GREE Holdings,Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥12.77B
• Operating Income: ¥1.07B
• Net Income: ¥-1.66B
• EPS: ¥6.29

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Disclaimer

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

AI Financial Analysis

Executive Summary

Verdict: A mixed FY2026 Q1 with resilient operating profitability and an exceptionally strong balance sheet, but weak capital efficiency (ROIC 2.2%) and data gaps/inconsistencies that cloud earnings quality. Revenue was 127.65 (−1.4% YoY), with gross profit of 62.51 and gross margin at 49.0%. Operating income was 10.68, implying an operating margin of roughly 8.4%, supported by undisclosed other operating items given that SG&A (63.85) exceeded gross profit. Non-operating income/expense totaled +1.07/−14.19, while interest expense was modest at 0.44, yielding a strong interest coverage of 24.27x. Reported ordinary income (14.92) and profit before tax (−14.26) are internally inconsistent with the operating and non-operating lines; net income is reported at 10.78 (EPS 6.29 yen), and total comprehensive income at 8.57. Net margin calculates to 8.4%, asset turnover to 0.102, and financial leverage to 1.35x, driving a low ROE of 1.2%. Liquidity is exceptionally strong: cash and deposits of 522.47 against current liabilities of 151.28 produce a current ratio of 731% and working capital of 955.08. Leverage is conservative with D/E of 0.35x and long-term loans at 90.00. Operating cash flow was not disclosed, preventing an OCF/NI comparison; thus, earnings quality cannot be validated via cash conversion. Dividend data were unreported, but a calculated payout ratio of 241.8% points to potential unsustainability if it reflects actual distributions. With ROIC at 2.2% (<5% warning threshold), capital efficiency remains a clear area for improvement. The slight top-line contraction and reliance on non-operating items underscore execution risk in core operations and portfolio management. Forward-looking, the fortress balance sheet provides ample optionality (investment, M&A, or shareholder returns), but improving ROIC and clarifying the P/L structure are priorities. Margin expansion/compression vs YoY cannot be assessed due to missing comparatives. Tax effects appear unusual (reported effective tax −16.1%), suggesting potential one-offs or valuation effects not fully explained. Overall, the quarter shows stable operating performance but subdued efficiency and opaque below-OP items, warranting cautious interpretation until disclosures improve.

Profitability Analysis

ROE decomposition: ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 8.4% × 0.102 × 1.35 ≈ 1.2%. The biggest drag is asset turnover at 0.102, reflecting a large asset base (1,257.18) relative to quarterly revenue (127.65). Net margin of 8.4% is reasonable for the sector, supported by positive operating income (10.68) despite SG&A exceeding gross profit—implying material other operating income not separately disclosed. Financial leverage is modest at 1.35x and is not a material driver of ROE. Business rationale: the company holds substantial cash (522.47) and investment securities (97.38), depressing turnover; also, past strategic investments can lower near-term ROIC/ROE until monetized. Sustainability: the operating margin near 8.4% could be sustainable if other operating income is recurring; however, opacity of the operating line composition introduces risk. Concerning trend flags: revenue declined 1.4% YoY; SG&A (63.85) is high at ~50% of revenue and exceeds gross profit, which increases dependence on other operating income to sustain OP. Non-operating expenses (14.19) are sizable, and ordinary income/PBT lines are internally inconsistent with sub-lines, suggesting classification or one-off factors that need clarification.

Growth Assessment

Top-line declined 1.4% YoY to 127.65, signaling a soft demand backdrop or portfolio contraction. Gross margin is high at 49.0%, but operating leverage is unclear because SG&A exceeds gross profit and detailed SG&A drivers are undisclosed. Operating income at 10.68 shows resilience, but durability hinges on the nature of other operating income. Non-operating swing (−14.19 expenses vs 1.07 income) indicates portfolio volatility or valuation losses. Reported net income of 10.78 and TCI of 8.57 suggest positive bottom line, but the P/L internal inconsistencies reduce confidence in the underlying growth quality. Outlook hinges on: stabilizing core revenue (games/media/ads), managing investment portfolio marks, and deploying abundant cash to accretive uses to lift ROIC. With ROIC at 2.2%, incremental growth should prioritize high-IRR projects. Near-term growth visibility is limited by missing disclosures (OCF, capex, segment detail).

Financial Health

Liquidity: very strong. Current assets 1,106.36 vs current liabilities 151.28 yields a current ratio of 731% and quick ratio of 731% (cash 522.47 dominates). No warning (Current Ratio >> 1.0). Solvency: conservative. Total liabilities 328.21, equity 928.97; D/E 0.35x. Interest-bearing debt disclosed only for long-term loans at 90.00; cash exceeds total debt, implying net cash. No warning (D/E well below 2.0). Maturity mismatch risk appears low given cash > current liabilities by ~371.19. Off-balance sheet obligations: none reported; no assessment possible. Equity base is strong (owners’ equity 915.70), supporting financial flexibility.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income cannot be assessed; by policy, this is a data gap rather than a quality flag. Free cash flow is also unreported; sustainability of dividends and capex coverage cannot be evaluated from cash flow statements. Working capital posture is conservative with large cash holdings and modest receivables (66.26); no signs of aggressive working capital release or buildup are inferable from the limited data. Given non-operating expense volatility and P/L inconsistencies, caution is warranted until OCF disclosures are available.

Dividend Sustainability

Dividend figures are unreported. A calculated payout ratio of 241.8% suggests potential over-distribution relative to current-period earnings if accurate, but without disclosed DPS/total dividends and OCF/FCF, this ratio should be treated cautiously. With substantial net cash, the company could fund distributions temporarily; however, structural sustainability depends on recurring FCF, which is not disclosed. Policy outlook cannot be inferred; watch for guidance on shareholder returns, buybacks, and target payout metrics.

Risk Assessment

Business Risks:

• Core revenue softness (−1.4% YoY) indicating demand or product-cycle risk in games/media/ads.
• Dependence on undisclosed other operating income to achieve positive operating profit (SG&A > gross profit).
• Non-operating expense volatility (14.19) likely tied to investment portfolio valuation or one-offs.
• Low capital efficiency (ROIC 2.2%), risking value creation shortfall.
• Tax volatility (reported effective tax −16.1%) implying potential one-off tax items or valuation allowances.

Financial Risks:

• Earnings quality uncertainty due to missing OCF and capex disclosures.
• Payout sustainability risk (calculated payout ratio 241.8%) if reflective of actual distributions.
• FX and market valuation risk on investment securities (97.38) and overseas exposures.
• Data inconsistencies between ordinary income, PBT, and sub-lines impairing reliability.

Key Concerns:

• Asset turnover at 0.102 and ROE at 1.2% indicate subdued returns despite a large equity base.
• Heavy reliance on cash/investments depresses ROIC; deployment discipline needed.
• Inconsistent P/L figures (ordinary income 14.92 vs OP and non-operating detail; PBT −14.26 vs NI +10.78) require management clarification.
• Lack of segment and SG&A breakdown limits visibility on recurring vs one-time profit drivers.

Investment Implications

Key Takeaways:

• Operating margin around 8.4% on revenue 127.65 shows operational resilience.
• Net margin 8.4% and ROE 1.2% reflect weak capital efficiency mainly from low asset turnover.
• Balance sheet strength is a clear positive (cash 522.47; D/E 0.35x; current ratio 731%).
• Non-operating expense volatility and P/L inconsistencies cloud earnings quality.
• ROIC at 2.2% is below the 5% warning threshold; improving return on capital is critical.

Metrics to Watch:

• Operating cash flow and FCF (to validate earnings and fund distributions).
• Breakdown of operating income (recurring vs one-offs; SG&A detail).
• Investment securities valuation gains/losses and non-operating items trajectory.
• ROIC and asset turnover improvements via portfolio pruning or reinvestment.
• Dividend guidance and buyback cadence vs cash generation.
• Revenue trajectory and gross margin stability in core businesses.

Relative Positioning: Versus domestic internet/content peers, the company stands out for a fortress balance sheet and strong liquidity but lags on capital efficiency (ROIC/ROE) and transparency of profit composition; near-term performance appears more defensive than growth-oriented.

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