FY2019 Operating Results: DeNA

Key insights

7 takeaways

01
DeNA reported a significant decline in FY2019, with operating profit dropping to -45.7 billion yen compared to 13.5 billion yen in FY2018, largely driven by substantial impairment losses.See it on page 2
02
Revenue for FY2019 reached 121.4 billion yen, a 2% decrease from the 124.1 billion yen recorded in FY2018.See it on page 19
03
The Sports business, which includes the Yokohama DeNA BayStars, saw revenue grow to 20.2 billion yen in FY2019 from 18.1 billion yen in FY2018, though it faces significant uncertainty due to COVID-19-related game cancellations and attendance restrictions.See it on page 12
04
The company's China game business showed growth in FY2019, bolstered by the December 2019 launch of the 'Slam Dunk' smartphone game which contributed significantly to performance in the third and fourth quarters.See it on page 10
05
The live communication app 'Pococha' demonstrated solid growth in both listener and streamer daily active users (DAU) between April 2018 and March 2020.See it on page 15
06
To address financial performance, DeNA has outlined a strategy for the next 1-2 years that includes strengthening the game business, optimizing growth investments, and reducing fixed costs through operational efficiencies.See it on page 8
07
As of May 2020, the company established a task force to manage COVID-19 impacts, noting that while the Games and Social Live Streaming segments remain unaffected, the Sports business faces potential losses if fan attendance remains restricted.See it on page 6

Summary

DeNA’s FY2019 operating results reflect a challenging fiscal year characterized by significant impairment losses and the onset of the COVID-19 pandemic. The company reported consolidated revenue of 121.4 billion yen, a slight 2% decline from the previous year. Operating profit saw a substantial downturn, shifting from a profit of 13.5 billion yen in FY2018 to a loss of 45.7 billion yen in FY2019, largely driven by heavy impairment charges and restructuring expenses. Despite these headwinds, the company maintained a cash and cash equivalent balance of 73.5 billion yen as of March 31, 2020, and successfully concluded a 36.3 billion yen share buyback program.

The Game segment remained the primary revenue driver, contributing 83.8 billion yen, which was flat year-over-year. Performance was bolstered by anniversary events for established titles like Granblue Fantasy and the successful launch of Slam Dunk in China. Conversely, the Sports segment faced volatility due to the seasonal nature of professional baseball and the cancellation of B.LEAGUE games, resulting in a segment profit of 1.2 billion yen. New business areas, including Automotive and Healthcare, continued to undergo structural reorganization, with the company prioritizing disciplined investment and the optimization of fixed costs to improve future profitability.

The company’s outlook for FY2020 remains cautious due to the unpredictable impact of COVID-19 on its sports and live event operations. In response, DeNA has established a task force to manage remote work transitions and has secured 20.0 billion yen in new borrowing to ensure sufficient operating capital. Moving forward, the strategic focus centers on strengthening the core game business, streamlining corporate functions, and fostering growth in social live streaming services like Pococha. The company has declined to provide a formal consolidated financial forecast for FY2020, citing the difficulty of accurately estimating the ongoing effects of the global health crisis.