Heroz, Inc. · TSE:4382
Heroz — FY04/2023 Earnings Presentation
60 slides from Heroz's earnings presentation, Jun 9, 2023
Slide 1: Presentation Material for FY04/2023 Full Year Financial Results
Presentation Material for FY04/2023 Full Year Financial Results June 9,2023 HEROZ, Inc. ｜4382｜ Notice This document is an excerpt translation of the original Japanese document and is only for reference purposes. In the event of any discrepancy between this translated document and the original Japane
Slide 2: Contents
Contents 1. Financial Highlights 2. FY04/2023 Full Year Performance (Consolidated) 3. FY04/2024 Forecast 4. Introduction of Shareholder Special Benefit Plan 5. Initiatives in each business segment 6. HEROZ Group Structure 7. Reference Materials © 2023 HEROZ Co., ltd. 2
Slide 3: Financial Highlights
01 Financial Highlights © 2023 HEROZ Co., ltd. 3
Slide 4: FY04/2023 Full Year Performance Summary
※Consolidated financial statements are disclosed from this fiscal year. Please note that previously non- consolidated financial statements were disclosed, and year-on-year comparisons are based on consolidated figures Financial Highlights for the current period and non-consolidated figures for the p
Slide 5: FY04/2023 Full Year Performance (Consolidated)
02 FY04/2023 Full Year Performance (Consolidated) © 2023 HEROZ Co., ltd. 5
Slide 6: Our Key Performance Indicators: EBITDA and AI SaaS
Our Key Performance Indicator ◼ We have set EBITDA, a measure of cash generation, as a key performance indicator and aim to sustainably increase corporate and share value through EBITDA growth. Performance Indicators for ◼ Formula: Operating profit + amortization and other non-cash expenses (amortiz
Slide 7: Performance Summary: Achieved significant growth through M&A
Performance Summary ： Achieved significant growth through M&A HEROZ Group Consolidated (FY04/2023) Net Sales EBITDA Operating Profit 2,980 mil yen 609 mil yen 257 mil yen YoY ＋101.0% YoY ＋222.8% YoY ＋641.4% AI SaaS KPI AI Security ARR Recurring Revenue Ratio Recurring churn rate 2,816 mil yen 58.0%
Slide 8: Performance Overview (FY04/2023 Full Year)
Performance Overview (FY04/2023 Full Year) ◼ Net sales totaled 2,980 million yen, growing.(+101.0%, YoY). ◼ EBITDA grew sharply to 609 million yen, (+222.8%,YoY) due to improved profitability of existing businesses and the effects of M&A. FY04/2022 FY04/2023 Earnings Forecast Actual to Results Actua
Slide 9: Key Performance KPIs (by Quarter)
Key Performance KPIs (by Quarter) Net Sales EBITDA (Units: JPY millions) (Units: JPY millions) 1,200 1,114 1,100 300 258 256 1,000 250 800 200 600 150 429 108 367 386 374 381 375 389 95 400 354 374 371 100 83 79 78 47 53 200 50 40 41 22 0 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Slide 10: Recurring Revenue Ratio increased significantly
Recurring Revenue Ratio increased significantly ◼ With the AI SaaS strategy, Recurring Revenue Ratio will be emphasized in the future in pursuit of sales quality. ◼ Recurring Revenue Ratio rose to 64.5% this quarter following the consolidation of VarioSecure and StrategIT as group companies. (Units:
Slide 11: ARR also increased significantly to 2.8 billion yen
ARR also increased significantly to 2.8 billion yen (Units: JPY millions) 3,500 ARR ARR grows significantly 2,862 3,000 2,816 371.5% YoY growth + 2,500 YoY growth 2,816 mil yen ◼ Recurring Revenue is the sum of BtoC and 2,000 BtoB subscription revenue and BtoB recurring revenue in AI/DX services, an
Slide 12: Breakdown of Recurring Revenue and Churn Rate
Breakdown of Recurring Revenue and Churn Rate Breakdown of Recurring Revenue AI Security： Churn Rate Trends for Managed for this Quarter Security Services (Units: JPY millions) 1.6% 700 BtoB Recurring Contracts 49 1.4% 1.4% /Subscriptions 600 98 Operate a lot of long-term projects 1.2% 1.2% lasting
Slide 13: Performance by Segments (FY04/2023 Full Year)
Performance by Segments (FY04/2023 Full Year) ◼ AI/DX services continue to grows over 10% YoY ,also, EBITDA margin at 39.0%, high profitability ◼ AI Security service is deployed by VarioSecure and maintains high profitability with an EBITDA margin of 44.0%. FY04/2022 FY04/2023 YoY YoY Results Actual
Slide 14: AI/DX Services Segment
AI/DX Services Segment ◼ This segment includes BtoC, mainly Shogi Wars, BtoB, which handles AI Solution for customers, and SaaS implementation and SaaS-linked development business, which is being developed by StrategIT. FY04/2023 High profitability with EBITDA margin of 39.0% Actual （Units: JPY mill
Slide 15: AI Security service
AI Security service ◼ This segment is developing the business of implementing the HEROZ Group's AI into the security business developed by VarioSecure, which joined the group this fiscal year. FY04/2023 Recurring sales ratio is high at 86.4%. Actual （Units: JPY millions） Recurring Revenue Ratio ◼ In
Slide 16: Balance Sheet (as of April 30, 2023)
Balance Sheet (as of April 30, 2023) ◼ The cash and deposits currently held by the Company will be gradually appropriated for investments to realize the Company's mid- to long- term growth strategy. ◼ With the consolidation of VarioSecure and StrategIT into the group, there is a goodwill balance of
Slide 17: FY04/2024 Forecast
03 FY04/2024 Forecast © 2023 HEROZ Co., ltd. 17
Slide 18: FY04/2024 Financial Forecast
FY04/2024 Financial Forecast ◼ For FY04/2024, we expect net sales to increase 61.0% YoY and EBITDA to increase 31.2% YoY, due to 10% organic growth and the full-year contribution of two group companies in the consolidated accounts. FY04/2023 FY04/2024 （Units: JPY millions） YoY Actual Forecast Net sa
Slide 19: Introduction of Shareholder Special Benefit Plan
04 Introduction of Shareholder Special Benefit Plan © 2023 HEROZ Co., ltd. 19
Slide 20: Business Alliance with WILLs Inc.
Business Alliance with WILLs Inc. ◼ We entered into a business alliance with WILLs Inc. for the purpose of "improving the efficiency of capital markets through enhanced IR activities" and "maximizing the corporate value of listed companies”. ◼ Our two companies plan to develop AI-based businesses. ◆
Slide 21: Outline of Shareholder Benefit Plan
Outline of Shareholder Benefit Plan ◼ Launched “HEROZ Premium Benefit Club" to further increase the attractiveness of investment in our shares and to increase the number of shareholders who will hold our shares over the medium to long term, taking advantage of the business alliance with WILLs Inc. ◆
Slide 22: About Shareholder Benefit Points
About Shareholder Benefit Points ◼ Points awarded based on the number of shares held ◼ Assumed annual rate of return are set at a maximum level of around 2%. Shareholder Benefit Points Number of shares to be granted held End of April End of October 700～799 3,500 3,500 800～899 4,000 4,000 900～999 5,0
Slide 23: Initiatives in each business segment
05 Initiatives in each business segment © 2023 HEROZ Co., ltd. 23
Slide 24: Group Business Structure
Group Business Structure AI/DX Service AI Security Segment BtoC BtoB Service Business Contents Shogi SaaS business for Provide solutions to customer issues Support for SaaS implementation Managed security and integration individuals, including "Shogi Wars," through data analysis and AI and developme
Slide 25: Initiatives in AI/DX Services
Initiatives in AI/DX Services ◼ The total number of games played in “Shogi Wars” exceeded 800 million. With the release of “Kishin - Analytics", an analysis tool for professionals, we continues our efforts to maximize the number of Shogi players. Initiatives implemented ◼ In the BtoB solutions busin
Slide 26: From Digital Transformation (DX) to AI Transformation (AIX)
From Digital Transformation (DX) to AI Transformation（AIX） We have been helping companies DX in their core operations, but the asymptotic process of digitization was inevitable Going forward, we will support discontinuous change by maximizing the power of the Large Language Model (LLM). AI Transform
Slide 27: Launch of an organization dedicated to the application of Generative AI
Launch of an organization dedicated to the application of Generative AI ◼ We have established a professional organization (LLM Group) dedicated to the application of Generative AI. We position ChatGPT and various other Generative AI technologies as the core of our AI SaaS strategy to accelerate the
Slide 28: Start providing HEROZ Knowledge System built with ChatGPT
Start providing ”HEROZ Knowledge System built with ChatGPT” ◼ We Started providing a SaaS-type product, “HEROZ Knowledge System built with ChatGPT “ Customized ChatGPT, which enables each company to utilize OpenAI, L.L.C.'s ChatGPT in a way that is suitable for their actual business operations, from
Slide 29: Started offering ChatGPT implementation with AI SaaS-type Solution
Started offering ChatGPT implementation with AI SaaS-type Solution ◼ Support for basic functions to introduce LLM and implementation support all in one place, ◼ HEROZ adds Generative AI to the Roots of its AI SaaS Strategy. Specialized Chatbot Generate mail 3D Editing discuttion Generate Story Summa
Slide 30: Next-generation contact center project with NTT Marketing Act Pro CX and USEN-NEXT
With NTT Marketing Act Pro CX and USEN -NEXT HOLDINGS, we are launching a "next-generation contact center" project that integrates human and Generative AI using ChatGPT. ◼ We have launched a project with NTT Marketing ACT Pro CX Corporation and USEN-NEXT HOLDINGS Corporation to improve business effi
Slide 31: dlshogi with HEROZ Won the World Computer Shogi Championship
“dlshogi with HEROZ” Won the World Computer Shogi Championship for the second year in a row ◼ “dlshogi with HEROZ”, a team composed of our AI engineers, won the 33rd World Computer Shogi Championship held from May 3 to 5 , 2023, winning the championship for the second consecutive year. ◼ Our Shogi a
Slide 32: Released JOINT, a platform for planning/building/operating SaaS
Released "JOINT", a platform for planning/building/operating SaaS ◼ Platform "JOINT" to be released at StrategIT (consolidated subsidiary) as of May 18, 2023. ◼ JOINT is a platform that provides the following three types of support necessary for each growth phase of a company as a business partner o
Slide 33: Initiatives in AI/Security Services
Initiatives in AI/Security Services ◼ Provides services to make corporate Internet use safe and comfortable. Boasts the top share of the firewall/UTM operation and monitoring service market in Japan for small- and medium-sized businesses, with a churn rate that remains low at less than 1%. Initiativ
Slide 34: Direction 1: Expand the scope of managed services
Direction ①Expand the scope of managed services and strengthen competitiveness ◼ In addition to gateway security, expand coverage from LAN to cloud computing and strengthen competitiveness by utilizing other companies' products. ◼ Building a next-generation operational infrastructure using AI to enh
Slide 35: Direction 2: Entering the growing security market
Direction② Entering the growing security market ◼ Entering the zero-trust security domain by leveraging knowledge from existing services. Operation Base FY02/2023 FY02/2027 FY02/2023 Expansion of Log Monitoring Promote zero-trust supported areas will security by linking increase the amount Authentic
Slide 36: Direction 3: Strengthen direct sales structure
Direction ③ Strengthen direct sales structure that differs from the existing sales network ◼ Build a strong direct sales structure by aggressively investing in online marketing and inside sales, in addition to the existing stable sales structure centered on sales via distributors. FY02/2023 FY02/202
Slide 37: HEROZ Group Structure
06 HEROZ Group Structure © 2023 HEROZ Co., ltd. 37
Slide 38: Company Overview
Company Overview Name HEROZ, Inc. ▍Director/Officer PMO Tamachi , 5-31-17 Shiba, Minato -k u, Location Tok yo Representative Director Co-CEO Established April 2009 Takahiro Hayashi Graduated from Waseda University Representatives Tak ahiro Hayashi/Tomohiro Tak ahashi Joined NEC as a technology engin
Slide 39: Our Vision
Our Vision Creating the future through artificial intelligence (AI) revolutions © 2023 HEROZ Co., ltd. 39
Slide 40: The AI revolution we started in the chess world
The AI revolution we started in the chess world Shogi Wars, our core business, is not just a Shogi application, but a Gaming Platform that has contributed greatly to the revolution of the Shogi world itself through cutting-edge AI technology. ➢7 mil users ➢500 thousands MAU ➢Played a total of over 8
Slide 41: The Importance of the AI Revolution in the Shogi World
The Importance of the "AI Revolution" we have caused in the Shogi World To advance society by properly implementing innovative technologies in the world. A Revolution in A Revolution in A Revolution in Learning sense of values entertainment value ➢ Shogi is taught steadily by a ➢ Shogi is warfare. B
Slide 42: Group Structure
Group Structure ◼ With the consolidation of VarioSecure Inc. and StrategIT Inc. as consolidated subsidiaries, we have shifted to the group management structure. ◼ Owns approximately 43% of the company ◼ Owns approximately 89% of the company ◼ Appoints majority of directors ◼ Dispatches 2 directors ◼
Slide 43: Reference Materials
07 Reference Materials © 2023 HEROZ Co., ltd. 43
Slide 44: HEROZ Group Strategy
HEROZ Group Strategy ◼ Based on the knowledge gained from our experience in solving individual customer issues, we will aim for SaaS-type business management driven by intelligence such as our data utilization and AI in the future.（HEROZ 2.0） HEROZ 1.0 HEROZ 2.0 Individual issue resolution More vers
Slide 45: Overall Group Strategy: AI SaaS
Overall Group Strategy ：AI SaaS ◼ We will evolve the products of our company and group companies into more intelligent data-driven software by making the most of our accumulated expertise in advanced AI implementation and our strength as an engineering group. Pillars of Business AI SaaS Products Cus
Slide 46: Aspect of the SaaS market and our views of the major trends
Aspect of the SaaS market and our views of the major trends ◼ While the SaaS market in Japan is expected to grow steadily, there is still room for further penetration. ◼ To reach the approximately 10 trillions yen potential market, it is necessary to grasp the trends in the Japanese SaaS market. Our
Slide 47: Our perception of the challenges of implementing SaaS
Our perception of the challenges of implementing SaaS By resolving trends that could be barriers to SaaS adoption through technology, we aim to materialize a latent market. Diversification of needs Integration with legacy systems Need for integrated management ◼ Rapid changes in the business environ
Slide 48: What we think AI SaaS should be like
What we think AI SaaS should be like We will support the provision of the ideal SaaS usage environment required by our clients by making full use of our accumulated know-how and technology. 顧客 HEROZ GROUP Automated and optimized CRM HR SaaS-to-SaaS collaboration Automated operations SaaS Big Data ac
Slide 49: Global Leader in Mind Game AI
Global Leader in Mind Game AI Chess AI Shogi AI Go AI Deep Blue (’97) defeated a AI developed by our engineers who Google acquired Deep Mind (’14) professional Chess player was member of HEROZ at that time AlphaGo, developed by Deep Mind, defeated a professional Shogi defeated a professional Go play
Slide 50: AI SaaS (AI Software as a Service)
AI SaaS(AI Software as a Service) Developing our AI construction capabilities cultivated through machine learning using deep learning of vast Shogi game data in the construction, finance, entertainment, and other fields Structural design data, Shogi game records financial data, etc. AI SaaS for deep
Slide 51: Profitability of AI SaaS
Profitability of AI SaaS Research/develop Shogi AI Standardize AI technology accumulated through shogi AI AI SaaS（AI Software as a Service） Establish an infrastructure which allows HEROZ to provide AI services efficiently to solve various challenges in various industries Client’s data sent to HEROZ
Slide 52: Overview of VarioSecure Inc.
Overview of VarioSecure Inc. Name VarioSecure Inc. Established June 2001 capital 749 million yen Employees 74 Performance Sales revenue: 2,566 million yen (FY02/2022)(IFRS) Operating profit: 751 million yen Net income: 500 million yen Osaka Office Head Office Sumitomo Corporation Nishiki-cho Buildin
Slide 53: Toward the Realization of an AI Security Company
Toward the Realization of an AI Security Company Provide customers with new safety and security in the age of zero-trust through the power of AI by utilizing a variety of corporate data. Supporting Digital Transformation by supporting corporate safety and security from the ground up Automation of on
Slide 54: AI Security Company's Growth Strategy
AI Security Company's Growth Strategy We will promote the following items jointly with VarioSecure to realize AI Security Company. ・ Mutual provision of management resources, including our AI technology and VarioSecure's industrial domain knowledge and data Realization of ・ Achieving an AI Security
Slide 55: Services provided by VarioSecure
(Reference) Business Overview - Services provided by VarioSecure Services of Security Framework VarioSecure Building • Asset Systems Network Integration Services Management • Vulnerability Management indentificat ion Vario Network Security Suite • Access Control • Intrusion Prevention VSR-VarioSecur
Slide 56: Providing services that make Internet use safe and comfortable
(Reference) Providing services that make Internet use safe and comfortable Service Category Managed Security Services Integration Services Installation support, operation and maintenance Service Form 24 hours/365 days, nationwide in Japan Equipment sales and construction Revenue Model Recurring type
Slide 57: VarioSecure's business model
(Reference) VarioSecure's business model ◼ Provided mainly as an adjunct to the Internet connection Collective offer Proposal and Sales agency agreement (OEM/Distributor) Sales Support Internet connection ＋ Security Security Services Sales Services Agent Cutomers (Japanese Companies) ￥ ￥ Usage fees
Slide 58: Overview of StrategIT Inc.
Overview of StrategIT Inc. Name StrategIT Inc. Establish July,2019 Capital 74 million yen Employees 25(excludes outsourcing) Location PMO Tamachi 7F, 5-31-17 Shiba, Minato-ku, Tokyo Our vision is to contribute to management improvement by integrating "Strategy" and "IT“ Buisiness SaaS Solution Imple
Slide 59: StrategIT's Business Overview
StrategIT’s Business Overview Develop various APIs (linked systems) for SaaS vendors to improve the convenience of SaaS, utilizing know-how gained through SaaS introduction consulting for BtoB. Business model to sell developed APIs to general companies through our SaaStainer (app store) １）Existing S
Slide 60: Notes
Notes ◼ The forward-looking statements contained in this material are based on information currently available to the Company, but are not guarantees of future performance and are subject to various risks and uncertainties. Actual results may differ from the forward-looking statements contained or d