MIXI,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥67.43B
• Operating Income: ¥7.21B
• Net Income: ¥5.02B
• EPS: ¥72.91

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: MIXI’s FY2026 Q2 shows soft topline and meaningful margin compression, with negative operating cash flow flagging earnings quality concerns despite a strong balance sheet. Revenue was 674.28 (−2.0% YoY), while operating income fell to 72.14 (−17.5% YoY), and net income was 49.02 (−6.2% YoY). Gross profit was 448.41, implying a solid gross margin of 66.5%, but SG&A of 376.26 weighed on operating leverage. Operating margin declined to 10.7% from an implied 12.7% a year ago, a compression of roughly 201 bps. Net margin registered 7.3% versus an implied 7.6% last year, a compression of roughly 30 bps. Ordinary income was 72.15 (−20.0% YoY), indicating little net help from non-operating items (non-op income 6.57 vs non-op expenses 6.56). EBITDA was 82.37 (12.2% margin), only slightly above operating profit, highlighting low D&A intensity (D&A 10.23; ~1.5% of sales). ROE calculated at 2.8% is subdued, with ROIC at 3.9% signaling capital efficiency below the 5% warning threshold. Operating cash flow was −40.82 despite positive earnings, resulting in an OCF/NI of −0.83x (quality alert). Liquidity remains robust with cash and deposits of 882.60, current ratio 298%, and D/E 0.40x; interest coverage is very strong at 70.7x. Financing CF was +111.29, alongside share repurchases of −60.61, suggesting reliance on balance sheet/financing while OCF is negative. Effective tax rate was 34.4%, broadly in line with statutory levels. The combination of margin compression and negative OCF points to cost pressure and/or working capital outflows overshadowing stable gross margins. Forward-looking, management needs to restore operating leverage (optimize SG&A/marketing) and improve cash conversion to sustain shareholder returns. With goodwill/intangibles totaling 753.1, impairment risk needs monitoring if growth underwhelms. Overall, near-term focus is on cash conversion, margin defense, and ROIC uplift from 3.9% toward mid-to-high single digits.

Profitability Analysis

DuPont ROE decomposition: ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 7.3% × 0.273 × 1.40 ≈ 2.8%. The biggest structural drag is low asset turnover (0.273), followed by modest net margin, while leverage is conservative at 1.40x. Versus last year, operating margin compressed by ~201 bps (10.7% vs 12.7% implied), and net margin compressed ~30 bps (7.3% vs 7.6% implied), indicating operating leverage deterioration more than below-the-line effects. Business drivers: SG&A at 376.26 (55.8% of revenue) appears heavy relative to revenue contraction (−2.0% YoY), pointing to marketing/personnel and platform costs not flexing fully with sales; non-operating was neutral (income 6.57 ≈ expenses 6.56). Sustainability: gross margin remains high at 66.5%, suggesting core unit economics are intact; however, if SG&A does not normalize with revenue or if user acquisition/engagement spending stays elevated, the operating margin pressure could persist. Risk flags: SG&A growth versus revenue cannot be precisely calculated with disclosed data, but the mix implies SG&A intensity is high; ROIC at 3.9% is below the 5% warning threshold, underscoring weak capital efficiency; and OCF/NI negative highlights quality concerns.

Growth Assessment

Topline contracted 2.0% YoY to 674.28, while operating income dropped 17.5% YoY to 72.14, indicating unfavorable operating leverage. Gross margin remained robust (66.5%), but operating margin fell to 10.7% (−201 bps YoY), driven by elevated SG&A burden. Net income declined 6.2% YoY to 49.02; net margin slipped to 7.3% (−30 bps YoY), reflecting operating pressure partly cushioned by modest non-operating items and a normalized tax rate (~34%). EBITDA margin was 12.2%, only ~150 bps above operating margin, indicating low D&A and limited margin cushion. Near-term revenue sustainability appears mixed given the contraction; stabilization hinges on user engagement in core titles/services and monetization efficiency. Profit quality is weakened by negative OCF despite positive earnings. Outlook-wise, improving marketing ROI, title pipeline execution, and cost discipline are required to restore operating leverage; otherwise, ROIC may remain sub-5% and weigh on valuation.

Financial Health

Liquidity is strong: current ratio 297.9% and quick ratio 297.9% (no inventory disclosed), with cash and deposits 882.60 comfortably exceeding short-term loans of 211.75. No warning on current ratio (<1.0) or leverage (D/E 0.40x well below 2.0). Solvency: interest coverage 70.73x indicates ample debt service capacity; total liabilities 710.15 vs total equity 1,760.88 confirms conservative capital structure. Maturity mismatch risk appears low given current assets 1,554.70 exceed current liabilities 521.97 by 1,032.73. Long-term loans 128.65 are modest relative to cash. Off-balance sheet obligations are not disclosed; none can be assessed from provided data. Goodwill (264.63) and intangible assets (488.50) are sizable (total 753.13), introducing potential impairment risk if profitability weakens.

Cash Flow Quality

OCF was −40.82 against net income of 49.02, yielding OCF/NI of −0.83x, which is a clear earnings quality flag. Without investing CF and capex disclosure, FCF cannot be computed, but negative OCF raises questions about cash earnings sustainability and working capital dynamics. Possible drivers include receivables build, prepayments, or timing effects in platform fees/marketing; specific components are not disclosed, limiting attribution. Financing CF was +111.29 alongside share repurchases of −60.61, implying reliance on financing/balance sheet while internal cash generation was negative in the period. No signs of deliberate working capital manipulation can be confirmed from the limited data; however, the divergence between NI and OCF requires close monitoring in subsequent quarters.

Dividend Sustainability

Dividend details are unreported, but the calculated payout ratio is 174.6%, suggesting distributions in excess of current earnings on a run-rate basis. With OCF negative this quarter, cash coverage of shareholder returns (dividends and buybacks) appears weak for the period. Share repurchases totaled −60.61 in financing CF, indicating active capital returns despite earnings and OCF pressure. Absent visibility on full-year FCF and capex, sustainability into future quarters is uncertain; improving OCF and moderating capital returns would be necessary to align with a <60% payout benchmark over time.

Risk Assessment

Business Risks:

• Title/portfolio concentration risk in games and entertainment services leading to revenue volatility
• User acquisition and marketing spend efficiency risk pressuring SG&A and margins
• Regulatory risk around gacha mechanics, youth protection, and digital content rules
• Platform dependency risk (app store policies, fees, algorithm changes)
• Goodwill/intangible impairment risk (753.1) if growth under-delivers

Financial Risks:

• Earnings quality risk: OCF/NI −0.83x despite positive NI
• Capital efficiency risk: ROIC 3.9% below 5% warning threshold
• Potential reliance on financing/balance sheet for shareholder returns while OCF is negative
• Interest rate sensitivity on cash balances and borrowing costs (though interest coverage currently strong)

Key Concerns:

• Margin compression: operating margin down ~201 bps YoY to 10.7%
• Negative operating cash flow against positive earnings
• High SG&A intensity (55.8% of revenue) limiting operating leverage
• Limited disclosure on investing CF and capex obscures FCF visibility

Investment Implications

Key Takeaways:

• Topline declined 2.0% YoY; operating income fell 17.5%, highlighting unfavorable operating leverage
• Operating margin compressed by ~201 bps to 10.7%; net margin down ~30 bps to 7.3%
• OCF negative (−40.82) vs NI positive (49.02): clear earnings quality red flag
• Balance sheet robust: net cash position with current ratio ~298% and D/E 0.40x
• ROIC at 3.9% signals sub-par capital efficiency, requiring improved returns on growth investments
• Active buybacks (−60.61) despite negative OCF raise sustainability questions for capital returns

Metrics to Watch:

• OCF recovery and OCF/NI ratio trending back above 1.0
• SG&A ratio and marketing ROI (operating margin trajectory)
• User engagement/ARPU and pipeline launches for revenue reacceleration
• Impairment indicators on goodwill/intangibles
• ROIC progression toward >5% in the near term
• Capital allocation mix: dividends/buybacks versus internal investment and OCF

Relative Positioning: Within Japan internet/gaming peers, MIXI exhibits a strong liquidity and low-leverage profile but currently lags on growth momentum and capital efficiency (ROIC 3.9%) with weaker cash conversion this quarter; improving operating leverage and cash generation are key to closing the gap with higher-ROIC, faster-growing competitors.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis