Bandai Namco Holdings Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥643.82B
• Operating Income: ¥105.48B
• Net Income: ¥80.82B
• 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

Bandai Namco Holdings (TSE:7832) reported FY2026 Q2 consolidated results under JGAAP with steady topline growth but softer profitability. Revenue was ¥643.8 billion, up 5.3% year on year, indicating resilient demand across the Group’s IP-driven portfolio (toys/hobby, games, visual/music, and amusement-related). Gross profit was ¥254.9 billion, implying a solid gross margin of 39.6%. Operating income declined 7.2% YoY to ¥105.5 billion, pointing to margin compression despite higher sales. The operating margin was 16.4%, while ordinary income of ¥110.2 billion suggests limited non-operating gains/losses and healthy core earnings power. Net income was ¥78.9 billion, down 2.3% YoY, with a net margin of 12.3%, showing better resilience at the bottom line than at the operating level. The DuPont-calculated ROE was 9.38%, driven by a net margin of 12.26%, asset turnover of 0.555x, and modest financial leverage of 1.38x. Balance sheet strength remains a key positive: total assets were ¥1,160.4 billion and total equity ¥841.6 billion, implying an equity ratio around the low-70% range on a calculated basis and a low debt-to-equity of 0.37x. Liquidity appears robust with a current ratio of 253% and quick ratio of 237.5%, underpinned by ¥704.9 billion in current assets and ¥278.6 billion in current liabilities. Working capital was sizable at ¥426.3 billion, and inventories of ¥43.4 billion look conservative relative to revenue scale, mitigating obsolescence risk in a hit-driven business. The ordinary-to-operating income gap (¥4.7 billion) suggests limited reliance on non-core items. Effective tax rate, approximated using ordinary income, appears in the low-30% range, consistent with Japan’s statutory environment. Cash flow statement items (OCF/FCF) and D&A were not disclosed in the provided data, limiting EBITDA-based analysis and cash conversion assessment; zeros should be interpreted as undisclosed rather than true zeros. Dividend data were also not disclosed here, so payout and FCF coverage cannot be evaluated from this dataset. Overall, the company demonstrates strong balance sheet health and durable gross profitability, but the quarter shows negative operating leverage: expenses rose faster than revenue, compressing operating income. Outlook hinges on launch timing and mix in games and toys, FX tailwinds, and disciplined SG&A and content amortization.

Profitability Analysis

ROE decomposition (DuPont) shows: Net profit margin 12.26% × Asset turnover 0.555 × Financial leverage 1.38 = ROE 9.38%. The gross margin of 39.6% is strong for an IP-anchored entertainment portfolio, indicating healthy unit economics across software/digital and higher-margin merchandise. Operating margin of 16.4% declined YoY in line with the 7.2% drop in operating income, implying cost pressure—likely higher content amortization, development expenses, and marketing tied to title launches and brand initiatives. Ordinary income margin of 17.1% suggests modest non-operating contribution, keeping core profitability the main driver. The net margin of 12.3% remains solid despite the operating compression, reflecting disciplined below-the-line items and a normalized tax burden. Operating leverage was negative in the period: revenue grew 5.3% but operating profit fell 7.2%, implying fixed/semi-fixed costs (development, content amortization, personnel, and promotion) outpaced growth. Expense mix (SG&A and content costs) was the principal swing factor, as cost of sales control still delivered a robust gross margin. Without disclosed D&A, EBITDA and cash earnings quality cannot be quantified; however, the gross-to-operating spread indicates that SG&A intensity increased YoY.

Growth Assessment

Topline growth of 5.3% YoY to ¥643.8 billion indicates continued engagement with the company’s IP ecosystem across toys/hobby and network entertainment, despite a tougher comparison and uneven title cadence industry-wide. The sustainability of growth will hinge on the games pipeline, mobile/console mix, and merchandising tie-ins to new and existing franchises. Geographic FX likely provided tailwind to overseas sales given yen weakness, supporting reported revenue. Profit quality showed some pressure: operating income was down 7.2% YoY, pointing to heavier spend or mix effects (e.g., more launch-related marketing or amortization). Ordinary income outpaced operating income slightly, suggesting limited non-operating lift and reinforcing that core trends are the main determinant. Near-term outlook depends on the second-half release slate, holiday season demand in toys, and timing of major IP activations in visual/music. A stabilization of SG&A intensity and content amortization is key to reversing negative operating leverage. Mix normalization (more catalog digital sales, high-margin merchandise, and steady amusement operations) could support margins if achieved. Inventory at ¥43.4 billion (low relative to revenue) suggests prudent supply management, supporting future sell-through. With a strong balance sheet, the company has capacity to invest in content and marketing to underpin future launches, though spend discipline will drive earnings trajectory.

Financial Health

Liquidity is strong: current ratio 253% and quick ratio 237.5%, supported by ¥704.9 billion of current assets versus ¥278.6 billion of current liabilities. Working capital of ¥426.3 billion provides ample buffer for seasonality and launch cycles. Solvency is robust: total liabilities are ¥309.4 billion against equity of ¥841.6 billion, implying a low debt-to-equity of 0.37x. Based on totals, the calculated equity ratio is roughly 72–73% (¥841.6b/¥1,160.4b), reflecting a conservative capital structure. Financial leverage in the DuPont framework is low at 1.38x, which limits ROE uplift from leverage but enhances resilience. Interest expense was not disclosed, and the reported interest coverage ratio of 0.0x is not meaningful given the absence of expense data in this extract. Overall, the balance sheet affords high flexibility for content investment, marketing, and potential inorganic opportunities, while maintaining a margin of safety against cyclical swings.

Cash Flow Quality

Operating cash flow, investing cash flow, financing cash flow, and D&A were not disclosed in this dataset (zeros indicate undisclosed). As such, OCF/Net Income and FCF cannot be evaluated and the reported OCF/NI ratio of 0.00 and FCF of 0 should not be interpreted literally. Earnings quality therefore cannot be triangulated via cash conversion metrics in this period from provided data. Working capital appears healthy with inventories of ¥43.4 billion and substantial receivables/cash implied in current assets; the low inventory-to-revenue footprint indicates disciplined inventory risk management. Without D&A, we cannot separate non-cash components within operating profit (e.g., content amortization vs. cash expenses). In prior quarters for similar businesses, content amortization and development costs can create timing differences between earnings and OCF; monitoring these components is essential once disclosed.

Dividend Sustainability

Dividend per share and payout data are not disclosed in this extract (zeros indicate undisclosed). Consequently, payout ratio assessment and FCF coverage cannot be determined from the provided information. With net income of ¥78.9 billion and a conservative balance sheet (low leverage, high liquidity), capacity for distributions appears ample in principle, but actual sustainability depends on the company’s stated policy, cash generation, and capital allocation to content development, growth capex, and potential buybacks. Until operating cash flow and capex/FCF are disclosed for the period, a definitive view on dividend sustainability cannot be formed from this dataset alone.

Risk Assessment

Business Risks:

• Hit-driven volatility in game titles and toy/merchandise tied to specific IP cycles
• Title launch timing slippage and uneven quarterly cadence affecting revenue recognition
• Rising development costs and content amortization impacting operating leverage
• Marketing intensity around launches compressing margins
• Inventory obsolescence risk for seasonal/toy items despite low current levels
• Dependence on key franchises and licensing dynamics for popular IP
• Amusement/experiential segment sensitivity to consumer traffic and macro conditions
• Foreign exchange volatility affecting overseas revenue and costs

Financial Risks:

• Potential margin pressure from cost inflation (personnel, materials, distribution)
• Cash flow timing mismatches due to content amortization and milestone accounting
• FX translation and transaction risks impacting earnings variability
• Concentration risk if non-operating items or one-offs influence quarterly comparisons

Key Concerns:

• Negative operating leverage: operating income down 7.2% YoY despite 5.3% revenue growth
• Limited visibility on cash conversion and FCF due to undisclosed cash flow data
• Undisclosed D&A obscures EBITDA and non-cash cost dynamics
• Need for SG&A and content spend discipline to stabilize operating margin

Investment Implications

Key Takeaways:

• Topline growth remained healthy (+5.3% YoY) with strong gross margin (39.6%).
• Operating margin compressed to 16.4%, reflecting cost/mix headwinds and higher spend.
• ROE of 9.38% is supported by solid margins and low leverage, not financial gearing.
• Balance sheet strength is a differentiator: equity ratio ~72–73% (calculated) and D/E 0.37x.
• Cash flow and EBITDA visibility are limited this quarter due to undisclosed items.
• Second-half execution on title pipeline and holiday demand will be pivotal for margin recovery.

Metrics to Watch:

• Operating margin trend and SG&A-to-sales ratio
• Content amortization and development expense as a share of sales
• Segment mix (games vs. toys/hobby vs. visual/music vs. amusement)
• Inventory turnover and sell-through rates during holiday season
• FX rates (USD/JPY, EUR/JPY) and hedging impacts
• OCF, capex, and FCF once disclosed
• ROE progression and capital allocation (dividends/buybacks) once disclosed

Relative Positioning: Within Japan’s entertainment and gaming ecosystem, the company remains well-capitalized with diversified IP monetization across physical and digital channels, offering more balance than single-franchise or single-platform peers; however, near-term profitability is sensitive to launch timing and spend discipline compared with pure-play high-margin software peers.

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