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Friday, May 13, 2022

Nintendo's Financial Results Briefing for Fiscal Year Ended March 2022 Q&A Analysis!

By LUDWIG VON KOOPA - These actually aren't that thrilling.

If you looked at some FAKE NEWS media stories over the past week, you might have heard very juicy things about Nintendo and their Q&A to analysts and investors over their fiscal year ended March 2022 financial results (that KoopaTV analysed here with TWO charts).

Of course, KoopaTV—as a responsible website—waited until the official Nintendo translation of that question and answer session, which lacks juice. Erm... I'd still like for you to read my thoughts on the seven questions, of course. I mean, I'm not just here to tell you to ignore everything below this part of the page! I put some effort into it!

Question 1: Why are you assuming sales declines and these foreign exchange rates?


I wonder if this is the same person that asked about Nintendo's foreign exchange rate assumptions at the 81st Annual Meeting of Shareholders last year. Or maybe Nintendo just has an on-going record of mispredicting foreign exchange rate assumptions to make their numbers look better. (Nintendo had to revise their initial assumptions last year later on.) Anyway, Nintendo president Furukawa acknowledged that there are many supply issues with semiconductors (something Nintendo foolishly dismissed last year) and things are just really uncertain. They also said accurate forecasts are hard in general. As for exchange rates (assuming 1 USD = 115 JPY and 1 EUR = 125 JPY), while Nintendo doesn't make much purchasing in Euros, they do spend a lot of American dollars, so currency shifts with that can effect profitability. Really not that thrilling of a discussion, as someone who slept during finance class (though I still got an A). Moving on...

Question 2: How is Nintendo Switch Sports selling?


Since Nintendo Switch Sports released April 29, it wasn't covered in the financial statements that ended March 31, 2022. Of course, when you're in front of the president of Nintendo in May 2022, you can ask him about whatever you want. And he said Nintendo Switch Sports “is off to a very good start in every region.” He gave some more colour to say that it's popular in Japan across a wide range of age groups, but more specifically in Europe and North America it's selling with the large demographic of mid-20s customers who played (and probably have nostalgia for) Wii Sports and Wii Sports Resort.

Reminder that if you played Wii Sports when you were 10, you might be 26 now.


Question 3: How is Nintendo Switch Online doing?


Furukawa refused to give an updated number of Nintendo Switch Online subscribers, but did say it's above 32 million. He acknowledged that there are some churn rates where people don't renew their subscriptions (especially if they're not being forced to auto-renew). Making the service more valuable and compelling is what they're doing to make people want to keep their subscriptions going and subscribe for the first time to begin with, which is why you see them adding things like the Splatoon 2 Octo Expansion and those Missions & Rewards.

Shout-out to me finally changing my avatar from King Bowser with a purple background to the Mario Kart blue Spiny Shell, on the basis that it could be me inside of that. (...It could also be an ISIS weapon to kill off KoopaTV's former employees, but...)

Furukawa declined to give specific numbers about Nintendo Switch Online + Expansion Pack, but more and more suckers are subscribing to it, especially in the United States. We don't know what the “especially high” “ratio” in the USA is. It could be a relative thing, like maybe 20% where other regions might be 5%, or it could be a majority, like 50%. No clarity.


Nintendo Switch profile icon elements blue spiny spiky Koopa shell Mario Kart
That could be me taking a nap.
Please don't send me unsolicited friend requests. I'll just reject them if I don't know who you are.
Why not comment in the comments section first?
By the way, being YOUR new friend means I'll have to delete someone else off my list, since I'm so popular that I'm at the limit.


Question 4: Why does Nintendo continue to have a strong software library six years into the Switch? What comes next?


Pretty stupid question. Anyway, Furukawa explains that because Nintendo had a divided hardware strategy before (think GameCube + Game Boy Advance; Wii + DS; Wii U + 3DS), their development and investment efforts were always split. Since they can be combined and because the Switch is doing so well, it's easier and worth it to keep the software strong.

Furukawa looked back and acknowledged that sometimes moving from one hardware generation to the next (like from the Wii to the Wii U) can be difficult for customers; and that's despite the big Wii ← Wii U backwards compatibility effort, compared to no backwards compatibility for the Switch. Furukawa believes that the Nintendo Account long-term relationship (he keeps going back to Nintendo Accounts very often every quarter or so; as a Nintendo user I really don't see the big deal with these or think of it as a relationship with Nintendo) will make going from one hardware generation to the next smooth for customers. No details on when that next hardware generation will be.


Question 5: How much will you rely on the Nintendo Switch (OLED model) to carry your sales goals, and Ukraine thoughts?


Furukawa provided some actually interesting figures:
  • In the fiscal year that ended, 25% of overall hardware purchases were made by people who already own a Nintendo Switch system
  • 30% of people who bought a Nintendo Switch Lite already had a Nintendo Switch
  • 40% of people who bought a Nintendo Switch (OLED model) already had a Nintendo Switch (or were replacing a previous Switch)

If Nintendo can somehow convince people who already own a Nintendo Switch to buy a second one, that'll surely increase the proportion of (OLED model) sales!

As for Ukraine, the current Russia-Ukraine conflict makes railway transportation to Europe difficult. Therefore, Nintendo is planning to fly their inventory around more as opposed to relying on cross-country railway travel. That might result in more expensive transportation costs, but I'm pleased that Nintendo is following KoopaTV's transportation hierarchy of plane superiority and train inferiority.


Question 6: How are you using your cash?


No specific answer, though Nintendo is buying some property with it for future research and development efforts.

Question 7: What's up with your DeNA relationship?


In a statement that I can't find on my own, apparently DeNA, Nintendo's partner on several mobile efforts, has sold their shares in Nintendo accumulated/exchanged from their years-long business alliance, in order to “move to the next stage of enhancing their relationship.” I would think if you wanted to enhance a relationship, you wouldn't go sell your shares. However, Furukawa didn't clarify matters, saying that Nintendo and DeNA operate “based on trust”...? He refused to disclose anything more besides that they will continue to collaborate and they've learned a lot together.

I think something is going on there. Unfortunately, we won't learn about it this week.



And that's all seven questions! Did you learn anything? ...Did you regret reading through that analysis? Hopefully not.


Check out last year's Financial Results Briefing for Fiscal Year Ended March 2021 Q&A analysis!

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