Digital Arts (2326) Q1 2025 earnings summary

Executive summary

• Net sales for Q1 FY2025 grew 7.0% year-over-year to 2,234 million yen, excluding the impact of DAC deconsolidation, driven by strong enterprise and public sector demand.

• Operating profit decreased 3.9% year-over-year to 838 million yen due to planned investments in human resources and higher communication expenses, but remained in line with internal forecasts.

• Demand for security solutions increased due to rising cyberattacks and information leaks, driving ICT adoption in business and education.

• Medium-Term Management Plan focuses on security business growth, public sector expansion, and personnel investment.

Financial highlights

• Net sales for Q1 FY2025 were 2,234 million yen, down 12.1% year-over-year; excluding DAC transfer, up 7.0%.

• Operating profit was 838 million yen (down 3.9%), ordinary profit 847 million yen (down 4.3%), and net income 584 million yen (down 5.0%) year-over-year.

• Gross profit was 1,508 million yen, down 0.9% year-over-year; EBITDA declined 1.8% to 1,089 million yen.

• Basic EPS was 42.50 yen, compared to 43.87 yen in the prior year.

• Cost of sales dropped 28.8% year-over-year due to DAC exclusion and lower labor costs.

Outlook and guidance

• Full-year FY2025 consolidated net sales forecast at 10,720 million yen, down 6.9% due to DAC exclusion, but gross profit margin expected to improve to 73.4%.

• Operating profit projected to rise 16.1% to 5,140 million yen; operating margin to reach 47.9%.

• Net income forecast at 3,540 million yen (+19.1%), EPS 257.39 yen.

• Annual dividend forecasted at 85 yen per share, up 5 yen, with a target payout ratio of 33%.

• No change to previously announced guidance; steady Q1 performance supports outlook.