Q1 2023 Sony Group Corp Earnings Presentation
Now it is time to start 'twenty grippy weighted.
Costs will hit it.
Our announcement my name so credit from you at all be possible creative for this meeting I'd like to first ash Central for key executive Deputy President and Chief Financial Officer, Senior Vice President, who will be giving the presentation about our projections for the.
The rest of the year and the result of first quarter of 2022, we are planning to finish this.
Al.
Yes.
And we've got to like you saw a great room.
Thank you very much.
Yeah, I'll start with discussing business Amber Orient around our company the forecast announced in May was based on gross out of the global economy as of January as well as major risks at a time all forecasting such direct impact from the situation in Ukraine, and the impact of COVID-19 in China business have aren't head.
Significantly since then and there are concerns about more slowdown of global economy by Malibu G. T rapid inflation as well as responding monetary policy by different countries. We are walking to assess the impact from those environmental changes I will take prompt access to address them at the top.
Priority in managing our business at our forecast we disclosed today incorporates skills impact your reasonable degree based on current circumstances.
<unk> Centre I NFS are highly sensitive to changes in macro environment, but we are also paying close attention to your all other segments, including Gen N F music picture and financial services, and we are taking steps to mitigate risks in managing our business now I'll explain the following topics.
Yeah.
FY 'twenty to Q1 consolidated sales increased 2% year on year, two two trillion $311 5 billion yen on console video predict income increased $26 9 billion yen to 307 billion yen, both of which four a record high for the first quarter income.
Before tax increased to $8 2 billion yen yellow and year to 291.4 billion yen. Our net income attributable to Sony Corporation, Sony Group Corporation shareholders increased $6 4 billion yen T $218 2 billion yen calculated as operating cash flow, excluding the financial service.
She saw our Knoxville off 167 points will be the yen, primarily driven by increase you're walking capital and the impact from currency adjustment G. T. A weaker Japanese yen the slideshow resolved by segment off FY 'twenty to Q1, now I'll explain FY 'twenty two causal vantiv results forecast co.
<unk> sales are expected to be one truly on 500 yen 100 billion, yet lower than our previous forecast and operating income is expected to be one truly 110 billion yen 50, veolia and lower than forecast Q1 operating profit was higher than the forecast, but in order to cover uncertainties in business environment.
Our second quarter and onward, we decided to maintain full year operating income forecast as announced in may for the five segments, except <unk> why are we have revised all of you for Jindal gaming market consolidated operating cash flow, excluding financial service is a fresh food to a clean break.
20 billion 230, BDO again lower than the previous forecast to reflect actual results in Q1, the assumed foreign currency rates have been updated to approximately 130 yen to the U S dollars and approximately 330 into Europe .
So our forecast by segment for FY 'twenty tube I'll now explain distribution in each of our business segments.
First one is G&A and AST segments, FY 'twenty to Q1 sales decreased 2% year on year to 610 full points 1 billion yen, primarily due to a decrease in software yourself, including add on content, partially offset by favorable impact from foreign exchange rates.
Operating income decreased significantly by 35 billion yen year on year to 52 point to eight giving a yen primarily driven by decrease in softer yourself and increasing gaming software development costs.
Upside a bigger shelf due to currency if I trade to see also expected to decrease by 40 billion from previous forecast two three trillion 680 billion yen, primarily due to revised for guests to a software sales for the year, reflecting the result of Q1 because of the fact this.
Such as decreases off yourself and negative impact of foreign exchange ratio together with the audio than expected closure robalo geographies shown resolve hitting 13, BDO and additional yearn for transaction for the year FY 'twenty operating income is expected to decrease by 50 billion from our previous forecast that 255 billion yen.
This shouldn't users total gameplay times declined 15% year on year in quarter one.
Gameplay time in June improved 3% compared with May and was down only 10% versus June 2021, but this is a much lower engagement level than we anticipated in our previous forecast.
We believe the main reason for this is that the growth of the overall game market has recently decelerated as opportunities have increased.
Have opportunities have increased for users to get out of home.
As COVID-19 infections have subsided in key markets. We just see mind, we intend to take action to increase user engagement in the second half of the fiscal year during which major titles, including first party software are scheduled to be released for moly by increasing the supply youre, placing five hot Hot Hot.
<unk> and promoting the new Playstation.
Plus services and for now we have made no change to our 80 million unit sales forecast for P. S. <unk> FY 'twenty two but since we are seeing a recovery from the impact of the lockdown in Shanghai and a significant improvement in the component supply we are working to bring forward more supply in the.
And holiday selling season, Sony Interactive Entertainment completed its acquisition of Bun Bungie on July 15th of this year and the collaboration between the two companies have begun. In addition, the acquisition of Haven atmosphere to your announced in March was completed in June 27th in addition to the content development capabilities.
Hansman at our existing studios, we are working to strengthen our first party self scale by creating new IP.
And accelerating the rollout of the live game services and multiplatform titles through synergies with the studios we've acquired Nexus. The music segment Q1 sales increased a significant 21% year on year to $308 1 billion, primarily due to the forex rate impact and the string.
<unk> revenue increase operating income increased $5 6 billion year on year to 61.0 be union, primarily due to the positive impact from exchange rate the contribution to operating income from visual media and platform accounting for the strictly more than 10% of the segment operating income for the quarter.
FY 'twenty your sales expected to increase <unk> 40 billion yen from our previous focus to one trillion join in 'twenty to 'twenty 'twenty 280 billion yen, mainly due to the Forex impact the operating income forecast is unchanged from our previous forecast of Q1 streaming revenue continued to grow with the revenues are recorded music growing too.
7% in music publishing growing 42% year on year, 8% and 20% respectively on the U S. Dollar basis, we are monitoring the impact of the global economic slowdown on streaming services, but we have not changed our view that the global music market, including both recorded music and music publishing will grow steadily over the.
Several years at a growth rate in the high single digit.
In recorded music, we are producing many hits such as Harry styles album, Harry's House, which has become a huge hit worldwide.
As a result, we averaged 47 songs in Fortifies weekly Global top 100 songs for the quarter a significant increase from the average 36 songs, we recorded last fiscal year.
In addition to Simpson and our ability to continue to generate hits, we are working to expand and diversify our profitability foundation by enhancing artist services through the Orchard and AWOL, expanding obviously as emerging markets and collaborating with business partners in new areas.
Chez social and gaming.
Next is the pictures segment.
22, Q1 sales increased a significant 67% year on year to $341 4 billion yen, primarily due to the foreign exchange rate impact and increasing their delivery in television production and the revenue increase from films released in the previous fiscal year and motion Pictures.
Operating income increased a significant $25 3 billion yen year on year to $50 7 billion yen due to increase in global sales of segment. If I joined yourselves expected to increase 50 billion compared to your previous forecast to want really in 380 billion yen, primarily due to foreign exchange rate.
The forecasts wolper and income is unchanged from the previous forecast theatrical revenue in the U S appears to be to recover to be recovering with box office revenue in some weeks weeks exceeding 2019 levels. Thanks, not only to the large scale films aimed at young audiences, but also hits in the family.
<unk>.
Wade was believed could be 19 would make it difficult to attract audience. We are looking forward to the movie block.
Bullet train is starting <unk> to be released in August in the U S demand for premium content continue to be strong due to increased competition between amongst the video distribution services as an intended major studio that provides productive to a variety of partners. We see this as an opportunity in addition to media networks.
The.
Service integration between control and and emission distribution business a few new mission.
Is proceeding smoothly and the number but paying subs subscribers in business partnership with both of them are growing at a pace that exceeds our expectation.
Next is the entertainment technology and services segment Q1 sales decreased 4% year on year to 550 to $2 3 billion yen, mainly due to a decrease in TV unit sales, resulting from the impact of lockdown in Shanghai and worsening market conditions, partially offset by the favorable Forex impact operating income.
<unk> 18, 2 billion yen year on year to $53 6 billion yen, mainly due to the impact of the decrease in television sales FY 'twenty. Two sales are expected to increase 50 billion from our previous forecast, particularly in 450 billion yen, mainly due to the forex impact partially offset by.
Incorporating the risk of market deceleration in your forecast for the second half of the fiscal year.
Operating income forecast is unchanged from our previous forecast.
Due to the faster than expected improvement in the utilization of our manufacturing facility following D. Shanghai, Lockdown and a faster than expected improvement in supply constraints for components centered on semiconductors, mainly for digital cameras Q1 operating income significantly exceeded our exceeded our previous forecast on the other hand, new risks such as global economies.
Especially in Europe , and the adverse effects of the strong dollar on our financial results have recently become apparent.
We plan to apply the upside to profit we enjoyed in Q1 to these risks and implement additional measures such as improvements in product mix and cost controls.
Dissipation of even more risks the inventory level at the end of June is a little high.
Even when we exclude the increase in valuation of the inventory due to the yen depreciation and the strategic stockpile of parts that we are concerned about security and we plan to just level in preparation for the expected softening of demand in the product market going forward. Moreover, we use daily promoting the transfer of production across multiple facilities be centrally.
And the production of key components and industrializing and further optimizing our operations, we will continue to strive to maintain and improve our profitability by responding quickly to market changes next is the imaging and sensing solutions segment sales for the quarter increased 9% year on year to $237 8 billion, mainly due to the Forex impact.
<unk>.
Operating income decreased $8 8 billion year on year to $21 7 billion, mainly due to an increase in R&D and depreciation expenses. Despite the positive Forex impact.
It's like 22 sales are expected to decrease 30 billion yen from the previous forecast of two one trillion 440 billion yen.
The operating income forecast is unchanged from our previous forecast.
Our focus this time assumes that we cannot expect a recovery in the Chinese smartphone market. This fiscal year after considering the trends seen in the Chinese market. During Q1, and we have incorporated deceleration of the middle and low end finished product market as well as lower sales of our mobile imaging sensors image sensors to reflect this deceleration.
Yes.
On the other hand in response to growing needs for a video recording the introduction of smartphone manufacturers of our larger die size high resolution image sensors in their high end lineup is steadily progressing.
Believe that this trend toward higher resolution quality improved functionality of cameras.
Become even more apparent from the second quarter onward, we anticipate that the larger die size sensor adoption of that customers will accelerate further and drive sales growth for mobile image sensors and <unk>.
<unk>.
Evening supply and demand equilibrium for logic semiconductors has become possible to gradually increase the production of high value add.
Image sensors, the production, which let's pivot the restricted due to supply constraints. Therefore, we expect that the product mix will gradually improve from the latter half of the fiscal year overall.
All over when it comes to automotive image sensors, and our eye trios and other solution businesses that are expected to grow significantly over the mid to long term, we will continue to proactively invest in the development of technology and the Spanish expansion of the system sales.
Is the financial services segment, if we're 22 to one in financial services revenue decreased the significant 28% to 297.8 billion yen, mainly due to the decrease in net gains on investment in the separate accounts at Sony Life Insurance Limited operating income decreased increased a significant 67.3 billion yen year on year.
<unk> to $81 3 billion yen, mainly due to the recording of a gain on the sales of real estate completed in April and the absence of the loss recorded in the same quarter of the previous fiscal year from the unauthorized withdrawal of funds both at Sony life.
<unk> previously announced the judicial procedures to recover the funds from the unauthorized withdrawal.
<unk> in July 22 financial services revenue and operating income forecast are.
On change from our previous forecast with a large scale and rapid changes in the business environment. This fiscal year, the risks and issues that need to be addressed are wide ranging and diverse in each business. We aimed at a really aggressive situation accurately and respond promptly to changes in the business environment and we plan to continue to operate the business with highest level of.
Caution.
At the same time Lee will steadily continue our efforts to achieve long term growth.
This.
My written remarks.
So Dallas a presentation from Mr. Sasaki it'll be followed.
By this we will have a media Q&A from <unk>.
<unk> 'twenty and can't Aiful invest salaries from 16 45, we are scheduled to be covering about 20 minutes for questions for those of US who have registered question ahead of time, please make a phone call to get designated phone number. Please.
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Thank you for waiting.
And we now like to start the Q&A session with your media Representatives.
And to respond your questions we have Mr Sasaki executive.
Resident and CFO .
And also is now much silcock.
A new vice president in charge of corporate planning and control support for financial business into many area and also a higher cost.
Kawa senior VP in charge of finance and IR and we will start the Q&A session. Please limit your questions up to two questions only.
And if you have a question please oh price Joe form with the asterisk and the.
One a one on one we have semi of Nikkei BP.
This is <unk> from Nikkei newspaper can you hear me yes.
Yes, we hear you.
I would like to understand the gaming business situation.
If we look at the materials.
The software sales.
Was it about 25% a decrease.
And this is also the reason why you have reduced the forecast for the year.
And maybe the reopening of the markets is the reason.
And the.
The growth of the gaming World, maybe as the for the industry as a whole it's slowing down.
So in the midterm do you think it has already peaked out so that is my first question.
My second question.
This is more about the future.
When it comes to the gaming and semi conductors.
Recently, mainly.
Mainly in the western markets there is inflation.
And there's also there's concerns about recessions.
So what is it related to your company is the consumers' lifestyle.
When it comes to gaming.
<unk> and software.
There might be impact to the demand for the semiconductors David sensors.
Including the high end consumers.
Maybe there is an impact.
Impacts in the market.
So I would like to understand if there is any impacts.
That you're feeling.
And.
What is the level of the risks that you're feeling for the future.
Can you explain that.
Those situations to me. Thank you very much for the question I think you asked me two questions.
<unk> game and networks services with the situation and now.
And also.
And a bunch of markets, mainly there's this concern of a recession.
The game and network associated and what does impact on ISS as well.
So I would like to answer both questions.
Regarding the.
The gaming.
Market.
Like you said.
Software.
Sales.
Has gone down 25%.
There are two factors to this one is the reopening.
Apparently.
Lee I showed you earlier.
Playstation users gaming time, I talked about the trend.
If you look at that I think it's apparent.
And also.
Compared to the previous fiscal year the major titles.
Sales has decreased.
The number of titles have gone down so I believe those are the two major.
Reasons.
The engagement itself.
For some time.
For the downward trend in June .
And for July we saw a slight recovery.
That's my understanding so.
We need to carefully observe the situation around this therefore the changes in the trend is something that we need to.
Incorporate into our future expectations.
And for the mid to long term growth and trends.
For now we don't have any serious concerns and for the game <unk> network services and assess.
Yes.
Impact.
The economic situation point of view for <unk> five demand.
The supply has not been sufficient.
So for this.
The demand has not gone down.
And.
First of all we need to really meet the demand I think that is the important thing to do.
And it also.
Regarding the image sensors, especially for smartphones.
And for the high end smartphones, we would have to see what the sales situation is going to be.
In China the.
Demand is slowing down.
And I don't think in this time, we will be able to see a recovery and I said that in my presentation.
So the mid to low end products.
Demand slowdown is actually significant so for the high end products.
From a global perspective.
The demand for our image sensors as of now.
Has not gone down and for now.
The demand is quite robust.
However.
Obviously this depends on the economic trends, but especially in the second half.
We would have to look at the global smartphone demand a.
Very closely.
That's all.
Now I'd like to take it to the next question.
So thank you song from Toyo case I. Please.
Hello, Saul Thank you Tony.
Hello can you hear me, yes, we hear you okay.
Very good. Thank you very much I'm Sasaki from Toyo case I. Thank you very much for your presentation I have two questions. First question is again about gaming now in the first quarter softer sales has decreased as I understood. It.
But like you said externality was main driver, but these de any other reasons why there from competitors. So maybe internally is there any reason Scott dropdown. The sales performance of software again, sorry, I forgot. The other thing is that progress that <unk> made a particular for semiconductors in the mid term perspective.
You have there were some concerns about that.
Full of pictures there are certain drivers that can equal actually on that semiconductors also.
Expect some like a turnaround the upsides coming in the midterm perspective in semiconductor.
Thank you for your question first question was on gaming is there any other factors that drove down slowdown of sales for form us in gaming soft drag accept externality that was your first second question was are your question was about first quarter progressively MAGE in light.
With our full year performance, particularly on the <unk> semiconductor business.
I understood.
First question.
The factors outside of external <unk>.
Audi T. It goes back to my audio presentation last year, we had a big title V contents being launched in this financially, particularly in the first quarter Theres nothing similar in terms of the magnitude of the size of the lung content, we are kind of us.
We had not as many big titles that before now progress for Q1, four I NSS.
First quarter actual in the first quarter was performing better than our expectation.
Cause our sales and our profit plans, while focusing more growth coming from second quarter and afterwards because of customers trend.
Product life cycles customers. These are the inputs that we take in that says the progress that we've made for this first quarter in this financing.
S business actually performed quite well in the first quarter.
Thank you.
Let us move to the next question Michael.
So just hang from TV Tokyo.
Okay. Thank you and once again my name is <unk> of TV, Tokyo, and most recently the depreciation of yen was taking place all of a sudden today went.
Went up and how what's your view this rapid changes up and down and also what's your prospect for this exchange rate. Thank you.
And to most recently exchange Forex market.
Is changing rapidly and our.
Our response to that.
Is this we also do have some management images Hyatt awesome.
Well.
I'll respond the impact of exchange rate at the start of the fiscal year for the consolidated operating income other than the financial services gaming and E. T emphasis and I had missed this in these three segments our sensitivity.
The one in down is 1 billion yen and.
For Euro.
<unk> 7 billion.
The difference as <unk> has pointed out is moving.
Frantically up and down.
To mitigate the risks.
We want to make sure we get enough margins and also the impact of the Forex.
Rate is very different depending on the segment I want to make sure that the we have a robust cost structure.
So that's how we try to respond in our operation.
Let us move on to the next question.
Visteon of omni clinical Gil newspaper.
My name is from Nickolenko, giving newspaper can you hear me, yes, we hear you.
Thank you very much.
I have one question regarding the operating income you have.
Neither downwards or for the year why is that.
So game and network service is the main reason why you have done that.
Out of that.
In this area what is the biggest factor for this revision.
Is it a reduced sale in software titles.
Thank you very much for the question.
As you have said for the full year.
The downward revision of downward revision is because of the Janet S. At.
At the beginning.
We may.
<unk> forecast for our software sales, especially for the first quarter.
We were.
Quite confident.
But we believed there was this gap.
And the results.
We thought that the reopening.
What much would be much more stronger.
That's.
That was based.
Based on the results.
For the Q2 onwards sales.
We have updated the information.
And.
We have made the best estimation for now.
That's all.
We'll take it to the next question.
So to call soft phone Bloomberg you're next.
Yes, I'm sort of cough on Bloomberg I, Ken I Hope you can Jimmy yes, I can hear you okay. Thank you.
Now a question two questions about gaming business software sales have been.
Decrease the use explained about a few times, but our hardware the P. S.
P. S. Five hardware shipment was not catch up with the demand do you think thats. The reason for slower softer as Matt. The other thing is about our consumer products, whether the cameras and other P. A.
<unk> getting hit from raw material cost and increased supply chain and the currencies. There are a lot of hits Linzess coming due you think PS five also needs to increase your shelf price point do you think it needs to be considered.
Thank you very much for that question.
Both of which war.
About game a network services with regard to your question So software sales.
The is the P. S. Five the hardware itself was not being supplied enough or distribution is that the reason no hardware supply was not meeting expectations on cost everywhere and not shipping the enough volume to cover the demand we acknowledged.
Is that fact, we want to address that to improve as soon as possible as I hate to repeat myself. There were two big constraints that we are imposed west one is parts and component availability and the other one is supply chain.
Lucid partially in component availability is higher a lot of improvements sure. We are very hopeful that this is quite optimistic about that for slaw supply chain disruption, we actually got a quite a hit from first quarter and the first quarter hardware evolving full sales walk quite.
Smaller than what we expected at the beginning of the year, so supply chain disruption.
Something that we hope to get or completely be addressed any case, we'd like to take a product a gauges. All he is better we wanted T daily vary as much as soon as possible eight medium to implement as a target has not been changed but we are trying to produce them soon as possible.
In ready for holiday season this year.
Second question was about a potential price increase fall if he is population issue five.
Disappointing time.
There is nothing I can tell year shatter year anything specific about prices. So please take it as my answer to your question. Thank you.
Okay.
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Ask the question.
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California device.
Yes.
Sharing none I would like to conclude the Q&A session with the media Representatives.
And the Q&A session for investors and analysts.
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441.
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My name is.
Chi I belong to the financial Department IR group.
And.
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Mr. <unk> of Morgan Stanley EMEA FTE. Please.
Yes. Thank you I have a more of a Morgan Stanley I have two question. One is about games. The other question is about NSS. So first question on gaming is now.
Now T S. Five shipments has being well the component parts as Jason has improved as he said.
But it's.
The supply is being slow muscle than launch under third party software has been postponed by third party content creators.
But do you think.
Are you alia I talked about.
How are you set a volume expectation was maybe too optimistic at the beginning but do you think software has got the impact because of the supply shortage or what about user engagement to <unk>, even though a lot of excited.
Users, who wants to play with BS VI, they get for the lack of better word get frustrated and maybe how they collect shifted his behavior can you talk about your perspective of how consumers are behaving based on that for those facts. The other thing is about the NSS, especially for the.
Mobile customers.
How would you see the risks and inventory availability for that you said mid to low end for Chinese market.
Bruce is the inventory like you said there was a concern for the inventory about the you are confident about the high end, but I think you talked about a lot of inventories which are commodity items. So can you talk about your risk associated with sellers adopt duration.
Well. Thank you for that question two questions. First question is on gains a second question on the ISS now first question the supply of our P. S. Five is the slow or supply to demand is that the reason why users decided to stay away gaffle.
<unk> slowed down the sales of software.
The hypothesis on why.
How do I see yet.
Well this is a very difficult question, but for us.
Yeah.
The supply of hardware.
Oh for sure increased user engagement for sure because he actually that's been proven from the data that we are paying attention to so somebody who are playing with P. S. Five tests to have very high engagement, which is a very positive sign by itself, but from that perspective placement shelf.
Five.
After supply more people use the hardware than positive impact while may expect to have the impact to come quickly. So in that sense in the second half that volume P. S fly by going to significantly increase so after the second half.
We have our own title third party contents are also being planned for their launches. So after the second quarter after.
There is a momentum, which we can build on to escalate.
Engagement.
So your question about inventories.
About this question.
Initially for image sensor for mobile so we're looking at to add production capacity and the demand forecast and we are going to be acquiring like Australia that scheme vantreese and inventory is going to be having a higher availability in la last year more recently in the first.
Walter the Shipman has slowed down a bit inventory right now is trending higher than our expectation but.
This is within a reasonable range looking at the at our growth projection.
Or now forecast how.
How do I see moving forward, especially.
So we are expecting to see stocking T expand more Celsius second quarter, so inventory levels going to.
Lower down is going to be coming to the normal level, but for the strategy clean. The entries are we are going to have deliberately have additional excess of inventory in 'twenty 'twenty four 'twenty 'twenty three so for the time being we expect the inventory level to for that particular for Stratus scheme inventory.
One is to stay the same no I talked about many of the components of commodity parts generally speaking I will.
States are words that statement, but when the demands change.
You know you might be concerned that if the demand slowed down too.
Much of the inventory May turn now on the as a risk, but we are going to be just into capacity for FY 'twenty. Three we will be able to flexibly might be able to control that based on the reaction from the marketplace. Thank you.
Let us move on to the next question.
Okay.
Peter <unk> from <unk> Securities. Please thank.
Thank you this.
This is <unk> from Bofa Securities I have two questions first question.
We've got an operating income plan.
You have made a downward revision.
Flow operating cash flow plan.
The downward revision.
Is a negative 230 billion yen. So that's my first question.
Secondly.
For ion issues.
In your explanation you talked about smartphones.
Mainly on the other hand, when it comes to the operating income plan due to Forex impact.
7 billion yen.
So for three quarters or so it's more.
The 30 billion yen is the impact of Forex for the industrial equipment and security cameras image sensors.
Are things that were not included in your explanation. So those are having a significant position so I would like to understand the situation.
And from a housekeeping perspective.
If you can give me any operating capacity factor of information that would be helpful. Thank you for the question regarding the first question.
Downward revision of the ink.
Operating income and also the cash flow situation.
Our working capital and attacks.
Those are the factors, but higher color will be explaining the details. Thank you very much for the question as it was explained and the speed and the performance that was also explained the operating cash flow is a negative.
This is also impacting the expectations of the working capital has gone down and due to the depreciation of the yen and from Mackenzie presented from the cash flow statement perspective, there was an adjustment made due to forex. So that is a significant and also.
The operating income has gone down by <unk> 50 billion.
And the operating cash flow is $230 billion and the gap between the two when you got into 230 billion yen negative <unk> 50 billion. This is the gnl's downward.
<unk> profits and also for the working capital increase.
Increase.
For this.
SaaS and also the increase in inventory for EG and Es.
Significant regarding ISS.
As a total geek, Spain after two Q second quarter in Alberta.
The sales is going to be significant, especially in the fourth quarter. So the account receivables will increase in inventory will also increase as well but for this.
The operating cash flow will come back from the next fiscal year. So that is why the operating capital is involved further forex calculation.
This is quite significant for this fiscal year.
Ian is depreciated, so that is quite significant and also.
As of May compared to me.
Yeah.
Payment has gone up and for pictures.
And TV production has also gone up.
And also lastly regarding the adjustments for the Forex the operating cash flow full portion.
Has gone to the negative side.
If you look at the cash flow statement I think it's clear.
For the so-called balance sheet for.
The foreign currencies.
It is also of being included in the calculation and we see an offset for the first quarter result, do you see that there is an offset.
So.
From a capital allocation perspective, the operating cash flow it looks like a negative but from a balance sheet perspective, it has come back.
So I think of all the folks adjustment I think.
That could be set thank you.
Thank you very much.
And as for <unk> says.
Yes.
The impact of a positive impact.
Forex.
Is offset by the profit in the industrial applications and the.
Security cameras.
And as I said that the macroeconomic slowdown risk.
Which as I mentioned earlier.
Is.
Considering that the large customers of ours in this area is in China.
And so we are we anticipate the risk of a possible slowdown for industrial usage.
But this would be somewhat of a conservative response, who may have.
And.
In terms of our sensors capacity.
And the.
Actual.
Input.
And in the supplement material.
There is some information.
We hope Youll referred to at the end.
This quarter.
142.
114 case license per.
A month and also in terms of input 124, K slices per months.
Let us move to the <unk> of JP Morgan.
Ts.
Yes. My name is <unk> from J P. Morgan I. Thank you very much I have two questions general questions both of which Jeff first question is about our operation the cost approach about the operation So.
Because the demand has a quite shift touch right now.
In your announcement there were a lot of instances of demand have shifted and took you saw you mentioned about two very quick agile response, but after first quarter being closed is there anything that you wanted to change versus not change in terms of the operation can you do you mind, highlighting changes and not changing operations.
He is speaking about changing operation in the first quarter you saw quite a wars that cash flows got dwarfs them before the film television consumer products like <unk>, who wants to manage inventory level and the sensors, there's a downward adjustment and the production capacity that both iron was.
If you cannot be made the inventory level is going to go up at the end of the period. So again based on those things what are the things that you would change versus not changed in terms of your operation Second question is about your approach about the full year. Our plans you have yesterday I understand me so much.
Estimates, but just having said that there are some uncertainties.
Now what are the uncertainties like a potential risks for example, hag issues in game or the high end products revenue or sales to the projections are not changing do you see any risks. So therefore those businesses at all.
And the unknown risk become materialize do you have any buffer to be able to cushion that surprises is that also part of it the numbers Thats included in our full year.
Thank you for your question first question was Ah changes or shifts on demands in a quite substantial ones.
Your question was what are we going to change in a while.
Not going to change second question was about potential risks for rest of the year. So I will take these two questions.
So first what are we changing or not changing in that respect what we are not changing is a building block for mid to long term strategy growth the investment therefore.
Mount of investment May adjust but what we are committed to do will not change we will not change of staff and commence full our investment for the future well weird.
Changing for this financial year is mostly on how we are using expenses under control of inventories I would say speaking first on expenses for example entertainment in overseas company overseas businesses in Entertainment industries are now becoming Barry.
On services for recruitment and so when there were head count who open positions we will try.
Not to traditional approach, but they will have taking more traditional conservative approach that then traditions and our marketing and our sales expenses are also look at are not spending them right. So operational teams or making sure that they are trying to making.
<unk> met with risks in the mind.
Now for inventory control.
So on all segments are huge attention is being given to inventories or gaming network is a first of all what the inventory is not a problem because suppliers not being able to catch up with demand, but for each on the F&I for iron SaaS.
All the segment.
Well the inventory went up there are three reasons why the inventory went up one is currency change weaker Japanese yen. Therefore, each on the surface level look like a bigger inventories because the value change in currency and we had a quite.
Quite a long month supply shortages, we have to make sure that we have a strong access is Charlotte material and also the E in terms of inventory control.
The bigger influences are actually comes from parts.
And components, so normalizing parts and components is something that we are focusing on right now in Vinci for Iron SaaS goes back to my earlier comment actually in FY 'twenty three we have our plants to capacity expansion, but the question is what timing.
Which we are going to turning that switch on that would be the one control mechanism that will use <unk>.
This next one is related to the second question is there any risk of a high end smartphones. The high end smartphone if theres going to be risks and become reality.
For the high end smartphone.
So we have these scenarios a solid scenario that reality becomes slower than that of a scenario if that's if.
If that happens the timing of the capacity expansion will be adjusted or postpone slightly later that would be the way to control.
The other one risk about a holiday seasons are gaming.
That's nice.
The economy being slowed down therefore is having any impact on the gaming business sales pro forma I don't think that will be that will be.
B a risk not from the economic slowdown and the do we open is probably the bigger reason so after second quarter.
When the big content tied whole canvas out we'll be able to test and see how there is going to perform and that will be a good indicator for us to assess the holiday season. Thank you.
Let us move onto the next question from Mizuho Securities <unk> San please.
Yes. Thank you I have two questions.
First of all for music and pictures.
A second is two areas.
Quarter.
<unk> performance was better than expected.
And pictures and music.
I would like to understand the situation and up to the second quarter compared to the budget.
Is it higher or lower.
What is the range.
And for now it looks healthy.
And there are some continuing factors.
So I'd like to understand situation regarding bungie.
You said that the acquisition has been completed and the cost.
It will change from 44 1 billion $2 57 billion I would like to understand the situation may go into from next year onwards, and I'd like to understand the business situation.
And the timing of the consolidation.
Can you give us an update please.
Thank you very much for the question regarding.
The.
Situation regarding music and pictures.
Regarding music in the first quarter. It was a it did very well and.
Spiderman and other titles made a major contribution.
For the entertainment area. The Prof. The profit contribution was very high from that perspective.
Dromos have been.
Produced for television.
There are many deliveries made.
So this quarter it performed very well and.
For.
Are we seeing a decrease in AR.
From.
This point onwards are you going to spud of men versus major titles the spider verse.
Has been postponed to the next term we have already made that decision.
So that would have a negative impact.
So that's why it's flat.
Regarding.
Music it's in line.
The streaming market.
Is doing very well it's growing.
Sure.
Margin.
Both.
Also are performing very well.
And regarding games.
So we'll have to look at the situation next year onwards, but.
Regarding the cost for the acquisition.
The expense for the F 'twenty three.
Compared to this year it will be an increase about 20% by 20% and also.
The bunch of Egypt business.
Having an impact on the whole.
Both in terms of revenue and profit and I think it will be minimal.
Thank you.
We're running out of science so.
We will.
Limit to only one question from per person.
And so now cut set us off from F N B C Nichols Hogan.
Well. Thank you very much so since I can only ask one question. This is related with the previous question, but Theres a some this is a general question now compared with a year on year under last the budget, one Q Q1, and a full year.
There are certain things that you have in KOB pointed versus not incorporated there are a lot of in and outside light do you kind of clearly understand them first of all Q1, So Shanghai locked down about 30 billion yen right Etfs is actually doing quite well picture.
Pictures are ahead of the plan.
<unk> no I NSS is also have.
Have a slight.
Slight change you saw a lot of changes were upsides and financial services also looks like that so.
But.
That the actual like our currency.
So positive negative also there are a lot of in and outs positive and negatives for currency can you just summarize like so a hummer currency actual impact compared with last share for the full year.
So this is again.
Gaming gaming is the only why don't you. If you have made the adjustment, but I N S. S awful.
Have performed slower a bit but there are if there are any other positives in the other businesses could you do you mind, making some comments about them.
Okay, so yelling ear and versus last year, there were a lot of things that we have incorporated not incorporated.
So currency versus last year, let me pick that up as our first discussion point.
At the beginning of the year this financial year.
So currency when we started this planning process.
Currency Forex impacts law, we we actually incorporate certain changes that could happen. So.
In Q.
Q1 about 30 billion yen in positive test on positive side I'm talking about impact will be at the bottom line and that's in the overall at high level, that's about the impact that we gain from currency Chad.
Other thing.
So there are changes on the upside and downside.
Kind of a complicated to describe.
The reason why I say that is what we announced at the beginning of financial year.
Alright back then lockdown in Shanghai was very clearly there we could see that coming.
Comics and geopolitical impacts.
We have actually incorporate those.
The geopolitical developments by global economic slowdown, including China is something that we didn't really anticipate incorporates and that's the environment change that we only saw afterwards and we have updated some based on dose and huge involvement and what's being incorporate.
What's not being called <unk>.
Quite messy.
You feel like well, partly because there was a positive from currency, but how much risk are we going to be incorporating I guess, that's what you're asking but major briskly that very different from business to business and the demand.
How demand is going to go up or down.
Economic slowdown the depth and the length of the economic slowdown.
That is a very important factor in determining that which is very difficult to predict what we can do is.
As clear as possible in terms of intelligence that we can see out there right now so positive impact from currency.
Conclusively been reflected for all risks are.
As a matter of fact in first quarter. This is just first quarter, we have three more quarters to go. So so in a sense. That's yeah. That's the only thing that I can say at least that high level. Thank you.
Next person and the last question is from Hassan Macrotous sweeps and rigor.
Gaming.
And that has been the Forex and also external factors.
But.
Is there a specific positive factor for example, I R&D.
Platform expansion.
And also there is I understand there's a launch for that game and if you could update us with those positive impact at involvements.
And from second quarter onwards, the positive factors you ask PS five hardware.
Playstation five hardware production.
Is now experiencing much less receptions from component supplies. That's I believe is in the one big factor.
And we want to produce as many units as possible in terms of processing capacity.
We have enough.
And because Shanghai Lockdown is.
<unk> already been resolved and as I mentioned earlier that the logistics lead time.
Is.
It has not recovered to the level pre COVID-19, so it will take a little bit longer so even considering that we want to produce.
More units as soon as possible.
And in terms of a third party and first party from second quarter onward, as I mentioned earlier, a major hit titles are expected and that's is going to be a positive factor. Obviously in terms of platform mix plant expansion extension new <unk> five.
On the positive side that the as of the end of end of June we were able to rollout as was planned.
So customers are moving to the new platform.
But uh huh.
How much of this is going to impact.
And we too early to see because we just rolled it out in end of June we need to collect more data to.
To say anything conclusive, but I don't think I think.
We had a very good start.
That's it.
Okay. Now we have reached the scheduled ending time vole Sony group.
Earnings announcement for Q1 FY.
22, and thank you very much for your participation. Thank you.
Okay.