Square Enix : Consolidated Financial Results for the Three-Month Period Ended June 30, 2021

Consolidated Financial Results

for the Three-Month Period Ended June 30, 2021 (Japan GAAP)

August 5, 2021

Company name:	SQUARE ENIX HOLDINGS CO., LTD.
Shares traded:	Tokyo Stock Exchange, First Section
Company code:	9684
Company URL:	https://www.hd.square-enix.com/eng
Representative:	Yosuke Matsuda, President and Representative Director
Contact:	Atsushi Matsuda, Chief Accounting Officer
Tel:	[phone]

Financial report submission:	August 11, 2021 (planned)
Cash dividend payment commencement:	－
Supplementary quarterly materials prepared: Yes
Quarterly results presentation held:	Yes (for institutional investors and analysts)

(Amounts under one million yen are rounded down)

1. Consolidated Financial Results (April 1, 2021 through June 30, 2021)

(1) Consolidated Financial Results

(Millions of yen and year-on-year changes in percents)

	Net sales		Operating income	Ordinary income	Profit attributable to
		owners of parent
Three months ended				％			％		％		％
June 30, 2021	88,604	1.8		17,316	(29.5)	17,661	(26.9)	12,655	(11.9)
June 30, 2020	87,054	63.2		24,549	241.4	24,169	283.8	14,372	248.6
Note: Three months ended June 30, 2021 Comprehensive income: 12,806 million yen [(10.6％)]
Three months ended June 30, 2020 Comprehensive income: 14,326 million yen [259.2％]
	Earnings per		Earnings per
	share, basic		share, diluted
Three months ended		yen			yen
June 30, 2021	105.98			105.74
June 30, 2020	120.47			120.24

Note: The Company has applied the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29; March 31, 2020) and other standards as of the start of the first quarter of the consolidated fiscal year ending March 31, 2022 and figures for the year ending March 31, 2022 reflect this change of accounting method.

(2) Consolidated Financial Position

(Millions of yen, ratios in percents and per share data)

	Total assets			Net assets	Equity ratio
As of						％
June 30, 2021		326,630		247,978	75.6
March 31, 2021		336,144		243,278	72.1
Note1. Total equity As of June 30, 2021:	247,040	million yen
As of March 31, 2021:	242,364	million yen

2. The Company has applied the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29; March 31, 2020) and other standards as of the start of the first quarter of the consolidated fiscal year ending March 31, 2022 and figures for the year ending March 31, 2022 reflect this change of accounting method.

2. Dividends

			Dividends per share
	1Q	2Q		3Q		4Q	Total
	yen	yen		yen		yen	yen
Fiscal year ended	－	10.00		－		68.00	78.00
March 31, 2021
Fiscal year ending	－
March 31, 2022
Fiscal year ending
March 31, 2022		10.00		－		51.00	61.00
(projection)

Note: No change in Dividend projection from previous announcement.

3. Consolidated Forecasts (April 1, 2021 to March 31, 2022)

(Millions of yen, year-on-year changes in percents and per share data)

	Net sales		Operating income	Ordinary income	Profit attributable to	Earnings
		owners of parent	per share
		％		％		％		％	yen
Fiscal year ending
March 31, 2022	340,000	2.2	40,000	(15.3)	40,000	(20.0)	24,000	(10.9)	201.10

Note1. No change in consolidated forecasts from previous announcement.

2. The Company has applied the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29; March 31, 2020) and other standards as of the start of the first quarter of the consolidated fiscal year ending March 31, 2022 and figures for the year ending March 31, 2022 reflect this change of accounting method.

Notes

1. Significant changes among major subsidiaries during the period: No
2. Adoption of special accounting treatment for quarterly consolidated financial statements: No
3. Changes in accounting policies, procedures, and methods of presentation for consolidated financial statements
4. 1. Changes in accounting policies due to revisions to accounting standards: Yes
   2. Changes other than 1. : No
   3. Changes in accounting estimates: No
   4. Retrospective restatement: No
5. Outstanding shares (common stock)
6. 1. Number of shares issued and outstanding (including treasury stock):

As of June 30, 2021	122,531,596
As of March 31, 2021	122,531,596
2. Number of treasury stock:	3,096,354
As of June 30, 2021
As of March 31, 2021	3,122,037

3. Average number of shares during the period (cumulative):

Three-month period ended June 30, 2021	119,413,412
Three-month period ended June 30, 2020	119,297,973

Disclaimer: (1) This document is a translation of the Japanese language "Kessan Tanshin" prepared in accordance with the guidelines of the Tokyo Stock Exchange. The Japanese language document shall prevail in the event any differences or discrepancies exist between this English translation and the original. (2) At the time of disclosure of this report, review procedures for quarterly financial statements pursuant to the Financial Instruments and Exchange Law had not been completed. (3) The forward-looking statements in this document are based upon the information currently available and necessarily include elements that are not entirely predictable. The achievement is not promised. Actual results may differ from the forward-looking statements in this document. (4) For additional information about forecasts, please refer to "1. Consolidated Results for the Three-Month Period Ended June 30, 2021 (3) Qualitative information on consolidated business forecasts" section on page 4 of Supplemental Information

Supplemental Information － Index

		Page
1. Consolidated Results for the Three-Month Period Ended June 30, 2021	2
(1)	Analysis of consolidated business results	2
(2)	Analysis of consolidated financial position	3
(3)	Qualitative information on consolidated business forecasts	4
2. Consolidated Financial Statements for the Three-Month Period Ended June 30, 2021	5
(1)	Consolidated Balance Sheets	5
(2)	Consolidated Income Statement and Consolidated Statement of Comprehensive Income	7
	Consolidated Income Statement	7
	Consolidated Statement of Comprehensive Income	8
(3)	Notes to Consolidated Financial Statements	9
	(Note regarding going concern assumptions)	9
	(Material changes in shareholders' equity)	9
	(Changes in accounting policies)	9
	(Additional information)	10
	(Segment information)	11

－ 1 －

1. Consolidated Results for the Three-Month Period Ended June 30, 2021

(1) Analysis of consolidated business results

The Square Enix group (the "Group") is continuing determined efforts to strengthen the competitiveness and profitability of its Digital Entertainment, Amusement, Publication and Merchandising business segments. Net sales for the three-month period ended June 30, 2021 totaled ¥88,604 million (an increase of 1.8％ from the same period of the prior fiscal year), operating income amounted to ¥17,316 million (a decrease of 29.5％ from the same period of the prior fiscal year), ordinary income amounted to ¥17,661 million (a decrease of 26.9％ from the same period of the prior fiscal year), and profit attributable to owners of parent amounted to ¥12,655 million (a decrease of 11.9％ from the same period of the prior fiscal year).

A discussion of results by segment for the three-month period ended June 30, 2021 follows.

●Digital Entertainment

The Digital Entertainment segment consists of planning, development, distribution, and operation of digital entertainment content primarily in the form of games. Digital entertainment content is offered to meet customer lifestyles across a variety of usage environments such as consumer game consoles (including handheld game machines), personal computers, and smart devices.

At the HD (High-Definition) Game sub-segment, the three-month period ended June 30, 2021 included the release of titles such as "Outriders" and "NieR Replicant ver.1.22474487139...," but net sales declined compared to the same period of the previous fiscal year, which had seen the release of "FINAL FANTASY VII REMAKE."

In the MMO (Massively Multiplayer Online) Game sub-segment, net sales rose versus the same period of the previous fiscal year due to growth in the number of monthly paying subscribers for "FINAL FANTASY XIV."

In the Games for Smart Devices/PC Browser sub-segment, net sales were higher than in the same period of the previous year due to earnings contributions from "DRAGON QUEST TACT," "OCTOPATH TRAVELER: Tairiku no Hasha," and "NieR Re[in]carnation," all of which were released in or after the second quarter of the previous fiscal year, as well as due to changes in the presentation of revenue resulting from the application of the revised Accounting Standard for Revenue Recognition.

Net sales and operating income in the Digital Entertainment segment totaled ¥69,876 million (a decrease of 6.0％ from the same period of the prior fiscal year), and ¥17,147 million (a decrease of 34.2％ from the same period of the prior fiscal year), respectively.

●Amusement

The Amusement segment consists of the operation of amusement facilities, as well as of the planning, development, and distribution of arcade game machines and related products for amusement facilities.

In the three-month period ended June 30, 2021, net sales rose substantially compared to the same period of the previous year, and the segment moved into the black at the operating line after having been heavily impacted the previous year by the temporary closures of amusement facilities in Japan enacted in order to combat the spread of COVID-19 in response to the Japanese government's declaration of a state of emergency.

Net sales and operating income in the Amusement segment totaled ¥9,452 million (an increase of 105.4％ from the same period of the prior fiscal year),and ¥344 million(operating loss of ¥1,512 million in the same period of the prior fiscal year), respectively.

－ 2 －

●Publication

The Publication segment consists of publication and licensing of comic magazines, comic books, and game- related books.

Sales of e-books and other digital media grew significantly in the three-month period ended June 30, 2021. In addition, sales of printed media were also brisk, resulting in higher net sales and operating income than in the same period of the previous year.

Net sales and operating income in the Publication segment totaled ¥7,246 million (an increase of 32.6％ from the same period of the prior fiscal year) and ¥3,250 million (an increase of 38.4％ from the same period of the prior fiscal year), respectively.

●Merchandising

The Merchandising segment consists of planning, production, distribution, and licensing of derivative products of IPs owned by the Group.

Net sales and operating income declined in the three-month period ended June 30, 2021, because of the release in the previous year of new character merchandise and other products based on the Group's own content.

Net sales and operating income in the Merchandising segment totaled ¥2,797 million (a decrease of 12.1％ from the same period of the prior fiscal year), and ¥924 million (a decrease of 23.9％ from the same period of the prior fiscal year), respectively.

1. Analysis of consolidated financial position
   ●Assets
   As of June 30, 2021, total current assets were ¥274,183 million, a decrease of ¥9,439 million compared to March 31, 2021. This was mainly due to a decrease in cash and deposits of ¥14,735 million and an increase in content production account of ¥2,531 million. As of June 30, 2021, total non-current assets were ¥52,447 million, a decrease of ¥74 million compared to March 31, 2021.
   As a result, total assets were ¥326,630 million, a decrease of ¥9,514 million compared to March 31, 2021.

●Liabilities

As of June 30, 2021, total current liabilities were ¥66,272 million, a decrease of ¥14,072 million compared to March 31, 2021. This was mainly due to decreases in notes and accounts payable-trade of ¥2,776 million, income taxes payable of ¥12,860 million and provision for bonuses of ¥1,212 million, respectively. As of June 30, 2021, total non-current liabilities were ¥12,379 million, a decrease of ¥141 million compared to March 31, 2021.

As a result, total liabilities were ¥78,652 million, a decrease of ¥14,214 million compared to March 31, 2021.

●Net assets

As of June 30, 2021, net assets were ¥247,978 million, an increase of ¥4,699 million compared to March 31, 2021. This was mainly owing to profit attributable to owners of parent of ¥12,655 million and dividend payments of ¥8,119 million.

As a result, the consolidated equity ratio stood at 75.6％ (72.1％ as of March 31, 2021).

－ 3 －