Consolidated Financial Results for the Six Months Ended September 30, 2021

(Under Japanese GAAP)
October 28, 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: November 8, 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 six months ended September 30, 2021 (From April 1, 2021 to September 30, 2021)(1) Consolidated financial results (cumulative)

Net sales

Operating Income

Six months ended%

September 30, 2021
September 30, 2020
Note: Comprehensive income(% is Year-on-year rate of increase / decrease)
Attributable to owners
Ordinary incomeof parent
quarterly net income
%

%

%

5,184

-16.2

967

-8.1

941

-8.8

612

-25.9

6,184

37.8

1,052

216.8

1,032

249.5

825

286.4

For the six months ended September 30, 2021 ¥613 million yen (-25.9%)
For the six months ended September 30, 2020 ¥826 million yen (284.7%)

Quarterly
Net earnings per share

Quarterly
Diluted net earnings
per share

Six months ended

Yen

Yen

September 30, 2021

21.41

21.38

September 30, 2020

29.01

28.96

(2) Consolidated financial Condition
Total Assets
Six months ended

Net Assets

Equity-to-asset ratio

Net assets per share

million yen

million yen

%

Yen

9,672

4,532

46.3

156.21

3,855

39.5

132.91

September 30, 2021
Fiscal year ended

9,610

March 31, 2021

Reference: Equity capital As of September 30, 2021
As of March 31, 2020

¥4,477 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

March 31, 2022
March 31, 2022 (Forecast)

―

0.00
―

0.00

0.00

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

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3. Forecast of consolidated financial results for the nine months ending December 31, 2021
(April 1, 2021 – December 31, 2021)(% increase or decrease from the same period of previous year)

Sales

Operating income%

Nine months total

8,000

-12.6

%

1,300

%

-22.8

Note: Revisions to the most recently announced earnings forecasts:

Profit attributable toEarnings per shareowners of parent

Ordinary income

1,300

-21.4

%

900

-30.7

8,000

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 Key Notes and Main Notes(4) Notes on quarterly consolidated financial statements(Change in accounting policy)” on p11of the attached material.
(4) Number of issued shares (common shares)(i) Total number of issued shares at the end of the period (including treasury shares)
As of September 30, 2021

29,072,696 shares

As of March 31, 2021

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

408,666shares

As of March 31, 2021

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

28,584,587 shares

Six months ended September 30, 2020

28,469,938 shares(Note) 385,600 shares of the Company (3,856 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 briefing for financial results targeting institutional investors and analysts on October28, 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 Six Months Ended September 30, 2021
(Under Japanese GAAP)

Table of Contents
1. Qualitative Information on Consolidated Financial Results for the Second Quarter Ended September 30, 2021 ····· 4(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(Six months ended September 30, 2020 and 2021)..................................................................................... 8
Consolidated quarterly statements of comprehensive income ......................................................................... 9(Cumulative period for consolidated first quarter, six months ended September 30, 2021) ........................... 9(3) Quarterly Consolidated Statement of Cash Flows .......................................................................................... 10(4) Notes on quarterly consolidated financial statements ..................................................................................... 11(Notes on going concern assumptions)......................................................................................................... 11(Notes on significant changes in the amount of shareholders' equity)............................................................ 11(Change in accounting policy) ...................................................................................................................... 11(Information by Segment)............................................................................................................................. 12

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

1. Qualitative Information on Consolidated Financial Results for the Second Quarter Ended September 30,
2021(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 gaming
business, we are working to expand our business by increasing profits from IP games in operation and developing new
IP games, utilizing the know-how we have accumulated through the development and operation of IP games over theyears. In the media business, we are also working on the development and operation of new services with the aim ofcreating the next generation of mainstay businesses.
In the first half of the current fiscal year, IP game applications in their seventh year of release performed well, driven
by the events held in September. In addition, many of the titles under operation continued to post stable profits from thefirst quarter, and the mainstay gaming business continued to improve in profitability, increasing the stability of thebusiness.
Net sales decreased from the same period of the previous year due to the weakening demand from stay at homeconsumption slowdown, the closing out on several titles in operation, and the withdrawal from the advertising business.
However, the decrease in revenue exceeded the decrease in expenses. Operating income (loss), ordinary income (loss),and net income (loss) attributable to shareholders of the parent company all decreased from the same period of theprevious year, as a result of the decrease in revenue exceeding the decrease in expenses.
As a result, the Group's consolidated net sales for the first half of the current fiscal year were 5,184,850 thousand yen(down 16.2% year on year), operating income was 967,370 thousand yen (down 8.1% year on year), ordinary income
was 941,288 thousand yen (down 8.8% year on year), and net income attributable to shareholders of the parent company
was 612.061 thousand yen (down 6.5% year on year), Net income attributable to shareholders of the parent company
was 612,061 thousand yen (down 25.9% year on year). Results by segment for the first half of the current fiscal year are
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, the IP game app, one of our mainstay titles, saw a strong performance from the event
held in September, contributing to revenue at a level close to the anniversary event held in May. As for other titles,
although many of them maintained strong sales, the demand on stay at home consumption weaken from the previous
fiscal year, the decrease in the number of titles in operation due to the closing of several titles, and the aging of the titles
since their release also contributed to the decline in sales compared to the same period last year.
As for profits, expenses decreased compared to the same period of the previous year thanks to the continued efforts
made to improve the efficiency of operating expenses and an increase in the amount of assets recorded as a result ofprogress in the development of new titles. However, this was not enough to compensate for the impact of the decline
seen in revenue, resulting in a year-on-year decrease in profit.
As a result, segment sales were 5,119,378 thousand yen (down 16.4% from the same period last year), and segment
income was 1,110,970 thousand yen (down 10.1% from the same period last year).
We will continue to strive to increase sales and operating income in this segment, our core business.

Media BusinessIn the media business, under the “DRIP (Drecom Invention Project)”, which is part of our efforts to create the next
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Drecom Co., Ltd. (3793) Consolidated Financial Results for the Six Months Ended September 30, 2021
(Under Japanese GAAP)

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. As for "Rooot," the number of companies using the service
exceeded was 20 in August 2021, and the service is steadily expanding.

(2) Explanation of Financial Position(Assets)
Current assets at the end of the first half of the current fiscal year totaled 7,108,580 thousand yen, a decrease of
560,565 thousand yen compared to the end of the previous fiscal year. This was mainly due to a decrease of 338,686
thousand yen in cash and deposits and a decrease of 239,740 thousand yen in accounts receivable-trade. Fixed assets
totaled 2,563,965 thousand yen, an increase of 622,688 thousand yen from the end of the previous fiscal year. This was
mainly due to an increase of 718,460 thousand yen in software in progress.
As a result, total assets amounted to 9,672,545 thousand yen.

(Liabilities)
Current liabilities at the end of the first half of the current fiscal year totaled 2,525,921 thousand yen, a decrease of655,962 thousand yen compared to the end of the previous fiscal year. This was mainly due to a decrease of 232,324
thousand yen in income taxes payable and a decrease of 150,414 thousand yen in asset retirement obligations.
Noncurrent liabilities totaled 2,614,292 thousand yen, an increase of 41,070 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, despite adecrease of 79,250 thousand yen in long-term loans payable.
As a result, total liabilities amounted to 5,140,214 thousand yen.

(Net assets)
Total net assets at the end of the first half of the current fiscal year were 4,532,331 thousand yen, an increase of
677,015 thousand yen compared to the end of the previous fiscal year. This was mainly due to the recording of net
income attributable to shareholders of the parent company of 612,061 thousand yen.
As a result, the equity ratio was 46.3% (39.5% at the end of the previous consolidated fiscal year).

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Drecom Co., Ltd. (3793) Consolidated Financial Results for the Six Months Ended September 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)

Six months ended September 30, 2021
(September 30, 2021)

ASSETS
Current assets
Cash and deposits

5,288,132

4,949,446

Notes and accounts receivable

1,841,939

1,602,199

Work in progress

7,077

37,231

Prepaid expenses

174,067

173,246

Other

357,928

346,456

Total current assets

7,669,146

7,108,580

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

259,203257,457-173,499-29,41485,704228,043

82,817

66,235

Accumulated depreciation-67,283-28,534

Tools, furniture & fixtures (net)15,53437,70061,85339,966

Accumulated depreciation-48,190-32,233

Lease assets (net)

13,663

7,733

Total tangible fixed assets

114,901

273,477

Lease assets

Intangible assets
Software407,586

198,933

Software suspense account471,118

1,189,578

Total intangible assets

878,704

1,388,512

7

96,297

Deferred tax assets

434,953

273,979

Deposit318,138

318,138

Other

194,571

213,560

Investments and other assets
Investment securities

Other investments and other assets
Total fixed assets
Total assets

6/12

947,671

901,975

1,941,277

2,563,965

9,610,423

9,672,545

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

Six months ended September 30, 2021
(September 30, 2021)

363,542495,723

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

100,000
640,000

200,000
677,750

Lease obligations
Accounts payable

14,773
660,610

11,043
517,545

Income taxes payable
Bonus payment reserve398,455
174,055

166,130
121,048

Asset retirement obligations
Other

150,414680,033

336,679

Total current liabilities

3,181,884

2,525,921

Long-term debt
Lease obligations

2,430,000
6,387

2,350,750
912

Asset retirement obligation
Other

34,060102,774

134,060
128,569

Total fixed liabilities

2,573,222

2,614,292

5,755,106

5,140,214

CapitalCapital surplus

1,761,208
2,017,979

1,792,991
2,050,152

Retained earnings
Treasury stock

146,380-131,058

758,441-124,080

Total shareholders' equity

3,794,509

4,477,504

-92

0

-92

0

Stock acquisition rights

58,65153,262

Non-controlling interests

2,247

1,563

3,855,316

4,532,331

9,610,423

9,672,545

LIABILITIESCurrent liabilities
Accounts payable

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 Six Months Ended September 30, 2021
(Under Japanese GAAP)(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Comprehensive Income
Statements
Quarterly Consolidated Statement of Income(Six months ended September 30, 2020 and 2021)(Unit: Thousand yen)Six months ended
September 30, 2020
(April 1, 2020 to September 30, 2020)

Six months ended
September 30, 2021
(April 1, 2021 to September 30, 2021)

Sales
Cost of sales

6,184,699
4,228,431

5,184,850
3,187,220

Gross profit

1,956,268

1,997,629

Selling, general and administrative expenses

904,064

1,030,259

Operating income

1,052,203

967,370

Interest received
Gain on investments in capital

13
8,072

25
-

Other

1,474

247

Total non-operating income

9,559

272

15,011

22,791259

500-

Foreign exchange loss
Other

13,297
1,090

2,050
1,013

Total non-operating expenses

29,65926,354

Ordinary income

1,032,103

941,288

Extraordinary loss
Impairment loss

-

4,957

-

4,957

1,032,103

936,331

Non-operating revenue

Non-operating expenses
Interest expense
Payment fee
Interest on bonds

Total extraordinary loss
Net income before income taxes and minority
interests
Corporate, inhabitant and enterprise taxes

217,383

162,402

Income taxes-deferred-12,245

160,933

Total income taxes

205,138

323,335

Quarterly net income

826,965

612,996

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

8/12

988

934

825,977

612,061Drecom Co., Ltd. (3793) Consolidated Financial Results for the Six Months Ended September 30, 2021
(Under Japanese GAAP)

Consolidated quarterly statements of comprehensive income(Cumulative period for consolidated first quarter, six months ended September 30, 2021)(Unit: Thousand yen)Six months ended
September 30, 2020
(April 1, 2020 to September 30, 2020)

Six months ended
September 30, 2021
(April 1, 2021 to September 30, 2021)

826,965

612,996

Quarterly net income or loss
Other comprehensive income
Other securities valuation difference

16

93

Total other comprehensive income

16

93

826,982

613,089825,993

612,154

988

934

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 Six Months Ended September 30, 2021
(Under Japanese GAAP)(3) Quarterly Consolidated Statement of Cash Flows(Unit: Thousand yen)Six months ended
September 30, 2021
(April 1, 2021 toSeptember 30, 2021)

Six months ended
September 30, 2020
(April 1, 2020 to
September 30, 2020)

Cash flow from operations
Quarterly net income before taxes
Depreciation
Stock compensation expense
Impairment loss
Interest received and dividends received
Interest expense
Interest on corporate bond
Increase/decrease in notes and accounts
receivable-trade）
Increase/decrease in inventories
Increase/decrease in accounts receivable-other
Increase/decrease in prepaid expenses
Increase/decrease in notes and accounts
payable-trade
Increase/decrease in accrued expenses
Increase /decrease in accrued consumption tax,
etc.
Increase/decrease in advances received
Increase/decrease in reserve for bonuses
Other
Subtotal
Receipts of interest and dividends
Interest payments
Payment of corporate taxes, etc.
Income taxes refunded
Net cash provided by operating activities
Cash flow from investment activities
Payments for acquisition of tangible fixed assets
Payments for acquisition of intangible fixed assets
Payments for purchase of investment securities
Payments for acquisition of shares in subsidiaries
resulting in change in scope of consolidation
Other
Net cash provided by investing activities
Cash flow from financial activities
Net increase / decrease in short-term loans
payableProceeds from long-term loans payable
Payments for long-term debt
Payments for redemption of bonds
Other
Net cash provided by financing activities
Cash and cash equivalents increased or decreased
Cash and cash equivalents at beginning of period
Cash and cash equivalents at the end of the quarter

10/12

1,032,103
288,247
18,795-8,841
15,011
259

936,331301,275
21,6004,957-25
22,791--136,039

239,740-280
117,168
222,451-29,927-126,423
9,894-47,858

132,181

26,906-22,415

52,318-195,413

61,362
26,991
1,668,596
8,841-19,397-39,369
1,618,671-136,190-52,584-23,056
1,082,734
270-22,478-395,264
8,567
673,829-4,773-208,120--49,692-777,680-96,290-164,000-129,813-2,000-378,893-11,917-1,065,394-888,000

100,000

1,000,000-375,663-45,000-15,349-324,012
915,764
2,258,707
3,174,471

299,000-340,500-5,622
52,877-338,686
5,283,892
4,945,206

Drecom Co., Ltd. (3793) Consolidated Financial Results for the Six Months Ended September 30, 2021
(Under Japanese GAAP)(4) 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 ofgeneral users and do not provide continuous benefits to general users), and the period between the purchase andconsumption of items is extremely short, so sales are recorded at the time of item sales. As a result, sales arerecorded at the time of sale.
The application of the revenue recognition accounting standard, etc., in accordance with the transitional treatmentprescribed in the proviso of paragraph 84 of the revenue recognition accounting standard, has no impact on retained
earnings at the beginning of the first quarter and on profit and loss for the first half of the current fiscal year. In
addition, in accordance with the transitional treatment prescribed in Paragraph 89-2 of the Accounting Standard for
Revenue Recognition, no reclassification has been made for the previous fiscal year using the new presentation
method.

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Drecom Co., Ltd. (3793) Consolidated Financial Results for the Six Months Ended September 30, 2021
(Under Japanese GAAP)(Information by Segment)
Segment Information
I. Previous six months ended, from April 30, 2020 to September 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
(1) Sales to external customers(2) Intersegment sales andtransfers
Total

Segment profit or Loss

6,123,307

61,391

6,184,699-

6,184,699

-

496

496

-496

-

6,123,307

61,8886,185,196-496

6,184,699

1,235,530-183,326

1,052,203-

1,052,203

Note: 1. Adjustments to net sales are adjustments for internal transactions.
2. Segment income /loss is adjusted with operating income in the quarterly consolidated statements of income.

II. Six months ended, from April 30, 2021 to September 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
(1) Sales to externalcustomers(2) Intersegment sales andtransfers
Total

Segment profit or Loss

5,119,378

65,471

5,184,850-

5,184,850

-

-

-

-

-

5,119,378

65,471

5,184,850-

5,184,850

1,110,970-143,599

967,370-

967,370

Note: Segment income / loss is adjusted with operating income in the quarterly consolidated statements of income.

(Significant subsequent events)
Not applicable

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