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IR Top Page > Financial Information > Financial Review

Financial Review (Japan GAAP)

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(as of August 1, 2019)

Here we breakdown our consolidated business results for the three months ended June 30, 2019 with graphs and diagrams.

1. Operating results overview

Net sales Operating income Ordinary income Net income attributable to owners of the parent Earnings per share of common stock
17,938
million yen
( 4.3%
increase YoY)
7,703
million yen
( 50.8%
increase YoY )
7,699
million yen
( 40.2%
increase YoY )
5,420
million yen
( 38.9%
increase YoY )
50.78 yen

Net sales (cumulative)

Operating income (cumulative)

Ordinary income (cumulative)

Net income attributable
to owners of the parent (cumulative)

During the three months ended June 30, 2019, with the tangible roll-out of the 5G era on the horizon, the industry saw a wave of structural changes coming in anticipation of new business opportunities. For example, IT giant Google unveiled its plan to enter the cloud gaming business (a market in which dedicated gaming consoles are unnecessary), while Microsoft also announced similar services.

In such an environment, the Company focused on improving our development structure, which is the source of our competitiveness, by concentrating management resources on the development of home video games in order to meet diverse customer needs both in Japan and abroad. At the same time, the Company endeavored to expand sales by focusing on marketing and promotion activities that are consistent with market trends, in addition to promoting its multi-platform strategy to provide games for a range of different hardware. The Company also advanced the selection and concentration of management resources through restructuring unprofitable businesses, such as scaling down the Arcade Games Sales sub-segment, as well as allocating funds and human resources to the eSports business, which has future growth potential. In such a situation, profit improved due to the continued popularity of major catalog titles overseas and the growth of highly profitable digital download sales.

As a result, for the three months ended June 30, 2019, consolidated net sales were 17,938 million yen (up 4.3% from the same term in the previous fiscal year). In terms of profitability, due to an increase in the percentage of highly profitable digital sales, operating income was 7,703 million yen (up 50.8% from the same term in the previous fiscal year), ordinary income was 7,699 million yen (up 40.2% from the same term in the previous fiscal year), and net income attributable to the owners of the parent was 5,420 million yen (up 38.9% from the same term in the previous fiscal year).

Status of business by operating segment

1. Digital Contents business

Net sales (cumulative)

Operating income (cumulative)

Operating margins (cumulative)

In this business, as the first quarter corresponded with a transition period between major titles in the overall release cycle, new game launches were limited to a select number of rerelease titles. However, driven by an expanded user base, sales continued to grow for Resident Evil 2 (for PlayStation 4, Xbox One and PC) and Devil May Cry 5 (for Xbox One, PlayStation 4, and PC), both of which are hit titles from the previous quarter. Flagship title Monster Hunter: World (for PlayStation 4, Xbox One and PC) has also continued to sell well over an extended period, supported by enduring popularity. These catalog titles boosted profit significantly by driving high-margin digital download sales.

The resulting net sales were 13,977 million yen (up 1.4% from the same term in the previous fiscal year) and operating income was 7,733 million yen (up 34.8% from the same term in the previous fiscal year) primarily due to contributions from catalog titles.

2. Arcade Operations business

Net sales (cumulative)

Operating income (cumulative)

Operating margins (cumulative)

In this business, the Company worked to secure a wide range of customers, including core users, repeat customers, and families through elaborately planned, community-based promotion activities, such as holding various events and conducting service day campaigns, under the banner of "the No. 1 arcade in the community."

As there were no new openings or closures of stores during the period under review, the total number of stores remained unchanged from the end of the previous fiscal year at 37.

The resulting net sales were 2,710 million yen (up 13.8% from the same term in the previous fiscal year) and operating income was 299 million yen (up 108.2% from the same term in the previous fiscal year).

3. Amusement Equipments business

Net sales (cumulative)

Operating income (cumulative)

Operating margins (cumulative)

In an environment of slow recovery in the gaming machine market, the Company did not launch any new model from its Pachinko and Pachislo sub-segment, focusing on its out-licensing business during the current quarter.

The resulting net sales were 225 million yen (down 40.1% from the same term in the previous fiscal year), however the Company did secure a slight return to profit, with operating income of 133 million yen (an operating loss of 154 million yen for the same term in the previous fiscal year).

4. Other Businesses

Net sales (cumulative)

Operating income (cumulative)

Operating margins (cumulative)

The net sales from Other Businesses, mainly consisting of royalty income from the licensing and sale of character merchandise, were 1,025 million yen (up 54.4 % from the same term in the previous fiscal year) and operating income was 640 million yen (up 55.6 % from the same term in the previous fiscal year).

2. Explanation of the consolidated financial position

Assets

Total assets as of the end of the first quarter decreased by 5,411 million yen from the end of the previous fiscal year to 117,996 million yen. The primary increase was 3,410 million yen in work in progress for game software. The primary decrease was 9,688 million yen in notes and accounts receivable - trade.

Liabilities

Total liabilities as of the end of the first quarter decreased by 8,093 million yen from the end of the previous fiscal year to 26,564 million yen. The primary decreases were as follows: 2,469 million yen in notes and accounts payable - trade, 2,188 in accrued income taxes and 1,207 million yen in accrued bonuses.

Net assets

Net assets as of the end of the first quarter increased by 2,682 million yen from the end of the previous fiscal year to 91,432 million yen. The primary increase was 5,420 million yen in net income attributable to owners of the parent. The primary decrease was 2,135 million yen in dividends from retained earnings.

3. Forecast and Outlook

The forecast for the consolidated business results for the current fiscal year ending March 31, 2020 remains the same as what was projected at the financial results announcement on May 7, 2019.

Earnings forecast for the fiscal year ending March 31, 2020
(From April 1, 2019 to March 31, 2020)

  Net sales Operating income Ordinary income Net income attributable to owners of the parent Net income per share
Year ending March 31, 2020 85,000 million yen
(15.0% decrease YoY)
20,000 million yen
( 10.2% increase YoY )
19,500 million yen
( 7.2% increase YoY )
14,000 million yen
( 11.5% increase YoY )
131.15

In our consolidated outlook for the fiscal year ending March 31, 2020, in addition to improvements in the Amusement Equipments business, we expect stable results primarily due to concentrating on digital sales of titles from the Consumer sub-segment of our Digital Contents business. Continuing to operate under our strategy for growth, we expect a decrease in net sales but an increase in profit because, while we expect cumulative unit sales of titles from our Consumer business to increase, per unit retail prices will be lower.

Our forecast calls for net sales of ¥85 billion (down 15% year-over-year); operating income of ¥20 billion (up 10.2% year-over-year); an operating margin of 23.5%; ordinary income of ¥19.5 billion (up 7.2% year-over-year), and net income attributable to owners of the parent of ¥14 billion (up 11.5% year-over-year).

In Consumer, we plan to further cement the global status of the Monster Hunter brand with the September 6 release of Monster Hunter World: Iceborne, a massive expansion. We will also work to further world-wide growth by focusing on catalog sales of Monster Hunter: World, Resident Evil 2 and Devil May Cry 5.

Outlook

The company expects an increasingly high-tech landscape, where high-resolution graphics and the adoption of AI (Artificial Intelligence) and VR (Virtual Reality) will enable greater realism and natural movement by characters in home video games.

As such, to generate synergy with its popular games via greater global brand awareness and value, the Company has been producing world-leading content, with brands such as Street Fighter and Resident Evil being made into Hollywood movies, now followed by Monster Hunter and Mega Man, which are also scheduled for live-action film adaptation. In recent years, as the domestic market matures, further efforts to increase sales in the larger overseas market have become essential to maintain sustained growth. The Company will, therefore, develop and sell titles that appeal to diverse customer needs, including games that are popular overseas, thereby enhancing customer satisfaction and ensuring its competitive advantage.

Moreover, in the fast-growing esports business, the Company, in addition to leveraging its abundant experience and operational knowhow accumulated over the years in the US, intends to make a full-scale entry into the market and gain a firm footing through the allocation of the necessary funds and human resources. Furthermore, by focusing its management resources in growth areas and priority divisions, as well as reinforcing existing divisions and downsizing and withdrawing from unprofitable divisions, the Company will rebuild its businesses in line with environmental changes. It will also aim for more cohesive business development and higher management efficiency while at the same time enhancing the corporate value of the entire Group by carrying out the business strategies and priority measures that utilize the Company's strengths.

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