GREE, Inc. Annual Securities Report: The 16th Fiscal Term

Key insights

6 takeaways

01
GREE, Inc. experienced a decline in the fiscal year ending June 30, 2020, with consolidated net sales falling 11.7% to 62,665 million yen and profit attributable to owners of the parent dropping 22.3% to 2,709 million yen.See it on page 117
02
The company maintains a strong financial position with an 89.3% equity ratio and 87,018 million yen in cash and cash equivalents, supporting ongoing share buybacks and dividend payments.See it on page 4
03
Management is executing an 'Engine × IP × Global' strategy to counter intense competition and regulatory pressure on game monetization, while diversifying into advertising, media, and the VTuber sector.See it on page 11
04
Operational risk management is prioritized through a focus on talent acquisition, strict regulatory compliance, and mitigating dependency on major platform providers Apple and Google.See it on page 14
05
The company transitioned from an Audit & Supervisory Board to an Audit & Supervisory Committee structure to accelerate decision-making and improve oversight.See it on page 58
06
Financial reporting is being aligned with international standards, including new protocols for revenue recognition and fair value measurement, supported by an unqualified audit opinion from Ernst & Young ShinNihon LLC.See it on page 63

Summary

GREE, Inc.’s 16th fiscal term report, covering the period ending June 30, 2020, details a challenging financial year characterized by declining revenues and profits. Consolidated net sales fell to 62,665 million yen, an 11.7% year-on-year decrease, while profit attributable to owners of the parent dropped by 22.3% to 2,709 million yen. Despite these headwinds, the company maintained a robust financial foundation, evidenced by an equity ratio of 89.3% and cash and cash equivalents totaling 87,018 million yen. This liquidity supports the company’s ongoing commitment to shareholder returns, including a consistent dividend policy and a significant share buyback program authorized to enhance capital flexibility.

The company operates as a diversified online media group, primarily generating revenue through paid services within its smartphone games business. To navigate a landscape defined by intense competition, technological shifts, and evolving regulatory scrutiny regarding monetization mechanics, the firm is executing an "Engine × IP × Global" strategy. This approach is complemented by expansion into advertising, media, and live entertainment, specifically the VTuber sector. Operational risks remain a primary focus, with the company emphasizing the need for rigorous compliance, talent acquisition, and the management of dependencies on major platform providers like Apple and Google.

Corporate governance underwent a significant transition during this period, moving from an Audit & Supervisory Board to an Audit & Supervisory Committee structure to improve management oversight and decision-making speed. This governance framework is supported by an executive officer system that separates strategic decision-making from operational execution. Furthermore, the company is actively aligning its financial reporting with international standards, including the adoption of new accounting standards for revenue recognition and fair value measurement. With an unqualified audit opinion from Ernst & Young ShinNihon LLC, the company remains focused on stabilizing its core business while leveraging its strong balance sheet to navigate the uncertainties of the global digital entertainment market.