| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥384.4B | ¥431.4B | -10.9% |
| Operating Income / Operating Profit | ¥24.2B | ¥37.1B | -34.7% |
| Ordinary Income | ¥32.1B | ¥28.9B | +11.1% |
| Net Income / Net Profit | ¥18.6B | ¥8.7B | +112.8% |
| ROE | 2.0% | 0.9% | - |
FY2026 Q3 cumulative results: Revenue ¥384.4B (YoY -¥46.9B -10.9%), Operating Income ¥24.2B (YoY -¥12.9B -34.7%), Ordinary Income ¥32.1B (YoY +¥3.2B +11.1%), Net Income ¥18.6B (YoY +¥9.9B +112.8%). Decline in the core Game business revenue and a 540bp deterioration in gross margin led to lower operating profitability, but non-operating income (foreign exchange gains ¥8.2B, interest income ¥3.4B) and special gains (gain on sale of investment securities ¥2.8B) boosted the bottom line, producing a significant increase in net profit. Operating margin was 6.3% (down 230bp from 8.6% prior year), net margin 4.8% (up 280bp from 2.0% prior year), indicating a bifurcation between weak operating performance and uplift from non-operating items.
[Revenue] Revenue ¥384.4B (-10.9%) was driven by contraction in the core Game business. By segment, Game ¥226.3B (-18.8%, composition 58.8%) decreased by ¥52.5B and pulled overall revenue down. In contrast, VTuber Business ¥66.9B (+7.9%, composition 17.4%) and DX Business ¥56.3B (+6.5%, composition 14.6%) expanded steadily. Investment Business ¥16.4B (-37.9%) and IP Business ¥12.7B (-3.9%) contracted, while Others ¥9.7B (+372.2%) grew rapidly from a small base. Gross margin was 46.8%, deteriorating 540bp from 52.2% prior year, suggesting title mix changes in Game and shifts in revenue mix.
[Profitability] Gross profit ¥180.1B (down ¥24.5B) and SG&A ¥155.9B (reduced ¥32.3B from ¥188.1B prior year) indicate cost optimization progress, but gross profit decline could not be fully offset, resulting in Operating Income ¥24.2B (-34.7%). Non-operating income ¥11.9B (interest income ¥3.4B, foreign exchange gains ¥8.2B, dividend income ¥0.2B) and non-operating expenses ¥4.0B (interest expense ¥1.6B, foreign exchange losses ¥9.3B) produced net non-operating profit of +¥7.9B, leading to Ordinary Income ¥32.1B (+11.1%). Special gains ¥3.0B (gain on sale of investment securities ¥2.8B) and special losses ¥0.3B (impairment on investment securities ¥0.3B) resulted in Profit Before Tax ¥34.8B (+26.8%). Income taxes ¥16.2B (effective tax rate 46.7%) and non-controlling interests -¥0.5B yielded Net Income ¥18.6B (+112.8%). Conclusion: lower revenue but higher net profit, with operating-stage decline and reliance on non-operating and special one-off contributions.
Game Business: Revenue ¥226.3B (-18.8%), Operating Income ¥27.0B (-8.9%), margin 11.9%. Contraction of the core business pressured company results, but margin held roughly in line with prior year as SG&A reductions provided support despite lower gross margin. VTuber Business: Revenue ¥66.9B (+7.9%), Operating Income ¥8.9B (+60.7%), margin 13.3%, delivering high-margin growth and contributing to company-level margin improvement as its composition expands. DX Business: Revenue ¥56.3B (+6.5%), Operating Income ¥7.0B (-0.3%), margin 12.5%, showing stable performance. IP Business: Revenue ¥12.7B (-3.9%), Operating loss ¥0.6B (turned from profit to loss), margin -4.4%. Investment Business: Revenue ¥16.4B (-37.9%), Operating loss ¥8.6B (expanded by ¥7.4B from prior year loss ¥1.2B), margin -52.2%, a large deficit that reduced company operating profit by approximately 3.5pt. Others: Revenue ¥9.7B (+372.2%), Operating Income ¥5.1B (+600.0%), margin 52.8%, small but highly profitable contribution. Corporate adjustments -¥14.7B (prior year -¥10.2B) suggest increased headquarter expenses.
[Profitability] Operating margin 6.3% (down 230bp from 8.6% prior year), Net margin 4.8% (improved 280bp from 2.0% prior year). Gross margin 46.8% (down 540bp from 52.2%) reflects changes in the Game business revenue mix. ROE 2.0% (improved 1.1pt from 0.9% prior year) improved due to higher net income but remains low. [Cash Quality] Cash and deposits ¥507.1B plus short-term investment securities ¥86.9B produce immediate liquid assets ¥594.0B, representing 48.0% of total assets. Days Sales Outstanding (DSO) 63 days (accounts receivable ¥66.2B ÷ daily sales ¥1.06B) is slightly above industry standard, indicating lengthening collection. Contract liabilities ¥32.7B (prior ¥37.9B) suggest drawdown of advance receipts. [Investment Efficiency] Total asset turnover 0.311x (prior 0.325x) shows efficiency deterioration as revenue decline outpaced asset reductions. Financial leverage 1.31x (prior 1.42x) provides limited contribution to capital efficiency. [Financial Soundness] Equity Ratio 76.4% (up 6.4pt from 70.0% prior year), Current Ratio 633% (current assets ¥1,126.2B / current liabilities ¥177.8B), Quick Ratio 633%—extremely strong liquidity. Interest-bearing debt ¥90.0B (long-term borrowings ¥90.0B) yields Debt/Capital 8.7% and Interest Coverage 15.1x (Operating Income ¥24.2B / interest expense ¥1.6B), indicating conservative leverage.
No cash flow statement disclosure was provided, but balance sheet movements were analyzed to infer cash trends. Cash and deposits ¥507.1B increased ¥18.6B from ¥488.5B prior year, and the ¥18.6B increase nearly matches Net Income ¥18.6B, suggesting cash generation from operations. Short-term investment securities ¥86.9B rose sharply by ¥86.4B from ¥0.5B prior year, indicating active use of surplus funds and liquidity management. Investment securities ¥53.0B declined ¥46.3B from ¥99.3B prior year, reflecting cash inflows from disposals (special gain ¥2.8B). Interest-bearing debt was ¥90.0B (long-term borrowings), down ¥70.0B from ¥160.0B prior year (total), with reduction including decreased near-term corporate bond liquidity (corporate bonds maturing within 1 year ¥60.0B, fixed corporate bonds ¥17.0B), indicating deleveraging. Accounts receivable ¥66.2B (prior ¥71.5B) decreased with revenue, but DSO 63 days remains long, warranting attention to collection cycle. Decline in contract liabilities ¥32.7B (prior ¥37.9B) suggests drawdown of advance receipts and weak new bookings, indicating weaker forward revenue recognition. Considering modest increase in cash and sale of investment securities, free cash flow generation from operations appears limited, with high dependence on non-operating and special factors.
Separating recurring and one-off factors: Operating Income ¥24.2B (-34.7%) points to weakness in recurring earnings, while non-operating income ¥11.9B (3.1% of revenue) centered on foreign exchange gains ¥8.2B and interest income ¥3.4B is volatile. Non-operating expenses ¥4.0B included foreign exchange losses ¥9.3B, which net against foreign exchange gains ¥8.2B to a net foreign exchange impact of -¥1.1B, showing sensitivity to currency movements. Special gains ¥3.0B (gain on sale of investment securities ¥2.8B) are clearly one-off and lack repeatability. The gap between Ordinary Income ¥32.1B and Net Income ¥18.6B is primarily due to high income taxes ¥16.2B (effective tax rate 46.7%), so heavy tax burden compresses bottom-line earnings. Comprehensive income ¥19.0B exceeded Net Income by ¥0.4B as positive foreign currency translation adjustments ¥5.5B outweighed negative valuation differences on available-for-sale securities ¥-4.9B. The structure of offsetting operating declines with non-operating and special items raises sustainability concerns; recovery in operating margin and narrowing losses in the Investment business are key to improving quality of earnings. Lengthening DSO and declining contract liabilities are warning signals for future cash generation.
No full-year earnings forecast was disclosed, but a year-end dividend forecast of ¥21.5 per share was provided. Dividend forecast was revised this quarter, suggesting a review of dividend policy or changes in earnings outlook. With cumulative 9-month Revenue ¥384.4B and Operating Income ¥24.2B, progress to full-year forecast is not provided; full-year dividend achievability will depend on Q4 performance. The current Net Income ¥18.6B versus total dividend payout of approximately ¥36.9B (outstanding shares 179.7 million - treasury shares 7.9 million × ¥21.5) exceeds cumulative earnings, so accumulation of full-year profits is prerequisite for dividend sustainability.
No dividend was paid in the cumulative period (interim dividend ¥0); year-end dividend forecast ¥21.5 per share. Using weighted average shares outstanding during the period 171.6 million shares (outstanding 179.7 million shares less treasury shares 7.9 million shares), total dividend payout is approximately ¥36.9B. Dividend payout ratio versus Net Income ¥18.6B is about 198%, an extremely high level, but this is based on 9-month cumulative figures and is expected to normalize as full-year Net Income accumulates. Given cash and deposits ¥507.1B and low leverage (Debt/Capital 8.7%), capacity to pay dividends is sufficient, but given operating-stage weakness and dependence on non-operating/special items, sustaining stable dividends requires recovery in operating cash generation and monetization of the Investment business. Dividend forecast was revised this quarter, reflecting management’s reassessment of dividend policy or earnings outlook. No share buyback was disclosed; shareholder returns are via dividend only.
Business concentration risk: Game business accounts for 58.8% of revenue, and an 18.8% decline in that business lowered overall revenue by 12.9pt. Shortened title lifecycles and high hit-dependency amplify performance volatility; underperformance of core titles can intensify earnings swings. While VTuber and DX growth provide diversification, scale remains limited, making Game re-growth and portfolio optimization essential.
Investment Business earnings volatility risk: Investment Business recorded Operating loss ¥8.6B (margin -52.2%), reducing company operating profit by ~3.5pt. Earnings can swing significantly due to market conditions and valuation losses; investment securities held ¥53.0B declined ¥46.3B year-on-year and recorded impairment ¥0.3B, leaving valuation risk on holdings.
High tax burden risk: Effective tax rate 46.7% (Income taxes ¥16.2B / Profit Before Tax ¥34.8B) substantially exceeds typical 30% range, compressing net margin. Persistent high tax burden may reflect regional mix, recoverability of deferred tax assets, or tax adjustments; delayed normalization of tax rate would limit net margin improvement.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.3% | 8.2% (3.6%–18.0%) | -1.9pt |
| Net Margin | 4.8% | 6.0% (2.2%–12.7%) | -1.1pt |
Both operating and net margins are below industry medians, placing profitability in the lower half within IT & Communications.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -10.9% | 10.4% (-1.1%–19.5%) | -21.3pt |
Revenue growth of -10.9% is well below the industry median +10.4%, positioning the company in the lower ranks for growth.
Source: Company aggregation of public financials
Operating weakness and dependence on non-operating items: Operating Income ¥24.2B (-34.7%), Operating margin 6.3% (down 230bp from 8.6%) show weakness at the operating stage, while Net Income ¥18.6B (+112.8%) was boosted by foreign exchange gains ¥8.2B, interest income ¥3.4B, and gain on sale of investment securities ¥2.8B. Quality of earnings depends on one-off non-operating and special items; sustainability requires Game re-growth and reduction of Investment losses. A 540bp deterioration in gross margin points to title mix changes; introducing high-margin titles and improving operational efficiency are keys to restoring operating margin.
Progress in portfolio diversification but challenges in monetization: VTuber Business achieved Revenue ¥66.9B (+7.9%) and Operating Income ¥8.9B (+60.7%), margin 13.3%, and DX Business maintained margin 12.5%. While dependence on Game (composition 58.8%) is easing, Investment Business operating loss ¥8.6B (margin -52.2%) subtracts ~3.5pt from company profit. Scaling VTuber and DX and turning Investment into a profit contributor will be critical for optimizing the portfolio, improving capital efficiency (ROE 2.0%, total asset turnover 0.311x) and stabilizing results. Although dividend forecast ¥21.5 per share is payable from cash ¥507.1B, strengthening operating cash flow is essential to sustain dividends.
This report was generated by AI analyzing XBRL financial statement data and is an automated earnings analysis document. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are compiled by the Company from public financial data and are provided for reference only. Investment decisions are your responsibility; consult a professional advisor as needed.