| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1713.7B | ¥1548.5B | +10.7% |
| Operating Income / Operating Profit | ¥222.6B | ¥266.0B | -16.3% |
| Ordinary Income | ¥247.0B | ¥265.1B | -6.8% |
| Net Income | ¥166.5B | ¥161.1B | +3.4% |
| ROE | 8.8% | 8.9% | - |
For the fiscal year ended March 2026, Revenue totaled ¥1,713.7B (YoY +¥165.2B, +10.7%), Operating Income was ¥222.6B (YoY -¥43.4B, -16.3%), Ordinary Income was ¥247.0B (YoY -¥18.1B, -6.8%), and Net Income was ¥166.5B (YoY +¥5.4B, +3.4%). This fiscal year saw a material change in the earnings mix driven by a rapid expansion of the Sports Business (Revenue +63.8%, Operating Income +154.5%) and a contraction in the Digital Entertainment Business (Revenue -10.8%, Operating Income -2.8%). While the company delivered higher Revenue and higher Net Income overall, the structure revealed a decline in profitability at the operating level. Operating margin contracted to 13.0% (down 4.2pp from 17.2% a year earlier). Non-operating income including foreign exchange gains of ¥22.7B provided support, narrowing the decline at the Ordinary Income level. Net Income turned positive due to improvements in extraordinary items.
[Revenue] Of Revenue ¥1,713.7B (+10.7%), the breakdown was: Digital Entertainment Business ¥838.9B (share 49.0%, -10.8%), Sports Business ¥658.5B (share 38.4%, +63.8%), Lifestyle Business ¥171.6B (share 10.0%, +16.0%), and Investment Business ¥44.4B (share 2.6%, -22.1%). The core Digital Entertainment Business, centered on the smart-device game "Monster Strike," continued to see declining Revenue, while the Sports Business drove consolidated Revenue growth—growing roughly 1.6x due to expansion in betting and viewing businesses. By geography, Japan accounted for ¥1,510.0B and Other regions ¥203.7B, with a domestic ratio of 88.1%, although the share of Other regions expanded year-on-year.
[Profitability] Gross profit was ¥1,135.9B (gross margin 66.3%). Selling, general and administrative expenses (SG&A) were ¥913.3B (SG&A ratio 53.3%), resulting in Operating Income of ¥222.6B (Operating margin 13.0%). SG&A increased by ¥119.0B YoY, corporate-wide expenses expanded to ¥196.8B (prior year ¥174.5B), goodwill amortization rose to ¥20.2B (prior year ¥14.2B), and depreciation increased to ¥24.0B, all pressuring operating margin. By segment, Digital Entertainment maintained high profitability with Operating Income ¥430.5B (margin 51.3%), while Sports generated ¥50.9B (margin 7.7%) and Lifestyle ¥8.8B (margin 5.1%), and the shift in revenue mix depressed consolidated margins. Non-operating income totaled ¥38.8B and included foreign exchange gains of ¥22.7B; after deducting non-operating expenses ¥14.3B (interest paid ¥4.5B, fees paid ¥5.8B), Ordinary Income reached ¥247.0B. Extraordinary items were near neutral with a net profit of ¥1.9B (extraordinary gains ¥5.4B, extraordinary losses ¥3.5B). After corporate tax, etc. of ¥83.3B (effective tax rate 33.5%) and non-controlling interests of -¥7.2B, Net Income attributable to owners of the parent was ¥166.5B (Net margin 9.7%). In summary, the company experienced Revenue up but Operating Income down; however, Non-operating income and improved extraordinary items produced higher Net Income.
The Digital Entertainment Business recorded Revenue ¥838.9B (-10.8%) and Operating Income ¥430.5B (-2.8%), maintaining the largest profit contribution with a margin of 51.3%, although top-line contraction continued due to content lifecycle. The Sports Business rapidly expanded to Revenue ¥658.5B (+63.8%) and Operating Income ¥50.9B (+154.5%), margin 7.7%, driven by scale expansion through M&A integration and enhanced monetization. The Lifestyle Business achieved Revenue ¥171.6B (+16.0%) and Operating Income ¥8.8B (from ¥1.0B prior year, +784.4%), returning to profitability with a stabilized revenue base centered on the family photo/video sharing app "Mitenne." The Investment Business declined to Revenue ¥44.4B (-22.1%) and Operating Income ¥10.0B (-49.5%), margin 22.5%, impacted by market conditions but remained profitable due to partial divestment gains in startup investments.
[Profitability] Operating margin 13.0% (prior 17.2%), Net margin 9.7% (prior 10.4%), Gross margin 66.3% (prior 68.5%) — margins declined across levels due to shifts in revenue mix and cost increases. ROE 8.8% (prior 9.7%) contracted as Net Income growth was limited relative to equity increases. [Cash Quality] Operating Cash Flow / Net Income was 1.16x, supported by accrual factors (increase in other liabilities ¥33.2B, etc.). Operating Cash Flow / EBITDA was 0.68x, somewhat weak, with a large tax payment burden of ¥118.4B. [Investment Efficiency] Total asset turnover was 0.61x, down YoY as intangible assets and goodwill from M&A reduced asset efficiency. [Financial Soundness] Equity Ratio 67.6% (prior 79.4%) remains high, but interest-bearing debt increased to fund M&A, raising leverage. Current Ratio 440.5%, Quick Ratio 438.1% indicate very strong short-term liquidity; cash and cash equivalents ¥1,115.6B substantially exceed current liabilities ¥400.2B.
Operating Cash Flow was ¥192.9B (prior ¥274.8B, -29.8%). Operating CF subtotal ¥311.3B was offset by corporate tax payments of ¥118.4B. Working capital movements included an increase in other liabilities ¥33.2B, a decrease in unpaid consumption tax ¥12.3B, and an increase in other receivables ¥14.2B; combined with non-operating and extraordinary items, the conversion of Net Income ¥166.5B to cash was healthy at 1.16x. Investing Cash Flow was a significant outflow of -¥315.5B, mainly due to acquisition of subsidiary shares ¥255.3B and acquisition of tangible/intangible fixed assets ¥97.9B, reflecting concurrent M&A-related and growth investments. Long-term loans made ¥40.0B and collections ¥12.1B further pressured investing CF. Free Cash Flow was negative at -¥122.7B, reflecting an investment-led phase. Financing Cash Flow saw inflows of ¥141.6B; long-term borrowings ¥352.0B funded dividends paid ¥83.8B, share buybacks ¥95.0B, and long-term borrowings repayments ¥23.5B, securing liquidity. Cash and cash equivalents increased by ¥30.2B from ¥1,081.7B at the beginning of the period to ¥1,111.9B at year-end, maintaining ample liquidity.
Ordinary Income ¥247.0B versus Operating Income ¥222.6B indicates a net addition of ¥24.4B from non-operating income. Non-operating income included foreign exchange gains ¥22.7B, which benefited from yen weakness and is assessed as having limited repeatability in the following year. Extraordinary items were nearly neutral at net ¥1.9B: extraordinary gains of ¥5.4B (gain on sale of fixed assets ¥0.1B, gain on sale of subsidiary shares ¥2.7B, etc.) were largely offset by extraordinary losses of ¥3.5B (impairment losses ¥1.0B, loss on disposal of fixed assets ¥0.8B, etc.). Comprehensive income was ¥190.2B, ¥23.7B higher than Net Income ¥166.5B, primarily due to a positive foreign currency translation adjustment of ¥28.8B, partially offset by valuation differences on available-for-sale securities of -¥4.1B. The alignment between Operating CF and Net Income is good, but the Operating CF / EBITDA ratio of 0.68x is somewhat low; working capital fluctuations and tax payments compress theoretical cash generation from operating profit. Overall, the quality of earnings is moderate, with some dependence on one-time forex gains and working capital contributions that somewhat reduce the sustainability of cash generation.
For FY ending March 2027, guidance is for Revenue ¥1,850.0B (YoY +8.0%), Operating Income ¥195.0B (YoY -12.4%), Ordinary Income ¥200.0B (YoY -19.0%), and Net Income attributable to owners of the parent ¥135.0B (YoY -18.9%), implying Revenue up and profits down. Progress rates to date are: Revenue 92.6%, Operating Income 114.2%, Ordinary Income 123.5%, Net Income 123.3%, indicating results have already exceeded full-year guidance levels. The Operating Income and Ordinary Income forecasts are conservatively set; while continued growth in the Sports Business is assumed, the company is factoring in increased goodwill amortization, depreciation, and corporate expenses. Dividend guidance is an annual ¥60 (compared with actual ¥120), a conservative level, but the company also disclosed a reference DOE target of 5% for FY2027, suggesting potential dividend increases tied to equity levels.
Annual dividend was ¥120 (interim ¥60, year-end ¥60), aggregate dividend amount approximately ¥8.19B, and payout ratio 47.0%. The prior year dividend was ¥110, representing a ¥10 increase. In addition, the company repurchased shares for ¥9.50B, bringing total shareholder returns to approximately ¥17.7B; the Total Return Ratio was 106.3% relative to Net Income ¥166.5B, indicating an aggressive shareholder return policy. Dividend coverage against Operating CF ¥192.9B was healthy at 2.36x, but against Free Cash Flow -¥122.7B coverage was negative, indicating that in an investment-led phase returns are financed from cash on hand and borrowings. For FY2027, the dividend policy indicates a DOE target of 5%; 5% of equity ¥189.47B is approximately ¥9.47B, and the dividend forecast of ¥60 (aggregate ~¥3.90B) is conservative by that metric.
Margin pressure from changes in revenue mix: There is a significant disparity in margins between Digital Entertainment (Operating margin 51.3%) and Sports (7.7%) and Lifestyle (5.1%). The rising share of Sports (sales composition 38.4%) structurally suppresses consolidated Operating margin. Operating margin declined 4.2pp YoY; continued mix shifts could further depress margins. Goodwill amortization ¥20.2B (EBITDA ratio 7.6%) and increasing corporate expenses are additional downside pressures.
Impairment risk on M&A-related assets: Intangible fixed assets ¥605.5B (prior ¥147.9B) and goodwill ¥238.3B (prior ¥72.6B) increased substantially, with intangible assets and goodwill representing 30.1% of total assets. Goodwill / equity ratio is 12.6% and Goodwill / EBITDA is 0.89x, currently within acceptable ranges, but if Sports Business monetization falls short of plans, impairment risk could materialize. Trademark rights ¥77.4B and software ¥146.6B will continue to generate amortization burdens.
Volatility in working capital and cash conversion: Operating CF / EBITDA of 0.68x depends on accrual factors; if one-time positive items such as increase in other liabilities ¥33.2B dissipate, Operating CF could be constrained. With Free Cash Flow at -¥122.7B while maintaining a Total Return Ratio of 106.3%, prolonged investment phases could threaten sustainability of dividends and buybacks and impact balance sheet health. Corporate tax payments of ¥118.4B are a significant cash outflow, and variability in tax cash-outs could affect liquidity.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 13.0% | 8.1% (3.6%–16.0%) | +4.9pt |
| Net Margin | 9.7% | 5.8% (1.2%–11.6%) | +3.9pt |
Profitability substantially exceeds industry median, driven by the high-return structure of the Digital Entertainment Business.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 10.7% | 10.1% (1.7%–20.2%) | +0.6pt |
Revenue growth is roughly in line with the industry median, as rapid expansion in Sports offset contraction in Digital Entertainment, maintaining an industry-average growth pace.
※Source: Company compilation
Rapid expansion of the Sports Business and change in revenue mix: With Sports Revenue +63.8% and Operating Income +154.5%, the sales composition expanded to 38.4% and is expected to continue growing. However, the Sports margin of 7.7% is far below the core Digital Entertainment margin of 51.3%, and the change in mix lowered consolidated Operating margin by 4.2pp. Margin improvement in Sports and stabilization in Digital Entertainment are key to restoring consolidated profitability.
Aggressive M&A investments and accumulation of intangible assets: Investing CF outflow of ¥255.3B for acquisition of subsidiary shares drove investing CF to -¥315.5B, with intangible fixed assets rising to ¥605.5B and goodwill to ¥238.3B. Long-term borrowings increased to ¥402.2B, but cash ¥1,115.6B, Debt/EBITDA 1.83x, and Interest Coverage 55.0x indicate maintained financial soundness and sufficient investment capacity. Going forward, PMI progress, synergy realization, and absorption of goodwill amortization are essential to balance sheet efficiency and profit growth.
Active shareholder returns alongside investment phase: With dividends ¥120 (payout ratio 47.0%) and share buybacks ¥9.50B, Total Return Ratio reached 106.3%, exceeding Net Income. Even during an investment-led phase with Free Cash Flow -¥122.7B, the company continued returns using cash on hand and borrowings; setting a DOE 5% target suggests stable dividends linked to equity growth. Normalization of investment cash-outs and return to positive FCF will enable sustainable expansion of total returns.
This report is an earnings analysis document automatically generated by AI from XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed financial statements. Investment decisions should be made at your own responsibility and, where appropriate, after consulting a professional advisor.