Questions about our Business
Q. Please describe the establishment of the Company.
Core Concept Technologies Inc. was established in Higashi Nihonbashi, Chuo-ku, Tokyo in September 2009 with the launch of the consulting and system development business aimed at utilizing IT technologies to support business reform for customers. In March 2020, we relocated our headquarters to Minami Ikebukuro, Toshima-ku, Tokyo (consolidated with the Minami Shinjuku Office), where we still are today.
Q. What are your features and strengths?
The Company’s features and strengths are as follows.
- Creation of synergies by operating two businesses: Support for digital transformation and support for staffing of IT personnel
- Business knowledge of manufacturing industry (also applied to construction and logistics industries) and cutting-edge technical IT capabilities (in particular, 3D graphics, AI, and IoT)
- Rapid and low-cost realization of digital transformation through “Orizuru” digital transformation development base
- Ability to support integration of diverse cloud solutions
- Human resource procurement capabilities based on “Ohgi,” an extensive network of small and medium-sized IT companies
Q. Which companies are your clients?
Our main client companies in Support for digital transformation are major firms (annual turnover of 100.0 billion yen or more) in the manufacturing, construction, and logistics industries, which are our areas of expertise. In Support for staffing of IT personnel, our main client companies are the major system integrators.
Q. Which companies are your competitors?
Our main competitors in Support for digital transformation include the major system integrators and consulting firms, but, at the same time, they are also our client companies in Support for staffing of IT personnel. In Support for staffing of IT personnel, companies that handle SES are our main competitors, but, at the same time, our relationship with them also involves mutual provision and procurement of IT personnel. We have set “Think Big, Act Together” as Our Values. This means that we work to promote digital transformation for our client companies in cooperation with other IT companies whether they be large, medium, or small, with a mindset of “collaboration rather than competition.”
Q. What are your strengths in digital transformation for manufacturing industry?
As the Company’s founding members worked in digital transformation support for manufacturing industry in their previous jobs, we have accumulated know-how over many years and have the strengths listed below.
- Able to engage in native-level conversations with customers in the language of the manufacturing floor
- Capable of constructing business processes with a comprehensive view of both management and on-site perspectives
- Capable of supporting digital transformation (retrofitting) while retaining old equipment
- Capable of supporting customer needs from all directions through integration of our in-house product “Orizuru” with standard cloud solutions
Q. What is your target timeframe for listing on the Prime Market?
The Company listed its shares on the TSE Mothers Market (now the Growth Market) in September 2021, and we aimed to list on the Prime Market as our next milestone. In the past, we focused on accumulating net assets, which was the only formal listing criteria for the Prime Market we had not achieved. However, we have also fallen short of the market capitalization criterion as a result of the slump in our share price due to the slowing growth rate. Accordingly, rather than making accumulation of net assets our top priority, we will prioritize the maximization of total shareholder return (TSR) through appropriate and timely growth investments and share buybacks and will consider listing on the Prime Market when we meet the formal listing criteria.
Q. Why do you operate two business – Support for digital transformation and Support for staffing of IT personnel – that do not appear to have synergies?
As the Company’s founding members worked in digital transformation support for manufacturing industry in their previous jobs, they now provide Support for digital transformation at CCT, leveraging their business knowledge of manufacturing industry and IT capabilities.
Our three reasons for operating Support for staffing of IT personnel are as listed below.
- Expanding our order receipt opportunities and diversifying our industry portfolio
We have received orders for an extensive range of projects in all industries as direct orders from business companies and as second-tier subcontractors for major system integrators. - Expanding our business partners (BPs)
We have provided our BPs with the opportunity to receive orders by distributing information on an extensive range of projects (our direct orders + projects as second-tier subcontractors from major system integrators) on a daily basis. - Exploring target fields in Support for digital transformation
A feature of our business model is that we operate the two businesses as described above to grow our topline through active utilization of BPs while also maintaining financial resilience.
Q. Please describe your sales system.
We have no dedicated sales organization in Support for digital transformation. Instead, the managers of each business division and project managers conduct sales activities although a small number of staff are exclusively assigned to some outbound sales. We have assigned sales staff for each client company in Support for staffing of IT personnel.
Q. It seems that if you provide support all the way through to in-house digital transformation, you will lose out on subsequent business. So why do you provide support through to in-house digital transformation?
The reasons are because client companies that want in-house digital transformation (do not want to depend on a specific vendor) need such support and because we can maintain our business through Support for staffing of IT personnel after in-house digital transformation. The question of whether we actually provide support all the way through to in-house digital transformation depends on the needs of the client company, but we believe it is effective as a strategy for differentiation from other companies.
Q. How big are the markets for Support for digital transformation and Support for staffing of IT personnel respectively?
The market for manufacturing digital transformation, real estate and construction digital transformation, and transport, transportation, and logistics digital transformation, which are our fields of expertise, is forecast to grow from approximately 2.0 trillion yen in FY2023 to approximately 4.4 trillion yen in FY2030. (Calculated based on “Future Outlook for the Digital Transformation Market 2025,” Fuji Chimera Research Institute, March 2025)
The market for IT staffing services is forecast to grow from approximately 1.1 trillion yen in FY2022 to approximately 1.3 trillion yen in FY2024. (“IT Staffing Service Market Survey,” Yano Research Institute Ltd., April 2024)
Q. Are there any differences in the way you make use of business partners in Support for digital transformation and Support for staffing of IT personnel?
Our full-time employees are mainly responsible for work such as project management, consulting, and high level development, and we use our business partners (BPs) for more general work. In Support for staffing of IT personnel, there is a higher ratio of BPs because the projects are second-tier subcontracts from major system integrators and mainly involve general work.
The overall picture of the ratio of full-time employees to BPs is 1:2 in Support for digital transformation and 1:8 in Support for staffing of IT personnel.
Q. How does the expansion of the Ohgi network help to reduce the multiple contracting structure?
We can place direct orders with small and medium-sized IT companies on Ohgi, which helps reduce the multiple contracting structure by eliminating the need for intermediate agencies.
Q. What are the advantages of participating in the Ohgi network for small and medium-sized IT companies?
We distribute information about an extensive range of projects on a daily basis, so the advantages are that these companies gain order receipt opportunities without having to engage in sales activities themselves and the unit price of orders is higher due to slimmer intermediary margins.
Q. What kind of products do you handle?
Orizuru, our in-house product, is a middleware system that connects the core system to onsite systems. We provide support for the needs of client companies from all directions by using and integrating solutions from other companies for core systems, sales management systems, BI tools, and other aspects (products from companies such as Salesforce, WingArc1st, Business Engineering Corporation, and Aras.)
Q. Is Orizuru a package product? Do you collect licensing fees and other charges?
Orizuru is positioned as a “digital transformation development base” although it can also be used as a package product with just the standard functions. We deliver it as a single product which is based on the standard functions and then customized according to the client company’s needs. In recent years, we have been shifting toward including licensing fees in contracts, but this accounts for a small proportion of our sales. The majority of sales consist of revenue from one-time fees based on fixed-price contracts.
Q. Is Ohgi the name of a service? How are sales recorded?
Ohgi is the extensive business partner network with small and medium-sized IT companies and the database of engineers who belong to this network, not the name of a service. Rather than recording sales based on Ohgi itself, we use it as a tool for us to distribute project information to business partners and search for business partners.
Q. What is your vision for growth over the medium to long term.
The growth rate has slowed as the scale of business has expanded, but we hope to maintain an organic growth rate of at least 15%. We will also aim for further growth by adding M&A to that.
Q. What is your M&A policy?
We are actively implementing M&A. Our policy consists of making mainly the local small and medium-sized IT enterprises into subsidiaries and using these subsidiaries as hubs to extend the Ohgi network across the country with the purpose of increasing the human resources that are essential for business expansion. We also target IT companies with potential to expand the industry sectors and products where we offer digital transformation services.
Q. What is your recruitment policy?
We are actively recruiting both new graduates and experienced professionals, with a particular focus on new graduate hiring. In terms of new graduates, we previously employed mainly graduate students majoring in science courses of national and public universities, but the number of undergraduate students and students majoring in humanities courses has also been on the rise recently. Since we can replace personnel involved in general work with business partners (BPs), it is our policy to hire full-time employees to serve as project managers or leaders and management personnel (including management candidates).
Questions about Financial Results and Finance
Q. When do you announce your financial results?
Our fiscal year ends on December 31 each year and the interim period ends on June 30. We announce our financial results in February and August respectively. We also disclose quarterly business results.
Q. Where can I see past business results?
Please see “Financial Results,” “Securities Report,” and “Operating Results” on our corporate website.
Q. How are sales recorded for Support for digital transformation and Support for staffing of IT personnel respectively?
We record sales for both Support for digital transformation and Support for staffing of IT personnel by adding up man-months based on fixed-price contracts. Our business is not based on a license sales or subscription model, so revenue consists of one-time fees, but existing customer sales are stable at around 90%.
Q. Why is the gross profit margin significantly different in Support for digital transformation and Support for staffing of IT personnel?
Support for digital transformation consists of direct orders from client companies. As it is a high-value added service that sells our knowledge and technical capabilities, the gross profit margin is around 40%. Support for staffing of IT personnel is mainly second-tier subcontracting for major system integrators. As it is a service that consists of providing IT personnel, the gross profit margin is 16 – 17%.
Q. Why is the ratio of outsourcing expenses to cost of sales higher than at other companies?
Our ratio of outsourcing expenses to cost of sales is around 60%, which is high compared to other companies. This is because we use a leveraged approach to management in our active utilization of business partners. By doing this, we combine top line growth with financial resilience.
Questions about Shares
Q. What exchange are the Company’s shares listed on?
We listed our shares on the TSE Mothers Market (now the Growth Market) on September 22, 2021.
Q. What is the Company’s securities code?
It is 4371.
Q. What is the number of shares in a unit?
100 shares.
A unit refers to the number of shares in a trading unit.
Q. What is your approach to shareholder returns?
To maximize shareholder returns, in addition to the increase in the share price due to the enhancement of corporate value through business growth, we aim to maximize total shareholder return (TSR) by increasing return on equity (ROE) over the medium to long term through improvement in the efficiency of invested capital with the provision of direct returns to shareholders while also securing the internal reserves needed for future business expansion and strengthening the financial structure.
As the business base is steadily growing, and we believe we can maintain the increase in revenue and profit in the future, there will be sufficient scope for the growth investments (human resources and M&A) needed for business expansion even with the payment of dividends. Therefore, we will commence the payment of dividends from FY2025 (March 2026).
Our basic policy is to provide stable progressive dividends with a target payout ratio of 20 to 30% to meet the expectations of shareholders when financial results are strong.
We will also consider share buybacks in an appropriate and flexible manner, giving comprehensive consideration to market trends, the share price, financial position, and other factors.
Q. Does the Company have a shareholder benefit program?
There is no such program in place at present.
Q. When does the Company hold its General Meeting of Shareholders?
The Annual General Meeting of Shareholders is held in late March each year. We inform shareholders as of December 31 each year about the date and the venue for the meeting and other matters in early March.
Q. Does the Company send the notice of convocation for the General Meeting of Shareholders by postal mail?
We plan to send a summary of the important points and agenda items for the General Meeting of Shareholders by postal mail. We plan to publish documents including the business report online. You can review these documents on our corporate website or on the Tokyo Stock Exchange’s website.
(The documents can be reviewed online from March 5.)
Q. How do I exercise my voting rights at the General Meeting of Shareholders?
We send a voting form with the notice of convocation for the General Meeting of Shareholders to shareholders recorded on the shareholder register as of the end of the record date for the General Meeting of Shareholders (as of December 31 for the Ordinary General Meeting of Shareholders). To exercise your voting rights:
- You can bring the voting form with you when you attend the General Meeting of Shareholders; or
- You can indicate your approval or disapproval on the voting form and send it by postal mail; or
- You can access the dedicated voting site and enter your approval or disapproval.
Q. What is the procedure for registering a transfer of shares or a change of address?
Please contact the securities company where you have your trading account for information on various procedures related to shares.
Q. Where can I make inquiries, such as requesting documents and other matters?
Please make inquiries here.