Digital Arts Inc.
(Securities Code: 2326)

Consolidated Financial Results for the Fiscal Year
Ended March 31, 2019
(From April 1, 2018 to March 31, 2019)
Supplementary Material
Thursday, May 9, 2019

Copyright © 2015 Digital Arts Inc.

Supplementary Material on Consolidated Financial Results
for the Fiscal Year Ended March 31, 2019

Key Points

Copyright © 2019 Digital Arts Inc.

Key Points(1) Increasing presence as a general security solution provider in the public sector
market, achieving record high sales.
⚫

Being highly regarded for the track record and reliability we have accumulated as a security provider with a focus on internal
data leakage, advanced security measures including those against targeted attacks, i-FILTER Ver. 10 and m-FILTER Ver. 5
made good sales.

⚫

Earlier than in the enterprise sector market, we increased our presence as a general security solution provider in the public
sector market.

(2) Also making progress in acquiring potential deals in the enterprise sector. Plan
to properly expand sales in the 25th period.
⚫

Although we have made some progress in acquiring new deals in the enterprise sector, we have been quicker to acquirelarge-scale projects that make a significant sales contribution in the public sector market.

⚫

We are also in the process of acquiring potential deals in the enterprise sector and we plan to learn from examples in the
public sector market to properly expand sales in the enterprise sector during the 25th period.

(3) Filtering is being introduced through mobile carriers as a result of revision oflegislation for the development of the Internet environment for young people⚫

The Act on Development of an Environment that Provides Safe and Secure Internet Use for Young People was revised on
February 1, 2018. It toughened the enforcement of the introduction of filtering to young people, which had been compulsory
before the revision.

⚫

Filtering is being introduced through mobile carriers as a result of this revision.

3

Copyright © 2019 Digital Arts Inc.

Supplementary Material on Consolidated Financial Results
for the Fiscal Year Ended March 31, 2019

Consolidated Results
Highlights

Copyright © 2019 Digital Arts Inc.

Consolidated Financial Highlights for the Fiscal Year Ending
March 31, 2019

Consolidated
net sales

OperatingprofitOrdinary
profitProfitattributable toowners ofparentNet Sales:

5,841 million yen(+724 million yen / +14.2% YoY)

Net sales rose considerably throughout the company following its increased
presence as a general security solution provider in the public sector market andbriskness in the consumer sector market.

Operating profit : 2,629 million yen(+726 million yen / + 38.2% YoY)

Profitability increased after the selection and concentration of management
resources began to produce positive effects, despite reorganization expenses in
the first half due to the revision of the Group’s overseas strategy.

Ordinary profit:

2,630 million yen （+721 million yen / + 37.8% YoY)

As a result of growth in operating profit, ordinary profit also increased.

Profit

:1,961 million yen(+679 million yen / + 53.0 % YoY)

The effect of curbing tax expenses associated with the liquidation of a subsidiaryin the United States resulted in massive profit growth.

5

Copyright © 2019 Digital Arts Inc.

Summary of Financial Results for the Fiscal Year Ending March
31, 2019
Consolidated Results(In millions of yen )FY March 2018

FY March 2019

Change YoY

Net sales

5,116

5,841

+14.2%

Gross profit

4,041

4,781

+18.3%

Selling, general andadministrative expenses

2,138

2,152

+0.7%

Operating profit

1,902

2,629

+38.2%

Ordinary profit

1,909

2,630

+37.8%

Profit attributable to owners ofparent

1,281

1,961

+53.0%

ROE

22.5%

28.1%

―

Dividend per share¥28.00¥48.00―6

Copyright © 2019 Digital Arts Inc.

Summary of Financial Results for the Fiscal Year Ending March
31, 2019
Non-Consolidated Results(In millions of yen)
FY March 2018

FY March 2019

Change YoY

Net sales

5,046

5,752

+14.0%

Gross profit

3,986

4,724

+18.5%

Selling, general andadministrative expenses

1,898

1,949

+2.7%

Operating profit

2,087

2,774

+32.9%

Ordinary profit

2,097

2,777

+32.4%

Profit860

1,784+107.4%

ROE

14.1%

25.1%

7

―

Copyright © 2019 Digital Arts Inc.

Trend in Net Sales(In millions of yen)

Record-high net sales

5,841（114%）

5,058

5,116

（126%）（101%）FY Mar. 2017

FY Mar. 2018

4,000
（118%）

3,402
2,707
2,190
1,852
1,700

1,387

（123%）（118%）

2,306

2,906
（107%）

3,027（112%）（104%）（117%）（105%）（109%）（100%）FY Mar. 2007

FY Mar. 2008

FY Mar. 2009

FY Mar. 2010

FY Mar. 2011

FY Mar. 2012

FY Mar. 2013

FY Mar. 2014

FY Mar. 2015

FY Mar. 2016

FY Mar. 2019

* Percentage figures represent comparisons with the preceding quarter.

8

Copyright © 2019 Digital Arts Inc.

Quarterly Trend in Net Salas

Quarterly net sales have increased year on year in all quarters (In millions of yen)
1,674
1,540

1,503

（123%）（133%）（107%）

1,565

1,546

（102%）（118%）

1,402（130%）

1,309
1,253

（87%）

（116%）

1,131

1,158

1,098

（121%）

1,217（105%）

1,083（126%）（135%）（99%）

916（113%）（119%）

1Q（114%）

811

803

2Q

3Q

FY March 2016

4Q

1Q

2Q

3Q

4Q

1Q

FY March 2017

2Q

3Q

FY March 2018

4Q

1Q

2Q

3Q

4Q

FY March 2019
Current Fiscal Year

* Percentage figures represent the same period a year earlier.

9

Copyright © 2019 Digital Arts Inc.

Cost of Sales and Selling, General and Administrative Expenses◼ Efficiency increased, reflecting the selection and concentration of management
resources as a result of reorganization following revision of the Group’s overseas
strategy despite an increase in depreciation after the release of a new product.
(In millions of yen)

FY March 2018

FY March 2019

Main Factors for
ChangeChange YoY

1,075

1,059

-15

Labor

453

421

-32

Depreciation

322

343

+21

Transfer to other accounts
Other manufacturing costs

298

294

-4

Selling, general andadministrative expenses

2,138

2,152

+14

Personnel expenses

1,050

1,034

-15

Advertising expenses

287

290

+2

Other

800

828

+27

Cost of sales

10

Increase in depreciation
after the release of a new
product

Increase in fees paid to
outside experts, etc.

Copyright © 2019 Digital Arts Inc.

Quarterly Trend in Cost of Sales(In millions of yen)

Increase in depreciation after the release of a new product
Labor
Depreciation

306

Transfer to other accounts and others

301（125%） （114%）

264
240
211

（96%）

（93%）

（99%）

244

（113%）

67

232

235

（97%）

（92%）

66

62

79

90

75

（101%）

（83%）

76

71

74

68

66

64
94
90

78
78
70

250
236

65

77
65

54

（92%）

（100%）（110%）（114%）

222

282

265

256

（93%）

227

289
（125%）

72

72

72

69

67

86

87

90

1Q

2Q

3Q

FY March 2016

109

103

112

4Q

1Q

2Q

106

3Q

68

69

98

102

4Q

1Q

2Q

FY March 2017

95
77

77

131

121

93

121

120
92

3Q

FY March 2018

4Q

1Q

2Q

110

3Q

98

4Q

FY March 2019
Current Fiscal Year

* Percentage figures represent the same period a year earlier.

11

Copyright © 2019 Digital Arts Inc.

Quarterly Trend in Selling, General and Administrative Expenses

Significant reduction in overseas expenses following revision of(In millions of yen)Group’s overseas strategy
Personnel expenses

Advertising expenses

586（148%）

510（125%）

488（123%）

482

92

576
（113%）

71

Other

Overseas expenses

596
556

（133%）

（99%）

498

88

53

（103%）

49
180

166

（107%） （88%）（112%）

69

（92%）

482
（90%）

60

42

190

182

469
（89%）
25

200
154

163

201

194

164

156

46

57

148
56

34

94

568

69

176

151

80

526

72
164

172

533
509

67

58
73

（111%）

569（102%）（114%）

68

632

56
83

59

219

208

221

1Q

2Q

3Q

FY March 2016

4Q

59

46

40

40

243

229

224

230

237

240

228

230

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

39

273

109

89

51

285

241

257

243

1Q

2Q

3Q

4Q

FY March 2017

FY March 2018

FY March 2019
Current Fiscal Year

* Percentage figures represent the same period a year earlier.

12

Copyright © 2019 Digital Arts Inc.

Supplementary Material on Consolidated Financial Results
for the Fiscal Year Ended March 31, 2019

By Market

Copyright © 2019 Digital Arts Inc.

Summary of Net Sales by Market◼ Consolidated net sales increased +14.2%.
◼ In the enterprise sector market, net sales grew +4.1%, reflecting a rise in the sales ratioof cloud-based products.
◼ In the public sector market, net sales rose +26.5%, reflecting our stronger presence as asecurity solution provider.
◼ In the consumer sector market, net sales surged +37.4% due to progress in the
introduction of filtering to young people.
Consolidated
net sales

Net Sales: 5,841 million yen(+724 million yen / +14.2 % YoY)Enterprise Sector

Net Sales: 3,133 million yen(+124 million yen / +4.1% YoY)

Public Sector

Net Sales: 2,191 million yen(+459 million yen / +26.5% YoY)

516 million yen(+140 million yen / +37.4% YoY)

Consumer Sector

Net Sales:

14

Copyright © 2019 Digital Arts Inc.

Trend in Net Sales by Market

Sales to the public sector and consumer
sector markets drove overall growth(In millions of yen)

5,841
（114%）

Enterprise Sector

Public Sector

Consumer Sector

5,058

5,116

（126%）（101%）

359

375

516

4,000
2,191

（118%）

3,402
2,906
2,707
2,190
1,700
1,387

（123%）（100%）

229

183
689

1,852

（118%）（109%）

290

257

2,306

（117%）（105%）

280（107%）

318

1,152

573
FY Mar. 2007

FY Mar. 2008（112%）

362
1,418

361

1,028

840

3,009

886

3,133

2,573

671

2,240

630
782

（104%）

2,125

1,140

260
997

3,027

1,732

342

923

1,013

FY Mar. 2009

FY Mar. 2010

1,205

FY Mar. 2011

1,429

1,436

FY Mar. 2012

FY Mar. 2013

1,637

FY Mar. 2014

1,899

FY Mar. 2015

FY Mar. 2016

FY Mar. 2017

FY Mar. 2018

FY Mar. 2019

* Percentage figures represent comparisons with the preceding quarter.

15

Copyright © 2019 Digital Arts Inc.

Quarterly Trend in Net Sales by Market

Net sales have increased in all quarters, driven by the public sector and(In millions of yen)consumer sector markets
1,674Enterprise Sector

Public Sector

Consumer Sector

1,503
1,253
（116%）

1,131
80

811

（119%）（113%）

498（135%）

916

803
89

1,098

403

（114%）

799（126%）

602

1,217

86

（105%）

80

141
536

120
699

92

546

497
408

424

427

（130%）

484

（99%）

92

89

78

115

（87%）

1,083

139

1,402

1,309
1,158

93

（121%）（118%）

103

105

84

1,546

（102%）（123%）（133%）（107%）

1,565

1,540

324

296
259

256

998

977
833

756
457

1Q

552

2Q

530

473

3Q

FY March 2016

4Q

1Q

619

590

2Q

3Q

640

4Q

1Q

FY March 2017

726

2Q

665

3Q

FY March 2018

4Q

688

731

715

1Q

2Q

3Q

4Q

FY March 2019
Current Fiscal Year

* Percentage figures represent the same period a year earlier.

16

Copyright © 2019 Digital Arts Inc.

Supplementary Material on Consolidated Financial Results
for the Fiscal Year Ended March 31, 2019

Enterprise Sector

Copyright © 2019 Digital Arts Inc.

Review of Enterprise Sector Market◼ Sales of mainstay product m-FILTER were firm, reflecting the steady acquisition of projects, mainly
renewals of contracts from the preceding consolidated fiscal year.
◼ FinalCode introduced the highly anticipated Browser View feature, which provided an impetus for theacquisition of deals after a temporary stagnation. It has secured one of the largest deals ever.*◼ The amount of orders received not yet recorded as sales increased due to a rise in the proportion ofcloud service-type products in the i-FILTER Series.
* Sales are apportioned in proportion to the contract duration.

SeriesSeries

99.7% of the year-ago figure.

110.7% of the year-ago figure.

137.8% of the year-ago figure.
18

Copyright © 2019 Digital Arts Inc.

Supplementary Material on Consolidated Financial Results
for the Fiscal Year Ended March 31, 2019

Public Sector

Copyright © 2019 Digital Arts Inc.

Public Sector◼ Being highly regarded for the track record and reliability we have accumulated as asecurity provider with a focus on internal data leakage, advanced security measures
including those against targeted attacks, i-FILTER Ver. 10 and m-FILTER Ver. 5

made good sales.
◼ Earlier than in the enterprise sector market, we increased our presence as a generalsecurity solution provider in the public sector market.

SeriesSeries

115.7% of the year-ago figure.

198.4% of the year-ago figure.

77.2% of the year-ago figure.
20

Copyright © 2019 Digital Arts Inc.

Supplementary Material on Consolidated Financial Results
for the Fiscal Year Ended March 31, 2019

Consumer Sector

Copyright © 2019 Digital Arts Inc.

Consumer Sector◼ The Act on Development of an Environment that Provides Safe and Secure Internet Use
for Young People was revised on February 1, 2018. It toughened the enforcement of theintroduction of filtering to young people, which had been compulsory before the revision.
◼ Filtering is being introduced through mobile carriers as a result of this revision.

For computers

108.2% of the year-ago figure.

For game consoles
and TVs

98.6% of the year-ago figure.

For mobile terminals

199.8% of the year-ago figure.

22

Copyright © 2019 Digital Arts Inc.

Supplementary Material on Consolidated Financial Results
for the Fiscal Year Ended March 31, 2019

Full-Year Financial Forecast
for the Fiscal Year Ending
March 2020

Copyright © 2019 Digital Arts Inc.

Full-Year financial Forecast for the Fiscal Year Ending March 2020
Consolidated Financial Forecast for the Fiscal Year Ending March 31, 2020

Results for FY March 2019

Plan for FY March 2020

% Change

Net sales¥5,841 million¥6,800 million

16.4%

Gross profit¥4,781 million¥5,450 million

14.0%

Selling, general andadministrative expenses¥2,152 million¥2,150 million-0.1%

Operating profit¥2,629 million¥3,300 million

25.5%

Ordinary profit¥2,630 million¥3,300 million

25.4%

Profit attributable to owners ofparent¥1,961 million¥2,277 million

16.1%¥48.00¥50.00

Dividend per share‒* In the “First Half of Consolidated Financial Forecast for the Fiscal Year Ending March 31, 2020” stated in the “Consolidated Financial Results for the
Fiscal Year Ended March 31, 2019” announced on May 9, 2019, “Profit attributable to owners of parent” for the first six months of the fiscal year
ending March 31, 2020 shows year-on-year profit decline because the results for the first six months of the fiscal year ended March 31, 2019 reflect a
tax shield associated with the liquidation of a US subsidiary.
On a full-year basis, the impact of this will be absorbed and we expect to post a year-on-year increase in profit attributable to owners of the parent.

24

Copyright © 2019 Digital Arts Inc.

Full-Year financial Forecast for the Fiscal Year Ending March 2020
Non-Consolidated Financial Forecast for the Fiscal Year Ending March 31, 2020

Results for FY March 2019

Plan for FY March 2020

% Change

Net sales¥5,752 million¥6,600 million

14.7%

Gross profit¥4,724 million¥5,400 million

14.3%

Selling, general andadministrative expenses¥1,949 million¥2,100 million

7.7%

Operating profit¥2,774 million¥3,300 million

18.9%

Ordinary profit¥2,777 million¥3,300 million

18.8%

Profit¥1,784 million¥2,290 million

28.3%

25

Copyright © 2019 Digital Arts Inc.

Return to Shareholders for Fiscal Year Ending March 31, 2020
■Dividends
We are planning to pay dividends as follows to return a portion of our earnings
to our shareholders.
Target payout ratio for fiscal year ending March 31, 2020: 30.5 % (of consolidated net profit)
Annual dividends of surplus forecasted for fiscal year ending March 31, 2020:
50.00 yen per share
Dividend (in yen) per share
InterimYear-end

Total

Consolidated
payout ratio

FY March 2019

18.00

30.00

48.00

34.0%

FY March 2020 (forecast)

25.00

25.00

50.00

30.5%

26

Copyright © 2019 Digital Arts Inc.

Supplementary Material on Consolidated Financial Results
for the Fiscal Year Ended March 31, 2019

FY03/20 Initiatives

27

Copyright © 2019 Digital Arts Inc.

Initiatives in the Fiscal Year Ending March 31, 2020

■ Security Industry Environment
Increasingly diverse and sophisticated threats•

Japan is facing increasingly diverse and sophisticated threats of attack, not only global
cyber attacks but also attacks targeting specific companies and organizations or
national agencies.

•

New ways of addressing new threats are essential.

Growing needs to reduce security operations workload•

In the environment described above, the outsourcing of security operations and thedevelopment of cloud-based security products to reduce the security operations
workload are gathering speed.

•

New needs associated with the Olympic and Paralympic Games, IoT, autonomous
driving, etc. are also expanding.

28

Copyright © 2019 Digital Arts Inc.

Initiatives in the Fiscal Year Ending March 31, 2020

■ Enterprise and Public Sector Initiatives
Further strengthen and expand sales of i-FILTER Ver.10, m-FILTER Ver.5 andFinalCode.
•i-FILTER Ver.10 and m-FILTER Ver.5, which are the latest versions of both products, are being used by 2,800
companies (facilities) and 3.6 million users (as of March 31, 2019) and we are gathering many examples that show
how both these products are effective in preventing increasingly diverse and sophisticated targeted attacks. We plan
to draw on these examples to develop more customers.

•

We are currently developing a new version of FinalCode to solve issues with introduction/operation and, on providing

the new version, we will conduct a review of the provision method and price and step up efforts to develop morecustomers.

Raise recognition of DigitalArts@Cloud and step up activities to promote theservice•

Sales of DigitalArts@Cloud are expanding as the use of cloud-based services to reduce the security operations
workload accelerates.

•

We will expand sales by developing DigitalArts@Cloud into a high added value service, fully utilizing its advantage asa cloud service that can reduce the time and effort involved in construction and operation, integrating the strengths of
i-FILTER, m-FILTER and FinalCode, and balancing enhanced convenience with a high level of security.

29

Copyright © 2019 Digital Arts Inc.

Initiatives in the Fiscal Year Ending March 31, 2020

■ Consumer Sector Initiatives
Promote the introduction of filtering to prevent harmful effects of Internet
usage from spreading•

The harmful effects of Internet usage through smartphones, etc. are becoming more widespreadwith the proliferation of smart phones among young people.

•

We will develop new customers by strengthening collaboration with other companies focusing on theprovision of i-FILTER to consumers through mobile carriers.

30

Copyright © 2019 Digital Arts Inc.

Notes on Descriptions

Among the descriptions of plans, strategies and financial forecasts in thispresentation material, those that are not historical facts are forward-looking
statements. They reflect judgments made by the management of Digital Arts Inc. on
the basis of information currently available to it. They may be subject toconsiderable change depending on changes in the environment and other factors,

and the Company does not in any way guarantee the achievement of the
projections. Digital Arts Inc. will disclose any significant changes that occur in the
future as appropriate.
With some exceptions, the basic figures in this presentation are rounded down to

the nearest million yen.

•

デジタルアーツ, DIGITAL ARTS, i-FILTER, info board, ARS, ActiveRatingSystem, ACTIVE RATING, ZBRAIN, D-SPA, SP-Cache, NET
FILTER, White Web, m-FILTER, m-FILTER MailFilter, m-FILTER Archive, m-FILTER Anti-Spam, m-FILTER File Scan, Mail Detox, i-FILTER,
DigitalArts@Cloud, D-Alert, and logos and icons related to Digital Arts Inc. and its products are trademarks or registered trademarks of Digital
Arts Inc.

•

FinalCode is a registered trademark of the Digital Arts Group.

•

Apart from this, the names of companies and products stated herein are trademarks or registered trademarks of their respective companies.

31

Copyright © 2019 Digital Arts Inc.

- For internet convenience, safety and security-

Copyright © 2015 Digital Arts Inc.