Enix

Current Report No. 59/2023: Decision to Limit the Scope of Project Dagger – Correction

The correction clarifies a corporate decision by PCF Group S.A., headquartered in Warsaw, to temporarily limit the scope of its internally funded Project Dagger.

• PCF Group S.A. has suspended the AAA release schedule for Project Dagger, originally planned for the 2025–2026 window.
• The majority of the Project Dagger development staff is being reallocated to three other internal projects: Maverick, Bifrost, and Victoria.
• A core team of approximately ten members will remain on Project Dagger to redefine its development direction and create a new pre-production version based on external feedback.

Current Report No. 58/2023: Strategic Talks Regarding Project Gemini

The board of PCF Group S.A., headquartered in Warsaw, announced the initiation of strategic negotiations with long-standing group publisher Square Enix Limited concerning the development model and commercial terms of the Gemini game project.

• PCF Group S.A. has entered strategic negotiations with Square Enix Limited to redefine the development model and commercial terms for the 'Gemini' game project.
• The current 'Gemini' project is being executed under a work-for-hire arrangement, but the board anticipates a high probability that future delivery terms will diverge from the existing contract.
• As of 24 November 2023, PCF Group continues to develop the project according to the original contractual framework while negotiations are ongoing.

Financial Results: Six-Month Period Ended September 30, 2023

The financial results for the six-month period ending September 30, 2023, provide a comprehensive overview of Square Enix Holdings’ performance across its primary business segments.

• Square Enix reported a decline in profitability for the first half of FY2024/3, with operating income falling to 17.3 billion yen (a 8.7 billion yen decrease) and profit attributable to owners of the parent dropping to 16.6 billion yen (a 22.8 billion yen decrease) compared to the same period last year.
• Net sales for the six-month period ended September 30, 2023, reached 172.0 billion yen, representing an increase of 8.7 billion yen over the previous year's 163.3 billion yen.
• Total unit sales for Digital Entertainment grew to 12.17 million units in 1H FY2024/3, up from 9.41 million units in 1H FY2023/3, driven largely by a rise in digital downloads to 9.44 million units.

Square Enix Holdings Financial Results Briefing: Q1 FY2024/3

Square Enix Holdings reported mixed financial results for the first quarter of the fiscal year ending March 31, 2024.

• Square Enix reported Q1 FY2024/3 net sales of ¥85.6 billion, a year-over-year increase of ¥10.8 billion, but operating income fell by ¥11.4 billion to ¥3.0 billion.
• Profit attributable to owners of the parent dropped by ¥12.0 billion to ¥6.3 billion, primarily due to high upfront development and marketing costs for major titles.
• The Digital Entertainment segment generated ¥62.3 billion in net sales, driven by Final Fantasy XVI and the Final Fantasy Pixel Remaster series, though profitability was impacted by amortization and advertising expenses.

Półroczne Sprawozdanie Zarządu z Działalności Grupy Kapitałowej PCF Group S.A. i Spółki PCF Group S.A.: za okres 1.01.2023 – 30.06.2023

PCF Group S.A. underwent a significant strategic transition during the first half of 2023, shifting its focus toward self-publishing and Game-as-a-Service models while maintaining a robust global presence across Poland, North America, and Europe.

• PCF Group raised approximately 235 million PLN through Series F and G share issuances, securing Krafton, Inc. as a 10% anchor investor to fund its 2023–2027 growth strategy.
• The company reported a net loss of 13.1 million PLN on 68.7 million PLN in revenue, representing a 24% year-over-year decline in revenue.
• Revenue remains highly concentrated, with over 75% derived from a single work-for-hire contract with Square Enix and no royalty payments received for Outriders to date.

Square Enix Holdings Financial Results: Three-Month Period Ended June 30, 2023

Square Enix Holdings reported its financial results for the first quarter of the fiscal year ending March 31, 2024, reflecting a period of increased net sales but decreased operating and net income compared to the same period in the previous year.

• Square Enix reported a significant decline in Q1 FY2024/3 operating income to 3.0 billion yen, a 11.4 billion yen decrease year-over-year, despite a 10.8 billion yen increase in net sales to 85.6 billion yen.
• The Digital Entertainment segment saw net sales rise to 62.3 billion yen due to the launch of 'FINAL FANTASY XVI', but operating income for the segment plummeted by 11.4 billion yen, largely due to the amortization of development costs.
• Total unit sales for HD and MMO games reached 7.54 million units in Q1 FY2024/3, nearly doubling the 4.28 million units sold in the same period of the previous fiscal year.

Square Enix Financial Results Briefing: Fiscal Year Ended March 31, 2023

Square Enix Holdings reported a decline in financial performance for the fiscal year ended March 31, 2023.

Square Enix Holdings Financial Results: Fiscal Year Ended March 31, 2023

Square Enix experienced a challenging fiscal year ending March 31, 2023, characterized by a contraction in overall financial performance.

• Square Enix reported a decline in performance for the fiscal year ended March 31, 2023, with net sales falling to 343.2 billion yen and operating income dropping to 44.3 billion yen, down from 365.2 billion and 59.2 billion respectively in the prior year.
• The company's operating income margin contracted by 3.3 percentage points to 12.9%, while the total number of employees decreased by 925, ending the period at 4,712.
• Digital Entertainment, the company's primary segment, saw total sales decline to 245.5 billion yen, driven by a drop in both digital and packaged game sales compared to the previous fiscal year.

Report on Operations of the Capital Group and PCF Group S.A. in 2022

The 2022 Management Board Report for PCF Group S.A. outlines a pivotal strategic transition for the organization as it shifts from a traditional work-for-hire model toward a self-publishing, Games-as-a-Service (GaaS) framework.

• PCF Group S.A. is transitioning from a work-for-hire model to a self-publishing, Games-as-a-Service (GaaS) framework, targeting 3 billion PLN in revenue by 2027.
• The company is scaling a development pipeline that includes projects Gemini, Dagger, Bifrost, and Victoria, supported by strategic partnerships with Square Enix and Krafton, Inc.
• In 2022, the group generated 171.5 million PLN in sales revenue, though net profit declined due to high investment costs and the restructuring of the Project Dagger agreement to regain full IP rights from Take-Two Interactive.

PCF Group Annual Financial Statements: 2022

PCF Group’s 2022 financial performance demonstrates a period of strategic transition, characterized by steady profitability and a pivot toward long-term self-publishing objectives.

• PCF Group generated 120.1 million PLN in revenue and 42.3 million PLN in net profit during 2022, while maintaining a low debt-to-EBITDA ratio of 0.32.
• Over 90% of the company's 2022 revenue was derived from contract production for Square Enix, highlighting a heavy reliance on a single partner.
• The board has suspended dividend payments until at least 2025 to prioritize capital reinvestment into internal development, international expansion, and the acquisition of a majority stake in Incuvo S.A.

Square Enix Holdings Financial Results Briefing: Nine-Month Period Ended December 31, 2022

Square Enix Holdings reported a challenging nine-month period for the fiscal year ending March 31, 2023, characterized by year-over-year declines in net sales and operating income.

Square Enix Holdings Financial Results: Nine-Month Period Ended December 31, 2022

Square Enix Holdings reported a decline in consolidated net sales and operating income for the nine-month period ended December 31, 2022, compared to the same period in the previous fiscal year.

• Square Enix reported a decline in consolidated net sales to 255.6 billion yen and operating income to 41.3 billion yen for the nine-month period ended December 31, 2022, representing year-over-year decreases of 18.0 billion yen and 8.8 billion yen, respectively.
• The Digital Entertainment segment, the company's primary revenue driver, saw net sales drop to 184.3 billion yen and operating income fall to 38.7 billion yen, largely due to weak performance in existing smart device and PC browser titles and HD games failing to meet previous-year levels.
• Total unit sales for Digital Entertainment fell significantly to 16.43 million units for the nine-month period, down from 29.45 million units in the same period of the prior fiscal year, with the most pronounced decline occurring in the North America/Europe region.