Akatsuki Inc. FY2026 FY Earnings Report

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Executive Summary

For the full year ended March 2026, Revenue was ¥258.6B (¥+22.0B YoY, +9.3%), Operating Income was ¥74.4B (¥+35.3B YoY, +90.1%), Ordinary Income was ¥76.2B (¥+33.8B YoY, +79.9%), and Net Income attributable to owners of the parent was ¥57.6B (¥+84.8B YoY, +311.8%), achieving substantial top-line and bottom-line growth. The GameComic segment accounted for 85.8% of revenue and drove consolidated profit with a high operating margin of 35.9%. Gross margin declined to 54.3% from 57.9% a year ago (-3.6pt), but SG&A ratio was compressed to 25.5%, improving operating margin to 28.8% (prior year 16.6%), a 12.2pt improvement. Net special gains of ¥19.2B (gain on sale of investment securities ¥18.1B) less special losses of ¥12.3B resulted in a fairly large post-operating-to-net profit drop of -25.8%, with an effective tax rate of 32.0%. Equity Ratio was 72.8% and cash and deposits were ¥305.6B, reflecting solid finances; however, Operating Cash Flow (OCF) was ¥26.9B, only 47.7% of Net Income, as working capital deterioration from increased accounts receivable and decreased contract liabilities pressured cash generation.

Performance Drivers

[Revenue] Revenue of ¥258.6B (+9.3% YoY) was driven overall by strong growth in Entertainment & Lifestyle at ¥25.8B (+119.1%), while the GameComic segment was ¥222.1B, slightly down (-1.0%). AI & DX Solutions recorded ¥11.5B (zero in the prior year) and was newly consolidated. In GameComic, operational efficiencies and optimization of advertising spend produced a large Operating Income increase of +92.9% despite a slight revenue decline. Entertainment & Lifestyle expanded more than twofold to ¥25.8B due to consolidation of subsidiaries such as PAPABUBBLE, with solid performance from online lottery systems and fan-app operations. AI & DX began to be recorded due to new consolidations like Natee, but incurred a segment loss of ¥2.4B at the launch-investment stage. Gross profit was ¥140.3B, with a gross margin of 54.3% down 3.6pt from 57.9% a year earlier, likely impacted by higher platform fees, outsourcing costs, and changes in revenue mix.

[Profitability] Operating Income of ¥74.4B (+90.1% YoY) improved operating margin substantially to 28.8% due to effective SG&A control. SG&A was ¥65.8B, down ¥32.0B from ¥97.8B a year ago, and the SG&A ratio improved to 25.5% from 41.3% (improvement of 15.8pt). GameComic segment Operating Income was ¥79.7B (segment margin 35.9%), representing the bulk of consolidated operating profit. Entertainment & Lifestyle achieved Operating Income of ¥4.7B (margin 18.4%) remaining profitable, while AI & DX posted an operating loss of ¥2.4B (margin -20.9%). Ordinary Income of ¥76.2B (+79.9% YoY) included non-operating income of ¥8.3B (interest income ¥2.2B, foreign exchange gain ¥4.8B) and non-operating expenses of ¥6.6B (interest expense ¥0.7B, foreign exchange loss ¥0.5B, investment partnership operating loss ¥2.99B, etc.), resulting in a net add-on of ¥1.8B from Operating Income. Net special gains of ¥19.2B (gain on sale of investment securities ¥18.1B, gain on step acquisitions ¥0.5B, gain on reissuance of stock acquisition rights ¥0.6B) less special losses of ¥12.3B (impairment of investment securities ¥5.1B, impairment loss ¥3.9B, business liquidation loss ¥1.2B, etc.) produced a net ¥6.9B, making profit before income taxes ¥83.1B. After deducting corporate taxes of ¥26.6B (effective tax rate 32.0%), Net Income was ¥57.6B (+311.8% YoY). In conclusion, strong operating performance in GameComic and SG&A efficiency drove substantial revenue and profit growth.

Segment Analysis

GameComic segment (Revenue ¥222.1B, -1.0% YoY; Operating Income ¥79.7B, +92.9% YoY) saw a slight revenue decline but improved margin to 35.9% through operational efficiencies and advertising optimization, forming the bulk of consolidated operating profit. Entertainment & Lifestyle segment (Revenue ¥25.8B, +119.1% YoY; Operating Income ¥4.7B, +2.4% YoY) doubled revenues through subsidiary consolidation such as PAPABUBBLE and maintained profitability with an 18.4% margin. AI & DX Solutions segment (Revenue ¥11.5B, prior year zero; Operating Loss ¥2.4B) was newly consolidated (e.g., Natee) and remains loss-making during launch investments with margin -20.9%. Other segments (Revenue ¥0.4B, -68.8% YoY; Operating Loss ¥0.6B) include content investment businesses and are shrinking. Pre-allocation segment profit total was ¥82.1B; after corporate/headquarter allocations of -¥7.7B, consolidated Operating Income was ¥74.4B.

Key Financial Metrics

[Profitability] Operating margin was 28.8%, up 12.2pt from 16.6% a year earlier; Net Income margin was 22.3% (prior year 7.0%), up 15.3pt. ROE was 12.7%, an 8.6pt improvement from 4.1% in the prior year, primarily driven by the large expansion of Net Income margin. ROA (based on Ordinary Income) was 13.0%, exceeding prior-year 7.9%. The GameComic segment’s operating margin of 35.9% drove consolidated profitability, while gross margin of 54.3% fell 3.6pt YoY, suggesting upward pressure from outsourcing and platform fees. [Cash Quality] OCF of ¥26.9B was only 46.7% of Net Income, with accruals at ¥30.7B (53.3% of Net Income) high; increases in accounts receivable of ¥7.0B and decreases in contract liabilities of ¥3.2B were primary drivers. Cash conversion (OCF/EBITDA) was 0.35x, indicating weak cash generation. Free Cash Flow was -¥5.9B, significantly affected by investment cash flow related to M&A at -¥32.8B (including acquisition of subsidiary shares -¥36.6B). [Investment Efficiency] Total asset turnover was 0.42x, and ROIC (NOPAT/(equity + interest-bearing debt)) was 10.9%, indicating good capital efficiency. CapEx was modest at ¥1.0B; with depreciation of ¥2.1B, CapEx/Depreciation was 0.46x. Goodwill was ¥37.8B (8.3% of equity, 0.49x of EBITDA), increased by M&A but within acceptable range. [Financial Soundness] Equity Ratio was 72.8%, down 3.1pt from 75.9% but still high. Interest-bearing debt was ¥89.6B (long-term borrowings ¥89.5B, corporate bonds ¥20.0B total, including short-term borrowings), and Debt/EBITDA was 1.17x, conservative. Cash and deposits of ¥305.6B result in a net cash position, and interest coverage (OCF/interest payments) was 40.1x, showing ample capacity to meet interest obligations. DSO extended to 79 days from 67 days prior year (+12 days), contributing to working capital deterioration.

Cash Flow Analysis

OCF was ¥26.9B, down -26.0% from ¥36.4B a year ago, representing 0.47x of Net Income (¥57.6B) and a low level. OCF subtotal (before working capital changes) was ¥65.4B and robust, but increases in trade receivables of ¥7.0B, decreases in contract liabilities of ¥3.2B, and other asset/liability movements led to a negative working capital contribution of ¥30.7B. Corporate tax payments of ¥38.7B were also significant, increasing markedly from ¥4.1B in the prior year. Investing Cash Flow was -¥32.8B; main items include acquisition of subsidiary shares -¥36.6B, purchases of investment securities -¥34.1B, withdrawals of time deposits ¥55.0B and placements of time deposits -¥37.7B, driven by M&A and strategic investments. CapEx was -¥1.0B and restrained; with depreciation of ¥2.1B, CapEx/Depreciation was 0.46x, indicating maintenance-level investment. Financing Cash Flow was ¥31.8B, reflecting borrowings of ¥67.5B from long-term borrowings less repayments of long-term borrowings -¥19.8B, corporate bond redemptions -¥10.0B, and dividend payments -¥15.9B. Free Cash Flow was -¥5.9B, meaning dividend payments were not covered by internal funds and were supplemented by borrowings and on-hand liquidity. Cash and cash equivalents increased by ¥31.8B from ¥310.6B at the beginning of the period to ¥342.4B at period-end, maintaining ample liquidity.

Quality of Earnings

Recurring earnings are centered on Operating Income of ¥74.4B. Non-operating income of ¥8.3B (3.2% of revenue) mainly consisted of interest income ¥2.2B and foreign exchange gain ¥4.8B. Net special gains were ¥6.9B (special gains ¥19.2B, including gain on sale of investment securities ¥18.1B, less special losses ¥12.3B including impairment of investment securities ¥5.1B). The gain on sale of investment securities ¥18.1B is a one-time factor and its repeatability next year is limited. Ordinary Income of ¥76.2B versus Net Income of ¥57.6B shows a -24.3% divergence, mainly due to corporate taxes of ¥26.6B (effective tax rate 32.0%) and tax effects after special items. OCF of ¥26.9B was only 46.7% of Net Income, raising concerns about accrual quality (OCF/NI ratio 0.47x). Increase in accounts receivable of ¥7.0B and extension of DSO to 79 days, and decrease in contract liabilities of ¥3.2B reducing the deferred revenue cushion, weakened cash conversion. Goodwill amortization was ¥1.99B, causing minor EBITDA distortion; EBITDA before goodwill amortization (for IFRS comparisons) was ¥76.5B (Operating Income ¥74.4B + amortization ¥2.0B), indicating underlying strength. Comprehensive Income was ¥55.2B, ¥2.4B lower than Net Income ¥57.6B, with other securities valuation differences -¥1.6B and foreign currency translation adjustments ¥0.3B net negative.

Shareholder Returns

The year-end dividend was ¥60, and together with the interim dividend of ¥55 the annual dividend totaled ¥115. Payout Ratio was 29.3% (annual dividend ¥115 ÷ EPS ¥391.97) and is at a sustainable level. Total dividends paid amounted to ¥1.66B (year-end ¥0.87B + interim ¥0.79B), and the dividend-to-Net Income ratio was 28.8% of Net Income ¥57.6B, conservative. However, Free Cash Flow was -¥5.9B and dividend payments were not covered by internal cash, with FCF coverage of -0.35x indicating shortfall. Dividend funding in the period was supplemented by on-hand liquidity of ¥305.6B and financing cash flow borrowings. Given ample cash and low leverage (Equity Ratio 72.8%), short-term dividend sustainability is high, but sustained shareholder returns depend on recovery of OCF in subsequent periods. The company revised the year-end dividend from undecided to ¥60, and the year-end dividend for the fiscal year ending March 2027 is currently undecided. No share buybacks were conducted; the return policy relies on dividends only.

Risk Factors

1. Concentration risk of business portfolio: The GameComic segment accounts for 85.8% of revenue and the majority of operating income, resulting in very high dependence on specific titles and operational KPIs. Although the segment’s revenue decline was limited (-1.0%), future increases in user acquisition costs or platform policy changes could impair profitability. With gross margin down -3.6pt YoY, continued upward pressure from outsourcing and platform fees could make maintaining operating margin difficult.

2. Working capital deterioration and weakening cash generation risk: OCF was ¥26.9B, only 46.7% of Net Income ¥57.6B, driven by accounts receivable increase ¥7.0B, DSO extension to 79 days, and contract liabilities decrease ¥3.2B. Cash conversion (OCF/EBITDA) at 0.35x is low, and Free Cash Flow was -¥5.9B, with dividends not covered by internal funds. If OCF recovery is delayed, securing dividend funds and investment capacity could be constrained, reducing financial flexibility.

3. Delay in monetization of new businesses: The AI & DX Solutions segment generated revenue of ¥11.5B but an operating loss of ¥2.4B (margin -20.9%) and remains in launch-investment phase. If this segment’s monetization is slower than expected, pressure on consolidated margins could be prolonged. Additionally, goodwill of ¥37.8B (8.3% of equity) is currently within acceptable range but could be subject to impairment risk if acquired businesses underperform.

Industry Benchmark (reference — company compilation)

Profitability & Returns

Both Operating Margin and Net Income Margin rank substantially above peers in the IT & Communications sector, with GameComic’s high-margin operations driving profitability well above industry averages.

Growth & Capital Efficiency

Revenue growth is slightly below the industry median but near the median, indicating steady growth.

※ Source: Company aggregation

Key Points to Watch in the Financial Results

1. Structural improvement to an Operating Margin of 28.8% and the high-margin GameComic operations (segment margin 35.9%) support ROE of 12.7% and high industry ranking. SG&A ratio compressed to 25.5%, demonstrating strong operating leverage. However, gross margin fell to 54.3% (-3.6pt YoY), with upward pressure from platform fees and outsourcing costs emerging. Future gross margin trends and sustainability of SG&A control will be key to maintaining margin levels.

2. OCF of ¥26.9B was only 46.7% of Net Income ¥57.6B, and working capital deterioration driven by increased accounts receivable (DSO 79 days) and decreased contract liabilities depressed cash generation. Free Cash Flow was -¥5.9B and dividends were not covered by internal funds, supplemented this term by liquidity and borrowings. While Equity Ratio is 72.8% and cash and deposits total ¥305.6B, recovery in OCF is a prerequisite for sustained dividends and investment capacity. Shortening collection periods and restoring advance payment levels are important monitoring points.

3. GameComic accounts for 85.8% of revenue and the company is highly dependent on a specific business. Although the segment maintained high-margin operations with +92.9% profit growth despite slight revenue decline, increased user acquisition costs or platform policy changes could pressure profitability. Entertainment & Lifestyle contributed with +119.1% revenue growth, while AI & DX remains in start-up investment with an operating loss of ¥2.4B; portfolio diversification and timing of new-business monetization are medium-term issues.

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This report is an earnings analysis document automatically generated by AI from XBRL earnings release data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your own responsibility; please consult a professional if necessary.