COLOPL : 3Q FY Sep.2023 Question and Answer Summary（223KB）

Note: This document is a translated version for reference purposes only. Therefore, any discrepancy may occur with the Japanese original version. Please refer to the Japanese version if you find anything unclear. COLOPL, Inc. takes no responsibility for any problems of translation.

Q&A for 3Q FY2023 Operating Results Briefing

This financial results meeting was held on Wednesday, August 2, 2023 at 4:00 p.m. Below is a summary of the question and answer session.

Q：Your quarterly performance has been up and down. Could you tell us if the third quarter is a difficult period for COLOPL group to improve its performance?

A：Smartphone games tend to have earnings skewed by anniversary events and seasonal factors. The fourth quarter includes anniversary events such as "Shironeko Project" and "DRAGON QUEST WALK," and the third quarter is a period of preparation for these events. The situation may change if a major hit title is produced, but at present, we think that ups and downs will occur depending on anniversary events and seasonal factors.

Q：We feel that conditions in the smartphone game market were not good in the third quarter. We would like to ask you how you view market conditions.

A：The overall feeling in the market is that the market has remained mostly flat, and existing popular titles and titles from overseas developers are dominating the market share, making it difficult for new titles to hit the market. Even under these market conditions, we will continue to take on the challenge of creating new titles that will surprise users in our own way and by utilising technology.

Q：What is the scale of development and revenue assumptions for blockchain game?

A：Although they are being developed on roughly the same scale as smartphone games, the development period is shorter and costs are lower than for smartphone games. The simplicity of the game model has led to greater efficiency, and we have been able to proceed to a closed beta within approximately one year of development. Regarding revenue, we expect IEO and pickaxe sales in the initial stage, and secondary distribution fee of NFT gemstones to be the main source of revenue in the mid-to-long-term. We believe that the "Proof of Gaming" allows NFT gemstones to have sustainable value, making the model sustainable.

Ｑ：With regard to the investment and development business, I would like to ask about the timing

of re-accelerating the pace of investment.

A：Market conditions in the emerging listed markets are gradually improving after a downturn, but we believe there is a time lag before the changes are reflected in the valuations of the unlisted company. Therefore, we intend to re-accelerate our investment at an appropriate time when valuations are revised in the future.

Ｑ：What is the background to the decline in other sales in the entertainment business and what is the outlook for the future?

A：Other sales fluctuate depending on the timing of events, etc., and there was no special movement in the third quarter under review. The structure is designed to generate a certain level of profit because expenses decrease in tandem with a decline in sales.

Ｑ：Regarding expenses, the ratio of royalties to sales increased. Is this due to the partnership with "Paris Saint-Germain" in the blockchain game?

A：The partnership with Paris Saint-Germain did not affect the third quarter results. The increase in royalties as a ratio of sales was due to collaborations on existing titles.

Ｑ：What are the current KPIs for "DRAGON QUEST WALK" and what is your policy for stable, long-term operation?

A：We are unable to provide detailed information on KPIs for third company IP title. We believe that "DRAGON QUEST WALK" offers users a variety of ways to play the game, based on the premise of long-term operation. In the third quarter, the "DRAGON QUEST VI" event was well received, and we will continue to pursue the unique Dragon Quest experience and continue to operate the game with the aim of keeping users entertained for a long time to come.

Ｑ：In Prime Minister Kishida's keynote speech at WebX 2023, he mentioned "Brilliantcrypto," although its name was withheld. What is the relationship between the government project and "Brilliantcrypto"?

A：Web3 is listed as one of the government's growth strategies, and we understand that the public and private sectors are currently working together to develop the business environment. As a member of the industry, we are involved in providing opinions to the government regarding the business environment. The environment in Japan regarding the crypto asset business is more developed than overseas, and it is becoming easier for listed companies to engage in this business. As for Prime Minister Kishida's keynote speech, we believe that it was mentioned because it is an

ambitious project for a listed company under these circumstances.

ー Thank you very much ー