Digital Arts Inc.（2326）

FY 03/18 Third Quarter Consolidated Financial Results（April 1, 2017 though December 31, 2017）
Reference Slides
January 31, 2018

Copyright © 2015 Digital Arts Inc.

FY03/18 Third Quarter Financial Results Reference Slides

KEY FINANCIAL POINTS

Copyright © 2018 Digital Arts Inc.

Key Financial Points① The decrease in large projects for government agencies andlocal governments was offset by the growth in theenterprise sector, resulting in higher sales and profits The decrease in large projects for government agencies and local governments won
during the previous fiscal year was offset by growth in i-FILTER and m-FILTER to theenterprise sector, resulting in higher sales and profits② Solid sales through current customers upgrading to iFILTER Ver.10 and m-FILTER Ver.５
 Released internet security solution i-FILTER Ver.10 and e-mail security solution
m‐FILTERVer.5. These provide increased ability to block malwares and data leakages
from Web and e-mail Solid flow of current customers upgrading to the new versions③ Steady business in consulting opportunities
 Due to the increased awareness of information security, there have been steady orders
received by subsidiary Digital Arts Consulting, contributing to the overall group sales

3Copyright © 2018 Digital Arts Inc.

FY03/18 Third Quarter Financial Results Reference Slides

CONSOLIDATED RESULTSHIGHLIGHTS

Copyright © 2018 Digital Arts Inc.

FY03/18 Third Quarter Highlights (Consolidated)

Consolidated
Net Sales

Operating
IncomeOrdinary
IncomeNet Income
Attributable toOwners of Parent

JPY 1,158 million（YoY

JPY +32 million／＋26.3％）

Despite the decrease in demand due to the completion of large publictenders, the increase in the enterprise market contributed to growthJPY 356 million（YoY

JPY +19 million／+1.7％）

Increased mainly due to YoY growth in sales, and lower costs including
the completion of initial investment costs connected to thecommencement of overseas business centered on the US subsidiary

JPY 360 million（YoY

JPY +43 million／+3.8％ ）Due to the increase in operating income, ordinary income also increased

JPY 258 million（YoY

JPY +83 million／ +12.1％）

The increase was due to the relatively strong operating performance inJapan and the reduction in taxes in conjunction with the completion ofup-front investments overseas
5Copyright © 2018 Digital Arts Inc.

FY03/18 Third Quarter Summary
Consolidated Results(Unit: JPY million)
FY03/17 ThirdQuarter

FY03/18 ThirdQuarter

YoY

FY03/18
Forecast

Net Sales

3,518

3,551

+0.9%

5,600

Gross Profits

2,776

2,777

+0.0%

4,450

Selling, General and
Administration
Expense

1,631

1,612

▲1.2%

2,450

Operating
Income

1,145

1,164

+1.7%

2,000

Ordinary Income

1,134

1,177

+3.8%

2,000

Net Income
attributable to ownersof parent693

777+12.1%

1,240

14.9%

14.3%

ROE

6――Copyright © 2018 Digital Arts Inc.

FY03/18 Q3 Summary
Non-Consolidated Results(Unit: JPY million)
FY03/17 Third
Quarter

FY03/18 Third
Quarter

YoY

FY03/18
ForecastNet Sales

3,575

3,523

▲1.4%

5,550

Gross Profits

2,765

2,730

▲1.3%

4,450

Selling, General and
Administration
Expense

1,451

1,426

▲1.7%

2,100

Operating
Income

1,313

1,303

▲0.8%

2,350

Ordinary Income

1,302

1,315

+1.0%

2,350

Net Income

880947

+7.6%

1,621

ROE

17.0%

15.4%

7――

Copyright © 2018 Digital Arts Inc.

Consolidated Net Sales Trend

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

3,551

3,518（128%）（101%）

FY03/17 Q3

FY03/18 Q3

2,747（118%）

2,3252,124
1,888
1,617
1,490
1,325（112%）

FY03/09 Q3

FY03/10 Q3（117%）

1,975（109%）（108%）（105%）（109%）

FY03/11 Q3

FY03/12 Q3

FY03/13 Q3

FY03/14 Q3

FY03/15 Q3

FY03/16 Q3※ Percentages indicate YoY net sales

8Copyright © 2018 Digital Arts Inc.

Consolidated Net Sales Trend (by Quarter)

Despite the drop-off in special demand to local governments,
this was offset by the enterprise market, and sales were on
1,540(Unit: JPY million)
1,503
par with year-earlier period（123%）（133%）

1,309

1,253（116%）

1,131

1,077

1,098（121%）（87%）

1,083（126%）（135%）（119%）

937（99%）916（113%）

811

803
715

673

1,158（114%）（113%）（119%）（111%）（103%）

1Q

2Q

3Q

4Q

FY 03/15

1Q

2Q

3Q

4Q

1Q

FY 03/16

2Q

3Q

FY 03/17

4Q

1Q

2Q

3Q

4Q

FY 03/18
Current FY※ Percentages indicate YoY net sales

9Copyright © 2018 Digital Arts Inc.

COS and SG&A The completion of initial investment costs connected to thecommencement of overseas business contributed to the reduction
in COS and SG&A（Unit：JPY million）

FY03/17Q2

FY03/18
Q2

YoY Growth741

774+32Labor

321

332+10Depreciation

214232+18

Transfer to other accounts
misc production cost

205

208+3

1,631

1,612

▲19

Personnel Expenses

856795▲60

Publicity

236227▲9Cost of Sales

Selling, General and
Administrative Expenses

Others

589

538
10+50

Key Factors

Personnel Expenses(Japan) -43M(Overseas) -16M

Increase in rent foroffices in Japan andfees for externaladvisors
Copyright © 2018 Digital Arts Inc.Cost of Sales (by Quarter)

The favorable results of the consulting subsidiary led to anincrease in consulting personnel and related costs(Unit: JPY million)
Labor

Depreciation

306

Other Accounts & Misc.

283（125%）

264（123%）

228（113%）

238（105%）（93%）

224（102%）

72

211

227
（96%）

222
（99%）

（93%）

52

59

48

67

77

80

93

93

96

101

1Q

2Q

3Q

4Q

FY 03/15

72

244（100%）（110%）（114%）

71

65
68

87

90

1Q

2Q

3Q

235

79

（97%） （92%）

66

72

72

62

78
69

67

86

232

94
78

70

（113%）

265

64

109
85

240

65
54

82

256

109

103

112

106

4Q

1Q

2Q

3Q

FY 03/16

FY 03/17

121

4Q

6869

98

102

1Q

2Q

131

3Q

4Q

FY 03/18
Current FY※ Percentages indicate YoY net sales

11Copyright © 2018 Digital Arts Inc.

Selling, General and Administrative Expenses (by Quarter)

Revised the organizational structure, and effectively utilized
resources in accordance with the medium- to long- term
personnel strategy(Unit: JPY million)
Personnel Expense

Publicity

586

OthersOverseas（148%）

510（125%）408（95%）58396（108%）

161

130

37

27

68

180

53（103%）

197

205

212

219

208

221

1Q

2Q

3Q

4Q

1Q

2Q3Q（107%）

（92%）

69182
163

201

83594640243

229

224

1Q

2Q

3Q

895139189

533

5656

34509

67

166

148

273

FY 03/15

88154
172

32498

176

151

149（99%）（114%）

49164

80
61

71

92

569

（102%）

72（111%）（106%）

158

482（113%）

596

556（123%） （133%）

73

394
363

488

576

4Q

FY 03/16

241257

243

1Q

2Q

3Q

FY 03/17

285

4Q

4Q

FY 03/18
Current FY※ Percentages indicate YoY net sales

12

Copyright © 2018 Digital Arts Inc.

FY 03/18 Third Quarter Financial Results Reference Slides

BY MARKET

Copyright © 2018 Digital Arts Inc.

Summary: Net Sales by Market
 Despite the lack of large project such as those in the previous FY, managed tosustain a +0.9% growth Attained +16.7% growth in the enterprise sector, offsetting the decrease in thenumber of public sector projects and special demand from local governments
 Continued to attain solid sales in the consumer market, despite the large
decrease in the PC shipments in Japan market
Consolidated
Net Sales

JPY 3,551 million（YoYEnterprise

JPY 2,031 million（YoYPublicJPY 1,247 million

Consumer

JPY +32 million／JPY +291 million／+16.7％）（YoY

JPY 271 million（YoY14+0.9％）

JPY -275 million／-18.1％）

JPY +17 million／ +6.9％）

Copyright © 2018 Digital Arts Inc.

Sales Trend by Market

Enterprise sales drove overall earnings(Unit: JPY million)

3,551

3,518（101%）（128%）

Enterprise

PublicConsumer

271

254

2,747
（118%）

2,325
1,888
1,490
1,325（117%）（109%）

206（105%）（109%）（108%）

265

266

223

215
562

640

711

FY 03/09 Q3

FY 03/10 Q3

194758

248

1,247
1,523

1,014
826（112%）

190
494

1,617

1,975

2,124750769585

2,031837923982

FY 03/11 Q3

FY 03/12 Q3

FY 03/13 Q3

1,108

FY 03/14 Q3

1,233

FY 03/15 Q3

1,483

FY 03/16 Q3

1,740

FY 03/17 Q3

FY 03/18 Q3※ Percentages indicate YoY net sales

15Copyright © 2018 Digital Arts Inc.

Sales Trend by Market

Growth in enterprise sector led to sales being on parwith same period of prior year
1,540

1,503（123%）（133%）

Enterprise

Public105

84

Consumer

1,309

1,253
1,077

9067385402715313（119%）8979960280

1,083（99%）

9292497894244277886（126%）（114%）

324

29689259

216

444409

2Q

3Q

457

4Q

FY 03/15

833756

665

1Q

403

（113%）

498

256

207

380916811

803（111%）（103%）（135%）

80

97（113%）

1,158

1,098

93（121%）（119%）

937（87%）（116%）

1,131(Unit: million JPY)

1Q

552

2Q

530

473

3Q

4Q

1Q

FY 03/16

619

590

2Q

3Q

FY 03/17

640

4Q

1Q

726

2Q

665

3Q

4Q

FY 03/18
Current FY※ Percentages indicate YoY net sales

16Copyright © 2018 Digital Arts Inc.

FY 03/18 Third Quarter Financial Results Reference SlidesENTERPRISE SECTOR

Copyright © 2018 Digital Arts Inc.

Enterprise Sector
 Robust sales in mainstay i-FILTER, m-FILTER series
 Secured small-start and test deployment projects for FinalCode Solid progress in mainly current customers upgrading to i-FILTER
Ver.10 and m-FILTER Ver.５SeriesSeries

YoY

110.1 ％

YoY

116.0 ％

YoY

107.5 ％
18Copyright © 2018 Digital Arts Inc.

FY 03/18 Third Quarter Financial Results Reference Slides

PUBLIC SECTOR

Copyright © 2018 Digital Arts Inc.

Public Sector
 Despite the steady introduction of mainstay products, we wereunable to make up for the impacts from the completion ofresponding to increased security measures in municipalities during
the previous consolidated fiscal year, the consolidation of Internet
connections in prefectures, and the completion of measures tostrengthen monitoring functions, along with the fact that large
projects for government agencies were received in the previous fiscalyear

SeriesSeries

YoY

80.1 ％

YoY

76.4 ％

YoY

236.0 ％
20

Copyright © 2018 Digital Arts Inc.

FY 03/18 Third Quarter Financial Results Reference Slides

CONSUMER SECTOR

Copyright © 2018 Digital Arts Inc.

Consumer Sector Continued to expand partnerships and sales through mobile and MVNO
for i-FILTER (Consumer) for smartphones
 Amid the decline in PC shipments in Japan, and the continued
challenging business environment, sales of multi-year packages andsales to internet cafes were solid, and sales of i-FILTER® for multidevices were steady, contributing to solid sales

PC

YoY

110.2 ％

Game console/TV

YoY

79.7 ％

Mobile Device

YoY

130.7 ％

22Copyright © 2018 Digital Arts Inc.

FY 03/18 Third Quarter Financial Results Reference Slides

FY 03/18 FORECAST

Copyright © 2018 Digital Arts Inc.

FY 03/18 Forecast
Consolidated Forecast

 Japan: Anticipate continuous and stable growth with the launch of anew product in new market
 Subsidiaries: Conservative outlook for the forecast(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

4,450

9.8 %

Selling, General and
Administration Expense

2,227

2,450

10.0 %

Operating Income

1,824

2,000

9.6 %

Ordinary Income

1,811

2,000

10.4 %Net Income
Attributable to Owners of Parent

1,125

1,240

10.2 %

Dividend per Share24 JPY

28 JPY

24―Copyright © 2018 Digital Arts Inc.

FY 03/18 Forecast
Non-Consolidated Forecast

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

FY 03/17
Actual

FY 03/18Forecast

Growth Rate

Net Sales

5,104

5,550

8.7 %

Gross Profit

4,028

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 © 2018 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 © 2018 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 are
based 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 tofulfill any forward-looking statements. Updated information, if
applicable, 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 registered27

Copyright © 2018 Digital Arts Inc.

‐Contributing to a more convenient,
comfortable and safe internet ‐Copyright © 2015 Digital Arts Inc.