KOEI TECMO HOLDINGS CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

In Q1, the Company recorded higher revenue and income, led by its core Entertainment Business. In addition, Ordinary Income and Net Income significantly exceeded the previous year due to a boost from non-operating income. Revenue was ¥173.7B (+17.4% year on year), while Operating Income was ¥54.1B (+51.3%), resulting in an Operating Income margin of 31.1%, an improvement from the previous year (approximately 24.1%). Ordinary Income of ¥157.2B (+79.2%) and Net Income of ¥113.5B (+86.9%) were primarily driven by non-operating income of ¥125.6B, including interest income of ¥43.4B and gains on sales of securities of ¥36.8B, resulting in growth well above the improvement at the operating level.

Factors Affecting Performance

【Revenue】Revenue was ¥173.7B, up +17.4% year on year. The Entertainment segment, which accounts for 91.6% of revenue, led growth with revenue of ¥159.3B (+17.3%). The Amusement Business also contributed with revenue of ¥11.2B (+6.3%), while the Real Estate Business generated revenue of ¥3.3B (+7.1%). The degree of concentration in a specific segment has not changed significantly from the previous year, and the structure in which the performance of the Entertainment Business determines overall Company performance remains in place.

【Profit and Loss】Operating Income was ¥54.1B (+51.3%), with operating leverage becoming apparent due to a gross margin of 55.8% and an SG&A expense ratio of 24.7% (contracting year on year). Meanwhile, Ordinary Income of ¥157.2B (+79.2%) was boosted by non-operating income of ¥125.6B, equivalent to 72.3% of Revenue, including interest income of ¥43.4B, gains on sales of securities of ¥36.8B, and valuation gains on derivatives of ¥18.4B. As a result, growth substantially exceeded the +51.3% increase in Operating Income. Net Income of ¥113.5B (+86.9%) was similarly supported to a significant extent by non-operating factors. The difference between Ordinary Income and Net Income was attributable to income taxes and other taxes of ¥43.7B (effective tax rate: 27.8%), with no special tax factors identified. In conclusion, the Company recorded higher revenue and income, reflecting improvements in both operating and non-operating performance.

Segment Analysis

The Entertainment Business generated revenue of ¥159.3B (+17.3%) and Operating Income of ¥52.9B (+42.7%), with a profit margin of 33.2%. It accounted for the majority of overall profit and served as the main driver of profitability. The Amusement Business recorded revenue of ¥11.2B (+6.3%) and Operating Income of ¥1.6B (+60.2%), with profit growth exceeding revenue growth and profitability improving. The Real Estate Business generated revenue of ¥3.3B (+7.1%) and Operating Income of ¥0.8B (flat), maintaining a stable profit margin of 22.5%. The Other category, which is not included in the reportable segments, recorded revenue of ¥0.8B and an Operating Loss of ¥1.2B, constituting a deduction from consolidated Operating Income. Profit margins vary significantly among segments, and the high-margin structure of the Entertainment Business is driving the overall Operating Income margin of 31.1%.

Key Financial Indicators

【Profitability】The Operating Income margin was 31.1%, while the Net Income margin was 65.3% (Net Income of ¥113.5B / Revenue of ¥173.7B). The Net Income margin substantially exceeding the Operating Income margin was attributable to non-operating income, equivalent to 72.3% of Revenue. 【Cash Quality】Cash and deposits were ¥461.7B, covering 4.6 times the ¥100B in short-term borrowings. Although this indicates substantial financial flexibility, growth in Ordinary Income and Net Income was supported by highly non-recurring items such as interest income and gains on sales of securities. 【Investment Efficiency】ROE was 4.1%, which can be explained by the combination of a Net Income margin of 65.3%, total asset turnover of approximately 5.2% (Revenue / total assets, quarterly basis), and financial leverage of 1.19 times. The low asset turnover ratio is a factor constraining capital efficiency. 【Financial Soundness】The financial base is robust, with an Equity Ratio of 83.8% and a current ratio of 381.6% (current assets of ¥1,346.5B / current liabilities of ¥352.9B). Most of the ¥186.7B in non-current liabilities consists of deferred tax liabilities of ¥178.8B, and the effective interest-bearing debt burden is limited.

Cash Flow Analysis

Although individual disclosure of the statement of cash flows is not available, cash trends can be reviewed based on cash-related balance sheet items. Cash and deposits were ¥461.7B, a decrease of ¥151.1B (-24.7%) from ¥612.8B at the end of the same period last year. In contrast, short-term securities increased to ¥700.2B (¥538.8B in the previous year, +30.0%), while investment securities increased to ¥1,271.3B (¥1,016.9B in the previous year, +25.0%), indicating an ongoing shift of funds from cash into securities. Accounts receivable were ¥113.3B, a decrease of ¥95.5B (-45.7%) from ¥208.7B in the previous year, suggesting a shortened collection cycle or a change in the timing of recognition. Overall, broad liquidity, including cash and securities, has expanded, indicating a fund management stance centered on increasing the investment portfolio.

Quality of Earnings

It should be noted that profit growth during the current period was supported significantly by non-operating income in addition to improvements in operating activities. Non-operating income was ¥125.6B, equivalent to 72.3% of Revenue, and consisted of interest income of ¥43.4B, gains on sales of securities of ¥36.8B, valuation gains on derivatives of ¥18.4B, foreign exchange gains of ¥4.5B, and dividend income of ¥3.0B, among other items. As a result, the Net Income margin expanded to 65.3%, compared with an Operating Income margin of 31.1%, with the divergence primarily attributable to non-recurring income related to investment securities. The effective tax rate was 27.8% (income taxes and other taxes of ¥43.7B / Profit Before Tax of ¥157.2B), indicating no significant tax distortion. Non-operating expenses were also limited at ¥22.5B. Accordingly, distortion from tax effects or extraordinary gains and losses was limited, but the high dependence on non-operating income should be considered when evaluating earnings repeatability.

Earnings Forecast and Guidance

Progress against the full-year plan was 19.3% for Revenue (¥173.7B / ¥900.0B) and 16.9% for Operating Income (¥54.1B / ¥320.0B), both below the standard quarterly progress rate of 25%. In contrast, progress was 37.4% for Ordinary Income (¥157.2B / ¥420.0B) and 36.6% for Net Income (¥113.5B / ¥310.0B), exceeding the standard by more than 10pt and indicating notable front-loaded progress below the operating level. This difference appears to have been primarily caused by the recognition of non-operating income, including interest income and gains on sales of securities, being concentrated in the first half. As of the current quarter, the earnings forecast has not been revised, and the key point going forward will be whether Operating Income can catch up in terms of progress.

Shareholder Returns

The dividend forecast is ¥0, and no revision to the dividend forecast has been made as of the current quarter. The Payout Ratio has not been calculated because the forecast dividend amount has not been determined. Given the financial base of cash and deposits of ¥461.7B and an Equity Ratio of 83.8%, financial constraints appear limited; however, no specific quantitative targets for the shareholder return policy can be confirmed from this report.

Risk Factors

1. Business Segment Concentration Risk: The Entertainment Business accounts for 91.6% of Revenue (¥159.3B / ¥173.7B), creating a structure in which the Business’s title lineup and digital sales trends directly affect overall Company performance.

2. Investment Securities Price Volatility Risk: Investment securities totaled ¥1,271.3B, accounting for 38.1% of total assets of ¥3,339.2B, an increase of ¥254.4B (+25.0%) from the previous year. Valuation difference on securities was ¥177.3B, a major component of comprehensive income of ¥294.4B, leaving the Company susceptible to the impact of market price fluctuations on valuation gains and losses and comprehensive income.

3. Earnings Volatility Due to Dependence on Non-Operating Income: Non-operating income of ¥125.6B was equivalent to 72.3% of Revenue, and growth in Ordinary Income and Net Income (+79.2% and +86.9%, respectively) substantially exceeded Operating Income growth (+51.3%). Quarterly earnings volatility may increase depending on interest rate trends and the timing of securities sales.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the Operating Income margin and Net Income margin substantially exceed the industry median, placing the Company’s profitability at a high level within the industry.

Growth and Capital Efficiency

The Revenue growth rate also exceeds the industry median, indicating high growth close to the upper bound of the IQR.

Source: Compiled by the Company

Key Points from the Earnings Results

1. The Operating Income margin improved by approximately 700bp from the previous year to 31.1%. As indicated by the gross margin of 55.8% and the SG&A expense ratio of 24.7% (contracting year on year), an improvement in the fundamental earning power of the Business has been confirmed.

2. Growth rates for Ordinary Income and Net Income (+79.2% and +86.9%, respectively) exceeded the growth rate for Operating Income (+51.3%). The difference was attributable to the contribution of non-operating income, equivalent to 72.3% of Revenue. The data indicates that the repeatability of this difference across quarters depends on market conditions.

3. Although the financial base is robust, with an Equity Ratio of 83.8%, a current ratio of 381.6%, and cash of ¥461.7B (4.6 times the ¥100B in short-term borrowings), investment securities account for 38.1% of total assets and increased 25.0% from the previous year, confirming an increase in market price volatility within the asset composition.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly available data using a residual income model (Ohlson-type model with an explicit 5-year fade period). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥897–¥953 at Cost of Equity ±1%, and ¥922–¥928 at ω ±0.1.

Notes:

• Because Net Income progress against the full-year forecast (37%) exceeds the standard level (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with front-loaded progress tend to exceed forecasts. The adjustment may be excessive for businesses with strong seasonality).
• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This figure does not predict or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

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