更新日時:2020/11/04 18:02:50

File tracking:FY0321 Second Quarter Consolidated Financial Results.docx

Quarterly Consolidated Financial Results for First Half of Fiscal YearEnding March 31, 2021 (Japanese Accounting Standards)
Name of listed company:Digital Arts Inc.
Securities code:

October 30, 2020
Tokyo Stock Exchange
1st Section

Listed on:2326

URL https://www.daj.jp
Representative Director,
Representative:(Title)(Name) Toshio Dogu
President and CEO
General Manager of theContact:(Title)Administration(Name) Isao Konishi
TEL: 03-5220-6045
Department
Scheduled date for submission of
Scheduled date to start dividends
November 9, 2020
December 2, 2020
quarterly report
distribution:
Preparation of supplementary explanatory: Yes
documents for quarterly results
Holding of quarterly results briefing: Yes(for institutional investors and financial
analysts)(Figures shown are rounded down to the nearest million yen.)

1. Consolidated financial results for the first half of the fiscal year ending March 31, 2021 (April 1, 2020 – September
30, 2020)(1) Consolidated operating results (cumulative totals)
Net sales
Million yen

First half of year ending
3,101
March 31, 2021
First half of year ended
2,764
March 31, 2020
(Note) ComprehensiveFirst half of year
income:ending March 31,
2021(Percentage figures represent changes from same period of previous
year.)
Profit attributable toOperating profit
Ordinary profit
owners of parent%

Million yen%

Million yen%

Million yen

%

12.2

1,310

19.5

1,316

20.5

908

22.0

0.0

1,096

5.9

1,092

5.0

745

(24.9)

906million
yen (

22.2%) First half of year
ended March 31,
2020

742million
yen (-25.3%)

Profit per share (basic) Profit per share (diluted)
First half of year ending
March 31, 2021
First half of year ended
March 31, 2020

Yen

Yen

64.84

63.35

53.40

51.80

(2) Consolidated financial position
Total assets

Net assets

Million yen

Equity ratio

Million yen

Net assets per share%

Yen

As of September 30, 2020
11,4379,238
80.6
657.61
As of March 31, 2020
10,852
8,680
79.7
617.27(Reference:) Equity capital: As of September 30, 2020 9,220million yen
As of March 31, 2020
8,652million yen

2. Dividends
Annual dividends
1Q-end2Q-endYen

Year ended March 31,－
2020
Year ending March 31,－
2021
Year ending March 31, 2021
(forecast)(Note Revisions to most recently announced dividend forecast

3Q-endYear-end

Total

Yen

Yen

Yen

Yen

25.00

－

25.00

50.00

－

30.00

55.00

25.00

: No

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File tracking:FY0321 Second Quarter Consolidated Financial Results.docx

3. Forecast of consolidated financial results for the year ending March 31, 2021 (April 1, 2020 – March 31, 2021)(Percentage figures represent changes from previous year for full year figures.)
Profit attributable toOperating profit
Ordinary profit
Profit per shareowners of parent

Net sales
Million yen%

Million yen%

Full year
7,500
32.9
3,550
52.5
(Note) Revisions to most recently announced results forecasts: No

Million yen%

Million yen

%

Yen

3,550

52.6

2,450

54.0

174.79* Notes(1) Changes in important subsidiaries during the first half of fiscal year
: Noneending March 31, 2021
(Changes in specified subsidiaries resulting in changes in scope of consolidation)
New-(Company name),

Excluding(2) Application of special accounting methods to the preparation ofquarterly consolidated financial statements-(Company name): Yes(Note) For details, please refer to “2. Quarterly Consolidated Financial Statements and Primary Notes (4) Notes to quarterly
consolidated financial statements (Application of special accounting methods to the preparation of quarterly consolidated financial
statements)" on page 10 of the attached materials.

(3) Changes in accounting policies, changes of accounting estimates and restatement
1) Changes in accounting policies due to revisions of accounting standards, etc.

:

None

2) Changes in accounting policies due to reasons other than those stated in 1)

:

None

3) Changes in accounting estimates

:

None

4) Restatement

:

None

(4) Number of shares outstanding (common stock)1) Number of shares issued and outstanding(including treasury shares)
2) Number of treasury shares
3) Average number of shares issued andoutstanding in each period (cumulative total)**

As of September 30,
2020
As of September 30,
2020

14,133,000
111,542First half of year
ending March 31,
2021

As of March 31,
2020
As of March 31,
2020

14,133,000
116,042First half of year
14,018,558

ended March 31,

13,957,694

2020

Quarterly financial statements are not subject to quarterly audits by certified public accountants or audit
corporations.
Explanation concerning the appropriate use of financial result forecasts and other special notes(Forward looking statements)
Business forecasts and other forward-looking statements in this material contain predictions based on future assumptions,
outlooks and plans as of the date of publication of this material. The Company does not warrant the accomplishment of theforecasts. Actual results may different significantly from the forecasts due to risks and uncertain factors associated with the world
economy, the state of competition, and fluctuations in foreign exchange rates and interest rates.
For matters concerning results forecasts, please refer to “1. Qualitative Information on Financial Results for the First Half of
Fiscal Year Ending March 31, 2021 (3) Explanation about information on future forecasts such as consolidated results forecasts"
on page 5 of the attached materials.
(How to obtain supplementary materials for quarterly results)
The material is available at Digital Arts Inc. corporate website.

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File tracking:FY0321 Second Quarter Consolidated Financial Results.docx

更新日時:2020/11/04 18:02:50○Table of Contents for the Attached Document

1. Qualitative Information on Financial Results for the First Half of Fiscal Year Ending March 31, 2021 ...................................... 4(1) Explanation about business results .................................................................................................................. 4(2) Explanation about financial position ................................................................................................................ 5(3) Explanation about information on future forecasts such as consolidated results forecasts................................... 5
2. Quarterly Consolidated Financial Statements and Primary Notes .............................................................................................. 6(1) Quarterly consolidated balance sheet ............................................................................................................... 6(2) Quarterly consolidated statement of income and quarterly consolidated statement of comprehensive income ..... 7
Quarterly consolidated statement of income
Consolidated first half ........................................................................................................................... 7
Consolidated statements of comprehensive income
Consolidated first half ........................................................................................................................... 8(3) Consolidated statement of cash flows .............................................................................................................. 9(4) Notes to quarterly consolidated financial statements......................................................................................... 10(Notes on the premise of a going concern) ..................................................................................................... 10(Notes on significant changes in the amount of shareholders’ equity) ............................................................. 10(Application of special accounting methods to the preparation of quarterly consolidated financial statements) 10―3―File tracking:FY0321 Second Quarter Consolidated Financial Results.docx

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1. Qualitative Information on Financial Results for the First Half of Fiscal Year Ending March 31, 2021
(1) Explanation about business results
During the first half of the consolidated fiscal year under review (April 1 through September 30, 2020), the circumstances
encountered by the Japanese economy were adverse. Economic activity stagnated and contracted due to the COVID-19 pandemic,
and as a result consumer spending and corporate earnings continued to decline sharply. Since then, the economy has begun to rally,
due to the increase in social and economic activities and the government economic package. However, the outlook is very uncertain
amid concerns about a resurgence of the pandemic and the ongoing deterioration of corporate performance.
In the security industry, in which the Digital Arts Group (the “Group”) operates, demand for security products expanded following
a series of damaging incidents caused by diversifying cyberattacks, including ransomware and Emotet. Apart from demand fromlarge-sized organizations, new demand for security measures is growing from medium and small-sized enterprises, which werecomparatively lagging in these measures. In addition, IoT, AI and other technologies were increasingly used and the practice ofworking from home spread quickly to stop the proliferation of the COVID-19 coronavirus, security personnel must now manage
increasingly diversifying and advancing risks, and the demand for security measures is expected to continuously grow. In the public
sector market, after the Japanese cabinet decision on the supplementary budget totaling 231.8 billion yen for the GIGA School
Concept in December 2019, a supplementary budget proposal earmarking an extra 229.2 billion yen aimed at speeding up theconcept was approved by the Japanese Cabinet in April 2020. It is urgent to swiftly create an environment using ICT to ensure all
children’s learning, even during an emergency, by rapidly providing every school-aged child with a terminal.
Amid these circumstances, the Group continued efforts to improve i-FILTER Ver. 10 and m-FILTER Ver. 5 by enhancing
performance and adding functions, and to provide higher-precision security environments to offer solutions for a secure Internet
environment regardless of the size of the customer.
For the enterprise sector market, the Group implemented activities for increasing recognition and sales promotion of
DigitalArts@Cloud, released in May 2018, in view of the rapid introduction of cloud technologies to online services and e-mailenvironments amid the spread of teleworking. The Group worked towards allowing users to solely view secure websites and receive
secure e-mail messages in the cloud environment. The Group also released the Desk@Cloud communication tool equipped not onlywith online conferencing, communication and chat features but also with security measures. Thus, it prepared to offer cloud services
that achieve not only security but also improved work efficiency.
For the public sector market, the GIGA School Concept sets out a policy of newly supplying around 7.5 million tablets to schoolaged children to ensure that each one has a terminal. In line with acceleration of this concept, the Company is working more closelywith sales partners to offer an extensive lineup of i-FILTER at special prices and is running a campaign to provide service thatmatches the standard specifications that conform to the Guidelines on Education Information Security Policy free of charge. With
these actions, the Company retained its current market share of around 60% among 1,741 boards of education and constructed asystem for holding a larger market share.
In the consumer sector market, as more and more young people are using smartphones, they are increasingly being affected byinappropriate Internet content chiefly via smartphone. Filtering needs to be promoted to protect young people. Amid the COVID19 coronavirus crisis, the closures of schools and tutoring schools are protracted and use of computers and other terminals for online
learning at home is increasing. Given these circumstances, the Company continued its educational activities and conducted efforts
to popularize i-FILTER in collaboration with mobile network carriers.
For the fiscal year under review, demand in the enterprise and public sector markets has rapidly soared for cloud service products,
following the spread of COVID-19. A large part of the amount of the contract for traditional mainstay license sales products isrecorded as sales in a lump at the time of shipment. For cloud service products, recorded sales are apportioned on a monthly basis
throughout the service provision period. This means that as the contracts for cloud service products become a higher percentage of
total contract amounts, there is a rise in deferred sales and a wider gap between contract amounts and sales.
As a result, net sales for the first half of the consolidated fiscal year under review stood at 3,101,538 thousand yen, up 12.2%
year on year, operating profit at 1,310,585 thousand yen, up 19.5% year on year, ordinary profit at 1,316,378 thousand yen, up
20.5% year on year, and profit attributable to owners of parent at 908,905 thousand yen, up 22.0% year on year.

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The following describes business performance in separate markets.
Enterprise Sector Market
In the enterprise sector market, active sales efforts enhanced recognition of effectiveness of i-FILTER Ver. 10 and m-FILTER Ver.
5 and helped acquire new contracts. Especially due to the COVID-19 pandemic, cloud services have increasingly been used to reduce
costs and operations management burdens. In addition, Digital Arts Consulting Inc., a subsidiary offering security consulting services,
enjoyed mounting demand and achieved an increase in sales.
Net sales in this market reached 1,832,515 thousand yen, up 19.08% year on year.
Public Sector Market
In the public sector market, the Group has traditionally enjoyed excellent recognition and a large market share as a provider ofJapan-made security solutions. Highly rated for its track record and reliability, new contracts for i-FILTER Ver. 10 and m-FILTER
Ver. 5, which provide advanced security measures and protect against targeted attacks, continued to gain new contracts. Also in the
public sector market, there is a rapid shift to security products with cloud technologies. The Group thus steadily acquired newcontracts for cloud service products in the i-FILTER series. It also began receiving contracts for the i-FILTER series from boardsof education with the help of the GIGA School Concept.
As a consequence, net sales in this market stood at 1,049,502 thousand yen, up 8.14% year on year.
Consumer Sector Market
In the consumer sector market, the Group focused on collaborating with mobile network carriers and MVNOs and on sales of iFILTER for Multiple Devices, which can be used on multiple operating systems using a single serial ID. As a result, it attained anincrease of users. Meanwhile, net sales tumbled due to revisions to the prices for sales to mobile network carriers.
Net sales in this market amounted to 219,520 thousand yen, shrunk 13.84% year on year.

(2) Explanation about financial position(Assets)
Total assets at the end of the second quarter of the consolidated fiscal year under review increased 584,899 thousand yen fromthe end of the previous consolidated fiscal year to 11,437,133 thousand yen, mainly due to an increase in cash and deposits.
(Liabilities)
Total liabilities at the end of the second quarter of the consolidated fiscal year under review increased 26,282 thousand yen fromthe end of the previous consolidated fiscal year to 2,198,292 thousand yen. This was due chiefly to an increase in advances received.
(Net assets)
Net assets at the end of the second quarter of the consolidated fiscal year under review increased 558,617 thousand yen from theend of the previous consolidated fiscal year to 9,238,841 thousand yen. This was due to an increase in retained earnings associatedwith the posting of profit attributable to owners of parent.

(3) Explanation about information on future forecasts such as consolidated results forecasts
Operating results for the first half of the consolidated fiscal year under review remained steady overall, and there was therefore
no change in the forecast of consolidated financial results for the year ending March 31, 2021 announced on May 8, 2020.
The Company has determined the results forecasts based on information available on the day of these financial results for the
first half of the year ending March 31, 2020. Actual results may be different from the forecasts due to a variety of factors. If there
are any significant changes, the Company will disclose them appropriately.

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File tracking:FY0321 Second Quarter Consolidated Financial Results.docx

2. Quarterly Consolidated Financial Statements and Primary Notes(1) Quarterly consolidated balance sheet(Thousand yen)
Fiscal 2020
(As of March 31, 2020)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - tradeFinished goods
Supplies
Other
Total current assets

First half of fiscal 2021
(As of September 30, 2020)

7,651,645
994,793771
654
85,614

8,257,462
1,022,982
643
597
98,951

8,733,479

9,380,638

Non-current assets
Property, plant and equipment
Intangible assets
SoftwareOther

249,474

234,470

1,331,410
79,251

1,277,510
87,016

Total intangible assets

1,410,661

1,364,527

Investments and other assets

458,619

457,497

2,118,755

2,056,494

10,852,234

11,437,133

32,469469,079
119,788
1,229,998
274,151

35,258443,370
72,533
1,328,184
269,671

Total current liabilities

2,125,487

2,149,019

Non-current liabilities
Asset retirement obligations
Other

45,877645

48,628645

Total non-current assets
Total assets
Liabilities
Current liabilities
Accounts payable - trade
Income taxes payable
Provision for bonuses
Advances received
Other

46,522

49,273

Total liabilities

Total non-current liabilities

2,172,010

2,198,292

Net assets
Shareholders' equity
Share capital
Capital surplus
Retained earnings
Treasury shares

713,590972,058
7,340,668(380,126)

713,590
968,548
7,899,149(365,385)

8,646,190

9,215,902

6,120

4,765

6,120

4,765

18,049
9,864

8,971
9,201

Total shareholders' equity
Accumulated other comprehensive income
Foreign currency translation adjustment
Total accumulated other comprehensive income
Share acquisition rights
Non-controlling interests
Total net assets
Total liabilities and net assets―6―

8,680,224

9,238,841

10,852,234

11,437,133

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File tracking:FY0321 Second Quarter Consolidated Financial Results.docx(2) Quarterly consolidated statement of income and comprehensive income
Quarterly consolidated statement of income
Consolidated first half

Net sales
Cost of sales

First half of fiscal 2020
(from April 1, 2019
to September 30, 2019)
2,764,132
630,407(Thousand yen)First half of fiscal 2021
(from April 1, 2020
to September 30, 2020)
3,101,538
875,557

Gross profit

2,133,724

2,225,980

Selling, general and administrative expenses

1,036,750

915,394

Operating profit

1,096,974

1,310,585

448
15
350

291

Non-operating income
Interest income
Commission income
Gain on forfeiture of unclaimed dividends
Foreign exchange gains
Subsidy income
Miscellaneous income
Total non-operating income
Non-operating expenses
Foreign exchange losses
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on reversal of share acquisition rights
Total extraordinary income
Extraordinary losses
Loss on retirement of non-current assets
Total extraordinary losses
Profit before income taxes

－
－
474

－
591
1,400
1,667
1,840

1,288

5,792

6,220

－

6,220
1,092,042－
1,316,378

404

8,995

404

8,995

0

0

0

0

1,092,446

1,325,373

Income taxes

347,551

417,131

Profit744,895

908,242

(413)

(662)

745,308

908,905

Loss attributable to non-controlling interests
Profit attributable to owners of parent―7―

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File tracking:FY0321 Second Quarter Consolidated Financial Results.docx

Quarterly consolidated statement of comprehensive income
Consolidated first halfFirst half of fiscal 2020
(from April 1, 2019
to September 30, 2019)744,895(Thousand yen)First half of fiscal 2021
(from April 1, 2020
to September 30, 2020)
908,242(2,480)(1,355)(2,480)(1,355)Comprehensive income

742,414906,887

Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controllinginterests

742,828

907,549

(413)

(662)

ProfitOther comprehensive income
Foreign currency translation adjustment
Total other comprehensive income―8―更新日時:2020/11/04 18:02:50

File tracking:FY0321 Second Quarter Consolidated Financial Results.docx(3) Quarterly consolidated statement of cash flows
First half of fiscal 2020
(from April 1, 2019
to September 30, 2019)
Cash flows from operating activities
Profit before income taxes
Depreciation
Increase (decrease) in provision for bonuses
Interest income
Loss on retirement of non-current assets
Foreign exchange losses (gains)
Gain on reversal of share acquisition rights
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Increase (decrease) in trade payables
Increase (decrease) in accounts payable - other
Decrease (increase) in other current assets
Increase (decrease) in other current liabilities
Other(Thousand yen)First half of fiscal 2021
(from April 1, 2020
to September 30, 2020)

1,092,446
382,093
3,861
(448)
0
6,321
(404)
271,666
118(4,235)(23,525)
7,928(67,865)
4,790

1,325,373
428,001(47,254)(291)
0(2,145)(8,995)
70,137
184
2,808(17,505)(18,396)
23,751(2,446)

Subtotal

1,672,746

1,753,220

Interest and dividends received
Income taxes paid
Income taxes refund

628(309,063)－
1,364,312

527(439,973)
4,774

Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from redemption of securities(18,502)(363,540)
300,000

Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from disposal of treasury shares
Dividends paid

1,318,549(22,583)(352,209)(82,042)－(374,792)

336,643(416,245)

11,149(350,073)(79,602)(338,923)

Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents(8,659)984

1,194,008

605,817

Cash and cash equivalents at beginning of period

5,569,172

7,651,645

Cash and cash equivalents at end of period

6,763,180

8,257,462―9―

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更新日時:2020/11/04 18:02:50(4) Notes to quarterly consolidated financial statements(Notes on the premise of a going concern)
There are no applicable matters.
(Notes on significant changes in the amount of shareholders’ equity)
There are no applicable matters.
(Application of special accounting methods to the preparation of quarterly consolidated financial statements)
Calculation of tax expenses
With respect to the calculation of tax expenses, reasonable estimations are performed on an effective tax rate established after
applying tax accounting to profit before income taxes for the consolidated fiscal year, which includes the first half of theconsolidated fiscal year under review, and such tax expenses are calculated by multiplying this estimated effective tax rate byprofit before income taxes.

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