| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1522.3B | ¥1139.3B | +33.6% |
| Operating Income / Operating Profit | ¥581.6B | ¥416.1B | +39.8% |
| Profit Before Tax | ¥752.3B | ¥387.0B | +94.4% |
| Net Income / Net Profit | ¥563.7B | ¥263.2B | +114.2% |
| ROE | 5.3% | 2.5% | - |
FY2026 Q1 results: Revenue ¥1,522.3B (YoY +¥383.0B +33.6%), Operating Income ¥581.6B (YoY +¥165.5B +39.8%), Ordinary Income ¥756.4B (YoY +¥366.0B +93.8%), Net Income ¥563.7B (YoY +¥300.5B +114.2%). Revenue was driven by North America +39.5% and China +59.7%. Operating margin improved to 38.2% (up +1.7pt from 36.5% a year ago). The large increase in Net Income was aided by Financial Income ¥199.7B (primarily foreign exchange gains ¥145.4B), causing Ordinary Income and Net Income growth to exceed Operating Income growth (+39.8%). Operating leverage emerged: SG&A ratio improved to 28.2% (from 29.1% a year ago, -0.9pt) and gross margin improved to 67.1% (from 65.6% a year ago, +1.5pt). The structure where South Korea accounts for 66.8% of Revenue and the majority of Operating Income continues, but regional diversification advanced with North America turning profitable (Operating Income ¥11.6B, margin 15.5%) and China achieving high profitability (Operating Income ¥3.3B, margin 46.8%). Operating Cash Flow (OCF) ¥530.1B, Free Cash Flow (FCF) -¥111.3B (mainly due to time deposit increase -¥893.6B), Cash and Cash Equivalents ¥4,542.6B — liquidity remains ample. Shareholder returns comprised Dividends ¥229.6B and Share Buybacks ¥93.2B.
Revenue: ¥1,522.3B (YoY +¥383.0B +33.6%). By region, North America ¥74.7B (+39.5%) turned profitable, China ¥7.0B (+59.7%) rose rapidly. South Korea ¥1,017.7B (-3.2%) slightly declined but remains core, accounting for 66.8% of Revenue. By market: North America & Europe ¥444.7B (+¥33.6B), China ¥313.9B (-¥61.9B), South Korea ¥574.8B (+¥32.3B). By business: PC Online ¥1,166.1B (+¥394.3B +51.1%) was the main driver; Mobile ¥346.7B (-¥16.7B -4.6%) declined. Growth was driven by PC Online expansion and regional expansion in North America and China.
Profitability: Cost of Sales ¥501.3B (prior year ¥392.4B, +¥108.9B +27.7%), resulting in Gross Margin 67.1% (up +1.5pt from 65.6%). SG&A ¥429.9B (prior year ¥331.7B, +¥98.2B +29.6%); SG&A growth (+29.6%) was contained relative to Revenue growth (+33.6%), improving Operating Margin to 38.2%. Operating Income ¥581.6B (YoY +¥165.5B +39.8%). Financial Income increased substantially to ¥199.7B (prior year ¥68.8B), with foreign exchange gains ¥145.4B as a one-off contributor, lifting Ordinary Income to ¥756.4B (YoY +¥366.0B +93.8%). Equity-method investment loss ¥16.9B (prior year ¥15.0B) widened slightly. Profit Before Tax ¥752.3B (YoY +¥366.0B +94.4%), income taxes ¥188.6B (effective tax rate 25.1%), Net Income ¥563.7B (YoY +¥300.5B +114.2%). North America’s turnaround and China’s high profitability drove segment margins higher, and Financial Income (mostly FX gains) materially contributed to Net Income — resulting in strong top-line and disproportionate bottom-line growth.
South Korea Segment: Revenue ¥1,017.7B (-3.2%), Operating Income ¥385.7B (-13.1%), Operating Margin 37.9%. Still the core business, but both Revenue and profit declined; accounts for 66.8% of Revenue and the bulk of profit.
North America Segment: Revenue ¥74.7B (+39.5%), Operating Income ¥11.6B (prior year ¥0.95B, +1118.4%), Operating Margin 15.5%. Turned profitable; Operating Income rose sharply and monetization progressed.
China Segment: Revenue ¥7.0B (+59.7%), Operating Income ¥3.3B (prior year ¥0.14B, +2235.7%), Operating Margin 46.8%. Small scale but high-margin and rapidly growing.
Japan Segment: Revenue ¥14.0B (-11.4%), Operating Loss ¥2.2B (prior year -¥6.7B, loss reduction +67.5%), Operating Margin -15.4%. Still loss-making but loss narrowed, suggesting a bottoming trend.
Other: Revenue ¥408.9B (data incomplete), Operating Income ¥190.7B. Growth and monetization in North America and China contributed to the improvement in consolidated Operating Margin. Dependence on South Korea remains high but regional diversification progress is observable.
Profitability: Operating Margin 38.2% (up +1.7pt from 36.5%), Net Margin 37.0% (up +13.9pt from 23.1%), Gross Margin 67.1% (up +1.5pt from 65.6%). ROE 5.3% (estimated 2.5% at prior fiscal year-end) is low but improved. DuPont decomposition: Net Margin 37.0% × Asset Turnover 0.110 × Financial Leverage 1.30x. The large improvement in Net Margin depends on Financial Income (FX gains), so persistence is limited. On the operating side, SG&A control and gross margin improvement produced leverage, lifting Operating Margin by +1.7pt. Asset Turnover is low, depressed by large cash, deposits, and financial assets (denominator effect), weighing on capital efficiency.
Cash Quality: Operating Cash Flow / Net Income ratio 0.94x — cash backing of profits is generally good. OCF ¥530.1B (prior year ¥492.9B, +7.6%) covers over 90% of Net Income ¥563.7B. Accrual ratio 0.3% — low — indicates healthy cash generation from operations.
Investment Efficiency: ROIC 4.1% (NOPAT ÷ (Net Assets + Interest-bearing Debt)) is low. Accumulation of cash and time deposits (total approx. ¥8,746B) and low Asset Turnover 0.110x suppress capital efficiency.
Financial Soundness: Equity Ratio 76.6% (up +1.0pt from 75.6% a year ago), Current Ratio 513%, interest-bearing debt effectively zero (only lease liabilities ¥510.3B), indicating extremely strong financial safety. Interest Coverage (EBIT / Financial Expense) ≈ 47.8x — negligible interest burden. DSO 157 days indicates long receivable collection period; monitoring collection efficiency is warranted.
OCF ¥530.1B (prior year ¥492.9B, +7.6%). Operating cash subtotal ¥540.2B (before working capital changes: Profit Before Tax ¥752.3B adjusted for Depreciation ¥32.8B, etc.), minus tax payments ¥47.1B. Working capital: decrease in trade receivables +¥198.4B offset by decrease in deferred revenue -¥114.9B; decrease in provisions -¥106.5B and foreign exchange losses -¥119.3B pressured cash. Investing CF -¥641.5B, primarily due to net increase in time deposits -¥893.6B; also intangible asset acquisitions -¥78.3B, capex -¥12.8B, and proceeds from marketable securities sales ¥406.8B. Financing CF -¥284.8B driven by dividend payments -¥229.6B and share buybacks -¥93.2B, partially offset by share issuance +¥49.9B. Free Cash Flow -¥111.3B (OCF ¥530.1B + Investing CF -¥641.5B) was affected by time deposit accumulation, but OCF alone is sufficient to cover dividends and capex. Cash and Cash Equivalents ¥4,542.6B (prior year ¥4,988.7B, -¥446.1B) — ample liquidity overall. Decrease in deferred revenue is a leading indicator and a risk to next period’s Revenue base; prolonged high DSO raises collection risk.
Operating earnings quality is good: Operating Income ¥581.6B (YoY +39.8%) was generated by SG&A control and gross margin improvement. However, the large increase in Net Income ¥563.7B (YoY +114.2%) relies heavily on Financial Income ¥199.7B (prior year ¥68.8B, +¥130.9B +190.5%), of which FX gains ¥145.4B (prior year FX gains ¥32.5B) were a significant one-off contributor. Non-operating income ratio is high: Financial Income represents 13.1% of Revenue, implying reversal risk if FX moves unfavorably. Equity-method investment loss -¥16.9B (prior year -¥15.0B) slightly worsened; contribution limited. Effective tax rate 25.1% is standard. OCF / Net Income 0.94x and accrual ratio 0.3% indicate sound operating cash conversion, but Net Income growth is heavily influenced by one-off Financial Income (FX gains), so sustainability is tied to operating trends. The recurring earnings base is the Operating Income improvement (+39.8%), while the Net Income surge should be evaluated separately as a Financial Income effect.
This period: Dividends paid ¥229.6B and Share Buybacks ¥93.2B executed. Payout Ratio is approx. 41% (Dividends ¥229.6B ÷ Net Income ¥563.7B). Total Return Ratio is approx. 57% ((Dividends ¥229.6B + Share Buybacks ¥93.2B) ÷ Net Income ¥563.7B), balanced with earnings. Full-year dividend forecast ¥30 per share (annual); given current earnings and liquidity (Cash and Cash Equivalents ¥4,542.6B), sustainability is high. This period’s Free Cash Flow -¥111.3B is insufficient in this single quarter, but OCF ¥530.1B can cover dividends and capex; excluding time deposit increases, cash flow is stable. Cancellation of Treasury Stock ¥996.2B was executed, leaving ending Treasury Stock balance ¥30.6B (down substantially from prior fiscal year-end ¥938.2B), reducing dilution pressure. Payout Ratio and Total Return Ratio are at reasonable levels, and abundant liquidity plus OCF support sustainability of shareholder returns.
Regional concentration risk: South Korea accounts for 66.8% of Revenue and the majority of Operating Income, making the company highly sensitive to the country’s game regulation, title dynamics, and FX. Although diversification via North America and China is progressing, high Korea dependence remains a volatility risk.
Transience of Financial Income and FX volatility risk: Of Financial Income ¥199.7B (13.1% of Revenue), FX gains ¥145.4B were the main driver of the large Net Income increase. FX reversal could produce the opposite effect and increase Net Income volatility. The divergence between Operating Income +39.8% and Net Income +114.2% indicates dependence on Financial Income, limiting sustainability.
Decrease in deferred revenue and collection efficiency risk: Deferred revenue (current) ¥416.1B (prior year ¥554.4B, -24.9%) declined, suggesting a reduced base for next period Revenue. DSO 157 days and prolonged collection periods could lead to increased bad debt or delays if credit management or payment terms change.
Revenue & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 38.2% | 6.2% (4.2%–17.2%) | +32.0pt |
| Net Margin | 37.0% | 2.8% (0.6%–11.9%) | +34.2pt |
Profitability metrics rank among the top within the IT & Communications sector; both Operating Margin and Net Margin substantially exceed medians.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 33.6% | 20.9% (12.5%–25.8%) | +12.7pt |
Revenue growth rate exceeds the industry median by +12.7pt, maintaining high growth.
※ Source: Company compilation
Emergence of operating leverage and progress in regional diversification: Operating Margin 38.2% (up +1.7pt) was achieved through SG&A control and gross margin improvement. North America’s profitability (Operating Income ¥11.6B, margin 15.5%) and China’s high profitability (Operating Income ¥3.3B, margin 46.8%) have diversified the regional portfolio and may alleviate Korea dependence (Revenue 66.8%) over the medium term. Operating improvements are substantive and regional expansion increases the sustainability of growth.
Rapid Net Income rise driven by Financial Income and limits to sustainability: Net Income +114.2% mainly relied on Financial Income ¥199.7B (centered on FX gains ¥145.4B). FX reversal could increase Net Income volatility; long-term valuation should focus on the Operating Income improvement trend (+39.8%). Attention should be paid to Financial Income reversion and whether Operating Income momentum persists in subsequent quarters.
Room for capital efficiency improvement and monitoring deferred revenue trends: ROE 5.3%, ROIC 4.1% — capital efficiency is low. Accumulated cash and time deposits (total approx. ¥8,746B) depress Asset Turnover. Deploying excess capital (growth investments / additional returns) is key to improving capital efficiency. Decline in deferred revenue (-24.9%) is a leading indicator of potential contraction in next period Revenue base; together with DSO 157 days, monitoring earnings quality and collection efficiency is important.
This report is an earnings analysis document automatically generated by AI from XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your own responsibility; consult professionals as needed before making investment decisions.