WOWOW (4839) FY2026 Q3 Earnings Report

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Executive Summary

Despite only a slight increase in revenue, the Company achieved a substantial increase in earnings, driven by a decline in large-scale content-related expenses from the previous year and improved cost efficiency. Revenue was ¥571.3B (+1.2% YoY), Operating Income was ¥39.7B (+165.3%), Ordinary Income was ¥46.7B (+111.9%), and Net Income was ¥32.0B (¥6.9B in the previous year). While profit margins improved significantly due to reductions in program costs and the restraint of SG&A expenses, the full-year forecast has been maintained at a conservative Operating Income of ¥7.0B (-65.6% YoY).

Factors Affecting Results

【Revenue】Revenue was ¥571.3B, a slight increase of +1.2% YoY. While membership revenue declined, increased event revenue and higher revenue from group companies (the telemarketing business) offset the decrease, securing an overall increase in revenue within a broadly flat range.

【Profit and Loss】Operating Income increased substantially to ¥39.7B (+165.3% YoY), while Ordinary Income rose to ¥46.7B (+111.9%). The primary factor was the reversal of the decline in program costs associated with large-scale content recorded in the previous year, with the gross margin improving to 34.4%. Extraordinary losses were limited to a total of ¥1.2B, including ¥1.0B in losses on disposal of fixed assets. The major factor was the absence of the impairment loss of ¥17.4B recorded in the previous year. The gap between Ordinary Income and Net Income was approximately 31%, with Ordinary Income of ¥46.7B versus Net Income of ¥32.0B, primarily due to the ¥13.9B burden of income taxes and other taxes. In conclusion, the Company achieved higher revenue and higher earnings.

Segment Analysis

The core Media and Content Business recorded revenue of ¥518B (-1% YoY) and Operating Income of ¥39.4B (+133%), making it the primary segment and accounting for approximately nine-tenths of total revenue. Although the decline in membership revenue was offset by increases in other revenue and group-company revenue, the reduction in program costs resulted in a substantial increase in earnings and drove the increase in consolidated Operating Income. The Telemarketing Business recorded revenue of ¥77B (+9%) and Operating Income of ¥0.3B, turning profitable from a loss of ¥198M in the previous year, supported by the expansion of external orders and restraint of SG&A expenses. Both segments contributed to higher earnings, although the main driver of the increase was the impact of reduced program costs in the Media and Content Business.

Key Financial Indicators

Profitability: ROE of 6.0% (annualized) and an Operating Income margin of 7.0% (improved from approximately 2.7% in the previous year)
Cash quality: Comprehensive income was ¥40.7B versus Net Income of ¥32.0B, with a ¥9.2B gain on valuation differences on securities contributing positively
Financial soundness: Equity Ratio of 72.6% (67.7% in the previous year); current assets of ¥663.0B versus current liabilities of ¥246.6B, resulting in a current ratio of approximately 269%
Other: Cash and deposits of ¥310.0B indicate ample on-hand liquidity, substantially exceeding accounts payable of ¥175.6B

Cash Flow Analysis

Detailed data from the statement of cash flows has not been provided. However, based on changes in the balance sheet, cash and deposits increased to ¥310.0B from ¥287.5B in the previous year. Accounts payable declined to ¥175.6B from ¥231.2B in the previous year, suggesting that payments for purchases and production costs progressed and working capital may have contracted. Construction in progress increased substantially, suggesting that investment in distribution infrastructure is underway. Comprehensive income of ¥40.7B exceeded Net Income of ¥32.0B, and there are no signs of impaired cash-generation capacity.

Quality of Earnings

Net Income was ¥32.0B versus Ordinary Income of ¥46.7B, with the difference primarily attributable to the ¥13.9B burden of income taxes and other taxes. Non-operating income was ¥7.9B, representing approximately 1.4% of revenue, and consisted of ¥3.5B in foreign exchange gains, ¥2.3B in equity-method investment gains and losses, and ¥0.7B in dividend income. Extraordinary items were limited, comprising extraordinary income of ¥0.4B and extraordinary losses of ¥1.2B, with no one-time factor such as the ¥17.4B impairment loss recorded in the previous year arising this period. The previous year’s low profitability was primarily attributable to temporary impairment losses and large-scale content expenses, while the increase in earnings this period reflects both structural improvements and the reversal of those temporary factors.

Earnings Forecast and Guidance

The full-year forecast calls for revenue of ¥766.0B (-0.2% YoY), Operating Income of ¥7.0B (-65.6%), and Ordinary Income of ¥15.0B (-50.0%), representing conservative levels despite strong progress through Q3. Ordinary Income had reached ¥46.7B on a nine-month cumulative basis, substantially exceeding the full-year forecast of ¥15.0B. Accordingly, the full-year forecast may be extremely conservative or may incorporate the recognition of significant costs in Q4. The background is presumed to be the assumption that program costs will represent 42.0% of standalone revenue for the full year, implying an increase from the Q3 result of 36.6%.

Shareholder Returns

The annual dividend forecast is ¥30. Based on the full-year forecast Net Income of ¥8.0B as the numerator, the Payout Ratio would exceed 100%. The Payout Ratio over the past five fiscal years has followed an upward trend of 39.0%→59.7%→77.3%→132.8%, suggesting a policy of maintaining dividend levels despite fluctuations in earnings. Given the Company’s financial strength, including cash and deposits of ¥310.0B and an Equity Ratio of 72.6%, concerns regarding overall sustainability are limited even if the Payout Ratio is high in a single fiscal year. There is no disclosure regarding share repurchases, and shareholder returns consist solely of dividends.

Catalysts

【Short Term】Contribution to group revenue from the film “Golden Kamuy: Abashiri Prison Assault Arc,” scheduled for release on March 13, 2026, as well as trends in program-cost recognition in Q4 and the resulting full-year earnings outcome.

【Long Term】Strengthening the subscriber base through the joint production of original dramas and other content under the business alliance with NTT DOCOMO, as well as the expansion of sports and live music content.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

Profitability remains slightly below the industry median.

Growth and Capital Efficiency

The revenue growth rate is substantially below the industry median, placing the Company among the low-growth companies in the industry.

※Source: Compiled by the Company

Risk Factors

1. Deterioration in subscriber trends: New subscriptions declined YoY, while net additions also deteriorated to △148 (△66 in the previous year). This indicates challenges in driving subscriptions in the absence of large-scale content.

2. Margin pressure from higher program costs: The full-year assumption for the program-cost ratio is 42.0%, exceeding the Q3 result of 36.6%. An expansion of content investment from Q4 onward could put pressure on the Operating Income margin.

3. Dependence on non-operating factors: Of the ¥46.7B in Ordinary Income, ¥3.5B was attributable to foreign exchange gains and ¥2.3B to equity-method investment gains and losses. These items are susceptible to foreign exchange movements and the performance of affiliated companies and may affect earnings stability.

Key Takeaways from the Results

1. The Operating Income margin recovered from the previous year’s low level to 7.0%. However, this was largely attributable to the reversal of the previous year’s large-scale content expenses and impairment losses, and the margin remains below the industry median of 8.3%.

2. The full-year forecast has been maintained at a conservative level substantially below the nine-month cumulative results, and the earnings data suggests potential recognition of program costs and one-time expenses in Q4.

3. The Payout Ratio has followed an upward trend over the past five fiscal years (39.0%→132.8%), continuously confirming a policy of maintaining dividend levels despite fluctuations in earnings.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,909–¥2,014 at ±1% for the cost of equity, and ¥1,944–¥1,971 at ±0.1 for ω.

Notes:

• Because Net Income progress against the full-year forecast (401%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of their forecasts tend to exceed those forecasts; adjustments may be excessive for businesses with strong seasonality).
• Because 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 from the full-year forecast).
• Because 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 mechanical calculation based solely on publicly disclosed data and is not a forecast of the market share price, a recommendation of any specific investment action, or a prediction or guarantee of future share prices.)

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This report is an earnings analysis document automatically generated by AI through an integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. 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, after consulting with professionals as necessary.

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