Konami: Financial Results for the Year Ended March 31, 2022

1. Business Performance
(1) Overview of Business Performance

(i) Business Performance

For the fiscal year ended March 31, 2022, the situation remains uncertain due to issues such as the tense state of affairs in Ukraine and the spread of COVID-19 variants. On the other hand, vaccination efforts have progressed, and we are beginning to see signs of recovery such as the gradual restarting of socioeconomic activities.

Amidst circumstances under a rapidly changing market environment, in terms of the business results for the fiscal year ended March 31, 2022, in addition to solid performance in the Digital Entertainment business throughout the fiscal year, performance of Amusement business, Gaming & System business and Sports business has recovered, resulting in increase of revenue and profit among all business segments. This led to an increase in total revenue and all profit categories, i.e., business profit, operating profit, profit before income taxes and profit attributable to owners of the parent for the fiscal year ended March 31,2022, have reached a record high.

In terms of the consolidated results for the fiscal year ended March 31, 2022, total revenue amounted to ¥299,522 million (a year-on-year increase of 9.9%), business profit was ¥80,315 million (a year-on-year increase of 25.2%), operating profit was ¥74,435 million (a year-on-year increase of 103.6%), profit before income taxes was ¥75,163 million (a year-on-year increase of 111.2%), and profit attributable to owners of the parent was ¥54,806 million (a year-on-year increase of 69.9%).

In the entertainment market, future development of game content is expected through the functional enhancement of various devices, including mobile devices and video game consoles, and the rollout of next generation communication systems. In conjunction with the changing times, the preference for enriching daily life through full and abundant experiences in personal spending has been strengthened. Furthermore, new experiences through game content are being offered in various ways, including eSports, which is regarded as a form of sports competition and is becoming well-known to a wide range of users and attracting more and more fans.

Digital Entertainment

Amidst these circumstances, as a new initiative for our business, we began global distribution of Yu-Gi-Oh! MASTER DUEL which allows our customers to enjoy playing Yu-Gi-Oh! TRADING CARD GAME as digital content anytime, anywhere. The title has been downloaded over 20 million times, and a wide range of users is enjoying it. Furthermore, the downloads have reached over 30 million times as of April 2022. We began selling Non-Fungible Tokens (NFTs) in an effort to preserve content that has been loved by our customers as an art.

As ongoing initiatives, each of our mobile titles— eFootball Winning Eleven 2021 (Known overseas as eFootball PES 2021), Yu-Gi-Oh! DUEL LINKS, which celebrated the fifth ?anniversary of its global launch, and PROFESSIONAL BASEBALL SPIRITS A (Ace), which announced a collaboration with legend Ichiro Suzuki, who played in the major leagues in Japan and America—has continued to be well received by our customers around the world. In the card game space, we continued the global expansion of Yu-Gi-Oh! TRADING CARD GAME, and even amidst the COVID-19 pandemic, it received strong support, both in Japan and overseas. In addition, we have endeavored to revitalize our content through measures such as holding major Duel tournaments and selling commemorative packs to mark the 25th anniversary of the original work. Alongside these initiatives, for Yu-Gi-Oh! RUSH DUEL, as a first step to enjoy the Yu-Gi-Oh! contents, we have been increasing brand awareness primarily to younger customers. In the computer and video games space, many customers have been enjoying Momotaro Dentetsu: Showa, Heisei, Reiwa mo teiban, which has sold over 3.5 million units, as one of our classic titles.

In the eSports space, we held the finals for the eBASEBALL PROFESSIONAL BASEBALL SPIRITS 2021 Grand slam tournament at “TOKYO eSPORTS FESTA 2022,” and delivered fierce competition. In addition, for the 2021 season of the “eBASEBALL Prospi A (Ace) League,” pro baseball eSports league, we held the eNippon Series to crown the best player in Japan for the first time. Furthermore, for PROFESSIONAL BASEBALL SPIRITS A (Ace), we assembled a record number of participants for the 2021 season of “Prospi A (Ace) Championship” to determine the mightiest player, and the finals drew a massive amount of attention. We are also holding “PROFESSIONAL BASEBALL Virtual Opening Game 2022” using the latest edition of eBASEBALL PAWAFURU PUROYAKYU 2022 to generate excitement for the start of the pro baseball season. We will continue to work towards further developing and building the appeal of eSports through these tournaments and various events.

In terms of financial performance, total revenue for the fiscal year ended March 31, 2022 in this segment amounted to ¥215,010 million (a year-on-year increase of 5.3%) and business profit for the fiscal year ended March 31, 2022 amounted to ¥76,424 million (a year-on-year increase of 4.1%).

In the amusement market, the global spread of COVID-19 has continued to affect sales of devices, in addition to having an impact on e-amusement participation (revenue share business).

Amusement

Amidst this situation, in our business of games targeted at amusement facilities, DANCE aROUND, the latest dance game in the Bemani series, and QuizKnock STADIUM, our latest quiz game, began operations. In the medal game space, GRANDCROSS GOLD, the latest game in the major medal pusher game series GRANDCROSS, which allows players to enjoy the feeling of being physically present that can only be experienced in amusement facilities, as well as ColorCoLotta: Frozen Island, the latest game in the ColorCoLotta series, which has shifted the stage for adventure from the everlasting summer sea to an icy island and added new play elements, began operations. “KONAMI AMUSEMENT GAME STATION,” which allows users to enjoy playing arcade games on PCs and smartphones at any time, continued its steady growth as well. Furthermore, we held “The 10th KONAMI Arcade Championship,” the official Konami eSports competition, to determine the top arcade game players, which was pushed back from July 2021 due to the spread of COVID-19, taking all possible measures to prevent infections. The fierce battles across 13 titles were broadcast live, and the event was a great success. PACHINKO SENGOKU COLLECTION BLACK, the model with new specifications for PACHINKO SENGOKU COLLECTION, and High School D x D2 also began operations.

In terms of financial performance, total revenue for the fiscal year ended March 31, 2022 in this segment amounted to ¥19,510 million (a year-on-year increase of 10.6%) and business profit for the fiscal year ended March 31, 2022 amounted to ¥3,492 million (a year-on-year increase of 44.7%).

In the gaming market, entrance restriction on casino facilities was relaxed in
North America and Australia, and the situation is revitalizing the markets returning to its pre-COVID-19 level. The other markets are gradually recovering although certain restrictions remain.

Gaming & Systems

Amidst these circumstances, we recognized revenue for the sale of slot machines including our core upright cabinet, the DIMENSION 27TM and the DIMENSION 49TM. In addition, the DIMENSION 49JTM, which is dedicated to participation (revenue share business), was selected for Best Slot Product, a prestigious award in the 20th Annual Global Gaming Business (GGB) Gaming & Technology Awards. In game content, Fortune Mint, a new content on our core cabinets, continued to maintain high performance in the North American market, resulting in increased sales of slot machines. As for titles are dedicated to participation, the new Lucky Envelope series has received favorable reviews and the All Aboard series has continued to perform well. Moreover, the installation of historical horse rating machines based on historical live horse racing outcomes is proceeding. In the casino management system, the installments of SYNKROS® casino management system to casino facilities continues to progress. Money KlipTM, which was provided to Resorts World Las Vegas, a major IR facility that opened last year, received a great deal of attention as the first case of a cashless system being introduced in Las Vegas.

In terms of financial performance, total revenue for the fiscal year ended March 31, 2022 in this segment amounted to ¥25,630 million (a year-on-year increase of 54.0%) and business profit for the fiscal year ended March 31, 2022 amounted to ¥3,495 million (business loss for the fiscal year ended March 31, 2021 amounted to ¥2,077 million).

In the sports market, due to the promotion of staying at home and working from home as a result of COVID-19, the importance of being healthy was reaffirmed for many people and the need for sports and exercise is growing.

Sports

Amidst these circumstances, with regard to our operation of sports clubs, we began offering “Keep-Your-Body-Warm Fitness” and “Gut Health Fitness” for “Karada Ikiiki Project” as a new proposal for healthy habits, with the aim of improving the original functions of people’s bodies, and maintaining and promoting their health. In addition to promoting the expansion of services for “Konami Sports Online Fitness” which allows people to participate from anywhere, including their homes, we opened a facility as a new type of business called “Pilates Mirror Futako Tamagawa,” (Setagaya-ku, Tokyo) women-only Pilates studios for small groups with ceiling-mounted mirrors.

With regard to the operation of outsourced facilities, a form of business that expands our network without ownership of assets, we leveraged our previously developed operational and leadership expertise, as well as our accomplishments, to promote our businesses, and began contracted operations of sports facilities in new areas such as Toyonaka City, Osaka, Chuo-ku, Tokyo and Yoshinogari Town, Saga.

As part of a demonstration project for the "Future Classroom" program, which is run by the Ministry of Economy, Trade and Industry, we began providing club coaching support for Osaka Minoh-Higashi High School—and for Rikkyo Niiza Junior High School and Rikkyo Ikebukuro Junior High School, in collaboration with the Rikkyo Educational Corporation—based around the theme of verifying a social system based on integration between a community with a focus on school facilities and the sports club industry.

In the sports and health-related products market, in addition to selling the latest model of POWER MAX V3 CONNECT, an aerobic bike targeted at athletes which has been supported by a large number of athletes in the 35 years since its launch in 1986, we have been developing products which will assist many of our customers in their efforts to become healthy, such as the release of “RENER” energy drink, which has 3,000 mg of citric acid in its formula. Also, we added new flavors with Lac - Shield® to protein supplement “asu-body.”

While this business has been affected by the spread of COVID-19, we have continued to work on reforming our cost structure by strategic withdrawing from unprofitable locations and other measures, and we closed 17 locations for the fiscal year ended March 31, 2022.

In terms of financial performance, total revenue for the fiscal year ended March 31, 2022 in this segment amounted to ¥41,957 million (a year-on-year increase of 15.2%) and business profit for the fiscal year ended March 31, 2022 amounted to ¥767 million (business loss for the fiscal year ended March 31, 2021 amounted to ¥5,873 million).

(iii) Outlook for the Fiscal Year Ending March 31, 2023

Projected consolidated results for the fiscal year ending March 31, 2023 are as follows: total revenue of ¥320,000 million; business profit of ¥81,000 million; operating profit of ¥76,500 million; profit before income tax of ¥76,500 million; and profit attributable to owners of the parent of ¥55,000 million.

With networked entertainment offerings rapidly becoming mainstream, now more than ever, many people have an increasing number of opportunities to enjoy playing games on any device. Amidst such a development, we will propose ways for people to play games which suit the characteristics of each device.

Digital Entertainment

As a new initiative going forward, we will sell eBASEBALL PAWAFURU PUROYAKYU 2022, the latest product in the PAWAFURU PUROYAKYU series. In addition to the powered-up standard mode, we will deliver fun to a large number of our customers through the installation of new modes. We will also distribute the competitive mystery game CRIMESIGHT via Steam®. Furthermore, we will work toward distributing Yu-Gi-Oh! CROSS DUEL content for smartphones, which is a new type of card battle for four players pursuing the fun of a new card game. In addition, we are moving forward with production on Teenage Mutant Ninja Turtles: The Cowabunga Collection in the computer and video game space, which is a compilation of 13 games in the series.

As an ongoing initiative, we will continue to take attractive measures for mobile titles such as PROFESSIONAL BASEBALL SPIRITS A (Ace) and Yu-Gi-Oh! DUEL LINKS, and strive for management that upholds our good reputation. With regard to Yu-Gi- Oh! MASTER DUEL, we are managing the game so that even more of our customers will be able to enjoy it, through activities such as holding events under various regulations and tournaments. Furthermore, for eFootballTM 2022 in the computer and video game space, we have made improvements and adjustments based on customer feedback, and we have updated the version of the game to improve the sense of urgency in the battle for the ball between players, which is often seen in real soccer matches, as well as the fun of playing with unique team tactics.

In the eSports space, the eFootballTM series and PROFESSIONAL BASEBALL SPIRITS A (Ace) were selected as competitive titles for “National Prefectural Competition eSports Championship 2022 TOCHIGI,” which is a “Once in a Lifetime” National Sports Festival of Japan, Hosted by Tochigi cultural program. Going forward, we will work on activities to disseminate the appeal of eSports with the aim of expanding the eSports fan base even more.

We will offer new ways to play, created through interpersonal communication via services such as the e-amusement service, which connects amusement facilities around the country by networking them together. In addition, as a service which allows players to enjoy arcade games at any time, we are working to enhance content for “KONAMI AMUSEMENT GAME STATION,” which makes it possible to play high-quality games on PC and smartphone. Furthermore, we will offer a new user experience by holding the eSports tournament “eMAH-JONG MAH-JONG FIGHT CLUB Pro Tournament” played via MAH-JONG FIGHT CLUB, hosted in conjunction with the Japan Professional Mahjong League, as well as the second season of the “BEMANI PRO LEAGUE –SEASON 2-” for the “BEMANI PRO LEAGUE,” which combines music and eSports. Through these events, we will deliver the amusement and fun of Konami titles, which are enjoyable for participants and spectators alike, to an even greater number of customers.

Amusement

In our slot machine business, we will expand our product range with a focus on strengthening our lineup of DIMENSIONTM series cabinets, including the introduction of DIMENSION 75CTM, a participation-dedicated product which features 75-inch curved monitors, and DIMENSION TOP BoxTM, a participation-dedicated product which combines a 27-inch main monitor with a 49-inch monitor. In addition, we plan to start entering the market of Class II machines which are permitted to be used in casino facilities operated by Native American tribes and the market of Video Lottery Terminals (VLT) in New York State. In game content, we will also focus on expanding our lineup to match the characteristics of DIMENSIONTM series cabinets. Through these measures, we will enhance KONAMI's presence in the market.

Gaming & Systems

In our casino management system business, in addition to new installations of

SYNKROS to casino facilities in North America and Australia, we will introduce a variety of functionality which will endeavor to enhance and strengthen our product appeal including Synk Vision, which provides optimal information to players using the latest biometric authentication technology, SYNK31TM, a money laundering prevention system. In addition, we will continue to develop products tailored to customers’ needs, including a new Synkbox Lite, a hardware that is smaller than previous versions and more easily carried in casino facilities and cruise ships.

 
 

For the operation of sports clubs, in addition to our initiatives in accordance with guidelines established by industry associations for preventing the spread of COVID- 19, we are continuing to take measures to prevent the spread of infection based on our own standards, such as ozone sterilization, and working to manage our facilities to ensure that our customers can use them safely and securely.

Sports

With regard to the operation of outsourced facilities, we were newly chosen by Yokohama City, Minami-ku (Kanagawa Prefecture), Fukuoka City (Fukuoka Prefecture), and Kyoto Prefecture to serve as designated management for the operations of sports facilities in each region, and will begin operations starting in April 2022.

For the “Undo Juku” exercise circle aimed at children, at the swimming school, we will begin offering “Undo Juku Digital Note”?—a digital service which helps children to continue learning in a fun way through synergy between “Smart Swimming Lesson System,” a service developed by Sony Network Communications Inc., and the coaching techniques of Konami Sports Club instructors—and assist children in their efforts to take on new challenges.

We will continue to provide products and services that are tailored to changing values that come with the establishment of a new-normal lifestyle.

(2) Consolidated Financial Position
(i) Total Assets, Total Liabilities and Total Equity

Total Assets:

Total assets amounted to ¥528,613 million as of March 31, 2022, increasing by ¥39,607 million compared with March 31, 2021. This mainly resulted from an increase in cash and cash equivalents due to solid performance in the Digital Entertainment business, despite a decrease in income taxes receivable.

Total Liabilities:

Total liabilities amounted to ¥180,537 million as of March 31, 2022, decreasing by ¥8,927 million compared with March 31, 2021. This primarily resulted from a decrease in bonds and borrowings due to repayment of short-term borrowings.

Total Equity:

Total equity amounted to ¥348,076 million as of March 31, 2022, increasing by ¥48,534 million compared with March 31, 2021. This mainly resulted from an increase in retained earnings due to recognition of profit attributable to owners of the parent for the year.

Ratio of equity attributable to owners of the parent was 65.8%, increasing by 4.7 points compared with March 31, 2021 due to an increase in equity including recognition of profit for the year.

Click here for the complete report with spreadsheet: https://img.konami.com/ir/en/ir-data/statements/2022/en0512_f3h9zd.pdf