Hennge K.k. · TSE:4475

Hennge K.k — FY2022 Earnings Presentation

68 slides from Hennge K.k's earnings presentation, Nov 11, 2022

1. Slide 1: FY09/2022 Full-year Consolidated Financial Results

   Note: This is a translation of part of the original Japanese version and is provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail. FY09/2022 Full-year Consolidated Financial Results HENNGE

2. Slide 2: Table of Contents

   HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Table of Contents 1. FY09/2022 Full-year Consolidated Financial Results 2. FY09/2023 Full-year Forecasts 3. Growth Strategy 4. Appendix Corporate Overview Total Addressable Market Others 5. Past Materials 2

3. Slide 3: FY09/2022 Full-year Consolidated Financial Results (Financial Results)

   HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results FY09/2022 Full-year Consolidated Financial Results (Financial Results) 3

4. Slide 4: Overview of Consolidated Financial Results

   HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Overview of Consolidated Financial Results (YoY, 12 months accumulated comparison) (unit: million yen) 1. The net sales rose by 16.5% YoY to 5.65B yen. The sales of HENNGE One rose by 18.6% YoY to 5.17B yen. 2. The total SG&A

5. Slide 5: Quarterly Trend of Net Sales

   HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Quarterly Trend of Net Sales ■ Professional service and others ■ HENNGE One (unit: million yen) FY19 FY20 FY21 FY22 5

6. Slide 6: Net Sales

   HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Net Sales (YoY, 12 months accumulated comparison) The net sales increased by 16.5% YoY to 5.65B yen. The sales of HENNGE One, our key driver of the growth, grew by 18.6%. (YoY, 12 mons accum. comparison) ■ Professional service

7. Slide 7: Quarterly Trend of Gross Profit

   HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Quarterly Trend of Gross Profit ● Gross profit margin ■ Gross profit (unit: million yen) FY19 FY20 FY21 FY22 7

8. Slide 8: Gross Profit

   HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Gross Profit (YoY, 12 months accumulated comparison) The gross profit increased by 0.75B yen YoY to 4.77B yen. The gross profit margin increased by 1.5pt YoY to 84.5%, and remains high. 84.5％ 83.0％ (YoY, 12 mons accum. comparison

9. Slide 9: SG&A

   HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Structure of Operating Expenses (YoY, 12 months accumulated comparison) (unit: million yen) SG&A to sales ratio 76.3% SG&A to sales ratio SG&A to sales (YoY) ratio 75.2% Other SG&A increased mainly due to enhanced recruitment

10. Slide 10: SG&A

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Structure of Operating Expenses (QoQ comparison of Q3 FY09/2022 & Q4 FY09/2022) (unit: million yen) QoQ (unit: million yen) Other SG&A increased QoQ mainly due to an Other SG&A +43 increase in recruitment costs associated with

11. Slide 11: Quarterly Trend of Net Sales and Operating Expenses

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Quarterly Trend of Net Sales and Operating Expenses ● Net Sales ■ Other SG&A ■ Advertising expenses ■ Business consignment and staffing expenses ■ Personnel expenses ■ R&D expenses ■ Cost of Sales (unit: million yen) FY19 FY20 F

12. Slide 12: Breakdown of Employees by Function

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Breakdown of Employees by Function 243 (Excluding part-time employees, as of 2022-09-30) 12

13. Slide 13: Number of Employees

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Number of Employees In Q4, the number of employees increased by 30 compared to the end of FY21. ■ Others ■ Professional service ■ Business Dev. ■ HENNGE One Customer Success ■ HENNGE One Sales ■ HENNGE One Dev./ R&D # of emplo

14. Slide 14: Cash Flow Statement

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Cash Flow Statement (YoY, 12 months accumulated comparison) (unit: million yen) (unit: million yen) CF from operating activities Increased 250 million yen YoY, mainly because most of the income consists of upfront payments for

15. Slide 15: FY09/2022 Full-year Consolidated Financial Results (Business Activities)

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results FY09/2022 Full-year Consolidated Financial Results (Business Activities) 15

16. Slide 16: Business Highlights

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Business Highlights ● Advertisements and events ○ Exhibition at “Japan IT Week Nagoya” (July 2022) ○ Starting “Ultra-trial campaign” (August to September 2022) Conducted out-of-home advertising around major stations in Tokyo,

17. Slide 17: Advertising Activities In Q4 FY2022

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Advertising Activities In Q4 FY2022 In Q4, we were carrying out the following multi-layered advertising activities in line with the initial plan for FY22. Exhibition at “Japan IT Week Nagoya” “Ultra-trial campaign” (July 2022)

18. Slide 18: FY09/2022 Full-year Consolidated Financial Results (KPI Results)

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results FY09/2022 Full-year Consolidated Financial Results (KPI Results) 18

19. Slide 19: HENNGE One KPI Highlights

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results HENNGE One KPI Highlights (Progress in 12 months, compared to the end of FY09/2021) # of user companies (N) # of contracted users ARR 2,213 companies 2.32M users 5.60B yen increased by 261 companies increased by 187K users inc

20. Slide 20: HENNGE One KPI

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results HENNGE One KPI (YoY, compared to the end of Q4 FY09/2021) # of contracted companies # of contracted users ARR YoY +13.4% YoY +8.7% YoY +18.2% (unit: companies) (unit: users) (unit: million yen) +261 +0.19M +0.86B companies use

21. Slide 21: HENNGE One Gross Revenue Churn Rate

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results HENNGE One Gross Revenue Churn Rate Continuously maintained a stable and sustainable growth model with a low churn rate. 0.25% 0.27% 0.24% 0.24% 0.23% 0.22% 0.21% 0.18% 0.16% 0.16% 0.18% 0.13% 21

22. Slide 22: HENNGE One Contracted Companies & Users

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results HENNGE One Contracted Companies & Users QoQ +41K users ● HENNGE One Contracted Users (K users) ■ HENNGE One Contracted Users (companies) QoQ +74 companies FY19 FY20 FY21 FY22 22

23. Slide 23: HENNGE One ARR & ARPU

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results HENNGE One ARR & ARPU QoQ +57 yen per user ● HENNGE One ARPU (yen per user) ■ HENNGE One ARR (millions of yen) QoQ +0.23B yen FY19 FY20 FY21 FY22 23

24. Slide 24: FY09/2023 Full-year Forecasts

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results FY09/2023 Full-year Forecasts 24

25. Slide 25: Our Policy of FY2023

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Our Policy of FY2023 To accelerate mid-term growth in HENNGE One ARR, continuously carrying out active marketing activities and building a more solid organization by enhancing our talent acquisition capability. HENNGE One Busi

26. Slide 26: Overview of FY2023 Forecasts

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Overview of FY2023 Forecasts (unit: million yen) 1. The sales of HENNGE One, our key driver of growth, is expected to grow by 20.7% YoY. The sales of Professional service and others is expected to grow by 2.4% YoY. 2. The net

27. Slide 27: FY2023 Forecasts of Sales by Business

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results FY2023 Forecasts of Sales by Business Sales of HENNGE One business is expected to grow by 20.7% YoY to 6.23B yen. HENNGE One Professional service and others (unit: million yen) ■ Actual (unit: million yen) ■ Forecast 27

28. Slide 28: FY2023 Forecasts of Operating Expenses

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results FY2023 Forecasts of Operating Expenses Advertising expenses is expected to increase by 3.5% YoY to 0.69B yen. Operating expenses excluding advertising expenses is expected to increase by 21.2% to 5.48B yen. Advertising expense

29. Slide 29: Growth Strategy

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Growth Strategy 29

30. Slide 30: Vision

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Vision We want to deliver the power of technology as many people as we can. Liberation of Technology テクノロジーの解放 30

31. Slide 31: Maximize LTV

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Maximize LTV Our growth strategy is to maximize LTV. Currently, Y and r are already in a high number, therefore our focus is to maximize ARR. LTV = ARR × Y × r Y = [Average contract duration in years] r = [Gross profit rate] AR

32. Slide 32: Maximize ARR

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Maximize ARR ARR ＝ N × n × ARPU maximize N N = # of contracted companies maximize n ● Increase our sales force n = Average # of contracted ● Extend our presence in a wider region Maximize ● Strengthen the partnership with our

33. Slide 33: Progress of Our Growth Strategy (HENNGE One)

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Progress of Our Growth Strategy (HENNGE One) Aim to accelerate ARR growth by focusing on increasing N in the short term while increasing ARPU in the mid/long term. 33

34. Slide 34: Growth Strategy on and After FY2023

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Growth Strategy on and After FY2023 By FY25, having HENNGE One ARR growth at mid-20% in CAGR, we aim to exceed 10B yen for HENNGE One ARR. Focus on increasing the number of contracted companies (N) and raising ARPU (unit : mil

35. Slide 35: HENNGE One, Supporting Customers' Change

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results HENNGE One, Supporting Customers’ Change Supporting customers’ SaaS utilization and continuously liberate technology. Messaging Security - SSO - Device control - Sending large files - Behavior Protection PPAP Free Zero Trust Au

36. Slide 36: HENNGE One as a SaaS Platform

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results HENNGE One as a SaaS Platform HENNGE One will grow as the global SaaS market expands. Currently integrates with and more Over 230 Cloud services 36

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38. Slide 38: Appendix (Corporate Overview)

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Appendix (Corporate Overview) 38

39. Slide 39: Corporate Profile

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Corporate Profile Company name : HENNGE K.K. Executives : Kazuhiro Ogura Representative Director, President and CEO Kazuaki Miyamoto Representative Director, Executive Senior Vice President Yoshiki Nagatome Director, Executive

40. Slide 40: Locations

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Locations Japan Taiwan Nagoya branch office 2016/8 Tokyo Head office Osaka branch office 2015/6 Fukuoka branch office 2018/8 40

41. Slide 41: Vision: Liberation of Technology

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Vision We want to deliver the power of technology as many people as we can. Liberation of Technology テクノロジーの解放 41

42. Slide 42: History

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results History Our business domain is ever-changing, but our will remains steadfast. Linux server eCRM software HENNGE One IoT as a Service Establishment management software HDE Customers Care (f.k.a. HDE mail service) HENNGE Worksty

43. Slide 43: Sales Structure by Business

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Sales Structure by Business 91.5% of the net sales comes from HENNGE One business. (as of Q4 FY2022) 43

44. Slide 44: HENNGE One

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results HENNGE One Identity as a Services (IDaaS) Provide centralized authentication to various SaaS-es, with Single Sign On (SSO) technology ID Federation Access Control Customizable policy Administrator Various cloud services Micros

45. Slide 45: HENNGE One

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results HENNGE One Support cloud usage with a balanced convenience and security through IdP features, which provide IP restrictions, device certificate, secure browser, and multi-factor authentication, and E-Mail security features, whi

46. Slide 46: HENNGE One Solid Customer Base

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results HENNGE One Solid Customer Base HENNGE One is used by 2,213 customers in various industries, and has 2.32 million users. Average number of contracted users per contracted company is approximately 1,050. (as of 2022-09-30) Break

47. Slide 47: Appendix (Total Addressable Market)

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Appendix (Total Addressable Market) 47

48. Slide 48: Cloud Adoption Rate in Japan

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Cloud Adoption Rate in Japan Cloud Adoption Rate in Japan has increased by 4.0pt to 22% from 2021. (Reference: Press release ‘Average Cloud Computing Adoption Rate in Japan’ in June 2021 by Gartner, Inc. URL of the original re

49. Slide 49: Number of Companies by Employee Size in Japan

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Number of Companies by Employee Size in Japan There is a huge potential market because cloud adoption will continue to accelerate. Customers’ demands # of employees 日本国内における従業員数規模別企業数 # of companies by each employee scale 5000

50. Slide 50: Regional Split in the number of companies

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Regional Split in the number of companies Japan has number of metro areas other than Tokyo. Our focus is to expand the business not only in Tokyo but also within other metro areas, such as Nagoya, Osaka, Fukuoka, and others. T

51. Slide 51: Appendix (Others)

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Appendix (Others) 51

52. Slide 52: Diversity and Inclusion

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Diversity and Inclusion Focusing our efforts on the Global Internship Program (GIP) to not only provide career development opportunities for the most talented candidates from all over the world, but also to be the precedent org

53. Slide 53: Diversity

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Diversity Diversity is the key driver to keep challenging and changing. We recognize the differences and respect the differences, which then we can create a basis for an ever-changing organization that value challenges. Diversit

54. Slide 54: Business Investments and New Business Development

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Business Investments and New Business Development We are approaching business fields adjacent to current businesses through both business investment and new business development, along with R&D activities in current businesses.

55. Slide 55: Past Materials (New Services, etc.)

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Past Materials (New Services, etc.) 55

56. Slide 56: Three New Features for HENNGE One

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results HENNGE One Business Three New Features for HENNGE One (Since October 2021) HENNGE One’s new features providing more secure file transfer, smartphone access security, and E-Mail protection from targeted attacks were launched in

57. Slide 57: HENNGE Connect

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results HENNGE One Business HENNGE Connect (Since April 2022) “HENNGE Connect” has been launched as a feature of HENNGE IdP Pro and HENNGE One Pro in April 2022. Enables seamless access management in a hybrid environment of on-premise

58. Slide 58: Renewal of Service Lineup for HENNGE One

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results HENNGE One Business Renewal of Service Lineup for HENNGE One (Since October 2021) Service lineups were renewed from October 2021. Approaching varieties of customers with high value-added suite plans, as well as setting up sing

59. Slide 59: License lineup for HENNGE One announced in June 2019

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results HENNGE One Business License lineup for HENNGE One announced in June 2019 (From June 2019 to September 2021) ※ New contracts taken into place after October 2021 will apply new licence lineup which was announced in August 2021.

60. Slide 60: HENNGE One for Education

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results HENNGE One Business HENNGE One for Education (Since July 2020) In response to GIGA School Program advocated by the Japanese Ministry of Education, Culture, Sports, Science and Technology (MEXT), HENNGE One for Education has be

61. Slide 61: SumaMachi

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Professional Service and Others Business SumaMachi (Since August 2020) SumaMachi is a communication service that enables smooth two-way communication with community residents to municipalities nationwide. (Previously named as

62. Slide 62: Past Materials (Marketing)

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Past Materials (Marketing) 62

63. Slide 63: Marketing Activities for HENNGE One

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Marketing Activities for HENNGE One It requires some time from marketing campaigns to the contribution in expansion of ARR as HENNGE One’s lead time is relatively long. However, the results of the investment in advertising exp

64. Slide 64: Past Materials (Our Surveys, etc.)

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Past Materials (Our Surveys, etc.) 64

65. Slide 65: SaaS usage survey to our customers (December 2019)

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results SaaS usage survey to our customers (on December 2019) On average, our customers are using 7 cloud services per company, and 24% of them are using 10 cloud services. (# of companies) (# of cloud services) Survey overview: SaaS

66. Slide 66: Glossary

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Glossary ARR (Annual Recurring Revenue) refers to revenue, normalized on an annual basis, that a company expects to receive from its customers for providing them with products or services of subscription-based model. ARPU (Ave

67. Slide 67: Disclaimer

    HENNGE K.K. (4475:TYO) FY09/2022 Full-year Consolidated Financial Results Disclaimer This document has been prepared by HENNGE K.K. (the “Company”) solely for information purpose. This document does not constitute or form part of and should not be construed as, an offer to sell or issue or the solici

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