Consolidated Financial Results
for the First Half of the Fiscal YearEnding March 31, 2020
(From April 1, 2019 to September 30, 2019)
Supplementary Material
October 30, 2019
Digital Arts Inc.
(Securities Code: 2326)
Copyright © 2015 Digital Arts Inc.

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

Key Points

Copyright © 2019 Digital Arts Inc.

Key Points(1) In the public sector market, sales of i-FILTER and m-FILTER declined year-on-year.
 Sales declined in reaction to the winning of multiple large projects in the previous fiscal year.

(2) Consolidated operating profit for 1H reached a record high.
 Net sales for the public sector market declined year-on-year, but net sales for the enterprise sector market and theconsumer sector market increased.
 Profitability increased due to the effects of the selection and concentration of management resources based on thereview of overseas strategies implemented in the previous consolidated fiscal year, and consolidated operating
profit secured a record high.

(3) Enhanced the lineup of DigitalArts@Cloud FinalCode@Cloud and Chat@Cloud were added to DigitalArts@Cloud lines. Actualizes a virus-free world thatallows users to not be conscious of security, even in cloud operations.
 Cloud operation needs increased in terms of enterprise security and net sales increased.

(4) 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.
 In the public sector market, changes are taking place in the field of education due to the progress of ICT, andefforts are underway to establish an environment in which one or a small number of students can use a single
tablet. Reflecting this, the number of devices is expected to increase.

3

Copyright © 2019 Digital Arts Inc.

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

Consolidated Results
Highlights

Copyright © 2019 Digital Arts Inc.

Consolidated Financial Highlights for the First Half of the
Fiscal Year Ending March 31, 2020
Net Sales: 2,764 million yen
Consolidated
net sales(+0 million yen / +0.0% YoY)

Progress was made in winning projects, mainly for renewals of contracts that
had remained outstanding in the previous consolidated fiscal year. Net sales
grew slightly due to a decrease in reaction to winning of large projects in theprevious fiscal year.

Operating profit: 1,096 million yen
OperatingprofitOrdinary
profitProfit attributable toowners of parent(+60 million yen / +5.9% 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: 1,092 million yen(+51 million yen / +5.0% YoY)

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

Profit: 745 million yen(-246 million yen / -24.9% YoY)

Profit declined due to a reaction to control the effect of tax expenses associatedwith the liquidation of the U.S. subsidiary in the previous consolidated period.

5

Copyright © 2019 Digital Arts Inc.

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

FY March 2020 1H

Change YoY

Full-Year Forecast

Net sales

2,764

2,764

+0.0%

6,800

Gross profit

2,237

2,133

-4.6%

5,450

Selling, general andadministrative
expenses

1,201

1,036

-13.7%

2,150

Operating profit

1,036

1,096

+5.9%

3,300

Ordinary profit

1,040

1,092

+5.0%

3,300

Profit attributable toowners of parent

992

745

-24.9%

2,277

15.0%

9.2%

ROE

―

―

* 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 Half of the
Fiscal Year Ending March 31, 2020
Non-Consolidated Results(In millions of yen)
FY March 2019 1H

FY March 2020 1H

Change YoY

Full-Year Forecast

Net sales

2,739

2,677

-2.3%

6,600

Gross profit

2,233

2,107

-5.6%

5,400

Selling, general andadministrative
expenses

1,046

986

-5.7%

2,100

Operating profit

1,186

1,120

-5.5%

3,300

Ordinary profit

1,190

1,117

-6.1%

3,300

Profit

818

770

5.9%

2,290

ROE

12.1%

9.5%

-

―

―

* 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

Net sales increased slightly year-on-year.

(In millions of yen)

2,764

（112%）

2,420（125%）

2,764（100%）

2,468（102%）

1,935（120%）

1,328

917

1,010
（110%）

1,103（120%）

1,351

1,610

1,481

（109%）（110%）（102%）（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
1H
1H
1H
1H
1H
1H
1H
1H
1H
1H
1H
1H

* Percentage figures represent comparisons with the preceding 1H.

8

Copyright © 2019 Digital Arts Inc.

Quarterly Trend in Net Salas

Net sales decreased slightly from the same quarter last year.
1,503

1,546

（102%）（123%）（133%）

1,674

1,565

1,540

（118%）

1,309
1,158

1,098
（135%）

1,514
（98%）

1,402
1,249

1,217

（103%）（105%）

1,083（126%）（107%）（130%）（87%）(In millions of yen)

（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

Increase in amortization of software based on a new version release, increase in labor cost due to the growth of domestic
subsidiaries



Selling, general and administrative expenses decreased due to the effects of the selection and concentration ofmanagement resources as a result of group reorganization based on the review of overseas strategies implemented in
the previous consolidated fiscal year.
(In millions of yen)
Main Factors for
ChangeFY March 2019 1H

FY March 2020 1H

Cost of sales

526

630

+103

Labor

213

253

＋40

Increase due to the growth ofdomestic subsidiaries(consulting business)

Depreciation

170

221

+50

Increase in amortization basedon a new version release

Transfer to other accounts
Other manufacturing costs

142

155

＋13

1,201

1,036

-164

540

529

-10

Selling, general andadministrative expenses
Personnel expenses
Advertising expenses
Other

183

116

477

389
10

Change YoY-66

Due to upfront use ofadvertising expenses
strategically in the previous 1H-87

Other expenses declined as aresult of the liquidation of a USbased subsidiary.

Copyright © 2019 Digital Arts Inc.

Quarterly Trend in Cost of Sales
Increase in depreciation based on the completion of the product version
upgrade in the current year
Increase in labor cost based on growth of domestic subsidiaries
343

Labor
Depreciation
Transfer to other accounts and others（145%）

306

301（125%） （114%）

240

256

（113%）（114%）

65

71（100%）（110%）

65
68

232

235

66

62

79

（97%） （92%）

72

78
69

103

112

106

1Q

2Q

3Q

FY March 2017

68

121

4Q

90

75

69

98

102

1Q

2Q

（92%）

2…

（101%）

93

90

3Q

121

120

4Q

1Q

FY March 2018

（99%）

76

2Q

73

74

123
97

95

92

82

250

（83%）

77

77

131

286

282

66
94

72

289

（125%）

265

244(In millions of yen)

110

3Q

FY March 2019

98

4Q

116

1Q

137

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 of Group’s overseas
strategy in the previous consolidated fiscal year
Personnel expenses

Advertising expenses

Other

Overseas expenses

576（113%）

71

68

632

596

556
（114%）（102%）（111%）

569

（99%）

498

（103%）

88

53

49
180

83

176

59

(In millions of yen)

163
56

51

243

1Q

2Q

3Q

FY March 2017

285

4Q

（107%）

67

526

94

（88%）

69

60
190

182

154

257

（92%）

69
166

241

509

533

568

201

548

（112%）

（87%）

482

（90%）

469

（89%）

42

25

164

156

46

57

200

194
109

89

59

46

40

40

243

229

224

230

237

240

228

230

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

FY March 2018

FY March 2019

13

487

（85%）
12

211
167

70

46

253

262

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 Half of the Fiscal Year Ending March 31, 2020

By Market

Copyright © 2019 Digital Arts Inc.

Summary of Net Sales by Market
 Total consolidated sales increased slightly.
 In the enterprise sector market, net sales achieved an increase of +8.4%, reflecting strong salesof i-FILTER Browser & Cloud.
 In the public sector market, net sales decreased 12.5% due to a decline in reaction to winning oflarge projects in the previous fiscal year.
 In the consumer sector market, net sales recorded a rise of +8.0%, reflecting the progress in theongoing introduction of filtering for young people.

Consolidated
net sales

Net Sales: 2,764 million yen(+0 million yen / +0.0 % YoY)Enterprise
SectorNet Sales: 1,538 million yen(+119 million yen / +8.4 % YoY)

Public Sector

Net Sales:

970 million yen(-138 million yen / -12.5 % YoY)

Consumer
SectorNet Sales:

254 million yen(+18 million yen / +8.0 % YoY)

14

Copyright © 2019 Digital Arts Inc.

Trend in Net Sales by Market
Net sales in the enterprise sector and consumer sector markets
remained strong.
Net sales in the public sector market decreased due to the decrease
in reaction to the winning of large projects in the previous fiscal year.
Enterprise Sector
Public Sector
Consumer Sector

2,420（125%）

174

2,468(In millions of yen)

2,764

（112%）（100%）

235

254（102%）

179

1,935（120%）

1,328

917
131
381

404

1,010

（110%）

144
384

481

1,103

（109%）

132（120%）

130

585

1,351

（102%）

140

527

1,481

1,610

1,096

（109%）

175（110%）

186

1,108

170

555

684

970

922

754

609

536

415

612

2,764

824

758

1,010

1,149

1,366

1,419

1,538

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
1H
1H
1H
1H
1H
1H
1H
1H
1H
1H
1H
1H

* Percentage figures represent comparisons with the preceding 1H.

15

Copyright © 2019 Digital Arts Inc.

Quarterly Trend in Net Sales by Market

Net sales for the enterprise sector market remained steady.
Enterprise Sector

Public Sector

1,565

105

84

（87%）

1,098

（135%）

916（114%）

799

89

80

1,158

602

（126%）

86

115

1,217

1,083

484

120

424

92

1,402

（98%）

1,249

536

114

（103%）

140
699
546

587

383

408

324

1,514

139

（130%）

141（105%）

（99%）

92
497

427

（118%）

103

1,309（107%）

1,546（102%）（123%）（133%）

1,674

Consumer Sector

1,540

1,503

(In millions of yen)

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

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

16

725

4Q

1Q

813

2Q

3Q

4Q

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

Supplementary Material on Consolidated Financial Results
for the First Half 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, 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 assignments on 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 the previous fiscal year.

SeriesSeries110.8% of the year-ago figure.

95.5% of the year-ago figure.

123.1% of the year-ago figure.
18

Copyright © 2019 Digital Arts Inc.

Supplementary Material on Consolidated Financial Results
for the First Half 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, 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.

SeriesSeries

96.8% of the year-ago figure.

57.1% of the year-ago figure.

118.0% of the year-ago figure.
20

Copyright © 2019 Digital Arts Inc.

Supplementary Material on Consolidated Financial Results
for the First Half 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
by young people were enacted. As a result, filtering use increased.
 Sales of multi-year package products and i-FILTER® for Multiple Devices that can beused on more than one device remained strong.

For mobile terminals
Other

109.6% of the year-ago figure.

For computers

105.8% of the year-ago figure.

22

Copyright © 2019 Digital Arts Inc.

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

Initiatives for the Second Half

Copyright © 2019 Digital Arts Inc.

Challenges for the Second Half (2H)
• Termination of Support for Windows7 (Jan. 2020)• Consumption tax hike (Oct. 2019)•

Partners were pressed to cope with the last-minutedemand for PC switchovers, and sales of our products
stagnated temporarily.

• Increased demand for low-price secure cloud operation•

released at high price•••

The Company’s brand image has not escaped
conventional filtering software.
Our product value has not reached end users.
Dramatic growth in the number of new order projects has
not been achieved.

24

Copyright © 2019 Digital Arts Inc.

Initiatives for the Second Half

(1)’s price revision/product reinforcement
While reinforcing product lines, review prices and increase the numberof licenses/groups.

(2) Help customers introduce large projects
Accurately communicate the product value/brand and actively makeapproaches to have an advantage in winning large projects.

(3) Reinforce sales personnel(4) New internal incentive compensation plan
To achieve dramatic growth, make sales capabilities more robustand establish a sales system that is not subject to the external
environment.

25

Copyright © 2019 Digital Arts Inc.

Supplementary Material on Consolidated Financial Results
for the First Half 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 share27―

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 %

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: 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
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

30.5%

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.