GungHo Online Entertainment : Financial Results for the 1st Quarter of Fiscal Year Ending December 31, 2023

Financial Results for the 1st Quarter of Fiscal Year Ending December 31, 2023

[Japanese GAAP] (Consolidated)

May 11, 2023

Name of listed company: GungHo Online Entertainment, Inc.

Stock exchange listing: Tokyo Stock Exchange

Code number: 3765

URL: https://www.gungho.co.jp/

Representative: Kazuki Morishita, Representative Director & President, CEO

Contact: Kazuya Sakai, Director & CFO, Executive General Manager of Finance Accounting Division

TEL: [phone]

Quarterly securities report issuing date: May 11, 2023

Dividend payment date: -

Supplemental information for quarterly financial statements: Yes

Quarterly financial results briefing session: Yes (For institutional investors and analysts)

(Amounts are rounded off to the nearest million yen)

1. Consolidated financial results for the 1st quarter of fiscal year ending December 31, 2023 (January 1, 2023 through March 31, 2023)

(1) Consolidated operating results (accumulated)

(Percentages indicate the changes from previous year)

Net sales

Operating profit

Ordinary profit

Quarterly net profit

Millions of yen

%

Millions of

%

Millions of yen

%

Millions of yen

%

yen

Three

months ended

30,722

28.3

8,483

13.0

8,828

11.6

5,150

6.8

March 31, 2023

Three months ended

23,954

-17.8

7,507

-29.0

7,909

-27.7

4,822

-28.8

March 31, 2022

(Note) Comprehensive

Three months ended 6,306 millions of yen

Three months ended 6,035 millions of yen

income

March 31, 2023

(4.5%)

March 31, 2022

(-24.5%)

Quarterly net profit

Diluted quarterly

per share

net profit per share

Yen

Yen

Three months ended

83.78

83.13

March 31, 2023

Three months ended

76.17

75.67

March 31, 2022

(2) Consolidated financial position

Total assets

Net assets

Shareholder's

equity ratio

Millions of yen

Millions of yen

%

Three months ended

149,944

132,004

77.0

March 31, 2023

Fiscal year ended

152,210

132,834

77.0

December 31, 2022

(Note)

Shareholder's

Three months ended

115,392 millions of yen

Fiscal year ended

117,250 millions of yen

equity

March 31, 2023

December 31, 2022

2. Dividends

			Dividends per share
		1st quarter	2nd quarter	3rd quarter		4th quarter	Total
		Yen	Yen	Yen		Yen	Yen
Fiscal	year ended	―	0.00	―		30.00	30.00
December 31, 2022
Fiscal year ending	―
December 31, 2023
Fiscal year ending
December 31, 2023		―	―		―	―
(Forecast)
(Note1)	Revision of forecasts for dividends most recently announced: No
(Note2)	Dividend forecasts for the fiscal year ending December 31, 2023 have yet to be determined.

3. Consolidated Earnings Forecast for the Fiscal Year Ending December 31, 2023(From January 1, 2023 to December 31, 2023)

The GungHo Group engages in the content business that is highly novel in nature and is subject to facing sudden, short- term changes in the operating environment. Since this makes it difficult to calculate proper and rational earnings forecasts, the Company adopts the policy of providing timely disclosure of financial results and summary of operations on a quarterly basis while refraining from disclosing its full-year consolidated earnings forecast.

*Notes

1. Changes in significant subsidiaries during the period
2. Adoption of any particular accounting methods for the preparation of quarterly consolidated financial statements
3. Changes in accounting policies, changes in accounting estimates and restatements
4. 1. Changes in accounting policies due to revisions of accounting standards
   2. Changes in accounting policies due to reasons other than 1)
   3. Changes in accounting estimates
   4. Restatements

• No
• No
• Yes
• No
• No
• No

1. Number of shares of common stock issued
2. 1. Number of shares of common stock outstanding at the end of the period (including treasury shares)
   2. Number of treasury shares at the end of the period
   3. Average number of shares during the first quarter

As of March	87,255,916	Fiscal year ended	91,199,116
31, 2023	shares	December 31, 2022	shares
As of March	27,359,623	Fiscal year ended	29,304,473
31, 2023	shares	December 31, 2022	shares
As of March	61,479,759	As of March 31,	63,309,345
31, 2023	shares	2022	shares

• This quarterly Summary of Consolidated Financial Results (Quarterly "Tanshin") is outside the scope of the external auditor's quarterly review procedure.
• Appropriate use of earnings forecast and other matters to note

・This document contains forward-looking statements including forecasts in relation to the results of operations and they are based on information available to the Company at the time of preparing the document along with certain assumptions that are deemed to be rational. Actual results may differ materially from those expressed or implied by the statements due to various factors. For the assumptions underlying the earnings forecast presented and other information regarding the use of such forecasts, please refer to "Information Related to the Consolidated Earnings Forecast and Other Future Projections" on page 2 of the Appendix.

• The Company plans on holding a financial results briefing session for investors as follows. All documents etc. distributed at the briefing session will be posted on the company's website after the briefing session is held.
• Financial results briefing session for institutional investors and analysts: Thursday, May 11, 2023

○Table of Contents for Appendix
1. Qualitative Information Concerning Consolidated Financial Results
for the Quarter Under Review	2
(1) Description of Operating Results	2
(2)	Description of Financial Position	2
(3)	Information Related to the Consolidated Earnings Forecast and Other Future Projections	2
2. Quarterly Consolidated Financial Statements and main notes	3
(1)	Quarterly Consolidated Balance Sheets	3
(2)	Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements of
	Comprehensive Income	5
	Quarterly Consolidated Statements of Income (Three-months Period)	5
	Quarterly Consolidated Statements of Comprehensive Income (Three-months Period)	6
(3) Notes to the Quarterly Consolidated Financial Statements	7
	(Notes on the Going-concern Assumption)	7
	(Notes on Any Significant Changes to the Amount of Shareholders' Equity)	7
	(Changes in accounting policies）	7
	(Segment Information)	7
	(Additional Information)	7
	(Significant Subsequent Events)	7

1

1. Qualitative Information Concerning Consolidated Financial Results for the Quarter

(1) Description of Operating Results

Japan's game market shrank in 2021 to 2.27 trillion yen*, down 0.8% year-on-year, due to a slight decrease in the software market offsetting the growth in the hardware market.

On the other hand, the global game content market expanded in 2021 to 21,892.7 billion yen*, up 6.1% year-on-year, owing to the continued growth of the mobile game market and the expansion of the PC online game market.

The outlook for the economic situation remains unclear due to the unstable international situation and certain areas seen as stagnant due to the impact of COVID-19.

Against this backdrop, our company continued to concentrate on game development with a focus on global distribution in aim of the "creation of new value," and in order to "maximize existing value," we have worked to maintain and expand MAU (Monthly Active Users: the number of users who log into the game at least once a month), and have made efforts to strengthen the brands of each of our games.

As for existing games, Puzzle & Dragons (referred to as "P&D" henceforth) celebrated the 11th anniversary of its service launch on February 20, 2023. P&D has had continuous updates, such as adding new dungeons and other items, improving game contents, and collaborating with famous characters from other companies, and events including the 11th anniversary commemorative events. These have all had the main objective of ensuring players continue to enjoy the game over the long term, and MAU continued to be firm. Nintendo SwitchTM "Ninja-Gum" action game "Ninjala" is continuing to expand its user base through collaboration events, online competitions, TV anime broadcasts, and a wide range of cross-media deployment, and the total number of downloads exceeded 10 million worldwide on February 14, 2023.

Looking at the businesses of our subsidiaries, the Ragnarok-related titles distributed by Gravity Co., Ltd. and its consolidated subsidiaries are continuing to contribute to our consolidated financial results with ongoing updates and events.

As a result, the Company's consolidated results of operations for the period under review were as follows. Net sales increased 28.3% year-on-year to JPY30,722 million, operating profit increased 13.0% year-on-year to JPY8,483 million, ordinary profit increased 11.6% year-on-year to JPY8,828 million, and quarterly net profit attributable to owners of parent company increased 6.8% year-on-year to JPY5,150 million.

The GungHo Group is a single-segment company; therefore, no segment information is disclosed.

*"Famitsu" 2022 Game White Paper

(2) Description of Financial Position

Total assets for the period under review stood at JPY149,944 million, a decrease of JPY2,266 million from the end of the previous fiscal year. This was mainly attributable to a decrease in cash and deposits by acquiring treasury shares, which was resolved at the Board of Directors held on February 14, 2023.

Total liabilities amounted to JPY17,940 million, a decrease of JPY1,435 million from the end of the previous fiscal year. This was primarily attributable to a decrease in accounts payable.

Total net assets came to JPY132,004 million, a decrease of JPY830 million from the end of the previous fiscal year. This was mainly due to the acquisition of treasury shares, which was resolved at the Board of Directors held on February 14, 2023.

(3) Information Related to the Consolidated Earnings Forecast and Other Future Projections

The GungHo Group engages in the content business that is highly novel in nature and is subject to facing sudden, short-term changes in the operating environment. Since this makes it difficult to calculate proper and rational earnings forecasts, the Company adopts the policy of providing timely disclosure of financial results and summary of operations on a quarterly basis while refraining from disclosing its full-year consolidated earnings forecast.

2