Digital Arts Inc. · TSE:2326

Digital Arts — Q1 FY2026 Earnings Presentation

70 slides from Digital Arts's earnings presentation, Jul 31, 2025

1. Slide 1: Consolidated Financial Results for the First Three Months of FY Ending March 2026

   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, 2025 to June 30, 2025 Consolidated Financial Results for the First Thr

2. Slide 2: Company Profile

   Company Profile For Internet Convenience, Domestic “White Operation” High operating profit and Safety and Security security provider 13.80 million active users*1 net sales Company Name Digital Arts Inc. Date of Tokyo Stock Exchange Prime Market June 1995 Stock Market Establishment (Securities Code:

3. Slide 3: Product Lineup

   Product Lineup Web Security Mail Security Enabling users to securely connect to websites Enabling users to securely send and receive email without security concerns without security concerns Option Option Endpoint Secure proxy Malicious website-filtering Measures to provide pop-ups for email misdeli

4. Slide 4: Product Price

   Product Price GIGA School Reference Price (monthly): 250 yen Reference Price (monthly): 1,000 yen*1 Reference Price (monthly): 500 yen Reference Price (monthly): 150 yen (for purchases of 500 licenses) (for purchases of 10 licenses) GIGA School Reference Price (monthly): 250 yen Reference Price (mon

5. Slide 5: Disclosure policy regarding contract amounts for the current fiscal year

   Disclosure policy regarding contract amounts for the current fiscal year In the current fiscal year, we expect to receive a large number of new orders for cloud service products, and therefore anticipate a significant difference between net sales and contract amount. To provide our investors and sha

6. Slide 6: Key Points

   Key Points Contracts achieved double-digit growth and exceeded plans following strong sales growth in the enterprise Contracts sector market and healthy orders received for projects for Phase 2 of the GIGA School Concept and Next- Generation School Affairs DX. In terms of net sales, despite steady g

7. Slide 7: INDEX

   01. Consolidated Results Highlights 02. Non-consolidated Results Highlights 03. Net Sales by Market 04. FY03/26 Initiatives INDEX 05. FY03/26 Status of Measures 06. FY03/26 Full-Year Financial Forecast 07. FY03/26 Return to Shareholders 08. Appendix 7 Copyright © Digital Arts Inc.

8. Slide 8: 01. Consolidated Results Highlights

   Consolidated Financial Results for the First Three Months of the Fiscal Year Ending March 31, 2026 01. Consolidated Results Highlights Copyright © Digital Arts Inc.

9. Slide 9: Consolidated Results Highlights

   Consolidated Results Highlights Enterprise The Group achieved growth by capturing the demand for email cloud security measures and by successfully cross-selling and upselling 2,306 Sector Market mainstay products, optional products, and file transfer products. Contracts million yen ＋313 million yen

10. Slide 10: Consolidated Statement of Income

    Consolidated Statement of Income Contracts achieved double-digit growth, driven by the high growth of the public sector market, surpassing initial projections. In terms of net sales, high growth in contracts in the public sector market was not immediately reflected as sales revenue under corporate a

11. Slide 11: Trend in Consolidated Contracts

    Trend in Consolidated Contracts Consolidated contracts climbed 15.7% year on year to 2,306 million yen, as a result of the substantial growth of cloud service products. Trend in Consolidated Contracts (Millions of Yen) License sales products/ Others Cloud sales products Cloud sales products 2,306 +1

12. Slide 12: Trend in Order Backlog

    Trend in Order Backlog Order backlog increased steadily due to the receipt of orders for Phase 2 of the GIGA School Concept, Next-General School Affairs DX, corporate cloud projects, and other projects. Trend in Order Backlog (Millions of Yen) Sales for the next fiscal year Sales for the next fiscal

13. Slide 13: Trend in Consolidated Net Sales

    Trend in Consolidated Net Sales Consolidated net sales grew 1.6% year on year, to 2,270 million yen due to solid growth in cloud services products. Trend in Consolidated Net Sales (Millions of Yen) Cloud sales products License sales products/ Others Cloud sales products  Net sales increased due to

14. Slide 14: Consolidated Cost of Sales and SG&A Expenses

    Consolidated Cost of Sales and Selling, General and Administrative Expenses Although communication expenses for data centers increased, measures to reduce the cost of sales were successful, and cost of sales was kept within plan limits. Selling, general, and administrative expenses increased as a re

15. Slide 15: Quarterly Trend in Consolidated Cost of Sales

    Quarterly Trend in Consolidated Cost of Sales Labor Depresiation Communication expenses Others Cost of Sales Transfer to other accounts 1,527 (Millions of Yen) 1,450 1,340 250 1,204 1,235 1,248 332 270 400 231 1,102 229 351 1,084 239 221 244 220 302 1,027 996 989 201 984 968 247 220 345 356 154 127

16. Slide 16: Quarterly Trend in Consolidated SG&A Expenses

    Quarterly Trend in Consolidated Selling, General and Administrative Expenses Personnel expenses Advertising expenses Others (Millions of Yen) 735 669 648 646 633 609 609 597 608 597 578 574 558 307 215 248 238 214 244 229 224 223 216 232 204 219 66 74 80 106 78 60 77 86 92 74 67 79 49 363 353 316 32

17. Slide 17: Consolidated Balance Sheet

    Consolidated Balance Sheet Advances received increased due to strong orders for cloud service products. Treasury share buybacks started in the previous fiscal year were completed as planned. (Millions of Yen) 連結貸借対照表 As of end of 1Q As of end of As of end of 1Q Change from end Main Factors for Chang

18. Slide 18: 02. Non-consolidated Results Highlights

    Consolidated Financial Results for the First Three Months of the Fiscal Year Ending March 31, 2026 02. Non-consolidated Results Highlights Copyright © Digital Arts Inc.

19. Slide 19: Summary of Non-consolidated Results

    Summary of Non-consolidated Results Contracts achieved double-digit growth, driven by the high growth of the public sector market, surpassing initial projections. In terms of net sales, high growth in contracts in the public sector market was not immediately reflected as sales revenue under corporat

20. Slide 20: 03. Net Sales by Market

    Consolidated Financial Results for the First Three Months of the Fiscal Year Ending March 31, 2026 03. Net Sales by Market Copyright © Digital Arts Inc.

21. Slide 21: Consolidated Contracts by Market

    Consolidated Contracts by Market The enterprise sector market is growing steadily, while the public sector market is experiencing significant growth. Trend in Consolidated Contracts by Market Enterprise Public Consumer (Millions of Yen) 2,306 +15.7% Enterprise sector market 101 -1.0%  In the enterp

22. Slide 22: Consolidated Net Sales by Market

    Consolidated Net Sales by Market Despite steady growth in the enterprise sector market, substantial growth in contracts in the public sector market was not immediately reflected as sales revenue under corporate accounting rules, resulting in a decrease in net sales. Trend in Consolidated Net Sales b

23. Slide 23: Trend in Consolidated Contracts by Market

    Trend in Consolidated Contracts by Market The contract amount for 1Q reached a record high. (Excluding DAC) (Millions of Yen) Enterprise Public Consumer DAC 2,246 2,248 2,306 [1,928] [1,796] 101 Consumer 1,979 318 1,993 [1,716] 452 102 263 113 107 114 1,160 Public 895 910 822 865 994 1,044 Enterpris

24. Slide 24: Trend in Consolidated Net Sales by Market

    Trend in Consolidated Net Sales by Market The Net sales for 1Q reached a record high. (Excluding DAC) (Millions of Yen) Enterprise Public Consumer DAC 2,541 2,386 [2,088] [2,067] 452 2,234 2,270 318 0 0 93 101 Consumer 1,919 106 105 [1,656] 263 999 Public 113 1,066 1,017 1,016 738 1,169 Enterprise 1

25. Slide 25: Quarterly Trend in Consolidated Contracts by Market

    Quarterly Trend in Consolidated Contracts by Market The contracts for 1Q reached a record high. (Excluding DAC) (Millions of Yen) Enterprise Public Consumer DAC 101 652 105 1,961 Consumer 556 99 104 101 104 1,366 452 535 102 1,215 107 101 1,073 967 1,160 Public 895 604 822 1,649 1,447 1,099 1,208 1,

26. Slide 26: Quarterly Trend in Consolidated Net Sales by Market

    Quarterly Trend in Consolidated Net Sales by Market The Net sales for 1Q reached a record high. (Excluding DAC) (Millions of Yen) Enterprise Public Consumer DAC 652 556 101 108 535 105 106 105 452 101 93 101 Consumer 106 1,232 1,215 1,295 1,320 1,194 999 1,084 1,066 1,016 Public 1,372 1,216 1,199 1,

27. Slide 27: Enterprise Sector: Contracts in Market by Product

    Enterprise sector market Contracts in Market by Product Despite the decline in large orders received in the previous fiscal year, we achieved growth due to capturing needs for email cloud security measures, as well as strong sales of the optional products Anti-Virus & Sandbox and f-FILTER integratio

28. Slide 28: Enterprise Sector: Net Sales in Market by Product

    Enterprise sector market Net Sales in Market by Product We achieved steady growth due to m-FILTER@Cloud capturing demand for email cloud security measures, as well as strong sales of the optional products Anti-Virus & Sandbox and f-FILTER integration options. Trend in Net Sales in Enterprise Sector

29. Slide 29: Public Sector: Contracts in Market by Product

    Public sector market Contracts in Market by Product Despite the loss of a major projects in Security improvements for local governments from the previous fiscal year, the Group achieved significant growth due to strong performance in securing orders for Phase 2 of the GIGA School Concept and Next-Ge

30. Slide 30: Public Sector: Net Sales in Market by Product

    Public sector market Net Sales in Market by Product Orders for Phase 2 of the GIGA School Concept and Next-Generation School Affairs DX projects are progressing well, resulting in a substantial increase in contracts. However, since this increase in contracts is mainly an increase in cloud service pr

31. Slide 31: Progress of Phase 2 of the GIGA School Concept

    Progress of Phase 2 of the GIGA School Concept The market share gained by broadly advertising i-FILTER—a product that has a competitive advantage—through sales and marketing activities has grown even further since the end of March, 2025. Introduction of filtering under the GIGA Schol Concept*1 Phase

32. Slide 32: Consumer Sector: Net Sales Market by Product

    Consumer sector market Net Sales Market by Product In the consumer sector market, we achieved growth as a result of strengthening promotional efforts with regard to MVNO distribution channels and OEM providers. We aim to achieve further growth through the release of security products for individual

33. Slide 33: 04. FY03/26 Initiatives

    Consolidated Financial Results for the First Three Months of the Fiscal Year Ending March 31, 2026 04. FY03/26 Initiatives Copyright © Digital Arts Inc.

34. Slide 34: Entire Security Market

    Product Strategy and Sales Strategy Entire Security Market Following a recent increase in the number of security incidents, the security market is growing faster than when the Medium-Term Management Plan (From FY March 2025 to FY March 2027) was being formulated. The need for security measures is ex

35. Slide 35: Product Strategy

    Product Strategy and Sales Strategy Product Strategy The Group will enhance its solutions in promising areas where the market is growing at a high rate and where the Group's advantages can be used, and it will carry out research and development in investment areas for the future expansion of its bus

36. Slide 36: Sales Strategies for Different Sizes of Corporation

    Product Strategy Implementation of Sales Strategies for Different and Sales Strategy Sizes of Corporation We will develop sales strategies tailored to company size, centered around our new product, Z-FILTER. Number of employees by company size Sales strategy  Step up direct promotion activities Lar

37. Slide 37: Focus on Target Industries

    Product Strategy and Sales Strategy Focus on Target Industries We will conduct intensive sales and marketing activities targeting industries determined in view of conformity to industry guidelines not only company size, the trends in orders gained, compliance with ISMS standards and others. Conformi

38. Slide 38: Phase 2 of the GIGA School Concept

    Increase in Public Sector Market Share Phase 2 of the GIGA School Concept Implementation of the second phase of GIGA School Concept began in 2024 (FY March 2025). [ GIGA School Concept operated by the Ministry of Education, Culture, Sports, Science and Technology ] 2019 2020 2021 2022 2023 2024 2025

39. Slide 39: Initiative for Phase 2 of the GIGA School Concept

    Increase in Public Sector Market Share Initiative for Phase 2 of the GIGA School Concept As a result of following up with existing customers and promoting the advantages of our products, our market share has expanded. Furthermore, we will work on setting appropriate unit prices (raising unit prices)

40. Slide 40: Timing of the Replacement of Devices

    Increase in Public Phase 2 of the GIGA School Concept - Timing of the Replacement of Devices - Sector Market Share When replacing GIGA devices in FY March 2025, one board of education considered the joint procurement of devices for a long time and another postponed their replacement to FY March 2026

41. Slide 41: Next-Generation School Affairs DX

    Increase in Public Sector Market Share Next-Generation School Affairs DX 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 bill

42. Slide 42: Initiative for Next-Generation School Affairs DX

    Increase in Public Sector Market Share Initiative for Next-Generation School Affairs DX The release of “Z-FILTER” expands the range of areas our products cover, and we expect this to lead to an increase in project unit prices. Overview diagram of security measures in school affairs DX Security suppo

43. Slide 43: Schedule for Development of Next-Generation School Affairs DX

    Increase in Public Schedule for Development of Next-Generation Sector Market Share School Affairs DX Preparations for the launch of the school affairs support system are expected to progress even further this fiscal year than previous fiscal year. [School Affairs DX development schedule] POINT % of

44. Slide 44: 05. FY03/26 Status of Measures

    Consolidated Financial Results for the First Three Months of the Fiscal Year Ending March 31, 2026 05. FY03/26 Status of Measures Copyright © Digital Arts Inc.

45. Slide 45: Market shares of i-FILTER and m-FILTER

    Market shares of i-FILTER and m-FILTER in the enterprise sector and public sector markets Market shares of i-FILTER in the enterprise sector Market shares of m-FILTER in the enterprise sector and public sector markets and public sector markets According to the ITR Market Review: Cyber Security Solut

46. Slide 46: Trends in target industries

    Product Strategy and Sales Strategy Trends in target industries Japan's Financial Services Agency (FSA) has reportedly requested financial institutions to stop using PPAP. There is a high likelihood that demand for PPAP countermeasures will accelerate in the financial industry. The Financial Service

47. Slide 47: What is "White Operation"?

    Reference: What is our mainstay solutions “White Operation” ? White operations use a whitelist method that permits users to connect only to websites and email messages that have been verified as secure in advance. It protects ICT environments from known and unknown threats irrespective of the comput

48. Slide 48: New Product Z-FILTER

    Product Strategy New Product [Z-FILTER] scheduled for release this fall and Sales Strategy Achieves secure access from inside and outside of a company to not only its external resources but also its internal resources. Solves the issues of existing zero trust security products such as deployment set

49. Slide 49: Difference Between i-FILTER and Z-FILTER

    Reference: Difference Between i-FILTER and Z-FILTER Z-FILTER includes all of the functions of i-FILTER. In addition, it is equipped with ZTNA and cloud FW functions and can thus control all communications. i-FILTER covers: Z-FILTER covers: In-house systems SaaS/Web In-house systems SaaS/Web SWG CASB

50. Slide 50: Progress of Phase 2 of the GIGA School Concept (1)

    Increase in Public Progress of Phase 2 of the GIGA School Concept (1) Sector Market Share The percentage of boards of education introducing pay filtering is now higher than in the first phase of GIGA School Concept. Introduction of filtering under the GIGA Schol Concept*1 Phase 1 of the GIGA Schol C

51. Slide 51: Progress of Phase 2 of the GIGA School Concept (2)

    Increase in Public Progress of Phase 2 of the GIGA School Concept (2) Sector Market Share By promoting the competitive advantage of i-FILTER through sales and marketing activities, market share expanded further from the end of March 2025. Introduction of filtering under the GIGA Schol Concept*1 Phas

52. Slide 52: Release of a comprehensive security product for individual customers

    Product Strategy Release of a comprehensive security product for individual customers and Sales Strategy The market share gained by broadly advertising i-FILTER—a product that has a competitive advantage—through sales and marketing activities has grown even further since the end of March, 2025. Majo

53. Slide 53: 06. FY03/26 Full-Year Financial Forecast

    Consolidated Financial Results for the First Three Months of the Fiscal Year Ending March 31, 2026 06. FY03/26 Full-Year Financial Forecast Copyright © Digital Arts Inc.

54. Slide 54: Full-Year Financial Forecast (Consolidated)

    Full-Year Financial Forecast for the Fiscal Year Ending March 31, 2026 (Consolidated) We will carry out product and sales strategies in the enterprise sector market and maximize our market share and the amount of orders received in the public sector market to achieve the growth of net sales, operati

55. Slide 55: Full-Year Financial Forecast (Non-Consolidated)

    Full-Year Financial Forecast for the Fiscal Year Ending March 31, 2026 (Non-Consolidated) We will carry out product and sales strategies in the enterprise sector market and maximize our market share and the amount of orders received in the public sector market to achieve the growth of net sales, ope

56. Slide 56: Status of Consolidated Net Sales

    Status of Consolidated Net Sales Consolidated net sales are forecast as follows: Status of Consolidated Net Sales Net sales for the current fiscal year (Millions of Yen)  For the current fiscal year, contracts are projected at 16,475 25,000 million yen. Our future actions aimed at reaching this lev

57. Slide 57: Status of Consolidated Contracts by Market

    Status of Consolidated Contracts by Market Consolidated contracts by market are forecast as follows: Trend in Consolidated Contracts by Market (Millions of Yen) Enterprise sector market Enterprise Public Consumer  Contracts are expected to grow, reflecting the expansion of White 16,475 Operation th

58. Slide 58: Status of Consolidated Net Sales by Market

    Status of Consolidated Net Sales by Market Consolidated net sales by market are forecast as follows: Trend in Consolidated Net Sales by Market (Millions of Yen) Enterprise sector market Enterprise Public Consumer  Net sales are expected to grow, reflecting the expansion of White Operation through p

59. Slide 59: Consolidated Cost of Sales and SG&A Expenses Forecast

    Consolidated Cost of Sales and Selling, General and Administrative Expenses Regarding cost of sales, depreciation is projected to increase, mainly due to investment in development personnel and product enhancement. Selling, general and administrative expenses are expected to rise mainly due to the i

60. Slide 60: Status of Consolidated Cost of Sales

    Status of Consolidated Cost of Sales Depreciation is expected to increase due to investments in personnel for the development of new products and new functions and the development and improvement of software. Communication expenses are forecast to increase slightly after implementation of fundamenta

61. Slide 61: Status of Consolidated SG&A Expenses

    Status of Consolidated Selling, General and Administrative Expenses Personnel expenses and hiring expenses are expected to increase for increasing investment in personnel, which is a priority area in the Medium-Term Management Plan. Status of Consolidated Selling, General and Administrative Expenses

62. Slide 62: Plan for Progress against the Full-Year Consolidated Financial Forecast

    Plan for Progress against the Full-Year Consolidated Financial Forecast The plan envisions progress in contracts to be made mainly in the second half due to the concentration of orders for projects for the second phase of GIGA School Concept and other orders in the second half. The plan foresees tha

63. Slide 63: 07. FY03/26 Return to Shareholders

    Consolidated Financial Results for the First Three Months of the Fiscal Year Ending March 31, 2026 07. FY03/26 Return to Shareholders Copyright © Digital Arts Inc.

64. Slide 64: Return to Shareholders for the Fiscal Year Ending Mar. 2026

    Return to Shareholders for the Fiscal Year Ending Mar. 2026 Starting FY March 2026, we will change our shareholder return policy as follows to strengthen our stance on returning profit to shareholders. Under the new policy, we plan shareholder returns for the fiscal year ending March 31, 2026 as fol

65. Slide 65: 08. Appendix

    Consolidated Financial Results for the First Three Months of the Fiscal Year Ending March 31, 2026 08. Appendix Copyright © Digital Arts Inc.

66. Slide 66: Method of recording sales by product

    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 Con

67. Slide 67: Relationship between contract amount and sales (one-year contracts)

    Relationship between contract amount and sales Supplement by product (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 million

68. Slide 68: Relationship between contract amount and sales (multi-year contracts)

    Relationship between contract amount and sales Supplement by product (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 con

69. Slide 69: 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

70. Slide 70: For internet convenience, safety and security

    - For internet convenience, safety and security -

Digital Arts — Q1 FY2026 Earnings Presentation on 6ix