BANDAI NAMCO : Consolidated Financial Report363.4 KB

Bandai Namco Holdings Inc.

Consolidated Financial Report for the Third Quarter of

the Fiscal Year Ending March 31, 2024

February 14, 2024

DISCLAIMER

• Bandai Namco Holdings Inc. provides this translation for your reference and convenience only and without any warranty as to its accuracy or otherwise. In the event of any discrepancy, the original "Kessan Tanshin" in Japanese shall prevail.
• This document contains forward-looking statements that are based on managementʼs estimates, assumptions and projections at the time of publication. A number of factors could cause actual results to differ materially from expectations.

Bandai Namco Holdings Inc.

Stock Listing: Tokyo Stock Exchange Code Number: 7832

(URL: https://www.bandainamco.co.jp/)

February 14, 2024

Consolidated Financial Report for the Third Quarter of the Fiscal Year Ending March 31, 2024 (Japanese GAAP)

Representative:	Masaru Kawaguchi, President and Representative Director
Contact:	Yuji Asako, Director
Scheduled filing date of the quarterly security report:	February 14, 2024
Scheduled starting date for dividend payments:	-
The Financial Highlights of the Financial Results for the Quarter:	Yes
The information session of the Financial Results for the Quarter:	Yes (for institutional investors and analysts)

* Figures are in millions of yen, rounded down

1. Consolidated Results for the Third Quarter of the Fiscal Year Ending March 31, 2024 (April 1, 2023 to December 31, 2023)

1. Consolidated Operating Results (For the Nine Months Ended December 31, 2023)

(Percentages indicate year-on-year changes.)

			Net sales		Operating profit	Recurring profit
			¥ million	%	¥ million	%	¥ million	%
	Third Quarter of the Fiscal Year	772,035	3.9	78,282	(26.3)	89,630	(23.4)
	Ending March 31, 2024
	Third Quarter of the Fiscal Year	743,187	18.3	106,203	15.2	116,961	22.4
	Ended March 31, 2023
			Profit attributable to	Basic earnings per share	Diluted earnings per
			owners of parent	share
			¥ million	%		¥		¥
	Third Quarter of the Fiscal Year	60,398	(28.5)		91.49		-
	Ending March 31, 2024
	Third Quarter of the Fiscal Year	84,444	36.9		127.95		-
	Ended March 31, 2023
(Note)	Comprehensive income: 93,090 million yen [(11.3)%] (FY2024.3 3Q), 105,000 million yen [69.1%] (FY2023.3 3Q)
(Note)	The Company conducted a share split with a ratio of three shares for every one share of common stock on April 1, 2023.
		Basic earnings per share were calculated assuming that the share split was conducted at the beginning of the previous
		fiscal year.

(2) Consolidated Financial Position

	Total assets	Net assets	Equity ratio
	¥ million	¥ million	%
As of December 31, 2023	959,423	699,695	72.9
As of March 31, 2023	926,358	652,133	70.4

(Reference) Equity: 699,257 million yen (as of December 31, 2023), 651,851 million yen (as of March 31, 2023)

2. Cash Dividends

					Annual cash dividends
		End of		End of	End of	Fiscal	Total
		first quarter		second quarter	third quarter	year-end
Fiscal Year Ended March 31, 2023		-	¥27.00	-	¥179.00	¥206.00
Fiscal Year Ending March 31, 2024		-	¥10.00	-
Fiscal Year Ending March 31, 2024						¥10.00	¥20.00
(Projections)

(Notes) 1. Revision to the projections of cash dividends for the Fiscal Year Ending March 31, 2024: No

Concerning the projected amounts of the year-end cash dividend for the fiscal year ending March 31, 2024, the base dividend is stated based on the Company's basic policy on the distribution of profits. The year-end cash dividend for the fiscal year ending March 31, 2024, will be considered by the Company based on the basic policy on the distribution of profits.

2. The Company conducted a share split with a ratio of three shares for every one share of common stock on April 1, 2023. The actual amount of dividends based on before the aforementioned share split is stated for the fiscal year ended March 31, 2023.

3. Consolidated Projections for the Fiscal Year Ending March 31, 2024 (April 1, 2023 to March 31, 2024)

(Percentages indicate year-on-year changes.)

	Net sales		Operating	Recurring	Profit attributable to	Basic earnings
				profit		profit		owners		per share
										of parent
	¥ million		%	¥ million		%	¥ million		%	¥ million		%	¥
Full Fiscal Year	1,000,000		1.0	82,000		(29.6)	93,000		(27.3)	-		-	-
(Note) Revision to the projections: Yes

Consolidated projections for the full fiscal year ending March 31, 2024 (announced on November 7, 2023) are revised in this document. For details of the revisions to the consolidated projections, please refer to "Notice Regarding Revisions to Consolidated and Non-consolidated Projections" announced today (February 14, 2024).

* Notes

(1) Changes in Significant Subsidiaries during the Period

(Changes in Specified Subsidiaries Resulting in the Change in Scope of Consolidation): No

(2) Application of Special Accounting for Preparing the Quarterly Consolidated Financial Statements: Yes

(Note) For more details, please refer to the section of "(3) Notes to Consolidated Financial Statements, (Application of Special Accounting for Preparing the Quarterly Consolidated Financial Statements)" of "2. Consolidated Financial Statements and Significant Notes" on page 12 of the attached material.

1. Changes in Accounting Policies, Changes in Accounting Estimation and Restatement
2. 1. Changes in accounting policies due to revisions to accounting standards and other regulations: No
   2. Changes in accounting policies due to other reasons: No
   3. Changes in accounting estimation: No
   4. Restatement: No
3. Number of Issued Shares (Common Stock)
4. 1. Total number of issued shares at the end of the period (including treasury stock)

As of December 31, 2023	666,000,000 shares
As of March 31, 2023	666,000,000 shares
b) Number of shares of treasury stock at the end of the period
As of December 31, 2023	5,813,649 shares
As of March 31, 2023	5,949,648 shares
c) Average number of shares during the period (cumulative from the beginning of the fiscal year)
For the Third Quarter of the Fiscal Year Ending March 31, 2024	660,131,861 shares
For the Third Quarter of the Fiscal Year Ended March 31, 2023	660,002,709 shares

(Note) The Company conducted a share split with a ratio of three shares for every one share of common stock on April 1, 2023. Total number of issued shares at the end of the period, number of shares of treasury stock at the end of the period, and average number of shares during the period have been calculated assuming that the share split was conducted at the beginning of the previous fiscal year.

• Quarterly Consolidated Financial Reports are not required to be subjected to quarterly reviews conducted by certified public accountants or an audit firm.
• Explanation on appropriate use of the projections of business results, etc.
• • Forward-LookingStatements:
    This document contains forward-looking statements that are based on managementʼs estimates, assumptions and projections at the time of publication and those forward-looking statements do not purport to be a promise by the Company to achieve such results. A number of factors could cause actual results to differ materially from expectations. Please refer to the section of "(3) Explanation Regarding Consolidated Projections and Other Forward-Looking Statements" of "1. Qualitative Information Regarding Consolidated Results for the Third Quarter" on page 3 of the attached material for matters pertaining to the earnings projections.
  • To Obtain Financial Highlights:
    The Financial Highlights will be posted on the Company's website on February 14, 2024.

(Reference) Non-consolidated Projections for the Fiscal Year Ending March 31, 2024 (April 1, 2023 to March 31, 2024)

(Percentages indicate year-on-year changes.)

	Operating revenue	Recurring profit		Profit		Basic earnings
									per share
	¥ million	%	¥ million		%	¥ million		%	¥
Full Fiscal Year	60,000	45.4	48,000		46.6	-		-	-

(Note) Revision to the projections: Yes

Non-consolidated projections for the full fiscal year ending March 31, 2024 (announced on May 10, 2023) are revised in this document. For details of the revisions to the non-consolidated projections, please refer to "Notice Regarding Revisions to Consolidated and Non-consolidated Projections" announced today (February 14, 2024).

Attached Material
Index
1. Qualitative Information Regarding Consolidated Results for the Third Quarter	2
(1)	Explanation Regarding Operating Results	2
(2)	Explanation Regarding Financial Position	3
(3)	Explanation Regarding Consolidated Projections and Other Forward-Looking Statements	3
2. Consolidated Financial Statements and Significant Notes	8
(1)	Consolidated Balance Sheets	8
(2)	Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income	10
	(Consolidated Statements of Operations)	10
	(Consolidated Statements of Comprehensive Income)	11
(3)	Notes to Consolidated Financial Statements	12
	(Notes on Premise of Going Concern)	12
	(Notes on Significant Changes in the Amount of Stockholdersʼ Equity)	12
	(Application of Special Accounting for Preparing the Quarterly Consolidated Financial Statements)	12
	(Segment Information)	12
	(Significant Subsequent Events)	14

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1. Qualitative Information Regarding Consolidated Results for the Third Quarter

(1) Explanation Regarding Operating Results

During the third quarter (nine months) of the fiscal year ending March 31, 2024, the future of the economic environment around the world remained uncertain mainly as a result of changes in the social situation, rising raw material and fuel prices, and exchange rate fluctuations, despite revitalization of socioeconomic activities due to the relaxation of restrictions on activities and other measures implemented due to the novel coronavirus disease (COVID-

1. pandemic.
   Under such circumstances, from April 2022, with the introduction of our Purpose "Fun for All into the Future" as the

ultimate definition of who we are as a Group and the introduction of a new logo, the Bandai Namco Group began our new three-yearMid-term Plan. In the Mid-term Plan, in order to achieve the medium- to long-term aims of the Bandai Namco Group based on our Purpose "Fun for All into the Future," we have established a Mid-term Vision of "Connect with Fans" that aims to constantly meet the needs of global IP fans, a wide range of business partners, Group employees, and communities around the world and to foster broad, deep, and multifaceted connections. As priority strategies, we are promoting our IP axis strategy, personnel strategy, and sustainability. By propelling the priority strategies, we will take advantage of the worldview and unique characteristics of IP (Intellectual Property: meaning characters and other intellectual property) to further evolve the IP axis strategy that aims to maximize IP value through the provision of the optimal products and services at the optimal times. We will also strengthen the global development of the IP axis strategy and enhance our sense of unity and collective strength under the ALL BANDAI NAMCO concept in order to achieve continuous growth.

In the third quarter (nine months), we strengthened our efforts united under the ALL BANDAI NAMCO concept, with our IP axis strategy at the core of our efforts, working across the Group and in cooperation with each region and business. In the Toys and Hobby Business, products for the mature fan base, card products, capsule toys and other items were popular, which contributed to the Group's overall performance. In the Digital Business, in addition to valuation losses, including a new title in online games launched this fiscal year, a loss on disposal was recorded due to changes in the composition of titles with a view to the next Mid-term Plan.

Consequently, the Group's consolidated results for the third quarter (nine months) were net sales of 772,035 million yen (year-on-year increase of 3.9%), operating profit of 78,282 million yen (year-on-year decrease of 26.3%), recurring profit of 89,630 million yen (year-on-year decrease of 23.4%), and profit attributable to owners of parent of 60,398 million yen (year-on-year decrease of 28.5%).

Operating results by segment are as follows.

Digital Business

As for the Digital Business, in network content, sales were stable in Japan and overseas due to ongoing measures targeting users for key app titles such as the DRAGON BALL series and ONE PIECE. In contrast, a new online game title fell far short of plan. In home console games, ARMORED CORE VI FIRES OF RUBICON, a new title for worldwide distribution, became popular. In home console games overall, results were impacted by the difference in the product mix from the same period of the previous year, which received significant contribution from repeat sales of ELDEN RING among existing titles.

In the Digital Business, in addition to valuation losses, including a new title in online games launched this fiscal year, a loss on disposal was recorded due to changes in the composition of titles with a view to the next Mid-term Plan. Going forward, we will build an optimal and well-balanced portfolio of titles, conduct an examination of our development structure, and strengthen development with an emphasis on quality.

As a result, net sales in the Digital Business were 263,012 million yen (year-on-year decrease of 8.9%), and segment profit was 1,615 million yen (year-on-year decrease of 96.5%).

Toys and Hobby Business

As for the Toys and Hobby Business, while impacted by rising prices for raw materials and fuel, the performance remained strong due to efforts to expand the product lineup in categories that are doing well, advance global business development, strengthen production operations and expand touch points through real events and stores. Specifically, products for the mature fan base such as model kits of the Gundam series, collectible figures, and character lotteries performed favorably mainly due to the successful outcomes produced by sales, marketing, and expansion of the product lineup. In addition, card products such as the ONE PIECE trading card game, capsule toys, confectionery and foods, and other products contributed to earnings by strengthening the product lineup, fan base and customer touch points.

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As a result, net sales in the Toys and Hobby Business were 390,212 million yen (year-on-year increase of 13.1%), and segment profit was 69,717 million yen (year-on-year increase of 31.7%).

IP Production Business

As for the IP Production Business, we produced several new works in video production, including TV animation programs and theatrical productions. Among those, Mobile Suit Gundam the Witch from Mercury brought in a new fan

base and led to strong sales of the Group's products and services. In addition, the performances of licensing businesses

and video streaming related to works, such as the Gundam series, the LoveLive! series, IDOLiSH7, That Time I Got Reincarnated as a Slime, and BLUELOCK, were stable, and GUNDAM FACTORY YOKOHAMA, which captured inbound demand, etc., was favorable.

As a result, net sales in the IP Production Business were 55,585 million yen (year-on-year increase of 1.0%), and segment profit was 6,801 million yen (year-on-year increase of 7.1%).

Amusement Business

As for the Amusement Business, net sales for existing amusement facilities in Japan increased to 102.4% year on year.

In addition, store development unique to Bandai Namco and linked to the Group's products and services, such as the

Bandai Namco Cross Store and the GASHAPON Department Store, saw strong performance. In arcade games, sales of the new product Mobile Suit Gundam Extreme Vs. 2 Overboost and Update kit for the popular series were strong. In addition, we continued our efforts to improve efficiency in light of changes in the external environment, such as rising fuel prices.

As a result, net sales in the Amusement Business were 88,310 million yen (year-on-year increase of 17.0%), and segment profit was 7,560 million yen (year-on-year increase of 9.0%).

Other Businesses

Other Businesses consist of companies that conduct businesses such as logistics support and other kinds of administration and operational support for each of the Group companies. We have been making efforts to manage such operations related to Group support in an efficient manner.

Net sales in the Other Businesses were 24,571 million yen (year-on-year increase of 4.4%), and segment profit was 1,268 million yen (year-on-year increase of 11.2%).

(2) Explanation Regarding Financial Position

At the end of the third quarter of the fiscal year ending March 31, 2024, total assets stood at 959,423 million yen, an increase of 33,065 million yen from the end of the previous fiscal year. The main factors were increases of 39,863 million yen in trade receivables and contract assets, 11,073 million yen in property, plant and equipment, and 31,337 million yen in investment securities, despite a decrease of 51,819 million yen in cash and time deposits.

Total liabilities amounted to 259,727 million yen, a decrease of 14,496 million yen from the end of the previous fiscal year. The main factors were decreases of 3,258 million yen in trade payables and 10,229 million yen in accrued income taxes.

Total net assets stood at 699,695 million yen, an increase of 47,562 million yen from the end of the previous fiscal year. The main factors were increases of 14,399 million yen in retained earnings, 20,670 million yen in valuation difference on available-for-sale securities, net of tax, and 11,435 million yen in foreign currency translation adjustments.

As a result, the equity ratio became 72.9% compared with 70.4% at the end of the previous fiscal year.

(3) Explanation Regarding Consolidated Projections and Other Forward-Looking Statements

Looking ahead, the Group expects uncertainty to continue in various regions around the world. We also expect the changes in the environment surrounding us such as the market as well as customer lifestyles and preferences to become even more intense.

Under these circumstances, adapting to escalating competitiveness in global markets and diversification in lifestyles and preferences of customers, in line with our IP axis strategy, the Bandai Namco Group will enhance sense of unity and collective strength under the ALL BANDAI NAMCO concept, while utilizing the characteristics of each business. From April 2022, with the introduction of our Purpose "Fun for All into the Future" as the ultimate definition of who we are as a Group and the introduction of the new logo, to maintain continuous growth over medium to long term for the aims under our Purpose, the three-yearMid-term Plan has started.

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1. Formulation of Bandai Namcoʼs Purpose "Fun for All into the Future" and introduction of the new logo

From April 2022, we have established our new Purpose "Fun for All into the Future" as the ultimate definition of who we are as a Group, conveying "the reason for our existence," "why we conduct our businesses and corporate activities," and "the meaningfulness we derive from working at Bandai Namco Group." What we believe to be particularly important elements in our Purpose are the ideas of "Connecting and working together to create things" and we will achieve "Fun for All into the Future" by Bandai Namco Group and our fans connecting through dreams, fun and inspiration. Furthermore, the Group CEO's desire to promote "Fun for All into the Future" is expressed in the phrase, "Creating a world of smiles and happiness together," and we will spread this message together with Bandai Namco's Purpose.

From April 2022, we have introduced a new logo that expresses the spirit of our Purpose. All companies with "Bandai Namco" in their names will use this logo, and companies with and without "Bandai Namco" in their names will display this new Group logo on all their products and services, in principle. This will enable us to bring together the value of all

our products, services, and labels under one logo, make the Group's sense of unity and its total capabilities appeal

strongly, and elevate the brand value of the Bandai Namco Group in the global market.

1. Our aims driven by our Purpose "Fun for All into the Future"

In accordance with our Purpose, the Bandai Namco Group aims to connect with IP fans, a wide range of business partners, Group employees, and communities around the world. We will strive to connect more broadly with new fans and more deeply with current fans. In addition, we will aim to foster multifaceted connections among current fans and new fans as well as communities of fans. In fostering connections with and among various fans, our highest priority will be the quality of the connections. Under the Mid-term Plan, we will advance a variety of strategies and initiatives focusing on broad, deep, and multifaceted connections with fans and on the quality of those connections.

1. Mid-termVision

In accordance with our Purpose "Fun for All into the Future," as we work toward what the Bandai Namco Group aims to be, under the Mid-term Plan we will strive to always meet the needs of IP fans, a wide range of business partners, Group employees, and communities around the world and to foster broad, deep, multifaceted connections.

1. Main strategies and investment plan

IP axis strategy

The IP axis strategy, which is the Bandai Namco Group's strength, is the core of the Mid-term Plan.

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We will aim for sustainable growth by implementing new initiatives to foster broad, deep, and multifaceted connections with fans around the world; by accelerating evolution in the IP axis strategy; and by working to build businesses as we work together under the ALL BANDAI NAMCO concept in regions around the world.

• IP x Fans (connecting with fans through IP): New framework for connecting with fans

Based on the IP axis, Bandai Namco will develop a metaverse for each IP as a new framework for connecting with fans. In this IP Metaverse, we are anticipating virtual spaces that will enable customers to enjoy a wide range of entertainment surrounding IP, as well as frameworks that leverage Bandai Namco's distinctive strengths to fuse physical products and venues with digital elements. We are aiming for open frameworks that provide venues for connections with and among fans and business partners. Through the IP Metaverse, we will establish communities among Bandai Namco and fans, as well as among fans themselves. Through these communities and content, we will build broad, deep, multifaceted connections that continue for long periods of time, and we will focus on the quality of those connections. In this way, we will work to maximize IP value over the medium to long term.

• IP x Value (enhancing IP value): Accelerating evolution in the IP axis strategy

We will leverage outlets for a wide range of products and services as well as our strengths in facilitating collaboration among physical and digital elements, and we will redefine the optimal IP axis strategy for IP fans and for IP itself. In these ways, we will aim to accelerate evolution in the IP axis strategy.

• IP x World (connecting the world through IP): Building businesses under the ALL BANDAI NAMCO concept

To work together and advance our strategies under the ALL BANDAI NAMCO concept in regions worldwide, we have implemented such initiatives as organizational restructuring and base consolidation around the world. Under this ALL BANDAI NAMCO concept, we work to build businesses in each region.

• Investment plan for accelerating evolution in the IP axis strategy

Over the three years of the Mid-term Plan, we will implement a total of 40.0 billion yen in strategic investment

to accelerate evolution in the IP axis strategy.
Strategic investment to maximize IP value:	25.0 billion yen
Investment to develop the IP Metaverse:	15.0 billion yen

Personnel strategy: Developing diverse human resources

In accordance with our Purpose "Fun for All into the Future," the Group strives to be a corporate group of "Same Spirit, Diverse Talents," where diverse people with various talents, personalities, and values can thrive. We will further focus on recruiting and promoting human resources regardless of whether they are new graduates or mid-career hires and regardless of gender, age, nationality, race, religion, or sexual orientation. In addition, we will focus on developing systems and environments that enable a diversity of people to thrive and work in a way that is both physically and mentally healthy. Under the Mid-term Plan, we will promote initiatives to support challenges taken on by employees and the development of human resources to promote the IP axis strategy on a global scale, as well as new and diverse ways to work.

In addition, we will actively engage in cooperation and collaboration with external human resources.

Sustainability: Connecting to smiles into the future

Under our Purpose "Fun for All into the Future" and "Bandai Namco Group Sustainability Policy," the Group has identified five themes that need to be addressed with particular importance as Material Issues. We are promoting various specific action plans linked to our businesses, such as initiatives to introduce electricity derived from renewable energy, eliminate petroleum-derived plastics, and promote the collection and recycling of model kit runners and empty capsules. Furthermore, to respond to the natural environmental problems that society is facing, we will set targets and steps for reduction of carbon dioxide emissions from the use of energy and strive to advance efforts toward decarbonization.

Based on the IP axis strategy, the Bandai Namco Group will work together with fans to advance sustainability activities that focus on the social issues that the Group should address.

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• Harmonious coexistence with the natural environment
• Provision of appropriate products and services
• Appropriate utilization and protection of intellectual property
• Establishment of work environments that facilitate mutual respect
• Harmonious coexistence with communities

In addition, on November 1, 2023, the Bandai Namco Group Human Rights Policy was established, which clearly stipulates the Bandai Namco Group's policy regarding respect for human rights. Going forward, we will fulfill our responsibility to respect the human rights of all stakeholders involved in the Group's business activities by aiming to continue to create a brighter future with people around the world through entertainment that awakens our humanity and connects us with others, with society, and with the world, as represented by Bandai Namco's Purpose "Fun for All into the Future."

1. System for promotion of the Mid-term Plan

• Strengthening the governance system of Bandai Namco Holdings

In order to further increase corporate value by strengthening our corporate governance system and implementing rapid decision-making and business execution, we made the transition to a company with an Audit & Supervisory Committee in June 2022.

• Partial changes of the Unit structure

From April 2022, we restructured the IP Production Unit and also integrated the Visual and Music Business and the Creation Business into the IP Production Business. In the IP Production Unit, Bandai Namco Filmworks Inc. will serve as a business management company upon having combined three companies that engage in the visual business within the IP Production Unit, namely SUNRISE INC., the visual business of Bandai Namco Arts Inc., and Bandai Namco Rights Marketing Inc.

1. Numerical targets, shareholder return policy

• Fiscal year ending March 31, 2025: Numerical targets

Consolidated net sales:	1,100.0 billion yen
Consolidated operating profit:	125.0 billion yen
ROE:	12% or more

In the future, the Bandai Namco Group aims to always meet the needs of IP fans, a wide range of business partners, Group employees, and communities around the world and to foster broad, deep, multifaceted connection, and each business around the world will further work as one under the ALL BANDAI NAMCO concept on the priority strategies, consisting of the IP axis strategy, Personnel strategy, and Sustainability, under the Mid-term Plan.

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