Digital Arts Inc. · TSE:2326

Digital Arts — 9M FY2025 Earnings Presentation

62 slides from Digital Arts's earnings presentation, Jan 31, 2025

  1. Slide 1: Consolidated Financial Results for the First Nine 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 December 31, 2024 Consolidated Financial Results for the First

  2. Slide 2: Company Profile

    Company Profile Domestic For Internet Convenience, 13.71 million High software Safety and Security active users profitability *1 developer Company Name Digital Arts Inc. Date of Tokyo Stock Exchange Prime Market June 1995 Stock Market Establishment (Securities Code: 2326) Listed on September 2002 Nu

  3. 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 Option Option Endpoint Secure proxy Malicious website-filtering Measures to provide pop-ups for email misdelivery NEW Web Sec

  4. 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, mainly propelled by the growth of the enterprise sector market, the Group achieved the growth of net sales for the first nine months of the fiscal year ending March 31,

  5. 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 31, 2025 06 - Full-Year Financial Forecast for the Fiscal Year Ending March 31, 2025 07 - Return to Shareho

  6. Slide 6: Consolidated Results Highlights

    01 Consolidated Results Highlights Consolidated Financial Results for the First Nine Months of the Fiscal Year Ending March 31, 2025 Copyright © Digital Arts Inc. 6

  7. Slide 7: Consolidated Results Highlights

    01 Consolidated Results Highlights 6,858 The Group achieved growth by capturing the demand for cloud security Enterprise measures related to both Internet and email and the demand for continuing on- sector market premises measures and by successfully cross-selling and upselling new Contracts million

  8. Slide 8: Consolidated Statement of Income

    01 Consolidated Statement of Income The contract amount increased around 20% reflecting the brisk performance in both the enterprise sector market and the public sector market. In particular, the growth rate in 3Q was the second highest quarterly growth rate following the one in 3Q of the first fisc

  9. Slide 9: Trend in Consolidated Contracts

    01 Trend in Consolidated Contracts Consolidated contracts totaled 6,858 million yen, up 19.8% year on year.（Excluding DAC ） *1 Trend in Consolidated Contracts (million yen) Cloud service products License sales products/Others Cloud service products DAC  Sales of cloud-based i-FILTER and m-FILTER pr

  10. 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) Sales from the next fiscal year (GIGA) Sales for t

  11. Slide 11: Change in Consolidated Net Sales

    01 Change in Consolidated Net Sales Consolidated net sales grew 7.3% year on year, to 7,274 million yen.（Excluding DAC ） *1 Change in Consolidated Net Sales (million yen) License sales products/Others Cloud service Products DAC Cloud service products 8,322  Sales were up due to progress in the post

  12. Slide 12: Supplement: 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

  13. Slide 13: Relationship between contract amount and sales (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

  14. Slide 14: Relationship between contract amount and sales (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

  15. 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 2,078 357 7,274 6,825 2,223 218 249 2,216 2,436 1,855 1,884 556 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 3,145 2,390 176 980 933

  16. 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

  17. 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 acounts (million yen) 1,527 1,450 1,340 250 1,235 1,248 270 400 1,204 332 231 1,102 229 351 1,084 239 221 989 244 220 302 1,027 962 984 946 921 247 201 220 345 356 154 32

  18. Slide 18: Quarterly Trend in Consolidated SG&A Expenses

    01 Quarterly Trend in Consolidated Selling, General and Administrative Expenses Personnel expenses Advertising expenses Others (million yen) 660 669 648 646 633 609 609 597 608 597 574 578 558 169 526 215 248 487 238 214 244 229 224 223 191 232 59 216 204 193 159 66 80 106 59 78 77 86 92 60 74 67 79

  19. Slide 19: Consolidated Balance Sheet

    01 Consolidated Balance Sheet Current assets decreased from the end of the previous fiscal year due to the payment of income taxes. The equity ratio was up 7.6 percentage points from the end of the previous fiscal year, to 78.6%. (million yen) Change from As of end of 3Q As of end of As of end of 3Q

  20. Slide 20: Non-consolidated Results Highlights

    02 Non-consolidated Results Highlights Consolidated Financial Results for the First Nine Months of the Fiscal Year Ending March 31, 2025 Copyright © Digital Arts Inc. 20

  21. Slide 21: Summary of Non-consolidated Results

    02 Summary of Non-consolidated Results The contract amount increased around 20% reflecting the brisk performance in both the enterprise sector market and the public sector market. In particular, the growth rate in 3Q was the second highest quarterly growth rate following the one in 3Q of the first f

  22. Slide 22: Net Sales by Market

    03 Net Sales by Market Consolidated Financial Results for the First Nine Months of the Fiscal Year Ending March 31, 2025 Copyright © Digital Arts Inc. 22

  23. Slide 23: Consolidated Contract Amount by Market

    03 Consolidated Contract Amount by Market As in 2Q, double digit growth was recorded in both the enterprise sector market and in the public sector market. (Excluding DAC ) *1 Trend in Consolidated Contract Amount by Market (million yen) Enterprise sector market Enterprise Public Consumer DAC  The c

  24. Slide 24: Consolidated Net Sales by Market

    03 Consolidated Net sales by Market As in 2Q, double digit growth was recorded in the enterprise sector market. In the public sector market, slight growth was achieved as a result of an unexpectedly significant increase in the cloud service product sales share. (Excluding DAC ) *1 Enterprise sector

  25. Slide 25: Trend in Consolidated Net Sales by Market

    03 Trend in Consolidated Net Sales by Market Net sales for the first nine months reached a record high. (Excluding DAC ) *1 (million yen) 8,322 Enterprise Public Consumer DAC 7,658 1,544 7,274 6,686 1,057 307 Consumer 313 327 755 327 4,750 3,555 Public 3,421 4,166 4,141 526 3,482 3,026 3,518 3,551 3

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

    03 Quarterly Trend in Consolidated Net Sales by Market Net sales for the nine months reached a record high. *1 (Excluding DAC ) (million yen) Enterprise Public Consumer DAC 652 556 384 108 241 381 535 105 357 106 105 Consumer 115 105 452 287 318 118 103 101 93 248 116 105 106 218 109 98 1,215 1,295

  27. Slide 27: Net Sales in Market by Product: Enterprise

    03 Net Sales in Market by Product Enterprise sector market Net sales grew enormously as a result of the capturing of demand for cloud security measures and for continued on-premises measures and the strong sales of the new f-FILTER product and the optional Anti-Virus & Sandbox product. (Excluding DA

  28. Slide 28: Net Sales Market by Product: Public

    03 Net Sales Market by Product Public sector market While the contract amount increased significantly (+33.0%) due to the acquisition of projects for the Security Improvements for Next-Generation School Affairs programs and Phase 2 of the GIGA School Concept (see page 23), Net sales increased slight

  29. Slide 29: Net Sales Market by Product: Consumer

    03 Net Sales Market by Product Consumer sector market In the consumer sector market, sales of filtering measures for mobile devices slowed following the end of demand for such measures. The Group will increase its efforts to sell these solutions to expand its target customers and tap into new demand

  30. Slide 30: FY03/25 Initiatives

    04 FY03/25 Initiatives Consolidated Financial Results for the First Nine Months of the Fiscal Year Ending March 31, 2025 Copyright © Digital Arts Inc. 30

  31. Slide 31: Product Lineup (repeat)

    04 Product Lineup *repeat Web E-mail 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 misdelivery

  32. Slide 32: Product Price

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

  33. Slide 33: i-FILTER and m-FILTER Market Shares

    04 i-FILTER and m-FILTER Market Shares i-FILTER m-FILTER According to the ITR Market Review: Cyber Security Solutions According to Current State and Future Prospect of Internal Market 2024 market research report published by ITR Threat Control Solutions Market in FY2023 Corporation, i-FILTER had a 5

  34. Slide 34: What is our mainstay solutions White Operation?

    04 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 computer liter

  35. Slide 35: Product Strategy: Market growth rate

    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*1 Investment areas Promisi

  36. Slide 36: 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

  37. Slide 37: 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

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

  39. Slide 39: Phase 2 of the GIGA School Concept: replacement timing

    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

  40. Slide 40: 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 ffairs DX: *As a regional fiscal measure, financial support of 180.5 bi

  41. Slide 41: 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

  42. Slide 42: 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]

  43. Slide 43: Status of Measures for the Fiscal Year Ending March 31, 2025

    05 Status of Measures for the Fiscal Year Ending March 31, 2025 Consolidated Financial Results for the First Nine Months of the Fiscal Year Ending March 31, 2025 Copyright © Digital Arts Inc. 43

  44. Slide 44: 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

  45. Slide 45: Take measures for AI security

    05 Take measures for AI security New Functions released in December Strengthen generative AI security using i-FILTER A function that visualizes the state of use of generative AI Word-by-word filtering control Solving data leaks and other A function that allows users to allow only issues connected to

  46. Slide 46: Toughening of Security for Local Government

    05 Toughening of Security for Local Government: Compliance with New Guidelines The α model is a commonly used security solution characterized by three-layer isolation. It is used for Local Governments' networks and personal computers and other business devices connected to them. Because of its empha

  47. Slide 47: 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 [

  48. Slide 48: New Function for GIGA School Concept

    05 New Function for GIGA School Concept 1 New functions released in the current fiscal year 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 s

  49. Slide 49: New Function for GIGA School Concept

    05 New Function for GIGA School Concept 2 A major update in the current fiscal year 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 l

  50. Slide 50: 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

  51. Slide 51: 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 Nine Months of the Fiscal Year Ending March 31, 2025 Copyright © Digital Arts Inc. 51

  52. Slide 52: 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

  53. Slide 53: 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

  54. Slide 54: 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

  55. Slide 55: 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

  56. Slide 56: 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

  57. Slide 57: 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

  58. Slide 58: 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

  59. Slide 59: Return to Shareholders for the Fiscal Year Ending March 2025

    07 Return to Shareholders for the Fiscal Year Ending March 31, 2025 Consolidated Financial Results for the First Nine Months of the Fiscal Year Ending March 31, 2025 Copyright © Digital Arts Inc. 59

  60. Slide 60: Return to Shareholders for the Fiscal Year 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

  61. Slide 61: 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

  62. Slide 62: For internet convenience, safety and security

    - For internet convenience, safety and security -

Digital Arts — 9M FY2025 Earnings Presentation on 6ix