Changes in market needs and sales plan volatility due to development lead times

「Because gaming-machine development takes approximately 1 to 2 years, the Group's sales plans and operating results may be affected if it is unable to respond flexibly to changes in market needs after development begins or if the sales timing overlaps with popular products from other companies.」

「Parlors have become particularly demanding in their evaluation of gaming machines in recent years, increasing their preference for selectively introducing products with lasting popularity that will not cause players to lose interest. Most other products have failed to attract sufficient attention. The group aims to strengthen product competitiveness and expand its market share, but gaming machine development takes 1 to around 2 years. If the group cannot respond flexibly to changes in market needs after development begins, or if its launch timing overlaps with popular products from other companies, its sales plans and earnings may be affected.」

「Parlors have become particularly demanding in their evaluation of gaming machines in recent years, increasing their preference for selectively introducing products with lasting popularity that will not cause players to lose interest. Most other products have failed to attract sufficient attention. The group aims to strengthen product competitiveness and expand its market share, but gaming machine development takes 1 to around 2 years. If the group cannot respond flexibly to changes in market needs after development begins, or if its launch timing overlaps with popular products from other companies, its sales plans and earnings may be affected.」

「After assessing market trends amid the COVID-19 pandemic, the company narrowed the number of titles sold, so the number of titles sold declined from the usual level, although」

「Because the company narrowed the number of titles sold after assessing parlors' appetite for purchasing new models amid the COVID-19 pandemic, the number of titles declined from the usual level, but」

「Gaming machine manufacturers temporarily experienced a stagnation in the supply of machines compliant with the new regulations due to delays in procuring components, a decline in the number of type approval tests accepted by the HoTsuKyo, and the persistently low approval rate.」

「No core pachinko machines were launched during the first quarter consolidated accounting period, and sales remained low. During the second quarter consolidated accounting period, however, sales volumes of other titles also increased, led by SANKYO's "Fever Mobile Suit Gundam: Char's Counterattack," resulting in growth in both sales and profit.」

「The Group launched 2 pachinko machine titles, excluding reuse machines, and 1 pachislot machine title. However, sales remained at a low level during the cumulative first quarter because the launch of core pachinko titles was scheduled from the second quarter onward.」

「Parlors have become particularly demanding in their evaluation of gaming machines in recent years, increasing their preference for selectively introducing products with lasting popularity that will not cause players to lose interest. Most other products have failed to attract sufficient attention. The group aims to strengthen product competitiveness and expand its market share, but gaming machine development takes 1 to around 2 years. If the group cannot respond flexibly to changes in market needs after development begins, or if its launch timing overlaps with popular products from other companies, its sales plans and earnings may be affected.」

「The pachislot machine business recorded revenue of ¥1.7 billion, down 78.1% year on year, an operating loss of ¥2.3 billion, compared with an operating loss of ¥400 million in the same period a year earlier, and sales of 4 thousand units, compared with 18 thousand units in the same period a year earlier. The main title sold was SANKYO-brand "Pachislot Total Eclipse" (July 2018), and no new models were launched during the third quarter accounting period under review, from October to December 2018.」

「The group's earnings can fluctuate significantly on a quarterly basis because they are affected by factors such as the timing of hit product launches in its core pachinko and pachislot businesses. In the cumulative first quarter of the previous fiscal year, the group recorded an operating loss because it launched relatively few models. In the cumulative first quarter of the fiscal year under review, however, pachinko machine "Fever Senki Zessho Symphogear," launched in August 2017, became a long-running hit and additional sales remained strong, enabling the group to secure operating profit and achieve an operating margin of 9.5%.」

「Against this backdrop, the group sold 15 pachinko titles, excluding reused machines, and 6 pachislot titles. Because only 5 new pachinko titles were launched in the first half, the group was forced to record an operating loss through the cumulative third quarter, but sales recovered in the second half after 10 titles were launched.」

「Sales recovered from the level through the cumulative second quarter by launching new titles, including tie-ups with well-known content, to capture replacement demand ahead of the regulatory revisions. However, as noted above, earnings fell short of expectations because parlors remained cautious about replacing machines and demand was concentrated on established titles with stable popularity.」

「Pachinko sales consisted mainly of additional sales of products launched in the previous fiscal year in new specifications, and revenue for the cumulative second quarter of the fiscal year under review remained low.」

「Pachinko sales were centered on additional sales of products launched in the previous fiscal year with new specifications, while sales of major titles were scheduled from the second quarter onward, leaving sales at a low level in the cumulative first quarter.」

「In this environment, the Group worked together to expand sales in its core pachinko and pachislot businesses and sold 5 pachinko titles, excluding reused machines, and 2 pachislot titles. However, sales of both pachinko and pachislot fell below target in the market environment described above, and weak revenue forced the Group to struggle on the earnings front as well.」

「Given that pachinko and pachislot machines could effectively not be sold in May, the Group focused on original products that did not use licensed properties and narrowed the number of models sold, resulting in 3 pachinko titles and 1 pachislot title.」

「Because gaming-machine development takes approximately 1 to 2 years, the Group's sales plans and operating results may be affected if it is unable to respond flexibly to changes in market needs after development begins or if the sales timing overlaps with popular products from other companies.」