Slide 1: FY2018 Third Quarter Financial Results
GREE, Inc. FY2018 Third Quarter Financial Results April 27, 2018 Copyright © GREE, Inc. All Rights Reserved.
Slide 2: Executive Summary
Executive Summary Net sales ¥17.9 billion, operating income ¥2.8 billion, EBITDA Financial Results ¥3.2 billion Overview ⁃ Surpassed operating income target despite sales falling short of target Overseas development, new titles off to a strong start ⁃ Release of North American version of DanMach
Slide 3: Executive Summary: Targeting Medium-Term Growth
Executive Summary Medium-Term Plan Targeting Medium-Term Growth Targeting sustainable growth as we build three earnings pillars Scale Third pillar: Live entertainment business Sowing the seeds of new business Second pillar: Advertising and media business Expanding scale of operations to create the n
Slide 4: Contents
Contents 1. Financial Results Overview 2. Operational Overview 3. Appendix Copyright © GREE, Inc. All Rights Reserved.
Slide 5: 1. Financial Results Overview
Contents 1. Financial Results Overview 2. Operational Overview 3. Appendix Copyright © GREE, Inc. All Rights Reserved.
Slide 6: FY18 3Q Financial Results Overview
1. Financial Results Overview (Consolidated) FY18 3Q Financial Results Overview Net sales ¥17.9bn, operating income ¥2.8bn Billions of yen FY18 3Q FY18 2Q FY17 3Q QoQ YoY Net sales 17.87 -1.59 1.99 19.46 15.88 EBITDA 3.15 0.45 0.94 2.71 2.21 Operating 2.78 0.44 1.23 2.34 1.55 income Ordinary 2.69 0.
Slide 7: Net Sales, EBITDA, and Operating Income
1. Financial Results Overview (Consolidated) Net Sales, EBITDA, and Operating Income Operating margin expanded by 3.6 percentage points QoQ to 15.6% Billions of yen 21.6 22.0 25.0% 19.2 19.5 17.9 15.9 15.6% 12.5% 12.5% 12.0% 11.0 12.5% 9.7% 3.1 3.1 2.7 3.2 2.8 2.4 2.7 2.3 2.2 1.5 0.0 0.0% 3Q 4Q 1Q 2
Slide 8: Operating Income Analysis
1. Financial Results Overview (Consolidated) Operating Income Analysis Operating income up ¥400 million to ¥2.8 billion on cost cutting Billions of yen 0.44bn increase ＋0.53 2.78 2.34 -1.59 ＋1.50 Operating Decrease in Decrease in Decrease in Operating Income net sales variable costs fixed costs Inco
Slide 9: FY18 3Q Cost Structure
1. Financial Results Overview (Consolidated) FY18 3Q Cost Structure Total costs down ¥2.0 billion QoQ to ¥15.1 billion Billions of yen FY18 FY18 FY17 Factors in change（QoQ） 3Q QoQ YoY 2Q 3Q Decreased due to use of more efficient advertising Advertising 0.83 -0.60 -0.06 (2Q 7.4% → 3Q 4.6%) 1.43 0.88
Slide 10: FY18 Earnings Forecast
1. Financial Results Overview (Consolidated) FY18 Earnings Forecast Net sales ¥77.5bn, operating income ¥10.0bn, EBITDA ¥11.5bn Billions of yen 1Q 2Q 3Q 4Q Full-year results results results forecast forecast Net sales 21.6 19.5 17.9 18.5 77.5 Operating income 2.7 2.3 2.8 2.2 10.0 Ordinary income 3.0
Slide 11: 2. Operational Overview
Contents 1. Financial Results Overview 2. Operational Overview 3. Appendix Copyright © GREE, Inc. All Rights Reserved.
Slide 12: Review and Summary of 3Q
2. Operational Overview: Summary Review and Summary of 3Q FY18 Business Plan Review Aggressive push forward with - Entered live entertainment business as third earnings Overall investment in pillar growth businesses - Released North American version of DanMachi (late March) “Game engine, IP, Mobile
Slide 13: Progress Made
2. Operational Overview: Game/entertainment business Progress Made Domestic Coin Consumption (Mobile) Topics Billions of coins Strengthened operation of existing titles 150 15.0 - Released major updates 12.6 - Entered into collaborations, etc. 10.4 10.0 Released In Love with News 9.0 - Released
Slide 14: Development pipeline
2. Operational Overview: Game/entertainment business - Mobile Development pipeline Four titles already released; total of six titles in development Progress made in preparing of existing titles for overseas markets FY19 and FY18 onward Already In released development 0 2 First-party IP Co-developed
Slide 15: Expected growth trend
2. Operational Overview: Game/entertainment business - Mobile Expected growth trend Sales growth through strengthening of operations and overseas development Initial strong Temporary Strengthening of Overseas performance decline operations development Sales growth Sales growth Note: The graphic belo
Slide 16: Strengthening operations for Another Eden
2. Operational Overview: Game/entertainment business - Mobile Strengthening operations for Another Eden Record-high ranking (5th) in April driven by rising update cycle even though a year has passed since release Structural factor: Increased accelerated pace of content Sales growth personnel Sales r
Slide 17: Development of DanMachi for overseas markets
2. Operational Overview: Game/entertainment business - Mobile Development of DanMachi for overseas markets April North American launch even stronger than Japan launch; expect further growth in global market Sales growth from Sales off to a strong start development for overseas markets Sales Sales Eu
Slide 18: Existing title 3Q Topics
2. Operational Overview: Game/entertainment business - Mobile Existing title 3Q Topics Large-scale updates and additional content Another Eden: The Cat Who Goes Beyond Time DanMachi Memoria Freese* Continuous updates Large-scale update • Continuously updated twice a month • Held events and added fun
Slide 19: Existing title 3Q Topics: Collaborations
2. Operational Overview: Game/entertainment business - Mobile Existing title 3Q Topics Collaborations with major titles and media mix campaigns SINoALICE SenkiZesshouSYMPHOGEARXDUnlimited Collaboration events Campaigns integrated with real-world events • Held Drag On Dragoon 3 event in March • Held
Slide 20: In Love with News
2. Operational Overview: Game/entertainment business - Mobile New titles In Love with News Live-action dating simulation game featuring News, reached top 20 in app rankings Released March 27 Off to a strong start User reviews Google Play App Store 4.5 4.7 Ranking 17 th - First official game app feat
Slide 21: Puchiguru Love Live!
2. Operational Overview: Game/entertainment business - Mobile New titles Puchiguru Love Live! Launch of new Love Live! game created in close collaboration with Sunrise, reached top 20 in app rankings Released April 24 Off to a strong start User reviews Google Play App Store 4.4 4.6 Ranking 31 th - A
Slide 22: Expansion of console business
2. Operational Overview: Game/entertainment business Expansion of console business Application of “Game engine, IP, and global” strategies to console games Second step:release of Another Eden for the Nintendo Switch announced on April 19 Expansion of game engine development Mobile games Console game
Slide 23: VR business
2. Operational Overview: Game/entertainment business – Consoles, etc. VR business Progress in investment, development and market promotion Development of VR games for children Providing VR use promotion tools Joint project with AEON fantasy Produced VR Office Tour with Toyoda High System • Developed
Slide 24: Entered the live entertainment business
2. Operational Overview: Live entertainment, etc. Entered the live entertainment business Planning investment of roughly ¥10bn in business specializing in virtual YouTubers in Japan and around the world Talent Discovery Manage- Program ment Planning Production IP Video Concerts Distribu- TV Show Dev
Slide 25: Business development that utilizes our strengths
2. Operational Overview: Live entertainment, etc. Business development that utilizes our strengths Accelerating business growth by leveraging our strengths including game and VR business knowhow and large-scale investment capabilities Accumulated knowhow related Large-scale investment to existing bu
Slide 26: Advertising and media business: Progress Made
2. Operational Overview: Advertising and media business Progress Made Growth in media page views Growth in number of clients 1.6x QoQ growth Further growth in number of advertisers from growth in scale of media 1.6x DoCoMo Bike Share, Dinos Cecile Co., Kanebo Inc. Ltd. Cosmetics Inc. Tokyu Hotels IP
Slide 27: 3. Appendix
Contents 1. Financial Results Overview 2. Operational Overview 3. Appendix Copyright © GREE, Inc. All Rights Reserved.
Slide 28: Targeting Medium-Term Growth
3. Appendix Medium-Term Plan Targeting Medium-Term Growth Targeting sustainable growth as we build three earnings pillars Scale Third pillar: Live entertainment business Sowing the seeds of new business Second pillar: Advertising and media business Expanding scale of operations to create the next gr
Slide 29: Game engine, IP, and global
3. Appendix FY18 Strategy Game and entertainment business strategy Game engine, IP, and global Engines Increase our sustainable competitive advantage ✖ Increase hit rate and IP profitability ✖ Global Increase earnings from IP- based titles 29 Copyright © GREE, Inc. All Rights Reserved.
Slide 30: Strategy 1: Game engine strategy
3. Appendix FY18 Strategy Strategy 1: Game engine strategy Increase our sustainable competitive advantage Game quality and achieving differentiation through quality Contents ・Characters ・Scenarios Enhance ・Immersion, etc. Contents Enhance Contents Apply Technical Apply base Technical ・Asset manageme
Slide 31: Strategy 2: IP strategy
3. Appendix FY18 Strategy Strategy 2: IP strategy Increase hit rate and profitability and make well-balanced use of a wide range of IP First-party IP Long-term growth from IP assets developed in house Wide Co-developed IP range of IP Created in cooperation with our partners Third-party IP Developmen
Slide 32: Strategy 3: Global strategy
3. Appendix FY18 Strategy Strategy 3: Global strategy Increase earnings from IP-based titles through our globally targeted Japan-based development system and by working with our partners Create and secure global IP Distribution Japan-based partnerships development and with best partners operation 32
Slide 33: Expected growth trend in mobile games
3. Appendix Expected growth trend in mobile games Sales growth through strengthening of operations and overseas development Initial strong Temporary Strengthening of Overseas performance decline operations development Note: The graphic below is meant to provide a rough image of expected native game
Slide 34: App, Video, and Investment
3. Appendix FY18 Strategy Advertising and media business App, Video, and Investment Establish media management App system with high continuation rate ✖ Video Accumulate high quality video production know-how ✖ Investment Establish our position in multiple genres 34 Copyright © GREE, Inc. All Rights
Slide 35: Main media brands
3. Appendix Main media brands Fashion video magazine Informational media on housing and lifestyles Beauty media based on the theme of “finding your ideal self” Outing and travel media based on the theme of “making every day fun” Notes: • The above is a list of main media brands operated by GREE as o
Slide 36: Entered the live entertainment business
3. Appendix Entered the live entertainment business Planning investment of roughly ¥10bn in business specializing in virtual YouTubers in Japan and around the world Talent Discovery Manage- Program ment Planning Production IP Video Concerts Distribu- TV Show Develop- Distribution tion ment System Sp
Slide 37: Business development that utilizes our strengths
3. Appendix Business development that utilizes our strengths Accelerating business growth by leveraging our strengths including game and VR business knowhow and large-scale investment capabilities Accumulated knowhow related Large-scale investment to existing businesses capabilities Character creati
Slide 38: Coin Consumption (1)
3. Appendix Coin Consumption (1) Overall coin consumption (1) Overall coin consumption (2) Billions of coins Billions of coins 250 25.0 250 25.0 22.9 22.9 21.5 21.5 1.9 20.0 20.0 2.2 5.3 18.4 18.4 1.7 17.6 17.6 5.8 2.5 7.1 5.0 1.5 7.7 6.8 7.0 4.5 12.5 125 6.2 125 12.5 8.4 17.7 15.7 15.0 13.9 13.1 11
Slide 39: Coin Consumption (2)
3. Appendix Coin Consumption (2) Mobile games Web games Billions of coins Billions of coins 15.0 150 15.0 150 13.9 1.3 11.5 11.5 10.9 1.5 1.1 9.9 9.8 9.0 0.8 8.5 7.7 7.5 7.5 75 6.3 7.5 75 5.2 4.7 2.1 4.5 12.6 3.8 10.0 10.4 9.0 5.4 4.6 4.7 4.3 4.0 3.9 0 0 3Q 4Q 1Q 2Q 3Q 3Q 4Q 1Q 2Q 3Q FY17 FY18 FY17
Slide 40: 3Q FY18 Cost Structure
3. Appendix 3Q FY18 Cost Structure Millions of yen FY18 FY18 FY17 3Q 2Q 3Q QoQ YoY Rental charges 686 -80 -97 766 783 Labor costs 1,974 -3 -146 1,977 2,120 Others 4,346 -690 1,468 5,036 2,879 Cost of sales 7,007 -773 1,225 7,780 5,782 Advertising 827 -604 -55 1,431 882 Commission fees 3,824 -486 701
Slide 41: 3Q FY18 Balance Sheet
3. Appendix 3Q FY18 Balance Sheet Billions of yen FY18 FY18 FY17 3Q QoQ YoY 2Q 3Q Current assets 98.48 2.45 -0.38 96.03 98.87 Fixed assets 27.56 0.20 -1.04 27.36 28.60 Total assets 126.04 2.66 -1.42 123.39 127.47 Current liabilities 11.71 0.32 -2.16 11.39 13.87 Fixed liabilities 0.64 0.05 -0.79 0.59
Slide 42: Breakdown of Group Headcount
3. Appendix Breakdown of Group Headcount Number of employees Headcount at Group companies end-3Q Game/Entertainment Business - 901 Mobile Game Business Pokelabo, Wright Flyer Studios (370) Platform/Operation Business funplex (262) Shared game depts. ExPlay (269) Advertising and Media Business Includ
Slide 43: ■ This document includes some forecasts, which are based on currently available information. Actual
■ This document includes some forecasts, which are based on currently available information. Actual performance may differ due to various factors. ■ When p roduc in g th is docu ment , we were ca refu l t o avoid er rors or omiss ion s, b ut th e accuracy and completeness of the provided informat io