Digital Garage, Inc.

2Q of FYE March 31, 2017 Financial Report2017.2.10

Table of Contents
Mission and Business Model・・・・・・・・・・ 3
Investment Highlights・・・・・・・・・・・・・ 7Group Financial Performance Review・・・・・ 13
Segment Performance Review・・・・・・・・ 18
Appendix・・・・・・・・・・・・・・・・・・・ 34

Copyright © 2017 Digital Garage, Inc. All Rights Reserved2Mission & Business Model

Copyright © 2017 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 © 2017 Digital Garage, Inc. All Rights Reserved4

DG’s 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 © 2017 Digital Garage, Inc. All Rights Reserved

5Enabling Platform for DG’s 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 © 2017 Digital Garage, Inc. All Rights Reserved

6Investment Highlights

Copyright © 2017 Digital Garage, Inc. All Rights Reserved

7Investment Highlights
Income before income taxes 4.7 B JPY +68% YoY for 2Q Cumulative FY17.3〜 Annual progress rate 66% in 9 months irregular settlement due to fiscal term change 〜

Ⅰ

IT: Large profit growth brought by a big exit, driving global incubation ecosystem Income before income taxes led by sales of stocks due to the acquisition of the investee(Citrus, a leading
payment provider in India) became +72% YoY 1.4 B JPY
 Launched open innovation program “TOYOTA NEXT” in collaboration with TOYOTA
 Launched “DG Lab Fund” for investment in next-gen startups to drive open innovation with “DG Lab“Ⅱ

MT : Smartphone Ads continue a good state, accelerating strategic data science business Significant increase : YoY Sales +45% 13.3 B JPY, Income before taxes +40% 0.7 B JPY
 Performance-based ads showed significant growth in both PC and smartphone for various verticals including
financials and cosmetics
 BIG MINING started to collaborate with Twitter, leveraging big data. Propelling data science businessⅢ

FT : Expansion of profit-making foundation for Payment services, driving next-gen FinTech
 Semi-annual transaction surpassed record-high 0.6 T JPY, YoY revenue +16%, Income before taxes +7%
 Started to support Apple Pay. Along with Alipay and Line Pay, cooperating with big platformers at full swing
 Established a JV ”ANA Digital Gate” with ANA Group to work on payment marketing joint projects※ DG takes a management approach to drive performance based on income before income taxes for total and by segment
Copyright © 2017 Digital Garage, Inc. All Rights Reserved

8Progress of “DG Lab”
Increased numbers of sponsors / participating companies in DG Lab on top ofincreased investment in fund. Driving R&D projects to create new business with
next-gen open innovation platform
BLOCK
CHAIN

BLOCK
CHAIN

Hosted Blockchain Core Camp
(BC2) for world-class blockchain
developers

Driving R&D projects in blockchain
DG to jointly develop next-generation platform technology withleading blockchain technology company, Blockstream
Key projects : Area money, Point exchange, Smart contract

Mr. Thaddeus Dryja
A leading developer at Lightning
Network

Mr. Nicolas DorierDeveloper of NThumbleBit and NBitcoin

Mr. Jeremy Rubin
Founder of Tidbit, the MIT Bitcoin Project,
the MIT Digital Currency Initiative< See Nikkei article Feb. 2nd for detail >Started making an investment from Fund (AI / BIO related)
Copyright © 2017 Digital Garage, Inc. All Rights Reserved

9Web media ”DG Lab Haus”
Delivers news on open innovations around the world andfuture discussed by leaders with focus on DG Lab domains
DG Lab Haus is a web media which delivers latest technology,
news, and future industry leaders discuss open innovation from five
perspectives of “Blockchain”, “VR/AR”, “Artificial Intelligence”,“Security”,”Biotechnology”.
Find /DG Lab Haus is named after “Haus” (German for a house) with the recruit
desire to develop a hub where we freely share ideas of how
professionals
technology plays a role in our lives.

Expertsin eachfield

DG LabDG LabCore
Partners

Sponsorship
Partners

http://media.dglab.com/

Present
R&D
results

Createnext-generation
projects
Copyright © 2017 Digital Garage, Inc. All Rights Reserved

10Initiative on open innovation「TOYOTA NEXT」
Launched open innovation program “TOYOTA NEXT” in collaboration with TOYOTA〜 Calling for proposals for TOYOTA to build the future’s mobility society 〜

TOYOTATOYOTA NEXT was created to imagine and design thenext generation mobility infrastructure and world
through the partnership between Toyota andrevolutionary technology and services held bystartups and research facilities「TOYOTA NEXT」Official HP https://toyotanext.jp/en/
Digital Garage

DG provides know-how related toinvestment in and development ofleading startup companies globally

Inamoto & Co.
Manages creative

Copyright © 2017 Digital Garage, Inc. All Rights Reserved

11

Joint project on payment marketing
Established a JV “ANA Digital Gate” with ANA group to provide payment solutions using FinTech〜 Combine DG’s latest IT technologies with ANA group’s sales network 〜

ANA

All Nippon Airways Trading Co., Ltd.

Boost
Local business

Inbound＜Mid-long term＞
Create new business and boost local economy with area money using blockchain andcustomer services with AI in collaboration with DG Lab＜Next Step＞
Data marketing business for ANA Mileage Club of 30 million members＜Topics for this term＞
Provides mobile settlement for ANA retails, airports, andtravel / commercial facilities
ANA Digital Gate, Inc.
All Nippon Airways Trading Co., Ltd. 51%
VeriTrans Inc.,
49%

Copyright © 2017 Digital Garage, Inc. All Rights Reserved

12Group Financial Performance Review

Copyright © 2017 Digital Garage, Inc. All Rights Reserved

13

FY17.3 2Q (Cumulative) Consolidated P/L Summary
YoY Sales grew +20%, Income before income taxes grew + 68% to 4.7 B JPY～ Incurred extraordinary income due to sales of stocks of a portfolio company,
66% progress rate on income before income taxes basis ～FY17.3

FY16.6

FY17.32Q (Act)

2Q (Act)%

AmountNet sales

19,843

23,817+20.0+3,973Operating income

1,626

906

-44.3

-720

Non-operating income

1,372

2,628

+91.4

+1,255

1,060

1,935

+82.5

+874

Foreign exchange gain

-

274

-

+274

Non-operating expenses

304

210

-30.8

-93

Foreign exchange loss

112

-

-

-112

Ordinary income

2,694

3,323

+23.3

+628

Extraordinary income

117

1,400

11.9 x+1,283

-

1,368

-

+1,368

Income before income taxes

2,802

4,710

+68.1

+1,908

Income taxes

1,004

1,004

-0.0

-0

Net income attributable to owners of parent

1,796

3,701

2.1 x

+1,904

JPY in Millions

Investment profit on equity method

Gain on sales of investments in securities

YoY

9 month2Q(Forecast) Progress
37,500

64%

7,100

66%

5,300

70%

Note: Compared FY17.3 2Q with FY16.6 2Q as follows due to change of fiscal term
Companies whose fiscal term was March ending prior to the change : FY16.6 2Q (Apr. – Sep. ) vs FY17.3 2Q (Apr. – Dec.)
Companies which changed fiscal term to March ending: FY16.6 2Q (Jul. – Dec. ) vs FY17.3 2Q (Jul. – Dec.)
Copyright © 2017 Digital Garage, Inc. All Rights Reserved

14

FY17.3 2Q (Cumulative) Consolidated Segment P/L Summary
Profit increase in all segments; MT sales／profit both about over +40% YoY growth～ MI being mainly influenced by the irregular settlement, investment profit on equity
method from Kakaku.com growing on real term basis ～FY16.6

FY17.32Q (Act)

2Q (Act)%

Amount19,843

23,817+20.0+3,97337,50064%

Incubation Technology

2,557

1,093

-57.2

-1,4646,500

17%MT Marketing Technology

9,232

13,394+45.1+4,161

17,50077%

FT Financial Technology

8,052

9,329

+15.9

+1,276

13,500

69%

-

-

-

-

-

-

2,802

4,710

+68.1

+1,908

7,100

66%

Incubation Technology

849

1,460

+72.0

+611

2,500

58%

MT Marketing Technology

560

784

+39.9

+223

1,100

71%

FT Financial Technology

867

931

+7.4

+64

1,500

62%

1,194

1,983

+66.0

+788

2,900

68%

JPY in Millions

Net salesIT

MI Media Incubation
Income before income taxes
IT

MI Media Incubation

YoY

FY17.39 month2Q(Forecast) Progress

Note: Income before income taxes per segment is based on figures prior to elimination or group deduction, etc
Copyright © 2017 Digital Garage, Inc. All Rights Reserved

15

FY17.3 2Q Consolidated B/S Summary
JPY in Million

FY16.6

FY17.3 2Q

Difference

Reason for change / Remarks

Current assets

48,324

65,146+16,821

Cash and deposits

15,70325,794+10,090

Payment segment related items, New borrowings,
Sales of stocks, payout of corporate tax and dividends, etc

Receivables

13,946

16,173+2,226

Payment segment related items

Money held in trust

2,592

4,898

+2,305

Payment segment related items

Operational investment securities

11,164

12,699+1,534

New investment, Mark-to-Market, etc

Fixed assets

29,011

32,052+3,040Investment securities

14,84418,049+3,205

Goodwill

5,765

5,529

-235

Total assets

77,33597,198+19,862

Current liabilities

30,18747,748+17,561

Deposits

21,87633,051+11,174

Short-term borrowing

3,200

8,404

+5,203Fixed liabilities

16,484

15,364-1,120Long-term borrowing

15,37014,330-1,039Total liabilities

46,671

63,112+16,441

Net assets

30,66434,085+3,421

Driving finance strategy with focus on

Shareholders' equity

28,61031,044+2,434

Common stock

7,435

7,437

+1

asset and capital efficiency

Capital surplus

2,825

2,946

+121

Retained earnings

18,41920,711+2,291

1,502

2,312

+810

138

896

+757

77,33597,198+19,862

Accumulated other comprehensive income

Unrealized gains on securities

Liabilities / Net assets

New investment, Increased investment profit on equity method,stock-selling, etc.

Payment segment related items
Transfer from Long-term borrowing, demand for working capital
Transfer of Long-term borrowing due within one year to
Current liabilities

Copyright © 2017 Digital Garage, Inc. All Rights Reserved

16

Segment Performance Review

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17

IT Segment
Ⅰ

Incubation Technology Segment
Net Sales

Income Before
Income Taxes

FY16.62Q(7-12) Actual

2,557 M JPY

849 M JPY

FY17.32Q(7-12) Actual

1,093 M JPY

1,460 M JPY

FY17.3

Forecast

6,500 M JPY

2,500 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➤ Digital Garage US, Inc.

The US-based global strategy headquarters➤ DK Gate, Inc. （66％ stake）

Invests in and incubates next generation content with Kodansha globally➤ DG Technologies, Inc. （80％ stake）

Drives strategic technology development with DG Lab➤ DG Daiwa Ventures, Inc.（50％ stake／equity method）

Manages DG Lab Fund to invest in startups with next-generation technologies

 Kodansha Advanced Media LLC（19％ stake／investment）

Marketing in digital distribution in US and English-speaking countries, film adaptation, event planning, etc
Copyright © 2017 Digital Garage, Inc. All Rights Reserved18

IT Segment – Track record
Achieved ROI 2x in the previous 3 year mid-term
Developed portfolio that generates 2.5 B yen of profit on annual averagePrevious
mid-term plan

Business performance of
DG Incubation(100 M Yen)

Net sales

Current
mid-term plan

13.6

14.6

15.6

16.6

4 yr avg.

16

39

55

46

39

Income before taxes

9

22

42

28

25

Amount invested

10

34

31

50

31

Investment balance

29

86

90

111

Income before
income tax margin64%

 Previous mid-term plan : Developed portfolio that generates 2.5 B yen of profit on annual avg
Achieved ROI 2x for the last three terms (13.6 - 15.6 ) Current mid-term plan

: Aim for ROI > 2x with new incubation model
Copyright © 2017 Digital Garage, Inc. All Rights Reserved

19

IT Segment Highlights
Segment
Income before
income taxes

1.4
YoY

Major Portfolio
Blockstream [U.S. /Canada]

B Yen
+72 ％

Develops sidechain
technologies, parallel
blockchains that areinteroperable

Current Portfolio
EquityDomestic
Overseas

Fund
Total
Note)

# of
companies

Book Value(B Yen)

121
38
83
6

12.0
2.1
9.9
0.7

127 12.8

DG Incubation’s investment balanceMark-to-market as of quarter end forlisted stocks. Equity includes convertible noteBook value totals may not match details because ofrounding down fractions

Increments [Japan]
Provide technicalknowledge platform
called Qiita forengineers

Droom [India]

Welby [Japan]

A leading online marketplace for
new and second-hand automobiles
in India

Builds apps for patients with chronic
malady, diabetes, cancers

Wevr [U.S.]

Goodpatch [Japan]

Virtual reality community and VR
media player for aspiring andprofessional creatives

Estimote [U.S.]
Provides small, wirelesssensors and location
technology to retailers

Web development and consulting
service firm

Monstar Lab [Japan]
Operates Sekai Lab, a global outsourcing
platform that provides a network of over
10 k engineers in over 15 countries
Copyright © 2017 Digital Garage, Inc. All Rights Reserved

20

IT Segment – image of mid to long term growth
Expanding investment scale and areas with addition of DG Lab Fund to ONL / DGIDeveloping new incubation model with dynamic and high coverage
Corporate value➡ Execute current mid-term plan

Ⅱ DG Incubation
Ⅰ Open Network(Early, Middle, Later)Lab Stable exit by DGI ROI > 2x

➡ Develop next-generation
services in the mid-long term
 In sync with DG Lab / DG Lab
Fund
New incubation model

Ⅲ

Pure investment toBusiness investment / consolidation

Startup /
Seed

Early

Middle ～ LaterTime
Copyright © 2017 Digital Garage, Inc. All Rights Reserved

21

MT Segment
Ⅱ

Marketing Technology Segment
Net Sales

Income Before
Income Taxes

FY16.62Q(7-12) Actual

9,232 M JPY

560 M JPY

FY17.32Q(7-12) Actual

13,394 M JPY

784 M JPY

FY17.3

Forecast

17,500 M JPY

1,100 M JPY➤ Marketing Technology Company

Supports client’s business through performance-based ads, Online to Offline strategy
and web marketing➤ Business Design Company
Offers consulting-based marketing➤ 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

Copyright © 2017 Digital Garage, Inc. All Rights Reserved

22

MT Segment - Highlight
Net sales (advertising volume) grew +45% YoY
Operating margin improved by 4.9 points（100 M Yen）

Net sales(YoY)

Gross profit(YoY)

Op. income(YoY)
OperatingMargin ※

16.6

17.3

1Q-2Q

1Q-2Q

92.3

133.9

(+19%)(+45%)

17.7

22.2(+16%)(+25%)

5.6

8.1

(+8%)

(+45%)

31.6%

36.5%

【Sales from Performance-based ads】
（100 M Yen）

 Ad volume (net sales) ⇒ Growth (YoY +82%) gaining traction in performance-based ads
 Operating Margin⇒ Improved by 4.9 points despite the increase of headcount in new business※ Operating margin : Op. income ÷ Gross profit
Copyright © 2017 Digital Garage, Inc. All Rights Reserved

23

MT Segment – Progress of data science business
BI. Garage’s “BIG MINING” started to collaborate with Twitter,following Credit Saison’s DMP
 Providing marketing solutions forcompanies with audience data of 300 M
transactions based on view logs of goods
and so on
DG Group Media DMP

 Collaboration with Twitter’s Targeting
API enable DG to send more effective
targeting ads using DG Group’s data

BIG MINING（DMP）Assets

Social Media

Consumer behavior dataof 300 M transactions

Credit Card DMP

Ad Network

DG DMP

Research・Ad

Participating startupsof DG portfolio

Smart PhonePOS DMP
ID-POS data of 50 M
people nationwide

Private DMP

Global DMP

Under
consideration

Asia membershipservices / media

Video

Copyright © 2017 Digital Garage, Inc. All Rights Reserved

24

MT Segment – BI. Garage’s strategy and vision

Overview of data science businessin collaboration with DG Lab
Segments ofcompanies
participating in DG Lab
Advertising
Consumer Electronics
Carriers
Distribution
Broadcasting / Contents→Platform which
supports R&D andcorporate strategy
by utilizing datafrom participatingcompanies in DG
Lab

Data Science(Analytics＆Development)

Real estate
Automotive
Financials
Air transportation
Cosmetics / Drugs
Game
OthersPublic DMP

Private DMP→Dentsu,
Kakaku.com,
Web Media Data ,Twitter,Facebook
distribution→Credit Saison→JACCS , etc
Used by credit
card companies(DMP)

OPEN DATA
・Open data fromgovernment,
local government
・Data fromstrategic zone
・Data from
Shibuya ward /Minato ward

New
Technology

Copyright © 2017 Digital Garage, Inc. All Rights Reserved25

MT Segment – image of mid to long term growth
Strategy【Image of sales】(B Yen)

【Data Marketing Solution】

Performance-based ads (PC)【Business Design Solution】

Smartphone/app ads

Data Marketing Solution

16.0

21.0

Accelerate growth with next gen solution
utilizing big data

Growth drivers
Mid to long termHigh quality, communication design with aworld class UI/UX in sync with a leading
creative lab

CAGR：+30%【Smartphone/app】


Drive business globally by leveraging
expertise in Japan

CAGR：+20%【Performance-based ads (PC)】Key Focus
This term
Growth drivers
Last 3 years



Vertical development beyond Finance,
Cosmetics, HRDiversify advertising methods with social
media ads as a core

CAGR：+15%

FY15.6 FY16.6
Act
Act

FY18.3Plan
Copyright © 2017 Digital Garage, Inc. All Rights Reserved

26

FT Segment
Ⅲ

Financial Technology Segment
Net Sales

Income Before
Income Taxes

FY16.62Q(7-12) Actual

8,052 M JPY

867 M JPY

FY17.32Q(7-12) Actual

9,329 M JPY

931 M JPY

FY17.3

Forecast

13,500 M JPY

1,500 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➢ PT MIDTRANS（Veritrans Indonesia) ( 21.81% owned by econtext ASIA／Non-consolidated）
Indonesian JV➢ Sendo Technology JSC (12.89%／Investment)
On-line marketplace for C2C and B2C in Vietnam

Copyright © 2017 Digital Garage, Inc. All Rights Reserved

27

FT Segment - Highlight
Semi-annual transaction (July – Dec 2016) surpassed record-high 0.6 T Yen
Operating income grew + 12% YoY＜ FT’s track record ＞＜ CY16 transaction reached 1.2 T Yen YoY 16.6%＞(100 M Yen)
15.6

16.6

17.3

1Q-2Q

1Q-2Q

1Q-2Q

Transaction volume

4,713

5,622

6,532

+16.2%Net sales

70.8

80.5

93.2

+15.8%

Op. income
Dep., Amotization of goodwill

Op. income before
Dep., Amotization of goodwill% to Net sales

1.2 T Yen

(100 M Yen)

5.9

8.4

9.4

4.1

4.1

4.4

10.0

12.6

13.8

14.1%

15.7%

14.8%

YoY

+11.9%

4,713 5,054

1H

15.6

2H

5,622 5,920

1H

16.6

6,532

2H

17.3
1H

Others 7.5%
Data processing
4.2%

+9.5%

Convenience
store＜Revenuebreakdown＞

24.2% Credit card
64.1%

Copyright © 2017 Digital Garage, Inc. All Rights Reserved

28

FT Segment – image of mid to long term growth
Growth Opportunities【Next gen payment (FinTech)】

Non-EC payment( new market )・Solution utilizing blockchain
・Financial smart contract
・Verification testing in sync with DG Lab【Alliance w/ major partners
including financial institutions】

Next gen payment(FinTech)・Initiated OEM to customers including

Resona bank and Orico card. Expand tofinancial business including lending business・Collaborate with business partners inpayment with large customer base【Non-EC payment (new market) 】
・Current service lines w/ mkt size (T Yen)

EC payment 10 - 15％ growth（Organic growth in existing
business）

Food (12)Real estate (9)Funeral (1.7)

Global expansion ( Asia )Alliance with major
partners including financial
institutions

セレモニーPAY

Driving school (0.4)
FY15.6Act

FY16.6Act

FY20.3Copyright © 2017 Digital Garage, Inc. All Rights Reserved29

MI Segment
Ⅳ

Media Incubation Segment
Net Sales

Income Before
Income Taxes

FY16.62Q(7-12) Actual-

1,194 M JPY

FY17.32Q(7-12) Actual-

1,983 M JPY

FY17.3

Forecast-

2,900 M JPY➤ Kakaku.com, Inc.（20％／Equity method affiliate）

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

➤ DK Media, Inc.（50%／Equity method affiliate）

Internet media business utilizing fashion magazines by Kodansha

Copyright © 2017 Digital Garage, Inc. All Rights Reserved30

MI Segment Highlights
Income before
income taxes

Investment profit on equity methodfrom Kakaku grew steadily

B Yen
+ 66%

【Income before income taxes】

1.9
YoY

YoY compared FY17.3 2Q with
FY16.6 2Q as follows due tochange of fiscal term
FY17.3 1Q includes invest profit
on equity method from Kakaku
for six months (April throughSep.)(B Yen)Adjustment for changeof fiscal term
Income before
income taxes

1.1
FY16.6
1Q-2Q

1.9
0.7
1.2
FY17.3
1Q-2Q

Copyright © 2017 Digital Garage, Inc. All Rights Reserved

31Initiative on development of next generation media
Developing digital media with Kodansha by combining content from women’s magazines with AI〜 Leverage high-quality of content held by publishers to create post curation media 〜< DK Media, JV with Kodansha >< Overview of compilation media >DK Media × AI
Internet media business using
women’s fashion magazines b Kodansha

Store view logs
Content
project（Publishers,
etc.）

Kodansha and DG have driven digital content＜Participating
business for global expansion of Japanese contents
magazines ＞
and new business incubations since capital andbusiness alliance in 2015.
As a third initiative, we formed a JV, DK Media, Inc.,
to operate internet media that utilizes women’s
fashion magazines.

Provide content

DK Media, Inc.

Users

Content
database

Evaluation dataof content

Clients

Editorialdepartment

Compilation
media

Use for corporate
marketing activities

Collaboration is expected to involve major publishing companies in the form of consortium
Copyright © 2017 Digital Garage, Inc. All Rights Reserved

32

Appendix

Copyright © 2017 Digital Garage, Inc. All Rights Reserved33

Half-year Consolidated Sales / Income before income taxes
YoY Sales grew +20%, Income before income taxes grew + 68% to 4.7 B JPY～ IT achieved big exit, MT and FT grew ～(JPY in Million）【Net Sales】

1H

2H
FY16.6【Income Before Income Taxes】

1H
FY17.3

1H

2H
FY16.61H
FY17.3Copyright © 2017 Digital Garage, Inc. All Rights Reserved34

Half-year comparison of IT Segment
Achieved significant growth in profit by selling stocks of a portfolio company acquired〜 Enhanced domestic and global portfolio. Investment balance reached about 12 B Yen 〜(JPY in Million）【Net Sales】

1H

2H
FY16.6【Income Before Income Taxes】

1H
FY17.3

1H

2H
FY16.61H
FY17.3Copyright © 2017 Digital Garage, Inc. All Rights Reserved35

Half-year comparison of MT Segment
Achieved + over about 40% YoY strong growth both in sales and profit～ Growth gaining traction in performance-based ads. Data science business grew steadily ～(JPY in Million）【Net Sales】

1H

2H
FY16.6【Income Before Income Taxes】

1H
FY17.3

1H

2H
FY16.61H
FY17.3Copyright © 2017 Digital Garage, Inc. All Rights Reserved36Half-year comparison of FT Segment
Achieved net sales +16% YoY with significant growth of transaction volume~ Payment grew in CtoC domain relating to event ticket selling in addition to growth of inbound payment ~(JPY in Million）【Net Sales】

1H

2H
FY16.6【Income Before Income Taxes】

1H
FY17.3

1H

2H
FY16.61H
FY17.3Copyright © 2017 Digital Garage, Inc. All Rights Reserved37

Half-year comparison of MI Segment
Investment profit on equity method from Kakaku grew steadily~ Launching incubation business with media as a core ~【Income Before Income Taxes】(JPY in Million）【GMV growth for consumable goods】

Kakaku.com【Number of persons seated throughTabelog’s online reservation system】（in thousand）

Tabelog
1H

2H
FY16.61H
FY17.3Results Briefing for Q3 FY2016, Kakaku.com, Inc.
Copyright © 2017 Digital Garage, Inc. All Rights Reserved

38

Contribution to Net sales(B Yen)

19.8

IT
△1.4
(△57%)

MT+4.1(+45%)

FT

23.8

+1.2
(+16%)

2016.6
1H

2017.31H+3.9 B Yen (+20%)
Copyright © 2017 Digital Garage, Inc. All Rights Reserved

39

Contribution to Operating income(B Yen)

1.6

IT
MT

△0.8
+0.2
(△95%) (+43%)

FT

HQ
+0.1
(+12%) /Elimination△0.2

2016.61H

0.9
2017.3
1H△0.7 B Yen (△44%)
Copyright © 2017 Digital Garage, Inc. All Rights Reserved

40

Contribution to Income before income taxes
FX Gain+ 0.3(B Yen)

2.8

IT
+0.6
(+72%)

MT+0.2(+40%)

FT
+0.06
(+7%)

MI HQ
/Elimination

4.7

+0.7
(+66%)

2016.61H+0.2

2017.3
1H+1.9 B Yen (+68%)
Copyright © 2017 Digital Garage, Inc. All Rights Reserved

41

Contribution to Net income attributable to owners of parent(B Yen)Investment profit
on equity method

+ 0.8

1.7

Op
incomeExtraProfit
ordinary
attributable
Extraloss Income to nonordinary
income+1.2
Non-op (12X)
Non-opincome

+0.0

taxes

controllinginterests

△0.0

+0.0

3.7

expense△0.09+1.2△0.7 (+91%) (△31%)(△44%)

Gain on sales ofinvestments in securities+ 1.3

2016.6
1H

2017.3
1H+1.9 B Yen (2.1x)
Copyright © 2017 Digital Garage, Inc. All Rights Reserved

42Quarterly Profit and Loss (Consolidated)

JPY in Million

FY16.6

FY17.3

1Q

2Q

3Q

4Q

1Q

2Q

Net sales

10,336

9,507

11,631

12,288

11,55812,258Operating income

1,425

201

1,477

1,097

412

493

Ordinary income

1,863

831

1,887

1,610

1,781

1,541

Income before income taxes

1,941

860

1,933

2,838

3,148

1,561

1,196

599

1,510

1,857

2,689

1,011

Net income attributableto owners of parent

Copyright © 2017 Digital Garage, Inc. All Rights Reserved

43Quarterly Segment Profit and Loss (Consolidated)

JPY in Million

Net sales

FY17.3

FY16.6
1Q

2Q

3Q

4Q

1Q

2Q

10,336

9,507

11,631

12,288

11,55812,258IT

Incubation Technology

1,899

657

1,863

1,921

496

596

MT

Marketing Technology

4,502

4,730

5,648

6,147

6,550

6,843

FT

Financial Technology

3,934

4,118

4,119

4,219

4,511

4,818

MI

Media Incubation

-

-

-

-

-

-

1,941

860

1,933

2,838

3,148

1,561

Income before income taxes
IT

Incubation Technology

1,064

△ 215

879

1,376

1,340

119

MT

Marketing Technology

247

313

386

448

368

415

FT

Financial Technology

413

453

440

451

468

462

MI

Media Incubation

627

566

683

1,174

1,292

691

Note: Income before income taxes per segment is based on figures prior to elimination or group deduction, etc
Copyright © 2017 Digital Garage, Inc. All Rights Reserved

44

Last 6 Year Financial Performance, Consolidated
Net sales
100 M Yen

CAGR 32 ％
337
279
110

380

Net income
437

100 M Yen

CAGR 42 ％

149
9

21

27

50 51
28

11.6 12.6 13.6 14.6 15.6 16.6

11.6 12.6 13.6 14.6 15.6 16.6

ROE

Dividend Payout Ratio

TSE Avg.* 7.9 %14.0 ％
11.8 ％
9.7 ％

17.6 ％
17.2 ％

10.1 ％

11.6 12.6 13.6 14.6 15.6 16.6

23.1％
10.3 ％
8.6 ％
0％

27.3 ％

8.2 ％

11.6 12.6 13.6 14.6 15.6 16.6

Note ) * Tokyo Stock Exchange, Summary of Earnings Digests by Listed Companies, Fiscal year ending Mar. 2015 (TSE 1st, 2nd, Mothers, and JASDAQ)
Used Net income attributable to owners of parent for FY15.6 onwards
Copyright © 2017 Digital Garage, Inc. All Rights Reserved

45

Press Releases
Date

Title

2017.2.3

Digital Garage to jointly develop next-generation platform technology with leading blockchain
technology company, Blockstream

2017.1.19

Japan's first preferred point service for cross-border EC malls aimed at members of "HAPPY GO",
Taiwan's largest multi-store loyalty program, is launched2017.1.12

Digital Garage Invests in Mind Fund, a Hong Kong Based Startup Studio and Investor

2016.12.7

Digital Garage collaborates with Toyota to build the future's mobility society support for operation of
the open innovation program TOYOTA NEXT2016.10.19

Digital Garage and DG Lab will host THE NEW CONTEXT CONFERENCE 2016 SAN FRANCISCO

2016.9.20

Apple Pay Coming to VeriTrans2016.8.24

Digital Garage and TIS to Establish Strategic Technological Development Company DG Technologies toDevelop FinTech-related Business2016.7.22

Digital Garage and Daiwa Securities Group establish "DG Lab Fund," a fund directed towards startups
that specialize in next generation technology

2016.7.4

Digital Garage, Kakaku.com, and Credit Saison establish open innovation-based R&D organization "DGLab"Copyright © 2017 Digital Garage, Inc. All Rights Reserved46

Please note that the business forecasts and strategies covered in today’s 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.