SEGA Sammy (TYO: 6460) FY2024 Earnings Review

Please note: This article is for informational purposes only and is not intended as investment advice. The mention of specific stocks is not a recommendation to buy or sell any securities.

For anyone following this newsletter, you know that I think SEGA Sammy Holdings Inc. (TYO:6460) is a fallen star that has the potential to make a spectacular comeback. Hence, I’ve been eagerly awaiting their FY24 earnings report, which finally dropped on May 10th.

So, how did it live up to my expectations?

Summary

• SEGA Sammy's FY24 report showcased a company in between resilience and vulnerability, with revenues leaping by 20.1% but profits tumbling 28% due to heavy restructuring costs (read: firing people and writing down assets at the Total War studio Creative Assembly)

• The company’s most controversal segment, pachislot and pachinko machines (gambling) excelled, with revenues soaring 44.3%. Conversely, the Entertainment Contents segment, despite an 11.4% revenue increase driven by hits like "Persona 3 Reload," faced profitability pressures from the restructuring.

• SEGA Sammy is (finally!) divesting the underperforming Japanese Phoenix Resort, expected to net an extraordinary income of ¥8.5 billion in FY2025, marking a significant shift back to its core gaming, content & gambling strengths.

• The anticipated 4.9% decrease in net sales and 20.8% drop in operating income for FY2025 might look bad at first, but I think reflects SEGA Sammy’s strategic recalibration towards its gaming and digital content prowess.

Financial Highlights & Segment Performance