Overview of Japan Information Create <4054>

3. The company's strengths

The company's strengths are: 1) Building an end-to-end service lineup structure that connects brokerage and management for small and medium-sized real estate brokerage and management companies nationwide as the target customers, 2) Achieving region-specific and detailed consulting and support through a nationwide network of 30 locations (as of the end of June 2024), 3) Pursuing revenue expansion through a freemium strategy by promoting new customer development and customer base expansion through free real estate industry property distribution services 'Real Estate BB' and 'Leare-Pro Intermediary', strengthening customer touchpoints, and cross-selling and upselling to paid services such as 'Rental Revolution', 4) Achieving high profitability and stable financial foundation through low cancellation rates and accumulated stock sales.

The transition of the number of customers using the freemium strategy's foundation service (free) for inter-agency property distribution services (total of 'Real Estate BB' and 'Leare-Pro Intermediary' from June 2023) is as follows: The number of customers at the end of June 2024 increased by 6,182 business establishments compared to the end of June 2023, reaching 49,199 business establishments. The customer base is expanding due to the freemium strategy. Moreover, the number of customers using the monthly paid services (including 'Leare-Pro Management' from June 2023) at the end of June 2024 increased by 470 business establishments compared to the end of June 2023, reaching 6,320 business establishments. The company plans to accelerate cross-selling and upselling strategies to paid services towards the expanding customer base through new service development and reinforcement of sales structure. Furthermore, the average monthly cancellation rate of paid services (the percentage of decreased monthly charges due to cancellations as a proportion of the monthly charges of existing contracts) has generally been around 0.5%. By maintaining a low cancellation rate through region-specific consulting and support, the low cancellation rate is believed to indicate the high customer satisfaction with the company's services.

There is significant room for market share expansion.

4. Risk Factors, Revenue Characteristics, Challenges, and Countermeasures

Common risk factors in the system development and information service industry include: suppression of corporate DX investments due to economic fluctuations, intensified market competition, occurrence of unprofitable projects, quality issues, system failures, delayed response to technological innovations, intellectual property rights, securing and nurturing talent, relationships with partner companies and sales partners, legal regulations, etc.

In the real estate brokerage and management sector where the company operates, there are over 1.2 million real estate transaction businesses nationwide. Due to the high number of small-scale businesses, many have low labor productivity, and there are many businesses that are lagging behind in business efficiency improvement through IT and DX. Additionally, it is considered a market with frequent turnover of businesses, with about 5,000 companies going out of business annually and about 6,000 companies opening each year by obtaining real estate transaction qualifications, resulting in a market where the number of corporate businesses is gradually expanding. Furthermore, many of the new businesses are led by young entrepreneurs known as the digital native generation, leading to a strong tendency to actively promote DX. The demand for DX investment in the real estate-related market is expected to expand, and our company sees significant room for market share expansion.

It should be noted that the company's performance is influenced by seasonal factors, with a lower proportion in the third quarter (January-March) and a higher proportion in the fourth quarter (April-June). This is because January and February are busy periods for real estate brokerage and management companies, and there is a strong tendency to conduct system implementation work after April. However, the company's stock sales expansion trend remains unchanged. In addition, the company's customers are small to medium-sized real estate brokerage and management companies (including individual affiliate stores to major FC chains), with the majority of customers paying less than one million yen per month for paid services. Therefore, the risk of dependence on specific customers is low.

(Authored by FISCO guest analyst Masanobu Mizuta)