DeNA Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥83.15B
• Operating Income: ¥24.95B
• Net Income: ¥22.82B
• EPS: ¥206.60

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Disclaimer

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

AI Financial Analysis

Executive Summary

DeNA (2432) reported robust FY2026 Q2 consolidated results under IFRS, with revenue of 831.51 and net income of 230.27 (all in 100M JPY), up 18.3% and 667.7% YoY respectively. Operating income surged to 249.46 (+354.1% YoY), implying an operating margin near 30%, materially above historical norms for the business. Gross profit of 338.85 and SG&A of 278.76 would typically yield operating profit of roughly 60, but the reported operating income was 249.46, indicating substantial other operating income embedded within operating profit under IFRS classification. Profit before tax was 297.43, and the effective tax rate was a low 11.5%, with the gap between PBT and net income suggesting meaningful non-controlling interests and/or other comprehensive flows. Total comprehensive income reached 402.44, far exceeding net income, pointing to sizable valuation gains in OCI (likely from investment securities or FX/valuation effects). DuPont decomposition shows a 27.7% net margin, 0.205x asset turnover, and 1.42x financial leverage, yielding an ROE of 8.1% (in line with the reported figure). The 8.1% ROE is driven predominantly by an unusually high profit margin rather than asset efficiency or leverage. Operating cash flow was 146.49, translating to OCF/Net Income of 0.64x, signaling weaker cash conversion due to working capital timing and/or significant non-cash gains recognized in profit. Free cash flow, defined here as OCF + investing CF, was 95.70 despite modest capex (-11.79), as other investing outflows drove total investing CF to -50.79. The balance sheet remains conservative with total assets of 4,048.82, equity of 2,844.97 (equity ratio 67.7%), and total liabilities of 1,413.12; interest-bearing loans are modest (ST 310.24, LT 51.25). The reported Debt-to-Equity ratio of 0.50x appears to reflect total liabilities to equity, not net debt to equity. Book value per share is estimated at 2,551.9 JPY, with basic EPS at 206.60 JPY on 111.46 million average shares. Dividend payout ratio is cited at 34.5%, and FCF coverage at 1.21x, suggesting current dividends are sustainable against FCF, though cash conversion should be monitored. EBITDA of 273.53 implies an EBITDA margin of 32.9% and confirms low D&A intensity (D&A 24.07). Liquidity granularity is limited as current liabilities and cash breakdown were not disclosed, but cash and equivalents were 928.03 at period end, offering flexibility. Overall, the quarter benefited from sizeable other operating contributions and valuation effects, elevating margins and comprehensive income beyond recurring core levels. Given multiple unreported line items, conclusions rely on the disclosed aggregates; the sustainability of gains embedded in operating income and OCI is the key question for the outlook.

Profitability Analysis

ROE of 8.1% is decomposed into a 27.7% net profit margin, 0.205x asset turnover, and 1.42x leverage, indicating margin-driven returns rather than efficiency or leverage. The operating income of 249.46 versus gross profit of 338.85 and SG&A of 278.76 implies approximately 189 of other operating income (e.g., gains on investments or IFRS fair value remeasurements) supporting the operating result. EBITDA of 273.53 and D&A of 24.07 indicate low capital intensity and high incremental margins this quarter. Gross margin reported at 40.8% and EBITDA margin at 32.9% both improved, but the spread between gross profit and operating income highlights non-core contributions embedded in operating profit. Effective tax rate was 11.5%, below a normalized range, boosting after-tax profitability and ROE. Equity-method income was -1.57, a small drag, suggesting that the bulk of upside stems from parent-level operating/valuation items. Operating leverage appears high in the period, with revenue up 18.3% YoY versus operating income up 354.1% YoY, reflecting both fixed-cost leverage and non-recurring/other operating gains. Net margin at 27.7% is atypically elevated for the company’s core gaming/entertainment operations, reinforcing the likelihood that one-off or volatile items contributed. The sizable gap between net income (230.27) and total comprehensive income (402.44) further indicates valuation tailwinds outside profit or loss. Overall profitability quality is strong on reported numbers but likely includes a non-trivial non-recurring component.

Growth Assessment

Top-line growth of 18.3% YoY to 831.51 suggests solid momentum in core businesses and/or successful new content and services. The outsized increase in operating income (+354.1% YoY) vastly outpaced revenue, implying a mix shift to higher-margin revenue and material support from other operating income. Sustainability is uncertain: the core margin uplift is not fully explained by gross profit progression alone, indicating reliance on gains that may not recur. Equity-method income was slightly negative (-1.57), not a growth driver this quarter. The low effective tax rate (11.5%) inflated bottom-line growth and may normalize. Given comprehensive income of 402.44, unrealized valuation gains (OCI) were significant, which helps reported net assets but does not assure repeatable earnings. Outlook hinges on recurring revenue drivers (live ops, pipeline launches, platform partnerships) and the cadence of investment-related gains/losses. With limited segment detail disclosed here, we assume gaming, sports/entertainment, and new businesses contributed to the top line but that investment-related items amplified operating profit. Near-term growth quality will be best gauged by operating income ex-gains, recurring EBITDA, and cohort monetization metrics. For the second half, normalization of tax rate and other income could temper profit growth even if revenue remains healthy.

Financial Health

Total assets were 4,048.82 and equity 2,844.97, yielding a high equity ratio of 67.7% and underscoring a strong balance sheet. Total liabilities of 1,413.12 result in a liability-to-equity ratio of approximately 0.50x (consistent with the reported Debt-to-Equity ratio definition here). Interest-bearing loans are modest (short-term 310.24, long-term 51.25), implying low financial leverage relative to equity and cash. Cash and equivalents were 928.03, providing ample liquidity buffer; however, current liabilities were not disclosed, preventing calculation of current and quick ratios. Working capital is listed at 1,426.88, but detailed current liability components are unreported, limiting precision in liquidity assessment. With EBITDA of 273.53 and limited interest-bearing debt, implied interest coverage would likely be strong, though exact interest expense was not disclosed. The strong OCI this period increased net assets, improving solvency metrics. Overall capital structure appears conservative with capacity for investment and shareholder returns, subject to variability in investment valuations.

Cash Flow Quality

Operating cash flow of 146.49 was 0.64x net income (230.27), indicating weaker cash conversion, likely due to working capital build and non-cash profit components (e.g., fair value gains). Free cash flow, defined as OCF plus investing CF, was 95.70, as investing CF was -50.79 reflecting capex (-11.79) plus additional investment outflows. The gap between EBITDA (273.53) and OCF (146.49) suggests cash outflows in working capital or non-cash gains inflating EBITDA/operating income. With comprehensive income far above net income, valuation gains likely boosted equity but not operating cash. Dividends paid in cash during the period (-22.28) were well covered by OCF and FCF. The absence of detailed working capital components (receivables, payables, inventories) constrains a granular diagnosis of cash conversion drivers. Overall, earnings quality appears mixed: strong reported profit but moderate cash realization in the quarter.

Dividend Sustainability

The calculated payout ratio is 34.5%, implying dividends are set at roughly one-third of current earnings. FCF coverage is 1.21x, indicating free cash flow was sufficient to fund dividends in the period. Cash dividends paid were -22.28, below the implied accrual payout, reflecting payment timing and/or interim dividend schedule. The balance sheet strength (equity ratio 67.7%, cash and equivalents 928.03) supports near-term dividend capacity. However, given that operating profit and net income appear aided by other operating gains and a low tax rate, sustainability depends on recurring cash earnings rather than accrual gains. With share repurchases unreported and DOE not available, we assume a stable-to-disciplined payout framework rather than aggressive distributions. Policy outlook will hinge on management’s stance toward investment portfolio gains, capital allocation to growth, and maintenance of a cash buffer for volatility.

Risk Assessment

Business Risks:

• Dependence on hit-driven content in gaming and entertainment, leading to earnings volatility
• Execution risk in new titles, live-ops monetization, and user acquisition efficiency
• Competitive intensity in mobile gaming and digital services impacting ARPU and retention
• Potential normalization of currently low effective tax rate, reducing net income
• Regulatory or platform policy changes affecting distribution fees and monetization
• Event-driven variability in sports/entertainment segments (attendance, scheduling, sponsorships)
• Concentration in domestic market dynamics and consumer spend cycles

Financial Risks:

• Earnings sensitivity to other operating income and valuation gains embedded in operating profit
• Volatility in OCI from investment securities affecting equity and capital deployment capacity
• Weaker cash conversion (OCF/NI 0.64x) if working capital outflows persist
• Equity-method losses (-1.57) could widen depending on investee performance
• Refinancing and rate risk on short-term loans (310.24) despite overall low leverage

Key Concerns:

• Sustainability of elevated operating margin given reliance on other operating income
• Potential reversal of valuation gains impacting both P&L and OCI
• Normalization of tax rate from 11.5% reducing bottom-line leverage
• Limited disclosure of current liabilities and cash breakdown, constraining liquidity analysis

Investment Implications

Key Takeaways:

• Strong topline (+18.3% YoY) with disproportionately higher operating profit (+354.1% YoY)
• ROE at 8.1% is margin-driven; asset turnover and leverage remain modest
• Other operating income appears sizable (~189), materially inflating operating profit
• Effective tax rate (11.5%) and OCI gains boosted bottom-line and equity
• Cash conversion was moderate (OCF/NI 0.64x), suggesting non-cash elements and WC effects
• Balance sheet conservative (equity ratio 67.7%, modest loans), supporting flexibility
• Dividends appear covered by FCF (1.21x), but sustainability tied to recurring cash earnings

Metrics to Watch:

• Operating income excluding one-off/valuation gains and recurring EBITDA
• OCF/Net income ratio and working capital movements
• Segment/Title-level revenue trends, DAU/MAU, ARPU, and pipeline launch cadence
• OCI drivers and fair value changes in investment securities
• Tax rate trajectory relative to normalized levels
• Debt maturity profile and cost of debt, especially short-term loans
• Dividend policy updates and any share repurchase announcements

Relative Positioning: Within Japan’s listed entertainment and internet services cohort, DeNA’s quarter shows above-peer profitability on reported figures due to significant other operating income and valuation tailwinds, while core operating efficiency and leverage remain conservative; sustaining this relative strength will depend on converting elevated margins into recurring cash flow and demonstrating durable top-line growth.

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