Sony Group Corp Q1 FY2024 earnings call

Management Statement and Operational Highlights

• G&NS: Hardware sales up due to FX and software; PlayStation MAU and play time growth; upcoming game launches like Concord, Astro Bot, and God of War Ragnarok PC version.
• Music: Sales up due to FX, box office, and streaming; mid-term growth forecast of mid-to-high single digit average annual growth rate.
• Pictures: Sales up due to FX; Crunchyroll subscriber growth to over 15 million; acquisition of Alamo Drafthouse Cinema.
• ET&S: Sales up due to FX; focus on high-value products like Bravia 9 Series and inventory control.
• I&SS: Sales up due to FX and mobile sensor sales; mid-term growth drivers include larger sensors for cameras.
• Financial Services: Revenue down due to market fluctuations; focus on life insurance growth and hedging against market risks.

Segment Performance

• G&NS: FY '24 Q1 sales 864.9 billion yen, +12% YOY; operating income 65.2 billion yen, +16 billion yen YOY. FY '24 forecast: sales 4.320 trillion yen (+120B from previous), operating income 320 billion yen (+10B).
• Music: FY '24 Q1 sales 442 billion yen, +23% YOY; operating income 85.9 billion yen, +12.5B YOY. FY '24 forecast: sales 1.740 trillion yen (+50B), operating income 330 billion yen (+15B).
• Pictures: FY '24 Q1 sales 337.3 billion yen, +5% YOY; operating income 11.3 billion yen, -4.7B YOY. FY '24 forecast: sales 1.520 trillion yen (+40B), operating income 125 billion yen (+5B).
• ET&S: FY '24 Q1 sales 600.9 billion yen, +5% YOY; operating income 64.1 billion yen, +8.4B YOY. FY '24 forecast: sales 2.420 trillion yen (+50B), operating income 190 billion yen (unchanged).
• I&SS: FY '24 Q1 sales 353.5 billion yen, +21% YOY; operating income 36.6 billion yen, +23.9B YOY. FY '24 forecast: sales 1.850 trillion yen (+10B), operating income 275 billion yen (+5B).
• Financial Services: FY '24 Q1 revenue 448.6 billion yen, -34% YOY; operating income 30 billion yen, -24.5B YOY. FY '24 forecast: revenue 910 billion yen, operating income 145 billion yen (unchanged).

Guidance

• Consolidated sales excluding Financial Services revised up 3% to 11.700 trillion yen; operating income up 35 billion yen to 1.165 trillion yen; net income up 55 billion yen to 875 billion yen.
• Full-year consolidated sales revised up 2% to 12.610 trillion yen; operating income up 35 billion yen to 1.310 trillion yen; net income up 55 billion yen to 980 billion yen.

Risks

• Exchange rate fluctuations and economic downturn, particularly in the US, affecting business performance.
• Market volatility impacting Financial Services, especially in Sony Life with surrender rates and market conditions.

Question and Answer

Q: About G&NS restructuring, what is the plan?

A: Hiroki Totoki responded that restructuring aims for cost structure and portfolio optimization, concentrating resources on high-quality games and reallocating others to the Studio Group.

Q: About Paramount acquisition, why not propose again?

A: Hiroki Totoki stated Paramount acquisition didn't fit with strategy, and IP is core but capital allocation was risky.

Q: About Crunchyroll growth, current situation and future?

A: Naomi Matsuoka said Crunchyroll surpassed 15 million subscribers, benefited from partnerships and content expansion, with plans to expand in Europe and other regions.

Q: About I&SS semiconductor production and market risk?

A: Hiroki Totoki said production increased for high-end products, and while competitors exist, risk of entry is small in the mid-term.

Q: About Financial Services operating income progress?

A: Kazuhiro Yamada explained first quarter progress was low due to surrender rates and market conditions, with focus on managing profitability through market attention.