Financial

FY2023 First Quarter Financial Results Briefing

Published by GREE

Summary

GREE, Inc. reported FY2023 first‑quarter results with net sales of ¥16.6 billion and operating income of ¥1.58 billion, driven largely by the Internet and Entertainment segment. The flagship game “Heaven Burns Red” continued to outperform expectations, sustaining high sales rankings and generating strong variable revenue; however, quarter‑on‑quarter sales declined after a peak in FY22 due to the absence of new releases and anniversary events. Variable costs fell, while fixed costs remained stable, resulting in a total cost reduction of ¥2.0 billion to ¥15.0 billion. The Metaverse business, centered on the global platform REALITY, achieved a milestone of 10 million downloads across 63 countries. GREE plans to expand content and communication features—such as new gaming titles, reaction stickers, and chat GIFs—to increase user engagement and monetize the platform further. The Commerce and DX segment continued to grow its SaaS offering, aumo My Business, with rising media users and clients. Investment and Incubation activities saw an AUM increase to ¥80 billion, driven by asset revaluation and new investments in three VC funds (Japan and the U.S.) and 14 startups. Despite a decline in listed‑stock valuations, unlisted holdings rose, improving overall portfolio value and IRR, particularly in the growth phase. Geographically, GREE’s operations span Japan and international markets, with a focus on expanding overseas reach for both gaming and Metaverse services. The company anticipates stable income in FY23, with a projected operating income of ¥1.0–¥1.5 billion for the second quarter, while maintaining aggressive investment in Metaverse development.

From the report

Toshiki Oya, Senior Vice President, CFO: Thank you for joining the FY2023 first quarter financial results briefing of GREE, Inc. I am Toshiki Oya. Please refer to the Executive Summary on page 2. Net sales was ¥16.6 billion, operating income was ¥1.6 billion, and EBITDA was ¥1.7 billion. The Internet and Entertainment Business surpassed our forecast on strong performance from Heaven Burns Red. Going to the Business Overview, the Game and Anime business continued strong performance from Heaven Burns Red. As I will explain later, it maintained strong performance by expanding main storyline. In the Metaverse business, we continued to develop REALITY. As you saw in the recent press release, its global downloads topped 10 million. We will continue to expand content and communication functions to make it even bigger. Regarding the outlook for FY23, we will continue aggressive investment, especially in the Metaverse business. We expect stable income, but a decline in profit year on year following strong performance from hit titles in FY22. For the second quarter, we expect operating income in the Internet and Entertainment Business of between roughly ¥1.0 billion and ¥1.5 billion. Please go to page 5, the overview of the first quarter financial results. Net sales and operating income will be covered later. Ordinary income picked up, largely because of the revaluation of funds and investments denominated in foreign currencies on the back of the weakening yen.

¥1.5 billion. Please go to page 5, the overview of the first quarter financial results. Net sales and operating income will be covered later. Ordinary income picked up, largely because of the revaluation of funds and investments denominated in foreign currencies on the back of the weakening yen. Page 6 illustrates the trends in net sales and operating income. The Internet and Entertainment business grew significantly in FY22 thanks to hit titles. The momentum continues, but the sales and profit declined compared to the fourth quarter following strong performance from released titles and anniversary events. But we will continue to operate Heaven Burns Red and other existing titles successfully. On the right side is the Investment and Incubation business. The first quarter saw a loss of ¥0.19 billion. This was a quarter with very few exits due to the recent sluggish stock market. We expect this environment to Page 1 of 4

continue for the short term, but we believe, in the medium to long term, this business will be able to make a stable contribution to profit. I will show you more details on our existing portfolio later. Page 7 is the operating income analysis. Compared to the fourth quarter, as I mentioned earlier, the sales in the Internet and Entertainment business declined significantly following strong performance from titles released in FY22 and anniversary events. Variable costs decreased accordingly. That is the main reason why we landed at ¥1.58 billion for the first quarter of FY23. Page 8 shows the cost structure. In the variable costs, commissions fees, etc. decreased. Fixed costs did not change significantly. Total costs decreased by ¥2.0 billion quarter on quarter to ¥15.0 billion. Now, let me move on to the operational overview. Page 10, this is the overall summary. Based on the long-term business plan, we have been strengthening the three earnings pillars and continued to do so in the first quarter. From page 11, let me explain the status of the Game and Anime business. I would like to reiterate that Heaven Burns Red has been performing very strong and maintained stable high sales ranking. We have recently added content, beginning to distribute Part 1 of Chapter 4 of the main story. We also conducted a half-year anniversary campaign as six months passed since the release. By constantly creating excitement, we have successfully maintained strong performance.

table high sales ranking. We have recently added content, beginning to distribute Part 1 of Chapter 4 of the main story. We also conducted a half-year anniversary campaign as six months passed since the release. By constantly creating excitement, we have successfully maintained strong performance. Page 12 is also about Heaven Burns Red. Aiming to develop and strengthen it as an IP over the long term, we have implemented various measures. We held an in-person event to energize the fan community and developed merchandise in collaboration with a major convenience store chain in order to grow the potential of the IP. Page 13 shows the pipeline. We leverage knowhow gained from producing hit titles in FY22 to plan and develop strong titles. We are planning and developing multiple new titles based on first-party and third-party IPs aiming for release in the next fiscal year and beyond. We will also continue to aggressively distribute existing titles in overseas markets to further enhance earnings potential and the user base. That's all for the Game and Anime business. Page 2 of 4

From page 14, let us look at the Metaverse business. REALITY is now distributed globally to 63 countries and territories, and the total global downloads topped 10 million just last month. This was a milestone, but our goal is to make it a communication platform used by hundreds of millions of people, so we will build on this and continue to work hard to reach even more users. Page 15. We also continued to expand our content. We energized users by launching new games and collaborating with popular IP. After months of preparation since last fiscal year, we finally launched new fishing games. Since the days of the GREE platform, the platform has been the centerpiece of our business. We expanded it successfully by leveraging games to energize communication on the platform. In the same manner, we will grow and expand our platform in the era of Metaverse. Games will also be a new source of monetization. We will continue to update them running a PDCA cycle. Our hopes are very high. Page 16. Continued expansion of communication functions. We have energized communication and improved convenience further through the Reaction Sticker function and Chat GIFs. That is all about the Metaverse business.

. We will continue to update them running a PDCA cycle. Our hopes are very high. Page 16. Continued expansion of communication functions. We have energized communication and improved convenience further through the Reaction Sticker function and Chat GIFs. That is all about the Metaverse business. Page 17 is about the Commerce and DX business focusing on the Commerce side this time. This business is centered on aumo and integrates multiple media with SaaS. In the first quarter, we continued to strengthen the media potential and made progress in strengthening the functions of aumo My Business, which is a SaaS business. Both the media users and clients of aumo My Business increased steadily. We expect the Commerce business to grow large as it accumulates users and clients year by year. That is the business model. The final part is the Investment and Incubation business. Let me give you an overview of our portfolio. Page 18 shows our AUM, total assets under management. This is the amount we are involved in managing and includes investments from external LPs. It is close to ¥80 billion. This quarter saw an increase of ¥7.3 billion quarter on quarter, mainly on asset revaluation which was primarily driven by the increased financial value of the startups on our CVC portfolio. I think you can see that the portfolio has been growing steadily. Page 3 of 4

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Words: 1,443
Format: PDF
Type: Financial

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