Net Sales Down 10.8%, Operating Income Up 36.9% Year-Over-Year in
Consolidated Results for the Nine Months Ended December 31, 2017
– Profit margin improved in Digital Contents business;
launch of major title in Q4 on the horizon-

Capcom Co., Ltd. today announced that in its consolidated business results for the nine months ended December 31, 2017, net sales decreased to 47,740 million yen (down 10.8% year-over-year), operating income increased to 7,009 million yen (up 36.9% year-over-year), ordinary income increased to 7,099 million yen (up 71.2% year-over-year), and net income attributable to owners of the parent increased to 4,439 million yen (up 60.7% year-over-year).

In the nine months ended December 31, 2017, our core Digital Contents business had a strong performance, backed by titles such as Resident Evil 7 biohazard and Monster Hunter XX (Double Cross) Nintendo Switch Ver.; however, net sales decreased due to revising the new product launch schedule in our Amusement Equipments business following changes to the market environment. Despite this, profit increased due to profitability improvements in the Digital Contents business, putting Capcom on firm footing to achieve five consecutive years of operating income growth.

The forecast for the consolidated business results for the current fiscal year ending March 31, 2018 remains the same as what was projected at the financial results announcement on April 27, 2017.

1. Results for the 9 months ended December 31, 2017
(from April 1, 2017 to December 31, 2017)

2. Earnings forecast for the fiscal year ending March 31, 2018

3. Status of Each Operational Department

(1) Digital Contents

1. a. In this business, Resident Evil 7 biohazard (for PlayStation 4, Xbox One and PC) and Monster Hunter XX (Double Cross) Nintendo Switch Ver. (for Nintendo Switch) performed strongly, in addition to Ultra Street Fighter II The Final Challengers (for Nintendo Switch) becoming a smash hit. Meanwhile, sales of Marvel vs. Capcom: Infinite (for PlayStation 4, Xbox One and PC), which was launched in September 2017 targeting the European and US markets, tended to be soft.
2. b. In online games, Monster Hunter Frontier Z, a perennial favorite which underwent a major update commemorating its 10th anniversary, gave a solid performance. In mobile contents, amid business reforms including alliance strategies carried out by the Company to bring about a breakthrough in the business, Monster Hunter Explore remained steadily popular, as licensing revenue utilizing our IP also contributed to the increase in profits.
3. c. The resulting net sales were 30,844 million yen (up 8.5% from the same term in the previous year) and operating income was 6,257 million yen (up 328.2% from the same term in the previous year).
4. d. In the fourth quarter of the fiscal year ending March 31, 2018, the Company plans on an aggressive sales campaign with the release of its flagship title, Monster Hunter: World (for PlayStation 4 and Xbox One).

(2) Arcade Operations

1. a. In this business, the market was revitalized owing to the growing number of new users, including women and inbound tourists. Under these circumstances, the Company made efforts to secure repeat customers and acquire new customers, such as families with children, through various methods. These included installing machines that meet diverse customer needs, holding events and conducting service-day campaigns, as well as reducing arcade-operating costs.
2. b. During the period under review, the Company opened two new stores and closed one bringing the total number of stores to 37.
3. c. The resulting net sales were 7,632 million yen (up 8.0% from the same term in the previous year) and operating income was 815 million yen (up 33.4% from the same term in the previous year).

(3) Amusement Equipments

1. a. In the struggling Pachinko & Pachislo sub-segment, the Company was able to secure a certain amount of profit for Resident Evil: Revelations by lowering its cost of sales ratio. Meanwhile, despite the Company’s efforts to expand its contracted product development, the effects of the recent changes in model-testing methods could not be avoided and sales were weak.
2. b. In the Arcade Games Sales sub-segment, sales of Monster Hunter Medal Hunting G, a consistently popular medal game remained strong. Nevertheless, sales for this business overall were soft.
3. c. The resulting net sales were 7,711 million yen (down 53.5% from the same term in the previous year) and operating income was 2,128 million yen (down 60.7% from the same term in the previous year).

(4) Other Businesses

The net sales from Other Businesses, mainly consisting of royalty income from licensing and sale of character merchandise, were 1,552 million yen (up 9.5% from the same period in the previous year) and operating income was 758 million yen (up 34.8% from the same period in the previous year).