Group Synergies and Selection and Concentration

「As part of selecting and concentrating on businesses for future growth, we continued to strategically scale back less profitable businesses, including maintenance and operations support.」

「In the consolidated fiscal year, we launched a completely independent two-group management structure under a new management system and pursued growth strategies specialized for each business.」

「We reviewed the growth strategy for businesses in Europe and the United States, where profitability had declined, and advanced initiatives to fully deploy Vietnamese resources in Japan, including unifying the Vietnamese subsidiary under the AGEST brand. With a view to a spin-off listing, we also reorganized the Group effective 1 January 2024 so that the group companies operating the Enterprise Business became direct subsidiaries of AGEST, thereby shifting to a structure focused on expanding the business in Japan under AGEST.」

「We also advanced initiatives to strengthen governance at overseas subsidiaries and promote collaboration across the Group centered on AGEST.」

「With a view to a spin-off listing, we worked to strengthen collaboration between AGEST and LOGIGEAR CORPORATION beyond previous levels and build a structure for offshore development and testing using engineering resources in Vietnam.」

「During the second quarter consolidated accounting period, our consolidated subsidiaries 株式会社AGEST and 株式会社エイネット carried out an absorption-type merger effective 1 July 2022, with AGEST as the surviving company and エイネット as the absorbed company.」

「We advanced our growth strategy using M&A and other means by strengthening collaboration with companies newly made subsidiaries through M&A in the previous fiscal year to expand the ERP business, and by concluding an absorption-type company split agreement and a business alliance agreement under which AGEST would succeed to Sobal’s quality evaluation business.」

「We will pursue growth in global markets by strengthening collaboration among group companies in Japan and overseas and providing one-stop services from translation and LQA through to marketing.」

「Global services in particular benefited from the increasingly active global expansion of content by overseas game developers, including those in China. In collaboration with DIGITAL HEARTS CROSS, which became a subsidiary in March 2021, the company worked to win new projects by strengthening its one-stop service offering, from translation and LQA through marketing support.」

「In Global Services, the results of DIGITAL HEARTS CROSS Marketing and Solutions Limited (formerly Metaps Entertainment Limited), which became a consolidated subsidiary in March 2021, were included in consolidation from the second quarter accounting period. In addition, the launch of group collaboration, including the sharing of customer bases, increased new projects across Global Services.」

「In June 2021, we changed the name of Metaps Entertainment Limited to DIGITAL HEARTS CROSS Marketing and Solutions Limited and changed the names of 5 other group companies (collectively, the “DIGITAL HEARTS CROSS Group”). By unifying them under the “DIGITAL HEARTS” brand, we sought to improve our presence in global markets and worked to build a structure that would further strengthen collaboration across the Group.」

「We will pursue growth in global markets by seeking group synergies with Metaps Entertainment Limited and focusing on providing comprehensive localization services, including translation, culturalization and marketing, which are required when expanding content overseas.」

「We strengthened collaboration among group companies in Japan and overseas to capture the growing demand for translation and localization reliably.」

「We made the LogiGear Group, which has expertise and an extensive track record in test automation, a consolidated subsidiary in August 2019. We prepared to deploy its substantial pool of test engineers in Vietnam in the Japanese market and pursued initiatives to develop that market, where test automation has not yet become widespread, including by collaborating with existing group companies and beginning proposal-based sales for test automation.」

「In August 2019, the company made the LogiGear group, which had expertise in test automation and a large number of experienced test engineers, a subsidiary. By beginning collaboration with existing subsidiaries at an early stage, it secured multiple test automation trial projects and advanced initiatives to develop the Japanese market, where test automation had not yet become widespread.」

「We advanced the development of a sales structure and a service delivery structure spanning the Group to develop the Japanese market, where test automation has not yet become widespread.」

「Specifically, in the Entertainment Business, we will pursue further growth by strengthening group collaboration and building a structure capable of comprehensively supporting game development, including not only our core debugging services but also game development support, translation and localization, and customer support, thereby strengthening engagement with client companies.」

「Because 株式会社デジタルハーツネットワークス, which had previously been treated as a non-consolidated subsidiary, became more material, it was included in the scope of consolidation from the second quarter consolidated accounting period.」

「From the first quarter consolidated accounting period, following an organizational change aimed at strengthening the management structure, we changed the reportable segments from the previous four categories, “Debugging Business,” “Media Business,” “Creative Business” and “Other Businesses,” to two categories, “Entertainment Business” and “Enterprise Business.”」

「In the cumulative third quarter consolidated period, we merged 株式会社デジタルハーツ, which operates the debugging business, and 株式会社ネットワーク二一, which operates the systems development business, to accelerate growth in IT support and system testing. We advanced service focus for future business growth and worked to reduce fixed costs, including by consolidating Network21’s office at Digital Hearts’ head office.」

「In the cumulative second quarter consolidated period, we decided to merge the subsidiaries 株式会社デジタルハーツ, which operates the debugging business, and 株式会社ネットワーク二一, which operates the systems development business, to accelerate growth in IT support and system testing. We prepared for the merger by consolidating Network21’s office at Digital Hearts’ head office in September 2017, while focusing and concentrating services for future business growth.」

「In the cumulative first quarter consolidated period, we focused and concentrated our services to accelerate growth in system verification within the debugging business. As a result, revenue from Other businesses was ¥152.754 million, down 62.1% year on year, and the segment loss was ¥32.794 million.」

「We will continue pursuing group synergies and seek sustained growth and maximum profitability by making strategic and optimal use of the management resources of our group.」

「The merger of consolidated subsidiaries engaged in similar businesses was intended to establish a more efficient organizational structure.」

「In system verification for business systems, e-commerce sites and other targets, we worked to win new and recurring projects by strengthening collaboration across the Group, improving our proposal capabilities and focusing on proactive sales activities.」

「We made Network21 Co., Ltd. a wholly owned subsidiary and strengthened its structure. This was because, as a priority area within our core debugging business, we considered it necessary to build a strong business foundation and share and execute business strategies rapidly in order to respond flexibly to verification needs in the growing system verification market, where further expansion is expected.」

「We will continue pursuing group synergies and seek sustained growth and maximum profitability by making strategic and optimal use of the management resources of our group.」