MEDIA DO Co.,Ltd. FY2026 FY Earnings Report

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Executive Summary

Although revenue growth was secured through the expansion of the core e-book distribution business, Operating Income declined slightly due to a higher cost ratio, while Ordinary Income and Net Income increased owing to improvements in non-operating factors, resulting in mixed trends across the financial indicators. Revenue was ¥1,085.4B (+6.5% year on year), Operating Income was ¥24.5B (-0.9%), Ordinary Income was ¥25.5B (+8.0%), and Net Income attributable to owners of the parent was ¥18.2B (+33.4%). The decline in profit at the operating level was primarily attributable to a lower gross profit margin, while the increases in Ordinary Income and Net Income were largely attributable to higher foreign exchange gains and equity in earnings of affiliates, as well as a reduced amortization burden for goodwill.

Factors Affecting Financial Performance

【Revenue】Consolidated revenue was ¥1,085.4B, an increase of +6.5% year on year. The e-book distribution business, which accounts for more than 93% of the total, led growth with revenue of ¥1,011.1B (+7.8%), while sales to major customers NTT Solmare (¥299.1B) and Amazon (¥174.8B) together accounted for approximately 43.7% of consolidated revenue. Meanwhile, the Strategic Investment Business contracted to ¥87.2B (-7.4%), slightly restraining overall growth.

【Profit and Loss】Operating Income was ¥24.5B (-0.9%), essentially flat. Although the cost of sales ratio increased and the gross profit margin declined to 9.1% (approximately 10.1% in the previous year), SG&A expenses were reduced to ¥73.7B (-5.3%). Goodwill amortization included in SG&A expenses decreased to ¥4.6B from ¥6.6B in the previous year, absorbing the impact of the lower gross profit to a certain extent. Ordinary Income was ¥25.5B (+8.0%), supported by improved non-operating income and expenses, including foreign exchange gains of ¥0.5B and equity in earnings of affiliates of ¥0.8B. Special gains of ¥8.4B (including gains on sales of investment securities of ¥1.5B, among others) and special losses of ¥8.9B (including impairment losses on investment securities of ¥5.3B and impairment losses of ¥3.3B, among others) were recorded, resulting in a net temporary impact of -¥0.5B. After deducting income taxes of ¥6.6B and profit attributable to non-controlling interests of ¥0.2B from Profit Before Tax of ¥25.0B, Net Income attributable to owners of the parent was ¥18.2B (+33.4%). The results showed a decline in profit on an Operating Income basis but an increase in profit on an Ordinary Income and Net Income basis due to non-operating factors, indicating that improvements in the profitability of the core business remain incomplete.

Segment Analysis

The e-book distribution business recorded revenue of ¥1,011.1B (+7.8%), segment profit of ¥49.2B (-1.2%), and a 4.9% profit margin. While the business continued to expand in scale, its profit margin remained almost flat. The Strategic Investment Business recorded revenue of ¥87.2B (-7.4%) and a segment loss of ¥6.3B, an improvement of +33.8% from the previous-year loss of ¥9.5B. Although the loss narrowed, the business continues to structurally weigh on company-wide profit. Goodwill amortization in the Strategic Investment Business decreased to ¥2.1B from ¥4.0B in the previous year, while impairment losses in the same business declined to ¥3.3B from ¥4.8B in the previous year, indicating a gradual reduction in the investment burden.

Key Financial Indicators

【Profitability】The Operating Margin was 2.3%, a slight decline from 2.4% in the previous year, with the reduction in SG&A expenses providing only limited support amid a low-margin structure characterized by a 9.1% gross profit margin. Meanwhile, the Net Profit Margin based on Net Income attributable to owners of the parent was 1.7%, improving from 1.3% in the previous year, while ROE (Net Income attributable to owners of the parent ÷ average Equity during the period) was 9.9%, exceeding 8.1% in the previous year.【Cash Flow Quality】Operating Cash Flow (OCF) of ¥24.5B was 1.35 times Net Income of ¥18.2B, indicating sound cash backing for earnings, although OCF itself declined by -37.6% year on year.【Investment Efficiency】ROA (based on Ordinary Income) was 4.6%, almost flat from 4.5% in the previous year. Capital expenditures of ¥0.3B were substantially below depreciation and amortization of ¥7.5B, indicating a low investment burden.【Financial Soundness】The Equity Ratio improved to 33.8% from 33.3% in the previous year. Against cash and deposits of ¥140.1B, interest-bearing debt totaled approximately ¥13.7B on a combined short- and long-term basis, indicating a conservative financial position.

Cash Flow Analysis

Operating Cash Flow was ¥24.5B, exceeding Net Income of ¥18.2B, but declined -37.6% from ¥39.3B in the previous year. The primary cause of the decline was an increase in trade receivables of -¥38.3B. Although an increase in trade payables of +¥27.3B partially offset this impact, the expansion of working capital is placing pressure on cash generation. Cash flow from investing activities was -¥4.3B. While capital expenditures remained limited at ¥0.3B, cash movements related to the acquisition and sale of investment securities and the sale of subsidiary shares constituted the main activity. Cash flow from financing activities was -¥16.0B, with repayments of long-term borrowings of ¥15.4B and dividend payments of ¥5.5B serving as the main sources of outflow. Free Cash Flow, calculated as the sum of OCF and investing cash flow, was ¥20.3B, maintaining a level sufficient to cover dividend payments.

Earnings Quality

Recurring earnings power is represented by Ordinary Income of ¥25.5B, calculated as Operating Income of ¥24.5B plus non-operating income and expenses of +¥0.9B. Foreign exchange gains of ¥0.5B and equity in earnings of affiliates of ¥0.8B were the main factors supporting the increase. Special gains of ¥8.4B (including gains on sales of investment securities of ¥1.5B, among others) and special losses of ¥8.9B (including valuation losses on investment securities of ¥5.3B, impairment losses of ¥3.3B, and litigation settlement costs of ¥0.3B) were largely offset, limiting the net impact of temporary factors to -¥0.5B. Comprehensive Income was ¥19.2B, of which ¥18.9B was attributable to owners of the parent. The difference of approximately ¥0.7B from Net Income attributable to owners of the parent of ¥18.2B was primarily attributable to an increase in valuation difference on investment securities and was not material. Since OCF exceeded Net Income, earnings were generally supported by cash. However, the working capital burden arising from the increase in trade receivables is a point to monitor when assessing future cash-generation capacity.

Earnings Forecast and Guidance

The company’s plan for the next fiscal year (fiscal year ending February 2027) calls for revenue of ¥1,180.0B (+8.7% year on year), Operating Income of ¥24.0B (-2.2%), Ordinary Income of ¥20.5B (-19.6%), and forecast EPS of ¥79.05. While continued revenue growth is expected, the plan calls for a slight decline in Operating Income and an approximately 20% decline in Ordinary Income, suggesting that the reversal of the benefits from this fiscal year’s non-operating income and expenses and special gains and losses has been incorporated into the forecast. Forecast EPS of ¥79.05 is below actual EPS of ¥119.85 for the current fiscal year, suggesting that one-time factors arising in the current fiscal year, including special gains and losses and the impact of non-controlling interests, may not be assumed to recur in the following fiscal year.

Shareholder Returns

The dividend for the current fiscal year was ¥40 at fiscal year-end, with no interim dividend, resulting in a Payout Ratio of 40.0% based on the company’s disclosures. Against Free Cash Flow of ¥20.3B, total dividends were approximately ¥5.5B, a level sufficiently covered by cash resources. Meanwhile, the dividend forecast for the following fiscal year has been disclosed as ¥0, a fact warranting attention as a change from the current fiscal year’s dividend results.

Risk Factors

1. Dependence on major customers: Sales to NTT Solmare (¥299.1B) and Amazon (¥174.8B) together account for approximately 43.7% of consolidated revenue, making the impact of changes in transaction terms with major business partners relatively significant.

2. Increasing working capital burden: Trade receivables increased by ¥38.3B during the period, contributing to the -37.6% year-on-year decline in Operating Cash Flow. Future trends in receivables collection could affect cash-generation capacity.

3. Continued losses in the Strategic Investment Business: The business continues to record a loss, with revenue of ¥87.2B and an operating loss of ¥6.3B. Including the previous year’s impairment loss of ¥3.3B, the structure in which the recovery of invested capital affects the company-wide profit margin remains in place.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

Both the Company’s Operating Margin and Net Profit Margin are below the industry median and are at levels close to the lower bound of the IQR.

Growth and Capital Efficiency

The Revenue Growth Rate is below the industry median but is within the IQR range.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. The Operating Margin remained almost flat from the previous year at 2.3%. The continued support from SG&A expense reductions amid a low-margin structure characterized by a 9.1% gross profit margin is noteworthy as a fact indicating room for improvement in the profitability of the core business.

2. The increases in Ordinary Income and Net Income were supported by non-operating and non-recurring factors, including foreign exchange gains, equity in earnings of affiliates, and a reduced goodwill amortization burden, indicating a direction different from the growth in Operating Income.

3. The fact that the dividend forecast for the following fiscal year is ¥0 is explicitly stated in the financial results data as a change from the current fiscal year’s dividend results (fiscal year-end dividend of ¥40 and Payout Ratio of 40.0%).

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

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