Outline of Results Briefing held on May 11, 2017

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SQUARE ENIX HOLDINGS CO., LTD.
FY2017/3 Financial Results Briefing Session Q&A

Date/Time: May 11, 2017 (Thurs) 6:00-7:00pm (JST)
Answerer: Yosuke Matsuda, President and Representative Director

Q&A

Q: Could you elaborate about your FY2018/3 earnings forecasts and your medium-term targets?

A: As regards our FY2018/3 earnings forecasts, I would note that the sales plan for the HD Games sub-segment is focused largely on titles for the Japanese market. The plan is a conservative one given the significant changes that have taken place in the Japanese market since the days when home consoles were the primary medium for game play. In terms of the medium-term targets, I will say that we are currently revisiting our pipeline with the objective of reaching our targets by around FY2020/3.

Q: Are the upper ends of your FY2018/3 forecast ranges conservative figures?

A: Our FY2018/3 earnings forecast figures are a bit conservative due to numerous uncertainties, including how market demand is likely to trend.

Q: How does your sales plan for “DRAGON QUEST XI” compared to that for the previous installment in the series?

A: It’s difficult to make a direct comparison given how different the market landscape is now compared to when we released “DRAGON QUEST IX,” which was back when home consoles were in their prime. Our plan is to leverage “DRAGON QUEST XI” to generate earnings across the DRAGON QUEST brand.

Q: Could you be more specific about your reasons for withdrawing from the IO Interactive A/S business?

A: Given the nature of the competitive landscape in the Western markets as well as other considerations, we decided we needed to concentrate our development resources. The decision to withdraw from that business was the result of a review of our Group’s allocation of both financial and human resources.

Q: Are you concerned that the release of “DRAGON QUEST XI” could cannibalize sales of existing titles in the DRAGON QUEST franchise?

A: We do not believe that releasing “DRAGON QUEST XI” will result in cannibalization. Given the high level of user satisfaction that each of our existing titles enjoys, we believe that their fans will continue playing them. In addition, we intend to bring excitement to the entire DRAGON QUEST franchise around the time we launch “DRAGON QUEST XI.”

Q: There is a ¥5 billion gap between the upper and lower ends of your FY2018/3 operating income forecast. Does that owe to your outlook for “DRAGON QUEST XI” sales?

A: That is the product of a multitude of factors and does not owe to any one title. Our outlook for “DRAGON QUEST XI” is conservative given changes in the market landscape and other considerations.

Q: Could you tell us how the launch of additional episodes of “FINAL FANTASY XV” has benefitted sales of the main title, and what purchase rates and margins look like?

A: We have not been able to calculate the impact of the episodes given that they’ve not been on the market that long. By releasing the additional episodes, we do expect to generate profits from the additional contents, but we also hope they will help raise purchase intent and extend the lifecycle of the product.

Q: “NieR:Automata” is a mid-sized title that has produced strong results. Will that have any impact on your strategy going forward, including the possibility of revisiting how you allocate your human resources?

A: In terms of the balance between in-house efforts and outsourcing, we intend to primarily develop our major franchises in-house and to outsource mid-sized titles. It is also important to cultivate new titles, and for that reason we are also thinking about how tie-ups with external companies can help balance our mix.

Q: Sales in the Games for Smart Devices/PC Browsers sub-segment rose by around ¥5bn between 3Q and 4Q FY2017/3. Could you tell what role existing titles, new titles, and overseas sales played in that growth?

A: That sales growth owed to greater sales overseas of titles such as “FINAL FANTASY BRAVE EXVIUS” and “KINGDOM HEARTS Union X," as well as to new titles such as “STAR OCEAN: anamnesis” and “DISSIDIA FINAL FANTASY: OPERA OMNIA.” We want to ramp up our offering of Japanese titles to the North American market going forward.

Q: Rankings for smartphone game apps suggest that sales of your existing titles are on a downtrend. What does your FY2018/3 plan assume about sales of existing titles?

A: We do not believe sales of our existing titles are on a downtrend. We are in the midst of implementing a variety of initiatives and engaged in operations that make sales growth possible.

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