Digital Arts Inc. · TSE:2326
Digital Arts — H1 FY2025 Earnings Presentation
59 slides from Digital Arts's earnings presentation, Oct 31, 2024
Slide 1: Consolidated Financial Results for the First Six Months of FY Ending March 2025
Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. From April 1, 2024 to September 30, 2024 Consolidated Financial Results for the Firs
Slide 2: Company Profile
Company Profile For Internet Convenience, Domestic 13.39 million High Safety and Security manufacturers active users profitability *1 Company Name Digital Arts Inc. Date of Tokyo Stock Exchange Prime Market June 1995 Stock Market Establishment (Securities Code: 2326) Listed on September 2002 Number
Slide 3: Product Lineup
Product Lineup Web E-mail Enabling users to securely connect to websites Enabling users to securely send and receive email without security concerns without security concerns Endpoint Secure proxy Malicious website-filtering Measures to provide pop-ups for email misdelivery NEW Web Security applianc
Slide 4: Key Points
Key Points Excluding the impact of the transfer of the shares of a consolidated subsidiary at the end of the previous fiscal year, propelled by the growth of the enterprise sector market, the Group achieved the planned growth of net sales the first six months of the fiscal year ending March 31, 2025
Slide 5: Index
01 - Consolidated Results Highlights 02 - Non-consolidated Results Highlights 03 - Net Sales by Market 04 - FY03/25 Initiatives I N DEX 05 - Status of Measures for the Fiscal Year Ending March 2025 06 - Full-Year Financial Forecast for the Fiscal Year Ending March 31, 2025 07 - Return to Shareholder
Slide 6: Consolidated Results Highlights
01 Consolidated Results Highlights Consolidated Financial Results for the First Six Months of the Fiscal Year Ending March 31, 2025 Copyright © Digital Arts Inc. 6
Slide 7: Consolidated Results Highlights
01 Consolidated Results Highlights 4,516 The i-FILTER business grew sharply, mainly due to the acquisition of Enterprise projects related to the transition to cloud security products and projects million yen sector market related to customers switching products due to the end of support (EOS) of Con
Slide 8: Consolidated Statement of Income
01 Consolidated Statement of Income While the contract amount increased more than planned on the back of strong enterprise and public sector market conditions, the increase in net sales remained in line with the plan, reflecting slow progress in the posting of net sales attributable to the greater-t
Slide 9: Trend in Consolidated Contracts
01 Trend in Consolidated Contracts Consolidated contracts totaled 4,516 million yen, up 13.8% year on year.（Excluding DAC*1） Trend in Consolidated Contracts Cloud service products (million yen) License sales products/Others Cloud service products DAC Sales of Cloud-based i-FILTER and m-FILTER rema
Slide 10: Trend in Order Backlog
01 Trend in Order Backlog Excluding GIGA School Concept projects, sales from which will be posted for the next and subsequent fiscal years, order backlog steadily increased. Trend in order backlog Sales from the next fiscal year (GIGA) (million yen) Many GIGA School Concept projects have five-year
Slide 11: Change in Consolidated Net Sales
01 Change in Consolidated Net Sales Consolidated net sales grew 6.2% year on year, to 4,838 million yen.（Excluding DAC*1） Change in Consolidated Net Sales (million yen) Cloud service products License sales products/Others Cloud service Products DAC Sales of cloud-based i-FILTER and m-FILTER remain
Slide 12: Method of recording sales by product
01 Supplement Method of recording sales by product License sales products Cloud service products Contract period (n months)＋1 month Contract period (n months) Amount equivalent to Equivalent to maintenance maintenance fee is prorated Order over contract period "n" fee backlog prorated over contract
Slide 13: Contract amount vs sales by product (one-year contracts)
01 Relationship between contract amount and sales by product Supplement (one-year contracts) For example, the diagrams on the left show the relationships between the contract amount and net sales in license sales products and cloud service products with a one-year contract at the amount of 600 milli
Slide 14: Contract amount vs sales by product (multi-year contracts)
01 Relationship between contract amount and sales by product Supplement (multi-year contracts) Many projects in the public sector market are multi-year contracts, such as five-year ones. They have longer periods until renewal. For example, the diagrams on the left show the relationships between the
Slide 15: Trend in Consolidated Net Sales, Operating Profit
01 Trend in Consolidated Net sales, Operating profit 1Q 2Q 3Q 4Q DAC *1 (million yen) 11,512 652 10,436 384 2,537 9,051 2,393 287 535 2,077 357 6,825 2,223 218 248 2,216 1,855 1,884 556 4,838 4,126 381 4,413 4,427 225 241 2,466 1,423 2,316 1,185 1,304 2,977 1,101 2,603 2,390 176 945 980 933 2,052 1,
Slide 16: Consolidated Cost of Sales and SG&A Expenses
01 Consolidated Cost of Sales and Selling, General and Administrative Expenses While the consolidated cost of sales and DAC’s personnel expenses decreased, communication *1 expenses increased at the data center due to the higher-than-planned growth of the percentage of cloud service products. (milli
Slide 17: Quarterly Trend in Consolidated Cost of Sales
01 Quarterly Trend in Consolidated Cost of Sales Labor Depresiation Communication expenses Others Cost of Sales Transfar to other accounts (million yen) 1,527 1,450 1,340 250 1,235 1,248 270 400 1,204 332 231 1,102 239 221 229 351 1,084 989 244 220 302 984 921 962 946 247 201 220 345 356 328 839 153
Slide 18: Quarterly Trend in Consolidated SG&A Expenses
01 Quarterly Trend in Consolidated Selling, General and Administrative Expenses Personnel exrenses Advertising expenses Others (million yen) 660 669 648 646 633 609 609 597 608 574 578 558 169 526 215 248 487 238 214 244 229 224 191 232 59 216 204 193 159 66 80 106 59 78 77 86 92 74 67 79 51 70 432
Slide 19: Consolidated Balance Sheet
01 Consolidated Balance Sheet The repurchase of our own stock that was announced on June 12, 2024 was completed as scheduled. (total acquisition price of 499 million yen). The equity ratio was up 3.3 percentage points from the end of the previous fiscal year, to 74.3%. (million yen) Change from As o
Slide 20: Operating Profit Forecast
01 Operating Profit Forecast As of the end of the first six months, the rate of progress in contract amount and net sales exceeded the plan, but the rate of progress in operating profit fell short of the plan. Operating profit was lower planned due to a deviation in the timing of the posting of sale
Slide 21: Non-consolidated Results Highlights
02 Non-consolidated Results Highlights Consolidated Financial Results for the First Six Months of the Fiscal Year Ending March 31, 2025 Copyright © Digital Arts Inc. 21
Slide 22: Summary of Non-consolidated Results
02 Summary of Non-consolidated Results While the contract amount increased more than planned due to the strong enterprise and public sector market conditions, the increase in net sales remained in line with the plan, reflecting slow progress in the posting of net sales which is attributable to the g
Slide 23: Net Sales by Market
03 Net Sales by Market Consolidated Financial Results for the First Six Months of the Fiscal Year Ending March 31, 2025 Copyright © Digital Arts Inc. 23
Slide 24: Consolidated Contract Amount by Market
03 Consolidated Contract Amount by Market The positive growth of the contract amount was achieved in both the enterprise sector market and the public sector market. (Excluding DAC*1) Trend in Consolidated Contract Amount by Market (million yen) Enterprise sector market Enterprise Public Consumer DAC
Slide 25: Consolidated Net Sales by Market
03 Consolidated Net sales by Market Solid growth was achieved in the contract amount in the enterprise sector market, but growth was minimal in the public sector market due to an increase in the percentage of cloud products. (Excluding DAC*1) Enterprise Enterprisesector sector market market Trend in
Slide 26: Trend in Consolidated Net Sales by Market
03 Trend in Consolidated Net Sales by Market Net sales for the first six months reached a record high. (Excluding DAC*1) (million yen) 5,563 5,084 Enterprise Public Consumer DAC 1,008 4,838 4,552 700 202 Consumer 211 505 224 229 2,361 Public 3,101 2,337 2,764 2,764 301 2,287 2,420 2,468 235 254 219
Slide 27: Trends in Non-Consolidated Net Sales
03 Preference Trends in Non-Consolidated Net Sales Net sales for the first six months reached a record high. (million yen) 4,833 4,379 4,548 4,044 2,739 2,677 2,797 2465 2,474 1,933 FY Mar. 2016 FY Mar. 2017 FY Mar. 2018 FY Mar. 2019 FY Mar. 2020 FY Mar. 2021 FY Mar. 2022 FY Mar. 2023 FY Mar. 2024 F
Slide 28: Quarterly Trend in Consolidated Net Sales by Market
03 Quarterly Trend in Consolidated Net Sales by Market Net sales for the six months reached a record high. (Excluding DAC*1) (million yen) Enterprise Public Consumer DAC 652 556 384 108 Consumer 241 381 535 105 357 106 115 105 452 287 318 118 103 101 93 248 116 105 106 218 98 1,215 1,295 Public 109
Slide 29: Net Sales in Market by Product: Enterprise
03 Net Sales in Market by Product Enterprise sector market Net sales achieved enormous growth, reflecting a major leap in the i-FILTER series following the acquisition of projects for shifting to cloud security and for shifting from competitors' products, as well as strong sales of options. (Excludi
Slide 30: Net Sales Market by Product: Public Sector
03 Net Sales Market by Product Public Sector market While the contract amount increased significantly (+17.9%) due to the acquisition of projects for the Security Improvements for Local Governments and Next-Generation School Affairs programs (see page 24), sales increase slightly due to slow progres
Slide 31: Net Sales Market by Product: Consumer
03 Net Sales Market by Product Consumer Sector market In the consumer sector market, net sales did not increase as expected due to the sense of plateauing with respect to demand for filtering measures. The Group will facilitate the strengthening of products and expand target customers, aiming to tap
Slide 32: FY03/25 Initiatives
04 FY03/25 Initiatives Consolidated Financial Results for the First Six Months of the Fiscal Year Ending March 31, 2025 Copyright © Digital Arts Inc. 32
Slide 33: Product Strategy
04 Product Strategy and Sales Strategy Product Strategy In view of the rate of growth of the product market and our advantages, we will increase solutions in promising areas and investment areas to maximize synergy with our mainstay solutions. +28.2% % ＝Market growth rates Investment areas Promising
Slide 34: Carry out upselling and cross-selling
04 Product Strategy and Sales Strategy Carry out upselling and cross-selling We will promote cross-selling and upselling for White Operation customers. Enhanced anti-infection protection to protect against File transfer and file encryption threats from the internet and from email PPAP Anti-malware c
Slide 35: Phase 2 of the GIGA School Concept
04 Phase 2 of the GIGA School Concept Increase in Public Sector Market Share The implementation of Phase 2 of the GIGA School Concept was planned for the five-year period starting in FY2024. [ GIGA School Concept operated by the Ministry of Education, Culture, Sports, Science and Technology ] 2019 2
Slide 36: Phase 2 of GIGA School Concept: Increase market share
04 Phase 2 of the GIGA School Concept Increase in Public Sector Market Share We will work proactively to ensure the renewal of existing contracts as well as receive new contracts to increase our market share. [ Our share of the GIGA School Concept market ] 2019 2020 2021 2022 2023 2024 2025 2026 202
Slide 37: Timing of the Replacement of GIGA School Concept Devices
Phase 2 of the GIGA School Concept 04 Increase in Public Sector Market Share – Timing of the Replacement of GIGA School Concept Devices - The GIGA School Concept device replacement will start in the fiscal year ending March 31, 2025 and will be fully implemented in the fiscal year ending March 31, 2
Slide 38: Next-Generation School Affairs DX
04 Next-Generation School Affairs DX Increase in Public Sector Market Share The Ministry of Education, Culture, Sports, Science and Technology calls for the following implementation as the direction of the next-generation school affairs DX: *As a regional fiscal measure, financial support of 180.5 b
Slide 39: Initiative for Next-Generation School Affairs DX
04 Initiative for Next-Generation School Affairs DX Increase in Public Sector Market Share Our products are applicable in many different areas to ensure security. We will proactively advertise the value of our products. Overview diagram of security measures in school affairs DX Security support map
Slide 40: Schedule for Development of Next-Generation School Affairs DX
04 Schedule for Development of Next-Generation Increase in Public Sector Market Share School Affairs DX Procurement of products is expected to start in the fiscal year ending March 31, 2025 with a view toward the operation of a school affairs support system. [School Affairs DX development schedule]
Slide 41: Status of Measures for the Fiscal Year Ending March 2025
05 Status of Measures for the Fiscal Year Ending March 2025 Consolidated Financial Results for the First Six Months of the Fiscal Year Ending March 31, 2025 Copyright © Digital Arts Inc. 41
Slide 42: Functions Upgrade [f-FILTER]
05 Functions Upgrade [f-FILTER] New Functions released in July Large-size storage / file storage period adjustment functions Examples of requests for f-FILTER Enhancement of features The uploadable file size is increased to 20 GB We hope that f-FILTER will support and an option is provided that allo
Slide 43: Toughening of Security for Local Government
05 Toughening of Security for Local Government: Compliance with New Guidelines The α model, defined as a method for connecting directly to cloud services from LGWAN-connected business devices, has been re-defined, as is, as the α’ model. There are a number of points that can be dealt with using the
Slide 44: Status of ISMAP Registration
05 Digital Arts' Solutions: Status of ISMAP Registration *1 Web Security Mail Security Enabling users to securely connect to websites Enabling users to securely send and receive email without security concerns Registered with ISMAP Registration Pending with ISMAP Registered with ISMAP Registration [
Slide 45: New Function for GIGA School Concept
05 New Function for GIGA School Concept 1 New functions released in April Visualizing what websites schoolchildren and students view and how often CASE 1 CASE 2 CASE 3 CASE 4 Number of those Terminal use ratio Duration of use by Ranking of time using terminals in by school online service slots in te
Slide 46: New Function for GIGA School Concept
05 New Function for GIGA School Concept 2 A major update in April It is a portal website that put together online learning videos. It supports search by grade or by subject and indication of videos in the order of popularity. It can be used by schoolchildren and students for home learning and for ed
Slide 47: GIGA School Concept
05 GIGA School Concept Advertise the superiority of i-FILTER to boards of education that have yet to introduce filtering and those which have introduced competitors' products in order to hold an even larger market share Introduction of filtering under the GIGA School Concept *1 Introduction of pay f
Slide 48: Full-Year Financial Forecast for FY Ending March 2025
06 Full-Year Financial Forecast for the Fiscal Year Ending March 31, 2025 Consolidated Financial Results for the First Six Months of the Fiscal Year Ending March 31, 2025 Copyright © Digital Arts Inc. 48
Slide 49: Forecasts for FY Ending March 2025 (Consolidated)
06 Forecasts for Fiscal Year Ending March 31, 2025 (Consolidated) DAC's sales of 2.3 billion yen and expenses of 2.2 billion yen, which were included in the financial results of the previous fiscal year, are excluded from consolidated earnings forecasts for the current fiscal year. Therefore, DA's g
Slide 50: Forecasts for FY Ending March 2025 (Non-consolidated)
06 Forecasts for Fiscal Year Ending March 31, 2025 (Non-consolidated） The Group aims to achieve growth in net sales and operating profit through the initiatives for the three priority areas set out in the Medium-Term Management Plan (FY2025-FY2027). (million yen) FY March 2024 FY March 2025 Full-Yea
Slide 51: Status of Consolidated Net Sales
06 Status of Consolidated Net Sales Consolidated net sales are forecast as follows: Status of Consolidated Net Sales Contracts for the current fiscal year (million yen) 16,000 New contracts are expected to be 10,300 million yen in the 14,000 current fiscal year, reflecting the facilitation of the
Slide 52: Status of Consolidated Net Sales by Market
06 Status of Consolidated Net Sales Consolidated net sales by market are forecast as follows: Status of Consolidated Net Sales Enterprise sector market (million yen) The Group expects to increase sales by Enterprise Pcblic Consumer DAC ＊1 increasing customers that use White Operation 11,512 10,720
Slide 53: Consolidated Cost of Sales and SG&A Expenses
06 Consolidated Cost of Sales and Selling, General and Administrative Expenses The cost of sales is expected to improve significantly because DAC’s cost of sales in the previous *1 fiscal year is excluded from consolidation. Selling, general and administrative expenses are expected to rise mainly du
Slide 54: Status of Consolidated Cost of Sales
06 Status of Consolidated Cost of Sales The labor cost and other expenses are expected to be reduced significantly because DAC’s labor *1 cost and other expenses are excluded from consolidation. Regarding communication expenses, cloud server expenses are expected to increase, reflecting an increase
Slide 55: Status of Consolidated SG&A Expenses
06 Status of Consolidated Selling, General and Administrative Expenses Personnel expenses are expected to increase with the enhancement of investments in human resources, which is a priority area in the Medium-Term Management Plan (FY2025 - FY2027). Status of Consolidated Selling, General and Admini
Slide 56: Return to Shareholders for the FY Ending March 2025
07 Return to Shareholders for the Fiscal Year Ending March 31, 2025 Consolidated Financial Results for the First Six Months of the Fiscal Year Ending March 31, 2025 Copyright © Digital Arts Inc. 56
Slide 57: Return to Shareholders for the FY Ending March 2025
07 Return to Shareholders for the Fiscal Year Ending March 31, 2025 We are planning to pay dividends as follows to return a portion of our earnings to our shareholders. Target payout ratio for fiscal year ending March 31, 2025: 33.0% Annual dividends of surplus forecasted for fiscal year ending
Slide 58: Notes on Descriptions
Notes on Descriptions Among the descriptions of plans, strategies and financial forecasts in this presentation material, those that are not historical facts are forward-looking statements. They reflect judgments made by the management of Digital Arts Inc. based on information currently available
Slide 59: For internet convenience, safety and security
- For internet convenience, safety and security -