Consolidated Financial Results for the First
Three Quarters of the Fiscal Year Ending
March 31, 2020
(From April 1, 2019 to December 31, 2019)
Supplementary Material
Friday, January 31, 2020

Digital Arts Inc.
(Securities Code: 2326)
Copyright © 2015 Digital Arts Inc.

Supplementary Material on Consolidated Financial Results for theFirst Three Quarters of the Fiscal Year Ending March 31, 2020

Key Points

Copyright © 2019 Digital Arts Inc.

Key Points①

Consolidated net sales slightly declined year on year.
 A drop in reaction to the winning of large-scale projects in the previous fiscal year With the conclusion of the Windows 7 support period in January 2020, replacement demand for PCs
substantially increased and sales agents’ initiative to focus on PC sales has lasted longer than initially
expected.

②

Lineup enhancement, price revision and new plan establishment
of DigitalArts＠Cloud FinalCode@Cloud and Chat@Cloud were added to DigitalArts@Cloud lines. Actualizes a virus-freeworld that allows users to not be conscious of security, even in cloud operations.
 Prices were revised and new plans for “i-FILTER@Cloud Harmful sites Blocker Edition” and “mFILTER@Cloud Misdirected E-mail Prevention Edition” were established due to growing needs for cloud
operations in terms of corporate security.
 Projects to make corporate and public facilities use the cloud were extensively successful following“Cloud First” endorsed by the government.

③

Sales of i-FILTER Browser & Cloud increased
 In the enterprise sector market, work style has diversified and there has been growing opportunities to
use terminals provided by companies including tablets or note PCs outside companies.

3

Copyright © 2019 Digital Arts Inc.

Supplementary Material on Consolidated Financial Results
for the First Three Quarters of the Fiscal Year Ending March 31, 2020

Consolidated Results
Highlights

Copyright © 2019 Digital Arts Inc.

Consolidated Financial Highlights for the First Three Quartersof the Fiscal Year Ending March 31, 2020

Consolidated
net sales

OperatingincomeOrdinary
incomeNet Sales:(-25 million yen／-0.6% YoY)

Consolidated net sales slightly decreased reflecting a drop in reaction to the winning of largescale projects in the previous fiscal year and sales agents’ ongoing focus on PC sales withthe expiration of the Windows 7 support period.

Operating profit:

1,648 million yen(-26 million yen／ -1.6% YoY)

Operating profit declined due to a decrease in net sales.

Ordinary profit:

1,648 million yen(-25 million yen／ -1.5% YoY)

Ordinary profit decreased due to a decrease in operating profit.

Profit:Profit attributable toowners of parent

4,141 million yen

1,128 million yen(-289 million yen／ -20.4% YoY)

Profit decreased due to a reaction to suppression effects on tax expenses associated with theliquidation of a U.S. subsidiary in the previous fiscal year.

5

Copyright © 2019 Digital Arts Inc.

Summary of Financial Results for the First Three Quartersof the Fiscal Year Ending March 31, 2020
Consolidated Results(Million yen)
ItemFirst 3 Quarters
FY March 2019

First 3 Quarters
FY March 2020

Change YoY

Full-Year Forecast

Net sales

4,166

4,141

-0.6%

6,800

Gross profit

3,357

3,156

-6.0%

5,450

Selling, general andadministrative
expenses

1,683

1,508

-10.4%

2,150

Operating profit

1,674

1,648

-1.6%

3,300

Ordinary profit

1,674

1,648

-1.5%

3,300

Profit attributable toowners of parent

1,418

1,128

-20.4%

2,277

ROE

21.2%

14.1%

―

―

* The full-year forecast figures reflect the consolidated financial forecast announced on May 9, 2019.
6

Copyright © 2019 Digital Arts Inc.

Summary of Financial Results for the First Three Quartersof the Fiscal Year Ending March 31, 2020
Non-Consolidated Results(Million yen)
ItemFirst 3 Quarters
FY March 2019

First 3 Quarters
FY March 2020

Change YoY

Full-Year Forecast

Net sales

4,127

3,990

-3.3%

6,600

Gross profit

3,342

3,129

-6.4%

5,400

Selling, general andadministrative
expenses

1,507

1,445

-4.1%

2,100

Operating profit

1,835

1,684

-8.2%

3,300

Ordinary profit

1,837

1,687

-8.1%

3,300

Profit

1,262

1,162

-7.9%

2,290

ROE

18.4%

14.5%

―

―

* The full-year forecast figures reflect the non-consolidated financial forecast announced on May 9, 2019.

7

Copyright © 2019 Digital Arts Inc.

Trend in Net Sales for the First Three Quarters

Flat from the same period a year ago.

(Million yen)

4,166
（117%）

3,518（128%）

4,141
（99%）

3,551
（101%）

2,747（118%）

2,325

1,325

1,490
（112%）

1,617

1,888
（117%）

1,975（105%）

2,124（109%）（108%）（109%）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. 2017 FY Mar. 2018 FY Mar. 2019 FY Mar. 2020
3Q
3Q
3Q
3Q
3Q
3Q
3Q
3Q
3Q
3Q
3Q
3Q
* Percentage figures represent comparisons with the preceding quarter.

8

Copyright © 2019 Digital Arts Inc.

Quarterly Trend in Net Salas

Roughly the same year on year.
1,565

1,540

1,503

1,546

（102%）（123%）（133%）（118%）

1,309
1,158

1,098
（135%）

1,514
（98%）

1,402

1,376
（98%）

1,249

1,217
1,083

（126%）（107%）（130%）（87%）(Million yen)

1,674

（103%）（105%）（99%）

916（114%）

1Q

2Q

3Q

FY March 2017

4Q

1Q

2Q

3Q

4Q

1Q

FY March 2018

2Q

3Q

FY March 2019

4Q

1Q

2Q

3Q

4Q

FY March 2020
Current Fiscal Year

* Percentage figures represent comparisons with the same period a year earlier.

9

Copyright © 2019 Digital Arts Inc.

Cost of Sales and Selling, General and Administrative Expenses


An increase in software depreciation resulting from the end of the new development of cloud products.



A rise in labor cost due to an increase in consultant personnel.
Profitability improved due to the effects of selection and concentration in management resources associatedwith the Group reorganization after a review of overseas strategy in the previous fiscal year.
(Million yen)First 3 Quarters
FY March 2019

Cost of sales

First 3 Quarters
FY March 2020

809

984

Change YoY

Main Factors for
Change

+175

Labor

323

391

+68

Increase due to the growthof domestic subsidiaries(consulting business)

Depreciation

266

347

+81

Increase resulting from theend of new development ofcloud products

Transfer to other accounts
Other manufacturing costs

219

246

+27

Selling, general andadministrative expenses

1,683

1,508

-174

Personnel expenses

791

774

-16

Advertising expenses

232

164

-68

Decrease due to a review
of advertising strategy-89

Other expenses declined
as a result of theliquidation of a US-based
subsidiary.

Other

659

569
10

Copyright © 2019 Digital Arts Inc.

Quarterly Trend in Cost of Sales
An increase in depreciation resulting from the end of the new development of cloud products.
352 (Million yen)
A rise in labor cost due to an increase in consultant personnel.
343（145%）

306

Labor
Depreciation
Transfer to other accounts and others

240

256
（113%）（114%）

65

71（125%） （114%）265

244 （100%）（110%）

65
68

72

232

235

79

103

106

1Q

2Q

3Q

FY March 2017

68

121

4Q

75

62

69

98

102

1Q

2Q

（92%）

236
（101%）

93

90

76

3Q

121

120

4Q

1Q

FY March 2018

（99%）

（83%）

2Q

87

123

126

137

136

2Q

3Q

73

97

95

92

82

250

74

77

77

131

286

282

66

78

112

90

（97%） （92%）

66

69

289
（125%）

94
72

301（124%）110

3Q

FY March 2019

98

4Q

116

1Q

4Q

FY March 2020
Current Fiscal Year

* Percentage figures represent comparisons with the same period a year earlier.

11

Copyright © 2019 Digital Arts Inc.

Quarterly Trend in Selling, General and Administrative Expenses
Domestic expenses were on par with the previous fiscal year, but overseas expenses shrank
substantially.
Personnel expenses

576

Advertising expenses

596

556

（102%）（113%）（114%）

71

68

498

88

569
53

83

51

257

243

1Q

2Q

3Q

FY March 2017

285

4Q

94

526

（107%） （88%）

67

548

（112%）

69

482
（90%）

60

42

190

469

201

194

164
109

89
46

40

40

243

229

224

230

237

1Q

2Q

3Q

4Q

1Q

FY March 2018

59

25

46

240

228

230

2Q

3Q

4Q

487
（85%）
12

473
（98%）

211
167

156

57

FY March 2019

（87%）
13

（89%）

200
163

56

241

（92%）

533

182

154

59

509
69

166

(Million yen)

568

（99%）

（103%）

176

632

Overseas expenses（111%）

49
180

Other

179

70

46

253

262

246

1Q

2Q

3Q

47

4Q

FY March 2020
Current Fiscal Year

* Percentage figures represent comparisons with the same period a year earlier.

12

Copyright © 2019 Digital Arts Inc.

Supplementary Material on Consolidated Financial Results
for the First Three Quarters of the Fiscal Year Ending March 31, 2020

By Market

Copyright © 2019 Digital Arts Inc.

Summary of Net Sales by Market
 Total consolidated sales decreased slightly.
 In the enterprise sector market, net sales achieved an increase of +8.2%, reflecting strong sales of iFILTER Browser & Cloud.
 In the public sector market, net sales decreased 10.2% due to a decline in reaction to winning of large
projects in the previous fiscal year.
 In the consumer sector market, net sales decreased 8.5% due to a reduction in offer price to carriers
despite the progress of filtering installation for minors.

Consolidated
net sales

Net Sales: 4,141 million yen(-25 million yen／-0.6% YoY)Enterprise
SectorNet Sales: 2,309 million yen(+175 million yen／+8.2% YoY)

Public Sector

Net Sales: 1,486 million yen(-168 million yen／-10.2% YoY)

Consumer
SectorNet Sales:

345 million yen

14(-32 million yen／-8.5% YoY)

Copyright © 2019 Digital Arts Inc.

Trend in Net Sales by Market
Net sales in the enterprise sector market increased thanks to strong sales of the i-FILTER
browser & cloud.
(Million yen)
Net sales in the public sector market decreased due to the decrease in reaction to thewinning of large projects in the previous fiscal year.
4,166
4,141
Enterprise Sector

Public Sector

Consumer Sector

3,518

3,551

（128%）（101%）

254

271

2,747

1,490
1,325
190
494

640

（112%）

215
562

711

1,617
（109%）

1,888（117%）

206

194
585

837

758

923

1,975
（105%）

2,124（108%）

265

266

223

248

377

345

1,523

1,486

1,247

1,014

826

750

769

982

2,325

（99%）

1,655

（118%）（109%）（117%）

1,233

1,108

1,483

1,740

2,031

2,134

2,309

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. 2017 FY Mar. 2018 FY Mar. 2019 FY Mar. 2020
3Q
3Q
3Q
3Q
3Q
3Q
3Q
3Q
3Q
3Q
3Q
3Q

* Percentage figures represent comparisons with the preceding quarter.

15

Copyright © 2019 Digital Arts Inc.

Quarterly Trend in Net Sales by Market
Net sales in the enterprise sector market increased thanks to strong sales of
the i-FILTER browser & cloud.
Enterprise Sector

Public Sector

1,565

1,540

1,503

105

84

103

1,309
（87%）

1,098

（135%）

916（114%）

799

89

80

1,158

602

（126%）

86

115

1,217

1,083

484

424

120

92

1,402

（98%）

1,249

536

114

699

1,376
（98%）

90

（103%）

140
546

587

515

383

408

324

1,514

139

（130%）

141（105%）

（99%）

92
497

427

（118%）(Million yen)

（107%）

1,546（102%）（123%）（133%）

1,674

Consumer Sector

296

833
530

1Q

619

590

2Q

3Q

FY March 2017

640

4Q

998

977

1Q

726

2Q

665

3Q

4Q

688

731

715

1Q

2Q

3Q

FY March 2018

FY March 2019

725

4Q

1Q

813

770

2Q

3Q

4Q

FY March 2020
Current Fiscal Year

* Percentage figures represent comparisons with the same period a year earlier.

16

Copyright © 2019 Digital Arts Inc.

Supplementary Material on Consolidated Financial Results
for the First Three Quarters of the Fiscal Year Ending March 31, 2020

Enterprise Sector

Copyright © 2019 Digital Arts Inc.

Enterprise Sector

 Sales of i-FILTER Browser & Cloud, which enables administrators to control access to websites
irrespective of location or situation, continued to expand, reflecting a rise in the number of people
who take out company-provided tablets, notebooks or other devices and work on their assignmentson the go against the backdrop of diversifying workstyles.
 Sales of m-FILTER declined due to a decrease in reaction to the winning of large projects in theprevious fiscal year.

SeriesSeries113.1% of the year-ago figure.

88.6% of the year-ago figure.

112.1% of the year-ago figure.
18

Copyright © 2019 Digital Arts Inc.

Supplementary Material on Consolidated Financial Results
for the First Three Quarters of the Fiscal Year Ending March 31, 2020

Public Sector

Copyright © 2019 Digital Arts Inc.

Public Sector

 Overall sales of the public sector market decreased due to the decrease of orders for projects withlarge monetary value that contributed to sales in the same period of the previous fiscal year.
 Because of the progress of ICT, changes are taking place in the field of education, and efforts areunderway to establish an environment in which one or a small number of students can use one
tablet. Reflecting this, sales expanded for i-FILTER Browser and Cloud.

SeriesSeries

89.4% of the year-ago figure.

89.0% of the year-ago figure.

109.7% of the year-ago figure.
20

Copyright © 2019 Digital Arts Inc.

Supplementary Material on Consolidated Financial Results
for the First Three Quarters of the Fiscal Year Ending March 31, 2020

Consumer Sector

Copyright © 2019 Digital Arts Inc.

Consumer Sector

 The number of minors who use smartphones increased and stricter laws on Internet usage byyoung people were enacted. As a result, filtering use increased. Meanwhile, net sales decreased
due to the reduction of offer price to carriers associated with free services to end users bycarriers.
 Sales of multiple-year package products and i-FILTER® for Multi-Device, which can be available
on multiple terminals, were sluggish.

For mobile terminals
Other

85.9% of the year-ago figure.

For computers

99.4% of the year-ago figure.

22

Copyright © 2019 Digital Arts Inc.

Supplementary Material on Consolidated Financial Results
for the First Three Quarters of the Fiscal Year Ending March 31, 2020

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
Revision of consolidated results forecast(Million yen)

Initial plan for
FY March 2020

Revised plan for
FY March 2020

ChangeNet sales

6,800

5,500

-1,300Gross profit

5,450

4,100

-1,350

Selling, general andadministrative expenses

2,150

2,050

-100

Operating profit

3,300

2,050

-1,250Ordinary profit

3,300

2,050

-1,250

Profit attributable to owners ofparent

2,277

1,430

-847

Dividend per share (yen)

50.00

50.00

―

Note: Refer to “Notice of Revision to the Full-Year Result Forecast for the Fiscal Year Ending March 2020” announced today for related
matters.
24

Copyright © 2019 Digital Arts Inc.

Full-Year Financial Forecast for the Fiscal Year Ending March
2020
Revision of results forecast on a non-consolidated basis(Million yen)

Initial plan for
FY March 2020

Revised plan for
FY March 2020

ChangeNet sales

6,600

5,200

-1,400Gross profit

5,400

4,050

-1,350

Selling, general andadministrative
expenses

2,100

1,950

-150

Operating profit

3,300

2,100

-1,200Ordinary profit

3,300

2,100

-1,200

Profit

2,290

1,450

-840

Note: Refer to “Notice of Revision to the Full-Year Result Forecast for the Fiscal Year Ending March 2020” announced today for related
matters.

25

Copyright © 2019 Digital Arts Inc.

Full-Year Financial Forecast for the Fiscal Year Ending March
2020
Background of revision to full-year consolidated results forecast
With the aim of becoming a total security solution maker, the Group has been progressing in higher
quality product development with a new concept and the consolidation of existing product line-ups in thedomestic market.
The Company gained high recognition and shares in the area of inside information leak-type security
measures. In addition, we facilitated sales promotion activities with the Group and sales agents. As aresult, new world view, the solution the Group offers, were highly evaluated and our presence as acomprehensive security measures maker has risen in the market.
However, replacement demand for PCs increased sharply due to the conclusion of the Windows 7
support period in January 2020 and sales agents’ initiative to focus on PC sales has lasted longer thaninitially expected for the fiscal year under review. Furthermore, a supplementary budget for the GIGA
School Concept, which works on unified enhancement of one school child on one terminal for learningand high-speed, high-capacity telecommunication networks, was approved by the Cabinet on December
2019. Consequently, projects under negotiation in the public sector market are being reviewed.
Under such circumstances, the winning of new large-scale projects came to an end to a certain
degree and negotiations to win existing projects are continuing. As business performance is expected tofall short of the previous forecast, net sales have been revised downward. As a result, operating profit,
ordinary profit and profit have been revised downward as well.

26

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
(Million yen)

Results for
FY March 2019

Revised plan for
FY March 2020

% Change

Net sales

5,841

5,500

-5.8%

Gross profit

4,781

4,100

-14.3%

Selling, general andadministrative expenses

2,152

2,050

-4.8%

Operating profit

2,629

2,050

-22.0%

Ordinary profit

2,630

2,050

-22.1%

Profit attributable to owners ofparent

1,961

1,430

-27.1%

Dividend per share (yen)

48.00

50.00

―

Note: Refer to “Notice of Revision to the Full-Year Result Forecast for the Fiscal Year Ending March 2020” announced today for related
matters.

27

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
(Million yen)

Results for
FY March 2019

Revised plan for
FY March 2020

% Change

Net sales

5,752

5,200

-9.6%

Gross profit

4,724

4,050

-14.3%

Selling, general andadministrative
expenses

1,949

1,950

+0.0%

Operating profit

2,774

2,100

-24.3%

Ordinary profit

2,777

2,100

-24.4%

Profit

1,784

1,450

-18.8%

Note: Refer to “Notice of Revision to the Full-Year Result Forecast for the Fiscal Year Ending March 2020” announced today for related
matters.
28

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: 48.9% (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
Interim

FY March 2019

18.00

FY March 2020

25.00

Year-end

FY March 2020 (forecast)

29

Total

Consolidated
payout ratio

30.00

48.00

34.0%

25.00

50.00

48.9%

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 forwardlooking 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 to considerable change depending on changes in theenvironment 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, Active Rating System, 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, FinalCode,i-FILTER, DigitalArts@Cloud, Chat@Cloud, D-Alert, D-Content, and logos and icons related to Digital Arts Inc. and its products are trademarks
or registered trademarks of Digital Arts Inc.

•

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

30

Copyright © 2019 Digital Arts Inc.

- For internet convenience, safety and security-

Copyright © 2015 Digital Arts Inc.