Sony Group Corp Q2 FY2024 earnings call

Management Statement and Operational Highlights

• G&NS Platform: Monthly active users across PlayStation platforms in September increased 8% to 116 million accounts; PS Plus sales up 18% in USD.
• G&NS Studio: Astro Bot successful with over 1.5 million copies sold; Helldivers 2 hit, Concord shut down; learning from successes/failures to strengthen development.
• Music: Streaming revenue up 9% year-on-year; expanding globally in emerging markets.
• Pictures: Recovering from strike impact; Crunchyroll expanding user base; India business rebuilding strategies.
• ET&S: Inventory reduced by ~10% at quarter end; acquired KinaTrax for sports data synergy.
• I&SS: Mobile sensor sales up due to unit price increase; preparing for normal run rate in Q4 2025.
• Financial Services: Preparing for partial spinoff and listing; working to improve ESR sensitivity to interest rates.

Segment Performance

• G&NS Segment: Sales for the quarter increased 12% year-on-year to ¥1,071.5 billion, operating income rose 184% to ¥138.8 billion. Full-year sales forecast increased by 4% to ¥4.490 trillion, operating income expected to rise 11% to ¥355 billion.
• Music Segment: Sales grew 10% year-on-year to ¥448.2 billion, operating income up 12% to ¥90.4 billion. FY ‘24 forecast unchanged.
• Pictures Segment: Sales decreased 11% year-on-year to ¥355.8 billion, operating income down 37% to ¥18.5 billion. FY ‘24 sales forecast slightly decreased, operating income down 8% to ¥115 billion.
• ET&S Segment: Sales ¥619.8 billion, essentially flat year-on-year; operating income up 15% to ¥70.2 billion. FY ‘24 forecast unchanged.
• I&SS Segment: Sales increased 32% year-on-year to ¥535.6 billion, operating income approximately doubled to ¥92.4 billion. FY ‘24 sales forecast down 4% to ¥1.770 billion, operating income down 9% to ¥250 billion.
• Financial Services Segment: Revenue decreased ¥167.2 billion year-on-year to negative ¥63.3 billion; operating income up ¥50.1 billion to ¥65.7 billion. FY ‘24 forecast unchanged.

Guidance

• Consolidated sales excluding Financial Services: Up to ¥11.800 trillion; operating income ¥1.165 trillion; operating cash flow ¥1.440 trillion (increased by ¥40 billion).
• Consolidated sales including Financial Services: Up to ¥12.710 trillion; operating income ¥1.310 trillion; net income ¥980 billion (unchanged).

Risks

• Financial Services: ESR sensitivity to interest rate fluctuations.
• I&SS: Customer production plan revisions impacting sales.
• ET&S: TV market softening in China; imaging business competitive conditions and increased sales promotion costs.

Question and Answer

• Q: About I&SS downward revision and game business reform.

A: Market recovery slow, customer production plan revisions part of business; gaming reform includes portfolio concept and cost optimization.

• Q: Impact of U.S. election and music catalogs.

A: Observe election impact on economy/geopolitics; music catalogs provide stable recurring income and expand usage across Sony Group.

• Q: PS5 Pro sales and ET&S digital camera outlook.

A: PS5 Pro targets hardcore users; ET&S TV market softening in China, imaging business faces competitive and promotion costs but no forecast change.

• Q: Operating cash flow and Financial Services.

A: Operating cash flow upward revised due to improved game business working capital; inventory control and year-end selling season impact cash flow.