Colopl : Summary of 2Q FY Sep.2017 Operating Results（KB）

(cumulative total: October 1, 2016 - December 31, 2016)

(Amounts less than ¥ million are rounded down.)
(The percentage indicates the change from the same quarter of the previous year)

※This chart is a translation of the original release in Japanese. In the event of any discrepancy, the original release in Japanese shall prevail.

※As the consolidation began in Sep.2016 3Q, we do not release the YoY comparison.

For details on each data item contained in the financial statements, please refer to Financial Data.

On February 1, we announced our financial results for the first quarter (October-December) of the fiscal year ending September 30, 2017.

Highlight
- The fiscal year ending September 30, 2017 is to all intents and purposes a new start, when, among other things, we have been fundamentally restructuring our organization since listing.
- In 1Q (October-December) we made a good start, with results showing progress against the full-year forecasts of 26.2% for net sales and 33.3% for operating profit.
- In particular, our year-end events were a success and we managed to significantly increase December sales of White Cat Project, White Cat Tennis and Black Cat.
- We implemented the largest restructuring of our organization since listing, adopting the style of separating the business units that allocate and manage engineers, etc. and the business units that execute game business.
- We are continuing to steadily expand in the three areas under our VR strategy.

1Q consolidated results were net sales of 14.4 billion yen, operating profit of 3.6 billion yen, and an operating margin of 25.4%. Costs were down overall, and advertising expenses also decreased by 1.1 billion yen to 1.6 billion yen, compared to 2.7 billion yen in 4Q of the previous fiscal year. However, our operating leverage is high and the operating margin fell 5.5 pts due to decreased sales. This was a good start, with progress against the full-year forecasts of 26.2% for net sales and 33.2% for operating profit.

Sales of our core title White Cat Project (FY14 app) slumped, reflecting lackluster sales in October and November despite recovery in December due to the success of year-end promotions. Similarly, sales of Black Cat (FY13 app) continued to fall despite recovery in December. 1Q sales of White Cat Tennis (FY16 app) cooled down compared to the upsurge directly after release, making the transition to stable sales. Consequently, the sales ratios of FY13 apps, FY14 apps and FY16 apps were similar.

We implemented the largest restructuring of our organization since listing. Previously, recruitment plans for engineers, etc. and staffing were left to each game development business unit, but last December we set up a new section specifically for this purpose and this section is now responsible for recruitment plans and staffing for all teams. We expect that this will result in the optimal allocation of human resources, thus improving hourly workforce productivity.

Under our VR strategy, we continue to strengthen our foothold in the three areas of investment, VR Game and 360o movie as before: (i) On the investment front, we announced the establishment of Colopl VR Fund 2, which was established on January 31. (ii) Regarding VR games, we are rolling out titles for newly launched HMDs including PSVR. (iii) In the 360o movie area, we have significantly expanded contents since the launch of the service in May 2016. A system for mass production is also in place.

In 1Q, we made a good start, with both net sales and operating profit exceeding one quarter of the full-year forecast. Our 2Q forecast is based on the assumption that, as every year, the environment will be tough due to seasonal factors. New titles will start to contribute to results from 3Q. Our aim is to maintain the current level and release new titles to plan, and we would like to achieve the figures given as guidance initially.