| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥543.4B | ¥574.9B | -5.5% |
| Operating Income / Operating Profit | ¥96.7B | ¥122.4B | -21.0% |
| Ordinary Income | ¥98.3B | ¥122.3B | -19.6% |
| Net Income / Net Profit | ¥60.0B | ¥76.3B | -21.3% |
| ROE | 12.1% | 16.9% | - |
For the fiscal year ended March 2026, results were down: Revenue ¥543.4B (YoY -¥31.5B -5.5%), Operating Income ¥96.7B (YoY -¥25.7B -21.0%), Ordinary Income ¥98.3B (YoY -¥24.0B -19.6%), Net Income ¥60.0B (YoY -¥16.3B -21.3%). A decline in the Information Systems Business revenue (YoY -12.2%) drove the overall decrease, while the Amusement Business recovered sharply (revenue +44.2%, operating income +213.9%), partially offsetting the decline. Operating margin remained high at 17.8% (down 3.5pp from 21.3% a year earlier) but contracted; gross margin 45.5% (prior ~46.5%) and SG&A ratio 27.7% both deteriorated, causing operating leverage to reverse. Special losses ¥8.3B (impairments, loss on disposal of fixed assets, etc.) reduced profit before tax to ¥90.0B, and with an effective tax rate of 36.1%, net income settled at ¥60.0B. Operating Cash Flow was ¥59.5B (YoY -22.7%), with working capital and tax payments as drags; Free Cash Flow was ¥32.4B, enabling dividends (¥1.78B) and share buybacks (¥3.10B). Equity ratio was 83.8% and cash and deposits ¥165.9B, indicating very strong financial health. Guidance for next fiscal year is conservative: Revenue ¥480.0B (-11.7%) and Operating Income ¥45.0B (-53.5%).
[Revenue] Revenue was ¥543.4B (YoY -¥31.5B -5.5%). By segment, the Information Systems Business was ¥457.7B (YoY -¥64.4B -12.2%), slowing in the core business as replacement demand for pachinko-hall systems ran its cycle and there is a lull in new large projects. The Amusement Business expanded sharply to ¥64.2B (YoY +¥19.8B +44.2%), driven by new pachinko/pachislot machine launches and demand for regulatory adaptations. Other Business (real estate leasing, etc.) grew to ¥22.1B (YoY +¥12.4B +128.5%), partly due to a change in presentation method increasing reported revenue. External customer revenue across all segments totaled ¥543.4B, with domestic sales continuing to account for over 90%, reflecting geographic concentration. The Information Systems Business accounted for 84.1% of revenue; its slowdown determined the overall decline.
[Profitability] Operating Income was ¥96.7B (YoY -¥25.7B -21.0%), a double-digit decline; operating margin contracted to 17.8% (down 3.5pp from 21.3%). Cost of sales was ¥296.1B, a cost-of-sales ratio of 54.5% (prior ~53.5%), worsening by 1pp, yielding gross profit ¥247.3B (gross margin 45.5%). SG&A was ¥150.6B (YoY +¥5.8B), rising despite revenue decline, with SG&A ratio 27.7% (prior ~25.2%, +2.5pp), highlighting rigid cost structure. Major SG&A components included personnel costs (wages and salaries ¥2.55B, bonuses ¥1.70B) and depreciation ¥0.92B, goodwill amortization ¥0.16B. By segment, Information Systems generated Operating Income ¥112.0B (OP -22.2%, OPM 24.5%), Amusement ¥11.2B (+213.9%, OPM 17.4%), Other ¥0.1B (+109.1%, OPM 0.6%). Corporate expenses were -¥26.6B (prior -¥23.7B), increasing allocations and amplifying the reversal of operating leverage. Ordinary Income was ¥98.3B with non-operating net income +¥1.6B; dividend income ¥0.3B and interest income ¥0.2B offset fees paid ¥0.2B and forex losses ¥0.2B. Profit before tax was ¥90.0B, with special losses ¥8.3B (impairment losses ¥0.3B, valuation losses on investment securities ¥0.3B, etc.) as one-off downsides. After corporate taxes ¥32.5B (effective tax rate 36.1%), net income was ¥60.0B (net margin 11.0%). In conclusion, the slowdown in the Information Systems Business and cost rigidity led to lower revenue and earnings; the Amusement recovery provided partial mitigation.
Information Systems Business (Revenue ¥457.7B, Operating Income ¥112.0B) posted revenue -12.2% and profit -22.2% but maintained high profitability with OPM 24.5%. Core products such as pachinko-hall computer systems and prize/customer management systems saw replacement demand pause and face a gap in large new projects. This is judged to follow the end of a prior large investment cycle, and operating leverage reversed, compressing OPM by about 2.1pp year-on-year. Amusement Business (Revenue ¥64.2B, Operating Income ¥11.2B) recovered sharply with revenue +44.2% and profit +213.9%, OPM improving to 17.4% from 8.1% a year earlier. New machine launches for pachislot and demand for regulatory compliance contributed. The prior year included impairment losses of ¥0.87B, so profit levels normalized; the current period recorded impairment losses ¥0.19B, reduced year-on-year, indicating a clear bottoming of profitability. Other Business (Revenue ¥22.1B, Operating Income ¥0.1B) grew revenue +128.5% and profit +109.1% but remains low-margin (OPM 0.6%). A change in presentation (moving items from non-operating income to revenue) for real estate leasing significantly increased reported revenue with limited contribution to operating profit. Corporate expenses -¥26.6B (prior -¥23.7B) reflect higher corporate overheads; aggregating segment operating incomes of ¥132.3B and subtracting corporate expenses yields consolidated operating income ¥96.7B, a compression of approximately ¥35B.
[Profitability] Operating margin 17.8% contracted 3.5pp from 21.3% but remains high relative to the manufacturing average 7.8% (+10.1pp). Gross margin 45.5% (prior ~46.5%) and SG&A ratio 27.7% (prior ~25.2%) both deteriorated, reversing operating leverage. Net margin 11.0% (prior ~13.3%) declined 2.3pp; effective tax rate 36.1% is heavy and suppresses net conversion efficiency. ROE 12.1% (prior 18.0%) decreased 5.9pp, driven by lower net margin and slower total asset turnover 0.917x (prior ~1.0x). Financial leverage 1.19x (prior 1.26x) declined, reducing capital efficiency. EBITDA ¥113.5B (Operating Income ¥96.7B + depreciation and amortization ¥16.8B) yields an EBITDA margin 20.9%; goodwill amortization ¥1.6B is 1.4% of EBITDA and immaterial.
[Cash Quality] Operating Cash Flow ¥59.5B equals 0.99x of net income ¥60.0B, broadly consistent, but OCF/EBITDA 0.52x indicates weak cash conversion. Working capital headwinds (accounts receivable increase -¥11.1B, inventories increase ¥12.6B, accounts payable decrease -¥4.3B) and tax payments weighed down cash flow, compressing the operating cash subtotal (pre-working-capital) ¥98.4B significantly.
[Investment Efficiency] Total asset turnover slowed to 0.917x (prior ~1.0x), due to revenue decline and a slight increase in total assets (+¥2.01B). Tangible fixed asset turnover 4.5x and intangible asset turnover 9.7x remain high-efficiency, but inventories at ¥94.1B (17.3% of sales) are elevated, with inventory days roughly 116 days (COGS÷365).
[Financial Health] Equity ratio 83.8% (prior 79.1%) improved +4.7pp, D/E ratio 0.19x (prior 0.26x) indicates effectively debt-free. Current ratio 463.5% (current assets ¥390.4B ÷ current liabilities ¥84.2B), and cash and deposits ¥165.9B cover current liabilities by about 2x, indicating extremely strong short-term liquidity.
Operating Cash Flow was ¥59.5B (prior ¥77.0B, -22.7%). Compared with Net Income ¥60.0B (prior ¥76.3B), OCF roughly aligns at 0.99x of net income but declined substantially year-on-year. Operating cash subtotal (pre-working-capital) was ¥98.4B (prior ¥125.7B), compressed by working-capital changes totaling -¥38.9B. Breakdown: inventory increase ¥12.6B (product inventories ¥94.1B remain heavy, inventory days ~116), accounts receivable increase -¥11.1B (electronic receivables +¥11.2B), and accounts payable decrease -¥4.3B were headwinds. Corporate tax payments were -¥39.4B (prior -¥48.9B), a heavy burden equal to a tax-cash-out ratio of 43.8% vs. profit before tax ¥90.0B. Investing Cash Flow was -¥27.1B: tangible fixed asset additions -¥7.3B, intangible fixed asset additions -¥16.7B (software-centered), and acquisition of subsidiary shares -¥12.7B were main outflows. Proceeds from sale of fixed assets ¥0.1B and sale of securities ¥0.04B were minor. Free Cash Flow was ¥32.4B (Operating CF ¥59.5B + Investing CF -¥27.1B), a sizable improvement from prior ~-¥0.9B; considering depreciation ¥16.8B, implied cash generation was ¥49.2B. Financing Cash Flow was -¥16.1B: dividend payments -¥16.3B and share buybacks -¥31.0B (total -¥47.3B) were partially offset by treasury share disposals +¥19.4B (presumed exercise of stock compensation) and bond redemption -¥0.05B. Net change in cash was +¥16.3B, ending cash and deposits ¥165.9B (opening ¥149.6B); cash equivalents including securities ¥30.0B sum to ¥195.9B and are ample.
Ordinary Income ¥98.3B less special losses ¥8.3B resulted in profit before tax ¥90.0B, an 8.4% temporary downward effect relative to ordinary income. Special losses consisted of impairment loss ¥0.3B (amusement business operating assets ¥1.9B and goodwill in other business ¥1.6B), valuation loss on investment securities ¥0.3B, and loss on disposal of fixed assets ¥0.1B, roughly in line with prior year special losses ¥8.0B (including impairment ¥6.9B). While items are to some extent one-off, recurring impairments suggest a structural cost aspect. Non-operating income ¥1.9B (dividends received ¥0.3B, interest income ¥0.2B, other ¥0.7B) contributed positively; non-operating expenses ¥0.3B (fees paid ¥0.2B, forex loss ¥0.2B) were minor. Comprehensive income was ¥58.1B (Net Income ¥60.0B - Other Comprehensive Loss ¥1.9B); other comprehensive income comprised valuation differences on available-for-sale securities +¥0.1B and retirement benefit adjustments +¥0.5B. Versus operating cash subtotal ¥98.4B and net income ¥60.0B, non-cash expenses were depreciation ¥16.8B, goodwill amortization ¥1.6B, provision changes -¥0.9B, stock-based compensation ¥2.0B totaling approximately ¥19.5B, which reconciles. Working-capital headwinds -¥38.9B and tax payments -¥39.4B pressured OCF, leaving OCF/EBITDA 0.52x, low but with no abnormal accruals; overall earnings quality is broadly sound.
Full-year guidance: Revenue ¥480.0B (YoY -¥63.4B -11.7%), Operating Income ¥45.0B (YoY -¥51.7B -53.5%), Ordinary Income ¥46.0B (YoY -¥52.3B -53.2%), projecting a significant decline. Compared with this period's results (Revenue ¥543.4B, Operating Income ¥96.7B, Ordinary Income ¥98.3B), the guidance embeds a steep deceleration in the second half (Revenue -¥63.4B, Operating Income -¥51.7B), reflecting normalization of demand in the Information Systems Business, upfront costs for new product investment, and cyclical adjustment in the Amusement Business—hence a conservative stance. Operating margin is expected to fall to 9.4% (from 17.8%, -8.4pp), assuming higher SG&A and one-off costs. EPS forecast ¥212.91 with annual dividend ¥40 implies payout ratio 18.8%, a sustainable level; dividend amount is retained at the current level (no cut) despite this period's payout ratio 22.8% (annual dividend ¥100). Progress rates show revenue 113.2% and operating income 214.9%, indicating large overperformance in the first half and the guidance assumes significant second-half revenue/earnings deterioration, though upside revision remains possible.
Annual dividend ¥100 (interim ¥30, year-end ¥70) with total dividend outlay ¥1.78B, payout ratio 22.8% (vs. Net Income ¥60.0B), at a sustainable level. DOE (dividend to equity) 4.1% is the ratio of total dividends to shareholders’ equity ¥49.67B, reflecting a shareholder-return focus. Against Free Cash Flow ¥32.4B, dividends ¥1.78B give FCF coverage 1.82x and are healthy, but total returns including buybacks ¥3.10B sum to ¥4.88B, exceeding FCF ¥32.4B and implying partial drawdown of cash; total return ratio 150.6% (Total Return ÷ FCF). With cash and deposits ¥165.9B and ample liquidity, the company pursued active shareholder returns. Treasury share disposals ¥1.94B (financing CF positive) are presumed from stock-compensation exercises, so net share buybacks were ¥1.16B (-¥3.10B + ¥1.94B). Including dividends, the effective total return was ¥2.94B (effective total return ratio 90.7%), by that interpretation. Next-year dividend guidance ¥40 (YoY -¥60) implies a dividend cut is expected; however, given conservative earnings guidance, maintaining dividends could be seen as a commitment.
Inventory stagnation and obsolescence risk: Product inventories ¥94.1B (17.3% of revenue) are heavy, with inventory days ~116. Pachinko/pachislot machines have short model cycles and high obsolescence risk with regulatory changes. Inventory increase this period ¥12.6B pressured operating cash; risks include inventory valuation losses and margin erosion from discounting. Contract liabilities ¥0.07B and contract assets ¥0.37B indicate limited advance receipts and slow pre-recognition cash recovery, implying high dependence on inventory financing.
Concentration risk in the Information Systems Business: The Information Systems Business accounts for 84.1% of revenue; demand swings here drive consolidated performance. This period saw -12.2% revenue and -22.2% operating income, evidencing reversed operating leverage. Dependence on investment cycles for pachinko-hall systems means revenue can fall sharply in customer investment-poor environments. Lack of disclosure of backlog makes future revenue visibility opaque; a lull in large replacement demand can cause large swings.
Rigidity of operating leverage: SG&A ¥150.6B (prior ¥144.8B) increased by ¥5.8B despite declining revenue, and SG&A ratio 27.7% (prior ~25.2%) worsened by 2.5pp. High fixed-cost components—personnel, depreciation, goodwill amortization—mean profits swing significantly with revenue. Guidance implies operating margin 9.4% (this period 17.8%), halving expected margins; absent structural cost reforms, declines could widen.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 17.8% | 7.8% (4.6%–12.3%) | +10.1pt |
| Net Margin | 11.0% | 5.2% (2.3%–8.2%) | +5.9pt |
Profitability metrics rank the company at the top of the industry; operating and net margins substantially exceed median, reflecting a high value-added business model.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -5.5% | 3.7% (-0.4%–9.3%) | -9.2pt |
Growth is below peers; while manufacturing median maintains positive growth, the company’s revenue decline indicates cyclical adjustment in Information Systems demand.
※ Source: Company compilation
Temporary adjustment in a high-margin model: Operating margin 17.8% maintains a +10.1pp advantage over the manufacturing average, but contracted 3.5pp year-on-year. The slowdown in Information Systems (OPM 24.5%) and cost rigidity are main drivers; the Amusement Business’s sharp recovery (OPM 17.4% vs. prior 8.1%) is a mitigating factor. Guidance is conservative (Operating Income -53.5%), but inventory trimming and recovery in new-product cycles could reverse margins. Over the past three years operating margin has stayed in the high double-digits, indicating structural high profitability remains.
Improvement in cash generation is key: OCF/EBITDA 0.52x is low, with extended inventory days (~116) the largest bottleneck. Inventory optimization of ¥94.1B could improve OCF by ¥12.6B, and stricter accounts receivable management could further improve by ¥11.1B. Balance-sheet resilience (cash ¥165.9B) is outstanding, but Free Cash Flow ¥32.4B versus total returns ¥4.88B indicates returns exceed FCF. Second-half inventory compression and OCF improvement are prerequisites for sustainable returns.
Progress toward rebalancing the segment portfolio: Revenue composition Information Systems 84.1% / Amusement 11.8% / Other 4.1% shows the dominance of Information Systems; however, Amusement’s +44.2% growth and improved diversification are emerging. Amusement OPM 17.4% doubled from 8.1% prior year, benefiting from regulatory responses and new machine introductions. Next year, smoothing demand across both businesses and synchronizing new-product cycles are critical to stabilizing profits; monitor realization of portfolio effects.
This report is an earnings analysis generated automatically by AI based on XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company from public financial statements. Investment decisions are your own responsibility; please consult a professional as appropriate before making any investment decisions.