CAPCOM CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

Capcom recorded substantial increases in both revenue and earnings, driven by strong sales of major titles and catalog products in its core Digital Contents Business. Revenue was ¥704.1B (+54.7% YoY), Operating Income was ¥410.5B (+66.9%), Ordinary Income was ¥414.5B (+81.1%), and Net Income attributable to owners of the parent was ¥291.6B (+69.2%), with all items recording double-digit growth. Operating Income growth outpaced Revenue growth, and the Operating Margin improved to 58.3% from 54.1% in the same period of the previous year. This improvement was attributable to the higher sales mix of the high-margin Digital Contents Business, together with improvements in both the gross profit margin and the SG&A expense ratio.

Factors Affecting Performance

【Revenue】Revenue increased 54.7% YoY to ¥704.1B. By segment, Digital Contents led the overall performance with revenue of ¥546.5B (77.6% of total, +83.0% YoY), while Amusement Facilities also recorded higher revenue of ¥67.6B (+20.6%). In contrast, Amusement Equipments posted lower revenue of ¥71.0B (-9.2%), and Other Businesses declined to ¥19.0B (-14.6%).

【Profit and Loss】Operating Income increased 66.9% YoY to ¥410.5B, outpacing revenue growth, and the Operating Margin improved by +4.2pt to 58.3% from 54.1% in the previous year. Both the gross profit margin, at 69.3% (68.1% in the previous year, +1.2pt), and the SG&A expense ratio, at 11.0% (14.1% in the previous year, -3.1pt), improved, indicating the emergence of operating leverage. Ordinary Income was ¥414.5B (+81.1% YoY). Non-operating income of ¥5.6B, mainly interest income, and non-operating expenses of ¥1.6B, mainly foreign exchange losses, were largely offset, resulting in Profit Before Tax of approximately the same level at ¥414.5B. No extraordinary gains or losses were recorded. After deducting income taxes of ¥122.7B (effective tax rate: 29.6%), Net Income attributable to owners of the parent was ¥291.6B (+69.2% YoY). Revenue and earnings increased.

Segment Analysis

Digital Contents serves as the core of the business in terms of both revenue and profit. Revenue was ¥546.5B (+83.0% YoY), Operating Income was ¥376.0B (+87.5%), and the profit margin was 68.8%, substantially exceeding the company-wide margin of 58.3%. Amusement Equipments recorded lower revenue and earnings, with revenue of ¥71.0B (-9.2% YoY) and Operating Income of ¥40.5B (-17.6%), while maintaining a high profit margin of 57.0%. Amusement Facilities recorded higher revenue of ¥67.6B (+20.6%), but Operating Income declined to ¥9.0B (-4.5%), with a profit margin of 13.3%, substantially below the company-wide average. Other Businesses, including the Character Business, recorded revenue of ¥19.0B (-14.6% YoY), Operating Income of ¥12.7B (-7.5%), and a profit margin of 66.6%. Digital Contents accounted for more than 90% of company-wide Operating Income, confirming a business portfolio structure heavily concentrated in Digital Contents.

Key Financial Metrics

【Profitability】The Operating Margin improved to 58.3% from 54.1% in the previous year, while the Net Profit Margin improved to 41.4% from 37.9%. The increase in the gross profit margin to 69.3% from 68.1% reflects the higher margins of Digital Contents and the increased sales mix of catalog products.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥271.5B, representing 0.93x Net Income attributable to owners of the parent of ¥291.6B. The OCF-to-EBITDA ratio was only 0.64x, based on EBITDA of ¥422.3B, calculated as Operating Income plus depreciation and amortization. Payments of income taxes of ¥145.6B and the reversal of the provision for bonuses of ¥55.5B were factors weighing on OCF.【Investment Efficiency】ROE was 10.2%. Given the high Equity Ratio of 84.1% (78.8% in the previous year), ROE was relatively subdued compared with the accumulation of equity.【Financial Soundness】Cash and deposits of ¥1,612.1B accounted for 47.2% of total assets of ¥3,413.1B. Against current assets of ¥2,577.2B, current liabilities were ¥387.1B, resulting in a current ratio of approximately 666%. Interest-bearing debt was virtually nonexistent, and financial leverage remained low.

Cash Flow Analysis

OCF was ¥271.5B, a substantial increase from ¥51.7B in the previous year. In addition to the increase in Net Income, the ¥158.0B decrease in trade receivables made a positive contribution, while income tax payments of ¥145.6B and the ¥55.5B decrease in the provision for bonuses were negative factors. Investing Cash Flow was positive at ¥210.6B, as proceeds from the redemption of time deposits of ¥250.2B exceeded expenditures including capital expenditures of ¥37.4B. As a result, Free Cash Flow (OCF + Investing Cash Flow) was ¥482.1B, comfortably exceeding cash outflows from financing activities of ¥110.5B, including dividend payments of ¥106.6B. Cash and cash equivalents at the end of the period stood at ¥1,407.5B, increasing from ¥1,028.3B in the same period of the previous year.

Earnings Quality

No extraordinary gains or losses were recorded during the period, and earnings were primarily generated by core operating activities. Non-operating income of ¥5.6B represented only 0.8% of revenue, with interest income of ¥5.1B as the primary component, indicating limited dependence on non-recurring factors. Non-operating expenses of ¥1.6B included a foreign exchange loss of ¥1.2B, but its impact on Ordinary Income of ¥414.5B was immaterial, and Ordinary Income and Profit Before Tax of ¥414.5B were almost identical. After deducting income taxes of ¥122.7B (effective tax rate: 29.6%), Net Income attributable to owners of the parent was ¥291.6B. Comprehensive Income was ¥296.9B, with the difference from Net Income limited to ¥5.3B. Foreign currency translation adjustments of +¥7.9B made a positive contribution, while deferred hedge gains and losses of -¥2.7B made a negative contribution; both were small in scale, and the discrepancy was limited. The fact that OCF was only 0.93x Net Income was attributable to working capital factors, namely tax payments and the decrease in the provision for bonuses. Although this does not materially impair earnings quality, it should be noted as a time lag in cash conversion.

Earnings Forecasts and Guidance

Against the full-year company plan, progress was 33.5% for Revenue (70.4/210.0B), 49.5% for Operating Income (41.1/83.0B), 49.9% for Ordinary Income (41.5/83.0B), and 50.3% for Net Income (29.2/58.0B). This significantly exceeded the standard Q1 progress rate of 25%, with profit items already achieving approximately half of the full-year plan. This early progress appears to have been driven by the strong launch of major titles and catalog sales. The company has not revised either its earnings forecast or dividend forecast, and it should be noted that the high progress rate does not immediately imply a change to the full-year plan.

Shareholder Returns

The annual dividend forecast is ¥23.00 per share, representing a planned increase from the previous fiscal year’s actual dividend of ¥20. Based on an average number of shares outstanding during the period of approximately 418M shares, total annual dividends are estimated at approximately ¥96B, implying a Payout Ratio of approximately 16.6% against the full-year Net Income forecast of ¥580B. Q1 Free Cash Flow of ¥482.1B substantially exceeded the expected annual dividend amount, indicating that the dividend burden is limited relative to cash generation capacity. No disclosure regarding share repurchases has been made, and shareholder returns are evaluated based on the Payout Ratio.

Risk Factors

1. Concentration in the Digital Contents Business: Digital Contents accounts for 77.6% of revenue and more than 90% of Operating Income. The title cycle and release timing of key franchises may therefore cause fluctuations in quarterly performance.

2. Working Capital Turnover Efficiency: Trade receivables decreased 47.4% YoY to ¥175.1B, but the OCF-to-Net Income ratio remained at 0.93x and the OCF-to-EBITDA ratio at 0.64x, confirming a time lag in cash conversion.

3. Early Progress Against the Full-Year Plan: The progress rates for Operating Income and Net Income were approximately 50%, a high level for Q1. Strong performance in the first half may fluctuate depending on the pace of title releases in the second half and thereafter.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

Profitability substantially exceeded the industry median and was at an exceptional level even within the IT and communications sector.

Growth and Capital Efficiency

Revenue growth also substantially exceeded the industry median, demonstrating a growth pace at the top level within the industry.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Profitability was exceptional compared with the industry benchmark, with an Operating Margin of 58.3% versus an industry median of 8.0%. The high-margin structure of the Digital Contents Business is driving company-wide profitability.

2. Q1 progress against the full-year plan was high at 49.5% on an Operating Income basis, confirming the characteristic that quarterly performance is susceptible to title release timing.

3. The financial foundation is conservative, with an Equity Ratio of 84.1% and cash and deposits of ¥1,612.1B, providing capacity to implement the planned dividend increase with a Payout Ratio of approximately 16.6%.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥955–¥1,015 at ±1% for the cost of equity, and ¥976–¥997 at ±0.1 for ω.

Notes:

• Amortization of goodwill of ¥0.2 per share has been added back to earnings (as a non-cash expense and for comparability with IFRS companies).
• Since Net Income progress against the full-year forecast (50%) exceeds the standard level (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of plan tend to exceed forecasts. The adjustment may be excessive for businesses with strong seasonality).
• Net assets as of the end of the quarter have been used (there is a timing difference from the full-year forecast).
• Since net assets include non-controlling interests, the theoretical value may be calculated at a somewhat high level.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not predict or guarantee future share prices)

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This report is an earnings analysis document automatically generated by AI based on XBRL financial 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 earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting professionals as necessary.

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