Square Enix Ends 2011 with 175% Increase in Profits

Square EnixSquare Enix recently released their financial results from April 1 through December 31. The company reports that they’ve seen a 175% ($65.3 million USD) jump in over all profits for 2011 compared to the same time last year, where the company saw a loss of 76.6% ($23.7 million).

The net sales for the time period was down 2.5% ($1.24 million), operating income increased by 24.6% ($146,000), and ordinary income increased by 56.3% ($124,000).

In Digital Entertainment, Square Enix saw favorable results with Deus Ex: Human Revolution (Europe, North America, and Japan) and Final Fantasy XIII-2 (Japan). The company also saw growth in fee-based service revenues from web, smartphones, and social networking services. The division saw a net sales increase of 6.2% ($699,000), and operating income increased by 11.6% ($162,000) from the previous year. The Amusement, Publication, and Merchandising divisions all operated at a loss for the company.

Square Enix also released a press release in regards to their financial results, where President and Representative Director Yoichi Wada made the following comments:

During the nine-month period ended December 31, 2011 (April – December), the Group’s results included increased sales of console games boosted by our major titles, Deus Ex: Human Revolution (Europe, North America and Japan) and Final Fantasy XIII-2 (Japan), as well as continued expansion in fee-based service revenues from growth areas including content for the web, smartphones and social networking services.

In the current fourth quarter (January – March 2012), despite the release of Final Fantasy XIII-2 in Europe and North America, expected costs including up-front expenditures in content development for growth areas during the period cause us to keep forecasts for the fiscal year unchanged.

As I stated at the start of the fiscal year, we are focusing all efforts on rebuilding the Group businesses toward generating a substantial earnings recovery from the fiscal year ending March 31, 2013 and beyond.

Analysis: It isn’t hard to imagine that Square Enix did well with Deus Ex: Human Revolution. Many anxiously waited for it, and it isn’t hard to fathom the name is what sold the game. However, I don’t think this is something they’ll be able to pull off with the next installment. I believe this mostly because the game received such a negative backlash in terms of its over all graphics quality, many flawed gameplay elements, and boss fight segments. This is going to have many gamers renting rather than buying the next installment of the Deus Ex franchise.

This next year doesn’t look that good for Square Enix. They have a few franchise titles slated for 2012, such as Hitman: Absolution and the Tomb Raider reboot, but historically, these franchises haven’t performed very well. The areas they’re likely to see continued growth are in the fee-based platforms and DLC with existing titles. There hasn’t been much announced as of yet, but the year is still young. Square Enix can only hope that these titles perform well enough to keep generating profits. As of right now, I wouldn’t hold my breath.


About Brandon Mietzner