growth driver.
Since the second quarter (Q2) of FY 2019, the Company (parent company)
has been primarily focused on the marketing platform business. However,since EC-CUBE was transferred to its consolidated subsidiary, on aconsolidated basis, the Company’s business is still classified into the sametwo segments as before.

[Figure 5] Business Restructuring and Segments
Business Segment(1) Marketing
Platform(2) EC Platform

Main Service① AD EBiS② THREe③ DMP→ Professional Service④ AdRepo⑤ ADPLAN⑥ Advertising Agency Referral Service⑦ Ad-Knowledge① EC-CUBE② SOLUTION → abolished

Business Subcategory

ChangeWithdrew (end of March 2020)
Transferred from SOLUTION; will scale downWill expand AD-EBiS-related software development project
Acquired (August 2018)
Acquired (Jaunary 2018); to be merged with AD EBiSStarted service in May 2020
Started service in July 2020
Transferred to EC-CUBE Co., Ltd., on 1/1/2019; 10% of shares to be sold to Orico

EC Contract Dev.
(DMP)

Transferred to SAI Co., Ltd. (equity method) and Radical Opti Co., Ltd. (later
removed from equity method)
Transferred to SOLUTION

Notes

Parent company

Consolidated
Equity method(Ref) Prepared by Alpha-Win Research Dept. from the Company’s securities report and interview.
(Note) Gray highlight indicates that the Company withdrew from that business. Words in red indicate changes since the previous fiscal year.

(4) 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.
(5) DMP (Data Management
Platform): A method by which a
corporate client can analyze its
own website（注 5）DMP：クライアントである企Changes since the previous fiscal year are the following (the numbers inparentheses and circles match the numbers in the table).
(1) ②Withdrew from the THREe business (operating platform for paidlisting ads4; withdrawal completed at the end of March 2020).
(1) ③ Scaled down the DMP5-related business that was previouslytransferred from the EC platform segment. Is now working on theProfessional Service business where it develops software related to AD EBiS.
(1) ⑤ Acquired the ADPLAN business from OPT, Inc. (consolidated
subsidiary of DIGITAL HOLDINGS [TSE First Section: 2389], previously
called OPT Holding Group; DIGITAL HOLDINGS is hereinafter referred to
as DIGTAL HD) in January 2020 (last fiscal year’s Q2) for Y315 million.
ADPLAN has the second largest share in the market after the Company. Thisbusiness is planned to be gradually merged with AD EBiS. The Company iscurrently in a business alliance with DIGITAL HD.
(1) ⑥Advertising Agency Referral Service: started as a new business in May.
Introduces the most suitable advertising agency to Internet advertisers. It is abusiness model where the Company receives referral fees when a contract isconcluded between the two parties (details on page 14).
9/40

This
Report業 Alpha-Win
が 自 社Company
サ イ トResearch
を分析す(hereinafter
る 手 “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 basedoninformation
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,法。
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: 12/7/2020(1) ⑦Ad-Knowledge: a newly developed, cloud-based project management
system designed for advertising agencies that was started in July. Supports
and streamlines the operation of advertising agencies that use programmatic
advertising6 (details described on page 14). Service is provided based on a
subscription-based business model7 (SaaS).

(6) Programmatic advertising: An
advertising method where
optimization of ads is conducted
automatically or supported
immediately. After submitting anad, optimization is conducted,
leading to better results.

(2) ①10% of the shares of EC-CUBE Co., Ltd. are planned to be acquiredby Orico to form an alliance, through which the Company plans to also
expand the EC platform segment.

(7) Subscription-based businessmodel: A business model whereusers pay for the provided service
based on the duration of use. See
also page 17.

◆ Detailed Business Contents (1) Marketing Platform Business
The transition in the sales and profit of the marketing platform businesssegment by fiscal year is shown below.

[Figure 6] Change in the Sales and Operating Profit of the Marketing Platform Business Segment
Sales(million yen)

FY 2012parentFY 2013parentFY 2014consolidated

FY 2015
consolidated

FY 2016
consolidated

FY 2017
consolidated

FY 2018
consolidated

FY 2019
consolidated

FY 2020
consolidated

Marketing Platform

545

666

883

911

1,074

1,255

1,530

1,951

2,317

➀ AD EBiS

499

567

722

822

1,012

1,200

1,402

1,747

2,127

② THREe

46

81

161

89

62

54

43

28

8

84

51

27

124

149

③ Professional Service (DMP)④ AdRepo⑤ ADPLAN

Not disclosed (acquired in Jan 2020; sales disclosed as a sum of AD EBiS + ADPLAN) ↑3⑥ Advertising Agency Referral Service

3⑦ Ad-Knowledge

Segment's O.P.
Segment's O.P. Margin

-61

-1

142

214

210

153

-121

46

198

-11.2%

-0.1%

16.1%

23.5%

19.5%

12.2%

-7.9%

2.4%

8.6%

(Ref) Prepared by Alpha-Win Research Dept. from the Company’s financial results summary, financial results briefing materials, andinterview. Includes estimates.

The marketing platform segment currently consists of seven businesses: theInternet advertising effect measurement systems ① AD EBiS and ⑤
ADPLAN; ③ Professional Service (including DMP); ④ AdRepo; ⑥Advertising Agency Referral Service; and ⑦Ad-Knowledge.

w The main businesses of themarketing platformsegment are AD EBiS
(originally developed
product) and ADPLAN(acquired). Both are Internet
advertising effectmeasurement systems.
w AD EBiS + ADPLAN
account for about 81% of theCompany’s total sales (FY2020).

①AD EBiS & ⑤ADPLANAD EBiS, the Company’s Proprietary Product
AD EBiS is the Company’s main product (81% of the Company’s total sales).
It was originally 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.

With the increasingly diversified and dispersed consumer behavior of today’s
Internet society, marketing and advertising over the Internet have also
become more sophisticated and complicated, increasing the necessity ofincorporating technology in their operation. The Company offers, at areasonable price, software that can accurately evaluate and leverage the effectof Internet ads through various methods of analysis, including various
functions (ad measurement, analysis, evaluation, etc.). It also provides
complete software support.

10/40
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)
w ADPLAN is planned to bemerged with AD EBiS.

Issued: 12/7/2020

Merging ADPLAN with AD EBiSThe Company has continued with the ADPLAN service after business
transfer. Going forward, the service is planned to be gradually transferred toand merged with AD EBiS to improve the efficiency of system development
and updates. Specific data on ADPLAN’s unit price, number of accounts, andsales are not disclosed. Since the transfer, its results have been disclosed as
the sum of AD EBiS + ADPLAN.
Business Model
AD EBiS and ADPLAN are both provided as SaaS based on a subscriptionbased business model (see page 17 for details).

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

Sales of AD EBiS
Number of
Accounts

×

Average
Unit Price(monthly)w With the transition to the
packaged plan with new
pricing, the unit pricerose significantly.

w AD EBiS’s average unit
price is increasing at a
double-digit rate.
Increased by approx. 2xover the past 5 years.

w Last FY, average unit
price increased by 18%.

It is a business model based on flat-rate, subscription-based pricing where
sales are determined by average unit price × number of active accounts. Bothnumbers are key performance indicators (KPIs) for the two businesses as well
as for the entire company.
Customers
These are B2B businesses. AD EBiS’s main customers include WOWOW,
Lion, MIKI HOUSE, Aiful, Zwei, Z-kai, Yazuya, and Setagaya
Shizenshokuhin. A little more than 100 companies were estimated to be usersof ADPLAN as of the time of its business transfer and many of them werelarge, 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 for reporting, etc.) canbe added to a plan. New contracts have already been transferred to this newprice system, and pricing was changed again after this transfer.
Change in the Average Unit Price
Change in the average unit price at the end of each quarter (as of the end of
the final month of each period) is shown in Figure 7 on page 12. There used
to be a significant seasonal variability between quarters, but since thetransition to the subscription-based business model, an upward and linear
trend has been maintained. The average unit price has been rising for 11
consecutive quarters since Q2 of FY 2018 and has increased by twofold overthe past five years.
From the end of FY 2019 to the end of FY 2020, the monthly average unit
price (average as of the end of the month; the same applies below) changed
from Y107,143 ⇒ Y126,825 (+18.4% or +19,682 yen YoY). The average
unit price increased in the previous fiscal year due to the additional revisionin pricing that was conducted after February 2020, the acquisition of new
customers in the high price range, and the incorporation of ADPLAN(estimated average unit price of about Y170,000). The average unit priceseems to be gradually increasing after October 2020, too.
Number of Active Accounts
On the other hand, based on end-of-the-quarter figures, the number of active
accounts had been consecutively increasing until the end of Q1 of FY 2019
11/40

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)(end of Dec 2018), but then declined after this for three quarters in a row due
to contract cancellations in response to the price revision. However, in last
fiscal year’s Q1, the trend was reversed, and the number of accounts slightly
increased to 1,438 (+13 or +0.9% QoQ). In Q2, the number sharply increased
to 1,543 (+105 or +7.3% QoQ), partly due to the incorporation of contractsof ADPLAN. Then, due to the impact of COVID-19 which caused atemporary suspension of services and contract cancellations, the number ofaccounts decreased to 1,451 in Q4. However, this number is still greater thanin Q4 of FY 2019 (1,425 companies) by 26 companies or 1.8% (Figure 8).
The monthly contract cancellation rate is estimated to be about 2%, and theCompany’s next challenge will be to reduce this rate.

w AD EBiS’s number ofactive accounts had
grown significantly byincorporating ADPLAN.
Then, partly due COVID19, the number fell in a
net decline. The nextchallenge will be to
reduce the contract
cancellation rate
(currently about 2% permonth).

[Figure 7] Change in the Average Unit Price of AD EBiS

[Figure 8] Change in the Number of Active Accounts of

AD EBiS(Y)

ADPLAN acquired

140,000
130,000
120,000
110,000

Average unit price increased by Y19,682 YoY and is now
greater than Y120,000
Expecting price to continue to rise with new customer
acquisition in high price ranges

100,000
90,000126,825

124,032

107,143

120,070

111,587

Change inprice system

Q4→Q1
seasonal
variability(# of accounts)

1,600

⤵

ADPLAN acquired

Change in pricesystem

1,569

1,500

1,518
1,513

1,400

1,425

1,516

1,433

1,543

1,438

1,451

1,464

1,300

1,100

98,042
86,621

1,000

84,91879,52560,000

Number of accounts slightly decreased due to COVID-19

1,200

102,262

80,00070,000Issued: 12/7/2020

900

50,000800
700

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

FY 2016

FY 2017

FY 2018

FY 2019

FY 2020Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FY 2015

FY 2016

FY 2017

FY 2018

FY 2019(Ref) Figures 7-8 were prepared by Alpha-Win Research Dept. based on the financial results briefing materials. After acquisition, ADPLAN’s
numbers are also included in AD EBiS.

w Sluggish progress with thenumber of accounts, but
thanks to the rise in unit
price, sales of AD EBiS
(amount) continued to growat a double-digit rate.

Sales
The rise in unit price and decline in the number of accounts reflect theCompany’s strategy to prioritize high unit price over the number of accounts.
Since Q3 of FY 2018, due to the transfer of existing customers to the newprice system, cancellations of low-priced contracts and contracts made via
sales agencies have increased. However, the rise in the unit price has morethan compensated for the sluggish progress with the number of accounts sothat the sales of AD EBiS have been able to continue to grow each year at a
rate of about 20% YoY (Figure 6 on page 10).
Going forward, the unit price is expected to steadily increase and the numberof active accounts is expected to increase in a slight upward trend due to theacquisition of more new customers in high price ranges and the major update
which will lead to the addition new functions, enhancement of service, andup-selling and cross-selling of products, as well as the greater price leadershipthat is expected to be gained through its extremely high market share.
Consequently, sales are expected to increase at a double-digit growth rate.
Market Share
Since its release in 2004, AD EBiS has been implemented by more than
10,000 users in total and has been maintaining the top share in the domestic
Internet advertising effect measurement 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%
12/40This 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)
w AD EBiS: top share in thedomestic Internet ad effectmeasurement system market
for 5 years in a row.
Exceptionally high share of
65.9%.

Issued: 12/7/2020

in FY 2016, 42.9% in FY 2017, and 44.2% in FY 2018. In FY 2019, an
exceptionally high share of 65.9% (estimate) was achieved thanks to theacquisition of ADPLAN (Figure 9).

[Figure 9] Share of Sales (by amount) of the Internet EffectMeasurement Market by Vendor (prediction for 2019)

YRGLM

65.9％

(Ref) Financial results briefing materials
Source: ITR - “ITR Market View: Mail / Web
Marketing Market 2020” (prediction for 20152019)2019 Estimate

Note: Combined sales of AD EBiS and ADPLAN
acquired from OPT, Inc. in January 2020

w Will conduct a sequential, full
update of AD EBiS starting in
Jan 20201. Plans to strengthen
product and promote sales.
(8) UI: Abbreviation for userinterface. The part directly
accessed by the user.

Major Update of AD EBiSThe Company announced that it will sequentially release a major (full) update
for AD EBiS starting in January 2021. In this full update, the Company plans
for a complete renewal of the UI8 as well as more than 20 additions or
improvements of functions, including an LTV (Customer Lifetime Value)
analysis function specialized for D2C9/subscription-based business models,
and the renewal of the API10 for connecting AD EBiS with external services.
Through this update, users will be able to analyze and utilize data "easier andfaster." To mark this update, the Company also renewed AD EBiS’s productlogo and service design.

(9) D2C (Direct to Consumer):selling directly to consumers(model)By strengthening and enhancing its product, the Company hopes to promotesales through the acquisition of new customers, upselling, and cross-selling.

(10) API (Application
Programming Interface): A
protocol that defines procedures,
data formats, etc., for accessing
and using functions and managed
data of computer programs fromexternal programs.

② THREe
THREe was an operating platform for paid-listing ads that was also 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 to concentrate its business resources on AD EBiS.

w Withdrew from THREe toconcentrate businessresources on AD EBiS.
w Moved the DMP businessfrom the EC platformbusiness segment. Plans towithdraw from thisbusiness.

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

Last fiscal year, DMP only contributed about 1% to the Company’s overallsales. The Company plans to scale down this DMP business in steps andeventually withdraw from it. Currently, for its Professional Service business,
it is working on the development of software related to AD EBiS.
④ AdRepo
In August 2018, the Company acquired AdRepo, an automatic reportgeneration tool for programmatic advertising. It has been developing this
13/40

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)
w AdRepo’s customers are ad
agencies. Automation
technologies enable
automatic creation of reports
for programmatic
advertising. Intends toactively expand thisbusiness to create synergy
with AD EBiS.

Issued: 12/7/2020

business in full scale since the beginning of FY 2019. Annual sales for last
fiscal year were about Y150 million. By acquiring new customers andcreating synergy with AD EBiS, the Company plans to develop andstrengthen this business as its growth business (we estimate that the full-yearsales for this fiscal year will be about Y165 million and the growth rate will
be about 10%). Its domestic market share is third from the top, behind ATOM(SO Technologies, Inc.: wholly-owned subsidiary of SoldOut, Inc [TSE First
Section 6553] and previously called TechLoCo Co., Inc.) and glu (ATALA
LLC: not listed; one of the Company’s partners).
AdRepo is a tool that fully automates the generation of reports by linking withmajor advertising platforms. It is a cloud service that has been developed toreduce the workload of advertising agencies in creating reports for
programmatic ads.

w Started a new service where
it introduces the mostsuitable advertising agency
to Internet advertisers.

w Started Ad-Knowledge, acloud-based project
management system/service
for advertising agencies.
Will support improvement
and streamlining ofoperations of advertising
agencies.

⑥ Advertising Agency Referral Service
In May 2020, the Company released a new service where it introduces themost suitable advertising agencies to Internet advertisers. Based on its
network of more than 300 advertising agencies and unique information, theCompany selects and introduces a candidate agency that suits each advertiser
in a one-stop support system. Through this service, advertisers can efficiently
find an agency with the best matching and improve the performance ofInternet advertising. Advertisers can use the service for free, but the Company
receives a referral fee from the advertising agency that it introduced when acontract is concluded between the two parties.
⑦ Ad-Knowledge
The Company newly developed this cloud-based project management system
for advertising agencies and launched this service in July 2020. Through thisservice, it supports the improvement and streamlining of the operation ofadvertising agencies who work with programmatic advertising.

In Japan, the mainstream for Internet ads is programmatic advertising withflexible control of budget limit, distribution period, and distribution method,and many companies are indeed using this type of advertising. However,since its operation requires expertise, experience, time, and energy,
companies often ask advertising agencies to manage the advertising for them.
Advertising agencies normally manage a wide range of advertising projects
at the same time, though, so project management has been a heavy task forthem, including the management of the timely confirmation and tuning ofadvertising results, progress management, and invoice processing.
Utilizing the know-how gained from its years of experience with the AD
EBiS business, the Company offers Ad-Knowledge as a solution to this issue
and intends to contribute to the customer success of advertising agencies.
Like AD EBiS, this service will be offered as a subscription-based service(SaaS).

14/40
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: 12/7/2020◆ Detailed Business Contents (2) EC Platform Business
Until FY 2018, the EC platform business had been composed of the twodivisions of ①EC-CUBE and ②SOLUTION. Currently, the Company only
works on the EC-CUBE business (Figure 10).

[Figure 10] Change in the Sales and Operating Profit of the EC Platform Business Segment
Sales(million yen)

FY 2012parentFY 2013parentFY 2014consolidated

FY 2015
consolidated

FY 2016
consolidated

FY 2017
consolidated

FY 2018
consolidated

FY 2019
consolidated

FY 2020
consolidated

EC Platform

323

422

477

526

539

465

275

253

300

➀EC-CUBE

150

207

245

230

219

208

254

253

300

②SOLUTION

174

214

232

296

319

257

20

0

0

104

(DMP)

98

75

107

136

38

-60

22

39

78

30.5%

17.8%

22.5%

25.8%

7.1%

-12.9%

8.2%

15.4%

26.1%

Segment's O.P.
Segment's O.P. Margin(Ref) Prepared by Alpha-Win Research Dept. from the Company’s securities report, financial results summary, financial results briefing
materials, and interview. Includes estimates.

w EC-CUBE will now be theEC platform segment’s
single main business.
w EC-CUBE also has the top
share in the domestic
market.
(11) Open source software: The
source code, which is basically the
blueprint for software, is madeavailable free of charge, letting
anyone revise and redistribute it.
(12) 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 is
operated by EC-CUBE Co.,
Ltd., the Company’s
consolidated subsidiary.
w Orico is expected to invest
in EC-CUBE Co., Ltd. toform an alliance. Plans totake in DX-related demand
to expand business.

① EC-CUBE
EC-CUBE is an open source software11 platform whereby users can create
and operate EC (e-commerce) websites on their own. The Company provides
EC-CUBE as free packaged software for web design to companies that will
begin selling and providing products and services online. Characterized bylow cost, high customization, and user-friendly interface, it has the largest
share in the domestic market and has become the standard platform.
EC-CUBE Co., Ltd. has set up a Freemium Model12 where it offers thesoftware for free but in return earns revenue from peripheral services.
Specifically, it makes profit through royalties received from its official
partners working on Internet businesses using this platform (payment
agencies, hosting businesses, etc.), function-addition fee for plug-ins(programs to add functions to software), and revenue from sellingcommercial licenses.
The EC-CUBE business had been transferred to EC-CUBE Co., Ltd., which
was a wholly owned consolidated subsidiary, on January 1, 2019, as part of
the YRGLM Group’s business restructuring. However, since EC-CUBE Co.,
Ltd. is a fully consolidated subsidiary, there has been no impact on the
consolidated financial results.
The development of the new version “EC-CUBE4” has been completed andwas released in October 2018. Its cloud version “ec-cube.co” was also
released in February 2019. With the expansion of the EC market and increasein payment agency fees, etc., financial performance has been improving at asolid pace.
In November 2011, Orico signed a basic agreement to invest in 10% of ECCUBE Co., Ltd.’s shares (Y155 million) to form an alliance. Going forward,
the Company plans to expand this business by supporting Orico’s members(830,000 stores) start e-commerce.
Through this alliance, the Company intends to utilize Orico's customer
network and sales force to cultivate new customers and expand business. In
addition, it plans to promote the sales of the cloud version of EC-CUBE or
15/40

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)(13) Government’s executive
adviser for CIO: executive adviser
for the Deputy Chief Cabinet
Secretary for Information
Technology Policy (previously
called Chief Information Officer
or CIO). Assigned with the task ofproviding support and advise to
the Deputy Chief Cabinet
Secretary for Information
Technology Policy and theInformation System Coordination
Division of the cabinet’s IT
Strategy Headquarters as part of
the Japanese government’s Egovernment development plan.
An external, independent, andneutral specialist with expertise in
relevant fields.

w The SOLUTION business(EC contract development)
has been transferred toequity-method affiliates.

Issued: 12/7/2020"ec-cube.co" through Orico and shift the business model from open-source
software (free basic functions) to cloud-based SaaS (fee-charging).
For Orico, this alliance will allow it to effectively take in the rising EC
demand caused by the stay-at-home trend and thereby increase revenue fromshopping settlement fees, etc. Therefore, this alliance seems to be a win-win
situation for both companies.
Also, EC-CUBE Co., Ltd. appointed Toshihiro Ichitani, the government’s
executive adviser for CIO13, as its DX promotion adviser, and plans to workon supporting companies throughout Japan with “DX with a focus on EC”
using EC-CUBE.
The Company also plans to expand its EC platform segment in generalthrough strategies including alliances with other companies.
Also, as described in page 7, EC-CUBE has earned a high score in an online
store trend survey. In the EC platform market (packaged software fordevelopment of EC websites), the following companies seem to be its
competitors among listed companies (in the order of product/service name,operating company or group, market, and securities code).
・BASE: BASE, TSE Mothers, 4477
・ecbeing: SOFT CREATE HD, TSE First Section, 3371
・Commerce21: Estore, JASDAQ, 4304
・ebisumart: Interfactory, TSE Mothers, 4057
・futureshop: Commerce One Holdings, TSE Mothers, 4496

② Former SOLUTION businessAlthough the SOLUTION business had been composed of a few businesses,with the restructuring of business, its main EC contract development businesshad been transferred to affiliated companies that the Company owned 20% of
shares each (reflected in non-operating profit/loss as profit or loss accounted
for by the equity method). This business is no longer among the segmentsthat are reflected in the consolidated sales.

16/40
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: 12/7/2020◆ Subscription-Based Business Model
Overview
The marketing platform business, which accounts for approximately 90% of
the Company's total sales, is almost entirely based (98.6%) on the SaaS
(cloud), flat-rate billing model (subscription model). In the subscriptionbased business model, users pay a predetermined, packaged price for theservice contents or the use of system services such as AD EBiS during acertain contract period, enabling continuously generation of revenue until thecontract becomes cancelled.

w The subscription-based
business model enables
continuous and stable
generation of profit bycharging fees for every
certain period of use.

Although expenses will precede at the beginning of a new contract, including
marketing and sales expenses for customer acquisition and R&D expenses,
over a customer’s lifetime (the period from the start to the end of transaction
with a customer), revenue is accumulated continuously, increasing thecustomer lifetime value (LTV: how much cumulative profit is generated
within a customer’s lifetime). Therefore, it is a business model that enables
stable growth.

w Initial costs are incurred
immediately after new
contracts are made but aregradually offset over thecourse of time, so that profit
begins to accumulate
steadily.

Change in the LTV (cumulative profit/loss) per Customer
Figure 11 shows the model for the change in the Company's cumulative profit
and loss over the average subscription contract period of three years.
In the month that a new contract is made, all expenses become recorded, sothat an overall loss is recorded for that particular month. However, since theCompany can then earn an almost fixed amount of sales revenue every monthstarting in the first month of contract, the cumulative break-even point (zero)is reached after eight months. From the ninth month, the cumulative
profit/loss (LTV) turns into a surplus and profit accumulates until the 36thmonth when cancellation is expected. In other words, it is a model with a timelag; when the number of contracts is increasing at an accelerating speed, there
will be little contribution to profit in the first year, but profit will thenaccumulate on a continual and stable basis from the second year until the endof contract.
The Company estimates the upper limit of the initial cost to be about 30% of
the LTV (the final cumulative profit; the rightmost end of the graph in Figure11) and controls the initial cost related to new contract acquisitions
accordingly.

[Figure 11] Model of the Change in LTV per Customer (cumulative profit and loss)

LTV

 for
 Change


Model
in LTVper
Customer

1

2

3

4

5

6

7

8

9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

Time
Second year

First year

Investment phase
Expenses for customer
acquisition precede

Third year

Return phase

After investment payback, profit steadily accumulates over thelong term(Ref) Financial results briefing materials

17/40
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: 12/7/2020

3． Shareholder Composition◆ Change in Composition by Shareholder Typew Individuals hold anextremely high proportionof shares: about 83%.

Regarding shareholder composition by shareholder type as of the end of
September 2020 (Figure 12), compared to one year ago, the proportion of“individuals, etc.” has slightly increased from about 81% to about 83% of thetotal and similarly “financial instruments business operators” has also
increased from a little less than 2% to about 4.5%. Meanwhile, “financial
institutions, etc.” has decreased from about 9% to about 8% and “overseas
corporate entities, etc.” too has decreased from 6% to a little less than 3%.

[Figure 12] Change in Shareholder Composition by Shareholder Type (unit = %)
(%)

100
95
90
85

Individuals, etc.

80~

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

FY 2019

FY 2020

10
9
8
7
6
5
4
3
2
1
0

Financial
institu tion s, etc.
Overseas corporate
entities, etc.
Other corporate
entities
Financial
instruments business
operators
FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

FY 2019

FY 2020(at year-end)(Ref) Prepared by Alpha-Win Research Dept. based on the Company’s securities report, etc.

◆ Major Shareholder Composition
w No significant changes tothe major shareholders.
Parties affiliated with theCompany (former andpresent executive officers
plus the employee stock
ownership plan) possess
about 60% of all shares intotal.

The major shareholders as of the end of September 2020 are shown in Figure
13 on page 19. The following is supplementary information. Compared withpast periods, the major shareholders have generally not significantly changed.
・The largest shareholder owning greater than 40% of the shares is Susumu
Iwata, the current president, founder, and owner.
・The second and third largest shareholders are both former executive officersof the Company (they have been gradually selling their shares). The sharesof the former and present executive officers of the Company, plus theemployee stock ownership plan at seventh place, amount to greater than
60% of the total shares.
・The fourth and the fifth largest shareholders are the Custody Bank of Japan.
Its final investors are unknown since it is a custodian (financial institutionthat manages securities on behalf of investors), but it has been owning theCompany’s shares since when it used to be trust banks. The Custody Bankof Japan was founded in July 2020 through the merger of the threecompanies JTC Holdings, Japan Trustee Services Bank, and Trust &Custody Services Bank. It is now the largest bank specialized in asset
management.
18/40

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)

w Also invested by several
investment trusts

Issued: 12/7/2020

According to the Report of Possession of Large Volume (the “5%-rule”
report) submitted on July 31, 2019, 328.4 thousand shares (5.15% of
outstanding shares) were mainly incorporated in the “MHAM Emerging
Growth Stock Open” portfolio (also called “J-Frontier”) managed by AssetManagement One (hereinafter, “AMO”). Some of those shares were latersold and the portfolio had 246.2 thousand shares (3.9% of outstanding
shares) as of February 25, 2020.
The Company’s stock is also incorporated in the “Japan Emerging Equity
Open” managed by Nikko Asset Management and “The 2020 Vision”
managed by Commons Asset Management (as of 12/18/2019, 103.5 thousand
shares and 47.3 thousand shares were owned, respectively). These
investments are most likely being conducted under the names of custodiansthat are among the major shareholders, although this cannot be confirmed.
・The nineth largest shareholder is Hakuhodo DT Media Partners Inc., theCompany’s sales agency.
・The investment purposes of UEDA YAGI TANSHI Co., Ltd., au Kabucom
Securities, and Mitsubishi UFJ Morgan Stanley Securities are unknown.
・Currently, there seems to be no obvious activist-like behavior among theinvestors.

w Treasury shares are about
1% of all outstanding
shares.

At the end of September 2018, the number of treasury shares owned by
the Company was 983 shares. Then, the Company bought back some ofits shares in February and March of 2019 (a total of about Y100 million
at an average stock price of Y1,363), increasing its treasury shares toabout 81.4 thousand shares by the end of September 2019. Following this,the Company used 22.7 thousand treasury shares as transfer-limited, stockbased compensation for its executives and employees. Therefore, as of theend of September 2020, it owned about 64.5 thousand treasury shares (about
1% of all outstanding shares). For the remainder, the Company intends to usethem for M&A and alliance strategies as well as stock-based compensation
for its executives and employees.

[Figure 13] Current Major Shareholders
Susumu Iwata (president and CEO)Hiroichi Fukuda (former executive vice president)
Kanako Mataza (former director and senior executive officer)
Custody Bank of Japan (trust account)
Custody Bank of Japan (securities investment trust account)
UEDA YAGI TANSHI Co., Ltd.
YRGLM Employee Stock Ownership Planau Kabucom Securities
Hakuhodo DY Media Partners Inc.
Mitsubishi UFJ Morgan Stanley Securities
Japan Trustee Services Bank (former name)
BNY GCM CLIENT ACCOUNT JPRD AC ISG (FE-AC)
SBI SECURITIES Co., Ltd.
Trust & Custody Services Bank (former name)
Rakuten Securities, 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: thousands of shares)(Ratio of treasury shares over all issued 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
―
―
―
39
―
60
―
59
―
―
―
―
―
―
―
―
―
29
―
―
62
36
35
―
―
0

2,817
1,021
352
―
―
―
48
―
60
―
―
60
―
60
―
―
―
28
―
―
29
28
24
―
―
―
―
―
0.045
0.00%

End of Sept.
2018

2,819
961
354
―
―
―
69
―
60
―
60
―
―
29
72
―
―
―
52
29
―
―
―
―
―
―
―
―
0.983
0.02%

End of Sept.
2019

2,822
801
353
―
―
―
68
―
60
―
333
―
―
123
64
284
113
―
―
―
―
―
―
―
―
―
―
―
81
1.28%

End of Sept.
2020

2,825
781
352
221
169
86
71
62
60
58

←Shareholding %

44.7
12.3
5.5
3.4
2.6
1.3
1.1
0.9
0.9
0.9

←Ranking

1
2
3
4
5
6
7
8
9
10

64
1.01%

(Ref) Prepared by Alpha-Win Research Dept. based on materials including the securities report. Words in red indicate groups and individuals
affiliated with the Company.

19/40
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: 12/7/2020

4． ESG◆ Environment
Company’s business is not the kind that harms the environment. It aims toconserve energy by saving electricity, etc.

◆ Society
The Company’s business contributes to improved operation efficiency andbusiness expansion of its users through its Internet marketing tools.
Social Initiatives
As measures against the COVID-19 crisis, the Company has set up a working
environment where its employees can incorporate remote work, so that it canensure safety and smooth operations. Currently, most of its business activities
are conducted and continued online.
w Actively engaged in CSR.
Supporting future
entrepreneurs, nextgeneration humanresources development, andwomen working in thetechnology industry.

The Company has been actively engaged in CSR (corporate social
responsibility) and has been undertaking the following social initiatives.
・Osaka to the World, an initiative for the development of the local regions:
Osaka Startups – providing a support program for startup companies basedin Osaka and for those aiming to start a company in Osaka.
・Promotion of Women's Active Participation in Society: supporting theimprovement of the status of women working in the technology industry
based on the philosophy of Girls in Tech (Japan branch of the nonprofit
organization launched in 2007 in San Francisco, USA).
・Next-Generation Human Resources Development: providing opportunities
for students to learn the programming skills necessary for leading-edge
technologies through actual job experience in order to foster a young
generation of talents.

◆ Governance
The Company has adopted a company system with an audit and supervisorycommittee and delegates Board decisions on executions of important businessmatters to directors to enable quick decision-making. Also, by incorporating
an executive officer system and separating business execution fromsupervision, the Company aims to improve management efficiency and speed.
w Plans to increase thenumber of directors tostrengthen its business
management structure

A proposal to appoint its current Executive Officer and General Manager ofBusiness Administration Division as a new director is expected to be passed
upon a resolution at the general shareholders’ meeting (in December). Thisappointment is aimed at strengthening the Company’s management structure
and will increase the number of directors by one to a total of six directors. Of
the six directors, three are outside directors who are also audit andsupervisory committee members (from Kobe Steel, Ltd. and MUFJ Bank,
Ltd.; certified public accountants). There is currently no woman among thedirectors or executive officers.
As an incentive, the Company has a program where shares are allotted todirectors (including directors who are audit and supervisory committee
members), executive officers, employees, etc., as transfer-limited, stockbased compensation.
The Company has not adopted any anti-takeover measures.
20/40This 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: 12/7/2020

5． History of Growth◆ Transition in Past Financial Results
w Developed and launchedunique products that can bedifferentiated from othercompanies. Has grown
rapidly by predicting andmeeting the needs ofsociety ahead of others. Alltime highs are being
consecutively achieved
every year for sales.

Sales
From FY 2010 to FY 2013, during which account settlement wasnonconsolidated, the Company increased sales for four consecutive fiscal
years. Since FY 2014, when consolidated account settlement began, theCompany has been achieving record-high sales consecutively for six fiscal
years through FY 2020 (the available disclosure materials indicate that sales
have been hitting record highs for at least 10 consecutive fiscal years). During
this period, sales increased by about 3.6x from about Y730 million to about
Y2,618 million.
The Company has achieved rapid growth by developing unique products thatcan be differentiated from other companies and by predicting and meetingthe needs of society ahead of other. This consecutive record highs in sales
were brought by the rapid expansion of the marketing platform’s AD EBiS
business as well as the steady growth of the EC platform including the ECCUBE and SOLUTION businesses.

w In FY 2015, record-highprofit was recorded.

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 FY 2019, posted an
operating profit andrecurring profit in aturnaround thanks to thelarge sales growth. In FY
2020, profit and sales grew
again, net profit was posted
in a turnaround with nolonger any extraordinary
loss, and dividend wasresumed.

ProfitRegarding 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
active business restructuring and upfront investment has increased theexpenses, leading to a consecutive decline in profit despite increasing sales.
In FY 2018, the Company recorded a net loss (of Y88 million) for the firsttime since becoming listed on the market due to upfront investments mainly
to hire more employees for development and sales (see Figures 14 and 15).
In FY 2019 (the fiscal year before the previous), thanks to the structuralreform and the sales growth of the core product AD EBiS of the marketing
platform business from increased average unit price, the Company posted
both an operating profit and a recurring profit for the full year in a turnaround.
In FY 2020 (last fiscal year), sales and profit grew for the consecutive fiscal
year, carried-forward loss was eliminated, and dividend payment was
resumed. Detailed results of FY 2020 will be described later (page 25).

[Figure 15] Change in the Number of Employees[Figure 14] Transition in Past Financial Resultsand Forecast (unit: million yen, %)3,800

Sales (left axis: million yen)

Recurring profit (left axis: million yen)(unit: persons)
30.0%

Recurring margin (right axis: %)
3,300

25.0%

2,800

20.0%

2,300

15.0%

1,800

10.0%

1,300

5.0%

800

0.0%

300

-5.0%

-200

-10.0%FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
E
E

(Ref) Prepared by Alpha-Win Research Dept. from the Company’s financial resultssummary. E: Alpha-Win’s forecast.
(Note) Consolidated results starting in FY 2014; nonconsolidated prior to this point.

Development

S&M

SupportAdministration

172

New business developmen t

144
98
71

68
11
8
14

11
10
12

35

38

FY 2014

FY 2015

13
15
14

12

151

25

21

122

20

18
15

21

29

36

29

35

34

25

56

64

74

66

65

FY 2016

FY 2017

FY 2018

FY 2019

FY 2020(Ref) Prepared by Alpha-Win Research Dept. from the Company’s
financial results briefing materials

21/40
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: 12/7/2020

6． Market Environment◆ Trends of 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, was 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 entire 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 16).

w Internet advertisingexpenditure grew by about
5.6x from 2005 to 2019. The
average annual growth rate
(simple average) is about
13.3%. Surpassed TV
advertising as the largest
advertising media.

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
for six 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 for the first time after
surpassing the share of television (27%), which is the largest among thefour mass-media advertising (newspaper, magazine, radio, and television).

[Figure 16] Change in Advertising Expenditure by Medium(index: the year 2005 has been set to 100)
600%

（％）

1200

Internet ads

550%[Figure 17] Change in Monthly Sales of Internet Ads(100 million yen)

30
25

The four mass media

500%

Total advertising expenditure

450%

Sales promotion

1000

20
15

800

400%

10

350%

5
600

300%

0

250%

-5

400

200%
150%

Internet sales (left axis)
YoY growth (right axis)
YoY decline (right axis)

200

-10
-15

100%

-20

50%
0%
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

11月
1月
Jan
3月
Mar
5月
May
Jul
7月
Sep
9月
Nov
11月
1月
Jan
3月
Mar
5月
May
Jul
7月
Sep
9月
Nov
11月
1月
Jan
3月
Mar
5月
May
Jul
7月
Sep
9月
Nov
11月
1月
Jan
3月
Mar
5月
May
Jul
7月
Sep
9月
Nov
11月
1月
Jan
3月
Mar
5月
May
Jul
7月
Sep
9月
Nov
11月
1月
Jan
3月
Mar
5月
May
Jul
7月
Sep
9月
Nov
11月
1月
Jan
3月
Mar
5月
May
Jul
7月
Sep
9月

1月

-25
Jan
3月
Mar
5月
May
Jul
7月
Sep
9月
Nov

0

2013年
2013

2014年
2014

2015年
2015

2016年
2016

2017年
2017

2018年
2018

2019年
2019

(Ref) Figure 16: prepared by Alpha-Win Research Dept. from Dentsu Inc.’s “2019 Advertising Expenditures in Japan” (published every February).
Figure 17: prepared by Alpha-Win Research Dept. from the “Survey of Selected Service Industries” by the Ministry of Economy, Trade, and Industry.

w In the Internet advertisingmarket, there has recently
been a negative trend, but
the situation is gradually
starting to improve.
w Internet advertising is
expected to grow at a
double-digit rate again overthe medium to long term.

Current Situation
Although EC-related demand has increased with the stay-at-home trend, the
COVID-19 crisis had caused the Internet advertising market as a whole toshrink on a year-on-year comparison (based on the sales of the advertisingindustry announced by the Ministry of Economy, Trade, and Industry).
However, the rate of decline has recently started to improve, gradually
starting to show signs of recovery (Figure 17). Since Internet usage ispredicted to expand in the future with the development of technology, oncethe society becomes adapted to the new normal, Internet advertisingexpenditure will likely continue to grow again at a double-digit rate.
22/40

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.

2020年
2020

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

Issued: 12/7/2020◆ Competitors
There seems to be no similar Japanese listed company that could be directlycompared with the Company. Its biggest rival product used to be ADPLAN(total number of user accounts back then was estimated to be about 10% of
the Company’s) of the listed company DIGITAL HD (previously OPT), but
the Company has already acquired this business and has become the top
player in the market with an extremely large share (Figure 9 on page 13).
Therefore, the Company no longer has a major competitor with a similar
service price range and has gained a greater price advantage and greater
appeal toward potential customers.

w No competitor among major
corporations with a similar
service price range. Gained
greater competitive advantage
through business acquisition.

For advertising effect measurement and analysis tools, competing and similar
products are Google Analytics14 and Adobe Analytics15 widely used bydomestic SMEs (small/medium-sized enterprises) and Web Antenna(implemented by more than 600 companies, including major companies aswell as ventures) provided by the private company beBit, Inc. However, theseother companies are not specialized in the field, and their products’ function,measurement target, analysis content, and support system are limited. In
comparison, the Company's products are superior in terms of specifications,development system, and support system, giving it a high competitive
advantage.

(14) 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 belong
to a high price zone.
(15) Adobe Analytics: An accessanalysis tool used by many large
websites. It can analyze
complicated and large data, ishighly customizable, and has
multiple and high-quality
functions, but the price is rather
high.

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).

w The Company can becompared with the US-based
company HubSpot, Inc.,
which has rapidly grownthrough a similar
subscription-based model.

Also, although it is not a competitor, the US-based company HubSpot, Inc.
(NYSE: HUBS) is also a listed company with a similar subscription-based
business model. HUBS is a company that develops marketing software andglobally provides marketing platforms that include functions such as sales
management, CRM, analysis, and reporting. It is a rapidly expanding
company. Although it has been consecutively posting a net loss due to upfront
investment costs, over the course of time, sales have been sharply increasing
and profit/loss margins have been improving significantly. Since its listing in
October 2014, its stock price has increased by 13x in anticipation of strong
business performance (as of November 27). During this period, its stock priceoutperformed SP500 and NASDAQ COMPUTER INDEX by about 1,128%
and 956%, respectively. The rapid growth and high reputation of the US
company HUBS, who started the cloud and subscription model ahead of theCompany, will be helpful in analyzing the Company’s prospects.

[Figure 18] Change in HubSpot, Inc.’s Financial Results (1)(USD 1 million)[Figure 19] Change in HubSpot, Inc.’s Financial Results (2)

0.0%

700

-10.0%

90.0%

600-20.0%

80.0%

500-30.0%

400-40.0%

300-50.0%

200-60.0%

100-70.0%

0-80.0%-100-90.0%FY 2010

FY 2011

FY 2012

Sales (left axis)

FY 2013

FY 2014

FY 2015

Operating Profit (left axis)

FY 2016

FY 2017

FY 2018

FY 2019

Operating Margin (right axis)(# of customer:
companies or persons)(ratios)

800

100.0%

80,00070,00060,00070.0%

50,000

60.0%
50.0%

40,00040.0%

30,00030.0%
20,00020.0%

10,000

10.0%
0.0%

0
FY 2010

FY 2011

FY 2012FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

FY 2019

Number of customers (right axis)

Sales & marketing expenses ratio (left axis)

R&D expense ratio (left axis)

General and administrative expenses ratio (left axis)

Gross margin (left axis)(Ref) Prepared by Alpha-Win Research Dept. based on HUBS’s financial results materials

23/40
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)
w Global trend of tightening
regulations on personal
information protection(16) ITP (Intelligent Tracking
Prevention)： A function that
restricts the use of cookies after acertain time for advertisements
known as targeting ads that use
browser cookies.
w With law revision, Japan also
moved toward tighter
personal info protection.
Consent by individuals has
become necessary when using
cookies.
(17) IP address: An identification
number assigned to each computeror communication device connected
to a network such as the Internet.
(18) Cookie: A code created on the
web browser side when browsing a
website. Temporarily stored andused mainly for website user
identification. The website visit
history and content browsing status
can be identified. It is widely used inInternet marketing services such as
personalized advertisement display
and web-based services.
（19）Third-party cookie: A
classification of cookies issued by thecookie issuer. Cookies issued by thedomain (website) visited by the user
(domain-specific) are first-party, andcookies issued by other third parties(domain-crossing) are third-party.
First-party cookies have theadvantages of being able to perform
tracking and effect measurementswith high accuracy and being lesslikely to be blocked by the user, butthey place a substantial load on thewebsite. On the other hand, thirdparty cookies can be issued acrossmultiple websites but raise concerns
over privacy protection and areeasily blocked by users, and accurate
measurement of effects of Internet
ads using these cookies is becoming
difficult due to restrictions.
w As a specialized company
with high technologicalexpertise, the tighter privacy
protection regulation is abusiness opportunity for theCompany.

Issued: 12/7/2020◆ Impact of Strengthened Personal Information Protection
on Advertising Effect Measurement
BackgroundIn response to the strengthening of the General Data Protection Regulation(GDPR) in the European Union (EU), regulations regarding the handling ofdata on personal information are becoming strengthened and tightened
globally from the viewpoint of privacy protection.
Details and Impact of the Tightening of Regulation Relevant to the Company
Specifically, for instance, Apple added the Intelligent Tracking Prevention16(hereinafter, “ITP”), a tracking prevention function, to its Safari browser(especially on iOS 14 and later versions with restrictions on using IDFA for
device identification). Browser companies are increasingly moving toward
limiting tracking using cookies by means such as ITP, since data such as IP
addresses17 and cookies18 have become regarded as personal information
when collecting data on user behavior on the web (currently, other browsers
such as Google Chrome and Internet Explorer have not been changed or
impacted).
Due to these new restrictions, advertising-related companies that conduct
cross-site tracking to collect and track information across multiple domains
will be negatively impacted. For instance, they may not be able to display
retargeting ads (ads targeting visitors to the website) or may encounter issues
in measuring advertising effects.
Response
In response to Japan’s tightening of the Personal Information Protection Law,
the Company began providing CNAME Tracking, a new measurement
method for AD EBiS that does not use third party cookies19. By around the
middle of this January, three months following its release, more than 300
companies have installed it. The Company has also announced a privacy
statement and declared its commitment to users and the society to comply
with and prioritize information protection and ensure reliability and safety.
Impact on the Company’s Business
If the user does not consent to the collection or use of personal information,
the quantity and quality of the collected data may be affected and the accuracyof effect measurement may decrease. However, since it is hard to imagine
advertisement without any measurement of its effects, we expect that there
will still be high demand for the measurement of advertising effects based on
available data. Regulations on information protection are expected to befurther tightened, increasing the demand for a highly accurate advertising
effect measurement that makes consideration for user privacy. At the sametime, increasingly sophisticated technological expertise is also expected to
become required. Since the Company has a specialized and industry-leading
technology development capability and support system, it can differentiate
itself from other companies that will face difficulties in catching up withtechnology (there are assumed to be many companies that will not be able toeffectively respond to the changes, including competitors, advertising
agencies, and potential users). Therefore, the tighter regulations will raise theCompany’s competitive advantage and can be seen as a business opportunity
for the Company.

24/40
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: 12/7/2020

7．Last Fiscal Year’s Results and Forecast forThis Fiscal Year
◆ Financial Results for FY 2020 (last fiscal year)
Summary
Consolidated financial results for FY 2020 (October 2019 - September 2020)
were as follows: sales of Y2,618 million (+18.8% YoY), operating profit of
Y276 million (+226.1% YoY), and net profit of Y184 million (net loss of
Y34 million in the fiscal year before the previous). Both sales and profits had
increased significantly. Sales of both platform segments increased by 18.8%
YoY and overall sales reached a record high for the consecutive fiscal year.
Gross margin deteriorated by 0.8 percentage point from 70.8% in the fiscal
year before the previous to 70.0% in the previous fiscal year, but the ratio of
SG&A expenses to sales improved significantly from 66.9% to 59.4%,
improving operating margin by 6.7 percentage points from 3.9% to 10.6%(Figure 20). SG&A expenses increased by only Y46 million or +5.4% YoY,
far lower than the rate of increase in sales. The Company had posted an
operating profit of Y85 million in FY 2019 in a turnaround, but this year’s
operating profit grew significantly to about 3x that amount. In the previous
fiscal year, there was no extraordinary loss such as litigation-related loss andloss on retirement of fixed assets, and a net profit was posted in a turnaround.

w Last FY, sales and profit
grew, and sales reached arecord high for anotherconsecutive year. SG&A
expenses ratio significantly
improved and operating
profit grew by a little
greater than 3x YoY.
w With no more extraordinary
loss, a net profit wasachieved in a turnaround.

Progress
The Company announced its full-year forecast at same time as its
announcement of Q1 results on February 7, 2020. Compared to this forecast,sales fell short by Y82 million (-3.0%), while operating profit was Y76
million or 38.0% greater (Figure 21). Although dividend was still
undetermined at that point, it announced in August that it will resume
dividend payment (annual dividend of Y3.8 per share), and eventually
increased it to Y4.0.

w Sales fell short of plan.
Profit and dividend
exceeded the Company’s
forecast as well as AlphaWin’s forecast. Dividend
was resumed for the 1sttime in 3 years.

We had made a more conservative forecast for sales compared to theCompany and had expected sales to be Y2,630 million, which came out to beabout the same as the actual results (Y2,618 million). On the other hand,
although we had expected operating profit to be Y235 million, which was
greater than the Company’s forecast, the actual result was higher (Y276
million). In the last three fiscal years, sales have tended to be revised
downward while profit has tended to be revised upward compared to theCompany’s forecast.

[Figure 20] Transition in Margins and Ratios[Figure 21] Transition in Results over the Past Six
Fiscal Years and Comparison with Forecast(unit: %)Gross margin

（％）

80.0
70.0

63.8

66.5

O.P. margin
64.7

40.0
30.0
20.0

59.9
45.4
18.3

SG&A expenses ratio

65.3

60.0
50.0

Sales
FY
FY 2015

71.4
65.9

70.8
66.9

49.3

70.0

FY 2016

59.4

FY 201742.1
24.4

FY 2018

15.4
5.4

10.0

3.9

10.6

-5.5

0.0
-10.0
FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

FY 2019

FY 2019

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

FY 2020

Date of forecast announcement
11/10/2014
Actual result (million yen)
Difference (%)
Difference (million yen)
5/12/2016
Actual result (million yen)
Difference (%)
Difference (million yen)
5/9/2017
Actual result (million yen)
Difference (%)
Difference (million yen)
2/6/2018
Actual result (million yen)
Difference (%)
Difference (million yen)
5/8/2019
Actual result (million yen)
Difference (%)
Difference (million yen)
Initial forecast: 2/7/2020
Actual result (million yen)
Difference (%)
Difference (million yen)

1,545
1,437
-7.0
-108
1,600
1,612
0.75
12
1,650 to 1,700
1,719
1.1 to 4.2
19 to 69
1,800
1,804
0.2
4
2,250 to 2,350
2,204-6.2 to -2.0
-146.0 to -46.0
3,000 →2,700
2,618
-3.0
-82

O.P.
(Amount or %)
350
350
0.0
0
200
247
23.5
47
10 to10092-8.0 to 820.0-8.0 to 820.0
-150
-98
52
0 to 5085∞ to 70.0
35 to 85
200
276
38.0
76

R.P.

N.P.
350
352
0.6
2
201
250
24.4
49
106
-115

203
230
13.3
27
130
168
29.2
38
72
-88

79

-35

190
261
37.4
71

130
183
40.8
53

25/40
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: 12/7/2020

Result by Segment: Marketing Platform
By business segment, sales of the marketing platform business segment
increased by Y367 million from Y1,951 million in the fiscal year before theprevious to Y2,317 million in the previous fiscal year. This increase accounts
for 89% of the Company’s total sales growth. Operating profit increased by
Y152 million from Y46 million to Y198 million, accounting for 79% of thetotal increase in profit (Figure 22).

[Figure 22] Transition in Financial Results by Segment(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 2014Amount/%
1,360
883
477
867
63.8%
618
45.4%
249
142
107
18.3%
16.1%
22.5%
234
138

FY 2015
Amount/%
1,437
911
526
956
66.5%
606
42.1%
350
214
136
24.4%
23.5%
25.8%
352
231

FY 2016
Amount/%
1,613
1,074
539
1,044
64.7%
796
49.3%
248
210
38
15.4%
19.5%
7.1%
250
169

FY 2017
Amount/%
1,719
1,255
465
1,123
65.3%
1,030
59.9%
93
153
-60
5.4%
12.2%
-12.9%
106
73

FY 2018
Amount/%
1,805
1,530
274
1,190
65.9%
1,289
71.4%
-98
-121
22
-5.5%
-7.9%
8.2%
-115
-89

FY 2019
Amount/%
2,204
1,951
253
1,561
70.8%
1,476
66.9%
85
46
39
3.9%
2.4%
15.4%
79
-35

FY 2020
Amount/%% Change / Diff.
2,619
18.8%
2,318
18.8%
301
18.8%
1,832
17.4%
70.0%
-0.8%
1,555
5.4%
59.4%
-7.6%
277
199
331.1%
78
101.6%
10.6%
6.7%
8.6%
6.2%
26.1%
10.7%
261
230.5%
183
To profit(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary

Operating margin of this business segment also improved from 2.4% to 8.6%
thanks to its highly profitable, core business AD EBiS (& ADPLAN; thesame applies below).
The annual average for the number of accounts of AD EBiS decreasedslightly partly due to the impact of COVID-19 (annual average ≒ averageof the number at the end of each quarter; decreased from 1,486 → 1,475;
note that the number of accounts at the end of the fiscal year has increased
from 1,425 → 1,451).
However, sales increased thanks to a large increase in AD EBiS’s average
unit price (in the same order as above, the annual average price increased by
Y22,112 or 22.4% from Y98,517→ Y120,629) (Figures 7 and 8 on page 12
and Figure 27 on page 30). The ADPLAN business, which had been acquiredin January 2020 through a business transfer, also contributed to the increasein both the number of accounts and the average unit price after Q2 throughthe transfer of accounts.
Result by Segment: EC Platform
On the other hand, in the EC platform business segment, monthly sales
fluctuated due to a time lag in recording sales caused by delays in the renewalof a part of the contracts and other factors.
However, for the full fiscal year, sales of this business segment increased by
Y47 million from Y253 million in the fiscal year before the previous to Y301
million in the previous fiscal year. Consequently, operating profit also
doubled from Y39 million to Y78 million. The EC market boom due to theincreased stay-at-home consumption caused by the COVID-19 crisis had led
to this significant increase in sales and profit. The segment’s operating margin
also improved by 10.7 percentage points from 15.4% to 26.1% (Figure 22).

26/40
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: 12/7/2020

w Sales fell short of plan
because COVID-19 caused
stagnation of sales activities
and cancellation by
especially impacted
customers.

Difference from Forecasted Sales
The difference between the Company's full-year sales forecast and actual
sales (the factor that caused sales to fall short by Y82 million) was mainly
due to the impact of COVID-19 on the marketing platform business segment,
especially the delays in expanding sales for the Professional service and instarting the new services as well as the sluggish progress with the number ofaccounts of AD EBiS. Regarding AD EBIS (including ADPLAN), thenumber of contracts ended up being lower than expected despite having
gained more new corporate customers in EC-related or other non-face-to-facebusinesses, most likely because of the suspension of service or cancellationof contracts by users in industries such as restaurants and travel that were
especially impacted by the COVID-19 crisis.

w Profit was revised up becauseof the solid performance of
the EC-related business andbecause costs were reduced orheld down.

Difference in Profit
Sales of the EC platform business segment, which has a high gross margin,were solid and higher than expected. In the marketing platform businesssegment, the data processing program was renewed, which helped
significantly reduce server management costs. Furthermore, by shifting
business activities online in general, SG&A expenses (business trip expenses,
advertising expenses, etc.) were reduced. As a result, profit ended up being
higher than it had been forecasted.

w Sales growth and cost
reduction were the main
factors that contributed to the
profit growth.

Factors Contributing to Increase/Decrease in Profit
The factors that caused an increase/decrease in the overall operating profit
are summarized in Figure 23. For the increase in profit, the sales growth was
the largest factor. Also, in addition to the above-mentioned reduction in costs,
revision of the sales agency fee system, measures to reduce and hold down
various costs including recruitment costs, and improvement in productivity
had also contributed to the increase in profit and compensated for the increasein personnel costs, depreciation and goodwill amortization, and server
management costs.

[Figure 23] Factors that Affected Operating Profit in FY 2020 (unit: million yen)
Increase
Rise in server cost held
down withimprovement of datacollection program(million yen)

600

47

500

336

Decrease

Held down theincrease in personnel
expenses including
subcontractor costs
through higher
productivity

-53

400

300

-74
8

200

100

0

Costs reduced fromshifting businessactivities onine

With the revision of
the sales agency
system, fees paiddecreased YoY

-77

-78

30

20

16

276

-13

84

FY 2019 Marketing EC PF Increased Increased Increasd Increase in Increased
sales server cost personnel depreciation transfer of
rent
operating PF sales growth
expense expense and proprietary
growthprofitassetsgoodwill
amortization

Decrease Decreased Decreased Decrease FY 2020in fees advertising recruitment in other operating
paid toexpenseexpenseexpenses
profitsales
agencies(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary

w In each quarter of last FY, theCompany posted net profit
and increased profit YoY as
well as QoQ.

Quarterly Transition in Results
Looking at the quarterly change in operating profit, we can see that theCompany was able to secure a profit in all quarters of the previous fiscal year.
Profit increased year-over-year as well as quarter-on-quarter.
27/40

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: 12/7/2020

From Q4 of FY 2017 (July - Sept 2017) to Q1 of FY 2019 (Oct - Dec 2019),
the Company had posted a loss for six consecutive quarters. In Q2 of FY 2019,
the Company posted a profit in a turnaround, and has stayed profitable forseven consecutive quarters as well as maintaining a profit growth trend sincethen (Figure 24). This rapid quarterly recovery in profit can be explained by
the improvement in profit margin caused by the sales growth of the corebusiness AD EBiS, the restructuring of the business portfolio, thetransformation of its business model, the recovery of the EC-CUBE due tovarious measures to bolster this business, and cost control.

w Through businessrestructuring and shift to the
fixed-payment businessmodel, business structure
became stable with little
seasonal variability.

[Figure 24] Quarterly Transition in Operating Profit
Marketing Platform Business Segment

EC Platform Business Segment(million yen)

140
120
100

20

24
28

22

19

33

11

22
67

35

36

9
38

41

60
40

35

43
35

80

41

35

69

41

13
77

4
36

45

50

60

25

0
-1

-8

15

14

-11

-20

-38

-44

-37

30

12
-23

-15
-1

-40

-21

-60
Q2

Q3

FY 2014

Q4

Q1

Q2

Q3

Q4

FY 2015

Q1

Q2

Q3

Q4

Q1

FY 2016

Q2

Q3

FY 2017

Q4

Q1

Q2

Q3

FY 2018

Q4

33

79
51

51

15
-4

3

-5

Q1

9

8

Profit grew partly because amount oftransfer to assets increased by Y20
million QoQ due to major function
development

-3
Q1

17

17
52

Q2

Q3

FY 2019

Q4

Q1

Q2

Q3

Q4

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

w Free cash flow had tended
to be negative but turned
slightly positive in thesecond half of the previous
FY.
w Shares of EC-CUBE Co.,
Ltd. that the Company
currently owns are
estimated to be worth Y1.4
billion. Also with Y1.1
billion in cash and deposits,
the Company has an ample
cash reserve.

Semi-Annual Transition in Cash Flow
Looking at semi-annual results, we can see that free cash flow (FCF) had been
negative for six consecutive quarters through the first half of the previous
fiscal year (Figure 25). One of the Company’s challenges had been to turn
FCF positive, but this was achieved in the second half of the previous fiscal
year thanks to the improvement in earning power and the completion of
investments. For the Company, about 300-500 million yen in cash would beenough as a normal working capital, but it currently has Y1.1 billion in cash
and deposits. Therefore, for the time being, even if funding becomes requiredfor M&As, etc., the Company intends to work with cash on hand and bankloans rather than equity finance.
Furthermore, when calculated simply based on the price at which the sharesof EC-CUBE Co., Ltd. will be sold to Orico (10% to be sold for Y155 million,
at a market value that is about 5.2 times greater than this subsidiary’s sales),the shares of the subsidiary EC-CUBE Co., Ltd. that the Company will own(90%) are estimated to be worth Y1.4 billion in market value. These sharescan be considered as a substantial asset reserve for the Company.

[Figure 25] 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
H1
H2
99
109
-368
-158
162
-262
-269
-50
924
774

FY 2020
H1
H2
92
429
-409
-101
391
-56
-317
328
847
1,119

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary. H1: first half. H2: second half.

28/40This 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: 12/7/2020◆ The Company’s Financial Forecast for FY 2021 (thisfiscal year)

w This FY’s forecast was notdisclosed due to theunpredictability of the
impact of the COVID-19
crisis. However, it is most
likely expecting
sales/profit growth and isplanning a dividend hike.

Due to the difficulty in making a rational prediction of the impact of COVID19, and since there are many uncertainties, the Company has decided to notdisclose a Q2 forecast or a full-year forecast for FY 2021. Its goal for dividendon equity (DOE), though, is 2% for this fiscal year, and it also plans toincrease annual dividend per share by Y0.5 to Y4.5 during the year.
However, since the Company has defined FY 2021 as part of its current profit
expansion phase and is planning to increase dividend at a fixed DOE of 2%,
it is most likely expecting growth in both sales and profit. Major businessstructure reforms and upfront investment have already peaked out, so theCompany now plans to ambitiously expand its platform business, including
the advertising agency platform and platform businesses in new areas ofbusiness, with its current AD EBiS and EC-CUBE businesses as the corebusinesses.
The Company has generally announced its forecast for sales and operating
profit at same time as the announcement of Q1 results in February or theinterim results in May (Figure 21 on page 25). This trend is also expected thisfiscal year; we believe that specific forecast figures will be announced at theannouncement of Q1 results scheduled for February 5, 2021, or at theannouncement of Q2 results scheduled for May 7, 2021, at the latest.
Current Situation
The impact of the COVID-19 crisis has stayed limited because demand fornon-face-to-face businesses such as EC has been firm due to increased stayat-home consumption, the Company is mostly based on a subscription-based
business model, and its business operations are highly compatible withremote work.

w Currently, monthly sales
are continuing to show apositive trend.

Sales in October, the first month of this fiscal year, show that a high yearover-year growth rate is being maintained for both business segments. There
does not seem to be any signs of a slowdown (Figure 26).
However, we should closely watch the sales of the marketing platform(compared to the same period of the previous fiscal year) after January 2021,
when the sales-increasing effect of the ADPLAN acquisition will diminish.

[Figure 26] Recent Monthly Transition in Sales (flash report)(upper row: sales, unit = thousand yen)(lower row: YoY change, unit = %)2019
10/2019 - 10/2020
Monthly Sales
MarketingPlatform

2020

2020

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct

167,418

173,197

183,085

200,850

197,252

200,976

198,072

197,817

198,330

197,871

201,505

201,488

203,942

112.2

115.1

114.1

126.9

118.8

117.3

117.2

119.5

121.7

120.7

121.7

119.6

121.8

26,164

17,60218,01926,041

16,1268,450

18,56914,856

57,68943,47425,47728,23635,699EC Platform
119.8

94.2

95.2

103.9

82.9

38.4

79.1

85.6

322.6

143.8

131.7

148.5

136.4

193,583

190,799

201,105

226,891

213,378

209,427

216,642

212,673

256,019

241,345

226,983

229,725

239,641

113.2

112.8

112.1

123.7

115.1

108.3

112.6

116.3

141.6

124.3

122.8

122.5

123.8

Entire Company(Ref) Prepared by Alpha-Win Research Dept. from the news release on the Company’s website.
(Note) The values shown are preliminary data before auditing by an auditor and may be revised in the future.

29/40
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)

w For this FY’s forecast, we did
not make changes to ourprevious forecast. Expecting
sales/profit growth anddividend hike.

Issued: 12/7/2020◆ Alpha-Win Research Dept.’s Financial Forecast for FY
2021 (this fiscal year)
Based on last fiscal year’s results and interview with the Company, we madea revision to this fiscal year’s forecast.
We did not change our forecast for FY 2021 from our previous forecast (thereport published on August 12, 2020), including the forecast for sales, profit,and dividend. Our forecast for this fiscal year is that sales will be Y3,010
million (+15.0% YoY), operating profit will be Y300 million (+8.7% YoY),
recurring profit will be Y290 million (+11.1% YoY), net profit will be Y200
million (+9.3% YoY), and dividend will be Y4.50. However, by segment,
while we raised the sales forecast for the currently solid EC platform businesssegment, we lowered the forecasted sales for the marketing platform businesssegment, especially for AD-EBiS whose growth in the number of accounts issomewhat sluggish.

[Figure 27] Alpha-Win Research Dept.’s Forecast for This Fiscal Year and Over the Medium Term(million yen)
Sales
Marketing PF
EC PF
Gross Profit
Gross Margin
SG&A Expenses
Ratio to sales
Operating Profit
Ratio to sales
Recurring Profit
Ratio to sales
Net Profit
Ratio to 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 2018 A

FY 2019 A

1,805
1,530
274
1,190
65.9%
1,289
71.4%
-98
-5.5%
-115
-6.4%
-89
-4.9%
Annual Average (A)
1,476

2,204
1,951
253
1,561
70.8%
1,476
66.9%
85
3.9%
79
3.6%
-35
-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
Smaller loss

78,9385.0%
21.9%-41.1%-0.3%
25.1%
To loss
To loss
To loss

FY 2020 CE
2,700

200
7.4%
190
7.0%
130
4.8%

FY 2020 E

FY 2020 A

FY 2021 CE

2,650
2,618
2,400
2,318
250
301
1,830
1,832
69.1%
70.0%
1,630
1,555
61.5%
59.4% Not disclosed
200
276
7.5%
10.5%
190
261
7.2%
10.0%
130
183
4.9%
7.0%
Annual Average (E) Annual Average (E)
1,500
1,475
0.9%
-0.7%
125,000
120,629
26.9%
22.4%
20.2%
18.8%
23.0%
18.8%
-1.3%
18.8%
-1.7%
-0.8%
10.5%
5.4%
135.5%
225.0%
140.4%
230.3%
To profit
To profit

FY 2021 E

FY 2022 E

FY 2023 E

3,010
3,390
3,860
2,630
2,940
3,310
380
450
550
2,100
2,380
2,750
69.8%
70.2%
71.2%
1,800
2,000
2,270
59.8%
59.0%
58.8%
300
380
480
10.0%
11.2%
12.4%
290
370
470
9.6%
10.9%
12.2%
200
255
320
6.6%
7.5%
8.3%
Annual Average (E) Annual Average (E) Annual Average (E)
1,490
1,520
1,550
1.0%
2.0%
2.0%
137,000
150,000
165,000
13.6%
9.5%
10.0%
15.0%
12.6%
13.9%
13.5%
11.8%
12.6%
26.3%
18.4%
22.2%
-0.2%
0.4%
1.0%
15.8%
11.1%
13.5%
8.7%
26.7%
26.3%
11.1%
27.6%
27.0%
9.3%
27.5%
25.5%

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary.
(Note) CE: the Company’s forecast/estimate. E: Alpha-Win’s forecast/estimate. A: actual results. Estimates for AD EBiS’s average unit price and number of active
accounts are annual averages (average of the numbers at the end of each quarter). The same applies to their actual results. ADPLAN is included in AD EBiS.

The assumptions used in our forecast are the following:

w We are expecting positive
results from the major update
to AD EBiS. AD EBiS’s sales
are predicted to grow by 15%
from the increase in unit
price and slight increase in
the number of accounts.

Sales
・For the number of accounts of AD EBiS, there does not seem to be a clear
trend of a net increase, so contract cancellation by users negatively affectedby COVID-19 will most likely offset the new contracts made with users
positively affected by COVID-19. However, starting in January 2021, thesequential major update to AD EBiS is expected to gradually augment the
product appeal. In addition, the Company plans to shift from its past policy
to prioritize price (acquiring customers with a high unit price) to a policy offocusing on increasing the number of accounts including users in the low
price range. Taking these factors into account, we estimated that the average
30/40This 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)
w We expect AD EBIS’s sales
growth rate (including
ADPLAN) to be 15% for thisFY, assuming that unit pricewill rise by 13% and thenumber of accounts will
increase by 1%.

Issued: 12/7/2020

number of accounts for the fiscal year will slightly increase by about 1%
compared to the previous fiscal year. On the other hand, since the update andits enhancement and addition of functions are expected to lead to upsellingand cross-selling, we expect the annual average unit price to increase by about
13%. As a result, the total sales of AD EBiS + ADPLAN are expected toincrease by 15% YoY to Y2,450 million.
・For businesses other than AD EBiS in the marketing platform businesssegment, sales of the current AdRepo business are expected to increase by
about 10% YoY while the sales of the Professional Service and other are
expected to be about the same as the previous fiscal year. Combined sales of
the new services, Ad-Knowledge and the Advertising Agency Referral
Service, are expected to be grow by about Y50 million (in the previous fiscal
year, these businesses had just been started and their combined sales were
estimated to be Y5-10 million). M&As and acquisitions other than those thathave been already completed and are making a full contribution to sales
growth have generally not been reflected in our sales forecast. Similarly, we
did not take into account the potential increase in sales due to future M&As.
・Sales of the marketing platform business segment is expected to increase
by approximately 13.5% to Y2,630 million, having considered the decreasein sales due to business withdrawal and various risks.

w We expect the EC platform’s
sales to grow by 25%.

w For profit margin, we expect
it to stay about the same YoY.

・On the other hand, in the EC platform business segment, sales of EC-CUBE
are expected to increase by about 25% to Y380 million. This reflects the EC
market boom due to increased stay-at-home consumption caused by the
COVID-19 crisis and the positive effects of the alliance with Orico.
Profit・Gross margin is assumed to stay about the same (70.0% in the previous
fiscal year → 69.8% for this fiscal year) due to temporary costs such as
development costs and server costs (costs associated with switching).
・Concerning SG&A expenses for this fiscal year, we expect to see full,positive effects from the revision to the sales agency fee system that was
conducted in the previous fiscal year. However, due to upfront investment
such as R&D and addition of employees (a net increase of 20 employees isplanned), as well as the increase in amortization of software and goodwill andthe increase in various costs following the acquisition of business, we expect
SG&A expenses to increase by about 15.8%. As a result, the ratio of SG&A
expenses to sales is predicted to stay about the same, from 59.4% in theprevious fiscal year to 59.8% in the current fiscal year.
・We made a somewhat conservative estimate of the operating margin:
approx. 10%, which is about the same level as last fiscal year’s 10.6%.
・Non-operating profit/loss and extraordinary/loss were not included.
・In this fiscal year onward, various uncertainties may impact the Company’s
financial results. These include the impact of COVID-19 on its current
businesses (especially AD EBiS’s unit price and number of accounts), sales
trend of its new businesses, and whether M&As and business acquisitions
will be conducted (and their effect on sales and profit, various associatedcosts, and timing).

31/40
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: 12/7/2020

8． Growth Strategy◆ Previous Medium-Term Business Plan/Strategy and Its
Results
w Last medium-term businessplan’s goal for sales had notbeen achieved but the goal tobuild a solid growth
foundation in Japan has beenachieved.

In the previous medium-term business plan, whose final year was FY 2020,
the sales target was Y3 billion (later revised to Y2.7 billion), but actual sales
fell short and were just over Y2.6 billion.
However, regarding its goal to "build a foundation for growth in Japan," it
was able to achieve sufficient results; it established an extremely strong
market position through its acquisition of the market’s second largest service
ADPLAN from DIGITAL HD Group, revised its sales agency system, andreleased Ad-Knowledge. On the other hand, challenges remain with thedevelopment of business in peripheral areas (Professional Service) anddevelopment of effect measurement products to lead the market as regulations
on the protection of personal information become tightened.
In addition, the Company has set medium/long-term targets related to the cost
structure of its main marketing platform segment, and has aimed to control
the ratio of each category of cost to sales (Figure 28). In general, the target
ranges have been achieved, excluding the ratio for new business development
costs and the resulting operating margin. Excluding new businessdevelopment, which was not initially included as a cost category, theoperating margin comes out to be 15%, which is within the target range of 10
to 20%. Therefore, the structural reforms seem to have helped improve theCompany’s profit management as well.
Due to the difficult recruitment situation, the Company could not makeprogress with its HR strategy as it had planned, but it was able to increase of
the net number of employees by 74 over the past four years (98 in FY 2016
→ 172 in FY 2020; simple average of 18.5 employees per year). Also, it wasable to improve the efficiency of its current businesses and shift more
employees to work on new business development (Figure 15 on page 21).

w In recent years, profit
margins significantly
improved thanks to thechange in the cost structure.
The target operating margin
seems to be within an
achievable range.

According to its medium/long-term business model for the marketing
platform business segment, the Company plans to increase sales and lower
each of the expenses for this business relative to this sales increase so that theoperating margin of this segment can be raised from the current 8% to its goalof 10-20%. Since this level of operating magin has been achieved in the past,
it seems to be an achievable goal. The lower end of the target range – anoperating margin of 10% – may become achieved during the current or next
fiscal year depending on cost control (Figure 20 on page 25).

[Figure 28] Cost Structure of the Marketing
Platform Business Segment(Ref) Prepared by Alpha-Win Research Dept. based on
the financial results briefing materials

Marketing PFʼs
Expense-to-Sales
Ratio

FY 2017

Marketing and
Sales

28%

UP

FY 2018

FY 2019

FY 2020

Medium/LongTerm Targets

33%

26%

23％

25-30%

29％

25-30%

15％

10-15%

7％

5%

26%

18％

15-20%

2%

8％

10-20%Development

24%

Customer Sucess(former “support”)

11%

11%

New Business
Development

ｰ

ｰ

UP

36%

Other Indirect
Expenses

25%

28%

Operating
Profit

12%

-8%

29%
UP

17%
ｰ

*1

*2

UP

*1 Due to increased allocation of common expenses to the segment following the sales decline of the EC platform caused by business restructuring*2 Due to the transfer of operation staff from Development to Customer Success
UP: Ratio increased due to strengthening of category

32/40
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: 12/7/2020◆ New Medium-Term Business Plan and Strategy
Upon starting a new fiscal year, the Company announced a new medium-term
w Announced a new mediumbusiness policy, "VISION 2023," for the three fiscal years from FY 2021 toterm business plan: overseas
FY 2023.
development temporarily
stopped due to COVID-19
and will focus on thedomestic market.

w In Japan, targeting the DX
market.

The Company had previously developed its business along president Iwata's
long-term business plan as described by his words, “By creating completely
new products in the field of Internet marketing that can be differentiated fromother companies, we hope to gain an extremely large market share in Japan,
and then develop our business globally to become a company with a strong
presence.” However, due to the COVID-19 crisis, overseas development was
temporarily stopped, and the Company has shifted its plan toward focusing
its resources on developing business in the domestic market.
Seeing the digital transformation (DX) trend accelerated by the COVID-19
crisis as a business opportunity, the Company plans to contribute to the DX
of its customers through data integration, analysis, and utilization support andfocus on expanding its business in sectors of the domestic market that are
moving toward DX.
Going forward, the Company plans to further enhance marketing support
through data and technology as well as shifting its business from its previous
focus on data measurement (recording the results of marketing) to data
integration and analysis (visualization of marketing results) and utilization ofdata (improving the results of marketing activities).

w Will expand businessthrough the MXP strategy

Toward this purpose, the Company set out a new policy: the MXP (Marketing
Transformation Platform) strategy. It plans to expand its business in the threeareas described below (Figure 29).

[Figure 29] MXP Strategy

Advertising
Agencies

Expansion ofCustomer Segment
2 Accelerated growth ofplatform business targeting
advertising agencies

Advertisers

3

Increasing the value
provided by the marketing
effect measurement platform
1

Core Businesses

Development ofplatform businessin new areas

New Businesses

Business Expansion(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing materials

w Will develop new customers
among large andsmall/medium-sizedcompanies for the effectmeasurement business.

①

Increasing the value provided by the marketing effect measurement
platform: work on increasing the value of the core businesses andcontributing to DX by selling measurement sensors to large corporations(sales of accumulated data), providing OEM services (has experience
with this business through its partner DIGITAL HD), and providing a
33/40

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: 12/7/2020

comprehensive marketing support package (combining the necessaryfunctions with value-added information/services) to SMBs
(small/medium-sized businesses).
w Will expand the businesstargeting advertising
agencies.

w The president himself willlead the development of thebusiness in new areas.

w Goals for FY 2023 or the final
year of the new medium-term
plan: sales of Y5 billion,
operating margin of 15%, and
DOE of 3% or greater.

②

Accelerating the growth of the platform business for advertising
agencies: contribute to DX through its advertising agency business by
integrating its products for advertising agencies and providing support toadvertising agencies from lead acquisition (collecting information onprospective customers) to improving operation efficiency.

③

Developing platform businesses in new areas: expand into new areas ofbusiness using the data and knowledge accumulated through the corebusinesses and develop services for improving marketing results(currently in the R&D phase).

Employees of the Company are already making progress with ① and ②,
and president Iwata himself intends to work on ③ , the development ofbusiness in new areas. For further growth, the Company plans to evolve andexpand with the current AD EBiS and EC-CUBE businesses as its corebusinesses, as well as actively expanding its business by creating platformbusinesses for advertising agencies and in new areas.
In FY 2023, the final year of the new medium-term plan, the Company plansto achieve the following target values: sales of Y5 billion, operating marginof 15% (equivalent to about Y750 million), and dividend on equity ratio(DOE) of 3% or more. Compared to the results of FY 2020, sales will needto grow at an annual rate of about 24% and operating profit will need toannually grow by 40% to achieve the target values.

[Figure 30] Goals of the New Medium-Term Business Plan
Consolidated Sales

5 billion yen

EC Platform
New Platform
Adverting Agency
PlatformMarketing EffectMeasurement Platform

Business Expansion

Consolidated
Sales

5 billion yen
Consolidated
Operating Margin

15%

Dividend on Equity(DOE)

FYFY202020

FYFY232023

FYFY262026

3% or more

VISION2023(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing materials

w We updated our forecast for
financial results over the
medium term. We kept ourforecast for next FY the same
as before; we predict sales,
profit, and dividend toincrease. Expecting doubledigit profit growth next FY as
well as the year after that.

◆ Alpha-Win Research Dept’s Forecast for Financial

Results over the Medium Term
Forecast for Next Fiscal Year (FY 2022)
We have made no major changes to our basic view of the medium-term
financial forecast for next fiscal year onward that was prepared in ourprevious report. Although we revised the sales of the marketing platform and34/40

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: 12/7/2020

the EC platform, as with this fiscal year’s forecast, we kept the forecast for
the next fiscal year (FY 2022) the same as our previous forecast. We also
made a new forecast for the fiscal year after the next or FY 2023.
Although the impact of COVID-19 will probably remain, we expect it tobecome relaxed, enabling the economic environment to improve. Therefore,
we predict that sales and profits will both increase in the next fiscal year (FY2022); sales are expected to be Y3,390 million (+12.6% YoY), operating
profit is expected to be Y380 million (+26.7% YoY), and net profit ispredicted to reach Y255 million (+27.5% YoY).
This forecast takes into account the increase in the unit price and number ofactive accounts of AD EBiS due to full contribution by the major update, theincrease in sales and profit of the EC-CUBE business, and the growth of the
new businesses including Ad-Knowledge and the advertising agency
platform, as well as the improvement in costs such as server management
costs.
Although the Company may possibly conduct a few new businessacquisitions each year, this possibility has not been reflected in our current
forecast. Also, although we kept our previous forecast that the profit growth
will raise dividend to Y5.3 per year, dividend may be increased even more as
DOE increases and profit is revised up.
w The Company’s target values
for FY 2023, the final year of
the new medium-term plan,
seem ambitious and may not
be easy to achieve.

Financial Forecast for the Fiscal Year After the Next (FY 2023)
Assuming that the economy will normalize in the fiscal year after the next
(FY 2023), we predict that sales will grow and costs will improve for both
platform business segments. Consequently, we predict that sales and profit
will grow consecutively, resulting in sales of Y3,860 million (+13.9% YoY),
operating profit of Y480 million (+26.3% YoY), and net profit of Y320
million (+25.5% YoY).
FY 2023 is the final year of the Company's new medium-term plan and theCompany has set goals of Y5 billion for sales, 15% for operating margin(equivalent to Y750 million), and 3% or more for dividend on equity (DOE).
These are ambitious goals, and the Company will need to expand business in
new areas and through M&As in order to achieve them.

w Consecutive dividend hike
expected, but considering thedividend payout ratio, aneven further dividend hike isquite possible too.

w We expect sales growth ofabout 10-20% per year overthe medium term.

Concerning dividend, the Company is aiming for a DOE of 3% or more in
the fiscal year after the next, which is more than 1.5 times greater than thecurrent fiscal year’s planned DOE. Therefore, we expect a consecutive
dividend hike from the current fiscal year to the fiscal year after the next,
resulting in Y9.3 per share. However, according to our estimate, dividend
yield is expected to only be 0.3% and dividend payout ratio is predicted toonly be 13.1%, so that there will be a relatively high likelihood of even moredividend hikes compared to the market average.
Going forward, the growth potential of the marketing platform business,
which is based on Ad tech tools and expertise, is expected to be large due toDX and the expansion of the marketing effect measurement market. Similarly,
EC platform also has a large growth potential due to the expansion of the EC
market. Therefore, over the medium to long term, sales are expected to growby about 10-20% per year.
In terms of profit and loss, we expect the Company to see positive resultsfrom the upfront investment, business restructuring, and cost structure reform,
35/40

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)
w Business model with a highmarginal profit ratio. Overthe medium to long term,
we expect profit to grow at a
rate of 20-30% per year
(normalized basis), which isgreater than the sales
growth rate.
w We expect financial results
to be affected by whether
the Company will succeed
in M&As and the new
businesses.

Issued: 12/7/2020

leading to sales growth and consequently a large profit growth rate since its
business has a high marginal profit ratio (estimated to be 70%). We expect anannual profit growth rate (on a normalized basis) of about 20-30%, which isgreater than the sales growth rate.
Although the business restructuring has been mostly completed, theCompany is still in its growth stage and is actively pursuing greater
competitiveness, expansion of business through new customer acquisition,and expansion into new and peripheral fields. Since it has an ambitious
attitude with regards to conducting M&As, business alliances, and businessacquisitions for synergy and business expansion, the Company’s sales andprofit will most likely be affected over the medium to long term by whether
it will succeed in these initiatives.
In addition, since financial performance will be influenced by the Company's
cost control, the effort put into achieving the bottom line of its target, and the
management topics that it will prioritize, some aspects are inevitably hard to
predict. Therefore, we made a somewhat conservative financial forecast.

w We believe that theCompany may achieve a
new record-high profit overthe medium term.

w The Company’s growthpotential will depend onwhether it cancomprehensively expand its
business in the data
marketing domain.

So far, the Company has been steadily expanding its business in line with its
plan. Over the medium term (about three to five years), record-high profit
may possibly be achieved (the current record highs were achieved in FY
2015: operating profit of Y350 million and net profit of Y230 million).
Over the medium to long term, with the current trend of strengthening
personal information protection, we believe that the key point in assessing theCompany’s future financial performance will be whether it can shift from its
specialization in Internet ad effect measurement to a more comprehensive
expansion of business for each of its platform business segments, including
new areas of business, through data integration, analysis and utilization
support.

36/40
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: 12/7/2020

9． Analyst’s View
◆ SWOT Analysis
The Company's SWOT analysis result is shown on Figure 31 (below is
supplementally information).
w The Company's strengths
are the president's
management skills,
product strength, support
system, business model,
and business strategy ofactively conducting M&As.

w Risks: tightening of
regulations related topersonal information
protection and COVID-19

The Company’s main strengths are its president’s management skill andexpertise with leading technologies in the Internet marketing field; its main
products and support system with proven and strong functions (technologicalexpertise, development speed, and responsiveness to changes that only
specialized major players like the Company can achieve); position in themarket (No. 1 in the Internet ad effect measurement market with an extremely
high share); stable, subscription-based business model; and business strategy
to actively engage in M&As, business acquisitions, and business alliances.
On the other hand, the main risks include new regulations pertaining to thecollection and use of personal information (as part of Internet ad effectmeasurement) due to strengthened privacy protection, the emergence ofalternative products due to the development of advanced AI technologies, theimpact of the COVID-19 crisis, and staff shortage.

[Figure 31] SWOT Analysis
Strength・The president's expertise in leading technologies of the market and his management skill
・Recognition, strong customer base, proven track record, and product strength (No. 1 in the Internet ad effect system tool
market with an extremely high share)
・The main marketing platform business is subscription-based; stable revenue can be expected
・Know-how and big data accumulated since foundation and their potential to be used
・Enhanced working environment; talents with specialized, leading-edge technological expertise; accumulation of know-how(competitive advantage as a major, specialized company with high development capability and ability to respond to needs)

Weakness

Opportunity

Threat・Specialized in a niche market; small in scale
・Business management is largely dependent on the president
・Employee shortage (engineers and sales reps)・Funding power (cash reserves for upfront investment and M&As)
・Business opportunities with the expanding EC market
・Internet ad marketing market's growth potential and potential for accelerated growth of current products
・Business expansion through M&As and business acquisitions; utilization of resources of external partners; alliances
・Development of new products and services
・Impact of COVID-19 (cancellation by users with deteriorated financial performance, suspended services, etc.)
・Launch of competing or alternative products/services, emergence of rivals, decline in competitiveness of existing products
・Tighter regulations related to stronger privacy protection in the use of personal information
・Defects in products/services and delays in development or in providing services with new function
・Large system troubles such as computer system stoppage(Ref) Prepared by Alpha-Win Research Dept.

◆

w Had paid no dividend
during a period in the past
due to worsened financial
performance. Held down
the outflow of cash andinstead used resources oninvestments for future
growth.

Shareholder Returns

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 32 on page 38). However,in FY 2018 and FY 2019, no dividend was paid since a net loss had beenposted consecutively for those years, and the Company also abolished theshareholder benefit program.
The Company had decided to continue with no payment of dividend in orderto recover its financial performance and increase shareholder value by
focusing on investments for future growth, rather than letting its cash flowout through dividend and benefit programs.
37/40

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)

w Dividend was resumed last
FY thanks to the structuralreform. Going forward, itplans to pay dividend
based on the level of DOE.
The increase in profit andDOE is expected to lead to
dividend hikes.

w Stock splits and sharebuybacks may also be
possible in the future.

Issued: 12/7/2020

However, thanks to its structural reform, the Company achieved a net profit
in a turnaround and eliminated its carried-forward loss, and was able toresume dividend in FY 2020 for the first time in three fiscal years (dividendof Y3.8 was first announced during the fiscal year, and then was increased toY4) (Figure 32). In addition, it announced its new policy to aim for a DOE of
2% this fiscal year and 3% or more in FY 2023. This was positive news, since
the new policy implies that dividend will be increased automatically with theincrease in profit. Although the Company is currently in its growth stage, it
intends to return profit to shareholders while continuing with its upfront
investments and also increase shareholder value by achieving growth infinancial performance.
Over the medium to long term, we believe that dividend will continue to be
increased with the increase in profit and DOE. In the future, depending on thestock price, the Company may conduct stock splits, share buybacks, and othermeasures to enhance return to shareholders.

[Figure 32] Change in Dividend and Dividend Payout Ratio
(Y)

（％）

50.0

10.0

45.0

9.0

44.0

Dividend

40.0

8.0
9.30

Dividend payout ratio
35.0

7.0

30.0

6.0

25.0

5.0

20.0

18.6

14.2

15.0
10.0

5.30

4.0
18.3

13.8
4.50

12.9

3.0
13.1

5.00
4.00

4.50

2.0

5.00

5.0

0.00

0.00

0.0
FY 2015

FY 2016

FY 2017

1.0

0.0

FY 2018

FY 2019

0.0
0.0
FY 2020

FY 2021 E

FY 2022 E

FY 2023 E(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary. E: AlphaWin’s forecast/estimate.

(20) AdTech (ad technology): A
generic term for information
technology used in advertisingbusiness, it refers to the digitaltechnology used in Internet ads,
etc. Specifically, it is thetechnology for efficiently selling/buying/distributing Internet ads
and measuring advertising effects.
Maximizes advertising effects forInternet advertisers andmaximizes profit for media
owners.

w Stock price significantly
outperforming TOPIX andTSE Mothers Index since thebeginning of this year,
reflecting positive financial
results.

◆ Stock Price and Characteristics and Factors that May
Affect Stock Price
The Company’s stock is a small-cap, AdTech20-related stock listed on TSE
Mothers. Since becoming listed, the volatility of stock price has been high(max of 5,260 yen in May 2016 and min of 677 yen in August 2015).
Figure C on page 3 of this Report shows the stock price and relative stock
price against TOPIX for the past approximately three years. Stock price wasbearish during the period that the Company’s financial performance had been
worsening. However, with the recovery in profit, it bottomed out and has been
fluctuating within a boxed range of 1,000 to 2,000 yen.
Since the beginning of this year, stock price has increased by 47%,
outperforming both the TOPIX and the TSE Mothers Index by 45% and 10%,respectively (as of November 30, 2020). This rise most likely reflects theCompany’s announcement of positive results during the previous fiscal year,
such as increased sales, upward revision to profit, and resumed payment ofdividend, despite the difficult economic situation caused by the COVID-19
38/40

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: 12/7/2020

crisis. It may also reflect the high anticipation for profit growth over the
medium term.
(21) 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 for the stock value of
emerging companies with a highgrowth potential or a net loss.

(22) Ad-Tech market players:
companies that plan, develop,
propose, and sell products,
services, and technologies related
to AdTechw According to valuation, its
current stock price does notseem cheap. Anticipation of
future high growth may bepartly reflected.

In Japan, there are no listed companies in the AdTech industry with asubscription model similar to the Company. In the US, HubSpot described on
page 23 can be seen as a similar company (market capitalization of USD18.2
billion, actual P/S21 of 27, and actual P/B of 26). As reference, though, we
compared the size, business contents, and valuations of 24 AdTech
market players22 that are listed on the market (listed companies with
AdTech-related business partly similar to the Company) and fivecompanies (page 16) that competes with the Company in the EC platformbusiness (packaged software for development of EC store websites, etc.)(Figure 33).
In this comparison, there is a large disparity between the companies andtherefore the average values are not very meaningful. However, as far as P/E,
P/B, P/S, and dividend yield are concerned, the Company's valuation is about
average and does not seem particularly expensive or cheap.
Similarly, compared to the average of the companies listed on the First
Section of the TSE (current fiscal year: forecasted P/E of 27.1, actual P/B of
1.3, and forecasted weighted average dividend yield of 2.0%), all indicatorsshow that valuation is expensive. This is perhaps because of the anticipationof high profit growth as an IT-related and especially AdTech-related,
mid/small-cap growth stock which is being partially reflected in the stock
price as a premium.

[Figure 33] Comparison with Similar Companies (24 AdTech-related companies + 5 EC-platform-related companies)
AdTech-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

Markets: TSE1=TSE 1st Section, TSE2=TSE 2nd Section, TM=TSE
Mothers, JQS=JASDAQ

Company NameBusiness Area

Full Speed

Internet marketing / AdTech (Internet Ad distribution tech)

DIGITAL HD

Internet ad agency / ad measurement tool

F@N Communications

Affiliate (pay-per-performance) ad

ValueCommerce

Affiliate (pay-per-performance) ad

Hamee

Mobile accessories / EC cloud support

BrainPad

Internet marketing / data analysis

CARTA HD

Ad platformYRGLM Inc.

Internet ad measurement tool

Asteria

Packaged software

Market
TSE2
TSE1
TSE1
TSE1
TSE1
TSE1
TSE1

RAKUS

Cloud service / Email delivery / IT engineer dispatching

TM
TSE1
TM

SEPTENI HD

Internet ad agency / smartphone marketing support

JQS

AccreteSMS delivery service

TM
TSE1
JQS

CyberAgentInternet ad agency / smartphone / games

GMO AD Partners

Internet ad agency and related platform

GMO TECH

App-installation-type charging ad / SEO

iiD

Contents marketing platform

Rentracks

Pay-per-performance Internet ad service

Allied Architects

SNS-related marketing support

FreakOut HD

Internet ad delivery (DSP)

Net Marketing

Pay-per-performance ad agency

Orchestra HD

Digital marketing for companies

Fringe81

Internet ad agency, media monetization support

SoldOut

Web marketing support for mid-tier companies/SMEs

GenieeAutomatic trading of media ad space / AdTech biz

TM
TM
TM
TM
TM
TSE1
TSE1
TM
TSE1
TM

Simple average of 24 AdTech-related companies
Average of TOPIX (closing price on 11/30/2020)

Markets: TSE1=TSE 1st Section, TSE2=TSE 2nd Section, TM=TSE
Mothers, JQS=JASDAQBusiness Area
MarketE commerce platform / online settlements
TM
EC website dev. package / selling merchandise to companies
TSE2
EstoreEC website development / online shopping support
JQS
Cloud commerce platform
InterfactoryTM
EC website mgmt support for mid-tier/SME EC website mgmt companies
Commerce One Holdings
TM
Simple average of 5 EC-platform-related companies

EC-Platform-Related Companies
Code
4477
3371
4304
4057
4496

Company Name
BASE
SOFT CREATE HD

Unit: million yen
Market Cap.
7,708
44,46833,541
119,959
28,582
31,77832,447
11,725
19,153441,623
60,5689,205
903,950
11,914
2,907
4,506
4,443
7,196
15,583
8,567
23,168
4,825
16,27916,08180,178Sales
20,200UD
29,20030,00012,832
6,950
22,0003,010
ND
15,11920,0001,650
500,000
36,0003,100
ND
10,0974,150
27,00015,50011,300ND
21,00015,58040,234

O.P. Margin
700
3.5
UD
2,700
9.2
5,500
18.3
1,778
13.9
400
5.8
3,250
14.8
300
10.0
ND
3,604
23.8
2,850
14.3
300
18.2
32,500
6.5
330
0.9
50
1.6
ND
217
2.1
230
5.5
200
0.7
650
4.2
600
5.3
ND
450
2.1
186
1.2
2,840
8.1

Unit: million yen
Market Cap.
196,11043,874
14,524
11,99821,63057,627Sales
7,810
22,965
9,645
1,598
2,409
8,885

Ratio

%
O.P.

P/S
0.38
1.15
4.00
2.23
4.57
1.47
3.90
29.21
3.03
5.58
1.81
0.33
0.94
0.44
1.73
0.58
0.55
2.05
0.78
1.03
3.29

%
O.P.

O.P. Margin
250
3.2
2,772
12.1
398
4.1
155
9.7
466
19.3
808
9.7

P/E
17.77
16.96
31.22
22.08
113.4919.51
58.08
162.3630.88
44.23
100.21
27.83
145.35
50.27
19.25
62.61
119.52
61.27
27.13

%
P/B
1.79
1.33
1.59
8.36
5.74
7.66
1.34
9.10
3.67
71.23
3.49
7.88
10.07
2.12
3.67
1.44
2.13
4.24
3.36
3.04
13.61
31.33
5.39
6.65
8.76
1.28

Ratio
P/S
25.11
1.91
1.51
7.51
8.98
9.0

P/E
1,156.82
24.67
125.9767.65
343.78Dividend Yield
4.36
0.98
0.45
0.00
1.26
0.24
0.07
0.61
0.52
1.80
0.34
0.00
1.62
0.00
0.00
1.04
0.28
0.00
0.75
1.65
(weighted 1.99)
%

P/B
47.72
3.63
6.96
17.41
14.45
18.0

Dividend Yield
0.00
0.94
1.03
0.00
0.00
0.39

Closing Price（ 11/30 ）Stock Price
495
1,867
436
3,480
1,763
4,275
1,274
1,840
1,095
2,437
436
1,651
7,150
711
2,641
899
557
512
935
579
2,530
466
1,555
894
1,754.92

Closing Price（ 11/30 ）Stock Price
9,590
3,185
2,814
3,255
5,750

(Ref) Prepared by Alpha-Win Research Dept. from the companies’ websites, securities reports, financial results summaries, and financial results briefing materials.
(Note) Generally, each company’s forecasted values from the latest financial results disclosure (latest quarterly financial results) or the most recent actual results(BPS, etc.) were used (based on disclosed data available as of November 30). For forecasts disclosed as ranges, as a general rule, the median was used for
calculations. For the Company, Alpha-Win Research Dept.’s forecast was used. For other companies, values not disclosed are marked by “ND” (not determined),“UD” (undisclosed), or “-”. The average was calculated using only valid figures.

39/40This 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)(23) PEG Ratio (Price Earnings
Growth Ratio): A valuation
indicator for stock value thattakes into consideration acompany's medium-term profit
growth rate. It is calculated by
dividing the expected priceearnings ratio (P/E) by the
expected medium-term profit
growth rate (%) per share.
Generally, a PEG ratio of lessthan 1 means the stock isundervalued, and overvalued if it
is more than 2.

w Should closely watch thetightening of personal
information protection
regulations, financial
performance, and KPIs as
factors that may impact stock
price

w Future growth may be
anticipated as a defensive,
ad-tech-related, domesticdemand-related, and smallcap growth stock.

Issued: 12/7/2020

Based on our forecast of the Company’s EPS, its P/E is expected to be 58.1
this fiscal year, 45.5 next fiscal year, and 36.3 the year after the next. If theCompany's normalized EPS growth rate over the medium term is assumed to
be 25%, its PEG Ratio23 comes out to be about 2.3 for this fiscal year (2.0 if
the growth rate is assumed to be about 29%). Assuming that a PEG of up to
about 2 is acceptable for growing companies, then the Company’s stock pricehas come to a level which may make it a candidate for investment. If the
momentum of its financial performance becomes strong, then its stock may
possibly rise to a higher level of price.
As factors that may affect stock price, we should continue to closely watch
the situation concerning tightened regulation on the protection of personal
information and the trends in monthly sales (YoY), as well as the quarterly
changes in profit growth and growth rate, the level of dividend, M&As andbusiness acquisitions or alliances, releases of new products and services, andthe trends of the entire Internet ad market.
In addition, as the most important management indicators (KPIs), we should
continue to follow the change in the unit price and the number of active
accounts of AD EBiS, which are key factors determining the Company’s sales
and indicative of the Company’s growth potential.
Over the medium to long term, the Company's marketing platform businesshas a large growth potential in the Internet advertising market, and theCompany seems to be in a good position with regards to reaping benefits fromthis growth potential. As a relatively defensive, AdTech-related, anddomestic-demand-related growth stock, future growth may be anticipated.

40/40
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.