Digital Garage, Inc.
FYE 30, 2015 FinJune ancial Report
New Mid-Term Plan
2015.8.14

Table of Contents
Mission and Business Model・・・・・・・・

3

Investment Highlights・・・・・・・・・・・

8

Group Financial Performance Review・・・ 11
Segment Performance Review・・・・・・・ 19
New 3-year Mid-term Plan Overview・・・

40

Appendix・・・・・・・・・・・・・・・・・・ 47
Copyright © 2015 Digital Garage, Inc. All Rights Reserved2Mission and Business Model

Copyright © 2015 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 © 2015 Digital Garage, Inc. All Rights Reserved4DGʼs Business Model
Producing and incubating Internet businesses by optimizing
our 3 core strengths: IT, MT, and FTIncubation
Technology

Incubation
Technology

MarketingTechnology

MarketingTechnology

Financial
Technology

Financial
Technology

Copyright © 2015 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 -

Advertising

Payment
環亞智富有限公司

Advertising / Promotion

Big Data Businesse-Commerce / Online Settlement Platform

Enabling Platform - 2 Revenue Sources
Copyright © 2015 Digital Garage, Inc. All Rights Reserved

6Incubation Stream
Functions and collaborations of the 3 regions connecting
US, Japan, and Asia

Copyright © 2015 Digital Garage, Inc. All Rights Reserved

7Investment Highlights

Copyright © 2015 Digital Garage, Inc. All Rights Reserved

8Investment Highlights (The Final Year of the Mid-term Plan)
Ordinary income of FY 15.6 achieved 71% YoY growth with 7.6 B JPY ;hit record high for four consecutive year

〜 Completed global expansion structure for DG model 〜

Ⅰ

Incubation：Promoting global investment ecosystem
 Investment balance expanded to 9 B JPY led by favorable conditions in JPN and US economies
 Launched the incubation center in SF, US. Collaboration with Betaworks; began localizing strong USinternet service
 Promoting global content businesses in collaboration with Wikia and Kodansha

ⅡMarketing : Performance ads continued strong growth with improved profitability
 Growth gaining traction in performance ads while the marketing industry shifts to businessintelligence Op income showed strong growth 24% YoY. Focusing the mobile domain in response to changes inuser access to the internet
 Following smartphone ad business, launched apps for smartphones as global strategy business

Ⅲ

Payment : Reorganized Payment Segment toward the age of FinTech
 Made econtext Asia a wholly-owned subsidiary of DG to speed up management decision making
 Domestic growth led by convenience-store and credit card settlements due to growing e-commercemarket Reaching EC economies through connecting ID payments of major EC platformers such as LINE,
Rakuten, Recruit, etc
Copyright © 2015 Digital Garage, Inc. All Rights Reserved9Track Record For DG Groupʼs Growth
Achieved EBITDA of 10 B JPY goal for the final year of the mid-term plan

〜 KPI of each Incubation・Marketing・Payment Segment in progress 〜
Trends in EBITDA

FY13

Full Year Act
This Year Act

ʼ14.12

Mid Term Plan

Bengo4.com
CrowdWorks

EBITDA(B JPY)

12
10
8

ʼ14.4

ʼ13.11Opened
DG717

ʼ12.4
Acquired
Veritrans

LaunchedBIG
MINING

ʼ14.6,9Invested inWikiaʼ13.12
econtext
ASIAʼsIPO

ʼ12.12

Mid-Term
Plan

6

2
0

2.9
FY12
Actual

5.9
FY13
Actual

Ad
Sales

11.0

Capital andbusiness alliancew/ Dentsu

4

IPO

Investment
Balance

6.6

10.0

Payment
Transaction
Volume

FY14

FY15

Enhanced portfolio with investment of 8 B JPY and 80
companies for domestic and global

2.9

8.6

9.0

( B JPY )Performance ads sales grew at 2 yr CAGR of 35%,
exceeding the market average growth

5.6

9.5

10.2

817.3

+35%

( B JPY )Annual transaction volume grew steadily,
reaching to about 1 trillion JPY level

735.5

CAGR

CAGR

976.8

+15%

( B JPY )Monthly group-wide users surpassed 140 million

FY14
Actual

FY15
ActualInterest expense, depreciation, and amortization are added back to income before income taxes to calculate EBITDA.

Kakaku.com
Group Users

Tabelogʼs Monthly users

46.16

56.61

67.78

(million)

Copyright © 2015 Digital Garage, Inc. All Rights Reserved

10Group Financial Performance Review

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11

FY15.6 (Cumulative) Consolidated P/L Summary
YoY Sales grew +12%, YoY Op income grew +84% to 4.8 B JPY〜 Ordinary income grew to 7.6 B JPY exceeding the initial forecast despite absorbing costs ofmaking econtext ASIA a wholly-owned subsidiary 〜
JPY in Millions

Net sales

Incubation
Marketing
Payment

Operating Income

Incubation
Marketing
Payment
Non-operating income

Investment profit on equity method

Foreign exchange gain
Non-operating expenses
Commission Fee

Ordinary Income

Extraordinary income
Gain on change in equity
Income before income taxes
Income taxes

Net Income
EBITDAFY14.6(Full Year Act)1

33,751
5,475
14,822
13,454
2,608
1,645
854
1,201
2,307
1,741
143
472
0
4,442
630
374
5,035
1,887
2,847
6,607

FY15.6(Initial
Forecast)

40,0007,500
17,00015,500
4,500
3,600
1,100
1,450

6,700

4,000
9,000

Ratio

(Full Year Act)

YoY %38,087
7,454
16,064
14,568
4,810
3,545
1,065
1,320
3,736
2,080
1,090
936
554
7,610
2,463
2,363
9,248
3,855
5,081
11,048

+12.8
+36.1
+8.4
+8.3
+84.4
2.2 x
+24.7
+9.9
+62.0
+19.5
7.6 x
+98.1
2836.2 x
+71.3
3.9 x
6.3 x
+83.7
2.0 x
+78.5
+67.2

Note: Interest expense, depreciation, and amortization are added back to income before income taxes to calculate EBITDA.
Op income per segment is based on figures prior to elimination or group deduction.

FY15.6
Act vs(Mid-Year Plan)

Fcst %

Published Aug 2012

-4.8
-0.6
-5.5
-6.0
+6.9
-1.5
-3.1
-8.9

40,0007,500
12,50020,000
6,500
3,500
1,500
3,000

+13.6

9,000

+27.0
+22.8

6,200
10,000

Copyright © 2015 Digital Garage, Inc. All Rights Reserved

12Half-year comparison of Consolidated Sales/Op income
Achieved Sales +12% YoY, Op Income +84% YoY in FY15.6~ Incubation drove the growth. Hit record high for cumulative Op income ~（JPY in Million）【Net Sales】【Operating Income】

Adjustment for changeof fiscal term

Adjustment for changeof fiscal term

Net sales

Operating income

1H

2H

FY13.6

1H

2H

FY14.6

1H

2H

FY15.6

1H

2H

FY13.6

1H

2H

FY14.6

1H

2H

FY15.6Note : FY13.6 actuals include the effect of an irregular 15-month reporting period, due to the fiscal year end shift from March to June for consolidated Veritrans Group.
9 months for 1H, 6 months for 2H
Copyright © 2015 Digital Garage, Inc. All Rights Reserved

13Half-year comparison of Incubation Performance
Partially selling stocks resulted in significant growth in sales and op income, delivering Incubation results〜 Enhanced domestic and global portfolio. Investment balance reached 9 B JPY 〜（JPY in Million）

1H【Net Sales】

2H

FY13.6

1H

2H

FY14.6【Operating Income】

1H

2H

FY15.6

1H

2H

FY13.6

1H

2H

FY14.6

1H

2H

FY15.6

Copyright © 2015 Digital Garage, Inc. All Rights Reserved

14Half-year comparison of Marketing Performance
Growth gaining traction in ROI-focused performance ads〜 Op margin improved to 6.6% by 0.8 points from the previous year even though
prior investment to data related business piled up 〜
（JPY in Million）

1H【Net Sales】

2H

FY13.6

1H

2H

FY14.6【Operating Income】

1H

2H

FY15.6

1H

2H

FY13.6

1H

2H

FY14.6

1H

2H

FY15.6

Copyright © 2015 Digital Garage, Inc. All Rights Reserved15

Half-year comparison of Payment Performance
Domestic growth led by convenience-store and credit card settlements
due to growing e-commerce market〜 Made econtext Asia a wholly-owned subsidiary. The related costs were recorded 〜（JPY in Million）

1H【Net Sales】【Operating Income】

Adjustment for change of fiscal term

Adjustment for change of fiscal term

Net sales

Operating Income

2H

FY13.6

1H

2H

FY14.6

1H

2H

FY15.6

1H

2H

FY13.6

1H

2H

FY14.6

1H

2H

FY15.6

Copyright © 2015 Digital Garage, Inc. All Rights Reserved

16

FY15.6 Consolidated B/S Summary
JPY in Million

FY14.6

FY15.6

Difference

Current assets

45,45557,752+12,296

Cash and deposits

24,29430,956+6,661

Receivables

8,596

11,646+3,049889

3,120+2,231

8,063

8,208

+144

Fixed assets

25,55428,752+3,197

Investment securities

10,644

14,220+3,576

Goodwill

7,354

6,237

-1,117

Total assets

71,00986,504+15,494

Current liabilities

25,461

50,623+25,162

Deposits

16,43420,998+4,564

Short-term borrowing

3,690

23,533+19,843

Fixed liabilities

9,058

6,805

-2,252Long-term borrowing

8,841

5,546

-3,294

Total liabilities

34,51957,429+22,909

Net assets

36,48929,074-7,415

Shareholders' equity

27,762

24,650-3,112

Common stock

7,399

7,426

+27

Capital surplus

10,8172,854-7,963Retained earnings

9,615

14,439+4,823

Accumulated other comprehensive income

2,679

4,002

+1,322

Unrealized gains on securities

2,193

2,585

+391

485

1,416

+931

Minority interests

5,906

126

-5,780Liabilities / Net assets

71,00986,504+15,494

Money held in trust
Operational investment securities

Foreign currency translation adjustment

Reason for change / Remarks

Sales of stocks, etc
Payment segment related items
Payment segment related items
New investment, Mark-to-market for stocks
related to IPOs, etc
Increased investment profit on equity method,
Mark-to-market for listed stocks, etc

Payment segment related items
Borrowing of funds for share purchase of econtext ASIA,
Transfer from Long-term borrowing
Transfer of Long-term borrowing due within one year to Current
liabilities, Demand for working capital

Shareholdersʼ equity reduced byeliminating changes in ownershipinterests from capital surplus
due to privatization of econtext ASIA

Unrealized gains after tax for
securities with market value

ʻ14.6

ʻ15.6

ROE

10.1 ％

17.2 ％

DPR

8.2 ％23.1 ％

EPS

60.66

108.11

Decreased due to making
econtext ASIA a wholly-owned subsidiary
Copyright © 2015 Digital Garage, Inc. All Rights Reserved

17Forecast for June 2016
Starting the first year of the new mid-term plan with the new four segments〜 IT to drive the growth, MT and FT to grow profit + 30% or more YoY 〜
FY14.6

FY15.6

FY16.6（Full Year Act）

（Full Year Act）

（Full Year Forecast） (YoY %)Net Sales
IT Incubation Technology
MT Marketing Technology
FT Financial Technology
MI Media Incubation

33,751
5,475
14,822
13,4540

38,087
7,454
16,064
14,568041,0007,000
18,50015,500
0

+8
-6
+15
+6
-

Income before income taxes※
IT Incubation Technology
MT Marketing Technology
FT Financial Technology
MI Media Incubation

5,035
1,595
874
1,496
1,776

9,248
2,804
1,064
1,335
4,477

8,200
4,100
1,390
1,840
2,500

-11
+46
+31
+38
-44

（－)

（2,361)

（－)

2,847

5,081

5,500

5 Yen

25 Yen15 Yen（JPY in Million）（Gain on change in equity）

Net Income
Dividend Per Share(Ordinary)(Commemorative)(5 Yen)( 5 Yen)(20Yen)(15 Yen)+8-

Segment profit changed to “Income before income taxes” from FY16. (See “New 3 year Mid-term Plan Overview” on P.40)
Note : Income before income taxes per segment is based on figures prior to elimination or group deduction※ Income before income taxes for FY14.6 and FY15.6 were reference values simply calculated due to the change to segment from FY16.6 and the change ofmanagement KPIs from op income to income before income taxes. The values may change subject to the disclosure in the future.
Copyright © 2015 Digital Garage, Inc. All Rights Reserved

18Segment Performance Review

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19

DG Groupʼs Business Segment
Accelerating Lean Global Through 3 Business Segments

Ⅰ

Incubation Segment

Global Incubation of next-generation Internet businesses

INCUBATION

Investments to cultivate promising startups
Development of media
Technological & business development based on agile
development methodology

ⅡMarketing Segment

MARKETING

Provider of web ads and latest marketing technologies
Data science businessWeb advertisement, media business
O2O related, business development

Ⅲ

Payment Segment

PAYMENTOne of the Asiaʼs largest payment platforms
One of the largest online payment
service providers in Japan
Expansion of payment platform to Asia

Copyright © 2015 Digital Garage, Inc. All Rights Reserved

20Incubation Segment
Ⅰ

Incubation Segment
Net Sales

Income Before
Income Taxes ※FY14.6

Full Year Actual

5,475 M JPY

1,595 M JPY

FY15.6

Full Year Actual

7,454 M JPY

2,804 M JPY

FY16.6

Full Year Forecast

7,000 M JPY

4,100 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➤ Neo Innovation, Inc.

Provides agile software development solutions and lean start up methodology➤ 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※ Income before income taxes for FY14.6 and FY15.6 were reference values simply calculated due to the change to segment from FY16.6 and the change ofmanagement KPIs from op income to income before income taxes. The values may change subject to the disclosure in the future.
Copyright © 2015 Digital Garage, Inc. All Rights Reserved

21Incubation Segment - Business Strategy
Seamlessly integrating the Import model with the Export model
Utilizing global agile development network and SF Incubation Center
Establishment of omnidirectional incubation model
Import Model

Export Model・Incubating promising startups globally・Supporting localization of foreign ventures

・Investing in promising domestic startups
・Supporting global expansion of Japanese
Lean Global companies

Exit

Media Lab Fund
Investing in ventures of eachstage globally

M&A

Early
Seed

Collaboration
with DG717

Middle –Later

Incubating promising seedstage Japanese ventures
Utilizing agile
development
network

http://onlab.jp/

Accelerate Global Incubation
Copyright © 2015 Digital Garage, Inc. All Rights Reserved

22

DG Incubation - Highlights
Investment total 8 B JPY in 3 FYs (2013-2015): investment balance expanded to 9 B JPY in FY 15.6

Constructing Portfolio that investees realize IPO stably
FY2013.6（2014.12）
TSEM（2013.11 ）NYSE（2013.4）
TSEM

FY2015.6

FY2014.6（2013.11）
TSEM

1(B JPY)

3.4(B JPY)

1.7(B JPY)

3.9(B JPY)

EndingInvestment Balance+
3 YearTotal Sales（2014.12）
TSEM

3.4

3 YearTotal investment
ROI:2x＋
Beginning
IRR:26%
Investment Balance( B JPY)

Portfolio companies achieved IPO in domestic and global
every term, recording stable sales

DGI
Sales

# of IPOed companies
FY13 – FY15 : Domestic 4, Overseas 1
FY16 : Domestic 1 ( already )（2015.7）
TSEM

Invested in promising startups through 1 – 3 B JPY per annum
investment
AnnualInvestment

FY2016.6

5.5(B JPY)

B JPY

8AmountInvested

2.1

Balance

9

Balance

11.1

Total
Sales

Copyright © 2015 Digital Garage, Inc. All Rights Reserved

23

DG Incubation - Highlights
Accelerating global incubation portfolio: investment to a newly-growing business area
Expecting further collaboration with global investing partners to establish a support system tolocalize in Japan
Current Portfolio

Major Portfolio※# of companies

Book Value ( M JPY )Equity（incl.CN）

88

8,537

Domestic

18

1,784

Overseas

70

6,706

Fund

6

521

Total

94

9,011

iRidge,Inc. [Domestic / B2B]
An O2O marketing provider including a location-based
push notification distribution platform for smartphones

AdStage, Inc. [Overseas / AdTech]
Provides intelligent cross-social-media
advertising platform

Note : Mark-to-market as of quarter end for listed stocks■Distribution by sector （equity/ incl. CN）

Big Data
0.8%

Provides employee perk packages to SMB

Payment Ad tech
0.7% 6.4%

Others
16.9%

B2B
42.9%
Value basis

AnyPerk, Inc. [Overseas / B2B]

Media
24.0%

Goodpatch Inc. [Domestic / B2B]

メディア
23.8%

Commerce
8.3%

Web development and consulting service firm

New Deal
Chartbeat, Inc. [Overseas / B2B]
providing the second-by-second analytics
of site visitor behaviors※ Major portfolio includes privately-held companies that have given DG disclosure permission of which DG's investment exceeds 100 M JPY and owns a minimum 5% share as of June 30,
2015. This information is based on the information disclosed from each company, and DG does not guarantee its authenticity, accuracy, rationality, and completeness.
Copyright © 2015 Digital Garage, Inc. All Rights Reserved

24

Providing stronger Japanese support to overseas Internet services
Launched localization of leading internet services in collaboration with Betaworks〜 Localizing real-time website analytics tool Chartbeat as the first step 〜

Major
Investment

Tumblra leading NYC-based incubator and pioneer tohave a business model of mixing incubating
startups and originally developed services.

Twitter(Acquired by
Yahoo in '13/5)(IPOed inʻ13/11)

GroupMe

Path

Examples ofOriginally-developed
services

TweetDeck(Sold to Twitterin '11/5)(Acquired by(Acquired by
Skype in '11/8)Daum Kakao in '15/5)

Giphy(Animated
GIF search）

BlogLovin(Mediaaggregator)

Bit.ly(URL shortening
service)

ChartBeat
DOTS(Site analytics (Smart-phone
tools)
games)

Investing proven services in English speaking communities
that Betaworks originally developed through theirsubsidiary companies, and accelerating localizing
support business Tracks and measures the second-by-second  Adopted by 50,000 websites in 62 countries including
attention of site visitor behaviors for sitemajor news outlets such as BBC, The New York Times
owners to identify the most engaging articles  Used by 80% of major US media
and advertisements in real-time

Next…

Copyright © 2015 Digital Garage, Inc. All Rights Reserved

25Incubation in the community marketing field
Creating
コンテンンツとコミュニティ領域での新規ビジネスの創造
a new business in both content and community area
With the synergy effect of the power of content, community and technology, a new
digital marketing strategy was established in a global scale

Wikia

Kodansha

Established in 2004 by the founder of Wikipedia
Jimmy Wales to commercialize wiki

Tie up with Kodansha to globalize contents andcultivate new business

130M
Unique user

Kodansha Advanced Media LLC

1.8B

Monthly PV

327K

Communities

200

Languages*Global traffic data

 Invested to Wikia Inc. and Wikia Japan Agency contract to sell ads on the JapanesewebsiteJV in SF, US(19% stake)Setting a platform at DG717 to collaborate business in global
delivering services including the companyʼs most popular
content “Attack on Titan”
Titles of Manga globally distributed to reach 5x to 2,000 by theend of ʻ17

DK Gate, Inc.

JV in Japan (66% stake)

Investing and nurturing next-gen content business with DG initiative

Delivering digital contents & globalizing

Accelerating Global Incubation
Copyright © 2015 Digital Garage, Inc. All Rights Reserved

26

Open Network Lab – Track Record
Established a strong brand recognition as the leading Japanese seed accelerator
 Nurtured 58 teams / 230+ entrepreneurs and engineers over 10 batches in 5 years since launch Continued hosting events for entrepreneurs with domestic and international guest speakers
 Has become the leading seed accelerator in Japan with over 20% applicants from overseas【# of applicants/accepted】
Domestic +Overseas

Domestic

Overseas

Overseas

57

64

16

23
19

42
68

Ae
cp
c et pacc
e tde d2010

Anyperk, Inc.

Provides employee-perk services to SMBs.
Raised $8.5M in Feb 2015, increasing the total
funding to $14.4M

WHILL, Inc.

Develops next-generation
personal mobility devices.
Raised $11M from 500 Startups
et al. in Sep 2014 and beganshipping the first model in Oct.

Papelook Inc.

2011

2012

2013

2014

61

65

2015

7 4 6 6 7 4 6 5 6 7 6※ The 11th batch started in ʼ15/7

Japan-based

Applicants (# of teams)

76

73

84 80 88

S i l i c o n Va l l e y based

> 20%

87

52 56

Updates from strong Open Network Lab graduates

The Papelook app lets users add stickers tophotos and create a collage. Raised 120M JPY
in Oct 2014. Total downloads surpassed 13M

Fablic, inc.
Operates a smartphone-based
flea market app Fril.
Raised 1 B JPY in Sep 2014.
Accelerating customer acquisition
through TV commercials
Copyright © 2015 Digital Garage, Inc. All Rights Reserved

27Marketing Segment
Ⅱ

Marketing Segment
Net Sales

Income Before
Income Taxes※

FY14.6

Full Year Actual

14,822 M JPY

874 M JPY

FY15.6

Full Year Actual

16,064 M JPY

1,064 M JPY

FY16.6

Full Year Forecast

18,500 M JPY

1,390 M JPY➤ Marketing Technology Company

Supports clientʼs business through performance-based ads, Online to Offline strategy
and web 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

 Digital Science Lab. Inc（50％／Equity method affiliate）
Provides ad solutions for smartphone applications

 LCO-Creation Singapore Pte. Ltd.（33.4％／Equity method affiliate）
Develops and runs a platform for smartphone-based international travel apps

※ Income before income taxes for FY14.6 and FY15.6 were reference values simply calculated due to the change to segment from FY16.6 and the change ofmanagement KPIs from op income to income before income taxes. The values may change subject to the disclosure in the future.
Copyright © 2015 Digital Garage, Inc. All Rights Reserved

28Marketing Segment – Business Strategy
Deeply cultivating exiting digital marketing businessand realizing growth strategy illustrated by I, II, and III below
Started strategic data science business and global business development

Ⅰ

Deeply cultivating digitalmarketing business

Monetization of O2O strategy and B2C media
businesses in addition to promoting growthof web promotions and mall businesses

Ⅲ

Ⅱ

Ⅱ

Gathering data and know-hows of DG
Group and Dentsu group to pioneer a newfrontier in data business

Ⅲ

Ⅰ

Expanding growth ofdata science business

Expanding each businessto Asia

Horizontal expansion of businesses to themajor Asian markets in conjunction with
Payment Segment

Copyright © 2015 Digital Garage, Inc. All Rights Reserved

29Marketing Technology Company – Highlights
Cumulative Results in FY15.6 (July to June)
Total sales

Op incomeNumber of clients

14.99 billion JPY

1.09 billion JPY

366 companies+7% YoY+23% YoY+16% YoY

Achieved 23% YoY high growth with 1.09 B Yen in Op income【Highlights】■Growth gaining traction in ROI-focused performance ads■Profitability focus led to op income % of 7.3% from 5.2%（100 MJPY）

Op income and margin %（％）

【Business Development Asia】■Established a JV (Digital Science Lab) with Metaps Inc.
● Metaps provides a platform for app developers globally.
Total downloads reached 2 B● DG and Metaps develop business globally with DGʼs expertiseand Metapsʼ app ad solutions■Capital and business alliance w/ Singapore-based LCO

YoY

+23%

● LCO has travel guide information covering 55 cities in 31 countries● Jointly provide travel guide app platform to Japanese companies having
loyalty programs● Develop O2O models to increase usersʼ app usage and store visits while
travelling abroad by offering promotional campaigns
Copyright © 2015 Digital Garage, Inc. All Rights Reserved

30Marketing Technology Company – Global Strategy
Launched app ads for smart-phone / O2O solutions globally
Digital Science Lab

LCO-Creation Singapore Pte.Ltd.

Provide app ad solutions with highprofitability by combining DGʼs expertise with
Metapsʼ capabilities in global business deployment
and analytics in big data

Converts leading free newspaper / classified ads invarious places to platform for international tourists.
Develops O2O models for inbound and outbound to growthe platform as a leading app in Asia

PC

Smart Phone
Smart Phone
APP ADAD

DG develops businesson its own

31 countries
55 cities
DG and Metaps
develop business globally➤ JV with Metaps. 50% stake➤ Metaps provide platform for app developers

8,000
contents➤ Capital and business alliance. 33.4% stake➤ LCO has travel info covering 55 cities and 31
countries
Copyright © 2015 Digital Garage, Inc. All Rights Reserved31BI. Garage - Highlights
DMP business enters the next phase, launching Private DMP
Providing optimum marketing solutions to clients by leveraging unique
database and cutting-edge business intelligence with Private DMP< Business Overview ＞
Data from
Kakaku.com

Data from
DGG

Data from Dentsu Groupand others

Data fromsponsors
Clients datafrom sponsors
Behavior data
etc

Data
scienceview

DSP targeting ad

Latesttechnology

Coordination
with CRM area

A two-phase approach to develop the business
２ND PHASE : Started to provide Private DMP to JACCS, a credit card company as the first step
Copyright © 2015 Digital Garage, Inc. All Rights Reserved

32

NaviPlus - Highlights
Further expanding customer base as a leading recommendation service provider in Japan

Increased adoption of NaviPlusʼ comprehensive marketing tools〜 # of active sites : 410 ( +7.3% YoY ) 〜

Comprehensive Marketing Tools

Enhanced platform

Providing tools such as recommendationengines and custom website search to increase
visitor conversion rates and to increase sales of
EC stores

Developing a new marketing solution“Retargeting mail” which helps convert
customers into buyers, improving profit for ecommerce

Site Visits

Search/ComparePurchase

Leading to purchase without dropping out

Site
Re-visits

Revisit after dropout

Retargeting Mail：

ｃｖ
Customers who viewed this item also viewed
Recommended products for you
Customer reviews by those who purchased
this item

Purchase

NEW Solution

Personalized mail with highopening ratio
Opening ratio 90%(max)
Conversion ratio 45% (max)【To be released in ʻ15/8/3 】

Copyright © 2015 Digital Garage, Inc. All Rights Reserved

33

Payment Segment
Ⅲ

Payment Segment
Net Sales

Income Before
Income Taxes※

FY14.6

Full Year Actual

13,454 M JPY

1,496 M JPY

FY15.6

Full Year Actual

14,568 M JPY

1,335 M JPY

FY16.6

Full Year Forecast

15,500 M JPY

1,840 M JPY➤ econtext ASIA Ltd.

Payment headquarters 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➢ Veritrans Shanghai（50％ owned by econtext ASIA ／ equity method affiliated company）
Chinese JV➢ PT MIDTRANS（Veritrans Indonesia) ( 23% owned by econtext ASIA／Non-consolidated）
Indonesian JV➢ Citrus Payment Solutions Pte. Ltd（ 15.59%／Investment ）The holding company for the Indian online payment solutions provider( Citrus Payment Solutions Pvt. Ltd )➢ Sendo Technology JSC (13.89%／Investment)
On-line marketplace for C2C and B2C in Vietnam※ Income before income taxes for FY14.6 and FY15.6 were reference values simply calculated due to the change to segment from FY16.6 and the change ofmanagement KPIs from op income to income before income taxes. The values may change subject to the disclosure in the future.
Copyright © 2015 Digital Garage, Inc. All Rights Reserved

34

Payment Segment – Business Strategy
Expanding business in electronic payments in a broad sense
while capturing the EC market growth

Electronic payments
in a broad senseEC

Making strategic shift to “Comprehensive FinTech” from “Payment agency”

Japan

Asia

STRATEGY Ⅰ

STRATEGY Ⅱ

Continued expansion of domestic
business

Aggressive expansion to Asia

Jointly cultivating settlement business with strong
domestic partners, expanding major client base, anddeveloping new businessesEnhance alliance with large platformers



Capture growing inbound opportunities

STRATEGY Ⅲ

Emerging EC Markets

→ JV



Developed EC Markets

→ M&A



China&India→ Tailored strategy

EC Fund to promote growth of e-commercebusiness in Asia

Expansion to various markets where the use ofelectronic payments increases on top of EC

Electronic payments in a broad
sense to become 66 trillion Yen
Big opportunities in cashless society

LatestTechnology
New lifestylesupported bysmartphonesettlements

Rapid growth in EC / Credit card
adoption
Big opportunities in Asian countries

Copyright © 2015 Digital Garage, Inc. All Rights Reserved

35

Payment Business - Highlights
FY15.6 (July to June) Results
Expanded to

Number of transactions

5 countries

192.20 million

Japan,Indonesia,China,India,Vietnam

Total amount of transactions

976.8 billion JPY+12.8% YoY+19.5% YoYPrivatized econtext ASIA, strengthening business collaboration
Domestic – Expanding services & partnerships

Foreign – Widening Asian expansion【Offline payment】

 Invested in Sendo to expand its online marketplace in Vietnam

 Card settlement for restaurants “Tabelog Pay”
real estate “Suma Pay”
 Veritrans mPOS to support EMV (thenew payment standard for IC card) and
NFC. Transaction can be made when
the card is held over a reader

 Privatization of econtext ASIA is complete
Transaction
amount ( 100 M )【Transaction Amount】
Veritrans

econtext【ID Payment w/ major EC platformers】

 Helping drive new customers for payment in alliance withmajor EC platforms having large customers such as Seven & iand Rakuten【Inbound, Cross-border EC】

 Provide “Buy Smart Japan” to overseas buyers
for Japanese EC sites such as Tokyu Hands,
Kojima.

上期
１H

下期
2H

2013.6期

FY13.6

上期
１H

下期
2H

2014.6期

FY14.6

上期
１H

下期
2H

2015.6期

FY15.6

Note: # of transactions is on a gross basis. Transaction amount includes payment amountand data transaction amount
Copyright © 2015 Digital Garage, Inc. All Rights Reserved

36

Payment Business – Entering into New EC BusinessElectronic payment to become a 66 trillion JPY market by 2017 as stores adopt cashless payment〜 Penetrating growing new electronic payment market in addition to EC market 〜【 Electronic Payment to reach66 trillion JPY in 2017】( JPY in Trillion )Electronic Payment
66 Trillion JPY(1.5 x)

Focus areas(market size)

44

Food
service（12 T JPY）

(ʼ12)

66

Private Final
Consumption
Apprx. 290(ʼ17)

Potential = Non-electronic
payments(Cash payment, etc)

Real
EstateRentals（9 T JPY）

Funerals（1.7 T JPY）

DGʼs Solutions

Tabelog Pay
Jointly providing credit card
settlement service for restaurants
with Kakaku.com utilizing 770 k
restaurants listed on Tabelog

Suma PAY
Providing credit card settlement services for rents
and deposits in conjunction with DG Groupʼs realestate advertising agency, DG Communications

Ceremony Pay

Providing credit card and loan
financing services to funeralcustomers

Convenience-store-style Settlement

Electronic payments (Credit / Debit / Prepaid cards, Electronic money, etc)
Source : DG research, Statistics Bureau of Japan, Yano Research Institute

RetailStoresBringing convenience-store style payment
services to rapidly growing Asian market
utilizing expertise developed over years with
47,000 stores in Japan

Copyright © 2015 Digital Garage, Inc. All Rights Reserved

37

Payment Business – Reaching huge e-commerce economies
Helping drive new customers for payment in alliance with major EC platforms
having large customer IDs such as Seven & i, Rakuten, LINE, and Recruit

EC Merchant# of Members : 100 M

ID(As of ‘15/6）# of Members : 37 M
(As of ‘15/2)# of Users : 58 M

Payment

v

N.A.

Login

(As of ‘15/1)

•
•

Send
customers

New
Merchant

Existing
Merchant

Login using each ID
Make payment with easeusing registered cards/
e-money
Copyright © 2015 Digital Garage, Inc. All Rights Reserved

38

Payment Business – Asian Expansion
Accelerating Expansion of Settlement and e-Commerce Solutions to Asia
Business
アジアでの事業展開
Expansion in Asia

Japan

（Vietnam）
China

Monthlytransaction(100 M JPY)

107

4x

India

Monthlytransaction(100 M JPY)

Vietnam25
ʻ14/6

Hong Kong・13.89％ owned by econtext ASIA・econtext ASIA invests in Sendo
primarily engaged in online
marketplace business and online
payment business in Vietnam

ʻ15/6

・Established in ʻ11. 15.59% owned
by econtext ASIA
・Monthly transaction grew 4x YoY to
10Ｂ JPY

Indonesia

・Established in ʻ12. 23% owned byecontext ASIA
・Monthly transaction grew about 2.2x
YoY to about 1.6 B JPY
・Expanding settlement options to banks,
convenience store, e-wallet, etc

2.2
x
7
ʻ14/6

16
ʻ15/6

Copyright © 2015 Digital Garage, Inc. All Rights Reserved

39New 3-year Mid-term Plan Overview

Copyright © 2015 Digital Garage, Inc. All Rights Reserved40Current Mid-term Plan Review
FY2015.6 EBITDA 10 B JPY(50% CAGR)Management
TargetResults

2012.62013.62014.62015.6

EBITDA

2.9

5.9

6.6

11

B JPY

B JPY

B JPY

B JPY

CAGR
55%

Completed Global Incubation Structure

Ⅰ

Networked major US cities and Asian countries

Ⅱ

Launched DG717 in SF, US. Established global incubation structure incollaboration with Betaworks, a leading startup studio in the east coast

Ⅲ

Invested in businesses that will become a landmark for the next 3
years. Established DGʼs position as a global incubator which invests
in and incubates seamlessly
Copyright © 2015 Digital Garage, Inc. All Rights Reserved

41Initiatives for the New Mid-term Plan“Think for yourself and question authority”

TENACITYOPENNESS

強い意志を持て

常識を疑え

INTEGRITY

AGILITY

真っ直ぐであれ

機敏であれ

COURAGE
勇敢であれ

Copyright © 2015 Digital Garage, Inc. All Rights Reserved

42

The Slogan and Concept of the New Mid-term Plan

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

Incubation
Technology

Ⅰ

Organic growth in each
IT/MT/FT segment

Ⅱ

Accelerating incubation throughDGʼs original cross-sectional
platforms of each segment

Ⅲ

Cross-sectional nurturing
DGʼs next pillar businessfrom each IT/MT/FT segment

Media Incubation(DG Lab)MarketingTechnology

Financial
Technology

Copyright © 2015 Digital Garage, Inc. All Rights Reserved

43Changes on Business Segment
Drive business strategies with the new 4 segmentsby adding MI to the current IT/MT/FTIT

Incubation
Technology(New)(ex) Incubation

MT

MarketingTechnology

FT

Financial
Technology(ex) Marketing(ex) Payment

Media Incubation

MI●Incubate businesswith media as a core
●Commercialize
seeds / R&D resultsfrom and outside
DG group●Accelerate businessalliance with DGʼs
portfolio, etc

Manage the new 4 segments to increase DG groupʼs overall profit ;Gain investment profit from Kakaku.com (equity method affiliate),
Enhance business alliance, Monetize R&D results
Copyright © 2015 Digital Garage, Inc. All Rights Reserved

44Key strategies of the New Mid-term Plan
Create new contexts for the next generation by flexibly responding
to drastic technological changes over the next 3 years
Incubation Technology

IT● Strengthen global incubation● Develop Open Network Lab in US／Asia● Promote R&D through open innovation
approaches

MT

Marketing Technology● Realize Data-driven Marketing● Strengthen smartphone domain／global
support● Growth Hack

Financial Technology

FT● Grow biz on domestic EC market● Strategic development in non-EC
areas and Asia
● From payment agency to“Comprehensive FinTech”

Media Incubation

MI● Incubate business w/ media as a core
● Further collaborate with Kakaku.com tocreate new business● O2O, FinTech, AdTech, Next-gen media,
medical, bio, etc

Copyright © 2015 Digital Garage, Inc. All Rights Reserved

45

The New 3 year Plan
2018.62015.615 B JPY

IncomeBefore Income
Taxes

9.2

Consolidated
ROE

17％

> 20%

23％

> 20%

4.6％
18.5％

20％

Consolidated
Dividend
PayoutRatio

Ordinary
Commemorative

B JPY（CAGR +17％）

 Accelerate global incubation< Background > Introduce IFRS targeting FY2017.6. Focusing on incubation results,
manage performance based on “income before income taxes”
 Set capital efficiency and shareholder return as significant management KPIs
Copyright © 2015 Digital Garage, Inc. All Rights Reserved

46Appendix

Copyright © 2015 Digital Garage, Inc. All Rights Reserved

47

Quarterly Profit and Loss(Consolidated)
JPY in Million

FY14.6
1Q

2Q

FY15.6
3Q

4Q

1Q

2Q

3Q

4Q

Net sales

7,273

8,349

8,271

9,857

8,126

9,760

8,377

11,822

Incubation

927

1,467

755

2,325

1,035

1,987

697

3,733

Marketing

3,068

3,557

4,012

4,184

3,669

4,111

4,003

4,279

Payment

3,277

3,326

3,503

3,346

3,421

3,661

3,675

3,810

86

726

374

1,421

398

1,341

461

2,608

Incubation

△ 77

548

△ 48

1,222

78

1,060

△8

2,415

Marketing

136

199

308

210

245

281

317

221

Payment

203

260

415

322

316

273

397

333

Ordinary income

473

1,214

810

1,944

1,173

2,290

929

3,216

Net income

389

1,037

446

974

780

2,726

571

1,002

EBITDA

970

1,956

1,207

2,473

1,618

4,961

1,437

3,031

191

204

170

191

171

217

182

182

Operating income

Amortization

Note: Interest expense, depreciation, and amortization are added back to income before income taxes to calculate EBITDA.
Op income per segment is based on figures prior to elimination or group deduction.
Copyright © 2015 Digital Garage, Inc. All Rights Reserved

48

Press Releases
Date

Title

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"

2015.6.30

Digital Garage and Metaps establish Digital Science Lab in a joint venture2015.6.22

Digital Garage to exhibit at SOLID 2015, an IoT event held in San Francisco Unveiling of "techrice" prototype, acloud service for rice farmers

2015.6.16

iRidge, Inc., DG Incubation's Portfolio Company, Approved For Listing On Tokyo Stock Exchange Mothers

2015.6.4

Digital Garage Enters into a Capital and Business Alliance with Singapore-based LCO to Support Loyalty Program
Businesses by Providing a Platform for International Travel Apps

2015.6.2

Digital Garage Completes 100% Acquisition of econtext ASIA, a Consolidated Subsidiary2015.5.25

Digital Garage to Hold "THE NEW CONTEXT CONFERENCE 2015 TOKYO" With Joi Ito As The Host-- The Future of
Digital Currency and Virtual Reality

2015.5.7

Digital Garage Invests in Website Analytics Tool Provider Chartbeat, Inc. to Support Japanese Expansion ThroughMedia Site Sales Boost

2015.5.1

Digital Garage Invests in US-Based FinTech Innovator MX Technologies - To Support Future Japan Expansion

2015.4.22

Digital Garage To Lead Capital Investment in and Support Global Expansion of Mobile App Analytics Tool Repro

2015.4.2

Open Network Lab to Enhance Its Seed Accelerator Program by Increasing Maximum Funding Size andStrengthening Support

2015.2.19

Digital Garage and Kodansha to establish a joint venture on digital content business for global expansion ofJapanese contents and new business incubations

2015.2.12

Digital Garage To Boost Its Japanese Expansion Business For Overseas Internet Services and Bring Website
Analytics Service 'Chartbeat' to Japan

2015.2.3

AnyPerk, Inc. announces an additional $8.5M Series A funding from DCM Ventures and DG Incubation

Copyright © 2015 Digital Garage, Inc. All Rights Reserved

49

Press Releases
Date

Title

2015.1.28

Digital Garage To Support Japanese Expansion of Global Social Media Community Wikia Through Capital
Investment To Wikia, Inc. and Advertising Sales On Wikia Japan

2014.12.5

econtext ASIA co-invests in Sendo which is owned by FPT Corporation, a leading technology company in Vietnam,
to expand its online marketplace and payment services in Vietnam

2014.11.19

Participation in a Share Purchase Program through Public Tender Offering by Kakaku.com, Inc.

2014.11.7

CrowdWorks, DG Incubation's Portfolio Company, Approved For Listing On Tokyo Stock Exchange Mothers

2014.11.7

Bengo4.com, DG Incubation's Portfolio Company, Approved For Listing On Tokyo Stock Exchange Mothers

2014.11.4

ECONTEXT and VeriTrans launched "Chargeback" group compensation insurance to participating merchants

2014.10.31

Sumitomo Mitsui Card, Digital Garage and iRidge Collaborate and Launch Mitsui Sumitomo VISA Taiheiyo Masters
App

2014.10.29

Digital Garage Invests in Fleksy, Inc.

2014.9.19

VeriTrans teams with China's leading search engine Baidu to launch "Free SIM" service for Chinese tourists visitingJapan

Copyright © 2015 Digital Garage, Inc. All Rights Reserved50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.