Hennge (4475) | First Look
Hennge provides a one-stop solution for businesses to control access to their cloud services. This effectively gives customizable and secure access to those who need it while protecting corporate systems from unauthorized access. Hennge allows workers to collaborate with each other, via file transfers and email, while guarding against data loss. Hennge, as Japan’s leading IDaaS provider, will benefit from the structural tailwind of Digital Transformation. Once Hennge becomes embedded within an organization, there is very little chance of clients churning out, paving the way to add-on additional higher value services.
Attractive Business Model
Hennge generates an ARR (annual recurring revenue) of ¥4.7 billion (around $45 million). In the most recent quarter, ARR grew at 21%. The company serves 1,950 enterprises, covering around 15% of all Japanese-listed companies.
Hennge targets mid-tier companies (300-5,000 staff), meaning that over 2m Japanese workers are using their service daily, generating an annual ARPU of ¥2,200 per employee.
Chart: ARR (¥m)
Huge Market Opportunity
The key driver of adoption for Hennge is the rate at which Japanese companies shift business practices into the cloud. As such, Hennge is key beneficiary of the inevitable uptake of cloud solutions as business embrace Digital Transformation. DX is still at a very early stage in Japan, with Gartner estimating that cloud adoption currently stands at just 22%. Interestingly, cloud adoption spiked following the Great East Japan Earthquake in 2011 as businesses suddenly had to solve Business Continuity Planning issues. Similarly, we expect that Covid will serve as a continued catalyst for cloud services to solve issues of greater collaboration, remote work and hybrid workforces. We estimate that IDaaS is at least a $0.5b market opportunity.
As companies shift data to the cloud services and adopt SaaS, they need to control access, control risk, share files internally and externally, prevent data loss and make sure that data is properly encrypted and archived. Hennge provides companies with secure administration over all their systems. As business practices have evolved, Hennge has continually integrated new services into its IDaaS – cloud security, authentication, automation, zero trust, messaging services and analytics. This has helped Hennge to develop a wide moat around its business, with churn at a very low 0.25%. We expect new services to underpin rising ARPU above and beyond the growth in customer count.
Chart: Product Overview
Chart: Selected Financial Data