DLE Inc.

Business Details

The only segment of the Group. Revenue sources include animation production of proprietary and jointly-held IP, Social Character Marketing Service (digital content production and campaign producing for advertisers), planning and development of digital content such as smartphone apps, and rights income and merchandise sales from production committees. In FY2026 (ending March 2026), the company carried out the scrapping of unprofitable subsidiaries and businesses, promoting the concentration of management resources on its core content production business. It is building a unique position centered on two pillars: AI studio operations and Alternative Video Production.

Recent Overview

Net sales down 26% and operating loss widened, but subsidiary scrapping completed and order backlog hit a record high

In FY2026 (ending March 2026), the company excluded five unprofitable consolidated subsidiaries (Churapps, MyFeel, ase, Dream Link LLC, and Tyrell) from the scope of consolidation, significantly shrinking the consolidation scope. Net sales came to ¥1,463 million (down 26.1% year on year), while operating loss widened to ¥595 million. On the other hand, the sale of investment securities and shares in affiliated companies resulted in extraordinary income of ¥591 million, improving net loss to ¥497 million from ¥728 million in the prior period. Through equity financing (¥300 million in convertible bond-type bonds with stock acquisition rights and a ¥96 million third-party allotment capital increase), cash balance increased to ¥818 million. As of the end of March 2026, the confirmed order backlog exceeded ¥1 billion, marking an all-time high, and the company forecasts net sales of ¥1,740 million and operating income of ¥100 million (returning to profitability for the first time in 9 periods) for FY2027 (ending March 2027).

Key Products

Growth Drivers

• Fundamental strengthening of production speed and cost competitiveness through AI studio operations (launched August 2025), along with increased inquiries following the start of regular terrestrial broadcasting
• Growing global demand for Japanese anime combined with widespread production delays and bankruptcies on the supply side, creating an expanding supply-demand gap that generates business opportunities
• "Hiroshi Nohara's Way of Lunch" won the Anime Topic Award in the TV Anime category at the "Japan Anime Trend Awards 2025," driving increased new orders for Alternative Video Production
• Confirmed order backlog exceeded ¥1 billion as of the end of March 2026, an all-time high, establishing the foundation for sales growth in FY2027 (ending March 2027)
• Completion of the scrapping of unprofitable subsidiaries and businesses has enabled concentration of management resources on the core content production business, with expected improvement in the earnings structure
• Policy tailwinds, including the selection of Japanese anime as a government priority initiative, and increased inbound demand due to the weak yen, are boosting the industry as a whole

Risks

• Material uncertainty regarding going concern: operating losses and negative operating cash flow have continued through FY2026 (ending March 2026), and countermeasures remain in progress, posing a material risk to cash flow
• Financial constraint and dilution risk from the issuance of ¥300 million in convertible bond-type bonds with stock acquisition rights (potential shares exist from the 21st, 23rd, 24th, and 26th stock acquisition rights and convertible bonds)
• Although the confirmed order backlog for the AI studio and Alternative Video Production is at an all-time high, the actual timing of revenue recognition and monetization remains uncertain depending on business progress
• Net sales have declined 26% year on year due to the significant reduction in the scope of consolidation (exclusion of 5 companies), creating downside risk to sales if the accumulation of new orders does not proceed as planned
• Large-scale extraordinary losses have already been recorded, including a ¥416 million valuation loss on investment securities and an ¥87 million loss on affiliate liquidation, but there remains a risk of additional valuation losses on remaining financial assets (¥578 million in investment securities)
• Instability in the sales base and foreign exchange risk associated with the contraction of overseas business, including Taiwan sales (¥396 million, 27% of the total)