Digital Garage, Inc.

FYE June 30, 2016 Financial Report2016.8.10

Table of Contents
Mission and Business Model・・・・・・・・・・ 3
Investment Highlights・・・・・・・・・・・・・ 8Group Financial Performance Review・・・・・ 14
Segment Performance Review・・・・・・・・ 20
Appendix・・・・・・・・・・・・・・・・・・・ 37

Copyright © 2016 Digital Garage, Inc. All Rights Reserved2Mission & Business Model

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

3Corporate Mission
As aDigital Garage creates innovative
business context for the new
Internet age and provides uniquebusiness solutions for new
lifestyles, society, and industries bylinking
Real & Cyber
Local & International
Marketing & Technology
Present & Future

Copyright © 2016 Digital Garage, Inc. All Rights Reserved4DGʼs Business Model
Producing and incubating Internet businesses by optimizing
our 3 core strengths: IT, MT, and FTInformation
Technology

Information
Technology

MarketingTechnology

MarketingTechnology

Financial
Technology

Financial
Technology

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

5Enabling Platform for DGʼs Incubation Model
DG continues to incubate and develop unique Internet services
through its Enabling Platform since the early days of the Internet

Ⅰ

Ⅱ

Ⅲ

Portal/Search

e-commerce/
Destination Site

Social Media

1995-2000

2000 -

2008-2015

Advertising2016 -

Payment
環亞智富有限公司

Advertising / Promotion

Big Data Businesse-Commerce / Online Settlement Platform

Enabling Platform – Two Revenue Sources
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

6Mid-Term Strategy - The Slogan and Concept

IT/MT/FT × Open Innovation〜 Creating New Contexts for a Better Society 〜Ⅰ

Organic growth in each
IT/MT/FT segment

Ⅱ

Accelerating incubation throughDGʼs original cross-sectional
platforms of each segment

Ⅲ

Nurture next generation ofmedia with DG Lab following
Kakaku.com and Tabelog

Incubation
Technology

Media Incubation(DG Lab)MarketingTechnology

Financial
Technology

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

7Investment Highlights

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

8Investment Highlights
Sales record high 43.7 B JPY +15% YoY, marking 6 years continuous growth in both sales and profit〜 Accelerating open innovation with the establishment of an R&D center ”DG Lab”〜

Ⅰ

Expansion of the Advertisement/Payment(MT/FT) bases led to an incredibly high profit,+ over 30% YoYSmartphone business continues to grow with good sales performance in Advertising division. In Data marketing
division, began business partnership with Credit Saison and other leading card companies



In Payment division, annual transaction volume surpassed 1 T JPY, growing faster than the market average.

Collaborating with ”DG Lab”, start approaching in next generation FinTech area (Blockchain)

Although unachieved budget, IT (investment business) built a steady eco system in global
investments

Ⅱ

Ⅲ



Although IT did not achieve the budget due to strong yen and slipped deal of selling stocks under the deteriorating
market conditions, investment balance grew to 11 B JPY through continued selected investments

Driving open innovation with the establishment of “DG Lab”. Focusing on Blockchain, AI, VR/AR, Security, andBiotechnology, aims to create business for the next generation

Dividend forecast increase due to TSE 1st stock market listing, change in financial term toMarch from next FY17, prospect for substantially highest-ever profitIncreasing annual dividend forecast to 30 Yen, as well as delivering commemorative divided 15 Yen per share tocelebrate DGʼs market change to TSE 1st section; dividend payout ratio rose to 27%

Integrating fiscal terms of consolidated companies to strengthen entire group management. Looking into IFRS
implementation in the futureForecasting 5.3 B JPY net income in spite of nine months settlement period. On a 12 month basis, prospecting
record high net income 6.1 B JPY, substantially +18% YoY
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

9Establishment of “DG Lab” (released on 7/4)
With Kakaku.com and Credit Saison establish open innovation-based R&D organization “DG Lab”
〜 Preparing for 2020, creating next-generation business with Blockchain, AI, and VR/AR 〜【DG Lab core three partners】＜Overview＞＜Estimating fields of partners＞
Advertising

Distribution

Automotive

ConsumerElectronics

Broadcasting /Contents

Cosmetics /Drugs

Financials

Game

Real estate

Air transportation

OthersCarriers＜DG Lab Fund＞
Digital Garage ＋ Daiwa Securities Group
Fund size：10-20B JPY＜Companies considering business cooperation＞
・iRidge, Inc・Kodansha Ltd.
・SONY CSL
・Daiwa Securities

・Dentsu Inc.
・Bengo4.com, Inc.
・Dentsu ScienceJam Inc.
・The Bank of Yokohama, Ltd.
・PARCO CO., LTD
・Resona Bank Ltd.
・BI.Garage, Inc.
And others (Japanese alphabetical order)※7/4 Press Release
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

10Establishment of ”DG Lab Fund” (released on 7/22)
Establish “DG Lab Fund” to invest in and out of Japan companies with next
generation-technologies, and to coordinate with business partners〜 Investing in DG Lab core area and supporting the portfolio companies
to increase their corporate value jointly with Daiwa Securities Group 〜

Operation
management
Investment

Management
fee
Distribution※This press release is not intended to offer any investment operation services and specific operation products. DG and Daiwa Securities Group are not calling for any participation of DG Lab Fund through this press release.
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

11Revision of Forecast Dividend (released on 6/6)
 Delivering commemorative divided 15 Yen per share to celebrate DGʼsmarket listing change to TSE 1st section
 Annual dividend is 30 Yen, payout ratio increased from 12.8％ to 27.3%

FY15.6

Dividend
Per Share(Ordinary)(Commemorative)

Dividend Payout Ratio

FY16.6

ActualInitial

RevisedChange25 Yen15 Yen30 Yen+15 Yen( 5 Yen)(15 Yen)(15 Yen)(- Yen)(15 Yen)(+15 Yen)(20 Yen)

23.1%

12.8%

27.3%

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

12Track Record For DG Groupʼs Growth
Achieved growth in sales and net income for the six consecutive year
〜 KPI of each Investment・Advertisement・Payment in progress 〜
Trends in Net income

FY14.６

Full Year Act
Forecast (9 month)
Forecast (12 month basis)(B JPY)

Opened
DG717

2.7
FY13.6
Actualʼ14.12
Bengo4.com
CrowdWorks
IPO

ʼ16.7
Launched
DG Lab

Payment
volume >1 T JPY

ʼ15.7
iRidgeIPO

ʼ14.4
LaunchedBIG
MINING
ʼ13.11

ʼ15.12

5.0

Investment
Balanceʼ16.5
Developed
Saison
DMP

5.1

6.1
5.3

2.8
FY14.6
ActualAd
Sales

Payment
Transaction
VolumeFY15.6

FY16.6

Enhanced portfolio with total 3 year investment of 11 B
JPY for domestic and global

8.6

9.0

11.1
( B JPY )Performance ads sales grew at 2 yr CAGR of 26%,
exceeding the market average growth

9.5

10.2

15.1

0.9

+26%

( B JPY )Annual transaction volume grew steadily,surpassing 1 trillion JPY

0.8

CAGR

CAGR

1.1

+19%

(T JPY)Monthly group-wide users surpassed 150 million

FY15.6
Actual

FY16.6
Actual

FY17.3
Plan

Note: Net income attributable to owners of parent for FY15.6 onwards

Kakaku.com
Group Users

Tabelogʼs Monthly users

56.6

67.2

72.6

(million)

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

13Group Financial Performance Review

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

14

FY16.6 (Cumulative) Consolidated P/L Summary
Marking record-high Sales + 15% YoY 43.7 B JPY, increasing Net income 5.1 B JPY〜 Unable to achieve profit forecast due to foreign exchange loss
from strong yen and slipped deal of stock selling 〜
FY16.6

FY15.6
JPY in Millions(Full Year Act)

(Initial
Forecast)

Act vs Fcst

YoY

(Full Year Act)%

Amount%AmountNet sales

38,08741,00043,763+14.9+5,675+6.7+2,763Operating income

4,809

5,200

4,201

-12.6

-608

-19.2

-998

Non-operating income

3,736

3,031

-18.9

-704

Investment profit on equity method

2,080

2,406

+15.6

+325

Foreign exchange gain

1,090

-

-

-1,090Non-operating expenses

936

1,040

+11.1

+104

Foreign exchange loss

-

689

-

+689

Ordinary income

7,610

6,193

-18.6

-1,417Extraordinary income

2,463

1,392

-43.5

-1,070

2,363

157

-93.3

-2,206

-

521

-

+521

23

706

29 x

+682

824

10

-98.7

-813

7,574

-18.1

-1,674

-7.6

-625

2,385

-38.1

-1,469

5,165

+1.7

+83

-6.1

-334

Gain on change in equity
Gain on sales of shares of sub. and associates

Gain on transfer of business
Extraordinary loss
Income before income taxes

9,248

Income taxes

3,855

Net income attributable to owners of parent

5,081

8,200
5,500

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

15

FY16.6 (Cumulative) Consolidated Segment P/L Summary
Ensuring double-digit profit growth in all IT/MT/FT, especially big rise in MT/FT +30% YoY〜 IT was not able to achieve forecast due to decrease of sales from strong yen andslipped deal of stock selling affected by the severe market condition 〜
FY16.6

FY15.6
JPY in Millions

Net sales(Full Year Act)

(Initial
Forecast)

Act vs Fcst

YoY

(Full Year Act)%

Amount%Amount38,08741,00043,763+14.9+5,675+6.7+2,763

Incubation Technology

7,454

7,000

6,343

-14.9

-1,111-9.4-656

MT Marketing Technology

16,06418,50021,028+30.9+4,963+13.7+2,528FT Financial Technology

14,56815,50016,392+12.5+1,823

+5.8

+892

-

-

-

-

-

-

-

Income before income taxes

9,248

8,200

7,574

-18.1

-1,674-7.6-625

Incubation Technology

2,804

4,100

3,105

+10.7

+300

-24.3

-994

MT Marketing Technology

1,061

1,390

1,396

+31.5

+334

+0.4

+6

FT Financial Technology

1,335

1,840

1,758

+31.6

+422

-4.4

-81

MI Media Incubation

4,477

2,500

3,052

-31.8

-1,424

+22.1

+552

2,361

-

157

-93.3

-2,203--IT

MI Media Incubation

IT（Gain on change in equity）

Note: Income before income taxes per segment is based on figures prior to elimination or group deduction, etc
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

16

FY16.6 Consolidated B/S Summary
JPY in Million

FY15.6

FY16.6

Difference

Current assets

57,742

48,324-9,418Cash and deposits

30,956

15,703-15,252

Receivables

11,646

13,946+2,299

Money held in trust

3,120

2,592

-527

Operational investment securities

8,208

11,164+2,956

Fixed assets

28,75229,011+259

Investment securities

14,22014,844+623

Goodwill

6,237

5,765

-471

Total assets

86,49577,335-9,159Current liabilities

50,62330,187-20,436

Deposits

20,99821,876+877

Short-term borrowing

23,533

3,200-20,333

Fixed liabilities

6,805

16,484+9,678Long-term borrowing

5,546

15,370+9,824

Total liabilities

57,42946,671-10,758

Net assets

29,06530,664+1,599

Shareholders' equity

24,64028,610+3,969Common stock

7,426

7,435

+8

Capital surplus

2,854

2,825

-28

Retained earnings

14,42918,419+3,989

Accumulated other comprehensive income

4,002

1,502

-2,500

Unrealized gains on securities

2,585

138

-2,44786,49577,335-9,159Liabilities / Net assets

Reason for change / Remarks

Repayment of borrowings, new investment, payout of corporate tax
and dividends, etc
Payment segment related items
Payment segment related items
New investment, Mark-to-market for stock related to IPO, etc.
Partial reclassification to operating investment securities, increased
investment profit on equity method, Mark-to-market for listed stocks,
etc.

Payment segment related items
Partial repayment of borrowings of funds for share purchaseof econtext ASIA
Shifted to long-term refinancing with low interest rate

Driving finance strategy with focus on
asset and capital efficiency

ROE

FY15.6

FY16.617.2 ％

17.6 ％

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

17Change in Fiscal Term (Fiscal Year-End)Integrating our Groupʼs Fiscal Term to March;driving the entire Group management
Reasons for thechange Integrate our groupʼs fiscal term
to drive efficient business
operation
 Swiftly grasp management
information and improvetransparency of management
through timely and appropriate
disclosure of management
information
 Correspond to integrating
consolidated companiesʼ fiscal
period, taking future
implementation of IFRS in
consideration

Details of Change of
Fiscal Year
FY17.3 comprises the financial results for the ninth
months2016
Mar. end

2017

Jun. end
1Q

Sep. end
2Q

Dec. end

Mar. end

3Q

9 months financial results(2016/7/1 – 2017/3/31)※ We will change our financial term from June to March only if we get an approval from our shareholders at the general
meeting in September 29 th, 2016
Copyright © 2016 Digital Garage, Inc. All Rights Reserved18Forecast for March 2017
Forecasting Sales 37.5 B JPY, Income before taxes 7.1 B JPY, Net income 5.3 B JPY〜 On 12 month basis, forecasting record high Net income 6.1 B JPY, substantially + 18% YoY 〜

FY15.6

FY16.6

FY17.3(9 Month)

JPY in Millions(Full Year Act) (Full Year Act)Net sales(Forecast)Ref.) FY17.3(12 month(YoY%)

basis)

38,08743,76337,50050,000+14.3

ITIncubation Technology

7,454

6,343

6,500

8,666

+36.6

MT

Marketing Technology

16,06421,02817,50023,333+11.0

FT

Financial Technology

14,56816,392

13,50018,000+9.8

MIMedia Incubation

-

-

-

-

-

9,248

7,574

7,100

8,500

+12.2

Income before income taxes
IT

Incubation Technology

2,804

3,105

2,500

3,333

+7.4

MT

Marketing Technology

1,061

1,396

1,100

1,466

+5.1

FT

Financial Technology

1,335

1,758

1,500

2,000

+13.7

MI

Media Incubation

4,477

3,052

2,900

2,900

-5.0

5,081

5,165

5,300

6,100

+18.1

25 Yen30 Yen20 Yen(5 Yen)(15 Yen)(20 Yen)(20 Yen)(15 Yen)

Net income attributable to owners of parent

Dividend Per Share(Ordinary)(Commemorative)

Note: Income before income taxes per segment is based on figures prior to elimination or group deduction, etc

Approximate figures byannualizing numbers forcompanies ending fiscal
year in June which aresupposed to change fiscal
term
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

19Segment Performance Review

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

20

IT Segment
Ⅰ

Incubation Technology Segment
Net Sales

Income Before
Income Taxes

FY15.6

Actual

7,454 M JPY

2,804 M JPY

FY16.6

Actual

6,343 M JPY

3,105 M JPY

FY17.3

Forecast

6,500 M JPY

2,500 M JPY➤ DG Incubation, Inc.

Invests in and incubates cutting-edge Internet startups➤ Open Network Lab, Inc.

Provides support to Internet-business entrepreneurs with global visions➤ Digital Garage US, Inc.

The US-based global strategy headquarters➤ DK Gate, Inc. （66％ stake）

Invests in and incubates next generation content with Kodansha globally Kodansha Advanced Media LLC（19％ stake／investment）

Marketing in digital distribution in US and English-speaking countries, film adaptation, event planning, etc

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

21

IT Segment Highlights
Segment sales

6.3

Portfolio achieved successful exits.
Investment balance reached 11 B Yen

B Yen【DGIʼs track record】

DGI sales

4.6

B Yen

Investment
balance11

Amountinvested

5.0

B Yen

14
12
10
8
6
4

Net Sales
Amount Invested
Investment
Balance

11.1
5.0
4.6

2
B Yen

0

FY13.6
FY14.6
FY15.6
FY16.6Full-Year Full-Year Full-Year Full-Year
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

22

IT Segment Highlights

Major Portfolio

Current Portfolio

Blockstream [U.S. /Canada]

Increments [Japan]# ofcompanies

Book Value(B Yen)Equity110

10.4

Domestic32

1.8

Droom [India]

Welby [Japan]

Overseas78

8.5

A leading online marketplace for
new and second-hand automobiles
in India

Builds apps for patients with chronic
malady, diabetes, cancers

0.7

Wevr [U.S.]

Goodpatch [Japan]

Fund
Total

6

116

11.1

Note) DG Incubationʼs investment balanceMark-to-market as of quarter end forlisted stocks
Equity includes convertible note

Develops sidechain
technologies, parallel
blockchains that areinteroperable

Virtual reality community and VR
media player for aspiring andprofessional creatives

Estimote [U.S.]
Provides small, wirelesssensors and location
technology to retailers

Provide technicalknowledge platform
called Qiita forengineers

Web development and consulting
service firm

Monstar Lab [Japan]
Operates Sekai Lab, a global outsourcing
platform that provides a network of over
10 k engineers in over 15 countries
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

23

IT Segment – image of mid to long term growth
Achieved ROI of 2x in the previous mid-term plan. Aim for ROI ofover 2x in the current mid-term plan2013.6 - 2015.6

2016.6 - 2018.6
 Track record
 Investment, Growth opportunity
 DGʼs global network

20(B Yen)10

Total investment＋
Beginning
Investment Balance Seed accelerator
ROI

>2x

ROI

2x

EndingInvestment Balance+
Total Sales

Total investment＋
Beginning
Investment BalanceEndingInvestment Balance+
Total Sales
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

24

MT Segment
Ⅱ

Marketing Technology Segment
Net Sales

Income Before
Income Taxes

FY15.6

Actual

16,064 M JPY

1,061 M JPY

FY16.6

Actual21,028 M JPY

1,396 M JPY

FY17.3

Forecast

17,500 M JPY

1,100 M JPY➤ Marketing Technology Company

Supports clientʼs business through performance-based ads, Online to Offline strategy
and web marketing➤ Business Design Company
Offers consulting-based marketing➤ BI.Garage, Inc.

Develops and provides ad products incorporating data science, social
marketing, and cutting edge ad technology➤ NaviPlus Co., Ltd.

Offers website support tools including personalized recommendation engines

Copyright © 2016 Digital Garage, Inc. All Rights Reserved25

MT Segment Highlights
Segment sales

21

YoY

Achieved + over 30% YoY growth both in sales andprofit. Performance based ads sales grew 1.5 x YoY

B Yen
+31 ％
(B Yen)Segment
Income before
income taxes

1.3
YoY

B Yen
+31 ％

8.5
3.2
FY12.6【Net sales】
11.0
5.6
FY13.6

14.8

16.0

21.0

+31%

9.5

10.2

FY14.6

FY15.6

Performance-based
ads

15.1
FY16.6

Data Marketing
Solution
Copyright © 2016 Digital Garage, Inc. All Rights Reserved26

MT Segment Highlights

Performancebased ad sales

15

YoY

B Yen
+49 ％

Smartphone / appdomains

3.9
YoY

B Yen
2.2 x

Growth continuing to gain traction insmartphone / app domains【Sales by Clients】(B Yen)

10.2
1.8
2.5

15.1

×1.5 [YoY]

3.9

×2.2

4.1

×1.6
Smartphone / app

5.9

7.0

FY15.6

FY16.6×1.2

Cosmetics / HR,etc
Financial Performance based ads grew steadily ( +49% YoY )→ Surpassing the market growth (+21% YoY *) Smartphone domains grew 2.2 x YoY
 All sub segments in financial, cosmetics, HR grew* “2015 advertising expenditures in Japan”, Dentsu
Copyright © 2016 Digital Garage, Inc. All Rights Reserved27

MT Segment – image of mid to long term growth
Strategy【Image of sales】(B Yen)

【Data Marketing Solution】

Performance-based ads (PC)【Business Design Solution】

Smartphone/app ads

Data Marketing Solution

16.0

21.0

Accelerate growth with next gen solution
utilizing big data

Growth drivers
Mid to long termHigh quality, communication design with aworld class UI/UX in sync with a leading
creative lab

CAGR：+30%【Smartphone/app】


Drive business globally by leveraging
expertise in Japan

CAGR：+20%【Performance-based ads (PC)】Key Focus
This term
Growth drivers
Last 3 years



Vertical development beyond Finance,
Cosmetics, HRDiversify advertising methods with social
media ads as a core

CAGR：+15%

FY15.6 FY16.6
Act
Act

FY18.6Plan
Copyright © 2016 Digital Garage, Inc. All Rights Reserved28

MT Segment – BI. Garageʼs strategy and vision

Overview of data science businessin collaboration with DG Lab
Segments ofcompanies
participating in DG Lab
Advertising
Consumer Electronics
Carriers
Distribution
Broadcasting / Contents→Platform which
supports R&D andcorporate strategy
by utilizing datafrom participatingcompanies in DG
Lab

Data Science(Analytics＆Development)

Real estate
Automotive
Financials
Air transportation
Cosmetics / Drugs
Game
OthersPublic DMP

Private DMP→Dentsu,
Kakaku.com,
Web Media Data ,Twitter,Facebook
distribution→Credit Saison→JACCS , etc
Used by credit
card companies(DMP)

OPEN DATA
・Open data fromgovernment,
local government
・Data fromstrategic zone
・Data from
Shibuya ward /Minato ward

New
Technology

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

29

FT Segment
Ⅲ

Financial Technology Segment
Net Sales

Income Before
Income Taxes

FY15.6

Actual

14,568 M JPY

1,335 M JPY

FY16.6

Actual

16,392 M JPY

1,758 M JPY

FY17.3

Forecast

13,500 M JPY

1,500 M JPY➤ econtext ASIA Ltd.

Payment corporation to expand e-commerce platforms globally➤ econtext, Inc.

Integrates online and offline business as the convenience store payment pioneer➤ Veritrans Inc.

Provides leading e-commerce payment solutions➢ PT MIDTRANS（Veritrans Indonesia) ( 21.81% owned by econtext ASIA／Non-consolidated）
Indonesian JV➢ Citrus Payment Solutions Pte. Ltd（ 16.72%／Investment ）The holding company for the Indian online payment solutions provider( Citrus Payment Solutions Pvt. Ltd )➢ Sendo Technology JSC (12.89%／Investment)
On-line marketplace for C2C and B2C in Vietnam

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

30

FT Segment Highlights
Amount of annualtransactions

1.1
YoY

T Yen
+18 ％

# of annualtransactions

0.2 B
YoY

Exceeded 1.15 trillion yen in annual transaction
volume in FY16.6. Sustains growth rate exceeding
the market growth【Amount of transactions 】(B Yen)

+18%

1,154

976

817

+19 ％

Market growthrate *

7.6%* METI “Domestic BtoC E-Commerce 2015”

FY14.6

FY15.6

FY16.6
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

31

FT Segment Highlights
Segment sales

16.3
YoY

B Yen
+13 ％

Segment
Op. income

1.7
YoY

B Yen
+35 ％

Segment
Income before
income taxes

1.7
YoY

B Yen
+32 ％

Cost reduction from reorganization helped boost
op income. Managing group resources efficiently（M Yen）

Transaction
amount

FY15.6 FY16.6
976

1,154

(B Yen)(B Yen)YoY+18.2%Net sales

14,568 16,392+12.5%

Op. income

1,320+35.2%

Op. margin
Income before
income taxes

1,785

9.1%

10.9%

1,335

1,758

・Increased volume in digitalcontent
・Growth in smartphone-based
CtoC (auction, flea market)

・Reduced cost from reorg
・Managed group resources
efficiently+31.6%

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

32

FT Segment – image of mid to long term growth
Growth Opportunities【Next gen payment (FinTech)】

Non-EC payment( new market )・Solution utilizing blockchain
・Financial smart contract
・Verification testing in sync with DG Lab【Alliance w/ major partners
including financial institutions】

Next gen payment(FinTech)・Initiated OEM to customers including

Resona bank and Orico card. Expand tofinancial business including lending business・Collaborate with business partners inpayment with large customer base【Non-EC payment (new market) 】
・Current service lines w/ mkt size (T Yen)

EC payment 10 - 15％ growth（Organic growth in existing
business）

Food (12)Real estate (9)Funeral (1.7)

Global expansion ( Asia )Alliance with major
partners including financial
institutions

セレモニーPAY

Driving school (0.4)
FY15.6Act

FY16.6Act

FY20.6
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

33

FT Segment - Building for the future with Blockchain technologies“What’s possible here is the new creation of an internet of value”
Reid Hoffman, LinkedIn Cofounder

Blockchain

SidechainSmartcontract

BitcinDigitalReal estateregistries

two‐way‐peg

Pointexchange

Sidechainʼs applications
Other
digitalcurrency

Real estate transaction
Smart contract
Point exchange system
Exchange system forother currencies
 Buying and selling ofused cards, etc





Other
digitalcurrency

Verification testingin DG Lab

Blockstream is a world-class technology company which develops sidechain technologies
where blockchain, the core technology of bitcoin, can be applied to various usages
DG made an investment in Blockstream in Feb 2016. DG has started to build a business platform in DG
Lab with their technologies
Copyright © 2016 Digital Garage, Inc. All Rights Reserved34

MI Segment
Ⅳ

Media Incubation Segment
Net Sales

Income Before
Income Taxes

FY15.6

Actual

-4,477 M JPY

FY16.6

Actual

-3,052 M JPY

FY17.3

Forecast-

2,900 M JPY➤ Kakaku.com, Inc.（20％／Equity method affiliate）

Operates purchase support service, Kakaku.com and restaurant review andrestaurant service, tabelog, etc.

Copyright © 2016 Digital Garage, Inc. All Rights Reserved35

MI Segment Highlights
Investment
profit on equity
method

2.4
YoY

B Yen
+ 16 ％

Income before
income taxes

3.0
YoY

B Yen
△ 32 ％

Special factor(Previous term)
Extraordinary income as DG
participated in share purchaseby Kakaku via public tender offering

2.2

B Yen

Investment profit on equity methodfrom Kakaku grew steadily【Income before income taxes】(B Yen)4.4

Extraordinary income
Investment profit onequity method

2.3

3.0

2.1

2.4

FY15.6

YoY+16%

FY16.6
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

36Appendix

Copyright © 2016 Digital Garage, Inc. All Rights Reserved37

Half-year Consolidated Sales / Income before income taxes

Sales grew + 15% YoY in FY16.6〜 Sales marked record high. MT and FT led the overall growth 〜【Net Sales】(JPY in Million）
27,00023,91924,00021,00018,000【Income Before Income Taxes】

17,887

20,200

7,000
6,000

19,843

5,693
4,772

5,000

15,0004,000

12,000

3,000

9,000

3,555
2,802

2,000

6,000

1,000

3,000
0

0

1H
上期

2H
下期

FY15.62015.6期

1H
上期

2H
下期

FY16.62016.6期

1H
上期

2H
下期

FY15.62015.6期

1H
上期

2H
下期

FY16.62016.6期
Copyright © 2016 Digital Garage, Inc. All Rights Reserved38

Half-year comparison of IT Segment

Partially sold stocks, delivering Incubation results〜 Enhanced domestic and global portfolio. Investment balance reached about 11 B Yen 〜【Net Sales】(JPY in Million）
5,000

2,500

4,431
3,785

4,000

3,000

【Income Before Income Taxes】

3,023

2,000

1,120

2,000

1,000

1,000

500

0

0

2H
下期

FY15.62015.6期

1H
上期

1,684

1,500

2,557

1H
上期

2,255

2H
下期

FY16.62016.6期

849

1H
上期

2H
下期

FY15.62015.6期

1H
上期

2H
下期

FY16.62016.6期
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

39

Half-year comparison of MT Segment
Growth continuing to gain traction in smartphone / app domains〜 Sales and income before taxes both grew strongly + over 30% YoY 〜【Net Sales】(JPY in Million）【Income Before Income Taxes】

14,0001,000

11,79512,000800

10,000
8,000

835

7,781

8,283

9,232
600

6,000

524

537

560

1H
上期

2H
下期

1H
上期

400

4,000
200

2,000
0

0

1H
上期

2H
下期

FY15.62015.6期

1H
上期

2H
下期

FY16.62016.6期

FY15.62015.6期

2H
下期

FY16.62016.6期
Copyright © 2016 Digital Garage, Inc. All Rights Reserved40Half-year comparison of FT Segment
Transaction amount increased significantly with profit +32 % YoY~ Expanding business in non-EC (food, real estate, etc). Enhancing “Payment OEM” to financial institutions ~【Net Sales】(JPY in Million）【Income Before Income Taxes】
1,000

10,000

8,000

7,082

7,485

8,052

867

8,339
800

6,000

600

4,000

400

2,000

200

0

0

1H
上期

2H
下期

FY15.62015.6期

1H
上期

2H
下期

FY16.62016.6期

891

783

552

1H
上期

2H
下期

FY15.62015.6期

1H
上期

2H
下期

FY16.62016.6期
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

41

Half-year comparison of MI Segment
Investment profit on equity method from Kakaku grew steadily~ Launching incubation business with media as a core ~【Income Before Income Taxes】(JPY in Million）
4,000（in Million）【Monthly unique users 】

3,129
3,000

Kakaku.com

Includes extraordinary income of 2.2 B
JPY. DG participated in share purchaseby Kakaku via public tender offering

1,858

2,000

1,347

1,194

1,000

Tabelog

0

1H
上期

2H
下期

FY15.62015.6期

1H
上期

2H
下期

FY16.62016.6期

Note : The fiscal year for Kakaku.com, Inc ends in March while the one for DG ends in June.
DGʼs full year earnings on a consolidated basis incur Kakakuʼs full year earnings (April - March).

Results Briefing for the Fiscal Year Ending March 31, 2016,
Kakaku.com, Inc.
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

42

FY16.6 Contribution to Net sales(B Yen)

38.0

MT
IT

+4.9
(+31%)

FT

43.7

+1.8
(+13%)△1.1(△15%)
FY15.6
Full year

FY16.6
Full year+5.6 B Yen (+15%)
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

43

FY16.6 Contribution to Operating income(B Yen)

4.8

FT

IT
△1.0
(△30%)

MT+0.3(+32%)

HQ/Elimination
△0.3

4.2

+0.4
(+35%)

FY15.6
Full year

FY16.6
Full year△0.6 B Yen (△13%)
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

44

FY16.6 Contribution to Income before income taxes by Segment(B Yen)9.2

Gain on change
in equity

MT

IT
+0.3
(+11%)

FT

+0.4
+0.3
(+32%)(+31%)

MI

△ 2.2

HQ
△1.4
(△32%) /Elimination

FY15.6
Full year△1.3

FX gain△ 1.4

7.5
FY16.6
Full year△1.6 B Yen (△18%)
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

45

FY16.6 Contribution to Net income attributable to owners of parent(B Yen) △0.6(△13%)

5.0

Op
income△0.7(△19%)+0.1
Non-op (+11%)
incomeGain on change
in equity

△ 2.2

+ 0.3

taxes

5.1

△0.2
Extra△1.4 (△92%)
Non-op ordinary Extra- (△38%)
ordinary
income income

Investment profit
on equity method

Profitattributable
to noncontrolling
Income interests

FX loss
+ 0.6

loss

△0.1
(△44%) △0.8(△99%)

FY15.6
Full year

FY16.6
Full year+0.1 B Yen (+2%)
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

46

Last 6 Year Financial Performance, Consolidated
Net sales
100 M Yen

CAGR 32 ％
337
279
110

380

Net income
437

100 M Yen

CAGR 42 ％

149
9

21

27

50 51
28

11.6 12.6 13.6 14.6 15.6 16.6

11.6 12.6 13.6 14.6 15.6 16.6

ROE

Dividend Payout Ratio

TSE Avg.* 7.9 %14.0 ％
11.8 ％
9.7 ％

17.6 ％
17.2 ％

10.1 ％

11.6 12.6 13.6 14.6 15.6 16.6

23.1％
10.3 ％
8.6 ％
0％

27.3 ％

8.2 ％

11.6 12.6 13.6 14.6 15.6 16.6

Note ) * Tokyo Stock Exchange, Summary of Earnings Digests by Listed Companies, Fiscal year ending Mar. 2015 (TSE 1st, 2nd, Mothers, and JASDAQ)
Used Net income attributable to owners of parent for FY15.6 onwards
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

47

Quarterly Profit and Loss(Consolidated)

JPY in Million

FY15.6

FY16.6

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

8,126

9,760

8,377

11,822

10,336

9,507

11,631

12,288Operating income

390

1,347

461

2,610

1,425

201

1,477

1,097

Ordinary income

1,165

2,297

928

3,218

1,863

831

1,887

1,610

Income before income taxes

1,204

4,488

972

2,582

1,941

860

1,933

2,838

772

2,733

571

1,004

1,196

599

1,510

1,857

Net sales

Net income attributableto owners of parent

Copyright © 2016 Digital Garage, Inc. All Rights Reserved48

Quarterly Segment Profit and Loss(Consolidated)

JPY in Million

Net sales

FY15.6

FY16.6

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

8,126

9,760

8,377

11,822

10,336

9,507

11,631

12,288IT

Incubation Technology

1,035

1,987

697

3,733

1,899

657

1,863

1,921

MT

Marketing Technology

3,669

4,111

4,003

4,279

4,502

4,730

5,648

6,147

FT

Financial Technology

3,421

3,661

3,675

3,810

3,934

4,118

4,119

4,219

MI

Media Incubation

-

-

-

-

-

-

-

-

1,204

4,488

972

2,582

1,941

860

1,933

2,838

Income before income taxes
IT

Incubation Technology

93

1,026

△8

1,692

1,064

△ 215

879

1,376

MT

Marketing Technology

236

287

316

220

247

313

386

448

FT

Financial Technology

391

391

373

179

413

453

440

451

MI

Media Incubation

443

2,686

682

664

627

566

683

1,174

Note: Income before income taxes per segment is based on figures prior to elimination or group deduction, etc
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

49

Press Releases
Date

Title

2016.7.22

Digital Garage and Daiwa Securities Group establish "DG Lab Fund," a fund directed towards startups
that specialize in next generation technology

2016.7.4

Digital Garage, Kakaku.com, and Credit Saison establish open innovation-based R&D organization "DG
Lab"

2016.6.2

Digital Garage and BEENOS join for investment operation in India

2016.5.9

Digital Garage newly established "Digital Garage First Penguin Award", honoring and celebrating
leaders who keep creatively challenging in the global world

2016.2.12

Digital Garage announces the sale of one of its US subsidiaries to Pivotal, a Silicon Valley-based cloud
software company

2016.2.4

Digital Garage Invests in Blockchain Developer Blockstream, Collaborating Toward the Verification
Testing of Financial Technology Products

2016.2.2

Digital Garage invests as lead investor in renowned creator Rei Inamoto's Business Invention Studio,
Inamoto & Co.

2015.12.16

Digital Garage Invests in Illustration and 3DCG Service Whomor, Offers Cloud Sourcing Services to over3000 Creators Internationally2015.11.16

Digital Garage Invests in Curation Media Company "Digg" To Support its Japan Expansion

2015.11.5

Digital Garage's Open Network Lab to Deploy Full Scale Global Expansion between North America,
Europe and Asia to Support Entrepreneurs Seeking to Expand Globally

2015.11.2

Digital Garage Invests in Monstar Lab, Inc, a Global Sourcing Business for IT Service Development

2015.10.23

Digital Garage hosts "THE NEW CONTEXT CONFERENCE 2015 San Francisco"2015.10.2

Open Network Lab Begins Accepting Applications for the 12th Batch of its Seed Accelerator Program

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

50

Press Releases
Date

Title

2015.9.15

In collaboration with Business France of the French Embassy Japan, Digital Garage will host "the 1st
French Tech Tokyo" pitch session

2015.9.15

Digital Garage enters into exclusive business collaboration with Taiwan's HAPPY GO--the biggest point
rewards card in Taiwan--to develop its business in Japan

2015.8.7

Kodansha and Digital Garage to Begin Full-Scale Expansion of Content Business in the U.S. Via JointVenture Kodansha Advanced Media Through Promoting Titles Including "Attack on Titan"

Copyright © 2016 Digital Garage, Inc. All Rights Reserved51

Please note that the business forecasts and strategies covered in todayʼs presentation are based on our current evaluation and future results may vary significantly depending
on unforeseeable events or circumstances. This announcement is solely for the purpose of the investors relationship and is not for making any solicitation for investment inany securities. This announcement does not constitute an offer to sell or the solicitation of an offer to buy any securities in the United States or any other jurisdiction in whichsuch offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Any securities of our consolidated
subsidiaries have not been registered under the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act") and may not be offered or sold in the United States absent
registration or an applicable exemption from the registration requirements of the U.S. Securities Act. Any public offering of securities to be made in the United States will bemade by means of a prospectus. Such prospectus will contain detailed information about the company making the offer and its management and financial statements.