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

11-Oct.-2021
FISCO Ltd. Analyst

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

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

11-Oct.-2021
https://scalagrp.jp/en/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Overview of FY6/21 results.................... ......................................................................................................

01

2. Outlook for FY6/22.. .....................................................................................................................................

01

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

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

03

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

04

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

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

10

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

12

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

17■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 19
1. Outlook for FY6/22.. .....................................................................................................................................

19

2. Mid-term management plan. . .......................................................................................................................

23■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 25■Information security measure------------------------------------------------------------------------------------------------------------------------ 26

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

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

11-Oct.-2021
https://scalagrp.jp/en/ir/█ Summary
Aiming to speed up growth by expanding existing businesses, M&A
and new business development
Scala, Inc. <4845> (hereafter, “the Company”) is a holding company that is aiming to create value and solve social
problems through its portfolio of businesses centered on the fields of IT/AI/IoT/DX. In FY6/21, it reorganized its
business segments into the IT/AI/IoT/DX Business, Customer Support Business, HR & Education Business, EC
Business, and Incubation & Investment Business. It is working to achieve the results target (revenue of ¥500bn in
FY6/30) set out in COMMIT5000, its mid-term management plan.
1. Overview of FY6/21 results
In FY6/21 in the ongoing businesses*1, revenue increased 14.6% compared to in the same period in the previous
fiscal year (year on year (YoY)) to ¥8,734mn, while operating profit decreased 3.0% to ¥220mn. Although revenue
was aided by the full-year contribution from the HR & Education Business of Grit Group Holdings Co., Ltd.*2, whichbecame a consolidated subsidiary from 4Q of the previous fiscal year, as well as strong performance in the EC
Business, revenue growth in the IT/AI/IoT/DX Business was very minor due to the impacts of the COVID-19 pandemic
while the Customer Support Business recorded a double-digit decline in revenue. Although profit increased in the EC
Business, profit declined in the IT/AI/IoT/DX Business, while the other businesses each posted a loss. One reason for
the weak performance was the fact that the Company positioned FY6/21 as a period to build the service “models”
in order to realize strong future growth, and it reinforced the platforms of each business. However, stemming frommatchings in the public-private co-creation platform “Gyaku Propo” (which literally means reverse solicitation proposal)
released in November 2020, the Company has started to see some buds of growth, such as incoming orders for
system development from local governments.
*1	Following the sale of shares of consolidated subsidiary SOFTBRAIN Co., Ltd. in November 2020, the businesses of thiscompany and its subsidiaries were classified as discontinued businesses, and revenue and operating profit show amounts
based on ongoing businesses and exclude discontinued businesses.
*2	Grit Group Holdings and its subsidiaries conduct business including a human resources services business, daycare andpreschool facilities, and a sports education services for children.

2. Outlook for FY6/22
For FY6/22 results, the Company is forecasting revenue from ¥12,000mn to ¥20,000mn (up 37.4% - 129.0% YoY)
and operating profit from ¥450mn to ¥1,200mn (up 104.2% - 444.6%). The forecasts are given in ranges considering
the impacts of M&A activity on results. On an existing businesses basis, the Company is expecting both revenue andoperating profit to increase by double digits, while the effects of M&A would come on top of this. Even the low-end
forecasts seem to include some impacts from M&A, and with ample cash on hand as well as bank borrowings, theCompany is planning to aggressively pursue M&A. In existing businesses, the Company is expecting double-digit
growth in the IT/AI/IoT/DX Business and the EC Business. In the Customer Support Business, the Company will
work to transform the earnings structure, so it expects an improvement in profit while aiming to maintain the current
level of revenue.

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01 26

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

Scala, Inc.

11-Oct.-2021

4845 Tokyo Stock Exchange First Section

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

Summary

3. Mid-term management plan and growth initiatives
Based on the mid-term management plan COMMIT5000, the Company is advancing three businesses—the value
creation support business, IT/AI/IoT/-related business, and social issue-solving business—targeting revenue of¥500bn and operating profit of ¥50bn in FY6/30 (revenue of ¥100bn and operating profit of ¥10bn in FY6/25). In
FY6/21, the Company built solution services, and its strategy is to horizontally expand these services widely to listedcompanies and local governments from FY6/22 onwards and thereby accelerate the pace of growth. In the IT/AI/
IoT/DX Business, the Company is focusing on winning orders for high-unit-price development projects, while it will
strive for growth in the HR business by increasing the number of registrations by job seekers, while likewise aiming
for growth in the education business by developing contracted operations and developing educational content, andseek growth in the EC Business by increasing membership and developing new services. In addition, the Company
hopes to advance M&A and business and capital tie-ups at a pace of about 10 per year, including co-creation andcollaboration. At FISCO, we first want to focus on developments in FY6/22.
Key Points
In FY6/21, revenue increased due to the effects of M&A, but operating profit declined due to the execution of
investment targeting growth• In FY6/22, the Company expects a significant increase in both revenue and profit due to the expansion ofexisting businesses and M&A execution• The Company’s mid-term management plan targets revenue of ¥500bn and operating profit of ¥50bn in FY6/30•

Results trends
Revenue (left)（¥mn）

17,11218,00015,00012,829Operating profit (right)
12,000～20,00017,025

（¥mn）

2,400
2,000

2,153

12,000

1,600
1,546

8,734

9,000

450～
1,200

934

6,000

1,200
800

220

3,000

400

0

0
FY6/18

FY6/19FY6/20FY6/21

FY6/22 E

Note: FY6/21 results are figures for ongoing businesses excluding SOFTBRAIN and its subsidiaries. FY6/22 results forecasts
show median values of disclosed ranges.
Source: Prepared by FISCO from the Company's financial results

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02 26

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

11-Oct.-2021
https://scalagrp.jp/en/ir/█ Company profile
With IT/AI/IoT as its core technologies, is integrating its consulting
capabilities, including for value creation management support
1. History
The Company was founded in December 1991 with an initial start as a sales distributor of database systems. It
realized significant growth in 1999 by inheriting support services, including customers, for the Model 204* mainframe
database management system license from Mitsui Knowledge Industry Co., Ltd.
*	Developed by US-based Computer Corporation of America and Sirius Software (now, Rocket Software). Major customers
were large companies in Japan such as the Bank of Japan <8301> and Tokyo Electric Power Company Holdings, Inc.
<9501>. Demand for it ceased due to changes in the market environment, and the service was ended in the fall of 2016.

In 2000, the Company determined that it needed to change its business structure to continue growing amid themigration of corporate information systems from mainframes to distributed processing (client/servers), and it started
expanding its business through M&A utilizing funds obtained from its IPO in 2001. Looking at developments over the
past few years, in 2017 the Company made plube Co., Ltd. (ownership ratio: 100.0%, currently Scala PLAYce, Inc.),an EC website management company, a subsidiary in order to enter the EC Business. In 2018, the Company madeLeoconnect, Inc. (ownership ratio: 66.0%), which provides customer support consulting for the brands and productsof the HIKARI TSUSHIN <9435> Group, a subsidiary, and also made Connect Agency, Inc. (ownership ratio: 51.0%),
which provides a cloud PBX service to companies and call centers making outbound calls for such customers as the
HIKARI TSUSHIN Group, a subsidiary. Also, in 2018, as part of the preparations toward strengthening development
capabilities and deploying the overseas business, subsidiary Scala Next Inc. established a Mandalay branch in
Myanmar to act as a base for offshore development and has started to recruit local engineers.
As measures toward building a value co-creation platform under mid-term management plan COMMIT5000 startingin 2019, the Company established Scala Partners, Inc. in July of the same year, and then made wholly owned
subsidiaries of J-Phoenix Research Inc., which provides management consulting and IR support, in October and
Grit Group Holdings, which provides HR & Education Business, in April 2020. The Company is also intensifying
efforts toward growth, such as by actively making capital and business alliances. In November 2020, the Company
sold its shares in SOFTBRAIN, a major sales support software group that was made a subsidiary in July 2016, toan investment fund, and removed from the scope of consolidation.
To conduct more flexible management, the Company switched to a holding company organization in 2004, and in
FY6/16, it changed its accounting standards to IFRS to disclose its results.

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03 26

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

11-Oct.-2021
https://scalagrp.jp/en/ir/

Company profile

History
Date
December 1991
January 1999

Major event
Founded Database Communications (now, Scala, Inc.)
Formed sales distribution contracts for the Japanese market with US-based Computer Corporation of America and Sirius andstarted Model 204 support

May 2001

Listed on the Osaka Securities Exchange’s NASDAQ Japan market (now, TSE JASDAQ (Standard))

April 2003

Acquired Interscience’s patent management software (product name: PatentManager) with the aim of entering the intellectual
property system field

October 2003
April 2004
September 2004
June 2006
November 2010

Acquired Dbecs Co., Ltd. as a subsidiary to enter the CRM field
Acquired Vodamedia Inc. as a subsidiary with the aim of entering the IVR (interactive voice response) field
Renamed as Fusion Partners Co. in the transition to a holding company structure and established Database Communications(now, Scala Services Inc.) as a new company and transferred its businessMerged subsidiaries Vodamedia and Dbecs and changed the company name to Digi-Ana Communications Inc. (now, Scala
Communications Inc.)
Acquired NewsWatch Inc. as a subsidiary

April 2012

Merged subsidiaries Digi-Ana Communications and NewsWatch (now, Scala Communications Inc.)

May 2014

Listing transferred to the TSE Second Section

December 2014

Shares elevated to the TSE First Section

November 2015

Acquired TriAx Corp. as a subsidiary

January 2016
July 2016

Renamed subsidiary Database Communications as PAREL, Inc.
Acquired SOFTBRAIN Co., Ltd. as a subsidiary

December 2016

Changed trade name to Scala, Inc.

December 2016

Merged the subsidiaries Digi-Ana Communications and TriAx Corp. and changed the trade name to Scala Communications Inc.

August 2017

Acquired plube Co., Ltd. as a subsidiary

March 2018

Acquired Leoconnect, Inc. as a subsidiary

October 2018

Acquired Connect Agency Inc. as a subsidiary

November 2018

Established Scala Next, Inc.

December 2018

Established the Scala Next, Inc., Mandalay branch (Myanmar)

July 2019
October 2019
November 2019

Established Scala Partners Inc.
Made a subsidiary of J-Phoenix Research Inc.
Established SCL Capital LLC.

April 2020

Made a subsidiary of Grit Group Holdings Co., Ltd.

June 2020

Invested in MyanCare, a health-tech company in Myanmar that provides remote medical services

August 2020

Established Scala Ace Co., Ltd. as a joint venture with ACE Data Systems Ltd., a major IT company in Myanmar (ownership ratio:
35%)

September 2020

Established Social Studio Inc. as a joint venture with Branding Technology Inc. in order to promote DX to the national and local
governments (ownership ratio: 51%)

November 2020

Developed the reverse public offering proposal service called “Gyaku Propo” specializing in SDGs for companies’ new businessdevelopment

Source: Prepared by FISCO from the Company’s website and the companies’ press releases

In FY6/21, reorganized the business segments into five segments:
the IT/AI/IoT/DX Business, Customer Support Business, HR &Education Business, EC Business, and Incubation & Investment
Business
2. Business description
Following the removal of the SOFTBRAIN Group from the scope of consolidation, the Company reorganized thebusiness segments into the IT/AI/IoT/DX Business (formerly the SaaS/ASP business), Customer Support Business,
HR & Education Business, EC Business, and Incubation & Investment Business in FY6/21.

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04 26

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

Scala, Inc.

11-Oct.-2021

4845 Tokyo Stock Exchange First Section

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

Company profile

On looking at the Group companies responsible for each business segment, the IT/AI/IoT/DX Business is comprised of six companies, centered on Scala Communications, Inc. Of these, Retool, Inc. plans, develops and sells
cloud management tools that visualize the various processes in corporate activities, however, its track record of
introductions is still small and its effects on results is negligible. Also, Social Studio Inc. is a subsidiary establishedin September 2020 as a joint venture with Branding Technology Inc. <7067> in order to support the promotion of
DX and SDGs to the national and local governments.
In addition to the above, Leoconnect, Inc. is engaged in the Customer Support Business, while the three companiesof Athlete Planning, Inc., Sports Stories, Inc. and FourHands, Inc. comprise the HR & Education Business. The
EC Business is conducted by Scala PLAYce, Inc., while the Incubation & Investment Business are conducted by
J-Phoenix Research, Inc., Scala Partners, Inc., SCL Capital LLC, and the SCSV-1 Investment Limited Partnership.
The Group also includes the Company itself as the holding company.
Subsidiaries by business segment and business content
Business segment

IT/AI/IoT/DX Business

Customer Support
Business
HR & Education
Business
EC BusinessSubsidiary

Main business

Scala Communications, Inc.

100.0

Scala Service, Inc.

100.0

Scala Next Inc.

100.0

Development of SaaS/ASP services, offshore development

Connect Agency, Inc.

51.0

Cloud-based PBX services

Retool, Inc.

100.0

Planning, development, and sales of cloud activity management tools

Social Studio Inc.

51.0

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

Leoconnect, Inc.

66.0

Customer support consulting (call center operations, etc.)

Athlete Planning, Inc.

100.0

HR recruiting (new graduate recruiting, mid-career recruiting) support, etc.

Sports Stories, Inc.

100.0

Exercise education, sports school operation, etc.

FourHands, Inc.

100.0

Infant education, community development support, etc.

Scala PLAYce, Inc.

100.0

Management of an EC site for the buying and selling of battletype trading
cards

Scala, Inc.
Incubation &Investment Business

Ownership
ratio (%)-

Provision of SaaS/ASP services

Group head office, holding company functions, investment business

Scala Partners, Inc.

100.0

Innovation, incubation, investment

J-Phoenix Research Inc.

100.0

Value creation management support (creation of analyst and integrated
reports, fund management support)

SCL Capital LLC

100.0

Investment fund management

SCSV-1 Investment Limited Partnership

71.4

Investment fundNote: As of the end of June 2021
Source: Prepared by FISCO from the companies’ securities reports, results briefing materials, and business briefing materials

Looking at the composition of sales by business segment in FY6/21, the IT/AI/IoT/DX Business provided 47.5%,
Customer Support Business 21.0%, HR & Education Business 15.5%, EC Business 15.0%, and Incubation &Investment Business 1.0%. In terms of profits by segment, the IT/AI/IoT/DX Business is the main pillar of profits.

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05 26

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

Scala, Inc.

11-Oct.-2021

4845 Tokyo Stock Exchange First Section

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

Company profile

Composition by business segment (FY6/21)
1.0%

15.0%

47.5%

15.5%

IT/AI/IoT/DX Business
Customer Support Business
HR & Education Business
EC Business
Incubation & Investment Business

21.0%

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

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06 26

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

11-Oct.-2021
https://scalagrp.jp/en/ir/

Company profile

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

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

Content management

Content delivery

Various types of reception

Inquiry management
Member management
Data management
IoT, big data

Product name

Description

i-search

Internal search engine for websites

i-ask

FAQ system

i-catalog

Product site management system

i-linkcheck

Link-loss detection system

i-flow

Progress management and approval system

Hosting services

Hosting services

i-print

Web page printing system

i-linkplus

Service for displaying links to related pages

i-giftDigital gift service

FresheyeSearch portal site

Corporate news

Monitoring important business information

SaaS-type IVR

24-hour, 365-day automated voice response

i-shopnavi

Store reservation support system

Campaign website construction

Campaign website construction and reception

i-assist

Web chatbot system

i-livechat

Web chat system

i-point

Point systems compatible with EC sites

PatentManager6

Latest patent management system

GripManager

Contract operations management system

Safe driving analysis

Processing and management of big data

Source: Prepared by FISCO from the Company’s results briefing materials and website(2) Customer Support Business
The Customer Support Business conducted by Leoconnect provides consulting operations for the management of
inbound call centers (24 bases nationwide), ranging from receiving inquiries about customer companies’ services
and products to follow-up after the response, and its main customers include the HIKARI TSUSHIN Group andits agencies. In addition to launching technologies such as i-livechat, i-assist, and IVR at each call center, theCompany is aiming to improve call center productivity by introducing C7, a new core system jointly developed with
Scala Communications that reflects customer needs (launched in November 2019). Going forward, the Company’s
strategy is to build its own call center and acquire customers outside the HIKARI TSUSHIN Group, and thereby
work to grow the business scale and improve profitability.

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

11-Oct.-2021
https://scalagrp.jp/en/ir/

Company profile(3) HR & Education BusinessIn the HR & Education Business, 65% of sales come from the HR business and 35% of sales come fromthe education business. In the HR business, Athlete Planning provides services including a comprehensive
employment support system for physical education students, a job hunt support service specifically for female
students, a second career support service for professional athletes. Currently, the source of earnings is theplanning and management of corporate joint briefing meetings to recruit new graduates. This service starts sellingexhibition booths to companies in June every year for events scheduled to be held from December to March of
the following year, presenting a seasonal factor for results with earnings concentrated in 3Q. However, amid the
COVID-19 pandemic it has been difficult to hold joint briefing meetings in person, so the Company has been
holding events online.
In the education business, FourHands provides educational services with high added value targeting infants toelementary school students. Its services include the Minna no Hoikuen nursery schools, Universal Kids international
combination day care centers and preschool, UK Academy for cultivating an international sensibility among
schoolchildren, and Largo KIDS day services, such as after-school activities specializing in exercise. Also, Sports
Stories provides sports classes, including the Fine’z baseball schools for children, the BEAUT soccer school, theDunkers basketball schools and Ballschule schools. A feature of these businesses is that they emphasize not only
athletic ability, but also emotional growth.
(4) EC BusinessIn the EC Business, Scala PLAYce buys and sells trading cards for battle-type games, and operates Card Shop
Yuyu-Tei, a reuse EC site with the functions of a capture site. The site has high name recognition in the gaming
industry and is influential to the extent that it is used as a reference indicator for the pricing of used cards, and so
it is known as the industry’s No. 1 EC shop. Many of the purchases on the site are made by overseas users, andstarting in FY6/20, users will be able to purchase from overseas users as well.
(5) Incubation & Investment Business
The Incubation & Investment Business consists of business investment conducted by the Company and regional
revitalization-related services in collaboration with local governments. It also includes engagement in value creation
management support by J-Phoenix Research, new business development by Scala Partners, and regional revitalization-related services centered on the management of the KomfortaWorkation website to introduce workation
facilities. Furthermore, it involves the SCSV-1 Investment Limited Partnership, the value co-creation engagement
fund operated by SCL Capital LLC, and improving the value related to its investments, engagements, etc.
The value co-creation engagement fund invests in listed companies with market capitalization up to ¥10.0bn forwhich ROIC of at least 15% is expected. The amount invested per company is in the ¥100-¥150mn range, andafter making an investment the shares are sold at the stage when the corporate value has reached the expectedlevel. The proceeds from the sale are then used to acquire shares in the next portfolio company.

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08 26

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

11-Oct.-2021
https://scalagrp.jp/en/ir/

Company profile

Aims to differentiate itself from competitors by increasing
convenience through developments from the customer’s perspective
and providing a rich service lineup
3. The Company’s strengths
One of the Company’s strengths in the IT/AI/IoT/DX Business is that it develops services from the customer’s
perspective. It handles most of its business as direct sales and 80% of revenue is from direct salesforces. It improves
service functions and develops new services by listening closely to customer needs and feeding this informationback to its development team, and its development policy is to meet 100% of customer requests. The Company
developed its core i-search and i-ask services thanks to this approach of meeting customer requests and its services
are characterized specially by their ease of use, and this has also enabled it to make smooth progress in expanding
sales to new customers.
Another strength is that the extensive lineup of services developed in this manner differentiates it from its competitors.
The ability to propose multiple services in packages enables the Company to satisfy diverse customer needs, and thiscross-selling helps to raise the average price per customer, boost customer satisfaction, and prevent cancellations.
The Company has done business with over 1,000 companies, including 400 listed companies.
The features of the IT/AI/IoT/DX Business revenue structure are that monthly billing revenue accounts for approximately 60% of revenue, and it has a recurring income-type business model in which monthly revenue builds up inaccordance with the accumulation of service contracts. The Company’s basic policy is to avoid usage-based billingas much as possible and to provide services only from fixed monthly billing (With usage-based billing included, thisbusiness accounts for over 70% of net sales). Also, the main services are maintaining high gross profit margins ataround 80%. A reason for this is that the Company initially develops services customized to customer needs, andthen develops them horizontally as general services, which enables it to keep development costs down as a result.
In the Company, these strengths are ascertained as three capabilities: “the capability to determine real issues”(accurately understanding customer needs in direct sales), “the capability to discover the hidden value of resources”(focusing only on functions that meet needs and developments that create and customize the value of IT resources),and “the capability to maximize value by proposing and executing the optimal combination of issues and resources”(optimization, including of the cloud environment, and dispatching project managers as necessary who will contributeto maximizing the satisfaction of stakeholders). Its strategy is to further strengthen these three capabilities, and as
the value co-creation platform, to realize high growth through developing businesses over a wide range of fields
including not only companies but local governments and overseas markets as well.

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

11-Oct.-2021
https://scalagrp.jp/en/ir/█ Results trends
In FY6/21, revenue increased due to the effects of M&A, but
operating profit declined due to the execution of investment
targeting growth
1. Overview of FY6/21 results
In the FY6/21 consolidated results, revenue increased but profits decreased, with revenue rising 14.6% YoY to¥8,734mn, operating profit declining 3.0% to ¥220mn, and profit before tax falling 7.2% to ¥188mn. Profit attributable to owners of parent increased 854.4% to ¥3,065mn due to the posting of a ¥2,770mn gain on the sale of
SOFTBRAIN’s shares.
FY6/21 consolidated results (IFRS)(¥mn)
FY6/20FY6/21Resultsvs. revenue

Company forecast

Resultsvs. revenue

Revenue

7,624-

9,000~12,000

8,734

-

YoY

Cost of sales

4,757

62.4%

-

5,098

58.4%

7.2%

SG&A expenses

2,603

34.1%

-

3,505

40.1%

34.7%

Other income/expenses

-36

-0.5%

-

90

1.0%

-

Operating profit

227

3.0%

100~500

220

2.5%

-3.0%

Profit before tax

203

2.7%

100~500

188

2.2%

-7.2%

Profit attributable to ownersof parent

321

4.2%

2,700~3,100

3,065

35.1%

854.4%

14.6%

Note: FY6/20 results are results for ongoing businesses and exclude SOFTBRAIN and its subsidiaries
Source: Prepared by FISCO from the Company's financial results

The main factors for the increase in revenue were the HR & Education Business, which was added to the consolidated scope from FY6/20 4Q, having an impact of adding ¥1,137mn of revenue, while the EC Business, which
operates the trading card game trading site performed well with a positive ¥325mn effect. Meanwhile, the mainstay
IT/AI/IoT/DX Business saw only a minor increase in revenue due to the impacts of the COVID-19 pandemic. For
operating profit, although profits increased in the EC Business, all of the other business segments saw a decline inprofit or a loss. Each business is establishing a platform targeting the construction of a growth foundation, and theincrease in upfront investment costs was the factor for the Company-wide decline in profit. Although revenue fellslightly short of the low end of the Company’s forecast range, each profit line was within the Company’s forecasted
ranges.

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10 26

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

Scala, Inc.

11-Oct.-2021

4845 Tokyo Stock Exchange First Section

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

Results trends

Revenue by business segment
FY6/20FY6/21（¥mn）
5,000
4,123 4,146

4,000
3,000
2,261

1,837

2,000

1,353

1,311
986

1,000
216

37

84

0
IT/AI/IoT/DX
Business

Customer Support HR & Education
Business
Business

EC Business

Incubation &Investment
Business

Source: Prepared by FISCO from the Company's financial resultsOperating profit by business segment
FY6/20

（¥mn）
1,000
800

832

FY6/21

756

600
400
200

95

29

162

0
-12

-200

-139 -144-400-383 -387-600

IT/AI/IoT/DX
Business

Customer Support HR & Education
Business
Business

EC Business

Incubation &Investment
Business

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

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11 26

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

11-Oct.-2021
https://scalagrp.jp/en/ir/

Results trends

Strong performance in the EC Business with double-digit increases
in both revenue and profits, while the core IT/AI/IoT/DX Businessposted higher revenue but lower profit due to proactive investment
2. Trends by business segment(1) IT/AI/IoT/DX BusinessIn the IT/AI/IoT/DX Business, revenue increased 0.6% YoY to ¥4,146mn and operating profit declined 9.1% to¥756mn. Due to the COVID-19 pandemic, companies reduced costs, contracted contact center operations, andsuspended or postponed marketing campaigns, which led to cancellations of some related services. As a result,revenue declined through 2Q. However, from 3Q onward, the rise in demand for operating efficiency improvements
using DX resulted in firm performance by mainstay services, and the Company posted sales for a number of otherprojects, including the development of digital platforms using the “xID” app linked to My Number Card, a contract
for the annual management of “Yell-Lab Ehime,” the DX promotion platform in Ehime Prefecture, and the partial
completion of the additional development of a driving safety support service for Sompo Japan Insurance. As aresult, the business achieved an increase in revenue for the full fiscal year.
Looking at revenue by type, monthly billing revenue declined slightly by 2% YoY due to cancellations of somerelated services caused by the COVID-19 pandemic. Meanwhile, revenue from usage-based billing increased 11%
YoY due to the increase in the use of “i-gift” and revenue from system development projects, which is recordedin temporary revenue, increased 3%. It can be said that despite the COVID-19 pandemic, revenue from monthly
billing and revenue and usage-based billing were stable. However, major companies continued to newly introduce
mainstay services such as i-ask, i-assist, and i-livechat.
Profits declined due to a variety of aggressive investments targeting business expansion (securing humanresources for launching new businesses, obtaining young, entrepreneurial human resources and promoting
communication with young venture companies).
New initiatives include the launch and start of operations of “Local Government DX Workshop” to share knowledge
and technologies with the aim of solving issues faced by local governments through DX, as well as tackling thecorporate value creation of client companies through combining DX support with the know-how related to value
co-creation management support, including investor relations.

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12 26

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

Scala, Inc.

11-Oct.-2021

4845 Tokyo Stock Exchange First Section

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

Results trends

Breakdown of revenue and operating profits
in the IT/AI/IoT/DX Business (quarterly ）Monthly billing revenue
Temporary revenue（¥mn）

Usage-based billing revenue
Operating profit

1 , 168

1,200
1 , 001
1,000

969

405

843
298

800
256
600

1 , 161112

134

1 , 030 1 , 021 1 , 048 1 , 023

1 , 053

957

975
382

202

252

230

280

252

187

195

134

135

149

121

122

128

151

156

277
152

61
623

629

400

526
200

249

589
234

633
352
204

642

243

640

2Q

3Q

4Q

1Q

FY6/19

648

641

178

140

129

132

2Q

3Q

4Q

1Q

0
1Q

646

FY6/20

628
173
2Q

625
292
159
3Q

4Q

FY6/21

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

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

Product

Description

Customers

Information
searchesi-search

Internal search engine forwebsites

Tokio Marine Nichido Anshin Life Insurance Co., Ltd., Meiji Yasuda Asset Management
Company Ltd., Sunstar Inc., KAJIMA CORPORATION, ipet Holdings, Inc., Sunplanet Co.,
Ltd., KING RECORD Co., Ltd., Chitose City, Atsugi City

Content
managementi-ask

FAQ system

ROHTO Pharmaceutical Co., Ltd., MEGMILK SNOW BRAND Co., Ltd., SANYO DENKI
CO., LTD., DIAMOND, Inc., JAPAN POST BANK Co., Ltd., Joshin Denki Co., Ltd.,TOSHIBA LIFESTYLE PRODUCTS & SERVICE CORPORATION, The Bank of Okinawa,Ltd., Toppan Inc., KOIKE-YA Inc., NH Foods Ltd.

i-assist

Web chatbot system

NIHON L'ORÉAL K.K., Sumitomo Life Insurance Company

i-livechat

Web chat system

Chubu Electric Power Miraiz Company, Incorporated, The Bank of Okinawa, Ltd., Toppan
Inc.

Inquiries
management

Source: Prepared by FISCO from the Company’s results briefing materials and the companies’ press releases(2) Customer Support BusinessIn the Customer Support Business, revenue decreased 18.8% YoY to ¥1,837mn and operating loss was ¥12mn(operating profit of ¥29mn in previous fiscal year). The factors causing revenue and profit to fall were that during the
COVID-19 pandemic, which has become prolonged, conventional call center operations for sales of new productsof companies in the HIKARI TSUSHIN Group declined, and the Company struggled to acquire new customers.
The Company has positioned the FY6/21-FY6/22 period as the transition period for transforming the earnings
structure, and it is advancing an expansion strategy. Specifically, the Company is working to make its services in
the customer support domain high value-added services, such as building a call center with a high profit margin.
In addition, it is aiming to strengthen profitability by incorporating the highly price-competitive BPO service forpeople with disabilities developed by its capital and business partner VALT JAPAN CO., LTD. into its call center
management operations.

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13 26

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

Scala, Inc.

11-Oct.-2021

4845 Tokyo Stock Exchange First Section

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

Results trends

Trends in quarterly results in the Customer Support Business
Revenue (left)（¥mn）

Operating profit (right)
（¥mn）

800

30

740
656

685

663
554

549

600

577

581

546

14
10

9

9

8

400
4

3

20
492
410

389

10

2

200

0

-4

-6

-7

-9

0

-10
1Q

2Q

3Q

4Q

1Q

2Q

FY6/193Q

4Q

1Q

FY6/202Q

3Q

4Q

FY6/21

Source: Prepared by FISCO from the Company's results briefing materials(3) HR & Education BusinessIn the HR & Education Business, revenue was ¥1,353mn and operating loss was ¥144mn. In the HR business,conditions remained challenging as the COVID-19 pandemic made it challenging to hold in-person new graduate
recruiting events, including joint briefing sessions held from winter through spring. However, the Company kept the
impact to a minimum with online-based alternatives and other means, while also engaging in new sales activities
augmenting its sales framework, which helped to blunt the negative impacts. Meanwhile, in the education business, although the Minna no Hoikuen nursery school and the international combined daycare center and preschool
Universal Kids performed well, some educational services were impacted by the COVID-19 pandemic. However,efforts to prop up sales and strengthen human resources referrals helped to turn results to an operating profit in
4Q, and earnings are otherwise on a recovery trend.

Trends in quartery results in the HR & Education Business
Revenue (left)

Operating profit (right)

（¥mn）

（¥mn）

500

200
103

68

400
300

0

-54

200

100

-81
388

363

-100
333

269
100

-200

180
-234

0
4Q

1Q

-300

2Q

FY6/203Q

4Q

FY6/21

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

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

14 26

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

11-Oct.-2021
https://scalagrp.jp/en/ir/

Results trends(4) EC BusinessResults were strong in the EC Business, with revenue increasing 33.0% to ¥1,311mn YoY and operating profit
growing 71.3% to ¥162mn. In addition to the expansion of online trading needs supported by stay-at-homedemand amid the COVID-19 pandemic, efforts including increasing the usability and convenience of the EC siteand optimizing it for mobile phones had positive impacts. Regarding profits, in addition to the effects of the higher
sales, an AI image processing system for automating card identification and pricing was introduced, contributing
to the increased efficiency of back-end operations and improvements in profitability.

Trends in quarterly results in the EC Business
Revenue (left)

Operating profit (right)
（¥mn）

（¥mn）
353

360
308
300
240

217
196

213

232

251

237

28

180
21

24

120

50

55
46

40
31

30

27

30

22

21

60

312

261

237

338

18

20

14

60

10

0

0
1Q

2Q

3Q

4Q

1Q

FY6/192Q

3Q

FY6/20

4Q

1Q

2Q

3Q

4Q

FY6/21

Source: Prepared by FISCO from the Company's results briefing materials(5) Incubation & Investment Business
Incubation & Investment Business revenue increased 127.6% YoY to ¥84mn, while operating loss was ¥387mn(operating loss of ¥383mn in previous fiscal year).
Revenue grew alongside steady increases in sales for value creation management support and DX support
projects by J-Phoenix Research, and Scala Partners’ workation service*1 also contributed. In addition, as the firstinvestment by the SCSV-1 Investment Limited Partnership, in December 2020 it invested in ARCHITECTS STUDIOJAPAN INC. <6085> (hereafter, ASJ) which operates an architect matching service*2. J-Phoenix Research isproviding ASJ with value co-creation-type management support, including to promote DX, and IR strategy support.
At the same time, it is working to improve its enterprise value, such as by building a DX platform for optimal
matching, providing online marketing tools, and jointly developing CRM solutions that utilize IT for architects,
construction stores, construction material manufacturers, and owners of facilities.
*1	A service to provide experiences that connect regions and people through excellent worksites and new work, and it
mainly entails managing the KomfortaWorkation website that introduces workation facilities.
*2	Total investment amount of ¥98mn, 108,000 shares acquired, 6.2% of voting rights, ¥913 per share.

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15 26

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

Scala, Inc.

11-Oct.-2021

4845 Tokyo Stock Exchange First Section

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

Results trends

Trends in quarterly results in the Incubation & Investment Business
Revenue (left)

Operating profit (right)
（¥mn）

（¥mn）
50
40

-21

0

-28

-47

-56

-81
30

-40
-72

-89

-80

-100
49

20

-120
26

22

10

27
21

10

2

-187

0

-160
-200

4Q

FY6/19

1Q

2Q

3Q

4Q

1Q

FY6/202Q

3Q

4Q

FY6/21

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

As a measure to support the DX of local governments, the Company released a reverse public offering proposal
service called “Gyaku Propo”, which is a public-private co-creation platform service co-created with Public dots &Company, and two projects have already been adopted, while four local governments are advancing initiatives
with the platform. Gyaku Propo is a service private-sector companies, such as large or start-up companies, can use
when they want to speedily implement measures, such as ascertaining demand trends and verifying hypotheses,
for a new business that solves social issues. In a conventional public offering proposal, a company aiming to
win a project submits a project plan to a soliciting local government with a budget, and a third party evaluatesand selects a winner. Conversely, in Gyaku Propo, a company openly solicits local governments who may want toparticipate in the theme for solving social issues that the company plans while shouldering the costs itself. Local
governments that can participate prepare and submit proposal documents, such as demonstration experiments,
in accordance with the theme. As multiple local governments may be selected, companies can also conduct many
demonstration experiments. Budgets for the projects will be paid to selected local governments by companies
participating in the public offering in the form of “donations.”

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16 26

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

11-Oct.-2021
https://scalagrp.jp/en/ir/

Results trends

Differences between reverse public offering and conventional public offering proposals

Source: Reprinted from the Company’s press release

As the first Gyaku Propo project, five local governments entered an open call for participants for a project on thetheme of “Realizing a safer transportation environment and society” brought forth by E.design Insurance Co.,
Ltd. After considering the applicants, Kobe City and Hino Town, Shiga Prefecture, were selected. Going forward,
Kobe City is advancing a project on the theme of “Building a framework to disseminate information towardeliminating traffic congestion at Kikuseidai, Mt. Mayasan,” while Hino Town is working on a project on the themeof “Promoting the safe use of bicycles through safety classrooms and cycling events.” E.design Insurance usedGyaku Propo in order to advance specific initiatives to “realize a safer traffic environment and society” together withlocal governments as part of its CSR initiatives. The open call for the second project has been completed, andtwo local governments have been selected. As of August 2021, proposals for three projects have been received.
Revenue from Gyaku Propo is limited, but there are possibilities related to developing systems used by projects, while
the Company’s strategy is to grow revenue by increasing cases in which the Company acquires opportunities toreceive orders for other system development projects from the participating local governments. In fact, thanks tomatchings through Gyaku Propo, the Company has received an order to develop a COVID-19 vaccination registration
system and to carry out a demonstration experiment on a vaccination reservation system using the My Number
Card for Hino Town, Shiga Prefecture.

Plans to actively invest the funds from the sale of SOFTBRAIN
shares
3. Financial condition and business indicators
Looking at the financial condition at the end of FY6/21, total assets were down ¥4,582mn compared to the endof the previous fiscal year to ¥20,330mn. In current assets, mainly due to the classification of SOFTBRAIN as a
discontinued business, cash and cash equivalents increased ¥1,986mn and trade and other receivables declined¥2,043mn. In non-current assets, SOFTBRAIN-related goodwill decreased ¥5,136mn, while right-of-use assets
increased ¥816mn. In addition, securities related to investment business increased ¥202mn due to securities
investment by the Incubation & Investment Business.

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17 26

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

11-Oct.-2021
https://scalagrp.jp/en/ir/

Results trends

Total liabilities were down ¥4,710mn compared to the end of the previous fiscal period to ¥9,859mn. Mainly due toclassifying SOFTBRAIN as a discontinued business, trade and other payables fell ¥1,622mn, while interest-bearing
debt declined ¥2,658mn. Total equity increased ¥127mn to ¥10,470mn. While non-controlling interests decreased¥2,631mn, equity attributable to owners of parent increased ¥2,759mn.
Looking at management indicators, the ratio of ownership attributable to owners of parent increased significantly
from 29.7% at the end of the previous fiscal year to 50.0%, while the interest-bearing debt ratio fell from 116.6% to58.8%. Net cash (cash and cash equivalents – interest-bearing debt) turned positive for the first time in two years,
improving significantly by ¥4,645mn from the end of the previous fiscal year to ¥3,835mn. The Company plansto utilize the funds acquired from the sale of SOFTBRAIN shares for new investment and to allocate some of it to
repay borrowings. Although profitability is at a low level, this is because the Company has positioned it as a period
for upfront investment targeting mid-term growth, and over the medium to long term the Company is aiming for an
operating margin of 10%.
Consolidated statement of financial position (IFRS)(¥mn)
FY6/18

FY6/19FY6/20FY6/21

Change
1,210

8,120

10,165

11,78012,991(Cash and cash equivalents)

4,950

6,393

7,822

9,809

1,986

(Trade and other receivables)

2,840

3,251

3,456

1,412

-2,043Current assets

8,112

8,529

13,132

7,338-5,793(Goodwill)

5,787

6,192

7,086

1,949

-5,136

Total assets

16,233

18,69424,912

20,330-4,582

Total liabilities

7,587

9,086

14,5699,859-4,710

4,793

5,978

8,632

5,973

-2,658

8,645

9,608

10,343

10,470127(Equity attributable to owners of parent)

6,448

7,010

7,402

10,162

2,759(Non-controlling interests)

2,196

2,597

2,940

308

-2,631

Ownership ratio attributable to owners of parent

39.7%

37.5%

29.7%

50.0%

20.3ptInterest-bearing debt ratio

74.3%

85.3%

116.6%

58.8%-57.8pt

ROE

11.4%

14.1%

4.5%

34.9%

30.4pt

ROA

9.9%

12.2%

0.9%

0.8%

-0.1ptOperating margin

12.1%

12.6%

3.0%

2.5%

-0.5ptNon-current assets(Interest-bearing debt)
Total equity

Indicators(Stability)(Profitability)

Note: FY6/20 and FY6/21 management indicators are on an ongoing business basis
Source: Prepared by FISCO from the Company's financial results

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18 26

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

11-Oct.-2021
https://scalagrp.jp/en/ir/█ Outlook
The outlook for FY6/22 is for both revenue and profits to increasesignificantly due to the expansion of existing businesses and theexecution of M&A
1. Outlook for FY6/22
For the FY6/22 results outlook, the Company has announced forecasts with ranges based on the fact that theCompany is considering carrying out M&A. For FY6/22 results, the Company is forecasting a large increase in bothrevenue and profits, expecting revenue from ¥12,000mn to ¥20,000mn (up 37.4% - 129.0% YoY), operating profit
from ¥450mn to ¥1,200mn (up 102.4% - 444.6%), and profit before tax from ¥400mn to ¥1,150mn (up 112.1% to509.8%). The Company is forecasting profit attributable to owners of parent of ¥300mn to ¥800mn (down 90.2%- 73.9%), with the YoY decline resulting from the fact that a gain on the sale of SOFTBRAIN shares was booked in
the previous fiscal year.
Concerning existing businesses, the Company is expecting double-digit YoY increases in both revenue and profit byblooming the seeds of the growth strategy that the Company worked on through FY6/21. In addition, the Company
plans to accelerate the earnings growth through M&A. The Company has not disclosed the monetary impact of
M&A on earnings, but it appears that the bottom end of the range values includes some degree of M&A impact.
The targets of M&A and business and capital alliances will be discovered and narrowed down through internal andexternal networks and independent surveys, and will be advanced at a pace of about 10 deals per year, including
co-creation and collaboration. Specific examples include IT companies that have technological capabilities for whichsynergies are expected to be generated, and companies that are expected to increase their corporate value by
utilizing the technological capabilities of the Company.
FY6/22 consolidated results forecast (IFRS)(¥mn)
FY6/22

FY6/21Results

Company forecast

8,734

12,000~20,000

37.4%~129.0%

Operating profit

220

450~1,200

104.2%~444.6%

Profit before tax

188

400~1,150

112.1%~509.8%

Profit attributable to owners of parent

3,065

300~800-90.2%~-73.9%

Basic earnings per share (¥)

174.6217.05~45.46

Revenue

YoY

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

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

19 26

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

Scala, Inc.

11-Oct.-2021

4845 Tokyo Stock Exchange First Section

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

Outlook

The plans for initiatives in each business segment going forward are as follows.
(1) IT/AI/IoT/DX BusinessIn the IT/AI/IoT/DX Business, the Company is aiming for double-digit annualized growth with new services andacquiring new contracts stemming from other businesses to increase recurring revenue, as well as by capturing
large projects in contracted development and by acquiring projects in consigned development that will lead to new
businesses. Looking at the number of contracts by service, the Company expects the number of contracts forthe i-series, which accounts for approximately 70% of current revenue, to increase 6.2% YoY to 2,550 contracts.
Meanwhile, the Company expects enterprise contracts (custom projects) which are somewhat high in unit priceto increase 15.2% to 190 contracts, and co-creation projects and other large projects to increase 29.6% to 35
projects. For co-creation projects, multiple deliveries are scheduled in the ongoing safe driving assistance projectfor Sompo Japan Insurance. Also, the “Real Estate Trust DX Platform,” an electronic contract platform using ID
verification utilizing “xID” which the Company has started to develop jointly through a business partnership with
Shinoken Group <8909> in FY6/21 will contribute to revenue. In July 2021, the Company started applying it from“contract” procedures, and going forward the Company will partner with financial institutions to make it possible
to complete financing applications on the platform, and in the future the Company plans to add functions forsettlement and registration related to real estate transactions.
As the number of companies working to improve operational efficiency and customer service through DX isincreasing, the Company plans to capture this demand. In co-creation projects, the unit price per customer is
expected to increase by not only contracting for system development, but also by proposing the introduction of
the i-series in marketing and CRM. Also, in the future, the Company plans to provide its own services in the fieldof health management. Regarding the IT/AI/IoT/DX Business, the Company expects an annual growth rate ofabout 15% in the medium term due to continued strong DX needs from companies and local governments, aswell as the Company’s efforts to enhance its services.
Number of contracts by service
FY6/22

Price

Cancellation
rate

FY6/21Results

Forecast

i-series

Approx. ¥100,000/month

Under 7%

2,401

2,550

Enterprise

Approx. ¥300,000/month

Under 2%

165

Co-creation

Over 2 million/month0%27

FY6/25YoY

Forecast

vs. FY6/21

6.2%

3,000

24.9%

190

15.2%

250

51.5%

35

29.6%

100

270.4%

Source: Prepared by FISCO from the Company's results briefing materials(2) Customer Support BusinessIn the Customer Support Business, the Company will work to increase added value to its services in the customer
support domain. Specifically, the Company will strive to enhance convenience and improve productivity, and aim
to grow the business scale and improve profitability by reducing low-profit projects and building high profit margin
call centers and combining it with the Group’s products and services.
With respect to FY6/22, the Company will continue to review projects with low profitability, so while the Company
aims to maintain its current level of revenue, it expects operating profit to become positive on a monthly basis,and be around the breakeven point for the full fiscal year. Looking at the number of call center seats, while thenumber of call center seats for handling traditional consulting will decline from 300 seats in FY6/21 to 200 seats
in FY6/22 and 100 seats in FY6/25, the in-house call center that the Company will newly launch will be expandedfrom 50 seats in FY6/22 to 500 seats in FY6/25. As a result, the Company aims to increase the total number ofseats from 300 in FY6/21 to 600 seats in FY6/25, and aims to increase the number of contracts from 250 to 500.

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

20 26

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

Scala, Inc.

11-Oct.-2021

4845 Tokyo Stock Exchange First Section

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

Outlook

Number of call center seats and contracts

Number of call center seats for consulting

Forecast

300

200

0
250

Number of in-house call center seats
Number of customer support contracts acquired

FY6/22

FY6/21Results

FY6/25YoY

Forecast

vs. FY6/21-33.3%

100-66.7%

50

-

500

-

300

20.0%

500

100.0%

Source: Prepared by FISCO from the Company's results briefing materials(3) HR & Education BusinessAmong the HR & Education Business, in the HR business the Company will work to increase the number ofregistered job seekers by new graduate recruiting and human resources referral service. The Company plans forthe number of physical education to increase from 17,000 in FY6/21 to 18,000 in FY6/22, for the number of new
graduate women students to increase from 13,000 to 14,000 students, and for the number of job seekers via
human resources referral to increase from 7,000 to 8,000 people. The Company will work to increase the numberof people registered by getting more placement requests from companies with strong brand power. Also, thenumber of hiring-related events, which was struggling due to the COVID-19 pandemic, is expected to recoverfrom 72 in FY6/21 to 80 in FY6/22 while continuing to hold online events.
Through these initiatives, the Company expects growth to continue in the HR business which the Company has
been focusing on since FY6/21 2H, and forecasts higher revenue and a turn to positive operating profit in FY6/22.
Heading towards FY6/25, the Company plans to focus on increasing the number of people registered among new
female graduates and job seekers through personnel referrals. Meanwhile, the Company expects stable growthin physical education students due to the fact that the registration rate is already at a high level.
Number of registered job seekers and number of hiring-related events held
FY6/22

FY6/21Results

Forecast

Number of job seeker registrations(new graduates of physical education schools)

17,00018,000

Number of job seeker registrations(new female graduates)

13,000

Number of job seeker registrations(human resources referral)
Number of hiring-related events held

FY6/25YoY

Forecast

Vs. FY6/21

5.9%

21,00023.5%

14,0007.7%

22,000

69.2%

7,000

8,000

14.3%

14,000100.0%

72

80

11.1%

110

52.8%

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

Meanwhile, in the education business, the Company will expand the business scale and increase the stability ofearnings by not only operating its own day care centers and preschools, but also by leveraging its know-how
to operate day care centers and preschools for customers on a contract basis. For the daycare centers andpreschools that it operates itself, the Company plans to increase the number of facilities from six facilities in FY6/21
to seven facilities in FY6/22. Also, one facility will outsource operations to the Company, and it appears that theCompany has received multiple inquiries from other interested parties. Via real estate developers, the Company
is seeing in increase in demand from real estate owners who want to utilize tenant space in condominiums for
day care centers and preschools. In addition, the Company plans to make progress on developing and selling
educational content as well as providing licenses, and the Company’s strategy is to steadily grow the businessscale while partnering with regional co-creation-related services.

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

21 26

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

11-Oct.-2021
https://scalagrp.jp/en/ir/

Outlook

Number of daycare centers and preschools operated by the Company and number offacilities operated on a contract basis
FY6/22

FY6/21Results

Forecast

Number of daycare centers and preschools operated
by the Company

6

7

Number of facilities operated on a contract basis

01

FY6/25YoY

Forecast

vs. FY6/21

16.7%

8

33.3%

-

5

-

Source: Prepared by FISCO from the Company's results briefing materials(4) EC BusinessIn the EC Business, the Company expects both revenue and profits to grow by double digits again in FY6/22.
The Company will work to increase the number of members and the number of cards sold through ongoing
improvements to the EC site “Yuyu-Tei” and by bolstering marketing. Also, the Company will improve profitability by
improving fulfillment operations. In terms of the number of members, the Company aims to increase membershipfrom 140,000 people in FY6/21 to 180,000 people in FY6/22, and then to 230,000 people in FY6/25, as theCompany strives for additional growth as Japan’s largest trading card game EC shop.
The Company is also considering opening physical stores targeting business scale expansion. Because physicalstores will be able to purchase trading cards directly from manufacturers, the Company expects that this will
enhance the product lineup and increase sales opportunities. For the future, the Company is also looking into thepossibility of producing card games related to the Group’s educational content.
Number of members of EC site Card Shop – Yuyu-Tei

Members

FY6/22

FY6/25

FY6/21Results

Forecast

YoY

Forecast

vs. FY6/21

140,000

180,000

28.6%

230,000

64.3%

Source: Prepared by FISCO from the Company's results briefing materials(5) Incubation & Investment Business
J-Phoenix Research is approaching around 200 companies per year on an ongoing basis, and the Company will
work to acquire value creation management support projects and DX support projects, as well as carry out M&A
and capital and business tie-ups.
Meanwhile, there is an extremely high level of interest in Gyaku Propo among companies engaging in new businessdevelopment and local governments, and the Company expects to obtain more projects. In FY6/22, the Company
plans to turn these projects profitable as well as obtain system development projects stemming from matchings. In
FY6/21, there were two projects for Gyaku Propo that led to matching contracts, and the Company aims to increase
this to 15 projects in FY6/22 and 30 projects in FY6/25. Likewise, the Company expects the number of systemdevelopment projects stemming from matchings to increase from one project in FY6/21 to 30 projects in FY6/25.
Track record of matching through Gyaku Propo and forecast
FY6/22

FY6/21Results

Forecast

Number of matches

2 projects

15 projects

Number of matched local public entities (total)

4 entities

Development projects stemming from matching

1 project

FY6/25YoY

Forecast

vs. FY6/21

7.5x

30 projects

15x

15 entities

3.75x

100 entities

25x

3 projects

3x

30 projects

30x

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

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

22 26

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

11-Oct.-2021
https://scalagrp.jp/en/ir/

Outlook

Examples of Gyaku Propo
Proposing company

Objective

Theme

StatusE.design Insurance Co., Ltd.

New business“Realizing a safer transportation environment and society”
development, CSR/CSVOpen callconcluded

WirelessGate, Inc.

New businessdevelopment

Gap between “ideal” public services and the “current situation”

Open callconcluded

DoctorMate Inc.

New businessdevelopment

Creating new systems in local governments/hospitals/nursing care facilities
in order to realize an “appropriate nighttime emergency transport model”

Open callconcluded

FamiOne, Inc.

New businessdevelopment

Creating towns and cities that are conducive to living and working in fromthe perspective of “Trying to conceive x urban development”

Open callconcluded

Information Services
International-Dentsu, Ltd.

New businessdevelopment

About “urban development measures using social scores” with the
purpose of generating related population

Open callconcluded

Source: Prepared by FISCO from Gyaku Propo website

In the mid-term management plan, is targeting revenue of ¥500bn
and operating profit of ¥50bn in FY6/30
2. Mid-term management plan
In the Company’s COMMIT5000 mid-term management plan running up to 2030 which it announced in August 2019,the basic policy is to utilize the Company’s strengths, which are its three capabilities of “determining real issues”(the value creation support business), “discovering the hidden value of resources,” (the AI/IoT/IT-related business),and “maximizing value by proposing and executing the optimal combination of issues and resources,” (the social
issue-solving business), and the strategy is to aim for mid- to long-term growth while linking these capabilities
together. In terms of numerical targets, the Company projects revenue of ¥100bn and operating profit of ¥10bn for
FY6/25, while it projects revenue of ¥500bn and operating profit of ¥50bn in FY6/30.
Considering the FY6/21 revenue of ¥8,734mn and operating profit of ¥220mn, these may seem to be lofty targets.
However, the Company’s aim is to grow and deepen existing businesses through its growth model of working
with joint-development partners to build “models” for “value creation management support + DX support” andthen horizontally developing this model. In addition, the Company’s strategy is to accelerate growth by proactively
advancing M&A as well as new business development. In addition, growth factors will be the acquisitions of capitalgains from the investment fund and the accumulation of recurring-type income from building IT systems for thecompanies it invests in and the provision of various services. The Company is positioning the provision of services tolocal governments lagging behind in DX as a growth field, and plans to accumulate orders while building a network
through Gyaku Propo. In order to execute these growth strategies, the Company has been investing proactively since2020, and expects the benefits of these efforts to emerge in FY6/22 and thereafter.

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

23 26

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

11-Oct.-2021
https://scalagrp.jp/en/ir/

Outlook

Key investments madeBusiness description

Reason for investment

Investment details

VALT JAPAN Co., Ltd.

Portfolio company

BPO business specializing in persons withdisabilities, support for hiring persons withdisabilities, etc.

To develop a social issue-solving business
related to work by persons with disabilities

Invested ¥22mn through capital increase
via third-party allotment

xID Inc.

Digital ID solutions using My Number
Card, etc.

In order to develop business related todigitalization of government administration
and regional areas

Acquired shares through capital increase
via third-party allotment (Feb. 2020)

MyanCare Co., Ltd.

Remote healthcare service in Southeast
Asia, etc.

In order to develop a social issuesolving business related to healthcare in
Southeast Asia

Investment through capital increase via
third-party allotment (June 2020)

Branding Technology Inc.

Branding support, digital marketingbusiness, etc.

In order to develop regional revitalization
through the branding of regional
companies

Established Social Studio Inc. as a joint
venture (Sept. 2020, ownership ratio: 51%)

ARCHITECTS STUDIOJAPAN INC.

Networking connecting architects andmember construction companies, etc.

In order to develop new businesses
through co-creation

Acquired 6.23% of shares for ¥98mn
through capital increase via third-party
allotment (Dec. 2020)

TRUVA Group Holdings,
Inc.

Movable property valuation and other
ABL-related services, M&A/businesssupport, agriculture, etc.

Engaged in regional revitalization via
regional financial institutions, deeply
cultivating IoT needs especially in the
agriculture and livestock industries

Established Scala Truva, Inc. as a joint
venture (May 2021, ownership ratio: 70%)

AGBIOTECH Co., Ltd.

Natural cultivation-related business,
system development, etc.

In order to develop a social issue-solving
business related to agriculture-

Cookbiz Co., Ltd.

Fee-based work referrals specializing in
the food-related industry, operation of job
posting site, training, etc.

In order to develop new businesses
through co-creation

Acquired 1.06% of shares for ¥30mn
through capital increase via third-party
allotment (Aug. 2021)

readytowork Co., Ltd.

Web system planning, development andoperation

Has a development base in Nepal. Will
strengthen the Group development
framework and turn this into a subsidiary
anticipating IT services development in
Nepal.

Acquired all shares and converted into a
subsidiary (Aug. 2021)

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

Also, given the fact that it is a growth field, competition with respect to the Company’s IT/AI/IoT/DX Business isfierce, but by integrating the Group’s comprehensive IT/AI/IoT capabilities, the consulting know-how of J-Phoenix
Research which is an expert in value creation for listed companies, and the resources of Public dots & Company
which is an expert in value creation for local governments, the Company thinks that it can differentiate itself fromits competitors, and is aiming for significant growth over the next 10 years. The policy for the overseas market is toproceed with caution given the increasing uncertainty in the global situation, but the plan is to continue to develop
the social issue-solving business, focusing on Southeast Asia, on the themes of medical and health, agriculture
and food, and education fields.
Overview of mid-term management plan COMMIT5000

Source: The Company's results briefing materials

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

24 26

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

Scala, Inc.

11-Oct.-2021

4845 Tokyo Stock Exchange First Section

https://scalagrp.jp/en/ir/█ Shareholder return policy
Emphasizes returning profits to shareholders, aims to keepincreasing dividends going forward
The Company’s basic shareholder return policy is to stably and continuously pay dividends while also securing
the internal reserves necessary to strengthen its financial structure and develop its businesses in the future, andthe Company aims to continually increase dividends under this policy. For FY6/21, the Company paid a year-end
dividend of ¥16.0 and an additional dividend increase of ¥2.0, as the Company commemorated the 30th anniversaryof its founding and returned a portion of the profits earned from investments. With this, the FY6/21 annual dividend
increased ¥6.0 YoY to ¥34.0. For FY6/22, the Company expects to increase the dividend ¥2.0 YoY to ¥36.0 per
share, which will mark the 13th consecutive period it has increased the dividend.
With respect to the Tokyo Stock Exchange’s new market segments, which will go into effect from April 2022, theCompany has chosen to switch to the Prime Market in order to realize its mid-term management plan and meetthe high expectations and demands of the capital market. After confirming that it was in compliance with the Prime
Market’s listing maintenance criteria, the Company submitted its application in September 2021. In addition, in orderto strengthen its governance system, the Company plans to pass a resolution at the general meeting of shareholders
scheduled to be held in September 2021 to transition from a company with audit and supervisory board members
to a company with a three committees (nomination, audit and remuneration).

Dividend per share
（¥）

40.0

30.0

20.0

10.0

20.0

34.0

36.0

FY6/21

FY6/22 E

28.0

24.0

0.0
FY6/18

FY6/19FY6/20Source: Prepared by FISCO from the Company's financial results

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

25 26

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

Scala, Inc.
4845 Tokyo Stock Exchange First Section

11-Oct.-2021
https://scalagrp.jp/en/ir/█ Information security measure
The Company’s mainstay business is SaaS/ASP services that utilize the internet, so information security is one ofits most important management issues. In terms of specific measures, all Group companies have obtained and willcontinue to maintain ISO/IEC27001 certification, which is the international standard for information security, and to
implement information security measures incorporating a global-standard third-party perspective. They also strive
to thoroughly manage the information assets owned by the Group based on an internal management system. Theyuse in-house servers and some private clouds for the information system, while also constructing backup systems.

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

26 26

Disclaimer
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however, FISCO does not warrant the accuracy, completeness, fitness nor reliability of thecontents of this report or the said information.
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◾ For inquiry, please contact: ◾

FISCO Ltd.
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Phone: 03-5774-2443 (IR Consulting Business Division)
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