Q1 FY2022
Financial Results Presentation Materials
Drecom Co., Ltd
July 29, 2021

Table of Contents

1. Review of Q1 (Apr-Jun) FY2022 Results

2. Medium-Term Plan (fiscal year ending March 31, 2023)

3. Forecast for Q2 (Jul-Sep) FY2022

4. appendix

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2

1. Review of Q1 (Apr-Jun) FY2022 Results

Summary of Q1 FY2022 Results
Despite of the intense emerging title competition, Operating profit margin and EBITDA margin increased in YoY.

Q1
(Apr-Jun)
FY2022

Q1(Apr-Jun)
FY2021(Unit: million yen)

Q4
(Jan-Mar)FY2021

YoY

QoQ

Revenue

2,661

3,303

-642

2,684

-23

Operating income

504

623

-229

368

+136

Operating income ratio(%)

18.9

18.8

NA

13.7

NA

EBITDA

671

758

- 87

564

+107

EBITDA Margin(%)

25.2

22.9

NA

21.0

NA

Ordinary income

492

609

-117

365

+127

Net income (loss)

300

467

-167

325

-25

Copyright Drecom Co., Ltd. All Rights Reserved.

31. Review of Q1 (Apr-Jun) FY2022 Results

Forecast (5/13) vs. ActualStrong sales of anniversary event titles, further successful cost reduction drove profits(Unit: million yen)17
Impact of product mix

350

137
Fixed cost
reduction

504

Q1 FY3/22
Operating Income(Actual)Q1 FY3/22
Operating Income(Forecast May 13th)

Revenue

2.66 billion yen

Budget: 2.70 billion yen

Operating income

0.5 billion yen

Budget: 350 million yen

Ordinary income

0.49 billion yen

Budget: 350 million yen

Net income

0.3 billion yen

Budget: 250 million yen

Copyright Drecom Co., Ltd. All Rights Reserved.

-1.4%+44.0%.

+40.5%.

+20.0%.

4

1. Review of Q1 (Apr-Jun) FY2022 Results

Analysis on Operating Income (Q4 FY21 vs Q1 FY22)
Lower fixed costs, due to further cost control, and progress in development (increase in capitalization) offset lower revenue,
resulting in higher profits

R&D(-) 15

Revenue
decline(-) 23

Variablecost(+) 36

Labor(+) 71

Outsourcing(-) 75Advertising(-) 3

Communication(-) 7

Depreciation(+) 16

Cost of
Goods
(+) 5

Other
Expenses(+) 4

Other accounts
Transferamount(+) 126

Increase in revenue (decrease in expenses)
Decrease in revenue (increase in expenses)

Q4 Operating
Income369
Copyright Drecom Co., Ltd. All Rights Reserved.

Q1 Operating
Income504

5

1. Review of Q1 (Apr-Jun) FY2022 Results

Topics by Business
Improving profitability while planting seeds for future growth➢

Titles that celebrated release anniversary events in April and May performed well. Gained stable support from fans byminimizing impact of strong competing titles➢

Many titles in operation continue to post stable profits. Unprofitable titles are being addressed with the aim of returning to
profitability in first half.

Game➢

Development is progressing smoothly. Six new titles are under development for release in the second half of this year.

➢

Secured and established dedicated human resources and departments to launch new businesses in light novel and comic
domains. Promote business development through collaboration and M&As.

➢

As development of location-based titles featuring popular IPs developed using AROW progresses, preparations forcommercialization of “AROW” for game development companies also progress.

New Business Development

Copyright Drecom Co., Ltd. All Rights Reserved.

➢“AKROGLAM”, Evil Prince and the Puppet continue to focus on IP development through fan community expansion➢

Load testing services are expanding through collaboration, while orders for Rooot are increasing.

6

Table of Contents

1. Review of Q1 (Apr-Jun) FY2022 Results

2. Medium-Term Plan (fiscal year ending March 31, 2023)

3. Forecast for Q2 (Jul-Sep) FY2022

4. Appendix

Copyright Drecom Co., Ltd. All Rights Reserved.

7

2. Medium-Term Plan (fiscal year ending March 31, 2023)

Medium-Term Plan

Drecom at the end of FY23
Drecom Today

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8

2. Medium-Term Plan (fiscal year ending March 31, 2023)

Medium-Term Plan (cont'd)
A comprehensive entertainment company that provides a wide variety of digital entertainment
content globally with a focus on IP
1) Successful Launch of New Titles
Main initiatives:• New Japan Pro-Wrestling STRONG SPIRITS• D_CIDE TRAUMEREI
9 new titles (Not-yet-announced)

1) Further Expansion of Game Business

2) IP Acquisition, Cultivation, and Development

Main initiatives:• Turnaround unprofitable titles by theend of first half of FY2022

2) Breaking away fromdependence on the F2P model
Main initiatives:• AROW (SaaS)• AKROGLAM (EC)Main initiatives:

Increasing
Business
Stability

GrowthPromotion• AKROGLAM• Wizardry VA (tentative)• Evil Prince and the Puppets

3) Expanding into Overseas Market
Main initiatives:• Derby Stallion: Masters• DISGAEA RPG

4) Business Development in New Area

• Rooot (SaaS)

Main initiatives• Server Stress Testing Service (SaaS)• AROW (Technology)• Load Testing Services (Technology)• AKROGLAM (Music)• Rooot (Marketing)

Copyright Drecom Co., Ltd. All Rights Reserved.

92. Medium-Term Plan (fiscal year ending March 31, 2023)

Stabilization of Game Business
Now with a healthy portfolio with revenue coming from multiple hit titles, not from few hit titles

2010

2011

Revenue by Titles’ Release Year

Operating Income
by Titles’ Release Year

Release Year of Titles

Release Year of Titles

2014

2015

2016

FY2020
Copyright Drecom Co., Ltd. All Rights Reserved.

2017

2018

FY2021

2019

2020

2010
2,010

2011
2,011

2014
2,014

FY2020

2016
2,016

2017
2,017

2018
2,018

2019
2,019

2020
2,020

FY2021102. Medium-Term Plan (fiscal year ending March 31, 2023)

IP Spiral Strategy
Aiming to Achieve “Spiral Growth,” Placing IP at the Core

Owned IPwith a competitive edge

VerticalGrowthx

MobileGames

Consumer game

Increase in overall value
through cross-media
deployment of IP

Cross-media development

Diversification of profit
opportunities

Animation
Comicsx• Diversification of business models

Horizontal
GrowthMusic

Light novels

IP• Overseas Expansion• Develop know-how acquired in thegame business in other areas

Copyright Drecom Co., Ltd. All Rights Reserved.

Develop know-how
acquired in the gamebusiness in other areas

Overseas
Expansion

Business Model
Diversification

112. Medium-Term Plan (fiscal year ending March 31, 2023)

Flow of IP development, Cultivation, and Monetization
Organize the characteristics of each entertainment domain, from IP development to monetization. Seek development that matchescharacteristics of each domain.

IP Development

Music

Light novels

ComicsCopyright Drecom Co., Ltd. All Rights Reserved.

Fostering IP

Consumergame

Animation

Drama

Monetization of IP

Movie

MobileGames

12

2. Medium-Term Plan (fiscal year ending March 31, 2023)

Initiatives in the Areas of Music, Light novels, and Comics
Focus on music, light novels, and comics this fiscal year.
Acquire and establish new dedicated personnel and departments, and start specific initiatives.
IP Development

Focused media

Publicly announced initiatives

Future approaches

Guidelines for the current term
• Further expansion of AKROGLAM

In-house investment

Music• Expansion and publication of unpublishedprojects• Securing necessary functions and humanLight novels
none
ComicsCopyright Drecom Co., Ltd. All Rights Reserved.

Alliances and collaborations, including
M&A

resources through alliances and collaborations,
including M&As
• Build a foundation for expansion in the• next fiscal year and beyond

132. Medium-Term Plan (fiscal year ending March 31, 2023)

Project Summary (as of July 31, 2021)
The number of titles under development with a total of 12 development projects underway as of the end of July 2021
Business

statusDefinition.

Number of projects

Operation

Titles in operation

11

Details➢ Third-party Distribution : 8 titles*.
➢ In-house distribution: 3 titles➢ Thrid-party Distribution:

Development

Game Business

Titles under developmentwith a view to release

Development

9•

New Japan Pro-Wrestling STRONG SPIRITS•

D_CIDE TRAUMEREI•

Derby Stallion: Masters•

Overseas versions of domestic hit IP titles➢ In-house distribution:•

Wizardry VA (tentative)➢ Unpublished:

PrototypeOperation
New Business
Development
Development

Titles that are in thedevelopment stage before
this development

Services in operation
Services underdevelopment with a viewto release

3
3
1

•

Location-based IP title using AROW•

Unannounced titles x 3➢ Evil Prince and the Puppets➢ Original title developed by Studio Rex, a group company➢ Unannounced title x 1➢ AKROGLAM➢ Load Testing Service➢ Rooot➢ New services in music field

Number of titles in operation as of the end of July 2021. Series titles are counted as one title.
Copyright Drecom Co., Ltd. All Rights Reserved.

14

2. Medium-Term Plan (fiscal year ending March 31, 2023)

Summary of Titles Under Development (as of July 31, 2021)
9 new titles under development, 6 titles scheduled for release in second half of FY2022.
New/Existingoverseas expansion

IP/OriginalDistribution Area

Publisher1) New Japan Pro-Wrestling STRONG SPIRITS

new

IP

domestic and overseas

other company

2) D_CIDE TRAUMEREI

new

original

domesticother company

3) Derby Stallion: Masters

existing title
overseas expansion

IPoverseas

other company

4) Unreleased Titles (1)neworiginal

undecided

Drecom5) Unreleased Titles (2)existing title
overseas expansion

IPoverseas

other company

6) Unreleased Titles (3)neworiginal

undecided

DrecomWizardry VA (tentative)

new

IP

domestic and overseas

Drecom2) Location-based IP Titles using AROW

new

IP

undecided

undecided3) Unreleased Titles (1)

new

IP

undecided

undecided

Title

Releasescheduledduring FY22***

6

Releasescheduled after
FY23
***

3

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15

2. Medium-Term Plan (fiscal year ending March 31, 2023)

Improve profitability of the game business
As of Q1 of FY2022, we had two unprofitable titles.
Aim to return to profitability by end of first half of FY2022 and record profits from all titles in operation.
Operating income of 11 titles* in operationin Q1 FY2022

Loss

Profit* Number of titles in operation at end of July 2021. Series titles are counted as one title, including three "enza" titles and Boku and Dragon.

Copyright Drecom Co., Ltd. All Rights Reserved.

16

2. Medium-Term Plan (fiscal year ending March 31, 2023)

IP Acquisition, Cultivation and Development: AKROGRLAM / Evil Prince and the Puppet
User base continues to grow for both services➢

Business development projects in the music domain among entertainment domains otherthan games.

➢

Original IP under development; official twitter account launched in November,official website in December 2019.

➢

As of July 2021, the number of followers of the official twitter account is approximately
24,000, and the number of subscribers to the official YouTube channel is approximately
13,000.

➢

As of July 2021, the number of followers of the official twitter account reached
75,000. The fan community is steadily expanding.

➢

An official store opened in April 2021, and e-commerce also launched.

➢

Online Collaboration Live "Denon Club x AKROGRAM - Future Summer-"
will be held in August 2021.

Copyright Drecom Co., Ltd. All Rights Reserved.

172. Medium-Term Plan (fiscal year ending March 31, 2023)

Overseas Expansion of Existing Titles"DISGAEA RPG" will be released on April 13, 2021
DISGAEA RPG

Derby Stallion: Masters©2016ParityBit©Nippon Ichi Software ©2021 FW Published by Boltrend Games.

➢

DISGAEA RPG, the English version of Maikai Senki Disgaea RPG, released globally on April 13, 2021.

➢

Derby Stallion: Masters is also scheduled for release in the first half of FY2022.

➢

Expanding into overseas markets in collaboration with Boltrend Games➢We will continue to increase the ratio of overseas sales through the overseas development of domestic hit titles and aim togrow to the same scale as domestic sales in the future.

Copyright Drecom Co., Ltd. All Rights Reserved.

18

2. Medium-Term Plan (fiscal year ending March 31, 2023)

Business Development in Areas Other than Games
Increase in sales and number of companies using Rooot; progress in development of IP location-based titles using AROW

Load Testing Service➢ Location-based game titles dealing with popular IP to be
developed using AROW is moving forward.
➢ Decided to change the target from individual developers to➢ Released in December 2020, a fan community promotion
service using Twitter.

➢ Strengths include problem solving and proposals thatstrike a balance between business and systems, based➢ Number of companies using the system on steadyon experience gained from past business operations,game development companies, which was originallyexpansion trend and increase to 5.0x in Q2 of FY 2022

such as support for load testing prior to service launchenvisioned.

compared to Q3 of FY 2021

and advice on overall activities to improve system

Commercialization to coincide with the release of theavailability, with a focus on DevOps support forabove location-based game titles.

services in operation.
5.0x➢ Start SaaS business to diversify revenue model andbreak away from dependence on F2P revenue.

Q3 Q3
FY3/21

Q2 Q2
FY3/22(Forecast)
Number of inductees(Q3 FY2021/ Q2 FY2022 (Forecast)
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Table of Contents

1. Review of Q1 (Apr-Jun) FY2022 Results

2. Medium-Term Plan (fiscal year ending March 31, 2023)

3. Forecast for Q2 (Jul-Sep) FY2022

4. Appendix

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3. Forecast for Q2 (Jul-Sep) FY2022

Management Policy for the Current Fiscal Year
➢ Return unprofitable titles to profitability during the first half of FY2022 and maintain profitability➢ New titles scheduled to be released during FY2022 are sure to be hits.
Game
Business

New titles are expected to contribute to earnings in second half of FY2022.
Aim for earnings growth from second half of FY2022.

➢ For new business development in areas other than games, we will focus on music, light novels, and comics. Secure necessaryfunctions, know-how, and human resources through in-house investment in music, and through alliances and collaborations
including M&A in light novels and comics.
New
Business
Development➢ Stabilize the existing game business and invest the profits generated in the creation of new entertainment services in gameperipheral areas.

➢ The office was relocated to accommodate a remote work style. We are focusing on creating a strong and flexible organizationthat will not waver even in the midst of major changes, such as developing a working environment that can secure excellent
human resources and ensure diversity in working styles.
Other➢ Continue to focus on group-wide performance expansion and business growth through further collaboration with subsidiaries

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21

3. Forecast for Q2 (Jul-Sep) FY2022

Guidance for Q2 FY2022
Earnings recovered in reaction to anniversary event in Q1 and the absence of major events. R&D and capitalization increased as
development progressed.
Q1
Apr-Jun 2022
ActualQ2
Jul-Sep 2022
forecast(Unit: million yen)

Q2
Jul-Sep 2022

Q2 Jul-Sep 2022
(cumulative total)

Q1 Apr-Jun 2022

(cumulative total)

Forecastchange%change%Revenue

2,661

2,339

5,000

2,661

-322

-12.1

6,184

-1,184-19.1

Variable cost

394

406

800

394

12

-3.0

945

-145

-15.3

Fixed cost

1,762

1,688

3,450

1,762

-74

-4.2

4,185

-735

-17.6

R&D cost

117

143

260

117

26

22.2

165

95

57.6

Capitalization

496

734

1,230

496

238

48.0

208

1,022

491.3

Operating income

504

246

750

504

-258

-51.2

1,052

-302

-28.7

Ordinary income

492

258

750

492

-234

-47.6

1,032

-282

-27.3

Net income

300

200

500

300

-100

-33.3

825

-325

-39.4

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22

Table of Contents

1. Review of Q1 FY3/10 Results

2. Medium-Term Plan (fiscal year ending March 31, 2023)

3. Forecast for Q2 (Jul-Sep) FY2022

4. Appendix

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23

4. Appendix

Revenue of Game Business (by Distribution Type)
Third Party Distribution Titles (IP game applications, enza titles)(Unit: million yen)

Drecom Distribution Titles

838

846

834
1,127
999

925

737

857

1,377

1,325

1,275

1,297

1,288

Q2

Q3

Q4

Q1

684

530

791

1,412

729

1,185

1,220

Q3

Q4

558

467

1,374

1,444

Q1

Q2

787
755

514

1,837

1,635

1,726

1,753
1,419

1,398

1,590
1,311

862

Q1

FY2018Q2FY2019Q3
FY2020

Q4

Q1

Q2

Q3
FY2021Q4Q1Q2 (Forecast)
FY2022* Sales of titles distributed by other companies are recorded on a net basis, while sales of titles distributed by the company are recorded on a gross basis.
* Excludes sales from platforms.
Copyright Drecom Co., Ltd. All Rights Reserved.

24

4. Appendix

Revenue of Game Business (by Release Year)

Before 2013

(Unit: million yen)

2014

2015

2016

2017

2018

2019

2020

608
437

553

124

161
409

2
226

381

824

281

154

611

635

204
220

293
292

750
571

147

482

48

272
948

191

558

550

590

509

272

393

1,187

662

24

563

776

140

2021

142

591

640

690

567

471

145

527

478

167

540

117

579

297

372

445

391

267

139

224

102

348

319

290
106

111

144

435

388

511

248

371

544

273
284

221

364
343

286

375

597

405
437

456
167

164

272
381

288

262
257

118

142

152

127

414

427

373

366

239

243

215

215

203

189

186

175

143

120

118

112

127

122

111

118

110

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

4Q

Q1

Q2

Q3

Q4

Q1

FY2018FY2019FY2020FY 2021

FY2022(Forecast)* Sales of titles distributed by other companies are recorded on a net basis, while sales of titles distributed by the company are recorded on a gross basis.
* Excludes sales from platforms.
Copyright Drecom Co., Ltd. All Rights Reserved.

25

4. Appendix

Revenue by Business Segments (FY2019 - Q1 FY2022)
game

Media

(Unit: billion yen)

61
127
10

0
222

129

222

14

21

2,671

2,640

Q4

Q1

100

267

73

132

3,051
2,643

2,962

2,882

2,644

2,473
2,120

Q1

3,242

Q2

Q3

FY2019Copyright Drecom Co., Ltd. All Rights Reserved.

Q4

2,384

2,181

2,103

Q1

Q2

Q3

FY2020

Q4

Q1

Q2

Q3

FY2021

FY202226

4. Appendix

Operating Income and EBITDA (FY2019-FY2022)
Operating income

EBITDA(Unit: million yen)

800

759
624

582

672

632
565
504

428

196
128

204

222

198
86

▲1

▲14
▲161

128

165

369

318

294

▲126

▲297
▲418
Q1

Q2

Q3

FY2019Copyright Drecom Co., Ltd. All Rights Reserved.

Q4

Q1

Q2

Q3

FY2020

Q4

Q1

Q2

Q3

FY2021Q4Q1

FY202227

4. Appendix

ESG Initiatives
1) Establish a working environment that takes into account human rights, diversity,and flexibility
In addition to prohibiting discrimination in the workplace and implementing
appropriate labor management, we are focusing on maintaining the health of ouremployees and creating a working environment that considers and respects the life
events and life stages of our employees by introducing remote work and encouraging

In order to achieve sustainable growth and maximize
shareholder value, and to ensure sound and appropriate
management, Drecom is focusing on strengthening
governance, especially the appointment of female directors,
the appointment of many independent outside directors withdifferent professional backgrounds, and active discussions.

male employees to take childcare leave.
2) Support for employees' health promotion and skill development
We are taking the following measures to create an1) Actively appointing female directors

As of January 2021, the ratio of female directors is 20%.

environment where employees can exercise their fullpotential in good health.

2) Balance between internal directors and independent outside directors-Installation of massage rooms

As of July 2021, the ratio of independent outside directors to all directors is 60%.

-Cafe space in partnership with a popular cafe
-Support for holding knowledge-sharing events

3) Diversity of Independent Outside Directors

and dissemination of technology-related information

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

3) Support for entrepreneurial communities

As a pioneer in the field of IT venture and student entrepreneurship, we are undertaking the following
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

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. 24 Board of Directors meetings are held
annually for FY2021 and 28 meetings are held annually for FY2020.

-Support students by sponsoring programming classes-Providing office space for study groups and seminars

Copyright Drecom Co., Ltd. All Rights Reserved.

28

4. Appendix

PL Summary
Q1
Apr-Jun 2022

Q4
Jan-Mar 2021

QoQ (%)(Unit: million yen)

Q1
Apr-Jun 2020

YoY (%)

1,621

-8.1

-27.5

1,764

2,236

Payment fee

220

-11.9

-19.3

250

273

Copyright fee

55

-30.7

-17.7

79

67

Labor cost

551

-7.8

15.8

597

475

Outsourcing costs

533

16.2

-24.6

458

706

Postage

139

5.2

-7.5

132

150

Software amortization

139

-5.2

11.3

147

125

Depreciation and amortization

20

-25.3

241.2

28

6

Purchases of raw materials

366

2.6

9.0

357

336

Transfer amount to other accounts

-614

27.2

228.5

-482

-187

1

-148.0

NA

-3

0

207

4.3

-11.1

198

233

Total hawker fees

535

2.8

20.9

551

443

Payment fee

28

15.8

6.7

24

26

Advertising expenses

16

26.7

-34.9

13

25

Labor cost

184

-11.4

19.6

208

154

Recruitment costs

36

86.6

148.7

19

14

R&D cost

117

14.6

54.5

102

76

Depreciation and amortization

6

-14.9

101.6

7

3

Amortization of goodwill

0

NA

NA

12

0

144

10.7

1.8

162

142

Total cost

Work in process
Other

Other
Copyright Drecom Co., Ltd. All Rights Reserved.

29

4. Appendix

BS Summary(Unit: million yen)

Q1
Apr-Jun 2022

Q4
Jan-Mar 2021

Q3
Oct-Dec 2021

note

7,630

7,669

5,913

Cash equivalent

5,299

5,288

3,466

Trade receivables

1,756

1,841

1,930

Other

574

539

516

Fixed assets

2,158

1,941

1,522

266

101

153

Mainly office equipment

1,065

878

800

Mainly released game apps and apps under development

0

0

12

Goodwill arising from M&A activities

Deferred tax assets

311

434

283

Other

515

526

271

Total assets

9,789

9,610

7,436

Current liabilities

2,924

3,181

2,788

Accounts payable and accrued expenses

1,051

1,024

1,152

Loans and bonds

1,012

740

750

860

1,417

886

2,706

2,573

1,122

2,429

2,430

1,010

Other

277

143

112

Net assets

4,158

3,855

3,525

Total assets / Total liabilities and net
assets

9,789

9,610

7,436

Current assets

Buildings, tools, furniture and fixtures
Software assets (including suspense accounts)
Goodwill

Other
Fixed liabilities

Loans and bonds

Copyright Drecom Co., Ltd. All Rights Reserved.

Linked to changes in sales

Bank loans / bond issuanceBank loans / bond issuance30

Among the perceptions, strategies, plans, etc., described in this document, the outlook is not a historicalfact but contains uncertain elements. Actual results may differ materially from those in the forwardlooking statements for a number of reasons. Important factors that may affect actual business results
include economic conditions surrounding our business, social trends, and changes in relativecompetitiveness due to demand trends for the services we provide. Important factors that may affect ourbusiness performance include, but are not limited to, the following.