Consolidated financial results Third quarter fiscal year Ending March 31, 2024
(Under Japanese GAAP)
January 30, 2024
Listed company name:

Drecom Co., Ltd.

Listing

Tokyo Stock Exchange

Code number

3793

URL:

https://drecom.co.jp/

Representative

Representative Director: Yuki Naito

Contact person

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

Scheduled date to file quarterly securities report: February 8, 2024
Scheduled start date to commence dividend payments: －Preparation of supplementary materials on quarterly financial results: Yes
Holding of quarterly financial results briefings: Yes

1.
(1)(Yen amounts rounded down to millions, unless otherwise noted.)
Consolidated financial results nine months ended September 30, 2023
(From April 1, 2023 to December 31, 2023)
Consolidated financial results (cumulative)
Net sales

Nine months ended

September 30, 2023
September 30, 2022

Operating Income

Million yen

%

7,637
8,380

Note: Comprehensive income

-8.9
3.7

Nine months ended

%

789
2,100

-62.4
47.9

729
2,025

%

Attributable toowners of parent
quarterly net income

-64.0
46.7

97
1,166

%

-91.7
36.7

101 Million yen (-91.3%)
1,168 Million yen (36.7%)

Quarterly
Diluted net earnings
per share

Yen

September 30, 2023
September 30, 2022

Yen

3.41
40.98

3.41
40.91

Consolidated financial condition
Total Assets

Nine months ended

September 30, 2023

Fiscal year ended

March 31, 2023

Net Assets

Million yen

13,487

Equity-to-asset ratio

Million yen

12,226

Reference: Equity capital As of December 31, 2023
As of March 31, 2023

2.

Million yen

Ordinary income

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

Quarterly
Net earnings per share(2)(% is Year-on-year rate of increase / decrease)

Net assets per share
%

Yen

5,653

41.5

195.78

5,631

45.6

195.705,601 Million yen
5,579 Million yen

Cash dividends
Annual dividends

Fiscal year ended

March 31, 2023
March 31, 2024
March 31, 2024
(Forecast)

Note:First quarter-end Second quarter-end
JPY
JPY

-

0.00
0.00

Third quarter-end
JPY-

Fiscal year-end
JPY

Total
JPY

5.00

5.00

0.00

0.00

Revision to the forecast of cash dividends most recently announced: Yes
For details, please refer to the " Notice of Revision of Full-Year Earnings Forecasts and Revision of Dividend Forecasts(No Dividend)" released today (January 30, 2024).

1

3.

Forecast of consolidated financial results for fiscal year ending March 31, 2024 (April 1, 2023 - March 31, 2024)(% increase or decrease from the fiscal year ending March 31, 2023)

Net sales
Fiscal year ending

March 31, 2024

Note:

Million yen

10,000Operating income%-7.4

Million yen

800

Profit attributable toowners of parent

Ordinary income
%

-64.9

Million yen

700

%

-68.1

Million yen

100

Earnings
per share

%

-91.4

Yen

3.51

Revision to the forecast of cash dividends most recently announced: Yes
For details, please refer to the " Notice of Revision of Full-Year Earnings Forecasts and Revision of Dividend Forecasts(No Dividend)" released today (January 30, 2024).

*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 issued shares at end of period (including treasury shares)
As of December 31, 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 December 31, 2023

612,695 shares

As of March 31, 2023

621,595 shares(iii) Average number of shares outstanding during period (cumulative from the beginning of the fiscal year)
Nine months ended December 31, 2023

28,558,079 shares

Nine months ended December 31, 2022

28,473,581 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.

*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 January 30, 2024.
The financial results presentation materials to be distributed at this briefing will be posted on the company's website
immediately after the briefing.

2

Table of Contents
1. Qualitative information on consolidated financial results forthird quarter ended September 30, 2023 ........................ 4(1) Explanation of operating results.................................................................................................................................. 4(2) Explanation of financial position ................................................................................................................................. 5(3) Explanation of consolidated earnings forecasts and other forward-looking information .......................................... 5
2. Quarterly consolidated financial statements and key notes ............................................................................................ 6(1) Quarterly consolidated balance sheet ......................................................................................................................... 6(2) Quarterly consolidated statements of income and quarterly consolidated comprehensive income statements ...... 8
Quarterly consolidated statement of income ............................................................................................................... 8(Cumulative period for consolidated third quarter, nine months ended December 31, 2023) ................................ 8
Consolidated quarterly statements of comprehensive income .................................................................................... 9(Cumulative period for consolidated third quarter, nine months ended December 31, 2023) ................................ 9(3) Notes to quarterly consolidated financial statements .............................................................................................. 10(Notes on going concern assumptions) ....................................................................................................................... 10(Notes on significant changes in the amount of shareholders' equity)....................................................................... 10(Information by Segment) ........................................................................................................................................... 10(Significant subsequent events) .................................................................................................................................. 113

1. Qualitative information on consolidated financial results for third 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 people's
expectations. We also strive to create unprecedented value and deliver experiences that captivate users. In themedium term, we aim to become a comprehensive entertainment company that provides a wide variety ofentertainment content globally based on IP and technology, and to achieve sustainable growth and increase corporate
value.
In the mainstay game business, our main business is game development and operation, and 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 are also experimentally launching newservices that utilize our knowledge of Internet services and advanced technologies; and are conducting trials towardcommercialization.
For the third quarter consolidated cumulative period, net sales were 7,637,627 thousand yen (down 8.9% YoY),
operating income was 789,399 thousand yen (down 62.4% YoY), and ordinary income was 729,210 thousand yen(down 64.0% YoY). In addition, the Company posted an extraordinary loss of 609,185 thousand yen due to the closureof two new titles released at the end of fiscal year ended March 31, 2023 and in the first quarter of fiscal year ended
March 31, 2024, and the decision to discontinue development of one title under development that had not yet beenannounced or was in the prototype stage, resulting in an impairment loss of 609,185 thousand yen. As a result, net
income attributable to parent company shareholders for the quarter was 97,393 thousand yen (down 91.7% YoY).
The results for each segment for third quarter consolidated fiscal year under review are as follows.

Game businessIn the game business, existing titles under operation continued to perform well in the third quarter, exceeding
expectations. In this segment, we have been aiming to accumulate earnings by releasing new titles in addition to thetitles under operation. However, due to the lower-than-expected revenue of the newly released titles, we reviewed
our operation/development portfolio and decided to close two new titles released at the end of fiscal year ended
March 31, 2023 and in the first quarter of fiscal year ended March 31, 2023, and to discontinue the development of
one title under development that was not yet announced or in the prototype stage.
Net sales decreased from the same period of fiscal year ended March 31, 2023, mainly due to lower sales of other
titles under management than in fiscal year ended March 31, 2023, despite strong sales of mainstay IP titles.
Profit decreased from the same period of fiscal year ended March 31, 2023 due to the above-mentioned decrease
in revenue and an increase in expenses associated with the release of two new in-house distribution titles at the endof fiscal year ended March 31, 2023 and in the first quarter of fiscal year ended March 31, 2024.
As a result, segment sales amounted to 7,300,248 thousand yen (down 10.5% YoY), and segment income amounted
to 1,492,361 thousand yen (down 39.4% YoY).
In this segment, our core business, we will continue to strive to maintain stable earnings from titles in operation,
review overall strategies for mobile game titles under development, reduce costs, and take other measures to improve
the profit-and-loss situation as quickly as possible, aiming to increase sales and profits through contributions fromnew titles to be released in the future. We will also review the overall strategy of mobile game titles underdevelopment and reduce costs to improve profitability as soon as possible.

Media businessIn the media business, while working on the publishing and video business to develop and nurture IP and diversify
revenue-generating channels, we have been publishing monthly from the light novel label "DRE Novels" and the comic
label "DRE Comics". In addition, utilizing our knowledge of Internet services and advanced technology, we aredeveloping new businesses in the Web3 domain and providing "Rooot" and "Fanflu," fan marketing support services
utilizing SNS, and "Mx.Load," a load testing service.

4Net sales increased year-on-year mainly due to the start of publication of "DRE Novels" and "DRE Comics" as wellas the NFT collection sales of the blockchain game "Eternal Crypt - Wizardry BC-", which is being developed jointlywith another company.
As for profits, new business areas such as publishing, video, and Web3 are making steady progress, but the loss
amount increased from the same period of fiscal year ended March 31, 2023 due to the ongoing cost advance.
As a result of the above, segment sales amounted to 337,378 thousand yen (up 48.5% YoY) and segment loss
amounted to 702,962 thousand yen (segment loss of 360,162 thousand yen in the same period of fiscal year ended
March 31, 2023). In this segment, we will continue to make investments to realize our mid-term goal, but we arereviewing some of our plans as we implement company-wide cost reductions.
Looking ahead, we will work to further improve profitability in our mainstay game business and aim to increase
sales and profits through contributions from new titles to be released in the future. In addition, we will continue toinvest and focus on business expansion into entertainment areas other than games and the development andnurturing of our own IP, aiming to grow into a comprehensive entertainment company with IP at its core.

(2) Explanation of financial position(Assets)
At the end of the third quarter, the total current assets amounted to 8,008,196 thousand yen, an increase of 159,801
thousand yen from the end of consolidated fiscal year ended March 31, 2023. This was mainly due to increases of
257,959 thousand yen in accounts receivable-trade and 412,934 thousand yen in other current assets, respectively,
despite a 559,144 thousand yen decrease in cash and deposits. Fixed assets totaled 5,479,630 thousand yen, an
increase of 1,101,628 thousand yen from the end of fiscal year ended March 31, 2023. This was mainly due to anincrease of 1,110,555 thousand yen in software in progress.
As a result, total assets amounted to 13,487,827 thousand yen.

(Liabilities)
At the end of the third quarter, the total current liabilities amounted to 4,238,527 thousand yen, a decrease of
61,967 thousand yen from the end of consolidated fiscal year ended March 31. This was mainly due to a decrease of
450,070 thousand yen in income taxes payable and an increase of 324,150 thousand yen in bank loans payable,
respectively. Noncurrent liabilities amounted to 3,595,644 thousand yen, up 1,300,862 thousand yen from the endof consolidated fiscal year ended March 31. This was mainly due to an increase of 1,330,350 thousand yen in bankloans.
As a result, total liabilities amounted to 7,834,171 thousand yen.

(Net assets)
At the end of the third quarter, the total net assets amounted to 5,653,655 thousand yen, an increase of 22,535
thousand yen from the end of consolidated fiscal year ended March 31. This was mainly due to an increase of 31,048
thousand yen in capital stock and capital surplus, respectively, and net income attributable to parent company
shareholders of 97,393 thousand yen for the period, while shareholders' dividends decreased by 145,518 thousandyen.
As a result, the equity ratio was 41.5% (45.6% at the end of consolidated fiscal year ended March 31).

(3) Explanation of consolidated earnings forecasts and other forward-looking information

Taking into consideration the consolidated financial results for the first nine months ended March 31, 2024 andthe outlook for the future, we have revised our consolidated financial forecast for the fiscal year ending March 31,
2024 (full year), which was announced on July 27, 2023.
For details, please refer to the " Notice of Revision of Full-Year Earnings Forecasts and Revision of Dividend
Forecasts(No Dividend)" released today (January 30, 2024).
The consolidated forecasts are based on information available as of the date of publication of this document, andactual results may differ from the forecasts due to various factors in the future.

5

2. Quarterly consolidated financial statements and key notes(1) Quarterly consolidated balance sheet(Unit: thousand yen)

Fiscal year ended
March 31, 2023
AssetsCurrent assets
Cash and deposits
Accounts receivable
Goods
Work in progress
Prepaid expenses
Other
Total current assets
Fixed assets
Tangible fixed assets
Building
Accumulated depreciation
Buildings, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Leased assets
Accumulated depreciation
Lease assets, net
Total tangible fixed assets
Intangible fixed assets
Software
Software in progress
Total intangible fixed assets
Investments and other assets
Investments in securities
Deferred tax asset(Security) deposit
Other
Total investments and other assets
Total fixed assets
Total assets

6

Nine months ended
December 31, 2023

6,044,573
1,484,658
5,268
17,482
148,928
147,482
7,848,394

5,485,429
1,742,618
12,08947,767
159,873
560,416
8,008,196

191,229-31,029
160,200
85,502-53,143
32,358
7,232-3,107
4,125
196,683

191,229-44,313
146,916
87,636-64,457
23,178
7,232-3,932
3,300
173,395

201,601
3,026,917
3,228,519

32,134
4,137,473
4,169,607

59,926491,226
199,404
202,242
952,800
4,378,002
12,226,397

69,926546,696
199,404
320,600
1,136,627
5,479,630
13,487,827

(Unit: thousand yen)

Fiscal year ended
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
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 available-forsale securities, net of taxes
Foreign currency translation adjustments
Total accumulated other comprehensive
incomeSubscription warrant
Noncontrolling interest
Total net assets
Total liabilities and net assets

7

Nine months ended
December 31, 2023

449,977
100,000
1,780,750
1,281
554,851
481,316
129,549
802,766
4,300,494

697,621100,000
2,104,900
1,388
663,387
31,246
41,538598,444
4,238,527

1,952,750
3,524
100,000
238,5072,294,782
6,595,277

3,283,100
2,563
100,000
209,9813,595,644
7,834,171

1,811,311
2,068,472
1,967,564-266,237
5,581,111

1,842,360
2,099,521
1,919,438-259,894
5,601,426-2,079

-641

82

790

-1,997

149

49,067
2,938
5,631,120
12,226,397

49,067
3,012
5,653,655
13,487,827

(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, 2023)(Unit: thousand yen)

Nine months ended
December 31, 2022

Nine months ended
December 31, 2023

(April 1, 2022 to December 31, 2022) (April 1, 2023 to December 31, 2023)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividends received
Gain on investment in capital
Other
Total non-operating income
Non-operating expenses
Interest expense
Fees and commissions
Other
Total non-operating expenses
Ordinary income
Extraordinary loss
Impairment loss
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

8

8,380,181
4,692,793
3,687,388
1,586,767
2,100,620

7,637,627
4,939,665
2,697,961
1,908,561
789,399

24
3,066
2,156
5,247

29
2,979
1,739
90
4,837

30,98447,0032,452
80,4402,025,427

30,56433,133
1,329
65,027729,210336,259
336,259
1,689,168
513,472
7,206
520,679
1,168,489
1,765
1,166,723

609,185
609,185
120,024
76,351-56,104
20,247
99,7772,384
97,393

Consolidated quarterly statements of comprehensive income(Cumulative period for consolidated third quarter, nine months ended December 31, 2023)(Unit: thousand yen)

Nine months ended
December 31, 2022

Nine months ended
December 31, 2023

(April 1, 2022 to December 31, 2022) (April 1, 2023 to December 31, 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

9

1,168,489

99,777

138

1,438

-296
-157
1,168,331

708
2,146
101,923

1,166,565
1,765

99,5392,384

(3) 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.

(Information by Segment)
Segment information
I. Previous nine months ended, from April 30, 2022 to December 31, 2022 consolidated period
1. Information on the sales, profits or losses per reporting segment(Unit: Thousand yen)

Reporting Segment
GamebusinessMediabusiness

Quarterly
consolidated
incomestatement
amount (Note)

Adjustment

Total

Sales
(1) Sales to externalcustomers(2) Sales or transfers
inside or between
segments

8,152,936

227,244

8,380,181-

8,380,181

-

-

-

-

-

Total

8,152,936

227,244

8,380,181-

8,380,181

Segment profit or Loss

2,460,783-360,162

2,100,620-

2,100,620

Note: Segment income or loss (-) is consistent with operating income in the quarterly consolidated statements of income.
2. Information on Impairment Loss on Fixed assets and Goodwill by Reportable Segment

Impairment losses were recorded in the "Game business" segment. The amount of impairment loss recorded was
336,259 thousand yen for the third quarter of Fiscal year ended March 31, 2023.
II. Nine months ended, from April 1, 2023 to December 31, 2023 consolidated period
1. Information on the sales, profits or losses per reporting segment(Unit: Thousand yen)

Quarterly
consolidated
incomestatement
amount (Note)

Reporting Segment

GamebusinessMediabusiness

Total

Adjustment

Sales(1) Sales to externalcustomers(2) Sales or transfers
inside or between
segments

7,300,248

337,378

7,637,627-

7,637,627

-

3,600

3,600

-3,600-Total

7,300,248

340,978

7,641,227-3,6007,637,627

Segment profit or Loss

1,492,361-702,962

789,399-

789,399

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

10

2. Information on Impairment Loss on Fixed assets and Goodwill by Reportable Segment
Impairment losses were recorded in the "Game business" segment. The amount of impairment loss recorded was609,185 thousand yen for the third quarter of Fiscal year ended March 31, 2024.

(Significant subsequent events)
Not applicable11