Third quarter fiscal year ending March 31, 2024
Financial results presentation

Drecom Co., Ltd.
January 30, 2024
Please refer to the Fact Sheet on our website for trends in consolidated financial results, cost of sales, SG&A expenses, andbilling sales in the game business. https://drecom.co.jp/ir/factsheet_202403Q3.pdf

Summary
Q3 FY2023

Existing operational titles continue to generate stable revenues(Apr-Dec)• Q3 Actual Sales: 7,637 million yen (-8.9% YoY) Operating income: 789 million yen (-62.4% YoY)

Actual*1

Ordinary income 729 million yen (-64.0% YoY) Net income 97 million yen (-91.7% YoY)

Revised full-year forecasts due to changes in outlook for two new releases
Forecast for
FY2023Business
Progress• Revised forecast to not include contribution of future new title releases in FY2024• Revised forecast (announced on January 30, 2024):
Sales 11,500 million yen -> 10,000 million yen, Operating income 500 million yen -> 800 million yen
Ordinary income 450 million yen -> 700 million yen, Net*2income 0 million yen -> 100 million yen

Steady progress in each business developed with aim of strengthening
IP production capabilities and diversifying• ”Blade & Bastard“, flagship title in publishing and visual business domain,
has surpassed cumulative series total of 100,000 copies.
• "Eternal Crypt - Wizardry BC-”, Jointly developed blockchain game was pre-released and INO ready

Copyright Drecom Co., Ltd. All Rights Reserved.

*1 Net quarterly loss attributable to owners of the parent *2 Net income attributable to owners of the parent

2

1. Review of Q3 (Oct-Dec) FY2023
2. Forecast for FY2023
3. Medium-term goals
4. Appendix

Copyright Drecom Co., Ltd. All Rights Reserved.

31. Review of Q3 (Oct-Dec) FY2023

Summary of business results third quarter of FY2023
Existing titles in operation continue to perform well
FY2023

FY2022

Q1(Apr-Jun)

Q2(Jul-Sep)

Q3(Oct-Dec)

2,346

2,745

2,546

Operating income

8463

Operating profit ratio

0.4%(Millions of yen)

Net sales

EBITDA *1
EBITDA Margin

Ordinary income *2
Net income (loss)
attributable toshareholders of theparent company*3Q3 Total(Apr-Dec)

Q3(Oct-Dec)

-199

7,637

2,579

317

-146

789

16.9%

12.5%

-

82

500

332

3.5%

18.2%

2
-441

Copyright Drecom Co., Ltd. All Rights Reserved.

Q3 Total(Apr-Dec)

YoY(Total)

-33

8,380

-742

492

-175

2,100

-1,311

10.3%

19.1%

-

25.1%

-

-168

915

556

-223

2,341

-1,425

13.1%

-

12.0%

21.6%

-

27.9%

-

451

275

-176

729

477

-202

2,025

-1,296

272

266

-6

97

110

+156

1,166

-1,069QoQ

YoY*1 EBITDA = operating income + amortization of goodwill + depreciation*2 Non-operating expenses of 31 million yen were recorded in Q3 due to borrowing (syndicated loan contract).
*3 Reviewing the operation/development portfolio, an extraordinary loss of 609 million yen was recorded in 1H.

4

1. Review of Q3 (Oct-Dec) FY2023

Q3 FY2023 Operating income (QoQ comparison)

Fixed costs decreased due to closure of unprofitable titles,
despite lower sales compared to the previous quarter, which was strong.
(Millions of yen)

Decrease in revenues (Increase in expenses)
Increase in revenues (decrease in expenses)

463

Outsourcing
expenses(+131)

Sales
decrease
Impact(-174)

Advertisingexpenses(+30)

Postage(+25)

Depreciation
expense
(+20)

Other
(+65)
Game
R&D
development
expenses
costs
(+46)
Amount recorded
as assets*(+149)

317
Labor cost(+6)
Impact of increase invariable costs due tochange in productmix(-190)Q2 FY2023
Operating
IncomeCopyright Drecom Co., Ltd. All Rights Reserved.

Cost ofmaterials forgame
development(-257)*Amount of development costs such as labor and subcontracting costs mainly related to pre-release games
deducted from manufacturing costs and transferred to assets as "Software in progress".

Q3 FY2023
Operating
Income5

1. Review of Q3 (Oct-Dec) FY2023

Q3 FY2023 Revenue from operational game titles
Improved profitability by closing unprofitable titles 1H
Profit/loss of operational 10 titles* (Q3 Oct-Dec 2023)

Loss

Profit* Series titles and titles developed for overseas are counted as one title. Number of titles in operation as of Dec 31, 2023. Including two enza titles and BOKU & DRAGONS.
Copyright Drecom Co., Ltd. All Rights Reserved.

61. Review of Q3 (Oct-Dec) FY2023

Topics of each businessGamebusiness

Existing operational titles continue to generate stable revenues• The flagship IP titles that performed well in Q2 experienced subdued trend in Q3 but it continues to make steady progress.

User testing conducted for two titles currently in development• “Wizardry Variants Daphne” with an open application format. “Evil Prince and the Puppet” within a small users group.

Publishing/Video Area: Comic book label "DRE Comics" to begin publication in Oct 2023.

• The publication of first two volumes of mainstay "BLADE & BASTARD" comic also contributed to segment sales in Q3.
• Webtoons label "DRE STUDIOS" launched, releasing its first work "Beyond breaking an engagement" in November 2023.

Media
business

Web3 area: “Eternal Crypt - Wizardry BC-”, was pre-released and INO* ready• NFT sales revenue by INO was recorded as segment sales in Q3. Contribution to overall performance• Continuation rate during pre-release period better than expected. Partial revision of future plans based on results of firstphase

Continue to develop/provide new services utilizing know-how from existing businesses• Operating fan marketing support services "Rooot" and "Fanflu", Load Testing Service ”Mx.Load”• “Rooot" has been installed in more than 250 services.
Copyright Drecom Co., Ltd. All Rights Reserved.

*INO: Abbreviation for Initial NFT Offering. Special NFTs are sold before the game is released with the aim of forming a core fan community. 7

1. Review of Q3 (Oct-Dec) FY2023
2. Forecast for FY2023
3. Medium-term goals
4. Appendix

Copyright Drecom Co., Ltd. All Rights Reserved.

8

2. Forecast for FY2023

Progress on future measures
Reinforcement of measures for newly released titles and review of investment plans,
as a year of rebuilding for next fiscal year
Future measures (reiterated)

State of progress• “Wizardry Variants Daphne” has been tested twice.
To ensure game is in perfect condition, we are fixing bugs,
developing additional content, and redesigning marketing plan

• Improve quality of new titles to be released and review

to ensure it is in good condition.

marketing plans• Greater emphasis on evaluation in pre-release gameverification and user testing• Small users group test of "Evil Prince and the Puppet" conducted.
A second test will be conducted Spring 2024 after modifications.
• Small-scale testing of "Location-based IP Titles" planned for Spring2024• Aim to improve probability of success and reduce risk bycollaborating with multiple companies and accepting• Decided to deploy for PC/console (title unannounced)

investment on project-by-project basis*Other measures: "Review overall strategy for unannounced/prototype mobile game titles" and "Curb R&D investment in new business areas".
Copyright Drecom Co., Ltd. All Rights Reserved. Company-wide cost reduction and investment plan review" continues to make progress and is omitted from this report.

92. Forecast for FY2023

Revision : Summary of full-year forecasts for FY2023
Revised full-year forecasts due to upswings in existing titles and changes in forecasts for two new titles
Previous
Forecast(Millions of yen)

Net sales

Revised
Forecast(Announced on
July 27, 2023)(Announced on
January 30, 2024)

11,50010,000Change fromprevious
forecast

Main Factors-1,500•Contributions from new title releases are no longer
expected to be included in this fiscal year••

Upswing of existing titles
Change in outlook to not include contributions
from new title releases in the current fiscal year

Operating income

500

800

+300

Ordinary income

450

700

+250

-

+100

・Extraordinary loss of 609 million yen due to the closure of"Dachimen Densetsu G" and "GGGGG" and the discontinuation ofdevelopment of "Project BEAT".

-• For details, please refer to the " Notice of Revision of Full-Year
Earnings Forecasts and Revision of Dividend Forecasts (NoDividend)" released today (January 30, 2024).

Net income0

attributable toshareholders of theparent company

per share dividend(Unit: Yen)undecided

100
0*The previous forecast (announced on July 27, 2023) was revised from the forecast announced at the beginning of the period (announced on May 11, 2023).
Copyright Drecom Co., Ltd. All Rights Reserved.

102. Forecast for FY2023

Revision : Summary of full-year forecasts for FY2023
Decrease in Net sales / Operating income

Upswing inexisting gamebusiness

Increase in Net sales / Operating income

Net sales

Operating income(Millions of yen)

Revised outlook Revised forecast forfor new titles
new businesses(Publishing/Video,
Web3, Others)Upswing inexisting gamebusiness
Revised outlook Revised forecast forfor new titles
new businesses(Publishing/Video,
Web3, Others)

11,500-1,50010,000800
500Previous Forecast
Copyright Drecom Co., Ltd. All Rights Reserved.

Revised Forecast Previous Forecast+300
Revised Forecast

112. Forecast for FY2023

Summary: FY2023 full-year forecasts
FY2023

FY2022

Q1(Apr-Jun)

Q2(Jul-Sep)

Q3(Oct-Dec)

Total(Apr-Dec)

Rate ofprogress

Q4 Forecast(Jan-Mar)

Full Year
Forecast

2,346

2,745

2,546

7,637

76.4%

2,362

10,00010,800

Variable cost

351

340

506

1,197

73.9%

423

1,621

1,386

Fixed cost

1,987

1,940

1,722

5,650

74.6%

1,927

7,578

7,132

Advertisingexpenses

141

81

50

272

71.6%

108

380

208

R&D expenses

82

140

94

318

76.9%

95

413

354

Game development
costs charged toassets*

-498

-494

-643

-1,636

78.1%

-457

-2,094-1,999Operating income

8

463

317

789

98.7%

10

800

2,281

0.4%

16.9%

12.5%

10.3%

-

0.4%

8.0%

21.1%

2

451

275

729

104.2%

-29

700

2,192

-441

272

266

97

97.4%

2

100

1,159

(Millions of yen)

Net sales

Operating profit
ratio

Ordinary income
Net income

attributable toshareholders of theparent company

Copyright Drecom Co., Ltd. All Rights Reserved.

Actual*Amount of development costs such as labor and subcontracting costs mainly related to pre-release games deducted frommanufacturing costs and transferred to assets as "software in progress".

12

2. Forecast for FY2023

Three years to scale up
Finish rebuilding by end FY March 2024; aim for growth in FY March 2025 and beyond.
FY2023

FY2024 – FY2025

Sales: 10 billion yen
Operating income: 0.8 billion yen

Sales: CAGR over 20%
Operating margin: Maintain 15%
GrowthRebuilding fornext fiscal year•

Improve profitability ofexisting businesses•

Review investment plans•

Company-wide cost
reductions•

Collaborating with othercompanies involving
investment and acceptanceon project-by-project basis

GrowthGame
Publication
Animation
Web3

Investment

Growth driver• New games• Light Novels• Comics/webtoon• Animation/Video• NFT• Blockchain game

Shareholder
returnCopyright Drecom Co., Ltd. All Rights Reserved.

Game
Publication
Animation
Copyright
acquisition
Web3

ProfitInvestment

Growth driver• New games• Light novels• Comics/webtoon• Animation/Video• NFT• Blockchain games• Rights management• Global expansion

Shareholder
returnProfit13

1. Review of Q3 (Oct-Dec) FY2023
2. Forecast for FY2023
3. Medium-term goals
4. Appendix

Copyright Drecom Co., Ltd. All Rights Reserved.

14

3. Medium-term goals

Transformation into comprehensive entertainment company
Current

Medium-term goal
Original IP

Original

Increase in-house IP bydevelopment and nurturing of original IP

Mobile gamebusiness

Diversification

Entertainment

GlobalGlobalDiversifying development inentertainment businessComprehensive
Entertainment
business

Expand content globally

Technology

Technology

Enter new markets withadvanced technology

Copyright Drecom Co., Ltd. All Rights Reserved.

15

3. Medium-term goals

Strengthen IP production capabilities

Elevate IP production capabilities by embracing "our strength" with support of "investment areas publishing, video business and Web3 area."
IP Producing Capability
IP development
and acquisition
policy・Focus on quality of IP
developed and acquired
・Aim to own controllable IP

OurStrengths

Game Development/
Distribution

Investment
Areas

×

IP development• Expand fan base through crossmedia development• Cultivate IP based on fan
communities

×Diversification of IP
monetization channels• Break away from dependence on the F2P
model• Create multi-tiered revenue portfolio based onvariety of monetization channels

IP fan community
management using SNS

IP game development/distribution

Light Novels
Comics
Webtoons

Cross-media development
Animation/video

Distribution Paper bookand e-book sales
Animation/movies
Rights management
Overseas expansion

NFT

NFT/
Community Management

Blockchain game

Copyright Drecom Co., Ltd. All Rights Reserved.

16

3. Medium-term goals

Status of in-house IP development and nurturing: Wizardry

Acquire copyrights and trademarks of a popular IP and make them our own IP, and then enhance IP value
through multimedia development

Wizardry•

From 2022 onward Novelization and comic book adaptation by Drecom Media•

Mobile Gaming•

Blockchain Gaming•

PC games by other companies (remakes and derivative works)

Portal site: https://wizardry.info/

Blade & Bastard

Wizardry Variants Daphne
Eternal Crypt-Wizardry BC-

Wizardry Legacy -BCF,CDS & 8-*1
Wizardry Gaiden: The Five Ordeals *2
Wizardry: Proving Grounds of the Mad Overlord *3
From 2020
Drecom acquired trademark rights.
Mobile Game Development Announcement••

Blade & Bastard

Wizardry Variants Daphne••
From 2009
Gamepot, Inc. acquired trademark rights
Derivative Series Development

From 1981• First software released for PC.
• Series development until about 2001
1981
Copyright Drecom Co., Ltd. All Rights Reserved.

2009

Eternal Crypt-Wizardry BC-

2020

Image of IP value enhancement*1: Distributed by D4 Enterprises, Inc. *2: Distributed by IID, Inc. on Steam*3: Distributed by Digital Eclipse on Steam. Classic Wizardry 1-5 is copyrighted by Sirtech Entertainment Corp. and developed under license.

17

3. Medium-term goals"Wizardry": "Wizardry Variants Daphne," the latest in the series
Closed beta test in October 2023. Survey report available on official website.
Conducted closed beta test (October 10-19, 2023)•••

More applications received than initially expected, with approximately 5,000 people participating.
Survey results good. Report available at https://wizardry.info/daphne/cbt-report/
Satisfaction: 89.1% of respondents answered "good, somewhat goodIntention to play: 89.5% said they "would play, somewhat would play".
Currently evaluating preparatory contents and timing of release
Improvement of remaining issues and development to expand the volume of content, aiming for a
fully-fledged release.

Copyright Drecom Co., Ltd. All Rights Reserved.

18

3. Medium-term goals"Wizardry": novel and comic "Blade & Bastard"
First volume of comics published in October, followed by second volume in December. Cumulative
circulation of series exceeded 100,000 copies.

Series has sold over 100,000 copies••

Mainstay products of publishing and video business
Aiming to further increase recognition and establish series as
an IP through a series of media mix projects.

Copyright Drecom Co., Ltd. All Rights Reserved.

Display contest held•

Calling on bookstores nationwide to participate in display
contest(Photo: Animate Hiroshima, winner of the Grand Prize)
19

3. Medium-term goals"Wizardry": blockchain game "Eternal Crypt - Wizardry BC-"
Preparations for official release of this title, being developed in collaboration with Turingum K.K., including
additional development, are in progress. 2nd and 3rd phases of pre-release period will begin Feb 2024. After
that, official release will be scheduled together with application version.
Pre-release period began October 2023.
•

Pre-play period limited to NFT holders sold at INO•

Played with high intensity and better than expected
continuation rate•

However, deviation from originally envisioned game experience
and, Due to some problems that made it impossible to proceed,
Revised schedules and carried out modifications andadditional development.

Phase 2 of pre-release scheduled to begin in Feb 2024
• Additional development and other measures largely completed• Official release of app and browser version scheduled after theend of preliminary release period• Once in operation, NFT sales from events and collaborations are
expected to be main source of revenue.(A certain percentage ofsales related to this title will be received from publishers asrevenue sharing)
Reference:”Eternal Crypt - Wizardry BC –” Offical website https://wiz-eternalcrypt.com/*"Q1-2024" on this image is for the period from January to March 2024.
Copyright Drecom Co., Ltd. All Rights Reserved.

20

3. Medium-term goals

Wizardry": New goods on sale at online store
Official online store "DRECOM SHOP" opened January 2024. Started selling new "Wizardry" goods.
We plan to continue to handle a variety of goods from our own IP and other content.

■DRECOM SHOP：https://drecomshop.com/••

Positioned as important for strengthening IP production
capabilities over the medium to long term, Aiming forcontinuous business operation and expansion of scale
The impact on business performance at this point is
negligible.

Copyright Drecom Co., Ltd. All Rights Reserved.

*The reservation period for "Wizardry" merchandise has already ended.

21

3. Medium-term goals

Status of in-house IP development and nurturing: Evil Prince and the Puppet
Initiatives to create fan communities from SNS operations, nurture IP, and develop it in multiple areas, including
goods creation and game development
Under development for mobile game release by end of 2024

2024 (planned)• Mobile gaming
•
•

•
•

April 2021
Goods now on sale at official online store.

November 2019
Project Presentations

November 2022
Game information released
Real Event Exhibit
Approx. 100,000

Approx. 60,000

SNS followers: approx. 10,000
2019

Copyright Drecom Co., Ltd. All Rights Reserved.

2021

2022

2024

Image of IP value enhancement223. Medium-term goals

Status of development, acquisition and nurturing of in-house IP: Drecom Media,
a publishing and video brand
Comic book label began publishing October 2023, with cumulative total of more than 50 titles
published. Steadily cultivating the seeds of our own IP
Published in Q3 FY2023
Number of series(As of end of Jan. 2024, duplicates exist)
Main Works
Light Novels

Comics/webtoonsMedia mix

21Series

7Series / 1Series

in preparation

累計刊行点数
Total number
publications
50
27
17

10

通期

Q1

Q2

12
31

25

18

FY2022
2023年3月期
Light Novels
ライトノベル（23/3）(FY2022)

8

35

60

Q3

Q4(forecast)
Q4(見込)FY20232024年3月期
Light Novels
ライトノベル（24/3）(FY2023)

Copyright Drecom Co., Ltd. All Rights Reserved.

Comics (FY2023)
コミック（24/3）

Piccoma women's
comics ranking

1st place*October 27, 2023

“I'm a looped daughter who was condemned 99
times, but this life I'm in "super-loved mode"!? 1-The 100th life that begins with the awakening of true
power-”

I've been told that I have only six months tolive, so I'm going to learn "light magic" andbreak the curse with a will to die.1-The Cursed Prince’s Re:Cure-

Comics: Roharu Kai, Original story: Yuji Yuji
Character draft: Nami Hidaka
Release date: October 25, 2023
Label: DRE Comics

Comics: Sumi Suzukaze
Original story: Genkotsu Kumano
Character draft: Fal_maro
Release date: October 25, 2023
Label: DRE Comics

23

1. Review of Q3 (Oct-Dec) FY2023
2. Forecast for FY2023
3. Medium-term goals
4. Appendix

Copyright Drecom Co., Ltd. All Rights Reserved.

24

4. Appendix

Game business: Market overview and business strategy
As domestic mobile game market matures, we will make investments that are not an extension of past to further
strengthen our business foundation
Maturation of domestic mobile game market

Strategy of our game business Smartphone-owning population reaching the ceiling.
 Competition with other content such as videos, comics,social networking sites
 Users are fixated by long hit titles
100 Millions of yen

and strengthen system•

Re-examine development potential of each title
without assuming attenuation•

Renovation and maintenance to withstand long-term
operation

Size of Japan's mobile game market and smartphone ownership
Maturation

14,000

%

100.0
90.0

12,00080.0

10,000

70.0

8,000
6,000

60.0

■Diversification and layering of revenue sources

50.0

•

Expansion into growing global markets.

•

Deployment to other platforms such as PC/consoles.

•

Introduction of revenue models other than Free toPlay/Pay to Win type such as outright purchase.

40.0
30.0

4,000

20.0

2,000
0

■Additional investment in titles under operation

10.0
2012年
2012 2013年2013 2014年
2014 2015年
2015 2016年
2016 2017年
2017 2018年
2018 2019年
2019 2020年
2020 2021年
2021 2022年
2022

モバイルゲーム市場規模
Mobile Game Market Size

0.0

スマートフォン世帯保有率
Smart phone owning household ratio

Source: Famitsu game white paper, ministry of internal affairs and communications white paper on information and communications
Copyright Drecom Co., Ltd. All Rights Reserved.

25

4. Appendix

Game business: Pipeline of operational and development titles
Secure long-term earnings by making additional investments for existing titles
Aim for diversification with release of new titles with different initiatives
2011 - 2023

Titles inoperation

10

Additional investment
and systemreinforcement->Securing long-term
stable earnings*

Titlesunderdevelopment

4

After 2024

Scheduled for release in fiscal year ending
March 31, 2025: 4• Wizardry Variants Daphne• Evil Prince and the Puppet• Location-based IP titles using “AROW”

New initiatives ineach title->Diversificationand layering• Unannounced title (developed by Drecom)* Series titles and titles developed overseas are counted as one title. Titles for PC and consoles are not included.
Copyright Drecom Co., Ltd. All Rights Reserved.

26

4. Appendix

Game business: Pipeline of operational and under development titles

Game

StatusDefinition

Number of projects

Operation

Titles in operation

10 *Development

Business

Titles underdevelopment withprospect for
releaseCommercialized
development

Prototype

Details Other company distribution: 5 titles
 In-house distribution: 5 titles•

Wizardry Variants Daphne-> 3D dungeon RPG

4

Titles for
Smartphones

Titles for PC andconsoles2

Titles at stage
beforecommercialization
development

Several•Evil Prince and the Puppets-> Dark fantasy adventure•

Location-based IP titles using “AROW”•

Unannounced title (developed by Drecom Co., Ltd.)•Tokyo Stories -working title-•

Unannounced title (NEW) Multiple projects in progress* Series titles and titles developed overseas are counted as one title.
Copyright Drecom Co., Ltd. All Rights Reserved.

27

4. Appendix

Title for PC and consoles: Tokyo Stories

An initiative to develop original titles for PCs and consoles on outright purchase basis
Highly regarded internationally, X has over 100,000 followers
Tokyo Stories -working title-

•
•
•
•
•
•
•
•

Genre: Adventure
Compatibility: PC (Steam) / Console (platform to be determined)
Release date: Undecided
Price: Undecided
Planning/Development/Sales: Drecom Co., Ltd.
Country of distribution: Worldwide (Japan and overseas)
Language: Undecided
Copyright Notice: ©Drecom Co, Ltd.

Copyright Drecom Co., Ltd. All Rights Reserved.

28

4. Appendix

Revenue status of titles in operation (by release date)
Total sales of titles under operation
2011

2014

FY2021

2015

2016

2017

2018

FY202220192020

Total business profit transition of titles under management
2021

2022

FY2023

2023

2011

2014

FY2021

2015

2016

2017

2018

FY2022

2019

2020

2021

2022

2023

FY2023*Please refer to fact sheet posted on our website for consolidated business performance trends, cost of sales, SG&A expenses, and game business billing sales trends.
Copyright Drecom Co., Ltd. All Rights Reserved.

https://drecom.co.jp/ir/factsheet_202403Q3.pdf

29

4. Appendix

Game titles in operationGame title

Distributor

Service start date

Chokotto Farm

Drecom Co., Ltd.

Jan 2011

ONE PIECE Treasure Cruise

BANDAI NAMCO Entertainment Inc.

May 2014

BOKU & DRAGONS

studiorex Co., Ltd. *1

Feb 2015

Derby Stallion: Masters

Drecom Co., Ltd.

Nov 2016

Everybody's Golf

Forward Works Corporation

Jul 2017

THE IDOLM@STER SHINY COLORSBANDAI NAMCO Entertainment Inc.

Apr 2018

NEKO & DRAGONS

studiorex Co., Ltd.*Apr 2019

Super Robot Wars DD

BANDAI NAMCO Entertainment Inc.

Aug 2019

Disgaea: Hour of Darkness RPG

Drecom Co., Ltd.

Nov 2019

New Japan Pro-Wrestling Strong Spirits

Bushiroad Inc.

Feb 2022*1 studiorex, Co., Ltd. joined our group in March 2020.

Copyright Drecom Co., Ltd. All Rights Reserved.

30

4. Appendix

Purpose of entry into entertainment x Web3
Aim to create system that benefits both users and management by combining FT/NFT and existing digitalentertainment content to form secondary distribution market
Example: Online game x Web3
Web 2.0
General online games
Diamond(In-gamecurrency)

Diamondsecondary distribution market(In-game currency)

System that benefits both users andmanagement

×x-FT

Weapons andArmor(In-game item)

Cryptocurrency
exchange=>

From the user's perspective,
Easy to buy because you can sell themwhen you no longer need them
New entertainments will be created from price movements ofsecondary distribution, buying and selling.

XX Sword(In-game item)xNFT

Copyright Drecom Co., Ltd. All Rights Reserved.

NFT
marketplace

From the management perspective,
Primary sales will become more active.
Commission income from secondary distribution also
contributes to earnings stability.

31

4. Appendix

Purpose of entry into entertainment x Web3
Web3 creates highly engaged fan community where users are part of project

Old Entertainment (Web 2.0)

Management

Entertainment x Web3
Management

Contents
Offer

a consideration

User

Contents
User andtoken holder

 Relationship with management is one-way.

 Users are also a part of project as investors

 Community formation is spontaneous Highly engaging fan communities are formed.

Copyright Drecom Co., Ltd. All Rights Reserved.

32

4. Appendix

Glossary
Terminology

Meaning

Games distributed in-house

Games for which Drecom is distributor. We are in charge of game planning, development, advertising,and sales.

Games distributed by othercompanies

The game is distributed by another company, and Drecom is in charge of development as a partnering company.

Platformer

Apple, Google, and other companies that provide service infrastructure systems to users and third parties.

Gross sales

The amount of money paid by the user to distributor, Drecom.

Net sales

The amount of money distributed from distributor to the developer, Drecom.

Developer

A company responsible for development of games.

Amount of game development costs
charged to assets

Amount of development costs, such as labor and subcontracting costs, mainly related to pre-release games,
deducted from manufacturing costs and transferred to assets as "Software in progress".

R&D expenses

Costs associated with planning and creating prototypes for new games and services.

IP

Abbreviation for Intellectual Property.

Commercialized development

Game development is in full swing.

Anniversary Events

Every six months and a year, an event is held that boosts the game. The number of active users and sales often
rise compared to normal times due to introduction of many new measures and contents

Copyright Drecom Co., Ltd. All Rights Reserved.

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For trends in consolidated financial results, cost of sales/ SG&A expenses, and sales of game business billing,
Please see the fact sheet posted on our website.
https://drecom.co.jp/ir/factsheet_202403Q3.pdf

Among the perceptions, strategies, plans, described in this document, the outlook is not a historical fact but contains uncertain elements. Actual results
may differ materially from those in the forward-looking statements for a number of reasons. Important factors that may affect actual business results
include, but are not limited to, economic conditions surrounding our business, social trends, and changes in relative competitiveness due to demand
trends for the services we provide.