Digital Garage, Inc.
- FYE 2011 Financial ReportAugust 12, 2011

Contents

Mission & Business Model・・・・・・・

2

Group Financial Performance Review

・・・・・・・

5

FYE 2011 Segment Performance Review

・・・・・・・ 15

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Mission & Business Model

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

DG’s Mission
context company

Context Company
Digital Garage creates innovative
business “context” for the new internet
age and provides unique businesssolutions for Japan’s new lifestyles,
society and industries by linking:

Real &
Local &
Marketing &Present &
-3-

Cyber
International
Technology
FutureCopyright © 2011 Digital Garage, Inc. All Rights Reserved

DG’s Business Modelcontext company

Produce and incubate Japan’s Internet businesses

with optimal use of our three core strengths: IT, MT and FT★ Information Technology

IT★ Marketing Technology

MT

FT★ Financial Technology-4-

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Group Financial Performance Review

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Investment Highlights
context company

Mid-term Plan Initial Forecast Achieved
New Media Incubation Strategy InitiatedExecuting Capital Increase through Public Offering / Building Global Investment & Development Networks

I

Surplus and operating income up 1 billion yen year-on-year■ Healthy growth of Hybrid Solution businesses as enabling platform■ Recovery of venture incubation businesses■ Robust investment in social media/smartphone business development

II

U.S.-Japan real-time business intelligence/development networks■ Establishment of Digital Garage US, Inc. as U.S. subsidiary (office: San Francisco)■ Collaboration with MIT Media Lab (office: Boston)■ Active foreign investments and DG's self-developed media offerings based on agile
development methods

III

Capital increase through public offering to maximize long-term growth potential■ Total of 8 billion yen in funding raised through domestic public offering■ Venture investments and new social media development■ Operating capital for new settlement system-6-

Copyright © 2011 Digital Garage, Inc. All Rights ReservedOverview of Capital Increase through Public Offeringcontext company

July 2011: Approx. 8 billion yen raised via public offering and third-party allotment
Purpose
Purpose ofof Capital
Capital Increase
Increase
Growth Strategy in New
Mid-Term Management Plan

Application
Application ofof FundFund

AmountAmountInvestment
Fund

Investment in domestic/overseas
Internet-related companies andangel funds

5,300
million yen

Development
Fund

Development of new social
media-based service system

938
million yen

Operating
Fund

Operating fund for expanded
settlement businesses(e.g., Kakaku.com settlement
assurance service)

1,500
million yen

Social Media-related
business Incubation
・ Globalization
・ Enhanced media
development capability
・ Improved solution offering
・ New business opportunities withcompanies with innovative
services following success of
Kakaku.com and U.S. Twitter

Repaymentof debt

Balance・ Investment in development of newsocial media-based service system

Total
Total

8,064
million yen

Dilution due to issuance of new shares: 14.6%
Number of shares increased due to capital increase (32,000) / Total number of shares issued following capital increase (218,224)**Total of 219,084 shares issued as of today including exercise of stock options following capital increase-7-

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

FYE 2011 Performance Summary: Profit and Loss (Consolidated)
context company

FYE 2010(¥ million)

ActualOriginal
Forecast

Revised on
May 27FYE 2011
Revisedon Aug 2

ActualYear-on-Year(Amount)

Net sales

8,346

10,60010,90011,065

11,067+2,720Operatingincome

-960

-250

50

135

135

+1,095

Ordinary
income

-457

500

900

970

972

+1,429Net income-2,207

310

800

900

901

+3,108FYE 2011 Consolidated PerformanceFirst operating surplus achieved post business restructuring Driven by growth of Hybrid Solution segment, net sales increase of 32.6% and operating income increase of
1,095 million yen on year-on-year basis achieved; venture incubation segment also delivered capital gains
 Ordinary income increased by 1,429 million yen year-on-year as result of income growth of Kakaku.com(equity in earnings of affiliates)
 FYE 2011 net income increased by 3,108 million yen year-on-year(from -2,207 million yen to 901 million yen)-8-

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

FYE 2011 Financial Summary: Balance Sheet (Consolidated)
context company

FYE 2010
Actual(¥ million)

FYE 2011
ActualYear-on-Year
Amount14,20814,345

+136

4,799
3,413
3,155

4,784
4,351
2,501

-15
+937
-654

Total assets

5,497
19,706

6,075
20,421+578+714

Current debt

9,941

9,933

-7

Incl. deposits

5,743
2,809

6,168
2,519

425
-290

935

592

-343

670

351

-319

8,829

9,895

+1,065

1,497

2,398

+901

19,706

20,421+714

Current assets
Incl. cash and deposits
Incl. receivables
Money held in trust

Fixed assets

Incl. interest-bearing debt

Fixed debt
Incl. interest-bearing debt

Net assets
Incl. retained earnings

Total debt/net assets■ Effect of capital increase: increased net cash

■ Balance sheet improvements

Settlement-related accounts
Receivables:
Payments owed byconvenience stores/credit cardcompanies (average payment
period: approx. two weeks)

Money held in trust:Payments protected by trust

Deposits:
Payments temporarily held until
paid to e-commerce clients

Net assets following
capital increase

17,959FYE 2010

FYE 2011

Post capitalincrease forecast

FYE 2010

FYE 2011

Post capitalincrease forecast

Capital-to-asset ratio

44%

48%

63%

1,320 million yen

1,914 million yen

9,978 million yen

Percentage of interest-bearing debt

17%

14%

10%

Net cash: (cash and deposits) - (interest-bearing debt)-9-

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Segment for FYE 2011 (Consolidated)
context company(¥ million)

FYE 2010(Actual)FYE 2011(Actual)Year-on-Year(Amount)（ Hybrid Solution Segment ）Net sales

7,527

9,252

+1,725

Operatingincome

150

634

+483

（ Media Incubation Segment ）Net sales

812

634

△177

Operatingincome

△107

△218

△111

（ Venture Incubation Segment ）Net sales

7

1,180

+1,173Operatingincome

△143

688

+831

* Operating income: based on figures prior to Group tax deduction-10-

Copyright © 2011 Digital Garage, Inc. All Rights ReservedQuarterly Comparisons of Consolidated Segment Net Sales/Operating Income
context company

Hybrid Solution Segment
Net sales(¥ million)

Operating income

3,000

250

2,384

2,500

2,565

2,187 2,005
1,836
1,765
2,000
1,738

191 201

200

2,297

134

150

107

1,500

100

1,000

50

500

0

32

68

51

-2
0

-50
Q1

Q2

Q3

Q4

FYE 2010

Q1

Q2

Q3

Q4

Q1

FYE 2011

Q2

Q3

FYE 2010

Q4

Q1

Q2

Q3

Q4

FYE 2011

Performance Review■ Steady growth in comprehensive total promotion business based on real/Web service integration■ Record-high total of settlement transactions driven by strong performance in gaming

and travel sectors■ Increased number of stores using; full-scale contribution to revenue expected

to start in next year
-11-

Copyright © 2011 Digital Garage, Inc. All Rights ReservedQuarterly Comparisons of Consolidated Segment Net Sales/Operating Income
context company

Media Incubation Segment
Net sales(¥ million)

250

Operating income0

230 237 231

200

188

-13

-20

155

143

150

122

-19

-40 -35

137

100

-60

50

-80

-36

-39

-43
-55

-83
0

-100
Q1

Q2

Q3

Q4

FYE 2010

Q1

Q2

Q3

Q4

Q1

FYE 2011

Q2

Q3

FYE 2010

Q4

Q1

Q2

Q3

Q4

FYE 2011

Performance Review■ Twitter ad sales back on growth trend following inventory adjustment upon introduction of newuser interface in September■ New sales record set at end of term despite nation-wide voluntary restraint in advertising in

immediate aftermath of earthquake disaster■ Focus on mobile business restructuring (Wheel established in December and DG Mobile soldin March) and smartphone-related businesses strengthened-12-

Copyright © 2011 Digital Garage, Inc. All Rights ReservedQuarterly Comparisons of Consolidated Segment Net Sales/Operating Income
context company

Venture Incubation Segment
Net sales(¥ million)

Operating income

1,000

800

939

604
800

600

600

400

400

200

163

240
0

200

0

7

Q1

Q2

0

0

Q3

Q4

0

0

FYE 2010

Q2Q3-20 -69

-16

Q1

Q3

Q1

-63

-200

0
Q1

-26 -29Q4

FYE 2011

Q2

FYE 2010

Q4

Q2

Q3

Q4

FYE 2011

Performance Review■ Due to sharply-rising stock valuations among U.S.-based SNS companies,

exit strategy withcarefully-timed sale being pursued■ Investment in graduates from Japan's first seed accelerator program "Open Network Lab" started■ Partnership with renowned investors expanded, while conducting further investment in promisingoverseas ventures by leveraging strong yen-13-

Copyright © 2011 Digital Garage, Inc. All Rights ReservedPerformance Forecast for FYE 2012
context company(¥ million)

FYE 2011
ActualFYE 2012
Plan

Year-on-Year(Amount)

11,067

13,800+2,732

Operating income

135

1,350

+1,214

Ordinary income

972

2,500

+1,527

Net income

901

2,100

+1,198Hybrid Solution

9,252

9,600

+347

Media Incubation

634

2,000

+1,365

Venture Incubation

1,180

2,200

+1,019Hybrid Solution

634

650

+15

Media Incubation

△218

260

+478

Venture Incubation

688

1,500

+811

Net sales＜Net sales by segment＞＜Operating income by segment＞-14-

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

FYE 2011
Segment Performance Review

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Enabling platform and net business incubation
context company

From the beginning of the internet era, DG has been accelerating
incubation of internet services utilizing “Enabling Platform”

1995～2000

2000～2008

Advertisement
Promotion/Solution

Social Marketing

national client
280 companies

national client
425 companies

2008～

Settlement
e-commerce/Social Commerce

Number of transactions 15 million
Total amount of transactions 116 billion yen

Enabling Platform-16-

Copyright © 2011 Digital Garage, Inc. All Rights ReservedNew Business Model as Social Media Incubator following Capital Increasecontext company

Next Decade: Development and Global Application of New MediaNew business development as social media incubator accelerated following recent capital increase

Discovery

Incubation/Structure; Establish agile structure that flexibly
adapts to rapidly-changing Internet
business market; Realize promising investment
opportunities more rapidly andextensively

San Francisco

Boston

DG US

Verification

Social Media
Incubator

Information
gathering/development
base

Services
Quality

Participationin leading
R&D projects

Development

Tokyo

Discovery ofpromising services
that create global
standard developedin Japan

Agile development:
A method that quickly improves service quality byrepeating development and verification process ina short cycle, the main approach used by leading
Internet companies such as Twitter and Google-17-

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Business Segment
context company

Ⅰ

Venture Incubation Segment- Silicon Valley-type hands-on incubation (import)- Support of Japanese startups targeting at overseas market (export)

Ⅱ

Media Incubation Segment

Media Incubation- Develop new next-generation social media

Ⅲ

VentureIncubation

Hybrid Solution Segment

Hybrid Solution- Departure from existing commissionedtype Integration and Settlement business-18-

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Venture
Incubation

Media Incubation

Hybrid Solution

I

Venture Incubation Segment➤ DG Incubation, Inc.
Venture business incubation through investment and development➤ Open Network Lab
Internet-based business accelerator program for aspiring engineers

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Business Overview: Venture Incubation Segment Performancecontext company

I

Venture Incubation Segment
Net sales

Operating income

FYE 2010 Actual

7 million yen-143 million yen

FYE 2011 Actual

1,180 million yen

688 million yen

FYE 2012 Forecast

2,200 million yen

1,500 million yen

Incubate
Incubateandandsupport
supporthigh-quality
high-qualityJapaneseJapaneseventures
ventureswhile
whileactively
actively
investinginvestingin
inoverseas
overseasventures
venturesbased
basedprimarily
primarilyin
inSilicon
SiliconValley
ValleyDG
DGIncubation,
Incubation,Inc.
Inc.
◆◆Through
Throughstrengthened
strengthenedpartnershippartnershipwith
withrenowned
renownedinvestors
investorsininSilicon
SiliconValley,
Valley,investment
in
next
key
socialmedia
thatfollows
successof
Twitterandinvestment in next key social media that follows success of Twitter andongoingongoingsupport
supportfor
forJapaneseJapanesemarket
marketlocalization
localizationbeing
beingconductedconducted◆◆Investment
Investmentininangel
angelfundfundSV
SVAngelAngelIIIIIIconductedconductedininMay
May2011;2011;early
earlyidentification
identificationofof
high-quality
high-qualityoverseas
overseasventures
venturesandandthoroughthoroughinformation
informationgathering
gatheringfor
for
directinvestment
being
pursueddirect investment being pursued

Open
OpenNetwork
NetworkLab
Lab◆◆Investments
Investmentsmade
madeinindomestic
domesticventures
ventures(e.g.,(e.g.,giftee,
giftee,Inc.
Inc.
-20-

, ,SpinningWorks
SpinningWorksInc.
Inc.

))

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Venture Incubation Strategy
context company

Incubate and support high-quality Japanese ventures
while actively investing overseas ventures based primarily in Silicon Valley
New venture incubation in the era of real-time web
New business models for both import/export
U.S. and other overseas seed-stage venture investments
Formation of dream team of Silicon Valley angel investors

Global business marketing model developed in Japan
Seed Accelerator program◆ Renowned overseas entrepreneurs mentoring
domestic ventures aiming to expand into global markets◆ Rapid expansion supported through IT, MT and FT solutions
once business is established◆ Early discovery of prospective overseas ventures◆ DG's parallel investment and Japanese market
localization support

Import model
IPO

Overseas ventures
Stage-specific investment

M&A

Middle stage

Seed
stage

Early
stage

Later stage

Co-investment with U.S. angel investors⇒ DG's independent parallel investment

Formation of U.S.
base and businessdevelopment

Export model- Collaboration with
influential venture
capitalists- U.S. market expansionof business models
developed in Japan- Mid-term project
development with MIT
Media Lab-21-

http://onlab.jp/
Incubation ofprospective seed-stage
ventures
Support new domestic ventures
and their entry to overseas markets

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Recent Investment Highlights
context company

Fund Investment
Purpose and benefits of investing in angel funds◆ Become involved in the inner workings of angel investor/venture capitalist networks todevelop organic business incubation model that includes investment⇒ Acquire up-to-date information on cutting-edge Internet businesses◆ Secure parallel investment privileges for angel fund investment targets⇒ Retain DG's independent investment opportunities- Founded by Ron Conway, advisor andinfluential Silicon Valley investor- Target: early-stage startup companies

Angel Fund A- Founded by renowned Silicon Valley investors- Target: early-stage startup companies(also actively invests in overseas ventures)

DGI and Ron Conway's main co-investment targets:[currently under development]

Individual Investment

Luxury jewelry and bag
marketplace founded by Kiyan
Foroughi and Avid Larizadeh inMarch 2009

Comprehensive beauty
services website (hair, makeup& nails, etc.) launched in
October 2010
-22-

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Venture
Incubation

Media Incubation

Hybrid Solution

II

Media Incubation <B2C businesses>➤ Media Incubation Division
Localization of overseas media and promotion of DG's original media development➤ Twitter Company

Twitter company

Operational support and business development for Twitter in Japan➤ CGM Marketing, Inc.
Twitter- and CGM-based ad product development, twinavi operation and Twitter business support➤ Wheel, Inc.
Content service provision for smartphones utilizing social media

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Business Overview: Media Incubation Segment Performancecontext company

Ⅱ

Media Incubation <ToC Solution businesses>
Net sales

Operating income

FYE 2010 Actual

812 million yen-107 million yen

FYE 2011 Actual

634 million yen-218 million yen

FYE 2012 Forecast

2,000 million yen

260 million yen

AsAsaasocialsocialmedia
mediaincubator,
incubator,focus
focuson
onDG'sDG'soriginal
originalmedia
media
development
developmentand
andincubate
incubatenew
newsocialsocialmedia
mediabusinessbusinessas
asnextnextTwitter
Twitter◆◆With
Withconsolidation
consolidationofofdispersed
dispersedgroup
groupresources,
resources,segment
segmentgrowth
growthasas"media"mediaincubation
incubationstrategy
strategyhub”
wasacceleratedhub” was accelerated◆◆AgileAgileglobal
globaldevelopment
developmentsystemsystemdevelopment
developmentand
andfurther
furtherpromotion
promotionofofbusinessbusinesscollaboration
collaborationwith
withinvestment
targets
were
conducted
with
new
Group
CTO
Ian
McFarland,
ChiefofTechnology
investment targets were conducted with new Group CTO Ian McFarland, Chief of Technology
Management
Managementatatleading
leadingU.S.
U.S.company
company◆◆Support
Supportfor
forJapaneseJapaneselocalization
localizationofofLinkedIn
LinkedInwas
wasprovided;
provided;Japan‘s
Japan‘sfirst
firstmedia
mediatied
tiedtotoLinkedIn
LinkedInwasdeveloped
andlaunched
was developed and launched-24-

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Strategy Outline and Development of Media Incubation Segment
context company

Incubate social media and platform to follow success of Twitter andsimultaneously develop third-party businesses linked with new media/platform
III Incubation of Japan's new social media services
New add-on business for popular and successful

II Twitter navigator site “twinavi” being prepared

Number of PC visitors: mixi, Twitter and Facebook

SAP(Unit: 1,000)

etc…

(Biz > Game）

Twinavi
application

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun(Source: NetRatings Japan, Inc.)IMedia ≒ Platform

ThirdThird-party
media

No. 1 social media status maintainedContents-25-

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

DG's Vision: Business Contexts for Next-Generation Social Media
context company

Social media in transition from gaming to real-time web to business applications
Shift from Japan's anonymity-based SNS to "real-life social networking"
Real name users/open

DG’s market trend forecast
Future real-lifesocial network

Real-life social network

Allgeneration
users/
businessand social
infrastructureYoungusers/
gamingFurther integration with real world will occur
via transformation of social media fromlimited use (e.g., gaming platforms)
to social infrastructure/business use
Smart technology
Arrival of super devices will be brought on
by development of open technology
regardless of user’s technological literacy
level
User-led approach
As a result, users can flexibly choose
services they use in areas previously
controlled by carriers and portal providers(including contents and settlement choices)

Anonymous users/closed-26-

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts: Media Incubation Headquarters
context company

Media Incubation Division
FYE 2011 Highlights◆ Business acceleration Division for social media incubation
Established Division with consolidated media development functionality
including product management, development, infrastructure, security, etc.

◆ Collaboration with business SNS LinkedIn
Started Japanese localization support including marketing, PR and research product marketing
to LinkedIn for launch of Japanese LinkedIn site scheduled to launch by the end of 2011

◆ Development and launch of Japan's first LinkedIn-connected media
Developed and released LinkedIn API-connected media as first product of DG's media
development designed for real name-based and business domain users and their requirements

Further promotion of media export in addition to imported media development
MidMid- andand longlongterm
term strategy
strategy◆ Collaborate with venture incubation segment and engage inmarketing/operational assistance for imported post-Twitter media services◆ Implement DG's original media and Onlab business in stages andproceed with global application plan

-27-

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts: Twitter Company
context company

Twitter company

Digital Garage Twitter company

FYE 2011 Highlights◆ Twitter as essential part of social infrastructure- Twitter being used extensively as real-time safety confirmation tool
following Great East Japan Earthquake on March 11- Various lifestyle infrastructure media initiatives being implemented/under development
under guidance of Ministry of Economy, Trade and Industry◆ User base expansion- Official PC users: rapid growth from 9.10 million UUs in June 2010 to 14.52 million UUs
in June 2011 (annual increase of approx. 1.6 times) (Source: NetRatings Japan, Inc.)- New world record for TPS (7,916 tweets/second) achieved upon
Japanese Women’s World Cup Football victory◆ New functions- Hashtags in Japanese/photo posting functions provided

Further promotional support of Twitter use as social infrastructure media
MidMid- andand longlongterm
term strategy
strategy◆ Promote awareness and share good practices for enterprise/government use◆ Proceed with cross selling services following completion of user interface renewal-28-

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts: CGM Marketing, Inc.
context company

CGM Marketing, Inc.
FYE 2011 Highlights◆ Twitter official PC/mobile advertising business
Maintained steady growth through completing ad inventory adjustment
following UI renewal and posted best monthly sales record of PC◆ Twinavi
Provided account authentication scheme for public institutions,
J Government on Twinavi, following Twitter use as social
infrastructure media during East Japan Earthquake(approx. 300 accounts opened in 44 prefectures)◆ Tweet manager
Started operational support for Tokyo Electric Power Co.
including Tweet monitoring/analysis; further promoted
implementation at central government institutions(Agency for Natural Resources and Energy, Cabinet Officeand Prime Minister's Office)Develop new media services while continuously expanding monetization of Twitter
MidMid- andand longlongterm
term strategy
strategy◆ Diversify Twitter-related ad products/profit-earning opportunities◆ Develop next-generation ad products that match consumer multi-social media use-29-

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts: Wheel, Inc.
context company

Wheel, Inc.
FYE 2011 Highlights◆ Social media-linked services- Launched smartphone service
allowing users to post decorated videos to Twitter- Gradually expanded content offerings from Android to Web-based PC access-----------------------------------------------Happy birthday! Just made a
special movie for you!
http://share.tt/gjlsjd------------------------------------------------

Buy
music

Post
video

Create fee-based content market that optimizes strength of social media
MidMid- andand longlongterm
term strategy
strategy◆ Shift focus of fee-based services from feature phones to smartphones
based on changes in smartphone user trends-30-

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Venture
Incubation
Media Incubation

Hybrid Solution

III

Hybrid Solution: B2B Solution businesses➤ e-context Company
E-commerce settlement platforms➤ DG&Ibex Company
Marketing promotion support, media development and web solutions

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Business Overview: Hybrid Solution Segment Performancecontext company

III

Hybrid Solution <ToB Solution businesses>
Net sales

Operating income

FYE 2010 Actual

7,527 million yen

150 million yen

FYE 2011 Actual

9,252 million yen

634 million yen

FYE 2012 Forecast

9,600 million yen

650 million yen

SteadySteadyexpansion
expansionof
of“enabling“enablingplatformer”
platformer”businessbusinessarea
areawhile
while
use
useof
ofsocialsocialmedia
mediaincreases
increases
e-context
e-contextCompany
Company◆◆Increased
Increasedrevenue
revenueand
andachievedachievedrecord
recordhighhighsettlements
settlementsthroughthroughdevelopment
developmentofof
newnewbusinessbusinessmodel
modelthat
thatadds
addsnew
newfunctions
functionstotoexisting
existingsettlement
settlementservices
servicessuch
suchasas

DG&Ibex
DG&IbexCompany
Company◆◆Increased
Increaseddigital
digitalsolution
solutionsales
salesand
andimproved
improvedunit
unitprofit
profitper
perclientclientby
bystrategicallystrategicallydifferentiating
differentiatingDG
DG
from
competitors
based
on
DG's
strengthandexpertiseinsocialmedia
from competitors based on DG's strength and expertise in social media
As
Asaaresult,result,achievedachievedoverall
overallHybrid
HybridSolution
Solutionnet
netsalessalesincrease
increaseofof1,725
1,725million
millionyen
yenandandoperatingincomeincreaseof
483
millionyen
operating income increase of 483 million yen-32-

Copyright © 2011 Digital Garage, Inc. All Rights ReservedHybrid Solution Segment Business Overview
context company

Further acceleration of Hybrid Solution areas (advertising/settlement)
based on three growth drivers
1. Flexibly adapt to new web trends: social media
2. Swiftly realize new opportunities created by smartphone market
3. Expand new businesses using capital increase1.
1.Adapting
Adaptingnew
newwebwebtrends
trends; Development of new settlement
services for growing smartphoneuser market

Three mid/longterm growth drivers; Development of new
settlement/solution services
linked to DG's social media

Settlement2.
2.Realizing
Realizingsmartphone
smartphonemarketopportunities
market opportunities

Hybrid Solution
Segment; Business promotion designed
for new consumer contact
points such as smartphones

Solutions; Expansion into new settlement
areas using capital increase3.
3.Expanding
Expandingnew
newbusinessbusinessusing
capitalincreaseusing capital increase-33-

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts: e-context Company (1)context company

FYE 2011 Actual
Number of affiliated websites

Number of transactions

Total amount of transactions

41,61715.28 million

116.3 billion yen(year-on-year)

120%(year-on-year)

114%(year-on-year)

114%

Number and amount of transactions both set new record highGrowth factors

Number of transactions

Further expansion of settlement areas and improved
business diversity contributed to increase in number oftransactions(Unit: 10,000)

Â Focus on credit card settlement in addition toexisting settlement formats resulted in 14% increasein number of transactions over previous year

1,400

Â User base forsettlement services withescrow function launched in November 2010
has expanded steadily

1,100(%: year-on-year)

1,528

1,600

(114%)

1,500

1,300

1,305

1,337

(103%)(102%)

1,263

1,200

1,000
08年6月期10年6月期FYE 2008 09年6月期
FYE 2009
FYE 2010 11年6月期
FYE 2011

Cultivation of new markets and clients through enhanced settlement functions
MidMid- andand longlongterm
term strategy
strategy◆ Accelerate business development for new smartphone-based settlement markets◆ Gain new clients by adding new services to enhance existing settlement functions-34-

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts: e-context Company (2)context company

New settlement services, etc.
◆ Full-scale performance was immediately
achieved despite delayed startup due toissues such as system connections,credit checks and earthquake impact(Unit: ¥1,000)◆ Completed registration with Kanto Local
Financial Bureau as fund transfer agent⇒ Able to offer currency trading services that weregenerally limited to financial institutions such as
banks

Total amount of transactions

500,000
400,000⇒ Plans to offer new settlement services(BtoC, CtoC and BtoB money transfers,
settlement combined with escrow services, etc.)

300,000
200,000
100,000
0◆ Co-launched security diagnostic service
Risk Search for e-commerce clients with LAC◆ Further expansion underway due tohigh level of client satisfaction◆ Provided smartphone settlement platform to
Kadokawa Shoten Publishing Ltd.'s
BOOK☆WALKER site

- Number of female store users increased- Credit card settlement: key purchase decision
factor (based on customer survey)⇒ Offer universal settlement functions
regardless of user device-35-

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Highlights and Forecasts: DG&Ibex Company
context company(Digital Garage DG&Ibex Company)
FYE 2011 Actual

Total sales

Profit per client

Number of clients

6.3 billion yen

22.5 million yen

280

125%

(year-on-year)(year-on-year)

126%(year-on-year)

102%

Achieved profit per client increase
due to steady growth of digital areas (web/mobile)
Growth factors

Gross margin comparisons: digital vs. other areas

Development of industry-specific digital/real media
comprehensive promotion based on DG's expertisein social media(cosmetics, credit card solutions, etc.)
Â Web marketing area: solution expansion contributed to
improvement of unit profit per client(156% increase year-on-year)

FYE 2009

FYE 2010

57%

59%

FYE 2011

63%

DigitalÂ Promotion area: strong growth exceeding industry average(108% increase year-on-year)

Ongoing development of solutions that adapt to changes in consumer contact points
MidMid- andand longlongterm
term strategy
strategy◆ Continuously develop cutting-edge solutions linked with new DG media◆ Capture larger share in clients through enhancement ofindustry-specific solution package-36-

Copyright © 2011 Digital Garage, Inc. All Rights Reserved

Please note that the business forecasts and strategies covered in this material are based on our current evaluationand future results may vary significantly depending on unforeseeable events or circumstances.