COMPANY RESEARCH AND ANALYSIS REPORT

Cross Marketing Group Inc.
3675
Tokyo Stock Exchange First Section

15-Oct.-2020
FISCO Ltd. Analyst

Kimiteru Miyata

FISCO Ltd.
http://www.fisco.co.jp

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

Cross Marketing Group Inc.
3675 Tokyo Stock Exchange First Section

15-Oct.-2020
https://www.cm-group.co.jp/en/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Business expansion through promoting digital transformation based on marketing solutions. ....................

01

2. Further reinforcing its strengths of marketing solutions and digital transformation. .....................................

01

3. Although 1H results were severe due to the impact of the novel coronavirus, the Company is stilldeveloping an active strategy......................................................................................................................

01

4. Although the current period’s results appear severe, the Company is eyeing new record highs“after coronavirus”. . .....................................................................................................................................

02■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. Business overview ......................................................................................................................................

03

2. History................................................... ......................................................................................................

03

3. Industry environment............................. ......................................................................................................

04■Business activities---------------------------------------------------------------------------------------------------------------------------------------------------- 05
1. Domestic research business ................. ......................................................................................................

05

2. Overseas research business .......................................................................................................................

06

3. IT solutions business.. ............................ ......................................................................................................

07

4. Other businesses (the promotions business).. ..............................................................................................

07

5. Business strengths.. .....................................................................................................................................

08■Business strategy------------------------------------------------------------------------------------------------------------------------------------------------------ 09
1. The strategy conducted since 2020.............................................................................................................

09

2. Specific measures in FY12/20 1H.......... ......................................................................................................

10■Business trends --------------------------------------------------------------------------------------------------------------------------------------------------------- 11
1. FY12/20 1H results .....................................................................................................................................

11

2. FY12/20 1H results by business segment. ...................................................................................................

13■Results outlook------------------------------------------------------------------------------------------------------------------------------------------------------------ 15
1. Responses for “after coronavirus” and the 3Q business conditions ............................................................

15

2. Outlook for 3Q revenue and policies...... ......................................................................................................

16

3. FY12/20 results outlook ..............................................................................................................................

17

4. Medium-term growth image. . ................. ......................................................................................................

18■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 19■Information security------------------------------------------------------------------------------------------------------------------------------------------------ 19

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

Cross Marketing Group Inc.
3675 Tokyo Stock Exchange First Section

15-Oct.-2020
https://www.cm-group.co.jp/en/ir/█ Summary
Aiming for re-growth “after coronavirus”
1. Business expansion through promoting digital transformation based on marketing solutions
Cross Marketing Group Inc. <3675> (hereinafter, “the Company”) is comprised of three businesses: research, IT
solutions, and other businesses. In the mainstay research business, centered on online research, it provides a onestop service, from analysis through to consulting and reporting, to meet the research needs of various domestic andoverseas customers. The IT solutions business handles mobile system planning, development, and operations, andalso dispatches engineering personnel. Under other businesses, the Company runs a promotion services businessto provide marketing support. Despite being a late-comer to the industry when it was founded, the Company has
since become one of the largest companies in the marketing research industry. Currently, based on marketing
solutions, which crosses over each of the businesses, it is promoting digital transformation to respond to the rapid
digitalization, and continues to grow while meeting diversifying customer needs.
2. Further reinforcing its strengths of marketing solutions and digital transformation
A feature of the Company’s research business is the quality and quantity of its panels (registered monitors). In termsof quantity, it is able to secure sufficient quantity as it has 2.19mn people on its active panels, and when combinedwith those of its business partners, it is said to have a total of 4.65mn people (as of October 2019). In terms of quality,
it constantly maintains the basic attributes of panels so they are up-to-date, and categorizes them in advance sothat they are easy to use. It also conducts thorough quality control of the panels, including de-registering malicious,
fraudulent respondents. Its strengths include that all of the responsible people, including sales staff, researchers,
and directors work together in the support system to solve customer problems; the experience of its researchers
in appropriately planning and designing solutions to problems; and an organizational structure that facilitates theflexible use of functions inside and outside of the Group. In addition to these basic features and strengths, it isconsidered that in the future, the expansion of its business scope through promoting digital transformation basedon its marketing solutions will be a factor that will further differentiate the Company from its competitors.
3. Although 1H results were severe due to the impact of the novel coronavirus, the Company is stilldeveloping an active strategy
The FY12/20 1H results were severe, with revenue of ¥7,700mn (down 12.6% year-on-year (YoY)) and operating
profit of ¥166mn (down 60.8%). This was mainly because economic activity around the world was greatly restrictedby the impact of the novel coronavirus pandemic. Additionally, within the Company, the research business struggled,
as it tends to reflect the economic environment more than the IT solutions business and the other businesses. In
particular, conditions were extremely severe in the overseas research business that is conducted in many cities where
lockdown measures were implemented, and in such ways, the impact of the novel coronavirus pandemic is being
observed in great detail. Despite this, from this fiscal period onward, the Company is actively developing a growthstrategy through promoting digital transformation. While on the one hand it will develop new services of customer
journey-type data analysis and support to grow D-to-C (manufacturer direct sales) brands, on the other hand it isdeveloping initiatives including establishing and integrating new companies and entering into business partnerships.

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01 19

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

Cross Marketing Group Inc.

15-Oct.-2020

3675 Tokyo Stock Exchange First Section

https://www.cm-group.co.jp/en/ir/

Summary

4. Although the current period’s results appear severe, the Company is eyeing new record highs “after
coronavirus”
As its response for “after coronavirus,” it is thought that the Company will promote “reforms to achieve both businessmaintenance and growth.” Despite this, the end of the novel coronavirus pandemic is currently still not in sight, so it
has not yet decided on the FY12/20 full year results forecasts. However, in terms of the current business conditions
on entering the 3Q, it appears that conditions bottomed-out in the 1H, which is when the state of emergency
was declared, and there are signs of a recovery. Therefore, for the 3Q results, revenue is expected to return toapproximately the same level as in the same period in the previous fiscal year, so it is considered that results will
be set on a recovery track by controlling SG&A expenses. As a result, while it appears difficult to secure FY12/20
results of the same level as in FY12/19, it is likely that they will acquire momentum from FY12/21 onwards. Above
all, as there seems to be no major changes to the Company’s medium- to long-term strategy and with the “after
coronavirus” period not that far away, it is considered possible to see a recovery, of new record high results and a
medium-term growth trend.
Key Points
Business expansion centered around marketing solutions and digital transformation
Although conditions are extremely severe in FY12/20 due to the impact of the novel coronavirus pandemic, theCompany continues to conduct active management• Possible to see a recovery “after coronavirus,” with new record high results and a medium-term growth trend••

Results trends（¥mn）

Revenue (left)

25,000Operating profit (right)

（¥mn）
1,500

1,342

1,267

1,233
20,0001,200
955

15,000900

727

10,00014,85915,96916,75817,492

18,580

5,000

600

300

0

0
FY12/15

FY12/16

FY12/17

FY12/18

FY12/19

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

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02 19

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

Cross Marketing Group Inc.
3675 Tokyo Stock Exchange First Section

15-Oct.-2020
https://www.cm-group.co.jp/en/ir/█ Company profile
Widening the room for growth by meeting diversifying customer
needs, centered on online research
1. Business overview
The Company businesses are divided into three segments: research, IT solutions, and other businesses. Its original
business was marketing research based primarily on online surveys, but over the years, it has developed a full rangeof services covering all areas of marketing research with quantitative and qualitative studies, and for both online andoffline, it provides a one-stop service domestically and overseas through a wide range of surveys. The IT solutions
business does mobile system planning, development, and operations, and also dispatches engineering personnel.
Other businesses include a promotion services business for marketing support. Up to the present time, the Company
has more strongly crossed over the functions of each business and greatly expanded its business scope from online
survey-based marketing research to marketing solutions centered on online research. Currently, based on marketing
solutions, it is promoting digital transformation* to respond to the rapid digitalization and expanding its businessscope with the aim of heightening its ability to meet diversifying customer needs, so the room for growth is widening.
*	Digital transformation (DX): the concept that the spread of IT will make every aspect of people’s lives more comfortable.

Going forward, growth is expected to continue in the medium- tolong-term
2. History
The Company can trace its roots back to Cross Marketing Inc., an online research company that was founded in
April 2003 by Miki Igarashi, the current Representative Director, President and CEO. In May 2006, Cross Marketing
entered into a capital and business alliance with EC Navi Inc. (currently VOYAGE GROUP Inc. (CARTA HOLDINGS,
INC. <3688>), the operator of ad platform and point media businesses). In March 2007, it entered into capitalalliances with major research companies such as Dentsu Research Inc. (currently DENTSU MACROMILL INSIGHT,
INC.) and Video Research Ltd. In October 2008, Cross Marketing listed its shares on the Mothers Section of theTSE. In August 2011, it acquired Index Inc.’s mobile solutions business (currently the IT solutions business). Throughefforts including establishing a subsidiary in Shanghai, China and entering overseas markets, the Company aimed
to expand its business areas. In 2013, it changed its company name to Cross Marketing Group Inc., and becamea holding company, and in March 2018, its listing was upgraded to the 1st Section of the TSE. In addition, it
accelerated M&A, new businesses, and structural reforms, including acquiring a series of leading companies like
Research and Development, Inc., and Supotant Co., Ltd., and even while being a late-comer, it is has quickly cometo be a leader in the marketing research industry. Since 2020 began, unfortunately results in the industry as a whole
have temporarily been kept down due to the impact of the novel coronavirus pandemic. Yet in the marketing researchmarket, which is projected to grow in the medium- to long-term, the Company is continuously developing a growthstrategy and it is expected to continue to achieve medium- to long-term growth “after coronavirus.”

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03 19

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

Cross Marketing Group Inc.
3675 Tokyo Stock Exchange First Section

15-Oct.-2020
https://www.cm-group.co.jp/en/ir/

Company profile

History
Date
April 2003

Founded in Shibuya-ku, Tokyo

January 2004

Relocated to Chuo-ku, Tokyo

May 2006

Entered into a capital and business alliance with Voyage Group and its subsidiary Research Panel, Inc.

October 2008

Listed on the Mothers section of the Tokyo Stock Exchange

August 2011

Subsidiary Cross Communication Inc. commenced operations after succeeding to a portion of Index Inc.’s mobile solution business

May 2012

Established subsidiary Cross Marketing China Inc. in Shanghai, China and commenced operations

June 2013

Transitioned to a holding company framework by establishing Cross Marketing Group Inc. through a sole-share transfer

August 2013
May 2014

Acquired shares in Markelytics Solutions Private Limited and Medical World Panel Online Inc.
Relocated the head office to Shinjuku-ku, Tokyo (Tokyo Opera City)

November 2014

Converted Kadence Group, which operates in eight countries in North America, Europe, and Asia, into a wholly owned subsidiary

February 2014

Converted affiliate Research and Development, Inc. into a consolidated subsidiary

April 2014

Cross Communication Inc. established subsidiary Cross Propworks Inc. in Hakodate

July 2015

Established Medilead Inc., and D&M Inc., and they started operations

August 2015

Established Cross Marketing (Thailand) Co., Ltd. (currently, Kadence International (Thailand) Co., Ltd.)

November 2015

Cross Communication Inc. converted JIN SOFTWARE (renamed Cross J Tech Inc.) into a subsidiary

April 2016
March 2018
April 2018
October 2018
November 2019
June 2020

Shopper’s Eye Inc., started operations
Listing was upgraded to the TSE 1st Section
Established Cross Ventures Co., Ltd.
Cross Communication made a subsidiary of Supotant Co., Ltd.
Supotant Co., Ltd., merged with Cross J Tech Inc., and the company name was changed to Fittio Inc.
Cross Marketing Inc., conducted an absorption merger of Research and Development, Inc. aimed at strengthening online andoffline synergies

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

The novel coronavirus pandemic has cast a large shadow over themarketing research industry
3. Industry environment
Alongside factors such as the diversification of consumption and the expansion of corporate results, the marketing
research market has grown stably. On broadly classifying marketing research in actual companies conducting surveys
in the field and online, it can be divided into online research and offline research. In this situation, online research issuperior on the points of speed, costs, and scale compared to conventional offline research such as visit surveys,
mail surveys, and telephone surveys. Therefore, since 2000, the online research market has been rapidly expanding
alongside the spread of Internet usage. In addition, the industries’ three major companies* are integrating marketing
research with promotions, IT solutions, and consulting to expand their busines scope to marketing solutions, while
companies other than these major companies are aiming to survive by demonstrating their uniqueness. Moreover,in recent years, within the digital-transformation movement, it has become necessary to make full use of the latest
IT technologies in order to respond to needs for big data surveys and analyses.
*	The three major companies: Macromill <3978>, INTAGE Holdings <4326>, and the Company.

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04 19

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

Cross Marketing Group Inc.
3675 Tokyo Stock Exchange First Section

15-Oct.-2020
https://www.cm-group.co.jp/en/ir/

Company profile

Since the beginning of 2020, the novel coronavirus pandemic has had a devastating impact and has cast a large
shadow over the marketing research industry. In particular, there was a three-month period from April to June during
which was a state of emergency was declared in Japan, and the entire world adapted self-restraint for sales andgoing out. Overseas, measures included cities being placed on lockdown, and in many regions, the downturn ineconomic activities was even stronger than in Japan. Therefore, particularly for offline surveys, in which the potential
for person-to-person contact is high, and also in industries that have been strongly affected by the impact of thenovel coronavirus pandemic, cancellations and postponements of research activities occurred, and results were
extremely severe for every company. Although there was a second wave of the novel coronavirus pandemic, which
had temporarily slowed down, from July onward, economic activities have gradually restarted and the businessconditions of each company in the industry appear to be showing signs of recovery. However, in terms of the industry
as a whole, it is expected to take at the very least around one year to recover from the slump in results during theApril-to-June period. Therefore, it is anticipated that digital transformation to promote improved efficiency will further
accelerate. In the next section, the Company’s businesses, followed by the results, will be described in detail.
April to June 2020 results of listed marketing research companies
(¥mn)
Code

Trading name

Revenue

YoY
difference

OperatingprofitYoY
difference

Research features

4326

INTAGE Holdings

10,676

-653

-774

-896

Japan’s largest marketing research company.
Strengths include panel surveys.

3978

Macromill

7,718-2,307-5,653-6,580Mainly conducts online surveys. Conducts lowcost market surveys domestically and overseas.
Also provides analysis services.

3675

Cross Marketing Group

3,081-1,016-261-275

Mainly online, but offline as well. Provides a onestop service, from planning through to aggregating
and analysis.

3695

GMO Research

696

-70

-25

-25

Mainly online surveys. Provides work support,such as for aggregating and analysis. Has internaland external survey respondents.

6555

MS&Consulting

206

-446

-202

-224

A mystery shopper specialist. Main customers are
retail companies. Also offers consulting.

2467

VLC Holdings

316

4

-113

34

User needs surveys and brands surveys. 20% forMaruetsu.

Note: MS&Consulting (6555) figures are an aggregation of March to May
Source: prepared by FISCO from each company’s financial results, financial results briefing materials, and websites█ Business activities
The research business is evolving and its business scope is
expanding
1. Domestic research business
The sequence of events in the Company’s online research is as follows: develop a questionnaire program in accordance with the plan and place it on the questionnaire server; conduct the questionnaire among the extracted panels;
carry out data cleaning, such as of logical contradictions and invalid answers; aggregate the survey results; andin many cases, prepare an analysis report and deliver it to the customer. Notable features of the Company are thequality and quantity of its panels, and its accompanying value-added services, such as analysis reports.

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05 19

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

Cross Marketing Group Inc.
3675 Tokyo Stock Exchange First Section

15-Oct.-2020
https://www.cm-group.co.jp/en/ir/

Business activities

What is most important for online research is the quality and quantity of the panels. In terms of quantity, the Company
boasts the largest number of questionnaire panels in Japan (as of October 2019) with a total of 4.65mn people onactive panels including the 2.19mn people who answered a questionnaire within the last one year and people fromits business partners. In terms of quality, in addition to the basic information like gender, age, and place of residence,the panels cover basic attributes such as composition of co-habitants and living arrangements. In order to ensure
the reliability of the data, Research Panel Inc. also updates the membership registration information every year
and ensures that the panels’ basic attributes information is always kept up to date. The Company also conducts
thorough quality control of the panels, including checking the contents of the questionnaire survey responses andde-registering malicious, fraudulent respondents. In addition, in order to smoothly conduct the surveys, it segments
the panels into specific themes in advance, such as car ownership or diseases, and has prepared more than 20
specialist panels. From the above, it is apparent that the Company’s online research is capable of highly accurate
and efficient surveys.
Moreover, the Company is developing its digital marketing in combination with quantitative research and qualitative
research that it conducts offline, including actually gathering together and interviewing survey respondents, and also
in combination with existing survey methods like IT. In addition to the normal questionnaires, it collects and analyzes
data posted on SNS and elsewhere and supports the construction of a data-driven decision-making system that
integrates questionnaire data with existing data. Medilead, which was made a subsidiary in 2015, conducts researchusing panels of doctors, medical practitioners, and patients, and provides various types of support, including support
for creating health management programs and illness-onset risk models, and support for writing theses, research andmedical technology evaluations, including for drug discovery and clinical trials. For such services that are focused on
specialized areas, aspects such as securing specialized human resources and responding to new technologies arenecessary; therefore, they can be called services with extremely high added value. Therefore, Medilead’s marketing
solutions have acquired extremely strong reputations and its business scope is expanding.
Roadmap for Marketing Solutions

Source: the Company’s homepage

The Kadence Group has completed the first stage of structuralreform
2. Overseas research businessJapanese companies are entering-into overseas countries in Asia and elsewhere, and the Company is also developing its business in Asia. In 2014, it conducted an M&A of the Kadence Group, which conducts a marketing researchbusiness in the United States, the United Kingdom, and Asia, thereby strengthening its business development in
Asia. However, because it barely contributed to consolidated results due to organizational issues and other factors,
the Company advanced structural reforms in FY12/18 and FY12/19. Currently, the Kadence Group has completed
the first stage of the structural reforms and aims to further strengthen its organizational structure. In the future, it isthought that the infrastructure foundation will be strengthened, such as by steadily developing bases in the UnitedStates (the West Coast area) and the areas in Asia it has not yet entered, and establishing BPO (Business Process
Outsourcing) bases and R&D centers in the English-speaking regions of Asia.

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06 19

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

Cross Marketing Group Inc.
3675 Tokyo Stock Exchange First Section

15-Oct.-2020
https://www.cm-group.co.jp/en/ir/

Business activities

Strengths include developing systems with the required robustness
for the financial services industry
3. IT solutions business
The IT solutions business offers a one-stop service for all essential functions in mobile and smartphone services, frommarketing to planning, development, operation, and promotion. More specifically, the IT solutions business engages
in website construction, smartphone app development, various tools and software package provision, surveys andanalysis, infrastructure and server building, online promotions, security measures, and operational outsourcing. The
Company has strengths in building and operating systems for financial institution apps and settlement and point
management that require robust performance and large-scale systems with millions of members, along with othersystems. The Company has an extensive track record for development and management in the financial services
industry, centered on securities companies. For instance, the apps it has developed have high shares of the accountsof listed Internet securities companies. The background to this track record is its expansion of sales to customers
such as credit card companies and online banks. Moreover, it does not only provide apps, it additionally provides
human resources to customer companies, while also conducting management-related operations with continuity.
Therefore, in 2019, Supotant, which conducted recruitment and temporary staffing with a focus on the Internet
and e-commence, and Cross J Tech Inc., were merged and the company name was changed to Fittio Inc. The
company has strengthened temporary staffing to manage and maintain websites and e-commerce sites developed
for customers.

The Company’s marketing solutions key business4. Other businesses (the promotions business)
The core of other businesses is the provision by D&M Inc. of cutting-edge marketing services, such as digitalmarketing that utilizes consumer data and digital promotions. Among those other businesses, the unique marketingsystem of OODA (Observe, Orient, Decision, Action), which differs from the traditional PDCA, has acquired an
excellent reputation as a service to support customers’ marketing strategies. It is also advancing data collaborations
with major DMP (Data Management Platforms) like TREASURE DATA and Adobe, and has become able to respondto the increasingly complex needs of advertisers and changes to the market environment by coordinating large-scale
attributes data and data on companies. The promotions business can be said to be a key business, because it isprovided as a one-stop, integrated service for the Company’s marketing solutions through a collaboration between
the research business and the IT solutions business.

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07 19

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

Cross Marketing Group Inc.
3675 Tokyo Stock Exchange First Section

15-Oct.-2020
https://www.cm-group.co.jp/en/ir/

Business activities

A strength is its support system through Group collaborations
5. Business strengths
Notable features of the Company’s research would seem to be screen designs that make it easier for respondents toanswer questions; distribution settings to achieve accurate target selection; accurate and high-quality data cleaning;
quick response with screen formulation, distribution, and data delivery using a high-performance questionnairesystem; an industry-leading number of panels in Japan; and surveys that are capable of targeting not only basic
attributes, but also small, unique groups as well. However, the other major players in the industry also possess thesame capabilities and services to some extent, so they do not significantly differentiate the Company. Its greatest
strength is considered to be its support structure that brings together all the responsible people, including sales staff,
researchers, and directors, who can adapt quickly and interact with clients to resolve issues in a unified manner,as opposed to the other major companies in the industry whose functions tend to be separate from one another.
Furthermore, the Company’s support structure, together with the experience of its researchers in providing suitableproposals and designs to address the client’s situation, and its strengths can be said to include its ability to provide
total marketing solutions that utilize the functions of the IT solutions business and promotions business in the Group,
which is considered to effectively differentiate the Company from its competitors. Below are the Group companies
that constitute the Company’s businesses and support its strengths.
List of Group companies

Source: the Company’s results briefing materials

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08 19

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

Cross Marketing Group Inc.
3675 Tokyo Stock Exchange First Section

15-Oct.-2020
https://www.cm-group.co.jp/en/ir/█ Business strategy
Evolving research for digital transformation
1. The strategy conducted since 2020
Due to the current rapid spread of IT, there has been a flood of Big Data in various fields. Even in the marketing
aspect, while on the one hand customers have become able to automatically accumulate this data, they are facedwith the major problem of precisely analyzing and managing it. In order to solve this problem, the Company provides
a high-value-added reporting service through data engineering (aggregating large volumes of data by engineers)that ties as quickly as possible and optimally aspects such as customers’ big data and the Company’s researchdata and consulting capabilities, and marketing solutions (analysis by marketers). Furthermore, it also integrates
marketing solutions and digital transformation, and the Group is evolving its support capabilities through marketingby actively conducting measures in this new phase.
Specifically, as previously stated, Medilead is not only conducting research with doctors and patients, but also
providing high-value-added services, including consulting specialized in the expert fields of medicine and data
science (analysis), and support for writing theses. On the other hand, by advancing the shift to online researchand the automation of research, digital transformation is expected to improve productivity for the Company aswell. Within this development, not only the major companies in the same industry, but also consulting firms andadvertising agencies are also beginning to make efforts. But it is considered that the Company is superior to othersin the same industry in terms of its systems’ flexibility and mobility, and to companies outside of the industry interms of its research functions.
Image of the business development utilizing digital technologies

Source: the Company’s results briefing materials

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09 19

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

Cross Marketing Group Inc.
3675 Tokyo Stock Exchange First Section

15-Oct.-2020
https://www.cm-group.co.jp/en/ir/

Business strategy

Continuing to implement a growth strategy during the novel
coronavirus
2. Specific measures in FY12/20 1H
In FY12/20 1H, the impact of the novel coronavirus pandemic was enormous and inevitably it attracted a lot of
attention. Yet even in this situation, the Company continued to actively implement a growth strategy to develop
digital transformation based on marketing solutions, and is currently developing and market launching new services.
It provides the services described below, including customer journey-type data analysis, support for the growth of
D-to-C (manufacturer direct sales) brands, Web crawling that uses AI, positional information big data analysis, andQwantz, which is a self-selection questionnaire. Aside from these, it has established withwork Inc., as marketing
research operations base in Fukuoka in order to conduct risk hedging in the event of a disaster and to strengthen
and recruit human resources. It integrates the online research mainly conducted by Cross Marketing and the offline
research mainly conducted by Research and Development, and with ICT and other factors in the background, it is
responding to the evolution of marketing activities in customers. Also, D&M has entered-into a business partnershipwith Temona Inc., and it is providing marketing support to the businesses that use Temona’s subscription system,
while Cross Communication Inc., has developed CONNECT, a new smartphone securities app with the stability andthe robustness required by Daiwa Securities Group Inc.<8601>.
New services in 2020 1Ha) Customer journey-type data analysis
The CRM analysis service, which aims to utilize companies’ big data, is a fully customized support service todeal with the issue of companies’ utilization of big data, including to convert to customer journey-type data, toactualize customers and their issues, and for test marketing. It seems that orders are currently increasing as amarketing support tool during the novel coronavirus pandemic. Customer journey-type data analysis refers tousing big data analysis to make visible customers’ (individual customers’) behaviors, thoughts, and emotions (thecustomer journey) that tend not to be seen in conventional marketing.
Example of a customer journey-type data analysis

Note: Diagram shows the marketing flow, of awareness data and behavior data and the calculation of LTV (Life Time Value)
based on an analysis of macro and micro customer data ~ the simulation of revenue improvement ~ improvement
measures ~ the verification of results by test marketing.
Source: the Company’s results briefing materialsb) Support for the growth of D-to-C (manufacturer direct sales) brands
This service, which was jointly developed for D-to-C brands by NEWROPE Co. Ltd., which is investing in Cross
Ventures Inc., and by Cross Communication Inc., is a targeting service that utilizes their abundant track records
in data marketing. Image data on SNS is analyzed using fashion AI technology, a database is created, a reserve
army of fans is extracted and fans are efficiently acquired, which will ultimately lead to continuous communication
with fans.

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10 19

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

Cross Marketing Group Inc.
3675 Tokyo Stock Exchange First Section

15-Oct.-2020
https://www.cm-group.co.jp/en/ir/

Business strategyc) Web crawling using AI
This is a service to support decision making by customers in the big data era. It uses AI and collects, coordinates,
and analyzes data from more than 1.7 billion websites around the world.
d) Positional information big data analysis
This is a service in which D&M conducts questionnaires and behavioral analysis and creates reports in relation
to consumers who are estimated to live in residential areas through the positional information big data analysisof X-Locations Inc., which has a business partnership with D&M. Its aims including acquiring new customers,
promoting repeats among existing customers, and improving customer-attraction efficiency through advertising.
e) The Qwantz self-selection questionnaireThis self-selection questionnaire provided by D&M has inexpensive fees and fast delivery, and it is easy for
respondents to use. Using partner companies’ demographic data on site visits and app usage for more than 5
million people, including on gender, age, and place of residence, allows the company to effectively narrow down
the destinations to which the questionnaire will be sent.

█ Business trends
Profits decreased significantly due to the impact of the novel
coronavirus
1. FY12/20 1H results
The FY12/20 1H results were severe, with revenue of ¥7,700mn (down 12.6% YoY), operating profit of ¥166mn(down 60.8%), ordinary profit of ¥186mn (down 45.6%), and net profit attributable to owners of parent of ¥32mn(a return to profitability). The reason for these results was solely the spread of the novel coronavirus pandemic.
Alongside the spread of the pandemic, the Company’s business activities were greatly restricted by the declarationof a state of emergency among other factors. The impact of the novel coronavirus pandemic was significant
overseas as well, and there were regions where the Company’s business activities were even more restricted thanin Japan. Therefore, the research business struggled as it tends to reflect the economic environment more than the
IT solutions business and the other businesses, and the overseas research business particularly struggled. Against
this backdrop of the social and economic environments, on the one hand the Company implemented measures like
reducing expenditures that are not necessary or urgent, establishing a remote-working environment, and ensuring
it had sufficient liquidity on hand, while on the other hand, it continued with a strategy to realize sustainable growth,
including by investing and pursuing Group synergies. The reason why net profit attributable to owners of parent
increased significantly in FY12/20 1H was a reaction to the goodwill impairment loss that was recorded in the same
period in the previous fiscal year due to the structural reforms of the Kadence Group.

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11 19

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

Cross Marketing Group Inc.

15-Oct.-2020

3675 Tokyo Stock Exchange First Section

https://www.cm-group.co.jp/en/ir/

Business trends

FY12/20 1H results(¥mn, %)
FY12/19 1H

Ratio (%)

FY12/20 1H

Ratio (%)

Change (%)

Revenue

8,808

100.0

7,700

100.0

-12.6

Gross profit

3,371

38.3

2,937

38.1

-12.9

SG&A expenses

2,947

33.5

2,771

36.0

-6.0

Operating profit

423

4.8

166

2.2

-60.8

Ordinary profit

341

3.9

186

2.4

-45.6

Net profit attributable toowners of parent

-955

-10.8

32

0.4

-

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

On dividing the 1H into the 3 months of the 1Q and the 3 months of the 2Q, the situation in the 1Q was that the
impact of the novel coronavirus pandemic was still hardly being felt, but that on entering the 2Q, the virus rapidly
spread, a declaration of a state of emergency was issued within Japan, and the self-restraint on going out and sales
activities became widespread. There were also regions overseas in which economic activities were paralyzed, due
in part to lockdowns in major cities. Based on these conditions, the Company moved quickly to keep down costs,
including labor costs and advertising costs. Furthermore, alongside the declaration of a state of emergency, there
were also decreases in other costs, such as for transportation and consumables, while goodwill amortization costs
also decreased due to the impairment loss in the previous period. As a result, in the 2Q alone, it reduced SG&A
expenses by ¥177mn. However, inherently the 2Q is not a period that generates profits, and this reduction was
unable to cover for the declines in revenue and gross profit, leading to a loss of profit.
Comparison of the 3-month results of the 1Q and the 2Q(¥mn, %)
3 months of 1Q

FY12/19 1Q

Ratio (%)

FY12/20 1Q

Ratio (%)

Revenue

4,711

100.0

4,618

100.0

-2.0

Gross profit

1,875

39.8

1,867

40.4

-0.4

SG&A expenses

1,465

31.1

1,440

31.2

-1.7

Operating profit

409

8.7

427

9.2

4.3

Ordinary profit

366

7.8

412

8.9

12.8

Net profit attributable toowners of parent

192

4.1

250

5.4

30.1

3 months of 2Q

Change (%)

FY12/19 2Q

Ratio (%)

FY12/20 2Q

Ratio (%)

Change (%)

Revenue

4,097

100.0

3,081

100.0

-24.8

Gross profit

1,496

36.5

1,069

34.7

-28.5

SG&A expenses

1,481

36.2

1,330

43.2

-10.2

Operating profit

14

0.3

-261

-8.5

-

Ordinary profit

-24

-0.6

-226

-7.4

-

-1,146

-28.0

-218

-7.1

-

Net profit attributable toowners of parent

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

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12 19

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

Cross Marketing Group Inc.

15-Oct.-2020

3675 Tokyo Stock Exchange First Section

https://www.cm-group.co.jp/en/ir/

Business trends

The IT solutions business and the promotions business performed
steadily overall
2. FY12/20 1H results by business segment
Looking at the FY12/20 1H results by segment, in the research business, revenue was ¥5,970mn (down 14.9%
YoY) and operating profit was ¥739mn (down 15.4%); in the IT solutions business, revenue was ¥1,711mn (up0.7%) and operating profit was ¥61mn (down 61.9%); and in other businesses, revenue was ¥369mn (down 3.2%)
and operating profit was ¥82mn (up 54.9%). Breaking down revenue in the research business, domestically it was¥4,474mn (down 7.4%) and overseas it was ¥1,256mn (down 37.7%).
FY12/20 1H results by business segment(¥mn, %)
Revenue before
adjustment

FY12/19 1H

Ratio (%)

FY12/20 1H

Ratio (%)

Change (%)

Research

7,013

79.6

5,970

77.5

Domestic research

4,831

54.8

4,474

58.1

-7.4

Overseas research

2,015

22.9

1,256

16.3

-37.7

IT solutions

1,698

19.3

1,711

22.2

0.7

381

4.3

369

4.8

-3.2

Other businesses
Segment profit before
adjustment

FY12/19 1H

Profit margin(%)

FY12/20 1H

Profit margin
(%)

-14.9

Change (%)

Research

874

12.5

739

12.4

-15.4

IT solutions

159

9.4

61

3.5

-61.9

Other businesses

53

13.9

82

22.3

54.9

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

In the domestic research business, the declaration of a state of emergency due to the novel coronavirus pandemic
resulted in restrictions on companies’ business activities and other impacts, and particularly in the 2Q, in whichcustomer companies reviewed their research budgets and some projects already underway were cancelled or
postponed. In particular, from the viewpoint of avoiding contact to prevent the spread of the virus, the number ofoffline survey projects was significantly reduced. Despite efforts to acquire orders and provide services, growth
was also sluggish for survey projects conducted on the Internet, mainly for those industries directly affected by the
declaration of a state of emergency. In October 2020 (scheduled), Cross Marketing, which is mainly responsible
for online research, will absorb Research and Development, which is mainly responsible for online survey research,
but this will be conducted as part of an existing plan aimed at synergies from the time of the M&A of Researchand Development rather than a result of the novel coronavirus pandemic. Although sales activities in the overseas
research business, have been restricted in many overseas bases more than in Japan, due in part to the city-wide
lockdowns and restrictions on going out, the structural reforms from the previous period were continued and theorganizational structure was greatly reviewed while considering the circumstances at each individual base. Therefore,
revenue declined significantly.

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13 19

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

Cross Marketing Group Inc.
3675 Tokyo Stock Exchange First Section

15-Oct.-2020
https://www.cm-group.co.jp/en/ir/

Business trends

Comparison of the research business' 2Q 3-month results
Domestic research revenue (left)
Operating profit (right)

Overseas research revenue (left)

（¥mn）

（¥mn）

2,500

400
2,065

2,000

300

288

1,656

1,500

200
1,069

1,000

100

500

359

-19

0

0

-100
FY12/19 2Q 3 months

FY12/20 2Q 3 months

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

In the IT solutions business and the other businesses, the novel coronavirus pandemic appears to have had a slight
impact on ordering activities, but hardly affected sales, which can be said to be solid. In the IT solutions business,resources were concentrated in large-scale outsourced development projects throughout the 1H, and operating profit
was recovering toward the 2Q. However, costs to respond to large-scale projects increased, resulting in a profit decline.

Comparison of the IT solutions business’ 2Q 3 -month results
Revenue (left)

Operating profit (right)

(¥mn)
1,000

(¥mn）
100

891
792

750

71

75
60

500

50

250

25

0

0
FY12/19 2Q 3 months

FY12/20 2Q 3 months

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

In other businesses, progress was made including for collaborations within the Group with the research businessto strengthen the sales structure and services and for collaborations with other companies. However, revenue
declined slightly due to the effects of the pandemic, including a slowdown in new customer acquisitions and the
postponements and cancellations of some projects. Despite this, an increase in operating profit was still secured,
mainly from the thorough management of the gross profit margin and reviews of various costs.

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14 19

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

Cross Marketing Group Inc.
3675 Tokyo Stock Exchange First Section

15-Oct.-2020
https://www.cm-group.co.jp/en/ir/

Business trends

Comparison of other businesses’ 2Q 3 -month results(¥mn)

Revenue (left)

Operating profit (right)

（¥mn）

250

50
43

200

175

171

150

40

30

100

20
20

50

10

0

0
FY12/19 2Q 3 months

FY12/20 2Q 3 months

Source: Prepared by FISCO from the Company’s results briefing materials█ Results outlook
Progressing reforms to achieve both business maintenance andgrowth
1. Responses for “after coronavirus” and the 3Q business conditions
Although there is still no vaccine for the novel coronavirus, in anticipation of the “after coronavirus” period, theCompany’s approach is to advance “reforms to achieve both business maintenance and growth” as a corporategroup responding to changes to society and to values. Within this approach, it has defined the short- to medium-termrisks and the specific response policies for the “after coronavirus” conditions that are currently being considered.
“After coronavirus,” it will first look at the changes to work styles and to organizational management, and as its
response policy, it will conduct both office work and remote work, premised on a safe working environment. In
addition, to support this it will progress reforms to the personnel evaluation system and to management. It seems
that the novel coronavirus pandemic is accelerating the downturn in offline survey projects, so based on this, theCompany will progress the shift to online research and digital transformation. From viewpoints such as avoiding
contact, it is considered that the ways of conducting sales activities and customer acquisition will change, but by
strengthening digital marketing and the CRM system, it will construct new relationships with customers. To respondto changes to consumer behavior and values and to the business environment, it will invest in existing businesses
so that it can provide new value and added value. There is the concern that the speed of growth will slow down due
to the slump in business activities, but against the backdrop of new borrowing of ¥2bn (disclosed in June 2020), theCompany will continue to invest to maintain and grow its businesses. As described below, the marketing researchmarket will continue to grow in the long term, while transforming the past, present, and future. Precisely for such amarket, new responses are necessary for “after coronavirus,” but it is considered that there has been no change to
the Company’s strategy of continuing to actively conduct business activities.

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15 19

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

Cross Marketing Group Inc.
3675 Tokyo Stock Exchange First Section

15-Oct.-2020
https://www.cm-group.co.jp/en/ir/

Results outlook

Bottomed-out in the 2Q, toward a recovery in the 3Q
2. Outlook for 3Q revenue and policies
In terms of the developments at the present time, business conditions bottomed-out in the 1H, in which a stateof emergency was declared, and appear to be recovering in the 3Q. In addition to the contributions of strongly
performing segments like promotions, large-scale projects at overseas bases are scheduled to be recorded in the
3Q. Therefore, the Company’s total consolidated 3Q revenue is expected to be in a range of decreasing 10% tounchanged YoY. Conversely, its policy is to control SG&A expenses and reduce them by from 10% to 5% YoY,
including by keeping down costs that are not necessary or urgent, reviewing the organizational structure, andreducing the floorspace of the head office through establishing remote working.

Outlook for the FY12/20 3Q consolidated revenue and SG&A expenses (YoY growth)
Consolidated revenue

Consolidated SG&A expenses

（%）
110.0

100.0

98.3

100.0

98.0

95.0

89.8
90.0

90.0

80.0

75.2

70.0
1Q

2Q

3Q outlook

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

In the domestic research business, inquiries for online research have hit bottom, while for offline projects, actual
surveys will be restarted and mystery-shopper surveys continue to be strong, so after bottoming-out in May, therecovery trend is continuing. Therefore, the Company’s policy is to strengthen services like face-to-face surveys
using Zoom and online seminars. However, its results are not expected to realize a V-shaped recovery from therecovery conditions of customers’ business activities, and for the 3 months of the 3Q, revenue in the domestic
research business is forecast to decline 10% YoY. In the overseas research business, the recovery has been slow inbases, mainly for offline surveys. However, business activities are gradually restarting and large-scale projects arescheduled in the US, so the forecast is for revenue to increase 20%. In addition, the Company plans to progress theshift to online, expenditure reductions, and the structural review. In the IT solutions business, restrictions to ordering
activities occurred in the 1H, including those for outsourced developments and dispatches of human resources, so
revenue is expected to decline in a range of from 20% to 10%. Therefore, in addition to focusing on already ordered
projects, the Company intends to strengthen new services and marketing to secure the number of projects. In otherbusinesses, the severe conditions for acquiring new customers are continuing, and in this situation, the number ofprojects from some existing customers is declining and the forecast is for revenue to decrease in a range from 10%
to unchanged YoY. As well as continuing to strengthen collaborations inside and outside the Group, the Company’s
policies are to review the personnel plan and the sales policies and methods, and to strengthen inbound marketing.

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16 19

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

Cross Marketing Group Inc.
3675 Tokyo Stock Exchange First Section

15-Oct.-2020
https://www.cm-group.co.jp/en/ir/

Results outlook

Revenue outlook by segment for the 3Q results (YoY growth)（%）

Domestic research revenue

Overseas research revenue

IT solutions

Other businesses
120.0

120.0

112.6
101.9

105.0
90.0

94.9
91.9

100.0

102.2
80.2

90.0

90.0

80.0

75.0
60.0

45.0

33.5

30.0
1Q

2Q

3Q outlook

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

Although it seems difficult to increase profits in the current period,
the Company is acquiring momentum toward the next period
3. FY12/20 results outlook
The Company has not yet decided on the FY12/20 full year results forecasts. This is because there is still no end
in sight to the global novel coronavirus pandemic, and the outlook remains uncertain in terms of how the external
environment will change in the future. Therefore, at the current time, it has determined it to be difficult to rationallyestimate results forecasts. Th Company intends to quickly announce them at the time when rational calculation
becomes possible.
Since the beginning of 3Q, economic activities in various countries, including in Japan, have been gradually recovering, although the impact of the novel coronavirus pandemic remains. The Company is also on a recovery track towardachieving revenue of around the same level as in the same period in the previous fiscal year, centered on its mainstay
domestic and overseas research business. In the IT solutions business and the other businesses, conditions are
expected to be somewhat severe in the 3Q due to the impact of the slowdown in ordering activities in the 1H, but arecovery is expected in the 4Q. For profits, the Company is attempting to support the results recovery by thoroughly
controlling SG&A expenses. From the above, the image for the full year results is that revenue and profits will both riseand get on a recovery track toward the 4Q, but it is expected that it will be difficult for these increases to completely
cover for the negative results in the 1H. However, in FY12/21, by further advancing cost controls, it is possible thatrevenue will return to the same level as in FY12/19 and that the profit level will also recover. Therefore, a renewal ofpeak profit may be on the horizon, depending on the recovery of economic activities.

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

17 19

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

Cross Marketing Group Inc.
3675 Tokyo Stock Exchange First Section

15-Oct.-2020
https://www.cm-group.co.jp/en/ir/

Results outlook

Opening-up a path to re-growth “after coronavirus”
4. Medium-term growth image
In the marketing research industry, it has become necessary to respond to an era in which needs and targets havediversified alongside market growth and in which the flood of data is increasing more and more. In doing so, inmarketing solutions, analog aspects, such as consulting, have come to be prioritized more. On the other hand,
it has become necessary to conduct digital transformation in order to steadily keep up with digital technologies
that are becoming more sophisticated at an accelerating pace. In its marketing solutions, through collaborations
inside and outside of the Group, the Company has been expanding its services menu from solutions centered on
research to consulting, temporary staffing, services specializing in expert fields, and other services. Furthermore,
for digital transformation, it is increasing the convenience of the research process, including for creating survey
questionnaires, through automation and other methods, while it is also expected to continue to work to improvefunctions to facilitate instantaneous processing and analysis of enormous volumes of data. The current situation isthat these efforts have been temporarily suspended in response to the novel coronavirus pandemic, but conversely,
the Company is continuing with a series of measures with an eye toward growth in the medium- to long-term. In thissituation, the conditions in each business are presently gradually recovering, and slowly but surely it has become
possible to see the future image. Specifically, it is considered that the Company’s image in the future will be to open
up a path for “after coronavirus” through marketing solutions and digital transformation, and that it will return to a
medium-term growth track.

Medium-term growth image
Revenue (left)

Ordinary profit (right)

(¥mn)

（¥mn）

25,0002,000

20,00015,96916,75817,492

18,58015,000

1,600
1,200

1,267

1,150

10,000

800
840
597

5,000

400

0
FY12/16

FY12/17

FY12/18

FY12/190
FY12/XXFISCO’s forecasts

Source: prepared by FISCO from Company materials

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

18 19

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

Cross Marketing Group Inc.
3675 Tokyo Stock Exchange First Section

15-Oct.-2020
https://www.cm-group.co.jp/en/ir/█ Shareholder return policy
In FY12/20, the interim dividend is ¥3.1, while the period-end
dividend is still undecided
The Company is aware that returning profits to shareholders is one of its most important management issues. Its
dividend policy is to continuing to stably return profits to shareholders through dividends and to determine thedividend amount based on the current rigorous demand for capital and the business investment plan for the future,
while targeting a consolidated dividend payout ratio of around 15%. In the FY12/20 full year consolidated results
forecasts, for the interim dividend it has maintained the initial forecast (¥3.1), as it acquired a certain level of earnings
in FY12/20 and also based on its dividend policy of continuing to stably return profits to shareholders throughdividends. However, due to the impact of the novel coronavirus pandemic and with maintaining management stability
and a continuous cash flow as its top priorities, the Company has not yet decided on the full year results forecasts.
Alongside this, it has also not determined the period-end dividend. Going forward, it plans to quickly announce theperiod-end dividend forecast at the time when rational calculation becomes possible, while considering the FY12/20
full year consolidated results and cash flow conditions.

Dividend per share and dividend payout ratio
Dividend per share (left)

Dividend payout ratio (right)

(¥)

（%）

6.0

30.0
6.0

6.0
5.5

4.0

5.5

5.5
21.2

19.5

Period-end
dividend isundecided
20.0

3.1

12.8
2.0

Interimdividend

0.0

10.0

0.0
FY12/15

FY12/16

FY12/17

FY12/18

FY12/19

FY12/20E

Note: dividend payout ratios for FY12/17 and FY12/19 are not shown as net losses were recorded.
Source: Prepared by FISCO from the Company’s financial results█ Information security
The research business collects personal information from those surveyed. Group companies that may come intopossession of personal information—including the parent company, UTIL, Inc., D&M, Inc., Research Panel, Inc.
and Medilead Inc.—have all been certified as meeting the data privacy standards set forth by JIPDEC (Japan
Information Processing and Development Center) and conduct proper collection, management, and handling of
personal information.

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

19 19

Disclaimer
FISCO Ltd. (“FISCO”) offer stock price and index information for use under the approval of theTokyo Stock Exchange, the Osaka Stock Exchange and Nikkei Inc.
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FISCO Ltd.
5-11-9 Minami Aoyama, Minato-ku, Tokyo, Japan 107-0062
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