Digital Arts Inc. (2326)

FY03/18 Consolidated Financial Results（1 April 2017 though 31 March 2018）
Reference Slides
27 June 2017

Copyright © 2015 Digital Arts Inc.

FY03/18 Q1 Financial Results Reference Slides

KEY FINANCIAL POINTS

Copyright © 2017 Digital Arts Inc.

Key Financial Points①

Steady gains in projects related to the Local Government Security
Enhancement initiatives
 Continued to obtain projects related to the local government security cloud structure, which
greatly drove earnings in previous FY, contributing to the solid sales in the public sector②Rapid increase in sales of FinalCode due to the increased
awareness of the necessity of security measures in the publicsector
 Through the strengthening of security measures led by the national government , there has
been an increase in the adoption of FinalCode, especially in local governments③

Solid sales of mainstay products i-FILTER, m-FILTER With the rise of targeted attacks against certain companies, there has been continued demandfor i-FILTER and m-FILTER to satisfy companies’ urgent security needs④

Steady growth in the consulting business Due to the increased awareness of information security measures, there has been steady sales
by subsidiary Digital Arts Consulting, contributing to overall group sales

3Copyright © 2017 Digital Arts Inc.

FY03/18 Q1 Financial Results Reference Slides

CONSOLIDATED RESULTSHIGHLIGHTS

Copyright © 2017 Digital Arts Inc.

FY03/18 Q1 Highlights (Consolidated)

Consolidated
Net Sales

Operating
IncomeOrdinary
IncomeNet Income

Attributable toOwners of Parent

JPY 1,158 Million（YoYJPY +241 million／+26.3％）

Continuing from the previous FY, sales in the public sector havecontinued to grow, leading the overall growth in sales

JPY 356 Million（YoY

JPY +257 million／+258.9％）

The large increase was mainly due to the growth in sales, and thereduction in costs resulting from the completion of the initial investment
costs connected to the commencement of overseas business centeredon the US

JPY 360 Million（YoY

JPY +281 million／+356.3％）

Due to the increase in operating income, the ordinary income also
increased significantly

JPY 258 Million（YoY

JPY +244 million／―％）The significant increase was due to the large increase in profits in Japanand the completion of investments in the offices abroad contributing tothe relative reduction in taxes
5Copyright © 2017 Digital Arts Inc.

FY03/18 Q1 Summary
Consolidated Results（Unit: JPY million）
FY03/17Q1

FY03/18
Q1YoY

FY03/18
Forecast

Net Sales

916

1,158

+26.3%

5,600

Gross Profits

676

925

+36.9%

4,450

Selling, General and
Administration
Expense576569

▲1.3%

2,450

Operating Income

99356+258.9%2,000

Ordinary Income

78360+356.3%2,000

Net Income
attributable to ownersof parent

13258―

1,240

0.3%

4.9%―

ROE6―

Copyright © 2017 Digital Arts Inc.

FY03/18 Q1 Summary
Non-Consolidated Results（Unit: JPY million）
FY03/17Q1

FY03/18
Q1

YoY

FY03/18
ForecastNet Sales

945

1,162

+23.0%

5,550

Gross Profit

688

907

+31.9%

4,450

Selling, General andAdministration
Expense

509

518

+1.7%

2,100

Operating
Income178389+118.0%2,350

Ordinary Income

161

394

+143.9%2,350

Net Income

102

299

+193.2%

1,621

ROE

2.0%

5.1%

―7―

Copyright © 2017 Digital Arts Inc.

Consolidated Net Sales Trend（Unit: JPY million）

Continue to post RECORD HIGH sales

1,158（126%）

916803（114%）（119%）

682（131%）521448368（122%）

FY03/09 Q1

FY03/10 Q1

650（114%）570673（103%）（84%）（116%）

FY03/11 Q1

FY03/12 Q1

FY03/13 Q1

FY03/14 Q1

FY03/15 Q1

FY03/16 Q1

FY03/17 Q1

FY03/18 Q1※ Percentages indicate YoY net sales

8Copyright © 2017 Digital Arts Inc.

Consolidated Net Sales Trend (by Quarter)

EXCEEDED FORCASTED SPEED
1,503（Unit: Million Yen）

1,540（123%）（133%）

1,253（116%）

1,131

1,077（121%）

937715673（114%）（113%）（119%）（111%）（103%）

1Q

916811803（126%）（135%）（119%）（113%）

1,158

1,098

2Q

3Q

4Q

FY 03/15

1Q

2Q

3Q

4Q

1Q

FY 03/16

2Q

3Q

FY 03/17※ Percentages indicate YoY net sales

94Q

1Q

2Q

3Q

4Q

FY 03/18

Current FYCopyright © 2017 Digital Arts Inc.

COS and SG&A The completion of initial investments connected to thecommencement of overseas business contributed to the reduction
in COS and SG&A

（Unit：JPY million）

FY03/17Q1

FY03/18
Q1

YoY Growth240

232-8103

98-4

Depreciation

72

68-4

Transfer to other accounts
Misc production cost

65

66

+0Selling, General andAdministrative Expenses

576

569

-7

Personnel Expenses

286

275

-11

Publicity

101

98-2

Cost of Sales
LaborOthers

195

188
10+6Key Factors-13M in personnel
expenses abroad+5M due to theincrease in rent inconjunction withoffice relocation
Copyright © 2017 Digital Arts Inc.

Cost of Sales (by Quarter)

Overseas costs leveled off, resulting in slight decline in （Unit：Million JPY）
cost of sales
Labor
Depreciation
Other Accoutns & Misc.
283

264

（123%）（93%）

228（113%）

52

238（105%）

59

224

227

72

211

（102%）（96%）

222（99%）

（93%）

48
54

67

85

70939396101

1Q

2Q

3Q

4Q

FY 03/15

777271265
244（100%）（110%）

6568

727287

90

1Q

2Q

3Q

69

109

103112

106

4Q

1Q

2Q

3Q

FY 03/16

FY 03/17※ Percentages indicate YoY net sales

11（97%）

78
68

67

86

232

66

64

78

80（113%）（114%）

65

109
82

240

256

121

4Q

98

1Q

2Q

3Q

4Q

FY 03/18

Current FY
Copyright © 2017 Digital Arts Inc.

Selling, General and Administrative Expenses (by Quarter)
Completion of up-front investments abroad led to reduction in （Unit：Million JPY）
SG&A
Personnel Expenses
OthersPublicity586

Overseas（148%）

510（125%）408（95%）58396（108%）

363

394

161

130

3727（113%）7192（123%） （133%）

7368

72

88（99%）

53（103%）

180

166

176

34148
56

182

5683

59

241

257

243

1Q

2Q

3Q

51

89

39

189

197

205

212

219

208

221

1Q

2Q

3Q

4Q

1Q

2Q

3Q

FY 03/15

498

569

154
172

32（102%）（114%）

151
149

596

556

49
164

80
61482（111%）（106%）

158488

576

273

4Q

FY 03/16

FY 03/17※ Percentages indicate YoY net sales

12285

4Q

243

1Q

2Q

3Q

4Q

FY 03/18

Current FY
Copyright © 2017 Digital Arts Inc.

FY 03/18 Q1 Financial Results Reference Slides

BY MARKET

Copyright © 2017 Digital Arts Inc.

Summary: Net Sales by Market
 +26.3% YoY growth in consolidated sales

 Enterprise sector sales +20.8%・Public sector sales +43.1%; maintaining
high growth rates
 Consumer sector continues to grow despite the large reduction in personal
computer shipments in JapanConsolidated
Net Sales

JPY 1,158 million（YoY+JPY241 million／+26.3％）

Enterprise

JPY 640 million（YoY+JPY110 million／+20.8％）

PublicJPY 424 million（YoY+JPY128 million／+43.1％）

Consumer

JPY 92 million（YoY+JPY2 million／ +3.3％）

14Copyright © 2017 Digital Arts Inc.

Sales Trend by Market

Sales in the enterprise and public sectors continue togrow at a high rate, leading to record high sales(Unit: million JPY)

1,158
（126%）

92
Enterprise

Public916

Consumer

803
682（131%）

521

368
70

448

（116%）（121%）

7072
144

69

650
570

（114%）

（83%）

101

73
332

216

170

FY 03/09 Q1（103%）

8589

424

89
296
256

207

190

640

126

171

673

（119%）（114%）

230

260

281

FY 03/10 Q1

FY 03/11 Q1

FY 03/12 Q1326

331

FY 03/13 Q1

FY 03/14 Q1

380

FY 03/15 Q1

456

FY 03/16 Q1

530

FY 03/17 Q1

FY 03/18 Q1※ Percentages indicate YoY net sales

15Copyright © 2017 Digital Arts Inc.

Quarterly Net Sales By Market

High growth in sales in the public sector
continued to lead sales(Unit: million JPY)

1,540

1,503（123%）（133%）

Enterprise

PublicConsumer

1,077

90673（103%）85715（111%）

402

313（119%）

89

1Q

444

409

2Q

3Q

（114%）

799

89（113%）

602

80

92

424

427

78（126%）296259

256

457

4Q

FY 03/15833

756665
380

498

89
216

207

811803（135%）

916
403

1,158

1,098

938097（113%）（116%）（121%）（119%）

937

1,253
1,131

105

84

1Q

552

2Q

530

473

3Q

4Q

1Q

FY 03/16619590

2Q

3Q

FY 03/17※ Percentages indicate YoY net sales

16640

4Q

1Q

2Q

3Q

4Q

FY 03/18

Current FY
Copyright © 2017 Digital Arts Inc.

FY 03/18 Q1 Financial Results Reference Slides

ENTERPRISE SECTOR

Copyright © 2017 Digital Arts Inc.

Enterprise Sector

 Solid sales of mainstay i-FILTER series
 Recovery in sales of m-FILTER from the last FY, secured strong
growth again Secured small-start and test deployment projects for FinalCodeSeriesSeries

YoY

111.0 ％

YoY

135.2 ％

YoY

106.0 ％
18Copyright © 2017 Digital Arts Inc.

FY 03/18 Q1 Financial Results Reference Slides

PUBLIC SECTOR

Copyright © 2017 Digital Arts Inc.

Public Sector
 Continued to obtain local government security cloud projects, which
drove overall earnings in the previous FY, posted increases in sales bothfor i-FILTER and m-FILTER Due to the effects of the Ministry of Internal Affairs and Communications’guidelines on fundamental strengthening of local government security,
local governments’ awareness has increased, leading to the increased
adoption of FinalCodeSeriesSeries

YoY

126.2 ％

YoY

199.3 ％

YoY

459.1 ％
20

Copyright © 2017 Digital Arts Inc.

FY 03/18 Q1 Financial Results Reference Slides

CONSUMER SECTOR

Copyright © 2017 Digital Arts Inc.

Consumer Sector
 Continued to expand partnerships and sales through mobile and MNVO
operators for i-FILTER (Consumer), promoted expanded sales andexpanded collaboration for mobile device version of i-FILTER forsmartphone Despite the continued decline in PC shipments in Japan, and theotherwise challenging business environment, sales of multi-year
packages and sales to internet cafes were solid, and direct sales formulti-devices were steady, contributing to solid sales
PC

YoY

103.3 ％

Game Console/TV

YoY

83.2 ％

Mobile Device

YoY

116.3 ％

22Copyright © 2017 Digital Arts Inc.

FY 03/18 Q1 Financial Results Reference Slides

FY 03/18 FORECAST

Copyright © 2017 Digital Arts Inc.

FY 03/18 Forecast
Consolidated Forecast

 Japan: Anticipate continuous and stable growth with the launch of anew product in new market
 Subsidiaries: Conservative initial outlook(Unit: million JPY, except where stated otherwise)

FY 03/17Actual

FY 03/18Forecast

Growth Rate

Net Sales

5,058

5,600

10.7 %

Gross Profit

4,051

4,4509.8 %Selling, General andAdministration Expense

2,227

2,450

10.0 %

Operating Income

1,824

2,000

9.6 %

Ordinary Income

1,811

2,000

10.4 %Net Income
Attributable to Owners of Parent

1,125

1,240

10.2 %

Dividend per Share24 JPY

28 JPY24―

Copyright © 2017 Digital Arts Inc.

FY 03/18 Forecast
Non-Consolidated Forecast

 Japan: Anticipate continuous and stable growth with the launch of anew product in new market(Unit: million JPY, except where stated otherwise)

FY 03/17
Actual

FY 03/18
Forecast

Growth Rate

Net Sales

5,104

5,550

8.7 %

Gross Profit

4,028

4,450

10.5 %

Selling, General and
Administration Expense

1,960

2,100

7.1 %

Operating Income

2,067

2,350

13.7 %

Ordinary

2,056

2,350

14.3 %Net Income

1,339

1,621

21.1 %

25Copyright © 2017 Digital Arts Inc.

FY 03/18 Return to Shareholder■Dividend Distribution
Digital Arts plans to return profit to its shareholders as follows:
Projected dividend payout ratio for the period ending March 2018:31.2% of consolidated net income for current period
The annual dividend amount for the period ending March 2018:
Estimated at 28.00 yen per share
Dividend per share (in JPY)
InterimFiscal yearend

AnnualConsolidated
Payout Ratio

FY 03/17

10.00

14.00

24.00

29.7％

FY 03/18 (Forecast)

14.00

14.00

28.00

31.2％

26

Copyright © 2017 Digital Arts Inc.

Notice

All statements herein, other than historical facts, contain forwardlooing statements and are based on DA’s current plans, strategies
and financial forecasts. These forward –looking statements are
based upon the management’s current assumptions and beliefs inlight of the information currently available to it. However,environmental changes and other important factors may cause
actual results to differ materially from those expressed herein. Allstatements herein are not intended to express DA’s commitment tofulfil any forward-looking statements. Updated information, ifapplicable, will be disclosed in a timely manner.
All numerical indications in this statement, unless stated otherwise,
are rounded to the nearest million JPY
DIGITAL ARTS, i-FILTER, info board, ARS, ActiveRatingSystem, ACTIVE RATING, ZBRAIN, D-SPA, SP-Cache, NET FILTER, White Web,m-FILTER, m-FILTER MailFilter, m-FILTER Archive, m-FILTER Anti-Spam, m-FILTER File Scan, Mail Detox, DigitalArts@Cloud, D Alert,
and related logos and icons are trademarks or registered trademarks of Digital Arts Inc. FinalCode is a registered trademark of FinalCode,
Inc.

27

Copyright © 2017 Digital Arts Inc.

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comfortable and safe internet-Copyright © 2015 Digital Arts Inc.