Tobila : Results of Operations for the Third Quarter of the Fiscal Year Ending October 31, 2020

Results of Operations for the Third Quarter of the Fiscal Year Ending October 31, 2020

Tobila Systems Inc.

(Tokyo Stock Exchange First Section 4441)

September 2020

1

Contents

1. Business Overview
2. 3Q FY10/20 Highlights
3. 3Q FY10/20 Financial Results
4. FY10/20 Earnings Forecast
5. 3Q FY10/20 Action Plan Progress
6. Competitive Strengths
7. Our Services and Business Model
8. References

2

Business Overview

3

Corporate Philosophy

We open the door to a better

future for our lives and the world

Using technologies for the challenge of solving social issues

We are constantly changing without any fear of failure and challenging conventional thinking to realize a better future which we dream of. We will be a source of products that help solve social issues and have benefits for people. We will also pursue appropriate earnings for steady growth as we expand and upgrade our operations. We believe that maintaining an environment where we can live in peace with our loved ones will lead directly to our growth and a better life for people worldwide.

We will strive to solve social issues using security for people in order to create a society with peace of mind.

4

Business Overview

The Fraud and Spam Prevention Services of Tobila Systems

The only business in Japan that uses a fraudulent call database for the prevention of malicious calls and other fraud and spam activities

Malicious calls are blocked for all

TobilaPhone subscribers

Fraudulent call database

Malicious call data	1
from users

Malicious call rejection

2

1

3

Malicious call data from the police or other gov't agency

Integration of the
malicious phone number	Malicious call
1

Malicious call data collected

by Tobila Systems

5

Business Overview

Business Fields

FY10/19

Sales composition

spam and Fraud services prevention

services Other

1

2

3

4

Filtering Service for Mobile Phones

TobilaPhone Mobile, Meiwaku Denwa Block and other services

Filtering Service for Landline Phones

Home Gateway, TobilaPhone for filtering fraudulent calls

Filtering Service for Business Phones

TobilaPhone Biz for filtering fraudulent calls

Other services

Sale of the HP4U website design and operation support system and the contracted development projects

75.7%

10.9%

1.6%

11.9%

Core

businesses

Allocating substantial resources for growth

Not

aiming for significant growth

6

3Q FY10/20 Highlights

7

Highlights

Small decreases from one year earlier in third quarter sales and operating profit because of COVID-19, but performance is consistent with the fiscal

year plan

Net sales:

¥312

Results of 3Q FY10/20

Operating profit: ¥134

million (down 2.1% QoQ)

million (down 5.5% QoQ)

■ Topics

• One-timesales were recorded in the 2Q but not in the 3Q
• Effective joint promotions contributed to 2Q growth, no promotions in the 3Q
• Slower core business growth as COVID-19 reduced operating hours of carrier shops, but performance started recovering in July
• Performance in the first three quarters is consistent with the FY plan because the first half was ahead of the plan

8

Highlights

More than 10 million monthly active users!

A big increase in the pace of growth in FY10/20 raised the number of monthly active users to more than 10 million!

Unit: Millions

12

10

8

6

4

2

0

On a trajectory to more than double the

number of monthly active users in FY10/20!

1Q	2Q	3Q	4Q	1Q	2Q	3Q	4Q	1Q	2Q	3Q
FY10/18				FY10/19				FY10/20

* Number of the monthly active users includes some provisional figures. The data may vary somewhat when the finalized figures are released and reflected in the data.

9

3Q FY10/20 Financial Results

10

Financial Results

Financial Summary (1/2) QoQ and YoY Comparisons

Sales increased 34% and earnings more than 50% from one year earlier and the operating margin remains high

A small decrease in sales and operating profit from the previous quarter because of COVID-19

		2Q FY10/20	3Q FY10/19
Unit: Millions of yen	3Q FY10/20	Results	QoQ	Results	YoY

Net sales	312	319	97.9%	231	134.8%

Operating profit	134	141	94.5%	87	152.9%
(Operating margin)	(42.9%)
Ordinary profit	133	115	116.0%	85	155.8%
(Ordinary profit margin)	(42.8%)
Profit	92	79	116.7%	57	160.5%
(Profit margin)	(29.7%)

11

Financial Results

Financial Summary (2/2) Progress vs. Plan

Sales are in line with the FY plan

Earnings at all levels are ahead of the plan

			1Q-3Q	1Q-3Q vs.	3Q vs.
	FY Plan	2H Plan	FY10/20
	FY Plan	2H Plan
			Results
Unit: Millions of yen
Net sales	1,227	658	902	73.5%	47.4%
Operating	468	266	376	80.4%	50.4%
profit
Ordinary profit	449	266	349	77.9%	50.4%
Profit	307	182	241		78.7%	51.0%

12

Earnings Forecast

Sales Composition

Mobile phone services sales were unchanged from the 2Q but are on pace to achieve the FY plan

Landline phone services sales were down from the 2Q due to one-time 2Q sales but are also in line with the FY plan

	FY10/20		FY10/20
	Plan
	1H	2H	3Q	QoQ	3Q vs.	1Q-3Q vs.
Unit: Millions of yen	2H Plan	FY Plan
Fraud and spam prevention	521	623	290	98.2%	46.6%	72.5%
services
Mobile phone services	450	527	248	100.7%	47.3%	72.5%
Landline phone services	60	76	33	79.5%	44.8%	76.5%
Business phone services	11	20	7	131.6%	37.3%	57.2%
Other services	48	35	22	93.7%	60.9%	87.4%

13

Financial Results

QoQ Changes in Operating Profit

A small decline in earnings because 3Q sales were slightly lower

Unit: Millions of yen

	Lower sales of fraud and	Lower sales of	Lower costs	Higher SG&A
2Q FY10/20	spam prevention services	3Q FY10/20
other services		expenses
Operating profit			Operating profit

Changes in sales

Changes in costs

14

Financial Results

FY10/20 Quarterly Expenses

No significant change in the composition of expenses from the 2Q

					Unit: Millions of yen
	3Q FY10/20	2Q FY10/20	3Q FY10/19
	Results	QoQ	Results	YoY
Cost of sales	78	82	95.2%	60		130.8%
Labor cost	54	52	104.1%	47		114.5%
Depreciation	10	10	101.4%	9		124.6%
Others	36	43	84.2%	22		165.9%
Pct. of cost of sales classified as	22.6%	22.5%	100.6%	22.7%		98.1%
R&D expenses and assets*
SG&A expenses	99	94	105.4%	84		118.7%
Personnel expenses	44	42	103.7%	38		116.7%
Advertising expenses	14	11	119.3%	4		350.1%
R&D expenses	10	7	133.2%	9		107.8%
Others	31	32	95.8%	32		95.4%

*The percentage of the cost of sales included in R&D expenses and assets due mainly to the characteristics of work performed by employees

15

Financial Results

Balance Sheet

Balance sheet remains sound with an equity ratio of 82.8%

A committed credit facility further strengths financial soundness

(Unit: Millions of yen)	FY10/19	3Q​FY10/20​	Change

Current assets

Cash and deposits

Notes and accounts receivable- trade

Other

Non-current assets

Property, plant and equipment

Intangible assets

Investments and other assets

1,139	1,303	+164
998	1,122	+124
109	144	+35
31	35	+4
170	224	+53
43	65	+21
85	108	+22
41	51	+9

Total assets	1,310	1,527	+217
Liabilities	309	263	-46
Current liabilities	284	247	-36
Non-current liabilities	24	15	-9
Net assets	1,000	1,264	+263
Equity ratio	76.4%	82.8%	+6.4%

*Figures are rounded down to the nearest million yen

16

FY10/20 Earnings Forecast

17

Earnings Forecast

FY10/20 Forecast

Earnings at all level are ahead of the fiscal year plan and earnings that exceed the plan are expected to be used to fund investments for future growth. There is no change in the FY10/20 plan.

1Q-3Q vs.

FY10/20

1Q-3Q

FY10/20

Unit: Millions of yen

Plan

FY10/20

Plan

All three profit

Net sales

1,227

Operating profit

468

Ordinary profit

449

Profit

307

1. 73.5%

1. 80.4%

1. 77.9%

1. 78.7%

figures are ahead of the pace needed to achieve the fiscal year plan.

18

3Q FY10/20 Action Plan Progress

19

3Q FY10/20 Action Plan Progress

FY10/20 Action Plan

Enlarge the current sources of earnings

• More monthly active users
• More alliance partners

Investments for future

growth

• Investment in new products
• Continuous investments in existing products

A financial strategy for the proper balance between short and

medium to long-term growth

A more powerful internal infrastructure

• Recruit skilled people
• Establish an environment and programs that attract skilled people
• Establish efficient management systems based on data analysis

20

3Q FY10/20 Action Plan Progress

Growth in Monthly Active Users of Fraud and Spam Prevention Service*

About 10.22 million monthly active users* (as of July 31, 2020)

Unit: Millions

12

10

8

6

4

2

0

• Monthly mobile phone filtering service users
• Monthly landline phone filtering service users

9.88

8.63

																	3.37	5.64
															2.94
													2.46
						1.41		1.68			2.05
		0.93		1.18
		0.09		0.12		0.16		0.19			0.22		0.25		0.29		0.31		0.32	0.33	0.34
				FY10/18							FY10/19					FY10/20

• Monthly active users (MAU) are the number of users of our products and services who access our server at least once a month to update a blocked phone number list automatically or to activate our app or other services. If a person uses multiple devices and each device has a separate agreement, the person is counted as different users. MAU is an important KPI for determining the contribution of our products and services to eliminating problems caused by fraudand spam activities. Our revenue is, however,

not always directly affected by an increase or decrease in MAU because contracts with business clients such as telecommunications companies have different terms.	21
* Number of the monthly active users includes some provisional figures. The data may vary somewhat when the finalized figures are released and reflected in the data.

3Q FY10/20 Action Plan Progress

Mobile Business Category Growth

Slowing growth of "monthly active users x unit price" sales

due to COVID-19

Quarterly sales of major contract categories of

filtering services for mobile phones

1Q	2Q	3Q	4Q	1Q	2Q	3Q
FY10/19				FY10/20

Fixed payment No. of contractors x unit price Monthly users x unit price

Performance vs. Prior Quarter*

• Monthly active users × Unit price

Sales	104.7%
Monthly active users	112.9%

• No. of contractors × Unit price

Sales	100.8%
Monthly active users	116.4%

● Fixed payment

Sales	100.0%
Monthly active users	119.0%

*Difference between 2Q FY10/20 and 3Q FY10/20	22
*See page 38 for information about the contract categories.

3Q FY10/20 Action Plan Progress

Recovery of the Monthly Active Users Growth Rate

Reduced carrier shop operations have lowered the monthly active user

growth rate in the "monthly active users x unit price" model, which is the

primary source of sales growth. Signs of a recovery in the growth rate started appearing in July.

3Q

8.2%

A rapid increase in the growth rate started in July as carrier shops returned to normal operations

1.2%

0.4%

April

May

June

July

-1.8%

Growth rate

10.0%

5.0%

0.0%

-5.0%

23

3Q FY10/20 Action Plan Progress

Investments for Future Growth

Many media, online and other activities for growth of TobilaPhone Cloud sales

	Media exposure		Web seminars
■ Articles about the TobilaPhone Cloud	■ Online seminar for TobilaPhone Cloud
•	Newspapers: Nikkei, Nikkei Sangyo,	•	Seminar was shown at the Telework
		Nikkan Kogyo, others		EXPO
•	Internet:	NewsPicks	•	Seminar video posted on SeminarShelf

Planning on more sales growth backed by a large volume of advertisements in the 4Q

24

3Q FY10/20 Action Plan Progress

A More Powerful Internal Infrastructure

Hired one fulltime engineer during the third quarter

Business Operations	Sales/Administration
FY10/20 Recruiting Plan: 5	FY10/20 Recruiting Plan: 3

During the 1Q-3Q, hired 3 of the 5	During the 1Q-3Q, hired 2 of the 3
sales/administration members to be added
engineers to be added

*Results of Operations for the Fiscal Year Ended October 31, 2019

(https://contents.xj-storage.jp/xcontents/AS05546/e80241b1/755f/4a3b/bf3a/d0e8c043791e/20200312160628928s.pdf)25

Competitive Strengths

26

Competitive Strengths

The Social Issue of Fraud and Spam Activities

The Significant Need for Filtering Services to Block Fraudulent Calls Our goal

• In 2019, there were 16,851 recorded cases in Japan of fraud and spam activities.
• Financial lossescaused by this category of fraud remained high, a total of ¥31.6 billionin 2019, showing serious concerns.
• Seniors accounted for 83.7% of all individuals who suffered losses due to this type of fraud, creating an urgent need for measures to create a safe and secured society.

20,000														60	Use technology
													to eliminate
16,000													50	problems caused
													40	by fraud and
12,000															spam activities
												30
8,000
												20
4,000
												10
0														0
2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
					Fraud reports		Losses (billion yen)

Source: Identification and Control of Special Fraud in 2019, National Police Agency

27

Competitive Strengths

Strengths of Tobila's Database Technology

Constant improvement in accuracy because accumulated data increases along with the number of users

Data from police

Large volume of clearly

defined telephone use data

More users

Exclusive data analysis

techniques

Rapid identification of blocked phone numbers

Our goal is the elimination of problems caused by fraud and
spam activities in Japan!	28

Competitive Strengths

The High Barriers to Entry of the Fraud and Spam Prevention Services Tobila Systems is effectively the only source of this service in Japan

• • No competitors
• Analysis using more than 1.1 billion units of data. There is no company or service in Japan that can match this level of data analysis.
• The 13 patents for our unique algorithms make it very difficult for a new competitor to emerge.
• A cyclical system in which data accuracy improves as the number of users increases. The database must be constantly checked and updated because criminals are always changing the phone numbers they use.

	Call	Fraudulent call database
	accepted/rejected
Data from the	by users
police

Users' phone		Integration of	Malicious call
call statistics	Exclusive
malicious call	rejection/warning
	survey data
	information

The suspicious/malicious phone number list is constantly updated

29

Our Services and Business Model

30

Our Services and Business Model

Filtering Service for Mobile Phones

Included in the optional packages of NTT docomo, KDDI (au), SoftBank and other cell phone carriers

Offered as an app for filtering fraudulent calls

Carrier/App (Examples)	Incoming call screen (when	A function for automatically displaying
suspicious/malicious number is detected)	information about the caller

SoftBank

Meiwaku Denwa Block

KDDI(au)

Meiwaku Message & Denwa Block

docomo

iPhone version

Android version

Anshin Security

31

Our Services and Business Model

Business Model for Filtering Service for Mobile Phones (1/2)

Cell phone carriers offer optional packages containing several apps

Carrier shops explain these apps to customers when they purchase a phone service subscription

	Packaged with other	Explanation/sale when
	phones are purchased
		optional apps
	携
Provision of app			Carrier
帯			shop
	Cell
	キ
	phone
	ャ
	carriers
	リ				Users
	ア
License fees	Optional package fee is paid with
		the phone service fee

Tobila Systems receives	Carriers conduct marketing activities, sell phones
license fees from the carriers	and services to users, and collect fees

32

Our Services and Business Model

Business Model for Filtering Service for Mobile Phones (2/2)

The three main contract categories with cell phone carriers

The monthly active users × unit price model will be the primary source of growth

	No. of	Monthly
	contractors	active users
Fixed payment	×	×
	Unit price	Unit price

Tobila Systems' sales remain

the same regardless of changes in the number of the carrier's user contracts and monthly active users

Tobila Systems' sales change

along with the number of users who have signed up for the optional package

Tobila Systems' sales

change along with the number of monthly active users

33

Our Services and Business Model

The Market in Japan for Optional Packages for Filtering Service for Mobile Phones

More than 44 million potential users of Tobila Systems apps at no extra charge Monthly active users are now only about 9.88 million - Enormous growth potential

							More than
							34.12 million
							potential users
About 184.80
million				Enormous growth
					potential	Number of users who can already use
							Tobila Systems apps without making
		Estimate					any extra payment
		About 44.00
		million			About 9.88 million
No. of cell phone	No. of contracts for	Monthly active users of
contracts		optional packages	Tobila Systems apps

• Number of cell phone contracts: Quarterly Data on Telecommunications Service Contract Numbers and Market Share, Ministry of Internal Affairs and Communications (June 29, 2020)
• Number of contracts for options: Tobila Systems estimate based on data collected by Tobila Systems for SoftBank, Smart Pass and Smart Pass Premium contracts as announced

by KDDI for au (https://www.kddi.com/corporate/ir/finance/report-segment/), and the number of contracts for options announced on December 19, 2018 for NTT Docomo	34
* Number of the monthly active users includes some provisional figures. The data may vary somewhat when the finalized figures are released and reflected in the data.

Our Services and Business Model

Filtering Service for Landline Phones

Offered mainly as a service that is embedded in Home Gateway and sold as an optional package to users of landline phones

• The fraudulent call filtering system is embedded in the Home Gateway service that telecommunication companies provide to their customers.
• The fraudulent call filtering system can be used with a landline phone (IP phone) by selecting the basic optional package.

Home Gateway Fraudulent Call Filtering Flowchart

Provided to the Home Gateway systems of two KDDI Group companies

Malicious caller

Call

Calls from numbers in the malicious

caller database are blocked

Database check of

caller's number

Currently used by two companies

With Attachment for Landline Phones

Incoming calls trigger one of three colors

depending on the level of safety LED

LED light emitting unit

For incoming calls

Safe

		A phone number
		that the user has
Green
	registered for
		receipt

	Neutral		Dangerous
	A call from public phones		A phone number
Yellow	or a phone number that	Red	that the user has
registered for

is not registered in the	rejection or that is in
blocking list
the blocking list, etc.

*Users of landline phones (IP phones) must use a Home Gateway with a link between the Internet and telephone.

35

Our Services and Business Model

Business Model for Filtering Service for Landline Phones

Sold as part of the optional package for IP phones

Sold by KDDI and other carriers along with landline phone services

Provision of services

License fees

Optional package (incoming call display,	Sale of an optional package
etc.) for fiber-optic phone services
Telecommunication companies	Shop

Users

Optional package fee is paid with the

phone service fee

Tobila Systems receives license

Telecommunication companies conduct marketing activities, sell

fees from the telecommunication

companies

services to users, and collect fees

• Licensing fee scheme ･･･ Number of optional package contracts × Unit price

36

Our Services and Business Model

The Market in Japan for Optional Packages for Filtering Service for Landline Phones

Two telecommunications companies include the Tobila Systems fraudulent call filtering service in their optional packages

There is much potential for growth by forming alliances with more companies

	About 30% want
		a call filtering
	service even at an
About		additional cost	Enormous growth
53.67 million					potential	Anticipate more natural growth as
					About	part of optional packages for
		About			landline phones (IP phones) sold
				15.80 million	with a fiber-optic service
		16.10 million
					About 0.34 million
No. of landline	Potential users of	Monthly active users
phone contracts	optional packages	of Tobila Systems app

*Number of landline phone contracts: Quarterly Data on Telecommunications Service Contract Numbers and Market Share, Ministry of Internal Affairs and Communications (June 29, 2020)

*29.8% of all users want a fraudulent call filtering service at an additional cost irrespective of whether or not they have ever received a malicious call37 according to the Smartphone Malicious and Fraudulent Call Survey by Mobile Marketing Data Laboratory (November 5, 2015).

Our Services and Business Model

TobilaPhone Biz Business Model (1/2)

Using partners for the sale of the TobilaPhone Biz fraudulent call filtering service

• Automatic call rejection; no need for time-consuming preparation of lists of phone numbers to be blocked
• Improves operating efficiency by reducing unwanted phone calls by salespeople
• Includes a recording capability that strengthens corporate compliance and reduces the risk of errors when receiving/placing orders

Tobila Systems	TobilaPhone	TobilaPhone Biz for
investigations		fiber-optic links

Fraudulent call database

TobilaPhone Biz for

fiber-optic links

Attachment exclusively for TobilaPhone Biz

Automatic accumulation of malicious phone number

Simple display for operations

data and updating of list of blocked numbers

Registration of up to 10,000 numbers for

Searches of phone call recordings

Use a browser to listen to recordings

Users can reject calls from unknown numbers

rejection or acceptance

Calls from unknown numbers can also be input for rejection.

10,000 rejection and acceptance numbers can be registered. No need to worry about the deletion, or time needed for deletion, of numbers registered in the past for rejection.

Users can locate a specific recording on a browser by using the attachment's web management screen. All recordings are organized according to the date and time and caller.

No need to buy playback software because recordings can be heard using a browser. Simply use a

PC browser for a recording search on the38 management screen by inputting a name, telephone

number or date and time.

Our Services and Business Model

TobilaPhone Biz Business Model (2/2)

A steady revenue stream model in which monthly licensing fees increase along with the number of companies using this service

Wholesale of

attachments	Sale of attachments
	Sales partners
Payment for	Payment for attachments	Corporate
attachments
	users
	Monthly license fee (¥5,000 or more)

39

Our Services and Business Model

What is TobilaPhone Cloud?

A cloud-based business phone service that allows people to use their personal smartphones for business activities

①

	PBX, capital
Everything	expenditures, lease
for business-use
¥ 0
phones,
communications

among employees, etc.

Incoming/outgoing call management Suspicious/malicious phone numbers Data recording

Simply install the app

on a smartphone

Capital expenditures ¥0

Use a single screen for all

operations

40

Our Services and Business Model

TobilaPhone Cloud Business Model

A steady-revenue model in which monthly licensing fees increase along with the number of basic service packages

Communication link

Provision of services

Telecommunication

companies

Users

Cost of link

Service fee

●Initial fee	＋	●Monthly fee
¥30,000	(1) Basic service packages x unit price (¥3,000) + (2) Phone use charges

*Depending on the number of users, one company may have more than one basic service package. *For more information about the basic service package: (https://tobilaphone.com/biz/cloud/price/)

41

Earnings Forecast

Medium-term Growth Projection

• Mobile phone services

Expect rapid sales growth to continue because there is still substantial growth potential

• Landline phone services

The goal is steady sales growth because of the large potential market for landline services and high level of interest in these services

• Business phone services

Aiming for a big increase in sales because of growing demand for TobilaPhone Cloud services, a new business, as more people work from home

• Others

Forecast a slow decline in sales because there will be no sales activities to seek new customers for website design and operation services and contracted projects

FY10/16	FY10/17	FY10/18	FY10/19	FY10/20	FY10/21	FY10/22	FY10/23	FY10/24
								42

References

43

References

Company Overview

Company name	Tobila Systems Inc.
Securities code	4441
Established	December 1, 2006 (Founded on April 1, 2004)
Head office address	Pacific Square Nagoya Nishiki 7F
	2-5-12, Nishiki, Naka-ku, Nagoya, Aichi
Business	Development and provision of fraud and spam prevention systems
Management	Atsushi Akita	Tomoki Matsushita	Toshihito Goto
	Takuya Yuki	Akemitsu Nakahama	Tomoyuki Matsui	Hisashi Tanaami
No. of employees	64 (Includes 12 temporary employees; as of July 31, 2020)
Location	Nagoya, Tokyo, Osaka
Major memberships	Council of Anti-Phishing Japan
	Aichi Prefecture Crime Prevention Association

Gifu Prefecture Crime Prevention Society

Mie Prefecture Crime Prevention Association

Shizuoka Prefecture Crime Prevention Association

44

References

Directors and Executives

Atsushi Akita

Representative Director and President

Born in 1980; 39 years old

Director, Full-time member	Outside Director, Part-time	Outside Director, Part-time
member of the Audit and
of the Audit and Supervisory	member of the Audit and
Committee	Supervisory Committee	Supervisory Committee
Takuya Yuki	Akemitsu Nakahama	Tomoyuki Matsui

Executive Vice President

Tomoki Matsushita

Director and CFO,

General Manager of

Administration Dept.

Toshihito Goto

Outside Director, Part-time

member of the Audit and

Supervisory Committee

Hisashi Tanaami

45

References

FY10/20 Quarterly Results

Unit: Millions of yen

		FY10/19				FY10/20
	1Q	2Q		3Q	4Q	1Q	2Q	3Q
Net sales	214	276		231	258	270	319	312
Fraud and spam prevention	193	223		210	237	244	295	290
services
Other services	20	52		21	21	26	23	22
Cost of sales	49	75		60	72	77	82	78
Labor cost	44	45		47	52	54	52	54
Depreciation	6	6		8	12	11	10	10
Others	15	40		22	29	31	43	36
Pct. of cost of sales classified	23.7%	21.5%		23.1%	22.4%	20.1%	22.5%	22.6%
as R&D expenses and assets*
SG&A expenses	62	72		84	98	93	94	99
Personnel expenses	36	36		37	40	41	42	44
Advertising expenses	5	5		4	2	0	11	14
R&D expenses	3	5		9	11	8	7	10
Others	17	25		32	44	42	32	31

*The percentage of the cost of sales included in R&D expenses and assets due mainly to the characteristics of work performed by employees

46

Disclaimer

• This presentation includes forward-looking statements that incorporate the current outlook, forecasts and risk factors. There are many uncertainties that may cause actual performance to differ from these statements.
• Risk factors and uncertainties include the economic environment in Japan and other countries, such as the industry and markets where Tobila Systems operates and changes in interest rates and foreign exchange rates.
• Tobila Systems has no obligation to update or revise the forward-looking statements in this presentation even if there is new information, a future event or any other reason for an update or revision.

47