Digital Garage, Inc.

3Q of FYE June 30, 2016 Financial Report2016.5.13

Investment Highlights
Record-high op income of 3.1 B JPY (+41% YoY) in cumulative 3Q FY16
〜 Record-high sales, op income, ordinary income. Listed on TSE 1st Section 〜ⅠPromoting global investment ecosystem Delivered incubation results, selling global investment portfolio gradually. Enhanced relations with
Credit Saison and iRidge as Credit Saison made an additional investment in iRidge
 Investment balanced grew to 11.5 B JPY through continued aggressive global investment
 Invested in key areas such as AI, VR/AR, Security, BioTech, following investment in a leading
blockchain developer, Blockstream

Ⅱ

Smartphone ads grew steadily. Started strategic data marketing business Growth gaining traction in smartphone ads. YoY sales grew +26%, income before taxes grew +13%
 Aggressively initiated investment in data related business Planning to launch new initiatives in DMP utilizing data from major credit card companies

Ⅲ

Payment platform expanded. Launched initiatives for FinTech
 Transaction volume grew +19% YoY to 860 B JPY. Op income grew strongly + over 30% YoY
 Enhancing "Payment OEM solutions" to major financial institutions
 Aiming to become a comprehensive FinTech company with a “next gen smart payment platform“
Copyright © 2016 Digital Garage, Inc. All Rights Reserved2Topics：Moving to TSE first section (listed on 5/9)

Digital Garage is now on the Tokyo Stock Exchange First Section
Since creating the first website, Digital Garage has over 20 years of history with the Internet. With the help of the Internet,
the wave of open innovation has overflowed into fields such as hardware and biotechnology. With the dramatic change in avariety of fields, the next 20 years will see more intense technological advancements and change daily lives compared to thepast 20 years. Within that competitive environment, we have always held the First Penguin Spirit and aimed to be at thefrontline of creating businesses that will be useful in the world. Please watch as Digital Garage paves a new path in the next 20
years.
special webpage for TSE First Section listing
http://www.garage.co.jp/en/tse1/

Copyright © 2016 Digital Garage, Inc. All Rights Reserved3Topics：【Project.1】 DG Lab

Business based on open
innovative platform to pass on
to our next generation
At DG Lab, we will focus on the following 5 areas:
Block Chain, VR/AR, AI, Security, and Biotechnology.
We will collaborate with our portfolio companies
inside and outside of Japan, in hopes of creating new
products and services that have the potential of
becoming DG’s next business pillar. Engineers anddesigners who are passionate in the leading researchdevelopments will gather to DG Lab, striving
together to develop through active discussions. With
the image of the next “Bauhaus of technology” inmind, we hope that DG Lab become a global
platform where new chemical change happens withINAMOTO&CO A creative company run by Rei Inamoto, Former Chief Creative Officer of AKQA.

design × data × technology were all organicallyconnected.

【special webpage】

http://www.garage.co.jp/en/tse1/#project1
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

4Topics：【Project.2】 First Penguin Award
In honor of those who follow Digital Garage’s philosophy,
we have newly established the First Penguin Award

Presented to: Mr. Keisuke Honda for the first ever First Penguin Award
Digital Garage has newly established "Digital Garage
First Penguin Award, " honoring and celebrating those
who keep creatively challenging oneself worldwide in thefields of Technology, Arts, and Sports, and also who isactively contributing in nourishing younger generations.
For the first time will be presented to Mr. Keisuke Honda,
a successful professional footballer actively playing at
Japan national football team because he acts as a rolemodel for the next generation. The awarding ceremony
will be held in Tokyo in July 2016.

【special webpage】

http://www.garage.co.jp/en/tse1/#project2
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

5Topics：【Project.3】 THE NEW CONTEXT CONFERENCE

Digital Garage's annual conference highlights
the Internet's news and cutting edge
technologies of the future
We will hold "THE NEW CONTEXT CONFERENCE 2016 Tokyo" on
Jul 5th‐6th, 2016 in Tokyo. We picked “Blockchain” and “Artificial
Intelligence” as the themes this year. The details are to beannounced later.

THE NEW CONTEXT CONFERENCE 2016 TOKYO
Dates：July 5 th-6 th, 2016
Venue：Tokyo Garden Terrace Kioicho Conference Hall
Host：Digital Garage, Inc.
※ NCC-San Francisco will be held in November 2016.

【special webpage】

http://www.garage.co.jp/en/tse1/#project3
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

6Group Financial Performance Review

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

7

FY16.6 3Q (Cumulative) Consolidated P/L Summary
Record-high YoY sales grew +20%, op income grew +41% to 3.1 B JPY〜 Ordinary income grew +4% to 4.5 B JPY with expansion of investment profit on equity method from
Kakaku despite recording foreign exchange loss 〜

FY16.6 Full Year

FY15.6 3Q

FY16.6 3Q

Cumulative Act

Cumulative Act%

AmountForecast

Net sales

26,264

31,474+19.8+5,21041,00077%

Operating income

2,199

3,104

+41.2

+905

5,200

60%

Non-operating income

2,627

2,156

-17.9

-471

1,522

1,687

+10.8

+164

Foreign exchange gain

689

-

-

-689

Non-operating expenses

435

678

+55.9

+243

Foreign exchange loss

-

400

-

+400

Ordinary income

4,391

4,582

+4.3

+190

Extraordinary income

2,369

164

-93.1

-2,205

2,301

145

-93.7

-2,155

68

-

-

-68

Income before income taxes

6,666

4,735

-29.0

-1,9308,200

58%Income taxes

2,275

1,412

-37.9

-862

Net income attributable to owners of parent

4,077

3,307

-18.9

-769

5,500

60%

JPY in Millions

Investment profit on equity method

Gain on change in equity
Gain on sales of investments in securities

YoY

1Q-3Q
Progress

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

8

FY16.6 3Q (Cumulative) Consolidated Segment P/L Summary
Double-digit growth of sales and income before taxes in IT/MT/FT〜 Income before taxes in IT grew strongly +55% YoY to 1.7 B JPY 〜
FY15.6 3Q

FY16.6 3Q

Cumulative Act

Cumulative Act%

AmountForecast

26,264

31,474+19.8+5,21041,00077%

IT Incubation Technology

3,720

4,421

+18.8

+700

7,000

63%

MT Marketing Technology

11,784

14,880+26.3+3,09518,50080%

FT Financial Technology

10,758

12,172+13.1+1,413

15,500

79%

-

-

-

-

-

Income before income taxes

6,666

4,735

-29.0

-1,9308,20058%IT Incubation Technology

1,111

1,728

+55.4

+616

4,100

42%

MT Marketing Technology

840

947

+12.6

+106

1,390

68%

FT Financial Technology

1,156

1,307

+13.0

+150

1,840

71%

MI Media Incubation

3,812

1,878

-50.7

-1,934

2,500

75%

2,301

145

-93.7

-2,155

JPY in Millions

Net sales

MI Media Incubation（Gain on change in equity）

YoY

FY16.6 Full Year
1Q-3Q
Progress

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

9

FY16.6 3Q Consolidated B/S Summary
JPY in Million

FY15.6

FY16.6 3Q

Difference

Reason for change / Remarks

Current assets

57,742

49,594-8,148Cash and deposits

30,956

16,843-14,112

Receivables

11,646

13,714+2,067

Money held in trust

3,120

2,089

-1,031

Payment segment related items
Payment segment related items

Operational investment securities

8,208

11,651+3,443New investment, Mark-to-market for stock related to IPO, etc.

Fixed assets

28,752

28,924+172

Investment securities

14,22014,537+317

Goodwill

6,237

5,883

-353

Total assets

86,49578,518-7,976

Current liabilities

50,62332,024-18,599

Deposits

20,99821,323+324

Short-term borrowing

23,533

6,508-17,025

Fixed liabilities

6,805

17,024+10,219

Long-term borrowing

5,546

16,077+10,531

Total liabilities

57,42949,049-8,380Net assets

29,06529,469+404

Shareholders' equity

24,64026,752+2,111

Common stock

7,426

7,435

+8

Capital surplus

2,854

2,825

-28

Retained earnings

14,42916,561+2,131

Accumulated other comprehensive income

4,002

2,248

-1,753

Unrealized gains on securities

2,585

774

-1,811

86,49578,518-7,976

Liabilities / Net assets

Payout of corporate tax and dividends, repayment of borrowings,
new investment, 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
Stable and long-term refinancing

Unrealized gains after tax for securities with market value

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

10

Contribution to Net sales(B Yen)
MT

26.2

IT

+3.0
(+26%)

FT

31.4

+1.4
(+13%)+0.7(+19%)

FY15.6
1Q-3Q

FY16.6
1Q-3Q+5.2 B Yen (+20%)
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

11

Contribution to Operating income(B Yen)

2.1

IT
+0.9
(+62%)MTFT

HQ/Elimination
△0.2

3.1

+0.3
+0.1
(+13%) (+34%)

FY15.6
1Q-3Q

FY16.6
1Q-3Q+0.9 B Yen (+41%)
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

12

Contribution to Income before income taxes by Segment(B Yen)6.6

Gain on change
in equity

MT

IT
+0.6
(+55%)

FT

MI

+0.1
△1.9
+0.1
(+13%) (△51%)(+13%)△ 2.1

HQ/Elimination

FY15.6
1Q-3Q△0.8

FX gain△ 0.8

4.7
FY16.6
1Q-3Q△1.9 B Yen (△29%)
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

13

Contribution to Income before income taxes by P/L(B Yen)6.6

Gain on change
in equity

+0.9
△0.4
+0.2
△ 2.1
(+41%) (△18%) (+56%)
Op
Non-opExtraNon-op
income income
ordinary △0.08
expenseincome (△89%)
Extra△2.2
Investment profit
ordinary(△93%)
on equity method
loss
+ 0.1
FX gain△ 0.6

FX loss+ 0.4

FY15.6
1Q-3Q

4.7
FY16.6
1Q-3Q△1.9 B Yen (△29%)
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

14

Segment Performance Review

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

15

Business highlights by segment

IT
MT
FT
MI

 Selling global investment portfolio gradually Investment balance reached 11.5 B Yen globally Smartphone ads grew steadily
 Driving alliances in big data related business Payment platform expanded. Op income grewsignificantly
 Launched initiatives for FinTech (Blockchain) Investment profit on equity method from
Kakaku grew steadily
 Preparing a new business using social graph
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

16

IT Segment Highlights

Major Portfolio

Current Portfolio# ofcompanies

Book Value(B Yen)Equity116

10.7

Domestic35

2.0

Overseas

Fund
Total

81
6

122

8.7
0.7

11.5

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

Blockstream [Canada]
Develops sidechain
technologies, parallel
blockchains that areinteroperable

Bridestory [Indonesia]
One of Indonesiaʼs top wedding
portal. Provides matching services
for vendors and consumers

Wevr [U.S.]
Virtual reality community and VR
media player for aspiring andprofessional creatives

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

Increments [Japan]
Provide technicalknowledge platform
called Qiita forengineers

Welby [Japan]

Builds apps for patients with chronic
malady, diabetes, cancers

Goodpatch [Japan]
Web development and consulting
service firm

ContextLogic [U.S.]
Operates Wish, a mobile shoppingapp. One of the “unicorn” startups
with $ 1 B valuations or higher
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

17

MT Segment Highlights
Performancebased ad sales

10.6
YoY

B Yen
+43 ％

Smartphone / appdomains

2.7
YoY

B Yen
2.4 x

Smartphone
Mix

26

YoY

%
+10％pts

Performance ad sales increased +43% YoY. Growth
gaining traction in smartphone domain【Net sales】(B Yen)7.3
1.1

FY15.6
1Q-3Q

10.6

2.7

（

Performancebased ads

Smartphone, app）

FY16.6
1Q-3Q◎ Aggressively initiated investment in data
related business- Collaboration with major credit card companies- Accelerate DMP business utilizing their data
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

18

FT Segment Highlights
Amount oftransactions
YoY

856

Cost reduction from reorganization helped boost
B Yen

+19 ％

Segment sales

12

YoY

B Yen
+13 ％

Segment
Op. income

1.3
YoY

op income. Managing group resources efficiently

B Yen
+33 ％

JPY M
Transaction

FY15.6

FY16.6

1Q-3Q

1Q-3Q

720

YoY

856 +18.8%

Amount(B Yen)(B Yen)Net Sales

10,758

12,172 +13.1%

Op. Income

987

1,320 +33.8%

Op. margin

9.2%

10.9%

1,156

1,307 +13.0%

Income before
income taxes

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

・Reduced cost from reorg
・Managed group resources
efficiently
Last term (special factors)
・FX gain (depreciation of yen)・Delivered incubation results in
Asia
Copyright © 2016 Digital Garage, Inc. All Rights Reserved

19

MI Segment Highlights
Investment
profit on equity
method

1.7
YoY

B Yen
+ 15 ％

Income before
income taxes

1.8
YoY

B Yen
△ 51 ％

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)

3.8
2.3
1.5
0.
FY15.6
1Q-3Q

Extraordinary income
Investment profit onequity method

1.8
1.7

FY16.6
1Q-3Q

YoY

+15%

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

20Appendix

Copyright © 2016 Digital Garage, Inc. All Rights Reserved

21Quarterly Consolidated Sales / Income before income taxes
Achieved Sales +20% YoY in 1Q-3Q FY16.6〜 Hit record high for cumulative 3Q sales, op income, and ordinary income 〜(JPY in Million）【Net Sales】

FY15.6【Income Before Income Taxes】

FY16.6

FY15.6

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

22Quarterly comparison of IT Segment
Partially sold stocks, delivering Incubation results〜 Enhanced domestic and global portfolio. Investment balance reached about 11.5 B Yen 〜(JPY in Million）【Net Sales】

FY15.6【Income Before Income Taxes】

FY16.6

FY15.6

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

23Quarterly comparison of MT Segment
Smartphone ads for apps grew steadily along with performance-based ads~ Aggressively initiated investment in data related business ~(JPY in Million）【Net Sales】

FY15.6【Income Before Income Taxes】

FY16.6

FY15.6

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

24Quarterly comparison of FT Segment
Transaction amount increased significantly with sales up +13 % YoY~ Expanding business in non-EC (food, real estate, etc). Enhancing “Payment OEM” to financial institutions ~(JPY in Million）【Net Sales】

FY15.6【Income Before Income Taxes】

FY16.6

FY15.6

FY16.6
Copyright © 2016 Digital Garage, Inc. All Rights Reserved25Quarterly 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）

Includes extraordinary income of 2.2 B
JPY. DG participated in share purchaseby Kakaku via public tender offering（in Million）【Monthly unique users 】

Kakaku.com

Tabelog

FY15.6

FY16.6Note : The fiscal year for Kakaku.com, Inc ends in March while the one for DG ends in June.
DGʼs 2Q earnings on a consolidated basis incur Kakakuʼs 3Q earnings (April - December).

Results Briefing for the Third Quarter of the Fiscal Year Ending
March 31, 2016, Kakaku.com, Inc.
Copyright © 2016 Digital Garage, Inc. All Rights Reserved26

Last 5 Year Financial Performance, Consolidated
Net sales

Net income

100 M Yen

CAGR 36 ％
337
279
110

380

100 M Yen

CAGR 54 ％

149
9

21

27

50
28

11.6 12.6 13.6 14.6 15.6

11.6 12.6 13.6 14.6 15.6

ROE

Dividend Payout
Ratio

TSE Avg.* 7.9 %14.0 ％
11.8 ％
9.7 ％

17.2 ％

10.1 ％

11.6 12.6 13.6 14.6 15.6

23.1％
10.3 ％
8.6 ％
0％

8.2 ％

11.6 12.6 13.6 14.6 15.6

Note ) * Tokyo Stock Exchange, Summary of Earnings Digests by Listed Companies, Fiscal year ending Mar. 2015 (TSE 1st, 2nd, Mothers, and JASDAQ)
Copyright © 2016 Digital Garage, Inc. All Rights Reserved27Quarterly Profit and Loss(Consolidated)

JPY in Million

FY16.6

FY15.6
1Q

2Q

3Q

4Q

1Q

2Q

3Q

8,126

9,760

8,377

11,822

10,336

9,507

11,631

Operating income

390

1,347

461

2,610

1,425

201

1,477

Ordinary income

1,165

2,297

928

3,218

1,863

831

1,887

Income before income taxes

1,204

4,488

972

2,582

1,941

860

1,933

772

2,733

571

1,004

1,196

599

1,510

Net sales

Net income attributableto owners of parent

Copyright © 2016 Digital Garage, Inc. All Rights Reserved28Quarterly Segment Profit and Loss(Consolidated)

JPY in Million

Net sales

FY15.6

FY16.6

1Q

2Q

3Q

4Q

1Q

2Q

3Q

8,126

9,760

8,377

11,822

10,336

9,507

11,631IT

Incubation Technology

1,035

1,987

697

3,733

1,899

657

1,863

MT

Marketing Technology

3,669

4,111

4,003

4,279

4,502

4,730

5,648

FT

Financial Technology

3,421

3,661

3,675

3,810

3,934

4,118

4,119

MI

Media Incubation

-

-

-

-

-

-

-

1,204

4,488

972

2,582

1,941

860

1,933

Income before income taxes
IT

Incubation Technology

93

1,026

△8

1,692

1,064

△ 215

879

MT

Marketing Technology

236

287

316

224

247

313

386

FT

Financial Technology

391

391

373

179

413

453

440

MI

Media Incubation

443

2,686

682

664

627

566

683

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

29

Press Releases
Date

Title

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 over 3000
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

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 Joint-Venture
Kodansha Advanced Media Through Promoting Titles Including "Attack on Titan"

Copyright © 2016 Digital Garage, Inc. All Rights Reserved30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.