Concentration of Revenue Recognition in the Second Quarter and Later Due to Customer Development Schedules

「In the third quarter, changes in customers' policies and approaches to their game businesses resulted in the cancellation or loss of several development projects, leading to lost anticipated revenue and lower utilisation of development personnel.」

「Performance for the first nine months of the current consolidated fiscal year was affected by 2 unprofitable projects in the Digital Entertainment Business through the second quarter, as well as the cancellation of several game software-related development projects during the third quarter, resulting in revenue of ¥3,243 million, down 27.6% year on year.」

「Against this backdrop, performance for the first six months of the current consolidated fiscal year was affected by unexpected problems arising in two development projects in the Digital Entertainment Business and delays in development work, among other factors, resulting in revenue of ¥2,013 million, down 33.7% year on year.」

「The cancellation of projects that had been initiated during the previous consolidated fiscal year and were entering full-scale development, as well as reviews of projects for which orders had been anticipated, meant that switching to and launching new projects took longer than expected, resulting in a temporary decline in utilisation.」

「In terms of profit, in a smartphone game development project, it became necessary to rework deliverables produced through the middle stage of development, and, in addition to the costs incurred in addressing the project and the completion date being pushed into the following fiscal year,」

「Performance for the first six months of the current consolidated fiscal year was affected by the spread of COVID-19 across each business. In particular, in the Digital Entertainment Business, development schedules for several major console game software projects currently in development were changed at customers' request to further improve quality, resulting in revenue recognition being pushed back to the second half and revenue of ¥1,838 million, down 15.8% year on year.」

「As the Company Group is working on many projects scheduled for completion from the fiscal year ending August 2022 onward, it expects revenue and profit for the current consolidated fiscal year to decline from the previous consolidated fiscal year. Against this backdrop, the performance for the first consolidated quarter of the current fiscal year, which has lower revenue than the other quarters due to development schedules agreed with customers, was expected to be loss-making from the outset. In the Digital Entertainment Business, a change in the development schedule for a major console game software project at the customer's request resulted in revenue of ¥774 million, down 19.8% year on year.」

「Revenue from game software-related operations was ¥507 million, down 39.6% year on year, due partly to revenue from development being concentrated in the fourth quarter more than in the previous year and a decline in operating revenue following the completion of a major operations project.」

「There has been no impact on the business from the spread of COVID-19 so far. However, as changes to development schedules caused by the spread of COVID-19 could delay the timing of revenue recognition, and costs related to COVID-19 countermeasures could arise, we will closely monitor developments.」

「As a result, performance for the current consolidated fiscal year was affected by the completion of development of some major smartphone game projects in the Digital Entertainment Business being pushed back to the following fiscal year, although」

「In terms of profit, although revenue increased, the concentration of revenue recognition in the fourth quarter and the increase in selling, general and administrative expenses resulted in operating profit of ¥29 million, down 64.9% year on year; ordinary profit of ¥63 million, down 34.2%; and quarterly net profit attributable to owners of the parent of ¥18 million, down 76.1%.」

「Although revenue increased, profit performance was affected, as in the previous consolidated fiscal year, by revenue recognition being concentrated in the second quarter and later due to development schedules agreed with customers. Operating loss was ¥47 million, compared with an operating loss of ¥92 million in the previous year; ordinary loss was ¥36 million, compared with an ordinary loss of ¥42 million; and quarterly net loss attributable to owners of the parent was ¥38 million, compared with a quarterly net loss attributable to owners of the parent of ¥52 million.」

「As a result, the performance for the first quarter of the current consolidated cumulative period was affected, as in the previous consolidated fiscal year, by revenue recognition being concentrated in the second quarter and later due to development schedules agreed with customers. Revenue was ¥560 million, up 2.5% year on year; operating loss was ¥92 million, compared with an operating loss of ¥130 million in the same quarter of the previous year; ordinary loss was ¥42 million, compared with an ordinary loss of ¥107 million; and net loss attributable to owners of the parent was ¥52 million, compared with a net loss attributable to owners of the parent of ¥91 million.」