This document is a partial translation of the original “Kessan Tanshin” in Japanese. Digital Arts Inc. provides this translation for your reference and convenience only
and without any warranty as to its accuracy or otherwise. In the event of any discrepancy, the original “Kessan Tanshin” in Japanese shall prevail.

FY03/17 Consolidated Financial Results
For Fiscal Year Ended March 31, 2017 (Japan GAAP)May 9, 2017
Company name: Digital Arts Inc.
<Tokyo Stock Exchange- First Section>
Code no.:2326 URL http://www.daj.jp
Representative:
Toshio Dogu, Chief Executive Officer
Contact Person:
Hidenobu Akazawa, Director, Administration Department Tel. (03) 5220-6045
Scheduled date of annual general meeting of shareholders: June 23, 2017
Scheduled date of payment of cash dividends: June 26, 2017
Scheduled date of filing Shihanki-Hokokusho:
June 26, 2017
Additional materials of the Consolidated Financial Results: Yes
Briefing session of the Consolidated Financial Results:
Yes (for institutional investors and analysts)(Amounts less than one million yen are rounded)

1. Consolidated Financial Results for Fiscal Year Ended March 2017 (April 1, 2016 through March 31, 2017)<1> Consolidated operating results (cumulative)(Percent indications show percentage of changes from corresponding figures for the previous period)

Net sales

Operating income

Net income attributable toowners of parent

Ordinary income

Millions of yen%

Millions of yen%

Millions of yen%

Millions of yen

%

5,058
4,000

26.4
17.6

1,824
1,006

81.2
16.4

1,811
994

82.2
9.2

1,125
545

106.1
2.8

FY03/2017
FY03/2016(Note): Comprehensive income: 1,127 million yen for FY03/2017 (110.1%);

Net income
per share-basic
FY03/2017
FY03/2016

536 million yen for FY03/2016 (-0.9%)

Net income
per share-diluted

Ordinary income tototal assets

Return on equity

Operating margin

Yen

Yen

%

%

%

80.92
39.26

80.68
39.14

23.0
12.4

26.8
16.7

36.1
25.2

(Reference): Equity in earnings (losses) of affiliates: － million yen for FY03/2017 and － million yen for FY03/2016<2> Consolidated financial position
Total assets

Net assets

Equity ratio

Net asset per share

Millions of yen

Millions of yen

%

Yen

7,380
6,133

5,270
4,642

70.2
74.7

357.07329.03

FY03/2017
FY03/2016(Reference): Total equity: 5,184 million yen as of March 31, 2017;

4,583 million yen as of March 31, 2016

<3> Consolidated cash flows
Cash flows from operating
activities

Cash flows from investing
activities

Cash flows from financing
activities

Cash and cash equivalents
at the end of period

Millions of yen

Millions of yen

Millions of yen

Millions of yen

2,012
1,027

(671)
(441)

(503)
(187)

3,298
2,443

FY03/2017
FY03/2016
2. Dividends

Annual cash dividends per share

FY03/2016
FY03/2017
FY03/2018 (forecast)

Total

Total cash
dividends(Annual)Payout ratio(Consolidated)

Dividend on
equity(Consolidated)

at 1Q end

at 2Q end

at 2Q end

at year-end

yen

yen

yen

yen

yen

Millions of yen

%

%

―
―
―

7.00
10.00
14.00

―
―
―

8.00
14.00
14.00

15.00
24.00
28.00

208
332

38.2
29.7
31.2

4.7
6.8

3. Forecast of Consolidated Operating Results for Fiscal Year Ending March 2018 (April 1, 2017 through March 31, 2018)(Percent indications show percentage of changes from corresponding figures for the previous period)

Net sales

At 2Q end (cumulative)
At FY end

Operating income

Net income
attributable to ownersof parent

Ordinary income

Net income pershare

Millions of yen%

Millions of yen%

Millions of yen%

Millions of yen

%

yen

2,650
5,600

9.5
10.7

820
2,000

3.8
9.6

820
2,000

6.9
10.4

508
1,240

11.8
10.2

36.78
89.71

－

1 －

※Notes<1> Significant changes in scope of consolidation: None
In : － (Company Name:)

Out : － (Company Name:)<2> Changes in accounting policies, accounting estimation change and restatement<2>-1 Changes in accounting policies due to the revision of the accounting standards: Yes<2>-2 Changes in accounting policies except for those in <2>-1:
None<2>-3 Changes due to accounting estimation change:None<2>-4 Restatement:
None(shares)<3> Number of shares issued<3>-1 Number of shares issued at the end of the period (including treasury shares)<3>-2 Number of treasury shares at the end of the period<3>-3 Average number of shares issued during the fiscal year

FY03/17

14,133,000

FY03/16

14,133,000

FY03/17311,175

FY03/16

201,800

FY03/17

13,903,526

FY03/16

13,905,940(Reference) Non-Consolidated Financial Results
1. Non-Consolidated Financial Results for Fiscal Year Ended March 2017 (April 1, 2016 through March 31, 2017)<1> Non-consolidated operating results(Percent indications show percentage of changes from corresponding figures for the previous period)

Net sales

Operating income

Ordinary income

Net income

Millions of yen%

Millions of yen%

Millions of yen%

Millions of yen

%

5,104
4,018

27.0
18.3

2,067
1,335

54.9
46.1

2,056
1,328

54.8
43.5

1,339
840

59.3
46.4

FY03/17
FY03/16

Net income
per share-basic
FY03/17
FY03/16

Net income
per share-diluted

Yen

Yen

96.31
60.45

96.02
60.25

<2> Consolidated financial position
Total assets

Net assets

Equity ratio

Net assets per share

Millions of yen

Millions of yen

%

yen

7,948
6,633

5,882
5,063

73.1
75.5

420.53359.28

FY03/17
FY03/16(Reference): Total equity: 5,812 million yen as of March 31, 2017;

5,005 million yen as of March 31, 2016.

2. Forecast of Non-Consolidated Operating Results for Fiscal Year Ending March 2018 (April 1, 2017 through March 31, 2018
(Percent indications show percentage of changes from corresponding figures for the previous period)

Net sales
At 2Q end (cumulative)
At FY end

Operating income

Ordinary income

Net income per share

Millions of yen%

Millions of yen%

Millions of yen

%

yen

2,600
5,550

5.5
8.7

980
2,350

6.7
14.3

676
1,621

9.2
21.1

48.92
117.31※This Consolidated Financial Results is exempt from audit procedures under the Financial Instruments and Exchange Act.
※Explanation of Appropriate Use of Performance Projections and Other Special Items(Forward Looking Statements)
Business forecasts contained in this report are based on information available to the Company and on a certain assumption the Company considers
reasonable on the date of this report’s announcement, and it does not constitute the Company’s intention to promise the accomplishment of the forecasts.
Due to unforeseen circumstances, actual results may differ significantly from such forecasts due to various risks and uncertainties which include, but
are not limited to, global economic environment, intensified sales competition, fluctuations in exchange rate and interest rate.
(Obtaining Reference Slides for the Financial Results)
Materials are available at Digital Arts Inc. corporate website.

－

2 －Digital Arts Inc. (2326)
Financial Results for Fiscal Year Ended March 31, 2017

1. Qualitative Information on Consolidated Financial Results for Fiscal Year Ended March 31, 2017
(1) Operation Results
In the current consolidated fiscal year (April 1, 2016 through March 31, 2017), the Japanese economy continued toshow moderate recovery with continuing upturn in employment as a result of the government’s aggressive economic
policies and corporate performance holding firm. On the other hand, prospects of the world economy remained unclear
with concerns of economic downturn, mainly due to decelerating economy in emerging countries, Brexit, and theuncertainties of the new Trump administration policies.
In the security industry where the Digital Arts Group (the “Group”) engages its primary business, growing concerns
over security incidents, such as large-scale leakage of personal data as a result of targeted attacks aimed at specificcorporations and organizations, led not only security admins, but also corporate managers to become more aware of theimportance of strengthening information security. Additionally, local governments actively improves their security under
the guideline of fundamental strengthening of local government data security issued by the Ministry of Internal Affair
and Communications.
In such circumstances, the Group strengthened domestic marketing activities for large corporations and organizations
that need relatively advanced security. Specifically, it created a department specializing in large domestic companies andorganizations. The Group also created a consulting business subsidiary, Digital Arts Consulting Inc., to assist withsecurity implementation and to provide high value added proposals for clients looking to implement security on a large
scale and use its products as global tools.
In the public sector, the Group dramatically increased sales by developing and offering solutions that satisfy the levelof security demanded in the Ministry of internal Affairs and Communications’ guidelines on strengthening local
government security.
Overseas, US subsidiary FinalCode, Inc. and Asia-Pacific subsidiary FinalCode Asia Pacific Pte. Ltd. began to acquire
contracts as a result of progress in partnerships with local sales partners and implementing concrete measures to drive
sales. In Europe, FinalCode Europe Limited focused on hiring employees and developing partnerships with local sales
partners.
Consolidated net sales for Fiscal Year 03/17 was JPY 5,058,685 thousand (+26.4% YoY). Despite increased
expenses from hiring employees in Japan, the following contributed to the overall increase in earnings: operating income
was JPY 1,824,248 thousand (+81.2% YoY), ordinary income was JPY 1,811,279 thousand (+82.2% YoY) and net
income attributable to parent company shareholders was JPY 1,125,043 thousand (+106.1% YoY).
Business performance by segment is as follows.
Enterprise Sector
Net sales to the enterprise sector were JPY 2,573,918 thousand (+14.9% YoY).
Sales were favorable for the Group’s main products in the enterprise sector, i-FILTER and m-FILTER, together witha surge in topline growth of FinalCode. Corporate managers are more aware of the importance of enhancing data security
as targeted attacks on specific companies are causing increasingly more damage. In such environment, the Group saw
continued implementation of i-FILTER and m-FILTER products that respond to a wide range of multifaceted security
risks. FinalCode 5, an enterprise-wide advanced file security released in FY03/16, met the demands of corporations that
handle large volumes of customer data, which firmly increased sales of FinalCode. With increasing awareness on data
security measures, orders received by Digital Arts Consulting were also favorable, contributing to the Group’s overallbusiness growth.
Public Sector
Net sales to the public sector were JPY 2,125,191 thousand (+49.9% YoY).
In the public sector, sales surged for the Group’s main offerings, i-FILTER and m-FILTER.
In accordance to a guideline issued by the Ministry of Internal Affairs and Communications on fundamental
strengthening of local government data security, prefectures are consolidating their internet connections andstrengthening surveillance (using cloud solutions for local government data security), while cities, wards, towns and－3 －Digital Arts Inc. (2326)
Financial Results for Fiscal Year Ended March 31, 2017villages are actively improving security (using the model for improving local government data systems). The Company’ssolutions that incorporates “i-FILTER (or D-SPA) to centralize web access” and “m-FILTER to neutralize web email
messages” captured the needs of clients seeking to respond to the above guidelines, and pushed up sales. Deployment of
FinalCode Limited Edition for Local Government, an edition that responds to needs specific to prefectural, city and local
municipality governments, has been favorable and contributed to the overall increase in sales.
Consumer Sector
Net sales in the consumer sector were JPY 359,575 thousand (+5.0% YoY).
In the consumer segment, the Group continued to enter tie-ups with mobile operators and other business partners ineffort to expand sales and increase collaboration for the mobile device version of i-FILTER (Consumer) for Smartphones.
Sales were firm for the PC version of the i-FILTER (Consumer) due to OEM-driven sales, robust shipment of multiyear packaged products, and other positive factors, despite the continuous decline in the number of domestic consumer
PC shipments. Sales also expanded thanks to robust direct sales of i-FILTER (Consumer) Multi-Device, which can beused on three operating systems (Windows, iOS, and Android) with a single serial ID.
[Forecast of Consolidated Financial Results for Fiscal Year Ending March 2018 (April 1, 2017 through March 31, 2018]

In the security industry where the Group engages its primary business, conventional security means face a challenge
to respond to external threats, including targeted attacks that are becoming increasingly multifaceted and diverse on a
global level. On the other hand, usage of cloud computing, IoT, and AI continue to expand, calling for security productsthat are effective against new types of cyber threats.
In light of these circumstances, the Group leverages its capacity to develop products solely in-house to offer
protection against enterprise data loss while also making a full-fledge entry into the external threat market, such asmeasure against targeted attacks. The Group anticipates an increase in demand for its products in response to legal
reforms (i.e. Electronic Books Maintenance Act, Private Information Protection Law, etc.), local government security
cloud framework, and plans by Ministry of Internal Affairs and Communications to place Wi-Fi in all public elementaryand middle schools.
For the Consumer Sector, the Group continues to partner with mobile carriers to expand sales of the consumer
edition of i-FILTER for smartphones and further drive the business.
For overseas business, the Group’s U.S. regional office, FinalCode, Inc., takes the lead to drive aggressive sales inmarkets outside Japan. The level of interest for persistent file security is quite high, leading to more serious deals in bothgovernment and private companies. The Group works to quickly close visible deals in order to recoup investment as
early as possible.
Based on these efforts, the Group anticipates net sales of JPY 5,600 million, ordinary income of JPY 2,000 million
and JPY 1,240 million for net sales attributable to owners of parents for the consolidated fiscal year ending March 31,
2018.
Business forecasts contained in this report are based on information available to the Group as of the date of thisreport, and actual results may differ from such forecasts due to various risks and uncertainties. Updates on material
information, if applicable, will be disclosed in a timely manner.
Forecast for Fiscal Year Ending March 2018 (Consolidated)
Net Sales
Millions of yen

Millions of yen

Millions of yen

5,600
5,058

2,000
1,811

1,240
1,125

FY03/2018 (Forecast)
FY03/2017 (Actual)
Forecast for Fiscal Year 03/2018 (Non-consolidated)
Net Sales
FY03/2018 (Forecast)
FY03/2017 (Actual)

Net Income Attributable to
Owners of Parent

Ordinary Income

Ordinary Income

Net Income

Millions of yen

Millions of yen

Millions of yen

5,550
5,104

2,350
2,056

1,621
1,339

(Amounts less than one million yen are rounded)
Note: Business forecasts contained in this report are based on information available to Digital Arts as of the date of this report, and actual results may differ fromsuch forecasts due to various risks and uncertainties.

－

4 －Digital Arts Inc. (2326)
Consolidated Financial Results for Fiscal Year Ended March 31, 2017

(2) Financial Position(Assets)
Current assets increased JPY 1,247,098 thousand to JPY 7,380,958 thousand compared to March 31, 2016. This was
mainly attributable to increase in cash and deposits due to an increase in operating cash flow and increase in accounts
receivable due to favorable sales.
(Liabilities)
Current liabilities increased JPY 618,792 thousand to JPY 2,110,618 thousand compared to March 31, 2016. Thiswas mainly due to increase in advance received for unearned maintenance sales and increase in accrued income tax.
(Net Assets)
Net assets increased JPY 628,306 thousand to JPY 5,270,339 thousand compared to March 31, 2016. This was mainly
due to increase in retained earnings by accounting net income attributable to owners of parent, although share buy-backcontributed to a slight decline in net assets.

－

5 －Digital Arts Inc. (2326)
Consolidated Financial Results for Fiscal Year Ended March 31, 2017

2. Consolidated Financial Statements(1) Consolidated Balance Sheet(thousands of yen)Preceding Cumulative
Fiscal Year(As of March 31, 2016)
AssetsCurrent assets
Cash and deposits
Accounts receivable – trade
Securities
Finished goods
Deferred tax assets
Other
Total current assets
Non-current assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings (net)
VehiclesAccumulated depreciation
Vehicles（net）
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures (net)Total Property, plant and equipment
Intangible assets
Software
Other
Total intangible assets
Investments and other assets
Investment securities
Deferred tax assets
Shares of subsidiaries and affiliates
Other
Investments and other assets
Total non-current assets
Total assets－

6 －Current Cumulative
Fiscal Year(As of March 31, 2017)

2,942,965
1,081,626
100,909413
73,81362,8844,262,613

3,898,836
1,296,271－
528
87,921
91,4495,375,007

124,367(80,277)
44,09015,977(5,362)
10,614294,391(221,838)
72,552
127,257

126,933(87,874)
39,05815,977(8,897)
7,080
304,932(225,744)
79,187125,326

821,395
174,131995,526

893,870
262,408
1,156,279

404,099
48,35656,769239,237
748,462
1,871,246
6,133,859

403,724
31,07032,788
256,761
724,344
2,005,950
7,380,958

Digital Arts Inc. (2326)
Consolidated Financial Results for Fiscal Year Ended March 31, 2017
(thousands of yen)Preceding Cumulative
Fiscal Year(As of March 31, 2016)
Liabilities
Current liabilities
Accounts payable – trade
Income taxes payable
Provision for bonuses
Advances received
Other
Total current liabilities
Non-current liabilities
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income
Foreign currency translation adjustments
Total accumulated other comprehensive income
Subscription rights to shares
Non Controlling Interest
Total net assets
Total liabilities and net assets－

7 －Current Cumulative
Fiscal Year(As of March 31, 2017)

5,844
283,949
109,975
721,033
327,288
1,448,091

18,068475,013
165,759
1,017,071
390,1222,066,035

43,089645
43,734
1,491,826

43,937645
44,582
2,110,618

713,590766,234
3,220,233(117,511)
4,582,547

713,590
778,435
4,098,920(410,665)
5,180,280

1,208
1,208
58,278－4,642,033
6,133,859

3,830
3,830
81,152
5,075
5,270,339
7,380,958

Digital Arts Inc. (2326)
Consolidated Financial Results for Fiscal Year Ended March 31, 2017(2) Quarterly Consolidated Statement of Income and Quarterly Consolidated Statement of Comprehensive Income
Quarterly Consolidated Statements of Income(thousands of yen)Preceding Cumulative
Fiscal Year

Current Cumulative
Fiscal Year

(From April 1, 2015
to March 31, 2016)(From April 1, 2016
to March 31, 2017)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Commission fees
Gain on forfeiture of unclaimed dividends
Insurance premiums refunded cancellation
Miscellaneous income
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Miscellaneous expenses
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on reversal of subscription rights to shares
Gain on sales of noncurrent assets
Total extraordinary income
Extraordinary loss
Loss on retirement of noncurrent assets
Loss on valuation of golf club membership
Total extraordinary loss
Income before income taxes
Income taxes - current
Income taxes – deferred
Total income taxes
Net income
Net income attributable to non-controlling interests
Net income attributable to owners of parent－

8 －4,000,620
926,094
3,074,526
2,067,600
1,006,925

5,058,685
1,007,151
4,051,533
2,227,284
1,824,248

1,366
170
3,367
1,836
1,084
7,826

1,206
200
1,178
－
247
2,833

8
20,432－
20,440994,311－
14,2991,503
15,803
1,811,279

3,701
2,638
6,340

318
－
318

1,960
－
1,960
998,691
447,392
5,314
452,707545,983－
545,983

1,902
6,700
8,602
1,802,995
674,697
3,178
677,875
1,125,11975
1,125,043

Digital Arts Inc. (2326)
Consolidated Financial Results for Fiscal Year Ended March 31, 2017

Quarterly Consolidated Statements of Comprehensive Income (Cumulative)(thousands of yen)Preceding Cumulative
Fiscal Year

Current Cumulative
Fiscal Year

(From April 1, 2015
to March 31, 2016)(From April 1, 2016
to March 31, 2017)

Net income
Other comprehensive income
Foreign currency translation adjustments
Total other comprehensive income
Comprehensive income(Breakdown)Comprehensive income attributable to owners of parent
Comprehensive loss attributable to non-controlling interests－

9 －545,983

1,125,119(9,295)(9,295)
536,688

2,622
2,622
1,127,741

536,688－

1,127,666
75