Heroz, Inc. · TSE:4382

Heroz — Q1 FY04/2024 Earnings Presentation

57 slides from Heroz's earnings presentation, Sep 8, 2023

Slide 1: Presentation Material for FY04/2024 Q1 Financial Results
Presentation Material for FY04/2024 Q１ Financial Results September 8,2023 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 Japanese
Slide 2: Contents
Contents 1. Financial Highlights 2. FY04/2024 First Quarter Performance (Consolidated) 3. Initiatives in each business segment 4. Frequently Asked Questions and Answers 5. HEROZ Group Structure 6. Reference Materials © 2023 HEROZ Co., ltd. 2
Slide 4: Financial Highlights
※ Consolidated financial statements are disclosed from the third quarter of the fiscal year ending April 30, 2023. Please note that YoY comparisons are based on consolidated figures for the current quarter and nonconsolidated Financial Highlights (non-consolidated) figures for the same period last y
Slide 5: FY04/2024 First Quarter Performance (Consolidated)
02 FY04/2024 First Quarter Performance (Consolidated) © 2023 HEROZ Co., ltd. 5
Slide 6: Our Key Performance Indicator: EBITDA
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 (FY04/2024 Q1) Net Sales EBITDA Operating Profit 1,118 mil yen 170 mil yen 73 mil yen YoY ＋197.7% YoY ＋309.2% YoY ＋410.1% AI SaaS KPI AI Security ARR Recurring Revenue Ratio Recurring churn rate 2,898 mil yen 64.9
Slide 8: Performance Overview (May-2023-July 2023)
Performance Overview (May-2023-July 2023) ◼ Both net sales and income grew significantly YoY due to M&A effects and organic growth. ◼ Although progress against the earnings forecast is slightly behind schedule, the number of projects is increasing, and we expect to achieve the target for the full ye
Slide 9: Key Performance KPIs (by Quarter)
Key Performance KPIs (by Quarter) Net Sales EBITDA (Units: JPY millions) (Units: JPY millions) ※Various investments for 1,200 1,100 300 growth in the next fiscal year 1,114 1,118 258 256 1,000 250 ※ 800 200 170 600 150 429 108 400 367 386 374 354 374 371 381 375 389 100 95 83 79 78 53 47 200 50 40 4
Slide 10: Recurring Revenue Ratio increased significantly
Recurring Revenue Ratio increased significantly ◼ With the AI SaaS strategy, we emphasize the importance on the ratio of recurring revenue to total revenue (Recurring Revenue ratio) ◼ Recurring Revenue ratio in 1Q was 64.9%, thanks to the effect of the two companies becoming group companies and the
Slide 11: ARR is 2,898 mil yen
ARR of the entire group is approximately 2.9 billion yen. (Units: JPY millions) 3,500 ARR ARR grows significantly 2,872 2,827 2,898 3,000 370.3% YoY growth + 2,500 ARR is 2,898 mil yen ◼ Recurring Revenue is the sum of BtoC and 2,000 BtoB subscription revenue and BtoB recurring revenue in AI/DX serv
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 50 BtoB Recurring Contracts 1.4% 1.4% /Subscriptions 105 Operate a lot of long-term projects 1.2% 600 1.2% lasting
Slide 13: Performance by Segments (May-2023-July-2023)
Performance by Segments (May-2023-July-2023) ◼ AI/DX services significant growth due to M&A and organic growth ,also, EBITDA margin at 31.9%, high profitability ◼ AI Security service is deployed by VarioSecure and maintains high profitability with an EBITDA margin of 43.3%. FY04/2023 FY04/2024 YoY Y
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 31.9% 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. FY04/2023 Recurring sales ratio is high at 86.4%. Actual （Units: JPY millions） Recurring Revenue Ratio ◼ In managed security services, differentiate
Slide 16: Balance Sheet (as of July 31, 2023)
Balance Sheet (as of July 31, 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 grouping of VarioSecure Inc. and StrategIT Corporation, there is a goodwill balance of 2.2
Slide 18: Group Business Structure
Group Business Structure AI/DX Services AI Security Segment BtoC BtoB Services 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 develop
Slide 19: Issuance of new shares as restricted stock compensation
Announcement regarding the issuance of new shares as restricted stock compensation. ◼ At the board of directors meeting on August 22, our company resolved to issue new shares as restricted stock compensation to our officers and employees. ◼ The purpose of introducing restricted stock compensation is
Slide 20: Initiatives in AI/DX Services
Initiatives in AI/DX Services ◼ The dedicated LLM group at HEROZ has decided to release the beta version of "HEROZ Knowledge System built with ChatGPT" which was announced in April. As a Customized ChatGPT that can be utilized in the fieldwork of each company, it aims to differentiate itself from co
Slide 21: 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 22: Supporting partner of Microsoft's Azure OpenAI Service Reference Architecture
We have joined as a supporting partner of Microsoft's "Azure OpenAI Service Reference Architecture". ◼ We have joined as a supporting partner of the "Azure OpenAI Service Reference Architecture", a service for developers provided by Microsoft Corporation. ◼ "Azure OpenAI Service Reference Architectu
Slide 23: Release of the β version of our LLM product
The release of the β version of our company's LLM product has been decided. ◼ We established a specialized unit (LLM Group) in May of this year with the purpose of applying Generative AI. We are positioning various Generative AI technologies, including ChatGPT, at the core of our AI SaaS strategy, a
Slide 24: Classification of LLM services and our positioning
The classification of LLM services as seen by HEROZ and our positioning. The mainstream service in the current market is the construction service using Azure OpenAI. We looking ahead to future trends, offers customization to meet the individual needs of each company at a realistic cost using LLM. •
Slide 25: Example: Advanced application of LLM in CS operations
Example: Advanced application of LLM in CS operations. We are developing an in-house product that automatically classifies various inquiries from users in Shogi Wars and generates responses. We plan to deploy it as a CS solution for group companies and the gaming industry in the future. Category: Fo
Slide 26: Cooperation using AI for the Radio NIKKEI program
Regarding our cooperation using AI for the Radio NIKKEI program . ◼ We provided technical cooperation for the production of a special program on Radio NIKKEI that was broadcast on August 11, 2023. In the program, we used 'ChatGPT' to conduct a challenge of having a conversation with AI. In addition,
Slide 27: KAMIYAGURA: DM2C Studio joins as co-partner
"KAMIYAGURA " is a project that DM2C Studio has newly joined as a co-partner. The release is planned for the year 2024. ◼ Regarding the digital trading card game “KAMIYAGURA" that our company and DEA are jointly developing, DM2C Studio of DMM Group has newly joined as a co-partner. We’re in charge o
Slide 28: Released JOINT, a platform for planning/building/operating SaaS
Released "JOINT", a platform for planning/building/operating SaaS ◼ On May 18, 2023, StrategIT issued a press release for “JOINT” . We plan to officially provide it to customers from the beginning of the new year, and development is progressing smoothly. ◼ JOINT is a platform that provides the follo
Slide 29: HEROZ's AI improving quality and efficiency in VarioSecure's SOC operations
Utilizing HEROZ's AI, we are promoting the improvement of quality and efficiency in VarioSecure's SOC operations. ◼ We plan to apply our AI to the network security operation monitoring tasks of VarioSecure's managed security services, and we plan to start operation this fall. ◼ By automating some of
Slide 30: 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 Main Achievements in the businesses, with a churn rate that remains low a
Slide 31: Direction ①Expand 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 32: Direction ② Entering the growing security market
Direction ② Entering the growing security market ◼ Entering the Zero Trust Security Domain by Leveraging Existing ServicesAs for progress in 1Q, Vario Managed LAN/Wi-Fi has been launched and the service release plan is on track. 1Q （progressing according to plan） Vario Managed LAN/Wi-Fi Enhanced vul
Slide 33: 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 35: Frequently Asked Questions and Answers ①
Frequently Asked Questions and Answers ① ◼ Some of the frequently asked questions and answers we receive in relation to our most recent financial results announcement. Q1. Regarding the earnings forecast for FY04/2024, what kind of growth are you expecting for HEROZ alone? ⇒ We do not disclose speci
Slide 36: Frequently Asked Questions and Answers ②
Frequently Asked Questions and Answers ② ◼ Some of the frequently asked questions and answers we receive in relation to our most recent financial results announcement. Q4. At present, VarioSecure's managed security services account for the majority of the group's recurring revenue. However, is there
Slide 38: Company Overview
Company Overview Name HEROZ, Inc. ▍Director and Officer PMO Tamachi , 5-31-17 Shiba, Minato -k u, Location Tok yo Representative Director CEO Takahiro Hayashi Established April 2009 Graduated from Waseda University Joined NEC as a technology engineer Representatives Tak ahiro Hayashi/Tomohiro Tak ah
Slide 39: 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 40: Our Vision
Our Vision Creating the future through artificial intelligence (AI) revolutions © 2023 HEROZ Co., ltd. 40
Slide 41: 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 42: 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 43: 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 45: 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 46: 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 47: 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 48: Issue hypothesis
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 49: 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 50: Social implementation of AI with real-world capabilities to promote AIX
Social implementation of AI with "real-world capabilities" to promote AIX Accelerate your company's AI Transformation (AIX) by enhancing core operations with AI. Takenaka Toyo Engineering Corporation Corporation IRIS OHYAMA Inc.～～Spave Control System～ ~EPC Toughening System ~ Sales Forecast ～ AI to
Slide 51: Overview of VarioSecure Inc.
Overview of VarioSecure Inc. Name VarioSecure Inc. Established June 2001 capital 749 million yen Employees 81 Performance Sales revenue: 2,634 million yen (FY02/2023)(IFRS) Operating profit: 581 million yen Net income: 383 million yen Osaka Office Head Office Sumitomo Corporation Nishiki-cho Buildin
Slide 52: 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 53: 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 54: 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 55: 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 56: 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 57: 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

HEROZ — Q1 FY04/2024 Earnings Presentation on 6ix

Heroz — Q1 FY04/2024 Earnings Presentation

Slide 1: Presentation Material for FY04/2024 Q1 Financial Results

Slide 2: Contents

Slide 3: Financial Highlights

Slide 4: Financial Highlights

Slide 5: FY04/2024 First Quarter Performance (Consolidated)

Slide 6: Our Key Performance Indicator: EBITDA

Slide 7: Performance Summary: Achieved significant growth through M&A

Slide 8: Performance Overview (May-2023-July 2023)

Slide 9: Key Performance KPIs (by Quarter)

Slide 10: Recurring Revenue Ratio increased significantly

Slide 11: ARR is 2,898 mil yen

Slide 12: Breakdown of Recurring Revenue and Churn Rate

Slide 13: Performance by Segments (May-2023-July-2023)

Slide 14: AI/DX Services Segment

Slide 15: AI Security service

Slide 16: Balance Sheet (as of July 31, 2023)

Slide 17: Initiatives in each business segment

Slide 18: Group Business Structure

Slide 19: Issuance of new shares as restricted stock compensation

Slide 20: Initiatives in AI/DX Services

Slide 21: From Digital Transformation (DX) to AI Transformation (AIX)

Slide 22: Supporting partner of Microsoft's Azure OpenAI Service Reference Architecture

Slide 23: Release of the β version of our LLM product

Slide 24: Classification of LLM services and our positioning

Slide 25: Example: Advanced application of LLM in CS operations

Slide 26: Cooperation using AI for the Radio NIKKEI program

Slide 27: KAMIYAGURA: DM2C Studio joins as co-partner

Slide 28: Released JOINT, a platform for planning/building/operating SaaS

Slide 29: HEROZ's AI improving quality and efficiency in VarioSecure's SOC operations

Slide 30: Initiatives in AI/Security Services

Slide 31: Direction ①Expand the scope of managed services

Slide 32: Direction ② Entering the growing security market

Slide 33: Direction ③ Strengthen direct sales structure

Slide 34: Frequently Asked Questions and Answers

Slide 35: Frequently Asked Questions and Answers ①

Slide 36: Frequently Asked Questions and Answers ②

Slide 37: HEROZ Group Structure

Slide 38: Company Overview

Slide 39: Global Leader in Mind Game AI

Slide 40: Our Vision

Slide 41: The AI revolution we started in the chess world

Slide 42: The Importance of the AI Revolution in the Shogi World

Slide 43: Group Structure

Slide 44: Reference Materials

Slide 45: HEROZ Group Strategy

Slide 46: Overall Group Strategy: AI SaaS

Slide 47: Aspect of the SaaS market and our views of the major trends

Slide 48: Issue hypothesis

Slide 49: What we think AI SaaS should be like

Slide 50: Social implementation of AI with real-world capabilities to promote AIX

Slide 51: Overview of VarioSecure Inc.

Slide 52: Toward the Realization of an AI Security Company

Slide 53: Providing services that make Internet use safe and comfortable

Slide 54: VarioSecure's business model

Slide 55: Overview of StrategIT Inc.

Slide 56: StrategIT's Business Overview

Slide 57: Notes