Consolidated Financial Resultsof the Fiscal Year Ended March 31, 2024
(From April 1, 2023 to March 31, 2024)

Financial Results Briefing Materials
May 8, 2024

Digital Arts Inc.
(Securities Code: 2326)

Copyright © 2015 Digital Arts Inc.

Company Profile
Company
nameDigital Arts Inc.

Date ofestablishment

June 1995

Service

Planning, development and sale of internet
security software

Head office

14F Otemachi First Square West Tower,
1-5-1 Otemachi, Chiyoda-ku, Tokyo

Net sales

11,512 million yen (fiscal year ended March 2024)

Operating profit

4,427 million yen (fiscal year ended March 2024)

Stock market

Tokyo Stock Exchange Prime Market

Number of
employees

Consolidated: 292 (as of March 31, 2024)

Sales office｜ Listed on September 2002

For internet convenience,
Safety and security

Domestic
manufacturers

12.62

millionactiveusers*

High
profitability(Securities Code: 2326)

Hokkaido Sales Office/ Tohoku Sales Office /Chubu Sales Office/ Kansai Sales Office/
Chushikoku Sales Office/ Kyushu Sales Office* The number of users of i-FILTER Ver. 10, m-FILTER Ver. 5, i-FILTER@Cloud and m-FILTER@Cloud as of March 2024
(internal research)

2

Copyright © Digital Arts Inc.

Product LineupWeb

E-mailEnabling users to securely connect
to websites without security
concerns

Enabling users to securely send andreceive email without security
concerns

Endpoint Web
security

file
File encryption solution
Automatically protecting files fromthe moment of creation and allowing
users to delete them after transfer

Measures to provide pop-ups foremail misdelivery

File transfer solution
Supporting secure filetransfers without leaking
critical information

IDaaS

Communication

Equipped with multi-factor authentication
to ensure the secure management of IDs
for cloud services

Providing workplaces and places foreducation with secure and comfortablecommunication spaces

Secure proxyappliance
Chat and
onlineconferencing

Malicious websitefiltering software
for home use[For email software] [For Microsoft365 software]

3

Video
conferencing
tool

Copyright © Digital Arts Inc.

Key Points
Net sales grew as planned in the fiscal year under review, reflecting increasing
demand for security measures. Operating profit increased slightly year on year withthe release of new products and increased expenses caused by expansion of DAC's
businesses.

01

In the enterprise section market, both software and consulting net sales rosesignificantly, reflecting increasing demand for security measures.

02

In the public sector market, net sales decreased slightly, with sales for Security
Improvements for Local Governments projects and those for GIGA School Concept
projects more than offset by the absence of sales from special demand-related projects
and large projects recorded in the previous fiscal year.

03

The year-on-year increase in operating profit was slight, reflecting an increase in
inspection expenses at DA due to the release of the unprecedentedly large number of
new products and a rise in labor costs linked to DAC's business expansion, among
other factors.

4

Copyright © Digital Arts Inc.

Contents
01

Consolidated Results Highlights

02

Non-consolidated Results Highlights

03

Net Sales by Market

04

Results of Measures for the Fiscal Year Ended March 202405

Policy for Initiatives for the Fiscal Year Ending March 202506

Full-Year financial Forecast for the Fiscal Year Ending March 2025

07

Return to Shareholders for the Fiscal Year Ending March 31, 2025
5

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results
for the Fiscal Year Ended March 31, 202401

Consolidated Results Highlights

6

Copyright © Digital Arts Inc.

Consolidated Results Highlights

Contracts

10,838 million yen(up +648 million yen or +6.4% YoY)

Net sales

11,512 million yen•

In the enterprise section market, growth accelerated due to the winning of
projects aimed to facilitate the transition to cloud security and those fromclients switching from competitors’ products, and the achievement of strong
option sales, as well as a significant increase in the number of new customers
gained at DAC.

•In the public sector market, negative growth was recorded due to thereactionary slowdown of special demand-related projects such as Security
Improvements for Local Governments projects and the first phase of GIGA
School Concept projects, as well as the impact of the closing of computerclasses.

•

Net sales grew in the enterprise sector market, reflecting sales of cloud service
products, for which orders were strong, license sales products and sales at DAC.

•In the public sector market, net sales declined slightly, with net sales for
Security Improvement for Local Governments projects and GIGA School Concept
projects more than offset by the absence of sales from special demand-related
projects and large public agency projects recorded in the previous fiscal year.

•

In terms of the cost of sales, there were greater-than-planned increases in
inspection expenses and labor costs/purchase expenses, the former due to therelease of the unprecedentedly large number of new products and the latterreflecting the expansion of DAC’s business, which led to putting downward
pressure to operating profit.

•

SG&A expenses were in line with the plan, although they rose chiefly due to anincrease in personnel expenses at DAJ and DAC.

(up +1,075 million yen or +10.3% YoY)

Operatingprofit

4,427 million yen(up +13 million yen or +0.3% YoY)

7

Copyright © Digital Arts Inc.

Consolidated Statement of Income
Net sales grew according to the plan, while expenses rose with the release of new products and increased expenses
caused by the expansion of DAC's business. On the other hand, profit attributable to owners of parent increased
significantly year on year, reflecting the recording of extraordinary income due to the transfer of shares in DAC.
(Million yen)

FY March 2023

FY March 2024

FY March 2024
Full-Year Forecast

Change YoY

Contracts

10,19010,838+6.4%-

Net sales

10,436

11,512+10.3%

11,500

Cost of sales

3,666

4,583

+25.0%

3,850

Gross profit

6,769

6,928

+2.3%

7,650

Selling, general and administrative
expenses

2,356

2,500

+6.1%

2,500

Operating profit

4,413

4,427

+0.3%

5,150

Operating margin

42.3%

38.5%

-

44.8%

Ordinary profit

4,429

4,443

+0.3%

5,150

Profit attributable to owners ofparent

3,062

4,377

+43.0%

4,880

EBITDA

5,388

5,429

+0.8%

-

* Financial Forecast is the consolidated financial forecast announced on February 14, 2024.
* EBITDA = Operating profit + Depreciation + Tax expenses included in operating expenses

8

Copyright © Digital Arts Inc.

Trend in Consolidated Contracts
Consolidated contracts totaled 10,838 million yen, up +6.4% year on year.
Trend in Contracts
Cloud service products(Million yen）•

In contracts for cloud service products, the Group
steadily won new contracts as a result of the
inclusion of additional functions and release of
options to address demand for a shift to cloudsecurity. However, in the public sector market,
with the second phase of GIGA Concept Schoolcoming up in the next fiscal year, new orders forthe first phase declined from the level of theprevious year, leading to a decrease in overall
contracts of 1.0%.

•

In the license sales products and other category,contracts increased 10.1%, reflecting theacquisition of projects from customers who
switched from competitors' on-premises products,
upselling due to the additional offering of options
and significant growth in contracts at DAC.

License sales products/Others

10,838

10,190
33.3％

66.7％

3,394

6,795

FY Mar. 2023(+6.4%)-1.0%+10.1%

3,359

31.0％

7,479

69.0％

FY Mar. 2024

9

Copyright © Digital Arts Inc.

Trend in Consolidated Contracts
The backlog of orders excluding those for GIGA School Concept projects
increased, despite a reduction of order backlog overall.
Sales from the fiscal year after
next (GIGA)

Trend in order backlog
Sales from the fiscal year after next (GIGA)

Sales for the next fiscal year (GIGA)

Sales from the fiscal year after next

Sales for the next fiscal year

(Million yen）

6,318

5,651

2,334

-43.6％

1,317

1,774

＋4.7％

1,856

770

＋14.0％

878

1,439
End of
FY Mar. 2023

Many GIGA School Concept projects are five-year
contracts. Over time, more sales are posted. Therefore,
the amount of sales to be recorded from the fiscal year
after next dropped.

＋11.1％

Sales for the next fiscal year
(GIGA)The Group continued to win new orders with respect to thefirst phase of GIGA School Concept projects. Sales to berecorded for the next fiscal year rose.
The order backlog is expected to rally sharply again,reflecting an increase in projects related to the second
phase of the GIGA School Concept starting from FY March
2025.
Sales from the fiscal year
after next

1,599

Sales for the next fiscal
year

The order backlog is steadily increasing, reflecting thegradually growing percentage of enterprise contracts thatare for cloud service products. Many of these are one-year
contracts.

End of
FY Mar. 2024

10

Copyright © Digital Arts Inc.

Change in Net Sales
Consolidated net sales grew 10.3% year on year, to 11,512 million yen.
Change in Net Sales(Million yen)

Cloud service products

License sales products/Others•

Net sales of cloud service products
increased 10.0% year on year, reflecting
steady growth in sales in the enterprise
sector market, as well as sales recorded forthe first phase of the GIGA School Concept
projects for which orders were received up
to the previous fiscal year and in the fiscal
year ended March 2024.

•

In the license sales products and othercategory, net sales increased 10.5%,
reflecting significant growth at DAC,
coupled with growth in sales in theenterprise sector market.

11,512(+10.3%)

10,436
35.8％

64.2％

3,731

6,704

FY Mar. 2023

+10.0%+10.5%

4,103

7,408

35.6％

64.4％

FY Mar. 2024

11

Copyright © Digital Arts Inc.

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

Contracts

Equivalent toEquivalent tolicense fee
maintenance fee

License sales
products

Orderbacklog

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

・・・

Amount equivalent to maintenance fee
is prorated over contract period "n"

Net
sales

Y+1
Y months(contract months) months

Y+2
months・・・

Y+nmonthsAmount equivalent to maintenancefee is recorded on a pro rata basis
over the contract period.
Y+n+1
monthsContract period (n months)

Contracts

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

Orderbacklog

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

・・・

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

Net sales

Y+1
Y months(contract months) months

Y+2
months

12

・・・

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

between the contract amount and net sales in license sales

Cloud service products

products and cloud service products with a one-year contract at
the amount of 600 million yen.

600

300

Trend inContracts

300

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

600
Year X

Year
Jan. X
Jan.

600
Year XYear XYear X+1…
Year
Feb. X X年11ヶ月
Dec.
Jan.
X+5年

Feb.

First year

Year X+1
…
Feb.
X+6年

Year X+1

Dec.
X+9年

Second year600

are half of those of the first year. For cloud service products, contracts inYear X+2

first year. An increase in new contracts for cloud service products will

Jan.
X+10年
Third year

the second and subsequent years are the same amounts as those in the
result in a higher growth rate in coming fiscal years than for license
sales products.

Net sales
Change in
Net Sales

For license sales products, a high percentage of net sales is recorded at

545

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
50
Year X+2
Jan.

13

the time of the contract. For cloud service products, net sales are posted
in monthly installments. For license sales products, net sales decrease
because of a decline in contracts at the time of renewal. For cloudservice 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, suchas five-year ones. They have longer periods until renewal.
License sales products
Cloud service products

For example, the diagrams on the left show the relationships
between the contract amount and net sales in license sales

600

600

600

600

600

600

products and cloud service products with a five-year contract of
600 million yen.

Trend inContracts

Year XX
Year

Change in
Net Sales

14
Year
Year
…
Year
X+4年
X+1
X+4

X+1

Year
X+5年
X+5

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

Year
Year
Year
…
X+6年
X+9年
X+6
X+9 X+10年
X+10

Net sales
552

552
12

Contracts

12

For license sales products, a high percentage of net sales is recorded552
12

at the time of the contract. For cloud service products, sales arerecorded in monthly installments for a period of five years. This

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

means a wider gap between the contract amount and net sales(order backlog).

14

Copyright © Digital Arts Inc.

Quarterly Trend in Net sales, Operating profit(Million yen)

1Q

2Q

3Q

11,512

4Q
10,436

3,190

9,051
2,778
2,364
6,825
5,639

4Q
3Q

2,074

1,649

1,376
1,514

4,413

4,126

679

1,687

1,249

683
413

1,413

Net sales

Operating profit

Net sales

FY March 2020

2,977

2,632

1,101

825

1,919

1,348

FY March 2021

Net sales

Operating profit

FY March 2022

15

1,185

4,427
3,022

980

2,386

1,238

Net sales

Operating profit

FY March 2023

1,304
933

2,541

1,009

731

485
Operating profit

2,698

945

1,004
663

551

1Q

2,134

1,500

4Q

2,326

2Q

2,758
2,573

1,315
872

Net sales

Operating profit

FY March 2024

Copyright © Digital Arts Inc.

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

FY March 2023

FY March 2024

Change YoY

3,666

4,583

+917

Labor

1,634

2,038

+403

Depreciation

838

839

+0

Communication
expenses

1,162

1,304

+141

Cloud server expenses rose as a result of an increase in licenses forcloud service products and foreign exchange fluctuations (+141M)

Other

895

1,384

+488

Increase due to the development of new DA products (＋154M)
Increase due to the expansion of DAC's business (+236M)

Transfer to otheraccounts

-865

-982

-117

2,356

2,500

+144

Personnel expenses

1,193

1,275

+81

Increase in DA’s personnel expenses (+57M)
Increase in DAC’s personnel expenses (+24M)

Advertising expenses

297

313

+16

Addition of sales promotions through events and seminars, etc.

Other

865

911

+46

Increase in the size-based business tax due to the transfer of shares in
DAC (+24M)
Increase in expenses for business trips for sales (+26M)

Cost of sales

Selling, general andadministrative expenses

16

Main Factors for Change

Increase due to the enhancement of DA's development workforce(+79M)
It rose with the strengthening of DAC consultants (+323M)

Copyright © Digital Arts Inc.

Quarterly Trend in Consolidated Cost of Sales
Transfer to other accounts(Million yen)

Cost of sales

1,527

Other

1,450

Communication expenses
Depreciation

1,204

Labor
1,102
946
839
134
Communication
expenses
Depreciation

153

225

158

321

169

989

173 226

170 222

213

223

244

214

217

164 220

208
204

332
1Q

427

2Q

302

229

351

231

332

270

312

308

294

212

202 901

206

208
1,014

983

200

250

356

345
324

400

1,019

1,178

211 1,108

214 1,277

766

330

349

354

3Q

4Q

1Q

FY March 2022

247 201

239 221

1,340

280

221
736

701

624

613
Labor

962

921

244 220

1,235

1,248

430

373

2Q

3Q

FY March 2023

17

476

4Q

452

1Q

558

470

2Q

3Q

556

4Q

FY March 2024
Copyright © Digital Arts Inc.

Quarterly Trend in Consolidated
Selling, General and Administrative Expenses
Personnel expenses
Advertising expenses
other(Million yen)

660
574

191

609
169

487

59
159
51

558

526
229
193

59
70

609

77

214

204

78

74

648

646
597

578

215

238
232

216

67

80

1Q

2Q

277

263

3Q

4Q

FY March 2022

302

280

1Q

2Q

316

293

3Q

4Q

FY March 2023

18

329

1Q

224

66
86

79

432
323

608

285

2Q

363

3Q

297

4Q

FY March 2024
Copyright © Digital Arts Inc.

Consolidated Balance Sheet
Cash and deposits rose due to the transfer of shares in DAC. The equity
ratio, ROE and ROA also rose.
(Million yen)
As of end of
FY March 2023

As of end of
FY March 2024

Change fromend of FY March
2023

Main Factors for Change

Current assets

18,92520,183+6.6%

Cash and deposits (+1,320M)(Cash and deposits)

17,01818,339+7.8%

Cash and deposits (+1,320M)

Non-current assets

2,223

2,334

+5.0%

Total assets

21,14922,518+6.5%

Current liabilities

6,924

6,467

-6.6%

(Advanced received)

5,187

4,418

-14.8%

Non-current liabilities

50

52

+2.7%

Equity capital

14,141

15,986+13.1%Net assets

14,173

15,998+12.9%

Equity ratio

66.9%

71.0%

-

ROE

23.3%

29.1%

-

ROA

15.1%

20.1%

-

19

Decreased linked to the progress in the recording ofsales.

Treasury share buy-back (-1,422M), Dividends paid(-1,116M), Profit (+ 4,377M)

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results
for the Fiscal Year Ended March 31, 2024

02

Non-consolidated Results Highlights

20

Copyright © Digital Arts Inc.

Summary of Non-consolidated Results
With an increase in the cost of sales not offset by the weaker-than-planned sales growth, both
operating profit and ordinary profit decreased. On the other hand, profit increased significantly year on
year, reflecting the recording of extraordinary income due to the transfer of shares in DAC.
(Million yen)

FY March 2023

FY March 2024

FY March 2024
Full-Year Forecast

Change YoY

Contracts

8,738

8,630

-1.2%

-

Net sales

8,984

9,304

+3.6%

10,000

Cost of sales

2,425

2,664

+9.9%

2,650

Gross profit

6,559

6,639

+1.2%

7,350

Selling, general andadministrative expenses

2,163

2,309

+6.8%

2,350

Operating profit

4,395

4,330

-1.5%

5,000

Operating margin

48.9%

46.5%

-

50.0%

Ordinary profit

4,407

4,348

-1.3%

5,000

Profit

3,048

4,536

+48.8%

4,930* Financial Forecast is the non-consolidated financial forecast announced on February 14, 2024.

21

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results
for the Fiscal Year Ended March 31, 2024

03

Net Sales by Market

22

Copyright © Digital Arts Inc.

Consolidated Contract Amount by Market
The contract amount expanded in the enterprise sector market while
it contracted in the public sector market.
Trend in Consolidated Contract
Amount by Market

10,838
10,190433

4,304(+6.4%)

-3.4%

418

3,760

In the enterprise sector market, net sales increased
by 1,207 million yen (+22.1%), attributable towinning projects aimed at facilitating the transition to
cloud security through the launch of new products,
the inclusion of new functions and the release of
options. Other factors included projects for clientsswitching from competitors’ on-premises products, aswell as the strong results of new customer acquisition
at DAC.

•In the public sector market, contracts decreased by
543 million yen (-12.6%) due to a decline in the total
recorded orders for Security Improvements for Local
Governments projects and the first phase of GIGA
School Concept projects, as well as the closing ofsome computer classes installed in schools.

(Million yen)Consumer
Public-12.6%

6,659

5,452
+22.1%FY MAR. 2023•

EnterpriseFY MAR. 2024

23

Copyright © Digital Arts Inc.

Consolidated Net sales by Market
The net sales expanded in the enterprise sector market while it slightly
contracted in the public sector market.
Trend in Consolidated Net Salesby Market

11,512
10,436
433

4,686

5,316

FY MAR. 2023(+10.3%)

-3.4%

-1.0%

+21.4%

418

4,637

6,456

FY MAR. 2024•

In the enterprise sector market, similar to thetrend in contracts, net sales increased by 1,139
million yen (+21.4%) due to the winning of
projects aimed to facilitate the transition to cloudsecurity through the launch of new products, theinclusion of new functions and the release of
options. Other factors included projects for clientsswitching from competitors’ on-premises products,
as well as the strong results of new customer
acquisition at DAC.

•In the public sector market, net sales decreasedslightly 49 million yen (-1.0%), reflecting negative
growth in contracts, despite the posting of sales
for the first phase of GIGA School Concept projects,
for which orders were received in or before theprevious fiscal year and in FY March 2024.

(Million yen)Consumer

PublicEnterprise

24

Copyright © Digital Arts Inc.

Trend in Consolidated Net Sales by Market
Net sales for the full year reached arecord high due to growth in theenterprise section market.

(Million yen)

11,512
10,436
9,051

3,402
362
1,140

4,000
342

5,058

5,116

359

375

2,125

1,732

516
2,191

445

432

2,240

2,573

FY Mar. 2015

FY Mar. 2016

FY Mar. 2017

Public6,456Enterprise

4,046

2,408

1,911

1,418

1,899

4,637
4,686

6,825
5,641

Consumer

433

444

5,841

418

3,009

3,133

3,284

FY Mar. 2018

FY Mar. 2019

FY Mar. 2020

25

3,984

FY Mar. 2021

4,559

FY Mar. 2022

5,316

FY Mar. 2023

FY Mar. 2024

Copyright © Digital Arts Inc.

Quarterly Trend in Consolidated Net Sales by Market

Net sales for the four quarter(Million yen)were a record high.

3,190
3,022

2,632

2,698

115

2,074
1,687
1,413
115

104

1,649
103

109

2,134
1,919
113

2,386

116

105

118

785

1,020

2,541

105

Consumer

1,215

Public1,869Enterprise

2,758
101

106
1,320

1,269

1,313

105

103

98
1,017

1,084

1,203
1,016

1,195

974

738
597

2,364

2,573

2,778

106

574

451

847

1Q

985

971

2Q

3Q

FY March 2021

1,179

4Q

1,067

1Q

1,204

2Q

1,060

3Q

1,227

1,262

1,310

1,274

4Q

1Q

2Q

3Q

FY March 2022

FY March 2023

26

1,469

1,418

4Q

1Q

1,596

1,572

2Q

3Q

4Q

FY March 2024
Copyright © Digital Arts Inc.

03

Net Sales by Market

Enterprise Sector

27

Copyright © Digital Arts Inc.

Net Sales in Enterprise Sector Market by Product
Growth in net sales accelerated with the winning of projects aimed at facilitating the transition to cloud security
and those from clients switching from competitors’ products. Additional factors were the achievement of strong
option sales, as well as a significant increase in the number of new customers gained at DAC.
•The i-FILTER series grew sharply, reflecting successful efforts tocapture demand for a shift to cloud security and demand fromclients switching from competitors' products, as well as strong salesof the Anti-Virus & Sandbox option. (+306 million yen/+11.6%)•

The m-FILTER series achieved growth, reflecting successful efforts
to tap into demand for countermeasures applicable to address
malware when receiving emails, and demand for countermeasures,
namely PPAP-based transmission and erroneous transmission
prevention, applicable when sending emails, as well as strong salesof options featuring the collaboration of the Anti-Virus & Sandbox
option and f-FILTER, a new product released in FY March 2024.
(+80 million yen/+8.4%)

m-FILTER
series•The Group won orders for the f-FILTER, which is a new product,
totaling approximately 12 million yen, applicable to new projects inthe enterprise sector market by capturing demand for PPAP inparticular.

i-FILTER
series•

DAC made good progress acquiring new clients and achieved
substantial sales growth (up 754 million yen or 52.4%), reflecting
growing demand for the promotion of DX and implementation for
security measures.

Trend in Net Sales in Enterprise
Sector Market by Product

6,456(Million yen)(+21.4%)

5,316
1,441
271
957

2,645

FY Mar. 2023

＋52.4％-0.7％+8.4％＋11.6％

2,196
269
1,037

2,952

DAC
FinalCode /other products

FY Mar. 2024

28

Copyright © Digital Arts Inc.

03

Net Sales by Market

Public Sector

29

Copyright © Digital Arts Inc.

Net Sales of Public Sector Market by Product
The Group continued to win new Security Improvements for Local Governments projects and the first phase of
GIGA School Concept projects. However, since the spread of GIGA terminals led to the closing of computerclasses in some schools, the renewal of existing contracts slowed.

Trend in Net Sales of Public Sector
Market by Product(Million yen)

4,686(-1.0%)

66

FinalCode

-1.1％

850

m-FILTER
series

-0.3％

3,718

81

859

FY Mar. 2023

The Group continued to win new Security Improvements for
Local Governments projects and the first phase of GIGA
School Concept projects. However, since the spread of GIGA
terminals led to the closing of computer classes※ in someschools and the i-FILTER used in the classes was cancelled,
sales of the i-FILTER series recorded slightly negative growth.
（-12 million yen/-0.3%）•

Procurement related to Security Improvement for Local
Governments projects continued in the fiscal year underreview. However, since it was less active than the level in theprevious fiscal year, sales of the m-FILTER series recordedslightly negative growth.
(-9 million yen/-1.1%)•

The Group won orders totaling 9 million yen for the f-FILTER,
which is a new product, applicable to new projects in the
public sector market, by tapping into the demand for network
DLP.

4,637

-18.3％

3,731•

i-FILTER
series※The idea that if each student had a GIGA terminal, computer classes would beclosed because students would not have to travel to the computer classroom to
use the computer for learning.

FY Mar. 2024

30

Copyright © Digital Arts Inc.

GIGA School Concept
Introduction of filtering under the GIGA School Concept*1
Introduction of pay filtering by Boards of Education

Not yetintroduced, etc.

20％

Charged filtering
already
introduced

Share of charged filtering introduced

Competitors
47％

Share ofi-FILTER

53%

80%

The percentage of boards of education thathave adopted pay filtering reached 80%.

Of the boards of education that have introduced
charged filtering, 53% have implemented i-FILTER.

*1：According to our survey of 1,741boards of education (Mar. 2024)

31

Copyright © Digital Arts Inc.

03

Net Sales by Market

Consumer Sector

32

Copyright © Digital Arts Inc.

Net Sales of Consumer Sector Market by ProductIn the consumer sector market, net sales did not increase as expected due to the sense of plateauing withrespect to demand for filtering measures. The Group will facilitate the strengthening of products andexpand target customers, aiming to tap into new demand.

Trend in Net Sales of Consumer
Sector Market by Product

418

433

211

221
FY Mar. 2023•

In products for computers, net sales
remained flat despite the promotions ofmultiple-year package products andinitiatives for products for Internet cafes.
(+0 million yen/+0.2%)•

With regard to products for mobile phones
and other terminals, revenue from contractdevelopment of products for mobile
terminals for carriers increased, while newcontracts declined, leading to a decrease in
net sales.
(-14 million yen/-6.7%)•

Regarding products for personal computers
and mobile phones, given the sense of aplateauing of demand for filtering measuresfor children, the Group will strengthen its
products, while also securing new revenue
sources through the expansion of target
customers.

(Million yen)(-3.4%)

＋0.2％

-6.7％

211

206

For computers

For mobile
terminals, otherFY Mar. 2024

33

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results
for the Fiscal Year Ended March 31, 2024

04

Results of Measures for
the Fiscal Year Ended March 2024

34

Copyright © Digital Arts Inc.

Response to Needs for Comprehensive Security
Areas of Focus
Focus on networks, authentication and terminals/data to respond to needs
for comprehensive security in the ICT environment: Areas of focus

Solutions

ICT environment

Internal processapplications

Sending andreceivingemail

SD-WANInternet accessNetwork(Next-generation
SWG)

Network

Network optimization

Log

Cloud
applications
SIEM

Authentication
SystemAuthenti
cationLog collection
and centralized
management

Internal devices anddata

External devices anddata

Terminals and data

Operation
monitoring
Monitoring
Detection andresponse
Analysis
ReportConsumer devices

35

ID-aware proxy (non-VPN)

ZTNA
CASB

Visualization and control of cloudservices

SWG
SEG

Secure email gateway

Cloud FW

Cloud proxy
Network control

IDaaSManagement of IDs on the cloudFiletransfer

Data and file transfer

DLP

Prevention of loss or leakage ofconfidential data

IRM

Data encryption

EDR

End-point monitoring and threat
detection
Copyright © Digital Arts Inc.

Product Roadmap in Fiscal Year Ended March 31, 2024
Planned functional upgrades to address demand for comprehensive security andnew product releases were completed. Sales activities and continuous functional
upgrades are underway after the releases.
Mar.

Respond toneeds forcomprehensive
security

Cmmunication
BusinessWeb

CASB function of
i-FILTER@CloudWeb

i-FILTER AI chat filter

Mail

m-FILTER MailAdviser OWA

File

f-FILTER

AuthenticationStartIn

Chat

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct. andlater

Released in
Apr. 3
Released inAug. 16
Released inJul. 4
Released in
Nov. 13
Released in
Sep. 7
Released inJun. 21

Desk

36

Copyright © Digital Arts Inc.

Response to Needs for Comprehensive Security
Results of Release
Released solutions to address risks related to networks, authentication andterminals/data.
: Results of release
Solutions

ICT environment

Internal processapplications

Sending andreceivingemail

SD-WANInternet accessNetwork(Next-generation
SWG)

Network

Network optimization

Log

Cloud
applications
SIEM

Authentication
SystemAuthenti
cationLog collection andcentralized
management

Internal devices anddata

External devices anddata

Terminals and data

Operation
monitoring
Monitoring
Detection andresponse
Analysis
ReportConsumer devices

37

ZTNA
CASB
SWG
SEG
Cloud FW

ID-aware proxy (non-VPN)

CASB
function

AI chatfilterNetwork control

IDaaS

File
transfer
DLP
IRM
EDR

End-point monitoring and threat
detection
Copyright © Digital Arts Inc.

New Products and New Function Releases【CASB】【AI chat filter】
Add the CASB function, to be one of the main functions in the next-generation SWG plan, anda new function for visualizing/controlling the status of use of generative AI increasingly indemand, to i-FILTER as standard features.

Network
SecurityNewfeatures

POINT

CASB function

 Inquiries for projects with SASE
requirements increased following therelease of the CASB function.

AI chat filter

Control The AI chat filter is a new function
designed for companies andorganizations willing to proactively use
generative AI, which is a trendy tool.

Blocked by policy

Protection from threats

Restrictions on Shadow IT Usage

Data security

Control of confidential data

Visibility

Visualization of usage status and information leakage risk••

Visualize and control the status of useof cloud services
Enabling flexible and robust
countermeasures against information
leakage

Support for confirmation of users who madea post, their group and time of
posting/support for highlighting of detectedwords/reasons for detection

Support for
confirmation oftargetgenerative AI

Support for confirmationof detected words andword category

Supporting flexible management/control ofaccess to generative AI by service and byaccount38

 Aim at creating further projects andincreasing user satisfaction, mainly
targeting small and medium enterprises
who cannot afford the high-priced
products of foreign affiliates due to theirlimited budgets since both the functions
are provided as standard features.

Copyright © Digital Arts Inc.

New Products and New Function Releases【Mail Adviser OWA】
Network
Security••

A product to provide pop-ups for email misdelivery supporting the Outlook Web Access (OWA) environment
Equipped with the original function to solve PPAP issues, meeting a wide range of needs for security
measures in email delivery

Strengthening the brandof products aimed toprevent email misdelivery

POINT

Recipients tab shows a list of all email addresses in
To, Cc and Bcc fields

Indicating the number of problems in
the Recipients, Text and Attached Filetabs.

Displaying the risks of erroneous
sending at once

The categories displayed at the
beginning of each domain are"external," "mobile," and "internal“.

Click on the destination address itself
to confirm* In addition to the above categories,
External, "Outside the unit" and"Within the unit" can be added.
The receiver can instantly be identified.
Automatically obtain information on eachuser's organization and convert thedomain into the organization information
so that erroneous addresses can be
spotted right away.

Pointing out what needs to be
confirmed when a cursor is pointed at
the address
The mail cannot be sent if any item isleft unconfirmed
The mail cannot be sent unless all thetabs, "Recipients," "Text" and "Attached
Files," are confirmed.

•

Measures to provide pop-ups for email misdelivery supporting the Outlook Web Access (OWA)•

Robust measures to prevent email misdelivery and solve PPAP issues

39 More users choose the Microsoft 365's OWA
environment as an environment to send andreceive emails since it works in any terminal
 Providing the original function to solve PPAP
issues in addition to the function to prevent
email misdelivery and allowing easy
introduction
 Unify the name of m-FILTER MailAdviser
OWA with the brand m-FILTER MailAdviser(for email software) to accelerate project
creation.

Copyright © Digital Arts Inc.

New Products and New Function Releases 【StartIn】
Authenticat
ion security

The Group has released StartIn, a new product featuring various types of original
multifactor authentication methods, in addition to ID management, log management
and ID provisioning, to offer secure authentication when SaaS is used.

Strengthening internet access points by offering various types of multi-factor
authentication functions
Original authentication method

Standard authentication method

One-time
password/pushauthentication

Smartphone-based
biometric
authentication(faces/fingerprints)

Authentication
with clients'
certificates*

Authentication withpositional
information

IP restriction

 ユーザーや市場の声を踏まえ、今後も製品強化も継続実施
40

Third-party
authentication

Regularauthentication

Copyright © Digital Arts Inc.

New Products and New Function Releases 【StartIn】
New
functionsreleasedin March
2024

It is possible to reduce the risk of unauthorized password-aided use of credentials by third parties.
Verify identity by using
biometric information suchas fingertips and faces, aswell as PIN.

Log into StartIn basedon the result of identity
verification

Perform a log-in to
multiple services at one
time by applying SSO

FIFO
authenticator
Passwordlesslog-in*It is possible to set passwordless-based authentication and depending the operation thereof, change the setting to use
such authentication as the second factor authentication after the ID/Password process.

41

Copyright © Digital Arts Inc.

New Products and New Function Releases 【StartIn 】
New
functionsreleasedin March2024

By installing certificates in terminals in advance, the product checks whether terminals to which Startln has
accessed hold certificates.
Distribution ofcertificates

The product issues certificatesthrough the administration
screen of StartIn.

Revocation ofcertificates

It is possible to choose
whether certificates should be
notified to users by email or
distributed by administrators
to each terminal.

The product allows accessfrom terminals that holdcertificates.

*The specifications are those planned as of March 2024 and may subject to change for implementation.

42

Copyright © Digital Arts Inc.

New Products and New Function Releases【f-FILTER】
Data
security

The product enables only appropriate receivers to gain access to files by conducting
checks through the original file checking function. Secure file transfer service
through storages.

f-FILTER's information leak prevention scheme① Conducts inspections
by uploading attached files③ Enters the email address andgains access to files after a
one-time password is authenticated② Sharing of the URL for
download through email or
chat

SenderRecipient43

DLP (information
leak prevention)

Visualizing important information
based on originally establisheddefinitions

File judgment

Scoring whether files can be provided
externally

Workflow

Approved by superiors throughworkflow and checked by human eyes

Antivirus

Checking malware in files that aresent and received

File viewing authority
management

It is possible to specify users who
can view files.

Copyright © Digital Arts Inc.

New Products and New Function Releases【f-FILTER】
Data
security

The product offers measures to address total security demand through collaboration
with m-FILTER and i-FILTER which are the Company's mainstay solutions.

Collaboration between email DLP measures/PPAPbased countermeasures and m-FILTER

E-mail×
POINT

Identifies and detects important data and confidential informationand prevents external leaks through email

Collaboration between network DLP measures andi-FILTER

Web

Addresses information leakage risks by visualizing and controlling
confidential information that passes through networks

 The Group won a project worth 21 million yen in the fiscal year under review by capturing demand for PPAPbased countermeasures through collaboration with m-FILTER and that for network DLP measures throughcollaboration with i-FILTER.
44

Copyright © Digital Arts Inc.

Launch the communication business
Chat and Online
Conferencing System

Launch the communication business in June 2023
Addressing security risks emerging in communication

Chat and online
conferencing
Chats(for schools)

GIGA School

Enhancementof featuresVideo
conferencing
tool

POINT

 Add the usage time restriction and Google Workspace collaboration functions to GIGA School Edition
 Aim to promote cross-selling in Phase 2 of GIGA School Concept projects, targeting in particular the users of
the GIGA School version of i-FILTER
45

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results
for the Fiscal Year Ended March 31, 202405

Policy for Initiatives For the Fiscal YearEnding March 2025

46

Copyright © Digital Arts Inc.

05

Policy for Initiatives For
the Fiscal Year Ending March 2025

Product strategy and sales strategy

47

Copyright © Digital Arts Inc.

Product Strategy
In view of the rate of growth of the product market and our advantages, we will
increase solutions in promising areas and investment areas to maximize synergy
with our mainstay solutions.
High

Investment areas
28.2%

XDR
CSPM/
CWPP

Marketgrowthrate

Future promising areas

15.2%

Unified endpoint
management(UEM) tools

Promising areas
SASE

19.5%

Vulnerability
assessment(VA)

Future core areas(stable areas)






Authentication

17.8%
14.5%

IDaaS

ImprovementLow

domain
Low

26.7%
SWG
33.0%
ZTNA
8.3%
CASB
FWaaS and
22.9%
othersOur main solutions

4.4%
3.1%

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

Increase in thenumber of solutions inpromising areas andinvestment areas

20.3%

Web access security

EDR・NDR

2.2%
2.2%

Implementation of downsizing,
withdrawal and collaboration withother companies

Areas for acquisition of
stable revenue

Our advantage
48＝ Market growth rates

Web filtering
Mail Security(including file
encryption)

Stable areasHigh

Our estimates based on various kinds ofinformation
Copyright © Digital Arts Inc.

Carry out upselling and cross-selling
We will promote cross-selling and upselling for White Operation customers.

PPAP countermeasures

Anti-malware measures
Enhanced anti-infection protection to protect
against threats from the internet and from email

File transfer and file encryption

ID management
Multi-factor authenticationand single sign-on (SSO)

Threat detection

White Operationclients49

Detecting attacks fromthe internet and email toissue alerts and reports
D Alert Reporting Service

Copyright © Digital Arts Inc.

05

Policy for Initiatives For
the Fiscal Year Ending March 2025

Increase in market share in the public
sector market

50

Copyright © Digital Arts Inc.

Phase 2 of the GIGA School Concept
The implementation of Phase 2 of the GIGA School Concept
was planned for the five-year period starting in FY2024.
GIGA School Concept operated by the Ministry of Education, Culture, Sports, Science and Technology
2019

2020

2021

2022

2023

2024

Construction of school
networks at all schools

2027

2028

Phase 2 of the GIGA School Concept – NEXT GIGA

Replacementof Devices

Budget scheme

Organized replacement of
the devices for eachschool-aged over a periodof around five years

Budget461.0
billion yen

Budget (-2025) ※266.1 billion yen

Deployment of
GIGA School supporters
Development of an emergency
online learning environment

2026

Cabinet decision already made regarding the budget
for device replacement up until 2025

Phase 1 of the GIGA School Concept
Support for the provision ofdevices for school-aged children– Achievement of an environment
in which every school-aged childhas a device2025※ Only for replacement of GIGA School
Concept Devices

Ministry of Education,
Culture, Sports, Scienceand Technology

Granting expenses tocreate a foundation
Prefectural government(foundation)
Granting subsidies

City/town/village

Joint procurement
on a prefectureby-prefecturebasis

The data were prepared by the Company based on data of the Ministry of Education, Culture, Sports, Science and Technology and media reports.

51

Copyright © Digital Arts Inc.

Initiatives in Phase 2 of GIGA School Concept
We will work proactively to ensure the renewal of existing contracts as well
as receive new contracts to increase our market share.
【Our share of the GIGA School Concept market】
Phase 1 of GIGA School Concept
2019

2020

2021

Earning themarket's trust

2022

Phase 2 of GIGA School Concept
2023

2024

2025

2026

2027

2028

The filtering market is expected
to grow under the GIGA School
Concept.

Share ofi-FILTER The shift from free filtering tocharged filtering will accelerate.

53%

Strengthening of functions,increase of product value andproper unit pricing

New
contracts

Increaseof ourmarketshare

the renewal ofexisting contracts
52

Copyright © Digital Arts Inc.

Phase 2 of the GIGA School Concept – Timing of theReplacement of GIGA School Concept Devices
The GIGA School Concept device replacement will start in the fiscal year ending March
31, 2025 and will be fully implemented in the fiscal year ending March 31, 2026.
[GIGA device replacement timing]
POINT

Percent of devices replaced

FY March 2025
FY March 2026
FY March 2027
FY March 2027
onwards

8
%

52%
22%
11
%
7
%

Other
Depending on the previous
fiscal year, the budget andother factors



As for the date of replacing GIGA devices,
approx. 60% of the education boards will
be due for replacement by the end of FY
March 2026.

The guidelines for device procurement inphase 2 of the GIGA School Concept
presented by the Ministry of Education,
Culture, Sports, Science and Technology
stipulate that the procured devices musthave a web filtering function. It is
anticipated that procurement of web filtering
will be faster than in phase 1.

The data were prepared by the Company based on data of the Ministry of Education, Culture, Sports, Science and Technology and media reports.

53

Copyright © Digital Arts Inc.

Next-Generation School Affairs DX
The Ministry of Education, Culture, Sports, Science and Technology calls for the following implementation as the
direction of the next-generation school affairs DX:*As a regional fiscal measure, financial support of 180.5 billion yen on a single-year basis has always been provided for computerization of school affairs

Work
style
reform01
02

Develop an environment offering connection to the schoolaffairs/learning systems from anywhere and allow flexible and safe work
styles tailored to the individual needs of teaching staff

Integration of schoolaffairs/learning networks

03

Allow low-cost and real-time integration of data owned by school affairs
system and the learning system

Cloud migration of schoolaffairs support system

04

Support the sophistication of school management, educationalguidelines and education policies by visualizing various kinds of data in
an integrated way by using the dashboard function

Creation of Data chaining
infrastructure (dashboard)

05

Allow securing operation continuity even in the event of a large-scaledisaster

Cloud migration of schoolaffairs support systemDatalinking

Resilience

This can be tackled by utilizing GIGA
devices and the existing network
environment

Make it possible to reduce the burden on teaching staff and school
officials working inside and outside the school, as well as on membersof the education boards, and support the acceleration and activation ofcommunication through active use of the general-purpose cloud tools

Security measuresare essential for
implementation ina safe andreassuring way

Source: Created by the Company based on https://www.mext.go.jp/b_menu/shingi/chousa/shotou/175/mext_01385.html

54

Copyright © Digital Arts Inc.

Initiative for Next-Generation School Affairs DX
Our products are applicable in many different areas to ensure security. We
will proactively advertise the value of our products.
＝ Scope of supports

Overview diagram of security measures in school affairs DX
Internet public cloudInternet public cloud

Automatic data encryption

Automatic
data encryption
File encryption

SchoolAffairs
systemMobile device
management

Antivirus

SchoolAffairs
systemLearning
systemMulti-factor
authentication

Multi-factor
authentication

Risk-based
authentication

Risk-based
authentication

Single sign-on

Single sign-on

Teaching staff’s
terminals
Data encryption

EDR

Security support map with our products

Teachers

Students

Encryption of communicationpath

Web filtering

Multi-factor
authentication

Antivirus

Multi-factor
authentication

Risk-based

Teaching staff’s
terminals

Schoolchildren and students'
terminals
Mobile device
management

Learning
systemMobile device
management

Data encryption

Antivirus

EDR

Risk-based

authentication
Authentication

authentication
Authentication

Single sign-on

Single sign-on

Teachers

Data encryption

Dataencryption/
EDR
EDR

Students

Encryption of communication
path

Web
filtering
Filtering

Schoolchildren and students'
terminals
Mobile device
management

Antivirus

Data encryption
Dataencryption/
EDR
EDR

Measure to prevent erroneous emailtransmission

Business trip destination, etc.

Schools

Business trip destination, etc.

Schoolchildren and students'
home, etc.

55

Schools

Schoolchildren and students'
home, etc.

Copyright © Digital Arts Inc.

Schedule for Development of Next-Generation School Affairs DX
Procurement of products is expected to start in the fiscal year ending March 31, 2025with a view toward the operation of a school affairs support system.
[School Affairs DX development schedule]
POINT

Percent of development achieved

FY March
2025
FY March
2026
FY March
2027
FY March
2028
FY March2029
No plans to
introduce17%As a regional fiscal measure, financial supportof 180.5 billion yen on a single-year basis has
always been provided for computerization ofschool affairs

The Ministry of Education, Culture, Sports,
Science and Technology's document, School
Affairs DX under the GIGA School Concept,
stresses the importance of security measuresby presenting some case studies. For schoolaffairs that involve the personal information ofschool-aged children, it is necessary to apply
stronger measures than the measures used
for GIGA School Concept devices.

18%
12
%

21%
19%
13
%

56

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results
for the Fiscal Year Ended March 31, 2024

06

Full-Year financial Forecast for
the Fiscal Year Ending March 2025

57

Copyright © Digital Arts Inc.

Forecasts for Fiscal Year Ending March 31, 2025
(Consolidated)
DAC's sales of 2.3 billion yen and expenses of 2.2 billion yen, which were included in the financial results of the previous
fiscal year, are excluded from consolidated earnings forecasts for the current fiscal year. Therefore, DA's growth in sales
is expected to result in significant improvements in the gross profit and operating profit margins. Meanwhile, profit
attributable to owners of parent of the previous financial results included extraordinary income of approximately 1.9
billion yen due to the transfer of shares in DAC.
(Million yen)
FY March 2024
Full-Year
Results

FY March 2025
Full-Year
Forecasts

Net sales

11,512

Cost of sales

Change％ Change

Main Factors for Change

10,720

-792

-6.9%

DAC's sales, which were of 2.3 billion yen in the previous fiscal year,
are excluded from consolidation, starting from the current fiscal year.

4,583

2,850

-1,733-37.8%For the above reason, DAC’s cost of sales, which was 1.9 billion yen
in the previous fiscal year, is excluded from consolidation, startingfrom the current fiscal year.

Gross profit

6,928

7,870

+941

+13.6%

Gross profit margin

60.2%

73.4%

-

-

Improved significantly due to the deconsolidation of DAC whose costof sales ratio is high.
For the above reason, DAC’s selling, general and administrative expenses,
which were 200 million yen in the previous fiscal year, are excluded fromconsolidation, starting from the current fiscal year.
Approximately 330 million yen are expected to be invested in human resources.

Selling, general andadministrative
expenses

2,500

2,730

+229

+9.2%

Operating profit

4,427

5,140

+712

+16.1%

Operating margin

38.5%

47.9%

-

-

Ordinary profit

4,443

5,140

+696

+15.7%

Profit attributableto owners of parent

4,377

3,540

-837

-19.1%

58

Improved significantly due to the deconsolidation of DAC

The previous fiscal year's profit reflects extraordinary income of
approximately 1.9 billion yen due to the transfer of shares in DAC.
Copyright © Digital Arts Inc.

Forecasts for Fiscal Year Ending March 31, 2025
(Non-consolidated）
The Group aims to achieve growth in net sales and operating profit through theinitiatives for the three priority areas set out in the Medium-Term Management Plan
(FY2025 - FY2027).
(Million yen)
FY March 2024
Full-Year
Results

FY March 2025
Full-Year
Forecasts

Net sales

9,304

10,710+1,405+15.1%

Sales are expected to grow through the implementation of
product/sales strategies and public sector market-focusedmeasures.

Cost of sales

2,664

2,850

+185

+7.0%

Approximately 180 million yen are expected to be invested inhuman resources of engineering.

Gross profit

6,639

7,860

+1,220+18.4%

Gross profit margin

71.4%

73.4%

-

-

Selling, general andadministrative
expenses

2,309

2,710

+400

+17.3%

Operating profit

4,330

5,150

+819

+18.9%

Operating margin

46.5%

48.1%

-

-

Ordinary profit

4,348

5,150

+801

+18.4%

Profit

4,536

3,550

-986

-21.7%

Change％ Change59

Main Factors for Change

Approximately 330 million yen are expected to be invested inhuman resources.

The previous fiscal year's result reflects extraordinary incomeof approximately 2.15 billion yen due to the transfer of shares
in DAC.

Copyright © Digital Arts Inc.

Status of Consolidated Net Sales
Consolidated net sales are forecast as follows:
Consolidated Forecast(Million yen）•

New contracts of DAJ are expected to be 10,300
million yen in the current fiscal year, reflecting thefacilitation of the acquisition of new customers andcross-selling and upselling with a focus on existingcustomers in the enterprise sector market and thewinning of the second phase of GIGA School
Concept projects and Next-Generation DX projects
in the public sector market.

•

3,456 million yen from the cloud projects that wereacquired before the previous fiscal year, such as
the first phase of GIGA School Concept projects,
are transferred as sales in the current fiscal year.
*1：DAJ = Digital Arts Inc.
*2：Sales recorded from the order backlog of contracts acquired in previous fiscal years*3：Contracts for the current fiscal year that are deferred to subsequent fiscal years(contract backlogs)*4：Sales returns at DAJ and sales at overseas subsidiaries

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Status of Consolidated Net Sales
Consolidated net sales by market are forecast as follows:
Forecast by Market•

11,512(Million yen）

418

＋2.8％

4,637

DAC
2,196

＋12.5％-21.5%

10,720(-6.9%)
430

5,218

Consumer*The results of the previous fiscal year
reflect DAC’s sales of approximately
2,196 million yen. Excluding such sales,
the Group expects an increase by 812
million yen, or 19.1%.

Public•6,456＋19.1％※Excluding
sales growthof DAC

Results for FY March 2024

5,071

In the enterprise sector market, the Group
expects to increase sales by increasing
customers that use White Operation andfacilitating cross-selling and upselling tocustomers who adopt White Operation, as wellas continuous product enhancement efforts.

Enterprise

In the public sector market, the Group expects
sales growth through the implementation ofsales and marketing measures for the second
phase of GIGA School Concept projects and
Next-Generation DX projects.

Forecast for FY March 2025

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Consolidated Cost of Sales
and Selling, General and Administrative Expenses
The cost of sales is expected to improve significantly because DAC's cost of sales in theprevious fiscal year is excluded from consolidation. Selling, general and administrative
expenses are expected to rise mainly due to the increased investment in human resources.
FY March 2024
Full-Year Results

FY March 2025
Full-Year Forecasts

Change YoY

Cost of Sales

4,583

2,850

-37.8%

Labor

2,038

1,071

-47.4%

Depreciation

839

852

+1.6%

Communication express

1,304

1,390

+6.6%

Other

1,384

642

-53.6%

Transfer to other accounts-982-1,107+12.7%

Selling, general andadministrative expenses

2,500

2,730

+9.2%

Personnel expenses

1,275

1,457

+14.3%

Advertising expenses

313

320

+2.0%

Other

911

952

+4.5%

62

(Million yen)

Main Factors for Change
Impact of the deconsolidation of DAC

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

Investments in human resources including the hiring of new
graduates, strengthening of employment activities andincentive plans

Copyright © Digital Arts Inc.

Status of Consolidated Cost of Sales
The labor cost and other expenses are expected to be reduced significantly because DAC’s labor costand other expenses are excluded from consolidation. Regarding communication expenses, cloud server
expenses are expected to increase, reflecting an increase in the number of customers as a result of the
expansion of sales of cloud service products.
Status of Consolidated Cost of sales(Million yen)63

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Status of Consolidated Selling, General and
Administrative Expenses
Personnel expenses are expected to increase with the enhancement of investments inhuman resources, which is a priority area in the Medium-Term Management Plan
(FY2025 - FY2027).
Status of Consolidated Selling, General and Administrative Expenses(Million yen)64

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Material on Consolidated Financial Results
for the Fiscal Year Ended March 31, 2024

07

Return to Shareholders for the
Fiscal Year Ending March 31, 2025

65

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Return to Shareholders for the Fiscal Year Ending March 31, 2025

We are planning to pay dividends as follows to return a portion of ourearnings to our shareholders.
 Target payout ratio for fiscal year ending March 31, 2025: 33.0%
 Annual dividends of surplus forecasted for fiscal year ending March 31, 2025:
85.00 yen per share.
 We expect to increase the annual dividend by 5.00 yen per share.
Dividend (in yen) per share

Consolidated
payout ratio

2Q-endYear-end

AnnualFY March 2024

40.00

40.00

80.00

36.5% ※1

FY March 2025 (forecast)

40.00

45.00

85.00

33.0％

※1 Excluding 1,930 million yen as a gain on sale of the stock of consolidated subsidiary Digital Arts Consulting Inc.

Treasury shares will be purchased using a flexible approach, with a focus on returns
to shareholders while taking into consideration trends in business performance andstock market movements.
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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.

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