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I am Yosuke Matsuda. I will be discussing developments at each of our business segments as well as our future outlook.
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This slide tracks our operating income by quarter. We posted operating income of ¥8.9 billion in 1Q FY2017/3, but that figure dropped to ¥2.2 billion in 2Q. Let’s look at the factors behind the decline.
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Firstly, 2Q saw the amortization of the majority of the development costs for “DEUS EX: Mankind Divided,” a major title that we launched in Western markets on August 23. Given that the title was only on the market for a short time in 2Q, the amortization charges were heftier than the sales booked during the quarter. Secondly, the smart device titles we launched in 1H FY2017/3 have not performed to our expectations. Because the volume of titles we released was somewhat large, not all of them were as fully realized in terms of content and quality as they might have been. We intend to ensure that our titles are released in six-month ending March 31, 2017 (“2H FY2017/3”) in prime condition by engaging in user testing, soft launches, and beta testing. The operating income decline also owed in part to impact from titles for which we went ahead and posted valuation losses due to the way they were performing. The third factor was upfront marketing spending. We post smartphone game sales with a one-month lag. This means that while September marketing spending hits our books in September, the September sales generated from that spending are not booked until 3Q. The marketing spending is therefore being recognized earlier.
