Digital Arts Inc.（2326）

FY 03/18 Consolidated Financial Results
For Fiscal Year Ended March 31, 2018
（April 1, 2017 though March 31, 2018）
Reference Slides
May 8, 2018

Copyright © 2015 Digital Arts Inc.

FY 03/18 Financial Results Reference Slides

KEY FINANCIAL POINTS

Copyright © 2018 Digital Arts Inc.

Key Financial Points①

The drop-off in large projects for government agencies and local
governments received during the previous year was offset by thegrowth in the enterprise sector, resulting in higher sales andprofits, although forecasts were not achieved The decrease in large projects for government agencies and local governments won during theprevious fiscal year was offset by growth in i-FILTER and m-FILTER to the enterprise sector,resulting in higher sales and profits, but forecasts were not achieved②Solid sales through current customers upgrading to i-FILTER
Ver.10 and m-FILTER Ver.５
 2,000 firms, 200 million licenses attained by end of March (quickest upgrading rate so far)
 Released internet security solution i-FILTER Ver.10 and e-mail security solution m‐FILTERVer.5.
These provide increased ability to block malwares and data leakages from Web and e-mail Solid flow of current customers upgrading to the new versions③Steady business in consulting opportunities
 Due to the increased awareness of information security, there have been a steady orders
received by subsidiary, Digital Arts Consulting, contributing to the overall group sales

3Copyright © 2018 Digital Arts Inc.

FY03/18

Financial Results Reference Slides

CONSOLIDATED RESULTSHIGHLIGHTS

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FY03/18 Q3 Highlights (Consolidated)

Consolidated
Net Sales

Operating
IncomeOrdinary
IncomeNet Income
Attributable toOwners of Parent

JPY 5,116 million（YoY

JPY +58 million／＋1.2％）

Despite the decrease in demand due to the completion of large publictenders, the increase in the enterprise market contributed to growth

JPY 1,902 million（YoY

JPY +78 million／+4.3％）

Increased due to the YoY increase in sales, the revision of the organizationand personnel strategy targeting medium- to long-term growth, andcurbing of personnel expenses by optimally allocating resources

JPY 1,909 million（YoY

JPY +98 million／+5.4％ ）Due to the increase in the operating income, ordinary income also
increased

JPY 1,281 million（YoYJPY +156 million／ +13.9％）

Increased due to the YoY increase in profits, and the tax-reducing effectdue to Group restructuring
5Copyright © 2018 Digital Arts Inc.

FY03/18 Summary
Consolidated Results(Unit: JPY million)
FY03/17

FY03/18

YoY

FY03/18
Forecast

Net Sales

5,058

5,116

+1.2%

5,800

Gross Profits

4,051

4,041

△0.2%

4,700

Selling, General andAdministration
Expense

2,227

2,138

△4.0%

2,200

OperatingIncome1,824

1,902+4.3%

2,500

Ordinary Income1,811

1,909

+5.4%

2,500

Net Income
attributable to ownersof parent

1,125

1,281

+13.9%

1,619

ROE

23.0%

22.5%

―

Dividend pershare

24.00

28.00

―

6―
36.00

Copyright © 2018 Digital Arts Inc.

FY03/18 Summary
Non-Consolidated Results(Unit: JPY million)
FY03/17

FY03/18

FY03/18
Forecast

YoY

Net Sales

5,104

5,046

△1.1%

5,600

Gross Profits

4,028

3,986

△1.0%

4,250

Selling, General and
Administration
Expense

1,960

1,898

△3.2%

1,900

Operating
Income

2,067

2,087

1.0%

2,350

Ordinary Income

2,056

2,0972.0%

2,350

Net Income

1,339860△35.7%

1,598ROE

24.8%

14.1%

7―

―

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Consolidated Net Sales Trend(Unit: JPY million)

RECORD HIGH sales

5,058

5,116（126%）（101%）

FY03/18 Q4
平成29年3月期

FY03/19 Q4
平成30年3月期

4,000
3,402
2,906
2,707（107%）

2,190
1,700
1,387

1,852（118%）

2,306

3,027（118%）（112%）（104%）（117%）（105%）（109%）（123%）（100%）

FY03/08 Q4
平成19年3月期

平成20年3月期
FY03/09 Q4

平成21年3月期
FY03/10 Q4 平成22年3月期
FY03/11 Q4

FY03/13 Q4FY03/12 Q4 平成24年3月期
平成23年3月期

FY03/14 Q4
平成25年3月期

FY03/15 Q4
平成26年3月期

FY03/16 Q4 平成28年3月期
FY03/17 Q4
平成27年3月期※ Percentages indicate YoY net sales

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Consolidated Net Sales Trend (by Quarter)
Despite the drop-off in special demand to local governments, this wasoffset by the enterprise market, and sales were higher than the yearearlier period
1,540(Unit: JPY million)

1,503（102%）（123%）（133%）

1,309

1,253（116%）

1,131

1,077

1,158

1,098（121%）（87%）

1,083（126%）（135%）（119%）

937

（99%）

916

（113%）

811803715673

1,565（114%）（113%）（119%）（111%）（103%）

1Q

2Q

3Q

4Q

FY 03/15

1Q

2Q

3Q

4Q

1Q

FY 03/16

2Q

3Q

FY 03/17

4Q

1Q

2Q

3Q

4Q

FY 03/18
Current FY※ Percentages indicate YoY net sales

9Copyright © 2018 Digital Arts Inc.

COS and SG&A COS and SG&A declined, mainly due to the revision of the organization andpersonnel strategy targeting medium- to long-term growth, and curbing ofpersonnel expenses by optimally allocating resources（Unit：JPY million）

FY03/17

FY03/18

YoY Growth

1,007

1,075+68Labor

443453+10Depreciation

293322+29

Transfer to other accounts
Misc production cost270

298+28Selling, General and
Administrative Expenses

2,227

2,138

△88

Personnel Expenses

1,183

1,050

△133309

287△22

Cost of Sales

Publicity

Others800733
10+67

Key Factors

Personnel Expenses(Japan) -99M
(Overseas) -34M

Increase in rent for
offices in Japan andfees for externaladvisors
Copyright © 2018 Digital Arts Inc.

Cost of Sales (by Quarter)

Slight increase in depreciation due to new product releasesLaborDepreciation(Unit: JPY million)

Other Accounts & Misc.

306（125%） （114%）

283
264（123%）228（113%）238（105%）（93%）

224（102%）72

211

227（96%）222（99%）（93%）

525967

240

77

93

93

96

101

1Q

2Q

3Q

4Q

FY 03/15

72

244（100%）（110%）（114%）

71

65
68

86

87

1Q

2Q

3Q

235

79

72

72

62

78
69

109

103

112

106

4Q

1Q

2Q

3Q

FY 03/16

FY 03/17

121

4Q

90

（97%） （92%）

6667

90

232

94
78

80
70（113%）

265

64

109
85

256

65

48
5482

301

68

69

98

102

1Q

2Q

90

131

121

3Q

4Q

FY 03/18
Current FY※ Percentages indicate YoY net sales

11Copyright © 2018 Digital Arts Inc.

Selling, General and Administrative Expenses (by Quarter)
Revised the organizational structure, and effectively utilized resources inaccordance with the medium- to long- term personnel strategy(Unit: JPY million)
586

Personnel Expense

Publicity

OthersOverseas

510（125%）

408
（95%）

58396
（108%）

161

37

68

498

88

53（103%）

72
180

148
83

273
189

205

212

219

208

221

1Q

2Q

3Q

4Q

1Q

2Q

3Q

（107%） （88%）

60

163

201

194

46

4040

243

229

224

230

1Q

2Q

3Q

4Q

182

59

89

51

39197

526

565634（92%）

533

69
166

176

509

6749130

FY 03/15（99%）

15417232569（102%）（114%）

151149

2771

92

164

80
61482（113%）596

556（123%） （133%）（111%）（106%）

15848873394
363（148%）576

4Q

FY 03/16

241257

243

1Q

2Q

3Q

FY 03/17285

4Q

FY 03/18
Current FY※ Percentages indicate YoY net sales

12Copyright © 2018 Digital Arts Inc.

FY 03/18 Financial Results Reference Slides

BY MARKET

Copyright © 2018 Digital Arts Inc.

Summary: Net Sales by Market Despite the lack of large project such as those in the previous FY, managed tosustain a +1.2% growth Attained +16.9% growth in the enterprise sector, offsetting the decrease in thenumber of public sector projects and special demand from local governments
 Solid sales in the consumer sector due to growth of MVNOs
Consolidated
Net Sales

JPY 5,116 million

Enterprise

JPY 3,009 million

PublicJPY 1,732 million

Consumer

JPY

375 million（YoY（YoY+1.2％）

JPY +435 million／+16.9％）（YoY（YoY14

JPY +58 million／

JPY -393 million／-18.5％）

JPY +15 million／ +4.4％）

Copyright © 2018 Digital Arts Inc.

Sales Trend by Market

Enterprise sales drove overall earnings(Unit: JPY million)

5,116
5,058（101%）（126%）

359
Enterprise

PublicConsumer

4,000

3,402
2,707

2,190
1,700
1,387（123%）（100%）

229

183

689

1,852（118%）（109%）

290

257
886

2,306（105%）

573
FY 03/07

FY 03/08

2,906（107%）（117%）

318

280

3,027（104%）

1,013

FY 03/09

FY 03/10

1,732

342
2,125（112%）

362
1,418

361

1,152

997

1,028

840

3,009

671

923（118%）

1,140

260

630
782

375

1,205

FY 03/11

1,4291,436

FY 03/12

FY 03/13

1,637

FY 03/14

1,899

FY 03/15

2,240

FY 03/16

2,573

FY 03/17

FY 03/18※ Percentages indicate YoY net sales

15Copyright © 2018 Digital Arts Inc.

Sales Trend by Market

Growth in sales in the enterprise sector led to company-wide(Unit: JPY million)
increase in sales
1,565
1,540

1,503
Enterprise

Public105

84

Consumer（102%）（123%）（133%）

1,253
1,077

90

673
85

402

715

313

（119%）

89799

602

80

1,083（99%）

9292

424

427

324

296
259

216

444

409

2Q

3Q

48449789

7886（126%）（114%）

89977

457

4Q

FY 03/15

833

7566651Q

403（113%）

498

256

207

380916811

803（111%）（103%）（135%）

8097（113%）

1,158

1,098

93（121%）（119%）

937（87%）（116%）

1,131

103

1,309

1Q

552

2Q

530

473

3Q

4Q

1Q

FY 03/16

619590

2Q

3Q

FY 03/17

640

4Q

1Q

726

2Q

665

3Q

4Q

FY 03/18
Current FY※ Percentages indicate YoY net sales

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Copyright © 2018 Digital Arts Inc.

FY 03/18

Financial Results Reference Slides

ENTERPRISE SECTOR

Copyright © 2018 Digital Arts Inc.

Enterprise Sector
 The needs of large companies wishing to find a solution to prevent
targeted attacks and data leakage, i-FILTER continued to lead growth Additional licenses, and company-wide adoption of FinalCode resulted
in a concentration of orders at the end of the fiscal year, but sustained
growth was achieved

SeriesSeries

YoY

113.6 ％

YoY

109.3 ％

YoY

112.1 ％
18Copyright © 2018 Digital Arts Inc.

FY 03/18 Financial Results Reference Slides

PUBLIC SECTOR

Copyright © 2018 Digital Arts Inc.

Public Sector
 Despite the steady introduction of mainstay products, we were unable to
make up for the impacts from the completion of responding to increased
security measures in municipalities during the previous consolidated fiscalyear, the consolidation of Internet connections in prefectures, and thecompletion of measures to strengthen monitoring functions, along with thefact that large projects for government agencies were received in theprevious fiscal year

SeriesSeries

YoY

84.4 ％

YoY

61.8 ％

YoY

159.2 ％
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Copyright © 2018 Digital Arts Inc.

FY 03/18 Financial Results Reference Slides

CONSUMER SECTOR

Copyright © 2018 Digital Arts Inc.

Consumer Sector
 Promoted partnerships with MVNOs, mobile companies, and the sale ofi-FILTER® (Consumer) for Multi-device, allowing users to use i-FILTER
on multiple devices with one serial code Amid the decline in PC shipments in Japan, and the continued
challenging business environment, sales of multi-year packages andsales of i-FILTER® for multi-devices grew steadily, contributing to solidsales
PC

YoY

108.4 ％

Game console/TV

YoY

96.1 ％

Mobile Device

YoY

102.7 ％

22Copyright © 2018 Digital Arts Inc.

FY 03/18 Financial Results Reference Slides

FY 03/19 FORECAST

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FY 03/19 Forecast
Consolidated Forecast

 Japan: Bolster sales of new products released last September Release cloud service from May, expect growth in this area
 Subsidiaries: Conservative outlook for the forecast(Unit: million JPY, except where stated otherwise)

FY 03/18
Actual

FY 03/19Forecast

Growth Rate

Net Sales

5,116

5,800

13.3 %

Gross Profit

4,041

4,700

16.3 %

Selling, General and
Administration Expense

2,138

2,200

2.9 %

Operating Income

1,902

2,500

31.4 %

Ordinary Income

1,909

2,500

30.9 %Net Income
Attributable to Owners of Parent

1,281

1,619

26.3 %

Dividend per Share

28 JPY

36 JPY

24―Copyright © 2018 Digital Arts Inc.

FY 03/19 Forecast
Non-Consolidated Forecast

 Japan: Bolster sales of new products released in September Release cloud service from May, expect growth in this area
(Unit: million JPY, except where stated otherwise)

FY 03/18
ActualFY 03/19Forecast

Growth Rate

Net Sales

5,046

5,600

11.0 %

Gross Profit

3,986

4,250

6.6 %

Selling, General and
Administration Expense

1,898

1,9000.1 %Operating Income

2,087

2,350

12.6 %

Ordinary

2,097

2,35012.0 %

860

1,598

85.7 %Net Income25Copyright © 2018 Digital Arts Inc.

FY 03/19 Return to Shareholder■Dividend Distribution
Digital Arts plans to return profit to its shareholders as follows:
Projected dividend payout ratio for the period ending March 2019:30.9％ of consolidated net income for the current period

The annual dividend amount for the period ending March 2019:
Estimated at JPY 36.00 per share
Dividend per share (in JPY)
InterimFiscal yearend

AnnualConsolidated
Payout Ratio

FY 03/18

14.00

14.00

28.00

30.3％

FY 03/19 (Forecast)

18.00

18.00

36.00

30.9％

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Copyright © 2018 Digital Arts Inc.

FY 03/18 Financial Results Reference Slides

FY 03/18 INITIATIVES

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FY03/19 Initiatives■ Enterprise and Public Sector Initiatives
Expand sales of i-FILTER Ver.10 and m-FILTER Ver. 5•••

Make it possible to defend against targeted attacks with the introduction of i-FILTER andFILTER
By using both, clients will be able to completely counter Web infections, data loss, andmalware from e-mails
Continue to enhance products and develop new functions to provide more precise securityenvironments

Start cloud service for i-FILTER and m-FILTER•••As Web services and the e-mail environment rapidly shift to the cloud, needs for cloudsecurity are also increasing, and we will commence cloud-based services for i-FILTER andm-FILTER
It will provide protection for companies of any size against targeted attacks and dataleakage through a few simple steps
The cloud service will also provide a safe environment to browse the internet as well as
allow the user to open any email without hesitation

The addition of strongly requested functions for FinalCode willsecure additional customers•

The addition of functions highly sought after by current users and prospective users•

Accelerate the attainment of new users and sales expansion
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Copyright © 2018 Digital Arts Inc.

FY03/18 Initiatives■ Overseas Market Initiatives
Implement a new strategy based on a new system, centered onFinalCode, Inc.
• Implement aggressive marketing activities centered on FinalCode, Inc.
• There has been a global increase in interest in file security, and there has been an increasein detailed projects both for governments and companies• In order to attain the prospective projects, we have restructured the organization and haveformulated a new business plan
• New members with lots of experience will spearhead the effort to capture projects globally

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Copyright © 2018 Digital Arts Inc.

Notice

All statements herein, other than historical facts, contain forwardlooing statements and are based on DA’s current plans, strategies
and financial forecasts. These forward –looking statements arebased upon the management’s current assumptions and beliefs inlight of the information currently available to it. However,environmental changes and other important factors may cause
actual results to differ materially from those expressed herein. Allstatements herein are not intended to express DA’s commitment tofulfill any forward-looking statements. Updated information, ifapplicable, will be disclosed in a timely manner.
All numerical indications in this statement, unless stated otherwise,
are rounded to the nearest million JPY
・DIGITAL ARTS, SBRAIN, i-FILTER, i-FILTER EndPoint Controller, m-FILTER, m-FILTER MailFilter, m-FILTER Archive, m-FILTER AntiSpam, m-FILTER File Scan and D-SPA are registered trademarks of Digital Arts Inc.
・FinalCode is a registered trademark of Digital Arts Group・Other corporate and product names are trademarks or registered trademarks of the respective companies

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‐Contributing to a more convenient,
comfortable and safe internet ‐Copyright © 2015 Digital Arts Inc.