Interviews with Listed Companies Regarding English Disclosure
HENNGE K.K.
Since its establishment in 1996, HENNGE K.K. (hereinafter the “Company”) has been changing its business domain to align with the trends for each era, aiming to achieve the "Liberation of Technology." The Company, whose core business is currently B2B cloud security services, declared English as its official language in 2013 and is also working on simultaneous disclosure in Japanese and English as part of its efforts to promote employee diversity and overseas business development.
We interviewed Ryo Kobayashi (Executive Officer/CFO), Akane Kataoka (Head of Investor Relations), and Chihiro Kurotaki (Member of Investor Relations) about the Company's English disclosure system, its merits, and the Company's future plans.
English is the Company's Official Language, and Disclosure in English is Essential also from the Perspective of Conveying Information to the Employees
What prompted you to start English disclosure?
Kataoka: English is the Company's official language, and there are employees from many different countries and regions. We use disclosure materials for internal information sharing as well, and disclosing in English allows us to share the information with all members. In addition, we are promoting our business to achieve our corporate philosophy of "Liberation of Technology." In order to let more people understand about the Company ,we believe it is necessary to disclose information in English as well as Japanese. We started disclosing information in English in order to make aware of our activities to people all over the world. Through these activities, we hope that we can reach potential overseas shareholders and customers.
Your company discloses materials simultaneously in Japanese and English. How is the team structured for preparing disclosure materials and what are some of the innovations you have made?
Kurotaki: We have four people who are in charge of Investor Relations (hereinafter “IR”) and prepare the materials in Japanese and English simultaneously. We make our disclosure materials in English by ourselves without outsourcing services or AI translation services. To achieve this, we begin preparing the materials way in advance, such as before the quarter ends or even during preparation of the previous quarter’s disclosure. Since our goal is to disclose the information that investors wish to have, we try to describe concisely and not add to that much text. We are also mindful of improving the content and preparing the materials efficiently.
We've heard about the risk of depending on one individual when conducting English-language disclosure. Are you making any efforts to reduce that risk?
Kataoka: At the time of our IPO, there was only one person in charge of IR, and we were completely dependent on the individual, including English disclosure. After our IPO, we’ve structured a team to strengthen our IR activities, and we are no longer dependent on the individual. Regarding the recruitment of IR personnel who use English, since English is the Company's official language, it was easy to get an understanding within the Company of its necessity.
Who is in charge of roadshows and meetings aimed at overseas investors?
Kataoka: It depends on the situation. Usually, the IR members correspond to the investors, but sometimes the CEO or CFO are. The explanation of our growth strategy is responded mainly by Mr. Ogura, the CEO of the Company. He speaks English without difficulty and expresses the Company's vision in his own words during the meetings. Since Mr. Kobayashi, the CFO of the Company, also speaks English, he holds meetings in English where requested. We think it is important to communicate in our own words, therefore, we do not ask for interpreters when meeting with investors.
Shareholder Diversity Leads to Healthy Share Price Formation
What is your goal in conducting overseas IR?
Kataoka: Our major goal is to improve liquidity. Investors each have different investment policies. We would like our shareholder base to consist of not only long-term shareholders but also investors who hold our shares for the short term. We would also like it to consist of various types of investors from various regions. Suppose our shareholders are leaning towards a specific type, liquidly may get impacted in one direction when an environmental change occurs that affects the investment behavior for that specific type of shareholder. Therefore, we believe that increasing shareholder diversity will lead to a healthy share price formation.
At one point, your company's percentage of overseas investors exceeded 30%. What are your thoughts about the percentage of overseas investors?
Kobayashi: The percentage of overseas investors is affected by a variety of factors, including changes in the macroeconomic and SaaS business environment. We believe that one of the main reasons for the increase in the Company's percentage of overseas investors is that they perceive us as the Japanese version of a SaaS company listed in the U.S. However, if we are only perceived in that way, our share price will be greatly affected by the trends of other companies in the same industry. Therefore, we now conduct our IR activities while being mindful of shareholder diversity. We approach overseas investors not only in North America, which was initially our main overseas investor base but also overseas investors in other regions and investors in Japan. There are also investors who invested in us once but are no longer our shareholders. In order to encourage those investors to become our shareholders again, we believe it is important to keep them warm by providing them with adequate information through disclosure in English. We would like to have a chance to increase our percentage of overseas investors, since this will increase our shareholder diversity and improve our liquidity.
Have you received any requests from overseas investors to put out more information?
Kataoka: Although this pertains to more than just disclosure in English, we sometimes receive comments that we should be more proactive about providing information, particularly when we meet with overseas investors and explain aspects of our corporate culture, such as our official language being English, since our IR materials do not explain those in detail. Therefore, in the future, we would like to promote an understanding of our qualitative strengths by providing more information about our culture.
Improving Our Disclosure Materials Never Ends
What are your future plans?
Kataoka: Improving our disclosure materials is never ending. There are still some materials that we have not yet been able to disclose in English, such as our Annual Securities Reports, and constant challenges await us as we consider the ongoing task of providing information. Therefore, we would like to improve our disclosure materials, while at the same time, streamlining the preparation of materials in English and expanding our IR team.
Do you have any advice for companies that are considering starting or expanding English-language disclosure?
Kataoka: Disclosure in English is a way to reach a wider range of investors. If we only made disclosures in Japanese, the investors we could reach would be limited to those very few who use Japanese. We believe that through our disclosures in English, we can increase the number of people who are interested in us and may become our shareholders, and this will inevitably lead to an increase in our liquidity.
Kobayashi: Some companies may not immediately benefit from disclosure in English. Nevertheless, we believe that disclosure in English will benefit companies in the longer term, and that they should start by doing what they can. In order to reach a wider range of investors, it is important to start from a small area where you can, and increase the amount of what you can do together with improving the current process.
(Interview on October 20, 2023)
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