当社の企業調査レポート（英語版）の発行に関するお知らせ

2020年08月07日

2020 年８月 7 日
各位
会社名株式会社テリロジー
代表者名代表取締役社長阿部昭彦
（コード番号 3356 東証 JASDAQ 市場）
問合せ先
役職・氏名執行役員経営管理部長廣谷慎吾
電話０３－３２３７－３２９１

当社の企業調査レポート（英語版）の発行に関するお知らせ

当社は、2019 年 12 月２日付「株主、投資家に向けた当社の情報開示・広報分野における活動の取り組みにつ
いて」にて公表のとおり、2020 年７月３日付にて株式会社フィスコより当社の企業調査レポート（日本語版）
を発行しておりますが、本日、海外の投資家向けに英訳された企業調査レポート（英語版）が発行されたことを
お知らせいたします。

当社の企業調査レポートにつきましては、添付資料をご参照ください。

以上
別添

COMPANY RESEARCH AND ANALYSIS REPORT

Terilogy Co., Ltd.

TSE JASDAQ Standard

7-Aug.-2020
FISCO Ltd. Analyst
Yoshihiro Maeda

FISCO Ltd.
http://www.fisco.co.jp
COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

■ Index

■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Company profile and business description. ................................................................................................. 01
2. Third consecutive year of higher sales and profits, as both profitability and financial
structure are improving. . .............................................................................................................................. 01

3. The Company forecasts higher sales and lower profits for FY3/21 results. .................................................. 02

4. Announcement of new medium-term management plan postponed to 2021.............................................. 02

■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. An IT solutions provider that continues to meet the demands of the present age. . ...................................... 03
2. Expanded its business areas to broadband, mobile,
and security with the corporate IP network business as its original business.............................................. 04
3. Core competence is its ability to find “emerging technologies” and “marketable products”
and its “market response”........................................................................................................................... 06

■Business description---------------------------------------------------------------------------------------------------------------------------------------------- 08
1. Develops its business in four sections by products and services................................................................ 08

2. Network Section.......................................................................................................................................... 08

3. Security Section........................................................................................................................................... 09

4. Monitoring Section. . ..................................................................................................................................... 10

5. Solutions Services Section.. ......................................................................................................................... 10

■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 11
1. FY3/20 results in which sales and profits increased for third consecutive fiscal year. . ................................. 11
2. The financial structure has significantly improved even accounting for the outflow of cash
accompanying the resumption of dividends................................................................................................ 14

■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 16
1. Company’s announced projections for FY3/21 results are must-reach targets. ........................................... 16

2. Watching the Company’s response to market changes amid the COVID-19............................................... 18

3. Acceleration of the partner strategy anticipating net sales to surpass ¥5bn. ............................................... 20

4. The new medium-term management plan is expected to be announced in May 2021. ............................... 22

We encourage readers to review our complete legal statement on “Disclaimer” page.
COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

█ Summary
An IT solutions provider with a strong ability to find “emerging
technologies” and “marketable products” and its “market
response.” Aiming to secure higher sales for the fourth consecutive
fiscal year in FY3/21 despite the coronavirus crisis

1. Company profile and business description

Terilogy Co., Ltd.<3356> (hereafter, also “the Company”) is an IT company that has been providing IP network-re-
lated products and cutting-edge products and solutions in the network security field since it was founded in July
1989 (the first year of the Heisei era). Its corporate philosophy is “to respond to the needs of our customers and
ensure their full satisfaction,” and in the Heisei era, it expanded its business areas to contribute to the construction
and development of an Internet society under the slogan “In collaboration with customer.” Today, in the Reiwa
era, the Company is working to provide solutions to meet the demands of the present age such as productivity
improvements, work-style reforms, the new way of life under the novel coronavirus disease (COVID-19) and for
inbound demand-related under its new slogan “No.1 in Quality.”

From the Company’s corporate history, it can be read that it has quickly ascertained the trends of broadband, mobile,
and cybersecurity and expanded its business areas to them with the corporate IP network business as its original
business. Also, the Company considers its own strengths to be, 1) its ability to find “emerging technologies” and
“marketable products” and its “market response,” 2) wide selection of customer solutions, 3) diverse service provision
approaches, 4) technical capabilities rooted in experience, and 5) global response capabilities. In particular, the first
strength listed above is used in its partnering strategy, which is a feature of the Company, and this is considered to
be the core competence on which all other strengths are based.

The Company is currently developing business activities in four sections by products and services; the Network
Section, the Security Section, the Monitoring Section, and the Solutions Services Section. Its features include that
it has established a 24-hours a day, 365-days a year maintenance system and an excellent distribution function
that combines direct and indirect sales.

2. Third consecutive year of higher sales and profits, as both profitability and financial structure are improving

In the FY3/20 consolidated results, net sales increased 10.7% year on year (YoY) to ¥4,051mn, operating income
rose 8.0% to ¥263mn, and ordinary income grew 25.4% to ¥288mn, as both sales and profits increased for the
third consecutive fiscal year.

Looking at the financial indicators, the improvement in profitability was added to the equity financing effect, resulting
in a significant increase in cash and deposits as well as shareholders’ equity. There was also a large improvement
in indicators of financial stability, including the equity ratio and the current ratio. As a result, the non-consolidated
retained earnings, which is normally the source of dividends, still is at a high enough level even after paying the
FY3/20 year-end dividend.

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

Summary

3. The Company forecasts higher sales and lower profits for FY3/21 results

For the FY3/21 consolidated results, as conservative projections considering the COVID-19 pandemic, the Company
has announced that it expects sales to increase but profits to decline, with net sales rising 3.2% YoY to ¥4,180mn
and operating income to decline 24.2% to ¥200mn. The reason that the Company is projecting lower profits despite
its forecast for higher sales in each business section is that it has factored in an increase in personnel expenses due
to aggressive expansion of headcount, and higher development costs for its own products. Also, the Company is
expecting to maintain a period-end dividend of ¥5 per share.

4. Announcement of new medium-term management plan postponed to 2021

The Company has stated that it will “implement measures for public relations and publicity activities aimed at
improving medium- to long-term and sustainable corporate value, while also aiming to maximize corporate value.”
Because FY3/20 was the final fiscal year of the previous medium-term management plan, the Company was
preparing to announce a new medium-term management plan with FY3/21 as the first year, but this has been
postponed due to the COVID-19 pandemic.

The next medium-term management plan will likely be formulated with FY3/22 as its first fiscal year. In the new
medium-term management plan, we can expect the Company to present an equity story that combines a detailed
action plan to pursue organic growth with an M&A strategy based on a highly-convincing financial strategy.

Key Points

• An IT solutions company that has accumulated a track record in the 30 years since its foundation. The Company
is currently conducting business activities through four sections; the Network Section, the Security Section, the
Monitoring Section, and the Solutions Services Section
• From the Company’s corporate history, it can be read to have a track record of accurately ascertaining the

trends of the times and skillfully changing its business focus areas to reflect them
• Also utilizing its core competence, its ability to find “emerging technologies” and “marketable products” and its

“market response,” in its partnering strategy
• In light of the impact of the COVID-19 pandemic, the Company is forecasting higher sales but lower profits in

FY3/21
• Expected to present an equity story that combines a specific action plan to progress organic growth with an

M&A financial strategy

We encourage readers to review our complete legal statement on “Disclaimer” page.

2,434 200
2,500 166 100

2,000 0

1,500 -100

1,000 -105 -200

500 -300

0 -400
FY3/17 FY3/18 FY3/19 FY3/20 FY3/21E
Note: Results are non-consolidated up to FY3/17 and consolidated from FY3/18 onwards
Source: Prepared by FISCO from the Company’s securities report and financial results

█ Company profile
An IT solutions provider that continues to meet the demands of the
present age.
Expecting initiatives responding to the new way of life under
COVID-19

1. An IT solutions provider that continues to meet the demands of the present age

The Company is an IT company that has been providing IP network-related products and cutting-edge products
and solutions in the network security field since its foundation in July 1989. In December 2004, it was newly listed
on the JASDAQ Securities Exchange (currently, the Tokyo Stock Exchange (TSE) JASDAQ).

Its corporate philosophy is “to respond to the needs of our customers and ensure their full satisfaction,” and in the
Heisei era, it expanded its business areas to contribute to the construction and development of the Internet society
under the slogan “In collaboration with customer.” Today, in the Reiwa era, the Company is working to provide
solutions to meet the demands of the present age such as productivity improvements, work-style reforms, the new
way of life under COVID-19 and for related of inbound demand under its new slogan “No.1 in Quality.”

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

Company profile

2. xpanded its business areas to broadband, mobile, and security with the corporate IP network business
E
as its original business

Looking at the Company’s corporate history, it can be read that it has quickly ascertained the trends and expanded
its business areas to them with the corporate IP network business as its original business. These include 1) the
rapid shift from Internet communication using telephone lines and ISDN lines to high-speed Internet communication
using broadband lines, such as ADSL and FTTH, 2) the arrival of the mobile era against the backdrop of the spread
of smartphones, and 3) the increasing importance of cybersecurity in Internet society.

The Company’s corporate IP network business began in 1990 when it entered-into a distribution contract with
Wellfleet of the US and started to provide routers (telecommunications equipment for relaying two or more different
networks, which are one of the main products to build IP networks. Although Wellfleet does not exist today, in 1998
the company was acquired by Nortel (Canada), the world’s second largest computer network device company
at the time, to compete against Cisco Systems, Inc. <CSCO> of the US founded in 1984, which was the largest
company back then. The Company’s discovery of Wellfleet in 1990 can be said to be a good example of its ability
to find “emerging technologies” and “marketable products.” Currently, the Company is a supplier that handles the
routers manufactured by Cisco Systems.

In the broadband area, in 1999 the Company started to provide ADSL-connection software, and subsequently
it developed hit products with more than 10 million users, which became a bridgehead into a business for major
telecommunication companies. Also, in 1999, it concluded a distribution contract with Redback Networks of the US,
and through the introduction of broadband access servers and other products, it contributed to building the FTTH
networks of various electric power companies. Also, in mobile-related, it realized growth for DNS/DHCP appliances
manufactured by Infoblox Inc. of the US (devices to issue an IP address) and in-house developed solutions for
monitoring networks have become its core products following the spread of smartphones. The Company was the
first in Japan to conclude a distribution contract with Infoblox of the US, which was founded in 1999. Currently,
DNS/DHCP appliances manufactured by Infoblox are handled by major companies in Japan and have acquired
the position of being the de-facto standard, so this can also be evaluated as indicating the Company’s “foresight.”

In the Security field, the Company has provided wide-ranging solutions by concluding a domestic (Japan) master
reseller contract with TippingPoint of the US, when it was independent in 2004 (it was acquired by Hewlett-Packard
of the US in 2010 and acquired by Trend Micro Inc. <4704> in 2015) followed by concluding reseller contracts with
OneSpan Inc. <OSPN> (formerly VASCO) in 2007, Lastline of the US in 2012, RedSeal of the US in 2015, Tempered
Networks of the US and KELA (Israel) in 2016, and Nozomi Networks of the US in 2018 (domestic (Japan) reseller
contract with Tempered Networks), which is enabling it to provide solutions over a wide range.

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

Company profile

Company history
July 1989 Terilogy Co., Ltd. established in Kanda, Chiyoda-ku, Tokyo. Enterprise networks business launched.
Apr. 1991 Maintenance outsourcing contract signed with Toshiba Engineering Corporation (now Toshiba IT-Services Corporation) and
maintenance service business launched.
May 1996 Outsourcing contract signed with Tokyo NTT Data Communication Systems Corporation (now NTT Data Business Systems
Corporation) and customer solutions business launched.
Nov. 1999 Distribution contract signed with American company Redback Networks, Inc. and broadband network business launched,
encompassing sales of Redback Networks broadband access servers, Ethernet software from American company Network
Telesystems, Inc. (now Affinegy, Inc.), and other such products.
Jan. 2003 DNS/DHCP servers distribution contract signed with Infoblox Inc. of the US.
Oct. 2004 Domestic (Japan) master reseller contract signed with American company TippingPoint Inc. (now Trend Micro Incorporated.).
Dec. 2004 Listed on JASDAQ Securities Exchange.
Sep. 2005 Certified under ISO 27001 information security management system (ISMS) standards.
Nov. 2005 Basic agreement on business collaboration signed with UNIADEX, Ltd. based on capital tie-up agreement.
Dec. 2006 Domestic (Japan) master reseller contract signed with American company NETSCOUT (now NETSCOUT Systems, Inc.).
Feb. 2007 Distribution contract signed with Belgian company VASCO Data Security International, Inc.
Mar. 2007 Certified under ISO 14001 environmental management system (EMS) standards.
Oct. 2008 Distribution contract signed with Singaporean company eG Innovations Pte Ltd.
Apr. 2010 Following merger of JASDAQ Securities Exchange and Osaka Securities Exchange, Terilogy listed on Osaka Securities Exchange
JASDAQ.
Aug. 2010 Domestic (Japan) reseller contract signed with American company APCON, Inc.
Feb. 2011 Asia-Pacific distribution contract signed with American company SevOne, Inc.
June 2012 Sales begun of "momentum," a unique probe software product developed in-house at Terilogy.
Sep. 2012 Distribution contract signed with American company Lastline, Inc.
July 2013 Following merger of Osaka Securities Exchange and Tokyo Stock Exchange, Terilogy listed on JASDAQ (Standard).
July 2013 Fullflex ZG master reseller contract signed with Accense Technology, Inc.
July 2015 Sales begun of CloudTriage, a unique, cloud-based operations monitoring service by Terilogy.
Dec. 2015 Distribution contract signed with American company RedSeal, Inc.
Apr. 2016 Distribution contract signed with Taiwanese system integration company SYSCOM.
Oct. 2016 Distribution contract signed with Canadian company Wedge Networks, Inc.
Oct. 2016 Exclusive domestic reseller contract signed with American company Tempered Networks, Inc.
Nov. 2016 Distribution contract signed with Israeli company KELA.
Jan. 2017 Basic agreement on business collaboration signed with NCXX Group Inc. based on capital tie-up agreement.
Jan. 2017 Basic agreement on joint security-product marketing signed with FISCO Ltd.
Jan. 2017 Basic agreement on business collaboration in the area of transaction security with Fisco Cryptocurrency Exchange Inc.
Jan. 2017 Basic agreement on business collaboration in the area of joint product development for blockchain technology applications signed
with SJI Ltd (now CAICA Inc.).
Mar. 2017 Wholly owned subsidiary Terilogy Worx Corporation established.
Dec. 2017 Shares required for ICT-business corporation establishment acquired by ITX Corporation, and wholly-owned consolidated
subsidiary Terilogy Serviceware Corporation established.
Apr. 2018 Distribution contract signed with American company Nozomi Networks Inc.
July. 2018 Sales begun of EzAvater, Terilogy’s unique, ultra-simple robotic process automation (RPA) tool.
Jan. 2019 Business tie-up agreement signed with Israeli company Harel-Hertz Investment House Ltd.
June 2019 Business tie-up with American company Sumo Logic.
July 2019 Consolidated subsidiary Terilogy Worx Corporation concluded distribution contract with American company BitSight.
Aug. 2019 Distribution contract concluded with Israeli company TechSee.
June–Sept. 2019 Distribution contracts for Company-developed RPA tool EzAvater concluded with Panasonic Solution Technologies Co., Ltd.,
Resona Gate Co., Ltd., Yamazakibuneidou, Inc., Nextage Co., Ltd., islenet Inc., UCHIDA ESCO Co., Ltd. <4699>.
Jan.–Feb. 2020 Distribution contracts for Company-developed RPA tool EzAvater concluded with Toppan Printing CO., LTD. <7911> and Hitachi
Systems, Ltd.
Mar. 2020 Consolidated subsidiary Terilogy Serviceware Corporation concluded business tie-up with Towa Engineering Corporation.
Mar. 2020 Distributor contract concluded with Israeli company Radware Ltd.
Apr. 2020 Established joint venture with VIETNAM CYBERSPACE SECURITY TECHNOLOGY JOINT STOCK COMPANY, a subsidiary of
Vietnamese telecom provider Hanoi Telecom, based on strategic business tie-up.
May 2020 Consolidated subsidiary Terilogy Serviceware Corporation acquired shares of IGLOOO Inc., making it a subsidiary.
June 2020 Distributor contract concluded with Computer Engineering & Consulting Ltd. <9692> for Company-developed RPA tool EzAvater.
Source: Prepared by FISCO from the Company’s securities report and website

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

Company profile

3. ore competence is its ability to find “emerging technologies” and “marketable products” and its “market
C
response”

The Company considers its strengths to be 1) its ability to find “emerging technologies” and “marketable prod-
ucts” and its “market response,” which is the discernment required to find and identify progressive, leading-edge
technologies and deploy them in markets in ways adapted specifically to local customers; 2) wide selection of
customer solutions, of a diverse selection of security and safety solutions for varying applications, encompassing
everything from network infrastructure to communication endpoints; 3) diverse service provision approaches, of a
flexible Terilogy-product provision comprising diverse intermixing of products and services, encompassing everything
from products utilizing leading-edge technologies through to maintenance services, software products developed
in-house, and new services; 4) technical capabilities rooted in experience, of technical strengths and abilities forged,
since its founding, through three decades of reliable, customer-tailored service provision; and 5) global response
capabilities, of products and services for global markets, including the rapidly growing markets of emerging nations
in Asia. Each of these strengths is backed-up by a track record of results, but in particular, the Company’s ability
to find “emerging technologies” and “marketable products” and its “market response” would seem to be its core
competence on which all of the other strengths are based.

The Company’s ability to find “emerging technologies” and “marketable products” is “after accurately ascertain
the trends of the times and incorporating them into its business areas, the ability to find the latest technologies in
overseas venture companies and to conclude a distributor contracts and other contracts with them,” and it has no
shortage of experience in discovering the latest technologies in overseas venture companies. In addition to Wellfleet
and Infoblox, which were introduced as good examples in the previous section, we can also mention TippingPoint
(Trend Micro), OneSpan, and Lastline as examples in the security field.

TippingPoint is a cybersecurity company specializing in IPS (Intrusion Prevention System) that was acquired by Trend
Micro in 2015 for approximately US$0.3bn, However, the Company concluded a domestic (Japan) master reseller
contract and accumulated a track record with TippingPoint 11 years before its acquisition, and it continues to have
a presence in which it is relied on by Trend Micro. Also, in 2007, the Company became the first in Japan to handle
OneSpan’s one-time password technology, which today has been adopted by all of Japan’s megabanks and become
an essential part of Internet banking. Moreover, in 2012, the Company started selling the targeted-attack counter-
measure cloud services of Lastline of the US, and as is clear from the trend in the number of targeted-attack emails
ascertained by the National Police Agency (2014: 1,723 cases→2015: 3,828 cases→2016: 4,046 cases→2017:
6,027 cases→2018: 6,740 cases), in recent years, malware and other targeted attacks have come to be recognized
as a major threat. This example would seem to clearly demonstrate the Company’s ability to accurately ascertain
the technological trends and cutting-edge technologies that it should precisely focus on as its business areas and
its ability to find “emerging technologies” and “marketable products” with “foresight.”

So why do overseas venture companies select the Company as their partners? The reason is the height of its “market
response” that it has fine-tuned since its foundation by implementing a management strategy that is supported by
its corporate philosophy of prioritizing customers’ needs and levels of satisfaction.

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

Company profile

The sources of the Company’s “market response” are 1) its ability to combine imported technologies with its
proprietary technologies to develop solutions with high levels of customer satisfaction, and 2) its ability to fill-in
missing parts by fully utilizing an alliance and M&A strategy. In general, even if venture companies are able to create
good technologies and products, in many cases they are inferior to major companies in the value chain for aspects
like maintenance and sales. But in the case of the Company, in 1991, two years after it was founded, it concluded
a maintenance outsourcing contract with Toshiba IT-Services Corporation (formerly Toshiba Engineering Co., Ltd.).
For sales, one of its features is that it has not only established an indirect sales network, including through alliances,
but that it has also worked to strengthen its direct sales force, such as by acquiring customer touch points through
business and capital alliances and M&A.

The Company has been highly evaluated by influential customers for its active utilization of a partnering strategy
for the entire value chain, from product development (combining imported technologies with its proprietary tech-
nologies) through to maintenance (in which the Company itself identifies problems and then outsources the actual
maintenance work) and sales (using both direct and indirect agency network sales), and it is efficiently building an
excellent customer base (more than 300 companies, mainly major companies, and it conducts business directly with
around 90% of customers). This has formed the “excellent distribution capabilities in Japan” (a wealth of customer
information, a maintenance system that operates 24 hours a day, 365 days a year, and extensive customer contact
points through combining direct sales with indirect sales) and it became the deciding factor for the overseas venture
companies to choose the Company as their partners in Japan.

In March 2020, the Company signed a distributor agreement with Israeli company Radware, which is one of the
global leaders in areas such as network virtual environments and cybersecurity solutions, and is a publicly listed
company on the NASDAQ market in the US. A press release from Nihon Radware K.K. stated, “Terilogy has a track
record of creating Japanese markets by providing numerous overseas cutting-edge technologies to the Japanese
market. Terilogy has achieved stable operation and management of technologies and products that previously had
no track record in the Japanese market, and has earned the trust of Japanese customers for many years. Radware
expects synergies between the strong solutions proposing and support capabilities provided by Terilogy and the
technical capabilities that have allowed Radware to be regarded as an industry leader, and has decided to conclude
a distributor contract this time, judging that Radware can provide integrated security solutions to Japanese corporate
customers, including main products “Cloud WAF Service,” “Bot Manager” and “Cloud Workload Protection.” We
view this as proof that the Company’s ability to find “emerging technologies” and “marketable products” and its
“market response” is viewed positively by overseas technology companies.

The Company’s value chain

Source: The Company’s website

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

█ Business description
Engages in business in four sections; the Network Section, the
Security Section, the Monitoring Section, and the Solutions Services
Section

1. Develops its business in four sections by products and services

The Company does not disclose segment information, but it develops its business activities in four sections accord-
ing to products and services; the Network Section, the Security Section, the Monitoring Section, and the Solutions
Services Section.

Diagram of the business structure

Source: The Company’s securities report

2. Network Section

In the Network Section in FY3/20, net sales were ¥896mn, which provided 22.1% of total net sales. The main
products and services it handles are 1) network products (routers, switches, and wireless LAN, DNS/DHCP), 2)
design and build of in-company information and communication systems and infrastructure, and 3) sales of a wide
range of network-related products, such as TV conferencing systems, and provision of professional services. The
Company takes pride in its ability to provide solutions optimized to meet customer needs because of the track
records accumulated in the 30 years since its foundation. In addition, it has a system in place to respond 24 hours
a day, 365 days a year for the maintenance work for the networks and incidental devices provided by this section.

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

Business description

Main products in the Network Section

Source: The Company’s website

3. Security Section

In the Security Section in FY3/20, net sales were ¥1,645mn, which provided 40.6% of total net sales and it is
the Company’s main business pillar. The main products and services it handles are 1) network security products
(firewalls, intrusion detection and prevention countermeasures, information leakage countermeasures, etc.), 2)
security authentication infrastructure (identifying service users on a network), and 3) security systems to prevent
unauthorized intrusions (one-time password products). In addition, it has a system in place able to respond 24 hours
a day, 365 days a year for maintenance work for the security devices and software products provided by this section.

Main products in the Security Section

Source: The Company’s website

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

Business description

4. Monitoring Section

In the Monitoring Section in FY3/20, net sales were ¥663mn, which provided 16.4% of total net sales, while a feature
of this section is the handling of the Company’s own-brand products. The main products and services it handles are 1)
packet analysis using an in-house developed product (momentum), 2) cloud-based monitoring services (CloudTriage),
and 3) network operation, management, and monitoring devices. In addition, it has a system in place able to respond
24 hours a day, 365 days a year for the maintenance work for the in-house developed products (momentum), and
network operation, management, and monitoring devices and software products provided by this section.

The Company’s own brands are “momentum,” (network packet capture products developed completely in-house),
which constitutes the core of the Monitoring Section, and “CloudTriage” (IT systems operation monitoring cloud
services managed under its own brand), which use a monthly billing model and forms part of the support business
section. In “momentum,” data (packets) exchanged on a network are collected in a storage device and analyzed
and made visible in order to validate service quality, specify locations of defects, and provide support measures. It
is, so to speak, a drive recorder-like solution on a network, and the Company has successfully acquired important
customers, such as major mobile communication carriers. Also, “CloudTriage” measures the operation conditions
of IT systems from the user’s viewpoint, and in the event of a decline in performance, like a delay in remote access,
it specifies the cause. It is provided inexpensively as a monthly billing cloud service.

Main products in the Monitoring Section

Source: The Company’s website

5. Solutions Services Section

In the Solutions Services Section in FY3/20, net sales were ¥845mn, which provided 20.9% of total net sales. The
main products and services it handles are 1) an in-house developed software Robotic Process Automation (RPA)
tool (EzAvater), 2) a multi-lingual real-time video interpretation service (Mieru-Tsuyaku), 3) a cloud-based, managed
VPN service (MORA VPN Zero-Con), 4) a Web conference service (MORA Video Conference), 5) a corporate Internet
connection service (MORA Hikari), and 6) a high-speed mobile data communication service (MORA Mobile).

Main products in the Solutions Services Section

Source: The Company’s website

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

Business description

The core of this section is formed by Terilogy Serviceware Corporation (changed corporate name from ITX
Corporation’s corporate ICT services business that was acquired from the Nojima Corporation <7419> Group in
December 2017), and in its M&A strategy, the Company is acquiring new business domains and a customer base
of medium-sized and SME customers, which it has had few of in the past. The point to focus on for this is the lineup
of new products matched to medium-sized and SME customer groups, such as the RPA tool (EzAvater) which is
attracting attention toward realizing work-style reforms and improved work efficiency, and the multi-lingual, real-time
video interpretation service (Mieru-Tsuyaku), which can be used to respond to inbound demand.

The features of “EzAvater” include it is extremely easy (robots for everyone = intuitive operations to enable the
creation of scenarios to automate routine tasks), it makes delays unlikely (the robots work at the speed of the
system, and it creates templates for exception processing and realizes stable operations), it does not matter what
app is used (through the adoption of image recognition technology, work can be automated regardless of the app,
as long as it is operating on Windows) and it can start small (can be introduced starting from a single PC). Due to
these features, “EzAvater” overcomes many of the weaknesses of RPA tools, such as that if there is no specialist
IT department, it is difficult to create the robots and the introduction costs and maintenance burden are large. This
software made it possible for a utilization method that creates robots that reflect the needs of work sites in each
department and to have them carry out daily management tasks. For sales of “EzAvater,” the Company is actively
utilizing a partnering strategy (it has introduced the Gold Partner system) with the aim of spreading its use among
a wide range of user groups, and during 2019 the Company concluded distributor contracts in rapid succession
with NCXX Solutions Inc., Panasonic Solution Technologies Co., Resona Gate Co., Ltd., Yamazakibuneidou, Inc.,
Nextage Co., Ltd., islenet Inc., and UCHIDA ESCO Co., Ltd. <4699>. Since the start of 2020, the Company has
concluded distributor contracts with Toppan Printing Co., Ltd. <7911>, Hitachi Systems, Ltd., and Computer
Engineering & Consulting Ltd. <9692>.

█ Results trends
In FY3/20, sales and profits increased for the third consecutive fiscal
year.
The financial structure has significantly improved even accounting
for the outflow of cash accompanying the resumption of dividends

1. FY3/20 results in which sales and profits increased for third consecutive fiscal year

In the FY3/20 consolidated results, net sales increased 10.7% YoY to ¥4,051mn, operating income rose 8.0% to
¥263mn, ordinary income grew 25.4% to ¥288mn, and net income attributable to owners of parent climbed 3.5%
to ¥214mn. Given the fact that sales and profits effectively increased in FY3/18 when the Company switched to
disclosing consolidated results, this marked the third consecutive fiscal year that both sales and profits increased.
Both net sales and operating income fell short of the initial forecasts (98.1% and 94.2% of the initial forecasts,
respectively), but ordinary income exceeded the initial forecast by 10.8%, while net income attributable to owners
of parent exceeded the initial forecast by 19.3%. The large increase in ordinary income compared to the increase
in operating income is largely due to foreign exchange gains and losses, and the small growth rate in net income
attributable to owners of parent is due to the decline in gain on sales of investment securities.

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COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

Results trends

Simplified income statement
(¥mn)
FY3/15 FY3/16 FY3/17 FY3/18 FY3/19 FY3/20
Net sales 2,804 2,639 2,434 3,221 3,660 4,051
YoY 9.5% -5.9% -7.7% - 13.6% 10.7%
Cost of sales 2,226 1,890 1,709 2,197 2,256 2,537
YoY 19.2% -15.1% -9.6% - 2.7% 12.5%
Gross profit 577 748 725 1,024 1,403 1,513
YoY -16.6% 29.7% -3.0% - 37.0% 7.8%
SG&A expenses 789 721 831 858 1,159 1,249
YoY -3.0% -8.6% 15.2% - 35.0% 7.8%
Operating income -212 26 -105 166 244 263
YoY - - - - 47.0% 8.0%
Ordinary income -207 -0 -97 173 229 288
YoY - - - - 32.3% 25.4%
Net income -211 -19 -99 154 207 214
YoY - - - - 34.6% 3.5%
Note: Results are non-consolidated up to FY3/17 and consolidated from FY3/18 onwards

From FY3/18, net income attributable to owners of parent
Source: Prepared by FISCO from the Company’s financial results and securities report

The gross profit margin has improved greatly, from 20.6% (non-consolidated) in FY3/15 to 37.4% in FY3/20 (a 0.9
percentage point YoY decline), and has remained at a high level. This confirms the effect of the improvement in the
product mix due to the launch of the Company’s own highly-profitable products and services. The FY3/20 SG&A
expense ratio was 30.8% (0.9 percentage point YoY decline), which is higher than the 26.6% in FY3/18, which was
the lowest level in the past 10 years (including non-consolidated results), but the ordinary profit ratio in FY3/20 was
7.1% (up 0.8 percentage point YoY), which was equal to FY3/04, which was the highest level since the Company’s
listing on the stock market. It can be said that the Company’s earnings capability has improved significantly while it
has been dealing with upfront investment costs such as the cost of developing its own products.

Trends in the profit margins, etc.
Gross profit margin (left) SG&A expenses ratio (left)
(%) Ordinary income margin (right) (%)
45.0 8.0
7.1
40.0 6.0
37.4
35.0 4.0

30.0 30.8 2.0

25.0 0.0

20.0 -2.0

15.0 -4.0

10.0 -6.0

5.0 -8.0

0.0 -10.0
FY3/16 FY3/17 FY3/18 FY3/19 FY3/20
Note: Results are non-consolidated up to FY3/17 and consolidated from FY3/18 onwards
Source: Prepared by FISCO from the Company’s securities report and financial results

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COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

Results trends

At the end of FY3/20, total assets were ¥4,203mn (up ¥1,008mn YoY) and net assets were up ¥828mn YoY at
¥2,269mn. Notable changes compared to the end of FY3/19 on the assets side include the ¥831mn increase in cash
and deposits and the ¥129mn increase in notes and accounts receivable – trade. Notable changes on the liabilities
side include the ¥207mn increase in accounts payable – trade, and a ¥137mn decline in interest-bearing debt.

Based on the financial results report, ROE declined 7.2 percentage points YoY to 11.6%, but this was alongside
the increase in shareholders’ equity and is not a problem. In fact, ROA (Return on Assets) rose by 0.5 pp to 7.8%,
which is its highest value in the last 10 years (including non-consolidated results), and overall, the profitability of
assets continues to improve.

Simplified balance sheet
(¥mn)
End of End of End of End of End of End of
Change
FY3/15 FY3/16 FY3/17 FY3/18 FY3/19 FY3/20
Current assets 2,614 2,019 2,063 2,288 2,355 3,404 1,049
Cash and deposits 1,578 1,007 1,098 972 1,064 1,895 831
Notes and accounts receivable - trade 516 524 493 863 742 871 129
Inventory assets 45 64 24 35 56 102 45
Non-current assets 438 435 375 834 839 798 -41
Property, plant and equipment 121 108 93 131 148 147 -1
Intangible assets 76 87 63 381 353 339 -13
Investments and other assets 240 239 218 321 337 311 -25
Total assets 3,052 2,455 2,439 3,123 3,194 4,203 1,008
Current liabilities 2,219 1,676 1,752 2,312 1,314 1,626 312
Accounts payable - trade 388 106 315 252 243 451 207
Short-term borrowings 1,107 928 750 1,177 137 130 -7
Non-current liabilities 109 78 49 48 439 307 -131
Long-term borrowings - - - - 386 256 -130
Lease obligations 98 67 35 9 11 7 -4
Total liabilities 2,329 1,755 1,802 2,361 1,753 1,934 180
Interest-bearing debt 1,107 928 750 1,177 524 386 -137
Total net assets 723 699 637 762 1,441 2,269 828
Note: Results are non-consolidated up to FY3/17 and consolidated from FY3/18 onwards
Source: Prepared by FISCO from the Company’s financial results and securities report

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COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

Results trends

Trends in shareholders’ equity and the equity ratio
Shareholders’ equity (left) Equity ratio (right)
（¥mn） (%)
2,500 60.0
53.9

45.0
2,000 48.0

1,500 36.0
28.5
26.1
24.4
2,265
1,000 24.0

1,438
500 12.0

0 0.0
FY3/16 FY3/17 FY3/18 FY3/19 FY3/20

Note: Results are non-consolidated up to FY3/17 and consolidated from FY3/18 onwards
Source: Prepared by FISCO from the Company’s securities report

At the end of FY3/20, cash and cash equivalents were ¥1,500mn. Net cash provided by operating activities was
¥484mn, mainly due to net income before taxes of ¥290mn, while net cash used in investing activities was ¥24mn,
which was not a major change versus the previous year. Meanwhile, net cash provided by financial activities was
¥464mn overall. This was due to ¥612mn in revenue from the issuance of shares accompanying the exercise of
share acquisition rights, despite the ¥137mn outflow due to the repayment of long-term borrowings.

Simplified cash flow statement
(¥mn)
FY3/15 FY3/16 FY3/17 FY3/18 FY3/19 FY3/20
Net cash provided by (used in) operating activities (a) 150 -223 291 -55 374 484
Net cash provided by (used in) investing activities (b) -49 -4 -0 -440 -55 -24
Net cash provided by (used in) financing activities 146 -231 -219 391 -218 464
Free cash flow (a) + (b) 100 -228 291 -495 318 459
Cash and cash equivalents at end of period 934 445 535 462 569 1,500
Note: Results are non-consolidated up to FY3/17 and consolidated from FY3/18 onwards
Source: Prepared by FISCO from the Company’s securities report and financial results

2. he financial structure has significantly improved even accounting for the outflow of cash accompanying
T
the resumption of dividends

What is noteworthy about the FY3/20 results is the enhanced soundness of the financial structure. Looking at
the key indicators of financial soundness, the equity ratio rose 8.9 percentage points YoY to 53.9%, a significant
increase from 24.4% at the end of FY3/18, while the current ratio was 209.4% (versus 179.2% at the end of FY3/19),
surpassing the 200% mark which indicates a sufficient level of ability to make payments. This is the result of the
equity financing utilizing the Company’s treasury shares in addition to the recovery in performance for the third
consecutive fiscal year.

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COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

Results trends

Taking a closer look, in FY3/20 the Company made progress on reducing non-current assets and accumulating
current assets, and cash and deposits were ¥1,895mn, accounting for 45.1% of total assets. In addition, share-
holders’ equity increased to ¥2,265mn, and retained earnings were ¥267mn, largely due to a transfer from capital
surplus, and shifted from a negative level a year earlier (minus ¥565mn) to positive territory.

The Company needs just over ¥82mn to cover the dividend of ¥5 per share, and non-consolidated retained earnings,
which is the normal source of dividend payments, stood at ¥156mn at the end of FY3/20 (compared to minus
¥617mn at the end of FY3/19), indicating that the Company has approximately two years’ worth of the source of
dividend payments.

Trends in the current ratio, cash and deposits, and retained earnings
（¥mn） Cash and deposits (left) Retained earnings (left) (%)
Current ratio (right)
2,000 250

1,500

1,000

-500

-1,000 0
FY3/16 FY3/17 FY3/18 FY3/19 FY3/20
Note: Results are non-consolidated up to FY3/17 and consolidated from FY3/18 onwards
Source: Prepared by FISCO from the Company’s securities report and financial results

Also, the greater soundness of the financial structure has led to an improvement in non-operating profit/loss. In the
case of the Company, which handles imported goods as its mainstay products, the impact of foreign exchange
profit/loss on non-operating revenue cannot be completely eliminated. However, in FY3/20, interest income was 3.2
times the level in FY3/19, and interest expenses were down 63.1% YoY, as the effects of reducing interest-bearing
debt became apparent, which played a role in improving the non-operating profit/loss.

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

Results trends

Trends in interest-bearing debt, interest expenses, and non -operating
profit/loss
Interest-bearing debt (left) Interest expenses (right)
（¥mn）（¥mn）
Non-operating profit/loss (right)
1,500 30

1,250 20

1,000 10

500 -10

250 -20

0 -30
FY3/15 FY3/16 FY3/17 FY3/18 FY3/19 FY3/20
Note: Results are non-consolidated up to FY3/17 and consolidated from FY3/18 onwards
Source: Prepared by FISCO from the Company’s securities report and financial results

█ Outlook
Four consecutive fiscal years of higher sales and profits set as a
must-reach target despite the coronavirus crisis.
The path to surpassing net sales of ¥5bn by acquiring new products
is becoming more solid

1. Company’s announced projections for FY3/21 results are must-reach targets

For the FY3/21 consolidated results, the Company has announced that it projects sales to increase but profits to
decline. Specifically, the Company is forecasting net sales to rise 3.2% YoY to ¥4,180mn, operating income to decline
24.2% to ¥200mn, ordinary income to fall 30.6% to ¥200mn, and net income attributable to owners of parent to
decrease 34.8% to ¥140mn. The Company is projecting lower profits despite its forecast for higher sales due to
the fact that it has factored in an increase in personnel expenses due to aggressive expansion of headcount, and
higher development costs for its own products. Also, the Company is planning to pay a period-end dividend of ¥5
per share based on its shareholder return policy of targeting a dividend payout ratio of 50% or above.

The Company’s announced projections are conservative, considering the impact of the COVID-19, and do not factor
in the accumulation of revenue from the Radware business described below. Inside the Company, the announced
figures are seen as “must-reach” targets, and even higher internal targets have been set. These targets aim to
achieve double-digit sales growth and avoid a decline in profits for the fourth straight fiscal year. Looking at the April
2020 results, it appears that business got off to a solid start in FY3/21. Despite the fact that the Company did more
hiring of new graduates than usual as an upfront investment, operating expenses (net sales-operating income) were
7% lower than the budgeted amount due to the effects of introducing remote work and telework, while the volume
of sales activity actually increased. It seems that telecommuting continued through mid-June.

We encourage readers to review our complete legal statement on “Disclaimer” page.

3,500

3,000 239

2,500 590

2,000
1,645 1,700
1,510 1,245
1,500

1,000

FY3/18 FY3/19 FY3/20 FY3/21E
Source: Prepared by FISCO from the Company’s materials

Looking at trends in quarterly net sales by business section. The Company is projecting net sales to increase in all
business sections in FY3/21, despite the fact that net sales declined YoY in FY3/20 4Q in each business section
except for the Security Section.

First of all, in the Security Section, network security projects and cyberthreat intelligence services are performing well
in response to increased cyberattacks and cases of unauthorized access. The Network Section, which had been
on a downward trend in sales since FY3/20 2Q due to the effect of large projects running their course, is expected
to see an increase in sales, mainly due to recurrence of replacement demand for DHCP/DNS appliances made by
Infoblox (US). In the Monitoring Section, the Company expects sales of “momentum,” the Company’s own product/
service to continue to increase, based on successful efforts to receive orders focusing on the monitoring field.

The Solutions Services Section, where the mainstay product is “Mieru-Tsuyaku,” a multi-language, real-time video
interpretation service, will be hurt by the major drop in foreign tourists to Japan due to the COVID-19 pandemic.
However, the Company is still aiming for an increase in sales based on a number of initiatives, including drumming
up demand for “Mieru-Tsuyaku” among foreigners living in Japan, bolstering the lineup of remote meeting services
such as “Zoom,” and expanding the distributor network for “EzAvater,” an RPA tool developed by the Company.

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

Outlook

Trends in quarterly net sales by business section
Network Section quarterly sales Security Section quarterly sales

(¥mn) FY3/18 FY3/19 FY3/20

Monitoring Section quarterly sales Solutions Services Section quarterly sales

FY3/18 FY3/19 FY3/20
(¥mn)

Prepared by FISCO from the Company’s securities report, quarterly securities report, and financial results

2. Watching the Company’s response to market changes amid the COVID-19

The Company outlines its key initiatives in FY3/21 as “responding to changes in the market due to the COVID-19
pandemic” and “the extra business strategy with a view to achieving net sales of ¥5bn.” As concrete measures for
the first initiative, the Company will focus on 1) cybersecurity measures targeting daily life and economic activities;
2) countermeasures against the rampant COVID-19; and 3) support for foreign language interpretation for foreigners
residing in Japan concerning measures to deal with the COVID-19s.

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

Outlook

In the Security Section, in addition to network security to counter cyberattacks and unauthorized access (network
security analysis by RedSeal (US)), the Company has added cyber-intelligence services that collect and analyze
malicious information such as that exchanged between cybercrime groups and to provide the intelligence on
cyberthreats to contracting companies (Israeli company KELA’s threat monitoring solutions that have a track record
in preventing terrorism at the 2012 London Olympics and Paralympic Games), cybersecurity measures for factories
and office buildings where IoT use has progressed (cyber-defense products manufactured by Tempered Networks
(US) that protect the safety of companies’ communications between sites), and industrial control systems (ICS)
manufactured by Nozomi Networks (US) that quickly detect cyberthreats and abnormal processes in industrial
control systems, such as in social infrastructure and in factories, to its service lineup.

The “new way of life” as announced by the Ministry of Health, Labour and Welfare includes examples of new work
styles such as telecommuting, working in rotations, staggered starting times, open office spaces, online meetings,
online business card exchanging, and holding in-person meetings in well-ventilated places with participants wearing
masks. Indeed, companies must have robust online environments and tools in order to continue doing business these
days. This current trend provides a clear tailwind for the Company, which provides network infrastructure-building,
cybersecurity, network monitoring, and various other IT solutions.

Looking at the Company’s service lineup, in terms of cybersecurity measures targeting daily life and economic
activities, we believe that there will be significant business opportunities, including for 1) Continuation and extension
of measures to bolster efforts targeting cyber-terrorism due to the postponement of the Tokyo Olympics and
Paralympics; and 2) Response to threats such as cyberattacks/unauthorized access which will increase due to the
progress in the shift to online by society as a whole.

Cybersecurity measures for daily life and economic activities
Air conditioning
system

Elevator
system

Electrical
system

Control room
Electrical
system
Air conditioning
system
Elevator
system

Source: The Company’s results briefing materials

With respect to countermeasures against the rampant COVID-19, the Company is deploying value-added services
using “Zoom,” which is well-known among the general public and is used for online meetings as well as other events,
including online drinking parties and the like. Specifically, by linking “Zoom” with “SumoLogic,” a log management/
analysis service, the Company is providing a service that enables customers to manage the usage status of online
meetings, business negotiations, classes, and events etc., in ways that are optimal for the individual needs of
users. The Company is also providing a remote service that enables interpretation among participants by linking the
Company’s “Mieru-Tsuyaku” to “Zoom” meetings or business talks with overseas offices or customers.

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

Outlook

Various situations in which Zoom is used

Source: The Company’s results briefing materials

With respect to foreign language interpretation support for foreigners residing in Japan concerning measures to deal
with the COVID-19, demand for the Company’s multi-language real-time video interpreting service (Mieru-Tsuyaku)
has been increasing. As the number of foreign residents in Japan increased for the seventh consecutive year,
especially for people from Asian countries, local governments, medical institutions, and financial institutions have
been needing to address the multi-nationalization of the services they provide, but the need to provide support about
dealing with the COVID-19 to foreigners living in Japan has made such needs even more acute.

“Mieru-Tsuyaku” is a video interpretation service that is usable anytime, anywhere, and with one touch, by using
a tablet or smartphone, with a call operator providing support, such as for customer service. It provides an inter-
pretation service for English, Chinese, Korean, Thai, Russian, Portuguese, Spanish, Vietnamese, French, Tagalog,
Indonesian, Nepalese, Hindi, and Japanese sign language for a flat rate (¥15,000 per month in the light plan, usable
from 10am to 9pm, and ¥25,000 per month in the standard plan, usable 24 hours a day). The Company also offers
a medical interpreting option (only in English, Chinese, and Korean, ¥35,000 per month).

The service is currently being offered to foreign nationals residing in Japan by the customers noted below. Local
government customers include Shinagawa City Hall, Iizuka City Hall, Fussa City Hall, Miyakojima City Hall, Tsukuba
City Hall, and Yomitan Village. Financial institution customers include Bank of Yokohama, Ltd. (all branches), while
medical institution customers include the providers of medical service for the crew of the large cruise ship docked
off the Port of Nagasaki (provided free of charge). Among drugstores, customers include Tomod’s, OHGA Pharmacy
(Fukuoka Prefecture), and Cocokara Fine <3098>. Preparations for a second and third wave of COVID-19 will likely
be needed, so demand for the service should increase even more.

3. Acceleration of the partner strategy anticipating net sales to surpass ¥5bn

In the “extra business strategy with a view to achieving net sales of ¥5bn,” the Company will continue to pursue 1)
Business growth through the M&A and business alliance strategy; 2) Acceleration of collaboration in the inbound
solution business; and 3) Additional market introductions of products and services based on strengthening the
cutting-edge technology sourcing tie-up strategy (US, Israel, etc.).

The Radware business based on a strategic distributor contract plays a central role in the effort to achieve business
growth through the M&A and business alliance strategy. The main products in this business are: 1) DDoS fighting
equipment and services that autonomously protect against Dos/DDoS attacks, which are also called “service stop
attacks;” 2) Load balancer (a product that distributes the load on a server allowing it to operates stably), which
boasts a large track record in the Japanese market; 3) Multi-homing equipment, which is the de facto standard for
line load balancing; 4) Cloud WAF service that achieves the highest level of web application security in the industry;
5) Bot manager that protects all channels, such as web applications, mobile applications, and API from automated
threats (Bots); and 6) Cloud Workload Protection service that comprehensively protects cloud assets. Products 2)
and 3) are network related, while the rest are security related.

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

Outlook

The Company became the primary distributor of Radware in Japan following the conclusion of a distributor contract
in March 2020, and it seems that the handover from the company that was previously in that position was smooth.
Due to good customer acquisitions, it is highly probable that the Company will achieve annual sales of about ¥600mn
(including maintenance contracts) within a few years. In addition, due to the fact that the previous primary distributor
mainly handled network-related products, the Company (which can distinguish the products from existing products
in the security-related field) might be able to grow the business scale even larger through cross-selling and up-selling.

Another focus of business growth through the M&A and business alliance strategy is the entry into the Vietnamese
market, where economic growth is remarkable. Specifically, in April 2020, the Company established a joint venture in
Vietnam (VNCS Global Solution Technology, the Company holds a 20% stake) based on a strategic business alliance
with VIETNAM CYBERSPACE SECURITY TECHNOLOGY JOINT STOCK COMPANY, a security-related equipment
distributor and a subsidiary of Hanoi Telecom, a Vietnamese telecommunications carrier. Although the contribution
to business results will be minor in the near term, it will be important to keep an eye on this business going forward,
as it will result in the expansion of usage of “Mieru-Tsuyaku” and enhancement of its functions.

Business development in the Vietnam market through a joint venture

Source: The Company’s results briefing materials

In acceleration of collaboration in the inbound solution business, the Company aims to build a value chain fully
covering pre-travel, on-travel, and post-travel, in the inbound domain. One specific move was entering the inbound
media business leveraging the conversion of IGLOOO Inc. into a subsidiary through the Company’s subsidiary
Terilogy Serviceware Corporation.

IGLOOO Inc. is a company that provides pre-travel and post-travel services, producing content and promoting
overseas travel, centered on the operation of “VOYAPON,” an online media for travel to Japan for people in Europe,
the US, and Australia. Up until now, the Company has been providing the multi-lingual real-time video interpreting
service “Mieru-Tsuyaku” in the “on-travel” domain for foreign tourists visiting Japan. IGLOOO’s services are highly
complementary and synergistic with the Company, which has established itself as being in the top position in the
industry.

Even with the COVID-19 pandemic, it seems certain that the national policy aimed at making Japan a popular
destination for tourism will be restarted in some way, so the Company’s decision to make an offensive move during
this difficult time deserves praise.

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORT
FISCO Ltd.
http://www.fisco.co.jp

Terilogy Co., Ltd. 7-Aug.-2020
3356 TSE JASDAQ Standard https://www.terilogy.com/english

Outlook

Inbound business strategy by building a value chain covering pre-travel, on-travel, and post-travel

Source: The Company’s results briefing materials

With respect to “Additional market introductions of products and services based on strengthening the cutting-edge
technology sourcing tie-up strategy (US, Israel, etc.),” the target domains include analysis/management of applica-
tion/data machine logs, internal fraud management, 5G solution AR (augmented reality), and handling diversification
of cutting-edge CTI (threat intelligence). The Company’s ability to find “emerging technologies” and “marketable
products” should prove to be valuable.

4. The new medium-term management plan is expected to be announced in May 2021

In May 2018, the Company announced a medium-term management plan themed “Toward Terilogy in Three Years’
Time.” In it, it sets the targets for the medium-term management plan’s final fiscal year of FY3/20; net sales ¥5bn and
resuming dividend payments. This would be achieved through the growth strategy, whose main pillars are 1) business
expansion through M&A and alliances, 2) providing product and services installed with the latest technologies, 3)
a value mix with the products of other companies, with its own products as the core products, and 4) taking on
the challenge of conducting an inbound-demand business and implementing measures to contribute to society.
Although the Company did not achieve net sales of ¥5bn, that target included expanding the business through M&A
and alliances. The Company did achieve an increase in sales and profits for the third consecutive fiscal year and
did resume paying a dividend in FY3/20. We believe these achievements are worthy of a certain amount of praise.

In a December 2019 press release, the Company stated that it will “Implement measures for public relations and
publicity activities aimed at improving medium- to long-term and sustainable corporate value, while also aiming to
maximize corporate value.” The Company was preparing to announce a new medium-term management plan in
May 2020, but abandoned that plan when the COVID-19 pandemic hit. On the condition that the pandemic is under
control by then, there is a high likelihood that the Company will announce its new medium-term management plan
in May 2021. We expect the Company to present an equity story that combines a detailed action plan to pursue
organic growth with an M&A and alliance strategy based on a highly-convincing financial strategy.

We encourage readers to review our complete legal statement on “Disclaimer” page.

Disclaimer

FISCO Ltd. (“FISCO”) offer stock price and index information for use under the approval of the
Tokyo Stock Exchange, the Osaka Stock Exchange and Nikkei Inc.

This report is provided solely for the purpose of offering information, and is not a solicitation
of investment nor any other act or action.

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however, FISCO does not warrant the accuracy, completeness, fitness nor reliability of the
contents of this report or the said information.

The issuers’ securities, currencies, commodities, securities and other financial instruments
mentioned in this report may increase or decrease in value or lose their value due to influence
from corporate activities, economic policies, world affairs and other factors. This report does
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This report has been prepared at the request of the company subject hereto based on the
provision of information by such company through telephone interviews and the like. However,
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subject to change without notice. FISCO is not obligated to update this report.

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◾ For inquiry, please contact: ◾
FISCO Ltd.
5-11-9 Minami Aoyama, Minato-ku, Tokyo, Japan 107-0062
Phone: 03-5774-2443 (Financial information Dept.)
Email: support@fisco.co.jp

101570

URL	http://www.terilogy.com/
業種	卸売業
設立	1989年7月14日

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