Digital Garage, Inc.

FYE March 31, 2018 Financial Report2018.5.11

Table of Contents
Mission and Business Model・・・・・・・・・・ 3
Investment Highlights・・・・・・・・・・・・・ 8Group Financial Performance Review・・・・・ 15
Segment Performance Review・・・・・・・・

22

Appendix・・・・・・・・・・・・・・・・・・・ 42

Copyright © 2018 Digital Garage, Inc. All Rights Reserved2Mission & Business Model

Copyright © 2018 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 © 2018 Digital Garage, Inc. All Rights Reserved4

DG’s 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 © 2018 Digital Garage, Inc. All Rights Reserved

5Enabling Platform for DG’s 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 © 2018 Digital Garage, Inc. All Rights Reserved

6

Copyright © 2018 Digital Garage, Inc. All Rights Reserved

7Investment Highlights

Copyright © 2018 Digital Garage, Inc. All Rights Reserved

8

Financial Results Highlights
FY18.3 Net income marked 5.4B JPY YoY* grew by 16%, achieved record-high for the first timein 9 years
Sales marked 60.1B JPY YoY grew by 24%, operating profit was 2.3B JPY grew 2.4 times YoY, and profit before income taxes
achieved 7.6B JPY YoY grew by 14%High growth in profit before income taxes in MT/FT; YoY grew by 37% in MT and grew by 29% in FT

Decided to voluntary application of International Financial Reporting Standards (IFRS) for the consolidated financial statements offiscal year ending March 2019.

Key points

Profit before income taxes by segments

FY17.3

MT
FT
IT
LTI

1.4
1.9
1.0
2.8

(B JPY)(B JPY)(B JPY)(B JPY)FY18.3

1.9
2.5
1.3
3.1

(B JPY)(B JPY)(B JPY)(B JPY)

YoY

+37 %
+29 %
+30 %
+13 %



Sales YoY grew by 28%, profit before income taxes YoY
grew by 37%

Mainline performance-based ads drive strongly. Sales forfinancial market grew strongly by 50% compared to 3Q
FY17. Cosmetics/HR also strongly grew by 29%Sales YoY grew by 11%, profit before income taxes YoY grew by29%
Maintained high growth exceeding EC market growth. Transaction
volume expanded to 1.5 Trillion JPY. Transaction volume in non-EC
payment, a key business area, grew 5 times compared to the period of
4QFY16-3QFY17 in charging/exchange settlement.



Sold domestic and overseas investment
portfolios sequentially. Profit before income
taxes YoY grew by 30%

Investment profit on equity method of Kakaku.com
trended steadily
Promote new business development

Note:* Due to the change of fiscal term last year, the YoY comparisons here are between annualized FY17.3 (nine months accounting) and FY18.3 full year. Annualized value of
FY17.3 is 1.33 times the FY17.3 results (nine months accounting). However, Kakaku.com, Inc.’s fiscal term has been March, therefore annualized adjustment is not applicable.
Copyright © 2018 Digital Garage, Inc. All Rights Reserved

9

Business Highlights< Major highlights of 4 segments and strategic R&D >Internet ads/ Promotion

MT
FT
IT
LTI



Continued expansion of internet ads. Substantial increase in sales and profits. Promoting the
upstream marketing consulting.
Providing DMP for storing proprietary data, and promoting the development of advertisingmaterials. Strengthen cooperation with Kakaku.com.
Started to build cross-border EC mall with Asian countries to respond to expanding cross-borderEC market.

Data scienceGlobal

EC payment

Continued high growth exceeding EC market. Substantial increase in sales and profits.

Non-EC/ Face to facepayments etc

AllianceTransaction volume of face-to-face settlement such as Alipay jumped 4.9 times in FY18.3
compared to the period from 4QFY16-3QFY17. Started payment of public funds.
Business alliance with Toshiba Tec Corporation, having largest share of POS systems in Japan.
Expanding payment methods in retailers

Investment
Incubation

Strengthen cooperation with US, Japan, Europe and Asia. Supporting start-ups play
an active role in the world.
Launched accelerator program “Open Network Lab HOKKAIDO”

DG Lab Fund

Invested domestic and overseas promising 22 start-ups, since DG Lab Fund has launchedThe number of monthly users of the group as a whole increased year by year to
280 million, up 31.5% from the same period of the previous year (March 2018)

In preparation focusing on life design area and bio health area

Kakaku.com
New business Driven by strategy investment and alliance focusing on five key fields and accelerated
commercialization
 Promotes strategic projects that utilize “DG Lab DVEP”™ for unique cryptocurrency
Entered into partnership agreement with Tokyo Tanshi Co., Ltd in FinTech.
 Launched Smart City Project in Shibuya, Sapporo and Fukuoka for regional revitalization
Copyright © 2018 Digital Garage, Inc. All Rights Reserved

10

Financial Results by Quarters: Consolidated Sales
Consolidated sales
FY16.6116
103

FY17.3

122

115

126

FY18.3 (+29%)

Comparisons showed here are between

156 152

real terms which is the same quarterly of162

4Q (1-3) FY18.3 and 3Q (1-3) FY17.3 inlast year

131

122

 4Q sales marked 16.2 B JPY, up
29% compared to 3Q FY1795

 MT segment achieved high growthand it drove the consolidated
sales growth(JPY in 100
Million)

1Q

2Q

3Q

4Q

1Q

2Q

3Q

1Q

2Q

3Q

4Q

(7-9)(10-12)(1-3) (4-6) (7-9)(10-12)(1-3) (4-6) (7-9)(10-12)(1-3)

Copyright © 2018 Digital Garage, Inc. All Rights Reserved

11

Financial Results by Quarters: Consolidated Profit before Income Taxes
Consolidated Profit before Income Taxes
FY16.6

FY17.33128

4Q (1-3) FY18.3 and 3Q (1-3) FY17.3
in real terms which is the same

Kakaku.com,Inc.
Investment profit onequity method

quarterly of last year

6 (7-9) by fiscal termchange19

19

Comparisons showed here are between

FY18.318
15

23 (+63%)

18

16

11

8

 4Q profit before income taxes
marked 1.8 B JPY, up 63%
compared to 3Q FY17
 All segments contributed tosignificant increase in profit
before income taxes(JPY in 100
Million)

1Q

2Q

3Q

4Q

1Q

2Q

3Q

1Q

2Q

3Q

4Q

(7-9) (10-12) (1-3) (4-6) (7-9) (10-12) (1-3) (4-6) (7-9)(10-12)(1-3)
Copyright © 2018 Digital Garage, Inc. All Rights Reserved

12

Copyright © 2018 Digital Garage, Inc. All Rights Reserved

13

Copyright © 2018 Digital Garage, Inc. All Rights Reserved

14Group Financial Performance Review

Copyright © 2018 Digital Garage, Inc. All Rights Reserved

15

FY18.3 (Cumulative) Consolidated P/L Summary
YoY sales grew by 24% record high of 60.1B JPY and operating profit grew 2.4 times to 2.3B JPY～ Profit before income taxes marked 7.6B JPY YoY grew by 14%. Net income marked 5.4B JPY YoY grew by
16%, achieved record-high for the first time in 9 years ～A
FY17.3B

FY17.3

FY18.3(12 months(Initial

conversation)

Forecast)(Reference)(4-3)

36,451

48,48058,500Operating profit723

Non-operating income

JPY in Millions(Full Year Act)

Ref. C (=B/A)
YoY(Full Year Act)Act vs Fcst%

Amount%Amount60,168+24.1+11,687+2.9+1,668

962

2,310

2.4 X

+1,347

3,246

3,427

3,305

-3.6

-122

2,528

2,479

2,768

Foreign exchange gain

171

227

-

Non-operating expenses

292

388

597

+53.9

+209

Foreign exchange loss

-

-

160

-

-

Ordinary profit

3,678

4,001

5,017

+25.4

+1,016Extraordinary income

2,265

2,869

2,669

-7.0

-200

Profit before income taxes

5,819

6,705

7,619

+13.6

+913

-4.8

-380

Income taxes

1,525

1,999

2,133

+6.7

+133

Profit attributable to owners of parent

4,289

4,699

5,460

+16.2

+761

-0.7

-39

(7-3)

Net sales

Share of profit of entities accounted forusing equity method

8,000
5,500

(4-3)

Note: Due to the change of fiscal term last year, the YoY comparisons here are between annualized FY17.3 (nine months accounting) and FY18.3 full year. Annualized value of FY17.3 is 1.33
times the FY17.3 results (nine months accounting). However, Kakaku.com, Inc.’s fiscal term has been March, therefore annualized adjustment is not applicable.
Kakaku,com.Inc. is affiliated company for using the equity method, and started to apply IFRS from FY18.3. The figures on FY17.3 has been applied retrospectively.

Copyright © 2018 Digital Garage, Inc. All Rights Reserved

16

FY18.3 (Cumulative) Consolidated Segment P/L Summary
All segments achieved substantial increase in sales and profits. High growth in profit before income
taxes in MT/FT; YoY grew by 37% in MT and grew by 29% in FT～ Profit before income taxes grew by 30% in IT, however not achieved forecast due to slipped deals in portfolio ～A
FY17.3B

FY17.3

FY18.3(12 months(Initial

conversation)

Forecast)(Reference)(4-3)

36,451

48,48058,500MT Marketing Technology

20,49427,257

FT Financial Technology

14,140

Incubation Technology

LTI Long Term Incubation

JPY in Millions(Full Year Act)

Ref. C (=B/A)
YoY(Full Year Act)Act vs Fcst%

Amount%Amount60,168+24.1+11,687+2.9+1,66832,00034,938+28.2+7,680+9.2+2,93818,806

20,50020,956+11.4+2,149

+2.2

+456

1,775

2,362

6,000

3,123

+32.3

+761

-47.9

-2,876

41

54

-

1,150

21.0 x+1,095--

Profit before income taxes

5,819

6,705

8,000

7,619

+13.6

+913

-4.8

-380

MT Marketing Technology

1,074

1,429

1,750

1,959

+37.1

+530

+12.0

+209

FT Financial Technology

1,478

1,966

2,300

2,539

+29.1

+572

+10.4

+239

Incubation Technology

766

1,019

3,800

1,325

+30.0

+306

-65.1

-2,474

LTI Long Term Incubation

2,899

2,822

2,500

3,176

+12.6

+354

+27.1

+676

(7-3)

Net sales

IT

IT

(4-3)

Note: Income before income taxes per segment is based on figures prior to elimination or group deduction, etc*MI segment has been changed to LTI segment from FY18.3, by aiming to generate sustainable business profit in mid-long term.
Some businesses in IT segment have transferred to LTI, therefore figures on FY17.3 updated with the current category.
Copyright © 2018 Digital Garage, Inc. All Rights Reserved

17

FY18.3 Consolidated B/S Summary
JPY in Million

FY17.3

FY18.3Difference

Current assets

59,62475,496+15,871

Cash and deposits

23,02932,922+9,892

Accounts receivable-other

15,422

16,889

+1,466

Money held in trust

2,264

5,307

+3,043Operational investment securities

11,856

12,364+507

Non-current assets

32,06133,295+1,233

Investment securities

18,357

16,552-1,805

Goodwill

5,411

7,822

+2,410Total assets

91,686

108,791+17,105

Current liabilities

38,81549,540+10,724

Deposits received

25,12736,499+11,371

Short-term loans payable

6,937

4,137

-2,800Non-current liabilities

18,49920,233+1,733Long-term loans payable

17,207

18,890+1,682

Total liabilities

57,31569,774+12,458

Net assets

34,37139,017+4,646

Shareholders' equity

31,63336,363+4,729

Capital stock

7,437

7,464

+27

Capital surplus

2,946

3,104

+158

Retained earnings

21,30025,819+4,518

Accumulated other comprehensive income

1,956

1,440

-516

Valuation difference on available-for-sale securities

644

339

-304

Total liabilities and net assets

91,686

108,791+17,105

Reason for change / Remarks

Income by the sales of investment securities, new borrowings etc
Expansion of FT business
Expansion of FT business
New investment, Mark-to-market, etc
Sales of investment securities, Transfer of investment securities of DG Life Design thathas become a consolidated subsidiary to goodwill, New investment, Increased
investment profit on equity method

Consolidation of DG Life Design, Inc.

Expansion of FT

Debt repayment and shift to long-term fixed rate

Increased net profit

Copyright © 2018 Digital Garage, Inc. All Rights Reserved

18

Notice of Voluntary Application of IFRS
Voluntary application of IFRS from the consolidated financial statements offiscal year ending March 2019
～ Promoting appropriate evaluation of corporate value through the application of global
accounting standards ～ Purposes of IFRS

Ⅰ

Improved international comparability offinancial information in capital markets

Ⅱ

Reflecting the DG Group’s business more
appropriately in corporate value
IT / LTI : Fair value of the investee⇒ More appropriate reflection on
financial statements of incubation
MT / FT : Change sales booking (partial) to net⇒ More appropriate presentation of
our high profitable recurringbusiness

Ⅲ Disclosure schedule plan Voluntary application of IFRS from theconsolidated financial statements of fiscal year
ending March 2019
FY19.3

FY20.3

1Q ～ 3Q

Year end

Year
1Q～期末
end

Financialresults reportJapanesestandards

IFRS

IFRS

Quarterly
financialstatement

Japanesestandards

Annual securities
report

IFRS
IFRS

IFRS

Reinforcement of group management/
Responding to M&A and reorganization etc

Copyright © 2018 Digital Garage, Inc. All Rights Reserved19Forecast of March 2019
Forecasting revenue 33.5B JPY, profit before tax 9.0B JPY, andprofit attributable to owners of parent 6.2B JPY～ Aiming for record net income for the second consecutive year ～FY18.3
JPY in Millions

FY19.3
JPY in Millions

Full Year Act

J-GAAP
Net sales

60,168Full Year
Forecast

YoY

33,500

-44.3

IFRS

Revenue

MT

Marketing Technology

34,938MT

Marketing Technology

14,500-58.5

FT

Financial Technology

20,956

FT

Financial Technology

6,500

-69.0

IT

Incubation Technology

3,123

IT

Incubation Technology

3,100

-0.8

LTI

Long Term Incubation

1,150

LTI

Long Term Incubation

6,500

6x

Profit before income taxes

7,619

9,000

+18.1

Profit before tax

MTMarketing Technology

1,959

MT

Marketing Technology

2,250

+14.8

FT

Financial Technology

2,539

FT

Financial Technology

3,200

+26.0

IT

Incubation Technology

1,325

IT

Incubation Technology

1,350

+1.9

LTI

Long Term Incubation

3,176

LTI

Long Term Incubation

3,450

+8.6

6,200

+13.5

Profit attributable to owners of parent

5,460

Profit attributable to owners of parent

Note: The main effects of the voluntary application of IFRS are expected to be the net presentation of income, the recording of unrealized gains/losses on the fair value of operational
investment securities, a decrease in amortization of goodwill, and reclassification of equity in earnings of affiliates.

Copyright © 2018 Digital Garage, Inc. All Rights Reserved

20

Copyright © 2018 Digital Garage, Inc. All Rights Reserved

21

Segment Performance Review

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22

MT Segment
Ⅰ

Marketing Technology Segment
Net Sales

Income Before
Income Taxes

FY17.3

Actual (9 months)

20,494 M JPY

1,074 M JPY

FY18.3

Actual34,938 M JPY

1,959 M JPY

FY19.3

Plan

14,500 M JPY

2,250 M JPY(IFRS)➤ Marketing Technology Company

Supports client’s 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 © 2018 Digital Garage, Inc. All Rights Reserved

23

MT Segment Highlights
Substantial increase in net sales and profit: Net sales marked 34.9B JPY, +28%
compared to annualized FY17.3, operating profit marked 1.9B JPY, +22%
～ Operating margin which shows profitability increased to 35.5% ～Net Sales
FY16.6

FY17.3(+28%)(JPY in
100 Million)

272

61

65

68

FY18.3

FY16.6349(JPY in
100 Million)

94(Annualized)

71

Operating Profit

78

80

FY17.3

95(+22%)(Annualized)

4.4
3.8

3.6

FY18.3

19.3

15.8

4.4

Operating Margin

6.1
4.2

4.2

4.6

(JPY in
100 Million)

FY17.3
Annualized

FY18.3YoY

Net sales

272.5

349.3

+ 28%

Gross profit (A)

45.1

54.5

+ 21%

(B)

15.8

19.3

+ 22%

35.1%

35.5%

+0.4
pointsOp. profit
Operatingmargin

4Q

1Q

2Q

3Q

1Q

2Q

3Q

4Q

(4-6)

(7-9)

(10-12)

(1-3)

(4-6)

(7-9)

(10-12)(1-3)

 Driven by performance-based ads

4Q

1Q

2Q

3Q

1Q

2Q

3Q

4Q

(4-6)

(7-9)

(10-12)

(1-3)

(4-6)

(7-9)

(10-12)(1-3)

 Net sales expansion made gross marginincreased, and increased employment
cost and fixed cost were absorbed

(B)
(A)

 Improved profitability
Copyright © 2018 Digital Garage, Inc. All Rights Reserved

24

MT Segment Highlights
4Q sales of performance-based ads marked 7.2B JPY, +33% compared to 3Q FY17.
Sales increased in all business categories～ Sales of financial business increased by 50%, cosmetics/HR by 29% compared to 3Q FY17 ～Net sales by industries (Performance-based ads)
FY16.6

FY17.3

FY18.3(JPY in
100 Million)

46
12
13

Main industry

51

53

54

14

16

17

14

16

17

63

35

72
63
19

19
22

20

19
24

19
22

Smartphone/ Entertainment/
App
Game

+ 11 %

26％+ 29 %

31％

Banks/ Securities/+ 50 %
Credit cards/
Insurance etc

42％

Cosmetics/

Cosmetics/
Medicine/HR/
HR/Others

Foods etc

30

20

21

21

20

21

23

4Q

1Q

2Q

3Q

1Q

2Q

3Q

4Q

(4-6)

(7-9)

(10-12)

(1-3)

(4-6)

(7-9)

(10-12)(1-3)

Financial

Ratio+ 33 %

All

79

Compared to 3Q
FY17 with 4Q FY18

Copyright © 2018 Digital Garage, Inc. All Rights Reserved25

MT Segment Growth Strategies and Approaches
Cross-border collaboration between Digital/ Real, and various measures～ Providing solutions utilizing apps to realize further business growth～

Value creation for 5 th generation ofmobile communication systemutilizing the latest technology
Product
Development

Expansionof mediavalue

Performancebased ads

App×
Payment
Payment application
linked to FT segment

LatestTechnology■ Main approaches
 Strengthen upstream marketing consultant

Internetads/
Promotion

Web
Strategy

Capital and business alliancewith iRidge, Inc.
BDC (Business Design
Company) is incorporated
into a joint venture with
iRidge, Inc.

Global expansion

a digital marketing center inEstablished
Sapporo as a near-shore center（Cooperate with Sapporo Electronics and Industries
Cultivation Foundation)

Data
Science
CRM Considering work style reform, operational
efficiency, and cost optimization

Global Aiming to build an ad tech platform
in collaboration with Kakaku.com
 Implement “Media Consortium”
targeting to improve media value
and brand value

 Consulting clients to support theirbusiness to expand overseas. First
opening up in Taiwan and Thailand.
 Before launching cross-border EC
malls in Asian countries,
preparations started in Taiwan
Copyright © 2018 Digital Garage, Inc. All Rights Reserved

26

FT Segment
Ⅱ

Financial Technology Segment
Net Sales

Income Before
Income Taxes

FY17.3

Actual (9 months)

14,140 M JPY

1,478 M JPY

FY18.3

Actual20,956 M JPY

2,539 M JPY

FY19.3Plan

6,500 M JPY

3,200 M JPY(IFRS)➤ 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➤ ANA Digital Gate, Inc.（49％ stake／equity method）
Develops and offers the new payment solution by FinTech

 Sendo Technology JSC（12.89% stake／Investment）
On-line marketplace for C2C and B2C in Vietnam

Copyright © 2018 Digital Garage, Inc. All Rights Reserved

27

FT Segment Highlights
Net sales marked 20.9B JPY, +11% compared to FY17, operating
profit marked 2.5B JPY, +27%
～ Operating margin which shows profitability increased to 43.1% ～Net Sales
FY16.6(JPY in
100 Million)

42

FY17.3188

FY18.3(+11%)(Annualized)

45

48

48

49

Operating Margin

Operating Profit
FY16.6

209

52

54

FY17.3(JPY in
100 Million)

53

19.7

FY18.3(+27%) 25.1

(Annualized)

4.6

4.8

5.3

5.8 5.9(JPY in
100 Million)

FY17.3
Annualized

FY18.3YoY

Net sales

188.0

209.5

+ 11%

Gross profit (A)

51.1

58.2

+ 14%

(B)

19.7

25.1

+ 27%

38.5%

43.1%

+4.6
points

6.7 6.6

4.5

Op. profit
Operatingmargin
4Q

1Q

2Q

3Q

1Q

2Q

3Q

4Q

(4-6)

(7-9)

(10-12)

(1-3)

(4-6)

(7-9)

(10-12)(1-3)

 Growth of existing client andacquisition of major EC companies
are contributed

4Q

1Q

2Q

3Q

1Q

2Q

3Q

4Q

(4-6)

(7-9)

(10-12)

(1-3)

(4-6)

(7-9)

(10-12)(1-3)

 As transaction record increased, grossprofit expanded, and achieved record
high operating income

(B)
(A)

 Operating margin improved by sales growth which
exceeded the expenses of strengthen the system
operation and capital investment
Copyright © 2018 Digital Garage, Inc. All Rights Reserved

28

FT Segment Highlights
Transaction marked 1.5T JPY, +20% compared to the period from 4QFY16 to 3QFY17,
exceeded EC market growth～ Face-to-face payments (Alipay etc) and cryptocurrency exchange settlement, have expanded rapidly
in our focusing Non-EC payment area ～Transaction Record
FY16.6(JPY in
100 Million)

FY17.3(+20%)

FY18.3

1.5 Trillion JPY

1.2 Trillion JPY

4,196(FY16.6 4Q - FY17.3 3Q)
3,441
2,980

3,423

Transaction volume in focusing area
(Non-EC payment)
Gap in 12
FY16.6 4QFY18.3
months
FY17.3 3Q

All

4,335

Specific Market(Real estate/
Funeral)

3,640
3,405

1Q

2Q

(4-6)

(7-9) (10-12)+ 53 %

Person-to-person
payments(Remittance payments)

+1%

3,091

4Q

2.4 x

3Q

1Q

2Q

(1-3)

(4-6)

(7-9)

3Q

4Q

Charging/Exchange
settlement(Cryptocurrency)

5.2 x

Face-to-facepayments(Mobile payments)

4.9 x

12 months 12 months(10-12) (1-3)

Continued high growth exceeded EC market growth 9.1％
Copyright © 2018 Digital Garage, Inc. All Rights Reserved

29

FT Segment – Progress of Strategic Area
Developing the new growth area as a payment platformer in FinTech～ Following Non-EC payment and face-to-face payment, launching public fundpayment and utility fees payment ～Market Environment
Electronic payment
113 T JPY in 2025
1.6x Growth from 2017

Growth Strategy
EC payment: Organic growth (10-15%)

Ⅰ

Non-EC payment/ Face-to-facepayment

 Specific market (Real estate/
Restaurants/ Funeral etc)
 Barcode payment
 New area (public fund payment/utility fees payment etc)Ⅱ

 Payment cooperation withbusiness partners having large
customer base(Ref. Statistics Bureau, Card Wave, Inc.)

Theme in FT segment

 New business with alliance Cashless society
 Vitalizing the local economies
 Inbound Next generation payment（FinTech）

Alliance

Ⅲ

Next generation payment
 Solution utilizing blockchain

Main approaches

 = New Approaches
 Payment for Real estate/
Restaurants/ Funeral etc Barcode payment
 Remittance service
 Cryptocurrency exchange
settlement

 Undertaking the collection business by credit card of the
National Pension Insurance, and payment of national
taxes at convenience stores (public finance sector)

 Develop face-to-facepayment of stores in
airport shops cooperatingwith ANA group.

 Business alliance with Toshiba Tec CorporationCollaborate in the service of payment at retailers
and EC field Correspond to “CloudSign Payment” based on
smart contract

 Experiments cooperating with
DG Lab
Copyright © 2018 Digital Garage, Inc. All Rights Reserved

30

FT Segment – Progress on strategic fields
Commissioned payment of national taxes at convenience stores using QR codes
led by the Ministry of Finance and the National Tax Agency～ Following the collection of national pension insurance premiums and various administrative
fees of Osaka Prefecture, full-fledged expansion into the public finance sector ～Efforts and Progress in the
Public Financing Sector

Overview of Tax Payment at Convenience Stores by QR CodeTaxation items

e-filing by e-taxGo to the tax office and file tax returns

Consumption
tax
Liquor tax
Cigarette tax
Gasoline tax

The Ministry of Health, Labour andWelfare：Credit card payment of national
pension insurance premiums

Osaka Prefecture：
Payment at convenience stores ofvarious administrative feesThe Patent Office：Credit card payment of patent fees etc…

Income tax
Corporate tax
Inheritance
tax
Gift taxTaxpayerCreating and presentationof QR code that records
tax payment information

Tax office
524 locations
nationwide

Applicable to all
national taxes■National tax
revenue*1
FY2018 Budget
Outputting tax payment
slips with QR codes *4
over store terminals

Pay taxes at cash
register

At convenience stores

92.7Trillion yen■National tax
number of payments*2
FY201644.07million payments

In response to the government's"Japan Revitalization Strategy,"
related ministries and agencies arepromoting the expansion of use ofelectronic payments in the public
sector as "measures for cashless"Continue to expand in various
fields of public finance

Payment starts at 33,452 convenience stores*3 of FamilyMart, LAWSON, and Ministop in
January 2019

*1 source: Calculated based on the breakdown of tax revenue by the Ministry of Finance*2 source: NTA, "Current Status and Challenges of Tax Administration"（Jan 2018）*3:Number of stores in Japan announced by each company in 2018 *4: QR Code is a registered trademark of DENSO WAVE CORPORATION.

Copyright © 2018 Digital Garage, Inc. All Rights Reserved31

IT Segment
Ⅲ

Incubation Technology Segment
Net Sales

Income Before
Income Taxes

FY17.3

Actual (9 months)

1,775 M JPY

766 M JPY

FY18.3

Actual3,123 M JPY

1,325 M JPY

FY19.3Plan

3,100 M JPY

1,350 M JPY(IFRS)➤ 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➤ DG Technologies, Inc. （80％ stake）

Drives strategic technology development with DG Lab➤ DG Daiwa Ventures, Inc.（50％ stake／equity method）

Manages DG Lab Fund to invest in startups with next-generation technologies

 Kodansha Advanced Media LLC（19％ stake／investment）

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

MI segment has been changed to LTI segment from FY18.3, by aiming to generate sustainable business profit in mid-long term.
Some businesses in IT segment have transferred to LTI, therefore figures on FY17.3 updated with the current category.

Copyright © 2018 Digital Garage, Inc. All Rights Reserved

32

IT Segment Highlights
Sold domestic and overseas investment portfolios sequentially
Profit before income taxes grew strongly from FY17.3～ Continue investment in highly selected start-ups in Japan and overseas ～Profit before income taxes(JPY in
100 Million)

FY16.6

FY17.3

FY18.3

28.0

13.2
7.6
1Q-3Q

1Q-4Q

(7-6)

(7-3)

(4-3)

Book Value
Equity11.5 B JPY

Domestic49

1.8 B JPY

Overseas94

9.7 B JPY

Fund

11

0.8 B JPY

Total

154

12.3 B JPY

Develops sidechain technologies,
parallel blockchains that areinteroperable

Note)DG Incubation’s investment balanceMark-to-market as of quarter end for listed
stocks. Equity includes convertible note.Book value totals may not match details
because of rounding down fractions

PureTech Health [U.S.]

Repro [Japan]
Operates mobile app analytics andmarketing SDK “Repro.”PR Table [Japan]
A public relations service provider. Utilizing
the concept of “storytelling®,” it expands its
service to an all-in-one public relations.

Goodpatch [Japan]
Provides one-stop services and productplanning, concept making, UX design,
prototyping, and implementation

A leading online marketplace for new andsecond-hand automobiles in India

A US based company that focuses on
incubation in advanced biotechnology field.
Listed on LSE.

Book Value

143

Blockstream [U.S. /Canada]

Droom [India]

1Q-4Q

# of
companies

Major Portfolio

Monstar Lab[Japan]
Operates Sekai Lab, a global outsourcing
platform that provides a network of over
10 k engineers in over 15 countries

Panair [Japan]
Provides “Panair Cloud”, an automatedelectricity retail platform that uses cloudcomputing and artificial intelligence.

Copyright © 2018 Digital Garage, Inc. All Rights Reserved33Supporting Globalization of Start-ups ＜GLOBAL INCUBATION STREAM＞～ Developing cooperation globally of an accelerator “Open Network Lab” ～ Through closer cooperation of US, Japan, Europe and Asia, supporting start-ups aiming for the world
 In collaboration with programs around the world, study alliances to enable entrepreneurs to shareoffice space across locations
 Planning events to bring promising start-ups to San Francisco and match local investors

EURO PEASI A / HO NG KO NG

TO KYOSAN FRANCI SCO / NEW YO RK / BO STO NCollaboration with DG will start this year

Copyright © 2018 Digital Garage, Inc. All Rights Reserved

34

Expansion of Open Network Lab
Launch an accelerator program ”Open Network Lab HOKKAIDO”～ Developing start-ups and promoting open innovation in Hokkaido ～Smart City Projectfor regional revitalization

Start as a joint business with The Hokkaido Shimbun Press. Throughcollaboration with universities and local governments in Hokkaido, will strive
to build an innovation ecosystem unique to Hokkaido

SapporoFukuoka
Tokyo (Shibuya)

Project area – in progress

Copyright © 2018 Digital Garage, Inc. All Rights Reserved

35

LTI Segment
Ⅳ

Long-term Incubation Segment

FY17.3

Actual (9 months)

FY18.3

Actual

FY19.3Plan(IFRS)Net Sales

Income Before
Income Taxes

41 M JPY

2,899 M JPY

1,150 M JPY

3,176 M JPY

6,500 M JPY

3,450 M JPY➤ Kakaku.com, Inc.（20％ stake／Equity method affiliate）

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

➤ DG Life Design, Inc.（70% stake）

With its mission of providing “Valuable Life,” expanding life care business,
sports marketing business and wine school business.

➤ DK Media, Inc.（50% stake／Equity method affiliate）

Internet media business utilizing fashion magazines by Kodansha

MI segment has been changed to LTI segment from FY18.3, by aiming to generate sustainable business profit in mid-long term.
Some businesses in IT segment have transferred to LTI, therefore figures on FY17.3 updated with the current category.

Copyright © 2018 Digital Garage, Inc. All Rights Reserved

36

LTI Segment Highlights
Profit before income taxes marked 3.17B JPY. Investment profit on equity method of Kakaku remains robust～ Good progress in profit before income taxes compared to FY17.3 ～Business progress of Kakaku.com, Inc.

Profit before income taxes(JPY in
100 Million)

Profit on sale ofrelated companies
Gain on changeon equity

Kakaku.com
Investment
profit on
equity method

New business

28.9

31.7

3.8
0.4

6.7
0.3

27.0

27.8

-2.3

-3.1

FY17.3

FY18.3【Total Accumulated Traffic for Kakaku.com Group】
Monthly traffic for all sites of Kakaku.com has increased to288.21 million, up 31.5% yoy (March 2018)

Mar※In FY17.3, Kakaku.com's performance, which accounts for the majorityof the LTI segment, included 12 months' worth of earnings.

YoY+31.5%(in million people)

June

Sept
2015

Dec

Mar

June

Sept

2016

Dec

Mar

June

Sept

2017

Dec

Mar
2018

Ref. Kakaku.com, Inc. Results Briefing for FY2018/3
Copyright © 2018 Digital Garage, Inc. All Rights Reserved37

Other Progress
1. Capital and business alliance with iRidge, Inc.
2. DG Lab

Copyright © 2018 Digital Garage, Inc. All Rights Reserved

38

Capital and business alliance with iRidge, Inc.
Strengthen user engagement by combining iRidge’s application marketing technology and DG group’s asset～ Capital participation as the largest outside shareholder (14.4%), second-largest shareholder after President Oda ～Capital and business alliance（Investment stake of 14.4％）

20%

80%

New company : DG Marketing Design, Inc.
Sales promotion, digital marketing business

81.5%< Synergies >


Ⅱ
Ⅲ
Ⅰ

14%
Marketing business based on real estate advertisement and housing

Alliance is formed between app marketing provided by iRidge to retailers, railways, banks, etc., andmarketing business in two companies in DG group to manufacturers and real estate companies.
Using data to provide further added value to consumers.
Alliance of iRidge's Smartphone Marketing Business in response to DG Lab's commercialization
Jointly promote payment functions and financial services for apps such as retailers, local
governments, and regional banks.
Copyright © 2018 Digital Garage, Inc. All Rights Reserved

39

Progress at DG Lab
R&D focused on five key fields is now in its third year of operation, and thecommercialization phase is now fully underway through business tie-ups,
demonstration experiments etc
BLOCK
Launch a Demonstration Experiment for the Smart Contract System
CHAIN

In cooperation with Bengo4.com, Inc., launched ademonstration experiment for the Smart Contract System toimprove the efficiency of personal loan services for Resona
Bank. This demonstration experiment is the first development
case in Japan to feature the same blockchain technology thatis used for the Bitcoin cryptocurrency. （March 2018）
Press release：
http://www.garage.co.jp/en/pr/2018/03/20180305.html

BLOCK Partnered with Tokyo Tanshi Co., Ltd. for Development of New Financial
CHAIN
Business with Blockchains and AI/AIEntered into a partnership agreement with Tokyo Tanshi Co., Ltd., which
has been providing brokerage services in open and interbank markets, todevelop new FinTech business opportunities. DG and Tokyo Tanshi will
also drive new business development with "DG Lab DVEP™", an advanced
framework for deployment and issuance of mobile digital currency
networks which DG Lab created extending Blockstream’s open platform
technology. （November 2017）
Press release ：http://www.garage.co.jp/en/pr/2017/11/20171121-1.html
Copyright © 2018 Digital Garage, Inc. All Rights Reserved

40

Progress at DG LabBLOCK Full Support for the World’s Largest Bitcoin Conference in
Tokyo
CHAIN

DG Lab has been selected as a Local Support Organizationfor Scaling Bitcoin, an international conference, scheduled
for 2018 Oct. 6-7 in Tokyo. The conference will bring
together Bitcoin developers with members of academia. As
a global leader in developing blockchain-related
technologies, DG Lab contributes to the operation of themeeting.
The international conference Scaling Bitcoin has been held
regularly since 2015 and is intended to address the
problems of scalability that exist within the Bitcoin
technology. It is a large-scale event that pulls together
more than 300 engineers and technicians from around theworld every year. This allows them to discuss the latest inblockchain technology in an environment that is free fromthe concerns of business, financial interests, and political
calculation.
Official site：https://tokyo2018.scalingbitcoin.org/

EVENT

Theme: Regulation and Technology

DG Lab will host THE NEW CONTEXT CONFERENCE 2018TOKYO on June 19, 2018 on the theme of “Governance ofRegulations and Innovations”. Globally acclaimed leading
researchers and entrepreneurs of the field will cometogether to discuss how start-ups and companies that
produce technological innovation are dealing withregulations and also how regulatory agencies are handling
continually evolving technologies.

Speakers: Jun Murai (Professor, Faculty of Environment andInformation Studies, Keio University), Hirohiko Nakahara(Counsellor, Economic Revitalization Bureau, Cabinet Secretariat,
Government of Japan), Osamu Doi, Ph.D. (Chief Executive,
Pharmaceutical and Medical Device Regulatory Science Society ofJapan), Takehiro Ohya (Professor, Faculty of Law, Keio
University), Pratik Shah (Research Scientist, MIT Media Lab),
Shin'ichiro Matsuo, Ph.D. (Research Professor, Georgetown
University), Ryuichiro Takeshita (Editor in Chief, The Huffington
Post Japan), Eugene Yi (Co-founder and President, Cortico),
Hiroyuki Watanabe (Managing Director, Nikkei Inc.), Oki
Matsumoto (CEO, Monex Group, Inc.), and more.

Official site ： http://ncc.garage.co.jp/en
Copyright © 2018 Digital Garage, Inc. All Rights Reserved

41

Appendix

Copyright © 2018 Digital Garage, Inc. All Rights Reserved

42

Financial Results: Consolidated profit and loss
JPY in Millions

FY14.6

FY15.6

FY16.6

FY17.3

FY18.3(Full Year Act)

(Full Year Act)

(Full Year Act)

(Full Year Act)

(Full Year Act)

9 monthNet sales

33,751

38,08743,76336,45160,168Operating profit

2,608

4,809

4,201

723

2,310

Non-operating income

2,307

3,736

3,031

3,246

3,305

1,741

2,080

2,406

2,528

2,768

Foreign exchange gain

143

1,090

-

171

-

Non-operating expenses

472

936

1,040

292

597

Foreign exchange loss

-

-

689

-

160

4,442

7,610

6,193

3,678

5,017

630

2,463

1,392

2,265

2,669

220

68

-

1,829

1,032

-

-

521

386

1,471

374

2,363

157

47

33

26

23

706

-

-

38

824

10

124

67

0

657

-

104

25

Profit before income taxes

5,035

9,248

7,574

5,819

7,619

Income taxes

1,887

3,855

2,385

1,525

2,133

Profit attributable to owners of parent

2,847

5,081

5,165

4,289

5,460

Share of profit of entities accounted for using equity
methodOrdinary profit
Extraordinary income
Gain on sales of investments in securities
Gain on sales of shares of sub. and associates

Gain on change in equity
Gain on transfer of business
Extraordinary loss
Impairment loss

Note: Kakaku,com.Inc. is affiliated company for using the equity method, and started to apply IFRS from FY18.3. The figures on FY17.3 has been applied retrospectively.
Copyright © 2018 Digital Garage, Inc. All Rights Reserved

43

Financial Results: Consolidated profit and loss by segments

JPY in Millions

FY14.6

FY15.6

FY16.6

FY17.3

FY18.3(Full Year Act)

(Full Year Act)

(Full Year Act)

(Full Year Act)

(Full Year Act)

9 monthNet sales

33,751

38,08743,76336,45160,168MT

Marketing Technology

14,822

16,06421,02820,49434,938FT

Financial Technology

13,454

14,56816,392

14,14020,956

IT

Incubation Technology

5,475

7,454

6,343

1,775

3,123

LTI*

Long Term Incubation

-

-

-

41

1,150

Profit before income taxes

5,035

9,248

7,574

5,819

7,619

MT

Marketing Technology

874

1,061

1,396

1,074

1,959

FT

Financial Technology

1,496

1,335

1,758

1,478

2,539

IT

Incubation Technology

1,595

2,804

3,105

766

1,325

LTI*

Long Term Incubation

1,776

4,477

3,052

2,899

3,176

Note: Income before income taxes per segment is based on figures prior to elimination or group deduction, etc*MI segment has been changed to LTI segment from FY18.3, by aiming to generate sustainable business profit in mid-long term.
Some businesses in IT segment have transferred to LTI, therefore figures on FY17.3 updated with the current category.
Copyright © 2018 Digital Garage, Inc. All Rights Reserved

44

Press Releases
Date

Title

2018.4.27

DG Lab to Host THE NEW CONTEXT CONFERENCE 2018 TOKYO on the Theme of "Governance ofRegulations and Innovations"2018.4.20

Digital Garage and The Hokkaido Shimbun Press Launch "Open Network Lab HOKKAIDO", an
Accelerator Program

2018.3.28

Digital Garage Supports Overseas Market Expansion by Domestic Suppliers through Cross-Border EC
Mall Development in Partnership with Overseas Companies

2018.3.27

Digital Garage Launches "JR KYUPO Point Mall", a Member-Preferential Shopping Site of JR Kyushu

2018.3.5

Digital Garage and Bengo4.com Launch a Demonstration Experiment for the Smart Contract System to
Improve the Efficiency of Personal Loan Services for Resona Bank

2018.2.28

VeriTrans Forms a Business Alliance with Toshiba Tec, Supporting for the Expansion of Payment
Methods in Retail Stores and Omnichannel Development

2018.1.22

Intercontinental Exchange and Blockstream (Digital Garage's Strategic Business Alliance Partner)
Launch Consolidated Data Feed for Cryptocurrencies （Blockstream's press release)2018.1.17

VeriTrans and econtext Offer Support for DOCOMO's "d PAY" Barcode Payments from Spring 20182018.1.15

Digital Garage and ANA Trading to Support Inbound Marketing for Domestic Companies and Local
Governments

2018.1.15

VeriTrans - Comprehensive Payment Solution VeriTrans4G Supports Google Pay

2017.12.27

Digital Garage Has been Selected as an LSO for Scaling Bitcoin to be Held in Tokyo in 20182017.12.12

Digital Garage Group to Cooperate in the 7th Digital Innovation Grand Prix Organized by the Keio
Research Institute at SFC

2017.11.21

Digital Garage Forms a Strategic Business Alliance with Blockstream, Entering the Second Phase ofDeveloping Blockchain Technology for Bitcoin

2017.11.21

Digital Garage and Tokyo Tanshi to Partner in FinTech, Development of New Financial Business with
Blockchains and AI

2017.11.20

econtext to Manage New System for Civil Fee Payments Made at Convenience Stores within Osaka
Prefecture2017.11.13

Digital Garage to Build Shibuya into a Smart City that Employs Advanced Technology by Joining Future
Design Shibuya

2017.10.30

Digital Garage Appoints Brian Yeh as Chief Investment Officer of DG Incubation to Strengthen North
American and Asian Investment Businesses

2017.10.26

VeriTrans to Provide Ministry of Health, Labour and Welfare with Credit Card Payment Service to the
National Pension Fund
Copyright © 2018 Digital Garage, Inc. All Rights Reserved

45

Press Releases
Date

Title

2017.10.10

DG Lab Developed All-Purpose Framework "DG Lab DVEP" TM for Unique Cryptocurrency throughBlockchain's Bitcoin

2017.10.3

DG Lab Fund Invested in Skydisc, a Cloud Service Using AI/IoT as the Fukuoka City's Startup Support
Program's First Project2017.10.2

Digital Garage and Tencent to Co-develop "QQ Odekake Japan", Mobile QQ's Contents for Japan-bound
Chinese Tourists

2017.9.29

DG Lab to Host THE NEW CONTEXT CONFERENCE 2017 SAN FRANCISCO

2017.9.21

Digital Garage Begins Support for Startups in Fukuoka Region in Cooperation with the Fukuoka
Directive Council

2017.9.8

DG Lab Fund Invested in 12 Start-ups with Next-Generation Technology in Fields such as Blockchain,AI, and Biotech

2017.8.31

Collaboration Partners Selected for TOYOTA NEXT, the Open Innovation Program Supported by Digital
Garage2017.8.29

Digital Garage Hosted "Digital Garage First Penguin Award 2017", which Honors Leaders who
Creatively Challenge The World2017.6.20

DG Lab to Unveil Open Platform for Interactive Agent Technology that Uses Artificial Intelligence2017.6.1

Digital Garage to Invest in AI Technology Startup Studio All Turtles and Support their Business
Development in Japan.

2017.5.31

THE NEW CONTEXT CONFERENCE 2017 TOKYO on July 25-26 The Event will Focus on Biotechnology
and Blockchain

2017.5.12

Digital Garage officially launches lifestyle service for wealthy consumers Business integration with two
subsidiaries leads to development of DG Life Design business2017.4.5

Blockstream Launches New Confidential Assets Feature for Enterprise Blockchain Customers (Press
Release of Blockstream)

Copyright © 2018 Digital Garage, Inc. All Rights Reserved46

Please note that the business forecasts and strategies covered in today’s 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.