Table of Contents

■Participants

■Opening Greeting

■Company Overview

■Q&A

■Closing Greeting

■Participants

Dream Arts Inc. <4811> President and CEO Takashi Yamamoto

Famous investor VTuber Hasshan.

Fisco Market Reporter, Hiroe Takai (Host).

■Opening Greetings

▲ Fisco Takai

Hello everyone. This is Hiroe Takai, Fisco Market Reporter. This time, we have Mr. Takaki Yamamoto, President & CEO of Dream Arts Co., Ltd. joining us. The famous investor VTuber Hasshan will pose some intriguing questions based on the theoretical stock price Candlestick. In the second half, we hope Mr. Yamamoto will answer questions from Hasshan. Now, let me introduce Mr. Yamamoto and Mr. Hasshan, who will be speaking today. First, Mr. Takaki Yamamoto, President & CEO of Dream Arts Co., Ltd. Thank you for joining us.

■Dream Arts Yamamoto

Thank you.

▲ Fisco Takai

After graduating from Universities, Mr. Yamamoto established Dream Arts, Inc. in December 1996, following his experience at Assist Corp. and Intel Japan, Inc. (now Intel Corp.). Dream Arts has the Task Center of "contributing to the development of people, organizations, and society filled with the joy of co-creation," and is updating Japan's DX and digitization through large corporations. In October 2023, it was listed on the Tokyo Stock Exchange Growth Market, and in December of the same year, it began a technological partnership with the American Silicon Valley IT venture Fortanix. Next is the renowned investor Hasshan. Thank you for being here.

● Hasshan

Hello, thank you for having me.

▲ Fisco Takai

As an IT engineer and investor, Hasshan has achieved 0.1 billion yen through long-term investments in undervalued growth stocks. Currently, he is independent and has started a project to create a sustainable stock market for beginners, overseeing and developing a stock introduction site "Stock Biz" that can be used without specialized financial knowledge. He also works as an investor Vtuber, delivering unique investment content such as theoretical stock prices and monthly information, and has surpassed 0.1 million copies in total of his business publications in money magazines, investment media, and SNS.

Mr. Yamamoto, Mr. Hasshan, thank you for being here. Now, let's begin with Mr. Yamamoto giving the corporate explanation. Mr. Hasshan, please feel free to share any points of interest as well. Thank you.

■Corporate Explanation

■Dream Arts Mr. Yamamoto

Thank you very much for this valuable opportunity today. I will begin by providing an explanation. The materials I will discuss are excerpts from the financial results presentation for the third quarter of the fiscal year ending December 2024, with a little additional information.

First, regarding the company overview, our headquarters are located in Tokyo, Hiroshima, Naha, and Ishigaki, and we have established a technology base in Dalian as a 100% subsidiary of the group. With nearly 300 employees, we promote cloud business including sales and consulting for large enterprise SaaS products.

Next, I believe the management team has been organized very well, including external Company Executives.

From our founding until 2017, there were various events. In fact, we once received approval for listing on the Nasdaq Japan, but declined at the last moment, causing quite a commotion. However, at that time, we actually shifted our market Target Materials to large enterprises and completely transitioned to a cloud service vendor from 2018. Thus, 2024 is intended to be the year of finalizing the transition of our Business model to cloud business.

Since 2018, we have been able to grow our top line by segment. The central line graph shows that the proportion of cloud sales reached nearly 80% by the end of this year, and the overall stock sales proportion also grew to about 90%. Profit trends saw a decline from 2018, hitting a bottom in 2021 before recovering. This follows a typical fish curve, where overhead costs increase significantly during reforms causing profits to drop briefly, but then reverses into recovery, recognizing that we could achieve IPOs at that point of reversal.

Our mission is to contribute to the development of people, organizations, and society filled with the joy of co-creation. The keyword is co-creation; one of the major factors for human prosperity on Earth is the act of collaboration. In an agricultural society, there has been significant specialization among various technologies as they evolve in their respective fields; however, by integrating these, we have established current civilization, and we want to extend the premise that humans fundamentally find joy in co-creation.

Next, there are the "DA Values", which are essential values we commit to at our company about what we prioritize. Although the specifics have changed since our founding, we have maintained the "DA Values" philosophy for 27 years, engaging in various activities to share and permeate this concept. It is recognized as a highly incomparable management resource that we treasure.

Shifting to the Business discussion, there is a donut here; our long-standing aspiration since 10 years ago is to be the leading company in the big donut market. This conceptualizes a company's system as a round circle, and since it’s a donut, it has no center. The center refers to supporting back-office systems like ERP, akin to the essential functions of the human body. That is something "we do not handle". We focus on the donut area of an organization, such as the limbs and muscles necessary for actual activities; hence, the big donut pertains to large enterprises. We have identified three target areas where we provide value: the area of DX innovation, strategic investment, and a rapidly expanding area, aiming to become the leading company in these sectors as our mid-term strategic policy.

Next, the company specializes in Enterprise, targeting companies with over 1,000 employees, particularly focusing on those with over 4,000 employees. Currently, the largest number of users in a single organization is around 0.1 million, and there are only a few SaaS options in Japan that can cover such large user organizations.

The products covering the big donut are these four services. The no-code development tool "SmartDB" for large enterprises is the growth driver, along with the internal portal construction tool "InsuiteX", the information sharing tool for the chain store industry "Shopran", and the cloud development and operation service "DCR" tailored for specific clients. "DCR" also offers completely customized systems intertwined with products for clients with very high levels of established trust.

Moving on to the core product "SmartDB". In "SmartDB", as forms for input and output are created, a database is automatically generated on the web. The created forms are protected by very high levels of security, and there is a workflow engine that covers not only databases but also processes (business operations, workflows), as well as communication functions and the ability to link with other companies' systems. The ability to operate in conjunction with other companies' cloud services is so important that it is often cited as a reason for adopting "SmartDB".

To further clarify the donut, the dark pink area in the center is named the MCSA area and is the target. The hole in the donut, the MCS (Mission Critical System), refers to the core systems that the company does not target, while the surrounding area is supported as the MCSA (Mission Critical System Aid) area. Specifically, it covers ERP front-end or systems around head office operations, contract management, and budget management. This area has a significant budget allocated, making it a strategic target for the company. The rest consists of Common Index operations, department databases and workflows, HR and general affairs application systems, company-wide approval processes, various group common operations, and areas forming the basis for digitalization, covering a wide range.

Next, the gray section on the right is ERP. There is cloud-based processing for financial accounting ERP, while the pink area on the left is covered by "SmartDB". Large enterprise ERPs tend to be quite massive, and it is not unusual for ERP projects to exceed 10 billion yen; hence, thick integration sections are required to ensure smooth operation, including pre-receipt processing and post-receipt processing. "SmartDB" can cover those areas.

To cover the security area, a collaboration is established with the USA Silicon Valley IT startup Fortanix, which has large financial institutions like Goldman Sachs as clients, to provide a service called "BYOK (Bring Your Own Key)" that separates encryption keys. For example, while the encryption performed by "SmartDB" is reassuring, users are concerned because the key to decrypt the information is also held by "SmartDB". To eliminate this concern in case of internal security incidents, the encryption is implemented, but the key to decrypt the information is independently held by a third party, Fortanix. Whenever necessary, a time-limited key is issued to users to decrypt and use the information, representing a very advanced security technology which has already been implemented within "SmartDB". It is already adopted by JCB, the only issuer of international credit cards in Japan. Additionally, there is a pending patent for a dynamic branching feature, which enables multiple databases to operate in sync; if one item is updated, all linked items are also updated, allowing users to create significantly complex functions within "SmartDB" without coding.

In practice, "SmartDB" is used at Duskin as the front system for ERP and accounting operations, and the department that created this system is not the IT department but the finance and accounting staff. This is remarkable, and while there are other companies that haven’t been announced yet, the initiative is gaining traction in others as well.

[Dream Arts] A prominent investor, Hasshan, questions President Yamamoto! To be continued in Vol. 2.