SQUARE ENIX HOLDINGS CO., LTD.
FY2021/3 Financial Results Briefing Session Q&A
Date/Time: May 13, 2021 (Thu); 6:30-7:30 pm (JST)
Main Speaker: Yosuke Matsuda, President and Representative Director
Q: You have presented your medium-term net sales and operating income targets as ranges. What sort of factors could determine where the ultimate results fall within those ranges? Will it hinge on your pipeline, on whether you step up your live services, or on whether your recurring revenue grows? Also, how should we take the fact that you are looking for the same operating margin at both the upper and lower ends of the range?
A: How successful we are at creating tentpole IP with our HD games will be key and will serve as the foundation upon which we grow our sales via the business strategies that we have presented as the initiatives that will take us to our medium-term earnings targets. If we can establish a structure whereby our marginal cost falls as sales grow, we believe that further improvement in our operating margin should be possible. We will be working to improve our operating margin with a minimum target of around 15%.
Q: You said that FY2022/3 lineup would consist largely of new IP, but what specifically are you working on? Are you talking about multiple efforts like “Outriders?” Also, what has the response to “Outriders” been like?
A: It does not mean that we will necessarily be releasing more titles in the looter shooter genre like “Outriders.” We have yet to announce some of our forthcoming releases, so I hope you will look to us unveiling those in June and thereafter. In regards to the response to “Outriders,” while there were slight issues with bugs and the like on launch, we believe it has gotten off to a good start as a new IP. In addition, we have been pleasantly surprised as the digital sales ratio for the title have been very high, and the number of active users has also beaten our expectations. We believe that our decision to make “Outriders” available with Microsoft’s Xbox Game Pass as soon as the title launched also worked in our favor. (to build an installed base for the game)
Q: You are guiding for net sales to be roughly flat YoY in FY2022/3, but you expect your profits to decline. If we assume that you do not anticipate any major YoY change in your stable recurring earnings and that the Amusement segment should pick up versus the previous fiscal year, does it mean that you expect only a limited earnings contribution from your new HD game titles given that the lineup will consist largely of new IP?
A: Our guidance assumes a certain amount of risk, based on the fact that our FY2022/3 HD game lineup consists largely of new IP.
Q: What progress have you made on the strategic alliance you announced with Tencent in 2018? Can we expect to see any output from that over the next three years?
A: We are in ongoing communications with Tencent, and there are some projects that are underway, but I will refrain from commenting on any details at present, including in terms of any output over the next three years.