NIHON FALCOM CORPORATION

Business Details

NIHON FALCOM's main business is the planning, production, development, and sale of game software, operating through two divisions: the Product Division (sales of proprietary game software and music CDs) and the Licensing Division (licensing and royalty income from domestic and overseas partners). With the "Kiseki" and "Ys" series as core IPs, the company is pursuing a global rollout across multiple platforms including Nintendo Switch 2, PS5, and Steam. In the interim period of FY2026 (ending March 2026)... [Note: the fiscal period label in the source, 2026年9月期, refers to the fiscal year ending September 2026], the Licensing Division accounted for approximately 92% of sales, and strong worldwide sales of "The Legend of Heroes: Trails in the Sky the 1st" drove substantial growth in both revenue and profit.

Recent Overview

The Licensing Division expanded sharply on the back of strong worldwide sales of "Trails in the Sky the 1st," with interim net sales up 153.9% year on year

In the interim period of FY2026 (ending September 2026) (October 2025 to March 2026), simultaneous domestic and overseas rollout of "Trails in the Sky the 1st" for Nintendo Switch 2, PS5, and Steam drove Licensing Division sales to a sharp increase of ¥1,419 million (up 194.8% year on year). Net sales of ¥1,535 million, operating profit of ¥969 million, and interim net profit of ¥689 million were recorded, all exceeding previously announced figures. The full-year earnings forecast was revised upward, with net sales raised to ¥3,600 million (up 37.7% year on year) and operating profit raised to ¥2,200 million (up 64.0% year on year). Meanwhile, the company also implemented shareholder returns by acquiring 412,500 shares of treasury stock (¥608 million). Contributions from "Kyo Xanadu -Ouka Genbu-" (scheduled for July 2026) and "Trails in the Sky the 2nd" (scheduled for simultaneous worldwide release in September 2026) are expected in the second half of the fiscal year.

Key Products

Growth Drivers

• Sharp expansion of the Licensing Division driven by continued strong worldwide sales of "Trails in the Sky the 1st" (interim licensing sales of ¥1,419 million, up 194.8% year on year)
• Contribution to second-half sales from the simultaneous worldwide release of "Trails in the Sky the 2nd" in September 2026 (Nintendo Switch 2, Nintendo Switch, PlayStation 5, Steam)
• New IP rollout and contribution to second-half sales from the July 2026 release of "Kyo Xanadu -Ouka Genbu-"
• Growing momentum in the home video game market triggered by the launch of Nintendo Switch 2, and acceleration of multi-platform deployment
• Expansion of overseas licensing income through continued rollout of translated titles for North America, Europe, and Asia
• Stable long-tail revenue from ports of older "Kiseki" and "Ys" series titles and download sales of English versions
• A high-margin earnings model with an extremely low cost of sales ratio (3.0% in the interim period), making revenue growth readily translate into operating profit growth

Risks

• A sales structure weighted toward the second half: cumulative interim sales of ¥1,535 million against a full-year forecast of ¥3,600 million (approximately 42.6%), creating a risk that delays or weak sales of second-half titles ("Kyo Xanadu -Ouka Genbu-" and "Trails in the Sky the 2nd") would directly affect full-year results
• A risk that the rapid expansion trend in the Licensing Division may not continue if sales of "Trails in the Sky the 2nd" fall short of "the 1st"
• Since the Licensing Division accounts for approximately 92% of sales, results are heavily dependent on contract trends and sales performance with key licensing partners
• Foreign exchange risk: since overseas licensing income accounts for a substantial portion of sales, earnings would be pressured by yen appreciation (interim foreign exchange gain was ¥13 million)
• Net assets decreased 1.1% from the end of the prior fiscal year due to treasury stock acquisitions (¥608 million) and dividend payments (¥205 million), which could reduce financial flexibility depending on future capital policy
• Impact on the acquisition of quality content and licensing negotiating power from intensifying competition in the game market and rivalry with major publishers
• Constraints on human resources for simultaneous development of multiple titles and quality maintenance, given the small-scale development structure (non-consolidated, single segment)