Gunosy Inc. FY2026 FY Earnings Report

Quick View

Executive Summary

For the fiscal year ended May 2026 (Full Year), Revenue was ¥64.4B (YoY +¥3.4B +5.6%), Operating Income was ¥1.9B (YoY -¥3.9B -67.7%), Ordinary Income was ¥3.5B (YoY +¥0.3B +8.9%), and Net Income was ¥22.6B (YoY +¥19.2B +562.6%). Revenue growth was driven by the core Media business, but at the operating level the company recorded a sharp decline in profit due to a deterioration in gross margin (45.8% from 47.5% in the prior year, -1.7pt) and higher SG&A (+¥4.4B +19.1%). Ordinary Income was supported by non-operating income including interest income ¥0.8B and foreign exchange gains ¥0.9B. Net Income expanded significantly YoY due to gain on sale of investment securities ¥0.5B and a reduction in corporate tax burden. Operating margin deteriorated to 2.9% (from 9.4% in the prior year, -6.5pt), but Net Income benefited from realized gains on the investment portfolio and changes in tax burden.

Drivers of Performance

[Revenue] Revenue was ¥64.4B (+5.6%) year-over-year. By segment, the Media Business recorded ¥54.7B (YoY -9.6%), GHoldings Business ¥9.4B (segment not disclosed in prior year), and New Business ¥0.3B (YoY -34.8%). The decline in Media Business revenue from ¥60.5B in the prior year to ¥54.7B includes the effect of segment reclassification that moved part of revenue into GHoldings. By geography, Japan was ¥53.8B (prior year ¥52.4B) and the U.S. ¥9.9B (prior year ¥8.5B), with overseas revenue expanding +16.0% supported by FX effects and recovering advertising demand. Major customers were Mediavine ¥9.1B and KDDI ¥7.6B, indicating high customer concentration. Cost of sales was ¥34.9B (cost of sales ratio 54.2%), up from ¥32.0B (52.5%) in the prior year (+1.7pt), as increases in advertising costs and traffic acquisition costs compressed gross margin.

[Profitability] Operating Income was ¥1.9B (-67.7%). SG&A was ¥27.6B (42.9% of sales), up from ¥23.2B (38.0% of sales) in the prior year (+¥4.4B), and amortization of goodwill ¥1.0B became a new burden. By segment Operating Income, Media delivered ¥11.6B (margin 21.3%) maintaining high profitability, while GHoldings had an operating loss of ¥2.1B and New had an operating loss of ¥2.0B, diluting consolidated profit. Non-operating income was ¥1.9B, driven by interest income ¥0.8B and FX gains ¥0.9B; after deducting non-operating expenses ¥0.2B (including equity-method investment losses of -¥2.6B), Ordinary Income was ¥3.5B (+8.9%). Extraordinary items included gain on sale of investment securities ¥0.5B, offset by impairment losses ¥0.7B and valuation losses on investment securities ¥0.6B, resulting in Profit Before Tax of ¥2.7B (-6.9%). Income taxes were ¥2.9B (effective tax rate approximately 108%), remaining elevated due to changes in deferred tax assets/liabilities and valuation allowances; compared with the prior-year tax structure, the contribution to final profit changed materially, and Net Income attributable to owners of the parent after noncontrolling interests was a significant increase to ¥22.6B. Excluding one-time factors (investment sale gains and tax relief), the underlying trend is higher revenue but lower operating profit.

Segment Analysis

The Media Business reported Revenue ¥54.7B (YoY -9.6%) and Operating Income ¥11.6B (YoY -18.3%, margin 21.3%). The revenue decline includes reclassification into GHoldings, but core properties “Gunosy” and “au Service Today” and subsidiary Game8’s domestic and overseas media remain stable cash-generating sources. The 21.3% margin is high but down YoY. GHoldings Business reported Revenue ¥9.4B and an operating loss of ¥2.1B (margin -22.5%), as G Holdings Co., Ltd.’s anime/manga IP-based social game publishing business is at a ramp-up stage. The segment was not disclosed separately in the prior year; goodwill amortization ¥0.97B and upfront investment costs contributed to losses. The New Business recorded Revenue ¥0.3B (YoY -34.8%) and operating loss ¥2.0B (margin -660.0%), encompassing growth-investment businesses such as Game8 SC and “IR Hub.” Given its small scale and large losses, it is a drag on consolidated profit. Corporate adjustments were -¥5.7B (corporate expenses), improved from -¥6.2B in the prior year.

Key Financial Metrics

[Profitability] Operating margin 2.9% (prior year 9.4%) deteriorated -6.5pt due to lower gross margin and higher SG&A ratio. Net margin 35.1% (prior year 5.6%) improved materially on a headline basis due to investment sale gains and tax burden changes, though sustainability is limited. EBITDA (Operating Income + D&A ¥0.5B) was ¥2.4B; pre-goodwill-amortization EBITDA was ¥3.4B, indicating underlying earnings power. ROE 21.0% (prior year 3.0%) rose temporarily driven by higher Net Income. ROA (on Ordinary Income basis) 2.8% (prior year 2.5%) showed slight improvement. [Cash Quality] Operating Cash Flow (OCF) was ¥6.8B versus Net Income ¥22.6B, yielding OCF/Net Income 0.30x, below the 0.8 threshold; excluding one-off investment sale gains, cash generation is not problematic. OCF/EBITDA 2.85x is high, indicating strong cash generation. Accrual ratio -5.5% suggests high earnings quality. [Investment Efficiency] CapEx/Depreciation 0.25x indicates restrained investment. Asset turnover 0.52x (prior year 0.48x) slightly improved. [Financial Soundness] Equity Ratio 86.0% (prior year 84.4%), Debt/Equity 0.6% (prior year 2.4%) indicate low leverage. Current Ratio 442% (prior year 460%), Quick Ratio 442% demonstrate very strong short-term liquidity. Debt/EBITDA 0.27x and Interest Coverage 186x reflect robust financial resilience.

Cash Flow Analysis

Operating Cash Flow was ¥6.8B (prior year -¥0.3B), turning positive. Subtotal (before working capital changes) was ¥8.0B; after working capital movements (decrease in trade receivables ¥2.6B and decrease in accounts payable -¥1.2B) and income taxes paid -¥2.2B, OCF was secured. OCF/Net Income is 0.30x, mainly because Net Income includes non-cash investment sale gains of ¥0.5B; underlying cash generation remains stable. Investing Cash Flow showed net cash inflow of ¥14.2B, primarily from withdrawals of time deposits (receipts ¥18.2B - placements ¥4.3B). Capital expenditure was -¥0.1B and intangible asset acquisition -¥0.7B, indicating highly restrained growth investment, and proceeds from sale of investment securities ¥0.7B contributed. Free Cash Flow (OCF + Investing CF) was ¥21.0B, ample. Financing Cash Flow was -¥7.5B, consisting of dividend payments -¥4.4B, share buybacks -¥1.1B, and long-term debt repayments -¥2.7B. Cash and cash equivalents increased from ¥39.9B at the beginning of the period to ¥54.4B at period end (+¥14.4B), further strengthening liquidity. FCF coverage (FCF ÷ total shareholder returns) was 3.93x, sufficient to cover dividends and buybacks.

Quality of Earnings

Ordinary Income ¥3.5B versus Profit Before Tax ¥2.7B reflects adjustments of extraordinary losses ¥1.5B (impairment ¥0.7B, valuation loss on investment securities ¥0.6B) and extraordinary gains ¥0.6B (gain on sale of investment securities ¥0.5B), netting to -¥0.9B. The jump from Profit Before Tax to Net Income (+¥19.9B) is attributable to income taxes ¥2.9B, where an effective tax rate of approximately 108% is an anomaly driven by movements in deferred tax assets/liabilities and release of valuation allowances. Comprehensive income was -¥0.3B, diverging significantly from Net Income ¥22.6B, due to foreign currency translation adjustments -¥8.3B, valuation differences on available-for-sale securities -¥0.3B, and OCI attributable to equity-method investees +¥1.8B. On the non-operating side, interest income ¥0.8B and FX gains ¥0.9B supported Ordinary Income, but equity-method investment losses -¥2.6B remain a persistent headwind. Core operating earnings have weakened, and increases in Ordinary and Net Income rely on one-off factors (investment sale gains and tax relief), so sustainability is limited.

Forecasts & Guidance

The company disclosed a Full Year forecast of Revenue ¥18.6B (YoY -37.0%), representing a substantial decline. This is likely a forecast for the next fiscal first quarter (3 months) rather than the full year, or it may assume business transfers or structural changes. Dividend guidance is ¥0, indicating a shift from the current period year-end dividend of ¥22 to no payout. As the assumptions underlying the forecast were not disclosed, clarification on achievability and background factors is awaited. A large decline from the current Full Year Revenue ¥64.4B may suggest segment reorganization or divestiture/downsizing of core businesses and thus requires investor communication.

Shareholder Returns

A year-end dividend of ¥22 was paid (ordinary dividend ¥18.30 + special dividend ¥3.70). Total dividends were ¥4.41B, representing a reported payout ratio of 19.5% against Net Income ¥22.6B; excluding one-off investment sale gains, the underlying payout ratio is higher. Share buybacks amounted to ¥1.1B (Financing CF), bringing total shareholder returns to ¥5.5B. Treasury stock at period end was ¥2.9B, equivalent to 1.2% of outstanding shares. With Free Cash Flow ¥21.0B, total return coverage was 3.93x, indicating ample capacity. The reported payout ratio 5.6% is a presentation-based figure and requires assessment against sustainable earnings. The next-period forecast shows dividend ¥0, indicating a dividend cut. Given cash and deposits ¥54.4B and low leverage, dividend capacity is abundant, but the company’s decision to change return policy is likely driven by business restructuring and uncertainty in performance outlook.

Risk Factors

1. Business and Customer Concentration Risk: The Media Business accounts for 84.9% of Revenue and 155% of consolidated Operating Income (segment profit total ¥7.5B), effectively shouldering losses from non-core businesses. High dependence on major customers (Mediavine ¥9.1B, KDDI ¥7.6B) means changes in contract terms or demand could directly impact performance. Geographic concentration is also high (Japan 83.5%, U.S. 15.4%), so advertising market volatility significantly affects revenue.

2. Continued Losses in Deficit Segments and Burden of Upfront Investment: Ongoing losses at GHoldings (Operating loss ¥2.1B) and New (Operating loss ¥2.0B) dilute consolidated profit. Goodwill amortization ¥1.0B per year is a mechanical JGAAP burden that will persist for several years. If investments take time to recover, contributions to cash flow will be delayed, potentially constraining shareholder returns and growth investments.

3. Volatility in Investment Portfolio and Unstable Tax Burden: Equity-method investment losses -¥2.6B and valuation losses on investment securities ¥0.6B indicate volatility in external investments that disrupt Ordinary and Net Income. Investment securities ¥48.9B (39.1% of total assets) present significant market risk; timing of realized gains/losses will affect Net Income. The abnormal effective tax rate of 108% reflected dependence on deferred tax movements and valuation allowances, making tax forecasting difficult going forward.

Industry Benchmarks (Reference, Company Analysis)

Profitability & Returns

Operating margin is 5.2pt below the industry median, reflecting lower gross margin and heavy SG&A burden. Net margin is temporarily elevated due to investment sale gains and special tax structure, but sustainability is limited.

Growth & Capital Efficiency

Revenue growth lags the industry median by 4.5pt, reflecting media market maturation and the ramp-up stage of loss-making businesses.

※Source: Company compilation

Earnings Highlights to Watch

1. The Media Business maintains high profitability (margin 21.3%) and functions as a stable cash generator. While major customer concentration and rising traffic acquisition costs are medium-term margin pressures, strong cash (¥54.4B) and low leverage (Debt/Equity 0.6%) provide a solid financial foundation.

2. Continued deficits at GHoldings and New (combined -¥4.1B) and equity-method losses -¥2.6B dilute consolidated profit. Goodwill amortization ¥1.0B is a recurring JGAAP burden; trends in EBITDA (¥2.4B) and pre-goodwill-amortization EBITDA (¥3.4B) are key indicators of underlying earnings power. Loss reduction in deficit segments and stabilization of the investment portfolio are catalysts for profit recovery.

3. The disclosed substantial revenue decline forecast (-37.0%) and shift to no dividend suggest business reorganization or structural changes. Given abundant FCF (¥21.0B), a change in shareholder return policy likely signals a strategic inflection. With CapEx/Depreciation 0.25x and restrained investment, timing of renewed growth investment and normalization of dividend policy are key items to monitor.

---

This report is an AI-generated earnings analysis based on XBRL financial statement data and is not a recommendation to invest in any specific security. Industry benchmarks are compiled by the company from public financial statements for reference purposes. Investment decisions are your responsibility; consult a professional advisor as needed.