■Future outlook for Netyear Group <3622>

2. Growth Strategy

The company has been promoting five points as its growth strategy: 1) Strengthening competitive advantage by expanding the areas of customer contact improvement, 2) Expanding key customers through multi-faceted service provision, 3) Creating stable customers by strengthening collaboration with NTT Data, 4) Expanding the services provided, and 5) Securing and developing human resources. The main points and progress are as follows.

(1) Strengthening competitive advantage by expanding the areas of customer contact improvement

By expanding the areas for improving customer contact and broadening the range of value provided, the aim is to respond to diverse customer needs and accelerate business growth. Specifically, by not only staying within the traditional web domain but also expanding customer contact to encompass the entire digital realm (social media, online advertising, e-commerce, etc.) and real (physical stores), the goal is to widen the support for client companies and secure competitive advantages in fiercely competitive markets.

(2) Expanding key customers through multi-faceted service provision

The aim is to deepen relationships with client companies through multi-faceted service provision and improve revenue efficiency by increasing the number of key customers. By providing multiple services in a one-stop manner for each customer contact, including planning, design, development, and operational improvements, the intention is to deepen transactions with key customers, where stable trades of several hundred million yen over multiple years can be expected, similar to starbucks. Currently, it remains limited to a few companies, but there are about ten candidate companies, which are intended to be developed into key customers in the future.

(3) Creating stable customers by strengthening collaboration with NTT Data

Share customer strategies with NTT Data and group companies, and work together to develop business opportunities and provide value by leveraging the strengths of both companies, aiming to create key customers that are difficult to reach alone. As mentioned previously, for the fiscal year ending March 2025, the collaboration system among four companies will be strengthened, focusing on acquiring collaborative projects.

(4) Expansion of Provided Services.

In order to achieve sustainable growth in the medium to long term, efforts will be made not only to expand custom projects but also to provide somewhat structured services. The company is currently focusing on the expansion of four services: "Design & Agile," "Brand Value Enhancement Support," "SaaS Integration," and "Full Stack SX." Although some results were achieved in the previous period, the gap between the needs of client companies and the services proposed by the company could not be bridged, which did not lead to an increase in overall revenue. For the fiscal year ending March 2025, efforts will be made to enhance service quality so that they become attractive services for client companies.

In addition, new service development is also progressing. A capital alliance contract was signed with Hexabase Co., Ltd. in September 2023 to jointly develop a headless CMS (Content Management System), and orders have already started to come in. A headless CMS is a CMS that does not have a front end (head), and unlike traditional CMS, the front end and back end are completely separated, allowing for flexible development and management. Compared to heavy and large enterprise-type CMS solutions, it enables a high degree of freedom in development and has become a recent trend in CMS.

Furthermore, in June 2024, a new service "Netyear CVR Max" supporting website CRO (Conversion Rate Optimization) was launched. Utilizing LeanGo's site improvement tool "DEJAM," this service aims to improve the CVR (Conversion Rate) of client-owned media and efficiently support revenue growth. Moving away from an approach that relied on the consultant's experience and intuition in the previously promoted POS (Performance Optimization Service), this service will support performance improvement through a PDCA cycle involving data-driven objective insights and qualitative analysis, utilizing the company's UX perspective and "DEJAM" for planning improvement measures, executing strategies, and verifying their effectiveness.

Currently under development is a tool called "AI Deep Insights," which uses AI technology to classify customer types and implement promotional measures through optimal channels (Web, applications, social media, real life, etc.), with a target release during the fiscal year ending March 2026. The company intends to utilize this as a door-knocking tool for acquiring new customers. Additionally, a public space CRM application called "coconiko" has been developed and launched. This system connects public spaces such as parks, sports facilities, shopping streets, and tourist spots with the local residents who visit and use them, providing features like map functions, coupon issuance, and digital stamp rally systems to support regional revitalization. By collecting and analyzing visitor and user data such as personal attribute information, behavioral history, and location information that were previously inaccessible to operators, service providers such as event hosts, tourist locations, and shopping streets will be able to implement effective marketing measures. The company plans to improve recognition through exhibitions and other opportunities in the future.

This is a jointly developed application with nandary candary, Inc., which supports fan marketing in the fields of corporate, local government, sports teams, park facilities, and entertainment. nandary candary acts as the general agent for sales.

(5) Securing and Developing Human Resources.

Regarding securing human resources for business growth, efforts will be made to hire diverse personnel with excellent expertise, as well as to promote the establishment of a working environment that accommodates diverse employment forms and flexible working styles centered on remote work. Additionally, for human resource development, a system has been established to support the acquisition of various qualifications, and there are plans to enhance educational programs and human resource management that draw out intrinsic motivation, resulting in a turnover rate of below 10%, lower than the industry average. A medium to long-term human resource development plan aimed at sustainable growth is also planned for the fiscal year ending March 2025.

Furthermore, specific initiatives for securing human resources include referral hiring and regional recruitment for mid-career hires, along with the joint promotion of the "Young IT and Digital Human Resource Development Project" with LULL since March 2022. This initiative aims to cultivate individuals with no experience in the IT industry into engineers and employ them. The scheme adopts LULL's IT human resource development curriculum, where web instructors and career advisors support both skills and career aspects. In addition, a curriculum related to UX, designed with rich knowledge from the company, is provided. Dozens of members are participating in the company’s development projects through LULL, and some of them are becoming employees, with plans to continue such initiatives in the future. Additionally, for the lack of human resources, a human resource circulation network is being built by assigning freelance personnel with the necessary skills for each project through partner companies.

As personnel enhancement progresses, it is expected that the outsourcing ratio, which accounts for about 40% of the cost of sales, will decrease, leading to improved profitability. Although mid-career hiring was suppressed for the fiscal year ending March 2025, the policy is to actively invest in human resources starting from the fiscal year ending March 2026 onward to build a management foundation for achieving sustainable growth.

(6) Medium-term Growth Image

The company is positioning the fiscal year ending March 2025 as a recovery phase towards future performance growth, focusing on cost efficiency and the creation of key customers. From the fiscal year ending March 2026 onward, it will work on sustainable growth through the expansion of key customers, in addition to a strategy to place revenue on a growth trajectory through scale growth that integrates the company's strengths in UX design power and technology.

(Written by FISCO guest analyst, Jo Sato)