DeNA

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Jun 30, 2011 - Released the Mobage smartphone application for Android. Launched social games developed with the ngCore g
Q1 FY2011 Operating Results Q1: Three months ended June 30, 2011

TSE

DeNA Co., Ltd.

2432

0

Q1 FY2011 Highlights



Net sales and operating income both reached an all time high for seven consecutive quarters. Net sales: JPY34,649 million (+ 43% YoY) Operating income: JPY15,809 million (+ 32% YoY)



We continued to see a steady increase in the number of third-party titles on Mobage and consumption of Moba-coins



Released the Mobage smartphone application for Android. Launched social games developed with the ngCore game engine



Started offering Mobage on Samsung Electronics’ Android-based smartphones in Japan



Established a subsidiary in South Korea and began marketing and exploring new game developers

1

Overview of Operations for Q1 FY2011

(Millions of yen) Q1 FY2011

Q1 FY2010

Change

Q4 FY2010

Change

Net sales

34,649

24,193

+43%

31,955

+8%

Operating income

15,809

11,989

+32%

15,736

+0%

Ordinary income

15,757

11,952

+32%

16,111

-2%

9,456

6,526

+45%

9,275

+2%

Net income

2

Net Sales by Segment

(Millions of yen)

34,649 31,955

Others E-Commerce Social Media

29,494 27,085 24,193 19,073

11,655 8,810

8,565

2009年度 FY2009

2010年度 FY2010

2011年度 FY2011

Note: Segment sales numbers are net sales (sales after consolidation and eliminations).

3

Breakdown of Expenses (Millions of yen) Q1 FY2011

Q1 FY2010

Change

Q4 FY2010

Change

5,959

3,169

88%

4,897

22%

Labor costs

608

127

376%

296

105%

(See note below)

Depreciation and amortization

543

395

37%

440

23%

(See note below)

Advertising media costs

387

693

-44%

491

-21%

Business consignment expenses

787

576

37%

650

21%

(See note below) Increase in game royalty revenue share (Approximately JPY2.3 billion in first quarter. +JPY250 million compared with fourth quarter) (Also, see note below)

Cost of sales

Linked to Pocket Affiliate sales

3,220

753

328%

2,629

22%

412

622

-34%

388

6%

12,880

9,033

43%

11,321

14%

Employee salaries

2,075

1,542

34%

1,766

17%

Sales promotion and advertising

5,043

4,195

20%

5,138

-2%

Commission fees and business consignment

3,547

2,406

47%

3,209

11%

Increased commission fees for agency settlement of item billings with Moba-coins

Others

2,215

888

149%

1,206

84%

Amortization of goodwill accompanying consolidation of overseas subsidiaries

Commission fees Others

Selling, general and administrative expenses

(See note below) 1,282 employees as of June 30, 2011 (1,080 as of March 31, 2011)

Note: Increase in expenses accompanying consolidation of overseas subsidiaries (ngmoco, Gameview)

4

Operating Income

(Millions of yen) Operating Income 営業利益 % of Net Sales 営業利益率

18,000 16,000

(%)

51.5

49.6

14,745

15,736

15,809 50

44.8 13,624

14,000 12,000

50.3

35.6

50.0

49.4 45.6

11,989

36.0

40

9,819

10,000

30

8,000

4,000

20

5,224

6,000 3,137

3,083

10

2,000 0

1Q

2Q

3Q

FY2009 2009年度

4Q

1Q

2Q

3Q

FY2010 2010年度

4Q

1Q

0

FY2011 2011年度

5

Cash Flows

(Millions of yen) Q1 FY2011

Q1 FY2010

Change

Q4 FY2010

Change

Cash flows from operating activities

-4,295

5,023

-9,318

17,677

-21,973

Cash flows from investing activities

-2,498

-1,526

-971

-92

-2,405

Cash flows from financing activities

-4,913

-1,302

-3,610

489

-5,402

Cash and cash equivalents at end of quarter

50,861

36,562

14,298

62,620

-11,758

6

Social Media Business Sales (Millions of yen) 31,161 367

28,306 368

25,511 261

23,325

1,779

1,696

2,615

1,527 1,819

1,774

Others

Everystar, others

2,015

223

20,578 224

1,787

Advertising 2,669

2,580

Banner ads, tie-up ads, ads matched to content/search, affiliate advertising (other companies’ media)

Avatar-related 27,448 24,149 20,856 18,737

15,987

Game-related

1Q

2Q

3Q FY2010

4Q

1Q FY2011

*Segment sales figures are prior to consolidation and eliminations.

Item billing, in-game ads (CPA/CPC), ads for third-party game developers, mixi Mobile (ad/payment program), affiliate advertising (users acquire Moba-coins),Overseas

Note: Overseas sales have been transferred from the “Other” item to the “Game-related” item beginning with the first quarter (quarter under review). Figures have been adjusted retroactively from the first quarter of 2010.

7

Topics Number of Registered Mobage Users in Japan

 Continued steady growth in consumption of Moba-coins -Total number of titles available on the Mobage platform surpassed 1,000

(Millions of members)

29.71

30 3,000 25 2,500 20 2,000

-Among third-party games, a title is now recording a consumption of more than one billion Moba-coins per month -On Yahoo! Mobage, a title is recording consumption of more than 100 million Moba-coins per month, and this platform is steadily expanding

1,500 15 1,000 10 500 5 00 Dec.

 Strong business partnership with telecommunications carriers -Users are now directed to Mobage through the “iMenu” and the “docomo Market” on the official NTT DOCOMO site

Mar.

FY2009

Jun.

Sept. FY2010

Dec.

Mar.

Jun.

FY2011

Note: The number of registered users is the total after excluding the overlap among users of the feature phone version, PCs (Yahoo! Mobage), and the users of smartphones (browser version).

Age Composition of Users (%) 30+

26

 Full-scale development of Mobage for smartphones

32

42

-Started offering social games developed with the ngCore game engine -Started offering Mobage on Samsung Electronics’ Android-based smartphones

20-29

43

42 38

31 10-19 9/30/09

26 6/30/10

20 6/30/11

8

Platform Power Increasing: Strong Moba-Coin Growth

Trends in consumption of Moba-coins (Million yen)

33,437

35,000

28,178

30,000 25,000

23,357 20,288

20,000

16,721 15,000

10,361 10,000 5,000 0 4Q FY2009

1Q

2Q

3Q

4Q

FY2010

1Q FY2011

Note: Includes consumption of Moba-coins, monthly membership service fees for social game and ticket sales

9

Growth of Mobage for Smartphone After launching Mobage for smartphones in December 2010 in Japan, the service usage has grown steadily due to the expanded game lineup and the arrangement of carrier billing.

Trends in ARPU of Mobage for smarphones 1,000

 Status of Mobage for smartphones in Japan ・April: Carriers billing began 938

(100 = December 2010)

・May: Released the Mobage smartphone application and started adapting popular browser-based titles to application-based titles.

800

・Number of titles: Browser-based Mobage—54 titles Application-based Mobage—13 titles (As of June 30, 2011)

600

400

200

100 0

Dec.

Jan. 12月 1月 FY2010

Feb. 2月

Mar. Apr. 3月 4月 FY2011

May 5月

Jun. 6月

Notes: 1. ARPU: Average revenue per user (computed as coin consumption/MAU) 2. MAU: Number of users who have used the site at least once a month

10

E-Commerce Business

Sales (Millions of yen)

Mobakore 3,870

3,541

3,580 3,370

All shares of Mobakore Co., Ltd. were sold to Senshukai Co., Ltd., at the end of November 2010. (October and November 2010 sales included)

3,447 Others

Paygent

Continued steady expansion in size of settlements

Mobaoku

Paid registered users: 1.26 million (as of June 30, 2011)

Bidders

Gross merchandise volume: JPY10,128 million (up 11.6% YoY) Stores: 4,168 (as of June 30, 2011)

FY2010

FY2011

*Segment sales figures are prior to consolidation and eliminations.

11

Our view of the social game market opportunity on SmartPhones

12

Expansion of the Social Game Market in Japan

 Recent growth in the market

 Rough image of smartphone coverage of the game market Core gamers

Fiscal 2011: Approximately JPY200 billion

PCs

High-end games Infinity Blade X (tentative) (“Super Creators” Project AQ IINTERACTIVE INC.)

*Incl. JPY135 billion from Mobage (annualized)

Console games

Application games

Ninja Royale Bokujo Hokkorina

Fiscal 2012–Fiscal 2013:

Approximately JPY300 billion Source: DeNA estimates

Browser games

Mobile phones

GUNDAM Royale Kaito Royale

Domain covered by smartphone

Casual gamers

In addition to the browser-based games and the application-based games, the social game market is continuing to expand to capture core gamers through high-end games. 13

Growth Potential of the Overseas Social Game Market Ten years ago, Japan had a 40% share of the world market for household game software. Overseas markets are also expected to grow in the social game market.

Social Game Market

Household Game Software Market 家庭用ゲームソフト市場規模 Approximately JPY 800 billion

Approximately JPY 2 trillion

Approximately JPY 400 billion

15%

15% 42%

Japan

Japan

50%

85%

85% Overseas

Several trillion JPY

Overseas

58%

50%

FY2001 2001年 

FY2010 2010年

FY2011 2011年

FY201x 201x年

Source: Ministry of Economy, Trade and Industry, FAMITSU GAME HAKUSHO 2011,

Sources: Think Equity and DeNA estimates

DeNA estimates

14

Growth Potential of the Smartphone Market The overwhelmingly widespread use of mobile phones and their convenience will be favorable for the expansion of social games.

 Global growth of smartphones Mobile phones

More than 5 billion

(phone calls and short message services (SMS))

PCs, tablet computers

 Advantages of mobile phones

More than 1 billion

Can use anytime 24/7/365

Possible to attract the light casual gamers

Payments via telecommunications carriers

Purchasing content is simple

Over the next five years, the outlook is that the majority of phones will be smartphones and create a huge market that is highly suitable for social games. 15

Social Media Categories Users are moving toward using various SNS categories for different purposes.

 Characteristics of SNS Categories Category

Representative players

Active users

ARPU

“Real friend” types

Facebook mixi renren

+++

+

Information transmission/ Collecting

Twitter weibo

+++

+

Business

LinkedIn Youthwant

+

++

++

+++

Entertainment/ virtual types

The need for social media is universal and does not depend on nationality or region. Virtual community-based platforms will take over the global market. 16

Characteristics of Entertainment/Virtual Social Media Profitability is much higher on virtual social graphs when comparing social games to real social graphs.  Mobage and Zynga: ARPU Comparison

 Kaito Royale in Mobage and mixi: ARPU Comparison

US$1=JPY80

USD12.06

Approximately 18 times

Approximately 10 times

USD0.66 •Mobage: Actual results as of June 2011 (on all devices); Zynga: average for January to March 2011 •Mobage ARPU: Moba-coin consumption (Actual in June, including monthly membership service fees and tickets)/MAU (note 2 below) •Zynga data source: SEC S-1 Filing (ARPU=Booking basis sales/MAU (Note 3 below)) Notes: 1. ARPU: Average revenue per user 2. MAU: Number of users who have used the site at least once a month 3. MUU: Equivalent of MAU

17

DeNA’s Strength  Know-how for mass-producing highly profitable games at high speed Game Design Patterns DeNA owns many game design patterns that stimulate user activity (Accumulated through trial and error during events inside games)  Generalized methods and know-how for retention (keeping customers) and monetization (generating revenues)  New game schemes by combining game patterns.

Sophisticated operation of social games DeNA has sophisticated balance tuning capabilities that continue to stimulate users to spend money (Controls in a timely way depending on the status of users)  Controlled parameters by time unit  Makes immediate changes in the game balance  Base system that enables fast analysis  Engaged, highly-capable team in data mining to make the above possible

DeNA can develop a large number of highly profitable games faster than other companies 18

DeNA’s Speed The essentials of the cross-border, cross-device strategy that DeNA has pursued since the acquisition of ngmoco has been completed and DeNA has started offering worldwide services.

 Platform • Released Mobage China and Mobage Global, completing the release of a worldwide common platform • Set up marketing to attract more customers through alliances with leading device manufactures. -offering Mobage on Samsung Electronics’ Android-based smartphones

• In addition to platform operating centers in Japan, the United States, and China, DeNA is establishing sales centers in other locations: - South Korea (already set up), Europe (scheduled center in London), and Southeast Asia (scheduled center in Singapore)

 Social Games • Expanded the social game lineup with enhanced capabilities for first-party and third-party games - DeNA currently has approximately 400 staff in Japan and overseas that are focused on developing smartphone applications. Development staff will soon be 1,000.

• In collaboration with game developers around the world, DeNA is expanding and will continue to expand its titles to include a variety of titles -For core gamers: “Infinity Blade X (tentative title) ” and titles to be released from the “Super Creators” project (AQ INTERACTIVE INC.) -For casual to middle-use gamers: Offerings include “Pocket Frogs,” “Zombie Farm,” “Zoo land.”

19

Summary Becoming the world’s top Social Gaming Platform With DeNA’s know-how and fast speed

Massive market Smartphones Social games

×

DeNA know-how Speed

The World’s Top Social Gaming Platform

20

Consolidated Performance Forecast for 1H FY2011 (Millions of yen) 1H FY2011 (Forecast)

1H FY2010 (Actual)

Change

Net sales

71,000

51,278

+38%

Operating income

32,500

25,614

+27%

Ordinary income

32,500

25,363

+28%

Net income

18,600

14,165

+31%

 Method for Forecasting Performance In the social game market, which is the Company's principal business, the speed of market growth is difficult to forecast because the market has recently been established, and the continued expansion in the range and diversity of devices. In addition, profitability is greatly influenced by many uncertainties, such as the availability of titles that suit user tastes and become popular. In addition, for similar reasons, it is difficult to forecast the profitability of the Mobage business, which expands overseas during the current fiscal year. Accordingly, due to the difficulty in calculating highly reliable performance forecasts for the full fiscal year and the interim period, we will announce performance outlooks for the next quarter, and at the time of announcements for each quarter.

21

The forecasts in these presentation materials represent management’s assumptions and beliefs based on the information currently available. Readers are cautioned that these forecasts are subject to a number of risks and uncertainties and may differ materially from actual results.

DeNA Co., Ltd. 22