Financial · August 1, 2016

Summary of Financial Results for First Half of Fiscal Year Ending December 31, 2016

Published by KLab

Summary

KLab Inc. reported a significant downturn in financial performance for the first half of the fiscal year ending December 31, 2016, covering the period from January 1 to June 30, 2016. Consolidated revenue fell 14.9% year-over-year to 8.88 billion yen, primarily driven by declining contributions from the title Love Live! School Idol Festival. The company’s profitability metrics showed a sharper decline, with operating income plummeting 96.7% to 51 million yen. The period concluded with an ordinary loss of 746 million yen and a net loss attributable to owners of the parent of 1.34 billion yen, a stark reversal from the 665 million yen profit recorded in the same period of 2015. The financial results were heavily impacted by non-operating and extraordinary items. The company recorded 752 million yen in foreign exchange losses due to the valuation of foreign currency assets. Furthermore, extraordinary losses reached 867 million yen, largely stemming from 757 million yen in impairment losses related to the titles Puzzle Wonderland and Age of Empires: World Domination. Despite these losses, KLab maintained a strong equity ratio of 78.4%, though total assets decreased by 1.82 billion yen compared to the end of the previous fiscal year. Looking forward, the company provided a forecast for the first three quarters of 2016, projecting revenue of 14.88 billion yen and an operating income of 1 billion yen, though it anticipates a net loss of 797 million yen for that period. A full-year forecast was withheld due to the inherent volatility of the mobile gaming industry and the difficulty of predicting hit products. Methodologically, the report follows Japanese GAAP and notes changes in accounting policies regarding business combinations and depreciation methods for certain facilities.

From the report

Summary of Financial Results for First Half of Fiscal Year Ending December 31, 2016 I!OM (Japanese GAAP) (Consolidated) This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. Name of listed company: KLab Inc. Securities code: 3656 Representative: [Name] Tetsuya Sanada Contact: [Name] Kazuyuki Takata Scheduled filing date for securities report: Scheduled date for dividends payment: Supplementary information for quarterly results: Information meeting for quarterly financial report: August 4, 2016 Stock exchange listing: Tokyo Stock Exchange First Section URL: http://www.klab.com/jp/ [Title] President & CEO [Title] Managing Director TEL: +81-3-5771-1100 August 4, 2016 － Yes Yes *Institutional investors and analysts only (Amounts of less than one million yen are rounded off) 1. Consolidated Operating Performance for First Half of FY2016 (January 1, 2016 – June 30, 2016) (1) Consolidated Operating Results (year-to-date) (% represents rate of increase or decrease over same period of previous fiscal year) Revenue Operating income Ordinary income Profit (loss) attributable to owners of parent Million yen % Million yen % Million yen % Million yen % First half of FY2016 8,879 (14.9) 51 (96.7) (746) － (1,342) － First half of FY2015 10,435 8.9 1,551 122.9 1,612 130.3 665 22.9 Note: Comprehensive income First half of FY2016: (1,348) million yen [―%] First half of FY2015: 656 million yen [20.2%]

ion yen % Million yen % Million yen % Million yen % First half of FY2016 8,879 (14.9) 51 (96.7) (746) － (1,342) － First half of FY2015 10,435 8.9 1,551 122.9 1,612 130.3 665 22.9 Note: Comprehensive income First half of FY2016: (1,348) million yen [―%] First half of FY2015: 656 million yen [20.2%] Net income Diluted net income per share per share Yen Yen First half of FY2016 (36.75) － First half of FY2015 18.35 17.93 Note: Diluted net income per share for the first half of FY2016 is not listed due to the fact that the net income per share is a loss. (2) Consolidated Financial Status Total assets Net assets Equity ratio Million yen Million yen % First half of FY2016 10,811 8,530 78.4 FY2015 12,633 9,867 77.7 Reference: Shareholders’ equity First half of FY2016: 8,476 million yen FY2015: 9,819 million yen 2. Dividends Annual dividends End of Q1 End of Q2 End of Q3 Year End Total Yen Yen Yen Yen Yen FY2015 ― 0.00 ― 0.00 0.00 FY2016 ― 0.00 FY2016 (Forecast) ― 0.00 0.00 Note: Revisions to the most recently announced dividend forecast: None

3. Consolidated Operating Performance Forecasts for FY2016 (January 1, 2016 – September 30, 2016) (% represents rate of increase or decrease over same period of previous fiscal year) Revenue Operating income Ordinary income Profit (loss) Net income attributable to owners per share of parent Million yen % Million yen % Million yen % Million yen % Yen First three quarters of 14,879 (10.2) 1,001 (55.9) 153 (92.8) (797) ― (21.82) FY2016 Note: Revisions to the most recently disclosed business performance forecast: None ■ Explanatory Notes (1) Changes to major subsidiaries during first half of FY2016: None (2) Changes to accounting principles or treatment: Yes Note: Refer to “(1) Adoption of Special Accounting Treatment” in section “2. Summary Information (Notes)” on page 4 of Supporting Information. (3) Changes to accounting policies, estimates, and restatements ① Changes to accounting revision of accounting standards: Yes ② Changes other than ①: None ③ Changes to accounting estimates: None ④ Restatements: None Note: Refer to “(2) Changes in Accounting Policy, Accounting Estimates, and Restatements” in section “2. Summary Information (Notes)” on page 4 of Supporting Information. (4) Number of outstanding shares (common shares) ① Period end outstanding shares First half of 37,858,500 shares FY2015 37,797,600 shares (including treasury shares) FY2016 ② Period end treasury shares First half of 1,308,300 shares FY2015 1,327,800 shares FY2016 ③ Average outstanding shares First half of 36,529,141 shares First half of 36,277,376 shares during the period FY2016 FY2015

f of 37,858,500 shares FY2015 37,797,600 shares (including treasury shares) FY2016 ② Period end treasury shares First half of 1,308,300 shares FY2015 1,327,800 shares FY2016 ③ Average outstanding shares First half of 36,529,141 shares First half of 36,277,376 shares during the period FY2016 FY2015 ■ Current Status of Quarterly Review Procedures Although “Consolidated Quarterly Financial Results” are not subject to quarterly review procedures in accordance with the Financial Instruments and Exchange Act of Japan, the quarterly review procedures have been completed at the time of disclosure of the “Consolidated Quarterly Financial Results.” ■ Note Regarding the Appropriate Usage of Forecasts and Other Special Instructions The forecasts in this report are based on the current data available to the Group and certain reasonable assumptions and may vary according to various factors in the future. For forecasts, refer to “(3) Forecasts and Various Factors in the Future” in section “1. Qualitative Information on Management Performance” on page 3 of Supporting Information.

Supporting Information INDEX 1. Qualitative Information on Management Performance 2 (1) Business Operation 2 (2) Analysis of Financial Status 2 (3) Forecasts for Third Quarter FY2016 and Various Factors in the Future 3 2. Summary Information (Notes) 4 (1) Adoption of Special Accounting Treatment 4 (2) Changes in Accounting Policy, Accounting Estimates, and Restatements 4 (3) Additional Information 4 3. Consolidated Financial Statements 5 (1) Consolidated Balance Sheets 5 (2) Consolidated Statements of Income and Comprehensive Income 7 (3) Notes Related to Consolidated Financial Statements 9 (Notes related to ongoing concern assumptions) 9 (Notes in case of significant change in shareholders’ equity) 9 (Segment information) 10 - 1 -

1. Qualitative Information on Management Performance (1) Business Operation ■ For the first half of FY2016, consolidated revenue was 8,879,075 thousand yen, down 14.9% from the same quarter of the previous fiscal year, and down 15.8% from the first quarter of FY2016. This was due mainly to decreases in the amount of revenue generated by “Love Live! School Idol Festival.” ■ Pertaining to expenditures for the first half of FY2016 - The cost of sales was 6,758,346 thousand yen, up 0.2% from the same quarter of the previous fiscal year, and down 15.5% from the previous quarter. - This change is mainly attributable to the decrease in overall revenue resulting in a decline in royalties and commissions. - Selling, general and administrative expenses were 2,069,647 thousand yen, down 3.1% from the same quarter of the previous fiscal year, and down 31.4% from the previous quarter. - This is attributable to decreased advertising and outsourcing expenses for “Bleach: Brave Souls.” - 752,374 thousand yen in foreign exchange losses and extraordinary losses of 867,735 thousand yen were listed this quarter. The foreign exchange losses are mainly attributable to the exchange rate used in the valuation of foreign currency assets held by the Group conducted on the last day of the first half of FY2016.

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Type: Financial

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