Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending March 31, 2023

(Under Japanese GAAP)
January 30, 2023
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: February 8, 2023
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 nine months ended December 31, 2022 (From April 1, 2022 to December 31, 2022)(1) Consolidated financial results (cumulative)

Net sales

Operating Income

Nine months ended%

December 31, 2022
December 31, 2021
Note: Comprehensive income(% is Year-on-year rate of increase / decrease)
Net income attributable
Ordinary income
to owners of parent
quarterly
%

%

%

8,380

3.7

2,100

47.9

2,025

46.7

1,166

36.7

8,078

-11.8

1,419

-15.7

1,380

-16.5

853

-34.3

For the nine months ended December 31, 2022 ¥1,168 million yen (36.7%)
For the nine months ended December 31, 2021 ¥854 million yen (-34.3%)

Quarterly
Net earnings per share

Quarterly
Diluted net earnings
per share

Nine months ended

Yen

Yen

December 31, 2022

40.98

40.91

December 31, 2021

29.87

29.83

(2) Consolidated financial Condition
Total Assets
Nine months ended

December 31, 2022

Net Assets

Equity-to-asset ratio

Net assets per share

million yen

million yen%

Yen

12,157

5,640

46.0

196.04

4,574

46.9

159.06

Fiscal year ended

9,653

March 31, 2022

Reference: Equity capital As of December 31, 2022
As of March 31, 2022

¥5,588 million¥4,522 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, 2022

―

0.00

－

5.00

5.00

March 31, 2023
March 31, 2023 (Forecast)

―

0.00

－
5.00

5.00

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

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3. Forecast of Consolidated Financial Results for the Fiscal Year Ending March 31, 2023 (April 1, 2022 - March 31, 2023)(% increase or decrease from the same period of previous year)

Sales

Operating income%

Fiscal year ending
March 31, 2023

10,700

1.6

%

2,200

%

38.3

Note: Revisions to the most recently announced earnings forecasts:

Profit attributable toEarnings per shareowners of parent

Ordinary income

2,100

36.2

%

1,100

36.3

38.59

Yes

* Notes(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in the change inscope of consolidation): None
New ―, (Company name) ―, Exclusion ―, (Company name) ―(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 (3) Notes onquarterly consolidated financial statements (Change in accounting policy)” on p10 of 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 December 31, 2022

29,129,591 shares

As of March 31, 2022

29,072,696 shares(ii)Number of treasury shares at the end of the period
As of December 31, 2022

621,566 shares

As of March 31, 2022

637,366 shares(iii) Average number of shares outstanding during the period (cumulative from the beginning of the fiscal year)
Nine months ended December 31, 2022

28,473,581 shares

Nine months ended December 31, 2021

28,569,388 shares(Note) 595,800 shares of the Company (5,958 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 January 30, 2023.
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 Third Quarter of the Fiscal Year Ending March 31, 2023
(Under Japanese GAAP)

Table of Contents
1. Qualitative Information on Consolidated Financial Results for the Third Quarter Ended December 31, 2022 ·········· 4(1) Explanation of Operating Results ......................................................................................................................... 4(2) Explanation of Financial Position.......................................................................................................................... 5(3) Explanation of consolidated earnings forecasts and other forward-looking information....................................... 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(Nine months ended December 31, 2022) ...................................................................................................... 8
Consolidated quarterly statements of comprehensive income ........................................................................... 9(Cumulative period for consolidated Third Quarter, Nine months ended December 31, 2022) ...................... 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 Third Quarter of the Fiscal Year Ending March 31, 2023
(Under Japanese GAAP)

1. Qualitative Information on Consolidated Financial Results for the Third Quarter Ended December 31,
2022(1) Explanation of Operating Results
The Group's raison d'etre is "with entertainment" and our goal is to continue to create services that exceed people's
expectations. We also strive to create unprecedented value and deliver experiences that captivate users. In the medium
term, we aim to become a comprehensive entertainment company that provides a wide variety of digital entertainment
content globally, centered on our IP, and to achieve sustainable growth and increase our corporate value.
In the mainstay game business, our main business is the development and operation of games, and we develop andoperate third-party IP games, game platforms, and original games. In the media business, we are developing businesses
with the aim of creating the next generation of core businesses. We have launched new services on a trial basis, utilizing
our knowledge internet services, and are conducting a series of trials for commercialization.
In the period under review, net sales increased 3.7% year on year to 8,380,181 thousand yen, operating income
increased 47.9% to 2,100,620 thousand yen, and ordinary income increased 46.7% to 2,025,427 thousand yen. The
impairment loss of one title in operation resulted in an extraordinary loss of 336,259 thousand yen, and net income
attributable to owners of the parent amounted to 1,166,723 thousand yen (up 36.7%).

The results for each segment for the nine months ended December 31, 2022 are as follows.

Game BusinessIn the game business, one of our mainstay IP game titles, which marked its 8th anniversary, maintained strong
performance driven by an Invigorated interest in our IP and contributed to earnings.
Net sales increased year-on-year mainly due to the release of new titles in the previous fiscal year, in addition to thecontinued strong performance of our mainstay IP titles.
Profits increased from the same period of the previous fiscal year due to the impact of increased revenues frommainstay titles, as well as streamlining of the operation system and the closing of some unprofitable titles.
As a result, segment sales amounted to 8,152,936 thousand yen (up 2.3% year-on-year) and segment income
amounted to 2,460,783 thousand yen (up 50.7% year-on-year). In this segment, our core business, we will continue to
strive to maintain stable earnings from titles in operation and aim to increase sales and profits through the success ofseveral new titles under development.

Media BusinessIn the media business, "Rooot," a Twitter-based fan community promotion service, continued to contribute to earnings.
In addition, while working on the publishing and video business to develop, acquire, and nurture IP and diversify revenuegenerating channels, we started publishing a light novel label, "DRE Novels," in October. In addition, we are focusing on
new business development in the Web3 domain.
Net sales increased year-on-year due to the strong performance of "Rooot," a Twitter-based fan community promotion
service, as well as the start of publication of light novels.
As for profit, the loss amount increased from the same period of the previous year due to the ongoing cost advancedue to investments in new business areas such as publishing, video, and Web3.
As a result, segment sales amounted to 227,244 thousand yen (up 107.6% year-on-year) and segment loss amounted
to 360,162 thousand yen (segment loss of 212,766 thousand yen in the same period last year). In this segment, theCompany will promote aggressive investments to achieve medium- to long-term business growth.

Looking ahead, we will work to further improve profitability in our mainstay game business and aim to grow sales
through the release of new titles. In addition, we will focus on business development in entertainment areas other thangames to grow into a comprehensive entertainment company centered on IP. Furthermore, we will promote our growthstrategy by integrating our existing businesses with the Web3 domains.

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Drecom Co., Ltd. (3793) Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending March 31, 2023
(Under Japanese GAAP)(2) Explanation of Financial Position(Assets)
Current assets at the end of the third quarter of the current consolidated cumulative period totaled 8,208,278 thousand
yen, an increase of 1,442,269 thousand yen from the end of the previous consolidated fiscal year. This was mainly due
to an increase of 1,534,761 thousand yen in cash and deposits. Noncurrent assets totaled 3,949,283 thousand yen, an
increase of 1,061,822 thousand yen from the end of the previous fiscal year. This was mainly due to an increase of
1,442,840 thousand yen in software in progress, despite a decrease of 518,803 thousand yen in software.
As a result, total assets amounted to 12,157,562 thousand yen.

(Liabilities)
Current liabilities at the end of the third quarter of the current consolidated cumulative period totaled 3,382,527
thousand yen, an increase of 672,610 thousand yen from the end of the previous consolidated fiscal year. This was
mainly due to increases of 173,096 thousand yen in income taxes payable and 342,000 thousand yen in bank loans
payable. Noncurrent liabilities totaled 3,134,989 thousand yen, an increase of 765,510 thousand yen from the end of theprevious fiscal year. This was mainly due to an increase of 789,000 thousand yen in bank loans.
As a result, total liabilities amounted to 6,517,516 thousand yen.

(Net assets)
Total net assets as of December 31, 2022 amounted to 5,640,045 thousand yen, an increase of 1,065,970 thousand
yen from the end of the previous fiscal year. This was mainly due to the recording of 1,166,723 thousand yen in net
income attributable to parent company shareholders.
As a result, the equity ratio was 46.0% (46.9% at the end of the previous fiscal year).

(3) Explanation of consolidated earnings forecasts and other forward-looking information
Taking into consideration the consolidated business results for the first nine months of the current fiscal year and future
prospects, we have revised our consolidated business forecast for the fiscal year ending March 31, 2023 (full year),which was announced on May 12, 2022.
For details, please refer to the "Notice of Revision of Full-Year Earnings Forecasts and Recording of Extraordinary
Loss" released today (January 30, 2023).
The consolidated earnings forecasts are based on information available as of the date of publication of this document,
and actual results may differ from the forecasts due to various factors in the future.

5/11

Drecom Co., Ltd. (3793) Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending March 31, 2023
(Under Japanese GAAP)

2. Quarterly Consolidated Financial Statements and Key Notes(1) Quarterly Consolidated Balance Sheet(Unit: thousand yen)
Nine months ended
December 31, 2022
(December 31, 2022)

Previous consolidated fiscal year
(March 31, 2022)

ASSETS
Current assets
Cash and deposits
Accounts receivable
Goods

4,737,225

6,271,986

1,485,317

1,642,300

－

5,137

Work in progress

10,144

20,676

Prepaid expenses

157,555

150,550

Other

375,766

117,626

Total current assets

6,766,009

8,208,278

184,236

191,229

Accumulated depreciation-13,603-26,601

Buildings (net)170,632

164,628

Fixed assets
Tangible Fixed Asset
Buildings

69,03082,936

Accumulated depreciation-33,995-47,968

Tools, furniture & fixtures (net)35,03434,968Tools, furniture & fixtures

7,232

7,232

Accumulated depreciation-2,007-2,832

Lease assets (net)

5,225

4,400

Total tangible fixed assets

210,891

203,996

Software557,325

38,522

Software in progress account

1,333,425

2,776,266

Total intangible assets

1,890,751

2,814,789

Lease assets

Intangible assets

Investments and other assets
Investment securities

7

59,926

Deferred tax assets

465,737

458,470

Deposit

199,404

199,404

Other

120,668

212,697

Other investments and other assets

785,818

930,498

2,887,461

3,949,283

9,653,470

12,157,562

Total fixed assets
Total assets

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Drecom Co., Ltd. (3793) Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending March 31, 2023
(Under Japanese GAAP)(Unit: thousand yen)Previous consolidated fiscal year
(March 31, 2022)

Nine months ended December 31, 2022
(December 31, 2022)

357,864
146,000
808,000
1,281
579,036
142,079
138,497
537,158

423,425
100,000
1,196,000
1,281
620,987
315,176
65,363
660,293

Total current liabilities

2,709,917

3,382,527

Fixed liabilities
Long-term debt
Lease obligations
Asset retirement obligation
Other

2,014,000
4,806
100,000
250,671

2,803,000
3,845
100,000
228,143

2,369,478

3,134,989

5,079,395

6,517,516

1,792,991
2,050,152
953,681-274,029

1,811,311
2,068,472
1,975,162-266,212

4,522,796

5,588,734

7

145

Foreign currency translation adjustments

－

-296

Total accumulated other comprehensive
income7-150

49,0672,203

49,067
2,393

4,574,075

5,640,045

9,653,470

12,157,562

LIABILITIESCurrent liabilities
Accounts payable
Short-term debit
Long-term debt due within one year
Lease obligations
Accounts payable
Income taxes payable
Bonus payment reserve
Other

Total fixed liabilities
Total liabilities
Net assets
Shareholders' equity
CapitalCapital surplus
Retained earnings
Treasury stock
Total shareholders' equity
Accumulated other comprehensive income
Net unrealized gains (losses) on availablefor-sale securities, net of taxes

Stock acquisition rights
Non-controlling interests
Total net assets
Total liabilities and net assets

7/11

Drecom Co., Ltd. (3793) Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending March 31, 2023
(Under Japanese GAAP)(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Comprehensive Income
Statements
Quarterly Consolidated Statement of Income(Nine months ended December 31, 2022)(Unit: Thousand yen)
Nine months ended
December 31, 2021
(April 1, 2021 to December 31, 2021)

Nine months ended
December 31, 2022
(April 1, 2022 to December 31, 2022)

Sales
Cost of sales

8,078,020
5,057,371

8,380,181
4,692,793

Gross profit

3,020,648

3,687,388

Selling, general and administrative expenses

1,600,665

1,586,767

Operating income

1,419,983

2,100,620

26
－
276

24
3,066
2,156

302

5,247

34,096
－
4,085
1,271

30,98447,003
2,452

39,45480,4401,380,831

2,025,427

Non-operating revenue
Interest received
Dividends received
Other
Total non-operating income
Non-operating expenses
Interest expense
Payment fee
Foreign exchange loss
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on reversal of subscription rights tosharesTotal extraordinary income

4,195

Extraordinary loss
Impairment loss

－

4,195

－

75,399336,259

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

75,399336,259

1,309,627

1,689,168

303,214513,472

Income taxes-deferred

151,909

7,206

Total income taxes

455,124520,679

Quarterly net income

854,5031,168,489

Net income attributable to noncontrolling interests

1,246

1,765

Net income attributable to owners of the parent

853,257

1,166,723

8/11

Drecom Co., Ltd. (3793) Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending March 31, 2023
(Under Japanese GAAP)

Consolidated quarterly statements of comprehensive income(Cumulative period for consolidated Third Quarter, Nine months ended December 31, 2022)(Unit: Thousand yen)
Nine months ended
December 31, 2021
(April 1, 2021 to December 31, 2021)

Nine months ended
December 31, 2022
(April 1, 2022 to December 31, 2022)

854,5031,168,489

100

138

Quarterly net income or loss
Other comprehensive income
Net unrealized gains on available-for-salesecurities, net of taxes
Foreign currency translation adjustments
Total other comprehensive income
Quarterly comprehensive income(Breakdown)
Quarterly comprehensive income for ownersof parent
Quarterly comprehensive income fornon-controlling shareholders

9/11

－

-296

100

-157

854,6031,168,331

853,357

1,166,565

1,246

1,765

Drecom Co., Ltd. (3793) Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending March 31, 2023
(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 "Guidance on Accounting Standard for Measurement of Fair Value" (ASBJ Guidance No. 31, June 17, 2021;
hereinafter referred to as "Accounting Standard for Measurement of Fair Value") is applied from the beginning of thefirst quarter of the current fiscal year. The new accounting policy stipulated in the “Accounting Standard for
Measurement of Fair Value” will be applied prospectively in accordance with the transitional treatment stipulated in
Paragraph 27-2 of “Accounting Standard for Measurement of Fair Value.” The new accounting policy is applied
prospectively. There is no impact from this change.

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Drecom Co., Ltd. (3793) Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending March 31, 2023
(Under Japanese GAAP)(Information by Segment)
Segment Information
I. Previous consolidated nine months ended (April 1, 2021 to December 31, 2021)
Information on the sales, profits or losses per reporting segment(Unit: Thousand yen)

Adjustment

Quarterly
consolidated
incomestatement
amount*Reporting Segment
Game
Business

Media
Business

Total

Sales
(1) Sales to external customers(2) Intersegment sales andtransfers
Total

Segment profit or Loss

7,968,562

109,457

8,078,020－

8,078,020

－

－

－

－

－

7,968,562

109,457

8,078,020－

8,078,020

1,632,750-212,766

1,419,983－

1,419,983*Note: Segment income /loss is adjusted with operating income in the quarterly consolidated statements of income.

II. Current consolidated nine months ended (April 1, 2022 to December 31, 2022)
1. Information on the sales, profits or losses per reporting segment(Unit: Thousand yen)

Adjustment

Quarterly
consolidated
incomestatement
amount*Reporting Segment
Game
Business

Media
Business

Total

Sales
(1) Sales to externalcustomers(2) Intersegment sales andtransfers
Total

Segment profit or Loss

8,152,936

227,244

8,380,181－

8,380,181

－

－

－

－

－

8,152,936

227,244

8,380,181－

8,380,181

2,460,783-360,162

2,100,620－

2,100,620*Note: Segment income / loss is adjusted with operating income in the quarterly consolidated statements of income.

2. Information on Impairment Loss on Noncurrent Assets and Goodwill by Reportable Segment
Impairment losses were recorded in the "Game Business" segment. The amount of such impairment loss recorded
was 336,259 thousand yen for the third quarter of the current consolidated cumulative period.
(Significant subsequent events)
Nothing applicable.

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