For Potential Investors

KAD OKAWA C OR POR AT I ON

Table of Contents

01

Overview of the KADOKAWA Group

02

Business Segments-- Strengths and Future Initiatives --

p.15

03

Value Creation Process

p.29

04

Sustainability Policy

p.31

p.3

01

Overview of the KADOKAWA GroupOur History

01

1949

2009

2022

KADOKAWA Bunko
first published

KADOKAWA Contents Gate,
the predecessor of
BOOK WALKER, established

ELDEN RING, game software,became a worldwide blockbuster.

1976

2022

Release of The Inugami
Family, the first live action
movie from KADOKAWA

Shifted to
the TSE
Prime Market

1983

2014
Acquisition of
FromSoftware
Management
integration with
DWANGO

Release ofHarmagedon,the first animationfrom KADOKAWA

2004
Transferred to
TSE 1st Section

Listed on theTSE 2nd Section

1999
Founded asa publisher

N High School opened by
KADOKAWA DWANGO Educational Institute

The first
overseas baseestablished in
Taiwan2014
Acquisition of Vantan by DWANGO

2016

Service launch of the
Kaku Yomu, a website
where online novels are posted

1998

1945

Making a further
leap forward with
“Global Media Mix
with Technology”

2020
Opening of TOKOROZAWASAKURA TOWN

2021

YEN PRESS,a strategic subsidiary in The TATESC Comics
North America, established electronic comic service
launched4

Business Segments

01◼

Business structure for global growth: Owned IP Rollout in diverse media channels

Publication/
IP Creation

GamingAnimation/Film⚫ Publishing and sales of paper books⚫ Publishing and sales of e-books ande-magazines⚫ Sales of magazines and web
advertising
Sword Art Online

Delicious in Dungeon

Author: Reiki Kawahara
Illustrator: abec

Author: Ryoko Kui⚫ Planning, production,and distribution ofanimation and live
action titles⚫ Video distribution
licensing⚫ Planning, production, and sales ofgame software and online games
Sadako DX©2022 Sadako DX production committee

Konosuba: God’s Blessing on
This Wonderful World!
©2019 Natsume Akatsuki, Kurone Mishima/
KADOKAWA/KonoSuba production committee

ELDEN RING

KADOKAWA
Education/EdTech⚫ Operation of Vantan trade schools in thecreative fields⚫ Provision of educational content and systems
intended for N High School and S High School,
which provide online education

Danganronpa Decadence©Bandai Namco Entertainment Inc. / ©2022 FromSoftware, Inc.
©Spike Chunsoft Co., Ltd. All Rights Reserved.

Web Services
Others⚫ Operation of IP
experiential facilities⚫ MD business dealing incharacter goods andothers⚫ Other new businesses⚫ Operation of video community service“Niconico"⚫ Planning, production, and operation of events
including Niconico Chokaigi and Animelo
Summer Live5

01

Details of Business Segments
Segment

Publication/
IP Creation

Animation/
Film

GamingWeb Services

Business

Main Business Activities

Paper-based books⚫

Publishing and sales of paper books, rights licensing, etc.

E-books/magazines⚫

Publishing and sales of e-books and e-magazines, etc.

Information Media⚫

Animation

Planning, production, and distribution of animation and film,
video distribution licensing, sales of package software, etc.

KADOKAWA Corporation
Kadokawa Daiei Studio Co., Ltd.
ENGI Co.Ltd.

⚫

Planning, production, and sales of game software and online
games

FromSoftware, Inc.
Spike Chunsoft Co., Ltd.
KADOKAWA Corporation

niconico⚫

Operation of video community service “Niconico"

Live

⚫

Planning and operation of events

Mobile⚫

Distribution of mobile content⚫

Education/
EdTech

KADOKAWA Corporation
BOOK WALKER Co., Ltd.
KADOKAWA ASCII ResearchLaboratories, Inc.
YEN PRESS, LLC

⚫

Film

GamingPublishing of paper magazines, sales of magazines and web
advertising, etc.

Major Companies

Education/EdTech

DWANGO Co., Ltd.

Operation of Vantan trade schools that develop humanresources in creative fields, provision by DWANGO of
educational content and systems intended for N High School
and S High School that provide online education, etc.

Vantan Inc.
DWANGO Co., Ltd.

Commercial facility operation, MD business including planningand sales of character goods, other new businesses, etc.

KADOKAWA Corporation
KADOKAWA Connected Inc.

Commercial facility
OthersMD⚫

Others6

01

Trends in Consolidated Results

Net sales

Operating profit(Million yen)

Operating margin

Net sales

Operating profit

300,000

35,000258,109

255,429
250,000

209,947
200,000

6.5％
18,519150,000

30,00025,931

221,208 8.4%

10.2%

7.1%

25,00018,45420,00013,62515,000100,000

10,00050,00005,000

FY2020

FY2021
FY2020

FY2022

FY20210

FY2023

FY2022

FY2023

209,947

221,208

255,429

258,109

Operating profit

13,625

18,51925,931

18,454

Operating margin

6.5%

8.4%

10.2％

7.1％

14,36920,213

26,66920,236

9,584

14,07812,67911,384

Net sales

Ordinary profit
Profit attributable toowners of parent

7

01

Business Portfolio (Net Sales and Operating Profit)
Ratios of net sales and operating profit by segment (FY2023)
Net sales
258,109(Million yen)

Operating profit
18,454100%

80%

Publication/
IP Creation

60%

40%

Animation/Film0%Gaming 25,351
Web Services 21,399
Education/EdTech 13,390
Others 20,298

Publication/
IP Creation

141,967

46,06020%

55%

10,360

18%
10%
8%
5%
8%

Animation/Film 4,574

Gaming7,950
Education/EdTech 1,727

Web Services 1,641

Others -4,399-20%

8

KADOKAWA Group's Appeal -- Ability to Create IPs --01

Continuing to create new entertainment content as a source of value, in the ever-expanding global
content market with capacity to produce more than 5,500 titles/year centered in publication

Unit: Million USD

1,500,000

Sizes of the global content market andNumbers of new titles and archived

digital content market

titles from the KADOKAWA Group6,500

All Contents

Digital Contents

140,000
Number of archived titles (right axis)

1,299,537

1,300,000

6,000

Number of new IP (left axis)

130,000

1,135,428
1,100,000

5,500

120,000

900,000

5,000

110,000

700,000

4,500

100,000

500,000

4,000

90,0003,500

80,000Overlord

KADOKAWA Manga
Gakushu Series
Nihon no rekishi(History of Japan)

Pan Dorobou

Sword Art Online

352,318
300,000
172,778
100,000

3,000
2016

2023

Source: Contents-no Sekai Shijo Nihon Shijo-no Gaikan (Overview of the global content market
and Japanese content market) from the Content Industries Division, Commerce and Information
Policy Bureau, Ministry of Economy, Trade and Industry(https://www.meti.go.jp/policy/mono_info_service/contents/downloadfiles/report/202002_contentsmarket.pdf), with partial edition by the Company*Figures for 2023 represent projected values.

70,000
FY2020

FY2021

FY2022

FY20239

KADOKAWA Group's Appeal-- Capability of Implementing Media Mix Strategy --01

Maximizing its value by not only creating new entertainment content but also driving theimplementation of “Media Mix Strategy” (rolling out content via diverse media centered inpublication, video, and game) on its own◼

Example of media mix strategy: Re: ZERO - Starting Life in Another World -E-books©長月達平・株式会社KADOKAWA刊／Re:ゼロから始める異世界生活2製作委員会
Licensed to and Published by Spike Chunsoft Co., Ltd.

⚫ Novels⚫ Comics⚫ Guidebooks, etc.

⚫ Animation⚫ Live action films

IP

Books

Intellectual property

Video

games
Games ⚫⚫ Mobile
Console games

Re:ZERO -Starting
Life in Another
World-MD (Goods)
Web Service⚫ Figurines⚫ Fan community/channel⚫ Digital content, etc.

©Tappei Nagatsuki, KADOKAWA CORPORATION /Production Committee of “Re: Life Starting from
Zero inDifferent World 2nd season”

Events⚫ Collaboration cafe
⚫ Bus tour, etc.

©TN,K,Re:ZEROP

10

KADOKAWA Group's Appeal -- Global Growth Potential --01

The value of owned IP, including its archives, is growing as it connects with more users on a global
scale through digitalization.
Sizes of the global content market and digital

KADOKAWA Group’s international net sales

content market

Unit: Million USD

60,0001,500,000
All Contents

Digital Contents

1,299,537
1,300,000

50,000Gaming52,426

Animation/Film(20.5％)

Publication/IP Creation
Others1,135,428

40,766

18,6281,100,000(15.8％)

40,0006,482
900,000
30,000700,000

Ratio of digitalcontent increased
from 15% to 27%.

500,000

20,000352,318

21,682 million yen
Composition ratio ofoverseas sales
10.3％

28,876(13.1％)

4,812

10,000172,778

2016

2023

Source: Contents-no Sekai Shijo Nihon Shijo-no Gaikan (Overview of the global content market
and Japanese content market) from the Content Industries Division, Commerce and Information Policy Bureau, Ministry of Econ
omy, Trade and Industry(https://www.meti.go.jp/policy/mono_info_service/contents/downloadfiles/report/202002_contentsmarket.pdf), with partial edition by the Company*Figures for 2023 represent projected values.

21,18820,203

16,376
9,219

100,000

13,009

7,507

5,008
7,292

300,000

11,906

162

1,070

702

181

0
FY2020

FY2021

FY2022

FY202311

KADOKAWA Group's Basic Strategy-- Growth Model Starting from IP Creation --

01
◼

◼

We remain focused on media mix of owned IP, mainly publishing, video, and gaming while the effective use of rights
licensing to other companies to maximize profits. The global expansion of owned IP is further accelerated by the power oftechnology.
Users experience the world of fusion of the real and digital through the content.

Global Media Mix with Technology

IP Creation

Expand new
IP items

Improve hit
ratioMedia mix

Improveproductivity

Publication

Animation/
Film

GamingGlobal rollout

Web
services,MD, etc.

Asia

North
America

Europe,South
America,and others

Promoting the digital transformation of editorial workand reforming of publication production logistics
Simultaneous media mix development to increase owned IP exposure and the utilization of digital marketing
Using social media for developing titles and increasing their visibility
Investment in personnel development for editors and in-house creators,
attraction and retention of production companies, and discovery and development of UGC creators
12

KADOKAWA Group's Business Portfolio and Investment Management

01◼
◼

Strengthen investments in content development and technology utilization with a focus on active investment areas
Make the profitability assessment and withdrawal criteria more strict by, for example, introducing a new investment management
systemBusiness portfolio analysis

Investment to expand business and increase profitability

CAGR (Net sales)
Live (*)

High

Promising growth
areas

Publication/Animation/
Gaming/Education

Business
expansion

Active investment
areas

ROIC
Low

High

Reform areas

Areas considered
for renewed
growthImplement profitability
improvement plans, and consider
withdrawing from businesses
based on certain criteria when it
is difficult to make improvements

Niconico business

Film/Commercial facility
Low* Shifted from reform areas in the previous mid-term plan, following the recovery from theimpact of COVID-19• Invest in M&A activities involving new internationalbases• Develop publications, videos (animation and liveaction) and game content• Develop an AI-based translation system• Develop an e-book app and a UGC service• Expand the scope of FromSoftware's own publishing• Invest in IT infrastructure in the Niconico business• Develop businesses for universities and open new Vantan
schools and courses• Introduce digital tools and AI systems for editing andanimation production
Improvement• Renovate the digital manufacturing and distributionofsystemprofitability• Introduce the BPR system for centralizing license
management

Investment management system• A new investment management system was introduced in FY2022→ Monitor profitability on a smallest organization basis and discuss
improvement plans and the withdrawal from investments• We will continue to make the criteria for assessing profitability at thetime of new investments and for withdrawing from investments morestrict13

01

Basic Finance Policy and Allocation of Funds

Basicapproach

Basic policy
Key KPIs

Allocationof funds

Execution of financial strategies that contribute to sustainable growth of sales andprofit, capital efficiency that exceeds the cost of capital, and the medium- to long-term
increase of corporate value

Ensure financial soundness

Pursue capital efficiency andstrengthen shareholder returns

A capital adequacy ratio ranging between around
50% and 60% should be considered to be the proper
standard that should be maintained going forward.

Aim to achieve an ROE of at least 12%
in the medium-to-long-term

Foundation funds

Growth investments

Set the level of cash and cash
equivalents to be retained
based on approximately 2.5
months of monthly sales,
working capital, future capitalneeds, etc.

Assume a maximum
investment of about 2/3 ofoperating cash flow by making
the strategic facilitation ofcore businesses and growthinvestments such as M&A
activities the top priority.

Shareholder return
Shareholder dividend
Seek to achieve a
payout ratio of 30% ormore and set a lower
limit of 30 yen per sharefor the annual dividend

Acquisition oftreasury stock
Flexible implementationin consideration of
investment capacity,
stock price level, etc.

14

02

Business Segments-- Strengths and Future Initiatives --Publication/IP Creation Segment

02

Trends in Results

Business Overview
Paper-based books/information media(Million yen)⚫

Sales of books and magazines, sales of digital ads, rights licensing, etc.

⚫

Publishing more than 5,000 new books each year⚫

⚫

Net sales

Net sales

150,000

Publishing books in a wide range of fields, including light novels,
comics, literary art, and children's books

17,370129,576
12,841

Active drive of media mix strategy, including adaptation into videos
and games

Operating profit

Operating margin

15,00013,155
10,360120,000

9.9%

10,0009.4%

E-books/magazines⚫

⚫

20,000141,967

139,990132,972
13.1%

Operating profit

7.3%

Selling the Company's e-books and magazine content to othercompanies' stores

5,000

Operating BOOK☆WALKER, an e-book marketplace, sells the titles of
the Company as well as other companies’ across an international
market including Japan

90,0000
FY2020

FY2021

FY2022

FY2023Business model of the Publication/IP Creation
KADOKAWAGroup
Shipping

Writing
Purchase

Authors

Manuscript fee,
etc.

Editors

Publication

Wholesalers of paper-based
books and magazines
Wholesale of e-books by
BOOK WALKER,
a Group company(External wholesalers usedpartially)

Rights licensing

Wholesale

Purchase

BOOK☆WALKER, theCompany's own
e-book store
Other companies' ebook stores

Wholesale
External video production
companies, gameproduction companies, etc.

RoyaltyBook stores in Japanand other countries
E-commerce stores

Sales

Purchase

Consumers

Operators of platforms
for videos, games, etc.
Purchase16

Publication/IP Creation Segment

02

Related Indicators

Market environment & Our strengths
Market environment of paper-based books• The domestic market has been contracting, partly
reflecting the shift to e-books.
• International market is growing as Japaneseentertainment content gain more popularity.

Return rates in the market and the
KADOKAWA Group

37.0%
35.0%

33.4%

• Continued improvement is
expected in the future. (See thenext page for details of initiatives.)

33.0%

Our strengths (paper-based books)• The capacity to create more than 5,500 titles/year,
which is among the largest in Japan.
• More than 130,000 archived titles• A return rate that is far below the industry average• Use of the Company's own UGC* platforms, including
Kaku Yomu, for discovering creators

31.0%

Markets

29.0%

KADOKAWA Group

27.0%

26.8%

25.0%
2019

2020

2021

2022

2023

*User Generated Content

Number of archived paper-based books
and e-books from the Group

Market environment of e-books• The domestic market is receiving a boost from theshift from paper-based books to e-books. The
market is also revitalized by the emergence of alarge number of electronic platforms.
• International market still has room to expand.
• There is also the development of new trends, suchas vertically scrolling comics, TATESC Comics.

131,629

140,000
130,000
120,000
110,000
100,000

130,614Paper-based books• The return rate at the Group haslong remained far below themarket level due to the original
DX promotion in production andlogistics.

90,000※ Market data are from Annual Report on
the Publication Market 2023 by the All
Japan Magazine and Book Publisher's andEditor's Association※ Market data are based on calendar year.
Data for the Group are based on fiscal
year (April to March).

• The number of paper-based books
in archives has been steadily
increasing from the current
production level of 5,500
titles/year.
• Publication of archived titles as ebooks has accelerated as well.

80,000

Our strengths (e-books)••

Approx. 130,000 archived titles
Operating our own platform as well

70,00060,00050,000
FY2020E-books

FY2021

FY2022

FY202317

02

Publication/IP Creation Segment
Future Initiatives
Intellectual property creation

Enhancing the capability of creating content in
the Publication Segment⚫ Reinforcing the foundation for creating new content
by increasing editors⚫ Creating and discovering hit content internationally⚫ Developing vertically scrolling titles (TATESC Comics)⚫ Discovering and developing talented creators at theCompany's UGC platform⚫ Improving hit ratio by using big data

Conventional
publishinglogistics flow

Intellectual property rollout

Improving the profitability of
paper-based books⚫ Automating order placement,
manufacturing and shipping⚫ Establishing a digitalproduction plant and a
distribution facility⚫ Promoting the introduction ofa system for direct orderplacement and automatedtracking from bookstores

Extending the life of IP in
the Publication Segment

International expansion of IP in the
Publication Segment⚫ Implementing media mix
strategy at an earlier stage⚫ Animation/game producers’
involvement early on, or
before publication⚫ Increasing the number ofpublication titles internationally⚫ Promoting the digital-first strategy⚫ Enhancing the multilingualtranslation center⚫ Enhancing the development of
BOOK☆WALKER global store

Order receipt

Publisher

Order receipt

Distributor

External printing
company

Continuous
growthProfitability
improvement

Bookstore

Around 10 business days
from order placement

Consumers

Delivery

Large lot printing

Automating order placement,
manufacturing and shipping
Direct order placement and automated tracking system through dedicated bookstore ordering system

Newpublishinglogistics flow

KADOKAWAIn-house digitalproduction plant andlogistics facility

Instant manufacturing and shipment from small lots

Bookstore

From 24 to 48 hours oforder placement

Distributor

Consumers

Automated warehouse dispatch

Reduces productreturns

Prevents missed sales

Improves profit
marginImproves customer
satisfaction

18

Animation/Film Segment

02

Trends in Results

Business Overview⚫

Planning, production and distribution of animation titles and films
mainly from owned intellectual property⚫

Video distribution licensing and rights licensing to games and MDs⚫

Selling packaged software, such as DVDs and Blu-rays⚫

⚫

Business related to production of movies, tv programming,commercial films, and other video content and studio operation
Operation of ”Movi-tike”, a digital movie ticket service

Net sales

Net sales

50,00043,28940,00030,00020,00031,314
7.3%(Million yen)

Operating margin

Operating profit

Operating profit

46,0609.9%

33,112

6,000

4,574

4.1%
2,274

4,000

5.0%
2,169

2,000

1,341

10,0008,000

00FY2020

FY2021

FY2022

FY2023Business model of the Animation/Film
KADOKAWA Group

Dividends paid inproportion toinvestment ratio

Sale of online distribution rights

Investment
Planning andproduction

Distribution(Distribution of some titles
by the Company)

Rights licensing
CompanyA

Company
B

CompanyC

The
Company

Production committee

Domestic andinternational
distribution platforms

Distribution/showing/sales

Theatre(Some operated by theCompany)

External gamedevelopment
companies, etc.

Consumers
Subscription, ticket purchase,
goods purchase

19

02

Animation/Film Segment
Related Indicators

Market environment & Our strengths
Market environment of videos•••

Japanese animation continues to enjoy worldwide
popularity.
In the theater market, demand tends to concentrate on
certain titles.
The digital distribution market is expanding givenchanges in consumers' viewing practices.

Unit:
TitlesNumber of animation video titles
from the Group(including minor investment)70

Our Strengths

10,000

50

8,000
6,000

30

•

Abundant opportunity for video adaption of owned bookintellectual property•

The capacity to plan and produce around 40 animation
titles/year
The ability to generate income from a wide range ofsources by adapting animation titles into games andcreating related goods•

12,00060

40Overseas net sales of
the Group's animation

Unit:
Million yen

4,000

20

2,000

10

0

0
FY2020

FY2021

FY2022

FY2023

FY2020

FY2021

FY2022

FY2023Future Initiatives
Animation• Increase the number of seasons and episodes per title (increase the number of stories produced)

Konosuba: God’s Blessing The Eminence inon This Wonderful World! Shadow©2019 Natsume Akatsuki, Kurone Mishima/
KADOKAWA/KonoSuba production
committee©逢沢大介・KADOKAWA刊／シャドウガーデン• In addition to a diverse range of in-house original IPs, continue to acquire popular IPs from othercompanies• Secure production quality and increase productivity (Increase the annual number of titles
produced in-house from 5 to 20)
As Long as We Both
Shall Live
©2023 "As Long as We Both Shall Live"
Film Partners

Film• Mainly develop major projects with the potential for success in the international markets, andincrease profitability by raising return on investment

20Gaming Segment

02

Trends in Results

Business Overview
⚫

⚫

⚫

⚫

FromSoftware has produced and developed unique, high-quality
game software, such as the DARK SOULS series and ELDEN
RING, and acquired a wide range of loyal fans.
Spike Chunsoft develops and sells original titles, such as
Danganronpa, and engages in localization and sales of games
from overseas, such as The Witcher, and contracted
development, among other businesses.

Net sales

Net sales

Operating profit

32,00046.8%
19,490
16,636
16,000Gotcha Gotcha Games develops and sells the game creation
software, RPG Maker

Operating profit

20,00025,351

16,00014,21824,000

Projects are also underway to adapt KADOKAWA's own IP into
games.

(Million yen)

Operating margin
30,351

31.4%

26.7%

12,000

16.5%

7,950
8,000

5,200
8,000

2,744

4,000

0

0
FY2020

FY2021

FY2022

FY2023Business model of the Gaming

Sales

Consumers

Purchase

Outside of Japan
Wholesalers
Retailers
Distribution platform
operators

Shipping

Purchase

Product planningand development

Partnercompanies

Investment
Royalty

KADOKAWA Group
FromSoftware
Spike Chunsoft
KADOKAWAJapan
Shipping

Purchase

Wholesalers
Retailers
Distribution platform
operators

Sales

Purchase

Consumers*Some shipped by the Company

21

Gaming Segment

02

Market environment & Our strengths

Major titles

Market environment of games••

The global gaming market has been growing at a highrate with the spread of PCs and smartphones.
While mobile games constitute the greatest growth driver,user populations of PC games and console games arealso increasing.

Our Strengths
•

•

•
•

Affiliating FromSoftware, a game studio with worldleading capabilities of creating and developing
entertainment content, we continue to release highly
popular console and PC games.
We operate multiple businesses, including contracted
development and localization for other companies, inaddition to in-house development.
We are also driving the creation of mobile games fromthe abundant portfolio of owned intellectual property
Media Mix Strategy enables our games from owned
intellectual property to be adapted into books/e-books
and videos on our own.

ELDEN RING
©Bandai Namco Entertainment Inc. / ©2022 FromSoftware, Inc.

SEKIRO: SHADOWS DIE TWICE©2019,2022 FromSoftware, Inc. All rights reserved. ACTIVISION is a trademark of Activision
Publishing Inc. All other trademarks and trade names are the properties of their respective owners.

Danganronpa series© Spike Chunsoft Co., Ltd. All Rights Reserved.

ARMORED CORE Ⅵ FIRES OF RUBICON🄫Bandai Namco Entertainment Inc./ 🄫1997-2023 FromSoftware, Inc. All rights reserved.

DARK SOULS series

The Eminence in Shadow Master of Garden©Daisuke Aizawa, KADOKAWA / Shadow Garden / © Master of Garden Production Committee

22

Gaming Segment

02

Future Initiatives
Intellectual property creation/development

Strengthening the ability to
produce gaming content⚫ Improving the quality and quantityof new games in owned IP⚫ Each Group company
demonstrates their originality⚫ Strengthening human resources
and the production system

Creating games using
publication and animation titles
from owned IP⚫
⚫
⚫

Full-scale entry
into the mobile
games business
Aggressive
investment
Promotingcrosssegmental
planning andsupervision

Promoting expansion of IP in
games
⚫
⚫
⚫

©KM,K/OL3P ©KADOKAWACORPORATION 2021

©Bandai Namco Entertainment Inc. / ©2022 FromSoftware, Inc.

Intellectual property rollout

Expanding additional contents ingames
Expanding the media mix into
the Publication and Video
businesses
Extending the life of each title

Continuous
growthProfitability
improvement

Expanding the geographic
coverage of in-house publishing⚫

Expanding the geographic
coverage of in-house publishing
to increase profitability© Spike Chunsoft Co., Ltd. All Rights Reserved.

© Spike Chunsoft Co., Ltd. All Rights Reserved.

©2019,2022 FromSoftware, Inc. All rights reserved. ACTIVISION isa trademark of Activision Publishing Inc. All other trademarks andtrade names are the properties of their respective owners.

©Daisuke Aizawa, KADOKAWA / Shadow Garden©Master of Garden Production Committee©Nikiichi Tobita 2022
©Bandai Namco Entertainment Inc. /©2022 FromSoftware, Inc.

23

02

Web Services Segment
Trends in Results

Business Overview
Niconico-related business⚫

⚫

25,000Operating Niconico Channel, the official channel platform ofcorporations, celebrities, and popular users

20,000Live Business⚫

Planning and operating events such as the Niconico Chokaigi, an
enormous event fusing the digital and real world, and Animelo
Summer Live, the world's largest anime song event

Mobile Business⚫

Net sales

Operating niconico, the largest video and live-streaming platform
in JapanOperating margin(Million yen)
Operating profit

22,00822,063

21,342

10,00021,3998,000

9.5%

15,000

9.4%

6,000

7.4%
1.7%

10,0002,096

Operation of DWANGO JP, which distributes music content for
smartphones and feature phones, among others

Operating profit

Net sales

2,013

1,641

5,000

4,000
2,000

362
0

0
FY2020

FY2021

FY2022

FY2023Business model of the Web Services
Niconico-related business
Providing services including ones
related to viewing and posting of videos

Users

Service usage fees and subscription

Live BusinessDwangoNiconico-related businesses /Live business

Providing platforms, advertising spaces, etc.

Companies

Advertising fees

Hosting events and selling goods

Buying tickets and goods

Users

Providing event exhibition spaces, etc.

Providing services and events whichfuse the online world with reality

Exhibition/Sponsoring

Companies

24

02

Web Services Segment
Market environment & Our strengths
Market environment of Web services• The video content market has continued to expand,largely reflecting the spread of smartphones.
• Video sharing services (in which videos areproduced and posted by general users) and video
distribution services (in which companies provide
the content they produce) constitute themainstream.
• The return of event and live concert markets is
expected to take time, partly reflecting the impact
of COVID-related restrictions and changes in
consumer behavior.

Related Indicators
Number of premium members

Unit:
10,000 people

Unit:
10,000 people

Number of paid members of* As of March 31

200

niconico Channel* As of March 31

150
150
100

100

50

50
0

0
FY2020

FY2021

FY2022

FY2023

FY2020

FY2021

FY2022

FY2023

Our Strengths• Diverse content created from UGC• Recurring profit from monthly fees and diverse
sources of revenue including pay-as-you-go
services and advertisements• Hosting events fusing the the digital and real world,which are Japan's leading events in terms of thenumber of visitors

Future Initiatives
Enhancing initiatives aimed at sales growth of the niconico-related business• Continuing to increase MAU by improving the content-creation infrastructure in each of thegenres where Niconico excels• Measures are underway to promote the diversification of income streams, such as Niconico
channel, pay-per-view live-streaming services, and social tipping, and to prevent the decline in
the number of premium memberships at an early stage

In the live business, we will aim to achieve profitability at an early stage throughselection and concentration of event planning for the future.

25

Education/EdTech Segment

02

Trends in Results

Business Overview⚫

⚫

Operating Vantan trade schools to develop human resources who
can immediately contribute to creative fields. Putting an emphasis
on developing workers who can immediately be effective in various
fields, with training provided by professionals who are active in
specialized fields.
Offering state-of-the-art online learning systems and high-level
educational programs to N High School and S High School, which
are operated by KADOKAWA DWANGO Educational Institute.

(Million yen)
Net sales

Operating profit

Net Sales

Operating margin

Operating Profit

15,00012,47512,000
9,000

6,000

10,8032,500

13,390
1,769

14.2%

1,727
12.9%

6.9%

2,000
1,500

1,000

743

3,000

500

0

0
FY2021

FY2022

FY2023Business model of the Education/EdTech
VantanBusinesses for N High School and S High School
Learning system
Training program

Training program

VantanDwangoEnrollment fees
TuitionUsage fees
Students

Kadokawa
DwangoEducational
Institute*Non-consolidated
company

Learning system
Training program

Enrollment fees
TuitionStudents

26

Education/EdTech Segment

02

Market environment & Our strengths

Related Indicators

Market environment ofUnit:
personthe Educational Business•••Our unique IT opens up educational
opportunities to a wider audience.

•

Educational systems developed in-house thatutilize cutting-edge technologies such as AI andVR•

Educational programs for developing practicalskills that utilize active professionals as lecturers
and a network with diverse companies

S High School students *As of March 31

9,000

30,0006,000

20,0003,000

10,0000

0
FY2021

FY2022

FY2023

FY2024FY2020

FY2021

FY2022

Fy2023Future Initiatives••

Number of N High School andUnit:person*As of April 30

The total number of students is declining due tothe falling birth rate in Japan.
The number of students attending
correspondence course high schools, whichconstitute the Company's business domain,
exceeded 200,000 for the first time in FY2020.
In the last few years, the number has been
increasing by 10,000+ annually.
Continued steady enrollment growth in tradeschools, one of our primary businesses, at the
600,000-student level for the past several years.

Our Strengths

Number of Vantan students••

At Vantan, students enrollment continues to grow as new courses are added and geographic
coverage continues to expand.
Educational programs that harness our strength in the N/S high school business continue to grow at ahigh pace.
Establish ZEN University (provisional name, awaiting for establishment approval) to reach new targets including
university students and working professionals
Supporting mid- to long-term career andhigher educational paths by strengthened
collaboration among schools

Further development of industries including
content creation and entertainment
Training anddevelopment of
human resources

Diverse society(provisional name,awaiting for establishment approval)

Sharing of knowledge
and expertise

Industry including
content creation,entertainment,
and others
27

Others Segment

02

Trends in Results

Business Overview
Commercial facility business⚫

⚫

(Million yen)

Operation of IP experiential facilities, including TOKOROZAWASAKURA TOWN, and sales of related goods
Operating the event hall, restaurant, stores, etc. at
TOKOROZAWA SAKURA TOWNNet Sales⚫

25,00020,29820,000Developing original products utilizing intellectual property

15,000Operation of e-commerce sites, including Chara-Ani.com, an
online store for mascot merchandise, figures, and other goods, aswell as the Kadokawa Store and KUJIBIKIDO, an online lottery
service

Other new businesses⚫

Operating Profit

25,000MD Business⚫

Operating profit

Net sales

20,00017,19915,000

11,487

10,00010,000

5,000

5,000

0

Development and operation of VirtualCast, a VR/metaverse
communication service- 5,000

0-4,927
FY2021-4,535
FY2022-4,399FY2023-5,000Future Initiatives•

TOKOROZAWASAKURA TOWN
©Kadokawa Culture Museum

Original products utilizing
intellectual property

VirtualCast••

In the Commercial facility business, we plan to provide more attractive
opportunities to experience the world of IP by utilizing the Group’s entertainment
content, to attract even more customers and improve profitability.
In the MD business, we will promote growth by further enhancing the productlineup including newly created figures, and strengthening international sales
channels
Boldly driving structural reform boldly to improve overall profitability
28

03

Value Creation Process

03

KADOKAWA Group’s Value Creation Process
The KADOKAWA Group is committed to bringing people happiness, mutual understanding, and both the legacy and creationof culture through a cycle of maximizing the value of owned IP. This cycle is composed of IP creation, users’ enthusiasm, andthe nurturing of future talent among authors and creators alike.
KADOKAWA’s
management capital

Human capital
Diversified human resources with highexpertise and creativity●Editorial personnel: Approx. 650 editors

Intellectual capital
Assets in IP creation and rollouts●Abundant archive titles:
Books: over 130,000, Videos: over 2,000 titles

Social capital
Networks and trust that maximize value●Number of business partners such as creators andauthors:
Approx.: 75,000 creators and authors

Financial capital
Abundant funding for sustainablebusiness activities● Equity ratio: 52.9%

Manufacturing capital
KADOKAWA’s digital manufacturing andlogistics base equipped with the mostadvanced technology in the domestic
paper-based book business owned by
KADOKAWA

Natural capital
Reduction of surplus consumption of
resources, energy saving

KADOKAWA’s ability to accelerate society’s creative cycle
Create IP

Deliver to users

We develop and expand IP in the form of books, videos, games,
and more, which are distributed to users through our editorial,
production, and technology skills.

We deliver entertainment content across various mediums
such as books, videos, and games to users in cooperation with
KADOKAWA’s directly managed bookstores, e-bookstores, IP
creation experiential facilities, internet media outlets, andmany other partners worldwide.
Overseas rollouts Number of translation languages of books

Books published in 2022:

29 languages

Approx. 5,900 titles

BOOK WALKER Number of registered memberships:

Animations released in 2023:

3.50 million

57 titles

IP experience facility Total number of
TOKOROZAWA SAKURA TOWN visitors:

Live action videos released in 2022:

19 title

Discover/nurture talent

KADOKAWAandSociety’s
creative cycle

We discover new talent through theoperation of posting platforms andhosting contests to generate newstories. We also support the growth oftalent through educational business.

Number of N & S High School students:

28,942

Approx. 3 million

In fandoms and digital-real hybrid
events, we provide opportunities forusers to connect and engage witheach other through our uniqueplatform and experiential facilities.

8,688

niconico Number of regular members:

Over 36 contests

Titles published on Kaku Yomu and completed as products:

approx. 374 titles (including those published by other companies)

Value we provide to users
Each individual can findtheir favorite content,leaving everyone happy

Value we provide tosociety
Diverse content fosters
interconnectivity within acommunity of mutual
understanding

Connect users

Number of Vantan students:

Contests open to the public (hosted by KADOKAWA)

Value provided

98.47 million

niconico channels:

Value we provide tocultureCulture is passed on to
the next generation,
which facilitates thecreation of new culture

11,195 channels
Niconico Chokaigi 2024:
In-person visitors:

125 thousand
Note: The above are the latest figures that have been found.

For more information,
see KADOKAWA’s Integrated Report.

30

04

Sustainability Policy

04

Human Capital Strategy
Enhance personnel systems
that improve motivation

Strengthen development of
global human resources
Strengthen personnel acquisition
and training

Strengthen support forsuccess⚫ Implementing hiring activities andstrengthening internship acceptancearound the world⚫ Enhancements to support programsfor employees stationed
internationally⚫ Improving various reward programsfor employees at international
subsidiaries⚫ Temporary remote work policy fromhome country for non-Japaneseemployees⚫ Expansion of eligibility for businessclass use on international businesstrips（At least the specified score on the⚫ Talent management of global nationals

Driving the success ofjunior personnel

Promoting the further utilization ofprograms⚫ Providing new graduate
employees with their desired
assignments⚫ Long-term internship system⚫ Free agent-type internal transfer program:increase in the number of successful transfers⚫ Improving in the percentage of employeeswith concurrent roles⚫ Increase in the number of proposals in the
open call for projects accepted for execution⚫ Enhance one-off payments for obtaining
qualifications

qualifying examination）

Strengthening the foundation
for growth

Creative human resources
Technology-oriented
human resources
Global human resources(Up to 10 million yen paid for qualifications
involving high levels of difficulty)⚫ Side job system⚫ Conducting practical training based on
specialization

Workplace environment that respects diversity
Realization of diverse work styles

Employment of persons with disabilities⚫ Workplace Choice System(selection of work location)⚫ Employment ratio of persons with disabilities:
2.32% in FY2023⚫ Improved support systems for
employees raising children or
providing family care

⚫ Currently around 96
employees with disabilities*
are active in the specialgroup.

⚫ Enhanced health support for
employees⚫ Rate of return from childcare
leave: 100％ in FY2023⚫ Improving the percentage of female managers andexecutives on a Group consolidated basis*
FY2022 19.3%

Target for FY2030 30%⚫ Percentage of female employees in the KADOKAWA
Group* As of the end of March 2024
Scene from a familyinteraction event for
employees raising children

Promoting opportunities for women▲KADOKAWA CRAFT INC.
operates a coffee roastingand sales business etc.

FY2021 42.2%

FY2022 43.2%* The ratio combines KADOKAWA and its domestic consolidated
subsidiaries

32

Summary of ESG Initiatives of the KADOKAWA Group04

Environment
Greenhouse gas (GHG)
emissions reduction

Reducing wasted paper-based products◆ The target of reducing greenhouse gas (GHG)
emissions by 50％ by FY2030 is expected to beachieved during FY2024, earlier than planned.
The electricity used in our company's building will be
virtually transitioned to renewable energy (scheduled in
December 2023) and a 88％ reduction will be achieved
in FY2024➢

Pursue virtually zero emissions throughout the
KADOKAWA Group in the future➢

Change in KADOKAWA's GHG emissions over time and target
CO2 emissions (t-CO2) * Trial calculation with adjusted emission coefficient
5,000

➢

Return rates of the Group’s paper-based books business havebeen improving continuously➢

The ratio of e-book sales in the Publication Segment is increasing

45.0%
40.0%
35.0%

32.3%

25.0%

34.6%

36.1%

Return rate

27.1%

26.8%

FY2019Target
22.4%

29.5%

26.8%

20.0%

3,783

41.1%

38.1%

E-book ratio

27.4%

30.0%

4,555
4,187

4,000

◆ Reduced wasted paper-based products in the paper-based
books business

FY2020

FY2021

FY2022

FY2023

FY2027

3,100
3,000

➢
88%
reduction
vs. FY2020

2,000

1,000

0

450

21/3期
FY2020

FY2021
22/3期

Ourcompany's building
千代田区・自社ビル
in Chiyoda ward

FY2022
23/3期
Rental賃貸物件
properties

FY202324/3期（予測）(Forecast)

65,000Seek
virtually zero
emissionsthroughout
the Group

FY202425/3期（予測）(Forecast)
ところざわサクラタウン
TOKOROZAWASAKURA TOWN

Realized a significant reduction of wasted paper-based products(tons)
Reduced paper consumption
by 18,740 tons (-32％)

55,00045,00035,000FY2018FY202333

Summary of ESG Initiatives of the KADOKAWA Group04

SocialProviding an equal and creativeeducational environment

Promoting the creativity anddiversity of employees◆ Promoting the diversity of the Group’s employees➢➢

In the KADOKAWA Group, women are 43.2% of
employees
We aim to further increase the percentage of women in
managerial-level positions towards FY2030◆ Provide practical education opportunities equally to diverse
students➢

N/S High Schools provide education opportunities equally to high school
students all over Japan, centered on online educational programs.
They are the largest high schools in Japan, having 28,942 students.

The number of N/S High Schools students

35%

28,942
21,68130.0%
30%

12,401
25%

KADOKAWA
20%

Average of

FY201919.3%

FY2021

FY2022companies

12.7%

Training anddevelopment of
human resources

10%

FY2022

May, 2024◆ Develop specialists in the creative industry and contribute to theindustry‘s sustained growth
Expect that they will join and contribute to the KADOKAWA Group

Japanese
15%

FY2020

FY2030◆ Developing an environment that realizes diverse
work styles(provisional name,awaiting for establishment approval)

Sharing of
knowledge andexpertise

Diverse society

Industries such as
content creation andentertainment,
including the
KADOKAWA Group34

Summary of ESG Initiatives of the KADOKAWA Group04

Governance
Separation of supervision and execution of management◆ Of the 13 members of the Board,
seven are Independent Members
Internal Members

Independent Members

14
11
5
6
Previous Board◆ Transition from a company with an Audit & Supervisory
Committee to a company with a Nominating Committee,
etc. to strengthen the corporate governance

8

6

➢

Expertise of independent members• Corporate management, global expansion• Global expansion, diversity• Legal, compliance• Knowledge of IT and technology• Legal, corporate governance• Finance, accounting• Global expansion, content creation• Human resources, corporate management

Shift to the system with a Nominating Committee, aRemuneration Committee and an Audit Committee, that all
consist of the Independent Members of the Board

Board of Directors (majority are independent members）• Appoint executives andrepresentative executives• Supervise business execution

Nominating
Committee

Current Board

Appoint/Dismisscommittee members

Remuneration
Committee

Audit
Committee
Audit◆ The Chairman of the Board is appointed fromthe Independent Members of the Board◆ Reduction of cross-shareholdings➢

The number of issuers of listed shares we are holding,and the cross-shareholdings portion of our net assets areboth being reduced
We will further reduce our cross-shareholdings going
forwardReportAudit

Business execution
24

➢

Audit

Number of issuers

19%

20%

Cross-shareholdings portionof our net assets
18

22

12%

20
16

16

15

FY2020

FY2021

FY2022

12

15%

10%
FY2018FY201935