Supplementary Explanation Provided at the FY 2020 Third Quarter GREE Results

GREE’s financial performance for the third quarter of fiscal year 2020 reflects a strategic pivot toward higher profitability despite a decline in overall sales. This reduction in revenue was primarily driven by the intentional shutdown of specific game titles as part of a broader portfolio reevaluation, alongside weakened performance in the advertising and media segments due to the global pandemic. Conversely, operating income experienced a quarter-over-quarter increase. This growth in profit is credited to the strong performance of high-margin, first-party intellectual property titles and the successful implementation of cost-saving measures, particularly the streamlining of promotional expenditures.

The broader economic environment, influenced heavily by the COVID-19 crisis, presented mixed challenges across the company’s core business segments. While the game business faced indirect setbacks such as the postponement of anime program airings, the advertising and media divisions felt a more direct negative impact on revenue. These external pressures necessitated a cautious outlook for the fourth quarter, with expectations that sales and income trends in the media sector will remain weak as the crisis persists.

Looking toward the end of the fiscal year and into 2021, the strategic focus shifts toward long-term stability through restructuring. Management anticipates the possibility of recording one-time losses in the fourth quarter as these restructuring measures are implemented to adapt to the ongoing pandemic-related shifts in the operating environment. Despite these short-term financial adjustments, the objective remains to establish a solid and sustainable earnings base for the upcoming fiscal year, leveraging the improved profitability of the gaming portfolio to offset volatility in other business segments.