Serverworks : Q1 FY02/21 Financial Summary

Q1 FY02/21 Financial Summary

2020.3.1 - 2020.5.31

Serverworks Co., Ltd. (Securities code: 4434)

Q1 FY02/21 Financial Highlights

Net sales of 1,922 million yen (+34% YoY), operating profit of 69 million yen (-31% YoY)

Net sales increased amid expansion in the cloud market and operating profit fell due to accelerated hiring and other factors.

Cloud Integration

Resale

MSP

• YoY increases in no. of customers and no. of projects
• Project unit price down 20% from Q4 FY02/20 due to increase in small and medium-sized projects

•	Growth in no. of AWS accounts	• Expansion in business with large-scale
•	Increase in ARPU	customers whose needs cannot be met
		with standard services

Sales of 106 million yen (-38% YoY） Sales of 1,580 million yen (+46% YoY）

Sales of 226 million yen (+33% YoY)

2

Financial Results

FY02/21 Earning Forecasts

We are continuing to tap further into the public cloud market.

* Forecasts compiled based on conservative outlook that factors in COVID-19 impact.

					(Unit: million yen)
	FY02/20 results	Composition (%)	FY02/21 forecasts	Composition (%)	% of year-earlier level
Net sales	6,811	100.0	8,003	100.0	117.5
Gross profit	1,086	15.9	1,200	15.0	110.5
Operating profit	417	6.1	417	5.2	100.0
Ordinary profit	421	6.2	426	5.3	101.2
Profit	333	4.9	306	3.8	91.9

* There are no changes to the full-year forecasts included in the "Summary of Non-Consolidated Financial Results for the Year Ended February 29, 2020," released on April 14, 2020.

4

(Unit: million yen)

Q1 FY02/21 Results

Net sales rose 34% YoY supported by successful efforts to expand sales in the Resale business. However, due to the low gross margin nature of the Resale business, the profit is not growing as much as the sales growth. In addition, the cost of sales and selling, general, and administrative expenses increased due to the growing labor costs resulting from hiring reinforcement so that the operating profit declined 30% YoY to 69 million yen.

	Q1 FY02/20	Composition (%)	Q1 FY02/21	Composition (%)	% of year-earlier level
	results	results
Net sales	1,440	100.0	1,922	100.0	133.5
Gross profit	243	16.9	244	12.7	100.3
Operating profit	100	7.0	69	3.6	69.5
Ordinary profit	92	6.4	76	4.0	83.2
Profit	93	6.5	55	2.9	59.1
EBITDA	117		89

5

Business Trends: Net Sales

Net sales in Q1 FY02/21 reached roughly 24% of our full-year forecast.

(million yen) 9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

Cloud Integration

Resale

MSP

Others

Differencewith full-year target

Forecast: 8,003

784

425	579	5,390
3,230			226
2,202					Progress rate
				1,580
	610	577	24%
372	106
FY02/18		FY02/19		FY02/20		FY02/21*

* FY02/21 figures reflect results from March to end-May 2020.	6

Business Trends: Quarterly Net Sales

Cloud Integration down 37.6% YoY, but AWS Resale up 46% YoY and MSP up 33% YoY.

(million yen)				Cloud Integration		Resale			MSP			Others
2,500
																								15
2,000
																								216		8
																						14	16				226
1,500															13			13	191	204
															162		170
												14
1,000							14				145											1,713		1,580
	15
		139													1,282	1,309
		132										1,100	1,084
												784
500		623	721
0		131	137			157	183		171	145	136	124		106
					Q1		Q2		Q3			Q4			Q1	Q2	Q3	Q4				Q1
								FY02/19												FY02/20				FY02/21

* Due to the nature of AWS Resale transactions, total usage fees are recorded as net sales.	7

Business Trends: Profit Margins

Gross profit margin and operating profit margin have both declined due to increase in the AWS Resale business as well as the increases in cost of sales and selling, general, and administrative expenses driven by growing labor costs resulting from reinforced hiring.

Gross profit/gross profit margin

(million yen)				Gross profit		Gross profit margin												(margin)
300																		30.0%
	18.1%	20.6%	19.0%	19.1%	16.9%	16.6%	17.1%	13.8%
200		12.7%			20.0%
100		163	208	209	278		243	272	284	285	244			10.0%
0																							0.0%
			Q1	Q2	Q3	Q4			Q1	Q2	Q3	Q4			Q1
																				FY02/21
									FY02/19						FY02/20

Operating profit/operating profit margin

(million yen)				Operating profit	Operating profit margin	8.9%							(margin)
150					7.8%	7.2%	7.0%		6.7%					10.0%
	5.2%			6.1%	5.1%
100
			130			112	3.6%	5.0%
50							100	100	105
	47		78	79	69
0											0.0%
		Q1	Q2	Q3	Q4		Q1	Q2	Q3	Q4		Q1

FY02/19

FY02/20

FY02/21

8

Q1 FY02/21 Sales by Product/Service Segment

Overall net sales continued to exhibit strong growth, rising 34% YoY driven especially by increase in the AWS Resale business. Although unit price of the Cloud Integration business was declined due to an increase of small to medium sized projects, the number of customers and projects rose.

					(Unit: million yen)
	Q1 FY02/20	Composition (%)	Q1 FY02/21	Composition (%)	% of year-earlier level
	results	results
Cloud Integration	171	11.9	106	5.5	62.4
Resale	1,084	75.3	1,580	82.2	145.7
MSP	170	11.9	226	11.8	132.6
(Managed Service Provider)
Other	13	0.9	8	0.5	64.7
Total	1,440	100.0	1,922	100.0	133.5

9

Business Trends: Cloud Integration

Large-scale projects have declined YoY, but an increase in small and medium-sized projects has driven up the number of customers and projects.

		# of customers (companies) / # of projects									Project unit price
		Project unit price		# of customers	# of projects					(thousands of yen)
250								2,500
				145
								1,968					131
200											119		2,000
106					115	115
	104	107	104			1,710	108	104
				93
150							1,365	100	1,343				1,500
								1,308
				1,135		1,191
										1,042
100			897		903								1,000
745	740									809
			82
											68	77
50	63	62									62	500
60	60		61	58	56		53
	48
0													Q1	0
	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
		FY02/18			FY02/19			FY02/20		FY02/21	10

1400

1200

1000

800

600

400

200

0

Business Trends: Number of AWS Accounts, ARPU

The number of AWS accounts as well as ARPU have both increased steadily, contributing to a continuous growth in sales in the Resale business.

(Unit: # of accounts)	No. of AWS accounts	(Unit: thousands of yen)	ARPU*
1,400			1600
			1,425

1,200	1,184
1,140
	1,058
1,000	1,002
902

			807
800			701726
		593640
600	468499534
400

200

0

640 674 690

1,201

1,0161,0871,106

770

Q1	Q2	Q3 Q4	Q1 Q2	Q3	Q4	Q1 Q2	Q3	Q4	Q1
FY02/18		FY02/19		FY02/20		FY02/21

Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1
	FY02/19			FY02/20	FY02/21

* Obtained by dividing AWS usage fees, including Reserved Instances, by number of customers. 11

Business Trends: Reserved Instances, Saving Plans*

Increase in number of customers looking to optimize costs by realizing significant discounts offered in exchange for committing to a long-term AWS usage.

(Unit: thousands of dollars)
20,000				Total AWS usage fees			Total for Reserved Instances (RI) and Savings Plans (SP)

15,000

10,000

5,000

0

Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1
		FY02/19				FY02/20		FY02/21

* AWS service under which substantial discounts are offered to customers who pay a fixed reservation fee and commit to AWS usage for a certain period.

12

Business Trends: SRE(*) portion of MSP

The portion of SRE, the dedicated team that supports unique customer needs by providing services ranging from system construction to operation and maintenance in the process leading up to a stable system operation, is expanding.

SRE	MSP MSP(SRE)
	(Unit: thousands of yen)

CI	MSP	117,045 Approx.	109,628
52%

* SRE：Site Reliability Engineering

13

Business Trends: Stock Business(*)

Sales in Stock businesses, including AWS Resale, MSP, and proprietary services, are increasing every year. Going forward, we plan to strategically strengthen stock businesses, which are expected to contribute to stable earnings over the long term.

(million yen)

(share)

2,500

100%

One-time revenue

Recurring-revenue

Share of recurring-revenue

businesses

businesses

businesses

2,000								93%	94%	95%
						90%	91%
1,500									90%
			87%	87%
		85%
		84%
1,000	84%							85%
500										80%
0	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	75%
		FY02/19					FY02/20		FY02/21

• One-timesales from Cloud Integration, where sales are recorded at the time of customer acceptance, positioned as one-time revenue, is specified as "Flow Business" . Recurring sales from AWS monthly usage fees, monthly charges for proprietary services such as Cloud Automator, licensing fees for continued use of third-party software services, and MSP usage fees and maintenance fees for AWS server monitoring and backup services (all of which entail continued AWS usage by companies) are specified as "Stock Business".

14

Business Trends: Number of New and Existing Customers (Entire Cloud Business)

The number of customers opting for a lift-and-shift approach, gradually migrating systems to the cloud and subsequently reconfiguring systems to ensure optimization in the cloud, is increasing.

# of customers (companies)

600

500

400

300

200

100

0

		Existing custom	ers			New customers

316	387	437

438

131	81	65
	19
FY02/18	FY02/19	FY02/20	*FY02/21

* FY02/21 figures reflect results from March to end-May 2020.

15

Increase in New Hires

We carefully planned new hires while factoring in the COVID-19 impact. However, since we continued to strengthen hiring, we nearly achieved the annual target within Q1.

We will examine the appropriate timing to resume hiring based on the market trends going forward.

New hires (employees)

				Sales, Marketing,		Manufacturing		Sales, Marketing, Admin Staff		Manufacturing Staff
50				Admin Staff		Staff		(difference with full-year target)		(difference with full-year target)
40
										Target: 22
30									26
								1
20	19							1
							14			8
											Achieved:
10
10					14	12		91%
			7
0
				FY02/18				FY02/19		FY02/20	*FY02/21

* FY02/21 figures reflect results from March to end-May 2020.	16

Number of Employee Trend

We continue to strengthen our workforce, particularly manufacturing staff, in tandem with business growth.

(Unit: employees)

							Director		Sales, Marketing,		Manufacturing
200									Admin staff		staff

150

100

		160
	103	141
94	98
71		90

52	60

50	40	35	35	43	54
	25
	7	8	8	8
0	6
FY02/17	FY02/18	FY02/19	FY02/20	*FY02/21

* FY02/21 figures reflect results from March to end-May 2020.

17

Business Trend : Life Time Value

The existing customers, who had been contracted with us, have a trend to increase our sales revenue (total of CI, Resale, MSP) over the years

FY2011

FY2016

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

	FY2012		FY2013		FY2014		FY2015
	FY2017		FY2018		FY2019

FY2011FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018FY2019

* The sales revenue before FY2017 is an estimated value based on re-calculated AWS resale revenue using recent results

18

(Unit: million yen)

Analysis of Factors Affecting Operating Profit in Q1 FY02/21

Due to the low gross margin nature of the Resale business, the profit is not growing as much as the sales growth and the cost of sales and selling, general, and administrative expenses increased due to an increase in labor and personnel expenses resulting from the active hiring so that the operating profit declined 31% YoY.

Net sales increase: +482

Q1 FY02/20

Operating

profit

100

Resale

+496

MSP

+55

Others -4

Cloud Integration

-64

Labor expenses
+57
	Manufacturing
		expenses -5
	Work in process, etc.: -5
	Outsourcing expenses: -14
	Communication expenses: +4	Cost of sales
Rent expenses on land and buildings: +5
		Hiring expenses: +4	＋429

Others: +3

Cost of sales

Increased purchasing due to higher sales in Resale business: +429

Personnel expenses: +27

Hiring expenses: +6

Communication expenses: +4

Advertising expenses: +3

Others: +1

Entertainment expenses: -6

Provision of allowance for doubtful accounts: -4

	Selling, general and
	administrative expenses
	＋31		Q1 FY02/21
				Operating
				profit
			69
	Selling, general and
	administrative expenses

Operating profit declined by 30 million yen, or -31% YoY

19

Q1 FY02/21 Financial Condition: Balance Sheet (Summary)

Investments and other assets and net assets increased due to a rise in accounts receivable based on sales increase and a valuation gain on investment securities. Retained earnings also increased steadily.

			(Unit: million yen)
	FY02/19	FY02/20	Change
Current assets	3,004	3,058	54
Non-current assets	1,467	1,569	101
Property, plant and equipment	69	66	-2
Intangible assets	100	95	-5
Investments and other assets	1,297	1,407	109
Total assets	4,472	4,628	155
Total liabilities	1,437	1,454	17
Current liabilities	1,148	1,136	-11
Non-current liabilities	288	318	29
Total net assets	3,035	3,173	138
Total liabilities and net assets	4,472	4,628	155

20

Current Ratio

Current ratio above 200%; ample on-hand liquidity

(million yen)

				Current		Current		Current
3,500				assets		liabilities		ratio
				262%			269%
3,000
2,500
166%
2,000
3,004				3,058
1,500
1,000	1,963
1,182			1,148	1,136
500
0
		FY02/19	FY02/20			*FY02/21

(ratio)

300%

250%

200%

150%

100%

50%

0%

* FY02/21 figures reflect results from March to end-May 2020.

21

Company Profile

Company Profile		*as of 5/31/2020
	Company Name		Serverworks Co., Ltd.
	Business Domain		System Planning/Development/Operation utlizing Cloud Computing
	Founded		February, 2000
	Capital		617,675,725 yen
	Headquater		Agebacho 1-21,Shinjuku-ku, Tokyo, Japan
	Office		Osaka, Fukuoka, Sendai, Nagoya, USA(California)
	Number of Employees	152
	Management		Ryo Oishi CEO
			Takashi Hashiba	Senior Vice President
			Hiroyuki Oshio	Senior Vice Presidnet & CAO
			Ichiro Terajima	Outside Director
			Mikiya Inoue	Audit & Supervisory Board member
			Tsutomu Toyao	Audit & Supervisory Board member
			Akihito Mochizuki	Audit & Supervisory Board member
			Shigetoshi Heiho	Audit & Supervisory Board member
	Affiliated company		Sky365 Co., Ltd.
	Major Shareholders		Board Members, TerraSky Inc., NTT Communications Corporation, NTT Data Corporation
	Certification		APN Premier Consulting Partner
			AWS Migration Competency Partner
			AWS End User Computing Competency
			AWS Managed Service Provider Program
			AWS Well-Architected Partner Program
			ISO /IEC 27001 (JIS Q 27001)

23

Management Introduction

President & CEO

Ryo Oishi

Oishi graduated from Tohoku University, majored in Economics, and joined Marubeni Corporation, which is one of the biggest "Sogo-Shosha". He engaged in establishing communication network related subsidiary as well as planning internet related business and sales. In Feburary 2000, he founded the company. After he started AWS business in 2009, Oishi became one of the first Cloud Evangelists in Japan and continue to evangelize Japanese market to use Cloud.

Senior VP

Takashi Hashiba

Hashiba graduated from Tokyo University of Agriculture, majored in Agriculture, and joined wholesale process food company, experiencing sales role. After joining our company in April 2006, he became head of sales and technical department and engaged in a large number of system installations. After starting AWS business, he continued engaging in numerous projects as well and provide huge contribute to expand our business. He became Senior VP in October 2013.

Senior VP & CAO

Hiroyuki Oshio

Oshio graduated Kobe University, majored in Economics, and joined Marubeni Corporation. He engaged in planning and installation of Internet enabled systems. Then, he joined software venture company and became SVP at subsidiary company in abroad as well as General Manager of Marketing. After joined our company in October 2013, he served as a head of Business Development as well as back office team. Oshio became Senior VP in August 2014.

Outside Director

Ichiro Terajima

Terajima graduated Tokyo University, majored in Engineering, and joined Sekisui Chemical Co., Ltd. He also studied at MIT and established AI venture company inside of the company, experienced wide variety of business roles. He became General Manager of Information Systems Dept. and served as a Chief of Information system group. He Joined TERRANET as a company representative. Terajima joined our company as Outside Director in November 2017.

24

About Amazon Web Services(AWS)

Market environment：About Public Cloud

A method of using software/Database/Server storage and other functions as a service via internet

In-house equipment		Internet
(Data center)
Server procurement,
Company
operation and maintenance
costs		Individual Pay only for what you use
		Company
On-premise		Public Cloud

26

Market environment：Public Cloud Classification

SaaS : Software as a Service	Example Salesforce, Kaonavi,
	：
Provide software package via internet	TeamSpirit, sansan etc…

IaaS : Infrastructure as a Service	Example：AWS、Microsoft Azure
Provide hardware and ICT infrastructure via internet

27

Market Environment: AWS Continues to Lead

AWS selected as "leader" that excels in vision and execution for ninth consecutive year in global market, and for third consecutive year in Japan. (Gartner's Magic Quadrant, IaaS field)

NTT Communications

Fujitsu

KDDI

Internet Initiative Japan

ITOCHU Techno-

Solutions

NEC

Softbank

As of April 2019

Source:https://pages.awscloud.com/jp_gc_2019-Gartner-MQ-for-Infrastructure-as-a-Service-JP-

Source:https://aws.amazon.com/jp/blogs/news/aws-named-as-a-leader-in-gartners-infrastructure-as-a-service-iaas-magic-quadrant-for-the-9th-consecutiveyear/Report.html?sc_channel=em&sc_campaign=JP-LN-2019-Gartner-

MQ&sc_medium=em_194990&sc_content=ln_ln_ot&sc_detail=gc900&sc_geo=japn&sc_country=jp&sc_outcome=ln&sc_publisher=other&trk=e28m_GC-900_gartner_mq_jp&trkcampaign=GC-900_gartner_mq_jp

Market Environment: AWS Market Share

In Q1 2019, AWS retained its leading share in the global cloud market.

Source:https://www.srgresearch.com/articles/chinese-companies-control-local-public-cloud-market-aws-and-microsoft-lead-	Source:https://www.srgresearch.com/articles/covid-19-fails-dent-aggressive-growth-cloud-spending-half-q1-market-
rest-apac	belongs-amazon-microsoft

29

Market Environment: Amazon Web Services (AWS)

Leader in cloud computing that boasts top global market share. Continues to provide new services and functional improvements based on customer feedback.

30

Market Environment: AWS Growth and Profitability at Amazon

AWS continues to grow, and now generates roughly 77% of operating profit at Amazon.

Net sales

(million dollars)	AWS	North America	International

100,000

80,000

60,000

40,000

20,000 5,442 6,105 6,679 7,430 7,696 8,381 8,995 9,954 10,219

0

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

FY02/19

FY02/20

FY02/21

Operating profit

(million dollars)

5,000

AWS

International

North America

4,000

3,000

2,000

2,077

2,177

2,223

2,121

2,261

2,596

3,075

1,000

1,400

1,642

0

(1,000)

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Source:https://ir.aboutamazon.com/quarterly-results

FY02/19

FY02/20

FY02/21

31

Market Environment: Size of Japanese Enterprise IT market

The Japanese enterprise IT market was valued at 10.8 trillion yen (+4.4% YoY) in 2019. In 2020, the market is projected to 10.8 trillion yen as active investment in cloud solutions to resolve pressing issues offsets reductions in IT investment due to COVID-19 impact. Sales of cloud solutions are expected to account for over 50% of the market by 2023, and the market is projected to grow to 12.8 trillion yen by 2024 (CAGR of 3.4%).

Sales (billion yen)		YoY growth

Source:https://www.idc.com/getdoc.jsp?containerId=prJPJ46296020

32

Market Environment: Size of Japanese Cloud Service Market

The Japanese cloud service market was valued at 2.4 trillion yen (+21.4% YoY) in FY2019, with the public cloud market accounting for 812.1 billion yen (+34.1% YoY). The growth momentum is projected to continue in FY2020 and beyond, and the public cloud market is projected to expand to roughly 2.4 trillion by FY2024 (CAGR of 24.4%).

100 million yen

Public cloud (Saas, Faas, Paas, Iaas)

Private cloud (community cloud, dedicated cloud, on-premises private cloud)

FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024

Source:https://www.m2ri.jp/release/detail.html?id=434

33

Market Environment: Size of Japanese Cloud Service Market (continued)

The three leading cloud companies (AWS, Microsoft Azure, and GCP) continue to see growth in service usage. AWS remains the leader in the PaaS and IaaS markets.

In the IaaS market, which offers solutions often used by companies migrating from an on-premises environment, AWS leads with a usage rate of 51.9% (+4.8% YoY), and over half of the Japanese companies adopting an IaaS solution opt for AWS.

[Configuration policy for new systems]

[Service usage rates for AWS, Microsoft Azure, and GCP]

Usage rate	PaaS usage rate

Over 1,000 people (n=1,502)

100-999 people (n=1,482)

1-99 people (n=2,915)

Usage rate		IaaS usage rate

2019

2020

2019

2020

Mainly public cloud	Mainly private cloud	Mainly hybrid cloud	Mainly on-premises cloud	Mainly non-cloud environment

Source:https://www.m2ri.jp/release/detail.html?id=434

34

Our Business Model

Business Model

Provide complete services for cloud journey, from Cloud strategy consultation to actual deployment and migration as well as post-migration operating services

Customer

Our service

Assessment
Establishing	Cloud Infrastructure	Cloud Operation
implementation	Design & deployment
plan

Provide complete service toward all cloud journey phases

Resale

Cloud Integration

MSP・SRE*

"Flow" business

"Stock" business

*SRE: Site Reliability Engineering. A concept advocated by Google Inc. in 2003 to operate an expanding large-scale IT system. The mission is to improve performance, availability, elasticity, security, etc. in order to secure
the reliability of the IT system and build a system that can be continuously improved by introducing various tools and strengthening collaboration with customers.	36

Difference between SRE and conventional MSP

For specific large customers, we set up a dedicated team to support customer needs which cannot be handled by the standard MSP service and provide service from system construction to operation and maintenance.

SRE

• Mainly provide support for migrating from on-premise environments to the Cloud, regardless o fnew/existing

customers.CI

• After completing the cloud migration, our MSP will take after the customer, when customer ask us to provide operation/maintenance services.

	• The standard operation service
MSP	specialized for the Cloud
environment, which we have been

providing to customers

37

Cloud migration lifetime

In the process from initial implementation(migration) to stable operation, the importance of SRE*, which supports customers unique needs, is increasing.

Implementation	Growth period	Maturity / stable operation
	SRE
CI	Large-scale customer who	MSP
	needs individual support
		Standardized operation service
	Small to mid scale customer using
	standard operation service
* SRE：Site Reliability Engineering		38

Core Service overview

Providing variety of services around AWS

Cloud Integration

Providing service to create Cloud migration strategy for migrating the system, which has been managed in on-premise environment, to cloud environment, as well as Infrastructure design, Establishment/deployment support services. We provide optimum design for customers from setting business objectives using Cloud, to actual migration, operation planning after cloud implementation.

Re-sale

We are reselling AWS centered cloud services to our customers as a solution which we add our unique values.

Especially, we develop and provide our unique application, "Cloud Automator", a service that automates AWS operations, to our customers. By combining these solutions with AWS, we maximize the benefit of AWS to our customers.

MSP（Managed Service Provider）

We provide 24x7 operation services, such as system performance monitoring, failure monitoring, recovery operation in the event of a failure, back-up operation for quick recovery from the failure, and security patches application for AWS infrastructure to middleware level.

39

Business model diagram

Enterprise customers

		AWS value-add resale		Maintenance/support service
AWS Implementation support

Cloud Integration	AWS	Cloud Automator	MSP/SRE
Re-sale	(Managed Service)

		Re-sale
		Subcontracting
	AWS purchase
Amazon Web Services, Inc.	(Affiliated company)
Sky365 Co., Ltd.

40

Our Strength

Unique Strengths ① : AWS Certified Top Tier Partner

Advanced

Select

What is a Premier Consulting Partner?

• Top-tierpartnercertified among tens of thousands of AWS partners
• 126 partners worldwide, only 10 companiescertified in Japan
• Serverworks has retained certification consistently since 2014

Registered

* As of June 2020

42

Unique Strengths ②: Advanced Technical Capabilities

Employing many highly skilled engineers with advanced expertise backed by AWS certifications

• Solution Architect Professionals
• DevOps Engineer Professionals
• Solution Architect Associates
• Developer Associates
• SysOps Associates
• Security Specialty
• Big Data Specialty
• Advanced Networking Specialty
• Machine Learning Specialty
• Alexa Skill Builder Specialty
• Database Specialty

38

24

85

39

48

22

15

15

5

12

6

* As of June 30, 2020	43

Unique Strengths ②: Advanced Technical Capabilities

Receive various certifications from AWS for our high technical skills and our achievement in specific fields

AWS Managed Service (MSP) Partner

The partner who can provide total AWS cloud services from planning/designing to actual building/migrating as well as operation and optimization as a business solution to customers. We received MSP partner certification in 2014 as a 1st partner in Japan to receive this certification and we have been continuously receiving the certification.

AWS Migration Delivery Partner
The partner who can assist customers at each stage of migrating existing
applications to AWS and provide staff, tools and education as part of professional
services.
AWS End-User Computing Navigate
The guideline for acquiring expertise in AWS desktop & application streaming
solution and a partner can be only certified by succeeding to pass the 5 phased
requirements. We are the 1st partner in Japan to achieve completion of the program.
AWS Well-Architected Partner Program
The partner who can appropriately evaluate customer's AWS
architecture by actively using AWS Well-Architected framework
backed by in-depth knowledge related to AWS implementation
support as well as numerous actual project experiences.	44

Unique Strengths ③: Solid Track Record

Track record of over 8,300 projects for over 800 companies*, mainly medium-sized and large companies

* As of June 30, 2020

45

Unique Strengths ④: Front Runner advantage

Maintaining and expanding the growth cycle of increasing stock businesses by leveraging our name recognition in the AWS industry as a leading company

A virtuous cycle has been created in which our business growth is further accelerated by cooperation with AWS.

As AWS, led by a powerful Amazon brand, has grown by 40+% compared to last year, our company recognition as the highest ranked AWS partner has been continuously improving as well. This situation leads to create pull-lead(*1) for receiving AWS implementation support project orders and leading to grow our stock businesses.

We publish more than 10 of these cases annually and this creates virtuous cycle that further raises AWS visibility in the enterprise market.

Improve AWS

brand

recognition

Publish	Improve our
customer	company
case studies	recognition

Increase in	New
business
Stock
creation from
business
pull-lead

* 1 : The situation that customers are coming to us, instead of aggressively reaching out to customers from us

46

Unique Strengths ⑤: Our original service "Cloud Automator"

Based on our depth knowledge in AWS constructions and operations, we develop original AWS operation automation service and provide it to our customers.

Contribute to both low-cost & high-quality operations and increase in Cloud Integration project orders

Feature 1

Feature 2

(Job Automation feature)

(Configuration review feature)

Auto

mate AWS Op

eration

Automatic AWS Config

check

Automate AWS essential

Periodically

review

operations such as

AWS

resources

to

back-up, Instance

check

whether it

is

start/stop, etc…

configured

based

on

designated rules

47

Unique Strengths ⑤: Our original service "Cloud Automator"

We have a track record of evolving services and specifications in response to changes in AWS as well as user demands. We transfer our know-how and experiences to internal resources

Implement Cloud Automator for addressing automation, standardization, simplification, efficiency, and risk elimination of AWS operations

To improve IT governance, we decided for full adoption of AWS By combination of using Cloud Automator, it enables to achieve both operation automation and operation efficiency at the same time

Optimizes costs by automatically switching to the DR site by automatically launches instances, only when needed, by using Cloud Automator

48

Growth Strategy

Growth Strategy: Winning Large migration projects

In Japanese market, more than half of the companies still do not use Cloud. We will continue to accelerate growth by acquiring large-scale cloud migration projects that have not yet been cultivated.

50

Growth Strategy: Support New Work Styles under "New Normal"

We will contribute to promote new work styles by leveraging cloud solutions such as Amazon Connect (cloud-based call center service) and Amazon Workspaces (virtual desktop service) provided by AWS.

Palsystem Consumers' Co-operative Union

J. Front Retailing Co., Ltd.

Established automated telephone order system using Amazon Connect.

It significantly contributes to support automation of the telephone orders, which have increased rapidly due to government requests to refrain from going out during the COVID-19 pandemic.

Deployed roughly 1,000 virtual desktops using Amazon Workspaces.

It is realizing an environment in which employees can always work securely regardless of their locations.

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Caution for forward-looking statements

The materials and information provided in this announcement include so-called"forward-looking statements". These are based on current expectations, projections and risky assumptions, and include uncertainties that could result in different result from these statements.

These risks and uncertainties include general industry and market conditions, and general domestic and international economic conditions such as interest rate and currency exchange fluctuations.

In the future, even if there is a new information and/or a future event, we are not obligated to update or modify the "forecast information" including in this announcement.

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