COVERAGE INITIATED ON: 2016.09.01 LAST UPDATE: 2020.09.29 Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is to provide an "owner's manual" to investors. We at Shared Research Inc. make every effort to provide an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will always present opinions from company management as such. Our views are ours where stated. We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at sr_inquiries@sharedresearch.jp or find us on Bloomberg. Research Coverage Report by Shared Research Inc. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
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Executive Summary
Business overview
--- Vision has two main businesses: Global WiFi (65% of sales and 75% of operating profit), in which it rents out mobile WiFi routers, and Information and Communications Service (33% of sales, 31% of operating profit), in which it provides telecommunications services and sells office equipment. Since its launch in 2012, the Global WiFi business has been increasing its share of both sales and operating profit. (figures as of FY12/19) ■ In the Global WiFi business, Vision rents out mobile WiFi routers* to both outbound (Japanese travelers going overseas) and inbound (people visiting Japan) travelers. The company procures mobile network access directly from telecommunications companies in Japan and abroad, enabling it to offer high-quality internet services at low prices. In FY12/19, roughly 63% of rental customers were individuals, and 37% were companies (by number of rentals). In FY12/19 the company rented out approximately 2,830,000 routers, of which 45% were to new customers and 55% to repeat customers. *Wireless LAN (WiFi) routers enable direct connection to mobile networks on the go viasmartphones, tablets, laptops, or game consoles. ■ In the Information and Communications Service business, the company mainly targets new businesses (startups). It arranges telephone lines and other information and communication services, and sells office equipment. Main sources of revenue: equipment sales, commissions from telecommunications companies, and revenue from office equipment maintenance. The company initially provides equipment at low prices, aiming to grow revenue per customerby expanding the number of services provided in line with customers' growth. Under this business model, most revenues are recurring monthly revenues. The company's marketing activities focus on customers who have demonstrated interest by reaching out to the company, and leverage customer referrals from other divisions as well as web marketing, call centers, and a Customer Loyalty Team (CLT; supporting existing customers). Marketing can be seen as effective: for example, sales of copiers per salesperson were roughly four times the industry average.
Trends and outlook
--- ■ In FY12/19, sales were JPY27.3bn (+27.0% YoY), operating profit was JPY3.3bn (+33.8% YoY), recurring profit was JPY3.4bn (+34.4% YoY), and net income attributable to owners of the parent was JPY2.2bn (+45.6% YoY). The company posted record sales and profits at all levels in FY12/19. ■ On May 12, 2020, when it announced Q1 FY12/20 results, Vision left its 1H and full-year FY12/20 forecasts "undetermined," citing mounting difficulty in forecasting the future business environment. It, however, announced full-year forecast with the 1H results announcement on August 17, 2020. The company forecast for FY12/20 calls for sales of JPY16.7bn (-38.9% YoY), an operating loss of JPY320mn (operating profit of JPY3.3bn in FY12/19), a recurring loss of JPY213mn (recurring profit of JPY3.4bn), and a net loss attributable to owners of the parent of JPY1.6bn (net income of JPY2.2bn). The company assumes that due to the COVID-19 pandemic, the steep decline in overseas travel numbers (both outbound and inbound) is likely to persist beyond FY12/20, and that there will not be social restrictions such as a second emergency declaration in Japan. ✔ With the number of overseas travelers down sharply, rentals to both inbound and outbound travelers at the company's Global WiFi business have been severely depressed. Vision has worked to minimize the hit to earnings on this front by temporarily shrinking its rental business directed at international travelers and focused instead on expanding its domestic WFi rental business. At the same time, it is working to reduce costs, by cutting communications costs by switching to pay-as-you- go contracts, reducing the use of contractors at airports and for logistics functions, and relocating excess staff to areas where demand is expected to grow in the future. These efforts to bring the Global WiFi business back into the black as quickly as possible have thus far reduced monthly operating losses from the peak of JPY182mn in April 2020 to JPY88mn in June, with the company expecting its depreciation burden to be lower in the months ahead following the impairment losses booked in Q2 FY12/20. The company aims to accelerate growth at its Information and Communications Service business, a growing business that has been a stable source of earnings. Having largely finished putting in place the loss-reduction measures by the end of Q2, Vision is switching from playing defense and to playing offense in Q3 by returning its focus to new earnings growth opportunities. Towardthis end, the company is planning various new investments and intends to make maximum use Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp of the experience and the expertise it has built up over the 25 years since its founding, including its three-legged team approach to winning new customers (online marketing, sales, and customer loyalty team), cross-marketing between its businesses, and pursuing business models designed to create recurring revenue streams. . Vision has not released a medium-term plan, but it aims for sharp expansion in profit alongside sustained investment in future growth. To this end, it has positioned the Global WiFi business as the growth driver and the Information and Communications Service business as a source of stable growth, and is pursuing expansion in its operations accordingly. To prepare for future business development in its group, the company will partially change its Articles of Incorporation and plans to develop services for travelers, who are its primary customers. It will expand into business fields it can pursue independently, and increase its ratio of in-house development including for services. The company envisions three growth stages in the mainstay Global WiFibusiness: targeting the outbound market, then the inbound market, followed by the overseas-to-overseas (non- Japanese travelers going to countries other than Japan) markets. In the outbound market, the company aims to increase the number of regions where it operates. In the inbound market, it plans to increase the number of locations in Japan where customers can pick up routers to capture more demand.
Strengths and weaknesses
Shared Research believes that Vision has three strengths: a niche market focus, an efficient marketing modelusing web marketing, and direct network access from major telecom carriers that allows it to provide high-quality internet service at low prices. Weaknesses: little technological differentiation, limited time to prove itself to clients, and relationships with telecom carriers in the Information and Communications Service business. (See Strengths and Weaknesses section for details.) Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Note: The company issued a 100for-1 stock split in December 2014, a 2-for-1 stock split in July 2017and a 3-for-1 stock split on October 1, 2019. Per share data have been retroactively restated. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Recent updates
Highlights
On September 29, 2020, Shared Research updated the report following interviews with Vision Inc. On August 17, 2020, the company announced earnings results for 1H FY12/20; see the results section for details. On July 31, 2020, the company announced that it had entered a business alliance with Chuco Co., Ltd. Background for the alliance △ Vision Web Service (VWS) is a business management tool developed by Vision and provided mainly to startup companies. VWS provides users with all-in-one functions, including employee attendance management, internal company calendar sharing, internal document approval, and expense calculation. △ In addition, with the COVID-19 pandemic stimulating demand for faster business playback speeds and requiring significant changes in the way business negotiations and meeting are conducted, the company has expanded sales of its JANDI social media tool for businesses as a specialized communication tool for companies that enables smooth communication while teleworking or working remotely.ムChuco is a general advertising company that began publishing and distributing to households its Happy Media® local lifestyle magazines in 1994, with the first edition distributed in Kani, Cifu Prefecture. With the cooperation of VC* member companies, it publishes and distributes these local magazines in all of Japan's prefectures. Seeking to publish magazines that are directly distributed to every home and provide local information and peace of mind for all generations and achieve a high response from readers, Chuco's magazines feature advertisements and sales promotions with close links to the local communities being served. Chuco aims to become a global company by developing and operating local businesses together with local residents and companies and expanding them nationwide. △ Through tie-ups, user referrals, and other joint efforts, the two companies will support the dissemination of various information throughout the community being served and comprehensively support optimal information and communication-related products and services, contributing to the further expansion of sales and services. At the same time, the two companies expect this alliance will contribute to business growth and corporate development.ムVision and Chuco decided to form this business alliance with the objective of contributing to the digital transformation of local communities by combining their advertising, media, and information service businesses that are closely tied to local communities. VC contract refers to a voluntary chain contract. Under this contract, Chuco publishes a free information magazine distributed to households under its Happy Media" trademark. The contract recognizes the freedom of Chuco and affiliate companies, and entitles Chuco to receive atrademark usage fee and a publishing site (Gside) usage fee from VC affiliate companies. For previous releases and developments, please refer to the News and topics section.
Source: Shared Research based on company data Note: Ovartedy earnings data for FY12/1 Note: Quarterly earnings data for F Note: Company estimates are latest figures. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
1H FY12/20 results (out August 17, 2020)
SummaryムSales: JPY9.6bn (-25.6% YoY)ムOperating loss: JPY1 5mn (versus operating profit of JPY1.7bn in 1H FY12/19) A Recurring profit: JPY67mn (-96.0% YoY)ムNet loss*: JPY1.4bn (versus net income of JPY1.1bn in 1H FY12/19) *Net income/loss attributable to owners of the parent A Sales down 25.6% YoY: Sales declined 43.3% YoY in the Global WiFibusiness. Due to the COVID-19 outbreakthere were basically no outbound or inbound rentals in Q2 (April-June), but the number of domestic rentals increased on an improvement in WiFi demand. Sales in the Information and Communications Service business increased0.2% YoY. Sales were favorable in cost-saving products and mobile communications equipment, including equipment used for teleworking. However, office equipment sales were up just slightly YoY, due to a temporary halt to new contracts and potential leasing customer assessments (the company ceased conducting customer assessments amid calls forself-restraint). △ Operating loss of JPY15mn: The Global WiFi business posted a segment loss of JPY21mn (versus segment profit of JPY1.6bn in 1H FY12/19). Operating profitfell 1.8% YoY in the Information and Communications Service business. GPM declined 7.8pp YoY to 50.1% while the SG&A-to-sales ratio rose 5.3pp YoY to 50.2%, resulting in an operating loss ofJPY15mn (OPM of 13.1% in 1H FY12/19). In the Global WiFi business, the cost ratio increased as sales fell. The cost ratio also increased in the Information and Communications Service business, where the increase in mobile phone sales contributed to a higher sales ratioof products incurring purchasing costs. Despite lower SG&A expenses on the review and reduction of various costs, lowersales resulted in the SG&A-to-sales ratio moving higher. Still, in the Global WiFi business the company managed to reduce its cost of sales and SG&A expenses from a combined total of JPY1.2bn in the month of February 2020 to JPY545mn in June 2020. As detailed below, depreciation will dedine going forward due to the impairment losses booked in Q2. Recurring profit down 96.0% YoY: The company booked IPY74mn in subsidy income. It booked IPY20mn in share buyback expenses in 1H FY12/19 but just JPY1mn in 1H FY12/20.ム△ Net loss attributable to owners of the parent of JPY1.4bn: The company booked impairment losses of JPY1.4bn as it reduced the recoverable amount on assets where it was unlikely to recoup its investment due to lower margins to their recoverable value on its books (detailed discussion follows). △ Full-year company forecast: On May 12, 2020, when it announced Q1 FY12/20 results, Vision left its 1Hand full-year FY12/20 forecasts "undetermined," citing mounting difficulty in forecasting the future business environment. It, however, announced full-year forecast with the 1H results announcement on August 17, 2020. The company forecast for FY12/20calls for sales of JPY16.7bn (-38.9% YoY),an operating loss of JPY320mn (operating profit of JPY3.3bn in FY12/19),a recurring loss of JPY213mn (recurring profit of JPY3.4bn), and a net loss attributable to owners of the parent of JPY1.6bn (net income of JPY2.2bn). The company assumes that due to the COVID-19 pandemic, the steep decline in overseas travel numbers (both outbound and inbound) is likely to persist beyond FY12/20, and that there will not be social restrictions such as a second emergency declaration in Japan.ムCompany growth strategy to address mid-pandemic and post-pandemic challenges: With the number of overseas travelers down sharply, rentals to both inbound and outbound travelers at the company's Global WiFi business were severely depressed. Vision has worked to minimize the hit to earnings on this front by temporarily shrinking its rental business directed at international travelers and focused instead on expanding its domestic WiFi rental business. At the same time, it is working to reduce costs, by cutting communications costs by switching to pay-as-you-go contracts, reducing the use of contractors at Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp airports and for logistics functions, and relocating excess staff to areas where demand is expected to grow in the future. These efforts to bring the Global WiFi business back into the black as quickly as possible havethus far reduced monthly operating losses from the peak of JPY182mn in April 2020 to JPY88mn in June, with the company expecting its depreciation burden to be lower in the months ahead following the impairment losses booked in Q2 FY12/20. The company aims to accelerate growth at its Information and Communications Service business, a growing business that has been a stable source ofearnings. Having largely finished putting in place the loss-reduction measures by the end of Q2, Vision is switching from playing defense and to playing offense in Q3 by returning its focus to new earnings growth opportunities. Toward this end, the company is planning various new investments and intends to make maximum use of the experience and the expertise it has built up over the 25 years since its founding, including its three-legged team approach to winning new customers (online marketing, sales, and customer loyalty team), cross-marketing between its businesses, and pursuing business models designed to create recurring revenue streams.
Impairment losses
△ In Q2, the company booked an extraordinary loss of JPY1.4bn to cover impairment losses booked in connection with reductions in its estimates for the recoverable amount of assets (including goodwill) in those cases where it determined that it was unlikely to recoup the value of assets carried on its books. Impairment losses by segment are as shown below. ▷ Global WiFi: JPY1.2bn for WiFi routers, options, software, and equipment. The routers used by the Global WiFi business are normally depreciated over two years, but the company decided to write off all the remaining depreciation in a single charge; this did not result in any cash outflow. ▷ Other segment: JPY186mn for write-down of assets related to its chauffeur-driven car sharing service Solid financial position △ムAfter some financing initiatives, the company effectively had cash on hand of about JPY9.0bn (cash and deposits of JPY5.7bn at end-June 2020, established commitment lines of JPY3.0bn as of May 2020, and overdraft facility of JPY250mn). Assuming the company did draw down the entire amount of its commitment lines and overdraft, it would still be in a sound financial position, with an equity ratio of about 60% (based on consolidated balance sheet as of end-1H FY12/20). The equity ratio as of end-1H FY12/20 was 78.4%.
Global WiFi
△ △ △ 1H FY12/20 segment sales were JPY4.6bn (-43.4%YoY) and segment loss was JPY20mn (segment profit of JPY1.6bn in 1H FY12/19). The increase in COVID-19 infections resulted in many countries, including Japan, issuing restrictions on overseas travel as well as stay-at-home directives, which contributed to a global slump in travel-related demand. According to the Japan National Tourism Organization (JNTO) data, the number of Japanese travelling abroad fell 68.7% YoY in the January-June 2020 period (corresponding to the company's 1H FY12/20), while the number of overseas visitors to Japan fell 76.3% YoY. Amid such an environment, new applications dropped sharply in February 2020, majority of existing applications were cancelled, and overseas subsidiaries were forced to suspend operations by local governments, all of which contributed to both sales and profit in the business declining.ムThe company worked to minimize the hit to earnings by temporarily shrinking its rental business directed at outbound and inboundtravelers and focusing instead on expanding its domestic WiFi rental business. At the same time, it worked to reduce costs, by cutting communications costs by switching to pay-as-you-go contracts with no base charges, reducing the use of Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp contractors at airports and for lcgistics functions, and relocating excess staff to areas where demand is expected to grow in the future. ▷ In the Global WiFi business, the company managed to reduce its cost of sales and SG&A expenses from a combined total of JPY1.2bn in the peak month of February 2020 to JPY545mn in June 2020. (The February figure of JPY1.2bn represents the sum of JPY313mn in cost of sales, JPY271mn in international communications costs, and JPY572mn in SG&A expenses. The June figure of JPY545mn represents the sum of JPY223mn in cost of sales, JPY7mn in international communications costs, and JPY314mn in SG&Aexpenses.) ▷ Although some of the communications costs the Global WFi business incurs are fixed, such as SIM cards, the company managed to get the fixed costs associated with overseas SIM cards down to around JPY4mn a month (having eliminated fixed costs for SIM cards that were temporarily suspended). As a result, monthly international communications costs fell from JPY271mn in February 2020to JPY7mn in June 2020.ム▷ In the Global WiFi business, monthly operating losses narrowed from JPY182mn in April 2020 to JPY88mn in June 2020. Depreciation will decline going forward due to the impairment losses booked in Q2. The domestic WiFi rental business saw 1 H sales set a new record high. The sales growth was aided by growing demand for communications in Japan as more companies moved to remote-work arrangements to ensure the health and safety of their employeesdue in part to government guidelines, as well as a pickup in use of online learning at schools in conjunction with the rollout of the government's GIGA school program.
Attributes of outbound customers in 1H FY12/20
■ Individuals vs. corporate users: In 1H FY12/20, individual users accounted for 67.3% of rentals (versus 65.9% in 1H FY12/19) and corporate users 32.7% (34.1%). In terms of revenue generated, individual users accounted for 58.7% (57.1%) and corporate users 41.3% (42.9%). In Q2 FY12/20 (April–June 2020), individual users accounted for 13.4% of rentals (versus 62.8% in Q2 FY12/19) and corporate users 86.6% (37.2%). In terms of revenue generated, in Q2 individual users accounted for 23.0% (53.5%) and corporate users 77.0% (46.5%). In Q2, the percentage of corporate users grew both in rentals and revenue generated. ■ New users vs. repeat users: In 1H FY12/20, new users accounted for 46.9% of rentals (versus 53.9% in 1H FY12/19) and repeat users 53.1% (46.1%). In terms of revenue generated, new users accounted for 49.2% (52.6%) and repeat users 50.8% (47.4%). In Q2 FY12/20 (April–June 2020), new users accounted for 21.6% of rentals (versus 56.8% in Q2 FY12/19) and repeat users 78.4% (43.2%). In terms of revenue generated, in Q2 new users accounted for 41.2% (55.4%) and repeat users 58.8% (44.6%). In Q2, the percentage of repeat users increased both in rentals and revenue generated.
Information and Communications Service
△ △ △ Segment sales (external sales) were JPY4.5bn (+0.2 YoY) and segment profit was JPY817mn (-1.8% YoY). The main activities in this business are for arranging landline, mobile, and broadband telecommunications services, selling and leasing office equipment, and building websites for startups and SMEs. Vision makes cross-selling and upselling proposals suited to the growth stages and needs of its key target customers (startups and venture firms). The company worked to offset business opportunity losses caused by stay-at-home requests by shifting to video conferencing instead of visiting clients and gradually incorporating teleworking into its marketing activities and responses to web-based inquiries. △ Amid an increase in the number of companies embracing telework, there were strong sales of cost-cutting and teleworking merchandise driven by higher demand for mobile communications equipment and broadband. Earnings were also underpinned by increases in SaaS products, including its Vision Workflow System (VWS) series, its JANDIsocial media tool for Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp businesses, its “meet in” online conferencing and online sales meeting service, and its “tele receptionist” telephone answering service. However, segment sales were up only 0.2% YoY, due to a temporary halt to new contracts and potential leasing customer assessmentsfor office equipment sales (the company ceased conducting customer assessments amid calls forself- restraint). △ Segment profitfinished down 1.8% YoY. The company managed to lower cost of sales by moving more equipment installation and website production work in-house and curtailed non-urgent and unnecessary spending. However, this was not enough to offset the impact of rising cost ratio caused by a growth in mobile phone sales (as purchases of products, which incur purchasing costs, increased as a percent of sales). For details on previous quarterly and annual results, see the Historical financial statements section. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
FY12/20 company forecast

Source: Shared Research based on company data solves shared neselies based on company crass.
Note: Floures rnay differ from company materials due to differences in rounding methods.
Note: Quarterly Earnings data for FY1
Overview
△ On May 12, 2020, when it announced Q1 FY12/20 results, Vision left its 1H and full-year FY12/20 forecasts undetermined*, citing mounting difficulty in forecasting the future business environment. It, however, announced full-year forecast with the 1H results announcement on August 17, 2020. △ The company forecast announced on August 17 calls for full-year consolidated sales of JPY16.7bn (-38.9% YoY), an operating loss of JPY320mn (operating profit of JPY3.3bn in FY12/19), a recurring loss of JPY213mn (recurring profit of JPY3.4bn), and a net loss attributable to owners of the parent of JPY1.6bn (net income of JPY2.2bn). > The company feels confident it will meet new forecast because the forecast does not include any boost to sales resulting from the pandemic, such as the increase in demand it has seen for its teleworking-related products and services. > The company says its focus now is not so much on cutting costs, because there are no areas left where it can cut costs much more than it already has, but rather on growing profits by bringing in its top-line ahead of current projections. Vision assumes that due to the COVID-19 pandemic, the steep decline in overseas travel numbers (both outbound and inbound) is likely to persist beyond FY12/20, and that there will not be social restrictions such as a second emergency declaration in Japan. △ムEstablished in June 1995, the Vision group has conducted its business under the principle of contributing to the world's information communication industry revolution. Given the circumstances it faces on its 25th anniversary, the company says its management and work force will maximize the experience and expertise it has accumulated so far, and accurately ascertain today's needs (including how people work and what form companies take now and after the COVID-19 pandemic is overcome). It also aims to contribute to the progress and development of humanity and society by providing the right products and services at the right time. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp *Revised 1H FY12/20 forecast (out May 12, 2020) Undetermined (previous forecast was JPY15.1bn) Sales: Operating profit: Undetermined(JPY1.9bn) Recurring profit: Undetermined (JPY1.9bn) Net income*: Undetermined (JPY1.3bn) *Net income attributable to owners of the parent *Revised FY12/20 full-year forecast (out May 12, 2020). Sales: Undetermined (previous target was JPY31.4bn) Operating profit: Undetermined (JPY4.0bn) Recurring profit: Undetermined (JPY4.0bn) Net income*: Undetermined (JPY2.7bn) *Net income attributable to owners of the parent Note: The company's initial forecast for PY12/20 did not include any impact from the COVID-19 pandemic because it was put together by the company in December 2019, before the COVID-19 started spreading around late-January 2020.
Segment outlook
Global WiFi
△ The company forecasts segmentsales of JPY7.0bn (-60.7% YoY) and a segment loss of JPY234mn (segment profit of JPY3.3bn in FY12/19). △ In the Global WiFi business, monthly losses narrowed from JPY182mn in April 2020 to JPY88mn in June 2020. Depreciation will decline going forward due to the impairment lossesbooked in Q2. The company is looking to get the segment back into the black relatively soon.ムムAssuming no recovery in the number of overseas travelers in FY12/20 and beyond, the company aims atturning a profit by operating the business with minimal costs. When overseas travel numbers recover, the company aims to operate with minimal headcount by arranging its organizational structure, streamlining operations, and improving convenience with the aim of maximizing margins and increasing share of use.
Information and Communications Service
△ The company forecasts segment sales of JPY9.1bn (+1.4% YoY) and segment profit of JPY1.4bn (+2.7% YoY). △ The company is looking to accelerate growth at its Information and Communications Service business, a growing business that has been a stable source of earnings.ムムThe company plans to focus on providing products and services tailored to changes in work styles (planning and sales of products to support teleworking). It plans to establish marketing methods that do not depend on location, maximizing productivity per employee, and boosting the share of recurring revenue that will underpin steady growth.
Growth strategy to address mid-pandemic and post-pandemic challenges
With the number of overseas travelers down sharply, rentals to both inbound and outbound travelers at the company's Global WiFi business have been severely depressed. Vision has worked to minimize the hit to earnings on this front by temporarily shrinking its rental business directed at international travelers and focused instead on expanding its domestic WiFi rental business. At the same time, it is working to reduce costs, by cutting communications costs by switching to pay-as-you-go contracts, reducing the use of contractors at airports and for logistics functions, and relocating excess staff to areas where demand is expected to grow in the future. These efforts to bring the Global WiFi business back into the black as quickly as possible have thus far reduced monthly operating losses from the peak of JPY182mn in April 2020 to JPY88mn in June, with the Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp company expecting its depreciation burden to be lower in the months ahead following the impairment losses booked in Q2 FY12/20. Meanwhile, the company aims to accelerate growth at its Information and Communications Service business, a growing business that has been a stable source of earnings. Having largely finished putting in place the loss-reduction measures by the end of Q2, Vision is switching from playing defense and to playing offense in Q3 by returning its focus to new earnings growth opportunities. Toward this end, the company is planning various new investments and intends to make maximum use ofthe experience and the expertise it has built up over the 25 years since its founding, including its three-legged team approach to winning new customers (online marketing, sales, and customer loyalty team), cross-marketing between its businesses, and pursuing business models designed to create recurring revenue streams. The Vision group is taking measures to minimize the impact of the COVID-19 pandemic by utilizing internal social mediaand video conferencing systems to facilitate prompt information sharing and decision making without being restrained by time or location.ムSecuring employee safety: The company is rigorously working to ensure the health of its employees and prevent infection. Specific measures include: daily health management, the placement and use of alcohol disinfectant and hypochlorous acid water at entrances to all offices, use of humidifiers, wearing of masks, hand washing and gargling, not coming to work when employees have colds or are otherwise unwell, disinfecting conference rooms, and the use of video conferencing systems for meetings both internal and external. It also communicates its viral infection countermeasures to its entire group, and is promoting off-peak commuting and restricting non-vital, non-emergency business trips in Japan and overseas.ムBusiness operation/other: The company has procured notebook PCs for telecommuting, and configured itself for telework- based sales and marketing (i.e. promoting remote sales and marketing). It is also implementing remote training for newly hired employees. It is taking measures in anticipation of maximum risks, developing and marketing merchandise to support telecommuting, and taking action in prediction of business activity after the pandemic has settled down. It is also revising its various budgets. Impact on the Global WiFi business and response Owing to the drop in overseas travel*, the Global WiFi business has seen a sharp decline in mobile device rentals both outbound and inbound**. *According to the Japan National Tourist Organization (JNTO), overseas travelers in March 2020 were down 85.9% YoY for outbound travel and 93.0% YoY for inbound travel. **The company's outbound and inbound rentals have been struggling since mid-February 2020 when the number of rentals declined. Against this backdrop, the company has responded as follows: △ Focus on domestic WiFi (allocating global WiFi business resources to domestic WiFi): Vision has made "telework" its key word in its focus on domestic WiFi service, and has begun offering teleworking plans under its three brands: “Global WiFi for Biz Telework Plan," "WiFi Rental.com," and "e-ca." The company says it has received high-volume requests from major corporations as well as for WiFi for online courses at universities. In June 2020, the company supplied 3,300 routers to public high schools in Osaka Prefecture, and it is in the process of negotiating similar agreements with boards of education in other areas. One challenge has been securing sufficient inventories of domestic SIMs. The company has secured domestic SIMs through its own procurement route. More than 60% of its devices are global WiFi devices, and it is taking the cloud WiFi routers currently used overseas and re-tasking them for domestic use. Cloud WiFi routers do not have physical SIMs built in. They are able to allocate cloud-based SIMs to other routers to suit telecommunications conditions, meaning the service can be operated with fewer SIMs than rental devices (in other words, the company can efficiently manage telecommunications costs). Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp △ Shift in personnel: Vision is directing most of its staff toward expanding sales of domestic WiFi services. While the company will continue to develop new technologies, it is temporarily rotating excess staff to jobs in the Information and Communication Service business (and will reassemble those original teams once overseas travel bounces back). The company says it has currently reassigned around 20 employees to Information and Communication Service. According to the company, those employees all have previous experience conducting Information and Communication Service sales, and have ht the ground running. △ Shipping centers: Since Vision initially launched its service in 2012, the company has been thoroughly disinfecting all rental equipment with alcohol. It continues to disinfect devices and other shipped items, meaning sterilization dces not require any additional duties. It has also begun to use its Global WiFi shipping centers as shipping centers for the Information and Communication Service and other businesses, thereby working to reduce outsourcing costs.ムAirport counters: The company is temporarily closing some of its airport counters or shortening their business hours. Staff wear masks and disinfecting alcoholis made available to customers and staff. It is working to accomplish its strategy to make stores smarter one year ahead of schedule. Specifically, it is adding more unmanned kiosks using Smart Pickup lockers and SIM card vending machines. Vision's non-face-to-face pickup service for rental devices was originally intended to provide more convenience, but now it plays a significant role in reducing the risk of COVID-19 infection, which is why the company is accelerating its smart store strategy. △ Cost cutting: The company has been working to cut communications costs by switching over to pay-as-you-go contracts with no base charges, reducing costs in other areas by reducing the use of contractors at airports and for logistics functions, and relocating excess staff to areas where demand is expected to grow in the future. Through these efforts, in the Global WiFi business the company managed to reduce its cost of sales and SG&Aexpensesfrom a combined total of JPY1.2bn in the peak month ofFebruary 2020 to JPYS4Smn in June 2020. (The February figure of JPY1.2bn is the sum of JPY313mn in cost of sales, JPY271mn in international communications costs, and JPY572mn in SG&Aexpenses. The June figure of JPY545mn is the sum of JPY223mn in cost of sales, JPY7mn in international communications costs, and JPY314mn in SG&Aexpenses.) Some of the international communications costs incurred are fixed, such as SIM cards, but the company managed to get the fixed costs associated with overseas SIM cards down to around JPY4mn a month by eliminating fixed costs for SIM cards that were temporarily suspended. As a result, monthly international communications costs fell from JPY271mn in February 2020 to JPY7mn in June 2020. Depreciation in the Global WiFi business will decline in Q3 and the following quarters due to the aforementioned impairment losses booked in Q2.
Impact on the Information and Communications Service business and response
The Information and Communications Service business was not particularly affected by the COVID-19 pandemic during Q1 FY12/20. Vision's key customers are newly established companies, and since preparations to establish new companies or open stores were already in progress, it seems likely that such new company and store launches went off as planned. However, the picture changed after moving into Q2 FY12/20. On the plus side, the business saw a pickup in sales of mobile communications equipment and products that help companies reduce costs in the wake of the state of emergency declaration by the Japanese government and restrictions placed on business activities by the national and local governments. On the minus side, due to a temporary halt to potential leasing customer assessments for office equipment sales, the booking of sales anticipated in Q2 slipped into the next quarter. Against this backdrop, Vision has responded as follows:ムFocus on teleworking and cost-cutting merchandise: The company has started to sell meet in, Inc.’s “meet in” web conference and online sales meeting system. The system enables online business negotiations. The only requirement is an internet connection. Conducting business negotiations and meetings online makes the reduction of travel time and expenses Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp possible. The main features are document and screen sharing, contract signing, connection of multiple people, exchange of business cards, recording, and questionnaires. △ Focus on monthly fee merchandise and original services: Vision is stepping up measures to raise its ratio of recurring revenue business that generates monthly earnings, rather than one-time revenue business. It is marketing in-house developed services or services used in house to its customers. Targeting primarily startup companies, the company provides cloud-based environments that allow users to use just the function they need in just the amount they need it at lower cost. It also supplied its Vision Workflow System (VWS) series and JANDI services to new customers free of charge through June 30, 2020. The VWS series manages working hours and workflow, and JANDI is a social mediatoolfor businesses. Vision has also begun providing its own "tele receptionist" telephone answering service. The service's light plan answers up to 50 calls a month for a basic monthly fee of JPYS,000 (excluding tax) and JPY300 per call (excluding tax). The middle plan answers up to 100 calls a month for a JPY10,000 basic monthly fee (excluding tax) and JPY200 per call (excluding tax). The company offered 50% off the fees per call for both plans through May 31, 2020. Telephone calls to offices and departments are answered by Vision's call center staff. The company launched this service in anticipation of use by companies adopting teleworking, as well as to prevent missing important calls when out of the office on sales visits. The content of calls received are communicated via chat or email. Reduction of supply chain risks: To reduce supply chain risks caused by the COVID-19 pandemic, the company has stockpiled certain items such as mobile devices (phone) and office equipment (copiers and business phones) and secured storage space for them. Sale of antiviral merchandise: Vision is working to boost sales of hypochlorous acid water, equipment (special atomizers), △ムand other antiviral merchandise to corporations (it began taking applications on May 28, 2020 and offered the service free of charge for up to four months to the first 1,000 units). It offers antiviral services on a subscription basis to stores, facilities, and other corporate needs (three two-liter bottles of hypochlorous acid solution for a basic monthly fee of JPY9,900 [excluding tax]). The solution is a 6.5ph midly acidic with a concentration of 200ppm, which is diluted for use. The service also provides rental spray atomizers for free). The company says it uses the very same hypochlorous acid water itself, which it sources form a supplier in China that it has been using for some time. △ Working on an approach to sales that is unrestricted by location: The company conducts sales using online business negotiation systems. It is intensifying efforts to minimize on-site sales visits, and it says it is also encouraging its customers to go digital as well.
Initiatives for the post-COVID-19 era
△ Convenience store pickup for devices: Vision has a new service that allows customers to pick up devices at 7-Eleven convenience stores near their work places or homes. It introduced the service in Kanto ahead of other regions of Japan, and it allows customers to pick up their devices during 7-Eleven store hours, even late at night. This offers customers' greater convenience by eliminating the need to stand in line at airport counters on their departure date. △ Airport counters and SmartPickup lockers: As of the end of Q2 Vision had 39 service counters and 36 Smart Pickup lockers and return boxes at 18 airports in Japan. It has also installed automated pickup lockers at 11 of those airports. The company is working to optimize service levels to customer needs, by encouraging repeat customers to make use of its Smart Pickup lockers while its airport staff attend to customers who require more explanation. “Ultra” short-notice online ordering: The combination of Vision’s smart store strategy, cloud WiFi, and database makes it possible to provide instant service to same-day departure customers, such as by allowing customers to apply online right in front of Vision's airport counters.ムムAccelerating the use of unmanned stores: As described earlier in this report. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jpムExpansion of unlimited plan areas: In response to customers expressing the desire for plans that they can use without being concerned about telecom volume, Vision is expanding the areas where it offers its unlimited plans (as of June 30, 2020, it covered 91 countries). The ratio of customers, both corporate and individual, selecting unlimited plans is rising (over 30%), which contributes to improve ARPU.ムDevelopment of mid-travel service and travel-related service platform (Reference) FY12/20 initial company forecast that did not factor in the impact of the COVID-19 pandemic The FY12/20 initial forecast that did not factor in the impact of the COVID-19 pandemic called for full-year sales of JPY31.4bn (+14.9% YoY), operating profit of JPY4.0bn (+20.4% YoY), recurring profit of JPY4.0bn (+19.2% YoY), and net income attributable to owners of the parent of JPY2.7bn (+20.1% YoY). The company expected sales and profits to reach record highs.ムForecast by segment: For Clobal WiFi, the company initially targeted segment sales of JPY21.1bn (+18.9% YoY) and segment profit of JPY3.7bn (+13.2% YoY); for Information and Communications Service, it expected segment sales of JPY9.2bn (+2.8% YoY) and segment profit of JPY1.5bn (+9.8% YoY). For otherbusinesses, it anticipated full-year sales of JPY1.1bn(+75.7% YoY) and a segment loss of JPY35mn (segment loss of JPY266mn in FY12/19). The FY12/20 initial company forecast was prepared in December 2019 and did not factor in the impact of the COVID-19 pandemic. The increase in COVID-19 infections resulted in many countries, including Japan, issuing restrictions on overseas travel as well as stay-at-home directives, which contributed to a global slump in travel-related demand. According to the Japan National Tourism Organization (JNTO) data, the number of Japanese in Q1 travelling abroad fell 39.6% YoY, while the number of overseas visitors to Japan fell 51.1% YoY. To strengthen its ability to respond to changes in the business environment, the company had planned to continue growing by improving its existing services. It was working to expand its services by supplying big data cultivated in the Clobal WiFi business, while developing overseas franchises and software as a service (SaaS; software provided through the cloud). Through these initiatives, the company had hoped to open up new markets while increasing customer lifetime value and recurring revenues. In FY12/20, in addition to developing unmanned airport stores, the company had aimed to leverage the latest technology to free itself of labor-intensive practices. In addition to its strategy to make stores smarter, it had planned to promote the automation of its call centers using AI (bots) and the use of RPA for administrative tasks. Vision had aimed to open Vision Kids nursery schools on the premises of its call centers, with the aim of providing an environment accommodating of employee needs. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp (Reference) The followingwas Vision's FY12/20 initial forecast by segment (before factoring in the impact of the COVID-19 pandemic):
Global WiFi business
ム소ムム
Information and Communications Service business
소ムThe company forecast segment sales of JPY9.2bn (+2.8% YoY) and segment profit of JPY1.5bn (+9.8% YoY). In addition to the growth of its existing businesses (telephone lines, office equipment, website production, etc.), it had aimed to strengthen sales of its proprietary services, and invest in SaaS (including organic growth, corporate acquisitions, and capital alliances) to expand its range of services to increase profits. OtherムムムムThe company expected sales of JPY1.1 (+74.0% YoY) and a segment loss of JPY3Smn (versus a loss of JPY266mn in FY12/19). The company had been looking to quickly get this business area into the black with the creation of its ProDrivers chauffeur-driven car sharing service and frontloaded spending in personnel ProDrivers provides comfortable chauffeured car service for traveling to and from airports, picking up executive staff, and general use. The company had looked to draw new customers from the companies that use its Global WiFi service (this includes domestic private and corporate users, as well as overseas visitors to Japan)and its Information and Communications Service. After starting in Tokyo, the company had planned to link up with partner companies and gradually expand its ProDrivers service to all major cities in Japan. Overseas, the company had planned to expand the ProDrivers service in conjunction with the SmartRyde service operated by DLGB, Inc., with which it has a capital and business alliance. △ The company expected Global WiFi segment sales of JPY21.1bn (+18.9% YoY) and segment profit of JPY3.7bn (+13.2% YoY). Vísion will focus on expanding sales of Global WiFi for Biz, increasing sales of unlimited plans, expanding its mid-travel services, and expanding overseas. The company had planned to further improve convenience by expanding the number of pickup locations, as well as distribution methods for its services, including direct store openings, franchise development, and tie-ups with local competitors (line provision) in line with the characteristics of each market. Vision had aimed to raise public awareness through various promotions. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Medium-term outlook
Focusing upfront spending and growth
Vision has not released a detailed medium-term business plan. However, the exercise conditions for the share subscription rights (paid-in stock options) offered to its directors (excluding external directors), employees, and subsidiary employees (163 people in total) on December 29, 2017, show the company is committed to sustaining strong profit growth (for details, see comments in the box below.) The conditions are as follows. Exercise of 30% of the rights: If operating profit exceeds JPY2.1bn in FY12/18 and JPY2.6bn in FY12/19. (Note: The company reported operating profit of JPY2.5bn in FY12/18 and operating profit of JPY3.3bn for FY12/19, fulfilling the conditions for exercise of 30% of the rights). ■ Exercise of 30% of the rights: If operating profit exceeds JPY3.1bn in FY12/20. (Note: The initial FY12/20 company forecast is operating profit of JPY4.0bn) ■ Exercise of 100% of the rights: If operating profit exceeds JPY3.6bn in any of the financal years from FY12/18 to FY12/21. (Note: The initial FY12/20 company forecast is operating profit of JPY4.0bn) Vision looks to achieve substantial profit expansion while continuing to invest in future growth. To this end, it has positioned the Global WiFi business as the growth driver and the Information and Communications Service business as a source of stable growth. The company also partially revised its Articles of Incorporation to prepare for further business development in its group (as discussed below). In order to enhance cohesion, motivation and morale for the purpose of increasing the company's earnings and enterprise value over the long term, Vision has resolved to issue stock options to directors and employees of the company, and employees of the company's subsidiates at the Board of Directors meeting to be held on November 13, 2017. The total number of the company's common stock that will increase when all options are exercised is equivalent to 8.3% of outstanding shares. The announcement stated that it will be possible to exercise 30% of the stock options if FY12/18 operating profit exceeds JPY2.1bn and FY12/19 operating profit exceeds JPY2.6bn, or if FY12/20 operating profit exceeds JPY3.1bn: It will also be possible to exercise 100% of all stock options if operating profit exceeds JPY3.6bn in any financial year from FY12/18 to FY12/21. Since there are exercise conditions that prevent the exercise of all stock options in the event that Vision does not achieve an operating profit of JPY3.6bn, which is regarded as a high level in light of past earnings, the company views achieving the target as a commitment to enhancing enterprise and shareholder value. The company believes that the dilution impact on shares will be reasonable. Number of stock options: 13,560 units Payment amount in exchange for stock options: 1 unit per JPY1,600 issued (1 unit per 100 Vision common shares) Payment date for amount paid in exchange for stock options: December 29, 2017 Application date: November 28, 2017 Persons to be allotted stock options and number of such persons: directors and employees of the company, and employees of the company's subsidiaries (190 persons and 13,560 units)
Expanding in-house services
Vision plans to expand into business fields it can pursue independently, while increasing its ratio of in-house development including for services. In-house development is expected to accelerate its business and facilitate price control. Services the company is already operating will be used and improved internally, and provided as services to customers. We understand Vision is also actively pursuing external sales of its expertise in sales force automation (SFA), which was developed in-house and is presently used for its own sales. Having also built up in-house expertise and completed optimization of its RPA currently deployed for in-house call centers, the company intends to provide such solutions to other companies and monetize them accordingly. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Changing Articles of Incorporation
17th General Shareholders Meeting In preparation for further business development in the Vision Croup, a proposal to revise the company's Articles of Incorporation was approved by a resolution at the 17th annual general meeting of shareholders on March 29, 2018. The operation of accommodation facilities for foreigners outside of National Strategic Special Zones and automobile transportation business were added as new items under business purposes (refer to the following table). Management has indicated it plans to expand into such businesses in the future. In the past, the company developed many new businesses via partnerships, but it now also looks to move into new fields independently. In addition, Vision is examining areas in which it could create mechanisms to enhancethe satisfaction of its customers such as private room rentals (commonly referred to as minpaku), a field that opened up after the lifting of existing restrictions in June 2018, and services related to transportation of inbound and outbound travelers, who are the company's primary customers. Vision has many customers who use Haneda Airport or Narita Airport. Although it has no intention of creating its own restaurants or sightseeing spots, it plans to develop businesses that allow customers to enjoy Japan and the world through travel and tourism.
18th General Shareholdings Meeting At the company's 18th general shareholders meetings held on March 26, 2019, the following matters were added for discussion:ムChildcare service businessムSmall-truck delivery business > Warehousing and contract warehousing business Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Global WiFi as growth driver
The company sees growth potential in the market where the Global WiFi business operates. Vision divided the segment into three areas, and plans to expand operations in stages. In addition, the company plans to offer media services (through a media service platform) providing information on various countries and creating more value for customers. Global WiFi business - growth model Organization (JNTO) In the first growth stage the company aims to target the outbound market (travelers from Japan going abroad). The number of Japanese traveling abroad is roughly 17–19mn per annum and smartphone uptake is growing rapidly. In 2019, the number reached about 20.08mn (+5.9% YoY). Assuming a unit price of JPY7,000 per user puts the potential market size at roughly JPY140.6bn (JPY7,000 in unit price x 20.08mn users). The target of the second growth stage is the inbound market (overseas visitors to Japan). In 2015, the number of travelers to Japan exceeded 19.7mn thanks to a series of measures by the government to encourage tourism(such as a relaxation of visa requirements and an expansion of the duty-free system). It reached a record 31.9mn (+2.2% YoY) in 2019. The government wants to increase the number of visitors to Japan to 40mn by 2020 and 60mn by 2030. Vision, which estimates that the size of the potential market is now roughly JPY220.0bn (JPY7,000 in unit price x 31.9mn), expects that the market will continue to expand. The target of the third stage is the overseas market(travelers going from one overseas country to another). According to the United Nations World Tourism Organization (UNWTO), on a global basis, the number of such travelers now exceeds 1.3bn travelers per annum. Assuming a unit price of JPY7,000 per user puts the potential market size at over JPY9tn (JPY7,000 X 1.4bn users). The company has overseas subsidiaries for developing the business and procuring network access in regions with strong travel demand including in popular tourist destinations such as South Korea, Hawaii, Hong Kong, Singapore, Taiwan, the UK, Vietnam, Shanghai, France, and Italy. It also began operations in New Caledonia and the US (California) from 2016. Vision noted that presently Verizon Communications, Inc., a major US mobile carrier, has not rolled out overseas roaming services at a low flat- rate. Therefore, Vision believes that if customers become increasingly aware that they can use Vision's flat-rate service overseas, it could see an uptick in user numbers. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp The company said that going forward it wants to tap into demand in Asian markets and major cities in the US and Europeby expanding its network of subsidiaries and franchises at various locations overseas. Vision expects that gaining even a small portion of this market could substantially contribute to earnings. While these markets are enormous, the company's Global WiFi business only rented out 2,830,000 routers in FY12/19 (2,160,000 for customers traveling overseas; 590,000 for visitors to Japan; and 70,000 for those traveling from one foreign country to another). Thus, the company sees ample room for growth in each of these markets. As part of an effort to expand into these markets (inbound, outbound, and overseas markets) and increase the number of end- users, in the Global WiFi business the company aims to strengthen ties with telcos in each country, increasing locations at airport counters where customers can rent Vision's equipment to increase convenience and improve quality. Specific measures that the company is implementing are as follows. Introduction of “Smart Pickup” lockers and “Smart Entry” kiosks to improve customer convenience The company has “Smart Pickup” points where customers receive mobile WiFi routers from lockers installed at airports and other locations. Users can easily unlock the lockers by tapping their smartphones—registered on the web beforehand. This service is more cost-effective and efficient (no waiting time for customers) than the company's conventional face-to-face services. The new service also allows the company to dedicate service counters to walk-in customers, along with other benefits. According to Vision, Smart Pickup lockers at Haneda Airport counters can service a maximum of 184 pickups per day (as of end December 2017, total 92 boxes with each box allowing for a morning and evening pickup; two rotations a day), with a pick up taking less than ten seconds. The company initially set up Smart Pickup points only at Haneda Airport but has since expanded to Narita Airport, Haneda Airport, Chubu Centrair International Airport, Kansai International Airport, Itami Airport, New Chitose Airport, Fukuoka Airport, Kitakyushu Airport, Kagoshima Airport, and Miyako Shimojishima Airport for a total of 10 airports and 31 pickup points (as of end December 2019) and is looking to continue expanding the number of Smart Pickup points going forward. Vision stated that Smart Pickup had resulted in shorter lines at staffed counters, and increased the number of walk-in contracts it processes by improving the utilization rate at counters. In light of the results, the company stated that it planned to install additional Smart Pickup lockers going forward. Further, the company said that it was continuing to introduce “Smart Entry” (self-service kiosks that allow tourists wishing to rent WiFi routers to process applications and make payments themselves; services available in six languages). The kiosks are initially for renting NINJA WiFi* and are installed at counters in Haneda Airport, but going forwardVision plans to addGLOBAL WiFi* rentals and install additional terminals, with increased functions. In conjunction with Smart Pickup, the service enables Vision to utilize vending machines to further automate service counter services Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Counters and Smart Pickup points /Smart Entry/Smart Check Smart Pickup user guide 1 Smart Entry (self-service kiosks: multi-lingual/includes Source: Shared Research based on company data Increasing customer contact points to attract more inbound customers (visitors to Japan) As of the end of December 2019, in Japan, Vision had a total of 38 contact points (pickup/drop-off counters), including those at 18 major airports (New Chitose Airport, Asahikawa Airport, Sendai Airport, Narita Airport, Haneda Airport, Niigata Airport, Komatsu Airport, Kansai International Airport, Chubu Centrair Airport, Itami Airport, Mt. Fuji Shizuoka Airport, Fukuoka Airport, Kitakyushu Airport, Oita Airport, Miyazaki Airport, Kagoshima Airport, Naha Airport, and Miyako Shimojishima Airport) and other locations (counters at Shibuya Chikamichi and JR Miyazaki Station and automated lockers for WiFi router pickup and return). There are three counters in Narita Airport and two in Haneda Airport. Already possessing such counters in the limited space of an airport not only improves the convenience for customers, but also impedes entry by competitors, serving as a strength for the company. Going forward, the company plans to expand the number of domestic contact points and strengthen initiatives to attract inbound customers (visitors to Japan) and initiatives with local governments and municipalities.
Travel-related services platform
In addition to the three growth stages in the Global WiFi business, the company aims to develop a new business areaas it targets future opportunities: a travel-related service platform that will provide useful information (media service) and offer useful services for travelers. In FY12/19, users of the company's Global WiFi® and NINJA WiFi® totaled roughly 4.5mn (outbound roughly 3.5mn and inbound roughly 1.0mn), and the total number of stays was 31.2mn (outbound 24.3mn and inbound 6.9mn). Generating an additional JPY100 per day in ARPU from such users through a travel-related service platform would have boosted annual revenue by Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp JPY3.1bn (31.2mn stays multiplied by JPY100/stay). This would have raised FY12/19 sales (JPY17.7bn) in the Global WiFi business by about 18%. The company said a media business would provide information tailored to travelers' destinations. For example, according to the company, many travelers visiting Japan are high net worth individuals (with plenty of purchasing power) that are not on group tours. Most Japanese companies, tourist areas and facilities have not worked out how to approach these individuals. Because Vision rents mobile WiFi routers (NINJA WiFi®) to those visiting Japan, it can reach out directly to such individuals. Further, this allows the company to collect information directly from the travelers and in turn supply information to shops, companies, and regional tourism destinations to draw travelers to these spots. Being able to obtain accurate information is critical in order to take full advantage of one's travel destination. As such, Vision continues to roll out several services that are useful for travelers, including iliand Pocketalk, a new wearable translation device (the company plans to gradually improve sophistication as a travel-assistance device) and an overseas restaurant reservation service capable of handling several languages, including Japanese. By combining these services, Vision will continue to provide services to tourists before, during and after their travels.
Information and Communications Service as a source of stable growth
Recurring-revenue business model In the Information and Communications Service segment, the company aims to continue its strategy of targeting startups. As these client companies grow, it will be able to offer the appropriate additional or expanded (solutions) services in line with their growth. The company aims to deepen ties between its websites, which attract customers, and its Customer Loyalty Team (CLT), which supports existing customers, to further improve marketing efficiency and boost revenue per customer by expanding the lineup of products that it handles and proprietary products. The Information and Communications Service is distinguished by its stable, recurring-revenue business model, which depends on the closely coordinated efforts of its web marketing, sales team, and CLT to win orders by providing the optimal solutions (products and services) for companies at their particular growth stage. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Continuous stock model for Information and Communications Service business Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Business
Business overview
A △ The company has two main businesses: the Clobal WiFi business, and the Information and Communications Service business. In the Global WiFi business it rents out mobile WiFi routers*, targeting the outbound (travelers from Japan to overseas) and inbound (travelers to Japan from overseas) markets. Vision is the largest of the three major Japanese companies that rent out mobile WiFi routers for use overseas, with a market share (sales basis) of more than 50% (as ofFY12/19, Shared Research survey).ムIn the Information and Communications Service business it targets mainly startups, and arranges telephone lines and other telecommunications services, sells office equipment, and builds websites. The main source ofrevenue is sales commissions from telecoms and office equipment manufacturers. * Refers to wireless LAN (WiFi) routers able to connect to mobile networks. Using these mobile WiFi routers, it is possible to connect to the internet via smartphones, tablets, notebook computers andgame consoles that have WiFi capability while on the move.ムFor its primary two business segments in FY12/19, Global WiFi accounted for 65% (previous year: 63%) of sales, and Information and Communications Service 33% (previous year: 36%) of sales, with the former accounting for 75% of profits. Since its launch in 2012, the Global WiFibusiness has been accounting for a rising share of both sales and profits (refer to figure below). Business model Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Business development
Origins: understanding customer needs
The company's origins lie in discovering and meeting customer needs. After current company CEO Sano worked for Hikari Tsushin (TSE1: 9435) for four years, he set up Vision LLC in Fujinomiya, Shizuoka, in April 1996. He discovered from some Brazilian people that international calls were expensive, and started arranging and selling low-priced international telephone services to South American residents in Japan. Global WiFi" was launched in February 2012 in response to demand for affordable and easy-to-use internet environments for people traveling overseas. The company has been renting out mobile WiFi routers in Japan since 2010, and used the expertise gained in this business to launch the Global WiFiservice just six months after the idea was born. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Evolution of sales and service lineup
Corporate services: improvements in marketing efficiency using websites
As the internet became more widespread from 2000, the focus of this business shifted to the corporate sector, and now almost all customers in the Information and Communications Service business are corporate clients. An issue in providing services to the corporate sector was improving selling efficiency, and the company has responded by adopting a new marketing strategy, including the use of websites such as copyki.com. Previously the company's marketing strategy primarily involved telemarketing, which would then lead to in-person sales, which was inefficient, and so many salespeople became frustrated and quit. Aware that the internet would become a commonplace means to gather information, Vision started to use websites in marketing activities from 2003. In 2004, the company launched a website called copyki.com to attract customers by selling copiers. It started making appointments and meeting with potential customers who sent enquiries and requested quotes through the website, and because these web customers have a high propensity to purchase products, contract rateswere improving.
Creates a number of websites following the success of copyki.com
Reflecting the success of copyki.com, the company launched a number of websites offering telephone line subscription (denwa- kanyuken.com), business phones(bizphone.com), corporate mobile phones(houjinkeitai.com) and phone lines(denwa- hikari.com) (in 2008). In addition to sites such as these (named after products), the company also created satellite sites specifically related to demand for related search keywords to reach even more customers. As a result, the ratio of telemarketing-based appointments is dropping (before the launch of these websites, these accounted for all contracts won). Now, over half of contracts come from concierge operations for handling website enquiries and continuing business with existing customers (CLT, explained later), add-ons from existing customers introduced by the sales team (upselling), and additional purchases of other products (cross-selling). According to the company, more efficient marketing also means that marketing staff turnover has declined dramatically, leading to accumulated sales expertise among staff. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Core strategy
The three main strategies the company is following are outlined below. Focused, niche market strategy: V Target: Overseas travelers and startup companies V Develop new markets by finding and serving the needs of those left behind by advances in information and communications technology > Focus management resources and services on carefully selected target markets ■ Price and quality leadership strategy: > Emphasize productivity, superior pricing, and reputation for service quality V Relentlessly pursue increases in productivity by increase speed of organization and operations V Demonstrate superior price competitiveness while maintaining high quality service Up-selling and cross-selling strategy: V Focus on in-house CRM as recurring-revenue business V Find new needs in information and communications services and consistently provide the right services at the right price at the right time V Establish long-term relationships with customers
Key characteristics of two businesses
Global WiFi
The key feature of the company's Global WiFibusiness is the ability to offer low-price and high-quality service, as Vision has direct negotiations and contracts with overseas telcos. Information and Communications Service There are three key features of the Information and Communications Service business. Mainly targeting startups The main targets of the Information and Communications Service business are startups. According to Vision, this is because they have more growth potential than major corporations. It is difficult for major corporations to double the number of employees, but if a startup's business goes well, there is plenty of scope for employee numbers to double or even grow by 10x. The company said thatthe number and variety of services it can offer these startups can also grow. Initial prices held low; recurring revenue model entails offering multiple services to each customer In order to lighten the burden on startups, Vision sets low initial prices for equipmentand other products. It aims to boost revenue per customer by providing an increasing number and variety of services in line with the growth of its startup clients. This business model means a relatively high proportion of ongoing monthly revenues in addition to one-time sales. The company supplies pre-owned as well as new phones to startups. Although there are concerns about bankruptcy for startups, according to Vision, its customers are highly cost-conscious, so the percentage that goes bankrupt is extremely low compared to the average for startups. Leveraging web marketing and Customer Loyalty Team (CLT) to boost marketing productivity The Information and Communications Service business targets corporate customers. In general, contracts are entered through face-to-face marketing, so achallenge is how to reduce marketing staff costs. The company made sales activities more efficient by promoting website-based marketing and conducting in-person sales focused on clients with high latent needs. The company has an extremely high success rate of gaining contracts from inquiring clients who came from the company's websites after searching for a service to fulfill their needs. For example, average copier sales per marketing employee for Vision are roughly 3x the industry average. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp The call center is another important marketing channel: the Customer Loyalty Team is involved in after-sales support for existing clients, and follows up with client companies as they reach certain growth stages. * In addition to sites named after products, the company also created satellite sites specifically related to demand for search keywords relevant to the products, to spread its customeracquisition net. Per the company, its websites are operated by teams, which has resulted in powerful customer attraction through SEO** results. The keywords that the users input in their searches are not just single words, but mostly strings of words that combine various needs. As a result, the company is able to tap into demand across awide front and increase the number of users. ** SEO (Search Engine Optimization) refers to technology that positions a website in the upper rankings of search results on search engines such as Yahoo! and Google.
Source: Shared Research based on company data Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Business segments

Segment overview
The Global WiFi business accounted for64.9% of consolidated sales and 75.1% of operating profit (FY12/19). Total number of contracts during FY12/19 was 2,830,000, an increase of 26.8% YoY (among overseas rental contracts, companies accounted for 36.9% and individuals 63.1%). In this segment, the company procures local networkaccess (mobile phone data access) by negotiating with telcos in countries around the world in order to develop its usable data volume, connection quality (speed, etc.), and other proprietary services, and rents out mobile WiFi routers and other devices that provide access for people traveling to these countries. In addition to Vision (parent company), consolidated subsidiaries Best Link, Vision Mobile Korea Inc., VisionMobile Hawaii Inc., and Vision Mobile Taiwan Ltd.carry out this business. The company is expanding its service offeringsrapidly in line with burgeoning demand for mobile access from travelers. Despite only starting in FY12/12, the Clobal WiFi business has grown to account for over half of the company's sales. In FY12/19, segment profit accounted for roughly 75% of total segment profit before adjustments, and the company has positioned the segment as a growth driver.
Services
Classifications
The Global WiFi segment can be broadly broken down into overseas business (travelers from Japan to overseas and overseas-to- overseas travelers) and domestic business (overseas visitors to Japan and domestic travelers). Services are provided under the Global WiFi® brand overseas, and primarily under the NINJA WiFi® brand in Japan. With the help of partner companies, the company provided overseas coverage in more than 200 different countries and regions (as of the end of December 2019). Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Overseas (Global WiFi®) business features
The company has direct contracts with telcos worldwide. This enables it to provide a low-price, high-quality internet environment for the mobile WiFi rental service it offers to outbound travelers (going from Japan to overseas). Per the company, in order to boost customer satisfaction and capture repeat customer demand, it is important to pay attention not only to price, but also to quality. As a result, Vision mainly obtains internet access overseas from major telcos, as it places importance on communication speed and breadth of coverage. The company has subsidiaries in regions with strong travel demand including South Korea, Hawaii, Hong Kong, Singapore, Taiwan, the UK, Vietnam, Shanghai, France, and Italy. These overseas subsidiaries primarily work to procure network access for each respective region, but the subsidiaries in South Korea, Hawaii, and Taiwan—like in Japan—provide the Global WiFi" service to both outbound and inbound customers. The company also opened offices in New Caledonia and the US (California) in 2016. There are four steps in the process to rent a mobile WiFi router: web application/payment (credit card payment), device handover, usage, and device return. Devices may be picked up and returned at counters at 53 major airports around the world. In Japan, the company has pickup/drop-off counters at 18 major airports. There is a home courier service for customers who cannot pick up or return the device to the airport. Local pickup is available in some areas (Hawaii, Korea, and Taiwan). Further, the company has a 24 hour/365-day support system via AI chat support, telephone, email, and social media. In certain overseas countries, it has help desks with Japanese-speaking staff. According to the company, it offers the lowest prices in the industry. It also said that it operates in the most countries with access to high-speed 4G-LTE communications and large data volumes (unlimited plan is available in 73 countries). Further, Vision said that it offers the most pickup points in the industry. As such, over 50% of the company's contracts are from repeat clients, although there is some seasonal variation. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Domestic (NINJA WiFi®) business features
The domestic and overseas operations are similar. The company procures domestic telecommunications access from three companies: NTT DoCoMo (TSE1: 9437), KDDI (TSE1:9433), and Softbank, a unit of SoftbankGroup(TSE1: 9984). The service flows are similar both in Japan and overseas (web registration and credit card payment) and is available in five languages: Japanese, English, traditional Chinese, simplified Chinese, and Korean. The pickup and drop-off points are 18 airports in Japan, with courier services to clients' hotels as well as the company's Shinjuku office and partner hotels and tourist information centers.
Competition
Telco companies' roaming services* compete withVision's services. Compared to roaming services, Vision said it had several advantages: lower prices (up to 89.9% lower than fixed price international roaming plans), faster speeds (contracts and collaboration with high-quality local telcos), ease of connection (merely requires switching power on), multi-device connectivity (possible to connect simultaneously with multiple people/devices). Compared with WiFihot spots**, the company arques that it has a wider coverage area (usable even on the move), fasterspeeds, ease of connectivity, and increased security. In particular, corporations have strong security needs and this is a major factor in customer acquisition. *Roaming service: refers to ability to access infrastructure of another telecommunications company that partners with a telco service provider outside the contracted service provider's service area. **A WiFi hotspot is a shop or other public space where it is possible to connect to the internetusing a wireless LAN (WiFi).
Future developments
The company aims to capture demand from increasing numbers of overseas visitors to Japan and Japanese travelers going overseas. It plans to leverage its customer data to expand media services (ads linked to the destination, local information for inbound travelers) and data supply services (offer retail operators big data analysis based on location data). Through such initiatives, the company aims to increase userconvenience and boost revenues. The company also said that it is putting a great deal of effort into developing ancillary services (such as tablet services, 360° camera services, translation device, and suitcase rentals) to boost ARPU.
Business model
The revenue of this business is a function of the number of mobile WiFi routers shipped multiplied by average revenue per user (ARPU)*. Costs are the sum of data telecommunications charges in individual countries + the cost of procuring mobile WiFi routers + ancillary equipment procurement costs. The company is focused on increasing customer numbers and improving procurement volumes, terms and conditions based on regional or seasonal demand forecasts. It also aims to increase turnover rates (utilization rates) for its mobile WiFi router rentals. *ARPU: (telecommunications charges/day + ancillary service charges) times number of days
Number of contracts
In FY12/19, the business had 2,830,000 contracts (total rental deals), increasing 26.8% YoY. Of these, roughly 76% were overseas (travelers from Japan going overseas). According to the company, 63.1% of its customers (rental contract basis) are individuals and 36.9% companies. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Global WiFi business rental contracts 17.3%

ARPU
ARPU averages approximately JPY7,000 (daily charge is roughly JPY1,000, and average rental period is around seven days). ARPU for individuals is lower than that for businesses. Sales to individuals tend to be concentrated in the spring and summer holidays. Corporate demand is somewhat slow in the July–September quarter, but relatively stable throughout the year. Q3 is the busiest period as it benefits from overlapping demand from both summer vacations and business trips. ARPU tends to increase with distance and number of days users travel. ARPU is high in Europe and the US, lower in Southeast Asia, with inbound users in Japan somewhere in the middle. Sales from Japanese people traveling abroad are highest in the US, Korea, and China, followed by Taiwan. Business expansion in the relatively low ARPU regions of Asia is a factor in the falling average ARPU. However, from 2019, the company introduced an unlimited traffic plan in response to customer feedback that they did not want to worry about daily usage caps, available in 73 countries as of end February 2020. This is making average ARPU rise. ARPU had been on a downward trend through FY12/18 due to an increase in individual users, but turned up YoY in FY12/19. The company aims to improve ARPU by expanding its plans and enhancing its optional services.
Cost structure
Around two thirds of cost of sales are network-usage payments to telcos, with the remainder being device depreciation. The company said that it was able to keep network utilization rates at nearly 100% through effective management. Devices are expensed on a two-year depreciation schedule. Note that the company is able to maintain its profit levels by controlling the cost of sales, since it utilizes a system that adjusts network usage in line with busy or quiet periods, which in turn affects the cost of Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp using those networks. The company created this system by developing a proprietary management system and negotiating with telcos. The company aims to reduce costs by improving operations and reducing procurement costs by expanding its business scale. Reducing telecommunications CoGS △ Improve procurement contract terms by securing volume discounts*¹ (lower rates as well as terms unique to Vision) △ Utilize next-generation telecommunications technology that utilizes SIMs in the cloud*2 Reduce surplus inventory (including line accounts) with more accurate order forecasting*3 △ *1 According to the company, Vision is the largest procurer of network access in the world. Through successful negotiations with network providers around the world, it has worked to lower its network procurement costs. *². ³ The company has indicated that asof end FY12/19, roughly 94% of its total rental contracts made use of cloud WiFi routers. Conventional WiFi routers need different SIM cards for each country in which WiFi service is used (in other words, a WiFi router with a maximumof nine SIM-card slots, can only be used in nine countries). Conversely, server-based management of SIM cards ensures SIM cards are switched automatically to the appropriate country as users travel around. This not only improves the efficiency of shipping operations, but also contributes to an increase in network usage (while reducing surplus inventory). Vision presently operates a global loT platform that allows it to monitor usage conditions for its customers across virtually the entire world. This in turn allows the company to take various types of action in response to customer usage conditions. Improving operational efficiency △ Use Al systems to help reduce call centers' operating costsムIncrease use of automated systems, such as “Smart Pickup” (automated lockers for WiFi router pickup and return) w and “Smart Entry" (self-service kiosks)*5 in some locations as well as install additional terminals (reduce service counter operation costs) Increase operational efficiency of manned service counters to improve sales ratio for optional services **Within a matter of seconds, users can pick up and drop off a router from a locker that is automatically assigned to them online. The locker is opened by tapping a QR code displayed on the screen of a user's smartphone. *5The self-service kiosks feature multi-language support that is developed by the company. They have access to customers' usage patterns and requests (e.g., first time or tenth time using the service, previous requests made to call centers), which contributes to superiorservice.
Sales channels
End users can apply to use the services through websites, apps, corporate sales, partners (companies that have concluded sales agent contracts or franchise contracts), and airport counters.
Source: Shared Research based on company data Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Information and Communications Service segment

Segment overview
The Information and Communications Servicesegment accounts for 32.8% of sales and 31.0% of operating profit (FY12/19). It targets mainly startupsand ventures as well as SMEs, and arranges telephone lines and other types of telecommunications services, mobile communication device sales, office equipment sales, and builds websites for its customers. The company and consolidated subsidiary Best Link are involved in this business. Sales in the segment fell temporarily in FY12/14 as the company changed the weightings of products it handled. Due to a rising share of highly profitable products and increased productivity, profits have continued to rise.
Services and business model
Sales structure
As information and telecommunications technology continues to evolve, the segment makes use of web marketing activities as a tool to target startups and general corporations. The idea is to grasp customer needs to offer the best products and services at the optimaltiming. The company also conducts door-to-door sales leveraging its headquarters, 12 sales offices across the country, and numerous partner corporations, which have given it a nationwide marketing presence.
Customers
Almost all of the segment's customers are corporate clients. There are roughly over 30,000 new signups per year. Around 60% of these new contracts are with startups, which numbered 16,000 in FY12/19. According to Ministry of Justice statistics, 118,532 new companies were established in 2019. This means Vision does business with one out of every ten ofthe newly created companies every year. The company is focusing on capturing more startup clients. The aim is to increase the number and type of services it provides them as their business grows. Per the company, bankruptcies amongst startups are declining, and its clients tend to be particularly cost-conscious, so bankruptcy rates are lower than in the general market. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Revenue
Revenues in this segment can be broadly divided into sales revenue from selling devices and office equipment, fees from telcos and power companies for arranging services (one-time commissions, and monthly commissions or “stock incentives”), and revenue from office equipment maintenance services. When contracts are signed, revenue from devices and office equipment and one-time commissions are booked as sales; subsequent monthly revenues comprise the monthly stock incentives and office equipment maintenance revenues. The company's business model entails setting low prices for devices and office equipment and collecting monthly revenues, to lighten the burden on startups. While the company has not disclosed details, we understand that monthly revenues such as monthly commissions ( “stock incentives”) and office equipment maintenance revenue significantly contribute to profits as the company's business model emphasizes continued business with its clients.
CoGS
Costs for signing up mobile phone subscribers include handset cost (no CoGS related to fixed-line telecommunications and electric powerbusinesses). Costs for officeequipment and security businesses include hardware and software, and outsourcing costs (commissions paid to sales agencies, etc.).
SG&A expenses
Typical SG&A expenses are personnel expenses, advertising and promotional spending, and rent for call centers and other facilities.
Subsegments
The revenue breakdown for subsegments in the Information and Communications Service segment are high for office equipment sales, mobile (cell phone) communications, and fixed telecommunications (landline) businesses, followed by the broadband (internet) business, and the internet media business (website development, etc.). Recently, the company has been adding new products to meet customer needs, such as the electric power service Haluene Denki (power sales agent).
Telecommunications access intermediary services
In this market, the company operates mobile, landline, and broadband businesses. It involves the sale of devices and obtaining network access (from telcos) for mobile phone, landline, and internet connections, as well as installations. Revenue comes from handset sales of landline and mobile phones (one-time revenue) and commissions for arranging network access (either one-time commissions when contracts are signed or monthly commissions*). *Monthly commissions. Payable by the telco, and based on monthly payments made by the customer to telcos. When handsets are upgraded, the payment period is extended. When the customer cancels the contract, payments stop.
Office equipment sales and after-sales support
The office equipment sales business's main source of selling copy machines (one-time revenue), and providing after-sales services (monthly revenues). The company procures copiers from manufacturers, which it sells to customers. While some sales involve a single payment, they are typically five-year leases. For leasing sales, the company sells the copier to a leasing company and receives revenue. The customer signs a contract with the leasing company, as well as an after-sales service contract for the copier with Vision. In addition to monthly base fees for using after-sales services, customers pay additional fees depending on frequency of use. The company sets copier prices low to reduce the burden on customers, and recoups revenues through after-sales service fees. As a result, revenue from copier sales comprises a substantial share of sales, but after-sales service revenues are a big contributor to profits. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Website services
The internet media business provides MORPH, a service which develops PC and smartphone compatible websites as its mainstay business. The company provides clients with the expertise it has built up operating its own websites to support their businesses. While the contribution to profits is small, this business helps stabilize customers' businesses, and contributes to expanding sales of Vision's other products. Initial fees for creating a website start from JPY100,000, with monthly charges starting from JPY50,000 (both as of December 2019 and excluding tax). Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Key group companies

*MFP (multifunction printer): umbrella term for digital copieror laser facsimile, with several functions such as copying, printing, facsimile and scanning ** UTM (Unified Threat Management): security measure available to companies, whereby one security device has multiple functions and whose use enables all-inclusive, integrated solutions. Security devices used for these purposes are known as UTM devices Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Note: Débt ratios calculated based on net debt.
Cost structure
The company has been posting double-digit sales increases since FY12/13 after launching the Global WFi business (mobileWiFi router rental services). The CoGS ratio rose slowly between FY12/13 and FY12/15, but has been stable at around 42% since FY12/16. The SG&A expense ratio has also been declining steadily due in part to implementation of web-based efficient marketing and improved operations as it improves the efficiency of device delivery (Smart Pickup, Smart Entry, Smart Check) and establishes a system that manages SIMs in the cloud in its Global WiFi business. The SG&A expense ratio was 45.3% in FY12/19, 11.1pp lower than in FY12/13.
Note: Figures may not match company numbers due to differences in rounding methods. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Market and value chain
Market overview
The company receives fees from outbound (from Japan to overseas), inbound (from overseas to Japan) and overseas-to-overseas (travelers from a region where the company has an officeto other countries abroad) travelers in its Global WiFi business. Startups are the main target of the Information and Communications Service business. The company said that in the Global WiFi business the key indicators are foreign and domestic traveler numbers, and in the Information and Communications Service business, the number of companies established.
Japanese travelers abroad
△ From 2010through 2015, the number of Japanese travelers abroad was influenced by various external factors: the Tohoku earthquake in 2011, yen strength in 2012, and yen weakness in 2013. Since bottoming out at 16.2mn in 2015, the number of Japanese travelers going overseas has been rising.ムAccording to statistics compiled by the Japan National Tourist Organization (JNTO), the number of Japanese travelers going overseas hit 20,081,000 in 2019, up 5.9% over the previous year and the highest figure recorded for two years running since record-keeping began back in 1964. The previous record was 18,490,000 set in 2012, when the number of overseas travelers jumped sharply. The rise in overseas travel is attributed to a number of factors, including strong corporate earnings that permitted more overseas business travel and promotion of work style reform that increased the amount of leisure time and led to more individuals traveling overseas as well.ムNotwithstanding, the rate of smartphone ownership is expected to continue rising steadily in 2018. As shown in the graph below, the household penetration rate for smartphone in Japan was stuck around 72% through 2016 then jumped to 79.2% in 2018. Japanese travelers abroad and smartphone penetration
Number of overseas travelers to Japan
ムThe number of foreign visitors to Japan in 2019 was 31.9mn(+2.2% YoY).The increase comes even as a series of natural disasters worked to hold down the number of travelers coming to Japan during part of the year, as by the end of the year the numbers had bounced back. The number of foreign visitors has now increased for eight consecutive years starting in 2011, and in 2019 reached the highest level it has ever been since the Japan National Tourist Organization (JNTO) started tracking foreign visitor numbers in 1964.ムWith the SummerOlympics due to be held in Tokyo in 2020, both the public and private sector have been expanding measures to attract overseas visitors to Japan. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp The government has stated a goal of attracting 40mn overseas travelers to Japan in 2020 and 60mn in 2030. A Foreign visitors to Japan Source: Shared Research based on Japan National Tourist Organization(INTO) materials and the Japanese government's Council for the Development of a Tourism Vision to Support the Future of Japanmeeting (held in March 2016) According to the United Nations World Tourism Organization (UNWTO), the number of travelers between countries is △ rising globally, and in 2018 represented a substantial market of over 11.4bn persons. The UNWTO forecasts that this figure will increase to 18.0bn persons in 2030.ムAlthough it currently does not cover parts of Africa, the company's Global WiFi service can be used in over 200 regions worldwide, so f it opens an office in a given region, it already has the base to meet demand of that area.ムIn addition to its current market expansion in Asia (Taiwan and South Korea), Vision aims to continue expanding its presence by increasing the number of local bases beyond North America and other locations with many overseas travelers, to capture burgeoning demand.
Global tourism numbers
ム
Number of registered companies
According to Ministry of Justicefigures, the number of companies being established in Japanhas been on a rising trend since 2009. In 2018, 116,208 companies were established (86,993 joint stock companies and 29,076 limited lability* companies). Compared to 2009, when the number bottomed, the number of registered companies increased 1.36x (1.09x for joint stock companies and 5.04x for limited liability and other types of companies).ムVision said that its main targets in the Information and Communications Service business are startup companies, because startups need more information and communications services as their business grows. Vision aims to maximize profits by offering low-priced telecommunications services including pre-owned equipment in the initial stages, and subsequently providing various additional services as the startup grows. △ The company figures that it does business with one out of every ten of the new companies started each year. *A new company format established in the 2006 corporate law revisions. The key advantages versus joint stock companies and individually owned businesses are low setup costs and limited liability. As a result, the number of small startups and SMEs has been on a rising trend. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Company registrations
Competition
Global WiFi
Operators involved in mobile WiFi router services for the outbound market similar to Vision include Telecom Square, Inc. (not listed) and XCom Global (formerly InterCommunications, not listed). In the past, competitors oftentimes procured networks through intermediaries. In contrast, Vision has been—and prioritizes—directly negotiating with local telcos to procure network access since it first started its business. The company says that this gives it an advantage over its two competitors, as it purchases network access based on its own terms, allowing the company to control costs and develop original services such as large- volume plans.Vision's sales are higher despite being a late entrant. In FY12/15, Vision's Global WiFi segment sales were over 1.6x sales of its two main competitors, giving it clout to negotiate prices. Other competition is primarily roaming services offered by major telcos, but Vision's prices are roughly one third of these services. Free WiFi hotspots also compete, but Vision's advantages are broad coverage and connectivity on the go. Further, there is no hacking risk due to the way it is set up, and having highly secure connections helps capture the corporate user market.

Information and Communications Service
There are many companies involved in selling telecommunications access and office equipment. Some of the majors are Otsuka Corp. (TSE1: 4768) and Hikari Tsushin (TSE1: 9435). However, Otsuka Corp. targets major corporations while Hikari Tsushin covers a broad range of customers including individuals. Vision differentiates itself by targeting startups.
Strengths and weaknesses
Strengths
✔ Niche market focus: The company operates two key businesses: the Global WiFi business, which rents WiFi routers, and the Information and Communication Service business, which sells office equipment and provides IT and communications services. In the Global WiFi business, the company possesses more than 50% share of the market, boasting an advantage by procuring communication lines with the support of scale merit. In the Information and Communication Service business, the company is cultivating its key customer base among newly established companies and SMEs. This is a distinctly different segment than the large corporations targeted by major competitors. Because Vision's customers are startups and SMEs, sales of a single product to any one customer are low. However, by selling multiple additional services to customers as they grow, Vision has been able to increase revenue per customer. Startups and SMEs are attracted by the low initial setup costs, enabling Vision to expand its customer base and achieve stable growth. ✔ Highly efficient sales model using Web marketing: The company conducts sales visits focusing on customers that have demonstrated interest. In 2003, it gradually shifted from telemarketing-focused sales to utilization of web marketing, and has been able to conduct efficient sales activities to potential customers who make enquiries from the website. Customers acquired from websites tend to be more active and have a strong propensity to contract, which has increased the contract rate. (For example, copier sales per employee are roughly 3x the industry average). This leads to a virtuous cycle of reduced employee turnover and accumulated sales knowledge by marketing staff. The company's concierge operations (CLT) for continuing business with existing customers and the sales team's ability to create demand for other products lead to effective upselling and cross-selling. . Direct network access allows provision of high-quality internet service at low prices: In the Global WiFi business, the company offers unique low cost and high quality (faster and more data) telecommunications services compared to competitors. This is because Vision has been procuring mobile network access directly from major telcos in Japan and abroad since the inception of its business, while competitors often purchased networks through intermediaries. In order to distinguish itself from companies who entered the business before it, Vision negotiates directly with telcos to expand its services and lower costs. To achieve this, the company has been establishing local subsidiaries to acquire telecom business permits in different countries. The company also benefits from having the leading market share and purchasing clout. This is partly because Vision used cash flow from its Information and Communications Service business to help it get the Global WiFi business up and running in a short period of time.
Weaknesses
✔ Limited time to prove itself to clients: The company is cultivating its key customer base among startups and SMEs. This is a distinctly different segment than customers targeted by major competitors (large corporations). The company's core strategy in the Information and Communications Service business is to focus on startups, and as these companies grow, increase the number of provided services. However, Vision will ultimately have to compete in the same arena as major rivals as startups grow into medium and large companies. The company aims to maintain continuous customer contact through CRM initiatives, primarily through the efforts of its Customer Loyalty Team (CLT), a concierge for customers. Relationships with telcos in the Information and Communications Service business: Vision receives commissions as compensation for its work as an agent arranging telecoms services provided by telcos. However, commission terms are changing as this market matures. Telcos' management policies could change, and they may make major changes to their terms. In such a case, the company would be unable to avoid animpact on its earnings and finances. For this reason, Vision is working to expand its range of products, including proprietary products, and improve marketing efficiency. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Historical performance
Q1 FY12/20 results (out May 12, 2020) Overview △ △ムA
*Net income attributable to owners of the parentムSales down 7.4% YoY: Sales decline 17.9% YoY in the Global WiFi business. While the COVID-19 outbreak contributed to a sharp drop in the number of outbound and inbound rentals from mid-February, the number of domestic rentals increased on an improvement in WiFi demand. Sales in the Information and Communications Service business increased 9.3% YoY. Cross- selling and upselling remained firm. Sales were also favorable in cost-saving materials and mobile communications equipment, including equipment used for teleworking. △ Operating profit down 50.2% YoY: Operating profit fell 62.5% YoY in the Global WiFi business, but improved 7.3% YoY in the Information and Communications Service business. GPM declined 4.4pp YoY to 54.3% while the SG&Ato-sales ratio rose 2.6pp YoY to 46.2%, resulting in OPM falling 7.0% YoY to 8.1%. In the Global WiFi business, the cost ratio increased as sales fell. The cost ratio also increased in the Information and Communications Service business, where the increase in mobile phone sales contributed to an increased sales ratio for products incurring purchasing costs. Despite lower SG&A expenses on the review and reduction of various costs, reduced sales resulted in the SG&A-to-sales ratio moving higher.ムムRevision to earnings forecast: When announcing Q1 FY12/20 results on May 12, 2020, the company revised its 1H and full-year forecasts to "undetermined" in light of the increased difficulty of reasonably forecasting operating conditions moving forward*. COVID-19 impact and countermeasures: The decrease in overseas travelers contributed to a sharp decline in the number of rentals in the Global WiFi business. While suffering from sluggish volume in the outbound and inbound rentals business, the company is seeking to minimize the impact by temporarily shrinking the business and reducing costs, including by restraining communications costs through the use of pay-as-you-go contracts and reducing airport and logistics outsourcing. The company is also relocating excess staff to areas expected to show favorable demand going forward. Nevertheless, it appears possible that the impact of Japanese government's declaration of a state of emergency on business activity could extend through and beyond Q2 (the company's response to the COVID-19 pandemic is detailed in the FY12/20 company forecast section). Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Revised 1H FY12/20 forecast (out May 12, 2020) Sales: Undetermined (previous forecast was JPY15.1bn) Operating profit: Undetermined (JPY1.9bn) Undetermined (JPY1.9bn) Recurring profit: Net income*: Undetermined (JPY1.3bn) *Net income attributable to owners of the parent Revised FY12/20 fullyear forecast (out May 12, 2020) Sales: Undetermined (previous target was JPY31.4bn) Operating profit: Undetermined (JPY4.0bn) Recurring profit: Undetermined (JPY4.0bn) Net income*: Undetermined (JPY2.7bn) *Net income attributable to owners of the parent Reasons for the revisions ▷ When announcing its earnings forecast on February 12, 2020, Vision did not include the expected impact from the spread of COVID-19, as uncertainty over when domestic and overseas infections would slow made it difficult for the company to reasonably calculate the impact on earnings. |>    The company believes the spread of the COVID-19 is likely to continue to have an impact its businesses throughout FY12/20. Moreover, amid ongoing uncertainty over when the number of infections will decline in Japan, the company believes the impact on corporate operations and the number of overseas travelers is likely to extend beyond FY12/20. ▷ With the goal of minimizing the impact from such an environment, the company is implementing a variety of measures, including promoting the flexible transfer of personnel, converting fixed costs to variable costs, and reducing costs. That said, the company revised its earnings forecast to "undetermined" in light of the increased difficulty of forecasting operating conditions moving forvard. The company indicated that it would announce earnings forecast once there were signs that conditions were settling and reasonable forecast could be made.
Global WiFi
△ A Q1 FY12/20 segment sales were JPY3.3bn (-17.9% YoY) and segment profit was JPY326mn (-62.5% YoY). The increase in COVID-19 infections resulted in many countries, including Japan, issuing restrictions on overseas travel as well as stay-at-home directives, which contributed to a global slump in travel-related demand. According to the Japan National Tourism Organization (JNTO) data, the number of Japanese in Q1 travelling abroad fell 39.6% YoY, while the number of overseas visitors to Japan fell 51.1% YoY. △ A Amid such an environment, new applications dropped sharply in February 2020, majority of existing applications were cancelled, and overseas subsidiaries were forced to suspend operations by local governments, all of which contributed to both sales and profit in the business declining. The company is seeking to minimize the impact by temporarily shrinking the outbound and inbound rentals business and reducing costs, including by restraining communications costs through the use of pay-as-you-go contracts and reducing airport and logistics outsourcing. The company is also relocating excess staff to areas expected to show favorable demand moving forward. A On the other hand, there are an increasing number of companies heeding government requests and introducing telework in order to ensure the safety of their employees and prevent the further spread of COVID-19. This has contributed to an increase in telecommunications-related demand in Japan and a sharp expansion in sales in the domestic WiFi rental business.
Information and Communications Service
△ Segment sales were JPY2.5bn (+9.3% YoY) and segment profit was JPY517mn (+7.3% YoY). △ The main activities in this business are for arranging landline, mobile, and broadband telecommunications services, selling and leasing office equipment, and building websites for startups and SMEs. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp △ Vision makes cross-selling and upselling proposals suited to the growth stages and needs of its key target customers (startups and venture firms). The company worked to offset business opportunity losses caused by stay-at-home requests by shifting to video conferencing instead of visiting clients and gradually incorporating teleworking into its marketing activities and responses to web-based inquiries. △ Amid an increase in the number of companies embracing telework, the business saw sales and profit improve on enhanced mobile communications equipment and broadband demand, as well as cost reductions in line with the in-house handling of office equipment installation work and website production, and curtailment of non-urgent and unnecessary spending.
Topics
△ Decision to sell off the ProDrivers business and the recording of impairment loss: In March 2020, the company decided to sell off the ProDrivers business by changing the way it runs the business from employing its own chauffeurs and owning its own vehicles, to sending customers to its tie-up partners. Vision says it has not yet transferred the business, nor has it decided to whom it will transfer the business (it says there are several interested parties). In Q1, the company recorded impairment losses of JPY186mn associated with its decision to transfer the ProDrivers business. △ Stock repurchase: Based on a resolution at a Board of Directors meeting held on February 21, 2020, the company bought back 909,000 shares of its stock via market tender offer. As a result, during Q1, treasury stock increased by JPY986mn and totaled JPY2.4bn at end-Q1.
Full-year FY12/19 results (out February 12, 2020)
Overview A Sales: JPY27.3bn (+27.0% YoY)ムA Recurring profit: Operating profit:
ムNet income*: JPY2.2bn (+45.6% YoY) *Net income attributable to owners of the parentムムム△ The company posted record sales and profits at all levels in FY12/19. Aqainst its full-year FY12/19 forecast, progress rates in FY12/19 were 105.9% for sales, 101.9% for operating profit, 103.4% for recurring profit and 105.2% for net income attributable to owners of the parent. Sales and profits were ahead of the company's plan. Sales up 27.0% YoY: The Global WiFi business generated 31.3% YoY sales growth on an increase in the number of rentals and higher ARPU due to rising demand for the Global WiFi Unlimited Plan. The Information and Communications Service business also posted a solid 15.2% sales increase with ongoing contributions from cross-selling and upselling. Operating profit up 33.8% YoY: Despite sustained efforts to improve cost efficiency, GPM declined 1.4 pp YoY to 57.4% reflecting changes in the service mix in Information and Communications and driver labor costs associated with the launch of ProDrivers. The SG&A-to-sales ratio fell 2.0pp YoY to 45.3% thanks to enhanced operational efficiency through the utilization of artificial intelligence (AI) and robot process automation (RPA). OPM rose 0.6pp YoY to 12.2%.
Global WiFi
A FY12/19 segment sales were JPY17.7bn (+31.3% YoY) and segment profit was JPY3.3bn (+36.8% YoY). Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp △ In terms of the number of foreigners visiting Japan, there was strong growth in East Asia as airline seating capacity increased. The number of Japanese traveling overseas was up every month in 2019 apart from November, with the total for 2019 rising 5.9% to 20.1mn (over 20mn for the first time) (source: Japan National Tourism Organization [JNTO]). The number of foreign visitors to Japan also rose to a record high 31.9mn (+2.2%), marking the seventh consecutive record high since 2013. Visitors from China passed 9.5 million (a record number for a single country); UK visitors grew more than 80% in September and October 2019 during the Rugby World Cup and exceeded 400,000 for the first time. △ Orders grew steadily against the backdrop of the strong travel market (rentals were up 26.8% YoY to 2,830,000 in FY12/19). As well, the newly launched unlimited traffic plan sold well and boosted ARPU, resulting in higher sales and profits. The price of the unlimited traffic plan charges is 2–3x the price of standard plans, eliminating the pattern of the faster rate of increase of individual users (whose ARPU is lower than that of corporate users) lowering overall ARPU.
Customer attributes in FY12/19
△ Individual users accounted for 63.1% of rentals (62.6% in FY12/18), and corporate users accounted for 36.9% (37.4%). In terms of monetary value generated, individual users accounted for 54.2% (53.6%), and corporate users accounted for 45.8% (46.4%). ▷ On a cumulative basis, individual customers accounted for higher percentages of both rentals and monetary value generated YoY. ▷  In Q4 (October–December 2019), corporate customers accounted for a higher percentage of both rentals and monetary value generated YoY (+3.0pp YoY in terms of rentals and +3.5pp YoY in terms of monetary value generated). The company encouraged continued corporate use through "GLOBAL WiFi for Biz," a model through which devices are permanently kept at offices (enabling constant availability without the need for rental agreement procedures for each use). This has also led to a reduction in operational costs.ムNew users accounted for 44.7% of rentals (45.6% in FY12/18) and repeat users accounted for 55.3% (54.4%). In terms of monetary value generated, new users accounted for 46.4% (46.4%) and repeat users for 53.6% (53.6%). Details of initiatives and investmentム△ △ △ Vision boosted ARPU through the popularity of its unlimited data plan, especially among corporate users. The company began offering rentals and, on an OEM basis, supplying GW01, a cloud-compatible smartphone-type WiFi router (reduced thickness from previous models by 59%, weight by 25%). By integrating the Smart CheckQR code reception counter system with Cloud WiFi and the customer database, the company has made it possible for customers to apply for routers right up to the departure of their aircraft. Unmanned shops using QR-code activated Smart Pickuplockers increase the accessibility of routers. The company selected Alice Hirose, an actress popular across all age groups, as the brand image character to convey the message that Global WiFi is simple and safe to use. The company ran a diverse promotional campaign with TV commercials, a dedicated website, giveaways, and instore panels.ムTo improve back-end efficiency without raising personnel expenses, the company set up a handset return center in Ome, Tokyo in September 2019, which became fully operational in December 2019. As of end December 2019, the facility could process more than 10,000 returned devices to prepare for shipment and charge 1,800 WiFi routers. The company has planned and developed its own equipment and systems for the facility, such as conductivity testers for power cables and battery chargers. This has allowed the company to improve the capability to fulfill demand and quality of service by bulk processing of returned items without raising the overall operational cost. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jpムOrders for “Global WiFi for Biz”, a permanent mobile WiFi router that eliminates the need for rental for each use, showed steady growth and an improvement in shipments.
Global WiFi Unlimited Plan
ム△ △ Vision offers a range of data plans tailored to customer needs. It has also responded to calls from customers seeking to break free from data usage limits by offering the Global WiFi Unlimited Plan, which offers unlimited usage volume, on a trial basis starting in February 2019. The company began gradually expanding the plan's area of availability in March of the same year. As of May 2020, the company was offering this plan in 91 countries. Daily fees for the plan range from JPY2,070–3,170 (fees vary by country; the fee in Japan is JPY1,170). With early reservation discounts, thesefees range from JPY1,870–2,970 (JPY970 in Japan). These fees are two to three times higher than those of normal plans with limited data usage (average daily fees of JPY1,000). Background: Recently, users have tended to consume large volumes of data due to the diversification of smartphone apps, the sending and receiving of large or high-resolution images and videos, and SNS posting. In some cases, several friends, family members or acquaintances will share the same device. According to the company, the Global WiFi Unlimited Plan contributes to higher ARPU (as it is offered at a price two to three times higher than normal plans) while also encouraging users of normal plans with limited data usage (daily limits of 300MB, 600MB, and 1.1GB) to step up to the next higher plan, which also raises ARPU.
Expansion of mid-travel services (optional services)
ムIn response to customer requests, the company expanded micktravel services (optional services) in August 2019. Service details are as follows: ▷ Addition of data volume during travel: When traveling, users have the option of adding additional data volume when they have reached their daily limit (this option is possible thanks to cloud-based SIM management). ▷ Layover option: This option allows users to send and receive data during layovers at airports. The fee for this option is only an additional JPY1,500, regardless of the number of layovers or the number of days it is used.
Information and Communications Service
ムSegment sales were JPY9.0bn (+15.2% YoY) and segment profit was JPY1.4bn (+11.9% YoY). Despite sluggish performance in infrastructure-related communication and lines and in orders the company receives as a new power sales agent, both sales and profit posted double-digit growth YoY thanks to an increase in revenue per order caused by the sale of sets packaging multiple products together, along with improved profitability through a reduction in office equipment installation and construction costs and website production costs.ムムThe main activities in this business are for arranging landline, mobile, and broadband telecommunications services, selling and leasing office equipment, and building websites for startups and SMEs. Vision makes cross-selling and upselling proposals suited to the growth stages and needs of its key target customers (startups and venture firms). The company aims for long-term customer interaction and stable growth by having customers sign up for its support and maintenance services. It saw sluggish growth in infrastructure-related communication lines and in orders as a new power sales agent, but sales and profit were up on an increase in revenue per order with the sale of sets of multiple products and on improved profitability attributed to in-house handling of office equipment installation work and website production. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp △ In response to diverse customer needs, Vision increased the number of products and services it handles, diversifying its monetization sources and enhancing its price competitiveness.ムWith increased demand for its new labor consulting service (subsidies consulting service), the company steadily increased the number of contracts by promoting its proprietary cloud-based Vision Workflow System (VWS), which operates on a monthly fee basis. △ Vision says one of its strengths is improved business efficiency owing to a system in which coordination between divisions serves as a bridge in conveying customer needs to the relevant division.
ESG initiatives
A Environment: The company is taking action to counteract global warming, promote eco-friendly and recycling measures, and help disaster-stricken communities, as outlined below. ▷ Green site license: An online environmental program for promoting "green electricity" to reduce CO2. ▷ NPO Shinsai Regain: Support for, and cooperation with NPO Shinsai Regain, which gathers, stores, analyzes, and communicates information, and engages in research related to earthquake support and preparedness > Cut-price LED lighting rental ▷ Paperless initiatives: Providing salespeople with iPads, use of video conferences to eliminate unnecessary travel, active use of electronic account books and internal SNS, and selecting suppliers that offer recycling services Social: The company uses diverse recruitment channels, tackles recruitment bias, and seeks to provide an HR system that matches current needs and a unique employee welfare program, as outlined below. ▷ Use of diverse recruitment channels: The company ensures fairness in recruitment, considers referrals, and actively hires women. Foreigners account for 18.3% of full-time employees. The company has received an award every year since 2015 from Meiro juku (a disability support organization) for its disability hiring program. ▷ HR system that matches current needs and unique employee welfare program: The company offers reduced working hours, shiftwork, and flextime options. Employees can take paid leave by the hour or half day, and are allowed to take the day off on their spouse's birthday (special leave). Employees are also entitled to subsidies for drinking water in the summer and influenza vaccine in winter. ➤ Sustained increase of average annual income: Improved productivity by aggressive use of AI chatbots and robot process automation (RPA) so that employees could be assigned to high value-added tasks. As a result, average annual income has continued to rise. ➤ Vision Kids Nursery (daycare facility for employees): The company opened a nursery on the premises of its customer center (Vision Future Business Center, where the Customer Loyalty Team [CLT] is based) in April 2019. Over 90% of employees are women. ▷ The company supports Japan Heart, an international medical NGO originating in Japan, which delivers healthcare to areas without access to medical services. △ Governance: The company is strengthening governance, promoting risk management, and enforcing compliance. ▷ Independent directors: Three of the six directors are independent outside directors and one is a woman. All four auditors are independent outside auditors. ▷ Strengthening information security: The company has attained Information Security Management System (ISMS) accreditation (international standard ISO/IEC 27001). It has established and runs an information security committee. ➤ The company runs regular training programs on compliance, risk management, and internal control activities.ムResearch Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Cumulative Q3 FY12/19 results (out November 8, 2019)
ムSales:ムOperating profit: JPY3.0bn (+39.0% YoY)ムムRecurring profit: JPY3.0bn (+40.3% YoY) Net income*: JPY2.0bn (+38.7% YoY) *Net income attributable to owners of the parentム△ The company posted record sales and profits at all levels in cumulative Q3. Against its full-year FY12/19 forecast, progress rates in cumulative Q3 were 79.7% for sales (versus 73.6% of full-year FY12/18 results in cumulative Q3 FY12/18), 91.0% for operating profit (86.0%), 92.7% for recurring profit (85.9%), and 93.9% for net income attributable to owners of the parent (93.7%). A △ Sales up 29.9% YoY: The Global WiFi business generated 33.8% YoY sales growth on an increase in the number of rentals and higher ARPU due to rising demand for the Global WiFi Unlimited Plan. The Information and Communications Service business also posted a solid 17.8% sales increase with ongoing contributions from cross-selling and upselling.ムOperating profit up 39.0% YoY: Despite sustained efforts to improve cost efficiency, GPM declined 1.2pp YoY to 58.3% as a result of changes in the service mix (of the Information and Communications Service segment). The SG&A expense ratio fell 2.1pp YoY to 43.8% thanks to enhanced operational efficiency through the utilization of artificial intelligence (AI) and robot process automation (RPA). OPM rose 1.0pp YoY to 14.5%. Full-year forecast: No changes have been made to the full-year forecast that was revised upward on August 9, 2019. If we subtract cumulative Q3 results from the full-year company forecast, results in Q4 (October-December 2019) would be JPYS.2bn (-7.8% YoY), assuming performance exactly matches the forecast. However, the company does not expect any particular negative impact on results, nor does it project any significant changes to earnings trends. Vision may be capable of using any profit it generates in excess of its forecast for investment in anticipation of growth in FY12/20 and beyond (increased procurement of WiFi routers, etc.), but the extent to which this is possible may be limited. Adjustments to sales are not possible. It is natural to think that the company has the capacity to perform above projections.
Global WiFi
△ Cumulative Q3 FY12/19 segment sales were JPY13.3bn (+33.8% YoY) and segment profit was JPY2.9bn (+49.6% YoY). Segment profit margin rose 2.3pp YoY to 21.6%. > Sales grew due in part to an increase in rentals and a rise in ARPU caused by higher demand for the Global WiFiUnlimited Plan (more details below). Contributing to the improved profit margin were reductions in CoGS and operational costs by utilizing cloud WiFi, improvement in procurement terms and conditions associated with an increase in the procurement of communication lines (volume discounts), and the application of artificial intelligence and robotic process automation. ▷ Overall ARPU had been falling but now seems to be recovering as both corporate and private demand for the Global WiFi Unlimited Plan (fees per day are two to three times that of the normal plan) rise. The company broke out of a downward trend in ARPU that had been the result of growth in individual users outpacing that of corporate users, which bring higher ARPU (ARPU in cumulative Q3 was roughly level YoY).ムDespite uncertainties surrounding the Japanese economy, the travel market remained brisk. Both the number of Japanese traveling overseas and the number of foreigners visiting Japan, driven by travelers from East Asia led by China in particular, hit record highs during cumulative Q3 (source: Japan National Tourism Organization [JNTO]). The upward YoY trend in the JPY20.5bn (+29.9% YoY) Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp number of Japanese traveling overseas has continued for 19 consecutive months since March 2018, and the monthly number of foreign visitors to Japan from China exceeded one million for the first time in July 2019 and then again in August. The Rugby World Cup provided additional tailwind. ▷ The company estimates that the Rugby World Cup had a minimal positive impact on results. > According to the company, the decline in tourists from South Korea and Hong Kong had a negligible negative impact on results, as they each accounted for only 2–3% of earnings. > Results in Q3 FY12/18 were affected by the closing of Kansai International Airport due to a typhoon (Terminal One, one of its core terminals, did not open for 17 days). In contrast, several typhoons struck Japan in cumulative Q3 FY12/19, but no such airport closings occurred. Sales and profit were both up as a result of investment aimed at capturing significant travel demand and becoming the company of choice for users for the long term.ムCustomer profile in cumulative Q3 FY12/19 △ Individual users accounted for 64.5% of rentals (60.7% in Q3 FY12/18), and corporate users accounted for 35.5% (39.3%). In terms of monetary value generated, individual users accounted for 55.8% (51.9%), and corporate users accounted for 44.2% (48.1%). ▷ On a cumulative basis, individual customers accounted for higher percentages of both rentals and monetary value generated YoY. ▷  In Q3 (July–September 2019), corporate customers accounted for a higher percentage of both rentals and monetary value generated YoY (+0.4pp YoY in terms of rentals and +0.7pp YoY in terms of monetary value generated). The company encouraged continued corporate use through “GLOBAL WiFi for Biz,” a model through which devices are permanently kept at offices (enabling constant availability without the need for rental agreement procedures for each use). This has also led to a reduction in operational costs.ムNew users accounted for 45.6% of rentals (45.9% in Q3 FY12/18) and repeat users accounted for 54.4% (54.1%). In terms of monetary value generated, new users accounted for 47.3% (46.4%) and repeat users for 52.7% (53.6%). Details of initiatives and investment △ △ Vision boosted ARPU through the popularity of its unlimited data plan, especially among corporate users. It responded to significant demand by increasing its procurement of WiFi routers and SIM cards. On August 1, 2019, the company began offering rentals and, on an OEM basis, supplying GW01, a cloud-compatible smartphone-type WiFi router (reduced thickness from previous models by 59%, weight by 25%). Shipments for "GLOBAL WiFi for Biz," a permanent in- house mobile WiFi router for offices, increased as it gained a positive reputation. Up until Q3 FY12/19, cloud-compatible routers accounted for an average of 93.8% of routers rented out (These routers cannot be used in certain countries depending on the telecommunications operators involved, so the company does not expect rentals of routers of this type to account for much more than 90% of all rentals).ムIt controlled the rise in cost ratio by improving procurement terms via volume discounts and reducing telecommunications CoGS by utilizing cloud WiFi.ム△ The company worked to relieve congestion and improve operational efficiency by making stores smarter through measures such as Smart Pickup automated lockers, Smart Entry self-service kiosks, and Smart Check QR code reception counters. At Kitakyushu Airport and Miyako Shimojishima Airport, Vision launched fully automated stores that can deliver devices to customers and accept returns from them, as well as vending machines for selling prepaid SIM cards for use in Japan. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp △ The company, through its strategy of making stores smarter, the use of cloud WiFi, and coordination of databases, has made possible on-the-spot (even at the counter) online applications to capture business from even customers who have been enticed by advertisement for the company's service on the wayto the airport, thus improving the efficiency of procedures at airport sales counters.
Information and Communications Service
△ Segment sales were JPY6.8bn (+17.8% YoY) and segment profit was JPY1.2bn (+16.7% YoY). Segment profit fell 0.1pp YoY to 17.2%. > Despite sluggish performance in infrastructure-related communication and lines and in orders the company receives as a new power sales agent, both sales and profit posted double-digit growth YoY thanks to an increase in revenue per order caused by the sale of sets packaging multiple products together and higher profitability due to in-house handling of office equipment installation work and website production. However, the segment profit margin fell somewhat due to an increase in the sales ratios of products that accompany procurement costs, such as office equipment (multifunction devices). △ △ The main activities in this business are for arranging landline, mobile, and broadband telecommunications services, selling and leasing office equipment, and building websites for startups and SMEs. Vision makes cross-selling and upselling proposals suited to the growth stages and needs of its key target customers (startups and venture firms). The company aims for long-term customer interaction and stable growth by having customers sign up for its support and maintenance services. It saw sluggish growth in infrastructure-related communication lines and in orders as a new power sales agent, but sales and profit were up on an increase in revenue per order with the sale of sets of multiple products and on improved profitability attributed to in-house handling of office equipment installation work and website production.ムム△
Other
△ △ In response to diverse customer needs, Vision increased the number of products and services it handles, diversifying its monetization sources and enhancing its price competitiveness. With increased demand for its new labor consulting service (subsidies consulting service), the company steadily increased the number of contracts by promoting its proprietary cloud-based Vision Workflow System (VWS), which operates on a monthly fee basis. Vision says one of its strengths is improved business efficiency owing to a system in which coordination between divisions serves as a bridge in conveying customer needs to the relevant division. Sales in the Other segment were JPY438mn (x4.5 higher YoY), and segment loss was JPY219mn (segment loss of JPY96mn in Q3 FY12/18). The company indicates that ProDrivers, a chauffeur-driven car sharing service that it is prioritizing, began generating profit on a monthly basis in September–October 2019. This change occurred due to an increase in repeat users, which drove up the service's utilization rate, with the number of vehicles owned remaining unchanged and the number of drives increasing only slightly.
Enhancement of initiatives for the future
As countermeasures for lost opportunities and declining profitability caused by a shrinking workforce and increased recruitment costs, Vision is conducting the following initiatives to improve productivity. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp A The company aims to leverage the latest technology to free itself of labor-intensive practices. In addition to its strategy to make stores smarter, it will promote the automation of its call centers using Al (bots) and the use of RPA for administrative operations. △ Vision will open Vision Kids nursery schools on the premises of its call centers to support employees who are also raising children, with the aim of providing an environment accommodating of employee needs. It aims to achieve a competitive advantage in the recruiting arena by improving the employment environment.
1H FY12/19 results (out August 9, 2019)
Overview
△ Sales:ム△ム|PY12.9bn (+31.3% YoY)
*Net income attributable to owners of the parentム△ △ムムムThe company posted record sales and profits at all levels in 1H. Against its 1H FY12/19 forecast, the company surpassed targets by 11.4% for sales, 17.6% for operating profit, 16.3% for recurring profit, and 11.8% for net income attributable to owners of the parent. Against its full-year FY12/19 forecast (upward revision*), the 1H progress rate was 50.2% for sales (versus 45.8% of full-year FY12/18 results in 1H FY12/18), 51.8% for operating profit (49.8%), 51.5% for recurring profit (49.8%), and 50.8% for net income attributable to owners of the parent (52.9%). Sales up 31.3% YoY: The Global WiFi business generated 36.7% YoY sales growth on an increase in the number of rentals. The Information and Communications Service business also posted a solid 17.8% sales increase with ongoing contributions from cross-selling and upselling. Operating profit up 36.7% YoY: Despite sustained efforts to improve cost efficiency, GPM declined 1.1pp YoY to 57.9% as a result of changes in the service mix. The SG&A expense ratio fell 1.6pp YoY to 46.2% thanks to enhanced operational efficiency through the utilization of artificial intelligence (AI) and robot process automation (RPA). OPM rcse 0.6pp YoY to 13.1%. Upwardly revised full-year forecast: Having surpassed its 1H forecast, the company raised its outlook for the full year. The upward revision involved nothing more than adding the amount by which 1H results surpassed its initial forecast, however, as the company made no changes to its initial forecast for 2H (sales, +10.4% YoY; operating profit, +26.1% YoY) even though 2H includes its busiest season (Q3, the July–September quarter). As a result, the revised full-year forecast shows YoY growth in sales and operating profit slowing from 1H to 2H; this does not seem likely, though, for while there is some risk from hurricanes and other factors, the company did not indicate any factors that are expected to slow sales growth during 2H.
Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Global WiFi
1H results summary △ 1H FY12/19 segment sales were JPY8.2bn (+36.7% YoY) and segment profit was JPY1.6bn (+38.9% YoY). △ 1H results gave the Global WiFi segment 49.9% of the upwardly revised full-year forecast for segment sales (JPY16.4bn) and 54.7% of the upwardly revised full-year forecast for segment profit (JPY2.9bn). Number of outbound travelers, inbound travelers, and rental contracts in the Global WiFi business △ △ムム△ Despite the many uncertainties surrounding the Japanese economy, the travel market remained brisk. According to statistics from the Japan National Tourism Organization, during the first half of 2019 (January–June) there were a total of some 9,542,000 Japanese traveling abroad (+8.6% YoY) and 16,634,000 foreigners visiting Japan (+4.6% YoY); both figures represent new record highs for the first half of the calendar year. The strong growth in Japanese traveling abroad was driven in part by the large outbound crowds during the extended Golden Week holiday period in early May; on the inbound tourism side, travelers from East Asia, particularly China, led the way. With the help of investments aimed at capturing this surge in travel demand and engendering long-term customer loyalty, Vision saw rentals of mobile WiFi routers at its Global WiFi business jump 44.8% YoY to 1.39mn units in 1H FY12/19. The market penetration of the company's Global WiFi service also increased, with 17.9% of outbound Japanese travelers renting a mobile WiFi router from Vision during 1H FY12/19 versus 14.9% in fullyear FY12/18 (company estimate). Source: Shared Research, based on company data Vision's global WiFi usage rate by overseas travelers
Source: Shared Research, based on company data Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Customer profile in 1H FY12/19
△ Corporate versus individual customers: During 1H FY12/19, the company saw individual customers increase relative to corporate customers both in numerical and monetary terms. Of the total number of rental contracts, individuals accounted for 65.9% (versus 59.2% in 1H FY12/18) and corporate customers 34.1% (versus 40.8%). Of total revenue from rental contracts, individuals accounted for 57.1% (versus 49.8%) and corporate customers 42.9% (versus 50.2%). A New versus repeat customers: During the period the company saw repeat customers account for a growing proportion of rentals both in numerical and monetary terms. Of the total number of rental contracts, new customers accounted for 53.9% (versus 54.9% in 1H FY12/18) and repeat customers 46.1% (versus 45.1%). Of the total revenue from rental contracts, new customers accounted for 52.6% (versus 55.0%) and repeat customers 47.4% (versus 45.0%). △ △ Details of initiatives and investments: Vision responded to significant demand during Golden Week by increasing its procurement of WiFi routers and SIM cards. Global WiFi Unlimited Plan (launched in February 2019; can be used in 71 countries) was well received, especially among corporate users, and led to higher average revenues per user*. The Global WiFi Unlimited Plan gained a strong following among individual users as well, especially among those who travel frequently or arrive at the airport without advanced reservations for a WiFi router. The company commented that the number of people using the Global WiFi Unlimited Plan has increased every month since the service was launched; it noted that Global WiFi Unlimited Plan users now account for roughly 10% of all users. *For example, users of the Global WiFi Unlimited Plan in the United States would pay JPY2,370 [JPY2,170 with early reservation discount], or JPY700 more than the JPY1,670 [JPY1,470 with early reservation discount] paid by users of the company's large data plan (with the limit of 1.1GB per day). A The company also increased shipments in connection with Global WiFi for Biz, offering internet service in 107 countries and regions with no need for rental applications for individual use, since routers are kept on hand internally. Measures aimed at reducing telecommunications costs and improving operational efficiency △ Steps taken to control telecommunications costs include negotiating with carriers to secure volume discounts and using next- generation telecommunications technology of Cloud WiFi, which manages SIM on the cloud (no need to insert or replace SIM cards; provides access to the company's cloud network in 107 countries and regions with a single device). Of the total number of global WiFi routers rented out in June 2019, Cloud WiFi accounted for 93% versus 77% in June 2018. Cloud WiFi using proprietary SIM cards is one of the ways Vision is seeking to differentiate itself from competitors, but the company does not expect rentals of this type of router to account for much more than 90% of rentals because there are some countries in which these new routers will not work, depending on telecommunications operators. For this reason, the boost provided by these new routers to YoY growth can be expected to gradually diminish going forward. △ On the operating efficiency front, steps taken to improve efficiency include the installation of automated Smart Pickup lockers, Smart Entry self-service kiosks, and Smart Check QR code reception counters, all of which help improve efficiency by relieving congestion at the company's service counters. ▷ As of the end of June 2019, Vision had a total of 25 domestic service counters (where rental units can be picked up and returned) with locations at 17 Japanese airports*¹; the company says it has one of the largest global service counter networks in the industry. ▷ At Japan's six largest airports, Vision has a total of 20 sets of automated Smart Pickup lockers*2. ▷  At Kitakyushu Airport (the only airport in Kyushu that operates 24/7), the company opened its first unmanned service center (automated Smart Pickup lockers where customers could both pickup and return devices) and installed the first Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp vending machine selling prepaid SIM cards for domestic use in a Japanese airport. The company selected Kitakyushu Airport to test the new service counter format because it is a busy airport with lots of arrivals and departures in early mornings and late nights, and since the cost of staffing English-speaking staff at service counter there would be prohibitive. In addition, with the combination of automated Smart Pickup lockers and SIM card vending machines, the company thought it would be able to capture demand not only from Asian travelers who were already familiar with the Vision name as a provider of pocket WiFi services, but also from US and European travelers who were familiar with using prepaid SIM cards. Because the automated Smart Pickup lockers and SIM card vending machines require less space, they are less costly to operate, and with the rollout of additional touch-screen operated lockers the company has been able to increase profitability while increasing convenience to customers. The company reported that the number of users steadily increased in the first and second month of the service launch. Last-minute online application filing has become possible thanks to the company's strategy of increasing the automation of its service centers, using cloud WiFi, and linking databases. As a result, the company has been able to capture impulse demand from travelers who have been enticed by ads they saw on the way to the airport and improve the efficiency of its airport service counter operations.*1 Total 2S service counters, locations at 17 different Japanese airports: Asahikawa Airport, New Chitose Airport, Sendai Airport, Narita Airport, Haneda Airport, Shizuoka Airport, Chubu Centrair International Airport, Niiqata Airport, Komatsu Airport, Itami Airport, Kansai International Airport, Oita Airport, Kitakyushu Airport, Fukuoka Airport, Miyazaki Airport, Kagoshima Airport, Naha Airport, Shibuya Chikamichi, and JR Miyazaki Station. *2 Smart Pickup locker locations and number of locker sets (as of June 30, 2019): Haneda Airport (three), Narita Airport (six), Chubu Centrair International Airport (three, with one more being added), Kansai International Airport (six), Itami Airport (one), Kitakyushu Airport (one, with one more being added).
Information and Communications Service
Overview of 1H FY12/19 results
ム△ △ Segment sales were JPY4.Sbn (+17.8% YoY) and segment profit was JPY832mn (+31.2% YoY). Compared with the upwardly revised full-year forecast, 1H results gave the segment 52.5% of its full-year target for sales (JPY8.6bn) and 53.9% of its full-year target for segment profit (JPY1.5bn). The main activities in this business include arranging landline, mobile, and broadband telecommunications services, selling and leasing office equipment, and building websites for startups and SMEs.
External operating environment: trends in corporate startups
△ △ Vision said that its main targets in the Information and Communications Service business are startup companies. The company figures that it does business with one out of every seven to eight of the new companies started each year. (For further details, see discussion in the "Market and Value Chain" section). According to a survey done by Tokyo Shoko Research, there were 128,610 companies started in 2018. Down 2.8% versus 2017, this represents the first decline in the number of Japanese startup companies since 2009, when the number of startups fell in the wake of the global financial crisis. That said, the number of startup companies is still relatively high, second only to the 132,291 figure recorded in 2017, which marked the first time the number of startup companies had exceeded 130,000 since in 2007. △ According to Ministry of Justice statistics, there were a total of 49,066 registrations of new companies during the five-month period from January to May 2019; as this represents a modest 1.3% decline versus the same period last year, it is fair to say that registrations of new companies are coming down at a slow rate but are still holding near the high levels marked last year.
Details of initiatives and investments
ムVision makes cross-selling and upselling proposals suited to the growth stages and needs of its key target customers (startups and venture firms). The company aims for long-term customer interaction and stable growth by having customers sign up for Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp its support and maintenance services. It saw sluggish growth in infrastructure-related communication lines and in orders as a new power salesagent, but sales and profit were up on an increase in revenue per order with the sale of sets of multiple products and on improved profitability attributed to in-house handling of office equipment installation work and website production.ム△ In response to diverse customer needs, Vision increased the number of products and services it handles, diversifying its monetization sources and enhancing its price competitiveness. With increased demand for its new labor consulting service (subsidies consulting service), the company increased the number of contracts by promoting its proprietary cloud-based Vision Workflow System* (VWS), which operates on a monthly fee basis. Vision says one of its strengths is improved business efficiency owing to a system in which coordination between divisions serves as a bridge in conveying customer needs to the relevant division. △ *Vision Workflow System(VWS): A proprietary workflow management tool, not only developed by but also used by the company for workflow management over a prolonged period of time. This all-in-one business process efficiency and sales support tool includes an employee attendance management function, an internal company calendar sharing function, an internal memo circular function, and an expense calculation system. Because work hours, employee schedules, internal company memos, and expense calculations can all be managed on the web, the system helps reduce unnecessary data collection work. The Vision Workflow System is especially strong when it comes to functions designed to improve employee productivity and give management a good handle on the status of their business. The system is affordable even for small companies because the fixed costs associated with the system are low (eligible for the government subsidy for implementing IT systems). The company also offers its VWS Web Call System as a total solutions package to support telemarketing operations.
Measures aimed at enhancing future growth prospects
As countermeasures for lost opportunities and declining profitability caused by a shrinking workforce and increased recruitment costs, Vision is conducting the following initiatives to improve productivity. △ The company aims to leverage the latest technology to free itself of labor-intensive practices. In addition to its strategy to make stores smarter, it will promote the automation of its call centers using AI (bots) and the use of RPA for administrative operations.ムVision will open Vision Kids nursery schools on the premises of its call centers to support employees who are also raising children, with the aim of providing an environment accommodating of employee needs. It aims to achieve a competitive advantage in the recruiting arena by improving the employment environment.
Starting rentals of GW01, the world's first cloud-based smartphone-type WiFi router
△ △ムムIn August 1, 2019, Vision began rentals of GW01, the world's first cloud-based smartphone-type WiFi router Compared with the cloud WiFi routers previously used by the company, GW01 is 59% thinnerand 25% lighter, weighting in at 180 grams with a width of 76mm, height of 154mm, and thickness of 7.9mm. Similar to the cloud WiFi routers previously used by the company, a single unit is able to automatically make connections with points in more than 108 different areas and can be used continually for up to 12 hours without recharging the battery. This means users do not have to worry about their battery level, which in any case can be monitored on the devices large screen. Because the device has a large display, advertisements can also be run on the device to good effect. According to the company, the cost of GW01 is no different than the cost of its old cloud WiFi routers because the additional cost of the large screen has been offset by the cost-savingsstemming from the elimination of an auxiliary battery. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Important developments since the end of 1H FY12/19
Share buybacks On July 3, 2019, the company bought back a total of 243,500 shares at a total cost of JPY1.1bn (average cost of JPY4,600 per share) through a tender offer.
Share split
The company announced a 3-for-1 share split of its common stock for shareholders of record as of September 30, 2019 > Total number of shares outstanding prior to the split:ム
D Total number of shares outstanding after the split: △ Total number of shares company is allowed to issue after the split:
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Since the launch of the Clobal WiFi business in FY12/12, sales have been expanding steadily.Earnings dipped due to launching costs of the Global WiFi business, but since this segment became profitable from FY12/14, profits have been expanding steadily. Consolidated OPM rose from 0.1% in FY12/13 to 12.2% in FY12/19. Subsidies booked as non-operating income mainly relate to subsidies from public authorities forthe opening of the Vision Future Business Center in Saga. However, the subsidies were finished in FY12/15. There have also been receipts from public authorities relating to language training for employees, but the amount is negligible and this item is lkely to shrink considerably from FY12/16. With the start of its day care facility for employees in FY12/19, the company received subsidies totaling JPY67mn, topping JPY40mn for the first time in four years. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Assets
The company's Information and Communications Service business is involved primarily in intermediary services and equipment purchase and sales, so tangible fixed assets form a small proportion of total assets. Rental assets booked as tangible fixed assets are mobile WiFi routers for rent in the Global WiFi business. Previously, the entire amount was expensed when mobile WiFi routers were rented out, but from FY12/13, in addition to being accounted for as rental assets in tangible fixed assets, depreciation was changed to the straight-line method over two years. In FY12/15, current assets grew rapidly year-over-year. This Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp was due to an increase of JPY4.2bn in cash and deposits accompanying the issue of shares upon listing on the stock market. Since then the company's growing business has led to further increases in current assets, driven for the most part by increase in cash and deposits and trade accounts receivable.
Liabilities
Since consolidated reporting started in FY12/13, cash and deposits have exceeded interest-bearing liabilities (i.e. the company has been in a net cash position). In FY12/15 there was a large increase in cash and deposits due to the issue of shares accompanying the stock market listing. Meanwhile, a decline in corporate bonds and long-term borrowings meant that the net cash position grew by roughly 5x from the previous year to JPY5.7bn. In FY12/19, robust earnings contributed to net cash of JPY8.4bn.
Net assets
The share of valuation and translation adjustments in net assets is negligible, with shareholders' equity the main component. Shareholders' equity has been rising due to accumulated retained earnings. The dramatic increase in net assets in FY12/15 was due to the issuance of new shares accompanying Vision's stock market listing in December 2015. As a result of this fundraising, capital and capital reserves rose by JPY2.Obn each as ofend December 2015. The funds raised were earmarked for investments related to the overseas expansion of the Clobal WiFi business, development expenses for databases and business systems, training of new recruits, debt repayments and working capital to support business expansion and to accelerate business growth. As of the end of FY12/19 net assets were up to JPY10.9bn, thanks in large part to additions to internal reserves and the resulting increase in shareholders equity. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Note: Figures may not match company numbers due to differences in rounding methods.
Cash flows from operating activities
The main components of operating cash flows are net income and depreciation. Operating cash flows are on a rising trend due to growth in net income and increased depreciation expenses on growing tangible fixed assets.
Cash flows from investing activities
The main elements affecting investing cash flows are the purchase of tangible fixed assets and inflows to term deposits. In FY12/14 and FY12/15, investing cash flows were negative (outflows) due to the acquisition of fixed assets in the Global WiFi business and term deposits. In FY12/16, despite revenue (JPY486mn) from funds recouped from term deposits, investing cash flows were negative due to cash outlays to acquire fixed assets and marketable securities. In three fiscal years fromFY12/17 to FY12/19, investing activities (including the acquisition of fixed assets, purchases of investment securities) resulted in net outflows of more than JPY1.4bn.
Cash flows from financing activities
The key element in financing cash flows is increæes and decreases in interest-bearing liabilities. In FY12/14, financing cash flows were negative (outflows), primarily due to the repayment of long-term loans and redemption of corporate bonds. In FY12/15, the company repaid long-term loans, but the issue of shares raised JPY4.1bn, so financing cash flows were positive (inflows). Note that as of the end of FY12/15, the shareholders' equity ratio had risen to 76.2% (from 48.5% previous year) due to fundraising. In FY12/16, though the shortfall was narrow due to the repayment of short and long-term loans (outflows), it turned negative. In FY12/17, outflows widened modestly, reflecting the exercise of stock options and proceeds from issuance of subscription rights to shares, alongside repayments of long-term loans, repayments of lease obligations, and listing related costs. In FY12/19, financing activities resulted in a net outflow of more than JPY1.1b n, most of whichwent to share buybacks. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

News and topics
June 2020
On June 16, 2020, the company announced that Osaka Prefecture had decided to use mobile WiFi routers provided by the company as part of its online schooling program.ムTo prepare for a second or third wave of COVID-19, Osaka Prefecture has committed itself to equipping its public high schools and other schools for online teaching by the end of June. As part of that effort, it solicited companies to provide mobile routers for loan to households that do not have telecommunications environments set up. Of the 20 companies who responded, Vision was selected. The deal consists of the purchase of 3,300 mobile routers equipped for 30 days of internet communications traffic (20GB). △ Vision has experience providing mobile WiFi routers to universities and vocational schools, and it has determined to engage in the spread of online education as a provider of mobile WiFi routers. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jpムThe emergency economic measures that the government has compiled in response to COVID-19 include the fast-tracked implementation of the “GIGA School” concept, and the government announced the acceleration of infrastructure such as “one device for every student" and installing the communications environments required for at-home online learning (see "Guarantee of learning based on acceleration of the GIGA School concept"). △ Vision has experience collaborating with regional municipalities to provide rental mobile WiFi routers as part of the efforts to meet inbound demand with proper internet communications environments for foreign tourists visiting Japan. Going forward, the company says that, by providing solutions to society's challenges, it will contribute to the development of a sustainable society as well as contribute to the world's information communication industry revolution.
May 2020
On May 12,2020, the company revised its 1H and full-year FY12/20 earnings forecasts. Revised 1H FY12/20 forecastム△ Sales: Undetermined (previous forecast was JPY15.1bn) Operating profit: Undetermined (JPY1.9bn)ムムRecurring profit: Undetermined (JPY1.9bn) Net income*: Undetermined (JPY1.3bn) *Net income attributable to owners of the parent Revised FY12/20 full-year forecast △ Sales: Undetermined (previous forecast was JPY31.4bn) △ Operating profit: Undetermined (JPY4.0bn)ムA Recurring profit: Undetermined (JPY4.0bn) Net income*: Undetermined (JPY2.7bn) *Net income attributable to owners of the parent Reasons for the revisions A When announcing its earnings forecast on February 12, 2020, Vision did not include the expected impact from the spread of COVID-19, as uncertainty over when domestic and overseas infections would slow made it difficult for the company to reasonably calculate the impact on earnings. △ムThe company believes the spread of the COVID-19 is likely to continue to impact its businesses throughout FY12/20. Moreover, amid ongoing uncertainty over when the number of infections will decline in Japan, the company believes the impact on corporate operations and the number of overseas travelers is likely to extend beyond FY12/20. With the goal of minimizing the impact from such an environment, the company is implementing a variety of measures, including promoting the flexible transfer of personnel, converting fixed costs to variable costs, and reducing costs. That said, the company revised its earnings forecast to "undetermined" in light of the increased difficulty of forecasting operating conditions moving forward. The company indicated that it would announce earnings forecast once there were signs that conditions were settling and reasonable forecast could be made.
March 2020
On March 27 2020, the company announced changes to the shareholder incentive plan. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp At a meeting of the Board of Directors on March 27, 2020, the company resolved to change its shareholder incentive plan. The changes will go into effect on April 1, 2020. Reason for the changes to the shareholder incentive plan After careful deliberation, the company determined to divert management resources to other profitable businesses to increase corporate value and better serve the interests of shareholders, and thereby decided to sell ProDrivers (chauffeur-driven car sharing service). Main changes to the shareholder incentive plan △ Before the change: Vision presented shareholders with tickets to use Global WiFi router rental service and its ProDrivers chauffeur-driven car sharing service. △ After the change: Vision will present shareholders with tickets to use Global WiFi router rental service, which provides mobile internet access in Japan and overseas.
February 2020
On February 21, 2020, the company announced the details of a share buyback program. Details of share buyback programムType of shares to be purchased: Company's common stockムNo. of shares to be purchased: 909,000 (upper limit, 1.89% of outstanding shares)ムMaximum purchase amount: JPY1.0bnムPurchase method: Market purchase on the Tokyo Stock Exchange A Buyback period: February 25, 2020 to April 30, 2020.

Shareholder returns
The company is currently prioritizing strengthening its balance sheet and growing the business as it thinks that further improvement of corporate value will generate the most returns for shareholders. As a result, it has not paid a dividend yet but recognizes shareholder returns as a key management priority. The company intends to enact a stable and continuous program of returning profits to shareholders while retaining enough internal reserves to strengthen its financial structure and grow the business, with due consideration to the operating environment. Per the company, the possibility of paying a dividend and potential timing is still undetermined. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Corporate governance and top management
Top management
CEO Kenichi Sano (born in 1969) joined Hikari Tsushin (TSE1: 9435) in 1990 after graduating from Kagoshima Commercial High School. He became a leading salesperson and after heading the key sales division founded Vision LLC as CEO in 1995. The company was reorganized to its current status as Vision Co., Ltd. in 1996.

Employees

Note: Numbers in brackets are average number of temporary employees. Employees (unconsolidated, as of December 31, 2019)
Note: Numbers in brackets are average number of temporary employees.
By the way
The company name, VISION, was chosen for a sense of being future-oriented, and easy to remember. It also ties in with the company's current corporate slogan: More vision, More success. Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Profile
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