First Quarter of Fiscal Year Ending Mar. 31, 2023
Financial Results Presentation Materials

Drecom Co., Ltd.
July 28, 2022
Please refer to the fact sheet on our website for consolidated financial results, cost of sales, SG&A expenses, etc., and billing sales in thegame business.

https://drecom.co.jp/ir/factsheet_202303Q1.pdf

Summary of this document

Q1 FY2023
financialresults(April-June)
Actual• Operating income, ordinary income, and net income reachedrecord highs on a quarterly basis
Q1 results: operating income 817 million yen,ordinary income 810 million yen, net income* 521 million yen

Favorable sales of mainstay title from their anniversary events, etc.
*Net income attributable to owners of the parent

Forecast for
FY2023• Steady progress in relation to full-year forecasts

Full-year forecast (announced on 5/12/2022): Net sales: 13,000 million yen,
Operating income: 2,000 million yen
Ordinary income 1,900 million yen, Net income* 1,200 million yen*Net income attributable to owners of the parent
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2

1. Review of Q1 (Apr–Jun) FY2023
2. Forecast for FY2023
3. Medium-term goals (as of FY2023)
4. Appendix

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31. Review of Q1 (Apr– Jun) FY2023

Summary of Q1 FY2023 Results
Record quarterly profit; IP titles celebrating their 8th anniversary performed well globally(Unit: million yen)

Year ending Mar.
31, 2023
Q1 (Apr-Jun)

Year ending Mar.
31, 2022
Q1 (Apr-Jun)

year on year
(Increase/Decr
ease)Year ending
March 31, 2022
Q4 (Jan-Mar)

Net sales

2,927

2,661

+265

2,450

+476

Operating income

817

504

+313

171

+646

Operating profit
ratio

27.9%

18.9%

―

7.0%

―

EBITDA*

909

671

+237

304

+605

EBITDA Margin

31.1%

25.2%

―

12.4%

―

Ordinary income

810

492

+318

160

+649

521

300

+221

-45

+567

Net income

attributable toshareholders of theparent company*EBITDA = operating income + amortization of goodwill + depreciation
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QoQ(Increase/
Decrease)4

1. Review of Q1 (Apr – Jun) FY2023

Q1 Results for FY2023 (Operating Income QoQ comparison)
Increased revenues from anniversary events, etc. resulted in significant QoQ increase of profit
Decrease in revenues (Increase in expenses)(Unit: million yen)

Increasein sales(+486)

Labor cost(+54)

Q4 FY, 2022
Operating Income

Outsourcing
cost
(+36)

Increase in revenues (decrease in expenses)

Depreciation
expense(+41)

Advertisingexpenses(+93)
Postage(-12)

Materials forgame
development
(-13)

Other
(+55)
Game
R&D
Development
expenses
Costs(-0)
Amount recorded
as assets*(-93)

Q1 FY2023
Operating Income*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".
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51. Review of Q1 (Apr – Jun) FY2023

Game Business: Earnings from Titles in Operation
Not only strong IP titles but also other long-term operational titles contributed to stable earnings
Profit/loss of 11 titles under management※(Q1 Apr-Jun 2023)

Loss

ProfitNumber of titles in operation as of July 31, 2022. Including two enza titles and BOKU & DRAGONS.
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61. Review of Q1 (Apr – Jun) FY2023

Topics of each business•Gamebusiness••

IP titles celebrating their 8th anniversary are performing well
→An integrated global content distribution schedule and other factors led to a successful anniversary event in May.

Securing stable income through long-term operating titles→ Secure stable earnings despite the severe market environment

Development of additional features is underway for some titles in development that are
not yet ready for release.
→Some releases have been pushed back slightly from the expected time-frame, and the timing of the ramp-up ofadvertising expenses has been pushed back to Q2 or later.
→ Assumption of contribution to earnings from the second half of the year remains unchanged.

•

Large number of entries to the Drecom Media Award for New Novelists→Numerous submissions (approximately 2,000 entries) to the Drecom Media Award, a novelist award for newcomers

Newbusiness••to the industry.

Steady sales growth for "Rooot" fan community promotion service→Sales increased 27.6% QoQ

Business activities in the Web3 domain are progressing steadily→In addition to blockchain game development, multiple projects are in progress, including the NFT project for IP creation.

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71. Review of Q1 (Apr – Jun) FY2023
2. Forecast for FY2023
3. Medium-term goals (as of FY2023)
4. Appendix

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8

2. Forecast for FY2023

Progress of Full-Year Consolidated Earnings Forecasts
In Q1 (April-June), anniversary events performed better than expected. Steady progress in relation to full-year forecasts.
FY2023(Unit: million yen)

Q1 (Apr-Jun)
ActualRate of progress(Reference) FY2022
Full Year
Forecast

Q1(Apr-Jun)
ActualQ2(Jul-Sep)
ActualQ3(Oct-Dec)
ActualQ4(Jan-Mar)
ActualFull year
Actual

2,927

22.5%

13,000

2,661

2,523

2,893

2,450

10,528

Variable cost

356

19.2%

1,860

394

380

391

365

1,630

Fixed cost

1,753

19.2%

9,139

1,762

1,680

2,048

1,913

7,306

Advertising expenses

24

3.4%

725

16

21

88

117

243

R&D expenses

55

7.5%

737

117

91

80

54

345

Game Development Costs
Amount recorded asassets*

-465

22.8%

-2,040

-496

-692

-485

-558

-2,233Operating income

817

40.9%

2,000

504

463

452

171

1,591

Ordinary income

810

42.7%

1,900

492

448

439

160

1,541

521

43.5%

1,200

300

311

241

-45

807

Net sales

Net income

attributable toshareholders of the parent
company*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".
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92. Forecast for FY2023

Progress of Net Sales and Operating Income in relation to Full-Year Forecasts
Sales expected to increase from 2H following the release of three new game titles (all distributed by the company)
Steady progress toward achieving the full-year operating income forecast of 2,000 million yen
Q1 Progress Rate
22.5%

Net sales

Q2 Progressgoal

Full-year forecast:

13,000 million yen

Q1 Results

2,927 million yen
Game Business: No major events in Q2 (July-September), but stable sales are expected from titles in operation.
Sales are expected to increase from the second half of the fiscal year, as three new titles would be distributed by the company and sales will beappropriated as gross sales.
New Business:

In the publishing business, we plan to publish more than 10 titles (paperback and e-book) in the second half of the fiscal year and beyond.
Q1 Progress Rate
40.9%

Operating income

Q2 Progressgoal

Full-year forecast:

2,000 million yen

Q1 Results

817 million yen
Game Business: No major events in Q2, and profit level will be normalized.
3 new titles are expected to contribute to earnings in 2H.
New Business:

Accelerate R&D investment in the publishing business and Web3 domains from Q2 onward.

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102. Forecast for FY2023

Summary of Consolidated Financial Forecast for the Full Year (Reiterated)
Recognized a great opportunity for business growth. Aggressive investment while expecting to secure profits.

2,211
10,528261
Newbusiness
Growth13,000(Unit: million yen)
Investment Portfolio

1,860

VariablecostGame Business
Growth725

Advertising expenses

Game
Publication
Web3 & other

Other fixed costs

9,718

investment
Game Development
Costs Amountrecorded as assets*

R&D
expenses

737

2,000

Depreciation andamortization

Tax-2,040FY 2022Net sales
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FY 2023
Net sales

FY 2023
Operating income

Investable
cash*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".

11

1. Review of Q1 (Apr. – Jun.) FY2023
2. Forecast for FY2023
3. Medium-term goals (as of FY2023)
4. Appendix

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123. Medium-term goals (as of FY2023)

Medium-term goal
A comprehensive entertainment company that provides a variety of digital entertainment
content globally based on IP.
(1) New game hits
Main Initiatives•

Six new titles under development hit themarket(2) Acquisition, development andcultivation of IP(1) Expansion of game business
Main Initiatives•

Improve profitability of titles in operation(2) Breaking away from dependence
from the F2P* model

Main Initiatives

Securing
Stability

Main Initiatives•

Webtoon, light novels, and•“AROW" AR application building platform•

Fan community promotion service "Rooot”•

Load testing service, vulnerability

comics (content sales)

assessment*F2P: Abbreviation for free to play. An online game that can be played basically for free.
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Promotion of
growthpotential•

Wizardry•

Evil Prince and the Puppets•

Publishing/Video•

NFT Project(3) Global expansion of existing/new titles(4) Business development in new
business areas
Main Initiatives•

Webtoon, light novels, comics (publishing)•

Blockchain Game Development (Web3)•“AROW" AR application building platform•

Fan community promotion service "Rooot”•

Load testing service, vulnerability assessment

133. Medium-term goals (as of FY2023)

Promoting growth potential: new game hits
Six development projects underway as of July 2022
Business

StatusDefinition

Number of projects

operation

Titles inoperation

11

Details Other company distribution: 7 titles
 In-house distribution: 4 titles•

Wizardry VA (tentative)→ 3D dungeon RPG for smartphones

Game

Business

Development(different title from the blockchain game Wizardry BCG (tentative)

Commercialized
development

Prototype

Titles underdevelopmentwith a prospect
for release

Predevelopment
stage title inworks

announced on 2022/3/18)

6several••Unannounced title (developed by Drecom)
Unannounced title (developed by Studio Rex)•

Evil Prince and the Puppets•

Location-based IP titles using “AROW”•

Unannounced title (developed by Drecom) Several projects are in progress, including two titles
to be exhibited at BitSummit X-Roads*.
Multiple projects in progress

Series titles and titles developed overseas are counted as one title.
BitSummit, a gaming event now in its 10th year, will be held in Kyoto on August 6 and 7, 2022.
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14

3. Medium-term goals (as of FY2023)

Promoting growth potential: new game hits (cont.)
11 titles in operation, with 3 planned for release during FY 2023
FY2012-FY2022

FY 2023 andthereafter

Title
under
operation
Scheduled to be released during the fiscal year ending

11*

1

March 31, 2023: 3 titles• Wizardry VA (tentative)→ 3D dungeon RPG for smartphones(different title from the blockchain game Wizardry BCG(tentative) announced on 2022/3/18)• Unannounced title (developed by Drecom)• Unannounced title (developed by Studio Rex)

Title
under
development

6*2

3 Titles scheduled to be released during the fiscal year
ending March 31, 2024
• Evil Prince and the Puppets• Location-based IP titles using “AROW”• Unannounced title (developed by Drecom)*1: Series titles and titles developed overseas are counted as one title. *2: Projects classified as prototypes on page 15 are not included above.
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15

3. Medium-term goals (as of FY2023)

Accelerate growth potential: acquire, develop, and nurture IP
Strengthen IP production capabilities by adding "publishing and video business, which are our investment areas,
and the Web3 domains" to "our strengths."

IP Producing Capability

IP development andacquisition

PolicyOur
Strengths

Investment
Areas• Focus on quality of IP developed
and acquired• Aim for controllable IP ownership.

Game Development/
Distribution

×

IP development• Expanding the fan base throughcross-media development• IP development based on fan
community×

Diversification of IP
monetization channels• Breaking away from dependence
on the F2P model• Multi-layered revenue portfolio
based on diverse monetization
channels

IP fan community
management using SNS

IP gamedevelopment/distribution

WebtoonLight novels
Comics

Cross-media development
Animation/Video etc.

Book and e-book sales
Animation/FilmRights management
Overseas expansion, etc.

NFT

NFT/Community
Management

Blockchain game

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16

3. Medium-term goals (as of FY2023)

Promote growth potential: Business development in new business areas(Web3 domains)

Launched 5 initiatives in areas of high affinity with existing businesses. Aiming to promote growth strategies
through Entertainment x Web3
Existing Initiatives

Initiatives in the Web3 domains(1) Blockchain gameGame Business(FT+NFT)

Mobile game
Development and Operation(2) NFT x Games

×Web3

Publishing andVideo Business

Webtoon, Animation
Light Novels, Comics

B to B Business

Fan Community Promotion Services(4) Business support in the
Web3 areas

M&A of game development
companies
IP Acquisition Investment(5) Net investment in the
Web3 areas

M&A, Investment

Load Testing Services

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(3) NFT

17

3. Medium-term goals (as of FY2023)

Promote growth potential: Business development in new business areas(Web3 domains) (cont.)
Strengthening recruitment activities in order to aggressively expand business in the Web3 domain.

Open Positions
Business PlanningResearch and business planning in the Web3 domains
Engineering positions
Research on Web3 related technologies
Smart contract development/operation▼For more information, please visit the "Drecom Recruiting Site"
https://recruit.drecom.co.jp/career/

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Community Management
Community management on Twitter and Discord
Community design for each product18

3. Medium-term goals (as of FY2023)

Entering Performance Expansion Phase
Aiming to enter a phase for a virtuous cycle of earnings expansion by aggressively investing cash generated fromthe game business.

FY2024FY2023
Sales: 13 billion yen (forecast)
Operating income: 2 billion yen (forecast)

Sales: +20% or more YoY
Operating margin: Maintain 15%

FY2025

Sales: +20% or more YoY
Operating margin: Maintain 15%
GrowthGrowthGrowthGame
Publication
Web3

Investment

Growth driver• Three new games• Light novels/Comics• webtoon• NFT• Blockchain game

Game
Publication
animation
Web3

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

Game
Publication
animation
copyright
acquisition
Web3

Growth driver• Three new games• Light novels/Comics• webtoon

Investment• Animation/Video• NFT• Blockchain game

Shareholder
returnProfitInvestment

Growth driver• New Game
• Light novels/Comics• webtoon• Animation/Video• NFT• Blockchain Games• Rights management• Global Expansion

Shareholder
returnProfit19

1. Review of Q1 (Apr. – Jun.) FY2023
2. Forecast for FY2023
3. Medium-term goals (as of FY2023)
4. Appendix

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20

4. Appendix

Revenue status of titles in operation (by release date)
Breaking away from the dependence on few hit titles to a portfolio that earns stable revenue from multiple hit titles
Total sales of titles under management
2011

2014

FY2020

2015

2016

2017

FY2021

2018

2019

2020

FY2022

Total business profit of titles under management
2021

2022

FY2023

2011

2014

FY2020

2015

2016

2017

FY2021

2018

2019

2020

FY2022

2021

2022

FY2023*Please refer to the fact sheet posted on our website for consolidated business performance trends, cost of sales, SG&A expenses, etc., and game business billing sales trends.
https://drecom.co.jp/ir/factsheet_202303Q1.pdf
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21

4. Appendix

ESG Initiatives
1) Establish a working environment that takes into account human rights,

In order to achieve sustainable growth and maximize
shareholder value, and to ensure sound andappropriate management, Drecom is focusing onstrengthening governance, especially the appointmentof female directors, the appointment of many
independent outside directors with different
professional backgrounds, and active discussions.

diversity, and flexibility
In addition to prohibiting discrimination in the workplace and implementing
appropriate labor management, we are focusing on maintaining the health of
our employees and creating a working environment that considers andrespects the life events and life stages of our employees by introducing
remote work and encouraging male employees to take childcare leave.
2) Support for employees' health promotion and skill development
We are taking the following measures to create anenvironment where employees can exercise their fullpotential in good health.
-Installation of massage rooms-Cafe space in partnership with a popular cafe
-Support for holding knowledge-sharing events

1) Actively appoint female directors

As of May 2022, the ratio of female directors is 20%.
2) Balance between internal directors and independent outside directors

As of May 2022, the ratio of independent outside directors to all directors is60%.

and dissemination of technology-related information

3) Diversity of Independent Outside Directors3) Support for entrepreneurial communities

The Company appoints experts in various fields, such as certified public
accountants, lawyers, and university professors, as independent outside

As a pioneer in the field of IT venture and student entrepreneurship, we are undertaking thefollowing initiatives to contribute to the development of future entrepreneurs andthe further revitalization of entrepreneurship in Japan.
-Holding programming classes for junior and senior high school students-Speaking at and supporting various entrepreneurship-related events-Support students by sponsoring programming classes-Providing office space for study groups and seminars

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directors.
4) Regular Board of Directors meetings and high attendance rate

The Board of Directors meets regularly on a monthly basis to share
information on business conditions and management issues in a timely
manner and engage in active discussions. 19 Board of Directors meetings were
held annually for FY2022 and 24 meetings were held annually for FY2021.

22

4. Appendix

List of game titles in operation
Title NameDistributor

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.

Feb 2015

Derby Stallion: Masters

Drecom Co., Ltd.

Nov 2016

Everybody's Golf

Forward Works Corporation

Jul 2017

Kirara Fantasia

Aniplex Corporation

Dec 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

Forward Works Corporation

Nov 2019

New Japan Pro-Wrestling Strong Spirits

Bushiroad Inc.

Feb 2022

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23

4. Appendix

Glossary
Terminology

Meaning

Games distributed in-house

Games for which Drecom is the 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 the distributor, Drecom.

Net sales

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

Developer

A company responsible for the 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".

Research and development 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 the introduction of many new measures and contents

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24

Please refer to the Fact Sheet on our website for consolidated financial results, cost of sales, SG&A expenses,
etc., and billing sales in the game business. https://drecom.co.jp/ir/factsheet_202303Q1.pdf

Among the perceptions, strategies, plans, etc., 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 ourbusiness, social trends, and changes in relative competitiveness due to demand trends for the services we provide.