Square Enix Holdings 3Q FY2017/3 Financial Results Briefing

Square Enix Holdings reported financial results for the nine-month period ending December 31, 2016, reflecting a period of high-profile releases balanced by significant development cost amortization. The company achieved net sales of ¥190.1 billion, representing a year-over-year increase, while operating income declined to ¥21.5 billion. This profit contraction was primarily driven by the heavy investment in the development of Final Fantasy XV, which saw its costs fully amortized during the third quarter. Despite the dip in operating income, profit attributable to owners of the parent rose to ¥17.1 billion, bolstered by favorable foreign exchange gains resulting from a weaker yen.

The Digital Entertainment segment served as the primary revenue driver, anchored by the successful launch of Final Fantasy XV, which reached 6 million units in shipments by early 2017. While the HD Games sub-segment benefited from major releases, the MMO sub-segment experienced a decline due to a lower volume of expansion disk sales compared to the previous year. The Amusement segment also faced a profit decline, as the absence of a major title launch comparable to the prior year’s Dissidia Final Fantasy offset the success of newer arcade offerings. Conversely, the Merchandising segment reported growth, directly supported by the release of major HD titles.

Looking toward the 2018 fiscal year, the company maintains a stable outlook, focusing on long-term user retention through premium downloadable content and free updates for existing titles. Strategic priorities include the upcoming release of Dragon Quest XI, continued expansion of MMO content, and the development of new and existing intellectual property for smart devices. Management intends to optimize development efficiency by utilizing a mix of proprietary engines and industry-standard tools like Unreal Engine 4, while maintaining a disciplined approach to asset risk and release scheduling.