Slide 1: FY2013 Third Quarter Financial Results
GREE, Inc. FY2013 Third Quarter Financial Results May 14, 2013 Copyright © GREE, Inc. All Rights Reserved.
Slide 2: Executive Summary
Executive Summary Sales and profit declined QoQ: Net sales of ¥37.8 billion, operating profit of ¥10.8 billion Third Quarter ⁃ Japan: Coin consumption on smartphone titles grew, but fell short of targets Highlights ⁃ Overseas: Coin consumption has doubled on strong performance from titles develope
Slide 3: Table of Contents
Table of Contents 1. Overview of Consolidated Financial Results 2. Coin Consumption 3. New Growth Strategy 4. Appendix Copyright © GREE, Inc. All Rights Reserved.
Slide 4: Overview of Consolidated Financial Results
1. Overview of Consolidated Financial Results FY2013 Third Quarter (January – March 2013) 2. Coin Consumption 3. New Growth Strategy 4. Appendix Copyright © GREE, Inc. All Rights Reserved.
Slide 5: FY2013 Third Quarter Financial Results
1. Overview of Consolidated Financial Results FY2013 Third Quarter Financial Results Net sales declined QoQ because, despite strong performance from our overseas businesses, sales from smartphone titles in Japan fell short of targets ※ Millions of yen 3Q FY2013 2Q FY2013 QoQ change 3Q FY2012 YoY cha
Slide 6: Net Sales, EBITDA, and Operating Profit
1. Overview of Consolidated Financial Results Net Sales, EBITDA, and Operating Profit Millions of yen 50,000 46,189 45,000 41,529 40,080 39,407 40,000 37,935 37,892 35,000 30,432 30,000 24,963 22,904 24,549 25,000 22,535 19,634 20,000 16,961 18,996 16,744 16,646 15,750 15,763 14,258 12,688 15,000 10
Slide 7: Sales by Business
1. Overview of Consolidated Financial Results Sales by Business Paid Services Sales Advertisement Sales Millions of yen Millions of yen 50,000 4,000 3,636 42,882 3,306 3,334 3,238 38,290 3,129 40,000 3,039 36,444 36,278 2,928 34,601 34,853 3,000 30,000 27,503 2,000 20,000 1,000 10,000 0 0 1Q 2Q 3Q 4
Slide 8: FY2013 Third Quarter Operating Expenses
1. Overview of Consolidated Financial Results FY2013 Third Quarter Operating Expenses Millions of yen 3Q FY2013 2Q FY2013 QoQ change 3Q FY2012 YoY change Cost of sales 6,658 6,344 +5% 3,678 +81% Rental charges 1,132 1,091 +4% 2,099 -46% Labor costs 2,521 3,119 -19% 979 +158% Others 3,005 2,134 +41%
Slide 9: FY2013 Third Quarter Balance Sheet
1. Overview of Consolidated Financial Results FY2013 Third Quarter Balance Sheet Millions of yen End-3Q End-2Q End-3Q QoQ change YoY change FY2013 FY2013 FY2012 Current assets 83,277 91,064 - 9% 102,657 - 19% Cash and cash 37,171 42,933 - 13% 51,662 - 28% equivalents Receivables 22,383 24,390 - 8% 3
Slide 10: Posting of Extraordinary Loss
1. Overview of Consolidated Financial Results Posting of Extraordinary Loss As part of our selection and concentration strategy, we will streamline our portfolio of core titles. We posted an extraordinary loss of 4.03 billion yen on a one-time write-off of assets related to some titles Millions of y
Slide 11: Revised FY2013 Forecast
1. Overview of Consolidated Financial Results Revised FY2013 Forecast Millions of yen Current revised Previous revised forecast (2) Difference (1)/(2) forecast (1) (as of February 12, 2013) 160,000 -6.3% Net sales 150,000 to 170,000 to -11.8% 50,000 -8.0% Operating profit 46,000 to 60,000 to -23.3%
Slide 12: Coin Consumption
1. Overview of Consolidated Financial Results 2. Coin Consumption 3. New Growth Strategy 4. Appendix Copyright © GREE, Inc. All Rights Reserved.
Slide 13: Japan coin consumption
2. Coin Consumption Japan coin consumption Coin consumption in Japan declined QoQ Coin consumption on feature phones Coins spent (hundreds of millions) 600 declined more sharply than our forecast There were no new hit in-house titles 400 for smartphones Pokelabo’s existing titles performed wel
Slide 14: Overseas Coin Consumption
2. Coin Consumption Overseas Coin Consumption Overseas coin consumption doubled QoQ Millions of USD Strategy of focusing on highly 40 profitable titles was successful Growth of multiple titles from US 30 studio drove coin consumption growth For reference: Monthly coin consumption (US studio) 20
Slide 15: New Growth Strategy
1. Overview of Consolidated Financial Results 2. Coin Consumption 3. New Growth Strategy 4. Appendix Copyright © GREE, Inc. All Rights Reserved.
Slide 16: Shift to selection and concentration strategy
3. New Growth Strategy Shift to selection and concentration strategy While keeping to our basic plan of pursuing growth in the domestic smartphone market and overseas markets, we are shifting to a strategy of selection and concentration 3Q results Current status/challenges Measures to be taken Slide
Slide 17: Pipeline for smartphone titles
3. New Growth Strategy Pipeline for smartphone titles Scheduled releases in 2013 of in-house/co-produced1 smartphone browser/native app titles: 15-20 in Japan and approx. 5 overseas No. of titles Target Released titles Type scheduled for release market (as of May 10, 2013)2 within CY2013 Smartphone
Slide 18: Smartphone browser titles
Smartphone browser 3. New Growth Strategy titles in Japan Smartphone browser titles Shoring up our highly competitive smartphone browser title portfolio Optimizing deployment of resources to implement aggressive measures aimed at improving KPIs and customer flow Current status/challenges Measures to
Slide 19: Strengthening Our Development Operations (1)
Smartphone browser Example 1 titles in Japan Strengthening Our Development Operations (1) Leverage resources inside and outside the company to improve KPI of existing titles and speed up development of next generation of core content Redeployment of company Joint ventures established with resources
Slide 20: Strengthening Our Development Operations (2)
Smartphone browser Example 2 titles in Japan Strengthening Our Development Operations (2) Established strategic business partnership with Grani in March 2013 Strengthening development operations through close collaboration with this leading partner and hit-title producer Valhalla Gate1 Growth in con
Slide 21: Shoring up smartphone browser portfolio: ARPU and MAU
Smartphone browser Example 3 titles in Japan Shoring up our smartphone browser portfolio Improve KPIs and maximize user activity by improving customer flow to create core titles Improvement of customer flow High （P22） Next core titles Core titles Improvement ARPU of KPIs （P21） Mid-level titles Next
Slide 22: Measures to improve KPIs of titles
Smartphone browser Example 4 titles in Japan Measures to improve KPIs of titles Improvement of KPIs of titles through introduction of guilds and real time events and fine tuning of game balance Co-produced game A In-house game B Use of guild battle event Addition of new card Retention rate ARPDAU Wo
Slide 23: Measures to improve customer flow
Smartphone browser Example 5 titles in Japan Measures to improve customer flow In addition to improving KPIs, implementing measures to improve customer flow and boost user activity Examples of improvement Expected customer flow measures improvement MAU ARPMAU Consumption Measure Impact Promotes Cr
Slide 24: Fostering games based on IP
Smartphone browser Example 6 titles in Japan Fostering games based on IP In response to strong sales of titles based on IP that are popular with core fans, we will conduct promotion of these games The IDOLM@STER MILLION LIVE! SWORD ART ONLINE: END WORLD (NAMCO BANDAI Games Inc.) (NAMCO BANDAI Games
Slide 25: Native Apps
Smartphone native app 3. New Growth Strategy titles in Japan Native Apps Aiming to create hit titles by streamlining our portfolio of titles and increasing the efficiency of our development operations Current status/challenges Measures to be taken Development and quality improvement Streamline title
Slide 26: Increasing efficiency to create hit titles
Smartphone native app Example 1 titles in Japan Increasing efficiency to create hit titles Limit costs and increase hit rate by streamlining title portfolio and strengthening development of and improving quality of core titles Aim Specific measures Concentrate on titles with potential to be hits (re
Slide 27: Growth of Pokelabo's card battle titles
Smartphone native app Example 2 titles in Japan Growth of Pokelabo’s card battle titles Pokelabo’s card battle games, including new titles, are performing well. We target further growth through joint development and technology sharing with GREE’s Japan studios Japan Top Grossing Apps (as of May 5, 2
Slide 28: Knowledge sharing
Smartphone native app Example 3 titles in Japan Knowledge sharing Targeting growth in GREE’s iOS sales and Pokelabo’s Android sales through knowledge sharing Difference in sales by OS (as of 3Q 2013) GREE (Japan) Pokelabo 2.7 2.8 Potential to triple sales 1.0 1.0 Google Play Android Apple Store iOS
Slide 29: Overseas business
3. New Growth Strategy Overseas business Overseas business We will also accelerate our selection and concentration strategy overseas and we aim for our overseas businesses as a whole to enter the black on a cash basis by December 2013 Current status/challenges Measures to be taken U.S. studio growin
Slide 30: Accelerate growth of U.S. studio
Example 1 Overseas business Accelerate growth of U.S. studio The U.S. studio has strong growth momentum, with multiple titles simultaneously in the top sales rankings. We plan to have the US studio share knowledge on how to create these successes with other studios Accelerate growth of U.S. studio U
Slide 31: Entry into South Korean Market
Example 2 Overseas business Entry into South Korean Market Released Lost in Stars in South Korea in April (distribution via South Korean Google Play and T- store). Off to a strong start and we aim to boost growth further with events and additional features Lost in Stars Title art and screenshot KPIs
Slide 32: Rigorous cost control
3. New Growth Strategy Overseas business Rigorous cost control We will increase productivity through HR development and improve cost efficiency by streamlining our title portfolio and consolidating offices and studios Current status/challenges Measures to be taken Increased number of employees due t
Slide 33: Appendix
1. Overview of Consolidated Financial Results 2. Coin Consumption 3. New Growth Strategy 4. Appendix Copyright © GREE, Inc. All Rights Reserved.
Slide 34: Domestic User Data (as of March 31, 2013)
4. Appendix Domestic User Data (as of March 31, 2013) Total domestic users 40.8 million GREE Users Number of users Gender breakdown Age breakdown 19歳以下 19 or under 21% 22% 35.4 million 46% 男性 Male 20代 20s 30代 54% 女性 Female 24% 33% 30s 40代以上 40s * Pokelabo users counted based on number of registered
Slide 35: Global Game Developer Ranking
4. Appendix Global Game Developer Ranking GREE in top 10 global game developer sales rankings (Mar. 13) for both categories Google Play App Store Rank Company Headquarters Rank Company Headquarters 1 GungHo Online Japan 1 Supercell Finland 2 NHN South Korea GungHo 2 Japan Online 3 WeMade South Korea
Slide 36: Resolution of System Failure Related to Spending Limits for Minors in Japan
4. Appendix Resolution of System Failure Related to Spending Limits for Minors in Japan We have resolved the system design flaw dating from April 2012 that led to system failure of the spending limits for minors Refunds of payments in excess of spending limits Measures taken to resolve system failur
Slide 37: Strengthening Our Organizational Structure
Improving user 4. Appendix environment Strengthening Our Organizational Structure We are taking steps to improve and strengthen our organizational structure, including the establishment of committees charged with continuously improving our user environment Established Business Operations Department
Slide 38: Measures to Improve User Environment (1)
4. Appendix Measures to Improve User Environment (1) GREE patrol system runs 24 hours a day, 365 days a year EMA (Content Evaluation and Monitoring Association) Patrol operates 24 hours, 365 days per year, monitoring posts systematically and by visual checks GREE Patrol Centers were established
Slide 39: Measures to Improve User Environment (2)
4. Appendix Measures to Improve User Environment (2) Development of a social gaming environment that people can use safely Efforts both inside and outside the company Advisory Board We established the User Environment Improvement Committee, headed by the CEO We also established an advisory board
Slide 40: Measures to Improve User Environment (3)
4. Appendix Measures to Improve User Environment (3) Educational Activities On- and Off-site Educational activities on-site GREE has established links to educational pages from each of our services Educational app, Manabou! Asobou! Rules of the Internet includes services for children of various
Slide 41: ■ This document includes some forecasts, which are based on currently available information. The
■ This document includes some forecasts, which are based on currently available information. The authenticity of the information is not guaranteed. Actual performance may differ due to various factors. ■ When producing this document, we were careful not to include errors or omissions, but the authen