ENVALITH
日本ファルコム株式会社 logo

NIHON FALCOM CORPORATION

3723・Growth Market・Information & Communication

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日本ファルコム株式会社 logo
NIHON FALCOM CORPORATION3723

Business

NIHON FALCOM CORPORATION was established in 2001 (originally founded in 1981) and is listed on the Growth Market of the Tokyo Stock Exchange as a game software specialist manufacturer. Centered on the "Legend of Heroes: Kiseki" series (cumulative sales exceeding 9 million units) and the Ys Series as its core IP, the company handles planning, production, development, and sales entirely in-house. Its main customers are domestic and international game publishers such as Konami Digital Entertainment, NIS America, Clouded Leopard Entertainment, and GungHo Online Entertainment America, and it operates through two divisions: direct product sales and licensing. The company deploys its titles across multiple platforms, including PlayStation 5, Nintendo Switch 2, Nintendo Switch, and PC (Steam), both domestically and internationally.

Business Model

In the Product Division, the company directly sells its own developed titles and music CDs, while the Licensing Division generates revenue from domestic and overseas publishers through localization and platform deployment licenses, monetized via upfront contract fees and running royalties. In FY2025 (ending September 2025), sales composition was ¥1,881 million (72%) from the Licensing Division and ¥731 million (28%) from the Product Division, with licensing revenue serving as the core driver. With virtually zero capital expenditure and no interest-bearing debt, the operating margin stands at an extremely high approximately 51%, reflecting an asset-light business model.

Company Strengths

Operating margin for FY2025 (ended September 2025) was 51.3% (operating profit of ¥1,340 million on net sales of ¥2,612 million). The company holds zero interest-bearing debt, an equity ratio of 94.6%, and cash and deposits of ¥10,350 million, indicating extremely high financial soundness. Its knowledge-intensive business model, which requires almost no capital expenditure, underpins this high profitability.

The Kiseki Series (The Legend of Heroes) is a long-running IP with cumulative sales exceeding 9 million units, and together with the Ys Series enjoys high brand recognition both domestically and overseas. Long-tail revenue from ports of older titles and English-language download sales continues to accumulate steadily, forming the foundation of Licensing Division net sales of ¥1,881 million.

In September 2025, the company achieved its first-ever worldwide simultaneous release with "The Legend of Heroes: Trails in the Sky the 1st" for Nintendo Switch, Switch 2, PS5, and Steam. The company continues to roll out localized versions for North America, Europe, and Asia, and major sales destinations for FY2025 (ended September 2025) included multiple overseas publishers such as NIS America (13.4%) and GungHo Online Entertainment America (11.2%).

ENVALITH's Perspective

For the interim period of FY2026 (ending March 2026 wait, ending September 2026), net sales of ¥1,535 million, operating profit of ¥969 million, ordinary profit of ¥993 million, and interim net profit of ¥689 million all exceeded previous guidance, leading to an upward revision of the full-year earnings forecast (net sales of ¥3,600 million, operating profit of ¥2,200 million, and net profit of ¥1,500 million). The main driver was the continued strong worldwide sales of "Kuro no Kiseki the 1st", and with the contribution of "Kuro no Kiseki the 2nd" (scheduled for simultaneous worldwide release in September 2026) to be added in the second half, the likelihood of achieving the full-year forecast is judged to be high.

Against the full-year sales forecast of ¥3,600 million, interim results stood at ¥1,535 million (progress rate of 42.6%), reflecting a structure in which sales recognition for "Kuro no Kiseki the 2nd" (scheduled for release in September 2026) and "Kyo Xanadu -Ouka Genbu- (in development)" (scheduled for release in July 2026) is concentrated in the second half. In particular, "Kuro no Kiseki the 2nd" is scheduled for release in the final month of the fiscal year (September), so even a slight shift in the release timing carries the risk of directly impacting the current fiscal year's results. The risk of significant quarterly earnings volatility due to title concentration and dependence on release timing continues to warrant close attention.

During the interim period, the company acquired 412,500 shares of treasury stock (¥608 million), demonstrating a proactive stance on shareholder returns. Meanwhile, cash flow from investing activities was limited to ¥1 million for the acquisition of intangible fixed assets, and cash and deposits stood at an ample ¥10,723 million (converted from the financial statements denominated in thousands of yen). As a small-scale developer, securing and developing development talent could become a medium- to long-term growth constraint, making it a key point of focus going forward how the company allocates its abundant cash toward growth investments (such as strengthening development capabilities, creating new IPs, and M&A).

Growth Strategy

Revenue expansion through simultaneous worldwide multi-platform releases and creation of new IPs

"Kuro no Kiseki the 2nd," the sequel to "Kuro no Kiseki the 1st," is scheduled for simultaneous worldwide release in September 2026 for Nintendo Switch 2 / Nintendo Switch / PlayStation 5 / Steam. Given the strong sales performance of the previous title, it is positioned as the key second-half revenue driver and holds the key to achieving the full-year forecast.

"Kyo Xanadu -Ouka Genbu-," scheduled for release in July 2026, aims to establish a new IP following the "Kiseki" and "Ys" franchises. It is expected to contribute to Product Division sales in the second half, while also serving as a foundation for future licensing expansion.

By continuing to distribute overseas download versions of the "Ys VIII," "Ys IX," and "The Legend of Heroes: Trails of Cold Steel" series, as well as ongoing development of the smartphone RPG "The Legend of Heroes: Gagharv Trilogy," the company secures stable licensing income to bridge the intervals between new title releases.

"Kuro no Kiseki the 1st" and "Kuro no Kiseki the 2nd" are being rolled out as titles supporting Nintendo Switch 2, capturing demand associated with the spread of the new hardware. This reflects a strategy of maximizing sales opportunities through multi-platform support.

Last updated: July 17, 2026