Square Enix Holdings Financial Results Briefing: Q1 FY2023/3

Square Enix Holdings reported financial results for the first quarter of the fiscal year ending March 31, 2023, reflecting a period of transition and strategic realignment. For the three-month period ending June 30, 2022, the company recorded net sales of ¥74.8 billion and operating income of ¥14.4 billion, representing year-over-year declines of ¥13.8 billion and ¥2.9 billion, respectively. Despite these decreases, profit attributable to owners of the parent rose to ¥18.3 billion, bolstered by foreign exchange gains. Earnings forecasts for the full fiscal year remain undetermined as the company evaluates the financial impact of recent divestitures and structural changes.

Performance across business segments was mixed. The Digital Entertainment segment, the company’s primary revenue driver, saw a decline in the HD Games sub-segment due to a lighter release schedule compared to the previous year. Conversely, the MMO sub-segment experienced growth, supported by strong subscriber numbers for Final Fantasy XIV. The Amusement segment showed recovery, with net sales and operating income increasing as pandemic-related restrictions eased. Meanwhile, the Publication and Merchandising segments faced challenges, with Publication reporting declines in both digital and print sales, and Merchandising experiencing a shift in sales mix that impacted operating income despite higher net sales.

Management is actively shifting its investment strategy to address rising development costs and earnings volatility. The company is moving away from a policy of exclusive full ownership of development studios, opting instead for a more flexible approach that includes joint ventures, equity-method affiliates, and minority stakes. This strategy aims to hedge investment risks while maintaining a robust development pipeline. Additionally, the company continues to prioritize expansion into new domains, specifically blockchain, as part of its long-term growth initiatives.