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IR Top Page > Financial Information > Financial Review

Financial Review (Japan GAAP)

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(as of February 4, 2020)

Here we breakdown our consolidated business results for the nine months ended December 31, 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
52,908
million yen
( 13.6%
decrease YoY)
18,448
million yen
( 37.1%
increase YoY )
18,702
million yen
( 38.1%
increase YoY )
13,065
million yen
( 42.3%
increase YoY )
122.39 yen

Net sales (cumulative)

Operating income (cumulative)

Ordinary income (cumulative)

Net income attributable
to owners of the parent (cumulative)

During the nine months ended December 31, 2019, advances in the communications environment provided a backdrop for new momentum in the sector as a spate of IT giants entered the market, including U.S.-based Apple with its Apple Arcade game subscription service, along with a new cloud-based game streaming service from Google.

In such an environment, in addition to focusing resources on the development and sales of home video game software, which is the source of our competitive advantage, the Company enhanced our development structure by bolstering our developer workforce and workplace environment. In such a situation, Monster Hunter World: Iceborne (for PlayStation 4 and Xbox One), our flagship title for the current fiscal year that launched in September, shipped over 3.2 million units worldwide, supported by consistent popularity. In addition, profit improved due to the continued popularity of major catalog titles, particularly in overseas markets, and the growth of highly profitable digital download sales.

Meanwhile, the Company released Shinsekai: Into the Depths, a highly-creative new title for the Apple Arcade game subscription service, in a bid to promote our multi-platform business strategy. In addition, the Company opened its first dedicated retail store in Shibuya Parco to capitalize on synergies with our popular game titles, offering exclusive and limited-edition merchandise. Further, the Company remained committed to building a new business model by working on initiatives to put on track our eSports Business Division, which has garnered attention for its future growth potential. These initiatives included holding events in Japan, such as Street Fighter League: operated by RAGE, and in the U.S., such as Capcom Cup 2019, the world championship tournament that caps the Capcom Pro Tour.

Aside from these initiatives, the Company worked to give back to society by engaging in ESG-related activities. These included characters from our Monster Hunter series being selected as mascots for the Osaka Prefectural Police’s cyber-crime prevention awareness program, which contributed to building awareness of online safety among the youth demographic.

The resulting net sales for the nine months ended December 31, 2019 were 52,908 million yen (down 13.6% from the same term in the previous fiscal year), the decrease due in part to promoting the shift from physical package sales to digital sales. In terms of profitability, profit improved at all levels due to the contribution of the hit title Monster Hunter World: Iceborne, primarily sold digitally, as well as to an increase in the percentage of highly profitable digital sales within catalog title sales. Specifically, operating income was 18,448 million yen (up 37.1% from the same term in the previous fiscal year), ordinary income was 18,702 million yen (up 38.1% from the same term in the previous fiscal year), and net income attributable to the owners of the parent was 13,065 million yen (up 42.3% 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 segment, Monster Hunter World: Iceborne (for PlayStation 4 and Xbox One) delivered solid sales and served as the key driver of profitability growth owing to a focus on high-margin digital sales. Further, healthy sales of catalog titles also boosted profit. Specifically, Resident Evil 2 (for PlayStation 4, Xbox One and PC) and Devil May Cry 5 (for Xbox One, PlayStation 4 and PC), both released in the previous fiscal year and recipients of an Award for Excellence at the Japan Game Awards: 2019, saw continued growth in sales buoyed by a growing user base. Monster Hunter: World (for PlayStation 4, Xbox One and PC), which was launched in January 2018, also continued to display its long sales life.

The resulting net sales were 40,589 million yen (down 15.2% from the same term in the previous fiscal year ) due to an increase in the percentage of digital sales. Operating income was 19,885 million yen (up 30.1% from the same term in the previous fiscal year) due to successfully revising the earnings structure and contributions from Monster Hunter World: Iceborne and 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 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."

During the period under review the total number of stores reached 40 with the opening of Capcom Store Tokyo in Shibuya Parco (Tokyo), a dedicated retail shop that sells character merchandise and represents a new business endeavor for Capcom, as well as two new arcades: Plaza Capcom Ikebukuro (Tokyo) and Plaza Capcom Fujiidera (Osaka).

The resulting net sales were 9,201 million yen (up 13.8% from the same term in the previous fiscal year) and operating income was 1,187 million yen (up 36.6% 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 in which the shrinkage of the game machine market shows no signs of stopping, mainly due to the revision in pachislo model certification methods, the Company did not launch any new models and instead focused on business from licensing.

The resulting net sales were 663 million yen (down 79.5% from the same term in the previous fiscal year), although the Company secured an operating income, albeit small, of 376 million yen (an operating loss of 639 million yen for the same term in the previous fiscal year) supported by the licensing business.

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 2,453 million yen (up 16.7% from the same term in the previous fiscal year) and operating income was 358 million yen (down 63.5% 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 third quarter increased by 6,466 million yen from the end of the previous fiscal year to 129,874 million yen. The primary increases were 7,629 million yen in cash on hand and in banks and 8,853 million yen in work in progress for game software. The primary decrease was 7,803 million yen in notes and accounts receivable - trade.

Liabilities

Total liabilities as of the end of the third quarter decreased by 2,153 million yen from the end of the previous fiscal year to 32,505 million yen. The primary decrease was 1,973 million yen in accrued income taxes.

Net assets

Net assets as of the end of the third quarter increased by 8,619 million yen from the end of the previous fiscal year to 97,369 million yen. The primary increase was 13,065 million yen in net income attributable to owners of the parent. The primary decrease was 4,270 million yen in dividends from retained earnings.

3. Forecast and Outlook

As of February 4, 2020, the forecast for the consolidated business results for the current fiscal year ending March 31, 2020 have been revised.

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

(million yen)

  Net sales Operating income Ordinary income Net income attributable to owners of the parent Earnings per share (yen)
Previous forecast (A) 85,000 20,000 19,500 14,000 131.15
Revised forecast (B) 80,000 22,000 22,000 15,500 145.20
Difference (B) - (A) (5,000) 2,000 2,500 1,500 -
Difference (%) (5.9) 10.0 12.8 10.7 -
(For Reference)
Actual ended Mar. 31, 2019
100,031 18,144 18,194 12,551 115.45
Reason for the revision

In our outlook for our full-year consolidated earnings for the fiscal year ending March 31, 2020, we expect consolidated net sales to dip below those of our previous forecast, despite expected unit sales being on par with the previous year, due to promoting the shift from traditional physical packaged sales to digital download sales.

Regarding profitability however, we have successfully executed our digital strategy, leveraging our wealth of IP: In addition to Monster Hunter: World, released two years ago, high-margin catalog titles such as Resident Evil 2 and Devil May Cry 5, both released last fiscal year, have performed well, while other classic titles that enjoyed popularity in the past continued to boast resilient sales.

This, along with strong orders for Shin Onimusha Dawn of Dreams, a title from our Pachislo business that is scheduled for release in March of this year, has led us to expect to beat our initial plan.

As a result, we expect operating income, ordinary income and net income attributable to owners of the parent to all exceed our previous forecast.

At present there have been no changes to our dividend forecast in relation to the revisions to our full-year consolidated business forecast.

Previous forecast (announced May 7, 2019)

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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