IR Message from President & CEO

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GA technologies Co., Ltd.
代表取締役社長執行役員 CEO
Ryo Higuchi

To Our Shareholders

I would like to express my sincere gratitude for your continued understanding and support for our activities. Thanks to your kind support and patronage, we have successfully completed the financial closing for the fiscal year ended October 2020. I would like to take this opportunity to express my gratitude as well as my ideas and thoughts to you.

Looking back on the 8th term (October 2020)

In 2020, the novel coronavirus infection (COVID-19) pandemic seriously disrupted our business plans. At the start of fiscal year 2020, we set up the Overseas Business Division, and I was responsible for the division, searching for overseas business opportunities from November 2019 to February 2020. When there was still room for growth in Japan such that we had to compete with other companies, why did we take on the challenge of looking overseas? The reason is that our vision is to “create a world-leading company,” with most global companies becoming world-leading firms after 20 years since their founding. We aim to have solidified the foundation for the domestic market approaching the 10th year since our founding, and have thus taken on the challenge of going overseas, aiming to become a global company by the 20th year since the founding. As a step in this direction, 2020 was a year for establishing a foothold in the overseas business. Our plan was to start operations in Thailand, China, and other Asian countries around May 2020, but the COVID-19 pandemic forced us to modify this plan.

It is said that there are “ups (Nobori-saka),” “downs (Kudari-saka)” and “No way (Ma-saka)!” in life as well as company management in Japan. The “No way!” happened this year. The timing of this “No way!” is certainly undesirable. However, looking back on history, paradigm shifts have occurred after “No way!” and heroic companies have emerged in times of emergency. Although our overseas business was running behind, I came across Shenjumiaosuan Co., Ltd. at that time, a company we have since merged with, and I had time to turn my eyes to our domestic businesses. When I once again looked at and reviewed the domestic businesses, I found many things to do and encountered opportunities that I had never seen before. I realized that our greatest strength as a venture company is our flexibility to deal with changes by turning any negative event into a positive opportunity.

We have consistently pursued “real estate  technology” and invested heavily in technology since our founding in 2013. As you may already know, Internet-based companies such as streaming services like Netflix and online meeting tools such as Zoom have grown in the wake of the COVID-19 pandemic. However, what we have been promoting is introducing technologies into the real industry, rather than being online-based. Most of Japan’s industries are real industries, such as retail sales, services and real estate. Approximately 30% of listed companies announced downward revisions in their financial forecast(*Note) due to the COVID-19 pandemic. Despite these circumstances, the GA technologies Group upwardly revised its initial net sales budget from 55 billion yen to 61 billion yen during fiscal year 2020, which the Group eventually achieved, as well as the initial operating income budget of 1.8 billion yen.

(1) Net sales: [FY2019] 39.2 billion yen → [FY2020] 63.0 billion yen (up 60.5% YoY)
Operating income: [FY2019] 1.19 billion yen → [FY2020] 1.88 billion yen (up 58.3% YoY)
(2) RENOSY membership: [FY2019] 59,323 → [FY2020] 98,058 (up 65% YoY)
(3) Number of companies that have introduced the ITANDI online tenant application system: [FY2019] 77 companies → [FY2020] 414 companies (up 438% YoY)

Each KPI has also been growing steadily.

Three consistent initiatives since the company was founded

As a result of our consistent pursuit of real estate x technology since our founding, we have upwardly revised our budget and achieved the target, while other real industries downwardly revised their budgets. Achieving the fiscal year 2020 budget during the COVID-19 pandemic could be compared with the proverb “Rome wasn’t built in a day.” It was largely attributed to three initiatives we have worked on since our founding.

The first initiative is investment in technology.
Most real estate companies use profits earned from real estate transactions for purchasing land. While we have invested all of our profits earned from transactions into technology, we have been told, “System development costs money, so engineers should be outsourced” and “Profits should be used for profitable land purchases.” However, we have been unwaveringly investing almost all of our profits into technology. This is because our corporate philosophy is “Technology × Innovation to Inspire the World”, and if we do not invest in technologies, then our existence has no meaning. When we started this business, we had no engineers or products. In the fiscal year 2020, seven years after our founding, the company had 154 engineers and the number of product items reached 40. It is not that we have invested in technology in the past six months because of the COVID-19 pandemic. We are where we are now because we have invested for seven years since our founding. We will continue to invest generously in technology.

The second initiative is taking risks.
In the fiscal year 2020, we merged Modern Standard, which is a leading real estate broker for high-end rental housing, as well as Shenjumiaosuan, the largest inbound real estate investment platform in Greater China. Since listing in July 2018, we have merged with five companies, with more than 5 billion yen invested in total. We are always conscious of taking risks in proportion to the business size. We have made many mistakes by taking risks. However, I would ask if there is any person who or any company that has achieved great results in life or running a company without taking on challenges or making mistakes. The indisputable fact of capital markets is that there is a trade-off between risk and return. I believe that success depends on how much risk you can take. Of course, this does not mean taking risks recklessly. Some people are worried about our rapid succession of M&As, but we have been conducting M&As strategically.

(1) Acquisition of affiliated real estate companies
(2) Expansion of one-stop services
(3) Best customer acquisition
(4) Platform enhancement
(5) Reinforce existing businesses

On the basis of these five measures, we have conducted M&As expected to secure synergy effects, in areas that we can understand. I engaged in PMI (Post Merger Integration) to make M&As successful. As a result, knowledge was accumulated, reproducibility was generated, and the probability of success increased. There was a reason for doing M&A just two months after listing. It is that I wanted to take action quickly to implement the PDCA cycle for M&A as soon as possible. Because M&As are difficult, and even if you take careful steps, many of them will fail. In my opinion, if you are to fail after all, the earlier you try, find problems and fix them, the earlier you can reach the goal. If failure is not fatal, you just stand up as many times as you like. “Take big risks as you grow,” “maximize the success rate” and “get started quickly”; these three concepts are the strengths of the GA technologies Group.

The third initiative is corporate culture.
Corporate culture is not built in a day. Studies have shown that 45% of daily behavior comes from unconscious habits. Our action guidelines comprise the following five words:

WILL・PROFESSIONAL・WIN-X・HEART・GRIT

You, shareholders, may want to hear about specific and quantitative strategies. However, I have reconfirmed the importance of an invisible qualitative corporate culture in times of emergency, so I have taken it up as the third initiative. So why does corporate culture matter in times of emergency? When things are not going well with a person or a company, or when in trouble, their true nature comes out. Everyone can be positive when things are going well. Even if you hastily prepare in an emergency and try to respond, people and companies cannot take action. Because they have no such practice. There will always be good times and bad times in life and in a company. You cannot change your practices in a day when in bad times. Whether in good or bad times, it is more important than anything else to continue to create corporate culture in a steady manner.

As our board members and founding members have been embodying strong WILL since our founding, we have been able to push forward with such WILL even in the face of the hardship of the COVID-19 pandemic. We have been embodying not only WILL but also other action guidelines. An organization is a group of people who work together. The right strategy can succeed only in a strong organization. Because it is people who execute the strategy. Because people are the most important asset of an organization, the practices that govern our daily activities are important, and the accumulation of positive practices will create a corporate culture, which will help us in times of emergency.

Changes in the real estate industry

Let me talk a little about the real estate industry as a whole. The COVID-19 pandemic has brought about a revolution. Until now, it was possible to do business without using technology, but due to the COVID-19 pandemic, it has become impossible to do business without using technology. The future of the real estate industry is expected to be as follows:

・Self-showings by which you can directly rent a property without going to the agent office
・Non-face-to-face leasing and sales contracts
・Uncoordinated customer experience by division of work will become a seamless purchasing experience by one-stop service
・Easy purchase of properties worldwide through crowdfunding
・Shift from paper- and fax-based operations to paperless

It has been 20 to 30 years since the Internet became widespread. These worldviews were imagined when the Internet spread, but no such reforms have been made in the real estate industry. The reason the real estate industry has not changed is that there are too few transactions for a customer to acquire literacy on real estate. In other words, an average person may experience moving three times in life and property transaction once or twice. If customers are dissatisfied, and such dissatisfaction is considerable, then innovation will be created to improve it. That is the general order of innovation creation. However, the real estate industry has had too few transactions to turn customer dissatisfaction into a problem to be solved. It is the real estate industry that has not made improvements, by not having to make efforts. However, due to the COVID-19 pandemic, many companies have finally realized they need to change and have reluctantly moved forward.

In addition, there is support from the government to promote digital transformation (DX) in real estate operations. The order is reversed, but the real estate industry is about to change drastically as a result of the COVID-19 pandemic. We have been trying to transform the industry with technology since 2013. Industry transformation is a great opportunity for us to accelerate our business.

Target for the 9th period (October 2021)

Integrating the RENOSY and Modern Standard websites, we now have products to provide one-stop service for renting, purchasing, selling, renovating, investing and managing. The real operation system is in place and we are finally ready to compete. In our business, like Amazon, which has e-commerce sites and operates logistics facilities, we not only operate the website, but also obtain real estate agent licenses on our own, as well as employ and develop in-house real sales representative. It takes time to scale a real operation, but once it is built, you have a highly competitive advantage. We have set the following three objectives for the fiscal year 2021.

The first is to pursue a one-stop service provided by RENOSY.
In line with integration of the websites, we will rebrand the organization of real operations, and unify the worldview, for example, by making uniforms for our sales representative. Similar to Louis Vuitton and Apple’s brick-and-mortar stores, we will unify brands of the websites as well as the real offices to improve customer experience. In the past, the real estate website operator and the real estate company listing properties on the website were different. As a result, the website operator could not be involved in improving the customer experience, and the customer experience could not be enhanced. In this regard, RENOSY provides a one-stop service to dramatically improve customer experience.

The second objective is to increase our share of online tenant applications and contracts, which is the main target of deregulation in the real estate industry.
We will take an overwhelming share through ITANDI’s online tenant application system. It is said that there are 2,000 to 2,500 management companies that manage more than 500 properties per company in Japan. Aiming to acquire 1,000 management companies by the end of December 2021, we have set a target of an approximately 50% share by the end of the next fiscal year. Obtaining an overwhelming share of online tenant applications leads to digital contracts. Furthermore, as the number of properties increases through the online tenant application, the presence of ITANDI BB, an inter-company website for real estate companies, will increase, and the number of properties in OHEYAGO, a real estate rental website for consumers provided by ITANDI, will also increase. OHEYAGO, like RENOSY, involves real operations. It is a product for which many challenges remain, but once a real operation is built, it will have a highly competitive advantage like RENOSY. We are in the middle of steadily increasing the number of properties posted on the website, which will take time. However, we will make sure to create a product market fit.

The third objective is to contribute to improving the business practices of 120,000 real estate companies in Japan.
We do not just want to facilitate our own real estate transactions. When the entire real estate industry is about to change, we will be contributing to 120,000 real estate companies. We have been engaged in actual business, have invested heavily in technology, and have made many mistakes since our founding in 2013. We will continue to provide our products and services so that other companies do not make the same mistakes. The 120,000 real estate companies are divided into leasing brokers, management companies, trading brokers, investment sales companies, and purchase for resale companies. ITANDI will contribute to leasing brokers and management companies through its “ITANDI BB" and "Nomad CloudRENOSY X will contribute to trading brokers, investment sales companies, and purchase for resale companies through “MORTGAGE GATEWAY by RENOSY", "Find in 2 seconds!" And "Property SCAN!” In this way, the GA technologies Group aims to contribute to all member real estate companies.

I have never felt more reassured by the sense of unity of the GA technologies Group in times of emergency. GA technologies Group members work hard to change the world every day. Amid the call for work style reform, it is not necessarily good to work hard every day. However, without their efforts, it would have been impossible to achieve the results of the fiscal year 2020. I am very proud of them. When innovation occurs and the world becomes more convenient, there are people and companies behind the scenes who have made it happen and supported it. At this time, the GA technologies Group aims to become a company that makes the world more convenient by creating innovation and supporting customers.

Everything is for customers.
We can stay in business because our customers purchase our products and use our services. The order of priority in the fiscal year 2021 continues to be customers, employees and shareholders.

Conclusion

2020年の1年はコロナ禍の影響により、弊社の株価も50%下落や5倍上昇などボラティリティが激しい年となりました。株価50%下落にしても、5倍上昇にしても、大事なことは「会社として地道に改善しているのか」「しっかりと成長の為に投資をしているのか」「ボードやメンバーが顧客創造に努めているのか」です。株価に一喜一憂することなく我々は常に顧客に目を向けていなければなりません。決して、株主様を軽視しているわけではなく、株価はコントロールできないためです。顧客に目を向けず短期的な視点のみであれば結果的に中長期には成長できず株主の皆さまの期待に応えられなくなります。もちろん、より我々の取り組みを株主の皆さまに理解していただけるように、情報開示は出来る限り積極的に実施いたします。第8期は通期で97本のプレスリリースを出しました。上場企業の平均リリース本数と比較すると5倍は出しております。引き続き株主の皆さまに事業を理解していただけるように努めてまいります。株主の皆さまや投資家の皆さまに中長期で応援していただけるよう今後も小さく纏まらず、大きくチャレンジし、更なる大きな成果を目指します。

Our philosophy: Technology × Innovation to Inspire the World.
Our vision: Create a world-leading company

All of us will continue to work hard in the fiscal year 2021 toward our large-scale philosophy and vision.
Thank you for your continued support.

(*Note) Teikoku Databank "Survey on earnings revision trends of listed companies due to the impact of COVID-19" (as of August 31, 2020) (https://www.tdb.co.jp/report/watching/press/pdf/p200902.pdf)

代表取締役社長執行役員 CEO

Profile of Ryo Higuchi, President & CEO of GA technologies

Born in Tokyo in 1982, Mr. Higuchi was a talented youth soccer player who dreamed of becoming an international recognized soccer star. He was on JEF UNITED ICHIHARA as a trainee (Currently known as J2 of Japan’s professional soccer league). At the age of 24, however, he gave up on this dream and switching his career path into business by working at a real estate company. He was inspired by the possibility of the real estate industry and with a desire to “change this profitable but technically outdated” industry, Mr. Higuchi founded GA technologies in 2013, as the representative of the company. Started from the early days of the business, the Company has been engaged in the brokerage business of existing real estate. Currently, it aims for building a data-driven, highly user-friendly real estate transaction model. mainly focusing on its end-to-end real estate brokerage platform. The company is also working on improving its internal business operations by bringing technology such as AI and RPA into the workflow and working on other data-driven improvements.

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