| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥379.8B | ¥279.6B | +35.8% |
| Operating Income / Operating Profit | ¥22.5B | ¥18.2B | +23.7% |
| Ordinary Income | ¥28.6B | ¥18.0B | +58.7% |
| Net Income / Net Profit | ¥12.4B | ¥10.3B | +21.0% |
| ROE | 4.5% | 3.9% | - |
For the fiscal year ended March 2026, Revenue was ¥379.8B (YoY +¥100.2B +35.8%), Operating Income was ¥22.5B (YoY +¥4.3B +23.7%), Ordinary Income was ¥28.6B (YoY +¥10.6B +58.7%), and Net Income attributable to owners of the parent was ¥19.9B (YoY +¥11.8B +143.6%). Strong increases were driven by the launch of large titles in the Digital Content Business and robust performance in the Amusement Business. However, gross margin declined to 35.5% due to a higher cost of sales ratio (down -10.7pt from 46.2% in the prior year), and operating margin edged down to 5.9% (down -0.6pt from 6.5%). Non-operating items—interest income of ¥2.0B and foreign exchange gains of ¥2.8B—contributed to significant improvement at the ordinary income level. A ¥3.0B impairment loss was recorded as an extraordinary loss, but Net Income doubled, EPS reached ¥32.93 (from ¥13.52, +143.6%), ROE improved to 4.5% (equivalent to an improvement from prior-year 3.1%), and the Equity Ratio remained healthy at 78.2%.
[Revenue] Consolidated Revenue increased substantially to ¥379.8B (+35.8%). By segment, the Digital Content Business surged to ¥204.9B (+58.9%), becoming the largest segment at a 53.9% share, driven by large title launches and expanded contract development. The Amusement Business reached ¥127.1B (+21.7%), accounting for 33.5% of sales, with steady sales of commercial equipment and goods. The Music & Visual Business was ¥47.8B (+3.5%), a 12.6% share, maintaining prior-year levels.
[Profitability] Gross profit was ¥135.0B (gross margin 35.5%), up ¥5.7B from ¥129.3B (46.2%) in the prior year, but gross margin deteriorated by -10.7pt. The main causes were changes in title mix within Digital Content, increased royalty burdens, and concentrated amortization of development costs. SG&A expenses were controlled at ¥112.5B (29.6% of sales) versus ¥111.1B (39.7%) in the prior year, essentially flat, and the SG&A ratio improved by -10.1pt, enabling Operating Income to increase ¥4.3B to ¥22.5B (+23.7%). Operating margin narrowed to 5.9% (down -0.6pt from 6.5%), indicating that revenue growth did not fully translate to operating profitability. By segment, Amusement delivered ¥31.7B Operating Income (margin 24.9%), up +18.0% YoY and maintaining high profitability; Music & Visual turned profitable at ¥9.1B (19.0% margin) from a ¥0.4B loss in the prior year; Digital Content swung to an operating loss of ¥0.6B (from ¥9.4B profit previously), and the deterioration in the core segment’s profitability constrained aggregate margin expansion. Non-operating income included interest income of ¥2.0B and foreign exchange gains of ¥2.8B, with non-operating income of ¥6.3B and non-operating expenses of ¥0.2B, producing a substantial increase in Ordinary Income to ¥28.6B (+58.7%). An impairment loss of ¥3.0B was recorded as an extraordinary loss, bringing profit before tax to ¥25.6B; after corporate taxes of ¥5.8B, Net Income attributable to owners of the parent was ¥19.9B (+143.6%). In conclusion, while revenue rose strongly, gross margin deterioration and losses in core Digital Content held back operating-stage growth; however, contribution from non-operating income and a low prior-year base resulted in a large increase in final profits—an increase in both revenue and profit.
The Digital Content Business grew rapidly to ¥204.9B (+58.9%) but fell into an operating loss of ¥0.6B (from ¥9.4B operating profit in the prior year). Despite accounting for 53.9% of sales, profitability collapsed to a -0.3% margin, likely due to concentrated amortization of development costs associated with large-title launches, increased royalty burdens, and a change in the mix toward commissioned development. The Amusement Business posted ¥127.1B in sales (+21.7%) and ¥31.7B in operating income (+18.0%), sustaining revenue and profit growth with an exceptionally high margin of 24.9%, leading companywide profitability. Strong sales of commercial equipment and goods, along with IP alliances and deployment of proprietary equipment, contributed. The Music & Visual Business recorded ¥47.8B in sales (+3.5%) and ¥9.1B in operating income (turning from a ¥0.4B loss to profit), with margin improving sharply to 19.0%, likely aided by efficiency gains in stage productions and character merchandising. After deducting corporate-level costs of ¥17.7B, consolidated Operating Income was ¥22.5B, with the Digital Content loss partially offsetting strong results in Amusement and Music & Visual.
[Profitability] Operating margin of 5.9% declined -0.6pt from 6.5% in the prior year, and gross margin deteriorated sharply to 35.5% (down -10.7pt from 46.2%), partially offset by an improvement in SG&A ratio to 29.6% (down -10.1pt from 39.7%). The Digital Content loss, together with high-margin Amusement (24.9%) and Music & Visual (19.0%), supported overall margins. ROE improved to 4.5% from an equivalent prior-year 3.1%, driven by higher net profit margin of 3.3% (from an equivalent 2.5%) and improved total asset turnover of 1.07x (from an equivalent 0.85x). ROA (on an Ordinary Income basis) was 8.4%, up +3.1pt from 5.3%, indicating marked improvement in asset efficiency.
[Cash Quality] The ratio of Operating Cash Flow to Net Income was 5.69x, indicating strong cash realization of profits. The accrual ratio was -26.3% (Operating CF ¥113.4B - Net Income ¥12.4B ÷ Total Assets ¥355.1B), negative, reflecting high quality of earnings. Operating CF/EBITDA was 2.47x (Operating CF ¥113.4B ÷ EBITDA ¥45.97B), showing solid cash generation relative to pre-depreciation earnings.
[Investment Efficiency] Capital expenditures were ¥5.73B, 0.24x depreciation of ¥23.49B, a low level indicating an investment-suppressed phase. Inventory turnover days have shortened centered on work-in-progress of ¥23.2B, but work-in-progress ratio remains high at 89%, making results sensitive to title progress.
[Financial Soundness] Equity Ratio was 78.2%, current ratio 344%, quick ratio 342%—extremely conservative. Cash and deposits of ¥175.2B account for 49.4% of total assets, and interest-bearing debt is zero, effectively debt-free. Net cash of ¥175.2B represents 46.1% of sales, providing ample liquidity and strong financial flexibility.
Operating Cash Flow was ¥113.4B (a large improvement from ¥-1.0B in the prior year), with profit before tax before adjustments of ¥25.6B plus non-cash charges including depreciation of ¥23.5B and impairment loss of ¥3.0B. A large contributor in working capital was a decrease in inventories of ¥45.97B. Prior-year work-in-progress of ¥70.9B was compressed to ¥23.2B in the current period, as revenue recognition of development titles and restrained new launches released working capital. Accounts receivable decreased by ¥0.3B and accounts payable decreased by ¥3.9B, both modest, and after payments of corporate taxes of ¥4.4B, operating CF remained very strong. Investing Cash Flow was -¥16.2B, driven by capital expenditures of ¥5.7B and intangible asset investments of ¥9.6B (mainly software), with net outflows including changes in long-term loans kept modest. Financing Cash Flow was -¥6.1B, primarily due to dividend payments of ¥6.1B. Free Cash Flow was ¥97.3B (Operating CF ¥113.4B + Investing CF -¥16.2B), ample, and after dividend payments of ¥6.1B still produced ¥91.2B of cash generation, increasing cash and deposits from ¥78.8B in the prior year to ¥175.2B (+¥96.5B). Foreign exchange effects of ¥4.9B also contributed, resulting in year-end cash balance of ¥174.9B and solid liquidity. Operating CF/Net Income ratio was 5.69x and FCF/Dividend ratio was 16.0x, indicating strong cash backing for dividends. The small scale of Investing CF (CapEx/Depreciation 0.24x) suggests restrained investment, leaving capacity for future growth investment while indicating a near-term investment-suppressed phase.
Operating Income of ¥22.5B versus Ordinary Income of ¥28.6B shows a ¥6.1B gap, primarily due to non-operating items such as interest income of ¥2.0B and foreign exchange gains of ¥2.8B. Interest income slightly decreased from ¥2.2B in the prior year, while foreign exchange gains were recorded at the same level as the prior year, and valuation gains on foreign-currency-denominated assets/transactions continued to lift ordinary income. Non-operating expenses were minimal at ¥0.2B; interest expense was zero and other non-operating costs effectively negligible. An impairment loss of ¥3.0B was recorded under extraordinary items, reducing profit before tax from ¥28.6B to ¥25.6B. The specific assets subject to impairment are not readily identifiable from disclosures, but are judged to be a temporary revaluation. Corporate taxes were ¥5.8B (effective tax rate 22.7%), down sharply from ¥8.3B (50.3%) in the prior year, with deferred tax reversals and tax adjustments supporting growth in final profit. Comprehensive income was ¥22.0B, ¥2.1B higher than Net Income of ¥19.9B, mainly due to ¥2.1B in foreign currency translation adjustments. Available-for-sale securities valuation differences were ¥0.0B and unchanged, so divergence between comprehensive income and net income was small and had limited impact on quality of earnings. With Operating CF of ¥113.4B being 5.69x the Net Income of ¥12.4B, accounting profits have strong cash backing, reducing accrual concerns. Overall, ordinary-stage earnings were supported by non-operating income, extraordinary losses were temporary squeezes, and lower effective tax rates plus strong operating cash flow underpin earnings quality, enabling clear distinction between recurring earnings power and one-off factors.
Full-year guidance projects Revenue of ¥300.0B (YoY -21.0%), Operating Income of ¥30.0B (YoY +33.4%), Ordinary Income of ¥30.0B (YoY +5.0%), Net Income of ¥20.0B, and EPS forecast of ¥33.01. Actual results of ¥379.8B exceeded Revenue guidance by ¥79.8B (+26.6%), achieving a revenue progress rate of 126.6%, but Operating Income of ¥22.5B fell short of the ¥30.0B forecast by ¥7.5B, yielding a progress rate of 75.0%. Ordinary Income of ¥28.6B also missed the ¥30.0B forecast by ¥1.4B (progress rate 95.3%), highlighting profit underperformance despite Revenue overachievement. Net Income attributable to owners of the parent was ¥19.9B (progress rate 99.5% vs. forecast ¥20.0B), nearly on target. The shortfall in operating profit despite much higher Revenue is primarily attributed to the increase in quantity from large-title launches in Digital Content accompanying gross margin deterioration and higher costs, underperforming profitability assumptions. Contributions from non-operating income allowed ordinary and final profits to fare relatively better, but operating-stage mix deterioration caused the gap versus forecasts in profit margins. The guidance decline of -21.0% YoY appears inconsistent with the actual ¥379.8B outcome and may reflect pre-adjustment figures or initial-year forecasts; on an actual basis, the full-year performance points to substantial revenue and profit growth. The divergence in progress rates suggests potential timing differences in revenue recognition or skewed expense allocation, indicating upside for margin recovery in the second half and a focus on correcting Digital Content profitability.
A year-end dividend of ¥12 was paid, making the full-year dividend ¥12 (interim dividend ¥0). With Net Income (individual basis) of ¥12.4B and total dividends of ¥6.1B, the disclosed Payout Ratio is 74.0%, which appears to be calculated on a non-consolidated basis. On a consolidated basis, with Net Income attributable to owners of the parent of ¥19.9B, the total dividend ¥6.1B implies a payout ratio of approximately 31%, a reasonable level. Operating CF of ¥113.4B and FCF of ¥97.3B are very ample, and dividend payments of ¥6.1B have an FCF coverage of 16.0x, indicating robust cash backing for dividends and high sustainability. No share buybacks were confirmed; shareholder returns consist solely of dividends, implying a Total Return Ratio ≈ Payout Ratio ~31% (consolidated basis). Given cash deposits of ¥175.2B and effectively debt-free status, there is substantial room for dividend increases and buybacks, but current policy is conservative, emphasizing stable dividends. The guidance lists a full-year dividend of ¥0, which conflicts with the actual ¥12 and may be a disclosure error or unadjusted forecast; actual policy suggests continuation of stable dividends.
Continued deficit risk in the Digital Content Business: The core business, accounting for 53.9% of sales, turned to an operating loss of ¥0.6B. If gross margin deterioration and rising cost burdens persist, recovery in group-wide profitability will be delayed. Performance will be highly sensitive to the success of large titles, royalty burdens, and timing of development cost amortization, making the certainty of return to profitability a focal issue for coming periods.
Inventory / Work-in-Progress progress risk: Work-in-progress of ¥23.2B accounts for 89% of inventories; delays in title development or shifts in revenue recognition timing can cause large swings in cash flow and profit. While compression of work-in-progress this period was the main driver of Operating CF ¥113.4B, increased development投入 next period could reverse the cycle.
Risk of prolonged investment restraint leading to growth slowdown: Capital expenditures of ¥5.7B are only 0.24x depreciation of ¥23.5B, a low level; insufficient advance investment in new title development and the IP pipeline could lower medium- to long-term revenue growth. Although Amusement and Music & Visual are currently high-margin drivers, preserving digital growth options will be necessary, and continued investment restraint could forfeit future revenue opportunities.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.9% | 8.1% (3.6%–16.0%) | -2.2pt |
| Net Margin | 3.3% | 5.8% (1.2%–11.6%) | -2.6pt |
The company's operating and net margins are below the IT & Communications industry medians, with Digital Content losses and gross margin deterioration being the main drivers of relative underperformance.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 35.8% | 10.1% (1.7%–20.2%) | +25.7pt |
Revenue growth significantly exceeds the industry median, driven by large Digital Content launches and strong Amusement performance, though growth quality (margins) lags industry averages.
※ Source: Company aggregation
Restoring profitability in the Digital Content Business is the top priority. The core segment, accounting for 53.9% of sales, turned negative and the substantial gross margin deterioration to 35.5% (-10.7pt) pressured group margins. If title mix improves, royalties and development costs are optimized, and monetization via strengthened live operations increases, operating margins have room to revert toward industry median levels.
Cash generation and financial base are extremely solid. Operating CF ¥113.4B (Operating CF/Net Income 5.69x), FCF ¥97.3B, and cash deposits ¥175.2B (effectively debt-free) provide a strong platform for dividend sustainability, potential dividend increases, and growth investment capacity. Although investment restraint is in effect (CapEx/Depreciation 0.24x), financial capacity exists to reaccelerate development investment once Digital Content returns to profitability, preserving medium- to long-term growth options.
High-margin structures in Amusement and Music & Visual underpin the group. Amusement margin 24.9% and Music & Visual 19.0% are high levels and partially offset Digital Content losses. Deepening IP alliances and secondary-use businesses can further enhance sustainability of these high-margin segments. While short-term relative profitability lags the industry, strong revenue growth (+25.7pt above median) and robust cash generation suggest convergence to industry median is possible if Digital Content profitability improves.
This report is an earnings analysis generated automatically by AI based on XBRL earnings release data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on public financial statement data. Investment decisions are your own responsibility; consult advisors as necessary before making investment decisions.
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