Sony Group Corporation (NYSE:SONY) Q4 2025 Earnings Call Transcript

Sony Group Corporation (NYSE:SONY) Q4 2025 Earnings Call Transcript May 14, 2025

Unidentified Company Representative: Thank you very much for coming to attend our Meeting despite of your busy schedule. Now we’d like to start Sony Group Corporation’s Corporate Strategy and Earnings Announcement Presentation 2025. I’m going to serve as MC. My name is [indiscernible] from PR department. Thank you very much. First, I would like to invite President and CEO of Sony Group Corporation, Mr. Totoki. He will be talking about the Corporate Strategy for Sony Group Corporation. Then I will invite Ms. Tao and Mr. Yamada. They will be talking about FY ’24 earnings and results and FY ’25 results forecast. And then after that, we are going to entertain questions. We are expecting the total of 90 minutes to complete the entire session. Totoki san, please the floor is yours.

Hiroki Totoki: Ladies and gentlemen, thank you very much for coming. Today first, I would like to talk about — I’d like to first like to take a mid to long-term look at Sony Group’s business and our overall strategic direction. Over the last several years, our business direction has shifted significantly towards entertainment. The decision to lean more heavily into this space was driven of course, by the strength and growth of our entertainment businesses. But it also was driven by the power of entertainment to move people and to fill the world with emotion, which is of course, at the heart of Sony Group’s purpose. In recent years, we have leaned heavily into expanding content in each category such as games, music, film and TV program.

IP expansion across our various businesses, strategic investments in content, music catalogs and growth areas such as Anime and the development and use of innovative technologies to support creation, all of which has been transformative for the Sony Group. And it has led to very strong results disclosed today. Looking at those results, it is worth noting that our entertainment business accounts for roughly 61% of our consolidated sales. And we have seen the resilience of entertainment businesses during economic downturn like during the COVID-19 pandemic. Our efforts in entertainment content and creation technologies are working steadily and our priorities and commitment to growing these categories remain unchanged. Building on our momentum and results to date and working with a laser like focus to realize our long-term creative entertainment vision will be at the core of our corporate strategies moving forward.

Launched last year, our long-term creative entertainment vision illustrates how we want to deliver condo through creativity and technology. A vision of a future that will create infinite realities together with creators, partners and employees and through synergies among our various businesses. Let’s take a look at the entertainment businesses that will be integral to making our creative entertainment vision a reality. First, the game and network services segment, which is doing extremely well. The expansion of PlayStation 5 both in the number of active users and per user spend is expected to continue and drive steady profit. As we look ahead, we will seek to capitalize on our momentum to drive sustainable profitable growth and invest thoughtfully to create the future of play.

We expect to see stable growth in revenue and profits from network businesses due to the growth of monthly active users corresponding to the further and steady expansion of the installed base. Specifically, we will seek higher revenue and profits from PlayStation Plus and maximize ARPU, average revenue per user of PlayStation Store through the personalization and by pricing optimization. In this fiscal year, we anticipate further growth in studio businesses through a broader user base driven by a new title launches from narrative based single player titles like Ghost of Yotei and live service games such as Marathon, as well as continuing success of already launched catalog contents and ongoing live services titles like Helldivers 2 and Destiny 2.

Q&A Session

We also plan to focus on stronger profitable peripherals such as PlayStation Portal, where our recently introduced beta cloud streaming feature allows users to enjoy their games on the go more easily. In the Music segment, we remain focused on strengthening our position in the global music market while continuing to improve profitability. Maintaining strong relationships with digital streaming platforms, Sony Music Group has had great success enhancing its core business value proposition, which includes repertoire centers in major markets around the world, robust label and artist services, tailored service to independent artists and DIY distribution and music publishing. In FY ’24, our music business in Japan notably enjoyed great success in bringing Japanese artists such as YOASOBI to the global market and plan to continue to build on this area.

As we look ahead in this segment, we plan to continue to strengthen these important ecosystems and focus on growing organically and via deliberate acquisitions throughout our business and in high growth markets such as Latin America, India and other Asian countries. Exploring additional strategic investments in key areas of business as well as music catalogs to expand revenue opportunities and increase asset value. Discovering and nurturing talent as well as building and strengthening relationships with local independent labels and artists to enhance our presence. Servicing fans who passionately support specific artists and content and expanding IP through biopics and documentaries involving Sony music artists as well as live events. And finally, we will continue exploring the use of cutting edge technologies such as AI in ways that create value and also protect the rights of our artists.

The film industry overall continues to recover from issues such as the COVID-19 and strike related shutdowns over the last few years, which impacted the number of film and TV productions. Our film business, like the rest of Hollywood continues to rebuild from these events and has some new titles on the horizon, as was presented at the most recent CinemaCon event. In 2026, Sony Pictures Entertainment expects to see the release of the latest Spider Man movie, Spider-Man: Brand New Day, as well as new film adaptation of the Capcom game, Resident Evil, and the latest Jumanji film. We expect strong IP lineups to continue including the final film in the Spider-Verse animated trilogy, Spider-Man: Beyond the Spider-Verse in 2027 and The Beatles, a four film cinematic event directed by Sam Mendes will exclusively hit theaters in 2028.

Anime is also expected to be a significant growth driver for the Picture segment as the Anime focused streaming service Crunchyroll certainly expands its paid subscribers and services. But more broadly, as we look ahead, we see SPE as a central hub for many of the synergistic cross company collaborations that are central to our creative entertainment vision. In recent years, we have seen the value and potential well executed cross business collaborations across the Sony Group companies. Examples include PlayStation productions, adaptation of our outstanding game IP such as Uncharted and The Last of Us to film and television with over 10 titles currently in production. Or the many collaborations among Sony Music artists and our other businesses and among our Sony Technologies and many of our creative businesses.

As we look ahead, we will lean into broader collaborations in Anime and through our engagement platform initiative, we will aim to create opportunities and synergies by connecting fan communities within and outside Sony across various entertainment sectors and in our location based entertainment efforts. Anime continues to be a major area, which leads the growth for the Sony Group across many parts of our business. At the heart of everything is anime’s vibrant creator and fan communities, which Crunchyroll will be celebrating later this month at its 2025 Crunchyroll Anime Awards in Tokyo on the 25. Building on our already successful Aniplex and Crunchyroll businesses, we have moved forward with several initiatives over the last several months to expand our reach in anime and strengthen content development including an upcoming anime series adaptation of Sony Interactive Entertainment’s hit IP Ghost of Tsushima: Legends to be produced in collaboration with PlayStation Productions, Aniplex, Crunchyroll, and Sony Music Entertainment.

The establishment of Hayate, Inc. a company jointly funded by Aniplex and Crunchyroll to plan and produce high quality anime works for global anime fans, a strategic capital and business alliance formed with Kadokawa Corporation to promote further media mixes and global expansion of both companies IP and an establishment of a strategic partnership with brand Bandai Namco Holdings, Inc. and Web3 startup Gaudiy, Inc. And as we look ahead, the anime industry’s market size is expected to continue growing at a CAGR in the high-single digits from 2023 to 2030, especially with anime streaming market, which is Crunchyroll’s core business that is expected to grow at a CAGR in the high 10% range by 2030. In this market environment, we also plan to further accelerate Crunchyroll’s growth by enhancing service offerings and acquiring users.

Our strategy is to broaden services offered to anime fans, which include e-commerce for anime merchandise, a mobile game library service and Manga offerings. To further expand Crunchyroll’s user base, which has now grown to over 17 million paid members as of March 31, 2025. We are closely collaborating with PlayStation Network, which has the largest monthly active users in the Sony Group. Specifically, since February, new customers and renewing customers can smoothly register for Crunchyroll’s paid services from PS5, which we expect to contribute further increases in paid membership. We will leverage PlayStation Network’s monetization capabilities to enhance Crunchyroll service. This back end integration is part of the engagement platform initiative we introduced last year, which aims to create business opportunities and synergies by connecting diverse fan communities both within and outside Sony across various entertainment sectors.

Based on the robust network infrastructure of PlayStation Network, we will utilize core backend functions such as payment, data infrastructure and security across various network services within the Sony Group, aiming to build a new platform that connects users and creators by meeting fans’ interests and desires. Alongside strengthening fan engagement, we also plan to enhance the development and operation of a common infrastructure that can be utilized across the Sony Group for better monetization. This will allow each company within the group to focus resources on enhancing competitiveness and differentiation in their respective businesses, aiming for business growth through expanding and deepening customer engagement. Looking further into the future, we are at early stages and exploring the potentials of LBE to maximize the value of the IP across various entertainment sectors.

Aspirational cross business collaborative efforts to date that merge IP and technology to create new experiences have all illustrated a growth potential for future. Up to this point, I have discussed growth and strategies within our entertainment businesses, but our innovative technology is also critically important for realizing our creative entertainment vision. In the Entertainment Technology and Services segment, we have shifted the focus of our business towards those that create content. Building on the success of Alpha, we are expanding our imaging ecosystem as a growth driver. This includes broadening offerings of tools and solutions for cinematographers, live streaming and remote workflow for industry leading creators and image authenticity technologies for news agencies.

In addition, we also plan to continue to focus on technologies in growth areas such as sports entertainment. We acquired KinaTrax last year to enhance our capabilities to utilize existing sports data like Hawk-Eye’s officiating and play analysis and we plan to continue to expand alternative broadcast through sports data and real time content creation technology that enhance fan engagement and attract new audiences. To support the leap in entertainment, we also plan to continue to revolutionize content creation technology. Key solutions include spatial content creation support system, XYN and real time VFX and 360 virtual mixing environment, which is now expanding into sound creation for films, games and animation. Furthermore, in the Imaging and Sensing Solutions segment, we expect the Image Sensor as a key device for capturing the real world to enhance the accuracy of content creation and elevate the reality of entertainment experiences to the next level.

For mobile image sensors, which is the pillar of the business, we are expecting the ongoing trend towards larger sensor size to continue for the coming few years. The demand for further evolution in image sensor performance such as resolution, noise reduction, dynamic range and power consumption remains high. We will work to introduce a new generation process in order to accommodate the production of such innovative sensors. Combining this next generation process with sensors such as the two layer transistor pixel [indiscernible]. We plan to continue delivering more value added differentiated sensors, thereby meeting our customers’ expectations. As we aim for further growth of the I&SS business in these ways, a major challenge will be controlling the necessary capital investments at an appropriate level and enhancing investment efficiency.

To this end, we plan to explore a range of options. Beyond the mobile sensor business, we plan to continue generating stable profit through cameras and sensors for industrial equipment and social infrastructure. For businesses with future growth potential such as automotive sensors, we aim for mid- to long-term growth and optimal development costs and frameworks, while carefully assessing the speed of market growth and business potential. In conclusion, the diversity of our business and our people will be of paramount importance in realizing our creative environment vision. Sony has about 110,000 employees actively working in various companies and organizations around the world, creating an environment of diverse and varied viewpoints, ideas and strategies.

The synergies generated by organically connecting diverse businesses and people are the source of Sony’s unique competitive advantage. As we look ahead, we will continue to evolve, unleash the creativity of creators and strive for a world of infinite realities, entertainment and excitement. Thank you very much.

Unidentified Company Representative: That was the presentation by Totoki. And now we’d like to proceed to earnings announcement. Now I’d like to begin the FY ’24 financial results and FY ’25 financial results forecast. Allow me to introduce executives on stage. Sony Group, President and CEO, Hiroki Totoki; Executive Officer, CFO, Lin Tao; Senior Vice President, Sadahiko Hayakawa, Sony Financial Group Corporate Executive Officer, CFO, Kazuhiro Yamada. At first, Mr. Totoki please.

Hiroki Totoki: Now we’d like to proceed to explaining our earnings result and forecast. And from after, Lin Tao and Kazuhiro Yamada will be presenting. And Lin Tao has become CFO of our group from April, the 1st.

Lin Tao: Thank you very much. Consolidated sales excluding the Financial Service segment for FY ’24 were ¥12,043.9 billion and operating income was ¥1,276.6 billion both record highs. Operating cash flow was ¥1,972.4 billion primarily due to an improvement compared to the previous fiscal year, year-on-year in the working capital of the G&SS and I&SS segments. Consolidated sales including the Financial Service segments were ¥12,957.1 billion. Operating income was ¥1,407.2 billion and net income was ¥1,141.6 billion. The results by segment for FY ’24 are shown here. Today, at a meeting of our Board of Directors, we approved the plan for the execution of the partial spin off of our financial service business. Pursuing to disapproval, the financial results of the Financial Service business during the current fiscal year until the execution of the spin-off will be classified as discontinued operation in our consolidated financial statements.

At the time of execution of the spin off in October, an accounting treatment will be carried out to exclude the financial service business from consolidation, and if the assets and liabilities of the financial service business will be separated from the consolidated statements of financial positions. After the execution of the spin off, the profit and loss of the financial service business will be recorded as operating income or loss in continuing operations in accordance with the equity method. In light of this, the results forecast for FY ’25 will be presented for continuing operations only, and results forecast for Sony Financial Group will be disclosed at our earnings announcement before the execution of the spin off and at Sony FG’s earnings announcement after the execution of spin off.

As we announced in our disclosure regarding the startup preparation for the spin off in February of last year, at the time of the deconsolidation of the financial service business, we plan to carry out an accounting treatment in accordance with the International Financial Reporting Standards to transfer in one lumpsum the accumulated other comprehensive income of the financial service business recorded in the equity section of the consolidated statements of the financial position to the profit and loss of the discontinued operation. Accumulated other comprehensive income for the financial service business as at the end of the past eight quarters has been trending as shown here. Although it is expected to fluctuate to a certain degree going forward, an accounting loss is expected to be recorded in the discontinued operation based upon the account recorded at the time of DNAV.

This accounting treatment is merely a transfer between line items in the equity section of the consolidated statement of the financial position, does not impair total equity and has no impact on the profit and loss of the continuing operations or our cash flow. Moreover, this transfer is an accounting treatment pertaining to the consolidated Sony that results from the deconsolidation of the financial service business and has no impact on to the consolidated financial position of Sony Financial Group. For more details, please refer to the materials regarding the spin off disclosed today. Now, I will explain our full year results forecast for the continuing operations for FY ’25. The full year forecast is sales of ¥11,700 billion, operating income of ¥1,380 billion before reflecting the impact of any additional U.S. tariff.

Now I will explain the impact of U.S. tariff policy. The situation surrounding our additional U.S. tariff is changing daily and the future is uncertain. But G&SS, ET&S and I&SS segments, which are currently expected to be impacted are responding quickly to the additional tariff that have already been implemented and are considering responses to multiple possible future scenarios. Under the tariff rate, we assumed we expect to be able to manage the impact on profitability of our continuing operations this fiscal year to approximately ¥100 billion or less than 10% of the operating income forecast we just showed by stockpiling strategic inventory in the U.S., adjusting product shipment allocation on the global basis, raising price on certain products with an eye on market trends and other means.

And we plan to continue to closely monitor the situation and take appropriate measures, and we expect to provide an update on the impact of our financial results at our first quarter earnings announcement in early August. The FY ’25 forecast for operating income of continuing operation incorporating this impact is flat year-over-year at ¥1,280 billion while net income is expected to decrease 13% to ¥930 billion, primarily because the valuation gains on equity, securities and the decrease in tax expenses we recorded in the previous fiscal year will not recur. Our forecast for the operating cash flow is ¥1.240 billion primarily due to a normalization of the working capital in G&SS resulting from the significant improvement in the previous fiscal year and expected increase in Motion Picture production cost.

The forecast for each segment is shown here. Now I will move to the — move on to provide an overview of each business. First one is G&SS. FY ’24 sales increased 9% year-on-year to ¥4,670 billion primarily due to an increase in third-party software sales and the impact of falling exchange rates. The operating income increased 43% year-on-year to ¥414.8 billion, a new record for the segment due to increase in all categories except for first party software. User engagement in the FY ’24 fourth quarter continued its strong momentum with the number of monthly active user across PlayStation in March, increasing 5% compared to the same month of the previous year to 124 million accounts in third-party software and network service revenue increasing year-on-year.

Our full year forecast for FY ’25 is sales of ¥4,300 billion and operating income of ¥480 billion. In addition to the stable profit growth for the platform business from the expanded user base, we expect major first party titles scheduled to release this fiscal year to contribute to sales and profit. To respond to the recently adopted U.S. tariff, we have been making preparations such as diversifying PS5 hardware production sites and stockpiling inventory in the U.S. and we expect to implement additional measures at the appropriate time after assessing any changes in the situation going forward. Next is the Music segment. FY ’24 sales increased 14% year-on-year to ¥1,842.6 billion and operating income increased 18% to ¥357.3 billion, a new record high for this segment.

On a U.S. dollar basis, the growth rate of streaming revenues for FY ’24 increased 5% year-on-year in recorded music and 13% in music publishing. Our full year forecast for FY ’25 is sales of ¥1,850 billion and operating income of ¥355 billion. Primarily due to the negative impact of Forex, we expect operating income for the segment to be essentially flat year-on-year, but we expect the operating income of Sony Music Group, managing our overseas music business to grow in the high-single digits on a U.S. dollar basis. Next is the Pictures segment. Despite a decrease in sales in television productions, FY ’24 sales increased slightly year-on-year to ¥1,505.9 trillion primarily due to ForEx impact. Operating income was essentially flat year-on-year at ¥117.3 billion primarily due to impact of the lower sales as mainly offset by the positive impact of ForEx. Our full-year forecast for FY ’25 and sales ¥1,500 trillion, operating income ¥125 billion.

We expect operating income to grow approximately 10% year-on-year on a U.S. dollar basis, excluding impact of ForEx, primarily driven by Crunchyroll. Next is the ET&S segment. FY ’24 sales decreased 2% year-on-year to ¥2,409.3 trillion, primarily due to a decrease in unit sales of televisions and smartphones. Despite the impact of sales decrease and additional restructuring charges in FY ’24 Q4 operating income increased 2% year-on-year to ¥190.9 billion primarily due to operational expense reduction. The interchangeable lens camera market performed well in FY ’24 Q4 mainly in the Chinese market, which benefited from subsidies and grew approximately 9% year-on-year on a unit basis. Our full-year forecast for FY ’25 is sales of ¥2,280 trillion and operating income of ¥180 billion.

This fiscal year, we plan to operate our business conservatively, prioritizing risk mitigation because we anticipate disruptions to markets and supply chains by recently adopted U.S. tariffs. Next is I&SS segment. FY ’24 sales increased 12% year-on-year to ¥1,799 trillion primarily due to the impact of ForEx and increased sales of mobile sensors. Despite an increase in manufacturing expenses, operating income increased 35% year-on-year to ¥261.1 billion, primarily due to favorable impact of ForEx. The benefit of increase in sales and improved manufacturing yields, both sales and operating income were record highs of the segment. Customer demand remained strong in FY ’24 Q4 and design wins for 2025 models are progressing smoothly. Our full-year FY ’25 forecast is sales of ¥1,960 trillion and operating income of ¥280 billion.

In FY ’25, we expect to achieve growth in sales and profit, primarily due to an expansion of mobile sensor sizes, despite expected appreciation of the yen compared to FY ’24. So far, we have not seen any changes in our customers’ order prospects due to additional U.S. tariff impact. Next is the Financial Services segment. Financial Services revenues for FY ’24 decreased ¥838.6 billion year-on-year to ¥931.4 billion primarily due to a decrease in net gains on investments at Sony Life. Operating income decreased ¥43 billion year-on-year to ¥130.5 billion, primarily due to the recording of a gain from the transfer of a portion of the shares of Sony Payment Services, Inc. in the fiscal year ended March 31, 2024, and a decrease in profit related to minimum guarantees for variable life insurance at Sony Life due to market fluctuations in FY ’24.

Sony Life’s new policy amount in FY ’24 increased 11% year-on-year, continuing its steady growth. Next, I will explain Sony Financial Group’s FY ’25 forecast. Starting with this announcement, in lieu of the financial services revenue we had before, we are disclosing operating revenue excluding a portion of gains on investments as a sales metric. As for profit metrics, in lieu of operating income, we are presenting income before income taxes and adjusted net income, which is net income excluding on realized gains and losses due to market fluctuations, gains and losses on sales of securities and other one-time gains and losses. Of the profit metrics, we have established adjusted net income as the most important key performance indicator, because we believe it more appropriately reflects the profitability of our business.

For FY ’25, we expect operating revenue to be ¥1 trillion adjusted net income to increase ¥46 billion year-on-year to ¥107.5 billion and income before income to decrease ¥70.8 billion year-on-year to ¥60 billion. During the current fiscal year, in order to strengthen Sony Life’s financial position, which we have been working on and to delve deeper and make significant progress reducing risks resulting from policy cancellation, we plan to replace yen denominated long-term bonds and reinsure a block of our U.S. dollar dominated whole life insurance policies, which have a high capital load. As a result, we plan to sell surplus U.S. dollar denominated bond assets to cover our declining insurance liabilities, and income before income taxes is expected to decrease significantly for the next two years, mainly due to the impact of gains and losses on these sales.

This series of measures is expected to significantly improve the ratio of duration matching of yen denominated assets and liabilities, which account for the majority of our balance sheet, significantly reduce policy cancellation risk associated with U.S. dollar denominated insurance and increase our level of ESR to a certain degree. Driven by factors such as an increase in the new policy amount, Sony Life’s adjusted net income is growing steadily and distributable amount, which leads to shareholder value expected to remain stable. In preparation for the spin off and listing, we will hold the Financial Services Investor Day on May 29th. In addition to providing more detail on the measures for improving our financial position that we explained today, we plan to discuss Sony FG’s strength business plan and the listing structure for the spin off, so please watch it.

Finally, I would like to explain the progress of our fifth mid-range plan. The key performance indicators for the entire group in this MRP, growth rate of operating income of a continuing operation of 10% or more and a three year cumulative operating income margin of continuing operations of 10% or more. In FY ’24, the G&NS and I&SS segments were the main drivers of profit growth, leading to overall operating income growth of 23% year-on-year and an operating income margin of 10.6%, giving us a very good start at the first fiscal year of the MRP. The full-year operating income forecast for FY ’25, which incorporates the impact of tariffs that as we presented today shows a two year cumulative average growth rate of 11% and operating income margin of 10.8%.

Although the environment remains uncertain, we believe that we are on track to achieve our targets. Regarding capital allocation for the period of the current MRP, we have revised our forecast for cumulative three year operating cash flow, which is our main source of capital from the initial plan of ¥4.5 trillion to ¥4.8 trillion taking into account the results of the previous fiscal year. We have made strengthening shareholder returns a priority for the MRP, so we intend to use the current increase in allocatable capital for greater shareholder returns. For FY ’25, we have established a ¥250 billion share buyback facility and aim to increase the pace of our increase in dividends, raising the annual dividend by ¥5 per share year-on-year after the stock split to ¥25 per share.

Our strategic investments budget of ¥1.8 trillion and capital expenditures budget of ¥1.7 trillion remained unchanged from the original plan. Given that the business environment is uncertain, including the impact of additional U.S. tariffs and net concerns about a global economic slowdown going forward, we plan to operate our business this fiscal year under cautious and conservative assumption. If there are significant changes in the business environment going forward, we plan to swiftly and flexibly revise the capital allocation plan we have presented this time. That is all for now. Thank you.

Unidentified Company Representative: So that has been the briefing from Tao-san and Yamada-san. So at 04:45 p.m., we’d like to start the Q&A session for media and then maybe around 05:10 p.m., we are going to solicit questions from the investors and analysts. We are expecting 20 minutes for each section. For online distribution, you — some of you have already registered the questions, please click the link to participate on the webinar. And regarding how to raise questions and some hosting announcements, please refer to the information which we have already sent to you. So please be patient until we resume. Thank you.

A – Unidentified Company Representative: It’s a bit too early, but we’d like to answer to the questions coming from the media. People who are joining from online, if you have questions please go to Webex screen and raise your hands button and if you have questions from this room, please raise your hands physically. And in this room, please make sure that you use a microphone. Please give up to two questions maximum. Okay. if you have questions please. Okay, so from this block please.

Unidentified Analyst: I am Yoshida [ph] from Nikkei newspaper. I have two questions. The first question is the question to Totoki san. Entertainment, the fusion of the entertainment businesses have been ongoing and also trying to have the live shooting of the game and also the animation is also booming. Well, for each segment, the speed of the collaboration or alliance amongst the different segments within this entertainment, how do you see that progress? And also Ghost of Tsushima, the first party animation, first party game animation, this is maybe one significant milestone. So yes, for the future, how many animations you are going to expect to produce? And also if you have any business target that will be disclosable, please?

And next question is to Tao san. A ¥100 billion is your impact for the additional tariff and semiconductor has not been changed. But those ¥100 billion, the major segments, what kind of businesses are included in this ¥100 billion impact and also into the future, maybe there are some factors for fluctuations such as Forex. what kind of valuable factors you are assuming for this impact?

Hiroki Totoki: Yes. Thank you. Thank you very much. To the first question, the synergy of the entertainment’s businesses, you talked about, you asked me about the speed, sense of the speed. Well, I think, yes, we have been accelerating the project. Why? This is because, yes, it was a top down direction. So for the entire group direction, we are trying to move with these projects. But now we are making bottom up to produce different projects. So now we are on this phase, which is the most important element. As business management, what we can do is trying to set up the environment. So synergy is only produced from the bottom up approach. So once we start to see multiple project based upon the bottom up approach, that will be the designable and that will be the source of competitiveness.

Well, yes, in terms of the acceleration, I’m sure that we are going to be able to accelerate. And of course, each business has to be strong and each segment has to have good materials or good production projects. So each segment has to be stronger, of course. And regarding the animation, I think this is not just limited to the animation, but right now over 10 titles, we already made them to the TV programs and also to the movies or films. And through the IPs, we are now producing, those are art pieces. So the pipeline is going to be bigger and that is really important. Tao san, please?

Lin Tao: Yes, regarding the tariff, let me answer to the tariff question. ¥100 billion impact have been it’s assuming the official tariff rate, which has been announced in hardware business is included in this. In terms of our portfolio G&NS games and also ET&S and I&SS semiconductors. So those three segments, we are actually incorporating on par basis from these three businesses. In terms of the tariff, we are not just simply calculating the simple tariff to come up with ¥100 billion but thinking about the currently available information and also looking at the market trend, we may pass on to the price and also shipment allocation. So we are taking a different measures in managing to come up to the ¥100 billion impact. That’s what we are thinking. Thank you very much. Maybe to add, well, the 12th of May, U.S. has additional tariff reduction for China. Maybe this ¥100 billion is not reflecting that tariff reduction between China and U.S.

Unidentified Company Representative: Next question, please. Those who have questions, please raise your hand. The person in gray, the gray shirt, over here please. Yamamoto [ph], a freelance writer.

Unidentified Analyst: I have two questions to Mr. Totoki. The first is about LBE, location based entertainment and the outlook. I at the CS, I have today enjoyed the immersive entertainment, but the LBE, I think they are temporary mostly in the past. But how will this evolve in the future? What is aiming — what is Sony aiming to achieve? For example, entertainment technology and I think this will be a showcase at a contact point with the consumer. And I think it’s very important that you promote LBE. So I’m wondering whether you’ll have more permanent LBEs instead of onetime or temporary. So what is your outlook? If any, please share that with us. And the second, if I may. The second question is about creation of new businesses at Sony. There’s Sony Acceleration Platform, which is being promoted for to create new businesses. And what is the outlook of the outputs outcome and what is your expectation going forward, please?

Hiroki Totoki: Thank you for the questions. First, about LBE. Well, to be honest, we are still searching for different possibilities, but we are doing a lot of terms and not just in Japan but also overseas. Well, we take certain risks in some cases or it could be that as a licensor, we do using the license, the LBE simulator types of experiments. So that is what we’re doing right now. However, as for myself, as you say rightly, in order to expand IP, this LBE will be a very effective tool and it goes beyond generations. I think we can come up with things that people of all generations would love, because this going to these events with family is something that we should be pursuing. But we cannot leapfrog and, for example, think of something like a theme park, investing and creating a theme park on our own.

We’re not thinking of any such thing. In order to reach that level, we have to think of which pathway to take and we have to think about the optimum pathway. We also are trying to verify this and together with partners, different partners, we have to work on this. So we are searching for such collaboration right now. And in regards to creating new businesses, well, a recent outcome in 2024 from April, Sony Thermo Technology, there is this device to cool down your body. And well, it’s very hot in the summer these days. So this device itself is increasing in sales year-on-year. So as a business, it’s already been established. And well, this week I received a report that they are growing their sales. So I’m looking forward to the future. SAP, well, rather than doing incubation on its own, they’re trying to offer to companies aiming to become grower and to do incubation, provide the hardware or tools to do the incubation.

So through such initiatives, both inside and outside of Sony, we want to create new businesses. If we can do that that will make us very happy. Thank you.

Unidentified Company Representative: Any other questions? In the central center block, second from the right, the person in the very front row.

Unidentified Analyst: Kogane Sake [ph] from Sankei Shimbun. I want to ask about strategy to Mr. Totoki. So based on Trump tariff, automobile manufacturers and electronics electricity manufacturers are shifting to manufacturing producing in the U.S. Well, the business model, I think it’s going to change going forward. Sony, I think has already started doing this in entertainment segment, are you thinking of producing in the U.S., for example, locally? Now even though you don’t become a platformer, you may have a good IP, so maybe that might be very beneficial and advantageous to you.

Hiroki Totoki: Thank you for the question. Yes, producing manufacturing locally in the entertainment, rather than saying for entertainment segment, I want to look at it from the hardware segment and the software segment. And in entertainment gaming like consoles, these hardwares, of course, can be produced locally. I think that would be an efficient strategy. But PS5 are being manufactured in many areas, whether it’s going to be manufactured in the U.S. or not. It needs to be considered going forward. We’re not in such a critical situation. In the entertainment segment, especially contents creation, recently in the movies. Well, Mr. Trump is saying that he’s going to have 100% tariff on films which are not produced, made in the United States that was announced.

But that is still pending apparently. So these are some of the movements that we need to consider. Regarding entertainment, if you take films, pictures for example, of course, locations are being made in various areas and it is all put together as a story. And there are pictures that are filmed outside of the U.S. because the Hollywood cost has gone up, skyrocketed. So it’s not so much a U.S. problem, but rather it’s an issue that is specific to the state of California. So as for contents, we don’t know how it will evolve. So we are paying attention, close attention to the trends. Now whether we’re going to become a platformer or not. As I explained today, Crunchyroll itself is a platform. And SIE PlayStation is a giant platformer for games.

So we are general contents. We don’t do general contents production, but we do have several platforms. So how can we strengthen that and expand that? I think that will be an important topic going forward.

Unidentified Company Representative: Next question please. Okay. So the central block, the person on the right hand side, please?

Unidentified Analyst: Thank you. Tsuchiya [ph] from Asahi newspaper. I have two questions to Totoki-san. The first question is a bit of the ambiguous broad question regarding the Trump tariff and also ForEx, it’s getting yen appreciation. So do you feel any deceleration of the growth right now? That’s the first question. And the second question is, yes, you talked about the spin-off of the Financial Service business. So not just limit to the Financial Services, but let’s say the semiconductors and other segments. Do you plan to kind of spin off of the other segments? Do you have the idea that other segments to be spun off? Those are the two questions.

Hiroki Totoki: Thank you very much for the question. To the first question regarding the sense of growth or economic situation, yes, we have been watching how things are evolving, but if — do we have any major change right now? Well, as far as our business is concerned, we are not really seeing a big change. However, maybe, yes, there is usually a little bit of time lag, when we start to see some deceleration. So that’s what we have to be watching for. And maybe the employment is going to be the first indicator, especially in the U.S. the employment situation is something which we are watching for. That’s our first answer. And to your second things about the business portfolio. Well, spin off is tending to attract a lot of attention, but this is just one of the methodologies.

And what we want to do is most important more important. Well, yes, the business portfolio is always dynamic, not as static, but it’s always dynamic. What we have to think about is as entire Sunny and also its business segments, how each segment is able to grow to the maximum level. That’s something which we have to think about. In the financial service business, as a solution, we decided to spin off that business. Other business segments, do we have any plans? We do not have the plans to spin off the other segments. But as necessary, we have to think about the different options, maybe one of the options on the table. So that’s what I can say. But as of now, for the short term, are we going to think about any spin off? No, that’s the question.

Thank you.

Unidentified Company Representative: My time is limited. So the next will be the last question. The person in the center, the front row, This person is from second from the left, my left.

Unidentified Analyst: Toyo Keizai Umegaki [ph] is my name. I have two questions. I think it will be mainly Totoki-san, but the anime business, Aniplex and Crunchyroll, they are crossing over two segments. And how much contribution are they making to your profitability? It’s hard to see as an outsider. You spent a lot of time explaining about this today as well. So what is the size of the profit? How much growth you’re expecting? Can you quantify to the best means possible? And well, it might be that it will be better to make it into one business segment because as a person like me who’s looking into the business performance, it’s easier for me to understand.

Hiroki Totoki: Yes. Thank you for your question and comment. Yes. Well, AniPlex is in the Music segment and Crunchyroll is in the Film segment. But well, we are not disclosing the performance of each company. And but to the best means possible in our explanation of the different business segments, we try to convey this to you, communicate this to you. Once it reaches a certain size, well, yes, I took your comment that it might be better to reorganize. Well, yes, that is one way of thinking. But not just for the sake of people understanding our business forecast, should we do such things. Instead, we have to think about the motivation of the organization and the expertise of the people working there. We always have to think about the optimum way. And we will keep in mind such options, but at this point in time, we do not have any plans to make any changes to the organization.

Unidentified Analyst: And the second is about I&SS. Well, the profit has increased this year, but you talked about reviewing investments. So are there any thoughts on this plus? And also the automobile sensor, the mid to long-term growth, I think that you’ve included this. So what is your outlook of the market growth and the overall outlook? Thank you.

Hiroki Totoki: Well, about the investment, we are always thinking about this, but in my speech, I did touch on this briefly. But we have to think of the long run and think about the sensitive evolution in the long run because we have to invest in manufacturing. And this investment, how should we implement the investment is something of importance to us. And are we going to do it 100% alone or are we going to invite an investment partner or like Hublight. So there are different options. So at what timing we execute is something that we are always thinking about. We have to think about the necessary investment and also our capability. So this is also the positioning of the market. So we have to think about the optimum option. And about the automobile sensors, automobile sensors as a market is growing.

But yes, growth is significant in, as you know, Chinese OEM, EVs, electric vehicles. But the Chinese OEM, electric vehicles, there is fierce competition. And it’s only after surviving that competition, if they have extra capacity, they go overseas. And therefore, they are very strict about pricing. The automobile sensor market is growing in size, but we have to keep an eye on these developments because it’s not a business necessarily where you can expect a large margin and large profitability. Having said so, rather than saying our outlook has changed, we are updating the market trend and think about our business alliance and make adjustments in our strategy. That is the way we look at it. Thank you.

Unidentified Company Representative: This concludes the questions from the media. Questions from the investors and analysts, so we’ll start at 05:10 p.m. — 05:08 p.m., excuse me.

Unidentified Company Representative: Next, we’d like to move on to the question-and-answer session with investors and analysts. This is Kando [ph] from the IR Group. I’ll be the moderator. For those of you participating online, please click the raise hand button on your Webex screen. If you have any questions in this room, please raise your hand and we will bring a microphone. Two questions limited to each person. Anyone would like to ask a question? The second row on the right hand side from the MCs and moderators side. Hirokawa [ph] from Innovation Investment. First about the games.

Unidentified Analyst: The first question, in the strategic presentation, I think you are trying to increase the monthly users, and this is increasing quarter-by-quarter. This monthly active users, why is it increasing? And how do you plan to continue increasing that going forward? Can you please elaborate on that point? Especially in 2026 and 2027, I think the sales of the consoles are going to go down. Therefore, I want to know about this.

Hiroki Totoki: May I answer each one of your questions? So on the game and network service, I’d like to ask Tao san to respond to that question. MAU, during the past 14 quarters, it’s always has been positive year-on-year. The generation evolving from PS4 to PS5, we’ve seen some changes. Rather than changing from one generation to the next generation, PS4 continues to be used actively. I think that is one of the most conspicuous differences. So going forward, every year, PS5’s sales will continue to increase and transition from PS4 to PS5 may happen. However, many of the users are new users. So in the future, MAU, I believe will continue to increase. I have that confidence.

Unidentified Analyst: Thank you very much. The second question about the console sales. In the Q4, the sales was 2.8 million, which was slightly less than Q3. But Q4, if you think about the tariff, I think maybe you should have brought it forward. But this Q4, 2.8 million units, when you compare that to your domestic plans and also the 2026 console sales, what kind of plans do you have for the 2026 console sales? Yes, the Q4 unit sales was as expected. Q3, as you know was the holiday season. So of course, the sales was very high. Including promotion, we had new titles and it was the most active season. Q4, in terms of the season, I think it was more composed. So the numbers, the units, it was as expected. Now about this year sales, this is a domestic image is 50 million unit sales is what we are anticipating.

It’s not that we have a very strong intention because there are a lot of tariffs and uncertain issues around the environment. So rather than looking for the unit sales, we want to look at the entire market and try to have a flexible approach to the shipment. Thank you.

Unidentified Company Representative: Next question, please. [Operator Instructions]. Now the third row from the front on the right hand side block. Thank you.

Junya Ayada: I am Ayada from JPMorgan Securities. I have two questions. The first question is regarding the impact of the tariff, ¥100 billion. Well, yes, assumption let’s say if the assumption going, it continues for the next fiscal year, this ¥100 billion impact is expected for the next fiscal year. So yes, it will be pushing down by ¥100 billion for the next year or by implementing some of the actions, you may be able to reduce this impact or maybe game ET&S, I&SS, sure those are the segments which are impacted by the tariff. But maybe thinking about timeline of the actions, maybe there are some segments which have more difficulties in taking those measures and having a less impact. Would you please talk about that?

Hiroki Totoki: Okay. To that question, let me answer to the question. Well, we do not have a specific simulation, but the measures which we are already implementing on top of the measures, we may have to implement other measures so that we can minimize the impact. That could be the reality. So how we are going to take those actions or measures? Well, usually, we have to reduce the fixed cost. And yes, trying to be competitive, this is leading to the more competitiveness, so maybe we have to do it. Of course, we have to do it. And of course, the shipment from where we are going to make the shipment, that is also a huge impact factor. So thinking about this flexibility of supply chain, we have to refine and adjust the supply chain.

And also in terms of so many SKUs for certain segment, if it’s not profitable, then maybe we may have to think about discontinuing or terminating the business if it’s not profitable or maybe we may have to switch to the next different model or maybe we have to pass the additional cost onto the price. So yes, some segments are difficult to take measures, but in terms of taking measures, I&SS, well the price — this is not the business model which we can control the price. So maybe this is a little bit more indirect influence. However, in that case, the level of the investment has to be reviewed, so that could be one option. Will the assumptions change within really short term right now? And if this is going to continue for the next year, I think we have to think about a lot more measures.

Thank you. The second question is for G&NS. The operating income — the assumption for the operating income for this fiscal year, the reason for the increase, the first-party increase of the profit and also add on contents, not the first-party, but third-party game contents. Well, regarding the first party, yes, maybe the major titles are based upon the previous titles. And also regarding the third party, including add on, I think in the past, you don’t really have a huge numbers onto the forecast at the beginning of the year. Well, what’s the difference in terms of the expectation to that segment? Thank you.

Hiroki Totoki: Regarding the first party titles for this year fiscal year, Ghost of Yotei, Best Landing 2 and Marathon, so those have been already announced. So we have major multiple titles in this fiscal year. So in this regard, Stranding 2 and Ghost of Yotei, we have the sequels. So yes, we can expect to a certain extent of the fans are going to also enjoy the new titles. Regarding the Marathon, this is a new genre, relatively speaking. So maybe we see a little bit of the risk. However, this is kind of a reasonable forecast to be incorporated. Regarding the third-party titles, we also have quite promising lineups of the third-party titles. So yes, the installed base of the console and MAU, we are expecting the solid numbers in terms of the consumption. So we believe this is reasonable. And also GTA VI is not included in our forecast. Thank you.

Unidentified Company Representative: Next question, please. On line, Nakane-san [ph] from Mizuho Securities, please.

Unidentified Analyst: Can you hear me?

Hiroki Totoki: Yes.

Unidentified Analyst: Nakane from Mizuho Securities. Thank you. I have a question to Tao Lin-san. You become CFO and what issues do you have in mind? What do you want to do? What is your ambition going forward? For example, pictures and games. Well, pictures, ROIC is 6%, so it’s the lowest and Quattro, it’s quite visible, but the film making, television production, I think it’s quite tough in various ways. So Tao-San, how would you like to boost the ROIC? What policies are you thinking of? How will you address this issue? Is it first about gain? Well, under the new organization, PL cash flow has improved significantly. Well, Tao-san, you were the CFO there. And the top line is increasing. I do understand that. But operation wise, what changes have taken place with generating at this profit and cash flow?

Please talk about the changes made yet. I think well, you’re spending SG&A to certain extent. So operation wise, I think there’s room to make it more efficient so as to improve profitability. So what are the measures you have in mind for that purpose? Thank you.

Lin Tao: What I want to do? Well, my top mission is to ensure the healthiness of financial performance and work together with Mr. Totoki to achieve his goals. So the Sony Pictures about the structure, yes, I do understand that. And so we have Crunchyroll, which is distributing anime and it’s a very important strategic company for us. And as Totoki CEO explained, SIE and PlayStation Network know-how will be leveraged as to create synergy. So I want to support the business in such a way. And second, about SIE, what has changed? Well, I think there are two major changes. One, still in units was the focus, but now they are focused on MAU. The management approach has changed. So I think there’s a major change in policy. So it’s [indiscernible] CEO’s strong leadership.

And I think that the management is focusing on engagement in MAU. And this is leading to profitability. The second change, the first-party studio, in the past, there were various issues and Totoki-san was temporarily the CEO And talked about various structural reforms. And compared to a few years ago years ago, the financial discipline is in place. Well, we’re still halfway and but there is still upside opportunity here. But I think the mindset has changed significantly. That is all. Thank you.

Unidentified Company Representative: Thank you. So let’s move on to the next question. There is a person in the middle of the room raising his hand.

Kohei Okazaki: Okazaki from Nomura Securities. I want to ask about game and I&SS, one question each. PlayStation 5, the production in the U.S., what kind of plans do you have? I think the ratio of production in China is higher, but if you’re trying to diversify, please let us know. I think you have some inventory in the U. S. So how much have you been able to consolidate that? Next one is I&SS. I think the manufacturing process needs to change. Well, what will that be? Is it the mobile manufacturing or could it be some kind of automotive equipments? I think you have made investments in the past. So compared to that past, how much investment are you planning, when?

Hiroki Totoki: On games, I’d like to answer your question. PlayStation and the peripherals is being produced in four countries. In the China, has high ratio. Yes, that’s true. But the supply chain has been diversified. And it’s not just China, but there are other countries in which it’s being going to be produced, manufactured. As for inventory, of course, the details change from day-to-day, but it’s the inventory for three months distribution, that is the image. I&SS, the manufacturing process review, new process is going to be introduced. The sensor needs to evolve. It becomes much more, we need a much more immobile type of image sensors, which will need a much more higher precision. So it’s not in the current MRP, but the next one and the following mid-range plan, we’ll incorporate that.

In 2030, it will gradually start to incorporate these changes. The details will be announced when we update our MRP every three years. So at that time, we can announce or give you the details. The investment size, it’s very difficult to compare to the past. This MRP, I think, yes, it went down. But if you look at the one before this one, I think we are probably getting closer to the two MRPs back. So the — it depends on the fab that is going to start operation in Kumamoto. Of course, we’re not going to do the investment without any plans. It depends on the demand. We have to have an optimal type of gradual investment that we’ll take into account the demand.

Unidentified Company Representative: Our time is limited. So next question is going to be the last question. SMBC Nikko Securities, Katsura-san, please.

Ryosuke Katsura: Two questions. The first is regarding tariff, ¥100 billion and one-third for each segment. And game is a little bit smaller and semiconductor is a bit higher than what I expected. In case of games, allocations are changing, that’s what you explained. But I&SS, should we understand this as indirect impact? That’s our first question. The next is operating cash flow. So the additional part will be returned on Slide 29, and that was what I heard. And yes, regarding the strategic investment, so yes, those will be on the shareholders’ return, but ¥1.8 trillion, which is the strategic investment. So as a first initial year, what will be the level and also the future thinking? Thank you.

Hiroki Totoki: Well, thank you very much. To your first question, I&SS as you expected it’s indirectly influenced. So the end products demand decrease is reflected on to their simulations. And in terms of the capital allocation, Hayakawa-san, please.

Sadahiko Hayakawa: Yes, let me answer to the question. Regarding the capital allocation, the strategic investment progress, yes, the capital allocation or last fiscal year, the execution, cash out already and also made decisions, and that is counted as capital allocation progress. From the previous year, it’s about ¥500 billion or maybe ¥510 billion that’s being progressed. And the cumulative for the three year, as was explained by Tao-san ¥1.8 trillion, which is not changed, but the growth investment, we always try to see the opportunities for growth investment, and that is going to continue, and that is what we are going to invest. The operating cash flow, yes, we are going to create that to the shareholder returns. So we have to have a good balance in terms of the capital allocation. So we are better at capital allocation. Thank you.

Unidentified Company Representative: Okay. So with that, we would like to close this Sony Financial Group, the corporate strategy and earnings announcement presentation 2025. Once again, thank you very much for your participation. So now all the speakers are going to the stage. Thank you.