Financial · November 5, 2024

GREE Holdings FY2025 Q1 Financial Results Briefing (Transcript)

Published by GREE

Summary

GREE, Inc.’s financial results for the first quarter of fiscal year 2025 reflect a period of mixed performance characterized by operational growth in core segments offset by significant volatility in the investment portfolio. The company reported net sales of ¥12.9 billion and a consolidated operating loss of ¥0.1 billion. While the Game and Anime, Metaverse, and DX businesses exceeded internal forecasts, the overall bottom line was pulled down by an ¥0.8 billion operating loss in the Investment Business and a ¥1.4 billion foreign exchange loss resulting from yen appreciation. The Game and Anime segment remains a long-term investment focus, seeing success with the Chinese launch of Heaven Burns Red despite seasonal weakness and high development costs for the pipeline. The Metaverse segment showed resilience, with the VTuber business growing sales by 71% year-over-year and the platform business benefiting from new livestreaming features. The DX Business maintained steady profit levels while investing in a new social DX product slated for release in the third quarter. Conversely, the Investment Business suffered from a lack of dividend distributions and ¥0.6 billion in valuation losses and write-downs, particularly from crypto assets and funds nearing their settlement periods. Geographically, the results cover GREE’s global operations, including domestic Japanese services and overseas expansions in China and the US. Management maintains a positive outlook for the remainder of FY2025, projecting a recovery in the second quarter driven by anniversary events in mainstay game titles. The long-term strategy focuses on achieving a 120–140% CAGR in the Metaverse and DX segments, with the VTuber business expected to reach profitability by FY2026. Despite recent volatility, the company emphasizes that its investment portfolio retains high unrealized value and continues to outperform industry benchmarks.

From the report

Toshiki Oya, Senior Vice President, CFO: Thank you for joining the FY2025 first quarter financial results briefing of GREE, Inc. I am Toshiki Oya. Looking at the executive summary on page 2, in 1Q of FY2025, we posted net sales of ¥12.9 billion, an operating loss of ¥0.1 billion, and negative EBITDA of ¥0.1 billion. As we will discuss in more detail later, results were sluggish as we posted valuation losses in the Investment Business. Results in the Game and Anime Business, Metaverse Business, and DX Business surpassed our forecasts for 1Q. In the Game and Anime Business, the Chinese version of Heaven Burns Red got off to a strong start. In the Metaverse Business, we continued to achieve strong growth in the platform business and the VTuber business. In the DX Business, we achieved solid profit even as we continued making investments. In the Investment Business, we posted an operating loss of ¥0.8 billion due to valuation losses on some holdings, but maintained high overall unrealized value in our investment portfolio. On page 5, we provide an overview of financial results for 1Q of FY2025. Sales and profit were as I just mentioned, but we also posted foreign exchange losses of approximately ¥1.4 billion due to the impact of yen appreciation on our overseas assets, resul ting in QoQ declines in ordinary profit and net profit.

provide an overview of financial results for 1Q of FY2025. Sales and profit were as I just mentioned, but we also posted foreign exchange losses of approximately ¥1.4 billion due to the impact of yen appreciation on our overseas assets, resul ting in QoQ declines in ordinary profit and net profit. On page 6, we provide an analysis of quarterly operating profit. There was a strong impact on net sales from sales declines in the Game and Anime Business and the Investment Business. Variable costs rose on an increase in advertising costs and valuation losses posted in the Investment Business. Fixed costs improved slightly and we posted an operating loss of ¥0.13 billion in 1Q of FY2025. On page 7, we break down our cost structure for 1Q. Variable costs rose slightly QoQ and YoY on an increase in advertising costs allocated to strengthen promotion of Heaven Burns Red. Commission fees declined due to a decline in sales and other variable costs rose as we posted valuation losses on investments. Fixed costs showed little change and total costs were ¥13.08 billion. Sanku Shino, Senior Vice President, CSO: Now, Sanku Shino will provide an explanation of the progress we have made toward achieving our management plan targets. Page 1 of 8

Page 10 shows sales and operating profit. Sales declined slightly QoQ and operating profit fell sharply on weak performance in the Investment Business. Page 11 shows our vision for long-term growth. We have positioned the Metaverse Business and the DX Business as continuous growth business and we target stable operating profit CAGR of 120–140% in these businesses. We have positioned the Game and Anime Business as a long-term investment business in which we target growth with a longer-term horizon. Page 12 shows sales and operating profit of continuous growth business. Sales of the business is growing steadily. Page 13 shows business conditions. 1Q profit surpassed expectations in the Game and Anime Business, the Metaverse Business, and the DX Business. However, due to valuation losses in the Investment Business, we posted a consolidated operating loss for the quarter. Page 14 shows the outlook for earnings in 2Q FY2025. In the Game and Anime Business, we expect to achieve QoQ growth in sales and profit on anniversary events, etc. for mainstay titles. Page 15 shows our forecasts and updated estimates for FY2025. Our estimates are in line with our full-year FY2025 forecast, but we expect slightly lower sales in the Game and Anime Business on slightly weaker performance from new titles and slightly higher overall operating profit. On page 16, we present our medium-term targets. We continue to target solid growth through steady growth in our continuous growth business. Page 18 shows sales and operating income by segment. Earnings are trending above expectations in all businesses except the Investment Business.

ting profit. On page 16, we present our medium-term targets. We continue to target solid growth through steady growth in our continuous growth business. Page 18 shows sales and operating income by segment. Earnings are trending above expectations in all businesses except the Investment Business. Page 19 shows our 2Q FY2025 estimates and full-year FY2025 forecasts by segment. Page 20 shows progress made in each business segment toward our full-year forecast. Page 2 of 8

Yuta Maeda, Senior Vice President: Yuta Maeda will cover the Game and Anime Business. Page 22 shows quarterly sales and operating profit in the Game and Anime Business over the past five years. On page 23, we present an overview of the Game and Anime Business. Earnings tend to weaken in 1Q due to seasonal factors related to mainstay titles. Sales and profit declined QoQ and YoY on a rise in costs as titles entered a critical stage of development. Page 24 shows the live service game business. While the Chinese version of Heaven Burns Red got off to a strong start, sales and profit declined QoQ and YoY on weakness from some titles and investment in titles in our development pipeline. We continue to make progress on the development of major new titles. Page 25 shows the licensed game business. Sales and profit rose QoQ on strong performance from overseas licensed game titles and an increase in returns from investments in anime. Page 26 shows our development pipeline. This slide shows only in-house development projects. We are also making steady progress on the development of titles other than the four shown here. On page 27, we show our earnings forecast for 2Q FY2025. We expect QoQ growth in sales and profit on events for mainstay titles in 2Q. Page 28 shows our forecast and updated estimates for FY2025. We plan to release already- announced new titles and the English version of Heaven Burns Red (in cooperation with Yostar Games) in FY2025. However, as in the past, we factor in earnings contribution from new titles conservatively.

n 2Q. Page 28 shows our forecast and updated estimates for FY2025. We plan to release already- announced new titles and the English version of Heaven Burns Red (in cooperation with Yostar Games) in FY2025. However, as in the past, we factor in earnings contribution from new titles conservatively. On page 29, we present our medium-term targets. We position the Game and Anime Business as a long-term investment business, targeting long term growth. We plan to continue to invest in the console games business, maintaining a balance between these investments and earnings. Page 3 of 8

Pages: 8
Words: 2,905
Format: PDF
Type: Financial

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