Ryosuke Katsura

Ryosuke Katsura asked about the gaming segment's Q3 profitability decline compared to Q1 and Q2, attributing it to hardware promotions and memory procurement, and its implications for the full-year outlook and next term's countermeasures. He also sought details on the scale of I&SS measures factored into Q4 and the plan for the next year.

Answer

Corporate Executive Officer and CFO Lin Tao confirmed that the Q3 gaming profitability decline was primarily due to year-end hardware sales promotions, including the Japan domestic model, which is expected to contribute to mid-to-long-term lifetime value. She stated no extraordinary inventory plans for the fiscal year-end. Senior VP of Corporate Planning and Control Naoya Horii specified that I&SS factored approximately JPY 20 billion in one-time costs for resource and asset optimization into Q4.

Kyosuke Katsura asked about the gaming profit in Q3, which was lower compared to Q1 and Q2, seeking reasons such as domestic hardware promotion, global promotion, memory procurement for inventory, and the impact of first-party title postponement. He also inquired about the scale of I&SS measures (resource and asset optimization) factored into Q4.

Answer

Lin Tao, Corporate Executive Officer and CFO, attributed lower Q3 gaming profit to year-end hardware sales promotions (Japan domestic model and global), which, while impacting short-term profit, contribute to mid to long-term lifetime value. She stated no extraordinary inventory plans for the fiscal year-end. Naoya Horii, Senior VP of Corporate Planning and Control, specified that the I&SS measures involve accelerated depreciation/amortization of assets within the segment, with a one-time cost of approximately JPY 20 billion factored into Q4.

Ryosuke Katsura of SMBC Nikko Securities Inc. raised concerns about the profit sustainability of the G&NS and I&SS segments into the next fiscal year. He also asked about expectations for the next generation of management and for the company's engagement with capital markets.

Answer

Executive Kenichiro Yoshida addressed business sustainability, stating G&NS profits are supported by network services and a strong game pipeline, while I&SS growth will continue via larger sensors, with the smartphone market being a key variable. Regarding management, Executive Hiroki Totoki added that he has high expectations for the 'Internet native' next generation, who can leverage new technologies like AI to innovate products and work styles.

Ryosuke Katsura from SMBC Nikko Securities asked about the I&SS segment's outlook for major customers and competitive risks. He also inquired about the Financial Services segment's operating income progress and associated risks.

Answer

Executive Hiroki Totoki stated I&SS production was increased for high-end products and competitive risk is low for the MLP period. An executive from Sony Financial Group, Yamada-san, explained the segment's slow start was due to increased policy surrenders and disaster impacts, with market fluctuations remaining a key risk.

Asked about the planned inventory reduction for Q4, the outlook for inventory levels into the next fiscal year, and the financial forecast for business segments other than Games and Pictures.

Answer

The executive stated that Q4 inventory impact will be limited and levels will be flat or slightly up. For the next fiscal year, inventory will grow in line with top-line growth. For other segments in FY24, Music is expected to outpace market growth, and Finance is projected to have gradual, slow growth due to IFRS adoption costs. More details will be provided in the spring.