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Company Overview & Core Strengths

• Sega Sammy was formed from the 2004 merger of game developer Sega and pachinko/pachislot machine manufacturer Sammy, with a mission to create moving experiences to invigorate and add color to society.
• The company has four core strengths: a diverse talented workforce supporting a broad entertainment portfolio; diversified three-segment business that reduces earnings volatility from market changes; a large library of valuable IP that can be expanded across channels; and steadily growing brand value that forms a stable earnings base.

Entertainment Contents Business Strategy

• The core strategic priorities are expanding major existing IP, increasing investment in development and product capability, and re-growing the European business which faced challenges in the prior fiscal year.
• Transmedia strategy: Expand flagship IP beyond core console/PC games into video, licensing, and mobile games to increase reach and fan engagement. This strategy has already delivered strong results for the Sonic IP. Key success factors include strengthened cross-functional internal collaboration between development, marketing and sales; win-win partnerships with external experts in non-game sectors; and leveraging in-house group capabilities in toys and amusement machine development.
• Regional expansion: Grow beyond core markets of Japan/Asia and North America/Europe into underpenetrated regions globally.
• IP portfolio structure: Focus on growing core major IP first (Sonic, Like a Dragon, Persona, Angry Birds, Football Manager, Total War), while working to reactivate popular legacy IP (e.g. SHINOBI, with a new title launching in August 2025).
• Sonic IP transmedia progress: The third Sonic movie has exceeded 70 billion yen in box office revenue, driving increased sales of older Sonic games, higher video segment profits, and a sharp jump in licensing revenue for merchandise and collaborations. The recently launched Sonic × Shadow Generations has already sold over 2 million units, and a new mobile Sonic title, Sonic Rumble, is launching to capture new fans from the movie's popularity. A fourth Sonic movie is already planned.
• Strong repeat title performance: The growth is driven by continued strong sales of popular back catalog titles such as Persona 5 Royal Remastered, cross-promotion from video adaptations (Sonic movies, Like a Dragon live-action drama), and strategic optimization of digital download pricing and catalog lineup that improves discoverability of older titles.
• Atlus development strengths: High narrative writing quality, strong UI design and direction, and an in-house high-quality fast localization team that can accurately convey Japanese cultural elements to global audiences, supporting successful simultaneous worldwide launches like Metaphor: ReFantazio.

Amusement Machine Business Strategy

• The long-term pachinko/pachislot market is in a gradual decline, but the market has recovered from COVID-19 impacts led by pachislot growth following regulatory revisions that have enabled more attractive new titles. The strategic goals are to reach combined number 1 operating share for pachinko and pachislot, and achieve over 90 billion yen cumulative adjusted EBITDA across the 3-year mid-term plan.
• Key strategies: (1) Strengthen and stabilize the earnings base: expand pachislot product range beyond the company's current core spec segment, develop new IP to complement hit existing franchises like Fist of the North Star, and grow new revenue streams via EC sales and selling proprietary cabinet platforms to other industry players; (2) Drive industry-wide activation: develop new lower-cost cabinets to reduce operator costs that can be passed to players, and increase promotional activity to attract new users and reactivate lapsed users.

Gaming Business Strategy

• The company is pursuing growth in the emerging U.S. online iGaming market, which is expanding as more states legalize online gambling. The company is currently completing acquisitions of GAN (a SaaS provider for casino operators) and Stakelogic (an iGaming content supplier), and will combine these capabilities with its existing casino machine customer base to offer integrated B2B solutions to the online market.

Capital Allocation & Shareholder Returns

• The company prioritizes growth investment in the Entertainment Contents consumer segment and the new Gaming business, split between IP development investment and strategic investment including M&A.
• Shareholder return policy follows the higher of 3% or higher dividend on equity or a 50% or higher total payout ratio, returning cash via dividends and share buybacks.

• The new 3-year mid-term plan launched in the current fiscal year targets total cumulative adjusted EBITDA of more than 230 billion yen across the three years, and a 3-year average return on equity (ROE of over 10%.
• The Amusement Machine business targets a cumulative adjusted EBITDA of over 90 billion yen across the 3-year plan, and aims to achieve the number 1 combined operating share for pachinko and pachislot.
• The company maintains its shareholder return policy of the higher of 3% DOE or 50% total payout ratio, and expects consistent shareholder returns in the current fiscal year, with the 50% total payout ratio likely to apply.

1. Entertainment Contents Business: The largest revenue segment, accounting for ~75% of total revenue. It has three subsegments: (1) Consumer: includes premium full-priced console/PC games and free-to-play mobile games, with hit IP including Sonic, Like a Dragon, Persona, and the newly launched Metaphor: ReFantazio; (2) Video: centered on animation studio TMS Entertainment, and includes revenue from Sonic movie adaptations; (3) AM&TOY: develops and sells arcade game machines and toys. This segment has grown to become the company's main profit driver since the 2016 fiscal year. 2. Pachinko & Pachislot Machine (Amusement Machine) Business: Accounts for approximately 25% of total revenue. Historically the company's core profit driver, the segment has delivered strong recent performance led by the hit title Smart Pachislot Fist of the North Star, which sold 80,000 units and lifted Sega Sammy's pachislot operating share significantly. 3. Gaming Business: A newly launched segment in the current fiscal year, currently small in revenue contribution with plans for future expansion. It includes development and sales of casino slot machines, and co-operation of the Paradise City integrated resort in South Korea. The segment's recently launched Railroad Riches slot machine won two industry awards in the US and is performing well.

• The long-term pachinko/pachislot market faces structural decline, with total installed units, total unit sales, number of operating stores, and annual turnover all declining over time.
• Transmedia IP expansion is not uniformly successful; not all video adaptations of game IP will achieve widespread popularity or fan satisfaction, and the company will need to accumulate know-how and gradually improve its success rate for new projects.
• The U.S. online iGaming market is still at an early stage of legalization, with only a limited number of states having currently legalized the market; full market expansion depends on further legalization progress across states. The new online iGaming business entry is still in progress, with no guarantee of successful market penetration or profitability.

Q: What factors drove the strong performance of the newly released Metaphor: ReFantazio, and what is Atlus' core development strength? What is the strategy for balancing new IP development and existing IP growth? / A: Metaphor's success comes from its development by the Persona series veteran creators, which gave existing Persona fans confidence to try the new IP. It also benefited from Sega's capability to launch the game simultaneously across multiple platforms worldwide, eliminating the opportunity loss of the staggered regional launches Atlus used previously. Atlus' strengths include strong narrative writing, polished UI and direction, and a high-speed high-quality in-house localization team that accurately conveys Japanese cultural nuances for global audiences. The company's strategy focuses most investment on growing existing core IP to generate stable earnings, with new IP development pursued as a secondary incremental priority.

Q: What are the key success factors and challenges for Sega Sammy's transmedia expansion strategy for IP like Sonic? What synergies has the Sonic movie success delivered? / A: Success requires early cross-functional collaboration between internal development, marketing, and sales teams, win-win partnerships with experienced external partners, and leveraging existing in-house group capabilities for related product categories. The main challenges when starting out were limited experience negotiating with the film industry and determining the right level of involvement to maintain Sonic's core IP identity, which led to an early design misstep that required adjustment. The third Sonic movie exceeded 7 billion yen in box office, and has delivered broader synergies including higher sales of older Sonic games, stronger video segment profits from increased viewership of earlier films, and a large jump in licensing inquiries and merchandise revenue that delivers more incremental benefit than the box office distribution share itself.

Q: What is Sega Sammy's outlook for the future of the pachinko market? / A: The pachinko market has remained softer than the recovering pachislot market in the near term. However, the introduction of the new Lucky Trigger feature for pachinko machines starting in March 2024 has already produced multiple hit titles, and Sega Sammy is focused on developing its own hit pachinko machines to contribute to a market recovery going forward.