CARTA HOLDINGS / 3688

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1 COVERAGE INITIATED ON: LAST UPDATE: Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is to provide an owner s manual to investors. We at Shared Research Inc. make every effort to provide an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will always present opinions from company management as such. Our views are ours where stated. We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at sr_inquiries@sharedresearch.jp or find us on Bloomberg. Research Report by Shared Research Inc.

2 LAST UPDATE: Research Report by Shared Research Inc. INDEX How to read a Shared Research report: This report begins with the trends and outlook section, which discusses the company s most recent earnings. First-time readers should start at the business section later in the report. Executive summary Key financial data Recent updates Highlights Trends and outlook Quarterly trends and results Medium-term targets and FY9/18 company forecast (out October 217); figures for FY9/19 not finalized due to merger Business, market and value chain Business overview Business segments Strengths and weaknesses Financial statements Income statement Balance sheet Cash flow statement Other information Corporate timeline Top management and non-executive directors Dividends Major shareholders Employees Company profile Historical earnings results and news Historical earnings results News and topics /69

3 LAST UPDATE: Research Report by Shared Research Inc. Business overview Executive summary VOYAGE is an internet service developer with two core segments. The Ad Platform segment (91% of total FY9/18 operating profit) uses supply-side platform (SSP) to help online publishers including Yahoo! Japan and other website operators maximize advertising revenues. The Point Media segment (21% of total FY9/17 operating profit) operates the reward points website, EC Navi. The company is seeking to build a third earnings pillar, the Incubation segment (-12% of FY9/18 operating profit). On October 31, 218, VOYAGE announced a merger with Cyber Communications Inc. (CCI), a wholly owned subsidiary of Dentsu Inc. VOYAGE and Dentsu are expected to discuss the medium-term management policy of the merged company when they announce their earnings results in late January February. VOYAGE has been involved in various businesses since its founding in 1999, but in recent years SSPs and DSPs (demand-side platforms; particularly smartphone-related services) have driven earnings growth, spurred by rapid growth in the programmatic market for online advertising. Existing businesses generate cash flow, which the company uses to aggressively develop new services for further growth. (The Incubation segment is in charge of new operations.) In the Point Media segment, the company implemented drastic structural reforms for a turnaround in FY9/18 to pave the way for renewed growth from FY9/19. Medium/long-term strategy (before merger) As a human-centered business development company, maximize corporate value while expanding into new businesses In October 216, the company reconfigured its management direction based on the strategies needed to meet its vision of where it wants to be in 5 1 years. To realize this vision, the company aims to 1) expand its main business areas from the two it currently has to between three and ten; 2) redefine its group concept, moving away from being merely a collection of consolidated subsidiaries toward a tight-knit team that shares common goals and values; and 3) keep the business units and subsidiaries that are already in place while delegating more decision-making authority. In October 217, VOYAGE unveiled medium-term targets that clarify achievement goals and timelines based on the strategies mentioned above. The company positions FY9/18 as a period of investment in future growth that should pave the way for profit growth in FY9/19 and beyond, and targets FY9/2 sales of JPY42.bn, operating profit JPY3.bn, net income of JPY1.8bn, and a payout ratio of 2%. We note that the company releases medium-term targets, not a medium-term plan. It does this to prevent strategic goals from being divulged to competitors and to ensure equal importance is attached to all targets. Key measures underpinning the medium-term targets include 1) reinforcing the company s Ad Platform segment and expanding corresponding market share, 2) implementing structural reforms at the Point Media segment to return to a growth track, and 3) establishing a third growth area. In order to get these initiatives underway as soon as possible, the company has increased hiring and is shifting personnel among group companies in order to make optimal use of its existing personnel. The company did not disclose operating profit forecasts by segment, but Shared Research assumes the following policies: 1) Ad Platform: While aiming for market share expansion and gross profit maximization, the company will further reinforce demand-side platforms, improve GPM through vertical integration, continue SG&A spending to support sustained growth, and accordingly raise OPM; 2) Point Media: The company looks to complete structural reforms in FY9/18, and achieve profit growth fueled by higher sales from FY9/19; 3) Incubation: The company will increase the number of businesses with growth prospects, and aim to generate operating profit at three businesses being developed in the segment. Business merger On October 31, when VOYAGE reported its FY9/18 results, the company also announced a merger with Dentsu subsidiary CCI by means of a share exchange and the VOYAGE Group changing to a holding company structure. The company plans to maintain its stock market listing. Dentsu is to hold 53.1% of shares in the new company. Reasons for the merger are as follows: Opportunities: Substantial scope for growth in the programmatic advertising market with national clients Threats: Establish partnerships in a landscape where media/ad platform giants such as Google, FaceBook, and Yahoo increase their presence 3/69

4 LAST UPDATE: Research Report by Shared Research Inc. Strengths and weaknesses: VOYAGE and CCI have complementary strengths and weaknesses More details of the merger are likely to emerge when VOYAGE announces FY9/19 results, when the company is expected to discuss specifics of its medium-term management policy (15 months earnings results of VOYAGE and 12 months results of CCI s are to be consolidated in FY12/2). 4/69

5 LAST UPDATE: Research Report by Shared Research Inc. Key financial data Income statement FY9/15 FY9/16 FY9/17 FY9/18 FY9/16 FY9/17 FY9/18 Cons. Cons. Cons. Cons. Q2 Q4 Q2 Q4 Q2 Q4 Sales 17,73 2,842 25,895 28,518 4,988 5,23 4,94 5,685 6,573 6,871 6,198 6,253 6,799 7,556 6,918 7,245 Ad Platform 9,833 13,31 18,314 19,26 2,874 3,264 3,129 3,764 4,495 4,964 4,395 4,46 4,635 4,847 4,737 5,41 Point Media 5,849 5,933 5,745 6,87 1,597 1,495 1,419 1,42 1,535 1,476 1,356 1,378 1,542 2,166 1,522 1,64 Incubation 2,813 2,175 2,82 2, YoY 16.5% 17.5% 24.2% 1.1% 12.8% 13.9% 15.3% 28.2% 31.8% 31.4% 25.5% 1.% 3.4% 1.% 11.6% 15.9% Ad Platform 3.% 32.5% 4.5% 5.2% 16.9% 28.9% 33.6% 5.7% 56.4% 52.1% 4.5% 18.5% 3.1% -2.4% 7.8% 13.% Point Media.9% 1.4% -3.2% 19.6% 11.5% -2.% -.5% -2.9% -3.9% -1.3% -4.4% -3.%.5% 46.8% 12.2% 19.1% Incubation -7.1% -22.7% -4.3% 24.5% -18.4% -2.7% -26.5% -26.5% -4.9% -19.7% -.1% 12.7% 9.5% 26.5% 42.9% 23.% Gross profit 6,562 6,421 8,15 8,162 1,669 1,6 1,528 1,624 2,155 2,222 1,864 1,774 2,4 2,65 2,39 2,19 GPM 37.% 3.8% 31.% 28.6% 33.5% 3.6% 3.9% 28.6% 32.8% 32.3% 3.1% 28.4% 3.% 27.3% 29.5% 27.9% SG&A expenses 4,324 4,7 6,28 6,742 1,7 1,124 1,243 1,263 1,52 1,539 1,538 1,612 1,624 1,634 1,724 1,759 YoY 5.9% 8.7% 32.1% 8.6% -2.9% 1.5% 13.% 24.6% 42.% 37.% 23.7% 27.6% 6.9% 6.2% 12.1% 9.2% SG&A ratio 24.4% 22.6% 24.% 23.6% 21.4% 21.5% 25.2% 22.2% 23.1% 22.4% 24.8% 25.8% 23.9% 21.6% 24.9% 24.3% Operating profit 2,238 1,721 1,86 1, Ad Platform 1,36 1,81 1,471 1, Point Media Incubation YoY 14.8% -23.1% 5.% -21.4% -3.8% -21.7% -38.1% -34.1% 6.1% 43.3% 14.4% -55.% -34.6% -36.9% -3.5% 59.9% Ad Platform 24.2% -17.3% 36.1% -12.1% -16.1% -17.9% -35.6% -2.9% 54.1% 68.3% 65.4% -33.8% -34.5% -23.7% 16.9% 37.4% Point Media.1% -19.7% -36.3% -26.2% 5.2% -22.4% -44.7% -5.1% -48.2% -.9% -5.3% -44.5% -63.6% -46.3% -2.9% 95.% OPM 12.6% 8.3% 7.% 5.% 12.% 9.1% 5.8% 6.3% 9.7% 9.9% 5.3% 2.6% 6.1% 5.7% 4.5% 3.6% Ad Platform 13.3% 8.3% 8.% 6.7% 11.% 9.7% 5.% 7.8% 1.9% 1.7% 5.9% 4.3% 6.9% 8.4% 6.4% 5.3% Point Media 13.7% 1.9% 7.1% 4.4% 16.6% 1.6% 8.3% 7.3% 8.9% 1.7% 4.3% 4.2% 3.2% 3.9% 3.7% 6.8% Non-operating income (expenses) Financial income Forex gains (losses) Equity in earnings of affiliates Other non-operating income Recurring profit 2,189 1,246 1,862 1, YoY 11.7% -43.1% 49.4% -23.1% -13.7% -37.2% -54.% -81.1% 25.% 8.6% 43.7% 83.8% -25.3% -38.5% -1.% 1.4% RPM 12.3% 6.% 7.2% 5.% 11.4% 7.3% 4.2% 1.6% 1.8% 1.% 4.8% 2.6% 7.8% 5.6% 4.3% 2.5% Extraordinary gains (losses) Implied tax rate 36.3% 47.1% 38.2% 4.9% 35.5% 4.8% 35.9% % 32.8% Minority interests Net income 1, ,162 1, YoY 45.2% -55.6% 58.7% -3.8% -3.8% -4.% -4.8% % 13.2% Net margin 9.3% 3.5% 4.5% 3.9% 7.9% 4.5% 2.5% -.4% 6.7% 7.% -1.3% 5.1% 5.2% 3.% 7.7%.1% Per share data Shares issued (year end; mn) Number of shares (average; mn) Book value per share (JPY) EPS (JPY) EPS (fully diluted; JPY) Dividend per share (JPY) Payout ratio 13.7% 16.2% 15.5% 16.% Balance sheet Current assets 7,84 7,362 9,578 1,725 7,473 7,726 7,17 7,362 8,378 9,463 9,173 9,578 9,47 1,392 1,114 1,725 Cash and cash equivalents 4,214 3,111 5,445 5,68 3,454 3,847 3,176 3,111 3,33 4,46 5,7 5,445 4,322 5,26 5,68 5,68 Accounts receivable 2,461 2,891 3,177 3,64 2,892 2,752 2,543 2,891 3,719 3,945 3,111 3,177 3,584 3,97 3,163 3,64 Inventories Others ,26 1, Tangible fixed assets Intangible fixed assets 1,639 2,67 2,21 1,82 1,689 1,683 2,138 2,67 2,654 2,593 2,255 2,21 2,166 2,64 2,23 1,82 Investments and other assets 3,1 2,917 3,794 4,57 3,78 3,172 3,165 2,917 3,6 3,42 4,133 3,794 3,669 3,892 4,483 4,57 Investment securities 2,66 2,425 3,263 3,559 2,732 2,792 2,671 2,425 2,532 3,116 3,781 3,263 3,145 3,386 3,978 3,559 Total assets 12,671 12,538 15,776 16,795 12,461 12,84 12,543 12,538 12,461 15,624 15,732 15,776 15,66 16,575 16,833 16,795 Current liabilities 5,478 5,538 6,931 7,158 5,412 5,668 5,335 5,538 6,386 6,93 6,658 6,931 6,661 7,483 6,824 7,158 Accounts payable 1,364 2,12 2,388 2,549 1,643 1,852 1,86 2,12 2,519 2,652 2,345 2,388 2,48 3,45 2,267 2,549 Short-term debt Provision for loyalty points 2,69 2,74 2,751 2,838 2,735 2,786 2,732 2,74 2,741 2,77 2,79 2,751 2,781 2,764 2,832 2,838 Other current liabilities 1, ,383 1, ,127 1,2 1,383 1,11 1,184 1,236 1,281 Fixed liabilities ,5 1,4 859 Long-term debt Others Net assets 6,274 6,333 8,114 8,777 6,186 6,34 6,476 6,333 6,87 7,842 8,117 8,114 7,778 8,88 8,969 8,777 Shareholders' equity 5,356 5,651 6,8 7,366 5,31 5,542 5,719 5,651 5,986 6,496 6,43 6,8 6,573 6,72 7,288 7,366 Valuation and translation adjustments ,6 1, ,5 1,45 1, ,99 1,432 1,162 Minority interests Total capital and liabilities 12,671 12,538 15,776 16,795 12,461 12,84 12,543 12,538 14,228 15,624 15,732 15,776 15,66 16,575 16,833 16,795 Cash flow statement Cash flows from operating activities , Cash flows from investing activities -2,68-1,145-1,2 2 Cash flows from financing activities Financial ratios Interest-bearing debt 1, ,27 1,168 1, ,234 1, Net cash 3,191 2,338 4,48 4,691 2,493 2,948 2,34 2,338 2,6 3,238 4,7 4,48 3,47 4,26 4,497 4,691 ROA (RP-based) 18.8% 9.9% 13.2% 8.8% ROE 31.8% 12.% 16.6% 13.6% Current ratio 142.4% 132.9% 138.2% 149.8% 138.1% 136.3% 131.5% 132.9% 131.2% 137.1% 137.8% 138.2% 135.8% 138.9% 148.2% 149.8% Fixed ratio 8.4% 83.8% 78.9% 71.2% 83.4% 82.6% 87.7% 83.8% 89.% 81.7% 83.7% 78.8% 8.% 79.1% 77.% 71.2% Equity ratio 47.8% 49.3% 49.8% 5.8% 48.% 48.% 5.2% 49.3% 46.2% 48.3% 49.8% 49.8% 5.% 47.2% 51.8% 5.8% 5/69

6 LAST UPDATE: Research Report by Shared Research Inc. Recent updates Highlights On November 15, 218, VOYAGE GROUP, Inc. announced changes in the trade name, fiscal year end, and certified public accountants. Changes in trade name and fiscal year end The company has decided to change its trade name to Carta Holdings, Inc., effective January 1, 219. It has decided on the trade name of a holding company resulting from a merger with Cyber Communications Inc. (CCI), effective January 1, 219, that remained undecided at the time of its announcement on October 31, 218. As a result of the management integration, the company will become a consolidated subsidiary of Dentsu Inc. In conjunction with the trade name change, the company has decided to change its fiscal year end from September 3 to December 31 to align its fiscal year end to that of the parent. By doing so, the company looks to improve transparency of management by disclosing its management information in an appropriate and timely manner, and aims to improve efficiency of management and business operations, such as devising management plans and managing financial results (the first fiscal year at VOYAGE GROUP after the merger will cover the 15-month period from October 1, 218 to December 31, 219). The company plans to propose partial changes to the Articles of Incorporation following the changes to its trade name and fiscal year end at the General Meeting of Shareholders scheduled for December 8, 218. The term Carta originates from a Latin word meaning paper, which later came to mean nautical chart in Portuguese; the word also has its roots in Magna Carta (Great Charter), the foundation of democracy and constitutionalism of the Kingdom of England. The company stated that it has chosen the name to reflect its goal of navigating new routes without being bounded by conventional wisdom and creating a new nautical chart; the new chart will then become a de facto standard, with which the company will build a sound digital information society together with various stakeholders. Changes in certified public accountants The company has decided to change its certified public accountants from Deloitte Touche Tohmatsu LLC to KPMG AZSA LLC., effective December 8, 218. Dentsu, the parent of the merged company, has appointed KPMG AZSA as its accounting auditor. The company has decided that having the same auditor as the parent will improve the effectiveness and efficiency of governance and consolidated financial statement audits of the group. The change in certified public accountants will also be proposed at the General Meeting of Shareholders scheduled for December 8, 218. On the same day, Shared Research updated the report following interviews with the company. On October 31, 218, the company announced earnings results for full-year FY9/18; see the results section for details. The company also announced a merger with Cyber Communications Inc. (CCI), a wholly owned subsidiary of Dentsu Inc., by a share exchange and change to a holding company structure. For previous releases and developments, please refer to the News and topics section. 6/69

7 LAST UPDATE: Research Report by Shared Research Inc. Trends and outlook Quarterly trends and results Income statement FY9/16 FY9/17 FY9/18 FY9/16 FY9/17 FY9/18 FY9/18 YoY change Q2 Q4 Q2 Q4 Q2 Q4 Cons. Cons. Cons. Est. % of FY Q2 Q4 Sales 4,988 5,23 4,94 5,685 6,573 6,871 6,198 6,253 6,799 7,556 6,918 7,245 2,842 25,895 28,518 3, 95.1% YoY 12.8% 13.9% 15.3% 28.2% 31.8% 31.4% 25.5% 1.% 3.4% 1.% 11.6% 15.9% 17.5% 24.2% 1.1% 15.9% Gross profit 1,669 1,6 1,528 1,624 2,155 2,222 1,864 1,774 2,4 2,65 2,39 2,19 6,421 8,15 8,162 8,5 96.% YoY -3.2% -6.7% -2.% 4.% 29.1% 38.9% 22.% 9.3% -5.3% -7.1% 9.4% 13.8% -2.1% 24.8% 1.8% 6.1% GPM 33.5% 3.6% 3.9% 28.6% 32.8% 32.3% 3.1% 28.4% 3.% 27.3% 29.5% 27.9% 3.8% 31.% 28.6% 28.3% -2.8pp -5.pp -.6pp -.5pp SG&A expenses 1,7 1,124 1,243 1,263 1,52 1,539 1,538 1,612 1,624 1,634 1,724 1,759 4,7 6,28 6,742 7,3 92.4% Personnel expenses ,419 2,86 2, Advertising expenses Amortization of goodwill Others , YoY -2.9% 1.5% 13.% 24.6% 42.% 37.% 23.7% 27.6% 6.9% 6.2% 12.1% 9.2% 8.7% 32.1% 8.6% 17.6% Personnel expenses 7.% 9.3% 4.5% 3.5% 15.2% 24.3% 17.% 16.9% 5.1% 3.2% 1.5% 6.5% 6.% 18.2% 4.1% Advertising expenses -1.3% -13.8% 16.2% 23.6% 39.7% -4.2% 2.6% 7.4% -14.7% 24.2% 57.9% -29.7% 3.2% 31.% 3.4% Amortization of goodwill 2,697.6% 15,339.% 12.5% 35.9% 74.4% 82.% 27.8% 1.9% -11.9% -1.2% -1.2% 3.9% 4.6% 29.9% 33.5% Others -7.2% 15.% 51.9% 72.2% 95.4% 73.9% 34.% 29.8% 19.4% 6.5% 15.1% 3.2% -47.2% -44.8% 38.5% SG&A ratio 21.4% 21.5% 25.2% 22.2% 23.1% 22.4% 24.8% 25.8% 23.9% 21.6% 24.9% 24.3% 22.6% 24.% 23.6% 24.3% +.8pp -.8pp +.1pp -1.5pp Personnel expenses 11.9% 11.% 12.8% 1.9% 1.4% 1.4% 11.9% 11.5% 1.6% 9.8% 1.8% 1.6% 11.6% 11.% 1.4% +.2pp -.6pp -1.1pp -.9pp Advertising expenses 3.1% 3.2% 2.8% 2.7% 3.3% 2.3% 2.6% 4.1% 2.7% 2.6% 3.7% 2.5% 2.9% 3.1% 2.9% -.6pp +.3pp +1.1pp -1.6pp Amortization of goodwill.7%.6%.9%.8%.9%.9% 1.%.8%.8%.7%.8%.7%.8%.9%.7% -.1pp -.2pp -.2pp -.1pp Others 5.7% 6.6% 8.7% 7.9% 8.5% 8.8% 9.3% 9.3% 9.8% 8.5% 9.6% 1.4% 7.2% 8.9% 9.6% +1.3pp -.3pp +.3pp +1.2pp Operating ,721 1,86 1,42 1, profit 118.4% YoY -3.8% -21.7% -38.1% -34.1% 6.1% 43.3% 14.4% -55.% -34.6% -36.9% -3.5% 59.9% -23.1% 5.% -21.4% -33.6% OPM 12.% 9.1% 5.8% 6.3% 9.7% 9.9% 5.3% 2.6% 6.1% 5.7% 4.5% 3.6% 8.3% 7.% 5.% 4.% -3.6pp -4.2pp -.7pp +1.pp Non-operating income (expenses) Financial income (expenses) Forex gains (losses) Equity in earnings of affiliates Others Recurring profit ,246 1,862 1,432 1, % YoY -13.7% -37.2% -54.% -81.1% 25.% 8.6% 43.7% 83.8% -25.3% -38.5% -1.% 1.4% -43.1% 49.4% -23.1% -35.5% Extraordinary gains (losses) Income taxes Implied tax rate 35.5% 4.8% #REF! 35.9% 33.4% 32.8% 352.% 25.8% 37.6% 37.9% 37.5% 116.4% 47.1% 38.2% 4.9% Minority interests Net income attributable ,162 1,117 1, to parent company shareholders 16.4% YoY -3.8% -4.% -4.8% -13.5% 11.5% 13.2% % -1,547.1% -19.8% -53.2% -761.% -97.3% -55.6% 58.7% -3.8% -9.6% Net margin 7.9% 4.5% 2.5% -.4% 6.7% 7.% -1.3% 5.1% 5.2% 3.% 7.7%.1% 3.5% 4.5% 3.9% 3.5% -1.5pp -4.pp +9.pp -5.pp OP before amortization of goodwill ,879 2,36 1, YoY 1.4% -16.4% -31.4% -3.% 9.7% 45.8% 16.3% -47.5% -32.7% -34.8% -4.6% 46.5% -18.2% 8.4% -19.9% OPM 12.7% 9.7% 6.7% 7.2% 1.6% 1.8% 6.2% 3.4% 6.9% 6.4% 5.3% 4.3% 9.% 7.9% 5.7% -3.7pp -4.4pp -.9pp +.9pp Sales 4,988 5,23 4,94 5,685 6,573 6,871 6,198 6,253 6,799 7,556 6,918 7,245 2,842 25,895 28,518 3, 95.1% Ad Platform 2,874 3,264 3,129 3,764 4,495 4,964 4,395 4,46 4,635 4,847 4,737 5,41 13,31 18,314 19,26 22, 87.5% Supply-side sales 1,939 2,243 2,281 2,745 2,963 3,155 2,718 2,66 2,667 2,736 2,61 2,654 9,21 11,498 1, fluct SSP (PC) ,631 2,718 1, fluct SSP (smartphone) 1,319 1,596 1,681 1,937 2,89 2,322 2,124 2,243 2,282 2,37 2,25 2,31 6,533 8,78 9, Demand-side sales 1,55 1,25 1,48 1,283 1,848 2,131 2, 2,226 2,438 2,623 2,641 2,954 4,637 8,27 1, Zucks 1,942 2,149 2,268 2,453 2,663 4,22 6,692 9, CMerTV Other Other Eliminations ,119-1,565-2, Point Media 1,597 1,495 1,419 1,42 1,535 1,476 1,356 1,378 1,542 2,166 1,522 1,64 5,933 5,745 6,87 5, % Points outstanding 2,734 2,785 2,732 2,74 2,74 2,77 2,79 2,751 2,781 2,764 2,832 2,838 2,74 2,751 2, Incubation ,175 2,82 2,592 2,7 96.% Advancing Other ,78 1,425 1, Withdrawn Eliminations YoY 12.8% 13.9% 15.3% 28.2% 31.8% 31.4% 25.5% 1.% 3.4% 1.% 11.6% 15.9% 17.5% 24.2% 1.1% 15.9% Ad Platform 16.9% 28.9% 33.6% 5.7% 56.4% 52.1% 4.5% 18.5% 3.1% -2.4% 7.8% 13.% 32.5% 4.5% 5.2% 2.1% Supply-side sales 12.4% 24.5% 3.9% 5.5% 52.8% 4.7% 19.2% -3.1% -1.% -13.3% -4.3% -.2% 29.8% 24.8% -7.3% fluct SSP (PC) 12.3% 22.1% 2.6% 64.7% 47.2% 31.2% -.5% -48.3% -55.9% -56.1% -4.8% -17.5% 29.4% 3.3% -46.8% fluct SSP (smartphone) 1.3% 24.6% 38.8% 5.5% 58.4% 45.5% 26.4% 15.8% 9.2% 2.1% 5.9% 3.% 31.3% 34.4% 4.9% Demand-side sales 83.8% 111.5% 75.5% 83.3% 75.2% 7.5% 9.8% 73.5% 31.9% 23.1% 32.1% 32.7% 88.3% 77.% 29.9% Zucks % 47.8% 76.6% 65.8% 53.5% 35.6% 46.2% 37.1% % 42.5% Point Media 11.5% -2.% -.5% -2.9% -3.9% -1.3% -4.4% -3.%.5% 46.8% 12.2% 19.1% 1.4% -3.2% 19.6% -2.5% Points outstanding 4.8% 5.% 2.6%.5%.2% -2.8% -.9% 1.7% 1.5% 2.1% 4.6% 3.1%.5% 1.7% 3.1% Number of memberships 9.9% 8.8% 8.2% 7.7% 7.6% 8.7% 9.8% 1.7% 1.6% 9.8% % 1.7% - Incubation -18.4% -2.7% -26.5% -26.5% -4.9% -19.7% -.1% 12.7% 9.5% 26.5% 42.9% 23.% -22.7% -4.3% 24.5% 29.7% Operating profit ,721 1,86 1,42 1, % Ad Platform ,81 1,471 1,293 1, % Point Media % Incubation Advancing Other Withdrawn OPM 12.% 9.1% 5.8% 6.3% 9.7% 9.9% 5.3% 2.6% 6.1% 5.7% 4.5% 3.6% 8.3% 7.% 5.% 4.% -3.6pp -4.2pp -.7pp +1.pp Ad Platform 11.% 9.7% 5.% 7.8% 1.9% 1.7% 5.9% 4.3% 6.9% 8.4% 6.4% 5.3% 8.3% 8.% 6.7% -4.pp -2.3pp +.5pp +.9pp Point Media 16.6% 1.6% 8.3% 7.3% 8.9% 1.7% 4.3% 4.2% 3.2% 3.9% 3.7% 6.8% 1.9% 7.1% 4.4% -5.7pp -6.8pp -.6pp +2.7pp Incubation 2.8%.2% 2.3% -7.9% 1.7% -1.3% 1.8% -17.7% 6.9% -1.% -6.3% -19.2% -.2% -3.6% -6.8% +5.2pp -8.7pp -8.1pp -1.5pp Number of employees Ad Platform Point Media Incubation Company-wide /69

8 LAST UPDATE: Research Report by Shared Research Inc. Full-year FY9/18 results (out October 31, 218) FY9/18: Sales up 1% YoY to new record high on strong growth at Ad Platform business; operating profit of JPY1.4bn was down 21% YoY but JPY2mn higher than expected Business merger: The company announced that it plans to merge with Cyber Communications Inc. (CCI), a wholly owned subsidiary of Dentsu, in January 219 by means of a share exchange The entity resulting from the merger will be a holding company (53.1% owned by Dentsu) for both VOYAGE and CCI, and intends to maintain its stock exchange listing. CCI is forecasting an operating profit of JPY1.4bn for FY12/18 The largest benefit from the merger will be the two companies' ability to combine their strengths and resources to tackle new challenges; the goal is to create a company that is the dominant leader in the internet advertising industry FY9/19: Due to the pending merger with CCI, VOYAGE has not issued a forecast for FY9/19 Ad Platform: Sales up 5.2% YoY. Demand-side platform sales continued to be robust, increasing 3%YoY, compensating for lower sales at supply-side platform due to the effects of media performance assessment, pushed up profits Operating profit up 48% excluding the effects of media performance assessment (pushed down earnings by approx. JPY6mn). Demand-side platform sales topped supply-side platform sales for the first time in and finished the full year up more than 5% Point Media: Structural reforms to increase attractiveness continue with an aim of growing the business over the medium to long term; sales and earnings got back on positive growth track in 2H as strategic measures aimed at reviving growth kicked in Incubation: In growth areas, steady progress in employment-related businesses; heavy upfront spending, including increases in employee headcount (including intra-group transfers), led to larger operating losses Losses increased despite cutbacks in ad spending stemming from delays in the release of new game titles as the company continued spending in preparation for the launch of new services and booked charges related to closure of other services Quarterly sales (upper) and operating profit (middle and lower) Ad Platform Point Media Incubation Eliminations YoY (right axis) 7,556 8, 6,573 6,871 6,799 7, 6,198 6,253 6,918 7,245 5,685 6, 4,988 5,23 4,94 1,476 2,166 1,64 1,535 1,356 1,378 1,542 1,522 4,423 4,59 5, 4,52 4,283 4,433 3,524 3,749 3,896 1,42 4, 1,495 1,597 1,419 1,432 1,526 3, 1,558 1,426 1,463 1,463 1,392 1,38 4,495 4,964 4,395 4,46 4,635 4,847 4,737 5,41 2, 3,764 1, 1,647 2,53 1,854 2,11 2,459 2,533 2,342 2,497 2,874 3,264 3,129-1, FY9/ FY9/14 Q2 Q4 FY9/ Q2 Q4 FY9/16 Q2 Q4 FY9/17 Ad Platform Point Media Incubation OPM (right axis) Q2 Q4 FY9/15 Q2 Q4 FY9/16 Q2 Q4 FY9/17 Q2 Q4 FY9/ Q2 Q4 FY9/18 Q2 Q Q2 Q4 8% 7% 6% 5% 4% 3% 2% 1% % -1% 16% 14% 12% 1% 8% 6% 4% 2% % -2% 8/69

9 LAST UPDATE: Research Report by Shared Research Inc. Ad Platform Point Media 2% 15% 1% 5% 17.3% 13.7% 18.4% 15.7% 15.3% 15.2% 13.% 1.1% 13.4% 12.3% 1.6% 11.2% 16.6% 14.9% 14.1% 1.4% 12.1% 11.% 1.6% 8.3% 9.7% 5.% 7.8% 7.3% 1.9% 1.7% 1.7% 8.9% 5.9% 4.3% 6.9% 8.4% 6.4% 5.3% 6.8% % FY9/14 FY9/15 FY9/16 FY9/17 4.3% 4.2% 3.2% 3.9% 3.7% FY9/18 Results overview FY9/18: Sales up 1% YoY to new record high on strong growth at Ad Platform business; operating profit of JPY1.4bn down 21% YoY but JPY2mn higher than expected; merger announced For FY9/18, the company reported full-year sales of JPY28.5bn (+1.1% YoY), a gross profit of JPY8.2bn (+1.8% YoY), and an operating profit of JPY1.4bn (-21.4% YoY). The top-line gains were driven by the Ad Platform segment, where most of the gains came from a 3% rise in sales at its demand-side platform business. Consolidated operating profit finished down, however, hurt by a JPY6mn charge stemming from the media performance assessment and the increases in spending that accompanied higher sales. Excluding charges stemming from the media performance assessment, gross profit rose by 1% and operating profit rose by 18%. Merger announcement Along with its earnings announcement, the company also announced that it planned to merge with Cyber Communications Inc. (CCI), a wholly owned subsidiary of Dentsu (TSE1: 4324). The merger will be consummated by means of a 1-for-26 share exchange (13,441,56 shares issued) on January 1, 219. The merger will bring the two companies together under a holding company structure, in which Dentsu will hold a 53.1% interest. VOYAGE intends to maintain its TSE1 listing after the merger. The merger will create a three-way capital alliance between VOYAGE, CCI, and Dentsu, and will also facilitate their joint efforts in various new fields going forward. The reason for changing to a holding company structure is to ensure each company focuses on growing its own business and that of group companies instead of wasting time and effort to blend different corporate cultures, atmospheres, and HR systems. The companies plan to introduce meetings and exchanges between employees of each company in stages. Overview Objectives With the merger, the companies aim to become the dominant leader in the growing internet advertising market. Reasons for the merger are as follows: Opportunities: Substantial scope for growth in the programmatic advertising market with national clients Threats: Establish partnerships in a landscape where media/ad platform giants such as Google, FaceBook, and Yahoo increase their presence Strengths and weaknesses: VOYAGE and CCI have complementary strengths and weaknesses 9/69

10 LAST UPDATE: Research Report by Shared Research Inc. Complementary strengths and weaknesses An internet service company like the VOYAGE, whose strength lies in its technological expertise (ad platform technology and service development), is a good match for an internet advertising company like CCI, whose strength lies in its expansive customer base and its ability to put together and execute internet ad proposals for national clients using premium media. The largest benefit from the merger will come from combining the strengths and resources of the two companies to jointly tackle new growth initiatives. There is little overlap in client base, because most of VOYAGE s clients are companies that prefer performance-based ads, i.e., mainly providers of online services such as games and E-Commerce. Following the merger, plans call for a) working together to expand the reach of the two companies in the field of internet advertising, including expanding sales on ad platforms operated by VOYAGE with the help of CCI and otherwise expanding their customer base through cross-selling; b) increasing development capabilities and original new product development by combining the technology and business development expertise of VOYAGE with CCI's strong customer base and customer relations along with its expertise in marketing; and c) expand business in new internet advertising fields and actively seek out new business opportunities in other internet-related fields. Complementary businesses areas after merger Dentsu s presence Dentsu will own more than 5% of the holding company s shares. VOYAGE expects Dentsu to maintain a solid relationship with CCI under the holding company, and sees potential for growing importance of the holding company s role as the trend of digital advertising begins to impact not only on online ads, but on traditional mass media such as television and newspapers as well. Dentsu also expects the new company to create new online businesses. Earnings For FY12/18, CCI is forecasting full-year sales of JP95.4bn (versus JPY28.5bn for VOYAGE in FY9/18), operating profit of JPY1.4bn (versus JPY1.4bn), recurring profit of JPY1.5bn (versus JPY1.4bn), and net income of JPY1.bn (versus JPY1.1bn). As of the end of September 218, CCI had a total of 1,32 employees (versus 366 for VOYAGE). CCI s fiscal year ends in December, while VOYAGE s fiscal year ends in September. Combining CCI s FY12/18 forecast and VOYAGE s FY9/18 results gives us sales of JPY124.bn, operating profit of JPY2.8bn (OPM of 2.3%), recurring profit of JPY2.9bn (2.3%), and net income of JPY2.1bn (1.7%). The new company will have approximately 1% share of the online advertising market (worth JPY1.2tn in 217 and estimated at JPY1.4tn in 218, based on Dentsu survey), which is growing at a rate of almost 2% per year. VOYAGE has an OPM of 5.% versus 1.5% for CCI, because media rep* accounts for the bulk of CCI s business, which has lower GPM than VOYAGE s Ad Platform business. As well, CCI has high SG&A expenses due to its large work force. 1/69

11 LAST UPDATE: Research Report by Shared Research Inc. Online advertising market (left), programmatic advertising market (middle), market share of programmatic advertising (right) (JPYbn) 1,5 Online ad media expenses Online ad ratio (right axis) 1, 3% , % % % 1, % 1,221 1,44 2% 1% Est. % (JPYbn) Performance-based ads Pure advertisement Programmatic ad market The media release announcing the merger presented the following earnings outlook for the two companies. 1) VOYAGE FY9/19: Net income is forecast to drop by around 3% in F9/19 in reaction to extraordinary income of JPY643mn recorded in FY9/18, (of which gain on the sale of affiliates was JPY541mn). Pretax profit was JPY1.8bn and net profit was JPY1.1bn in FY9/18. Thus estimated net income in FY9/19 = JPY1.1bn x 7% = JPY782mn. 2) VOYAGE FY9/2: The company forecasts around 6% growth in operating profit, recurring profit, and net income (JPY782mn x 16% = JPY1.3bn) due to higher sales of the Ad Platform business on the back of online advertising market growth and increased monetization of the Incubation business. 3) CCI FY12/18: CCI forecasts approximately 4% decline in operating profit, recurring profit, and net income (FY12/18 net income forecast: JPY1.bn) as a result of reviewing transactions with some customers. 4) CCI FY12/19: The company forecasts around 3% profit decline due to investments and other factors (JPY1.bn x 7% = JPY713mn). 5) CCI FY12/2: The company forecasts a 3% operating profit increase as a result of sales growth in online advertising and expansion of new businesses (JPY713mn x 13% = JPY926mn). 6) CCI FY12/21: The company forecasts approximately 5% growth in operating profit, recurring profit, and net income (JPY926mn x 15% = JPY1.4bn). Regarding the outlook for operating profit of the merged company, Shared Research expects an upward trend in FY12/19, although VOYAGE has not announced its FY9/12 outlook. However, considering that CCI is forecasting about 4% lower profits, it is unclear whether the merged company will post an increase in profit (note that VOYAGE will be reporting 15 months results). In FY12/2, sharp profit growth is forecasted (around 6% increase for VOYAGE and 3% increase for CCI). We look for continued profit growth in FY12/21 at this stage, because we see no reasons for VOYAGE to forecast lower profits and CCI expects profit to increase by around 5%. We thus expect profits to trend up in the next few years. Media rep: A wholesale-type business that serves as an intermediary between advertisers and media. CCI and DAC are two major media rep firms CCI FY12/18 outlook: Margins have fallen because of the impact of reviewing intra-group transactions with Dentsu. We believe the reviews began in late F12/17 and will have a full-year impact in FY12/18. VOYAGE business segments The company has not announced its full-year FY9/19 forecasts on the grounds that it is impossible to make a reasonable estimate of the impact of the merger. VOYAGE intends to unveil its medium-term management policy at the same time as announcing its first earnings results (for FY9/19) after the merger. Our outlook for VOYAGE s business segments is as follows. a) Ad platform business: Adverse business conditions look set to continue on the supply side due to regulation changes at global platformers like Yahoo! and Google, including efforts to manage ad fraud, but earnings growth is likely to continue, driven by steady growth of the demand side, in which the company is concentrating its management resources. b) Point Media business: Targets earnings bottom in FY9/18 and recovery/growth in FY9/19 as a result of restructuring to return to a growth trajectory. c) Incubation business: Look for sales and profit growth overall, with an outlook for solid profit growth in HR-related business and positive outlook for Kajitaku (housework service), while the company continues to invest reasonable sums in growing new businesses. 11/69

12 LAST UPDATE: Research Report by Shared Research Inc. Earnings (left: VOYAGE; middle: CCI; right: simple sum of net income) Sales Operating profit OPM (right axis) Sales Operating profit OPM (right axis) 3, 28,518 3% 12, 5% 2,5 25,895 97,661 25, 25% 1, 92,944 95,44 4% 2, 2,842 2, 17,73 2% 8, 66,87 3% 1,5 15, 15% 6, 2% 1, 1, 1% 4, 1% 5 5, 5% 2, 2,238 1,721 1,86 1,42 2,68 2,878 2,534 1,419 % % FY9/15 FY9/16 FY9/17 FY9/18 FY12/15 FY12/16 FY12/17 FY12/18 VOYAGE CCI 2,135 2,177 1,18 1, , ,39 1,251 1, FY12/18 FY12/19 FY12/2 FY12/21 Supplementary information There will be a grace period (running from January 1, 219 through December 31, 222) during which the shares of the VOYAGE will be able to maintain their stock exchange listing even though the company has ceased to exist as the substantial surviving entity as a result of the merger. If the VOYAGE can meet the standards for a new stock exchange listing before the last day of the grace period, the grace period will be lifted. However, if the company is unable to meet the standards for a new stock exchange listing, its stock would be de-listed. Outlook for FY9/19 (as of ; for reference) In its initial medium-term plan, VOYAGE aimed for double-digit growth every year on average at each segment with FY9/2 sales target of JPY42.bn (JPY3.bn at Ad Platform, JPY8.bn at Point Media, and JPY4.bn at Incubation; FY9/17 results were JPY18.3bn at Ad Platform, JPY5.7bn at Point Media, and JPY2.1bn at Incubation). For FY9/18, the company expected greater than 2% increase in sales at all segments except Point Media (-JPY1mn) with a sales target of JPY3.bn (JPY22.bn at Ad Platform, JPY5.6bn at Point Media, and JPY2.7bn at Incubation). However, reaching full-year FY9/18 targets seems unlikely considering cumulative results. Cumulative results fell short of plan because the main platform at the Ad Platform business, fluct (SSP), continued posting lower sales largely due to changing business environments. Another main platform, Zucks (DSP), and other businesses are performing strong. In its medium-term plan, the company expected FY9/18 operating profit to fall JPY6mn YoY to JPY1.2mn due to the effects of media performance assessment at Ad Platform (accounting for JPY6mn decline), expenses involved in structural reform at Point Media (JPY3mn), and strengthened measures for promoting new businesses (JPY4mn). The company expects to turn profit from FY9/19 and reach JPY3.bn in operating profit by FY9/2. In FY9/18, as lower SG&A expenses compensated for lower sales until, operating profit is likely to meet the target unless advertising expenses unexpectedly hike up in Q4. In FY9/19, the company apparently expects higher sales at each segment. Although profit largely depends on measures to strengthen promotional activities at the Incubation business, the company forecasts higher profit in line with medium-term plan. The company may have to significantly increase advertising spending in response to improved projections for future growth potential because of the nature of Incubation business structure. As a result, the company may budget expenses conservatively for FY9/19 as it did for FY9/18. As higher spending could indicate greater number of new businesses with high growth potential, Shared Research would like to pay attention to the company s forecasts announcement planned in September 218. Following is the overview of each business. Ad Platform In FY9/18, the company aims for higher sales for both supply-side and demand-side platforms. Supply-side platform sales (main clients are media and app companies) fell 9.4% YoY or JPY8mn in cumulative (+5.6% or +JPY4mn for smartphones; -52.1% or -JPY1.2bn for PC), continuing a downtrend since Q4 FY9/17 and undershooting the initial target. However, negative factors (changes in the business environment such as increased awareness of advertisers and fraudulent ad block measures [voluntary control at the industry-level, measures against ad hoc]) are expected to dissipate in FY9/19. The company views it important to acquire media clients (and smartphone app companies) to expand its customer base. It plans to continue increasing market share of its supply-side platform fluct and expand gross profit margin. Shared Research will pay attention to full-scale operation of video reward advertising business (officially launched in April 218). At the demand-side platform business (main clients are advertisers), Zucks showed strong performance from through FY9/18 in both ad network and affiliate advertising, surpassing the pace of market growth; Zucks is continuing to perform strong in Q4 as well. The company expects Zucks to maintain momentum in FY9/19 and expects additional contributions from growth of video ad distribution platform CMerTV. Effects of various initiatives, such as providing sufficient staff to Zucks and making continued efforts to improve sales, development, and media development are showing results. 12/69

13 LAST UPDATE: Research Report by Shared Research Inc. CMerTV continued to maintain a highly profitable earnings structure in. However, because the company ranks next to major players (YouTube, Facebook, LINE, Twitter, Instagram, etc.) in terms of sales, despite there being room for growth in the medium term, it is noteworthy that its earnings performance may fluctuate. Ad Platform sales (JPYbn) 6 5 (JPYbn) Supply-side Demand-side Other Eliminations YoY (right axis) 12% % Supply-side Demand-side % 6% 4% 2% % FY9/14 FY9/15 FY9/16 FY9/17 FY9/18-2% FY9/14 FY9/15 FY9/16 FY9/17 FY9/18 Point Media In FY9/18, Point Media performed in line with the initial plan even without the effects of a one-time factor (point reimbursement campaign) in Q2. Results of the company s strategies to revive growth (cost reduction and revisions to point redemption rates per customer base, e.g., smartphone users) began to be evident in sales and profits. Sales continue to be on an uptrend since, and GPM is improving thanks to meticulous control of point redemption rates. SG&A expenses are also kept under control as employee transfer from a department to another within the company proceeds. As a result, operating profit is making steady progress toward the initial full-year target of JPY2mn. In FY9/19, the company expects higher profit on sustained growth in sales and successful structural reforms. The sales target of JPY8.bn by FY9/2 is not easy to achieve, and in fact, the company had viewed the sales target as well as its goals for expanding the Incubation business as challenging since the launch of the medium-term plan. Share Research would like to pay close attention to earnings forecasts and strategies for FY9/19. Number of employees (left), sales per employee (right) FY9/15 Ad Platform Point Media Incubation Company-wide Overseas FY9/ FY9/ FY9/ FY9/14 Ad Platform Point Media Incubation Total FY9/15 FY9/16 FY9/17 FY9/18 Incubation The company views Incubation as an important business to drive future growth, and accordingly, it is strengthening upfront spending at the segment to develop it as the third pillar of earnings. The company plans to grow the Incubation business centered on HR-related, e-commerce, and FinTech as focus areas and game publishing as the other. In FY9/18, employment support for new college graduates for engineering positions in the HR-related business has maintained sales growth of over 5% since, driving both segment sales and profit. E-commerce operates mail-order sales of cosmetics and household support service. Online sales of household support service in collaboration with Kajitaku Co., Ltd., a subsidiary of Aeon Delight (TSE 9787) is gradually making contributions to sales. In game publishing, the company reports that it has become able to stably supply game titles every quarter. Although the company expects a JPY4mn increase in marketing expenses YoY for FY9/18, it is likely that the company will not spend it all (as of, marketing expenses were JPY272mn, up JPY121mn YoY). As a result, the forecast for full-year operating loss of JPY1mn is within reach. In FY9/19, the company aims for higher sales and profits at the HR-related business as it expects sales growth to absorb investments in management resources including personnel. At the e-commerce business, the company looks to see contributions from new businesses to be launched by the end of FY9/18 or planned to be launched in addition to growth in existing cosmetics and household support services. In terms of profit/loss, the company has positioned F9/19 as a period of upfront spending such as promotion and personnel expenses, but expects household support services to contribute to sales. Further, Shared Research would like to keep an eye on MYLISH, a fixed-rate fashion rental service launched in July /69

14 LAST UPDATE: Research Report by Shared Research Inc. HR-related business is centered on subsidiary Supporterz, Inc. Supporterz mainly operates employment support services for new college graduates for engineering positions by satisfying the need of both job seekers and employers and receives fees: new college graduates find it difficult to go to Tokyo to look for work on their own, so instead many end up working at regional manufacturers and the like; IT companies in Tokyo want to hire skilled engineers, but as it is difficult to recruit mid-career employees, they instead look to hire new college graduates with experience in development. Operating in the black, Supporterz is continuing to post higher sales and profit. MYLYSH is a flat-rate fashion rental service launched on July 25, 218. It is similar to competitors in that there is no limit on number of days an item can be borrowed nor any shipping/cleaning charges, but it intends to differentiate its service by offering items selected by influencers and collaborating with fashion brands. Although it aims to increase the number of brands whose items it carries, most items at the time of launch were from Baroque Japan Limited (TSE 3548) brands, such as MOUSSY and SLY. Incubation performance (left: sales, middle: operating profit, right: advertising expenses) FY9/14 Advancing Other Withdrawn FY9/15 FY9/16 FY9/17 FY9/ FY9/14 Advancing Other Withdrawn FY9/15 FY9/16 FY9/17 FY9/ FY9/ Advancing FY9/ Other FY9/ List of investment targets (from FY9/17 onward) Date Company Stake Business description Dec 216 VOYAGE NEXUS 1.% New subsidiary Operates online sales business of housework support services, partnering with Kajitaku Jun 217 OMEGA - Investment Plans, develops, and operates ad network based on proprietary big data technologies Jun 217 The Bridge - Investment Operates Trip Free, a free SIM card service, for foreign tourists visiting Japan Jul 217 IT Realize - Investment Operates "Local bank app with CRECO", a package solution for local and shinkin banks Aug 217 AOS Mobile - Investment Provide B2B mobile communication services including AOSSMS and InCircle Sep 217 Generic Solution - Investment Sales of GS8, software for information search and machine learning Nov 217 Countir Bank 39.% JV with Countir Operates virtual currency-related business. Plans to launch virtual currency wallet service in summer 218 Jan 218 C-POT 3.% JV with Shogakukan Supports building database on publication content for the publishing industry Jan 218 SelvasM. Inc. 3.% JV with Infraware Inc. (South Korea) Operates overseas mobile game business (having development synergies with VOYAGE game publishing business) Feb 218 cosoral Inc. 1.% New subsidiary Operates Posly (service to support child-rearing using the internet) Jun 218 Media Brst - Investment Provides content production and media operations focusing on comedy performances Jun 218 Shuminavi Inc. - Investment Operates Shuminavi, an experience-matching platform Sep 218 Palsbots Inc. - Investment Develops application software for robots and interactive services Sep 218 DogHuggy Inc. - Investment Operates DogHuggy, a dog hosting service Detailed review of transaction terms and conditions: The company revised transaction terms and conditions of media companies (publishers) that have tended to be avoided by advertisers. It had implemented similar measures in the past and sales from related media had been on the decline; however, full-scale implementation in the end of FY9/17 had a significant impact on sales. The full impact on sales and earnings was seen in Q4 FY9/17 and will be evident in FY9/18. The company estimates that this move will cost it some JPY1.5bn in annual sales (JPY6mn in both and Q2, and JPY3mn in ) and roughly JPY6mn in gross profit ( operating profit), with hits of JPY2 3mn in both and Q2, and roughly a JPY1mn hit in. Because these sales carried relatively high margins, this has also brought down the GPM. 14/69

15 LAST UPDATE: Research Report by Shared Research Inc. Supplementary data Gross profit margin 3pp 2pp 1pp pp -1pp -2pp -3pp -4pp -5pp -6pp YoY change GPM (right axis) -7pp FY9/14 FY9/15 FY9/16 FY9/17 FY9/18 48% 2% 46% 18% 44% 16% 42% 14% 4% 12% 38% 1% 36% 34% 32% 3% 28% 8% 6% 4% 2% % FY9/14 FY9/15 Consolidated OPM FY9/16 Ad Platform OPM FY9/17 FY9/18 SG&A expenses 2, 1,5 1, Personnel Advertising and promotion Goodwill amortization Other SG&A Research Panel (before restructuring) OPM (right axis) GPM (right axis) 1,724 1,759 1,612 1,624 1,634 1,52 1,539 1, FY9/12 FY9/ , FY9/14 1,243 1,263 1,36 1,37 1,11 1,17 1,1 1,124 1,7 1, FY9/15 FY9/ FY9/17 FY9/18 5% 4% 3% 2% 1% % Ad Platform Ad Platform segment earnings performance (new accounting method from FY9/14) 6, 5, 4, 3, 2, 1, 13.7% 1, % 2, FY9/ % 15.2% 3, % 3,264 3, % 1.4% 12.1% 11.% 2,874 2,459 2, % 2,342 2,497 1,854 2,11 7.8% 5.% Q2 Q4 FY9/15 Sales Operating profit OPM (right axis) Q2 Q4 FY9/ ,495 4, % 1.7% Q2 Q4 FY9/ ,395 4,46 4,635 4,847 4,737 5,41 5.9% 4.3% 6.9% 8.4% 6.4% 5.3% Q2 Q4 FY9/18 Q2 Q4 24% 2% 16% 12% 8% 4% % 3,5 3, 2,5 2, 1,5 1, 5 1, ,319 Smart phones PCs Supply-side 3,155 2,963 2,745 2,718 2,66 2,667 2, ,243 2, , , ,322 1,937 2,89 2,124 2,243 2,282 2,37 2,25 2,31 1,596 1,681 3,5 3, 2,5 2, 1,5 1, 5 1, ,25 1,131 Zucks CMerTV Other Demand-side 2,623 2,641 2,438 2, , , 194 1, , ,48 2,453 2,149 2,268 1,942 1,672 1,678 1,4 1, , ,663 FY9/16 FY9/17 FY9/18 FY9/16 FY9/17 FY9/18 15/69

16 LAST UPDATE: Research Report by Shared Research Inc. Point Media Point Media segment earnings performance 2,5 Sales Operating profit OPM (right axis) 17.3% 16.6% 14.9% 2, 15.7% 1,558 1,597 1, % 11.2% 12.3% 13.4% 14.1% 1,526 1,392 1,38 1,432 1,426 1,463 1,495 1,535 1,419 1,42 1,476 1,5 1.6% 1,356 1, % 8.3% 1.7% 7.3% 1, ,5 FY9/ Q2 Q4 FY9/15 Q2 Q4 FY9/ Q2 Q4 FY9/17 1,542 2,166 1, % 4.2% 3.2% 3.9% 3.7% 1,64 6.8% Q2 Q4 FY9/18 Sales form EC Navi and Research Panel Sales from point exchange Segment sales 2,166 Q2 Q4 15% 1% 5% % 2, 1,5 1, 1, , ,419 1, ,535 1, ,356 1, , ,131 1, , ,137 1, , FY9/16 FY9/17 FY9/18 Post-structural reform forecast for sales and earnings FY9/17 FY9/18 FY9/2 (JPYbn) Act. Est. Change Target Vs. FY9/17 Vs. FY9/18 Sales Cost of sales Cost ratio 59.2% 63.4% +4.2pp 7.% +1.8pp +6.6pp Gross profit SG&A expenses SG&A ratio 33.6% 33.% -.59pp 23.8% -9.87pp -9.29pp Operating profit OPM 7.1% 3.6% -3.57pp 6.3% -.89pp +2.7pp For details on previous results, please refer to the Historical earnings results section. 16/69

17 LAST UPDATE: Research Report by Shared Research Inc. Medium-term targets and FY9/18 company forecast (out October 217); figures for FY9/19 not finalized due to merger Old accounting method New accounting method Income statement FY9/12 FY9/13 FY9/14 FY9/15 FY9/14 FY9/15 FY9/16 FY9/17 FY9/18 FY9/2 Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Init. Est. Targets CAGR Sales 8,139 9,858 15,46 17,563 15,222 17,73 2,842 25,895 3, 42, 17.5% YoY 2.7% 21.1% 52.6% 16.7% % 17.5% 24.2% 15.9% Gross profit 3,292 3,844 5,962 6,522 6,3 6,562 6,421 8,15 8,5 GPM 4.5% 39.% 39.6% 37.1% 39.6% 37.% 3.8% 31.% 28.3% SG&A expenses 3,29 3,37 4,81 4,324 4,81 4,324 4,7 6,28 7,3 Personnel 1,85 1,833 2,47 2,283 2,47 2,283 2,419 2,86 Advertising and promotion Amortization of goodwill Overseas research Other , YoY -.5% 23.4% 5.9% - 5.9% 8.7% 32.1% 17.6% SG&A ratio 4.4% 33.6% 27.1% 24.6% 26.8% 24.4% 22.6% 24.% 24.3% Operating profit ,881 2,198 1,949 2,238 1,721 1,86 1,2 3, 18.4% YoY -99.6% 24,423.2% 25.6% 16.9% % -23.1% 5.% -33.6% OPM.% 5.4% 12.5% 12.5% 12.8% 12.6% 8.3% 7.% 4.% 7.1% Non-operating income (expenses) Financial income (expenses) Forex gains (losses) Equity in earnings of affiliates Other non-operating income Recurring profit ,891 2,149 1,959 2,189 1,246 1,862 1,2 YoY - 13,93.5% 257.3% 13.7% % -43.1% 49.4% -35.5% RPM.% 5.4% 12.6% 12.2% 12.9% 12.3% 6.% 7.2% 4.% Extraordinary gains (losses) Implied tax rate % 39.4% 41.3% % 36.3% 47.1% 38.2% Minority interests Net income attributable to parent company shareholders ,114-1,134 1, , ,8 15.7% YoY % % -55.6% 58.7% -39.7% Net margin -1.9% 3.1% 7.4% - 7.5% 9.3% 3.5% 4.5% 2.3% 4.3% OP before amortization of goodwill ,893 2,256 1,961 2,296 1,879 2,37 YoY 3,927.% 245.1% 19.2% -13.1% 17.1% -18.1% 8.4% OPM.2% 5.6% 12.6% 12.8% 12.9% 13.% 9.% 7.9% Income by segment FY9/12 FY9/13 FY9/14 FY9/15 FY9/14 FY9/15 FY9/16 FY9/17 FY9/18 FY9/2 Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Init. Est. Targets CAGR Sales 8,139 9,858 15,46 17,563 15,222 17,73 2,842 25,895 3, 42, 17.5% Ad Platform 3,579 4,66 7,393 9,727 7,566 9,833 13,31 18,314 22, 3, 17.9% Supply-side sales 916 2,39 4,99 6,912 5,65 7,94 9,21 11,498 fluct SSP (PC) 61 1,167 1,987 2,47 2,21 2,34 2,631 2,718 fluct SSP (smartphone) 315 1,142 2,922 4,865 3,44 4,977 6,533 8,78 Other fluct impressions (bn) 712 1,258 2,283 2,954 2,374 2,951 3,426 - ecpm (estimated) Demand-side sales ,715 2,463 4,637 8,27 Other 2,638 1, , Eliminations ,119-1,565 Point Media ,794 5,849 5,933 5,745 5,6 8, 11.7% Points outstanding (JPYbn) 1,943 2,283 2,577 2,69 2,577 2,69 2,74 2,751 Number of memberships (1,) New members (1,) Withdrawal (estimated; 1,) Incubation ,27 2,813 2,175 2,82 2,7 4, 24.3% Advancing Other ,543 1,875 1,78 1,425 Withdrawn , Eliminations -1, YoY 2.7% 21.1% 52.6% 16.7% % 17.5% 24.2% 15.9% Ad Platform 13.6% 81.8% 31.6% - 3.% 32.5% 4.5% 2.1% Supply-side sales 152.1% 112.6% 4.8% - 4.1% 29.8% 24.8% fluct SSP (PC) 94.1% 7.2% 3.% -.6% 29.4% 3.3% fluct SSP (smartphone) 262.2% 155.8% 66.5% % 31.3% 34.4% Other % - fluct impressions (bn) 76.7% 81.5% 29.4% % 16.1% - ecpm (estimated) 42.6% 17.1% 8.8% % 12.6% -.8% Demand-side sales 26.3% % 88.3% 77.% Other -34.% % -61.6% -42.9% Point Media % 1.4% -3.2% -2.5% Points outstanding (JPYbn) 17.5% 12.9% 4.4% - 4.4%.5% 1.7% Number of memberships (1,) 9.5% 11.3% 1.3% - 1.3% 7.7% 1.7% Incubation % -22.7% -4.3% 29.7% Operating profit ,881 2,198 1,949 2,238 1,721 1,86 1,2 3, Ad Platform ,282 1,52 1,36 1,81 1,471 1,1 OP before amortization of goodwill ,34 1,64 1,364 1,239 1,71 Point Media Incubation OPM.% 5.4% 12.5% 12.5% 12.8% 12.6% 8.3% 7.% 4.% 7.1% Ad Platform 6.2% 6.8% 13.4% 13.2% 13.9% 13.3% 8.3% 8.% 5.% Point Media % 13.7% 1.9% 7.1% 3.6% Incubation % 4.6% -.2% -3.6% -3.7% Number of employees Ad Platform Point Media Incubation Company-wide Overseas Software engineering and creative Sales and consulting Back office Management Overseas (locally hired) Note: Segment figures for sales, operating profit, and OPM include intragroup transactions. 17/69

18 LAST UPDATE: Research Report by Shared Research Inc. Medium-term targets (to be updated after scheduled announcement of new medium-term management plan following merger in January 219) Old accounting method New accounting method Income statement FY9/12 FY9/13 FY9/14 FY9/15 FY9/14 FY9/15 FY9/16 FY9/17 FY9/18 FY9/2 CAGR Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Init. Est. Targets 3-year 2-year Sales 8,139 9,858 15,46 17,563 15,222 17,73 2,842 25,895 3, 42, 17.5% 18.3% YoY 2.7% 21.1% 52.6% 16.7% % 17.5% 24.2% 15.9% Gross profit 3,292 3,844 5,962 6,522 6,3 6,562 6,421 8,15 8,5 GPM 4.5% 39.% 39.6% 37.1% 39.6% 37.% 3.8% 31.% 28.3% SG&A expenses 3,29 3,37 4,81 4,324 4,81 4,324 4,7 6,28 7,3 YoY -.5% 23.4% 5.9% - 5.9% 8.7% 32.1% 17.6% SG&A ratio 4.4% 33.6% 27.1% 24.6% 26.8% 24.4% 22.6% 24.% 24.3% Operating profit ,881 2,198 1,949 2,238 1,721 1,86 1,2 3, 18.4% 58.1% YoY -99.6% 24,423.2% 25.6% 16.9% % -23.1% 5.% -33.6% OPM.% 5.4% 12.5% 12.5% 12.8% 12.6% 8.3% 7.% 4.% 7.1% Recurring profit ,891 2,149 1,959 2,189 1,246 1,862 1,2 YoY - 13,93.5% 257.3% 13.7% % -43.1% 49.4% -35.5% RPM.% 5.4% 12.6% 12.2% 12.9% 12.3% 6.% 7.2% 4.% Net income attributable to parent company shareholders ,114-1,134 1, , ,8 15.7% 6.4% YoY % % -55.6% 58.7% -39.7% Net margin -1.9% 3.1% 7.4% - 7.5% 9.3% 3.5% 4.5% 2.3% 4.3% Income by segment FY9/12 FY9/13 FY9/14 FY9/15 FY9/14 FY9/15 FY9/16 FY9/17 FY9/18 FY9/2 CAGR Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Init. Est. Targets 3-year 2-year Sales 8,139 9,858 15,46 17,563 15,222 17,73 2,842 25,895 3, 42, 17.5% 18.3% Ad Platform 3,579 4,66 7,393 9,727 7,566 9,833 13,31 18,314 22, 3, 17.9% 16.8% Point Media ,794 5,849 5,933 5,745 5,6 8, 11.7% 19.5% Incubation ,27 2,813 2,175 2,82 2,7 4, 24.3% 21.7% Eliminations -1, YoY 2.7% 21.1% 52.6% 16.7% % 17.5% 24.2% 15.9% Ad Platform 13.6% 81.8% 31.6% - 3.% 32.5% 4.5% 2.1% Point Media % 1.4% -3.2% -2.5% Incubation % -22.7% -4.3% 29.7% Operating profit ,881 2,198 1,949 2,238 1,721 1,86 1,2 3, Ad Platform ,282 1,52 1,36 1,81 1,471 1,1 Point Media Incubation OPM.% 5.4% 12.5% 12.5% 12.8% 12.6% 8.3% 7.% 4.% 7.1% Ad Platform 6.2% 6.8% 13.4% 13.2% 13.9% 13.3% 8.3% 8.% Point Media % 13.7% 1.9% 7.1% Incubation % 4.6% -.2% -3.6% Earnings trend 5, 4, 3, 2, 1, -1, 3, 25,895 2,842 15,222 17,73 9,858 7,324 7,928 8,139 5, ,532 2,157 2,55 2,846 3, ,949 2,238 1,721 1,86 1, FY6 / FY6 /1 FY6 /2 FY6 /3 FY6 /4 FY6 /5 FY9 /5 Sales Operating profit OPM (right axis) FY9 /6 FY9 /7 FY9 /8 FY9 /9 FY9 /1 FY9 /11 FY9 /12 FY9 /13 FY9 /14 FY9 /15 FY9 /16 FY9 /17 FY9 /18 42, 3, FY9 /2 2% 16% 12% 8% 4% % -4% With the ultimate goal of achieving operating profit of JPY1.bn going forward, VOYAGE positions the years through FY9/18 as a period of investment in future growth, paving the way for renewed growth from FY9/19. It looks for FY9/2 operating profit of JPY3.bn In October 217, the company released its medium-term targets. For FY9/2, the company is targeting sales of JPY42.bn, operating profit of JPY3.bn, net income of JPY1.8bn, and a dividend payout ratio of 2%. Plans call for continued heavy spending on future growth initiatives during FY9/18 with the aim of accelerating earnings growth from FY9/19. Management revealed in a briefing that it set a relatively cautious sales target for the Ad Platform segment, which is vulnerable to a rapidly changing management environment, and comparatively ambitious targets for the Point Media segment and the Incubation segment. The operating profit target of JPY3.bn is the same target mentioned as part of the conditions governing the exercise of the stock options issued in May 217 (5% of stock option rights may be exercised if operating profit reaches JPY2.5bn or more, and 1% if operating profit reaches JPY3.bn or more between FY9/17 and FY9/2). We note that this is merely one milestone on the 18/69

19 LAST UPDATE: Research Report by Shared Research Inc. way to the ultimate operating profit target of over JPY1.bn, and that the company has set the target while assuming ongoing steady investment in growth in FY9/21 and beyond. Key initiatives going forward include reinforcing and expanding market share of its Ad Platform business; structural reforms at its Point Media business to get back on a growth track; and establishing a third growth business. In order to get these initiatives underway as soon as possible, the company has increased hiring and is shifting personnel among group companies in order to make optimal use of its existing personnel. Clarification of achievement goals and timelines in Future Management Policy released in October 216 In October 216, the company unveiled a Future Management Policy, which not only included a presentation of the future vision for VOYAGE GROUP but also basic policies and anticipated growth trends for sales and profit growth over the medium and longer term. The strategies underpinning the latest medium-term targets are essentially unchanged from the policy announced a year ago. However, the clarification of achievement goals and timelines hint at a strong commitment on the part of management. Below, we provide an overview of the strategies intended to support achievement of the medium-term targets. We note that the company releases medium-term targets, not a medium-term plan. It does this to prevent strategic goals from being divulged to competitors and to ensure equal importance is attached to all targets. Basic policy As people-centered business development company, maximize enterprise value while expanding into new business areas When formulating its Future Management Policy released in October 216, the company reconfigured its business plans based on the strategies needed to meet its vision of where it wants to be in 5-1 years. As for that vision for the future, the company is looking to 1) expand its main business areas from the two it currently has to a minimum of three as perhaps as many as ten; 2) redefine its group concept, moving away from being merely a collection of consolidated subsidiaries toward a tight-knit team that shares common goals and values; and 3) emulate the autonomous business units and subsidiaries already in place by delegating more decision-making authority. Medium/long-term image of sales (left) and operating profit (right) as of October 216 Incubation Point Media M&A, investments Shift to smartphones Investments X Ad Platform PC supply side Investments Harvest Ad Platform SP supply side Investments Harvest SP demand side Investments Harvest Point Media PC - Harvest Shift to smartphones Harvest X Incubation Enhance investments Harvest Source: Share Research based on company data No change in core strategy; expects Ad Platform business to continue driving growth As before, the company will be looking to its Ad Platform business as its main growth driver, so there has not really been any change in its core strategy. Moreover, the company will implement structural reforms in its Point Media business to spark renewed growth and develop the business into a stable source of earnings, and aims to generate operating profit in at least three businesses it is fostering under the Incubation segment. With regard to new business areas, the company is looking to maximize its enterprise value and is stepping up its efforts to develop businesses in areas that are connected to its Ad Platform business. The company plans to essentially hold off on major acquisitions for the time being while it focuses its internal resources on expanding existing businesses and developing new businesses. 19/69

20 LAST UPDATE: Research Report by Shared Research Inc. Breakdown of business plans by segment Ad Platform Point Media Supply side Demand side Strengthen platform with emphasis on market share expansion, and aim for gross profit increase; for fluct, aim for new app media, strengthen network with large media, and expanding share at existing customers Zucks: Segment growth driver. Joint initiatives in sales, development, and media development, aim for acquiring performance-based ads (Voyage's strength); CMerTV: enhance independent content distribution capabilities including digital signage, for differentiation Structural reforms in FY9/18. Raised point redemption rate to accelerate monetizing smartphone users; expects use behavior changes leading to sales increase, to get growth back Incubation Source: Shared Research, based on company data Views on earnings forecasts Profit decline in FY9/18 due to special factors and structural reforms, followed by renewed profit growth phase from FY9/19 VOYAGE did not announce targets for FY9/19, which is the intervening year between the medium-term targets (FY9/2) and the current fiscal year (FY9/18), but it apparently sees profit bottoming out in FY9/18 and getting back on a growth track in FY9/19, with profit growth increasing further in FY9/2. Enhance investment to create the third growth engine Leveraging online business development expertise, reinforce tie with non-it companies The company did not disclose operating profit forecasts by segment, but Shared Research assumes the following policies: 1) Ad Platform: While aiming for market share expansion and gross profit maximization, the company will further reinforce demand-side platforms, improve GPM through vertical integration, continue SG&A spending to support sustained growth, and accordingly raise OPM; 2) Point Media: The company looks to complete structural reforms in FY9/18, and achieve profit growth fueled by higher sales from FY9/19; 3) Incubation: The company will increase the number of businesses with growth prospects, and aim to generate operating profit at three businesses being developed in the segment. However, the company only looks for a.2pp increase in OPM to 7.1% in FY9/2 from the 7.% recorded in FY9/17. Shared Research understands this reflects 1) a restructuring-driven decline in GPM in the Point Media segment (JPY3mn cost increase depressing GPM by just over 5pp; equivalent to 1pp decline at the consolidated level), and 2) the need for investment in future growth in the Incubation segment with an eye toward FY9/21 and beyond. Positioning of VOYAGE s Ad Platform business in the online ad market No change to original positioning of FY9/16 FY9/18 as period of investment in future growth; cementing business foundations with an eye toward future operating profit target of above JPY1.bn VOYAGE says it has stepped up investment in growth from FY9/16, and positioned FY9/16 FY9/18 as a period of investment in growth. FY9/18 marks the final year of that period, and the company looks to get back on a growth track from FY9/19. Shared Research understands management sees FY9/18 as a year to cement the foundations that will support the development of a business structure capable of ultimately generating operating profit of over JPY1.bn. The company expects SG&A expenses to increase by JPY1.1bn in FY9/18, representing a.4pp increase in the ratio of SG&A expenses to sales. In addition to regular investment in growth focused on the Ad Platform segment, management also looks to strengthen promotion for new businesses. 2/69

21 LAST UPDATE: Research Report by Shared Research Inc. Investments in future growth and earnings trends FY9/16: The company spent heavily in FY9/16 and operating profit finished the year down 23% (to JPY1.7bn) despite a 17.5% increase in revenue (the fourth consecutive year of double-digit growth). Earnings also took a hit from a mid-year strategy shift at the Ad Platform segment's demand-side business that called for trading off margins for market share, as well as some problems following the upgrade of the website run by the company's Point Media businesses. FY9/17: The initial forecast for FY9/17 called for a 3.3% decline in operating profit to JPY1.2bn reflecting a sharp increase in investments in future growth, most of which was to be booked under SG&A expenses. In April 217, the company revised up its full-year operating forecast to JPY1.8bn to reflect 1H factors such as success with steadily reaping benefits from projects secured during peak advertising demand season, earnings contributions from CMerTV (after conversion into consolidated subsidiary in October 216), and investments in the Incubation segment slipping into the next fiscal year. Operating profit finished in line with the revised target, at JPY1.8bn. In addition, we note that the impact of a review of media clients (gross profit for reviewed clients was JPY6mn in FY9/17) affected roughly 1.5 months in and the full quarter in Q4, as noted above. Factors expected to drive changes in operating profit in FY9/18 3, 2, , 1, , , 5 1,86 Gross profit SG&A expenses 1,2 FY9/17 Operating profit Impact of media reviews Gross profit increase in line with higher sales Point Media restructuring expenses SG&A increase in line with higher sales Increase in promotion spending for new businesses FY9/18 Operating profit Source: Shared Research, based on company data Special factors: review of media clients not factored in as of October 216 (JPY6mn profit decline in FY9/18) Although the competitive landscape has not changed much, we note that the review of media clients (which had not been factored in as of October 216) substantially affected forecasts for FY9/18 and beyond. With the aim of building healthy ad platforms, VOYAGE held a review of some media companies with low advertising efficiency in May, and concurrently rolled out fraudulent ad prevention measures. As a result, supply-side sales and profit declined considerably in the PC market. Of the JPY8.bn in gross profit for FY9/17, JPY6mn (October to mid-may, roughly 7.5 months) was derived from companies subject to the review. Consequently, the review drove a substantial decline in gross profit for 2H, and particularly Q4. As noted below, FY9/18 forecasts call for a 34% YoY decline in operating profit, but after excluding the impact from the review of media companies, the company looks for flat operating profit even after including investments in future growth and restructuring costs. The impact of the review of media clients was a major surprise. Views on GPM In the Ad Platform segment, management believes growth in gross profit can be achieved by pursuing vertical integration (ideal example would be to distribute ads secured via demand-side platforms to media companies using the VOYAGE s supply-side platforms), as discussed below. In FY9/16, GPM for both supply-side and demand-side platforms declined. In FY9/17, the trends for both platforms diverged. In supply-side platforms, impact on gross profit eased after excluding effects from a decline in relatively high-gpm projects due to the review of media companies in May. In demand-side platforms, GPM declined due to the company s late entry compared to other pioneers and the adoption of a strategy focused on market share expansion from FY9/16. Thereafter, however, the company handled a mix of projects (positive and negative) but this did not result in a downtrend in GPM. Shared Research assumes that GPM is lower in the Ad-Tech segment than in the Media segment, and believes that within the Ad-Tech segment, supply-side platforms essentially generate lower GPM than demand-side platforms. Accordingly, a rising share of sales for the Ad-Tech segment in general, or for supply-side platforms within the Ad-Tech segment, tends to depress GPM. In the Incubation segment, e-commerce businesses such as VOYAGE NEXUS (mainly relies on commission income) and ZENOSIS (operates online cosmetics business) have high GPM, and the same applies for VOYAGE SYNC GAMES (game publisher). (However, all of these incur marketing costs.) Accordingly, a rising share of sales for these businesses drives up GPM. 21/69

22 LAST UPDATE: Research Report by Shared Research Inc. Major investments and joint ventures Date Company name Investment Stake Business description Dec 214 MerMedia % Joint venture Plans and operate online content such as Asajikan.jp. Feb 215 intelish 2 51.% Joint venture Plans, develops, and operates a private marketplace centered on premium impressions Apr 215 DO HOUSE % Equity-method affiliate Engages in sampling marketing business Apr 215 Kauli 1,478 1.% Consolidated subsidiary Consolidated in May 215. Merged with fluct in the end of Dec. 215 Jun 215 logly % Equity-method affiliate Operates native adverting platform logly lift Jun 215 Media Vague 49 2.% Equity-method affiliate Operates commuting-related content media such as Traffic News Jul 215 Marketing Applications Stock swap 35.6% Equity-method affiliate Offers market research, marketing applications such as data aggregation and reports Oct 215 GoldSpot Media 1 25.% Equity-method affiliate Offers video ad platform (Apr 216 wholly owned sub; 217 absorption-type merger) Nov 215 coconala - - Investment Operates online marketplace based on knowledge and skill Jan 216 FinTech Lab - - New entity Research and development of innovation applying technology in finance Jan 216 SYNC GAMES 5 2.3% Equity-method affiliate Game-related businesses for smartphone Jan 216 IT Realize - - Investment Operates credit card collective management app CRECO (venture company for fintech) Mar 216 Repro - - Investment Offers marketing tool for mobile phone apps Mar 216 TORICO - - Investment Operates various manga-related services Mar 216 GoldSpot Media 45 1.% Fully-consolidated subsidiary via additional investment Offers video ad platform (Apr 216 wholly owned sub; 217 absorption-type merger) Mar 216 maneo market - - Investment Operates a peer-to-peer lending service (venture company for fintech) May 216 JION - - Investment Operates online media "JION", which provides ideas on adults' lifestyles Jun 216 Umami - - Investment Provides a service for foreign visitors to Japan, including the restaurant app. Umami Jul 216 Fuller - - Investment Provides smartphone apps for companies, developed and operated by the company Jul 216 IROYA - - Investment Apparel IT venture operating IROZA, an e-commerce select shop Jul 216 Momentum 6 2.5% Equity-method affiliate via additional investment Offers tools that block inappropriate ads and protect brands distributing online content Sep 216 CMerTV % Consolidated subsidiary Consolidated in Oct 216. Operates video ad distribution business Sep 216 Credit Engine - - Investment Develops online lending services for SMEs and sole proprietors Dec 216 VOYAGE NEXUS - - New subsidiary Operates online sales business of housework support services, partnering with Kajitaku Jun 217 OMEGA - - Investment Plans, develops, and operates ad network based on proprietary big data technologies Jun 217 The Bridge - - Investment Operates Trip Free, a free SIM card service, for foreign tourists visiting Japan Jul 217 IT Realize - - Investment Operates "Local bank app with CRECO", a package solution for local and shinkin banks Aug 217 AOS Mobile - - Investment Provide B2B mobile communication services including AOSSMS and InCircle Sep 217 Generic Solution - - Investment Sales of GS8, software for information search and machine learning Source: Share Research based on company data *: Sold off. 22/69

23 LAST UPDATE: Research Report by Shared Research Inc. Ad Platform segment 6, 5, 4, 3, 2, 1, 6, 5, 4, 3, 2, 1, -1, 13.7% 1, FY9/14 1, ,3 FY9/ % 2, % 1, % 2,11 Source: Share Research based on company data 15.3% 15.2% 3, % 12.1% 11.% 3,129 2,874 2,459 2, % 2,342 2, Q2 Q4 FY9/15 2, ,364 1,285 1,384 Sales Operating profit OPM (right axis) Q2 Q4 FY9/ ,725 1,81 1,742 1,55 1,824 1,939 5.% 3, % ,495 4, % 1.7% Q2 Q4 FY9/17 Supply-side Demand-side Other Eliminations YoY (right axis) 1,854 2,11 2,459 2,533 Q2 Q4 FY9/15 2,342 2,497 2,874 Q2 Q4 FY9/16 3,264 3,129 1,25 1,48 2,243 2,281 3,764 1, ,848 2,745 2,963 3,155 Q2 Q4 FY9/17 4,395 4,46 5.9% 4.3% Q2 Q4 4,495 4,964 4,395 4,46 2,131 2, 2,226 2,718 2,66 Q2 Q4 24% 2% 16% 12% 8% 4% % 12% 1% 8% 6% 4% 2% % -2% Overview The main growth driver at the company's Ad Platform business thus far has been fluct, a supply-side platform service that serves the needs of both the PC and smartphone-based markets. However, since FY9/16 the company has been rapidly ramping up demand-side platform services such as Zucks Ad Network, which specializes in smartphone advertising. The current medium-term targets call for FY9/2 sales of JPY3.bn (average annual growth rate of 17.9% versus sales of JPY18.3bn in FY9/17), and the company looks for contributions from demand-side platforms centered on Zucks Ad Network. While the platform market in the programmatic advertising sector is becoming increasingly polarized, VOYAGE s SSP fluct and ad network Zucks Ad Network have emerged as winners, and the company intends to strengthen the competitiveness of its platforms with the aim of further expanding market share and sales. Rather than relying on clever schemes, VOYAGE will implement a more conventional strategy. By enhancing its platforms and strengthening development, sales, and proposal capabilities, the company plans to expand its lead over rivals. It aims to formulate and steadily implement strategies for each platform. Specific initiatives include: a) enhancing platform capabilities, including measures to handle new ad delivery formats and devices, and improve algorithms for ad delivery that will make better use of available data; b) at its supply-side platform business (fluct), stepping up development of new app media, strengthening relations with large media operators, and increasing its share of all ad bookings done by existing customers; c) at its demand-side platform business (Zucks Ad Network), expanding joint initiatives with group companies in the areas of sales, development, and media development to increase the group's customer base and spend per customer; d) at CMerTV, making greater use of ties with other group companies to enhance independent content distribution capabilities, increase average spend per customer, and increase repeat business. In addition, management has apparently made no changes to its basic policy as of October 216 (see box below). Below, we outline the company s thinking on supply-side and demand-side platforms. As of October 216, the company's core plans at its Ad Platform business include: 1) in the supply-side platform market, expanding market share and increasing its average price for ads by moving more into premium ads and video ads; 2) in the demand-side platform market, continuing current efforts 23/69

24 LAST UPDATE: Research Report by Shared Research Inc. to expand market share, and toward this end, investing heavily to develop new services and features; 3) on the M&A front, holding off on major acquisitions and focusing instead on building a solid base for growth at the companies acquired during FY9/15 and FY9/16; 4) on the earnings front, improving profitability over the medium/long term by strengthening the ties between its supply-side and demand-side platform businesses and increasing its GPM, which now appears to have bottomed out in both areas; and 5) pushing ahead with vertical integration of its businesses in the programmatic advertising market. Key words the company is using to describe its push in areas targeted for expansion are "demand side," "video," and "big data." Growth strategy for Ad Platform business (as of October 216) Note: Imp refers to number of impressions Supply-side platform services Targets market share expansion and maximization of gross profit On the supply side, the company plans to continue focusing its efforts on expanding its market share and maximizing gross profit with fluct, its supply-side platform service. Fluct's 3% market share makes VOYAGE one of the largest providers in the SSP market but the company still has its sights set on being in an even more dominant number-one position. As before, the company is eying expansion of services that maximize ad revenues for its clients (media companies) in the online advertising market and also plans to move into general consulting that would include other areas outside of SSP services. Expectations for new development of app media VOYAGE has been expanding the number of client media companies for PC websites, mobile websites, and smartphone applications, but its market share for smartphone applications is relatively small. Shared Research believes the company intends to strengthen new development of app media while increasing its market share in each existing media. Focus on synergies with CMerTV An increase in market share can be expressed in the following equation: (Number of impressions) X (ad price) X (advertising space utilization rate). The KPI the company is focusing on right now is the ad price and that is why it is moving toward higher-priced video ads and premium ads. As a supply-side platform provider looking to run higher-priced ads, it is more important for VOYAGE to have a larger proportion of its own ad inventory consist of higher-priced ads than it is to have connections with more demand-side platforms. Video ads are more expensive than typical display ads. This means the acquisition of CMerTV in October 216 (discussed in detail later in this report), even though it is a demand-side platform provider, should be able to help out VOYAGE's supply-side platform business by helping it establish relationships with large Japanese clients and expand its ad inventory. Video ads VOYAGE in October 215 acquired 1 shares (a 25% stake) in GoldSpot Media, Inc. (GSM), making it an equity-method affiliate. In March 216, VOYAGE acquired the remaining shares in GoldSpot and made it a wholly owned subsidiary. As a supply-side platform provider, GoldSpot operates rich media and video ad creation and distribution platforms, and provides services to a broad range of Japanese clients, including automobile and consumer goods companies. In October 217, GoldSpot was integrated into VOYAGE subsidiary fluct through an absorption-type merger with the aim of further strengthening its video ad functions. Video ad distribution via VOYAGE distribution network 24/69

25 LAST UPDATE: Research Report by Shared Research Inc. Through this move, VOYAGE intends to obtain media through which its SSP service fluct will be able to provide video advertising, garner more video advertising deals through (demand-side platform providers) Zucks Ad Network and fluct Direct Reach, strengthen its competitive advantage as an advertising platform by running it on the company s distribution network, and provide increased added value. Then in September 216, CMerTV joined VOYAGE group as a consolidated subsidiary. CMerTV operates its own video ad platform. CMerTV is led by Akira Igarashi. Having worked for several mass media companies himself, Mr. Igarashi is said to be a match for even Japan's large ad agencies when it comes to winning accounts from Japanese clients. As he is expected to help VOYAGE overcome the previous hurdles it faced in establishing relationships with Japanese clients, VOYAGE views its acquisition of CMerTV as a large step on the path toward a larger share of the video ad market. The combination of the strengths of supply-side platform fluct in distribution and the strengths of demand-side platform CMerTV in ad acquisition is expected to generate significant synergies for VOYAGE in the video ad market. In June 217, CMerTV officially launched BEAUTINISTA TV as a new service. CMerTV leveraged the six years of expertise accumulated since its founding into BEAUTINISTA TV, and established a business structure that integrates production and sales, covering all aspects from infrastructure development to display equipment, program content production, and ad space sales. On September 26, 216, the company announced that it would acquire shares in CMerTV, which operates a video ad distribution business (stake: 58.39% of issued shares; JPY68mn), and make it a consolidated subsidiary. The acquisition, effective October 3, 216, contributed to VOYAGE s FY9/17 results and is anticipated to boost medium- to long-term earnings. Video ad market: According to a CyberAgent study, Japan s video ad market expanded 62% YoY to JPY5.6bn in 215 and another 57% to JPY84.2bn in 216. In 222, it s expected to reach just below JPY3.bn. CMerTV develops platforms to distribute online video ads. It has been incorporating TV commercial advertisers views in its development since its establishment at the start of the video ad era, while remaining aware of the copyrights of advertising materials in its initiatives. VOYAGE commented that CMerTV has a solid track record of doing business with Japanese clients, with a major auto brand as its first client, and it has been well received as a distributor of brand video ads adapted to the mobile device era. In the video advertising market, ads for PC and smartphones are expected to grow. Currently, the market is dominated by major media players. Although in-stream advertising by YouTube, etc. (about 5% in 216 according to a CyberAgent study) is the mainstream delivery format at present, in-feed advertising by social media companies, e.g., Facebook and Twitter (just over 2%) has expanded rapidly at a pace of 2.5x YoY to JPY19.7bn and is projected to reach over JPY1.bn in 222. However, Shared Research thinks that VOYAGE s market position will be leveraged if and when video advertising becomes spread in general media. The company also anticipates an increase in its average price per ad and a higher gross margin resulting from growth in its video advertising operations. CMerTV: sales and earnings FY3/14 FY3/15 FY3/16 FY3/14 FY3/15 FY3/16 Sales Net assets Operating profit Total assets Recurring profit Net asset per share (JPY) 3,248 3,56 3,863 Net income Earnings per share (JPY) Source: Shared Research, based on company data Domestic video advertising market (JPYbn) In-stream advertising In-feed advertising In-banner advertising Others (JPYbn) PC advertising Smartphone advertising CY14 CY15 CY16 CY17 CY18 CY19 CY2 CY21 CY22 CY14 CY15 CY16 CY17 CY18 CY19 CY2 CY21 CY22 Source: Shared Research, based on the November 9, 216 press release by Ad-Tech STUDIO (Cyber Agent, Inc.) 25/69

26 LAST UPDATE: Research Report by Shared Research Inc. Revenues from SSP services (JPYmn, impressions in 1mn) 12% SSP (smartphone) SSP(PC) YoY (smartphone, left axis) YoY (PC, left axis) 3,155 1% 2,962 8% 2,744 2, ,66 2,231 6% 2, % 1,724 1,81 1,75 1,912 1, % 1,364 1,284 1, ,29 % ,196 1,281 1,211 1,287 1,319 1,596 1,681 1,937 2,89 2,322 2,124 2, % % % Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 FY9/12 FY9/13 FY9/14 FY9/15 FY9/16 FY9/17 (bn) FY9/12 Number of impressions FY9/13 Source: Shared Research, based on company data YoY (right axis) FY9/ % FY9/15 34.% 21.9% % 4.4% 7.2% FY9/ % 35.5% 31.8% FY9/17 2.1% 8.5% % 3,6 3,2 2,8 2,4 2, 1,6 1, % 8% 6% 4% 2% % Demand-side platform services Zucks Ad Network to focus on performance-based ads, CMerTV to strengthen digital signage and other independent content distribution VOYAGE aims to expand demand-side platforms centered on Zucks Ad Network and CMerTV. Zucks Ad Network accounts for a large portion of sales and is expected to deliver strong growth going forward, so management sees Zucks Ad Network becoming a driver of sales growth. VOYAGE believes that, despite being a late entrant, Zucks Ad Network has exhibited strong growth relative to major competitors such as nend and i-mobile. It attributes this mainly to 1) fast market growth in the performance-based ad market which requires a greater degree of cost-effective advertising and results, and 2) efforts to strengthen Zucks Ad Network as a platform of choice for advertisers and agencies of performance-based ads. CMerTV distributes brand video ads to premium media, and intends to strengthen its digital signage and other independent content distribution to support diversification. Shared Research understands this will support stronger relationships with advertisers (provision of media that matches the needs of advertisers), enhance spend per customer, and increase repeat business. As part of this effort, CMerTV officially launched BEAUTINISTA TV in June 217, as a new service that will distribute beauty salon-related video ads to tablets installed in major beauty salon chains. CMerTV leveraged the six years of expertise accumulated since its founding into BEAUTINISTA TV, and established a business structure that integrates production and sales, covering all aspects from infrastructure development to display equipment, program production, and ad space sales. Going forward, the company intends to create similar independent distribution networks. CMerTV s strengths: Most of the ads CMerTV's proposes to ad sponsors are video ads that are like TV commercials, so it is very proficient when it comes to securing the necessary permission to use copyrighted video content. CMerTV has also worked with more than 1 national brands and has experience dealing with newspapers, magazines, and other premium media. It aims to set up a system that prevents inappropriate distribution, and deliver video ads that are fully viewed based on an understanding of the viewer environment and attitudes. 26/69

27 LAST UPDATE: Research Report by Shared Research Inc. Vertical integration Advertising revenues: from advertiser to publisher Agency DSP, ADNW Zucks AdNW 1 Ads SSP SSP sales Publisher (media) VOYAGE media The company has also not made any changes with respect to its vertical integration strategy. In the value chain from online ad media companies to agencies, VOYAGE aims to improve GPM while vertically integrating its businesses by providing services other than SSP and the ad network. The company already owns Zucks Ad Network, which distributes smartphone app ads, and represents the advertisers side, not the SSP side. A large portion of demand side clients seem to be related to video games, but the scope of clients is expanding, and the company is steadily increasing sales by continuing to win orders for large projects. Even if GPM for each platform declines, the pursuit of vertical integration will allow VOYAGE to increase GPM per ad. OPM in the Ad Platform segment declined to 8. % in FY9/17, but the company believes it can bring it back to over 1% going forward by pursuing vertical integration while continuing to invest in human resources with an eye toward growth. Market overview According to ad agency Dentsu Inc. (TSE1: 4324), domestic online publishers generated JPY1.3tn from selling advertising space in 216, up 13% YoY. Optimized advertising (VOYAGE s Ad Platform segment is in this category) has exhibited rapid growth, rising 22% YoY in 215, to JPY622.6bn, and 19% in 216, to JPY738.3bn. Market size / sales Growth rate (JPYbn) CY11 CY12 CY13 CY14 CY15 CY16 CY12 CY13 CY14 CY15 CY16 Online advertising market (publishers' fees; per Dentsu) ,52 1,159 1,31 8% 8% 12% 1% 13% Publishers' fees (selling advertising space) % -1% 3% -1% 7% Publishers' fees (optimized advertising) % 22% 24% 22% 19% Ads using ad-tech market (per AdTech Studio and Seed Planning) % 41% Via ad networks % 46% Via RTB % 28% VOYAGE Ad-Tech sales (SSP, ad network, performance-based advertising) % 53% Supply side % 4% Demand side % 84%, Dentsu, Inc., Ad-Tech STUDIO (Cyber Agent, Inc.) Point Media segment outlook Segment earnings performance 1,8 1,6 1,4 1,2 1, % 1,463 1, % FY9/14 1,392 1,38 1, % 11.2% 12.3% Sales Operating profit OPM (right axis) 16.5% 1,597 1, % 1,426 1,463 1, % 1,419 1, % 1.6% Q2 Q4 FY9/ Q2 Q4 FY9/16 8.2% 7.3% 1, % 1, % Q2 Q4 FY9/17 1,356 1, % 4.2% Q2 Q4 18% 16% 14% 12% 1% 8% 6% 4% 2% % 27/69

28 LAST UPDATE: Research Report by Shared Research Inc. Plans drastic structural reforms in FY9/18 to pave the way for renewed growth For its Point Media business, the company is targeting FY9/2 sales of JPY8.bn; this represents average annual growth of 11.7% versus sales of JPY5.7bn in FY9/17. To achieve this target, the company is counting on structural reforms to get growth back on track. Reforms include shifting toward smartphone media, reviewing its point redemption program to better fit smartphone users, and cutting costs. The Point Media segment consists of all of the company's in-house reward points-related media businesses (EC Navi, PeX, Research Panel, etc.) that were under the old Media segment in FY9/17. When initially launched, these in-house media businesses were geared toward the PC market, and the company has thus far worked to maximize revenues by focusing on characteristics of PC users. More recent efforts to support smartphones have brought up the number of active smartphone users to roughly one third of PC users. However, the revenue per user is still only roughly 4% of PC counterparts, and an increase in the number of smartphone users will therefore present problems for ARPU growth. VOYAGE attributes this to 1) its point redemption rate being low relative to competitors because it was set with PC user characteristics in mind (steady approach of responding to surveys on a daily basis and other similar activities), and 2) smartphone users typically focusing on point redemption accompanying purchases. As part of drastic restructuring measures in FY9/18, the company will push for a) an increase in the point redemption rate, and b) a personnel transfer to other businesses. The company forecasts a JPY3mn increase in CoGS, mainly reflecting a rise in the point redemption rate (equivalent to a 5.3pp increase in the ratio of CoGS to sales), and this will have a major impact on OPM. It plans to raise the point redemption rate in FY9/18, and expects sales to grow following changes in user behavior. Based on smartphone user trends, FY9/18 sales remain unchanged YoY, but the company forecasts an acceleration in sales growth in FY9/19 and FY9/2. It has increased the number of awarded points accompanying purchases from the start of FY9/18 (Yahoo! Japan Shopping: up from 4 points to 1 points per JPY1 [equivalent to JPY1]). At the briefing held on October 25, 217, management said it had the impression that changes in user behavior will be contributing to sales growth. The company views its outstanding loyalty points (JPY2.8bn at end-fy9/17) as a major asset and is looking at ways to effectively utilize this asset. Shared Research will monitor the situation, including forays into FinTech. Incubation segment outlook Segment sales (left) and operating profit (right) FY9/15 FY9/16 FY9/17 FY9/14 Advancing Other Withdrawn FY9/ FY9/ Advancing Other Withdrawn FY9/ FY9/ Establishing third growth area (Incubation business) The Incubation segment was established in FY9/17, and includes the new businesses VOYAGE is fostering in the hope that they will be major earnings pillars in the future. At the very least, the company would like to see one or two of these businesses grow into major sources of earnings in the next 5-1 years and, toward this end, it has stepped up spending in this area from FY9/16. With the medium-term targets, the company is further expanding the areas to be advanced under the Incubation business, and looks for FY9/2 sales of JPY4.bn; this represents an average annual growth of 24.3% versus sales of JPY2.1bn in FY9/17. The growth is expected to come from areas where the company is currently expanding its presence HR-related businesses, 28/69

29 LAST UPDATE: Research Report by Shared Research Inc. e-commerce, and FinTech by spending heavily on business development and promotion. The company is also contemplating making use of its expertise in web-related fields to strength alliances with companies outside of the IT industry. VOYAGE aims to establish a third growth area, and apparently intends to bring at least three businesses under the Incubation segment to profitability by FY9/2, the year that coincides with the medium-term targets. Specific areas where the company is forecasting sales growth include 1) human resources, where subsidiary Supporterz runs a business providing support for companies looking to hire new college graduates; 2) e-commerce, where subsidiary VOYAGE NEXUS conducts online sales of household support services and subsidiary ZENOSIS operates a single-product online business; and 3) video game publishing. In the area of human resources, subsidiary Supporterz is the heart of the company's business. Supporterz specializes in finding college and graduate students majoring in science and technology at regional universities in support of companies looking to hire new graduates for engineering jobs. Supporterz has already placed new grads with more than 3 different companies. Having built a solid earnings structure, Supporterz is generating steady profits. Going forward, it will strengthen hiring operations for mid-career employees, and look for corresponding earnings growth (roughly JPY4mn in FY9/17). In the field of e-commerce, VOYAGE holds high expectations for subsidiary VOYAGE NEXUS, which conducts online sales of household support services. VOYAGE NEXUS is a tie-up with Kajitaku Co., Ltd., an Aeon Delight (TSE: 9787) subsidiary. It serves as an online sales channel for Kajitaku, and started operations in October 217. Relying on commission fees as its principle source of revenue, it has a GPM of 1% and its SG&A expenses mainly consist of personnel and advertising costs. Management plans aggressive spending on advertising in FY9/18 as an investment in future growth. In addition, subsidiary ZENOSIS runs an online business specializing in cosmetics or, more specifically, ViTAKT brand skincare products. In order to increase sales under its regular buyer program, which charges an introductory price of JPY1,8 for the first bottle and JPY8,3 thereafter (with one bottle every two months), the company is planning to put more money into advertising its products. In the area of FinTech, the company apparently plans to step up in-house development work and related investment spending, but has not factored this into its medium-term targets. Although the company has not positioned the game publishing business (games not developed in-house) as a field to advance, it intends to invest in related advertising cost as deemed appropriate. VOYAGE s strength in this field lies in leveraging its ad platforms and serving ads based on precise media and content (with costs being offset on a consolidated basis). 29/69

30 LAST UPDATE: Research Report by Shared Research Inc. Business, market and value chain Business overview Change is the only constant VOYAGE is an internet service developer. Its businesses have evolved since its founding in 1999, as the company responds to changes in markets and customer demand. Spurred by rapid growth in the programmatic market for online advertising, earnings at VOYAGE have been driven by its advertising platform services for users both on the supply side (i.e., the media side), where its platform enables web publishers to maximize earnings from online advertising, as well as on the demand side (i.e., advertisers). Sales and operating profit 3, 25, 2, 15, 1, 5, -5, 3, 25, 2, 15, 1, 5, -5, 9,858 7,324 7,928 8,139 5, ,532 2,157 2,55 2,846 3, Founding and first growth phase ( ) Sales Operating profit OPM (right axis) Operated a free gift website and aimed for sales of JPY1bn with various media When established, VOYAGE operated MyID, a website that compiled information on online promotional campaigns. After being considered for acquisition by multiple major online companies, it became a subsidiary of CyberAgent, Inc. (TSE1: 4751) in 21 (with a 72.7% stake as of May 212). VOYAGE saw limited growth potential in the free-gift promotional website model used for MyID, so began expanding horizontally, creating different media in a bid to achieve sales of JPY1bn. 15,222 17,73 2,842 25,895 28,518 1,949 2,238 1,721 1,86 1,42 FY9/99 FY9/ FY9/1 FY9/2 FY9/3 FY9/4 FY9/5 FY9/6 FY9/7 FY9/8 FY9/9 FY9/1 FY9/11 FY9/12 FY9/13 FY9/14 FY9/15 FY9/16 FY9/17 FY9/18 9, ,532 2,157 2,55 2,846 3,736 5,386 7,324 7,928 8, FY6 / FY6 /1 FY6 /2 Sales Operating profit OPM (right axis) FY6 /3 FY6 /4 FY6 /5 FY9 /5 FY9 /6 FY9 /7 FY9 /8 FY9 /9 FY9 /1 FY9 /11 FY9 /12 FY9 /13 2,842 17,73 15,222 25,895 1,949 2,238 1,721 1,86 FY9 /14 FY9 /15 FY9 /16 FY9 /17 25% 2% 15% 1% 5% % -5% 25% 2% 15% 1% 5% % -5% Launched price-comparison website EC Navi in July 24 Sales had grown to JPY2.2bn by FY6/5, but the company thought it was unlikely to generate sales of JPY1bn from multiple small-scale media (such as 2 small media, with each generating revenue of JPY5mn). So it shifted its focus to just growing core media. As the user base for free-gift promotional websites like MyID had limited appeal for advertisers, the company thought it would be difficult to make this its core media. So in July 24, the company launched EC Navi, an overhauled version of MyID. Restructuring (25 211) Launched search syndication business The company entered the price comparison and e-commerce product search market, which was dominated by Kakaku.com, Inc. (TSE1: 2371). Although weaker competitors were being weeded out, VOYAGE aimed to gain a competitive edge by using a crawler-based search engine. It managed to grow earnings through 26, which also meant its organization swelled. In response, 3/69

31 LAST UPDATE: Research Report by Shared Research Inc. management split the company into different divisions. Management also established new businesses, including search syndication Ad-Tech segment s precursor. Search syndication drives earnings VOYAGE generated advertising revenue from EC Navi by displaying keyword-targeted ads (search advertising) alongside search results from a customized Yahoo Search box. In 27, VOYAGE teamed up with Overture Services, Inc. (acquired by Yahoo! Inc. [NASDAQ: YHOO] in 29) to offer consulting services for publishers looking to put this type of advertising on their media. The business grew, and in 28 VOYAGE established adingo, a wholly owned subsidiary, and reported annual sales of almost JPY3bn. Collapse of search syndication business model In July 21, Yahoo! JAPAN Corp (TSE1: 4689) announced that its search engine and search advertising would henceforth be powered by Google Inc. (NASDAQ: GOOGL) systems, spelling the end for VOYAGE s search syndication business, which it had operated in partnership with Yahoo!. This was a critical moment for VOYAGE: a business that had generated JPY562mn in operating profit (FY9/1) and more than JPY1bn in gross profit would cease to exist within a few years. Second growth phase (212 onward) Supply-side platform (SSP) fluct The company developed fluct, a supply side platform (SSP), in a bid to recover earnings lost from the end of the search syndication business. Launched in October 21, fluct gives publishers control over their impressions, allowing them to maximize advertising revenues. Overall sales growth was weak in FY9/11 and FY9/12 because increasing fluct sales overlapped with declining search syndication sales. Since then, earnings have been driven by both reward point media such as EC Navi, and ad platforms such as fluct and Zucks (established in April 211 to offer advertising services for smartphones). In addition, the company added the Incubation segment in FY9/17, and aims to develop it into a third growth area. For an overview of present conditions in the new segment, see the Medium-term outlook section. Group structure VOYAGE GROUP: consolidated management, with different company for each business Speed up decision-making and develop businesses under a united Group strategy VOYAGE GROUP consists of the parent company, 14 consolidated subsidiaries, and 8 equity-method affiliates, as of the end of FY9/17. It plans to establish a subsidiary for each business, while managing the group as a whole. The aim is to establish lines of responsibility for each business and speed up decision-making, while at the same time consolidating group governance at the parent company, ensuring that all group companies are working in synch. Looking to form a tight-knit team with shared values and goals, continue to delegate decision-making authority Starting in FY9/17, the company is looking to redefine its group concept, moving away from being merely a collection of consolidated subsidiaries toward a tight-knit team with common goals and values maintain the existing autonomous business units and subsidiaries while delegating more decision-making authority 31/69

32 LAST UPDATE: Research Report by Shared Research Inc. Business structure Subsidiary overview by segment (as of September 3, 218) Ad Platform Point Media Incubation Equity-method affiliates Main subsidiary Stake Established description CMerTV 53.6% Jul 211 Operates video ad platform CMerTV fluct 1.% Jun 28 Operates fluct (SSP); formerly adingo Zucks 1.% Apr 211 Operates Zucks Ad Network, and Zucks Affiliate (performance-based advertising) VOYAGE MARKETING 1.% Jan 27 Operates PeX (website for loyalty points exchange); offer point-related solutions Research Panel 6.% Nov 25 Operates Research Panel (website to participate in questionnaires) VOYAGE NEXUS 1.% Dec 216 Online sales of housework support services VOYAGE VENTURES 1.% Mar 211 Offers support for startups Supporterz 1.% Apr 212 Operates new graduate recruitment services Zenosis 1.% Feb 215 Operates online sales of cosmetics MerMedia 65.% Dec 214 Plans and operates content media such as asajikan.jp (morning hour lifestyle proposals) VOYAGE GAMES 1.% Nov 217 Operates game marketing business VOYAGE Lighthouse Studio 1.% Nov 217 Operates media business cosoral 1.% Feb 218 Provides online services to support child-rearing Furusato Honpo 1.% Feb 218 Operates a portal site for local specialties and hometown tax donation Main affiliates Stake Invested Ventny, Inc. 37.2% May 215 Social lending service for employees in emerging countries Do House 21.8% Apr 215 Operates sampling marketing business Marketing Applications 2.1% Dec 213 Offers marketing-related applications such as market research, data aggregation, and report writing mediavague 26.7% Jun 215 Operates commuter-related contents media such as Norimono News C-POT 3.% Jan 218 Develops businesses leveraging publisher's content SelvasM. Inc. 29.9% Jan 218 Operates mobile game business for overseas users Countir Bank 39.% Dec 217 Operates business related to cryptocurrency Segments VOYAGE has three segments: Ad Platform, Point Media, and Incubation. The company's Ad Platform business uses the latest internet advertising technology in its supply-side platform, which helps internet media companies (i.e., website operators such as Yahoo!) maximize the earnings from their advertising space. The company's Ad Platform business also offers a demand-side platform for advertisers that enables them to manage their online ads and maximize ad effectiveness. The Point Media segment operates rewards website EC Navi. The Incubation segment is where VOYAGE is focusing on creating new business that will drive future growth. FY9/18: Sales (left) and operating profit (right) breakdown by segment Incubation 2,592 9% Incubation % Point Media 6,87 24% Ad Platform 19,26 67% Point Media 33 17% Ad Platform 1,293 73% 32/69

33 LAST UPDATE: Research Report by Shared Research Inc. Quarterly earnings trends (top: sales, bottom: operating profit; JPYmn) 8, 7, 6, 5, 4, 3, 2, 1, -1, ,524 1,463 4,52 1,558 3,749 3,896 1,392 1,38 4,423 4,59 1,432 1,526 1,647 2,53 1,854 2,11 2,459 2,533 2,342 2,497 2,874 3,264 3,129 FY9/ FY9/14 Q2 Q4 FY9/ Ad Platform Point Media Incubation Eliminations YoY (right axis) Q2 Q4 FY9/15 4,283 4,433 1,426 1,463 4,988 1,597 Q2 Q4 FY9/ , ,94 1,495 1,419 5,685 1,42 3,764 6,573 1,535 Q2 Q4 FY9/ ,871 1,476 6,198 6,253 1,356 1,378 6,799 1,542 7,556 2,166 6,918 1,522 7,245 1,64 4,495 4,964 4,395 4,46 4,635 4,847 4,737 5, Q2 Q4 FY9/18 Ad Platform Point Media Incubation OPM (right axis) Q2 Q4 FY9/ Q2 Q4 FY9/ Q2 Q4 FY9/18 Q2 Q Q2 Q4 8% 7% 6% 5% 4% 3% 2% 1% % -1% 16% 14% 12% 1% 8% 6% 4% 2% % -2% 33/69

34 LAST UPDATE: Research Report by Shared Research Inc. Business segments Ad Platform segment (formerly Ad-Tech segment) Earnings performance Sales Operating profit OPM (right axis) 6, 5, 18.4% 4,964 4,847 5,41 4,495 4,395 4,46 4,635 4, % 15.2% 4, 3, % 13.% 3,264 3, % 1.4% 12.1% 11.% 2, % 1.7% 3, 2,459 2, % 2,53 2,342 2,497 1,854 2,11 7.8% 1, % 8.4% 2, 5.9% 6.4% 5.% 5.3% 4.3% 1, Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 FY9/14 FY9/15 FY9/16 FY9/17 FY9/18 24% 2% 16% 12% 8% 4% % Source: Shared Research, based on company data Ad Platform segment drives earnings VOYAGE is an internet service developer. Its businesses have evolved since its founding in 1999 as the company has responded to changes in the market and customer demand. Spurred by rapid growth in the programmatic market for online advertising, growth at VOYAGE in recent years has been driven by its advertising platform services for users on the supply side (i.e., the internet media side), where the platform enables web publishers to maximize the earnings from their advertising space, as well as services for users on the demand side (i.e., advertisers). The programmatic market: The system of real-time bidding (RTB), where ads are selected using real-time auctions for each ad impression. The ad with the highest bid is distributed to the impression. The price paid, however, is the second-highest bid from the auction. The publisher can also set a price floor the transaction doesn t take place if the highest bid is still below the price floor. Where to set the price floor is an important component of the supply side/publisher s strategy. The market automates the buying of display, native, and video ads through channels such as ad networks and RTB/DSPs. Supply-side platform (SSP): A platform for maximizing online publishers advertising revenues. These platforms connect to multiple ad networks, demand-side platforms (DSPs), and ad exchanges, delivering the most appropriate and profitable ads to impressions. Plus, they reduce publishers operational costs by consolidating advertising management and distribution. Different SSPs offer different distribution systems and analysis. VOYAGE s SSP, fluct, stands out by also functioning as an ad server for manual, human-controlled advertising. Fluct is also a cross-device platform, supplying impressions for advertising on PCs and mobile devices such as smartphones. Helping online publishers maximize advertising revenues The Ad Platform business offers tools to help online publishers (supply-side companies) such as Yahoo! maximize advertising revenue. In this segment, the company takes the perspective of the supply side (online publishers), who want to maximize ad revenue, not advertisers (such as game developers), who are trying to maximize the cost-effectiveness of ads. SSP market leader for PC advertising with a 3% share but lagging behind smartphone pioneers VOYAGE provides an SSP for PC and smartphone publishers to maximize ad revenue. For the demand side, the company offers services such as Zucks Ad Network for smartphone advertising and Zucks Affiliate, performance-based advertising services for apps and websites. The company estimates its share of the SSP market at roughly 3% (as of September 217). A late entrant, the company s smartphone ad network lags behind nend, which is the industry pioneer, but it has continued to deliver high growth by leveraging its strength in performance-based advertising services. In addition, we note that VOYAGE conducted a review of media clients in May 217, which resulted in a drop in sales and gross profit for SSP services for PC advertising. Review of media clients: With the aim of building healthy ad platforms, VOYAGE held a review of some media companies with low advertising efficiency in May, and concurrently rolled out fraudulent ad prevention measures. As a result, supply-side sales and profit declined substantially in the PC market. Of the JPY8.bn in gross profit for FY9/17, JPY6mn (October to mid-may, roughly 7.5 months) was derived from companies subject to the review. As a result, the review led to a considerable decline in gross profit for 2H, and particularly Q4. 34/69

35 LAST UPDATE: Research Report by Shared Research Inc. VOYAGE s position in the online advertising market Real-time bidding for online advertising VOYAGE focuses on online advertising, such as the banner ads that appear on the top right of the Yahoo! Japan homepage. (Yahoo! is a heavyweight in Japan, with an average of 6.6bn page views per month between October and December 214.) As described below, the company s SSP technology comes into play during the.1 seconds that it takes for an advert to display in that space. The process until an ad is displayed in a certain space, using SSP An ad impression becomes available: a user visits a website via PC internet browser, providing an opportunity for an impression to load in an advertising space (impression refers to the display of an advert). Invitation to a real-time auction for the impression: the SSP distributes information to demand-side platforms (DSPs), including data on the user such as search and browsing history and the size of the advertising space. Advertisers compete to join the auction: the DSPs calculate optimum bids per instructions from each advertiser, select the participants in the auction, and present them to the SSP. Auction begins: the SSP selects the winning advertiser based on the bids submitted by the DSPs. Successful auction: the SSP checks the winning bid against the price floor set by the publisher. Assuming the bid is higher than the price floor, the winning ad will be displayed (the second-price auction system is used, were the winning bidder effectively pays the price of the second-highest bid). Or, incomplete auction: if the winning bid is lower than the price floor, an advert from an advertising network connected to the SSP will be displayed instead. In such cases, impressions are often sold at fixed rates. Demand-side platform (DSP): DSPs are like SSPs for advertisers, instead of publishers, helping them maximize ads cost-effectiveness. DSPs facilitate real-time bidding (RTB) by consolidating access to a range of ad networks and SSPs. They also analyze vast amounts of data to maximize ads effectiveness. Second-price auction: the bidder with the highest bid wins the auction, but the price paid is that of the second-highest bid. This type of auction is said to result in higher prices overall. Advertising spaces and fees Publishers sell impressions to advertisers Publishers VOYAGE s clients pocket what remains of advertising revenues after subtracting ad agency commissions and fees for DSPs, ad networks, and SSPs. 35/69

36 LAST UPDATE: Research Report by Shared Research Inc. Advertising revenues: from advertiser to publisher Agency DSP, ADNW Zucks AdNW 1 Ads SSP SSP sales Publisher (media) VOYAGE media SSPs to maximize publishers revenues; DSPs to maximize advertisers cost-effectiveness DSPs and SSPs have competing aims in the real-time bidding (RTB) process. DSPs work on advertisers behalf to place ads cheaply and effectively; SSPs try to maximize publishers advertising revenues. The outcome depends on the ad and advertising space, and the connections on each side. Connections to leading ad networks such as Yahoo Display Network and Google Display Network are essential for DSPs, as is the capacity to sell directly to advertisers. Connecting to more networks also enables SSPs to sell more inventory and may result in higher prices. Generating higher GPM from SSPs and gross profit through other processes DSP providers take a higher share of advertising fees than SSP providers. But VOYAGE intends to boost GPM by taking more gross profit from both ad networks and SSPs. It plans to do so by growing the Zucks Ad Network for smartphone advertising, a market where real-time bidding (RTB) has yet to fully take off. Prior to RTB, SSPs, and DSPs Online advertising existed prior to the introduction of SSPs, DSPs, and RTB. Even today, not all ads are bought and sold this way. Advertising on smartphones is mostly through ad networks. This is because advertising on smartphones is dominated by certain sectors, such as video game companies. The number of advertisers is also limited, and major ad networks exert influence. Online ad market Japan The domestic online advertising market continues to grow rapidly, even as the TV and print advertising markets struggle. In 216, the online advertising market grew by 13% YoY, to JPY1.3tn, according to ad agency Dentsu, Inc. (TSE1: 4324). Optimized advertising using the ad technology mentioned above grew by 19% YoY to JPY738.3bn, continuing a stretch of growth of about 2%. Domestic online advertising fees (JPYbn) Display ads Keyword-targeted ads Publishers' fees (ad space) Publishers' fees (optimized ads) Ad production costs Online advertising market 1, , , CY1 CY1 CY2 CY3 CY4 CY5 CY6 CY7 CY8 CY9 CY1 CY11 CY12 CY13 CY14 CY15 CY16 CY17 Source: Shared Research based on Dentsu, Inc. materials Programmatic market estimated at JPY225.bn (up 2% YoY) in 215 From around 211, demand for smartphone ads in the programmatic market (the system of real-time bidding (RTB), where ads are selected using real-time auctions for each ad impression) have been replacing PC ad demand, driving market growth. 36/69

37 LAST UPDATE: Research Report by Shared Research Inc. According to the survey, the market was expected to expand to JPY225.bn (up 19.6% YoY) in 215: JPY11.5bn (up 3.2% YoY) from PCs and JPY123.5bn (up 37.5% YoY) from smartphones. Programmatic market size estimates Source: Shared Research based on company materials Total SPP ad transaction value increases steadily with programmatic market expansion SSPs have spread steadily in the past few years in line with diversifying distribution of online ads and increased demand from media companies for efficient online ad operation. Recently SSP services are even being offered to major overseas operators. Led by major operators, the market is being realigned because of rising competition. The total value of SSP ad transactions has continued to increase as the programmatic market expands, and ad deliveries are received from multiple channels such as DSP and ad networks. For 218, the survey projects total SSP ad transaction value in the programmatic market at JPY43.4bn. This is due to expectations that smartphone ads will replace PC ads as a growth driver, and increased transaction value from more types of ad formats, such as video ads and native ads. Total SSP ad transaction value estimates Evolving market The use of SSP algorithms to sell impressions automatically is rapidly increasing, as the industry moves from the old model using salespeople to sell advertising space to the programmatic buying of ads, with real-time trading. Optimized advertising: the use of tools to optimize advertising, either automatically or instantaneously. Includes keyword-targeted advertisements and real-time bidding (RTB) technology. Programmatic buying: the automatic buying and selling of online ad inventory, including the use of RTB technology. 37/69

38 LAST UPDATE: Research Report by Shared Research Inc. Changes in online advertising products Early 2s Late 2s Present Future ads ads Sales by salepeople ads Manual display ads ads Manual display ads Manual display ads RTB Ad networks Manual display ads RTB Ad networks Programmatic advertising Ad networks Ad networks Changing face of ad technology Online display adverts began with advertisers buying space on media for a period of time, i.e. manual, human-mediated advertising. The market diversified. Ad servers systems for automatically distributing ads appeared, and publishers became able to rotate multiple ads in the same advertising space. New pricing models also appeared, such as cost-per-click (CPC) advertising. Ad networks were developed, aggregating impressions from different media. This made it easy for advertisers to distribute targeted ads. In time, advertising inventory marketplaces known as ad exchanges sprung up, allowing ad networks to trade adverts and impressions. Demand-side platforms (DSPs) then appeared in response to calls for greater efficiency. DSPs offer access to multiple ad exchanges and ad networks, and maximize effectiveness. On the flip side, publishers began using sell-side platforms (SSPs) also offering access to multiple ad exchanges and ad networks in an attempt to maximize ad revenue. The advent of DSPs and SSPs paved the way for real-time bidding. Online publishers changing methods of maximizing advertising revenue Until 211, online publishers attempted to maximize revenues from each advertising space by deciding manually whether to sell impressions directly to advertisers, place them on ad networks, or sell them through an affiliate. In 212, publishers began trying to maximize overall advertising revenues by selling as many advertising impressions as possible even if it meant a lower price per impression. Now most publishers use this model. Publishers will probably use SSPs for all advertising spaces on their media, attempting to maximize advertising revenues from the site as a whole, while increasing efficiency. 38/69

39 LAST UPDATE: Research Report by Shared Research Inc. Maximizing advertising revenue from online media SSP market risk The SSP market is growing. Yet major ad network operators such as Google Display Network, Yahoo Display Network, and nend could block access to DSPs and SSPs (instead providing DSP and SSP functionality themselves). Business conflict with between SSPs and ad networks could also lead to the SSP being disconnected to the network. In addition, the business may be not worth continuing if revenues are dented by fierce competition. Business structure The businesses under the Ad Platform segment have fluctuated over the years (see the following figure), but demand-side services have been generating new revenue since FY9/16. The company's SSP and other services are explained in detail below. Ad network: a service that distributes ads from an advertiser s ad server across multiple media. These networks make it easy for advertisers to distribute ads and publishers to put advertising space on media. They also facilitate the procedures, configuration, and analysis of multiple media and advertisements, which previously was performed individually for each medium or advertisement. Changes in sales FY9/13 FY9/14 FY9/15 FY9/16 FY9/17 FY9/18 Others Zucks SSP 2,31 57% Others 1,416 17% Demandside 1,715 21% SSP 5,65 62% Others 866 8% Demandside 2,463 24% SSP 7,94 68% Demandside 4,637 33% Others 347 2% SSP 9,21 65% Demandside 8,27 41% Others 172 1% SSP 11,498 58% Demandside 1,657 49% Others 269 1% SSP 1,66 5% 39/69

40 LAST UPDATE: Research Report by Shared Research Inc. SSP Service SSP sales trends 12% 1% 8% 6% 4% 2% % -2% -4% -6% -8% SSP (smartphone) SSP(PC) YoY (smartphone, left axis) YoY (PC, left axis) 3,155 2,962 2,744 2,717 2,66 2,667 2,736 2,61 2, ,231 2, ,724 1,81 1,912 1,75 1, ,364 1,383 1, ,29 1,596 1,681 1,937 2,89 2,322 2,124 2,243 2,282 2, ,25 2, ,196 1,281 1,211 1,287 1, Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 FY9/12 FY9/13 FY9/14 FY9/15 FY9/16 FY9/17 FY9/18 3,6 3,2 2,8 2,4 2, 1,6 1,2 8 4 Business trends Wholly owned subsidiary Fluct (previously adingo) operates the SSP platform called fluct. Fluct is one of the largest domestic SSPs for the PC and smartphone ad market. VOYAGE estimates its share of the market at about 3%. The company is aiming to acquire a dominant share of the domestic SSP market, and consolidated Kauli in April 215. Further, the company is aware that the premium ad market is growing, and wants to cultivate this market through subsidiary intelish and DoubleClick Ad Exchange operated by Google (access offered from April 215). Progress of the Ad-Tech segment Sales Sales hinge on number of impressions, the percentage of those impressions successfully supplied with ads (the percentage of impressions sold) and the price. It supplies ads for almost 1% of available impressions. This allows for the calculation of the effective cost per mille (ecpm) the cost per 1, impressions, or the average price. Total impressions (bn) FY9/12 Number of impressions % % % 35.5% 31.8% % 2.1% 22.% % 7.2%12.9% 8.5% 7.2% 1.6% FY9/13 YoY (right axis) FY9/14 FY9/15 FY9/ FY9/ FY9/18 1% 8% 6% 4% 2% % Sales reporting period (Securities reports and financial statements based on accounting standards prior to FY9/15) The old accounting method made it difficult to analyze VOYAGE s earnings, particularly its quarterly results. In Ad-Tech, sales were reported one month later than generated, i.e. sales reported in (October-December) were generated in September-November. For example, the rush of demand in March 214 to beat the consumption tax hike was reflected in 4/69

41 LAST UPDATE: Research Report by Shared Research Inc. results (April-June), not Q2 (January-March). This affected the SSP and ad network businesses. However, the company switched to a new accounting method from FY9/15 so sales are booked on time. Earnings until FY9/14 have been retroactively adjusted accordingly. Sales reporting (old accounting method; replaced by a new method) Sales generated Sales generated Sales generated Sales generated Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep sales Q2 sales sales Q4 sales Source: Shared Research Profit impact As an SSP provider, VOYAGE receives revenues in the form of advertising fees from DSPs or ad networks. The company pays about 8% (as of FY9/14) of these revenues to the publisher as the procurement cost of the advertising space, booked as CoGS. But competition is heating up in the smartphone ad market, implying gross margin pressure. Gross margins are lower at the Ad Platform segment than at the old Media segment. But the SG&A expense ratio is also lower, so the two segments have roughly equal operating margins (FY9/14). The Ad Platform business is not labor intensive, but SG&A expenses are trending upward as the company invests in this business. As with Media, infrastructure costs are included in SG&A expenses. Ad Platform OPM 2% 18.4% 18% Ad-Tech OPM 17.3% 16% Media OPM 16.6% 15.3%15.2% 14.9% 14.1% 14% 12.7% 15.7% 13.% 12.1% 11.3% 12% 13.7% 11.% 1.1% 13.4% 1.4% 1.9%1.7% 9.7% 1% 8.8% 8.% 8.4% 1.2% 7.8% 7.2% 1.6% 11.2%12.3% 1.6% 1.7% 8% 9.2% 6.9% 6.% 8.9% 5.9% 6.4% 8.3% 5.% 5.3% 6% 7.3% 4.3% 6.4% 3.5% 6.8% 6.% 4% 2.4% 5.3% 4.3% 4.2% 2% 3.9% 3.2% 3.7% % 1.7% 1.7% 1.6% FY9/12 FY9/13 FY9/14 FY9/15 FY9/16 FY9/17 FY9/18 Barriers to entry in the SSP and DSP market DSP Moderate SSP Moderate to high Barriers to entry Low for DSPs based on retargeting, but differentiation is tough. DSPs must have links with publishers (supply-side) when the service is launched, but providers that get off to a slow start struggle to secure connections with major publishers Industry pioneers have a significant advantage, as economies of scale affect ad distribution costs. Like DSPs, SSPs must also have links with DSPs and ad networks when the service is launched, but providers that get off to a slow start may struggle to secure connections with major advertisers and ad networks. Switching cost (the cost of changing SSP or DSP providers) Low to high Low if only switching to improve DSP functionality; higher if data management platforms (DMP) and other systems are integrated with the DSP Low to moderate Publishers may switch SSPs to improve overall margins Pioneers have the upper hand Pioneers have the upper hand Characteristics Capacity for selling to advertisers affects earnings in the short term. Advertiser loyalty affects medium-term earnings. Loyalty can be increased with other solutions, e.g. DMPs. Pushing up margins is vital. SSP providers must also have technical skill, sales capacity, and operational expertise to respond to publishers' issues 41/69

42 LAST UPDATE: Research Report by Shared Research Inc. Group companies Most of the company's acquisitions thus far have been aimed at bolstering its Ad Platform business. The figure below provides a brief description of all of the companies that VOYAGE as acquired or invested in and are now part of the VOYAGE group. Overview of M&A activity Date Company Stake Business description Dec 214 MerMedia 65.% Joint venture Plans and operate online content such as Asajikan.jp. Feb 215 intelish 51.% Joint venture Plans, develops, and operates a private marketplace centered on premium impressions Apr 215 DO HOUSE 21.8% Equity-method affiliate Engages in sampling marketing business Apr 215 Kauli 1.% Consolidated subsidiary Consolidated in May 215. Merged with fluct in the end of Dec. 215 Jun 215 logly 22.6% Equity-method affiliate Operates native adverting platform logly lift Jun 215 Media Vague 26.7% Equity-method affiliate Operates commuting-related content media such as Traffic News Jul 215 Marketing Application 35.6% Equity-method affiliate Offers market research, marketing applications such as data aggregation and reports Oct 215 GoldSpot Media 25.% Equity-method affiliate Offers video ad platform (Apr 216 wholly owned sub; 217 absorption-type merger) Nov 215 coconala - Investment Operates online marketplace based on knowledge and skill Jan 216 FinTech Lab - New entity Research and development of innovation applying technology in finance Jan 216 SYNC GAMES 2.3% Equity-method affiliate Game-related businesses for smartphone Jan 216 IT Realize - Investment Operates credit card collective management app CRECO (venture company for fintech) Mar 216 Repro - Investment Offers marketing tool for mobile phone apps Mar 216 TORICO - Investment Operates various manga-related services Mar 216 GoldSpot Media 1.% Fully-consolidated subsidiary via additionaloffers video ad platform (Apr 216 wholly owned sub; 217 absorption-type merger) Mar 216 maneo market - Investment Operates a peer-to-peer lending service (venture company for fintech) May 216 JION - Investment Operates online media "JION", which provides ideas on adults' lifestyles Jun 216 Umami - Investment Provides a service for foreign visitors to Japan, including the restaurant app. Umami Jul 216 Fuller - Investment Provides smartphone apps for companies, developed and operated by the company Jul 216 IROYA - Investment Apparel IT venture operating IROZA, an e-commerce select shop Jul 216 Momentum 2.5% Equity-method affiliate via additional inves Offers tools that block inappropriate ads and protect brands distributing online content Sep 216 CMerTV 58.4% Consolidated subsidiary Consolidated in Oct 216. Operates video ad distribution business Sep 216 Credit Engine - Investment Develops online lending services for SMEs and sole proprietors Dec 216 VOYAGE NEXUS 1.% New subsidiary Operates online sales business of housework support services, partnering with Kajitaku Jun 217 OMEGA - Investment Plans, develops, and operates ad network based on proprietary big data technologies Jun 217 The Bridge - Investment Operates Trip Free, a free SIM card service, for foreign tourists visiting Japan Jul 217 IT Realize - Investment Operates "Local bank app with CRECO", a package solution for local and shinkin banks Aug 217 AOS Mobile - Investment Provide B2B mobile communication services including AOSSMS and InCircle Sep 217 Generic Solution - Investment Sales of GS8, software for information search and machine learning Nov 217 Countir Bank 39.% JV with Countir Operates virtual currency-related business. Plans to launch virtual currency wallet service in summer 218 Jan 218 C-POT 3.% JV with Shogakukan Supports building database on publication content for the publishing industry Jan 218 SelvasM. Inc. 3.% JV with Infraware Inc. (South Korea) Operates overseas mobile game business (having development synergies with VOYAGE game publishing business) Feb 218 cosoral Inc. 1.% New subsidiary Operates Posly (service to support child-rearing using the internet) Jun 218 Media Brst - Investment Provides content production and media operations focusing on comedy performances Jun 218 Shuminavi Inc. - Investment Operates Shuminavi, an experience-matching platform Sep 218 Palsbots Inc. - Investment Develops application software for robots and interactive services Sep 218 DogHuggy Inc. - Investment Operates DogHuggy, a dog hosting service *: Sold off. GoldSpot Media, Inc. On March 1, 216, the company announced its decision to acquire additional shares in GoldSpot Media, Inc. (GSM), making it into a wholly owned consolidated subsidiary. As of March 1, 216, the company held 1 GSM shares, with a 25.% stake in GSM (1 shares). The company intends to buy an additional 3 GSM shares (JPY45mn) in order to convert GSM into a wholly owned consolidated subsidiary, with April 1 as the planned date to acquire the shares. Reason for the acquisition Viewing it as an opportunity to expand its video advertising business, VOYAGE invested in GSM in October 215, making it into an equity-method affiliate, and undertook initiatives to expand into rich media advertising (including video). According to the company, it has decided to make GSM a wholly owned consolidated subsidiary in order to deepen ties between the companies, and further strengthen business expansion. Through this move, VOYAGE intends to obtain media through which its SSP service fluct will be able to provide video advertising, garner more video advertising deals through fluct Direct Reach, strengthen its competitive strength as an advertising platform, and provide increased added value. Following the acquisition Although the company expects limited impact on its consolidated earnings, it believes that it will lead to improved earnings in the long term. It intends to include GSM s results for the April 1 September 3, 216 period in its FY9/16 earnings. 42/69

43 LAST UPDATE: Research Report by Shared Research Inc. GSM results FY12/13 FY12/14 FY12/15 (JPY, JPYmn) FY12/13 FY12/14 FY12/15 Sales Net assets Operating profit Total assets Recurring profit Net asset worth per share -5,184-9,238 29,365 Net profit Earnings per share -15,184 8,62 33,436 Kauli In April 215, the company spent JPY1.5bn to acquire and consolidate Kauli. This acquisition is expected to have only a slight impact on FY9/15 profits. Shared Research believes the key points of this acquisition are to establish a top share of the domestic SSP market, and to lay the groundwork for building the No. 1 ad distribution platform for programmatic trading. The key points for VOYAGE in terms of building competitive advantages in the SSP market are the quantity and quality of connected demand-side platforms (DSP) / ad networks; ad distribution algorithms; and quantity and quality of ad impressions. Furthermore, the company s SSP fluct has strong consulting expertise in guaranteeing the quantity and quality of advertising impressions, while Kauli is strong in the areas of ad distribution algorithms and big data analysis. Shared Research sees the acquisition of Kauli as a step toward taking the dominating market share as the company becomes the biggest player in the SSP market in terms of sales and the number of advertising impressions, and as business synergies combine the expertise and technologies of both companies. Kauli, Inc. earnings performance and VOYAGE Ad-Tech segment (now Ad Platform segment) earnings performance FY1/12 FY1/13 FY1/14 FY1/15 FY9/14 FY9/15 Q2 Q4 Q2 Sales ,576 1,834 2,69 1,914 2,312 2,427 YoY 111.8% 5.% 38.5% 93.8% 99.7% 97.7% 48.6% 46.7% 32.4% Operating profit YoY 18.5% 46.9% 34.% 1,45.2% 225.3% 183.7% 193.1% 62.8% 17.9% OPM 17.8% 9.9% 9.7% 9.4% 12.4% 16.6% 12.6% 11.9% 13.8% 14.8% Recurring profit YoY 5.% 41.7% RPM - 9.9% 9.9% 1.2% Net income YoY 22.2% 33.3% Net assets Total assets Impressions (bn) intelish In February 215, VOYAGE established the subsidiary intelish, Inc. In Shared Research s view, this was to establish itself in a niche market that is also promising; add more value as an SSP provider; and offer added value on the DSP side. As of FY9/15, this was still a niche market, but one that is expected to grow in the future. Shared Research expects that VOYAGE intends to establish a position in this market quickly by targeting clients already using its SSP services. intelish is a joint venture with online advertising solution provider slo interactive, inc. (s1o-i), which has a significant track record of operating DSPs. Capital is JPY4mn, with VOYAGE holding a 51% stake and s1o-i holding the remaining 49%. intelish will offer a private marketplace that allows a select range of advertisers to bid programmatically for select impressions on select media. In conventional open auctions, both advertisers and publishers are anonymous. Advertisers cannot be certain what impressions they will purchase. For publishers, there are risks that inappropriate ads will harm the value of their brands, and that market forces which drive auctions will level ad spaces, harming their value. Private marketplaces (PMP) offer a method of buying and selling advertising programmatically. They differ from conventional open auctions in that publishers can restrict the advertisers and ad placement prior to the auction. This means publishers and advertisers know who will bid and what type of media the ad will be displayed on prior to the auction, allowing publishers to offer only premium impressions. 43/69

44 LAST UPDATE: Research Report by Shared Research Inc. This eliminates the risk of damage to publishers brands, and offers a new way to sell ad inventory programmatically. It also has the significant advantage of allowing publishers to consider what type of advertisers their media is best suited to, and what type of content is most effective. Advertisers can also buy premium impressions programmatically, selecting the media and placement for their ads. It also allows advertisers to check the results of their ads on a more granular level, looking not just at the big picture, but at the benefit from each medium. Intelish private marketplace The conventional programmatic market (open auction) Private marketplace (PMP) Open Auction Private Marketplace All advertisers Unspecified impressions Select range of advertisers Select range of impressions According to the company, intelish will focus on solving the issues of both publishers and advertisers. The plan is to implement a continuous cycle of improvement akin to the PDCA (plan-do-check-act) cycle, by tightening up ad strategies in light of the results of previous distributions. Impact of DoubleClick Ad Exchange on earnings Shared Research believes the company began offering access to DoubleClick Ad Exchange to increase the volume of premium advertising space it handles. Premium publishers can use DoubleClick Ad Exchange to increase transparency and boost advertising profits with preferred clients and private auctions. The addition of DoubleClick Ad Exchange to adingo s services also means that adingo consultants can help publishers optimize their advertising. In Shared Research s view, the addition of DoubleClick Ad Exchange complements VOYAGE s strategy, and may create opportunities for growth in the Ad Platform segment. According to the company, it is able to offer access to DoubleClick Ad Exchange because of its track record of maximizing advertising revenues of over 6, publishers with fluct and utilizing Google AdSense as an approved partner. DoubleClick Ad Exchange: Ad exchanges offer bidding and purchasing on impressions across a range of media and ad networks. Google s DoubleClick Ad Exchange provides a select range of premium publishers with a way of managing their advertising inventory. As a revenue-management platform, DoubleClick Ad Exchange helps publishers manage their inventory on multiple ad networks and maximize advertising revenues from all impressions. It is also flexible, allowing publishers to specify whether impressions are sold anonymously or with their brand attached, what type of ads are allowed, and whether advertisers can collect data about user movements. Zucks Wholly owned subsidiary Zucks provides smartphone ad services. This subsidiary offers two main solutions to maximize publishers advertising revenue and advertisers cost-effectiveness: Zucks Ad Network and Zucks Affiliate. Zucks Ad Network The Zucks Ad Network focuses on cost per click (pay per click) advertising on smartphones and apps. This type of advertising generates revenues when users click an ad. Zucks Affiliate: performance-based advertising services Zucks Affiliate offers performance-based advertising services for smartphones. These ads generate revenues when users perform certain actions, such as installing apps, registering as users, and buying products and services. 44/69

45 LAST UPDATE: Research Report by Shared Research Inc. Ads displayed via Zucks Ad Network and Zucks Affiliate Interstitial ads Inline ads Incentive offered for installation Conversion of logly to an equity-method affiliate Stake in the companies VOYAGE already holds 6.94% of outstanding shares in Logly. Its stake will increase to 22.57% following the third-party allocation of new shares. It plans to spend JPY3mn on acquiring these shares. The company does not hold any shares in Media Vague. After the third-party allocation of new shares, it expects to hold 2.3% of shares outstanding. It plans to spend JPY5mn on acquiring these shares. These two third-party allocations are scheduled for June 3, 215. Reasons for subscribing to the allocation First, by making Logly an equity-method affiliate, the company plans to strengthen its business relationship with Logly, and expand its business to include native advertising and DSP services, in addition to existing SSP services. Second, by making Media Vague an equity-method affiliate, the company plans to strengthen its business relationship with Media Vague, and embark on new initiatives, such as high quality, new content-based media that leverages both companies expertise. Logly, Inc.: A technology company founded in May 26, strong in data analysis technology such as natural language processing and machine learning. Offers the pioneering logly lift native ad platform * and the logly DSP (demand-side platform), which helps advertisers maximize the effect of their ads. Through VOYAGE VENTURES a consolidated subsidiary that invests in and supports internet start-ups the company acquired shares in Logly in August 211, and seconded director (and representative director of consolidated subsidiary adingo, presently Fluct) Kazuyuki Furuya to Logly. The company has since focused on growing the businesses of both companies, mainly by forming a partnership in the Ad-Tech business. *Native advertising: ads with the same form, design, content, and format as the publisher s articles and content. This type of ad does not hinder the user s attempt to obtain information. It was said to be difficult to sell on ad exchanges because the output format is not standardized, unlike traditional display ads. This is due to native ads emphasis on consistency with the publisher s design (tone and manner) and features. In October 212, Logly became one of the first companies in Japan to build and operate a system to optimize the distribution of native ads for each publisher s design and context. This made it possible for companies to sell both their own inventory and that of their media partners to advertisers. Media Vague Co., Ltd.: established in April 211. Strong network of contacts in major news media and reporters, and production skills for original articles. Operates the in-house content-based media Norimono News focusing on transport infrastructure, as well as tie-up content with other companies such as Full-Count, a baseball column website, and Football Channel, a specialist soccer website. The company has offered ad-tech services to Media Vague to help maximize ad revenues, and has built a strong business relationship. 45/69

46 LAST UPDATE: Research Report by Shared Research Inc. Point Media segment Knowledge sharing in the Point Media segment Segment overview The Point Media segment, newly established in FY9/17, combines all of the reward points-related businesses that had previously been a part of the Media segment. VOYAGE has built its own points system by planning and operating promotional media such as the rewards website EC Navi ( the points exchange website PeX ( and Research Panel ( where users can complete surveys for points. VOYAGE s points websites form its own points system VOYAGE has built its own points system: points earned on EC Navi and Research Panel can be exchanged for PeX points on PeX. Users can then convert PeX points into online shopping gift cards (e.g. Amazon), e-money (Suica points, T Points, and WAON points), Air Miles (All Nippon Airways [ANA] and Japan Airlines [JAL]), and cash (transfers to Mizuho Bank and Japan Post Bank). VOYAGE has operating subsidiaries and managers for each of its various media, and follows consistent management strategies across its own media. Earnings performance 2,5 Sales Operating profit OPM (right axis) 17.3% 16.6% 14.9% 2, 15.7% 1,558 1,597 1, % 11.2% 12.3% 13.4% 14.1% 1,526 1,392 1,38 1,432 1,426 1,463 1,495 1,535 1,419 1,42 1,476 1,5 1.6% 1,356 1, % 8.3% 1.7% 7.3% 1, FY9/ Q2 Q4 FY9/15 Q2 Q4 FY9/ Q2 Q4 FY9/17 1,542 2,166 1, % 4.2% 3.2% 3.9% 3.7% 1,64 6.8% Q2 Q4 FY9/18 Q2 Q4 15% 1% 5% % Promotional media: EC Navi EC Navi is an e-commerce site. Main sources of revenue: commissions on purchases made by customers referred to partner e-commerce websites, commissions on visits to sponsor websites or requests for more information, and advertising. The company also returns some revenue to users as EC Navi points, booked as CoGS. Gross margins are high on commissions on purchases on affiliated e-commerce websites. If a user spends JPY1, on an affiliated website, VOYAGE receives an average commission of almost JPY2 (almost 2%), of which it returns about 4% (JPY8) to the user as rewards points (as of FY9/17). In addition, VOYAGE aims to implement drastic structural reforms in FY9/18, and raise its point redemption rate accompanying purchases to compete with rival websites geared toward smartphones. 46/69