NIHON FALCOM CORPORATION FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥2.61B
• Operating Income: ¥1.34B
• Net Income: ¥903M
• EPS: ¥87.91

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

日本ファルコム株式会社 (37230) reported FY2025 Q4 (JGAAP, non-consolidated) results showing modest top-line growth with stronger profit expansion, indicative of healthy operating leverage and disciplined cost control. Revenue rose 3.5% YoY to ¥2,612m, while operating income increased 8.1% YoY to ¥1,340m, driving an operating margin of approximately 51.3%. Net income was ¥903m (+6.0% YoY), implying a robust net margin of 34.6% and confirming strong profitability for an asset-light content/IP business model. Gross profit of ¥2,272m translates to an exceptionally high gross margin of about 87.0%, underscoring limited cost of sales and a favorable revenue mix. Ordinary income exceeded operating income (¥1,364m vs. ¥1,340m), suggesting positive non-operating contributions (e.g., interest/royalty income) and minimal financial burden. The DuPont framework yields a calculated ROE of 8.3%, decomposed into a 34.6% net margin, 0.227x asset turnover, and 1.06x financial leverage, consistent with an under-levered, high-margin, low-turn business. Liquidity is extremely strong: current assets of ¥10,548m against current liabilities of ¥524m imply a current ratio above 20x and substantial working capital of about ¥10,024m. The balance sheet is very conservative with total liabilities of ¥524m versus equity of ¥10,877m, implying a debt-to-equity ratio near 0.05x and an equity ratio we estimate at roughly 94.6% (computed from reported assets and equity). Cash generation is solid, with operating cash flow (OCF) of ¥1,013m exceeding net income (OCF/NI ≈ 1.12), supported by modest non-cash items and likely favorable working capital movements. EBITDA of ¥1,351m (margin ~51.7%) is close to operating income given low D&A (¥10.5m), highlighting an asset-light cost base. The effective tax rate implied by reported tax expense (¥392m) and net income is around 30%, even though a pre-filled “effective tax rate” metric shows 0%; this reflects reporting limitations rather than actual tax economics. Dividend data (DPS and payout ratio) are not disclosed in this dataset; consequently, dividend sustainability cannot be concluded from the provided numbers alone. Reported share data (outstanding/treasury shares, BPS) are also not disclosed, limiting per-share analytics beyond EPS (¥87.91). Overall, the company exhibits high profitability, strong cash conversion, and a fortress balance sheet, but growth visibility hinges on the release slate and licensing pipeline inherent to the content business. We acknowledge several fields are undisclosed or presented as zero; the analysis focuses on non-zero reported items and ratios derived from them.

Profitability Analysis

ROE (8.3%) is driven primarily by a very strong net profit margin (34.6%), modest asset turnover (0.227x), and low financial leverage (1.06x). Gross margin stands at approximately 87.0% (¥2,271.9m gross profit on ¥2,612m revenue), reflecting an IP/licensing-heavy mix and limited COGS. Operating margin is about 51.3% (¥1,340m/¥2,612m), improving YoY as operating income grew faster than revenue (+8.1% vs. +3.5%), signaling positive operating leverage. Ordinary income outpaced operating income by ~¥24m, indicating net non-operating income and negligible financing costs. EBITDA margin is ~51.7%, with D&A at only ~¥10.5m, underscoring an asset-light model and lean fixed-cost base. The margin structure suggests high-quality profitability, though sustainability depends on title release cadence and licensing renewals. Low asset turnover is typical for content/IP firms, where intangible value does not fully cycle through revenue each year. Given minimal leverage, returns are derived from core operations rather than financial engineering, leaving upside to ROE mainly from improving asset turnover and/or sustained high margins.

Growth Assessment

Revenue grew 3.5% YoY to ¥2,612m, indicating modest top-line expansion. Operating income rose 8.1% YoY to ¥1,340m, outpacing sales and implying mix improvements and/or disciplined SG&A control. Net income increased 6.0% YoY to ¥903m, consistent with the operating trend and stable non-operating items. The combination of incremental revenue and stronger profit growth evidences positive operating leverage in FY2025. Gross margin at ~87% and EBITDA margin at ~52% imply limited incremental cost burden for growth, favorable for scalability if the pipeline performs. Profit quality remains strong given OCF/NI of ~1.12, suggesting earnings are cash-backed. Outlook hinges on release timing, platform performance, and licensing breadth; absent detailed disclosure on the pipeline in this dataset, near-term growth visibility is moderate. Given the asset-light model, upside in profits can be realized with relatively small revenue increments, but downside sensitivity is elevated if key releases underperform. Non-operating contributions (ordinary income above operating income) add a modest buffer to profit but are likely not the main driver of growth. Overall, growth appears sustainable at a moderate pace provided the company maintains a steady cadence of content and monetizes its back catalog effectively.

Financial Health

Total assets are ¥11,495m and total equity is ¥10,877m, implying an equity ratio of approximately 94.6% (computed) and a highly conservative capital structure. Total and current liabilities are both ¥524m, with no indication of interest-bearing debt in the dataset. The debt-to-equity ratio is about 0.05x, underscoring de minimis leverage risk. Liquidity is very strong: current assets ¥10,548m vs. current liabilities ¥524m yield a current ratio of ~20.1x and substantial working capital of ~¥10,024m. Inventories are not disclosed; the quick ratio approximates the current ratio, reinforcing liquidity strength. Interest expense is not disclosed (reported as zero), and with ordinary income above operating income, financial burden appears minimal. The balance sheet can comfortably absorb volatility in release schedules or timing of receivables. Overall solvency risk is low given the near debt-free profile and large equity buffer.

Cash Flow Quality

Operating cash flow of ¥1,013m exceeds net income of ¥903m, producing an OCF/NI ratio of 1.12, which supports earnings quality. With D&A at only ¥10.5m, the gap between NI and OCF (¥110m) likely reflects favorable working capital movements and other non-cash adjustments rather than heavy non-cash charges. Investing cash flow is undisclosed (reported as zero), so total free cash flow cannot be precisely determined; using available data, FCF approximates OCF at ¥1,013m, indicating strong internal funding capacity. Financing cash flow is -¥204m, suggesting outflows potentially for dividends or share-related activities, but specifics are not provided. The low D&A supports the asset-light narrative; maintenance capex is likely modest, but the absence of investing CF disclosure limits precision on sustainable FCF. Working capital appears well managed given the large current asset base and small current liabilities; however, without breakdowns (cash, receivables, prepaids), we cannot diagnose collection cycles or cash balances. Overall, cash conversion is strong and consistent with reported profitability.

Dividend Sustainability

Dividend information is not disclosed in the dataset (DPS and payout ratio reported as zero), so we cannot infer a payout level or policy. The company generated substantial operating cash flow (¥1,013m) against minimal reported financing outflows (-¥204m), suggesting capacity to fund distributions if desired. With an estimated equity ratio near 95% and limited leverage, the balance sheet could support stable dividends in principle. However, absent actual DPS and policy guidance, we cannot assess payout consistency, policy targets, or FCF coverage of dividends. If dividends are reinstated or disclosed, key metrics to evaluate sustainability would include payout ratio versus net income, dividend coverage by OCF and by FCF (after capex), and sensitivity to earnings cyclicality tied to the release pipeline.

Risk Assessment

Business Risks:

• Title pipeline and hit-dependency risk affecting revenue timing and volatility
• Concentration risk in key IPs and platforms
• Digital store/platform policy changes impacting pricing and margins
• Licensing/royalty renewal and counterparty risks
• Foreign exchange exposure on overseas sales and licensing
• Competitive intensity from larger global publishers and indie developers
• Content schedule slippage affecting quarterly cadence
• Aging catalog monetization risk if backlist sales decelerate

Financial Risks:

• Revenue recognition and receivables timing affecting quarterly OCF
• Limited disclosure on investing cash flows and cash balance
• Potential reliance on non-operating income to bridge earnings in soft quarters
• Key person/talent retention costs potentially pressuring margins
• Low asset turnover constraining ROE absent growth

Key Concerns:

• Growth visibility dependent on upcoming releases and licensing deals
• Undisclosed cash and investing CF data limit precision on FCF and liquidity composition
• High margins may normalize if mix shifts away from licensing/back catalog

Investment Implications

Key Takeaways:

• Profitable, asset-light model with very high gross (87%) and operating (~51%) margins
• Positive operating leverage: revenue +3.5% YoY vs. operating income +8.1% YoY
• Strong cash conversion (OCF/NI ~1.12) supports earnings quality
• Very conservative balance sheet with estimated equity ratio ~94.6% and D/E ~0.05x
• Ordinary income exceeds operating income, indicating net non-operating tailwinds
• Low D&A (~¥10.5m) implies minimal maintenance capital needs
• Growth pace moderate; visibility tied to content release cadence and licensing

Metrics to Watch:

• Revenue mix (own-title sales vs. licensing/royalties) and gross margin trajectory
• Operating margin and SG&A efficiency as release slate evolves
• Pipeline disclosures: title timing, platforms, and regional expansion
• OCF/NI ratio and working capital movements (receivables collection)
• Investing cash flows and capex intensity once disclosed
• Cash and equivalents balance and capital allocation (dividends, buybacks)
• Asset turnover improvements and their impact on ROE

Relative Positioning: Relative to domestic small/mid-cap game developers, the company appears highly profitable with a very conservative balance sheet and strong cash conversion, but exhibits low asset turnover and growth that is inherently dependent on an IP-driven release/licensing cadence.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis