Sega Sammy Holdings FY Ending March 2018: 3rd Quarter Results Presentation

Key insights

6 takeaways

01
Sega Sammy experienced a decline in overall performance during the first three quarters of FY2018, primarily driven by a contraction in the Pachislot and Pachinko segment.See it on page 1
02
The Pachislot and Pachinko sector faces a mandatory transition to new regulatory standards by 2021, requiring the phased removal of older machines and lower jackpot limits.See it on page 29
03
The Entertainment Contents segment achieved significant international growth, with sales in North American and European markets increasing by 120 percent year-over-year.See it on page 39
04
The company revised its full-year financial forecasts downward to account for ongoing market volatility and regulatory adjustments in the domestic gaming machine business.See it on page 4
05
Sega Sammy is actively diversifying its portfolio through the launch of the PARADISE CITY integrated resort in South Korea and the pursuit of gaming licenses in Nevada.See it on page 4
06
Digital game revenue, anchored by titles such as Phantasy Star Online 2, remains a stable contributor to the company’s domestic financial performance.See it on page 15

Summary

Sega Sammy Holdings experienced a period of significant operational transition during the first three quarters of the fiscal year ending March 2018. The company faced a notable decline in overall performance, primarily attributed to a contraction in the Pachislot and Pachinko segment. This downturn resulted from a reduced title pipeline and the anticipation of stringent regulatory revisions, which mandate lower jackpot limits and adjusted payout ratios to curb gambling elements. These industry-wide changes necessitate a phased removal of older machine types through 2021, forcing the company to navigate a challenging domestic market environment while preparing for a transition to new, compliant standards.

Despite these domestic headwinds, the Entertainment Contents segment demonstrated resilience and growth, bolstered by strong performance in packaged games and amusement machines. International expansion served as a critical growth engine, evidenced by a 120 percent year-over-year increase in sales across North American and European markets. This global momentum is complemented by strategic diversification efforts, including the successful launch of the PARADISE CITY integrated resort in South Korea and the pursuit of gaming licenses in Nevada.

The company’s financial outlook reflects a cautious approach, with downward revisions to full-year forecasts intended to account for the ongoing market adjustments within the Pachislot and Pachinko sectors. By balancing steady domestic digital game revenue from titles like Phantasy Star Online 2 with aggressive international development and integrated resort operations, the organization is actively shifting its focus toward a more diversified global portfolio. These efforts, supported by disciplined capital expenditure and a strategic realignment of its core business segments, aim to stabilize long-term performance amidst evolving regulatory and market landscapes.