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Transcript of Dena Results Material
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FY 2011 Q2Operating Results
DeNA Co., Ltd.
Q2: Three months ended September 30, 2011
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FY 2011 Q2 Highlights
There was steady growth in Moba-coin consumption (Mobage's virtual currency) onthe Mobage platform.
For Android, we released a beta version of Mobage Global in English-speakingterritories and Mobage China in China. We began to introduce social games usingthe ngCore game engine.
Progress continues in porting Mobage games for feature phones to smartphonebrowser version.
We also released an iOS Mobage app.
1
We strengthened our smartphone development capabilities through ourestablishment of a game development studio in Sweden and acquisition of PunchEntertainment in Vietnam.
A new net sales record was set for the eighth consecutive quarters.
- Net sales: JPY 34,689 million (+28% YoY)
- Operating income: JPY 15,407 million (+13% YoY)
We set up a subsidiary in Singapore and began cultivating new local developers.
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Item Q2 FY2011 Q2 FY2010Y on Y
change
Q1 FY2011Q on Q
change
Net sales 34,689 27,085 +28% 34,649 +0%
Operating
income 15,407 13,624 +13% 15,809 -3%
Ordinaryincome
14,725 13,410 +10% 15,757 -7%
Net income 8,190 7,638 +7% 9,456 -13%
Overview of Financial Results
Unit: Millions of yen
2
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Net Sales by Segment
3
4,9377,711
14,883
20,37523,203
25,41128,203
31,067 30,971
3,175
3,529
3,495
3,396
3,391
3,666
3,133
3,130 3,163
452
414
695
421
490
417
619
451 554
0
10,000
20,000
30,000
40,000
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
Others
E-commerce
Social media
34 ,689
FY 2009 FY 2010
(Millions of yen)
8,565
11,655
19,073
29,494
24,193
27,085
31,955
FY 2011
34,649
Note :Above segment sales numbers are after consolidation and eliminations.
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ItemQ2
FY2011
Q2
FY2010
Y on Ychange
Q1
FY2011
Q on Q
change
Cost of sales 6,290 3,314 +90% 5,959 +6%
Labor costs 676 175 +286% 608 +11%Expanding game development capabilities
at overseas subsidiaries
Depreciation andamortization
650 409 +59% 543 +20%Increasing server numbers, etc. as part ofdisaster recovery measures
Advertising mediaexpenses
312 643 -51% 387 -19% Linked to Pocket Affiliates sales
Outsourcing expenses 924 553 +67% 787 +17%Expanding game development capabilitiesat overseas subsidiaries
Commission fees 3,293 907 +263% 3,220 +2% Increase in game revenue share
Others 432 625 -31% 412 +5%
Selling, general, andadministrative expenses
12,991 10,146 +28% 12,880 +1%
Personnel expenses 2,253 1,522 +48% 2,075 +9%
Number of consolidated employees at the
end of September: 1,604(1,282 at the end of June)
Sales promotion &advertising expenses
4,684 5,077 -8% 5,043 -7%Decrease in sales promotion expensessuch as TV commercials
Outsourcing expenses
Commissions fees3,848 2,614 +47% 3,547 +8%
Increase commission fees for agencysettlement of items billings with Moba-coins
Others 2,205 931 +137% 2,215 -0% Amortization of goodwill for foreign subs
Breakdown of Expenses
4
Unit: Millions of yen
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(%)
(Operating income:Millions of yen)
FY2010FY2009
Operating Income
5
FY2011
3,083
5,224
9,819
11,989
13,624
14,745 15,736 15,809 15,407
36.0
44.8
51.5 49.6 50.3
50.0 49.4
45.6 44.4
0
10
20
30
40
50
60
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
Operating income
% of Net Sales
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Item Q2 FY2011 Q2 FY2010 Y on Ychange
Q1 FY2011 Q on Qchange
Cash flow fromoperating activities
18,018 14,292 +3,726 -4,295 +22,313
Cash flow from
investing activities -1,643 -4,095 +2,452 -2,498 +854
Cash flow fromfinancing activities
-137 -1 -135 -4,913 +4,775
Cash and cashequivalents at the
end of quarter
66,455 46,472 +19,982 50,861 +15,594
Cash Flows
6
(Millions of yen)
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Note :The above figures are prior to consolidation eliminations.:Starting in the current fiscal year, overseas net sales were transferred from Others to Game-related.Figures have been revised retroactively to the second quarter of 2010.
Banner ads, tie-up ads, adsmatched to content/search,affiliate advertising (othercompanies media), etc.
Everystar, etc.
Item billing, in-game ads(CPA/CPC), developeradvertising, mixi mobileapplications (ad/paymentprograms), affiliate programs(users gain Moba-coins forbuying goods, etc.), overseasbusiness, etc.
Social Media Business
Advertising
Others
Avatar-related
Game-related18,737
20,856
24,149
27,448 27,800
2,669
2,615
2,015
1,819 1,385
1,696
1,779
1,774
1,527 1,374
223
261
368
367 503
2Q 3Q 4Q 1Q 2Q
(Millions of yen)
FY 2010
Net sales
23,325
25,511
28,306
FY 2011
31,161 31,062
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0
10,000
20,000
30,000
40,000
1Q 2Q 3Q 4Q 1Q 2Q
First-party games and collaboration gamesThird-party
Mobage Platform Expansion
16,721
20,28823,357
28,178
Trends in Moba-coin consumption*(Millions of yen)
FY 2010
33,437
FY 2011
37,034
Continued steady growth in Moba-coin consumption, driven by third-party games
- In contrast, there has been decrease in Moba-coin consumption in first-party games, due to (1) delayon releasing major IP titles and (2) our lack of timely response in addressing the popular card-battlecategory.
- Third-party card battle games have been driving Moba-coin consumption.
- Moba-coin consumption for first-party games and third-party games becameapproximately same level.
* Includes consumption of Moba-coins, monthly membership service fees for social games and ticket sales. 8
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Growth of Mobage Japan
Although Mobage has 32 million users (an increase of 11 million users YoY) as of the end of
September 2011, there is still high growth potential with regard to users in their 30s and older, agroup with a high ARPU, meaning that there remains good opportunity for further expansion ofARPU.
Breakdown by active userage group %
ARPU*by user age group
Active users of Mobage Japan:penetration by age
above
30
20-29
10-19
Sep
2009
Sep
2010
Sep
2011
3124 20
4341
37
2635
43
* ARPU: Average revenue per user (computed as coin consumption/MAU**). The figures are as of September 2011.** MAU: Number of users who have used the site at least once a month.
The index below have been adjustedso that the number of users in the
10-19 age group equals 100.
0
10,000
20,000
30,000
40,000
50,000
60,000
Mobageusers
(Unit: 1,000 people)
10-19 20-29 30-59
9
100
360
648
0
200
400
600
800
10-19 20-29 above 30
Total populationin age group
Further potentialfor expansion
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Status of Mobage for Smartphones
Moba-coin consumption on Mobage for Smartphones (SP) also is steadily growing
10
Steady expansion of smartphone content lineup
- A steady stream of new game releases,including third-party titles
Trends in Moba-coin consumption
- Although SP ARPU is also steadilyexpanding, the majority of it is driven by
browser-based games.
FY 2009 FY 2010 FY 2011
3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
FP 97 153 357 577 774 879 904 991
SP 20 49 163
Trends in number of game titles
Trends in Mobage FP*/SP ARPU**
3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
FY 2011FY 2010FY 2009
SP
FP
- Number of titles as of end of Sep 2011Browser-based games: 145 titlesApplication-based games: 18 titles
* FP: Feature phones** ARPU: Average revenue per user (computed as coin consumption/MAU**). The figures are as of September 2011.*** MAU: Number of users who have used the site at least once a month.
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1,222 1,399 1,236 1,268
1,0331,070
1,091 1,041
709
835897 985
147
166146 153469
400
1,262
1,026
1,098
143
2Q 3Q 4Q 1Q 2Q
(Millions of yen)
FY 2010
Net sales
Scale of payment processing continues
to steadily grow
At the end of Nov. 2010, all shares inMobacolle Co., Ltd, were transferred toSENSHUKAI Co., Ltd.(Sales up to Nov. 2010 are consolidated)
Paying members: 1.19 million(as of end of Sep 2011)
Transactions handled: 10,011 million yen(+7.7% YoY)
Shops 4,033 (as of end of Sep 2011)
3,580
E-commerce Business
3,870
3,370
11
FY 2011
3,5293,447
Note :The above figures are prior to consolidation eliminations.
bidders
PAYGENT
Others
MOBAOKU
Mobacolle
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Key Focus Areas for 3Q Onward
(1) Expansion of game lineup
Mobage Japan (FP/SP browser-based games)
- Strengthening of lineup of first party and collaborative developmenttitles
Mobage Global (SP application-based games):
- Strengthen the lineup of first-party games and popular iOS titles
(2) Strengthening of social game development capabilities
(3) Quick full-scale rollout of Mobage Global
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Title
(1)-1 Expansion of Game Lineup (Mobage Japan)
Plan: Successive releases of games developed by the first party and collaborative development
teams for FP/SP browsers based on major IPs and card-battle games
3QFY
2011
4QFY
2011
FY2012
GenrePlanned
release date
Gundam Card Collection(Bandai Namco Games)
Professor Layton Royale
Chronicles of Horse Racing
Final Fantasy New Social Game
Card battle
Puzzle RPG
Card battle
RPG
Mid Oct
Late Oct
Early Nov
This winter
Successive releases ofgames featuring major IPs and card-battle games
We plan to raise thepercentage of card-battle titles at least up to50% of all new releases.
Identify new trends early and create new game design patterns based on new trends
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(1)-2 Expansion of Game Lineup (Mobage Global)
Strengthen the SP app lineup with first-party titles and popular iOS titles
Turn flagship first-party titles into major hits Secure a wide-range of key & popular titles
* : As these are new titles, there is no past ranking information that could be used as reference.** : Top Free Ranking,Top Grossing Ranking columns respectively indicate the highest position reached in the Top Free and Top Sales rankings on the US App
Store. Pocket God and Fragger are Paid applications. As such, we used the Top Paid and Top Sales rankings.Source : appannie.com, topappcharts.com, AppStore 14
Title Developer Type Release dateTop FreeRanking**
Top GrossingRanking**
Ninja Royale * DeNA 1st party Released
We rule ngmoco 1st party Released 1 1
Haypi Kingdom Haypi Inc. 3rd party Released 5 4Pocket Frogs NimbleBit 3rd party Released 3 12
Paper Toss Backflip Studios 3rd party Released 1
Paradise Island Series Game Insight 3rd party Released 12
Zombie Farm The Playforge 3rd party Released 4 2
Dragon Craft * ngmoco 1st party December
Skyfall RPG * ngmoco 1st party November
Icee Maker Sunstorm 3rd party November 1 13Pocket God Bolt Creative 3rd party November 3 10
Texas Poker KAMAGAMES 3rd party November 2 1
Tiny Tower NimbleBit 3rd party November 5 3
Tiny Chef Tiny Co 3rd party November 2 4
Monster Rancher for Everyone Tecmo Koei Games 3rd party November
MapleStory NEXON 3rd party December
Tap Fish series Gameview Studios 1st party Jan.Mar. 2012 1 1Tap Ranch 2 Gameview Studios 1st party Jan.Mar. 2012 4 11
Fragger Harold Brenes 3rd party Jan.Mar. 2012 1 3
Mystery Dungeon:Shiren the Wanderer
CHUNSOFT 3rd party Jan.Mar. 2012
No More Heroes for Mobage(Tentative name)
Grasshopper Manufacture 3rd party TBA
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(2) Strengthening of Social Game Development Capabilities
The steady expansion of development capabilities to support strategy 1,
Expansion of Game LineupIn addition to M&A strategy, we are actively engaged in joint ventures and capital
tie-ups to rapidly build a 1000-people game development organization.
15
Development of app-based
smartphone games, mainly forcasual and light gamers
Development of the above games andmass-creation of excellent games underexisting game design patterns
Recruitment and training ofengineers with low costs
Development of high-quality app-basedsmartphone games Creation of new game design
patterns Recruitment of high spec talents
and foster excellent creativityJoint ventures andbusiness/capital tie-ups
High-qualitydevelopment site
Development subs
Core development base
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(3) Quick Full-scale Rollout of Mobage Global
Roadmap
Initial & current status
Tune-up focus: sign-up and game launching process, start-up time and stability
After making necessary tunings, the rating and ranking* for our key titles have beenincreased rapidly.
- Rating: Zombie Farm/We Rule/Pocket frogs 4.6/5.0
- Ranking: Zombie Farm 9th Place / We Rule 40th Place
Future objectives
Rapidly acquire users through continue improvements in software, aggressivemarketing program and the continued release of new titles.
Focusing on reaching $100 million Moba-coin consumption per quarter, with$50 million in Moba-coin consumption during the Jan-Mar 2012 quarter as an initial
target.
16* Rating and Ranking as of Oct. 31st on US Android Market
Jul Aug Oct Nov ~ Dec
Global service
beta in English-speaking
territories
Global service beta with
language localization(non-English-speaking
territories)
The migration from the
beta version to the fullrelease and started to
acquire users
Release of an
iOS version
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Consolidated Performance Forecast for Q3 FY 2011
ItemQ3 FY 2011
(Forecast)
Q3 FY 2010
(Actual)
Y o Y
Change
Net sales 105,000 80,772 +30%
Operatingincome
46,000 40,359 +14%
Ordinaryincome 44,400 40,147 +11%
Net income 24,500 22,328 +10%
Policy for Announcement of Performance ForecastsForecasting the speed of growth in the social gaming market (where the Companys principal businessresides) is difficult as the market is very new and there is an increasing diversity of devices being used inplaying games. Furthermore, profitability in the market is greatly affected by many uncertain factors, suchas users preferences and whether new titles become hits or not. In addition, it is difficult for reasonssimilar to those mentioned above to forecast the profitability of our global business, which commenced
during current fiscal year. Accordingly, we only announce our performance forecast for next quarterduring announcement of each quarters operating results.
17
(Millions of yen)
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Entry to Japanese
Professional BaseballBusiness
18
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Main Objectives
Corporate Branding & Visibility
Contribution to the local community
Contribution to the development of Japanese
Professional Baseball League
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20
Business Synergy
Baseball x Mobage will provide new entertainment potential
- Collaboration with Professional Baseball Business will promote mid to long termgrowth of our business Maximize the business synergy by fully utilizing Mobage community functions
Combining Professional Baseball, a Japanese national sports, and our socialgaming capabilities will create tremendous entertainment opportunities
We can attract lots of new users over 30s to Mobage
Favorite Sports by Japanese
Baseball
Soccer
Golf
Sumo
Boxing010
20
30
40
50
60
04 05 06 07 08 09 10
Data source Favorite Sports Research by Chuo Research Company in Japan
010
20
30
40
5060
70
80
20-29 30-39 40-49 50-59 60-
Male
Female
Professional Baseball Popularity by Age & Sex *
* From Favorite Professional Sports (Professional Baseball) by Age & Sex ( Favorite Sports Research in 2007)
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DeNA Co., Ltd.
The forecast data contained within this presentation and thesepresentation materials have been determined based on informationavailable to date, but may contain an element of uncertainty.Please be aware that the actual performance data and similarinformation are subject to influence from diverse factors, and may
differ from the forecasts presented herein.