Development delays and monetization uncertainty for new games and services

「Over the next five years, we will move beyond dependence on hits from new titles and build a system for continuously creating and developing IP.」

「Because sales of the mobile game title released at the end of the previous fiscal year performed below expectations, the company revalued future revenue and calculated the recoverability of the investment. As a result, during the first quarter, it recognized impairment charges on assets related to the game app. In addition, based on past business performance, the company conservatively revised its outlook for the profitability of its packaged PC and console game titles and recognized impairment charges on assets for titles under development recorded as software under construction.」

「The company revalued the future revenue of a mobile game title released at the end of the previous fiscal year during the first quarter and recognized impairment charges. As a result, an extraordinary loss of ¥1,563.462 million was recorded, resulting in an interim net loss attributable to owners of the parent of ¥2,362.395 million, compared with an interim net loss attributable to owners of the parent of ¥1,022.028 million in the same period of the previous year.」

「In addition, impairment charges were recognized following a revaluation of the future revenue of 1 new mobile game title released in the first quarter. As a result, an extraordinary loss of ¥601.886 million was recorded, resulting in an interim net loss attributable to owners of the parent of ¥1,022.028 million, compared with an interim net loss attributable to owners of the parent of ¥169.363 million in the same period of the previous year.」

「For the cumulative consolidated second quarter, sales were ¥5,091.538 million, down 12.2% year on year, operating profit was ¥472.280 million, down 70.6%, and ordinary profit was ¥453.584 million, down 70.7%. In addition, the company closed 2 new titles released at the end of the previous fiscal year and in the first quarter, and decided to discontinue development of 1 title under development at the unannounced/prototype stage. As impairment charges were recognized, an extraordinary loss of ¥609.185 million was recorded, resulting in a quarterly net loss attributable to owners of the parent of ¥169.363 million, compared with quarterly net profit attributable to owners of the parent of ¥1,056.684 million in the same period of the previous year.」

「In the game business, the company released the new self-distributed title 『ダチメン伝説G』 through a subsidiary, but sales fell below expectations, and the company decided to close the title.」

「In addition, impairment charges were recognized for 2 titles in operation, resulting in an extraordinary loss of ¥386.259 million.」

「In addition, an extraordinary loss of ¥336.259 million was incurred because impairment charges were recognized for 1 title in operation, resulting in a quarterly net profit attributable to owners of the parent of ¥1,166.723 million, up 36.7% year on year.」

「Profit increased year on year due to the increase in revenue from flagship titles and the closure of certain unprofitable titles, among other factors.」

「Profit increased year on year due to the increase in revenue from flagship titles and the closure of certain unprofitable titles, among other factors.」

「An extraordinary loss of ¥381.399 million was incurred, mainly because impairment charges were recognized for 2 titles released during the current fiscal year, resulting in profit for the year attributable to owners of the parent of ¥807.301 million, down 50.3% year on year.」

「Sales declined year on year due to the closure of multiple titles and the withdrawal from the advertising business, among other factors.」

「Although many of the other titles continued to perform steadily, sales declined year on year owing to the weakening of stay-at-home demand seen in the previous fiscal year, the decline in the number of titles in operation following the closure of multiple titles, and the effects of titles aging since release.」

「Although many other titles continued to perform steadily, revenue declined year on year due to a decrease in the number of titles in operation following the closure of several titles and the effects of the time elapsed since their release.」

「At the same time, the response to unprofitable titles also progressed steadily, and almost all titles reached a state of generating stable profits, further improving the profitability of the core game business and increasing the stability of the business.」

「The response to unprofitable titles also progressed steadily, further improving the profitability of the core game business and increasing the stability of the business.」

「At the same time, the response to unprofitable titles also progressed steadily, further improving the profitability of the core game business and increasing the stability of the business.」

「Extraordinary losses for the current consolidated fiscal year mainly consisted of an impairment loss of ¥565.017 million, recorded following the discontinuation of a game app under development and the revaluation of some game apps in operation. They increased by ¥159.232 million from the previous consolidated fiscal year to ¥610.017 million, up 35.3% year on year.」

「Although we continued to invest in “enza” and new business development, expenses declined year on year because measures addressing unprofitable titles were completed and operating costs were optimized, resulting in operating results turning into an operating profit.」

「However, sales declined year on year because development revenue recorded in the same period of the previous year was not recorded in the quarter.」

「However, sales declined year on year because development revenue recorded in the same period of the previous year was not recorded in the cumulative consolidated first quarter because there were no new releases.」

「Sales declined year on year because new titles whose distribution began in the previous consolidated fiscal year and the current consolidated fiscal year made only limited contributions to sales, and some titles were discontinued as the company sought to focus its management resources on selected areas.」

「Because some unprofitable titles remained in the process of improving profitability, the company continued to record losses, posting an operating loss of ¥704.968 million (operating profit of ¥341.269 million in the same period of the previous year). In addition, following a revaluation related to the enza business conducted together with 株式会社BXD, the company recorded an equity-method investment loss of ¥324 million in the quarter, resulting in an ordinary loss of ¥1,282.386 million (ordinary profit of ¥193.261 million in the same period of the previous year). Regarding profit for the period attributable to owners of the parent, the company revalued the future revenue of titles in operation and recorded an extraordinary loss of ¥260 million in the quarter, resulting in a net loss for the period of ¥1,372.538 million (net profit for the period attributable to owners of the parent of ¥75.385 million in the same period of the previous year).」

「In terms of earnings, expenses were contained through operating efficiency improvements and company-wide cost optimization, which are currently being pursued as the highest-priority objectives, and profitability improved quarter on quarter. However, year on year, the number of titles in operation increased, resulting in higher operating costs, and profit turned into a loss. Operating loss was ¥578,557 thousand, compared with operating profit of ¥167,348 thousand in the same period of the previous year; ordinary loss was ¥824,106 thousand, compared with ordinary profit of ¥59,664 thousand; and net loss attributable to owners of the parent was ¥655,499 thousand, compared with net profit attributable to owners of the parent of ¥36,020 thousand.」

「In terms of profit, operating expenses increased year on year because the number of game apps in operation increased and many game apps were still in the process of transitioning to more efficient operating structures, resulting in narrower profit margins. In addition, we recorded major renovation investments in existing game apps, which are being introduced to expand sales, under selling, general and administrative expenses. As a result, we recorded an operating loss of ¥417.520 million (operating profit of ¥34.843 million in the same period of the previous year), an ordinary loss of ¥512.875 million (ordinary profit of ¥17.390 million in the same period of the previous year), and a net loss attributable to owners of the parent of ¥504.632 million (net loss attributable to owners of the parent of ¥4.073 million in the same period of the previous year).」

「We released 3 new IP games in early December, but 1 of them experienced communication failures and frequent revisions. We are still working toward stable operations at an early stage.」

「『ダービースタリオン マスターズ』 performed weakly because challenges emerged in appealing to user needs and the measures implemented made only a limited contribution to sales. Going forward, we will review our operating measures and aim for a recovery ahead of its first anniversary in November and the winter period, when sales typically expand.」

「“ダービースタリオン マスターズ,” released in November 2016, got off to a strong start and continued to contribute revenue at levels above initial expectations.」

「The new game “ダービースタリオン マスターズ,” released in November 2016, received support from users and, together with the effects of advertising and promotional initiatives, contributed more revenue than initially expected.」

「For the new game “ダービースタリオン　マスターズ,” which was scheduled for release during the second quarter, we reviewed the release timing with the aim of increasing the likelihood of a hit.」

「There have been no material changes to the business and other risks described in the annual securities report for the previous fiscal year.」

「“崖っぷちバスターズ” performed below expectations from immediately after its release, and no improvement in profitability was expected even after initial modifications. Accordingly, as part of the app portfolio review accompanying the strategy described above, we decided in the third quarter to recognize impairment losses on this title together with 2 original games whose development had been discontinued, and recorded an extraordinary loss.」