Annual Securities Report: GREE, Inc.

Key insights

7 takeaways

01
GREE, Inc. reported consolidated net sales of 75,440 million yen for the fiscal year ending June 30, 2023, up 0.7%, with operating profit of 12,498 million yen, up 8.7%.See it on page 134
02
Growth came from the Investment and Incubation segment, while the core Internet and Entertainment segment faced some pressure.See it on page 110
03
GREE is restructuring its reporting into five categories (Game and Anime, Metaverse, DX, Commerce, and Investment) and consolidating its investment activities under a dedicated subsidiary, GREE Capital Management, Inc., to improve operational autonomy and decision-making.See it on page 7
04
The company holds a strong balance sheet, with a 73.7% equity ratio and cash and cash equivalents of 74,293 million yen, earmarked for expansion in metaverse, digital transformation, and commerce.See it on page 4
05
Executive compensation is tied to long-term performance through share-based incentives and stock options linked to a market capitalization target of 500 billion yen.See it on page 68
06
Key risks identified include intense competition in the smartphone gaming market, regulatory compliance, and intellectual property protection, with TCFD-aligned climate disclosures integrated into its sustainability strategy.See it on page 14
07
Ernst & Young ShinNihon LLC issued an unqualified audit opinion, but flagged the valuation of unlisted stocks as a key audit matter because it relies on management's earnings projections.See it on page 138

Summary

GREE, Inc.’s annual report for the fiscal year ending June 30, 2023, outlines a period of stable financial performance and strategic organizational evolution. The company reported consolidated net sales of 75,440 million yen and an operating profit of 12,498 million yen, reflecting a 0.7% increase in sales and an 8.7% rise in operating profit. While the core Internet and Entertainment segment faced some pressure, the Investment and Incubation segment demonstrated significant growth. To enhance operational autonomy and decision-making, the company is restructuring its reporting into five distinct categories—Game and Anime, Metaverse, DX, Commerce, and Investment—and has consolidated its investment activities under a dedicated subsidiary, GREE Capital Management, Inc.

The company maintains a strong financial position, characterized by a 73.7% equity ratio and cash and cash equivalents totaling 74,293 million yen. This capital is earmarked for continued expansion into the metaverse, digital transformation, and commerce sectors, alongside its established game and anime businesses. Governance remains a central pillar of the organization, supported by an Audit & Supervisory Committee, independent nomination and remuneration committees, and an executive officer system. Executive compensation is closely aligned with long-term performance, featuring share-based incentives and stock options tied to a market capitalization target of 500 billion yen.

Risk management and sustainability are integrated into the company’s long-term strategy, with a focus on TCFD-aligned climate disclosures and rigorous internal controls. Key operational risks, such as intense competition in the smartphone gaming market, regulatory compliance, and intellectual property protection, are mitigated through comprehensive oversight and the recruitment of specialized talent. Ernst & Young ShinNihon LLC provided an unqualified audit opinion, confirming the accuracy of the financial statements while noting that the valuation of unlisted stocks remains a key audit consideration due to the reliance on management’s earnings projections.