TOKYOTOKEIBA CO.,LTD. FY2026 Q2 Earnings Report

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Executive Summary

The first half of FY2026 recorded increases in both revenue and earnings, continuing moderate growth while maintaining profitability. Revenue was ¥198.2B (+2.7% YoY), Operating Income was ¥73.6B (+3.9%), Ordinary Income was ¥74.0B (+4.6%), and Net Income was ¥49.8B (+2.3%). The Operating Income growth rate exceeding the revenue growth rate was primarily attributable to an improvement in the gross margin (42.8%, compared with 42.3% in the previous year), while Net Income growth fell below the growth rate at the operating level due to a higher tax burden.

Factors Affecting Business Performance

【Revenue】Revenue increased 2.7% YoY to ¥198.2B. The core Public Racing Business (RacingFacilities) generated ¥149.7B (+2.9% YoY), accounting for 75.5% of total revenue, followed by the Warehouse Leasing Business at ¥30.9B (+2.4%) and the Services Business at ¥11.6B (+3.4%). Meanwhile, the Amusement Park Business experienced a revenue decline, generating ¥6.5B (-5.5%).

【Profit and Loss】Operating Income increased 3.9% YoY to ¥73.6B, while Ordinary Income increased 4.6% to ¥74.0B, with both growth rates exceeding the revenue growth rate. The primary factor was an improvement in the gross margin from 42.3% to 42.8%; however, SG&A expenses increased 4.3%, outpacing revenue growth and partially offsetting the earnings benefit. Profit in the Services Business increased substantially by 125.9%, while the loss in the Amusement Park Business widened to ¥5.4B. Net Income was ¥49.8B (+2.3%), below the growth rate at the operating level due to the higher effective tax rate. Overall, the Company achieved increases in both revenue and earnings.

Segment Analysis

The Public Racing Business generated revenue of ¥149.7B (+2.9% YoY) and profit of ¥63.6B (+2.5%), with a profit margin of 42.5%, making it the primary source of consolidated profit. The Warehouse Leasing Business generated revenue of ¥30.9B (+2.4%) and profit of ¥20.7B (+3.0%), with a profit margin of 66.8%, the highest profitability among the businesses. The Services Business generated revenue of ¥11.6B (+3.4%) and profit of ¥2.7B (+125.9%); although small in scale, it recorded substantial earnings growth. The Amusement Park Business generated revenue of ¥6.5B (-5.5%) and incurred a loss of ¥5.4B, with the loss widening from the previous year and acting as a downward pressure on consolidated performance. The Company has a high dependence on the Public Racing Business, creating a structure in which trends in that business determine consolidated performance.

Key Financial Indicators

【Profitability】The Operating Income margin was 37.1%, an exceptionally high level, improving further from 36.7% in the same period of the previous year. The Net Income margin was approximately 25.1%, also high, although it declined slightly YoY due to the higher tax burden.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥49.1B, equivalent to 0.99 times Net Income, indicating that cash backing was generally maintained. However, OCF decreased 47.8% YoY, as increases in accounts receivable and higher income tax payments weighed on cash generation.【Investment Efficiency】ROE was 10.1%, driven by the high Net Income margin, with limited dependence on financial leverage. Capital expenditures of ¥15.9B were approximately 0.49 times depreciation and amortization expense of ¥32.6B, indicating that investment in asset renewal remained below depreciation and amortization.【Financial Soundness】The Equity Ratio was high at 77.9%, while the current ratio was 156.8%, indicating sound short-term payment capacity. Interest-bearing debt was limited, and the overall financial foundation was strong.

Cash Flow Analysis

Cash flow from operating activities was ¥49.1B, down 47.8% YoY. The primary factors behind the decline were cash outflows related to working capital and taxes, including an increase in accounts receivable (-¥12.9B) and higher income tax payments. This contrasts with the same period of the previous year, when a decrease in accounts receivable and cash inflows related to taxes contributed positively. Cash flow from investing activities was positive at ¥2.8B, with capital expenditures limited to ¥15.9B, below depreciation and amortization expense of ¥32.6B. Cash flow from financing activities was -¥27.0B, with dividend payments (-¥18.9B) being the primary outflow factor. Free cash flow, calculated as the sum of OCF and investing cash flow, was ¥51.9B, with the restrained level of capital expenditures supporting short-term FCF generation.

Earnings Quality

The earnings growth in the first half was primarily attributable to the recurring factor of gross margin improvement. Special items were limited to ¥0.2B in extraordinary income, and no one-off factors with a material impact on earnings quality were identified. Non-operating income was ¥0.9B, mainly consisting of ¥0.3B in dividend income, while non-operating expenses were ¥0.4B, mainly consisting of ¥0.4B in interest expense; both were small in scale, and the difference between Ordinary Income and Operating Income was limited. OCF was 0.99 times Net Income, indicating that earnings and cash generation were broadly aligned. However, the decline in OCF from the same period of the previous year included timing-related factors associated with increases in accounts receivable and tax payments, indicating that accruals—the difference between accounting earnings and cash—temporarily widened during the first half. Comprehensive Income was ¥53.1B, exceeding Net Income of ¥49.8B, with the ¥3.3B increase in valuation difference on securities being the primary source of the difference.

Earnings Forecast and Guidance

First-half progress against the full-year plan was 46.5% for revenue (¥198.2B / ¥426.0B), 46.5% for Operating Income (¥73.6B / ¥158.3B), and 46.7% for Ordinary Income (¥74.0B / ¥158.6B). Although these figures were approximately 3–4pt below the standard first-half progress rate of 50%, the variance was not significant. The Company has not revised either its earnings forecast or dividend forecast, and its plan assumes that more than half of full-year profit will be generated in the second half.

Shareholder Returns

The dividend per share for the first half was 60 yen, while the full-year dividend forecast is 146 yen. The Payout Ratio based on Net Income was approximately 34% on a first-half actual basis, a level that does not represent an excessive burden relative to earnings. Share repurchases were ¥0.1B, a small amount, making dividends the central form of shareholder return. Based on the full-year forecast of ¥107.9B in profit attributable to owners of the parent, the forecast Payout Ratio is estimated at approximately 35%, which is within a sustainable range considering the levels of OCF and FCF.

Risk Factors

1. Concentration of earnings in the Public Racing Business: This business generated revenue of ¥149.7B and segment profit of ¥63.6B, representing the core of consolidated profit. The structure is such that changes in customer usage trends, systems, or operating policies could materially affect consolidated profitability.

2. Widening losses in the Amusement Park Business: Revenue declined 5.5% YoY to ¥6.5B, while the segment loss widened to ¥5.4B. Vulnerability to changes in visitor trends and operating costs remains an issue.

3. Capital expenditure levels and cash conversion efficiency: Capital expenditures remained at approximately 0.49 times depreciation and amortization expense, raising the issue of medium- to long-term renewal investment needs within the fixed-asset-intensive business structure. In addition, OCF declined 47.8% YoY, with cash outflows related to accounts receivable and taxes weighing on cash conversion during the first half.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

The Company's profitability substantially exceeds the industry median, with both its Operating Income margin and Net Income margin ranking among the highest.

Growth and Capital Efficiency

The revenue growth rate is substantially below the industry median, demonstrating the contrasting characteristics of high profitability and low growth.

※Source: Compiled by the Company

Key Points from the Financial Results

1. The Company maintains exceptionally high profitability, with an Operating Income margin of 37.1% and a gross margin of 42.8%, substantially exceeding industry levels. This high profitability is supported by the core Public Racing Business and Warehouse Leasing Business.

2. OCF declined 47.8% YoY, and OCF/EBITDA also decreased. The factors were increases in accounts receivable and cash outflows related to taxes; whether these factors normalize in the second half will be a key point to monitor.

3. While capital expenditures remaining at approximately half of depreciation and amortization expense contributes to short-term FCF generation, the relationship with medium- to long-term asset renewal needs should be monitored continuously given the fixed-asset-intensive business structure.

Theoretical Share Price (Reference Value)

Sensitivity: 3,857 yen–4,082 yen for a ±1% change in the cost of equity, and 3,962 yen–3,973 yen for a ±0.1 change in ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, nor does it forecast or guarantee future share prices.)

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This report is a financial results analysis document automatically generated by AI based on XBRL financial results summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed financial results data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.

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