デジタルハーツホールディングス（3676） – Presentation Material for the Fiscal Year Ended March 31, 2022

Presentation Materialfor the Fiscal Year Ended March 31, 2022 May 12, 2022Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.Tokyo Stock Exchange Prime Market: Code 3676https://www.digitalhearts-hd.com/Summary of Business ResultsCopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.1New Group OrganizationNew group organization with two core companies of AGEST, Inc. and DIGITAL HEARTS Co., Ltd. since April 1, 2022.Aiming to improve each expertise and create new values creationin each business fieldEnterprise BusinessEntertainment BusinessBusiness Activities• System Testing• IT engineer platform service• Support of ERP Introduction• Security testing and security monitoring• System development• Maintenance and operation supportBusiness Activities• Game debugging• Marketing support• Operating of game media• Translation/LQA• Support of game software development• Customer supportCopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.2Highlights for the Fiscal Year Ended March 31, 2022Summary of Business ResultsTopicsSignificant record-high net sales and operating incomeNet sales¥ 29,178 mn(YoY 128.7%)Operating income¥ 2,701 mn(YoY 141.5%) Double-digit growth of net sales and segment income in both Enterprise and Entertainment business. Over 110% organic growth of sales, excluding M&A impacts Achieved the full-year forecasts revised upward in February 2022Three M&As for future growthidentity Inc.Consolidated since Q2 FY2021 PLDeveloping SES business utilizing a pool of highly-skilled freelance engineers.DEVELOPING WORLD SYSTEMS LIMITED Consolidated since Q4 FY2021 PLA gold partner of Oracle. Support for the introduction, maintenance, and operation of Oracle system in the U.K. and the U.S.CEGB Co., Ltd.To be consolidated since Q1 FY2022 PLIntroduction and operation consulting for SAP and system development supportCopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.3Summary of Financial Results for FY2021Achieved significant growth of sales and profit with existing businesses growth and the impact of M&As. Improved OP margin even with investment for future growth.(Mln Yen)Net salesFY2020FY2021YoY Change22,66929,1786,509128.7%Cost of sales16,23520,7874,551Cost of sales (%)Gross profitSG&A71.6%6,4334,52471.2%8,3915,6901,9571,165128.0%-0.4points115.5%108.3%Operating income1,3942,701792141.5%Operating income margin8.4%9.3%+0.8pointsOrdinary income1,9752,778Profit attributable to owners of parent9741,780803806140.7％182.7%EBITDA2,3223,4301,107147.7%Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.4Analysis of Changes in EBITDASignificant increase in EBITDA by approx. 1.5 times due to higher sales and improved profitability in existing businesses and the impact of M&As.Due to changes in sales-mixLower gross marginIncreasein salesEffectsof M&A+330Improve grossmargin of allservices-62Increasein SG&A+392(JPY mn)+50Effectsof M&A-262EBITDAIncrease company-wide common cost such as labor cost3,430-187Increasein SG&A+329Increasein sales+544-28EBITDA2,322Enterprise BusinessEntertainment BusinessFY2020Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.FY20215Trend in Net Sales and Operating IncomeSignificant record-high net sales and operating income even withcontinuous investments in human resources and M&As for future growth.Operatingincome(JPY mn)1.24,800Net sales(JPY mn)29,17830,000Q4Q3Q2Q117,353 15,0004,393 25,00020,00010,0005,000021,138 5,460 22,669 6,355 19,254 4,861 7,932 14,0007,747 2,7017,400 7530.41,6000.83,2000.62,4000.2800065,455 5,782 1,9081,3945,234 3275,437 7256553694,988 5,093 6,098 547328189158OperatingincomeNet salesFY2020Net salesOperatingincomeFY20215777336361,7354,696 5,059 1,6051845474635394,223 4,039 4,882 4,450 363464475302Net salesOperatingincomeFY2017Net salesOperatingincomeFY2018Net salesOperatingincomeFY2019Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.Q4 FY2020 (As of March 31, 2021)Q4 FY2021 (As of March 31, 2022)YoY ChangeConsolidated Balance Sheets(JPY mn)Total assetsCurrent assetsCash and depositsNoncurrent assetsProperty, plant and equipmentIntangible assetsGoodwillInvestments and other assetsTotal liabilitiesCurrent liabilitiesShort-term loansNoncurrent liabilitiesTotal net assetsShareholders’ equityAccumulated other comprehensive incomeSubscription rights to sharesNon-controlling interests14,3389,7445,076 4,5935982,6702,4671,3248,0247,9044,7281196,3145,642481361017,56510,3925,2087,1726935,0944,7631,3849,9899,6795,4213097,5766,776228-572Total liabilities and net assets14,33817,5653,226Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.3,2266471322,578942,4232,295591,9641,7746921901,2611,133179-13-387Consolidated Statements of Cash Flows（Mln Yen）FY2020FY2021YoY ChangeNet cash provided by operating activities1,4163,0771,660(*Cash flows before income taxes paid)1,8693,7401,871Net cash used in investing activities-1,813-2,537-723Net cash used in (provided by) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase in cash and cash equivalentsCash and cash equivalents at the beginning of periodDecrease in cash and cash equivalents resulting from exclusion of subsidiaries from consolidationCash and cash equivalents at the end of periodCopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.1,730-5462,27671,341139132131-1,2083,7045,0411,337-3ー5,0415,17313238FY2021 Financial Results by Segment 【Notice regarding Earnings by Segment】・Net sales by segment include inter-segment sales or transfers.Segment income is based on operating income.・Sub-segments of Entertainment Business changed from Q1 FY2021.For this reason, the figures for FY2020 and earlier by sub-segments of Entertainment Business arereclassified to reflect the change in sub-segments, and comparisons are made.Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.9Summary of Financial Results by Segment(JPY mn)FY2020FY2021YoYNet sales22,66929,178128.7%Operating income2,701141.5%EnterpriseEntertainmentAdjustmentsEnterpriseEntertainmentAdjustmentsEBITDAEnterpriseEntertainment7,02115,647-1,9081883,077-1,3562,3224243,22611,49117,687-6493,668-1,6161,0823,938163.7%113.0%–344.8%119.2%255.0%122.1%103,430147.7%Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.Financial Result of Enterprise Business Achieved sales increase by YoY 1.6 times and improved a segment income margin to 5.7% with DX acceleration in the market.(JPY mn)Net salesSystem TestingIT service /SecuritySegment incomeEBITDAFY2020FY2021YoY7,0213,5813,43918842411,491163.7%4,9546,537138.3%190.1%649344.8%1,082255.0%Quarterly results of Enterprise BizSegment incomeEBITDA24 2 35 14 139 100 37 42 64 -21 -7 (JPY mn)6004002000-200-400-155 -184 Q1Stable profit contribution437 230 112 152 147 144 87 170 229 267 246 FY2019FY2020FY2021Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.11Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Enterprise Business – System Testing div. – Increased in number of clients and improve the scale of transactions with existing clients by actively proposing total solutions for quality improvement, such as manual testing, vulnerability diagnosis, and test automation. Contribution of newly joined companies through M&As and others, MK Partners and TPP SOFT since Q2 and DEVELOPING WORLD SYSTEMS since Q4. Organic growth of net sales YoY 120%, excluding the effects of M&As. Kept high gross margin ratio 35.2% as annual, while keeping investing in business expansion.Quarterly salesQuarterly trend(JPY mn)6,0005,0004,0003,0002,0001,00002,414 924488570430YoY 138%3,581 1,078 937 777 788 4,954 1,558 1,233 1,144 1,018 Q4Q3Q2Q1(JPY mn)1,6001,20080040001,55860.0% Net sales Gross margin ratio1,233 1,144 1,078 1,018 937 36.1%36.9%40.0%788 777 42.1% 41.9%34.3%30.8%35.1%32.1%FY2019FY2020FY2021FY2020FY2021Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.Q1Q2Q3Q4Q1Q2Q3Q420.0%0.0%12Enterprise Business – IT Services / Security div. – Achieved YoY growth of over 120% in all categories of Security, Maintenance/operation, and System development/SES services. Sales of System development/SES grew significantly more than doubled YoYby contribution of newly acquired identity Inc. since Q2. Approx. YoY 1.4 times increase in the number of internal security personnel by utilizing our unique training program for cyber security personnel. Aiming to train and develop more security personnel in the future.Quarterly salesQuarterly sales by service(JPY mn)7,0006,0005,0004,0003,0002,0001,0000YoY 190%6,537 1,995 (JPY mn)2,500SecuritySales of identity Inc. contributed from Q2 to SES serviceMaintenance and operationSystem development and SES1,995 1,841 1,689 1,841 1,000735 763 772 1,167 1,011 2,608 869 645 569 523 3,439 1,167 772 763 735 Q4Q3Q2Q11,689 1,011 2,0001,5005000FY2019FY2020FY2021FY2020FY2021Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.13Q1Q2Q3Q4Q1Q2Q3Q4Financial Results of Entertainment Business Sales growth in both Domestic Debugging and Global and others by capturing increasing demand in the booming console game market and in the accelerating overseas expansion of entertainment contents. New record-high profits with high segment income margin of 20.7% thanks to the effects of higher sales and the gross margin improvement. From Q1 FY2021, the classification of sub-segments has been changed to visualize “Global and others” as a growth driver of Entertainment business.（JPY mn）Net salesFY2020FY2021YoY Change15,64717,687133.0%Domestic Debugging11,53612,123105.1%Global and others4,1115,563135.3%Segment incomeEBITDA3,0773,2263,668119.2%3,938122.1％Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.14Entertainment Business -DomesticDebugging div.- The growth in the Domestic Debugging division has been driven by itsservices for console games with active new title developments in the market. Full-year gross margin ratio was 31.1%, improved by 2.5P YoY, due to higher sales and aggressive operational reforms, even with a rise in national minimum wages in the market. Aiming to further improve its profitability by increasing market share as a leading company and by developing higher operational efficiency.Quarterly salesQuarterly trend(JPY mn)16,00014,00012,00010,0008,0006,0004,0002,0000YoY 105%(JPY mn)4,000 Net salesGross margin ratio3,0002,681 2,846 2,9533,054 2,9313,1493,0303,011 35.0%31.4%33.0%30.8%31.3%31.1%30.7%12,356 2,850 3,267 3,154 3,084 11,536 3,054 2,953 2,846 2,681 12,123 3,011 3,149 3,030 2,931 Q4Q3Q2Q12,0001,000025.5%24.6%Q1Q2Q3Q4Q1Q2Q3Q4FY2020FY2021FY2019FY2020FY2021Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.40.0%30.0%25.0%20.0%15Entertainment Business – Global and others div.- Achieved double-digit sales growth in every Global, Creative, and Media services by steadily acquiring cross-border projects against the backdrop of booming market conditions. The existing businesses achieved double-digit sales growth, and newly consolidated DIGITAL HEARTS CROSS group contributed since Q2. Aiming for rapid expansion especially in Asian market by pursuing synergies with DIGITAL HEARTS CROSS group amid brisk expansion of contents abroad.Quarterly salesQuarterly sales by service(JPY mn)7,0006,0005,0004,0003,0002,0001,00003,759 816 1,054 939 949 YoY 135%4,111 1,054 1,118 1,050 887 5,563 1,366 1,522 1,536 1,137 Q4Q3Q2Q1(JPY mn)2,0001,5001,0005000Media and othersCreativeGlobalSales of DIGITAL HEARTS CROSS Group contributed from Q2 to Global service1,536 1,522 1,366 1,050 1,118 1,054 1,137 887 FY2019FY2020FY2021Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.Q1Q2Q3Q4Q1Q2Q3Q4FY2020FY202116FY2022 Consolidated Financial ForecastCopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.17FY2022 Consolidated Financial Forecast Aiming for record-high net sales and operating income while accelerating investment for future growth. Enterprise Business will keep driving the growth of the group.Full-year FY2021 (Actual)Full-year FY2022 (Forecast)YoY Change29,17835,500121.7%（Mln Yen）Net salesEnterpriseEntertainmentOperating incomeOperating income marginOrdinary incomeProfit attributable to owners of parentEBITDACopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.11,49117,6872,7019.3%2,7781,7803,43015,37520,1253,2903,2902,2504,240133.8%113.8%121.8%118.4%126.4%123.6%189.3%+0.0pointsChanges in sub-segmentsWith the change in the actual services of Enterprise Business,sub-segments are changed from FY2022.■FY2021 and earlierReportable segmentsMain ServicesEnterprise Business■ From FY2022Reportable segmentsEnterprise BusinessMain ServicesMain Operating Companies*The changes are underlinedSystem TestingSystem testingVulnerability diagnosisQA solutionSystem developmentLogiGear groupSystem testingVulnerability diagnosisAGEST, Inc.Introduction of ERP and CRMCEGB Co., Ltd.Penetration testIT service /SecurityIT services and othersIT supportSecurity monitoringIT engineer platform serviceAGEST, Inc.identity Inc.Entertainment BusinessEntertainment BusinessDomestic DebuggingDebuggingDomestic DebuggingDebuggingDIGITAL HEARTS Co., Ltd.Global and othersGlobal and othersTranslation / LQADIGITAL HEARTS Co., Ltd.Game software developmentDIGITAL HEARTS CROSS groupCustomer supportFLAME Hearts Co., Ltd.Marketing support, etc.Aetas, Inc.(Reason for Change)- Through cross-selling initiatives, increasing in the number of projects providing “one-stop“ service including development,testing, and security services.- Expanding the range of solutions by accelerating group collaboration and generating synergies through aggressive M&As.Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.19System developmentIntroduction of ERP and CRMPenetration testSecurity monitoringIT supportIT engineer platform serviceTranslation / LQAGame software developmentCustomer supportMarketing support, etc.Enterprise Business – FY2022 Plan -Strong growth with booming market conditions including an acceleration of DX as a tailwind.1. To accelerate the growth of existing businesses by aggressively investing in human resources and technologies.2. To pursue their own growth of newly acquired companies in FY2021 and early synergies with existing subsidiaries as well.OrganicM&A15,375 11,491 7,021 5,022 3,302 1,892 (JPY mn)18,00016,00014,00012,00010,0008,0006,0004,0002,0000FY2017FY2018FY2019FY2020FY2021Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.FY2022(Forecast)20Enterprise Business – Major initiatives -Organic growthM&AsTo further develop business foundation,plan to invest approx. 0.3 bn yen in growthTo pursue their own growth of acquired entities and early synergies with group01Maximize synergies with our groupHiring engineers01 Strengthen referral recruitment Increase the number of candidates by deeperrelationships with recruiting agents Human resource development through AGEST Academy Branding initiatives to establish a “tech-oriented” brand different from the previous “gaming culture”Marketing and promotion02 Actively participate in exhibitions and hold seminars by CTO and CTSO. Strengthen cross-selling, such as testing, security, and system development support Promoting Technological Sales03 QA solutions with experts Developing advanced testing and next-generation QA solutions utilizing cutting-edge technologies. Strengthening conventional test outsourcingservice.Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.: Leverage freelance engineers: Expand SAP business in Japan: Develop new automation tools: Expand SAP business in U.S. and Europe02Aggressive strategic M&As to strengthen human resources and technologies Target companies include software testing companies and ERP-related companies. Continue to implement appropriate governance, including strict ROIC standards and reviews by the Investment Committee.21Enterprise Business – Key KPIs -Improve the number of clients and the average sales per client, through strengthening the cross-selling and increasing in engineer resources.KPI for QA solutionFY2021 (Actual)FY2022(Target)Number of clients with orders748 companies830 companiesAnnual sales per clientJPY 10 mnJPY 12 mnNumber of engineers924 people1,100 peopleSales ratio of Advanced Testing and Next-generation QA28.9%45.0%Number of clients with orders: Number of clients with transactions in the fiscal year(Including oversea group companies)Annual sales per client: Average annual sales in the fiscal year per clientNumber of engineers: Test engineers, development engineers, infrastructure engineers, security specialists andothers. (Excluding the number of part-time job testers and business partners)Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.22Entertainment Business – FY2022 Plan -As a stable cash-generating business basement of the group,aiming for continuous growth and profitability improvement centered on the highly profitable “Debugging” business1. To improve the profitability by obtaining large-scale titles’ order and strengthening the service quality in the Domestic Debugging division.2. To expand sales by capturing global demand through strengthening subsidiaries in overseas.Domestic debuggingGrobal and othersSegment income ratio15,568 15,951 16,115 15,647 20,125 17,687 19.1%19.3%18.4%19.7%20.7%FY2017FY2018FY2019FY2020FY2021Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.FY2022(Forecast)23(JPY mn)25,00020,00015,00010,0005,000050.0%40.0%30.0%20.0%10.0%0.0%Entertainment Business – Major initiatives -In the growing game industry with a rapid change, aiming to become a “Global Quality Partner” with a strong commitment to the success of game companiesChanges in the market environmentSevere competition among major IT companies to acquire excellent contentsCloud gamesExpansionNFT gamesMetaverseKey StrategiesStrengthen the quality of services To Define and pursuit quality ofcustomer satisfaction To optimize quality, cost, and speed To strengthen the organization and human resources To utilize tools and technologyExpand servicesImprove capability for globalization Full-scale marketing support service Multi-linguistic support and collaboration with marketing, for customer support service New service of development support and debugging, for NFT games and Metaverse-related To expand localization services To utilize AI translation To use overseas media as global support for Japanese clients To provide total support foroverseas game clients into the Japanese and Asian marketsImprovement of Reliability, Profitability and Cash generating powerCopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.24Entertainment Business – Key KPIs -Share of DebuggingMulti-service ratioGlobal sales ratioFY2021(Actual)Approx. 75%Approx. 25%Approx. 30%FY2022(Forecast)Approx. 85%Approx. 35%Approx. 40%Debugging service involvement ratioamong top 100 new game titles in the market*Ratio of providing multiple services among main debugging projects of us*Ratio of Global and others service in Entertainment BizCopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.*An internal investigation25Dividends Forecast of FY2022Reflecting strong profit growth of FY2022 to shareholder returns plan.Annual dividend is planned to be ¥21.0, an increase of record-high ¥6.0 YoY.Basic Policy to Return Profits to ShareholdersWhile securing sufficient internal reserves to invest in business growth and strengthen our management structure, stable dividends to shareholders with a payout ratio of 20% as the minimum targetInterim dividendsYear-end dividendsDividend payout ratio13.0 6.5 6.5 14.0 14.0 7.0 7.0 15.0 7.5 DividendPayout ratio18.1%DividendPayout ratio20.2%10.5 7.0 7.0 7.5 FY2018FY2019FY2020FY2021FY2022(Forecast)Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.21.0 10.5 100.0%90.0%80.0%70.0%60.0%50.0%40.0%30.0%20.0%10.0%0.0%26(yen)24.020.016.012.08.04.00.0Growth StrategyCopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.27Our Growth StrategyBased on the stable growth of highly profitable Entertainment Business,accelerating the rapid expansion of Enterprise Business through strengthening human resources and technology to provide the best QA solution servicesCopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.28Environment surrounding Enterprise BusinessWith the acceleration of Digital Transformation and technological evolution, demand for software testing is growing rapidly and requiring higher expertise. Changes in utilization of technology• Software application•• X-Tech related IT systemIoT equipment• CASE• Smart City• Metaverse• AI• Core business IT system• Web system• Built-in software systemDevelopment MethodsWaterfall typeDevelopment MethodsAgile typeChanges in needs for testing Providing suitable testing service to ever-evolving technology Comprehensive testing including Test consulting in the early stage of non-functional aspects such as cyber-securitythe development life cycle (=Shift-Left) Verifying that the system operates as Improving the efficiency of test processes planned in the final process of developmentby test automation or use of impact analysis toolsCopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.29Vision of Enterprise BusinessBy utilizing leading-edge quality technologies, to become a service provider of optimum QA solutions at a high level to diversifying needsSAVE the DIGITAL WORLDSupporting the innovation of clients’ business with rich user experienceProvide quality assurance service in areas such as CASE and Smart City,with testing methods not developed yet in the market.Next-GenerationQAHelp streamline the testing process by leveraging technologyContribute to improve quality of software including non-functional aspects such as security, or efficiency of testing processes withAdvanced Testingautomation tools.Supporting the testing process from a third-partyperspectiveProviding outsourcing services to support clients with insufficient experiences and resources for software testing.Test OutsourcingCopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.30Enterprise Business PlanIn FY2022, further investing in the business foundation such as human resources and technology, and strengthening higher services as “Advanced Testing“ and “Next-Generation QA“2022-2017-2020-2021Launching Enterprise BusinessDeveloped the ‘Second Pillar’ of the BusinessEvolving the business for Next-Generation QA2023-To be a leading-edge quality technology company Aggressive investment in engineers. Expansion of services through alliances. Built an operation system. Turned profitable in FY2020. Expansion of the talent pool of IT human resources and improve technological capability by aggressive M&As. Decision of group reorganization for further growth Developing all three aspects of business, as human resources, technologies”, and processes, to be with a global standards, centered on “AGEST, Inc.” Expand the client base by strengthening the marketing and sales structure. Keep aggressive M&As. Contribute to the creation of a secure and safe digital society by providing unprecedented QA solutions. Continue to research cutting-edge technologies and continuously update testing methods.FY2017 (Actual)FY2021 (Actual)FY2023 TargetNet sales¥1.8 bnNet sales¥11.4 bnFY2022 PlanNet sales¥25.0bn + αOP margin-%(Operating loss)OP margin5.7%Net sales¥15.3 bnOP margin5% – 6%OP margin8% – 10%Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.31Enterprise Business PlanWith a view to develop “Next-Generation QA“,to develop three areas of the quality, such as human resources, technologies, and processes according to global standardsLeading-edge quality technologies=Acquisition of global standards in testing industry+Exploration of advanced and practical testing methodsRecruit engineers with specialized knowledge and skillsPeopleTechnologyLeverage cutting-edge tools for software testingAcquire specialized knowledge in new testing methods Technology experts Infrastructure engineers Development engineers Security specialists Testing engineers• QA consultation• Automation engineer• Test plan / designer• Test operationProcessDevelop optimal testing processes suitable for each QA solutionCopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.32Enterprise Business – People -PeopleEstablished “AGEST Academy” to study software testing knowledge both academically and practically, to standardize engineer skills and improve capability of the group.AGEST AcademyTest engineer training programs along “ISTQB(*)” syllabus, supported by Mr. BlackRegular lecturersby industry expertsCYBER BOOT CAMPto learn practical skills from active ethical hackersProviding an AI test training program supervised by Dr. ReidTo develop rich contents supported by authorities in software testing industry in Japan and overseasMr. Rex BlackWorldwide authority to software testing.Former President of the ISTQB.Many authored works.Hung NguyenWorldwide authority to software testing. The co-author of a major book for test engineers.Representative of our subsidiary LOGIGEAR CORPORATION.Juichi TakahashiA pioneer in software testing in Japan. Hold a Ph.D. in software testing and many authored works.Our Chief Testing Solution Officer (CTSO).Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.*ISTQB…International Software Testing Technician’s Qualification33Enterprise Business – Technology -TechnologyTo take initiatives such as researching advanced technologies and developing new testing methods01Improving and developing test automation tools 02Promoting R&D of new testing methods through industry-university collaboration Developing test automation tools for SAPsystems through group collaboration. As a new R&D center,Newly established AGEST Testing Lab. Strengthening alliances to expand QA services with automation tools.Automation ToolsResearch ActivitiesResearcherAdaptation of Software Testing to AI ProductsThe University of Electro-CommunicationsDr. Yasuharu NishiResearch on agile testingWASEDA UniversityDr. Hironori WashizakiSeleniumappiumCopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.R&D on security testing using fuzzing testing methodsUniversity of NagasakiDr. Masahiko Kato34Enterprise Business – Process -In early compliance with “ISO/IEC/IEEE 29119,”to be the Leading Company in the Testing IndustryProcessWhat is ISO/IEC/IEEE 29119?An international standard for software testing. It was released in some stages from 2013 to 2016 as the world’s first testing standard and is designed to be used in any form of software testing for any organizations.Supported byDr. Start ReidTo develop a testing process in compliance with “ISO/IEC/IEEE 29119.” Improve the accuracy and quality of testing services by developing a testing process in compliance with the global standard.The first developed training program for “ISO/IEC/IEEE 29119” in Japan, supervised by Dr. Reid Have a single global standard of testing quality with all internal engineers by providing this training program through “AGEST Academy.”35The founder of the ISTQB. Advising the development of global standards for the testing process as the convener of ISO Software Testing Working Group 26, which has published software testing standard, “ISO /IEC/IEEE 29119.”Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.Enterprise Business – M&As -Accelerate strengthening human resources and technologies with aggressive M&As.Past M&AsKenzo MiyajimaDirector of AGEST, Inc.PeopleTechnologyFreelance engineer talent poolTest automation tools for Oracle softwareTest automation expertise and offshore in VietnamJuichi TakahashiExecutive Officer and CTSOof AGEST, Inc.SAP’s expertiseSalesforce expertiseSoftware testing engineers in JapanSoftware Development engineersMamoru SekiDirector and CPO of AGEST, Inc.M&As have contributed to strengthen management personnel as well.Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.36Illustrative growth of Enterprise BusinessProviding optimal QA solutions for more diverse testing needs with“Use of leading-edge tools,“ ”Compliance with global standards,“ and “Development of unconventional testing methods“Scope of Services for each ProjectUnconventional testing methods to ever-evolving marketIn compliance with global standardsWe aim.QAQA consultingTest automation toolsSecurity TestTest planning, designing, and executingRatio of Advanced Testand Next-generation QAApprox. 60%Test planning, designing, and executingIllustrative net salesTest automation toolsSecurityTestTest planning, designing, and executingAdvanced Test and Next-generation QATest OutsourcingRatio of Advanced Testand Next-generation QAApprox. 30%Ratio of Advanced Testand Next-generation QAApprox. 45%(JPY mn)20,00015,00010,0005,0000Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.37FY2021FY2022FY2023Medium-Term Targets (FY2021-FY2023)FY2023 TargetGroup BusinessConsolidated Sales¥22.6 bn¥29.1 bn¥50.0 bnROIC (*1)16.8%22.0%M&A and alliances3 projects3 projectsNumber of Clients in Japan as a group878companies1,005companiesSDGsover 15%5 projects(in 3years)2,000 companiesNumber of IT HumanResources incl. Qualitist (*2) 4,517 people 10,660 people20,000 peopleFemale managers ratio (ratio to total managers) (*3)10.7%11.8%over 20%Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.*1 ROIC=EBITDA×(1-effective tax rate)÷(interest-bearing debt+shareholders’ equity)*2 Qualitist…Our original term for specialist contributing to the quality incl. engineers*3 calculated from the data of our group companies in Japan38M&A CriteriaM&A StrategyStrategic growth with M&As based on a strict discipline.1. Strict ROIC standards to maintain higher investment efficiency and profitability*ROIC=EBITDA×(1-effective tax rate)÷(interest-bearing debt+shareholders’ equity)2. Targeting companies with future growth potential and current stable profitability3. Well balanced PMI initiatives between its organic growth and synergies with our groupTarget CompaniesTo obtain engineer human resources – Software testing companies- Companies with engineers especially for development of open systems- SES providers with rich human resources as own employeeTo strengthen technology capability- ERP-related service providers in JapanNet sales: ¥0.5 – 3.0 bnNumber of engineers: 30 – 150 engineersAcquisition price: Max. ¥3.0 bnAround 2-3 projects per year as a planSize of targetcompaniesNumber of projects- Internal Investment Committee from various views including business Governanceoperation, legal, finance, HR, and others.- Board of Directors including advices from outside directors with rich Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.39knowledge and experience of M&As or finance.Medium-Term Targets (FY2021-FY2023）Illustrative growth of net sales¥ 50.0 bnM&AEnterprise BusinessGlobal and othersDomestic DebuggingEnterprise Business¥ 25.0 bn+αIncluding M&A, etc.¥ 5.0 – 10.0 bnEntertainment Business¥ 23.0 bn＋α¥ 22.6 bnEnterprise BusinessOver CAGR 40%(Including M&A and synergy effects)¥ 7.0 bn¥ 4.1 bn¥ 11.5 bnFY2020Global and othersOver CAGR 30%(Including M&A and synergy effects)Domestic DebuggingCAGR 5 – 10％(Including M&A and synergy effects)Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.FY202340(JPY bn)55.050.045.040.035.030.025.020.015.010.05.00.0For Future Sustainable GrowthWith our mission ”SAVE the DIGITAL WORLD”,we keep contributing to the developmentof digital society. Organic GrowthStrong growth of Enterprise Businessand Global Service.M&A GrowthImprove tech capability and expand human resources with aggressive M&As.¥ 50.0 bn¥ 29.1 bnNew Value CreationDevelop innovative value for x-Tech, CASE, Smart City, Metaverseand more. ¥ 17.3 bnIllustrative consolidated net salesProviding “Quality” for Digital SocietyFY2017FY2021FY2023(Target)Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.41AppendixCopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.42Why Invest in DIGITAL HEARTSOne of the few testing companies in JapanRatio of independent outside directors40.0%Employment creationfor more than8,000 testersForeign staff members of more than 20 nationalitiesHigh sales growth of CAGR 14% (*)Business that supports Digital securityCopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.* FY2016-FY2021 average sales growth rate for 5 years43Corporate ProfileOur MissionSAVE the DIGITAL WORLDMarket environment Growth of console game market Growth of mobile game marketExpansion of IoT Expansion of DX Listed on TSE 1st SectionShifted to a holding company structure and listed on TSE 1st SectionTo be a Global Quality PartnerStarted ‘Second Founding’ PeriodGrowth Period20172021Expanding ‘EnterpriseBusiness’HistoryListed on TSE Mothers Established2012201120142013Fully entered the enterprise fieldStarted Creative business 2008Started Media business2001Started Debugging business‘First Founding Period’Accelerating diversification in the game industryStarted ‘Second Founding Period’promoting the industrial shift of “debugging” businessCopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.44Business SegmentOur core business: System Testing and DebuggingSystemTesting17.0% Testing for enterprise system incl. website Supporting for test automation DevOps / Agile testing support Vulnerability diagnosisIT service /Security22.4%Net sales¥ 29,178 mnDomestic Debugging41.5%IT service /Security22.4% Development support of IT System IT support Penetration test Security monitoringSystem Testing 17.0%GlobalAnd others19.1%Domestic Debugging41.5% Debugging for console games, mobile games and pachinko/slot machinesSales breakdown by segment(FY2021)※Sales of each segment and unit include inter-company sales and/or transfers. GlobalOther19.1%overseas markets Translation, LQA*, and localization for game software Marketing support for game launching in Game development and CG development Game information site “4Gamer.net”Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.*LQA = Linguistic Quality Assurance45Enterprise BusinessiEntertanment BusinessOutline of System Testing and DebuggingOur ServicesTest Design Test consulting Planning for test and schedule Supporting for test automationOutline of ServicesDevelopTestMaintain after a product releaseRunning various tests Functional test Performance test Stress test Acceptance test Usability Test, etc.Continuation test Operations management Evaluation and improvement UpdateServiceDescriptionMain clientBarriers to entrySystem TestingDetection of bugs in enterprise systems from a test-engineers’ knowledge.− SIers− Development vendors− Core system enterprisesOutsourcedProjects Ratio↑Human resource shortagein IT Industry.↑Knowledge and expertise onsoftware testing is required.LowMiddleHigh↑A license for purchasingdedicated equipment fordebugging is required.↑Knowledge and expertise onhuman resource management to accommodate changeable development schedules are required.High46DebuggingDetection of bugs in games from a player’s perspective.− Game makersCopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.Outline of Our System TestingISTQB Global Partner(One of three companies in Japan)Diverse automation toolsOne of the largest variety of toolsin the domestic software testing industry Largest classin JapanNumber of people with ISTQB qualifications365 people(Consolidated base as of March 31,2022)What is the ISTQB?ISTQB is an international accreditation body for software testing.ISTQB has four partner programs: [Silver], [Gold], [Platinum] and [Global].Global partner is required, as a group, to have one or more Platinum companies and Gold companies in two or more countries.Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.SeleniumappiumSupported by global authoritiesin software testing Dr. Stuart ReidThe founder of the ISTQB. The convener of ISO Software Testing Working Group 26The co-author of a major book for test engineers.Hung NguyenMr. Rex BlackFormer President of the ISTQBA pioneer in software testing in Japan. Many authored works.Juichi Takahashi47Strength of Entertainment BusinessMarket Leader in domestic debugging service Strong operating profitDebugging service involvement ratioamong top 100 new console game titles *Approx. 75%(JPY bn)4.02.9 3.0 2.9 3.0 3.6 Around JPY 3.0 bnfor the past 5 consecutive years3.02.01.00.0*An internal investigationFY2017FY2018FY2019FY2020FY2021Passionate talents who love gameAbundant and wide variety of test terminals20+ offices and operation centersApprox. 8,000registered testersCopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.Game consoles2,054Smartphones6,782(As of March 31,2022)Domestic13Global8(As of March 31,2022)48Our Growth StrategyRapid expansion of the Enterprise Biz the foundation of the Entertainment BizEnterprise BusinessNet SalesSegment income marginRapid Growth BusinessSales: CAGR over 57% (4 years)-0.8%1,892 FY2017-6.9%3,302 FY2018-1.3%5,022 2.7%7,021 Entertainment BusinessFY2019FY2020FY2021Stable & Highly Profitable Business Average OP%: 19.4% (4 years)5.7%11,491 Net salesSegment income margin19.1%19.3%18.4%19.7%15,568 15,951 16,115 15,647 20.7%20.0%17,687 (JPY mn)15,00010,0005,0000(JPY mn)18,00017,00016,00015,00014,000FY2017FY2018FY2019FY2020FY2021Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.10.0%5.0%0.0%-5.0%-10.0%25.0%15.0%10.0%49Consolidated financial statement(JPY mn)FY2014FY2015FY2016FY2017FY2018FY2019FY2020FY2021Net sales　Enterprise Business　Entertainment Business　AdjustmentsOperating income　Enterprise Business　Entertainment Business　AdjustmentsOperating income margin　Enterprise Business　Entertainment BusinessProfit attributable to owners of parentTotal assets　Current assets　　Cash and deposits　Noncurrent assets　　GoodwillTotal liabilities　Interest-bearing liabilitiesTotal net assets　Shareholders’equity ratioShareholders’ equity ratioNet cashDebt Equity RatioNet cash provided by operating activitiesNet cash used in investing activitiesNet cash provided by (used in) financing activitiesROE Dividend Payout Ratio13,2851,71311,609-391,517501,915-44711.4%2.9%16.5%5398,2725,7563,0582,5161,1694,1041,8654,1684,09249.5%1,1930.5870-568-95013.8%37.6%15,0112,38212,696-701,963712,379-48613.1%3.0%18.7%3616,5335,0642,1971,4694373,4441,3673,0892,81443.1%8300.51,080-17-1,91310.5%60.4%15,4441,95213,544-521,9062032,453-75012.3%10.4%18.1%7957,6516,2213,3441,4302014,7931,6462,8582,63234.4%1,6980.61,825-610-6929.2%32.3%17,3531,89215,568-1081,735-142,966-1,21510.0%-19.1%1,2008,5756,8133,8941,7611505,0051,6103,5703,36939.3%2,2830.51,436-618-25040.0%20.9%19,2543,30215,951-01,605-2263,086-1,2548.3%-19.3%1,5759,8327,4034,1972,4284814,8191,7645,0124,79148.7%2,4330.488962-69338.6%18.0%21,1385,02216,115-1,394-672,964-1,5036.6%-18.4%79210,6377,4533,7393,1831,0275,1982,5535,4384,92246.3%1,1860.51,086-1,018-51516.3%38.6%22,6697,02115,647-1,9081883,077-1,3568.4%2.7%19.7%97414,3389,7445,0764,5932,4678,0244,7976,3145,69139.7%2780.81,416-1,8131,73018.4%31.0%29,17811,49117,687-2,7016493,668-1,6169.3%5.7%20.7%1,78017,56510,3925,2087,1724,7639,9895,5907,5767,00439.9%-3820.83,077-2,537-54628.1%18.2%50Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.Past M&AsEnterprise BusinessiEntertanment BusinessAcquisition of engineersTechnological CapabilityAcquisitionAcquisition of new services for game industryGeographical expansionAimsPast M&AsSoftware testing engineers in JapanSoftware development engineers in VietnamHigh skill domestic freelance engineersTest automation toolsOffshore in VietnamSalesforce consultingFor Oracle softwareTest automation toolsSAP’s expertiseJapan’s largest game information website”4Gamer.net”Game software development / CG content developmentGame translationin South KoreaGame translation in TaiwanMarketing and promotion support in China and Asian countriesCopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.51Shareholder ReturnsBasic Policy to Return Profits to ShareholdersWhile securing sufficient internal reserves to invest in business growth and strengthen our management structure, stable dividends to shareholders with a payout ratio of 20% as the minimum targetChanges in dividends Interim dividendsYear-end dividendsDividend payout ratio(yen)25.020.015.010.05.00.038.6%14.031.0%13.06.518.0%6.514.07.07.07.07.015.07.518.2%7.5FY2018FY2019FY2020FY2021FY2022(Forecast)Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.21.010.520.2%20.0%10.510.0%50.0%40.0%30.0%0.0%52Business RisksMajor risksCountermeasures1.Leakage of confidential information- Prohibiting staff members from bringing personal items into the test room- Physical security measures including access control with fingerprint authentication and the installation of security cameras- Introduction of a personal reference system that applies to all registered testers2.Obsolescence of existing services by technological innovation- Focusing on the application of the latest technologies, including a test automation project- Focusing on the development of new services to improve added value3.Reduction of productive population in Japan- Developing internal training programs that will enable the active participation of members with diverse generational, racial, and other backgrounds- Securing human resources strategically by using overseas offices as well4.Expansion of corporateacquisition and new businesses- In-depth market research and due diligence- Reducing risks by building a system for appropriate business management after acquisitionCopyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.53(Ref.) Our Aims for Sustainable Value CreationOur Major Initiatives and Sustainable Development Goals (SDGs)Human resourceTo resolve the shortage of IT human resource・In-house support system for all employees (incl. part-timers) to acquire the testengineer’s qualification “JSTQB”.・Ethical hacker training courses and engineer training programs for employees.・Opened a free school for engineers in collaboration with WORKPORT, inc.・Project to discover and foster potential ethical hacker candidates among high schoolstudents in collaboration with HASSYADAI.social.Human resourceWorkplace for diverse human resources・Provide workplaces for diverse people such as students, part-timers, young actors andmusicians, and people with disabilities at test centers with over 3,000 people every day.・Employ foreign nationalities of more than 20 countries/areas, such as Asia,Europe and the U.S., who engage in translation/linguistic debugging service, etc.TechnologyTo realize a secure and safe digital society・Contribute to improve quality of various kinds of software through game debugging,system testing, and other services.・Preservation of information assets in the net society through cyber security services.・Challenges for technological innovation through research and development on test automation and AI utilization.CommunitiesTo revitalize local community and resolve IT disparities・Create jobs through out nationwide test centers (Lab.) and promote teleworking/work-from-home style by Remote Debugging service.・Implemented “Cyber Security Support Team for SMEs in Tohoku region” as one ofprojects of Information-technology Promotion Agency, Japan (IPA)Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.54Group Companies(Holding Company)Enterprise BusinessEntertainment BusinessAGEST, Inc.System testing, Cyber-security, etc.DIGITAL HEARTS Co., Ltd.Game debugging, Localization, etc. LogiGear GroupDIGITAL HEARTS CROSS GroupSystem Testing, Test Automation SupportMarketing support, etc.MK Partners, Inc.Salesforce consulting TPP SOFT, JSCSystem developmentANET CorporationSystem Testingidentity Inc.DEVELOPING WORLD SYSTEMS LIMITEDIntroduction and maintenance support for Oracle productsDIGITAL HEARTS (Shanghai) Co., Ltd.Game debugging, Localization, etc.DIGITAL HEARTS USA Inc.Game debugging, Localization, etc.Orgosoft Co., Ltd.Game debugging, LocalizationDigital Hearts Linguitronics Taiwan Co., Ltd.Game translationFLAME Hearts Co., Ltd.IT freelance engineer platform serviceGame development and CG content developmentCEGB Co., Ltd.Aetas, Inc.SAP implementation and operation support, system development support, etc.Operation of a game information site, “4Gamer.net”Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.55Glossary TermsEnterprise BusinessEntertainment BusinessSystem TestingDebuggingQALQATesterQualitistMeaningOur business segment of services for non-game, enterprise software including software testing and cyber security. It is our group’s growth driver with big social change of DX.Our business segment of services for game and entertainment industries including debugging and localization. It is our “cash cow” in Japan and growing in the global market.Detecting enterprise system bugs for ERP, websites, business apps and others. We use this word for “Enterprise Business.”Detecting game software bugs from the user’s perspective. We use this word for “Entertainment Business.” “Debugging” may refers to identification and correction of errors, but we specialize in “identifying and reporting bugs” without correcting them. 1/3 of debugging is for console games and 2/3 is for mobile games.Abbreviation for “Quality Assurance”, including software testing and game debugging.Abbreviation for “Linguistic Quality Assurance” such as translating to foreign language and detecting errors the game software from localization view.Test engineerEngineers for software testing. It is not popular in Japan as a job career, and we have recruit IT engineers and trained them to become test engineers.We refer “tester” as staff who carries out debugging service. Most of our testers are registered part-time jobbers. Some are trained to work as test engineers or cyber-security specialists.Console games A game played using dedicated hardware devices such as Nintendo Switch and PlayStation.Our original term for specialist contributing to the software quality. It includes not only various IT specialists such as test engineers and cyber-security specialists for Enterprise Business, but also testers, translators, 2D/3D graphic designer and others for Entertainment Business in the game industry.Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.56＜Contact＞Investor and Public Relations DivisionPhone：+81-3-3373-0081Email：ir_info@digitalhearts.comHP：https://www.digitalhearts-hd.comThis presentation has been developed strictly for the purposes of investor relations activities and does not in any way attempt to influence or facilitateinvestment decisions or represent a solicitation for investment. While the information provided herein is based on that believed to be reliable at thetime of submission, the Company does not guarantee its accuracy, be it partial or overall. Furthermore, because this presentation features the viewsand assessments of the Company at the time of its writing, it may therefore be subject to change without prior notice due to unforeseen developmentsin the Company’s operating environment. The Company and its affiliated companies, as well as their executive officers, may hold positions in thesecurities and/or financial products featured in this presentation, and may stand to profit or incur losses from their positions. The relevant parties mayalso purchase or sell securities and/or financial products, either in person or by proxy. This presentation is protected under exclusive copyright of theCompany. To quote, reproduce or transfer any section, either partially or in its entirety, is prohibited by law. Those who wish to quote from, reproduceor transfer the information contained herein must therefore acquire in advance the written consent of the copyright holder.Copyright© 2022 DIGITAL HEARTS HOLDINGS Co., Ltd. All Rights Reserved.57