Digital Arts Inc.
(Securities Code: 2326)

Consolidated Financial Results for the First Quarter of
the Fiscal Year Ending March 31, 2020
(From April 1, 2019 to June 30, 2019)
Supplementary Material
Wednesday, July 31, 2019

Copyright © 2015 Digital Arts Inc.

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

Key Points

Copyright © 2019 Digital Arts Inc.

Key Points(1) Started to supply FinalCode Ver. 6 in June 2019
The software incorporates an automatic file encryption function, for which there is strong demand from existingusers and potential customers, and creates a world in which there is no raw data.



We introduced a free browsing function for internal users and volume discounts according to the number oflicenses purchased.

(2) Enhanced the lineup of DigitalArts@Cloud

The product creates the world of a virus-free room in the cloud environment as well, where users are notconscious of security, after the addition of FinalCode@Cloud and Chat@Cloud to its lineup.

(3) Sales of i-FILTER Browser & Cloud increased against the backdrop ofworkstyle reforms and changes in the field of education.
In the enterprise sector market, sales of i-FILTER Browser & Cloud, which enables administrators to control
access to websites irrespective of the location or situation, expanded, reflecting a rise in the number of people
who take out company-provided tablets, notebooks or other devices and work on their assignments on the goagainst the backdrop of diversifying workstyles.

In the public sector market, due to the progress of ICT, changes are taking place in the field of education, andefforts are underway 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, which features the capability to
implement sophisticated security measures for tablets as well as the addition of a service of providing
information that creates the optimal environment for learning.
3

Copyright © 2019 Digital Arts Inc.

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

Consolidated Results
Highlights

Copyright © 2019 Digital Arts Inc.

Consolidated Financial Highlights for the First Quarter of the
Fiscal Year Ending March 31, 2020

Consolidated
net sales

OperatingprofitOrdinary
profitProfit attributable toowners of parent

Net Sales:

1,249 million yen (+31 million yen / +2.6% YoY)

Progress was made in winning projects, mainly for renewals of contracts that
had remained outstanding in the previous consolidated fiscal year, securing an
increase in net sales year on year.

Operating profit: 413 million yen (+118 million yen / + 40.0% YoY)
Profitability increased due to the effects of the selection and concentration ofmanagement resources based on the review of overseas strategies
implemented in the previous consolidated fiscal year.

Ordinary profit: 411 million yen (+117 million yen / + 39.8% YoY)
As a result of growth in operating profit, ordinary profit also increased.

Profit:

280 million yen (+105 million yen / + 60.2% YoY)

Profit increased significantly due to a decrease in tax expenses as a result of
the liquidation of an overseas subsidiary.

5

Copyright © 2019 Digital Arts Inc.

Summary of Financial Results for the First Quarter of the
Fiscal Year Ending March 31, 2020
Consolidated Results(In millions of yen )FY March 2019 1Q

FY March 2020 1Q

Change YoY

Net sales

1,217

1,249

+2.6%

Gross profit

927

962

+3.8%

Selling, general andadministrative expenses

632

548

-13.2%

Operating profit

295

413

+40.0%

Ordinary profit

294

411

+39.8%

Profit attributable to owners ofparent175

280+60.2%

ROE

2.8%

3.6%

6

―

Copyright © 2019 Digital Arts Inc.

Summary of Financial Results for the First Quarter of the
Fiscal Year Ending March 31, 2020
Non-Consolidated Results(In millions of yen)
FY March 2019 1Q

FY March 2020 1Q

Change YoY

Net sales

1,204

1,211

+0.6%

Gross profit

926

950

+2.6%

Selling, general andadministrative expenses

543

517

-4.8%

Operating profit

382

433

+13.3%

Ordinary profit

382

432

+13.0%

Profit263

297+12.9%

ROE

4.1%

3.9%

7

―

Copyright © 2019 Digital Arts Inc.

Trend in Net Sales(In millions of yen)

Continuously secured an increase in net sales.
1,249
1,217
1,158

(103%)(105%)(126%)

916(114%)

803(119%)

682
521
448
368

673

650

(131%)

570(103%)(114%)(84%)(116%)(122%)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
1Q
1Q
1Q
1Q
1Q
1Q
1Q
1Q
1Q
1Q
1Q
1Q

* Percentage figures represent comparisons with the preceding quarter.

8

Copyright © 2019 Digital Arts Inc.

Quarterly Trend in Net Salas

Ended the first quarter with an increase in net sales year on
1,674
year, as in the previous year.
1,503(107%)

1,565

1,540

1,546

(102%)(123%)(In millions of yen)

(118%)(133%)

1,402(130%)

1,309
(87%)

1,158
1,098

1,249

1,217

(103%)(105%)

1,083(126%)(135%)(99%)

916(114%)

1Q

2Q

3Q

FY March 2017

4Q

1Q

2Q

3Q

4Q

1Q

FY March 2018

2Q

3Q

FY March 2019

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

9

4Q

1Q

2Q

3Q

4Q

FY March 2020
Current Fiscal Year
Copyright © 2019 Digital Arts Inc.

Cost of Sales and Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased due to the effect of the more focused
application of management resources as a result of group reorganization based on the review ofoverseas strategies undertaken in the previous consolidated fiscal year. Consequently, profitability
improved considerably.

(In millions of yen)

Main Factors for
ChangeFY March 2019 1Q

FY March 2020 1Q

289

286

-3

120

116

-4

Depreciation

93

97

+4

Transfer to other accounts
Other manufacturing costs

75

73

-2

Selling, general andadministrative expenses

632

548

-83

Personnel expenses

273

263

-10

Cost of sales
Labor

Change YoY

Advertising expenses

121

70

-51

Advertising expenses wereused ahead of schedule
strategically in the previous
year.

Other

236

215

-21

Other expenses declined as aresult of the liquidation of a
US-based subsidiary.

10

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

306

Depreciation

301

Transfer to other accounts and others(125%)

265

256
240

244
(110%)

232

235

(97%)

(92%)

66

62

79

(92%)

236

90

75

286

282

(125%)(100%)(113%)(114%)

289(114%)(101%)

(99%)

250
(83%)

73

76

65
71

74

68

65

66
94

72

72

103

112

1Q

2Q

69

106

3Q

FY March 2017

68

69

98

102

1Q

2Q

121

120
92

3Q

4Q

1Q

FY March 2018

97

95
77

77

131

121

4Q

93

90

78

2Q

110

3Q

FY March 2019

98

4Q

116

1Q

2Q

3Q

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

Significant reduction in overseas expenses following revision ofGroup’s overseas strategy
Personnel expenses
Other

576
(113%)

71

Advertising expenses
Overseas expenses

596
556(114%)

68

632(111%)

569(102%)
(99%)

498

88

53

(103%)

509

533

526

(107%)

(88%)

180

568

(87%)

166

482
(90%)

60

69

176

548

(112%)

69

(92%)

67
49

94

(In millions of yen)

42

190

182

469

13

(89%)

25
211

200
154

163

201

194

164

156

46

57

56
83

59

109

89

51

59

70

46

40

40

243

229

224

230

237

240

228

230

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

285

241

257

243

1Q

2Q

3Q

FY March 2017

4Q

FY March 2018

FY March 2019

253

1Q

2Q

3Q

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 Quarter of the Fiscal Year Ending March 31, 2020

By Market

Copyright © 2019 Digital Arts Inc.

Summary of Net Sales by Market
 Consolidated net sales increased +2.6%.
 In the enterprise sector market, net sales achieved an increase of +5.4%, reflecting strong
sales of i-FILTER Browser & Cloud.
 In the public sector market, net sales were discouraging as a result of a decline of -6.3%
due to the absence of large projects recorded in the previous year.
 In the consumer sector market, net sales recorded a rise of +16.4%, reflecting the
progress in the ongoing introduction of filtering for young people.
Consolidated
net sales

Net Sales: 1,249 million yen(+31 million yen / +2.6 % YoY)Enterprise Sector

Net Sales:

725 million yen(+37 million yen / +5.4 % YoY)

Public Sector

Net Sales:

383 million yen(-25 million yen / -6.3 % YoY)

Consumer Sector

Net Sales:

140 million yen(+19 million yen / +16.4 % YoY)

14

Copyright © 2019 Digital Arts Inc.

Trend in Net Sales by Market
Sales to the enterprise sector and consumer sector markets
remained solid.
There are expectations of a recovery in sales to the public sector
market in the second quarter, in which orders increase notably.

(In millions of yen)

1,249
1,217
1,158
(126%)

Enterprise Sector

Public Sector

Consumer Sector(105%)

120(103%)

140

92

916
(114%)

803(119%)

682
521

368
70

448

(116%)(121%)

70

72

69

673

650

(131%)

570

296

101

256

73
332

207
170

216
640

144

230

424

85

126

171

383

89

190

260

408

(103%)(114%)

(83%)

89

281

326

380

331

456

688

725

530

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
1Q
1Q
1Q
1Q
1Q
1Q
1Q
1Q
1Q
1Q
1Q
1Q

* Percentage figures represent comparisons with the preceding quarter.

15

Copyright © 2019 Digital Arts Inc.

Quarterly Trend in Net Sales by Market
Secured an increase in sales on the back of strong performances recorded in businesses
for the enterprise sector and consumer sector markets.
(In millions of yen)Enterprise Sector

Public Sector

1,503

1,540

Consumer Sector(123%)(133%)

1,158

1,098
916
(114%)

799

602

1,546

(102%)(118%)

103

115

(87%)

1,217

86

(105%)(126%)(135%)

1,565
1,309

105

84

1,674

1,083

80

(130%)

1,249

141
536
699
546

383

408

424

(103%)

140

497
427

139

120

92

89

1,402

484

(99%)

92

(107%)

324

296
998

977
833
530

1Q

619

590

2Q

3Q

FY March 2017

640

4Q

1Q

726

2Q

665

3Q

4Q

FY March 2018

688

731

715

1Q

2Q

3Q

FY March 2019

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

16

725

4Q

1Q

2Q

3Q

4Q

FY March 2020
Current Fiscal Year
Copyright © 2019 Digital Arts Inc.

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

Enterprise Sector

Copyright © 2019 Digital Arts Inc.

Review of Enterprise Sector Market
 Sales of our mainstay i-FILTER and FinalCode products remained steady as progress was made in
winning projects, mainly for renewals of contracts that had remained outstanding in the previous
consolidated fiscal year.
 Sales of i-FILTER Browser & Cloud, which enables administrators to control access to websites
irrespective of location or situation, expanded, reflecting a rise in the number of people who take out
company-provided tablets, notebooks or other devices and work on their assignments on the goagainst the backdrop of diversifying workstyles.

SeriesSeries109.8% of the year-ago figure.

89.5% of the year-ago figure.

128.3% of the year-ago figure.
18

Copyright © 2019 Digital Arts Inc.

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

Public Sector

Copyright © 2019 Digital Arts Inc.

Public Sector
 Overall sales for the public sector market were lower than the level in the same period of theprevious year due to the decrease of orders for projects with large monetary value that
contributed to sales in the previous year.
 Because of the progress of ICT, changes are taking place in the field of education, and efforts
are underway 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, which features thecapability to implement sophisticated security measures for tablets as well as the addition of aservice of providing information that creates the optimal environment for learning.

SeriesSeries

94.8% of the year-ago figure.

81.6% of the year-ago figure.

133.1% of the year-ago figure.
20

Copyright © 2019 Digital Arts Inc.

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

Consumer Sector

Copyright © 2019 Digital Arts Inc.

Consumer Sector
 Sales grew, mainly reflecting the progress in the introduction of filtering, as the number ofyoung people who use smartphones continued to increase, and strong direct sales ofmulti-year package products and i-FILTER for Multiple Devices that can be used on morethan one terminal device.

For computers

99.3% of the year-ago figure.

For game consoles
and TVs

98.3% of the year-ago figure.

For mobile terminals

141.3% of the year-ago figure.

22

Copyright © 2019 Digital Arts Inc.

Supplementary Material on Consolidated Financial Results
for the First Quarter 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
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

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 ourearnings 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.

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.

27

Copyright © 2019 Digital Arts Inc.

- For internet convenience, safety and security -Copyright © 2015 Digital Arts Inc.