Financial · May 1, 2023

Summary of Main Supplementary Explanations Questions and Answers at the FY2023 Third Quarter GREE Results Briefing Held on May 11, 2023

Published by GREE

Summary

GREE’s financial performance and strategic outlook for the third quarter of fiscal year 2023 highlight a period of international expansion and technological evolution. The successful launch of overseas versions of Heaven Burns Red serves as a primary driver for the Internet and Entertainment Business. While specific long-term forecasts remain premature only three months post-launch, initial sales levels align with market expectations, indicating a strong start in global territories. For the upcoming fourth quarter, the company anticipates operating income of approximately 1.5 billion yen in this segment, accounting for the natural tapering of revenue following major anniversary events in the Japanese market. The metaverse platform REALITY represents a significant pillar of growth, having surpassed 10 million global users. The platform distinguishes itself from competitors through high daily active user engagement and a proven monetization model centered on avatars and livestreaming. Strategic development for REALITY involves the integration of generative AI to facilitate user-generated content, mirroring successful industry trends seen in platforms like Fortnite. Current experimental applications of AI focus on the automated creation of 3D assets, including avatars and environmental elements, to enhance the service's scalability and creative depth. Financial stability is further supported by the Investment and Incubation Business, which expects to post roughly 0.5 billion yen in operating income for the fourth quarter. This figure is largely secured through dividend income from corporate venture capital funds. Collectively, these results demonstrate a dual focus on maintaining core gaming profitability while aggressively scaling a monetized metaverse ecosystem for a global audience. The geographic scope emphasizes a shift toward international markets, particularly as the domestic Japanese mobile market matures and the company seeks to leverage its technological strengths in AI and virtual communities.

From the report

■Summary of main supplementary explanations questions and answers at the FY2023 Third Quarter GREE results briefing held on May 11, 2023 【Q1 】 Can you let us know about earnings contribution and the outlook for overseas versions of Heaven Burns Red? 【A1 】 As it has only been roughly three months since the release of overseas versions of Heaven Burns Red, it is not possible to provide an accurate forecast at this time. However, overseas versions have gotten off to a quick start and we have achieved sales levels in line with the scale of the markets in which these versions were released. 【Q2 】 What are the strengths of REALITY when compared with metaverse services offered by other companies? 【A2 】 We see two main strengths. The first is that a large community has already been formed in REALITY. REALITY’s user numbers are growing rapidly, especially overseas, and the number of global users has surpassed 10 million. In addition, many of our users visit REALITY on a daily basis. This is extremely rare among global metaverse services. REALITY’s second strength is that progress has already been made in terms of monetization. Many metaverse services have been unable to achieve monetization despite having large user bases. One of REALITY’s strengths is that we have achieved steady monetization via avatars and livestreams, etc.

is that progress has already been made in terms of monetization. Many metaverse services have been unable to achieve monetization despite having large user bases. One of REALITY’s strengths is that we have achieved steady monetization via avatars and livestreams, etc. 【Q3 】 How is REALITY making use of generative AI? 【A3 】 Other companies operating metaverse services (such as Fortnite) have allowed users to make use of generative AI to create user-generated content (UGC), which has contributed to the expansion and development of services. We aim for REALITY to gradually evolve into a metaverse that incorporates such UGC elements. We have already begun to experimentally use AI to create 3D assets such as avatars and world elements. 【Q4 】 What is the income outlook for 4Q FY2023 in the Internet and Entertainment Business? 【A4 】 Due to the winding down of contribution from anniversary events for the Japanese version of Heaven Burns Red and the release of overseas versions, we expect operating income in the Internet and Entertainment Business in 4Q of roughly ¥1.5 billion. 【Q5】 What is the income outlook for 4Q FY2023 in the Investment and Incubation Business? 【A5】 Because we have received dividend income from CVC funds in 4Q, we expect to post

operating income from already-secured sources of roughly ¥0.5 billion in the Investment and Incubation Business in 4Q.

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