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Tuesday, February 9, 2021

Nintendo's Nine-Month Financial Results Q&A Briefing for Fiscal Year Ending Mar. 2021

By LUDWIG VON KOOPA - Stock analysts, like gamers, want to know what the next big first-party game is gonna be. (Spoiler alert: Still unknown.)

You've (maybe) seen Nintendo's recently reported financial results that cover their October to December 2020 performance, which is 3/4s through their fiscal year ending at the end of March 2021. They were PRETTY DANG GOOD, according to my commentary.

But what did Nintendo's investor and analyst community think about it? Well, let's look through their Nine-Month Financial Results Briefing for Fiscal Year Ending Mar. 2021 (Conference Call) Nintendo Co., Ltd. Question and Answer summary that took place last week, and was very recently made available in English. There's eight questions! I'm gonna commentate on the questions and the answers in this article. ...And I'll try (and succeed) to keep it light and entertaining for you.

Question 1: Why aren't you projecting even MORE profit?


In the first question, the caller thinks that Nintendo's increased projections for the financial performance for the last three months of the fiscal year (January to March 2021) seems “very modest,” while thinking that a global shortage of semiconductors could be the reason. Nintendo president Shuntaro Furukawa dismissed the semiconductor shortage reasoning, and says that the projection seems modest if you're doing a year-over-year comparison... and such a comparison is a bad idea, since March 2020 is when Animal Crossing: New Horizons came out. ...And it seems like Nintendo won't be able to replicate that this year in that specific time period. But Nintendo believes that in absolute terms, the financial projection for the end of March 2021 is actually not that modest, and they'll try to outperform their projection.

Question 2: How about share buybacks?


This caller seemed happy about the special addition to the annual dividend that Nintendo announced they'd do for their shareholders, but also wanted to suggest that Nintendo buy back their shares, which also increases the value of the remaining outstanding shares. Furukawa said he'd consider it, but said that dividends that reflect their annual profitability is still their primary vehicle for returning profits to shareholders.

By the way, share buybacks are wrongly vilified by the liberal media, but they're also overrated if you want to keep holding onto the company's stock instead of sell it to the company. You gotta find people willing to sell it! I'd rather take the dividends.


Question 3: Why did digital sales increase?


This investor wanted to know why digital sales (download-only software, add-on content (or DLC), and Nintendo Switch Online) increased a lot on the third-quarter. This is a dumb question, because everything increased. A lot. It's the holiday season. Furukawa explained there were increases across the board instead of one area, citing indie title growth in overseas markets (the indie scene is a lot different, and smaller, in Japan) for games that are download-only, the bad-faith Pokémon Sword Expansion Pass and Pokémon Shield Expansion Pass, and people buying the second Fighter Pass in Super Smash Bros. Ultimate. No thanks to Min Min, I'm sure.

Furukawa is a believer that the coronavirus has made a lot of people experience the convenience of digital purchases, so they'll continue to make them. (Though he didn't word it like that, just that digital buyers will keep buying digital, and there's a lot of digital buyers now.) I'd personally still rather own physical copies of my games.


Question 4: Will the Switch outsell the Wii?


Currently, the Nintendo Wii is Nintendo's best selling console (as opposed to handheld), at 101.63 million units. The Switch is the second-best selling console, at 79.89 million units. Setting your goal to be your best plus one is fairly arbitrary, but that's what this investor wants, and Furukawa says it's Nintendo's goal as well. They gave a very software-driven response (and Animal Crossing: New Horizons proves that out), while also saying there's a market for families buying multiple Switch consoles, and they want to keep pursuing that. That segues into the next question...

Question 5: How has software selling changed?


Since the Nintendo Switch has a bunch of hardcore gamers as well as a bunch of casual Animal Crossing gamers, what's Nintendo's approach to dealing with this diversity in the install base? Furukawa says that evergreen titles (games that have already released on the Switch, as opposed to newly released blockbusters) made up a greater ratio of the games sold this year compared to previous years. ...Which makes sense, since Nintendo lacked big new games to sell.

It's been a topic in previous question & answer sessions: How do we get Animal Crossing players to... buy other games? And while Furukawa acknowledged there is a contingent of Animal Crossing: New Horizons fans who continue to ONLY play that game, he also says Animal Crossing consumers have also gone and bought other games like Super Smash Bros. Ultimate and The Legend of Zelda: Breath of the Wild.

Question 6: What will the software lineup look like for next year?


Furukawa doesn't want to announce anything new, so he's saying the plans for the next few months are Super Mario 3D World + Bowser's Fury in February, MONSTER HUNTER RISE in March from CAPCOM, and New Pokémon Snap in April. ...And stay tuned for future announcements. One thinks if any of those flop in sales, that'll be pretty bad. If people were honest like me, at the very least, there's no way you can justify New Pokémon Snap's price point.

Question 7: Are the Chinese buying the Nintendo Switch?


Note the investors don't care about Nintendo's complicity in ethnic cleansing of minority groups sponsored by the Chinese Communist Party. They just care if the non-dead people in China are buying Nintendo Switch consoles. Tencent, Nintendo's Chinese distribution partner, said that they've shipped one million Switch consoles by the end of 2020. Furukawa refused to say if this is a good number or not and declined to share plans or expectations for China, but they really like Ring Fit Adventure. (So does everyone else. Including me. Unfortunately, I have not played it tonight, but look forward to playing it on Wednesday. You should look forward to my fitness log releasing this Friday. The one last Friday was hilarious.)

Question 8: Why isn't there a new hardware model?


In this last question, the investor wants some specific details on how Nintendo will sell more Switch consoles beyond what's already been sold. They want a new hardware model, a new sales region, or something. Where's the growth area?

Furukawa thinks that special-designed models like the gross Red + Blue Mario one will drive more sales, and says they do not have plans to announce a new model. They also think non-Japan parts of Asia Pacific (like China and Oceania) have big potential for growth.

Surprisingly, no one in the conference call, according to this summary, discussed the delayed Super Nintendo World theme park. You'd think that'd be a fairly popular topic, since “IP expansion” is often discussed on these calls as a business strategy. COVID-19 was also not mentioned directly. That's the first time in a long time!



Ludwig sold his NTDOY stock a long time ago, while the share price was a bit lower than what it is now. It might've been a mistake (though at the time, Nintendo's stock sucked), but it also means he doesn't have a financial conflict of interest when writing KoopaTV articles.


Check out the six-months-into-the-year-ending-March-2021 question and answer briefing write-up here!
Ludwig reuses this analysis format for the eight questions asked for when the March 2021 fiscal year actually ended. There are some returning questions!

4 comments :

  1. As a company who is complicit in one ethnic cleansing, don't you think we should begin thinking about the Koopa Klean-up?

    It's just a little kleaning.

    ReplyDelete
  2. Are these callers just random people? Those 'dumb' questions kinda make me mad since there looks to be only so many questions that can be asked. Although I suppose it's always easier to critique, i can't think of any investment specific questions to ask.

    ReplyDelete
    Replies
    1. No, they're institutional Nintendo investors/stock analysts.

      Delete

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