Digital Arts Inc. · TSE:2326
Digital Arts — H1 FY March 2024 Earnings Presentation
59 slides from Digital Arts's earnings presentation, Oct 31, 2023
Slide 1: Consolidated Financial Results for the First Half of FY Ending March 2024
Consolidated Financial Results for the First Half of the Fiscal Year Ending March 31, 2024 (From April 1, 2023 to September 30, 2023) Financial Results Briefing Materials October 31, 2023 Digital Arts Inc. (Securities Code: 2326) Copyright © 2015 Digital Arts Inc.
Slide 2: Product Lineup
Product Lineup Web E-mail file Enabling users to securely connect to Enabling users to securely send and File encryption solution File transfer solution websites without security concerns receive email without security concerns Automatically protecting files from Supporting secure file the moment of
Slide 3: Contents
Contents 01 Consolidated Results Highlights 02 Non-consolidated Results Highlights 03 Net Sales by Market 04 Status of Measures for the Fiscal Year Ending March 2024 05 FY03/24 Initiatives 06 Full-Year financial Forecast for the Fiscal Year Ending March 2024 07 Return to Shareholders for the Fiscal
Slide 4: Consolidated Results Highlights
Material on Consolidated Financial Results for the First Half of the Fiscal Year Ending March 31, 2024 01 Consolidated Results Highlights 4 Copyright © Digital Arts Inc.
Slide 5: Consolidated Results Highlights
Consolidated Results Highlights • In the enterprise section market, the Group achieved growth by winning new projects and new customers for DAC. It did so by Contracts 4,976million yen offering a new optional function to respond rising demand for cloud services and comprehensive security needs. • In
Slide 6: Consolidated Statement of Income
Consolidated Statement of Income Expenses increased primarily due to preparations for the release of new products and new functions and a rise in the number of DAC staff members. (Million yen) FY March 2023 FY March 2024 FY March 2024 Change YoY 1H 1H Full-Year Forecast Contracts 4,737 4,976 ＋5.0% -
Slide 7: Consolidated Cost of Goods Sold and SG&A Expenses
Consolidated Cost of Goods Sold and Selling, General and Administrative Expenses FY March 2023 FY March 2024 1H 1H Change YoY Main Factors for Change (Million yen) Cost of goods sold 1,668 2,128 +460 Increase due to the enhancement of DAJ's*1 development Labor 727 923 +195 workforce (+24M) It rose w
Slide 8: Trend in Consolidated Contracts
Trend in Consolidated Contracts Consolidated contracts totaled 4,976 million yen, up +5.0% year on year. Trend in Contracts Cloud service products • Contracts for cloud service products License sales products/Others increased 1.9% because the Group not 4,976 (Million yen） only gained new projects st
Slide 9: Trend in Consolidated Contracts: Order Backlog
Trend in Consolidated Contracts The order backlog excluding GIGA School projects increased despite a reduction of total contracts. Trend in order backlog ① Many GIGA School Concept projects are five- year contracts. Over time, more sales are Sales FY3/2025 onwards (GIGA) Sales 3-4Q FY3/2024 (GIGA) S
Slide 10: Change in Net Sales
Change in Net Sales Consolidated net sales grew 9.4% year on year, to ¥5,563 million. Change in Net Sales Cloud service products License sales products/Others 5,563 (Million yen) (+9.4%) • Net sales of cloud service products 5,084 increased 12.5% year on year, reflecting the steady acquisition of ne
Slide 11: Quarterly Trend in Net Sales, Operating Profit
Quarterly Trend in Net sales, Operating profit Net sales hit a record high in the Second quarter under review. (Million yen) 1Q 2Q 3Q 4Q 10,436 9,051 2,778 2,364 6,825 5,639 2,573 5,563 2,074 2,134 1,500 4,413 4Q 4,126 1,649 3,022 2,977 1,101 2,698 1,185 1,376 3Q 2,632 2,326 980 1,004 945 2,188 1,68
Slide 12: Quarterly Trend in Consolidated Cost of Goods Sold
Quarterly Trend in Consolidated Cost of Goods Sold Cloud server expenses (communication expenses) and labor costs increased, the former due to a rise in the number of licenses for cloud service products and foreign exchange rate fluctuations and the latter reflecting the enhancement of DAC's consult
Slide 13: Quarterly Trend in Consolidated SG&A Expenses
Quarterly Trend in Consolidated Selling, General and Administrative Expenses Personnel expenses Advertising expenses (Million yen) other 660 648 609 609 597 574 578 558 169 526 501 499 485 487 238 229 214 191 216 232 414 59 204 153 193 195 166 159 78 80 59 77 161 44 74 67 79 32 58 51 70 34 432 301 3
Slide 14: Consolidated Balance Sheet
Consolidated Balance Sheet The equity ratio increased to 68.1%, reflecting a decrease in total assets after the acquisition of treasury shares and payment of dividends. (Million yen) Change from As of end of As of end of As of end of end of FY Main Factors for Change 2Q FY March 2023 FY March 2023 2
Slide 15: Non-consolidated Results Highlights
Material on Consolidated Financial Results for the First Half of the Fiscal Year Ending March 31, 2024 02 Non-consolidated Results Highlights 15 Copyright © Digital Arts Inc.
Slide 16: Summary of Non-consolidated Results
Summary of Non-consolidated Results SG&A expenses increased due to the development of new products and a rise in communication expenses (cloud server expenses). (Million yen) FY March 2023 FY March 2024 FY March 2024 Change YoY 1Q 1Q Full-Year Forecast Contracts 4,032 3,962 △1.7% - Net sales 4,379 4
Slide 17: Net Sales by Market
Material on Consolidated Financial Results for the First Half of the Fiscal Year Ending March 31, 2024 03 Net Sales by Market 17 Copyright © Digital Arts Inc.
Slide 18: Consolidated Contract Amount by Market
Consolidated Contract Amount by Market The contract amount expanded in the enterprise sector market while it contracted in the public sector market. Trend in Consolidated Contract • In the enterprise sector market, the contract Amount by Market amount was up 408 million yen or 15.9% due to (Million
Slide 19: Consolidated Net Sales by Market
Consolidated Net sales by Market Positive growth was achieved in both the enterprise sector market and in the public sector market. Trend in Consolidated Net Sales • In the enterprise sector market, net sales by Market increased 17.2%, or 441 million yen, due to a rise (Million yen) in the number of
Slide 20: Trend in Consolidated Net Sales by Market
Trend in Consolidated Net Sales by Market Net sales for the first half reached a record high. 5,563 (Million yen) 211 Consumer 5,084 224 4,552 229 2,337 Public 2,287 3,101 2,051 2,764 2,764 219 2,420 2,468 235 254 174 179 1,049 1,935 1,108 970 1,610 170 922 1,096 175 3,014 Enterprise 754 2,573 609 2
Slide 21: Quarterly Trend in Consolidated Net Sales by Market
Quarterly Trend in Consolidated Net Sales by Market Net sales for the second quarter were a record high. (Million yen) 3,022 2,778 105 Consumer 2,632 2,698 2,573 105 118 2,541 2,364 2,386 115 103 106 2,074 2,134 116 105 1,320 Public 1,919 98 1,203 109 1,269 1,687 1,649 113 1,313 1,195 1,016 1,017 1,
Slide 22: Enterprise Sector
03 Net Sales by Market Enterprise Sector 22 Copyright © Digital Arts Inc.
Slide 23: Net Sales in Enterprise Sector Market by Product
Net Sales in Enterprise Sector Market by Product In response to the expansion of the scope of protection following the increasing frequency of damage from more diverse cyber attacks and the expansion of scope for security in line with the trend towards one-stop security measures, the Group released
Slide 24: Net Sales Growth and Expansion of DAC
Net Sales Growth and Expansion of DAC on a Non-consolidated Basis Number of consultants Security consulting sales* IT strategy consulting sales* (Persons) (Million yen) (Million yen) 225 101 116 783 502 197 End of FY March End of 2Q FY FY Mar. 2023 FY Mar. 2024 FY Mar. 2023 FY Mar. 2024 2023 March 2
Slide 25: Public Sector
03 Net Sales by Market Public Sector 25 Copyright © Digital Arts Inc.
Slide 26: Net Sales of Public Sector Market by Product
Net Sales of Public Sector Market by Product Notable changes in the market include the closure of classes using computers following the widespread use of GIGA terminals and the reduction of demand from local governments for the improvement of security. Trend in Net Sales of Public Sector Market by P
Slide 27: GIGA School Concept
GIGA School Concept Introduction of filtering under the GIGA School Concept*1 Introduction of charged filtering Share of charged filtering introduced Not yet introduced,etc. 25% Competitors 41% Charged filtering already i-FILTER 59% introduced 75% • The percentage of boards of education that • i-FIL
Slide 28: Consumer Sector
03 Net Sales by Market Consumer Sector 28 Copyright © Digital Arts Inc.
Slide 29: Net Sales of Consumer Sector Market by Product
Net Sales of Consumer Sector Market by Product New issues raised include filtering measures for bring-your-own-devices (BYOD) for learning. Trend in Net Sales of Consumer Sector Market by Product (Million yen) 224 211 (△5.5%) • In products for computers, the number of users of multiple-year package
Slide 30: Status of Measures for FY Ending March 2024
Material on Consolidated Financial Results for the First Half of the Fiscal Year Ending March 31, 2024 04 Status of Measures for the Fiscal Year Ending March 2024 30 Copyright © Digital Arts Inc.
Slide 31: Progress in the Product Roadmap in FY March 2024
Progress in the Product Roadmap in FY March 2024 The functional upgrade to fulfill comprehensive security needs and new product releases, both of which were due to be done in the current fiscal year, were almost done by 2Q. Regarding the launch of the communication business, the product was rele
Slide 32: Status of Measures to Be Implemented in FY March 2024
Status of measures to be implemented in the fiscal year ending March 31, 2024 Introduction of new products to fulfill comprehensive security needs and implementation of active marketing efforts. Among the efforts for public entities and schools, products for enhancing security for local governme
Slide 33: FY03/24 Initiatives
Material on Consolidated Financial Results for the First Half of the Fiscal Year Ending March 31, 2024 05 FY03/24 Initiatives 33 Copyright © Digital Arts Inc.
Slide 34: Responding to the ICT Environment
05 FY03/24 Initiatives Responding to the ICT Environment 34 Copyright © Digital Arts Inc.
Slide 35: Strategy in Security Products Market
Strategy in Security Products Market Expand the product portfolio to promote synergy in terms of the existing main products' functions and customer base. Investment areas Future core areas (stable areas) Promising ＝ Market growth rates High Future promising areas areas 30.2% XDR 22.6% SASE 20.3% CSP
Slide 36: Expansion of White Operation
Responding to the ICT Environment Expansion of White Operation Maximize synergy between the existing main products and new products, centering around White Operation, which is our strength. What is White Operation? The products adopt White Operation based on whitelist database, instead of blacklisti
Slide 37: Areas of Focus for This Term
Responding to the ICT Environment Areas of Focus for This Term Release new products/new functions for Network, Authentication, Terminal/Data and Chat and Online Conferencing System aiming at providing the total support for the ICT environment. ＝ Area of focus ICT environment Solutions for this term
Slide 38: New Products and New Function Releases: CASB and AI Chat Filter
Responding to the ICT Environment New Products and New Function Releases Add the CASB function, to be one of the main functions in the next-generation SWG plan, and Network a new function for visualizing/controlling the status of use of generative AI increasingly in Security demand, to i-FILTER as s
Slide 39: New Products and New Function Releases: MailAdviser OWA
Responding to the ICT Environment New Products and New Function Releases • A product to provide pop-ups for email misdelivery supporting the Outlook Web Access (OWA) environment Network • Equipped with the original function to solve PPAP issues, meeting a wide range of needs for security Security me
Slide 40: New Products and New Function Releases: StartIn
Responding to the ICT Environment New Products and New Function Releases Release StartIn, a new product featuring the original multifactor authentication Authentication method, in addition to ID management, log management and ID provisioning, security and providing secure authentication when using S
Slide 41: New Products and New Function Releases: f-FILTER
Responding to the ICT Environment New Products and New Function Releases • Release f-FILTER, an original solution to file transfer featuring the DLP function Data • Meeting the needs for measures to prevent information leakage of terminals/data security in the ICT environment (i) Check the files tak
Slide 42: New Products and New Function Releases: Desk
Responding to the ICT Environment New Products and New Function Releases Chat and Online • Desk was released on June 21 (our anniversary of foundation), Conferencing launching the communication business. System • Addressing security risks emerging in communication. Chat and online conferencing Chats
Slide 43: Education Business (GIGA School/School Affairs DX)
05 FY03/24 Initiatives Education Business (GIGA School/School Affairs DX) 43 Copyright © Digital Arts Inc.
Slide 44: Education Business Performance Forecasts
Education Business Performance Forecasts In the education business, contracts can be expected to increase due to the special demands for GIGA School Concept, Next-generation school affairs DX and DX high school* for the five years following the FY March 2024. Single year budget size Approx. ¥195.3 b
Slide 45: Update Timing for GIGA Terminal
NEXT GIGA Update Timing for GIGA Terminal GIGA terminals are being gradually updated due to the NEXT GIGA School Concept since FY2024 and will go into full swing in FY2025. GIGA terminal update timing FY2023 Other （0.4%） POINT （6.6%） FY2024 （8.0%） The Ministry of Education, Culture, Sports, From F
Slide 46: Support for Guideline
School Affairs DX Support for Guideline 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 billion yen on a single-year basis h
Slide 47: Development Schedule
School Affairs DX Development Schedule Security measures in school affairs DX will start from FY2024, aiming to bring the system into operation in FY2025. ◆ Schedule for introduction/renewal of integrated school affairs support systems No plans to Fiscal year FY2025 FY2026 FY2027 FY2028 FY2029 intro
Slide 48: Full-Year Financial Forecast for FY Ending March 2024
Material on Consolidated Financial Results for the First Half of the Fiscal Year Ending March 31, 2024 06 Full-Year financial Forecast for the Fiscal Year Ending March 2024 48 Copyright © Digital Arts Inc.
Slide 49: Forecasts for FY Ending March 2024 (Consolidated)
Forecasts for Fiscal Year Ending March 31, 2024 (Consolidated) Expand existing businesses and develop new businesses with the aim of increasing net sales and profit (Million yen) FY March 2023 FY March 2024 Change % Change Full-Year Results Full-Year Forecasts Net sales 10,436 11,500 ＋1,063 ＋10.2 %
Slide 50: Forecasts for FY Ending March 2024 (Non-consolidated)
Forecasts for Fiscal Year Ending March 31, 2024 (Non-consolidated） Expand existing businesses and develop new businesses with the aim of increasing net sales and profit (Million yen) FY March 2023 FY March 2024 Change % Change Full-Year Results Full-Year Forecasts Net sales 8,984 10,000 ＋1,015 ＋11.3
Slide 51: Status of Consolidated Net Sales
Status of Consolidated Net Sales Consolidated net sales are forecast as follows: Consolidated Forecast • Net sales that will be carried over to and (Million yen） posted for the fiscal year in question will increase given an increase in the number of contracts acquired in previous fiscal years in con
Slide 52: Status of Consolidated Net Sales by Market
Status of Consolidated Net Sales Consolidated net sales by market are forecast as follows: Forecast by Market • In response to corporate needs for total security solutions, we will enhance the 11,500 (Million yen） product lineup in order to attract new (+10.2%) clients. 10,436 ＋5.3％ 456 Consumer • N
Slide 53: Consolidated Cost of Goods Sold and SG&A Expenses Forecast
Consolidated Cost of Goods Sold and Selling, General and Administrative Expenses Labor costs, communication expenses and personnel expenses are expected to increase after the release of the new products/new functions. (Million yen) Results for Forecast for Change YoY Main Factors for Change FY March
Slide 54: Status of Consolidated Cost of Goods Sold
Status of Consolidated Cost of Goods Sold The increase in DAJ’s development personnel will lead to a rise in labor expenses. Cloud server expenses (communication expenses) will grow with the expansion of sales of cloud service products and an increase in the number of licenses. Status of Consolidate
Slide 55: Status of Consolidated SG&A Expenses
Status of Consolidated Cost of Goods Sold Personnel expenses will surge due to an increase in the number of staff after new graduates employees joined the Group. Travel and transportation expenses as well as entertainment expenses (as part of Other) will increase as the COVID-19 pandemic fades. Stat
Slide 56: Return to Shareholders for FY Ending March 2024
Material on Consolidated Financial Results for the First Half of the Fiscal Year Ending March 31, 2024 07 Return to Shareholders for the Fiscal Year Ending March 31, 2024 56 Copyright © Digital Arts Inc.
Slide 57: Return to Shareholders for the Fiscal Year Ending March 31, 2024
Return to Shareholders for the Fiscal Year Ending March 31, 2024 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, 2024: 31.6% Annual dividends of surplus forecasted for fiscal year ending Mar
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. on the basis of information currently availa
Slide 59: For internet convenience, safety and security
-For internet convenience, safety and security - Copyright © 2015 Digital Arts Inc.
Digital Arts — H1 FY March 2024 Earnings Presentation on 6ix