Major Questions Concerning Actual Results for First Quarter of Year Ending March 2014

Key insights

7 takeaways

01
Sega Sammy Holdings reported significant Q1 growth for the fiscal year ending March 2014, driven by strong performance in the Pachislot/Pachinko segment and a return to profitability for the Consumer Business.See it on page 1
02
The Pachislot Hokuto No Ken Chapter of Resurrection title served as the primary catalyst for growth in the machine sales segment.See it on page 2
03
Digital gaming success was anchored by Phantasy Star Online 2, which reached 2.5 million cumulative downloads, and Puyopuyo!! Quest, which surpassed 3 million downloads by late July 2013.See it on page 2
04
Capital expenditures rose significantly due to land acquisition for a development project in Busan, South Korea, while depreciation increased following the opening of new manufacturing and distribution facilities in September 2012.See it on page 1
05
The company maintained its full-year financial forecasts despite Q1 operating income exceeding projections, citing a need to monitor second-quarter trends following a heavy concentration of title releases in the first half of the year.See it on page 1
06
The Amusement Machine Sales Business recorded an operating loss due to a lack of major releases, while the Amusement Center Operations Business experienced a decline in sales despite improved income.See it on page 2
07
The company is advancing a resort complex development in Incheon with a 2016 target opening date, bolstered by the recent integration of casino operations through a joint venture.See it on page 2

Summary

Sega Sammy Holdings experienced a significant increase in sales and income during the first quarter of the fiscal year ending March 2014, primarily driven by strong performance in the Pachislot and Pachinko Machines Business and the digital games sector. The release of the major pachislot title Pachislot Hokuto No Ken Chapter of Resurrection served as a primary catalyst for growth in the machine sales segment. Simultaneously, the Consumer Business returned to profitability, bolstered by the sustained success of the PC online game Phantasy Star Online 2, which reached 2.5 million cumulative downloads, and the rapid adoption of the smartphone title Puyopuyo!! Quest, which surpassed 3 million downloads by late July 2013.

Operational expenditures saw notable shifts during this period. Research and development costs rose across both the Consumer and Pachislot/Pachinko segments, while capital expenditures increased significantly due to land acquisition for a complex development project in Busan, South Korea. Depreciation also trended upward, reflecting the operational commencement of new manufacturing and distribution facilities established in September 2012. Despite these investments, the company maintained a cautious stance regarding its full-year financial forecasts, noting that while first-quarter operating income exceeded initial projections, the concentration of major title releases in the first half of the year necessitates further observation of second-quarter trends before considering any formal revisions.

The company’s broader portfolio showed mixed results across other segments. The Amusement Machine Sales Business recorded an operating loss due to a lack of major title launches, though performance remained aligned with initial internal forecasts. Conversely, the Amusement Center Operations Business saw a decline in sales despite an increase in income, attributed to sluggish same-store sales in domestic facilities. Looking ahead, the company continues to advance its resort complex development in Incheon, with a target opening date of 2016 and the recent integration of casino operations through a joint venture.