Quarterly Consolidated Financial Results for the First Half of Fiscal
Year Ending March 31, 2022 (Japanese Accounting Standards)
Name of listed company:
Securities code:

Digital Arts Inc.

Listed on:

October 29, 2021
Tokyo Stock Exchange
1st Section

2326

URL https://www.daj.jp
Representative Director,
Representative: (Title)(Name) Toshio Dogu
President and CEO
General Manager of theContact:(Title)(Name) Isao Konishi TEL: 03-5220-6045
Administration Department
Scheduled date for submission
Scheduled date to start dividends
November 5, 2021
December 2, 2021
of quarterly report:
distribution:
Preparation of supplementary explanatory：Yes
documents for quarterly results:
Holding of quarterly results briefing:
Yes ( for institutional investors and financial analysts )(Figures shown are rounded down to the nearest million yen.)

1. Consolidated financial results for the first half of the fiscal year ending March 31, 2022 (April 1, 2021 –September 30, 2021)(Percentage figures represent changes from same periodof previous year.)
Profit attributable toOperating profit
Ordinary profit
owners of parent(1) Consolidated operating results (cumulative totals)
Net sales
Million yen%

Million yen%

Million yen%

Million yen%

First half of year ending
4,552
46.8
2,079
58.7
2,080
58.0
1,433
57.7
March 31, 2022
First half of year ended
3,101
12.2
1,310
19.5
1,316
20.5
908
22.0
March 31, 2021
(Note) Comprehensive First half of year
1,435million yen ( 58.3％) First half of year
906million yen ( 22.2％)
income:ending March 31, 2022
ending March 31, 2021
Profit per share(basic)First half of year ending
March 31, 2022
First half of year ended
March 31, 2021

Profit per share(diluted)
Yen

Yen

102.16

99.81

64.84

63.35

(2) Consolidated financial position
Total assets

Net assets

Million yen
As of September 30, 2021
18,588
As of March 31, 2021
14,856(Reference) Equity capital: As of September 30, 2021:

Equity ratio

Net assets per share％
Million yen
11,093
59.5
10,062
67.6
11,066million yen As of March 31, 2021:

Yen

788.58715.7910,041million yen

2. Dividends
Annual dividends
1Q-end2Q-endYen

3Q-endYen

Year ended March 31, 2021
25.00－
Year ending March 31, 2022
60.00－
Year ending March 31, 2022
(forecast)(Note) Revisions to most recently announced dividend forecast: No

Year-end

Annual

Yen

Yen

Yen

－

30.00

55.00

－

35.00

95.00

3. Forecast of consolidated financial results for the year ending March 31, 2022 (April 1, 2021 – March
31, 2022)(Percentage figures represent changes from same period of previous year.)
Profit attributable toOperating profit
Ordinary profit
Profit per shareowners of parent

Net sales
Million yen

Million yen%

Million yen%

Yen

Full year
9,000
31.9
4,000
34.3
4,000
(Note) Revisions to most recently announced results forecasts: Yes%

Million yen

%

33.7

2,770

34.5

197.40* Notes(1) Changes in important subsidiaries during the first half offiscal year ending March 31, 2021

None

(Changes in specified subsidiaries resulting in changes in scope of consolidation)
New―(Company name) , Excluding―(Company name)(2) Application of special accounting methods to the preparation
Yesof quarterly consolidated financial statements:(Note) For details, please refer to “2. Quarterly Consolidated Financial Statements and Primary Notes (4) Notes toquarterly consolidated financial statements (Application of special accounting methods to the preparation of quarterly
consolidated financial statements)" on page 9 of the attached materials.

(3) Changes in accounting policies, changes of accounting estimates and restatement
1) Changes in accounting policies due to revisions ofYesaccounting standards, etc.:
2) Changes in accounting policies due to reasons other thanNone
those stated in 1):
None3) Changes in accounting estimates:
4) Restatement:

None(4) Number of shares outstanding (common stock)1) Number of shares issued and outstanding As of September
30, 2021(including treasury shares)
2) Number of treasury shares

As of September
30, 2021

14,133,000
99,531First half of year

3) Average number of shares issued andending March 31,
outstanding in each period (cumulative total)
2022

As of March 31,
2021
As of March 31,
2021

14,133,000
104,462First half of year
14,032,314

ended March 31,

14,018,558

2021* Quarterly financial statements are not subject to quarterly audits by certified public accountants or audit corporations*Explanation concerning the appropriate use of financial result forecasts and other special notes(Forward looking statements)
Business forecasts and other forward-looking statements in this material contain predictions based on futureassumptions, outlooks and plans as of the date of publication of this material. The Company does not warrant theaccomplishment of the forecasts. Actual results may different significantly from the forecasts due to risks and uncertain
factors associated with the world economy, the state of competition, and fluctuations in foreign exchange rates andinterest rates.
For matters concerning results forecasts, please refer to “1. Qualitative Information on Financial Results for the First
Half of Fiscal Year Ending March 31, 2022 (3) Explanation about information on future forecasts such as consolidated
results forecasts" on page 4 of the attached materials.

(How to obtain supplementary materials for quarterly results)
The material is available at Digital Arts Inc. corporate website.

○Table of Contents for the Attached Document
1. Qualitative Information on Financial Results for the First Half of Fiscal Year Ending March 31, 2021 ···· 2(1) Explanation about business results ························································································ 2(2) Explanation about financial position ······················································································· 4(3) Explanation about information on future forecasts such as consolidated results forecasts ················· 4
2. Quarterly Consolidated Financial Statements and Primary Notes ·················································· 5(1) Quarterly consolidated balance sheet····················································································· 5(2) Quarterly consolidated statement of income and comprehensive income ······································· 6
Quarterly consolidated statement of income
Consolidated first half ································································································ 6
Quarterly consolidated statement of comprehensive income
Consolidated first half ·································································································· 7(3) Quarterly consolidated statement of cash flows ······································································ 8(4) Notes to quarterly consolidated financial statements ································································· 9(Notes on the premise of a going concern)············································································· 9(Notes on significant changes in the amount of shareholders' equity) ·········································· 9(Application of special accounting methods to the preparation of quarterly consolidated financial statements)(Change in accounting policy) ···························································································· 9

1. Qualitative Information on Financial Results for the First Half of Fiscal Year Ending March 31, 2022
(1) Explanation about business results
During the first half of the consolidated fiscal year under review (April 1, 2021 to September 30, 2021), the Japanese
economy continued to face challenging circumstances due to the continuing worldwide effects of COVID-19. Consumer
spending and corporate earnings continued to decline as a result of the stagnation and contraction of economic activities.
Signs of an economic recovery continued to emerge with the step-by-step relaxation of voluntary restraints on economic
activities in response to government measures for stimulating the economy and progress in vaccination. However, theeconomic outlook remained uncertain.
In the security industry, in which the Digital Arts Group (the “Group”) operates, the importance of security solutions
grew in response to the risk of information leaks and increasingly sophisticated and diverse cyber attacks, including
targeted attacks targeting specific enterprises, government agencies and other organizations. At the same time, demand
for security products made in Japan rose under the chaotic world situation. Further, in the enterprise sector market,
working from home became unavoidable, and demand for software products to prepare for working in the home andperforming business processes securely and efficiently increased under the prolonged effects of the pandemic.
Meanwhile, progress was also made in the public sector market, with the strengthening of security measures by local
governments, in addition to the GIGA School Concept, which envisions the development of an environment with one
learning terminal for each school-aged child.
Under these conditions, in the enterprise sector market, the Group took advantage of the fact that more and more
people are working from home and web services and e-mail environments are shifting to the cloud and expanded salesof its i-FILTER@Cloud and m-FILTER@Cloud services, creating a world in which the Internet and emails can be usedwithout hesitation in the cloud environment. In the public sector market, the Company provided a special version of iFILTER that caters to needs arising from the GIGA School Concept. At the same time, it continued to run campaigns,
including the provision of free services that conform to the Guidelines on Education Information Security Policy, in its
ongoing efforts to expand sales from schools. In addition, the Company focused on proposing solutions to support local
government efforts to strengthen security measures, which will be ramped up from the next fiscal year.
Demand in the enterprise and public sector markets has soared for cloud service products due to the effects of the
COVID-19 pandemic. A large part of the amount of the contract for traditional mainstay license sales products isrecorded as sales in a lump at the time of shipment. For cloud service products, recorded sales are apportioned on amonthly basis throughout the service provision period. For that reason, the ratio of cloud service product contracts toall contracts remained high in the current fiscal year, sustaining a trend from the previous fiscal year. Net sales deferredto the next and subsequent fiscal years increased from the end of the first half of the previous fiscal year.
As a result, net sales for the first half of the consolidated fiscal year under review amounted to 4,552 million yen (up46.8% year on year), operating profit reached 2,079 million yen (up 58.7% year on year), ordinary profit came to 2,080
million yen (up 58.0% year on year), and profit attributable to owners of parent was 1,433 million yen (up 57.7% year
on year).
Overview of Consolidated Business Results(Million yen)First three months ofyear ended March
31, 2021

First three months ofyear ending March
31, 2022

1,413

1,919

＋505

＋35.7

Operating profit

485

731

+246

+50.8

Ordinary profit

489

732

+243

+49.8

Profit attributable toowners of parent

334

506

+172

+51.6

Net sales

Change% Change

The following describes business performance in separate markets.
Enterprise Sector Market
In the enterprise sector market, orders increased for i-FILTER and m-FILTER cloud services which are used to reduce
costs and operations management burdens in response to the spread of COVID-19. In addition, net sales for Digital
Arts Consulting Inc., a subsidiary offering security consulting services, increased with a progress achieved in new
customer acquisition in line with greater corporate demand for cybersecurity and digital transformation (DX).
Net sales in this market reached 2,271 million yen, up 23.9% year on year.
Public Sector Market
In the public sector market, the Company has enjoyed a high degree of recognition and a large market share as aprovider of domestically produced security solutions. Sustaining a trend from the previous fiscal year, many schools
adopted the Company's i-FILTER@Cloud based on the GIGA School Concept in recognition of its reliability andfunctionality, enabling learning at home without anxiety. As a result, orders for the cloud service surpassed theCompany's estimate. Further, the Company received orders for i-FILTER projects for government and municipal officesin the second quarter under review, ahead of its forecast of receiving the orders in the third quarter of the current fiscal
year. Orders for i-FILTER projects for local governments also showed progress. These developments caused net sales
in the market to expand substantially.
As a consequence, net sales in this market stood at 2,051 million yen, up 95.5% year on year.

Consumer Sector Market
In the consumer sector market, the Group focused on collaborating with mobile network carriers and MVNOs and onsales of i-FILTER for Multiple Devices, which can be used on multiple operating systems using a single serial ID. As aresult, it attained an increase of users.
Net sales in this market amounted to 229 million yen, up 4.4% year on year.

(2) Explanation about financial position(Assets)
Total assets at the end of the first half of the consolidated fiscal year under review increased 3,732 million yen fromthe end of the previous fiscal year, to 18,588 million yen. This was due mainly to an increase of 3,300 million yen in
cash and deposits.
(Liabilities)
Total liabilities at the end of the first half of the consolidated fiscal year under review rose 2,701 million yen from theend of the previous fiscal year, to 7,495 million yen. This was due mainly to an increase of 2,490 million yen in advances
received, attributable to an increase in the amount of contracts for which orders were received.
(Net assets)
Net assets at the end of the first half of the consolidated fiscal year under review grew 1,030 million yen from the endof the previous fiscal year, to 11,093 million yen. This was mainly due to an increase in retained earnings due to therecording of profit attributable to owners of parent, which outweighed a decrease in dividends paid.

(3) Explanation about information on future forecasts such as consolidated results forecasts
The Group has revised the forecast for the full-year financial forecast announced on May 7, 2021. Please refer to the
Notice of Difference between Forecasts and Results for the first half of the fiscal year ending March 31, 2022, and FullYear Financial Forecasts Revision released today for matters related to the revisions made to the forecasts.

2. Quarterly Consolidated Financial Statements and Primary Notes(1) Quarterly consolidated balance sheet(Million yen)First half of fiscal 2022
(from April 1, 2021
to September 30, 2021)

First half of fiscal 2021
(from April 1, 2020
to September 30, 2020)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - tradeFinished goods
Supplies
Other

11,382
1,268

14,682
1,527

0
3

0
2

70

111

12,725

16,326233

215

Software
Other

1,274
128

1,232
289

Total intangible assets

1,403

1,522

Investments and other assets

493

524

Total current assets
Non-current assets
Property, plant and equipment
Intangible assets

Total non-current assets
Total assets

2,130

2,262

14,856

18,588

32
688

19
678

194
3,370

373
5,861

Liabilities
Current liabilities
Accounts payable - trade
Income taxes payable
Provision for bonuses
Advances received
Other

456

511

Total current liabilities

4,743

7,445

Non-current liabilities
Asset retirement obligations

48

48

Other

1

1

Total non-current liabilities

50

50

4,793

7,495

713
963

713
959

Total liabilities
Net assets
Shareholders' equity
Share capital
Capital surplus
Retained earnings
Treasury shares

8,699

9,712

△342

△326

Total shareholders' equity

10,034

11,058

7

7

7

7

8
12

12
13

Accumulated other comprehensive income
Foreign currency translation adjustment
Total accumulated other comprehensive
incomeShare acquisition rights
Non-controlling interests
Total net assets
Total liabilities and net assets

10,062

11,093

14,856

18,588

(2) Quarterly consolidated statement of income and comprehensive income
Quarterly consolidated statement of income
Consolidated first halfFirst half of fiscal 2021
(from April 1, 2020
to September 30, 2020)
3,101(Million yen)First half of fiscal 2022
(from April 1, 2021
to September 30, 2021)
4,552

Cost of sales

875

1,238

Gross profit

2,225

3,314

915

1,234

1,310

2,079

0

0

Gain on forfeiture of unclaimed dividends
Foreign exchange gains

01－

Subsidy income
Miscellaneous income

1
1

－
0

Total non-operating income

5

0

－
－

0
0

1,316

2,080

8

1

8

1

Loss on retirement of non-current assets

0－

Total extraordinary losses

0

－

1,325

2,081

Net sales

Selling, general and administrative expenses
Operating profit
Non-operating income
Interest income0

Non-operating expenses
Foreign exchange losses
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on reversal of share acquisition rights
Total extraordinary income
Extraordinary losses

Profit before income taxes
Income taxes

417

646

Profit908

1,435

Profit (loss) attributable to non-controlling interests△01

Profit attributable to owners of parent

908

1,433

Quarterly consolidated statement of comprehensive income
Consolidated first three months

ProfitOther comprehensive income
Foreign currency translation adjustment

First half of fiscal 2021
(from April 1, 2020
to September 30, 2020)
908(Million yen)First half of fiscal 2022
(from April 1, 2021
to September 30, 2021)
1,435

△1

0

△1

0

Comprehensive income

906

1,435

Comprehensive income attributable toComprehensive income attributable to owners ofparentComprehensive income attributable to noncontrolling interests

907

1,433

△0

1

Total other comprehensive income

(3) Quarterly consolidated statement of cash flows(Million yen)First half of fiscal 2022
(from April 1, 2021
to September 30, 2021)

First half of fiscal 2021
(from April 1, 2020
to September 30, 2020)
Cash flows from operating activities
Profit before income taxes

1,325

2,081

428
△47

434
178

Interest income
Loss on retirement of non-current assets

△0
0

△0
－

Foreign exchange losses (gains)
Gain on reversal of share acquisition rights
Decrease (increase) in trade receivables
Decrease (increase) in inventories

△2
△8
70
0

△0
△1
2,231
0

Increase (decrease) in trade payables
Increase (decrease) in accounts payable - other

2
△17

△13
65

Decrease (increase) in other current assets
Increase (decrease) in other current liabilities

△18
23

△40
△15

Other

△2

△35

Subtotal

1,753

4,884

0

0

△439
4

△653

Income taxes refund
Net cash provided by (used in) operating activities

1,318

4,231

Purchase of property, plant and equipment
Purchase of intangible assets

△22
△352

△0
△527

Net cash provided by (used in) investing activities

△374

△528

11

12

Purchase of treasury shares
Dividends paid
Proceeds from issuance of share acquisitionrightsNet cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents

－
△350

△0
△420

－

5

△338

△403

0

0

605

3,300

Cash and cash equivalents at beginning of period

7,651

11,382

Cash and cash equivalents at end of period

8,257

14,682

Depreciation
Increase (decrease) in provision for bonuses

Interest and dividends received
Income taxes paid－

Cash flows from investing activities

Cash flows from financing activities
Proceeds from disposal of treasury shares(4) Notes to quarterly consolidated financial statements(Notes on the premise of a going concern)
There are no applicable matters.
(Notes on significant changes in the amount of shareholders’ equity)
There are no applicable matters.
(Application of special accounting methods to the preparation of quarterly consolidated financial statements)
Calculation of tax expenses
With respect to the calculation of tax expenses, reasonable estimations are performed on an effective tax rateestablished after applying tax accounting to profit before income taxes for the consolidated fiscal year, which
includes the first half of the consolidated fiscal year under review, and such tax expenses are calculated bymultiplying this estimated effective tax rate by profit before income taxes.
(Change in accounting policy)(Application of Accounting Standard for Revenue Recognition, etc.)
The Company has applied “Accounting Standard for Revenue Recognition” (ASBJ Statement No.29 issued on
March 31, 2020; hereinafter, “Accounting Standard for Revenue Recognition”), etc. from the beginning of the first
three months of the consolidated fiscal year under review and recognizes revenue in the amount expected to bereceived in exchange for promised goods or services when the control of those goods or services is transferred tocustomers.
As a result, sales rebates, which were previously recorded as selling, general and administrative expenses, arenow deducted from sales. The application of the Accounting Standard for Revenue Recognition, etc. is subject to thetransitional treatment provided for in the proviso of Paragraph 84 of the Accounting Standard for Revenue Recognition.
The cumulative effect of the retrospective application, assuming the new accounting policy had been applied toperiods prior to the beginning of the first three months of the consolidated fiscal year under review was added to or
subtracted from the beginning balance of retained earnings of the first three months of the consolidated fiscal year
under review. However, this did not have any impact on such beginning balance.
As a result of application of the Accounting Standard for Revenue Recognition, etc., net sales and selling, generaland administrative expenses for the first half of the consolidated fiscal year under review both decreased, causing
gross profit to fall. However, the impact was insignificant and operating profit, ordinary profit and profit before income
taxes were not affected.