| Metric | Current Period | Same Period of Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥49.7B | ¥31.6B | +57.2% |
| Operating Income | ¥0.4B | ¥-6.5B | +106.0% |
| Ordinary Income | ¥-0.9B | ¥-8.3B | +88.5% |
| Net Income | ¥-1.3B | ¥-47.5B | +97.4% |
| ROE | -1.1% | -46.1% | - |
In Q2, the Company achieved a turnaround to operating profitability against the backdrop of substantial revenue growth. However, ordinary and net losses continued due to the burden of non-operating expenses, indicating that earnings improvement from higher revenue remains only halfway complete. Revenue was ¥49.7B (¥31.6B in the same period of the previous year, YoY +57.2%), while Operating Income turned profitable at ¥0.4B (¥-6.5B in the same period of the previous year). Ordinary Loss was ¥-0.9B (¥-8.3B in the same period of the previous year), and Net Loss attributable to owners of the parent was ¥-1.3B (¥-47.5B in the same period of the previous year), with the magnitude of losses substantially reduced in both cases. The primary drivers of revenue growth were the expansion of in-game billing and related revenue in the Games Business and a sharp increase in Other Revenue (including licensing). The rebound from the ¥44.3B impairment loss on software in progress (extraordinary loss) recorded in the previous year also contributed to the particularly large improvement in net income.
【Revenue】Of total revenue of ¥49.7B, the Games Business accounted for ¥45.5B (91.6% of total, YoY +44.3%), serving as the main growth driver. Other Businesses generated ¥4.2B (YoY +6567.9%), but the sharp increase primarily reflects the nearly zero level in the same period of the previous year, and the absolute amount remains limited.
【Profit and Loss】The gross margin improved substantially to 28.5% from 10.0% in the same period of the previous year. In addition, the SG&A ratio declined to 27.7% from 30.5% in the previous year, resulting in a turnaround to Operating Income of ¥0.4B (¥-6.5B in the same period of the previous year). Meanwhile, non-operating expenses of ¥2.1B exceeded non-operating income of ¥0.8B, which was primarily composed of foreign exchange gains of ¥0.6B, resulting in an Ordinary Loss of ¥-0.9B. Net Income was ¥-1.3B, with the magnitude of the loss substantially reduced partly due to the rebound from the large impairment loss (¥44.3B) recorded in the same period of the previous year. Both revenue and operating results improved, allowing the performance to be assessed as higher revenue and earnings, including a turnaround to operating profitability. However, ordinary and net losses continued due to the impact of non-operating expenses.
It should be noted that “Segment Profit or Loss” in the segment classification is calculated on a gross profit basis and differs in definition from Company-wide Operating Income after the deduction of SG&A expenses. The Games Business generated revenue of ¥45.5B (YoY +44.3%) and segment profit of ¥16.1B (segment gross margin of 35.5%), serving as the primary contributor to both profitability and growth. Other Businesses generated revenue of ¥4.2B but recorded a segment loss of ¥-2.0B (segment gross margin of -47.4%), operating at a loss and exerting downward pressure on the Company-wide gross margin of 28.5%.
【Profitability】The Operating Margin improved to 0.8% from -20.5% in the same period of the previous year, while the Net Profit Margin improved substantially to -2.5% from -150.2% in the same period of the previous year, although it remained in negative territory. ROE remained at -1.1%. 【Cash Quality】Accounts receivable increased sharply to ¥24.5B (¥11.5B in the previous year, +113%), while cash and deposits declined to ¥36.5B (¥52.1B in the previous year, -30.0%), indicating weak cash support for the improvement in earnings. 【Investment Efficiency】Total asset turnover was approximately 0.34x (revenue of ¥49.7B ÷ total assets of ¥146.4B), and intangible assets accounted for 25.3% of total assets. 【Financial Soundness】The Equity Ratio was high at 80.0% (77.6% in the previous year), and the Current Ratio was 294% (current assets of ¥83.6B ÷ current liabilities of ¥28.4B), indicating substantial short-term financial resilience.
Although operating results turned profitable, cash and deposits declined to ¥36.5B from ¥52.1B in the previous year, a decrease of ¥15.6B (-30.0%), indicating that the improvement in earnings did not translate directly into cash generation. The primary factor was a sharp increase in accounts receivable to ¥24.5B (+¥13.0B, +113%), resulting in a greater amount of cash tied up than the increase in accounts payable (+¥2.1B). In addition, investment in content development continued, with ¥11.2B of software in progress transferred to software recorded in the relevant account at ¥25.8B, further placing pressure on cash. Meanwhile, share capital and capital surplus increased by a combined approximately ¥14.6B, and the balance of stock acquisition rights also expanded to ¥2.8B. Accordingly, capital raising through the exercise of stock acquisition rights and other measures appears to have supported net assets and helped secure funding.
The turnaround to Operating Income of ¥0.4B was driven by an improvement in the gross margin (10.0%→28.5%) and a decline in the SG&A ratio (30.5%→27.7%), indicating an improvement in recurring earnings power. On the other hand, the Ordinary Loss of ¥-0.9B resulted from non-operating expenses of ¥2.1B exceeding non-operating income of ¥0.8B, including foreign exchange gains of ¥0.6B, and therefore included highly volatile non-recurring factors. The ¥44.3B impairment loss on software in progress (extraordinary loss) recorded in the previous year did not occur in the current period, while extraordinary income was limited to ¥0.04 million. Consequently, one of the primary reasons for the substantial reduction in Net Loss was the rebound from the temporary loss recorded in the previous year. Comprehensive Income was a loss of ¥-2.4B, exceeding the Net Loss attributable to owners of the parent of ¥-1.3B. Unrealized gains and losses on securities of ¥-0.9B and foreign currency translation adjustments of ¥-0.2B were factors depressing other comprehensive income. Changes in the fair value of investment securities amplified the ultimate impairment of capital, and the divergence between net income and comprehensive income requires monitoring when assessing earnings quality.
Progress against the full-year plan was 29.2% for revenue (¥49.7B/¥170.0B) and 3.9% for Operating Income (¥0.4B/¥10.0B), both substantially below the standard 50% level at the halfway point of the fiscal year. As of the current quarter, there were no revisions to the earnings forecast or dividend forecast, and the business plan appears to assume a second-half concentration of earnings. Given that operating results were a loss of ¥-6.5B in the same period of the previous year due to the large impairment loss, significant earnings growth in the second half will be necessary to achieve the full-year Operating Income plan of ¥10.0B.
The dividend at the end of Q2 was ¥0, and the Company also paid no dividend in the same period of the previous year. The full-year dividend forecast remains unchanged at ¥0, with no revision to the dividend forecast. Given the continuation of Net Loss and the pressure on working capital accompanying the increase in accounts receivable, the Company appears to be prioritizing the retention of internal funds. No share repurchases were identified.
Title and Business Concentration Risk: The Games Business accounts for 91.6% of revenue, creating a structure in which performance is highly susceptible to billing trends for major titles and event operations.
Working Capital Expansion and Cash Generation Risk: While accounts receivable increased sharply to ¥24.5B (+113%), cash and deposits declined to ¥36.5B (-30.0%), indicating that earnings improvement has not translated sufficiently into cash generation.
Volatility in Non-Operating Profit and Loss: Non-operating expenses of ¥2.1B exceeded non-operating income of ¥0.8B, including foreign exchange gains of ¥0.6B, contributing to the Ordinary Loss. In addition, investment securities increased to ¥7.9B (+221.1%), creating a risk that valuation gains and losses—namely, unrealized gains and losses on securities of ¥-0.9B in the current period—could affect Comprehensive Income and net assets.
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 0.8% | 17.3% (4.1%–24.5%) | -16.5pt |
| Net Profit Margin | -2.5% | 13.0% (2.0%–16.2%) | -15.5pt |
Both the Operating Margin and Net Profit Margin were substantially below the industry median, placing the Company’s profitability at the lower end of the industry.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 57.2% | 22.5% (16.2%–26.8%) | +34.7pt |
The Revenue Growth Rate substantially exceeded the industry median, indicating that top-line growth was relatively high within the industry.
Source: Compiled by the Company
The turnaround to operating profitability (¥-6.5B in the same period of the previous year → ¥0.4B in the current period) reflects structural improvement in profitability driven by both the improvement in the gross margin (10.0%→28.5%) and the decline in the SG&A ratio (30.5%→27.7%). However, ordinary and net losses continued due to the burden of non-operating expenses.
Progress against the full-year plan remained low at 29.2% for revenue and 3.9% for Operating Income, and achievement of the back-half-weighted plan assumes the accumulation of title and event revenue in the second half.
Share capital and capital surplus increased by a combined approximately ¥14.6B, indicating that capital raising through the exercise of stock acquisition rights and other measures contributed to maintaining the financial base. The partial offset of the working capital headwinds from declining cash and increasing accounts receivable is noteworthy when assessing the quality of liquidity management.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not constitute a recommendation to invest 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 a professional as necessary.
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