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Sony Q1 FY 3/2023 (Apr-Jun) Earnings Release

MarcoP90

Archivist

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Q1 FY2022 (year-on-year)
 Sales: 11.7 bln yen (2%) decrease (FX Impact: +57.9 bln yen)
·(ー) Decrease in sales of non-first-party titles including add-on content
·(ー) Decrease in sales of first-party titles
·(+) Impact of foreign exchange rates
 OI: 30.5 bln yen (37%) significant decrease (FX Impact: -4.8 bln yen)
·(ー) Impact of decrease in sales of non-first-party titles including add-on
content
·(ー) Impact of decrease in sales of first-party titles
·(ー) Increase in costs, mainly for game software development at existing
studios

FY2022 Forecast (change from May forecast)
 Sales: 40 bln yen (1%) downward revision
·(ー) Decrease in sales of non-first-party titles including add-on content
·(+) Impact of foreign exchange rates
 OI: 50 bln yen (16%) downward revision
·(ー) Impact of decrease in sales of non-first-party titles including add-on
content
·(ー) Negative impact of foreign exchange rates
·(ー) Increase in expenses* associated with acquisitions, mainly due to the
acquisition of Bungie, Inc. being completed earlier than the assumed
timing (approx. 13 bln yen increase: approx. 44 bln yen → approx. 57
bln yen)

Note: Regarding expenses associated with acquisitions completed within the current fiscal year, Sony has included the estimated impact of these acquisitions based on certain assumptions in the
forecast for the current fiscal year. However, the actual amount of expenses to be recorded in the current fiscal year is subject to change depending on factors such as the accounting treatment to be finalized after the closing dates.


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Sales are expected to be higher than the May forecast due to higher-than-expected sales in the Pictures, Entertainment, Technology & Services* and Music segments, partially offset by lower-than-expected sales in the Game & Network Services (“G&NS”) and Imaging & Sensing Solutions segments.
Operating income is expected to be lower than the May forecast due to an expected decrease in operating income in the G&NS segment.
Both income before income taxes and net income attributable to Sony Group Corporation’s stockholders are expected to be lower than the May forecast mainly due to the above-mentioned expected decrease in operating income.
* The former Electronics Products & Solutions segment has been renamed the Entertainment, Technology & Services (ET&S) segment effective from April 2022. This change has not resulted in any reclassification of businesses across segments.


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1 Hardware is revenue from game consoles such as PlayStation®4 and PlayStation®5.
2 Physical Software is revenue from first party game software for PlayStation® consoles sold on discs to retailers and royalties from third party software sold on discs.
3 Digital Software is revenue from full game downloads of both first and third party titles sold via the PlayStation™Store.
4 Add-on Content is revenue from digital content other than full games sold via the PlayStation™ Store, such as in-game currency, in-game items and expansion packages.
5 Network Services is revenue recognized through the PlayStation™Network of PlayStation®Plus, PlayStation™Now and advertising revenue. This does not include Game Software and Add-on Content revenue.
6 Others includes revenue from peripherals including PlayStation®VR and revenue from sales of first-party titles on platforms other than PlayStation® consoles.
7 Hardware units are disclosed on a sell-in basis.
8 Software unit sales include PlayStation®4 and PlayStation®5 software, including software bundled with PlayStation®4, PlayStation®5 and PlayStation®VR in all regions.
9 Full game software digital download ratio is calculated by dividing PlayStation®4 and PlayStation®5 full game software units sold via digital transactions by total full game software units.
10 Monthly Active Users is an estimated total number of unique accounts that played games or used services on the PlayStation™Network during the last month of the quarter and is based on company research, and may be updated in the future.

Presentation transcript


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• Next, I will explain the FY22 consolidated results forecast.
• Consolidated sales are expected to be 11 trillion 500 billion yen, 100 billion yen higher than the previous forecast and operating income is expected to be 1 trillion 110 billion yen, 50 billion yen lower than the previous forecast.
• Although Q1 results were higher than our previous forecast, uncertainties in the business environment from the second quarter onward remain, so we decided to maintain the full-fiscal year operating income forecast we announced in May for the five segments other than G&NS where we have revised our view as to the overall game market.
• Consolidated operating cash flow excluding the Financial Services segment is expected to be 820 billion yen, 230 billion yen lower than the previous forecast due to the incorporation of the actual results of Q1.
• The assumed foreign currency exchange rates have been updated to approximately 130 yen to the U.S. dollar and approximately 138 yen to Euro.

Current State of Business - Game & Network Services Segment (G&NS Segment)

Total gameplay time for PlayStation users declined 15% year-on-year in Q1. Gameplay time in the month of June improved 3% compared with May and was down only 10% versus June 2021, but this is a much lower level of engagement than we anticipated in our previous forecast.
• We believe the primary reason for this is that the growth of the overall game market has recently decelerated as opportunities have increased for users to go outside due to a reduction in COVID-19 infections in key markets.
• Taking this situation into account, we intend to take action to increase user engagement in the second half of the fiscal year, during which major titles including first party software are scheduled to be released, primarily by increasing the supply of PlayStation®5 (“PS5™”) hardware and promoting the new PlayStation Plus service.
• At this point in time, we have made no change to our 18 million unit sales forecast for PS5™ hardware in FY22, but since we are seeing a recovery from the impact of the lockdown in Shanghai and a significant improvement in the supply of components, we are working to bring-forward more supply into the year-end holiday selling season.
• Sony Interactive Entertainment LLC completed its acquisition of Bungie on July 15 of this year and collaboration between the two companies has begun.
• In addition, the acquisition of Haven Entertainment Studios, announced in March, was completed on June 27. In addition to enhancing the content development capability of our existing studios, we are working to strengthen our first-party software by creating new IP and accelerating the roll-out of live game services and multi-platform titles through synergies with the studios we have acquired.

Q&A transcript to follow later.
 
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