COMPANY RESEARCH AND ANALYSIS REPORTPiPEDO HD, Inc.
3919
Tokyo Stock Exchange First Section

23-May-2017
FISCO Ltd. Analyst

Noboru Terashima

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

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

PiPEDO HD, Inc.
3919 Tokyo Stock Exchange First Section

23-May-2017https://www.pipedohd.com/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. FY2/17 results missed initial guidance, though earnings increased sharply YoY..........................................

01

2. Modest forecast for FY2/18 as the first year of the new medium-term business plan..................................

01

3. New medium-term plan sets realistic goals of ¥7,300mn in net sales and ¥1,700mn inoperating profit in FY2/20...................... ......................................................................................................

01■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 02
1. Company profile.. ................................... ......................................................................................................

02

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

02

3. Business content.........................................................................................................................................

04■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 09
1. Profit-and-loss conditions............................................................................................................................

09

2. Financial standing and cash flow conditions................................................................................................

12■Business outlook-------------------------------------------------------------------------------------------------------------------------------------------------------- 13■Medium-to-long-term growth strategy------------------------------------------------------------------------------------------------- 14
1. New medium-term plan sets fairly realistic goals. ........................................................................................

14

2. Priority measures.........................................................................................................................................

15■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 15

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

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

PiPEDO HD, Inc.
3919 Tokyo Stock Exchange First Section

23-May-2017https://www.pipedohd.com/██Summary
New medium-term business plan targets ¥7,300mn in net sales and¥1,700mn in operating income in FY2/20
PiPEDO HD, Inc. <3919> is a pure holding company (hereafter, also “the Company”), and PIPED BITS Co., Ltd., its
main consolidated subsidiary, is a unique IT company that supplies the SPIRAL® platform (middleware) in a cloudformat. The Company provides a platform for national clients and other large companies, mid-sized companies,
and smaller system integrators (SIers) and also sells proprietary applications for specific industries (such as beautyand construction industries) and engages in businesses that utilize these applications.
1. FY2/17 results missed initial guidance, though earnings increased sharply YoY
The Company reported ¥4,802mn in net sales (up 19.9% year on year (YoY)), ¥845mn in operating profit (up 45.6%),¥864mn in recurring profit (up 54.1%), and ¥404mn in profit attributable to owners of parent (up 63.1%) in FY2/17.
It lowered targets during the fiscal year because initial targets were fairly bullish, and the FY2/17 results exceeded
the revised targets. Earnings grew at a strong pace in FY2/17, a positive trend. Information Asset Platform businessdelivered by PIPED BITS, the core group company, led the advances in earnings.
2. Modest forecast for FY2/18 as the first year of the new medium-term business plan
The Company’s FY2/18 forecast targets ¥5,300mn in net sales (up 10.4% YoY), ¥845mn in operating profit (up0.0%), ¥835mn in recurring profit (down 3.4%), and ¥470mn in profit attributable to owners of parent (up 16.2%).
While this plan envisions healthy expansion of net sales, it only expects flat earnings because of proactive investments, mainly in personnel, as the first year of a new three-year plan. However, these are constructive outlays aimed
at realizing robust gains in the final fiscal year of the medium-term plan, and the content is not a reason for concern.
3. New medium-term plan sets realistic goals of ¥7,300mn in net sales and ¥1,700mn in operating profit in
FY2/20
The Company announced the new medium-term (three-year) business plan that sets goals of ¥7300mn in net salesand ¥1,700mn in operating profit in FY2/20. We think the goals in this plan are very realistic and well within reachfollowing the Company’s experience of missing goals in its previous medium-term plan. In fact, earnings might
exceed the goals and trends should be closely monitored.
Key Points
Implements businesses that primarily leverage the proprietary SPIRAL® platform
Expecting flat operating profit in FY2/18 due to proactive investments• New medium-term plan sets goals of ¥7,300mn in net sales and ¥1,700mn in operating profit in FY2/20••

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

01 15

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

PiPEDO HD, Inc.

23-May-2017

3919 Tokyo Stock Exchange First Section

https://www.pipedohd.com/

Summary㻾㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㼟㻔¥㼙㼚㻕㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕

㻤㻠㻡

㻢㻘㻜㻜㻜
㻡㻘㻜㻜㻜

㻠㻘㻜㻜㻜

㻢㻞㻡
㻡㻢㻠

㻔¥㼙㼚㻕

㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻕
㻤㻠㻡

㻣㻡㻜
㻡㻤㻜

㻢㻜㻜

㻟㻘㻜㻜㻜

㻠㻡㻜
㻠㻘㻤㻜㻞

㻞㻘㻜㻜㻜
㻝㻘㻜㻜㻜

㻥㻜㻜

㻡㻘㻟㻜㻜
㻟㻜㻜

㻠㻘㻜㻜㻢
㻞㻘㻡㻝㻣

㻟㻘㻝㻣㻟
㻝㻡㻜

㻜

㻜
㻲㼅㻞㻛㻝㻠

㻲㼅㻞㻛㻝㻡

㻲㼅㻞㻛㻝㻢

㻲㼅㻞㻛㻝㻣

㻲㼅㻞㻛㻝㻤㻌㻱

Source: Prepared by FISCO from the Company’s financial results██Company profile
Implements businesses that primarily leverage the proprietary
SPIRAL® platform
1. Company profile
The Company is a pure holding company established through a transfer of shares from PIPED BITS on September
1, 2015. It has 11 consolidated subsidiaries, one equity-method affiliate, and four other investee companies as ofMarch 31, 2017. Nevertheless, PIPED BITS remains the core company in the group so our review of the history andbusiness content focuses on PIPED BITS.
2. History
PIPED BITS was established by its founder and current President of PiPEDO HD, Nobuaki Satani in April 2000. For
most companies, data acquired in the course of business including customer attributes and e-mail addresses form
important “information assets”, so the Company commenced operations with services to effectively use them atthe same time as managing them securely. What was developed in-house in order to carry out this business was
the proprietary SPIRAL® platform for data management. (Details to follow.) Subsequently, the Company developeda range of applications based around SPIRAL® and has been engaged up to the present time in rolling-out thesebusiness applications.

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

02 15

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

PiPEDO HD, Inc.
3919 Tokyo Stock Exchange First Section

23-May-2017https://www.pipedohd.com/

Company profile

PiPEDO HD history
Sep. 2015

PiPEDO HD was established by a single transfer of shares from PIPED BITS Co., Ltd. and listed on the Tokyo Stock ExchangeFirst Section (PIPED BITS Co., Ltd. was delisted in August 2015). PiPEDO HD acquired the shares of the four subsidiaries of
PIPED BITS by a property dividend, converting them into its own subsidiaries.

Dec. 2015

Made additional investment into Current Inc., converting it into a subsidiary

Mar. 2016

Established GONDOLA CO., LTD., FRIENDIT Inc., and BIREKI Co., Ltd.

Oct. 2016

Established BLOOM NOTES, INC.

Source: Prepared by FISCO from Company website

PIPED BITS history
Apr. 2004

Established as K.K. Sahara in Tokyo’s Setagaya Ward, aiming at e-mail based marketing support software, after receiving a capital
investment from Current Inc. (Tokyo, Setagaya Ward)

Oct. 2000

Developed e-mail marketing platform “SPIRAL Messaging Place®”.

Dec. 2000

Spun-off to become independent via an MBO, and relocated headquarters to 1-12-15 Jinnan, Shibuya Ward, Tokyo.

Jan. 2001

Changed trade name to PIPED BITS Co., Ltd.

Feb. 2001

Launched SPIRAL Messaging Place® service

Apr. 2001

Introduced a sales agent system to SPIRAL Messaging Place®

Dec. 2001

Introduced SLA (Quality Certification System) to SPIRAL Messaging Place®

Dec. 2006

Listed on the TSE Mothers exchange

Apr. 2009

Changed the service name from SPIRAL Messaging Place® to SPIRAL®.

Jan. 2010

Acquired certain operations, namely the CMS and EC businesses from HiDESIGNS Inc.

Apr. 2010

Launched apparel EC platform “SPIRAL EC®”.

Dec. 2010

Started to tackle the Internet advertising and Internet media-related areas. Launched Media EC operations.

Mar. 2011

Acquired the Apparel web solution business from Gras CORPORATION. Launched E-Commerce Business to operate, manage
and develop e-commerce sites tailored to the apparel and fashion space.

Sep. 2011

Increased capital via a third party capital allotment to United Ventures Inc.,
Acquired “Net de Kaikei”, a cloud-based accounting business, from Business Online Co., Ltd.

Mar. 2012

Acquired “Biyoshimeikaikan”, a hair catalogue publication business, from SAMURAI PROJECT CORPORATION.
Made Paperless Studio Japan Co., Ltd. a subsidiary.

Mar. 2014

Made AsBase Inc. a subsidiary via a stock swap.

Feb. 2015

Invested in Sprinklr Japan KK to make inroads into the SNS businessMar. 2015

Subscribed to a third party allocation of shares by Current, Inc.
Invested in Sprinklr, Inc. (United States)

May 2015

Established Publica Co., Ltd.

July 2015

Began providing My Number total solutions
Established WEARHEART Inc.

Source: Prepared by FISCO from Company website

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

03 15

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

PiPEDO HD, Inc.
3919 Tokyo Stock Exchange First Section

23-May-2017https://www.pipedohd.com/

Company profile

3. Business content(1) Product overview
The Group’s flagship business is its proprietary platform SPIRAL®, and the provision to users of related applications, not by way of outright sales but rather in a rental ASP format. Within the layers of software, SPIRAL®’sposition may be referred to as a cloud-based middleware.
Positioning of SPIRAL®

Source: Prepared by FISCO from Company website and materials

Generally, when developing operational and other systems, the majority of companies need to purchase thehardware required to develop and run the system, the operating system (OS), development environment (tools),
database(s), middleware and other elements themselves (or outsource development), and by combining them,develop the base (platform) in order to run the system. Additionally, they must also bear the burden (cost) ofmaintaining it post-development. However, with SPIRAL® developed by PIPED BITS, because the development
tools are embedded not only can a range of applications be easily developed, given that it has a database built-in
too, it also enables the use and sharing in each application of customer and other data stored in SPIRAL®.
Further, these applications and data classes may be easily reproduced and delivered. This provides a significant
advantage over package software.
As a result, corporate customers may easily and holistically operate with (use) and manage data, and at thesame time greatly reduce application development costs by using SPIRAL®. Additionally, given that it is a payfor-use monthly fee format platform, it further helps to reduce costs. Starting with major financial institutions, thecompanies that have introduced SPIRAL® include many preeminent corporations.
Recently in the IT industry, the majority of services are provided in a cloud format, with them being described in avariety of ways depending on the content of the particular cloud format service. PIPED BITS‘s SPIRAL® belongs
to the area called PaaS (Platform as a Service).
(2) Main product content and prices
As noted above, the Company’s flagship product SPIRAL® is a platform environment. Accordingly, the main
customers using it are large tier companies which internally develop in-house operating systems and othersoftware, SME-sized SIers that undertake development of systems for SMEs, and also web production and web
development companies. By using SPIRAL®, the Company is able to internally develop applications aimed at
specific industries and users, and then also sell these applications. These types of core products are not soldas a package but are sold entirely in an ASP format. Below are the major products and their monthly pricing(minimum fees).

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

04 15

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

PiPEDO HD, Inc.
3919 Tokyo Stock Exchange First Section

23-May-2017https://www.pipedohd.com/

Company profile

It goes without saying that in the Company’s business model, increases in active accounts (fee-based) is linked
to sales growth. However, the fees mentioned below are only basic or minimum fees and the actual fees change
depending on data volumes (pay-for-use). Therefore, sales do not simply equal the number of accounts multipliedby the basic fee. But in order to view sales trends, the number of active accounts is an important indicator.
a) SPIRAL®
The Company’s flagship product. The core platform including installed database(s), development environment,
and execution environment. From ¥25,000/month.
b) SPIRAL PLACE®
Cloud format groupware possessing website creation and updating functions, and at the same time linked to SNS.
As groupware, it allows web content enhancement and updating as well as traffic analysis via simple (manual)
operations while sharing calendars and files, being also linked to Facebook and Twitter. It is highly regarded byretail chain stores and others that employ large numbers of staff. Basic fees are from ¥6,000/month.
c) SPIRAL EC®
An e-commerce (EC) platform focused on apparel. While pursuing a sophisticated brand image for EC sites
aimed at apparel, it is highly regarded by the industry for resolving a number of issues, such as simplifying
update procedures and also containing this within a low budget. Usage fees are pay-for-use determined by thetransaction amount.
d) Net de Kaikei®, Net de Aoiroshinkoku®
A cloud format accounting service targeting small to medium-sized companies and sole proprietors. Its operations
were acquired and sales launched in September 2011.
e) SPIRAL Affiliate
A holistic ASP affiliate management service that reduces the issues and costs associated with introducing andoperating affiliate marketing for advertisers. It contains a number of special features, such as free upfront costs
for SPIRAL® users only.
f ) Other
There are also applications aimed at specialist fields and industry sectors. Further, through alliances with various
specialist companies, the goal is to expand the use and applications of SPIRAL®.
(3) Business segment
The Company has three main business segments – Information Asset Platform business, Advertising business,and Solutions business. Information Asset Platform business supplies PaaS mainly through SPIRAL®, including
SPIRAL®, SPIRAL PLACE®, SPIRAL EC®, Net de Kaikei®, and others. Advertising business handles agent salesof various Internet ads and consists of SPIRAL AFFILIATES®, listing, and other advertisements. Solutions businessreceives consignments of apparel EC operations and other production projects and is divided into production,
EC operations, and BIM consulting and others.

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

05 15

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

PiPEDO HD, Inc.
3919 Tokyo Stock Exchange First Section

23-May-2017https://www.pipedohd.com/

Company profile

Segment information(¥mn)
FY2/17
Information Assets Platform businessNet sales

Operating profit

3,386

853

SPIRAL®
SPIRAL EC
Net de Kaikei

Provision of PaaS centered on SPIRAL®

Other
Advertising business

231

SPIRAL Affiliate

55

Agent sales of various Internet ads

Advertising
Solutions business

1,183

Design-62

Apparel EC management,
contracting of design proposals, etc.

EC management
BIM consulting, other contracting services

Source: Prepared by FISCO from the Company’s results briefing materials(4) Other consolidated subsidiaries and their business operations
In addition to the mainstay businesses (PIPED BITS), the Company also operated various related businesses via
the following subsidiaries.
a) Paperless Studio Japan Co., Ltd
Paperless Studio Japan is involved in the building project production and management and BIM Building
Information Modeling) consultant businesses. The company also runs BIM and CIM personnel courses for people
working in design and construction. In May 2012, the company started providing the BIM construction information
platform ArchiSymphony®.
b) AsBase Inc.
AsBase develops and provides the ASP/SaaS type call center platform service BizBase® (groupware, work flow,
attendance management, expense calculation, transportation fee calculation, business talk records, customer
management, work progress, time card, shift management, screen sharing and remote operation, point management, etc.).
c) Publica Co., Ltd.
A specialist company for providing open data services to local governments and government agencies. Publica
promotes the availability of data held by government agencies, local governments, and private-sector businesses
and develops services that make use of the data to enable it to be managed autonomously. Publica has developeda system for internet distribution of local government public relations bulletins–the “My Public Relations Bulletin”
system.
d) WEARHEART Inc.
WEARHEART was established in July 2015 to develop e-commerce for the women’s magazine ViVi publishedby Kodansha Ltd. The company was primarily responsible for the aspects of system development, website
construction, product purchasing, and distribution. However, the Company dissolved this entity at end of February
2017 because income did not grow as anticipated (note: results appeared in consolidated data through FY2/17).

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

06 15

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

PiPEDO HD, Inc.
3919 Tokyo Stock Exchange First Section

23-May-2017https://www.pipedohd.com/

Company profilee) GONDOLA CO.,LTDGONDOLA was formed by the corporate split of a previously existing media strategy company on March 1,
2016. The company is active in the three service domains of advertising solutions, web solutions, and social
management. By combining an original service line-up in planning, production system development, and operation,with IT utilizing information management platforms such as SPIRAL Affiliate, SPIRAL® and Sprinklr, GONDOLA
enables one-stop solutions for corporate management issues and business activity optimization.
f) FRIENDIT Inc.
FRIENDIT provides comprehensive support for e-commerce related system implementation, online shop management, and omni-channels at the strategic level. Assisting customers with the common issues of personnel
shortages and experience gaps, FRIENDIT produces marketing activities that directly boost sales volume andvalue, from IT-based administration optimization through to promoting use of data on products, members, andpurchasing. The company was formed on March l, 2016 by a corporate spilt-off from the in-house Apparel andFashion Company.
g) BIREKI Co., Ltd.
BIREKI provides IT services centered on the digital medical record app “BIREKI®” for beauty salons. The company’s business activities aim to enrich the lives of people by helping to increase the value of as many people working
in the beauty industry as possible and making beauty therapy more accessible and enjoyable. The company was
newly established on March 1, 2016 through a corporate spin-off from the previous Bireki Company.
h) Current, Inc.
Current’s core businesses involve web access improvement and digital CRM for developing loyal users (implementation services such as communication and data management design, message creation and construction,
message delivery, and effect verification) while integrating information assets and implementing optimal messaging
to users. Aiming to generate business synergies between Current, with its strengths in stationed marketing
support, and PIPED BITS, which has expertise in information asset utilization and IT solutions, the Company
increased its equity stake in Current in December 2015 and converted it into a subsidiary.
i) BLOOM NOTES, INC.
The Company spun off its division in charge of in-house human resource development and education as a
subsidiary on October 3, 2016 in order to provide similar education services to external customers. It organizedknowhow into a structured program to resolve issues related to human resource development at SMEs and also
operates a human resource development agent business to support implementation.
j) VOTE FOR,INC.
The Company established this entity in Mach 2017 to conduct business using the Seijiyama® political andelection information site that existed internally. It aims to build voting systems that utilize blockchain and othernew technologies that facilitate Internet-based voting.
k) I LOVE INC.
The Company created this entity in Mach 2017 to make further progress in the “I LOVE ShimoKitazawa” local
revitalization project and pursue development of a new transaction format for single-coin donations, tips, andother small-sum transactions employing smartphone virtual currency.

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

07 15

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

PiPEDO HD, Inc.
3919 Tokyo Stock Exchange First Section

23-May-2017https://www.pipedohd.com/

Company profile

SPIRAL®’s primary feature is flexible customization(5) Special characteristics and strengthsa) Ease of system construction
SPIRAL®’s greatest distinguishing feature is its ability to be freely customized. As explained above the Company
itself combines SPIRAL®’s functions, and develops applications for its own operational systems and specificcustomers (areas), and excluding areas such as financial institutions, which require extremely high reliability, almost
any operational system could be created by combining SPIRAL®’s functions. These operational systems havebeen generally developed by operators known as SIers. However, it is possible to replace the majority of the work
traditionally done by SIers through a combination of SPIRAL® functions, with corporate customers able to easily
undertake a range of development and system creation themselves.
b) Every type of application can be linked
SPIRAL® possesses a broad range of functions. However, the most basic function is that it enables, for example,
a corporate customer managing databases over the Internet to easily engage in various tasks, from databasecreation through to data manipulation (such as registration, updating and deletion), batch data registration, anddownloading. Specifically, in cases such as those where companies undertake online surveys, market researchor new product evaluations, on the company side, by using SPIRAL® they can very easily create a survey,
deliver it to targeted and prospective customers, have them complete the surveys, and then collect them. If acustomer satisfaction questionnaire is linked to the customer database, it becomes possible to analyze themaccording to customer attributes, and conduct follow-up in order to enhance satisfaction levels. Survey results
may be aggregated in real time, and compiled into a report. Via SPIRAL®, this series of actions between different
applications may all be easily undertaken with simple operations.
In the same way, with regard to creating forms, such as for gift promotions/affinity marketing campaigns, recruitment application forms, questionnaire forms, seminar applications, account openings, and information requests,
it is possible via SPIRAL® to expeditiously undertake actions such as form creation; the recording, updating,and deletion of member attributes; and login verification. For example, in a case such as holding seminars,
even if hypothetically multiple seminars are proceeding simultaneously, the taking of multiple applications andmanagement of cancellations can be carried out instantaneously, making the holding of the seminar more efficient.
It is also easy to develop this data in a search form tabulating it, having a yes or no Q&A questionnaire, or creating
a summary chart or graph. Also, given the addition of services from AsBase that possesses voice (telephone)solutions, and an alliance with Sprinklr Japan KK, whose strength is systems for SNS, it is expected that customer
convenience will be enhanced further.
One of the Company’s competitors is salesforce.com, Inc. of the United States, but this company has grownthrough repeated acquisitions of other companies. Therefore, its various applications were developed by thedifferent companies it acquired, so each application was not created on the same platform. Consequently, whena client needs to link multiple applications, in many cases this requires additional development costs and time.
On this point, SPIRAL® is considerably superior to salesforce.com’s product, as its applications are on the same
platform and as a result, each of the applications can be easily (inexpensively and quickly) linked.

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

08 15

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

PiPEDO HD, Inc.
3919 Tokyo Stock Exchange First Section

23-May-2017https://www.pipedohd.com/

Company profilec) Superiority in installation costs and security
Further, because SPIRAL® is not sold as package software, but provided as a pay-as-you-go cloud service, adistinctive feature is that client companies may themselves build requisite systems rapidly and at low cost, without
taking and incurring unnecessary time and expenses. That is, even in the initial period when the system is installed,
it can be developed from just a small investment without incurring major costs.
In addition to its superiority in terms of costs, the Company also provides guarantees, maintenance and monitoring
functions on the security front, which is extremely convenient, particularly for SME-sized SIers. For example,
in the event that vulnerability is identified in the SSL (Security Sockets Layer), which is the most widely usedcommunication cryptographic technology on the Internet, normally it is necessary for each system integrator
to individually deal with this vulnerability. But if SPIRAL® is used, the Company is able to take all necessary
actions and the issue is resolved on SPIRAL®, eliminating the need for the SIers to deal with it individually. Useof SPIRAL®, meanwhile, reassures final customers about security.
d) Installation case studies
One example of a successful installation of the Company’s SPIRAL® was the case of Asahi Fire and Marine
Insurance Co., Ltd. The company introduced SPIRAL® as a customer service system. By linking client attributeswith various types of data, the number of requests for information materials increased by 130 times, and thework time needed from receiving to answering a customer request was reduced from the usual time of around30 minutes to just 2 or 3 minutes. Moreover, when introducing the system, the Company competed with other
SIer companies to win the account and the Company’s quote was only about 1/10th the cost of its competitors.
Although every case is different, this example clearly demonstrates the competitive advantages of SPIRAL®.

██Results trends
FY2/17 results missed period-start forecast, though negatives are gone
1. Profit-and-loss conditions
The Company reported ¥4,802mn in net sales (up 19.9% YoY), ¥845mn in operating profit (up 45.6%), ¥864mn inrecurring profit (up 54.1%), and ¥404mn in profit attributable to owners of parent (up 63.1%) in FY2/17. While operating
profit was considerably below initial guidance (¥1,000mn), it exceeded the revised target from during the year.
Main reasons for undershooting period-start forecast were the EC-related subsidiary launched with upbeat growth
expectations exhibited sluggishness and fraudulent access to the Company’s products during the period resulted
in a complete suspension of new sales activities for roughly a month.
While fraudulent access presented a severe challenge, the Company has fully repaired and resolved the situation andis restoring customer trust. Internal controls, meanwhile, have been improved. Furthermore, the Company alreadydissolved the struggling EC subsidiary (WEARHEART) at the end of February 2017, protecting itself from further
downside. Earnings at many other subsidiaries are lagging expectations, but steadily growing and the Company isbolstering internal management and other capabilities. The Company explained that “problems should be eliminatedduring the current fiscal year and this is preparing us for the next growth stage.” While earnings missed period-startguidance, operating profit rose 45.6% YoY, a positive result.

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

09 15

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

PiPEDO HD, Inc.

23-May-2017

3919 Tokyo Stock Exchange First Section

https://www.pipedohd.com/

Results trends

Summary income statement(¥mn, %)
FY2/16

FY2/17

ChangeAmount% of total

Amount% of total

Amount

4,006

100.0

4,802

100.0

795

19.9

3,041

75.9

3,386

70.5

345

11.4

Advertising business

222

5.5

231

4.8

9

4.4

Solutions business

743

18.6

1,183

24.7

440

59.3

Gross profit

2,857

71.3

3,280

68.3

423

14.8

SG&A expenses

2,276

56.8

2,435

50.7

158

7.0

Operating profit

580

14.5

845

17.6

264

45.6

Information Assets Platform business

552

-

853

-

300

54.4

Advertising business

53

-

55

-

1

3.0

Solutions business

-25

-

-62

-

-37

-

Recurring profit

560

14.0

864

18.0

303

54.1

Profit attributable to owners of parent

247

6.2

404

8.4

156

63.1

Net sales
Information Assets Platform business%

Source: Prepared by FISCO from the Company’s financial results and results briefing materials(1) Trends in active accountActive account volume strongly influences the Company’s results because it mainly operates cloud-based
businesses. Active account volume dropped by 58 accounts from the end of the previous fiscal year to 10,676
accounts at the end of February 2017. Net sales are growing, despite the drop in overall active accounts, due
to decline in accounts with relatively low average spending and increase in accounts with relatively high averagespending. We think these trends might continue and advise monitoring of not just the number of overall accounts
but also the content.

㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼍㼏㼠㼕㼢㼑㻌㼍㼏㼏㼛㼡㼚㼠㻌㼚㼡㼙㼎㼑㼞㻌㼍㼚㼐㻌㼠㼔㼑㻌㼏㼍㼚㼏㼑㼘㼘㼍㼠㼕㼛㼚㻌㼞㼍㼠㼑（㻭㼏㼏㼛㼡㼚㼠㼟）㻭㼏㼠㼕㼢㼑㻌㼍㼏㼏㼛㼡㼚㼠㻌㼚㼡㼙㼎㼑㼞㻌㻔㼘㼑㼒㼠㻕㻝㻜㻘㻤㻥㻤

㻝㻝㻘㻜㻜㻜

㻝㻜㻘㻥㻜㻣
㻝㻜㻘㻣㻡㻣

㻝㻜㻘㻤㻜㻜
㻝㻜㻘㻢㻜㻜

㻝㻜㻘㻢㻣㻢 㻝㻠㻚㻜㻑
㻝㻞㻚㻜㻑
㻝㻜㻚㻜㻑

㻝㻜㻘㻝㻢㻢
㻢㻚㻞㻑

㻥㻚㻣㻑

㻤㻚㻜㻑

㻠㻚㻟㻑

㻤㻚㻡㻑

㻝㻜㻘㻜㻜㻜㻥㻘㻤㻜㻜㻝㻢㻚㻜㻑㻝㻜㻘㻣㻟㻠 㻝㻜㻘㻣㻡㻜 㻝㻜㻘㻣㻤㻠 㻝㻜㻘㻣㻜㻠㻝㻜㻘㻠㻜㻠

㻝㻜㻘㻠㻜㻜 㻝㻜㻘㻟㻞㻠㻝㻜㻘㻞㻜㻜

㻝㻜㻘㻡㻢㻥 㻝㻞㻚㻢㻑㻯㼍㼚㼏㼑㼘㼘㼍㼠㼕㼛㼚㻌㼞㼍㼠㼑㻌㻔㼞㼕㼓㼔㼠㻕

㻞㻚㻝㻑

㻢㻚㻜㻑
㻞㻚㻡㻑

㻝㻚㻣㻑

㻞㻚㻠㻑 㻝㻚㻥㻑

㻞㻚㻡㻑

㻞㻚㻡㻑

㻥㻘㻢㻜㻜

㻠㻚㻜㻑
㻞㻚㻜㻑

㻥㻘㻠㻜㻜

㻜㻚㻜㻑
㻝㻡㻛㻝㻽 㻝㻡㻛㻞㻽 㻝㻡㻛㻟㻽 㻝㻡㻛㻠㻽 㻝㻢㻛㻝㻽 㻝㻢㻛㻞㻽 㻝㻢㻛㻟㻽 㻝㻢㻛㻠㻽 㻝㻣㻛㻝㻽 㻝㻣㻛㻞㻽 㻝㻣㻛㻟㻽 㻝㻣㻛㻠㻽

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

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

10 15

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

PiPEDO HD, Inc.
3919 Tokyo Stock Exchange First Section

23-May-2017https://www.pipedohd.com/

Results trends(2) Profit and loss by segment
Information Asset Platform sales expanded 11.4% YoY to ¥3,386mn thanks to healthy growth by the mainstay
SPIRAL® product. Advertising sales were up 4.4% to ¥231mn with SPIRAL AFFILIATES®, though only slightly
improved. Solutions business recorded a sharp 59.3% increase in sales to ¥1,183mn because of new consolidation of WEARHEART and Current, upbeat Paperless Studio Japan and consignment and production businesses,
and higher sales in EC operations.
Next, we look at operating profit trends by segments. Information asset platform business realized a 54.4% YoY
increase to ¥853mn owing largely to robust results from mainstay SPIRAL®. Advertising operating profit was only
about flat YoY at a 3.0% increase to ¥55mn. Solutions business, meanwhile, incurred a ¥62mn operating loss (vs.
a ¥25mn loss in the previous year) because investments at WEARHEART and higher personnel costs at Paperless
Studio Japan. Losses widened even with the steep rise in sales. The Company hence decided to shrink the EC
operations business and dissolve WEARHEART at the end of February 2017.
(3) Impact of unauthorized accesses to SPIRAL EC®
One of the Company’s core products, SPIRAL EC®, a platform specialized for the apparel industry, encountered
unauthorized access from an external party in June 2016, and the Company discovered that personal information
might have been improperly viewed as well as signs of personal information leaks. The Company promptly took
the following measures in its dealings with all customers.
a) First notice (June 22)
Report on the event, impact scope, cause, and occurrence background and emergency actions and policies forpreventing recurrence in light of this informationb) Second notice (June 30)
Follow-up report on emergency actions and policies for preventing recurrence. Explanation of the backgroundand aim of the establishment of the “unauthorized access countermeasures office” as part of prevention effortsc) Third notice (July 15)
Follow-up report on emergency actions implemented after the second notice. Report on appointment of an
external security specialist as a technical adviser on prevention measures and establishment of an emergency
security countermeasures councild) Fourth notice (July 27)
Report on “confirmation of a certain level of safeness in the current system” (safety declaration) by the emergency
security countermeasures council including the external security specialist (technical adviser) mentioned in thethird notice
Additionally, the Company announced that it conducted comprehensive inspections and confirmed safenessat not only SPIRAL EC®, which was affected by the fraudulent access, but also its mainstay SPIRAL® service
that utilizes a different configuration. It took quick actions in dealing with existing customers after discovery of
the fraudulent access, and all employees joined together in handling the responses. This approach halted newsales activities for about one month and thereby contributed to missing initial forecast as already explained. The
Company booked about ¥15mn in extraordinary losses to cover damages compensation and one-time costs
related to strengthening service security.

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

11 15

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

PiPEDO HD, Inc.
3919 Tokyo Stock Exchange First Section

23-May-2017https://www.pipedohd.com/

Results trends

The unauthorized access incident was a lethal matter for the Company in light of “reliable security” being one of
the sales points for the service (software), and there was a possibility of “questions about whether the businesscould continue” depending on circumstances. However, the Company’s employees joined together to deliver a
rapid and sincere response to the incident, and this effort resulted in advancing repairs and improvements of theservice (software) and minimized the loss of customer trust. In fact, the Company only had a few cancellations
after the unauthorized access and this outcome confirms that customers continue to trust the Company.
While the Company confronted crisis conditions at one point because of the unauthorized access incident, as
explained above, it has not only fully achieved service (product) safeness, but also even bolstered security. It lost
one month’s worth of new sales opportunities. Yet the experience raised employee cohesiveness and awarenessof operations further and showing intangible positive effect. Furthermore, the Company kept cancellations to asmall amount and has not lost customer trust. The unauthorized access problem hence has been fully resolved
at this point and is not affecting the Company’s business.
2. Financial standing and cash flow conditions
Looking at financial standing at the end of FY2/17, total asset value increased by ¥1,307mn from the end of theprevious fiscal year to ¥5,064mn mainly because of a ¥1,223mn rise in cash and deposits (current assets) associatedwith bank loans worth ¥1,500mn. Total liabilities climbed by ¥1,015mn to ¥2,974mn primarily due to the ¥1,105mn
increase in fixed liabilities related to higher long-term loans payable. Net asset value grew by ¥256mn to ¥2,089mn
mainly owing to a ¥404mn increase in legal retained earnings from booking profit attributable to owners of parent.
Balance sheet(¥mn)
End of FY2/16

End of FY2/17

ChangeCurrent assets

1,919

3,340

Fixed assets

1,837

1,723

1,421
-113

Total assets

3,757

5,064

1,307

Current liabilities

1,873

1,818

-54

Fixed liabilities

50

1,155

1,105

Total liabilities

1,923

2,974

1,051

Total net assets

1,833

2,089

256

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

Cash flow from operating activities had a ¥623mn surplus with main items as ¥775mn in profit before income
taxes, ¥191mn in depreciation, and ¥306mn in income tax paid. Cash flow from investing activities had a ¥179mn
deficit, primarily because of the ¥169mn purchase of intangible assets, to acquire software and other intangible
assets. Cash flow from financing activities had a ¥779mn surplus with ¥921mn in net inflow for loans and ¥144mn
in outflow for cash dividends paied. As a result, cash and cash equivalents grew by ¥1,223mn during the period to¥2,143mn at period-end.
Cash flow statement(¥mn)
FY2/16

FY2/17

Cash flow from operating activities

424

623

Cash flow from investing activities

-734

-179

Cash flow from financing activities

-138

779

Change in cash and cash equivalents

-448

1,223

Year-end balance of cash and cash equivalents

920

2,143

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

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

12 15

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

PiPEDO HD, Inc.
3919 Tokyo Stock Exchange First Section

23-May-2017https://www.pipedohd.com/██Business outlook
Expecting flat operating profit in FY2/18 because of proactive
investments
The Company’s FY2/18 guidance targets ¥5,300mn in net sales (up 10.4% YoY), ¥845mn in operating profit (up0.0%), ¥835mn in recurring profit (down 3.4%), and ¥470mn in profit attributable to owners of parent (up 16.2%).
The Company only expects flat operating profit, despite a double-digit rise in sales, because of proactive investments, mainly in personnel, in the first year of the new medium-term plan (explained below) aimed at reaching thegoals. We think this is a very conservative earnings view, which assumes modest sales growth paired with maximum
imaginable expenses, and might be revised higher during the period.
Results forecast(¥mn, %)
FY2/17

FY2/18 forecast

ChangeAmount% of total

Amount% of total

Amount

%

4,802

100.0

5,300

100.0

498

10.4

Operating profit

845

17.6

845

15.9

0

0.0

Recurring profit

864

18.0

835

15.8

-29

-3.4

Profit attributable to owners of parent

404

8.4

470

8.9

66

16.2

Net sales

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

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

13 15

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

PiPEDO HD, Inc.
3919 Tokyo Stock Exchange First Section

23-May-2017https://www.pipedohd.com/██Medium-to-long-term growth strategy
New medium-term business plan sets goals of ¥7300mn in net salesand ¥1,700mn in operating profit in FY2/20
1. New medium-term plan sets fairly realistic goals
The Company announced the Medium-Term Business Plan 2020, a new medium-term business plan with FY2/20
as the final year, after completing the previous medium-term plan in FY2/17. The new plan sets goals of ¥7300mn
in net sales and ¥1,700mn in operating profit in FY2/20 that work out to average annual growth rates (CAGR) from
FY2/17 of 15.0% in net sales (vs. 24.0% in the previous plan period) and 26.2% in operating profit (vs. 14.4%).
While group companies have separately presented more ambitious goals and are striving to achieve these levels, theCompany refers to its plan as an “outlook” that factors in a certain amount of future uncertainty (rather than goals),
taking into account its experience of missing earnings goals in its previous medium-term plan.

㼀㼞㼑㼚㼐㻌㼕㼚㻌㼛㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㼀㼞㼑㼚㼐㻌㼕㼚㻌㼚㼑㼠㻌㼟㼍㼘㼑㼟
㻔¥㼙㼚㻕

㻔¥㼙㼚㻕

㻤㻘㻜㻜㻜
㻣㻘㻜㻜㻜

㻝㻘㻣㻜㻜

㻝㻘㻤㻜㻜

㻣㻘㻟㻜㻜

㻝㻘㻢㻜㻜

㻯㻭㻳㻾 㻝㻡㻚㻜㻑㻯㻭㻳㻾 㻞㻢㻚㻞㻑

㻝㻘㻠㻜㻜

㻢㻘㻜㻜㻜
㻠㻘㻤㻜㻞

㻡㻘㻜㻜㻜

㻠㻘㻜㻜㻜

㻯㻭㻳㻾
㻞㻠㻚㻜㻑

㻟㻘㻜㻜㻜

㻞㻘㻡㻝㻣

㻝㻘㻞㻜㻜
㻝㻘㻜㻜㻜
㻤㻜㻜
㻢㻜㻜

㻞㻘㻜㻜㻜

㻯㻭㻳㻾
㻝㻠㻚㻠㻑

㻤㻠㻡

㻡㻢㻠

㻠㻜㻜

㻝㻘㻜㻜㻜

㻞㻜㻜

㻜

㻜
㻲㼅㻞㻛㻝㻠

㻲㼅㻞㻛㻝㻣

㻲㼅㻞㻛㻞㻜㻌㻱

㻲㼅㻞㻛㻝㻠

㻲㼅㻞㻛㻝㻣

㻲㼅㻞㻛㻞㻜㻌㻱

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

The Company described its new medium-term business plan in the following way, “Our previous medium-term planutilized a bottom-up approach with maximum goals from subsidiaries. However, some companies substantially
missed these goals and others achieved healthy growth but lagged their projections. The new medium-term planhence utilizes minimum attainable goals and also incorporates maximum potential risk at holding-company level.”
We think this is a fairly conservative outlook due to factoring in maximum possible expenses with highly realistic
sales targets.

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

14 15

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

PiPEDO HD, Inc.
3919 Tokyo Stock Exchange First Section

23-May-2017https://www.pipedohd.com/

Medium-to-long-term growth strategy

2. Priority measures
The Company uses a title of “Re-Innovation” for the new medium-term plan and seeks to become a “corporategroup that contributes to a future rich information lifestyle.” It intends to implement the priority measures covered
below to achieve this goal and the above-mentioned qualitative values.
(1) Promote “real x IT”
The Company intends to strengthen the contact point between real business and IT and pursue innovative
businesses. It established new subsidiaries as examples.
a) VOTE FOR
The Company established this entity in Mach 2017 to conduct “real x IT” business using the Seijiyama® politicaland election information site that existed internally. It aims to build voting systems that utilize blockchain and othernew technologies that facilitate Internet-based voting with emphasis on Seijiyama® and Internet-based voting.
b) I LOVEThe Company created this entity in Mach 2017 to make further progress in the “I LOVE ShimoKitazawa” local
revitalization project that had already been taking place internally and apply this knowhow to cultivate “towns
capable of delivering enjoyable services on par with shopping malls and theme parks.” Specifically, it will pursue
development of a new transaction format for single-coin donations, tips, and other small-sum transactions
employing smartphone virtual currency.
(2) Group hiring and group cultivation
Group companies will conduct common elementary education in the IT field in order to boost the overall knowledge
level and reduce time spent on training front-line staff. It hopes to maximize earnings in FY2/20 through these
efforts and hire about 150 people as a group by FY2/19.
Subsidiary BLOOM NOTES (established in October 2016) will support the group hiring and cultivation. This
entity’s main business is a customized personnel training service for arrangement of unique knowhow at customer
companies into a program and assistances in implementation, and the Company plans to harness the same
program for cultivation of its own group personnel.
(3) Effective utilization of information assets at group companies
The Company intends to further promote customer and product/service matching at group companies and create
new transactions and businesses.

██Shareholder return policy
The Company has presented a shareholder return policy of paying cash dividends with a target dividend payout
ratio of about 30%. It plans to pay a ¥21 annual dividend again in FY2/17, putting dividend payout using the profit
target at 33.9%.

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

15 15

Disclaimer
FISCO Ltd. (the terms “FISCO”, “we”, mean FISCO Ltd.) has legal agreements with theTokyo Stock Exchange, the Osaka Exchange,and Nikkei Inc. as to the usage of stock priceand index information. The trademark and value of the “JASDAQ INDEX” are the intellectual
properties of the Tokyo Stock Exchange, and therefore all rights to them belong to the Tokyo
Stock Exchange.
This report is based on information that we believe to be reliable, but we do not confirm or
guarantee its accuracy, timeliness,or completeness, or the value of the securities issued bycompanies cited in this report. Regardless of purpose,investors should decide how to use
this report and take full responsibility for such use. We shall not be liable for any result of its
use. We provide this report solely for the purpose of information, not to induce investment or
any other action.
This report was prepared at the request of its subject company using information provided
by the company in interviews, but the entire content of the report, including suppositions andconclusions, is the result of our analysis. The content of this report is based on informationthat was current at the time the report was produced, but this information and the content of
this report are subject to change without prior notice.
All intellectual property rights to this report, including copyrights to its text and data, areheld exclusively by FISCO. Any alteration or processing of the report or duplications of thereport, without the express written consent of FISCO, is strictly prohibited. Any transmission,
reproduction, distribution or transfer of the report or its duplications is also strictly prohibited.
The final selection of investments and determination of appropriate prices for investment
transactions are decisions for the recipients of this report.
FISCO Ltd.