DIGITAL GARAGE
ANNUAL REPORT 2021

NEW CONTEXT DESIGNER

This annual report was prepared using information current as of August 31, 2021.
Digital Garage, Inc.
DG Bldg., 3-5-7 Ebisu Minami, Shibuya-ku, Tokyo 150-0022, Japan
Shibuya Parco DG Bldg., 15-1 Udagawa-cho, Shibuya-ku, Tokyo 150-0042, Japanwww.garage.co.jp/en/

Contents:“Earthshot”

03 DG's PURPOSE & MISSION
05 FOUR SEGMENTS / BUSINESS MODEL
07 FIRST PENGUIN SPIRIT
09 DG HISTORY
11 FY2021.3 HIGHLIGHTS
13 MESSAGE FROM THE CEO
15 FY2021.3 FINANCIAL AND BUSINESS RESULTS
21 BUSINESS OVERVIEW
23 FT SEGMENT
25 MT SEGMENT
27 IT SEGMENT
29 LTI SEGMENT
31 DG LAB
33 DIRECTORS
35 CORPORATE GOVERNANCE
42 NON-FINANCIAL HIGHLIGHTS
43 FINANCIAL INFORMATION
49 GROUP BUSINESS ACTIVITIES
51 COMPANY & STOCK INFORMATION

Cautionary Statement
Discussions of Digital Garageʼs current plans and strategies, and outlooks for future
performance, included in this annual report are based on information available as of the
preparation of this report. Digital Garage believes the views expressed are reasonable as of
the time this report was prepared. Nevertheless, risk and uncertainty are inherent in
discussions of the future. Users of this report should bear in mind that various factors may
cause actual results to differ from expectations or outlooks expressed in this annual report.

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DIGITAL GARAGE2

DG's Purpose & Mission
beyond the DG 25th Anniversary

PurposeDesigning “New Context” for a sustainable
society with technology

Mission & Values

Integrating

Technology ESG Incubation

with the FIRST PENGUIN SPIRIT, we continue to create
sustainable “business context”
Principle＜CORPORATE SLOGAN＞“Think for yourself and question authority"
Timothy Leary

Since its founding in 1995, this quote has been a part ofthe corporate credo of Digital Garage, which has
continuously grown alongside the development of theInternet in Japan. Consistently at the forefront of theInternet industry and introducing revolutionary change
in social mechanisms, from communication to financialtransactions, our employees meet the demands ofversatility to think beyond the constraints of convention.
Digital Garage is what it is today because each andevery person in the company stands by these words.

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4

FOUR SEGMENTS / BUSINESS MODEL

FOUR SEGMENTS

Business ModelWe create innovative internet services with

FT

open innovation in four segments. Adding
to sustainable growth in marketing (MT)and payment services (FT), which are
indispensable for the profitability ofFour segments and business concept

internet-related businesses, we will
discern the future of technology evolution
and create new businesses through DG

Connecting diverse business areas with contexts,
discerning the evolution of technology,
and building a system capable of ongoing business growth

LTI

MT

POINT.2

three core technologies: IT (Information Technology), MT (Marketing Technology),IT

FT (Financial Technology).
These new contexts, projected onto business areas, have given rise to ourFinancial Technology (FT) Segment, Marketing Technology (MT) Segment,

POINT.3

BLOCKCHAINAI

SOCIAL MEDIA

1995-2000

2000-

2008-2015

SECURITY

BUSINESS MODEL
The Digital Garage Group’s three earnings bases

BIOHEALTH

2016MarTech

Acceleration of incubation
with DG’s uniquecross-segment platform

Continuously bringing incubation
results into the DG Group

Incubation Technology (IT) Segment, and Long-term Incubation (LTI) Segment.

E-COMMERCE
DESTINATION SITE

POINT.1

Organic growth in the FT,
MT, and IT Segments

Digital Garage provides “new contexts” through the Internet by implementing

PORTALSEARCHLab, an open innovation platform.

FinTechXR

Incubation model applying the enabling platform
The Marketing Technology Segment and Financial Technology Segment are generating stable earnings
as two earnings bases (enabling platform).
Digital Garage’s incubation model uses this enabling platform to invest inand nurture companies in Japan and abroad.

Japan’s leading digital marketing company

Japan’s leading integrated payment platform

ENABLING PLATFORM | TWO EARNINGS BASES

Adding DG Lab to this incubation model, we are striving to continue contributing to society
by further accelerating incubation, and developing and providing useful services.

ENABLING PLATFORM | TWO EARNINGS BASES
Japan’s leading digital marketing company

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Japan’s leading integrated payment platform

DIGITAL GARAGE

6FIRST PENGUIN SPIRITFIRST PENGUINSPIRIT
The “First Penguin” is the first penguin that jumps into the ocean in search of food,despite the possibility of encountering dangerous predators.
This is what DG calls the venture spirit of having the courage
and unshakeable will to be the first to step forward and take up a challenge.
DG is contributing to Japanese and global society
with a creed of having the “First Penguin Spirit.”
Penguins must catch fish in order to survive.
However, there are many predators, such as killer whales and leopard seals,
lurking in the treacherous sea where they have to go for food.
In face of the danger, there is the first penguin that takes the plunge into the waters with courage in its search for food.
Digital Garage Group values this “First Penguin Spirit,” which represents courage in the face of risks,
and the strong will to plunge headlong in order to achieve the goal. This has been the Groupʼs credo since its establishment.
This spirit is upheld by each Digital Garage employee in their day-to-day business activities,
to become the pioneering “First Penguins” that deliver services that benefit and serve society.

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8

DG HISTORY
Digital Garageʼs history 1995-2020

The track record of business incubation is formed by the main

Then now, “Open Innovation” has been jointly created by grouppart of Japanʼ s internet history. Crawler-based searchcompanies and partner companies and is fully operational withservices/blog search/price comparison with e-commerce

DG Lab as the platform. In addition, Japan and overseas(Kakaku.com)/restaurant search site (tabelog.com)/localization

investment is accelerating in the DG Lab Fund (a combined scale

support and advertisements for social media (Twitter, Facebook,of 20.0 billion JPY for DG Lab Funds I and II) in the areas of

LinkedIn)/total handled in the convenience store payment

blockchain, AI, xR, BioHealth and security.

platform and credit card payment platform (DGFT) is 3.1 trillion

While forming the incubation stream, the experience and track

JPY/total OMO* handled in the digital marketing sector is 35.0

record accumulated while constantly being involved inbillion JPY/acquired the first authorization for “Regulatory

cutting-edge Japan and overseas internet businesses has

Sandbox in Japan” in the FinTech field (Crypto Garage, Inc.).

become a strength of Digital Garage Group, which has been the

FUKUOKA
HONG KONG

2020

source for generating high value-added context.

2000’O0 E-COMMERCE
DESTINATION SITE

Established an operational base throughby developing a settlement service
targeting e-commerce sites, and byinvesting in Kakaku.com, a company
developing a price- comparison site

2008

2012

Entered into a businessalliance with Twitter, Inc.
and provided localization
supportMade VeriTrans Inc. into a
consolidated subsidiary to
become one of Japan ʼ slargest payment platforms

2018

2000

2005

2011

2013

2016

Digital Garage was listedon the OTC (now the Tokyo
Stock Exchange JASDAQ)

Established DG Incubation
to invest in and provide
business support to venturecompanies

Established DGUS, theDG Group ʼ s US base ofoperations, to accelerate
US incubation activities

Established the incubation
center, DG717, in the heartof San Francisco

Invested in Blockstream,Inc., which develops
blockchain technology

1995

1998

2000

2007

2008

Microsoft introduced
Windows 95

Number of Internet users
in Japan surpassed 10 million

Google introduced aJapanese-language search service

Apple introduced
the iPhone

Number of fiber-optic service users
exceeded number of ADSL users in Japan

Recorded an all-time high for profit for the first timein nine periods, and DG Lab began full-scale initiatives
aimed at commercialization

2018

2018

Launched the first transverse consortium program in theindustry dedicated to the area of residences and living

Launched the open innovation type accelerator
program in the biotechnology and healthcare sectors

2014

2017

2020
28 prominent media
comp anie s in v e s te d in
BI.Garage and built a joint
advertising platform with theaim of online media value
creation for media companies

2020
Developed “Musubell ” forcentr alized real estate
contract management

Corporation
Partners

IT/MT/FT Open Innovation

Social Media Incubator

Hybrid Solution

Opened a new officein Shibuya PARCO DG Building

Open Incubation toward 2020

2018

Number of smartphone subscribers
AI program called “AlphaGo” beat the GDPR was enacted
exceeded number of feature phone subscribers best professional Go player in the world

Designing our New Normal Context

2019
5G network launched

1995

2000

2004

2011

2013

2016

2016

2019

2019

2019

Created Japanʼs first personal
homepage “ Tomigaya, ” andestablished Digital Garage toplan and create internet-based
advertising

Established ECONTEXT,
INC. to provide payment
and other e-commerce
solutions

Made DG&Ibex, a company
providing advertising andpromotion services by fusing
real space and cyberspace,into a consolidated subsidiary

Established the OpenNetwork Lab to support
next-generation startups

BI. Garage, a joint venturewith the Dentsu Group,
embarked on a big data
operations mission

Launched an R&D
platform by DG,
Kakaku.com, and Credit
Saison to create new
businesses, DG Lab

Established ANA Digital Gate,
Inc., a joint venture between
VeriTrans Inc. and ALL
NIPPON AIRWAYS TRADING
CO., LTD. developing new
payment solutions

A c quir e d t h e f ir s t
authorization for theblockchain sector by theRegulatory Sandbox in
Japan in the FinTech field

Established the joint-venturecompany TD Payment
Corporation with VeriTrans Inc.
and TOSHIBA TEC CORPORATION
to develop multi-payment
solutions for POS systems

Commenced pro v ision ofmerchant-presented mode multi-QR
code payment solution “Cloud Pay”

1995

2003

’95-’00
PORTAL SEARCH

Established an internet advertisingbusiness with a high-traffic portal site andcrawler-based search engine at its core

Kakaku.com was listed on
the Tokyo Stock Exchange
Mothers Index

2008

’O8
SOCIAL MEDIA

Expanded advertising/marketing businesses
for a new era of users utilizing blogs, Twitter,and other forms of social media

2016

Established “DG Lab,” an R&D platform, with the aim ofdeveloping technology that supports next generation businesses

2019

Profit before tax for the first year under IFRS rose
60% YoY to 13.4 billion JPY, a record high*“Online Merges with Offline” A marketing philosophy that merges online and offline to remove the border between the two and have the starting point for everything begin online

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10HIGHLIGHTSFY2021.3 HIGHLIGHTSDIGITAL GARAGE GROUP

4 SEGMENTS

Record-high profit before tax
of 14.3 billion JPY
Profit before tax
DGG

The Financial Technology Segment recorded record high profits withstrong EC payments and in the Incubation Technology Segment there
was large increase in the fair value of investees, which substantiallydrove consolidated profit before tax
Consolidated profit before tax by segment
FT

DIGITAL GARAGE GROUPFINANCIAL TECHNOLOGY SEGMENT(JPY in Millions)

4,049 4,118(JPY in Millions)

FY16.6IT

5,819(JPY in Millions)

1,959

1,853
1,215

1,075

735

1,479

FY17.3

FY18.3

FY19.3

JGAAP

7,619

MARKETING TECHNOLOGY SEGMENT

1,396

2,539
1,758

10,008
7,575

3,349

14,317

13,424MT

FY20.3

FY21.3

FY16.6

INCUBATION TECHNOLOGY SEGMENT

10,264(JPY in Millions)

FY17.3

FY18.3

FY19.3

JGAAP

IFRS

LTI

FY20.3

LONG-TERM INCUBATION SEGMENT(JPY in Millions)

4,378

6,889

4,701

3,053 2,899 3,176

766
FY17.3

FY18.3

FY19.3

FY20.3JGAAP*FY17.3 has a nine-month irregular account settlement period as a result of the change of closing date.
*IFRS have been voluntarily applied since FY19.3.

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IFRS

2,653

3,563

3,105

FY16.6

FY21.3

IFRS

1,325

FY21.3
FY16.6

FY17.3JGAAP

FY18.3

FY19.3

FY20.3IFRS

FY21.3

FY16.6

FY17.3JGAAP

FY18.3

FY19.3

FY20.3

FY21.3IFRS* The value of segment proﬁt before tax for FY19.3 has been revised retroactively following the segment change (from MT to FT) of Naviplus Co., Ltd.,
which was implemented in FY20.3.

DIGITAL GARAGE

12

MESSAGE FROM THE CEOANNUAL REPORT 2021

MESSAGE FROM THE CEO

Under the “ DG FinTech Shif t, ” we will shif t to
management centered on Financial Technology
aim to continually increase corporate value.

the Incubation Technology Segment, thepandemic led to the rapid progress ofdigital transformation (DX) globally, whichsignific antly increased the f air v alue ofinvesteesʼ shares and drove profits. However,i n t h e M a r ke t i n g Te c h n o l o g y S e g m e n t ,although the mainstay digital promotion
business per formed soundly, demand for
promotions in the real estate sales, retail,and other industries plummeted. Businessstructure optimization costs, such as officeconsolidation, were also recorded. In theLong-term Incubation Segment, earnings
d e c l i n e d d u e to r e s tr a i n t o n co n s u m e rspending related to restaurants andentertainment, etc., as well as the suspensionof business operations as a result of the
spread of the COVID-19.

Shareholder Return
DG views shareholder returns as one of its principal
management concerns. Decisions about dividends are basedon considerations of factors such as financial condition,business performance outlook and future funding needs.
In the Mid-Term Business Plan, which commenced fromF Y21.3, the cash generating abilit y of the DG Group ʼ sbusiness is measured and shareholder returns are basedon management that is focused on cash flows. Note that theFY21.3 year-end dividend was up 4 JPY per share from theprevious period with an ordinary dividend of 32 JPY. The
ordinary dividend payout ratio was 15.1%, while the “dividend
payout ratio to business cash flow before income taxes,”
introduced as a benchmark for shareholder returns, was
20.6% compared with the target of at least 20%.
In 2020, Digital Garage marked the 25th anniversary of
its founding. As a company that would create “contexts”
useful for the world, since its establishment, DG has built
a solid track record of constantly being at the cutting edge

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recurring
Segment andKaoru Hayashi

Management integration of core payment service subsidiaries VeriTrans, Inc.
and econtext, Inc. and “DG FinTech Shift”

F Y 2021.3 Financial Summar y

As for the consolidated business results for
FY21.3, revenue was 40,478 million JPY (up9.6% YoY), profit before tax was 14,317 million
JPY (up 43.1% YoY), and profit attributable toowners of parent was 9,786 million JPY (up31.9% YoY). As a result, profit before tax, our
key management indicator, reached a newrecord high. Despite being affected by the
spread of the COVID-19 infection from the
beginning of the term, the results reflect theclear promotion of business with the FinTech/
DX shift strategy for the Group.
In the core Financial Technology Segment,de spite the imp ac t of the spread of the
COVID-19 on travel/inbound demand, profits
reached record highs as the market size of
e-commerce expanded and new domestic
payment methods were enhanced, which
absor bed the increase in fixed cost s. In

Digital Garage, Inc.
Representative Director, President
Executive Officer and Group CEOof internet development, and taking on “ first-in-Japan”
projects. The DG Group will maintain its spirit of the “First
Penguin” while accurately grasping the trends in cuttingedge technologies and also utilizing the know-how andglobal network for incubation built to date to contribute tosociety.
In addition, we formulated and revised the concept of“Creating useful ʻcontextsʼ for the world in the Internet age,”which we have consistently used since our establishment,
into a new purpose that is more suitable for the ESG era
from FY22.3. The corporate slogan is now “ New Context
Designer DG.” With the corporate purpose of “ Designingʻ New Context ʼ for a sustainable society with technology,”
we have set our sights on the next 25 years with a renewed
spirit.
I would like to take this oppor tunit y to ask all our
stakeholders, including our shareholders, for an evengreater level of support and encouragement.

On April 1, 2021, we integrated the businessof our core payment ser vice subsidiaries
VeriTrans, Inc. and econtext, Inc., which will
promote the Group str ategy “ DG FinTech
Shift ” as the new consolidated subsidiary DG
Financial Technology, Inc. (DGFT). We willleverage our 25-year network of investment
and incubation to further accelerate payment
support for businesses, and advertising, DX
and CRM support for payment merchants andpayment providers in marketing. Our strategy
is to expand gross transaction volume (GTV) in
the FT segment and increase profitability andgrowth.
During the past 20 years since the earlydays of the internet, the DG Groupʼs paymentbusines s has been prov iding a s afe andsecure payment infrastructure while taking
on the challenge of various initiatives thathave been “Japanʼs firsts,” and has grown tobecome a company designated as a criticalinfrastructure by the government, handlinga p p r ox i m a t e l y 3 t r i l l i o n J P Y i n a n n u a ltransaction volume and approximately 700
million transactions per year. In addition to
our payment service provider business, wehave launched “ DG FinTech Shift,” a Groupstrategy that integrates payment and data,in order to develop next-generation services
utilizing various technologies and data ownedby the DG Group.
Based on “ DG FinTech Shift,” the DG Groupwill shift from gradual federal management
to recurring management centered on FT.
We will redefine F T Segment as the corerecurring business of the DG Group both inname and reality. By combining the groupʼsabundant busine s s e s and s er v ice s w ith
DGFT ʼs solid settlement infrastructure backed
by stable 24/365 operations, and throughthe development of a variety of payment andsettlement services and the development of
next-generation businesses that utilize data,
we will contribute to a sustainable society as
an essential social infrastructure.

Dividend Trends
FY15.6

FY16.6

FY17.3

FY18.3

FY19.3

FY20.3

FY21.35 JPY

15 JPY
15 JPY

20 JPY

24 JPY

28 JPY

28 JPY

32 JPY---

10 JPY-(JGAAP)

Ordinary dividend(JGAAP)

Commemorative
20 JPY
In commemoration
20th anniversary of our change to thedividend(JGAAP)(JGAAP)(IFRS)TSE First Section(IFRS)

25th anniversary(IFRS)

1.17 billion JPY 1.41 billion JPY 0.94 billion JPY 1.13 billion JPY 1.28 billion JPY 1.75 billion JPY 1.47 billion JPY
Total dividend
5.0
Purchase oftreasury sharesbillion JPY
Ordinary dividend
4.6%
13.7%
22.0%
20.7%
13.3%
17.4%
15.1%
payout ratio
Total return ratio
23.1%
27.3%
22.0%
20.7%
64.3%
23.5%
15.1%
Dividend payout ratio
to business cash flow
before income taxes

-

-

-

-

-

51.2%

20.6%

DIGITAL GARAGE

14

FY2021.3 FINANCIAL AND BUSINESS RESULTS

ANNUAL REPORT 2021

FY2021.3 FINANCIAL AND BUSINESS RESULTS
Since adopting IFRS, profit before tax hit record-high 14.3 billion JPY
Working toward achieving Mid-term Plan, we optimized our business portfolio andclarified our strategies (implementation of FinTech Shift)
In FY21.3, revenue was 40,478 million JPY (+9.6% YoY), profit
before tax was 14,317 million JPY (+43.1% YoY), and profit
attributable to owners of parent was 9,786 million JPY (+31.9%
YoY). Despite the impact from COVID-19 pandemic from the
beginning of the period, the Group collectively worked toformulate a clear strategy to undertake a shift to FinTech andcarry out digital transformation (DX), and achieved recordhigh revenue and profit.
In the Financial Technology Segment, although the spread of
COVID-19 impacted demand for the tourism/inbound market,
worked to expand the size of the EC market and enhance
new payment methods in Japan, we managed to absorb theincrease in fixed costs and achieved growth in revenue andprofit.
In the Marketing Technology Segment, we experienced adecline in demand for promotions related to real estate sales,
retail, etc., despite robust performance in our mainstay
digital promotion business, and we also recorded costs
associated with business restructuring and optimization suchas office consolidation.
In the Incubation Technology Segment, the pandemic has

rapidly accelerated digital transformation at a global level,
and revenue was elevated by the significant increase in thefair value of operational investment securities of investees.
In the Long-term Incubation Segment, we experienced adecline in revenue resulting from the impact of COVID-19
pandemic, including the effect of consumers staying home onrestaurants and entertainment-related businesses, and thesuspension of operations by business operators.
One of the financial targets in our Mid-term Plan is ROE. We
achieved 17.1% ROE, which is higher than our cost of capitalof 8%. Furthermore, we measure the cash flow generation
capability of the DG Groupʼs business operations, and aim to
implement shareholder return through cash-flow-conscious
management. Beginning with FY20.3, we adopted a “ dividend
payout ratio to business cash flow before income taxes”
of 20% or more as the indicator for shareholder return,and looking at actual results for FY21.3, the payout ratio
was 20.6% and financial soundness was secured. As such,
we achieved improvement in capital efficiency and stableshareholder return.

■Consolidated P/L (IFRS)FY20.3

FY21.3

Revenue

36,93640,478+9.6% +3,542

Revenue in recurring business

26,687

24,945-6.5%-1,742

Revenue in operational investment securities

4,020

11,031

2.7×+7,011Other income

2,416

1,949

-19.3%-467

Finance income
Share of profit of investments accounted for using equity method
Expenses〈Financial targets in the Mid-term Plan〉

Amount9359-36.9%

-34

3,720

2,495

-32.9%-1,22526,92926,161

-2.8%

-767

12,036

10,697-11.1%-1,339Selling, general and administrative expenses

14,022

14,537

+3.7%

+514
+125

Other expenses

492

617 +25.5%

Finance costs

379

311

Profit before tax

10,008

Profit attributable to owners of parent

7,420-17.9%-68

14,317 +43.1% +4,309

9,786 +31.9% +2,365

JPY in Millions

FY20.3

FY21.3

Revenue

36,93640,478YoY%

Amount

+9.6% +3,542

Financial Technology

8,609

9,666 +12.3%

Marketing Technology

15,375

13,049-15.1%-2,327

Incubation Technology

4,868

11,482

2.4×+6,614Long-term Incubation

7,929

5,931

-25.2%-1,998

155

351

2.3×

+196

Others/Adjustments and Eliminations
Profit before tax

10,008+1,056

14,317 +43.1% +4,309

Financial Technology

4,049

4,118

+1.7%

+69

Marketing Technology

1,853

735

-60.3%-1,118

Incubation Technology

3,563

10,2642.9×+6,701Long-term Incubation

4,701

2,653

-43.6%-2,048Others/Adjustments and Eliminations-4,158-3,452-+705■Condensed Consolidated B/S (IFRS)JPY in Millions
Current assets
Cash and cash equivalents

End of FY20.3

End of FY21.3

Difference

98,852

113,548+14,696

32,702

37,989+5,287

Trade and other receivables

26,657

26,574-83

Operational investment securities

36,54647,170+10,624

63,44464,753+1,310Investments accounted for using equity method

21,47522,446+972

Intangible assets

3,496

4,000

+504

Non-current assets

Property, plant and equipment

Other financial assets

were lower than the targets in each segment, the targets for
growth set under the Plan remain unchanged. The Incubation
Technology Segment, on the other hand, conducted salesof securities, mainly listed stocks, and steadily conductedinvestment and recovery in Japan and overseas with the aimof achieving an investment hurdle rate (ROI) of 2.5 times.
Under the current Mid-term Plan, we are pushing forwardwith the Group strategy of “DG FinTech Shift ”. By utilizing
the investment incubation network we have developed
over 25 years, we will increase profitability and growth
rates by fur ther accelerating our payment suppor t tobusiness operators, our advertising/digital transformation/customer relationship management to member stores andpayment business operators in marketing, and by growing
the transaction volume (GTV) in our Financial Technology
Segment in order to achieve the Mid-term Plan.

%

Cost of sales

Current liabilities
Borrowings

Trade and other payables

In F Y21.3, the initial year for the Mid-term Plan, theFinancial Technology Segment implemented strategic
investments to strengthen infrastructure and facilities forthe growth of payment transactions, and the MarketingTechnology Segment carried out restructuring that included
office consolidation and personnel reduction aimed at
optimizing the business structure. In the Long-term
Incubation Segment, our equity affiliate Kakaku.com Inc.
generated decreased revenues due to the impact of COVID-19
pandemic, while Cr ypto Garage, Inc. recorded businessdevelopment costs to develop advanced financial services
that utilize crypto assets and block chain technology. FY21.3
was a year characterized by efforts focused on strategic
investment and business portfolio optimization carried out
to achieve the Mid-term Plan against the backdrop of the
COVID-19 pandemic. Although the annualized growth rates

YoY

JPY in Millions

Total assets

Progress update on Mid-term Plan (current five-year Mid-term Plan (FY21.3-FY25.3) initiated in FY21.3 under slogan of “Designing our New Normal Context”)■ Segment P/L (IFRS)

21,367

19,478-1,890

6,319

7,878

+1,559162,296

178,301+16,006

50,83856,865+6,027-1,292

4,927

9,768

+4,84041,20339,911

58,66358,355

Other financial liabilities

13,553

12,168-1,385

Deferred tax liabilities

5,426

8,515

+3,089Total liabilities

109,501

115,220+5,719Total equity

52,79563,082+10,287

Non-current liabilities

Bonds and borrowings

Equity attributable to owners of parent

38,24752,03335,85062,134-308-2,397+10,101

Share capital

7,591

7,637

+46

Capital surplus

4,409

4,566

+157

Treasury shares-5,012-4,915

+96

324

2,062

+1,737Retained earnings

44,72152,785+8,064Non-controlling interests

762

947

+185

162,296

178,301+16,006

Other components of equity

Total liabilities and equity[Assets]
Total assets increased by 16.0 billion JPY from theend of FY20.3. This is because of an increase of 10.6
billion JPY in operational investment securities
due to a steady r ise in fair value of investees,
and an increase of 5.3 billion JP Y in cash andcash equivalents primarily due to an increase inoperating revenue.

[Liabilities]
Total liabilities increased by 5.7 billion JPY from theend of FY20.3. This is because of an increase of 3.0
billion JPY in deferred tax liabilities due to a rise infair value of financial assets, and an increase of 2.5
billion JPY in bonds and borrowings primarily due
to borrowings for reinforcement of infrastructureand equipment in the Financial Technology Segment
aiming to achieve the Mid-term Plan.

[Equity]
Total equity increased by 10.3 billion JPY from theend of FY20.3. This is because of an increase of 8.1
billion JPY in retained earnings due to the recordingof profit and payment of dividends of 1.7 billion
JPY, and an increase of 1.7 billion JPY in fair valueof financial assets measured at fair value throughother comprehensive income.

Financial strategy topics

TargetGrowth Indicators (Profit before tax, CAGR)
Financial Technology Segment

20% or more

Marketing Technology Segment

20% or more

Long-term Incubation Segment

15% or more

Hurdle Rate for Investment (ROI)
Incubation Technology Segment

Capital Efficiency
ROE

Shareholder Return

Dividend payout ratio to business cash flow before income taxes

15

DIGITAL GARAGE

2.5×20% or more
20% or more

The DG Group implement s it s financial and capital
strategies under its basic policy on financing, which is tosecure working capital at a level sufficient for businessgrow th financing and maintain and expand business
operations while not compromising financial health andstability. While striving to diversify financing methods andimprove capital efficiency, the Group borrows from financial
institutions, issues convertible bond-type bonds with shareacquisition rights, and utilizes interest-bearing debt todevelop its business while utilizing some level of asset/
equity ratio.
In order to be able to flexibly respond to rapid changes inthe external environment, the Group, while maintaining asufficient cash level and had secured lines of credit frommultiple financial institutions. However, in F Y21.3, DG
entered into commitment line agreements of 7.0 billion JPY
in total with multiple financial institutions. This has enabledthe DG Group to further improve its liquidity, and establish
provisions for the Groupʼs working capital and investment
funding demands.
Going for ward, we aim to improve capital efficiency byimplementing financial strategies designed to maximize
corporate value while realizing an optimal capital structurethat strikes a good asset-liability balance.
DIGITAL GARAGE

16

FY2021.3 FINANCIAL AND BUSINESS RESULTS

ANNUAL REPORT 2021

Key Performance Indicators
Revenue

Balance of interest-bearing liabilities, asset/equity ratio

Revenue rose 9.6% YoY, to 40.5 billion JPY in
F Y21.3. In the Marketing Technology Segment,
the transaction volume declined as a result of
delays and cancellations of promotions related toreal estate sales, retail, etc., due to the impact of
COVID-19 pandemic, despite a robust transaction
volume in our mainstay digital ads. Moreover, in
the Long-term Incubation Segment, equity affiliate
Kakaku.com, Inc. generated reduced revenues dueto the impact of COVID-19 pandemic, particularlyin the tabelog.com business. On the other hand, in
the Incubation Technology Segment, fair values ofoperational investment securities rose favorably
and in the Financial Technology Segment, revenues
increased due to growth in the size of the EC
market and robust performance by the mainstay
businesses.

(JPY in Millions)60,16943,76336,452

FY16.6

FY17.3
JGAAP

35,687

FY18.3

FY19.340,47836,936

FY20.3IFRS

FY21.3

Profit before tax(JPY in Millions)

14,317

13,42410,0087,575

FY16.65,819

FY17.3
JGAAP

7,619

FY18.3

FY19.3

FY20.3IFRS

FY21.3Business cash flow before income taxes
Due to the adoption of IFRS, the changes in fairvalue valuations not based on cash flows have an
increased effect on profits. Therefore, we havedefined "business cash flow before income taxes"
as profit before tax that has been adjusted in amanner that is in line with the cash inflow andoutflow based on actual business operations, andwe have set the dividend payout ratio based on
cash flow as the shareholder return indicator.
(JPY in Millions)

FY20.3

FY21.3Business cash ﬂow
before income taxes

3,418

7,162

Dividend payout ratio to businesscash ﬂow before income taxes

51.2%

20.6%

DIGITAL GARAGE〈Balance of interest-bearing liabilities〉

2.57

2.73

2.79

Asset/
equity ratio

18.57

FY16.6

3.15
38.17

24.14

23.03

FY17.3JGAAP

FY18.3

FY19.33.12
43.17

FY20.3IFRS(JPY in Billions)

2.87

45.62

FY21.3

Balance of operational investment securities

Profit before tax rose 43.1% YoY, to 14.3 billion
JP Y in F Y 21.3. In the Financial Technolog y
Segment, although fixed costs increased due tothe implementation of strategic investments tostrengthen infrastructure and facilities aimed at
expanding transaction volumes, increased profit
was secured due to strong growth of transaction
volumes. In the Marketing Technology Segment,
one-time costs were recorded as a result of
restructuring efforts such as office consolidationand personnel reduction carried out to optimize
the business structure. However, in the Incubation
Technology Segment, the growth in investee fairvalue made it possible to absorb the increase incosts and post record-high profit.

17

At the end of F Y21.3, the balance of interestbearing liabilities increased by 2.4 billion JPY fromthe end of FY20.3, to 46.0 billion JPY, and asset/
equity ratio was 2.9, down 0.25 points YoY. This isdue to the achievement of the record-high profit in
FY21.3 and an increase in retained earnings due tothe recording of profit, despite borrowings madeto reinforce infrastructure and facilities to achieve
the Mid-term Plan in the Financial Technology
Segment.
The Company strives to realize an optimal capital
structure that strikes a good balance between
equity and interest-bearing liabilities.
Going for ward, by expanding our financing
capacity and diversifying the means of financing,
we will maintain financial health while conducting
the financial and IR strategy utilizing some level ofasset/equity ratio.

The balance sheet v alue, or the balance of
operational investment securities, which is anindicator that we mainly focus on in the Incubation
Technology Segment, was 47.2 billion JPY, an
increase of 10.6 billion JPY YoY.
As a result of incubation activities, stocks of threecompanies that had conducted IPOs in Japan andstocks of overseas listed companies were sold, and4.5 billion JPY in new investments were made to
implement turnover of the portfolio. Furthermore,in the North American area, in particular, ThredUp
was listed on NASDAQ and strategic investment
was conducted in promising companies in the area ofdigital transformation and FinTech and the fair value
valuations of operational investment securities that
we continued to hold grew, resulting in an increase inoperational investment securities by 7.4 billion JPY
from the end of FY20.3.

47,170(JPY in Millions)

36,546
26,695
11,164 11,857 12,364

FY16.6

FY17.3JGAAP

FY18.3

FY19.3

FY20.3IFRS

FY21.3ROE
Calculation method for business cash ﬂow before income taxes
Proﬁt before tax
Depreciation

Adjustment
items

Share of loss (proﬁt) of investments accounted
for using equity method
Gain on sale of shares of subsidiaries and associates
Revenue in operational investment securities(excluding gain on sale)

Business cash ﬂow before income taxes

In FY 21.3, ROE rose 2.1 percentage points YoY,
to 17.1%. This was mainly because of a significant
increase in profit attributable to owners of parent.
In terms of indicators for profitability and capitalefficiency, the DG Group continues set ROE of
20% as its target under the Mid-term Plan, andit also aims for management that is conscious ofa cost of shareholder ʼs equity at 8% or more, ascalculated by DG.
Going forward, we will continue to make effort
into achieving the ROE at 20% level, with the costof shareholder ʼs equity at 8% or more, throughmanagement with the focus on profitability andcapital efficiency.

21.9%
17.6%

FY16.615.0%

13.5% 15.3%

FY17.3JGAAP

FY18.3

FY19.3

FY20.3
IFRS

17.1%

FY21.3

DIGITAL GARAGE18

FY2021 FINANCIAL AND BUSINESS RESULTS

ANNUAL REPORT 2021

P/L, KPIs and Business Overview by Segment
Financial Technology Segment

Revenue

Profit before tax

Transaction volume

Number of transactions(JPY in Millions)(JPY in Millions)(JPY in Billions)(Million transactions)

7,447

FY19.3

8,609

9,666
3,349

FY20.3

FY21.3

FY19.34,049

FY20.34,118

FY21.325,89030,567

20,8832019.3期

657
393

FY20.3

FY21.3

FY19.3487

FY20.3

Revenue in the FT Segment for FY21.3 increased 12% YoY and profit before tax
increased 2% YoY at 4,118 million JPY, and the increase in fixed costs for system
investment, etc. were absorbed to achieve record-high financial results.
Transaction volume, which is one of the FT Segment ʼs KPIs, was 3.1 trillion JPY,
up 18% YoY, and the number of transactions increased 35% YoY to 0.66 billion
JPY with high growth. The transaction volume for tourism and inbound related
decreased sharply, falling 75% or approximately 190.0 billion JPY YoY. On theother hand, the EC market grew at a greater speed, with QR code payments inJapan, and the transaction volume of new payments such as online pre-orderand mobile order payments for takeaways, deliveries, etc. also grew.

FY21.3Marketing Technology Segment

Revenue

Profit before tax

Advertisement volume

Advertisement volume for digital ads
for the finance sector(JPY in Millions)(JPY in Millions)(JPY in Millions)(JPY in Millions)

12,922

15,375

1,853

13,04936,5681,215

15,91934,87335,028

FY20.3

FY21.3735
FY19.3

FY20.3

FY21.3

FY19.3

FY20.3

FY21.3

FY19.3

11,594

FY19.3

12,232

FY20.3

FY21.3

Incubation Technology Segment

Long-term Incubation Segment

Revenue

Profit before tax(JPY in Millions)(JPY in Millions)

11,482
8,022

19

DIGITAL GARAGE

ROI

10,264

3.5×

3.6×

6,889
4,868

FY19.3

FY20.33,563

FY21.3

For FY21.3, revenue for the MT Segment was down 15% YoY and profit before
tax was 735 million JPY, down 60% YoY. Advertisement volume for our mainstay
digital ads was robust, up 9% YoY. In particular, the transaction volume forcashless promotions for the finance sector, such as communication carrier
payments, credit cards, etc. were strong, up 30% YoY. On the other hand,advertisement volume overall declined due to the postponement or cancellationof promotions related to real estate sales, retail, etc., due to the impact of
COVID-19 pandemic. Moreover, due to costs incurred in relation to businessrestructuring optimization measures, such as office consolidation, revenue andprofit decreased.

FY19.3

FY20.30.7×
FY21.3

FY19.3

FY20.3

FY21.3F o r F Y 2 1. 3 , r e v e n u e f o r t h e I T
Segment was up 136% YoY and profit
before tax was 10,264 million JPY, up
188% YoY. As the result of increase
in investee fair value by financing
investees, sales of stocks of threecompanies that had conducted IPOs
i n J a p a n a n d s to c k s of o v e r s e a slisted companies, etc., revenue inoper ational investment securities
rose 174% YoY to 11,031 million JPY.
Hurdle Rate for Investment (ROI),
which was calculated based on actual
profits under Japanese accounting
principles is 3.5 times, and it was one
year in which investment and exit
were steadily conducted in Japan andoverseas.

Profit before tax(JPY in Millions)

4,378

4,701

2,653

FY19.3

FY20.3

FY21.3

Profit before tax for the LTI Segment
fell 44% YoY, to 2,653 million JPY in
FY21.3. Equity affiliate Kakaku.com,
Inc. posted a decrease in profit due
to the effect of COVID-19 pandemic
on restaurant and tourism related
sec tor s. However, per for mancein the shopping business in the
kakaku.com business, the Kyujin
Box business in the new media andsolutions business, and the financebusiness remained strong. Goingfor ward, we will create ser vices
t h a t s h o w f u t ur e p r o mi s e in adiverse range of lifestyle scenes andcontinue to provide new value.

DIGITAL GARAGE

20

BUSINESS OVERVIEW

FTProvides a diversity of comprehensive payment platforms as one ofJapan’s largest payment system providers supporting social infrastructure
FINANCIALTECHNOLOGYSEGMENT

Launched payment solutions for the new-normal services, which include mobile orders for
major fast food operators and online customer and sales services for major department stores
Promoted expanding DGFT payment infrastructure through alliances with TOSHIBA TEC CORPORATION, the top
company in POS systems in Japan and Recruit Lifestyle, which has the top share in mobile POS systems in Japan
Integrated QR code payment systems for small business through “Cloud Pay” and expanded the number ofshops using the system to about 400,000 stores to become a major player in the QR code payment network

Develops comprehensive digital marketing solutions that integrate the digitaland the real world and data marketing businesses utilizing various data

MT

MARKETINGTECHNOLOGYSEGMENT

Transaction volume for main-stay digital ads was strong, mainly for credit-card
related and other financial services and telecommunications
Formed a capital and business alliance with a global technology company (1plusX)and started developing a next-generation advertising platform for the post-cookie era
Launched services in new fields such as “Musubell,” a digitization service forthe real estate industry, which is undergoing digital transformation, and
SAKIZAKI TERUKO, the largest digital signage media in Japan for beauty salons

IT

Invests in and incubates startups in Japan and overseas by providing
support through collaborations with DG Group businesses
INCUBATIONTECHNOLOGYSEGMENT

Strategic investment in promising companies in the area of DX/FinTech led to the significant growthof the fair value of investees
In the North American area in particular, steadily conducted investment and exit, since investees in which
we have been aggressively investing as members of the Silicon Valley inner circle are showing significant growthPlans to continue our participation in investment and incubations in Japan, Asia and North America that showpromise for next-generation FinTech businesses in the DG Group while also actively developing ESG investment

LTI

Striving to create medium- to long-term, continuous cash inflow by utilizing theknowhow of investment cultivation and business development that the DG Grouphas been nurturing until today
LONG-TERM
INCUBATIONSEGMENT

Kakaku.com: Profit decreased due to the effect of COVID-19 pandemic on restaurant and travel related sectors,
while performance was strong for the Kakaku.com business and the new media and solutions business
Crypto Garage: made connections with leading crypto asset operators in Japan and overseas,
and completed its registration as a crypto asset exchange service provider on June 29, 2021
BrainscanTechnologies: The number of brain MRI medical examinations increased strongly andprofit was achieved for the full year

21

DIGITAL GARAGE

KEY FIGURES FY2021.3
Transaction volume

3.1

trillion JPY

YoY +18%

Principal Companies (as of April 1, 2021)

Number of transactions

660

million transactions

YoY +35%

Profit before tax

4.1

billion JPY

YoY +2%KEY FIGURES FY2021.3
Advertisement volume

35.0

billion JPY

YoY +0.4%

Principal Companies (as of April 1, 2021)

Of which, digitalads for the finance sector

15.9

billion JPY

Profit before tax

0.7

billion JPY

YoY -60%

YoY +30%

KEY FIGURES FY2021.3
Balance of operational
investment securities

47.2

billion JPY

YoY +29%

Principal Companies (as of April 1, 2021)

Number ofinvestees of DG Ventures

235

companies

Profit before tax

10.3

billion JPY

2.9× YoYKEY FIGURES FY2021.3
Monthly uniqueusers of Kakaku.com*1

274.77

millionYoY +7%

Principal Companies (as of April 1, 2021)

Brain MRI medical
examinations performed
by BrainscanTechnologies

20,000

Profit before tax

2.7

billion JPY

cases

YoY -44%*1 Unique users measures the number of users visiting the site by counting the number of users on a browser basis. Therefore, users who visit the site on multiple occasions are counted as one user.
Double-counting as a side effect of high-speed loading of mobile webpages and mechanical accesses by third partiesʼ web-scraping bots etc. are eliminated from the count to the fullest extent possible.

DIGITAL GARAGE

22

FT

During the past 20 years since the early days of the internet, we have been providing a safe and secure
payment infrastructure while taking on the challenge of various initiatives that have been “Japan’s firsts.”

Revenue

FY2021.3
FT Segment Results

We have grown to become a company designated as a critical infrastructure by the government, handlingapproximately 3 trillion JPY in annual transaction volume and approximately 700 million transactions per year.

FINANCIAL TECHNOLOGYSEGMENT

Business Model

The Financial Technology Segment is responsible for “payment,” one ofDigital Garageʼs enabling platforms. As a payment service provider, wecollectively provide EC businesses and face-to-face retail stores withever-increasing number of diverse payment methods, including various
electronic money such as Suica, and QR code payment services such as
d PAY and PayPay as well as overseas Alipay and WeChat Pay, in addition
to credit card payments and convenience store payments. We are also
the pioneers in the domestic provision of Apple Pay, Google Pay, andAmazon Pay, which have recently grown in popularity throughout theworld.
With cashless payments also being promoted as national policy, various
payment methods such as QR code payments have continued to grow.
While introducing the wide variety of payment methods demanded byconsumers is important for EC businesses and face-to-face retail stores,

individually carrying out system development, managing personal
information including payment data, and conducting payment receiving
operations is a large challenge due to the complexity of these processes.
Furthermore, recently it has become commonplace to conduct sales
promotions based on payment and purchasing data analysis. The
Financial Technology Segmentʼs business is to provide comprehensive
payment platforms at once to those types of retail businesses.
The business model for the payment business is to subtract thecommissions paid to the credit card companies and convenience store
chains from the payment commissions gained in accordance with theamount and the number of transactions by retail businesses, and record
it as revenue. Additionally, transaction types are diversifying, as
commissions are received for the provision of capabilities such as fraud
detection systems and QR code issuing systems.

3.1

billion JPY(YoY +2%)

Number of transactions

660

trillion JPY

Approx.

(YoY +18%)

million transactions(YoY +35%)

According to the “FY2020 Industrial Economic ResearchCommissioned Project (E-Commerce Market Survey) (July2021)” conducted by the Ministry of Economy, Trade andIndustry, the scale of the domestic BtoC-EC market fell 0.4%
YoY to 19.2779 trillion JPY due to the large impact of theapproximate 60% decline in travel services, which accounts forthe largest share of that market, due to the spread of COVID-19.
However, in April 2018, the Cabinet Office set a target*2 toincrease the cashless payment ratio in Japan from 21.3%*1 in
2017 to 40% in 2025. The progress in becoming cashless means
the electronic settlement market is forecast to grow.

Non-face-to-face market

EC

BtoC-EC market

Face-to-face market

Electronic
settlement market

19 trillion JPY 86.7 trillion JPY

20 %Non-EC

Cashless payment ratio Approx.

Government target cashless payment ratio

40 % 120305.8 trillion JPY
trillion JPY（2025）

Private-sector final consumption expenditure*1 Payments Japan Association. May 2021. Cashless Roadmap 2020.
*2 Ministry of Economy, Trade and Industry. April 2018. Cashless Vision.

Since establishment until 2020

Now

Future (From 2025 and onward)

FY2021.3 Topics

Business model and stakeholders
Bank payments

International payments

Carrier payments

CASE.1QR Code payments
Japan

Cryptocurrency payments

ID payments

Electronic money/point payments

Post-settlement payments

OnlineProvision of payment services for online customer and sales services

Amid the accelerating shift to online sales for physical stores andomnichanel sales, the FT Segment is promoting and supportingO2O measures and digital transformation at merchants. We
provided Email link function-based credit card payment services
for the LUMINE Card Web Payment Service, an online customer
and sales service offered by LUMINE Shinjuku. Apart from this, wehave developed IVR payment solution to complete payments
through automative voice response without going through an
operator when paying by credit card for an order placed by
telephone. An end-to-end response is possible from servicing
customers by merchants to payments.

Overseas

Convenience store payments

4.1

billion JPY(YoY +12%)

Transaction volume

Market Environment

As one of Japanʼs largest payment system providers, we provide a diversity of comprehensive payment platforms including
credit card payment, convenience store payment, QR code payment, etc.

Credit card payments

9.7

Profit before tax

Multi-QR code
payments

RealAlliance strategy

Business operator

Customer- Card- Convenience store- Bank- Electronic money

Enters payment informationon the admin page
Receives payment URL via Email/social media

Payouts from thepayment screen- Recruit Group(mobile POS)

Merchants

EC businesses

Face-to-face retail stores- TOSHIBA TEC CORPORATION

CASE.2(POS)- ANA GroupUsers

FY2021.3 Business Review
We strategically made upfront investments to achieve the Mid-term Business Plan and achieved a record high profit despite the impact of COVID-19 pandemic.
Travel and inbound related transactions fell sharply by 75% YoY due tothe spread of COVID-19. On the other hand, in addition to the increase in
the EC market, there were favorable trends with a large increase in theprovision of new payment methods, such as online pre-order andmobile order payments and domestic QR code payments through thepromotion of cashless payments. Transaction volume increased 18%(JPY in Billions)

9.67

8.61

(JPY in Billions)

4.05

3,056.7

2,589.0

2%

Up

6.83

FY21.3

Revenue
Payment business

DIGITAL GARAGE

Up

7.32

FY20.3

EC/DX business

1,441.7

657

345.7

FY20.336

1,835.4

221

Up

FY21.3

Profit before tax

810.6

875.7

FY20.3

FY21.3

304

35%
Up

230

FY20.3

Transaction volume
Spread type

National Tax Agency website Register on the Convenience Store Payment QR Code Generation Page

Tax payer

Issuance and display of a QR Code contains tax payment information

Scan the QR Code to the multi-media kiosk to print a payment document

Tax office

Pay taxes at the register

Convenience store

Growth Strategy

41

487

18%

We are providing online payment solutions such as credit card
payments and convenience store payments in the support for“eletronic payments of public fees” being promoted by ministries andgovernment offices. In addition, we are assisting with support for
installation procedures and the development of systems that are
hurdles to installation.
Furthermore, we provide the QR code-based national tax collection
service at convenience stores to the National Tax Agency. QR Codes
can be used (including when filing taxes) for easy payments atconvenience stores for most national taxes, such as income tax,
corporate tax, and consumption tax.We also provide our credit card
payment service for payments of natoinal pension plan premiums
that are managed by the Ministry of Health, Labour and Welfare andcommisions such as patent fees for the Japan Patent Office.

File taxes on the Final Income Tax Return Generation Page

(Million transactions)

336.7

12%

23

(JPY in Billions)

4.12

2.35

1.78

YoY to 3.1 trillion JPY, and the number of transactions increased 35%
YoY to 660 million. We were able to achieve a record high preformance,
promoting strategic investment in systems needed for an expansion of
the total payment volume to achieve the Mid-term Business Plan, eventhough there was an increase in fixed costs.

Support for cashless payments of public feesat ministries and government offices

312

FY21.3

Number of transactions
Fee type

Shop payment type

In addition to expanding our share in the EC market, one of our main sectors,
we will work to further develop the non-EC market as a strategy for non-EC
payments/face-to-face payments, which includes new payment methods suchas online pre-order and mobile order payments for takeaway and delivery, andothers. Regarding face-to-face payments, we are promoting businessexpansion through system collaboration and buinsess alliances with business
partners that have large-scale customers or core systems. We provide
multi-payment solutions packaged with TOSHIBA TEC CORPORATIONʼs POS
registers for large-scale retail stores. For small and medium-sized retailstores, we provide mPOS and Recruit Groupʼs AirREGI, which use smartphones,
tablets and dedicated payment terminals; and QR code payments through“Cloud Pay,” a QR code payment system that enables multiple QR andbarcode-based payment at once in a simple manner by just displaying a single
QR code in a store. By providing these, we will continue to provide very
convenient payment services according to the size of each retail store.
In addition to the PSP business, we have launched “DG FinTech Shift,” a group
strategy that integrates payment and data, in order to develop next-generation
services utilizing various technologies and data owned by the DG group. We willfurther strengthen collaboration with the MT and IT Segment, support retailbusinesses by providing marketing and CRM, etc. through the use of payment
purchase data, and further accelerate Group collaboration such as in the
support of payment service providers with digital promotion, to increase thetotal transaction volume, growth potential and competitiveness of the FT
Segment.

DIGITAL GARAGE

24

MT

We provide clients with marketing that is rapidly transitioning from mass marketing to digital marketing,and in addition to all kinds of internet advertising, we provide a broad range of marketing solutions
including improved engagement such as CRM, data analysis, AI use, and payment coordination

MARKETING TECHNOLOGYSEGMENT

Profit before tax

Revenue

FY2021.3
MT Segment Results

13.0

billion JPY(YoY -15%)

ビジネスモデルBusiness Model

0.7

Advertisement volume

35.0

billion JPY(YoY -60%)

Market Environment

Providing clients in a variety of industries with end-to-end marketing solutions that integrate the digital and real
The Marketing Technology Segment is responsible for “marketing,”
one of Digital Garageʼs enabling platforms. Specifically, we provide
solutions for our clientsʼ particular needs and challenges in a range ofindustries including financial and payment service provision thatcomprise the business ecosystem of the FT Segment, retail businessesof EC site and face-to-face stores, content service provision such as
smartphone apps and digital contents on websites, real estatedevelopment, and manufacturing of various products in order tomaximize our clientsʼ marketing ROI (cost-effectiveness). We aredeveloping a one-stop service ranging from creative output including
advertising agency functions, smartphone app develpment, anddevelopment of a CRM database foundation, to new data analysis
technologies that consider the trends for personal information
protection.

Structure of the MT Segment

We offer businesses in a variety of industries with end-to-end marketing scenarios and solutions that integrate the digital and the real world.
Clients

MT Segment

Contact point

Banks/credit card/securities/
payments/financial in general

Digital field

Web media

Cosmetics/consumer
goods manufacturers

Utilizing next-generation
technologies such as data
analysis DMP

Web/app development

Apps/games/content
services such as e-books

Advertising for capturing new customers
Brand advertising
Data-driven advertising

Influencer marketing
SNS account management

Attracting EC customers
Sales promotion

SNS

Search engine

AppReal estate developers

Other/human resources/
transportation/hotels/travel, etc.

CRM to attract customers
using apps/Web/
payment services

Store design/VMD
Event planning
Sampling

Ratio of internet advertising expenditures

2.2
2011

2012

2013

2014

2015

2016

Contextual Ads in the post-cookie era＜Europe＞

Real store

13.0

industries, etc. as a result of the spread of the COVID-19. In addition,
revenue and profit were both down due to the promotion of businessstructure optimization measures such as consolidating office sites, andthe recording of restructuring costs for DG Communications Co., Ltd., asubsidiary that operates our marketing business in the real estate field.
However, we should be able to demonstrate these benefits from
FY22.3.

34.9

35.0

8.3

6.2

Strategic investment(BI. Garage, DGDV*)FY21.3

Revenue25

DIGITAL GARAGE

Real estate ads

FY20.3

FY21.3

Profit before tax
CRM and others

7.5

7.6

Digital ads

12.2

15.9

FY20.3

FY21.3Advertisement volume
Financial

Cosmetics/HR

Strategic alliances in Japan and Asia
*DGDV: DG Daiwa Ventures Co., Ltd. (50% stake/an equity-method affiliate)

Launched real estate DX solution “Musubell,” which accessses the real estate legal tech field“Musubell” is a centralized real estate contract management service announced in July 2020. “Musubell” reduces burdens on both the seller and thecustomer at the time of a new real estate sales contract, further opening up a new real estate DX field. Since the launch of the service, various
companies have been introducing “Musubell,” and as a second stage, we plan to partner in areas such as the development of the (second-hand) realestate brokerage field and housing loan services.

Real estate electronic contract system

Automatically sorts and produces the necessary documents for real estatepurchasing contracts and handles execution of electronic contracts

Eliminates the need for tasks such as signing,
stamping, and mailing through digitization

Online centralized management of contract status

Surge in industry needs due to COVID-19 and the trend for DX

Growth Strategy

5.4

6.7

0.74

FY20.3

CASE.2(JPY in Billions)

1.85

2020

Technology license

advertising agencies covering more than 500 media brands● Web/TV/Print/Podcasts, etc.
● Reaching 99% of the population who interact with media● Sales cross all services and devices

Digital advertising volume performed well particularly for finance such as telecom carrier payments and credit cards.
Profit was recovering, bottoming out in 2Q, despite business structural reform costs and upfront costs for strategic businesses, etc.

15.4

2019

● The largest media alliance in Germany, composed of five

FY2021.3 Business Review(JPY in Billions)2018＜Japan＞

Next-generation technologies
venture through cutting edge
technicians hailing from Google, etc.

* “Online Merges with Offline”
A marketing philosophy that merges online and offline to remove the border between the two and have the starting point for everything begin online(JPY in Billions)2017

Capital and business alliance with a global-tech company (1plusX)

Adopted by various countries in Europe, such as Ad Alliance, Germany

The advertisement volume in the mainstay digital ads was firm. In
particular, in cashless promotions for credit card and other financial
businesses, which are DGʼs partners in the FT segment, advertisement
volume was robust, up 30% YoY to 15.9 billion JPY, realizing the FinTech
Shift through Group collaboration. On the other hand, overall
advertisement volume declined to 35.0 billion JPY due to thepostponement or cancellation of promotions in the real estate and retail

6.2

BI.Garage, which plays an important role in the advertising business in the post-cookie era, has begun developing a next-generation advertising
platform together with 1plusX, a leading European data platformer. By utilizing 1plusXʼs platform that complies with strict privacy regulations in the
U.S. and Europe, including GDPR and CCPA, Contextual Ads will finally be launched as a product of the content media consortium, which iscomprised of 28 leading media companies in Japan.

Mass media
Formulating strategy of
OMO marketing overall

36%

Overall advertising expenditure in Japan
Internet advertising expenditures

Capital and business alliance with a global-tech company (1plusX) Development of Contextual Ads in the post-cookie era

OMO* field

Distribution/retail

Advertising expenditure in Japan(JPY in Trillions)

Source: 1. Dentsu Inc., Advertising Expenditures in Japan 2. Dentsu Inc., Global Ad Spend Forecasts

CASE.1

Consumer

Digital marketing andformulating strategy ofdigital transformation

Although overall advertising expenditure in Japan fell 11% YoY to 6.2
trillion JPY in 2020 due to the imapct of COVID-19 pandemic,
stay-at-home consumption has been active due to the self-retraint on
going out and movement and a suddenn acceleration in the digitaltranformation (DX) in society such as delivery, EC and cashless
payments. Internet advertising expenditures have preceded the recovery
from the impact of COVID-19 pandemic, continuing to grow 6% YoY to 2.2
trillion JPY.
Under such circumstances, in addition to the expansion of existing
digital advertising, DG is aiming for further growth by strengthening
collaboration in the Financial Technology Segment in the finance field,
one of our strengths, and developing new businesses such as DX service.

FY2021.3 Topics

Mail order/EC

Digital ads

billion JPY(YoY +0.4%)

Smartphone/app

Real estateWith payments and marketing currently becoming our two corebusinesses, DG is advancing strategic integration with the Financial
Technology Segment, one of the major payment platforms in the
FinTech industry, to achieve a rare business model that realizes
monetization in both the payment and marketing businesses. Apartfrom promotional advertising for businesses, the providers of a wide
variety of payment methods carried by the Financial Technology
Segment, we also provide cashless payments and digital marketing in
the OMO field, using our DGʼs solution that incorporates CRM, point
management and payment, various marketing functions such as
coupons, and a QR code payment function.

Also for “Cloud Pay” which enables various QR payments to beprocessed in a store, the Marketing Technology Segment is responsible
for a payment management app service for stores and managing
merchants, while the Financial Technology Segment is responsible forpayment gateways.
In the future, with the spread of D2C (Direct to Consumer) by
manufactures of products and the increase in the proportion of EC in allindustries, we will develop the advertising and CRM solutions cultivatedover many years and marketing technologies alongside the FT
Segment based on the DG Group strategy “DG FinTech Shift.”

DIGITAL GARAGE

26

IT

Proceeding to invest in next-generation technologies in global areas including Japan, the US and Asia,

Revenuetargeting emerging companies at a wide range of growth stages, from seed and early-stage startups

INCUBATION TECHNOLOGYSEGMENT

11.5

FY2021.3
IT Segment Results

through to later-stage businesses

Profit before tax

billion JPY(2.4× YoY)

10.3

billion JPY(2.9× YoY)

Fair value valuations

47.2

billion JPY(YoY +29%)

Business Model

TOPICS
We discover and support promising emerging companies
around the world based on the Global Incubation Streamthat links leading VC partners in Japan, the US, Europe, and Asia.
By supporting the acceleration of business expansion throughcollaborations in payment and marketing, fields in which the DG Group
operates, and collaborations in new fields of technological development
being worked on by DG Lab, we will aim to increase the value of theinvestee companies. Also, by advancing a cycle in which the funds
raised through exits are invested in new startups based on the criteriaof achieving ROI of 2.5 times, we are aiming to continuously enhance thefair value.
Fair value valuations, which represent the equity value of thoseinvestees, are presented in the balance sheet as the balance of
operational investment securities.

DGʼs Investment Ecosystem

Focused area

Startup seed

By adding funds to the investment business to date, we aim to
expand the DG Groupʼs investment business in terms of bothinvestment scale and investment fields.
We completed the establishment of DG Lab Fund II with a total
amount of 12.5 billion JPY in November 2020. We are enhancing
investment in leading domestic and global startups throughoperation of funds totaling 20.0 billion JPY together with DG Lab
Fund I, and supporting the increase in corporate value throughcollaboration with DG Lab. In addition, in June 2021, weestablished the “Open Network Lab & ESG I ʻEarthshot Fundʼ” for

Focused area

Value

Middle
stage

Early

MiddleEnhance follow-on investment that utilizes funds and promote ESG investment
startups in the ESG field. This fund is a collaboration with “Open
Network Lab,” Japanʼs first seed accelerator program
established in 2010. The fund will invest in promising startups inJapan and abroad, focusing on participation in Open Network Lab(application/selection) and companies related to the ESG field,
and provide follow-up investments to investees with highpotential for growth. After the investment, we will provide full
support to enhance the corporate value of the investeesʼ
business, etc. by utilizing Open Network Labʼs diverse resources
and network for supporting investees.

Time

Later

Japanʼs first support program specializing
in seed stage startups since 2010
Two startup support programs
specializing in lifestyle areas

Global Incubation Stream

Startup support program to accelerate commercializationfrom trial experiments in the startup cities Fukuoka region
Startup support program specializingin biotechnology and healthcare areas
Support program specializing in seedstage startups operating in Hokkaido

FUKUOKA
HONG KONG*Launched in 2021

Open Network Lab
Incubating startups looking to succeed on a global stage, as Japanʼs first seed accelerator program since 2010

FY2021.3 Business Review
Success of strategic investment in leading DX companies. Sale of three stocks through IPOs in Japan and overseas listed shares, etc.
Revenues from operating investment securities increased 2.7 times YoY
to 11,031 million JPY as a result of an increase in fair value due tofinancing of investees and the sale of mainly three stocks through IPOs in
Japan and overseas listed shares, etc. In addition, the balance sheet
value, in other words value of operational investment securities, which isan important indicator for the IT Segment, was 47.2 billion JPY, an
increase of 10.7 billion JPY from the end of the previous fiscal year.
Particularly in the North America area, our strategic investments inleading DX/FinTech companies have been successful, such as ThredUp
going public on Nasdaq. Investees, which DG has been actively investing
as a member of the Silicon Valley inner circle, have grown significantly
while entering a period of investment recovery. In addition, ourinvestment activities in Asia area, especially in India, which we have been
focusing on in recent years, are steadily bringing results. We will continue
to implement investment incubation mainly in DX/FinTech/social
problem solving emerging companies in Japan, Asia and the North
America area, and will also actively develop ESG investments.

27

DIGITAL GARAGE

Most recent 5 years

5.6×(JPY in Billions)

47.2

2.2 times

36.5

3.6×

3.5×

2.8×
2.4×

2020 book sales

Open Network Lab graduates (extract)

Applications from more than 1,000 companies
around the world (1/3 of the entries from overseas)

Approximately 13% of companies have already exited
0.7×

Balance of operational investment securities

Results

Supporting more than 130 startups+29%

End of FY19.3 End of FY20.3 End of FY21.3

benefits service for small and medium-sized companies with an
office in the US, and WHILL, Inc., involved in the development of
next-generation wheelchairs.
In addition, we commenced Open Network Lab Hokkaido,
BioHealth, Resi-Tech, Fukuoka from 2018, also accelerating
initiatives being developed specializing in specific fields and regions.
We have supported the companies of people with promisingbusiness ideas through this program.

2.6 times

During the previous Mid-term Business Plan

26.7

Since its establishment as Japanʼs first seed accelerator programin 2010, Open Network Lab has expanded its open innovation
program specializing in regions and areas and held more than 30
programs.
To date turned out more than 130 startups including IPO startups
and unicorns such as SmartHR, Inc., developer of cloud personnel
labor software, giftee, Inc., online gift service (listed on Mothers in2019), Fablic, Inc., development of the “Fril app (now Rakuma)”(Acquired by Rakuten in 2016), Fond, Inc., which develops a welfare

FY16.3

FY17.3

FY18.3

FY19.3

FY20.3

Invested companies (extract)
FY21.3

ROI results
DIGITAL GARAGE

28

LTI

Revenue

Aiming to create long-term, continuous cash inflow by collaborating with investees of the Company and the
DG Group, and further initiatives such as establishing joint ventures with other collaboration partners

LONG-TERM INCUBATIONSEGMENT

5.9

FY2021.3
LTI Segment Results

Profit before tax

billion JPY(YoY -25%)

Business Model

Share of profit of Kakaku.com accounted for using equity method

2.7

2.4

billion JPY(YoY -44%)

billion JPY(YoY -36%)

Kakaku.com

In the Long-term Incubation Segment, we strive to create medium-

The DG Group is known as an internet incubator, and to realize one

Following the Company ʼ s investment in 2002, the business of

to long-term, continuous cash inflow by utilizing the knowhow ofof its missions of creating new businesses, we believe it is important

Kakaku.com, Inc. has steadily grown to a company with sales in theaccumulated monthly users for the Kakaku.com Group has grown toinvestment cultivation and business development that the DG Groupto create not only short-term incubation results (gains on sales oforder of 60.0 billion JPY. In addition to Kakaku.com and Tabelog,

274.47 million in March 2021.

shares), but also long-term, continuous cash inflow as represented

has been nurturing until today.

by our investment and business development at Kakaku.com, Inc.

Kakaku.com, Inc.ʼs main business progress

Trends in sales revenue of Kakaku.com, Inc.*(JPY in Billions)

LTI Segment Business Model

progress is also being made in new media business and the[Kakaku.com, Inc. Group Accumulated Traffic] Monthly users for the overall groupare increasing year by year, totaling 274.47 million users, a 7.4% YoY increase

60.0(Millions of people)
300
50.0
icottoKyujin Box
TASCLAP

40.0

Kinarino

200

Linkage of FT/MT
businesses

ReturnBusiness development

Sumaity
4travelLow price trips

20.0

Tabelog

10.0

Kakaku.com, Inc. Group
Hold for medium- tolong-term periodBusiness investment

Strategic business group

Sell

LTI

IT

For the creation of
medium- to long-term,
continuous cash inflow
Short-term
incubation
results

Kakaku.com
Other

0

0.0

2002

2020

Business growth

FY2021.3 Business Review
Profit before tax decreased 44% YoY to 2.7 billion JPY.
Profit fell due to a decline in investment profit on equity method for Kakaku.com
and the commercialization cost of new business
During FY21.3, revenue was 5,931 million JPY (-25.2% YoY) andBrainscanTechnologies, Inc., which has been involved in brain MRI

profit before tax was 2,653 million JPY (-43.6% YoY). Kakaku.com,

health screening business for driving operators, increased 2.4

Inc., which is an equity-method affiliate, was affected by the spreadtimes YoY to approximately 20,000, and achieved full-yearof COVID-19, mainly for its Tabelog business, but EC and job

profitability. We will continue to grow our business with a view toinformation websites remained firm.

developing services in collaboration with the AI-related

In a d d i t i o n , t h e n u m b e r o f b r a i n MR I ex a m i n a t i o n s a ttechnologies of the DG group.

DIGITAL GARAGE

9 12 3
FY20166

9 12 3
FY20176

9 12 3
FY20186

9 12 3
FY20196

9 12 3
FY2020Initiatives in Crypto Assets Field
certification of the first blockchain FinTech field under the Regulatory

venture for the purpose of developing and commercializing

Sandbox System in January 2019. We forecast the full-fledged use byblockchain financial services in the FinTech field. “SETTLENET,”

prime domestic and overseas crypto asset business operators will

which was developed by Crypto Garage, Inc., acquired thecommence during FY22.3.

Crypto Garage Business Model
Time

6*Extracted from Kakaku.com, Inc.ʼs Results Briefing for FY2021/3* Under IFRS from FY2017

Crypto Garage, Inc. was established in September 2018 as a joint

29

Bus Hikaku Navi

100

priceprice.com

・・・

Business value

Foundation of
JV company

webCG
eiga.com

30.0

Registration of crypto asset exchange provider

DvP payment service for corporate transactions
We forecast increased demand for cover transactions on
stock exchanges due to expanding scale of the distribution

Overseas
OTC
operators

Domesticexchanges
Simultaneous payment
on blockchain

Completed the registration as a crypto asset exchange provider
for the development of new services in light of the needs of the crypto assets market

Registration details of crypto asset exchange provider
Jurisdiction

Kanto Local Finance Bureau

Registration number

Director-General of the Kanto
Local Finance Bureau No. 00029

Registration dateJune 29, 2021

Name of crypto asset exchange provider

Crypto Garage, Inc.

Crypto assets handled

L-BTC- Setting tokens on Japanʼs first Bitcoin sidechain“ Liquid Network ” (L-BTC) as the crypto assets handled- Bitcoin sidechain (Liquid Network), which the DG investee Blockstream
Corporation Inc. operates, has grown to 59 member companies- Bitcoin mining business of Blockstream Corporation Inc. is thedriver as the leading business- Planning to commence the provision of payment solutions andintermediation for transactions between domestic crypto asset
exchange providers and overseas OTC business operators forthe purpose of improving the efficiency of the coverage market
and mitigating risks

DIGITAL GARAGE30DG LABAn open innovation organization for discovering technology seeds that will become new businesses,
focusing on five advanced technology areas, and for promoting business development

Open Innovation Platform to Create Next-Generation Businesses

Projects Being Promoted by DG Lab for Commercialization (Partial Extract)“ DG Lab, ” an R&D organization operated by DG, together with
Kakaku.com and KDDI with the aim of creating products andservices that will serve as new business pillars utilizing
cutting-edge technologies, is accelerating toward business

Probabilistic Programming

development in the five top priority research areas. Throughcollaboration with DG Lab partners, DG Lab Fund investee
companies and others, DG Lab will create a series of businesses
that play roles in society from a global perspective.

5 Priority Areas

BLOCKCHAIN

DG Lab is supporting the promotion of the use of Probabilistic Programming

appreciates PPʼs ability to leverage deep learning and other machine(“PP”), a new AI technology development system being promoted by thelearning technologies to build more advanced AI and has made a donation

Massachusetts Institute of Technology (MIT). Unlike conventional AI

to the MIT Probabilistic Computing Project that expands use of PP for thedevelopment, by enabling to incorporate statistical hypothesis into AI, PP

purpose to improve prediction accuracy in the fields of FinTech and Internet

realizes the development of AI model that takes account of tacit

advertising, and is planning to launch Japanʼs first PP course at Keioknowledge/common sense, etc. like human beings do. DG Lab highly

University in collaboration with the MIT Probabilistic Computing Project.

Promoting R&D in priority areas of five technologies:“Blockchain,” “AI,” “xR,” “Security,” and “Biohealth”

R&D and Business DevelopmentAI

XRCore Partners

Employing engineers and business development members with extensive knowledge in eachtechnology area, and promoting research and business development in both technology and business

Structured
modeling

Semiotic programming

Open Innovation Organization
Promoting business collaboration that levers each company strengths withsponsors and startups bringing their respective resources and assets, etc.

BIOHEALTHSECURITY

Generativemodeling

Probabilistic

Programming

Collaboration with Startups
Collaborating with leading domestic and overseas startups that havecutting-edge technologies and further accelerating commercialization

Probabilistic inference

Learningfrom data
Neural network

DG Lab FundWe have been investing in companies conducting R&D in next-generation core technologies in Japan and overseas. We collaborate with
DG Lab, cultivate these core technologies as pillars of next-generation businesses and aim to maximize the investment outcomes.

● Digitally tokenize the bonds and verify the issuance, redemption, payment of dividend and transfer● Implement the transfer of rights on digital bonds with simultaneous payment of funds

Enterprises (sponsors and fund investors)
LP investment

ReturnProof of concept testing for issuance of “digital bonds” utilizing blockchain technology

Business collaboration/
R&D results

Sponsorship

R&D and proof of concept testing

Dividend
Token

in the ﬁve strategic areas:

blockchain, AI, xR, security, and biohealthInvestment area: Corresponds with the 5 areas of DG Lab
Blockchain/AI/xR/Security/Biohealth

JPY
Token

Fund I(DG Lab First Investment Business Partnership)
Scale: 6.8 billion JPY; Term: 10 years

Fund II

JPY
Token

Digitalbonds

BLOCKCHAIN

Investees
collaborationAI

XR

JPY Dividend
Token
Token

Digitalbonds

Digital bonds

Cash

JPY
Token

(DG Lab II E.L.P Cayman)

Scale: 12.5 billion JPY; Term: 10 years

31

DIGITAL GARAGE

BIOHEALTHSECURITY

Platform that enables exchange of digital assets with blockchain

Issuance of digital bonds as an STO use case

DIGITAL GARAGE

32

MANAGEMENT SYSTEMANNUAL REPORT 2021

Directors

Kaoru
Hayashi

Representative Director

Keizo
Odori

Member, Board of Directors

KAORU HAYASHIKEIZO ODORIMAKOTO SODA
Jun 1994

Representative Director, From Garage, Inc.

Apr 2000

Joined Faith, Inc.

Aug 1995

Founded Digital Garage, Inc.
Representative Director, Digital Garage, Inc.

Jun 2005

Director, Faith, Inc.

Jun 2003

Chairman and Director, Kakaku.com, Inc. (current)

Sep 2010

Director, Digital Garage, Inc.

Nov 2004

Representative Director, President
and Group CEO, Digital Garage, Inc.

Sep 2012

Director, in charge of the Payment Segment(now the Financial Technology Segment),
Digital Garage, Inc.

Jun 2009

Representative Director and Chairman, DG
Incubation, Inc. (now DG Ventures, Inc.)

Oct 2013

Jul 2016

Director Chairman & CEO, Digital
Garage US, Inc. (current)

Sep 2016

Sep 2016

May 2017

Representative Director, Chairman
and CEO, BI. Garage, Inc. (current)
Representative Director, President
Executive Officer and Group CEO,
Digital Garage, Inc. (current)
Representative Director, Chairman
and President, DG Incubation, Inc.
(now DG Ventures, Inc.) (current)

Aug 2018

Chairman CEO, DG Communications
Co., Ltd. (current)

Jun 2021

Representative Director, Chairman
and CEO, DG Financial Technology,
Inc. (current)

Jun 2021

Representative Director, Chairman
and President, DG Incubation, Inc.
(current)

Member, Board of Directors and Co-Founder

Joined Dresdner Kleinwort Benson
Securities, Ltd.

Masahito
Okuma

Member, Board of Directors

Aug 2001

Joined Digital Garage, Inc.

Apr 2000

Joined Softbank Finance Corporation

Joined FAST RETAILING CO., LTD.

Jul 2006

Director, DG&Ibex Company(now Marketing Technology Company)

Nov 2011

Director and Executive Officer, VeriTrans
Inc. (now DG Financial Technology, Inc.)Jan 2011

Senior Operating Officer, Digital Garage,
Inc. and Executive Vice President, DG&Ibex
Company (now Marketing Technology Company)

Apr 2013

Representative Director, Executive
Officer and CEO, NaviPlus Co., Ltd.
(current)

Oct 2013

Director, Executive Officer and COO, VeriTrans
Inc. (now DG Financial Technology, Inc.)

Joined Daiwa Institute of Research Ltd.

Apr 2000

Joined Monex Securities Inc.

Mar 2007

Joined Digital Garage, Inc. Executive Officer,
in charge of the Corporate Strategy Division

Representative Director and President,
ECONTEXT, INC. (current)

Sep 2009

Director, Head of the Group CEO
Office, Digital Garage, Inc.

Apr 2018

Senior Corporate Officer and COO of DG Lab, Digital Garage, Inc.

Sep 2012

Jun 2018

Director, Head of Corporate Strategy Division, Digital
Garage, Inc., and Executive Vice President of DG&Ibex
Company (now Marketing Technology Company)

Director and Senior Executive Officer, Digital Garage, Inc.

Jan 2012

Director, in charge of the Corporate
Strategy Division, Digital Garage, Inc.

Director, Senior Executive Officer, COO of DG Lab,
Head of Group CEO Division, Digital Garage, Inc.

Representative Director, DG Technologies, Inc. (current)

Corporate Officer, Digital Garage, Inc.

President and CEO, Crypto Garage, Inc. (current)

Sep 2016

Jul 2015

Apr 2019

Apr 2017

Director, Senior Executive Officer, in charge of DG Lab,in charge of the Incubation Technology Segment, andHead of Corporate Strategy Division, Digital Garage, Inc.

Sep 2015

Director, ECONTEXT, INC. (current)

Sep 2015

Representative Director, Executive
Officer and President, VeriTrans Inc.
(now DG Financial Technology, Inc.)Jun 2017

Representative Director and President,
DK Gate, Inc. (current)

Jan 2019

Director, TD Payment Corporation (current)

Feb 2019

Director, CyberBuzz, Inc. (current)

Apr 2020

Director, Senior Managing Executive Officer, and in
charge of overall domestic business, Digital Garage, Inc.
(in charge of the Marketing Technology Segment and theLong-term Incubation Segment)

Jun 2020

Director, Crypto Garage, Inc. (current)

Apr 2021

Director, Senior Managing Executive Officer, incharge of group business strategy and execution, and
Co-Head of Group CEO Division, Digital Garage, Inc.

Jun 2021

Representative Director, President, and Co-COO,
DG Financial Technology, Inc. (current)

Jun 2021

Director, Vice President Executive Officer and Group COO,
in charge of the Long-term Incubation Segment, and CoHead of Group CEO Division, Digital Garage, Inc. (current)

Nov 2016

Joined Digital Garage, Inc.

Apr 2017

Corporate Officer and COO of DG Lab, Digital Garage, Inc.

Dec 2017

Director COO, Digital Garage US, Inc. (current)

Director, Senior Executive Officer,
in charge of the Corporate Strategy
Division and the Media Incubation
Technology Segment, Digital Garage, Inc.

Jun 2019

Representative Director, DG Daiwa Ventures, Inc. (current)

Jun 2019

Director, Senior Executive Officer, in charge of GroupCEO Division, in charge of the Long-term Incubation
Segment, and COO of DG Lab, Digital Garage, Inc.

Apr 2019

Director, Senior Executive Officer, in charge of
the Corporate Strategy Division and the Longterm Incubation Segment, Digital Garage, Inc.

Nov 2019

Representative Director, BrainscanTechnologies, Inc. (current)

Apr 2020

Jun 2019

Director, Senior Executive Officer,
in charge of the Corporate Strategy
Division, Digital Garage, Inc.

Director, Senior Executive Officer, in charge of DG Lab Division,and in charge of other related business, Digital Garage, Inc.

Apr 2021

Director, Vice President and COO, DG Ventures, Inc. (current)

Apr 2021

Director, Senior Executive Officer, in charge of the
Incubation Technology Segment, in charge of DG Lab, and in
charge of Global Business, Co-Head of Group CEO Division,and Head of Digital Health Department, Digital Garage, Inc.

Sep 2016

Apr 2020

Director, Senior Managing Executive
Officer, in charge of the Corporate Strategy
Division, Digital Garage, Inc. (current)

Jun 2021

Member, Board of Directors, D2 Garage, inc. (current)

Jun 2021

Director, DG Incubation, Inc. (current)

Jun 2021

Director, ACADEMIE DU VIN (current)

Emi
Omura

Jun 2021

Director, Vice President and COO, DG Incubation, Inc. (current)

Jun 2021

Director, Managing Executive Officer, in chargeof the Incubation Technology Segment, in chargeof DG Lab, and in charge of Global Business, CoHead of Group CEO Division, and Head of Digital
Health Department, Digital Garage, Inc. (current)

YasuyukiRokuyata

MAKOTO SAKAI

Aug 1995

Oct 2002

Dec 1995

Director, Digital Garage, Inc.

Apr 1986

Mar 2011

Representative Director and President,
DG Incubation, Inc. (now DG Ventures, Inc.)

Jul 2011

Director and COO, Digital Garage, Inc.

Sep 2012

Director and Vice President, in charge of
the Incubation Segment (now the Incubation
Technology Segment), Digital Garage, Inc.

Mar 2005 Partner, the Sirius Law Office

Jul 2013

Director, Digital Garage US, Inc.

Sep 2010

Sep 2016

Director, Vice President Executive Officer, in charge of
the Incubation Technology Segment, Digital Garage, Inc.

Outside Auditor,
Digital Garage, Inc.

Sep 2016

Outside Director, Audit andSupervisory Committee
Member, Digital Garage, Inc.
(current)

Admitted to practice law in Japan(Tokyo Bar Association)

Sep 2006

Director, Digital Garage, Inc. (current)

Jul 2008

Partner, Athena Law OfficeApr 2011

Director, MIT Media Lab

Sep 2010

Jun 2012

Board Member, The New York Times
Company

Associate Expert, International
Labour Office in Geneva, theInternational Labour Organization(ILO)

DIGITAL GARAGE

Jan 2014

Director, the Office of International
Affairs, Japan Federation of Bar
Associations

Sep 2014

Outside Director, Digital Garage, Inc.
(current)

Apr 2017

Director, Vice President Executive Officer, Digital Garage, Inc.

Jun 2019

Counsel, Kamiyacho International
Law OfficeJun 2018

Director, Audit and Supervisory Committee
Chairperson, Digital Garage, Inc. (current)

Apr 2021

Counsel, CLS HIBIYA TOKYO LAWOFFICE (current)

Sep 2018

Auditor, Crypto Garage, Inc. (current)

Jan 2019

Auditor, TD Payment Corporation (current)

Jun 2019

Auditor, BrainscanTechnologies, Inc. (current)

Jan 2020

Auditor, ACADEMIE DU VIN (current)

May 2018

Director, Senior Executive Officer, in charge of
DG Lab, the Incubation Technology Segment,
and Group CEO Division, Digital Garage, Inc.

Sep 2016

Senior Corporate Officer, Digital Garage, Inc.

Apr 2020

Director, Senior Executive Officer, in charge of the
Incubation Technology Segment, Digital Garage, Inc.

Oct 2016

Director, ANA Digital Gate, Inc. (current)

Apr 2021

Director, Senior Executive Officer, in charge ofGroup Data Strategy and Open Network Lab, and
Co-Head of Group Data Strategy Department,Group CEO Division, Digital Garage, Inc.

Oct 2018

Director, SCORE.Co., Ltd. (current)

Jan 2019

Director, TD Payment Corporation (current)

Apr 2020

Director, Senior Executive Officer, in charge ofthe Marketing Technology Segment, Recurring
Business, Group Information Security (CISO), andHead of Group Data Strategy Department, GroupCEO Division, Digital Garage, Inc. (current)

Senior Corporate Officer and in
charge of the Financial Technologies
Segment, Digital Garage, Inc.

Jun 2020

Director, Senior Executive Officer, incharge of the Financial Technology
Segment, Digital Garage, Inc. (current)

Jun 2021

Director, DG Financial Technology, Inc. (current)

Jun 2021

Jun 2021

Director, NaviPlus Co., Ltd. (current)

Representative Director, President,
and Co-COO, DG Financial
Technology, Inc. (current)

Jun 2021

MakotoSakai

YASUYUKI ROKUYATABoard Member, Chairman, PureTech
Health plc

HIROSHI SHINO

Joined Mitsubishi Corporation

EMI OMURA

Director, Sony Corporation

MASASHI TANAKA

Apr 1999

JOICHI ITO

Jun 2013

Member, Board of Directors

Mar 2011

Director (Audit and Supervisory Committee Chairperson)

May 2015

HIROSHISHINO

Member, Board of Directors

MASAHITO OKUMA

Outside Director

Founded Digital Garage, Inc. Representative
Director, Digital Garage, Inc.

MasashiTanakaJun 1997

JOI
ITO

33

Member, Board of Directors

Apr 1983

Sep 2016

MakotoSoda

Outside Director, Audit and Supervisory Committee Member

Apr 1988

Admitted to practice law inJapan (Nagoya Bar Association)
Registered to the Tokyo Bar
Association

Aug 2000 Established the Sakai
Makoto Law Office

Mar 2019 Representative, the Sakai
Makoto Law Office (current)

JUNJI
INOUE

Outside Director, Audit and Supervisory Committee Member

KOJI
MAKINOMINORUOHNO

Outside Director, Audit and Supervisory Committee Member

Outside Director, Audit and Supervisory Committee Member

JUNJI INOUE

KOJI MAKINOMINORU OHNO

Oct 1988

Joined KPMG Minato Audit
Firm (now KPMG AZSA LLC)
Tokyo Office

Jan 1977

Established Labor Consultants Ohno OfficeApr 2003

Representative Member, Labor
Consultants Ohno Office (current)

Became a Certified Public
Accountant

Sep 2003

Auditor, Digital Garage, Inc.

Established and Representative,
Makino Koji Certified Public
Accountant Office (current)

Jun 2015

Advisor, Japan Federation of Labor andSocial Security Attorneyʼs Associations

Jun 2017

Chairman, Tokyo Labor and Social
Security Attorney Association

Apr 1974

Joined Mitsubishi Corporation

Apr 2003

Executive Officer,
Mitsubishi Corporation

Jun 2003

Representative Director,
Executive Officer &President, IT Frontier Corp.

Aug 1992
Jan 2006

Jun 2007

Director, eAccess Ltd.

Jun 2012

Standing Executive Director,
Remote Sensing Technology
Center of JapanFeb 2009

Director, BE1 Accounting
Office (current)

Jun 2017

Outside Director, Audit and Supervisory
Committee Member, Digital Garage, Inc.

Sep 2012

Outside Auditor, Digital Garage, Inc.

Sep 2012

Outside Director, Audit andSupervisory Committee
Member, Digital Garage, Inc.
(current)

Outside Auditor,
Digital Garage, Inc.

Jun 2019

Sep 2016

Chairman, Japan Federation of Labor and Social
Security Attorneyʼs Associations (current)

Sep 2016

Outside Director, Audit andSupervisory Committee
Member, Digital Garage,
Inc. (current)

Jun 2020

Outside Director, Audit andSupervisory Committee Member,
Digital Garage, Inc. (current)(as of July 1, 2021)

DIGITAL GARAGE

34

CORPORATE GOVERNANCE

ANNUAL REPORT 2021

Corporate Governance

Basic Concepts
Consistent with our «principle» and «credo», as described below,

growth and medium- to long-term increases in corporate value, by

Digital Garage, Inc. (DG) has committed to living up to the faith of ourenhancing and strengthening corporate governance that emphasizes

shareholders and all other stakeholders, and to achieving ongoingtransparency, fairness, and speedy, resolute decision-making.

＜ Principle ＞＜ Credo ＞
TENACITYOPENNESS

Think for yourself and question authority.

INTEGRITY
AGILITY
COURAGEFor details of our Corporate Governance Policy, please refer to the following website.

Board of Directors
The Board of Directors of Digital Garage, Inc. consists of 13
members. Five of the 13 members are also Audit and Supervisory
Committee members, and four of these five members are outside
directors. Of the eight members who are not Audit and Supervisory
Committee members, one is outside director. In addition to its regularmonthly meetings, the Board of Directors meets at other times,
as necessary. In FY21.3, meetings of the Board of Directors were
held a total of 16 times. The Board of Directors makes decisions onimportant matters set forth in laws and regulations, the Articles ofIncorporation, and Board of Directors Provisions. It also oversees theactivities of board members as they perform their duties. Outside
directors perform governance functions by drawing on their individual
expertise, management experience and insight, to oversee board
activities and contribute advice, from an independent perspective.
More than one third of the total 13 members of the Board of Directors
or five members are outside directors, and all of the five outside
directors have been reported as independent directors in accordancewith the regulations of the Tokyo Stock Exchange. In this way, we
believe a system is in place at the Board of Directors to conduct highly
effective oversight.
Audit and Supervisory Committee
DGʼs Audit and Supervisory Committee consists of five members- one director and four outside directors. Audit and Supervisory
Committee members attend Audit and Supervisory Committee
meetings held after regular monthly meetings of the Board of

https://www.garage.co.jp/en/company/corporate-governance/

Directors. They attend other important meetings, including thoseof the Board of Directors, as well, and are free to express theiropinions and contribute in other ways to enhance the effectiveness ofcorporate governance.
Nomination and Remuneration Advisory Committee
DG has established the Nomination and Remuneration Advisory
Committee, which consists of three or more members of thedirectors and whose majority is comprised of independent outside
directors. The Nomination and Remuneration Advisory Committee
is made up of three members: Representative Director, Kaoru
Hayashi, Independent Outside Director Makoto Sakai (Chairman),and Independent Outside Director Junji Inoue. Upon the consultation
with the President, Executive Officer, the election of the Board of
Directors and remuneration thereof (excluding Audit and Supervisory
Committee Member) are deliberated and reported.
Internal Control System
To provide an environment that supports appropriate risk taking bydirectors and others, the Board of Directors has acted to build andmaintain proper internal control and risk management systems. The
Board of Directors supervises these systems to ensure their effective
operation. It has also approved resolutions for the formulation of the
Basic Policies on the Construction of an Internal Control System, in
accordance with Japanʼs Companies Act, Ordinance for Enforcementof the Companies Act, and Financial Instruments and Exchange Act.

Corporate Governanceoversees the performance of duties by directors more broadly. While realizing a greater
strengthening of corporate governance through ensuring no less than a 1-to-3 ratioof outside directors in the Board of Directors, DG has introduced an executive officer
system to clearly separate the business execution function from the decision making andsupervisory functions with the aim of bringing greater speed and efficiency to the executionof business. Moreover, with the aim of strengthening the independence and objectivity inthe functions of the nomination and remuneration of directors within the Board of Directors
and bolstering the corporate governance further, DG established the Nomination andRemuneration Advisory Committee consisting of three or more members of the directors
and whose majority is comprised of independent outside directors in February 2020.

DG has always viewed corporate governance as a critical management concern andstriven to take the steps necessary to ensure strong governance. Given the adoptionof Japanʼs Corporate Governance Code, we switched to the “company with audit andsupervisory committee” form of organization to achieve the “growth-oriented governance”
called for by the code. This organizational change was formalized following the approvalof a resolution to that effect at the 21st Shareholdersʼ General Meeting, convened on
September 29, 2016. Under the “company with audit and supervisory committee” formof organization, directors who are Audit and Supervisory Committee members perform
oversight for management decision making and the performance of duties by directors
in meetings of the Board of Directors. The Audit and Supervisory Committee, meanwhile,
Corporate Governance Organization Chart(as of June 23, 2021)

Propose/Report

Establish
Select/Oversee
Delegate decisionmaking for important
operational matters

Audit/Report

Audit and Supervisory Committee

ReportDirectNomination and Remuneration
Advisory Committee Members
Submit forconsideration/ Consult
ReportReport/Express opinions

Report Audit

Cooperate

ReportInternal Audit Office
Audit

Cooperate

Independently Audit

Delegate certain
management authority
and responsibility

ReportExecutive Officers

35

DIGITAL GARAGE

Deliberate

Management
Committee

DG segments, departments, offices, and group companies

ReportConsult

Cooperate

Compliance Committee
Information Security Committee, etc.

FY16.6

FY17.3

FY18.3

FY19.3

FY20.3

FY21.3

FY22.3Company with Audit and Supervisory Committee (from September 2016)

8

8

8

7

8

8

7

8

Independent Outside Directors

2

2

2

5

6

6

5

6

5

Total

10

10

10

12

14

14

12

14

13

Percentage of Independent Outside Directors

20%

20%

20%

42%

43%

43%

42%

43%

38%

Standing Corporate Auditors

1

1

1

Independent Outside Auditors
Audit and Supervisory Internal Directors
Committee
Independent Outside Directors

3

3

3

Board of Directors Internal Directors

Board of Auditors

8

1

1

1

1

1

1

3

4

4

3

4

4

Non

OutsideOptional Committee Remuneration Advisory Committee

Non

Non

Internal Directors

1

1

1

Independent Outside Directors

1

1

1

Chairperson

Kaoru Hayashi Representative Director◎ (Chair)

Keizo Odori

Director○

Makoto Soda

Director○

Masahito Okuma Director○

Non

OutsideMasashi Tanaka Director○

Internal Directors

1

1

1

Hiroshi Shino Director○

Independent Outside Directors

2

2

2

Joichi Ito

Director○

Director

Independent/ ○OutsideEmi OmuraPresident, Executive Officer

FY15.6Company with Board of Auditors (from September
1999 through September 2016)

Form of Organization Design

Nomination and
Board of Audit andSupervisory
Remuneration
Directors Committee Advisory Committee

Elect/Dismiss

Independent Auditor

Board of Directors

Elect/Dismiss

FY14.6

Members of Board of Directors, Audit and Supervisory Committee,
Nomination and Remuneration Advisory Committee

Shareholdersʼ General Meeting
Elect/Dismiss

The Development of Strengthened Corporate Governance

Audit and Supervisory
Yasuyuki Rokuyata Committee
Chairperson
Audit and Supervisory
Makoto Sakai Committee
MemberAudit and Supervisory
Junji Inoue
Committee Member
Audit and Supervisory
Koji Makino
Committee Member
Audit and Supervisory
Minoru Ohno Committee
MemberIndependent/
OutsideIndependent/
OutsideIndependent/
OutsideIndependent/
Outside○Supervision
and Audit ofManagement

Nomination and Remuneration
Advisory Committee
Chairperson

EffectivenessEvaluation

Evaluation of board effectiveness (from May 2016)
Supplementary principle 4-1(3) Supervision of succession planning (from February 2016)○◎ (Chairman)○○◎ (Chairman)

○

○

○

○

○

○

○

Corporate
Governance
ReportDirectors
remuneration

Explained Matters

Supplementary principle 4-2(1), 4-3(2), 4-3(3), and 4-10(1)Appointment and dismissal of CEO and securing objectivity
and transparency of decision-making process of remuneration for directors
Establishment of independent and optional committees
Introduction of a director grading system (from August 2016)
Introduction of restricted stock-based
remuneration system (from September 2016)

Resolution of decision policy regarding the details of
remuneration, etc. for individual directors (March 2021)

DIGITAL GARAGE

36

CORPORATE GOVERNANCE

ANNUAL REPORT 2021

Corporate GovernanceMatters discussed at the Board of Directors

Reasons for appointment as Outside Directors
Outside Directors are appointed based on whether the person
has an excellent personality and insights, is capable of advising on
overall management by drawing on their own knowledge, and isable to appropriately reflect the opinions of stakeholders, including
minority shareholders, from an independent viewpoint in the Board

Name

of Directors. Directors who are Audit and Supervisory Committee
Members are appointed based on whether the person has an
excellent personality and insights, and has knowledge and experience
to appropriately, fairly, and efficiently perform the audit of duties
executed by the Directors.

Audit andSupervisory Independent Reason for the appointment
Committee
OfficerMember

EMI
OMURA

○

Although Emi Omura has not been involved in corporate management other than having served as an outside officer, she has experience inglobal work environment through her post at an international institution in addition to her wealth of experience and expertise as attorneyat-law. As Outside Director of DG, she has provided us with valuable opinions and suggestions concerning business management of DG
from a broader perspective. We therefore expect her to continue contributing to appropriate oversight of business operation of DG, andappointed her as Outside Director who is not an Audit and Supervisory Committee Member.

MAKOTO
SAKAI○○

Although Makoto Sakai has not been involved in corporate management other than having served as an outside officer, he has considerable
experience and expertise as attorney-at-law. As Outside Auditor and Outside Director who is an Audit and Supervisory Committee Memberof DG, he has provided us with valuable opinions and suggestions concerning business management of DG from a legal perspective.
We therefore expect him to continue contributing to appropriate oversight of business operation of DG and ensuring its sound business
management, and appointed him as Outside Director who is an Audit and Supervisory Committee Member.

JUNJI
INOUE

○

○

Junji Inoue has a wealth of overseas business experience, and as Outside Auditor and Outside Director who is an Audit and Supervisory
Committee Member of DG, he has provided us with valuable opinions and suggestions concerning business management of DG from a
global perspective. We therefore expect him to continue contributing to appropriate oversight of business operation of DG and ensuring its
sound business management, and appointed him as Outside Director who is an Audit and Supervisory Committee Member.

KOJI
MAKINO○○

Although Koji Makino has not been involved in corporate management other than having served as an outside officer, he has a wealthof experience and expertise as certified public accountant and consultant. As Outside Auditor and Outside Director who is an Audit andSupervisory Committee Member of DG, he has provided us with valuable opinions and suggestions concerning business management of DG
from an accounting and taxation perspective. We therefore expect him to continue contributing to appropriate oversight of business operation of
DG and ensuring its sound business management, and appointed him as Outside Director who is an Audit and Supervisory Committee Member.

MINORUOHNO○○

Although Minoru Ohno has not been involved in corporate management other than having served as an outside officer, he has a wealth ofexperience and expertise as labor and social security attorney. As Outside Auditor and Outside Director who is an Audit and Supervisory
Committee Member of DG, he has provided us with valuable opinions and suggestions concerning business management of DG in the past.
We therefore expect him to continue contributing to appropriate oversight of business operation of DG and ensuring its sound business
management, and appointed him as Outside Director who is an Audit and Supervisory Committee Member.

Remuneration for Directors
The 21st Ordinary Shareholdersʼ General Meeting held on
September 29, 2016, approved the remuneration amount for
Directors (excluding Audit and Supervisory Committee Members)
to be 500 million JPY or less per year (including total 50 million JPY
or less for Outside Directors, excluding the portion for employee
salaries), and apart from this annual remuneration, amount of themonetary remuneration claims provided for stock acquisition rights
allocated as stock compensation-type stock options to be 250 million
JPY or less per year, and amount of the monetary remuneration
claim provided to grant restricted shares for one fiscal year to be
100 million JPY or less. With regard to the amount of remuneration
for Directors (Audit and Supervisory Committee Members), it wasapproved at the 21st Ordinary Shareholdersʼ General Meeting held on

September 29, 2016, that the remuneration shall be 100 million JPY
or less per year.
DGʼs Board of Directors passed a resolution of policies concerning
the determination of the detail of remuneration for individual Directors(excluding Directors who are Audit and Supervisory Committee
Members). This resolution of the Board of Directors was adopted
based on policies formulated in light of actual remuneration alreadypaid by DG to the Directors. The amount and detail of remuneration
for the Directors who are Audit and Supervisory Committee
Members were determined within the total amount resolved in the
Shareholderʼs General Meeting based on the discussion of the Audit
and Supervisory Committee Members.
Remuneration for Directors for FY21.3 is as follows.

Total amount of remuneration by type (JPY in Millions)Fixedremuneration

Performance-linked
remuneration

Directors (excluding Audit and Supervisory
Committee Members and Outside Directors)

468

468

-

-

258

7

Directors (Audit and Supervisory Committee
Members; excluding Outside Directors)

30

30

-

-

-

1

Outside Directors

46

46

-

-

-

6

Retirement
benefits

Non-monetary remuneration
included in the total amount

Main matters resolved

Main matters reported

First quarter- Mid-term Plan
- Summary of Consolidated Financial Results- Convocation of Ordinary Shareholdersʼ General Meeting- Matters relating to director personnel remunerations- Securities Report- Partial revision of internal control and corporate governancebasic policy- IR activities report- Evaluation of board effectiveness- Corporate Governance Report- Performance report

Second quarter- Revision to Internal Reporting Policy- Conclusion of Commitment Line Contracts- Summary of Consolidated Financial Results and Quarterly
Securities Report- Performance report

Third quarter- Establishment of a subsidiary- Establishment of a fund
- Summary of Consolidated Financial Results and Quarterly
Securities Report- Capital and business alliance of subsidiaries- Performance report

Fourth quarter- Appointment of Executive Officers- Decision policy of the detail of individual Directorʼs
remuneration- Approval of the next fiscal yearʼs budget- Summary of Consolidated Financial Results and Quarterly
Securities Report- Status of cross-shareholding- Reorganization of subsidiaries- Performance report

Evaluation of Board Effectiveness
The Board of Directors implements the evaluation andanalysis of overall board effectiveness. The evaluations andanalyses are made based on self-evaluations conducted byindividual Directors for matters such as the composition
and the operation of the board, matters concerning board
deliberations, the role and duties of the board, the roleand duties of the Nomination and Remuneration Advisory
Committee, and items of respective principles of thecorporate governance code that are not exercised.
The evaluation results for FY21.3 confirmed that theoverall board effectiveness has been sufficiently ensured. In
particular, the evaluation states that the Board of Directors
held an active discussion about DG ʼ s medium- to longterm strategies and plans given the COVID-19 pandemic
as a turning point, strengthened risk management system,

including internal control and internal reporting system.
Furthermore, in the area of human resources development,
the evaluation identified that the Board of Directors put
forward initiatives including implementation of programs for
middle management, focused on discussion on medium- tolong-term issues and direction of DG.
The Board of Directors will continue to discuss succession
planning and human resources development, as they are theissues to be reviewed to enhance the board effectiveness.
Furthermore, the Board of Directors aims to bolster its PDCA
cycle for the enhancement of corporate value by putting inplace management focused on cost of capital and to haveample time to discuss matters concerning ESG and SDGs
(Sustainable Development Goals) and compliance withJapanʼs Revised Corporate Governance Code.

Number ofrecipientdirectors

Total amount of
remuneration(JPY in Millions)Categories of directors

Matters discussed at the Board of Directors in FY21.3 are as follows. The Board of Directors holds free and open-minded exchange ofviews and opinions.

*1 The total amount of non-monetary remuneration for Directors (excluding Audit and Supervisory Committee Members and Outside Directors) consists of fixed
remuneration of 258 million JPY.
*2 Non-monetary remuneration consists of DGʼs stocks, representing recorded expenses of stock acquisition rights granted as stock options remuneration of 206
million JPY and expenses related to restricted shares of 52 million JPY.
*3 In addition to the total amount of remuneration mentioned above, each subsidiary paid a total amount of 197 million JPY of fixed remuneration during the fiscal
year under review for six Directors concurrently serving as Directors (excluding Audit and Supervisory Committee Members) of the subsidiary of DG and one
Director (excluding Audit and Supervisory Committee Members) concurrently serving as the Advisor of the subsidiary of DG.

37

DIGITAL GARAGE

DIGITAL GARAGE

38

CORPORATE GOVERNANCE

ANNUAL REPORT 2021

Compliance and Information Security

Compliance Statement

Basic Information Security Policy

The purpose of Digital Garage is as follows: “Designing ʻNew Contextʼ for a sustainable society with technology.”

DG regards the information we possess and our information systems (computers, networks, etc.) for executing business by DG and

In order to achieve this purpose and ensure our sustainable development, each and every employee is called upon to understandour subsidiaries (“DG Group”) as “information assets.” We make best efforts for information security to safely handle these assets.

changes in society and ensure that our actions resonate with our environment, in the spirit of the “first penguin.” We recognize
the irreplaceable roles that our employees play in our efforts and the importance of providing them with a rewarding working
environment that they are proud to be a part of. In addition, individuals must also commit to regulatory compliance.
DG has established a compliance program outlining standards for individual business conduct with integrity and efficiency basedon our shared ethical values.
In order to exercise the aforementioned corporate philosophy, every staff member at DG is committed to adhering to thecompliance program guidelines as detailed in the following seven articles in our code of conduct.

Operational structure for information security
CEO and directors in charge of information security appoint a chief information security officer (CISO), who serves as a central information hub
in security management throughout the overall DG Group. Because the DG Group implements different business formats in each segment anddifferent security risks must be dealt with in each company, the group is taking required security measures and acquires external certifications.
CISO also conducts reviews for multifaceted confirmation of the security structure. A structure is set up in which, if a serious security incident
occurs in the DG Group, CISO serves a central role to promptly work with DGʼs management and respond appropriately to the problem.

Certifications＜Code of Conduct＞
1. Hold high ethical standards and conduct business in compliance with laws
2. Respect fundamental individual rights and diversity and maintain a healthy work environment freefrom discrimination and harassment
3. Promote harmonious co-existence with society and conduct environmentally-responsible businessactivities
4. Foster transparency of business and fair and free competition
5. Maintain fair and healthy relationships with government and other public offices
6. Disclose necessary corporate information to stakeholders fairly and openly
7. Manage and utilize corporate assets and information appropriately and effectively

DGʼs Compliance Statement can be viewed on the following webpage.
https://www.garage.co.jp/en/company/corporate-governance/compliance

Personal Information Protection Policy

The DG Group is qualified to obtain third-party certifications according to the special characteristics of our businesses.
DG has received PrivacyMark certification for our personal information protection management system complying to JIS Q 15001.
DG and our subsidiaries have received certification as a group for ISO/IEC 27001:2013, an international standard for information security
management systems (ISMS), and JIS Q 27001:2014, a Japanese standard. Our subsidiaries that handle credit card information have also
received Payment Card Industry Data Security Standard (PCI DSS) certification, the international security standard of credit card industry forthe safe handling of credit card information.

Measures against cyber attacks
The DG Group recognizes the threat of increasingly diverse, sophisticated cyber attacks, and is taking continual measures against such attacks.
These include incorporating multilayer defense and the latest defense technologies into our systems. We also educate officers and employees
about threats to guard against attacks involving internal parties (targeted attacks, etc.).

Business continuity
DG believes our social mission is to provide a range of online services. In the event of a disaster, cyber terrorism, system failure, or otherserious danger, we will first ensure securely and accurately safekeeping customer information and continuing our services to the maximum
level possible, upon securing the safety of our officers and employees and their family members.

Setting and promoting understanding of information security rules
DG establishes information security rules and continually promotes thorough understanding of them among officers and employees by conducting
security training for new hires, as well as annual security training. An employee who breaches laws, ordinances, this Basic Information Security
Policy, information security-related rules, or internal regulations will be subject to penalties in compliance with the company regulation manual, etc.

Code of Conduct
In operating its businesses, DG receives and/or collects personal information from customers, business partners, employees, etc.
DG recognizes the importance of personal information and pays utmost care in protecting it.

For information on the Personal Information Protection Policy, please refer to the webpage below.
https://www.garage.co.jp/en/policy/

List of certifications obtained by DG and our subsidiaries
PrivacyMark

ISMS

Digital Garage, Inc.

○○DG Financial Technology, Inc.

○

○

○

ECONTEXT, INC.

○

○

○

Emphasizing transparency, fairness, and continuity, DG endeavors to provide information in a timely manner to all of its

DG Communications Co., Ltd.

○

shareholders, investors and other stakeholders. Our basic policy is to disclose information in compliance with the regulations on

BI.Garage, Inc.

timely disclosure established under the Financial Instruments and Exchange Act and by Tokyo Stock Exchange, Inc. DG also strives

NaviPlus Co., Ltd.

to disclose as proactively and quickly as possible even information to which the timely disclosure regulations do not apply, if we

DG Ventures, Inc.

consider it useful in promoting understanding of DG.

Academie du Vin Co., Ltd.

Disclosure Policy

39- DG employees strictly adhere to all information security provisions and practice stringent compliance management in accordance with the protocols
of applicable regulations, industry business norms and our code of conduct, as well as contractual security obligations.
- We set information security objectives to maintain an appropriate level of information security and work to reliably achieve them.
- We conduct ongoing activities related to the Basic Information Security Policy and have established a risk management cycle to counter new threats.
We work to constantly review and continuously improve this policy.

○
○
○
○

For information on the Disclosure Policy, please refer to the webpage below.

For information on the Basic Information Security Policy, please refer to the webpage below.

https://www.garage.co.jp/en/ir/disclosurepolicy/

https://www.garage.co.jp/ja/compliance/security/

DIGITAL GARAGE

PCIDSSDIGITAL GARAGE

40

CORPORATE GOVERNANCE / NON-FINANCIAL HIGHLIGHTS

Outside Directorsʼ View on Digital Garage

ANNUAL REPORT 2021

Non-Financial Highlights

As of March 31, 2021

Outside Director EMI OMURA
We have been facing historically unresolved social issues as well as new social issues triggeredby the pandemic. With a capability of active and tactical “intervention,” I believe DG has the power
to commit to these issues as catalysts for transforming society. We should review the sustainabilityof our business from the perspectives of environment, society, and governance in accordance withevolving international standards. This is my stance concerning monitoring, which I will follow through.

Outside Director, Audit and Supervisory Committee Member MAKOTO SAKAI

Number of Group companies

Number of Group employees

Ratio of female employees

Number of female managers/Ratio

31

898

Our continued First Penguin Spirit is signified by the effort made by DG marking the 25th
anniversary under the slogan of “DG FinTech Shift” to integrate each segment with the aim of building
a new framework. In many cases, the introduction of laws typically follows peopleʼs real voices andconcerns, and in the actual business practice, we often need to appropriately resolve cases which are
not envisioned by laws. I will draw on my experience earned through legal practice to carry out theoperation as an Audit and Supervisory Committee Member and put in place appropriate governance.

Outside Director, Audit and Supervisory Committee Member JUNJI INOUE
Amid accelerating technological innovation and diversifying society, DG has stood at the forefrontof innovation and community since its foundation. In recent years, with the COVID-19 global
pandemic and dramatically changing global natural environment urging us to address such issues
immediately, digital technologyʼs role has seen a dynamic flux. As an Outside Director, I am
determined to enhance and strengthen corporate governance system that effectively facilitatesswift and precise management decision-making by bringing in a new perspective for DG to be acompany that continues creating new values.

41.2

%

19/14.1%* Ratio to Digital Garage (non-consolidated) (471 people)* Number of people/ratio to Digital Garage (non-consolidated) (135 people)

Number of Independent Outside Directors/Ratio

Remote work ratio

Outside Director, Audit and Supervisory Committee Member KOJI MAKINO
Enhancement of “corporate value” is DGʼs big mission. The source of wealth has shifted fromtangible assets such as real estate properties to intangible forms, requiring environmental
measures and sustainability.
To this end, it is required to disclose corporate essence, namely architectures, from a long-term
perspective. I hope to have an active discussion about the corporate value and enhancement thereof.

Outside Director, Audit and Supervisory Committee Member MINORU OHNO
I have been engaged in corporate governance and internal control in business activities, among
others, particularly from “non-financial” and “human resources” perspectives. As an Audit andSupervisory Committee Member, I will continue to take action to realize DGʼs concept, “Social
implementation of technology with new context design with an eye toward a sustainable society,”in a time when responses to SDGs and ESG as well as business and human rights are sought out.

41

DIGITAL GARAGE

5/38.5%

62.5%* As of June 30, 2021

DIGITAL GARAGE

42

Financial Information

ANNUAL REPORT 2021

Summary of Consolidated Business Performance Indicators

Key Performance Indicators (JPY in Millions)
JGAAP

IFRS
FY14.6

FY15.6

FY16.6

FY17.3 (9 months)

FY18.333,75238,08743,76336,45260,169Net sales* International Financial Reporting Standards (IFRS) have been voluntarily applied since FY19.3.

Revenue

FY18.3

FY19.3

FY20.3

FY21.325,50335,68736,93640,478Proﬁt before income taxes

5,035

9,249

7,575

5,819

7,619

Proﬁt before tax

8,376

13,42410,00814,317

Net proﬁt

3,148

5,394

5,189

4,293

5,486

Proﬁt

6,337

9,790

7,331

9,518

Proﬁt attributable to owners of parent

2,847

5,081

5,165

4,289

5,461

6,412

9,771

7,420

9,786

Total assets

71,01086,49577,336

91,686

108,791

Total assets

119,545

146,890

162,296

178,301

Net assets

Proﬁt attributable to owners of parent

36,49029,06530,66434,37139,017

Total equity

43,19947,34552,79563,082

Cash ﬂows from operating activities

△35

5,040

△2,6194,149

14,294

Cash ﬂows from operating activities

12,316

2,580△12,322

7,047

Cash ﬂows from investing activities△5,155509△1,072△1,453

1,009

Cash ﬂows from investing activities

2,883△2,397△5,473△864

Cash ﬂows from ﬁnancial activities

11,261

1,390△11,638

4,176△2,307

Cash ﬂows from ﬁnancing activities

174

8,509

2,363

△914

Cash and cash equivalents at end of year

25,18434,07718,321

25,33538,249Cash and cash equivalents at end of period

39,45048,15432,702

37,989

ROE

10.1%

17.2%

17.6%

13.5%

15.3%

ROE

16.1%

21.9%

15.0%

17.1%

Ordinary dividend payout ratio

8.2%

4.6%

13.7%

22.0%

20.7%

Ordinary dividend payout ratio

-

13.3%

17.4%

15.1%

Total return ratio

8.2%

23.1%

27.3%

22.0%

20.7%

Total return ratio

-

64.3%

23.5%

15.1%

-

-

51.2%

20.6%

Dividend payout ratio to businesscash ﬂow before income taxes

Trends in Share Price
Total shareholder return

（yen）

5,000

Digital Garage
TOPIX

FY18.3

FY19.3

FY20.3

FY21.397.6％

151.7％

139.6％

150.0％

195.6％

123.8％

143.5％

136.3％

123.3％

175.3％* Total shareholder return refers to the overall yield and return on an investment. It is measured by the ratio obtainedby dividing revenue received due to the share investment, including capital gain and dividends, by the share price.
It is calculated by a formula prescribed by the Cabinet Ofﬁce.
* Value as of the end of FY17.3 and thereafter when invested at the closing price at the end of FY16.6.

4,000

3,000

FY17.352-week high and low share price
FY17.3

FY18.3

FY19.3High (yen)

2,448

4,070

Low (yen)

1,680

1,926

FY21.3

4,840

4,630

4,545

2,273

2,481

3,080

October 9,
2003

Listing ofDigital Garage,
Inc.

Listing of
Kakaku.com,
Inc.

September
14, 2018

IFRS Voluntary
Adoption Release
Date

Raised ¥25.0 billion capitalfrom corporate bond issuance,
repurchased ¥5.0 billion
own shares

July 19,2011
Raised approx. ¥8.0
billion capital frompublic offering

May 9,
2016
Changed listing to
the TSE First
SectionApril 26,
2012
Made SBI VeriTrans Co., Ltd.
(now DG Financial Technology,Inc.) a subsidiary

Dec. 14,
2000

2,000

FY20.3

May 11,2018

As ofMarch 31,
2021

1,000

0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

*On February 20, 2004, Digital Garage, Inc. conducted a 5 for 1 share split for its shareholders as of December 31, 2003.
On October 1, 2013, Digital Garage, Inc. conducted a 200 for 1 share split for its shareholders as of September 30, 2013.
This table is stated retrospectively and is based on the share split-adjusted share price.

43

DIGITAL GARAGE

DIGITAL GARAGE

44

Financial Information

ANNUAL REPORT 2021

Consolidated Balance Sheet and Consolidated Statement of Financial Position (JPY in Millions)
JGAAP
FY12.6

FY13.6

FY14.6

FY15.6

FY16.628,00533,83745,45557,74348,324

59,62475,496

Cash and deposits/Money held in trust

15,71319,09725,18434,076

18,29625,29338,229Notes and accounts receivable

2,480

2,689

3,659

3,824

5,442

7,056

Operational investment securities

1,904

2,641

8,064

8,208

11,164

Receivables

7,578

9,037

8,597

11,646

Current assets

FY17.3 (9 months)* International Financial Reporting Standards (IFRS) have been voluntarily applied since FY19.3.

FY18.3

FY18.3

FY19.3

FY20.3

FY21.378,77699,18698,852

113,548

Cash and cash equivalents

39,45048,15432,702

37,9897,741

Trade and other receivables

21,33023,25426,657

26,574

11,856

12,364

Operational investment securities

16,745

26,69536,54647,17013,946

15,422

16,889Other ﬁnancial assets

442

451

1,323

912

△524

△3

273

Other current assets

809

632

1,624

903

40,76947,70463,44464,753Current assets

330

373

△49

△11

21,333

22,17325,55428,75229,012

32,06133,295

913

2,039

2,159

2,251

2,279

2,245

2,338

Property, plant and equipment

8,495

9,421

21,367

19,47813,08011,094

8,588

7,574

7,456

7,224

9,869

Intangible assets

2,104

2,575

3,496

4,000

Software

959

1,107

1,210

1,315

1,665

1,784

2,019

Goodwill

7,959

6,575

7,689

7,689

Goodwill

12,105

9,968

7,355

6,237

5,766

5,411

7,822

Investment property

16

19

23

22

25

27

28

7,341

9,041

14,80818,927

19,27722,592

21,087

Investment securities

4,300

5,521

10,644

14,22014,844

18,357

Other

3,041

3,520

4,164

4,707

4,433

Total assets

49,33956,011

71,01086,495Current liabilities

28,50621,802

25,461

Notes and accounts payable

1,154

1,232

Deposits

14,956

Short-term borrowing

10,740

Income taxes payable
Other

Other
Non-current assets
Tangible ﬁxed assets
Intangible assets

Other
Investments and other assets

Non-current liabilities
Bonds payable and Long-term borrowing
Deferred tax liabilities
Other

Total liabilities

Non-current assets

2,966

3,046

2,932

2,924

13,915

19,13921,47522,446

Other ﬁnancial assets

5,010

6,662

6,319

7,878

16,552

Deferred tax assets

195

137

45

60

4,235

4,535

Other non-current assets

124

148

120

278

77,336

91,686

108,791

119,545

146,890

162,296

178,301

50,62430,18738,81549,54048,04452,42050,83856,865

1,630

2,039

2,729

3,713

5,018

Trade and other payables

39,40745,79941,20339,911

18,23016,43420,99921,87625,12736,499Borrowings

4,623

2,211

4,927

9,768

305

3,691

23,534

3,200

6,937

4,137

Other ﬁnancial liabilities

760

853

1,783

1,712

741

811

1,242

2,148

720

435

1,008

Income taxes payable

1,010

1,076

207

1,328

915

1,224

2,464

1,904

1,662

2,603

2,878

Other current liabilities

2,244

2,482

2,717

4,146

356

6,950

9,059

6,806

16,484

18,49920,233

Non-current liabilities

28,302

47,12558,66358,355

183

6,800

8,841

5,547

15,37017,207

18,890Bonds and borrowings

19,24335,95938,24735,850

-

21

43

938

596

488

551

Other ﬁnancial liabilities

5,244

5,430

13,553

12,168

173

129

175

321

517

803

792

Deferred tax liabilities

2,754

4,744

5,426

8,515

Other non-current liabilities

1,061

992

1,437

1,822

Investments accounted
for using equity method

Total assets
Current liabilities

28,86228,752

34,52057,43046,671

57,31569,774

Total liabilities

76,34699,545109,501

115,220

6,017

7,330

7,399

7,426

7,435

7,437

7,464

Share capital

7,465

7,504

7,591

7,637

Capital surplus

9,703

11,016

10,817

2,854

2,825

2,946

3,104

Capital surplus

3,748

4,235

4,409

4,566

Retained earnings

4,505

7,003

9,616

14,43018,42021,30025,819Retained earnings

29,95538,59344,72152,785

Treasury stock

△70

△70

△70

△70

△70

△50

△26

Treasury shares△26△5,026△5,012△4,915

Other components of equity

Common stock

45

IFRS

Total shareholdersʼ equity

20,15625,28027,76324,641

28,611

31,63336,363

Total equity attributableto owners of parent

Total net assets

20,47727,25936,49029,06530,66434,37139,017

Total equity

Total liabilities/net assets

49,33956,011

71,01086,49577,336

91,686

108,791

DIGITAL GARAGE

Total liabilities and equity

1,575

1,303

324

2,062

42,71746,60952,03362,134

43,19947,34552,79563,082

119,545

146,890

162,296

178,301

DIGITAL GARAGE

46

Financial Information

ANNUAL REPORT 2021

Consolidated Statements of Income (JPY in Millions)JGAAP
Net sales
Cost of sales

IFRS
FY12.6

FY13.6

FY14.6

FY15.6

FY16.6

14,90427,96533,75238,08743,76336,45260,16910,645

21,53325,53525,84732,27329,83948,524Gross proﬁt

FY17.3 (9 months)* International Financial Reporting Standards (IFRS) have been voluntarily applied since FY19.3.

FY18.3

4,259

6,432

8,217

12,24011,4906,613

11,644

2,637

5,110

5,609

7,431

7,288

5,889

9,333

1,622

1,322

2,608

4,810

4,201

724

2,310

Revenue
Revenue in recurring business

Revenue in operational
investment securities
Share of proﬁt of investments
accounted for using equity method

Other income
Selling, general and administrative expenses

Expenses
Operating proﬁt

Cost of sales

Selling, general andadministrative expenses

FY18.3

FY19.3

FY20.3

FY21.325,50335,68736,93640,47818,141

22,713

26,687

24,945

1,007

6,090

4,020

11,031

3,481

4,835

3,720

2,495

2,875

2,050

2,509

2,008

17,12722,26426,92926,161

7,187

10,401

12,036

10,697

9,095

11,296

14,022

14,537

Ordinary proﬁt

2,709

3,079

4,442

7,610

6,193

3,679

5,018

Other expenses

845

567

871

928

Proﬁt before income taxes

2,535

4,215

5,035

9,249

7,575

5,819

7,619

Proﬁt before tax

8,376

13,42410,00814,317

Proﬁt attributable to owners of parent

2,106

2,716

2,847

5,081

5,165

4,289

5,461

Proﬁt attributable to owners of parent

6,412

9,771

7,420

9,786

Earnings per share (yen)

48.80

60.21

60.66

108.11109.8391.11

115.80Earnings per share (yen)135.99210.28161.37212.49Diluted earnings per share (yen)

48.77

60.14

60.48

107.86109.4690.68

114.95

Diluted earnings per share (yen)134.98199.26147.82

193.82

Consolidated Statements of Cash Flows (JPY in Millions)
JGAAP
Cash ﬂows from operating activities
Proﬁt before income taxes

IFRS
FY12.6

FY13.6

FY14.6

FY15.6

FY16.6

2,542
2,535

FY17.3 (9 months)

3,212

△35

5,040

△2,6194,149

14,294

4,215

5,035

9,249

7,575

5,819

7,619

FY18.3

Depreciation and Amortization of software

207

617

631

711

761

656

963

Share of (proﬁt) loss of entities accounted for using equity method△1,004△1,361△1,741△2,081△2,406△2,528△2,768Loss (gain) on sales of shares of subsidiaries and associates-△1,131

-

0

△521

△386

△1,471

Decrease (increase) in investment securities for sale

△1,019△582△1,972△1,437△4,240△66△1,100Decrease (increase) in trade and other receivables△2,653△1,492△516△3,164△3,865△1,833△1,318

Increase (decrease) in trade payables and deposits received

3,672

3,285

△1,292

5,102

1,686

4,197

12,491

804

△339

△180

△3,340△1,609△1,710△122

Other
Cash ﬂows from investing activities* International Financial Reporting Standards (IFRS) have been voluntarily applied since FY19.3.

FY18.3
Cash ﬂows from operating activities
Proﬁt before tax
Depreciation and amortization

Share of loss (proﬁt) of investments
accounted for using equity method
Loss (gain) on sales of shares ofsubsidiaries and associates
Decrease (increase) in investment
securities for sale
Decrease (increase) in tradeand other receivables
Increase (decrease) in tradeand other payables

Other

FY20.3

FY21.3

12,316

2,580△12,322

7,047

8,376

13,42410,00814,317

1,696

1,952

2,369

3,637

△3,481△4,835△3,720△2,495△1,467△1,152△1,283△1△3,065△10,085△9,810△10,52791△3,459△3,19522

10,301

6,719△5,715

△521

△135

16

△976

2,615

△9,411

1,515△5,155509△1,072△1,453

1,009

Cash ﬂows from investing activities

2,883△2,397△5,473△864

Purchase of property, plant and equipment△559△1,248

△303

△165

△316

△223

△308

Purchase of property, plant and equipment△290△1,265△3,493△1,501

Purchase of intangible assets

△269

△688

△513

△581

△722

△630

△833

Purchase of intangible assets△852△1,213△1,749△1,706

Purchase of investment securities

△371

△419

△4,189△952△1,195△223△1,190Purchase of investment securities△2,587△4△186

Purchase of shares of subsidiaries resulting inchange in scope of consolidation

212

893

0

-

2,427

2,863

Proceeds from sale of investment
securities△1,191

67

2,941

949

0

1,865

△5,678

△448

-

-

-

-

△538

Payments for acquisition of subsidiaries

△406

-

△1,043-Other△2,6014,106△1,043

2,207

1,161

△2,804

1,015

Other

2,681

1,719

816

664

Proceeds from sales of investment securities

Cash ﬂows from ﬁnancing activities

15,273△1,817

11,261

1,390△11,638

4,176△2,307

Net increase (decrease) in short-term borrowing

7,440△10,640

3,300

12,245△14,545

2,800△2,200Net increase (decrease) in long-term borrowing

△387

6,587

1,952

3,986

4,163

2,787

721

△1

△217

△234

△234

△1,175△1,407

△943

8,220

2,453

6,243

△14,607

△81

△4

115

Dividends paid
Other

Cash ﬂows from ﬁnancing activities
Net increase (decrease)in short-term borrowing
Net increase (decrease)in long-term borrowing
Proceeds from issuance of bonds
with share acquisition rights

DIGITAL GARAGE

15,75919,091

25,18434,07718,32225,33538,249

174

8,509

2,363

△914

△2,165

△109

82

2,002

676

△9,836

4,789

256

-

25,161--Dividends paid

△943

△1,073△1,289△1,748

Repayments of lease liabilities

△693

△867

△1,435△1,861

3,299△4,767216

437

39,45048,15432,702

37,989Other
Cash and cash equivalents at end of period

47

FY19.3

Cash and cash equivalents at end of period

DIGITAL GARAGE

48

GROUP BUSINESS ACTIVITIESANNUAL REPORT 2021

FINANCIAL TECHNOLOGY SEGMENT
DG Financial Technology, Inc.
Consolidated subsidiary

NaviPlus Co., Ltd.
Consolidated subsidiary

ECONTEXT, INC.
Consolidated subsidiary

TD Payment Corporation
Affiliate

ANA Digital Gate, Inc.
Affiliate

SCORE Co., Ltd.
Affiliate

Since its establishment in 1997, DG Financial Technology, Inc. has provided a credit
card payment system incorporating the latest security technology in the US, andbeen a leader in the payment aspect of e-commerce in Japan. Going forward, DG
Financial Technology, Inc. will focus on developing, and introducing cashless payment
systems, in major markets where electronic payment has yet to be adopted.
NaviPlus Co., Ltd. develops and provides marketing solutions that optimize
the contents and navigation of EC sites, such as search engines andrecommendation engines, by using gathered and analyzed data based on its
proprietary technology.
ECONTEXT, INC. pioneered cash payments using kiosk terminals at convenience
stores and has promoted the provision of online payment services to EC
businesses centered on convenience store payments. As a money transfer
business, it also operates a money sending service.

Company

DG Communications Co., Ltd.
Consolidated subsidiary

BI.Garage, Inc.
Consolidated subsidiary

CyberBuzz, Inc.
(TSE Mothers 7069)
Affiliate

DG Ventures, Inc.
Consolidated subsidiary

Digital Garage US, Inc.
Consolidated subsidiary

DK Gate, Inc.
Consolidated subsidiary

TD Payment Corporation is a joint venture between DG Financial Technology, Inc.
and TOSHIBA TEC CORPORATION offering multiple payment solutions for POS
systems to meet diversifying cashless payment needs.

D2 Garage, Inc

ANA Digital Gate, Inc. is a joint venture between DG Financial Technology, Inc.
and the ANA Groupʼs ALL NIPPON AIRWAYS TRADING CO., LTD., developing a
corporation-oriented payment solution business that uses FinTech.

DG Incubation, Inc.

SCORE Co., Ltd. is a joint venture between DG Financial Technology, Inc. andNissen Co., Ltd. providing post-settlement payment services. The two companies
combine their payment business knowledge, technologies, and other strengths
with the aim of developing Fintech services incorporating new marketing
elements, such as credit monitoring, scoring, and purchasing promotion.

MARKETING TECHNOLOGY SEGMENT
Digital Garage MarketingTechnology Company

INCUBATION TECHNOLOGY SEGMENT

In addition to advertising awareness and acquisition advertising, Digital Garage MarketingTechnology Company provides a wide range of marketing solutions from CRM and othersolutions to improve engagement, through to data analysis, AI applications, and settlement
systems. It leverages the cutting-edge technology and assets of the DG Group to develop andoffer unique solutions, and provide support to clients, the market, and the world as a businessstrategy partner with continuous assistance and business creation akin to social infrastructure.
Utilizing the real-estate-advertisement-related knowhow cultivated andaccumulated over many years including knowledge, experience, and data, as wellas the DG Groupʼs advanced technology and sophisticated strategy management,
DG Communications Co., Ltd.ʼs business does not stop at property sales in thereal estate field, but uses real estate as a gateway to provide solutions to help
people live more comfortable lives.
With framing the concept of “ CONTENTSDATATECHNOLOGIES, ”
BI.Garage, Inc. has been developing the “ Contents Media Consortium ” , thejoint advertisement distribution business platform collaborated with Japanese
influential contents media companies, as well as other solutions that utilize theknow-how of social media management and the DG Groupʼs extensive data andcutting-edge technologies.
CyberBuzz, Inc. is developing a social media marketing business centered on
influencers under the vision of “changing communication into value and changing
the world.” CyberBuzz, Inc. is providing services such as promotion support
using the influencer network, social media account management service, and “tobuy,” the influencer commerce media.

Consolidated subsidiary

Consolidated subsidiary

DG Daiwa Ventures, Inc.
Affiliate

As the investment arm of the Digital Garage Group, DG Ventures, Inc. supports
Internet entrepreneurs throughout the world. It operates an investment businessgoing beyond simple investment as an incubator, to create ventures collaboratively
with targeted startup companies that are expected to give rise to synergies with the
DG Groupʼs various businesses.
Digital Garage US, Inc. is the DG Groupʼs US-based global strategy headquarters. It
operates the DG717 incubation center established in the heart of San Francisco in2013, supporting entrepreneurs and engineers from around the world.

A joint venture of Digital Garage, Inc. and Kodansha Ltd., the purpose of DK Gate
is to make strategic investments in content businesses. DK Gate, Inc. focuses on
identifying and nurturing companies pursuing next-generation content businesses
throughout the world.
The “Open Network Lab HOKKAIDO” business is creating a start-up support programthat aims to build a start-up ecosystem in Hokkaido and investing in developing
start-ups that leverage Hokkaidoʼ s resources and issues such as primary industry,
tourism, and rich natural world.

DG Incubation, Inc. supports start-up companies taking on a challenge globally
through the incubation business and fund management.

DG Daiwa Ventures, Inc. was established as a joint venture between Digital Garage,
Inc. and Daiwa Securities Group Inc. and operates investment funds. The purposeof this fund is to promote investment in promising Japanese and overseas startups
with advanced technologies in the research areas DG Lab has designated as highpriorities.

LONG-TERM INCUBATION SEGMENT
Kakaku.com, Inc.
(TSE First Section 2371)
Affiliate

Crypto Garage, Inc.
Consolidated subsidiary

BrainscanTechnologies, Inc.
Consolidated subsidiary

Academie du Vin Co., Ltd.
Consolidated subsidiary

Dentsu ScienceJam Inc.
Affiliate

Kakaku.com, Inc. operates a price comparison site (kakaku.com) and a restaurant
review and advertising site (tabelog.com).

Crypto Garage, Inc. is a joint-venture between Digital Garage, Tokyo Tanshi Co., Ltd.
and Blockstream, Inc. that is accelerating R&D and commercialization of advanced
financial services leveraging blockchain in the Fintech field.

BrainscanTechnologies, Inc. aims to develop and monetize services using a medical
examination data platform founded on business dealing with brain MRI medical
examinations for driving operators.

Academie du Vin Co., Ltd. manages the wine school business and is expanding awine wholesale business.

Dentsu ScienceJam Inc. commercializes scientific research results.

(as of April 1, 2021)

49

DIGITAL GARAGE

DIGITAL GARAGE

50COMPANY & STOCK INFORMATIONANNUAL REPORT 2021

COMPANY INFORMATION(as of March 31, 2021)

STOCK INFORMATION
Stock Information

Basic Information(as of March 31, 2021)

Company Name

Digital Garage, Inc.

Authorized shares

120,000,000

H e a dDG Bldg., 3-5-7 Ebisu Minami, Shibuya-ku, Tokyo 150-0022, Japan

Total number of shares issued

47,441,900

Voting rights

460,711

Shareholders

4,841

O f f i c e

Shibuya PARCO DG Bldg., 15-1 Udagawa-cho, Shibuya-ku, Tokyo 150-0042, Japan
E s t a b l i s h e dAugust 17th, 1995

Pe03-6367-1111 (Main)x

03-6367-1119

h

F

o

n

a

Major Shareholders(as of March 31, 2021)

Shares Owned

Ownership Percentage

6,830,300

14.82

The Master Trust Bank of Japan, Ltd. (Trust accounts)

3,509,200

7.62

Dentsu Group Inc.

3,300,000

7.16

2,364,500

5.13

Stock listings

Tokyo Stock Exchange 1st section (4819)

Fiscal year end

March 31

Stock Capitalization

7,637 million yen

Number of employees

898 [consolidated] / 471 [non-consolidated]

TIS Inc.

Kaoru Hayashi

DIGITAL GARAGE CHART(as of April 1, 2021)

Organization Chart

Custody Bank of Japan, Ltd. (Trust accounts 9)

1,818,000

3.95

Custody Bank of Japan, Ltd. (Trust accounts)

1,724,400

3.74

J.P. Morgan Bank Luxembourg S.A.

1,166,300

2.53

790,300

1.72

The Bank of New York Mellon
State Street Bank and Trust Company

751,074

1.63

Credit Saison Co., Ltd.

655,200

1.42* Share ownership percentages were calculated based on issued shares net of treasury shares (1,363,660 shares).

Shareholdersʼ General Meeting
Audit and
Board of Directors Supervisory Committee

Dividend Trends

Internal Audit Office

FY15.6(JGAAP)

FY16.6(JGAAP)

FY17.3(JGAAP)

FY18.3(JGAAP)

FY19.3(IFRS)

FY20.3(IFRS)

FY21.3(IFRS)

Ordinary dividend

5 JPY

15 JPY

20 JPY

24 JPY

28 JPY

28 JPY

32 JPY

Commemorative
dividend

20th anniversary

In commemoration of ourchange to the TSE First Section

-

-

-

Total dividend

1.17 billion JPY

1.41 billion JPY

0.94 billion JPY

1.13 billion JPY

1.28 billion JPY

Representative Director
Management Committee
Group CEO Div.

Next Generation FinTech Dept.
DX Business Planning Dept.
Digital Health Dept.
Group Data Strategy Dept.

DG LabOpen Network Lab Promotion Dept.
Corporate Strategy Div.

20 JPY

15 JPY

Legal Dept.

1.47 billion JPY

-

-

-

-

5.0 billion JPY--

Ordinary dividend payout ratio

4.6%

13.7%

22.0%

20.7%

13.3%

17.4%

15.1%

Total return ratio

23.1%

27.3%

22.0%

20.7%

64.3%

23.5%

15.1%

Dividend payout ratio to businesscash flow before income taxes

-

-

-

-

-

51.2%

20.6%

Share Ownership Distribution(as of March 31, 2021)
Treasury shares
2.88%(1,363,660)

Investment securities firms
0.87%(413,408)

General Affairs Dept.
Human Resources Dept.

Non-Japanese individuals
36.93%(17,519,560)

Number of shares

Individuals/other
22.24%(10,551,639)

47,441,900

Performance Marketing Div.
CRM Strategy Div.
Business Strategy Div.

DIGITAL GARAGE

1.75 billion JPY

Purchase of treasury shares

Information Technology Dept.

51-

Corporate Strategy Dept.
Accounting Dept.

Marketing Technology Company

10 JPY
25th anniversary

Other Japanese institutions
15.54%(7,374,233)

Financial institutions
21.54%(10,219,400)

DIGITAL GARAGE

52