Future growth strategy.

1. Environmental awareness and growth potential

(1) Environmental awareness

The problem of labor shortage, especially in small and medium-sized enterprises, is becoming more serious. On the other hand, the background of the increasing demand for Caster <9331> services is the change in thinking about work styles due to the penetration of remote work triggered by the COVID-19 pandemic. It is expected that the demand for the service will increase from both the job-seeking side (workers) and the job-offering side (client companies). In particular, in the case of small and medium-sized enterprises, the utilization of BPO, which requires large lots, has not yet advanced. The increasing demand due to labor shortage is a tailwind for the company's service (WaaS).

※1 It is predicted that the number of labor supplies that will be short in 2040 will be 11 million (source: Recruit Works Research Institute "Future Forecast 2040").

※2 According to the company's survey (conducted in August 2022, sample size: 2,810 companies, using Fastask), the usage of BPO is 61.0% for large companies (with more than 300 employees) and 39.9% for small and medium-sized enterprises (with less than 300 employees) (source: Business Plan and Growth Potential).

(2) Target market and growth potential

The company's policy is to expand from the current back-office-centric area to the general area of ​​planning operations, and further expand to the large IT business area in the market. According to the company's calculations, the Total Addressable Market (TAM) for the outsourcing needs of the company's services is 2.7 trillion yen, the Serviceable Addressable Market (SAM) is 1.1 trillion yen, and the Serviceable Obtainable Market (SOM) in the existing area is 800 billion yen. The core target market is 170 billion yen. Of course, this is only a Fermi estimation based on certain assumptions, but it is useful to understand the company's perspective and direction, and it can be considered rational considering the situation where many small and medium-sized enterprises are suffering from labor shortages (IT talent shortage is even more serious) and cannot fully respond to digital transformation.

2. Direction of Growth Strategy

The company has not yet announced specific medium-term management plans, but it has set out the direction of accelerating sales growth by strengthening existing businesses and expanding segments. For existing businesses, in the back-office area, it will strengthen the areas of accounting and labor administration with high expertise and a significant shortage of personnel. On the other hand, in order to expand segments, it is considering entering areas such as consulting, marketing, and engineering, for which needs have already been identified from customers, from the current back-office area. In addition, the strategy for expanding business areas and expanding channels involves moving from WaaS to BPaaS, and promoting business alliances with various platforms by positioning itself as a third-party supplier of human resources.

3. Focus Points for Medium- to Long-term Attention by Our Analysts

We also see the strategy of opening up new markets and raising the angle of growth by expanding the target areas as an inevitable direction toward the realization of the mission to make remote work the norm. Considering the fact that the expansion of segments has pushed up the company's performance in the past, it can be said to be reasonable. However, when expanding into areas with higher expertise such as consulting, marketing, and engineering from the current back-office area, the key point is to what extent the past successful experiences and know-how can be utilized, and how to tune the business model itself. Of course, for the company that has been accumulating detailed experience since its founding, it will be well aware of this. In that sense, the company's entry into BPaaS this time is worth noting as a specific strategy for future business expansion. Collaboration with various platforms that gather clients from each area will clearly accelerate the speed of growth in terms of business expansion and know-how accumulation. Moreover, there is a clear trend towards active use of AI technology, and the company's impending actions for the future are becoming more and more tangible. In any case, despite being a company that has opened up the market with a good vision and strong beliefs, in order to further develop its business and make an impact on society in the future, it can be said that it is now time to demonstrate its management capabilities.

(Written by Fisco Guest Analyst Ikuo Shibata)