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Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
Digital Garage - Financial Report FYE 2011
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Digital Garage - Financial Report FYE 2011

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Digital Garage's FYE 2011 financial report …

Digital Garage's FYE 2011 financial report

Source: http://www.garage.co.jp/en/ir/pdf/110812_dg_4q_en.pdf

Published in: Business, Economy & Finance
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  • 1. Digital Garage, Inc. - FYE 2011 - Financial Report August 12, 2011
  • 2. ContentsMission & Business Model ・・・・・・・ 2Group Financial Performance Review ・・・・・・・ 5FYE 2011 Segment Performance Review ・・・・・・・ 15 Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 3. Mission & Business Model Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 4. DG’s Mission context company Context Company Digital Garage creates innovative business “context” for the new internet age and provides unique business solutions for Japan’s new lifestyles, society and industries by linking: Real & Cyber Local & International Marketing & Technology Present & Future -3- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 5. DG’s Business Model context companyProduce and incubate Japan’s Internet businesseswith optimal use of our three core strengths: IT, MT and FT ★ Information Technology IT ★ Marketing Technology MT FT ★ Financial Technology -4- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 6. Group Financial Performance Review Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 7. Investment Highlights context company Mid-term Plan Initial Forecast Achieved New Media Incubation Strategy InitiatedExecuting Capital Increase through Public Offering / Building Global Investment & Development Networks I Surplus and operating income up 1 billion yen year-on-year ■ Healthy growth of Hybrid Solution businesses as enabling platform ■ Recovery of venture incubation businesses ■ Robust investment in social media/smartphone business development II U.S.-Japan real-time business intelligence/development networks ■ Establishment of Digital Garage US, Inc. as U.S. subsidiary (office: San Francisco) ■ Collaboration with MIT Media Lab (office: Boston) ■ Active foreign investments and DGs self-developed media offerings based on agile development methodsIII Capital increase through public offering to maximize long-term growth potential ■ Total of 8 billion yen in funding raised through domestic public offering ■ Venture investments and new social media development ■ Operating capital for new settlement system -6- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 8. Overview of Capital Increase through Public Offering context company July 2011: Approx. 8 billion yen raised via public offering and third-party allotment Purpose of Capital Increase Purpose of Capital Increase Application of Fund Application of Fund Amount Amount Growth Strategy in New Investment in domestic/overseas Investment 5,300 Mid-Term Management Plan Internet-related companies and Fund million yen angel funds Social Media-related business Incubation ・ Globalization Development Development of new social 938 Fund media-based service system million yen ・ Enhanced media development capability Operating fund for expanded ・ Improved solution offering Operating settlement businesses 1,500 Fund (e.g., Kakaku.com settlement million yen ・ New business opportunities with assurance service) companies with innovative services following success of Repayment Kakaku.com and U.S. Twitter Balance of debt ・ Investment in development of new social media-based service system 8,064 Total Total million yenDilution due to issuance of new shares: 14.6%Number of shares increased due to capital increase (32,000) / Total number of shares issued following capital increase (218,224)* *Total of 219,084 shares issued as of today including exercise of stock options following capital increase -7- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 9. FYE 2011 Performance Summary: Profit and Loss (Consolidated) context company FYE 2010 FYE 2011 Original Revised on Revised Year-on-Year(¥ million) Actual Actual Forecast May 27 on Aug 2 (Amount)Net sales 8,346 10,600 10,900 11,065 11,067 +2,720Operatingincome -960 -250 50 135 135 +1,095Ordinaryincome -457 500 900 970 972 +1,429Net income -2,207 310 800 900 901 +3,108 FYE 2011 Consolidated Performance First operating surplus achieved post business restructuring Driven by growth of Hybrid Solution segment, net sales increase of 32.6% and operating income increase of 1,095 million yen on year-on-year basis achieved; venture incubation segment also delivered capital gains Ordinary income increased by 1,429 million yen year-on-year as result of income growth of Kakaku.com (equity in earnings of affiliates) FYE 2011 net income increased by 3,108 million yen year-on-year (from -2,207 million yen to 901 million yen) -8- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 10. FYE 2011 Financial Summary: Balance Sheet (Consolidated) context company FYE 2010 FYE 2011 Year-on-Year (¥ million) Actual Actual AmountCurrent assets 14,208 14,345 +136 Settlement-related accounts Incl. cash and deposits 4,799 4,784 -15 Receivables: Incl. receivables 3,413 4,351 +937 Payments owed by convenience stores/credit card Money held in trust 3,155 2,501 -654 companies (average payment period: approx. two weeks)Fixed assets 5,497 6,075 +578 Money held in trust:Total assets 19,706 20,421 +714 Payments protected by trustCurrent debt 9,941 9,933 -7 Incl. deposits 5,743 6,168 425 Deposits: Payments temporarily held until Incl. interest-bearing debt 2,809 2,519 -290 paid to e-commerce clientsFixed debt 935 592 -343 Incl. interest-bearing debt 670 351 -319 Net assets followingNet assets 8,829 9,895 +1,065 capital increase Incl. retained earnings 1,497 2,398 +901 17,959Total debt/net assets 19,706 20,421 +714■ Effect of capital increase: increased net cash ■ Balance sheet improvements FYE 2010 FYE 2011 Post capital increase forecast Post capital Capital-to-asset ratio 44% 48% 63% FYE 2010 FYE 2011 increase forecast 1,320 million yen 1,914 million yen 9,978 million yen Percentage of interest-bearing debt 17% 14% 10% Net cash: (cash and deposits) - (interest-bearing debt) -9- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 11. Segment for FYE 2011 (Consolidated) context company FYE 2010 FYE 2011 Year-on-Year(¥ million) (Actual) (Actual) (Amount)( Hybrid Solution Segment ) Net sales 7,527 9,252 +1,725 Operating 150 634 +483 income( Media Incubation Segment ) Net sales 812 634 △177 Operating △107 △218 △111 income( Venture Incubation Segment ) Net sales 7 1,180 +1,173 Operating △143 688 +831 income * Operating income: based on figures prior to Group tax deduction -10- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 12. Quarterly Comparisons of Consolidated Segment Net Sales/Operating Income context companyHybrid Solution Segment(¥ million) Net sales Operating income3,000 250 2,5652,500 2,384 200 191 201 2,297 2,187 2,005 1,836 1342,000 1,765 150 1,738 1071,500 100 68 32 511,000 50 500 0 -2 0 -50 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FYE 2010 FYE 2011 FYE 2010 FYE 2011Performance Review■ Steady growth in comprehensive total promotion business based on real/Web service integration■ Record-high total of settlement transactions driven by strong performance in gaming and travel sectors■ Increased number of stores using ; full-scale contribution to revenue expected to start in next year -11- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 13. Quarterly Comparisons of Consolidated Segment Net Sales/Operating Income context companyMedia Incubation Segment (¥ million) Net sales Operating income 250 0 230 237 231 200 -13 188 -20 -19 155 143 150 137 -40 -35 122 -39 -36 -43 100 -60 -55 50 -80 -83 0 -100 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FYE 2010 FYE 2011 FYE 2010 FYE 2011Performance Review■ Twitterad sales back on growth trend following inventory adjustment upon introduction of new user interface in September■ Newsales record set at end of term despite nation-wide voluntary restraint in advertising in immediate aftermath of earthquake disaster■ Focus on mobile business restructuring (Wheel established in December and DG Mobile sold in March) and smartphone-related businesses strengthened -12- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 14. Quarterly Comparisons of Consolidated Segment Net Sales/Operating Income context companyVenture Incubation Segment (¥ million) Net sales Operating income 1,000 800 939 604 800 600 600 400 200 163 400 240 200 0 -26 -29 -20 -69 -16 0 7 0 0 0 0 -63 0 -200 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FYE 2010 FYE 2011 FYE 2010 FYE 2011Performance Review■ Due to sharply-rising stock valuations among U.S.-based SNS companies, exit strategy with carefully-timed sale being pursued■ Investment in graduates from Japans first seed accelerator program "Open Network Lab" started■ Partnership with renowned investors expanded, while conducting further investment in promising overseas ventures by leveraging strong yen -13- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 15. Performance Forecast for FYE 2012 context company(¥ million) FYE 2012 Year-on-Year FYE 2011 Actual Plan (Amount) Net sales 11,067 13,800 +2,732Operating income 135 1,350 +1,214Ordinary income 972 2,500 +1,527 Net income 901 2,100 +1,198<Net sales by segment> Hybrid Solution 9,252 9,600 +347 Media Incubation 634 2,000 +1,365 Venture Incubation 1,180 2,200 +1,019 <Operating income by segment> Hybrid Solution 634 650 +15 Media Incubation △218 260 +478 Venture Incubation 688 1,500 +811 -14- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 16. FYE 2011Segment Performance Review Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 17. Enabling platform and net business incubation context companyFrom the beginning of the internet era, DG has been acceleratingincubation of internet services utilizing “Enabling Platform” 1995~2000 2000~2008 2008~ Advertisement Settlement Promotion/Solution Social Marketing e-commerce/Social Commerce national client national client Number of transactions 15 million 280 companies 425 companies Total amount of transactions 116 billion yen Enabling Platform -16- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 18. New Business Model as Social Media Incubator following Capital Increase context company Next Decade: Development and Global Application of New MediaNew business development as social media incubator accelerated following recent capital increase Discovery Incubation/Structure Realize promising investment Establish agile structure that flexibly opportunities more rapidly and adapts to rapidly-changing Internet extensively business marketSan Francisco Boston Verification Services DG US Social Media Quality IncubatorInformation Participationgathering in leading/development R&D projectsbase Development Discovery of promising services that create global Agile development: standard developed A method that quickly improves service quality by Tokyo in Japan repeating development and verification process in a short cycle, the main approach used by leading Internet companies such as Twitter and Google -17- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 19. Business Segment context companyⅠ Venture Incubation Segment- Silicon Valley-type hands-on incubation (import) Venture- Support of Japanese startups targeting at overseas market (export) IncubationⅡ Media Incubation Segment - Develop new next-generation social media Media IncubationⅢ Hybrid Solution Segment Hybrid Solution - Departure from existing commissioned- type Integration and Settlement business -18- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 20. Venture Incubation Media Incubation Hybrid SolutionI Venture Incubation Segment ➤ DG Incubation, Inc. Venture business incubation through investment and development ➤ Open Network Lab Internet-based business accelerator program for aspiring engineers Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 21. Business Overview: Venture Incubation Segment Performance context companyI Venture Incubation Segment Net sales Operating income FYE 2010 Actual 7 million yen -143 million yen FYE 2011 Actual 1,180 million yen 688 million yen FYE 2012 Forecast 2,200 million yen 1,500 million yen Incubate and support high-quality Japanese ventures while actively Incubate and support high-quality Japanese ventures while actively investing in overseas ventures based primarily in Silicon Valley investing in overseas ventures based primarily in Silicon Valley DG Incubation, Inc. DG Incubation, Inc. ◆ Through strengthened partnership with renowned investors in Silicon Valley, ◆ Through strengthened partnership with renowned investors in Silicon Valley, investment in next key social media that follows success of Twitter and investment in next key social media that follows success of Twitter and ongoing support for Japanese market localization being conducted ongoing support for Japanese market localization being conducted ◆ Investment in angel fund SV Angel III conducted in May 2011; early identification of ◆ Investment in angel fund SV Angel III conducted in May 2011; early identification of high-quality overseas ventures and thorough information gathering for high-quality overseas ventures and thorough information gathering for direct investment being pursued direct investment being pursued Open Network Lab Open Network Lab ◆ Investments made in domestic ventures (e.g., giftee, Inc. ◆ Investments made in domestic ventures (e.g., giftee, Inc. , ,SpinningWorks Inc. SpinningWorks Inc. )) -20- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 22. Venture Incubation Strategy context company Incubate and support high-quality Japanese ventures while actively investing overseas ventures based primarily in Silicon Valley New venture incubation in the era of real-time web New business models for both import/exportU.S. and other overseas seed-stage venture investments Global business marketing model developed in Japan Formation of dream team of Silicon Valley angel investors Seed Accelerator program ◆ Early discovery of prospective overseas ventures ◆ Renowned overseas entrepreneurs mentoring domestic ventures aiming to expand into global markets ◆ DGs parallel investment and Japanese market ◆ Rapid expansion supported through IT, MT and FT solutions localization support once business is established Import model Export model Formation of U.S. IPO base and business development - Collaboration withOverseas ventures M&A influential ventureStage-specific investment capitalists - U.S. market expansion Middle stage of business models http://onlab.jp/ Later stage developed in Japan Early Incubation of stage - Mid-term project prospective seed-stage Seed development with MIT ventures stage Media Lab Co-investment with U.S. angel investors Support new domestic ventures and their entry to overseas markets ⇒ DGs independent parallel investment -21- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 23. Recent Investment Highlights context companyFund InvestmentPurpose and benefits of investing in angel funds◆ Become involved in the inner workings of angel investor/venture capitalist networks to develop organic business incubation model that includes investment ⇒ Acquire up-to-date information on cutting-edge Internet businesses◆ Secure parallel investment privileges for angel fund investment targets ⇒ Retain DGs independent investment opportunities - Founded by Ron Conway, advisor and influential Silicon Valley investor Angel Fund A - Target: early-stage startup companies - Founded by renowned Silicon Valley investors DGI and Ron Conways main co-investment targets: - Target: early-stage startup companies (also actively invests in overseas ventures) [currently under development]Individual Investment Luxury jewelry and bag Comprehensive beauty marketplace founded by Kiyan services website (hair, makeup Foroughi and Avid Larizadeh in & nails, etc.) launched in March 2009 October 2010 -22- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 24. Venture Incubation Media Incubation Hybrid SolutionII Media Incubation <B2C businesses> ➤ Media Incubation Division Localization of overseas media and promotion of DGs original media development ➤ Twitter Company Twitter company Operational support and business development for Twitter in Japan ➤ CGM Marketing, Inc. Twitter- and CGM-based ad product development, twinavi operation and Twitter business support ➤ Wheel, Inc. Content service provision for smartphones utilizing social media Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 25. Business Overview: Media Incubation Segment Performance context companyⅡ Media Incubation <ToC Solution businesses> Net sales Operating income FYE 2010 Actual 812 million yen -107 million yen FYE 2011 Actual 634 million yen -218 million yen FYE 2012 Forecast 2,000 million yen 260 million yen As a social media incubator, focus on DGs original media As a social media incubator, focus on DGs original media development and incubate new social media business as next Twitter development and incubate new social media business as next Twitter ◆ With consolidation of dispersed group resources, segment growth as "media incubation strategy ◆ With consolidation of dispersed group resources, segment growth as "media incubation strategy hub” was accelerated hub” was accelerated ◆ Agile global development system development and further promotion of business collaboration with ◆ Agile global development system development and further promotion of business collaboration with investment targets were conducted with new Group CTO Ian McFarland, Chief of Technology investment targets were conducted with new Group CTO Ian McFarland, Chief of Technology Management at leading U.S. company Management at leading U.S. company ◆ Support for Japanese localization of LinkedIn was provided; Japan‘s first media tied to LinkedIn ◆ Support for Japanese localization of LinkedIn was provided; Japan‘s first media tied to LinkedIn was developed and launched was developed and launched -24- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 26. Strategy Outline and Development of Media Incubation Segment context companyIncubate social media and platform to follow success of Twitter andsimultaneously develop third-party businesses linked with new media/platform III Incubation of Japans new social media services New add-on business for popular and successful II Twitter navigator site “twinavi” being prepared Number of PC visitors: mixi, Twitter and Facebook SAP (Unit: 1,000) (Biz > Game)etc… Twinavi application Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun (Source: NetRatings Japan, Inc.) I No. 1 social media status maintained Media ≒ Platform Third-party Third- Contents media -25- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 27. DGs Vision: Business Contexts for Next-Generation Social Media context company Social media in transition from gaming to real-time web to business applications Shift from Japans anonymity-based SNS to "real-life social networking" Real name users/open DG’s market trend forecast Future real-life social network Real-life social network Further integration with real world will occur via transformation of social media from limited use (e.g., gaming platforms) All- to social infrastructure/business use generationYoung users/ Smart technology users/ businessgaming Arrival of super devices will be brought on and social infrastructure by development of open technology regardless of user’s technological literacy level User-led approach As a result, users can flexibly choose services they use in areas previously controlled by carriers and portal providers (including contents and settlement choices) Anonymous users/closed -26- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 28. Highlights and Forecasts: Media Incubation Headquarters context company Media Incubation Division FYE 2011 Highlights◆ Business acceleration Division for social media incubation Established Division with consolidated media development functionality including product management, development, infrastructure, security, etc.◆ Collaboration with business SNS LinkedIn Started Japanese localization support including marketing, PR and research product marketing to LinkedIn for launch of Japanese LinkedIn site scheduled to launch by the end of 2011◆ Development and launch of Japans first LinkedIn-connected media Developed and released LinkedIn API-connected media as first product of DGs media development designed for real name-based and business domain users and their requirements Further promotion of media export in addition to imported media development ◆ Collaborate with venture incubation segment and engage in Mid- and long- Mid- and long- marketing/operational assistance for imported post-Twitter media services term strategy term strategy ◆ Implement DGs original media and Onlab business in stages and proceed with global application plan -27- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 29. Highlights and Forecasts: Twitter Company context company Twitter company Digital Garage Twitter company FYE 2011 Highlights ◆ Twitter as essential part of social infrastructure - Twitter being used extensively as real-time safety confirmation tool following Great East Japan Earthquake on March 11 - Various lifestyle infrastructure media initiatives being implemented/under development under guidance of Ministry of Economy, Trade and Industry ◆ User base expansion - Official PC users: rapid growth from 9.10 million UUs in June 2010 to 14.52 million UUs in June 2011 (annual increase of approx. 1.6 times) (Source: NetRatings Japan, Inc.) - New world record for TPS (7,916 tweets/second) achieved upon Japanese Women’s World Cup Football victory ◆ New functions - Hashtags in Japanese/photo posting functions provided Further promotional support of Twitter use as social infrastructure mediaMid- and long- ◆ Promote awareness and share good practices for enterprise/government useMid- and long-term strategyterm strategy ◆ Proceed with cross selling services following completion of user interface renewal -28- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 30. Highlights and Forecasts: CGM Marketing, Inc. context company CGM Marketing, Inc. FYE 2011 Highlights◆ Twitter official PC/mobile advertising business Maintained steady growth through completing ad inventory adjustment following UI renewal and posted best monthly sales record of PC◆ Twinavi Provided account authentication scheme for public institutions, J Government on Twinavi, following Twitter use as social infrastructure media during East Japan Earthquake (approx. 300 accounts opened in 44 prefectures)◆ Tweet manager Started operational support for Tokyo Electric Power Co. including Tweet monitoring/analysis; further promoted implementation at central government institutions (Agency for Natural Resources and Energy, Cabinet Office and Prime Ministers Office) Develop new media services while continuously expanding monetization of Twitter Mid- and long- ◆ Diversify Twitter-related ad products/profit-earning opportunities Mid- and long- term strategy term strategy ◆ Develop next-generation ad products that match consumer multi-social media use -29- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 31. Highlights and Forecasts: Wheel, Inc. context company Wheel, Inc. FYE 2011 Highlights ◆ Social media-linked services - Launched smartphone service allowing users to post decorated videos to Twitter - Gradually expanded content offerings from Android to Web-based PC access ------------------------------------------------ Happy birthday! Just made a special movie for you! http://share.tt/gjlsjd ------------------------------------------------ Buy Post music video Create fee-based content market that optimizes strength of social mediaMid- and long-Mid- and long- ◆ Shift focus of fee-based services from feature phones to smartphonesterm strategyterm strategy based on changes in smartphone user trends -30- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 32. Venture Incubation Media Incubation Hybrid SolutionIII Hybrid Solution: B2B Solution businesses ➤ e-context Company E-commerce settlement platforms ➤ DG&Ibex Company Marketing promotion support, media development and web solutions Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 33. Business Overview: Hybrid Solution Segment Performance context companyIII Hybrid Solution <ToB Solution businesses> Net sales Operating income FYE 2010 Actual 7,527 million yen 150 million yen FYE 2011 Actual 9,252 million yen 634 million yen FYE 2012 Forecast 9,600 million yen 650 million yen Steady expansion of “enabling platformer” business area while Steady expansion of “enabling platformer” business area while use of social media increases use of social media increases e-context Company e-context Company ◆ Increased revenue and achieved record high settlements through development of ◆ Increased revenue and achieved record high settlements through development of new business model that adds new functions to existing settlement services such as new business model that adds new functions to existing settlement services such as DG&Ibex Company DG&Ibex Company ◆ Increased digital solution sales and improved unit profit per client by strategically differentiating DG ◆ Increased digital solution sales and improved unit profit per client by strategically differentiating DG from competitors based on DGs strength and expertise in social media from competitors based on DGs strength and expertise in social media As aaresult, achieved overall Hybrid Solution net sales increase of 1,725 million yen and As result, achieved overall Hybrid Solution net sales increase of 1,725 million yen and operating income increase of 483 million yen operating income increase of 483 million yen -32- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 34. Hybrid Solution Segment Business Overview context company Further acceleration of Hybrid Solution areas (advertising/settlement) based on three growth drivers 1. Flexibly adapt to new web trends: social media 2. Swiftly realize new opportunities created by smartphone market 3. Expand new businesses using capital increase 1. Adapting new web trends 1. Adapting new web trends Three mid/long-Development of new settlement term growth drivers Development of newservices for growing smartphone settlement/solution servicesuser market linked to DGs social media Settlement2. Realizing smartphone 2. Realizing smartphone market opportunities Hybrid Solution market opportunities SegmentBusiness promotion designed Solutionsfor new consumer contact Expansion into new settlementpoints such as smartphones areas using capital increase 3. Expanding new business 3. Expanding new business using capital increase using capital increase -33- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 35. Highlights and Forecasts: e-context Company (1) context company FYE 2011 Actual Number of affiliated websites Number of transactions Total amount of transactions 41,617 15.28 million 116.3 billion yen (year-on-year) 120% (year-on-year) 114% (year-on-year) 114% Number and amount of transactions both set new record high Growth factors Number of transactions (%: year-on-year) (Unit: 10,000) Further expansion of settlement areas and improved 1,600 1,528 business diversity contributed to increase in number of (114%) transactions 1,500 1,305 1,337 1,400 Focus on credit card settlement in addition to (103%) (102%) existing settlement formats resulted in 14% increase 1,300 1,263 in number of transactions over previous year 1,200 User base for settlement services with 1,100 escrow function launched in November 2010 1,000 has expanded steadily 08年6月期 09年6月期 10年6月期 11年6月期 FYE 2008 FYE 2009 FYE 2010 FYE 2011 Cultivation of new markets and clients through enhanced settlement functionsMid- and long- ◆ Accelerate business development for new smartphone-based settlement marketsMid- and long-term strategyterm strategy ◆ Gain new clients by adding new services to enhance existing settlement functions -34- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 36. Highlights and Forecasts: e-context Company (2) context company New settlement services, etc.◆ Full-scale performance was immediately achieved despite delayed startup due to issues such as system connections, credit checks and earthquake impact ◆ Completed registration with Kanto Local Financial Bureau as fund transfer agent (Unit: ¥1,000) Total amount of transactions ⇒ Able to offer currency trading services that were 500,000 generally limited to financial institutions such as banks 400,000 ⇒ Plans to offer new settlement services 300,000 (BtoC, CtoC and BtoB money transfers, settlement combined with escrow services, etc.) 200,000 100,000 0 ◆ Co-launched security diagnostic service Risk Search for e-commerce clients with LAC◆ Further expansion underway due to high level of client satisfaction ◆ Provided smartphone settlement platform to - Number of female store users increased Kadokawa Shoten Publishing Ltd.s - Credit card settlement: key purchase decision BOOK☆WALKER site factor (based on customer survey) ⇒ Offer universal settlement functions regardless of user device -35- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 37. Highlights and Forecasts: DG&Ibex Company context company (Digital Garage DG&Ibex Company) FYE 2011 Actual Total sales Profit per client Number of clients 6.3 billion yen 22.5 million yen 280 (year-on-year) 126% (year-on-year) 125% (year-on-year) 102% Achieved profit per client increase due to steady growth of digital areas (web/mobile) Growth factors Gross margin comparisons: digital vs. other areas Development of industry-specific digital/real media comprehensive promotion based on DGs expertise FYE 2009 FYE 2010 FYE 2011 in social media (cosmetics, credit card solutions, etc.) Web marketing area: solution expansion contributed to 57% 59% 63% improvement of unit profit per client (156% increase year-on-year) Digital Promotion area: strong growth exceeding industry average (108% increase year-on-year) Ongoing development of solutions that adapt to changes in consumer contact points ◆ Continuously develop cutting-edge solutions linked with new DG mediaMid- and long-Mid- and long-term strategyterm strategy ◆ Capture larger share in clients through enhancement of industry-specific solution package -36- Copyright © 2011 Digital Garage, Inc. All Rights Reserved
  • 38. Please note that the business forecasts and strategies covered in this material are based on our current evaluation and future results may vary significantly depending on unforeseeable events or circumstances.

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