| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | - | - | - |
| Operating Income / Operating Profit | ¥138.7B | ¥193.4B | -28.3% |
| Ordinary Income | ¥137.4B | ¥189.3B | -27.4% |
| Net Income | ¥86.8B | ¥121.5B | -28.5% |
| ROE | 1.7% | 2.3% | - |
FY2027 Q1 started with a significant decline in profits: Operating Income ¥138.7B (prior ¥193.4B, -¥54.7B -28.3%), Ordinary Income ¥137.4B (prior ¥189.3B, -¥51.9B -27.4%), and Net Income attributable to owners of the parent ¥81.96B (prior ¥115.65B, -¥33.69B -29.1%). Revenue rose to ¥887.4B (prior ¥848.8B, +¥38.6B +4.6%), but profitability deteriorated materially due to a sharp decline in Operating Income in the IP & Anime Business to ¥5.2B (-91.8%) and expansion of SG&A to ¥247.8B (prior ¥207.3B, +¥40.5B +19.6%). Operating margin contracted to 15.6% (prior 22.8%, -7.2pt) and net margin to 9.2% (prior 13.6%, -4.4pt). The Film Business remained resilient with Operating Income ¥96.0B (+6.1%), and the Real Estate Business supported margins with ¥55.6B (-6.8%) at high profitability, but the steep profit decline in the IP & Anime segment—one of the core segments—resulted in an overall revenue-up, profit-down outcome.
[Revenue] Revenue ¥887.4B (YoY +4.6%) was driven by the Film Business ¥433.8B (+7.7%) and the Theatrical Business ¥59.1B (+15.5%). The Film Business secured 7.7% revenue growth due to a stronger lineup and recovering box-office trends, and the Theatrical Business achieved double-digit growth of 15.5% from improved performance rates. The Real Estate Business remained firm at ¥204.3B (+1.4%), maintaining stable growth as a stock revenue base. Conversely, the IP & Anime Business declined to ¥182.6B (-3.9%) due to timing concentration of releases and gaps in the lineup. Segment revenue composition was Film 48.9%, Real Estate 23.0%, IP & Anime 20.6%, Theatrical 6.7%, Other 0.9%.
[Profitability] The main reasons for the substantial decline in Operating Income to ¥138.7B (-28.3%) were a steep fall in the IP & Anime Business Operating Income to ¥5.2B (prior ¥63.4B, -91.8%) and an expansion in SG&A to ¥247.8B (+19.6%). IP & Anime’s margin fell to 2.8% (prior 32.6%) as upfront recognition of production and promotion expenses pressured profitability. Drivers of higher SG&A were increased advertising expenses ¥30.9B (prior ¥24.8B) and other SG&A ¥102.6B (prior ¥80.3B), reflecting strengthened ad investment and concentration of front-loaded costs around release timing. The Film Business delivered Operating Income ¥96.0B (+6.1%) with a margin of 22.1%, maintaining high profitability, while Real Estate posted ¥55.6B (-6.8%) with margin 27.2%, supporting consolidated profits as a stock-income base. Theatrical improved significantly to ¥4.8B (+578.6%) due to operating leverage from higher utilization. Ordinary Income was ¥137.4B (-27.4%) with non-operating income ¥4.8B and non-operating expenses ¥6.1B, resulting in a small net impact. Equity-method investment losses ¥5.49B pressured Ordinary Income, partially offset by interest income ¥1.89B and foreign exchange gains ¥1.92B. After recording special losses ¥5.2B, profit before tax was ¥132.2B (-27.97%), and after corporate taxes ¥45.4B (effective tax rate 34.3%), Net Income attributable to owners of the parent was ¥81.96B (-29.1%). In conclusion, the results were revenue-up, profit-down.
The Film Business is the core segment, accounting for 69.2% of consolidated Operating Income with ¥96.0B (prior ¥90.5B, +6.1%). Revenue was ¥433.8B (+7.7%) and margin 22.1%, supported by an enhanced lineup and improved box-office trends. Real Estate posted Operating Income ¥55.6B (prior ¥59.6B, -6.8%) with margin 27.2%, maintaining top-level profitability and supporting corporate profits as a stock-revenue base. Revenue was ¥204.3B (+1.4%), continuing stable growth. IP & Anime’s Operating Income plunged to ¥5.2B (prior ¥63.4B, -91.8%), with margin shrinking to 2.8% (prior 32.6%). Revenue declined to ¥182.6B (-3.9%) due to concentrated release timing and temporary lineup gaps; upfront production and promotion costs heavily depressed profitability. Theatrical improved markedly to Operating Income ¥4.8B (prior ¥0.7B, +578.6%), revenue ¥59.1B (+15.5%), margin 8.0%, with operating leverage from improved utilization and fixed-cost absorption. Other Businesses swung to an operating loss of ¥0.22B (prior operating profit ¥0.45B), a minor impact on the whole.
[Profitability] Operating margin 15.6% (prior 22.8%, -7.2pt), Ordinary income margin 15.5% (prior 22.3%, -6.8pt), Net margin 9.2% (prior 13.6%, -4.4pt) — profitability contracted at all levels. ROE 1.7% (prior 2.4%, annualized basis) was mainly driven down by the decline in net margin. ROE decomposition (three-factor) yields roughly 1.56% (quarterly) from Net margin 9.2% × Total asset turnover 0.127x (quarterly) × Financial leverage 1.33x, with the reduction in Net margin being the largest contributor. By segment, margins were Real Estate 27.2%, Film 22.1%, Theatrical 8.0%, IP & Anime 2.8%, and the sharp margin decline in IP & Anime pressured consolidated margins. [Cash Quality] Operating CF / Net Income = 1.36x (Operating CF ¥118.5B / Net Income ¥86.8B) — strong cash backing of profits. OCF / EBITDA = 0.67x (Operating CF ¥118.5B / EBITDA ¥175.9B) is somewhat low, influenced by timing items: inventory increase -¥23.8B and corporate tax payments -¥141.6B. The subtotal of Operating CF before working capital changes was ¥258.6B, indicating robust core cash-generating capacity. [Investment Efficiency] Capex ¥58.3B / Depreciation ¥37.2B = 1.57x, indicating continued growth investment including cinema complex renewal and real estate development. Goodwill balance ¥188.5B equals 3.6% of shareholders’ equity and 1.07x EBITDA — a healthy level with limited M&A risk. [Financial Strength] Equity Ratio 75.1% (prior 73.3%, +1.8pt) — extremely strong. Interest-bearing debt ¥12.4B (short-term ¥0.37B, long-term ¥12.0B) versus cash and equivalents ¥591.8B and short-term investment securities ¥347.8B — effectively nearly debt-free. Debt/EBITDA 0.07x, interest coverage 1,260x (EBIT ¥138.7B / interest expense ¥0.11B), current ratio 216% (current assets ¥2,194B / current liabilities ¥1,014.6B), quick ratio 193% — liquidity and payment capacity are very high.
Operating CF decreased to ¥118.5B (prior ¥223.1B, -46.9%). In addition to profit decline, inventory increase -¥23.8B and corporate tax payments -¥141.6B pressured Operating CF. These were partially offset by accounts payable increase +¥57.5B and trade receivables decrease +¥5.0B. The subtotal of Operating CF before working capital changes was ¥258.6B (prior ¥348.9B), showing solid core earnings power. Investing CF was cash inflow ¥37.4B (prior outflow -¥95.1B); while capital expenditures were -¥58.3B, net increase in short-term investment securities +¥99.9B more than offset this. Free Cash Flow was a sufficiently positive ¥155.9B (Operating CF ¥118.5B + Investing CF ¥37.4B). Financing CF was cash outflow -¥235.7B (prior -¥85.9B), reflecting cash dividends ¥110.7B and share buybacks ¥118.7B; total returns amounted to ¥229.4B, outpacing FCF ¥155.9B. The gap was covered by drawing down on liquidity and short-term investment securities. Cash and cash equivalents decreased to ¥788.99B (prior ¥866.83B, -¥77.84B) but a strong liquidity buffer is maintained.
Overall quality of earnings is high. Of Operating Income ¥138.7B, the foundational Film and Real Estate businesses account for approximately 109% of Operating Income (¥96.0B + ¥55.6B = ¥151.6B), indicating a large share of recurring income sources. Non-operating income ¥4.8B is small relative to revenue (0.5%), primarily routine financial income such as dividend income ¥0.37B and foreign exchange gains ¥1.92B. Equity-method investment losses ¥5.49B are a main driver of non-operating expenses ¥6.1B, likely a temporary factor due to performance volatility of equity-method affiliates. Special losses ¥5.2B had limited impact on profits, and there is no material distortion of the recurring earnings structure. Accrual (Net Income - Operating CF) is -¥31.7B (Operating CF ¥118.5B - Net Income ¥86.8B), net income ratio -37%, a healthy level indicating accounting profits are backed by cash generation. Comprehensive income ¥95.4B exceeded Net Income ¥86.8B by ¥8.6B; foreign currency translation adjustment +¥5.7B and OCI share of equity-method affiliates +¥5.1B contributed positively, while valuation difference on available-for-sale securities -¥1.9B and actuarial adjustments for retirement benefits -¥0.4B were small negative contributors. The divergence between comprehensive income and net income is +9.9%, modest and reflective of substantive shareholder value increase.
Progress against full-year forecasts: Operating Income 22.4% (¥138.7B / ¥620B), Ordinary Income 20.5% (¥137.4B / ¥670B), Net Income attributable to owners of the parent 20.0% (¥82.0B / ¥410B). Compared with a standard Q1 progress benchmark of 25%, Operating Income is short by -2.6pt, Ordinary Income -4.5pt, Net Income -5.0pt. The shortfall is mainly due to the sharp decline in IP & Anime Operating Income (-91.8%) and front-loaded SG&A; a back-end weighted release schedule is assumed. Full-year plan assumes Operating Income ¥620B (YoY -8.7%), Ordinary Income ¥670B (YoY -4.5%), Net Income ¥410B; recovery depends on richer release lineup and improved marketing efficiency from Q2 onward. Given the relatively large progress gap, it is necessary to monitor progress at the Q2 results and the feasibility of the second-half plan.
Q1 dividend payments were ¥110.74B, and combined with share buybacks ¥118.67B, total return was ¥229.41B. The year-end forecast dividend is ¥11 per share; based on forecast EPS ¥49.22, payout ratio is approximately 22%, a conservative level. A 5-for-1 stock split for common shares was implemented on March 1, 2026, and the forecast dividend ¥11 is post-split. Total returns ¥229.4B exceed Q1 Free Cash Flow ¥155.9B, but a strong balance sheet (cash and equivalents ¥591.8B, short-term investment securities ¥347.8B) and effectively debt-free structure support sustainability. Payout ratio 22% allows flexibility and strong capacity to maintain dividends. Total Return Ratio including buybacks is about 56% (¥229.4B / full-year forecast Net Income ¥410B), an active level but sustainable given cash generation and financial strength.
Revenue volatility in the IP & Anime Business: IP & Anime Operating Income plunged to ¥5.2B (prior ¥63.4B, -91.8%), with margin shrinking to 2.8% (prior 32.6%). Concentrated release timing and temporary lineup gaps caused upfront production and promotion expenses to heavily burden profits. The segment accounts for ¥182.6B in revenue, or 20.6% of the group, but contributes only 3.7% of consolidated Operating Income, exposing instability in the earnings structure. Quantitatively, the YoY change in IP & Anime profit of -¥58.2B exceeds the consolidated Operating Income decline of -¥54.7B, indicating the segment’s profit collapse is the primary driver of consolidated profit decline.
SG&A expansion reversing operating leverage: SG&A rose to ¥247.8B (prior ¥207.3B, +¥40.5B +19.6%), far outpacing revenue growth of +4.6%. Advertising expenses were ¥30.9B (prior ¥24.8B, +¥6.1B +24.6%) and other SG&A ¥102.6B (prior ¥80.3B, +¥22.3B +27.8%), driven by intensified promotion around releases and concentration of front-loaded costs. SG&A ratio increased to 27.9% (prior 24.4%, +3.5pt), compressing operating margin to 15.6% (prior 22.8%, -7.2pt). Quantitatively, SG&A increase ¥40.5B accounts for 74% of the Operating Income decline ¥54.7B, underscoring the importance of cost control.
Working capital swings pressuring cash flow: Inventory increase -¥23.8B and corporate tax payments -¥141.6B reduced Operating CF to ¥118.5B (prior ¥223.1B, -46.9%). OCF/EBITDA = 0.67x indicates temporary deterioration in cash conversion efficiency, with inventory buildup a near-term cash pressure. Inventory balance rose to ¥239.9B (prior ¥211.8B, +¥28.1B +13.3%), and improvement depends on subsequent sales collection. Quantitatively, of the ¥140.1B decline from the subtotal of Operating CF before working capital changes ¥258.6B to final Operating CF ¥118.5B, corporate tax payments ¥141.6B account for almost the entire amount, with inventory increase ¥23.8B as an additional pressure factor.
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Earnings support from high-margin Real Estate and Film businesses: Real Estate margin 27.2% and Film margin 22.1% remain high, and the combined Operating Income of these two segments ¥151.6B exceeds consolidated Operating Income ¥138.7B. Real Estate revenue ¥204.3B continues stable growth, supporting consolidated profits as a stock-revenue base. Film revenue ¥433.8B (+7.7%) secured growth and maintained profitability via an enhanced lineup. Quantitatively, the combined Operating Income ¥151.6B from these segments accounts for 109% of consolidated Operating Income, helping to limit the impact of the rapid profit decline in IP & Anime.
IP & Anime turnaround is key to achieving full-year targets: Q1 progress toward full-year Operating Income stands at 22.4%, below the standard 25%, primarily due to IP & Anime Operating Income ¥5.2B (-91.8%). Enriching the release lineup in the second half and improving marketing efficiency are essential to meet full-year targets. Quantitatively, to reach full-year Operating Income ¥620B, incremental profit of ¥481.3B (¥620B - ¥138.7B) is required, implying an average quarterly addition of ¥160.4B (¥481.3B / 3 quarters) from Q2 onward. Increasing quarterly results from Q1 ¥138.7B to the required quarterly average ¥160.4B depends on improved margins in IP & Anime and continued Film growth.
Balance of strong financial base and proactive returns: The company maintains Equity Ratio 75.1% and Debt/EBITDA 0.07x while executing total returns ¥229.4B (dividends ¥110.7B + buybacks ¥118.7B). Total Return Ratio is about 56% (full-year forecast Net Income ¥410B), an aggressive level, but sustained by free cash flow generation and ample liquidity (cash and equivalents ¥591.8B, short-term investment securities ¥347.8B). Quantitatively, current ratio 216% and quick ratio 193% indicate very high liquidity; cash and cash equivalents ¥788.99B cover 78% of short-term liabilities ¥1,014.6B, and including short-term investment securities coverage rises to about 93%.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are aggregated by our firm from publicly available financial statements as reference information. Investment decisions are made at your own responsibility; please consult professionals as necessary before making investment decisions.