CEO Comments

Kaoru Hayashi

Representative Director,
President Executive Officer and Group CEO,
Digital Garage, Inc.

CEO Comment “Summary of FY2014 Financial Results and Overview for Current Term”

Today, we announced our financial result for the FYE June 30, 2014 that was approved at today’s special board meeting. This is to provide the highlights from the FY2014 and our outlook for the FY2015.

Ⅰ. FY2014 Highlights

We recorded a significant increase in both sales and profit with the net sales of 33.715 billion JPY (+20.7% YoY), operating income of 2.608 billion JPY (+97.2% YoY), and ordinary income of 4.442 billion JPY (+44.3% YoY) which marked the record-high for the third consecutive year. Our venture incubation business benefited favorably from the positive turnaround of stock markets in Japan and abroad, leading to a 5.7x increase in operating income YoY, while our ROI-focused performance ad business led the significant growth of our Marketing Segment, bringing in +81% more operating income than the previous fiscal year.

Ⅱ. Outlook for FY2015 and Our Progress Through Midterm Three-Year Business Plan

We anticipate our incubation and marketing businesses to lead our growth throughout FY2015 similar to the previous year. Our payment business is expected to return to a 20+% profit growth as there is no more IPO-related temporary cost for econtext Asia Limited (our Hong Kong headquarters). We plan on adding 2 JPY per share to our final dividend in commemoration of the company’s 20th year anniversary, increasing the expected final dividend to 7 JPY per share.

FY2014 completed the second year of our Midterm Business Plan introduced in August, 2012 where we strategically adopted the Lean Global concept to pursue the “1st stage of DG’s global management centered around Global Incubation.” Last fall, we celebrated the opening of our incubation space called DG717 in San Francisco. At the end of last year, econtext ASIA, the holding company for our payment businesses, went public at Hong Kong Stock Exchange. These complete the ‘bridges’ in our Incubation Stream to connect the US, Japan, and Asia, building a steady ground for realizing our Lean Global concept and making FY2014 a fruitful year while having the overall ordinary income grow for the third consecutive year.

I believe our three Segments will experience a continued growth this year in both domestic and foreign markets. Our Marketing Segment has completed the preparation for big data-related business, which is our group’s strategic focus area. Combined with its steadily-growing performance ad business, our Marketing Segment has entered the next stage of growth. Our Payment Segment is beginning to turn its rudder to Asia after its stable growth in the domestic market. Our Incubation Segment will aggressively pursue new investments and further return on investment by taking advantage of the incubation platform completed last year.

In the rapidly-changing Internet industry our company was able to celebrate its 20th year anniversary this year. We plan on publishing a book this fall providing the bird’s-eye view of the past and present of the Internet in Japan to which DG Group has contributed and the future with the anticipation of the 2020 Olympic Games in Tokyo with the topics ranging from the company’s history since its founding, to the future visions for Internet businesses by myself and the company’s co-founder Joi Ito, and the future business strategies of the key DG personnels. I hope this to become a commemorative book for those who have provided various support to Digital Garage over the years.

In closing, I would like to express my sincere gratitude to those stakeholders who have provided support to us for the past 20 years. We will continue to expand our business as a leading Internet company in Japan for the next anniversary and to contribute to the global Internet community. We look forward to your continued support and encouragement.

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