Even via summary, this is a lengthy article. As such, I’m giving you links to jump around in it, instead of just scrolling through it every time.

More will be discussed on this in the shareholder meeting that will be taking place on 12/20 at 1:30pm.

Falcom has released their numbers and offered a summary explanation for them.

In the 2015-2016 period:

Ys VIII: Lacrimosa of Dana was released for the PlayStation Vita in July 2016, as well as Tokyo Xanadu eX+ being released for the PlayStation 4 in September 2016.

Japan saw the release of licensed titles Sora no Kiseki SC Evolution, and Sora no Kiseki the 3rd Evolution, and the online game Akatsuki no Kiseki began its distribution. On top of this, this period also saw the English release of Trails of Cold Steel II, the Chinese and Korean language releases of Ys: Memories of Celceta, and the release of Ys VIII Lacrimosa in simplified Chinese. There have also been multiple collaborations with major game titles from this year.

Along with this information, Falcom has also announced three major plans for the 9/2016 ~ 9/2017 period.

The Kiseki series, with its breakthrough release of Sen no Kiseki and Sen no Kiseki II will see the release of its next title, Sen no Kiseki III

The highly anticipated PS4 release of Ys VIII -The Lacrimosa of Dana- will occur.

There will be an initiative for multiple releases, not only domestically, but for North America, Europe, and Asia, and Falcom will be participating in the development for various platforms, and smartphone titles to provide a more proactive stance with their contents.

More details are past the cut.

Financial Summary for Year Ending on Sept 2016

Total Sales Operating Profit Current Profit EOY Net Income 2016 ¥1,464,000,000

($13,180,000) ? 7.0 ¥584,000,000

($5,258,000) ? 15.7 ¥584,000,000

($5,258,000) ? 15.3 ¥386,000,000

($3,475,000) ? 15.2 2015 ¥1,575,000,000

($14,179,000) ? 38.0 ¥692,000,000

($6,229,000) ? 46.8 ¥689,000,000

($6,203,000) ? 47.1 ¥456,000,000

($4,105,000) ? 41.1

All conversions are approximations, and have been rounded accordingly.

Conversion rates valid as of 11/22/2016 @ 2:45pm Central Time

For the fiscal year ending in Sept 2016, Nihon Falcom has posted the above numbers. In the summary to explain the numbers, they have pointed out that both console and handheld markets are in the process of stabilizing in the Japanese market as of this time, and that the PlayStation 4 is finally beginning a wider expansion internationally.

Falcom has made a push over the past year to get software out for both the PlayStation Vita and the PlayStation 4. Tokyo Xanadu was released at the end of last year, but has continued to enjoy sales into this fiscal year. Also included in this year, Ys VIII Lacrimosa of Dana was released in July as part of the company’s 35th anniversary. Afterwards, Tokyo Xanadu eX+ was released to PlayStation 4 in September. Falcom also promotes the high value of Tokyo Xanadu, due to its awards over the course of 2016.

As the total sales also includes licensing and royalties, Falcom also brings up other titles published outside of the company using their IP. This includes Sora no Kiseki SC Evolution in December 2015 and Sora no Kiseki the 3rd Evolution in July 2016, both for the PlayStation Vita. Akatsuki no Kiseki, a browser based game developed for the 10th anniversary of the series, also had its service begin in 2016.

North America and Europe saw the English language releases both Trails of Cold Steel, Trails of Cold Steel II for PlayStation Vita and PlayStation 3. Ys is also brought up, as continued sales of the Steam releases helps expand the awareness of the brand and series throughout English language gamers.

For the Asia territories, the Chinese and Korean versions of both Sora no Kiseki FC Evolution and Ys Memories of Celceta were released for PlayStation Vita. Furthermore, Ys VIII -Lacrimosa of Dana- was also released in simplified Chinese in August 2016.

Other collaborations include licensed additions to Phantasy Star Online 2 (from Sega), Lodoss War Online (from Game-On), Taiko no Tatsujin (from Namco), Monster Hunter Frontier (from Capcom), and Emil Chronicle Online (from Gung Ho Online Entertainment).

Earnings Forecast for the Period Ending in 9/2017

In million yen increments.

Total Sales Operating Profit Current Profit EOY Net Income 2017 1,800 ? 22.9 750 ? 28.4 750 ? 28.3 500 ? 29.2 2016 1,464 ? 7.0 584 ? 15.7 584 ? 15.3 386 ? 15.2

When writing about the forecast of the series, the first thing Falcom mentions is, unsurprisingly the upcoming release of The Legend of Heroes Sen no Kiseki III. The series, as a whole, has won the company numerous awards, including various Famitsu Awards, and the Users Choice Award from the PlayStation Awards on a repeated basis. As such, they state that the series, holds a great deal of value with the company and has sold over 9 million copies over all of the games and their releases.

Ys VIII -Lacrimosa of Dana- is also scheduled to see a PlayStation 4 release in the 2016-2017 fiscal year, as well.

In terms of licensing, they point out that brand recognition outside of Japan is getting stronger, and as such that they intend to play a more proactive role in the the licensing and release of their titles and property on various platforms and smartphones across the globe.

Financial Condition

Assets for the company have increased 299 million yen, to a total of 4,155 million yen, from the previous fiscal year. This is primarily caused by an increase of 759 million yen towards cash on hand, and a decrease of 448 million yen with accounts receivable.

The debts for this year have decreased 15 million yen to a total of 315 million yen. The primary causes for this are a decrease of 84 million yen in accounts payable, and an increase of 67 million yen in unpaid corporation taxes.

As a result, the company’s net worth has increased by 314 million yen at end of the fiscal year last year, to total up to 3,840 million yen. The causes for this would include the allotment of 71 million yen in dividends and a net profit of 386 million yen.

Falcom is very upfront on the sorts of risks that an investor will be encountering when considering stocks in the company. The risks included are the nature of the nature of the marketplace- Falcom’s income is very dependent on the goods they produce, so their earnings may fluctuate during the year based on market and whether or not a game has been released in that quarter.

Other risks include concerns from development times. While the average range is six months at its shortest to 2-3 years at its longest, technological innovations can interfere with development and lengthen these time periods. Intellectual property issues were also brought up, as there can be challenges in processing copyrights and the more that Falcom cooperates with third-parties, the greater the chances of IP infringements. They have also mentioned that the process of hiring and training new employees can constitute a risk with the company.

These aren’t the only risks. There are other risks that are outside of the company that can impact its value. Legislation, for example, can interfere with game development, especially if laws are put into place to impact the digital marketplace in Japan. Another risk comes in the form of game piracy- if it goes out of control on any of the titles, they will run into an issue of lost sales opportunities due to illegal copies being out on the marketplace. The last that’s brought up would be issues involving personal information. As the company interacts directly with the marketplace there is always the risk of hacking or the leak of personal information, which could damage the trust Falcom has with their customers and turn funds towards repairing this and handling any caused damages.

Falcom has also talked about the profit sharing policies that they have for their shareholders, and that they take careful considerations for the dividends that they pay out. They have also revealed that this year, it has been decided that shareholders will receive 7 yen per share of company stock that they own.

Operational Policies

Falcom addresses multiple topics when speaking about the management policies for the company. The foundation of the company’s management style seeks to maximize originality and high quality game content through creative staff members and effective teamwork. They also seek to utilize efficient management processes to help drive the creativity and staff members, as this kind of operation can help increase the amount earned through sales numbers.

When speaking about their long-term business strategies, they speak of an ‘attack and defend’ strategy that the company has held since its inception- ‘attack’ as in challenging themselves while creating new works to the game industry, and ‘defend’ from the risks that come about as they deal with issues related to development times, ensuring quality titles, and managing human resources. With a solid foundation, they can manage with the issues thrown at them.

Detailed Financial Summary

These are the various tables involved with the financial information of the company. Included in this section is the primary balance sheets that shows how they got to the numbers above.

Balance Statement

In thousand yen increments

Prev. Year (2015) Current Year (2016) Property Division Current Assets Cash on Hand 3,052,949 3,812,687 Accounts Receivable 586,647 137,653 Manufactured Goods 2,487 1,301 Raw Materials 3,807 1,994 Prepaid Expenses 4,541 4,399 Deferred Tax Assets 34,497 36,598 Misc. 1,286 1,281 Current Assets Sum 3,686,216 3,995,916 Fixed Assets Tangible Property Facilities Related Installations 16,281 16,281 Total Depreciation Amount 13,052 13,895 Facilities Related Installations

(Net Amount) 3,229 2,386 Tools, Equipment, and Furnishings 27,977 27,977 Total Depreciation Amount 3,229 2,386 Tools, Equipment, and Furnishings

(Net Amount) 3,229 2,386 Fixed Assets Sum 7,389 4,564 Intangible Fixed Assets Software 4,617 6,453 Telephone Permissions 757 757 Intangible Fixed Assets Sum 5,374 3,210 Assets from Additional Investments Security Investments 116,578 116,578 Deferred Tax Assets 9,722 4,927 Securities and Deposits 31,075 30,680 Sum of Assets from Additional Investments 157,375 152,185 Sum of Fixed Assets 170,139 159,961 Total Assets 3,856,356 4,155,977 Debt Division Current Liabilities Accounts Payable 107,330 22,952 Arrears 70,570 60,235 Accrued Expenses 14,551 14,332 Unpaid Corporate Taxes 83,053 150,838 Unpaid Consumption Taxes 29,502 41,108 Advances Received 7 2 Deposits 5,753 5,870 Reward Provisions 20,250 20,250 Sum of Current Liabilities 331,017 315,590 Total Debts 331,017 315,590 Net Worth Division Shareholder Equity Capital Stock 164,130 164,130 Capital Surplus Capital Reserve Fund 319,363 319,363 Sum of Capital Surplus 319,363 319,363 Profit Surplus Miscellaneous Profit Surplus Contingent Reserve 710,000 710,000 Transferred Profit Surplus 2,331,962 2,646,910 Sum of Profit Surplus 3,041,962 3,356,910 Treasury Stock 117 117 Sum of Shareholder Equity 3,525,338 3,840,286 Total Net Worth 3,856,356 4,115,887

Detailed Profit Statement

In thousand yen increments

Prev. Year (2015) Current Year (2016) Sales Sales of Manufactured Goods 770,537 817,068 Royalty Income 804,495 647,113 Total Sales 1,575,032 1,464,182 Cost of Sales Cost of Sales for Manufactured Goods 250,069 260,976 Cost of Sales for Royalty Income — 1,500 Total Cost of Sales 250,069 262,476 Total of All Sales 1,324,962 1,201,706 Sales and Administrative Costs Shipping and Freight Costs 9,343 10,603 Advertising Expenses 65,335 91,014 Promotional Costs 21,940 15,643 Executive Salary 51,786 50,822 Executive Bonus 3900 — Employee Salary and Wages 24,016 24,251 Bonuses 2,918 2,900 Sums Transferred into Bonus Reserves 2,353 2,295 Legal Costs 13,013 12,315 Hiring Costs 13,221 12,643 Utility Costs 1,196 878 Payment Handling 33,312 33,323 Supply Expenses 1,427 1,415 Travel Expenses 1,476 1,628 Communication Expenses (Postage) 752 585 Depreciation Costs 1,883 1,508 Research and Development 358,990 343,007 Miscellaneous 25,258 12,536 Sum of Sales and Administrative Costs 632,115 617.374 Operating Profit 692,807 584,331 Earnings from Outside the Business Interest Receipts 620 349 Dividend Receipts — 572 Excluded Profits from Unpaid Dividends 865 702 Sum of Earnings from Outside the Business 1,485 1,623 Costs from Outside the Business Losses from Foreign Exchange 4,431 1,576 Sum of Costs from Outside the Business 4,431 1,576 Special Costs Costs from Eliminating Fixed Assets 16 — Sum of Special Costs 16 — Current Income Before Taxes 689,846 584,378 Corporation, Municipal, and Enterprise Taxes 2009,492 194,777 Sum of Adjustments from Corporation Tax 24,198 2,693 Sum of Taxes 233,691 197,471 Current Net Income 453,154 386,907

Detailed Statement of the Cost of Sales of Manufactured Goods

In Thousand Yen Increments

Operation Section Previous Year (2015) Current Year (2016) Division Amount Ratio (%) Amount Ratio (%) I. Material Cost 219,847 87.9 225,991 87.0 II. Outsourcing Cost 30,239 12.1 33,737 13.0 SUBTOTAL 250,087 100.0 259,789 100.0 III. Inventory Count of Goods

at Beginning of Term 2,470 2,487 SUM TOTAL 252,557 262,277 IV. Inventory Count of Goods

at End of Term 2,487 1,301 Difference in Costs

of Goods 250,069 260,976

Document Regarding Fluctuations in Capital Stock

Document for Previous Fiscal Year (9/2014 ~ 9/2015) (In Thousand Yen Increments)

Shareholder Equity Sum of

Net Worth Capital

Stock Capital Surplus Profit Surplus Treasury

Stock Sum of

Capital

Stock Capital Reserve Misc. Profit Surplus Special Reserve Transferred Profit Surplus Current Term Balance 164,130 319,363 710,000 1,978,607 ?36 3,172,064 3,172,064 Change of Sums in Current Term Surplus Shares ?102,799 ?102,799 ?102,799 Current Net

Income 456,154 456,154 456,154 Treasury

Stock Profit ?80 ?80 ?80 Sum of Fluctuations

For the Current

Period — — — 353,354 ?80 353,274 353,274 Remainder at

the end of this

Period 164,130 319,363 710,000 2,331,962 ?117 3,525,338 3,525,338

Document for Current Fiscal Year (9/2015 ~ 9/2016) (In Thousand Yen Increments)

Shareholder Equity Sum of

Net Worth Capital

Stock Capital Surplus Profit Surplus Treasury

Stock Sum of

Capital

Stock Capital Reserve Misc. Profit Surplus Special Reserve Transferred Profit Surplus Current Term Balance 164,130 319,363 710,000 2,331,962 ?117 3,525,338 3,525,338 Change of Sums in Current Term Surplus Shares ?71,959 ?71,959 ?71,959 Current Net

Income 386,907 386,907 386,907 Treasury

Stock Profit — — Sum of Fluctuations

For the Current

Period — — — 314,948 — 314,948 314,948 Remainder at

the end of this

Period 164,130 319,363 710,000 2,646,910 ?117 3,840,286 3,840,286

Cash Flow Statement

In thousand yen increments

Prev. Year (2015) Current Year (2016) Cash Flow from Business Activities Current Net Income Before Taxes 689,846 584,378 Depreciation Costs 6,620 5,378 Reduction of Fluctuations of Reward Reserves

(? is decrease) ?1,500 — Interest and Dividend Receipts ?620 ?921 Loss from Elimination of Fixed Assets 16 — Reduction of Fluctuations in Sales Credit

(? is increase) 1,025,925 448,993 Reduction of Fluctuations in Inventory Assets

(? is increase) 733 2,999 Fluctuation Amounts of Other Assets

(? is increase) 394 479 Reduction of Fluctuations in Purchased Debts

(? is decrease) ?197,014 ?84,378 Reduction of Fluctuations of Arrears

(? is decrease) ?42,251 ?10,102 Fluctuation Amounts of Unpaid Taxes

(? is decrease) ?25,571 11,605 Fluctuation Amounts of Other Debts

(? is decrease) ?9,243 1,618 Subtotal 1,447,334 960,048 Amounts Received via Interests and Dividends 620 921 Amount Paid for Corporation Tax ?641,020 ?129,418 Cash Flow from Business Activities 806,934 831,552 Cash Flow from Investment Activities Expenses from the Value of Tangible Assets ?516 — Expenses from the Value of Intangible Assets ?491 ?387 Expenses from the Value of Investment Securities ?116,578 — Other — 63 Cash Flow from Investment Activities ?117,585 ?324 Cash Flow from Financial Activities Expenses from the Value of Treasury Stock ?80 — Dividend Payments ?101,664 ?71,489 Cash Flow from Financial Activities ?101,745 ?71,489 Increased Reduction in Cash and Cash Value Articles

(? is decrease) 587,603 759,738 Balance of Cash and Cash Value Articles at Start of Term 2,465,346 3,052,949 Balance of Cash and Cash Value Articles at End of Term 3,052,949 3,812,687

Other Related Information

Previous Fiscal Year: 10/1/2014 ~ 9/30/2015

Information on Manufactured Goods and Services

In thousand yen increments

Manufactured Goods Licensed Goods Total Amount Sales to Outside Clients 770,537 804,495 1,575,032

Regional Information – Total Sales

In thousand yen increments

Japan Asia North America Total 1,053,630 350,257 171,144 1,575,032

Information on Major Clients

In thousand yen increments

Client Name Total Sales Segment Name Konami Digital Entertainment 600,623 Game Development/Sales Changyou.com 255,360 Game Development/Sales Sony Computer Entertainment 226,463 Game Development/Sales Marvelous USA, INC 167,520 Game Development/Sales

This Fiscal Year: 10/1/2015 ~ 9/30/2016

Information on Manufactured Goods and Services

In thousand yen increments

Manufactured Goods Licensed Goods Total Amount Sales to Outside Clients 817,068 647,113 1,464,182

Regional Information – Total Sales

In thousand yen increments

Japan Asia North America Total 1,187,247 37,322 239,613 1,464,182

Information on Major Clients

In thousand yen increments

Client Name Total Sales Segment Name Konami Digital Entertainment 694,711 Game Development/Sales Sony Computer Entertainment 282,677 Game Development/Sales Marvelous USA, INC 156,151 Game Development/Sales

[ Falcom 2015/2016 End of Year Financial Report ]

[ Falcom’s End of Year Financial Supplementary Document ]

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