Cash continues to flow at DeNA with FY11 Q2 net income up 7% yoy to $105 million

Japanese mobile social gaming company DeNA (TYO:2432), has announced its eighth consecutive set of record financial figures for its FY11 Q2, the three months ending September 30.

Net sales were ¥34.7 billion (around $450 million), up 28 percent year-on-year.

Operating income was ¥15.4 billion (around $200 million), up 13 percent year-on-year.

Net income was ¥8.2 billion (around $105 million), up 7 percent year-on-year.

However, all three indices were down compared to the FY11 Q1 quarter which ended 30 June.

It's the first time the company hasn't seen a consecutive quarterly increase in net sales for two years, suggesting domestic demand - although still massively profitable - may have peaked.

Indeed, broken down into sectors, sales in its core social media segment were actually down, if by less than 1 percent.

As can be seen below, operating margin as a percent of net sales also continued to drop for the fourth quarter in a row, although still a highly respectable 44.4 percent.

DeNA said Mobage now has 32 million subscribers, up from just under 30 million three months ago.

The company pointed to the increasing use of its Moba-coin virtual currency in Japan - up 11 percent to ¥37 billion (around $480 million), as well as the ongoing process of porting its feature phone games to smartphones.

Compared to 49 smartphone games released in Q1, 163 were released in Q2.

In the context of static sales, DeNA confessed its first party games in Japan hadn't monetised as well as they could have done, as the company had experienced delays to key IP as well as not releasing enough card-battle games, which are proving very popular.

Hence, it promised that at least 50 percent of its first party games would be card-battlers in Q4, while Q3 will see releases in this genre from Bandai Namco - including Gundam Card Collection - while RPGs such as Professor Layton Royale and a new Final Fantasy game will also be released.

When it came to global expansion, DeNA highlighted the beta launch of the English language version of Mobage for Android, and the release of the first games using the ngCore engine that's based on ngmoco's old Plus+ network.

It hopes the full version of Mobage Global will be released for Android in October, with an iOS version released before the end of 2011.

This will be backed by what DeNA calls an "aggressive marketing program", as it seeks to hit its longterm goal of generating $100 million Moba-coin transactions per quarter outside of Japan, with a target of $50 million during FY11 Q4.

Because of this expansion in Asia, Europe and the US, wage costs were up a whopping 286 percent year-on-year to around $9 million. And this will continue to rise as DeNA hope to add 600 development staff to its headcount over the coming months

But, the bottomline is DeNA continues to generate a lot of money, with cash flow from operating activities being ¥18 billion (around $235 million), up 26 percent year-on-year.

It ended the quarter with cash and cash equivalents of ¥66.5 billion (around $865 million), up around $200 million compared to the total three months ago.

[source: DeNA (PDFs 1/2)]