■ Outlook for Sios <3744>
2. Growth Strategy
As part of the growth strategy for the fiscal year ending in December 2024, the company is focusing on three key initiatives: (1) continued investment in SaaS and subscription business, (2) expansion of API solution business, and (3) business enhancement through AI generation.
(1) Continued investment in SaaS and subscription business
By continuing to invest in the SaaS and subscription business, the company aims to establish a sustainable revenue base for sustained growth. Specifically, the company will continue to develop the already monetized "Gluegent series" and strengthen subscription sales of "LifeKeeper" domestically and internationally while expanding its functionality.
a) "Gluegent series"
The series has been focusing on product development and marketing efforts, resulting in the acquisition of new customers and continued growth. The combined ARR* of the "Gluegent Flow" and "Gluegent Gate" products, in particular, increased by 18.0% compared to the same month of the previous year in June 2024 (Flow increased by 32.8%, Gate increased by 12.3%), achieving double-digit growth for both products. The growth has been on an upward trend since June 2020, with a CAGR (Compound Annual Growth Rate) of 17.6% (based on ARR for Gluegent Flow/Gate as of June) for the four-year period from June 2020. In comparison, competing companies such as Eightred <3969> achieved a CAGR of 16.4% (stock revenue for the first quarter of the fiscal year ending in March 2021 to the first quarter of the fiscal year ending in March 2025), rakumo <4060> achieved a CAGR of 20.4% (SaaS revenue for the second quarter of the fiscal year ending in December 2020 to the second quarter of the fiscal year ending in December 2024), and HENNGE <4475> achieved a CAGR of 21.5% (revenue for "Henge One" for the third quarter of the fiscal year ending in September 2020 to the third quarter of the fiscal year ending in September 2024), showing a comparable CAGR to other SaaS companies. However, as the company is still relatively small compared to its competitors, it aims for even higher growth rates.
* ARR (Annual Recurring Revenue) = Monthly Recurring Revenue (sum of monthly recurring revenue based on subscription contracts) at the end of the month x 12 months.
As part of the ARR expansion strategy, it is important to increase new customer acquisition, upsell to existing customers, and implement measures to prevent cancellations. In "Gluegent Flow," efforts to strengthen the integration with Microsoft 365 in addition to Google Workspace are aimed at improving user efficiency and convenience. Stronger digital marketing and collaboration with sales partners, such as online seminars, have led to the acquisition of new customers. To prevent cancellations, the customer success system has been strengthened to enhance customer follow-up, resulting in a continued low cancellation rate from the previous period. Furthermore, "Gluegent Flow" won first place in the "Small and Medium Enterprises Division" in the introduction cases section at the BOXIL SaaS AWARD 2024, and received high praise on the ITreview, the largest domestic review site for IT products. The comprehensive integration features, user-friendly UI/UX design, and easy task management have been highly evaluated.
※1 The enhanced integration features allow automatic data export to Excel and other file-saving capabilities.
※2 The BOXIL SaaS AWARD is an event hosted by SmartCamp Co., Ltd. which judges, selects, and awards outstanding SaaS. Excellent SaaS products are recognized annually and quarterly.
※3 The introduction cases section is where SmartCamp selects services that support companies' workstyle reform and DX promotion based on entry cases, taking into account their contribution to companies and society. The small and medium-sized enterprises division targets companies with 101 to 500 employees.
"Gluegent Gate" has steadily expanded, exceeding a cumulative total of 0.25 million users since its service launch in 2011, amid the increasing importance of information security measures in the era of zero trust. In July 2024, it added SCSK's ERP "ProActive C4" to its list of supported services, and further growth is expected as it plans to collaborate with SCSK on seminars and marketing activities. In terms of prevention of cancellations, it has built a customer success framework that can continuously support customers from consulting before implementation to addressing post-implementation issues, resulting in a consistently low cancellation rate.
※ The new approach to security discards the traditional concept of "boundaries" in internal and external network environments, and instead verifies the safety of access to all information assets without trust to prevent threats to information assets.
b) Strengthening the subscription of "LifeKeeper"
"LifeKeeper" aims to strengthen sales through subscription contracts (flat rate, pay-as-you-go) amid the growing use of cloud environments domestically and internationally. Overseas, the revenue for the second quarter of the fiscal year ending December 2024 increased by 8.5% compared to the same period the previous year, and the average annual growth rate since December 2020 has been 43.4%, indicating steady expansion. The company is currently developing sales through subscription contracts in the domestic market to build a stable revenue base by increasing the proportion of stock-type sales. Furthermore, attention towards "LifeKeeper" as a solution to significant incidents is expected to rise, following a major system fault in July 2024 caused by a malfunction in one of its software products, leading to a global infrastructure downtime.
* There was a bug in the update file for the information security product 'Falcon' Windows version provided by the US company CrowsStrike
(Written by FISCO guest analyst, Jo Sato)