Business Overview 4. DX Regional Collaboration Project Signpost's DX and Regional Collaboration Project started in March 2022 with the establishment of the DX and Regional Collaboration Division. It aims to provide products and services that contribute to regional collaboration by collaborating with local financial institutions nationwide, utilizing its own DX technology and open innovation. In August 2022, it began working with Oita Made Co., Ltd., which was established with the investment of multiple companies in Oita Prefecture, including Oita Bank, to sell original products made in Oita Prefecture to both domestic and overseas markets and to match local companies and Signpost's products and services in order to promote the revitalization of Oita Prefecture's economy. In addition, in April 2024, it started offering DX support services for medium-sized and small businesses. As the first effort, it supports the creation of DX declaration by (The) Fourth Hokuriku Bank, Ltd. (Niigata City, Niigata Prefecture) to deploy DX declaration support services to the market. Furthermore, it will realize new solutions by commercializing its own technology and open innovation and promote regional collaboration through innovation.

4. Revenue structure. Prodelight<5580>'s revenue is generally composed of cloud PBX "INNOVERA", line "IP-Line", and terminal sales. The revenue of "INNOVERA" consists of monthly fixed usage fees of the system including initial setup revenue and options, and the increase in the number of accounts (number of user terminals) and the rise in option usage rate drive growth. "IP-Line" is composed of initial setup revenue, monthly fixed usage fees, and charges based on call charges, and growth is accelerated by increasing the number of channels (the number of users who can use the same telephone number at the same time) and call time. Terminal sales consist of sales revenue for "Yealink" telephone terminals and electronic blackboards, and sales volume supports revenue growth. Among these, the use of systems and lines is for recurring revenue※, so profitability improves as usage increases, and revenue tends to accumulate every period. As for terminals, it is expected that they will shift to the use of personal smartphones by using apps.

※Recurring revenue refers to billing revenue generated by continuous service provision, etc., also called stock-type revenue. Generally, it is cost-effective.

With a high composition ratio of recurring revenue accounting for about 80% of the company's revenue, it is expected to support the company's future growth and stable revenue. Among them, "IP-Line" and "Yealink" involve down payments to Alteia Networks and Yealink, respectively, but "INNOVERA" is a high-income system developed independently by the company. Therefore, the company is particularly watching "INNOVERA" accounts, "IP-Line" channels, and recurring rates as important indicators. Considering its characteristic of having a lot of recurring revenue, it is unlikely that costs will increase significantly in the future, but it is possible that partner incentives may increase as variable costs as the company strengthens its partnerships.

The company's main target is mid-sized companies with 11 to 100 employees in the Tokyo metropolitan area, but due to the introduction of small-scale plans that do not require initial setup and an increase in the upper limit on the number of users with the introduction of "INNOVERA PBX 2.0", the company has expanded its target to include professionals and startups with less than 10 employees and even large companies. In conjunction with this, in September 2022, the company launched a sales agent system called "Partner Program", which covers not only major cities but also remote areas, and can cover small businesses as well as mid-sized and large businesses, thus establishing a system to incorporate the expanding cloud PBX market into the company's growth. As mentioned later, the proportion of sales via partners, which was previously 70%, increased to 80% in the fiscal year ending August 2023, and there are already signs of the effects of strengthening partnerships, such as an increase in large-scale projects.

Revenue structure. Prodelight<5580>'s revenue is generally composed of cloud PBX "INNOVERA", line "IP-Line", and terminal sales. The revenue of "INNOVERA" consists of monthly fixed usage fees of the system including initial setup revenue and options, and the increase in the number of accounts (number of user terminals) and the rise in option usage rate drive growth. "IP-Line" is composed of initial setup revenue, monthly fixed usage fees, and charges based on call charges, and growth is accelerated by increasing the number of channels (the number of users who can use the same telephone number at the same time) and call time. Terminal sales consist of sales revenue for "Yealink" telephone terminals and electronic blackboards, and sales volume supports revenue growth. Among these, the use of systems and lines is for recurring revenue※, so profitability improves as usage increases, and revenue tends to accumulate every period. As for terminals, it is expected that they will shift to the use of personal smartphones by using apps. ※Recurring revenue refers to billing revenue generated by continuous service provision, etc., also called stock-type revenue. Generally, it is cost-effective. With a high composition ratio of recurring revenue accounting for about 80% of the company's revenue, it is expected to support the company's future growth and stable revenue. Among them, "IP-Line" and "Yealink" involve down payments to Alteia Networks and Yealink, respectively, but "INNOVERA" is a high-income system developed independently by the company. Therefore, the company is particularly watching "INNOVERA" accounts, "IP-Line" channels, and recurring rates as important indicators. Considering its characteristic of having a lot of recurring revenue, it is unlikely that costs will increase significantly in the future, but it is possible that partner incentives may increase as variable costs as the company strengthens its partnerships. The company's main target is mid-sized companies with 11 to 100 employees in the Tokyo metropolitan area, but due to the introduction of small-scale plans that do not require initial setup and an increase in the upper limit on the number of users with the introduction of "INNOVERA PBX 2.0", the company has expanded its target to include professionals and startups with less than 10 employees and even large companies. In conjunction with this, in September 2022, the company launched a sales agent system called "Partner Program", which covers not only major cities but also remote areas, and can cover small businesses as well as mid-sized and large businesses, thus establishing a system to incorporate the expanding cloud PBX market into the company's growth. As mentioned later, the proportion of sales via partners, which was previously 70%, increased to 80% in the fiscal year ending August 2023, and there are already signs of the effects of strengthening partnerships, such as an increase in large-scale projects.

(Author: FISCO guest analyst Nobumitsu Miyata)