Consolidated Financial Results for the Three Months Ended June 30, 2021

(Under Japanese GAAP)
July 29, 2021
Listed company name:

Drecom Co., Ltd.

Listing

Tokyo Stock Exchange

Code number

3793

URL:

https://drecom.co.jp/

Representative

President and Representative Director: Yuki Naito

Contact person

Board of Directors, Hideki Goto (TEL) +81 (0)50-3101-9977

Scheduled date to file quarterly securities report: August 10, 2021
Scheduled start date to commence dividend payments: －Preparation of supplementary materials on quarterly financial results: Yes
Holding of quarterly financial results briefings: Yes(Yen amounts are rounded down to millions, unless otherwise noted.)
1. Consolidated Financial Results for the three months ended June 30, 2021 (From April1, 2021 to June 30, 2021)(1) Consolidated financial results (cumulative)

Net sales(% is Year-on-year rate of increase / decrease)
Attributable to owners
Ordinary incomeof parent
quarterly net income

Operating Income

Three months ended

%

%

%

%

June 30, 2021

2,661

-19.4

504

-19.2

492

-19.1

300

-35.6

June 30, 2020

3,303

46.6

623

386.4

609

301.4

467

282.4

Note: Comprehensive income

For the three months ended June 30, 2021 ¥301 million yen (-35.6%)
For the three months ended June 30, 2020 ¥467 million yen (281.3%)

Quarterly
Quarterly
Diluted net earnings per
Net earnings per share
share
Three months ended

Yen

Yen

June 30, 2021

10.53

10.51

16.41

16.39

June 30, 2020
(2) Consolidated financial Condition
Total Assets
Three months ended

Net Assets

Equity-to-asset ratio

Net assets per share

million yen

million yen

%

Yen

9,789

4,158

41.9

143.54

9,610

3,855

39.5

132.91

June 30, 2021

Fiscal year ended

March 31, 2021
Reference: Equity capital As of June 30, 2021
As of March 31, 2021

¥4,098 million¥3,794 million

2. Cash dividends
Annual dividends
First quarter-end Second quarter-end Third quarter-end

Fiscal year-end

Total

Fiscal year ended

JPY

JPY

JPY

JPY

JPY

March 31, 2021

―

0.00

―

0.00

0.00

0.00

―

0.00

0.00

March 31, 2022
March 31, 2022
(Forecast)―

Note: Revision to the forecast of cash dividends most recently announced: None

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3. Forecast of consolidated financial results for the six months ending September 30, 2021 (April 1, 2021 – September 30,
2021)(% increase or decrease from the previous year)

Sales

Operating income%

6month total

5,000

-19.2

%

750

%

-28.7

Note: Revisions to the most recently announced earnings forecasts:

Profit attributable toEarnings per shareowners of parent

Ordinary income

750

-27.3

%

500

-39.5

17.51

None

* Notes(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in the change inscope of consolidation): None
(2) Adoption of accounting treatment specific to the preparation of quarterly consolidated financial statements: None
(3) Changes in accounting policies, changes in accounting estimates, and re-display of amendments(i) Changes in accounting policies due to revisions to accounting standards: Yes(ii) Changes in accounting policies due to other reasons: None(iii) Changes in accounting estimates: None(iv) Retrospective restatement: None
(Note) For details, please refer to "2. Quarterly Consolidated Financial Statements and Main Notes (3) Notes to
Quarterly Consolidated Financial Statements (Changes in Accounting Policies)" on page 10 of the attached materials.
(4) Number of issued shares (common shares)(i) Total number of issued shares at the end of the period (including treasury shares)
As of June 30, 2021

28,981,700 shares

As of March 30, 2021

28,976,700 shares(ii) Number of treasury shares at the end of the period
As of June 30, 2021

430,366 shares

As of March 30, 2021

428,366 shares(iii) Average number of shares outstanding during the period (cumulative from the beginning of the fiscal year)
Three months ended June 30, 2021

28,550,949 shares

Three months ended June 30, 2020

28,449,634 shares(Note) 407,300 shares of the Company (4073 voting rights) owned by Custody Bank of Japan, Ltd. (hereinafter referred toas “ESOP Trust Unit”) are included in the number of treasury stock at the end of the above period.
*Quarterly financial results reports are exempt from quarterly review conducted by certified public accountants or an audit
corporation..
*Proper use of earnings forecasts, and other special matters(Notes on future descriptions)
The forecasts above are based on information currently available and certain assumptions deemed reasonable by theCompany as of the date of release of this document. Actual future results may differ from forecasts figures due to various
factors(How to obtain supplementary explanatory materials for financial results)
The Company is scheduled to hold a financial results briefing for institutional investors and analysts on July 29, 2021. The
financial results presentation materials to be distributed at this briefing will be posted on the Company's website
immediately after the briefing.
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Drecom Co., Ltd.(3793) Consolidated Financial Results for the Three Months Ended June 30, 2021
(Under Japanese GAAP)

Table of Contents
1. Qualitative Information on Consolidated Financial Results for the First Quarter Ended June 30, 20124(1) Explanation of business results ············································································································ 4(2) Explanation of Financial Position........................................................................................................................... 5
2. Quarterly Consolidated Financial Statements and Key Notes

6(1) Quarterly Consolidated Balance Sheet .................................................................................................................. 6(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Comprehensive Income Statements··· 8
Quarterly Consolidated Statement of Income ....................................................................................................... 8
Consolidated quarterly statements of comprehensive income .............................................................................. 9(3) Notes on quarterly consolidated financial statements··············································································· 10(Notes on going concern assumptions) ............................................................................................................... 10(Notes on significant changes in the amount of shareholders' equity) .................................................................. 10(Change in accounting policy) ............................................................................................................................. 10(Information by Segment).................................................................................................................................... 11(Significant subsequent events) .......................................................................................................................... 11

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Drecom Co., Ltd.(3793) Consolidated Financial Results for the Three Months Ended June 30, 2021
(Under Japanese GAAP)

1. Qualitative Information on Consolidated Financial Results for the First Quarter Ended June 30, 2012
(1) Explanation of business results
The environment surrounding the Internet service industry, to which our group belongs, continues to undergo rapidchanges. According to the 2020 Telecommunications Usage Trends Survey, as of the end of August 2020, the percentage
of households with smartphones continued to increase, reaching 86.8%, surpassing the percentage of households withPCs (70.1%) and fixed-line phones (68.1%). Smartphones are now positioned as the most important information andcommunication devices in our daily lives. As of the end of August 2020, the percentage of people using smartphones toaccess the Internet reached 68.3%, and along with PCs (50.4%), smartphones are now positioned as a major device forInternet use. In response to the rapid spread of smartphones and their increasing importance as Internet devices, theInternet service industry has seen the creation of new services for smartphones one after another, and the market
continues to expand and competition intensifies.
Under such an environment, the Group has positioned the provision of services for smartphones as its main businessand is focusing on the expansion of existing services and the development of new services. In the mainstay social gamebusiness, we are working to expand our business through the development and operation of new IP games under astrategy focused on IP games, and in the media business, we are also working to develop and operate new services
with the aim of creating the next generation of mainstay businesses.
In the first quarter of the current fiscal year, the “enza” title released in April 2018 and the IP game application releasedin May 2014 celebrated their third and seventh anniversaries, respectively, and performed well with anniversary events
as a tailwind. Although the competitive environment was severe due to the emergence of powerful competing titles,
measures taken to improve fan satisfaction were successful and contributed to stable earnings. In addition, many of thetitles in operation are recording stable profits, further improving the profitability of the mainstay game business andincreasing the stability of the business. Although net sales decreased year on year due to the closing of several titles inoperation and withdrawal from the advertising business, expenses decreased year on year due to the implementation ofa more cost efficient operation system and an increase in the amount of assets posted due to the progress ofdevelopment. However, due to the impact of the decrease in sales, operating income, ordinary income, and net income
attributable to shareholders of the parent company all decreased compared to the same period of the previous year.
As a result of the above, the Group's consolidated net sales for the first quarter of the current fiscal year were 2,661,328
thousand yen (down 19.4% from the same period of the previous year), operating income was 504,153 thousand yen(down 19.2%), ordinary income was 492,441 thousand yen (down 19.1% from the same period of the previous year),and net income attributable to shareholders of the parent company was 300,713 thousand yen (down 35.6% from thesame period of the previous year). Ordinary income was 492,441 thousand yen (down 19.1% year on year), and net
income attributable to owners of the parent was 300,713 thousand yen (down 35.6% year on year). The status of eachsegment in the current consolidated fiscal year is as follows.

Game Business
The main business of this segment is the development and operation of games, and we are engaged in thedevelopment and operation of third-party IP games, game platforms, and original IP games.
As for third-party IP games, our mainstay IP game application released in May 2014 celebrated its seventh anniversary
in May, and the "enza" title released in April 2018 celebrated its third anniversary, with the strong support of users, it
performed well despite the tough competition from strong competing titles. Regarding other titles, although many titles
remained strong, sales decreased year-on-year due to a decrease in the number of operational titles due to the closingof multiple titles and the effect of aging from the release.
As for profits, expenses decreased compared to the same period of the previous fiscal year due to continued efforts
to improve the efficiency of operating expenses and an increase in the amount of assets recorded as a result of progressin the development of new titles. As a result of the above, segment sales totaled 2,640,125 thousand yen (down 18.6%
year on year). segment profit was 586,851 thousand yen (down 17.9% year on year). We will continue to strive our corebusiness to increase sales and operating income.

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Drecom Co., Ltd.(3793) Consolidated Financial Results for the Three Months Ended June 30, 2021
(Under Japanese GAAP)Media BusinessIn the media business, under the “DRIP (Drecom Invention Project)”, which is part of our efforts to create the next
generation of mainstay businesses, we launched new services on a trial basis, utilizing our knowledge of Internet services,and repeated trials for commercialization. In addition to the commercialization of our mainstay "AROW", an AR
smartphone application building platform that uses location information and 3D real maps, and the development of new
titles using "AROW", we also launched "AKROGLAM", a new trial in the music domain, "Rooot", a new service that wehave developed in the past. a marketing service using twitter, and "load testing service," which leverages the know-how
we have accumulated through the development and operation of large-scale services in the past.
However, as many new services are still in the business development stage and costs continue to be upfront, segment
sales were 21,202 thousand yen (down 65.5% from the same period last year) and segment loss was 82,698 thousandyen (segment loss of 91,082 thousand yen in the same period last year).
In the future, we will work to further improve the profitability of our mainstay game business, focus on the development
and marketing of services in order to achieve hits with several new titles scheduled for the second half of the year, andfocus on the development of new businesses in the entertainment field other than games aiming to achieve the Group's
medium- to long-term goal of becoming a comprehensive entertainment company with a focus on IP.
In the current fiscal year, we will continue to recognize the epidemic of the new coronavirus infection as a major risk
to our business, and place priority on generating stable profits and securing cash flow. We will strive to achieve balanced
management by actively investing in the future, while at the same time maintaining a conservative stance based on thepremise of not putting pressure on profits and cash flow.

(2) Explanation of Financial Position(Assets)
Current assets as of the end of the first quarter of the current fiscal year were 7,630,872 thousand yen, a decrease of
38,273 thousand yen compared to the end of the previous fiscal year. This was mainly due to a decrease of 85,196
thousand yen in accounts receivable. Fixed assets totaled 2,158,986 thousand yen, an increase of 217,709 thousand
yen from the end of the previous fiscal year. Fixed assets increased 217,709 thousand yen from the end of the previous
fiscal year to 2,158,986 thousand yen, mainly due to a decrease of 131,354 thousand yen in software and an increaseof 317,663 thousand yen in software in progress.
As a result, total assets amounted to 9,789,858 thousand yen.

(Liabilities)
Current liabilities at the end of the first quarter of the current fiscal year totaled 2,924,170 thousand yen, a decreaseof 257,714 thousand yen compared to the end of the previous fiscal year. This was mainly due to decreases of 341,116
thousand yen in income taxes payable and 125,495 thousand yen in provision for bonuses, despite an increase of
250,000 thousand yen in short-term loans payable. Fixed liabilities totaled 2,706,832 thousand yen, an increase of
133,610 thousand yen from the end of the previous fiscal year. This was mainly due to an increase of 100,000 thousand
yen in asset retirement obligations.
As a result, total liabilities amounted to 5,631,003 thousand yen.

(Net assets)
Total net assets at the end of the first quarter of the current fiscal year were 4,158,854 thousand yen, an increase of
303,538 thousand yen compared to the end of the previous fiscal year. This was mainly due to the recording of 300,713
thousand yen in net income attributable to shareholders of the parent company.
As a result, the equity ratio was 41.9% (39.5% at the end of the previous consolidated fiscal year).

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Drecom Co., Ltd.(3793) Consolidated Financial Results for the Three Months Ended June 30, 2021
(Under Japanese GAAP)

2. Quarterly Consolidated Financial Statements and Key Notes(1) Quarterly Consolidated Balance Sheet(Unit: thousand yen)Previous consolidated fiscal year
(March 31, 2021)

Three months ended June 30, 2021
(June 30, 2021)

ASSETS
Current assets
Cash and deposits

5,288,132

5,299,538

Notes and accounts receivable

1,841,939

1,756,742

Work in progress

7,077

5,429

Prepaid expenses

174,067

175,552

Other

357,928

393,609

Total current assets

7,669,146

7,630,872

Fixed assets
Tangible Fixed Asset
Buildings
Accumulated depreciation
Buildings (net)
Tools, furniture & fixtures

259,203

411,436-173,499-193,771

85,704

217,664

82,817

109,664

Accumulated depreciation-67,283-69,948

Tools, furniture & fixtures (net)15,53439,71661,85361,853

Accumulated depreciation-48,190-52,295

Lease assets (net)

13,663

9,558

Total tangible fixed assets

114,901

266,939

Lease assets

Intangible assets
Software407,586

276,231

Software suspense account471,118

788,781

Total intangible assets

878,704

1,065,012

Investments and other assets
7

7

Deferred tax assets

434,953

311,185

Deposit318,138

318,138

Other

194,571

197,702

Investment securities

Other investments and other assets
Total fixed assets
Total assets

6/11

947,671827,034

1,941,277

2,158,986

9,610,423

9,789,858

Drecom Co., Ltd.(3793) Consolidated Financial Results for the Three Months Ended June 30, 2021
(Under Japanese GAAP)(Unit: thousand yen)Previous consolidated fiscal year
(March 31, 2021)

Three months ended June 30, 2021
(June 30, 2021)

LIABILITIESCurrent liabilities
Accounts payable

363,542

398,838

Short-term debit
Long-term debt due within one year

100,000
640,000

350,000
662,000

Lease obligations
Accounts payable

14,773
660,610

13,499652,927

Income taxes payable
Asset retirement obligations

398,455
174,055

57,33848,559Bonus payment reserve
Other

150,414680,033

150,414590,593

Total current liabilities

3,181,884

2,924,170

Long-term debt
Lease obligations

2,430,000
6,387

2,429,500
3,650

Asset retirement obligation
Other

34,060102,774

134,060
139,622

Total fixed liabilities

2,573,222

2,706,832

5,755,106

5,631,003

CapitalCapital surplus

1,761,208
2,017,979

1,762,774
2,019,545

Retained earnings
Treasury stock

146,380-31,058

447,093-131,058

Total shareholders' equity

3,794,509

4,098,355

-92

-92

-92

-92

Stock acquisition rights

58,651

59,382

Non-controlling interests

2,247

1,208

3,855,316

4,158,854

9,610,423

9,789,858

Fixed liabilities

Total liabilities
Net assets
Shareholders' equity

Accumulated other comprehensive income(loss)
Valuation difference on available-for-salesecurities
Total accumulated other comprehensive
income (loss)

Total net assets
Total liabilities and net assets

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Drecom Co., Ltd.(3793) Consolidated Financial Results for the Three Months Ended June 30, 2021
(Under Japanese GAAP)(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Comprehensive Income
Statements
Quarterly Consolidated Statement of Income(Three months ended June 30, 2021)(Unit: Thousand yen)Three months ended
June 30, 2020
(April 1, 2020 to June 30, 2020)Three months ended
June 30, 2021
(April 1, 2021 to June 30, 20201)

Sales
Cost of sales

3,303,191
2,236,241

2,661,328
1,621,178

Gross profit

1,066,950

1,040,149

Selling, general and administrative expenses

443,177

535,996

Operating income

623,773504,1531―098

Non-operating revenue
Interest received
Gain on investments in capital
Other

1,034

3

Total non-operating income

1,036

102

8,113

11,039Payment fee
Interest on bonds

―
106

250
―

Foreign exchange loss
Other

5,953
1,573

524
―

Total non-operating expenses

15,746

11,814

609,062

492,441

609,062

492,441

129,726
11,71967,379123,768

Total income taxes

141,446

191,147

Quarterly net income

467,616

301,293616

580

467,000

300,713

Non-operating expenses
Interest expense

Ordinary income
Net income before income taxes and minority
interests
Corporate, inhabitant and enterprise taxes
Income taxes-deferred

Net income attributable to noncontrolling interests
Net income attributable to owners of the parent

8/11

Drecom Co., Ltd.(3793) Consolidated Financial Results for the Three Months Ended June 30, 2021
(Under Japanese GAAP)

Consolidated quarterly statements of comprehensive income(Cumulative period for consolidated first quarter, three months ended June 30, 2021)(Unit: Thousand yen)Three months ended
June 30, 2020
(April 1, 2020 to June 30, 2020)Three months ended
June 30, 2021
(April 1, 2021 to June 30, 20201)

467,616

301,293

Other securities valuation difference16―

Total other comprehensive income

16―

467,632

301,293

467,016

300,713616

580

Quarterly net income or loss
Other comprehensive income

Quarterly comprehensive income(Breakdown)
Quarterly comprehensive income for ownersof parent
Quarterly comprehensive income fornon-controlling shareholders

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Drecom Co., Ltd.(3793) Consolidated Financial Results for the Three Months Ended June 30, 2021
(Under Japanese GAAP)(3) Notes on quarterly consolidated financial statements(Notes on going concern assumptions)
Nothing applicable.

(Notes on significant changes in the amount of shareholders' equity)
Nothing applicable.

(Change in accounting policy)(Application of Accounting Standard for Revenue Recognition, etc.)
The "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020. The "AccountingStandard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020; hereinafter referred to as the"Accounting Standard for Revenue Recognition") and other related standards have been applied from the beginningof the current first quarter, the Company will recognize revenue at the amount expected to be received in exchange
for the promised goods or services when control of the goods or services is transferred to the customer. As a resultof this change, with respect to billing revenue from general users, we have changed from recording sales at the timeof consumption of in-game currency to recording sales based on the nature of the items provided. The items provided
by the Group to general users are generally consumable items (consumed by certain actions of general users anddo not provide continuous benefits to general users), and the period between the purchase and consumption of
items is extremely short, so sales are recorded at the time of item sales. As a result, sales are recorded at the timeof sale.
The application of the revenue recognition accounting standard, etc. follows the transitional treatment prescribedin the proviso of paragraph 84 of the revenue recognition accounting standard, but there is no impact on retained
earnings at the beginning of the first quarter of the current fiscal year.
The adoption of the revenue recognition accounting standard had no impact on profit and loss for the first quarterof the current fiscal year.
In accordance with the transitional treatment prescribed in Paragraph 89-2 of the Accounting Standard for Revenue
Recognition, no reclassification has been made to the prior year's consolidated financial statements to conform to
the new presentation.

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Drecom Co., Ltd.(3793) Consolidated Financial Results for the Three Months Ended June 30, 2021
(Under Japanese GAAP)(Information by Segment)
Segment Information
I. Previous three months ended, from April 30, 2020 to June 30, 2020, consolidated period
Information on the sales, profits or losses per reporting segment(Unit: Thousand yen)

Quarterly
consolidated
incomestatement
amountReporting Segment
Gamebusiness

Media
Business

Adjustment

Total

Sales
Sales to externalcustomers

3,241,795

61,3963,303,191―

3,303,191

Sales or transfers
inside or between
segments

―

―

―

―

―

Total

3,241,795

61,3963,303,191―

3,303,191

Segment profit or Loss

714,855-91,082

623,773―

623,773

Note: Segment income or loss is the same as operating income in the quarterly consolidated statements of income.

II. Three months ended, from April 30, 2021 to June 30, 2021, consolidated period
Information on the sales, profits or losses per reporting segment(Unit: Thousand yen)

Quarterly
consolidated
incomestatement
amountReporting Segment
Gamebusiness

Media
Business

Adjustment

Total

Sales
Sales to externalcustomers

2,640,125

21,202

2,661,328―

2,661,328

Sales or transfers
inside or between
segments

―

―

―

―

―

Total

2,640,125

21,202

2,661,328―

2,661,328

Segment profit or Loss

586,851-82,698

504,153―

504,153

Note: Segment income or loss is the same as operating income in the quarterly consolidated statements of income.

(Significant subsequent events)
Not applicable

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