GREE Reports FY2015 First Quarter Results

FY2015 First Quarter Financial Summary

Billions of yen

Notes

• 1. Breakdown of FY15 1Q net sales: paid service sales ¥23.63 billion; ad media sales ¥1.79 billion
• 2. EBITDA＝Operating income/loss + depreciation costs + amortization of goodwill
• 3. In FY15 1Q non-operating income, an exchange gain of ¥17.2 billion was recorded, mainly due to an exchange gain on USD-denominated loans to overseas subsidiaries
• 4. An extraordinary loss was recorded as a result of a ¥2.03 billion write-off of assets related to certain titles
• Figures are rounded off

Financial Highlights

• Net sales amounted to ¥25.42 billion compared to ¥26.58 billion in the previous quarter
• Operating income was ¥6.38 billion compared to ¥6.13 billion in the previous quarter
• Net income was ¥3.48 billion compared to ¥2.78 billion in the previous quarter
• Operating margin improved by 2 percentage points to 25.1%
• Cut fixed costs by ¥0.22 billion or 1.9% quarter on quarter through strict cost control; reduced total costs by ¥1.41 billion or 7%
• Recorded an extraordinary loss after reviewing our game portfolio and terminating development or operation of selected titles, resulting in ¥2.03 billion in write downs of game-related assets

Business Update

Overall:

• Made steady progress with shift to native game* business structure, while pursuing cross-border, cross-platform strategy through partnerships with LINE and KDDI
• Consumption on smartphones grew to approximately 74% of total coin consumption

Japan Game Business:

• Recorded firm sales of 4Q Wright Flyer Studios release Shometsu Toshi and 1Q Pokelabo release CROSS SUMMONER. Implementing growth initiatives for these titles including TV advertising from 2Q, targeting monthly sales of several hundred million yen each
• Advanced with shift to native games through expansion of native development operations and qualitative improvements to development capabilities. New experimental titles Cubic Tour and el were selected as featured games on the App Store and Google Play™ in 80 countries, accumulating more than 2.6 million downloads and 1 million downloads respectively—with zero marketing spend
• Plan to launch three new first-party native game titles this winter (two from Wright Flyer Studios and one from Pokelabo)

Overseas Game Business:

• Narrowed game portfolio at U.S. studio and reallocated resources to focus on growth initiatives such as new development, expansion of our Android offering, and improvements to coverage of European markets

Non-game Businesses:

• Commerce & Lifestyle: Low-cost renovation service provider Ie Plus has enjoyed steady growth in applications and contracts since launch of service in July 2014. Targeting further growth by increasing affiliate contractors and partner companies
• Advertising: Moved to enter high-growth mobile video ad market with acquisition of exclusive distribution license in Japan for global ad distribution platform AdColony. Implementing test campaign from 2Q with official launch of service scheduled for 3Q
• Investment: GREE Ventures invested in three startups: Somewrite, Inc., a Japan-based operator of a native ad network; FiNC, Inc., a Japan-based provider of an online diet coach service; and Ayannah, a Philippines-based provider of digital commerce and payment services for the unbanked

• * Note on terminology:
  “Native game” refers to mobile games provided as downloadable native apps for smart device platforms such as Android and iOS. “Web game” refers to browser-based games for feature phones and smartphones.

Fiscal 2015 First Half Earnings Forecast (July 1, 2014 – December 31, 2014)

Billions of yen

Reference

For presentation materials and further information, visit GREE, Inc. - Investor Relations

About GREE, Inc.

GREE is a global technology company with businesses that include mobile gaming, social media, advertising, and venture capital. Established in December 2004, GREE created the world's first mobile social game in 2007 and today is a global leader in free-to-play, reaching audiences around the world with its portfolio of first-party and partner titles. GREE has studios in Tokyo, San Francisco, Vancouver, and Seoul, and is listed on the Tokyo Stock Exchange (3632).