Sony Group Corp

Thank you very much for taking time out of your busy schedules to join us today. As it is scheduled time to begin, we will now start the Sony Group Corporation Fiscal Year 2024 Third Quarter Earnings Announcement. I'll be serving as MC. I'm Ishii from PR. First, I'd like to introduce the speakers. Representative Corporate Executive Officer, Chairman and CEO, who is to become Representative Corporate Executive Officer and Chairman Effective April 1st, Kenichiro Yoshida. current representative corporate executive officer, president, COO, and CFO. To become representative corporate executive officer, president, and CEO on April 1st, Hiroki Totoki. Senior Vice President, Corporate Planning and Control, Lead of Group Diversity, Equity and Inclusion, Support for Financial Services, Business and Entertainment Area, Naomi Matsuoka. Senior Vice President in Charge of Finance and IR, Sadahiko Hayakawa. corporate executive officer and CFO, Sony Financial Group, Kazuhiro Yamada. First, Mr. Yoshida will say a few words, followed by an explanation of the earnings results for the third quarter of the fiscal year ending March 31, 2025, and the full year forecast by Mr. Totoki, Mr. Hayakawa, Ms. Matsuoka, Mr. Yamada, and then we'll move on to the Q&A session. After the Q&A session, there will be a photo session for the media with Mr. Yoshida and Mr. Totoki. The entire event is scheduled to last about 80 minutes. Mr. Yoshida, please.

Hello, everyone. We recently announced our new management structure effective April 1st. Hiroki Todoki will be appointed CEO of Sony Group Corporation. Based on his achievements until now, and from the perspective of future long-term growth, I'm convinced that Todoki is ideally equipped to be the next CEO, and the board is in unanimous agreement. Today, I wanted to take this opportunity to join you and share a few words. Taking a brief look back since returning to Sony from the ISP SONNET together with Totoki in December 2013, I served as CFO for four years and then CEO for seven years. I would like to once again express my gratitude to you all for your feedback, including your encouragement and critical analysis throughout this period. I believe that Sony was nurtured by the capital markets. During my time as CFO, I often spoke within the company about moving from internal negotiation to external accountability. Our aim was to verify the effectiveness of our management initiatives by asking ourselves whether they are explainable. There is a great deal that business leaders can learn from dialogue with the media, analysts and investors, and I myself have learned much. If I were to mention one thing from my seven years as CEO, it would be our purpose that I defined in my first year. The key word within this is kando inherited from my predecessor, Kazuo Hirai. I think of our purpose as a promise. It is a promise that we make to each and every employee. It is based on the belief that you are the driving force behind Kando. I trust that most Sony Group employees think that it is not Yoshida who achieved something, but rather we are the ones that did it, and we are the ones that will continue to do it. I believe that this kind of intrinsic strength is vital for connecting our purpose to profit. Going forward, I myself, alongside our employees, intend to be part of the driving force behind Kando and offer my support to Totoki and the new management team. That is all from myself. With that, I would like to hand over to Totoki.

Thank you very much. I am Totoki. I am now assigned. as the President, CEO, and I look forward to taking over the company, which Hirai and Yoshida have greatly added value to as CEOs, and to working to create new value by realizing our creative entertainment vision and driving Sony's evolution and further growth. Now I will explain the contents shown here, and then I will give a general summary at the end. First speaker, Hayakawa-san, please. Thank you. The consolidated sales, excluding the financial services segment for the quarter, increased 7 percent compared to the same quarter of the previous fiscal year to 3,695.7 billion yen, and operating income increased 10 percent to 423 billion yen. Consolidated sales including the financial services segment increased 18% year-on-year to 4,409,600,000,000 yen. Operating income increased 1% to 469,300,000,000 yen, a record high for the third quarter. And net income increased 3% to 373,700,000,000 yen. The results by segment for the quarter are shown here. Next, I will explain consolidated results forecast for FY24. Consolidated sales, including the financial services segment, have been upwardly revised slightly from the previous forecast to 11 trillion 900 billion yen. Operating income has been upwardly revised 2% to 1 trillion 190 billion yen, and operating cash flow has been upwardly revised 15% mainly due to the improvements in working capital to 1 trillion 660 billion yen. Consolidated sales including the financial services segment have been upwardly revised 4% from the previous forecast to 13 trillion 200 billion yen. Operating income has been upwardly revised 2% to 1 trillion 335 billion yen. The net income has been upwardly revised 10% to 1 trillion 80 billion yen. The full year forecast by segment is shown here. I will move on to an explanation of the state of each business. The first is games and network services. Sales for the quarter increased 16% year-on-year to 1,682.3 billion yen, primarily due to the increased sales of hardware and third-party software. Although we had a big hit of Marvel's Spider-Man 2 in the same quarter of the previous fiscal year, operating income increased 37% year-on-year to 118.1 billion yen, a record high for the third quarter in the segment, primarily due to the impact of higher revenue from network services and third-party software, as well as improved profitability of hardware. Promotion expenses per unit of PlayStation 5 on which the promotion was implemented in the current quarter decreased approximately 20% year on year and we think that we are implementing an optimal sales program given the market environment. We are managing PS5 inventory at an appropriate level, with inventory at the end of December decreasing 46% compared to the same month of the previous year, significantly contributing to an improvement in cash flow. Taking into account the result of the quarter, we have revised upward our full year forecast for sales by 3% to 4,610 billion yen and operating income by 7% to 380 billion yen compared with our previous forecast. The number of monthly active users it may use across PlayStation platforms in December increased 5% compared to the same month of the previous year, reaching 129 million accounts, the highest number in PS history. Total play time also increased 2% year on year, marking the seventh consecutive quarter year on year growth. More than 40% of users who purchased a PS5 during the quarter were new users. Combined with a moderation in the decrease in the number of PS4 active users, this has contributed substantially to the increase of MA use. Cumulative unit sales of PS5 from launch until the end of December are essentially the same level as the cumulative unit sales of PS4 for the same period of time since launch, even though PS5 had a higher price. Furthermore, MAUs after the same amount of time has passed since launch have increased significantly by approximately 1.4 times. This shows that the user base for the PS platform has significantly expanded from PS4 generation due to the PS5's backward compatibility in various user engagement initiatives. As for PlayStation Plus, Revenue in the quarter increased 20% year-on-year on a U.S. dollar basis, primarily due to an increase in average revenue per user, APRU, mainly due to a shift to higher tiers of service and impact of price revisions. In this way, the momentum of the platform business is currently strong, and we expect to see stable earnings growth going forward. Last November, we released a beta version of a cloud streaming feature on the PS Portal Remote Player. This means that PS Plus Premium subscribers can now play over 120 PS5 game titles on the PS Portal stream directly from cloud servers without going through a PS5 console. By leveraging the lessons from the beta test, we aim to further improve the streaming and gaming user experience so users can enjoy PS games anytime, anywhere, and even more easily. At the Game Awards 2024, held on December 13, 2024, our first-party title, Astro Bot, won four categories, including Game of the Year and Best Family Game, the most of any title. In addition, the live service game, Helldivers 2, released in February last year, won the Best Ongoing Game and Best Multiplayer Game awards. The fact that titles in general we are aiming to expand in the future, including titles for families and live service games, have received these awards is a major stride towards our building a broader title portfolio. In addition to the awards, it received held diverse to large update Omens of Tyranny, released in December 2024, has been well received and user engagement has once again increased significantly. Next fiscal year, we plan to release games such as the major title Ghost of Yotei and the sequel to the popular title Death Stranding, and we expect even further expansion in earnings from first-party software.