Nintendo Q4 & Fiscal Year 2021 Earnings

At the tail end of March 2020, as we were just heading into the pandemic and which feels like years ago at this point, Nintendo released Animal Crossing: New Horizons, which in just a few days sold around 12 million copies and gave a good indication of how things were going to look during the pandemic, financially.

Sure enough, 12 months later and we now have the results from the past 12 months of Nintendo’s financials, which range from April 2020 until the end of March 2021 and encompass their FY2021. Even after the massive surge that Nintendo saw during the last few months of FY20, their projections for FY2021 were still fairly reasonable and most projections initially were less than FY20 actual.

Overall Net Sales were 1,758 billion Yen, which is an increase of almost 35% when compared to the previous fiscal year. Operating profit on the other hand was up almost 82% when compared to FY20 because they were just selling systems and releasing very few titles reducing marketing on big titles.

Nintendo Hardware Sales FY2021

The Nintendo Switch has now sold 84.59 million units in just over four years, which is incredible. It is now the 4th best selling Nintendo console of all time behind only the Wii which sold 101.63 million, the original GameBoy which sold 118.69 million, and the DS family which had many iterations and sold 154.02 million. It will likely surpass the Wii during FY22 with a moderate projection and if the Switch Pro does come to fruition then with a monster year there is even a possibility of surpassing the GameBoy, leaving only the DS.

It is also now in the top ten best selling consoles of all time at number 8. Based on projections for the upcoming fiscal year, the Nintendo Switch should become the 5th best selling console of all time by this time next year. If the Switch can maintain these hardware sales over the next 3-4 years then it will likely become the best selling console of all time. With a little help from a Switch Pro, an eventual price drop for the base model and a slate of amazing first party titles including new entries from Zelda, Mario and Mario Kart means that becoming the best selling console of all time in the next 3-4 years is very real.

These hardware sales for the Nintendo Switch speak loudly on their own but not only did hardware sales in the fourth quarter surpass record from the fourth quarter in FY20 when animal crossing released, but out of the 28.83 million units Nintendo sold in FY21, 16.28 million of them were sold when the brand new Xbox Series X|S and the PS5 were available.

The next generation of consoles were hard to find and maybe some people decided to go with a slightly more available Nintendo Switch but I think those sales numbers are mostly buyers whose first choice was the Nintendo Switch. Out of the 28.83 million units sold, the numbers were about 2:1 in favour of the standard Switch with 20.32 million units sold and 8.51 Switch Lite units sold.

Nintendo Software Sales FY2021

On top of being the 4th best selling Nintendo system of all time, on the way to likely becoming the best selling and having some great hardware figures during the past fiscal year, Nintendo also announced that software sales were incredible as well. During FY21, Nintendo sold 230.88 million, which is up drastically from the previous fiscal year of 168.72 that ended with a massive Animal Crossing boost.

These new software sales now give the Nintendo Switch one of the best attach rates for their consoles. Currently for every Nintendo Switch sold, there is 7 units of software sold or an average of each console owner buying 7 games thus far. To put that into persecutive, the gold standard for attach rate is the Nintendo Wii that sits at an attach rate of almost 9.

Total software sold for the Switch is now 587.12 million units, and when you look at the last two fiscal years that have a combined 399.6 million units, this means that the Switch is just warming up as these two years have accounted for almost 70 percent of the total software sold on the system.

As always Nintendo consoles are primarily focused on first party software and during FY2021, these titles accounted for 82.8 percent of all games sold on the Switch, which is up about 4 percent from the prior fiscal year. Nintendo now has 22 first party titles that have sold at least a million copies and 36 games in total that have sold at least a million on the hybrid system.

Nintendo continues to see growth in digital sales but are still lacking behind many other companies that have transitioned into primarily digital. Digital software sales accounted for 42.8 percent of total software, which was up almost 9 percent from FY2020 which is likely helped by the pandemic. However, there is something about Nintendo that feels more collectible and it is likely how the first party titles rarely see price drops or that the software usually isn’t overly dated by its graphical limitations since Nintendo doesn’t focus on that.

During FY2021, Nintendo added 8 new titles to the million sellers club including Super Mario 3D All-Stars with 9.01, Super Mario 3D World + Bowser’s Fury with 5.59, Clubhouse 51 with 3.14, Paper Mario with 3.12, Hyrule Warriors with 3.07, Pikmin 3 with 2.04, Xenoblade with 1.52, and Mario Kart Home Circuit with 1.27. The MK Home Circuit numbers seem impressive to me that the premium toy/game hybrid sold as well as it did. I am curious what the expectations were for that title internally.

On a similar premium title Ring Fit Adventure sold an additional 7.38 million copies during FY21, which brings its total to 10.11 million which hopefully MK Home Circuit isn’t judged against. Super Mario Party now sits as one of the top ten best selling games on the Switch with 14.79 million copies sold and will likely see a little bump in the upcoming fiscal year as it just received a update two years after release that will add in multiple online modes that should make it great for social distancing.

However the best selling game on the Switch still continues to be Mario Kart 8 Deluxe that sold another 10.6 million copies during FY21 bringing its total to 35.39 million copies sold and is once again pulling away from Animal Crossing New Horizons as many thought that would surpass the kart racer. MK8 Deluxe, is easily one of the first titles that people will pick up when buying a new system for themselves or as a gift. It’s a timeless classic and everyone can play it.

Nintendo Fiscal Year 2022 Forecast and Projections (FY22)

Despite some record breaking sales figures during FY21, Nintendo saw their stock drop about 5% post earnings report. The share price went from around 72 down to around 68 likely for a few reasons. The first was that looking at the release calendar for the rest of the fiscal year, things still look quite bare. Sure there is Mario Golf in June but past Skyward Sword HD on July 16 everything else is still TBD including listings for Bayonetta 3, Metroid Prime 4 and BOTW2. However, since being announced all of these titles have been TBD in every earnings call. Investors have no concrete reasons to be excited for the possibility of what could happen with Nintendo in FY22.

Although in some recently revealed court documents in the Epic v. Apple case, there was some emails between Microsoft and Epic that showed what Microsoft was expecting Nintendo to do in FY21, which could mean that these items could be pushed back to FY22. It could also just be some people at Microsoft just trying to assume worst case scenario for planning their release calendar. Microsoft was anticipating BOTW2 and Metroid Prime 4 to be released during the past fiscal year.

Along with shareholders, it looks as though Nintendo isn’t expecting anything groundbreaking this year. More accurately there is a glass half empty, glass half full way of looking at their FY22 forecast and expectations. The projections are lower than FY21, but that was one full fiscal year during a pandemic when people are spending much more time at home and indoors giving them the time and reason to revisit gaming.

However their projections are still very respectable and Nintendo is usually a little more timid with their projections as they usually surpass them. For last years projections they were only projecting 19 million hardware units sold, along with 140 million units of software sold. Both of these projections were revised and increased throughout the year multiple times. Even with minimal releases during the past year and supply constraints, Nintendo was able to beat their initial projections by a large margin.

For FY2022, Nintendo is projecting a drop of around 9% in sales and a 30% drop in profit. For hardware they are projecting 25.5 million units, which is a large amount of consoles sold but is also 11.5% lower than what they just reported from FY21. This is a large margin higher than their initial projections at the start of last fiscal year. After having a banner year and selling 28.83 million units, it has to be expected that, despite the dry pipeline after Skyward Sword HD, there will be some big titles for the holidays.

Software projections are also down with an estimated 190 million units compared to their just reported 230.88 million. This projection shows a decrease of 17.7%, but it is drastically higher than FY20 figures of 168.72 million units, in a year with a game like Animal Crossing: New Horizons, and it is also much higher than the 140 million Nintendo projected for FY21.

As mentioned the glass is clearly half empty or half full depending on how you look at it. If Nintendo releases any marquee titles for the second half of 2021 including BOTW2, Metroid Prime 4, or even if the speculation becomes true and they release the Switch Pro or the New Nintendo Switch, then Nintendo should be once again in a fantastic position to surpass these expectations.