Consolidated Financial Results for the
Fiscal Year Ending March 31, 2022
(From April 1, 2021 to March 31, 2022)

Financial Results Briefing Materials
May 10, 2022

Digital Arts Inc.
(Securities Code: 2326)
Copyright © 2015 Digital Arts Inc.

Contents

 Consolidated Results Highlights
 Non-consolidated Results Highlights
 By Market
 Full-Year financial Forecast for the Fiscal Year Ending
March 2023
 FY03/23 Initiatives
 Return to Shareholders for Fiscal Year Ending March
31, 2023

2

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results the Fiscal YearEnding March 31, 2022

Consolidated Results
Highlights

3

Copyright © Digital Arts Inc.

Key Points
Business has grown steadily, with the acquisition of projects dueto the rapid spread of teleworking in the enterprise sector market,
and GIGA school projects and local government projects in the
public sector market.

consolidated
net sales

consolidated
operatingprofitRecord high in consolidated net sales

9,051 million yen （up＋32.6% YoY）

Record high in operating profit

4,126 million yen（up+38.6% YoY ）4

Copyright © Digital Arts Inc.

Consolidated Results Highlights

Contracts

Net sales

9,210million yen(△2,258 million yen or △19.7%
year on year)

9,051million yen(up + 2,226 million yen or +32.6%
year on year)

Operatingprofit4,126million yen(up +1,148 million yen or +38.6%
year on year)

5•

Orders increased in the enterprise sector market,
thanks to an increase in the number of cloud service
users along with the increasingly common practiceof teleworking and growth in new customers for DAC•

Orders increased in the public sector market, withstrong orders from public agencies and local
governments, excluding projects related to the GIGA
School Concept.

•

Orders increased in the enterprise sector market,
thanks to an increase in the number of cloud service
users along with the increasingly common practiceof teleworking and growth in new customers for DAC.

•In the public sector market, orders received for iFILTER projects (GIGA, public agencies, local
governments) increased.

• In cost of goods, server expenses increased
due to growth in cloud service users• SG&A expenses increased mainly due toonline events held for partners and press
advertising. The amount of First-half bonuses
to be paid increased.

Copyright © Digital Arts Inc.

Consolidated Results Summary（(Million yen)

FY March 2021

FY March 2022

Change YoY

FY March 2022
Full-Year
Forecast

Contracts

11,4699,210△19.7％-Net sales

6,825

9,051

+32.6%

9,000

Cost of goods sold

1,946

2,676

+37.5%

2,700

Gross profit

4,878

6,374

+30.7%

6,300

Selling, general andadministrative
expenses

1,900

2,248

+18.3%

2,300

Operating profit

2,977

4,126

+38.6%

4,000

Operating margin

43.6%

45.6%

Ordinary profit

2,991

4,135

+38.2%

4,000

Profit attributable toowners of parent

2,059

2,900

+40.8%

2,770

EBITDA

3,908

5,099

+30.5%

-

-

44.4％

* Financial Forecast is the consolidated financial forecast announced on October 29, 2021.
* EBITDA = Operating profit + Depreciation + Tax expenses included in operating expenses
6

Copyright © Digital Arts Inc.

Trend in Consolidated Contracts
Consolidated contracts increased steadily, excluding the impact of the
GIGA School Concept.
7(Million yen)•

Consolidated contracts totaled 9,210 million
yen, down 19.7% year on year. Steadyprogress continued, excluding the impact ofprojects from the GIGA School Conceptcarried on from the previous year (For details,
see page 8.)•

The contract term for GIGA School Concept
projects covers several years, and many
contracts are to be renewed in three to five
years. (For details, see page 11.)•For the period under review, GIGA School
Concept projects, in which cloud service
products had constituted a large majority,
decreased and shifted to projects from publicagencies and local governments with license
sales products. Accordingly, the cloud ratio
contracted.

Trend in Contracts
Cloud service products

License sales products/Others

11,469

53.1％

46.9％

△19.7%

9,210
6,092

5,376

FY March 2021

△50.7%＋15.4%

3,004

32.6％

6,206
67.4％

FY March 2022

7

Copyright © Digital Arts Inc.

Trend in Consolidated Contracts
Brisk contract amount excluding the impacts of GIGA School Concept projects(Million yen)

Trend in Contracts
License sales
products/Others

Cloud service
products•

Contract amount rose considerably by 24.7%
or 1,502 million yen year on year from 6,083
million yen to 7,585 million yen in the public
sector market, excluding the impact of GIGA
School Concept projects (5,386 million yen inprevious year and to 1,625 million year in theyear under review).

•

In the enterprise sector market, contract
amount grew with excellent sales of i-FILTER
and m-FILTER for businesses as a result of
online seminars and other promotional
measures and with new customers captured
for DAC.

•

Contract amount for i-FILTER and m-FILTER
jumped hugely following a steady gain of
projects from public agencies and local
governments in the public sector market.

GIGA School Concept
projects

11,469
9,210
5,386

1,293

1,625
+15.5%

7,585

6,083
4,790

FY March2021

1,494

6,091
+26.9%FY March2022

8

Copyright © Digital Arts Inc.

Trend in Order Backlog
Contracts for cloud service products grew while multi-year
projects for the GIGA School Concept decreased. Net sales will
decrease for the fiscal year after next and later.
Trend in Order Backlog(Million yen)•

Sales to be recorded in the fiscal year after next or later

deferred to the next fiscal year or later

Sales to be recorded in the next fiscal year

6,572

6,439

Cloud service products cause net sales(order backlog) to go up because theamount of sales recorded in the shortperiod is small. (See Supplement on

4,043

△9.6%

p.10.11.)3,656•

Since the contracts for cloud service
products are renewable at fixed prices(whereas the renewal price for license
sales products is half the contract price

2,396+21.7%

2,916

for the first year), this recurring revenue
business model creates a stable profit
base.

End of
FY March 2021
2021年3月期末

End 2022年3月期末
of FY March 2022

9

Copyright © Digital Arts Inc.

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

Contracts

Equivalent tomaintenance fee
Equivalent tolicense fee

Licensesales
products

Orderbacklog•

License fees make up a large
proportion of the contract
amount. This portion isrecorded in a lump sum assales in the month when thecontract is obtained.

•

Amount equivalent tomaintenance fee is recorded
on a pro rata basis over thecontract period.

•

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

•

As the contract amount ofcloud service products rises,
the contract amount that isdeferred (orderbacklog) increases.

・・・

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

Y months(contract months)

Y+1
month

Y+2
month

・・・

Y+n
monthsY+n+1
monthsContract period (n months)

Contracts

Contract amount is prorated overcontract period "n"Cloud
serviceproducts

Orderbacklog

・・・

Net sales

Y months(contract months)

Y+1
month

Y+2
month

10

・・・

Y+n-1
month

Y+n
monthsCopyright © Digital Arts Inc.

Supplement) Relationship between contract amount andsales by product
Many projects in the public sector market are multi-year contracts, such as five-year
contracts. License sales products and cloud service products both earn from contract
renewals.
The diagrams on the left show the relationships
between the contract amount and sales in license

Licenseproducts
Licensesales
sales
products

sales products and cloud service products on the

Cloudservice
serviceproducts
Cloud
products
Trend in Contracts

500

assumption of a five-year contract with an amount of
250

250

11

500 million yen.
•

500

500

In a multi-year contract for cloud service
products, there is a large gap between the500

contract amount and sales. The orderbacklog is high.

X年 X
Year
X年

X+1年 … Year
X+4
Year
… X+4年
X+1年
年
X+1
X+4

X+5年
Year
X+5年
X+5

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

X+10年
Year
X+10年
X+10

Change in Net Sales•

For license sales products, a high percentage
of sales is recorded at the time of contract

460

conclusion. The amount of contract renewal
210

100
Year X

10 … 10
100
100
Year
X+1

…

Year
X+4

210

is half the amount of the initial contract. Thatmeans a small gap between the contract100

10 … 10
100
100

100

amount and sales and a very limited order

Year
X+5

Year
X+6

Year
X+9

Year
X+10

backlog.

…

11

Copyright © Digital Arts Inc.

Quarterly Trend in Net sales, Operating profit
9,051(Million yen)

Net sales and operating profit reached record highs.
2,364

1Q

2Q

3Q

4Q

6,823

5,839

5,639

2,074

5,115
1,674

2,134

1,500

4,126

1,565

1,649
1,402
1,083

1,309

1,546
738

565

1,217

356
Net sales

OperatingprofitFY March 2018

2,977

2,627

1,901

242
1,158

1,376

954

2,326
1,514

679

638

551

740

683

1,249

OperatingprofitFY March 2019

1,413

Net sales

OperatingprofitFY March 2020

12

825

1,348
1,919
731

485
Net sales

OperatingprofitFY March 2021

1,101

945

1,004

663

413

295
Net sales

1,687

2,632

Net sales

OperatingprofitFY March 2022
Copyright © Digital Arts Inc.

Consolidated Cost of Goods Sold and Selling, Generaland Administrative Expenses
ChangeYoY(Million yen)

FY March 2021

Cost of goods sold

1,946

2,676

+729

1,192

1,440

+248

Depreciation

810

844

+34

Communication
expenses

225

719

+493

Cloud server expenses will rise as a result ofsales expansion of cloud products.

Other

525

666

+140

Outsourcing expenses soared after DAC
obtained more orders.

Transfer to otheraccounts

△808

△994

△186

Transfer to software in progress increased asa result of the increase in development
projects

Selling, general andadministrative expenses

1,900

2,248

+347

Personnel expenses

1,055

1,296

+241

Bonuses to be paid to employees increased
due to sales growth.

Advertising expenses

168

239

+71

Increase due to online events held for partners
and press advertising.

Other

677

712

+34

Labor

FY March 2022

13

Main Factors for Change

DAC increased consultants
Bonuses to be paid to employees increased
due to sales growth.

Copyright © Digital Arts Inc.

Quarterly Trend in Consolidated Cost of Goods Sold•

Bonuses to be paid to employees increased due to sales growth.

•

Cloud server expenses will rise as a result of sales expansion of cloud
products.
他勘定振替高Transfer to otheraccounts

売上原価
Cost of goods sold

その他
Other

Communication
通信費
expenses

Depreciation
減価償却費

946

労務費
Labor
793
723

482
91

29 196

197

108

93

29 183

286

1Q1Q

26

565
114

195

32

34

183

216

221

2Q2Q

3Q
3Q

4Q4Q

121

141

175

60

237

179
210

87

206

262

254

1Q
1Q

2Q
2Q

225

173
220

158

226

223

213

217

214

349

332

3Q
3Q

4Q
4Q

1Q1Q

427

2Q
2Q

736

701

624

613

324

FY March 2021
14

321

204

584

486

447

164

124

202

427

153

962

208

45
198

203

212

FY March 2020

110

377

353

343

189

198

198

192

165

548

526

609

622

151

839

921

(Million yen)

330

349

3Q
3Q

4Q4Q

FY March 2022
Copyright © Digital Arts Inc.

Quarterly Trend in Consolidated Selling, General and
Administrative Expenses•

Bonuses to be paid to employees increased due to sales growth.

•

Increase due to online events held for partners and press advertising.
Personnel
人件費
expenses

Advertising
広告宣伝費
expenses

Overseas
海外費用
expenses

その他
Other

(Million yen)

660

548

13

574
487

473

12

501
443

211
167

70

46

179

190

246

1Q

2Q

3Q

FY March 2020

153

44

32

210

4Q

1Q

59
159

166

526

193

59
58

34

272

169

487
191

161

43

253

485

414
195

47

262

499

51

70

277

263

3Q

4Q

432
301

218

2Q

3Q

FY March 2021

15

262

4Q

323

1Q

2Q

FY March 2022

Copyright © Digital Arts Inc.

Summary of Consolidated Balance Sheet
Capital efficiency was good, with year-on-year improvement in both ROE and ROA.
Although the equity ratio fell due to an increase in advances received, financial healthhas improved further.
As of end of FY
As of end of FY
Change from end(Million yen)March 2021

of FY March 2021

March 2022

Current assets

12,725

17,105+34.4%(Cash and deposits)

11,382

15,773+38.6%

Non-current assets

2,130

2,236

+5.0%

Total assets

14,856

19,341+30.2%

Current liabilities

4,743

7,130

+50.3%(Advanced received)

3,370

5,684

+68.6%

Non-current liabilities

50

50

+0.7%

Equity capital

10,041

12,129+20.8%Net assets

10,062

12,159+20.8%

Equity ratio

67.6%

62.7%

-

ROE

22.0%

26.2%

-

ROA

16.0%

17.0%

-

16

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results the Fiscal YearEnding March 31, 2022

Non-consolidated Results
Highlights

17

Copyright © Digital Arts Inc.

Summary of Non-consolidated Results（単位：百万円）(Million yen)

FY March 2021

FY March 2022

Change YoY

FY March 2022
Full-Year
Forecast

Contracts

10,6938,163△23.7%-Net sales

6,074

8,003

+31.8%

7,850

Cost of goods sold

1,273

1,821

+43.0%

1,800

Gross profit

4,801

6,182

+28.8%

6,050

Selling, general andadministrative expenses

1,854

2,141

＋15.5%

2,150

Operating profit

2,947

4,040

+37.1%

3,900

Operating margin

48.5％

50.5％

Ordinary profit

2,964

4,052

+36.7%

3,900

Profit

2,044

2,832

+38.5%

2,690

-

49.7%

* Financial Forecast is the non- consolidated financial forecast announced on October 29, 2021.
18

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results the Fiscal YearEnding March 31, 2022

By Market

19

Copyright © Digital Arts Inc.

Consolidated Contract Amount by Market

Trend in Consolidated Contract Amountby Market(Million yen)

11,469430

4,091

FY March 2021

In the enterprise sector market, thecontract amount was up 532 million
yen, or 13.0%, given an increase inorders received for the i-FILTER and
m-FILTER series and the expansion
of DAC as a result of the growth ofteleworking.

•In the public sector market, thecontract amount was down 2,805
million yen, or 40.4%, due to theimpacts of GIGA School Concept
projects (5,386 million yen inprevious year and 1,625 million yen
in current year) despite more orders
received from public agencies andlocal governments than expected.

9,210

+3.5%

6,947

•

(△19.7%)△40.4%+13.0%

445

Consumer

4,142

Public4,623

EnterpriseFY March 2022

20

Copyright © Digital Arts Inc.

Consolidated Net sales by Market

Trend in Consolidated Net Sales by Market

9,051(Million yen)

444

Consumer

4,046

Public(+32.6%)

6,825+68.0%+14.5%3,984

FY March 2021

In the enterprise sector market, net
sales were up 575 million yen, or
14.5%, due to an increase in orders
received for the i-FILTER and m-FILTER
series as a result of an increase intelecommuting and the growth of DAC.

•In the public sector market, net sales
were up 1,638 million yen, or 68.0%,
orders received from public agencies
and local governments exceeded theforecast level, in addition to posted
sales of GIGA School Concept projects
that lasted from the previous fiscal
year.

+2.8%

432

2,408

•

4,559

EnterpriseFY March 2022
21

Copyright © Digital Arts Inc.

Trend in Consolidated Net Sales by Market(Million yen)

Record sales were achieved in both the enterprise sector and public

9,051

sector markets thanks to the increase in teleworking and advances in ICT

444

Consumer

4,046

Publiceducation in schools.
6,825

432
5,841

5,058

5,116

359

375

4,000
3,402
2,707

280
997

2,906

318
1,152

1,429

1,436

FY Mar 2012

FY Mar 2013

3,027

362

361
1,028

1,637

FY Mar 2014

342

2,125

1,732

516

2,191

5,641

445

2,408

1,911

1,418

1,140

1,899

FY Mar 2015

2,240

FY Mar 2016

2,573

FY Mar 2017

22

3,009

3,133

3,284

FY Mar 2018

FY Mar 2019

FY Mar 2020

3,984

FY Mar 2021

4,559

EnterpriseFY Mar 2022

Copyright © Digital Arts Inc.

Quarterly Trend in Consolidated Net Sales by Market
Net sales for the fourth quarters reached a record high, bolstered by strong
performances in the enterprise sector and public sector markets.
(Million yen)

2,632
115

2,134

2,074
109
1,687
1,514

1,249
140

114

1,500
1,376

100

90

587

104
1,413
115

426

103

116

Consumer

98

1,919
113

1,649

2,364

1,313
1,020

785

Public

974
738

597

574

451

515

383

725

1Q

975

813

770

2Q

3Q

FY March 2020

4Q

847

1Q

1,179

985

971

2Q

3Q

FY March 2021
23

4Q

1,067

1Q

1,204

2Q

1,060

3Q

FY March 2022

1,227Enterprise

4Q

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results the Fiscal YearEnding March 31, 2022

Enterprise Sector

24

Copyright © Digital Arts Inc.

Net Sales in Enterprise Sector Market by Product
Trend in Net Sales in Enterprise Sector
Market by Producti-FILTER series

m-FILTER series

FinalCode

DAC

Other

•

Sales of the i-FILTER series remained
strong, rising 94 million yen, or 4.0%, in
response to growing corporate demand forcybersecurity due to increased
teleworking.

•Sales of the m-FILTER series were strong(up 177 million yen or 26.7%), owing torising demand for mail security and PPAP
problem-solving.

•

DAC made good progress acquiring newclients and achieved substantial sales
growth (up 296 million yen or 39.8%),
reflecting growing DX needs and demand
for security measures among enterprises.

4,559(+14.5%)(Million yen)

7

3,984
13

745
190
666

2,367

FY March 2021

+39.8%+7.0%+26.7%

+4.0%

1,042
204
844

2,461

FY March 2022

25

Copyright © Digital Arts Inc.

Net Sales Growth and Expansion of DAC on
a Non-consolidated Basis
Number of consultants(Persons)

Consulting sales*(Million yen)

55

Solution sales*(Million yen)

1,015

65

91

780
58

•

End of FY March

End of FY March

2021

2022

DAC actively hired talent,focusing on those from leading
consulting firms and leading
systems integrators.

FY March 2021

FY March 2022•

Consulting sales grew 130%
year on year, reflecting thedevelopment of new clients.

•

DAC steadily met DX demandand demand for cyber security
measures.

FY March 2021•

FY March 2022

Sales of solutions
incorporating Digital Arts
products also soared,
increasing 155% year on
year.

*: DAC's non-consolidated net sales

27

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results the Fiscal YearEnding March 31, 2022

Public Sector

28

Copyright © Digital Arts Inc.

Net Sales of Public Sector Market by Product

Trend in Net Sales of Public Sector Market
by Producti-FILTER series

m-FILTER series

FinalCode

その他
Other

•

In addition to posted sales of GIGA
School Concept projects that lasted
from the previous fiscal year,
contracts gained from publicagencies and local governments werehigher than forecasted and sales of
the i-FILTER series achieved a huge
growth (up 1,476 million yen or
76.2%).

•

Brisk orders were received from local
governments and sales of the mFILTER series leaped (up 154 million
yen or 38.4%).

4,046(Million yen)(+68.0%)5

71556+25.6%

2,408
13+38.4%

56

402
3,413
1,936

FY March 2021

+76.2%FY March 2022

29

Copyright © Digital Arts Inc.

GIGA School Concept
GIGA School Status*1
Introduction of charged filtering

Share of charged filtering introduced

Not yetintroduced, etc.

Competitors

27%(Less than 10 companies)

49%

Charged filtering

i-FILTER
51%

already introduced73%•

The proportion of Boards of Education
which have adopted paid-for filtering
increased from 59% at the end of theprevious fiscal year to 73%.

*1：According to our survey of 1,788boards of education (March 2022）

31•

i-FILTER's share grew from 46% at theend of the previous fiscal year to 51%.

•

Contracts increased from 5.3 billion yen
at the end of the previous fiscal year to
6.9 billion yen.
Copyright © Digital Arts Inc.

Material on Consolidated Financial Results the Fiscal YearEnding March 31, 2022

Consumer Sector

32

Copyright © Digital Arts Inc.

Net Sales of Consumer Sector Market by Product

Trend in Net Sales of Consumer Sector
Market by ProductFor mobile terminals,other(Million yen)444(+2.8%)

432
208

223

FY March 2021

• In products for computers,
sales of multiple-year
package products and iFILTER® for Multi-Device,
which are available on
multiple terminals, remained
strong.

For computers-6.2%+11.2%

195• Sales of products for mobile
terminals remained strong
due to a continuous
increase in the number ofyoung smartphone users.

248

FY March 2022

33

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results the Fiscal YearEnding March 31, 2022

Full-Year Financial Forecast for
Fiscal Year Ending March 31, 2023

34

Copyright © Digital Arts Inc.

Forecasts for Fiscal Year Ending March 31, 2023
(Consolidated)(Million yen)

FY March 2022
Full-Year
Results

FY March 2023
Full-Year
Forecasts

Change% Change

Net sales

9,051

10,500＋1,448＋16.0 %

Cost of goods sold

2,676

3,350

＋673

＋25.2 %

Gross profit

6,374

7,150

＋775

＋12.2 %

Gross profit
margin

70.4％

68.1％

Selling, general andadministrative
expenses

2,248

2,450

＋201

＋9.0 %

Operating profit

4,126

4,700

＋573

＋13.9 %

Operating margin

45.6%

44.8％

Ordinary profit

4,135

4,700

＋564

＋13.7 %

Profit attributable toowners of parent

2,900

3,250

＋349

＋12.0 %

35

-

-

-

-

Copyright © Digital Arts Inc.

Forecasts for Fiscal Year Ending March 31, 2023
(Non-consolidated)(Million yen)

FY March 2022
Full-Year
Results

FY March 2023
Full-Year
Forecasts

Change% Change

Net sales

8,003

9,000

＋996

＋12.4 %

Cost of goods sold

1,821

2,150

＋328

＋18.0 %

Gross profit

6,182

6,850

＋667

＋10.8 %

Gross profit margin

77.2％

76.1％

Selling, general andadministrative
expenses

2,141

2,250

＋108

＋5.1 %

Operating profit

4,040

4,600

＋559

＋13.8 %

Operating margin

50.5％

51.1％

Ordinary profit

4,052

4,600

＋547

＋13.5 %

Profit

2,832

3,200

＋367

＋13.0 %

36

-

-

-

-

Copyright © Digital Arts Inc.

Status of Consolidated Net Sales(Million yen）

Consolidated Forecast•

Net sales that will be carried over to and posted
for the fiscal year in question will increase
given an increase in the number of contracts
acquired in previous fiscal years in connection
with the GIGA School Concept in the public
sector market.

•

New contracts of DAJ are expected to amount
to 8,400 million yen after measures to expand
sales of new functions and strategic sales
measures for the enterprise sector market andthe winning of projects to improve theresilience of municipal information systems in
the public sector market.

•

As in the previous fiscal year, DAC will increase
the number of consultants and is expected tocontinue growing through the acquisition of
new clients.

*1: Sales recorded from the order backlog of contracts
acquired in previous fiscal years*2: Sales deferred to subsequent fiscal years (order backlog)*3: DAJ = Digital Arts Inc.
*4: DAC = Digital Arts Consulting Inc.

37

Copyright © Digital Arts Inc.

Status of Consolidated Net Sales(Million yen）

Forecast by Market• In response to corporate needs for total
security solutions, we will enhance theproduct lineup and improve links withother companies' products in order toattract new clients.

10,500(+16.0%)
450

9,051

Consumer

+1.2%

444

+12.4%

Enterprise
4,559+20.6%

Results for FY March 2022

We will increase the number of DAC
staff to achieve growth by acquiring newcustomers.

•

Net sales that will be carried over to andposted for the fiscal year in question will
increase given an increase in thenumber of contracts acquired inprevious fiscal years in connection with
the GIGA School Concept in the public
sector market.

•

Sales growth will be attained by winning
projects for the further improvement of
the resilience of municipal information
systems and by expanding our market
share in connection with the GIGA
School Concept.

Public

4,550
4,046

•

5,500

Forecast for FY March 2023

38

Copyright © Digital Arts Inc.

Consolidated Cost of Goods Sold and Selling,
General and Administrative Expenses
Results for FY
March 2022

Forecast for FY
March 2023

Change
YoY

2,676

3,350

+25.2%

1,440

1,600

+11.1%

DAC will increase the number of consultants.

Depreciation

844

950

+12.4%

Increase in depreciation of software for cloud
products.

Communication
expenses

719

1,000

+39.1%

Cloud server expenses will rise as a result ofsales expansion of cloud products.

Other

666

800

+20.1％

Increase in outsourcing of development-994-1,000-0.5%

Selling, general andadministrative expenses

2,248

2,450

+9.0%

Personnel expenses

1,296

1,270

-2.0%

Advertising expenses

239

290

+20.9%

Advertising in newspapers and other media
will increase.

Other

712

890

+25.0%

Recruiting expenses will increase forincreasing consulting personnel at DAC.

(Million yen)

Cost of goods sold
Labor

Transfer to otheraccounts

39

Main Factors for Change

Copyright © Digital Arts Inc.

Status of Consolidated Cost of Goods Sold
Labor costs are expected to rise because DAC will increase the number ofconsultants.
Communication expenses are expected to increase as a result of sales expansion of(Million yen)cloud products.
Status of Consolidated Cost of goods soldFY March
2022
results

Labor

Depreciation

Communicationv
expenses
40

OtherTransfer toother accounts

FY March2023
forecast
Copyright © Digital Arts Inc.

Status of Consolidated Selling, General and
Administrative Expenses
Recruiting expenses (in the "other" category) will increase for increasing
consulting personnel at DAC.
(Million yen)

Status of Consolidated Selling, General and
Administrative Expenses

FY March
2022
results

Personnel
expenses

Advertisingexpenses
41

Other

FY March2023
forecast
Copyright © Digital Arts Inc.

Material on Consolidated Financial Results the Fiscal YearEnding March 31, 2022

FY03/23 Initiatives

42

Copyright © Digital Arts Inc.

Current Circumstances Surrounding Cyber Security
Measures(1)

Mounting needs forcomprehensive security(2)

Diversification of cloud services and the
spread of remote working and homelearning meant an increase in ICT assetsthat need to be protected and expansionof the domain of security threats.

(3)

Measures against malware
infections

Malware threats are intensifying due todiversification and sophistication of
cyberattacks from rampant ransomware,
Emotet and other malware.

Strengthening security measuresfor public institutions(4)

Enhancing security measures for
GIGA School devices

Not only is there demand from those whohave yet to introduce filtering but also
demand for switching from free filtering and
DNS filtering to high performance filtering
software for protecting schoolchildren.

• Local governments seek security cloud andgreater security resilience.
• Medical institutions have growing needs
for cyber security measures.

43

Copyright © Digital Arts Inc.

(1) Mounting Needs for Comprehensive Security
Diversification of cloud services and the spread of remote working andhome learning meant an increase in ICT assets that need to be protected andexpansion of the domain of security threats.

Security solutions providing broader security measuresthan ever before are now required.

External cloud service

Home

Perimeter
defenseSatellite
officeConcentration ofcommunication loads

Open server

Open serverInternal server

VPN system

External

44

Copyright © Digital Arts Inc.

(1) Mounting Needs for Comprehensive Security
To meet the needs for comprehensive security, roll out Digital Arts' original nextgeneration secure web gateways (SWGs) featuring enhanced functions of the existing
URL filtering software (i-FILTER) and a wide range of additional security solutions.
(Anti-Virus & Sandbox were released on May 10.)

Schematic of functions of next-generation SWGs

Additional functions
Internet

ApplicationsWeb Visualizing the state of use ofcloud services by users

CASB
URL filtering

Secure Web
Gateway

Enhancement offeatures

Antivirus
Sandbox
DLP
Cloud FW

 Performing checks on viruses
and behaviors in communication
 Identifying confidential
information to stop it fromflowing out of the office Controlling the traffic of all
cloud applications

Computers and otherdevices inside andoutside the office

45

Copyright © Digital Arts Inc.

(2) Measures against Malware Infections
Financial loss from ransomware and confidential information theft by targeted
attacks rank high among the 10 major security threats with the diversificationand sophistication of cyberattacks.
Rank* The ordinal number inparentheses ( ) represents therank in the previous year.

Ten major security threats 2022 for organizations

1st (1st)

Financial loss by ransomware

2nd (2nd)

Confidential information theft by targeted attacks

3rd (4th)

Attacks exploiting supply chain weaknesses

4th (3rd)

Attacks targeting teleworking and other new normal
workstyles/

5th (6th)

Information leakage through internal fraudulent acts

6th (10th)

Increase in abuse after the publication of measures against
vulnerabilities

7th (NEW)

Attacks before release of patches (zero-day attacks)

8th(5th)Financial loss by business e-mail compromise

9th (7th)

Suspension of business due to unexpected IT infrastructure
failure10th (9th)Careless information leakage* Source: Information-technology Promotion Agency, Japan (IPA): 10 Major Security Threats 2022

https://www.ipa.go.jp/security/vuln/10threats2022.html

46

Copyright © Digital Arts Inc.

(2) Measures against Malware Infections
m-FILTER and i-FILTER provide protection against infection through e-mail for
Digital Arts products.
FinalCode and i-FILTER prevent information theft even in the case of intrusion
by any means other than e-mail.
The status of zero reports on infection damage is continued.*1

Measures against infection
Measures against
infection from email fileattachments

Block or removal ofmacrosMeasures against information theft

Measures against
infection due toconnection to any URL
on email

Measures against
unauthorized taking out
of filesAutomatic
encryption to blockinformation theft

Blocking connection
to malicious orphishing websites

Measures against
taking out of files
onlineControl over online
uploadingAlso supporting
investigation andanalysis of unauthorized
uploads

Part of the i-FILTER functions was newly released on May 10 as a low-cost option of
m-FILTER.
*1: The number of reports on damage due to malware infection from users of i-FILTER Ver. 10, m-FILTER Ver. 5, i-FILTER@Cloud and m-FILTER@Cloud as of March 2022 (Source: Digital
Arts)

47

Copyright © Digital Arts Inc.

(3) Strengthening Security Measures for Public
Institutions
Security cloud projects for prefectural governments generally proceed asscheduled. Procurement for improving the resilience for municipal
governments is making progress following completion of procurement for
prefectural governments and it is expected to end in FY2023.

Schedule for public-sector projects
TargetGovernment

Security
cloud (SC)* Government
cloud also needs
to be considered.

Enhancementof resilience ofmunicipalities* Government
cloud also needs
to be considered.

FY2016FY2017FY2018FY2019Centralministries andagencies

FY2020

FY2021Introdu
ction
of
ISMAP

Budgeting, bidding, and procurement foreach projectPrefectu
resMunicip
alities

Revision ofprocurement
guidelines

Revision ofprocurement
guidelines
Budget: 16,440 million yen

FY2023

FY2024FY2025

Transfer budget:
2,930 million yen

Budget: 7,180 million yen
Prefectu
res

FY2022

Budgeting
Bidding/procureBudgeting for eachmunicipality

Budgeting
Bidding/procurePrepared using information from the Ministry of Internal Affairs and Communications (MIC) as a reference. https://www.soumu.go.jp/main_content/000729600.pdf

48

Copyright © Digital Arts Inc.

(3) Strengthening Security Measures for Public
Institutions
All solutions shown in the outline of countermeasures for municipal
information systems are possible using combinations of Digital Arts products.
We will win projects mainly for m-FILTER with Anti-Virus and Sandbox.

Overview of Solutions for Municipal Information Systems
Outline of countermeasures
Review of "three layers of protection"(α model protection and above)

Even with the β model for separation of the three layers, asecure environment can be realized.

Measures for shift away from PPAP
(process of sending an encrypted file (withpassword) attachment in an email and thensending the password to unzip the file in asecond email)File encryption

Security monitoring(For reference) Illustration of introduction of Digital Arts
solutions in environments with separation of the three layers (αmodel, β model and β’ model)
Municipal
ities

File Security

Remote access security(protection against malware, etc.)

Municipal information security cloud(prefectural government offices)

Realizes safe operations through automatic file encryption
Deletes data through file tracking and leaves deletion history
Prevents leaks from HDD through authentication mechanism

Anti SpamBlocks dangerous e-mails through e-mail filtering
Blocks malware infections through sanitization
Prevents inadvertent mistakes and leaks through protection
against errors when sending out emails

Terminal
System using National Identification
Number (My Number)

LGWAN-connected
systemIntegration withmunicipal AD
enables LDAP
authentication

Original
is sent

Only the bodyof the email issent

Terminal

Block harmful information through web access controls
Flexibly creates filtering tools based on policy settings
Performs log monitoring through integration with SIEM productTerminal
Cannot be viewed

Terminal

Terminal

Terminal

Internet-connected system

Even if an important file is leaked outside, it cannot be viewed.

The Anti-Virus & Sandbox functions werereleased on May 10 as an option.
49

Copyright © Digital Arts Inc.

(3) Strengthening Security Measures for Public
Institutions
A number of cases of damage from cyber attacks sustained by medical institutions haveoccurred in recent years. In light of that, the security guidelines for the medical industry will bestrengthened.
It is possible to provide large medical institutions with proposals similar to network separationfor enhancing resilience of municipal information systems.
There is great potential for the adoption of Digital Arts products.
Structure of network separation at major medical
institutions
Connection withexternal service
operators*

Hospital information system(HIS) networks
Electronic health record systems
Medical accounting systems
Department systems (for images,
examinations and others)
Medical equipment, service
terminals and others

Connection with external
parties through sharingof medical information

Internet connection

Networks for separate
applications

Information system network
Back office systems
Personnel management,
accounting, logistics and others
Medical equipment and service
terminals
Terminals for researchers (foracademic conferences) (fordatabases and others)

Reference terminals

•
•
•
•

Connection with regional healthcare
networks (medical information, etc.)
Connection with testing institutions
Connection with home care and nursing
care facilities
Remote medical care and others* Cloud service operators, maintenance andmanagement service providers and others* Source: Ministry of Health, Labour and Welfare: Information Security Training Material (for medical professionals)
https://www.mhlw.go.jp/content/10808000/000761105.pdf

50

Copyright © Digital Arts Inc.

(4) Enhancing Security Measures for
GIGA School Devices
Some boards of education that introduced free DNS filtering solutions are shifting to iFILTER and other paid filtering solutions for purposes of strengthening security andreducing clerical workloads.
Introduction of filtering by Boards of Education*1

March 2021

March 2022

40%

35%
Not yet 未導入
introduced
6%

Not yet未導入
introduced
無償ﾌｨﾙﾀﾘﾝｸﾞFreefiltering

18%

15%
無償ﾌｨﾙﾀﾘﾝｸﾞFreefiltering
11%
DNS
filtering
10%

有償ﾌｨﾙﾀﾘﾝｸﾞ
Payfiltering
introduced
導入済み

DNS filtering
14%

有償ﾌｨﾙﾀﾘﾝｸﾞ
Payfiltering
introduced
導入済み

71%

79％

*1: Based on interviews with 651 school boards responsible for more than 3,000 pupils and students (According to our research)

51

Copyright © Digital Arts Inc.

Penetration of "White Operation"

Realizing safe office IT environments protected
through "White Operation"

Trend in i-FILTER v10 and m-FILTER v5
Licenses Used

12,000(Thousand licenses)

10,022
7,958

4,665

We reached the March 2022 target of

3,604

10 million licenses.
We will broaden the product lineup andstep up collaboration with other companies
to further encourage the take up of White2019年3月

2020年3月

2021年3月

2022年3月

2023年3月

52

Operation.
Copyright © Digital Arts Inc.

Acceleration of Synergies within the GroupWe release a one-stop service encompassing sales, construction and operation of Digital Arts
products.
The use of D-Alert paves the way for services from the detection of incidents to recovery.

Clients in the enterprise
sector market

Consulting services＆“QuickStart” services“White operation" clients Propose Digital Arts products to consulting
clients.
Expansion ofenterprise
sectormarket Achieve an early introduction of Digital Arts
products in optimal settings based on theGroup's expertise.

“D Alert QuickIR option”
Website tampering
Incident detection
enterprise (D Alertfeature）*1

 Provision of charged services dealing witheverything from the detection of incident torecovery and prevention.
Everything fromdetection torecovery dealt withwithin the GroupInves
tigation

Action

Reco
very

Preve
ntion

*1: D-Alert has issued 2,626 reports for the current fiscal year. It notifies customers on a real-time basis to urge them totake security measures.
53

Copyright © Digital Arts Inc.

Acceleration of Synergies within the Group
Expand the scope of value provided and the level of profit through DAC
service, ensure continuous contact with E/U as the Group, and use it for
product sales growth.
Security advisory
D Alert QuickIR option

The incident response service originatedfrom “detection with D Alert”
It covers the investigation of terminals anddevices with which Digital Arts products
are used, initial response and identificationof causes.

Consulting

Operation andmaintenanceOperation and maintenance service

Identify current issues through security
assessment.



Offer proposals on measures for improving
security levels and support decisionmaking.

Propose and sell security products best
suited to customers' environments.

Sale

Building andsetting

QuickStart service
This service offers operation andmaintenance concerning Digital Arts
products.
To be provided

: Started providing: Scheduled for release
in FY2022

54

Service for installing security at a level ofrecommended settings in a form
appropriate for customer environments
Started providing

To be provided

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results the Fiscal YearEnding March 31, 2022

Return to Shareholders for Fiscal
Year Ending March 31, 2023

55

Copyright © Digital Arts Inc.

Return to Shareholders for Fiscal Year Ending March
31, 2023

We are planning to pay dividends as follows to return a portion of our earnings to ourshareholders.
Target payout ratio for fiscal year ending March 31, 2023: 32.4%
Annual dividends of surplus forecasted for fiscal year ending March 31, 2023: 75.00
yen per share
We expect to increase the annual dividend by 5.00 yen per share.

Dividend (in yen) per share
2Q-endFY March 2022
FY March 2023
(forecast)Year-end

AnnualConsolidated
payout ratio

30.00

40.00

70.00

33.9％

35.00

40.00

75.00

32.4％

56

Copyright © Digital Arts Inc.

Notes on Descriptions

Among the descriptions of plans, strategies and financial forecasts in thispresentation material, those that 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 environment and 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 thenearest million yen.
•

デジタルアーツ、DIGITAL ARTS、i-FILTER、i-FILTER@Cloud Anti-Virus & Sandbox 、D-SPA、White Web、m-FILTER、
m-FILTER MailFilter、m-FILTER Archive、m-FILTER Anti-Spam、m-FILTER Anti-Virus & Sandbox、m-FILTER@Cloud Anti-Virus &Sandbox、FinalCode、i-フィルター、DigitalArts@Cloud、Desk@Cloud、Desk,Dアラート,and other logos and icons related to Digital
Arts Inc. and its products are trademarks or registered trademarks of Digital Arts Inc.

•

Apart from this, the names of companies and products stated herein are trademarks or registered trademarks of their respective
companies.

57

Copyright © Digital Arts Inc.

-For internet convenience, safety and security -Copyright © 2015 Digital Arts Inc.