AFTER THE GAME

Want Extra Lives?

Happy Tuesday War & Peaceniks. Ready for another game?

Nintendo has an odd fiscal calendar. It starts April 1 and ends March 31, which probably makes the start of every new financial year a lot of fun (April Fools!), but it makes Full Year comparisons for their business a bit wonky.

Nintendo released earnings results for 4Q last week. 👆 Their 6% drop in 4Q revenue could be troubling if not for the 18% growth in net profits and an announcement that Nintendo expects to reach 15.5 million Switch consoles sold by the end of their fiscal year (on March 31) - a half-million consoles over target. All important - but only part of Mario’s latest tale.

When reading earnings during this time of year, I focus more on Full Year performance, IMHO a better indicator of long term health. For Nintendo, a FY YoY report is difficult because their last full year earnings report was around April Fools 2023, and their Fiscal Year ends in less than 90 days from now.

So, to understand where Nintendo is, and how their full year will end, we have to look to their nine fiscal months to date, aka the last nine months of 2023.

Despite negative growth in 4Q revenue, Nintendo grew revenue 8% from April through December 2023. And, in today’s cut-it-until-you-make-it Media culture, their ability to grow profit 13% while growing revenues 8%, and beating until sales goals, is rare.

The Switch is now the third best-selling console of all time. And the anticipation of their next model is high. Unlike Microsoft and Sony, Nintendo is targeting a different, singular profile of gamers, with ambitions beyond the average console.

“We try not only to put one system in every home, but several in every home, or even one for every person.”

- Nintendo letter to shareholders

It’s a great and differentiated strategy with a great and differentiated product. for decades Nintendo has catered to a specific segment of gamers who play on handheld consoles, but aren’t classic mobile gamers - thus carving out their own kingdom in the gaming universe.

As I wrote recently, casual mobile gaming, without a console, is by far the most popular format and platform for gaming worldwide.

You can see, by comparison, the handheld console market is relatively small - half that of consoles and four times smaller than traditional mobile gaming on smartphones.