GREE Reports FY2015 Second Quarter Results

FY2015 Second Quarter Financial Summary

Billions of yen

Notes

• 1. Breakdown of FY15 2Q net sales: Paid service sales ¥22.51 billion; ad media sales ¥1.62 billion
• 2. EBITDA＝Operating income/loss + depreciation costs + amortization of goodwill
• 3. In FY15 2Q non-operating income, an exchange gain of ¥2.31 billion was recorded, mainly due to an exchange gain on USD-denominated loans to overseas subsidiaries
• 4. In FY15 2Q, an extraordinary loss of ¥11.69 billion was recorded
• Figures are rounded off

Financial Highlights

• Net sales amounted to ¥24.12 billion compared to ¥25.42 billion in the fiscal 2015 first quarter
• Operating income was ¥4.73 billion compared to ¥6.38 billion in the fiscal 2015 first quarter
• A net loss of ¥7.66 billion was recorded compared to net income of ¥3.48 billion in the fiscal 2015 first quarter
• The operating margin decreased by 5.5 percentage points to 19.6%
• Recorded a ¥7.0 billion extraordinary gain on sale of investment securities related to the sale of shares of gumi Inc., but also recorded extraordinary losses totaling ¥18.4 billion due to impairment charges related to goodwill associated with OpenFeint, Inc. and Pokelabo, Inc., resulting in a total extraordinary loss of ¥11.7 billion
• Fiscal 2015 full-year forecast: net sales of ¥98.0 billion; operating income of ¥20.0 billion

Business Update

Overall:

• Net sales and operating income exceeded forecasts due to a firming of revenues from first-party and partner web games*
• Consumption on smartphones grew to approximately 76% of total coin consumption
• On track with transition to native game business structure; targeting a turnaround from fourth quarter of fiscal 2015 through a firming of web game revenues, growth of existing titles in Japan and overseas, and releases of new titles

Japan Game Business:*

• Made steady progress with native shift through expansion of native development operations and qualitative improvements to development capabilities; plan to release new titles from the fiscal 2015 third quarter
• Preparing to release new titles such as the Wright Flyer Studios title Pazukue and the Pokelabo and SEGA Networks co-developed title POITTO HERO
• Plan to release first co-developed title with LINE on LINE GAME in the fiscal 2015 fourth quarter
• Generated strong growth in revenues from Shometsu Toshi through effective mass marketing that included a TV advertising campaign

Overseas Game Business:*

• Returned to positive revenue momentum on firm sales of War of Nations and Knights & Dragons
• Made steady progress with measures to improve coverage of European markets
• Continued to invest in growth while maintaining profitability on a cash basis

Non-game Businesses:

• Advertising: Sales of global ad distribution platform AdColony off to strong start on strong demand from advertisers and steady progress in securing media partners
• Home-related services: Acquired sekaie Inc., provider of online fixed-price renovation service Renoco. Aim to become a top player in the rapidly growing online renovation service industry; current sales trends on track for annual net sales of roughly ¥1.0 billion

• * 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.

FY2015 Full-year Earnings Forecast (July 1, 2014 – June 30, 2015)

Billions of yen

• Figures are rounded off

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).