Sega Sammy : Consolidated Financial Results for the Six Months Ended September 30, 2022 (Japanese GAAP)

October 31, 2022

(Translation)

Consolidated Financial Results

for the Six Months Ended September 30, 2022 (Japanese GAAP)

Name of Company	:	SEGA SAMMY HOLDINGS INC.
Listing	: Tokyo Stock Exchange Prime
Code number	:	6460
URL	:	https://www.segasammy.co.jp/english
Representative	:	Haruki Satomi
		President and Group CEO, Representative Director
Inquiries	:	Yoichi Owaki
		Executive Vice President, Executive Officer
		Managing Director of Finance & Accounting Division

TEL	: [phone]
Scheduled date to file quarterly report	: November 11, 2022 (plan)
Scheduled date to commence dividend payments	: December 1, 2022 (plan)
Preparation of supplementary material on quarterly financial results	:	Yes
Holding of quarterly financial results briefing	:	Yes (for institutional investors)

(Amounts below one million yen are rounded down)

1. Consolidated Financial Results for the Six Months Ended September 30, 2022 (April 1, 2022 - September 30, 2022)

1. Consolidated Operating Results

(Percentage represents changes from the prior period)

	Net sales		Operating income		Ordinary income	Profit attributable
			to owners of parent
Six months ended	Millions	%		Millions	%			Millions	%	Millions	%
of yen		of yen			of yen	of yen
September 30, 2022	150,095	11.3		9,574	(34.8)			12,300	(16.6)	9,619	(19.9)
September 30, 2021	134,893	22.4		14,678	-			14,752	-	12,012	-
(Note) Comprehensive income
Six months ended September 30, 2022	: ¥15,924 million (18.9%)
Six months ended September 30, 2021	: ¥13,391 million (-%)
	Net income		Net income per
	per share		share (diluted)
Six months ended	Yen		Yen
September 30, 2022	43.56			43.34
September 30, 2021	51.08			50.93
(2) Consolidated Financial Position
	Total assets		Net assets		Equity ratio
As of	Millions of yen		Millions of yen			%
September 30, 2022	437,438			299,535			68.4
March 31, 2022	435,492			292,637			67.1
(Reference) Shareholders' equity
September 30, 2022	: ¥299,148 million
March 31, 2022	: ¥292,411 million

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2. Cash Dividends

		Cash dividends per share
	First quarter	Second quarter	Third quarter	Year-end	Total
	Yen	Yen	Yen	Yen	Yen
Year ended	-	20.00	-	20.00	40.00
March 31, 2022
Year ending	-	20.00
March 31, 2023
Year ending			-	21.00	41.00
March 31, 2023 (plan)
(Note) Revision to the forecast of cash dividends most recently announced: No

3. Forecast of Consolidated Financial Results for the Year ending March 31, 2023 (April 1, 2022 - March 31, 2023)

(Percentage represents changes from the prior year)

	Net sales	Operating income	Ordinary income	Profit attributable	Net income
	to owners of parent	per share
	Millions	%	Millions	%	Millions	%	Millions	%	Yen
	of yen	of yen	of yen	of yen
Full-year	375,000	16.8	40,000	24.8	40,000	20.0	28,000	(24.4)	126.83

(Note) Revision to the forecast of operating results most recently announced: No

4. Other

1. Changes in significant subsidiaries during the period: No
2. Adoption of accounting treatment specific to the preparation of quarterly consolidated financial statements: Yes
3. Changes in accounting policies, changes in accounting estimates, and restatements
4. 1. Changes in accounting policies due to revisions to accounting standards and other regulations.: Yes
   2. Changes in accounting policies due to other reasons: No
   3. Changes in accounting estimates: No
   4. Restatements: No
5. Number of issued shares (common stock)
6. 1. Number of issued shares at the end of the period (including treasury stock)

September 30, 2022 :	241,229,476
March 31, 2022	:	266,229,476

2. Number of treasury stock at the end of the period September 30, 2022 : 20,473,289

March 31, 2022

: 43,307,930

3. Average number of shares during the period (cumulative from the beginning of the fiscal year)

Six months ended September 30, 2022	:	220,825,119
Six months ended September 30, 2021	:	235,191,643

(Note)

• This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.
• This report is not required the auditing procedures by certified public accountants or accounting auditors.
• The forward-looking statements, such as results forecasts, included in this document are based on information available to the SEGA SAMMY HOLDINGS INC. (the Company) at the time of the announcement and assumptions considered reasonable, and do not purport to be a promise by the Company to achieve such results. Actual results could differ materially, depending on a range of factors. For the assumptions prerequisite to the results forecasts and the points to be noted in the use of the forecasts, please see "Forecast of Consolidated Operating Results" on page 5.
• The Company plans to hold a briefing on financial results for institutional investors on October 31, 2022. The contents and explanations of the meeting (video and audio) will be posted on the Company's website.

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Operating Results and Financial Position

(1) Overview

Regarding the environment of the Entertainment Contents Business, in the consumer area, the market environment for the game market on a global scale continues major changes as platforms expand and diversify with the digitization of game contents and services including diversifying revenue opportunities through packaged sales, download content sales, free-to-play games (F2P), subscription services, etc., as well as prolonged sales period. Although the recent market trends seem to be cooling down due to the impact of changes in consumer behavior following the normalization of social and economic activities, there has been a growing expectation of the continued revitalization and growth of the game market on a global scale in the future. As for amusement machines market, although the prize category has been strongly performing and driving the overall market, the impacts of supply chain disruptions and raw material price hikes have appeared as of late.

With regard to the pachislot and pachinko industry, for pachinko machines, strong utilization has been maintained, driven by multiple popular titles. For pachislot machines, the introduction of No. 6.5 models as a new regulation responding to the revision of regulation, has been progressing since June 2022, and titles supported by users have appeared one after another with the recovery of utilization level after their introduction. Also, smart pachislot from November 2022, and smart pachinko from around spring 2023, which will offer an expanding range of gameplay, are scheduled to be introduced, leading to expectations for further demand expansion.

In the resort industry, international visitors to Japan continue to be affected by travel restrictions. In Japan, during the second quarter ended September 30, 2022, the travel demand recovered centered on individual customers, because there were no state of emergency, etc. put in place by the government or local municipalities despite the re-spread of COVID- 19.

In this business environment, net sales for the six months ended September 30, 2022 amounted to ¥150,095 million (an increase of 11.3% for the same period in the previous fiscal year). The Group posted an operating income of ¥9,574 million (a decrease of 34.8% for the same period in the previous fiscal year), ordinary income of ¥12,300 million (a decrease of 16.6% for the same period in the previous fiscal year), and profit attributable to owners of parent of ¥9,619 million (a decrease of 19.9% for the same period in the previous fiscal year).

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Result of each segment is as follows.

Net sales in each segment here do not include inter-segment sales between segments.

« Entertainment Contents »

In the consumer area, for Full Game, the Group released "Soul Hackers 2", "Two Point Campus", etc. as new titles, leading to sales of 10,140 thousand copies (14,040 thousand copies for the same period in the previous fiscal year). For F2P, "Project SEKAI COLORFUL STAGE! feat. Hatsune Miku" continued to strongly perform.

In the amusement machine area, the Group mainly sold UFO Catcher® series and prizes, etc.

In the animation and toy area, for animation, the Group recorded allocated revenue of "Detective Conan: The Bride of Halloween", etc., and for toy, new products such as "With a front camera! Fun to change mouse covers! Sumikkogurashi Personal Computer Premium Design by yourself", etc., and regular products were sold.

As a result, net sales in this segment were ¥116,629 million (an increase of 8.5% for the same period in the previous fiscal year) and ordinary income was ¥17,246 million (a decrease of 24.1% for the same period in the previous fiscal year).

« Pachislot and Pachinko Machines »

For pachislot machines, the Group recorded overall sales of 34 thousand units (31 thousand units for the same period in the previous fiscal year). "Pachislot Kabaneri of the Iron Fortress", the Group's first No. 6.5 models released in July 2022, is strongly performed both sales and utilization. For pachinko machines, the Group sold "P Monster Hunter Double Cross Renzoku Shuryou ver.", etc., leading to overall sales of 23 thousand units (23 thousand units for the same period in the previous fiscal year). With regard to titles sold, all of the titles were sold more units than planned and progressed steadily overall.

As a result, net sales in this segment were ¥27,534 million (an increase of 18.0% for the same period in the previous fiscal year) and ordinary income was ¥2,011 million (ordinary loss of ¥1,324 million for the same period in the previous fiscal year).

« Resort »

In the resort business, at "Phoenix Seagaia Resort", due to the contribution of the government and unique measures to stimulate tourism demand, the number of facility users for the second quarter ended September 30, 2022, exceeded that for the second quarter ended September 30, 2019 before the spread of COVID-19, and the demand centered on individual customers was high.

Overseas, "PARADISE CITY", operated by PARADISE SEGASAMMY Co., Ltd. (affiliate accounted for using the equity method), from January to June 2022, the drop amount (purchased amount of chips by customers) was 29.0%, and the number of casino users was 47.5% compared with the same period of 2020, respectively, remained sluggish due to the travel restriction in each country caused by the spread of COVID-19, etc. Meanwhile, signs of recovery in the number of Japanese VIP have been seen due to partially relaxed travel restrictions from June 2022.

*PARADISE SEGASAMMY Co., Ltd. is posted three months delay due to the fiscal year ended in December.

As a result, net sales in this segment were ¥5,649 million (an increase of 47.4% for the same period in the previous fiscal year) and ordinary loss was ¥2,392 million (ordinary loss of ¥3,955 million for the same period in the previous fiscal year).

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(2) Forecast of Consolidated Operating Results

No changes will be made to the forecast of consolidated financial results for the fiscal year ending March 31, 2023, announced on May 13, 2022.

The future plans for business segments in the fiscal year ending March 31, 2023, are as follows.

« Entertainment Contents »

In the consumer area, for Full Game, the Group will launch new titles in earnest from the third quarter of the fiscal year. The Group will work on expanding sales of a new major title "Sonic Frontiers", and plans to release multiple new titles such as remastered versions of Persona series "Persona 5 Royal (Remaster)", "Persona 3 Portable (Remaster)", "Persona 4 Golden (Remaster)", including "Football Manager 2023", "Like a Dragon: Ishin!", "Company of Heroes 3", "Endless Dungeon", etc. For F2P, the Group will continue to enhance the operation of existing titles and schedules to release one new title. In the amusement machine area, the Group will continue to strengthen sales of UFO Catcher® series and prizes, etc. In the animation and toy area, the Group plans to record revenue from various video production and distribution, etc., and to sell new products and regular products for toy.

As for the business environment, in the consumer area, there is no meaningful impact at this time although higher development costs and longer development time, associated with the impact of growing inflation and increasing human resource mobility, require monitoring. In the amusement machine area, while the demand for prize category has been continued, impacts of supply chain disruptions, exchange rate fluctuations, and raw material price hikes require monitoring.

« Pachislot and Pachinko Machines »

In the Pachislot and Pachinko Machines Business, the Group will launch mainstay titles in earnest from the third quarter of the fiscal year. For pachislot machines, the Group will continue the launch of No. 6.5 models which are strong utilization, such as "Pachislot Hard Boiled", "Pachislot Saga of Tanya the Evil", etc. For pachinko machines, the Group will launch multiple titles such as "P The Seven deadly Sins 2", "P TIGER & BUNNY ~Kanzen Muketsu WILD Spec~", etc. The Group will also launch smart pachislot and smart pachinko machines actively, and strive to increase "Share in utilization, in installation, and in sales". Of note, while parts procurement still requires monitoring, the Group will proceed to respond as appropriate.

« Resort »

In the Resort Business, the Group expects earnings to recover based on the assumption that the behavioral restrictions associated with COVID-19 will be relaxed. At "Phoenix Seagaia Resort" in Japan, the Group will also engage in unique measures such as strengthening CRM, and strive to strengthen further acquisition of individual and group customers.

Overseas, for "PARADISE CITY", the drop amount of Japanese VIP from August to September 2022 has recovered sharply due to partially relaxed travel restrictions from June 2022. Since high demand is also expected in the future, the Group will continue to strengthen the acquisition of customers such as enhancing marketing, etc.

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