Heroz, Inc. · TSE:4382
Heroz — Q3 FY04/2023 Earnings Presentation
44 slides from Heroz's earnings presentation, Mar 10, 2023
Slide 1: Presentation Material for FY04/2023 Q3 Financial Results
Presentation Material for FY04/2023 Q3 Financial Results March 10,2023 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 do
Slide 2: Contents
Contents 1.Financial Highlights 2.HEROZ Group Strategy 3.Group Structure 4.FY04/2023 Q3 Performance (Consolidated) 5.Reference Materials © 2023 HEROZ Co., ltd. 2
Slide 3: Financial Highlights
01 Financial Highlights © 2023 HEROZ Co., ltd. 3
Slide 4: Financial Highlights
※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: HEROZ Group Strategy
02 HEROZ Group Strategy © 2023 HEROZ Co., ltd. 5
Slide 6: Company Overview
Company Overview Name HEROZ, Inc. ▍Director/Officer PMO Tamachi 2F, 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 en
Slide 7: Our Vision
Our Vision Creating the future through artificial intelligence (AI) revolutions © 2023 HEROZ Co., ltd. 7
Slide 8: 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 9: 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 10: 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 11: 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 12: 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 13: Group Structure
03 Group Structure © 2023 HEROZ Co., ltd. 13
Slide 14: Group Structure
Group Structure ◼ With the consolidation of VarioSecure Inc. and StrategIT Inc. as consolidated subsidiaries, we have shifted to the group management structure. ◼ Total net sales of the three companies are approximately 4.5 billion yen(sum of the most recent results). Listed on the TSE Prime Market
Slide 15: 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 16: FY04/2023 3rd Quarter Performance (Consolidated)
04 FY04/2023 3 rd Quarter Performance (Consolidated) © 2023 HEROZ Co., ltd. 16
Slide 17: Our Key Performance Indicator
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 18: Performance Summary: Achieved significant growth through M&A
Performance Summary ： Achieved significant growth through M&A HEROZ Group Consolidated (cumulative Q3) Net Sales EBITDA Operating Profit 1,879 mil yen 352 mil yen 195 mil yen YoY ＋70.7% YoY ＋218.7% same period last year： -3 mil yen AI SaaS KPI AI Security ARR Recurring Revenue Ratio Recurring churn
Slide 19: Performance Overview (May 2022-January 2023)
Performance Overview (May 2022-January 2023) ◼ Net sales totaled 1,879 million yen, growing.(+70.7%, YoY). ◼ EBITDA grew sharply to 352 million yen, (+218.7%,YoY) due to improved profitability of existing businesses and the benefits of M&A. FY04/2022 FY04/2023 Earnings Forecast rd rd Progress agains
Slide 20: Key Performance KPIs (by Quarter)
Key Performance KPIs (by Quarter) Net Sales EBITDA (Units: JPY millions) (Units: JPY millions) 1,200 300 1,114 258 1,000 250 800 200 600 150 429 108 367 386 374 381 375 390 95 400 354 375 372 100 83 80 78 47 53 200 50 40 41 23 0 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q FY0
Slide 21: 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 63.9% this quarter following the consolidation of VarioSecure and StrategIT as group companies. (Units:
Slide 22: 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 3,000 2,862 YoY growth376.4% 2,500 ARR for the group 2,862 mil yen ◼ Recurring Revenue is the sum of BtoC and 2,000 BtoB subscription revenue and BtoB recurring revenue in AI/DX services, 1,50
Slide 23: 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 56 1.4% 1.4% /Subscriptions 600 97 Operate a lot of long-term projects 1.2% 1.2% lasting
Slide 24: Performance by Segments (May 2022-January 2023)
Performance by Segments (May 2022-January 2023) ◼ AI/DX services continue to grow at +11.9% YoY ,also, EBITDA margin at 37.8%, high profitability ◼ AI Security service is deployed by VarioSecure and maintains high profitability with an EBITDA margin of 43.7%. FY04/2022 FY04/2023 YoY YoY （Excluding M
Slide 25: AI/DX Services Segment
AI/DX Services Segment ◼ This segment includes BtoC, mainly Shogi Wars, BtoB, which handles AI development for customers, and SaaS implementation and SaaS-linked development business, which is being developed by StrategIT. FY04/2023 3 rd Quarter Actual High profitability with EBITDA margin of 37.8%.
Slide 26: 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 3 rd Quarter Actual Recurring sales ratio is high at 86.3%. (May/2022-Jan/2023) （Units: JPY milli
Slide 27: Balance Sheet (as of January 31, 2023)
Balance Sheet (as of January 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 consolidation of VarioSecure and StrategIT into the group, there is a goodwill balance o
Slide 28: Reference Materials
05 Reference Materials © 2023 HEROZ Co., ltd. 28
Slide 29: 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 30: 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 31: 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 32: Potential demand for AI in the construction domain
Potential demand for AI in the construction domain (one of our focus areas) ◼ We believe there is also significant potential demand for enhancing operational efficiency through AI in the construction industry, which is one of our areas of focus ◼ There will be a shortage of 110,000 construction tech
Slide 33: Japan: Potential AI Demand is Among the Largest Worldwide
Japan: Potential AI Demand is Among the Largest Worldwide ◼ Potential AI demand in Japan can be expected to be among the largest worldwide, as the working population is expected to decrease significantly going forward Projection of Population Age 15-64 (Median Prediction Interval, 2020=100) ◼ When d
Slide 34: Use of Our AI in DX
Use of Our AI in DX ◼ Domestic DX (digital transformation) is expected to accelerate due to the future decrease in the working population as well as the impact of the COVID-19 pandemic ◼ AI allows for DX of a wide variety of operations including those involving decision-making, which were previously
Slide 35: Overview of VarioSecure Inc.
Overview of VarioSecure Inc. Name VarioSecure Inc. Established June 2001 capital 749 million yen Employees 75 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 36: 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 37: 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 38: (Reference) Business Overview - 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 39: (Reference) 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 40: (Reference) 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 41: Overview of StrategIT Inc.
Overview of StrategIT Inc. Name StrategIT Inc. Our vision is to contribute to management improvement by integrating "Strategy" and "IT“ Establish July,2019 And our mission is to bring the power of SaaS to all companies Capital 74 million yen We aim to be a company that promotes the utilization and v
Slide 42: 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 43: Strengths and Features with StrategIT
Strengths and Features with StrategIT Holds patent for "Master Hub," a development platform that brings together all the know-how required for SaaS collaborative development Operate "SaaStainer," an app store that provides SaaS-linked applications (recurring monthly fee model) ・Patented ”Master Hub”
Slide 44: 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