Consolidated Financial Results for the
Fiscal Year Ending March 31, 2023
(From April 1, 2022 to March 31, 2023)
Financial Results Briefing Materials
May 9, 2023

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

Contents➢ Consolidated Results Highlights➢ Non-consolidated Results Highlights➢ By Market➢ Results of Measures for Fiscal Year Ending March 2023
➢ Full-Year financial Forecast for the Fiscal Year Ending March 2024
➢ FY03/24 Initiatives➢ Return to Shareholders for Fiscal Year Ending March 31, 2024

2

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results the Fiscal Year Ending
March 31, 2023

Consolidated Results Highlights

3

Copyright © Digital Arts Inc.

Consolidated Results Highlights

Contracts

10,190million yen(up +979million yen or +10.6%
year on year)

Net sales

10,436million yen(up +1,384million yen or +15.3%
year on year)

Operatingprofit

4,413million yen(up +286 million yen or +7.0%
year on year)• In the enterprise section market, the Group achieved growth bywinning new projects and new customers for DAC. It did so byoffering a new optional function to respond rising demand for cloudservices and comprehensive security needs.
• In the public sector market, the Group won new GIGA School
Concept projects and strong orders from local governments.

• Net sales increased in the enterprise sector market thanks togrowth in sales of cloud service products and DAC growth.
• In the public sector market, net sales grew following theacquisition of good orders from local governments in addition toposted sales of GIGA School Concept projects.
••

In cost of sales, server expenses increased due to growth in licenses
for cloud service products and the impact of rapid yen depreciation.
SG&A expenses were affected by an increase in advertisingexpenses and an increase in recruiting expenses after DAC
increased consultants.

4

Copyright © Digital Arts Inc.

Consolidated Results Summary
FY March 2023
Full-Year
Forecast

FY March 2022

FY March 2023

Contracts

9,210

10,190＋10.6%-Net sales

9,051

10,436＋15.3%

10,500

Cost of goods sold

2,676

3,666

＋37.0%

3,350

Gross profit

6,374

6,769

＋6.2%

7,150

Selling, general andadministrative expenses

2,248

2,356

＋4.8%

2,450

Operating profit

4,126

4,413

＋7.0%

4,700

Operating margin

45.6%

42.3%

Ordinary profit

4,135

4,429

＋7.1%

4,700

Profit attributable toowners of parent

2,900

3,062

＋5.6%

3,250

EBITDA

5,099

5,388

＋5.7%

(Million yen)

Change YoY

44.8%

-

-

* Financial Forecast is the consolidated financial forecast announced on May 10, 2022.
* EBITDA = Operating profit + Depreciation + Tax expenses included in operating expenses

5

Copyright © Digital Arts Inc.

Trend in Consolidated Contracts
Consolidated contracts totaled 10,190 million yen, up +10.6％ year on year.

Trend in Contracts(Million yen)

Cloud service products•

Contracts for both cloud services and license
sales increased year on year.

•

Contracts for cloud service products
increased 12.9%, as the Group steadily won
new projects amid growing cloud demand in
the enterprise sector market.

•

In the category of license sales products andother, the reactionary fall from a large
government office project in the public sector
market in the previous fiscal year was morethan offset by receiving local government
projects and the steady growth of the market
for enterprises, resulting in a 9.5％ increase.

License sales products/Others

9,210
32.6％

67.4％

+10.6%

3,004+12.9%

6,206

＋9.5%

FY March 2022

10,190
3,395

6,795

33.3％

66.7％

FY March 2023

6

Copyright © Digital Arts Inc.

Trend in Consolidated Contracts
Sales of GIGA School Concept projects were posted, and orders for cloud service
projects increased.
Trend in Order Backlog•

Many GIGA School Concept projects are fiveyear contracts. Over time, more sales areposted. The amount of sales to be recorded
will drop in FY March 2025 and later.

•

For the current fiscal year, the Group willcontinue winning new GIGA School Concept
projects. Sales to be recorded for the next
fiscal year will rise.

•

From FY March 2025 onwards, a majority of
the GIGA School Concept projects will expire.
Contracts will grow towards a new peak.

•

Many projects for enterprises are one-year
contracts. Of them, the percentage that arecloud service products is gradually rising.
Sales to be recorded for the next fiscal year
will increase.

(Million yen)
Sales to be recorded in the fiscal year after next or later(GIGA)
Sales to be recorded in the next fiscal year(GIGA)

6,572

6,318

3,035

2,334

1,559

1,774

△23.1％
DOWN＋13.8％
UP

620

770

＋24.1％

1,356

1,439

＋6.1％

End of FY March 2022

End of FY March 2023

UP
UP

7

Copyright © Digital Arts Inc.

Supplement）Method of recording sales by productContract period (n months)＋1 month

Contracts

Equivalent tomaintenance fee
Equivalent tolicense fee

License sales
products

OrderbacklogNetsales

Y months
Y+1(contract months) months•

License fees make up a large proportion of thecontract amount. This portion is recorded in a lumpsum as sales in the month when the contract isobtained.

•

Amount equivalent to maintenance fee is recorded
on a pro rata basis over the contract period.

•

Contract amount is recorded as sales on a pro rata
basis over the contract period (split into equalmonthly amounts).

•

As the contract amount of cloud service products
rises, the contract amount that is deferred (orderbacklog) increases.

・・・

Amount equivalent to maintenance fee isprorated over contract period "n"Y+2months・・・

Y+nmonthsY+n+1
monthsContract period (n months)

Contracts

Contract amount is prorated
over contract period "n"Cloud service
products

Orderbacklog

・・・

Net
sales

Y months
Y+1(contract months) months

Y+2
months

8

・・・

Y+n-1
monthsY+nmonthsCopyright © Digital Arts Inc.

Supplement) Relationship between contract amount andsales by product (one-year contracts)
For example, the diagrams on the left show the relationships
License sales products
Cloud service products

between the contract amount and net sales in license sales
products and cloud service products with a one-year contract at theamount of 600 million yen.

600
300

Trend inContracts

300

Contracts
For license sales products, contracts in the second and subsequent

600
Year X
Jan
X年1ヶ月

600

600

Year X+1
Year XYear X
…
Jan
Feb
Dec
X年2ヶ月
X年11ヶ月
X+5年

Year X+1
…
Feb
X+6年

First year

Second year

Year X+1
Dec
X+9年

Year X+2
Jan
X+10年
Third year

years are half of those of the first year. For cloud service products,
contracts in the second and subsequent years are the sameamounts as those in the first year. An increase in new contracts forcloud service products will result in a higher growth rate in coming
fiscal years than for license sales products.
Net sales
For license sales products, a high percentage of net sales is

Change in
545
Net Sales

recorded at the time of the contract. For cloud service products, net

50

5
50

Year XJan

Year XFeb

5
50… Year X
Dec

245
50
Year X＋1
Jan

5
50

5
50

Year X+1 … Year X+1
Feb
Dec

245

sales are posted in monthly installments. For license sales products,
net sales decrease because of a decline in contracts at the time of50
Year X+2
Jan

9

renewal. For cloud service products, net sales are constant.

Copyright © Digital Arts Inc.

Supplement) Relationship between contract amount andsales by product (multi-year contracts)
Many projects in the public sector market are multi-year contracts, such as fiveyear ones. They have longer periods until renewal.
License sales products
Cloud service products

600

600

For example, the diagrams on the left show the
relationships between the contract amount and net
sales in license sales products and cloud service
products with a five-year contract of 600 million yen.

600

Trend inContracts

Contracts
600

Year X

X年

Change in
Net Sales

600

10
Year

…

Year

Year

For both license sales products and cloud service
products, contract amounts are unchanged at thetime of renewal.

600
Year

…

Year

Year

X+1
X+4 X+5年
X+5
X+6
X+9 X+10年
X+10
X+1年
X+4年
X+6年
X+9年

552

552
12

12

Net sales
For license sales products, a high percentage of net
sales is recorded at the time of contract. For cloudservice products, sales are recorded in monthly
installments for a period of five years. This means awider gap between the contract amount and net sales(order backlog).

552
12

12

120

120 … 120120

120 … 120

120

Year X

Year
Year
…
X+1
X+4

Year
X+5

Year
X+6

Year
X+10

…

Year
X+9

10

Copyright © Digital Arts Inc.

Quarterly Trend in Net sales, Operating profit
Quality net sales and operating profit marked new highs.

(Million yen)
10,436

1Q

2Q

3Q

9,051

4Q

2,778
2,364
6,825

5,839

2,573

5,639

1,674

2,074

2,134

1,500
1,649

1,402

1,546

2,627

954

1,376

2,977
2,326

1,514

679

1,217

740
295

1,249

683

Net sales

OperatingprofitNet sales

Operatingprofit2019年3月期

1,687

1,413

825

Net sales

Operatingprofit2021年3月期

11

1,101

2,698

1,348
1,919

1,238
2,386
1,009

731
Net sales

Operatingprofit2022年3月期

1,185
980

945

1,004

485

413

2020年3月期

2,632

663

551

638

4,413

4,126

Net sales

Operatingprofit2023年3月期
Copyright © Digital Arts Inc.

Consolidated Cost of Goods Sold and Selling, General and
Administrative Expenses(Million yen)

FY March 2022

FY March 2023

ChangeYoY

Main Factors for Change

2,676

3,666

+990

1,440

1,634

+193

Depreciation

844

838

△6

Communication
expenses

719

1,162

+443

Increase by soaring cloud server expenses following a
growth in licenses for cloud service products and rapid
foreign exchange fluctuations.

Other

666

895

+229

Increase in purchase of goods due to rises in DAC's
outsourcing expenses and in license purchase projects.

△994

△865

+128

Selling, general andadministrative expenses

2,248

2,356

+108

Personnel expenses

1,296

1,193

△102

Advertising expenses

239

297

+57

Other

712

865

+152

Cost of goods sold
Labor

Transfer to other accounts

12

Rise is after increasing DAC consultants despite areactionary fall from the large amount of bonuses paid in
the previous fiscal year.

Reactionary fall from the large amount of bonuses paid in
the previous fiscal year.

Hiring expenses swelled after DAC increased consultants.
Copyright © Digital Arts Inc.

Quarterly Trend in Consolidated Cost of Goods Sold
• Labor expenses swelled after DAC increased consultants• Cloud server expenses (communication expenses) soared after growth in licenses for cloud service
products and rapid foreign exchange fluctuations.
(Million yen)Transfer to other accounts
Cost of goods sold
1,204

other
1,102

Communication expenses
Depreciation
946

Labor
793
723
609
110
34

183

622
121

175

141

237

60

179
210

87

45

262

1Q

254

2Q

321
225

173
220

158

989
247
170

226

222

206

280

244

206

613

3Q

FY March 2021

349

4Q

332

1Q

427

330

2Q

3Q

FY March 2022
13

349

4Q

901

208

983

1014

766

736

701

624

202

221

217

214

204

486
324

312

324
223

238 221

201

169

584
427

164

213

202
447

153

962

208

198
203

151

839

921

242 220

1,235

354

1Q

373

2Q

430

3Q

476

4Q

FY March 2023
Copyright © Digital Arts Inc.

Quarterly Trend in Consolidated Selling, General and Administrative Expenses•

Advertising expenses increased.

•

Recruiting expenses (included in Other) rose following an increase in the number of DAC consultants.
Personnel expenses(Million yen)

Advertising expenses

660

Other

609

574
501

499

169

191
153

195
161
32

44

1Q

159

193

59
58

77

51

70

277

263

3Q

4Q

214
204

74

78

578

216

67

432
301

218

2Q

229

59

166

34
272

526
487

485

414

609
558

3Q

FY March 2021

262

4Q

323

1Q

2Q

FY March 2022
14

302

280

1Q

2Q

316

293

3Q

4Q

FY March 2023
Copyright © Digital Arts Inc.

Summary of Consolidated Balance Sheet
As sales of GIGA School Concept projects were recorded, advances received shrank.
The financial health continued to improve, with an equity ratio of 66.9%(Million yen)

As of end of FY March2022

As of end of FY March2023

Change from end of FY
March 2022

Current assets

17,10518,925+10.6%(Cash and deposits)

15,77317,018+7.9%

Non-current assets

2,236

2,223

△0.6%

Total assets

19,341

21,149+9.3%

Current liabilities

7,130

6,924

△2.9%

(Advanced received)

5,684

5,187

△8.7%

Non-current liabilities

50

50

+0.7%

Equity capital

12,12914,141+16.6%Net assets

12,15914,173+16.6%

Equity ratio

62.7%

66.9%

-

ROE

26.2%

23.3%

-

ROA

17.0%

15.1%

-

15

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results the Fiscal Year Ending
March 31, 2023

Non-consolidated Results
Highlights

16

Copyright © Digital Arts Inc.

Summary of Non-consolidated Results(Million yen)

FY March 2022

FY March 2023

Change YoY

FY March 2023
Full-Year Forecast-

Contracts

8,163

8,738

+7.0%

Net sales

8,003

8,984

+12.3%

9,000

Cost of goods sold

1,821

2,425

+33.1%

2,150

Gross profit

6,182

6,559

+6.1%

6,850

Selling, general andadministrative expenses

2,141

2,163

+1.0%

2,250

Operating profit

4,040

4,395

+8.8%

4,600

Operating margin

50.5%

48.9%

Ordinary profit

4,052

4,407

+8.8%

4,600

Profit

2,832

3,048

+7.6%

3,200

51.1%

-

* Financial Forecast is the non-consolidated financial forecast announced on May 10, 2022.

17

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results the Fiscal YearEnding March 31, 2023

By Market

18

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Consolidated Contract Amount by Market
Trend in Consolidated Contract
Amount by Market

10,190(Million yen)(+10.6%)

9,210

433

Consumer

4,304

Public•In the enterprise sector market, the contract
amount was up 828 million yen, or 17.9%. Thiswas due mainly to brisk orders gained forcloud service products amid growing demandfor cloud services, increased orders for new
projects in association with the newfunctional option ready for total security
added to the i-FILTER and m-FILTER series,
and DAC's steady growth.

•

In the public sector market, the contract
amount rose 162 million yen, or 3.9%. This wasdue chiefly to the receipt of orders for new
GIGA School Concept projects and orders for
local government projects, which started
gathering momentum in the current fiscal year,
offsetting a reactionary fall after winning large
projects from public agencies in the previous
fiscal year.

△2.8％
DOWN

445
＋3.9％
UP

4,142

4,623

FY March 2022

5,452Enterprise＋17.9％UP

FY March 2023

19

Copyright © Digital Arts Inc.

Consolidated Net sales by Market
Trend in Consolidated Net Sales by Market

10,436(Million yen)(+15.3%)

9,051

433

Consumer•In the enterprise sector market, net sales forcloud service products increased due to a risein contracts in response to growing demandfor cloud services, in addition to growth basedon new customers for DAC, resulting in an
increase of 758 million yen (16.6%).

•

In the public sector market, net sales rose 639
million yen, or 15.8%, reflecting a high volumeof orders received for the projects of publicagencies and local governments, in addition toposted sales of GIGA School Concept projects
that had continued since before the previous
fiscal year.

△2.6％
DOWN

444

4,686

Public＋15.8％
UP

4,046

4,559

FY March 2022

5,316Enterprise＋16.6％UP

FY March 2023

20

Copyright © Digital Arts Inc.

Trend in Consolidated Net Sales by Market(Million yen)

Both in the enterprise sector market and in the public sector
market, net sales hit record high following brisk performance.

10,436433

Consumer

4,686

Public5,316Enterprise

9,051
444

5,841
5,058
359

5,116

2,906
318
1,152

3,027
361
1,028

362

342

2,125

1,732

2,191

445

2,408

1,911

1,418

1,140

1,436

1,637

1,899

FY March
2013

FY March
2014

FY March
2015

4,046

5,641

375

4,000
3,402

516

6,825
432

2,240

FY March
2016

2,573

FY March
2017

3,009

3,133

3,284

FY March
2018

FY March
2019

FY March
2020

21

3,984

FY March
2021

4,559

FY March
2022

FY March
2023

Copyright © Digital Arts Inc.

Quarterly Trend in Consolidated Net Sales by Market
Net sales for the for quarters reached a record high, bolstered by strong performances in the(Million yen)enterprise sector and public sector markets.

2,778
2,698

2,632
115

2,134

2,074
109

1,514
1,249

1,376

114

1,500

587

1,649

104

103

115

1,919
113

116

2,573

105

103

1,203
1,269

1,313

Consumer

105

98

785

100
90

140

1,413

1,687

2,364

2,386

118

Public

1,195

1,020

1,017

1,227

1,262

1,310

1,274

4Q

1Q

2Q

3Q

974
738

597

426

574

451

515

383

1,179
725

1Q

975

813

770

2Q

3Q

4Q

FY March 2020

847

1Q

985

971

2Q

3Q

4Q

1,067

1Q

FY March 2021

1,204

2Q

1,060

3Q

FY March 2022
22

1,469

Enterprise

4Q

FY March 2023
Copyright © Digital Arts Inc.

Material on Consolidated Financial Results the Fiscal YearEnding March 31, 2023

Enterprise Sector

23

Copyright © Digital Arts Inc.

Net Sales in Enterprise Sector Market by Product
Functions were added to products andcooperation with agencies were strengthened in
response to more frequent, diverse cyber attacks.

Trend in Net Sales in Enterprise
Sector Market by Producti-FILTER series

m-FILTER series

FinalCode

DAC

5,316

other

(Million yen)•(+16.6%)yen, 7.5%, in response to growing corporate demand for

7

4,559
7

1,042
204
844

1,441
263
957

Sales of the i-FILTER series remained strong, rising 184 million

cybersecurity.

＋38.4％UP•

demand for email security and PPAP problem-solving.

＋29.2％
UP＋13.4％UP

Sales of the m-FILTER series remained solid, owing to rising(+113 million yen or +13.4％)•

Sales of the FinalCode series remained strong, meeting demand
for responses to PPAP and the revised Act on the Protection of
Personal Information.
(+59 million yen or +29.2％)

＋7.5％

2,461

2,645

UP

•

DAC made good progress acquiring new clients and achieved
substantial sales growth (up 399 million yen or 38.4%),
reflecting growing DX needs and demand for security measuresamong enterprises.

FY March 2022

FY March 2023

24

Copyright © Digital Arts Inc.

Penetration of "White Operation“(Enterprise Sector Market)
Realizing safe office IT environments
protected through "White Operation"

Trend in i-FILTERv10 and m-FILTERv5 Licenses
Used in the Enterprise Sector Market
i-FILTER v10

m-FILTER v5(Thousand licenses)

3,344
2,762
2,009
1,563

494

2,299

653

580

390
1,173

FY March
2019

1,515

753

1,719

2,109

Penetration in the enterprise sector
market progressed steadily, with the 5year CAGR of user licenses standing at

2,590

21%.
FY March
2020

FY March
2021

FY March
2022

FY March
2023

※

25

CAGR（Compound Average Growth Rate）

Copyright © Digital Arts Inc.

Net Sales Growth and Expansion of DAC on a Non-consolidated Basis

Number of consultants(Persons)

Security consulting sales*

913(Million yen)

101

634

End of FY March

End of FY MarchFY March 2022

2022

2023

IT strategy consulting sales*(Million yen)

380

427

65

DAC actively hired talent, focusing
on those from leading consulting
firms and leading systems
integrators.

FY March 2023

Offering comprehensive services
including security checkups andanalysis, proposals of measuresand solutions for raising thesecurity level and support for
implementation

FY March 2022

FY March 2023

DAC proposed initiatives andsolutions to promote DX atcustomers in consideration of
security and provided comprehensive
consulting services, including
implementation support.
*: DAC's non-consolidated net sales

26

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results the Fiscal Year Ending
March 31, 2023

Public Sector

27

Copyright © Digital Arts Inc.

Net Sales of Public Sector Market by Product
Trend in Net Sales of Public Sector Market
by Producti-FILTER series

m-FILTER series

FinalCode

4,686
4,046
5

71

•

other

(+15.8%)
13

81

859

556

In addition to posted sales of GIGA School Concept
projects that had continued since before the(Million yen)previous fiscal year, contracts gained from public＋14.9％

agencies and local governments increased andUPsales of the i-FILTER series remained strong, which＋54.5％
UP

offset a reactionary fall from large projects
contracted by government offices in the first half ofthe last fiscal year. （+317 million yen or ＋9.3%）

＋9.3％

3,413

3,731

•

UP

Brisk orders were received from local governments
and sales of the m-FILTER series leaped (+303

million yen or +54.5%).

FY March 2022

FY March 2023

28

Copyright © Digital Arts Inc.

Penetration of "White Operation“ (Public Sector Market)）
Trend in i-FILTERv10 and m-FILTERv5
Licenses Used in the Public Sector Market(Thousand licenses)

8,336
i-FILTER v10

Realizing safe public facility IT environments
protected through "White Operation"

m-FILTER v5

7,260

1,078

826

5,496
622

7,257

6,434

2,518
1,940

519

4,874

Users increased sharply alongsideadvancement of the GIGA School
Concept, with the 5-year CAGR of user
licenses reaching 44%.

436
1,504
FY March
2019

1,999

FY March
2020

FY March
2021

FY March
2022

FY March
2023

29

※

CAGR（Compound Average Growth Rate）
Copyright © Digital Arts Inc.

GIGA School Concept
GIGA School Status*1
Share of charged filtering introduced

Introduction of charged filtering

Not yet introduced, etc.

Competitors

23%(Less than 10 companies)
45%

i-FILTER
55%

Charged filtering
already introduced77%•

The proportion of Boards of Education
which have adopted paid-for filtering
increased from 73% at the end of theprevious fiscal year to 77%.

*1：According to our survey of 1,741boards of education Mar 2023）

30•

i-FILTER's share grew from 51% at the end of theprevious fiscal year to 55%.

•

Cumulative contracts reached 8.6 billion yen at
the end of the third quarter from 6.9 billion yen at
the end of the previous fiscal year.
Copyright © Digital Arts Inc.

Material on Consolidated Financial Results the Fiscal Year Ending
March 31, 2023

Consumer Sector

31

Copyright © Digital Arts Inc.

Net Sales of Consumer Sector Market by Product
Trend in Net Sales of Consumer
Sector Market by ProductFor mobile terminals, otherFor computers

444

433

(Million yen)

• In products for computers, thenumber of users of multiple-year
package products and i-FILTER® for
Multi-Device, which are available on
multiple terminals, remained strong.

(△2.6%)

195

＋8.1％

211

UP

• Revenue from contract developmentof products for mobile terminals for
carriers decreased despite anincrease in the number of users.

248

FY March 2022

△10.9％221

DOWN

FY March 2023

32

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results the Fiscal Year Ending
March 31, 2023

RESULTS OF MEASURES FOR FISCALYEAR ENDING MARCH 2023

33

Copyright © Digital Arts Inc.

Results of Measures for Fiscal Year Ending March 2023
Mounting needs forcomprehensive security①②

Measures against malware infections

Malware threats are intensifying due todiversification and sophistication of cyberattacks
from rampant ransomware, Emotet and othermalware.

Diversification of cloud services and the spread of
remote working and home learning meant anincrease in ICT assets that need to be protected andexpansion of the domain of security threats.

•

Link between i-FILTER, m-FILTER and FinalCode to combat infections and data theft•Anti-Virus & Sandbox as a new functional option (launched in May 2022)•

Link between m-FILTER and Crypto-bin to combat the practice of sending a zipped file attachment and a separate-mail message with password (launched in September 2022)•

D Alert Reporting Service as a measure against malware infections(Released on i-FILTER in December 2022 and to be released on m-FILTER in February 2023)

After organic growth and the release of Anti-Virus & Sandbox, the Company earned net sales of 358 million yen by the end of
FY March 2023. The figure has already surpassed the target of 55 million yen in connection with the next-generation Secure
Web Gateway (SWG) in the Medium-Term Management Plan and is continuing to rise steadily.
34

Copyright © Digital Arts Inc.

Results of Measures for Fiscal Year Ending March 2023③

Strengthening security measuresfor public institutions④

Not only is there demand from those who have yet to
introduce filtering but also demand for switchingfrom free filtering and DNS filtering to highperformance filtering software for protecting
schoolchildren.

• Local governments seek security cloud andgreater security resilience.
• Medical institutions have growing needs forcyber security measures.

•

Combine i-FILTER, m-FILTER and FinalCode to meet local
governments’ guidelines of countermeasures•

Respond to the policy of toughening guidelines in the
medical industry•

Cumulative contracts for security cloud services reached
523 million yen at the end of this fiscal year from 319
million yen at the end of the previous fiscal year.

•

Cumulative contracts for Enhancement of resilience ofmunicipalities reached 1,739 million yen at the end of thisfiscal year from 704 million yen at the end of the previous
fiscal year.

Enhancing security measuresfor GIGA School devices•

Shift of some boards of education which had
introduced free or DNS filtering to paid filtering•

i-FILTER's share grew from 51% at the end of the previous
fiscal year to 55%.

•

Cumulative contracts reached 8.6 billion yen at the end of
this fiscal year from 6.9 billion yen at the end of theprevious fiscal year.

*For details, see pages 30.
35

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results the Fiscal Year Ending
March 31, 2023

Full-Year Financial Forecast for
Fiscal Year Ending March 31, 2024

36

Copyright © Digital Arts Inc.

Forecasts for Fiscal Year Ending March 31, 2024 (Consolidated)
Expand existing businesses and develop new businesses with the aim of increasing net sales and profit(Million yen)

FY March 2023
Full-Year
Results

FY March 2024
Full-Year
Forecasts

Change% Change

10,436

11,500＋1,063＋10.2 %

Cost of goods sold

3,666

3,850

＋183

＋5.0 %

Gross profit

6,769

7,650

＋880

＋13.0 %

Gross profit margin

64.9％

66.5％

Selling, general andadministrative expenses

2,356

2,500

＋143

＋6.1 %

Operating profit

4,413

5,150

＋736

＋16.7 %

Operating margin

42.3%

44.8％

Ordinary profit

4,429

5,150

＋720

＋16.3 %

Profit attributable toowners of parent

3,062

3,550

＋487

＋15.9 %Net sales

37

-

-

-

-

Copyright © Digital Arts Inc.

Forecasts for Fiscal Year Ending March 31, 2023 (Non-consolidated)
FY March 2023
Full-Year
Results

FY March 2024
Full-Year
Forecasts

Net sales

8,984

10,000＋1,015＋11.3 %

Cost of goods sold

2,425

2,650

＋224

＋9.3 %

Gross profit

6,559

7,350

＋790

＋12.1 %

Gross profit margin

73.0％

73.5％

Selling, general andadministrative expenses

2,163

2,350

＋186

＋8.6 %

Operating profit

4,395

5,000

＋604

＋13.7 %

Operating margin

48.9％

50.0％

Ordinary profit

4,407

5,000

＋592

＋13.4 %

Profit

3,048

3,450

＋401

＋13.2 %

(Million yen)

38

Change-% Change---

Copyright © Digital Arts Inc.

Status of Consolidated Net Sales
Consolidated Forecast(Million yen）

*1•

Net sales that will be carried over to andposted for the fiscal year in question will
increase given an increase in the number ofcontracts acquired in previous fiscal years inconnection with the GIGA School Concept in
the public sector market.

•

New DAJ contracts are expected to amount to9,385 million yen following measures toexpand sales of new functions and new
products for the enterprise sector market andpublic sector market, together with strategic
sales measures.
*1：DAJ = Digital Arts Inc.

*2

*2：DAC＝ Digital Arts Consulting Inc.
*3

*3：Sales recorded from the order backlog of contracts
acquired in previous fiscal years*4*4：Sales deferred to subsequent fiscal years (order backlog)

39

Copyright © Digital Arts Inc.

Status of Consolidated Net Sales
Forecast by Market

11,500(+10.2%)

10,436(Million yen）

456

Consumer• In response to corporate needs for total
security solutions, we will enhance the productlineup and improve links with othercompanies' products in order to attract newclients.

＋5.3％
UP

433

5,022
4,686

5,316

Results for FY March 2023

Public6,021

Enterprise

＋7.2％

•

Net sales that will be carried over to andposted for the fiscal year in question will
increase given an increase in the number ofcontracts acquired in previous fiscal years inconnection with the GIGA School Concept in
the public sector market.

•

The market share in GIGA School Concept
projects will increase and solidify security for
local governments to expand sales

UP＋13.3％UP

Forcast for FY March 2024

40

Copyright © Digital Arts Inc.

Consolidated Cost of Goods Sold and Selling,
General and Administrative Expenses
ChangeYoY

Results for FY
March 2023

Forecast for FY
March 2024

3,666

3,850

+5.0%

1,634

1,980

+21.1%

Increase in number of DAJ's development personnel.

Depreciation

838

910

+8.5%

Increase in depreciation of software for cloud products.

Communication
expenses

1,162

1,230

+5.8%

An increase in cloud server expenses as a result of the
expansion of sales of cloud service products and anincrease in the number of licenses.

895

770

△14.1％

A decrease in outsourcing expenses following a shift ofengineering operations outsourced by DAC to internal
operation.

△865△1,040+20.1%

Selling, general andadministrative expenses

2,356

2,500

+6.1%

Personnel expenses

1,193

1,310

+9.7%

An increase in the number of personnel due to therecruitment of new graduates.

Advertising expenses

297

310

+4.1%

Advertising in newspapers and other media will increase.

Other

865

880

+1.7%

An increase in travel and transportation expenses as the
COVID-19 pandemic fades.

(Million yen)

Cost of goods sold
Labor

Other

Transfer to other accounts

41

Main Factors for Change

Copyright © Digital Arts Inc.

Status of Consolidated Cost of Goods Sold
The increase in DAJ’s development personnel will lead to a rise in labor expenses.
Cloud server expenses (communication expenses) will grow with the expansion of sales ofcloud service products and an increase in the number of licenses.
Status of Consolidated Cost of goods sold

42

(Million yen)

Copyright © Digital Arts Inc.

Status of Consolidated Cost of Goods Sold
Personnel expenses will surge due to an increase in the number of staff after new graduates employees
joined the Group.
Travel and transportation expenses as well as entertainment expenses (as part of Other) will increase as the
COVID-19 pandemic fades.
Status of Consolidated Selling, General and(Million yen)
Administrative Expenses

43

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results the Fiscal Year Ending
March 31, 2023

FY03/24 Initiatives

44

Copyright © Digital Arts Inc.

Consolidated Contracts and Net Sales Forecast by Market
for FY March 2024
Forecasting contracts and net sales to rise 6.8% and 10.2%, respectively, year on year for
FY2023, we will be pursuing a number of different measures.
[Million yen]Contracts

Net sales[Million yen]EnterpriseEnterprise

10,885

Consumer
DAC

11,500PublicPublic(+6.8%)

10,190
1,442
433

4,305

4,010

1,500
450

DAC

UP

＋3.9％
△1.3％

4,684

＋17.1％

UP

1,442

456

＋5.3％
UP

4,686

3,875

UP
FY March 2023

1,500

5,022

DOWN

FY March 2024 results
Forecast

FY March 2023

45

＋4.0％

10,434
433

UP

4,251

(+10.2%)

Consumer

＋4.0％

4,522

＋7.2％
UP

＋16.7％UP

FY March 2024 results
Forecast
Copyright © Digital Arts Inc.

Main Measures for FY March 2024
We will improve our response to needs for comprehensive security, enter the authentication market, and launch thecommunication business as one of the initiatives to address a vision of creating new value and increasing demand set
out in the medium-term management plan.

1.

Respond to needs for comprehensive security•

Use the CASB function to improve the nextgeneration SWG function
Upgrade measures for detecting and responding tomalware infections
Improve measures against PPAP and erroneous
email transmission
Develop non-VPN remote access products

•
•
•

3.

2.

•
•

Expand sales in enhanced security for local
governments
Increase market share in GIGA School Concept
projects

4.

Launch the communication business

Expand sales to public organizations andschools

Enter the authentication (IDaaS) market

Introduce to the market StartIn, an original
IDaaS solution for enhanced authentication
security (with positional information and thirdparty authentication) and reduced ID
management burdens (ID provisioning
function)

Roll out Desk as a secure communications tool
for the online communication market, wheresecurity issues remain to be solved

46

Copyright © Digital Arts Inc.

Positions of Measures in ICT Environment
Execute measures for comprehensively supporting the ICT environment centering on the cloud
Solutions

ICT environment

Internal processapplications

Sending andreceiving
email
Cloud
Application

Internet accessCommunications(Next-generation
SWG)

Communications

1. Respond to needs for comprehensive security

SD-WAN
Network
optimization
Log

Certification
System

ID-aware proxy (non-VPN)

SWG
SEG

Cloud proxy

Cloud FW

CertificationSIEM
Log collection andcentralized
management

IAP
CASB

Visualization and control of cloud services

Secure email gateway
Network control
4. Enter the authentication market

IDaaSManagement of IDs on the cloud
1. Respond to needs for comprehensive security

Internal devices anddata

Terminals anddata

Internal devices anddata

Operation
monitoring
Monitoring
Detection andresponse
Analysis
ReportConsumer devices

Chat and Online Conferencing System

Storage

Data storage and sharing

DLP

Prevention of loss or leakage ofconfidential data

IRM

Data Encryption

MDM

Mobile device management

EDR

End-point monitoring and threat detection

1. Respond to needs for comprehensive security

3. Launch the communication business47

Copyright © Digital Arts Inc.

Schedules of Main Measures for FY March 2024
Improve functions for responding to needs for comprehensive security and introduce new products to markets
Launch the communications business ahead of the schedule set in the medium-term management plan

Product or function

1. Respondto needs
forcomprehensivesecurity

Mar.

Apr.

4. Enter theauthenticati
on market

4. StartIn

Jul.

Aug.

Sep.

Oct. andlater

ReleasefinishedJul.

1-2. m-FILTER MailAdviser OWA

3. Desk

Jun.

Apr.

1-1. CASB Functionality of iFILTER@Cloud

3. Launchthecommunicati
on businessMay

ReleaseJun.
ReleaseAug.
Release48

Copyright © Digital Arts Inc.

1-1. CASB functionality of i-FILTER@Cloud
Visualizing the status of use of cloud services by employees (to meet needs for measures against shadow IT and formeasures to manage sanctioned IT), the function got off to a good start after its release.

[Schematic of visualization of the status of use of cloud services]

49➢

Count the number ofconnections to individualcloud services and thenumber of file downloads anduploads to visualize trends inuse➢Strengthen measures against
shadow IT (introduction anduse of IT tools at employees'
discretion without permission
from the IT department or thesystem management
department)➢

Strengthening measures for
sanctioned IT (cloud services,
applications, computers andother IT equipment for which
the company officiallyconcludes contracts and theuse of which is permitted)
Copyright © Digital Arts Inc.

1-2. m-FILTER MailAdviser OWA
Improve functions including measures for PPAP (placing of file attachments into storage)◼ Support the Outlook Web Access (OWA) and improve functions
PPAP countermeasures

Countermeasure against wrong
email transmission

Support fordisabling ofviewing anddownload of fileattachments inthe event oferroneous emailtransmission

A function similar to that of the existing MailAdviser is featured.
It supports checking of the sender, body text and fileattachment name and for setting attached file views anddownloads.

Support for
confirmation of
the status offile opening/viewing anddownloads(1) Separate the fileattachment andupload it

PPAP countermeasures
By placing the attached file in storage, the raw filecan be downloaded if the mail recipient was given
permission to download.

(3) Access to the URL
After authentication
with the email address,
download the fileattachment(2) Insert the URL for
download into the bodytext of the email

Sender50+ Mail Adviser OWA

Recipient
Copyright © Digital Arts Inc.

3.Desk
Roll out Desk as an application which can be used as a core of various operations

NEW

The name Desk embodies our hope that this application serves as a desk for work that is close tousers in their computers, tablets or smartphones at any time and at any place.
Leveraging our knowledge in the security business, it will provide a communication space withsecurity and comfort.
51

Copyright © Digital Arts Inc.

3.DeskBy moving up ahead of schedule, creating new value and increasing demand, the long-term vision stated in the mediumterm management plan, execute a full-scale promotion of Desk as a new product in the communication business.

As online communication tools are increasingly used, they are more highly regarded for theirconvenience in helping make communication easy, irrespective of the place. On the other hand, newsecurity risks have emerged.

New security risks

Erroneous chattransmission

Information leaks tooutsiders

Cyberbullying

The Desk series provides a communication space with security and comfort.

52

Copyright © Digital Arts Inc.

3.「Desk」
Desk has excellent features to provide a communication space with security and comfort.
Desk's excellent features

Security

Providing a communication space with security and comfort

IP address restriction and twofactor authentication

Lowering the risks involved in erroneoustransmissions through a feature to prevent them

File encryption

Robust authentication to reduce the risks ofdata leaks

A feature to stop erroneoustransmissions

Chat
monitoring

A monitoring feature to prevent cyberbullying

Bullying alert
Suicide alert
A user interface friendly to
any user

Usability

Collaboration with Azure AD
Supporting batch user registration

Reassurance linked to themade-in-Japan status
53

Copyright © Digital Arts Inc.

3.「Desk」
Provide a lineup of four different product editions matched with different types of users and scenarios
Among them, focus on the GIGA School edition[Desk product lineup]
Product name

Desk

Desk Event

Category

Chat and Online Conferencing System

Webinar System

EditionRegular

GIGA School

RegularOutlineHolding chat, online
conferencing and filesharing features tosupport one-to-one
and multiple-tomultiple interactive
communications

Offering features
helpful to theeducation field suchas chat monitoring toensure safe andsecure chats at
schoolSupporting one-tomultiple online
communications
such as morning
meetings, internal
workshops andonline seminars

Users

Enterprises andpublic organizations

Schools
54

Enterprises, publicorganizations and schools

Shareholders
Meetings
Paving the way forthe distribution ofvirtual shareholders
meetings and forelectronic voting

Listed companies

Copyright © Digital Arts Inc.

3.「Desk」
Enhance communication at school with the use of Desk
GIGA School
Teachers◆◆ Notifications to students◆ Notifications to parents◆ Coordination withexternal parties◆◆

Students◆◆ Online lessons◆ Group chats◆ Communication withparents and teachers

Parents
Sharing of communication
networks
Notifications of teacher
attendance or absence
Communication with children
External parties
Communication with local
stakeholders such as
PTAs and managers ofchildren's baseball teams

We will be releasing an edition specially equipped with monitoring and other features and designed for use at schools
within the current fiscal year.
We will offer a platform for secure information sharing, mainly among teachers, students and parents, and aim tocreate a useful communication platform for schools covering external parties in the future.
55

Copyright © Digital Arts Inc.

3.「Desk」
We will expand Desk from enhancing communication at school to a regional
communication platform.
GIGA School
Supporting secure communication
between teachers and students andbetween students
 Simplified initial settings
 School management features Group management features
 Communication in classes andlessons
 Chat monitoring Online lessons
 Chats between
students

Supporting secure communication
with community stakeholders

Supporting communication
with parents
 Personal voice communication
between students
 Digitization of notices andother items to be distributed
 Notifications of student
attendance and absence Collaboration with learning eportal services
 Communication between family
members

 Build a system for linking
with local stakeholders

Teachers

 Supervision of relationships
between students and relatedparties
Collabor
ation
withlearning
e-portals

Learning
e-portals
Teachers

Digitization
Parents

Version 1 to be released in FY March 2024

External parties

Students
Students

Students

Teachers

Digitization

Parents

Version 2 to be released in FY March 2024

56

Version 3 to be released in FY March 2025
Copyright © Digital Arts Inc.

4.「StartIn」
Promote StartIn as the most secure and comfortable solution at the start of all processes
in enterprises

NEW

The name of StartIn has been coined by combining Start with In, given that an authentication solution is a system inwhich users should start by logging in before any process or learning.
It has an original authentication method using positional and other information to provide a comfortable environment.
57

Copyright © Digital Arts Inc.

4.「StartIn」
It offers solutions to all issues involved in the corporate process of transfer to a cloudenvironment.
StartIn's solution

Limitation of perimeter security
After the shift to a cloud environment, there is no boundary
separating inside and outside the office. It is therefore difficult tomanage IDs and to ensure the security of information assets.

Lack of uniformity in security levels

Singleauthentication
information
No need to log
in on a serviceby-service
basis

Each cloud service requires separate authentication andauthorization as well as data protection. It is difficult to attain asingle security level for all services.

Collaboration with different
cloud services

StartIn

Increasing the burden of ID
management on administrators
Administrators face an increasing burden since it is necessary toseparately manage IDs and passwords, make authority settingsand implement security measures for different cloud services.
58

Centralizationof ID
management ofauthority andaccess control

A robust
authenticati
on method
independent
from cloudservices

User’sterminal

Administrator’s
terminal
Copyright © Digital Arts Inc.

4.「StartIn」
StartIn's superior features ensure a high security level in a cloud environment.
They also reduce ID management burdens.
Original robust authentication and simple ID
management

StatIn's superior features

Its robust authentication feature ensures ahigh security level even in a cloudenvironment.

ID and password
One-time password
Multi-factor
authentication

Biometric authentication fordevices
Authentication with clients'
certificates

ID provisioning, AD collaboration and otherfeatures reduce the ID management burden.

Authentication with positional
information

Third-party authentication

ID/PW

Regular authentication

Positional
information

Third party

Visibility

Increasedrobustness

Activity
management

Regularauthentication

ID provisioning
ID management
Activity
management

Collaboration with AD and Google
Workspace ID

Log management and portal
59

Copyright © Digital Arts Inc.

Strategy in Security Products Market
In addition to consistent growth in market share in stable areas, continue to expand the productportfolio to investment areas with high market growth rates and other promising areas to meet needs
for comprehensive security
Investment areas
High
XDR

Marketgrowthrate

Future core areas (stable areas)

Future promising areas
30.2%
22.6%

CSPM/
CWPP

28.2%

CNAPP

17.9%

File and content
sharing services

Vulnerability
assessment
(VA)

11.2%

17.9%

Certification
IDaaS

Promisin
g areasSASE

EDR and NDR

20.3%

Web access security✓ SWG✓ SDP/IAP

Businesschat＝ Market growth rates

Expand the portfolio
to promising areas/
investment areas✓ CASB✓ FWaaS and others

10.3%

Unified endpoint
management(UEM) tools

Current portfolio
6.0%
5.4%

Web filtering

Gateway security✓ Security monitoring tools✓ FW-, VPN- and UTM-related
products

Low

Improvement
domain
Low

1.7%

2.4%

Mail Security(including file
encryption)

Implementation of downsizing,
withdrawal and collaboration
with other companies

Areas for acquisition
Stable areasof stable revenue

Our advantage
60

High
Copyright © Digital Arts Inc.

Material on Consolidated Financial Results the Fiscal Year Ending
March 31, 2023

Return to Shareholders for Fiscal
Year Ending March 31, 2024

61

Copyright © Digital Arts Inc.

Return to Shareholders for Fiscal Year Ending March 31, 2023
We are planning to pay dividends as follows to return a portion of our earnings to ourshareholders.
Target payout ratio for fiscal year ending March 31, 2024: 31.6%

Annual dividends of surplus forecasted for fiscal year ending March 31, 2024: 80.00
yen per share.
We expect to increase the annual dividend by 5.00 yen per share.
Dividend (in yen) per share
2Q-endYear-end

AnnualConsolidated
payout ratio

FY March 2023

35.00

40.00

75.00

34.4％

FY March 2024

40.00

40.00

80.00

31.6％

(forecast)
62

Copyright © Digital Arts Inc.

Notes on Descriptions

Among the descriptions of plans, strategies and financial forecasts in this presentation material, thosethat 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 to considerable change depending on changes in the environmentand 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、i-FILTER@Cloud Anti-Virus & Sandbox 、D-SPA、White Web、m-FILTER、
m-FILTER MailFilter、m-FILTER Archive、m-FILTER Anti-Spam、m-FILTER Anti-Virus & Sandbox、m-FILTER@Cloud Anti-Virus & Sandbox、
FinalCode、i-フィルター、DigitalArts@Cloud、Desk@Cloud、Desk、Dアラートand other logos and icons related to Digital Arts Inc. and its products aretrademarks 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.

63

Copyright © Digital Arts Inc.

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