Capcom Summary of Consolidated Financial Results: Q3 Fiscal Year Ending March 31, 2007

Key insights

7 takeaways

01
Capcom achieved a 40.1% increase in operating income to 6,648 million yen and a 45.2% increase in ordinary income to 7,701 million yen for the nine months ending December 31, 2006, despite a 41.5% decline in net income due to prior-year tax adjustments.See it on page 1
02
The Home Video Games division saw a 90.0% surge in operating income driven by the success of titles like Dead Rising and improved cost management, even as net sales for the segment fell by 14.6%.See it on page 2
03
The Contents Expansion segment experienced rapid growth, with net sales increasing by 110.2% and operating income rising by 57.2%, fueled by mobile game distribution and peripheral sales.See it on page 2
04
Total net sales for the nine-month period reached 49,283 million yen, representing a 2.8% increase compared to the previous year.See it on page 2
05
Arcade Operations and Arcade Games segments underperformed, reporting declines in operating income due to high facility expansion costs and weak sales of arcade card products.See it on page 8
06
Management revised its full-year fiscal projections upward, targeting 69,600 million yen in net sales and 4,400 million yen in net income.See it on page 3
07
The company maintained a stable financial position with a shareholders' equity ratio of 43.4% while prioritizing a strategy of global expansion in North America and Europe.See it on page 3

Summary

Capcom’s consolidated financial results for the third quarter of the fiscal year ending March 31, 2007, reflect a period of strategic restructuring and operational focus amidst a transitioning global video game market. The primary objective of the company during this period was to improve earning capacity through a multi-platform software strategy, aggressive overseas expansion, and a refined management approach that prioritized high-performing business segments while divesting from underperforming subsidiaries.

Financial performance for the nine-month period ending December 31, 2006, showed growth in top-line and core profitability metrics. Net sales reached 49,283 million yen, a 2.8% increase over the same period in the previous year. Operating income rose significantly by 40.1% to 6,648 million yen, and ordinary income increased by 45.2% to 7,701 million yen, largely driven by reduced costs of goods sold. However, net income declined by 41.5% to 4,347 million yen, a variance attributed to adjustments in deferred tax asset valuation reserves made during the prior year.

Segment performance varied across the company’s diverse operations. The Home Video Games division, despite a 14.6% decrease in net sales, saw operating income surge by 90.0% due to the success of titles like Dead Rising and improved cost management. The Contents Expansion segment emerged as a high-growth area, with net sales increasing by 110.2% and operating income rising by 57.2%, bolstered by mobile game distribution and peripheral device sales. Conversely, Arcade Operations and Arcade Games faced challenges, with operating income declining in both segments due to facility expansion costs and sluggish sales of specific arcade card products.

The company maintained a solid financial position with a shareholders' equity ratio of 43.4%. Looking ahead, management revised its full-year forecasts upward, projecting net sales of 69,600 million yen and net income of 4,400 million yen. Future strategy remains centered on global market penetration, particularly in North America and Europe, alongside continued investment in online and mobile content to ensure long-term competitiveness in an increasingly hardware-intensive industry.