GungHo Online Entertainment : Financial Results for the 2nd Quarter of Fiscal Year Ending December 31, 2023

Financial Results for the 2nd Quarter of Fiscal Year Ending December 31, 2023

[Japanese GAAP] (Consolidated)

August 9, 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: August 9, 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 2nd quarter of fiscal year ending December 31, 2023 (January 1, 2023 through June 30, 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

Six months ended

67,671

45.1

17,063

28.9

18,133

25.9

10,175

17.2

June 30, 2023

Six months ended

46,635

-8.6

13,242

-23.1

14,403

-18.5

8,684

-34.6

June 30, 2022

(Note) Comprehensive

Six months ended

15,544 millions of yen

Six months

ended 11,585 millions of

income

June 30, 2023

(34.2%)

June 30, 2022

yen (-23.8%)

Quarterly net profit

Diluted quarterly

per share

net profit per share

Yen

Yen

Six months ended

167.75

166.35

June 30, 2023

Six months ended

138.73

137.82

June 30, 2022

(2) Consolidated financial position

Total assets

Net assets

Shareholder's

equity ratio

Millions of yen

Millions of yen

%

Six months ended

166,332

141,642

73.0

June 30, 2023

Fiscal year ended

152,210

132,834

77.0

December 31, 2022

(Note) Shareholder's

Six months ended

121,464 millions of yen

Fiscal year ended

117,250 millions of yen

equity

June 30, 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	―	0.00
December 31, 2023
Fiscal year ending
December 31, 2023			―		―	―
(Forecast)
(Note1)	Revision of forecasts for dividends most recently announced: No
(Note2)	The company has decided to pay no interim dividend for the Q2 period at the Board of Directors held on August
	9, 2023. 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

(4) Number of shares of common stock issued
1)	Number of shares of common stock	As of June	87,255,916	Fiscal year ended	91,199,116
	outstanding at the end of the period
	30, 2023	shares	December 31, 2022	shares
	(including treasury shares)
2)	Number of treasury shares at the end of	As of June	27,361,853	Fiscal year ended	29,304,473
	the period	30, 2023	shares	December 31, 2022	shares
3)	Average number of shares during the first	As of June	60,661,534	As of June 30,	62,598,365
	quarter	30, 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: Wednesday, August 9, 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 (Six-months Period)	5
	Quarterly Consolidated Statements of Comprehensive Income (Six-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

Regarding the circumstances of the domestic and overseas economy in the quarter under review, while we gradually recovered from the stagnation caused by COVID-19 and the movement of people became more active, the situation continued to be unpredictable owing to factors including the possibility of a resurgence in COVID-19, worldwide inflation, an unstable international situation and foreign exchange fluctuation.

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.

Regarding our existing games, June 25, 2023 marked the 3rd anniversary of the service launch of the battle ninja gum action game for Nintendo Switch™ "Ninjala". We have been making comprehensive efforts with the aim of having a greater number of users enjoy this game, such as holding 3rd anniversary events, adding new content, collaboration with famous characters from other companies, TV anime broadcasts and offline events. "Puzzle & Dragons" ("P&D") started its service in 2012 and is now in its 12th year. Its MAU has remained firm due to continual updates such as adding new dungeons, holding original events, and collaboration with famous characters from other companies, each of which has been carried out so that a greater number of people can enjoy P&D in the long term.

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 45.1% year-on-year to JPY67,671 million, operating profit increased 28.9% year-on-year to JPY17,063 million, ordinary profit increased 25.9% year-on-year to JPY18,133 million, and quarterly net profit attributable to owners of parent company increased 17.2% year-on-year to JPY10,175 million.

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

(2) Description of Financial Position

Total assets for the period under review stood at JPY166,332 million, an increase of JPY14,122 million from the end of the previous fiscal year. This was mainly due to the increase in cash and deposit when the Company recognized the quarterly income attributable to owners of parent.

Total liabilities amounted to JPY24,690 million, an increase of JPY5,315 million from the end of the previous fiscal year. This was primarily attributable to an increase in accounts payable trade.

Total net assets came to JPY141,642 million, an increase of JPY8,807 million from the end of the previous fiscal year. This was mainly due to the increase in non-controlling interests.

(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