New Medium-term Business Plan (FY2025/3-FY2027/3)
SQUARE ENIX HOLDINGS CO., LTD.
Takashi Kiryu, President and Representative Director
May 13, 2024
Statements made in this document with respect to SQUARE ENIX HOLDINGS CO., LTD. and its consolidated subsidiaries’
(together, “SQUARE ENIX GROUP") plans, estimates, strategies, and beliefs are forward‐looking statements about the future performance of
SQUARE ENIX GROUP.
These statements are based on management's assumptions and beliefs in light of information available to it at the time these materials were
drafted and, therefore, the reader should not place undue reliance on them. Also, the reader should not assume that statements made in this
document will remain accurate or operative at a later time.
A number of factors could cause actual results to be materially different from and worse than those discussed in forward‐looking statements.
Such factors include but are not limited to:
1. changes in economic conditions affecting SQUARE ENIX GROUP’s operations;
2. fluctuations in currency exchange rates, particularly with respect to the value of the Japanese yen, the U.S. dollar, and the Euro;
3. SQUARE ENIX GROUP’s ability to continue to win acceptance of its products and services, which are offered in highly competitive
markets characterized by the continuous introduction of new products and services, rapid developments in technology, and subjective
and changing consumer preferences;
4. SQUARE ENIX GROUP’s ability to expand international success with a focus on its businesses; and
5. regulatory developments and changes and SQUARE ENIX GROUP’s ability to respond and adapt to those changes.
The forward‐looking statements regarding earnings contained in these materials were valid at the time these materials were drafted.
SQUARE ENIX GROUP assumes no obligation to update or revise any forward‐looking statements, including forecasts or projections, whether
as a result of new information, subsequent events, or otherwise.
The financial information presented in this document is prepared according to generally accepted accounting principles in Japan.
2
Today’s agenda
3
Our previous medium-term business plan: A review
1
Our long-term vision & new corporate philosophy structure
2
4 strategies
3 targets
Our new medium-term business plan
3
Today’s agenda
4
Our previous medium-term business plan: A review
1
Our long-term vision & new corporate philosophy structure
2
4 strategies
3 targets
Our new medium-term business plan
3
Our previous medium-term business plan: A review (1/3)
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1
400~500bn yen
356.3bn yen
60~75 bn yen
32.5 bn yen
FY2024/3
Previous mid-term
target
FY2024/3 Actual FY2024/3
Previous mid-term
target
FY2024/3 Actual
Net Sales
Operating Income
Did not reach our quantitative targets for net sales or operating income under our previous medium-term business plan
● Began rebuild of HD Game (HD) & Smart Devices/PC Browser (SD) portfolios
└ Divested three overseas studios and IPs
● Expanded MMO business to strengthen our earnings base
● Achieved a smooth transition to stable growth in the Publication segment
● Achieved a V-shaped recovery in the Amusement segment
└ Committed to cost cutting during the pandemic
● Sustained growth in the Merchandising segment
Achievements
6
Our previous medium-term business plan: A review (1/3)
1
Our previous medium-term business plan: A review (3/3)
7
1
● HD game development profitability
└ Launched many titles but some failed to live up to profit expectations, especially outsourced
titles and some AAA titles
● Slowdown in SD games
└ Unable to create hit titles to offset maturation of Japanese market, aging of existing titles
● Insufficient Group-wide portfolio management
└ Cannibalization between our own titles due to overlapping launch schedules
● Gaps in our management infrastructure
Challenges
Our long-term vision & new corporate philosophy structure
Today’s agenda
8
Our previous medium-term business plan: A review
1
2
4 strategies
3 targets
Our new medium-term business plan
3
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The power of content is the power to move people
Enriching people’s lives by helping them create
unforgettable experiences
With the passage of time, the moments that move us the most form
unforgettable experiences
that leave indelible marks on our hearts
Our long-term vision & new corporate philosophy structure
2
Unforgettable experiences help shape the values that ground us
Unforgettable experiences enrich our lives
We want to help create unforgettable experiences
by delivering content full of undeniable fun
Introduced our new corporate philosophy structure, comprising our Purpose, which clearly states why we are here, and our
Values, which are to guide our employees in thought and deed
Our long-term vision & new corporate philosophy structure
10
2
Creating New Worlds with Boundless Imagination
to Enhance People’s Lives.
Purpose
Values
Deliver Unforgettable Experiences
Embrace Challenges
Act Swiftly
Stronger Together
Continuously Evolve
Cultivate Integrity
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© ARMOR PROJECT/BIRD STUDIO/SQUARE ENIX © SQUARE ENIX LOGO ILLUSTRATION:© YOSHITAKA AMANO © SQUARE ENIX CHARACTER DESIGN: TETSUYA NOMURA/ROBERTO FERRARI LOGO ILLUSTRATION:©1997
YOSHITAKA AMANO © SQUARE ENIX LOGO & IMAGE ILLUSTRATION:© YOSHITAKA AMANO LIFE IS STRANGE: TRUE COLORS © 2021, 2022 Square Enix Ltd. All rights reserved. Developed by Deck Nine Games. LIFE IS STRANGE,
LIFE IS STRANGE: TRUE COLORS, SQUARE ENIX and the SQUARE ENIX logo are registered trademarks or trademarks of the Square Enix group of companies. DECK NINE and the DECK NINE GAMES are registered trademarks of Idol
Minds, LLC. All other trademarks are the property of their respective owners. © SQUARE ENIX 「スペースインベーダー」(C) TAITO CORPORATION 1978 ALL RIGHTS RESERVED. © Hiromu Arakawa/SQUARE ENIX
Our long-term vision & new corporate philosophy structure
2
With IP as our core competence, we will deliver a rich variety of content offering undeniable fun to our customers around the world.
Intellectual
Property
Digital
Entertainment
Comics /
Novels / Books
Merchandising
Amusement
Today’s agenda
12
1
2
3
4 strategies
3 targets
Our previous medium-term business plan: A review
Our long-term vision & new corporate philosophy structure
Our new medium-term business plan
13
Square Enix Reboots and Awakens
～A 3-year reboot for long-term growth～
3
Our new medium-term business plan
Positioning of our new medium-term business plan
Evolve to deliver a rich variety of content
offering undeniable fun all over the world
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HD
Establish a development footprint capable of consistently and
regularly releasing titles that beat our customers’ expectations
SD
Resume growth trajectory by sustaining our reach to both existing
and new customers and by exploring new business models
MMO, Publication,
Amusement
Maintain and develop momentum and expand our global fan base
Expand the breadth of the business by growing the licensing
business and adding to our lineup of services
Merchandising
Develop management infrastructure to make us a more efficient organization
Create and sow the seeds for new IPs and businesses
that will lead to further growth for the next generation
3
Square Enix Reboots and Awakens
～A 3-year reboot for long-term growth～
Our new medium-term plan: 4 strategies
15
3
Enhance productivity by optimizing the development footprint in the
Digital Entertainment (DE) segment
Diversify earnings opportunities by strengthening customer contact points
Roll out initiatives to create additional foundational stability
Allocate capital giving consideration to the balance between growth
investment and shareholder returns
Square Enix Reboots and Awakens
～A 3-year reboot for long-term growth～
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Enhance productivity by optimizing DE segment development footprint
Our content production account
● Recognized ¥38.8 bn in content production account
write-downs/extraordinary losses in FY2024/3 based on
a careful review of the account in keeping with the
mid/long-term portfolio philosophy under our new
medium-term business plan
1
● Took preliminary steps to establish a disciplined
pipeline strategy that will enable us to create an
attractive, layered lineup of titles
50.6bn yen
71.4bn yen
78.1bn yen
96.7bn yen
87.2bn yen
87.3bn yen
48.5bn yen
0.0
20.0
40.0
60.0
80.0
100.0
120.0
FY2019/3 FY2020/3 FY2021/3 FY2022/3 FY2023/3 FY2024/3
(before
impairment)
FY2024/3
(after
impairment)
1. The content subject to impairment losses consisted largely of titles slated for release in FY2027/3 and beyond, so any impact on our income statements during this medium-term
business plan will be minimal. The content product account write-downs were recognized as operating losses, while the disposal losses were recognized as extraordinary losses. The
operating losses and disposal losses are referred to collectively as “impairment” on the above chart.
Mid/long-term portfolio philosophy
Shift from quantity to quality,
delivering undeniable fun
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Ensure that our development process strikes a good balance between a “product-out”
approach driven by content reflecting the creativity that springs from our employees’
imaginations, and a “market-in” approach driven by customers’ voices and market
trends
When allocating human talent and development investments, prioritize titles with
strong potential to be loved for years, while also enhancing the skill sets of the core
teams responsible for developing titles that sustain each IP
Strive to establish a layered title lineup that enables a schedule based on the optimal
cadence and timing of launches from the perspectives of both the total portfolio and
individual IPs
Enhance productivity by optimizing DE segment development footprint
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Focus on developing titles that deliver fun only Square Enix can create
Enhance productivity by optimizing DE segment development footprint
● Strive to maintain and grow the fan bases for our major and mid-class HD titles by
focusing on consistent fun
● Strive to increase our hit rate with SD titles by focusing on fun that ensures
customers can play for a long time with confidence
● With new IPs, prioritize fun that is novel and creative to enable the development of
new fan bases
● Also strengthen lineup of catalog titles by leveraging rich IP library
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Establish a development footprint that produces fun only Square Enix can create
Enhance productivity by optimizing DE segment development footprint
● Strengthen in-house development capabilities by revamping our internal development
footprint
└ Retire our organizational design based around business units and introduce an operationally integrated
organization focused around our development functions
● Transition to a framework that advances projects by harmonizing individual creativity
and organizational management
└ Redefine the missions of producers and associated job types and establish internal support capabilities
└ Enhance development investment efficiency by revisiting the entire progress management process for
title development
Our new medium-term plan: 4 strategies
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3
Enhance productivity by optimizing the development footprint in the
Digital Entertainment (DE) segment
Diversify earnings opportunities by strengthening customer contact points
Roll out initiatives to create additional foundational stability
Allocate capital giving consideration to the balance between growth
investment and shareholder returns
Square Enix Reboots and Awakens
～A 3-year reboot for long-term growth～
Diversify earnings opportunities by strengthening customer contact points
21
Shift to a multiplatform strategy
● Aggressively pursue a multiplatform strategy for HD titles that includes Nintendo
platforms, PlayStation, Xbox, and PCs
└ Create an environment where more customers can enjoy major franchises and AAA titles, including from
our back catalog
● For SD titles, explore PC launches and other options in addition to iOS and Android
└ Maximize new user acquisitions on launch and over the course of the game’s life
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Continuously establish contact points for our titles by stepping up digital sales
Diversify earnings opportunities by strengthening customer contact points
● Step up digital sales of new titles
└ Deploy promotional initiatives on launch that better direct customers toward digital purchases
● Strengthen earnings base by expanding sales of catalog titles
└ Create opportunities to generate earnings from our rich library of back titles
● Pursue initiatives focused on attracting PC users
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Create interaction with customers
by increasing sophistication of publishing function
Diversify earnings opportunities by strengthening customer contact points
● Pursue operational integration of publishing-related functions in Japan
└ Consolidate the marketing functions that were previously spread across creative business units,
expanding shared knowledge and eliminating duplicate functions to pursue greater efficiency
└ Create new reporting lines designed to enhance collaboration between sales and marketing functions
● Increase sophistication of marketing by leveraging first-party data
└ Utilize CRM solutions and data analytics in launch campaigns for HD and SD titles
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Create earnings opportunities by offering IP
across a range of entertainment experiences
Diversify earnings opportunities by strengthening customer contact points
● Reach new markets by furthering our pursuit of a cross-media strategy
└ Expand geographic coverage of our licensing business by establishing a new IP business development
department focused on global markets
● Establish an organization that promotes the use of our IP across a range of entertainment
experiences
└ Generate synergies by integrating organizations affiliated with the Merchandising segment
Our new medium-term plan: 4 strategies
25
3
Enhance productivity by optimizing the development footprint in the
Digital Entertainment (DE) segment
Diversify earnings opportunities by strengthening customer contact points
Roll out initiatives to create additional foundational stability
Allocate capital giving consideration to the balance between growth
investment and shareholder returns
Square Enix Reboots and Awakens
～A 3-year reboot for long-term growth～
Roll out initiatives to create additional foundational stability
26
Revisit overseas business division functions & organizational structures
● Revisit European and American functions/organizational structures, thereby
optimizing costs
└ Redesign organizational structures in line with new development organization in Japan
● Strengthen functions of London development site by promoting collaboration
between Group resources in Japan and abroad
└ Close collaboration with divisions in Japan (creative studios and publishing)
└ Enable greater mobility of talent across the Group
Roll out initiatives to create additional foundational stability
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Introduce organizational and HR-related initiatives aimed at
balancing creativity and productivity in our businesses in Japan
● Build a flat organization
└ Expand opportunities to select existing employees for specific roles, thereby tapping new talent
└ Simplify decision-making mechanisms
● Implement HR initiatives aligned to the operationally integrated organizational structure
of our development functions
└ Develop and roll out a single recruitment, promotion, and management appointment system for our
integrated development functions
● Establish a mid/long-term talent development system
└ Rebuild training and development system for new hires
└ Introduce internal programs to enhance capabilities of junior and mid-level employees
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Roll out initiatives to create additional foundational stability
Enhance business infrastructure to bolster employee productivity
● Invest capital to enhance our development environment
└ Invest in infrastructure that maximizes employee productivity in a hybrid work environment
└ Create an attractive office environment that helps unleash the creativity of our development teams
● Refine our management accounting system to enable greater visibility into our
business activities
Our new medium-term plan: 4 strategies
29
3
Enhance productivity by optimizing the development footprint in the
Digital Entertainment (DE) segment
Diversify earnings opportunities by strengthening customer contact points
Roll out initiatives to create additional foundational stability
Allocate capital giving consideration to the balance between growth
investment and shareholder returns
Square Enix Reboots and Awakens
～A 3-year reboot for long-term growth～
Under our new medium-term business plan, we will give consideration to the balance between growth investment and
shareholder returns in allocating capital, with the framework below serving as our basic philosophy.
Capital allocation: Balancing growth investment & shareholder returns
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• M&A等
• 安定的な配当
• 特別配当
• 自己株式の取得
Total 3-year
operating cash flow
Balance
sheet
¥50~70 bn
Funding
Strategic
investments
Capex
Use
¥30 bn
¥60 bn
Total
¥80~100 bn
● M&A/investment
└ Leverage insights from our own businesses to
execute inorganic investments aimed at
expansion into additional domains and the
creation of greater stability
└ Exercise strict selectivity in identifying
investment opportunities that will help enhance
our corporate value
● Shareholder returns (dividends and
share buybacks)
└ Flexibly repurchase shares in addition to
offering regular dividends
└ Allocated 20 billion yen for potential
share buybacks today
We devised the following policy based on a reassessment of our approach to capital allocation, giving consideration to the
balance between growth investments and shareholder return.
Shareholder return policy
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• Set a dividend payout ratio of 30%
• Revised the breakdown of per-share dividends
(interim dividend and year-end dividend)
• Allocated funds for the flexible repurchase of shares,
subject to considerations including strategic investment
opportunities, financial conditions, and the share price
• Revised our approach to capital allocation, taking the
balance between growth investment and shareholder
returns into consideration, and rewarded shareholders
with an amount equivalent to the growth in our cash and
deposits from end-FY2023/3 to end-FY2024/3
Our total shareholder return
Total payout ratio
Dividend per share
¥124
¥38
¥20 bn
earmarked
for buybacks
¥4.5 bn
¥14.8 bn
Regular
dividend
Share
buybacks
30%
165% *
FY2023/3
Actual
FY2024/3
Forecast
*Arrived at by dividing 24.5 billion yen (the total of 4.5 billion yen in expected dividends for the fiscal year ended March 31, 2024 and 20 billion yen in potential
share buybacks) by 14.9bn yen in profit attributable to owners of parent for the fiscal year ended March 31, 2024
(billions of yen)
Our new medium-term plan
32
Allocate capital giving consideration to the balance
between growth investment and shareholder return
Diversify earnings opportunities by strengthening
customer contact points
Enhance productivity by optimizing the development
footprint in the Digital Entertainment (DE) segment
Roll out initiatives to create additional foundational
stability
Initiatives
4 strategies
• Focus on developing titles that deliver fun only Square Enix can
create and establish a development footprint that enables that
• Shift to a multiplatform strategy
• Continuously establish contact points for our titles by stepping
up digital sales
• Create interaction with customers by increasing sophistication of
publishing function
• Create earnings opportunities by offering IP across a range of
entertainment experiences
• Revisit overseas business division functions & organizational
structures
• Introduce organizational and HR-related initiatives aimed at
balancing creativity and productivity in our business in Japan
• Enhance business infrastructure to bolster employee productivity
• Allocated up to 100 billion yen for total strategic investments over a
three-year period
By executing our new medium-term business plan,
we will achieve a shift from quantity to quality
and evolve to deliver a rich variety of content offering undeniable fun all over the world
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Target ROE of at least 10%, shifting to a management
approach mindful of capital efficiency
Achieve stable profit generation from the overall DE segment
and target a consolidated operating margin of 15%
in the fiscal year ending March 31, 2027
Allocated up to 100 billion yen for total strategic
investments
over a three-year period
(including up to 20 billion yen for potential share repurchases
over the next year)
Our new medium-term plan: 3 financial targets
Enhance productivity by optimizing the development
footprint in the Digital Entertainment (DE) segment
Diversify earnings opportunities
by strengthening customer contact points
Roll out initiatives to create additional foundational
stability
Allocate capital giving consideration to the balance
between growth investment and shareholder
returns
Consolidated Financial Forecasts: Fiscal Year ending March 31, 2025
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Fiscal Year Ended
March 31, 2024
Fiscal Year Ending
March 31, 2025
Full Year Results Full Year Forecasts Change
Net Sales 356.3
310.0
(46.3)
Operating Income 32.5
40.0
7.5
Operating Income Margin 9.1%
12.9%
3.8pt
Ordinary Income 41.5
40.0
(1.5)
Ordinary Income Margin 11.7%
12.9%
1.2pt
Profit attributable to owners
of parent
14.9
28.0
13.1
Dividends per share
(Yen)
Interim
10
28
18
Year-end
28
43
15
Total
38
71
33
(Billions of Yen)
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Creating New Worlds with Boundless Imagination
to Enhance People’s Lives.
