Gamewith / 6552

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GameWith / 6552

COVERAGE INITIATED ON: 2019.09.27 LAST UPDATE: 2021.04.19

Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is to provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will always present opinions from company management as such. Our views are ours where stated. We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at [email protected] or find us on Bloomberg.

Research Coverage Report by Shared Research Inc. GameWith / 6552 RCoverage LAST UPDATE: 2021.04.19 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

INDEX

How to read a Shared Research report: This report begins with the trends and outlook section, which discusses the company’s most recent earnings. First-time readers should start at the business section later in the report.

Executive summary ------3 Key financial data ------5 Recent updates ------6 Highlights ------6 Trends and outlook ------7 Quarterly trends and results ------7 Business ------19 Business model ------19 Cost structure ------29 Market and value chain------31 Competition (Japan) ------37 Strengths and weaknesses ------39 Historical results and financial statements ------41 Income statement ------41 Balance sheet ------42 Cash flow statement ------43 Historical performance ------44 Other information ------51 History ------51 News and topics ------51 Corporate governance and top management ------52 Dividend policy ------54 Major shareholders (as of November 2020) ------55 Employees ------55 Profile ------56

02/57 GameWith / 6552 RCoverage LAST UPDATE: 2021.04.19 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Executive summary

Business overview

◤ Business areas and revenue per business area: GameWith, Inc. is a specialist media company that provides information on games. The company operates “GameWith,” Japan’s leading website for game app information and gaming tips (company estimated market share of nearly 40%), and earns ad revenue from selling ad spaces. The Media segment is the company’s only reporting segment. Founded in June 2013 by President Takuya Imaizumi who was then fresh out of university, the company listed on TSE Mothers in June 2017 and moved to TSE First Section in August 2019. In FY05/20, revenue was JPY2.9bn (-8.2% YoY) and operating profit JPY408mn (-49.5% YoY). ◤ The company breaks down its revenue by content categories (business areas): Game Guide accounted for 62.9% of total revenue in FY05/20 (-14.1% YoY), Game Review 23.3% (+10.9% YoY), Video Streaming 10.9% (+16.7% YoY), and Other 2.9% (-45.5% YoY). By offering such content, the company helps build player communities and prolongs the life span of the games, which in turn brings in more revenue from related ads. Strengthening content for the top six megahit smartphone games (apps) proved successful for GameWith. Meanwhile, as viewers have started to drift away from the top titles, the company is keen to develop Game Review and Video Streaming into the next mainstay following Game Guide. ◤ Game Guide: In this business, the company operates the core “GameWith” website featuring game app information and gaming tips (domestic version), as well as English and Chinese (overseas) versions of “GameWith” and @WIKI, a wiki rental service specializing in game tips. Revenue in this business consists of income from ad space sales via ad network and fees for posting contracted game guide articles and videos (tie-up ads). The income from ad space sales can be calculated by multiplying revenue per page by the number of page views. ◤ Game Review: Revenue for Game Review is not simply a function of revenue per page view times page view count. Rather, the company contracts directly with the advertiser for tie-up ads and gets a fixed monthly amount per ad space. GameWith’s strategy is to make Game Review, which provides opportunities for consumers to start playing games, a second source of earnings following Game Guide. The company said it wants to be the first brand that comes to mind when users look for a new game to play, and aims to transition from being “GameWith,” the game guide site, to “GameWith,” the game media site. ◤ Video Streaming: The company streams video content it creates over video platforms such as YouTube (the main platform for gameplay videos in Japan). Revenue in Video Streaming comes mainly from ads displayed on video platforms. Views of esports videos are trending strongly. ◤ Cost structure: Excluding advertising and one-time expenses, personnel expenses comprise about 70% of costs, rent about 10%, and server use roughly 4%. These are effectively fixed costs and the combined total for personnel, rent, and servers was roughly JPY2.0bn in FY05/20. The company spent virtually nothing on advertising through FY05/20 and planned to invest JPY863mn on promotion in FY05/21. When announcing Q3 FY05/21 results, however, the company stated that it had revised its promotional strategy and decided to reduce its planned spending on advertising. ◤ Company strategy: GameWith sees its mission as building a world with a more enjoyable game experience. As of FY05/20, Game Guide was its main business, but the company has ambitions of becoming a global game infrastructure. It thus intends to branch out beyond the media business and get involved in all businesses that will lead to greater game enjoyment. Until FY05/18, the company worked to generate revenue and become profitable in the domestic media business. From FY05/19, it adopted a three-pronged strategy. The first element of this strategy was to focus on the Game Review business to build a second source of earnings in addition to Game Guide; the second was to step up its overseas development, primarily in the English-speaking world; and the third was to expand into a variety of game-related areas outside its existing business. ◤ Strengthening Game Review business: The company said it wants to be the first brand that comes to mind when users look for a new game to play, and aims to transition from being “GameWith,” the game guide site, to “GameWith,” the game media site. With the spread of smartphones, the Japanese game market has grown to roughly JPY1.3tn (Ministry of Internal Affairs and Communications, 2019 Information and Communications White Paper) and with the growth of the game market, the domestic game population has swelled to about 50mn, roughly 40% of the total (Famitsu’s Game White Paper) population. As a result, the addressable market of so-called mass-market gamers, whose game literacy is relatively unsophisticated, has expanded. This calls for a new approach that extends beyond the traditional target of game tip websites, the so-called “heavy gamers” with relatively sophisticated game literacy, to target the mass-market demographic.

03/57 GameWith / 6552 RCoverage LAST UPDATE: 2021.04.19 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

In FY05/21, the company aims to capture new users through large promotional campaigns (budget of JPY863mn) and develop applications and improve user interface (UI) and user experience (UX). Through these efforts, the company aims to maximize the medium- to long-term growth of revenue and earnings in the game review business. The company thinks that, in the long term, revenue from Game Review will outstrip that from Game Guide.

Trends and outlook

◤ In FY05/20, the company reported full-year consolidated revenue of JPY2.9bn (-8.2% YoY), operating profit of JPY408mn (- 49.5% YoY), recurring profit of JPY409mn (-49.4% YoY), and net income of JPY219mn (-68.0% YoY). The operating profit margin of 14.1% was down 11.6pp YoY. After having come all the way through the end of Q3 with revenue and earnings running generally in line with plan, the company hit a bump in the road in Q4, when revenue finished 20% below plan and earnings at all levels came in short of expectations as the novel coronavirus pandemic spread across Japan and the rest of the world. With the Japanese government going so far as to make an official state of emergency declaration in April, many people in Japan had little choice but to stay home. And while this led to increases in the number of people playing video games at home and more page views on the company’s websites and apps, total revenue at the company (mainly calculated by multiplying the number of page views on its websites and apps by the average revenue per ad) still finished the year below plan as the average revenue per ad earned by the company came tumbling down as many companies decided to scale back ad placements.

◤ Full-year FY05/21 earnings forecast: As of July 15, 2020, the company had left its full-year FY05/21 forecast undetermined due to the difficulty of reasonably estimating the business impact of the novel coronavirus pandemic. However, it announced full- year forecasts based on available information as of October 2020. The revised forecast calls for revenue of JPY2.9bn (left undetermined in previous forecast, JPY2.9bn in FY05/20), operating loss of JPY417mn (same, profit of JPY408mn), recurring loss of JPY424mn (same, profit of JPY408mn), net loss of JPY353mn (same, profit of JPY219mn), and loss per share of JPY19.63 (same, EPS of JPY12.23 yen). At the Q3 FY05/21 results announcement on April 7, 2021, the company made no changes to the earnings forecast it released on October 7, 2020. As of end-Q3, revenue had reached 72.7% of the full-year target. The company is currently assessing the impact from the shift in its Game Guide strategy on revenue as well as the extent of the decrease in advertising expenses due to the review in its promotional strategy. The company did not revise its full-year forecast at the time it announced Q3 results, because it had not decided on the extent of advertising expense cuts in Q4. It expects Q4 advertising expenses being lower than previously planned to boost full-year FY05/21 profit beyond the forecast.

◤ Numerical targets in medium-term business strategy: The company has not disclosed numerical targets for its medium-term business strategy.

Strengths and weaknesses

Strengths:

▷ Ability to attract viewers with search engine optimization and maximize their lifetime value by harnessing quality content

▷ Top share in niche market of guide sites for smartphone games

▷ Relatively low-risk business that does not require large initial investment Weaknesses:

▷ Game Guide business highly dependent on top mobile game titles

▷ Dependent upon major platforms run by Apple Inc. and Alphabet Inc. as channels for attracting users

▷ Earnings are mainly from advertising, and thus vulnerable to fluctuations in ad volume driven by the economic cycle

04/57 GameWith / 6552 RCoverage LAST UPDATE: 2021.04.19 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Key financial data

Income statement FY05/15 FY05/16 FY05/17 FY05/18 FY05/19 FY05/20 FY05/21 (JPYmn) Parent Parent Parent Parent Parent Cons. Cons. Est. Revenue 389 994 1,582 2,678 3,149 2,890 2,936 YoY - 155.5% 59.1% 69.3% 17.6% -8.2% 1.6% Gross profit - 589 1,017 1,812 1,801 1,403 YoY - - 72.6% 78.1% -0.6% -22.1% Gross profit margin - 59.3% 64.3% 67.7% 57.2% 48.5% Operating profit - 331 657 1,169 808 408 -417 YoY - - 98.7% 77.8% -30.8% -49.5% - Operating profit margin - 33.3% 41.5% 43.6% 25.7% 14.1% - Recurring profit 125 330 654 1,169 808 409 -424 YoY - 164.7% 98.4% 78.7% -30.9% -49.4% - Recurring profit margin 32.0% 33.2% 41.4% 43.6% 25.7% 14.1% - Ne t in c o me 9 4 220 466 816 686 219 -353 YoY - 133.9% 111.2% 75.3% -15.9% -68.0% - Net margin 24.2% 22.2% 29.4% 30.5% 21.8% 7.6% - Per-share data (split-adjusted; JPY) Shares issued (year-end; '000) 164 8,200 16,400 17,312 18,015 18,218 EPS 6.4 13.4 28.4 48.7 39.1 12.2 -19.6 EPS (fully diluted) - - - 44.4 37.4 12.1 Dividend per share ------Book value per share 5 19 87 147 183 187 Balance sheet Cash and cash equivalents 619 831 1,335 2,415 2,709 2,685 Total current assets 731 1,025 1,629 2,851 3,311 3,143 Tangible fixed assets 1 67 54 84 94 58 Investments and other assets 120 120 133 280 361 507 Intangible fixed assets - 0 0 0 0 121 Total assets 852 1,211 1,816 3,181 3,766 3,829 Short-term debt ------Total current liabilities 113 223 364 601 416 428 Long-term debt ------Total fixed liabilities - 29 27 35 48 48 Total liabilities 113 252 390 637 464 475 Shareholders' equity 739 960 1,425 2,545 3,302 3,351 Total net assets 739 960 1,425 2,545 3,302 3,354 Total interest-bearing debt ------Cash flow statement (JPYmn) Cash flows from operating activities 97 279 524 951 341 437 Cash flows from investing activities -119 -68 -20 -174 -117 -294 Cash flows from financing activities 498 - - 303 70 -167 Financial ratios ROA (RP-based) 24.8% 32.0% 43.2% 46.8% 23.3% 10.8% ROE 21.3% 26.0% 39.0% 41.1% 23.5% 6.6% Employee data Number of employees (ex. temp. workers) 8 26 39 71 125 134 Temporary workers (average for the period) 35 53 63 91 114 110 Average age - - 31.2 31.1 30.5 30.8 Average years of service - - 1.4 1.7 2.0 2.5 Average annual salary (JPYmn) - - 5,790 6,029 6,151 6,111 Source: Shared Research based on company data Notes: Per-share data is adjusted for stock splits. Figures may differ from company materials due to differences in rounding methods.

05/57 GameWith / 6552 RCoverage LAST UPDATE: 2021.04.19 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Recent updates Highlights On April 19, 2021, Shared Research updated the report following interviews with GameWith, Inc.

On April 7, 2021, the company announced earnings results for Q3 FY05/21; see the results section for details.

On February 2, 2021, Shared Research updated the report following interviews with the company.

For previous releases and developments, please refer to the News and topics section.

06/57 GameWith / 6552 RCoverage LAST UPDATE: 2021.04.19 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Trends and outlook

Quarterly trends and results

Cumulative FY05/ 19 FY 05/ 20 FY 05/ 21 FY 05/ 21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3% of Est.FY Est. Revenue 762 1,575 2,329 3,149 749 1,500 2,208 2,890 688 1,402 2,135 72.7% 2,936 YoY 13.5% 22.5% 19.3% 17.6% -1.7% -4.8% -5.2% -8.2% -8.2% -6.5% -3.3% 1.6% Gross profit 474 967 1,358 1,801 395 777 1,115 1,403 343 713 1,087 YoY -2.0% 8.4% 1.0% -0.6% -16.7% -19.7% -17.9% -22.1% -13.2% -8.2% -2.5% Gross profit margin 62.2% 61.4% 58.3% 57.2% 52.7% 51.8% 50.5% 48.5% 49.9% 50.8% 50.9% SG&A expenses 230 463 740 993 262 495 734 995 414 803 1,324 YoY 69.0% 73.0% 75.3% 54.3% 13.9% 6.9% -0.9% 0.2% 58.3% 62.3% 80.5% SG&A ratio 30.1% 29.4% 31.8% 31.5% 34.9% 33.0% 33.2% 34.4% 60.2% 57.3% 62.0% Operating profit 244 504 618 808 133 282 381 408 -71 -90 -237 - -417 YoY -29.7%-19.3%-33.0%-30.8%-45.4%-44.1%-38.3%-49.5% - - - - Operating profit margin 32.1% 32.0% 26.5% 25.7% 17.8% 18.8% 17.3% 14.1% - - - - Recurring profit 243 503 616 808 133 282 381 409 -74 -95 -245 - -424 YoY -29.7%-19.2%-33.0%-30.9%-45.4%-44.0%-38.1%-49.4% - - - - Recurring profit margin 31.9% 31.9% 26.4% 25.7% 17.7% 18.8% 17.3% 14.1% - - - - Net income 170 349 418 686 85 186 249 219 -77 -142 -247 - -353 YoY -31.0%-21.5%-36.4%-15.9%-49.8%-46.5%-40.4%-68.0% - - - - Net margin 22.3% 22.1% 17.9% 21.8% 11.4% 12.4% 11.3% 7.6% - - - - Quarterly FY05/ 19 FY 05/ 20 FY 05/ 21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3 Revenue 762 813 754 820 749 751 708 683 688 715 732 YoY 13.5% 32.3% 13.2% 13.0% -1.7% -7.7% -6.1% -16.8% -8.2% -4.8% 3.4% Gross profit 474 493 391 443 395 382 338 288 343 370 374 YoY -2.0% 20.5% -13.5% -5.3% -16.7% -22.5% -13.5% -35.0% -13.2% -3.1% 10.6% Gross profit margin 62.2% 60.6% 51.9% 54.0% 52.7% 50.9% 47.8% 42.1% 49.9% 51.8% 51.1% SG&A expenses 230 233 277 252 262 233 239 261 414 389 521 YoY 69.0% 77.1% 79.4% 14.2% 13.9% 0.0% -13.9% 3.4% 58.3% 66.7% 118.2% SG&A ratio 30.1% 28.7% 36.8% 30.8% 34.9% 31.1% 33.7% 38.2% 60.2% 54.5% 71.2% Operating profit 244 260 114 190 133 149 100 27 -71 -19 -147 YoY -29.7% -6.3% -61.7% -22.7% -45.4% -42.8% -12.6% -86.0% - - - Operating profit margin 32.1% 31.9% 15.1% 23.2% 17.8% 19.8% 14.1% 3.9% - - - Recurring profit 243 260 113 192 133 149 100 27 -74 -21 -150 YoY -29.7% -6.1% -62.0% -22.9% -45.4% -42.7% -11.9% -85.7% - - - Recurring profit margin 31.9% 32.0% 15.0% 23.4% 17.7% 19.8% 14.1% 4.0% - - - Net income 170 179 69 269 85 101 62 -29 -77 -65 -104 YoY -31.0% -9.8% -67.6% 68.7% -49.8% -43.4% -9.6% - - - - Net margin 22.3% 21.9% 9.2% 32.8% 11.4% 13.5% 8.8% - - - - Source: Shared Research based on company data. Note: Figures may differ from company materials due to differences in rounding methods. The company moved to consolidated accounting starting in Q3 FY05/20.

07/57 GameWith / 6552 RCoverage LAST UPDATE: 2021.04.19 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Quarterly revenue by business area

Revenue by business area FY 05/ 19 FY05/20 FY 05/ 21 Cumulative (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Game Guide 542 1106 1644 2116 496 955 1407 1817 365 767 1176 Game Review 145 313 440 607 164 355 516 673 208 405 609 Video Streaming 61 132 201 269 72 141 214 314 99 196 285 Revenue adjustments due to taxation change - - - 84 - - - 1 - - - Other 1323427016476983143059 Total revenue 761 1574 2327 3146 748 1498 2206 2888 687 1401 2133 YoY Game Guide -1.5% 5.2% 4.5% 0.0% -8.5% -13.7% -14.4% -14.1% -26.4% -19.7% -16.4% Game Review 113.2% 131.9% 92.1% 77.5% 13.1% 13.4% 17.3% 10.9% 26.8% 14.1% 18.0% Video Streaming 125.9% 106.3% 93.3% 61.1% 18.0% 6.8% 6.5% 16.7% 37.5% 39.0% 33.2% Revenue adjustments due to taxation change------98.8%--- Other -50.0% -34.3% -6.7% 37% 23.1% 104.3% 64.3% 18.6% -12.5% -36.2% -14.5% Total revenue 13.4% 22.5% 19.3% 17.6% -1.7% -4.8% -5.2% -8.2% -8.2% -6.5% -3.3% % of total revenue Game Guide 71.2% 70.3% 70.6% 67.3% 66.3% 63.8% 63.8% 62.9% 53.1% 54.7% 55.1% Game Review 19.1% 19.9% 18.9% 19.3% 21.9% 23.7% 23.4% 23.3% 30.3% 28.9% 28.6% Video Streaming 8.0% 8.4% 8.6% 8.6% 9.6% 9.4% 9.7% 10.9% 14.4% 14.0% 13.4% Revenue adjustments due to taxation change - - - 2.7% - - - 0.0% - - - Other 1.7% 1.5% 1.8% 2.2% 2.1% 3.1% 3.1% 2.9% 2.0% 2.1% 2.8% Total revenue 100.0% 100.0% 100.0% 97.3% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Revenue by business area FY 05/ 19 FY05/20 FY 05/ 21 Quarterly (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3 Game Guide 542 564 538 472 496 459 452 410 365 402 409 Game Review 145 168 127 167 164 191 161 157 208 197 204 Video Streaming 61716968726973100999789 Revenue adjustments due to taxation change - - - 84 - - - 1 - - - Other 1310192816312214141629 Total revenue 761 813 753 819 748 750 708 682 687 714 732 YoY Game Guide -1.5% 12.6% 3.1% -13.1% -8.5% -18.6% -16.0% -13.1% -26.4% -12.4% -9.5% Game Review 113.2% 150.7% 35.1% 47.8% 13.1% 13.7% 26.8% -6.0% 26.8% 3.1% 26.7% Video Streaming 125.9% 91.9% 72.5% 7.9% 18.0% -2.8% 5.8% 47.1% 37.5% 40.6% 21.9% Revenue adjustments due to taxation change------98.8%--- Other -50.0% 11.1% 90.0% 367% 23.1% 210.0% 15.8% -50.0% -12.5% -48.4% 31.8% Total revenue 13.4% 32.4% 13.1% 13.0% -1.7% -7.7% -6.0% -16.7% -8.2% -4.8%3.4% % of total revenue Game Guide 71.2% 69.4% 71.4% 57.6% 66.3% 61.2% 63.8% 60.1% 53.1% 56.3% 55.9% Game Review 19.1% 20.7% 16.9% 20.4% 21.9% 25.5% 22.7% 23.0% 30.3% 27.6% 27.9% Video Streaming 8.0% 8.7% 9.2% 8.3% 9.6% 9.2% 10.3% 14.7% 14.4% 13.6% 12.2% Revenue adjustments due to taxation change - - - 10.3% - - - 0.1% - - - Other 1.7% 1.2% 2.5% 3.4% 2.1% 4.1% 3.1% 2.1% 2.0% 2.2% 4.0% Total revenue 100.0% 100.0% 100.0% 89.7% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Source: Shared Research based on company data Cumulative figures shown in table above are simple sums of quarterly figures and may differ from the company’s cumulative figures Portion of revenues included in Other reclassified as Video Streaming revenue

Game Guide revenue includes the proceeds from network ads (ad network advertising) and tie-up ads (contracted game guide articles and videos). Game Review revenue consists mainly of tie-up ads (game review articles and videos). Video Streaming revenue is revenue from network ads delivered via YouTube. Network ad revenues are a product of page views (PV) and revenue per PV. Tie-up ads are ads directly contracted by the company at a fixed monthly price per ad space.

08/57 GameWith / 6552 RCoverage LAST UPDATE: 2021.04.19 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Quarterly trends in game guide site “GameWith” PV and revenue per PV index Page view (PV) metrics FY 05/ 19 FY05/20 FY 05/ 21 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Revenue per page view (index: Q1 FY05/20 =100) 97 104 106 103 100 88 8969718087 YoY -8.5% 12.8% 9.0% 1.8% 3.1% -15.2% -15.8% -32.9% -29.0% -9.1% -2.2% QoQ -4.0% 7.0% 1.9% -2.8% -2.7% -12.0% 1.1% -22.5% 2.9% 12.7% 8.7% Page view count (monthly average; mn) 710 680 620 550 590 580 560 630 490 470 470 YoY -5.3% -9.3% -15.1% -23.6% -16.9% -14.7% -9.7% 14.5% -16.9% -19.0% -16.1% QoQ -1.4% -4.2% -8.8% -11.3% 7.3% -1.7% -3.4% 12.5% -22.2% -4.1% 0.0% Revenue per PV ｘPV count 68,870 70,577 65,553 56,551 59,000 51,040 49,840 43,470 34,790 37,600 40,890 YoY -13.4% 2.3% -7.4% -22.2% -14.3% -27.7% -24.0% -23.1% -41.0% -26.3% -18.0% QoQ -5.3% 2.5% -7.1% -13.7% 4.3% -13.5% -2.4% -12.8% -20.0% 8.1% 8.7% Source: Shared Research based on company data Since Q2 FY05/19, overseas contributions have been included in page view count and revenue per page view. Revenue per PV index in FY05/19 was adjusted by Shared Research based on indexes disclosed in Q4 FY05/20 and earlier

Quarterly cost per view index Cost per view (CPV) metrics FY 05/ 19 FY05/20 FY 05/ 21 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Cost per view (index: Q1 FY05/20 =100) 97 112 117 117 100 97 109 72 75 88 91 YoY ----3.1%-13.0%-7.1%-38.7%-25.0%-9.3%-16.5% QoQ - 15.0% 5.2% 0.0% -14.8% -3.0% 12.4% -33.9% 4.2% 17.3% 3.4% Source: Shared Research based on company data. Raw figures for number of video views are not disclosed.

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Quarterly trends in cost structure and OPM

Cost structure FY 05/ 19 FY 05/ 20 FY 05/ 21 Cumulative (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Total personnel costs and expenses 349 730 1176 1610 405 823 1246 1677 439 875 1334 Rents 54 107 172 236 65 129 193 258 50 87 102 Server fees 18 39 64 87 25 48 72 101 24 48 72 Depreciation 3 10 19 28 7 17 27 27 0 0 0 Floor expansion expenses 0010100000000 Advertising expenses - - - - - 4 9 33 157 320 616 Other 90 179 264 362 111 194 276 374 79 146 225 Cost of revenue and SG&A expenses 514 1,065 1,705 2,333 613 1,215 1,823 2,470 749 1,476 2,349 YoY Total personnel costs and expenses 71.9% 74.6% 78.7% 66.0% 16.0% 12.7%6.0%4.2%8.4%6.3%7.1% Rents 42.1% 32.1% 37.6% 31.8% 20.4% 20.6% 12.2% 9.3% -23.1% -32.6% -47.2% Server fees 12.5% 25.8% 42.2% 45.0% 38.9% 23.1% 12.5% 16.1% -4.0% 0.0% 0.0% Depreciation -40.0% 0.0% 26.7% 21.7% 133.3% 70.0% 42.1% -3.6% -100.0% -100.0% -100.0% Floor expansion expenses ----37.5%------Advertising expenses ------Other 50.0% 53.0% 48.3% 44.8% 23.3% 8.4% 4.5% 3.3% -28.8% -24.7% -18.5% Cost of revenue and SG&A expenses 59.6% 62.1% 67.0% 55.7% 19.3% 14.1% 6.9% 5.9% 22.2% 21.5% 28.9% % of total costs and expenses Total personnel costs and expenses 67.9% 68.5% 69.0% 69.0% 66.1% 67.7% 68.3% 67.9% 58.6% 59.3% 56.8% Rents 10.5% 10.0% 10.1% 10.1% 10.6% 10.6% 10.6% 10.4% 6.7% 5.9% 4.3% Server fees 3.5% 3.7% 3.8% 3.7% 4.1% 4.0% 3.9% 4.1% 3.2% 3.3% 3.1% Depreciation 0.6% 0.9% 1.1% 1.2% 1.1% 1.4% 1.5% 1.1% 0.0% 0.0% 0.0% Floor expansion expenses 0.0% 0.0% 0.6% 0.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%0.0% Advertising expenses - - - - - 0.3% 0.5% 1.3% 21.0% 21.7% 26.2% Other 17.5% 16.8% 15.5% 15.5% 18.1% 16.0% 15.1% 15.1% 10.5% 9.9% 9.6% Cost of revenue and SG&A expenses 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Revenue 761 1,574 2,327 3,146 748 1,498 2,206 2,888 687 1,401 2,133 Operating profit 244 504 618 808 133 282 381 407 -70 -89 -236 Operating profit margin 32.1% 32.0% 26.6% 25.7% 17.8% 18.8% 17.3% 14.1% -10.2% -6.4% -11.1% Cost structure FY 05/ 19 FY05/20 FY05/21 Quarterly (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Total personnel costs and expenses 349 381 446 434 405 418 423 431 439 436 459 Rents 5453656465646465503715 Server fees 18 21 25 23 25 23 24 29 24 24 24 Depreciation 3799710100000 Floor expansion expenses 001000000000 Advertising expenses - - - - - 4 5 24 157 163 296 Other 90 89 85 98 111 83 82 98 79 67 79 Cost of revenue and SG&A expenses 514 551 640 628 613 602 608 647 749 727 873 YoY Total personnel costs and expenses 71.9% 77.2% 85.8% 39.1% 16.0% 9.7% -5.2% -0.7% 8.4% 4.3% 8.5% Rents 42.1% 23.3% 47.7% 18.5% 20.4% 20.8% -1.5% 1.6% -23.1% -42.2% -76.6% Server fees 12.5% 40.0% 78.6% 53.3% 38.9% 9.5% -4.0% 26.1% -4.0% 4.3% 0.0% Depreciation -40.0% 40.0% 80.0% 12.5% 133.3% 42.9% 11.1% -100.0% -100.0% -100.0% -100.0% Floor expansion expenses ------Advertising expenses ------Other 50.0% 56.1% 39.3% 36.1% 23.3% -6.7% -3.5% 0.0% -28.8% -19.3% -3.7% Cost of revenue and SG&A expenses 59.6% 64.5% 75.8% 31.7% 19.3% 9.3% -5.0% 3.0% 22.2% 20.8% 43.6% % of total costs and expenses Total personnel costs and expenses 67.9% 69.1% 69.7% 69.1% 66.1% 69.4% 69.6% 66.6% 58.6% 60.0% 52.6% Rents 10.5% 9.6% 10.2% 10.2% 10.6% 10.6% 10.5% 10.0% 6.7% 5.1% 1.7% Server fees 3.5% 3.8% 3.9% 3.7% 4.1% 3.8% 3.9% 4.5% 3.2% 3.3% 2.7% Depreciation 0.6% 1.3% 1.4% 1.4% 1.1% 1.7% 1.6% 0.0% 0.0% 0.0% 0.0% Floor expansion expenses 0.0% 0.0% 1.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%0.0% Advertising expenses - - - - - 0.7% 0.8% 3.7% 21.0% 22.4% 33.9% Other 17.5% 16.2% 13.3% 15.6% 18.1% 13.8% 13.5% 15.1% 10.5% 9.2% 9.0% Cost of revenue and SG&A expenses 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Revenue 761 813 753 819 748 750 708 682 687 714 732 Operating profit 244 260 114 190 133 149 99 26 -70 -19 -147 Operating profit margin 32.1% 31.9% 15.1% 23.3% 17.8% 19.9% 14.0% 3.8% -10.2% -2.7% -20.1% Total headcount 213 223 236 242 248 244 251 247 248 242 251 Source: Shared Research based on company data Notes: Total personnel costs and expenses are the total of directors’ compensations (booked as cost of revenue and SG&A expenses), salaries and allowances, bonuses and bonus provisions, legal welfare expenses, shareholder perks, outsourcing expenses, and hiring and training expenses. Cumulative figures shown in the table above are simple sums of quarterly figures and may differ from the company’s cumulative figures. Figures too small to be disclosed in quarterly company announcements are assumed to be JPY0mn. Total headcount is the average number of employees (including temporary workers) and directors, based on those employed in each month.

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Q3 FY05/21 results

▷ For cumulative Q3 FY05/21, the company reported consolidated revenue of JPY2.1bn (-3.3% YoY), an operating loss of JPY237mn (versus a profit of JPY381mn in cumulative Q3 FY05/20), a recurring loss of JPY245mn (versus a profit of JPY381mn in cumulative Q3 FY05/20), and a net loss of JPY247mn (versus a profit of JPY249mn in cumulative Q3 FY05/20). Lower Game Guide revenue led to lower overall revenue YoY. In cumulative Q3, the company reported an operating loss as it booked JPY616mn in advertising expenses, which was driven by airing TV commercials aimed at attracting mass-market gamers in its Game Review business. Thanks to advertising effects, the total number of GameWith app downloads at end-Q3 had grown 67% compared to end-FY05/20, generally in line with the company’s forecast. ▷ The company announced that it was scaling back some of its iOS app mobile game reviews in order to conform to App Store guidelines (App Store Review Guidelines 3.2.2—Business—Other Business Model Issues—Unacceptable) and maintain iOS app updates. This is not expected to have an impact on the Game Guide business area. Mobile game reviews will continue for Android applications and web browsers, so the company expects the overall impact on future revenue to be limited, because most users access its site via web browser searches. ▷ The company’s review of its promotional strategies is aimed at reducing advertising expenses from currently estimated levels. In particular, from Q4 onward, the company plans to attract users primarily via online marketing instead of raising its profile by

airing TV commercials. It will forego some of the TV commercials planned for Q4 (e.g., it will not air TV commercials in April or May). The company also intends to reduce web marketing expenses from the level it initially forecast. The company commented that although plans may change going forward, as of end Q3, it expected advertising expenses in Q4 to be less

than the JPY157mn spent in Q1. The change in policy is the result of reviews regarding the cost-effectiveness of advertising expenses, which revealed the need to cut back on some iOS app mobile game reviews (see above). ▷ Full-year FY05/21 earnings forecast: The company has made no changes to the earnings forecast it released on October 7, 2020. As of end-Q3, revenue had reached 72.7% of the full-year target. The company is currently assessing the impact from the shift in its Game Guide strategy on revenue as well as the extent of the decrease in advertising expenses due to the review in its promotional strategy. The company did not revise its full-year forecast at the time it announced Q3 results, because it had

not decided on the extent of advertising expense cuts in Q4. It expects Q4 advertising expenses being lower than previously planned to boost full-year FY05/21 profit beyond the forecast. See the “Full-year company forecast” section for assumptions underlying the company forecast and other details.

Business performance

▷ In Q3 (December 2020–February 2021), the company reported Game Guide revenue of JPY409mn (-9.5% YoY), Game Review revenue of JPY204mn (+26.7% YoY), and Video Streaming revenue of JPY89mn (+21.9% YoY). A drop in PV count resulted in lower Game Guide revenue YoY. Game Review revenue expanded YoY on increased brand recognition due to the airing of TV commercials and the resumption of game development previously delayed by advertisers due to the spread of COVID-19. In Video Streaming, the company noted a recovery in cost per view index, although the average number of views decreased in Q3 compared to Q2. ▷ At its Game Guide business, the company saw an average of 470mn page views per month during Q3, down 16.1% YoY and flat compared to the 470mn figure reported in Q2. This decline was due to a decrease in blockbuster game titles and the conclusion of a period of demand associated with shelter-in-place requests issued in response to the COVID-19 pandemic. The

company does not expect the PV count to drop substantially from Q3 levels. Monthly average revenue per PV index (indexed to 100, base period Q1 FY05/20) was 87 in Q3 (-2.2% YoY), indicative of recovery when compared to the index value of 71

11/57 GameWith / 6552 RCoverage LAST UPDATE: 2021.04.19 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

reported for Q1 FY05/21. In December 2020, revenue per PV returned to the level seen before the arrival of COVID-19, but the company indicated only moderate growth following the government declaring a state of emergency in January 2021.

Costs

▷ In Q3, advertising expenses increased to JPY296mn (versus JPY157mn in Q1 and JPY163mn in Q2), largely as a result of the company airing TV commercials featuring celebrities.

▷ Personnel-related costs of JPY459mn in Q3 were up 8.5% YoY. As a result of aggressive hiring in esports and other categories, employee headcount as of end-Q3 was 251, up by nine employees compared to end-Q2. The company has curbed increase in the number of writers by progressively outsourcing work to writers living outside Tokyo. An increase in advertising expenses lowered personnel-related costs as a percentage of total costs YoY to 52.6%.

▷ The company recorded JPY76mn in loss on office closures as an extraordinary loss in Q2. This extraordinary loss has already been accounted for in the company’s initial FY05/21 forecast. The company aimed to cut down costs by relocating some of its offices assuming that it would maintain the full remote work system. Accordingly, the company recorded the book value of fixed assets previously recorded in association with former office locations and rent covering the remaining lease periods for these locations as losses.

For details on previous quarterly and annual results, please refer to the Historical financial statements section.

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Full-year company forecast

Full-year company forecast FY05/19 FY05/20 FY05/21 (JPYmn) 1H Act. 2H Act. FY Act. 1H Act. 2H Act. FY Act. 1H Act. 2H Est. FY Est. Revenue 1,575 1,574 3,149 1,500 1,391 2,890 1,402 1,534 2,936 YoY 22.5% 13.1% 17.6% -4.8% -11.6% -8.2% -6.5% 10.3% 1.6% Cost of revenue 608 740 1,348 723 765 1,487 690 YoY 54.5% 56.7% 55.7% 18.9% 3.3% 10.3% -4.6% - - Gross profit 967 834 1,801 777 626 1,403 713 YoY 8.4% -9.3% -0.6% -19.7% -24.9% -22.1% -8.2% - - Gross profit margin 61.4% 53.0% 57.2% 51.8% 45.0% 48.5% 50.8% - - SG&A expenses 463 530 993 495 500 995 803 YoY 73.0% 41.0% 54.3% 6.9% -5.6% 0.2% 62.3% - - SG&A ratio 29.4% 33.7% 31.5% 33.0% 35.9% 34.4% 57.3% - - Operating profit 504 304 808 282 126 408 -90 -327 -417 YoY -19.3% -44.0% -30.8% -44.1% -58.5% -49.5% - - - Operating profit margin 32.0% 19.3% 25.7% 18.8% 9.1% 14.1% - - - Recurring profit 503 305 808 282 127 409 -95 -329 -424 YoY -19.2% -44.2% -30.9% -44.0% -58.4% -49.4% - - - Recurring profit margin 31.9% 19.4% 25.7% 18.8% 9.1% 14.1% - - - Net income 349 338 686 186 33 219 -142 -211 -353 YoY -21.5% -9.2% -15.9% -46.5% -90.2% -68.0% - - - Net margin 22.1% 21.5% 21.8% 12.4% 2.4% 7.6% - - - Source: Shared Research, based on company data. Note: Figures may differ from company materials due to differences in rounding methods.

Supplementary information provided alongside Q3 results announcement (April 7, 2021) The company has made no changes to the earnings forecast it released on October 7, 2020. As of end-Q3, revenue had reached 72.7% of the company’s full-year target. The company is currently assessing the impact from the shift in its Game Guide strategy on revenue as well as the extent of the decrease in advertising expenses due to the review in its promotional strategy. The company did not revise its full-year forecast at the time it announced Q3 results, because it had not decided on the extent of advertising expense cuts in Q4. It expects Q4 advertising expenses being lower than previously planned to boost full-year FY05/21 profit beyond the forecast.

Revenue

▷ The company is scaling back some of its iOS app mobile game reviews in order to conform to App Store guidelines (App Store Review Guidelines 3.2.2—Business—Other Business Model Issues—Unacceptable) and maintain iOS app updates. This is not expected to have an impact on the Game Guide business area. Mobile game reviews will continue for Android applications and web browsers, so the company expects the overall impact on future revenue to be limited, because most users access its

site via web browser searches. ▷ ▷ The company estimates that it needs Q4 revenue of JPY801mn to attain its full-year forecast. Although the company posted Q4 revenue over JPY800mn in FY05/19, it is an ambitious target in view of the above negative factors impacting game review revenue.

Costs

▷ The company’s review of its promotional strategies is aimed at reducing advertising expenses from currently estimated levels. In particular, from Q4 onward, the company plans to attract users primarily via online marketing instead of raising its profile by airing TV commercials. It will forego some of the TV commercials planned for Q4 (e.g., it will not air TV commercials in April or

May). The company also intends to reduce web marketing expenses from the level it initially forecast. The company commented that although plans may change going forward, as of end Q3, it expected advertising expenses in Q4 to be less

13/57 GameWith / 6552 RCoverage LAST UPDATE: 2021.04.19 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

than the JPY157mn spent in Q1. The change in policy is the result of reviews regarding the cost-effectiveness of advertising expenses, which revealed the need to cut back on some iOS app mobile game reviews (see above). ▷ The company noted that as a result of relocating a portion of its headquarters’ offices, monthly costs (rent) will be reduced by several million yen starting in Q4.

Revised forecast (announced October 7, 2020) Revised FY05/21 earnings forecast

▷ Revenue: JPY2.9bn (TBD in previous forecast, JPY2.9bn in FY05/20)

▷ Operating loss: JPY417mn (same, profit of JPY408mn)

▷ Recurring loss: JPY424mn (same, profit of JPY408mn)

▷ Net loss*: JPY353mn (same, profit of JPY219mn)

▷ Loss per share: JPY19.63 (same, EPS of JPY12.23) *Net loss attributable to owners of the parent

Assumptions underpinning earnings forecast As of July 15, 2020, the company had left its full-year FY05/21 forecast undetermined due to the difficulty of reasonably estimating the business impact of the novel coronavirus pandemic. However, it announced its full-year forecast based on currently available information. While the company expects higher revenue YoY, it projects lower operating profit, recurring profit, and net income YoY as it plans to invest JPY863mn in advertising expenses.

▷ With regard to the impact of the pandemic, the earnings outlook does not assume a major improvement or deterioration in conditions from that of October 2020. However, as it cannot eliminate the possibility of unpredictable fluctuations in earnings performance driven by external factors such as the spread of the novel coronavirus and the timing of its containment, the company will promptly revise the forecast if it expects significant fluctuations in performance.

▷ The company expects the pandemic to continue affecting its earnings, and for Game Guide, which provides tips that help gameplay, it projects a fall in revenue per ad and delays in new game releases. Under these circumstances, the company plans to grow revenue by 1.6% YoY by focusing its resources on Game Review, which provides information for finding games to play. It expects revenue to grow each quarter thereafter.

Revenue

▷ The company assumes a JPY161mn YoY decline in Game Guide revenue, a JPY103mn YoY increase in Game Review revenue, and a JPY105mn YoY increase in Video Streaming revenue. It expects overall revenue to increase modestly driven by growth in Game Review and Video Streaming revenue and a recovery in Game Guide revenue.

▷ In Q1 FY05/21, the Game Guide business was affected by a decline in new game releases (especially for native mobile games as a whole). The company explains that release schedules for new games are being pushed back across the board, and that game developers will adjust the timing of their promotional activities accordingly. Consequently, it thinks upcoming game releases are unlikely to be concentrated into any one period. In the event of a second wave of novel coronavirus infections, the company does not expect impact from delays on the same scale as experienced during the first wave, mainly because game developers have already taken measures to mitigate impact of the pandemic, including by transitioning to remote work. The company looks for its PV count to bottom out and remain broadly on par with the level of Q1 FY05/21, and it sees revenue per PV improving from Q1 FY05/21 despite lingering impact from the novel coronavirus pandemic.

▷ In the Game Review business, the company expects spending on advertising to drive an increase in the number of app installs and an improvement in its profile as a game media site. Because users who seek out game reviews look to discover interesting games, the company thinks the lifetime value (LTV) for such users manifests over a longer period of time than for users who browse game guides. It therefore looks for modest revenue growth in FY05/21. The company plans to provide more

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information about the concrete results of previous advertising activities, including the effect of the TV commercials aired in October 2020, in Q2 or later.

▷ In the Video Streaming business, the company will work to further strengthen scouting activities for esports players and launch new channels. It looks for a continued increase in subscribers of YouTube channels of affiliated esports players, but expects the pace of growth to slow.

▷ Epic Games, Inc. (unlisted) has been embroiled in a dispute with Apple Inc. (NASDAQ: AAPL) and Alphabet Inc. (NASDAQ: GOOGL) over commission fees, and its Fortnite game has been banned from the app stores of both companies as a result. GameWith does not expect any impact on its revenue from this development. It expects Fortnite players will switch to playing the game on PC or consoles, but it does not anticipate a major decline in the overall player base.

▷ Turning to changes in the business environment, the company expects events such as the launch of the PlayStation 5 (PS5) scheduled for November 2020 and the rollout of 5G service to transform game infrastructure. In the past, changes to game infrastructure have altered the way games were played, and affected game media accordingly. The company aims to expand its market share by responding appropriately to the forthcoming changes in game infrastructure.

Cost

▷ The company plans to spend JPY863mn on advertising to raise the profile of its game information website “GameWith” while airing TV commercials and carrying out web marketing aimed at growing revenue for the Game Review business. The company had aired TV commercials in August, which falls into Q1 FY05/21, and plans to continue airing TV commercials each quarter going forward. It intends to sustain the effect of the advertising by replacing creatives. In addition, although the company will keep advertising spending in FY05/22 and beyond below or at the level of FY05/21, it plans to continue to invest in advertising in the foreseeable future.

▷ The company expects personnel costs and expenses to increase JPY205mn YoY due to the hiring of management resources and other factors. It also promotes full remote work and will continue to maintain this arrangement to achieve further cost improvements.

Initial estimates (announced July 15, 2020) At the time of its release of FY05/20 results on July 15, 2020, the company did not issue a forecast for FY05/21. By way of explanation, it said the impact of the novel coronavirus pandemic on the operating environment (lower revenue per page view, etc.) made it extremely difficult to put together reasonable estimates at this point in time, but promised to provide a forecast as soon as it was in a position to do so.

▷ The company said that revenue per page view in Game Guide started recovering in June 2020 as people resumed going out. However, as of July 2020, the company said it would be difficult to forecast this metric going forward as it is hard to foresee how the COVID-19 situation will unfold.

▷ Headcount: The company said it had no plans to make significant upward or downward changes from FY05/20 levels. Given this, it is likely that personnel expenses, a major share of total costs, will trend in line with FY05/20.

▷ Advertising expenses: The company spent virtually nothing on advertising through FY05/20, but plans to invest several hundred million yen on promotion in FY05/21, through a combination of TV commercials and online ads. GameWith plans to run a series of ads starting in Q1, while keeping an eye on their impact. The main object of the campaigns will be to strengthen the Game Review business. Because advertising charges are falling across the board for all media in the pandemic, the company said it thought it could conduct more cost-efficient promotional campaigns than previously anticipated.

▷ Rent: GameWith expected its monthly rent to fall by JPY4–5mn due to the closure of its satellite office and an increase in remote working.

▷ Balance sheet strength: The company planned to borrow a total of JPY1.3bn with a five-year payback period from four financial institutions at the end of July, 2020. The company decided on this plan to ensure that it has ample cash on hand and to prepare for possible ongoing impact from the novel coronavirus pandemic.

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Initiatives by business Going forward, the company plans to continue putting management resources into its “GameWith” platform and other game information media businesses to support ongoing growth at these businesses by increasing their media value with additional content that gamers find useful. Plans also call for continued efforts aimed at expanding overseas businesses, developing new businesses, and building out existing businesses, while at the same time keeping a close eye on how the novel coronavirus pandemic is impacting these markets. At its Game Guide business, now that it has established a respectable position in the mobile game guide market with its “GameWith” and other platforms, the company plans to offer more game guide content directed toward console games, an area that also holds great promise in terms of potential growth. It also plans to grow the English-language version of “GameWith.” At its Game Review business, the company is looking to not only provide more content for users with a high degree of game literacy (the traditional target of its game information media business), but also expand content aimed at new users, those who play games but have a relatively low degree of game literacy. Towards this end, the company will be putting more money (several hundred million yen) into advertising and promotion with the aim of expanding the user base of its “GameWith” (both website and app versions) and other media platforms and building up a strong revenue base that will help it sustain growth over the medium to long term. It also plans to accelerate tie-up marketing.

At its Video Streaming business, the company is looking to take advantage of the growing viewership of narrated third-party shooter and other esports matches by working together with professional esports teams to expand its video streaming business in this area.

Difference between initial company forecast and results Results vs. Initial Est. FY05/14 FY05/15 FY05/16 FY05/17 FY05/18 FY05/19 FY05/20 (JPYmn) Parent Parent Parent Parent Parent Parent Cons. Revenue (Initial Est.) - - - - 2,070 3,154 3,217 Revenue (Results) 7 389 994 1,582 2,678 3,149 2,890 Results vs. Initial Est. - - - - 29.3% -0.2% -10.2% Operating profit (Initial Est.) - - - - 787 905 616 Operating profit (Results) - - - 657 1,169 808 408 Results vs. Initial Est. - - - - 48.5% -10.7% -33.7% Recurring profit (Initial Est.) - - - - 785 904 616 Recurring profit (Results) -35 125 330 654 1,169 808 409 Results vs. Initial Est. - - - - 48.9% -10.6% -33.7% Net income (Initial Est.) - - - - 527 623 420 Net income (Results) -35 94 220 466 816 686 219 Results vs. Initial Est. - - - - 54.9% 10.1% -47.8% Source: Shared Research based on company data. Note: Figures may differ from company materials due to differences in rounding methods.

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Medium-term business strategy

GameWith sees its mission as building a world with a more enjoyable game experience. As of FY05/20, Game Guide was its main business, but the company has ambitions of becoming a global game infrastructure. It thus intends to branch out beyond the media business and get involved in all businesses that will lead to greater game enjoyment.

Until FY05/18, the company worked to generate revenue and become profitable in the domestic media business. From FY05/19, it adopted a three-pronged strategy. The first element of this strategy was to focus on the Game Review business to build a second source of earnings in addition to Game Guide; the second was to step up its overseas development, primarily in the English-speaking world; and the third was to expand into a variety of game-related areas outside its existing business.

The company has not disclosed numerical targets for its medium-term business strategy.

Strategy by business Game Guide The company considered its mobile game guide market position to be its strength as of FY05/20, but said it would focus on console game guides as well starting in FY05/21.

▷ Demand for console game tips trending upward, partly because players are staying at home due to COVID-19. The company explains that lifestyle changes driven by fewer short periods of idle time during the day and longer chunks of time spent at home due to a decline in commuting are having an impact.

▷ GameWith imagines that it will achieve growth through a scenario in which revenue from mobile games continues to increase while console game-related revenue expands its share of total revenue.

Console game: A computer game designed to be played on a commercial household game console.

Also, in the overseas business, the English version of “Game With” is showing solid aggregate page-view growth on a quarterly basis, so the company is training writers for the English version to increase the number of titles with a view toward future growth.

▷ With the spread of smartphones, the Japanese game market has grown to roughly JPY1.3tn (Ministry of Internal Affairs and Communications, 2019 Information and Communications White Paper) and with the growth of the game market, the domestic game population has swelled to about 50mn, roughly 40% of the total (Famitsu’s Game White Paper) population. As a result, the addressable market of so-called mass-market gamers, whose game literacy is relatively unsophisticated, has expanded. This calls for a new approach that extends beyond the traditional target of game tip websites, the so-called “heavy gamers” with relatively sophisticated game literacy, to target the mass-market demographic.

▷ In FY05/21, the company aims to capture new users through large promotional campaigns (with a JPY863mn budget for advertising and promotions) and to develop applications and improve user interface (UI) and user experience (UX). Through these efforts, the company aims to maximize the medium- to long-term growth of revenue and earnings in the game review business. The company thinks that, in the long term, revenue from Game Review will outstrip that from Game Guide.

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Video streaming Due to growth in the number of views for esports videos and channel registration numbers, the company plans to continue its focus on esports videos through the launch of new channels and a variety of other efforts.

▷ In the esports arena, which is difficult to monetize, the company aims to establish revenue from video streaming as a source of earnings and wants to provide an environment where esports participants can focus on improving their abilities.

Other Blockchain games After the April 2020 launch of the official version of EGGRYPTO, a blockchain game jointly developed with another company, the company plans to incorporate elements of casual games and generate earnings through token sales (sales of rare characters) and in-game charges.

18/57 GameWith / 6552 RCoverage LAST UPDATE: 2021.04.19 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Business Business model Company overview GameWith is a specialist media company that provides information on games. It operates “GameWith,” Japan’s leading website for game app information and gaming tips (company estimated market share of nearly 40%), and earns ad revenue from selling ad spaces. In FY05/20, revenue was JPY2.9bn (-8.2% YoY) and operating profit JPY408mn (-49.5% YoY). The company breaks down its revenue by the content it offers: namely, Game Guide, Game Review, and Video Streaming. In FY05/20, Game Guide accounted for 62.9% of total revenue (-14.1% YoY), Game Review 23.3% (+10.9% YoY), and Video Streaming 10.9% (+16.7% YoY). The remaining 2.9% (-45.5% YoY) was other revenue.

The company has elevated the media value of its “GameWith” platform by devoting management resources to the operation and improvement of its three main content categories.

▷ Game Guide: provides tips that help players advance in their games

▷ Game Review: provides information that allows players to find games they like

▷ Video Streaming: offers YouTube videos starring gamers and esports players

GameWith offers this content to the viewers of its website and apps and earns revenue by selling ad spaces in these media. Ad spaces sold include pure ads sold directly by the company and ads sold via ad networks. As revenue per PV is higher for pure ads, GameWith’s policy is to increase pure ads. Fluctuations in the game industry have a large impact on the company’s earnings since the users of the company’s services are gamers.

Revenue model

Users

Provide content Browse articles Provide videos View videos

Guide viewers Game Game Video Guide Review Streaming Create fans

Make Sell payment ad spaces Tie-up ads YouTube

Make Sell Make Sell Ad networks payment ad spaces payment ad spaces

Make Sell payment ad spaces

Advertisers, ad agencies

Source: Shared Research based on company data Notes: Overseas data included in PV and revenue per PV index from Q2 FY05/19

19/57 GameWith / 6552 RCoverage LAST UPDATE: 2021.04.19 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Quarterly revenue by business area Revenue by business area FY05/ 19 FY05/20 FY 05/ 21 Cumulative (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Game Guide 542 1106 1644 2116 496 955 1407 1817 365 767 1176 Game Review 145 313 440 607 164 355 516 673 208 405 609 Video Streaming 61 132 201 269 72 141 214 314 99 196 285 Revenue adjustments due to taxation change ---84---1--- Other 1323427016476983143059 Total revenue 761 1574 2327 3146 748 1498 2206 2888 687 1401 2133 YoY Game Guide -1.5% 5.2% 4.5% 0.0% -8.5% -13.7% -14.4% -14.1% -26.4% -19.7% -16.4% Game Review 113.2% 131.9% 92.1% 77.5% 13.1% 13.4% 17.3% 10.9% 26.8% 14.1% 18.0% Video Streaming 125.9% 106.3% 93.3% 61.1% 18.0% 6.8% 6.5% 16.7% 37.5% 39.0% 33.2% Revenue adjustments due to taxation change------98.8%--- Other -50.0% -34.3% -6.7% 37% 23.1% 104.3% 64.3% 18.6% -12.5% -36.2% -14.5% Total revenue 13.4% 22.5% 19.3% 17.6% -1.7% -4.8% -5.2% -8.2% -8.2% -6.5% -3.3% % of total revenue Game Guide 71.2% 70.3% 70.6% 67.3% 66.3% 63.8% 63.8% 62.9% 53.1% 54.7% 55.1% Game Review 19.1% 19.9% 18.9% 19.3% 21.9% 23.7% 23.4% 23.3% 30.3% 28.9% 28.6% Video Streaming 8.0% 8.4% 8.6% 8.6% 9.6% 9.4% 9.7% 10.9% 14.4% 14.0% 13.4% Revenue adjustments due to taxation change - - -2.7% - - -0.0% - - - Other 1.7% 1.5% 1.8% 2.2% 2.1% 3.1% 3.1% 2.9% 2.0% 2.1% 2.8% Total revenue 100.0% 100.0% 100.0% 97.3% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Revenue by business area FY05/ 19 FY05/20 FY 05/ 21 Quarterly (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3 Game Guide 542 564 538 472 496 459 452 410 365 402 409 Game Review 145 168 127 167 164 191 161 157 208 197 204 Video Streaming 61716968726973100999789 Revenue adjustments due to taxation change ---84---1--- Other 1310192816312214141629 Total revenue 761 813 753 819 748 750 708 682 687 714 732 YoY Game Guide -1.5% 12.6% 3.1% -13.1% -8.5% -18.6% -16.0% -13.1% -26.4% -12.4% -9.5% Game Review 113.2% 150.7% 35.1% 47.8% 13.1% 13.7% 26.8% -6.0% 26.8% 3.1% 26.7% Video Streaming 125.9% 91.9% 72.5% 7.9% 18.0% -2.8% 5.8% 47.1% 37.5% 40.6% 21.9% Revenue adjustments due to taxation change------98.8%--- Other -50.0% 11.1% 90.0% 367% 23.1% 210.0% 15.8% -50.0% -12.5% -48.4% 31.8% Total revenue 13.4% 32.4% 13.1% 13.0% -1.7% -7.7% -6.0% -16.7% -8.2% -4.8%3.4% % of total revenue Game Guide 71.2% 69.4% 71.4% 57.6% 66.3% 61.2% 63.8% 60.1% 53.1% 56.3% 55.9% Game Review 19.1% 20.7% 16.9% 20.4% 21.9% 25.5% 22.7% 23.0% 30.3% 27.6% 27.9% Video Streaming 8.0% 8.7% 9.2% 8.3% 9.6% 9.2% 10.3% 14.7% 14.4% 13.6% 12.2% Revenue adjustments due to taxation change - - -10.3% - - -0.1% - - - Other 1.7% 1.2% 2.5% 3.4% 2.1% 4.1% 3.1% 2.1% 2.0% 2.2% 4.0% Total revenue 100.0% 100.0% 100.0% 89.7% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Source: Shared Research based on company data Notes: Cumulative figures shown in table above are simple sums of quarterly figures and may differ from the company’s cumulative figures.Part of revenues included in Other reclassified as Video Streaming revenue

Relationship between main products and business areas

Source: Company data Relationship between main products and business areas The company disclosed a quarterly revenue breakdown by product (ad offerings; disclosed through Q4 FY05/19) and business area. There are three types of products—network ads in the web and app platforms, tie-up ads, and network ads in video

20/57 GameWith / 6552 RCoverage LAST UPDATE: 2021.04.19 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

streaming. Advertisers or ad network companies (YouTube in the case of video ads) pay the company for network ads based on page views and the price per page view. Tie-up ads are directly contracted by the company at a fixed monthly price per ad space. Network ads made up most of Game Guide revenue, but tie-up ads are on the rise. Game Review that mostly involves tie-up ads is quickly growing into a second earnings pillar after Game Guide. Videos streamed via YouTube involve network ads for which revenue is determined by page views and the price per page view. Contracted game guide videos and review videos generate tie-up ad revenues booked under Game Guide and Game Review, respectively. The company announced with FY05/19 results that it would change its business breakdown from a product-based one to a classification based on business areas, reflecting the company’s operations more accurately. This is in line with the company’s plan to position Game Review as its next growth driver. Amid sluggish revenue growth from Game Guide due to the drop in PV, performance has been brisk in Game Review, where the company mainly generates revenue from tie-up ads.

Synergy effects GameWith has developed various services ancillary to the game guide content. It offers game reviews and streams videos to promote use of the “GameWith” platform when gamers look for a new game. The company’s game guides serve as an entry point, while viewer traffic across its content offerings (game guides, game reviews, and video streaming) produces a synergy effect that maximizes viewer retention within the company’s platform. Generally speaking, gamers who discover a title that hooks them will first search walkthrough sites and play the game while referring to multiple sites, gradually narrowing down their choice to the site that is frequently updated and offers quality information. An enhanced reputation of the “GameWith” platform creates a buzz online and attracts more viewers, thereby generating a virtuous cycle.

▷ The company planned to spend JPY863mn on promotion in FY05/21, with the primary aim of strengthening the Game Review business. However, at the time of announcing Q3 results, the company stated that it would review its promotional strategy and reduce its spending on advertising. It thinks that promotional activities will also have a beneficial impact on the game guide and video streaming businesses, which it is not targeting directly.

Synergy effects

Source: Company data

Based on the company’s own survey (source: SimilarWeb; total number of domestic website visits in March 2020–February 2021), GameWith ranked 36th in Japan in the number of website visits and ranked 1st among game media. The top-ranked company is search engine Google, with portal site Yahoo coming in second and video site YouTube in third. Recipe site Cookpad ranked 35th, restaurant guide site Tabelog 44th, and blog site Ameba 50th, followed in 52nd by another blog site, Hatena Blog.

Overview by business Game Guide In this business, the company operates the core “GameWith” website featuring game app information and gaming tips (domestic version), as well as English and Chinese (overseas) versions of “GameWith” and @WIKI, a wiki rental service specializing in game tips. Revenue in this business can be calculated by multiplying revenue per page by the number of page views.

21/57 GameWith / 6552 RCoverage LAST UPDATE: 2021.04.19 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

“GameWith” game app information and gaming tip website (domestic version) GameWith hires top-ranking gamers to write game guide articles in a systematic way, building a structure in which the company can respond quickly to events and frequently update its platform with new articles. To improve the writing operation, these gamers (writers) receive training and education, article production tools, and manuals, and the company also implements divisions of labor. The in-house writers are organized into a number of teams, and the gamers who rank in the top 0.1% are charged with writing game guide articles.

▷ The company constantly monitors already popular titles, as well as those with quickly rising popularity, and focuses on promptly posting game guide articles on these titles when they are accessed the most. It is careful not to miss any titles that have the potential to become popular. Refreshing its coverage in line with the changes in title rankings ensures a consistently high level of viewer traffic. Even if a given title declines in popularity, there will be little negative impact on the company’s earnings as long as the gamers who played it turn their interest to a new title. However, the company’s results will be negatively affected if the gamers spend their disposable time on an activity other than gaming.

▷ The shelf life of game guide articles depends on the title. In general, game guide articles on mobile games must be frequently updated in response to frequent game updates and in-game events that occur at regular intervals. The advantage is that mobile titles tend to remain popular for at least several years. In contrast, console games are not frequently updated, which means demand for articles covering them is high right after their release but dwindles as time passes. It is also becoming more important to alter formats to meet new user needs. The company says they are starting to pivot from RPGs, whose players generally favor database-oriented guide articles, to battle royal type games (first-person and third-person shooter games, etc.), where the players’ focus is more on combat maneuvers.

▷ Game guide articles on the same game ultimately tend to resemble each other. Also, the barriers to entry are low because even individuals can write game guide articles (for certain games and regardless of page views). The company aims to differentiate the site as a whole by rapidly publishing accurate game guide articles and offering comprehensive coverage of popular titles.

Revenue structure Revenue in this business consists of income from ad space sales via ad network and fees for posting contracted game guide articles and videos (tie-up ads). The income from ad space sales can be calculated by multiplying revenue per page by the number of page views. In addition to attracting traffic through search engine optimization, the company has succeeded in increasing PV and revenue per PV by securing skilled writers to boost content volume and quality. The inception of the company coincided with the release of popular native app game titles for smartphones such as Puzzle & Dragons* and Monster Strike*, and this has also acted as a strong tailwind to business growth. At the time, the main sources of information about these games were walkthrough sites of individual gamers and consumer generated media (CGM). While many gamers struggled to play with limited information, the company was the first to launch a game guide site for smartphone games as a business, attracting fans with better quality walkthrough content. The company also forms player communities within the “GameWith” platform to maximize viewer retention and conversion rates (CVR). By doing so it gains the trust of game companies (the advertisers), which leads to an increase in ad orders. Having strengthened its sales structure targeting game companies, GameWith outperforms its competition in capturing ad orders.

*Puzzle & Dragons: a game app for IOS, Android, and Kindle Fire distributed by GungHo Online Entertainment, Inc. (TSE1: 3765). The iOS version was released on February 20, 2012 and the Android version on September 18, 2012. It is free to play, but charges for additional items bought in-game. It incorporates elements of both RPG (role playing game) and puzzle game genres.

* Monster Strike: a game app for iOS and Android distributed by XFLAG, a studio owned by mixi, Inc. (TSE Mothers: 2121). The iOS version was released on October 10, 2013 and the Android version on December 15, 2013. It is free to play, but charges for additional items bought in-game. It is an action RPG (role playing game).

22/57 GameWith / 6552 RCoverage LAST UPDATE: 2021.04.19 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Quarterly trends in game guide site “GameWith” PV and revenue per PV index

Page view (PV) metrics FY05/ 19 FY05/20 FY05/ 21 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Revenue per page view (index: Q1 FY05/20 =100) 97 104 106 103 100 88 8969718087 YoY -8.5% 12.8% 9.0% 1.8% 3.1% -15.2% -15.8% -32.9% -29.0% -9.1% -2.2% QoQ -4.0% 7.0% 1.9% -2.8% -2.7% -12.0% 1.1% -22.5% 2.9% 12.7% 8.7% Page view count (monthly average; mn) 710 680 620 550 590 580 560 630 490470470 YoY -5.3% -9.3% -15.1% -23.6% -16.9% -14.7% -9.7% 14.5% -16.9% -19.0% -16.1% QoQ -1.4% -4.2% -8.8% -11.3% 7.3% -1.7% -3.4% 12.5% -22.2% -4.1% 0.0% Revenue per PV ｘPV count 68,870 70,577 65,553 56,551 59,000 51,040 49,840 43,470 34,790 37,600 40,890 YoY -13.4% 2.3% -7.4% -22.2% -14.3% -27.7% -24.0% -23.1% -41.0% -26.3% -18.0% QoQ -5.3% 2.5% -7.1% -13.7% 4.3% -13.5% -2.4% -12.8% -20.0% 8.1% 8.7% Source: Shared Research based on company data Since Q2 FY05/19, overseas contributions have been included in page view count and revenue per page view. Revenue per PV index in FY05/19 was adjusted by Shared Research based on indexes disclosed in Q4 FY05/20 and earlier Revenue per page view Most of the revenue in the game guide business comes from advertisements placed via ad networks. Revenue per page view is thus affected by the supply/demand balance for the overall online advertising industry.

Number of page views

The company does not place as much importance on the number of page views as it once did. This is because: 1) the number of page views is difficult to control as it is easily affected by the trend in popular titles, 2) even if the number of page views decreases, sales can still be increased by increasing the sale of pure ads to raise revenue per PV, and 3) advertisers value actual monetization (app installs) over the number of page views.

▷ The company used to disclose monthly trends in its Game Guide PV index, broken down into three major titles and other titles. The decline in page view numbers in FY05/19 was the result of a decline in figures for the top three titles.

▷ In Q4 FY05/20, page views increased as more users played games at home due to the COVID-19 pandemic. Since Q1 FY05/21, page views for the three major titles have been on the decline again.

▷ Eighty to ninety percent of users access the content through mobile devices like smartphones and tablets. The main user base ranges in age from 18 to 44, with users aged 25 to 35 comprising the largest group. When selling ad space through ad networks or agencies, GameWith sets standards so that only ads relevant to the young user base are displayed.

▷ When they do not access via an app, in many cases, users enter terms such as “XYZ [game name]” and “tips” into a search engine such as Google, and directly access an article with tips. As a result, in Game Guide, it is important to update articles as soon as possible and employ SEO skillfully in order to obtain page views. Conversely, relatively few users specify “GameWith” in their searches, so there was formerly little point in the company investing in promotion for branding purposes. However, the company’s attitude toward advertising is changing. Branding is becoming important in game guides for mass-market gamers, especially when it comes to getting them to install apps (for details refer to Game Guide business section).

▷ However, the lifetime value for users in the Game Guide business manifests over a shorter period of time than for users in the Game Review business because it is affected by the playtime for games.

23/57 GameWith / 6552 RCoverage LAST UPDATE: 2021.04.19 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Monthly trends in Game Guide PV index (for three major titles and other titles)

Three main titles Other titles 140 131 127 126 118 115 116 120 111 111 106 107 107 100 97 100 111 109 100 100 80 94 82 79 60 69 68 64 57 40

0 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May 2018 2019 Source: Shared Research based on company data Notes: PV index is indexed to the PV count excluding Game Review-related PV as of June 2018 Three main titles are top three titles as of June 2018 based on monthly PV

Overseas “GameWith” English and Chinese versions GameWith has launched English and Chinese versions of its “GameWith” site. The English version garnered 14mn monthly page views in Q1 FY05/20.

▷ As of May 2020, the English version of “GameWith” featured mainly console game content. In Q4 FY05/20, page views on the English website more than tripled from Q1 as people stayed home due to the COVID-19 pandemic. This period of stay-at- home demand concluded in FY05/21, and PV count has remained slightly above the Q3 FY05/20 level since Q1.

▷ Different types of games are popular in Japan and overseas. As a result, the overseas versions of the site must publish content that differs from the Japanese version as they cover titles that are popular in their respective regions. Another difference is that users from the Europe and the US tend to prefer video content to written content. As of January 2020, GameWith was increasing the number of page views overseas by rolling out content on titles that are popular both in Japan and abroad, but owing to the difference in popularity of titles overseas, the number of page views is not growing as much as in Japan.

▷ Since revenue per ad varies based on region, growth in page views is not a reliable indicator of revenue growth. As of January 2019, more than 70% of page views for the English version of “GameWith” came from North America, the UK, and Australia, developed economies with high revenue per page view.

@WIKI In December 2019, GameWith established a subsidiary, AtWiki, Inc., to operate a wiki rental service specializing in game guide information, and acquired Atfreaks Limited’s @WIKI business. Revenues from the service are recorded under the Game Guide category.

▷ Writers produce and publish content for targeted games on the “GameWith” website. @WIKI differs in that its users are the ones who create and publish content. As such, there are no fixed personnel expenses for writers.

▷ As all ad postings in @WIKI are sold through ad network companies, revenue per ad is less than for “GameWith.” Furthermore, no mechanism had been established for raising revenue per PV before GameWith acquired @WIKI. Thus, there was significant scope to increase revenue per PV at @WIKI by leveraging GameWith’s expertise on raising revenue per PV. In fact, in Q2 FY05/21, after its acquisition, monthly average revenue per page view for @WIKI was up 129% from Q2 FY05/20, immediately before the acquisition, despite lower revenue per ad due to the COVID-19 pandemic. The company commented that the short-term improvement in revenue per ad more or less ended in Q2 FY05/21, and any further improvement in revenue per PV will be gradual.

▷ @WIKI has averaged 90–100mn monthly page views. The company expects @WIKI’s page views to track a gentle decline in the long term, and plans to recoup its purchase price primarily by boosting revenue per ad.

24/57 GameWith / 6552 RCoverage LAST UPDATE: 2021.04.19 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

▷ The “GameWith” website is concentrated on titles with a high number of users. It, therefore, makes sense to use the acquisition of @WIKI to cover titles not able to be covered by writers on “GameWith.” Due to the difference in website positioning, though, it is unlikely that the number of page views can be significantly raised from the current number.

Game Review GameWith’s strategy is to make Game Review, which provides opportunities for consumers to start playing games, a second source of earnings following Game Guide. The company said it wants to be the first brand that comes to mind when users look for a new game to play, and aims to transition from being “GameWith,” the game guide site, to “GameWith,” the game media site. The company has built one of the leading comprehensive game databases in Japan. It posts quality game review articles and videos by having the employees play the games themselves.

Revenue structure

▷ Revenue for Game Review is not a function of page-view count times revenue per page-view. Rather, the company contracts directly with the advertiser for tie-up ads and gets a fixed monthly amount per ad space. According to the company, the time spent reading articles on Game Guide tends to be short, but readers tend to spend longer on Game Review articles, and customer loyalty is strong.

▷ Because users who seek out game reviews primarily look to discover interesting games, the company thinks the lifetime value (LTV) for such users manifests over a longer period of time than for users who browse game guides.

▷ While revenue forecasts are easy with tie-up advertising, to avoid alienating users, it is important to strike a balance, avoiding bias in content and overly familiar relationships with game companies.

Apps strategy In addition to reviewing games in the conventional website platform, the company plans to focus on its apps strategy from FY05/20 onward to become the top-of-mind brand for players looking for games to play. A top-of-mind brand refers to the first name that comes to mind when a need arises for a specific product category, and is reflective of the strength of a brand’s psychological imprint. Although web searches and apps deal with the same game content, the former requires an active stance and a relatively high technical literacy on the user’s part, whereas the latter is more passive. Gamers who conduct web searches have a specific purpose while app users start with a more abstract objective such as thinking of how to spend time. Apps like Cookpad (recipe search) and Tabelog (restaurant search) have established themselves as top-of-mind brands. People wanting to cook or eat out at a stylish restaurant can click on these apps, which then would spur interest with photos and videos and guide the viewers to more concrete information such as menus. As video demand is rising in particular, GameWith is shifting to a video- oriented app design. Its apps are for both iOS and Android.

▷ In FY05/21, the company aims to capture new users through large promotional campaigns and to develop applications and improve user interface (UI) and user experience (UX). Through these efforts, the company aims to maximize the medium- to long-term growth of revenue and earnings in the game review business. The company thinks that, in the long term, revenue from Game Review will outstrip that from Game Guide. However, that is not to say that growth in app downloads will immediately lead to earnings growth. The first step to is increase downloads and grow the user base. From there, the company will need to attract more beginner gamers by leveraging features such as push notifications.

▷ Due to the nature of the Game Review business, GameWith app users typically use their app under certain circumstances, such as when having time to kill or hankering to play a game, and the majority of them are mostly likely not constant daily users.

25/57 GameWith / 6552 RCoverage LAST UPDATE: 2021.04.19 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

▷ In Q3 FY05/21, the company announced that it was scaling back some of its iOS app mobile game reviews in order to conform to App Store guidelines (App Store Review Guidelines 3.2.2—Business—Other Business Model Issues—Unacceptable) and maintain iOS app updates. This is not expected to have an impact on the Game Guide business area. Mobile game reviews will continue for Android applications and web browsers, so the company expects the overall impact on future revenue to be limited, because most users access its site via web browser searches.

Key advantages of the apps

▷ Web browser users arrive at articles by searching for game titles in a search engine, rather than by searching for the GameWith brand. As such, it is important for GameWith’s articles to rank higher in search results than those of competitors. However, in the case of the apps, users are guaranteed to use GameWith’s articles.

▷ User attributes can be more accurately ascertained for app users than for web-based users. As user attributes are vital information to advertisers, the accurate ascertainment of attributes can lead to a rise in revenue per PV.

▷ There is potential to increase the user conversion rate by leveraging functions, such as push notifications.

Video Streaming The company streams video content it creates over video platforms such as YouTube (the main platform for gameplay videos in Japan). The company has accumulated knowhow on developing YouTube channels, having produced a number of popular YouTubers. It supports creators in various ways so that they can perform at their best. Support includes provision of its own studio for shooting videos, assistance in recording and editing, collaboration and joint appearance arrangements, strengthening of fan communities, channel development, collaboration with game companies, and administrative support.

▷ Revenue in Video Streaming comes mainly from ads displayed on video platforms. This revenue can be calculated by multiplying cost per view by the number of views. Revenue from videos provided as a part of Game Review is attributed to the Game Review business, rather than the Video Streaming business.

▷ The company said that fluctuations in Video Streaming cost per view are greater than those in Game Guide. This is because in Game Guide, revenue per ad is adjusted across numerous advertisers and numerous media through ad networks. In contrast, the arrangement is different for video distribution, as cost per view is set between the video platform and the advertiser.

▷ The number of views and number of channel registrations for esports-related video streaming, such as third person shooter (TPS) videos, are rising as people stay home due to COVID-19.

▷ The company explains that its strength in the video streaming business is that it is a natural choice for those who want to specialize in games, such as esports players. At standard YouTuber management companies, content creators are required to do other work unrelated to games in areas where they have little interest. The company said that content creators who want to specialize in games gravitate toward GameWith.

Revenue from videos provided as a part of Game Review is attributed to the Game Review business. Third Person Shooter (TPS): A type of action game enabling the player to move freely in a world or game space from the perspective of a third party who follows the main character, and fight with weapons or bare hands. Fortnite is a typical game in this genre.

Quarterly cost per view index

Cost per view (CPV) metrics FY05/19 FY05/20 FY05/21 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Cost per view (index: Q1 FY05/20 =100) 97 112 117 117 100 97 109 72 75 88 91 YoY ----3.1%-13.0%-7.1%-38.7%-25.0%-9.3%-16.5% QoQ - 15.0% 5.2% 0.0% -14.8% -3.0% 12.4% -33.9% 4.2% 17.3% 3.4% Source: Shared Research based on company data. Raw figures for number of video views are not disclosed.

esports More than an estimated 1mn people play esports and viewers excluding the player population number around 380mn worldwide. In Japan, there are only around 3.9mn players and 1.6mn viewers (based on Famitsu’s Game White Paper). One

26/57 GameWith / 6552 RCoverage LAST UPDATE: 2021.04.19 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

reason for its limited popularity is that big prizes are not offered in Japan, because esports are regulated by the Act against Unjustified Premiums and Misleading Representations.

The esports business consists of pro gamers, game commentators, event organizers, managers, writers, and sponsors. GameWith employs pro gamers, game commentators, and writers, and invests in an esports event organizer in India. The company’s esports business model focuses on creating content and building a track record on its own to develop the market in Japan so that it can attract sponsorship as an outcome. A growing number of young people in Japan are showing an interest in becoming esports players according to the company. The attraction of esports for viewers and companies is not the number of PVs as is the case with conventional game guides, but—like go and shogi board games—is found in the thrill of exploring the skills and strategies of the players and complex walkthrough information. Just as advances in AI have not stifled the popularity of go and shogi but instead propelled a new generation of players and star players, esports has a great potential to produce synergies with AI. However, with regard to the timing and method of monetizing the esports business, this is still in the trial-and-error stage.

Unlike RPGs, it is not possible to watch esports while you play the game. Thus, organizers must charge viewers directly instead of relying on a PV-based charging system. In fact, viewers often pay an admission fee to watch esports competitions overseas. VR concert tickets are selling out on the day they go on sale. Esports and VR concerts do not have physical limitations such as geography and arena capacity and thus have the potential to grow into huge markets provided the content (star players and artists) is appealing.

Other Other revenue comes from areas such as event production and blockchain games. Event production The company operates an event production business with an aim of fulfilling its mission to “create a more enjoyable gaming experience,” not only online, but offline as well.

Blockchain games Blockchain games are games that harness blockchain technology. Blockchain does not have a central administrator; instead, an unspecified number of participants store and manage network information. Blockchain games stand out in that it involves an automated, decentralized system that is fraud-free; gamers’ assets and liabilities remain even if the game is discontinued; and virtual currency (Ethereum [ETH]) is used within the game.

Shared Research thinks GameWith moved into blockchain games because of its strong affinity with cloud game services (see below). By acquiring expertise in blockchain games (including virtual currency) that do not have centralized administration, the company could also differentiate itself from Google, Apple, Facebook, and Amazon when they make a full-scale entry into cloud game services.

GameWith officially launched its first blockchain game, EGGRYPTO, in April 2020. The game was jointly developed with Kyuzan Inc. Following the launch, the company began token sales (sales of rare characters). From FY05/21 onward, it plans to incorporate elements of casual games and generate earnings through token sales and in-game charges. In August 2020, it added gacha (loot box) functionality. As of January 2021, the company generates revenue mainly through in-game charges, while working to attract more users. In January 2021, the company achieved record highs in both revenue and unique user count after implementing an advertising and promotional spending program on a trial basis from late 2020 to early 2021.

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Blockchain game EGGRYPTO Blockchain game EGGRYPTO

Source: Company data Source: Company data

EGGRYPTO is set in a mysterious world protected by the World Tree. Players collect the monster eggs laid by the Tree, incubate and fortify them, and buy and sell them in the marketplace. Some monster eggs can be obtained for free, making the game easy to play for users unfamiliar with blockchain games (source: company press release).

Gacha Also called loot box. Gacha refers to a system where players can purchase virtual boxes with random contents. In many cases, the boxes have a low probability of containing a rare character or item.

The use of the term “gacha” in this sense is an extension of its original use to refer to toy vending machines (where the user does not know what toy they will get). The word “gacha” is said to sound like the noise these vending machines make.

In addition, Crypto Games Inc., which the company invests in, launched blockchain game CryptoSpells in June 2019.

Blockchain game CryptoSpells

Source: Company data Cloud game services The history of games shows us that big hits appear when new platforms evolve. These include Super Mario Brothers on Nintendo’s Famicom, Final Fantasy on Sony’s PlayStation, pay mobile phone games by GREE, Inc. (TSE1: 3632), and social games of DeNA Co., Ltd. (TSE1: 2432). Further, free game apps like Puzzle & Dragons and Monster Strike downloadable on high performance smartphones have created a market that grew to surpass that of console games. The next big game platform is believed to be cloud games.

Cloud games refer to computer game streaming services. All controller input information is processed by cloud servers and images reflecting the result of the input is displayed on a monitor connected to the game device via the Internet. Users do not have to pay for an expensive game console and can play games with a PC or smartphone. 5G infrastructure with reduced delay and fast response times is essential for stress-free enjoyment of cloud games. Major IT companies with large data centers (cloud servers) that provide cloud computing services such as Google, Microsoft, and Sony have announced that they are moving into cloud game services (e.g., Googe’s Stadia and Microsoft’s Console Streaming and Project xCloud). Cloud games transcend the limitations of game consoles. For example, a multiplayer game previously limited to 30 players could now be played by 1,000 players. We think that cloud games will change the way companies charge for gameplay from a

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combination of free app downloads and charges for items players purchase in game to a subscription model charging a fixed fee for the use of server capacity. This would stabilize the revenue of game companies in the same way telecom carriers stabilized theirs through increasing ARPU. To prepare for the era of cloud games, the company plans to provide experiences and value that fits the needs of each user as well as continuing to provide walkthrough information and video streaming. Cloud games will include console and PC games as well as smartphone games. Shared Research believes the success of transitioning to this new platform will determine the future of GameWith.

Since blockchain games (which the company expedites launch as a new business) and cloud games have high affinity, the company thinks they will inevitably integrate. Further, it believes blockchain games will establish a relation with the real economy by serving as an entrance to virtual currency-based economy. Although GameWith is not involved, VR has high affinity with cloud games as well. Netflix plans to enter the gaming market with a view to integrating film and game. In the world of cloud, the difference between video and game lies in whether the content is interactive or not. We believe it will not be long before a world similar to the one depicted in the film Matrix emerges as a new type of entertainment.

Revenue from top customers

The top customer of GameWith by revenue is Google Asia Pacific Pte. Ltd., which accounted for over 26.8% of revenue in FY05/20 according to company disclosure. We understand revenue from Geniee Inc. (TSE Mothers: 6562) declined sharply, because GameWith took in-house the supply side platform (SSP) operation that had been outsourced to ad network companies. F@N Communications, Inc. (TSE1: 2461) is a major ad network company that mainly sells ads soliciting smartphone app installation (adopts a results-based compensation model). In FY05/20, F@N Communications did not meet the disclosure standard for top customers (generation of more than 10% of the company’s revenue).

Revenue from top customers

Revenue from top customers (JPYmn) FY05/15 FY05/16 FY05/17 FY05/18 FY05/19 FY05/20 Google Asia Pacific Pte. Ltd. 362 777 705 705 775 F@N Communications, Inc. - 79 357 357 - Geniee, Inc. 608 247 8 - - Other 24 479 1,608 2,087 2,115 % of total Google Asia Pacific Pte. Ltd. 36.4% 49.1% 26.3% 22.4% 26.8% F@N Communications, Inc. - 5.0% 13.3% 11.3% - Geniee, Inc. 61.2% 15.6% 0.3% - - Other 2.4% 30.3% 60.1% 66.3% 73.2% Source: Shared Research based on company data

Cost structure

Excluding advertising and one-time expenses, personnel expenses comprise about 70% of costs, rent about 10%, and server use roughly 4%. These are effectively fixed costs and the combined total for personnel, rent, and servers was roughly JPY2.0bn in FY05/20.

Expected changes in FY05/21 cost structure

▷ Headcount: The company said it had no plans to make significant upward or downward changes from FY05/20 levels. The company expects personnel costs and expenses to increase JPY205mn YoY due to the hiring of management resources and other factors.

▷ Advertising expenses: The company spent virtually nothing on advertising through FY05/20 and planned to invest JPY863mn on promotion in FY05/21. When announcing Q3 FY05/21 results, however, the company stated that it had revised its promotional strategy and decided to reduce its planned advertising expenses. Its promotions will be conducted through a combination of TV commercials and online ads. GameWith plans to run a series of ads starting in Q1, while keeping an eye on their impact. The main object of the campaigns will be to strengthen the Game Review business. Because advertising charges are falling across the board for all media in the pandemic, the company said it thought it could conduct more cost-efficient promotional campaigns than previously anticipated.

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▷ Rent: GameWith expected its monthly rent to fall by JPY4‒5mn due to the closure of its satellite office and an increase in remote working.

Quarterly trends in cost structure and OPM Cost structure FY05/19 FY05/20 FY05/21 Cumulative (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Total personnel costs and expenses 349 730 1176 1610 405 823 1246 1677 439 875 1334 Rents 54 107 172 236 65 129 193 258 50 87 102 Server fees 18396487254872101244872 Depreciation 3 10 19 28 7 17 27 27 0 0 0 Floor expansion expenses 0010100000000 Advertising expenses -----4933157320616 Other 90 179 264 362 111 194 276 374 79 146 225 Cost of revenue and SG&A expenses 514 1,065 1,705 2,333 613 1,215 1,823 2,470 749 1,476 2,349 YoY Total personnel costs and expenses 71.9% 74.6% 78.7% 66.0% 16.0% 12.7%6.0%4.2%8.4%6.3%7.1% Rents 42.1% 32.1% 37.6% 31.8% 20.4% 20.6% 12.2% 9.3% -23.1% -32.6% -47.2% Server fees 12.5% 25.8% 42.2% 45.0% 38.9% 23.1% 12.5% 16.1% -4.0% 0.0% 0.0% Depreciation -40.0% 0.0% 26.7% 21.7% 133.3% 70.0% 42.1% -3.6% -100.0% -100.0% -100.0% Floor expansion expenses ----37.5%------Advertising expenses ------Other 50.0% 53.0% 48.3% 44.8% 23.3% 8.4% 4.5% 3.3% -28.8% -24.7% -18.5% Cost of revenue and SG&A expenses 59.6% 62.1% 67.0% 55.7% 19.3% 14.1% 6.9% 5.9% 22.2% 21.5% 28.9% % of total costs and expenses Total personnel costs and expenses 67.9% 68.5% 69.0% 69.0% 66.1% 67.7% 68.3% 67.9% 58.6% 59.3% 56.8% Rents 10.5% 10.0% 10.1% 10.1% 10.6% 10.6% 10.6% 10.4% 6.7% 5.9% 4.3% Server fees 3.5%3.7%3.8%3.7%4.1%4.0%3.9%4.1%3.2%3.3%3.1% Depreciation 0.6% 0.9% 1.1% 1.2% 1.1% 1.4% 1.5% 1.1% 0.0% 0.0% 0.0% Floor expansion expenses 0.0% 0.0% 0.6% 0.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%0.0% Advertising expenses -----0.3%0.5%1.3%21.0%21.7%26.2% Other 17.5% 16.8% 15.5% 15.5% 18.1% 16.0% 15.1% 15.1% 10.5% 9.9% 9.6% Cost of revenue and SG&A expenses 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Revenue 761 1,574 2,327 3,146 748 1,498 2,206 2,888 687 1,401 2,133 Operating profit 244 504 618 808 133 282 381 407 -70 -89 -236 Operating profit margin 32.1% 32.0% 26.6% 25.7% 17.8% 18.8% 17.3% 14.1% -10.2% -6.4% -11.1% Cost structure FY05/19 FY05/20 FY05/21 Quarterly (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Total personnel costs and expenses 349 381 446 434 405 418 423 431 439 436459 Rents 5453656465646465503715 Server fees 1821252325232429242424 Depreciation 3799710100000 Floor expansion expenses 001000000000 Advertising expenses -----4524157163296 Other 90 89 85 98 111 83 82 98 79 67 79 Cost of revenue and SG&A expenses 514 551 640 628 613 602 608 647 749 727 873 YoY Total personnel costs and expenses 71.9% 77.2% 85.8% 39.1% 16.0% 9.7% -5.2% -0.7% 8.4% 4.3% 8.5% Rents 42.1% 23.3% 47.7% 18.5% 20.4% 20.8% -1.5% 1.6% -23.1% -42.2% -76.6% Server fees 12.5% 40.0% 78.6% 53.3% 38.9% 9.5% -4.0% 26.1% -4.0% 4.3% 0.0% Depreciation -40.0% 40.0% 80.0% 12.5% 133.3% 42.9% 11.1% -100.0% -100.0% -100.0% -100.0% Floor expansion expenses ------Advertising expenses ------Other 50.0% 56.1% 39.3% 36.1% 23.3% -6.7% -3.5% 0.0% -28.8% -19.3% -3.7% Cost of revenue and SG&A expenses 59.6% 64.5% 75.8% 31.7% 19.3% 9.3% -5.0% 3.0% 22.2% 20.8% 43.6% % of total costs and expenses Total personnel costs and expenses 67.9% 69.1% 69.7% 69.1% 66.1% 69.4% 69.6% 66.6% 58.6% 60.0% 52.6% Rents 10.5% 9.6% 10.2% 10.2% 10.6% 10.6% 10.5% 10.0% 6.7% 5.1% 1.7% Server fees 3.5%3.8%3.9%3.7%4.1%3.8%3.9%4.5%3.2%3.3%2.7% Depreciation 0.6% 1.3% 1.4% 1.4% 1.1% 1.7% 1.6% 0.0% 0.0% 0.0% 0.0% Floor expansion expenses 0.0% 0.0% 1.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%0.0% Advertising expenses -----0.7%0.8%3.7%21.0%22.4%33.9% Other 17.5% 16.2% 13.3% 15.6% 18.1% 13.8% 13.5% 15.1% 10.5% 9.2% 9.0% Cost of revenue and SG&A expenses 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Revenue 761 813 753 819 748 750 708 682 687 714 732 Operating profit 244 260 114 190 133 149 99 26 -70 -19 -147 Operating profit margin 32.1% 31.9% 15.1% 23.3% 17.8% 19.9% 14.0% 3.8% -10.2% -2.7% -20.1% Total headcount 213 223 236 242 248 244 251 247 248 242 251 Source: Shared Research based on company data Notes: Total personnel costs and expenses are the total of directors’ compensations (booked as cost of revenue and SG&A expenses), salaries and allowances, bonuses and bonus provisions, legal welfare expenses, shareholder perks, outsourcing expenses, and hiring and training expenses. Cumulative figures shown in the table above are simple sums of quarterly figures and may differ from the company’s cumulative figures. Figures too small to be disclosed in quarterly company announcements are assumed to be JPY0mn. Total headcount is the average number of employees (including temporary workers) and directors, based on those employed in each month.

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Market and value chain

Global games market The global games market has grown consistently since 2012, and is projected to expand roughly 1.5× from 2019 to 2023 (source: Newzoo). Although the console, PC, and mobile games segments have expanded across the board, growth has been particularly strong for mobile games, which account for nearly 50% of the market according to 2020 estimates. At the same time, growth in mobile games has slowed since 2018, and the changes from trends seen through 2017 warrant attention.

Global games market

Market size 2012 2013 2014 2015 2016 2017 2018 2019 2020 2023 (USDbn, % of total) Forecast Fo recast Total 70.6 76.5 84.8 93.1 106.5 121.7 138.8 146.2 174.9 217.9 YoY 8.4% 10.8% 9.8% 14.4% 14.3% 14.1% 5.3% 19.6% 0.2 Console games 31.8 29.8 29.7 29.8 32.0 32.9 42.2 47.9 51.2 YoY -6.1% -0.5% 0.4% 7.2% 2.8% 28.5% 13.5% 6.8% PC games 26.1 29.1 30.5 31.7 32.0 32.9 34.3 35.7 37.4 YoY 11.3% 5.0% 3.7% 0.9% 2.8% 4.5% 4.0% 4.8% Mobile games 12.7 17.6 24.6 31.7 42.6 56.0 62.2 76.2 86.3 YoY 38.5% 39.8% 28.7% 34.6% 31.4% 11.0% 22.5% 13.3% Console games 45% 39% 35% 32% 30% 27% 30% 33% 29% % of PC games 37% 38% 36% 34% 30% 27% 25% 24% 22% total Mobile games 18% 23% 29% 34% 40% 46% 45% 43% 49% Source: Newzoo Note: The value of each games market through 2017 is derived by multiplying the total market size by the share of each games segment.

Size of global games market by region (based on 2020 estimates) (USDbn) Market size YoY % of total Asia-Pacific 84.3 17.5% 48% North America 44.7 21.4% 26% Latin America 6.8 25.2% 4% Europe 32.9 19.9% 19% Middle East and Africa 6.2 30.2% 3% Total 174.9 19.6% 100% Source: Newzoo

Annual consumer spending in Japan Based on the Ministry of Internal Affairs and Communications (MIC) Survey of Household Economy, household telecommunication fees (annual expenditure per household) increased from over 3% to over 4% of total expenditure between 2010 and 2019. Fixed-line telecommunication charges are falling every year, but mobile communication charges more than compensate and contribute toward the overall increase. Although content-related spending is slowly falling, this is mainly due to a decline in spending on books, other printed materials, and music/video media. Video games account for 2.5–3.9% of content- related spending, fluctuating significantly from year to year. Mobile communications charges alone, driven by high-performance smartphones, continue to rise amid Japan’s continuing population decline. Games have formed a dynamic market, with frequent changes in software attributes and the companies taking center stage as the main game platform shifted from TV/PC and game consoles to mobile phones and smartphones.

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Annual content-related spending per household (JPY)

(JPY) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Telephone communication fees 110,771 111,372 111,906 112,453 113,775 117,720 120,392 122,207 122,624 122,741 Fixed line 30,853 30,806 30,429 29,354 27,536 26,414 24,086 21,957 19,281 19,275 Mobile 79,918 80,566 81,477 83,099 86,239 91,306 96,306 100,250 103,343 103,446 Consumption expenditures 3,027,938 2,966,673 2,971,816 3,018,910 3,017,778 2,965,515 2,909,095 2,921,476 2,956,782 2,996,452 Telecom as % of consumption expenditures 3.66% 3.75% 3.77% 3.72% 3.77% 3.97% 4.14% 4.18% 4.15% 4.10% Content spending 83,098 81,586 80,567 78,994 78,305 75,226 77,548 77,644 75,282 74,262 Movie, theater (admission fees) 6,677 5,843 6,138 6,112 6,453 5,786 6,504 6,818 6,783 6,842 Broadcasting reception fees 22,723 23,537 23,651 23,620 23,966 24,130 25,112 25,692 26,185 25,756 TV games 3,259 2,637 2,922 2,432 2,229 1,846 1,978 2,771 2,606 2,491 Books and other publications 46,214 45,411 44,339 43,364 42,646 40,795 40,281 39,303 37,013 36,708 Music and video media 4,225 4,158 3,517 3,466 3,011 2,669 3,673 3,060 2,695 2,465 Content as % of consumption expenditures 2.74% 2.75% 2.71% 2.62% 2.59% 2.54% 2.67% 2.66% 2.55% 2.48% Movie, theater (admission fees) 8.0% 7.2% 7.6% 7.7% 8.2% 7.7% 8.4% 8.8% 9.0% 9.2% Broadcasting reception fees 27.3% 28.8% 29.4% 29.9% 30.6% 32.1% 32.4% 33.1% 34.8% 34.7% TV games 3.9% 3.2% 3.6% 3.1% 2.8% 2.5% 2.6% 3.6% 3.5% 3.4% Books and other publications 55.6% 55.7% 55.0% 54.9% 54.5% 54.2% 51.9% 50.6% 49.2% 49.4% Music and video media 5.1%5.1%4.4%4.4%3.8%3.5%4.7%3.9%3.6%3.3% Source: Shared Research, based on MIC data (2020) * Video games denotes total for PC games and console games

Competition for disposable time Average Internet usage time is much higher among Japanese aged 10–29 than other age groups. This group also has the highest average usage time playing online games and social games, especially on weekends and holidays. However, even in this age group, the time spent reading and posting on social media and watching videos posted and shared is greater than time spent playing online and social games. The time cost to secure the disposable time of a limited universe (gamers) has increased amid the growing diversification of online content and services.

Average Internet usage time in Japan by activity (minutes) (weekdays; minutes) Total 10s 20s 30s 40s 50s 60s Male Female Read and write emails 34.6 16.0 25.9 45.3 34.1 45.8 30.5 36.8 32.3 Browse and write blogs and websites 22.4 14.2 28.8 30.9 22.9 24.1 12.1 25.4 19.3 Read and write social media 32.3 64.1 71.4 35.3 19.5 23.9 8.2 26.6 38.1 Watch movies via uploading and sharing services 25.9 74.2 46.6 30.6 16.2 12.2 7.0 31.7 20.0 Watch video on demand 5.4 10.7 9.5 7.2 3.6 4.0 1.5 4.7 6.0 Play online and social games 15.5 33.8 29.8 19.9 11.2 10.5 2.2 21.6 9.4 Make use of internet calls 3.1 9.2 7.8 2.2 1.3 0.9 1.7 3.7 2.6 Simple aggregation 139.2 222.2 219.8 171.4 108.8 121.4 63.2 150.5 127.7 (holidays; minutes) Total 10s 20s 30s 40s 50s 60s Male Female Read and write emails 22.4 20.6 20.5 26.4 19.3 21.6 25.3 19.3 25.5 Browse and write blogs and websites 22.9 12.2 36.5 23.8 25.4 27.7 9.9 26.5 19.2 Read and write social media 36.2 83.4 81.1 38.4 19.5 24.0 9.1 29.5 43.0 Watch movies via uploading and sharing services 37.2 114.8 69.0 44.1 19.5 17.2 8.9 49.2 24.9 Watch video on demand 7.4 13.2 11.6 10.4 5.0 5.9 2.9 8.6 6.1 Play online and social games 23.7 58.1 48.1 28.5 13.0 18.3 2.2 33.5 13.7 Make use of internet calls 3.7 13.8 10.7 2.1 0.6 0.6 1.3 5.4 1.9 Simple aggregation 153.5 316.1 277.5 173.7 102.3 115.3 59.6 172.0 134.3 Source: Shared Research, based on MIC data (2020)

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Usage rates of main social media services and apps in Japan Social media users (as % of age group) Total 10s 20s 30s 40s 50s 60s Male Female LINE 86.9% 94.4% 95.7% 94.9% 89.3% 86.3% 67.9% 85.1% 88.8% Twitter 38.7% 69.0% 69.7% 47.8% 33.4% 28.1% 9.3% 41.8% 35.4% Facebook 32.7% 28.9% 39.3% 48.2% 35.9% 33.5% 12.1% 33.4% 32.1% Instagram 37.8% 63.4% 64.0% 48.6% 32.5% 30.9% 9.3% 31.9% 43.8% mixi 4.1% 1.4% 6.6% 5.1% 4.0% 4.7% 2.1% 4.0% 4.2% GREE 2.1% 1.4% 4.3% 1.2% 3.7% 1.1% 0.7% 2.5% 1.6% Mobage 4.2% 7.7% 8.1% 4.7% 3.7% 2.2% 1.7% 5.9% 2.4% Snapchat 2.9% 12.7% 2.8% 3.2% 1.8% 0.7% 1.4% 3.0% 2.8% Google+ 12.5% 47.9% 20.4% 12.6% 5.5% 6.5% 2.8% 11.3% 13.6% YouTube 76.4% 93.7% 91.5% 85.4% 81.3% 75.2% 44.8% 79.7% 73.0% niconico 17.4% 30.3% 33.2% 20.6% 12.3% 14.4% 5.5% 20.4% 14.3% Source: Shared Research, based on MIC data (2020)

Distribution of gamers in Japan According to Famitsu’s Game White Paper (2020), out of 78mn people aged 5–59 surveyed in Japan, 48mn played video games. Out of those who said they played games, 37mn played game apps, 22mn played console games, and 13mn played PC games (figures include double-counting for players who use multiple formats). The paper suggests game apps have the highest user count because they do not require a special game console or PC with high specs and can be played almost anywhere. GameWith’s site in Japan mainly targets game app users.

Characteristics of the Japanese game app market Popular games in Japan Games with RPG elements are thought to be popular in the Japanese market. The fact that not much skill is required to play most RPG games means they achieve higher overall playtime. In contrast, games that are popular overseas are strongly characterized by the incorporation of skill elements (for example, battle royale and sports games). The barrier to enjoyable play is higher for these skill-oriented games, which suppresses overall playtime.

▷ Game Guide content related to RPGs are in relatively high demand on the site. Being able to access the most up-to-date information on RPG strategy can lead to more efficient play. In contrast, obtaining information on skill-oriented games has little effect on success, and thus there is relatively low demand for skill-oriented game information on the site. For example, even if a player were to get information on how to use a character in a fighting game, it doesn’t necessarily mean he or she would be able to actually control the character in the recommended way.

▷ Furthermore, players mainly fight against the computer in RPGs. Since game companies can easily add new varieties of characters and items that players can buy in RPGs, it is easier to monetize these types of games through a gacha system (the characters and items increase player satisfaction without having an effect on other players). In contrast, strategy games are mostly multiplayer, which necessitates balanced gameplay and makes it difficult to monetize them with a gacha model. These differences indirectly affect GameWith since advertising methods differ based on the type of games a company produces.

The rise and fall of the top 15 titles in Japan The sales share of the top 15 titles in the Japanese game market has declined between 2016 and 2018. The number of titles that need traditional game guides (for example, games in which tips on monster assessment, ways to obtain them, and party formation are in high demand) in the top 15 ranked by monthly active users (MAU) is falling. The company plans to strengthen its initiatives for titles like the battle royale games that require player skills.

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Sales share of top 15 game app titles

Top 15 game titles by MAU

Source: Shared Research, based on company data (App Annie data) Notes: MAU: Monthly Active User Number of titles with traditional game guide needs: Number of titles with needs such as monster assessment, ways to obtain monsters, forming parties, etc.

Top games of 2020 (iOS and Google Play) in Japan by total consumer spending Ranking App Company 1Monster Strike mixi 2 Fate/Grand Order Sony 3 Knives Out NetEase 4 Puzzle & Dragons GungHo Online Entertainment 5 Dragon Quest Walk Square Enix 6 Professional Baseball Spirits A Konami 7Pokémon GO Niantic 8 Dragon Ball Z Dokkan Battle Bandai Namco 9 Disney: Twisted Wonderland Aniplex

10 Depose Girls c4games Source: App Annie Global esports market Goldman Sachs Global Investment Research estimates that the number of esports audience around the world will increase from 167mn per month in 2018 to 276mn per month in 2022. The audience is mainly the younger digital generation (79% are under 35), with a large percentage in Asia. The total number of viewers of the main esports media, YouTube and Twitch, is said to exceed the total for HBO, Netflix, and ESPN. In addition to rising media copyright fees and sponsor fees, the establishment of pro sports leagues has boosted esports revenue, which is expected to reach USD3.0bn in 2020. The increase in the number of viewers is correlated with the rise in prize money, and esports players’ incomes are reaching similar levels as those of professional athletes.

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esports audience and prize money forecasts esports revenue forecasts

(mn) Audience (mn) Prize pool (USDmn) (USDmn) (USDmn)

300 276 450 3,500 413 2,963 250 400 3,000 250 225 359 350 194 2,500 2,173 200 307 300 167 2,000 256 250 150 1,592 200 1,500 1,184 100 170 150 1,000 869 100 50 500 50 0 0 0 2018F 2019F 2020F 2021F 2022F 2018F 2019F 2020F 2021F 2022F Source: Shared Research, based on Goldman Sachs data Source: Shared Research, based on Goldman Sachs data

Breakdown of esports revenue Breakdown of esports revenue and related forecasts

Source: Shared Research, based on Goldman Sachs data Source: Shared Research, based on Goldman Sachs data

Blockchain games market Blockchain games are games that harness blockchain technology. Blockchain does not have a central administrator; instead, an unspecified number of participants store and manage network information. Blockchain games stand out in that it involves an automated, decentralized system that is fraud- free; gamers’ assets and liabilities remain even if the game is discontinued; and virtual currency (Ethereum [ETH], etc.) is used within the game.

The merits of blockchain games are: 1) direct P2P transactions, 2) the ability to limit the number of token issue, and 3) blockchain sustainability without an administrator. Direct P2P transactions mean players can engage directly with other players in game asset transactions. Players can purchase developed characters or powerful weapons from other players when they start playing the game, and sell their game assets when they decide to stop playing. Limiting the number of token issue (placing an upper limit to the availability of each character or item token) defines and highlights the rarity of these tokens and strengthens the game element. In terms of blockchain sustainability, game assets and their ownership rights do not disappear and continue to exist in the blockchain even after the game service ends.

To play a blockchain game, players must purchase the virtual currency needed for the game at an exchange. For this reason, blockchain games have not yet become familiar for most consumers. Blockchain games are currently developed on the assumption that players know about virtual currencies, which limits the number of players. A comprehensive platform that ensures safety and usability is needed to make blockchain games as popular as video and online games.

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Main blockchain game development companies (Japan) Company Established Game title Axel Mark Mar 1994 Contract Servant Platinum Egg Dec 2002 CryptoDerby Samurai Soft Jul 2012 MyCryptoFootballer Good Luck 3 Feb 2013 Crypt-oink Arc Sep 2013 Wallet Battler Blue Print Apr 2015 Venus Scramble Gaia May 2017 Crypto Alchemist double jump.tokyo Apr 2018 My Crypto Heroes Kyuzan Apr 2018 EGGRYPTO Digital Quest - CryptoKanojo CryptoGames - CryptoSpells ELEMENTAL STORY CryptoSpells-S (tentative)

Source: Shared Research, based on dApps market data

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Competition (Japan) Company-run game guide sites In the era of game consoles like Famicom and PlayStation and heyday of DeNA’s mobile games and GREE’s browser games, some game guide sites by individual gamers attracted tens of millions of PV on major titles like Dragon Quest and Final Fantasy, although corporate sites like “Famitsu” and “AppBank” did exist. Company-run game guide sites such as “GameWith” started up in quick succession as popular native-app games for smartphones like Puzzle & Dragons and Monster Strike appeared. Today, company-run sites dominate the top ranks of game guide sites in terms of access frequency.

GameWith is the top brand among company-run smartphone game guide sites and the only listed company that specializes in this field. Other listed companies Gunosy Inc. (TSE1: 6047), CARTA HOLDINGS, Inc. (TSE1: 3688), and NLINKS Co., Ltd. (TSE2: 6573) also run game guide sites, but these are only a part of a broader business portfolio. Unlisted companies that run game guide sites include AppMedia and GOROK, Inc.

Total revenue of game guide sites run by listed and unlisted companies is an estimated JPY10bn, or less than 1% of the game market in Japan worth over JPY1.3tn.

GameWith is far ahead of its competitors according to an index of total number of visits to game guide sites (1.5x that of the second-ranked company and 3x that of third-ranked company in the industry).

According to materials disclosed by Gunosy, which operates Game8 Inc. (second-ranked company by revenue), Game8 reported a monthly PV count of 380mn as of September 2020, and revenue of JPY1.1bn and operating profit of JPY330mn in FY03/20. Its revenue suggests a business scale that is roughly one-third of GameWith’s, but it is difficult to accurately compare the two companies due to the difference in their fiscal year-end. We can also not compare the number of PVs for the two companies because GameWith only discloses relative values.

Rival companies that run game guide sites Revenue OPM ROE TickerCompany Fiscal year Business description (% of total revenue) (JPYmn) 6552 GameWith FY05/20 2,890 14.1% 6.6% Ad revenues in game guide websites (99) Gunosy Ads (52), ADNW (35), operation of game guide site Game8 (6), 6047 Gunosy FY05/20 13,987 6.1% 3.6% other (7)

Partner Sales (36), Ad Platform (36), Consumer (29; including operation 3688 CARTA HOLDINGS FY12/20 22,487 15.4% 7.5% of Kamigame comprehensive game media)

Contracting and collection of NHK broadcasting reception fees (80), real 6578 NLINKS FY02/20 4,776 -3.5% -15.3% estate chat (10), operation of game guide site Altema (9), other (1)

Operation of game guide site AppMedia, development and operation of Unlisted AppMedia - - - - online media services and smartphone apps, video talent, ad agency Unlisted Gorok - - - - Operation of game guide site GAMY Source: Shared Research based on company data. Note: Figures may differ from company materials due to differences in rounding methods. Note: CARTA HOLDINGS’s most recent fiscal year (FY12/19) was an irregular 15-month period (October 2018 to December 2019).

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Major game guide sites by total visitor count index

(mn) 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 100.00

"GameWith" 98.17

Game guide site Game8 65.62

Kamigame 30.75

@wiki 24.45

Altema 23.60

Source: Shared Research, based on SimilarWeb

Balance sheet comparison of listed companies that run game guide sites

GameWith (6552) Gunosy (6047) CA RTA HOLDINGS（3688） NLINKS (6578) (JPYmn) FY05/18 FY05/19 FY05/20 FY05/18 FY05/19 FY05/20 FY09/18 FY12/19 FY12/20 FY02/18 FY02/19 FY02/20 Parent Parent Cons. Parent Parent Parent Cons. Cons. Cons. Parent Parent Cons. Revenue 2,678 3,149 2,890 11,201 15,017 13,987 28,518 28,518 26,158 3,958 4,757 4,776 Gross profit 1,812 1,801 1,403 5,874 7,137 6,011 8,015 8,162 22,966 3,958 4,757 4,776 SG&A expenses 643 993 995 3,935 4,834 5,151 6,208 6,742 19,126 3,643 4,375 4,944 Operating profit 1,169 808 408 1,938 2,302 859 1,806 1,420 3,840 315 381 -167 Recurring profit 1,169 808 409 1,939 2,289 838 1,862 1,432 3,813 316 374 -161 Net income 816 686 219 501 2,009 386 1,149 1,111 2,122 202 208 -182 ROE 41.1% 23.5% 6.6% 6.0% 20.6% 3.6% 16.6% 13.6% 13.4% 41.3% 20.9% -15.3% ROA (RP-based) 46.8% 23.3% 10.8% 18.3% 17.9% 6.3% 13.0% 8.8% 11.3% 29.1% 22.5% -8.7% Opeating profit margin 43.6% 25.7% 14.1% 17.3% 15.3% 6.1% 6.3% 5.0% 14.7%8.0%8.0%-3.5% Total assets 3,187 3,765 3,829 11,555 13,982 12,762 15,776 16,795 50,621 1,283 2,048 1,852 Net assets 2,545 3,302 3,354 8,719 10,985 10,921 8,114 8,777 23,720 592 1,407 1,191 Equity ratio 80.0% 87.7% 87.5% 75.1% 77.7% 84.8% 0.0% 0.0% 0.0% 46.1% 68.7%64.3% Operating CF 951 341 437 2,392 2,067 -631 3,184 602 5,902 247 181 -228 Investing CF -174 -117 -294 -329 130 -986 -1,002 200 3,987 -57 -211 -183 Financing CF 303 70 -167 127 192 -459 106 -569 -549 - 606 -21 Cash and deposits 2,414 2,708 2,685 8,767 11,157 9,075 5,445 5,680 14,547 647 1,223 887 Interest-bearing debt000000000000 Net debt -2,414 -2,708 -2,685 -8,767 -11,157 -9,075 -5,445 -5,680 -14,547 -647 -1,223 -887 Source: Shared Research based on company data. Note: Figures may differ from company materials due to differences in rounding methods.

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Strengths and weaknesses

Strengths

◤ Ability to attract viewers with search engine optimization and maximize their lifetime value by harnessing quality content: The company provides various content ancillary to game guides for smartphone games. It reviews games and streams video so that the game guide viewers will also use the “GameWith” platform when they look for games to play. The game guides serve as an entry point, while viewer traffic across the content offerings (game guides, game reviews, video streaming, and gamer communities) produces a synergy effect that maximizes viewer retention within the company’s platform. Generally speaking, gamers who discover a title that hooks them will first search walkthrough sites and play the game while referring to multiple sites, gradually narrowing down their choice to the site that is frequently updated and offers quality information. An enhanced reputation of the “GameWith” platform creates a buzz online and attracts more viewers, thereby generating a virtuous cycle. In addition to attracting traffic through search engine optimization, the company has succeeded in increasing page views (PV) and revenue per PV by securing skilled writers to boost content volume and quality. By maximizing viewers’ lifetime value and conversion rates, the company has been able to gain the trust of advertisers (game companies), which has led to ad order growth.

◤ Top share in niche market of guide sites for smartphone games: GameWith is the top brand among company-run smartphone game guide sites and the only listed company that specializes in this field. Other listed companies Gunosy Inc. (TSE1: 6047), CARTA HOLDINGS, Inc. (TSE1: 3688), and NLINKS Co., Ltd. (TSE2: 6573) also run game guide sites, but these are only a part of a broader business portfolio. GameWith is far ahead of its competitors according to an index of total number of visits to game guide sites (1.5x that of the second-ranked company and 3x that of third-ranked company in the industry). According to materials disclosed by Gunosy, which operates Game8 Inc. (second-ranked company by revenue), Game8 reported a monthly PV count of 380mn as of September 2020, and revenue of JPY1.1bn and operating profit of JPY330mn in FY03/20. Its revenue suggests a business scale that is roughly one-third of GameWith’s, but it is difficult to accurately compare the two companies due to the difference in their fiscal year-end.

◤ Relatively low-risk business that does not require large initial investment: The specialist media business the company operates provides game related information. It does not require significant upfront investments, in contrast with game developers, which must recover large development and advertising expenses, making it a low-risk business.

◤ Relatively low-risk and high-margin because of concentration in game media: The company’s game media business that provides game-related information earns advertising revenue according to PV of content for hit titles, making it a low-risk business that does not require substantial upfront investment. In the game business ecosystem, market value is heavily concentrated on development. Total revenue of top specialist media like GameWith that provide game information is only around JPY10bn, or less than 1% of the domestic game market (over JPY1tn). GameWith’ long-term vision is to build a global game infrastructure. We believe earnings of companies engaged in game-related media and infrastructure are more stable than those of game development companies, whose earnings fluctuate widely depending on hit titles. As a specialist game media company, GameWith’s OPM (43.6% in FY05/18 and 25.7% in FY05/19) is on a par with OPM of game development companies and higher than those of peers.

Weaknesses

◤ Game Guide business highly dependent on top mobile game titles: Demand for console game tips is trending upward as people stay at home due to COVID-19, but as of FY05/20, the company’s strengths were in mobile game tips, and its offerings in terms of console game tips were somewhat sparse. In the mobile game space itself, the company is highly dependent on top titles (each of which is a smartphone app). This carries the risk that page views will decline rapidly as growth in top titles slows, which could hold back revenue and earnings. The top three titles appear to account for over half of page views for the domestic version of the “GameWith” game information and tip website. This is a lopsided degree of dependence given that the top 15 titles account for roughly 40% of the domestic game apps market overall.

◤ Dependent upon major platforms run by Apple Inc. and Alphabet Inc. as channels for attracting users: GameWith depends on search engine Google (run by Alphabet Inc.) to lure users to its site on the Internet and relies on app platforms run by Apple

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Inc. (NASDAQ: AAPL) and Alphabet Inc. to entice app users. As well, most of its videos are delivered on YouTube, run by Alphabet Inc. Consequently, its earnings are impacted by the management policies of these platform companies. In Q3 FY05/21, the company announced that it was scaling back some of its iOS app mobile game reviews in order to conform to App Store guidelines (App Store Review Guidelines 3.2.2—Business—Other Business Model Issues—Unacceptable). Mobile game reviews will continue to be accessible through Android apps and web browsers, so the company expects the overall impact on future revenue to be limited because most users access its services through web browser searches. Moving forward, the company will need to continue considering the operating policies of these major platform companies as it manages its businesses.

◤ Earnings are mainly from advertising, and vulnerable to fluctuations in ad volume driven by the economic cycle: In FY05/20, Game Guide accounted for 62.9% of total revenue (-14.1% YoY), Game Review 23.3% (+10.9% YoY), Video Streaming 10.9% (+16.7% YoY) and Other 2.9% (-45.5% YoY). Game Guide uses ad networks, while Video Streaming uses video platforms’ ad distribution systems. In an economic downturn, revenue per ad declines due to a change in the supply/demand balance as the volume of advertising placed through these distributors declines. This is difficult for the company to control and impacts revenue. In fact, in Q4 FY05/20, revenue per ad fell amid the coronavirus outbreak.

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Historical results and financial statements Income statement

Income statement FY05/15 FY05/16 FY05/17 FY05/18 FY05/19 FY05/20 (JPYmn) Parent Parent Parent Parent Parent Cons. Revenue 389 994 1,582 2,678 3,149 2,890 YoY - 155.5% 59.1% 69.3% 17.6% -8.2% Cost of revenue 405 565 866 1,348 1,487 Gross profit 589 1,017 1,812 1,801 1,403 GPM - 59.3% 64.3% 67.7% 57.2% 48.5% SG&A expenses 259 360 643 993 995 SG&A ratio - 26.0% 22.8% 24.0% 31.5% 34.4% Operating profit 331 657 1,169 808 408 YoY - - 98.7% 77.8% -30.8% -49.5% OPM - 33.3% 41.5% 43.6% 25.7% 14.1% Non-operating income 0 0 3 4 6 Non-operating expenses 1 3 3 4 5 Recurring profit 125 330 654 1,169 808 409 YoY - 164.7% 98.4% 78.7% -30.9% -49.4% RPM 32.0% 33.2% 41.4% 43.6% 25.7% 14.1% Extraordinary gains 161 Extraordinary losses 14 12 70 Income taxes 109 189 339 271 119 Implied tax rate 33.1% 28.8% 29.3% 28.3% 35.2% Net income attributable to owners of the parent 94 220 466 816 686 219 YoY - 133.9% 111.2% 75.3% -15.9% -68.0% Net margin 24.2% 22.2% 29.4% 30.5% 21.8% 7.6% Source: Shared Research based on company data. Note: Figures may differ from company materials due to differences in rounding methods. SG&A expenses FY05/17 FY05/18 FY05/19 FY05/20 (JPYmn) Parent Parent Parent Cons. SG&A expenses 360 643 993 995 Directors' compensations 51 88 75 86 Salaries and allowances 49 86 200 217 Provision for bonuses 6 17 26 34 Outsourcing 7 12 82 49 Consumables 14 26 35 - Service fees paid 36 46 66 81 Various compensations 36 61 56 53 Depreciation 24 25 29 30 Other 136 283 423 444 Source: Shared Research based on company data. Note: Figures may differ from company materials due to differences in rounding methods.

In FY05/20, revenue declined due to falling revenue per ad as the coronavirus spread.

In FY05/19, the company booked JPY161mn in consumption tax refunds as extraordinary profit. In FY05/20, the company booked extraordinary losses of JPY25mn on investment securities and JPY45mn on the closing of its satellite office.

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Balance sheet

Balance sheet FY05/15 FY05/16 FY05/17 FY05/18 FY05/19 FY05/20 (JPYmn) Parent Parent Parent Parent Parent Cons. ASSETS Cash and deposits 619 831 1,335 2,415 2,709 2,685 Accounts receivable 90 167 249 363 341 372 Merchandise - - 1 - - - Prepaid expenses 5 18 23 36 61 56 Consumption taxes receivable - - - - 188 25 Deferred tax assets 4 9 20 34 - - Other 13 1 0 5 11 7 Total current assets 731 1,025 1,629 2,851 3,311 3,143 Buildings and structures - 56 40 57 60 34 Tools, furniture, and fixtures 1 10 14 27 34 24 Total tangible fixed assets 1 67 54 84 94 58 Goodwill - - - - - 121 Software - 0 0 0 0 0 Total intangible assets - 0 0 0 0 121 Investment securities - - - 62 88 124 Guarantee deposits 119 120 133 190 238 260 Deferred tax assets 1 - - 28 35 122 Investments and other assets 120 120 133 280 361 507 Total fixed assets 121 187 187 364 455 686 Total assets 852 1,211 1,816 3,181 3,766 3,829

LIA BILITIES Accounts payable - - - 35 55 49 Accounts payable–other 24 22 48 65 70 89 Accrued expenses 25 54 49 84 103 116 Income taxes payable 37 100 158 265 70 38 Deposits received 3 6 6 11 12 - Provision for bonuses 1 5 38 58 94 105 Asset retirement obligations 1 - - - - - Other 22 37 65 83 12 31 Total current liabilities 113 223 364 601 416 428 Deferred tax liabilities - 5 3 - - - Construction in process - 23 23 35 48 48 Total fixed liabilities - 29 27 35 48 48 Total liabilities 113 252 390 637 464 475 NET A SSETS Capital stock 341 341 341 492 527 543 Capital surplus 340 340 340 491 526 542 Retained earnings 59 280 745 1,562 2,248 2,467 Treasury stock - - - -0 - -200 Accumulated other comprehensive income ------2 Subscription rights to shares - - - - - 3 Total net assets 739 960 1,425 2,545 3,302 3,354 Working capital 90 167 249 328 287 323 Total interest-bearing debt ------Net debt -619 -831 -1,335 -2,415 -2,709 -2,685 Source: Shared Research based on company data. Note: Figures may differ from company materials due to differences in rounding methods.

In FY05/20, the company booked goodwill of JPY121mn accompanying the acquisition of AtWiki, Inc. in the Game Guide business.

The company has basically operated using shareholders’ funds, but in order to boost its resilience against the COVID-19 pandemic and potential long-term effects, it has borrowed JPY1.3bn with a five-year payback period from four banks at end-July 2020 to ensure ample cash on hand.

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Cash flow statement

Cash flow statement FY05/15 FY05/16 FY05/17 FY05/18 FY05/19 FY05/20 (JPYmn) Parent Parent Parent Parent Parent Cons. Cash flows from operating activities (1) 97 279 524 951 341 437 Pre-tax profit - - 654 1,155 957 338 Depreciation - - 24 25 29 30 Impairment losses - - 33 20 36 11 Losses (gains) on sale of fixed assets - - - 14 12 25 Decrease (increase) in consumption taxes receiva - - - - -181 163 Change in working capital - - -67 -85 41 -36 Decrease (increase) in accounts receivable - - -83 -113 21 -30 Decrease (increase) in inventories - - -1 1 - - Increase (decrease) in accounts payable - - 18 27 20 -6 Cash flows from investing activities (2) -119 -68 -20 -174 -117 -294 Purchase of tangible/intangible fixed assets - - -7 -41 -28 -6 Proceeds from sale of tangible/intangible fixed assets ------Payments for acquisition of businesses ------200 Free cash flow (1+2) -21 212 504 777 225 144 Cash flows from financing activities 498 - - 303 70 -167 Proceeds from issuance of shares - - - 282 - - Acquisition of treasury shares ------200 Depreciation and amortization (A) - - 24 25 29 30 Capital expenditures (B) - - -7 -41 -28 -6 Change in working capital (C) - - -67 -85 41 -36 Simple FCF (NI + A + B - C) - - 549 885 646 280 Source: Shared Research based on company data. Note: Figures may differ from company materials due to differences in rounding methods.

Cash flow from operating activities Cash flows from operating activities depend mainly on movements in pre-tax profit and income tax payments. In FY05/19 and FY05/20, there were special factors involving fluctuations in consumption taxes receivable.

Cash flow from investing activities In FY05/20, there were outflows of JPY200mn associated with the acquisition of AtWiki, Inc. in the Game Guide business.

Cash flow from financing activities In FY05/18, there were financing inflows of JPY282mn from shares issued via the company’s IPO. In FY05/20, there were financing outflows of JPY200mn from a share buyback.

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Historical performance

1H FY05/21 results

▷ In 1H FY05/21, the company reported consolidated revenue of JPY1.4bn (-6.5% YoY), operating loss of JPY90mn (versus a profit of JPY282mn in 1H FY05/20), recurring loss of JPY95mn (versus a profit of JPY282mn in 1H FY05/20), and net loss of JPY142mn (versus a profit of JPY186mn in 1H FY05/20). Lower Game Guide revenue led to lower overall revenue YoY. In 1H, the company reported an operating loss as it booked JPY321mn in advertising expenses, which was driven by airing TV commercials aimed at attracting mass-market gamers in its Game Review business. Thanks to advertising effects, the total number of GameWith app downloads at end-1H had grown 36% compared to end-FY05/20, which is basically in line with the company’s growth target. ▷ In Q2 (September–November 2020), the company reported Game Guide revenue of JPY402mn (-12.4% YoY), Game Review revenue of JPY197mn (+3.1% YoY), and Video Streaming revenue of JPY97mn (+40.6% YoY). A drop in PV count resulted in lower Game Guide revenue YoY. Meanwhile, strategic efforts led to higher Game Review revenue YoY. In Video Streaming, the company noted a recovery in cost per view index, although the average number of views decreased in Q2 compared to Q1. ▷ At its Game Guide business, the company saw an average of 470mn page views per month during Q2, down 19.0% YoY and short of the 490mn figure reported in Q1. Usage of guide articles about major game titles that have been on the market for some time is on a downtrend. Average revenue per page-view index (indexed to 100, base period Q1 FY05/20) was 80 in Q2

(-9.1% YoY), indicative of recovery when compared to the index value of 71 reported for Q1 FY05/21. ▷ The company recorded JPY76mn in loss on office closures as an extraordinary loss. This extraordinary loss has already been accounted for in the company’s initial FY05/21 forecast. The company aimed to cut down costs by relocating some of its offices

assuming that it would maintain the full remote work system. Accordingly, the company recorded the book value of fixed assets previously recorded in association with former office locations and rent covering the remaining lease periods for these locations as losses. ▷ Full-year FY05/21 earnings forecast: The company has made no changes to the earnings forecast it released on October 7, 2020. As of end-1H, revenue had reached 47.8% of the company’s full-year target. It should be noted that those earnings forecasts are premised on neither any dramatic improvement or dramatic exacerbation of the impact of COVID-19 compared

to the situation in October 2020.

Business performance By devoting management resources to providing and improving its content categories offered via the “GameWith” platform, the company increased the value of the platform as a game information medium. The three main content categories are the following: Game Guide, which provides tips that help gameplay; Game Review, which provides information for finding games to play; and Video Streaming, which offers YouTube videos starring gamers and esports players who work exclusively with GameWith. The company provides this content to the viewers of its websites and apps and earns revenue mainly by selling ad spaces in them. The Media segment being its only reporting segment, the company does not break down sales and earnings by segment.

Impact of COVID-19 pandemic

▷ Q2 saw declines in both positive and negative effects of the COVID-19 pandemic. Overall, although game guide page views lagged, advertising generally improved. In terms of individual business lines, Game Guide saw a decline in the number of page views, while revenue per page view generally improved. In Game Review, the company’s customers generally resumed game development. In Video Streaming, the number of views was down slightly, but cost per view showed improvement. While revenue per page view and cost per view are staging a comeback, they have not yet returned to pre-COVID levels.

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▷ In January 2021, which falls within Q3 FY05/21, the flare-up in new COVID-19 cases prompted the Japanese government to re- declare a state of emergency in specified areas. The previous emergency declaration was lifted in May 2020. However, the company says that, as of January 13, 2021, it has not seen any major drop in revenue per page view or cost per view as a result of the new declaration. While acknowledging the potential for revenue per page view and cost per view to be impacted, the company projects that any such effects to be milder than they were during the emergency declaration back in April and May 2020 since society is now better equipped to deal with the situation and operations at game companies, its primary customer base, have been relatively unaffected. It should also be noted, though, that earnings forecasts the company announced in October 2020 are premised on neither any dramatic improvement or dramatic exacerbation of the impact of COVID-19 compared to the situation in October 2020.

Game Guide

▷ The English language version of GameWith enjoyed special demand in Q4 FY05/20, stemming from the COVID-19 outbreak, and the company says that the number of page views in Q2 FY05/21 has returned to pre-pandemic levels. Revenue per page view had declined due to the impact of COVID-19, but the company indicates it made substantial improvement in Q2.

Game Review

▷ One of the app revenue sources the company anticipates is fees on its customers’ downloading of game apps. The company says its near-term target is to reach 1 million annual downloads. Assuming an average of JPY1,000 per download, as the company stated in Q2 FY05/21, its annual goal works out to JPY1bn in sales. Being the first brand that comes to mind among mass gamers as well as effectively managing push notifications are crucial for promoting game app downloads, and the company says it will continue to raise its profile through advertising and engage in push notification operations.

▷ The plan disclosed in October 2020 is premised on airing television commercials five times for the year, but with the caveat that it could reduce that to just four times, depending on the cost-to-benefit situation, if TV networks start charging more for commercials.

Video Streaming

▷ The company’s mainline esports YouTube channel continues to gain more subscribers.

Other supplemental items

▷ Although the company has left its earnings forecasts released in October 2020 unchanged, it has made minor alterations to the breakdown. It lowered its sales targets by JPY13mn in Game Guide, JPY2mn in Game Review, and JPY13mn in Video Streaming. At the same time, it now forecasts an JPY18mn smaller increase in personnel-related expenses.

▷ Apple, Inc. (NASDAQ, AAPL) is scheduled to place restrictions on the use of IDFA (“Identifier for Advertisers”, a user identifier for mobile devices used to target advertising) in early 2021. As a preliminary step, in December 2020, Apple rolled out new rules that require apps sold on Apple’s App Store to provide downloaders with detail on the tracking and collection of data on their use of other apps or websites. GameWith, though, expects these changes and restrictions to have no major impact on its earnings since its apps use only a limited type of user data, mainly ID, location, and usage, and its customer range is generally predictable, users of its media being largely game fans.

▷ Personnel-related costs of JPY436mn in Q2 were up 4.3% YoY. An increase in advertising expenses lowered personnel-related costs as a percentage of total costs YoY to 60.0%. The company’s employee headcount of 242 as of end-Q2 represented a decrease of six employees compared to end-Q1.

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Q1 FY05/21 results

▷ In Q1 FY05/21, the company reported consolidated revenue of JPY688mn (-8.2% YoY), operating loss of JPY71mn (versus a profit of JPY133mn in Q1 FY05/20), recurring loss of JPY74mn (versus a profit of JPY133mn in Q1 FY05/20), and net loss of JPY77mn (versus a profit of JPY85mn in Q1 FY05/20). Lower Game Guide revenue led to lower overall revenue YoY. Progress versus full-year forecast was 23.4% for revenue. In Q1, the company reported an operating loss as it booked JPY157mn in advertising expenses for TV commercials aimed at attracting mass market gamers in its Game Review business. The TV commercials drove an increase in the number of installs for the company’s app, with growth exceeding its expectations. ▷ For the three-month period of Q1 (June–August 2020), the company reported Game Guide revenue of JPY365mn (-26.4% YoY), Game Review revenue of JPY208mn (+27.1% YoY), and Video Streaming revenue of JPY99mn (+36.4% YoY). A drop in page views as well as sluggish revenue per page view resulted in lower Game Guide revenue YoY. Game Review revenue expanded YoY as the company secured tie-up ads in connection with TV commercials. In Video Streaming, the number of views for esports-related video streaming remained strong from Q4 FY05/20, which more than offset sluggish cost per view, resulting in higher revenue YoY. ▷ At its Game Guide business, the company saw an average of 490mn page views per month during Q1, down 16.9% YoY and substantially short of the 630mn figure reported in Q4. The decline was due to fewer new games (native mobile games across

the board) being released. Average revenue per page view was down sharply as shown by the index the company calculates to track average monthly revenue per page view*, which at 71 in Q1 was down 29.0% YoY and roughly flat compared to the index value of 69 reported for Q4 FY05/20 (*indexed to 100, base period Q1 FY05/20). Ad placements remained sluggish due to the novel coronavirus pandemic. ▷ Full-year FY05/21 earnings forecast: As of July 15, 2020, the company had left its full-year FY05/21 forecast undetermined due to the difficulty of reasonably estimating the business impact of the pandemic. However, it announced its full-year forecast

based on currently available information. The revised forecast calls for revenue of JPY2.9bn (left undetermined in previous forecast, JPY2.9bn in FY05/20), operating loss of JPY417mn (same, profit of JPY408mn), recurring loss of JPY424mn (same, profit of JPY408mn), net loss of JPY353mn (same, profit of JPY219mn), and loss per share of JPY19.63 (same, EPS of JPY12.23

yen). While the company expects higher revenue YoY, it projects lower operating profit, recurring profit, and net income YoY as it plans to invest JPY863mn in advertising expenses. See the full-year company forecast section below for assumptions and details of the revised forecast.

▷ In the Game Guide business, @WIKI’s monthly average revenue per PV in Q1 FY05/21 was up 65% from Q2 FY05/20, immediately before the acquisition, as the business benefited from the expertise of “GameWith.” @WIKI also reported a monthly average PV count of 101.7mn, and its revenue surpassed the company’s expectations.

▷ In the Video Streaming business, the average cost per view index in Q1 FY05/21 (indexed to the monthly average cost per view of Q1 FY05/20) remained at a low 75, trending at a low level since Q4 FY05/20. This was mainly attributable to impact

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from a decline in ad volume. However, the average view count in Q1 FY05/21 increased more than in Q4 FY05/20 mainly thanks to continued growth in subscribers for YouTube channels of esports players affiliated with the company.

▷ In Q1 FY05/21, personnel costs and expenses of JPY439mn in Q1 were up 8.4% YoY. An increase in advertising expenses lowered personnel costs and expenses as a percentage of total costs to 58.6%. The company’s employee headcount of 248 at end-Q1 represented an increase of one employee over end-FY05/20. The closure of the company’s satellite office contributed to a reduction in rent from JPY65mn in Q4 FY05/20 to JPY50mn.

Full-year FY05/20 results

▷ The company issued a revised forecast for full-year results for FY05/20 on June 17, 2020. After having come all the way through the end of Q3 with revenue and earnings running generally in line with plan, the company hit a bump in the road in Q4, when revenue finished 20% below plan and earnings at all levels came in short of expectations as the novel coronavirus pandemic spread across Japan and the rest of the world. With the Japanese government going so far as to make an official state of emergency declaration in April, many people in Japan had little choice but to stay at home. And while this led to increases in the number of people playing video games at home and more page-views on the company’s websites and apps, total revenue at the company (mainly calculated as the product of the number of page-views on its websites/apps and the average revenue per ad) still finished the year below plan as the average revenue per ad earned by the company came tumbling down as many companies decided to scale back ad placements.

▷ In FY05/20, the company reported full-year consolidated revenue of JPY2.9bn (-8.2% YoY), operating profit of JPY408mn (- 49.5% YoY), recurring profit of JPY409mn (-49.4% YoY), and net income of JPY219mn (-68.0% YoY). The operating profit margin of 14.1% was down 11.6pp YoY. These figures were closely in line with the revised forecast issued by the company on June 17, 2020.

▷ For the three-month period of Q4 (March–May 2020), the company reported Game Guide revenue of JPY410mn (-9.2% YoY), Game Review revenue of JPY157mn (-2.7% YoY), and Video Streaming revenue of JPY100mn (+37.1% YoY). The decline in revenue per ad took an especially big bite out of Game Guide revenue. Strenuous marketing efforts helped stem the decline in Game Review revenue. Cost per view fell in Video Streaming, but overall revenue from Video Streaming still finished the quarter higher YoY thanks to strong growth in revenue from esports-related video streaming, such as third person shooter (TPS) videos, and a sharp increase in the average number of views, which nearly doubled on a QoQ comparison basis.

▷ At its Game Guide business, the company saw an average of 630mn page-views per month during Q4, up 14.5% YoY and well ahead of the 560mn figure reported in Q3. The increase was attributed to a jump in the number of people playing video games while staying at home amid the novel coronavirus pandemic. Average revenue per page-view was still down sharply, though, as shown by the index the company calculates to track average monthly revenue per page-view*, which at 79 in Q4 was down 25.5% YoY and well below the index value of 92 reported for Q3 (*indexed to 100, base period Q1 FY05/19). The company attributed most of the drop in revenue per page-view to a decline in the number of ads being placed by overseas companies.

▷ In Q4 the company booked extraordinary losses of JPY25mn in losses on investment securities and JPY45mn in losses on office closures. The office closure losses primarily consisted of restoration costs and breach-of-contract penalties associated with the closure of a satellite office amid the spread of remote working.

▷ The company did not issue a forecast for FY05/21. By way of explanation, the company said the impact of the pandemic on the operating environment made it extremely difficult to put together reasonable estimates at this point in time, but promised to provide a forecast as soon as it was in a position to do so. The company spent virtually nothing on advertising through FY05/20, but plans to invest several hundred million yen on promotion in FY05/21. Refer to full-year company forecast section for details on the outlook for cost structure in FY05/21.

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Third Person Shooter (TPS): A type of action game enabling the player to move freely in a world or game space from the perspective of a third party who follows the main character, and fight with weapons or bare hands. Fortnite is a typical game in this genre.

Impact of novel coronavirus pandemic On the plus side, the school closures, stay-at-home orders, and other measures undertaken by the Japanese government to help curb the spread of the novel coronavirus pandemic led to increases in the amount of time people spent playing video games and the number of video views. On the minus side, the slowdown in economic activity that accompanied the pandemic mitigation measures prompted delays in the release of new games (especially mobile game apps) on the part of game companies, and this in turn led to fewer ads being placed by overseas game makers and a decline in average revenue per ad at GameWith.

▷ March marks the end of the fiscal year for many Japanese companies, so they typically tend to increase ad placements to use up their advertising budgets, but we understand that this was less evident in 2020 due to the COVID-19 pandemic.

▷ Revenue per ad placed via ad networks declined as restaurants and apparel companies cut advertising due to people staying at home.

▷ As of May 2020, the English version of “GameWith” featured mainly console game content. In Q4 FY05/20, page views on the English website more than doubled from Q3 as people stayed home due to COVID-19.

▷ In Q4 FY05/20, following its acquisition, monthly average revenue per page view for @WIKI was up 26% from Q2 FY05/20, immediately before the acquisition, despite lower revenue per ad due to COVID-19. In Q4 FY05/20, the monthly average page view count for @WIKI was 91.5mn, versus 90.5mn in Q3.

Accounting for 65.8% of total costs, personnel costs and expenses of JPY431mn in Q4 were basically flat YoY. The company’s employee headcount of 247 at end-Q4 represented an increase of five employees over end-FY05/19. The company spent JPY24mn on advertising through local TV commercials and online ads as a test run for large-scale promotions it plans for FY05/21.

Q3 FY05/20 results Overview

▷ For the nine-month period through Q3 FY05/20, the company reported consolidated revenue of JPY2.2bn (-5.2% YoY), operating profit of JPY381mn (-38.1% YoY), recurring profit of JPY381mn (-38.1% YoY), and net income of JPY249mn (-40.4% YoY). The operating profit margin of 17.3% was down 9.2pp versus the same nine-month period in FY05/19.

▷ Revenue and operating profit held up well through January 2020, according to the company, but began coming under pressure in February as fears about the coronavirus led to delays in the release of new games and game-related events. The company’s Game Review business in particular started feeling the pinch in February, and the impact on monthly ad pricing was also visible in its Game Guide business. The company noted that normally it could expect to see strong revenues and earnings in Q4 (March–May), but that the coronavirus pandemic was likely to depress results this fiscal year (FY05/20).

▷ For Q3 (December 2019–February 2020), the Game Guide business reported revenue of JPY452mn (-1.6% YoY), the Game Review business revenue of JPY161mn (-15.7% YoY), and the Video Streaming business revenue of JPY73mn (+5.5% YoY). Each of these businesses was affected by the novel coronavirus pandemic, as was the revenue breakdown.

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▷ In Q3, monthly page views (PV) at its game guide site GameWith averaged 560mn (-9.7% YoY), or roughly the same as the average of 580mn logged in Q2. The company calculates an index for revenue per page view, indexing this figure to 100 in January 2017, when it first established its ad management system. In Q3 FY05/20 this index stood at 191, down 15.5% versus the same quarter in FY05/19 and basically flat versus the index value of 189 in Q2 FY05/20. These figures do not include performance in the @WIKI business, which the company acquired in December 2019.

▷ Results for the first nine months of FY05/20 left the company with 68.6% of its full-year target for revenue, 61.9% of its full-year target for operating profit, 61.8% of its full-year target for recurring profit, and 59.1% of its full-year target for net income.

▷ The company has still made no changes to its initial forecast for full-year results announced on July 10, 2019. In December 2019, the company announced that it moved to consolidated accounting starting in Q3 following the establishment of consolidated subsidiary AtWiki, Inc., but noted that the addition of AtWiki would not have a material impact on FY05/20 results and made no changes to its full-year forecast. As mentioned above, however, the company noted that normally it could expect to see strong earnings in Q4 (March–May), but that the coronavirus pandemic was likely to depress results in FY05/20. With regard to segment reporting, the company said it would not be providing a breakdown of results by segment since the Media segment is its only reporting segment.

Impact of coronavirus pandemic Impact on operating environment The measures enacted by the Japanese government to help prevent the spread of the coronavirus, including temporary school closures and voluntary stay-at-home orders, have led to increases in the time spent playing video games and the number of video views. That has not helped GameWith, however, because its clients are the game companies themselves, which have been forced to delay the launch of some new mobile game apps and, since the latter half of February 2020, have also been compelled to either cancel or delay many game-related events.

▷ Games usually have a large amount of data, and it is difficult for game companies to suddenly shift development to telework in terms of IT infrastructure. Although it is difficult to estimate the exact amount of time this will delay game launches by, as of mid-April, the company estimates that most games in development will be delayed by two to three months.

Impact on GameWith’s revenue and earnings With ad placements coming down (especially ads placed by overseas companies) and ad pricing also under pressure, the company said its earnings are likely to continue to feel the impact of the coronavirus mitigation measures going forward.

▷ The decrease in the number of ads is thought to be due to the delay in the game development at overseas game companies. Another factor is that it has become difficult to hold in-person events.

▷ As of mid-April 2020, revenue per ad at “GameWith” is about 20‒30% lower than under non-pandemic conditions. On the other hand, page views (PV) trended slightly higher than under normal conditions. According to the company, it takes roughly one week to ascertain revenue per ad, and it pointed out that revenue per ad began to fall conspicuously in the latter half of February.

▷ Since GameWith’s customers are mainly large game companies with which the company has an established relationship, problems such as being unable to perform sales activities (unable to contact the customer’s representative) or losses on doubtful accounts for accounts receivable have not yet occurred.

Business performance By devoting management resources to providing and improving its content categories offered via the “GameWith” platform, the company increased the value of the platform as a game information medium. The three main content categories are the following: Game Guide, which provides tips that help gameplay; Game Review, which provides information for finding games to play; and Video Streaming, which offers YouTube videos starring gamers and esports players who work exclusively with the company. The company provides this content to the viewers of its websites and apps and earns revenue mainly by selling ad spaces in them.

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During Q3 FY05/20 (December 2019-February 2020), the company saw top-line revenue decline versus year-ago levels as releases of some new games were delayed, particularly those from overseas companies. Q3 personnel costs of JPY422mn were down roughly 5% versus the same quarter in FY05/19, and accounted for 69.5% of the company’s overall expenses. The company had a total of 251 employees at end-Q3 FY05/20, an increase of seven employees versus 244 at the end of the previous quarter (Q2) and an increase of roughly 6% versus end-Q3 FY05/19.

▷ The company has followed a strategy focused on improving its apps. The rationale for this strategy is that app users necessarily read articles published by the company, therefore it can raise value for ad placement by developing a more accurate understanding of user attributes, and have the potential to improve the conversion rate by leveraging smartphone functions such as push notifications. In FY05/21, GameWith plans to aggressively advertise to increase the number of app users. The method and scale of advertising are under consideration, and the company plans to elucidate its policy in more concrete terms when it announces financial results for FY05/20. Currently, ad prices in media in general are falling due to the impact of the novel coronavirus. If the low-ad-price environment is to continue, the company may be able to advertise relatively efficiently in FY05/21.

▷ Quoting the Famitsu Mobile Game White Paper 2020, the company estimates the percentage of game app users in Japan who use game information/guide sites when searching for mobile games at approximately 7.5% as of 2020. Since many users use multiple game information/guide sites to access information, GameWith believes it can increase page views (PV) by expanding the number of users of game information/guide sites in general while maintaining its current share of nearly 40% (company estimate).

▷ For @WIKI, while GameWith thinks it will be difficult to greatly increase the number of page views (PV), it believes there is room to improve revenue per ad. The company has started to see improvement in revenue per ad after working to improve the site over a period six months, and says it can raise revenue per ad for the site to about one-half to two-thirds that of “GameWith.” The current revenue per ad of @WIKI stands at about one-sixth of that of “GameWith,” and the site’s monthly PV averaged 90 million in Q3 FY05/20. @WIKI revenue is recorded under the Game Guide category.

▷ In Q3 FY05/20, the English version of “GameWith” had 17 million average monthly PV.

▷ The company has implemented telework since March 30, 2020 and says that all business activities have continued as normal.

▷ Concerning personnel, the company says that while it may engage in pinpoint hiring of necessary personnel, it does not have plans to greatly increase its workforce. Since the company has transitioned to telework, it recognizes there is opportunity to raise article writing productivity by using skilled writers who reside outside of Greater Tokyo.

▷ Concerning investment in other companies, GameWith plans to continue to actively gather information and consider possible deals. The company says it has not changed its policy of limiting its investment targets to companies involved in game-related businesses.

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Other information

History

Date Description Jun 2013 Est ablished in Minat o, T okyo, w it h t he aim of operat ing game guide w ebsit e Sep 2013 Launched game guide website "GameWith" Mar 2014 Relocated head office within Minato, Tokyo Jun 2015 Relocated head office within Minato, Tokyo Sep 2016 Started commercialization of ads related to game guide video commentaries Jun 2017 Listed shares on the Mothers market of the Tokyo Stock Exchange Nov 2017 Launched apps for iOS and Android covering the whole services of GameWith Dec 2017 Launched "GameWith" in Taiwan, and started overseas operation Jul 2018 Launched "GameWith" in the English language Aug 2019 Changed listing to The First Section of the Tokyo Stock Exchange Dec Established AtWiki Inc. and made it a consolidated subsidiary Transferred @WIKI business from Atfreaks Limited

Source: Shared Research based on company data

News and topics October 2020 On October 7, 2020, the company announced a revision to its full-year FY05/21 earnings forecast.

Revised FY05/21 earnings forecast

▷ Revenue: JPY2.9bn (left undetermined in previous forecast, JPY2.9bn in FY05/20)

▷ Operating loss: JPY417mn (same, profit of JPY408mn)

▷ Recurring loss: JPY424mn (same, profit of JPY408mn)

▷ Net loss*: JPY353mn (same, profit of JPY219mn)

▷ Loss per share: JPY19.63 (same, EPS of JPY12.23) *Net loss attributable to owners of the parent

Reason for revision As of July 15, 2020, the company had left its full-year FY05/21 forecast undetermined due to the difficulty of reasonably estimating the business impact of the novel coronavirus pandemic. However, it announced its full-year forecast based on currently available information. While the company expects higher revenue YoY, it projects lower operating profit, recurring profit, and net income YoY as it plans to invest JPY863mn in advertising expenses.

▷ In terms of expenses, the company plans to spend JPY863mn on advertising to raise the profile of its game information website “GameWith” while airing TV commercials and carrying out web marketing aimed at growing revenue for the Game Review business. The company had aired TV commercials in August, which falls into Q1 FY05/21, and plans to continue airing TV commercials each quarter going forward while strengthening web marketing. In addition, the company promotes full remote work and will continue to maintain this arrangement to achieve further cost improvements.

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▷ As the company cannot eliminate the possibility of unpredictable fluctuations in earnings performance driven by external factors such as the spread of COVID-19 and the timing of its containment, it will promptly revise forecasts if it expects significant fluctuations in performance.

June 2020 On June 17, 2020, the company announced the revision to its earnings forecast.

Revised company forecast for full-year FY05/20 results

▷ Revenue: JPY2.9bn (versus previous forecast of JPY3.2bn)

▷ Operating profit: JPY407mn (versus JPY616mn)

▷ Recurring profit: JPY409mn (versus JPY616mn)

▷ Net income*: JPY215mn (versus JPY420mn)

▷ EPS: JPY11.99 (versus JPY23.42) *Net income attributable to owners of the parent

Reason for revision GameWith’s revenue is calculated by multiplying the number of views of company operated media by revenue per ad. With the spread of the novel coronavirus, both domestically and internationally, and the Japanese government’s emergency declaration from April 2020, the number of users playing games at home has increased and the number of views has exceeded forecast, however, with many companies scaling down placing advertising, revenue per ad has fallen below forecast. As a result, while revenue was in line with forecasts until cumulative Q3, in Q4 revenue missed the company plan by 20%, while operating profit, recurring profit, and net income attributable to owners of the parent also came in below forecast.

Corporate governance and top management Top management The company’s founder, president and representative director Takuya Imaizumi co-founded a social game company called Cosmonauts while a Keio University student, overseeing development as director and CTO. Cosmonauts mainly developed mobile games for DeNA under contract, but was liquidated after revenue slumped and employees had to be laid off, with no president. Shared Research regards Imaizumi as a leader with a good balance between aggressiveness and caution, having experienced the startup, restructuring, and liquidation of a company in a short period of time while he was still a student.

App games had taken over from browser games in popularity around 2012. After graduating from university, Imaizumi founded GameWith with the support of a venture capital firm to build a business from scratch. In 2012, there were no official game guide sites for smartphones, and individual gamers were the only ones providing walkthroughs. Predicting early on that the number of players per game would increase exponentially once smartphones became commonplace and games became available for free downloads, he decided to set up and run a game guide site as a business.

Management team and outside directors Director Yusuke Murata, General Partner of Incubate Fund, who supported GameWith from the beginning, takes a long-term investment stance as President Imaizumi’s supporter and adviser. He has continued to provide management support after the company’s stock market listing.

Tomoyuki Takeichi, former chairman of Square Co., Ltd. (now Square Enix Holdings; TSE1: 9684), became an outside director in May 2016. With his extensive experience and networks, he serves as a reliable adviser to the young President Imaizumi.

New directors appointed in August 2019 are Shujiro Ito (Director, Executive officer, and Head of Corporate Planning Office) and Hirokazu Hamamura, an outside director, who was the former president of Enterbrain, Inc. (now Kadokawa; TSE1: 9468).

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Hamamura is also vice chairman of the Japan esports Union, well positioned to help the company run its new esports business. In addition, Hamamura heads the Famitsu group and is experienced in the game console and PC game markets, in which the company is a late starter.

GameWith’s corporate government has been strengthened all round with the appointment of two outside directors who are prominent figures in the industry. We think the addition of Head of Corporate Planning Office Shujiro Ito to the management team will allow President Imaizumi to concentrate more on leading the company’s business model change that incorporates new businesses.

Former COLOPL (TSE1: 3668) executive officer and director of human resources Noriaki Ogata was appointed executive officer, COO, and general manager of the personnel department in July 2020, and a director of the company following the ordinary general meeting of shareholders in August 2020.

GameWith’s management team and outside directors

President and Director and Director Outside director Outside director representative director executive officer

Takuya Imaizumi Shujiro Ito Yusuke Murata Tomoyuki Takechi Hirokazu Hamamura

Founder, Head of General Partner, Ex-chairman and Senior adviser, GameWith, Inc. corporate planning office, Incubate Fund representative director, KADOKAWA Corporation GameWith, Inc. Square Co., Ltd. (representative, Famitsu (now Square Enix Group), Vice chairman Holdings Co., Ltd.) Japan esports Union Source: Shared Research based on company data

Noriaki Ogata appointed as a director

Source: Company data

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Takuya Imaizumi: President and representative director Date Description Jun 2012 Executive officer and Chief Technology Officer, COSMONAUTS Co., Ltd. Mar 2013 Graduated from Keio University Jun 2013 Founded GameWith, Inc.; president and representative director Jun 2020 President, representative director and executive officer (current position)

Shujiro Ito: Director, executive officer, head of Corporate Planning Office Date Description Apr 2001 Joined Telewave Co., Ltd. (now iFlag Co., Ltd.) Oct 2007 Joined LandPia Co., Ltd.; head of Management Planning Office Oct 2011 Joined Will Holdings, Inc. (now W ill Group, Inc.) Sep 2015 Joined GameWith, Inc.; head of Management Planning Office Aug 2018 Executive officer and head of Management Planning Office, GameWith Director, executive officer, head of corporate planning office, GameWith Aug 2019 (current position)

Yusuke Murata: Director, executive officer and COO, head of Personnel Division Date Description Apr 2007 Joined Leverages Co., Ltd. Aug 2012 Joined Colopl, inc. Mar 2018 Director, FiNC Technologies Inc. Director, COO and executive officer, head of Personnel Division (current Aug 2020 position)

Yusuke Murata: Director Date Description Apr 2003 Joined NIF Ventures Co., Ltd. (now Daiwa Corporate Investment Co., Ltd.) Apr 2010 Founded Incubate Fund and became a general partner (current position) Aug 2013 Director, GameWith, Inc. (current position) General manager of Planning Department, Japan Venture Capital Association Jul 2015 (current position)

Tomoyuki Takechi: Director Date Description Apr 1979 Joined Shikoku Bank, Ltd. May 1996 Joined Square Co., Ltd. (now Square Enix Holdings Co., Ltd.) Jun 1996 President and representative director, Square (now Square Enix Holdings) May 2000 Chairman and representative director, Square (now Square Enix Holdings) Founded Takechi Communications Co., Ltd., and became president and Oct 2009 representative director (current posit ion) May 2016 Director, GameWith, Inc. (current position)

Hirokazu Hamamura: Director Date Description Apr 1985 Joined ASCII, Inc. President and representative director, Enterbrain Co., Ltd. (now KADOKAWA Apr 2000 Corporation) Jan 2018 Vice chairman, Japan esports Union (current position) Senior adviser, Digital Entertainment, Kadokawa (now KADOKAWA Corporation) Nov 2018 (current posit ion) Aug 2019 Director, GameWith, Inc. (current position) Source: Shared Research based on company data

Dividend policy

The company has not paid dividends in recent years based on a policy of strengthening retained earnings to consolidate its business base, which it thinks is the best way to maximize shareholder value. The company plans to use retained earnings to finance future business expansion, but is considering a policy of repurchasing shares when it judges the amount to be in excess of required funding. In addition, from August 22, 2019 to September 2, 2019, GameWith repurchased 251,000 shares (approximately 1.4% of issued shares worth JPY200mn).

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Major shareholders (as of November 2020)

Shares held Shareholding Top shareholders ('000) ratio Takuya Imaizumi 5,378 29.80% Incubate Fund Number Two Investment LLP (Murata account 3,812 21.12% YJ Number One Investment Partnership 2,145 11.88% Incubate Fund Number Three Investment Limited Partnership 1,120 6.20% The Master Trust Bank of Japan, Ltd. (Trust account) 230 1.27% Masahiko Makabe 188 1.04% Rakuten Securities Co., Ltd. 167 0.92% Mikio Mori 165 0.91% Hiroki Abe 145 0.80% Ken Inoue 121 0.67%

SUM 13,473 74.66% Source: Shared Research based on company data

Since the company’s founding, the top two shareholders have been President Imaizumi (shareholding about 30%) and Incubate Fund (about 21%). YJ Capital, wholly owned subsidiary of Yahoo! Japan, is the third-largest shareholder (about 12%). Most other major shareholders are individuals.

Employees

Employees FY05/14 FY05/15 FY05/16 FY05/17 FY05/18 FY05/19 FY05/20 (JPYmn) Parent Parent Parent Parent Parent Parent Cons. Consolidated Number of employees (excl. temp. workers) 136 Number of temporary workers (average) 110 Sales per employee (incl. temp. workers) 11.7 OP per employee (incl. temp. workers) 1.7 Parent Number of employees (excl. temp. workers) 7 8 26 39 71 125 134 Number of temporary workers (average) 6 35 53 63 91 114 110 Sales per employee (incl. temp. workers) 0.5 9.0 12.6 15.5 16.5 13.2 11.7 OP per employee (incl. temp. workers) 6.4 7.2 3.4 1.7 Average age 31.2 31.1 30.5 30.8 Average years of service 1.4 1.7 2 2.5 Average annual salary (JPY'000) 5,790 6,029 6,151 6,111 Source: Shared Research based on company data

The number of employees was 246 at end-FY05/20 (136 full-time employees at end-FY05/20 and 110 temporary workers on average in FY05/20). The work force of the parent company is young, with an average age of 30 and average 2.5 years in service.

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Profile

Company Name Head Office Roppongi Hills Mori Tower 20F GameWith, Inc. 6-10-1 Roppongi, Minato-ku, Tokyo Phone Listed On +813-5775-5233 First Section of the Tokyo Stock Exchange Established Exchange Listing June 2017 (TSE Mothers) June 2013 August 2019 (TSE1) Website Financial Year-End https://gamewith.co.jp/en May IR Contact IR Web https://gamewith.co.jp/en/contact?type=ir https://gamewith.co.jp/en/ir

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Advance Create Co., Ltd. Doshisha Corporation KFC Holdings Japan, Ltd. ROUND ONE Corporation ADJUVANT COSME JAPAN CO., LTD. Dream Incubator Inc. KI-Star Real Estate Co., Ltd. RYOHIN KEIKAKU CO., LTD. Aeon Delight Co., Ltd. Earth Corporation KLab Inc. SanBio Company Limited Aeon Fantasy Co., Ltd. Edion Corporation Kondotec Inc. SANIX INCORPORATED Ai Holdings Corporation Elecom Co., Ltd. Kumiai Chemical Industry Co., Ltd. Sanrio Company, Ltd. AI inside Inc. en Japan Inc. Lasertec Corporation SATO HOLDINGS CORPORATION AirTrip Corp. Estore Corporation. Locondo, Inc. SBS Holdings, Inc. and factory, inc. euglena Co., Ltd. LUCKLAND CO., LTD. Seikagaku Corporation ANEST IWATA Corporation FaithNetwork Co., Ltd. Marumae Co., Ltd. Seria Co.,Ltd. AnGes Inc. Ferrotec Holdings Corporation MATSUI SECURITIES CO., LTD. Serverworks Co.,Ltd. Anicom Holdings, Inc. FIELDS CORPORATION Media Do Co., Ltd. SHIFT Inc. Anritsu Corporation Financial Products Group Co., Ltd. Medical System Network Co., Ltd. Shikigaku Co., Ltd Apaman Co., Ltd. First Brothers Col, Ltd. MEDINET Co., Ltd. SHIP HEALTHCARE HOLDINGS, INC. ARATA CORPORATION FreeBit Co., Ltd. MedPeer,Inc. SIGMAXYZ Inc. Artspark Holdings Inc. Gamecard-Joyco Holdings, Inc. Mercuria Investment Co., Ltd. SMS Co., Ltd. AS ONE CORPORATION GameWith, Inc. Metaps Inc. Snow Peak, Inc. Ateam Inc. GCA Corporation Micronics Japan Co., Ltd. Solasia Pharma K.K. Aucfan Co., Ltd. Good Com Asset Co., Ltd. MIRAIT Holdings Corporation SOURCENEXT Corporation AVANT CORPORATION Grandy House Corporation Monex Goup Inc. Star Mica Holdings Co., Ltd. Axell Corporation GiG Works Inc. MORINAGA MILK INDUSTRY CO., LTD. Strike Co., Ltd. Azbil Corporation Hakuto Co., Ltd. Mortgage Service Japan Limited. SymBio Pharmaceuticals Limited AZIA CO., LTD. Hamee Corp. MRT Inc. Synchro Food Co., Ltd. AZoom, Co., Ltd. Happinet Corporation NAGASE & CO., LTD TAIYO HOLDINGS CO., LTD. Base Co., Ltd Harmonic Drive Systems Inc. NAIGAI TRANS LINE LTD. Takashimaya Company, Limited BEENOS Inc. HENNGE K.K. NanoCarrier Co., Ltd. Take and Give Needs Co., Ltd. Bell-Park Co., Ltd. Hosokawa Micron Corporation Net Marketing Co., Ltd. TEAR Corporation Benefit One Inc. Hope, Inc. Net One Systems Co.,Ltd. Tenpo Innovation Inc. B-lot Co.,Ltd. HOUSEDO Co., Ltd. Nichi-Iko Pharmaceutical Co., Ltd. 3-D Matrix, Ltd. Broadleaf Co., Ltd. H2O Retailing Corporation Nihon Denkei Co., Ltd. The Hokkoku Bank,Ltd. CanBas Co., Ltd. IDOM Inc. Nippon Koei Co., Ltd. TKC Corporation Canon Marketing Japan Inc. IGNIS LTD. NIPPON PARKING DEVELOPMENT Co., Ltd. TKP Corporation Career Design Center Co., Ltd. i-mobile Co.,Ltd. NIPRO CORPORATION Tsuzuki Denki Co., Ltd. Carna Biosciences, Inc. Inabata & Co., Ltd. Nisshinbo Holdings Inc. TOCALO Co., Ltd. CARTA HOLDINGS, INC Infocom Corporation Nisso Corporation TOKAI Holdings Corporation CERES INC. Infomart Corporation NS TOOL CO., LTD. Tokyu Construction Co., Ltd. Chiyoda Co., Ltd. Intelligent Wave, Inc. OLBA HEALTHCARE HOLDINGS,Inc. TOYOBO CO., LTD. Chori Co., Ltd. ipet Insurance CO., Ltd. OHIZUMI MFG. CO., LTD. Toyo Ink SC Holdings Co., Ltd Chugoku Marine Paints, Ltd. Itochu Enex Co., Ltd. Oisix ra daichi Inc. Toyo Tanso Co., Ltd. cocokara fine Inc. ItoKuro Inc. Oki Electric Industry Co., Ltd Tri-Stage Inc. COMSYS Holdings Corporation JAFCO Co.,Ltd. ONO SOKKI Co., Ltd. TSURUHA Holdings COTA CO.,LTD. JMDC Inc. ONWARD HOLDINGS CO.,LTD. VISION INC. CRE, Inc. JSB Co., Ltd. Pan Pacific International Holdings Corporation VISIONARY HOLDINGS CO., LTD. CREEK & RIVER Co., Ltd. JTEC Corporation PARIS MIKI HOLDINGS Inc. World Holdings Co., Ltd. Daiichi Kigenso Kagaku Kogyo Co., Ltd. J Trust Co., Ltd PIGEON CORPORATION YELLOW HAT LTD. Daiseki Co., Ltd. Japan Best Rescue System Co., Ltd. P3, inc. YOSHINOYA HOLDINGS CO., LTD. Demae-Can CO., LTD JINS HOLDINGS Inc. QB Net Holdings Co., Ltd. ZAPPALLAS, INC. DIC Corporation JP-HOLDINGS, INC. RACCOON HOLDINGS, Inc. Digital Arts Inc. KAMEDA SEIKA CO., LTD. Raysum Co., Ltd. Digital Garage Inc. Kanamic Network Co.,LTD RESORTTRUST, INC. kaonavi, inc. Attention: If you would like to see companies you invest in on this list, ask them to become our client, or sponsor a report yourself.

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