Consolidated financial results Second quarter fiscal year Ending March 31, 2024

(Under Japanese GAAP)
October 26, 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

Director, Hideki Goto (TEL) +81 (0)50-3101-9977

Scheduled date to file quarterly securities report: November 9, 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 six months ended September 30, 2023 (From April 1, 2023 to September 30, 2023)(1) Consolidated financial results (cumulative)

Net sales
Six months ended

September 30, 2023
September 30, 2022

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

Operating Income

Million yen%

5,091 -12.2
5,800 11.9

Million yen%

472 -70.6
1,607 66.2

For the six months ended September 30, 2023
For the six months ended September 30, 2022

Quarterly
Net earnings per share
Six months ended

September 30, 2023
September 30, 2022%

453 -70.7
1,547 64.4

-169
1,056

%

－
72.6

¥166 million yen (-%)
¥1,057 million yen (72.6%)

Quarterly
Diluted net earnings
per share

Yen

Yen

-5.94
37.13

－
37.08

(2) Consolidated financial condition
Total Assets
Six months ended

September 30, 2023

Net Assets

Equity-to-asset ratio

Net assets per share

Million yen

Million yen%

Yen

11,388

5,385

46.8

186.42

5,631

45.6

195.70Fiscal year ended

March 31, 2023

12,226

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

¥5,334 million¥5,579 million

1/12

2. Cash dividends
Annual dividends
First quarter-end Second quarter-end Third quarter-end
Fiscal year ended

March 31, 2023
March 31, 2024
March 31, 2024
(Forecast)Fiscal year-end

Total

JPY

JPY

JPY

JPY

JPY

－

0.00

－

5.00

5.00

－

0.00
－

－

－

Note: Revision to the forecast of cash dividends most recently announced: None
The year-end dividend forecast for March 2024 has not yet been determined.

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

March 31, 2024

Operating income

Million yen

11,500% Million yen

6.5

500

%

Ordinary income

Profit attributable toEarnings per shareowners of parent

Million yen%

Million yen

450 -79.5

0

-78.1

Note: Revisions to the most recently announced earnings forecasts:

%

Yen

－

0.00

None

*Notes(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in the change inscope of consolidation): NoneNew―, (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)

(ii)

Total number of issued shares at the end of the period (including treasury shares)
As of September 30, 2023

29,224,108 shares

As of March 31, 2023

29,129,591 shares

Number of treasury shares at the end of the period
As of September 30, 2023

610,795 shares

As of March 31, 2023

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

28,530,632 shares

Six months ended September 30, 2022

28,456,134 shares

Note: 581,600 shares of the Company's stock (5,816 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.

2/12

*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 tovarious 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 October 26, 2023.
The financial results presentation materials to be distributed at this briefing will be posted on the company's website
immediately after the briefing.

3/12

Drecom Co., Ltd.(3793) エラー! 参照元が見つかりません。
(Under Japanese GAAP)

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

5(1) Explanation of operating results

5(2) Explanation of financial position

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 second quarter, six months ended September 30, 2023) .................................. 9
Consolidated quarterly statements of comprehensive income ................................................................................. 10(Cumulative period for consolidated second quarter, six months ended September 30, 2023) ................................ 10(3) Quarterly Consolidated Statement of Cash Flows

11(4) Notes to quarterly consolidated financial statements

12(Notes on going concern assumptions) .................................................................................................................... 12(Notes on significant changes in the amount of shareholders' equity)...................................................................... 12(Change in accounting policy) .................................................................................................................................. 12(Information by Segment) ......................................................................................................................................... 12(Significant subsequent events) ............................................................................................................................... 12

4/12

Drecom Co., Ltd.(3793) エラー! 参照元が見つかりません。
(Under Japanese GAAP)

1. Qualitative information on consolidated financial results for the second quarter ended September 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
expectations. We also strive to create trailblazing value and deliver captivating experiences. In the medium term, we aim
to become a comprehensive entertainment company that provides a wide variety of entertainment content globally basedon IP and technology, achieve sustainable growth and increase corporate value.
In the mainstay game business, our main business is game development and operation. 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 also experimentally launch new services
that utilize our knowledge of Internet services and advanced technologies, and conduct trials toward commercialization.
In the second quarter of the current consolidated cumulative period, net sales were 5,091,538 thousand yen (down
12.2% year-on-year), operating income was 472,280 thousand yen (down 70.6% year-on-year), and ordinary income
was 453,584 thousand yen (down 70.7% year-on-year). In addition, the Company posted an extraordinary loss of
609,185 thousand yen due to the decision to close two new titles released at the end of the previous fiscal year and in
the first quarter of the current fiscal year, and to discontinue development of one title not yet announced or in the
prototype stage of development, and recorded impairment losses, resulting in a net loss attributable to owners of theparent of 169,363 thousand yen for the quarter (compared to net income attributable to owners of the parent of 1,056,684
thousand yen for the same period last year).
The results for each segment for the second quarter of the consolidated fiscal year under review are as follows.

Game businessIn the game business, existing titles under operation performed well in the second quarter, exceeding expectations.
In this segment, we aim to drive earnings by releasing new titles in addition to the titles under operation. However, since
the new titles we have released have been performing below expectations, we have reviewed our operation/development
portfolio. In the second quarter, we decided to close one title in operation that was released at the end of the previous
fiscal year; and to discontinue the development of one title in development that has not yet been announced or is still in
the prototype stage.
Net sales decreased from the same period of the previous year, mainly due to lower sales of other titles undermanagement than in the previous year, despite strong sales of mainstay IP titles.
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 4,971,912 thousand yen (down 12.3% year-on-year), and segment income
was 988,698 thousand yen (down 45.4% year-on-year). In this segment, our core business, we will strive to growearnings from titles in operation. 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 other measures to improve
the profit/loss situation as soon as possible. In addition, we will aim to increase sales and profits through the contributionof new titles to be released in the future.

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 on the light novel label "DRE Novels." In
addition, we are developing new businesses in the Web3 domain and providing "Rooot" and "Fanflu" a SNS-based fanmarketing support services, by leveraging our expertise in Internet services and advanced technology.
The "DRE Novels" publication boosted sales, but lower sales for "Rooot" led to a YoY decline in net sales.
As for profit, in addition to the above-mentioned factors of revenue decline, the amount of loss increased from thesame period of the previous year due to ongoing costs from investments in new business areas such as publishing,video, and Web3.
As a result of the above, segment sales amounted to 119,625 thousand yen (down 8.1% year-on-year) and segment
loss amounted to 516,418 thousand yen (segment loss of 201,898 thousand yen in the same period last year). In thissegment, we will continue to invest in R&D to achieve our medium-term goal. However, we are reviewing some of our
5/12

Drecom Co., Ltd.(3793) エラー! 参照元が見つかりません。
(Under Japanese GAAP)

plans and will implement other measures along with a company-wide cost-reduction exercise.

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 future. In addition, we will continue to invest andfocus on business expansion into entertainment areas other than games and development 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)
At the end of the second quarter, the total current assets amounted to 11,388,756 thousand yen. The increase inaccount receivables and software in progress has contributed to this figure, while cash and deposits have decreased.
This represents a decrease of 837,640 thousand yen compared to the previous fiscal year's end.

(Liabilities)
Total liabilities at the end of the second quarter amounted to 6,003,256 thousand yen (down 592,020 thousand yen
from the end of the previous fiscal year), mainly due to a decrease in loans payable.

(Net assets)
Net assets at the end of the second quarter of the current consolidated fiscal year amounted to 5,385,500 thousandyen (down 245,620 thousand yen from the end of the previous consolidated fiscal year), mainly due to the net loss
attributable to parent company shareholders of 169,363 thousand yen for the quarter.
As a result, the equity ratio was 46.8% (45.6% at the end of the previous fiscal year).

6/12

Drecom Co., Ltd.(3793) エラー! 参照元が見つかりません。
(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)

Six months ended September 30, 2023
(September 30, 2023)

AssetsCurrent assets
Cash and deposits
Accounts receivable
Goods

6,044,573
1,484,658

3,973,506
2,194,354

5,268

6,943

Work in progress

17,48250,163

Prepaid expenses

148,928

153,930

Other

147,482

176,541

7,848,394

6,555,439

Building

191,229

191,229

Accumulated depreciation-31,029-39,885

Buildings, net

160,200

151,344

Tools, furniture and fixtures

85,50287,307

Accumulated depreciation-53,143-60,631

Tools, furniture and fixtures, net

32,35826,675

7,232

7,232

Accumulated depreciation-3,107-3,657

Lease assets, net

4,125

3,575

Total tangible fixed assets

196,683

181,594

201,601

39,156

Software in progress

3,026,917

3,493,843

Total intangible fixed assets

3,228,519

3,532,999

Total current assets
Fixed assets
Tangible fixed assets

Leased assets

Intangible fixed assets
SoftwareInvestments and other assets
Investments in securities

59,92669,926

Deferred tax asset

491,226

586,784(Security) deposit

199,404

199,404

Other

202,242

262,608

Total investments and other assets

952,800

1,118,723

Total fixed assets
Total assets

7/12

4,378,002

4,833,317

12,226,397

11,388,756

Drecom Co., Ltd.(3793) エラー! 参照元が見つかりません。
(Under Japanese GAAP)(Unit: thousand yen)Previous consolidated fiscal year
(March 31, 2023)

Liabilities
Current liabilities
Accounts payable
Short-term debt
Current portion of long-term debt
Lease obligations
Accounts payable - otherAccrued income taxes
Allowance for bonuses
Other
Total current liabilities
Fixed liabilities
Long-term debt
Lease obligations
Asset retirement obligations
Other
Total long-term liabilities
Total liabilities

Six months ended September 30,
2023(September 30, 2023)

449,977

388,796

100,000
1,780,750

100,000
1,678,050

1,281
554,851

1,281
605,252

481,316
129,549

130,061
80,390802,766

741,4124,300,494

3,725,244

1,952,750
3,524

1,955,200
2,883

100,000
238,507

100,000
219,928

2,294,782

2,278,012

6,595,277

6,003,256

1,811,311

1,842,360

2,068,472
1,967,564

2,099,521
1,652,682

Total net assets
Capital stock
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders' equity
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

8/12-266,237-259,894

5,581,111

5,334,669-2,079

-641

82

78

-1,997-562

49,06749,067

2,938

2,325

5,631,120

5,385,500

12,226,397

11,388,756

Drecom Co., Ltd.(3793) エラー! 参照元が見つかりません。
(Under Japanese GAAP)(2) Quarterly consolidated statements of income and quarterly consolidated comprehensive income statements
Quarterly consolidated statement of income(Cumulative period for consolidated second quarter, six months ended September 30, 2023)(Unit: Thousand yen)Six months ended
Six months ended
September 30, 2022
September 30, 2023
(April 1, 2022 to September 30, 2022) (April 1, 2023 to September 30, 2023)

Net sales
Cost of sales

5,800,434

5,091,538

3,171,491

3,262,237

Gross profit

2,628,942

1,829,300

Selling, general and administrative expenses

1,021,083

1,357,020

Operating income

1,607,859

472,280

Non-operating income
Interest income

23

28

Dividends received
Gain on investment in capital

3,066
2,080

2,979
1,614

Other

1,179

67

Total non-operating income

6,349

4,690

19,68820,757

46,332
570

1,379
1,250

Non-operating expenses
Interest expense
Fees and commissions
Other

66,591

23,386

Ordinary income

1,547,617

453,584

Extraordinary loss
Impairment loss-

609,185-

609,185

1,547,617-155,601

457,711108,256

32,001-96,191

Total non-operating expenses

Total extraordinary loss
Income before income taxes and minority
interests
Corporate, inhabitant and enterprise taxes
Income taxes-deferred
Total income taxes
Net income
Net income attributable to noncontrolling interests
Net income attributable to owners of the parent

9/12

489,712

12,065

1,057,904-167,666

1,220

1,697

1,056,684-169,363

Drecom Co., Ltd.(3793) エラー! 参照元が見つかりません。
(Under Japanese GAAP)

Consolidated quarterly statements of comprehensive income(Cumulative period for consolidated second quarter, six months ended September 30, 2023)(Unit: Thousand yen)Six months ended
Six months ended
September 30, 2022
September 30, 2023
(April 1, 2022 to September 30, 2022) (April 1, 2023 to September 30, 2023)

Net income
Other comprehensive income
Net unrealized gains (losses) on available-forsale securities, net of taxes
Foreign currency translation adjustments
Total other comprehensive income
Comprehensive income(Breakdown)Comprehensive income attributableto owners of the parent
Comprehensive income attributable
to noncontrolling interests

10/12

1,057,904-167,666

-

1,438

-

-3

-

1,435

1,057,904-166,231

1,056,684-167,928

1,220

1,697

Drecom Co., Ltd.(3793) エラー! 参照元が見つかりません。
(Under Japanese GAAP)(3) Quarterly Consolidated Statement of Cash Flows(Unit: Thousand yen)Six months ended
Six months ended
September 30, 2022
September 30, 2023
(April 1, 2022 to September 30, 2022) (April 1, 2023 to September 30, 2023)

Cash flow from operations
Quarterly net income before taxes
Depreciation and amortization
Stock compensation expense
Impairment loss
Interest and dividend income
Fees and commissions
Interest expense
Trade receivables (- for increase)
Inventories (- for increase)
Accounts receivable-other (- for increase)
Consumption taxes receivable (- for increase)
Prepaid expenses (- for increase)
Notes and accounts payable (- for decrease)
Accrued liabilities (- for decrease)
Accrued consumption taxes (- for decrease)
Advances received (- for decrease)
Accrued bonus (- for decrease)
Other
Subtotal
Receipts of interest and dividends
Interest payments
Payment of corporate taxes, etc.
Cash flow from operating activities
Cash flow from investment activities
Payments for acquisition of tangible fixed assets
Payments for acquisition of intangible fixed assets
Payments for purchase of investment securities
Other
Cash flows from investing activities
Cash flow from financial activities
Net increase / decrease in short-term loans
payableProceeds from long-term loans payable
Payments for long-term debt
Dividends paid
Other
Cash flows from financing activities
Effect of exchange rate changes on cash andcash equivalents
Cash and cash equivalents increased or decreased
Cash and cash equivalents at beginning of period
Cash and cash equivalents at the end of the quarter

11/12

1,547,617
177,073
20,002-3,09045,083
19,688-584,962-699
14,480169,624-17,005-42,987-61,233
66,817
1,980-21,699
3,113
1,333,805
3,635-15,235-154,761
1,167,443-155,601
110,441
21,960609,185-3,007
1,379
20,757-709,695-34,309
16,180-46,394
14,175-61,181
56,024-56,137-18,770-61,281-28,492-324,766
3,264-20,801-456,617-798,921-12,651-916,245-59,920
69,254-919,562-1,163-1,007,214-10,000-10-1,018,387-1,000-2,449,400-1,103,000-144,407-7,8381,193,153-

400,000-500,250-144,930-8,573-253,754-3

1,441,034
4,732,985
6,174,019-2,071,066
6,040,496
3,969,429

Drecom Co., Ltd.(3793) エラー! 参照元が見つかりません。
(Under Japanese GAAP)(4) Notes to 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 six months ended, from April 30, 2022 to September 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
(1)

Sales to externalcustomers

5,670,326

130,1075,800,434-

5,800,434

-

-

-

-

-

5,670,326

130,1075,800,434-

5,800,434

1,809,758-201,898

1,607,859-

1,607,859(2) Sales or transfers
inside or between
segments
Total
Segment profit or Loss

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

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

Quarterly
consolidated
incomestatement
amountReporting Segment
Gamebusiness

Media
Business

Adjustment

Total

Sales
(1) Sales to externalcustomers(2) Sales or transfers
inside or between
segments
Total
Segment profit or Loss

4,971,912

119,625

5,091,538-

5,091,538

-

-

-

-

-

4,971,912

119,625

5,091,538-

5,091,538

988,698-516,418

472,280-472,280

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

(Significant subsequent events)
Not applicable

12/12