Company Overview

1. Company Overview

J-DEP ADVANCE <5885> sets its mission as "Advance with you, let's advance the world", and is a company mainly engaged in the system incubation business targeting AI. The system incubation business is a service that supports speeding up research and development with a different approach by providing servers and the company's original solutions using cutting-edge technology to address the challenges of researchers and developers dealing with AI, visualization, big data, etc in their system environments. President and CEO Masamichi Iino learned about NVIDIA products at the 2007 Supercomputing Conference in Nevada, USA and felt the potential of a small card to drastically change the concept of parallel computing, which became the trigger for the trade with NVIDIA and the driver of subsequent success. The company still has a good relationship with NVIDIA and has become the number one partner in Japan. As of the end of May 2024, the number of employees is 21, and they operate with a small but elite team. The company was listed on the TSE Standard Market in June 2023.

2. History

The predecessor of the company was Towadenki Co., Ltd., established in 1978 as an electronic component trading company. From the beginning, they excelled in transactions with universities and research institutions, and even though the products and services they handle have changed, their sales network with those institutions has been maintained. The first turning point came in 2007 when they met NVIDIA at a conference in the USA, and that year started handling NVIDIA products. It was at a time when GPUs, previously used for gaming chips, began to be used for high-performance computing (technology that processes big data quickly using powerful processors capable of parallel processing).

The next turning point was in 2015 when advancements in GPU technology and deep learning led to a surge in AI application development. The company developed and released its own AI workstation called the 'DeepLearning BOX', establishing AI solutions. While their focus had previously been on fluid analysis and visualization, with universities and research institutions as major customers, they succeeded in expanding their customer base to business companies in the automotive and precision machinery industries in the AI era. Furthermore, from 2018 onwards, they entered the era of large-scale AI and cloudification, with their solutions also scaling up. In 2018, they started handling the NVIDIA DGX (an appliance server mainly used for large-scale AI learning), quickly responding to the needs for large-scale and cloud-based solutions. In February 2024, to support AI investments in the mobility industry, they started the 'GPU Advanced Test Drive' (GAT) with Toyota Tsusho Group's Nexti Electronics (later mentioned).

3. Business content

The company's business consists of a single segment, the 'System Incubation Business', but it provides two services: 'DX Services' and 'Service & Support'.

1) 'DX Services'

The main 'DX Services' are divided into three services: 'AI Visualize Solution Services', 'Other DX Solution Services', and 'Subscription Services'. Among the 'AI Visualize Solution Services', the AI solution service develops and operates AI services for customers, combining hardware, software, and tools suitable for developing and operating AI using Deep Learning, to develop, assemble, and sell turnkey systems. Models such as 'DeepLearning BOX' (company's original product) and DGX series (NVIDIA product) are the main products. The Visualize Solution Services target customers who perform computer processing using images and videos, offering assembly and sales of graphic workstations for CAD, CAE, computer graphics production, and digital signage. Models such as GWS series (company's original product) and 'Omniverse' (NVIDIA product) are the main products. 'Other DX Solution Services' include assembly and sales of high-speed, high-capacity storage for storing large amounts of data, sales and configuration of high-bandwidth network equipment for fast data transmission, sales and configuration of software to enhance hardware convenience, design and construction of systems combining these elements. In 'Subscription Services', the company offers its developed solutions for rental or cloud-based services. The company's cloud service features a non-virtualized bare-metal cloud, ensuring no performance degradation in physical environments with significant security benefits. The revenue composition of 'DX Services' is 91.9% (fiscal year ending May 2024).

2) 'Service & Support'

'Service & Support' provides optional operational support services to ensure continuous use of the company's solutions (hardware, software, construction expertise) as the latest stable system through ongoing hardware maintenance and environmental updates, not just hardware maintenance. The revenue composition of 'Service & Support' is 8.1% (fiscal year ending May 2024).

The company's services are classified into Flow Business and Stock Business models. Most of the 'DX Services' fall under Flow Business, with Subscription Services classified as Stock Business. 'Service & Support' is categorized under Stock Business. While the current ratio of Stock Business is low, there is a policy to improve it in the medium to long term.

(Written by FISCO Guest Analyst, Hideo Kakuta)