SEGA SAMMY HOLDINGS INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥201.11B
• Operating Income: ¥10.06B
• Net Income: ¥30.39B
• EPS: ¥13.01

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

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

AI Financial Analysis

Executive Summary

For FY2026 Q2 (consolidated, JGAAP), Sega Sammy Holdings reported revenue of ¥201.1bn, down 5.0% YoY, with a sharp contraction in profitability as operating income fell 69.3% YoY to ¥10.1bn and net income declined 90.9% YoY to ¥2.75bn. The gross profit margin remains high at 49.9%, indicating resilient unit economics and pricing/mix, but operating margin compressed to roughly 5.0%, reflecting significant operating deleverage and higher operating costs. Ordinary income of ¥10.8bn exceeds operating income by about ¥0.76bn, implying net positive non-operating contribution, but below-the-line items and taxes weighed heavily on the bottom line. Using the provided DuPont metrics, ROE is 0.73%, driven by a very slim net margin (1.37%), modest asset turnover (0.310x) and moderate financial leverage (1.71x). Balance sheet strength looks solid: total assets of ¥648.1bn and total equity of ¥378.6bn imply an equity ratio of roughly 58% (despite a reported 0% equity ratio which is clearly an undisclosed placeholder). Liquidity is strong with a current ratio of 412.8% and quick ratio of 401.1%, and working capital of ¥294.6bn provides ample short-term flexibility. Interest expense of ¥0.85bn is well covered, with interest coverage at 11.8x based on operating income, indicating manageable financial risk. Tax expense of ¥4.92bn suggests a high tax burden relative to profits; if ordinary income approximates pre-tax income under JGAAP, the implied tax rate is in the mid-40% range, but the notable gap between post-tax and net income points to additional below-the-line charges or non-controlling interest effects. Cash flow data (OCF/FCF) and D&A are not disclosed in this dataset, so earnings-to-cash conversion cannot be evaluated this quarter from the provided fields. Dividend and share count data are also not disclosed here; EPS is ¥13.01, but per-share balance sheet metrics cannot be confirmed. Overall, the quarter shows healthy gross profitability but substantial operating margin compression and a significant squeeze at the net level, while balance sheet liquidity and solvency remain robust. The key question is whether the operating cost step-up and below-the-line drag are transitory or structural. Revenue decline of 5% alongside a near-70% drop in operating income indicates elevated operating leverage and sensitivity to topline and title/cycle timing. Management’s guidance (not provided here) and pipeline visibility will be crucial to assessing second-half recovery potential. With substantial equity capital and strong liquidity, financial resilience appears sound despite weaker earnings.

Profitability Analysis

ROE_decomposition: Reported DuPont inputs: Net margin 1.37%, asset turnover 0.310x, financial leverage 1.71x, yielding calculated ROE of 0.73%. The very low net margin is the dominant driver of weak ROE; asset turnover is modest for the business model and leverage is moderate. margin_quality: Gross margin is 49.9% (¥100.4bn gross profit on ¥201.1bn revenue), indicating strong product/service-level economics. Operating margin is ~5.0% (¥10.1bn/¥201.1bn), a sharp decline YoY given operating income fell 69.3% on only a 5% revenue decline, implying heavier SG&A/R&D and/or mix impacts. Net margin at 1.37% reflects significant below-operating line drag (taxes and other items). operating_leverage: Revenue -5.0% YoY to ¥201.1bn; operating income -69.3% YoY to ¥10.1bn. Back-solving implies prior-year operating income ≈ ¥32.8bn on revenue ≈ ¥211.7bn, i.e., operating margin declined from ~15.5% to ~5.0% (~10.5pp compression), evidencing high negative operating leverage this period.

Growth Assessment

revenue_sustainability: Topline contracted 5.0% YoY to ¥201.1bn. Given the magnitude of profit decline relative to revenue, mix and timing appear to be important; sustaining or re-accelerating revenue is critical to recover margins under the current fixed cost base. profit_quality: Despite a solid gross margin (49.9%), the operating margin fell markedly, suggesting elevated fixed costs and/or higher content amortization, promotional spend, or project costs. Ordinary income benefited slightly from non-operating items (+¥0.76bn vs operating income), but net income was heavily affected by taxes and below-the-line items. outlook: A recovery hinges on H2 execution, pipeline performance, and cost discipline. With strong liquidity, the company is positioned to navigate volatility; however, the current cost structure implies that topline momentum will be key to restoring double-digit operating margins.

Financial Health

liquidity: Current assets ¥388.7bn vs current liabilities ¥94.2bn implies a current ratio of 412.8% and quick ratio of 401.1% (low inventories of ¥11.0bn). Working capital is ¥294.6bn, indicating ample short-term coverage. solvency: Total equity ¥378.6bn and total liabilities ¥263.2bn imply a healthy balance sheet; the implied equity ratio is roughly 58% (using assets and equity), even though the reported equity ratio field is 0% (undisclosed). Interest coverage is 11.8x, suggesting manageable debt service risk. capital_structure: Financial leverage (assets/equity) is 1.71x. The provided debt-to-equity ratio is 0.70x, but detailed interest-bearing debt breakdown is not disclosed here; nonetheless, leverage appears moderate and well-supported by equity.

Cash Flow Quality

earnings_quality: Operating cash flow and investing/financing cash flows are not disclosed in this dataset (zeros indicate unreported), so cash conversion of earnings cannot be assessed. The sharp drop in net income alongside solid operating income coverage of interest suggests no immediate red flags on servicing, but cash corroboration is missing. FCF_analysis: Free cash flow is not available due to undisclosed OCF and capex. Without D&A disclosure, EBITDA metrics are also not assessable from this dataset. working_capital: Inventories are modest at ¥11.0bn relative to sales, and the quick ratio of 401% indicates limited inventory risk this period. Broader working capital dynamics (receivables/payables turns) are not provided.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are not disclosed in this dataset (reported as 0.00, indicating undisclosed). EPS is ¥13.01 for the period, but without dividend data we cannot assess payout against earnings. FCF_coverage: FCF not disclosed; therefore, dividend coverage by free cash flow cannot be evaluated from the provided figures. policy_outlook: Given the weaker earnings and lack of disclosed dividend figures here, any assessment of dividend trajectory would require management guidance and historical policy reference, which are not included in this dataset.

Risk Assessment

Business Risks:

• High operating leverage: substantial margin sensitivity to relatively small revenue changes.
• Product/title and cycle timing risk leading to revenue volatility and cost absorption issues.
• Potential mix deterioration or increased promotional intensity compressing margins.
• Execution risk in H2 pipeline needed to restore operating margin.
• Regulatory or market environment changes affecting core business segments.

Financial Risks:

• Tax burden and below-the-line items materially impacting net income.
• Potential currency effects on earnings (not disclosed here) given international exposure.
• Dependence on non-operating gains to support ordinary income in weaker quarters.
• Limited visibility on cash flow due to undisclosed OCF/FCF data in this dataset.

Key Concerns:

• Operating margin compressed by ~10.5pp YoY despite only a 5% revenue decline.
• Net margin at 1.37% and ROE at 0.73% indicate weak profitability.
• Lack of disclosed cash flow and D&A data impedes assessment of earnings quality and FCF.
• High implied tax burden and other below-the-line charges driving the large gap between operating and net income.

Investment Implications

Key Takeaways:

• Topline down 5.0% YoY to ¥201.1bn with disproportionate profit decline highlights high operating leverage.
• Gross margin remains strong at 49.9%, but operating margin is ~5.0% and net margin 1.37%.
• ROE is low at 0.73%, constrained by slim net margins and modest asset turnover.
• Balance sheet strength is solid: implied equity ratio ~58%, interest coverage 11.8x, working capital ¥294.6bn.
• Cash flow and dividend data are undisclosed here; additional disclosures are needed to judge cash earnings quality and shareholder return capacity.

Metrics to Watch:

• H2 revenue trajectory and title/launch pipeline conversion.
• Operating expense run-rate and progress on restoring double-digit operating margins.
• Below-the-line items (taxes, extraordinary items, NCI) and their impact on net income.
• Cash flow from operations and capex once disclosed, to assess FCF and dividend capacity.
• Inventory and receivables trends as indicators of demand and working capital discipline.

Relative Positioning: Within Japanese entertainment and gaming-related peers, the company currently exhibits strong balance sheet and liquidity but underperforms on profitability and ROE this quarter due to elevated operating leverage and below-the-line pressure.

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