| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥556.8B | ¥428.8B | +29.9% |
| Operating Income / Operating Profit | ¥201.7B | ¥162.8B | +23.9% |
| Ordinary Income | ¥202.0B | ¥162.1B | +24.6% |
| Net Income / Net Profit | ¥140.9B | ¥115.1B | +22.4% |
| ROE | 52.3% | 52.4% | - |
For FY2026, Revenue was ¥556.8B (vs. prior year +¥128.1B, +29.9%), Operating Income was ¥201.7B (vs. prior year +¥38.9B, +23.9%), Ordinary Income was ¥202.0B (vs. prior year +¥39.9B, +24.6%), and Net Income was ¥140.9B (vs. prior year +¥25.8B, +22.4%), achieving double-digit profit growth at all profit levels. Gross profit was ¥248.7B (gross margin 44.7%, down 220bp from 46.9% in the prior year). SG&A was contained at ¥46.9B (8.4% of sales), and the operating margin remained at a high level of 36.2% (down 180bp from 38.0% in the prior year). Net profit margin was 25.3% (down 150bp from 26.8% in the prior year), but net income increased substantially in absolute terms.
[Revenue] Revenue continued high growth at ¥556.8B (YoY +29.9%). Cost of sales rose to ¥308.1B (prior year ¥227.7B, +35.3%), increasing faster than revenue growth, and the cost ratio rose to 55.3% (up 220bp from 53.1% in the prior year). As a result, gross profit expanded in absolute terms to ¥248.7B (+23.7%) due to higher sales, but gross margin compressed to 44.7% (down 220bp from 46.9% in the prior year). The rise in cost ratio is suggested to be driven by higher variable costs related to content production and IP licensing and changes in sales mix. SG&A was restrained to ¥46.9B (prior year ¥38.3B, +22.6%), growing below the revenue increase, and the SG&A ratio improved to 8.4% (50bp improvement from 8.9% in the prior year), indicating some economies of scale.
[Profitability] Operating Income was ¥201.7B (YoY +23.9%), with an operating margin of 36.2% (down 180bp from 38.0% in the prior year). Non-operating items produced net income of +¥0.3B (interest income ¥0.4B and foreign exchange losses ¥0.2B, etc.), compared with net expense of ▲¥0.7B in the prior year, bringing Ordinary Income to ¥202.0B (YoY +24.6%). Improvement in non-operating results was mainly due to exchange rate movements between fiscal years, enhancing stability outside core operations. Profit before tax was ¥202.0B, corporate taxes and other amounted to ¥61.1B (effective tax rate 30.2%, up 120bp from 29.0% in the prior year), resulting in Net Income of ¥140.9B (YoY +22.4%). The slight increase in tax burden is within normal variation accompanying higher profit levels; special gains/losses were minor, consisting only of ¥0.3B of loss on disposal of fixed assets, indicating profit quality is supported by recurring core earnings. In conclusion, the company achieved higher sales and profits; although gross margin and operating margin contracted, profits in absolute terms rose significantly, confirming coexistence of growth and profitability.
[Profitability] The company maintained very high profitability with an operating margin of 36.2%, net margin of 25.3%, and ROE of 52.3%. ROE components are net margin 25.3% × total asset turnover 1.53x × financial leverage 1.35x; compared with prior-year ROE 55.2% (net margin 26.8% × total asset turnover 1.47x × financial leverage 1.33x), the 150bp decline in net margin was partially offset by improved total asset turnover. [Cash Quality] Operating Cash Flow / Net Income ratio was a high 1.11x, indicating good cash conversion. The accrual ratio is (Net Income ¥140.9B - Operating Cash Flow ¥156.8B) / Total Assets ¥365.0B = ▲4.3%, indicating a cash-generative earnings structure. [Investment Efficiency] Total asset turnover was Revenue ¥556.8B / Total Assets ¥365.0B = 1.53x (improved from 1.47x in the prior year), indicating high asset efficiency. Capital expenditures were restrained at ¥2.0B, reflecting low capital intensity; the tangible fixed assets / total assets ratio remained at 5.9%. [Financial Soundness] Equity Ratio was 73.9% (down 150bp from 75.4% in the prior year), current ratio 336.5%, quick ratio 292.2%, all extremely healthy, and debt-to-equity (debt-to-capital) stood at 0.35x, maintaining a conservative capital structure. Cash and deposits of ¥220.5B are 2.3x short-term liabilities of ¥95.4B, indicating no short-term liquidity concerns.
Operating Cash Flow (OCF) was ¥156.8B (YoY +40.2%), exceeding Net Income of ¥140.9B, indicating strong cash generation. The subtotal of cash flow from operations was ¥210.0B; changes in working capital included a decrease in accounts receivable of +¥6.2B which was a positive contributor, while increases in inventory ▲¥6.2B and decreases in accounts payable ▲¥5.4B were negative contributors, leaving a small net headwind to cash. After corporate tax payments of ¥53.6B, operating cash flow was ¥156.8B, and the main driver of cash generation was high core profitability. Investing cash flow was ▲¥2.8B, restrained to capital expenditures ¥2.0B and intangible asset acquisitions ¥0.2B (total ¥2.3B), reflecting low capital intensity. Free Cash Flow was ample at ¥154.0B. In financing cash flow, dividends of ¥41.2B and share buybacks of ¥50.1B totaling ¥91.3B were executed, making total shareholder returns about 60% of FCF. Cash and deposits increased from ¥158.2B at the beginning of the period to ¥220.5B at the end, a rise of ¥62.3B, securing financial capacity to balance growth investment and shareholder returns.
Non-operating items yielded net income of +¥0.3B (interest income ¥0.4B and foreign exchange losses ¥0.2B, etc.), indicating minor contribution from non-core activities. Special items were limited to ¥0.3B loss on disposal of fixed assets, so one-off impacts were minimal. The difference between Ordinary Income ¥202.0B and Net Income ¥140.9B is primarily corporate taxes and other ¥61.1B; the effective tax rate of 30.2% is within a normal range. Compared to Operating Income ¥201.7B, OCF was ¥156.8B, with an OCF/Operating Income ratio of 0.78x; considering working capital movements and tax payments, this is a consistent level. The subtotal of operating cash inflows ¥210.0B vs. Operating Income ¥201.7B is mainly explained by non-cash items (depreciation, increase in bonus reserves, etc.), and accruals are appropriate. Earnings quality is centered on recurring core profits, consistent with cash flows, and overall is favorable.
Annual dividend is interim ¥35 and year-end ¥40, totaling ¥75, with a payout ratio of 34.5%, remaining conservative. Total dividends are estimated at approximately ¥45.7B, and dividend coverage relative to FCF ¥154.0B is 3.4x, indicating high sustainability. Share buybacks of ¥50.1B were executed, and combined with dividends total shareholder returns were approximately ¥95.8B, representing about 62% of FCF as the total return ratio. Dividend burden relative to equity (DOE) vs. equity ¥269.6B is about 17%, leaving ample room for retained earnings. Backed by cash balances of ¥220.5B and strong OCF generation, the company’s financial structure allows for stable-to-gradually-increasing dividends and flexible share buybacks.
Gross margin decline risk: Gross margin declined to 44.7% (down 220bp from 46.9% in the prior year), reflecting a rise in cost of sales ratio. This is believed to be driven by increased variable costs for content production and IP licensing and changes in sales mix. If cost control remains insufficient, there is a risk of further pressure on operating margin (36.2%, down 180bp from 38.0% in the prior year).
Inventory valuation / turnover risk: Inventory stood at ¥42.2B (prior year ¥36.1B, +17.1%), rising albeit at a pace below revenue growth. Inventory turnover days are Inventory ¥42.2B / Cost of Sales ¥308.1B × 365 days = approximately 50 days. Changes in demand outlook or product mix may introduce impairment or obsolescence risk. In OCF, inventory increase ▲¥6.2B was a cash headwind, so optimizing inventory management is a challenge.
Platform dependency / performance volatility risk: Due to the nature of the content and IP business, revenue can fluctuate depending on dependency on particular platforms, algorithm changes, and the presence or absence of hit content. Although non-operating results improved, external factors such as exchange rate fluctuations (foreign exchange losses ¥0.2B) can also impact performance. Maintaining high operating margins will require continuous expansion of the IP portfolio and diversification of revenue sources.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 36.2% | 8.1% (3.6%–16.0%) | +28.1pt |
| Net Margin | 25.3% | 5.8% (1.2%–11.6%) | +19.5pt |
The company’s profitability substantially exceeds the industry median, with operating and net margins outstanding within the IT & Communications sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 29.9% | 10.1% (1.7%–20.2%) | +19.8pt |
Revenue growth rate also exceeds the industry median by approximately 20ppt, demonstrating high growth.
※ Source: Company aggregation
Coexistence of high growth and high profitability: The company achieved both revenue growth of +29.9% and an operating margin of 36.2%, materially outperforming industry averages. ROE of 52.3% indicates high capital efficiency, and OCF/Net Income ratio of 1.11x shows solid cash generation. Although gross margin and operating margin contracted YoY, profits in absolute terms rose significantly, which can be viewed as temporary variation during a growth investment phase. Going forward, stabilization of the cost ratio and expansion of the IP portfolio will be key to margin improvement.
Ample cash and flexible capital allocation: Against Free Cash Flow ¥154.0B, total returns of approximately ¥95.8B (dividends + share buybacks) equating to a total return ratio of about 62% were executed, and cash balances rose to ¥220.5B. Dividend coverage is 3.4x and Equity Ratio is 73.9%, indicating substantial financial flexibility and expanded strategic options for growth investment, additional returns, or M&A. While monitoring inventory increases and gross margin trends, maintaining capital efficiency and expanding returns in balance will be critical.
This report is an earnings analysis document automatically generated by AI that analyzed XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by our firm based on publicly disclosed financial statements. Investment decisions are your own responsibility; please consult a professional as necessary before making any investment decisions.