Digital Garage, Inc.

1Q of FYE March 31, 2020 Financial Report2019.8.9

Financial Results Highlights
FY20.3 1Q Profit before tax: 2.2 B JPY, down 35% YoY
Comprehensive income: 4.6 B JPY, up 25% YoY
FY19.3 1Q

Consoli
dated

Profit before tax
Comprehensive
income

3.4
3.7(B JPY)(B JPY)FY20.3 1Q

2.2
4.6(B JPY)(B JPY)

FT
MT■Advertisement volume 8.2 B JPY(YoY down by 9%)■Other volume 1.4 B JPY (YoY up by 30%)

IT
LTI

(CRM, Data science, application development etc)

■Investment/ Sold
■Fair valuation

1.2 B JPY/ 0.4 B JPY

27.8 B JPY (from E of Mar. 2019 up by 4%)■Investment profit on equity method of Kakaku.com
0.9 B JPY (YoY up by 21%)
■Monthly traffic for all sites of Kakaku.com
267.1 million+25 ％Increasing the fair valueof Welby, and achieving
incubation results

By Segments

KPI■Transaction volume 0.6 T JPY (YoY up by 20%)■of which, face-to-face settlement
39.6 B JPY (YoY up by 88%)

-35 ％The impact of exchange rates-1.2B JPY
≒ Decrease in profit before tax

Profit before tax

1.0
0.4
0.1
1.5

(B JPY)(B JPY)(B JPY)(B JPY)

YoY

+24 ％

Record-high profits andboth EC/non-EC
settlements were strong+26 ％Strong CRM and payment
application development
business, strengthening
collaboration with FT-91 ％Fair value of investees
increased steadily despite
the impact of exchange
rates

+42 ％

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

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

2

FY20.3 1Q Consolidated P/L, C/I Summary (IFRS)Revenue decreased by 4% YoY to 8.2 B JPY, profit before tax decreased by 35% YoY to
2.2 B JPY, and comprehensive income increased by 25% to 4.6 B JPY～ Revenue in recurring business grew by 15% YoY, revenue in operational investment securities decreased by
74％, and the fair value of other comprehensive income is 8 times YoY ～FY19.3

FY20.3

1Q

1Q

8,548

8,217

-3.9

-331

Revenue in recurring business

5,323

6,138

+15.3

+815

Revenue in operational investment securities

1,732

459

-73.5

-1,273

Other income

664

817

+22.9

+152

Finance income

104

1

-98.8

-103

Share of profit of investments accounted for using equity method

725

803

+10.8

+78

5,154

5,999

+16.4

+845

Cost of sales

2,463

2,740

+11.2

+277

Selling, general and administrative expenses

2,582

2,951

+14.3

+369

Other expenses

72

78

+8.5

+6

Finance costs

37

230

6.3 X

+193

Profit before tax

3,394

2,218

-34.6

-1,176

Profit attributable to owners of parent

3,113

1,624

-47.8

-1,488

Profit

3,135

1,617

-48.4

-1,518

549

2,972

5.4 X

+2,423

376

3,107

8.3 X

+2,732

3,684

4,589

+24.5

+904

JPY in Millions

Revenue

Expenses

Other comprehensive income
Net change in fair value of equity instruments designated asmeasured at fair value through other comprehensive income

Comprehensive income

YoY
(%)

(Amount)

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

3

FY20.3 1Q Consolidated Segment P/L Summary (IFRS)
Double-digit growth in revenue and profit in FT, MT and LTI～ Fair value of investee companies increased steadily in IT, but profit decreased due to the impactof foreign exchange rates etc ～JPY in Millions

Revenue

FY19.3

FY20.3

YoY

1Q

1Q

(%)

(Amount)

8,548

8,217

-3.9

-331

FT

Financial Technology

1,577

1,889

+19.8

+312

MT

Marketing Technology

3,239

3,570

+10.2

+330

IT

Incubation Technology

1,898

507

-73.3

-1,391LTILong Term Incubation

1,740

2,232

+28.3

+492

3,394

2,218

-34.6

-1,176

Profit before tax
FT

Financial Technology

809

1,003

+24.0

+194

MT

Marketing Technology

307

386

+25.8

+79

IT

Incubation Technology

1,634

146

-91.0

-1,487

LTI

Long Term Incubation

1,050

1,493

+42.2

+443

NOTE: Segment revenue and profit before tax are before elimination of intersegment transaction and corporate revenue and expenses.
Copyright © 2019 Digital Garage, Inc. All Rights Reserved4Changes in Profit before Tax and Comprehensive Income

 Profit before tax andcomprehensive income
FY19.3

FY20.3

1Q

1Q

(%)

(Amount)

Profit before tax

3,394

2,218

-34.6

-1,176

Profit attributable to owners of parent

3,113

1,624

-47.8

-1,488Comprehensive income

3,684

4,589

+24.5

+904

JPY in Millions

YoY

 FT / MT / LTI segment+ 0.7 B JPY

 IT segment- 1.5 B JPY➡ Impact of exchange rates
Profit from sales of stocks
Gain on fair value valuation

 HQ➡ Increased in SG&A expenses due to- 1.1 B JPY- 0.5 B JPY+ 0.2 B JPY- 0.4 B JPY

business expansion
Impact of exchange rates- 0.20 B JPY- 0.17 B JPY

Decrease of profit before tax- 1.2 B JPY

 Decrease of profit- 1.5 B JPY➡ Continuing operations
Discontinues operations- 0.70 B JPY- 0.82 B JPY Other comprehensive income+ 2.4 B JPY➡ Increased fair value due to Welby listing etc + 2.73 B JPY
Foreign currency translation adjustments- 0.25 B JPY

Increase of comprehensive income + 0.9 B JPY
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

5

FY20.3 1Q Consolidated B/S Summary (IFRS)JPY in Million

End of FY19.3

End of FY20.3 1Q

Reason for change / Remarks

Difference

99,186

93,562-5,624

Cash and cash equivalents

48,15441,549-6,605Trade and other receivables

23,25422,990-264

Operational investment securities

26,69527,812+1,11747,70453,691+5,987

6,575

6,966

+391

New acquisition

19,13919,530+391

Increased investment profit on equity method

6,662

11,884+5,222

Total assets

146,890

147,253+363

Current liabilities

52,42047,758-4,662

Borrowings

2,211

5,657

+3,446

Trade and other payables

45,79938,794-7,00547,125

48,819+1,694

Bonds and borrowings

35,95935,837-122

Deferred tax liabilities

4,744

6,286

+1,541

Total liabilities

99,54596,576-2,968

Total equity

47,34550,677+3,331

46,60949,948+3,338

Share capital

7,504

7,531

+27

Capital surplus

4,235

4,237

+2

Treasury shares-5,026-5,026-0

Other components of equity

1,303

4,275

+2,971Retained earnings

38,59338,931+338

Non-controlling interests

736

729

-7

Total liabilities and equity

146,890

147,253+363

Current assets

Non-current assets
Goodwill
Investments accounted for using
equity method

Other financial assets

Non-current liabilities

Total equity attributable toowners of parent

New investment, Relating to FT business, payment of income taxes and dividends etc

Relating to FT business etc
New investments and increase in fair value of investee companies

New investments and increase in market value of listed shares

Funding requirements for working capital in FT
Relating to FT business etc

Estimated taxes related to unrealized gains on securities

Increase in fair value of investee companies (Other comprehensive income)
Increased profit

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

6Segment Performance Review

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

7

FT Segment
Ⅰ

Financial Technology Segment
Revenue

Profit before tax

FY19.3

1Q

1,577 M JPY

809 M JPY

FY20.3

1Q

1,889 M JPY

1,003 M JPY➤ econtext ASIA Ltd.

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

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

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

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

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

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

8

FT Segment Highlights
Revenue rose 20% YoY, profit before tax marked 1B JPY, +24％ YoY, record-high quarterly
earnings～ Transaction volume marked approx. 578.8B JPY, +20% YoY, number of transaction surpassed
100 million, +17％ YoY ～Transaction Volume
FY19.3
1Q(JPY in
100 Million)(+20%)

4,832

FY20.3
1Q

5,788
OthersNumber of Transaction
FY19.3
1Q

FY20.3
1Q(in million)(+17%)

89.9

Convenience
store
payment

105.48

コンビニ
OthersConvenience
store payment

FY19.3
1Q(JPY in
100 Million)(+20%)

15.8

データ
Data
処理

FY20.3
1Q

18.9
OthersMonthly
basic fee
/Initial
Convenience
store
payment

processing
payment

Data
processing
payment

Profit before tax

Revenue

データ
Data
処理
processing
payment

Card
payment

カード

Card
カード

payment

FY19.3
1Q(JPY in
100 Million)
Profit before tax(+24%)

FY20.3
1Q
Ratio of profit
before tax torevenue

10.0

8.1
コンビニ
コンビニ

53.1%

51.3%
カード
カード

カード

Card
payment

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

9

FT Segment － Face-to-face settlement initiatives
Alliances with business partners to cover large businesses and small and medium-sized retail stores～ Providing payment solutions for face-to-face retailers in response to a cashless society ～Alliance strategy
JV with Toshiba TEC, thetop share company inJapan

Payment Terminal
POS
Register

Providing multi-payment
solution
JV with ANA group
Providing multi-payment
terminals for airports,
duty-free shops, face-toface retailers, etc

Partnering with NTT
DOCOMO, INC. andleading players in Japanand overseas for MPM
settlement of common
QR codesTabletPOS
MultiPayment
TerminalmPOS
QR CodeScanning
Panel
Cloud Pay

Merchant by Size
Large
Scale

Department stores,
Supermarkets,
Shopping centers,
Major retailers etc

MediumScale

Small Scale

Retail stores,
Restaurants,
Service industry
etcNote) MPM (Merchant Presented Mode) : Method in which consumers scan QR codes displayed at stores with their smartphones to make payments
Copyright © 2019 Digital Garage, Inc. All Rights Reserved10

MT Segment
Ⅱ

Marketing Technology Segment
Revenue

Profit before tax

FY19.3

1Q

3,239 M JPY

307 M JPY

FY20.31Q

3,570 M JPY

386 M JPY

➤ Marketing Technology Company

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

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

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

Offers website support tools including personalized recommendation engines➤ CyberBuzz, Inc. （25％ stake／equity method）

Provides the social media marketing platform structured with influencers as its
center part

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

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

11

MT Segment Highlights
Revenue marked 3.6B JPY, +10% YoY, and profit before tax increased to 0.4B JPY, +26％ YoY～ Reviewed customer mix to improve profitability. Aim to secure high profitability throughselection and concentration ～Revenue

Advertisement volume(JPY in
100 Million)

FY18.3

FY19.3

98
84

79

82
23

63

21
19

35

16

19

19

22
22

21

22

19

20

23

27

30

24

98

90 93

25
25

FY20.3

24

16

1Q

1Q

(+10%)

35.7(JPY in
100 Million)

FY19.3

FY20.3

1Q

1Q

Profit before tax(+26%)

Ratio of profit before
tax to revenue

3.9

3.1
17

22
20

28

19

27

17

32

26

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

(7-9)

(10-12)

(1-3)

(4-6)

(7-9)

(10-12)

(1-3)

(4-6)

Smartphone/App

Real estate■ Smartphone/App business recovered YoY despitesluggish growth in each sector

10.8%
9.5%

1Q

Cosmetics/HR

FY20.322(4-6)

Financial

FY19.3

32.4

19
19

19

82

(JPY in
100 Million)

Profit before tax

 Reviewed customer mix andprioritized profitability over revenue

 Improved margin by selecting and focusing on
high-margin customers
 The CRM Marketing Business, which has ahigher gross margin than the Internet
Advertising Business, performed well
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

12

MT Segment Highlights
Responding to Changes in the Business Environment
Promoting growth strategies across segments, including FT＜Marketing Technology Company＞

Ⅰ MT / FT collaboration＜DG Communications Co., Ltd.＞Ⅱ Real estate / Collaborate with ONL＜CyberBuzz, Inc.＞

Ⅲ Social Media Marketing＜Media Consortium Planning Office＞

Ⅳ National Client

Leading data scientists in Japan Establishment of the JR Kyushu Group's CRM and payment platform
 Promote marketing measures for franchisees in collaboration with the multi-QR code settlement
application Cloud Pay

Gross profit composition of non-advertising CRM and app development, etc.
increased by 4 points YoY to 24%“Open Network Lab Resi-Tech” for the real estate developer industry
The first Demo Day was held in August. Launched support for demonstration projects
implemented by seven major domestic companies and five startups to resolve industry
issuesDevelop proprietary platforms for influencer marketing utilizing SNS
such as Instagram and Facebook.
Operates SNS accounts of brand advertisers and provides proprietary
analysis tools.
Formed a Digital Value Study Group with 38 leading Japanese content media companies,and conducted test marketing of high-value digital advertisements to major clientsusing participating media in July. Promote activities for joint commercialization.

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

YoY +29%

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

Number of clients

FY19.3 1Q FY20.3 1Q

35

68

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

13

IT Segment
Ⅲ

Incubation Technology Segment
Revenue

Profit before tax

FY19.3

1Q

1,898 M JPY

1,634 M JPY

FY20.3

1Q

507 M JPY

146 M JPY

➤ DG Incubation, Inc.

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

Seed Accelerator Program in progress in the 19 th term

➤ D2 Garage, Inc.

Manages “Open Network Lab HOKKAIDO” for the startups in Hokkaido➤ DG Daiwa Ventures, Inc. （50％ stake／equity method）

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

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

Drives strategic technology development with DG Lab➤ DK Gate, Inc.

Researches and develops of next-generation content business companies ina global scale with Kodansha Ltd.
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

14

IT Segment Highlights
Profit before tax decreased YoY due to the impact of foreign exchange rates and a
decline in valuation profit associated with stock sales～ On the other hand, fair value excluding foreign currency fluctuations steadily increased ～BS

Operational investment securities

Profit before tax

PL(JPY in
100 Million)

267(JPY in
100 Million)

Year on Year Change

278

Valuation
profit+2.0

16.3

Dividends
etc

+0.3

Impact ofexchange
rates

-11.4

Valuation
profit on
sales of
stock

-5.1

Others-0.6

1.5
End of FY19.3

End of FY20.3 1Q

FY19.3 1Q

FY20.3 1Q
Copyright © 2019 Digital Garage, Inc. All Rights Reserved

15

IT Segment Highlights
The fair value of the investee at the end of June 2019 was 27.8B JPY～ Strengthen the support system and aim to increase investment value ～Examples of investment

Portfolio by regions※
Others

Japan

8.2%

30.2%

※book value

North
America

Asia
Europe38.0%

Operational
investment securities
27.8B JPY

23.0%

0.5%

TOPICS
NoBroker Technologies
Solutions [India]

Helium Systems [US]Operates India’s peer-to-peer property
marketplace. Using this service, people
can rent/buy houses online without
brokers.

Operates an IoT smart sensor device forenterprises and industries, used inmonitoring facilities or for quality control

Raised $51 million in
Series C in June

Raised $15 million in June

QD Laser [Japan]

Grub Market [US]Develop and provide new semiconductor
laser solutions in the telecommunications,industrial, medical, and consumer sectors asa pioneer in the commercialization ofquantum dot laser technology

Develop a leading marketplace platform
specializing in fresh organic foods

WHILL [Japan]

Neutron Holdings [US]Transform antiquated power wheelchair
into an intelligent personal electric vehicle,
focusing on an approachable andaesthetically pleasing powered vehicle.

Ride-sharing service for electric scooters
focusing on last mile solutions

Sen Do Technology

Game Closure [US][Vietnam]Operates Sendo, a marketplace for C2C
and B2C in Vietnam, and provides
electronic wallet services

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

Expedient Healthcare
Marketing [India]

Droom [India]

Operates “Healthians.com”, a healthcare webbased service that provides reservations for
examinations at clinics and related informationfrom doctors and specialists

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

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

16

LTI Segment
Ⅳ

Long-term Incubation Segment
Revenue

Profit before tax

FY19.3

1Q

1,740 M JPY

1,050 M JPY

FY20.3

1Q

2,232 M JPY

1,493 M JPY➤ Kakaku.com, Inc. （20％ stake／equity method ）Operates purchase support service Kakaku.com, restaurant review andrestaurant service tabelog, and New Media and Solutions➤ Crypto Garage, Inc.

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

➤ ACADEMIE DU VIN

Operates wine schools and wholesaling wine.

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

17

LTI Segment Highlights
Profit before tax marked 1.5B JPY, +42% YoY. Investment profit on equity method of Kakaku
remains robust～ “Tabelog” and “New Media” performed well ～(JPY in
100 Million)

Profit before tax
税引前利益

14.9（＋42%）

Business Progress of Kakaku.com, Inc.
【Total Accumulated Traffic for Kakaku.com Group】
Monthly traffic for all sites of Kakaku.com has increased to267.1 million, up 10.2% yoy (June 2019)

10.5

FY19.3 1Q(in million people)

FY20.3 1Q

YoY+10.2%

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

Ref. Kakaku.com, Inc. Results Briefing for 1Q FY2020/3

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

18Appendix

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

19

Financial Results: Consolidated PL (IFRS)JPY in Millions

FY2018.3

FY2019.3(Result)(Result)

Continuing operations
25,50335,687

Revenue in recurring business

18,141

22,713

Revenue in operational investment

1,007

6,090

Other income

2,111

1,933

Finance income

764

117

3,481

4,835

Revenue

Share of profit of investments accounted for using equity method

Expenses

17,12722,264

Cost of sales

7,187

10,401

Selling, general and administrative expenses

9,095

11,296

Other expenses

542

332

Finance costs

303

235

Profit before tax

8,376

13,424

1,857

4,088

6,518

9,336

Revenue

3,260

1,261

Expenses

3,403

1,655

Profit (loss) before tax from discontinued operations

-143

-394

38

-225

Loss (gain) on sales on discontinued operations-

898

Income tax expense from sale of discontinued operations-

275

Profit (loss) from discontinued operations

-181

454

Profit

6,337

9,790

6,412

9,771

-75

19

Income tax expense
Profit from continuing operations
Discontinued operations

Income tax expense

Profit attributable to
Owners of parent
Non-controlling interests

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

20

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

Revenue

FY18.3

FY19.3(Result)(Result)

25,50335,687

FT

Financial Technology

5,929

6,693

MT

Marketing Technology

9,939

13,676

IT

Incubation Technology

2,553

8,022

LTI

Long Term Incubation

6,301

7,133

8,376

13,424

Profit before tax
FT

Financial Technology

2,809

3,174

MT

Marketing Technology

1,856

1,390

IT

Incubation Technology

1,321

6,889

LTI

Long Term Incubation

3,621

4,378

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

21

Press Releases

Date

Title

2019.8.2

Digital Garage Supports Joint PoC Projects by 7 Major Companies and 5 Startups through "OpenNetwork Lab Resi-Tech"

2019.7.25

Digital Garage Joins MIT Media Lab's "Space Exploration Initiative"

2019.5.31

Digital Garage, Fukuoka D.C., and Fukuoka Growth Next Launch the Smart City Incubation Program,"Open Network Lab FUKUOKA"

2019.5.16

Digital Garage Group Launches "Cloud Pay", a Merchant-presented mode Multi-QR Code Payment
Solution2019.5.13

Digital Garage and Welby Launch a Proof of Concept Project for PHR Lifestyle Disease Prevention
Program in Fukuoka City to Build a Personal Health Record Platform2019.5.9

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

2019.4.19

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

2019.4.12

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

2019.4.1

VeriTrans Launches Credit Card Payment Services for Patent and Other Fee Payments to the Japan
Patent Office

Copyright © 2019 Digital Garage, Inc. All Rights Reserved

22

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