The time has come to begin the announcement of Consolidated Financial Results of Sony Group Corporation. I'll be serving as Master of Ceremonies Okada of Corporate Communications. First, Mr. Totoki, President and COO and CFO will explain to you the FY22 consolidated results and FY'23 consolidated results forecast, followed by Q&A We are scheduled to have a total of 70 minutes now. Mr. Totoki, please.

Today, I will explain the following, consolidated sales for FY'22 were ¥11,539.8 billion, and consolidated operating income was ¥1,208.2 billion both reaching record heights. Income before income taxes was ¥1,180.3 billion and net income attributable to Sony Group Corporation stockholders was ¥937.1 billion. Consolidated operating cash flow excluding the financial services segment was ¥415.5 billion primarily due to an increase in working capital. Results for FY'22 by segment are shown on this slide. The cash flow results by segment are shown here. Next, I will explain the full year consolidated results forecast for FY'23. We have decided to disclose the actual results and forecast for adjusted EBITDA on a consolidated basis, which is a group KPI for the current mid-range plan and adjusted all IBDA by segment, which is a metric that adds back a portion of depreciation and amortization expenses to adjusted operating income. Please see Page 24 of the material for the methods of calculating these metrics. For FY'23, we forecast sales of ¥11,500 billion, operating income of ¥1,170 billion and adjusted EBITDA of ¥1,750 billion. The consolidated operating cash flow forecast excluding the financial service segment is expected to increase significantly year on year to ¥1,250 billion mainly as a result of a decrease in working capital. The FY'23 results forecast by segment is shown here. Now, I will move to an overview of each business segment. First is the Game and Network Services segment. FY'22 sales were ¥3,644.6 billion, mainly due to the impact of foreign exchange rates and increased sales of PlayStation 5 hardware. Operating income was ¥250 billion, primarily due to an increase in software development expenses, and the recording of acquisition related expenses, despite the impact of increased sales of first party software and improved profitability of hardware. For FY'23, we forecast sales…

It was a presentation by Mr. Totoki. After this, from 4:20, we have Q&A from the media, from 4:45, Q&A from investors and analysts. And we allocate about 20 minutes each for Q&A sessions. [Operator Instructions]. Thank you for waiting. We will now begin the Q&A session with the media. So those people who respond will be Mr. Hiroki Totoki, President, COO and CFO; Ms. Naomi Matsuoka, Senior Vice President; Mr. Sadahiko Hayakawa, Senior Vice President will begin the Q&A session. [Operator Instructions] The first question is Mr. Tatuni [ph] from Nikkei. Mr. Tatuni the floor is yours.

I have two questions, if I may. The first question about the growth going forward in the short term and medium term. This fiscal year, ROIC for each business is going to -- the ROIC is going to come down. The increase in inventory and other factors are there. So when would you expect to see increase in ROIC again? For each business, there may be differences, especially for games and entertainment. Can you explain what is the prospect going forward? And specifically, what will be the drivers for improving ROIC? Can you please elaborate on that? That's my first question. Secondly, in the medium to long-term growth, mobility and Metaverse are the key in this area. Possible risks and the hurdles and challenges, how do you look at the risks and the hurdles, for example, competitive environment? What is your outlook? That's my first question. And second question, short term, you'll be financing with borrowing. Excluding Financial Services and net debt, it is a temporary measure or Totoki became President. And are you going to -- you have -- you will be changing the rules for the discipline and you'll be using more of the debt borrowing? What is the direction going forward?

Thank you for questions. Well, then, first, your first question, ROIC, entertainment -- mainly about entertainment, that's your question. With regards to ROIC, FY22, as you know, especially in game, PS5 inventory has increased. Working capital increased as a result -- which resulted in deterioration of ROIC. That is a major point. Basically, PS5 hardware sales increased, which resulted in a decrease in inventory. So this will be working positively for ROIC, especially acquisition-related expenses in FY22 and FY23, ¥50 billion to ¥60 billion of expense. So the -- that impact, it will be much less in FY24 and onwards, which will also be a factor to increase ROIC. And then for Music, M&A and catalog acquisition had impact upon deterioration of ROIC. But in the medium to long term, M&A is sure to contribute to growth. And the catalog -- having catalog is indeed -- it has been strengthening our position in the industry. Therefore, for ROIC, you look at the medium-term perspective, and I believe that it is going to come to optimum level. As for the Pictures recovery from the COVID-19 and reopening of the economy. So theatrical release will increase and production will also be increased. Production expense increases. ROIC will -- were down. But then with the theatrical release, profit will be generated and ROIC will go down again. So we'll be growing in the medium term. And then mobility and Metaverse, what possible risks are there and what are the hurdles was your question. With regards to mobility, we are in the mid of development. So at this point in time, we do not -- we are not at a stage where we should be discussing risks or concerns. But opportunities are huge. Industry is transforming. It is a time of transformation. So we take advantage of this time and with joint venture with Honda Motors, we are going to show results. And then with regards to Metaverse, the expectation is higher than no one is expecting. But in the medium to long term, with the evolution and development of technology, at some point in the future, the market will blossom. And more than anything else, we are a company which is centering around entertainment. And the 3D CG entering related Metaverse, we have technology, which is our strength. So in line with the growth of the market, in a timely fashion, we are going to maximize our technology. And then net debt. Excluding Financial Services, net debt situation. Debt equity balance is basically the balance with the rating. So on that point, I'd like to invite Mr. Hayakawa, to make some supplementary comment.

Thank you for your question. First, balance sheet net debt, you mentioned. As of the end of March, the consolidated, excluding Financial Services, ¥590 billion. As Totoki-san explained, short term, PlayStation 5 production increased, which resulted in increase in working capital. And this is -- PS5 is to be penetrated widespread for growth and with the intention we are increasing working capital. As Totoki said in his speech, for this finance with a short term borrowing. Next fiscal year -- or this fiscal, operating cash flow is ¥1.25 trillion. And from third quarter this fiscal year, we are going to convert inventory into cash and manage cash. Now about fiscal discipline, basically our fiscal discipline remains unchanged. We have a strong financial basis. For example, one of the discipline, the ratio of capital to the shareholders is 50.3%. We have strong financial foundation. So while maintaining fiscal discipline, we are making investments for growth. So the growth investment and the fiscal discipline and the efficiency of balance sheet, we hit the right balance and come up with a fiscal -- the financial -- capital financial policy.

So we would like to invite next question please, from [Indiscernible] please.

So from [indiscernible], I hope you can hear my voice, yes. So I have two questions. First question is due to the macroeconomic situation change. So for the EP&S, I think you have referred, so in the European country, there have been a slowdown in the economy. And therefore, due to the reason, there are lots of companies providing a conservative forecast. And therefore, how is the incorporated in FY23 forecast? So that is my first question. And the second question is that outside from the financial results, now because there have been changes in the top management of the financial company, and therefore, could you make a comment on this?

So thank you very much for the question. For the first question, talking about the macroeconomic condition being changed. And looking at the whole, the business environment will be here, there have been a financial restraint. And also there due to this Ukraine issue and also the global economy disruption, and those conditions have not changed from the last year. And therefore, I don't have any optimistic forecast. However, in advanced countries and especially in the European countries, I believe there will be a slowdown. And also for the emerging countries like China, due to the reopening of the pandemic, there is a forecast for the recovery. However, my gut feeling is that there is transparency. And therefore, that is a global condition. However, for our business -- so from our business perspective, so the U.S. economic condition is going to give a direct impact. And also there is a great impact to the global economy. And therefore, we focus on that U.S. economy. And talking about -- so there had been a change of the CEO. And our intention for this change is that Mr. Endo is going to assume the CEO position starting from the next year because he had worked in the Finance Ministry and also more FFA [ph]. And therefore, he had contributed to the smooth operation of the monetary market, and he has a great knowledge. And therefore, utilizing his know-how as well as knows and experience, we would like utilizing the corporate governance, sustainability and also in the global economic condition. And therefore, he has this great knowledge. And therefore, since FY 2020, so he had been serving as a senior advisers, giving us advise. And this time, so we expect him to contribute to this leadership. And therefore, from the overall decision, we had asked him to assume this position. That is all. Thank you.

Let us move on to the next question. Nakajima san from Kerotusan [ph] please.

This is Nakajima from Kerotusan. Can you hear me?

Yes.

I have two questions. Regarding PlayStation 5, this fiscal year, 25 million is the target, which is the highest ever. Compared to PS1 and 2, is it the highest ever compared to those units? If that is the case, smartphone games is recently very popular and the hardware costs have been going up. Prices have been going up with such a severe environment is PS5 really popular. What is your take on that? And for smartphone games being really popular, the game consoles, what is the -- what is going to be the changes in the existence of that in FY23? On a profit basis, this part is going to go down for software. So you talked about the increase in software development costs. With the background of that, can you specifically share that information with us?

Thank you very much for the question. So this is about the games. For this fiscal year, the target for PS5 is 25 million units. The reason is because compared to the past PS generations, compared to them, in a single fiscal year, 25 million units, if we can achieve that, it will be the highest level ever. The reason why we believe that this is possible, PS4, customers exist now and the PS4 usage use them and they switch to PS5. And we looked at how much would be switching. And also there are customers -- new customers also, and we've been looking at that as well. And based on the data, we have put together this forecast. And based on this forecast, we believe that 25 million units within this fiscal year is something that we would we believe that we can achieve. And also regarding the second question, or rather what would be the meaning of having these game consoles in the future? And regardless of the times, having some kind of hardware at hand is necessary. The computing power will be at hand or it would be -- it could be in the cloud. So in the future, that change could happen. But in any case, some kind of a client would be necessary to enjoy different games. So with the evolution of technologies and the hardware that matches the times, providing that time of hardware will create value. And also -- regarding your second question, even though the revenue is going up, why is the profits going down? One is the game development costs are going up. And also from a technical standpoint, the acquisition-related costs is increasing this term. The game development cost is going up because of the following reasons the first-party software development is going to be strengthened, and the live services will be launched. And intentionally, we are enhancing this part. So that is why the expenses are increasing. That's all.

Now we'd like to move on to the next question, Asaka [ph] san from Nikkei Business please.

Asaka from Nikkei Business. Can you hear me?

Yes, we can hear you.

About the decrease of operating cash flow. Earlier, you said that the working capital has increased. Can you elaborate more specifically what are the factors, which resulted in increase in working capital? Secondly, is this impacted temporary? Or this will be continuing into this fiscal year, please?

Thank you. On that question, first, FY22 operating cash flow was low level. And the reason for that, and it going to return to recover the conclusion is, it is going to recover next year. And the deals, I'd like to ask Hayakawa to explain.

Thank you for your question. Your question about operating cash flow. FY23 result, ¥415.5 billion, a increase in working capital mainly from business and business increase in the inventory. Game business, as I mentioned earlier, PlayStation 5 production, there are constraints in production. But the constraint is removed. So with increased production, which resulted in increased working capital. Secondly, the movie production cost and the cash outflow is there with the production. Now under COVID-19, the film production was not as much as possible in the past. And in production, marketing expense is incurred. But the theatrical release is not done. So the cash flow after was not there during pandemic. But from next -- the last fiscal year, normalization occurred. So increase in working capital and the normalization resulted an increase in theatrical release. As Mr. Totoki said earlier, for this fiscal year, PlayStation 5 will be sold when the operating cash flow of ¥1.25 trillion, we are expecting. That's all from me.

So due to the time constraint, we would like to invite the last question. [Operator Instructions] So I think we have no more questions. Therefore, we would like to conclude this Q&A session. Thank you very much. So excuse me, please wait. So from the Freelance, Nishida san [ph] please. So are you able to join, Nishida san, please? So we would like to conclude this Q&A session. So we are going to have the Q&A session with the investors and analysts. Please wait for a while. Thank you.

Thank you very much for waiting. Now we would like to start Q&A session with investors and analysts. So I'm going to serve as a moderator. My name is Sinchi [ph] from IR Group. The respondents are those three people. And please refer to the instructions that have been already sent. [Operator Instructions] Now I would like to start Q&A session. [Operator Instructions]. From BofA Securities, Hirakawa please.

Thank you very much. So this is Hirakawa from BofA Securities. For the sensors and games and today, so according to the presentation, I&SS has been risen to 53%. And therefore, so I think this kind of changing to the large scale has contributed to the improvement to 51%. And are you going to improve more? And also talking about the development road map with partners. And the second is about the gaming, and there have been an increase of cost for the games and also for the M&A costs, so 20% increase so increase of ¥10 billion. So game development cost, how much increase was there for the game development costs. Those are two questions.

Thank you very much for the question. For the first, for the I&SS market share, so as I have mentioned in my presentation, so currently for the smartphone cameras and for the sensors, so the large scale sensors, and that's driving. So we are driving. And for the Chinese OEM and there have been one in sensors. However, thinking about that in the midterm, we are able to increase our market share in the future. So this is the first point. And for the second point, for the Game & Network Services, the game development cost and how much increase is there. So Matsuoka is going to explain. Naomi please?

So talking about the development costs for the games and how much increase was there. So actually speaking, so HR costs and also the development costs. And also due to the increase of M&A cost was there. And talking about the HR costs and also the development costs. So for within that, the development costs in comparison to previous year, we expect an increase. However, we are going to -- so I think we are able to offset the costs. And for the M&A cost, so the Bungie Inc. for this year, for the full year, we are going to be consolidated, and therefore, that's ¥12.3 billion increase and therefore, ¥65 billion. So talking about the sales cost and for the PS5, so we expect more sales of PS5. And therefore, there will be the increase of that cost.

Thank you very much. Moving on to the next question. From JPMorgan Securities, Ayada-san please.

Thank you. This is JPMorgan. I also have two questions. First question regarding games. This term, the operating profit is ¥ 20 billion -- is going to increase by ¥20 billion. On Page 15, there are several items listed up. So can you elaborate a little more on them? Mainly there are three points, the hardware loss is going to improve. Right now the Yen is $130 to the dollar so is it based on that or are memory and parts cost going to go down. So are there any factors that would drive the improvements? And for the software, the first-party software is going to decrease according to your forecast. How about third-party software and other types? And for SG&A, you talked about that just now. Last year, it was not really included. So what is the difference in this term and last term for games? Secondly, for image sensors, for fourth quarter and first quarter, if you compare the wafer introduction was slowed down. From your perspective, the smartphone market situation, depending on the regions or North America, depending on the models and channels and if there's any periods that will we see recoveries, please let us know.

Thank you very much for your question. Regarding -- your first question regarding the games. This term, compared to before, it will -- the profits will go up by ¥20 billion. And what is the breakdown of that? First of all, regarding the hardware, there is the foreign exchange situation and also the material costs is also a factor. So it's a combination. And with that, we believe that the profit will improve from there. And also regarding the software, it's a slight increase, but basically it will be flat. The add-ons is not going to particularly go down with -- in our assumption. Regarding the third-party software, maybe we are a little bit careful. In the first quarter, we will look at the performance of the first quarter and then review it once again. So that was about the software. And also, regarding how it is recognized, from this term, for software development costs will be listed up. The live services is a new service that we will develop and provide. And along with that, the development process has been revisited and a part will be included in the capital or it will be capitalized. That's all. And regarding I&SS -- excuse me, the smartphone market situation. Regarding China, we are not optimistic. If we look at the logistical inventory levels in the fourth quarter at around February, it went down slightly but in March it went up again. So we believe that we should not be optimistic. And also, the mid to low camera sensors, the inventory levels of our competitors are quite high. So we believe that the price will be going down rapidly. So again, we're not optimistic about that. And in North America and Asia, the smartphone markets there, especially for the high-end smartphones, in the fourth quarter -- compared to the fourth quarter, the situation has weakened slightly. So for FY23, that's our assumption. So overall, for the smartphone market, we believe that we should not be optimistic. So currently, that is what we believe. Personally, I believe that the recovery would come in, in FY24. That's all.

Thank you very Mr. Ayada. Then next we move on to the next question. SMBC Nikko Securities, Katsura-san, please.

Thank you. Katsura from SMBC Nikko Securities. Two questions. The first question, cash flow, excluding finance service, you said ¥1.25 trillion operating cash flow. Investment cash flow, can you please explain as well? Semiconductors' CapEx plan and you are exiting break as compared to last year. So maybe the background is, as you have explained. Other than that, if there is key points about the cash flow, please, investment cash flow. And secondly, related to the operating cash flow, inventory in Q3-Q4, you maintained a high level. This year, the inventory control, how do you control inventory procurement materials and forecast? What kind of level of inventory do you have in mind? These are my two questions. .

Thank you very much for your questions. Now about cash flow, Hayakawa will be responding.

Thank you. About the investment cash flow, last fiscal year, investment cash flow, operating cash flow is ¥400 billion. Cash outflow has increased and the investment cash flow, a bit more than ¥300 billion increase. Strategic investment with acquisition of Bungie Inc. increased and also CapEx was also increased, which resulted in an increase in investment cash flow. For this fiscal year, strategic investment, of course, future growth will take opportunity. We are exploring opportunities. On the other hand, in view of the current market environment, as Mr. Totoki said in his presentation, we look at the valuation and the timing. But more recently, we are to be more conservative and cautious. That's all from me.

About CapEx, as he explained, I&SS CapEx is reflected. And then inventory control by each business segment, there are ways of management. With regards to games, for the year-end sales, there will be increasing inventory in the first half. And toward the end of the year, this will be more normalized. And then EP&S, this fiscal year -- or the last fiscal year, the result, there were some concerns, but -- that we are able to control the inventory very well. So for this fiscal year, likewise, we are going to have the conservative sales plan and the appropriate level of inventory is to be maintained and controlled and will continue to do so. I&SS logic and sensor strategic inventory will be reduced from the second quarter onwards. Amount of inventory, the sales size will increase. So end of FY23, as compared to the end of FY22, it is going to be higher. However, the turnover month on a forward basis, then it's going to be appropriate level. We are calculating that it is on profit level. And it's -- we are going to bring it to the appropriate level. That's all from me. Thank you.

Thank you very much. So we would like to move on to the next question from the Citigroup, Ezawa, please.

From Citigroup, Ezawa. So I have two questions. The first one is about OIBDA. You're going to start disclosure. And therefore, this is in comparison to EBITDA. So what is the difference? And therefore, why you are going to start the disclosure of OIBDA and also going for EBITDA and OIBDA? Will there differences or rather a larger gap between the two? And if that is the case, please explain the logic. And the second question is about the semiconductor for the new fiscal year operating profit. So there have been the reason for the changes of operating income and however, increase of the sales and increase of revenue. However, because I think you listened according to the value of absolute value. And therefore, the sales is JPY 20 billion. However, the absolute value in comparison to others, it's rather small. So is there any reason behind? Those are the two questions.

Thank you very much for the question. For the first one, for the OIBDA closure. So in comparison to EBITDA because it doesn't include outside of the sales and then for the six segments. So outside of the sales, well, because we don't distribute the material and therefore, looking at the segment, OIBDA. So in comparison of because it's much similar to the EBITDA and whether the gap is going to increase, that's not going to happen in the future. So for the time being, for three years as an important KPI, the consolidated EBITDA, so we use the cumulative three-year figure. So they have been outlined in the three-year business plan. However, looking at each segments, so therefore, naturally, so I think it is necessary to explain. And therefore, we -- at this timing, we are -- we decided to disclose the OIBDA. And therefore, because this will be an access with the external -- basis of the external communication. So talking about I&SS, so with the increase of sales and the impact of the revenue is slightly small. So that was a question. However, talking about this point, well, because, of course, there will be an increase of revenue. However -- well, because with the mass production of the new product, there will be more costs required. Therefore, the profitability for FY23 will go down and therefore, taking into this consideration into our forecast.

Yes, thank you. Thank you very much. We only have a short time left. So the next question will be the last one. Mizuho Securities, Nakane please.

This is Nakane-san from Mizhuo Securities. Thank you very much. I have two questions. I'd like to understand the assumptions that are using for this term and ones that you did you explain. Regarding I&SS, at the end of the fiscal, the production capacity assumptions and inventories are going to increase. What is the operational movements after Q2? And Totoki-san talked about this earlier you have the mid to low inventories, until the last term, the mid- to low was also something that you were going after proactively. And I'm sure that you still have some inventory left. Last time or this term, you will be focused on high-end this term. For the remaining inventory, how about the risk of valuation, and is there also something that you have already reflected and is that something that we should not be concerned about. Second is about H&S the JV is improving and R&D costs are going to go up. The JV in audio and video in cameras mobile and others. If we look at these categories, JV is going to go into the black from red, how is it going to improve, and/or how is it going to deteriorate, it could be qualitative if you can.

Thank you very much for the questions. Regarding I&SS, at the end of the fiscal year, there -- what is the assumption for the production capacity. Regarding this, -- one moment please. It certainly -- for FY22, in the fourth quarter average capacity for the facilities would be 133,000 per month and in the -- it will be 160,000 per month in terms of the introduction. And for FY23 first quarter, 130,000 and then 127,000 what will be set in. And also focusing on the high-end part is not going to change. Regarding the mid to low inventory valuation reduction risk. As of now, we don't think that we will go to that point where we would have to reduce the valuation. Regarding the strategic inventory, the general purpose items can be stably sold. So we don't believe that it would go to that point. Regarding ASP, mid to low, for this term, the situation is going to become severe. We believe that there is a possibility of that. So that's the overall picture. And also regarding EP&S, in each category, regarding the profits, to talk about this qualitatively, for the digital cameras, in FY23, the revenue will go up and the profits will slightly go down. And also for TVs, the revenue will go down significantly and the profitability situation will improve. And in the latter half of last year, we struggled. So this term is a conservative sales situation. And also -- and for other categories, headphone, the revenue will go down, profits will go up. The high-end, high-value models, added value models is where we're going to focus on. And also for mobile, the revenues will go down and profitability situation will improve. The units will be narrowed down and fixed costs will be -- will go down and we will try to improve profitability. For the different categories, from a qualitative basis, that is what we believe would happen. That's all.

Thank you very much, Mr. Nakane. With this, we would like to end the financial result announcement for the Sony Group. Thank you very much.