Overview of Terilogy Holdings ＜5133＞ business

1. Business Overview. P-B Systems <4447> is an independent SIer based in Fukuoka, with expertise in system virtualization technology and strong cloud-based infrastructure building capabilities that builds various information systems for mid-sized enterprises, SaaS providers, and public agencies. The secure cloud system business is the core of the business, supporting total security, resilience building related to cybersecurity, and the realization of DX with cloud technology, ranging from digital work promotion to experience-sharing VR theaters with MetaWalkers, a series of emotional system businesses. The company is also fostering metaverse businesses. The company has claimed to have been a "small group of professionals in system virtualization" to date. However, steering toward further growth in the future, the company plans to expand its scale from the FY2024, aiming to transform itself into a "professional group of hybrid clouds."

The company group divides its business (changed from March 2024) into the network department, which sells and maintains network-related products, the security department, which sells and maintains network security-related products, and the solution service department, which sells and maintains the group's developed software, IT services, inbound promotion, and other products. The network department and security department mainly handle products from overseas emerging IT companies such as Silicon Valley and Israel. Including the solution service department, the handled solutions cover a wide range of areas including network-related, IT security-related, OT/IoT security-related, cloud security-related, CTI-related, group development/operation management/monitoring-related, and more.

In the past five periods (from the fiscal year ending March 2020 to the fiscal year ending March 2024), the departmental sales (the figures prior to the classification change before March 2023) have been expanding due to increased demand, new product sales, and the effects of M&A in the security department and the solution service department. The network department benefited from the sales increase due to the replacement demand for the IP address management server's new model since the fiscal year ending March 2021, but the replacement demand for it subsided in March 2023. The revenue composition ratio for the fiscal year ending March 2024 is 22.7% for the network department, 43.7% for the security department, and 33.6% for the solution service department.

As for the main M&A and alliance strategies of the company group since 2022, in March 2022, Terilogy Works (currently Constella Security Japan) entered into a capital and business alliance (increased shareholding in June 2023 to strengthen the relationship) with Japan Cyber Defense, Inc. for the purpose of contributing to Japan's national security. In August 2022, the company entered into a capital and business alliance with Kanematsu Electronics for expanding transactions mainly related to security and developing next-generation businesses. In February 2023, the company invested in the Israeli venture investment fund 'IL Ventures' in order to discover companies with next-generation advanced and cutting-edge technology for new business areas such as DX solutions for the manufacturing industry. In May 2023, the company entered into a capital and business alliance (converted to an equity-method affiliate) with ITM, a subsidiary of Sakura Internet, to accelerate the provision of cloud security managed services, development of industry-specific cloud infrastructure in the OT field, and solution development. Furthermore, in July 2023, the company made CresSeed a wholly-owned subsidiary through a simplified stock exchange; in October of the same year, it made eFestep, which mainly engages in software development for major manufacturing companies, a consolidated subsidiary (merged with CresSeed on April 1, 2024); and in March 2024, it made Logit, which specializes in CX (customer experience) solutions, a consolidated subsidiary by acquiring it from Infocom Co., Ltd. In May 2024, the company, Terilogy, and Takamatsu Trading Co., Ltd. <2676> entered into a business alliance to expand the market in the industry-specific solutions.

(Authored by FISCO guest analyst Masanobu Mizuta)