The time has come. FY 2023 Q2 financial results announcement for Sony Group Corporation. I am Okada, Corporate Communications. I will be serving as master of ceremonies. Let me introduce the people on the stage. First, Mr. Hiroki Totoki, President, COO and CFO; Naomi Matsuoka, Senior Vice President, Corporate Planning and Control Ned Group DE&I support for Finance, Business and Entertainment Area; Sadahiko Hayakawa, Senior Vice President in charge of Finance and IR. Today, 3 persons will be explaining the consolidated results for the second quarter FY '23 and full year consolidated results forecast, after which we are going to have a Q&A session. We are scheduled to have a total of 70 minutes [Foreign Language]. Today, after Ms. Matsuoka and Mr. Hayakawa explained the content on here, I will summarize the entire earnings briefing. Mr. Hayakawa, please go ahead.

From here, Ms. Matsuoka, and I will explain. Consolidated sales for the quarter were JPY2,828.6 billion, an increase of 8% compared to the same quarter of the previous fiscal year. Consolidated operating income significantly decreased JPY106.4 billion year-on-year to JPY263.0 billion, mainly due to the JPY64.3 billion decrease in the operating income of the Financial Services segment. I will explain the details in the parts devoted to each business. Adjusted EBITDA decreased JPY60.8 billion year-on-year to JPY426.4 billion. Income before income taxes decreased JPY113.5 billion year-on-year to JPY257.6 billion. Net income attributable to Sony Group Corporation stockholders decreased JPY81.6 billion to JPY200.1 billion. Results by segment for the quarter are shown here. Next, I will explain the full year consolidated results forecast for FY '23. The assumed exchange rate for the second half of the fiscal year have been revised to approximately JPY142 for the U.S. dollar and approximately JPY152 for the euro. The full year forecast is for sales to be JPY12.4 trillion, an increase of JPY200 billion from the previous forecast for operating income to be unchanged at JPY1.170 trillion. And for net income attributed to Sony Corporation's stockholders to be JPY880 billion, an increase of JPY20 billion from the previous forecast. Adjusted EBITDA is expected to be JPY1.785 trillion, an increase of JPY35 billion from the previous forecast. The consolidated operating cash flow forecast, excluding the Financial Services segment is expected to be JPY1,160 billion, a decrease of JPY90 billion, mainly due to the impact of the foreign currency conversion adjustment resulting from the change in the foreign exchange rate assumption and the increase in working capital in the G&NS segment. The FY '23 results forecast by segment is shown here. Now I will move on to an overview of each business segment. First, the G&NS segment.…

Thank you for waiting. Now we'd like to entertain questions from the media. As for the case of the presentation, the people who will be responding to questions as shown on the slide. [Operator Instructions] The first question Toyokeizai -- megas, please.

Uegaki from Toyo. Can you hear me?

Yes, please.

I have two questions. About the game segment. Page 11, hardware loss increase question. Can you elaborate upon this more? Also another point ISS. In the press explanation, share in the society will be increased by FY 2025 in a major way. If you look at the appendix, the current situation is not that good. And in your presentation, ALS, its progress is not as much as expected. About the target, you are not going to change the target? These are my 2 questions.

Thank you for your questions. First, game and network service hardware loss an increase of loss was your question. Second quarter results, I think you are referring to the second quarter results. There's some technical aspect to this. Last year, there was a temporary FX gains occurred on the yen basis as compared to that -- the year before that, there was an increase in the same period last year from the purchase of the parts to the complexion, the lead time is long. And in the meantime, yen depreciated rapidly. So there was such a special factor. That is first, that my answer to the second question -- the first question. Second one, at the beginning, two FY '25, automotive share is going to be increased according to plan. And what is the current situation? What's your question? In the automotive market, itself, it is getting more normalized. So in the medium to long term, the growth target remains unchanged. In some OEMs, the circumstances of specific OEMs and changes of the share are the factors. And it doesn't change the medium to long-term trend. That concludes my response.

All right so next question.

Yes. So I'm Tsutsumi of Nikkei Newspaper. So I have 2 questions. So Page 5. So the target -- and so the figure is our target is rather high, but I'd like to ask in this quarter was about the attainment of 17 million. How do you think that you can attain this goal in the unit terms? And the small models, well, the size actually has been the bottleneck here, but the Skayma and how do you see this going forward? Can you elaborate on that, the Spiderman? And the second one is maybe not so related, but the current clear, the game subsidiaries and studios. And I think I have seen this in the mass media reporting, but the labor cuts has been talked about, cutting personnel. So in the game, the cost control. Have you changed the management policy for cost control? Or are you being more severe about cost control? So if you have any particular thoughts on this, can you share with us? And then related to this, in mid- to long term, the live service games. So the live service games well, I had heard last year about this, but to FY '26, that it is going to be 12 trillion. But have you ever changed the policy or thinking about changing the policy? So if you have any thoughts on this, please tell us.

Okay. So for myself, I would answer your questions. About the first question. So PS5, about the target of PS5. Well, 250 -- JPY25 million, so it is rather a high target. So it's not something that we can attain very easily. And we think that the year-end sales is the most important sales period. And towards this year-end sales, we want to have holiday sales season. We want to have the new models for the holiday sales. So the Spider-Man is also aimed for the year-end holiday sales. So 25 million yes, we want to keep as a target. But in this holiday season, we will take a look at how much. So it's not that we want to increase the installed bases, but we want to have the profitability balance as well. So that's for the first question answer. And the second question here, so this is based on the reporting in the media, but I think it's about Bungie. And last year, July, we acquired this Bungie and SIE, the Bungie management and testing franchise to be strengthened, and new game titles to be developed. And studios, the live science games to support development and also the studios to have the competitivity increased and made more efficient. So those has been our attempts and initiatives. And as part of that, Bungie to have the efficiency throughout the company. So the indirect divisions, we had about 100 people. We had cut as the labor so personal cut. And the impact on the profitability is already incorporated into the current forecast. So PlayStation Studios. So the indirect system, we have a review on this. And so we had had personnel cuts regarding this. And the live service last year, in FY '25, we have 12 titles. But this is the third question, I think, about the 12 titles. And then we are reviewing this. So the titles for the gamers' expectations, we have not been able to meet the game's expectations, but we are trying as much as possible that this would be played by the gamers and liked by gamers for a long time. So the 12 titles -- so 6 titles would be released by FY '25. That's our current plan. And the remaining 6 titles, as for when to be released, we are still working on that. And the live service games and multiplay titles, that's the total of that. So in mid- to long term, we want to end this kind of service, and that's the unchange policy of our company, but it's not that we stick to certain titles, but for the gamers and game titles quality should be the most important. That's how I feel about it. Thank you.

Next, we'd like to take the next question. The Weekly Diamond, in Madasa, please?

I hope you can hear me?

Yes, we can hear you.

I have two questions. The first question is about AT&S earlier in your presentation, you said that the demand on TV is going down. And as a result, you are working on the cost reduction effort. So which kind of cost are you trying to reduce? Please talk about this initiative. The second question is about imaging and sensing solution, the Slide 15. FY '23 forecast says that the additional cost reduction. So more specifically, what is your cost reduction effort like.

Thank you very much for your question. First, on ET&S. So the sales and market condition will continue to be difficult. So our sales cost will be reduced and operation cost will also be cut down. So we have moved up this initiative. The sales amount will go probably go down slightly. But in terms of profitability, we believe that we can maintain the same level. So with that in mind, we will work on the cost reduction. As for I&SS, on this, the additional cost reduction that we are mentioning here, we have several points included here. The equipment, we are reviewing the equipment condition. So we are also reviewing the situation for next year, and we are reviewing the outsourced work as well. These are the main things that we are working on. That's all.

I'd like to move on to the next question. [Operator Instructions] Are there any questions? There seems to be none. So with this, we'd like to conclude the Q&A session for the media. Q&A for investors and analysts will start at 4:42.

We'll begin the Q&A session for investors, analysts shortly. Would you kindly wait until the Q&A session begins. Thank you very much for waiting. Now we'd like to entertain questions from the investors and analysts. I am Kondo of Finance and I group reserving master ceremonies. The people on the slide, so on the slide will be responding to your questions as was the case of media session. As for the operation of telephone set and attention point for attention, please look at the invitation that in advance. [Operator Instructions] We set aside about 20 minutes for Q&A session. Now we'd like to begin the question-and-answer session. [Operator Instructions] Morgan Stanley, MUFG Securities, please.

Ono from Morgan Stanley. One question for a game and one for the films. First, game network. FY '24, the factors for increase or decrease of revenue and profit. Can you explain these factors. For example, the small lighter Vaden will be launched, and they will have impact upon the result, the price increase of hardware and the plan change of the PlayStation Plus. About half of the year, there will be impact, simply calculated it will be in the latter half of JPY20 billion. What is your view on this? And Bungie's acquisition cost will be significantly decreased, you said. If you can comment on the size of the impact. And first-party titles, to number of titles are pushed out to the next fiscal year, is that also a factor for increasing profit? Are there any other factors which might impact decrease in the profit for the game sector? As for the pictures, long last, strikes are about to be complete -- to be ended, and we feel relieved. Towards next year, fiscal year pipeline, and together with the release, depreciation costs might occur as well, there may be pluses and minuses for this year and next fiscal year. In the Pictures segment, is it possible to achieve increased income and increased profit? Or is that going to be difficult for next fiscal year? These are my questions.

Thank you for your questions. First, Game & Network Services, next fiscal year, what are the factors for pushing up or pushing down the income and profit? First, starting from PS Plus. As you pointed out, it will have full year impact from FY '25. 12-year package, then that's how the impact will be. True math package, which means about 60% of the users you can think in that way. And then acquisition-related cost, not only Bungie but number of acquisition-related costs occur. It -- the cost peaked in FY '23 in FY '24, on a dollar basis as compared to this year, about 20% decrease will be the level of acquisition costs. That is about the acquisition. And then hardware-related costs, this fiscal year, in terms of selling units of volume, it is going to be the peak this year. Sales, promotion-related costs and logistic-related costs will be reused. We are expecting that there will be a reduction. And this will be a factor for increase in profit. On the other hand, for content, continuing on additional investment will be made. And this will be partially offsetting the increase in profit. That's my response to the first question. With regards to pictures, news there that the strike has come to a close in the morning of Japan time. So how it is coming to a close, we do not know the specifics yet. But no doubt that it is going to come to an end. So for the fiscal year's forecast, what we are showing now, we are likely to come very close to that or there may be a bit more upside opportunities, but we have to examine in more detail. This year, the launch impact and comparing this with FY '24. And is it possible to see increased revenue and increased profit? It's not that simple calculation. Strike ends then there will be a resumption of the theatrical release and the windowing in FY '24, there are more windows, then for that, marketing promotion costs will be incurred to be prepared for that. So we cannot just simply compare fiscal year one -- fiscal year to another fiscal year and say whether it's possible to see increase in both revenue and profit. But the fact that the strike has come to end is indeed a positive factor in the medium to long term, and we'd like to increase the profit accordingly.

Thank you. All right. So next question. From Citigroup, Ms. Ezawa, please.

Yes. So my name is Ezawa from Citigroup Securities. Can you hear me?

Yes.

And I want to ask one on game and one on semiconductors. But games, this period, PlayStation 5 hardware, so to 25 million units target. So according to what Tecan told us, so 25 million unit would be kept. But the profitability, we should look at the balance with the profitability and this 25 million target. So specifically, how do you see it? How much profitability change would there be? So that 25 million units would not be kept? Or to what extent can we try to aim for 25 million objective. So the selling cost, how much more would there be necessary? So how much profit would you like to see? So can you elaborate on that and tell us how you think about it? And the second question is about semiconductors. So the yield and next term. So there is going to be fruit. So the new products, and there is going to be having issues of yield, I think. So about the yield, can you elaborate on this so that what's happening in the yield of semiconductor? So it's not going quite well. So now in the improvement phase, you say, but the improvement, is it a structural improvement that's happening or that because you are changing to the different kind of products. So is it some kind of a more over -- onetime kind of a treatment? So just by changing the product. So -- and another additional question, if I may, about the impact of profit. So if you can review this. So 15% impact on the -- for free. So JPY35 billion in numbers, is that right? So can you tell us about it?

Okay. Thank you for your questions. So first of all, on the game network services, so 25 million units and the balance with the profitability. So well, if I put it successfully as a company, we are having the guidance for this year. So this guidance, the operating profit, we are going to keep this operating profit according to the guidance for this year. And the profitability is not going to be too much of a downside from the current estimated profitability. So we don't do such a drastic discount sales or the promotion. That's my answer to the first question. And I&SS about the yield. Well, technical content, it's really the competitivity -- source of competitivity. So it's going to be a quite a detailed discussion. So I would like to refrain from going into that detailed discussion at this point. But generally speaking, for the semiconductors, so the new wafer, the new product and then the yield to stabilize, we would require a certain amount of time. So it starts from low yield, and then with the improvement, then the targeted level can be achieved. That's how the new product of semiconductor would go. So I think it's taking more time than we first initially thought. So we are challenging new technology here. And it's not just one new technology, but we have several issues here. So that's keeping us from advancing. And our semiconductor is with a long touch so the wafer in. So the improvement situation, we cannot see the total picture very easily because that is quite long. And that is causing this yield issue, and that's at the bottom of the yield issue. So the improvement is not structural, but we have to look at each phenomena, and we have to accumulate the solutions and to make it optimal. And if we have changed to a new different product? No, that's not what we are doing. That's my answer.

And the impact on the profit, well, the 15%, how much would that translate into amount?

Yes, that's just as you said, JPY35 billion. Thank you.

We'd like to entertain the next question. SMBC Katsura, please, SMBC Nikko Securities, Katsura-san. Please go ahead.

This is Katsura from SMBC Nikko Securities. And I have 2 questions as well. in GNS and INSS. First, on game, next year in March, Ranson is going to leave and Totoki-san going to have this role concurrently. So the background has already been explained in the press release, but -- in the mid- to long term, NS top management, what is your vision? That is what I'd like to ask. That's the first question. And the second question on I&SS. Next fiscal year, or looking at the supplementary sheet, wafer capacity is 154,000 already. And next fiscal year, the number of models will be expanded. So I think that is one of the reasons. But on the other hand, you will be reviewing the lines and also reducing the number of lines. So next fiscal year, the depreciation of the investment. What is going to be the scale? And depending on that, will it impact the improvement of profitability and to what extent? That is what I'd like to understand.

Thank you very much for your questions. First, on G&NS this time, starting October 1, I became Chairperson and then in April -- on April 1, I will be the provisional CEO for interim. And this has already been published, but it will be for a maximum 1 year will be an acting CEO. And during this time, my most important mission will be to find the successing CEO and assigning the person and transitioning to the person smoothly. So game and networking services is a strategically important business for Sony. So -- of course, employees and other stakeholders have high expectation towards this business. So we want to address the expectation by selecting the appropriate CEO and transition to the person as soon as possible. That is the answer to the first question. And second question on I&SS, FY '24 our view. The investment has been continuing and depreciation expenses will increase next fiscal year as well because we are moving to dice size -- large-sized equipment. And as a result, the demand will be increasing, but the -- we will be discerning the market condition recovery. And so next fiscal year onward, we'd like to make decision on investments. I believe that next fiscal year, for the next mid-range plan, I believe that we can talk about our next mid-range plan thoroughly to use. So as we talk about that, I think that we can talk about the size of investments that we will be making in the next 3 years. That is all. Thank you.

Thank you. The time is running short. So from now, I'd like to ask questions to be limited to 1 question per person. Next, JPMorgan Securities, Ayada-san, please.

Ayada from JPMorgan. One question. Game. I have a question regarding game. Second quarter operating profit an increase and decrease. -- thinking behind that, can you explain in a quantitative fashion -- excluding FX impact, JPY8.5 billion decrease in profit on a year-on-year basis. The factors for this hardware negative was large and software was an increase in promotion and others is SNG was large. So what is the impact for each of these factors? And if it's difficult to say in a quantitative manner, the profitability of software remains -- whether the profitability of software is not changing from the before.

Quantitatively, we are not disclosing. So I would like to highlight the important points. First, operating profit and the factors for increase. The largest contributor is software. Simply, software sales was good. First party, slightly weak. Third party is strong. On a net basis, there will be contribution -- positive contribution. And then the second is the positive impact of the exchange rate. And next is network service. Simply, network service revenue increased. And the negative factors are the following: there are two factors. One is hardware. PS5 selling is increasing and related to that. And then sales is increasing this much. And SG&A is increasing accordingly. So these are the positive and negative factors.

Thank you. All right the next question and this will be the last question. So from Matsui Securities [ph].

The cash flow I would like to ask and 1.16 trillion and so at the year-end the inventory doubled and the GNS and INS, what kind of level would that be and for the next year onwards, so the working capital would be more pressurized and so obviously it would be better. So for the game and INSS, would you tell us how it's going to be or how you view this?

Yes, thank you for the question and ask for the question. So as I would answer this question. Yes. And for your question. And this issue that you raised. So JPY90 billion for the cash flow is because of the foreign exchange impact and also the inventory and the working capital -- sorry, not the inventory, but working capital for the debt we have and the PlayStation 5 and also the semiconductor. The second quarter and the third quarter, the sales to be increased, so we have more inventory on hand. And as of much and it's going to be normalized. And especially game, the inventory would be much less in March, okay? And for the next year, so it's going to be a compressed inventory. So how is the operating cash flow would be? So midterm plan, we are reviewing this now closely. And about the working capital, it's going to come back. And here, the cash flow would be positively impacted. And what you had asked the inventory level as of year-end, G&NS and I&SS is different. So about the game, PlayStation 5 sell-in would be increased so that inventory would be largely decreased. And I entices, as has been explained, the revenue is increasing quite rapidly. In that case, the inventory is going to be at a level that's appropriate to that. Thank you, and that's all for me.

As such, we would like to close the Sony Q2 FY 2023 consolidated results meeting. Thank you so much.