FinancialSquare Enix
Square Enix Annual Report FY2007
1 Jul 200756 pages~137 min full read
Square Enix reported a 31.3% increase in net sales to ¥163.5 billion and a 67.5% surge in operating income for FY2007, largely driven by the consolidation of Taito Corporation and the success of Final Fantasy XII.
See it on page 21Net income declined 32% to ¥11.6 billion due to over ¥11 billion in extraordinary losses incurred from restructuring the amusement segment, which included closing unprofitable arcades and divesting Taito’s karaoke business.
See it on page 21The company is shifting its business model toward persistent network services and mobile platforms, evidenced by a 315% growth in mobile segment operating income.
See it on page 8International operations in North America and Europe now account for 23% of total revenue, supporting the company's long-term goal of doubling recurring income to ¥50 billion.
See it on page 8Square Enix maintains a strong financial position with nearly ¥100 billion in cash reserves and zero interest-bearing debt.
See it on page 24Handheld titles, specifically Dragon Quest Monsters: Joker and Final Fantasy III, served as primary growth drivers during the console hardware transition period.
See it on page 6Square Enix achieved a significant financial milestone during the fiscal year ended March 31, 2007, reporting a 31.3% increase in net sales to ¥163.5 billion and a 67.5% surge in operating income. This growth was primarily driven by the consolidation of Taito Corporation and the international success of major titles such as Final Fantasy XII. Despite these gains, net income fell 32% to ¥11.6 billion due to substantial extraordinary losses totaling over ¥11 billion. These losses stemmed from a strategic restructuring of the amusement segment, which included closing unprofitable arcades and divesting Taito’s karaoke business to focus on core competencies.
The company is currently navigating a transition toward becoming a global content and community provider, shifting its focus from traditional software sales to persistent network services and mobile platforms. This strategy proved successful during the console hardware transition, as handheld titles like Dragon Quest Monsters: Joker and Final Fantasy III became primary growth drivers. While Japan remains the dominant market, international operations in North America and Europe now account for 23% of total revenue. This global expansion is supported by a robust liquidity position, with cash reserves nearing ¥100 billion and a total absence of interest-bearing debt.
Management has set a long-term goal to double recurring income to ¥50 billion by capitalizing on the 315% growth in mobile segment operating income and expanding established franchises. To support this evolution, the company has strengthened its corporate governance and internal controls while adopting a 30% consolidated dividend payout ratio. Despite the challenges of goodwill amortization and impairment losses related to subsidiaries like UIEvolution, Inc., the financial structure remains stable, characterized by a shift toward increased foreign share ownership and a disciplined approach to risk management and capital allocation.
