AMUSE INC. FY2027 Q1 Earnings Report

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Executive Summary

This quarter marked a sharp reversal from the previous revenue growth trend, resulting in a significant decline in earnings due to the rapid slowdown in the events-related business. Revenue was ¥176.5B (-22.1% year on year), Operating Income was ¥3.4B (-90.6%), Ordinary Income was ¥4.2B (-88.1%), and Net Income attributable to owners of the parent was ¥1.3B (-94.4%). The primary factor was a -31.3% decline in revenue from the events-related business, which accounts for 61% of the revenue mix, along with its shift into an operating loss. Operating leverage turned negative due to the decline in gross margin and the relative rigidity of selling, general and administrative expenses.

Factors Affecting Business Performance

【Revenue】Revenue was ¥176.5B, down -22.1% year on year. By segment, the events-related business recorded ¥107.9B (-31.3%), representing a significant decline in the core business, while the talent appearances and commercial advertising business increased revenue to ¥23.2B (+16.2%), and the music and visual content business was nearly flat at ¥40.7B (-3.0%). The decline in the events-related business pushed down company-wide revenue.

【Profit and Loss】Operating Income fell sharply to ¥3.4B (¥35.5B in the same period last year, -90.6%). The events-related business fell into an operating loss of ¥1.3B, compared with a substantial profit in the previous year, while the music and visual content business posted profit of ¥3.5B (-52.1%) and the talent appearances and commercial advertising business posted profit of ¥3.5B (-13.7%). All segments recorded lower earnings, including the talent appearances and commercial advertising business despite its revenue growth. Ordinary Income was ¥4.2B, supported by ¥0.9B in non-operating income, including ¥0.4B in foreign exchange gains. Net Income was reduced to ¥1.4B by an extraordinary loss of ¥0.5B on disposal and sale of fixed assets and a high effective tax rate of 61.9%, resulting in a significant gap versus Ordinary Income. In conclusion, the company experienced declines in both revenue and earnings.

Segment Analysis

The events-related business, accounting for 61% of the revenue mix, recorded revenue of ¥107.9B (-31.3%) and an operating loss of ¥1.3B, falling into the red and significantly depressing company-wide profit. The music and visual content business was nearly flat in terms of revenue at ¥40.7B (-3.0%), but profitability deteriorated, with profit declining to ¥3.5B (-52.1%); its profit margin fell significantly to 8.6% from the previous year. The talent appearances and commercial advertising business was the only segment to achieve revenue growth, with revenue of ¥23.2B (+16.2%), but profit declined to ¥3.5B (-13.7%) due to the impact of higher costs. Its profit margin of 14.9% remained the highest among the 4 segments. The other business recorded revenue of ¥4.7B (-38.9%) and an operating loss of ¥2.3B, with losses continuing despite its small scale. Across the company, weakness in utilization rates and the number of events in the events-related business is the central factor behind the deterioration in performance.

Key Financial Indicators

【Profitability】The Operating Income margin declined significantly to 1.9% from 15.7% in the previous year, while the Net Income margin decreased to 0.7% from 10.4%. The gross margin also fell to approximately 9.5%, compared with an estimated level of around 22% in the previous year. SG&A expenses were ¥13.4B, and the decrease from ¥14.5B in the previous year did not keep pace with the -22.1% decline in revenue, indicating that cost rigidity exacerbated the deterioration in profit margins. 【Cash Flow Quality】Cash and deposits declined to ¥231.9B from ¥269.7B in the previous year, but interest-bearing debt remained minimal at ¥1.0B in long-term borrowings and ¥0.3B in bonds, maintaining a net cash position. 【Investment Efficiency】ROE declined significantly to 0.4% for the quarter, primarily due to the sharp decline in the Net Income margin and lower asset turnover. 【Financial Soundness】The Equity Ratio remained high at 63.5%, compared with 62.0% in the previous year, while liquidity remained ample, with current assets of ¥476.7B versus current liabilities of ¥205.7B.

Cash Flow Analysis

Although detailed disclosure of the statement of cash flows is not available, an analysis of funding trends based on changes in the balance sheet indicates that cash and deposits were ¥231.9B, a decline of ¥34.7B from ¥268.7B in the previous year. Contract liabilities, or advance receipts, were ¥32.1B, declining slightly from ¥33.2B in the previous year, suggesting a downward trend in advance receipts from customers. Work in process accumulated to ¥33.3B, indicating that projects currently in production remain outstanding before being converted into cash. The ¥0.4B foreign exchange gain included in non-operating income provided only temporary support, and the recovery of cash-generation capacity from the core businesses will be a key focus going forward. Interest-bearing debt is extremely limited, so the pressure from cash outflows related to capital expenditures and debt repayments is limited.

Earnings Quality

Recurring income includes ¥0.9B in non-operating income, consisting of ¥0.4B in foreign exchange gains and ¥0.4B in interest and dividend income, among others. However, this represents only approximately 0.5% of revenue, indicating a low level of dependence and an insufficient scale to conceal the deterioration of the core business. Meanwhile, the extraordinary loss of ¥0.5B on disposal and sale of fixed assets reduced Net Income as a temporary factor. The gap between Ordinary Income of ¥4.2B and Net Income of ¥1.4B is substantial, primarily due to the high effective tax rate resulting from income taxes of ¥2.3B, approximately 62% of pre-tax income of ¥3.7B. From an accrual perspective, the simultaneous accumulation of work in process and decline in contract liabilities may indicate a gap between the timing of revenue recognition and cash collection.

Earnings Forecast and Guidance

Progress against the full-year plan was 16.8% for Operating Income, at ¥3.4B/¥20.0B, and 10.4% for Net Income attributable to owners of the parent, estimated at ¥1.3B/¥12.5B. Both were significantly below the standard quarterly progress pace of 25%. The full-year forecast calls for Operating Income of ¥20.0B (-67.3% year on year) and Ordinary Income of ¥21.0B (-66.3%), indicating that management itself expects a significant earnings decline. There were no revisions to the earnings forecast or dividend forecast. The lagging Q1 performance appears to have been caused by the events-related business falling into the red, extraordinary losses, and the high effective tax rate. The pace of recovery in event-related earnings toward the second half will be key to achieving the full-year plan.

Shareholder Returns

The annual dividend forecast is ¥64, implying a Payout Ratio of approximately 83.0% against the full-year forecast EPS of ¥77.09. The previous year’s dividend was ¥20; only the annual result is disclosed because details such as the interim and year-end dividends are not included in the available data. This represents a substantial planned dividend increase. There has been no revision to the dividend forecast, and ¥64 remains in place at present. Although the Payout Ratio is high, the company has sufficient short-term payment capacity, given cash and deposits of ¥231.9B and extremely limited interest-bearing debt. However, the high Payout Ratio is premised on the achievement of the full-year earnings recovery plan and therefore requires monitoring.

Risk Factors

1. Earnings volatility in the events-related business: The events-related business, which accounts for 61% of the revenue mix, declined -31.3% in revenue and fell into an operating loss of ¥1.3B. The company’s structure is such that fluctuations in the number of events and utilization rates directly affect consolidated performance, making the pace of recovery in the second half a prerequisite for achieving the full-year plan.

2. Risk regarding the timing of monetization due to the accumulation of work in process: Work in process increased to ¥33.3B from ¥31.4B in the previous year, representing a high proportion of current assets. If the timing of sales recognition for projects in production is delayed, a gap may arise between revenue recognition and cash collection.

3. Risk of sustained high effective tax rate: The effective tax rate for the quarter was approximately 62% (income taxes of ¥2.3B / pre-tax income of ¥3.7B), a high level that significantly pressured Net Income. The extent to which full-year Net Income progress, currently 10.4%, recovers will depend on whether this level is temporary or structural.

Industry Benchmark (Reference; Company Analysis)

No industry benchmark data available

Key Points from the Earnings Results

1. The core events-related business fell into the red, with revenue declining -31.3% and an operating loss of ¥1.3B. This was the central factor behind the deterioration in performance and presented a sharp contrast with the talent appearances and commercial advertising business, which achieved revenue growth and maintained a 14.9% profit margin. The imbalance in the earnings structure within the business portfolio became apparent.

2. The financial position, consisting of an Equity Ratio of 63.5%, cash and deposits of ¥231.9B, and interest-bearing debt of approximately ¥1.3B, demonstrates strong downside resilience even during a period of deteriorating earnings.

3. Full-year progress was below the standard pace, at 16.8% for Operating Income and 10.4% for Net Income. The high-return plan, with a Payout Ratio of approximately 83%, is premised on an earnings recovery in the second half. The pace at which work in process is converted into sales and the normalization of the effective tax rate are key points to monitor in assessing future earnings quality.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,925–¥2,032 at ±1% for the cost of equity, and ¥1,965–¥1,985 at ±0.1 for ω.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used; there is a timing difference relative to the full-year forecast.
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting a professional as necessary.

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