SEGA Sammy Q3 FY3/2025 Financial Results (Oct - Dec 2024) | Ordinary Income down by 13.9% vs 9m...

For the nine months ended December 31, 2024, although sales and ordinary income in the Entertainment Contents Business significantly increased, net sales and ordinary income fell from the same period in the prior year when "Smart Pachislot Hokuto No Ken" was a huge hit in the Pachislot and Pachinko Machines Business. The Group recorded an extraordinary loss of approximately ¥6.1 billion in the second quarter for the fiscal year due to the sale of overseas development studio, Amplitude Studios SAS through a management buyout. In contrast, as the Group was influenced by the rebound effect from the restructuring loss occurred in the prior year, and the Company recorded an extraordinary income by transfer of the shares of Phoenix Resort Co., Ltd., in the first quarter for the fiscal year, the profit attributable to owners of the parent resulted in an increase from the same period in the prior year.The provisional accounting treatment in the same period of the prior year was applied to the business combination withRovio Entertainment Corporation on August 17, 2023. Due to the finalization of provisional accounting treatment for business combination in the end of the prior year, all the numbers shown are reflected by the result of the finalization ofprovisional accounting treatment in terms of the comparison and analysis between the prior and current period of ninemonths ended for the fiscal year. With regard to future plans, the consumer and animation area in the Entertainment Contents Business are showing strong performance. As a result, each stage of profit up to ordinary income for the fiscal year ending March 2025 is expected to exceed the Company's business plan at the beginning of the fiscal year. In contrast, profit attributable to the owners of parent, as well as the adjusted EBITDA, which has been adopted as a management indicator from the current fiscal year, are expected to be lower than the Company's business plan at the beginning of the fiscal year due to recording the restructuring loss through the sale of overseas development studio as mentioned above, etc. For details, please refer to "Notice of Revision of Operating Results Forecast" announced on February 7, 2025.

« Entertainment Contents »
« Entertainment Contents »For the nine months ended December 31, 2024, both the consumer area and the animation area showed the strongperformance which had been continued from the second quarter of the fiscal year, and both sales and profit resulted in highly increased from the same period in the prior year. In the consumer area, the Group launched several major new titles this term. "Metaphor: ReFantazio" released inOctober, won three awards, including "BEST RPG", at "The Game Awards 2024", annual award held in Los Angels inthe U.S. last December, and its current sales are exceeding the Group's expectations at the beginning of the fiscal year. Additionally, "SONIC X SHADOW GENERATIONS" released in October, steadily increased its sales units andsurpassed 2 million units in global cumulative sales in January 2025. In repeat titles, the sales have also been favorable, driven by titles such as "Persona 5 Royal (Remaster)" and "Unicorn Overlord", etc.However, the Group has decided to cancel the development of "Football Manager 25", which was scheduled for release in March 2025. Due to the development cancellation, the Group recorded a loss in the third quarter bywork-in-process assets write-downs. This decision was made because, despite aiming the development for significant advancements in the standard series through the renewal and the addition of new features for the UI and graphics, it was determined that it would be difficult to ensure sufficient product quality expected by the March release. With carrying over the development assets to its sequel, the Group will continue development efforts to produce and serve higher-quality works.In the animation area, the "Sonic" series animations and other distribution income continued the strong performance.Regarding "Sonic" IP, the third movie, "Sonic the Hedgehog 3", released sequentially from December 20, has grossed arecord $460 million worldwide in the series. In light of these circumstances, it has been announced that the fourth movie is scheduled to be released in March 2027. Expecting that the revenue contribution from the third movie installment which will be evident in the next fiscal year and beyond, prioritizing Sonic IP, the Group has been achieving strategic deployment through games, films, and merchandise, thereby realizing the growth and maximization of the IP's value as part of the Group's Mid-term Plan's key theme of a transmedia strategy.In the amusement and toy area, prize category sales remained steady, but the Group continued to be affected by rising raw material prices due to the depreciation of yen.

With regard to future plans, in the consumer area, the Group plans to release "Like a Dragon: Pirate Yakuza in Hawaii", a new Full Game from one of our flagship IPs, in February and anticipates the steady trend of sales in repeattitles by Full Games. In the animation area, the distribution income through "Sonic" animation series continuously is expected. The distribution income through "SAKAMOTO DAYS", which is produced by the Group and currently serialized in Weekly Shonen Jump (published by Shueisha Inc.), is expected as well.

※ For new released titles, please see "Results Presentation Q2 for the fiscal year ending March 31, 2025"https://www.segasammy.co.jp/en/ir/library/

« Pachislot and Pachinko Machines »For the nine months ended December 31, 2024, sales and profit fell from the same period of the prior year when"Smart Pachislot Hokuto No Ken" was a huge hit. In contrast, several titles, including the key title of this term, "e Hokuto No Ken 10", released in the second quarter, exceeded the expectations and its sales performed steady compared to the Group's expectation at the beginning of the fiscal year.With regard to future plans, in the fourth quarter, the Group plans to release "Pachislot Kaidoumokushiroku Kaiji Kyouen" and "A-SLOT+ DISC UP ULTRAREMIX" for pachislot. For pachinko, the Group also plans to release several titles including "e SOUTEN-NO-KEN Raryu" and "e Shin Hokuto Muso Chapter 5 Dodeka START", which are equipped with the upgraded "Lucky Trigger" in response to the latest regulatory revision.Featuring the "Dodeka START" function on "e Shin Hokuto Muso Chapter 5 Dodeka START", which enhances gaming efficiency, the Group expects this title to contribute significantly to hall operations as competitors have demonstrated high operational performance by other titles with similar features. Through the launch of these titles, the Group forecasts to secure an ordinary income of ¥20 billion for the fiscal year ending March 2025.In the next fiscal year and beyond, the Group plans to release of new titles, including sequels to the well-received"Hokuto No Ken Chapter of Resurrection 2" and "Kabaneri of the Iron Fortress: The Battle of Unato", as well as titles collaborating with the hit animation "Tokyo Revengers" and "Lycoris Recoil". Through these initiatives, the Group aims to improve the combined operating share in the pachislot and pachinko market.

※ For new released titles, please see "Results Presentation Q2 for the fiscal year ending March 31, 2025"https://www.segasammy.co.jp/en/ir/library/

« Gaming business »
At the start of the New Medium-term Plan released in May 2024, the Company established the new "Gaming Business". In the Gaming Business, SEGA SAMMY CREATION INC. ("SSC") develops, manufactures, and distributes gaming devices, and PARADISE SEGA SAMMY Co., Ltd. (affiliate accounted for using the equity method), which is a joint venture with Paradise Co., Ltd. in South Korea, develops and operates the integrated resort facility,"PARADISE CITY". In November 2023, with the aim of entering the online gaming market, especially the U.S. iGaming market expected to continuous grow in the future, the Company concluded an agreement to acquire GAN Limited ("GAN"), which operates a B2B platform business mainly for the U.S. casino operators. In July 2024, the Company also announced the conclusion of an agreement to acquire Stakelogic B.V. ("Stakelogic"), a Netherlands-based company that develops B2BiGaming content supplier business. The Company is proceeding to complete the acquisition. For the nine months ended December 31, 2024, sales increased from the same period of prior year, and the ordinary income turned positive. The factors include the continued high operation and favorable sales of "Railroad Riches ™ ", compatible with the new video slot machine cabinet "Genesis Atmos®", receiving the high market evaluations and recording favorable sale. In"Paradise City" located in South Korea, the casino continued to maintain a high level of drop amounts (purchased amount of chips by customers at the table) from Japanese VIP customers, and casino sales recorded the highest quarterly value since its opening in the July-September quarter of 2024, contributing to profits through equity-method earnings. Additionally, hotel sales also performed well, with an occupancy rate of 84.6% in the same quarter, the highest since its opening.*PARADISE SEGASAMMY Co., Ltd. is recorded with a three-month delay due to its December fiscal year-end. With respect to the future, in the sale of gaming equipment, the Group released "Super Burst - Cartin' Gold ™ ",following "Genesis Atmos® " in the U.S., which has shown a promising start. With continuing to introduce gaming equipment highly evaluated in the market, the Group strives increasing the number of machines installed, developingnew customers, and acquiring new licenses. For "Paradise City", the Company expects to contribute to profits throughequity-method earnings, driven by continued strong casino sales centered on Japanese VIP customers.


Under the New Medium-term Plan, GAN will become a gaming service provider with comprehensive range of services by adding Stakelogic's unique content to its own B2B platform business, which is one of its strengths. By combining these services with SSC's customer network, the Group will create synergies and work to establish the gaming business as the Company's third business pillar. The Group received approval for merger with GAN from the Nevada Gaming Commission in the U.S. in October 2024, and is currently also proceeding with regulatory approvals in other countries and regions. The completion of GAN's acquisition was expected in the fourth quarter of the fiscal year ending March 2025, but considering the time required for the procedures from the initial forecast, it is now amended in the first quarter of the fiscal year ending March 2026. The completion of Stakelogic's acquisition is also expected in thefirst quarter of the fiscal year ending March 2026.

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FY2025/3 Q3 Results

➢ Strong performance overall due to strong performance in Entertainment*
• Strong performance centered on CS*2 and Animation area (Entertainment)
• Recorded loss associated with inventory write-down (CS)
• Steady performance (Pachislot & Pachinko)

Forecast

➢ Revised operating results forecasts
• Launch new titles in each segment

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FY2025/3 Q3 Results
➢ Strong performance as a whole
• Ordinary income exceeded initial forecasts due to factors including strong repeat sales in Full Game, as well as strong sales of Sonic’s cinematic works
• SONIC X SHADOW GENERATIONS and Metaphor: ReFantazio released in Q3 have been sold well
• Implemented inventory write-down associated with cancellation of Football Manager 25

Forecast
➢ Revised forecast upward due to strong performance of Full Game in CS and Animation
• Launch mainstay IP titles, expect steady repeat sales (CS)
• Expect strong performance in Animation area
• Continue to be impacted by raw material price hikes caused by weak yen (CS, AM & TOY)

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Results highlights

Forecast

Results for the Entertainment Content Business segment

Consumer Area: Sales trend (revenue and units)

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