Consolidated Financial Results for the Nine Months Ended December 31, 2021

(Under Japanese GAAP)
January 27, 2022
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 9, 2022
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, 2021 (From April 1, 2021 to December 31, 2021)(1) Consolidated financial results (cumulative)

Net sales

Operating Income

Nine months ended%

December 31, 2021
December 31, 2020
Note: Comprehensive income(% is Year-on-year rate of increase / decrease)
Attributable to owners
Ordinary incomeof parent
quarterly net income
%

%

%

8,078

-11.8

1,419

-15.7

1,380

-16.5

853

-34.3

9,156

31.3

1,683

217.3

1,653

221.5

1,298

232.5

For the nine months ended December 31, 2021 ¥613 million yen (-25.9%)
For the nine months ended December 31, 2020 ¥826 million yen (284.7%)

Quarterly
Net earnings per share

Quarterly
Diluted net earnings
per share

Nine months ended

Yen

Yen

December 31, 2021

29.87

29.83

December 31, 2020

45.59

45.49

(2) Consolidated financial Condition
Total Assets
Nine months ended

Net Assets

Equity-to-asset ratio

Net assets per share

million yen

million yen

%

Yen

9,770

4,619

46.8

160.67

3,855

39.5

132.91

December 31, 2021
Fiscal year ended

9,610

March 31, 2021

Reference: Equity capital As of December 31, 2021
As of March 31, 2021

¥4,568 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

3. Forecast of consolidated financial results for the nine months ending December 31, 2021
(April 1, 2021 – March 31, 2022)(% increase or decrease from the same period of previous year)

Sales

Operating income%

Nine months total

10,900

-7.9

%

1,700

%

-17.2

Note: Revisions to the most recently announced earnings forecasts:

Profit attributable toEarnings per shareowners of parent

Ordinary income

1,650

-18.3

%

1,000

-38.4

35.17

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 p.8 “2. Quarterly Consolidated Financial Statements and Key Notes (3) Notes onquarterly consolidated financial statements(Change in accounting policy)”.
(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, 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 December 31, 2021

637,366 shares

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)
Nine months ended December 31, 2021

28,569,388 shares

Nine months ended December 31, 2020

28,491,583 shares(Note) 613,300 shares of the Company (6,133 voting rights) owned by 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.
*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 January
27, 2022. The financial results presentation materials to be distributed at this briefing will be posted on the Company's
website immediately after the briefing.

Drecom Co., Ltd. (3793) Consolidated Financial Results for the Nine Months Ended December 31, 2021
(Under Japanese GAAP)

Table of Contents
1. Qualitative Information on Consolidated Financial Results for the Third Quarter Ended December 31, 2021 ········· 2(1) Explanation of business results.............................................................................................................................2(2) Explanation of Financial Position ..........................................................................................................................3
2. Quarterly Consolidated Financial Statements and Key Notes ······································································ 4(1) Quarterly Consolidated Balance Sheet .................................................................................................................4(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Comprehensive Income Statements....................................................................................................................................................................................6
Quarterly Consolidated Statement of Income .....................................................................................................6(Cumulative period for consolidated third quarter, nine months ended December 31, 2021)..........................6
Consolidated quarterly statements of comprehensive income ............................................................................7(Cumulative period for consolidated third quarter, nine months ended December 31, 2021)..........................7(3) Notes on quarterly consolidated financial statements ...........................................................................................8(Notes on going concern assumptions) ...............................................................................................................8(Note in the event of a significant change in the amount of shareholders' equity) ..............................................8(Change in accounting policy) .............................................................................................................................8(Information by Segment) ....................................................................................................................................91

Drecom Co., Ltd. (3793) Consolidated Financial Results for the Nine Months Ended December 31, 2021
(Under Japanese GAAP)

1. Qualitative Information on Consolidated Financial Results for the Third Quarter Ended December 31,
2021(1) Explanation of business results
The environment surrounding the Internet service industry, to which we belong, continues to undergo rapid changes.
According to the 2020 Telecommunications Usage Trends Survey, as of the end of August 2020, the percentage ofhouseholds 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%, smartphones are now positioned as a major device for Internet use. In response to
the rapid spread of smartphones and their increasing importance as Internet devices, the Internet service industry has
seen the creation of new services for smartphones one after another, and the market continues to expand andcompetition intensifies.
Under such an environment, we have positioned the provision of services for smartphones as its main business andis 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 the years. In the
media business, we are also working on the development and operation of new services with the aim of creating thenext generation of mainstay businesses.
In the third quarter of the current fiscal year, many of the titles in operation continued to post stable profits, increasing
the stability of the business.
Net sales decreased from the same period of the previous year due to the closing of several titles and withdrawal fromthe advertising business. On the other hand, anniversary events for various titles maintained their strong performance.
In the media business, sales of new services are steadily increasing. Expenses decreased compared to the same periodof the previous fiscal year. This was due to the implementation of an operational structure with a focus on further cost
efficiency and an increase in the amount of assets posted due to the progress of development, despite the temporary
expenses incurred in the committee style project.
As a result of the above, our consolidated net sales for the third quarters of the current fiscal year were 8,078,020
thousand yen (down 11.8% from the same period of the previous year), operating income was 1,419,983 thousand yen(down 15.7%), ordinary income was 1,380,831 thousand yen (down 16.5%), and net income attributable to the parent
company was 853,257 thousand yen (down 34.3%). The status of each segment in the third quarters of the current fiscal
year is as follows.

Game Business
The main business of this segment is the development and operation of games, and we are engaged in thedevelopment and operation of third-party IP games, game platforms, and original IP games.
Net sales decreased from the same period of the previous fiscal year due to a decrease in the number of titles inoperation following the closure of multiple titles.
On the other hand, an event held in September for an IP game application of another company, one of our mainstay
titles, performed well and helped to push the revenue at a level close to the anniversary event held in May. In addition,
many of our titles in operation have also maintained strong sales
Expenses decreased compared to the same period of the previous fiscal year helped by continued efforts to improvethe efficiency of operating expenses and an increase in the amount of assets posted contributed by progress made in
the development of new titles, despite the temporary expenses incurred in the committee style project.
As a result, segment sales were 7,968,562 thousand yen (down 12.3% from the same period last year), and segment
income was 1,632,750 thousand yen (down 16.6% from the same period last year).

Media BusinessIn the media business, under the “DRIP (Drecom Invention Project)”, which is part of our efforts to create the next
generation of mainstay businesses, we launched new services on a trial basis, utilizing our knowledge of Internet services,and repeated trials for commercialization. In addition to the commercialization of our mainstay "AROW", an AR
smartphone application building platform that uses location information and 3D real maps, and the development of new
titles using "AROW", we focused on expanding new services in areas other than the gaming business, such as "Rooot",2

Drecom Co., Ltd. (3793) Consolidated Financial Results for the Nine Months Ended December 31, 2021
(Under Japanese GAAP)a fan based community promotion service using Twitter, and "Load Testing Service", which utilizes the know-how wehave cultivated through the development and operation of large-scale services in the past.
Net sales increased year on year due to the steady expansion of the "Rooot" service. As for expenses, many services
are still in the business development stage, and expenses continue to be upfront. As a result, segment sales were109,457 thousand yen (up 53.3% from the same period last year), and segment loss was 212,766 thousand yen(segment loss of 274,718 thousand yen in the same period last year).
In the future, we will continue to work on further improving our mainstay gaming business profitability, and focus on
the development and marketing of services in order to make a hit with several new titles planned for the fourth quarterand beyond.
We are focusing on business development in entertainment areas other than gaming, such as the establishment of anew publishing division in August 2021, and will aim to grow into a comprehensive entertainment company centered on
IP, which is our medium to long-term goal.
In the current fiscal year, while we continue to recognize the epidemic of the novel coronavirus as a major management
risk, we will place priority on generating stable profits and securing cash flow, and we will work to achieve balanced
management by proactively investing for the future. At the same time, we will maintain a conservative stance based on
the premise that profits and cash flow should not be squeezed.

(2) Explanation of Financial Position(Assets)
Current assets at the end of the third quarter of the current fiscal year totaled 7,041,474 thousand yen, a decrease of
627,671 thousand yen compared to the end of the previous fiscal year. This was mainly due to a decrease of 684,928
thousand yen in cash and deposits. Fixed assets totaled 2,728,668 thousand yen, an increase of 787,391 thousand yen
from the end of the previous fiscal year. This was mainly due to an increase of 1,203,533 thousand yen in software in
progress.
As a result, total assets amounted to 9,770,143 thousand yen.

(Liabilities)
Current liabilities at the third quarter of the current fiscal year totaled 2,592,524 thousand yen, a decrease of 589,360
thousand yen compared to the end of the previous fiscal year. This was mainly due to a decrease of 351,800 thousand
yen in income taxes payable and a decrease of 150,414 thousand yen in asset retirement obligations. Fixed Liabilities
totaled 2,557,916 thousand yen, an increase of 15,305 thousand yen from the end of the previous fiscal year. This was
mainly due to an increase of 65,940 thousand yen in asset retirement obligations, but a decrease of 120,000 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 third quarter of the current fiscal year were 4,619,702 thousand yen, an increase of764,386 thousand yen compared to the end of the previous fiscal year. This was mainly due to the recording of 853,257
thousand yen in net income attributable to shareholders of the parent company.
As a result, the equity ratio was 46.8% (39.5% at the end of the previous consolidated fiscal year).

3

Drecom Co., Ltd. (3793) Consolidated Financial Results for the Nine Months Ended December 31, 2021
(Under Japanese GAAP)

2. Quarterly Consolidated Financial Statements and Key Notes(1) Quarterly Consolidated Balance Sheet(Unit: thousand yen)
Nine months ended December 31,
2021(December 31, 2021)

Previous consolidated fiscal year
(March 31, 2021)

ASSETS
Current assets
Cash and deposits

5,288,132

4,603,204

Notes and accounts receivable

1,841,939

1,912,953

Work in progress

7,077

5,269

Prepaid expenses

174,067

177,782

Other

357,928

342,2657,669,146

7,041,474

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

259,203

168,640-173,499-9,07285,704

159,568

82,81770,702

Accumulated depreciation-67,283-32,298

Tools, furniture & fixtures (net)15,53438,40461,853

1,732

Accumulated depreciation-48,190-1,732

Lease assets (net)

13,663－

Total tangible fixed assets

114,901

197,972

Software407,586

108,907

Software suspense account471,118

1,674,651

Total intangible assets

878,704

1,783,559

7

96,297

Deferred tax assets

434,953

282,999

Deposit318,138

199,404

Other

194,571

168,435

Other investments and other assets

947,671

747,137

1,941,277

2,728,668

9,610,423

9,770,143

Lease assets

Intangible assets

Investments and other assets
Investment securities

Total fixed assets
Total assets

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

Nine months ended December 31, 2021
(December 31, 2021)

363,542
100,000
640,000
14,773
660,610
398,455
174,055
150,414680,033

387,628
209,000
708,000
912
608,444
46,65458,560－573,323

Total current liabilities

3,181,884

2,592,524

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

2,430,000
6,387
34,060102,774

2,310,000

2,573,222

2,557,916

5,755,106

5,150,440

1,761,208
2,017,979
146,380

1,792,991
2,050,152
999,637-131,058-274,029

3,794,509

4,568,752

-92

7

-92

7

58,65149,067

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

Total fixed liabilities
Total liabilities
Net assets
Shareholders' equity
CapitalCapital surplus
Retained earnings
Treasury stock
Total shareholders' equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Total accumulated other comprehensive
incomeStock acquisition rights
Non-controlling interests
Total net assets
Total liabilities and net assets

5－100,000
147,916

2,247

1,874

3,855,316

4,619,702

9,610,423

9,770,143

Drecom Co., Ltd. (3793) Consolidated Financial Results for the Nine Months Ended December 31, 2021
(Under Japanese GAAP)(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Comprehensive Income
Statements
Quarterly Consolidated Statement of Income(Cumulative period for consolidated third quarter, nine months ended December 31, 2021)(Unit: Thousand yen)
Nine months ended
December 31, 2020
(April 1, 2020 to December 31, 2020)

Nine months ended
December 31, 2021
(April 1, 2021 to December 31, 2021)

Sales
Cost of sales

9,156,085
6,079,693

8,078,020
5,057,371

Gross profit

3,076,391

3,020,648

Selling, general and administrative expenses

1,392,463

1,600,665

Operating income

1,683,927

1,419,983

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

14
8,072
2,258

26
276

Total non-operating income

10,344302

22,918259
14,061
3,321

34,096
4,085
1,271

40,56039,454

1,653,711

1,380,831

-

4,195

-

4,195

-

75,399-75,3991,653,711

1,309,627

323,71729,788303,214
151,909

Total income taxes

353,505

455,124

Quarterly net income

1,300,205

854,503

1,337

1,246

1,298,868

853,257

Non-operating expenses
Interest expense
Interest on bonds
Foreign exchange loss
Other
Total non-operating expenses
Ordinary income
Extraordinary profits
Gain on reversal of subscription rights tosharesExtraordinary profits
Extraordinary loss
Impairment loss
Total extraordinary loss
Quarterly net income before income taxes andminority interests
Corporate, inhabitant and enterprise taxes
Income taxes-deferred

Quarterly net income attributable to noncontrollinginterests
Quarterly net income attributable to owners of theparent6

Drecom Co., Ltd. (3793) Consolidated Financial Results for the Nine Months Ended December 31, 2021
(Under Japanese GAAP)

Consolidated quarterly statements of comprehensive income(Cumulative period for consolidated third quarter, nine months ended December 31, 2021)(Unit: Thousand yen)
Nine months ended
December 31, 2020
(April 1, 2020 to December 31, 2020)

Nine months ended
December 31, 2021
(April 1, 2021 to December 31, 2021)

1,300,205

854,503

16

100

16

100

1,300,222

854,603

1,298,885

853,357

1,337

1,246

Quarterly net income or loss
Other comprehensive income
Other securities valuation difference
Total other comprehensive income
Quarterly comprehensive income(Breakdown)
Quarterly comprehensive income for ownersof parent
Quarterly comprehensive income fornon-controlling shareholders

7

Drecom Co., Ltd. (3793) Consolidated Financial Results for the Nine Months Ended December 31, 2021
(Under Japanese GAAP)(3) Notes on quarterly consolidated financial statements(Notes on going concern assumptions)
Nothing applicable.
(Note in the event of a significant change in the amount of shareholders' equity)
Based on the Board of Directors' meeting held on October 28, 2021, the Company acquired 227,700 shares oftreasury stock during the third quarter of the current fiscal year through the contribution of an additional trust underthe "Stock Benefit Trust (J-ESOP)" plan.
As a result, treasury stock increased by 149,948 thousand yen to 274,029 thousand yen at the end of the third
quarter of the current fiscal year.
(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.

8

Drecom Co., Ltd. (3793) Consolidated Financial Results for the Nine Months Ended December 31, 2021
(Under Japanese GAAP)(Information by Segment)
Segment Information
I. Previous nine months ended, from April 30, 2020 to December 31, 2020, consolidated period
Information on the sales, profits or losses per reporting segment(Unit: Thousand yen)

Adjustment

Quarterly
consolidated
incomestatement
amount9,156,085

Reporting Segment
Gamebusiness

Media
Business

Total

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

Segment profit or Loss

9,085,164

70,9209,156,085

－

－

496

496

-496

9,085,164

71,417

9,156,582-496

9,156,085

1,958,646-274,718

1,683,927－

1,683,927

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. Nine months ended, from April 30, 2021 to December 31, 2021, consolidated period
Information on the sales, profits or losses per reporting segment(Unit: Thousand yen)

Adjustment

Quarterly
consolidated
incomestatement
amount*Reporting Segment
Gamebusiness

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.

(Significant subsequent events)
Not applicable9