Message from the CEO

Simplex Holdings, Inc.
CEO

Hideki Kaneko

Creating value added and delivering innovation
with the best and brightest team.

Simplex Group's history of challenges

Simplex Group’s origins

The Simplex Group, with Simplex as a tech firm working in tandem with Xspear as a consulting firm, guides our clients throughout their entire digital transformation (DX) journey. Our core competencies are technology, consulting, and finance, these are skills that I first developed while working as a company employee. I joined Arthur Andersen (now Accenture) after graduating from college. Later, I moved to a Silicon Valley startup that developed trading tools, which sparked my interest in finance. I then moved on to Solomon Brothers Asia Securities (now Citigroup Securities), then regarded as the world's most powerful investment bank. There is no doubt that my experiences at these three companies are at the core of the Simplex Group.

One thing I felt strongly while working for these international companies was the high potential of a team of Japanese professionals. Through my experiences at the U.S. headquarters of these firms, I became confident that a team based out of Japan could compete on an equal footing with finance and IT professionals working in New York, London, and even Silicon Valley. However, in the eyes of the world, Japan as a country was often looked down as being second-rate in both finance and IT. The key factor for this ultimately comes down to corporate management and the industry structure peculiar to Japan. I was determined to build the best possible team capable of making an impact on the Japanese financial and IT industries by launching a company of my own, and ultimately, taking innovation from Japan to the rest of the world. It was with these resolutions and aspirations that I founded Simplex in September 1997.

First founding phase and IPO

After our founding in 1997, Simplex achieved consistent growth with a business model that defied the conventional wisdom of the industry and an “edgy” strategy that differed from other IT companies. One of the reasons for this steady growth was the lack of Japanese companies capable of proposing and building trading systems based on an understanding of financial engineering. Simplex successfully took the lead in this niche field and acquired most of the major financial institutions as clients without the need for organizing a sales force. Instead, project managers worked closely with the end users and provided solutions that truly impressed them. As a result of these business activities, Simplex achieved strong growth, listing on the JASDAQ market in February 2002, then moved to the First Section of the Tokyo Stock Exchange in September 2005.

Earnings stagnation and MBO

However, after FY3/2010, Simplex's growth reached a plateau. This was due, in part, to the fact that we had run our course in terms of building systems for major financial institutions in niche fields. But more fundamentally, it was because the scope of our business activities had become limited by the strong brand image of Simplex as a firm that could only deal with complex projects in niche fields that other companies could not. I was acutely aware that we needed to focus on making our capabilities more widely known to our major financial institution clients. In addition, the business environment at that time was such that there was a need to provide major financial institutions with a one-stop platform for trading and risk management, in response to a trend toward enhancing risk management functionality that began after the collapse of Lehman Brothers in 2008. We therefore took the best people in the field off projects and set up a sales force, implementing a proactive consultative sales approach. This was a major shift in strategy as we decided to approach clients not only as a niche player but also as a player handling the entire platform. To that end, we began by targeting capital markets departments in major financial institutions and helping them create an IT roadmap for the next five years free of charge. Based on that roadmap, we intended to take on the construction of an entire platform that would go live in a few years. This measure naturally entailed the risk of stagnation in business performance during this period, since the top professionals on the frontline had to be taken off the client site. At the time, the Nikkei Stock Average was trading around multi-year lows, below 10,000 yen, due to the Great East Japan Earthquake and other factors. Simplex's share price was also on a downward trend. I determined that I could not allow shareholders to bear the risk of a decline in the share price due to stagnating earnings. Finally, in October 2013, we decided we would carry out an MBO.

Second founding phase and re-listing

The key factor for the MBO was to achieve breakthroughs in existing businesses and to launch new ones. As a result, immediately after the MBO, we did indeed make breakthroughs in existing businesses and put several new ones on track, aided by factors such as the trend toward more robust risk management. With the confidence that we had proven the reproducibility of the Simplex business model in new businesses, we achieved a re-listing in September 2021. In June 2024, we held a longThe key factor for the MBO was to achieve breakthroughs in existing businesses and to launch new ones. As a result, immediately after the MBO, we did indeed make breakthroughs in existing businesses and put several new ones on track, aided by factors such as the trend toward more robust risk management. With the confidence that we had proven the reproducibility of the Simplex business model in new businesses, we achieved a re-listing in September 2021. In June 2024, we held a long awaitedvshareholders' reception after the annual shareholders' meeting, which had previously been postponed due to the pandemic. Although it had been over 11 years since the MBO, some of the shareholders at that time were in attendance, which was quite an emotional experience.awaitedvshareholders' reception after the annual shareholders' meeting, which had previously been postponed due to the pandemic. Although it had been over 11 years since the MBO, some of the shareholders at that time were in attendance, which was quite an emotional experience.

Innovation we are trying to achieve

Simplex was founded with the strong conviction that we wanted to create innovation that had never existed before and take this from Japan to the rest of the world. However, the kind of innovation we are referring to is fundamentally different from the kind that Steve Jobs brought about when he transformed the world with his smartphone. The innovation achieved by a visionary manager like Steve Jobs requires an ability to see a future that ordinary people cannot imagine. So, what kind of innovation Simplex Group is trying to achieve? There are certain problems in the world that have an ideal solution that everyone can envisage, but too many barriers exist to make it happen. The kind of innovation we are referring to is achieved by solving these kinds of problems in a hands-on and tenacious manner, and before other companies.

5DNAs as a code of conduct

To realize such innovation, we established the 5DNAs as our code of conduct in 2010. Of these, “No. 1” is the one we emphasize most, namely that we will steadily deal with difficult problems one at a time to reach ideal solutions envisioned by everyone in the fastest possible time. The ability to create the kind of innovation we have in mind should only be possible for a company with the No. 1 competency in its business area. That is why the 5DNAs start with “No. 1.” And for the 27 years since our founding, we have made it our mission to become the No.1 company in the domains we serve. The 5 DNAs, starting with “No. 1,” are central to everything we do within the Group on a daily basis. This is also an important guideline for recruiting talent. The Simplex Group values diversity among our employees, as we require a wide variety of talents to innovate. At the same time, we need a strong culture that we all share in order to continue creating added value. The core of this culture is our 5DNAs.

In terms of employee diversity, with the establishment of Xspear in 2021, we have been strengthening our recruitment of mid-career talent on top of hiring new graduates. Our policy of recruiting and training the top 10% of talent in the market, regardless of whether they are new graduates or mid-career hires, remains unchanged. People are the cornerstone of the Simplex Group's entire strategy, and they support us in achieving sustainable growth and high profitability. The Simplex Group is a place where outstanding professionals with different talents can achieve self fulfillment. I hope that the Simplex Group will continue to play a meaningful role in the life journeys of our employees.

Sustainable management in pursuit of reproducibility

FY3/2024 was a year in which we clearly demonstrated our commitment to sustainability. We identified our materiality issues and set specific goals for each of them, with a focus on human capital management—the most important element in our operations.

The sustainable management I am striving for is to hire the top 10% of talent in the market who share our 5DNAs and provide an environment where they can maximize their abilities. The success of these individuals will serve as a catalyst for bringing more new people onboard with high aspirations for growth. Once this virtuous cycle has been set in motion, we will be able to respond flexibly to any changes in the times and create a new cycle of innovation down the line.

It is important that all our employees share the process to acquire the capabilities required of them at any given time—a requirement that goes hand in hand with “reproducibility.” In this instance, reproducibility refers to the ability to continue producing results with a steep learning curve in a short period of time. This can be achieved by leveraging accumulated know-how through legitimate and sustained efforts in the right direction. This is why we always emphasize reproducibility, not only in consulting and system development, but also in employee training and evaluation.

Toward sustainable development of all of society

Over the past ten years, the Simplex Group has become a leading cultivator of talent. Today, many startups and publicly listed companies have former Simplex employees in CEO or CTO positions. While it is with some sadness that I have seen these talented people leave, I am also personally delighted to see them step up to the next level. Every day I am reminded that the success of ex-Simplex professionals enhances our reputation as a company that cultivates talent. The formation of this “Simplex Ecosystem” is my greatest joy as a manager. I believe that the success of ex-Simplex professionals, who have honed their skills with us, contributes in a variety of industries to sustainable development of the whole society.

Vision1000 as a long-term growth strategy

Trend and challenge of DX in Japan

The DX of Japanese companies now lags that of Europe and US companies. One of the reasons for this situation is the “third generation banking online system,” an interbank remittance system that was considered the most advanced in the world in the 1980s. Prior to the bubble era, the third generation banking online system was a symbol of Japan leading the world in technology. However, its convenience meant no change was required through DX, and as a result, Japan fell behind Western economies. Looking at this in another way, there is still solid DX demand in Japan. We believe that by capturing this demand, we can expect sustained growth and high profitability. However, many Japanese companies also face an important challenge when it comes to DX, which is the limitations of in house system development.

While Japanese companies are increasingly willing to utilize in-house system development, this brings high barriers for non-tech companies. One example would be the lack of IT personnel. There is a need for staff who can assess and make a judgment on how a company's business model should change with the evolution of IT, especially at the management level. However, it takes a long time to develop such personnel.

There are also structural issues that get in the way of in-house system development. Especially in non-tech companies, talented staff tend to be assigned to core businesses and rarely to the systems department function. In addition, the larger the company, the larger and heavier legacy existing systems there are that cannot be easily untangled. These compounding factors make bringing the in-house system development a challenging task for many Japanese companies.

Simplex Group's vision

In order for us to have a certain social impact in the midst of this DX trend, we believe it is important to first aim for 100 billion yen in revenue. Based on this belief, we have formulated Vision1000, which defines the Simplex Group's vision and also serves as a long-term growth strategy for sustainable enhancement of corporate value. And as a halfway point on our journey toward Vision1000, we have also formulated our Medium-Term Business Plan (MTBP2027) covering three years from FY3/2025.

There are three goals that we aim to achieve with Vision1000. The first is to be the one and only strategic partner for our clients. SBI SECURITIES, the leading comprehensive online securities company in Japan in terms of number of accounts and market share, has selected us to be its one and only strategic partner. We aim to be similarly chosen by leading firms in various industries. Second, for our employees, the Simplex Group will continue to be the dominant Biz x Tech innovator. Innovation in the DX field is at the forefront of the times, and the exciting appeal of this challenge is attracting many talented people. In order to continue to draw in such talent, Simplex Group will continue to aspire to be a dominant innovator in the field of Biz x Tech. The third is to be the game changer in the age of DX for society. While more and more Japanese companies are facing challenges in DX, we are of the view that in-house production is not the only answer, and we aim to be the game changer who can have an impact on society.

Vision1000 sets out indicative targets of 100 billion yen in revenue, a 30% operating profit margin, and a 20% ROE by the early 2030s. If we can reach this level, we should finally be able to draw close to the top tier players in the IT industry in terms of operating profit.

A passion to evolve myself from an Entrepreneur to a Leader

For FY3/2025, the fi rst fi scal year of MTBP2027, the Simplex Group has set a target of exceeding 10 billion yen in operating profi t for the fi rst time since its founding. I am aware that there are only a few dozen managers in Japan who have consistently achieved operating profi t of 10 billion yen or more in their own start-up companies. Although I am not a type of person who is eager to set personal goals, I feel that I will be able to make the transition from an Entrepreneur to a Leader only when I can generate 10 billion yen in operating profi t on a regular basis. In that sense, while achieving 10 billion yen in operating profi t is one step along the way for Vision1000, it is a number that I personally consider very important. Although it is my personal story, I am making my own preparations for FY3/2025, which will see me make the leap from an Entrepreneur to a Leader.

My responsibility as a manager to our shareholders and investors is nothing less than to aim for sustainable growth and high profi tability. The numerical performance targets in MTBP2027 are my commitment, and I am prepared to take full responsibility as management if we fail to achieve them. In terms of our share price, we will continue to be mindful of conducting IR activities based on transparency and consistency so that volatility will be kept within a certain range, taking into consideration CAGR for both revenue and operating profi t margin as indicated in MTBP2027.

Innovation is the source of our profi tability and continued growth. What it takes to bring that innovation is creativity of our people. We will continue to focus on recruiting and training the top 10% of talent in the market who are passionate about making clients happy and who derive a sense of accomplishment through work. Finally, I would like to thank all of our employees for their dedication to creating innovation, and I would also like to thank our shareholders and investors for their continued support.

Hideki Kaneko
Representative Director, President and CEO

This message is the CEO's message in the Integrated Report 2024.

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