Interviews with Listed Companies Regarding English Disclosure
Kaonavi, inc.
Cloud service provider kaonavi, inc. was established in 2008 by its founder, who has built a career as an IT engineer and as head of the human resources department. The talent management system "KAONAVI,” a product which is a platform for data utilization, consolidates all personnel data in the cloud, and has been introduced by more than 2,400 companies and organizations in various industries and businesses.
We asked Director & CFO Mr. Kimitaka Hashimoto, who has worked on disclosing IR information in English since its listing on TSE Mothers in 2019, about the reasons behind the Company’s English disclosure practices and efforts.
Fair Disclosure of Information to Overseas Investors
Please tell us how you came to disclose information in English.
Because the Company has a subscription-based business model, we started out in a deficit. Institutional and retail investors in Japan avoided us back then just because we were in a deficit, but overseas institutional investors had a better understanding of our kind of business model, so there was interest in investing depending on how we were valuated. Because of this, we were aware that we needed to disclose information in English so that people overseas would know about and understand the Company. We have been disclosing information in English since our listing in 2019.
How did you choose which documents would be disclosed in English?
To treat non-Japanese speakers as fairly as possible in providing information, we decided to translate earnings reports, earnings presentation materials, and timely disclosure documents first. We also disclosed the minutes from earnings briefings in Japanese and English.
Please tell us about the English disclosure system.
For timely disclosure documents, we outsource technical items such as restricted stocks to experts. Other documents are handled by two people in charge of IR, including myself. We also ask a native English speaker within the Company to proofread. If we outsource the translation work and disclose documents without checking them first, the translation might be inaccurate. So, we are lucky to have someone within the Company who can proofread translations.
Please tell us about the process from translation to disclosure.
After documents are created in Japanese, they are translated into English by IR staff. They are then proofread by a native speaker in the Company within a few days, and disclosed in Japanese and English at the same time. The key to creating English language materials is to create documents in Japanese with consideration given to the fact that they will be translated into English. Sentences in Japanese tend to be long and vague. If we write in Japanese taking into account that it will be translated into English, the Japanese will be simpler and more easily understood. Naturally, then, translating it into English will be easier.
For earnings reports and earnings presentation materials, once their formats have been created in English, we generally only have to update them and do not have to do much more beyond that.
What do you do in order to disclose information in Japanese and English at the same time?
In order to disclose materials in Japanese and English simultaneously, we believe that it is essential to finalize a Japanese draft without the numbers as soon as possible. That is, we start translating the Japanese materials into English after finalizing the details, with numbers to be added later. When there are corrections to the Japanese text, we add them to the English materials at the same time.
Increasing Publicity through Proactive Dialogue with Overseas Investors
What IR activities have you provided for overseas investors?
(Source: From the front page of the website of kaonavi, inc. in English)
To boost our profile immediately after listing, we increased our contact with investors, such as by participating in conferences. After connecting with investors, we are sometimes referred to other investors. We have gradually gain recognition by doing so.
Some interviews are set up through direct inquiries while others are requested by securities companies.
We also try to have interviews with as many investors as possible by making our availability known and by requesting securities companies to set up interviews with investors, in addition to participating in conferences held by securities companies. We should create an environment where a wide range of investors can access and see our company first and foremost in order to expand our investor base. So we are increasing the number of interviews we conduct. We have approximately 60 to 70 interviews per quarter with investors at home and abroad. The number of interviews with overseas investors is greater.
Interviews are generally conducted by the Company management. As is often the case with newly listed companies, investors make investment decisions after they look at corporate managers. So when we were first listed, the Company CEO intended to participate in interviews often. Recently, the Company CFO has mainly been meeting with investors because the CEO spends a lot of time planning for business strategies and product development. Earnings presentation materials in English are used in interviews with overseas investors.
Do you arrange interpreters for interviews with overseas investors?
Securities companies arrange for interpreters when they set interviews, while institutional investors arrange for interpreters when they request interviews. We have had no problems communicating with them during interviews.
How do you choose investors to have interviews with?
We do not choose investors for interviews. We meet all investors based on their requests. When long-only investors hold shares, the share prices will be stable. However, the liquidity will become lower due to fewer numbers of shares in the market. As such, we consider it important that long-short investors that invest in hedge funds and the like trade as well.
How do overseas investors evaluate your company's information disclosure practices?
We receive comments from domestic and foreign investors that our earnings presentation materials are easy to understand. Some investors say that there is no need to hold one-on-one meetings to learn about our business status, as all necessary information including KPI is disclosed. Still, we will increase the amount of information to be disclosed and the level of transparency.
Has dialogue with overseas investors alerted you to anything new?
We received some useful comments and advice regarding industry trends, business strategies, and governance, among other things. It is encouraging that they understand our medium- to long-term strategy and support us. We have also recently been made aware that different countries have different social values and cultures. I remember when we were first listed, there were many investors who were surprised to hear that the situation in Japan at the time was that human resource information was not used as data, so it was difficult for them to understand our products. There are few such investors now.
Disclosing Information in English Resulted in Improvement in Foreign Investor Ratio
What do you think are the benefits and effects of disclosing information in English?
One of our achievements was that the ratio of foreign investors rose to some 20% (20.8%, as of the end of September 2021) without issuing shares through an overseas offering. Regardless of whether you implement them, I think the fact that there will be more options for financing, such as capital increases through overseas public offerings, is one benefit that arises from efforts to broaden the base of potential shareholders and increase the ratio of foreign investors by disclosing in English.
How will you proceed with your IR activities relating to your English information disclosure practices in the future?
The notice of general shareholders meeting is available only in Japanese, so we would like to prepare it in English as well. We are considering disclosing other documents such as annual reports in English in the future. In addition, in order to lessen the gap with companies listed on the Prime Market, we would like to be able to draft a good story to tell investors, such as when disclosing information about sustainability.
Do you have any advice for companies that are considering starting or expanding their English disclosure practices?
It's what's on the inside that counts. I believe that it is important to prepare good disclosure materials in Japanese first. If you neglect to take this essential step, there will be no substance and it will not be cost effective, even if that information is translated into English.
(Interview on December 14, 2021)
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