Bandai Namco Holdings Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥643.82B
• Operating Income: ¥105.48B
• Net Income: ¥79.06B
• EPS: ¥121.91

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

Verdict: Solid top-line growth but margin compression led to a modest profit dip; overall execution remains strong with a robust balance sheet. Revenue rose 5.3% year over year to 6,438.16, while operating income declined 7.2% to 1,054.81, indicating negative operating leverage in the period. Gross profit reached 2,622.79, yielding a gross margin of 40.7%. SG&A expenses were 1,567.98, or 24.4% of sales, contributing to the operating margin decline. Operating margin printed at 16.4% versus roughly 18.6% a year ago, implying about 220 bps of compression. Ordinary income was 1,101.96 (-4.6% YoY), supported by net non-operating income of 47.15 (income 66.26 minus expenses 19.11). Net income came in at 789.09 (-2.3% YoY), for a net margin of 12.3% and EPS of 121.91 yen. The effective tax rate was 28.5%, broadly in line with a normalized range. DuPont metrics indicate ROE of 9.4%, driven by a 12.3% net margin, 0.555x asset turnover, and 1.38x financial leverage. ROIC was reported at a healthy 16.1%, comfortably above the 8% excellence benchmark. Liquidity is exceptional: current ratio 259.5% and quick ratio 239.4%, underpinned by cash and deposits of 3,724.87. The capital structure is conservative with a D/E of 0.38x and an equity ratio of about 72.5% (total equity of 8,416.29 over assets of 11,603.58). Earnings quality cannot be fully assessed due to unreported operating cash flow; OCF/NI and FCF coverage of dividends are not calculable at this time. Non-operating items were a tailwind this quarter but were not the primary driver of profit. The main pressure point is higher operating costs relative to growth, implying near-term margin sensitivity to title mix and product cycles. Looking ahead, sustaining mid-teens ROIC alongside a recovery in operating margin will be key to underpinning dividend capacity and maintaining ROE near or above the high single digits.

Profitability Analysis

ROE decomposition: 9.4% ROE = 12.3% Net Profit Margin × 0.555x Asset Turnover × 1.38x Financial Leverage. The component that changed the most versus last year is net profit margin, as operating income declined 7.2% despite a 5.3% revenue increase, compressing operating margin by roughly 220 bps to 16.4%. The business driver appears to be SG&A growth outpacing gross profit growth (SG&A at 24.4% of sales), likely reflecting higher marketing and development/commercialization spend aligned with product launches and title mix. This effect is partly cyclical and mix-related; it is not necessarily structural if forthcoming titles and seasonal volumes improve absorption, but near-term visibility is limited. Asset turnover at 0.555x is steady for the franchise-driven model and cash-heavy balance sheet; leverage at 1.38x remains conservative and stable. Concerning trend to flag: negative operating leverage (OI down while sales up) indicates cost discipline and mix need attention; SG&A growth likely exceeded revenue growth in the period.

Growth Assessment

Top line expanded 5.3% YoY to 6,438.16, demonstrating resilience across franchises and product categories. However, profit growth lagged due to cost inflation and/or heavier commercial spend, with operating income down 7.2% and ordinary income down 4.6%. Net income declined 2.3%, cushioned by positive net non-operating items of 47.15. Gross margin stood at 40.7%, but operating margin compressed 220 bps to 16.4%, evidencing negative operating leverage. ROIC of 16.1% indicates investments continue to earn well above the hurdle rate, supporting medium-term value creation. Near-term outlook hinges on title pipeline, merchandising cycles, and holiday seasonality; recovery in operating margin is plausible if mix improves, but cost pressure remains a watch point. Sustainability of revenue growth is reasonable given the breadth of IP, though hit-driven volatility persists. Profit quality appears mixed: ordinary income benefited slightly from non-operating gains, while core operating profitability softened.

Financial Health

Liquidity is strong: current ratio 259.5% and quick ratio 239.4%, with working capital of 4,566.95. No warning on current ratio (<1.0) or leverage (D/E > 2.0); reported D/E is a conservative 0.38x. Cash and deposits of 3,724.87 cover all current liabilities (2,862.40), indicating low maturity mismatch risk. Total equity of 8,416.29 implies an equity ratio near 72.5%, underscoring balance sheet strength. Interest-bearing debt details are unreported, but overall liabilities are modest relative to assets. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow were unreported, so OCF/Net Income and FCF coverage cannot be calculated. As such, we cannot assess cash conversion or working capital cash effects this quarter. Balance sheet composition (large cash position, modest inventories of 575.40 and receivables of 1,591.02 against payables of 1,218.19) suggests conservative working capital, but without OCF we cannot rule out timing effects. No signs of working capital manipulation can be identified from the limited data provided.

Dividend Sustainability

The calculated payout ratio is 58.5%, near the upper bound of the typical sustainability threshold (<60%). FCF coverage is not calculable due to unreported cash flows and capex. However, sizable cash on hand (3,724.87) and retained earnings (7,088.67) provide a buffer for distributions. Maintenance of mid-teens ROIC and stabilization of operating margin will be important to keep payout comfortable. Policy outlook cannot be inferred from disclosures here; monitor the full-year guidance and cash flow statement once available.

Risk Assessment

Business Risks:

• Hit-driven IP and title pipeline risk affecting revenue and margin volatility
• Product mix and platform cycle risk impacting operating leverage
• Cost inflation in marketing and content development pressuring SG&A
• Supply chain and inventory obsolescence risk in toys/merchandise

Financial Risks:

• Potential FX volatility affecting overseas revenue translation and procurement costs
• Limited visibility on cash flow generation due to unreported OCF/FCF
• Non-operating income variability (interest and other) modestly influencing ordinary income

Key Concerns:

• Operating margin compressed by ~220 bps despite 5.3% sales growth
• Negative operating leverage indicating SG&A growth above revenue growth
• Dependence on upcoming release schedule for profit recovery

Investment Implications

Key Takeaways:

• Revenue growth solid at +5.3% YoY, but operating income -7.2% signals cost/mix headwinds
• Operating margin at 16.4% vs ~18.6% last year; about 220 bps compression
• ROE 9.4% with conservative leverage (1.38x) and strong liquidity
• ROIC 16.1% indicates strong capital efficiency despite near-term margin pressure
• Balance sheet strength (cash 3,724.87; equity ratio ~72.5%) supports resilience and dividends

Metrics to Watch:

• Operating cash flow and free cash flow once disclosed
• SG&A as a percentage of sales and marketing spend efficiency
• Operating margin trajectory through the holiday season
• Title pipeline performance and mix between digital and physical
• FX movements and their impact on margins
• Inventory turns and receivables collection

Relative Positioning: Within the Japanese entertainment and content IP peer set, Bandai Namco maintains above-average balance sheet strength and ROIC, but near-term operating margin underperformance versus revenue growth highlights execution risk tied to title mix and cost intensity.

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