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Outline of Results Briefing by SQUARE ENIX HOLDINGS held on May 13, 2019

Outline of Results Briefing by SQUARE ENIX HOLDINGS held on May 13, 2019

SQUARE ENIX HOLDINGS CO., LTD.
FY2019/3 Financial Results Briefing Session Q&A

Date/Time: May 13, 2019 (Mon); 5:30-6:30 pm (JST)
Main speaker: Yosuke Matsuda, President and Representative Director


Q&A highlights

Q. What level of profits do you look for from the Games for Smart Devices/PC Browsers sub-segment in your FY2021/3 earnings forecast?

A. We expect sales of at least ¥100 billion and a margin in line with that of FY2019/3.

Q. How sales of your major titles trend swings your earnings. Do you take any measures to mitigate your risk of earnings volatility?

A. We reduce volatility risk by expanding our base of stable recurring revenue from sources such as digital downloads, e-commerce and the publication businesses.

Q. What specific moves are you taking to expand additional sales? Also, what does your FY2020/3 plan anticipate in terms of additional sales of the major titles you released in FY2019/3?

A. We are working to grow additional sales by engaging in sales and marketing efforts based on regional sales trends and customer preferences and by our sales and development teams coordinating to execute a variety of promotional initiatives. Our FY2020/3 plan takes a conservative view of additional sales of the major titles we released in FY2019/3. This view represents a significant reduction versus our original expectations.

Q. Is there any correlation between print sales and digital sales in the Publication segment?

A. The proportion of digital sales is on the rise in the Publication segment, but print sales are also growing. Readers are increasingly choosing to purchase the print version after having bought the digital version, so we do see a complementary relationship between the two.

Q. Could you tell us about the progress of your strategic alliance with the Tencent Group?

A. We are holding regular meetings. I have nothing I can announce at present, but once we reach agreement on a major project, we will make an announcement on it and brief to you.

Q. At the end of FY2019/3, the balance of your content production account was in excess of ¥50 billion. What do you think of the soundness of your assets?

A. We have determined them to be sound based on a careful examination of the asset value of each individual title. We also see our content production account as a driver necessary to our future growth. A rich content production account is the key to our growth.

Q. What do you think of the potential of new platforms that have been announced such as Google’s STADIA and Apple’s Apple Arcade? Also, how much of an earnings contribution do you expect from these services in FY2021/3?

A. While we see significant potential from game streaming, we believe the FY2021/3 earnings contribution will be limited. Streaming will enable us to deliver our products and services to casual game players and players in regions where home consoles are not commonplace, so we initially look for growth in customer numbers, but we anticipate that achieving that in FY2020/3 will be impractical.

Q. Could you share your breakdown for your FY2020/3 outlook for the Digital Entertainment segment?

A. We take a conservative view on additional sales of HD games released in FY2019/3. For the MMO sub-segment, we look for growth in both sales and profits given the release of expansion packs. We are also targeting sales and profit growth for the Games for Smart Devices/PC Browsers sub-segment, which we hope to achieve through the full-year earnings contribution by last December’s launch “Romancing SaGA Re;univerSe” and through added earnings from new FY2020/3 releases such as “LAST IDEA.”

Q. Did you post any licensing revenue in 4Q FY2019/3 in the Games for Smart Devices/PC Browsers sub-segment? Do you believe that you will likewise be posting licensing revenue in FY2020/3?

A. Licensing revenue was recognized in 4Q FY2019/3 as result of the receipt of the fee. We also look to book it in FY2020/3.