Slide 1: FY2014 Fourth Quarter Financial Results
GREE, Inc. FY2014 Fourth Quarter Financial Results August 13, 2014 Copyright © GREE, Inc. All Rights Reserved.
Slide 2: Executive Summary
Executive Summary 最後に書き直し Net sales and operating income declined YoY to ¥125.6 billion and ¥35.0 billion respectively ⁃ Game Business ⁃ Shortage of new hit titles on smartphones a key issue amid continued decline on feature phones ⁃ Strengthened product development capabilities at Japan studios,
Slide 3: Contents
Contents 1. Financial Results Overview 2. Operational Overview 3. Appendix Copyright © GREE, Inc. All Rights Reserved.
Slide 4: 1. Financial Results Overview
Contents 1. Financial Results Overview 2. Operational Overview 3. Appendix Copyright © GREE, Inc. All Rights Reserved.
Slide 5: FY14 Full-year and 4Q Financial Results Overview
1. Financial Results Overview (Consolidated) FY14 Full-year and 4Q Financial Results Overview Full-year net sales of ¥125.6 billion, operating income of ¥35.0 billion Operating income declined QoQ on lower net sales Billions of yen FY14 FY14 4Q FY14 3Q FY13 4Q Full-year YoY QoQ YoY Net sales1 125.60
Slide 6: Net sales, EBITDA, and Operating Income
1. Financial Results Overview (Consolidated) Net sales, EBITDA, and Operating Income Operating margin declined by 9.0 percentage points to 23.1% Billions of yen 400 40 50.0% 35.33 32.62 31.07 26.58 32.0% 27.7% 28.1% 20 200 23.1% 25.0% 11.64 11.67 10.96 9.78 9.95 9.15 7.73 6.13 0 0.0% 1Q 2Q 3Q 4Q FY1
Slide 7: Operating Income Analysis
1. Financial Results Overview (Consolidated) Operating Income Analysis Despite cost cuts totaling ¥0.8 billion, operating income decreased to ¥6.13 billion due to large impact of lower sales at Japan and overseas studios Billions of yen ¥3.82bn 9.95 decrease -4.50 +0.80 6.13 -0.13 Operating Decrease
Slide 8: Difference between FY14 4Q Forecast and Actual Results
1. Financial Results Overview (Consolidated) Difference between FY14 4Q Forecast and Actual Results Japan and overseas studios sales fell short of targets Billions of yen FY14 4Q FY14 4Q Forecast Difference Actual (announced May 8) Net sales 26.6 30.0 -11% Operating income 6.1 9.1 -33% Ordinary inco
Slide 9: FY14 4Q Cost Structure
1. Financial Results Overview (Consolidated) FY14 4Q Cost Structure Total costs decreased 3.2% QoQ to ¥20.45 billion Billions of yen FY14 FY14 FY13 Factors in change (QoQ) 4Q 3Q QoQ 4Q YoY Aggressive marketing to promote new first-party and Advertising 3.80 2.88 +0.92 6.26 -2.46 partner releases and
Slide 10: Improved earning power and strengthened financials
1. Financial Results Overview (Consolidated) Improved earning power and strengthened financials Increased net cash by approximately ¥28.7 billion compared with end of fiscal 2013 through strict cost control and curbing of investing activity Cut fixed costs Increased net cash* Billions of yen Billion
Slide 11: Year-end Dividend
1. Financial Results Overview (Consolidated) Year-end Dividend We plan to pay dividends of ¥11 per share to maintain the consolidated dividend payout rate at a similar level to FY2013. We target a consolidated dividend payout ratio of 20% over the medium to long term Planned dividend (FY2014) Previo
Slide 12: FY15 1Q Earnings Forecast
1. Financial Results Overview (Consolidated) FY15 1Q Earnings Forecast FY15 1Q forecast: net sales of ¥26.0 billion; operating income of ¥5.5 billion Billions of yen (Reference) FY15 1Q Forecast FY14 4Q Actual Change FY14 Full-year Actual Net sales 26.0 26.6 -2% 125.60 Operating income 5.5 6.1 -10%
Slide 13: 2. Operational Overview
Contents 1. Financial Results Overview 2. Operational Overview 3. Appendix Copyright © GREE, Inc. All Rights Reserved.
Slide 14: FY14 Initiatives and FY15 Strategy
2. Operational Overview: Summary FY14 Initiatives and FY15 Strategy FY14 Initiatives FY15 Business Strategy Made steady progress with structural reforms to create a leaner organization and Decisive pivot to native game business streamlined development capabilities, among structure Overall other
Slide 15: Coin Consumption (Smartphones)
2. Operational Overview: Game Business KPIs FY14 4Q results Coin Consumption (Smartphones) Total coin consumption on smartphones grew 14% YoY, driven by strong growth in native games for overseas markets Full-year coin consumption on smartphones (億コイン) Billions of coins 125.2 ■ Web games (smartphone
Slide 16: Coin Consumption (Overall)
2. Operational Overview: Game Business KPIs FY14 4Q results Coin Consumption (Overall) In 4Q consumption dropped substantially on both feature phones and native games, resulting in an overall QoQ decline of approximately 12%. Ratio of consumption on smartphones to total grew to around 73% Coin Consu
Slide 17: Coin Consumption (Native Games)
2. Operational Overview: Game Business KPIs FY14 4Q results Coin Consumption (Native Games) Coin consumption in overseas markets declined on weaker performance at U.S. studio Billions of coins Japan market 140 14 12.6 12.8 12.7 Performance of long-run hit titles such as 11.2 Tsuri-sta and Driland
Slide 18: Coin Consumption (Web Games)
2. Operational Overview: Game Business KPIs FY14 4Q results Coin Consumption (Web Games) Overall consumption down 11% QoQ on continued steep decline in consumption on feature phones. Consumption on smartphones reflecting a lack of “killer” titles Billions of coins 400 40 38.2 34.2 First-party / Co-d
Slide 19: Decisive pivot to native
2. Operational Overview: Japan Game Business FY15 plan FY15 Business Strategy (1/7) Decisive pivot to native Triple size of native game operations Boost Japan studio headcount from 300 to 1,000 Double number of native game production lines Increase from 10 to 20 Strengthen publishing operations Maxi
Slide 20: FY15 Business Strategy (2/7)
2. Operational Overview: Japan Game Business FY15 plan FY15 Business Strategy (2/7) During FY14 rose to a level from which we can compete in today’s native game market. Aim to scale up operations toward creating a hit title Creating the conditions for hit titles Enhance development process FY14
Slide 21: FY15 Business Strategy (3/7)
2. Operational Overview: Japan Game Business Improve hit rate FY15 Business Strategy (3/7) Optimize studio operations and approaches for full native game development Improve game development capabilities to achieve rich gameplay and innovative design characteristic of full native games Strengthening
Slide 22: FY15 Business Strategy (4/7)
2. Operational Overview: Japan Game Business Boost output FY15 Business Strategy (4/7) Shift first-party new game development resources to full native games, while maintaining efficient operation of existing web titles. Approximately 700 people from Web Game Business to be assigned to full native ga
Slide 23: FY15 Business Strategy (5/7)
2. Operational Overview: Japan Game Business Boost output FY15 Business Strategy (5/7) Plan to double number of production lines by increasing development staff assigned to full native games Increase production lines for new full native games 20 ×2 10 15 5 5 5 ■Pokelabo ■GREE (Japan) 22 Copyright ©
Slide 24: FY15 Business Strategy (6/7)
2. Operational Overview: Japan Game Business Boost output FY15 Business Strategy (6/7) Use cross-border and cross-platform opportunities to maximize sales for each title through cooperation between GREE studios in Japan and overseas and through collaboration with leading publishers Cross-border, cro
Slide 25: FY15 Business Strategy (7/7)
2. Operational Overview: Japan Game Business Boost output FY15 Business Strategy (7/7) Optimize resources in web game business including GREE Platform to ensure continued earnings contribution while maintaining stable operations Web game business strategy Rapid shift in market conditions made it d
Slide 26: Progress at Japan studios
2. Operational Overview: Native Game Business (Japan) FY14 4Q results Progress at Japan studios Released Shometsu Toshi, the first title from Wright Flyer Studios. Monthly coin consumption on The SAMURAI Kingdom, released in 3Q by Pokelabo, exceeded 100 million Update on new titles Shometsu Toshi Th
Slide 27: Initiatives at Japan studios (1/2)
2. Operational Overview: Japan Game Business (Native) FY14 4Q results Initiatives at Japan studios (1/2) Aim to increase monthly sales through growth initiatives Growth initiatives Shometsu Toshi The SAMURAI Kingdom Wright Flyer Studios Pokelabo Released on iOS in Jan. 2014 Released on Android and i
Slide 28: Initiatives at Japan studios (2/2)
2. Operational Overview: Japan Game Business (Native) FY14 4Q results Initiatives at Japan studios (2/2) Plan to release total of 3 titles from Japan studios in FY15 1Q1 Developing new casual titles in new genres for FY15 2Q Upcoming titles CROSS SUMMONER Pokelabo Planned for release on Android and
Slide 29: First-party titles
2. Operational Overview: Japan Game Business (Web) FY14 4Q results First-party titles Continued to implement new measures based on evaluation of user demand, with a view to continuing to operate existing hit titles in the medium to long term Continued improvement of existing hit titles Driland Cerbe
Slide 30: First-party titles
2. Operational Overview: Japan Game Business (Web) FY15 1Q plan First-party titles Five first-party titles in production, from fully original games to games based on strong IP Upcoming GREE titles LOST LAND TACTICS Dragons’ Party Planned for release on August 25, 2014 Planned for release on August 2
Slide 31: Collaboration with leading partners
2. Operational Overview: Game Business FY14 4Q results Collaboration with leading partners GRIPHONE title Game of Gangs: Shuffle the Cards exceeded monthly consumption of 100 million coins within two months of its release Coin consumption Game of Gangs: Shuffle the Cards1 GRIPHONE※2 100m coins Relea
Slide 32: Collaboration with leading partners
2. Operational Overview: Game Businesses FY15 1Q plan Collaboration with leading partners Collaborate with leading partners to release new titles in highly popular genres Upcoming title Shirohime Quest KADOKAWA Planned for release on August 15, 2014 Simulation game in which the player becomes lord
Slide 33: FY15 Business Strategy (1/2)
2. Operational Overview: Overseas Game Business FY15 1Q plan FY15 Business Strategy (1/2) Use new management and growth strategy to achieve sustainable growth of top line in mid to long term Overseas business sales Achieved monthly Increased earnings Start of overseas business Invested in growth Sus
Slide 34: FY15 Business Strategy (2/2)
2. Operational Overview: Overseas Game Business FY15 plan FY15 Business Strategy (2/2) Achieve sustainable growth Target hardcore genres Grow revenues by targeting new market segment Expand product offering on Android and in European languages Maximize game revenue by releasing Android and European
Slide 35: Initiatives at Overseas Studios (1/4)
2. Operational Overview: Overseas Game Business FY15 plan Initiatives at Overseas Studios (1/4) New COO at GREE International: Andrew Sheppard, former president of Kabam’s worldwide game studios Accelerate growth under new management In August 2014, Andrew Sheppard joined GREE International as COO
Slide 36: Initiatives at Overseas Studios (2/4)
2. Operational Overview: Overseas Game Business (Native) FY15 1Q plan Initiatives at Overseas Studios (2/4) Plan to release two new titles during FY15 1Q Launch new titles in new game genres to target top rankings Pipeline for new titles Rich mid-core Hardcore City of Rivals ABRIA U.S. studio South
Slide 37: Initiatives at Overseas Studios (3/4)
2. Operational Overview: Overseas Game Business FY15 plan Initiatives at Overseas Studios (3/4) Release existing titles on Android and in European languages Initiatives to grow sales of existing titles Growth potential in Android sales Growth potential in European language sales Comparison of 4Q coi
Slide 38: Initiatives at Overseas Studios (4/4)
2. Operational Overview: Overseas Game Business FY14 4Q results Initiatives at Overseas Studios (4/4) League of War, a title developed in collaboration with MunkyFun, has recorded robust sales growth. Going forward, GREE will expand its collaboration with leading developers on game production Update
Slide 39: Chinese-language Markets (1/2)
2. Operational Overview: Publishing Business FY14 4Q results Chinese-language Markets (1/2) Lost in Stars, a game developed in our Seoul studio, has been well received in Taiwan, Hong Kong, and Macau, where it was recently published GREE Korea title published in Chinese-language markets Lost in Star
Slide 40: Chinese-language Markets (2/2)
2. Operational Overview: Publishing Business FY15 1Q plan Chinese-language Markets (2/2) Collaborate with leading partners to launch titles with strong IP in overseas markets Collaboration with leading partner in China market Title NARUTO – Shinobi Masters Country China available Language Simplified
Slide 41: Creating New Services
2. Operational Overview: Expanding Business Domains (New Services) Creating New Services Implementing investments with focus on business domains in which we can establish a dominant position. In new services, quickly build business foundation for focus areas by establishing new subsidiaries and by i
Slide 42: New Fund
2. Operational Overview: Expanding Business Domains (Venture Capital) New Fund GREE Ventures formed a second fund, having attracted investments from a number of leading corporations and institutional investors in Japan including the Organization for Small & Medium Enterprises and Regional Innovation
Slide 43: 3. Appendix
Contents 1. Financial Results Overview 2. Operational Overview 3. Appendix Copyright © GREE, Inc. All Rights Reserved.
Slide 44: FY14 4Q Cost Structure
3. Appendix FY14 4Q Cost Structure Millions of yen FY14 4Q FY14 3Q QoQ FY13 4Q YoY Rental charges 1,093 1,104 -11 1,233 -140 Labor costs 2,897 3,644 -747 2,510 +387 Others 2,138 2,346 -208 2,523 -385 Cost of sales 6,128 7,094 -966 6,266 -138 Advertising 3,801 2,882 +919 6,265 -2,463 Commission fees
Slide 45: FY14 4Q Balance Sheet
3. Appendix FY14 4Q Balance Sheet Billions of yen FY14 4Q FY14 3Q QoQ FY13 4Q YoY Current assets 92.92 89.03 +3.89 93.00 -0.08 Fixed assets 57.87 59.80 -1.93 65.74 -7.87 Total assets 150.79 148.83 +1.97 158.75 -7.95 Current liabilities 32.71 32.09 +0.61 48.32 -15.61 Fixed liabilities 4.07 5.78 -1.72
Slide 46: FY14 Cash Flows
3. Appendix FY14 Cash Flows Implemented strict cost control and curbed investing while securing earnings to achieve a ¥19.12 billion increase in cash and cash equivalents by end of FY2014 64.59 Billions of yen 45.47 34.43 14.49 - 3.16 - 12.39 -34.87 -8.37 FY13 FY141 ■ Cash and cash equivalents at en
Slide 47: Coin Consumption
3. Appendix Coin Consumption 1 Overseas markets Japan Market Millions of dollars Billions of coins 80 500 50 72 70 44.1 68 39.7 60 36.9 20.2 32.9 18.4 17.5 40 250 25 15.9 23.9 21.3 19.4 171 0 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY14 FY14 ■Third-party ■First-party/ Co-developed2 Notes: 1. Divided by region of
Slide 48: Coin Consumption (Web Smartphones)
3. Appendix Coin Consumption (Web Smartphones) Coin consumption Composition (%) Billions of coins 24 240 100% 20.5 19.4 32% 18.8 33% 34% 35% 17.2 6.5 6.5 6.4 6.1 12 50% 120 68% 67% 66% 65% 14.0 12.9 12.3 11.1 0 0% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY14 FY13 FY14 FY13 ■ Third-party ■ First-party/ Co-developed
Slide 49: Review of FY2014 Releases
3. Appendix Review of FY2014 Releases FY14 Releases3 H1 H2 Remarks 7 titles Collaborated with leading partners to release original 11 titles Partner titles and titles based on popular IP titles1 Grew monthly sales of several titles to more than ¥100 Web games As previously announced million St
Slide 50: Japan User Data (as of June 30, 2014)
3. Appendix Japan User Data (as of June 30, 2014) 1, 2 Total no. of 53.7 million users in Japan GREE Users Number of users Gender breakdown Age breakdown 19 or under 男性 21% 45% Male 28% 20s 43.0 million 2 55% 30s 女性 Female 22% 29% 40s or above Notes: 1. Pokelabo users counted based on number of regi
Slide 51: Breakdown of Group Headcount
3. Appendix Breakdown of Group Headcount 1 Number of employees 1,882 221 ■ Corporate, Headquarters Includes GREE Business Operations 116 105 ■ Engineering, Headquarters ■ Commerce and Media, Advertising, Venture Capital Includes GREE Entertainment Products, Glossom, GREE Ventures, etc. 735 ■ Web Gam
Slide 52: Forward-looking statements notice
■ This document includes some forecasts, which are based on currently available information. Actual performance may differ due to various factors. ■ When producing this document, we were careful to avoid errors or omissions, but the accuracy and integrity of the information is not guaranteed. Copyri