Bank of Innovation,Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥12.37B
• Operating Income: ¥2.15B
• Net Income: ¥1.36B
• EPS: ¥339.99

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Disclaimer

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

AI Financial Analysis

Executive Summary

FY2025 Q4 delivered a strong earnings beat on profitability despite top-line contraction. Revenue declined 9.2% YoY to 123.66, but operating income surged 62.0% YoY to 21.54, and net income rose 50.9% YoY to 13.51. Gross profit was 59.98, with a gross margin of 48.5%, indicating solid unit economics for a content/IP-light, live-ops mobile game model. The operating margin (calculated) improved to 17.4% (21.54/123.66), versus an implied ~9.8% a year ago, suggesting c. +760 bps of operating margin expansion YoY. Net profit margin (calculated) improved to 10.9% from an implied ~6.6% last year, or roughly +430 bps, aided by tighter operating costs and small non-operating swings. SG&A was 38.44 (31.1% of sales), indicating good cost discipline relative to the top-line decline. Ordinary income reached 21.85 (+60.4% YoY), highlighting consistent improvement from operating through ordinary levels with only minor non-operating noise. Cash generation was excellent: operating cash flow of 28.67 was 2.12x net income, evidencing high earnings quality and strong cash conversion. Free cash flow was robust at 29.90, supported by minimal capex (-0.35) and a small net inflow from investing activities. The balance sheet remains very conservative with current ratio at 352.5% and liabilities-to-equity at 0.37x, and reported loans of just 0.13 indicate a substantial net cash position (cash 41.86). ROE (DuPont) was 23.2%, driven primarily by higher net margin and healthy asset turnover (1.557) with modest leverage (1.37x). Effective tax rate was elevated at 38.2%, slightly diluting net margins but not enough to offset operating strength. Reported operating margin metrics in XBRL (0.2%) appear not aligned with calculated margins; we rely on the calculated figures from provided line items. No dividend information was disclosed; retained earnings stood at 46.47, providing optionality for future shareholder returns. Forward-looking, sustained profitability depends on maintaining engagement/monetization for existing titles and launching new content to offset revenue normalization. Overall, the quarter demonstrates resilient margin management and strong cash generation in the face of lower revenue, positioning the company well for pipeline-driven growth or disciplined shareholder returns.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 10.9% × 1.557 × 1.37 = 23.2%. The component with the most notable positive change YoY is net profit margin, inferred from operating income growth (+62% YoY) despite a 9.2% revenue decline, implying significant operating margin expansion (~+760 bps YoY to 17.4%). Asset turnover at 1.557 remains solid; given revenue declined, any improvement would likely reflect efficient asset utilization and a relatively light asset base rather than sales growth, while we lack prior asset data to quantify YoY change. Financial leverage is conservative at 1.37x (Assets/Equity 79.43/58.16), indicating that ROE is driven by operational performance rather than leverage. Business drivers: tighter SG&A, disciplined UA spend, and better monetization per active user likely expanded margins; non-operating items were immaterial. Sustainability: margin gains are partly sustainable if marketing efficiency and live-ops monetization persist; however, the hit-driven nature of mobile games makes margin durability dependent on title health and pipeline cadence. Watch-outs: SG&A growth vs revenue is favorable this quarter (SG&A ratio 31.1% on lower sales), but if UA reinvestment ramps for new titles, operating leverage could reverse.

Growth Assessment

Top line contracted 9.2% YoY to 123.66, suggesting normalization from prior peaks or tougher comps. Profit growth was strong: operating income +62.0% YoY to 21.54 and net income +50.9% to 13.51, driven by cost discipline and monetization efficiency rather than revenue growth. Gross margin of 48.5% and operating margin of 17.4% underscore improved unit economics. Non-operating contribution was minimal (non-op income 0.33; expenses 0.02), so growth is predominantly operating in nature and higher quality. Revenue sustainability hinges on user engagement and content cadence for existing titles plus new launches; no R&D pipeline data was disclosed to assess near-term catalysts. Ordinary income margin of ~17.7% (21.85/123.66) highlights broad-based margin improvement. Effective tax rate at 38.2% is a headwind if it persists; any normalization would be an incremental tailwind to net growth. Outlook: stable-to-soft revenue near term without new title boosts, but profitability should remain resilient if marketing ROI remains disciplined; upside requires pipeline execution or stronger in-game events. Absent guidance, we model flat-to-slightly down revenue with sustained double-digit operating margins as a base case.

Financial Health

Liquidity is very strong: current assets 71.45 vs current liabilities 20.27, yielding a current ratio of 352.5% and ample working capital of 51.18. Quick ratio equals current ratio (no inventories reported), pointing to high immediate liquidity; no warning triggers (current ratio >> 1.0). Solvency: liabilities-to-equity (reported as D/E) is 0.37x (21.27/58.16), conservative; interest-bearing debt is minimal with long-term loans of 0.13, implying a substantial net cash position (cash 41.86). No maturity mismatch risk is evident given large cash and receivables (15.22) relative to short-term obligations. No off-balance sheet obligations were disclosed. Equity base is solid at 58.16 with retained earnings of 46.47. There are no leverage red flags (D/E well below 2.0).

Cash Flow Quality

Earnings quality is high: OCF of 28.67 is 2.12x net income (13.51), well above the 0.8 threshold, indicating strong cash conversion. Free cash flow was 29.90, supported by low capex (-0.35) and a net positive investing cash flow (1.23), consistent with a capital-light mobile content model. Cash generation comfortably covers ordinary operating needs and provides capacity for reinvestment or shareholder returns. Working capital appears favorable; receivables (15.22) are well covered by cash and OCF, and there are no signs of aggressive working capital maneuvers based on available data (e.g., no inventory build reported, payables not disclosed). Sustainability: FCF should remain positive if margins stay elevated and capex light; risk lies in potential step-up in UA spend or content investment ahead of new launches.

Dividend Sustainability

Dividend data is unreported; thus payout ratio and DPS cannot be assessed. From a capacity perspective, retained earnings (46.47) and strong FCF (29.90) indicate ample ability to fund a dividend or buybacks if the board elects to do so. With negligible debt and a sizable net cash position, liquidity is not a constraint. Sustainability would hinge on maintaining positive OCF after any increases in UA or development spend. Policy outlook is unclear given lack of disclosures; absent explicit guidance, we assume a conservative stance on distributions with optionality preserved by cash generation.

Risk Assessment

Business Risks:

• Hit-driven title risk: revenue concentration on a small number of mobile games can lead to volatility as user engagement ebbs and flows.
• User acquisition cost volatility and platform algorithm changes affecting marketing ROI.
• Platform dependency on Apple/Google stores, including fees and policy shifts (e.g., privacy changes).
• Regulatory risk around gacha mechanics and monetization practices in Japan and abroad.
• Content pipeline execution risk: delays or underperformance of new titles/events.
• Tax-rate volatility (effective tax rate 38.2%) impacting net margins.

Financial Risks:

• Revenue decline (-9.2% YoY) could persist without new content catalysts, pressuring margins if marketing spend normalizes upward.
• Potential increase in UA spend ahead of launches may compress operating margin from 17.4% toward historical levels.
• FX exposure if overseas revenue is material (not disclosed), affecting reported results.

Key Concerns:

• Sustainability of margin gains amid softening top line.
• Limited disclosure granularity (e.g., SG&A breakdown, R&D, title mix) constrains forward assessment.
• High dependence on a few flagship titles typical of the segment.

Investment Implications

Key Takeaways:

• Strong profit beat on lower revenue highlights effective cost control and monetization.
• Operating margin expanded to 17.4% (approx. +760 bps YoY), net margin to 10.9% (approx. +430 bps).
• Cash conversion is excellent (OCF/NI 2.12x) with robust FCF (29.90) and minimal capex.
• Balance sheet is very conservative with substantial net cash and low liabilities (liabilities/equity 0.37x).
• ROE at 23.2% is driven by margin strength and a capital-light model rather than leverage.
• Earnings quality is high; non-operating items are negligible.
• Near-term growth depends on sustaining engagement and pipeline delivery; lack of R&D disclosure is a constraint.

Metrics to Watch:

• Operating margin trajectory vs UA/reinvestment levels (SG&A ratio trend).
• Title-level KPIs (DAU/MAU, ARPDAU, retention) and store ranking trends.
• OCF/NI ratio and working capital movements (receivables days).
• Content pipeline milestones and launch schedule.
• Effective tax rate normalization potential.
• Cash balance vs capital allocation (dividends/buybacks/M&A).

Relative Positioning: Within Japan mobile gaming peers, the company stands out for strong cash conversion, net cash balance sheet, and high ROE driven by margin efficiency. However, like peers, it remains exposed to title concentration and UA volatility; sustained outperformance will depend on consistent live-ops monetization and successful pipeline execution.

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