Q1 FY2017 Operating Results

August 9, 2017

DeNA Co., Ltd.

Copyright © DeNA Co., Ltd. All Rights Reserved.

  1. Financial Results

  2. Strategy and Initiatives

  3. Guidance

  4. Reference

1

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Financial Results Summary

  • Core game business results and non-GAAP operating profit were in line with Q1 guidance

    *One-time factors discussed on slide 6

  • After careful review of the expected income tax benefit from the closure of the West game business, determined that no additional benefit could be taken for Q1

    (billion yen)

    Item

    FY2016

    FY2017

    Q1

    Q2

    Q3

    Q4

    Q1

    YoY Change

    QoQ Change

    Revenue*

    38.3

    38.2

    32.2

    35.1

    36.5

    -5%

    4%

    Revenue excl. Sports

    32.8

    32.0

    31.6

    33.7

    30.1

    -8%

    -11%

    Operating profit (IFRS)

    7.4

    7.9

    3.4

    4.5

    6.4

    -13%

    42%

    Operating profit(Non-GAAP)**

    7.8

    7.9

    3.4

    5.8

    7.4

    -4%

    27%

    Operating profit excl. Sports

    6.0

    5.7

    5.0

    7.2

    5.2

    -13%

    -28%

    Profit before tax

    7.0

    8.1

    5.8

    4.6

    8.1

    15%

    74%

    Income tax expense

    1.7

    1.8

    -12.7

    2.7

    2.5

    45%

    -8%

    Profit for the period

    5.3

    6.3

    18.6

    2.0

    5.6

    5%

    185%

    Profit for the period: Owners of the parent

    5.2

    6.1

    17.6

    2.0

    5.3

    3%

    163%

    Profit for the period: Non-controlling interests

    0.2

    0.2

    1.0

    -0.1

    0.3

    71%

    -

    EPS (Yen)

    35.63

    41.78

    121.13

    13.94

    36.67

    3%

    163%

    *For IFRS revenue, we defer revenue over the period that we expect the user to use a particular game in games that have a sin gle payment model or are similar to that model.

    **For full reconciliation of GAAP to Non-GAAP metrics, please see the reference section. 2

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    Financial Results by Segment (IFRS)

    (billion yen)

    Item

    FY2016

    FY2017

    Q1

    Q2

    Q3

    Q4

    Q1

    YoY

    Change

    QoQ

    Change

    Revenue

    38.3

    38.2

    32.2

    35.1

    36.5

    -5%

    4%

    Game

    26.1

    24.3

    23.6

    27.4

    24.3

    -7%

    -11%

    E-commerce

    4.6

    4.9

    5.1

    4.5

    4.0

    -15%

    -12%

    Sports

    5.5

    6.3

    0.6

    1.4

    6.3

    16%

    348%

    New Businesses and Others

    2.3

    3.0

    3.1

    2.1

    2.1

    -8%

    2%

    Adjustments

    -0.3

    -0.2

    -0.2

    -0.3

    -0.2

    -

    -

    Operating profit

    Operating profit margin

    7.4

    19%

    7.9

    21%

    3.4

    11%

    4.5

    13%

    6.4

    18%

    -13%

    -

    42%

    -

    Segment profit / loss*

    7.2

    8.0

    3.6

    6.9

    6.5

    -10%

    -6%

    Game

    6.9

    6.3

    6.1

    9.4

    7.3

    7%

    -22%

    E-commerce**

    0.4

    0.6

    0.5

    0.7

    -0.5

    -

    -

    Sports

    1.8

    2.2

    -1.6

    -1.3

    2.2

    25%

    -

    New Businesses and Others

    -1.2

    -0.9

    -1.4

    -1.6

    -1.4

    -

    -

    Adjustments

    -0.7

    -0.1

    -0.0

    -0.3

    -1.2

    -

    -

    Other income ***

    0.1

    0.1

    6.1

    0.1

    0.3

    95%

    108%

    Other expenses***

    0.0

    0.2

    6.2

    2.5

    0.4

    1248%

    -85%

    *During Q1 FY2017 we reviewed the segment allocationof overall companycosts, and reflected those changes for each segment for past quarter results starting Q1 FY2016. The breakdown of businesses and services in each segment has not changed. These updated segment operating results have not been audited

    **Recorded 872 million in cost of sales as corrections of costs attributed to DeNA Travel during FY2016 and before

    ***Includes non-extraordinary gains and losses under Japanese GAAP (e.g. Loss on sales / retirement of tangible / intangible assets)

    3

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    Cost and Expense Breakdown (IFRS)

    (billion yen)

    Item

    FY2016

    FY2017

    Q1

    Q2

    Q3

    Q4

    Q1

    YoY Change

    QoQ Change

    Cost of Sales

    14.9

    14.8

    12.9

    13.7

    15.0

    1%

    9%

    Personnel Expenses

    1.3

    0.9

    1.1

    0.8

    1.1

    -13%

    44%

    Depreciation and amortization

    2.2

    2.3

    2.3

    2.1

    2.1

    -3%

    -1%

    Outsourcing expenses

    2.5

    2.9

    2.6

    2.5

    2.8

    12%

    14%

    Commission fees

    6.1

    5.8

    5.8

    6.4

    5.8

    -5%

    -10%

    Others*

    2.8

    2.9

    1.2

    1.9

    3.1

    12%

    65%

    Selling, general, and

    administrative expenses

    16.2

    15.4

    15.7

    14.5

    15.0

    -7%

    3%

    Personnel Expenses

    3.7

    3.6

    3.6

    3.7

    4.1

    11%

    12%

    Sales promotion & Advertising expenses

    3.2

    2.8

    2.9

    2.2

    2.6

    -18%

    17%

    Outsourcing expenses

    & Commission fees

    7.3

    7.0

    7.0

    6.6

    6.3

    -13%

    -4%

    Others

    2.0

    2.0

    2.3

    2.0

    1.9

    -1%

    -3%

    Other income**

    0.1

    0.1

    6.1

    0.1

    0.3

    95%

    108%

    Other expenses**

    0.0

    0.2

    6.2

    2.5

    0.4

    1248%

    -85%

    Consolidated employee

    headcount

    2,497

    2,496

    2,413

    2,400

    2,441

    -2%

    2%

    *Recorded 872 million in cost of sales as corrections of costs attributed to DeNA Travel during FY2016 and before

    **Includes non-extraordinary gains and losses under Japanese GAAP. (e.g. Loss on sales / retirement of tangible / intangible assets)

    4

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    Game Business

  • Virtual currency consumption and segment operating profit performed in line with guidance

    Virtual Currency Consumption* Game Business Segment Operating Profit**

    FY2016 FY2017

    *Includes consumptionof free virtual currency

    FY2016 FY2017

    **During Q1 FY2017 we reviewed the segment allocation of overall companycosts, and reflected those changes for each segment for past quarter results starting Q1 FY2016. These updated segment operating results have not been audited.

    5

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    E-commerce Business

    Revenue*

    Processing Settlement

    Updates

    • Transactions from non-DeNA services continue to grow

      Travel

    • Gross transaction value for Q1 of 15.4 billion yen** (12.2 billion yen for Q1 FY2016)

    • Recorded 872 million (maximum possible) in cost of sales as corrections of costs attributed to DeNA Travel during FY2016 and before

      • Have always taken measures to amend the discrepancy between the data in the systems used for travel agency operations and on account balances

      • Identified maximum possible additional costs while pursuing

        initiatives that aimed to completely resolve the issue, including reforming our accounting system, increasing data accuracy, and strengthening oversight

      • Since impact on the financial results for previous fiscal years is

        limited, the maximum possible amount is all recorded in Q1

        Auction

    • Pace of decline in the number of paid members is softening

      *Previous quarter revenue has been restatedto exclude the DeNA Shopping and au Shopping Mall businesseswhich were sold on December 28, 2016.

      **From FY2017, the gross transaction value for the travel business includes the gross transaction value from the Singaporesubsidiary. (Q1 FY2017 gross transaction value: 1.3 billion yen) 6

      Copyright © DeNA Co., Ltd. All Rights Reserved.

      Sports Business

  • Yokohama DeNA Baystars achieved new team record for average stadium attendance per home game for the first half of the season (38 games total)

  • Signed the I☆ (LOVE) YOKOHAMA Agreement (Comprehensive Agreement to Promote Sports and

    Energize Regional Economy) with the City of Yokohama in March 2017

  • The Yokohama Stadium expansion plan was approved by the Yokohama City Council in June 2017

Home Game

Average Stadium Attendance*

Expansion Plan for Yokohama Stadium (Announced March 2017)

  • Increase capacity to 35,000 (currently 29,000)

  • Starting construction in November 2017, with construction to mainly take place in the off-season, in preparation for usage during the 2020 Tokyo Olympics

  • Total cost: approx. 8.5 billion yen (estimate)

*Average stadium attendance per game for Yokohama DeNA Baystars home games each regular season (including home games held outside Yokohama Stadium)

**The 2017 figure is the average attendance per home game for the first half of the 2017 season (38 games), while the 2011 to 2016 figures represent the average attendance per home game for the who le season 7

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  1. Financial Results

  2. Strategy and Initiatives

  3. Guidance

  4. Reference

8

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Strengthening Business Portfolio and View for Mid to Long Term Growth

  • Continue to strengthen the core game business

  • Over the long term, create multiple new business pillars

  • Use FY2020 as a checkpoint to confirm our progress towards achieving our long term goals

  • Proactively utilize M&A opportunities to strengthen our portfolio

Operating Profit 100 billion yen level

Other Pillars

Operating Profit

Checkpoint to Long Term Goal

  1. billion yen Game

    Business

    FY2016 Actual FY2020 Long Term Goal 9

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    DeNA's Business Portfolio

    Games & Entertainment

    Sports E-Commerce &

    Net Services

    Internet + AI

    Healthcare Automotive

    10

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    Game Business (Nintendo Alliance)

    • Released in February 2017

    • Focusing on operations as we perform rapid updates and run events for this title with the goal of making it enjoyable over a long period of time

    • Reached a satisfactory level of sales

      © 2017 Nintendo / INTELLIGENT SYSTEMS

    • Released for iOS in December 2016 and for Android in March 2017

    • Distributing in 165 countries and regions, progress in download growth

© 2016 Nintendo

*All titles referenced on this slide are published by Nintendo 11

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Game Business (Nintendo Alliance)

Future titles

  • Scheduled for release during FY2017

  • More detailed information about the release timing will be provided later

  • The Nintendo Partnership is a mid to long term partnership, and we will announce more details about the future title lineup at the appropriate timing

  • Future partnership titles are in development

    *All titles referenced on this slide are published by Nintendo 12

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    Game Business (Excluding Nintendo)

    • Good progress in strengthening of in-game operations of existing key 1st and 2nd party titles as well as in new releases

Gyakuten Othellonia

Exceeded 12 million downloads (as of July 28, 2017) Promotional push started end of July,

including TV commercials

Uta Macross

Launched August 3, 2017

First rhythm game in the Macross series Reached 200,000 pre-registrations

13

*Images are of the game in development

©'82,'84,'92,'94,'95,'97,'02,'15 BW ©'07 BW/MFP・M ©'09,' 11 BW/MFP ©DeNA

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New Businesses & Others (Updates): Media Business*

Business Results Recent Updates

(million yen)

Item

FY2016

FY2017

Q1

Q2

Q3

Q4

Q1

Revenue*

976

1,484

1,229

-29

31

Segment profit / loss*

-603

-236

-849

-1,195

-586

*The above figures are based on management accounting, following the allocation of shared costs for the relevant business; review procedures have not been undertaken in accordance with the Financial Instruments and Exchange Act.

*From FY2017, the Curation Platform Business was renamed the "Media Business."

  • On August 8, established MERY Co., Ltd.*, a joint venture with SHOGAKUKAN formed to jointly operate a digital media business mainly focused on women's fashion

    *An equity method affiliate company

    (Ownership: SHOGAKUKAN 66.66%; DeNA 33.34%)

  • Will reform the operating structure of the previous MERY service, and create all articles through a new process, with the aim to create a completely new type of media

  • This joint venture will incorporate SHOGAKUKAN's expertise in article publishing, including planning, editing, and reviewing, and DeNA's expertise in building systems and online marketing

  • DeNA has no plans to operate media independently

  • Expect losses for the media business to continue to shrink quarter-over-quarter

    14

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    New Businesses & Others (Updates): Automotive Business

    • Provides a service that allows for smooth taxi dispatch, making use of a demand forecasting system that utilizes AI

    • Plan to run field tests from September 2017 in certain areas in Yokohama, in cooperation with the City of Yokohama and the Kanagawa Taxi Association

    • These field tests are a part of the I☆ (LOVE) YOKOHAMA Agreement

TaxiBell: Taxi Dispatch App Utilizing AI

Taxi

Driver's Dedicated Device

Dispatch App

User

Increase revenue for taxi

*

companies through

matching and AI-driven demand forecasting

System

*Trademark pending for the service name and logo 15

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  1. Financial Results

  2. Strategy and Initiatives

  3. Guidance

  4. Reference

16

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Consolidated Financial Guidance for Q2 FY2017

Q1

FY2016

Q2 Q3

Q4

FY2017

Q1

Q2e

38.3

38.2

32.2

35.1

36.5

36.3

32.8

32.0

31.6

33.7

30.1

30.0

Revenue(IFRS)

Revenue excluding Sports

(bill ion yen)

Q1

FY201

Q2

6

Q3

Q4

FY2017

Q1

Q2e

7.4

7.9

3.4

4.5

6.4

7.8

+0.1

-0.2

-0.4

+0.5

+0.1

-0.2

+0.3

+0.2

+6.4

+0.8

+0.9

-

-0.0

-

-5.9

-

-

-0.1

7.8

7.9

3.4

5.8

7.4

7.5

6.0

5.7

5.0

7.2

5.2

5.5

Reconciliation of operating profit to non-GAAP operating profit

Operating profit (IFRS)

Accounting adjustments related to seasonality, net Acquisition and restructuring related expenses Sales and disposition related gains

Non-GAAP operating profit

Non-GAAP operating profit excl. Sports

17

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  1. Financial Results

  2. Strategy and Initiatives

  3. Guidance

  4. Reference

18

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IFRS to Non-GAAP Reconciliation

FY 2016

(bil lion yen)

FY 2017

Q1 Q2 Q3 Q4 Q1

Reconciliation of Operating profit to Non-GAAP operating profit

Operating profit(IFRS) 7.4 7.9 3.4 4.5 6.4

Accounting adjustments related to seasonality, net +0.1 -0.2 -0.4 +0.5 +0.1

Acquisition and restructuring related, net +0.3 +0.2 +6.4 +0.8 +0.9

Sales and disposition related gain (loss) -0.0 - -5.9 - -

Non-GAAP operating profit 7.8 7.9 3.4 5.8 7.4

Profit (loss) from seasonal sports business -1.8 -2.2 +1.6 +1.3 -2.2

Non-GAAP operating profit excluding Sports 6.0 5.7 5.0 7.2 5.2

FY 2016

FY 2017

Q1 Q2 Q3 Q4 Q1

Reconciliation of Operating profit to Non-GAAP EBITDA

Operating profit(IFRS) 7.4 7.9 3.4 4.5 6.4

Accounting adjustments related to seasonality, net +0.1 -0.2 -0.4 +0.5 +0.1

Acquisition and restructuring related expenses +0.3 +0.2 +6.4 +0.8 +0.9

Sales and disposition related gains -0.0 - -5.9 - -

Depreciation and amortization +2.7 +2.8 +2.9 +2.7 +2.6

Retirement of fixed assets (excl. one-time factors) +0.0 +0.2 +0.1 +0.8 +0.3

Non-GAAP EBITDA 10.5 10.9 6.4 9.4 10.4

*Please consult the Q4 FY2015 Operating Results for more information regarding our introduction of Non -GAAP disclosure

19

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Consolidated Cash Flow Overview

(billion yen)

FY2016

FY2016

Apr-Jun

FY2017

Apr-Jun

Operating cash flow (A)

22.7

5.8

11.7

Profit before tax

25.6

7.0

8.1

Depreciation and amortization

11.1

2.7

2.6

Income tax paid

-9.8

-3.9

-2.1

Others

-4.2

-0.0

3.1

Investing cash flow (B)

-7.4

-2.2

-3.1

Financing cash flow

-2.4

-4.8

-5.9

Cash dividends paid

-2.9

-2.8

-4.5

Cash dividends paid to non-controlling shareholders

-2.0

-2.0

-1.2

Others

2.5

0.0

-0.3

FCF ((A)+(B))

15.3

3.6

8.6

Cash and cash equivalents (Consolidated)

88.2

73.7

90.8

(Non-consolidated basis)

57.0

47.0

61.4

20

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Segment Breakdown

Segments

Businesses

Game Business

Japan and international game businesses

E-Commerce Business

Sub-segment names (Major service names in parenthesis)

  • Travel (DeNA Travel)

  • Auction (Mobaoku)

  • Processing Settlement (Paygent)

Sports Business

Baseball, Running Club, etc.

New Businesses and Others

Sub-segment names (major service names in parenthesis)

  • IP-generating platform (Manga Box, Everystar, MyAnimeList)

  • Healthcare (MYCODE, KenCoM, Aruite Otoku)

  • Automotive

  • Other internet services (SHOWROOM, Mirrativ)

  • Media

21

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The information and data contained within this presentation and these presentation materials have been determined based on information available as of August 9, 2017. The company disclaims any obligation to update or revise such information and data, whether as a result of new information, future events or otherwise.

In addition, any forward-looking statements contained in this presentation or these presentation materials are based on our opinions and information available as of August 9, 2017, and involve uncertainty. Please be aware that the actual performance data and similar information are subject to influence from diverse factors and may differ from the forecasts presented herein.

DeNA Co., Ltd.

22

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DeNA Co. Ltd. published this content on 09 August 2017 and is solely responsible for the information contained herein.
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