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Tokyo Stock Exchange 1st (4819)
Digital Garage

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CEO Comment Volume 59,

Toward the Final Stage of 3-Year Midterm Business Plan

Today we announced our Q2FY15 financial results after the board’s approval.

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Our Q2FY15 consolidated financial result marks the record-high income with 17.887 billion JPY (+14.5% YoY) net sales, 1.793 billion JPY (+114.1% YoY) operating income, and 3.464 billion JPY (+105.3 YoY) ordinary income. This is led by the expansion of our incubation business within and outside of Japan while all of our three business units, Incubation, Payment, and Marketing, recorded a positive growth in both sales and income.

On January 30th we issued an upward revision to our yearly forecast and dividend. The revised dividend will be 25 JPY per share, adding 18 JPY as a special dividend to the initially planned amount of 7 JPY per share (5 JPY for a normal dividend, 2 JPY for a special dividend). As we celebrate the company’s 20th year anniversary, this commemorative dividend is one of the ways to place emphasis on shareholder returns on which we will continue to focus as an important management theme.

There remains only 6 months in our 3-Year Midterm Business Plan set in August 2012, introducing the Lean Global concept to strategically pursue the “1st stage of DG’s global management centered around Global Incubation.” DG717, the core of the incubation stream connecting the US, Japan, and Asia to lead the DG’s growth, has settled into the local startup community through organizing various events providing co-working space and is now ready for full-scale operation.

Each of our business segments has built a strong foundation for profitability to wrap up the 3-Year Midterm Business Plan. Our Incubation Segment saw two of DG Incubation’s portfolio companies, Beng4.com and CrowdWorks, go public at TSE Mothers in December 2014, while making new investments including Wikia, Inc., the operator of the world’s largest community-based fansite which is the for-profit counterpart to Wikipedia (Press Release). For Wikia, we also made an investment to its Japanese subsidiary and signed an exclusive advertisement sales agreement in order to maximize our return through monetizing the business and through investment. This model is similar to our partnership with Twitter.

In addition, at the Incubation Segment, we established a new organization called App Works to nurture services offered by our global portfolio companies in Japan by applying our expertise localizing overseas startups and to systematically build new businesses. As the first project DG will support a real-time website analytics tool Chartbeat (Press Release) that spun off from Betaworks, a US-based startup studio with which DG signed a capital alliance in February 2012. Chartbeat is spreading rapidly and is adopted by 80% of major media sites in the US. App Works will continue to introduce and support promising services from the US to Japan while launching business ideas from within.

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Our Marketing Segment has set its ground for further growth as BI.Garage, its data science business unit utilizing big data held by the DG Group and Dentsu Group, has gotten on a steady path while the Segment’s performance ad business continues to mark strong sales.

For our Payment Segment, we made an investment to Sendo, a Vietnamese marketplace and electronic wallet operator and agreed on a joint venture, making Vietnam the fourth country for us to enter for settlement business through joint ventures and large capital injections in Asia after Indonesia, China, and India.

As the 3-Year Midterm Business Plan comes close to its end and as we begin to feel certain for achieving the goal, we are shifting our focus to the next 3 year period. Compared to 3 years ago, the US economy made a positive turn-around and gave rise to many startups in San Francisco. In Asia, the Internet industry has grown steadily, especially in India, Indonesia, and China. In such a positive macroeconomic condition, we believe it is our mission to take role as a global player in the Internet industry while riding the favorable wind brought by Abenomics in the domestic market.

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In light of this global landscape we have set a new company slogan - IMAGINE MORE. In the era where the Internet continues to mediate the fusion of various things at an accelerated pace, we believe that it will become important to develop new businesses by going one step further using our imagination to the full extent while questioning the ordinary and that just expanding the current business will not be enough. We look forward to your continued support and encouragement.

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