Consolidated Financial Results for the First Quarterof the Fiscal Year Ending March 31, 2025
(From April 1, 2024 to June 30, 2024)

Financial Results Briefing Materials
July 31, 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 offices｜ Listed on September 2002

For internet convenience,
Safety and security

Domestic
manufacturers

13 million
activeusers *1High
profitability(Securities Code: 2326)

Hokkaido Sales Office/ Tohoku Sales Office /Chubu Sales Office/ Kansai Sales Office/
Chushikoku Sales Office/ Kyushu Sales Office*1: The number of users of i-FILTER Ver. 10, m-FILTER Ver. 5, i-FILTER@Cloud and m-FILTER@Cloud as of June 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

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

Endpoint Web
security

Measures to provide pop-ups for email
misdelivery

File transfer solution
Supporting secure file transfers 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
Excluding the impact of the transfer of the shares of a consolidated subsidiary at the end of theprevious fiscal year, net sales for the first quarter of the fiscal year ending March 31, 2025
increased year on year and achieved faster growth than planned by the Group, driven by growth in
the enterprise sector market. Because of the schedule of investment in human resources,
operating profit decreased, but this result was as planned by the Group.

01

In the enterprise sector market, net sales grew, through major growth in i-FILTER,
which captured needs for a variety of security measures. (Excluding DAC*1)

02

In the public sector market, net sales grew following the acquisition of Security
Improvements for Local Governments projects, which remained in demand, and NextGeneration School Affairs DX projects, for which full-scale procurement began this year.

03

With the exclusion of DAC from consolidation, the consolidated cost of sales andpersonnel expenses decreased. Operating profit decreased, although it was in line withplans. The fall was due mainly to increased investment in human resources as planned,a rise in communication expenses after the expansion of the user base of a cloud service
product, and increased sales promotion aimed at sales expansion.
*1: DAC: Digital Arts Consulting (a consolidated subsidiary in which shares were transferred at the end of the previous fiscal year)

4

Copyright © Digital Arts Inc.

Contents
01

Consolidated Results Highlights

02

Non-consolidated Results Highlights

03

Net Sales by Market

04

FY03/25 Initiatives

05

Status of Measures for the Fiscal Year Ending March 202506

Full-Year Financial Forecast for the Fiscal Year Ending March 31, 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 First Quarter of the Fiscal Year Ending March 31, 202501

Consolidated Results Highlights

6

Copyright © Digital Arts Inc.

Consolidated Results Highlights
Special
Notes
Contracts
The figure in square
brackets [ ]represents the result
excluding DAC.

Net sales
The figure in square
brackets [ ]represents the result
excluding DAC.

Operatingprofit

The transfer of all shares in Digital Arts Consulting (DAC*1), a consolidated subsidiary, held by theCompany at the end of the previous fiscal year has an impact of lowering contracts and net sales
by around 452 million yen respectively for the current fiscal year.

1,993 million yen• In the enterprise sector market, i-FILTER sales rose significantly,
mainly because of the winning of projects aimed at facilitating thetransition to cloud security and those from clients switching fromcompetitors’ products.

[＋196 million yen or ＋11.0％ YoY]

• In the public sector market, performance was steady with theacquisition of Security Improvements for Local Governments
projects and Next-Generation School Affairs DX projects.

(-255 million yen or -11.4% YoY)

2,234 million yen(-307 million yen or -12.1% YoY)[＋145 million yen or ＋7.0％ YoY]

• In the enterprise sector market, sales saw robust growth, reflecting
sales from strong orders for cloud service products and from license
sales products.
• In the public sector market, sales were up following the posting ofsales from Security Improvements for Local Governments projects
and Next-Generation School Affairs DX projects, as well as from
GIGA School Concept projects received in preceding fiscal years.
•

With respect to the cost of sales, labor expenses rose due to a basepay increase for development personnel and communication
expenses climbed after an increase in users of cloud service
products. SG&A expenses rose with an increase in sales promotional
measures to boost sales.

•

Given the schedule of investment in human resources, operating
profit decreased, but this result was as planned by the Group.

838 million yen(-33 million yen or -3.9% YoY)

*1: DAC: Digital Arts Consulting (a consolidated subsidiary in which shares were transferred at the end of the previous fiscal year)

7

Copyright © Digital Arts Inc.

Consolidated Statement of Income
Contracts and net sales (excluding DAC*1) grew faster than had been expected by the Group. In contrast, due to theschedule for investment in human resources, operating profit decreased, although it was in line with the Group's plan.
(Million yen)First Quarter
FY March 2024
Contracts

First Quarter
FY March 2025

FY March 2025
Full-Year Forecast *2

Change YoY

2,248 [1,796]

1,993-11.4% [+11.0%]-

2,541 [2,088]

2,234-12.1% [+7.0%]

10,720

Cost of sales

1,019

726

-28.8%

2,850

Gross profit

1,521

1,508

-0.9%

7,870

Selling, general and administrative
expenses

648

669

+3.1%

2,730

Operating profit

872

838

-3.9%

5,140

34.3%

37.6%

-

47.9%

Ordinary profit

885

847

-4.3%

5,140

Profit attributable to owners ofparent

614

584

-5.0%

3,540

1,109

1,089

-1.8%

-

The figure in square brackets [ ] represents the result
excluding DAC.

Net sales

The figure in square brackets [ ] represents the result
excluding DAC.

Operating margin

EBITDA *3*1: DAC: Digital Arts Consulting (a consolidated subsidiary in which shares were transferred at the end of the previous fiscal year)*2: Financial Forecast is the consolidated financial forecast announced on May 8 2024.
*3: EBITDA = Operating profit + Depreciation + Tax expenses included in operating expenses

8

Copyright © Digital Arts Inc.

Trend in Consolidated Contracts
Consolidated contracts totaled 1,993 million yen, up 11.0% year on year.（Excluding DAC ）*1

Trend in Contracts
DAC

Cloud service products•

Contracts for cloud service products grew 15.9%.
Sales of i-FILTER@Cloud were strong as it
captured needs for the transition to cloud security
in the enterprise sector market and needs for thevisualization of the state of use of SaaS following
the expansion of its utilization for business. In
addition, Next-Generation School Affairs DX
projects were steadily won in the public sector
market.

•Contracts for license sales products and othercategory increased 7.1% (excluding DAC). In theenterprise sector market, the Group won projects
for shifting from competitors' on-premise
products. In the public sector market, we received
brisk orders for Security Improvements for Local
Governments projects, Next-Generation School
Affairs DX projects and other projects.

License sales products/Others

2,248

1,993

452

FY Mar. 2024
1Q

(Million yen）(+11.0%)

1,796
43.5％

782

＋15.9％

906

45.5％

56.5％

1,014

＋7.1％

1,086

54.5％

FY Mar. 2024
1Q (Excluding DAC)FY Mar. 2025
1Q

*1: DAC: Digital Arts Consulting (a consolidated subsidiary in which shares were transferred at the end of the previous fiscal year)

9

Copyright © Digital Arts Inc.

Trend in Order Backlog
Excluding GIGA School Concept projects, sales from which will be posted for the
next and subsequent fiscal years, contracts steadily increased.
Sales from the next fiscal year
(GIGA)

Trend in order backlog
Sales for 2Q-4Q FY Mar. 2025

Sales from the next fiscal year

Sales for 2Q-4Q FY Mar. 2025 (GIGA)

Sales from the next fiscal year(GIGA)

6,029

2,426

5,408
-43.2％

Many GIGA School Concept projects have five-year terms.
Over time, sales were posted from more and more of the
projects won in the first phase of GIGA School Concept.
That resulted in a decrease in the amount of sales to beposted for the next and subsequent fiscal years.

(Million yen）

Meanwhile, the acquisition of projects in the second phaseof GIGA School Concept gathered pace and contracts are
expected to increase further.

1,378

Sales for the 2Q-4Q FY Mar. 2025
(GIGA)

1,587

1,488

＋6.7％

887

＋17.7％

1,044

1,227

＋14.0％

1,398

End of

End ofFY Jun. 2023

FY Jun. 2024

Sales in the 2Q-4Q period of the fiscal year under review
will rise because the Group has been continuously gaining
new GIGA School Concept projects.
Sales from the next fiscal year

Sales for 2Q-4Q FY Mar. 2025

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.

10

Copyright © Digital Arts Inc.

Change in Net Sales
Consolidated net sales grew 7.0% year on year, to 2,234 million yen.（Excluding DAC ）*1

Change in Net Sales(Million yen)

DAC

Cloud service products

2,541

Net sales of cloud service products were up
9.6%, reflecting brisk sales growth of iFILTER@Cloud in the enterprises sector
market, the acquisition of Next-Generation
School Affairs DX projects in the public
sector market, and the posting of sales
from the GIGA School Concept projects won
in preceding fiscal years.

•

Net sales of license sales products andother category (excluding DAC) increased
4.5% after net sales growth in theenterprise sector market and the winning of
Security Improvements for Local
Governments projects, Next-Generation
School Affairs DX projects and otherprojects in the public sector market.

Licence sales/Others

2,234

452

FY Mar. 2024
1Q

•

2,088

(+7.0%)

48.1％

1,100
1,004 +9.6%

49.3％

51.9％

1,084 +4.5% 1,133

50.7％

FY Mar. 2024
1Q (Excluding DAC)FY Mar. 2025
1Q

*1: DAC: Digital Arts Consulting (a consolidated subsidiary in which shares were transferred at the end of the previous fiscal year)

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

Net
sales

・・・

Amount equivalent to maintenance fee isprorated over contract period "n"

Y+1
Y months(contract months) months

Y+2
months・・・

Y+nmonthsY+n+1
monthsLicense fees make up a large
proportion of the contract
amount. This portion is recorded
in a lump sum as sales in themonth when the contract isobtained.
Amount equivalent tomaintenance fee is recorded ona pro rata basis over thecontract period.

Contract 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 overthe contract period (split into
equal monthly amounts).

・・・

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

Net sales

Y months
Y+1(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
DAC

1Q

*1

2Q

3Q

10,436
3,190

9,051

3Q
2Q

2,758
2,573

2,074

2,134

2,977
1,687

1,289
Net sales

2,632

945

1,004
663
825

profitFY Mar. 2021

1,185

2,698

980

318

263

1,656

1,348

1,238

2,067

Net sales

OperatingprofitFY Mar. 2022

3,022

Net sales

OperatingprofitFY Mar. 2023

1,304
933

452

2,088

1,009

731

485
Operating

1,101

4,427

4,413

4,126

1,649

124

1Q

2,778

2,364

6,825

4Q

(Million yen)

11,512

4Q

1,315

2,234
838

872
Net sales

OperatingprofitFY Mar. 2024

Net sales

OperatingprofitFY Mar. 2025

*1: DAC: Digital Arts Consulting (a consolidated subsidiary in which shares were transferred at the end of the previous fiscal year)

15

Copyright © Digital Arts Inc.

Consolidated Cost of Sales
and Selling, General and Administrative Expenses

While the consolidated cost of sales and DAC*1 personnel expenses decreased, the Group
increased investment in human resources as planned.
(Million yen)First Quarter
FY March 2024

First Quarter
FY March 2025

Change YoY

Main Factors for Change

1,019

726

-293

Labor

452

256

-195

Depreciation

200

213

+12

Communication
expenses

294

369

+74

Cloud server expenses rose as a result of an increase in licenses forcloud service products (+74M)

Other

301

145

-156

Increase due to the development of new DA products (＋20M)
Impact of exclusion of DAC from consolidated (Approx. -170M)

Transfer to otheraccounts

-229

-258

-28

Selling, general andadministrative expenses

648

669

+20

Personnel expenses

329

314

-15

Increase in DA’s personnel expenses (+9M)
Impact of exclusion of DAC from consolidated (Approx. -24M)

Advertising expenses

80

106

+25

Addition of sales promotions through events and seminars, etc.

238

248

+10

Cost of sales

Other

16

Increase due to the enhancement of DA‘s development
workforce (＋39M)
Impact of exclusion of DAC from consolidated (Approx. -230M)*1: DAC: Digital Arts Consulting (a consolidated subsidiary in which shares were transferred at the end of the previous fiscal
year)

Copyright © Digital Arts Inc.

Quarterly Trend in Consolidated Cost of Sales
Transfer to other accounts
Cost of Sales
Other
Communication expenses
Depresiation
Labor

839
134
Communication
expenses
Depreciation
Labor

225

169

946
153
158

321

208

204
613
332
1Q

427

1,450

989

921

962

164 220173 226

170 222

213

223

244

214

217

624

701

330

2Q

(Million yen)

3Q

FY Mar. 2022

736

349
4Q

221

1,102
247 201

354
1Q

1,235

1,248

244 220239 221302 229

312

324

280

766

1,204

202 901

206

983

430

373
2Q

3Q

FY Mar. 2023

17

208
1,014
476

4Q

1,340
351

231

250

332 270

400

345

356

145

212
1,178

2141,277

369

558

556

984

294

308

200
1,019

2111,108

452

470

1Q

1,527

258

213 726
256

2Q

3Q

FY Mar. 2024

4Q

1Q

FY Mar. 2025

Copyright © Digital Arts Inc.

Quarterly Trend in Consolidated
Selling, General and Administrative Expenses
Personnel expenses

Advertising expenses

other(Million yen)

660
574

609
169
487

191

59
159

558

526
229
193

59

77

51

70

277

263

3Q

4Q

609

214
204

74

78

648

646
597

578

66

80

1Q

2Q

FY Mar. 2022

302

280

1Q

2Q

316

293

3Q

4Q

FY Mar. 2023

18

86

79

432
323

329

1Q

248
224

232

67

608

215

238
216

669

285

2Q

363

3Q

FY Mar. 2024

106

297

314

4Q

1Q
FY Mar. 2025
Copyright © Digital Arts Inc.

Consolidated Balance Sheet
The equity ratio was up 3.3 percentage points from the end of the previous fiscal(Million yen)
year, to 74.3%.
As of end of 1Q
FY March 2024

As of end of
FY March 2024

As of end of 1Q
FY March 2025

Change fromend of FY
March 2024

Main Factors for Changes

Current assets

18,18920,183

19,108-5.3%

Cash and deposits（-1,290M）(Cash and deposits)

16,387

18,33917,049-7.0%

Income tax paid (-1,354M), fund for treasury sharepurchases (-500M), and others

Non-current assets

2,256

2,334

2,363

+1.2%

20,446

22,51821,471-4.6%

Current liabilities

6,486

6,467

5,451

-15.7%(Advanced received)

5,317

4,418

4,395

-0.5%

Non-current liabilities

50

52

52

+0.0%

Equity capital

13,877

15,986

15,955-0.2%

Net assets

13,90915,99815,967-0.2%

Equity ratio

67.9%

71.0%

74.3%

-

ROE

4.4%

29.1%

3.7%

-

ROA

3.0%

20.1%

2.7%

-

Total assets

19

Income taxes payable (-1,071M)
Decreased linked to the progress in the recording ofsales.

Treasury share buy-back(-67M), Dividends paid(-550M),Profit(+584M), and others

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results
for the First Quarter of the Fiscal Year Ending March 31, 2025

02

Non-consolidated Results Highlights

20

Copyright © Digital Arts Inc.

Summary of Non-consolidated Results
Contracts and net sales increased year on year and faster than had been expected by the Group, chiefly
driven by the growth in the enterprise sector market. In contrast, due to the schedule for investment in
human resources, operating profit decreased, although it was in line with the Group's plan.
(Million yen)First Quarter
FY March 2024

First Quarter
FY March 2025

FY March 2025
Full-Year Forecast

Change YoY

Contracts

1,793

1,990

+11.0%-Net sales

2,085

2,231

+7.0%

10,710

Cost of sales

616

725

+17.6%

2,850

Gross profit

1,469

1,506

+2.5%

7,860

Selling, general andadministrative expenses

591

665

+12.6%

2,710

Operating profit

877

840

-4.2%

5,150

42.1%

37.7%

-

48.1%

Ordinary profit

888

849

-4.5%

5,150

Profit

617

586

-5.0%

3,550

Operating margin

Note: Financial Forecast is the non-consolidated financial forecast announced on May 8, 2024.

21

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results
for the First Quarter of the Fiscal Year Ending March 31, 2025

03

Net Sales by Market

22

Copyright © Digital Arts Inc.

Consolidated Contract Amount by Market
The contract amount expanded in the enterprise sector market, and it expandedin the public sector market as well. (Excluding DAC )*1

Trend in Consolidated Contract
Amount by Market•

In the enterprise sector market, contracts(excluding DAC) increased by 128 million yen (or+14.8%). The i-FILTER attained solid sales,
meeting needs for the shift to cloud security, forthe visualization of the state of use of SaaS after
expansion of its use for business, and for theshift from competitors' on-premise products.

•

In the public sector market, contracts increased
by 73 million yen (or +8.9%). This reflects a
brisk performance, including the acquisition of
Security Improvements for Local Governments
projects, Next-Generation School Affairs DX
projects and other projects.

(Million yen)

2,248
DAC

452

1,993

1,796

(+11.0%)

107

-4.5%

822

+8.9%

102

Consumer

895

Public866 +14.8% 994
FY Mar. 2024
1Q

FY Mar. 2024 1Q(Excluding DAC)EnterpriseFY Mar. 2025
1Q
*1: DAC: Digital Arts Consulting (a consolidated subsidiary in which shares were transferred at the end of the previous fiscal year)

23

Copyright © Digital Arts Inc.

Consolidated Net sales by Market
The net sales expanded in the enterprise sector market, and it expanded in the public
sector market as well. (Excluding DAC )*1

Trend in Consolidated Net Salesby Market

452•

In the public sector market, net sales increased 49
million yen (or +4.9%). We won steadily Security
Improvements for Local Governments projects aswell as Next-Generation School Affairs DX projects.
We also recorded sales from the GIGA School
Concept projects won in preceding fiscal years.

2,234(+7.0%)

2,088

106 -12.0%

1,016 +4.9%

93

Consumer

1,066 Public

965 +11.2% 1,074 EnterpriseFY Mar. 2024
1Q

In the enterprise sector market, net sales(excluding DAC) rose 108 million yen (or +11.2%).
Their trend was similar to that of contracts. The iFILTER sold well to meet needs for the transfer tocloud security, for visualization of the state of useof SaaS after expansion of its utilization forbusiness, and for the shift from competitors' onpremise products.

(Million yen)

2,541
DAC

•

FY Mar. 2024
1Q (Excluding
DAC)

FY Mar. 2025
1Q
*1: DAC: Digital Arts Consulting (a consolidated subsidiary in which shares were transferred at the end of the previous fiscal year)

24

Copyright © Digital Arts Inc.

Trend in Consolidated Net Sales by Market
Net sales for the first quarter reached a record high. (Excluding DAC )(Million yen)

*1

2,541
2,386

318

DAC

2,234

452

1,919

263
1,413
1,158
803
456

916
640

1,217

1,249

688

725

124

1,074

Enterprise

1,016

1,066

Public

943

965

1,017

803

723

530
738
424

408

383

451

89

92

120

140

115

113

105

106

93

FY Mar. 2017 1Q

FY Mar. 2018 1Q

FY Mar. 2019 1Q

FY Mar. 2020 1Q

FY Mar. 2021 1Q

FY Mar. 2022 1Q

FY Mar. 2023 1Q

FY Mar. 2024 1Q

FY Mar. 2025 1Q

256

296

89
FY Mar. 2016 1Q

Consumer*1: DAC: Digital Arts Consulting (a consolidated subsidiary in which shares were transferred at the end of the previous fiscal year)
Note: DAC figures for 2020 and earlier are omitted, given that they have minor impacts.

25

Copyright © Digital Arts Inc.

(Reference) Trends in Non-Consolidated Net Sales
Net sales for the first quarter reached a record high.

(Million yen)

2,065

2,085

2,231

1,655

802

945

1,162

1,204

1,211

1,287

FY Mar. 2016

FY Mar. 2017

FY Mar. 2018

FY Mar. 2019

FY Mar. 2020

FY Mar. 2021

FY Mar. 2022

FY Mar. 2023

FY Mar. 2024

FY Mar. 2025

1Q

1Q

1Q

1Q

1Q

1Q

1Q

1Q

1Q

1Q

26

Copyright © Digital Arts Inc.

Quarterly Trend in Consolidated Net Sales by Market
Net sales for the first quarter reached a record high. (Excluding DAC )(Million yen)

*1

DAC

652

556
241

381
287

218

962

225

535

452

1,869

318

248
929

263
176

384
357

940

943

1,020

1,017

917

1,040

1,084

1,216
1,036

965

1,074
1,074

Enterprise

1,066

Public

811
961

124

803
808

745

722
1,313

1,269
974

785

738

1,195

1,203

1,320
1,084

1,016

1,215

597

574

115

104

103

109

113

115

98

116

105

118

103

105

106

106

101

105

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

451

FY Mar. 2021

FY Mar. 2022

FY Mar. 2023

FY Mar. 2024

93

Consumer

1Q

FY Mar. 2025

*1: DAC: Digital Arts Consulting (a consolidated subsidiary in which shares were transferred at the end of the previous fiscal year)

27

Copyright © Digital Arts Inc.

03

Net Sales by Market

Enterprise Sector

28

Copyright © Digital Arts Inc.

Net Sales in Enterprise Sector Market by ProductNet sales achieved enormous growth, reflecting a major leap in the i-FILTER series
following the acquisition of projects for shifting to cloud security and for shifting fromcompetitors' products, as well as strong sales of options. (excluding DAC )*1

Trend in Net Sales in Enterprise
Sector Market by Product•The i-FILTER series sales grew sharply (by +119 million yenor +18.6%), reflecting successful efforts to capture demand
for a shift to cloud security, demand for the visualization of
the state of use of SaaS after expansion of its use for business,and demand from clients switching from competitors' onpremise products, as well as strong sales of the Anti-Virus &Sandbox option.

•

The m-FILTER series sales contracted (by -12 million yen or-4.9%) due to the impact of the large project in the previous
year, although m-FILTER@Cloud earned high marks and brisk
new projects for its comprehensive functions to meet multiple
email security needs, including protection from ransomware
attacks and email security in the cloud environment.

•

The new product, f-FILTER, is a solution primarily controlling
what is called PPAP, a file transfer practice in which the file isconverted into a password-protected zip file before sending
and the password is sent in a separate e-mail message. Brisk
orders were won for a bundle with m-FILTER and the numberof projects increased.

(Million yen)

1,418
DAC

452

1,074

965
67

(+11.2%)
FinalCode /+2.9％69
other products

257

-4.9％

641

＋18.6％

244

m-FILTER
series760

i-FILTER
seriesFY Mar. 2024
FY Mar. 2024
FY Mar. 2025
1Q
1Q (Excluding DAC)
1Q

*1: DAC: Digital Arts Consulting (a consolidated subsidiary in which shares were transferred at the end of the previous fiscal year)

29

Copyright © Digital Arts Inc.

03

Net Sales by Market

Public Sector

30

Copyright © Digital Arts Inc.

Net Sales of Public Sector Market by ProductNet sales were strong with the continued acquisition of Security Improvements for
Local Governments projects and the new acquisition of Next-Generation School Affairs
DX projects.
Trend in Net Sales of Public Sector
Market by Product•

Sales of the i-FILTER series went up (by +56
million yen or +7.0%), reflecting the healthyacquisition of Security Improvements for Local
Governments projects and Next-Generation School
Affairs DX projects.

•

Sales of the m-FILTER series were down slightly(by -5 million yen or -2.6%). We managed to win
Next-Generation School Affairs DX projects andlarge projects for Security Improvements for Local
Governments projects, but local governments
seemed to have weaker needs for security
improvement measures than in the previous fiscal
year.

•

In the Next-Generation School Affairs DX projects,
the FinalCode series and the new product of fFILTER responded to file security needs.
Accordingly, the pipeline improved.

(Million yen)

1,016
16

1,066

-10.9％

192

-2.6％

807

＋7.0％

FY Mar. 2024 1Q(＋4.9%)
14

FinalCode/Other Products

187

m-FILTER
series864

i-FILTER
seriesFY Mar. 2025 1Q

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
with respect to demand for filtering measures. The Group will facilitate the strengthening of products
and expand target customers, aiming to tap into new demand.
Trend in Net Sales of Consumer
Sector Market by Product106•

Net sales of products for computers rose (by+2 million yen or +3.7%) as a result ofadvertising multiple-year package products
and taking initiatives for products forInternet cafes.

•

Net sales of products for mobile terminals
and others declined (by -14 million yen or-28.4%), reflecting a slowdown in newcontracts obtained.

•

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)93(-12.0%)53

52

FY Mar. 2024 1Q＋3.7％-28.4％

56

37

For computers

For mobile
terminals, otherFY Mar. 2025 1Q

33

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results
for the First Quarter of the Fiscal Year Ending March 31, 2025

04

FY03/25 Initiatives

34

Copyright © Digital Arts Inc.

04

FY03/25 Initiatives

Product Strategy and Sales Strategy

35

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 Future promising areas
28.2%

XDR
CSPM/
CWPP

Marketgrowthrate

Future core areas (stable areas) Promising areas

SASE

19.5%

Vulnerability
assessment
(VA)

15.2%






Authentication

17.8%
14.5%

Unified endpoint
management(UEM) tools

IDaaS

SWG
ZTNA
CASB
FWaaS and others

ImprovementLow

domain
Low

26.7%
33.0%
8.3%
22.9%

Our main solutions

4.4%
3.1%

Web filtering

2.2%

Mail Security(including file
encryption)

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

Increase in thenumber of solutionsin promising areasand investment areas

20.3%

Web access security

EDR・NDR＝ Market growth rates

2.2%

Implementation of downsizing, withdrawal andcollaboration with other companies

Areas for acquisition of stable revenue Stable areas

Our advantage

High Source: Our estimates based on various kinds of information

36

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

File transfer and file encryption

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

ID management

Threat detection

Multi-factor authenticationand single sign-on (SSO)

Detecting attacks from theinternet and email to issue
alerts and reports

White Operationclients
37

D Alert Reporting Service

Copyright © Digital Arts Inc.

04

FY03/25 Initiatives

Increase in Public Sector Market Share38

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

Replacementof Devices

2027

2028

Phase 2 of the GIGA School Concept – NEXT GIGA
Budget scheme

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

Budget461.0
billion yen

Budget (-2025)*1
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*1 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

Jointprocurement
on aprefecture-byprefecture basis

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

39

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

2022

Phase 2 of GIGA School Concept
2023

2024

2025

2026

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

Earning themarket's trust The shift from free filtering tocharged filtering will accelerate.

2027

2028

New
contracts

Strengthening of functions,increase of product value andproper unit pricing

Increaseof ourmarketshare

the renewal ofexisting contracts
40

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 2028
onwards

8%

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

52%
22%
11
%
7
%

Other
Depending on thebudget and otherfactorsSource： The data were prepared by the Company based on data of the Ministry of Education, Culture, Sports, Science and Technology and media reports.

41

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
reformDatalinking

Resilience01

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

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

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

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 system

03 system and the learning system

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

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

42

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

File encryption
Automatic
data encryption

SchoolAffairs
systemTeaching staff’s
terminals
Mobile device
management

Antivirus

Security support map with our products

SchoolAffairs
systemLearning
systemMulti-factor
authentication

Multi-factor
authentication

Risk-based
authentication

Risk-based
authentication

Single sign-on

Single sign-on

Teachers

Data encryption

EDR

Students
Encryption ofcommunication path
Web filtering

Multi-factor
authentication

Antivirus

Multi-factor
authentication

Risk-based

Mobile device
management

Data encryption

Antivirus

EDR

Risk-based

authentication
Authentication

Authentication
authentication

Single sign-on

Single sign-on

Teaching staff’s
terminals

Schoolchildren and students'
terminals
Mobile device
management

Learning
systemData encryption
Dataencryption/
EDR
EDR

Teachers

Students
Encryption ofcommunication pathWebfiltering
Filtering

Schoolchildren and students'
terminals
Mobile device
management

Antivirus

Data
encryption/
EDR
EDR

Data encryption

Measure to prevent erroneous
email transmission

Business trip destination, etc.

Schools

Schoolchildren and students'
home, etc.

Business trip destination, etc.

43

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,
2025 with 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
support of 180.5 billion yen on a singleyear basis has always been provided forcomputerization of school 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 measures by presenting some casestudies. For school affairs that involve thepersonal information of school-aged
children, it is necessary to apply stronger
measures than the measures used for GIGA
School Concept devices.

18%
12
%

21%
19%
13
%

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

44

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results
for the First Quarter of the Fiscal Year Ending March 31, 2025

05

Status of Measures for the Fiscal YearEnding March 2025

45

Copyright © Digital Arts Inc.

Functions Upgrade [StartIn]New Functions
released in June

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.

46

Copyright © Digital Arts Inc.

Functions Upgraded [f-FILTER]
New Functions
released in July

Examples of requests for f-FILTER

Enhancement of features

Customer A

We hope that f-FILTER will
support large files of over 100
MB, since they cannot be sent by
e-mail.

The uploadable file size is increased to 20 GB
and an option is provided that allows users tochoose from different levels of storage
capacity according to their needs.

Customer B

For security reasons, we want tolimit the file access period toseveral days. (A period shorter
than 30 days is desirable.）

The software is modified to provide astandard function that allows users to set thefile access period within a range from one day
to 30 days.

Customer C

We hope that, for audit purposes,
files can be stored for a longer
period than 30 days, such as five
to seven years.

An option is provided that allows users to
configure the file storage period to one year,
three years, five years, seven years andothers.
47

Copyright © Digital Arts Inc.

Toughening of Security for Local Government:
Compliance with New Guidelines

A system for connection under the so-called α (alpha) model from a business terminal in the LGWAN connection
system to the cloud service is called the α' model, and this model is now under consideration. There are a numberof points that can be dealt with using the Company's solutions, and acquisition of certification under the
Information system Security Management and Assessment Program (ISMAP*1) is significant for implementing themeasures. It is likely that the situation will be advantageous to the Company.
Japanese Government Cloud and the
Basic Resident Registration Network

System LGWAN

Municipal information
security cloudSpecific cloud service
Authentication

File transfer to and fromexternal sources

Web connection control and access log
management

Neutralization of email and files
Encryption of communication channels, restriction
on destinations of connections, and access
restrictions on tenants

In collaboration with OPSWAT

Measures against erroneous transmission andmanagement of email archives

m-FILTER

Local governments
System using National Identification
Number (My Number)

LGWAN-connected system

Secure management of confidential files

Secure management of confidential files

Internet-connected system
File transfer

in collaboration with
FileZenS

Terminals handling individual numbers

Terminals connected to LGWAN

Neutralized
communication

Terminals connected to the Internet*1: Security assessment system for government information systems

48

Copyright © Digital Arts Inc.

Digital Arts' Solutions: Status of ISMAP Registration
Web Security

Mail Security

File Encryption

Registeredwith ISMAP

Registeredwith ISMAP
Microsoft 365
supported Version

Registeredwith ISMAP

Registration
pending with
ISMAP

Enabling users to securely connect to
websites without security concerns

Enabling users to securely send and receive email

Automatically protecting files from themoment of creation and allowing users todelete them after transfer

Secure file transfer

IDaaS

Chat/teleconference

Registration
pending with
ISMAP

Supporting secure file transfers without
leaking critical information

Registration
pending with
ISMAP

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

49

Registeredwith ISMAP

Providing workplaces and places foreducation with secure and comfortablecommunication spaces

Copyright © Digital Arts Inc.

New Function for GIGA School Concept (1)Visualizing what websites
schoolchildren and students viewand how often
Number of thoseusing terminals in thelate night time slot

Terminal use
ratio by school

Duration of use by
online service

Ranking of timeslots in terms ofratio of use

New functions
released in April

Meeting one of the conditions for subsidies forterminal replacement costs, monitoring thestate of operation of terminals for fulfillment of
the minimum standard for specifications.
50

Copyright © Digital Arts Inc.

New Function for GIGA School Concept (2)A major updatein April!
It is a portal website that put together online learning videos.
It supports search by grade or by subject and indication ofvideos in the order of popularity. It can be used byschoolchildren and students for home learning and for
educational materials in school classes.

Point1

Point2

For previews andreviews of school classes

For educational materials
in school classes

What is learned atschool can be previewed
and reviewed at any
time and anywhere.

Videos can be used as
education materials for amore intuitive
understanding.

51

Copyright © Digital Arts Inc.

GIGA School Concept
Advertise the superiority of i-FILTER to boards of education that have yet to introduce
filtering and those which have introduced competitors' products in order to hold aneven larger market share
Introduction of filtering under the GIGA School Concept*1
Introduction of pay filtering by Boards of Education

Not yetintroduced, etc.

20％

Share of charged filtering introduced

Competitors
47％

Charged filtering
already introduced

Share of i-FILTER

80%

53%

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

The percentage of boards of education that haveadopted pay filtering reached 80%.

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

52

Copyright © Digital Arts Inc.

Strengthening of Sales Promotion for Expanding Sales
Make known the enriched lineup of solutions in events, different typesof ads, email magazine, videos and other promotional activities
Event participation

Ads in railway stations

Self-organized events

From May 8, 2024 to May 10, 2024

JR Tamachi station, Hamamatsucho
station and Shinagawa station
Advertising

May 23 and 31, 2024

May 23, 2024

Partner meeting 2024

In the morning edition of
the Nikkei newspaper

EDIX Tokyo 2024

Facebook ads

Listing ads

E-newsletters

53

Newspaper advertisement

Video introducing the products

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results
for the First Quarter of the Fiscal Year Ending March 31, 202506

Full-Year Financial Forecast for
the Fiscal Year Ending March 31,
2025

54

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)
*1

FY March 2024
Full-Year
Results

FY March 2025
Full-Year
Forecasts

Change％ Change

11,512

10,720

-792

-6.9%

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

Cost of sales

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, starting from thecurrent fiscal year.

Gross profit

6,928

7,870

+941

+13.6%

Gross profit margin

60.2%

73.4%

-

-

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%Net sales

Main Factors for Change

Improved significantly due to the deconsolidation of DAC whose cost of
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, areexcluded from consolidation, starting from the current fiscal year.
Approximately 330 million yen are expected to be invested in humanresources.

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.

*1: DAC: Digital Arts Consulting (a consolidated subsidiary in which shares were transferred at the end of the previous fiscal year)

55

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 the initiatives forthe three priority areas set out in the Medium-Term Management Plan (FY2025 - FY2027).
FY March 2024
Full-Year
Results

FY March 2025
Full-Year
Forecasts

Net sales

9,304

10,710+1,405+15.1%

Cost of sales

2,664

2,850

+185

+7.0%

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％ Change(Million yen)

Main Factors for Change
Sales are expected to grow through theimplementation of product/sales strategies and public
sector market-focused measures.
Approximately 180 million yen are expected to beinvested in human resources of engineering.

Approximately 330 million yen are expected to beinvested in human resources.

The previous fiscal year's result reflects extraordinary
income of approximately 2.15 billion yen due to thetransfer of shares in DAC*1.

*1: DAC: Digital Arts Consulting (a consolidated subsidiary in which shares were transferred at the end of the previous fiscal year)

56

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 School
Affairs 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：Sales recorded from the order backlog of contracts acquired in previous fiscal years*2：Contracts for the current fiscal year that are deferred to subsequent fiscal years(contract backlogs)*3：Sales returns and sales at overseas subsidiaries

57

Copyright © Digital Arts Inc.

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

11,512
DAC
*2

2,196

10,720(+15.0%)9,316 +2.8%430Consumer*1 The results of the previous fiscal

418

5,218

Public5,071

Enterprise

4,637 +12.5%

4,259 ＋19.1％
Result for FY March Result for FY 2024
2024
(Excluding DAC)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. *1
year reflect DAC’s sales ofapproximately 2,196 million yen.
Excluding such sales, the Group
expects an increase by 812 million
yen, or +19.1%.

•

Forecast for FY
March 2025

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 School Affairs DX projects.

*2: DAC: Digital Arts Consulting (a consolidated subsidiary in which shares were transferred at the end of the previous fiscal year)

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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 *1 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%

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

Depreciation(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 andan increase in the number of licenses.

Investments in human resources including the hiringof new graduates, strengthening of employment
activities and incentive plans+4.5%*1: DAC: Digital Arts Consulting (a consolidated subsidiary in which shares were transferred at the end of the previous fiscal year)

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Status of Consolidated Cost of Sales
The labor cost and other expenses are expected to be reduced significantly because DAC’s *1 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)

*1: DAC: Digital Arts Consulting (a consolidated subsidiary in which shares were transferred at the end of the previous fiscal year)

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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)61

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Material on Consolidated Financial Results
for the First Quarter of the Fiscal Year Ending March 31, 2025

07

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

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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 our earnings 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. (planned toincrease for 11 consecutive years)
Dividend (in yen) per share

Consolidated
payout ratio

2Q-endYear-end

AnnualFY March 2024

40.00

40.00

80.00

36.5％ *1FY March 2025（forecast）

40.00

45.00

85.00

33.0％

Treasury shares will be purchased using a flexible approach, with a focus on returns to shareholders
while taking into consideration trends in business performance and stock market movements.
■Reference [Total payout ratio]（Million yen）

Dividends paid

Amount of treasury
stock aquired

Total return

Total payout ratio

FY March 2024（results）

1,105

1,429

2,534

82.6％ *1FY March 2025（forecast）

1,158

500 *2

1,658

46.8%

*1 Excluding 1,930 million yen as a gain on sale of the stock of consolidated subsidiary Digital Arts Consulting Inc.
*2 Announced on June 12, 2024

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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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