Fiscal 2018 Konami Group Interim Report April 1, 2017 – September 30, 2017 KONAMI HOLDINGS CORPORATION To Our Shareholders women, who year after year have shown an increasing tendency to focus their leisure activities on improving health and physical strength. Reflecting this growing interest in health consciousness, we are also seeing an increasing preference for sports. In addition to the aging of society, there has been a steady increase in customers engaging in activities to improve their personal appearance and a diversification of related needs and products. The gaming business is enjoying the ongoing growth of the gaming market amid the development and opening of new casino facilities as well as of integrated resorts (IR) that house casinos across the globe. At the same time, the gaming business is expected to benefit from an increased range of opportunities resulting from factors such as the legalization of slot machines that contain a I sincerely hope that this interim report finds our skill element, which helps address the issue of young shareholders prospering and in good health. people trending away from playing slots. The Japanese economy in which the KONAMI Group Due to a partial revision to the law, restrictions on operates continues to experience long-term recovery, with entrance times for minors have been relaxed and the improvements in corporate earnings and employment. number of customers bringing their families to arcades in Personal consumption is still weak, however. Meanwhile, shopping centers has increased. In addition, efforts aimed uncertainty persists in regard to politics and policies in at industry-wide market revitalization have led to the Europe and the United States, despite economies cultivation of new users and resulted in signs of recovery maintaining a steady pace in terms of recovery. in the amusement market. In the entertainment market, game content continues Under such circumstances, the Group has responded to diversify along with functional enhancement of various to customer needs in an appropriate manner. We will devices, including mobile devices and home video game continue to strive for unity as a group, responding quickly consoles. As for the game industry, we are keeping an eye to global changes and fulfilling shareholder expectations. on eSports, which brings the competitiveness of sports to Moving forward, we would like to ask for the continued gaming, as part of efforts to produce content that offers support of all our shareholders. customers new ways to enjoy themselves. In connection with the health and fitness industry, there is a growing trend toward health consciousness Takuya Kozuki throughout society, especially among senior citizens and President and Representative Director 1 Consolidated Financial Highlights Figures indicated for fiscal 2014 conform to U.S. GAAP; those from fiscal 2015 onward reflect International Financial Reporting Standards (IFRS). Total Revenue Year-on-year Operating Prot Year-on-year increase increase (¥ billion) ■ Interim ■ Annual (¥ billion) ■ Interim ■ Annual 13.8% 46.4% 300 40 36.4 249.9 2,260 229.9 217.6 218.2 30 200 24.7 25.0 20 17.0 107.7 101.4 115.4 100 97.9 98.7 15.3 12.4 10 7.7 6.5 3.8 0 0 ’14 ’15 ’16 ’17 ’18 ’14 ’15 ’16 ’17 ’18 (Fiscal years ended/ending March 31) (Fiscal years ended/ending March 31) Prot Attributable to Owners of the Parent Year-on-year Total Revenue by Business Segment increase Amusement (¥ billion) ■ Interim ■ Annual % 40.6 ¥12.6 billion 30 26.0 Gaming & Systems Digital Entertainment 20 17.2 ¥12.6 billion 12.2 ¥57.8 billion 9.9 10.5 10 7.8 2.03.8 3.9 Health & Fitness 0 ’14 ’15 ’16 ’17 ’18 ¥33.0 billion (Fiscal years ended/ending March 31) 124 For the consolidated results for the six months ended September 30, 2017, total membership plans. These plans enable customers to select a pricing plan based revenue amounted to ¥115,356 million (a year-on-year increase of 13.8%), operating on the number of times they use our facilities and to use more than one facility. profit was ¥24,951 million (a year-on-year increase of 46.4%), profit before income We have intended to promote and expand the Konami Sports Club’s services taxes was ¥24,836 million (a year-on-year increase of 52.9%), and profit attributable supporting the concept of “sustainable fitness.” to owners of the parent was ¥17,180 million (a year-on-year increase of 40.6%). In our Gaming & Systems Business, we have promoted sales of Concerto, a In the Digital Entertainment Business, mobile games such as JIKKYOU key product of the video slot machine series, the long-selling Podium series, and PAWAFURU PUROYAKYU, Yu-Gi-Oh! DUEL LINKS, PROFESSIONAL the SYNKROS casino management system mainly in the U.S., Asian, and BASEBALL SPIRITS A (Ace), and Winning Eleven 2017 (known overseas as PES Oceanian markets. 2017 - Pro Evolution Soccer 2017 -) continued to perform favorably. As for card In our Amusement Business, we began operation of the MAH-JONG FIGHT games, we continued global development of the Yu-Gi-Oh! TRADING CARD CLUB HIGH-GRADE MODEL arcade game and NOSTALGIA FORTE music GAME series and held an international tournament in Japan, combining it with game, which have continued to operate steadily. As for pachislot machines, G1 the Yu-Gi-Oh! DUEL LINKS mobile game tournament, which went forward as an Derby Club, which was launched in the previous fiscal year, has maintained its eSports event. In computer and video games, we began sales of Winning Eleven high-ranking level of long-term stable operation among the regulation 5.5 2018 (PES 2018 - Pro Evolution Soccer 2018 -), to favorable reception. pachislot machines that were adapted to meet new standards, and has performed In our Health & Fitness Business, we continued to develop our pricing and strongly, underpinned by additional orders and favorable market reviews. For more detailed financial data, please visit the KONAMI website and go to the Financial Information page. https://www.konami.com/ir/en/ 2 Topics Digital Entertainment Health & Fitness A Number of Introductions of the Latest Installments of Popular Series Reviving the Sports Club Brand XAX Exhibit at TOKYO GAME SHOW 2017 “ Creating a comfortable space for the mind and body in your town” In September, KONAMI introduced a number of representative content at its exhibit at TOKYO GAME Konami Sports Club has revived the XAX brand, a former SHOW 2017—the largest game festival in Japan. pioneer in the sports club industry that has always been In addition to playable versions of global content such ahead of the times, opening the first facility—XAX as METAL GEAR SURVIVE and Winning Eleven 2018 Nishikujo (Konohana-ku, Osaka Prefecture)—in July with (PES 2018 - Pro Evolution Soccer 2018 -), the newest XAX Kanadenomori (Narashino City, Chiba Prefecture) installment in the Winning Eleven series, we also provided following in October. visitors with a brief virtual reality (VR) trial for the newest Both locations have been rebranded as XAX Sports installment of our LovePlus dating simulation series— Spots under the concept of “creating a comfortable LovePlus EVERY—which was well received. space for the mind and body in your town.” We are Also, in accordance with visitor votes and review developing the brand as fitness clubs suited to the times meetings held by the selection committee, the LovePlus and their locations with the aim of creating sports clubs EVERY products introduced and displayed at TOKYO that are comfortable places for customers to engage in GAME SHOW 2017 were presented with a Japan Game sports every day. To that end, we offer multipurpose Award for 2017 in the future division for highly rated support and training. products that are yet to be released. Konami Sports Club will continue to encourage cheerful enjoyment of sports and to be a total health partner to our customers. 3 Topics Gaming & Systems Amusement SYNKROS Finding the Strongest Competitor in QUIZ MAGIC ACADEMY Resorts World Bimini Implementation QMA Japan Tour 2017 Genting Americas, a large-scale resort facility manager, KONAMI is holding nationwide eSports tournaments— has decided to implement KONAMI’s casino management QMA Japan Tour 2017—for the arcade game QUIZ system—SYNKROS—at Resorts World Bimini on North MAGIC ACADEMY: THE WORLD EVOLVE. More than Bimini Island in the Bahamas. 700 amusement facilities from all over Japan have been The casino management system conducts real-time competing in this user-based tournament, with KONAMI management of customer and accounting information as supporting the customers and arcades sponsoring it. well as information on slot machines installed in casinos. There are many categories for people of all ages, By analyzing information stored within the system, a wide including the Young Wizards’ Cup, which is for those in range of tasks can be performed, including accounting university and younger. We approach each tournament and safety management, managerial decisions, and with excitement as they lead up to the final competition customer services. in the spring of 2018. KONAMI aims to further innovate its SYNKROS Through QMA Japan Tour 2017, KONAMI has not technology and continues to work toward daily only been able to reveal the charm of QUIZ MAGIC improvements in order to make facility management ACADEMY as a game that is both fun to play and watch smoother for casino operators. to ever more customers, it has been able to further Looking ahead, we are striving to become the top vitalize communication between amusement facilities company in the industry and respond to expected and customers. market diversification through our product appeal cultivated in worldwide markets. 4 KONAMI’s eSports Initiatives Further Development of Popular Content In eSports, games are treated as competitive sporting The PAWAPURO game and PROFESSIONAL BASEBALL events.