Gree fy2012 q1-1

Copyright © 2004-2007 GREE,Inc. All Rights Reserved.Copyright © GREE, Inc. All Rights Reserved.

GREE, Inc. Financial Results for the Fourth Quarter of the Fiscal Year Ended June 30, 2012

August 14, 2012

(Revised: August 24, 2012)

Copyright © GREE, Inc. All Rights Reserved.

This document contains a partial revision to the FY2012 4Q Presentation Materials announced on August

14 (underlined below).

Revision:

“Business Strategy: Japan,” p.20

(Before)

Numerous in-house and co-branded games planned based on major IP

(After)

Numerous projects based on major IP planned, including in-house and co-branded games

Sample lineup of games planned through co-production in partnership with Namco Bandai Games Inc.


FY2012 Fourth Quarter Business Results

Business Strategy for the Fiscal Year

Ending June 30, 2013 (FY2013)

Contents


FY2012 Fourth Quarter Business Results


FY2012 Fourth Quarter Highlights

Launched GREE Platform globally, enabling

distribution of games in 169 countries (*1)

Through Funzio acquisition, secured excellent

creative talent and development and operational

expertise behind hit social games and top-ranking

titles on the U.S. App Store

Continued investing globally in hiring and other

areas. Expanded network of game studios to span

five countries—Japan, U.S., China, South Korea and

the U.K.

Focused on global expansion and improvement of

user environment, which resulted in a shortage of

major IP titles and new titles

Implemented measures to improve the GREE user

environment, including anti-RMT measures (*2),

setting of monthly purchase limits for underage

users, and discontinuation of comp-gacha functions

Formed partnerships aimed at securing major IP

titles and strengthened game development pipeline

targeting launches in FY2013

Progress of global

expansion

3

Expansion in

Japan

Global launch of GREE Platform

(*1) As of July 31, 2012

(*2) Real money trading (RMT) indicates using usage rights of GREE services to make monetary or property exchanges, as well as all

related advertising, announcing and soliciting.


FY2012 Fourth Quarter and Full-Year Financial Results

(Consolidated)

Millions of yen

4

※ FY2012 YoY change 4Q FY2012 YoY change 3Q FY2012 QoQ change

Net sales 158,231 +147% 40,080 +90% 46,189 -13%

Operating profit 82,729 +166% 18,996 +94% 24,549 -23%

Ordinary profit 81,935 +166% 18,439 +90% 24,505 -25%

Net profit 47,967 +163% 12,328 +117% 13,448 -8%

Net sales reached a record high of ¥158.231 billion (+147% YoY)

FY2012 expenses increased significantly due to costs associated with global expansion,

including labor and rental charges. However, all profit lines rose sharply as growth in net

sales outpaced growth in expenses, mainly on higher paid services revenue.


Net Sales & Operating Profit (Consolidated)

Millions of yen

5

12,410 14,302

16,372

21,093

30,432

41,529

46,189

40,080

6,221 6,924 8,199

9,789

16,646

22,535 24,549

18,996

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

2011年6月期 2012年6月期

売上高営業利益 Net sales Operating profit

FY2011 FY2012


Sales by Business (Consolidated)

Millions of yen Millions of yen

Advertisement Sales

6

Steady growth in sales of partner

advertising and reward advertising. Focused on global expansion of GREE

Platform and improving our user

environment, resulting in a shortage of

major IP titles and new titles.

10,147 11,938

13,906

18,387

27,503

38,290

42,882

36,444

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

2011年6月期 2012年6月期 FY2011 FY2012

2,262 2,363

2,466

2,706

2,928

3,238 3,306

3,636

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

2011年6月期 2012年6月期 FY2012 FY2011

Paid Services Sales


FY2012 Fourth Quarter Operating Expenses

(Consolidated)

7

Millions of yen

Rental charges: Increased in FY2012 due to higher user activity and increased number of

data centers associated with global expansion

Advertising: Increased in FY2012, but ratio of advertising expenses to sales declined YoY

due to more effective advertising based on cost performance assessment

Labor costs: Increased in FY2012 due to smooth progress of global personnel plan

FY2012 YoY change 4Q FY2012 YoY change 3Q FY2012 QoQ change

Cost of sales: 13,099 +138% 4,571 +122% 3,678 +24%

Rental charges 5,963 +120% 1,606 +52% 2,099 -23%

Labor costs 4,289 +151% 1,709 +190% 979 +75%

Others 2,846 +160% 1,254 +206% 599 +109%

SG&A: 62,403 +127% 16,512 +79% 17,962 -8%

Advertising 18,516 +36% 4,489 +14% 5,246 -14%

Paid-charge

commissions 18,809 +167% 4,958 +101% 5,501 -10%

Labor costs 7,043 +289% 2,300 +237% 1,968 +17%

Others 18,033 +255% 4,764 +121% 5,245 -9%


FY2012 Fourth Quarter Balance Sheet

(Consolidated)

Millions of yen

8

End-4Q FY2012 End-4Q FY2011 YoY change End-3Q FY2012 QoQ change

Current assets 122,287 47,607 +157% 102,657 +19%

Cash and cash

equivalents 72,759 22,254 +227% 51,662 +41%

Receivables 28,238 16,944 +67% 32,993 -14%

Others 21,288 8,407 +153% 18,001 +18%

Fixed assets 43,010 15,248 +182% 22,715 +89%

Assets 165,297 62,855 +163% 125,373 +32%

Current liabilities 68,512 25,202 +172% 53,914 +27%

Liabilities 81,311 25,393 +220% 54,102 +50%

Paid-in capital 2,179 2,135 +2% 2,172 +0%

Capital reserves 2,177 2,133 +2% 2,169 +0%

Capital reserves 79,338 33,434 +137% 67,009 +18%

Others 291 - 241 - - 80 -

Shareholders’ equity 83,985 37,462 +124% 71,270 +18%


FY2012 Fourth Quarter Cash Flow Statement

(Consolidated)

9

End-4Q FY2012 End-4Q FY2011 YoY change

Net cash provided by operating activities 59,578 15,678 +280%

Net cash provided by investment activities -24,488 -3,272 +648%

Net cash provided by financing activities 15,479 -1,090 -

Cash and cash equivalents at the end of the period 72,759 22,254 +227%

Millions of yen


Dividends

■ In FY2012, GREE’s consolidated net sales rose 146.6% and net income rose

163.0% YoY. We therefore plan to strengthen measures to return value to

shareholders.

■ We recognize shareholder returns as an important aspect of our business and will

pay dividends in line with our business performance and financial circumstances,

while also setting aside internal reserves to optimize and develop our business.

■ In line with our basic policy of tying dividend distributions to earnings results, we

target a consolidated dividend yield of 20% over the long term

■ Based on a consideration of the 146.6% increase in consolidated net sales and

163.0% increase in consolidated net income, we forecast a dividend of ¥30 per

share (FY2011: ¥9 per share) and a consolidated dividend ratio of 14.5%.

.

* FY2012 dividend distributions must be approved at the regular meeting of shareholders scheduled for September 25, 2012.

Year-end dividend forecast:¥30 per share

10


Clear

guidance

Comp-

gacha

RMT

Guidelines for comp-gacha

Guidelines for in-game notifications

Compilation of examples of comp-gacha

Guidelines on measures to prevent real money trading

Initiative Date announced

May 25

June 22

June 22

June 22

Protection

of youth

Guidelines

User

environment

Provision of an environment appropriate for young users

April 23

Initiatives to Improve User Environment

Activities of the Social Game Platform Contact Conference

Improve transparency by providing appropriate notifications regarding gacha

function terms and content

In addition to providing examples of comp-gacha, also provided game

companies with examples of functions that could interfere with the independent

and rational decision making of users and warn against their use.

Prohibition of RMT and prevention of fraud, deceitful practices, or other actions

that have an adverse impact on the user environment

Provision of an appropriate environment that not only protects young users, but

allows them to enjoy social games in the long term

Dissolution/

reorganization System Formation of committee to guide the establishment of Social

Gaming Environment Quality Council (tentative name) June 22

11


Initiatives to Improve User Environment

Formation of committee to guide the establishment of the Social Gaming

Environment Quality Association (tentative name)

Social Game Platform

Contact Conference

Dissolution and reorganization

Establishment committee

Participants • Academic experts

• Experts in the field

• Attorneys

• CESA

• Six member

corporations of Social

Game Platform Contact

Conference Regular meetings started July 25

Social Gaming Environment Quality Association

(tentative name)

Establishment date

October (tentative)

Purpose

• To promote the development of

a social gaming environment

that people can use safely

Participants (current plan)

• Academic experts

• Experts in the field

• Consumer groups

• Game companies

• Platform companies

Main activities (current plan)

Self-imposed

regulations to enhance

user environment

Educational activities

targeting youth

Consumer help desk

(management of

counseling center)

12


FY2012 Fourth Quarter Operational Review

13

Revamped UI to create new worldwide

mobile social gaming platform with unified

English- and Japanese-language design

App Portal

English

App Portal

Japanese

Launched GREE Platform globally in

May 2012

GREE’s first exhibit at E3, the largest

game show in the world

GREE’s booth featured playable demos

of 13 GREE titles and 12 GREE partner

titles.


Net sales from global (ex-Japan) market

Steady growth in net sales from

global market

14

Launched beta version of Japanese

titles globally. Planning to implement

beta promotions sequentially

Launched several in-house titles globally

0.0

0.5

1.0

1.5

2.0

2012年1-3月期 2012年4-6月期

Unit: Indexed with Jan.-Mar. 2012 net sales as 1

*Total ex-Japan net sales of GREE and Funzio


Jan.-Mar., 2012 Apr.-Jun., 2012



Secured major IP

Formed partnership with Namco Bandai

Games Inc. with a view to developing

business globally. In the first phase, launched

NARUTO Shinobi Masters (feature phone)

version on June 27th

15

©K S/S・T・P

©G・A

Copyright (Japan Only)

New game design

Launched new game Tomodachi Dogs

(English title Puffy Puppy) as a smartphone

native app in April


Business Strategy for the Fiscal Year

Ending June 30, 2013 (FY2013)


FY2013 earnings forecasts

17

FY2013

(forecast) (A)

FY2012

(actual) (B)

(A)/(B)

Change

Net sales 195,000

～205,000 158,231

+23.2%

～+29.6%

Operating income 74,000

～84,000 82,729

(10.6%)

～+1.5%

Ordinary income 74,000

～84,000 81,935

(9.7%)

～+2.5%

Net income 46,000

～52,000 47,967

(4.1%)

～+8.4%

Millions of yen

Net sales • Japan

• Europe,

North

America, Asia

Costs • Japan

• Europe,

North

America, Asia

Net sales in Japan are expected to recover and enter into a gradual

growth mode with the launch of major IP titles and new smartphone-

compatible titles

Launch in-house and co-branded games offered in Japan on the global

market. Net sales expected to grow with launch of new titles in genres

such as simulation games and card battle games

Maintain costs at an appropriate level by making cost-effective

advertising purchases and operating servers efficiently.

Make aggressive investments, especially in human resources, to create

systems to support global growth.

：

：

：

：


FY2013 Business Strategy

Improve game

KPIs

Introduce hit

titles

Expand and

improve game

design

Other

Japan Europe, North America, Asia

Expand lineup of in-house and co-

branded games based on major IP

Develop and provide new game

design to succeed major card battle

hits

Improve CSR activities and initiatives

to improve user environment

Expand lineup of simulation games

Launch additional card battle games

Improve ARPDAU and other KPIs

based on understanding of the

market characteristics of each region

Improve KPIs through introduction of

new game models, etc.

Expand area of coverage through

expansion of languages supported

18


FY2013 Business Strategy: Japan

Compliance with

guidelines

GREE

titles/jointly

launched games

GREE partner

games

Discontinuation of

comp-gacha Completed by end-

May Completed by end-

June

Discontinuation of

comp-gacha-like

functions

Completed by end-

June Completed by end-

June

Clear in-game

guidance Began implementing

sequentially in June Completed by end-

August

(For reference) Progress in compliance with guidelines

19

Coin consumption recovering in August

Company resources that had been

focused on global launch of GREE

Platform and on initiatives to improve the

user environment are now being freed to

focus on game development and

operation

Developing new game models such as

event models

FY2013 Q1 progress

July-Aug. coin consumption during first five days of month

90

100

110

7月 8月

(Unit: Indexed so that 1 = coin consumption during first five days of July)

1.1

1.0

0.9 July

2012

August

2012



20

BLEACH Soul Masters © Tite Kubo/Shueisha, TV TOKYO, dentsu, Pierrot

©GREE,Inc.


（Started preregistration on 7/20. End-Aug. launch planned)

FY2013 Major IP titles planned (selected titles) Numerous projects based on major IP planned,

including in-house and co-branded games

SUMMONNIGHT COLLECTION ©NBGI

Powered by AltPlus Inc.

(Autumn launch planned)

Pacman series

(Winter launch planned)

Idolmaster series

(Winter launch planned)

…many more game

launches also planned

Tales of Card Evolve ©MUTSUMI INOMATA ©KOSUKE FUJISHIMA ©2012 NAMCO BANDAI Games Inc.

(Summer launch planned)

Sample lineup of games planned through co-production

in partnership with Namco Bandai Games Inc.


※ Launched in July 2012

21


FY2013 New games planned (selected titles)

Animal Days MONPLA SMASH Wacky Motors

MODE STYLE Soul Island

※

Expand lineup beyond card battle games into new smartphone compatible game genres


1. Use CSR to accelerate our efforts to make the world a better place through

the power of the Internet.

2. Contribute to the sustainable development of Internet society

3. Contribute to society as a whole, recognizing our position as participants

in the economy and members of the local community

22

Support the Internet technical community and academic research

Promote the use of the Internet in economic, political, educational,

and healthcare activities

Promote culture and the arts using the Internet

Conduct educational activities that promote a safe Internet

Improve the user environment of the Internet for youth

Provide support for athletes representing Japan

Contribute to efforts to protect the environment, promote social

welfare, and provide humanitarian aid to those in need

Improve CSR activity



FY2012 CSR Activity Report* Fostering young engineers and creators

23

Sponsorship of SamurAI coding, the Information Processing Society of Japan’s

International AI Programming contest for young engineers

Support for the education of young programmers through a business/education

partnership with Vantan Contents Tracks Inc., the company that runs Vantan

Game Academy

Sponsorship of the 18th Student CG Contest sponsored by the Computer

Graphic Arts Society (CG-ARTS)

Support for CodeSprint Japan, a programming contest that originated in Silicon

Valley, as the main sponsor Joint press conference with IPSJ (April

2012)

Supporting local industries

Special sponsorship of Kochi Prefecture Social Network Game Design Contest, to

promote the creation of local industry and increase youth employment

This was the first social game contest in Japan hosted and supported by a local

NPO, the Kochi Prefecture Content Business Promotion Council (members

include the Kochi prefectural government, Shikoku Bank, and The Bank of Kochi).

The winner of the first contest, Koakuma no Joken, was released as a full-scale

game on January 23, 2012.

The second contest was won by a middle school student and the entry, Shin-Ryuki

Guild Fantasia, was released as a full-scale game on June 7, 2012.

Second Kochi Prefecture Social Network

Game Design Contest winner, Shin-Ryuki

Guild Fantasia

* Please see our webpage for more examples of CSR activities: http://www.gree.co.jp/csr/

Supporting and working with the technical community

Sponsorship of Android Bazaar and Conference 2012 Spring, hosted by Japan

Android Group and The University of Tokyo

Sponsorship of Jenkins User Conference 2012 Tokyo for users of the Jenkins

continuous integration tool

Sponsorship of Open Source Conference 2012 Kansai@Kyoto, where the latest

information on open source projects was presented


Developing and preparing to launch

further titles in addition to the card

battle games already offered

Have already attained ARPAU of

approx. US$1 from current offering of

card battle games

Achieve major improvement in KPI,

conduct ongoing promotions 24

FY2013 Business Strategy: Europe, North America, Asia

Release Android versions in addition to

iOS version

Planning launch of new games based

on the simulation game design but with

different motifs

Steady growth through two main game genres

Growth in simulation games Expansion of card battle games



25

Success through effective promotions

No. of apps

in top 100 Company

No. of

companies

6 or more Zynga(※2) 1

4 or more

Electronic Arts(※3)

TeamLava

GREE(※4)

Disney

TinyCo, Inc.

5

2 or more

Gameloft

Machine Zone, Inc

Pocket Gems, Inc.

Activision Publishing,

Inc.

Beeline Europe

Booyah, Inc.

FreshPlanet Inc.

Halfbrick Studios

Ludia

Mobage, Inc.

Supercell

Z2Live, Inc

12

Success on iPhone and iPad

Multiple titles in the top ranking of the

iPhone U.S. App Store

MODERN WAR achieved No.1 in the

Top-Grossing Ranking1 on the U.S. App

Store

Expanding lineup and gaining promotional expertise

Used effective promotions to achieve

ranking at No.21 for MODERN WAR on

the Top Grossing. Also achieved sharp

rise to No.89 for Cerberus Age

Will introduce new promotions following

improvements in KPIs

No. 21 (Aug. 13, 2012) Top Grossing

Ranking

Source: U.S Overall Google Play

No. 89 (Aug. 13, 2012) Top Grossing

Ranking

Source: Apple Inc.

(*1) Top 100 grossing apps in U.S. Apps Store as of August 11

(*2) Includes apps from acquisition OMGPOP

(*3) Includes apps from acquisition PopCap Games

(*4) Includes apps from acquisition Funzio


26


Net sales increased steadily in July,

mainly in the U.S. market

Introduce language support in Korean,

Chinese and other languages. Expand

business in Asia, Europe market

Developing business in Asia, Europe markets

0

0.5

1

1.5

6月 7月

*Total ex-Japan net sales of GREE and Funzio

GREE Platform support for 14

languages planned

Unit: Indexed so that June net sales= 1

Net sales from global (ex-Japan) market

Jun 2012 July 2012


Appendix


会員

GREE

SNS + Social Games

SNS

Advertisement Sales Paid Service Sales

Growth in

Page Views

Purchase of

items

28

Diary

/ Comments Community /

MB

My Apps

Social games

Users


Great Pirates Battle Game!!

(released in August 2010)

“Pirate Kingdom Columbus” One-of-a-kind pet you can keep in

your mobile

(released in July 2007)

“Odoriko Clinoppe”

“Dino Life” Cavemen and dinosaurs getting along together?

Popular simulation game

(released April 2012)

“Alien Family” Alien family

rearing adventure

(release March 2012)

New exploration type card game

(released in August 2008)

“Tanken Doliland” Easy gardening experience

with your mobile

(released in September 2008)

“Hacöniwa”

In-house social games

Feeling Fantastic! Play Fishing

Game with your mobile!

(released in May 2007)

“Tsuri-Sta”

29

“Sengoku Kingdom” The Grand Battle! Sengoku

Card Game!

(released in February 2011)

“Cerberus Crusade” The Social-Strategy RPG

(released in April 2011)

“Majin Kingdom” A battle game with summoning

legendary heroes!

(released in December 2011)

“Dragon Ark” Classical fantasy + simulation

+ action game

(released in Feb. 2012)

“Sankoku Shinki” Sankokushi+ fantasy+ card

(released in Feb 2012)

“Decobito” A Delightful Life with Animals

(released in June 2011)

“Zombie Jombie”

Major U.S. hit with more than

1 million downloads

(released March 2012)

* Major markets excluding Japan, China and Korea

（※）（※）（※）

“AKB48 Stage Fighter” The first AKB48-themed social

game

(released October 2011)

“NARUTO Shinobi Masters” Collect ninja cards and do battle!

(released June 2012)

“Tomodachi Dogs”

Start your new life with

your pet dog!


“Wacky Motors” Race your rivals for treasure in this

car battle game.

(released July 2012)

“Kingdom Age” Lead your army and build your kingdom in

this exciting strategy game


（※）

“Modern War” Build your military and achieve victory

in modern war!

(released December 2011)

（※）

“Crime City” Build your criminal empire!

(released August 2011)

（※）

A Blockbuster! Monster Adventure

(released in June 2010)

“Mon-Pla”

©K S/S・T・P

©G・A


ⒸAKS ⒸGREE, Inc./A-Team. Inc


Wide Variety of Revenue Sources

- 純広告（バナー/テキスト） - タイアップ広告

広告

GREE Mobile screen

広告メディア収入へ貢献

有料課金収入へ貢献

30

- SNSと連動した無料ゲーム -内製ゲーム他、多様なラインナップ

ソーシャルゲーム

- Original ads (banners/text)

- Tie-up ads

Advertisement

Advertisement

Sales

Paid

Service Sales

Social games

- Free-to-play games linked to social network

- Rich lineup includes in-house games


Illegal and harmful content

GREE Patrol

Warning/

Deletion

Screening/

Monitoring

Certified as a

“Safe Content Site”

EMA (Content Evaluation and Monitoring Association)

31

The president chairs the committee.

Held monthly, members include executives in charge, patrol staff, legal staff, etc.

The first website approved by EMA (Content Evaluation and Monitoring Association) (Aug. 2008)

Maintains management system that exceeds EMA standards, passing continuous and periodic

inspections

24時間365日の GREE パトロール体制

A 24 hour, 365 days per year patrol service begun in November 2006.

GREE Patrol Centers were established in Tokyo, Hokkaido, and Okinawa, employing about

450 personnel.

Systematic and visual surveillance of content and reporting is conducted. If inappropriate

material is discovered, measures are taken such as deletion, cautioning, suspension of

service, etc.

Restrictions by age

Messaging between users over 18 and those under 18 is restricted.

Users under 18 are excluded from the searches of users over 18.

Friend request messages to under 18s are limited to standard wording.

User authentication

New sign-ups to GREE are verified using mobile phone authentication. Users in violation are

blocked from signing up again.

Membership of a mobile phone filtering service is checked to verify the user’s age.

Age information held by KDDI and SBM is checked for verification. (Discussions with other

carriers underway.)

GREE patrol system runs 24 hours a day, 365 days a year

Third-party certification

Security and Safety Improvement Committee chaired by CEO

Improving Safety & Security


Improving Safety & Security:

Educational Activities On- and Off-site

32

Educational activities off-site

Continually carrying out education activities aimed toward educational organizations and local governments such as courses on GREE’s

initiatives and the opening of the Patrol Center

Active participation in many kinds of educational events and cooperation with private and public bodies such as the Safe Net-Making

Promotion Conference

Educational activities on-site

From February 2009, GREE joined the “Motto Good Net” initiative of the Safe Net-Making

Promotion Conference, and maintains an official “Motto Good Net” account in GREE.

From July 2011, links were added to each service on GREE to an educational page.

Content is being renewed to make it even easier to understand.

In Dec. 2011, the educational application “GREE’s 6 Promises to All,” which was released in

Aug., was upgraded to a service for each age.

Educational app, Manabou! Asobou! Rules of the Internet includes this section for children of

elementary school age and younger.

Educational activities conducted by GREE employees at Azabu High School (May 19,

2012)

Participation in conference on smartphone use for high school students in Osaka (July

12, 2012)


■ This document includes some forecasts, which are based on currently available information. The

authenticity of the information is not guaranteed. Actual performance may differ due to various factors, etc.

■ When producing this document, we were careful not to include errors or omissions, but the authenticity

and integrity of the information are not guaranteed.

Making the world a better place through the power of the Internet.

Gree fy2012 q1-1

Business

Transcript of Gree fy2012 q1-1