Digital Garage, Inc.

FYE March 31, 2019 Financial Report2019.5.10

Table of Contents
Mission and Business Model ・・・・・・・・・・ 3
Investment Highlights ・・・・・・・・・・・・

7

Segment Performance Review ・・・・・・・・ 15
Progress at DG Lab・・・・・・・・・・・・・・ 33
Appendix・・・・・・・・・・・・・・・・・・・ 39

Copyright © 2019 Digital Garage, Inc. All Rights Reserved2Mission & Business Model

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

3Corporate Mission
As aDigital Garage creates innovative
business context for the new
Internet age and provides uniquebusiness solutions for new
lifestyles, society, and industries bylinking
Real & Cyber
Local & International
Marketing & Technology
Present & Future

Copyright © 2019 Digital Garage, Inc. All Rights Reserved4DGʼs Business Model
Producing and incubating Internet businesses by optimizing
our 3 core strengths: IT, MT, and FTInformation
Technology

Information
Technology

MarketingTechnology

MarketingTechnology

Financial
Technology

Financial
Technology

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

5Enabling Platform for DGʼs Incubation Model
DG continues to incubate and develop unique Internet services
through its Enabling Platform since the early days of the Internet

Ⅰ

Ⅱ

Ⅲ

Portal/Search

e-commerce/
Destination Site

Social Media

1995-2000

2000 -

2008-2015

Advertising2016 -

Payment
環亞智富有限公司

Advertising / Promotion

Big Data Businesse-Commerce / Online Settlement Platform

Enabling Platform – Two Revenue Sources
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

6Investment Highlights

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

7

Financial Results Highlights
Profit before tax for the first year of application of IFRS increased 60% YoY to 13.4 B JPY, a record high

FY18.3
Consoli
dated

Profit before tax

8.4(B JPY)KPI

FT■Transaction volume 2.1 T JPY (YoY up by 34%)■of which, face-to-face settlement
111.4 B JPY (YoY 2.7x)

MT■Advertisement volume36.5 B JPY (YoY up by 12%)■of which, for financial sector
11.5 B JPY (YoY up by 16％)IT
LTI

■Investment / Sold

7.0 B JPY / 3.4 B JPY■Fair valuation

26.7 B JPY (YoY up by 60%)

■Investment profit on equity method of Kakaku.com
3.5 B JPY (YoY up by 6%)■Monthly traffic for all sites of Kakaku.com
271.18 million

FY19.3

13.4(B JPY)

Profit before tax

3.2(B JPY)

1.4(B JPY)

6.9(B JPY)

4.4(B JPY)+60 ％By segments
YoY

+13 ％

Reached recordhigh, both EC/nonEC were strong-25 ％Profit decreased due toa decrease in large-scale
game projects last year
and upfront investment

5x

Significant increase infair value valuation of
investees and strong exit

+21 ％Investment profit onequity method of
Kakaku.com, Inc.
trended steadily

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

8Introduction of IFRS
Voluntary application of IFRS from the consolidated financial statements offiscal year ending March 2019
〜 Reflect the revenue structure of FT/MT and the fair value assessment of the investment
business more appropriately〜

Ⅰ Reflecting the Group's business more appropriately in the IFRS financial statements
 IT / LTI : Appropriately record appraised value on
the balance sheet by evaluating the fairvalue of investee companies
 FT / MT : Reflect revenue structure more clearly bychanging from the traditionalpresentation of gross amount to thepresentation of net revenue

Ⅱ

Improving comparability of financial information in global capital markets

Ⅲ

Strengthening Group management/ Improving capability for M&A and organizational restructuring
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

9

FY19.3 Consolidated P/L Summary (IFRS)Revenue increased 40% YoY to 35.6 B JPY, profit before tax increased 60% to 13.4 B JPY, and profit
increased 52% to 9.8 B JPY〜 Revenue in recurring business grew by 25% YoY, revenue in operational investment securities
increased 6 times YoY 〜
FY18.3

FY19.3

YoY

FY19.3

vs Forecast(Result)(Result)(%)(Forecast)(%)

25,50335,687+39.9

33,500+6.5

Revenue in recurring business

18,141

22,713+25.2

Revenue in operational investment securities

1,007

6,090

6.0 X

Other income

2,111

1,933

-8.4

Finance income

764

117

-84.7

3,481

4,835

+38.9

17,12722,264+30.0

Cost of sales

7,187

10,401+44.7

Selling, general and administrative expenses

9,095

11,296+24.2

Other expenses

542

332

-38.8

Finance costs

303

235

-22.5

Profit before tax

8,376

13,424

+60.3

9,000

+49.2

Profit attributable to owners of parent

6,412

9,771

+52.4

6,200

+57.6

JPY in Millions

Revenue

Share of profit of investments accounted for using equity
methodExpenses

NOTE: The above profit before tax refers to the profit before tax of continuing operations excluding discontinued operations
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

10

FY19.3 Consolidated Segment P/L Summary (IFRS)
Double-digit revenue growth in all business segments〜 MT's profit fell 25% YoY, but FT and LTI both posted double-digit profit growth andIT's five-fold jump 〜
JPY in Millions

Revenue

FY18.3

FY19.3

YoY

FY19.3

vs Forecast(Result)(Result)(%)(Forecast)(%)

25,50335,687+39.9

33,500+6.5

FT

Financial Technology

5,929

6,693

+12.9

6,500

+3.0

MT

Marketing Technology

9,939

13,676+37.6

14,500-5.7

ITIncubation Technology

2,553

8,022

3.1 X

3,100

2.6 X

LTI

Long Term Incubation

6,301

7,133

+13.2

6,500

+9.7

8,376

13,424

+60.3

9,000

+49.2

Profit before tax
FT

Financial Technology

2,809

3,174

+13.0

3,200

-0.8

MT

Marketing Technology

1,856

1,390

-25.1

2,250

-38.2

IT

Incubation Technology

1,321

6,889

5.2 X

1,350

5.1 X

LTI

Long Term Incubation

3,621

4,378

+20.9

3,450

+26.9

NOTE: Segment revenue and profit before tax are before elimination of intersegment transaction and corporate revenue and expenses.
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

11

FY19.3 Consolidated B/S Summary (IFRS)
Reason for change / Remarks

JPY in Million

FY18.3

FY19.3Difference

Current assets

78,77699,186+20,410

Cash and cash equivalents

39,45048,154+8,704

Trade and other receivables

21,33023,254+1,924

Operational investment securities

16,745

26,695+9,95040,76947,704+6,935

7,959

6,575

-1,384

Decrease due to sale of shares and impairment

13,915

19,139+5,224

Increased investment profit on equity method, Increases in fair value of equity method Fundinvestees

5,010

6,662

+1,652

New investments and increase in market value of listed shares

119,545

146,890+27,345

Current liabilities

48,04452,420+4,376

Borrowings

4,623

2,211

-2,41339,40745,799+6,39228,302

47,125+18,822

Bonds and borrowings

19,24335,959+16,716

Deferred tax liabilities

2,754

4,744

+1,990Total liabilities

76,34699,545+23,199

Total equity

43,19947,345+4,146

ROE reached 22%, exceeding the Mid-term target

42,71746,609+3,892of 20%.

Share capital

7,465

7,504

+39

Capital surplus

3,748

4,235

+487

Treasury shares-26-5,026-5,000

1,575

1,303

-272

29,95538,593+8,638Non-controlling interests

483

736

+254

Total liabilities and equity

119,545

146,890+27,345

Non-current assets
Goodwill
Investments accounted for using
equity method

Other financial assets
Total assets

Trade and other payables
Non-current liabilities

Total equity attributable to owners ofparentOther components of equity

Retained earnings

Raising funds by issuing CB, Share buy-back, Loan repayments etc
Relating to FT business
New investments and increase in fair value of investee companies

Partially appropriated funds procured through the issuance of convertible bonds torepayment of borrowings
Relating to FT business, etc
CB issuance, partially appropriated funds procured through the issuance of convertible bonds torepayment of borrowings
Estimated taxes related to unrealized gains on securities

The fair value of investee companies: 26.7 B JPY

Acquisition of treasury shares
Increased profit

ROE

FY18.3

FY19.316 %22 %Copyright © 2019 Digital Garage, Inc. All Rights Reserved

12

FY20.3 Forecast and Target (IFRS)
Recurring business expected to grow 15% YoY, investments and incubations to ROI 2.5x
〜 Consolidated forecasts are not disclosed due to difficulties in reasonable calculation,
but the Mid-term Plan targets for each segment are not changed〜

FY19.3
Recurringbusiness

Profit before tax

FT

3.2

MT

1.4

(B JPY）(B JPY ）Investments
Profit before tax
and incubations

IT
LTI

6.9
4.4

(B JPY）(B JPY ）FY20.3Mid-term Plan

YoY

Growth indicators(CAGR)

+13 ％

+15 ％

+15%, expects double-digit

-25 ％

+15 ％

recurring business (FT andYoY

Hurdle rate forinvestment

5X
+21 ％

2.5 X
2.5 X

 Targeting YoY growth ofProfit before tax growth inMT) Promote investments andreturns based on a ROI 2.5
 Expecting strong
performance of Kakaku.com,
Inc.
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

13

FY20.3 Dividend Forecast (IFRS)Dividend forecast not yet determined due to non-disclosure of financial forecast〜 Based on the target dividend payout ratio of 20% in the Mid-term Plan, striving to achieve an
optimal balance among growth investments, financial soundness, and shareholder returns 〜

Dividend Policy
Ensuring an optimal balance between“promoting investment for growth” and“ensuring financial soundness”, while
enhancing “returns to shareholders”
Targeting a dividend payout ratio of
20%, taking into account actual cash
flows, while securing retained
earnings necessary for growth
Dividend investments and strengthening thefinancial base
Adjustments, such as deducting fair value valuation
gains and losses from Profit before tax, will be madebased on the profit before tax ratio of fair value
valuation gains and losses without cash flows.

Implementing a shareholder return
policy flexibily that contributes to theShareimprovement of capital efficiency inbuyback accordance with its share price,
taking into account its businessperformance and financial condition.

Dividend
per share

FY18.3

FY19.3

FY20.3

Interim

0 Yen

0 Yen

Year-end

24 Yen28 YenTotal

24 Yen28 Yen－－－1.1B JPY

1.3B JPY

Total
dividend
Sharebuyback
Payout ratio

5.0B JPY
JGAAP
IFRS

Total return JGAAP
ratio
IFRS

21 %
18 %
21 %
18 %

－

13 %

－

64 %
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

14

Segment Performance Review

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

15

Business Highlights< Major highlights of 4 segments >FTMTEC Payment

Non-EC /Alliances

Digitalmarketing

Data science

Continued high growth exceeding EC market. Substantial increase in profits. Transaction volume
in public financing sector and data processing payment expanded.

ANA Digital Gate's Face-to-Face Payment (mPOS) transaction volume grew steadily. Started
post-settlement business through JV with Nissen Co., Ltd Established a JV with TOSHIBA TEC CORPORATION, which has the largest share of the POS
market in Japan and overseas, to provide multi-payment services.



As the Internet advertising industry is entering a turning point, we are promoting growthstrategies across all segments, with FT, which are performing soundly. Building the JR Kyushu
Group's CRM and Payment Platform as the first stepStrengthen data science business utilizing proprietary data across the Group. As thesecretariat of the Japan Premium Media Consortium, promoting a variety of demonstration
experiments linking national clients with high-quality media.
Promoting < Global Incubation Stream > linking the United States, Japan, Asia, and Europe

Investment(DGI)  Resi-Tech : Established a cross-industry accelerator originating in Japan that specializes in the

IT

LTI

Incubation (ONL) housing and lifestyle fields in collaboration with seven major real estate andconstruction companies in November 2018. Started the program in April 2019.
BioHealth : Formed a consortium with 22 companies, including major pharmaceutical andmedical-related companies, and launched an accelerator program specializing in thebiohealth field. The first Demo Day was held.

Kakaku.com, Inc.  Steady growth in “Tabelog” and “New Media”, in addition to Kakaku.com
New business

Crypto Garage, Inc. received official authorization to conduct the first finance project under the“Regulatory Sandbox”* by Cabinet Office in Japan. Launching test the issuance of JPY tokens
and the delivery versus payment settlement service between the token and crypto assets.
＊The Act is to develop an environment in which businesses are able to conduct demonstration tests and pilot projects for new technologies and business models thatare not envisaged under existing regulations with a limited number of participants and within the predetermined implementation periods. (ref. METI)
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

16

FT Segment
Ⅰ

Financial Technology Segment

FY18.3
FY19.3

Revenue

Profit before tax

JGAAP

20,956 M JPY

2,539 M JPY

IFRS

5,929 M JPY

2,809 M JPY

IFRS

6,693 M JPY

3,174 M JPY➤ econtext ASIA Ltd.

Payment corporation to expand e-commerce platforms globally➤ econtext, Inc.

Integrates online and offline business as the convenience store payment pioneer➤ VeriTrans Inc.

Provides leading e-commerce payment solutions➤ ANA Digital Gate, Inc. （49％ stake／equity method）
Develops and offers the new payment solution by FinTech➤ SCORE Co., Ltd（49％ stake／equity method）

Development of post-settlement payment business and various financial
businesses utilizing settlement data

➤ TD Payment Corporation（49％ stake／equity method）
Offers multiple payment solutions for POS systems

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

17

FT Segment Highlights
Revenue rose 13% YoY, profit before tax marked 3.17B JPY, +13％ YoY〜 Revenue is presented on a net basis, and profit before tax marked record-high 〜
Profit before tax

Revenue(JPY in
100 Million)(JPY in
100 Million)

209

Profit before tax

188

Ratio of profit before
tax to revenue

163
145

IFRS
-150

17.5

(+13%)

67

59

31.7

adjustment
+2.8

25.3

adjustment(+13%)

IFRS

28.1
47.4％
47.3％

19.6

13.3

12.1％

FY18.3

JGAAP

FY19.3

IFRS

FY18.3

JGAAP

FY19.3

IFRS※Figures for FY17.3 are annualized due to a nine-month irregular accounting period.
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

18

FT Segment Highlights
Transaction volume marked approx. 2.1T JPY, +34% YoY, number of transaction increased to 390 million,+33％ YoY〜 Contributions from data processing, which provides personal authentication and sales processing services
related to credit card payments〜

Transaction Volume
FY18.3(JPY in
100 Million)(+34%)

FY19.3

20,883
Others

15,578

Number of Transaction
FY18.3(in million)(+33%)

293.98Data
processing
payment

FY19.3392.93
OthersDataprocessing
payment

FY18.3(JPY in
100 Million)(+13%)

59.3

カード

FY19.3(JPY in
100 Million)

66.9(+13%)

Others

31.7

28.1

Data
processing
payment

Convenience
store
payment

Card
payment

FY18.3

FY19.3Monthly
basic fee
/Initial

Convenience
store
payment

Card
payment

Profit before tax

Revenue

Convenience
store
payment

コンビニ

Card
payment

カード

カード

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

19

FT Segment – Progress of Strategies
Developing the new growth area as a payment platformer in FinTech〜 Following Non-EC payment and face-to-face payment, promoting public fundpayment and post-settlement payment 〜

Growth Strategy 1

Non-EC payment/
Face to face payment

Market Environment

Growth Strategy 2
Alliance■Payment cooperation with business
partners having large customer base■Tie-ups with major overseas
payment companies■QR code payment■Specific market (Real estate/
Restaurants/ Funeral etc)
■New area (public fund payment/utility fees payment etc)

■ QR code payment︓Alipay, WeChatPayv■Expand payment methods through tieups with strategic partners ANA Group,
Nissen, and TOSHIBA TEC

 Payment for Real estate/ Restaurants/
Funeral etc■Remittance service■Undertaking the collection business bycredit card of the National Pension
Insurance, and payment of national
taxes at convenience stores (publicfinance sector)

Theme in FT segment

Cashless

Vitalizing the local
economies

Inbound■Provide local settlement solutionsin Japan to overseas payment
service providers and support
global e-commerce

Next generation
payment (FinTech)(Ref. METI, Card Wave, Inc.)
Copyright © 2019 Digital Garage, Inc. All Rights Reserved20

MT Segment
Ⅱ

Marketing Technology Segment

FY18.3
FY19.3

Revenue

Profit before tax

JGAAP

34,938 M JPY

1,936 M JPY

IFRS

9,939 M JPY

1,856 M JPY

IFRS

13,676 M JPY

1,390 M JPY➤ Marketing Technology Company

Supports clientʼs business through performance-based ads, Online to
Offline strategy and web marketing➤ DG Communications Co., Ltd.

Provides solutions that make people's lives more comfortable, mainly throughthe real estate advertising business➤ BI.Garage, Inc.

Develops and provides ad products incorporating data science, social marketing,and cutting edge ad technology➤ NaviPlus Co., Ltd.

Offers website support tools including personalized recommendation engines➤ CyberBuzz, Inc.（25％ stake／equity method ）Provides the social media marketing platform structured with influencers as its
center part

➤ DG MARKETING DESIGN, Inc.（20％ stake／equity method）

Established on June 25th, 2018 and its predecessor is Business Design Company
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

21

MT Segment Highlights
Revenue marked 13.7B JPY, +37% YoY, and profit before tax decreased to 1.39B JPY, -25％ YoY〜 Advertising for financial and real estate fields was strong. Profit decreased due to upfront
investment in new projects and personnel expansion 〜
Profit before tax

Revenue
349(JPY in
100 Million)

273(JPY in
100 Million)

adjustment

18.6

Ratio of profit before
tax to revenue

210

13.9
(+37%)
137

adjustment -1

19.6

Profit before tax

IFRS
-249

160

IFRS

14.3

18.6%

(-25%)
13.9

10.6
10.1%

100
5.6%

FY18.3

JGAAP

FY19.3

IFRS

FY18.3

JGAAP

FY19.3

IFRS※Figures for FY17.3 are annualized due to a nine-month irregular accounting period.
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

22

MT Segment Highlights
Advertisement volume rose 4.0 B JPY, +12% YoY, especially for financial fields was strong, up 16%〜 Earnings slump bottomed out due to the decrease of large-scale game projects in FY18.3 〜Advertisement volume
FY18.3(JPY in
100 Million)

98
79

63

FY19.3

84

25

21
35
19

19

19
22

90
23
16

93
25
19

98
82
19

4.6BJPY 9.2BJPY （2.0X）

Strong real estate
advertising
Entry into Resi-tech■Smartphone/App

9.4BJPY 7.1BJPY （-24％）

Decrease of large-scale
game projects in FY18.3

22■Cosmetics/HR

8.4BJPY 8.5BJPY（+0.3％）

Driven by advertising forcosmetics and healthfoods

Promoting cashless
operations is a favorable

19

30

27

28

27

32

■Financial

9.9BJPY 11.5BJPY（+16％）

3Q

4Q
(1-3)

■Total

32.5BJPY 36.5BJPY（＋12％）

24

1Q

2Q

3Q

4Q

1Q

2Q

(4-6)

(7-9)

(10-12)

(1-3)

(4-6)

(7-9) (10-12)

Cosmetics/HR

Smartphone/App

Factors■Real estate

20

23

Financial

FY18.3 FY19.3 （YoY）

22

20

21

19

16

19

22

24

【Volume by industry】

Real estate＊In applying the IFRS, DG Communications Co., Ltd. became a consolidated subsidiary in the second half of FY18.3
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

23

MT Segment Highlights
Strategy for the Business Environment Changes＜Marketing Technology Company＞

Promote growth strategies across segments, with FT.
Building the JR Kyushu Group's CRM and Payment Platform as the first step

＜DG Communications Co., Ltd.＞

Launch of "Open Innovation Program" for the Real
Estate Developer Industry＜CyberBuzz, Inc.＞

Strengthen social media marketing
Capital participation in "Cyber Buzz" as largest external shareholder＜Media Consortium Planning Office＞

Optimizing Advertising Value in Collaboration with National Clients
In charge of the secretariat of “the Japan Premium Media Consortium”

Ⅰ Financial / Collaborate with FT
Ⅱ Real estate / Collaborate with ONL
Ⅲ Social Media Marketing
Ⅳ National Client

Leading data scientists in Japan

Next-generation data technology＜ Strengthen data science business across FT / MT / LTI ＞
BI. Garagetransaction volume

YoY +62%

Ⅴ

Increased advertising business from national
clients by menu developed mainly by DG and
Kakaku.com

Number of clients

FY18.345

FY19.3123

Assigned C.D.O.(Chief Data Officer) to promote open innovation outside the advertising field
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

24

IT Segment
Ⅲ

Incubation Technology Segment

FY18.3
FY19.3

Revenue

Profit before tax

JGAAP

3,123 M JPY

1,325 M JPY

IFRS

2,553 M JPY

1,321 M JPY

IFRS

8,022 M JPY

6,889 M JPY➤ DG Incubation, Inc.

Invests in and incubates cutting-edge internet startups➤ Open Network Lab, Inc.

Provides support to internet-business entrepreneurs with global visions➤ DG Daiwa Ventures, Inc. （50％ stake／equity method）

Manages DG Lab Fund to invest in startups with next-generation technologies➤ Digital Garage US, Inc.

The US-based global strategy headquarters➤ DG Technologies, Inc.

Drives strategic technology development with DG Lab

Some businesses in DGHQ segment have transferred to IT segment, therefore figures on FY18.3 updated with the current category.
Copyright © 2019 Digital Garage, Inc. All Rights Reserved25

IT Segment Highlights
Growth in unrealized gains on fair value valuation due to adoption of IFRS, Profit before tax 5x YoY〜 Focus on nurturing start-ups to increase the value of investees 〜
PL

Revenue(JPY in
100 Million)

80.2

PL

Profit before tax

68.9(JPY in
100 Million)

BS

Operational investment securities(JPY in
100 Million)

267

167
3.1 X

5.2 X

25.5
13.2

FY18.3

FY19.3

FY18.3

FY19.3

FY18.3

FY19.3Copyright © 2019 Digital Garage, Inc. All Rights Reserved

26

IT Segment Highlights
Expand investment in North America, mainly Silicon Valley〜 Newly invested 7.0B JPY in FY19.3 〜－ Portfolio by regions（book value at end of year） －WHILL [Japan]

Operational investment securities︓ 26.7B JPY＝NewGame Closure [US]OthersTransform antiquated power wheelchair
into an intelligent personal electric vehicle,
focusing on an approachable andaesthetically pleasing powered vehicle.

Japan
29.6%

Monstar Lab [Japan]

Operates Sekai Lab, a global outsourcing
platform that allows engineers fromaround the world to request development

North America
37.4%

Provider of a mobile application intended
to offer a HTML5 game development
platform.

Asia
24.1%

Panair [Japan]

Provides “Panair Cloud”, an automatedelectricity retail platform that uses cloudcomputing and artificial intelligence.

8.4%

Grub Market [US]Develop a leading marketplace platform
specializing in fresh organic foods

Europe0.5%
Sen Do Technology [Vietnam]
Operates Sendo, a marketplace for C2C
and B2C in Vietnam, and provides
electronic wallet services

Droom [India]
A leading online marketplace for new andsecond-hand automobiles in India

MX Technologies [US]Offers a PFM (personal financial management)
tool for financial institutions in the US.

Copyright © 2019 Digital Garage, Inc. All Rights Reserved27

IT Segment Highlights －１) Global Incubation Stream
Collaboration among the United States, Japan, Europe and Asia "Global Incubation Stream"〜 Identifying leading investment projects and strengthening business development/ incubation systems 〜

Copyright © 2019 Digital Garage, Inc. All Rights Reserved28

IT Segment Highlights －２) Seed Accelerator Program
Expansion into various categories derived from Japan's First Seed Accelerator Program Open Network Lab〜 Started a business development program specializing in specialized fields and areas〜
Open Network Lab＜2010〜2019＞

Started as Japan's first seed
accelerator program and grew steadily
Launched in 2010
10th year of
FY19.3

The 18th period
ended
The 19th offering

More than 100
startups graduate

Resi-Tech
Industry's first cross-sectional
consortium specializing in theresidential and lifestyle sectors

Supported by

Bio Health

HOKKAIDO

22 sponsoring companies
Japan's first open innovation program

With the D2Garage of a JV with Hokkaido Shimbun,
the industry, government, and academia will
collaborate to expand throughout the region
Supporters
Universities

And more..

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

29

LTI Segment
Ⅳ

Long-term Incubation Segment
Revenue

FY18.3
FY19.3

Profit before tax

JGAAP

1,150 M JPY

3,176 M JPY

IFRS

6,301 M JPY

3,621 M JPY

IFRS

7,133 M JPY

4,378 M JPY➤ Kakaku.com, Inc. （20％ stake／equity method）

Operates purchase support service, Kakaku.com and restaurant review andrestaurant service, tabelog, etc.

➤ Crypto Garage, Inc.

Promoting development of advanced financial services utilizing blockchain
technology and cryptography technology with Tokyo Tanshi Co., Ltd.

➤ ACADEMIE DU VIN

Operates wine schools and wholesaling wine.

➤ DK Media, Inc. （50% stake／equity method）

Internet media business utilizing fashion magazines by Kodansha

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

30

LTI Segment Highlights
Profit before income taxes marked 4.4B JPY, +21% YoY. Investment profit on equity method of
Kakaku remains robust〜 “Tabelog” and “New Media” performed well 〜(JPY in
100 Million)

Profit before tax
税引前利益

44.8

IFRS
adjustment
+4.5

30.5

FY15.6

FY16.629.0

FY17.3JGAAP

Business Progress of Kakaku.com, Inc.
43.8

Monthly traffic for all sites of Kakaku.com has increased to

36.2

271.18 million, up 7.9% yoy (March 2019)

31.8

FY18.3【Total Accumulated Traffic for Kakaku.com Group】(in million people)

FY18.3

FY19.3

IFRS※Figures for FY17.3 are annualized due to a nine-month irregular accounting period※Figures from FY15.6 to FY17.3 are Media Incubation Segment

YoY
+7.9%

Regarding changes in traffic measurement method
Due to the mobile webpage speed, Kakaku.com, Inc. has been experiencing some overlap when measuring monthly user numbers but as of September 2018
Kakaku.com, Inc. has switched to a method which allows them to exclude overlapping users. The graph from September 2016 to September 2018 was recreatedusing the new method.

Ref. Kakaku.com, Inc. Results Briefing for FY2019/3

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

31

LTI Segment – Promote Blockchain Financial BusinessAccelerating commercialization of blockchain-based financial services〜 Developed P2P protocols, following SETTLENET 〜
For video of Crypto Garage/SETTLENET/P2P, click HERE
September 2018

OutlineEstablished Crypto Garage,
Inc., a JV with Tokyo
Tanshi Co., Ltd.

December 2018

 Concluded and implemented a transaction with Blockstream to hedge
Bitcoin price fluctuation risk, and completed Proof of Technology.
 Aim to contribute to the formation of a sound market inwhich lead more businesses to participate in transaction byeliminating counterparty risk, reducing transaction costs and providing
solution to hedge price fluctuation of cryptographic assets.

Capital and businessalliance with Blockstream

February 2019
Launched SETTLENET and
Authorized by Regulatory
Sandbox in Japan

April 2019
Developed P2P protocol
based crypto asset
derivative
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

32

Progress at DG Lab

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

33

Progress at DG Lab
SummaryⅠ
Ⅱ

Developed P2P protocols to realize virtual currency
derivative transactions to support commercialization of
Crypto Garage, Inc.
Jointly developed Personal Health Record services incollaboration with Welby Inc., a provider of healthcare andmedical information-related services.
Welby was listed on the TSE Mothers market in March 2019.

Ⅲ

Provides AR art experience using the songs of Ryuichi
Sakamoto. Implemented promotional measures in
Sapporo using "Sound AR."Ⅳ

DG Lab Fund formed the second fund following thefirst fund.
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

34

Progress at DG Lab（Blockchain）
Accelerating R&D, business development, and ecosystem building that centered on
the highest level of technological expertise of DG Lab developer team. Continuing
technological development to create next-generation businesses.
BLOCK
CHAIN

Support for commercialization

Expansion of ecosystem

Supporting Crypto Garageʼs service development

Full support for Scaling Bitcoin

A P2P Protocol based crypto asset
derivative

DLCs(DG Lab deliverable)

Smart Contract technology that enables
conditional payments based on future
projections

DG Lab supports the development of the P2P protocol "P2P
derivatives," which realizes derivative transactions in crypto assets
developed by Crypto Garage. This protocol uses the smart contracttechnology "DLCs (Discreet Log Contracts)," which delivers
conditional payments based on future projections developed by DG
Lab in collaboration with MIT Media Lab. DG Lab aims to develop
businesses in other blockchain fields.

On October 6-7, 2018, DG Lab organized Scaling Bitcoin, aninternational conference held at Keio University, which brings
together Bitcoin developers and academics from around the world.
DG Lab fully cooperated as a local support organization and DG Lab
engineer also appeared as presenters.
In general, there is a shortage of blockchain engineers. DG Lab
believes that training and enlightenment of engineers are essential
to the development of the industry, and will continue to work for
expansion of the blockchain ecosystem.

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

35

Progress at DG Lab（AI × BioHealth）
Took steps to create new businesses in collaboration with partners using DG Lab'stechnological capabilities. Adapted a multi-disciplinary approach to achievecommercialization.
BIO
HEALTHx AI

Joint development
Joint development of Personal Health Record businesswith Welby

BIO
HEALTH

Expansion of ecosystem“Open Network Lab BioHealth” 1st batch ends
Startups selected

Partner companies× Welby was listed on the TSE Mothers market
in March 2019
 DG is the largest external shareholder

In collaboration with Welby, DG Lab is promoting the aggregation
business of personal health record and medical information (PHRs).
Jointly developing PHR services utilizing advanced technologies such as
blockchain and AI, where DG Lab is conducting R&D. In the future, DG
Lab and Welby will collaborate with local governments, national healthand healthcare institutions, pharmaceutical companies, and healthrelated businesses to build a platform for personal health record andmedical information.

The first batch of “Open Network Lab BioHealth” accelerator program,which specializes in the biotechnology and healthcare fields, wascompleted. Four companies were selected from 56 applicants oftechnology-based ventures, and their growth were supported withpartners and experts, including major pharmaceutical companies. In
the future, the program will expand in cooperation with domestic andoverseas partners and experts.

Copyright © 2019 Digital Garage, Inc. All Rights Reserved36Progress at DG Lab（VR/AR）
Successfully discovered technology seeds and conducted several PoCs, which will leadto commercialization. Accelerating efforts to create businesses utilizing newtechnologies.
VR/AR

Discovery of technological seeds and demonstration

Demonstration experiments for commercialization

Providing AR art experiences using Ryuichi Sakamotoʼs music

Implemented promotional measures in Sapporo using "Sound AR"

On October 1-8, 2018, DG Lab conducted a demonstration
experiment of "Sound AR" in collaboration with J-WAVE and Mori
Building, combining location information and audio content at
Roppongi Hills. Using the "WEB-AR" technology, which allows users
to experience AR technology only with the browsers developed by
DG Lab, Ryuichi Sakamoto's music, scenery, and AR art weresynchronized for installation art in several locations within Roppongi
Hills using smartphones.

During the Sapporo Snow Festival held on February 4-11, 2019,
promotional measures were implemented using "Sound AR.”
Leveraging its "WEB-AR" technologies, DG Lab provided content
that collects SEKAI NO OWARI songs in stamp rally format at
multiple locations in the venue, and also implemented sales
promotion measures to receive coupons by checking in toneighboring stores. Going forward, DG Lab will promote theutilization in the areas of events and entertainment.
Copyright © 2019 Digital Garage, Inc. All Rights Reserved37

Progress at DG Lab Fund
Established the DG Lab 2nd Fund following the 1st Fund〜Accelerating the Global Incubation Ecosystem of large enterprises and startups〜
Sponsor companies
and fund investors
LP Investment

Sponsor companies: Bank, Securities, System integrator,
Telecommunications etc
Fund investors: IT, Bank, Securities, Newspaper, Real estate firm, Travel etc

Sponsorship

ReturnR&D and experiments in strategical
５ focus areas(Blockchain, AI, VR/AR, Security,
BioHealth)Investment fields:
Collaboration with 5 focus areas of DG Lab
Blockchain, AI, VR/AR, Security, BioHealth

Examples of
portfolio companies

1st Invested in 31 companies
Blockstream
Develop and provide
Sidechain, a platform technology thatfacilitates multi-purpose applications ofblockchain

Idein

Develop an optimized
compiler for deep learning models. Edge
Computing is possible with inexpensive
general-purpose hardware.

Business cooperation/
R&D results

Panair
Provides an automatedelectricity retail platform that uses cloudcomputing and artificial intelligence.

Akili Interactive

Develop digital medicine
using digital content as a medicine fornervoussystemdiseases(ADHD,
depression, etc.)

Collaboration
withportfolio
companies

2nd Formed in April 2019

Expand investment globally (North America, Asia and Europe)

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

38

Appendix

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

39

Financial Results: Consolidated Sales/ Revenue
Consolidated Sales/ Revenue
601

437
380

484

(+40%)

356

 Revenue increased 40%
YoY to 35.6B JPY

337
279

110

 Double-digit revenue growthin all business segments

255

149

(JPY in 100
Million)

FY11.6 FY12.6 FY13.6 FY14.6 FY15.6 FY16.6 FY17.3 FY18.3 FY18.3 FY19.3

JGAAP

IFRS

※Figures for FY17.3 are annualized due to a nine-month irregular accounting period.
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

40

Financial Results: Consolidated Profit Before Tax
Consolidated Profit Before Tax(+60%)

134

92
75

42

67

76

 Profit before tax posted
record-high income of
13.4B JPY, up 60% YoY

84

50

25
9
(JPY in 100
Million)

FY11.6 FY12.6 FY13.6 FY14.6 FY15.6 FY16.6 FY17.3 FY18.3 FY18.3 FY19.3

JGAAP

 MT profits declined, butboth FT and LTI profits roseby double-digit figures,
while IT profits rosesignificantly, 5X.

IFRS※Figures for FY17.3 are annualized due to a nine-month irregular accounting period.
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

41

Financial Results: Consolidated PL (IFRS)JPY in Millions

FY2018.3

FY2019.3(Result)(Result)

Continuing operations
Revenue

25,50335,687

Revenue in recurring business

18,141

22,713

Revenue in operational investment

1,007

6,090

Other income

2,111

1,933

Finance income

764

117

3,481

4,835

Share of profit of investments accounted for using equity method

Expenses

17,12722,264

Cost of sales

7,187

10,401

Selling, general and administrative expenses

9,095

11,296

Other expenses

542

332

Finance costs

303

235

Profit before tax

8,376

13,424

1,857

4,088

6,518

9,336

Revenue

3,260

1,261

Expenses

3,403

1,655

Profit (loss) before tax from discontinued operations

-143

-394

Income tax expense
Profit from continuing operations
Discontinued operations

38

-225

Loss (gain) on sales on discontinued operations

Income tax expense-

898

Income tax expense from sale of discontinued operations-

275

Profit (loss) from discontinued operations

-181

454

Profit

6,337

9,790

6,412

9,771

-75

19

Profit attributable to
Owners of parent
Non-controlling interests

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

42

Financial Results: Consolidated PL (JGAAP)
JPY in Millions

FY14.6

FY15.6

FY16.6

FY17.3

FY18.3(Full Year Act)

(Full Year Act)

(Full Year Act)

(Full Year Act)

(Full Year Act)

9 monthNet sales

33,751

38,08743,76336,45160,168Operating profit

2,608

4,809

4,201

723

2,310

Non-operating income

2,307

3,736

3,031

3,246

3,305

1,741

2,080

2,406

2,528

2,768

Foreign exchange gain

143

1,090

-

171

-

Non-operating expenses

472

936

1,040

292

597

Foreign exchange loss

-

-

689

-

160

4,442

7,610

6,193

3,678

5,017

630

2,463

1,392

2,265

2,669

220

68

-

1,829

1,032

-

-

521

386

1,471

374

2,363

157

47

33

26

23

706

-

-

38

824

10

124

67

0

657

-

104

25

Profit before income taxes

5,035

9,248

7,574

5,819

7,619

Income taxes

1,887

3,855

2,385

1,525

2,133

Profit attributable to owners of parent

2,847

5,081

5,165

4,289

5,460

Share of profit of entities accounted for using equity
methodOrdinary profit
Extraordinary income
Gain on sales of investments in securities
Gain on sales of shares of sub. and associates

Gain on change in equity
Gain on transfer of business
Extraordinary loss
Impairment loss

Note: Kakaku,com.Inc. is affiliated company for using the equity method, and started to apply IFRS from FY18.3. The figures on FY17.3 has been applied retrospectively.
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

43

Financial Results: Consolidated PL by Segments (IFRS)JPY in Millions

Revenue

FY18.3

FY19.3(Result)(Result)

25,50335,687

FT

Financial Technology

5,929

6,693

MT

Marketing Technology

9,939

13,676

IT

Incubation Technology

2,553

8,022

LTI

Long Term Incubation

6,301

7,133

8,376

13,424

Profit before tax
FT

Financial Technology

2,809

3,174

MT

Marketing Technology

1,856

1,390

IT

Incubation Technology

1,321

6,889

LTI

Long Term Incubation

3,621

4,378

NOTE: Segment revenue and profit before tax are before elimination of intersegment transaction and corporate revenue and expenses.
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

44

Financial Results: Consolidated PL by Segments (JGAAP)

JPY in Millions

FY14.6

FY15.6

FY16.6

FY17.3

FY18.3(Full Year Act)

(Full Year Act)

(Full Year Act)

(Full Year Act)

(Full Year Act)

9 monthNet sales

33,751

38,08743,76336,45160,168MT

Marketing Technology

14,822

16,06421,02820,49434,938FT

Financial Technology

13,454

14,56816,392

14,14020,956

IT

Incubation Technology

5,475

7,454

6,343

1,775

3,123

LTI*

Long Term Incubation

-

-

-

41

1,150

Profit before income taxes

5,035

9,248

7,574

5,819

7,619

MT

Marketing Technology

874

1,061

1,396

1,074

1,959

FT

Financial Technology

1,496

1,335

1,758

1,478

2,539

IT

Incubation Technology

1,595

2,804

3,105

766

1,325

LTI*

Long Term Incubation

1,776

4,477

3,052

2,899

3,176

Note: Income before income taxes per segment is based on figures prior to elimination or group deduction, etc*MI segment has been changed to LTI segment from FY18.3, by aiming to generate sustainable business profit in mid-long term.
Some businesses in IT segment have transferred to LTI, therefore figures on FY17.3 updated with the current category.
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

45

Topics : Data Science Business
Expansion of initiatives in the strategic data science business〜 Collaboration with Media Consortium on various demonstration experiments 〜
Data Science Business Expansion

Japan Premium Media Consortium Initiatives-Developing a Data Tech Business Using
Comparative Behavioral Data-- Demonstrate empirical research to transform advertising attitudes withbrand-safe premium media-< BI. Garage Transaction Volume >36 major media companies participate
Admin Office : Digital Garage, Inc.

(+62％)

Newspapercompany

TV stationRadiostation Viewability Brand safety Elimination of ad fraud
 Ensuring reliability inadvertising etc

Consumer

Providing optimal advertisingindicators and advertising value
for both brand advertisers andinfluential premium media

Internet
Media

Premium media



FY19.3（National Clients)



FY18.3Development of national client businesses(consumer goods company etc)
Providing group-specific data-accumulating
DMPs (Data Management Platform)
Marketing technology that combines
content using media data with advertising
distribution

AdvertisersMagazinepublisher

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

46

Press Releases
Date

Title

2019.5.9

DG Lab to Host THE NEW CONTEXT CONFERENCE 2019 TOKYO on the Theme of “How to Build a Data
Ecosystem”

2019.4.19

Crypto Garage Developed and Executed the Contract of a P2P Protocol Based Crypto Asset Derivative
Settled in Bitcoin

2019.4.12

DG Incubation Co-leads Investment in Food E-Commerce Service GrubMarket

2019.4.1

VeriTrans Launches Credit Card Payment Services for Patent and Other Fee Payments to the Japan
Patent Office2019.3.25

ECONTEXT Expands its Convenience Store Payment Service to Support Barcode-based Smartphone
Payments at FamilyMart

2019.3.19

Digital Garage Group and Kyushu Railway Company to Build a CRM & Payment Platform for JR Kyushu
Group and Jointly Develop the JR Kyupo App

2019.2.27

Digital Garage's Capital and Business Alliance Partner, Welby is Approved for Listing on the TSE's
Mothers Section

2019.1.29

Digital Garage Group's Face-to-face Payment Business Exceeds Annual Transaction Amount of 100
Billion Yen

2019.1.28

DG Lab Provides AR Technology for a SOUND RPG Event Collaborated with an Eminent Musician inJapan2019.1.21

Crypto Garage, The First Blockchain and Finance Project Authorized by Regulatory Sandbox in Japan

2019.1.21

Crypto Garage Launches SETTLENET Product to Boost Application Development for Blockchain Based
Financial Institutions

2018.12.19

ECONTEXT Launches the QR Code-Based National Tax Collection Service at Convenience Stores to the
National Tax Agency

2018.11.16

VeriTrans and Toshiba Tec Establish TD Payment, A JV Offering Multiple Payment Solutions for POS
Systems

2018.11.8

Digital Garage Launches "Open Network Lab Resi-Tech," a Global Accelerator Program Targeting Real
Estate-Related Startups

2018.11.6

ECONTEXT Registered as Electronic Payment Service Provider

2018.11.1

econtext Provides a Comprehensive Service for New Online Application System of Hiroshima Prefectural
Board of Education

2018.10.10

DG Lab to Host THE NEW CONTEXT CONFERENCE 2018 SAN FRANCISCO

2018.10.5

Digital Garage Exhibits at Japan Healthcare Venture Summit 2018 Hosted by the Ministry of Health,Labour and Welfare
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

47

Press Releases
Date

Title

2018.10.2

econtext Launches Convenience Store Payment Services for Civil Fee Payments in Osaka Prefecture

2018.9.13

VeriTrans Provides Credit Card Payments for a PoC of Ringo Pass, JR-East's New Public Transportation
Smartphone App

2018.9.4

Announcement Regarding Result and Completion of Repurchase of Shares through Off-Auction Own
Share Repurchase Transaction (ToSTNeT-3)

2018.8.30

Announcement Regarding Determination of Terms of Issue of Zero Coupon Convertible Bonds due
2023

2018.8.29

Announcement Regarding the Issuance of Zero Coupon Convertible Bonds due 2023

2018.8.29

Announcement Regarding Repurchase of Shares2018.8.29

Announcement Regarding Repurchase of Sharesthrough Off-Auction Own Share RepurchaseTransaction (ToSTNeT-3)

2018.8.29

VeriTrans and Nissen to Establish a JV in the Postpaid Shopping Business2018.8.27

Digital Garage & KDDI Entered into a Basic Agreement on Strategic Alliance2018.8.2

Digital Garage and Welby Form a Capital and Business Alliance to Build a Person-Centered Health andMedical Data Platform2018.8.1

Digital Garage and Tokyo Tanshi to Establish a JV for Blockchain Financial Service R&D and Business in
the Fintech Field

2018.7.20

Digital Garage and iRidge's Fintech Subsidiary Collaborate in the Regional Digital Currency Field

2018.6.15

Digital Garage Launches "Open Network Lab BioHealth", an Accelerator Program Specialized in
Biotechnology and Healthcare

2018.5.23

Digital Garage Launches One-Stop Marketing and Fulfillment Solution for Online Shopping Suppliers
Aiming to Expand Overseas in Thailand and Taiwan

2018.5.17

DG Lab to Host THE NEW CONTEXT CONFERENCE 2018 TOKYO on the Theme of "Governance ofRegulations and Innovations"2018.4.27

Digital Garage and The Hokkaido Shimbun Press Launch "Open Network Lab HOKKAIDO", an
Accelerator Program

2018.4.20

VeriTrans Provides Credit Card Payments for a PoC of Ringo Pass, JR-East's New Public Transportation
Smartphone App

Copyright © 2019 Digital Garage, Inc. All Rights Reserved48

Please note that the business forecasts and strategies covered in todayʼs presentation are based on our current evaluation and future results may vary significantly depending
on unforeseeable events or circumstances. This announcement is solely for the purpose of the investors relationship and is not for making any solicitation for investment inany securities. This announcement does not constitute an offer to sell or the solicitation of an offer to buy any securities in the United States or any other jurisdiction in whichsuch offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Any securities of our consolidated
subsidiaries have not been registered under the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act") and may not be offered or sold in the United States absent
registration or an applicable exemption from the registration requirements of the U.S. Securities Act. Any public offering of securities to be made in the United States will bemade by means of a prospectus. Such prospectus will contain detailed information about the company making the offer and its management and financial statements.