Digital Arts Inc.（2326）

FY 03/18 Second Quarter Consolidated Financial Results（April 1, 2017 though September 30, 2017）
Reference Slides
October 30, 2017

Copyright © 2015 Digital Arts Inc.

FY 03/18 Q2 Financial Results Reference Slides

KEY FINANCIAL POINTS

Copyright © 2017 Digital Arts Inc.

Key Financial Points① Growth in the enterprise market made up for the nonrecurrence of large projects for government agencies
obtained in the same period of the previous FY, ensuring an
increase in both sales and profits Growth in m-FILTER in the enterprise market made up for the non-recurrence of large
projects for government agencies obtained in the same period of the previous FY,
ensuring an increase in sales and profits② Release of i-FILTER Ver.10 and m-FILTER Ver.５
 Released internet security solution i-FILTER Ver.10 and e-mail security solution
m‐FILTERVer.5. With the increased ability to block malwares and data leakages, thesecontribute to the decrease in costs for data protection and employee training
 Now prepared to obtain new projects in Q3③ Steady orders received in consulting Due to the increased awareness about information security, there has been steadysales by subsidiary Digital Arts Consulting, contributing to the overall group sales

3Copyright © 2017 Digital Arts Inc.

FY03/18 Q2 Financial Results Reference Slides

CONSOLIDATED RESULTSHIGHLIGHTS

Copyright © 2017 Digital Arts Inc.

FY03/18 Q2 Highlights (Consolidated)

Consolidated
Net Sales

Operating
IncomeOrdinary
IncomeNet Income
Attributable toOwners of Parent

JPY 2,468 million（YoY+48 million／ +2.0％）

Growth in the enterprise market made up for the non-recurrence of large
orders to government agencies obtained in the year-earlier period,ensuring YoY increase in sales

JPY 922 million（YoY+132 million／ +16.8％）

The YoY growth in sales, and the reduction in costs due to the completionof up-front investment connected to the commencement of overseas
business centered on the US contributed to the increase in profit

JPY 932 million（YoY+165 million／ +21.5％）

Due to the increase in operating income, the ordinary income alsoincreased

JPY 618 million（YoY+164 million／ +36.1％）

The increase was due to the large increase in profits in Japan and thecompletion of investments in the offices abroad contributing to therelative reduction in taxes
5Copyright © 2017 Digital Arts Inc.

FY03/18 Q2 Summary
Consolidated Results(Unit: JPY million)
FY03/17Q2

FY03/18
Q2YoY

FY03/18
Forecast

Net Sales

2,420

2,468

+2.0%

5,600

Gross Profits

1,922

2,000

+4.0%

4,450

Selling, General and
Administration
Expense

1,132

1,078

▲4.8%

2,450

Operating
Income789

922+16.8%

2,000

Ordinary Income

767932+21.5%

2,000

Net Income
attributable to ownersof parent454

618+36.1%

1,240

ROE

9.6%

11.3%

6――Copyright © 2017 Digital Arts Inc.

FY03/18 Q2 Summary
Non-Consolidated Results(Unit: JPY million)
FY03/17Q1

FY03/18
Q2

YoY

FY03/18
Forecast

Net Sales

2,465

2,474+0.4%

5,550

Gross Profits

1,938

1,978+2.1%

4,450

Selling, General and
Administration
Expense1,001956

▲4.5%

2,100

Operating
Income

936

1,021

+9.0%

2,350

Ordinary Income

918

1,030

+12.2%

2,350

Net Income

619

734

+18.5%

1,621

ROE

11.8%

12.0%

7――

Copyright © 2017 Digital Arts Inc.

Consolidated Net Sales Trend

Continue to post RECORD HIGH sales(Unit: JPY million)

2,468

2,420（102%）（125%）

1,935（120%）

1,328917

FY03/09 Q2

1,010（110%）

FY03/10 Q2

1,1031,481

1,351（120%）（102%）

FY03/12 Q2

FY03/13 Q2

1,610（109%）（110%）（109%）

FY03/11 Q2

FY03/14 Q2

FY03/15 Q2

FY03/16 Q2

FY03/17 Q2

FY03/18 Q2※ Percentages indicate YoY net sales

8Copyright © 2017 Digital Arts Inc.

Consolidated Net Sales Trend (by Quarter)
Despite the non-recurrence of large projects obtained in the year(Unit: JPY million)
earlier period, organic growth was maintained 1,5401,503（123%）（133%）

1,309

1,253（116%）

1,131

1,077

1,098（121%）

937
715

673（114%）（113%）（119%）（111%）（103%）

1Q（126%）

916

811803（87%）（135%）（119%）（113%）

1,158

2Q

3Q

4Q

FY 03/15

1Q

2Q

3Q

4Q

1Q

FY 03/16

2Q

3Q

FY 03/17※ Percentages indicate YoY net sales

94Q

1Q

2Q

3Q

4Q

FY 03/18

Current FY
Copyright © 2017 Digital Arts Inc.

COS and SG&A The completion of initial investments connected to thecommencement of overseas business contributed to the reduction
in COS and SG&A

（Unit：JPY million）

FY03/17Q2

FY03/18
Q2

YoY GrowthKey Factors

497467▲29Labor215200▲14Depreciation

144137▲6Transfer to other accounts
Misc production cost137

128▲8Selling, General and
Administrative Expenses

1,1321,078▲54

Personnel Expenses

585

540

▲44Personnel Expenses(Japan) -25M(Overseas) -25M

Publicity

174163▲11Japan -７M
Overseas -７M

Others372

373+1

Cost of Sales

10Copyright © 2017 Digital Arts Inc.

Cost of Sales (by Quarter)

Overseas costs leveled off, resulting in slight decline incost of sales
283

Labor

264（123%）（93%）

228（113%）52238（105%）

59

224

227

72

211（102%）（96%）

222（99%）

（93%）

48
5467

85

70

9393

96

101

1Q

2Q

3Q

4Q

FY 03/15

7772717272244（100%）（110%）

6568

87

90

1Q

2Q

3Q

69

109

103

112

106

4Q

1Q

2Q

3Q

FY 03/16

FY 03/17※ Percentages indicate YoY net sales

11232

235

（97%） （92%）

66

62

68

69

98

102

1Q

2Q

78

67

86

(Unit: million JPY)

Other Accounts & Misc.

265

64

78

80

（113%）（114%）

65

109
82

240

256

Depreciation

121

4Q

3Q

4Q

FY 03/18

Current FY
Copyright © 2017 Digital Arts Inc.

Selling, General and Administrative Expenses (by Quarter)
Revised the organizational structure, and effectively utilized resourcesin accordance with the medium- to long-term human resources strategy
Personnel Expenses

Publicity

OthersOverseas510（125%）408（95%）58396（108%）

363

394

161

130（148%）488
73

3727（113%）

71

92

68

72

88（99%）

53（103%）

180

3456

83

59

51

197

205

212

219

208

221

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

FY 03/16

257

243

1Q

2Q

3Q

FY 03/17※ Percentages indicate YoY net sales

12（92%）

163
56

241

509

182

89
46

39273(Unit: million JPY)

69
166

176

148

189

FY 03/15

498569154
172

32（102%）（114%）

151
149

596

556

49
164

80
61482

576（123%） （133%）（111%）（106%）

158

586

285

4Q

243

229

1Q

2Q

3Q

4Q

FY 03/18Current FY
Copyright © 2017 Digital Arts Inc.

FY 03/18 Q2 Financial Results Reference Slides

BY MARKET

Copyright © 2017 Digital Arts Inc.

Summary: Net Sales by Market
 Despite the lack of large projects such as those in the previous FY, managed tosustain +2.0% growth Attained +18.9% growth in the enterprise sector, offsetting the non-recurrenceof large public sector projects
 Continued to attain solid sales in the consumer market, despite the decline in thePC market
Consolidated
Net Sales

JPY 2,468 million（YoYEnterprise

JPY 1,366 million（YoYPublic

JPY 922 million

Consumer

JPY 179 million（YoY（YoY14

JPY +48 million／+2.0％）

JPY +216 million／+18.9％）

JPY -173 million／-15.8％）

JPY +4 million／ +2.7％）

Copyright © 2017 Digital Arts Inc.

Sales Trend by Market

Enterprise sales continue to support high(Unit: million JPY)

overall growth2,4682,420（102%）（125%）

Enterprise

PublicConsumer

1,935179174（120%）

1,610
1,328917
131381404
FY 03/09 Q2

1,010（110%）

144384481

FY 03/10 Q2

1,103（109%）（120%）

130

132
585

1,481

1,351（110%）（102%）

536

527

922
1,096

175
754

186

140

170（109%）609

415555612684

FY 03/11 Q2

FY 03/12 Q2

FY 03/13 Q2

758824

FY 03/14 Q2

FY 03/15 Q2

1,010

FY 03/16 Q2

1,366

1,149

FY 03/17 Q2

FY 03/18 Q2※ Percentages indicate YoY net sales

15Copyright © 2017 Digital Arts Inc.

Quarterly Net Sales By Market

Growth in the enterprise sector ensured stable
overall growth

1,540

1,503（123%）（133%）

Enterprise

PublicConsumer

1,077
937

97（113%）90673（103%）85715（111%）

402

80

313

（119%）

89

1Q

444

409

2Q

3Q

（114%）

799

89（113%）

602

80

92
497
424

427

78

86（126%）

296
259

256

457

4Q

FY 03/15

833

756

665
380

498

89
216

207

811

803

（135%）

916
403

1,158

1,098

93（121%）（119%）

1,309（87%）（116%）

1,131

105

84

1,253

(Unit: million JPY)

1Q

552

2Q

530

473

3Q

4Q

1Q

FY 03/16

619

590

2Q3QFY 03/17※ Percentages indicate YoY net sales

16640

4Q

1Q726

2Q

3Q

4Q

FY 03/18

Current FYCopyright © 2017 Digital Arts Inc.

FY 03/18 Q2 Financial Results Reference Slides

ENTERPRISE SECTOR

Copyright © 2017 Digital Arts Inc.

Enterprise Sector
 Solid sales of mainstay i-FILTER series
 Recovery in sales of m-FILTER from the last FY, secured strong growthagain Secured small-start and test deployment projects for FinalCodeSeries

Series

YoY

104.3 ％

YoY

127.1 ％

YoY

134.5 ％
18Copyright © 2017 Digital Arts Inc.

FY 03/18 Q2 Financial Results Reference Slides

PUBLIC SECTOR

Copyright © 2017 Digital Arts Inc.

Public Sector
 Due to the effects of the Ministry of Internal Affairs and Communications’guidelines on fundamental strengthening of local government security,
local governments’ awareness has increased, leading to the increased
adoption of FinalCode Although projects were attained, it was not enough to make up for thenon-recurrence of the large government agency projects attained in theyear-earlier period
SeriesSeries

YoY

78.2 ％

YoY

102.1 ％

YoY

347.5 ％
20Copyright © 2017 Digital Arts Inc.

FY 03/18 Q2 Financial Results Reference Slides

CONSUMER SECTOR

Copyright © 2017 Digital Arts Inc.

Consumer Sector
 Continued to expand partnerships and sales through mobile and MNVO
operators for i-FILTER (Consumer), promoted expanded sales andexpanded collaboration for mobile device version of i-FILTER for
smartphone Despite the continued decline in PC shipments in Japan, and theotherwise challenging business environment, sales of multi-year
packages and sales to internet cafes were solid, and direct sales for
multi-devices were steady, contributing to solid sales
PCYoY

100.0 ％

Game Consol/TV

YoY

61.4 ％

Mobile Device

YoY

134.3 ％

22Copyright © 2017 Digital Arts Inc.

FY 03/18 Q2 Financial Results Reference Slides

FY 03/18 FORECAST

Copyright © 2017 Digital Arts Inc.

FY 03/18 Forecast
Consolidated Forecast

 Japan: Anticipate continuous and stable growth with the launch of anew product in a new market
 Subsidiaries: Conservative initial outlook(Unit: million JPY, except where stated otherwise)

FY 03/17
Actual

FY 03/18Forecast

Growth Rate

Net Sales

5,058

5,600

10.7 %

Gross Profit

4,051

4,4509.8 %Selling, General and
Administration Expense

2,2272,45010.0 %Operating Income

1,824

2,000

9.6 %

Ordinary Income

1,811

2,00010.4 %Net Income
Attributable to Owners of Parent

1,125

1,240

10.2 %

Dividend per Share

24 JPY

28 JPY

24―Copyright © 2017 Digital Arts Inc.

FY 03/18 Forecast
Non-Consolidated Forecast

 Japan: Anticipate continuous and stable growth with the launch of anew product in a new market(Unit: million JPY, except where stated otherwise)

FY 03/17Actual

FY 03/18Forecast

Growth Rate

Net Sales

5,1045,550

8.7 %Gross Profit4,028

4,450

10.5 %

Selling, General and
Administration Expense

1,960

2,100

7.1 %

Operating Income

2,067

2,350

13.7 %

Ordinary

2,056

2,350

14.3 %Net Income

1,339

1,621

21.1 %

25Copyright © 2017 Digital Arts Inc.

FY 03/18 Return to Shareholder■Dividend Distribution
Digital Arts plans to return profit to its shareholders as follows:
Projected dividend payout ratio for the period ending March 2018:31.2% of consolidated net income for current period
The annual dividend amount for the period ending March 2018:
Estimated at 28.00 yen per share
Dividend per share (in JPY)
InterimFiscal yearend

AnnualConsolidated
Payout Ratio

FY 03/17

10.00

14.00

24.00

29.7％

FY 03/18 (Forecast)

14.00

14.00

28.00

31.2％

26

Copyright © 2017 Digital Arts Inc.

Notice

All statements herein, other than historical facts, contain forwardlooing statements and are based on DA’s current plans, strategies
and financial forecasts. These forward –looking statements arebased upon the management’s current assumptions and beliefs inlight of the information currently available to it. However,environmental changes and other important factors may cause
actual results to differ materially from those expressed herein. Allstatements herein are not intended to express DA’s commitment tofulfil any forward-looking statements. Updated information, ifapplicable, will be disclosed in a timely manner.
All numerical indications in this statement, unless stated otherwise,
are rounded to the nearest million JPY
DIGITAL ARTS, i-FILTER, info board, ARS, ActiveRatingSystem, 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, DigitalArts@Cloud, D Alert,
and related logos and icons are trademarks or registered trademarks of Digital Arts Inc. FinalCode is a registered trademark of FinalCode,Inc.

27

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