＜2020 Group Slogan＞

Digital Garage, Inc.

FYE March 31, 2020 Financial Report2020.5.13

Table of Contents
Mission and Business Model ・・・・・・・・・・・

3

Investment Highlights ・・・・・・・・・・・・・

7

Response and Impact of COVID-19・・・・・・

13

Segment Performance Review ・・・・・・・・・

17

New Five-Year Mid-term Plan Digest・・・・・・

29

Appendix・・・・・・・・・・・・・・・・・・・

48

Copyright © 2020 Digital Garage, Inc. All Rights Reserved2Mission & Business Model

Copyright © 2020 Digital Garage, Inc. All Rights Reserved

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

Copyright © 2020 Digital Garage, Inc. All Rights Reserved4

DG’s Business Model
Producing and incubating Internet businesses by optimizing
our 3 core strengths: IT, MT, and FTInformation
Technology

Information
Technology

MarketingTechnology
MarketingTechnology

Financial
Technology

Financial
Technology

Copyright © 2020 Digital Garage, Inc. All Rights Reserved

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

Ⅰ

Ⅱ

Ⅲ

Portal/Search

e-commerce/
Destination Site

Social Media

1995-2000

2000 -

2008-2015

Marketing2016 -

Payment
環亞智富有限公司

Advertising / Promotion

Big Data Businesse-Commerce / Online Settlement Platform

Enabling Platform – Two Revenue Sources
Copyright © 2020 Digital Garage, Inc. All Rights Reserved

6Investment Highlights

Copyright © 2020 Digital Garage, Inc. All Rights Reserved

7

Financial Results Highlights
FY20.3 Profit before tax: 10B JPY, down 25% YoY due to a profit decline in IT and one-time expenses for the
expansion of the head office～ Double-digit revenue and profit growth in recurring business (FT/MT) and the fair value ofinvestees also increased ～FY19.3

Consolidated
Profit before tax

13.4 B JPY

FY20.310.0 B JPY -25 ％FTMT■ Advertisement volume■ Other volume

34.9 B JPY(YoY down by 5%)
7.1 B JPY (YoY up by 77%)

(Next-generation user database business, etc.)

IT
LTI■ Investment/ Sold
6.7 B JPY/ 0.7 B JPY■ Fair valuation 36.5 B JPY (from E of Mar.2019 up by 37%)

■ Investment profit on equity method of Kakaku.com
3.8 B JPY (YoY up by 9%)■ Monthly traffic for all sites of Kakaku.com
255.87million• Profit decline in IT and
impact of exchange rates• One-time expenses for the
expansion of the head office

By Segments

KPI■ Transaction volume 2.6 T JPY (YoY up by 24%)
■ of which, face-to-face settlement
0.2 T JPY (YoY up by 53%)

（YoY）

4.0 B JPY +21 ％• EC payments performed strongly• Growth in face-to-face settlement
such as QR/POS (strategic
alliances with major companies)

1.9 B JPY +52 ％• Recovery mainly in the financial
sector by promoting selection andefficiency• Next-generation user databasebusiness (apps and CRM/ point
business) performed well

3.6 B JPY -48 ％• Profit decline by exchange rates
impact and a reactionary decline
following large-scale Exit in FY19.3• Significant increase in fair value
valuation of investees+7 ％• Investment profit on equity methodof Kakaku.com, Inc. trended
steadily• Completion of preparations forcommercialization of Crypto Garage

4.7 B JPY

Copyright © 2020 Digital Garage, Inc. All Rights Reserved

8

FY20.3 Consolidated P/L Summary (IFRS)Revenue increased by 4% YoY to 36.9 B JPY, profit before tax decreased by 25% YoY to 10.0 B JPY～ Revenue in recurring business grew by 18% YoY, revenue in operational
investment securities decreased by 34％ ～FY2019.3

FY2020.3

YoY

1Q

2Q

3Q

4Q

FY

1Q

2Q

3Q

4Q

FY

%

Amount

8,548

9,677

8,465

8,997

35,687

8,217

11,379

9,078

8,262

36,936+3.5%+1,249

Revenue in recurring business

5,323

5,722

5,352

6,316

22,713

6,138

6,718

6,576

7,256

26,687+17.5%+3,974

Revenue in operational investment securities

1,732

2,677

1,398

283

6,090

459

3,332

968

-739

4,020

-34.0%-2,070

Other income

664

206

872

191

1,933

817

422

301

877

2,416

+25.0%+483

Finance income

104

125

-134

22

117

1

16

28

48

93

-20.2%-24

Share of profit of investments accounted forusing equity method

725

946

978

2,185

4,835

803

891

1,205

821

3,720

-23.1%-1,115

5,154

5,671

5,286

6,153

22,264

5,999

6,271

6,016

8,643

26,929+21.0%+4,665

Cost of sales

2,463

2,629

2,312

2,997

10,401

2,740

2,976

2,853

3,467

12,036+15.7%+1,635

Selling, general and administrative expenses

2,582

2,914

2,829

2,970

11,296

2,951

3,138

3,121

4,813

14,022+24.1%+2,726

Other expenses

72

76

70

113

332

78

86

74

254

492

+48.2%+160

Finance costs

37

51

74

73

235

230

71

-32

109

379

+61.1%+144

Profit before tax

3,394

4,006

3,179

2,844

13,424

2,218

5,108

3,062

-381

10,008-25.4%-3,416

Profit attributable to owners of parent

3,113

2,612

1,957

2,089

9,771

1,624

3,647

2,253

-105

7,420

-24.1%-2,351

JPY in Millions
Revenue

Expenses

NOTE: The above Revenue, Expenses, and Profit before tax refer to the continuing operations excluding discontinued operations
Copyright © 2020 Digital Garage, Inc. All Rights Reserved

9

FY20.3 Consolidated Segment P/L Summary (IFRS)FT and MT performed well, achieving double-digit growth～ Profit decline due to the fair value evaluation of IT segment and one-time expenses
for the expansion of the head office ～FY2019.3
JPY in Millions

FY2020.3

YoY

1Q

2Q

3Q

4Q

FY

1Q

2Q

3Q

4Q

FY

%

Amount

8,548

9,677

8,465

8,997

35,687

8,217

11,379

9,078

8,262

36,936+3.5%+1,249FT Financial Technology

1,763

1,812

1,838

2,034

7,447

2,083

2,204

2,184

2,138

8,609

+15.6%+1,162MT Marketing Technology

3,053

3,390

2,953

3,526

12,922

3,376

3,984

3,705

4,311

15,375+19.0%+2,454

IT

Incubation Technology

1,898

2,890

1,485

1,749

8,022

507

3,462

1,405

-506

4,868

-39.3%-3,154

LTI Long Term Incubation

1,740

1,506

2,245

1,642

7,133

2,232

1,696

1,744

2,257

7,929

+11.2%+796

Others/Adjustments and Eliminations

94

79

-56

47

164

19

33

39

63

155

-5.2%

-8

3,394

4,006

3,179

2,844

13,424

2,218

5,108

3,062

-381

10,008-25.4%-3,416

FT Financial Technology

849

856

950

693

3,349

1,061

1,112

1,129

746

4,049

+20.9%+700

MT Marketing Technology

266

402

188

359

1,215

327

676

512

336

1,853

+52.4%+637

Incubation Technology

1,634

2,573

1,208

1,475

6,889

146

3,138

1,114

-835

3,563

-48.3%-3,326

LTI Long Term Incubation

1,050

825

1,528

976

4,378

1,493

932

890

1,385

4,701

+7.4%

+323

Others/Adjustments and Eliminations

-405

-650

-695

-659

-2,408

-810

-751

-584

-2,013-4,158--1,750

Revenue

Profit before tax

IT

NOTE: Revenue here shows revenue from external customers. Segment profit before tax is before elimination of intersegment transaction and corporate revenue and expenses.
Copyright © 2020 Digital Garage, Inc. All Rights Reserved

10

FY20.3 Consolidated Profit before Tax Analysis of Change
Recurring business continues to drive～ Profit decreased due to a reactionary decline in the IT segment and the impact of exchange rates,
as well as the recording of one-time expenses for the expansion of the head office ～Profit before Tax YoY

+13.4

134

Increased
profit in
FT/MT

+3.1
Investment
profit on equity
method of
Kakaku.com, Inc.

(JPY in 100 million)

-21.8
-13.0
Decreased
profit in IT(except for
exchange
rates impact)

IT

Impact ofexchange
rates-1.2B JPY

-10.1
One-time
expenses forthe expansionof the head
office-4.7-1.1

Businessdevelopmentcosts

HQ costandothers100

HQ -0.1B JPY

FY19.319.3期

FY20.320.3期
Copyright © 2020 Digital Garage, Inc. All Rights Reserved

11

FY20.3 Consolidated B/S Summary (IFRS)JPY in Million
Current assets

End of FY19.3 End of FY20.3

Difference

Reason for change / Remarks

99,18698,852-334

Cash and cash equivalents

48,15432,702-15,452

Trade and other receivables

23,25426,657+3,403Operational investment securities
Non-current assets

26,69547,70436,54663,444+9,851+15,740

New investments and increase in fair value of investee companies

Property, plant and equipment

9,421

21,367+11,946

Increase in leased assets, buildings, fixtures, etc. due to the expansion of the head office

Goodwill

6,575

7,689

+1,114

Total assets

19,139146,890

21,475
162,296+2,336+15,406

New acquisition
Increased investment profit on equity method

Current liabilities

52,42050,838-1,582

Borrowings

2,211

4,927

+2,717

Transfer from long-term borrowings to current portion of borrowings

Trade and other payables
Non-current liabilities

45,79947,125

41,20358,663-4,595+11,538

Relating to FT business etc

Bonds and borrowings

35,95938,247+2,288Borrowing of funds for expansion of head office, etc

Other financial liabilities

5,430

13,553+8,123

Recognition of lease liabilities for expansion of head office, etc

Deferred tax liabilities
Total liabilities

4,744
99,5455,426
109,501+682+9,956

Total equity

47,34552,795+5,45046,60952,033+5,424

Share capital

7,504

7,591

+88

Capital surplus

4,235

4,409

+174

Treasury shares-5,026-5,012+14

Other components of equity

1,303

324

-979

Retained earnings

38,59344,721+6,127

Non-controlling interests
Total liabilities and equity

736
146,890762
162,296+26+15,406

Investments accounted for using equity method

Total equity attributable to owners of parent

Decreasing cash and cash equivalents in FT business

Increased profit

Copyright © 2020 Digital Garage, Inc. All Rights Reserved

12Response and Impact of COVID-19

Copyright © 2020 Digital Garage, Inc. All Rights Reserved

13

Our Response to COVID-19
In addition to ensuring the safety of our stakeholders, employees in the FT will have the minimum number toattend the office for the purpose of business execution, which designated as critical infrastructure services inJapan. The Head Office division worked at office for handling financial results, but other segments were
thoroughly committed to telecommuting. The telecommuting rate for the group as a whole was 88% in April.

February Recommendation for work-fromhome
 Recommendation for staggered
working hours and flextime work
 Prohibition of participation inmeetings, events, seminars, etc. by
the large numbers
 Avoidance of unnecessary and nonurgent outings
 Thorough prevention of infectious
diseases and disease response Thorough care to people who havea family

March

April

 Establishment of emergency affairs
office Meetings with internal and external
stakeholders were held remotely inprinciple
 Restrict transfers between bases
and to other floors in the samebuilding Thermographic temperature
measurement at the time ofentry into the office In principle, work-from-homefrom April 8

Work-from-home rate
MT, IT, LTI

97 ％

FT

66 ％

Head Office77 ％DG Group

88 ％※Results of 2020 April

 The FT secured the minimum number
to work at office for business execution
as a critical infrastructure service inJapan
 The Head Office worked at office
temporarily for handling financial
results
Copyright © 2020 Digital Garage, Inc. All Rights Reserved

14

COVID-19 Impact Analysis (As of May 13, 2020)
Category

Impact on Digital Garage

FT is steadily promoting business as critical infrastructure services in Japan(minimal impact)

FT

e-commerce

Sales of digital contents, such as merchandise andvideo, increased due to the demand from staying at
home and spending

Public funds
Lifeline

Increase in payments related to utilities, drug stores,
supermarkets, etc.

TravelInboundFace-to-face settlements for inbound tourists declined
due to a decline in travel-related business(*Alipay/WeChatPay account for about 3% of FT)

90% of major clients are advanced digital shift enterprises (little impact)

MT

Financial
Smartphone/App

Credit card business is growing steadily, backed by thepromotion of cashless services. In addition, the financial
business as a whole, including securities and FX-related
businesses, performed well.
Payment apps, e-books, games, and other staying-at-homerelating businesses also performed well.

RetailReal estate

Orders declined in the retail and real estate fields due tothe postponement or cancellation of promotions.
(*Account for about 10% of MT)
Copyright © 2020 Digital Garage, Inc. All Rights Reserved

15

COVID-19 Impact Analysis (As of May 13, 2020)
Category

Impact on Digital Garage

Occurrence of impairment risk and increasing polarization

IT

Stockholdings
Investment
environment■Occurrence of impairment risk due to business slowdown ininvestee companies（Estimation of max. risk: approx. 10% of stockholdings of 36.5B JPY）

■Progress of bipolarization through further digital shifts“Tabelog" affected by restraint from going out, andthe crypto assets market is revitalized

LTI

Kakaku.com, Inc.
Crypto Garage

N/A -Despite the impact of “Tabelog”, transactions fordurables and consumer goods at “Kakaku.com”
remained strong.
Full-year forecasts not yet announced.
■The momentum of crypto assets is recovering.
Especially bitcoin have halving and become more
active.
■Begin this fiscal year with the participation of majordomestic players and overseas companies

Copyright © 2020 Digital Garage, Inc. All Rights Reserved

16

Segment Performance Review

Copyright © 2020 Digital Garage, Inc. All Rights Reserved

17

FT Segment
Ⅰ

Financial Technology Segment
Revenue

Profit before tax

FY19.37,447 M JPY

3,349 M JPY

FY20.38,609 M JPY

4,049 M JPY➤ econtext, Inc.

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

Provides leading e-commerce payment solutions➤ econtext ASIA Ltd.

Payment corporation to expand e-commerce platforms globally➤ NaviPlus Co., Ltd.

Subsidiary of VeriTrans Inc. Offers website support tools including personalizedrecommendation engines➤ 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

NOTE: Revenue here shows revenue from external customers. Profit before tax is before elimination of intersegment transaction.
Copyright © 2020 Digital Garage, Inc. All Rights Reserved

18

FT Segment - Highlights
Transaction volume marked approx. 2.6 T JPY, +24% YoY,
number of transaction marked 486 million, +24% YoY～ Revenue rose 16% YoY, Profit before tax marked 4.05 B JPY, +21% YoY, record-high earnings～
Transaction Volume
FY19.3

FY20.3(JPY in 100 Million)

FY19.3(in Million)(+24%)

25,89020,883

Number of Transaction

OthersConvenience
Store
Payment

Data
processing

CreditCard
payment

FY20.3

Revenue
FY19.3(JPY in 100 Million)(+24%)

486.99(+16%)

86.1

Others392.93

Convenience
Store Payment

Dataprocessing

データ
処理

カード

CreditCard
payment

FY20.3

74.5

Profit before tax
FY19.3

FY20.3(JPY in 100 Million)
Ratio of profit before
tax to revenue

45.0%

47.0%

(+21%)

40.5

OthersMonthly basic fee
/ OEM

33.5

Convenience
Store Payment

Dataprocessing
CreditCard
payment

Copyright © 2020 Digital Garage, Inc. All Rights Reserved

19

FT Segment - Face-to-face Settlement Initiatives
Alliances with business partners to cover large businesses and small and medium-sized retail stores～ The government's cashless return policy has provided a tailwind～
Alliance strategy

Transaction volume ofFace-to face settlement

Merchant by Size ／ Payment Terminal

JV with Toshiba TEC,
the top share company

POS
Registerin Japan
Providing multi-payment
solution
JV with ANA group
Providing multi-payment
terminals for face-toface retailers, etc

Partnering with NTT
DOCOMO, INC. andleading players inJapan and overseas
such as au PAY for
MPM settlement ofcommon QR codes

Large
Scale

TabletPOS

MediumScale

MultiPayment
TerminalmPOS

Small ScaleQR CodeScanning
Panel
Cloud Pay

【FY20.3】

217.0

Billion JPY
【YoY】

X

1.5
FY19.3141.7 B JPY

Image of QR Code Standfor shop installationNote) MPM (Merchant Presented Mode) : Method in which consumers scan QR codes displayed at stores with their smartphones to make payments
Copyright © 2020 Digital Garage, Inc. All Rights Reserved20

MT Segment
Ⅱ

Marketing Technology Segment
Revenue

Profit before tax

FY19.3

12,922 M JPY

1,215 M JPY

FY20.3

15,375 M JPY

1,853 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➤ CyberBuzz, Inc. （20.7％ 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

NOTE: Revenue here shows revenue from external customers. Profit before tax is before elimination of intersegment transaction.
Copyright © 2020 Digital Garage, Inc. All Rights Reserved

21

MT Segment - Highlights
Revenue marked 15.4 B JPY, +19% YoY, and profit before tax increased to 1.85 B JPY, +52％ YoY～ Maintain profitability improvement through selection and concentration of highly
profitable cases ～Revenue

Advertisement volume(JPY in
100 Million)

FY18.3

FY19.3

FY20.3(JPY in
100 Million)

FY19.3

Cosmetics/HR
Financial

79

63

84

98
25

21
19

35

19

19
22

22

20

18

90
23
16
22

93
25

82

85 84
24 82

19
19
20

22

21

19
16
19

19

20
19

154

21
13

(JPY in
100 Million)

FY19.321(+19%)

97

98

FY20.3

22

Real estate
Smartphone/App

Profit before tax

129

18
17

Ratio of profit before
tax to revenue

9.4%

16
15
14

(+52％)

FY20.3

12.1%

12

18.5

10

8

13
12

17

21

22
17

18

16

11

23

10

12.2

6

9

18

8
7

4

6
5

21

23

24

30

27

28

27

32

26

25

31

40

4
2

3
2
1

0

0

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

■Recovery due to specialization in areas of expertisesuch as finance (credit card-related advertising) Other than
19.3 Internet Advertising
20.3
Business, next-generation user
database business (apps and CRM/
point business) performed well

19.3and concentration
20.3
 Selectionof caseswith an emphasis on improving
profitability
 Successful control of SG&A expenses
Copyright © 2020 Digital Garage, Inc. All Rights Reserved

22

MT Segment - Highlights
Responding to Changes in the Business EnvironmentⅠ
ⅡⅢ

MT / FT collaboration
Real estate / Collaborate with ONL＜CyberBuzz, Inc.＞

Social Media Marketing

Revenues from next-generation user database business (apps and CRM/ point business)increased 2.5 times YoY
Point marketing business of credit card company performed well. Continue to promote
cross-segment growth strategies including FT“Open Network Lab Resi-Tech” for the real estate developer industry
Open for the 2nd Batch
Collaborating with leading real estate partner companies to start and promotedemonstration experiments that are consistent with urban plans

Develop proprietary platforms for influencer marketing utilizing
SNS such as Instagram and Facebook
Generate future marketing group synergies

Leading data scientists in Japan

Next-generation data technology＜Media Consortium Planning Office＞ Formed a Japan Premium Media Consortium with 40 leading Japanese content media

Ⅳ National Clientcompanies, and conducted test marketing of high-value digital advertisements to major clients.
Promote activities for joint commercialization. Scheduled to be a joint venture this year.

＜ Strengthen data science business across FT / MT / LTI ＞
BI.Garagetransaction volume

YoY +39%

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

Number of clients

FY19.3129

FY20.3163

Copyright © 2020 Digital Garage, Inc. All Rights Reserved

23

IT Segment
Ⅲ

Incubation Technology Segment
Revenue

Profit before tax

FY19.38,022 M JPY

6,889 M JPY

FY20.3

4,868 M JPY

3,563 M JPY➤ DG Ventures Inc. （Former DG Incubation, Inc.)*
Invests in and incubates cutting-edge internet startups*Trade name changed to “DG Ventures Inc.” as of January 1st 2020.

➤ Open Network Lab （program）

Seed Accelerator Program in progress in the 21st term

➤ Digital Garage US, Inc.

The US-based global strategy headquarters➤ DG Daiwa Ventures, Inc. （50％ stake／equity method）

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

NOTE: Revenue here shows revenue from external customers. Profit before tax is before elimination of intersegment transaction.
Copyright © 2020 Digital Garage, Inc. All Rights Reserved

24

IT Segment - Highlights
The balance of operational investment securities as of the end of March 2020 was
36.5 B JPY, up 37% from the end of FY19.3～ Decreased due to the impact of exchange rates and a reactionary decline following
a large-scale Exit in FY19.3 ～Operational Investment Securities（ratio by currencies）(JPY in(+37%)

100 Million)

365

INR(Rupee) 4.1%

267

JPY

25.4%

USD

67.7%

IT Segment KPI
Others
0.8%
GBP
2.1%

Operational investment securities

End20.3期末of FY20.3

36.5B JPY

• Amount in BS, which represents the value of equity ininvestees in the IT segment• Fair value of equity of investee based on application of IFRS
• Fair value increased steadily in FY20.3, up 37% YoY

ROI

Past 5 years

x2.9• Criteria for measuring the results of investment andrecovery in the short to medium term
• Investment and recovery based on ROI 2.5 times forinvestment for Exit purposes• Achievements in the past five fiscal years were 2.9 times,
exceeding the benchmark.

Profit before tax
End 19.3期末of FY19.3

End of FY20.3

FY20.3

3.56B JPY

• Steady increase in fair value of investees• Decreased due to a reactionary decline following the largescale Exit in FY19.3, in addition to the negative impact offoreign exchange rates of 1.2 B JPY.
Copyright © 2020 Digital Garage, Inc. All Rights Reserved25

IT Segment – Portfolio and Examples of Investment
Balanced investment in Japan, the U.S. and Asia

～ Aiming to continuously improve investment value, working to further strengthen the
support system ～Portfolio by Regions
Building a well-balanced investment
portfolio centered on Japan, North
America, and Asia
Europe0.4%

Others

9.0%

Japan

～

Examples of Investment

QD Laser [Japan]
Develop and provide new semiconductor laser
solutions in the telecommunications, industrial,
medical, and consumer sectors as a pioneer in thecommercialization of quantum dot laser technology

Moneytree [Japan]

North
America

31.4%

25.0%
Asia

34.2%

Provides personal finance app that aggregates bank,credit card, e-money, and various expenses to theuser’s smartphone etc to check and track accountbalances and usage.

Goodpatch [Japan]

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

NoBrokerTechnologies
Solutions [India]

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

Expedient
Healthcare
Marketing [India]

Provides one-stop services and product planning,
concept making, UX design, prototyping, andimplementation

Operates “Healthians.com”, a healthcare web-based service
that provides reservations for examinations at clinics andrelated information from doctors and specialists

Vivino [US]Cobalt Labs [US]Vivino is the world’s largest online wine marketplaceand most downloaded wine app, uses community data
to suggest personalized wine recommendations.

Provides a penetration test platform (PTaaS) that
conducts intrusion testing of enterprise software in
the form of crowdsourcing, from the discovery ofvulnerabilities through to restoration.
Copyright © 2020 Digital Garage, Inc. All Rights Reserved

26

LTI Segment
Ⅳ

Long-Term Incubation Segment
Revenue

Profit before tax

FY19.3

7,133 M JPY

4,378 M JPY

FY20.37,929 M JPY

4,701 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.

NOTE: Revenue here shows revenue from external customers. Profit before tax is before elimination of intersegment transaction.
Copyright © 2020 Digital Garage, Inc. All Rights Reserved

27

LTI Segment - Highlights
Profit before tax marked 4.7 B JPY, up 7% YoY～ Investment profit on equity method of Kakaku.com, Inc. steadily contributed ～Profit before tax

税引前利益(JPY in 100 Million)

43.8

19.3期
FY19.3

（+7%）

47.0

Business Progress of Kakaku.com, Inc.
【 Total Accumulated Traffic for Kakaku.com Group 】
Monthly traffic for all sites of Kakaku.com has increased to255.87 million, down 6% YoY (March 2020)(in million people)

YoY
+6%

20.3期
FY20.3
Ref. Kakaku.com, Inc. Results Briefing for FY2020/3
Copyright © 2020 Digital Garage, Inc. All Rights Reserved28

New Five-Year Mid-term Plan Digest

Copyright © 2020 Digital Garage, Inc. All Rights Reserved

29

Reviewing the 3-Year Mid-term Plan (FY2018.3 - FY2020.3)
CAGR of Recurring Business was 16%, exceed growth indications by favorable profit growth.
Hurdle Rate for Investment (ROI) was 2.2x
Growth Indicators（Profit before tax CAGR）
FY17.3 (Full Year Conversion)

CAGR (17.3 ～ 20.3)

Results*FY18.3

FY19.3

FY20.3CAGR(JGAAP)FT

2.1 B JPY +15 ％

+27 ％

+19 ％

+21 ％

+20 ％

MT

1.4 B JPY +15 ％

+37 ％

-35 ％

+52 ％

+9 ％

+31 ％

-2％

+29 ％

+16 ％

Note: Recurring business total
Hurdle Rate for Investment

IT

LTI

FY18.3 ～ FY20.3

ROI 2.5 x

20 ％Shareholder Return Dividend
Payout Ratio 20 ％Capital Efficiency

ROE

2.2 X
*FY18.3

FY19.3

FY20.3

15 ％
21 ％

22 ％
13 ％

15 ％
24 ％

NOTE） FY17.3 profit before tax in FT and MT announced on May 12, 2017, retroactively reflected the change in segments. The growth rate, ROE, and dividend payout ratio for FY18.3 are calculated based on JGAAP.
Copyright © 2020 Digital Garage, Inc. All Rights Reserved30Targets of the New Mid-Term Plan(FY2021.3 - FY2025.3)■ Aiming to further increase corporate value over the next five years by capturing structuralchanges brought about by the pandemic■ Set new shareholder return indicators that reflect actual conditions, in addition to previous
mid-term plan indicators

Growth Indicators
FY20.3FT

4.0 B JPY

（Profit before tax CAGR）

CAGR（20.3 – 25.3）

20 ％



Contributing to society as a government​-specified​operator of “Critical infrastructure”, and supporting
digital businesses utilizing cutting-edge technologies
Further growth of digital ads to leading DX companies,
and development of brand ads from developing DX
companies into a second pillar
In addition to Kakaku.com, capture changes in New
Normal era and create strategic businesses inJapan and overseas

MT

1.9 B JPY

20 ％



LTI

4.7 B JPY

15 ％

Investment Indicators in the Incubation BusinessIT

FY20.3

FY25.3

ROI 2.2 X

2.5 X

Capital Efficiency
Shareholder Return

 Investment and return at a level that achieves
the investment hurdle rate

ROE
Dividend payout ratio to Business cash flow
before income taxes

20 ％
20 ％
Copyright © 2020 Digital Garage, Inc. All Rights Reserved

31Concept of New Mid-term Plan (FY2021.3 - FY2025.3)

Designing our New Normal Context～ Creating the Next Generation DX(Digital Transformation) Context in a New Order ～Pandemic seeks to create a New Normal centered on lifestyle, economy,
education, and healthcare.
On the other hand, leapfrogging evolution of services and businesses usingstate-of-the-art technologies drives the beginning of the new era.
Global technology continents (digital) that transcend
industry-government-​academia​ boundaries will emerge, and various digital
shifts will begin landslide.
Working with a variety of companies around the world, we will continue tocreate contexts that benefit the global community while maintaining
dynamic equilibrium and neutrality.

Copyright © 2020 Digital Garage, Inc. All Rights Reserved

32Strategic Frameworks of New Mid-term Plan by Segments～ Creating the Next Generation DX(Digital Transformation) Context in a New Order ～＜Key fields＞ lifestyle, economy, education, and healthcare
FT

Financial Technology

Incubation Technology●Further social contribution as a government​-specified​●Continued investing barbell strategy in seed, early andITlater stages (discovering Leapfrogging businesses)●Utilize Open Network Lab (Japan's first seed accelerator),
which marks the 10th anniversary, and further strengthen
the community of seed and early●Maximizing the use of Global Incubation Stream in the
U.S., including Silicon Valley, and realizing a strategic
investment​-portfolio​

operator of “Critical infrastructure”●Comprehensive support for digital businesses utilizing
leading-edge payment technologies●Creating leapfrogging FinTech businesses byhybridizing various data

Designing our New Normal Context
MT

Marketing Technology●Further growth in digital advertising as a leading DX
company

2021〜2025

Long-term Incubation●In addition to Kakaku.com, Inc., capture changes in
New Normal era and create strategic businesses inJapan and overseas●Develop brand advertising from DX developing

CryptoAsset●Creating leapfrogging MT businesses by hybridizing

Medicalcompanies into a second pillar
various data

Recurring Segments

LTI✔ Full-scale

development of advanced financial
services utilizing crypto assets and blockchain
technology✔ Started a new business based on the MRI businessfor drivers using big data of brain × AI

Investment/Incubation Segments
Copyright © 2020 Digital Garage, Inc. All Rights Reserved

33

FT Segment

Copyright © 2020 Digital Garage, Inc. All Rights Reserved34

FT: Business Concept（Recurring business from FT side）
Key factor

I External environmental change

Cashless

Ⅱ External environmental change

Contactless

FT Business Matrix

Ⅲ

External environmental change

Deregulation
Plan: FT transaction volume＜Online settlement (service)＞

2.6 T JPY

10 T JPY

2020.3 ～ 2025.3＜DX advanced
company＞

Current
main
現在の
主力領域
fieldsDigitalTransformationized
Fields in future

Resonance with MT＜DX developing
company＞

DigitalShift＜Offline settlement (service)＞

CAGR:20%

Landslidetransformationof DX●Cooperation withgroup media●Mass media companies
which BI.Garage
cooperate

MT

D

B

●Mobile carriers●Cloud Pay(QR)●Crypto assets

Copyright © 2020 Digital Garage, Inc. All Rights Reserved

etc

35

FT: Business Environment and Strategic Plan
< Business Environment>
Regulation change

Landslide DX and deregulation, and supporting payment infrastructure(lifestyle, economy, education, and healthcare)Cashless growth

Accelerate growth by cashless face-to-face payments in addition to EC markets

Awareness of Contactless Demand materialized through pandemics based on technologies such as QR

payments, biometric identification, and NFC< Market size and track records>
 Cashless
87 T JPY (‘20)⇒ 113 T JPY (‘25)

FT face-to-face settlement

0%

CAGR +5 % Cashless ratio
approx. 30% (‘20)

Ref：METI, Card Wave, Inc.




20 %

FT transaction volume
CAGR(Trillion JPY)

+ 30 %CAGR⇒ approx. 40% (‘25)

Contributing to society as a government​-specified​operator of “Critical infrastructure”
As a social infrastructure, responsible for e-commerce,store checkout counters, utility charges, and all payment
systems8%+ 22 %

1.0
FY15.6(Results)

102.6
FY20.3(Results)

FY25.3(Plan)

Copyright © 2020 Digital Garage, Inc. All Rights Reserved36

MT Segment

Copyright © 2020 Digital Garage, Inc. All Rights Reserved37MT: Business Concept
GOAL< Contents × Data × Technologies >In addition to the mainstay ” Ⅰ MTC”, establishing quickly “ Ⅱ Branding business” and“ Ⅲ Context Marketing Business” then aim to be a leading company in a fully networked society

MT Business Matrix

Plan: MT growth＜Affiliate Market＞＜DX advanced
company＞

Ⅰ
Current＜MTC＞
main fields Ⅱ＜MTC＞ Second pillar
Branding
business＜BIG etc＞

Ⅲ

Context Marketing
Business

CAGR ： 20％
2020.3 ～ 2025.3＜DX developing
company＞

Resonance with FT
Cashless × Contactless × Regulation

DigitalShift

Landslidetransformation
of DX

FT

D

B

CAGR ： 20％＜Branding Market＞
Copyright © 2020 Digital Garage, Inc. All Rights Reserved38MT: Strategic Plan
GOAL

Ⅰ

Establish “Digital Marketing Eco System” in New Normal era
Growing existing business: Digital marketing

Ⅱ Second pillar: Next-Generation Brand Advertising<Supporting further growth of DX advanced companies><Digitalization support for DX developing companies
and mass media>

Provides full funnel marketing, from advertising topurchasing, leveraging the customer base of approx.
1,000 companies
Supporting advanced DX companies for further digitalstrength
Developing payment purchasing data marketing in
addition to advertising and CRM in the financial field,
where collaborating with FTGroup-wide support for the national cashless policy
Develop smart contract business for the DX era,
including electronic solutions for real estate contracts
Deregulation that captures the major flow ofcontactless services

Ⅲ

Targeting advertising by SNS using groupmedia data
First business in BI. Garage group-wide
collaboration

Next-generation PMP solutions that simultaneously
enhance advertising value and achieve brand safety
New business with the Quality Media Consortium
Establishment of matching technology using crossdata in the post-cookie era
Next generation business: Prominent CP ×
Advertisers x Technology

Context Marketing Business: Establishing a new ecosystem that links consumers,
advertisers, and media
Copyright © 2020 Digital Garage, Inc. All Rights Reserved

39

IT/LTI Segment

Copyright © 2020 Digital Garage, Inc. All Rights Reserved40

IT Segment Mid-term Strategy
GOAL

Establishment of “Global strategy portfolio” by capture changes in New Normal era

The Next Generation
DX Context in Japan＜Discovering Leapfrogging Businesses＞

The Next Generation
DX Context over the world

Valuation✔ Cashless✔ Contactless✔
New Regulation＜DG group cooperation＞■ Recurring (FT・MT)■ LTI (Kakaku.com, Inc.,
crypto assets )■ DG Lab■ Open Network Lab

Startup
Seed

Early

Middle

Later

Time

< Concentrated
investment area>

The number ofinvestment companies : Many
The amount of investment : Few

The number ofinvestment companies : Few
The amount of investment : Many

＜The total investment JPY 36.5 billion (FY20.3)＞

Japan 1/3 Asia 1/3 America 1/3 etc

Global Incubation Stream■ Global Incubation Stream partner■ Joint investment
with the partner fund
■ Overseas expansionof Japanese startup companies
Copyright © 2020 Digital Garage, Inc. All Rights Reserved

41

LTI Segment Mid-term Strategy ブロックチェーン(暗号資産)
In addition to Kakaku.com, Inc., capture changes in New Normal era and create
strategic businesses in Japan and overseas

GOAL

Blockchain (crypto assets)
Ⅰ

Full-scale development of advanced
financial services utilizing crypto assets
and blockchain technology

The crypto assets such as the Bitcoin are starts for
activation in the half-valued period, and we start thebusiness for participation of domestic major player
and overseas business company in this term.

Bio Health (medical)
Ⅱ

Started a new business based on the
MRI business for drivers using big dataof brain × AI

Aiming to Service Development and monetization
by Platform of Health Care Data

Transportationcompany

Medical Institutions

OTC
operators
in overseas

Simultaneous
settlementon blockchain

Exchange
in JapanInsurancecompany
Pharmaceuticalcompany
Health insurance Doctor
society

Inspection instrument (MRI)

Medical examinee(Drivers)

Platform of Health Care Data

(Electronic medical chart,
Health examination results、Life log)
Copyright © 2020 Digital Garage, Inc. All Rights Reserved42

DG Lab

Copyright © 2020 Digital Garage, Inc. All Rights Reserved

43

DG Lab ‐ Strategic Initiatives of R&D″DG Lab″ started in 2016 advance to the second stage

JV with

1st

R&D and experiments instrategical ５ focus areas(Blockchain, AI, XR,
Security, Bio Health)

Fund
2nd
＜Core Sponsor＞ Fund

＜

Inc.

＞

Fund size 6.8 billion
Invested in 31 companies
Fund size 15 billion (expected)
Commenced the investment operations＜Sponsor＞
1st Fund and 2nd Fund:17companies(The present time)

R&D/Next-Generation Business Themes＜2nd Phase＞＜3 rd Phase＞

 AI

Data utilization business to start from the individual Blockchain

Technology development to make a processing speed

 Blockchain

Settlement system of crypto assets for corporations.
The settlement business by the Blockchain utilization
for retail.

 xR/Data

Construct advertisement platform which utilize the Bio HealthUtilization of MRI image data and Health examination

 Bio Health

Digital medicine circulating platform (DTx)in consideration for privacy.

results

fast and with respect to Smart Contract
data that targeted outdoor signage

Copyright © 2020 Digital Garage, Inc. All Rights Reserved

44

ESG in DG Group

Copyright © 2020 Digital Garage, Inc. All Rights Reserved

45

ESG in DG Group（Mid-term Plan Period）
ESG resonance with “Designing our New Normal Context”

S

E＜Field＞＜Measures＞

Social■Sponsorship and support for the Tohoku Youth
Orchestra aimed at reconstruction after theGreat East Japan Earthquake
・Planning to support non-profit organizations
networked with experts from Boston

Environment■Fostering and supporting social entrepreneurs
through Open Network Lab■Support for activities in the Peace-Nippon
Project
Archiving activities that preserve Japan’snatural beauty in the future■Assigning a SDGs Director in the U.S.

G

Governance■Further enhancement of corporate value throughdialogue and collaboration with shareholders andstakeholders, and strengthening of governanceSelection of three SDGs measures
・Solving social issues by contributing to
the development of internet technology
・Contribution to sustainable society
development
・Building Global Partnerships to Realize SDGs

Copyright © 2020 Digital Garage, Inc. All Rights Reserved

46

ESG in DG Group

Cooperation in NPO activities
utilizing the latest technologies
that bring together industry,
government, and academia

Full-scale support for NPOs launched by
Joichi Ito, a director and co-founder,
together with Reid Hoffman. Beginningwith a project aimed at COVID-19,
which is being promoted through a
network of experts from Boston, amecca of global biotech, support andpromotion of social contribution-type
projects that create new normal bycollaborating with the DG Group forvariousprojects
utilizingartificial
intelligence,statisticalanalysis,biotechnology,
cybersecurity,etc.
beyond the barriers between industry,
government, and academia.

Assigning a SDGs Director in the U.S.
Corporate Officer Debbie Altomonte

Fostering and supportingsocial entrepreneurs

As a graduate of Open Network Lab, the entire DG Group provides
support to social entrepreneurs, such as PIRIKA, which deals with waste
issues. Example: PIRIKA, DG, and Shibuya Ward collaborate to promote
projects to resolve river and marine trash problems, where artificial turf
is the source.

Director and Co-Founder
Joichi Ito

Projects●Development of COVID-19 diagnostics kit●Development of contact tracing
technologies and policies to maintain social activities●Global and open clinical trial design●Design of next-generation
coworking spaces, etc.

Sponsorship and support for
the Tohoku Youth Orchestra

An orchestra organized around children from thethree disaster-stricken prefectures to symbolize
recovery from the Great East Japan Earthquake. Mr.
Ryuichi Sakamoto presides over it as a volunteer. It
was positioned as a place of growth where children
learned about the world and experienced it with
their peers through instruction and performancesby outstanding musicians and exchanges withpeople. We will continue to provide support not
only through sponsorship but also through social
media and creative programs.
Copyright © 2020 Digital Garage, Inc. All Rights Reserved

47Appendix

Copyright © 2020 Digital Garage, Inc. All Rights Reserved48

Shareholder Return• Due to the application of IFRS, gains and losses on fair value not associated withcash flows could account for a higher proportion of profit before tax than in the past.
That means the profit may not reflect effective cash flows.
• As a new shareholder return, set dividend payout ratio based on cash flow, not net
income.

Previous
TargetDividend payout ratio to net income 20％
Main differences between Net Income andBusiness cash flow before income taxes+－ Gain or losses on fair value valuation in IT－ Investment profit on equity method+ Depreciation/Software amortization+ Income taxes
New Target Dividend payout ratio

to Business cash flow before income taxes

20％
Copyright © 2020 Digital Garage, Inc. All Rights Reserved49

Shareholder Return
Define effective cash flows from our business as “Business cash flow before income taxes”＜Method of calculation of Business cash flow before income taxes＞
Cash flows from operating activities
Changes in working capital
Adjustment items

The amount with deduction gains and losses on fair value valuation from increase ininvestment securities for sale
Income taxes
Repayments of lease obligations

Business cash flow before income taxes

Copyright © 2020 Digital Garage, Inc. All Rights Reserved

50

Press Releases
Date

Title

2020.3.26

ECONTEXT Offers the "CASH POST" BtoC Wire Transfer Service to Help Schools Refunding Lunch Fees

2020.3.17

VeriTrans Releases "Payment Service for Contact Center conducting Telework"

2020.3.13

VeriTrans Provides Facial Recognition Payment Service for SEVEN-ELEVEN JAPAN's Cashless Payment Proof ofConcept

2020.2.27

Notice regarding Commemorative Dividend for 25th Anniversary and Revision of the Dividend Forecast

2020.2.27
2020.2.13
2020.1.22

Digital Garage Group Provides OMO Solution Based on Point Membership Infrastructure for JR Kyushu's "JR Kyupo
App"
Start of Data Linkage Between "VeriTrans Atobarai" Post-settlement Payment Service and "VeriTrans 4G"
Comprehensive Payment Solution
ECONTEXT Supports "ATM Uketori" for the CASH POST Wire Transfer Service through the Collaboration with Seven
Payment Service

2019.12.27

Digital Garage Group's "Cloud Pay", a Multi-QR Code Payment Solution, Supports KDDI's au PAY

2019.12.23

VeriTrans Provides Credit Card Payment Services for GO2GO, IDOM's Car Sharing Service

2019.12.16

VeriTrans - Comprehensive Payment Solution VeriTrans4G Supports "PayPay"

2019.10.24

Digital Garage Group's "Cloud Pay", a Multi-QR Code Payment Solution, Supports Alipay, AlipayHK, and Kakaopay

2019.10.23

7 Companies Established the Japan Digital Therapeutics Consortium and Launch Activities

2019.10.4

DG Lab to Host THE NEW CONTEXT CONFERENCE 2019 SAN FRANCISCO

2019.9.17

VeriTrans Provides Post-Settlement Payment Service "VeriTrans Atobarai" for UNIQUEST's "Small Funeral"

2019.9.12

Digital Garage and KDDI Conduct a Digital Transformation (DX) Proof of Concept Using AR and VPS Technology

2019.8.30

Digital Garage and Daiwa Securities Group Establish DG Lab Fund II for Global Startups with Next-generation
Technologies

Copyright © 2020 Digital Garage, Inc. All Rights Reserved

51

Press Releases
Date

Title

2019.8.16

Digital Garage's Equity Method Affiliate, CyberBuzz is Approved for Listing on the TSE's Mothers Section

2019.8.2

Digital Garage Supports Joint PoC Projects by 7 Major Companies and 5 Startups through "Open Network Lab ResiTech"

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 Solution

2019.5.13
2019.4.19

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 Platform
Crypto Garage Developed and Executed the Contract of a P2P Protocol Based Crypto Asset Derivative Settled in
Bitcoin2019.4.12

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 © 2020 Digital Garage, Inc. All Rights Reserved52

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.