Q2 FY2016 Operating Results November 4, 2016 DeNA Co., Ltd.
1. Financial Results 2. Strategy and Initiatives 3. Guidance 4. Reference 1
Financial Results Summary Both IFRS and non-gaap operating profit grew YoY Sports business on track to contribute to profit on a full-year basis Item (billion yen) FY2015 FY2016 Q2 Q3 Q4 Q1 Q2 Revenue (IFRS) 37.1 33.8 35.0 38.3 38.2 QoQ -2% -9% 3% 9% -0% YoY 3% -2% -3% 1% 3% Revenue from Sports 4.0 0.7 1.5 5.5 6.3 QoQ 7% -83% 123% 268% 15% YoY 10% 13% 103% 46% 57% Revenue excl. Sports 33.1 33.2 33.5 32.8 31.9 QoQ -2% 0% 1% -2% -3% YoY 2% -2% -5% -3% -4% Operating profit (IFRS) 7.4 3.3 5.1 7.4 7.9 QoQ 84% -55% 55% 43% 7% YoY -8% -36% 11% 83% 7% Non-GAAP operating profit 6.1 3.4 3.9 7.8 7.9 QoQ -10% -45% 15% 101% 1% YoY -21% -34% -20% 14% 28% Operating profit from Sports 1.0-1.8-1.1 1.8 2.2 QoQ 20% - - - 24% YoY 25% - - 109% 115% Operating profit excl. Sports 5.1 5.2 4.9 6.0 5.7 *For full reconciliation of GAAP to Non-GAAP metrics, please see the reference section QoQ -14% 1% -5% 21% -5% YoY -27% -22% -13% 0% 11% 2
Consolidated Financial Results (IFRS) Item Q2 Q3 Q4 Q1 Q2 *Includes non-extraordinary gains and losses under Japanese GAAP. (e.g. Loss on sales / retirement of tangible / intangible assets) YoY Change QoQ Change Revenue 37.1 33.8 35.0 38.3 38.2 3% -0% Game 27.5 27.3 26.6 26.1 24.3-12% -7% E-commerce 4.9 4.8 5.2 4.6 4.9 1% 7% Sports 4.0 0.7 1.5 5.5 6.3 56% 15% New Businesses and Others 1.2 1.4 2.0 2.3 3.0 147% 31% Adjustments -0.4-0.3-0.2-0.3-0.2 - - Operating profit 7.4 3.3 5.1 7.4 7.9 7% 7% Operating profit margin FY2015 FY2016 (billion yen) 20% 10% 15% 19% 21% - - Segment profit / loss 6.8 3.5 4.9 7.2 8.0 18% 11% Game 6.4 6.0 6.6 6.7 6.1-5% -8% E-commerce 0.6 0.7 0.7 0.4 0.5-13% 42% Sports 1.0-1.8-1.1 1.8 2.2 114% 23% New Businesses and Others -1.3-1.3-1.0-1.3-0.9 - - Adjustments 0.0-0.1-0.4-0.3 0.1 413% - Other income * 1.3 0.1 2.3 0.1 0.1-93% -34% Other expenses* 0.8 0.3 2.1 0.0 0.2-67% 807% 3
Cost and Expense Breakdown (IFRS) Item Q2 Q3 Q4 Q1 Q2 *Includes non-extraordinary gains and losses under Japanese GAAP. (e.g. Loss on sales / retirement of tangible / intangible assets) YoY Change QoQ Change Cost of Sales 15.2 14.0 14.3 14.9 14.8-3% -1% Personnel Expenses 1.5 1.5 1.4 1.3 0.9-37% -26% Depreciation and amortization 2.3 2.2 2.2 2.2 2.3-2% 5% Outsourcing expenses 2.5 2.2 2.1 2.5 2.9 15% 15% Commission fees 6.4 6.2 6.2 6.1 5.8-9% -5% Others 2.5 1.9 2.4 2.8 2.9 16% 2% Selling, general, and administrative expenses 15.1 16.3 15.8 16.2 15.4 2% -5% Personnel Expenses 3.3 3.3 3.4 3.7 3.6 11% -2% Sales promotion & Advertising expenses Outsourcing expenses & Commission fees 3.1 4.1 3.1 3.2 2.8-8% -10% 6.9 7.0 7.0 7.3 7.0 1% -5% Others 1.9 1.9 2.4 2.0 2.0 7% 1% Other income* 1.3 0.1 2.3 0.1 0.1-93% -34% Other expenses* 0.8 0.3 2.1 0.0 0.2-67% 807% Consolidated employee headcount FY2015 FY2016 (billion yen) 2,444 2,410 2,435 2,497 2,496 2% -0% 4
Game Business (Japan Game Business) No new app launches in Q2, and browser coin consumption was in line with expectations Titles such as Super Gundam Royale* are starting to show results from strengthening of in-game operations, and we will apply the same strategy to other titles *Game provided by: BANDAI NAMCO Entertainment Inc. Coin Consumption in Japan by Business Operating Profit from Japan Game Business* *Figures are based on management accounting 5
Game Business (International Game Business) On track to improve the bottom line by one billion yen YoY for the international game business China: Built a unique position that utilizes our strengths, and will continue with current strategy West: Dissolution decision was made on October 18 to change our strategy towards collaborations with external partners International Coin Consumption International Operating Loss* Exchange rates at the end of each quarter: (Unit:Yen) FY2015 FY2016 Q2 Q3 Q4 Q1 Q2 1 USD 120 120 112 103 101 1 RMB 19 19 17 15 15 *Figures are based on management accounting 6
E-commerce Business Travel business continued to perform well In the Shopping business, DeNA Shopping and au Shopping Mall are scheduled to be sold to KDDI on December 28, 2016* Travel Gross Transaction Value Shopping Gross Transaction Value** Revenue** *Performance for FY2015: Revenue of 5.2 billion yen, operating profit of 580 million yen **See appendix for information regarding major services within the Shopping sub-segment. DeNA BtoB market figures are excluded beginning Q2 FY2015 7
1. Financial Results 2. Strategy and Initiatives 3. Guidance 4. Reference 8
FY2016 Update Game Business In order to achieve even greater success in native apps: Revising regional studio strategy Reallocating resources, with a focus on the Nintendo partnership Curation Platform Business Two media, in addition to MERY, have exceeded 20 million monthly users* Revenue for all media is growing exponentially Others Sports business on track to be profitable for FY2016 Continuing to explore other areas of long-term growth, such as automotive and healthcare *Source: Google Analytics. Refers to the total number of monthly users for each service. Figures include users who access the same service across multiple devices, including smartphones and PC 9
Game Business (Nintendo Alliance) Super Mario Run (December 2016), Fire Emblem (during FY2016) and Animal Crossing (during FY2016) are scheduled to launch (to be published by Nintendo) More updates on our mid to long-term partnership with Nintendo in FY2017 onward will be announced as available Super Mario Run A new kind of Mario game that you can play with one hand Over 20 million people requested notification Planned release in approximately 150 countries in December Free to download, some content available for free (All of the game content can be enjoyed after paying a set purchase price) 2016 Nintendo *Reference: Semi-Annual Financial Results Briefing material 10
Game Business (Approach to FY2016 2H) Progress in transition to native app, aiming to create lineup to achieve even greater global success (billion yen) Native app Proactively allocate resources towards the Nintendo partnership Try to capture the West market primarily through collaboration with external partners No change to strategy in China or planned enhancements of live operations for existing titles in Japan Aiming to launch approximately five new apps in 2H for both Japan and China respectively, outside the Nintendo partnership Browser Continue live operations to generate ongoing profit and cash long-term FY2014 FY2015 FY2016 Browser game coin consumption Native app coin consumption (total of all regions) *The arrows are meant to be illustrative and do not represent actual expected performance 11
New Business Pillars (Curation Platform Business) Revenue and total monthly users* are growing exponentially Profitable on a monthly basis for September 2016, expecting to achieve quarterly profitability in Q3 Total Monthly Users * Revenue *Source: Google Analytics. Refers to the total number of monthly users for each service. Figures include users who access the same service across multiple devices, including smartphones and PC 12
New Business Pillars (Curation Platform Business) Aim to grow using both brand and performance-based advertising, leveraging the unique characteristics of each media Brand Advertising Demand for brand advertising in genres such as fashion and home decor is high Increasing ARPDAU by expanding advertising offerings (ex: sponsored articles) and implementing other monetization methods Ample opportunity for ARPDAU growth Performance-Based Advertising Revenue from network and affiliate ads has increased significantly as the user base grew exponentially Expecting further expansion of user base and monetization Women s Fashion Home Decor Travel Healthcare 13
1. Financial Results 2. Strategy and Initiatives 3. Guidance 4. Reference 14
Consolidated Financial Guidance for Q3 FY2016 Non-GAAP operating profit excluding Sports expected to be flat Additional information about Q3 guidance No contribution factored in to guidance from Nintendo partnership titles not launched as of November 4, 2016 Guidance for IFRS includes the gain from the sale of the Shopping Mall business (approx. 5.9 billion yen) and expenses associated with the dissolution of the West subsidiaries (approx. 2.8 billion yen) FY2015 FY2016 (billion yen) Revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3e YoY QoQ Revenue (IFRS) 37.7 37.1 33.8 35.0 38.3 38.2 32.4-4% -15% Revenue from Sports 3.7 4.0 0.7 1.5 5.5 6.3 0.9 34% -86% Revenue excl. Sports 34.0 33.1 33.2 33.5 32.8 31.9 31.5-5% -1% FY2016 FY2016 (billion yen) Q1 Q2 Q3 Q4 Q1 Q2 Q3e YoY QoQ Reconciliation of operating profit to non-gaap operating profit Operating profit (IFRS) 4.0 7.4 3.3 5.1 7.4 7.9 7.1 114% -10% Accounting adjustments related to seasonality, net +0.3-0.2-0.2 +0.1 +0.1-0.2-0.3 - - Acquisition and restructuring related expenses +2.5 +0.2 +0.2 +0.6 +0.3 +0.2 +3.2 1283% 1224% Sales and disposition related gains - -1.2 - -2.0-0.0 - -5.9 - - Non-GAAP operating profit 6.8 6.1 3.4 3.9 7.8 7.9 4.2 24% -47% Profit (loss) from seasonal sports business -0.9-1.0 +1.8 +1.1-1.8-2.2 +1.8 1% - Non-GAAP operating profit excl. Sports 5.9 5.1 5.2 4.9 6.0 5.7 6.0 16% 6% 15
1. Financial Results 2. Strategy and Initiatives 3. Guidance 4. Reference 16
IFRS to Non-GAAP Reconciliation FY 2014 FY 2015 (billion yen) FY 2016 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Reconciliation of Operating profit to Non-GAAP operating profit Operating profit(ifrs) 7.0 8.0 5.2 4.6 4.0 7.4 3.3 5.1 7.4 7.9 Accounting adjustments related to seasonality, net +0.3-0.2-0.2 +0.1 +0.3-0.2-0.2 +0.1 +0.1-0.2 Acquisition and restructuring related, net - +0.0 +0.1 +0.1 +2.5 +0.2 +0.2 +0.6 +0.3 +0.2 Sales and disposition related gain (loss) - - - - - -1.2 - -2.0-0.0 - Non-GAAP operating profit 7.3 7.8 5.1 4.8 6.8 6.1 3.4 3.9 7.8 7.9 Profit (loss) from seasonal sports business -0.2-0.8 +1.6 +0.9-0.9-1.0 +1.8 +1.1-1.8-2.2 Non-GAAP operating profit excluding Sports 7.1 6.9 6.7 5.7 5.9 5.1 5.2 4.9 6.0 5.7 FY 2014 FY 2015 (billion yen) FY 2016 *Please consult the Q4 FY2015 Operating Results for more information regarding our introduction of Non-GAAP disclosure Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Reconciliation of Operating profit to Non-GAAP EBITDA Operating profit(ifrs) 7.0 8.0 5.2 4.6 4.0 7.4 3.3 5.1 7.4 7.9 Accounting adjustments related to seasonality, net +0.3-0.2-0.2 +0.1 +0.3-0.2-0.2 +0.1 +0.1-0.2 Acquisition and restructuring related expenses - +0.0 +0.1 +0.1 +2.5 +0.2 +0.2 +0.6 +0.3 +0.2 Sales and disposition related gains - - - - - -1.2 - -2.0-0.0 - Depreciation and amortization +2.5 +2.6 +2.8 +2.9 +3.2 +2.8 +2.7 +2.6 +2.7 +2.8 Retirement of fixed assets (excl. one-time factors) +1.0 +0.3 +0.3 +0.6 +0.4 +0.7 +0.2 +1.3 +0.0 +0.2 Non-GAAP EBITDA 10.8 10.7 8.2 8.3 10.4 9.7 6.3 7.8 10.5 10.9 17
Consolidated Cash Flow Overview FY2015 FY2015 Apr-Sep (billion yen) FY2016 Apr-Sep Operating cash flow (A) 26.7 16.5 14.8 Profit before tax 20.9 12.0 15.1 Depreciation and amortization 11.3 5.9 5.5 Income tax paid -7.8-2.5-5.1 Others 2.3 1.0-0.7 Investing cash flow (B)* -40.0-26.1-6.5 Financing cash flow 20.1 19.7-4.0 Cash dividends paid -2.6-2.6-2.9 Disposition of Treasury stock* 22.2 22.1 0.2 Others 0.6 0.2-1.3 FCF ((A)+(B)) -13.3-9.7 8.4 Cash and cash equivalents (Consolidated) 75.2 78.7 79.2 (Non-consolidated basis) 48.6 50.7 52.0 *Impact from the business and capital alliance with Nintendo is reflected to investing cash flow and disposition of treasury stock in financing cash flow by approximately 22 billion yen respectively in FY2015. Acquisition of Nintendo s treasury shares and disposition of our treasury stock were both effective April 2, 2015. 18
Game Business Revenue Recognition by Financial Accounting Rules Revenue recognition by game business segments in financial accounting 1st- and 2nd-party browser titles: total coin consumption is recognized as revenue (i.e. gross revenue recognition) 1st- and 2nd-party native app titles: revenue is recognized in one of two ways: gross revenue recognition, and net revenue recognition in which the partners revenue is deducted from the gross revenue before being recognized. Net revenue recognition is expected to increase mainly among IP titles, but neither gross or net revenue recognition impacts profitability of the business. 3rd-party browser titles: net revenue recognition 3rd-party native app titles: net revenue recognition Coin Consumption in Japan by Business Japan Game Business Revenue 19
Segment Breakdown Segments Businesses Game Business Japan and international game businesses E-Commerce Business Sports Business Sub-segment names (Major service names in parenthesis) Travel (DeNA Travel, Shumee-to Club) Shopping (DeNA Shopping, au Shopping Mall, SEIYU.com) Auction (Mobaoku) Processing Settlement (Paygent) Baseball, Running Club, etc. New Businesses and Others Sub-segment names (major service names in parenthesis) Curation platform (MERY, iemo, Find Travel) IP-generating platform (Manga Box, Everystar, MyAnimeList) Automotive Healthcare (MYCODE, KenCom) Mobile social incubation (SHOWROOM, Mirrativ) 20
The information and data contained within this presentation and these presentation materials have been determined based on information available as of November 4, 2016. 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 November 4, 2016, 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. 21