GREE

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FY2024 Second Quarter Financial Results

Consolidated net sales for the second quarter of fiscal year 2024 reached ¥14.2 billion, with operating income totaling ¥0.8 billion. These results align with internal projections despite a 10% sequential decline in sales. Performance was primarily influenced by the Game and Anime segment, which saw an 11% revenue drop to ¥10.4 billion following the conclusion of major first-quarter anniversary events and the closure of specific titles. However, the company anticipates a recovery in the third quarter driven by the second anniversary of Heaven Burns Red and its strategic expansion into the Chinese market. The Metaverse segment presents a bifurcated outlook, characterized by a 119% year-on-year sales increase in the VTuber business alongside profitability in the REALITY platform. Despite these gains, aggressive investments in talent expansion resulted in a quarterly operating loss for the division. The company aims for the Metaverse segment to reach a break-even point by the end of the fiscal year, with a long-term operating profit target of ¥1.9 billion by fiscal year 2026. Simultaneously, the Marketing DX and Commerce businesses emerged as significant growth drivers, with the latter achieving a 137% year-on-year surge in operating income fueled by SaaS solutions for the hospitality and restaurant industries. The Investment business reported a quarterly loss due to the timing of distributions, yet it maintains a robust foundation with assets under management totaling ¥83.1 billion and substantial unrealized gains of ¥32.6 billion. While the company faces short-term volatility in its core gaming operations, the diversification into high-growth areas like digital transformation and commerce provides a stabilizing effect. Management maintains its full-year forecasts, banking on upcoming seasonal events and the continued scaling of its platform and service-based businesses to drive second-half performance.

market-forecast investment japan+1

GREEFeb 2024

Financial

FY2024 First Quarter Financial Results

The first quarter of FY2024 reflects a transitional period characterized by a strategic pivot toward the Metaverse and Commerce segments amid a temporary downturn in investment income. Consolidated net sales reached ¥15.8 billion with an operating income of ¥1.2 billion, representing significant quarter-on-quarter declines of 22% and 75% respectively. This contraction was primarily attributed to the Investment Business, which experienced an 86% drop in sales and an operating loss of ¥0.2 billion due to a lack of large-scale distributions. Despite this volatility, the investment portfolio remains robust with ¥82.7 billion in assets under management and an 18% internal rate of return, significantly outperforming domestic venture capital benchmarks. The Game and Anime segment continues to serve as the primary revenue driver, contributing ¥11.7 billion in sales. Performance within this division was bolstered by successful anniversary events for key titles like Heaven Burns Red, though overall results were tempered by a post-peak decline in other areas. To ensure long-term stability, a pipeline of 17 titles is scheduled for release through FY2026. Simultaneously, the Metaverse segment successfully revamped its earnings structure to achieve a ¥0.1 billion operating profit, supported by improved cost efficiency in the Platform Business and aggressive expansion in the VTuber sector. Strategic diversification efforts yielded positive results in the Commerce business, which achieved profitability through the growth of SaaS-related services. While the DX business remained stagnant due to a reduction in operational projects, the broader corporate outlook remains focused on achieving ¥1.9 billion in Metaverse operating income by FY2026. With a stable balance sheet featuring ¥50.3 billion in cash and a workforce of over 1,600 employees, the organization remains positioned to meet its full-year targets by balancing mature gaming assets with emerging digital platforms and high-yield venture investments across Japan and the United States.

investment market-analysis market-forecast+2

GREENov 2023

Financial

Summary of Main Supplementary Explanations Questions and Answers at the FY2024 First Quarter GREE Results Briefing Held on November 2, 2023

The financial performance and strategic outlook for the first quarter of fiscal year 2024 indicate a period of steady operational growth across diverse business segments, despite a cautious short-term earnings forecast. Management anticipates a consolidated operating income of approximately 0.5 billion yen for the second quarter, excluding the investment business. The full-year outlook remains consistent with previous projections, targeting a consolidated operating income between 4.0 billion and 5.0 billion yen. This conservative estimate reflects a lack of expected contributions from new titles within the game and anime business and minimal anticipated income from the investment segment during this period. The metaverse business, specifically the REALITY platform, demonstrates robust growth driven by successful anniversary events and strong performance in the Japanese and North American markets. Monetization strategies for this platform are diversifying, with significant earnings contributions currently stemming from avatar sales and gifting features. While the development pipeline for the game and anime business remains active with multiple titles in progress, specific schedules and details are withheld due to the fluid nature of development and the complexities of managing external intellectual property relationships. Expansion within the digital transformation business highlights a growing client base that is outpacing industry averages. This segment currently serves two primary categories: the game and entertainment industries, which utilize advertising and quality assurance solutions, and national-scale clients in the food and beauty sectors focused on digital marketing. By leveraging internal group expertise, the company is positioning itself as a critical service provider for digital infrastructure across these varied industries. Overall, the strategic focus emphasizes stabilizing core platform growth and diversifying service offerings while navigating a transitional period for the gaming pipeline.

market-analysis monetization metaverse+2

GREENov 2023

Financial

Summary of Main Supplementary Explanations Questions and Answers at the FY2023 Fourth Quarter GREE Results Briefing

GREE’s strategic outlook following the fourth quarter of fiscal year 2023 emphasizes a transition toward a more diversified business portfolio to mitigate the challenges of an increasingly low-margin smartphone game market. The company is shifting its development pipeline into four distinct categories: in-house development, regional expansion, joint development, and licensing. This approach leverages successful intellectual properties like Heaven Burns Red to secure collaboration opportunities with global IP holders. While specific release dates for the 2024 fiscal year remain undisclosed, the focus is on maintaining high quality despite rising development scales that have pressured industry-wide profitability. The Metaverse Business segment represents a critical growth pillar, with the Platform and B2B Metaverse divisions already achieving profitability. Earnings from these areas are being reinvested into the VTuber and Web3 businesses. The long-term objective is for all four metaverse sub-sectors to be profitable by fiscal year 2026, contributing significantly to group earnings. Current synergies are primarily indirect, such as the high international profile of the REALITY platform driving interest in English-speaking VTuber auditions, though more direct promotional integrations are planned as these businesses mature. Financial projections indicate a conservative near-term outlook, with consolidated operating income for fiscal year 2024 estimated between 4.0 and 5.0 billion yen. This forecast accounts for a lack of major new title contributions and a reactive decline following previous investment gains. By fiscal year 2026, the company aims for a more balanced income structure where approximately half of non-investment operating income is generated by segments outside of the Game and Anime Business. This medium-term strategy focuses on stabilizing earnings through business portfolio adjustments while targeting consistent 10% returns from the Investment Business.

market-analysis metaverse mobile+1

GREEAug 2023

Financial

FY2023 Fourth Quarter Financial Results

GREE Group concluded fiscal year 2023 with net sales of ¥75.4 billion and operating income of ¥12.5 billion, demonstrating resilience despite a revenue contraction in the final quarter. While the core Game and Anime segment experienced a decline in sales and income due to a reactionary dip following major promotional events for Heaven Burns Red, the Investment Business emerged as a primary driver of profitability. This segment achieved a 1,489% year-over-year increase in operating income, supported by a total Assets Under Management of ¥80.7 billion and high-performing venture capital portfolios. The strategic outlook for fiscal year 2024 and beyond focuses on structural reforms and global expansion. The Game and Anime division is pivoting toward a multilayered development strategy with a pipeline of 17 titles scheduled through 2026, emphasizing first-party IP and international distribution to offset projected short-term revenue declines. Simultaneously, the Metaverse segment has been restructured into four specialized units—Platform, VTuber, B2B, and Web3—with the goal of achieving an overseas sales ratio exceeding 50% by 2026. Although heavy investments in VTuber productions are expected to keep the segment at a break-even level in the immediate term, these efforts are central to long-term growth in the North American market. Further diversification is evident in the DX and Commerce businesses, which are transitioning toward high-margin B2B SaaS models and integrated marketing services. The aumo platform has reached 17 million monthly active users, providing a foundation for lateral expansion into the HR sector. Despite temporary margin suppression caused by initial investments and the completion of large-scale projects, the company forecasts a 48% compound annual growth rate in Commerce sales through 2026. To support these multi-sector initiatives, the group has increased its total headcount to 1,670 employees, signaling a commitment to scaling its operational capacity across its evolving digital ecosystem.

investment market-analysis japan+1

GREEAug 2023

Financial

FY2023 Third Quarter Financial Results

GREE reported net sales of ¥22.2 billion and operating income of ¥4.2 billion for the third quarter of fiscal year 2023, reflecting a strategic balance between core gaming profitability and aggressive expansion into emerging digital sectors. Financial performance was primarily bolstered by the continued success of the flagship title Heaven Burns Red and the strategic exit of positions within the Investment and Incubation business. While the Internet and Entertainment segment experienced growth, operating income faced downward pressure from a ¥3.1 billion increase in costs, largely attributed to substantial upfront promotional investments intended to secure long-term market share. The company’s growth strategy centers on the diversification of its Metaverse and DX business units. The REALITY platform has achieved significant scale, recording over 42 million annual visitors and expanding its B2B footprint through the REALITY XR cloud and the launch of the FIRST STAGE PRODUCTION VTuber agency. These initiatives are supported by a robust financial foundation, including ¥30.8 billion in net cash and a total asset base of ¥120 billion. Despite a slight quarterly decrease in investment securities due to distributions, the investment portfolio remains a critical pillar of value, maintaining approximately ¥75 billion in assets under management. Long-term stability is further evidenced by the Investment and Incubation segment’s internal rate of return, which ranges from 16% to 23% across various phases. Although advertising expenditures rose significantly during the quarter to support global launches, the company maintained a stable headcount of 1,593 employees and reaffirmed its dividend forecast of ¥11 per share. This financial posture indicates a commitment to prioritizing medium-to-long-term growth in virtual world infrastructure and digital transformation while leveraging the steady cash flow generated by its established gaming and investment operations.

market-analysis investment japan+1

GREEMay 2023

Financial

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

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.

market-analysis monetization metaverse+3

GREEMay 2023

Financial

FY2023 Second Quarter Financial Results

GREE’s financial results for the second quarter of fiscal year 2023 reflect a period of strategic global expansion and aggressive investment in the Metaverse, despite a decline in overall profitability. The company reported net sales of ¥16.6 billion and an operating income of ¥1.7 billion. While operating income surpassed forecasts due to the sustained performance of the hit title Heaven Burns Red, the company recorded a net loss of ¥0.9 billion for the quarter, primarily driven by foreign exchange losses and valuation losses on investment securities. The Internet and Entertainment segment remains the primary revenue driver, bolstered by the success of Heaven Burns Red, which received multiple accolades in Google Play’s Best Games of 2022. To sustain growth, the company is executing a global rollout, specifically targeting Korean and traditional Chinese markets. Simultaneously, the Metaverse business, centered on the REALITY platform, demonstrated steady growth in overseas sales. GREE is prioritizing the expansion of REALITY’s communication functions and world-building features, such as the Tokyo Dome World collaboration, to energize its international user base. The Investment and Incubation segment manages total assets of ¥77.3 billion. Although asset revaluation led to a slight quarter-on-quarter decrease in total value, the company continues to see high long-term returns from its venture capital funds and startup investments. GREE’s cost structure showed a slight reduction in total costs to ¥14.8 billion, aided by lower variable expenses. Looking ahead, the company anticipates stable income but expects a year-on-year decline in total profit as it continues to pivot toward aggressive medium-to-long-term investments in the Metaverse and new intellectual property development.

investment market-analysis japan+1

GREEFeb 2023

Financial

Summary of Main Supplementary Explanations Questions and Answers at the FY2023 Second Quarter GREE Results Briefing Held on February 8, 2023

GREE’s financial performance for the second quarter of fiscal year 2023 reflects a strategic transition toward global expansion and internal IP development. While the Game and Anime business experienced a temporary sales decline following the conclusion of major anniversary events for Heaven Burns Red, the Metaverse and Commerce and DX segments maintained steady growth. Management anticipates a recovery in the third quarter, projecting operating income for the Internet and Entertainment Business between ¥1.0 billion and ¥1.5 billion. This outlook is driven by the one-year anniversary of Heaven Burns Red in Japan and its expansion into Korean and traditional Chinese markets, where pre-registration interest has been high. The Metaverse Business, centered on the REALITY platform, has reached a significant milestone by surpassing its breakeven point to achieve profitability. Growth is increasingly driven by international markets, with North America, Indonesia, and Thailand following Japan in user concentration. The platform attracts a predominantly female, Generation Z demographic who utilize the service for private communication. Monetization remains consistent across regions through live-stream gifting, avatar sales, and in-game purchases. To sustain this momentum, the company plans to increase advertising expenditures to scale REALITY into a global platform with hundreds of millions of users. Strategic initiatives in the Anime Business focus on securing proprietary IP and diversifying development pipelines to enhance long-term profitability. By producing anime in-house, the company aims to create a synergistic ecosystem where media content drives deeper engagement with its gaming titles. Although the Investment and Incubation Business faces near-term volatility and potential quarterly losses due to current market conditions, the company maintains a positive medium-to-long-term outlook based on its diversified investment portfolio. Overall, the strategy emphasizes aggressive promotional investment to solidify market share in the global entertainment and metaverse sectors.

market-analysis monetization market-forecast+1

GREEFeb 2023

Financial

FY2023 First Quarter Financial Results

GREE’s financial results for the first quarter of fiscal year 2023 reflect a period of strategic transition characterized by steady performance in core gaming titles and aggressive expansion into the Metaverse. The company reported net sales of ¥16.6 billion and an operating income of ¥1.6 billion. While these figures represent a quarter-on-quarter decline in profit following the exceptional success of hit titles and anniversary events in the previous fiscal year, the Internet and Entertainment business surpassed internal forecasts. The Game and Anime segment was anchored by the continued strong performance of Heaven Burns Red, which maintained high sales rankings through storyline expansions and successful marketing campaigns. Simultaneously, the Metaverse business saw significant growth, with the REALITY platform surpassing 10 million global downloads across 63 countries. Management is prioritizing long-term growth through the expansion of REALITY’s communication functions and the development of new titles leveraging both first-party and third-party intellectual property. The Investment and Incubation segment remains a significant pillar of value, with total assets under management reaching ¥78.9 billion, an increase of ¥7.3 billion from the previous quarter due to asset revaluation. The company continues to invest in venture capital funds and startups globally, maintaining a high unrealized valuation of ¥32.6 billion in operational investment securities. The outlook for the remainder of fiscal year 2023 anticipates stable income but a year-on-year decline in overall profit. This is attributed to a high baseline from the previous year and a deliberate strategy of aggressive investment in the Metaverse and other growth areas. The company maintains a solid balance sheet with ¥89.7 billion in net assets and a headcount of 1,632 employees, signaling a commitment to sustained infrastructure and talent development.

investment market-analysis metaverse+2

GREENov 2022

Financial

Summary of Main Supplementary Explanations Questions and Answers at the FY2023 First Quarter GREE Results Briefing

The financial performance for the first quarter of fiscal year 2023 reflects a period of stabilization and strategic reinvestment across key business segments. The game business experienced a typical seasonal slowdown following the fourth-quarter peak, yet maintained a solid foundation through the sustained success of Heaven Burns Red. This title has established a stable user base, and its high level of visual expressiveness and multifaceted marketing approach now serve as the internal benchmark for future development and operational strategies. Management anticipates a recovery in momentum toward the end of the calendar year, driven by planned anniversary events and new content releases. The metaverse business has reached a significant financial milestone by achieving breakeven status. Current efforts are focused on expanding the user base for the REALITY platform, with profits being systematically reinvested into promotional activities to secure long-term growth. In contrast, the outlook for the investment and incubation business remains cautious due to volatile market conditions. While some distributions from investment exits are expected, there is a recognized risk of quarterly losses if these distributions fail to offset operational costs, leading to a conservative earnings forecast for this segment in the near term. Projected operating income for the internet and entertainment business in the second quarter is estimated to fall between 1.0 billion and 1.5 billion yen. This guidance accounts for the ongoing transition of the game portfolio and the deliberate reinvestment strategy within the metaverse sector. Overall, the strategy emphasizes leveraging the technical and operational know-how gained from recent hits to ensure the scalability of upcoming titles while maintaining a disciplined approach to emerging business segments and venture investments.

market-analysis game-publishing monetization+2

GREENov 2022

Financial

FY2022 Fourth Quarter Financial Results

Fiscal year 2022 concluded with net sales of ¥74.9 billion and operating income of ¥11.5 billion, representing year-over-year growth primarily fueled by the success of major titles like Heaven Burns Red. While the Game Business drove top-line performance, overall net income decreased to ¥10.1 billion as a result of lower investment-related gains compared to the prior year. The company maintains a robust financial foundation, ending the period with ¥116.7 billion in total assets and a net cash position of ¥46.6 billion, supported by a stable workforce of over 1,600 employees. Strategic priorities for the upcoming fiscal year emphasize global expansion and the diversification of digital services. The Metaverse segment is positioned for aggressive growth through the REALITY platform, which is transitioning into a corporate service provider via its "World" offerings. Simultaneously, the Commerce and DX segment is scaling its SaaS marketing capabilities, with the aumo My Business service now reaching over 30,000 participating locations. Although a short-term profit decline is anticipated in fiscal year 2023 following the peak performance of recent hit titles, the long-term objective remains a return on equity of 10% or higher. The Investment and Incubation segment continues to serve as a critical pillar of value, managing a portfolio of 28 venture capital funds and 34 startups with total assets under management reaching ¥71.6 billion. This segment provides high internal rates of return and a valuation of ¥31.4 billion in operational investment securities. By integrating these investment returns with global IP distribution in the Game and Anime sectors, the organization aims to achieve discontinuous growth and solidify its presence across the international digital entertainment and marketing landscapes.

market-analysis investment japan+1

GREEAug 2022