WOW WORLD 2352

WOW WORLD

Recent Updates

2022-05-12

Acquisition of shares of the newly-established splitting company of Spaceship, Inc. and conversion to a subsidiary through a capital increase via third-party allotment; capital and business alliance with Data Vehicle, Inc. and underwriting of capital increase via third-party allotment

2022-05-12

Full-year FY03/22 flash update

2022-04-05

Q3 FY03/22 report update

Get in touch

KDX Nishi Gotanda Building 7-20-9 Gotanda, Shinagawa-ku, Tokyo

https://www.wow-world.co.jp/

03-6672-6788

Summary

WOW WORLD develops and sells emailing and related software and services under the WEBCAS brand. In FY03/18, it posted revenue of JPY1.5bn (+14.5% YoY) and operating profit of JPY348mn (+21.3% YoY). The company holds a 12% share of the emailing software space, making it the No. 4 company in the domestic emailing software market of over 200 companies. The company has three segments: Applications, Consulting, and Custom Development. The Applications segment generates 80% of total revenue and nearly all the operating profit. In this business, the company develops the WEBCAS systems, which it offers in two formats: cloud services (offered over the internet; 70% of segment revenue) and on-premises services (licensed software that runs on client servers; 30% of segment revenue). Azia stands out as the only emailing software company in Japan offering customized cloud services that cater to individual client needs.

Internet Software & ServicesSoftwareIT Services

Key dates

2018-08-21

Coverage initiation

Full Report

2022-05-12

Full-year FY03/22 flash update

2022-05-12

Q3 FY03/22 flash update

2022-02-01

1H FY03/22 flash update

2021-10-29

Q1 FY03/22 flash update

2021-07-30

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Executive summary

Business overview

WOW WORLD Inc. is gradually transforming itself into a company that provides operational support services bolstered by its operations centered on email distribution and the development and sale of associated peripheral software. In accordance with this expansion in its business operations, the company dispensed with its previous name, “Azia,” in favor of its current name, “WOW WORLD,” on July 1, 2021. The company holds a 12% market share of the emailing software space, making it the No. 4 company in the domestic emailing software market of over 200 companies. In FY03/21, the company had four reporting segments: Applications, Consulting, Custom Development, and E-Commerce. The Applications segment generates 80% of total revenue and nearly all the operating profit.

In its core Applications segment (the “Enterprise Software” segment from the start of FY03/22), the company is primarily focused on development and sale of the WEBCAS email distribution system, and cloud-based sales account for more than 80%. Additionally, it enhances the usability of cloud systems that provide same services by customizing various aspects to fit individual user needs. WOW WORLD’s services are clearly distinct from those of its competitors because WOW WORLD is the only company in the industry that performs these customizations. In FY03/21, the company acquired Connecty Inc., a company with considerable strength in the field of content management systems (CMS), and subsequently adjusted its reporting segments effective from the beginning of FY03/22.

The company’s main clients are e-commerce operators that communicate with a large number of consumers via email. WOW WORLD has about 1,300 accounts, from SMEs to large companies such as cosmetics manufacturer Fancl, with most (1,100 of the accounts) using its cloud-based services. Cloud services are mainly offered as yearly subscription plans, with users paying monthly usage fees averaging JPY60,000/month. WOW WORLD is steadily adding clients by following up on online inquiries and referrals from existing accounts. It has kept its monthly churn rate at 2–3%, and client numbers are growing at an annual pace of just over 10%. The company has a steady earnings base, underpinned by the recurring revenue of its cloud offerings.

The company is taking an aggressive stance toward the expansion of its business through M&A. On August 16, 2018, the company acquired an e-commerce business from unlisted firm Hamons, Inc., and thereafter established Mamachu. WOW WORLD is operating its own independent e-commerce operations while also attempting to leverage these operations as an opportunity to conduct research that will provide ideas for future product development. On August 18, 2020, the company announced that it would include Connecty Inc. in its group by acquiring its unlisted parent company, Connecty Holding. The acquisition aims to reinforce the company’s core businesses.

Trends and outlook

FY03/22 results: The company reported full-year revenue of JPY2.8bn (+20.2% YoY), operating profit of JPY363mn (-11.9% YoY), recurring profit of JPY366mn (-14.0% YoY), and net income attributable to owners of the parent of JPY213mn (-4.1% YoY). EBITDA was JPY593mn (+4.9% YoY). The addtion of Connecty Inc. to the group in October 2020 contributed to revenue. Cloud services in the Enterprise Software segment, a traditional mainstay of the company's operations, increased, resulting in 13 consecutive quarters of revenue growth. In terms of profit, the company posted a record EBITDA due to growth in cloud services. However, operating profit declined due to higher personnel expenses resulting from an increase in headcount, mainly new graduates, and salary increases, as well as preparations for the voluntary adoption of IFRS (International Financial Reporting Standards), and consulting fees incurred in connection with the full-scale launch of the Customer Success division.

FY03/23 forecast: The full-year forecast calls for revenue of JPY3.4bn (no comparative given due to transition to IFRS), operating profit of JPY510mn, recurring profit of JPY500mn, net income attributable to owners of the parent of JPY320mn, and EBITDA of JPY730mn. The Enterprise Software segment (name unchanged) will be reorganized to include the CDP business of Connecty. The Digital Marketing Operation Support segment will be split into the Large-scale Web Development segment and the Communication Support and Consulting segment, with the development and operation businesses of the Large-scale Web Development segment undertaken by Connecty. The Communication Support and Consulting segment will be divided into the communication and CDP businesses: the former will be handled by the company (operation support consulting via email), its subsidiary FUCA, and the newly consolidated Newstream; the latter will be made up of Connecty's CDP operation and consulting businesses. The Other and E-commerce businesses will be integrated into a new Other business. Since the company will transition to IFRS on a voluntary basis from FY03/23, there are no YoY comparisons. The company expects revenue growth for FY03/23, driven by growth in the existing business and Connecty's CDP business, as well as a contribution from the newly consolidated Newstream.

With the completion of the current medium-term business plan (from FY03/18 to FY03/20), the company plans to announce a new medium-term plan on May 14, 2020. By collaborating with Japan Growth Investments Alliance, Inc., the company is following its policy of cultivating its existing businesses and incubating new pillars of business.

Strengths and weaknesses

WOW WORLD’s strengths are its customized cloud-based services (the only emailing software company in Japan with such a product offering), wide range of support related to emailing software, and high name recognition that allows clients to seek out its products. Its weaknesses are the tendency for its key products to interfere with future breakthroughs, limited growth speed in the Applications segment (the Enterprise Software segment starting from the beginning of FY03/22), and overdependence on certain products in its portfolio. (See the Strengths and weaknesses section for details.)

Key financial data

Income statement		FY03/13	FY03/14	FY03/15	FY03/16	FY03/17	FY03/18	FY03/19	FY03/20	FY03/21	FY03/22	FY03/23
(JPYmn)		Parent	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Est..
Revenue		779	1,007	1,031	1,146	1,330	1,523	1,704	1,876	2,357	2,834	3,440
	YoY	8.6%	29.3%	2.4%	11.1%	16.1%	14.5%	11.9%	10.1%	25.6%	20.2%	-
Gross profit		549	677	645	749	849	943	985	1,156	1,317	1,554
	YoY	10.3%	23.1%	-4.6%	16.0%	13.4%	11.1%	4.5%	17.3%	13.9%	18.0%
	Gross profit margin	70.5%	67.2%	62.6%	65.3%	63.8%	61.9%	57.8%	61.6%	55.9%	54.8%
Operating profit		135	242	179	239	287	348	372	463	412	363	510
	YoY	44.7%	78.9%	-26.3%	34.1%	20.0%	21.3%	6.7%	24.5%	-11.0%	-11.9%	-
	Operating profit margin	17.4%	24.0%	17.3%	20.9%	21.6%	22.9%	21.8%	24.7%	17.5%	12.8%	14.8%
Recurring profit		140	239	181	243	292	362	370	470	425	366	500
	YoY	41.6%	70.2%	-24.2%	34.2%	20.2%	24.0%	2.3%	27.0%	-9.6%	-14.0%	-
	Recurring profit margin	18.0%	23.7%	17.6%	21.2%	21.9%	23.8%	21.7%	25.1%	18.0%	12.9%	14.5%
Net income		49	131	109	161	177	236	130	321	223	213	320
	YoY	-49.3%	167.1%	-16.7%	47.9%	9.8%	33.6%	-45.1%	147.0%	-30.6%	-4.1%	-
	Net margin	6.3%	13.0%	10.6%	14.1%	13.3%	15.5%	7.6%	17.1%	9.4%	7.5%	9.3%
Per-share data (split-adjusted; JPY)
Shares issued (year-end; '000)		4,652	4,652	4,652	4,652	4,552	4,552	4,412	4,412	4,412	3,999
EPS		13.6	35.0	28.2	40.5	43.0	58.0	32.3	81.0	56.1	54.2	82.8
EPS (fully diluted)		13.1	32.7	27.0	39.5	42.7	58.0	32.3	-	53.4	51.0
Dividend per share		3.8	7.0	7.5	9.0	12.5	18.0	20.0	23.0	25.0	30.0	33.0
Book value per share		188.4	218.6	236.0	278.2	294.5	366.1	343.0	389.9	438.9	385.6
Balance sheet (JPYmn)
	Cash and cash equivalents	687	742	840	830	779	1,022	759	902	1,183	888
Total current assets		830	915	1,020	1,134	1,137	1,371	1,169	1,317	1,744	1,431
Tangible fixed assets		17	29	41	79	112	99	119	112	128	164
Investments and other assets		90	73	80	143	159	229	326	359	436	417
Intangible assets		10	36	28	50	98	152	74	154	930	1,066
Total assets		947	1,053	1,169	1,406	1,506	1,851	1,688	1,942	3,238	3,078
	Accounts payable	4	7	6	6	7	8	25	41	40	41
	Short-term debt	0	0	0	0	0	0	0	0	159	166
Total current liabilities		199	168	197	239	270	316	275	333	638	829
	Long-term debt	0	0	0	0	0	0	0	0	703	568
Total fixed liabilities		12	14	8	12	30	36	48	60	787	651
Total liabilities		211	182	206	251	299	352	323	392	1,425	1,480
Total net assets		736	871	963	1,155	1,206	1,499	1,365	1,550	1,813	1,598
Total liabilities and net assets		947	1,053	1,169	1,406	1,506	1,851	1,688	1,942	3,238	3,078
Total interest-bearing debt		0	0	0	0	0	0	0	0	862	734
Cash flow statement(JPYmn)
Cash flows from operating activities		187	115	132	186	239	349	210	440	416	469
Cash flows from investing activities		-192	-42	-26	84	-168	-55	-218	-222	-478	-334
Cash flows from financing activities		7	-18	-9	21	-123	-52	-269	-80	350	-431
Financial ratios
ROA (RP-based)		15.8%	23.9%	16.3%	18.9%	20.0%	21.6%	20.9%	25.9%	16.4%	11.6%
ROE		7.3%	17.1%	12.4%	15.6%	15.1%	17.6%	9.1%	22.1%	13.5%	13.2%
Equity ratio		74.0%	78.4%	79.0%	81.3%	79.7%	80.6%	80.4%	79.4%	53.8%	48.4%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Parent results shown through FY03/13, consolidated results from FY03/14.

Segment revenue and profit			FY03/16	FY03/17	FY03/18	FY03/19	FY03/20	FY03/21	Segment revenue and profit		FY03/21	FY03/22
(JPYmn）			Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	(JPYmn）		Cons.	Cons.
Revenue			1,146	1,330	1,523	1,704	1,876	2,357	Revenue		2,357	2,834
	YoY		11.1%	16.1%	14.5%	11.9%	10.1%	25.6%		YoY	25.6%	20.2%
	Applications		963	1,125	1,229	1,283	1,439	1,681	Enterprise Software		1,681	1,910
		YoY	12.5%	16.8%	9.2%	4.4%	12.2%	16.8%		YoY	16.8%	13.6%
		% of total	84.0%	84.6%	80.7%	75.3%	76.7%	71.4%		% of total	71.4%	67.4%
	Consulting		150	183	272	306	287	505	Digital Marketing Operation Support		505	803
		YoY	-14.6%	22.1%	49.2%	12.3%	-6.2%	75.9%		YoY	75.9%	59.0%
		% of total	13.0%	13.7%	17.9%	18.0%	15.3%	21.4%		% of total	21.4%	28.3%
	Custom Development		34	23	22	14	14	6	Other		6	3
		YoY	-	-33.3%	-3.6%	-35.4%	-2.9%	-58.0%		YoY	-58.0%	-46.4%
		% of total	3.0%	1.7%	1.4%	0.8%	0.7%	0.2%		% of total	0.2%	0.1%
	E-commerce		-	-	-	101	136	165	E-commerce		165	118
		YoY	-	-	-	-	35.2%	21.3%		YoY	21.3%	-28.8%
		% of total	-	-	-	5.9%	7.3%	7.0%		% of total	7.0%	4.2%
Operating profit			239	287	348	372	463	412	Operating profit		412	363
	YoY		34.1%	20.0%	21.3%	6.7%	24.5%	-11.0%		YoY	-11.0%	-11.9%
	Applications		452	524	610	613	740	724	Enterprise Software		724	839
		YoY	20.9%	16.0%	16.3%	0.4%	20.8%	-2.2%		YoY	-2.2%	16.0%
		Operating profit margin	46.9%	46.6%	49.6%	47.7%	51.4%	43.0%		Operating profit margin	43.0%	43.9%
	Consulting		5	-2	10	15	6	47	Digital Marketing Operation Support		47	-39
		YoY	-65.8%	-	-	44.8%	-58.8%	664.6%		YoY	664.6%	-
		Operating profit margin	3.2%	-1.1%	3.8%	4.8%	2.1%	9.2%		Operating profit margin	9.2%	-4.8%
	Custom Development		2	8	5	6	4	2	Other		2	2
		YoY	-	306.3%	-44.4%	22.5%	-33.3%	-45.2%		YoY	-45.2%	-4.1%
		Operating profit margin	6.1%	37.4%	21.6%	40.9%	28.1%	36.6%		Operating profit margin	36.6%	65.5%
	E-commerce		-	-	-	-2	-11	-18	E-commerce		-18	-19
		YoY	-	-	-	-	-	-		YoY	-	-
		Operating profit margin				-1.7%	-8.2%	-10.9%		Operating profit margin	-10.9%	-15.7%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Until FY03/12, the company operated in two segments: Application Development segment (currently Applications segment) and Contract Development segment. In the table above, figures for the former segments are shown under the Applications segment and the Consulting segment, respectively. In FY03/13, the company renamed the Application Development segment as the Applications segment, and the Contract Development segment as the Service Solutions segment (scope of operations unchanged in both cases). In the table above, figures for the latter are shown under the Consulting segment. In FY03/17, the company split the Service Solutions segment into the Consulting segment and the Custom Development segment, resulting in the present segmentation (three segments). (Figures for FY03/16 have been retroactively adjusted to match the present segmentation.) Established a new E-commerce segment from FY03/19.
Effective from the beginning of FY03/22, the Applications segment will be renamed the Enterprise Software segment, and the Consulting segment will be known as the Digital Marketing Operational Support segment. Meanwhile, the E-Commerce segment remains unchanged, and the Custom Development segment has been transferred into the Other segment.

Recent updates

Acquisition of shares of the newly-established splitting company of Spaceship, Inc. and conversion to a subsidiary through a capital increase via third-party allotment; capital and business alliance with Data Vehicle, Inc. and underwriting of capital increase via third-party allotment

2022-05-12

On May 10, 2022, WOW WORLD Inc. announced the acquisition of shares of a newly-established splitting company of Spaceship Inc. and its conversion into a subsidiary through the underwriting of a third-party allotment of new shares.

WOW WORLD announced that, at a Board of Directors meeting held on the same day, it signed a joint venture agreement with Spaceship, Inc. (Minato-ku, Tokyo, unlisted) to split the marketing business operated by Spaceship Inc. and resolved to acquire the shares of the new company to be established. WOW WORLD also announced that it will underwrite a third-party allotment of capital by the new company and will make it a subsidiary.

Spaceship provides digital marketing support services to major corporations and a variety of other industries. WOW WORLD believes that the establishment of a cooperative framework with Spaceship will help support the acquisition, development, and conversion of prospective digital marketing clients into customers. The new company will be called Newstream and is due to be established on July 1, 2022. The impact of this transaction on the company's forecast for FY03/23 is expected to be minimal. For details, please refer to the company release.

On May 10, 2022, WOW WORLD Inc. announced a capital and business alliance with Data Vehicle, Inc. and the underwriting of a capital increase via third-party allotment of new shares.

WOW WORLD announced that, at a Board of Directors meeting held on the same day, it concluded a capital and business alliance agreement with Data Vehicle, Inc. (Minato-ku, Tokyo, unlisted) and will underwrite a capital increase via third-party allotment by Data Vehicle.

Data Vehicle was established in November 2014 as a company specializing in data analysis tools. It develops and sells data analysis tools, dataDiver and dataFerry, that can be used without specific knowledge of statistics or programming, and services, such as DX human resource training services, based on its mission, "the democratization of data science". Through its business alliance, WOW WORLD plans to improve operational efficiency in its WEBCAS business. After the acquisition, the company will own 143 shares of Data Vehicle (143 voting rights, 9.13% of voting rights). The impact of this transaction on the company's forecast for FY03/23 is expected to be minimal. For details, please refer to the company release.

Trends and outlook

Quarterly trends and results

Cumulative				FY03/20				FY03/21				FY03/22				FY03/22
(JPYmn)				Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	FY Est.
Revenue				442	881	1,370	1,876	451	921	1,640	2,357	677	1,388	2,109	2,834	99.8%	2,840
	Enterprise Software			326	672	1,052	1,439	346	713	1,220	1,681	442	945	1,428	1,910	97.2%	1,966
		Cloud services		268	535	812	1,116	290	574	934	1,322	376	768	1,176	1,586	95.7%	1,658
			CRM	-	-	-	-	290	574	885	1,216	322	657	1,007	1,352	100.1%	1,350
			CMS	-	-	-	-	-	-	48	105	54	110	169	234	101.3%	231
		On-premises services		58	137	240	323	56	139	284	359	64	176	249	324	105.2%	308
	Digital Marketing Operation Support			74	134	206	287	54	114	283	505	202	381	585	803	97.6%	822
			CRM	-	-	-	-	54	114	174	253	63	126	184	230	85.8%	268
			CMS	-	-	-	-	-	-	109	251	139	254	401	571	103.1%	554
	Other			3	8	10	14	1	2	5	6	1	1	2	3	77.3%	4
	E-commerce			38	67	102	136	50	92	132	165	32	61	94	118	94.2%	125
	YoY			18.3%	13.0%	11.3%	10.1%	2.0%	4.5%	19.7%	25.6%	50.3%	50.7%	28.6%	20.2%		20.5%
	Enterprise Software			11.7%	10.4%	12.3%	12.2%	6.0%	6.1%	16.0%	16.8%	27.8%	32.6%	17.1%	13.6%		16.9%
		Cloud services		32.7%	18.8%	17.0%	18.3%	8.2%	7.2%	15.1%	18.4%	29.7%	33.8%	25.9%	20.0%		25.4%
			CRM	-	-	-	-	-	-	-	-	11.0%	14.5%	13.8%	11.2%
			CMS	-	-	-	-	-	-	-	-	-	-	252.1%	122.9%
		On-premises services		-35.3%	-13.7%	-1.2%	-5.0%	-4.0%	1.6%	18.3%	11.3%	14.1%	26.9%	-12.3%	-9.8%		-14.3%
	Digital Marketing Operation Support			-3.6%	-10.4%	-8.6%	-6.2%	-27.9%	-15.0%	37.7%	75.9%	276.7%	233.7%	106.4%	59.0%		62.9%
			CRM	-	-	-	-	-	-	-	-	16.7%	10.5%	5.7%	-9.1%
			CMS	-	-	-	-	-	-	-	-	-	-	267.9%	127.5%
	Other			-23.5%	12.0%	-6.2%	-2.9%	-58.5%	-71.7%	-52.3%	-58.0%	-36.2%	-57.0%	-51.8%	-46.4%		-30.6%
	E-commerce			-	372.7%	76.8%	35.2%	31.0%	36.9%	29.2%	21.3%	-35.2%	-33.4%	-29.2%	-28.8%		-24.4%
Gross profit				255	528	837	1,156	270	550	898	1,317	360	765	1,160	1,554
	YoY			23.1%	18.7%	20.0%	17.3%	5.8%	4.3%	7.2%	13.9%	33.5%	38.9%	29.3%	18.0%
	Gross profit margin			57.7%	59.9%	61.1%	61.6%	59.9%	59.8%	54.7%	55.9%	53.2%	55.1%	55.0%	54.8%
SG&A expenses				186	347	515	694	184	396	635	905	260	548	859	1,192
	YoY			28.3%	18.9%	14.8%	13.0%	-0.9%	14.4%	23.3%	30.5%	41.5%	38.3%	35.2%	31.6%
	SG&A ratio			42.0%	39.3%	37.6%	37.0%	40.8%	43.0%	38.7%	38.4%	38.4%	39.5%	40.7%	42.0%
Operating profit				70	181	322	463	86	154	263	412	100	216	302	363	98.0%	370
	YoY			11.3%	18.2%	29.2%	24.5%	23.9%	-15.1%	-18.5%	-11.0%	16.4%	40.6%	14.9%	-11.9%		-10.1%
	Operating profit margin			15.7%	20.6%	23.5%	24.7%	19.1%	16.7%	16.0%	17.5%	14.8%	15.6%	14.3%	12.8%		13.0%
Recurring profit				72	190	331	470	88	155	274	425	101	214	299	366	98.9%	370
	YoY			14.7%	24.7%	34.8%	27.0%	23.2%	-18.4%	-17.2%	-9.6%	14.6%	38.6%	9.2%	-14.0%		-13.0%
	Recurring profit margin			16.2%	21.5%	24.2%	25.1%	19.6%	16.8%	16.7%	18.0%	15.0%	15.4%	14.2%	12.9%		13.0%
Net income				49	128	225	321	64	98	168	223	56	118	167	213	115.4%	185
	YoY			21.3%	29.4%	41.7%	147.0%	29.8%	-23.2%	-25.4%	-30.6%	-12.3%	20.0%	-0.4%	-4.1%		-16.9%
	Net margin			11.1%	14.5%	16.4%	17.1%	14.1%	10.7%	10.2%	9.4%	8.2%	8.5%	7.9%	7.5%		6.5%
Quarterly				FY03/20				FY03/21				FY03/22
(JPYmn)				Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Revenue				442	440	488	506	451	470	719	717	677	711	721	725
	Enterprise Software			326	346	380	387	346	367	507	462	442	503	484	482
		Cloud services		268	267	276	305	290	284	360	387	376	392	408	410
			CRM	-	-	-	-	290	284	311	331	322	335	350	1,352
			CMS	-	-	-	-	-	-	48	57	54	56	59	234
		On-premises services		58	78	104	83	56	83	145	75	64	112	73	75
	Digital Marketing Operation Support			74	60	71	81	54	60	169	221	202	179	204	218
			CRM	-	-	-	-	54	60	60	79	63	63	58	230
			CMS	-	-	-	-	-	-	109	142	139	115	147	571
	Other			3	5	2	4	1	1	3	1	1	0	1	1
	E-commerce			38	29	35	34	50	42	41	33	32	29	32	24
YoY				18.3%	8.1%	8.5%	6.9%	2.0%	7.0%	47.2%	41.7%	50.3%	51.2%	0.2%	1.1%
	Enterprise Software			11.7%	9.2%	15.9%	11.8%	6.0%	6.1%	33.5%	19.2%	27.8%	37.1%	-4.6%	4.4%
		Cloud services		32.7%	7.6%	13.7%	22.0%	8.2%	6.2%	30.5%	27.2%	29.7%	37.9%	13.2%	5.9%
			CRM	-	-	-	-	-	-	-	-	11.0%	18.0%	12.5%	308.5%
			CMS	-	-	-	-	-	-	-	-	-	-	22.9%	310.5%
		On-premises services		-35.3%	14.9%	22.2%	-14.5%	-4.0%	5.7%	40.4%	-8.9%	14.1%	35.7%	-49.8%	-0.4%
	Digital Marketing Operation Support			-3.6%	-17.5%	-5.2%	0.4%	-27.9%	1.1%	136.7%	172.6%	276.7%	195.5%	20.5%	-1.5%
			CRM	-	-	-	-	-	-	-	-	16.7%	5.0%	-3.3%	191.1%
			CMS	-	-	-	-	-	-	-	-	-	-	34.9%	302.1%
	Other			-23.5%	53.0%	-44.1%	8.2%	-58.5%	-79.3%	28.1%	-74.3%	-36.2%	-81.1%	-46.9%	-17.6%
	E-commerce			-	104.9%	-19.2%	-20.9%	31.0%	44.5%	14.7%	-2.6%	-35.2%	-31.2%	-19.8%	-27.2%
Gross profit				255	273	309	319	270	280	347	419	360	404	396	394
	YoY			23.1%	14.8%	22.2%	10.9%	5.8%	2.8%	12.3%	31.4%	33.5%	44.1%	13.9%	-6.0%
	Gross profit margin			57.7%	62.1%	63.3%	63.0%	59.9%	59.6%	48.3%	58.4%	53.2%	56.9%	54.9%	54.3%
SG&A expenses				186	161	169	178	184	213	239	270	260	288	311	333
	YoY			28.3%	9.7%	7.2%	7.9%	-0.9%	32.0%	41.7%	51.3%	41.5%	35.5%	30.0%	23.3%
	SG&A ratio			42.0%	36.6%	34.5%	35.3%	40.8%	45.2%	33.2%	37.7%	38.4%	40.5%	43.1%	45.9%
Operating profit				70	112	141	140	86	68	109	149	100	116	85	61
	YoY			11.3%	23.0%	46.9%	14.8%	23.9%	-39.3%	-22.9%	6.2%	16.4%	71.2%	-21.5%	-59.0%
	Operating profit margin			15.7%	25.4%	28.8%	27.8%	19.1%	14.4%	15.1%	20.8%	14.8%	16.3%	11.8%	8.4%
Recurring profit				72	118	141	139	88	66	119	151	101	113	85	66
	YoY			14.7%	31.8%	51.0%	11.7%	23.2%	-43.8%	-15.5%	8.4%	14.6%	70.6%	-28.9%	-56.0%
	Recurring profit margin			16.2%	26.8%	28.9%	27.6%	19.6%	14.1%	16.6%	21.1%	15.0%	15.9%	11.8%	9.2%
Net income				49	79	97	96	64	35	69	55	56	62	49	46
	YoY			21.3%	35.0%	62.1%	-	29.8%	-56.1%	-28.2%	-42.8%	-12.3%	78.9%	-29.1%	-15.5%
	Net margin			11.1%	18.0%	19.8%	18.9%	14.1%	7.4%	9.7%	7.6%	8.2%	8.7%	6.8%	6.4%

Source: Shared Research based on company data
Note: For the segment breakdown, Shared Research has retroactively adjusted the old segments based on the business operations of the new segments.
Note: Figures may differ from company materials due to differences in rounding methods.

Quarterly revenue trends
Quarterly operating profit trends

Source: Shared Research based on company data

Full-year FY03/22 results (out May 10, 2022)

Full-year FY03/22 (April 2021–March 2022) consolidated results

Revenue: JPY2.8bn (+20.2% YoY)
Operating profit: JPY363mn (-11.9% YoY)
Recurring profit: JPY366mn (-14.0% YoY)
Net income attributable to owners of the parent: JPY213mn (-4.1% YoY)

Market conditions

The prolonged COVID-19 pandemic and the unstable international situation continued to have a negative impact on the global economy. Digital-related demand was firm with the progress in the digitalization of customers' approach in the web and e-mail marketing business.

Revenue growth

On July 1, 2021, the company changed its name to WOW WORLD Inc. In FY03/22, it posted its 13th consecutive quarter of revenue growth with a contribution from Connecty Inc., which joined the group in October 2020, along with an increase in cloud services in the Enterprise Software business, which was already a mainstay business.

EBITDA

Starting in FY03/21, the company has changed one of its key management indicators from operating profit to EBITDA (operating profit plus depreciation, goodwill amortization, and share-based remuneration expenses). The reason for the change is that one of the growth strategies set out in the medium-term management plan is the development of new businesses through M&A. If this strategy is fulfilled, the company may incur significant goodwill amortization expenses that do not involve cash payments.

FY03/22 EBITDA was JPY594mn (+4.9% YoY), marking a record high for the company, thanks to growth in cloud services. However, operating profit declined due to higher personnel costs from hiring and salary increases, focused on new graduates, preparations for the voluntary transition to IFRS and consulting fees incurred in connection with the full-scale launch of the Customer Success division.

1H FY03/22 results by segment are as shown below.

Enterprise Software (formerly Applications) segment

Revenue: JPY1.9bn (+13.6% YoY)
Gross profit margin: 68.6% (+4.0pp YoY)

Consolidation of Connecty and strong performance in cloud services

Connecty Inc., which was not yet a part of the group in FY03/21, contributed to revenue. Further, existing cloud services also saw revenue growth led by SaaS Standard (previously "ASP").

Quarterly Annual Recurring Revenue (ARR) for cloud services

		FY03/20				FY03/21				FY03/22
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
CRM WEBCAS Premium		564	588	612	612	624	636	672	660	675	696	708	667
	YoY	20.5%	11.4%	21.4%	18.6%	10.6%	8.2%	9.8%	7.8%	8.2%	9.4%	5.4%	1.1%
CRM WEBCAS Standard		324	348	372	384	360	384	444	456	491	504	552	532
	YoY	17.4%	16.0%	14.8%	18.5%	11.1%	10.3%	19.4%	18.8%	36.4%	31.3%	24.3%	16.7%
CMS		-	-	-	-	-	-	156	165	172	181	194	210
	YoY	-	-	-	-	-	-	-	-	-	-	24.4%	27.3%
Total		888	936	984	996	984	1,020	1,272	1,281	1,338	1,381	1,454	1,409
	YoY	19.4%	13.0%	18.8%	18.6%	10.8%	9.0%	29.3%	28.6%	36.0%	35.4%	14.3%	10.0%

Source: Shared Research based on company data

Digital Marketing Operation Support (formerly Consulting) segment

Revenue: JPY803mn (+59.0% YoY)
Gross profit margin: 24.1% (-8.4pp YoY)

Consolidation of Connecty Inc.

The segment posted a huge rise in revenue. As with the Enterprise Software segment, this was mainly due to the revenue contribution from Connecty. However, profit declined YoY at FUCA due to higher personnel costs as apparel and cosmetics companies that form the main customer base were negatively impacted by the pandemic.

E-commerce segment

Revenue: JPY118mn (-28.8% YoY)
Gross profit margin: 42.5% (+3.8pp YoY)

A new segment created in Q2 FY03/19, the E-commerce segment consists largely of subsidiary Mamachu, which sells baby clothes online through its website Babychu. The company established the e-commerce business with a goal of acquiring marketing expertise in the online retail sales arena. Revenue declined due to a drop in demand related to outings, which is the sort of demand Babychu targets. This drop in demand was primarily the result of the prolonged impact of the pandemic.

Other segment

Revenue: JPY3mn (-46.4% YoY)
Gross profit margin: 79.5% (+30.2pp YoY)

Other is mainly the old Custom Development business

The Other segment comprises mainly the old Custom Development segment. The company is not actively seeking new orders, instead just continuing existing projects with high margins.

Full-year company forecast for FY03/23

		FY03/21			FY03/22			FY03/23
(JPYmn)		1H Act.	2H Act.	FY Act.	1H Act.	2H Act.	FY Act.	1H Est.	2H Est.	FY Est.
Revenue		921	1,436	2,357	1,388	1,446	2,834	1,580	1,860	3,440
	YoY	4.5%	44.4%	25.6%	50.7%	0.7%	20.2%	13.8%	28.7%	21.4%
Cost of revenue		371	670	1,040	624	656	1,279
Gross profit		550	766	1,317	765	790	1,554
	Gross profit margin	59.8%	53.4%	55.9%	55.1%	54.6%	54.8%
SG&A expenses		396	509	905	548	643	1,192
	SG&A ratio	43.0%	35.4%	38.4%	39.5%	44.5%	42.0%
Operating profit		154	258	412	216	146	363	135	365	500
	YoY	-15.1%	-8.4%	-11.0%	40.6%	-43.2%	-11.9%	-37.6%	149.4%	37.8%
	Operating profit margin	16.7%	17.9%	17.5%	15.6%	10.1%	12.8%	8.5%	19.6%	14.5%
Recurring profit		155	271	425	214	151	366	130	370	500
	YoY	-18.4%	-3.6%	-9.6%	38.6%	-44.1%	-14.0%	-39.4%	144.5%	36.7%
	Recurring profit margin	16.8%	18.8%	18.0%	15.4%	10.5%	12.9%	8.2%	19.9%	14.5%
Net income		98	124	223	118	96	213	85	235	320
	YoY	-23.2%	-35.5%	-30.6%	20.0%	-23.1%	-4.1%	-27.9%	145.9%	49.9%
	Net margin	10.7%	8.7%	9.4%	8.5%	6.6%	7.5%	5.4%	12.6%	9.3%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

FY03/23 full-year outlook (out May 10, 2022)

Revenue: JPY3.4bn (no comparative growth rate given due to transition to IFRS)
Operating profit: JPY510mn
Recurring profit: JPY500mn
Net income attributable to owners of the parent: JPY320mn
EPS: JPY82.8 (FY03/22 EPS [diluted]: JPY50.97)

Review of business segments

The Enterprise Software segment (name unchanged) will be reorganized to include the CDP business of Connecty. The Digital Marketing Operation Support segment will be split into the Large-scale Web Development segment and the Communication Support and Consulting segment, with the development and operation businesses of the Large-scale Web Development segment undertaken by Connecty. The Communication Support and Consulting segment will be divided into the communication and CDP businesses: the former will be handled by the company (operation support consulting via email), its subsidiary FUCA, and the newly consolidated Newstream; the latter will be made up of Connecty's CDP operation and consulting businesses. The Other and E-commerce businesses will be integrated into a new Other business.

Enterprise Software segment (formerly Enterprise Software + CDP)

The full-year revenue forecast is JPY2.3bn. Revenue from communications platforms (cloud and on-premise) is forecast at JPY1.9bn (+14.6% YoY). The CDP business (JPY33mn) will be newly included.

Large-scale Web Development (formerly part of Digital Marketing Operation Support)

The full-year revenue forecast is JPY598mn. The company expects revenue of JPY367mn (-3.0% YoY) for development and JPY231mn (+20.8% YoY) for operation.

Communication Support and Consulting (formerly part of Digital Marketing Operation Support + CDP)

The full-year revenue forecast is JPY461mn. The company expects revenue of JPY393mn (+72.4% YoY) for communication and JPY68mn (+1260.0% YoY) for CDP.

Other (formerly E-commerce + Other)

The full-year revenue forecast is JPY131mn (+8.3% YoY).

EBITDA forecast

EBITDA is forecast to be JPY730mn (+23.0%), with an EBITDA margin of 21.2% (+0.3pp YoY). The company expects higher personnel costs associated with strengthening the sales system in line with the expansion of the parent company's business and costs associated with ISMAP (+JPY34mn), and plans to strengthen investment in areas such as rebranding. Meanwhile, it intends to improve its profit margin through controlling outsourcing costs and personnel expenses at Connecty which were unexpectedly higher in FY03/22.

Implementation of new policies from FY03/22 (reference)

Full-scale launch of Customer Success Division

Through the launch of its Customer Success Division in FY03/22, the company will aim to strengthen sales activities focused on lowering the churn rate associated with cloud services, raising average revenue per customer, and increasing upward impact from cross-sales. At the same time, the company will attempt to generate higher revenue through CRM-related operations in its Enterprise Software segment (previously referred to as cloud services in the Applications segment).

The company has already begun implementing sales activities enhanced through integration of customer success management methods. In Q1, ARPU associated with WEBCAS SaaS Standard trended upward while the corresponding churn rate also declined compared to Q4 FY03/21 (January–March 2021). WOW WORLD will obtain useful information and suggestions through consultations with organizations and individuals such as Hiroko Razavi (recently added as an outside director) and plans to strengthen these customer success initiatives while expanding their scope to include WEBCAS SaaS Premium.

The company aims to lower the WEBCAS SaaS Standard churn rate to half its current level at some point in the future. Additionally, the company will focus on developing new applications for its core series of WEBCAS services with the goal of achieving future expansion in the scope of sales activities associated with overall customer success management.

The company plans to enhance operational efficiency at Connecty and the company’s existing cloud services by expanding customer success efforts across the group.

Signs of business area expansion

The company has positioned FY03/22, the second year of its medium-term management plan, as a year in which it will see how well its initiatives in customer success, which it views as vital to the company's growth moving forward, contribute to revenue growth. In FY03/22, the company also announced that it would begin conducting business operations in the customer data platform field that leverage services currently being developed by Connecty. The company is now focused on building its track record in this area.

A customer data platform (CDP) is a database system for the aggregation, synthesis, and analysis of personally identifiable customer data (first-party data). Clients equipped with the appropriate system infrastructure can utilize CDPs to ensure effective implementation of marketing measures (analysis and data transmission). CDPs are also capable of handling anonymous customer data (third-party data) that has previously been utilized with digital marketing systems such as data management platforms. Due to these attributes, Shared Research believes that the company’s primary business domain will begin to shift from email distribution services to marketing support services at an accelerated pace.

Company forecasts versus results

Results vs. Initial Est.		FY03/13	FY03/14	FY03/15	FY03/16	FY03/17	FY03/18	FY03/19	FY03/20	FY03/21	FY03/22
(JPYmn)		Parent	Parent	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.
	Revenue (Initial Est.)	720	900	1,120	1,130	1,265	1,445	1,700	1,950	1,900	3,150
	Revenue (Results)	779	963	1,031	1,146	1,330	1,523	1,704	1,876	2,357	2,834
Results vs. Initial Est.		8.2%	7.0%	-7.9%	1.4%	5.2%	5.4%	0.2%	-3.8%	24.0%	-10.0%
	Operating profit (Initial Est.)	56	170	245	220	265	318	420	446	330	600
	Operating profit (Results)	135	235	179	239	287	348	372	463	412	363
Results vs. Initial Est.		141.7%	38.4%	-27.1%	8.8%	8.3%	9.5%	-11.5%	3.7%	24.7%	-39.5%
	Recurring profit (Initial Est.)	60	170	245	220	270	321	420	445	330	600
	Recurring profit (Results)	140	239	181	243	292	362	370	470	425	366
Results vs. Initial Est.		133.9%	40.7%	-26.1%	10.4%	8.1%	12.8%	-11.8%	5.7%	28.9%	-39.0%
	Net income (Initial Est.)	30	100	145	140	180	208	275	300	225	339
	Net income (Results)	49	125	109	161	177	236	130	321	223	213
Results vs. Initial Est.		63.0%	25.0%	-24.9%	15.0%	-1.7%	13.6%	-52.8%	6.9%	-1.1%	-37.0%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

In FY03/15, earnings declined YoY following sharp demand growth ahead of the consumption tax hike in the previous year, and this, coupled with the absence of major projects, forced the company to revise down its forecast. Over the last three years, however, earnings have largely surpassed forecast supported by a steady increase in monthly subscription fees for cloud services. In FY03/19, a gap has opened up between net income forecast and actual net income. This is due to an impairment loss caused by the reduction in the asset value of software assets that had already been recorded, as a result of the change in direction of the company’s business strategy.

For FY03/20, although the company did not achieve its revenue target, profits cleared the company’s target thanks to major profit contributions from the (former) Applications segment, notably growth in lucrative cloud services. In FY03/21, both revenue and profits exceeded initial targets thanks to brisk demand for digitalization and contributions from a newly acquired consolidated subsidiary. In FY03/22, revenue increased for the 13th consecutive year due to a contribution from Connecty, which joined the company from October 2020, as well as an increase in cloud services in the Enterprise Software segment, which has been a mainstay of the company for many years.

Medium-term outlook

Revisions to the new medium-term business plan (out May 11, 2021)

In light of FY03/21 results, the company upwardly revised the targets in the medium-term business plan it initially announced on May 14, 2020. While making no substantial changes to its fundamental management policies, the company lifted its targets for each year for the reasons outlined below. In particular, the revised plan reflects the company’s belief that it has built up a customer base that exceeds that initially envisioned for FY03/23, the last year in the plan.

Connecty Inc., joined the group in October 2020.

The COVID-19 pandemic has contributed to increased digitalization demand and growth in cloud services has exceeded what was expected when the medium-term plan was formulated.

Details regarding the revisions to the plan are as follows. Factoring in cloud services growth, the company lifted its revenue and EBITDA targets by about JPY100.0bn and JPY300mn, respectively for both FY03/22 and FY03/23 (the final year in the plan).

FY03/22: Initial revenue target of JPY2.2bn lifted to JPY3.2bn, initial EBITDA target of JPY585mn lifted to JPY850mn.

FY03/23: Initial revenue target of JPY2.6bn lifted to JPY3.8bn, initial EBITDA target of JPY800mn lifted to JPY1.1bn.

Growth strategies: Implications of the upward revisions

The company in May 2021 upwardly revised its medium-term business plan targets. The company around the same time also released a series of important management-related releases, including releases regarding the company changing its name and its management structure. Shared Research believes that the upward revisions to medium-term plan targets, the change in the company’s management structure (to a holding company structure), as well as its name change, is part of the company's medium-term growth strategy. The company is focused on building the foundation for medium- to long-term growth in line with its revised medium-term plan.

M&A strategy

The company in FY03/20 clarified its intention to pursue growth through M&A, announcing a tie-up with Japan Growth Investments Alliance, Inc., a company specializing in growth investment in small and medium-sized companies showing the potential for expansion, creating funds for small buyouts, and supporting the growth of portfolio companies (its major shareholders at Monex Group (TSE1: 8698), Japan Tobacco (TSE1: 2914), and Hakuhodo DY Holdings (TSE1: 2433). In FY03/21, the company made Connecty Inc. a consolidated subsidiary, with the collaboration and integration of the two company’s businesses made in a way that complemented the areas of expertise at each, which resulting in a sharp improvement in revenue in FY03/21.

With the full-year contribution coming into play, the consolidation of Connecty is likely to continue to play an important role in the company's expansion of its business in FY03/22. Management has also indicated that it aims to achieve M&A activity on roughly the same scale as Connecty in each year remaining in the current medium-term business plan. Shared Research believes that the company will continue to narrow down its M&A targets through cooperation with Japan Growth Investment Alliance and other business partners, as well as through its own internal efforts.

Group companies

The WOW WORLD group comprises the company and subsidiaries Connecty Inc., FUCA Co., Ltd., and Mamachu, Inc.

Connecty Inc. (66.7% ownership)

Connecty develops and provides SaaS-based cloud content management system (CMS) services as well as digital transformation (DX) consulting services. In 2005, Connecty’s current executive director, Yasuyuki Hattori, launched Japan’s first cloud enterprise CMS, called Connecty CMS on Demand. In 2011, Connecty became a consolidated subsidiary of Works Applications (Tokyo, unlisted), but Hattori bought back the company in 2019 through his holding company. Connecty's customer base mainly comprises major corporations.

In terms of customer base and products, Connecty has a high affinity with WOW WORLD’s Applications and Consulting segments (These two segments have been restructured along with businesses handled by Connecty, and, effective from the beginning of FY03/22, subsequently became the “Enterprise Software” segment and the “Digital Marketing Operational Support” segment), and brings strengths in new customer development and consulting methods to the table. Revenue for FY06/20—reflecting Connecty’s content management system (CMS) and Web consulting businesses only—totaled JPY589mn (+9.7% YoY), while operating profit was JPY75mn (+11.9% YoY). Connecty Inc. became a consolidated subsidiary in October 2018 following the company’s acquisition of shares in holding company CONNECTY HOLDING on August 18, 2020. Connecty has been contributing to consolidated earnings since Q3 FY03/21 and revised its fiscal term to end in March following its consolidation.

FUCA Co., Ltd. (87.7%)

FUCA provides proposal, planning, production, and analysis services for websites and email newsletters. It was added to the group in October 2013, and operates under what was previously known as the "Consulting" segment. FUCA excels in website design and has a solid track record in this field (for example, it handles website development for a major cosmetics manufacturer). WOW WORLD has managed to secure its largest client through a joint proposal with FUCA.

In FY03/18, FUCA contributed over 10% of consolidated revenue. In FY03/19, the subsidiary posted revenue of JPY273mn, recurring profit of JPY10mn, and net income attributable to parent company shareholders of JPY7mn.

Mamachu, Inc. (100.0%)

In August 2018, Mamachu was established to take over operations of an e-commerce business transferred from Hamons, Inc. (Osaka, Japan). The business operates the babies’ clothing e-commerce website “Babychu.” In FY03/19, the company launched its new E-commerce segment with Mamachu as its main constituent. According to the company, the e-commerce workers at Hamons are highly proficient in merchandising and sales promotion efforts, and are quite willing to utilize new marketing tools. The company believes that by assimilating and making the best use of this expertise, it will be able to boost the functionality of its products and improve its consulting service capabilities.

The purpose of the E-commerce segment is to enable the company to gain consulting know-how and make functional enhancements to the company’s mainstay WEBCAS series through the management of an e-commerce website. In FY03/19, Mamachu had revenue of JPY101mn, an ordinary loss of JPY3mn, and a net loss attributable to shareholders of JPY3mn.

Growth strategies for the existing businesses

In its medium-term management plan, the company states that it is targeting “dramatic” growth for its existing businesses. More specifically, while average annual growth in cloud services over the three years through 2020 trended at about 10%–15%, the company targets average annual growth for the cloud business over the period covered by the medium-term plan of 25%. In order to achieve this, the company is introducing “customer success” and bolstering promotions.

Customer success entails providing active support to the customer in order to achieve customer success, i.e., the business results the customer targets, and profit at the company itself (the seller). Management recognized the importance of customer success in cloud services, and by strengthening its customer success activities aims to improve the churn rate and unit price per contract in its cloud services. To strengthen its efforts in this area, the company has established a Customer Success division. In addition, the company plans to invite Hiroko Razavi, a leading authority on the introduction of customer success in Japan, as an outside director to provide advice on initiatives and progress associated with the company's customer success activities.

In terms of strengthening promotions, the company will implement promotional measures on a joint basis Japan Growth Investments Alliance, Inc. Shared Research believes the company aims to expand its customer base through this effort, with content designed to effectively attract new customers. While the company has provided no disclosure on specific promotional efforts, one of the key shareholders of partner Japan Growth Investments Alliance, Inc. is Hakuhodo DY, under which operates Hakuhodo Inc. as a major advertising agency.

Conversion to a holding company structure

A management system for group expanding through M&A

M&A is one of the company’s growth strategies. However, corporate groups formed this way are often a collection of companies with different histories, ways of conducting business, and corporate cultures. As such, there is the possibility that a company’s individual dynamism could be lost if they are integrated into another company in the manner often undertaken to date. In order to maintain the growth potential of these group companies while maintaining central management, the company believes that a holding company system, in which each operating company is under the control of a management company, is the best management option. Based on the idea that the entire group will undergo great change, the company decided to change its name in July 2021.

Inviting outside directors

Strengthening the business strategies

Following approval at the shareholders’ meeting, the company will invite two outside directors, Kazuo Miyata and Hiroko Razavi, to join the board in 2021. Mr. Miyata, who has served as a senior executive officer of Fujitsu Limited (TSE1: 6702) and as president and representative director at Fujitsu Group companies, has a wealth of personal contacts as well as experience in the field of project management. Management has strong expectations Mr. Miyata will use his leadership to improve the company’s development structure and root out large projects. As noted earlier, the company is also extending an invitation to Hiroko Razavi, a leading expert in customer success, which is key to the growth of the company's cloud services. The company looks to Ms. Razavi to advise it as it pursues growth in its cloud services.

Strengthening compliance

Inviting outside directors means the company could not only benefit from advice on business operations, but also to strengthen its compliance. The idea of compliance refers not only to laws and regulations, but also to corporate ethics in a broader sense, and strengthening the function of outside directors is an important measure to advance the monitoring of corporate activities from a third-party perspective.

As of FY03/2021, the company's compliance status based on the revised Corporate Governance Code stood at 93.8%. Management has indicated that it intends to achieve 100% compliance by the end of FY03/22. The company has not achieved compliance with principle 2.3, which focuses on the response to sustainability issues and includes the following four sub-points.

①The board of directors should further explore measures for proactively and efficiently addressing sustainability issues.

②Listed companies should improve the quality and quantity of disclosure based on the Task Force on Climate-related Financial Disclosure (TCFD), or equivalent framework, recommendations.

③The board of directors should duly supervise the systematic fostering of candidates as successors to the CEO, etc.

④Listed companies with a controlling shareholder should have independent outside directors as at least one-third of their board members (or a majority in the case of companies listed on the prime market) or establish an ad hoc committee.

Changing the company name

Following approval for a change in the Articles of Incorporation at the general shareholder’s meeting in June 2021, the company moved to revise its name from July 2021 from Azia to WOW WORLD. While strengthening the company brand was the main reason for changing the company name, management also noted that it decided to change its name in line with the goal of being a “relationship engineering” professional group with the ability to create a world of surprises through the power of its people and technology. According to the company, “wow” is a word used to describe a situation exceeding hopes or expectations, and the change in the company’s name reflects its desire to contribute through its activities to a society full of such wonders. In order to connect the “wow” of the employees working within the company, the “wow” of the customers the company serves, and the “wow” of the people who receive the customer's services, the company will use the latest technologies to provide "services that deliver the best information at the best time.” To achieve this goal, the company plans to expand the functions of WEBCAS and strengthen the integration of external systems, including AI tools.

New medium-term business plan (announced May 14, 2020)

Under its previous medium-term plan (which extended through the end of FY03/20), the company had initially been looking to move into the marketing automation market, but it changed directions to focusing more on building up existing businesses (see the “Change in direction for medium-term vision” section below) and ended up realizing record-high earnings in FY03/20.

Still, the company recognized that it might not be able to sustain growth in the future based on existing products alone, and that it would also need to emphasize the development of new products with sales and earnings comparable to its existing mainstay products, as well as the creation of new businesses with the help of M&A. Towards this end, for the sake of more thoroughly implementing its medium-term business plan, the company decided to form a business and capital alliance with Japan Growth Investments Alliance, Inc., consummating the capital alliance by issuing warrants via a private placement, and using this new business partnership to aid its efforts to grow through innovation under its new medium-term business plan covering the years FY03/21 through FY03/23.

Rapid growth for existing business segments

Source: Shared Research based on company data

New business: building one more pillar

Source: Shared Research based on company data

Optimizing financial strategy

Source: Shared Research based on company data

The new three-year plan will be guided by the company’s desire to create another major source of earnings to support its drive to grow through innovation. Major strategies aimed at helping the company reach the performance metrics under the new plan call for three points: (1) rapid growth at existing businesses, (2) the creation of new businesses for another major source of earnings, and (3) optimizing its financial strategy. More specifically, the company is looking to increase the annual growth rate at its mainstay cloud services business from 10–15% up to 25%, lean heavily on M&A to develop new businesses, and use its large cash position to finance growth investments.

Earnings objectives: Revenue (left) and operating profit (right)

Source: Shared Research based on company data

Earnings trends indicated by the company are shown above. It plans on business growth via expansion in existing domains along with new business undertakings. Under the new three-year plan extending through FY03/23, the company is targeting final-year revenue of JPY2.6bn and EBITDA of JPY800mn.

Under its new tie-up agreement, the company expects the role of Japan Growth Investments Alliance, Inc. (J-GIA) to be to work toward the success of the medium-term business plan by leveraging its investments and business support experience in the domains of business administration, M&A, and marketing.

Enhancement of sales and marketing: In collaboration with J-GIA, the company will undertake the formulation of promotion strategies and sales tools for the sake of further growth in WEBCAS transactions.
New business development via M&A strategy formulation and execution: J-GIA will provide multi-level support in identifying and implementing M&A deals with potential for synergy with existing businesses, thereby establishing a new pillar of business via M&A.

(Reference) Change in direction for medium-term vision (FY03/19)

From cross-channel marketing platforms to message delivery optimization solutions

On May 10, 2017, the company unveiled a medium-term business plan ending in FY03/20. The company’s three-year management vision calls for “the development of a cross-channel marketing platform*,” and the company aimed to achieve its management targets through the launch of such a product. The marketing platform had been envisioned as a system that would facilitate comprehensive management and automated execution of various marketing activities undertaken by client companies. It was an extension of the company’s present efforts to develop mechanisms that allow clients such as e-commerce operators to maximize revenue by using a wide range of communication channels such as email, LINE, and texting. The company expected its latest major product, WEBCAS Auto Relations, to help realize this objective. It launched Version 1.0 of the system in June 2016, followed by Version 2.0 in March 2017, and Version 3.0 in 2018. In FY03/20, the final year of the plan, the company intended to release Version 4.0, which would have marked the initial completion of the product.

However, the company set off on the above-mentioned change in direction at the end of FY03/19, announcing a pivot in its product strategy toward “message delivery optimization solutions.” With this change the company put an end to substantial new development of its WEBCAS Auto Relations platform beyond Version 3. Figures for FY03/19 reflected the impairment loss from abandoning software assets relating to its old initiatives.

Background to the change in direction

The company cited the following three reasons for its change in direction.

The companyhe company had been aiming to create “cross-channels,” but this was dependent on actual demand for marketers, which it judged would take too much time to increase. In other words, the company had preempted the market’s needs by too great a margin. Also, as a latecomer to the Marketing Automation industry the company judged it would be difficult to differentiate its products from those of its competitors.

The company thinks it would be able to maintain its technical superiority in email delivery performance by focusing on that field.

From the perspective of managerial efficiency, the company thinks it advantageous to focus its present development resources in areas where it has already demonstrated excellence while coordinating with data-related solutions companies.

The company explained its decision as follows: “Rather than dispersing our developmental resources across the board, we believe it more strategically sound to focus on our strengths while entering the Marketing Automation (MA) market through coordination with other MA companies.” The company at first intended to build a cross-channel MA platform capable of handling collection, analysis, and management of consumer data, which it would use to select optimized marketing channels while also managing delivery. However, the company will now focus its development on channel optimization in which it has technological advantages, leaving data integration to be handled by cooperative partners.

As concerns data integration, the company feared it would be caught in development competition with companies that already had a presence in the market. Moreover, the company explained that through the creation of its E-commerce segment in FY03/19 (operation of an e-commerce site by fully owned subsidiary Mamachu) it began to think that integrated automation platforms would not necessarily fulfill the needs of e-commerce businesses. Considering market trends and investment efficiency, the company chose to focus on maintaining leadership in its strong areas rather than pouring investment in development for a market already occupied by competitors.

The company says its business strategy hereafter will utilize cooperative partnerships on the data integration front while focusing development in the email delivery field. The company entered into alliance with a solutions software company Marketo Inc. (headquartered in the US) specializing in the marketing automation field in September 2018 and Marketo has already adopted the company’s delivery engine for email delivery to its Japanese customers. By expanding its client base through these kinds of partnerships, the company will concentrate on increasing its competitiveness in the fields in which it excels.

Business

Business description

Provider of emailing software and related services

WOW WORLD previously sold in-house developed emailing software and related software and services to companies such as e-commerce operators. During this period, the company described itself as a global provider of solutions that boost e-commerce revenue (solutions that combine application software and related services).
Currently, the company is utilizing the mechanisms it established during this period to transition toward providing operational support services, including the construction of database systems that facilitate the management, analysis, and transmission of various data held by client companies.
It generated revenue of JPY2.4bn in FY03/21, when the email distribution software market was valued at roughly JPY13.0bn. WOW WORLD estimates its market share at about 12%, putting it among the top four companies in a market with over 200 companies.

Until the conclusion of FY03/21, the company’s business portfolio consisted of four segments: Applications, Consulting, Custom Development, and E-commerce. The growth engine was the mainstay Applications segment, in which WOW WORLD developed and sold emailing and related software systems. This segment accounted for approximately 70–80% of the company’s total revenue and earned nearly all of its total profits.

*Effective from the beginning of FY03/22, the company has adjusted its reporting segments. The company made this change because it added Connecty Inc. as a consolidated subsidiary in FY03/21 and combined its businesses with the former Applications and Consulting segments. As a result of this change, the former Applications segment has become the “Enterprise Software” segment, and the former Consulting segment has become the “Digital Marketing Operational Support” segment. The Enterprise Software segment comprises customer relationship management (CRM) operations that the company has been performing for some time and a content management system (CMS) business administered by Connecty. Meanwhile, the company’s CRM operations partly consist of business activities related to SaaS Premium (formerly known as “SaaS”) and SaaS Standard (formerly known as “ASP”), which the company collectively refers to as “cloud services.” These operations also include on-premises services (formerly known as “Licensing”). The Custom Development segment has been scaled down and consequently transferred into the Other segment. No changes have been made to the E-Commerce segment. Here, FY03/21 results have been explained using the former segment alignment.

Revenue by segment

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Revenue breakdown by segment
Operating profit breakdown by segment

Note: Source: Shared Research based on company data
Note: The Custom Development segment was launched in FY03/16 and the E-commerce segment was launched in FY03/18.
Note: Effective from the beginning of FY03/22, the Custom Development segment has been merged into the Other segment.

Business model

Monthly subscription growth model

The company’s mainstay cloud services have expanded to account for approximately 60% of total revenue, and the company has built a business model that ensures steady revenue growth driven by monthly subscriptions. As of end FY03/20, the company had 1,358 client accounts for its cloud services (about 232 SaaS accounts and 1,126 ASP accounts). Rather than pursuing only large accounts, the company aims to keep its client base diversified, which contributes to overall stability. Half of the revenue from on-premises services (roughly 200 accounts) is derived from maintenance fees, and nearly 70% of the company’s total revenue is recurring.

Steady net influx of clients

Client flows underpin earnings stability, and the company is steadily adding clients on a net basis. The company’s new clients are secured roughly half through the internet and the other half via referrals from existing clients or in the form of new functions added for existing clients. Unlike its competitors, WOW WORLD does not engage in telephone sales because order conversion for sales calls is low, as emailing systems require a certain degree of explanation, making it difficult to gauge demand over the telephone.

Specific sales activities are as follows. In the case of online recruitment, the company dispatches sales representatives to potential clients who have established contact through a listing ad. According to the company, it typically faces competition from rivals, but it signs up 30–40 new clients on 200–250 inquiries per month. There are 40 total new accounts per month when including client referrals. In addition, in cloud services, clients for ASP (low-priced plan) outnumber those opting for SaaS. In on-premises services, the company adds an average of five new clients per year. Meanwhile, the monthly churn rate is 2–3% (which is the sector average, according to the company), resulting in 100–150 net customers added per year.

Steady increase in spend per account

We understand the average spend per account for ASP has remained generally flat at about JPY33,000/month) over the last few years due to difficulties in differentiating offerings in an extremely competitive environment. For SaaS (JPY239,000/month) and on-premises services (JPY5mn/account), however, the average spend per account has increased due to higher customer numbers at these accounts (i.e., increase in email addresses calculated on a pay-as-you-go basis), and an increase in the number of client companies requesting integration with related systems (using a wider range of software). As a result, WOW WORLD says the average spend per account is steadily rising for cloud services.

Segment overviews

The company revised its segment classification system in FY03/22. A breakdown of the reported segment changes is as follows.

The Applications segment is now the Enterprise Software segment. The Applications segment was broken down into the cloud and licenses business, but these businesses are replaced in the Enterprise Software segment by the CRM and CMS businesses. The Consulting segment is now the Digital Marketing Operation Support segment, comprising the CRM and CMS businesses, while Customer Development is now “Other.” E-commerce remains unchanged.

Disclosed segment changes