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Outline of Results Briefing by SQUARE ENIX HOLDINGS held on November 7, 2018

Outline of Results Briefing by SQUARE ENIX HOLDINGS held on November 7, 2018

SQUARE ENIX HOLDINGS CO., LTD.
2Q FY2018/9 Financial Results Briefing Session Q&A

Date/Time: November 7, 2018 (Wed); 5:30-6:30 pm (JST)
On behalf of the company: Yosuke Matsuda, President and Representative Director


Q&A

Q: What pushed your content production account to ¥54.4 billion despite the partial disposition that contributed to the booking of the extraordinary loss?

A: This was because the content production account includes both major titles slated for launch in 2H and those under development for release in FY2020/3 and beyond.

Q: Did you book any valuation losses on contents other than the dispositions that contributed to the booking of the extraordinary loss?

A: We posted valuation losses on smart device and HD game title contents under cost of goods sold.

Q: Will the changes to the development organization at the Games for Smart Devices/PC Browsers sub-segment result in any one-off costs?

A: We do not expect any.

Q: Your peers will be releasing a string of major titles ahead of the holiday season. What are your expectations for sales of “JUST CAUSE 4,” which is scheduled for a December release?

A: We have high expectations for JUST CAUSE 4 because of the high quality of the finished game.

Q: How do you feel about your progress toward your full-year targets?

A: The progress we made in 1H was in line with our forecast.

Q: How will greater selectivity about new smart device titles change numbers of your titles going forward?

A: Compared to the pace of our releases to date, we will likely release fewer titles going forward.

Q: What can you tell us from a medium- to long-term perspective about the strategic alliance with Tencent that you announced at the end of August 2018?

A: Announcements on the nature of our alliance with Tencent will be forthcoming as soon as details are finalized. Tencent is strong in overseas markets as well, so we hope to collaborate with them globally.

Q: What kind of businesses do you currently anticipate rolling out in the subscription model context?

A: Nothing is finalized at present, but we hope to take advantage of subscription models while also growing full game downloads.

Q: What can you tell us about making titles available on STEAM?

A: STEAM is a major platform for PC games, and we are focused on making our titles available on it. We also reference the opinions of its user community, which we find to be very valuable.

Q: You have new titles coming out in 3Q and 4Q: What sort of operating income do you expect in each quarter?

A: We want to reach our earnings guidance on the back of new title sales. I will refrain from making any comment beyond that.

Q: Is it possible you could cut headcounts in conjunction with narrowing down the number of new titles you release for smart devices?

A: It will not directly lead to headcount reductions because we are planning on reassigning resources internally.

Q: How much will you be able to reduce development lead times by having Luminous Productions focus on major titles?

A: I cannot give you a quantitative answer, but we will reduce development lead times by revisiting our development organization and making effective use of game engines.

Q: Are smart device apps competing with each other for users’ playtime?

A: We have to admit that happens. In order to capture new users, we need to provide something that is new and fun. As such, we will be selective about the new titles we release for smart devices going forward.