Presentation Material for
FY04/2023 Full Year Financial Results
June 9,2023
HEROZ, Inc. ｜4382｜

NoticeThis document is an excerpt translation of the original Japanese document and is only
for reference purposes. In the event of any discrepancy between this translated
document and the original Japanese document, the latter shall prevail.

Contents
1. Financial Highlights
2. FY04/2023 Full Year Performance (Consolidated)
3. FY04/2024 Forecast
4. Introduction of Shareholder Special Benefit Plan

5. Initiatives in each business segment
6. HEROZ Group Structure
7. Reference Materials© 2023 HEROZ Co., ltd.

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01
Financial Highlights© 2023 HEROZ Co., ltd.

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※Consolidated financial statements are disclosed from this fiscal year. Please note that previously nonconsolidated financial statements were disclosed, and year-on-year comparisons are based on consolidated figures
for the current period and non-consolidated figures for the previous period.

Financial Highlights◼

FY04/2023 Full Year
Performance Summary

Forecast and Initiatives
for FY04/2024

Business alliance with
WILLs, Inc.
and introduction ofshareholder special
benefit plan◼
◼

Net sales were 2,980 million yen (+101%, YoY) due to organic growth and the consolidation of two
companies, VarioSecure, Inc. and StrategIT, Inc. from third quarter of this fiscal year.
EBITDA was 609 million yen (+222%, YoY), and Operating Profit was 257 million yen (+641%,YoY),
resulting in a profitable landing.
After agreement with our audit firm regarding the losses recorded by our consolidated subsidiary,
VarioSecure, Inc. for the FY02/2023, we have decided to record an extraordinary loss as a provision
for the designated purchase guarantee.

◼

Expecting organic growth in both AI/DX service and AI Security service, we forecast
net sales of 4,800 million yen (+61% YoY), EBITDA of 800 million yen (+31% YoY), operating profit of
400 million yen (+55% YoY), and net income attributable to the parent company of 30 million yen.

◼

Established the LLM Group, a dedicated unit to handle Generative AI, including large-scale language
models , and appointed a new full-time executive officer to promote AI Transformation (AIX).

◼

We have resolved to form a business alliance with WILLs, Inc. and to introduce a shareholder special
benefit plan.
With the aim of "improving capital market efficiency through enhanced IR activities" and "maximizing
the corporate value of listed companies," we have entered into a business alliance with WILLs, Inc.
Both companies plan to develop AI-based businesses.
Introduced a “HEROZ premium benefit club” offered by WILLs Inc. as a shareholder benefit.
Shareholders holding 700 or more shares receive shareholder incentive points.

◼
◼
◼

© 2023 HEROZ Co., ltd.

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02
FY04/2023 Full Year Performance(Consolidated)© 2023 HEROZ Co., ltd.

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Our Key Performance Indicator◼ We have set EBITDA, a measure of cash generation, as a key performance indicator and aim to sustainably

Performance Indicators for
Business Profitability
EBITDAEBITDA

increase corporate and share value through EBITDA growth.
◼ Formula: Operating profit + amortization and other non-cash expenses (amortization of goodwill, security deposits,etc.)◼ Years of depreciation

・Investment in servers for machine learning: Mainly 5-year useful life and declining-balance method
・ Amortization period of goodwill (amount)
VarioSecure, Inc. 14 years（2,180 million yen）,StrategIT, Inc. 9years（219 million yen）

◼ We intend to address more generic problem solving with AI SaaS as our group strategy.

Performance Indicators for
AI SaaS Business

ARR*
ARR
リカーリング売上
Recurring Revenue Ratio
解約率
Churn
rate

We will focus our management efforts on the following indicators that are important to our AI SaaS business model.
◼ ARR（Annual Recurring Revenue）

An important indicator essential for understanding the growth and profitability of SaaS businesses.
Estimated as 12 times the last month of the quarter.
◼ Recurring Revenue Ratio

Indicator of ongoing sales that can be booked on a regular monthly basis.
◼ Churn rate

The churn rate of existing customers is an important indicator of the stability of the above recurring sales.

© 2023 HEROZ Co., ltd.

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Performance Summary ： Achieved significant growth through M&A
HEROZ Group Consolidated(FY04/2023)
Net Sales

2,980

mil yenYoY ＋101.0%

EBITDA609

mil yenYoY ＋222.8%

Operating Profit

257

mil yenYoY ＋641.4%

AI SaaS KPI
ARR

2,816

mil yenYoY ＋371.5%

Recurring Revenue Ratio

AI Security
Recurring churn rate

58.0%

0.5%

YoY ＋19.1%pt

YoY -0.5%pt* Recurring Revenue is the sum of HEROZ’s BtoB recurring sales and BtoC subscription sales, VarioSecure's managed security services sales, and StrategIT's subscription sales and maintenance sales.
** Recurring churn rate is the churn rate for managed security services in the AI Security service.
© 2023 HEROZ Co., ltd.

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Performance Overview (FY04/2023 Full Year)◼ Net sales totaled 2,980 million yen, growing.(+101.0%, YoY).
◼ EBITDA grew sharply to 609 million yen, (+222.8%,YoY) due to improved profitability of existing businesses and the effects of M&A.

FY04/2022
Results

FY04/2023
Actual(Non-Consolidated)（Consolidated ）Net sales

1,482

EBITDA

Earnings Forecast

Actual to
Forecast

YoY(Announced on
December 9, 2022)

2,980+101.0%

2,900

+2.8%

188

609

+222.8%550+10.9%

Operating Profit

34

257

+641.4%

250

+3.2%

Ordinary Profit

87

216

+146.3%

200

+8.1%

Net Income (loss)

49

-574

-

-590

-

(Units: JPY millions)

attributable toowners of the parent© 2023 HEROZ Co., ltd.

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Key Performance KPIs (by Quarter)
EBITDANet Sales(Units: JPY millions)(Units: JPY millions)
1,200

1,114

1,100

300

258 256
1,000

250

800

200

600

150

400

367 386 374

429

108

381 375 389
354 374 371

100

95
83

79

78
53

47

50

200

41

40
22

0

0
1Q

2Q

3Q

FY04/2021

4Q

1Q

2Q

3Q

FY04/2022

4Q

1Q

2Q

3Q

4Q

FY04/2023

1Q

2Q

3Q

FY04/2021

4Q

1Q

2Q

3Q

FY04/2022

4Q

1Q

2Q

3Q

4Q

FY04/2023

In the fourth quarter of the fiscal year ended April 30, 2023, due to a change in theaccounting period of StrategIT Inc. , only two months' worth of sales were recorded
for the company, resulting in a decrease from the third quarter; however, if threemonths' worth of sales were recorded, the increase would be greater than in the third
quarter.
© 2023 HEROZ Co., ltd.

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Recurring Revenue Ratio increased significantly◼ With the AI SaaS strategy, Recurring Revenue Ratio will be emphasized in the future in pursuit of sales quality.
◼ Recurring Revenue Ratio rose to 64.5% this quarter following the consolidation of VarioSecure and StrategIT as group companies.

(Units: JPY millions)

1,200

Net Sales

Recurring revenue

Raito of Recurring revenue

100.0%
90.0%

1,000

80.0%
800

600

400

64.5% 70.0%

63.9%

60.0%

1,114

37.5%

38.5%

40.1%

39.3%

40.4%

1,100

39.3%

50.0%

712

710
40.0%

200

374

354

133

381

371

144

149

389

375
150

151

30.0%

153

0

20.0%

1Q

2Q

3Q
FY04/2022

4Q

1Q

2Q

3Q

4Q

FY04/2023© 2023 HEROZ Co., ltd.

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ARR also increased significantly to 2.8 billion yen(Units: JPY millions)

ARR

3,500

ARR grows significantly
2,862

3,000

2,816

2,500

371.5%
YoY growth 2,816 mil yen
YoY growth +◼ Recurring Revenue is the sum of BtoC and
2,000

BtoB subscription revenue and BtoB
recurring revenue in AI/DX services,and management security service revenue in
AI Security services.

1,500◼ In management security services, the

1,000

543

600

600

597

610

company continues to enjoy a high share of
the market for SMEs, due to its consistent
support system.

612

500

◼ Going forward, ARR will achieve growth

0
1Q

2Q

3Q

FY04/2022

4Q

1Q

2Q

3Q

FY04/2023

4Q

through the introduction of AI into security
services and the development of SaaSlinked applications.

© 2023 HEROZ Co., ltd.

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Breakdown of Recurring Revenue and Churn Rate
Breakdown of Recurring Revenue
for this Quarter(Units: JPY millions)
700

600

49
98

AI Security： Churn Rate Trends for Managed
Security Services
1.6%

BtoB Recurring Contracts/Subscriptions
Operate a lot of long-term projects
lasting more than one year

500

1.4%

1.2%
1.2%

1.1%
1.0%
1.0%

Shogi Wars Subscription(Reference Values)

400

1.4%

0.9%

0.9%

0.8%

Membership grew steadily, up 8.0% YoY
0.6%
300

0.9%
0.9%

0.9%

0.8%
0.8%
0.8% 0.7%
0.8%
0.8%
0.8% 0.8%0.8% 0.8% 0.8%
0.8%

0.7%

562

0.6%
0.4%

200

0.5%

AI Security
Managed Security Services
0.2%

100

Churn rate remains low at less than 1%.
0.0%

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
FY02/2018
FY02/2019
FY02/2020
FY02/2021
FT02/2022
FY02/2023

0※ The above graphs are based on VarioSecure’s discloser materials.
© 2023 HEROZ Co., ltd.

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Performance by Segments (FY04/2023 Full Year)◼ AI/DX services continue to grows over 10% YoY ,also, EBITDA margin at 39.0%, high profitability◼ AI Security service is deployed by VarioSecure and maintains high profitability with an EBITDA margin of 44.0%.

FY04/2022
Results

FY04/2023
Actual(Non-Consolidated)（Consolidated）

1,482

Segment Profit
EBITDA（Units: JPY millions）

Net Sales
AI/DX
service

EBITDA Margin

AI Security
service

Segment Profit
adjustment

YoY

YoY

（Consolidated ）（Excluding M&A
impact）

1,683+13.6%

+6.0%

34

494

-

-

188

655

-

-

12.7%

39.0%

-

-

Net Sales

1,297

Segment Profit

380

EBITDA

571

EBITDA Margin

44.0%

Segment Profit-617※ The Company has changed its business segments from the third quarter of the current fiscal year. The segment income adjustment of -617 million yen
represents corporate expenses that are not allocated to each segment.
For the previous year's figures, corporate expenses are included in AI/DX services. Therefore, year-on-year comparisons are not shown for Segment profit,
EBITDA, and EBITDA margin.

© 2023 HEROZ Co., ltd.

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AI/DX Services Segment◼ This segment includes BtoC, mainly Shogi Wars, BtoB, which handles AI Solution for customers, and SaaS

implementation and SaaS-linked development business, which is being developed by StrategIT.

High profitability with EBITDA margin of 39.0%

FY04/2023
Actual（Units: JPY millions）

Recurring Revenue Ratio
Net Sales

1,683

36.0 ％◼ Shogi Wars continued to see solid revenue growth from theprevious quarter. Continue to reach out to a wide range of users
with the aim of maximizing the Shogi population.
◼ BtoB business at HEROZ saw an increase in the number ofOperating Margin
Operating
Profit494

29.4 ％

projects in highly specialized entertainment-related fields.
Continued to focus on improving business efficiency in eachindustrial area through AI.
◼ StrategIT aims to grow recurring sales by strengthening therevenue base of its SaaS-linked apps and other products.
◼ Developing AI-based SaaS product collaboration to create

EBITDA Margin
EBITDA

655

synergies among group companies.

39.0 ％© 2023 HEROZ Co., ltd.

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AI Security service◼ This segment is developing the business of implementing the HEROZ Group's AI into the security business developed by

VarioSecure, which joined the group this fiscal year.

Recurring sales ratio is high at 86.4%.

FY04/2023
Actual（Units: JPY millions）

Recurring Revenue Ratio
Net Sales

1,297

86.4 ％◼ In managed security services, differentiate the company with value-

added features in addition to a stable sales base.
◼ Specifically, we will provide additional functions that are in highdemand and substantially revamp the UI.

Operating
Profit380

Operating Margin◼ In addition, we will expand our business to adjacent businesses,

29.3 ％

leveraging our high market share for small and medium-sizedenterprises.
◼ Specifically, the company will expand sales of EDR products for the

EBITDA Margin
EBITDA571

44.0 ％

remote work era by developing distributors and provide antiransomware solutions mainly to the medical industry.
◼ Around September 2023, we plan to start streamlining operations

using our AI in Security Operations Center (SOC).

© 2023 HEROZ Co., ltd.

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Balance Sheet (as of April 30, 2023)◼ The cash and deposits currently held by the Company will be gradually appropriated for investments to realize the Company's mid- to longterm growth strategy.
◼ With the consolidation of VarioSecure and StrategIT into the group, there is a goodwill balance of 2.3 billion yen in intangible assets, which
will be amortized in the future.

Units: JPY millions

As of 4/30/2022（Non-Consolidated)（A）

As of 4/30/2023(Consolidated)（B）

Increase and decrease
（B-A）

3,959

4,963

1,004

3,660

3,798

138

2,675

3,709

1,033

Property, plant and equipment

260

273

-22

Intangible assets

25

2,640

2,615

2,390

831

-1,559

6,635

8,673

2,037

Current Liabilities

194

994

799

Fixed Liabilities

－

1,598

1,598

6,440

6,080

-360

Current Assets
Cash and deposits
Fixed Assets

Investments and other assets
Total Assets

Net Assets© 2023 HEROZ Co., ltd.

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03
FY04/2024 Forecast© 2023 HEROZ Co., ltd.

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FY04/2024 Financial Forecast◼ For FY04/2024, we expect net sales to increase 61.0% YoY and EBITDA to increase 31.2% YoY,
due to 10% organic growth and the full-year contribution of two group companies in the consolidated accounts.

FY04/2023
ActualFY04/2024
Forecast

YoY

Net sales

2,980

4,800

+61.0%EBITDA

609

800+31.2%

Operating Profit

257

400

+55.1%

Ordinary Profit

216

385

+78.1%

-574

30

ー

（Units: JPY millions）

Net Income (loss)
attributable toowners of the parent© 2023 HEROZ Co., ltd.

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04
Introduction of
Shareholder Special Benefit Plan

© 2023 HEROZ Co., ltd.

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Business Alliance with WILLs Inc.
◼ We entered into a business alliance with WILLs Inc. for the purpose of "improving the efficiency of capital markets throughenhanced IR activities" and "maximizing the corporate value of listed companies”.
◼ Our two companies plan to develop AI-based businesses.

◆https://www.WILLs-net.co.jp/

WILLs Inc.

Business Alliance Details◆Tokyo Stock Exchange Securities code：4482◆Businesses
Comprehensive consulting company for IR and SR activities.
Offering services such as "Premium Benefits Club," which combines a shareholder benefits programwith DX for shareholder management, "IR-navi," a marketing tool for institutional investors, and the"ESG Solution Business," which provides planning, production, and consulting services for
integrated reports.
・”IR-navi" provided by WILLs, Inc. is equipped with "Corporate Management Diagnosis AI(tentative name)" developed by HEROZ and provided to listed companies.
・Development of AI tools related to "Premium Benefits Club" by HEROZ
・Mutual introduction of potential customers by sharing the customer networks of both companies
・ Planning and development of new services© 2023 HEROZ Co., ltd.

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Outline of Shareholder Benefit Plan
◼ Launched “HEROZ Premium Benefit Club" to further increase the attractiveness of investment in our sharesand to increase the number of shareholders who will hold our shares over the medium to long term,
taking advantage of the business alliance with WILLs Inc.

◆ Eligible Shareholders
・Started for shareholders holding over 700 shares as recorded in the shareholders' register as of the end of
October, 2023.
・Thereafter, shareholders who hold 700 or more shares and are recorded in the Company's shareholder registry asof the end of April or October of each year are eligible.
◆Outline of Shareholder Benefit Plan
・ Points are awarded to eligible shareholders based on the Shareholder Benefit Points Chart.
Points can be exchanged for more than 5,000 different products, including food and electrical appliances, on
the “HEROZ Premium Benefits Club," a website exclusively for shareholders, depending on the number of points
earned.
・Shareholder benefit points can be exchanged for "WILLs Coin" and combined with shareholder benefit
points from companies that have introduced a premium benefit club.
・It is also possible to exchange the right to use the Shogi AI "Kishin" in Shogi Wars.

© 2023 HEROZ Co., ltd.

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About Shareholder Benefit Points◼ Points awarded based on the number of shares held
◼ Assumed annual rate of return are set at a maximum level of around 2%.

Number of shares
held

Shareholder Benefit Points
to be granted
End of April

End of October

700～799

3,500

3,500

800～899

4,000

4,000

900～999

5,000

5,000

1,000～1,499

7,500

7,500

1,500～1,999

15,00015,000Over 2,000

25,00025,000*Annual rate of return is calculated with the number of shareholder incentive points in the numerator and the minimum number of shares for which such points are
granted x the share price in the denominator.
The share price is calculated based on the two-month average share price of 1,272 yen from April 1, 2023 to May 31, 2023.
© 2023 HEROZ Co., ltd.

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05
Initiatives in each business segment© 2023 HEROZ Co., ltd.

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Group Business Structure

AI/DX Service
Segment

BtoC

Business
Contents

Main KPI

BtoB

AI Security
Service

Shogi SaaS business forindividuals, including "Shogi Wars,"
utilizing AI and other technologicalcapabilities that won the World
Computer Shogi Championship.

Provide solutions to customer issues
through data analysis and AI
development.
Provide AI Solution that can beutilized in practical operations for awide variety of customers.

Support for SaaS implementationand development of systems that
integrate APIs between SaaS. Selling
API applications on the app market.

Managed security and integration
services for secure Internet use,
primarily for small and medium-sizedbusinesses.

Recurring Revenue⚫ MAU※1⚫ Billing rate
⚫ MPU※2⚫ ARPPU※3

Recurring Revenue and Solution
revenue⚫ Recurring Revenue Ratio⚫ number of customers⚫ number of employees⚫ utilization rate/unit cost
⚫ revenue per employee

Recurring Revenue and Solution
revenue⚫ number of customers⚫ number of employees⚫ utilization rate/unit cost
⚫ revenue per employee⚫ number of apps
acquired/churned⚫ ARPPU※3

Recurring Revenue⚫ number of customers⚫ churned⚫ revenue per customer※1 MAU：Monthly Active User
※2 MPU：Monthly Paid User
※3 ARPPU：Average Revenue Per Paid User

© 2023 HEROZ Co., ltd.

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Initiatives in AI/DX Services

Initiatives implemented
in the FY04/2023

Initiatives for
FY04/2024◼

The total number of games played in “Shogi Wars” exceeded 800 million.
With the release of “Kishin - Analytics", an analysis tool for professionals,
we continues our efforts to maximize the number of Shogi players.

◼

In the BtoB solutions business, the number of new customer projects increased with the launch of the salesorganization. Inquiries related to Generative AI are also increasing, and we will continue to actively cultivate newclients in the current fiscal year.

◼

Accelerate the expansion of the Group's AI SaaS business by establishing a cooperative framework that
anticipates synergies in our group. SaaS collaboration system and our AI solution technology.

◼

Formed a dedicated LLM unit to promote AI Transformation
Launched a SaaS-type product “HEROZ Knowledge System built with ChatGPT” offering Customized ChatGPT,
which can be utilized in a form suitable for actual business operations of a company.

◼

Establishment of Shogi Wars economic zone
In addition to the stable growth of “Shogi Wars", we plan to release “Kishin Learning" this fiscal year, aiming toestablish a Shogi Wars economic zone by providing a Shogi platform through learning, playing games andanalysis game data.

◼

Release of platform service “JOINT”
StrategIT (Our group company) released a platform service “JOINT” that provide support as a business partner
to SaaS sellers on May 18. 2023, to accelerate the expansion of the SaaS market.

© 2023 HEROZ Co., ltd.

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From Digital Transformation (DX) to AI Transformation（AIX）
We have been helping companies DX in their core operations, but the asymptotic process of digitization was inevitable
Going forward, we will support discontinuous change by maximizing the power of the Large Language Model (LLM).

AI Transformation
Can be directed and interacted with in natural language, eliminating
the need for an asymptotic process for digitization.

✓ Automation of crossorganizational/whole businessand manufacturing processes
achieved with fewer resources

Realizing of LEAP FROG

Continuous process is inevitable

Digitalization✓ Digitization of
analog and physical data

DigitalTransformation

Digitalization✓ Digitalization of businessprocesses across theorganization✓ Digitization of individual
business andmanufacturing processes✓ Changing business model
for customer-driven value
creation✓ Reform business model for"superior customer-driven
value creation

Possible with more generic AI.

Specialized AI is assumed.

※ Based on the definition in the DX Report by the Ministry of Economy, Trade and Industry© 2023 HEROZ Co., ltd.

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Launch of an organization dedicated to the application of Generative AI◼ We have established a professional organization (LLM Group) dedicated to the application of Generative AI.
We position ChatGPT and various other Generative AI technologies as the core of our AI SaaS strategy to accelerate the
AI Transformation of society.

◼ LLM Group is an organization that embodies HEROZ's engineer-first attitude and high AI implementation capabilities, led
by the development members of "dlshogi with HEROZ".
Leveraging HEROZ's strength in AI business applications and StrategIT’s implementation know-how in the iPaaS domain,
we will lead the application of LLM both internally and externally.

Social Implementation of AI

Deep Learning Applications

API Linkage■LLM Group" will focus on pursuing Generative AI technology using its advanced technical capabilities in AI implementation andimplementation know-how in the iPaaS domain.
■ We will work to realize interactive services using various APIs provided by OpenAI and AzureOpenAI services.
In the future, we plan to further expand HEROZ's AI SaaS services with an eye toward the application of image generation AI and
multimodal Generative AI.
© 2023 HEROZ Co., ltd.

27

Start providing ”HEROZ Knowledge System built with ChatGPT”◼ We Started providing a SaaS-type product, “HEROZ Knowledge System built with ChatGPT “ Customized
ChatGPT, which enables each company to utilize OpenAI, L.L.C.'s ChatGPT in a way that is suitable for theiractual business operations, from April 2023.

◼ By loading specific internal standards, know-how, etc., ChatGPT can be made more useful in actual business
operations, taking into account the specific circumstances of the client companies.

Introduction Phase

Bringing in andindexing text
features

Categorized bydepartment
CustomerInternal document
collection

Cloud Server
Construction

Operation Phase

PromptEngineering

Business Use
Trial

Start ofoperation

Deployment toother departments

To enable the use of ChatGPT in corporate practice, the system provides responses based on the latest information andlocalized information that lies dormant in the company.
Can be operated with consideration for the information security of client companies© 2023 HEROZ Co., ltd.

28

Started offering ChatGPT implementation with AI SaaS-type Solution◼ Support for basic functions to introduce LLM and implementation support all in one place,◼ HEROZ adds Generative AI to the Roots of its AI SaaS Strategy.
Specialized Chatbot
Generate mail3D Editing

discuttion
Generate Story

Prompt Management

ID Management

Summarize
Documents Management

HEROZ
AI SaaS
voice recognition

Billing Management

API Linking

Generate texture

SaaS Basic Function
Voice synthesis/genarate
Prepare and summarize minutes

AI Function

Generate Codesoftware development

Character Dialogue

Our
Direction✓ Can be used immediately without the need for configuration, as long as each company has its own internal rules anddocuments.
✓ SaaS-lization enables external linkage of functions necessary for Chatbot coordination and user-side coordination.
✓ In the future, we plan to bundle more Generative AI Solutions such as voice and image generation as SaaS as
needed.
© 2023 HEROZ Co., ltd.

29

With NTT Marketing Act Pro CX and USEN -NEXT HOLDINGS, we are launchinga "next-generation contact center" project that integrates human and Generative AI using ChatGPT.

◼ We have launched a project with NTT Marketing ACT Pro CX Corporation and USEN-NEXT HOLDINGS Corporation to improve businessefficiency and sophistication by utilizing ChatGPT in contact centers.
◼ Leveraging the respective strengths of each company to not only improve contact center productivity, but also to further seamlessly
enhance the employee and customer experience.
◼ At the launch of this project, we have received an endorsement by Microsoft Japan to promote Digital Transformation through the use ofnext-generation AI, and we plan to jointly promote this project.

© 2023 HEROZ Co., ltd.

30

“dlshogi with HEROZ” Won the World Computer Shogi Championshipfor the second year in a row◼ “dlshogi with HEROZ”, a team composed of our AI engineers, won the 33rd World Computer Shogi Championship heldfrom May 3 to 5 , 2023, winning the championship for the second consecutive year.
◼ Our Shogi analysis service "Kishin Analytics" will also reflect this winning version. Provided mainly for professional shogi
players to support the evolution of the shogi world.

◆The World Computer Shogi Championship is anannual shogi championship held by the Computer
Shogi Association to improve the skills of shogi(Japanese chess) software.
◆ Team members of "dlshogi with HEROZ"HEROZ AI Engineer Kaoru Kawashima
HEROZ AI Engineer Kunihiko Kano
HEROZ AI Engineer Yuhei Omori© 2023 HEROZ Co., ltd.

31

Released "JOINT", a platform
for planning/building/operating SaaS
◼ Platform "JOINT" to be released at StrategIT (consolidated subsidiary) as of May 18, 2023.
◼ JOINT is a platform that provides the following three types of support necessary for each growth phase of a company as abusiness partner of a SaaS provider to accelerate the expansion of the SaaS market.
1. Products：Commercialization of non-core parts required for SaaS planning, construction, and operation
2. Consulting Services：Consulting services for SaaS planning, strategy formulation, API development, etc.
3. Professional Supports： Services such as maintenance, operation, and linked application construction services utilizing JOINT

Everything here for the growing SaaS vendor

1/3

API integration
A highly versatile, integrated solution for complex workflows
and on-premise systems can be built in low-code for many
companies.

2/3

Design your appstore
Delivery format can be selected according to requirements.
You can also integrate the app store into your company's
website or products. You can also change the design of yourown product-occupied app store.

3/3

Platform to build SaaS
Even if you are strengthening the integration with othercompanies' SaaS and cannot build an integrated application
because your product or the SaaS you are integrating withdoes not have an API, you can build an API and standardize
your product API with the introduction of Joint.

© 2023 HEROZ Co., ltd.

32

Initiatives in AI/Security Services◼ Provides services to make corporate Internet use safe and comfortable. Boasts the top share of
the firewall/UTM operation and monitoring service market in Japan for small- and medium-sizedbusinesses, with a churn rate that remains low at less than 1%.

Initiatives implemented
in the FY04/2023◼ As part of the enhancement of the Managed Security Services service, the company is working
with HEROZ to develop an AI-based processing function for SOC operations and management.
◼ Focus on customer development through aggressive approaches to specific industries (medical
industry) to speed up VSR's expansion into adjacent areas for business expansion in adjacentareas◼ Strengthen competitiveness of managed services• In addition to gateway security, expand coverage from LAN to cloud computing and strengthen
competitiveness by utilizing other companies‘ products• Building next-generation operational infrastructure through the use of AI

Initiatives for
FY04/2024◼ Entering the growing security market
Entering the zero-trust security domain by leveraging knowledge from existing services◼ Reinforcement of new sales structure
In addition to the existing stable sales structure centered on sales via distributors, build a strong
direct sales structure by aggressively investing in online marketing and inside sales© 2023 HEROZ Co., ltd.

33

Direction ①Expand the scope of managed services
and strengthen competitiveness◼ In addition to gateway security, expand coverage from LAN to cloud computing and strengthen competitiveness byutilizing other companies' products.
◼ Building a next-generation operational infrastructure using AI to enhance the efficient operation of managed services, astable revenue base.

Managed services for othercompanies' productsManaged Cloud Security

Managed LAN/Wi-Fi

Gateway Security

FY02/2023

FY02/2027© 2023 HEROZ Co., ltd.

34

Direction② Entering the growing security market◼ Entering the zero-trust security domain by leveraging knowledge from existing services.

Operation Base
FY02/2027

FY02/2023
FY02/2023

Expansion of
supported areas will
increase the amountof data that can beutilized.

Utilization Data.
Authentication andAccess Restrictions

Log Monitoring
Authentication
Management

Promote zero-trust
security by linking
data and operational
infrastructure

Gateway Security

Gateway Security

Operation BaseOperation
Monitoring

Zero Trust Security

Enhanced operational
monitoring systemthrough the use of AI
and increased data

Next-generation operational
monitoring using AI© 2023 HEROZ Co., ltd.

35

Direction ③ Strengthen direct sales structurethat differs from the existing sales network◼ Build a strong direct sales structure by aggressively investing in online marketing and inside sales, in addition to theexisting stable sales structure centered on sales via distributors.

FY02/2023
FY02/2023

FY02/2027

End users

End users

Sales
Networks

Sales agents

FY02/2023
FY02/2023
Existing sales
agents
FY02/2023

Agency TechnicalSupportAgency TechnicalSupportNew sales
agentsMarketing and Inside Sales

Sales
Actions© 2023 HEROZ Co., ltd.

36

06
HEROZ Group Structure© 2023 HEROZ Co., ltd.

37

Company Overview
Name

HEROZ, Inc.

Location

PMO Tamachi , 5-31-17 Shiba, Minato -k u,
Tok yoRepresentative Director Co-CEO

Established

April 2009

Takahiro Hayashi

Representatives

Tak ahiro Hayashi/Tomohiro Tak ahashi

Business
Description

AI/DX Service
AI Security Service

MembershipJapan Deep Learning Association
The Japan Society for Artificial Intelligence2022

Acquires shares of VarioSecure, Inc. through third -party allotment andmakes it a consolidated subsidiary
Acquired shares of StrategIT Corporation and made it a consolidated
subsidiary.
Moved to the Tokyo Stock Exchange Prime Market

2021

Capital and business alliances with VarioSecure

2019

Listed on the First Section of Tokyo Stock Exchange (TSE)2018

Listed on Tokyo Stock Exchange (TSE) Mothers
Capital and business alliance with Netmarble Games Corporation▍Director/Officer

Graduated from Waseda University
Joined NEC as a technology engineer
Experience at IT strategy division, business planning division
Founded HEROZ

Representative Director Co-CEO

Tomohiro Takahashi
Graduated from Waseda University
Joined NEC as a technology engineer
Experience at Business Planning Division, BIGLOBEFounded HEROZ

Director CTO

2017
2016

Capital and business alliances with Takenaka Corporation
and Koei Tecmo GamesJVA2016 Small and Medium Enterprise Award
Capital and business alliance with Bandai Namco Entertainment

2013

Shogi AI, developed by engineers who was member of HEROZ at that time formerly
with HEROZ, defeated a shogi professional

2012

Launched mobile app, “Shogi Wars”

Keiichi Iguchi
Operating officer
CFO

Hiroya Mori
Operating officer
CSO

Kyota Seki

Graduated from Tokyo Institute of Technology
Joined NEC Central Research Labs

Graduated from Aoyama Gakuin University
Passed the CPA Examination
After joining an auditing firm and a consulting firm, served as General Managerof the Finance Division of PERSOL HOLDINGS CORPORATION
Graduated with a Master's degree from the University of Tokyo
Joined Panasonic Corporation and Deloitte Tohmatsu Consulting G.K.
Involved in projects such as new business strategy development© 2023 HEROZ Co., ltd.

38

Our Vision

Creating the future throughartificial intelligence (AI) revolutions© 2023 HEROZ Co., ltd.

39

The AI revolution we started in the chess world
Shogi Wars, our core business, is not just a Shogi application, but a Gaming Platform that has contributed greatly
to the revolution of the Shogi world itself through cutting-edge AI technology.

➢7 mil users➢500 thousands MAU➢Played a total of over 800 mil times

From "competition" to "collaboration”
The Age of Humans vs.AI

The Age of Human with AI

Evolution of the Shogi world

Growing pessimism that shogi is over

Human intelligence evolves with AI

A new era has arrived in which
practicing with AI is the norm.

In 2017, PONANZA won against thenMeijin Amahiko Sato

Professionals are now studying Shogi
through AI(we also launched Kishin Analytics)

Sota Fujii, the 7th crown, is the poster
child of AI.

.
© 2023 HEROZ Co., ltd.

40

The Importance of the "AI Revolution" we have caused in the Shogi WorldTo advance society by properly implementing innovative technologies in the world.

A Revolution in
Learning

A Revolution insense of values➢ Shogi is taught steadily by alimited number of masters➢ Belonging to Encouragement
association is authoritative.

➢ Shogi is warfare. Being strongin chess is a principle that runs
through everything➢ Using AI to measure the board
and look back on moves is thenorm.

➢ Shogi is a game. The
attractiveness of each chessplayer is important.

➢ Dan acquisition is now possible
through an app.

➢ Technology became a partner inco-creation.

Non-professionals can achieve
a professional look in less time.

Not simply improving productivity,
but fundamentally transforming thevalue we provide.

➢ Technology is a competitor

A Revolution inentertainment value➢ Only the core fans will enjoy
watching it.

➢ Shogi is a game to be playedand enjoyed by oneself.

➢ AI makes it clear at a glance
which move changed the game➢ Shogi is also enjoyable to watch

Gamification
makes daily work more fun

The direction we are heading© 2023 HEROZ Co., ltd.

41

Group Structure◼ With the consolidation of VarioSecure Inc. and StrategIT Inc. as consolidated subsidiaries, we have shifted to the group management

structure.

◼ Owns approximately 43% of thecompany◼ Appoints majority of directors◼ Owns approximately 89% of the company◼ Dispatches 2 directors◼ Dispatches 3 directors

Listed on the TSE Standard Market (4494)
Deemed acquisition date ：2022/8/31

Venture company inits 5th year of operation
Deemed acquisition date ：2022/9/30© 2023 HEROZ Co., ltd.

42

07
Reference Materials© 2023 HEROZ Co., ltd.

43

HEROZ Group Strategy◼ Based on the knowledge gained from our experience in solving individual customer issues, we will aim for

SaaS-type business management driven by intelligence such as our data utilization and AI in the future.（HEROZ 2.0）

HEROZ 1.0

HEROZ 2.0
More versatile issue resolution

Individual issue resolution●●prediction AI

×customer

data

HEROZ AIHEROZ GroupWe will expand AI to a wider range of society by realizing intelligent SaaS,
utilizing the core technology of algorithm and AI development cultivated through Shogi AI, and the advanced knowhow accumulated through solving individual problems.

© 2023 HEROZ Co., ltd.

44

Overall Group Strategy ：AI SaaS
◼ We will evolve the products of our company and group companies into more intelligent data-driven software by making the most of ouraccumulated expertise in advanced AI implementation and our strength as an engineering group.

Pillars ofBusiness

AI SaaS Products

Customized AI

Mind Sports

VarioSecure Security Services

StrategIT iPaaS

data

Advanced AI implementation
know-howUsing Deep LearningWorld’s Strongest Shogi AI

Engineers committed towinning cultivated by Shogi AI.

Data analysis technology toapply customer Big Data

Preparation for the implementation of vision

HEROZ Group

Embodying the vision throughout the group© 2023 HEROZ Co., ltd.

45

Aspect of the SaaS market and our views of the major trends◼ While the SaaS market in Japan is expected to grow steadily, there is still room for further penetration.
◼ To reach the approximately 10 trillions yen potential market, it is necessary to grasp the trends in the Japanese SaaS market.

Our view of future trends
in the SaaS market
in the SaaS market

Enterprise Software Market
in Japan （SI）

10.8

tn yentn yen potential market

10

SaaS Market in Japan(2026)

1.7 tn yen
CAGR

11%

SaaS Market in Japan(2022)

Diversification of needs

Diversifying market needs will accelerate SaaS adoption,and increase demand for operational expertise

Integration with legacy systems
For the foreseeable future, the integration of on-premiseand cloud systems is inevitable, and the transition to zerotrust security will be done in phases.

Need for integrated management
Multiple SaaS deployments increase the burden ofsystem management and operations

1.1tn yen(Source: IDC Japan Domestic Enterprise IT Market Forecast, Fuji Chimera Research Institute, Software Business New Market 2022 Edition)© 2023 HEROZ Co., ltd.

46

Our perception of the challenges of implementing SaaS
By resolving trends that could be barriers to SaaS adoption through technology, we aim to materialize a latent market.

Diversification of needs◼ Rapid changes in the business environment

Issue hypothesis
behind the trend

have led to diversification of issues andcircumstances faced by customers.
◼ Many high-level IT professionals are

unevenly distributed among SIers andcannot promote implementation andoperation customized to the specific needsof each company.

Integration with legacy systems◼ Traditional perimeter defenses are reaching◼ Handling multiple SaaS is becoming thetheir limits as remote work and cloud
adoption accelerate.
◼ Especially, small and medium-sizedenterprises (SMEs), where "one-person
information systems" is an issue, are unable
to respond to recent security trends such as
Zero Trust.

Security

Advanced AI implementation
know-how

Need for integrated management

norm, and management costs are becoming
bloated.
◼

Therefore, there is a need for a migration
service to ensure consistency andcentralized management of information
managed within each SaaS.

iPaaS

Products of our group companies
Machine resources to increase the value of the product© 2023 HEROZ Co., ltd.

47

What we think AI SaaS should be like
We will support the provision of the ideal SaaS usage environment required by our clients by making full use of ouraccumulated know-how and technology.

顧客

CRM

HEROZ GROUP

HR

Automated and optimized
SaaS-to-SaaS collaboration
Automated operations
and maintenance

mail

SaaS Big Data
accumulated through business activities

Chat

Advanced Security

MA
Learning with AI© 2023 HEROZ Co., ltd.

48

Global Leader in Mind Game AI

Chess AI

Shogi AI

Go AI

Deep Blue (’97) defeated aprofessional Chess player

AI developed by our engineers who
was member of HEROZ at that time
defeated a professional Shogi(Japanese Chess) player (’13)

Google acquired Deep Mind (’14)
AlphaGo, developed by Deep Mind,
defeated a professional Go player (’16)

IBM

Google© 2023 HEROZ Co., ltd.

49

AI SaaS(AI Software as a Service)
Developing our AI construction capabilities cultivated through machine learning using deep learning of vast Shogi game datain the construction, finance, entertainment, and other fields

Shogi game records

Structural design data,
financial data, etc.

AI SaaS for deep learning and other machine learning（AI Software as a Service）

Shogi AI

Construction AI
Finance AI etc.

AI SaaS：AI Software as a Service is“Business model that provides models built by machine learning/deep learning as a service”© 2023 HEROZ Co., ltd.

50

Profitability of AI SaaS

Research/develop Shogi AI

Standardize AI technology accumulated
through shogi AI
AI SaaS（AI Software as a Service）

Client’s data sent to HEROZ
Kishin/model developed bymachine learning

Output after machinelearning through deeplearning, etc.

Output applied inbusiness settings

Establish an infrastructure which allows
HEROZ to provide AI services efficiently tosolve various challenges in various industries
just by changing input data
Provide comprehensive AI services withmassive servers
Achieve stable, sustained earnings and highswitching costs

Accumulated data to be used for further
machine learning

Output precision increases throughrepeated machine learning

Earning structure: initial setup fee andongoing fees
© 2023 HEROZ Co., ltd.

51

Overview of VarioSecure Inc.
Name

VarioSecure Inc.

Established

June 2001

capital

749 million yen

Employees

74

Performance(FY02/2022)(IFRS)Sales revenue: 2,566 million yen
Operating profit: 751 million yen
Net income: 500 million yen

Head Office
Location

Sumitomo Corporation Nishiki-cho Building 5F,
1-6 Kanda Nishiki-cho, Chiyoda-ku, Tokyo

Osaka Office Location

Osaka Office
Fukuoka Office

1-2-19 Kitahorie, Nishi-ku, Osaka-shi, Osaka

Fukuoka Office Location

1-12-17, Hakataekihigashi,
Hakata-ku, Fukuoka-shi, Fukuoka

Business

Managed Security Services
Integration Services

President and Representative Director
Director
Director
Director
Director (From HEROZ)
Director (From HEROZ)
Director (From HEROZ)
Outside Director
Director and Audit Committee
Director and Audit Committee
Director and Audit Committee

Yoshihiko Inami
Yasufumi Kajiura
Satoshi Yamamori
Hideko Isoe
Takahiro Hayashi
Keiichi Iguchi
Hiroya Mori
Masataka Shiba
Kenji Sakai
Hideo Fukai
Hidetaka Nishina

Webhttps://www.variosecure.net/

Certification

ITSMS（ISO20000）、ISMS（ISO27001）、privacy markTokyo Head
Office(As of February 28, 2023 ）© 2023 HEROZ Co., ltd.

52

Toward the Realization of an AI Security Company
Provide customers with new safety and security in the age of zero-trust through the power of AI by utilizing a variety of corporate data.
Supporting Digital Transformation by supporting corporate safety and security from the ground up

Automation of one-stop
service for customers

device data
Various hardware
usage data stored
in the company's
network✓ AI replaces complicated security
settings and operations✓ Anyone can easily implement
advanced security

transmission data
User behavior datacollected via the
network

Aggregation ofa wide variety of data

Insight Extraction

Advanced andsemi-automatedoperations

systemdevelopment

data scienceAIdevelopment

SaaS usage data
Usage data for
multiple SaaS
accounts

personalized data
Data varies by
individual andindividual company

Basic AI Technology

Turning Non-IT
Professionals into IT
Professionals✓ Setting up and maintaining asecurity environment on thesame level as largeorganizations

Reproduction of theprofessional skills of amaster craftsman✓ Identifying and handlingirregularities that only an
experienced veteran would
notice.

© 2023 HEROZ Co., ltd.

53

AI Security Company's Growth Strategy
We will promote the following items jointly with VarioSecure
to realize AI Security Company.

・ Mutual provision of management resources, including our AI

Realization of
AI Security Company

technology and VarioSecure's industrial domain knowledge and data
・ Achieving an AI Security Company through Collaboration in New
FieldsService expansion
into the zero-trust area

・ Promote the use of AI in our managed security services and the
expansion of our services into the zero-trust area

Business system innovation
through the utilization of AI.

・Promote the use of AI in the backyard (core systems)
・ Utilize AI technology for labor saving, efficiency improvement, andsales promotion based on such utilization© 2023 HEROZ Co., ltd.

54

(Reference) Business Overview- Services provided by VarioSecure
Security Framework• AssetManagement• Vulnerability
Management

Services of
VarioSecure

Building
Systems

Network Integration Services

indentificat
ion

Vario Network Security Suite• Access Control• Intrusion Prevention

Protection

VSR-VarioSecure Router(Integrated Internet Security Services)

VCR-Vario Communicate Router• Detect andmonitor security
events

Detection(Sales of integrated security equipment for SMEs)

Vario-EDR Services
SupportVSR-VarioSecure Router(Integrated Internet Security Services)

Recovery

VDaP-Vario Data Protect(Data Backup Service)© 2023 HEROZ Co., ltd.

55

(Reference) Providing services
that make Internet use safe and comfortable
Service Category

Managed Security Services

Integration Services

Service Form

Installation support, operation and maintenance
24 hours/365 days, nationwide in Japan

Equipment sales and construction

Revenue Model

Recurring type (monthly charge)

one-time fee-type① Integrated Internet Security Services(Managed type)Protecting Internet Entrances

For organizations with less than 50
members

Dedicated equipment for managed security services

Integrated security equipment for SMEs

VSR—VarioSecure Router

VCR—VarioCommunicate Router

Data retention in case of emergency② Data Backup Services
Service Content① Sales of intefrated security equipment for SMEs
(Sales type)

Dedicated equipment for data backup services

VDaP—Vario Data Protect② Network Integration Services• Procurement and construction of network
equipment
Construction of company network(wireless LAN network)

Rogue Terminal Detection, Vulnerability
Management③ Vario-NSS(Network Security Suite)

Assists in detecting and responding to cyberattacks④ Vario-EDR Services© 2023 HEROZ Co., ltd.

56

(Reference) VarioSecure's business model◼ Provided mainly as an adjunct to the Internet connection

Collective offer
Proposal and Sales

agency agreement(OEM/Distributor)
Sales Support

Internetconnection＋
Security
Services

Sales
Agent

Security
Services

Cutomers

Usage fees￥￥

Monthly fee

Monthly fee(Japanese
Companies)

supports© 2023 HEROZ Co., ltd.

57

Overview of StrategIT Inc.

Name

StrategIT Inc.

Establish

July,2019

Capital74 million yen

Employees

25(excludes outsourcing)

Location

PMO Tamachi 7F, 5-31-17 Shiba, Minato-ku, Tokyo

Buisiness

SaaS Solution Implementation Support
SaaS API Linkage Development Service
Operation of app store (SaaStainer)

President andRepresentative
Director
Director and CTO
Director
Director
Director

Fumie KatoWeb

https://www.StrategIT.jp/

Our vision is to contribute to management improvement by integrating"Strategy" and "IT“
And our mission is to bring the power of SaaS to all companies
We aim to be a company that promotes the utilization and valueenhancement of SaaS

Yuhei Kawamoto
Masaki Moriwaki（Outside Director）
Takahiro Hayashi（Outside Director)
Hiroya Mori（Outside Director）© 2023 HEROZ Co., ltd.

58

StrategIT’s Business Overview
Develop various APIs (linked systems) for SaaS vendors to improve the convenience of SaaS, utilizing know-how gained
through SaaS introduction consulting for BtoB.
Business model to sell developed APIs to general companies through our SaaStainer (app store)

１）Existing Services● SaaS Implementation
SaaS Solution Implementation Support

・Main and high-growth/high-profitability business
・Focus on mid-size projects (from 30 million yen)・Incorporation of Microsoft Dynamics(NetSuite, freee, Microsoft Dynamics, etc.)●

Collaborative Development
API integration development
System integration, development of linked
applications

・Developed an API system for SaaS vendors to link SaaS
vendors by utilizing our know-how of SaaS implementation
・ Have contacts with top SaaS listed companies ARR

Official Apps
Apps for major SaaS solution functions●

SaaStainer
App store（SaaStainer）
Providing a platform for SaaS solution information

・Recurring Sales Model
・Number of registered SaaStainer accounts: 1,091
companies
・Number of listed apps: 60, Number of paid apps: 18
・Pillars of future growth２）New Products Development
MasterHub API Platform（MAPIP）
Collaborative Platform Application

・In-house development of API integration platform application

・Provide customers with an environment that allows them todevelop their own API integration© 2023 HEROZ Co., ltd.

59

Notes◼ The forward-looking statements contained in this material are based on information currently
available to the Company, but are not guarantees of future performance and are subject to various
risks and uncertainties. Actual results may differ from the forward-looking statements contained ordeemed to be contained herein due to changes in the business environment and other factors.

◼ This document contains information about our company and other companies, etc., and we makeno representations or warranties as to the accuracy or completeness of the information contained
herein.

© 2023 HEROZ Co., ltd.

60