Consolidated Financial Results for the First
Quarter of the Fiscal Year Ending March 31, 2024
(From April 1, 2023 to June 30, 2023)

Financial Results Briefing Materials
July 31, 2023

Digital Arts Inc.
(Securities Code: 2326)

Copyright © 2015 Digital Arts Inc.

Contents➢ Consolidated Results Highlights➢ Non-consolidated Results Highlights➢ Net Sales by Market➢ Status of Measures for Fiscal Year Ending March 2024
➢ Full-Year financial Forecast for the Fiscal Year Ending March 2024

➢ FY03/24 Initiatives➢ Return to Shareholders for Fiscal Year Ending March 31, 2024

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Copyright © Digital Arts Inc.

Material on Consolidated Financial Results for the First Quarter of
the Fiscal Year Ending March 31, 2024

Consolidated Results Highlights

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Copyright © Digital Arts Inc.

Consolidated Results Highlights

Contracts

Net sales

2,248million yen(up +1million yen or +0.1%
year on year)• In the public sector market, the Group continued to win new GIGA School
Concept projects and local government projects. However, the amounts oforders for some projects decreased due to the rescheduling of theseprojects to 2Q.

2,541million yen• Net sales increased in the enterprise sector market thanks togrowth in sales of cloud service products and DAC growth.

(up +155million yen or +6.5%
year on year)

Operatingprofit• In the enterprise section market, the Group achieved growth by winning
new projects and new customers for DAC. It did so by offering a new
optional function to respond rising demand for cloud services andcomprehensive security needs.

872million yen(△136 million yen or △13.5% year
on year)• Net sales in the public sector market decreased due to therescheduling of some projects to 2Q, despite recording the sales
from GIGA School Concept projects.
• In cost of sales, server expenses and personnel expenses
increased due to rises in the number of licenses for cloudservice products and the number of staff at DAC, respectively.
• In SG&A expenses, expenses for sales promotion events foragents and internal strategic meetings increased in conjunction
with new product releases.

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Copyright © Digital Arts Inc.

Consolidated Statement of Income
Expenses increased primarily due to preparations for the release of new products andnew functions and a rise in the number of DAC staff members.
(Million yen)
FY March 2023
1Q

FY March 2024
1Q

Change YoY

FY March 2024 FullYear Forecast

Contracts

2,246

2,248

＋0.1%

-

Net sales

2,386

2,541

＋6.5%

11,500766

1,019＋33.0%

3,850

1,619

1,521

△6.0%

7,650

609

648

＋6.4%

2,500

Operating profit

1,009

872

△13.5%

5,150

Operating margin

42.3%

34.3%

Ordinary profit

1,019

885

△13.2%

5,150

702

614

△12.4%

3,550

1,268

1,109

△12.6%

Cost of goods sold

Gross profit
Selling, general andadministrative expenses

Profit attributable to owners ofparentEBITDA

44.8%

-

-

* Financial Forecast is the consolidated financial forecast announced on May 9, 2023.
* EBITDA = Operating profit + Depreciation + Tax expenses included in operating expenses

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Copyright © Digital Arts Inc.

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

FY March2023 1QFY March 2024
1Q

Change
YoY

766

1,019

+252

Labor

354

452

+98

Depreciation

221

200

△20

Communication
expenses

244

294

+49

Other

169

301

+132

△222

△229

△6

Selling, general andadministrative expenses

609

648

+39

Personnel expenses

302

329

+26

Advertising expenses

77

80

+3

229

238

+9

Cost of goods soldTransfer to other accounts

Other

Main Factors for Change

Increase due to the enhancement of DAJ's*1 development workforce(+17M).
It rose with the strengthening of DAC*2 consultants (+79M)

Cloud server expenses rose as a result of an increase in licenses forcloud service products and foreign exchange fluctuations (+48M)

Increase due to the development of new DA products (＋45M)
Increase due to the expansion of DAC's business (+65M)

Increase due to the enhancement of DA's sales workforce (+13M)
Increase in the number of personnel in DAC's administrative
department (+12M)*1: DAJ = Digital Arts Inc.
*2: DAC = Digital Arts Consulting Inc.

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Copyright © Digital Arts Inc.

Trend in Consolidated Contracts
Consolidated contracts totaled 2,248 million yen, up +0.1% year on year.
Trend in Contracts•

Contract for cloud service products
increased 2.6% because the Group not
only gained new projects steadily amid
growing demand for cloud services inthe enterprise sector market but it also
gained new GIGA project orders in the
public sector as in the previous fiscal
year.

•

In the category of license sales
products/other, contracts decreased
1.2% due to the impact of therescheduling of some local government
projects to 2Q in the public sector,
despite an increase in sales at DAC.

Cloud service products
License sales products/Others

33.9％

66.1％

2,246

+0.1%

2,248

762

+2.6%

782

1,484

▲1.2%

FY Mar. 2023 1Q

1,466(Million yen）

34.8％

65.2％

FY Mar. 2024 1Q

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Copyright © Digital Arts Inc.

Trend in Consolidated Contracts
The order backlog excluding GIGA School projects increased due to progress inthe posting of sales of GIGA School Concept projects and increased orders forcloud services for enterprises.
Trend in order backlog
Sales FY3/2025 onwards (GIGA)

Sales 2-4Q FY3/2024 (GIGA)

Sales FY3/2025 onwards

Sales 2-4Q FY3/2024

6,427(Million yen）

6,029

•

Many GIGA School Concept projects are fiveyear contracts. Over time, more sales areposted. The amount of sales to be recorded
will drop in FY March 2025 and later.

•

Sales to be recorded 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.

•

From FY March 2025 onwards, a majority of
the GIGA School Concept projects will expire.
Contracts will grow towards a new peak.

•

The order backlog is steadily increasing,reflecting the gradually growing percentage
of enterprise contracts that are for cloudservice products. Many of these are one-year
contracts.

△22.8％

3,144

2,426

DOWN

＋9.2％

1,362

1,488

749

887

1,171

1,227

End of June 2022

End of June 2023

UP

＋18.4％
UP

＋4.8％
UP

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Copyright © Digital Arts Inc.

Change in Net Sales
Consolidated net sales grew 6.5% year on year, to ¥254.1 million.
Change in Net Sales•

Net sales of cloud service products
increased 14.5% year on year,
reflecting an increase in the number ofprojects in the enterprise sector market
due to growing demand for cloudservices, as well as the Group's
consistent success in gaining new
GIGA projects.

•

In the category of license sales
products and other, sales edged up
1.9% because the timing of orders for
local government projects was pushed
off to 2Q in the public sector market.

Cloud service products
License sales products/Others

36.8％

877

63.2％

2,541

+6.5%

2,386

(Million yen)

+14.5%

1,004

+1.9%

39.5％

60.5％

1,508

1,536

FY Mar. 2023 1Q

FY Mar. 2024 1Q

9Copyright © Digital Arts Inc.

Quarterly Trend in Net sales, Operating profit
Net sales hit a record high in the first quarter under review. On the other hand,costs associated with preparations for the release of new products increased.
10,436(Million yen)

9,051

1Q

2Q

3Q

4Q

2,778
2,364

6,825
2,573

5,639

2,074

2,134

1,500
1,649
2,977

1,376
2,326
1,514

679

1,687

683

1,413

Operating profit

FY March 2020

825

Net sales

Operating profit

FY March 2021

2,698

1,348
1,919

1,238
2,386

Operating profit

FY March 2022

10

2,541

1,009

731
Net sales

1,185
980

945

1,004

485

413
Net sales

1,101

2,632

663

551
1,249

4,413

4,126

Net sales

Operating profit

FY March 2023

872
Net sales

Operating profit

FY March 2024

Copyright © Digital Arts Inc.

Quarterly Trend in Consolidated Cost of Goods Sold
Cloud server expenses (communication expenses) and labor costs increased, the former due to a rise in thenumber of licenses for cloud service products and foreign exchange rate fluctuations and the latter reflecting
the enhancement of DAC's consultant personnel.
(Million yen)Transfer to otheraccounts
Cost of goods sold

1,204
1,102

Other
Communication
expenses
Depreciation

946
793

Labor

723
609

622

110
183
34

121

203

202

175

237

60

262
1Q

254
2Q

173

164

220

321

225

158

989
170

226

324

349

3Q

4Q

FY March 2021

332

1Q

427

2Q

202 901

349

354

373

3Q

4Q

1Q

2Q

11

229

294

208
983

1,014

200

1,019

766

330

FY March 2022

307

280

221
736

701

624

613

584

486

214

204

239 221

312

324

206
217

1,253

247 201

222

244

223

213

169

87
206

198

447

210

153

962

208

45

427

134

151
141

839

921

244 220

1,235

430

3Q

FY March 2023

476

452

4Q

1Q

FY March 2024
Copyright © Digital Arts Inc.

Quarterly Trend in Consolidated Selling, General and Administrative Expenses

SG&A expenses increased due to the enhancement of the sales workforce and arise in the number of staff members in DAC's administrative departments.
Personnel expenses

Advertising expenses(Million yen)

other

660

648
609

574
501

499

169
191

153

195
161
32

44

1Q

159

204

193

59

77

58

214

229

51

70

277

263

3Q

4Q

78
74

578
238
216
80
67

432
301

218

2Q

526

59

166

34
272

558

487

485

414

609

3Q

FY March 2021

262

4Q

323

1Q

2Q

FY March 2022

302

280

1Q

2Q

316

293

3Q

4Q

FY March 2023

12

329

1Q
FY March 2024
Copyright © Digital Arts Inc.

Consolidated Balance Sheet
Equity ratio rose 1.0% from the end of the previous fiscal year to 67.9%.
As of end of 1Q FYMarch 2023

As of end of FY
March 2023

As of end of 1Q
FY March 2024

Change fromend of FY
March 2023

(Million yen)

Main Factors for Change

Current assets

16,99018,92518,189△3.9%(Cash and deposits)

15,57517,01816,387△3.7%

Non-current assets

2,213

2,223

2,256

+1.5%

Total assets

19,204

21,14920,446△3.3%

Current liabilities

6,848

6,924

6,486

△6.3% Income taxes payable (△542M)(Advanced received)

5,777

5,187

5,317

+2.5%

Non-current liabilities

50

50

50

+0.0%

Equity capital

12,27314,141

13,877△1.9% Dividends paid △561M, Profit ＋614M

Net assets

12,304

14,173

13,909△1.9%

Equity ratio

63.9%

66.9%

67.9%

-

ROE

5.8%

23.3%

4.4%

-

ROA

3.6%

15.1%

3.0%

-

13

Treasury share buy-back fund (△500M),
etc.

Increase in contracts for cloud service
products

Treasury share buy-back △319M,

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results for the First Quarter of the
Fiscal Year Ending March 31, 2024

Non-consolidated Results
Highlights

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Copyright © Digital Arts Inc.

Summary of Non-consolidated Results
SG&A expenses increased due to the development of new products and the(Million yen)strengthening of sales.
FY March 2023
1Q

FY March 2024
1Q

Change YoY

FY March 2024
Full-Year Forecast

Contracts

1,926

1,793

△6.9%

-

Net sales

2,065

2,085

+1.0%

10,000520

616+18.5%

2,650

1,544

1,469

△4.9%

7,350

Selling, general andadministrative expenses

556

591

+6.3%

2,350

Operating profit

988

877

△11.2%

5,000

47.9%

42.1%

-

50.0%

Ordinary profit

994

888

△10.6%

5,000

Profit687

617△10.1%

3,450

Cost of goods sold
Gross profit

Operating margin* Financial Forecast is the non-consolidated financial forecast announced on May 9, 2023.

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Material on Consolidated Financial Results for the First
Quarter of the Fiscal Year Ending March 31, 2024

NET SALES BY MARKET

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Copyright © Digital Arts Inc.

Consolidated Contract Amount by Market
Trend in Consolidated Contract
Amount by Market
Enterprise

Public

2,248

2,246
113

910

1,223

Consumer•In the enterprise sector market, thecontract amount was up 96 million yen or
7.8% due to increased orders received
resulting from additional functions of the iFILTER and m-FILTER series, new deals
that the Group won by implementing astrategy to expand sales to specific targets
and the growth of DAC.

•In the public sector market, the Group
continued to gain new GIGA School
Concept projects. However, the contract
amount decreased 9.7%, or 88 million yen,
due to the rescheduling of some local
government projects to 2Q.

(Million yen)(+0.1%)
△5.3%

107

△9.7%

822

+7.8%

1,318

FY Mar. 2023

FY Mar. 2024

1Q

1Q
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Consolidated Net sales by Market
連結売上高推移
Trend in市場別
Consolidated
Net Sales by Market
Enterprise

PublicConsumer(Million yen)

2,541

2,386
105

1,017

1,262

(+6.5%)
+0.6%

△0.1%

+12.3%

106

1,016

1,418

FY Mar. 2023

FY Mar. 2024

1Q

1Q

• In the enterprise sector market, net sales
increased 12.3%, or 156 million yen, due to arise in the number of new projects in response
to growing demand for cloud services, coupledwith the acquisition of new customers for DAC.
• In the public sector market, sales were on an
increasing trend due to the posting of sales of
GIGA School Concept projects. Even so, net
sales slipped 0.1%, one million yen, because thetiming of orders for local government projects
was pushed off to 2Q.

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Copyright © Digital Arts Inc.

Trend in Consolidated Net Sales by Market
Net sales for the first quarters reached a record high(Million yen)

2,541
2,386

106

Consumer

105

1,919
113

1,413
1,158
803
570

73
170

650

673

101

85

216

207

326

331

380

FY Mar. 2013
1Q

FY Mar. 2014
1Q

FY Mar. 2015
1Q

89
256

456

FY Mar. 2016
1Q

916
89

92
424

1,217

1,249

120

140

408

383

115
451

1,067

FY Mar. 2017
1Q

640

688

725

FY Mar. 2018
1Q

FY Mar. 2019
1Q

FY Mar. 2020
1Q

19

1,017

738

296

530

1,016 Public

1,262

1,418 Enterprise

847

FY Mar. 2021
1Q

FY Mar. 2022
1Q

FY Mar. 2023
1Q

FY Mar. 2024
1Q

Copyright © Digital Arts Inc.

Quarterly Trend in Consolidated Net Sales by Market(Million yen)

2,778
2,698

2,632
115

2,134

2,074
109

1,687
1,514
1,249

1,376

114

1,500

587

104

103

115

1,919
113

116

2,386

2,573

105

103

2,541
106

Consumer

1,016

Public

1,469

1,418

Enterprise

4Q

1Q

105

98

1,203
1,269

1,313

785

100
90

140

1,413

1,649

2,364

118

1,195

1,020

1,017

1,227

1,262

1,310

1,274

4Q

1Q

2Q

3Q

974
738

597

426

574

451

515

383

1,179
725

1Q

975

813

770

2Q

3Q

FY March 2020

4Q

847

1Q

985

971

2Q

3Q

4Q

1,067

1Q

1,204

2Q

1,060

3Q

FY March 2022

FY March 2021

20

FY March 2023

FY March 2024
Copyright © Digital Arts Inc.

Material on Consolidated Financial Results for the First
Quarter of the Fiscal Year Ending March 31, 2024

Enterprise Sector

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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

1,418
(+12.3%)1,262
3(Million yen)

1

452

318
63

66

263

257

641

FY Mar. 2023
1Q

FY Mar. 2024
1Q•

Sales of the i-FILTER series remained strong, rising 28
million yen, 4.5%, in response to growing corporate demandfor cybersecurity.

•

Sales of the m-FILTER series remained solid due to risingdemand for email security and the offering of new functional
options. However, net sales decreased 2.5%, 7 million yen,because some projects were pushed off to 2Q.

•

Sales of the FinalCode series remained strong, meeting
demand for responses to PPAP and the revised Act on theProtection of Personal Information. (+3 million yen or +5.3％)•

DAC made good progress acquiring new clients andachieved substantial sales growth (up 134 million yen or
42.0%), reflecting growing DX needs and demand for
security measures among enterprises.

＋42.0％
UP

＋5.3％
UP

△2.5％
down

613

Functions were added to products andcooperation with agencies were strengthened in
response to more frequent, diverse cyber attacks.

＋4.5％
UP

22

Copyright © Digital Arts Inc.

Net Sales Growth and Expansion of DAC on a Non-consolidated Basis

Number of consultants

Security consulting sales*(Million yen)

(Persons)

101

IT strategy consulting sales*

346

107

(Million yen)

92

106

FY Mar. 2023 1Q

FY Mar. 2024 1Q

226

End of FY March2023

End of 1Q FYMarch 2024

Actively recruited excellent individuals
with DX and cyber security expertiseFY Mar. 2023 1Q FY Mar. 2024 1Q

Grew significantly due to the receptionof an ISMAP acquisition-related project
and a new project in which it provides
comprehensive support including
security assessment and support for the
implementation of security measures.
23

Grew steadily by planning IT strategies
to help customers implement DX andgaining consulting projects for activities
such as the reform of operations and theutilization of DX solutions.
*DAC's net sales (before consolidated
journal adjustments)
Copyright © Digital Arts Inc.

Material on Consolidated Financial Results for the First
Quarter of the Fiscal Year Ending March 31, 2024

Public Sector

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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• i-FILTER series sales slipped 0.7%, 6
million yen, due to the rescheduling ofsome local governments projects to
2Q, although sales of GIGA School
Concept projects were recorded as in
the previous fiscal year and new
projects were received.

(Million yen)

1,016

1,017

(△0.1%)△22.5％

21

16

down

183

192

＋4.9％
UP

813

807

FY Mar. 2023 1Q

FY Mar. 2024 1Q• m-FILTER series sales grew on theback of orders for local government
projects.
(＋9 million yen or＋4.9％)

△0.7％
down

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Copyright © Digital Arts Inc.

GIGA School Concept
GIGA School Status*1
Share of charged filtering introduced

Introduction of charged filtering

Not yetintroduced,etc.
Competitors

23%(Less than 10 companies)
45%

i-FILTER

55%

Charged filtering alreadyintroduced77%•

The percentage of boards of education that haveadopted pay filtering increased to 77%.
*1：According to our survey of 1,741boards of education (Jun 2023)

26•

i-FILTER's share was 55%.

•

Cumulative contracts reached 9.0 billion yen
at the end of the third quarter from 8.6 billion
yen at the end of the previous fiscal year.
Copyright © Digital Arts Inc.

Material on Consolidated Financial Results for the First
Quarter of the Fiscal Year Ending March 31, 2024

Consumer Sector

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Copyright © Digital Arts Inc.

Net Sales of Consumer Sector Market by Product
Trend in Net Sales of Consumer
Sector Market by ProductFor mobile terminals,

otherFor computers

105

53

106

(Million yen)

• In products for computers, thenumber of users of multiple-year
package products and i-FILTER® for
Multi-Device, which are available on
multiple terminals, remained strong.

(+0.6%)

53

＋1.5％
UP

• Revenue from contract developmentof products for mobile terminals for
carriers decreased despite anincrease in the number of users.
△0.4％

52

52

FY Mar. 2023 1Q

FY Mar. 2024 1Q

DOWN

28

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results for the First Quarterof the Fiscal Year Ending March 31, 2024

STATUS OF MEASURES FOR FISCALYEAR ENDING MARCH 2024

29

Copyright © Digital Arts Inc.

Schedules of Main Measures for FY March 2024
Improve functions for responding to needs for comprehensive security andintroduce new products to markets
Launch the communications business ahead of the schedule set in themedium-term management plan
Mar.
Apr.
May Jun.
Jul.
Aug.
CASB functionality of iFILTER@Cloud

Respond to needs forcomprehensive
security

i-FILTER AI chat filter*1

Release scheduled
for August

Released in
July

*1

f-FILTER
Desk

Enter theauthentication market

StartIn

Oct. andlater

Released in
April

m-FILTER MailAdviser OWA

Launch thecommunication business

Sep.

Release scheduled
for October

Released in
June

Releasescheduled forAugust*1 i-FILTER AI chat filter and f-FILTER were added in addition to the schedule announced on May 9, 2023 in the Supplementary materials for the Financial Results of the Fiscal
Year Ended in March 31, 2023.

30

Copyright © Digital Arts Inc.

Status of measures to be implemented in the fiscal year ending
March 31, 2024
With a large number of new functions and new products expected to be released in the current fiscal year,
the Company invested actively to enhance development and its sales workforce, promote sales events foragents and facilitate internal strategic meetings. Steady progress is being made.

Situation

Measures✓

Use the CASB function to improve the next-generation SWG
function

Respond toneeds forcomprehensiv
e security✓

Upgrade measures for detecting and responding to malware
infections✓

i-FILTER＠Cloud CASB functionality (released in April 2023)

Improve measures against PPAP and erroneous emailtransmission

m-FILTER MailAdviser OWA (released in July 2023)✓

Develop non-VPN remote access products

f-FILTER (to be released in October 2023)✓

Released the i-FILTER AI chat filters(to be released in August 2023)

Expand sales
to public
organizations
and schools

Total sales of Anti-Virus & Sandbox increased to
415 million yen from the previous fiscal year's 358
million yen.

✓

Total contracts for improving security of local
governments increased from 1,739 million yen in theprevious fiscal year to 1,841 million yen.

Expand sales in enhanced security for
local governments✓

Combine i-FILTER, m-FILTER and FinalCode to meet
local governments' outlines of countermeasures

Increase market share in GIGA School
Concept projects

In-house online seminars on the themes of thehandling of medical care and local government
security attracted many attendees.
31

Copyright © Digital Arts Inc.

Status of measures to be implemented in the fiscal year ending
March 31, 2024
The Group launched the new Desk business and received new orders as early as June.
Awareness of the StartIn certification business improved through the implementation of
in-house online seminars and sales to agents.

Situation

Measures

Launch thecommunication business✓

Received an order by creating a project soon after
release in the focused public sector andeducation markets.

Roll out Desk as a securecommunications tool for the online
communication market, wheresecurity issues remain to be solved

The Desk chat/online tool and Desk Event webinar
tool(released in June 2023)✓
Enter theauthentication(IDaaS) market

Introduce to the market StartIn, an
original IDaaS solution for enhanced
authentication security (withpositional information and thirdparty authentication) and reduced ID
management burdens (IDprovisioning function)

Progress is being made as planned for releases.
The number of inquiries from agents is increasing.
StartIn, an IDaaS solution（to be released in August 2023）

32

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results for the First Quarterof the Fiscal Year Ending March 31, 2024

Full-Year Financial Forecast for Fiscal YearEnding March 31, 2024
SUPPLEMENTARY MATERIALS FOR FINANCIAL RESULTS OF THE FISCAL YEAR ENDED MARCH 2023 (ANNOUNCED ON MAY 9, 2023)

33

Copyright © Digital Arts Inc.

Forecasts for Fiscal Year Ending March 31, 2024(Consolidated)
Expand existing businesses and develop new businesses with the aim of increasing net sales and profit(Million yen)
FY March 2023
Full-Year Results

FY March 2024
Full-Year Forecasts

Change% Change

10,436

11,500＋1,063＋10.2 %

Cost of goods sold

3,666

3,850

＋183

＋5.0 %

Gross profit

6,769

7,650

＋880

＋13.0 %

Gross profit margin

64.9％

66.5％

Selling, general andadministrative expenses

2,356

2,500

＋143

＋6.1 %

Operating profit

4,413

5,150

＋736

＋16.7 %

Operating margin

42.3%

44.8％

Ordinary profit

4,429

5,150

＋720

＋16.3 %

Profit attributable to owners ofparent

3,062

3,550

＋487

＋15.9 %Net sales

34

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Copyright © Digital Arts Inc.

Forecasts for Fiscal Year Ending March 31, 2024 (Non-consolidated）(Million yen)

FY March 2023
Full-Year Results

FY March 2024
Full-Year Forecasts

Change% Change

Net sales

8,984

10,000＋1,015＋11.3 %

Cost of goods sold

2,425

2,650

＋224

＋9.3 %

Gross profit

6,559

7,350

＋790

＋12.1 %

Gross profit margin

73.0％

73.5％

Selling, general andadministrative expenses

2,163

2,350

＋186

＋8.6 %

Operating profit

4,395

5,000

＋604

＋13.7 %

Operating margin

48.9％

50.0％

Ordinary profit

4,407

5,000

＋592

＋13.4 %

Profit

3,048

3,450

＋401

＋13.2 %

35

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Copyright © Digital Arts Inc.

Status of Consolidated Net Sales
Consolidated Forecast• 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.

(Million yen）

• New DAJ contracts are expected toamount to 9,385 million yen following
measures to expand sales of new
functions and new products for theenterprise sector market and public
sector market, together with strategic
sales measures.
*1：DAJ = Digital Arts Inc.
*2：DAC＝ Digital Arts Consulting Inc.
*3：Sales recorded from the order backlog of contracts
in previous fiscal years

acquired*4：Sales deferred to subsequent fiscal years (order backlog)

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Copyright © Digital Arts Inc.

Status of Consolidated Net Sales
Forecast by Market

11,500(Million yen）(+10.2%)

10,436

456

433

5,022

• 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.

＋5.3％
UP
Consumer

Public• 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.

＋7.2％

4,686

UP

Enterprise

5,316

Results for FY March 2023

6,021

＋13.3％UP• The market share in GIGA School
Concept projects will increase andsolidify security for local governments
to expand sales

Forecast for FY March 2024

37

Copyright © Digital Arts Inc.

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

Results for FY
March 2023

ChangeYoY

Forecast for FY
March 2024

Main Factors for Change

3,666

3,850

+5.0%

1,634

1,980

+21.1%

Increase in number of DAJ's development personnel.

838

910

+8.5%

Increase in depreciation of software for cloud products.

1,162

1,230

+5.8%

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

895

770

△14.1％

A decrease in outsourcing expenses following a shift ofengineering operations outsourced by DAC to internal
operation.

△865△1,040+20.1%

Selling, general andadministrative expenses

2,356

2,500

+6.1%

Personnel expenses

1,193

1,310

+9.7%

An increase in the number of personnel due to therecruitment of new graduates.

Advertising expenses

297

310

+4.1%

Advertising in newspapers and other media will increase.

Other

865

880

+1.7%

An increase in travel and transportation expenses as the
COVID-19 pandemic fades.

Cost of goods sold
Labor
Depreciation
Communication
expenses

Other

Transfer to other accounts

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Copyright © Digital Arts Inc.

Status of Consolidated Cost of Goods Sold
The increase in DAJ’s development personnel will lead to a rise in labor expenses.
Cloud server expenses (communication expenses) will grow with the expansion ofsales of cloud service products and an increase in the number of licenses.
Status of Consolidated Cost of goods sold

39

(Million yen)

Copyright © Digital Arts Inc.

Status of Consolidated Cost of Goods Sold
Personnel expenses will surge due to an increase in the number of staff after new graduates employees
joined the Group.
Travel and transportation expenses as well as entertainment expenses (as part of Other) will increase as the
COVID-19 pandemic fades.
Status of Consolidated Selling, General and
Administrative Expenses

40(Million yen)

Copyright © Digital Arts Inc.

Material on Consolidated Financial Results for the First Quarter of the
Fiscal Year Ending March 31, 2024

FY03/24 Initiatives
SUPPLEMENTARY MATERIALS FOR FINANCIAL RESULTS OF THE FISCAL YEAR ENDED MARCH 2023 (ANNOUNCED
ON MAY 9, 2023)

41

Copyright © Digital Arts Inc.

Main Measures for FY March 2024
We will improve our response to needs for comprehensive security, enter the authentication market, and launch thecommunication business as one of the initiatives to address a vision of creating new value and increasing demand set
out in the medium-term management plan.

1.

Respond to needs for comprehensive security•

Use the CASB function to improve the nextgeneration SWG function
Upgrade measures for detecting and responding tomalware infections
Improve measures against PPAP and erroneous emailtransmission
Develop non-VPN remote access products

•
•

•

3.

2.

•

•

Expand sales in enhanced security for local
governments
Increase market share in GIGA School Concept
projects

4.

Launch the communication business

Expand sales to public organizations andschools

Enter the authentication (IDaaS) market

Introduce to the market StartIn, an original
IDaaS solution for enhanced authentication
security (with positional information and thirdparty authentication) and reduced ID
management burdens (ID provisioning
function)

Roll out Desk as a secure communications tool
for the online communication market, wheresecurity issues remain to be solved

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Copyright © Digital Arts Inc.

Positions of Measures in ICT Environment
Execute measures for comprehensively supporting the ICT environment centering on the cloud
Solutions

ICT environment

Internal processapplications

Sending andreceiving
email
Cloud
Application

Internet accessCommunications(Next-generation
SWG)

Communications

1. Respond to needs for comprehensive security

SD-WAN
Network
optimization
Log

Certification
System

ID-aware proxy (non-VPN)

SWG
SEG

Cloud proxy

Cloud FW

CertificationSIEM
Log collection andcentralized
management

IAP
CASB

Visualization and control of cloud services

Secure email gateway
Network control
4. Enter the authentication market

IDaaSManagement of IDs on the cloud
1. Respond to needs for comprehensive security

Internal devices anddata

Terminals anddata

Internal devices anddata

Operation
monitoring
Monitoring
Detection andresponse
Analysis
ReportConsumer devices

Chat and Online Conferencing System

Storage

Data storage and sharing

DLP

Prevention of loss or leakage ofconfidential data

IRM

Data Encryption

MDM

Mobile device management

EDR

End-point monitoring and threat detection

1. Respond to needs for comprehensive security

3. Launch the communication business

43

Copyright © Digital Arts Inc.

Schedules of Main Measures for FY March 2024
Improve functions for responding to needs for comprehensive security and introduce new products to markets
Launch the communications business ahead of the schedule set in the medium-term management plan

Product or function

1. Respondto needs
forcomprehensivesecurity

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct. and
later

Apr.

1-1. CASB Functionality of iFILTER@Cloud

ReleasefinishedJul.
Release1-2. m-FILTER MailAdviser OWA

3. Launchthecommunicati
on business3. Desk

4. Enter theauthenticati
on market

4. StartInfinished

Jun.
ReleasefinishedAug.
Releasefinished

44

Copyright © Digital Arts Inc.

1-1. CASB functionality of i-FILTER@Cloud
Visualizing the status of use of cloud services by employees (to meet needs for measures against shadow IT and formeasures to manage sanctioned IT), the function got off to a good start after its release.
[Schematic of visualization of the status of use of cloud services]

45➢

Count the number ofconnections to individualcloud services and thenumber of file downloads anduploads to visualize trends inuse➢Strengthen measures against
shadow IT (introduction anduse of IT tools at employees'
discretion without permission
from the IT department or thesystem management
department)➢

Strengthening measures for
sanctioned IT (cloud services,
applications, computers andother IT equipment for which
the company officiallyconcludes contracts and theuse of which is permitted)
Copyright © Digital Arts Inc.

1-2. m-FILTER MailAdviser OWA
Improve functions including measures for PPAP (placing of file attachments into storage)◼ Support the Outlook Web Access (OWA) and improve functions
PPAP countermeasures

Countermeasure against wrong
email transmission

Support fordisabling ofviewing anddownload of fileattachments inthe event oferroneous emailtransmission

A function similar to that of the existing MailAdviser is featured.
It supports checking of the sender, body text and fileattachment name and for setting attached file views anddownloads.

Support for
confirmation of
the status offile opening/viewing anddownloads(1) Separate the fileattachment andupload it

PPAP countermeasures
By placing the attached file in storage, the raw filecan be downloaded if the mail recipient was given
permission to download.

(3) Access to the URL
After authentication
with the email address,
download the fileattachment(2) Insert the URL for
download into the bodytext of the email

Sender46+ Mail Adviser OWA

Recipient
Copyright © Digital Arts Inc.

3.Desk
Roll out Desk as an application which can be used as a core of various operations

NEW

The name Desk embodies our hope that this application serves as a desk for work that is close tousers in their computers, tablets or smartphones at any time and at any place.
Leveraging our knowledge in the security business, it will provide a communication space withsecurity and comfort.
47

Copyright © Digital Arts Inc.

3.DeskBy moving up ahead of schedule, creating new value and increasing demand, the long-term vision stated in the mediumterm management plan, execute a full-scale promotion of Desk as a new product in the communication business.

As online communication tools are increasingly used, they are more highly regarded for theirconvenience in helping make communication easy, irrespective of the place. On the other hand, newsecurity risks have emerged.
New security risks

Erroneous chattransmission

Information leaks tooutsiders

Cyberbullying

The Desk series provides a communication space with security and comfort.

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Copyright © Digital Arts Inc.

3.「Desk」
Desk has excellent features to provide a communication space with security and comfort.
Desk's excellent features

Security

Providing a communication space with security and comfort

IP address restriction and twofactor authentication

Lowering the risks involved in erroneoustransmissions through a feature to prevent them

File encryption

Robust authentication to reduce the risks ofdata leaks

A feature to stop erroneoustransmissions

Chat
monitoring

A monitoring feature to prevent cyberbullying

Bullying alert

Suicide alert
A user interface friendly to
any user

Usability

Collaboration with Azure AD
Supporting batch user registration

Reassurance linked to themade-in-Japan status
49

Copyright © Digital Arts Inc.

3.「Desk」
Provide a lineup of four different product editions matched with different types of users and scenarios
Among them, focus on the GIGA School edition[Desk product lineup]

Product name

Desk

Desk Event

Category

Chat and Online Conferencing System

Webinar System

EditionRegular

GIGA School

RegularOutlineHolding chat, online
conferencing and filesharing features tosupport one-to-one
and multiple-tomultiple interactive
communications

Offering features
helpful to theeducation field suchas chat monitoring toensure safe andsecure chats at
schoolSupporting one-tomultiple online
communications
such as morning
meetings, internal
workshops andonline seminars

Users

Enterprises andpublic organizations

Schools
50Enterprises, publicorganizations and schools

Shareholders
Meetings
Paving the way forthe distribution ofvirtual shareholders
meetings and forelectronic voting

Listed companies

Copyright © Digital Arts Inc.

3.「Desk」
Enhance communication at school with the use of Desk
GIGA School
Teachers◆◆ Notifications to students◆ Notifications to parents◆ Coordination withexternal parties◆◆

Students◆◆ Online lessons◆ Group chats◆ Communication withparents and teachers

Parents
Sharing of communication
networks
Notifications of teacher
attendance or absence
Communication with children
External parties
Communication with local
stakeholders such as
PTAs and managers ofchildren's baseball teams

We will be releasing an edition specially equipped with monitoring and other features and designed for use at schools
within the current fiscal year.
We will offer a platform for secure information sharing, mainly among teachers, students and parents, and aim tocreate a useful communication platform for schools covering external parties in the future.
51

Copyright © Digital Arts Inc.

3.「Desk」
We will expand Desk from enhancing communication at school to a regional
communication platform.
GIGA School
Supporting secure communication
between teachers and students andbetween students
 Simplified initial settings
 School management features Group management features
 Communication in classes andlessons
 Chat monitoring Online lessons
 Chats between
students

Supporting secure communication
with community stakeholders

Supporting communication
with parents
 Personal voice communication
between students
 Digitization of notices andother items to be distributed
 Notifications of student
attendance and absence Collaboration with learning eportal services
 Communication between family
members

 Build a system for linking
with local stakeholders

Teachers

 Supervision of relationships
between students and relatedparties
Collabor
ation
withlearning
e-portals

Learning
e-portals
Teachers

Digitization
Parents

Version 1 to be released in FY March 2024

External parties

Students
Students

Students

Teachers

Digitization

Parents

Version 2 to be released in FY March 2024

52

Version 3 to be released in FY March 2025
Copyright © Digital Arts Inc.

4.「StartIn」
Promote StartIn as the most secure and comfortable solution at the start of all processes
in enterprises

NEW

The name of StartIn has been coined by combining Start with In, given that an authentication solution is a system inwhich users should start by logging in before any process or learning.
It has an original authentication method using positional and other information to provide a comfortable environment.
53

Copyright © Digital Arts Inc.

4.「StartIn」
It offers solutions to all issues involved in the corporate process of transfer to a cloudenvironment.
StartIn's solution

Limitation of perimeter security
After the shift to a cloud environment, there is no boundary
separating inside and outside the office. It is therefore difficult tomanage IDs and to ensure the security of information assets.

Lack of uniformity in security levels

Singleauthentication
information
No need to log
in on a serviceby-service
basis

Each cloud service requires separate authentication andauthorization as well as data protection. It is difficult to attain asingle security level for all services.

Collaboration with different
cloud services

StartIn

Increasing the burden of ID
management on administrators
Administrators face an increasing burden since it is necessary toseparately manage IDs and passwords, make authority settingsand implement security measures for different cloud services.
54

Centralizationof ID
management ofauthority andaccess control

A robust
authenticati
on method
independent
from cloudservices

User’sterminal

Administrator’s
terminal
Copyright © Digital Arts Inc.

4.「StartIn」
Capture latent needs by launching new products in markets with high growth potential
Main functions required in the market

IDaaS Market Size Trends

ID management / access management / single sign-on / multi-（100 Million yen）factor authentication

Market growth in line with increased use of cloudservices

210
190

Toward 2027, the market is expected to grow at a CAGR of
17.9% to 21 billion yen (+13.2 billion yen from 2021). Market
growth is expected to continue

165
140
CAGR
＋17.9％

115
94

Future needs for ID management for internal systems
In the future, needs are expected to expand not only for external
cloud services, but also for ID management for internal systems,
improved login convenience, multi-factor authentication, risk-based
authentication, and other authentication platforms.

78

Authentication is critical in the zero-trust model
2021

2022

2023

2024

2025

2026

Likely to be introduced in conjunction with SWG, CASB,
and other solutions.

2027

Source: Created by Fuji Chimera Research Institute, Inc. based on "Network Security Business Survey Overview" (2022)

55

Copyright © Digital Arts Inc.

4.「StartIn」
StartIn's superior features ensure a high security level in a cloud environment.
They also reduce ID management burdens.
Original robust authentication and simple ID
management

StatIn's superior features

Its robust authentication feature ensures ahigh security level even in a cloudenvironment.

ID and password
One-time password
Multi-factor
authentication

Biometric authentication fordevices
Authentication with clients'
certificates

ID provisioning, AD collaboration and otherfeatures reduce the ID management burden.

Authentication with positional
information

Third-party authentication

ID/PW

Regular authentication

Positional
information

Third party

Visibility

Increasedrobustness

Activity
management

Regularauthentication

ID provisioning
ID management
Activity
management

Collaboration with AD and Google
Workspace ID

Log management and portal
56

Copyright © Digital Arts Inc.

Strategy in Security Products Market
In addition to consistent growth in market share in stable areas, continue to expand the productportfolio to investment areas with high market growth rates and other promising areas to meet needs
for comprehensive security

Investment areas
High
XDR

Marketgrowthrate

Future core areas (stable areas)

Future promising areas
30.2%
22.6%

CSPM/
CWPP

28.2%

CNAPP

17.9%

File and content
sharing services

Vulnerability
assessment
(VA)

11.2%

17.9%

Certification
IDaaS

Promisin
g areasSASE

EDR and NDR

20.3%

Web access security✓ SWG✓ SDP/IAP

Businesschat＝ Market growth rates

Expand the portfolio
to promising areas/
investment areas✓ CASB✓ FWaaS and others

10.3%

Unified endpoint
management(UEM) tools

Current portfolio
6.0%
5.4%

Web filtering

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

Low

Improvement
domain
Low

1.7%

2.4%

Mail Security(including file
encryption)

Implementation of downsizing,
withdrawal and collaboration
with other companies

Areas for acquisition
Stable areasof stable revenue

Our advantage
57

High
Copyright © Digital Arts Inc.

Material on Consolidated Financial Results for the First Quarter of the
Fiscal Year Ending March 31, 2023

Return to Shareholders for Fiscal
Year Ending March 31, 2024

58

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, 2024: 31.6%
Annual dividends of surplus forecasted for fiscal year ending March 31, 2024: 80.00
yen per share.

We expect to increase the annual dividend by 5.00 yen per share.
Dividend (in yen) per share
2Q-endYear-end

AnnualConsolidated
payout ratio

FY March 2023

35.00

40.00

75.00

34.4％

FY March 2024

40.00

40.00

80.00

31.6％

(forecast)
59

Copyright © Digital Arts Inc.

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.

•

デジタルアーツ、DIGITAL ARTS、i-FILTER、i-FILTER Anti-Virus & Sandbox、i-FILTER@Cloud Anti-Virus & Sandbox、D-SPA、Anti-Virus &Sandbox for D-SPA、ホワイト運用、m-FILTER、m-FILTER MailFilter、m-FILTER Anti-Virus & Sandbox、m-FILTER@Cloud Anti-Virus & Sandbox、
FinalCode、i-フィルター、DigitalArts@Cloud、Desk、Desk Event、StartIn、f-FILTERand 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.

60

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