Digital Information Technologies : Summary of Business Results for the Third Quarter Ended March 31, 2021 (Consolidated)

(% change from the previous corresponding period)

Summary of Business Results

for the Third Quarter Ended March 31, 2021

[Japan GAAP] (Consolidated)

Company	Digital Information Technologies Corporation
Stock Code	3916	URL:https://www.ditgroup.jp/
Representative	Satoshi Ichikawa, President and Representative Director
Contact	Ken Mochizuki, Director and Division Manager of Corporate Planning
Division

Expected date of filing of quarterly report: May 14, 2021

Expected starting date of dividend payment: -

Preparation of quarterly supplementary financial document: Yes

Quarterly results briefing: None

May 14, 2021

Listed on the TSE

T E L: [phone]

（Rounded down to million yen）

１. Consolidated business results for the nine months ended March 31, 2021 (July 1, 2020 through March 31, 2021)

(1) Consolidated results of operations

	Net sales		Operating income	Ordinary income	Net income attributable to
		owners of parent
For the nine months ended	Million yen	%	Million yen	%	Million yen	%	Million yen	%
March 31, 2020	10,837	6.1	1,492	25.9	1,496	25.8	1,035	25.6
March 31, 2019	10,209	11.6	1,185	24.2	1,189	23.7	824	24.6
(Note) Comprehensive income
Nine months ended March 31, 2021: 1,029 million yen (24.1 %)
Nine months ended March 31, 2020: 829 million yen (25.7 %)
	Net income	Diluted net income
	per share		per share
For the nine months ended		Yen		Yen
March 31, 2020		67.93		-
March 31, 2019		54.07		-

(Note) Diluted net income per share is not presented because there are no dilutive shares.

(2) Consolidated financial position

	Total assets	Net assets	Shareholders' equity
	ratio
As of	Million yen	Million yen	%
March 31, 2021	6,143	4,367	71.1
June 30, 2020	5,364	3,660	68.2
(Reference) Shareholders' equity
As of March 31, 2021: 4,367 million yen
As of June 30, 2020: 3,660 million yen

2. Dividends

				Annual dividend
	End of 1Q		End of 2Q	End of 3Q	Year-end	Total
For the fiscal year		Yen	Yen	Yen	Yen	Yen
ended June 30, 2020		-	9.00	-	11.00	20.00
ending June 30, 2021		-	10.00	-
ending June 30, 2021 (forecast)					14.00	24.00

(Note) Revisions to dividend forecast for the current quarter: Yes

(% change from the previous corresponding period)

3．Forecast of consolidated business results for the fiscal year ending June 30, 2021 (July 1, 2020 through June 30, 2021)

	Net sales	Operating income	Ordinary income	Net income attributable	Net income
	to owners of parent	per share
For the fiscal year	Million yen	%	Million yen	%	Million yen	%	Million yen	%	Yen
ending June 30, 2021	14,300	5.9	1,600	24.2	1,680	23.7	1,142	16.7	74.92

(Note) Revisions to business forecast for the current quarter: Yes

*Notes

1. Changes in significant subsidiaries during the period (changes in specified subsidiaries accompanying changes in the scope of consolidation): None
2. Application of accounting procedures specific to preparation of the consolidated quarterly financial statements: None

1. Changes in accounting policies, accounting estimates and restatement
   ① Changes in accounting policies associated with revision of accounting standards: ②Changes in accounting policies other than ①
   ③Changes in accounting estimates
   ④Restatement
2. Shares outstanding (common stock)

• Number of shares outstanding at the end of period (treasury stock included)

As of March 31, 2021	15,501,820 shares
As of June 30, 2020	15,501,820 shares

• Treasury stock at the end of period

As of March 31, 2021	253,459 shares
As of June 30, 2020	253,459 shares

• Average number of stock during period (quarterly cumulative period)

Nine months ended March 31, 2021	15,248,361 shares
Nine months ended March 31, 2020	15,248,380 shares

• None
• None
• None
• None

(Note) The number of treasury stock to be deducted from the calculation of the number of treasury stock at the end of the period and the number of treasury stock during the period includes the Company's shares held by Asset Management Services Trust Bank, Ltd. (Trust E-Account) as trust assets under the Employees' Benefit Trust (J-ESOP) Plan. Asset Management Services Trust Bank, Ltd. merged with JTC Holdings, Ltd. and Japan Trustee Services Bank, Ltd. on July 27, 2020, and changed its trade name to Custody Bank of Japan, Ltd.

*Quarterly financial summary is not subject to quarterly auditing procedures by certified public accountants or auditing firms.

*Explanation regarding appropriate use of business forecasts and other special instructions

Forecasts regarding future performance in this material are based on information currently available to the Company and certain assumptions that the company deems to be reasonable at the time this report was prepared. The Company does not make promises about the achievements. Actual results may differ significantly from the forecasts due to various factors.

• Contents

1. Qualitative Information Regarding Consolidated Quarterly Business Results………………………………………………. 2

1. Explanation of Business Results………………………………………………………………………………………….. 2

(2) Explanation of Financial Position…………………………………………………………………………………………	4
(3) Explanation of Results Forecasts and Other Future Predictions…………………………………………………………..	4
2. Consolidated Quarterly Financial Statements and Main Notes……………………………………………………………….	5
(1) Consolidated Quarterly Balance Sheets…………………………………………………………………………………...	5
(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income…………………………..	6
(Consolidated Quarterly Statements of Income)
(Third Quarter Cumulative)………………………………………………………………………………………...	6
(Consolidated Quarterly Statements of Comprehensive Income)
(Third Quarter Cumulative)………………………………………………………………………………………...	7

1. Notes on Quarterly Consolidated Financial Statements…………………………………………………………………... 8
   (Notes Regarding Going Concern Assumptions)……………………………………………………………………….. 8

(Notes Regarding Substantial Changes in Shareholders' Equity)……………………………………………………….	8
(Segment Information)…………………………………………………………………………………………………...	8

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1. Qualitative Information Regarding Consolidated Quarterly Business Results

(1) Explanation of Business Results

During the subject third quarter cumulative period (July 1, 2020 to March 31, 2021), the business environment remained severe due to COVID-19 both in Japan and overseas. In Japan, although there was a temporary improvement in economy through the government's economic stimulus measures, the spread of the third wave of COVID-19 led to the declaration of a State of Emergency once again and the spread of damage in many industries. Overseas, while there were signs of recovery in economic activity in developed countries, where vaccinations started earlier, the overall outlook remained uncertain, with many countries still experiencing a spread of infections, such as new variant of COVID-19.

In the information service industry, to which our company belongs, it has become difficult to avoid the impact of the infection, although the degree of impact varies depending on the business portfolio including customer composition and other aspects. In addition, as working environment has been changing such as many companies introducing remote work and other factors, more efficient way of working is required.

Even in this environment, IT investment by domestic companies continued to grow, although it varied depending on the industry. The growth was driven by system renewal, cloud service adoption, and the progress of DX (Digital Transformation), which had been promoted even before the COVID-19 crisis.

For our group as well, the progress in fields such as Artificial Intelligence (AI), Internet of Things (IoT), and Robotic Process Automation (RPA, the automation and efficiency enhancement of tasks using software robots) have led to increased opportunities to enter new businesses and the expansion of business scope.

Under the COVID-19 crisis, the need for strengthening cyber security measures and improving the work efficiency further increased, and this provided a tailwind for our group, which has effective solutions for these issues.

Under such conditions, the DIT Group formulated the following five business strategies as its medium-term management plan, and continued to take proactive measures to achieve them.

・Renovation (Strengthen and stabilize business foundation through reform of existing businesses) ・Innovation (Create new value centered on in-house products)

・Shift from competition to collaboration (Expand business through cooperative efforts) ・Shift from development to services (Expand business from service-oriented perspective) ・Secure and develop human assets (Hire and train personnel)

During FY6/21, the final year of the current medium-term management plan, DIT will promote our business with focusing on the two business policies: "stabilize the business foundation" and "strengthen growth factors." With respect to Triple 10(*), which is a medium-term management target by FY6/21, we achieved the target of operating profit margin of 10% one year ahead of schedule in FY6/20. We will continue to promote management that emphasizes the operating income margin.

*Triple 10

・Net sales of 10.0 billion yen in FY6/17 (already achieved)

・Operating income of 1.0 billion yen in FY6/19 (already achieved)

・Operating profit margin of 10% in FY6/21 (already achieved in FY6/20)

Among these efforts, the software development business showed strong growth in "Renovation" after the software development business has compensated the decline in the system sales business due to the drop in special demand such as the response to the reduced tax rate following the consumption tax hike in the previous year.

In terms of "Innovation", DIT achieved steady growth as a result of ongoing efforts to enhance product appeal and strengthen sales for WebARGUS¹, DIT's in-house products built on proprietary technology, and the Excel process innovation platform xoBlos².

In addition, in the third quarter of the current fiscal year, operating income margin increased by 2.2 percentage points to 13.8%, due to the combination of higher profit margins resulting from qualitative improvements in business operations and the reduction of cost of sales (mainly commuting expenses) and SG&A expenses (mainly transportation, entertainment and meeting expenses) due to COVID-19.

As a result, net sales in the subject third quarter cumulative period amounted to 10,837,152 thousand yen (up 6.1% year-on- year), with operating income of 1,492,738 thousand yen (up 25.9%), ordinary income of 1,496,687 thousand yen (up 25.8%),

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and net income attributable to owners of parent of 1,035,824 thousand yen (up 25.6%).

(*1) WebARGUS is a new type of website security solution that detects the tampering of websites as it occurs, and immediately restores the site to its original state. Instant detection and restoration protect corporate and other websites from malicious, unknown cyber-attacks, while at the same time prevents the escalation of the damage, such viruses spreading via the tampered website.

(*2) xoBlos is an innovation platform for Excel to automate inefficient Excel-based tasks, allowing for dramatic improvements in efficiency in a short period. (Excel® is a registered trademark in the U.S. and other countries by the U.S. Microsoft Corporation)

Results by segment are as follows.

Of note, the following sales by segment and segment income (operating income) are figures before offsetting internal transactions between segments.

• Software Development Business

In the business solutions unit (business system development and operation support), thanks to the success of the business portfolio review that we have been promoting, and orders from existing customers have continued to grow steadily even under the COVID-19 crisis. In business system development, although sales of the mainstay financial services were on a downward trend due to the shifting of some personnel as part of the portfolio review, we were able to acquire more projects than expected, mainly in the ERP-related, pharmaceutical, and public sectors, resulting in steady sales growth and a steady improvement in profits. In operational support, we expanded the scale of our operations not only for existing major customers but also for new customers that we have developed over the past one or two years, as the impact of COVID-19 was relatively small, and we were able to steadily respond to the needs of system infrastructure construction. As a result, both sales and profits grew significantly.

In the embedded solutions business field (embedded system development and embedded system verification), sales and profits increased year on year a result of the steady implementation of countermeasures in anticipation of the impact of COVID-19 on the automobile industry, which we have strategically shifted our focus to. In embedded systems development, sales and profits both increased due to growth in semiconductor and communication systems, as well as the expansion of IoT services for home appliances, although sales of in-vehicle systems remained the same level as the previous fiscal year. In embedded system verification, sales of 5G related products (mobile devices and base stations) covered the decline in in-vehicle related sales, resulting in higher sales and profits from the previous fiscal year.

In both the Business Solutions and Embedded Solutions businesses, a large portion of work was done via remote work. However, we were able to limit the impact of the environmental changes that were originally feared to have no impact on our business.

In the in-house product business, we were able to achieve higher results than the previous year, although there were still restrictions on business negotiations due to the impact of COVID-19. In the cyber security business, both sales and profits grew steadily, as evidenced by the full-scale operation of WebARGUS by large-scale customers. We also strengthened its product capabilities by expanding the total security service lineup with WebARGUS as its core, including collaboration with an external cyber security specialist (F-Secure Corporation and SSH Communications Security in Finland). In the business efficiency improvement business, we strengthened the sales system of xoBlos, which was integrated with our subsidiary DIT Marketing Service Co., Ltd., and showed steady growth in both sales and profits. In addition, we continued to work on promoting the xoBlos Plus One concept, which adds data from another perspective via xoBlos to specific information held by various systems such as RPA and ERP, thereby increasing the value of the data and strengthening our product capabilities.

As a new initiative to respond to the "new normal" society caused by COVID-19, we have been providing outsourced electronic contract services since October, and inquiries for this service are growing steadily mainly from the housing construction industry. The service is called DD- CONNECT, in which the Company and DAIKO DENSHI TSUSHIN, LTD. conduct from the introduction to operation and maintenance of the electronic contract cloud called "CONTRACTHUB @ absonne" by NS Solutions Corporation on behalf of its customers.

As a special note, our executive officer has been appointed as a certified evangelist by the Japan RPA Association.

As a result, net sales in the Software Development business amounted to 10,365,306 thousand yen (up 7.9% year-on-year), with operating income of 1,449,632 thousand yen (up 33.9%).

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