Consolidated financial results for the First quarter of the fiscal year Ending March 31, 2024

(Under Japanese GAAP)
July 27, 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: August 10, 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 three months ended June 30, 2023 (From April 1, 2023 to June 30, 2023)(1) Consolidated financial results (cumulative)

Net sales
Three months ended

Operating Income

Million yen%

June 30, 2023

2,346

June 30, 2022

2,927

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

Million yen

%

%

%

-19.8

8

-99.0

2

-99.7

-441

－

10.0

817

62.1

810

64.6

521

73.5

For the three months ended June 30, 2023 -¥439 million yen (-%)
For the three months ended June 30, 2022 ¥522 million yen (73.4%)

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

Yen

Yen

June 30, 2023

-15.50－June 30, 2022

18.35

18.34

(2) Consolidated financial condition
Total Assets
Three months ended

Net Assets

Equity-to-asset ratio

Net assets per share

Million yen

Million yen%

Yen

11,111

5,044

44.9

175.19

5,631

45.6

195.70June 30, 2023
Fiscal year ended

March 31, 2023
Reference: Equity capital As of June 30, 2023
As of March 31, 2023

12,226¥4,993 million¥5,579 million

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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, 2023

―

0.00

―

5.00

5.00

0.00

―

―

―

March 31, 2024―

March 31, 2024
(Forecast)

Note: Revision to the forecast of cash dividends most recently announced: Yes
The year-end dividend forecast for March 2024 has not yet been determined. For details, please refer to the " Notice Concerning
Recording of Operating Expenses and Extraordinary Losses, Revision of Full-Year Earnings Forecasts, and Revision of Dividend
Forecasts" released today (July 27, 2023).

3. Forecast of consolidated financial results for the fiscal year ending March 31, 2024 (April 1, 2023 - March 31, 2024)(% increase or decrease from the previous year)

Net sales
Fiscal year ending

Million yen

March 31, 2024

11,500Operating income% Million yen

6.5

500

%

-78.1

Ordinary income

Profit attributable toEarnings per shareowners of parent

Million yen%

Million yen%

Yen

450 -79.5

0

－

0.00

Note: Revisions to the most recently announced earnings forecasts:
Yes
For details, please refer to the " Notice Concerning Recording of Operating Expenses and Extraordinary Losses, Revision of FullYear Earnings Forecasts, and Revision of Dividend Forecasts" released today (July 27, 2023).

*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: None(ii) Changes in accounting policies due to other reasons: None(iii) Changes in accounting estimates: None(iv) Retrospective restatement: None
(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, 2023

29,129,591 shares

As of March 31, 2023

29,129,591 shares(ii) Number of treasury shares at the end of the period
As of June 30, 2023

624,995 shares

As of March 31, 2022

621,595 shares(iii) Average number of shares outstanding during the period (cumulative from the beginning of the fiscal year)
Three months ended June 30, 2023

28,506,875 shares

Three months ended June 30, 2022

28,435,330 shares

Note: 595,800 shares of the Company's stock (5,958 voting rights) held by The Custody Bank of Japan, Ltd. (hereinafter referred to as“ESOP Trust Unit”) are included in the number of treasury stock at the end of the above period.

2/11

*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 27, 2023.
The financial results presentation materials to be distributed at this briefing will be posted on the company's website
immediately after the briefing.

3/11

Drecom Co., Ltd.(3793) Consolidated financial results for the First quarter of the fiscal year Ending March 31, 2024
(Under Japanese GAAP)

Table of Contents
1. Qualitative information on consolidated financial results for the first quarter ended June 30, 2023

5(1) Explanation of operating results ··········································································································· 5(2) Explanation of financial position ··········································································································· 6(3) Explanation of consolidated earnings forecasts and other forward-looking information····································· 6
2. Quarterly consolidated financial statements and key notes

7(1) Quarterly consolidated balance sheet···································································································· 7(2) Quarterly consolidated statements of income and quarterly consolidated comprehensive income statements······· 9
Quarterly consolidated statement of income .......................................................................................................... 9(Cumulative period for consolidated first quarter, three months ended June 30, 2023)

9

Consolidated quarterly statements of comprehensive income .............................................................................. 10(Cumulative period for consolidated first quarter, three months ended June 30, 2023)

10(3) Notes on quarterly consolidated financial statements··············································································· 11(Notes on going concern assumptions) ............................................................................................................... 11(Notes on significant changes in the amount of shareholders' equity) .................................................................. 11(Information by Segment).................................................................................................................................... 11(Significant subsequent events) .......................................................................................................................... 11

4/11

Drecom Co., Ltd.(3793) Consolidated financial results for the First quarter of the fiscal year Ending March 31, 2024
(Under Japanese GAAP)

1. Qualitative information on consolidated financial results for the first quarter ended June 30, 2023
(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 value that has never existed before and deliver experiences that captivate users.
In the medium term, we aim to become a comprehensive entertainment company that provides a wide variety ofentertainment content globally based on IP and technology, and to achieve sustainable growth and increase corporate
value.
In the mainstay game business, our main business is game development and operation, and we develop and operate
third-party IP games, game platforms, and original games. In the media business, we publish and sell novels, comics,
and other books and e-books with the aim of developing and nurturing IP. We are also experimentally launching newservices that utilize our knowledge of Internet services and advanced technologies, and are conducting trials towardcommercialization.
In the first quarter of the current consolidated cumulative period, net sales were 2,346,198 thousand yen (down 19.8%
year-on-year), operating income was 8,487 thousand yen (down 99.0% year-on-year), and ordinary income was 2,328
thousand yen (down 99.7% year-on-year). In addition, the Company posted an extraordinary loss of 416,328 thousand
yen due to the decision to close a subsidiary's new title and the recording of impairment losses, resulting in a net loss
attributable to owners of the parent of 441,807 thousand yen for the quarter (compared to net income attributable toowners of the parent of 521,831 thousand yen for the same period last year).
The results for each segment for the first quarter of the consolidated fiscal year under review are as follows.

Game businessIn the game business, a subsidiary released a new in-house distributed title "Dachimen Densetsu G" but decided toclose it due to lower-than-expected sales. In addition, some existing titles also fell short of expectations.
Net sales decreased year-on-year mainly due to the closure at the end of February 2023 of one title that had been in
operation for approximately five years, as well as the fact that some of the titles under operation fell below the level ofthe previous year.
Profit decreased from the same period of the previous year due to the above-mentioned decrease in revenue and anincrease in expenses associated with the release of two new in-house distribution titles at the end of the previous fiscal
year and in the first quarter of the current fiscal year.
As a result, segment sales amounted to 2,268,870 thousand yen (down 20.5% year-on-year), and segment income
was 236,019 thousand yen (down 73.6% year-on-year). In this segment, our core business, we will continue to strive tomaintain stable earnings from titles in operation, and since the situation for new mobile game titles is more difficult than
expected, we will review overall strategies for mobile game titles under development, reduce costs, and take othermeasures to improve the profit/loss situation as soon as possible. In addition, we will aim to increase sales and profits
through the contribution of new titles to be released in the latter part of the second half of the fiscal year.

Media businessIn the media business, while working on the publishing and video business to develop and nurture IP and diversify
revenue-generating channels, the Company has been publishing monthly from the light novel label "DRE Novels". In
addition, we are developing new businesses in the Web3 domain and providing "Rooot," a Twitter-based fan community
promotion service, by leveraging our expertise in Internet services and advanced technology.
Net sales increased year-on-year due to the stable revenue recorded by "Rooot" and the start of publication of "DRE
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 of the above, segment sales amounted to 77,328 thousand yen (up 3.4% year-on-year) and segment loss
amounted to 227,531 thousand yen (segment loss of 75,209 thousand yen in the same period last year). In this segment,
we will continue to invest in R&D to achieve our medium-term goal, but we plan to revise some of our plans andimplement other measures as we implement company-wide cost reductions.

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Drecom Co., Ltd.(3793) Consolidated financial results for the First quarter of the fiscal year Ending March 31, 2024
(Under Japanese GAAP)

Looking ahead, we will review overall strategies for mobile game titles under development and implement cost
reductions and other measures to improve the profit-and-loss situation as soon as possible, and aim to increase sales
and profits through contributions from new titles to be released in the latter part of the second half of the fiscal year. In
addition, we will continue to invest and focus on business expansion into entertainment areas other than games anddevelopment and nurturing of our own IP, aiming to grow into a comprehensive entertainment company with IP as its
core.

(2) Explanation of financial position(Assets)
Current assets at the end of the first quarter of the current consolidated fiscal year totaled 6,682,429 thousand yen, adecrease of 1,165,964 thousand yen from the end of the previous consolidated fiscal year. This was mainly due to adecrease of 1,343,864 thousand yen in cash and deposits. Fixed assets totaled 4,429,182 thousand yen, an increase of
51,179 thousand yen from the end of the previous fiscal year. This was mainly due to an increase of 55,206 thousand
yen in software in progress account, despite a decrease of 27,569 thousand yen in software.
As a result, total assets amounted to 11,111,612 thousand yen.

(Liabilities)
Current liabilities at the end of the first quarter of the current consolidated fiscal year totaled 3,696,531 thousand yen,a decrease of 603,963 thousand yen from the end of the previous consolidated fiscal year. This was mainly due todecreases of 51,679 thousand yen in accounts payable-trade, 42,500 thousand yen in current portion of long-term loans
payable, 455,140 thousand yen in income taxes payable, and 90,519 thousand yen in provision for bonuses. Noncurrent
liabilities totaled 2,370,795 thousand yen, an increase of 76,013 thousand yen from the end of the previous fiscal year.
This was mainly due to an increase of 82,250 thousand yen in long-term loans payable.
As a result, total liabilities amounted to 6,067,327 thousand yen.

(Net assets)
Total net assets as of June 30, 2023 amounted to 5,044,284 thousand yen, a decrease of 586,835 thousand yen fromthe end of the previous fiscal year. This was mainly due to the net loss attributable to parent company shareholders of
441,807 thousand yen.
As a result, the equity ratio was 44.9% (45.6% 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 quarter of the current fiscal year and future
prospects, we have revised our consolidated business forecast for the fiscal year ending March 31, 2024 (full year), which
was announced on May 11, 2023.
For details, please refer to the "Notice Concerning Recording of Operating Expenses and Extraordinary Losses at
Consolidated Subsidiaries, Revision of Full-Year Earnings Forecast, and Revision of Dividend Forecast" released today(July 27, 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.

6/11

Drecom Co., Ltd.(3793) Consolidated financial results for the First quarter of the fiscal year Ending March 31, 2024
(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, 2023)

Three months ended June 30, 2023
(June 30, 2023)

AssetsCurrent assets
Cash and deposits
Accounts receivable

6,044,573
1,484,658

4,700,709
1,661,126

Goods

5,268

6,004

Work in progress

17,482

32,662

Prepaid expenses

148,928

158,681

Other

147,482

123,245

Total current assets

7,848,394

6,682,429

Fixed assets
Tangible fixed assets
Building

191,229

191,229

Accumulated depreciation-31,029-35,457

Buildings, net

160,200

155,772

Tools, furniture and fixtures

85,50286,700

Accumulated depreciation-53,143-56,845

Tools, furniture and fixtures, net

32,35829,855

7,232

7,232

-3,107-3,382

Leased assets
Accumulated depreciation
Lease assets, net

4,125

3,850

Total tangible fixed assets

196,683

189,477

Intangible fixed assets
Software201,601

174,032

Software in progress

3,026,917

3,082,124Total intangible fixed assets

3,228,519

3,256,156

Investments and other assets
Investments in securities

59,92659,926

Deferred tax asset

491,226

483,315(Security) deposit

199,404

199,404

Other

202,242240,902

Total investments and other assets

952,800

983,548

4,378,002

4,429,182

12,226,397

11,111,612

Total fixed assets
Total assets

7/11

Drecom Co., Ltd.(3793) Consolidated financial results for the First quarter of the fiscal year Ending March 31, 2024
(Under Japanese GAAP)(Unit: thousand yen)Previous consolidated fiscal year
(March 31, 2023)

Three months ended June 30, 2023
(June 30, 2023)

Liabilities
Current liabilities
Accounts payable

449,977

398,298

Short-term debt
Current portion of long-term debt

100,000
1,780,750

100,000
1,738,250

Lease obligations
Accounts payable - other1,281
554,851

1,281
574,433

Accrued income taxes
Allowance for bonuses

481,316
129,549

26,17639,030Other

802,766

819,060

Total current liabilities

4,300,494

3,696,531

1,952,750

2,035,000

3,524
100,000

3,204
100,000

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

238,507

232,591

Total long-term liabilities

2,294,782

2,370,795

6,595,277

6,067,327

Capital stock
Capital surplus

1,811,311
2,068,472

1,811,311
2,068,472

Retained earnings
Treasury stock

1,967,564-266,237

1,380,237-266,237

Total shareholders' equity

5,581,111

4,993,784-2,079

-101

82

78

-1,997-23

49,06749,067

2,938

1,456

Total liabilities
Total net assets
Capital stock

Accumulated other comprehensive income
Net unrealized gains (losses) on availablefor-sale securities, net of taxes
Foreign currency translation adjustments
Total accumulated other comprehensive
incomeSubscription warrant
Noncontrolling interest
Total net assets
Total liabilities and net assets

8/11

5,631,120

5,044,284

12,226,397

11,111,612

Drecom Co., Ltd.(3793) Consolidated financial results for the First quarter of the fiscal year Ending March 31, 2024
(Under Japanese GAAP)(2) Quarterly consolidated statements of income and quarterly consolidated comprehensive income statements
Quarterly consolidated statement of income(Cumulative period for consolidated first quarter, three months ended June 30, 2023)(Unit: Thousand yen)Three months ended
June 30, 2022
(April 1, 2022 to June 30, 2022)

Three months ended
June 30, 2023
(April 1, 2023 to June 30, 2023)

Net sales

2,927,195

2,346,198

Cost of sales

1,618,881

1,662,472

Gross profit

1,308,314

683,726

Selling, general and administrative expenses

491,125675,238

Operating income

817,189

8,487

Non-operating income
Interest income
Dividends received
Gain on investment in capital

0

0

－

2,979
3,345

4,106

Other

524

76

Total non-operating income

4,631

6,401

Non-operating expenses
Interest expense

10,051

10,666

Fees and commissions
Other

729
500

644
1,250

11,281

12,560810,5392,328－

416,328

Total non-operating expenses
Ordinary income
Extraordinary loss
Impairment loss
Total extraordinary loss
Income (loss) before income taxes and minority
interests
Corporate, inhabitant and enterprise taxes－

416,328

810,539-413,999

207,758

19,942

Income taxes-deferred

80,346

7,038

Total income taxes

288,105

26,980Net income (loss)
Net income attributable to noncontrollinginterests
Net income (loss) attributable to owners of theparent522,433-440,980

601

827

521,831-441,807

9/11

Drecom Co., Ltd.(3793) Consolidated financial results for the First quarter of the fiscal year Ending March 31, 2024
(Under Japanese GAAP)

Consolidated quarterly statements of comprehensive income(Cumulative period for consolidated first quarter, three months ended June 30, 2023)(Unit: Thousand yen)Three months ended
June 30, 2022
(April 1, 2022 to June 30, 2022)

Three months ended
June 30, 2023
(April 1, 2023 to June 30, 2023)

Net income (loss)
Other comprehensive income
Net unrealized gains (losses) on available-forsale securities, net of taxes
Foreign currency translation adjustments

522,433-440,980

－

1,977

－

-3

Comprehensive income

522,433-439,006

521,831-439,834

601

827(Breakdown)Comprehensive income attributable toowners of the parent
Comprehensive income attributable tononcontrolling interests

10/11

Drecom Co., Ltd.(3793) Consolidated financial results for the First quarter of the fiscal year Ending March 31, 2024
(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)
Nothing applicable.
(Information by Segment)
Segment information
I. Previous three months ended, from April 30, 2022 to June 30, 2022, 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

2,852,416

74,7782,927,195－

2,927,195

Sales or transfers
inside or between
segments

－

－

－

－

－

Total

2,852,416

74,7782,927,195－

2,927,195

Segment profit or Loss

892,398-75,209817,189－

817,189

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

II. Three months ended, from April 1, 2023 to June 30, 2023, consolidated period
1. Information on the sales, profits or losses per reporting segment(Unit: Thousand yen)

Reporting Segment
Gamebusiness

Media
Business

Adjustment

Total

Quarterly
consolidated
incomestatement
amount

Sales
Sales to externalcustomers

2,268,870

77,3282,346,198－

2,346,198

Sales or transfers
inside or between
segments

－

－

－

－

-

Total

2,268,870

77,3282,346,198－

2,346,198

Segment profit or Loss

236,019-227,531

8,487

－

8,487

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

2. Information on impairment losses related to fixed assets per reporting segment
In the Game Business segment, the company recorded impairment losses of 416,328 thousand yen as of the firstquarter of the current consolidated cumulative period.
(Significant subsequent events)
Not applicable
11/11