DeNA Q3 FY2019 Results Briefing: Q&A Summary

Key insights

7 takeaways

01
DeNA recognized a 49.4 billion yen impairment loss in Q3 FY2019, primarily driven by 40.2 billion yen in goodwill related to the 2010 acquisition of ngmoco, LLC.See it on page 2
02
The company expects its first full-year operating loss since going public, leading the two representative directors to return 50% of their compensation for three months.See it on page 3
03
DeNA will merge its MOV taxi business with JapanTaxi on April 1, 2020, transitioning MOV to an equity-method affiliate to mitigate the impact of fierce competition and high investment costs.See it on page 2
04
New business areas, including MOV, recorded a cumulative operating loss of 8.4 billion yen through Q3, with full-year growth investment expected to exceed 10 billion yen.See it on page 4
05
The Game Business is struggling with profitability due to high development and marketing costs for new titles, with management targeting a performance recovery starting in the second half of the next fiscal year.See it on page 3
06
Management identified Pococha and insurance integrated with wellness programs as the primary drivers for future topline growth, while acknowledging that Pokémon Masters underperformed expectations.See it on page 5
07
As of Q3, the company maintains a strong cash position with approximately 25 billion yen earmarked for operating capital, leaving funds available for potential M&A and future shareholder returns.See it on page 5

Summary

DeNA’s Q3 FY2019 results briefing addresses significant financial challenges, primarily driven by a 49.4 billion yen impairment loss within the Game Business. This loss, which includes 40.2 billion yen in goodwill related to the 2010 acquisition of ngmoco, LLC and 8.1 billion yen in software assets, reflects a conservative accounting shift following the company's inability to meet growth expectations for new titles. Consequently, the company anticipates its first full-year operating loss since going public, prompting the two representative directors to voluntarily return 50% of their compensation for three months.

The company is currently navigating a difficult smartphone gaming market, where high development costs and intense competition have hampered profitability. Management acknowledges that recent titles, including Pokémon Masters, have underperformed relative to expectations, necessitating a strategic pivot toward cost optimization and organizational restructuring. While the company remains committed to leveraging intellectual property partnerships to drive future hits, it projects that a recovery in the Game Business will likely not materialize until the second half of the next fiscal year.

Beyond gaming, DeNA is restructuring its portfolio to focus on more promising growth areas, specifically live streaming via Pococha and wellness-integrated insurance programs. A major development in the automotive sector involves the upcoming merger of the MOV taxi service with JapanTaxi, scheduled for April 2020. This move is intended to address fierce market competition and the high costs associated with independent expansion. While this merger will lead to the de-consolidation of MOV, the company maintains a strong cash position, with approximately 25 billion yen earmarked for operating capital and continued exploration of future M&A opportunities.