| Digital Information Technologies Corporation (3916) |
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Company |
Digital Information Technologies Corporation |
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Code No. |
3916 |
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Exchange |
TSE 1st Section |
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Industry |
Information and communications |
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President |
Norikazu Ichikawa |
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Address |
FORECAST Sakurabashi, 4-5-4 Hatchobori, Chuo-ku, Tokyo |
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Year-end |
End of June |
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URL |
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* The share price is the closing price on October 12. The number of shares issued was taken from the latest brief financial report.
ROE and BPS are the values for the previous term. |
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*The forecast is from the company. A 2-for-1 share split was implemented on October 1, 2016. EPS and BPS were retroactively recalculated.
*From FY 6/16, net income is profit attributable to owners of the parent. Hereinafter the same will apply. This Bridge Report introduces the fiscal year June 2017 earnings results of Digital Information Technologies Corporation. |
| Key Points |
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| Company Overview |
 1-1 Corporate history In 1996, he was appointed president of Toyo Computer System, Inc. as the successor to one of his acquaintances. He expanded its business area starting from business system development, and then computer sales business(current: system sales business), embedded product development validation business and operation support businesses tuning Toyo Computer System Inc. into a multifaceted and diverse IT company. In 2002, he established Toyo IT Holdings Corporation, which is the predecessor of current Digital Information Technologies Corporation, by separating several companies under the same group and establishing subsidiaries with 100% ownership. In 2006, he integrated four subsidiaries into one company and renamed it to the current company name. In addition, in January 2011, he established DIT America, LLC in Kansas, U.S.A. Digital Information Technologies Corporation was listed on JASDAQ of Tokyo Stock Exchange (TSE) in June 2015, listed on the second section of TSE in May 2016 and listed on the first section of TSE in March 2017. The details of the development and sales business for own-brand products are as follows:  April, 2005 - Released "APMG," a self-developed IT security product.October, 2009 - Released "xoBlos," an Excel work innovation platform.July, 2014 - Released "WebARGUS," a website security solution.
1-2 Corporate ethos, etc.  Employees are to uphold this company policy as their creed and follow these principles at all times. 1-3 Business contents1. Segments
There are two segments: software development business and system sales business. The software development business consists of 3 business units: business solution unit, embedded product solution unit and original product business unit.
 (1) Software Development Business
The sales for this business unit is mostly from custom development for end-users and information systems companies which are clients' subsidiaries in a wide variety of industries including finance, communications, distribution and transportation as well as for leading SI vendors.1) Business Solution Unit (Business system development unit) Specifically, development for websites and key systems, front and back office operations, new system development and maintenance development with technologies developed in each area. The company has developed trustworthy relationships with leading companies in each area which enables them to secure stable orders. (Operation support unit)
Main clients include communications carriers, total human service corporations and information system companies which are airlines subsidiaries.This "business unit to support clients' daily operations through IT" has stable revenue as it is an ongoing business in line with the business website domains of leading companies. Specific business includes:  Support desk operation for end-users who use various business systems.Build and maintain infrastructure (servers and networks).Efficient system operations in line with the latest technology trends.2) Embedded Product Solution Unit
This business unit is trusted by leading manufacturers to directly develop custom software for in-vehicle devices, mobile devices, information home appliances and communication devices. For in-vehicle devices, mobile devices and information home appliances, the unit develops custom software for overall systems including firmware, device business unit controls and applications.(Embedded product development unit) It focuses on Auto-Drive related field with new technology, as well as infotainment for in-vehicle devices as the demand for this market is expected to grow. In addition, it undertakes software development for wireless base stations, communication module devices and virtual networks (*) for communication devices. Virtual network (*): software control technology to rebuild network flexibly without making any changes to the physical network.
(Embedded product verification unit)
This business unit verifies and makes suggestions to improve qualities and functions of products through its verification service. It provides verification services domestically and internationally (North America, Asia, Europe, etc.) including laboratory tests using specialized devices to verify product operation and function, field tests to verify products in the actual environments, as well as overall system tests conducted as the final quality verification from the perspectives of the third party. Some of the overseas field tests are designated to its subsidiary, DIT America, LLC, which provides fast service with verification of product usability from the perspective of local staff. The range of products for verification includes in-vehicle devices, medical devices, communication devices and mobile devices. 3) Original product business unit
The company develops and sells its original products as a growing business, using its unique technology. Currently, the company strongly focuses on the sales of two products, "WebARGUS," a website security solution, which detects tampered website simultaneously as it occurs and instantly restores the original normal condition, and "xoBlos," an Excel work innovation platform, which features data decomposition and restoration as well as meeting various forms of data business processing needs. There are other products such as "APMG (Anti Phishing Mail Gateway) ," a solution to prevent damages from phishing and illegal use of brands by automatically adding electronic signatures on e-mails, and "Rakuraku page," a CMS (content management system), which enables editing and updating websites easily. (2) System Sales Business
The company and its subsidiary, Toyo Infonet Co., Ltd, sell "Rakuichi," a business support mission-critical system, for small and medium enterprises, manufactured by Casio Computer Co., Ltd. as its one of agencies.The sales area is started at Kanagawa first and expanded to Tokyo, Chiba, Gunma and Ehime successively. The Company provides substantial support for their users to increase the client retention rate. In addition, they set up a call center to attract and build a new client base. The number of sales for "Rakuichi" has been recorded to be the highest across all agencies for 12 consecutive years. 2. Main Strategic Products
1) "WebARGUS," a new website security solution
WebARGUS is a new security solution which detects tampered websites instantaneously and immediately restores it to its original state. By detecting and restoring immediately when incident occurs, WebARGUS protects corporate websites from damage caused by malicious and unknown cyber-attacks and simultaneously prevents the escalation of the damage from viruses spreading via the tampered website.
 ◎ Increasing tampering of websites
According to the research conducted by "JPCERT Coordination Center," (*) tampered websites reported to the center was 3,274 in fiscal 2016 (April 2016 to March 2017), smaller than 7,724 cases in 2013, but it is still at a high level.
"JPCERT Coordination Center" (*): This center receives reports concerning computer security incidents including hacking via internet and service disturbance in Japan. It also supports measures, grasps how the problems are generated, analyzes the methods, investigates and advises on measures to prevent recurrences from a technical point of view.
 ◎ The background of the development of "WebARGUS"
Under these circumstances, the company, which had already released a solution called "APMG" to prevent damage from phishing and illegal use of brand by automatically adding electronic signature in e-mails, started developing "WebARGUS," based on a core security technology in the spring of 2013, after 2 years of research. Then in July 2014, it released "WebARGUS."The major characteristic and strength of the company is that it has a variety of rich IT related technologies, and has a highly standardized core security technology. This is because its engineers have a mindset to embrace challenges and are not afraid to take risks. Thus, they are not satisfied with just developing custom products. This is strongly influenced by the company's organization strategy represented by its corporate culture and in-house company system which will be explained later in this report.  On the other hand, if "WebARGUS" is installed, because it instantly detects and restores websites when tampered with, the condition of a website can be maintained in the normal state. Thus, the website does not need to be disabled in a rush when the application detects a threat. Companies can concentrate on pursuing the cause and strengthening protection while its website is kept open to public. Most of the detection software detects tampered website with a periodic monitoring on pre-configured, specified timing or intervals. With this method, there will be a time lag between when the website is tampered with and when it was detected, so it is inevitable for the website to be tampered. In addition, if the interval is shortened to reduce the time lag, there are other challenges such as increasing CPU load. On the other hand, when some kind of event occurs (such as data deletion or addition excluding browsing), "WebARGUS" conducts real time scanning to detect the event. The major feature of this product is that it is also equipped with an instant restoring function which enables restoration to the original state in less than 0.1 seconds after the detection (average time under the demo environment: 0.003 seconds per file). This instant restoration is its unique technology. The annual license fee of "WebARGUS" is JPY480,000 (excl. tax) per OS with support. This also includes free update modules for minor version updates. ◎ Introduction and sales
When WebARGUS was released, the sales growth was rather slow because general understanding of website security was mainly about protection against hacking into a computer system and awareness about "tampering" was limited. However, the acknowledgment that "software for detection is needed as well as for protection" is growing rapidly due to the more frequent mentioning of the independent administrative agency, "IPA (Information Processing Association)," taking measures to prevent defacement. This agency is established to support the IT national strategy from a technical and personnel aspect perspective and is supervised by the Ministry of Economy, Trade and Industry.Under these circumstances, the company has carried out promotion and marketing including organizing seminars for target users who recognize the necessity for a higher level of security, and participation in exhibitions. It also focuses on agency sales to strengthening marketability. There are currently a total of 29 companies with agency contracts. They have been actively involved in development collaborations with data centers and cloud service corporations. Furthermore, the company is expected to expand its business overseas as well as product sales in Japan. The company is preparing to provide support for the tampering of websites across the globe. ◎ Strengthening the feature of merchandise
In April 2016, a Windows version was released in addition to the Linux version.Also, the development of an enterprise version for large-scale users is underway, and the company aims to release it in summer 2017 Additionally, it is considering the release of products in a series including WebARGUS which can be used with embedded products for a security measure in the IoT age. For the embedded version, an official project has started product development and has been reviewing to provide specific business capabilities and researching relevant technology. 2) "xoBlos," an Excel work innovation platform
Even in advanced corporations with a high level of IT, there are numerous Excel-based tasks in the office. Most non-routine tasks consist of repetitive manual operations such as generating Excel reports by manually inputting data from paper reports, aggregating totals from multiple Excel sheets and visualizing and analyzing CSV data extracted from packaged system.The company's original-brand, "xoBlos," entirely automates these inefficient Excel-based tasks and provides drastic improvements to workflow in a short term.  ◎ Background of development
Many corporations use Excel, the major spreadsheet software, for generating quotations and invoices. However, in cases where they generate these documents in different formats for each client according to the clients' requirements, manual input is mandatory because it is difficult to tally, sort and analyze in a systematic way.For this, the company developed "xoBlos," an Excel work innovation platform, to automate tasks and significantly improve workflow efficiency.  One recent case is that "xoBlos" was chosen for "Disaster Information Management System" developed by IBM Japan which was provided for free, jointly with IBM Japan in the Kumamoto earthquake. The system was used for correspondence of relief supplies between shelters and national and local governments as well as exchanging information about action statuses * A sample use case: Automated quotation and invoicing operations enabled a company to process over 30,000 tasks per month without overtime.
Yakult Support Business Co. Ltd. has implemented "xoBlos." Its business is to issue invoices on behalf of sales companies and management of business activities such as sales and revenue management for 11 companies including other Yakuruto subsidiaries. They issue 33,000 invoices monthly. During the period when the most billing tasks occur, at the end and the beginning of each month, all employees except management had been engaged in billing by working overtime every day. In addition, mistakes and issues were common because they were pressed for time. This was caused by the fact that there was a different invoice format for each client. The process of billing operation mainly consist of each sales company inputting sales data into a mission-critical system developed by Yakult HQ, and then Yakult Support Business Co., Ltd outputting the data and mailing them to each client. However, because the invoice formats are different for each client, they had to output the raw billing data from the mission-critical system and input them into Excel spreadsheets manually to generate invoices. There were hundreds of invoice formats, and the operation was extremely inefficient. They implemented "xoBlos" to improve this situation, and soon the workflow become drastically more efficient. There have been no confusions during the billing period, and the company's credibility has increased. While the workload increased, it managed to eliminate 180 hours of overtime per month without increasing the number of employees. ◎ Introduction and sales
Currently, there are over 250 companies with "xoBlos."The company has been expanding sales including hosting seminars jointly with one of its major agencies, Daiko Denshi Tsushin, Ltd (8023, the second section of TSE), by taking full advantage of its wide variety of clients, branches and marketability. As the demand for the product from large companies increases, there are more cases where they can showcase examples of implementation of the system to the public. In addition, as sales have increased, there are more agencies that started selling its products utilizing the resources of the whole company rather than just one section. ◎ Strengthening the features of merchandise
The company has promoted solutions in collaboration with other products developed by other companies. For example, "xoBlos" collaborates with "X-point" developed by ATLED Corporation, which has been the best software in the workflow system market for 5 consecutive years. As for the product itself, the company is aiming to strengthen the features of its website-based integrated version "xoBlos Corabo" to accommodate broader requirements. 1-4 Characteristics and strengths1) Multifaceted and diverse IT company
The company has expanded its business areas by flexibly responding to the progress of information technology, from business system development business to computer sales(current: system sales), embedded product development and verification business, and operational support business as well as working on its original products based on its technical strengths which have been developed during the process of business expansion.One of the major characteristics of the company is that it is a multifaceted and diverse IT company and has a wide range of business activities and provides own-brand product with originality. 2) Organizational strategies of partial and total optimization
Another significant characteristic of the company is that it has an organizational strategy with two opposite factors, partial and total optimization in a well-balanced manner.For partial optimization, the company has specialized companies under an in-house company system which aim to be the best in each field. It also provides training and produces entrepreneurs with innovative spirits. For total optimization, the company pursues synergy between companies while respecting independence of each in-house company; through scrap and build done by the headquarters, collaboration between each in-house company and development of new business areas.  3) Development and sales of original own-brand products
As mentioned above, the company has developed a variety of original own-brand products like "WebARGUS" with itsunique technologies. They are growing to be the primary source of revenue in the future.
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| Fiscal Year June 2017 Earnings Results |
 Sales and profit grew for seven terms in a row, exceeding the revised forecast and marking a record high.
Sales were 10,273 million yen, up 10.0% YoY. The system sales business was sluggish, but the software development business was healthy for all of the three sections. SG&A expenses, including personnel expenses and R&D cost, augmented, but it was offset by sales growth. Consequently, operating income grew 24.6% YoY to 653 million yen. Although the surrender value of insurance decreased and litigation expenses were posted, ordinary income increased 16.0% YoY and net income rose 32.7% YoY. Sales and profit grew for the 7th consecutive term, exceeding the revised forecast, and marked a record high.   ◎ Software Development Business
Both sales and profit increased. Business solution unitThe system development in the fields of mainly finance, and also those for medical care, pharmaceutical products, social infrastructure grew and operation support was healthy. Accordingly, both sales and profit grew YoY. Embedded product solution unitThe decline in mobile product-related demand was offset by the demand for development of in-vehicle products. The transactions for testing in-vehicle devices targeted at overseas markets and the business of testing products for medical care were healthy. Original product unitThe large-scale orders for "WebARGUS" were placed, and the number of transactions for "xoBlos" significantly increased. The performance of CMS was healthy. ◎ System Sales Business
Sales and profit dropped. As for "Rakuichi" produced by Casio Computer Co., Ltd. targeting small to medium-sized enterprises, the cultivation of new customers was favorable, but the sale to repeat customers was sluggish. The sales of multifunction machines and combination sales of original products were healthy.  Total liabilities augmented 30 million yen from the end of the previous term to 1,299 million yen as trade payables increased while long-term debts shrank. Net assets rose 457 million yen from the end of the previous term to 2,414 million yen due to the growth of retained earnings, etc. Consequently, equity ratio increased 4.3 points from 60.7% at the end of the previous term to 65.0%. The balance of short to long-term debts declined 32 million yen to 37 million yen.  The deficit of financing CF dropped due to the decrease in the amount of repayment of long-term debts. The cash position improved. |
| Fiscal Year June 2018 Earnings Estimates |
 Sales and profit are estimated to grow for eight consecutive terms in a row.
Sales and operating income are estimated to be 10,820 million yen, up 5.3% YoY, and 730 million yen, up 11.7% YoY, respectively. Every business is expected to see sales growth, so, even though the company will keep concentrating on the investment in new businesses, profit is forecasted to grow by double digits and profit rate is expected to rise. It is estimated that sales and profit will grow for the 8th consecutive term, marking a record high. An interim dividend will be paid from this term. The interim and term-end dividend amounts are both 10 yen/share, totaling up to 20 yen/share. The estimated payout ratio is 31.4%.  ◎ Business solution unit
Like in the previous term, sales are estimated to grow in the fields of mainly finance, and also medical care, pharmaceutical products, social infrastructure, and operation support is expected to be healthy.
◎ Embedded product solution unit
It is forecasted that the demand for development of in-vehicle devices will be strong and the business of development and testing will be healthy. The business of testing products for medical care is estimated to be favorable.
◎ Original product unit
As the demand for security grows and the company follows the trend of shortened working hours and the reform of ways of working, "WebARGUS" and "xoBlos" are estimated to grow considerably.
◎ System Sale Business
As the company actively promotes sales by selling "Rakuichi" to new customers and replacing old products with new ones, sales are forecasted to grow.
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| Growth Strategy |
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In its business infrastructure, the company will make stable transactions in a wide range of existing business fields to further strengthen its business foundation, and provide new value through growth factors such as original products and other new products. Following "Development" from the second preceding term (ended June 2016), the company has positioned the previous term (ended June 2017) and the current term (ending June 2018) as "Reinforcement," and from the next term onward it will enter "Expansion and Stabilization." As a medium-term objective, the company aims for "Triple 10s," which consists of sales of 10 billion yen, an operating income of 1 billion yen, and an operating income margin of 10%. In regards to sales, it achieved this target in the previous term.   <Growth strategy and results/Future measures>
Growth strategies, results, and future measures to take in each business are as follows.
 * SOC: Abbreviation of "Security Operation Center." A SOC indicates roles or organizations specializing in monitoring and analyzing threats to information systems of corporations.
* Advanced near-shore: A cost-effective development method carried out by a group of high value-added technicians at local bases in Japan.   (*) ARM Architecture: A method for designing processors whose intellectual property right is held by ARM in the U.K. and which is widely adopted for semiconductor chips for low power applications such as smartphones and in-vehicle devices.
(*) System Resilience Ideology: To be resilient means to show strength of stability and the ability to recover quickly. In the case of WebARGUS, this refers to the instantaneous detection/restoration mechanism (websites are restored to their original state immediately after tampering is detected.)  (*) RPA (Robotic Process Automation): Software robots which automate work processes. As part of the reform of ways of working, companies adopting RPA are increasing.
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| Conclusions |
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| <Reference : Regarding corporate governance> |
 ◎ Corporate Governance Report
Last Update: April 10, 2017
  Disclaimer
This report is intended solely for information purposes, and is not intended as a solicitation to invest in the shares of this company. The information and opinions contained within this report are based on data made publicly available by the Company, and comes from sources that we judge to be reliable. However, we cannot guarantee the accuracy or completeness of the data. This report is not a guarantee of the accuracy, completeness or validity of said information and or opinions, nor do we bear any responsibility for the same. All rights pertaining to this report belong to Investment Bridge Co., Ltd., which may change the contents thereof at any time without prior notice. All investment decisions are the responsibility of the individual and should be made only after proper consideration.Copyright(C) 2017 Investment Bridge Co., Ltd. All Rights Reserved. |
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