Capcom Consolidated Financial Results: Q1 Fiscal Year 2011

Key insights

7 takeaways

01
Capcom experienced a sharp decline in profitability for Q1 ending June 30, 2010, with operating income falling 72.6% to 1,005 million yen and net income dropping 90.4% to 213 million yen.See it on page 1
02
Net sales for the quarter decreased by 2.4% year-over-year to 19,037 million yen, driven by the appreciation of the yen, rising development costs, and the underperformance of titles like Lost Planet 2.See it on page 4
03
Overseas markets became the primary revenue source, accounting for 51.3% of total consolidated net sales compared to 40.4% in the same period the previous year.See it on page 14
04
The Mobile Contents segment demonstrated growth through iPad and iPhone distribution, providing a counterpoint to the weak performance in the flagship Consumer Online Games segment.See it on page 4
05
Arcade Operations improved operating income through cost-cutting and site closures, while the Amusement Equipments segment recorded an operating loss due to reduced capital expenditures by operators.See it on page 5
06
Despite the poor quarterly results, Capcom maintained its full-year earnings forecast of 95,000 million yen in net sales and 8,000 million yen in net income.See it on page 1
07
The company maintains a stable financial position with a shareholders' equity ratio of 62.2%.See it on page 1

Summary

The first quarter financial results for Capcom for the period ending June 30, 2010, reflect a challenging start to the fiscal year characterized by declining profitability and sluggish performance in key home video game segments. The company reported net sales of 19,037 million yen, a 2.4% decrease compared to the same period in the previous year. Profitability saw a more significant contraction, with operating income falling 72.6% to 1,005 million yen, and net income dropping 90.4% to 213 million yen. These results were primarily attributed to the appreciation of the yen, increased software development costs for flagship titles, and the underperformance of major releases such as Lost Planet 2.

The company operates across four primary segments: Consumer Online Games, Mobile Contents, Arcade Operations, and Amusement Equipments. While the Consumer Online Games segment remained the largest revenue driver, it faced headwinds from weak sales of specific titles. Conversely, the Mobile Contents segment showed growth, bolstered by the distribution of titles for the iPad and iPhone. The Arcade Operations segment saw a slight improvement in operating income due to cost-control measures and the closure of unprofitable locations, despite a decline in overall sales. The Amusement Equipments segment struggled, recording an operating loss as arcade operators reduced their capital expenditures.

Geographically, the company experienced a shift in its sales mix, with overseas sales accounting for 51.3% of total consolidated net sales, up from 40.4% in the same quarter of the previous year. Despite the difficult quarterly performance, the company maintained its full-year earnings forecast, projecting net sales of 95,000 million yen and net income of 8,000 million yen for the fiscal year ending March 31, 2011. The financial position remains stable, with a shareholders' equity ratio of 62.2%.